Amp v Kien Dan Luu Pty Ltd & Ors No. DCCIV-97-9 Judgment No. D3764
[1998] SADC 3961
•25 February 1998
AUSTRALIAN MUTUAL PROVIDENT SOCIETY V KIEN DAN LUU PTY LTD, KIEN DAN LUU AND VLASSIA SOULA LUU
Civil
Judge PironeThe plaintiff’s claim is to recover the sum of $19,144.52 with interest thereon at the appropriate contractual rate from 28th September 1994. Its case may be summarised as follows.
In June 1989 the plaintiff made an advance of $19,144.52 to the corporate defendant. At that time the corporate defendant was an agent of the plaintiff. The advance was made for the purposes of enabling that defendant to develop the agency which it had with the plaintiff. The advance was secured by the plaintiff taking a charge over the corporate defendant’s insurance registers which the corporate defendant had with the plaintiff, as well as by a guarantee which the plaintiff took from each of the two personal defendants.
The advance was to be repaid only in certain circumstances. One of those circumstances was upon the cessation of the corporate agent’s appointment as an agent of the plaintiff “for whatever reason”. Upon the occurrence of that event the advance in question was to be repaid forthwith and was to bear interest at the appropriate contractual rate until fully repaid.
The corporate defendant’s agency with the plaintiff, according to the plaintiff, was terminated in September 1994. It was then that the corporate defendant ceased to be an agent of the plaintiff and accordingly therefore it was then that, according to the plaintiff, the amount of the advance became due and repayable. Repayment was demanded from each of the defendants. The demand was not met and the amount owing remains due and payable.
The defendants and each of them admit that the alleged advance was made and received. They further admit having received a notice of demand for payment of the amount in question, but deny that they are indebted to the plaintiff either as alleged or at all.
It is the defendants’ case that upon the plaintiff purporting to terminate the corporate defendant’s appointment as its agent, the plaintiff took possession of the corporate defendant’s insurance registers which that defendant had with the plaintiff. The value of those registers, say the defendants, was in excess of the value of the advance. The defendants say that, by its actions, the plaintiff realised the security which it had taken, and its alleged indebtedness therefore was thereby fully satisfied. Thereafter the plaintiff should have accounted for the surplus balance of the moneys held by the plaintiff to the corporate defendant. The plaintiff did not account to the defendants and the corporate defendant has thereby suffered a financial loss, recovery of which that defendant counterclaims against the plaintiff.
The corporate defendant goes on to say that the plaintiff’s purported termination of its appointment as the plaintiff’s agent was wrongful and in breach of contract by reason whereof the corporate defendant has suffered a financial loss in the sum of $114,793.50 which sum it seeks to recover from the plaintiff by way of counterclaim.
The personal defendants for their part say that their respective obligations under the alleged guarantee, if any, have not crystallised. They say that they are not liable to the plaintiff either as claimed or at all because, amongst other reasons, they are not bound by the terms of the alleged guarantee, and, in any event, because the corporate defendant’s alleged indebtedness to the plaintiff has been fully discharged by reason of the plaintiff having expressly or by implication, realised the security which it had taken over the corporate defendant’s insurance registers.
The personal defendants, and each of them, go on to say that the purported termination of the corporate defendant’s appointment by the plaintiff as the plaintiff’s agent was wrongful and in breach of contract, by reason whereof they have suffered a financial loss in the sum of $5,761.07, which sum they seek to recover from the plaintiff by way of counterclaim.
The personal defendants and each of them further say that as a result of the plaintiff’s breach of contract and wrongful termination of the corporate defendant’s appointment as its agent, each of them has suffered “chronic stress-related illness” in respect of which each of them claims compensation by way of damages “as a result of ill health”.
I have received an extraordinary number of documents as exhibits. The quality of many of them leaves a lot to be desired in that many of them are either photocopies or copies of photocopies. Some of them are in handwriting, which at times is either illegible or undecipherable or nonsensical. Some of the exhibits which have been tendered by the parties show substantial differences both in volume and more importantly in content notwithstanding that the exhibit in question was tendered in relation to the same topic. I have heard evidence, arguments and submissions extending over thirty two days. The transcript runs into 2250 pages. Evidence on many topics, as well as various documents, were received de bene esse.
The defendants and each of them proceeded unrepresented during the whole of the plaintiff’s case and for a substantial part of their own case. They did so notwithstanding my repeated and untiring efforts to encourage them to obtain legal representation.
The male defendant was in desperate need of the services of an interpreter and whilst one was made available at all times, the male defendant demonstrated an ongoing reluctance to use the interpreter and an obstinate persistence in wanting to express himself in English when his ability to communicate in that language was substantially imperfect, and on many occasions, what he said was incomprehensible because of his accent.
I have not held any of this against the defendants, of course, but the case has been what would not be unreasonable to describe as a living nightmare from start to finish, not only for the reporting staff and my own staff, but also for counsel and, of course, for myself.
Another major difficulty that I have encountered has been the complexity of the issues which have been raised on the pleadings by the parties, and especially by the defendants in the course of presenting their case.
Yet another problem that I have had to face has been provided by the undercurrent mathematics which underpin the rights, entitlements and obligations of the parties.
At this point I wish to acknowledge yet again the extraordinary assistance which I have received from Mr Rydon of counsel for the plaintiff. The nature of the defendants’ case presented Mr Rydon with a tremendously difficult task. That task was made even more difficult by the defendants’ attitude, by the manner in which the defendants presented their case and by the very obvious cultural differences which existed between those involved in this litigation. Mr Rydon showed exceptional understanding, politeness and patience whilst discharging his duty to his client and to the court in a most capable, courageous and competent manner.
Given the difficulties that I was experiencing and the nature of the issues that I was called upon to determine, some of which, as I understood it, being dependent upon the credibility of some of the witnesses, I was particularly careful in the course of the trial to observe the demeanour of each witness very closely whilst they were in the witness box.
I took particular note of the manner in which each of them reacted and responded to cross-examination when testifying about topics on which they were being questioned.
Having carefully reflected upon the matter I have now come to a firm conclusion, not only in relation to their respective reliability and trustworthiness as witnesses, but also as to what, and how much of what, each of them told me with respect to the various matters which fall for my determination I can rely upon and accept with confidence as a reliable basis for the making of relevant findings of fact on matters in issue.
At this point I am bound to say that there were inconsistencies and improbabilities in what I heard from some of the witnesses, and that part of the evidence which I heard was either unconvincing, intrinsically improbable or contrary to other well established facts.
The conclusion I have reached at the end of the day is that none of the witnesses inspire sufficient confidence to enable me to accept what they have said at face value and without substantial reservation.
When in doubt, therefore, as to which version of the facts, as narrated by the witnesses, was more likely to be accurate and reliable, I have looked elsewhere in order to find some confirmatory or supporting material. I have had regard to the intrinsic likelihood of the story as told before finally accepting any part of any witnesses’ testimony and/or before finding the facts that I have found based on my impression of the witness and on the other matters to which I have referred.
In performing my task I have remembered that, in relation to the claim it is for the plaintiff to prove every aspect of the case and that it is not for the defendants to disprove any part of it. Conversely I have also remembered that in relation to the counterclaim it is for the defendants to prove every aspect of the case and that it is not for the plaintiff to disprove any part of it.
Before reaching my final conclusion on whether or not I could or should accept any part of the evidence of any witness as a reliable basis on which I could make relevant findings of fact, I have reminded myself of what was said (obviously in another context) by Dixon J (as he then was) in Jones v Dunkel (1959) 101 CLR 298, and by the same Justice in Briginshaw v Briginshaw (1938) 60 CLR 336.
In Jones’s case (supra) His Honour said:-
“.... the law .... does not authorise a court to choose between guesses, where the possibilities are not unlimited, on the ground that one guess seems more likely than another or the others. The facts proved must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied.”
In the case of Briginshaw (supra) His Honour said:-
“.... when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality.”
I have used these words as a guide remembering, of course, that the party who carries the onus of proof needs only to satisfy me on the balance of probabilities as to the matters which I am called upon to decide in the case for that party.
With all these considerations in mind, and having carefully re-read and noted the transcript of evidence and the exhibits tendered by the parties, after giving due weight to each of the arguments advanced and to the submissions made by their counsel, I now find the following facts being satisfied as to each of them on the balance of probabilities.
The plaintiff’s action is based on a written agreement, bearing date 6th June 1989. That agreement is hereinafter referred to as “the loan agreement”. The parties to the loan agreement are the plaintiff as lender, the corporate defendant as borrower and the two personal defendants as guarantors.
The corporate defendant became known by its present name on the 14th day of August 1987.
The personal defendants are, and at all material times were, husband and wife.
The male defendant has been a shareholder in, and has held the position of director of, the corporate defendant since about that date.
The female defendant on the other hand has been a director of the corporate defendant since the 29th day of May 1989 and has held shares in it since the 28th August 1989.
I have noted with some interest that, for reasons which were not fully explained to me, the plaintiff was itself a shareholder of the corporate defendant with effect from 28th December 1987 until (significantly) 14th April 1994 when its shareholding was transferred to the personal defendants who remain the sole shareholders in the corporate defendant. I say “significantly” because on the plaintiff’s own case, as at that date, the plaintiff was already in possession of sufficient material which would have entitled it to bring the agent’s appointment to an end with the same or substantially similar consequences as are said to flow from the eventual termination relied on by the plaintiff.
In about the month of September 1986 the male defendant underwent a training programme for a “sales career” with the plaintiff. He completed the programme satisfactorily and on 17th October 1986 (document 71 of “P1”) he was appointed as an “AMP representative on probation” with effect from 20th October 1986. As a probationary representative the male defendant held two appointments. One of them was with the “AMP Society”. The other was with “AMP Fire and General Insurance Co. Ltd.”. The probationary period was to last for some fourteen months. During that time the male defendant was to be paid a retainer of $25,000.00 per annum. That retainer was payable semi-monthly.
The male defendant accepted his appointment as a probationary agent of the plaintiff on terms as stipulated in document 71 of P1. He did so by written document dated 23rd October 1986 (document 78 of P1). On 19th October 1987 the male defendant was advised amongst other things (document 92 of P1) that he had successfully completed his training period, that he had been accepted as an agent of the plaintiff with effect 16th October 1987, and that he would continue to receive his commissions on a bi-monthly basis.
