Eighty-Second Agenda Pty Ltd v Handberg
[2015] FCA 1136
•27 October 2015
FEDERAL COURT OF AUSTRALIA
Eighty-Second Agenda Pty Ltd v Handberg [2015] FCA 1136
Citation: Eighty-Second Agenda Pty Ltd v Handberg [2015] FCA 1136 Parties: EIGHTY-SECOND AGENDA PTY LTD and GJR INVESTMENTS PTY LTD v GEOFFREY NIELS HANDBERG and BRENT LEIGH MORGAN File number: VID 282 of 2015 Judge: MIDDLETON J Date of judgment: 27 October 2015 Catchwords: CORPORATIONS – liquidators – proof of debt – refusal to allow lodgement to prove debt –– preventing lodgement of proof of debt – construction of deeds of compromise – relevant principles – terms of settlement – appeal dismissed. Legislation: Corporations Act 2001 (Cth)
Federal Court (Corporations) Rules 2000 (Cth)Cases cited: Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640
Osborn v McDermott [1998] 3 VR 1
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451
Prenn v Simmonds [1971] 1 WLR 1381
Programmed Total Marine Services Pty Ltd v Ships “Hako Endeavour”, “Hako Excel” and “Hako Esteem” (2014) 229 FCR 563
Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45
Western Export Services Inc v Jireh International Pty Ltd (2011) 282 ALR 604Date of hearing: 21 August 2015 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 61 Counsel for the Plaintiffs: Mr A Trichardt Solicitor for the Plaintiffs: Charles Fice Counsel for the Defendants: Mr J Moore QC Solicitor for the Defendants: Mills Oakley Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 282 of 2015
BETWEEN: EIGHTY-SECOND AGENDA PTY LTD
First PlaintiffGJR INVESTMENTS PTY LTD
Second PlaintiffAND: GEOFFREY NIELS HANDBERG
First DefendantBRENT LEIGH MORGAN
Second Defendant
JUDGE:
MIDDLETON J
DATE OF ORDER:
27 OCTOBER 2015
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The application be dismissed.
2.Unless any party notifies the Court in writing by 4.00pm on 2 November 2015 that they wish to dispute the order as to costs, the Plaintiffs pay the costs of the Defendants.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 282 of 2015
BETWEEN: EIGHTY-SECOND AGENDA PTY LTD
First PlaintiffGJR INVESTMENTS PTY LTD
Second PlaintiffAND: GEOFFREY NIELS HANDBERG
First DefendantBRENT LEIGH MORGAN
Second Defendant
JUDGE:
MIDDLETON J
DATE:
27 OCTOBER 2015
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
INTRODUCTION
On 10 March 2015, the Defendants made a decision to prevent the Plaintiffs from submitting a proof of debt as creditors, pursuant to s 554E of the Corporations Act 2001 (Cth) (the ‘Act’), in the winding up of Traditional Values Management Ltd (in liquidation) (the ‘Decision’).
This is an application by the Plaintiffs:
(a)for an order pursuant to r 14.1(3) of the Federal Court (Corporations) Rules 2000 (Cth), extending the Plaintiffs’ time for filing the Originating Process in this proceeding until 1 June 2015;
(b)pursuant to s 1321 of the Act, appealing against the Decision not to allow the Plaintiffs to prove as creditors of Traditional Values Management Ltd (in liquidation) (‘TVM’) on the basis that terms of settlement dated 10 April 2013 entered into between the Plaintiffs, the Defendants and others (the ‘Terms of Settlement’) prevent the Plaintiffs from so proving; and
(c)for an order reversing the Decision and ordering the Defendants to admit the Plaintiffs’ claims as creditors under s 554E of the Act in respect of the amount outstanding under the Terms of Settlement.
At the hearing of this matter on 21 August 2015, I granted the application for extension of time, which was unopposed by the Defendants, and heard the remainder of the application.
BACKGROUND AND RELEVANT FACTS
Between 2006 and 2008, the Plaintiffs and other creditors (collectively, the ‘Creditors’) loaned a total of approximately $4,500,000.00 to TVM under two loan agreements, respectively dated 14 August 2006 (the ‘2006 Loan Agreement’) and 14 April 2008 (the ‘2008 Loan Agreement’).
