| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : CSC MINING SERVICES PTY LTD (In Liquidation) -v- DIAMOND [2013] WADC 2 CORAM : REGISTRAR KINGSLEY HEARD : 15 AUGUST 2012 DELIVERED : 10 JANUARY 2013 FILE NO/S : CIV 1415 of 2012 BETWEEN : CSC MINING SERVICES PTY LTD (In Liquidation) (ACN 131893886) Plaintiff
AND
BENEDICT SCOTT DIAMOND
First Defendant
WA CRUSHING & SCREENING SERVICES PTY LTD
Second Defendant
Catchwords: Practice - Application pursuant to O 14 Rules of the Supreme Court - Turns on own facts - No new principles Legislation: Nil
(Page 2)
Result: Application allowed
Representation: Counsel:
Plaintiff : Mr K Morgan
First Defendant : Ms C Bahemia
Second Defendant : Ms C Bahemia
Solicitors:
Plaintiff : Morfett Legal
First Defendant : Carol Bahemia Lawyers
Second Defendant : Carol Bahemia Lawyers
Case(s) referred to in judgment(s):
Ansearch Ltd v Wavetech Pty Ltd [2006] WASC 184
Blomley v Ryan (1956) 99 CLR 362
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Masters v Cameron (1954) 91 CLR 353
Osborn v McDermott (1998) 3 VR 1
Rossiter v Miller (1878) 3 App Cas 1124
(Page 3)
1 REGISTRAR KINGSLEY: The plaintiff (CSC Mining) has brought proceedings against Diamond and WA Crushing and Screening Services Pty Ltd (WACS) pleading that Diamond, on his behalf and on behalf of WACS, on 6 July 2011 entered into a written agreement for the full and final settlement of proceedings in District Court action CIV 4039 of 2010 (the CIV 4039 proceeding).
2 CSC pleads that the settlement agreement is comprised in an email dated 5 July 2011 signed by Diamond on his own behalf and on behalf of WACS on 6 July 2011 (the 6 July 2011 email). CSC has brought an application pursuant to O 14 Rules of the Supreme Court. That application is supported by the affidavits of De Silva, the solicitor for CSC, sworn 14 June 2012, De Silva's first affidavit) and sworn 13 August 2012 (De Silva's second affidavit). Diamond opposes the application and has filed an affidavit sworn 12 July 2012 (Diamond's affidavit).
The legal principles 3 The principles upon which an application for summary judgment pursuant to O 14 RSC are well known. The power to order summary judgment should be exercised with great care, and should not be exercised unless it is clear there is no real question to be decided. A party should not be deprived of their opportunity to be heard in the appointed manner under the guise of expeditious finality of the action. In all cases where there remains uncertainty as to a plaintiff's right to judgement, then summary judgement must be refused; Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; Ansearch Ltd v Wavetech Pty Ltd [2006] WASC 184.
Context 4 In 2010 CSC issued the CIV 4039 proceedings against Diamond pleading that, as a director of CSC, Diamond withdrew funds totalling $397,950. CSC categorised those monies as loans repayable by Diamond to CSC. CSC contends that the 2010 proceedings were settled by the 6 July 2011 email. 5 Diamonds defence, filed on 22 March 2011, to the CIV 4039 proceeding was on the basis that the monies alleged to have been taken by Diamond represented, in part, the payment to Diamond for expenditure on his personal credit card for company purposes, and salary adjustments for his roles fulfilled in the business. (Page 4)
The context of the 5 July 2011 email 6 The context come from De Silva's two affidavits. On 20 June De Silva emails Diamond attaching CSC's discovery in the 2010 proceedings, a proposed set of consent orders extending time, and noting that De Silva had not received any proposal from Diamond to settle the 2010 proceedings. De Silva suggests that this be done urgently as 'the more costs are incurred by CSC, the more difficult settlement will become'. 7 Diamond responds on 20 June 2011 stating 'thanks Jason, will do'. On 27 June 2011, De Silva emails Diamond noting that he has not received signed consent orders, the affidavit of discovery, or a proposal to settle. De Silva, in that email, notes that CSC will instruct him to diligently prosecute the matter which will result in increased costs being claimed from Diamond. 8 On 29 June 2011 Diamond proposes a settlement offer of $150,000 paid over two years at $25,000 every three months, starting 1 October 2011. 9 At an undetermined time, Diamond deposes that he spoke to De Silva and there was discussion about the amount of the proposed settlement. In par 13 of Diamond's affidavit, he deposes that the final offer from him was $200,000 with payment over two years. Diamond thought agreement was reached on this basis. 10 Diamond deposes, at par 5 to 12, that at the time of this conversation, he was experiencing a great deal of pain and discomfort in his neck due to, as he describes, a shattered disc and vertebrae. He was prescribed Nurofen, Panadol and then Oxycontin and Oxynorm and the medication made him feel sick, drowsy and unable to concentrate. 11 Subsequent to the telephone conversation with De Silva, Diamond deposes that he received an email dated 4 July 2011 from De Silva which provided for his partner as guarantor. Diamond remembers that he read that provision, telephoned De Silva and told him that his partner was not to be a guarantor. Diamond goes on to depose that he has no recollection of any of the remaining provisions of the 4 July email. Thereafter, De Silva sends to Diamond the 5 July email.