At all material times the plaintiff had in operation a system whereby a limited company could become a corporate agent. The principal officer of the corporate agent or more precisely “the specified employee” as defined in the contractual documents between the parties (in this case the male defendant) would thereafter sell the plaintiff’s insurance product under the umbrella of the corporate agent. That is in effect what happened in the case at bar as from and after 1987.
In or about the month of August of that year the corporate defendant entered into a “corporate representative agreement” with the plaintiff.
It is common ground that the form of agreement which was used by the parties in 1987 was one that had been first introduced by the plaintiff on 1st January 1984. The terms and conditions of appointment as well as the rights and obligations of the parties were initially set out in that document.
The plaintiff says that the agreement in question was of an evolving nature in the sense that changes would be made to it as circumstances warranted that course of action to be taken. Mr Sykes, at one time counsel for the defendants, for his part said that the contract was of an osmotic nature. The plaintiff goes on to say that as at 1987 various changes had in fact been made to the agreement since its inception in 1984. Those changes, when made, were communicated by the plaintiff to all its agents. Communication was effected by means of a memorandum or document called “Message to Agents Advice” (“M.T.A.”). The various changes (when made and communicated) became part of the agreement. The document itself was updated in about 1987 in order to incorporate the changes that had been made to that time. I find that that had in fact occurred by the date of the corporate defendant’s appointment.
Upon being appointed as the plaintiff’s agent, the corporate defendant was provided with the relevant agreement and executed a form of acknowledgment. That form of acknowledgment document is in evidence as document 24 of exhibit P1. It provides amongst other things that:-
“(a).. the terms and conditions of appointment are set out in the Agreement and may only be amended by agreement;
................”
and further that
“(f)... the Society or AMP Fire may each vary commission rates and terms and other benefits available at its discretion at any time but will firstly negotiate such variations with the Federal Board of Management of the Federation of Associations of AMP Society Representatives. Variations will be notified by the issuing of a letter, or memorandum to representatives and continuance of the Company’s appointment after the issue of any such letter or memorandum will be taken as acceptance of the variations notified; ..........”
The plaintiff says, but the defendants dispute, that further changes were in fact made to the agreement on various occasions firstly between 1987 and 1991 and secondly between 1991 and 1994. Those changes, says the plaintiff, were communicated on each occasion to all its agents (including the corporate defendant). Communication, as previously, was effected in each instance by means of M.T.A.s as and when the relevant changes were made. Those changes (when made and communicated) became part of the agreement. The form of agreement document was again updated in 1991 in order to incorporate the changes that had been made to that time. The plaintiff says that the updated document was distributed to all its agents (including the corporate defendant) in late 1991 or early 1992.
The defendants for their part say that, to their knowledge, after the date of their appointment in 1987 no changes were made to the 1984 agreement as it stood in 1987. They go on to say firstly that no such changes were made, secondly that none were communicated to them between 1987 and 1991 and thirdly that they were never provided with a copy of the document which allegedly contains changes which are said to have been made between 1987 and 1991.
The position which has been assumed by the defendants is based on the evidence of the male defendant. For the sake of clarity I note at this point that in the course of these reasons I sometimes refer to the male defendant as “Mr Luu”.
Mr Luu did not impress me as a truthful and reliable witness on this topic. The grounds on which he relied and the reasons which he gave in support of the stand that he took were unsatisfactory and unconvincing. I have carefully reflected on the matter. My conclusion at the end of the day is that there is absolutely no reason for me to doubt what I was told on these topics by the witnesses for the plaintiff. I accept that evidence. I reject the evidence of the male defendant. I find that various changes were in fact made from time to time to the agreement as it stood in August 1987; that those changes were made on various occasions from 1987 to 1991; that when those changes were made, the relevant change was on each occasion communicated by the plaintiff to all its agents including the corporate defendant; that on each occasion the change in question was communicated by means of MTA’s; that the form of the agreement document was updated in 1991 in order to incorporate the various changes that had been made to that time; that the updated document was distributed by the plaintiff to all its agents in late 1991 or early in 1992 and finally that the document as it had been updated in 1991 was in fact distributed to and received by the corporate defendant.
The plaintiff says that further changes were made to the agreement on various occasions from 1991 to mid 1994; that each change, when made, was communicated to all its agents, including the corporate defendant, and that communication, as previously, was always effected by means of MTA’s.
It was the plaintiff’s case that two in particular of those various changes were made in 1994; that each change came into operation on 1st January 1994 and that the two changes in question were communicated by the plaintiff to all its agents, including the corporate defendant by MTA 94/36 and MTA 94/37 respectively. Those two documents and the annexures thereto are in evidence as documents numbered 410 and 411 respectively of exhibit P1.
Throughout the course of the trial, the male defendant maintained most emphatically that no changes had been made to the agreement after August 1987 and that what governed the parties’ rights and obligations throughout the period to September 1994 was that document as it stood in 1987. It was his evidence that he had certainly not been provided with, and that he had never seen either MTA 94/36 or MTA 94/37.
It is most relevant for me to note at this point that by the time of closing submissions the male defendant, through counsel for the defendants, did not maintain that assumed position. He did not do so in two respects.
One of them was in relation to exhibit D22. That exhibit is dated 30th November 1993. It is headed “Memorandum to Agents”. It deals with the topic of “Agency Development Loan” but more significantly it deals with the topic of “Buyer of Last Resort”. I say “significantly” because, for example, depending on the reason or reasons for terminating the agency appointment, upon that appointment being terminated, different consequences flow in relation to the disposal of the agency’s Fire and General Register. If the rights of the parties are to be determined in accordance with the agreement as it stood in August 1987 the consequence of terminating the appointment is that “the Register will revert to AMP Fire” (vide clause l.4 of Part lD). I am satisfied that there are no contractual provisions in the agreement as it stood in 1987 which deal with the topic of compensation in those circumstances. If, on the other hand, and this is important, the rights of the parties are to be determined in accordance with the agreement as it stood in November 1993 because of, for example, the change which was brought about by D22, the position would be substantially different because by that document the plaintiff makes a commitment which the defendants say applies to the case at bar. Exhibit D22 contains inter alia the heading “OUR COMMITMENT” and goes on to say as follows:-
“AMP undertakes that for business written prior to 1 January 1994, current BOLR multiples will apply until 31 December 1996 and for the foreseeable future beyond that date. Furthermore, AMP would give three months notice of any change in 1997 and beyond.”
The defendants rely upon the provisions of this document for their contention that upon the termination of the corporate defendant’s appointment as the plaintiff’s agent, the corporate defendant is entitled to rely upon the B.O.L.R. provisions because, based on the plaintiff’s commitment in D22, those provisions would apply to it without any qualifications and its registers therefore would have to be valued on that basis.
I leave to one side for the moment what the words “current B.O.L.R. Multiples” appearing in D22 might mean, other than to say that in order to find what they mean or how they are to be calculated, one must of necessity look at what the plaintiff says is the agreement as it stood as at November 1993 but, critically, as it might have been varied from time to time since 1987 in order to incorporate those terms.
The other aspect of the matter in relation to which the male defendant has shifted grounds is in relation to MTA 94/36 and MTA 94/37. Notwithstanding the position which the defendants had adopted and maintained up to final submissions stage, their counsel conceded, in his final address to me, that MTA 94/36 had been properly issued and that it had been properly communicated by the plaintiff to all its agents. Based on that concession I was invited to infer that the corporate defendant had probably received it and accordingly, therefore, that it had become part of the contract. It was submitted that I should find accordingly.
Such a finding, critically, is an essential link, not so much in the defendants’ defence, but particularly in their counterclaim. I say that because the case for the defendants is that they are entitled to damages on the ground that the plaintiff terminated the corporate defendant’s appointment as the plaintiff’s agent contrary to the terms of the agreement between the parties and more particularly, as I understood counsel’s submissions, contrary to the express provisions contained in MTA 94/36 with respect to “counselling”. The counselling provisions on which the defendants rely are not to be found anywhere else or in any other document regulating the relationship of the parties apart from MTA 94/36.
The defendants accept that the corporate defendant ceased to be an agent of the plaintiff in September 1994 but dispute the grounds on which termination of the agency was effected. As to the document which regulates their rights and obligations, the parties are not ad idem with respect to the precise terms of the corporate representative agreement as it stood as at September 1994. The plaintiff has tendered the relative agreement as a primary document numbered 413 in exhibit P1 together with all relevant subsequent changes which were made to it until September 1994. I shall refer to that document inclusive of all the later changes to it as “the 1991 agreement”. The defendants for their part have tendered what they say was the relevant agreement at the material time as a primary document numbered 7 forming part of exhibit D18 but concede and ask me to find that it was varied by exhibit D22 and MTA 94/36. I shall hereafter refer to that document inclusive of the two conceded later changes as “the 1987 agreement”.
What then was the agreement as it stood in September 1994? More specifically was it the 1991 agreement as contended for by the plaintiff, or was it the 1987 agreement as contended for by the defendants.
I have carefully considered the evidence which has been adduced by the parties. I accept the evidence which has been adduced by the plaintiff. I reject the evidence for the defendants. I do so for the reasons already given and others which will become evident in the course of this judgment. At the end of the day I am satisfied and find that what governed the parties’ relationship as at September 1994 was the 1991 agreement. I reject the evidence of the defendants to the contrary.
I shall now direct my attention to the plaintiff’s claim and inferentially to the defendants’ defence and counterclaim. In doing so I make findings of fact as follows.
Upon being appointed as the plaintiff’s agent, the male defendant, and later the corporate defendant in his place, held two separate appointments. One of them was with the A.M.P. Society. That appointment entitled the defendants to procure new life insurance, disability insurance, superannuation and re-instatement of lapsed policies.
The other appointment was with the AMP General Insurance. That appointment authorised the defendants to procure general insurance.
Commission on both types of insurance was paid by the plaintiff semi-monthly. Upon payment of the commission due, the plaintiff provided the defendants with all relevant supporting information and documentation. Some only of that supporting information and documentation has been produced and tendered in evidence. Accordingly, therefore, I do not have the full picture before me.
At all material times the plaintiff had an Agency Development Loans Scheme (otherwise known as “A.D.L.”). Under that scheme, the plaintiff made certain advances to its agents. The quantum of those advances was calculated according to a prescribed formula. Details of that formula are not relevant for present purposes.