The 2006 Loan Agreement was secured by a fixed and floating debenture charge document, executed by TVM and the Creditors, and registered on 23 August 2006 (the ‘2006 Charge’). The 2006 Charge was over approximately $5,500,000.00 worth of loans made by TVM to individuals to invest in timeshare schemes (the ‘Timeshare Loans’).
The 2008 Loan Agreement also provided for a fixed and floating charge in favour of the Creditors over the Timeshare Loans, to be entered into contemporaneously with that loan agreement.
On 3 February 2010, at a meeting of TVM’s creditors, the Defendants were appointed joint and several liquidators of TVM.
Upon commencing as liquidators, the Defendants found that no charge securing TVM’s obligation to repay the loans under the 2008 Loan Agreement had in fact been entered into by TVM and the Creditors.
On 22 February 2012, the Defendants made an application to the Supreme Court of Victoria (the ‘2012 Proceeding’) seeking, inter alia, the following:
(a)A declaration that the charge granted by TVM pursuant to the 2008 Loan Agreement was void as against the Defendants;
(b)A declaration that the obligations of TVM under the 2008 Loan Agreement were not secured by the 2006 Charge;
(c)A declaration that there was no amount payable to the Creditors of the 2006 Loan Agreement because:
(i)the debt owed by TVM pursuant to the 2006 Loan Agreement was discharged by the 2008 Loan Agreement;
(ii)alternatively, the amount advanced pursuant to the 2006 Loan Agreement and the 2006 Charge was limited to the sum of the $4,000,000.00; or
(iii)alternatively, the debt owed pursuant to that agreement had been repaid by TVM;
(d)An order that the Creditors repay to the Defendants $2,316,916.29 (or alternatively $288,630.70) on the basis that that amount was paid to the Creditors by the Defendants on the mistaken belief that a valid and subsisting charge secured the satisfaction of the debt under the loan agreements;
(e)A direction pursuant to s 511 of the Act that the Defendants were justified in treating the Creditors as unsecured creditors of TVM; and
(f)Alternatively to the paragraph above, if the debts owed to the Creditors under the 2008 Loan Agreement were secured by the 2006 Charge, a direction pursuant to s 511 of the Act that the Defendants were justified in treating the Creditors as secured creditors of TVM.
In the 2012 Proceeding, the Defendants claimed that the following amounts remained owing by TVM to the Creditors:
(a)under the 2006 Loan Agreement – nil;
(b)under the 2008 Loan Agreement – $647,468.09; and
(c)under a loan advance made in 2009 – $130,211.38.
In response, the Creditors claimed, inter alia, that:
(a)contrary to the Defendants’ claims, it was the common intention of all parties to the 2008 Loan Agreement that the 2006 Charge would continue to secure TVM’s obligations under the 2008 Loan Agreement;
(b)there was no separate or additional security given in respect of the 2008 Loan Agreement because it was the parties’ intention that the 2008 Loan Agreement would ‘simply restate the legal relationships between TVM and the [Creditors] under the 2006 loan agreement’; and
(c)contrary to the amounts asserted by the Defendants to be owing to the Creditors, the total amount still owing to them exceeded $900,000.00.
On 10 April 2013, the Creditors and the Defendants compromised the 2012 Proceeding by entering into the Terms of Settlement. The Terms of Settlement were entered into by the Defendants on their own behalf and on behalf of TVM.
In March 2014, the Defendants discovered that Ms Lynne Philistin, an employee of TVM retained by the Defendants to assist in the collection of the Timeshare Loans, had fraudulently processed $1,053,350.00 worth of loan applications (the ‘Philistin Fraud’).
The Philistin Fraud significantly reduced the value of the Timeshare Loans which, under the Terms of Settlement, had been agreed by the parties to act as security for the amount stipulated in the Terms of Settlement to be owing by TVM to the Creditors.
In June 2014, the Creditors brought an action against the Defendants in the Supreme Court of Victoria for damages for misleading and deceptive conduct, breach of contract, and negligence. The parties settled that proceeding on confidential terms in March 2015.
