Cannon (Bankrupt) v Scott (Trustee), in the matter of Cannon
[2024] FedCFamC2G 861
•12 September 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Cannon (Bankrupt) v Scott (Trustee), in the matter of Cannon [2024] FedCFamC2G 861
File number: MLG 448 of 2024 Judgment of: JUDGE CHAMPION Date of judgment: 12 September 2024 Catchwords: BANKRUPTCY – Appeal against the decision of Trustee to admit proof of debt – Parties rights did not merge on execution of a Deed of Settlement because release and discharge was conditional on payment of sum of money as to which the Applicant defaulted – Where the Court did not exercise its discretion to go behind the judgment which gave rise to the proof of debt – Where the assignment of debts to the creditor was legally effective – Court confirmed decision of Trustee – Application otherwise dismissed Legislation: Bankruptcy Act 1966 (Cth) ss. 102(1), 104(1) Cases cited: Cannon v Statewide Secured Investments Pty Ltd [2018] FCA 954
Juric-Kacunic v Vaupotic [2013] NSWSC 41; 18 BPR 31,131
McDermott v Black (1940) 63 CLR 161
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37
Osborn v McDermott (1998) 3 VR 1
Palais Imports Pty Ltd v Cooper [2023] FedCFamC2G 68
Pekar v Jess (Trustee) [2022] FCA 1367
Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132; [2017] HCA 28
Re Hawkins; Ex parte Troup [1895] I QB 404
Simon v O’Gorman Pty Ltd (1979) 27 ALR 619
Statewide Secured Investments Pty Ltd v Cannon and Cipriani [2018] FCCA 110
Statewide Secured Investments Pty Ltd v Cipcon Pty Ltd [2016] VCC 18
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52
Wilson v Official Trustee in Bankruptcy (2000) 97 FCR 196
Division: Division 2 General Federal Law Number of paragraphs: 69 Date of last submissions: 30 August 2024 Date of hearing: 30 August 2024 Place: Melbourne Solicitor for the Applicant: Mr McNab of Diamond Solicitors Counsel for the First Respondent: Mr Silver Solicitor for the First Respondent: Mills Oakley Counsel for the Second Respondent: Ms Folie Solicitor for the Second Respondent: Ashurst ORDERS
MLG 448 of 2024 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF JOHN GEORGE CANNON (BANKRUPT)
BETWEEN: JOHN GEORGE CANNON
Applicant
AND: ANDREW JOHN SCOTT AS TRUSTEE OF THE BANKRUPT ESTATE OF JOHN GEORGE CANNON
First Respondent
BANKSIA SECURITIES LIMITED (IN LIQUIDATION) ACN 004 736 458
Second Respondent
ORDER MADE BY:
JUDGE CHAMPION
DATE OF ORDER:
12 SEPTEMBER 2024
THE COURT ORDERS THAT:
1.The Court confirms the decision of the Trustee made on or about 6 May 2024 to admit the proof of debt lodged by Banksia Securities (Ltd) (in liquidation) in the bankrupt estate of Mr John Cannon in the amount of $8,312,859.
2.The Court otherwise dismisses the application for review of the decision of the Trustee under s. 104(1) of the Bankruptcy Act 1966 (Cth).
3.The First Respondent and the Second Respondent will file and serve any submissions (not exceeding 5 pages) as to costs and any affidavit on which they rely not later than 4 PM on 26 September 2024.
4.The Applicant will file and serve any submissions (not exceeding 5 pages) as to costs and any affidavit on which he relies not later than 4 PM on 10 October 2024.
5.The First Respondent and the Second Respondent will file and serve any submissions in reply (not exceeding 3 pages) not later than 4 PM on 17 October 2024.
6.There is liberty to apply.
