Corbett v Nguyen
[2012] NSWSC 530
•23 May 2012
Supreme Court
New South Wales
Medium Neutral Citation: Corbett v Nguyen [2012] NSWSC 530 Hearing dates: 1, 2, 3 May 2012 Decision date: 23 May 2012 Jurisdiction: Equity Division Before: Windeyer AJ Decision: Judgment for plaintiff on part of claim.
Cross claim against second defendant dismissed.
Catchwords: CONTRACTS- construction and interpretation of contracts- whether clause in Deed of Transfer of Company Shares void for uncertainty- where clause stipulated an "additional" $50,000 be paid to plaintiff- where plaintiff claimed entitled to $50,000 in addition to other monies and defendants claimed plaintiff entitled to fixed amount of $50,000- consideration of surrounding circumstances- clause void for uncertainty.
EQUITY- mistake- equitable remedies- rectification- where cross claimants sought rectification of Deed if on its proper construction the plaintiff was entitled to the additional $50,000- no unilateral mistake- common mistake- consideration of subjective intentions and post contractual conduct- defendants entitled to rectification in event clause not found void for uncertainty.Cases Cited: Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 Category: Principal judgment Parties: James Edmund Corbett (Plaintiff)
Hau Nhon Nguyen (First Defendant)
Hoa Nhon Nguyen (Second Defendant)
Ai Nhon Nguyen (Third Defendant)
Abaco Machines (Australasia) Pty Ltd (Trustee of the Tuyet Superannation Fund) (Fourth Defendant)
David Duc Van Nguyen (Second Cross Defendant)Representation: Counsel:
H Altan (Plaintiff)
Atkinson Vinden Lawyers (Plaintiff)
J C Thompson (Defendants)
N J Owens (Second Cross Defendant)
Solicitors:
Gerard Gooden Solicitor (Defendants)
Yeldham Price O'Brien Lusk (Second Cross Defendant)
File Number(s): SC 2004/185405
Judgment
HIS HONOUR: The question for decision is whether the plaintiff Mr Corbett is entitled to be paid by the first, second and third defendants the sum of $50,000 in addition to his entitlement to superannuation benefits in a fund of which the fourth defendant is the trustee. I will refer to the first three defendants together as the defendants and the fourth defendant, Abaco Machines (Australasia) Pty Ltd as "Abaco".
That question depends upon the proper construction of a deed which was intended to bring about a separation of the parties and their interests in Abaco.
This litigation was commenced by summons filed on 27 May 2004. Over eight years later the case now pleaded pursuant to a third amended statement of claim and, so far as the cross claim is concerned, a third amended cross claim, has come on for hearing. If the delay itself is not rather disquietening, the action has been before a Registrar or Judge on at least 68 occasions for directions or on the hearing of various interlocutory applications. The case appears to have come to the attention of the Chief Judge in November 2010, when among other things, she directed the parties to file an estimate of their costs to that date. Pursuant to that order the plaintiff's costs were said to be $563,670; the defendants' $290,484 and those of the second cross defendant $52,881. In other words, over $907,000 had been expended up to that date on the claim which amounted at commencement to $100,000 plus interest or other losses and now amounting to $50,000 plus earnings on that sum since 2002. These costs, of course, have considerably increased in preparation for the hearing and the actual hearing. It is important to bring this embarrassing litigation to an end. Proportionality has gone by the wayside but the plaintiff and the defendants may have their reasons for behaving as they have. It is also proper to say that the plaintiff's present solicitors commenced to act for him after his costs referred to in this paragraph were incurred.
By the time the case came on for hearing there were only two real issues to be determined between plaintiff and defendants. The first was whether, so far as contributions by Abaco to a superannuation fund were concerned, these were agreed to be paid on an age based basis or whether it was agreed that equal payments would be made for the plaintiff and the three individual defendants. The second issue was whether the plaintiff was entitled to a sum of $50,000 in addition to his superannuation entitlements as at 30 June 2001. The first issue was resolved by agreement during the trial, the parties agreeing for the purposes of the litigation, on a figure as to the plaintiff's entitlements as at the relevant date. The second issue now remains to be determined.
By cross claim the defendants, as against the plaintiff, seek rectification of the deed if on its proper construction the plaintiff is entitled to the additional $50,000. In the event of entitlement being established and their rectification claim failing, the defendants, by cross claim against Mr David Nguyen, their former solicitor, the second cross defendant (the solicitor), seek indemnity for any amount they are required to pay the plaintiff to satisfy the claim for the additional $50,000 and any order for costs.
Basic facts
The plaintiff through a nominee and the individual defendants were shareholders in Abaco, a company involved in the manufacture of an industrial lifting device. The plaintiff through the nominee held 55% of the shares in that company and each of the defendants held 15%. Abaco wished to purchase its own factory premises. Advice was obtained from an accountant, Mr Skinner, as to a tax effective method for this. He advised that the property should be purchased as an asset of a unit trust the units in which would be held by a superannuation fund to be established in which the shareholders would be members, and Abaco be trustee. As monies would have to be borrowed for the purchase of the property, the advice of Mr Skinner was that to comply with the then superannuation law it would be necessary for the mortgage loan to be repaid within a short period, and the most beneficial way of achieving this was for the company to make age based contributions on behalf of the four members to the new superannuation fund and in addition for the company to pay rent to the trustee of the fund as owner of the premises.