In a letter to the director of the first Plaintiff dated 5 February 2015, Mr Roger Reidy, the Receiver appointed under the 2006 Charge, noted that the value of the Timeshare Loans at 31 January 2015 was $149,385.61, while the balance of the amount to be repaid to the Creditors pursuant to clause 1(a) of the Terms of Settlement was $317,456.94.
At the beginning of March 2015, the Plaintiffs instructed their solicitors to notify the Defendants of their desire to submit a proof of debt under s 554E of the Act in the winding up of TVM. The Plaintiffs sought to utilise s 554E to prove for the amount that would remain outstanding under the Terms of Settlement as a result of the reduction in value of the Timeshare Loans on account of the Philistin Fraud (the ‘Outstanding Amount’).
On 10 March 2015, the Defendants made the Decision against which the Plaintiffs now appeal in this proceeding.
CONSIDERATION
The disposition of this proceeding depends on the proper construction of the Terms of Settlement. The ultimate task is to ascertain the common intention of the parties by construing the Terms of Settlement.
Relevant clauses of the Terms of Settlement
The whole of the Terms of Settlement needs to be considered. However, the following clauses in the Terms of Settlement were the main focus of attention:
1. The [Defendants] and first to sixth defendants (“the Creditors”) agree that:
(a)the debt owed by TVM to the Creditors is $717,500 (“the Debt”).
(b)The Debt is secured by the “2006 Charge” over “the Timeshare Loans” as those terms are defined in paragraph 5 of the amended points of claim dated 7 June 2012.
(c)Interest will accrue on the Debt at 11.5% per annum from 11 April 2013.
…
4.The [Defendants] will on the 10th of each month, commencing 10 June 2013, apply the Timeshare Loan repayments received by them in the previous month (and for the payment made on 10 June 2013, the repayments made in April and May 2013) as follows:
(a)two-thirds of the amount of all such repayments (net of “collection costs” as that term is defined in the deed of agreement between the parties dated 24 August 2015) will be paid to the Creditors in reduction of the Debt; and
(b) the remainder will be retained by the [Defendants].
…
6.Each of the [Defendants] and the Creditors release each other from all claims the subject of and related to the proceeding.
…
9. For the avoidance of doubt:
(a)the Creditors will not be entitled to submit a proof of debt in the winding up of TVM for any alleged unpaid balance of the loan agreements the subject of the proceeding…
13.The Creditors will not take any step to enforce their rights under the 2006 Charge unless the [Defendants] fail to make any payment required to be made by them under this agreement, but in the event the [Defendants] fail to make any payment, the Creditors may exercise all or any of their rights under the 2006 Charge.
In addition, clause 3 of the Terms of Settlement provided for an initial payment of $210,000.00 from the Defendants to the Creditors, upon the Defendants’ receipt of an agreed amount held by Mr Reidy, as former Receiver of TVM.
The Plaintiffs’ Position
The Plaintiffs submit that the Defendants’ Decision preventing them from submitting a proof of debt relied upon an erroneous construction of the Terms of Settlement.
The Plaintiffs submit that, as a result of the 2012 Proceeding, the Terms of Settlement constitute an ‘accord and satisfaction’ compromise, the significance of which has been described by Phillips JA in Osborn v McDermott [1998] 3 VR 1 at 10 as follows:
With accord and satisfaction, either party may sue upon the compromise, but only on the compromise and for nothing else: the original cause of action has gone.
On this basis, a new contract will have arisen from the Terms of Settlement, precluding the Plaintiffs from bringing any further claim in respect of the loan agreements the subject of the 2012 Proceeding.
The Plaintiffs describe the debt determined under the Terms of Settlement as a ‘new’ debt which has replaced the ‘old’ debt, being the amount alleged to be owing under the loan agreements, which were the subject of the 2012 Proceeding. On this construction, the Plaintiffs contend that clause 9(a) only relates to the submitting of proofs in relation to the ‘old’ debt, and has no effect on the submission of proof in respect of the ‘new’ debt, as defined in clause 1(a) (the ‘Debt’).
