Cayman National Bank Ltd v Russell & Russell No. DCCIV-03-1494
[2004] SADC 82
•28 May 2004
CAYMAN NATIONAL BANK LTD V RUSSELL & RUSSELL
[2004] SADC 82Judge Clayton
Civil
The appellants Peter Glen Russell and Carolyn Fay Russell have appealed against a decision of Master Rice which was posted to the parties on 11 March 2004.
The dealings between the Cayman National Bank Ltd and Mr and Mrs Russell have extended over many years. They are discussed in the reasons of the Master.
The appeal relates to that part of the decision which dealt with an application for summary judgment pursuant to DCR 25.01 in action 1494 of 2003. The Master entered judgment for the plaintiff Cayman National Bank in the sum of US$70,000. In reaching that decision he concluded that the defendants had not raised an arguable defence and that a Deed of Settlement to which I refer below required that monies were payable forthwith or in the alternative within a reasonable time. The Master concluded that the defendants had been given a reasonable time to effect payment but had not done so. He ordered that the defendants pay the plaintiff’s costs of and incidental to the action and the argument on 9 February 2004.
The Master’s reasons also dealt with applications involving the same parties in actions 182 of 2003 and 129 of 2000, but those parts of the decision are not the subject of this appeal.
The plaintiff’s application in 1494 of 2003 sought judgment pursuant to DCR 25.01 against the defendants in the sum of $70,000. The application was based upon a Deed of Settlement executed by the defendants on 25 March 2003 which settled a number of disputes between the parties. The Notice of Appeal does not suggest that the application was not appropriate for relief pursuant to DCR 25.01. The grounds of appeal assert that the Master erred in seven ways. They are:
“1.That he failed to adequately consider, consider at all and/or failed to give appropriate weight to the effects on both parties of the Defendants’ successful Appeal in the District Court on 3 December 2002.
2.That he failed to adequately consider, consider at all and/or failed to give appropriate weight to the status of both parties in litigation as a result of the said Appeal and in particular, the Defendants’ status prior to entering the Deed of Settlement on or about 24 March 2003.
3.That he failed to adequately consider, consider at all and/or failed to give proper weight to the circumstances surrounding the formation of the said Deed, and extraneous matters and in particular the conversations, documents and the respective party’s intentions to entering the said Deed.
4.That he failed to consider entirely the Defendants’ submissions surrounding the formation of the said Deed and as a consequence, failed to understand and evaluate their Defence.
5.That he improperly gave too much weight to the Defendant’s attempts to pay an agreed sum to the Plaintiff and as a consequence, drew improper and unfair adverse inferences against the Defendants.
6.That he improperly imported words, consequences and intentions into the said Deed which were outside the Defendants’ contemplation when agreeing to enter into the Deed.
7.That he demonstrated a course of conduct to be biased against the Defendants by:
(i) asking inappropriate questions and drawing inappropriate inferences at a Directions Hearing of these matters on 14 January 2004.
(ii) making an inappropriate statement at a Directions Hearing of these matters on 14 January 2004.
(iii) making an inappropriate statement at a Directions Hearing of these matters in October 2002.”
There is no dispute that the parties executed the Deed of Settlement on 25 March 2003. The preamble to the Deed recites the circumstances leading up to the execution of the Deed. Clause F states, “On the terms contained in this Deed the parties have agreed to settle all matters between them without the admission of liability”. In Clause 3 of the Deed, Cayman National Bank Ltd agreed to release, discharge and indemnify the appellants against all actions etc, which Cayman National Bank Ltd had or may have against Mr and Mrs Russell. In Clause 4 Mr and Mrs Russell agreed to release Cayman National Bank Ltd. Clause 6 of the Deed provided:
“6. Payment
In consideration of Cayman National’s release of the Russell’s from all claims under the terms of this Deed the Russell’s agree to pay to Cayman National the sum of US$70,000.00 (Payment).”
