Banning v Ortin
[2008] WASC 139
•16 JULY 2008
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: BANNING -v- ORTIN [2008] WASC 139
CORAM: TEMPLEMAN J
HEARD: 1 FEBRUARY 2008
FURTHER SUBMISSIONS 9 & 19 JUNE 2008
DELIVERED : 16 JULY 2008
FILE NO/S: CIV 2082 of 2007
BETWEEN: MARTIN BANNING
First Plaintiff
DOUGLAS FRANK BREWER
Second PlaintiffAND
MARIA MICHELLE ORTIN
First DefendantTHE REAL ESTATE & BUSINESS AGENTS SUPERVISORY BOARD
Second Defendant
Catchwords:
Practice and procedure - Defendants' application for summary judgment - Plaintiffs' action to restrain claim against regulator's fidelity fund - Identical facts and circumstances in court proceedings - Settlement by deed of court proceedings - Whether terms of deed prevent claim against anyone who is not a party to the deed - Whether implied term that deed precluded claim on the fidelity fund - Whether rectification of deed - Whether mistaken belief that claim not proceeding against fidelity fund - Deed prevents fund being subrogated against plaintiffs
Legislation:
Real Estate and Business Agents Act 1978 (WA), s 118, s 119
Result:
Application dismissed
Category: B
Representation:
Counsel:
First Plaintiff : Mr A O Karstaedt
Second Plaintiff : Mr A O Karstaedt
First Defendant : Mr D H Solomon
Second Defendant : No appearance
Solicitors:
First Plaintiff : Holborn Lenhoff Massey
Second Plaintiff : Holborn Lenhoff Massey
First Defendant : Solomon Brothers
Second Defendant : No appearance
Case(s) referred to in judgment(s):
Ansett Australia Holdings Ltd v International Air Transport Association [2006] VSCA 242
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Con‑Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226
Hooker Town Developments Pty Ltd v Director of War Service Homes (1973) 47 ALJR 320
Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144
McDermott v Black (1940) 63 CLR 161
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451
Pukallus v Cameron (1982) 180 CLR 447
Real Estate and Business Agents Supervisory Board v Espanol Holdings Pty Ltd (in liq) [No 2] [2008] WASCA 109
Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
TEMPLEMAN J: The plaintiffs, Martin Paul Banning and Douglas Frank Brewer, have brought an action against Maria Michelle Ortin as the first defendant and the Real Estate & Business Agents Supervisory Board (the Board) as second defendant, in which they seek, inter alia, to restrain Ms Ortin from pursuing a claim against the Real Estate & Business Agents Fidelity Guarantee Fund (the Fund), established under s 107 of the Real Estate and Business Agents Act 1978 (WA) (the Act).
The Board, which is established under s 6 of the Act, is responsible for dealing with claims against the Fund.
In this application, Ms Ortin seeks the summary dismissal of the action, pursuant to O 16 r 1 of the Rules of the Supreme Court 1971 (WA).
If the application is to succeed, Ms Ortin must satisfy the court that the action is frivolous or vexatious, or that she has a good defence on the merits.
Background
On or about 18 February 1999, Ms Ortin and her family trustee company, Espanol Holdings Pty Ltd (Espanol), brought an action in the Supreme Court against seven defendants, including the present plaintiffs: Espanol Holdings Pty Ltd v Banning, CIV 1172 of 1999 (the 1999 action).
In the 1999 action, Espanol and Ms Ortin claimed that the present plaintiffs, who are, or were, real estate agents, and who had been retained to sell property belonging to Ms Ortin, had acted improperly in so doing.
In essence, Ms Ortin claimed that she and Espanol had suffered loss by reason of misleading and deceptive and unconscionable conduct practised on her by the present plaintiffs; their negligence, breach of fiduciary duty and breach of contract.
In or about March 1999, Ms Ortin and Espanol each made a claim against the Fund. The claims arose out of the same facts and circumstances as those the subject of the 1999 action.
On 29 April 2005, shortly before the trial of the 1999 action was due to commence, the parties (other than the third defendant) entered into a Deed of Settlement and Release (the Deed) by which they settled the action. At that stage, the claim brought by Ms Ortin and Espanol against the Fund, was still pending.