NOTATION:
A.In the absence of any party seeking an oral hearing as to costs the court will determine the issue of costs on the papers. If any party seeks an oral hearing, the court will list any dispute as to costs for hearing on the first available date.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE CHAMPION:
On or about 6 May 2024 under s. 102(1)(a) of the Bankruptcy Act 1966 (Cth) the Trustee (Mr Andrew Scott who is the First Respondent) admitted a proof of debt Banksia Securities (Ltd) (in liquidation) lodged in the bankrupt estate of Mr John Cannon, the Applicant. The proof of debt was in the amount of $8,312,859 (Banksia Proof). The 6 May 2024 Banksia Proof was a revision of an earlier 16 January 2024 proof of debt Banksia lodged. The earlier January 2024 proof is not otherwise relevant.
Under s. 104 of the Act, the Applicant appeals against the Trustee’s decision to admit the Banskia Proof. Banksia was joined as the Second Respondent to Mr Cannon’s application.
I note two important background issues at the outset.
On 5 April 2016 Judge Anderson in the County Court of Victoria (CCV) in Statewide Secured Investments Pty Ltd v Cipcon Pty Ltd [2016] VCC 18 made orders that that the Applicant (who was the Second Defendant in the CCV Proceeding) pay:
(1)Statewide Secured Investments Pty Ltd (SSI), the first plaintiff in the CCV Proceeding, the sum of $5,342,205.39; and
(2)Permanent Custodians Ltd (PCL), the second plaintiff in the CCV Proceeding, the sum of $2,254,299.87.
On 23 October 2018 SSI (as Assignor) and Banksia (as Assignee) entered into a deed titled “Transfer and Acknowledgement Deed (Cannon Cipriani Loan Assets)”. Under cl. 2 of the SSI/Banksia assignment deed, SSI agreed to assign and transfer all of its right, title and interest in and to the Cannon Cipriani Loan Assets to Banksia and Banksia agreed to accept the assignment and transfer of those Cannon Cipriani Loan Assets. The definitions set out in the SSI/Banksia assignment deed detail that the judgment SSI obtained in the CCV Proceeding was within the scope of the assigned assets.
On the same day, 23 October 2018, PCL (as Assignor) and Banksia (as Assignee) entered into an assignment deed which save for the identity of the Assignor party in all material respects was the same as the deed SSI and Banksia entered into on the same day. In particular, the PCL/Banksia assignment deed contained a cl. 2 in identical terms to the SSI/Banksia assignment deed.
In these reasons, I refer collectively to the SSI/Banksia assignment deed and the PCL/Banksia assignment deed as the “Assignment Deeds”.
The orders in the CCV Proceeding against the Applicant and in favour of SSI and PCL and SSI and PCL’s subsequent assignment of assets to Banksia including the benefit of the CCV Proceeding orders underpin the Banksia Proof. The sum of the CCV Proceedings orders, together with statutory post-judgment interest, add to the amount in the Banksia Proof of 6 May 2024 of $8,312,859. The Trustee and Banksia submit that the Assignment Deeds were legally effective in assigning the benefit of those CCV Proceeding orders from SSI/PCL as assignors to Banksia as assignee and therefore I ought to confirm the Trustee’s admission of the Banksia Proof.
WHAT ARE THE ISSUES?
The following three issues arise for decision (I have dealt with them chronologically which is in a slightly different order than did the parties):
(1)whether the parties’ rights merged in a Deed of Settlement before the CCV judgment made 6 June 2014?
(2)whether the court should exercise its discretion to “go behind” the CCV judgment because in truth and reality there was no debt owed?
(3)whether the Assignment Deeds are legally ineffective because they:
(a)are undated; or
(b)otherwise were not intended to be legally binding or to assign the debts on the date they were entered into.
At trial, the Applicant did not press other arguments previously made in written submissions before trial. He abandoned his argument that any assignment from SSI to Banksia was superseded by a subsequent assignment by SSI to Securities Holdco Ltd. He also abandoned the argument that the Assignment Deeds were not legally effective because they were signed under powers of attorney. It is not therefore necessary for me further to consider those arguments.
I will deal in turn with each of the three issues I have identified above.
For the reasons below, I will confirm the Trustee’s decision and dismiss the application.