Clause 12 recited that the Deed recorded the entire agreement between the parties about its subject matter and Clause 12.3 noted;
“Neither party has given any warranty or made any representation to the other party about the subject matter of this Deed, other than those warranties and representations appearing in this Deed.”
As I have mentioned there was no dispute about the execution of the Deed. The case revolved around the interpretation of the Deed, in particular the interpretation of Clause 6.
The defendants acknowledge that Clause 6 of the Deed creates an obligation on their part to pay US$70,000. The dispute related to the time for payment. Cayman National Bank Ltd asserted that payment of the US$70,000 was due. Mr and Mrs Russell stated that the payment was not yet due and that they were not obliged to make payment until they were able to do so.
The Master reached the conclusion that on its proper construction the Deed required payment of the US$70,000 immediately on completion by the parties of the execution requirements. In the alternative he found that the payment was to be made within a reasonable time.
An application by Mr Russell that the Master be disqualified from hearing the plaintiff’s application was dismissed on 9 February 2004. His Honour’s ex tempore Reasons for that decision were posted to the parties on 11 February 2004. I discuss that matter below in the light of ground of appeal 7.
Mr Russell referred to his affidavit of 27 February 2004 and Exhibit PGR2 which is an earlier version of the Deed. Clause 6 of that Deed Exhibit PGR2, which had been signed by Mr and Mrs Russell, was similar to the Deed upon which the claim was based, save that the words “payment within 30 days of execution of this Deed” were deleted from the final document. Mr Russell said the deletion was made at his request because he and his wife were not certain that they would be able to perform within that time (that is 30 days). He said he told the solicitor for the plaintiff that he did not want to commit himself to something he could not afford. He said he told the solicitor he was not prepared to sign a Deed with any closed period, be it 30 days, 60 days, 90 days or whatever and the solicitor agreed to “remove the offending words, that Clause 6 of the Deed would not be subject to any specific time period either reasonable or not reasonable. So on the basis of that agreement we signed the Deed”. He said the solicitor for the bank agreed “we wouldn’t be under any pressure to find the funds, but we would be transparent and proactive in finding the funds, and we were.”
Mr Russell also argued that the defendants had a defence on the merits in that the debt arose when the bank mistakenly paid US$100,000 to a third party who absconded with the funds. He said the merit of his defence was evidenced by a decision of His Honour Judge Bright, who had set aside a default judgment.
The real complaint of Mr Russell was that the Master did not take notice of the matters which Mr Russell put to him regarding the background and formation of the Deed. He argued that Clause 6 of the Deed should be interpreted in accordance with an “oral antecedent agreement” which was reached between himself and the solicitor before the Deed was signed. He contended that when the Deed was signed there was “an already concluded agreement whereby Mr and Mrs Russell had agreed to pay the bank certain moneys, the bank had agree to forego their costs, Mr and Mrs Russell had agreed to withdraw a complaint against the bank to a monetary authority and Mr and Mrs Russell ‘had agreed not to be subject to a closed period’”. He said that was the intention of both parties prior to signing of the Deed and “if it had not been that way we wouldn’t have signed the Deed, because it wasn’t in our best interest to the sign the Deed; we were giving up what we had gained at the appeal …”. He said he made it very clear to the solicitor for the bank that “we were not interested in being subject to a closed period where we would be taken back to our original appeal position. We were not interested in signing something where the bank could have at any time sought to obtain judgment and put us back in the same position as it was before”. He argued that the Master “should have looked at the background of the Deed because that was fundamental in finding out what Clause 6 meant, what we and Mr Miller agreed upon”.
Those submissions raise two matters. First, the interpretation of Clause 6 and secondly, whether a prior agreement had been reached before the Deed was executed.
Mr Russell said that Clause 6 should be interpreted so that the obligation to pay US$70,000 was open-ended - “it was as long as it took”. He pointed out that the bank had a charge over the property and that he and his wife were motivated to pay the money back as quickly as possible so that the charge could be lifted. In fact the so-called “charge” is a warrant for sale to enforce the judgment.