Following the settlement of the 1999 action, Ms Ortin sought to pursue her claim against the Fund. The present plaintiffs contend that she was precluded from doing so by the terms (express or implied) of the Deed, or by reason of pt VIII of the Act. The present plaintiffs therefore commenced these proceedings to restrain Ms Ortin or to stay her claim against the Fund.
In order to determine whether the action should be dismissed summarily, it is necessary to consider each of the grounds on which the plaintiffs rely. I deal with each ground in turn.
The proper construction of the Deed
The plaintiffs plead in par 9 of the statement of claim that on the proper construction of cl 3 of the Deed, Ms Ortin and Espanol are prevented from pursuing their claims against the Fund.
The Deed was made between Espanol and Ms Ortin as plaintiffs, and the present plaintiffs and four others as defendants. It was then recited:
A.The Plaintiffs were party to several property transactions in which the Defendants were involved in differing capacities.
B.The Current Proceedings and the WACIRF Proceedings arose out of the transactions.
C.The parties have agreed to settle the Current Proceedings which are listed for trial to commence on 2 May 2005 in accordance with the terms of this deed, and in anticipation of the settlement in this deed taking effect, adjourn that trial pending settlement taking effect.
Clause 1 of the Deed contained provisions relating to interpretation and definitions. The term the 'Current Proceedings' were there defined as action CIV 1172 of 1999, and included third party proceedings in the WACIRF proceedings. Those proceedings were defined to mean action CIV 1722 of 1999.
The 'Effective Date' was defined as being the date upon which the court made an order dismissing the Current Proceedings.
Clause 2 provided for payment to Espanol and Ms Ortin of amounts totalling $550,000 by five of the defendants. The terms of payment are not relevant for present purposes.
Clause 3 then provides:
(a)Upon the Effective Date, each of the parties, for itself and its successors and assigns, forever releases and discharges each of the other parties severally from any claim, action, demand, suit or proceeding for damages, debt, restitution, equitable compensation, account, injunction, specific performance or any other remedy that it has or may have against them:
(1)arising out of the subject matter of, or the facts relied upon in, the Current Proceedings or the WACIRF Proceedings; or
(2)arising out of any thing related to those proceedings including, without limitations, any damage, loss, cost or expense suffered as a result of those proceedings,
whether arising at common law, in equity, or under statute or otherwise (the Released Matters) and:
(3)covenants with each of the other parties severally not to claim, sue or take any action against any of them in respect of the Released Matters.
For the avoidance of doubt the release contained in clause 3(a) includes any cross claims or claims for contribution between the Defendants.
The plaintiffs contend that Ms Ortin's claim against the Fund is 'a claim … arising out of the subject matter of, or facts relied upon in the Current Proceedings [ie, the 1999 action] … or arising under statute …'
The plaintiffs therefore contend that they have been released from that claim.
Ms Ortin accepts that the claim against the Fund falls within the description set out above. But she contends that the release can be effective only in relation to claims brought against the other parties to the Deed: ie, claims 'against them'.
The plaintiffs do not accept that construction. They submit that the words 'or any other remedy it has or may have against him' should be read ejusdem generis with the words 'proceedings for damages, debt, restitution, equitable compensation, account, injunction and specific performance'. Those words, it is submitted, describe remedies, whereas the words 'any claim, action, demand or suit' are apt to describe proceedings, but not remedies.
I prefer Ms Ortin's construction. In my view, cl 3 should be read as providing for mutual releases from any claim (including a claim made in an action, demand, suit or proceeding) for a remedy (including damages, the remedies set out thereafter, or any other remedy) a party has or may have against any other party. That, I think, is what is meant by the words 'against them'.
This construction is, I think, supported by cl 3(a)(3), whereby each of the parties covenants with each of the other parties not to claim, sue, or to take any action 'against any of them' in respect of the Released Matters. None of the parties covenants not to bring any claim (etc) against anyone who is not a party to the Deed.
I therefore conclude that the words used expressly in cl 3 do not prevent Ms Ortin from pursuing her claim against the Fund.
Does the Deed contain an implied term?
In par 10 of the statement of claim, the plaintiffs plead:
In the alternative to paragraph 9, it was an implied term of the Deed that upon settlement of the Supreme Court action the First Defendant and Espanol would not continue with the Fidelity Fund claim.
Particulars of implied term
The term is reasonable and equitable, it is necessary to give proper efficacy to the settlement agreement, it is obvious, capable of clear expression and does not contradict any express term of the Deed. The Plaintiffs further rely on the confidentiality provisions contained in Clause 6 of the Deed.