There were disputes as to whether the defendants agreed to age based contributions which would or could have favoured the plaintiff, or whether the arrangement was for equal contributions to be paid by the company as employer. In light of the agreement reached this question no longer needs to be decided unless it sheds light on the remaining question. However, it is relevant to say that while there are certain technicalities, the plaintiff contended that while the defendants' contributions on an age basis were paid in full, his were not, as insufficient funds were available in the company. The plaintiff claimed that in part this was due to some company funds being siphoned off by the defendants.
For reasons which no longer matter, the plaintiff and the defendants fell into dispute. In June 2001 Mr Corbett decided he wanted to end the relationship and he gave to the defendants a document headed "Settlement Offer" as follows:
"SETTLEMENT OFFER
I want clear in my hand $100,000.00 for the sale of my 70% share holding in Abaco Machines (Australasia) Pty Ltd. Below is a list of all expenses that must be paid out.
1. Full salary for the financial year 2001 including superannuation entitlements.
2. John Lyons loan total approximately $29,299.00.
3. Credit cards. City Visa card $9,388.66. Master Card $7,403.97.
4. All legal and accounting fees associated with the sale of my shares.
5. Abaco must pay the outstanding rent to the Tuyet Superannuation Fund before the end of the financial year.
6. I ordered a lap top computer last week. I want the order to continue and I will take the computer with me when I leave.
In return I will licence to Abaco Machines (Australasia) Pty Ltd the patent rights of the lifting clamps for one year with the only charges being that of maintaining the patents. The price structure for the clamps is to be maintained for the full period of the licence agreement. The agreement is to start from 1/7/2001.
The payments for the Hyundai will be taken over by myself.
If the above is not negotiable and if it is not acceptable to the three Nguyen brothers then I offer to buy the 30% share holding in Abaco Machines (Australasia) Pty Ltd for $70,000 and will take over all the debts of Abaco Machines and An Binh Co."
It is not suggested this offer was accepted. There was discussion about other terms. The defendants instructed the solicitor, to prepare documents based partly on the settlement offer document and partly on their oral instructions. The solicitor was not acting for the plaintiff but only for the defendants. There is some dispute about the events which follow, but no dispute that two agreements, first a Deed of Transfer of Company Shares, and second a Slab Lifter Limited Term Licence Agreement were entered into. Both were dated 12 July 2001. The first between Mr Corbett and the defendants and the second between Herdgraph Pty Ltd, a company controlled by Mr Corbett, and Abaco. The second agreement has no relevance to this action. It is the first agreement which gives rise to the remaining dispute and it is necessary to set it out in full.
"DEED OF TRANSFER OF COMPANY SHARES
Date: This Deed of Transfer of Company Shares is made on the
12 of July 2001.
Parties:
a. James Edmund Corbett of 13 Leatherwood Crescent, Baulkham Hills NSW 2153, licensor and transferor ("Corbett")
b. Nhon Hau Nguyen of 2 Boundary Road , Chester Hills NSW, Nhon Hoa Nguyen and Nohn Ai Nguyen of 174 South Terrace, Bankstown NSW, licensee and transferee ("Nguyen Brothers")
Interpretations
a. "The Company": Abaco Machines (Australasia) Pty Ltd, ABN No: 54 070058 954, registered address at Unit 4, 34-36 Fairfield Street Fairfield NSW 2165.
b. "Tuyet Superannuation Fund": The superannuation fund which is the owner of the premises that the company are operating from, with tax file no 28 980 453.
c. "Hong Unit Trust": the trust with ABN 28 980 453 that the company is the sole trustee.
Purpose:
i. Corbett agrees to transfer all his shares, rights and legal entitlements in the company to Nguyen Brothers in accordance with the terms of this Agreement.
ii. Nguyen Brothers agrees to purchase Corbett's shares in the company from Corbett.
Terms:
1. Corbett warrants that he is the beneficial owner of 550 shares in the company and that he has secured the transfer of those shares from the owner registered with the Australian Security and Investment Commission to himself. Corbett acknowledges that the registered name of the owner of those 550 shares is that of Mr Thanh Ngoc TRAN. Corbett endeavours to complete the formal transfer of company shares from Thanh Ngoc Tran to himself prior to transferring those shares to Nguyen Brothers.
2. Corbett agrees to transfer all his shares, namely the 550 shares in the company and all rights and legal entitlements in the company to Nguyen Brothers.
3. In exchange for the transfer of company shares and all entitlements in company from Corbett to Nguyen Brothers, the company agrees to repay Corbett the loan of $56,935.33. Nguyen Brothers also pays Corbett a further sum of $42,474.67.
4. Nguyen Brothers agrees to pay the following items of expenses in addition to the above arrangements:
i) Remaining Superannuation entitlements attributable to Corbett for the 2001 financial year (1st July 2000 to 30th June 2001).
ii) Payment of John Lyons' loan totalling $29,299. This payment should be made before the 31st of December 2001. If this total amount will not be made before the 31st of December 2001 then Corbett will be entitled to charge interest on any outstanding balance at an interest rate equivalent to the Commonwealth Bank Home Loan rate applicable at the 31st of December 2001.
iii) Company's credit cards: City Visas Card of $9,388.66 and Master Card $7,403.97.
iv) All accounting and legal fees associated with this transfer of shares and this patent licence agreement.
5. Corbett agrees to transfer all his units in Hong Unit Trusts to Nguyen Brothers as part of this transfer.
6. Nguyen Brothers agrees to pay Corbett an additional $50,000 by rolling over Corbett's entitlement in Tuyet Superannuation Fund to a Superannuation Trustee nominated by Corbett. This payment is to be made before the end of June 2002.
7. After this transfer is completed and that other than the terms of this Deed and Agreement, Corbett shall no longer have any entitlements or rights or obligations concerning the company.