The relevant allowances were made by the plaintiff to its eligible agents to enable those agents to assist them in the development of the business of the agency concerned. The corporate defendant took advantage of the scheme and made an application for a loan for the stated purpose. The application was accepted. The corporate defendant’s entitlement, according to the eligibility formula, was calculated at $19,144.52. The corporate defendant agreed to borrow that sum and an agreement was entered into. The agreement in question (to which I shall refer as “the loan agreement”) was made on 6th June 1989. The document is in evidence as document 130 of P1. The sum of $19,144.52 was in fact borrowed from the plaintiff by the corporate defendant on 23rd day of June 1989 (document 139 of Pl). I shall hereafter refer to that sum of money as “the loan”.
The loan agreement contains specific provisions as to the circumstances in which the loan was to be repaid. The relevant part of the provisions upon which the plaintiff relies in the case at bar read as follows:-
“2.1.. The Agent will forthwith repay to AMP the Loan upon the happening of any one or more of the following Repayment Events:-
(a).... cessation of the Agent’s appointment as an AMP agent for whatever reason; ...............” (my emphasis)
The relevant “repayment event”, upon which the plaintiff relies, is “cessation of the agent’s appointment”. That event, says the plaintiff, in fact occurred in September 1994. At that time the corporate agent’s appointment as an AMP agent was terminated by the plaintiff for reasons to which I will refer later in this judgment. The loan, therefore, became repayable forthwith, says the plaintiff, but it has not been repaid and the plaintiff claims repayment of it against the corporate defendant in these proceedings.
The defendants do not dispute that the agency could be terminated in certain circumstances, nor do they dispute that the corporate defendant in fact ceased to be an agent of the plaintiff in September 1994, but challenge the alleged grounds on which the appointment is said to have been terminated. They say that the plaintiff acted in breach of contact. I shall address that issue later in these reasons. For the time being I am satisfied and find that the corporate defendant ceased to be an agent of the plaintiff with effect from September 1994 as claimed by the plaintiff.
In addition to the repayment provisions, the loan agreement also provides for the payment of interest on the amount of the loan. The agreement specifies the rate of, and the circumstances in which, interest is to be paid. The relevant provisions are contained in Clause 3.1. That clause reads as follows:-
“3.1The Agent agrees to pay interest to AMP on the Loan at AMP’s commercial lending rate from time to time, such interest to accrue from day to day until the Loan is repaid in full, and to be paid at the time of repayment of the Loan PROVIDED that in the period up to the occurrence of a Repayment Event, AMP shall accept interest at the rate of Nil % per annum.”
The plaintiff claims interest on the amount of the loan in accordance with the provisions of the above clause 3.1 from September 1994 to date. I am satisfied and find that the plaintiff is entitled to interest as claimed. I note, however, that there is no evidence before me as to what the plaintiff’s “commercial lending rate” of interest was at the relevant time, or indeed at any time.
The loan agreement contains a guarantee clause. That clause is numbered 7. It reads as follows:-
“7.1The Controller, the Other Registered Proprietor and each of them unconditionally and irrevocably guarantee to AMP the due repayment in fully [sic] of the Loan and the payment of any interest due in respect of the Loan by the Agent.
7.2... This guarantee is a continuing security and extends to the ultimate balance of the Loan and all interest payable including any amounts of the Loan advanced at any future time. The Controller, the Other Registered Proprietor and each of them waive any right they have of first requiring AMP to proceed against or enforce any right power remedy or Security or claim payment from the Agent or any other person before claiming from any Controller or any Other Registered Proprietor under this guarantee.
7.3... Any Security given to AMP by any Other Registered Proprietor at any time is intended to secure the obligations of that Other Registered Proprietor under this guarantee.”
For the purposes of the guarantee clause of the loan agreement, “the Controller” is the male defendant. The female defendant is “the other registered proprietor”.
The personal defendants say that the guarantee clause does not bind them. On that topic I make the following findings.
The loan agreement inclusive of the guarantee clause was executed by each of the two personal defendants. Their signatures were witnessed by one L.P. McEvoy. At the relevant time Mr McEvoy was a barrister and solicitor. In addition to witnessing the personal defendants’ signatures, Mr McEvoy signed a certificate. That certificate is to the effect that before the subject document was executed by the defendants Mr McEvoy had fully explained to the personal defendants their liability under Clause 7 of the agreement.
On the basis of these findings I am satisfied that the personal defendants received independent legal advice about the nature of the agreement into which they were about to enter before they in fact entered into it. I reject the evidence of the personal defendants to the contrary. In particular I reject their evidence to the effect that they did not know that what they were signing was a guarantee, or that they were not aware of their obligations or that those obligations were not fully explained to them by Mr McEvoy, or that Mr McEvoy was not an independent legal practitioner. I am satisfied and find that the personal defendants and each of them knew what they were doing and knew and understood the nature and full extent of their obligations under the guarantee.
The plaintiff says that the amount of the loan was not repaid by the corporate defendant as principal debtor. For that reason demand for the repayment of the same was made onto the personal defendants as guarantors. The plaintiff says that the amount in question remains unpaid and seeks to recover it from the guarantors in these proceedings.
In paragraph 11 of their defence and counterclaim the defendants say that:-
“11... The ADL in the sum of $19,144 was provided by the plaintiff to the first defendant for the express purpose that it be used by the first defendant in development of its business. The first defendant used those monies in developing sub agencies and offices interstate thereby increasing the size of the plaintiff's business by increasing sales of the plaintiff's products.”
As I understood the defendants’ case, what they were saying was that the plaintiff made the loan to the corporate defendant for the express purpose of enabling it to develop its business. The corporate defendant in fact used the loan in developing its agencies and offices interstate. The purpose for which the loan was made, therefore, was accomplished in that the size of the plaintiff’s business increased by increased sales of its product. On those grounds therefore the loan was not repayable either by the corporate defendant as principal debtor or by the personal defendants as guarantors.
The evidence I heard did not support the contention to which I have referred. Indeed I note that contrary to the pleading, at one stage the male defendant went totally outside of it and said that the loan was not repayable because it was a gift. Having given vague, imprecise and confusing evidence, he was asked at page 101:-
“What did you understand that money to be, did you understand it to be a loan, a gift or something else”
to which he replied
“They just said gift for (sic) AMP”.
This evidence is contrary to what Mr Luu said elsewhere and is contrary to the very purpose of the loan agreement and of the security document to which I will refer shortly. I totally reject it.
In the course of his evidence Mr Luu referred to a conversation which he had had with an officer of the plaintiff named Mr Dennis Botting. The impression that Mr Luu left me with was that he had been given to understand by Mr Botting that the loan would become repayable upon the corporate defendant ceasing to be an agent of the plaintiff, and further, that if and when that were to occur, Mr Luu and a representative of the plaintiff would sit down and work out the value of the registers to the intent that one would be offset against the other and the balance would be payable as appropriate. The plaintiff did not challenge that evidence. Mr Botting was not called. The arrangements referred by Mr Luu are sound in logic, make sense in fact, and are in accordance with the provisions of the loan agreement and of the security documents. I accept Mr Luu’s evidence to that effect and find accordingly.
Having carefully considered everything which has been put to me by the parties, at the end of the day I am satisfied and find that, all other things being equal, the corporate defendant is liable to the plaintiff as principal debtor and further that the personal defendants and each of them are liable to the plaintiff as guarantors. I say “all other things being equal” because the corporate defendant as well as the personal defendants have contested the plaintiff’s claim against each of them and have counterclaimed damages against the plaintiff on various grounds. One of those grounds is that if the personal defendants are liable as guarantors (which in any event they deny) they say that their liability under the alleged guarantee has not crystallised because, so the argument runs, the corporate defendant’s alleged indebtedness to the plaintiff has been fully satisfied as a result of the plaintiff having realised the security which it took for the loan. On that basis the defendants say that neither the corporate defendant nor either of the personal defendants is liable to the plaintiff either as claimed or at all. Indeed they say that it is the plaintiff who is indebted to the corporate defendant on the ground that the value of the security that it realised, by taking it and retaining it, was greater than the amount of the alleged debt.
It is to that aspect of the matter that I shall now turn my attention.
I am satisfied and find, as it is common ground between the parties, that the indebtedness of the corporate defendant to the plaintiff with respect to the loan was secured by a fixed and floating charge which the plaintiff took over “the secured property” of the corporate defendant. That charge is evidenced by a document which the parties executed on 16th June 1989. The document in question is in evidence as document No. 133 of exhibit P1. In that document (to which I shall hereafter refer to as “the security document’) the corporate defendant is called “the chargor”. The plaintiff is called “the chargee”. The “secured property” over which the charge was taken is defined as including, amongst other things, the chargor’s “fire register” and the chargor’s “life register”.
The terms “fire register” and “life register” are defined in the security document as follows:-
“’Fire Register’ means AMP Fire & General Insurance Co. Limited’s complete list of the policies serviced by the Chargor from which is calculated the Chargor’s entitlement at present or in the future to commission or renewal commissions.”
“‘Life Register’ means the total of the Chargee’s listings of all policies serviced by the Chargor from which is calculated the Chargor’s entitlement at present or in the future to service payments from the Chargee.”
In the event that it should have become necessary for the plaintiff to realise the security, the security document itself provides for the manner in which the proceeds from the realisation of the security should be applied. Those provisions are contained in clause 17 of the security document. The clause is headed “Application of Money” and reads as follows:-
“17.1......... Subject to clause 17.4 and to the extent permitted by law, money received towards satisfaction of the Secured Money is to be applied (after satisfaction of claims taking priority over this charge) as follows:
........ ..........................
(c)... thirdly, towards satisfaction of the balance of the Secured Money in the manner and order which the Chargee determines in its absolute discretion; and
(d)... fourthly, to the extent not otherwise applied, to the Chargor or any other person entitled to them. (In particular, the Chargee may pay the balance of the money to a person with a subsequent Security Interest in the Secured Property whether registered or not, or may pay it into court by way of interpleader without incurring liability to the Chargor).”
Clause 17.1 of the security document refers to the term “Secured Money”. That term is defined as meaning:-
“all amounts which now or in the future for any reason whatsoever are payable, are owing but no (sic) currently payable, are contingently owing, remain unpaid or may become owing by the Chargor to the Chargee in connection with the Loan Agreement ....”
Before deciding the issue presently under consideration which has been raised by the defendants it is necessary to step back and to have regard to certain provisions of the agreement between the parties as well as to the reasons for the plaintiff’s termination of the corporate defendant’s appointment as its agent and more particularly whether the agency appointment was terminated in accordance with or contrary to the terms of the agreement. It is important to do this because, as it seems to me, the rights, duties, obligations and entitlements of the parties may well depend upon the answers to be given to the questions involved in the matters to which I have referred.