The confidentiality provision referred to in that paragraph is contained in cl 6 of the Deed which is in the following terms:
No party may disclose any information in respect of this deed, other than for the purpose of enforcing this deed, obtaining legal or tax advice in relation to this deed, or as required by law.
The plaintiffs contend that the term sought to be implied is capable of satisfying the requirements set out in the advice of the majority of the members of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266:
… for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract (283).
In my view, the term the plaintiffs seek to imply, fails at least at the second and third hurdles. I do not think such a term is necessary to give business efficacy to the Deed. That is because the stated object of the Deed, as set out in the recitals to which I have referred above, was to compromise the litigation a few days before the trial was due to commence. In those circumstances, I do not think it can be said to have been so obvious, as to 'go without saying', that Ms Ortin would at the same time, abandon the outstanding claim against the Fund. This is particularly so, bearing in mind that the amount of her claim was far greater than the amount she received under the Deed.
The plaintiffs contend that whether the requirements for an implied term can be established are 'pre‑eminently matters for trial'. I take that to mean that a trial would be necessary to establish the factual matrix within which the Deed was executed.
It is now clear that evidence of the surrounding circumstances may be used in order to determine the common intention of the parties, in the sense of understanding what they meant by the words they used: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144; Ansett Australia Holdings Ltd v International Air Transport Association [2006] VSCA 242 [49].
If facts are relied on by a party as an aid to construction, they are material to the dispute. They should therefore be pleaded, and where appropriate, particularised. Here, however, the plaintiffs do not plead anything beyond the particulars of the implied terms set out above, including the reference to cl 6 of the Deed.
The plaintiffs contend that Ms Ortin could not pursue her claim against the Fund, without disclosing the contents of the Deed, which, by cl 6, she was prohibited from doing. This, the plaintiffs contend, supports the implication of the term that Ms Ortin would not pursue her claim against the Fund.
I do not accept that contention. By s 116 of the Act, a person who suffers loss by reason of a defalcation of a licensee, may be reimbursed 'only to the extent of the defalcation'. That being so, Ms Ortin would be required to give credit for the amount of $550,000 she received under the Deed. However, it would not be necessary for Ms Ortin to refer to the Deed or its contents, when informing the Board that she had received a payment of $550,000.
The Board has a power under s 124 of the Act to require production and delivery to it of documents necessary to support any claim made, or available for that purpose, or for the purpose of exercising its rights against any defaulting licensee. If, therefore, the Board required Ms Ortin to produce any document relating to the payment of $550,000, she would be 'required by law' to produce the Deed and would not, therefore, be in breach of cl 6.
I therefore conclude that the statement of claim does not disclose any basis for the implication of the term sought by the plaintiffs.
Should the Deed be rectified?
In par 11 of the statement of claim, the plaintiffs plead that:
… the Deed did not reflect and was contrary to the common intention of the parties that [Ms Ortin] and Espanol would not continue the Fidelity Fund claim after the Effective Date, and that the Deed falls to be rectified to so provide.
The pleading goes on in par 11 to allege that to the knowledge of Ms Ortin personally 'and on behalf of Espanol' it was important to the plaintiffs that there should not be 'ventilated in any forum' serious allegations of impropriety, including allegations of sexual impropriety in relation to the first defendant, which he had at all times denied. It was said that the plaintiffs wanted to avoid
damage to their reputations and the adverse publicity that would be likely to attend upon the ventilation of the allegations.
The common intention is said to be inferred reasonably from those matters.
It may be accepted, for the purposes of this application, that Ms Ortin knew, when she executed the Deed, that the defendants did not want to have allegations of impropriety made against them in public proceedings. However, the plaintiffs do not allege that by any words or conduct, Ms Ortin, or anyone acting on her behalf, expressed any intention to include in the Deed a provision which prevented Ms Ortin from pursuing her claim against the Fund. Indeed, it is by no means clear that allegations of impropriety made against the defendants in the context of such a claim would necessarily be ventilated in public.
It is well settled that a plaintiff who seeks rectification of a document is required to advance 'convincing proof' that the document, by mutual mistake of the parties, does not embody their agreement: Pukallus v Cameron (1982) 180 CLR 447, 452.