The 5 July email 12 On 5 July 2011, De Silva emails to Diamond which, in its third paragraph, states: (Page 5)
A pre trial conference is listed for Thursday 7 July 2011 at the Supreme Court. By telephone you made a settlement offer to our client to pay $200,000 in respect of the action, payable in instalments of $25,000/quarter commencing on 1 October 2011. Other conditions, were also discussed, such as security and consent of judgment against you to be held in 'escrow'. 13 The email continues at the fourth paragraph where De Silva noted his instructions that: Subject to creditor approval as required under the Corporations Act 2001 and subject to our client being satisfied as to your overall financial decision and ability to service payments and provide security, our client is willing to settle its claim against you in the above action for payment by you of $200,000 to our client (the settlement sum) on the following conditions, and a settlement deed will be prepared to reflect the same and must be executed by 14 July 2011. 14 Thereafter the email continues with a three monthly regime of payments of $25,000 commencing 1 October 2011, the adjournment of the pre-trial conference listed 7 July 2011 in the Supreme Court, and the request that Diamond, on his own behalf, and for WACS sign three consent orders. 15 The email concludes by providing for a guarantee from WACS and that WACS mortgage and charge their assets in favour of CSC in payment of the settlement sum. If there is default in paying the settlement sum, Diamond and WASC must pay any costs of enforcing the terms of settlement for recovering the judgment sum under the indemnity or solicitor and own client basis. 16 De Silva in the 5 July email requires Diamond by 1.00 pm Wednesday 6 July 2011 to print and sign the bottom of each page of the email and to sign it on his own behalf and on behalf of WACS as confirmation of agreement to its terms and to send that the signed agreement to the solicitors for CSC by facsimile or by scanning and emailing the scanned signed email. The 5 July 2011 email was signed by Diamond on 6 July 2011. 17 At par 23 of Diamond's affidavit, Diamond deposes that he does not recall reading, or signing, the 5 July email until his solicitor showed him a copy of the signed email. Diamond deposes that what he intended by his email of 5 July 2011 was that settlement would simply be a matter of paying the amount in instalments with no guarantee. On that point I note that De Silva on 5 July 2011 at 3.27 pm in an email to Diamond states that (Page 6)
CSC requires a guarantee from WASC. Diamond, it appears replied by email dated 5 July 2011 at 4.39 pm agreeing to that Proposal. 18 Diamond's deposes he thought the liquidator required him to show that WACS would generate sufficient funds to pay Diamond an amount that could then be used to meet the quarterly payments that he had proposed. Diamond says that the signed email of 5 July 2011 did not reflect the agreement he had reached with De Silva. Diamond cannot say whether he read the email of 5 July 2011 at all or in part. I again note Diamond's response by email dated 5 July 2011 to De Silva. 19 By email dated 11 August 2011, De Silva informed Diamond that the financial conditions were waived. At a liquidators meeting held 29 August 2011 the terms of settlement set out in the 5 July 2011 email were approved. 20 Diamond engaged a solicitor on or about 16 September 2011 and his solicitor contacted CSC's solicitor who stated he had instructions to proceed to a summary judgment application. On 5 October 2011, Diamond's solicitor received an email from CSC's solicitor stating that CSC would apply for judgment if the sum of $25,000 was not received within three working days, namely 10 October 2011. Diamond gave his solicitor instructions that the sum be deposited into CSC solicitor's trust account and be held in escrow until either agreement reached between the parties or if no agreement were reached within 14 days then the sum be refunded to Diamond. 21 De Silva deposes in his first affidavit that on 12 October 2011, Diamond attended their offices and presented the solicitors with a cheque in the sum of $25,000 which was post-dated for Saturday 14 October 2011. CSC solicitors were advised by letter dated 19 October 2011 from St George Bank that the cheque had been dishonoured.