8. The company shall transfer the title over the Hyundai car to Corbett and Corbett agrees to be responsible for all finance payments as from the date of this Deed and Agreement. A charge over the company as a result of a loan for the finance of the above Hyundai shall be discharged as soon as Corbett can make alternative arrangement for finance."
I will refer to this document as "the Deed".
Pleaded Claims
The remaining claim of the plaintiff is that under the terms of the Deed, he is entitled to have paid to him:
(a) all his superannuation entitlements up to 30 June 2001 which are now agreed to be $43,503.00;
(b) an additional sum of $50,000 to be paid in accordance with clause 6 of the Deed.
The case of the Nguyen Brothers is that there had been a disagreement about the plaintiff's superannuation entitlements but by way of compromise it was agreed that these would be fixed at $50,000; that this was the only amount payable; that the only reason it had not been paid was that Mr Corbett had not given any instructions to roll it over into a fund nominated by him; but that when instructions were finally received in November 2011 it was paid to the nominated fund.
If, on the proper construction of the Deed, that was not the result then the defendants seek rectification of the Deed.
As I have said, if the claims as to construction and rectification put forward by the defendants fail, then by cross claim against the solicitor the defendants seek damages for breach of retainer through negligence.
Construction of the Deed
To put it as kindly as possible the Deed is not well drafted. That is the position even accepting the solicitor did not intend it to be the final document which at this stage I do not need to decide. The document which came into existence was a very poor draft. It is particularly so, if, accepting the solicitor's first evidence to be correct, clause 6 was never changed in any of the drafts.
Nothing turns on clause 3. The amounts have been paid. The problems turn on clause 4(i) and clause 6. While clause 4(i) is not a matter for contention as all superannuation entitlements including those for the final year 30 June 2001 have been agreed as to amount and satisfied by the amount of $50,000, paid in November 2011, the clause is relevant to consideration of clause 6. The ordinary meaning of the words in clause 4(i) would be that if the entitlements for the year stated had not been paid to the account of Mr Corbett as at the date of the Deed they would be paid. The sub-clause could not on any sensible reading refer to all superannuation entitlements standing to the credit of Mr Corbett in the fund.
Clause 6 raises a number of questions. The first is what is meant by "additional". It could mean additional to the clause 3 payments or additional to the clause 4 payments, or additional to both. On the other hand, as it was to be paid by a roll-over of superannuation entitlements it could mean nothing at all or be so uncertain as to be meaningless. The plaintiff contends that the meaning is that the defendants were to pay an additional $50,000 to the credit of his superannuation fund which with the monies already there would be rolled over to a fund nominated by him. The defendants contend that the correct meaning of clause 6 is that the superannuation entitlements of Mr Corbett would be fixed at $50,000, that if the entitlements were less than that the defendants would pay the shortfall to the fund and that amount would be rolled over. In my view there is no clear meaning of clause 6 and it is not possible to determine the intentions of the parties by reading the words in their ordinary meaning. I say that because it is not possible to pay an additional amount by rolling over an existing superannuation entitlement. The meaning put forward by the defendants on the other hand has the difficulty that Mr Corbett was entitled to his superannuation benefits in the fund on termination which could either stay there or be rolled over to a different fund. The obligation so far as the entitlement was concerned was that of the company as trustee not the defendants.
Ambiguity and Surrounding Circumstances
In these circumstances where the wording is uncertain or ambiguous it is possible to turn to surrounding circumstances. I turn to that but there is little to assist as evidence of subjective intentions is not admissible.
It seems to me that the surrounding circumstances are these:
(a) the parties wanted a complete and final split;
(b) there had been disagreement as to whether or not contributions on behalf of the four members to the superannuation fund were to be made on the basis of age based maximum contributions or equal contributions for all four and, perhaps;
(c) the offer letter from Mr Corbett.
As far as (b) in the above paragraph is concerned, there is no doubt that Mr Skinner recommended age based contributions and said they were essential for the success of his proposed method for purchase of the property as an asset of the superannuation fund. The original entries reflected this but were subsequently altered on instructions from one of the defendants. That does not really matter. Mr Corbett insisted that age based contributions to his account should have been greater. There is a problem with his claim, because at least for the first year, there were no contributions made to his account after he attained the age of 50 years so that the maximum allowable contribution was the same as those for the other defendants. That does not really matter as he did not know that. On his claims for age based entitlements he would have, on separation, been entitled to considerably more than $50,000 if Abaco as employer had funds to enable this to happen, which in fact was not the case. On the position of the defendants for equal payments he would have been entitled to less than $50,000. The now agreed figure supports this, although perhaps that is irrelevant. So far as surrounding circumstances are concerned all that is relevant is that there was disagreement. That does not assist construction.
As far as the letter of offer is concerned, the $50,000 is not mentioned in it, but that is no basis for construing clause 6 as the defendants suggest as both sides agree that there were to be terms additional to those in that letter. Other evidence of the subjective intentions of the parties is admissible only on the claim for rectification and could not be considered here. There were some submissions as to subsequent conduct of Mr Corbett and whether this was admissible on the question of construction. I think it clear that it is not in the case of contracts in writing. The most recent Court of Appeal case on this is Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 at [142].