The Plaintiffs assert that that construction is consistent with, and reflected in the different terminology used in clauses 1(a) and 9(a). The Plaintiffs claim that had the parties intended for clause 9(a) to prohibit proofs in respect of the ‘new’ Debt, that clause could have referred to that Debt, as defined in clause 1(a). Alternatively, the wording in clause 9(a) could have been mirrored in clause 1(a) to make it clear they referred to the same thing. The Plaintiffs contend that the difference in the wording is significant: the two clauses are intended to refer to separate, unrelated amounts.
In addition, the Plaintiffs also submit that the Terms of Settlement should be viewed in such a way that clause 9(a) operates to ‘delineate the ambit’ of clause 6. That is, the release of the claims in the 2012 Proceeding means that proofs of debt in respect of those claims are debarred, as both clauses concern the ‘old’ debt under the 2012 Proceeding.
Given this, the Plaintiffs claim that the only way in which clause 9(a) could operate to prohibit proofs of debt being submitted in relation to the Debt is for the words ‘the Debt, or any part thereof’ to be inserted into the clause, between the words ‘TVM’ and ‘for any’. The Plaintiffs argue that inserting such words would also necessitate additional words to be inserted into clause 6.
The Plaintiffs submit a further basis for their position, claiming that in exchange for relinquishing their claims under the loan agreements in the 2012 Proceeding, the ‘new’ Debt was to be secured by the 2006 Charge. By extension, the Plaintiffs claim that they were rendered secured creditors. As secured creditors, the Plaintiffs claim that they are entitled to all corresponding rights and benefits, including in particular, the right to submit a proof of debt pursuant to s 554E of the Act.
The Defendants’ Position
The Defendants argue for a contrary construction whereby clause 9(a) operates to prevent the Plaintiffs from submitting a proof of debt.
Having regard to the context and surrounding circumstances, the Defendants claim that the history of the loan agreements and the position adopted by the parties under the 2012 Proceeding support the argument that the Terms of Settlement prevent lodging of the proof of debt.
According to the Defendants, the Terms of Settlement should be interpreted by having regard to the following three key aspects of the claims in the 2012 Proceeding:
·The claim that the 2008 Loan Agreement operated as a cancellation of the 2006 Loan Agreement;
·The dispute as to whether the repayments under the 2008 Loan Agreement were secured; and
·The Defendants’ claim that approximately $2.3 million had mistakenly been paid to the Creditors on the belief that the repayments under the loan agreements were secured.
In light of these factors, the Defendants submit:
[t]he Terms of Settlement represented a significant compromise of TVM’s position. TVM contended in the proceeding that the Plaintiffs were required to stand in line with all other unsecured creditors. In terms of settlement, TVM agreed that the Plaintiffs had rights of security. The price for that compromise was two-fold. First, the amount owed by TVM to the Plaintiffs was agreed to be $717,500, and not the higher amount the Plaintiffs claimed. Second, the Plaintiffs’ rights of recovery were restricted to the secured property, one-third of which would be recovered for the benefit of the [Defendants].
The role of clause 9(a) therefore, was to ensure that the Creditors’ recovery could not be supplemented by proof of debt claims during TVM’s winding up, and was to be restricted to the value of the Timeshare Loans, as the security.
The Defendants also place significance on the characterisation of the Debt. The Defendants submit that one effect of the Terms of Settlement was that the parties had reached agreement on, and identified in clause 1(a), the quantum of the existing debt, and that ‘the defined term “Debt” was simply a shorthand way to describe the agreed unpaid balance of the loan agreements.’ On this construction, the ‘new’ Debt of clause 1(a) and the ‘unpaid balance of the loan agreements’ of clause 9(a) are one in the same thing. As such, the amount defined as the Debt is to be captured by clause 9(a), thereby preventing lodgement of the proof of debt in respect of the Outstanding Amount.
The Defendants’ counsel concede that it would have been clearer if clauses 1(a) and 9(a) used consistent terminology. However, it was argued that on an objective construction of clause 9(a), any amount owed under the loan agreement includes the Debt as it ‘plainly means what’s owed under the loan agreement’.