THE NATURE OF THE HEARING BEFORE ME
In Palais Imports Pty Ltd v Cooper [2023] FedCFamC2G 68 Judge Brown explained at [31]–[35] that the review of the Trustee’s decision in the Court is a review de novo. The Applicant need not demonstrate error in the Trustee’s decision. I am to decide afresh whether the proof of debt ought to be admitted.
The Applicant carries the onus. In Pekar v Jess (Trustee) [2022] FCA 1367 at [37], Hespe J said the onus is on the Applicant as the party seeking the review of the Trustee’s decision to satisfy the court that the Banksia Proof should not be admitted based on the material before the court.
ISSUE 1: DID THE RIGHTS OF THE PARTIES “MERGE” IN A DEED OF SETTLEMENT DATED 6 JUNE 2014?
The CCV Proceeding which culminated in the orders of Judge Anderson on 5 April 2016 was commenced in 2012.
On 6 June 2014, after the CCV Proceeding had been on foot for some time but before trial, SSI, PCL, the Applicant, and Mr Walter Cipriani agreed to settle the CCV Proceeding and entered into a Deed of Settlement. Recital K of the Deed of Settlement was as follows:
Statewide, PCL, Cannon and Cipriani agree to settle the Proceeding on the terms set out in this agreement.
The Applicant submits that as a result of a Deed of Settlement dated 6 June 2014 the rights of SSI and PCL “merged” in that document.
Clause 2.1(a)(i) of the Deed of Settlement was as follows:
2.1 Payment of settlement amount
(a) In full and final settlement of the Proceeding:
(i) Cannon and Cipriani will pay the Settlement Sum by bank cheque payable to BSL on or before 13 October 2014;
In cl. 1.1. of the Deed the “Settlement Sum” is defined to be the amount of “$500,000”.
The Applicant admits that he breached cl. 2.1(a) and did not pay the $500,000. He says at [10] of his second affidavit made on 26 July 2024:
Prior to the trial of the County Court proceedings, my dispute with Permanent Custodians Limited and Statewide Secured Investments Pty Ltd was settled on the terms of binding Deed of Settlement dated 6 June 2014. Albeit that I failed to make the payment of $500,000.00 due under the Deed of Settlement, Permanent Custodians Ltd did not elect to terminate the Deed of Settlement. I have not received any explanation as to why it was necessary or appropriate in the circumstances for the County Court proceedings to go to trial. Because the Deed of Settlement has not been terminated, I believe that it remains binding on the parties to it, and on my bankrupt estate.
[Emphasis added]
Clause 3(a) of the Deed provided for SSI and PCL to release the Applicant “upon the satisfaction clause of clause 2(a)(i)”, that is, that is upon payment of Settlement Sum (my emphasis).
Contrary to the evidence set out in the Applicant’s second affidavit above, by letter dated 21 October 2014, Ashurst, lawyers for SSI and PCL, in a letter written shortly after the Applicant defaulted in the fulfillment of his obligations under the Deed by his failure to pay the settlement sum on 13 October 2014, wrote to lawyers for the Applicant. By that letter dated 21 October 2014 SSI and PCL expressly terminated the Deed when they wrote:
… our clients hereby terminate the deed of settlement entered into between the parties to the Proceeding on 6 June 2014.
The Applicant’s breach of his fundamental obligation under the Deed to pay the $500,000 was a repudiation of his obligations under the Deed, which repudiation SSI and PCL accepted as bringing their obligations under the Deed.
The submission that the parties’ rights “merged” in the Deed made on 6 June 2014 rests on the distinction between an “accord executory” and an “accord and satisfaction”. As Phillips JA explained in Osborn v McDermott (1998) 3 VR 1 at 8:
The fundamental distinction between the effect of a compromise by way of mere accord executory and the effect of a compromise by way of accord and satisfaction is that the former does not operate to discharge existing rights and duties unless and until the accord is performed, whereas the latter operates as a discharge immediately the accord (or agreement) is achieved. The reason for the difference in effect flows from their different nature. The first, the mere accord executory, is the compromise of an existing cause of action if and when something is done (usually to the direct advantage of the plaintiff) whereas the second, the accord and satisfaction, is the compromise of an existing cause of action in return for the promise that something be done. To put it more shortly, in return for abandoning his cause of action the plaintiff accepts, in the case of the former, an act, and in the case of the latter, a promise.