The defendants concede that in order to establish the occurrence of the repayment event which would entitle the plaintiff to call in the ADL and demand repayment of the loan, it is not for the plaintiff to satisfy the court that the termination of the appointment was effected in accordance with the terms of the agreement. The defendants accept that proof of that fact is not part of the plaintiff’s case and that it is for the defendants to satisfy the court that the termination of the corporate defendant’s appointment as the plaintiff’s agent was effected otherwise than as provided for by the agreement - and therefore in breach of it if they are to succeed in their counterclaim. It is to that aspect of the matter that I shall now turn my attention.
The so-called termination of appointment provisions are contained in Clause 1.1 and 1.1(f)(i) of Part 1D of the 1991 agreement. That clause is addressed to the plaintiff’s agents and provides that:-
“1.1 Your appointment as an Agent may be terminated by yourself or by the Society at any time, without prior notice and without assigning any cause”
and goes on to say that it:-
“will automatically be terminated ....
(f) in the Manager’s discretion if you:
i)have not achieved or maintained the performance standards required from time to time by the Society, or
....”
The plaintiff says that in terminating the corporate defendant’s appointment as its agent, the plaintiff acted in pursuance of that clause and relies on document 315 of exhibit P1 in support of its contention. That document is dated 28th September 1994. It is signed by “Greg Robbie” and reads as follows:-
“The Directors
Kien Dan Luu Pty Ltd
8 Aberfeldy Avenue
WOODVILLE SA 5011
Dear Sir,RE: YOUR AMP AGENCY
We prefer (sic) to previous correspondence from both myself and Gary Leverington.
You will be aware of the terms of your current Corporate Agency appointment, in particular Part 1.D, clause 1.1 which provides as follows:
‘This appointment as a Corporate Agent may be terminated by the Company or by the Society at any time, without prior notice and without assigning any cause and will automatically be terminated on the first of:(f).... if in the Manager’s discretion the Company or the Specified Employee:
(i).... have not achieved or maintained the performance standards required from time to time by the Society.’
It is with regret that we inform you that in accordance with the terms of the above clause your AMP corporate appointment (including both AMP Society and AMP General Insurance Ltd) is hereby terminated effective immediately.
You will be contacted shortly in respect of the details of any current outstanding debts.
Yours faithfully,
(Signed)
GREG ROBBIE
STATE MANAGER
AGENCY OPERATIONS
28 September 1994”Although the letter itself does not make it abundantly clear, having regard to what transpired between the parties before this letter was written and dispatched, there is no doubt in my mind that what the plaintiff was saying was that the reason why the agency was terminated was because the corporate defendant had “not achieved or maintained the performance standards required from time to time” by the plaintiff and accordingly, therefore, that the plaintiff was relying on the provisions of clause 1.1(f)(i) rather than on clause 1.1 and I so hold despite Mr Rydon’s (at one stage) apparent stand to the contrary.
The defendants challenge the position which has been assumed by the plaintiff on various grounds. Those grounds, as I understood the defendants’ case may be summarised as follows:-
1There were no performance standards which the corporate defendant was required to achieve and or to maintain.
2In the alternative, if there were performance standards to be achieved or to be maintained by the corporate defendant from time to time, those standards were at all material times in fact achieved and maintained by the corporate defendant.
3In the further alternative, if there were performance standards to be achieved and/or to be maintained by the corporate defendant, and if the corporate defendant did not achieve and/or maintain those standards as alleged, the plaintiff nevertheless purported to terminate or terminated the corporate defendant’s appointment as its agent contrary to and, therefore, in breach of the agreement in that:-
A...... The appointment was not properly terminated because:-
(i) “The manager” at whose discretion the appointment may be terminated had not been defined or identified and therefore there is no person who can exercise the specified discretion;
and/or
(ii)... There is no evidence before the Court of the exercise of discretion by any person.
and/or
(iii).. The act of writing and posting document 315 of P1 does not constitute termination of the appointment within the meaning, and for the purposes, of the agreement.
B.The plaintiff did not follow its own procedure for the purpose as set out in MTA 94/36.
In relation to the matters referred in paragraph 3A above I am satisfied that the Greg Robbie, who signed document 315 of exhibit P1, was at all material times the state manager of the plaintiff’s agency operations. As such, in my opinion, Mr Robbie comes within the meaning of the expression “Manager” in clause 1.1(f) of Part 1D of the agreement. I am satisfied, therefore, that the letter of 28th September 1994 came about as a result of the exercise of a discretion reposed in Mr Robbie as manager. My further view is that the act of writing and forwarding that letter constituted the act of termination or was at least confirmatory of that fact. I reject each of the submissions of the defendants as made with respect to paragraph 3A above.
I shall now direct my attention to a consideration of the other grounds on which the defendants base their counterclaim. The first question that I must answer is this:-
Were there performance standards which were set by the plaintiff from time to time and which its agents, and in particular the corporate defendant, were required to achieve and to maintain?
The parties are at odds as to the answer that should be given to this question. The plaintiff invites me to answer it affirmatively. The defendants urge me to answer it in the negative. Their counsel relies upon the 1987 agreement and in particular on what appears at page G1 11 of part 4B of document 7 of D18. That document addresses the corporate agent with these words:-
“[You have] freedom of action to run your own business [and] to dictate your own earnings by the results that you achieve”.
Based on this provision of the agreement the corporate defendant says that it had the right to work as and when it pleased and to earn as much or as little as it wanted to earn. On that basis therefore the corporate defendant says that there were no production standards which it was required to achieve or to maintain. I do not accept this submission for two reasons - one of them is because, as I have already found, it is the 1991 agreement and not the 1987 agreement that governs the relationship of the parties and their respective rights and obligations. Critically, for this purpose, the 1991 agreement does not contain the clause on which the defendants rely and for that reason therefore I reject their contention.
Another reason why I do not accept the contention of the defendants is because it is inconsistent, not only with the evidence of the witnesses for the plaintiff, but, critically, it is inconsistent with the evidence of the male defendant himself. True it is that in the course of giving evidence he did not use the expression “minimum production standards” but in the context of the discussion before me there is no doubt in my mind, and I find, that he was speaking about the same concept. For this reason also, therefore, I reject the contention of the defendants and find that there was indeed a minimum production standard which the plaintiff set from time to time and which its agents, including the corporate defendant, were required to achieve and to maintain.
I note at this point that, in relation to another topic, different terms were used by the various witnesses and indeed by counsel in order to describe the same concept. Witnesses for the plaintiff made reference to validation earnings and base earnings. The male defendant spoke of minimum earnings, eligible earnings and minimum eligible earnings. Each of those terms were used in connection with production standards which were set by the plaintiff and which were required to be maintained by its agents, including the corporate defendant from time to time. I find that, although different terms were used to describe the same concept, the proper label for present purposes is “validation earnings” and further, that that is what the witnesses were speaking about. Speaking of “validation earnings” the parties are agreed (vide the agreed facts at page 727 of the transcript) that prior to 1994 there were no documents in existence between the parties which dealt with either the meaning of that concept or with the quantum of those earnings which the corporate defendant was required by the plaintiff to achieve at any given time, or as to the manner in which those earnings were to be calculated in order to determine whether or not the required level had been achieved.
As to quantum, the evidence of the male defendant was that the corporate defendant was required to earn $25,000 in 1987 and just under $20,000 for the 1991 calendar year as well as for each of the calendar years thereafter until and including the 1994 calendar year. The evidence of the witnesses for the plaintiff on the other hand was that the required level for each of the 1992 and 1993 calendar years (I leave to one side the 1994 calendar year for the moment) was $23,760 and that the male defendant had been so advised by his branch manager at the beginning of each of those years.
The male defendant’s evidence on the topic was unclear and uncertain. As for the evidence of the witnesses for the plaintiff on the topic I noted some inconsistencies on what was said, but at the end of the day I found it to be more truthful and reliable. I accept it for my purposes. I reject the evidence of the male defendant to the contrary. I find that the level of validation earnings which the corporate defendant had to achieve for each of the calendar years in question was $23,760 and that the male defendant was so advised by his branch manager at the beginning of each of those calendar years.
The parties were not ad idem as to the manner in which the required level of “validation earnings” was to be calculated. The plaintiff’s case, and the evidence of its witnesses, was that what must be had regard to are commissions earned on new business only consisting of initial payments and deferred instalments. The defendants, for their part, contended that all commissions earned from all sources inclusive of commissions earned on new business as well as commissions earned on renewals (otherwise known as “service commissions”) are to be taken into account in calculating validation earnings.
I heard substantial evidence on the topic. Each counsel made extensive submissions in support of the stand taken by their respective clients. The male defendant was an unimpressive witness. I have no faith in his testimony on this topic. In my view the evidence of the witnesses for the plaintiff has the ring of truth about it.
Having carefully considered everything which has been put to me I must say that at the end of the day I am persuaded to the appropriate degree that Mr Rydon’s submissions are well founded and that they hold good in logic and in fact. Furthermore, in my view, they are commercially sound. In addition to my already stated reasons I adopt what Mr Rydon said on the topic as my own and use it as an additional reason for rejecting the male defendant’s evidence as well as the corporate defendant’s contention. For the same reasons I accept Mr Rydon’s submissions on the topic and find that, in calculating the required level of validation earnings, what has to be taken into account is the amount of the initial payment and the amount of the deferred instalments of commissions earned on the writing of new business only. I am satisfied that all commissions earned otherwise than for the writing of new business are to be excluded.
In the course of the trial the plaintiff contended, and its witnesses said, that the corporate defendant had not achieved the required level of validation earnings for the 1992 calendar year and, further, that it had not done so for the 1993 calendar year also. The corporate defendant maintained otherwise. It did so on the evidence of the male defendant. It also tendered documentary evidence (by means of aide memoires which form part of Exhibit D20) showing how the relevant quantum had been calculated. The calculation was based on information which had been provided to it by the plaintiff in the form of various commission, premium and other statements. Those statements were tendered as exhibits and are before me.
I have carefully considered the documents which have been tendered by the parties. I bear in mind the submissions of counsel. I have scrutinised the evidence of the witnesses. At the end of the day I am satisfied that in arriving at what the defendants say is the level of validation earnings achieved by the corporate defendant for each of the relevant years, the male defendant has included in the relevant calculation, amounts of commission which should have been excluded because they are neither initial payments nor deferred instalments of commissions earned on the writing of new business. I accept the evidence of the witnesses for the plaintiff. I reject the evidence of the male defendant. I find that the corporate defendant did not achieve the required level of validation earnings for the 1992 calendar year and, further, that it did not do so for the 1993 calendar year either.