The arguments of Mr Russell would require the Court to ignore the parol evidence rule. That rule as formulated by Lord Blackburn in English v John Buttery & Co (1878) 3APP CAS 552 at 557 and approved by Isaac J in Gordon v McGregor (1999) 8 CLR 316 at 323 is expressed in the following paras;
“Now, I think it is quite fixed – and no more wholesome or salutary rule relative to written contracts can be devised – that where parties agree to embody, and do actually embody, their contract in a formal written Deed, then in determining what the contract really was and really meant a court must look to the formal Deed and to that Deed alone. That is only carrying out the will of the parties.”
In Working Paper 70, 1976, para 4, the Law Commission identified three “so called” rules. The first rule is that where a document exists other evidence of the terms of the document is not admissible. The third rule excludes evidence of the writer’s intended meaning. Put another way, the parol evidence rule excludes the use of evidence of extrinsic material “to subtract from, add to, vary or contradict the language of a written instrument”. Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347.
The argument of Mr Russell is that evidence of the negotiations leading up to the execution of the Deed should be admitted for the purpose of interpreting Clause 6 in the way that he contended. I think the learned Master correctly excluded the evidence of the events leading up to the execution of the Deed and correctly determined the rights and obligations of the parties by reference to the words in the Deed itself.
What then do the words in Clause 6 mean? Mr Russell argued that Clause 6 meant that he could pay the $70,000 whenever he was able. In my opinion there is nothing to read that qualification into Clause 6.
The time for performance of obligations under a contract is to be determined by reference to the intention of the parties as expressed in the contract. Intention is an issue of construction. Carter and Hyland, Contract Law in Australia 4th edition, para 1802. Where a contract does not specify the time for performance of obligation must be reported within a reasonable time ibid, para 1804.
First the Master found that Clause 6 required the $70,000 to be paid forthwith. I do not agree with that finding. The alternative finding of the Master was that the payment should be made within a reasonable time. In my opinion the alternative finding was correct.
Authorities establish that where a contract does not specify the time of performance of an obligation in a contract, then the obligation in question must be performed in a reasonable time. Hick v Raymond (1893) AC 22 at 32; Canning v Temby (1905) 3 CLR 419 at 424.
I now turn to consider the specific grounds of appeal in the context of these observations.
Ground 1
There was no reason why the Master needed to consider the decision of Judge Bright of 3 December 2002. That decision was irrelevant to the interpretation of Clause 6 of the Deed of Settlement. I am not able to understand how the Master could have given any weight to the decision in interpreting Clause 6. The effect of the decision was to set aside a default judgment so that the defendant could contest the plaintiff’s claim. The contested claim was one of the matters settled by the Deed. It is not correct to suggest that the Deed should be interpreted by “giving appropriate weight to the effects on both parties of the defendant’s successful appeal …”. On close analysis the ground of appeal is meaningless.
I also note the comments of the Master in his reasons that Judge Bright had set the judgment aside on terms, which had not been met, so that the judgment remained in place. If that is the case the comfort, which Mr & Mrs Russell sought to derive from the reasons of Judge Bright, was unjustified.
Grounds 2 and 3
These grounds raise the events prior to the execution of the Deed of Settlement on about 24 March 2003. In my opinion the Master correctly found that the Deed of Settlement was an entire contract. Evidence of the previous events is excluded by the parol evidence rule. The rights of the parties stand to be determined by the Deed rather than the events which preceded the Deed. The rights and liabilities arising out of events which had preceded the Deed were merged into the settlement recorded by the Deed.
Ground 4
I have not been convinced that the Master failed to consider the defendant’s submissions surrounding the formation of the Deed. More importantly, the circumstances surrounding the formation of the Deed are inconsequential. The rights of the parties stand to be determined by the interpretation of the Deed itself.