Philips JA cited the earlier “classic statement” of the relevant distinction from the judgment of Dixon J (as he then was) in McDermott v Black (1940) 63 CLR 161 at 184-185 as follows:
The distinction depends on what exactly is agreed to be taken in place of the existing cause of action or claim. An executory promise or series of promises given in consideration of the abandonment of the claim may be accepted in substitution or satisfaction of the existing liability. Or, on the other hand, promises may be given by the party liable that he will satisfy the claim by doing an act, making over a thing or paying an ascertained sum of money and the other party may agree to accept, not the promise, but the act, thing or money in satisfaction of his claim. If the agreement is to accept the promise in satisfaction, the discharge of the liability is immediate; if the performance, then there is no discharge unless and until the promise is performed.
[Emphasis added]
Under the Deed made on 6 June 2014, any release of the Applicant from his pre-existing obligations did not arise unless and until he paid the Settlement Sum. The rights of SSI and PCL would only have merged in the Deed once the Applicant paid the Settlement Sum. Applying Phillips JA’s analysis in Osborn and Dixon J’s distinction in McDermott, the Applicant promised that he would satisfy SSI and PCL’s claim by paying “an ascertained sum of money” ($500,000) and SSI and PCL agreed to accept the “money” in satisfaction of the claim. There was no discharge as to the pre-existing claims then pending in the County Court “unless and until the promise [was] performed”. Because the Applicant did not pay the money, there was no discharge of pre-existing rights. Given the Applicant’s default, SSI and PCL were free to continue to pursue the CCV Proceeding as they did.
Because rights did not merge in the Deed, the County Court trial proceeded culminating in the orders of Judge Anderson on 5 April 2016.
The Applicant has not proved his contention that the Court should vary the decision of the Trustee to admit the Banksia Proof because the rights of SSI and PCL merged in the Deed of Settlement made on 6 June 2014.
ISSUE 2: SHOULD THE COURT EXERCISE ITS DISCRETION TO “GO BEHIND” THE CCV JUDGMENT BECAUSE IN TRUTH AND REALITY THERE WAS NO DEBT OWED?
The Applicant contends that I ought to exercise a discretion to go behind the County Court orders to ascertain whether the judgment is founded on a real debt.
In its bankruptcy jurisdiction the court has a discretion to go behind a judgment debt to ascertain whether there is in truth and reality a debt.
In Simon v O’Gorman Pty Ltd (1979) 27 ALR 619 at 632-633 Lockhart J explained, approving what Lord Esher had said in Re Hawkins; Ex parte Troup [1895] I QB 404 at 405-9, that the same discretion exists in respect of a petitioning creditor’s claim under s. 52 or as to a proof of debt lodged under Part VI of the Act. Edelman J explained the reason for principle in Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132; [2017] HCA 28 at [97] that the court exercises its power “to protect the rights of creditors who are not parties to the litigation giving rise to the judgment debt.”
In Ramsay, at [37] – [38], the High Court plurality explained a court will only go behind a judgment if “sufficient reason is shown for questioning whether behind the judgment there is in truth and reality a debt” (my emphasis). The categories of case in which the court may go behind a judgment are not closed and are not limited to circumstances of fraud, collusion or miscarriage of justice.
I have not been persuaded there is sufficient reason for questioning whether in truth and reality there is a debt in this case such that I should exercise a discretion to go behind the judgment debt for three reasons which I have set out below.