Furthermore, the Defendants claim that their position is also supported by the inclusion of the introductory phrase in clause 9(a) – ‘[f]or the avoidance of doubt.’ Had the phrase not been included, the Defendants contend that, in circumstances where the value of the Timeshare Loans and the security they were providing was reduced or threatened in any way, some doubt about the parties’ rights may have arisen.
Aside from the Philistin Fraud, the Defendants claim that other circumstances may have arisen to have jeopardised the amount secured by the 2006 Charge. The Defendants note, for example, that the Timeshare Loans were a collection of loans taken by individuals, a group of whom could have been rendered bankrupt and been unable to repay. In such circumstances, the Defendants contend, clause 9(a) would be necessary to clarify that the Creditors would not have recourse to any other amounts from TVM.
Findings
The relevant legal principles
As I have indicated, the determination of this application turns on the proper construction of the Terms of Settlement, particularly clause 9(a). It is well established that the principles applicable to the interpretation of contracts apply equally to the interpretation of a deed, such as the Terms of Settlement at hand: Prenn v Simmonds [1971] 1 WLR 1381 at 1383–1384; Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45 at [10].
The legal principles relevant to the interpretation of contracts are also well settled: Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 347–352; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461–462; Western Export Services Inc v Jireh International Pty Ltd (2011) 282 ALR 604 at [4]–[5]. A recent articulation of these principles was made by French CJ, Hayne, Crennan and Kiefel JJ in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35]:
this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood the terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties… intended to produce a commercial result”. A commercial contract is to be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.
These principles have also been recently applied by the Full Federal Court in Programmed Total Marine Services Pty Ltd v Ships “Hako Endeavour”, “Hako Excel” and “Hako Esteem” (2014) 229 FCR 563. In that case, the Court was required to interpret a deed arising from negotiations between two parties, following the failure of the one of the parties to perform their obligations under a services agreement for the manning of shipping vessels. In outlining the relevant legal principles, Besanko J held (at [115]):
The process of construing the Deed is informed not only by the text of the document, but also by the surrounding circumstances known to both parties and the purpose and object of the transaction embodied in the document (Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ). Lord Wilberforce in a well-known passage in his speech in Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 said (at 995-996):
In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.
As an initial observation, I accept that the Terms of Settlement constitute an ‘accord and satisfaction’, and establish a new contract between the parties. However, as my reasons below explain, the question still remains as to the construction of these new arrangements and their operation.
In the context of a compromise, it is important to identify the disputes which the parties, by their agreement, were endeavouring to resolve. This is done not to give a strained interpretation to ordinary language, but is particularly useful in the case of ambiguity or where a contract may be susceptible to more than one meaning.
The Terms of Settlement in fact refer to the 2012 Proceeding, and to certain terms or agreements referred to in the pleadings in that proceeding (see, for example, clauses 1(b), 9(a) and 13).
Whilst the parties contend that there is no ambiguity in the Terms of Settlement, the clauses in dispute potentially have a different operation depending on the construction adopted by the Court in this proceeding.
The construction of the Terms of Settlement
The context and the language of the Terms of Settlement
I have come to the view that the interpretation of the Terms of Settlement is especially informed by both the underlying purpose of, and context giving rise to, the Terms of Settlement.
Having regard to the purpose of the Terms of Settlement to bring the proceeding and disputes to an end, I accept the Defendants’ submission that objectively construed, the Terms of Settlement were intended to provide a mechanism for dealing with all the Creditors’ claims in relation to the loan agreements.
I consider the Defendants’ interpretation of the Terms of Settlement to be a more rational reflection of the way in which the specific claims of the parties in the 2012 Proceeding would have been compromised. The most compelling example of this is that the price (or a portion of the price) the Creditors had to pay for (a) the recognition of an amount owing to them, and (b) the Debt being secured by the 2006 Charge, given both issues were heavily disputed in the 2012 Proceeding, was the restriction of their rights of recovery to the value of the Timeshare Loans.