This then brings me to the 1994 calendar year. The plaintiff says that in that year substantial changes were made to the agreement which regulated the rights and obligations of the parties and that those changes became operative on and from 1st January 1994. Particulars of the relevant changes, for present purposes, are contained in MTA 94/36 and in MTA 94/37. Those documents are in evidence before me as documents numbered 410 and 411 respectively and form part of exhibit P1. The plaintiff says that each document was properly issued and distributed by the plaintiff to all its agents, including the corporate defendant. I have already referred to the position which the corporate defendant assumed throughout the course of the trial and to the shift in that position which was adopted by defence counsel during closing submissions on specific instructions received from the male defendant with respect to MTA 94/36. The defendants’ position with respect to MTA 94/37 remained the same to the very end. The male defendant still says that he was unaware of the existence of that document, that he had never seen it, that he had never received it and accordingly therefore (up to closing submissions stage) that it not form part of the agreement.
It is interesting to note that each of the two MTA’s in question is dated 3rd March 1994. MTA 94/36 is a document on which the defendants want to rely in support of their counterclaim. Hence the concession that it was probably received by the defendants and that it forms part of the amended 1987 agreement. Not so with respect to MTA 94/37. On the face of it, the contents of that document favour the plaintiff’s case rather than the case for the defendants. Not surprisingly, therefore, the defendants maintained that it was not received.
In my opinion the evidence of the male defendant on this topic is inherently implausible. I find it to be totally incredible. I have no hesitation in rejecting it. I find that each MTA was properly issued by the plaintiff, that each of them was properly distributed to all its agents, including the corporate defendant, and that the contents of each MTA form part of the agreement between the parties.
Mr Tredrea of counsel for the defendants must have anticipated that, in the light of his concession with respect to MTA 94/36, my finding, as I have just indicated, was inevitable. It was probably for that reason that, having invited me to find that MTA 94/36 became a contractual term between the parties (on the basis of his submission at page 1941) when I said to him on the same page:-
“If that be so then the minimum standard that was fixed for 1994, that’s 94/37, [also] that falls in the same category doesn’t it? Namely that it was issued by AMP, [and that] it was distributed to the agent, [and] I can infer that Mr Luu received it and therefore that [its] contents [are] bind[ing] upon him and to that extent [that] the agreement has been varied.”
he answered:-
“Yes”.
One of the changes that was brought about by MTA 94/36 was the withdrawal of the old minimum standards, and the formal introduction of the new concept of “production standards”. Production standards according to MTA 94/36 are “the levels below which the contribution from an agent’s business does not cover the required A.M.P. overheads”. Those standards are achieved by an agent in one of two ways. One of them is by achieving the appropriate “validation earnings” level. The other is by accumulating the required “target points”.
The evidence of the witnesses for the plaintiff and the documentary evidence that has been tendered satisfy me to the appropriate degree, as I find, that “validation earnings” are a measure which the plaintiff applies to new business and only to new business coming into the system. Those earnings represent a figure which is derived from the amount of new business that an agent writes from time to time. The level of validation earnings which is required to be achieved by an agent is dependant upon “base earnings”. As at 1st January 1994 the “base earnings” requirement for the ensuing year was fixed at $20,000-00. Annexure 2 of MTA 94/37 deals with the meaning of the term “base earnings”. I accept the meaning of the term as defined and adopt the definition as my formal finding without referring to it in detail.
The term “validation” for its part is defined in Annexure 1 of MTA 94/37. In relation to an agent of the corporate defendant’s status, it provides that:-
“For each settlement an Agent is defined to be validating if calendar year to date Base Earnings (see Annexure 2) are at least equal to the amounts in the table below and if the Agent’s latest available Persistency Rate in respect of certain Personal Insurance Individual Regular Premium Business is at least equal to the minimum Persistency Rate published from time to time by AMP (81% with effect from 1/1/94).”
Reference should now be made to the table referred in the definition of “validation”. However, the corporate defendant does not dispute that the last new policy was written in the month of October 1993. Given that, as I have already found, the agency had been under-performing in each of the 1992 and the 1993 calendar years, and given further that it had not been performing at all in 1994 (save and except for the writing of one $5,000 superannuation policy in July 1994) there is no doubt in my mind, as I find, that during the whole of 1994 the corporate defendant had neither achieved nor had it maintained the required level of validation earnings. For this reason, therefore, I need not refer to the table mentioned in the definition of “validation” in any detail to see whether or not validation levels were achieved. I simply accept it and adopt it as my formal finding on the matter and further find that validation earnings levels were not achieved for the relevant period.
I have noted earlier that as a result of changes which became operative on 1st January 1994 the agent was provided with an alternative method of achieving the required production standard. The agent could do so by accumulating “target points”.
For the purposes of reaching the target, the accumulation of target points (unlike “validation”) is not based exclusively on new business. Points are accumulated or calculated for each type of business. They are so calculated on a rolling twelve month period. The points so calculated are added together and are then compared with, or measured against, the target as set by the plaintiff. The target which was required to be achieved in relation to any rolling twelve month period was set at 1090 points for the 1994 calendar year. An example of how target points are calculated may be found in documents numbered 293, 294 and 301 of exhibit P1.
The plaintiff’s case was that the corporate defendant did not reach the minimum production standards required to be achieved for any part of the 1994 calendar year up to the end of September 1994 in that at no time during 1994 had the corporate defendant achieved either the required minimum validation earnings level, or the required target points. The corporate defendant contends otherwise. I reject that contention.
I am satisfied as I find it to be the fact that the corporate defendant did not achieve or maintain the minimum production standards required by the plaintiff for any part of the 1994 calendar year in that at no time during that year did the corporate defendant achieve or maintain either the required level of validation earnings, or the necessary target points. It also follows that I am satisfied as I also find that although there is no onus on the plaintiff to prove it as a fact, the plaintiff’s allegation that it terminated the corporate defendant’s appointment as its agent on the ground that it had not achieved or maintained the performance standards required by the plaintiff at the material time has been made out. I reject the defendants’ contention that on the topic under discussion the plaintiff acted in breach of contract. On that topic my finding is that the plaintiff acted in accordance with the provisions of the agreement between the parties and accordingly, therefore, that the defendants’ case has not been made out; but that is not the end of the matter.
On 15th December 1994 the plaintiff’s solicitors wrote to the plaintiff (document numbered 369 of exhibit P1) and said inter alia as follows:-
“Mr Luu firmly believes that over the last couple of years, he has been very badly treated by AMP.”
Critically, the letter goes on to say:-
“He even feels that an intentional course of action has been followed with a view to forcing the forfeiture of the register.”
The particulars relied on by the defendants in support of that contention are contained in paragraph 20.1 to 20.7 of their amended defence and counterclaim. They are as follows:-
“20.1In March 1994 the plaintiff’s new agency manager at Burnside Sales Centre, Mr Gary Leverington (”Leverington”) met with the second defendant. At that meeting Leverington made racist and derogatory comments to the second defendant in reference to his Chinese background.
20.2At that meeting Leverington told the second defendant that the second defendant had been with AMP too long and was “going stale”. Leverington made it clear to the second defendant, by his words and conduct, that he intended to remove the first defendant from its position as an AMP agent.
20.3On 25th March 1994 the second defendant, on behalf of the first defendant, wrote to AMP disputing Mr Leverington’s assertions that the first defendant was not meeting performance standards and setting out his most recent premium figures. The first defendant did not receive a response to that letter.
20.4In early April 1994 the second defendant met with Leverington at the AMP Burnside Sales Centre. At that meeting Leverington, in front of other AMP agents, told the second defendant that he, Leverington, didn’t like the second defendant and “wanted him out”.
20.5On 22 May 1994 the second defendant, on behalf of the first defendant, wrote to AMP again disputing Mr Leverington’s assertions that the first defendant was not meeting performance standards and stating that Mr Leverington had acted in a racist manner towards him in public. The first defendant did not receive a response to that letter.
20.6The actions of Leverington caused the second defendant severe stress. He feared that he would lose his job because of Leverington’s racist attitude. He sought medical treatment for his stress. He found that it was difficult to concentrate on his work when he was fearful for his position.
20.7Due to stress related hill-health of the second defendant, the first defendant’s business suffered. The first defendant, as managing director of the first defendant, was unable to work at his previous rate and the first defendant’s policy portfolio reduced.”
The evidence of the male defendant on some of the topics referred in the pleadings, which I have quoted, was indeed consistent with those pleadings. Some of the documentary evidence which he tendered, however, as well as the evidence which he gave in relation to those documents was inconsistent with the position that he had assumed.
There can be no doubt that Mr Luu and Mr Leverington first met on 17th March 1994. Equally there can be no doubt on Mr Luu’s own evidence, and on what he put to Mr Leverington in the course of his cross examination of him, that the alleged racist and derogatory comments in reference to his Chinese background had allegedly been made at that meeting, and yet the matter was not raised by Mr Luu either orally or in writing with anyone until 22nd May 1994 (well over two months later) when he sent a facsimile message to various departments and in particular to “Mr Ian Salmon AMP Society Managing Director” and to “Mr Ian Burgess AMP Society Chairman”. That fax is in evidence as document 268 of exhibit P1. Interestingly, what Mr Luu said in that document was this:-
“Early April/94 Staff from Burnside S/C ‘Gary LEVERINGTON’ Racism face to face with my personal in public”
and concluded by saying:-
“follow sent letter to offer purchase my company business of Register values.”
The latter part of Mr Luu’s writing that I have quoted suggests, and Mr Luu’s evidence confirmed, that, at some stage, Mr Leverington had in fact written to Mr Luu with an offer to purchase his register. I find that evidence to be totally incredible. I reject it.
As for the former part of the letter that I have quoted, Mr Leverington said, and I accept, that he first heard of the subject accusation when he asked for, and was provided with, a copy of the letter in question. That request was made in the course of a telephone discussion which he had had with Mr Luu on 24th May 1994. The only complaint bearing on the topic made by Mr Luu, in the course of that telephone discussion as recorded by Mr Leverington in document 276 of exhibit P1 (which record I accept as reliable) is that Mr Leverington “had yelled at him” and that he had done so “in public too”. Nothing was said to Mr Leverington about any racism or racist remarks. Critically, according to document 276 of exhibit P1, the alleged remarks are said to have been made not in March 1994 when Mr Leverington met with Mr Luu (as pleaded) and not on the very first meeting between the two of them (as deposed in evidence) but rather in “early April 1994” which Mr Luu later identified in evidence as being at some time “between 7th and 10th April 1994”.