It is of course the duty of the court construing an instrument to endeavour to come to a decision as to meaning. The parties must have intended the Deed to have a meaning and be binding although of course it is possible that they intended different things. I have thought about this for some time, but have come to the conclusion that the wording of clause 6 does not bear the meaning for which the plaintiff contends. I have, of course, taken into account the fact that the plaintiff's superannuation entitlements were the responsibility of the fund trustee not the defendants, but so were the clause 4(i) payment and the 4(ii) and (iii) payments the responsibility of Abaco. To construe clause 6 as the plaintiff contends it would be necessary to read it as if its wording were as follows:
6. Nguyen Brothers agrees to add $50,000 to Corbett's existing entitlement in Tuyet Superannuation Fund and to roll over the ensuing entitlement to a superannuation fund nominated by Corbett before the end of June 2002.
The parties have agreed that whatever was due the payment date was 30 June 2002. I do not consider it possible to construe clause 6 in that way without rectification. I am unable to find that was the objective intention of the parties although the obligation was on the defendants. The rollover of Corbett's entitlement on a reasonable reading must refer to existing entitlement not existing entitlement plus $50,000. Neither do I consider it possible to conclude that on its proper construction clause 6 means that the superannuation entitlements of Corbett were agreed and fixed at $50,000 and that any deficiency would be made up by the defendants topping up Corbett's entitlement to $50,000. I find clause 6 void for uncertainty.
Rectification
The plaintiff does not seek rectification. No doubt there are good reasons for this, but absent rectification the claim must fail as I have found clause 6 void for uncertainty. It follows that the claim of the plaintiff for an additional $50,000 must fail.
As the defendants have agreed to and paid the $50,000 they say was what was agreed, it is not necessary to go further to determine the cross claim. However in case I am wrong so far, it is proper to deal with the third amended cross claim of the defendants in which they seek an order that the Deed be rectified by deleting clause 6 and substituting the following:
6. "Nguyen Brothers agree to:
i. pay into the Tuyet Superannuation Fund on behalf of Corbett such amount as is necessary to increase to $50,0000 only the net amount standing to Corbett's credit as at 30 June 2001, being the "Remaining superannuation entitlements attributable to Corbett for the 2001 financial year" as that phrase is used in Clause 4(i) above; and
ii. cause the Tuyet Superannuation Fund, prior to 30 June 2002, to roll over Corbett's Accumulated Contributions resulting entitlement of $50,000.00 to a superannuation trustee nominated by Corbett in writing to the Cross-Claimants."
This wording seems to me to cause much the same difficulty as the Deed, the words added by underlined amendment to 6(i) just adding to the confusion. No attention was given to this at the hearing. No doubt the problem could have been cured by omitting the word "being" and inserting in lieu the word "including" or by deleting the underlined words but it is not necessary to decide this.
The claim for rectification is made both on the basis of common mistake and unilateral mistake, the latter on the basis that the plaintiff, knowing of the intentions of the defendants, stood by and let them enter into a provision contrary to their known intentions and his intentions. In rectification claims evidence of subjective intentions and post contractual conduct is admissible.
I do not consider the unilateral mistake basis made out. The Deed was prepared by the solicitor for the defendants. He did not act for Mr Corbett. It was put strongly to Mr Corbett that about two years after the deed was signed he thought or was told that clause 6 on one reading might entitle him to an additional $50,000. It was not put to him and not established that he knew of the mistake at the date of signing the Deed. I turn to common mistake.
The cross claimants bear the onus and I will deal with their evidence first. They accept there was a dispute and discussion about superannuation entitlements over and above what was set out in the letter of offer.
In his affidavit of 28 January 2009 Nhon Ai Nguyen in discussing the settlement offer deposed as follows:
84. That same day I spoke to the Second Defendant by telephone and said to him:
"What do you think of Jim's offer?"
The Second Defendant replied:
"Let me think about it".
85. On that same day or the next day the Plaintiff said to me:
"If you buy me out you will have to roll over my superannuation entitlement into a fund that I appoint."
I replied:
"How much superannuation are you owed?"
The Plaintiff replied:
"Around $50,000 more or less
I replied words:
"Okay, I will speak to my brothers."
86. That day I telephoned the Second Defendant and said to him:
"Jim has advised me that his superannuation entitlement will be approximately $50,000 and that we will have to roll it over to a fund of his choice. Come back to Australia and we will negotiate with Jim."
The Second Defendant replied:
"Okay, I will fly back to Australia to speak to Jim and try and negotiate with him. I will fax some issues that we should consider."
A copy of the facsimile transmission which I received from t he Second Defendant is annexed hereto and marked "F".
87. In June 2001 the Second Defendant and I had a meeting with
the Plaintiff. I said to the Plaintiff:
"Can we talk about your offer?"
The Plaintiff replied:
"Yes, but there is no room to negotiate on my terms, either you buy me out as offered, or I will buy you out."
88. At this meeting or another meeting with the Plaintiff I said to the Plaintiff:
"Lets fix on $50,000 as your superannuation entitlement."
The Plaintiff replied:
"Okay, I will receive $50,000 as my entitlement in the Tuyet Super Fund to be rolled over into a super fund of my choice."
Ai also deposed to going with his brother Hau to see Mr David Nguyen, solicitor. Paragraphs 94 and 95 of the same affidavit are as follows:
94. I said to David Nguyen:
"Jim requires the sum of $100,000 for the transfer of his shares in Abaco Machines to be split as follows: $56,935.33 representing a company loan and only $42,474.67 representing the cash payment. Further, Jim will transfer his units in the Hong Unit trust to my brothers and me and he will roll over all of his entitlements from the Tuyet Superannuation Fund to a fund of his choice. Jim will also provide Abaco Machines with a Licence Agreement for one year for the use of the lifting device patented by his company Herdgraph Pty Limited. Here is the guideline that he has given me."