Proof is, of course, a matter of evidence. But evidence can be adduced only to prove the material facts alleged in the relevant pleading. And if there is to be convincing proof of a common intention (which is not, necessarily, a concluded agreement), there must be some act or conduct on the part of the parties from which it can be inferred that they were of one mind: Hooker Town Developments Pty Ltd v Director of War Service Homes (1973) 47 ALJR 320, 323 ‑ 324. The plaintiffs rely on the confidentiality provisions of cl 6 of the Deed as evidence of common intention that Ms Ortin would not pursue her claim against the Fund. However, given the interpretation which I place on cl 6, as set out above, I am not persuaded that its inclusion in the Deed advances the plaintiffs' case on rectification.
The plaintiffs then rely on statements said to have been made to the plaintiffs immediately after the Deed was executed by Mr Douglas Solomon, of Solomon Brothers, who were the solicitors for Ms Ortin and Espanol. Mr Solomon is alleged to have said:
Aren't you glad it's all over?
Accepting, for the purposes of this application, that Mr Solomon said the words set out above, I do not regard them as manifesting an intention on the part of Ms Ortin that she would not proceed with the claim against the Fund. In my view, given that the words were spoken immediately after the Deed had been executed, which brought the proceedings to an end, the words can be taken equally well to refer to that fact.
I therefore conclude that the pleaded case in support of the claim for rectification, at its highest, could not provide the convincing proof necessary to justify that relief.
Furthermore, on Mr Solomon's understanding of s 119 of the Act (to which I shall refer below), the effect of the Deed was to eliminate the possibility that the plaintiffs could be at risk from any further monetary claim being made against them, even if Ms Ortin received some reimbursement from the Fund.
Was there a unilateral mistake?
In par 11A of the statement of claim, it is pleaded, as an alternative basis for rectification, that the plaintiffs mistakenly believed that the Deed provided, or took effect such that Ms Ortin would not pursue her claim against the Fund.
It is alleged that Ms Ortin, personally and on behalf of Espanol, 'knew, suspected or had reason to know' that the plaintiffs mistakenly believed that the Deed had that effect, but did not bring the mistake to the plaintiffs' attention.
The facts relied on in support of this claim may be summarised as follows:
1.The allegations in the claim against the Fund as well as in the action, included serious allegations of impropriety against the plaintiffs, as well as allegations of sexual impropriety by the first plaintiff, which he had at all times denied. The sexual impropriety was alleged to have occurred at a time when the first plaintiff was married, as he was when the Deed was executed. It was important to the plaintiffs that the allegations were not ventilated in any forum, so as to avoid damage to their reputations and the attendant adverse publicity.
2.Ms Ortin, personally and on behalf of Espanol, knowing that the first plaintiff was married and knowing of 'the consequences and implications of an adverse finding' in the Fund claim, must have known or suspected that the plaintiffs intended that the allegations would not be ventilated in any forum.
It is then alleged that Ms Ortin and Espanol did not bring the mistake to the attention of the plaintiffs: and that the mistake provided an advantage to Ms Ortin and Espanol and/or a detriment to the plaintiffs.
In my view, this claim suffers from the same shortcomings as that based on mutual mistake. That is, the plaintiffs do not allege any words or conduct on the part of Ms Ortin or Espanol from which it can be inferred that she knew the plaintiffs were labouring under a mistake.
In any event, assuming for the purposes of this application that the facts alleged in par 11A of the statement of claim (as summarised above) are true, I accept the submission made on behalf of Ms Ortin that the decision of Dixon J in McDermott v Black (1940) 63 CLR 161, 183 ‑ 185 provides, on the facts of this case, a complete answer to a claim based on unilateral mistake.
In order to explain this point, it is necessary to refer again to cl 1.2 of the Deed where the Effective Date was defined as being the date upon which the court made an order dismissing the then current proceedings. It will be recalled that by cl 3 of the Deed, the Deed did not take effect until the Effective Date.
That being so, as Dixon J pointed out in McDermott v Black at 184, the Deed took effect as 'an accord executory' rather than an accord and satisfaction. The consequence of the Deed being an accord executory is that:
Until the satisfaction is given the accord remains executory and cannot bar the claim.