Ground 5
The defendants complain that the Master gave too much weight to the defendants’ attempts to pay an agreed sum to the plaintiff. The reasons do not indicate that the defendants’ attempts to pay an agreed sum had any inappropriate influence on the result. The obligation to pay the sum of $70,000 is not in dispute. The dispute relates to the time of payment. The time of payment was a matter to be determined by an interpretation of the Deed and that was how the Master arrived at his decision. The attempts to pay the agreed sum did not influence the result.
Ground 6
The appellant has not put forward any material in support of this ground. The Master did no more than to interpret the Deed. Ironically it was Mr Russell who tried to import “words, consequences and intentions” into the Deed. There is no merit in this ground of appeal.
In my opinion the Master correctly found that the Deed was an entire agreement and that the parties had acknowledged that neither party had given any warranty or representation other than those appearing in the Deed (Clause 12). I think the Master correctly determined that the proper interpretation of Clause 6 of the Deed required the payment to be made within a reasonable time. There is no merit in the submission of the appellants that the Deed did not require them to make payment until they were able to. I find that the Master correctly determined that the defendants had a reasonable time to pay, but have not paid the settlement monies.
The defendants’ argument was that if one had regard to the decision of his Honour Judge Bright of 3 December 2002 and the fact that the first edition of the Deed (Exhibit PGR2 to the affidavit to Peter Glen Russell sworn 27 January 2004) was amended by the deletion in the second edition of the Deed (Exhibit AIWM6 to the affidavit of Mr Miller sworn 19 September 2003) of the words “such payment to be made within thirty (30) days of the parties executing this Deed”, then the final form of the Deed should be given the interpretation contended for by Mr Russell or alternatively the Deed should be interpreted in such a way as to mean that there was no time within which the $70,000 had to be paid.
In my opinion the Master correctly rejected those arguments. Clause 12.1 provides that the Deed records the entire agreement between the parties about its subject matter and Clause 12.3 notes that neither party has given any warranty or made any representation to the other party about the subject matter of the Deed. Accordingly the circumstances surrounding the decision of Judge Bright and the drafting of Clause 6 are of no relevance in interpreting the Deed. The Deed must be interpreted having regard to the words used in the document.
I have read the affidavit of Mr Russell sworn 27 January 2004 and the exhibits to that affidavit. I have also read the affidavit of Mr Russell sworn 9 January 2004 and the exhibits to that affidavit. There is nothing in either affidavit which could provide a defence to the claim. Mr Russell has not referred me to any authority which establishes that the Master erred in refusing to consider extrinsic evidence for the purpose of interpreting the Deed.
The respondent relies upon the parol evidence rule. The rule excludes extrinsic evidence where the parties have used clear words in a document to evidence an agreement. In the present case, what that means is that even if the negotiations relied upon by Mr Russell did evidence an intention different from that which is evidenced in the written agreement, evidence of those negotiations would be excluded. In any event, the evidence relied upon by the appellants does not satisfy me that the intention of the parties was something different from that which the clear words of the Deed of Settlement disclose.
Ground 7 (Bias)
In Ground 7, Mr and Mrs Russell claim that the Master should have disqualified himself on the ground of bias.
The test for bias is whether in the minds of reasonable persons there would be a reasonable apprehension that the Judge may not be fairly discharging his or her duty in deciding the case or whether a fair minded lay observer might reasonably apprehend that the Judge might not bring an impartial and unprejudiced mind to the resolution of the matter. Actual bias is prejudgment to a conclusion already formed. See Minister for Immigration and Multicultural Affairs v Ghia (2001) 178 ALR 421 and Johnson v Johnson (2000) 174 ALR 655. The apprehension is to be judged objectively by reference to a reasonable observer. See R v Eastman (1994) 76 A Crim R 9.
This is a case where the failure of the Judge to disqualify himself has been raised as a ground of appeal against a final judgment so that the reasons in Rajski v Wood (1989) 18 NSWLR 512 apply. Where it appears that a Judge who delivered a judgment was disqualified by reason of bias, an appeal court has discretion to reopen the matter and set aside the judgment.