Diamond's defences 22 Diamond appears to raise five matters in response to the claim of CSC: • that the settlement is not binding as it was pending execution of a deed;
• there is no valuable consideration because some of the pleaded alternative bases of claim in the original action were later struck out;
(Page 7)
• it would be unconscionable for the CSC to rely upon the settlement agreement by reason that Diamond was not legally represented, some of CSC's pleading were later struck out, and Diamond always maintained he had a good defence to the claim;
• CSC's solicitor allegedly told Diamond that CSC would be able to proceed to judgment against Diamond, and
• Diamond was allegedly in significant pain and which allegedly required heavy medication. Discussion 23 The plaintiff's counsel submits that the 5 July email falls into the first category of the three classes of contractual agreement identified in Masters v Cameron (1954) 91 CLR 353. In Masters v Cameron, the three classes of contract were: • Firstly where the parties have reached finality in arranging where the terms of their bargain and attend to be immediately bound to the performance of those terms, but at the same time, propose to have the terms restated in a form which will be fuller and more precise but not different in effect;
• Secondly, where the parties have completely agreed upon the terms of their bargain and intend no departure from or addition to that which their agreed terms express or implied, but nevertheless have made performance of one or more of the terms conditional upon execution of a formal document; and
• Thirdly, where the intention of the parties is not to make a concluded bargain at all unless and until they execute a formal contract.
24 The court in Masters v Cameron stated in each of the first two cases there is a binding contract. The court referred to Lord Blackburn in Rossiter v Miller (1878) 3 App Cas 1124 where he said that the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties, does not, by itself, show that they continue merely in negotiations. Lord Blackburn continued at p 1151: … as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed. (Page 8)
25 The terms of the 5 July email are clear and are subject to two conditions, one of which was waived, and the other satisfied. The terms of the 5 July email were to be incorporated into a deed, and were so incorporated in a deed sent to Diamond. 26 In my opinion, the 5 July email is clear on its face that it intended to take immediate effect. The 5 July email was intended as a compromise of the CIV 4039 proceedings. 27 The next question is how the 5 July 2011 agreement is to be categorised. The 5 July email acted as a compromise of the CIV 4039 proceedings. There is no doubt that a compromise of an action will constitute good consideration. 28 A compromise agreement can fall into two categories; the accord executory or an accord and satisfaction. Osborn v McDermott (1998) 3 VR 1 suggests there may be a third category, the conditional accord and satisfaction. The 5 July email compromise is either an accord and satisfaction where the plaintiff has abandoned its claim in exchange for the defendant promising to do something, or an accord executory where the plaintiff abandons its claim in exchange for the defendant doing something – usually paying money. 29 In Osborne v McDermott, the court considered the distinction between an accord executory and accord and satisfaction. In the end the court, at p 10, concluded that there were three possibilities: • Firstly, a mere accord executory, which on the authority does not constitute a contract;
• Secondly, at the other end of the scale, accord and satisfaction where there is an immediate and enforceable agreement once the compromise is agreed upon; and
• Thirdly, somewhere between the two, accord and conditional satisfaction where the compromise amounts to an existing and enforceable agreement between the parties for performance, but which does not operate to discharge any existing cause until there has been performance.
30 The court went on to say that where there is accord and conditional satisfaction, the plaintiff is bound to await performance and accept it if tendered. But if there was no performance, then the plaintiff may proceed according to the general principle called into play when any agreement is repudiated: the plaintiff may either treat the agreement (the accord) as at an end and proceed on its original cause of action; or he may, at his (Page 9)
option, sue on the compromise agreement, in place of the original cause of action. 31 In my opinion the 5 July email falls into the category of an accord and conditional satisfaction. CSC has agreed to compromise its CIV 4039 proceedings in terms of the 5 July agreement. The 5 July agreement contained terms as to performance but, by the dishonouring of the cheque, those terms were not performed. CSC had then the option either to treat the 5 July agreement as repudiated and proceed on the original action, or sue on the 5 July compromise agreement. CSC has sued on the 5 July compromise agreement. 32 Diamond suggests there may have been some unconscionable conduct on the part of CSC. In my opinion the evidence of Diamond falls short of any such conclusion. The law in relation to unconscionable dealing is still that as stated by Kitto J in Blomley v Ryan (1956) 99 CLR 362, 415: It applies where one party to a transaction is at a special disadvantage in dealing with the other party because of illness, ignorance, inexperience, impaired facilities, financial needs or other circumstances to affect his ability to conserve his own interest, and the other party unconscientiously takes advantage of the opportunity placed in his hands. 33 However, more telling, the element of taking advantage requires that CSC was aware or ought reasonably to have been aware of some special disadvantage under which Diamond laboured. There is no evidence that CSC was aware of this or could reasonably have been aware of this. 34 Diamond deposes that he was not legally represented and suggests he was incapable of making a judgment about his best interest at the time of signing the 5 July email. It is clear from the email threads passing between Diamond and De Silva that Diamond was, in all the circumstances, capable of making a judgment about his best interest in relation to settling the matter with CSC. 35 Accordingly, in my opinion, Diamond has not shown any defence to the claim and CSC is entitled to judgment.
|