First, a judgment against debtor in favour of a creditor obtained after a contested trial is usually to be expected to provide the most reliable statement of the debt “humanly attainable.” As the plurality said in Ramsay at [68]:
For the purposes of s 52 of the Act, a judgment may usually be taken to be sufficient evidence of a debt (76) in that a judgment against a debtor in favour of a creditor obtained after a trial is, generally speaking, a reliable indication of the true state of indebtedness as between creditor and debtor. Indeed, such a judgment can usually be expected to provide the most reliable statement of the debt humanly attainable because the ordinary processes of the adversarial system provide a practical guarantee of reliability. The testing of the relative merits of a claim and counterclaim under the rigours of adversarial litigation will usually establish the true state of accounts as between the parties to the proceedings. Accordingly, a Bankruptcy Court will usually have no occasion to investigate whether the judgment debt is a true reflection of the real debt.
[Emphasis added]
The observations of the plurality in Ramsay as to s. 52 apply equally to s. 104 of the Act.
In 2016 there was a five-day CCV contested trial. At the end of the trial, Judge Anderson made orders which recorded that the Applicant owed a debt to SSI and PCL. It is that debt, subsequently assigned to Banksia, as to which the Trustee has admitted the Banksia Proof. In the context of a five-day trial where the merits of the claim as to the existence of a debt have been tested “under the rigours of adversarial litigation” the judgment and orders which record the Applicant’s debt is the “the most reliable statement of the debt humanly attainable because of the ordinary processes of the adversarial system.” Judgment in the CCV Proceeding was entered after a full investigation of the issues. The Applicant did not appeal the CCV orders. That 5-day trial is a practical guarantee that the debt in truth and reality exists.
Second, the Applicant has already unsuccessfully sought to persuade this Court that there is not in truth and reality a debt owing and sought unsuccessfully to persuade this Court to go behind the CCV judgment in the context of opposing the petitioning creditor’s application for a sequestration order.
In Statewide Secured Investments Pty Ltd v Cannon and Cipriani [2018] FCCA 110 Judge Riethmuller (as he then was) refused the Applicant’s application that he exercise his discretion to go behind the CCV judgment. The substantial reason was that there was, in reality, no argument to suggest that the debt was not owing. There was only a “technical point” as to whether the debt was assigned from SSI to PCL and as to which of the two plaintiffs in the CCV Proceeding should receive the money. The court found “that there can be no practical injustice to the debtors who have been found liable to pay the debt” (at [39]). Expressed in another way, the Applicant contested the identity of the creditor in the CCV Proceeding, not the existence of the debt.
Further, the Applicant appealed against the orders of Judge Riethmuller and Davies J dismissed the appeal in Cannon v Statewide Secured Investments Pty Ltd [2018] FCA 954 (Statewide FCA Decision). Her Honour noted that the issue concerned whether the judgment debt was owed to SSI or PCL (the issue was the identity of the Creditor, not the existence of the debt). Her Honour concluded at [16]:
No error in the primary judge’s conclusion or reasoning for declining to go behind the judgment has been shown and it has not been established that there were substantial reasons for questioning whether behind the judgment there was in “truth and reality” a debt owing by the appellants to Statewide. To the contrary, as the primary judge stated at [35] it was the position of the appellants at trial that the judgment should be in favour of Statewide for the judgment debt to the extent that it related to the earlier Supreme Court judgment. The appellants not only did not put to Judge Anderson in the County Court that such a course was contrary to his Honour’s earlier reasons, the appellants expressly argued that judgment should be in favour of Statewide because there had been no assignment of the Supreme Court judgment debt. Whilst the appellants now take a different view, nothing has been presented to suggest that the debt is not truly owed by the appellants to Statewide: cf. Ramsay HealthCare Australia Pty Ltd v Compton [2017] HCA 28. In the circumstances, the appellants have not demonstrated that the primary judge’s exercise of discretion miscarried.
As to whether I should exercise my discretion to go behind the orders in the CCV Proceeding, I note that the Applicant has essentially run before me the same argument that was run before Judge Riethmuller and, on appeal, before Davies J. There is no new or fresh submission since those decisions were made as to why I should exercise my discretion to go behind the judgment debt which was not before the Court.