Although the Deed was executed on 29 April 2005, the order dismissing the action was not made until after 1 June 2005: exhibit LMR 11 to the affidavit dated 16 November 2007 of Lisa Maree Retallack. The delay resulted from the plaintiffs becoming aware, on or about 10 May 2005, that Ms Ortin would be pursuing her claim against the Fund. Ms Retallack exhibits to her affidavit the inter‑solicitor correspondence, commencing with a letter dated 12 May 2005 from the plaintiffs' solicitors to Solomon Brothers, acting on behalf of Ms Ortin, and concludes with a letter dated 16 May 2005 between the same solicitors: exhibits LMR 4 ‑ 10.
The essence of the correspondence was that the plaintiffs were protesting that Ms Ortin's continued pursuit of her claim against the Fund was 'inconsistent with the spirit of the settlement negotiations, and the terms of settlement'. Against that, Solomon Brothers asserted that at no time had their clients ever agreed that they would not pursue a claim against the Fund. The plaintiffs' solicitors stated their clients' intention to make payment due under the Deed only on the condition that Ms Ortin and Espanol withdrew the claim against the Fund.
However, on being informed by Solomon Brothers that this course of conduct would be regarded as a repudiation of the Deed, the outstanding amount was paid and the action thereafter dismissed, by consent.
The position is, therefore, that while the Deed remained executory, the plaintiffs became aware that Ms Ortin would be pursuing her claim against the Fund and they made the payments due under the Deed in that knowledge. They therefore took the benefit of the release and discharge contained in the Deed when they could have sought rescission on the basis of the alleged unilateral mistake.
I accept the submission made by counsel for Ms Ortin, that in these circumstances, the plaintiffs are estopped from now raising the issue of mistake. Having made the payments under the Deed in the knowledge that Ms Ortin would be pursuing her claim against the Fund, the plaintiffs cannot now deny her that opportunity in the knowledge that the amount she accepted in settlement of the 1999 action was far less than the amount she was claiming against the Fund.
This is an example of estoppel by convention which, as the High Court said in Con‑Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226, 244, has often been recognised, quoting a number of authorities for that proposition. See also, Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65 [193] ‑ [204], where the authorities are reviewed by Tobias JA.
For these reasons, I conclude that the plaintiffs' case for rectification based on unilateral mistake must fail.
Does the Deed prevent the Board from exercising any right of subrogation against the plaintiffs and thereby preclude a claim against the Fund?
This is an issue which, when the present application was heard, remained pending before the Court of Appeal. The decision was delivered on 14 May 2008, following which, the parties made further submissions as to its significance to this application: Real Estate and Business Agents Supervisory Board v Espanol Holdings Pty Ltd (in liq) [No 2] [2008] WASCA 109.
The issue arises from par 12 of the statement of claim, which is as follows:
12.1On a proper construction of the provisions of Part VIII of the Real Estate and Business Agents Act 1978 ('the Act'), including s 119 thereof, the right to pursue a claim against the Fidelity Guarantee Fund is predicated and dependent upon the Board having the right of subrogation to the rights and remedies of the claimant against the licensee.
12.2The settlement of the Supreme Court action pursuant to the Deed negated any right of subrogation by the Board.
12.3Any right of the First Defendant and Espanol to pursue the Fidelity Fund claim was thereby terminated.
Sections 118 and 119 of the Act provide as follows:
118.Fidelity Fund, defences to claims against
In any action brought against the Board in relation to the Fidelity Fund, all defences that would have been available to the defaulting licensee are available to the Board.
119.Board subrogated to successful claimant
On payment from moneys standing to the credit of the Fidelity Fund in settlement in whole or in part of any claims under this Act, the Board shall be subrogated, to the extent of that payment, to all rights and remedies of the claimant against the licensee in relation to whom the claim arose or in the event of the death or insolvency or other disability of the licensee, against his personal representatives or other persons having authority to administer his estate, and to all other rights and remedies of the claimant in respect of the defalcation to which the claim relates.
In the Court of Appeal, McLure JA, with whom Steytler P and Pullin JA agreed, held that the release contained in the Deed provided the Board with a defence under s 118 and would defeat the Board's subrogated claim under s 119: [2008] WASCA 109 [31] ‑ [37].
It is accepted by counsel for Ms Ortin that the result of the Court of Appeal judgment is that Ms Ortin's application for summary dismissal of the plaintiffs' claim must fail, albeit on the basis of s 118 of the Act, not s 119. However, as I understand the judgment, the Court of Appeal held that both provisions would prevent Ms Ortin from pursuing a claim against the Fund.
On either view, this application must be dismissed.
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