Forrester v Clarke
[2012] WASC 3
•6 JANUARY 2012
FORRESTER -v- CLARKE [2012] WASC 3
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASC 3 | |
| 06/01/2012 | |||
| Case No: | CIV:1981/2009 | 28 NOVEMBER 2011 & 16 DECEMBER 2011 | |
| Coram: | EM HEENAN J | 16/12/11 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Judgment for plaintiff for $150,000 | ||
| B | |||
| PDF Version |
| Parties: | KYLIE ANNE MEMPHIS FORRESTER BEVERLY MAREE CLARKE MACKENZIES CORPORATION PTY LTD |
Catchwords: | Contract Settlement of action Deed Summary enforcement by court in original action Alleged counterclaim Assertion of set-off No basis for equitable set-off |
Legislation: | Competition and Consumer Act 2010 (Cth) |
Case References: | Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 3] [2009] WASC 52 Commissioner of State Taxation v Extos Pty Ltd (2000) WASCA 293 Connaught Restaurants Ltd v Indoor Leisure Ltd [1994] 1 WLR 501 CSR Investments Pty Ltd v Alcan Northern Territory Alumina Pty Ltd [2003] NSWSC 1137 Thomas v Cummins (2009) WASC 228 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
BEVERLY MAREE CLARKE
First Defendant
MACKENZIES CORPORATION PTY LTD
Second Defendant
Catchwords:
Contract - Settlement of action - Deed - Summary enforcement by court in original action - Alleged counterclaim - Assertion of set-off - No basis for equitable set-off
Legislation:
Competition and Consumer Act 2010 (Cth)
(Page 2)
Result:
Judgment for plaintiff for $150,000
Category: B
Representation:
Counsel:
Plaintiff : Ms K J Levy
First Defendant : Mr J Maclaurin
Second Defendant : Mr J Maclaurin
Solicitors:
Plaintiff : Kitto & Kitto
First Defendant : Curwood & Co
Second Defendant : Curwood & Co
Case(s) referred to in judgment(s):
Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 3] [2009] WASC 52
Commissioner of State Taxation v Extos Pty Ltd (2000) WASCA 293
Connaught Restaurants Ltd v Indoor Leisure Ltd [1994] 1 WLR 501
CSR Investments Pty Ltd v Alcan Northern Territory Alumina Pty Ltd [2003] NSWSC 1137
Thomas v Cummins (2009) WASC 228
(Page 3)
1 EM HEENAN J: By a notice of motion dated 17 August 2011, later amended on 22 August 2011, the plaintiff, Kylie Anne Memphis Forrester, seeks judgment against the defendants for a money sum totalling $150,000 plus costs. The defendants are Beverly Maree Clarke and Mackenzies Corporation Pty Ltd.
2 This motion for judgment has been made in an action in which the plaintiff had commenced proceedings against those defendants for alleged breaches of the terms of a deed of trust involving the conduct of businesses through the second defendant, Mackenzies Corporation Pty Ltd, in which both the plaintiff and the first defendant had units and interests. The action had been commenced by a writ of summons dated 27 May 2009 with a lengthy statement of claim which sought extensive relief involving setting aside the execution of the deed of trust establishing the second defendant in the conduct of the businesses, dissolving the trust and ancillary orders in relation to the assets of the businesses and for winding-up. It is not necessary to go into the terms of the statement of claim or the issues joined in the action. What occurred was that the parties proceeded to a mediation before a Registrar which led to a settlement of the action. The terms of the settlement were incorporated in a deed between all the present parties dated 9 September 2009. That deed contains a number of recitals and they are:
Whereas:
(a) Forrester [meaning the plaintiff] through her controlled family trust 'Forrester Trump Family Trust' and Clarke [meaning the first defendant] through her controlled family trust 'Clarke Family Trust' each owns one half of the issued units of the Mackenzies Enterprise Unit Trust which operates the brothel businesses in Perth and Kalgoorlie respectively (under lease) known as Langtrees and Langtrees 181 ('the Businesses');
(b) Forrester has commenced action CIV 1981 of 2009 in the Supreme Court of Western Australia against Clarke and Mackenzies Corporation in respect of the Businesses and the Mackenzies Enterprise Unit Trust;
(c) the parties have agreed to settle the litigation CIV 1981 of 2009 and Forrester has agreed to procure the sale by the Forrester Trump Family Trust to the Clarke Family Trust of all units owned by the Forrester Trump Family Trust in the Mackenzies Enterprise Unit Trust on the terms of this deed.
Now therefore the parties covenant and agree as follows …
(Page 4)
3 The first covenant is that the recitals which I have just described are hereby made. Those recitals are binding against the parties and I must take them to establish the relationship between the parties and the nature of the business which is conducted. It is obvious that these are businesses for the conduct of brothels and, as I said on the last occasion, they come within the scope of the law in respect of which contracts were frequently not enforced on the basis that they were contrary to public policy, if not illegal.