The third reason I decline to go behind the judgment debt may be no more than another mode of expressing the reasoning that underlies the first and second reasons. Once the argument about the Deed of Settlement made on 6 June 2014 before the trial in the CCV Proceeding is disposed of, the Applicant’s case was not in in substance an argument that he did not owe the debt. It was an argument about the correct identity of the creditor: SSI or PCL. Such an argument is an arid inquiry overtaken by subsequent events in circumstances (as I will discuss next) when both SSI and PCL in 2018 assigned whatever debt the Applicant may have owed to each of them because of the orders in the CCV Proceeding to Banksia. SSI and PCL’s subsequent assignments to Banksia mean that a further inquiry of which of them was owed the debt in 2016 is not relevant to the Trustee’s 2024 decision to admit Banskia’s proof of debt, provided the Assignment Deeds made in 2018 were legal effective.
WERE THE ASSIGNMENT DEEDS ASSIGNING SSI AND PCL’S DEBTS TO BANKSIA LEGALLY INEFFECTIVE?
As noted, subsequently, SSI (as Assignor) and Banksia (as Assignee) entered into a “Transfer and Acknowledgement Deed (Cannon Cipriani Loan Assets)”. Aside from the identity of the parties PCL (as Assignor) and Banksia (as Assignee) entered into a “Transfer and Acknowledgement Deed (Cannon Cipriani Loan Assets)” entered into a Deed on identical terms.
The Applicant submitted at [39] of his written submissions:
The logical conclusion to be drawn from the plain fact that the Transfer and Acknowledgement Deeds and the Notices of Assignment are both conflicting and undated, is that at no time have the parties to those Deeds ever intended to be legally bound by them, nor were they certain of exactly what the subject matter of the Deeds was.
[Emphasis added]
The Applicant’s contentions require a decision as to two issues as to whether the Assignment Deeds were legally ineffective in their purported assignment of the debt the Applicant owed to SSI and PCL to Banksia which would have been the consequence of undermining the Banksia Proof:
(a)whether the fact that the Assignment Deeds are “undated” render them legally ineffective; and
(b)whether the Assignment deeds are “conflicting” and the fact that there are identical Assignment Deeds where SSI and PCL are named as the assignors means that I ought to infer that the Deeds were not intended to be legally binding to assign the debts on or about the date they were made.
I will deal with each of these issues in turn.
(a) Are the Deeds ineffective because they are undated?
Mr Ross McClymont, a partner a Ashurst, lawyers for Banksia (in liquidation), made two affidavits in this proceeding. He was not cross-examined. His evidence was uncontroverted. Mr McClymont’s uncontroverted evidence was that the Assignment Deeds were executed on 23 October 2018 (Mr McClymont, First Affidavit, [23]).
The Applicant’s argument — more precisely stated — was that the Assignment Deeds were legally ineffective to assign the debts on 23 October 2018 because they were undated.
Clause 2 of the Assignment Deeds was as follows:
2. ASSIGNMENT AND TRANSFER OF CANNON CIPRIANI LOAN ASSETS
With effect on and from the Completion Date, the Assignor agrees to assign and transfer all of its right, title and interest in and to the Cannon Cipriani Loan Assets to the Assignee, and the Assignee agrees to accept the assignment and transfer of those Cannon Cipriani Loan Assets.
“Completion Date” is defined in the interpretation provision as follows:
"Completion Date" means the date of this document.
The headers of the Assignment Deeds do not include a day or month as to when they were made. The headings read:
THIS IS DEED is made on 2018.
In addition to Mr McClymont’s uncontroverted evidence that the deed was executed on 23 October 2018, in evidence was an exchange of emails between the assignor and the assignee on 23 October 2018 (10.43 am) requesting that the Assignment Deeds be executed and a response on 23 October 2018 (2.43 pm) that commenced “please see attached executed documents as requested” and which attached the executed assignment deeds together with Notice of Assignment to the Trustee. The Trustee submitted in any event that such notification to the Trustee was unnecessary for the purposes of an effective assignment of a chose in action in equity (Wilson v Official Trustee in Bankruptcy (2000) 97 FCR 196, [36]).
The Applicant’s argument was that because the “Completion Date” (at least as to a day and month) did not appear on the face of the document the documents were legally ineffective to assign the debts on 23 October 2018.