Mr Luu was cross examined on that topic as well as on the topic of who (if anyone as he had alleged by the use of the expression ‘in public’) was actually present when the alleged comments were made. His evidence on that last topic, which evidence I need not quote in detail, appears at pages 1031-1034.
Mr Luu impressed me most unfavourably on each of these topics. He contradicted himself. He was vague. He was imprecise. He was evasive. I refer in particular (without quoting) to what he said at pages 1030-1034. I have no faith in the truthfulness and reliability of what he told me. I just do not believe him. I reject his evidence.
Mr Leverington, for his part, impressed me far more favourably on this aspect of the case. He impressed me as one who would have behaved in a professional manner, notwithstanding the obviously hard and apparently ruthless or harsh commercial decisions that he made and the actions that he took. He denied having made the alleged, or any, comments as deposed to by Mr Luu. I believe him. I accept his evidence. I reject that of Mr Luu. I find that none of the relevant matters on the topics under discussion as pleaded in paragraphs 20.1, 20.2, 20.4 and 20.5 have been proved to my satisfaction. My further finding, therefore, is that the defendants’ case as pleaded has not been made out and I so hold.
Having said as much I must also add that there is no doubt in my mind that at that first meeting, and in the course of their “lengthy discussions”, Mr Leverington would have enquired as to how long Mr Luu had been with the plaintiff and also, having regard to his client base, to his appearance and to his marked accent, as to his ethnicity. In asking questions on those topics Mr Leverington, in my opinion, did not have a hidden agenda, did not nurture or display a dislike for Mr Luu or for people of his race, and did not necessarily want him out of the plaintiff’s organisation because of that. That is not to say, however, that Mr Luu did not have a perception that that was so. I think that he did have that perception but it was self induced and of his own choice. In my judgment, the perception which Mr Luu had of the situation in which he found himself was reasonably held, but Mr Leverington is not to blame for it because, in my view, it had not been deliberately or otherwise induced by anything that Mr Leverington did or said. I reject Mr Luu’s contention to the contrary.
I shall now direct my attention to the defendants’ assertion that the plaintiff is nevertheless in breach of contract because the corporate defendant’s appointment as the plaintiff’s agent was terminated otherwise than in accordance with the procedure set out in the contractual documents between the parties. In support of that contention the defendants rely upon the contents of MTA 94/36 to which I have already referred and in particular on that part of the document which is contained under the heading “Production Standards” and “Procedure”. The relevant material under each heading reads as follows:-
“PRODUCTION STANDARD
The Production Standard is now set as the level below which the contribution from an Agent’s business does not cover the required AMP overheads. Agents who are not performing at or above this level will be counselled by their Agency Manager (or Sales Manager in some circumstances) and/or AMP General Adviser over a period of up to 6 months. If, following this counselling, Agents do not increase their performance to the desired level, their Agency Agreement ..... will be terminated.”
“Procedure
Should an Agent fail to achieve or maintain the above standard, the Agent will be counselled. Counselling will be provided by the Agency Manager (or the Sales Manager for Associate Agents of a General Agent) and/or the AMP General Adviser. If the Agent is working in a Structure (General Agency, Managing Agency or Contract for Services), the Principal will be notified and the involvement of the Principal in the counselling will be discussed. At the end of the initial counselling session the Agency will be provided with a written report. It will state the objectives for the Agent, the period within which the objectives are to be met and the action to be taken to achieve the objectives.
If the objectives are not achieved by the given date, further counselling may be required, but if, after a maximum period of 6 months from the initial counselling, the standard has not been achieved, the Agency Agreement (with AMP and AMP General) will be terminated.”
The parties are at odds as to whether or not this procedure was followed. The answer to be given to the question will determine the final outcome of the case. This issue was made the central focus of the defendants’ case. Because of its importance I propose to deal with the matter fully and at some length by considering everything that took place since the beginning of 1994 and the background material leading to it.
I make the following findings of fact being satisfied as to each of them to the appropriate degree.
The corporate defendant was at all material times operating from the Burnside branch of the plaintiff’s business operations. At all material times there were between thirty five and sixty agents attached to that branch.
Up until the end of the month of December 1993 the agency manager of that branch had been one Mr John Lipkiewicz. That person and the male defendant had enjoyed a good working relationship. The male defendant says that there had not been any problems between them, and that Mr Lipkiewicz had never complained to him about his performance. He added that Mr Lipkiewicz might have spoken to him at times but that the manager had always accepted his explanation. I heard evidence from Mr Lipkiewicz. Mr Lipkiewicz did not contend otherwise. Mr Lipkiewicz went on to say that he was aware of the personal defendant’s working practices and was never overly concerned about any obvious gaps in his performance because he had always made up the shortfalls save and except for the last couple of years which I took to mean the calendar years 1992 and 1993. I accept that evidence and find accordingly.
In late February/early March 1994 a new branch manager was appointed to the Burnside branch of the plaintiff’s agency. That person was Gary Leverington. He took over on 1st or 2nd March 1994. At that time the State Manager was Greg Robbie.
I have heard evidence from Mr Leverington. He told me and I accept that he had been appointed as the principal agency manager in charge of the operations of the AMP Burnside office in early March 1994.
His further evidence was to the following effect.
Shortly before taking up his appointment, and more precisely on 28th February 1994, Greg Robbie had instructed him by telephone to do a report on five or six named agents of the Burnside agency who, according to the plaintiff’s records, had written no new business thus far in 1994. The report was to be prepared by Mr Leverington and was to be submitted to Mr Robbie as soon as possible. One of the agents on whom the report was sought was the male defendant and/or the corporate defendant.
Upon taking up his new appointment Mr Leverington did not limit himself to reviewing the performance of the named agents. He undertook a review of the performance of all of the agents who were then attached to the Burnside branch. In the course of that review he made an analysis of what business had been completed or written since and including January 1994. Having done that, however, he then went back in time and looked at reports, in his own words, on
“what awards had been achieved, or what standards had been achieved, what results had been achieved by the advisers in the preceding year.”
The corporate defendant was one of the agents whose performance was reviewed in that manner. Having completed the review, Mr Leverington concluded that “the results for 1994 and in the preceding year had not been satisfactory”. He went on to say, in his own words, that the defendant was “a file that we would need to examine further”. That had to be done because, in Mr Leverington’s view the corporate defendant was one of several agents who, according to the review, was not at that time, and had not previously been, meeting the standards which the plaintiff required of its agents in accordance with its guidelines. Those guidelines, of course, were “minimum performance” or “production standards” which were based on the achievement of target points and/or on reaching the required “validation earnings” level. I have referred to these concepts and I have discussed what they mean, how quantum is to be calculated and at what level they were set, elsewhere in this judgment.
I remind myself that although the quantum of “validation earnings” is determined by the application of a quite complex formula the “lion’s share” of them is made up of new business commissions that are generated by an agent from selling the insurance products of the plaintiff.
I note that commissions earned by an agent from selling insurance products are divided primarily into initial commissions, and renewal or otherwise known as service commissions. “Initial commissions” for their part consist of an immediate part payment of commission upon the writing of the new business and two instalments representing the balance payable in relation to the writing of that new business in the two successive calendar years.
The corporate defendant’s agency business was a mixed insurance business. It sold a variety of the different types of insurance products which were offered by the plaintiff. All the witnesses agreed that the preponderance or vast majority of its business was superannuation based. I have made specific findings as to that elsewhere in these reasons.
The review which was conducted by Mr Leverington for the period from 1st January 1993 to about the end of the first quarter of 1994 showed that the defendant had written very little business for the period under review and none at all since October 1993. That state of affairs, of course, was of concern to Mr Leverington because amongst other reasons it meant that the defendant was not validating the agency or, differently expressed, the agent was a non-performing agent in the sense that the agency was not achieving the minimum performance or production standard. Certain consequences flowed from an agent being classified as a non-performing agent. Such a status called into play the counselling procedures to which I have already referred.
I have noted elsewhere that an agent who did not achieve the required level of “validation earnings” could nevertheless be validating his agency if the agent had accumulated the required number of target points, i.e. 1090 for any rolling twelve month period.
The next topic, with which I propose to deal, is the personal defendant’s claim for loss of concessional home mortgage loan interest.
In order to assist me in quantifying that loss, the defendants have provided me with a document marked “aide memoire 5”. That document is in evidence as part of exhibit D20. It fixes the claimed loss at $6,690.60. I note in passing that the loss claimed in the documents filed in Court is $5,761.00 and that the relevant documents have not been amended notwithstanding the increase in the claimed loss.
At one stage, in the course of his closing address, Mr Rydon was minded to present an argument to the effect that the defendants’ claim under this heading was not maintainable for the same reasons that, in his submissions, the defendants’ claim for damages for personal injuries (to which I shall direct my attention shortly) is also not maintainable. I note that, on reflection, Mr Rydon wisely desisted from doing so. He could hardly do otherwise in the light of the express provisions contained in clause 2 of part 3D of the 1991 agreement itself.
The plaintiff, in the circumstances, does not contest the arithmetic, but disputes the period for which the claim should be allowed. I shall deal with that issue in the course of dealing with the same issue in relation to the corporate defendant’s claim for $70,000.00 with respect to alleged loss of income for the period from 28th September 1994 to 10th December 1996 when the documents were filed in Court.
I shall now deal with the defendants’ claim for loss of income.
In order to assist me in assessing the claimed loss of income, the corporate defendant has submitted a document marked “aide memoire 1”. That document is in evidence as part of exhibit D20. In that document the defendant has shown all amounts earned with, and received from, the plaintiff by way of commissions from all sources, from the commencement of the appointment to its eventual termination.
The corporate defendant says, and the plaintiff does not dispute, that the average yearly commissions so paid and received was about $38,200.00 per annum in round figures. The defendants argue, therefore, that that is the figure at which the subsequently resulting yearly loss of income should be assessed. The plaintiff takes issue with that contention for a number of reasons. It is to the more important of those reasons that I shall now turn my attention.
One of the reasons for the plaintiff’s stand is based on the opening provisions of clause 1.1 of part 1D of the 1991 agreement which, as I remind myself, provides that:-
“Your appointment as an Agent may be terminated by yourself or by the Society at any time, without prior notice and without assigning any cause, ....”