The circumstances giving rise to the bias application are set out in ex tempore reasons of the Master which were posted to the parties on 11 February 2004.
The effect of Mr Russell’s complaint is that by reason of the Master’s failure to set aside the summary judgment in 2002, which judgment was subsequently set aside by Judge Bright, he has pre-judged the matter. As I have mentioned, the claim which was the subject of the summary judgment was one of the matters resolved by the Deed of Settlement. Mr Russell also complained that two comments made by the Master on 14 February 2004 suggested that the Master had pre-judged the matter.
The first situation raised by the Notice of Appeal (Ground 7.1) relates to comments by the Master in questioning Mr Russell’s ability to meet the settlement sum under the Deed (the US$70,000) and a liability to the Australian Tax Office. The second situation (Ground 7.2) relates to comments by the Master to the effect that an application by Mr and Mrs Russell to set aside the Deed of Settlement only had a slim chance of success. That comment was made in the context of Action 182 of 2003. The third situation relates to comments made by the Master during a hearing in September 2002 in Action 129 of 2000 when the Master concluded that it was not appropriate to set aside a judgment on the basis that no arguable defence had been presented to the claim. That is the decision which was overturned by Judge Bright on 3 December 2002.
At the hearing of the application which is the subject of the appeal the issue was when was the payment of US$70,000 required by Clause 6 of the Deed to be made. The Master had not been required to apply his mind to that question previously. In 2002 the Master was required to decide whether the plaintiff was entitled to summary judgment on its claim. That was a different question from the one which is the subject of this appeal.
The two statements made by the Master on 14 January 2004 do not show any pre-judgment of the interpretation of the deed. The first statement related to Mr Russell’s ability to meet his debts. That is something different from the interpretation of the Deed and a determination of when payment was required to be made. However having regard to Mr Russell’s statement that he has not made the payment of US$70,000, because he is not able to, the Master’s query was both relevant and well founded. Mr Russell’s defence was based on the fact that payment was not due because Mr Russell was not yet in a position to pay. Mr Russell himself had, therefore, made his ability to meet his debts a relevant matter. Given that any implied criticism of Mr Russell’s financial situation was factually correct, it is difficult to see how the statements demonstrate any bias against Mr Russell. In fact, Mr Russell himself had raised his lack of funds in paragraphs 8, 9 and 10 of his affidavit of 9 January 2004 in support of his resistance to the application being set down for hearing.
As to the statement that an application to set aside the Deed of Settlement may have had a slim chance of success, that statement did not go to the interpretation of the Deed. In fact, the Master was not confronted with an application to set aside the Deed. The statement attributed to the Master did not show any pre-judgment of the relevant question namely when is payment due.
In my opinion, none of the statements complained of would cause a fair-minded lay observer to apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the interpretation of Clause 6.
The comments of the Master need to be viewed in the light of the way in which modern litigation takes place. In Johnson v Johnson (2000) HCA 48 (2000) 174 ALR 655 the members of the court said:
“While the fictional observer, by reference to whom the test is formulated, is not to be assumed to have a detailed knowledge of the law, or of the character or ability of a particular judge, the reasonableness of any suggested apprehension of bias is to be considered in the context of ordinary judicial practice. The rules and conventions governing such practice are not frozen in time. They develop to take account of the exigencies of modern litigation. At the trial level, modern judges, responding to a need for more active case management, intervene in the conduct of cases to an extent that may surprise a person who came to court expecting a judge to remain, until the moment of pronouncement of judgment, as inscrutable as the Sphinx. … Judges are not expected to wait until the end of the case before they start thinking about the issues, or to sit mute while evidence is advanced and arguments are presented. On the contrary, they will often form tentative opinions on matters in issue and counsel are usually assisted by hearing those opinions, and being given an opportunity to deal with them.”