I do not accept the Applicant’s submissions.
In interpreting a commercial contract as the plurality in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 said at [47]:
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean.
Further, in Mount Bruce the plurality said at [49]:
sometimes, recourse to events, circumstances and things external to the contract is necessary.
And at [51]:
…a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties … intended to produce a commercial result”.
In Juric-Kacunic v Vaupotic [2013] NSWSC 41; 18 BPR 31,131 Sackar J said at [49]:
The first, although it is not a matter pleaded by the defendant, is a matter which I think has been fairly raised by the plaintiffs’ legal representatives, if only to be put to one side, and that is that the deed is in fact undated. The question is: What are its consequences? The answer is; as a matter of law, none.
…
[Emphasis added]
Referring to the commentary in two academic texts Sackar J continued at [49]:
…the authors in both places assert that a date is not essential to the validity of a deed.
Further, Sackar J noted at [51] that in that case he accepted and found that the deed was signed and witnessed on a particular date.
In this case, the combination of Mr McClymont’s uncontroverted evidence and the exchange of emails on 23 October 2018 enable me to find that the Assignment Deeds were executed on 23 October 2018.
In interpreting the Assignment Deeds, I have regard to the statements of principle drawn from Mount Bruce. I am entitled to approach the construction task on the basis that the parties intended to produce a commercial result. I find that the “Completion Date” is 23 October 2018.
The Assignment Deeds were legally effective to assign the relevant debts from SSI and PCL to Banksia on 23 October 2018.
(b) Are the Assignment deeds not legally binding for any other reason?
I have not accepted the Applicant’s submissions that because the Assignment Deeds were “undated” they were not intended to be legally binding or were not in fact legally binding.
I also do not accept the submission that the Assignment Deeds were “conflicting”. Davies J handed down her decision in the Statewide FCA decision on 22 June 2018. By 23 October 2018, by this stage in the chronology, SSI and PCL well knew that, at least as far as the Applicant was concerned, the correct identity of the creditor following the CCV Proceeding was controversial. There was, however, no apparent dispute between SSI and PCL as to these issues. I see the two assignment deeds as complementary, rather than conflicting. Each party assigned all they had to assign to Banksia including the benefit of the judgment debts arising from the CCV Proceedings.
The completion of the assignments by way of a deed (a solemn legal document) is the surest evidence that the parties which executed the documents intended the documents to be legally binding and represented to a reasonable reader that they were legally binding (Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 at [45]). Further, the proposition that SSI, PCL and Banksia, all commercial parties, did not intend to be legally bound by a deed they signed runs counter to the notion that commercial parties intended to produce a commercial result (Mount Bruce, [51]) and the apparent logic of events.
I do not accept the Applicant’s submissions that the nature of the documents discloses that they were never intended to be legally binding.
WHAT IS MY CONCLUSION?
For all of the reasons set out above, I am satisfied on the evidence before me that the Applicant owes a debt of $8,312,859 to Banksia. The Applicant has not proved that Banksia is not a creditor by reference to a combination of the orders in the CCV Proceedings and the subsequent Assignment Deeds.
I will make an order under s. 104 of the Bankruptcy Act 1996 which confirms the Trustee’s decision to admit the Banksia Proof. I will otherwise dismiss the application.
I indicated to the parties that I would hear further from them as to costs. Prima facie costs ought to follow the event. Also, as indicated, it is my preliminary preference to fix costs rather than put the parties to the additional expense of a taxation. This preference to fix costs may or may not prove to be realistic. There may be consequential issues I have not anticipated. I will make orders that the Trustee and the Second Respondent file any submissions as to costs within 14 days. I will order that the Applicant respond within 14 days. I will permit the Trustee and the Second Respondent 7 days to reply. If any party wishes to have an oral hearing as to costs or other consequential issues, they ought to contact chambers and an oral hearing will be listed. In the absence of any such contact, I will decide issues as to costs on the papers.
I certify that the preceding sixty-nine (69) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Champion. Associate:
Dated: 12 September 2024
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