Mr Rydon says that document 315 of exhibit P1 is in fact a termination of the appointment in pursuance of that clause and accordingly, therefore, that there is no loss claimable by the defendants either as to quantum or as to time. I reject that contention because everything that happened, before document numbered 315 was written, points inexorably to the conclusion that termination was effected under the second limb of that clause, i.e. on the basis that the corporate defendant “had not achieved or maintained the performance standards required from time to time” by the plaintiff. The whole case of the plaintiff has indeed been presented and fought on that basis.
Even so, says Mr Rydon, on the material before me I should find that the plaintiff would have exercised its alternative right to bring the relationship to an end, and that it would have done so within a day, a week, or in any event within a very short period of time, from and after 28th September 1994. In his own words, as they appear at page 2222, Mr Rydon said:-
“You will have heard I think all of the factors that we say would militate in favour of the view that if there had been say the hypothetical judge coming down to AMP on 28 September and saying, ‘Guys, I think you’ve mucked this up’, in my submission the next day they would have exercised that right under the no prior notice, no need to show cause and bring it to them. If not the next day then the day after, the week after, but as soon as it had become apparent that there was something wrong with the process that had been adopted -.”
Mr Rydon had previously been more generous to the defendants. He said at page 2062:-
“.... AMP could have terminated the day after on the basis of the ‘no show cause required’ and in my submission it is overwhelmingly the circumstantial evidence, that if it wasn’t the day after, it would have been the week after or the month after or three months after, but it was coming.”
Mr Rydon’s submission was based on what fell from the Court in Maredelanto Compania Naviera S.A. v Bergbau-Handel G.m.b.H. The Mihalis Angelos [1971] 1 Q.B. 164 as summarised by Hope JA in TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at page 150 (the T.C.N. case) to the effect that:-
“.... where a defendant in proceedings to recover damages for breach of contract has a right under the contract to alternative methods of performance, the court should, indeed must, assume that the defendant would have performed the contract in the way least advantageous to the plaintiff and most advantageous to the defendant; ....”
His Honour Hope JA referred to the above principle with approval in the T.C.N. case, but explained the decision by adding that the principle, which the case espouses, allows, and indeed requires, that regard be had to the facts and relevant circumstances in a manner which avoids the assessment of damages based on a:-
“..... fiction that a defendant would have adopted one method of performance when the facts belie that possibility.”
When dealing with the matter in the Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 C.L.R. 64 Mason CJ and Dawson J accepted that:
“Where compensation is sought in respect of the deprivation of a possible benefit which is dependent upon the unrestricted volition of another it may be impossible to say that any assessable loss results from the breach.”
but went on to say at page 93:
“However, this statement must be understood in the light of the principle that the mere existence of a contractual right in a party to terminate does not operate automatically to restrict the damages that can be awarded.”
In their Honours’ view:
“The court must have regard to the facts and evaluate the possible exercise of the right in all the relevant circumstances of the case.”
Mr Tredrea argued that Amann’s case (supra) is distinguishable on the facts and for that reason, that it has no applicability to the case at bar. I agree that the facts are substantially different but, in my opinion, the principle which the Amann’s case espouses is equally applicable to the facts of the case before me and I so hold. For that reason I reject Mr Tredrea’s submission.
As I understand the law, the defendants should be awarded full damages for the plaintiff’s breach unless the circumstances be such as to require a discount to be made for the reasonable possibility that the plaintiff would have acted in its best interests, and would thereby have exercised its alternative right to terminate the agency, in accordance with the terms of the contract, by making use of the no notice, no cause clause, thereby reducing the quantum of damages which it would otherwise become liable to pay.
Amann’s case (supra) requires me to have regard to the facts, as found, and on those facts to evaluate the possible exercise on the part of the plaintiff of its right to bring the agency appointment to an end under the first limb of clause 1.1 of part 1.D of the 1991 agreement. Mr Tredrea urges me to find that the exercise of that right would have been most unlikely in the circumstances. That that is so appears to be supported by Mr Leverington’s evidence at page 254, which I have already quoted at page 44 of these reasons. I bear in mind, however, that that factual situation is totally inconsistent with the defendants’ own case to the effect that Mr Leverington wanted Mr Luu out because he did not like him and because he was Chinese.
Mr Rydon urges me to find that the exercise of the plaintiff’s right to bring the relationship to an end was ever present and that, having regard to what had transpired between the parties, the termination of the appointment was a certainty. That, of course, is contrary to the evidence of Mr Leverington, to which I have already referred, and it is also contrary to what Mr Rydon himself was putting to me arguendo in the course of the trial.
Having taken everything that has been put to me into account, I have no doubt at all in my mind, as I find, that the alternative right of the plaintiff to bring the relationship to an end, in accordance with the provisions of the contract, would have been exercised. My only uncertainty is as to the time when that would have happened. The material that I have, on which I can answer that question, is firstly, the evidence of Mr Leverington; secondly, the concession of Mr Rydon at page 2062 to the effect that the plaintiff could have exercised its right the day after, the week after or the month after or three months; thirdly, the evidence of Mr Luu and finally the drawing of inferences from the facts that I have found. Those facts show that the corporate defendant had been a non-performing agent for the calendar year 1992 and continuously thereafter through to September 1994; that no new business had been written since October 1993; that targets were set at various times and from time to time by Mr Leverington since April 1994 but that none of those targets were ever achieved; that termination of the appointment was first alluded to in March/April 1994; that on 27th April 1994 the corporate defendant was formally advised that the agency would be terminated on 25th May 1994 unless the set targets were achieved by that date and, finally, that the letter of termination was not in fact written and dispatched until 28th September 1994. The plaintiff, of course, could have exercised its right to bring the agency to an end by using the no notice, no cause clause, and could have done so at any time in and since and continuously from the 1992 calendar year, but did not ever do so. Critically, for present purposes, it took the plaintiff some five months from notifying the defendant in April 1994, that it would terminate for non-performance until September 1994 when it actually did so on that ground.
Doing the best I can with the material before me, and having evaluated the facts, I am prepared to say that the plaintiff’s right to the alternative method of termination would certainly have been exercised, and that it would probably have been so exercised at the expiration of a maximum period of six months from the end of September 1994, i.e. at the end of the month of March 1995. I have decided on that period because, in my opinion, given its status and stature in the industry, the plaintiff would not only have wanted to actually do what was in fact fair and reasonable, but would have been anxious to see that what it did would be seen to have been fair and reasonable. Given that counselling was to be over a period of a maximum of six months, and given that it took the plaintiff a good five months from threatening to terminate until actual termination, and given that it could have done so under either limb of the clause, but chose not do so for a period of some two years before that time, in my view, a period of six months, with some reasonable discounting to account for the contingency of an earlier exercise of that right, would be a reasonable period all round. On that basis I fix that period at four calendar months. If the period that I have allowed may seem generous to the defendants, or unfavourable to the plaintiff, my response is that the plaintiff could have, but has chosen not to, call any evidence in support of its contention that the termination would have been imminent.
As to the quantum of the alleged loss, Mr Rydon says that it should not be assessed on the claimed yearly average of $38,000. That figure is an unreliable standard, says Mr Rydon, because I should be satisfied on the evidence before me that, in the period prior to any unlawful activity on the part of AMP occurring, Mr Luu’s income was slipping away. Mr Tredrea took issue with that and submitted that the average of $38,000 should be taken as the base. I reject that submission. I think that there is force in Mr Rydon’s submission. Looking at aide memoire 1 of exhibit D20, and the documents referred therein on which it is based, it is clear to me that the financial year ended June 1992 was a boom year in the sense that, on the face of it, the defendant earned an extraordinarily high income. The same may be said for the financial year ended June 1989. It is equally clear to me that in the financial year ended June 1994 the defendant earned an extraordinarily low income. There might have been good and valid reasons for the result, of course, other than the fact that the income was slipping away, but the inference that I draw is that by that time the defendants’ yearly income had indeed been slipping away. I bear in mind, of course, that Mr Luu had taken holidays from August to October 1993 and that his absence would undoubtedly have effected the result. I also bear in mind that from and after March 1994 Mr Luu encountered what he saw as unsurmountable difficulties with Mr Leverington, which prevented him from writing new business, but the fact remains that, apart from a new $5000 superannuation policy which he wrote in July 1994, Mr Luu wrote no new life or superannuation business at any other time during that year. In fact looking at the immediately preceding year, the last new policy he wrote was in October 1993. I accept Mr Rydon’s submission that Mr Luu’s income was on the decline. Different reasons have been offered for that state of affairs. Critically, for present purposes, at about that time the superannuation industry was undergoing substantial changes. Those proposed changes were talked about in 1992 and were more talked about in 1993.
I take judicial notice of the fact that the Superannuation Industry (Supervision) Act 1993 (to which I shall refer as “The S.I.S. Act”) and the associated relevant pieces of legislation, received royal assent on 30th November 1993. Amongst other changes the S.I.S. Act made certain tax related changes to superannuation contributions.
True it is that those changes did not become operative until 1st July 1994, but I think Mr Rydon is right in saying that as the proposed changes were being talked about in 1992, and were more talked about in 1993, would-be investors were standing back and were considering their options before deciding whether to invest, or continue their investment, in that type of insurance. I am satisfied that that was a major contributing factor to the decline in Mr Luu’s income. I reject Mr Tredrea’s submissions to the contrary.
Mr Luu gave evidence to the effect that his business was predominantly superannuation based. Mr Leverington accepted that proposition at page 246 but at page 247 agreed with Mr Rydon that the split was probably one half superannuation and one half of other types of insurance.
Although the documentation, which has been tendered in evidence, provides an imperfect analysis of the breakdown of Mr Luu’s agency business, I think that one can confidently say that in the year preceding 1994 his superannuation type business amounted to approximately 40 to 45 per cent of the total business of the agency, and I so find.
In the light of these findings Mr Rydon urges me to make a substantial discount from the claimed yearly average income of $38,000 on which to base quantification of the defendants’ loss for the relevant period. Mr Tredrea says I should not discount that figure at all because the changes brought about by the S.I.S. Act would not have resulted in the sale of a lesser quantity of superannuation based insurance. I must say that my experience and common sense tells me differently. More to the point, the facts speak against that inference. I say that because, given that the change did not come into effect until the 1994 financial year, and given that Mr Luu wrote most of his superannuation based insurance business in or shortly before the month of June 1994, I would have expected to have seen at least some business written at about that time. The evidence before me shows that none at all was written, not only in or about June but also at any other earlier time in 1994. I reject Mr Tredrea’s submission. I accept the submissions of Mr Rydon subject to the qualification that, in my opinion, Mr Luu would probably have continued to write at least some superannuation based insurance and would probably have increased the sales of other types of insurance to compensate at least in part for that loss. Doing the best I can with the material before me I fix the lost yearly income at $27,000.00. It follows, therefore, that I assess the loss of income for the relevant period at $9,000.