4 There has been no plea of illegality raised in the original action or in the present proceedings. The present proceedings are brought to enforce this deed. There is a question as to whether or not the court should of its own motion notice the nature of this business and withhold relief. There is a variety of views about the extent to which the court should itself refuse to lend aid to litigants because of the illegal or immoral nature of the business concerned, but the modern trend seems not to notice that, except in cases of clear statutory illegality, unless it is raised by the parties. I will proceed on that basis.
5 Under the terms of this settlement, there were covenants involving the plaintiff transferring her units or the units of the Forrester Trump Family Trust to the Clarke Family Trust in respect of the ownership of the Mackenzies Enterprise Unit Trust. In effect, control of the businesses by the ownership of the units in the unit trust would be transferred to the first defendant or to the trust company which she controlled. The evidence establishes that that was done.
6 Then there is covenant number 3:
Forrester, in consideration of the discontinuance (as hereafter set out) of CIV 1981 of 2009 [which was to eventuate on the completion of these terms and which has not yet occurred] and in consideration of the transfer and assignment in clause 2 above shall be paid the sum of $426,000 by Clarke and Mackenzies on a joint and several basis by payments as follows.
7 There then follows a schedule of five payments, the first two of $100,000 payable in October 2009 and April 2010, the third of $76,000 on 25 October 2010, and the fourth and the fifth each of $75,000 in April and October 2011 respectively. The evidence establishes that the first three instalments have been met by the defendants but the final two instalments due on 24 May 2011 and 25 October 2011 have not been paid. It is in respect of those that judgment is being sought. The deed goes on to
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- contain a covenant, covenant number 4, upon which the defendants place considerable importance. It says:
For the avoidance of doubt Forrester acknowledges and agrees that upon execution of this Deed, she ceases to have any right, entitlement or interest in any aspect of the Businesses and she will do nothing which may prejudice the conduct and continuation of the Businesses.
Upon performance by the parties of the covenants in the preceding clauses of this deed, the parties mutually release each other from all liability, including but not limited to any claims, actions, suits, choses in action or other entitlements the subject of action CIV 1981 of 2009 or which may have been otherwise pleaded or actioned by the subject matter of the civil action.
This release may be pleaded as a bar to any action which has been pleaded or which could have been pleaded in CIV 1981 of 2009.
The parties shall do all acts and procure and sign all documents necessary to perfect and perform their covenants in this Deed.
9 Then there is provision for due execution and it is acknowledged that the deed was duly executed and delivered.
10 What has since happened is that the transfer by the plaintiff of the units in the Mackenzies Enterprise Unit Trust to the first defendant or to entities associated with her has been achieved, and the first defendant has gone into occupation and control of the businesses and has been running them ever since. As I have already said, the first three of the instalments totalling $276,000 under the deed have been paid.
11 More recently a dispute has arisen between the parties because it is alleged by the defendants that in conduct associated with the lack of renewal of the lease of the premises from which the businesses were conducted and because, so it is alleged, the plaintiff has been instrumental in instituting another business of similar character which has gone into competition with the businesses which were being run and conducted through the Mackenzies Enterprise Trust, there has been a breach of covenant number 4, in that the plaintiff has done things which may prejudice the conduct and continuation of the businesses. That is denied by the plaintiff but there is controversy as to whether or not that is so.
(Page 6)
12 Upon the basis of that alleged breach of covenant, the defendants maintain that they are justified in withholding payment of the final two instalments; that they have various causes of action against the plaintiff, which I shall elaborate upon in more detail shortly, and that those claims justify, if it is necessary to identify the justification by relying upon an equitable set-off, the refusal to pay the outstanding $150,000. On that basis they resist the motion for judgment and further submit that proceedings of this nature for the enforcement within this action of the terms of settlement are inappropriate and are not apt to allow justice to be done between the parties. The defendants' position is that the plaintiff should be left to sue, in a separate action and upon the covenants of the deed, for the outstanding payments and that, if and when that is done, the defendants could set up a counterclaim and maintain an action for damages or more extensive relief which would, in their words, impeach the deed and justify the equitable set-off which I have already mentioned.
13 Initially the defendants' submissions went further than that, to suggest that in some way or another the defendants would be absolved of their obligations under the deed, perhaps by an action under the Competition and Consumer Act 2010 (Cth) in which ancillary relief similar to that available under s 87 might be granted.
14 It is very difficult to imagine how the defendants could have anything other than an action for damages against the plaintiff in view of the allegations which they have made and the events which have happened. This is because there is no suggestion or argument made by the defendants that the entire transaction which was the subject of the deed of settlement should be set aside or that the parties should return to the prior status quo in which each had units in equal shares for the operation of these businesses through the Mackenzies Enterprise Trust. There is reason to believe that even if any of the parties did seek rescission or the setting aside of the deed on any grounds, it would not be possible to achieve such a restitutio in integrum because of the changes made in the businesses, not least of which is the expiration of the lease which is the subject of the defendants' complaint.