I then handed David Nguyen the guideline and he replied:
"Okay, I can draft that agreement in the next few days, and provide you with a copy for your approval."
95. At this meeting I also said to David Nguyen:
"Jim has agreed that his entitlement in the Tuyet Superannuation Fund will be fixed at $50,000. Therefore, it is agreed that he will roll over this $50,000 by June 2002 into a superannuation fund of his choice."
Our conversation with David Nguyen was conducted in Vietnamese.
Ai said that at a second meeting, the solicitor explained the terms of the deeds which he had drafted. As to clause 4(i) he said it referred to expenses to be paid. As to clause 6 he said (at paragraph 97):
"Yes Jim gets a fixed sum of $50,000 for his superannuation."
Ai said that he took the drafts to show them to Corbett who subsequently required a number of changes, though mainly to the licence agreement. He could remember no changes to the Deed of Transfer. He said that the changes were made and a new document produced after which he had a meeting with Corbett and the deeds were signed that day. After that he said he asked the plaintiff about the roll over of the superannuation monies and the plaintiff said:
"Don't worry you still have a year to pay, when I open my super fund, I will advise you how to rollover my entitlements."
The evidence of the meetings with the solicitor was confirmed by the second defendant who is generally known as Harry. So far as is relevant, in his affidavit sworn 2 February 2009 he said, in relation to superannuation, that the solicitor said:
"James Corbett will receive his superannuation entitlements for his employment at Abaco Machines for the year ending 30 June, 2001. This entitlement will be paid by Abaco Machines to the Tuyet Superannuation Fund. James Corbett's total entitlements in the Tuyet Superannuation Fund will not exceed $50,000 which includes his remaining superannuation entitlements as at 30 June, 2001. The total will be rolled over into a superannuation fund of James Corbett's choice by June 2002."
Harry said that at the meeting when the final documents were collected, nothing was said about clauses 4(i) and 6 as they had not been changed.
Mr David Nguyen swore an affidavit in 2004 which was not read in his case but which was subsequently after cross examination, put into evidence without objection as an exhibit. Paragraphs 6, 7 and 9 are as follows:
"6. During this meeting either the Second Defendant or the Third Defendant (depending on which of them attended the meeting) handed me a document, a true copy of which is annexed hereto and marked "A". As the document was handed to me the person who attended said to me words to the following effect:-
"My brothers and I are purchasing the remaining shares in Abaco Machines Pty Limited from Jim Corbett. This document [referring to Annexure A] sets out Jim Corbett's preliminary proposal. It should be the basis of the agreement that you prepare."
(annexure "A" is the letter of offer)
7. I cannot recollect the entire conversation that took place between myself and the person who attended the meeting. I recall, however, that the person who attended the meeting said to me words to the following effect:-
"Jim has agreed with us that his superannuation entitlement in the Tuyet Superannuation Fund will be paid out as part of the arrangement for Jim Corbett to leave the company. Jim has agreed that his superannuation entitlement is $50,000.00. He will roll that entitlement into another superannuation fund of his choice. My brothers and I have agreed that in addition to the payout of $50,000.00, we will pay to Jim the remaining contributions attributable to the 2001 financial year."
9. At the time I prepared the draft document entitled "Deed of Transfer of Company Shares" I gave consideration to the terminology of Clause 4(i) and Clause 6. I prepared Clause 6 to reflect that James Corbett was to receive a payout of his superannuation entitlement in the Tuyet Superannuation Fund as part of his departure from the company. I prepared Clause 4(i) to reflect that the First, Second and Third Defendants were to ensure that the contributions which the Fourth Defendant had to make to James Corbett's superannuation fund for the financial year ending 2001 would be paid. The payment of these contributions were in addition to the payout of $50,000.00 and I considered that the contributions could be paid to James Corbett directly, or into the Tuyet superannuation Fund or into a superannuation fund of James Corbett's choice."
The solicitor said that he prepared amendments on at least two occasions. He had no copies of previous drafts, no file notes, and it seems, no file and of course that makes his evidence far less reliable. He said in that affidavit no amendments were made in any of the drafts to clause 4(i) or clause 6. In an affidavit dated 25 May 2009 read in his case that he could not remember whether any amendments were requested to those clauses. Paragraph 8 of this later affidavit is significant and I set it out in full:
8. Shortly after this telephone conversation, I had a conference with either the second or third cross claimant at my office in Cabramatta. During this meeting, I had a discussion with either the second or third cross claimant. I cannot recall the entire conversation that took place. I recall a discussion in words to the following effect:
Cross Claimant: My brothers and I are directors and shareholders of Abaco Machines Pty Limited. Jim Corbett is also a director of that company.
My brothers and I are purchasing the remaining shares in Abaco Machines from Jim. This document [the cross claimant then handed me the document entitled Settlement Offer, [a copy of which is annexure 'B' to the affidavit of the second defendant, Hhon Hoa Nguyen (Harry) sworn in these proceedings] sets out Jim's preliminary proposal. It should be the basis of the agreement that you prepare.
Jim has agreed with us that his superannuation entitlement in the Tuyet Superannuation Fund will be paid out as part of the arrangement for Jim to leave the company. Jim has agreed that his superannuation entitlement is $50,000. He will roll that entitlement into another superannuation fund of his choice. My brothers and I have agreed that we will pay to Jim the remaining contributions attributable to the 2001 financial year.
I said: You will need to give me your accounting documents which show the amount of Corbett's superannuation balance and the remaining contributions attributable to the 2001 financial year.
Cross Claimant: We will provide you with the documents you have mentioned. We believe that the amount of superannuation that we will be required to pay to Corbett will be about $50,000 not including Jim's remaining contributions attributable to the 2001 financial year.