I accept the Defendants’ submissions that it follows that on an objective construction of clause 9(a), ‘any alleged unpaid balance of the loan agreements the subject of the proceeding’ is intended to encompass the Debt of clause 1(a). This argument is particularly supported by the specific inclusion of ‘any’ in clause 9(a). This word extends the scope of clause 9(a) to cover any amount relating to the 2012 Proceeding, such amounts now the subject of the Terms of Settlement, and specifically clause 1(a).
In developing their position, the Plaintiffs placed significant weight on the differences in the use of terminology in clauses 1(a) and 9(a), as, on the face of the Terms of Settlement, there does not appear to be a reason why different terminology was used, if the amounts were referrable to each other. While there are clearly cosmetic differences in the use of the language, I am not persuaded that there are any meaningful differences in substance. Rather, I accept that the differences are more suggestive of poor drafting, than they are of the creation of a discrete debt of the kind for which the Plaintiffs contend.
On this interpretation, I find that the role of clause 1(b) is two-fold: it provides assurance that the Debt in clause 1(a) would be paid, while at the same time drawing a boundary around the extent of the Creditors’ rights under the Terms of Settlement. It follows therefore, that being so restricted to recovering the secured amount, the prohibition in clause 9(a) necessarily applies to the Debt in clause 1(a), to prevent recovery beyond the extent of the security.
Further, it is significant to look at the operation of clauses 1 to 4. Clause 1(a) merely sets out the agreed amount of the debt – $717,500.00. No obligation to pay is found in that clause. Clause 2 provides for payment by the Receiver. Clause 3 provides for payment of $210,000.00 in reduction of the Debt within a set time. Clause 4 then relates to the application of the Timeshare Loan repayments, if received by the Defendants, again in reduction of the Debt. There is no obligation on the Defendants to pay under clause 4, other than applying the Timeshare Loan repayments once received by them. If the Defendants did not receive any Timeshare Loan repayments, they would not breach the Terms of Settlement or ‘fail to make any payment required to be made by them under this agreement’, within the terms of clause 13.
The operation and structure of clauses 1 to 4, and the existence of clause 13, support the Defendants’ approach to the construction of the Terms of Settlement.
‘For the avoidance of doubt’
Another element of the Terms of Settlement which is key to informing their interpretation is the introductory phrase of clause 9(a) – ‘for the avoidance of doubt’. I am of the view that these words have a deliberate function to resolve ambiguity.
On the Plaintiffs’ construction, clause 9(a) is taken to simply reaffirm or reiterate the release of the claims described in clause 6. Therefore, on this interpretation, it would have been clear and not at all doubtful how clause 6 was to apply, having been reiterated by clause 9(a) itself. As such, these words of clarification and emphasis would be superfluous.
On the Defendants’ interpretation, however, in the absence of clause 9(a), doubt may have in fact arisen as to the Creditors’ ability to submit a proof in circumstances where the Debt was not fully repaid under the Terms of Settlement. These words affirm therefore, the parties’ agreement that, in the event that the security does not ultimately satisfy the Debt, the Terms of Settlement do not make other avenues of recovery available to the Creditors; it was not part of the compromise struck by the parties. On this interpretation, the introductory phrase is important and necessary.
Remedy for breaching clauses 3 and 4
Also relevant to the construction of the Terms of Settlement is the issue of what remedy would follow breaches of clauses 3 and 4.
I have already referred to clause 13. Clause 13 provides for the Creditors’ full exercise of their rights under the 2006 Charge in the event that the Defendants fail to make payment, such as failing to comply with clause 3 or failing to apply the Timeshare Loan repayments actually received by them in accordance with clause 4.
Clause 13 indicates therefore that the parties agreed to being given certain carefully selected rights under the Terms of Settlement if payment was not made thereunder, such being limited to the 2006 Charge. The rights do not include the entitlement to submit a proof of debt as the Plaintiffs seek to do in this proceeding.
CONCLUSION
For the foregoing reasons, I confirm the Decision and dismiss the Plaintiffs’ application.
I order that:
(1)The application be dismissed.
(2)Unless any party notifies the Court in writing by 4.00pm on 2 November 2015 that they wish to dispute the order as to costs, the Plaintiffs pay the costs of the Defendants.
I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton. Associate:
Dated: 27 October 2015
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