As to the quantum of the alleged loss of concessional home mortgage interest, the plaintiff has not disputed either the arithmetic contained in aide memoire 5 of exhibit D20, or the documents on which the calculations contained therein have been based. What is in dispute is the period for which the alleged loss has to be allowed. I have already fixed that period elsewhere. According to aide memoire 5, the amount claimed for 1994-1995 is $1,797.63. It follows, therefore, that I assess the defendants’ loss under this heading at $600.00 for the relevant period.
This then brings me to a consideration of the personal defendants’ claim for damages for personal injuries allegedly sustained by each of them as a result of the plaintiff’s unlawful termination of the corporate defendant’s appointment as its agent. Paragraph 22 of the amended defence and counterclaim reads as follows:-
“By virtue of the wrongful termination of the first defendant’s AMP Agency the second and third defendants have suffered chronic stress related illness.”
The defendants’ claim under that heading is for:-
“Damages as a result of ill health full particulars whereof will be provided prior to the trial of this action.”
Each of the two personal defendants has given evidence in support of that claim. I have also heard from their respective medical practitioners and I have received medical reports. All of the evidence that I have heard on this topic was received de bene esse. This is because, in Mr Rydon’s submission, the defendants’ claim is one which is not recognised by, or maintainable at, law.
One of the reasons advanced by Mr Rydon for his contention was that, except in special circumstances (and the case at bar was not one of them) damages for the personal injuries in the nature of distress are not recoverable in an action for breach of contract. Another reason advanced by Mr Rydon was that even if, contrary to his submission, such damages are recoverable in such an action, the principle can not apply to the defendants in the case at bar because neither of them was a party to the contract which, as I have found, was terminated contrary to its terms. For the former proposition Mr Rydon referred me to, and relied upon, what fell from various members of the High Court in Baltic Shipping Company v Dillon [1992-1993] 176 CLR 344. That was a case in which a female passenger on a cruise vessel suffered personal injury when the vessel sank ten days into a fourteen day cruise. The passenger brought an action against the shipowner for damages for breach of contract. The Court awarded damages to her. Those damages included, not only the refund of the whole fare, but also compensation for disappointment and distress. The case eventually reached the High Court. In relation to the question of compensation for disappointment and distress, their Honours Mason CJ, Toohey and Gaudron JJ held that such damages are not recoverable in an action for breach of contract unless they proceed from physical inconvenience caused by the breach, or unless the contract is one, the object of which is to provide enjoyment, relaxation or freedom from molestation. Mason CJ said at page 365 that:-
“.... It is preferable to adopt the rule that damages for disappointment and distress are not recoverable unless they proceed from physical inconvenience caused by the breach or unless the contract is one the object of which is to provide enjoyment, relaxation or freedom from molestation.”
Deane and Dawson JJ dealt with the topic at pages 380 et seq. Their Honours said at page 380:-
“One of the general rules relating to the assessment of compensatory damages for breach of contract which has been accorded the status of settled principle is the rule that a plaintiff is not entitled to recover damages for the ‘disappointment of mind’, distress and injured feelings ‘occasioned by the breach of contract’.”
The Court recognised, of course, that the general rule that was propounded is subject to exceptions. Deane and Dawson JJ for example said at page 381 that
“The many cases in which an award of damages for breach of contract has included compensation for mental distress can be grouped (sometimes a little uncomfortably) into a number of different categories, including breach of promise of marriage, breach of contract causing physical injury and breach of contract directly causing physical inconvenience.”
Mason CJ for his part said this at page 362:-
“It is convenient now to take stock of the exceptions to the general rule. First, damages for injured feelings were recoverable in the action for damages for breach of promise of marriage. Secondly, it is beyond question that a plaintiff can recover damages for pain and suffering, including mental suffering and anxiety, where the defendant’s breach of contract causes physical injury to the plaintiff. Thirdly, there are cases in which damages for breach of contract have included compensation for the physical inconvenience suffered by the plaintiff in certain circumstances. They include the physical inconvenience suffered by the plaintiff when the defendant’s train did not carry him to the stipulated destination and that suffered by a plaintiff who purchased property with defects no revealed in the surveyor’s report upon which the plaintiff relied. Fourthly, courts have included compensation for an element of subjective mental suffering where the plaintiff has sustained physical inconvenience as a result of the defendant’s breach of contract and the mental suffering is directly related to that physical inconvenience. Finally, there are other cases in which the plaintiff has recovered damages for distress, vexation and frustration where the very object of the contract has been to provide pleasure, relaxation or freedom from molestation.”
Mr Rydon says that the case at bar does not come within any of the recognised exceptions to the general principle and that the defendants’ case should be dismissed. Mr Tredrea took issue with that proposition. In his submission the Baltic Shipping case (supra) has no applicability to the case at bar because the case at bar, in Mr Tredrea’s own words at page 2032:-
“.... is clearly not a contract for a pleasurable objective or where there is any implied term of satisfaction.”
He made his position abundantly clear by saying:-
“This is purely a claim for personal injury for breach of contract and it is under those general principles that we invoke.”
I could not quite follow what was being put to me and sought to clarify the matter by saying:-
“HIS HONOUR: If you are right, it would mean that a shareholder of BHP can suffer mental trauma and stress as a result of some particular contract which BHP has with somebody else, and if BHP unlawfully terminates that contract, this shareholder feels aggrieved and suffers mental stress, he has got a claim for damages for breach of contract.”
to which Mr Tredrea responded:-
“No. It is limited obviously to the parties to the contract.”
and that, of course, is exactly what Mr Rydon was saying in support of his alternative submission that the defendants could not succeed because there was no privity of contract between them and the plaintiff. Mr Tredrea sought to overcome that obstacle by putting the claim of the female defendant to one side for the time being and submitting that, although the contract was between the plaintiff and the corporate defendant, because of Mr Luu’s special relationship with both the corporate defendant and with the plaintiff, I should really regard Mr Luu as being the corporate defendant, or differently expressed, that Mr Luu and the corporate defendant were “one and the same”. His submission, therefore, was that on that basis I should hold that Mr Luu was one of the contracting parties thereby entitling him to the remedy that he seeks. Mr Rydon’s response was that to accept that proposition would be to apply the law as it stood more than a century ago before the decision in Salomon v Salomon [1897] A.C. 22 and to circumvent the rule dealing with privity of contract as it was explained by the High Court in Trident General Insurance Co Limited v McNiece Bros. Proprietary Limited [1987-1988] 165 C.L.R. 107.
I accept the submissions of Mr Rydon. I reject the submissions of Mr Tredrea. I hold that the principles enunciated and accepted by the Court in the Baltic Shipping case (supra) apply to the case at bar and accordingly, therefore, that the personal defendants’ action for damages for personal injuries allegedly suffered by each of them, as a result of the plaintiff’s breach of a contract, to which neither of them were parties, is not recognised by, or maintainable at, law. For that reason, and on those grounds, I propose to dismiss the personal defendants’ claim under that heading. I rule the evidence, which I heard de bene esse in support of that claim, to be legally inadmissible and for that reason I do not propose to make any findings of fact in that regard.
The effect of the findings that I have made is that both the claim and the counterclaim have been proved, but the net result would be judgment for the corporate defendant in the sum of $14,994.00 (i.e.$25,138 + $9,000 - $19,144.00) and judgment for the personal defendants in the sum of $600.00.
Before leaving this case, there are two other matters to which I wish to refer.
The first of them concerns the various assessments that I have made in terms of quantum. Each party has adopted a particular course of action in presenting the case. That, of course, was their choice and I make no criticism of either party save as to say that by adopting that chosen course, and without offering such further evidence which in my opinion could and should have been presented, my task in making the several assessments that I have made has been made far more difficult than it would, or should otherwise, have been because, in my opinion, the evidence before me (documentary and otherwise) is both deficient and insufficient to enable me to make, what I would have preferred to have been, a more precise or accurate, and therefore fairer, assessment of what I have found to be the defendants’ losses.
It is true, of course, that the Court, doing the best that can be done with insufficient material, may have to form conclusions on matters on which there is no evidence, and may have to make, for example, allowance for contingencies, even to the extent of making a pure guess (Halsbury Third Edition, volume 11 pages 226-227 paragraph 394) but as Bray CJ remarked in Nunan v Gerblich 10 SASR 39 at page 52:-
“.... that does not mean that courts ought to be asked to guess when factual material could have been put before them which would at least have narrowed the range of guesswork.”
It seems to me, with all due respect to the advisers of each party, that more precision could have been obtained in the case at bar, and more assistance and guidance, by way of additional oral and/or documentary evidence could have been made available to the Court in an endeavour to assist it in performing its difficult task. That has not been done. In those circumstances, in dealing with the plaintiff’s claim, as well as with the defendants’ counterclaim, I have reminded myself that whilst justice, of course, must be done to the plaintiff’s case whether by claim or counterclaim as presented, defendants, too, whether by claim or counterclaim, are entitled to justice and accordingly, therefore, that plaintiffs as well as defendants, whether by claim or counterclaim, have to suffer for deficiencies in their proof should that be the nature of the case as presented.
That being so, it seems to me that neither the plaintiff nor the defendants before me should really be surprised if the result that has been achieved differs from that which each, or either, of them might have expected.
In fairness to counsel and lest it be thought that I have overlooked them, the other aspect of the matter to which I want to refer is this.
Various points have been argued by counsel and submissions have been made in relation to each of them.
I have considered all of them but I have not found it necessary to deal individually with each of them or to specifically canvass each of them in detail.
I have deliberately recounted only some of those arguments and submissions and I have done so merely by way of examples.
Accordingly, therefore, when any point made by counsel has not been specifically mentioned by me in these reasons, it must be taken that I have reached the conclusion, after fully considering it, that there is no substance in it.
And finally I put on record my appreciation for the tremendous assistance that I have received from counsel, the reporting staff, each of my alternative associates and, of course, my secretary in bringing this very troublesome case to the position that it has reached.
Later in Court 6th March 1998.
Counsel for the Plaintiff: Mr. D. Rydon with Mr. V. Daminato
Counsel for the Defendants: Mr. K. Tredrea.As to entry of the formal judgment and ruling as to costs and interest please refer to Ruling D3775 delivered 6th March 1998.
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