I said: I can draft a deed to provide for the transfer of shares and to provide for the payment of superannuation entitlements based on what you have told me and based on the settlement offer document provided by Mr Corbett. I will send a draft of that deed to you for you to review. Once you are happy with the terms of that document, and once we review the accounting documents I have referred to, then it can be sent to Corbett's lawyers for their agreement.
In oral evidence and in cross examination the solicitor maintained that he had never intended the document which was signed to be the final agreement ready for signature, that he expected to be told the superannuation account balances and that he did not know the document had been signed. He had expected that there would be some negotiations with the solicitor for Mr Corbett and an agreement would be reached. He said that he was never told prior to the documents being signed that the drafts had been provided to Mr Corbett. He was not cross examined about that but I do not accept this. His evidence, in whichever form is correct, supports the case of the cross claimants that they had never intended to pay an additional $50,000 to the plaintiff.
The evidence of Mr Corbett was contrary to this. He said that on two occasions drafts were produced which made no reference to the $50,000 and he had said that he would not sign unless this were included. He said that when the final draft was prepared with clause 6 in it he was happy with it and signed. He said that his intention was always to obtain an additional figure because he did not think he had received his proper entitlements by way of superannuation.
In cross examination by Mr Thompson for the defendants, the following evidence was given by the solicitor:
Q. You would agree that your recollection in October 2004 would have been much better of the events of 2001 than you recollection in May of 2009?
A. Well - yes.
Q. And you say at paragraph 7 of your first affidavit that one of the brothers said to you "my brothers and I have agreed that in addition to the pay out of $50,000 we will pay to Jim the remaining contribution attributable to the 2001 financial year?
A. Yes.
Q. Do you recall that? In fact, what they said to you was "we will increase what is in Mr Corbett's account from whatever it is to $50,000". They were their instructions to you, weren't they?
A. Yes, they were.
Q. And their instructions to you were that only $50,000 was to be paid to Mr Corbett in relation to superannuation?
A. That is correct, yes.
Q. And is it the case that you drafted clause 4.1 in order to effect the parties' intentions that the amount of super was to be raised from what appeared in the account to $50,000?
A. That is correct.
Q. And clause 6 was intended to be a machinery provision to effect the payment of that $50,000 to Mr Corbett?
A. That is correct.
Q. So in paragraph 9 of your earlier affidavit where you say "the payment of these contributions were in addition to the payment of $50,000 and I considered the contributions could be paid to James Corbett directly or into the Tuyet Superannuation Fund, or into a superannuation fund of James Corbett's choice", that statement is incorrect isn't it. Paragraph 9 last 4 lines?
A. Yes, but I can explain this.
Q. I would just like you to answer the question: It is incorrect?
A. It is correct, yes.
Q. Wait a second. The statement is correct, or the statement is incorrect? I am suggesting to you -
HIS HONOUR: Let him answer the question.
A. The statement is incorrect.
THOMPSON: Thank you.
Q. And the correct statement of your instructions was as it appears in paragraph 8.1 of your defence to the third amended cross claim namely if the amount of that entitlement as at the time of the rollover was less than 50,000 then the cross-claimants were to contribute the amount required to bring - it says increase, but there is a typo there - bring the rollover amount to $50,000.
A. Yes.
In cross examination by Mr Altan for the plaintiff, the following additional evidence was given by the solicitor:
Q. Yes. So what I want to ask you is that when one or both of the brothers came to see you, they told you about some superannuation entitlements that were due to Mr Corbett?
A. Correct.
Q. And they also told you about a further settlement amount that they agreed to pay Mr Corbett, did they?
A. No they did not.
Q. If I can get you to look at your first affidavit sworn on 3 November 2004?
A. Yes.
Q. You say in paragraph 7 that one of the brothers said to you "Jim has agreed with us that his superannuation entitlements in Tuyet Superannuation Fund will be paid out as part of the arrangement for Jim Corbett to leave the company. Jim has agreed that his superannuation entitlement is $50,000. He will roll that entitlement into another superannuation fund of his choice. My brothers and I have agreed that in addition to the payout of $50,000 we will pay to Jim the remaining contributions attributable to the 2001 financial year"?
A. That was the confusion but not the instructions, yes. The 2001 contribution should have should have a sum in it to be top up to be $50,000, and then the whole 50,000 was to be rolled over. That's what I meant.
Q. Well, that is not what is said there, is it?
A. The sum agreed is $50,000 but I was told that it has not received $50,000 and the brothers were to top it up to $50,000 so in that paragraph you see Jim agreed his superannuation entitlement $50,000 because in fact it was not $50,000 it was to be topped up and rolled over. That is the instruction I got.
Q. Are you saying there is no amount that was to be paid in addition to that amount?
A. That's correct.
Q. So you where you use the words, "in addition" in paragraph 7?
A. You see -
Q. You say those were not your instructions do you?
A. I say that the amount was already included in that $50,000 there.
Q. But that is not what is reflected in the words, "in addition" is it?
A. I agree it does not reflect fully.
Q. Do you agree that those were the words used in the instructions that were given to you?
A. Yes.
Q. And I think you have agreed with Mr Thompson that your recollection of events that occurred in 2001 were better in 2004 at the time you swore this affidavit than they are now or indeed when they were in 2009?
A. Naturally, yes, but that does not mean everything that you remember in that year will be remembered well then compared to now so, yes, to that statement you cannot agree. Your memory in 2004 compared to 2001 obviously should be clearer but that does not follow that everything you remember in that year will be clearer. I can't, no one can say anything about it.