Another instructive comment was made by the Chief Justice in IOOF Australia Trustees Ltd v Seas Sapfor Forests Pty Ltd (2000) 78 SASR 151 where His Honour said at 184:
“The observer is taken to understand that there will be occasions when both judge and counsel will, to put it bluntly, express themselves in a manner that is to be regretted. It is important that judges maintain a calm and judicial manner, but as I have already said a fair-minded observer is not to be taken to believe that judges are perfect. The observer will accept that occasional departures from the appropriate standard and nothing more are indications of ordinary frailty.”
As I have said, I cannot see any basis for criticising the comments made by the Master. However, if I am wrong in that assessment, whatever the Master said was nothing more than the sort of comment to which the Chief Justice was referring in the passage referred to. None of the comments of the judge indicated that he might not bring an “impartial and unprejudiced mind” to bear on the interpretation of Clause 6.
In Kola v District Court of South Australia & Anor (2001) SASC 268 the Chief Justice said that where it is suggested that a judge might not bring an impartial and unprejudiced mind to bear on the decision that:
“In such a case it is important to remember that the issue is whether it appears that the judge is prepared to hear submissions with an impartial an unprejudiced mind, and not whether it appears that the judge has an inclination or a disposition to decide a point in a particular way. There might be a variety of reasons, including previous decisions made by the same judge, or decisions made by other judges of the court, which make it likely that a judge will decide a point in a particular way. But it does not follow that the judge will not have an impartial and unprejudiced mind, as long as the judge is willing to listen to, and to consider, the argument to be put to the judge.” (Paragraph 33)
In that case the Chief Justice referred to Re JRL; ex parte CJL (1986) 161 CLR 342 at 352 where Mason CJ said:
“It needs to be said loudly and clearly that the ground of disqualification is a reasonable apprehension that the judicial officer will not decide the case impartially or without prejudice, rather that he will decide the case adversely to one party. There may be many situations in which previous decisions of a judicial officer on issues of fact and law may generate an expectation that he is likely to decide issues in a particular case adversely to one of the parties. But this does not mean either that he will approach the issues in that case otherwise than with an impartial and unprejudiced mind in the sense in which that expression is used in the authorities or that his previous decisions provide an acceptable basis for inferring that there is a reasonable apprehension that he will approach the issues in this way. In issues of this kind disqualification is only made out by showing that there is a reasonable apprehension of bias by reason of pre-judgment and this must be ‘firmly established’.”
In Australian National Industries Limited v Spedly Securities Limited (In Liquidation) (1992) 26 NSWLR 411 the New South Wales Court of Appeal disqualified a judge from hearing successive matters which raised issues of fact or credit which had already been decided by him. This is not such a case. The Master had not been required to consider the interpretation of Clause 6 of the Deed or any relevant questions previously.
If Mr Russell had been able to demonstrate unwaived bias on the part of the Master, that may have deprived the court of jurisdiction, so as to render the decision of the Master void. In such a case the Supreme Court may have power to make an order in the nature of prohibition. See Kola above at paragraph 25 and The Queen v Industrial Commission of South Australia ex parte Amscol & Ors (1978) 18 SASR 65 per Bray CJ at 79. Fortunately I am not required to consider whether the decision of the Master should be set aside or whether I must substitute my own decision on the merits because on my finding the question of bias does not arise.
I mention in passing that the appellants have not contested the Master’s recital of facts in the reasons dated 11 February 2004 dealing with the question of bias.
I have concluded that none of the circumstances raised by paragraph 7 of the Notice of Appeal demonstrate either a course of conduct or that the Master was biased against the defendants in any way.
I accept the submission of counsel for the respondent that it does not follow from the reasons of Judge Bright that Master Rice was biased against the appellants. The Reasons of Judge Bright do not support any allegation of bias. As counsel submitted, the Master acted as a judicial officer, dealt with the matter on the affidavits before him, made a decision and was overturned on appeal. The fact of being overturned on an appeal does not establish bias.
In all the circumstances, the appellant’s have not made out any of the grounds of appeal.
The appeal will be dismissed.
I will hear the parties as to the question of costs.