Q. What I am saying to you is that if you said in 2004 that part of the instructions given to you by one of the Nguyen brothers they used the words "in addition" chances are it is more likely that they did use those words in their instructions to you, isn't it?
A. No I disagree with that.
Q. Your memory gets better with time does it?
A. It doesn't. Some event that may be remembered better. It does not necessarily follow that you everything that you remember a few years back better from previously. It does not follow. I cannot follow that logic at all, I am sorry.
Q. In paragraph 9 of your affidavit in case there was any doubt about what is said in paragraph 7, you say again in the last sentence, "The payment of these contributions were in addition to the payout of $50,000 and I can considered that the contributions could be paid to James Corbett directly or into the superannuation fund or into a superannuation fund of James Corbett's choice." Do you see you had firmly in your mind that there were 2, or at least what you set out in the last paragraph of paragraph 9 conveys that in drafting these documents you had in your mind that there were 2 separate and distinctive totals?
A. No, not at all.
Q. You do not agree that is what the last paragraph of paragraph 9 conveys?
A. No. The point was when the superannuation was in the name of Tuyet, it seemed distinct to superannuation but in fact it refer to the same thing.
Q. Well?
A. I don't where the Tuyet superannuation, the name came from but that is probably why I asked for the documents. Tuyet has nothing to do with this company of Jim Corbett or Nguyen brothers so I thought there must be some arrangement there about Tuyet superannuation so that might explain.
Q. And that entitlement is the subject of what you drafted in 4.1, isn't it?
A. 4.1 and 6.
Q. Of the deed?
A. Yes, 4.1 and 6 are related.
Q. Well, I suggest to you what you have set out in paragraphs 7 and 9 of your first affidavit are correct?
A. That may be interpreted but it was very clear to me that they refer to the contribution of the 2001 year.
Q. And I suggest to you that you drafted the deed in accordance with the instructions, exactly in accordance with the instructions you were given?
A. Yes. To the best of my ability, yes.
There was no cross examination on the evidence as to no changes or no recalled changes to clause 4(i) and clause 6.
The evidence of Mr Corbett was contrary to this. He maintained he had told the defendants he required $50,000 in addition to the amount to his credit in the funds accounts only plus the entitlements for the year ended 30 June 2001. His version is set out in 22 to 28 of his affidavit of 30 August 2007 as follows:
22. I rang Ai Nguyen early in the morning at his home from my home. I said words to the effect of:
"... Now I want to separate from you and your brothers as quick as I can, so this is the deal. You give me $100,000 and I piss off or I pay you $70,000 and you piss off."
Ai Nguyen said words to the effect of:
"Let me think about it".
I said words to the effect of:
"Don't take too long. I want an answer by the time I get to work."
23. After I arrived at work Ai Nguyen approached me and said words to the effect of:
"We will give you the $100,000 for your share of the business".
I said words to the effect of:
"And that is to be clear in my hand".
After this conversation I went and wrote some figures on paper, which I titled "Settlement Offer". I gave the paper to Ai Nguyen who went and showed it to his brother Hau Nguyen the First Defendant. He came back to me a little later and said:
"It's a good offer and we will take it."
24. At the time I made the offer, the Second Defendant, Hoa Nguyen was in Vietnam. He immediately flew back to Australia on hearing of my offer. Shortly after his arrival back in Australia, Hoa Nguyen started to renegotiate the deal by presenting me with a document titled, "Deed of Transfer of Company Shares", which was for less than what was initially agreed to. Hoa Nguyen said to me words to the effect of:
"This is the deal. I had it drawn up by a solicitor."
25. After having a brief look at the document, I said words to the effect of:
"This is not the deal. There is no room for negotiation here. You have two options. You either give me what I want or you take what I offer."
Hoa Nguyen said words to the effect of:
"What do you want".
I said words to the effect of:
"Exactly what is in my offer".
26. Some days later Hoa Nguyen presented me with another "Deed of Transfer of Company Shares", which was similar to the first document. I said to him words to the effect of:
"You have not fixed it up."
Hoa Nguyen said:
"That's it".
I said words to the effect of:
"No, it is not and the offer does not exist anymore. You had a choice but you want to play funny bugger. I will now see what I can do to have you and your brothers removed as directors and your employment terminated. Remember, I hold 55% of the shares".
27. After this conversation with Hoa Nguyen, I left the office. About one hour later I returned to the office and was approached by Ai Nguyen who said he wanted to talk, saying words to the effect of:
"We will give you want you want".
I said words to the effect of:
"It's too late. You had your chance. You agreed to my offer and then you reneged."
Ai Nguyen said to me words to the effect of:
"It wasn't me, it was Harry".
I said words to the effect of:
"Too bad. You had a very generous offer but you stuffed it. I was prepared to walk away virtually nothing, basically with just the money I put into the business and no superannuation."
Ai Nguyen said to me words to the effect of:
"We can talk about that".
I said words to the effect of:
"Talk about what?"
Ai Nguyen said to me words to the effect of:
"I will get Harry and Hau".
I said words to the effect of:
"Do what you like".
28. About five minutes later the three Nguyen brothers came into the office. They were lead by Ai Nguyen who was adamant that they wanted to conclude a deal and wanted to know what I wanted. Again Hoa Nguyen became the negotiator. Hoa Nguyen said words to the effect of:
"Ai said you want us to put some money into your superannuation".
I said words to the effect:
"I did not say that but you certainly owe me money for super for what you have diddled me out of".
Hoa Nguyen said words to the effect of:
"How much do you want?"
I said words to the effect of:
"I have got nothing this year and I should have received $70,000 and I was $30,000 short last year, so that is $100,000".
Hoa Nguyen said words to the effect of:
"We will give you $50,000".
I said words to the effect of:
"OK but also with everything else including my present super entitlements".
Mr Corbett wrote to Abaco on 1 March 2002 demanding details of his superannuation account. He wrote again on 8 March 2002 making a further demand. This letter was prepared by Mr Skinner. On the same date Mr Skinner wrote to the directors of Abaco raising a number of issues but stating his understanding that the balance of Mr Corbett in the fund "is in the order of $60,000."
Mr Corbett wrote to the Trustees, Abaco Machines (Australasia) Pty Ltd on 11 July 2002. The letter enclosed an instruction to pay eligible termination payments to a particular superannuation fund. The letter included the following paragraph:
"Based on the last set of accounts of fund I had 38% of the value and thus my benefit would be no less than $90,440. Would you please pay this amount to my nominated complying superannuation fund within 14 days from the date of this letter."
In cross examination Mr Corbett said the $50,000 was additional to that.
Messrs Baker & Company, a firm of accountants, wrote to Mr Corbett on 11 September 2002. That letter stated that the entitlement of Mr Corbett as at 31 August 2002 was $44,688 and that pursuant to the Deed of Transfer "additional contributions were required to bring your balance to $50,000 as agreed". They enclosed documentation to enable a roll over of $50,000 to take place. There were some further communications which did not take the matter very far, but it did not include any entitlement to an additional $50,000.
The correspondence was relied upon by the defendants as evidence of subsequent conduct by Mr Corbett admissible on the question of rectification. It was put to Mr Corbett in cross examination that in the demands he made and the figures for entitlements he referred to in the correspondence there was no suggestion that an additional $50,000 was due. Mr Corbett said this was probably a mistake. I found this unconvincing.
Mr Skinner's explanation for the lack of mention of the additional $50,000 in his correspondence was that he was not aware of provisions of the Deed. He did concede that had he known about the $50,000 it was likely that a demand for that amount would have included in his letter as well.
There is no evidence of any claim being made for the additional $50,000 until these proceedings were started by the filing of the statement of claim on 6 August 2004.
I consider that the failure of Mr Corbett to make any demand for the payment of the $50,000 in a period of over two years is a matter to be taken into account in determining whether or not his version of the agreement intended to be incorporated into the Deed should be accepted.
As I have said, a case for rectification based on unilateral mistake is not made out. I turn to common mistake. Mr Corbett does not seek rectification. The reasons for that are obvious in light of the evidence of the solicitor which was not really challenged on the main issue. It is clear that the intention of the defendants was that superannuation entitlements would be fixed at $50,000. The evidence of the solicitor supports their evidence and was not shaken in any way except perhaps as to whether the contributions for the year to 30 June 2001 were to be paid in addition to the $50,000. The question is whether or not this was the intention of Mr Corbett. On this question I did not find the evidence of Mr Corbett convincing. I do not accept that clause 6 was not in the first or second drafts of the deed. However bad the drafting there is no doubt some provision as to the $50,000 had to be included from the start. In addition the fact that no mention was made of the $50,000 in correspondence after the contract at the least does go to support acceptance of the version of the defendants. I find that the agreement made was that the superannuation entitlements would be topped up to $50,000 and that the Deed signed does not set out the agreement. The defendants would therefore be entitled to rectification in the event I had not found clause 6 void for uncertainty. Such rectification would not be in the precise terms sought in the pleadings as those terms seem to be predicated on a meaning of clause 4(i) which I do not accept. However, as the intention is clear, if it were necessary I would allow an appropriate amendment to the order sought.
Cross Claim against Solicitor
As the cross claim against the solicitor is only pleaded in the event the plaintiff succeeds as against the defendants it is not necessary to go into it further. However, had the defendants failed I consider the cross claim against the solicitor would have succeeded and I briefly state the reasons.
I do not accept the solicitor was waiting to be given some figure to insert into clause 4(i) and clause 6. It is quite unlikely he would have put a figure into clause 6 if that was to be changed. His explanation so far as clause 4(i) was concerned of there being no need to leave a gap in computer produced documents was quite unconvincing. He was told the deed had been signed yet expressed no concern about this. He thought the document as drawn was in accordance with his instructions. It was not. It was not really suggested by him that the defendants would have signed the document if it meant they would have to pay an additional $50,000. Had they been bound to do so I think it clear that this would have followed from a breach of retainer. I can only add that solicitors who do not keep proper files, notes and records when good practice requires that they do are always in a difficult position when a claim is made against them. That does not mean the claiming party will succeed, it only makes it more difficult for the solicitor to succeed.
Result
Mr Corbett has accepted that his superannuation entitlement as at 30 June 2002, which of course includes any amount due for the year ended 30 June 2001 was $43,503. His claim which has failed was that he is entitled to an additional $50,000 at that date. The defendants contended and admit he was entitled to $50,000 as a superannuation roll over figure at that date. That amount was paid when a roll over direction and authority was given in November 2011. The entitlements belonged to the plaintiff. The earnings that would have accrued on the entitlements from 30 June 2002 have been agreed. These are, of course, not being taken from or paid by the defendants. They are fund earnings. The agreed amount remaining due at 30 April 2012 after taking into account the $50,000 paid is $24,262.17. To that should be added a daily rate figure of 83¢ to bring about a judgment amount today of $24,281.26.
Costs
I will hear submissions on costs.
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Decision last updated: 23 May 2012
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