15 Therefore there is no arguable basis upon which the Court could or should proceed other than that the defendants may have a claim or claims for unliquidated damages against the plaintiff for breach of covenant. I do not consider that there is an arguable basis shown for the existence of any different form of relief. Even if there had been, I do not consider that that would be determinative because whatever species of cause of action or consequent relief the defendants might have against the plaintiff, there is
(Page 7)
- no suggestion that this cannot be pursued in other proceedings which the defendants can bring. The real question is whether or not there is any basis to exclude the plaintiff from the immediate entitlement to the overdue payments of $150,000 payable under the terms of the deed which I have already described.
16 The principal argument raised by counsel for the defendants in this regard was that the procedure of summary enforcement of the terms of a settlement in an action is a rare or exceptional jurisdiction which ought not be embarked upon in the present circumstances because of its incapacity to allow the true rights of the parties to be examined, vindicated and implemented.
17 A convenient summary of the principles in this respect is contained in the decision of Beech J in Thomas v Cummins [2009] WASC 228, where his Honour was dealing with an application to enforce in this summary jurisdiction the terms of a settlement embodied in a Tomlin order made previously in the same litigation. His Honour declined to exercise the summary jurisdiction. In relation to the principles, his Honour began at [24]:
By its nature, a Tomlin order is an order giving effect to settlement terms agreed between the parties. The terms of the settlement are a schedule to the orders but are not orders of the court. The compromise agreement in the schedule supersedes the parties' previous rights and obligations which had been in dispute: Extos Pty Ltd v Commissioner of State Taxation [1999] WASCA 270 [84] - [85]. (This decision was reversed on appeal in Commissioner of State Taxation v Extos Pty Ltd [2000] WASCA 293 but on a different point.)
18 His Honour then deal with other matters and said at [26]:
The terms of the Tomlin order in this action contemplate enforcement of the compromise agreement in the schedule. On certain conditions, that is a permissible course: E F Phillips and Sons Ltd v Clarke [1970] 1 Ch 322, 325. That will be permissible provided that:
(1) the terms of the order include a qualified stay and liberty to apply, and
(2) the application to enforce is strictly to enforce the terms embodied in the orders and the schedule, and does not depart from the agreed terms.
19 His Honour then dealt with some particular features of the litigation before him and went on at [27] to say:
(Page 8)
- By this application Mr Thomas seeks to enforce the compromise agreement in a summary way. In that respect, substantially the same principles apply to any motion to enforce a compromise agreement, whether recorded in a Tomlin order or not. An agreement compromising the action can be summarily enforced by an application in the action, provided that the court is 'clearly satisfied that justice can be done under the summary procedure': Roberts v Gippsland Agricultural & Earth Moving Contracting Co Pty Ltd [1956] VLR 555; General Credits (Finance) Pty Ltd v Fenton Lake Pty Ltd [1985] 2 Qd R 6, 9 - 10; Dalmatian Nominees Pty Ltd v Marinovich, (Unreported, WASC, Library No 980670, 20 November 1998) 12 - 14.
20 His Honour then said at [28]:
Whether justice can be done under the summary procedure requires consideration of all the circumstances of the case, including:
(a) the extent to which extraneous matters to the original action are involved;
(b) how substantial the questions to be determined are;
(c) to what extent questions of credibility are likely to arise; and
(d) whether pleadings and discovery may be desirable: Roberts v Gippsland (564); General Credits v Fenton Lake (9 - 10).
21 Then finally on this aspect of the case Beech J said at [29]:
In Dalmatian Nominees v Marinovich (14), Murray J suggested that an application to summarily enforce an agreement to compromise an action should be viewed as akin to an application for summary judgment under O 14 of the Rules of the Supreme Court 1971 (WA). Consequently, it is for an applicant for summary enforcement to satisfy the court that there is no real question to be tried.
22 It is appropriate to go to one of the cases which his Honour cited, the decision of the Full Court of the Victorian Supreme Court in Roberts v Gippsland Agricultural and Earth Moving Contracting Pty Ltd. At pages 562 and 563, and with the agreement of his brother judges, Smith J identified the practice, procedures and principles applicable to whether or not summary enforcement of the terms of settlement would be allowed in the action which had produced the settlement. His Honour said as follows:
(a) The Court would ordinarily leave a party to proceed by separate bill if the agreement involved matters extraneous to the suit compromised. And it regarded an agreement as falling within this general category (i) if it dealt with property as to which no question
- was raised in the suit, or (ii) if it provided for things to be done which went beyond the ordinary range of what the Court would order in such a suit, or (iii) if its enforcement involved giving effect to equities of a different nature from those involved in the suit, or (iv) if there were parties to the agreement who were not parties to the suit: Forsyth v Manton (1820) 5 Madd 78; Askew v Millington (1851) 9 Hare 65; Richardson v Eyton (1852) 2 De GM & G 79; Dawson v Newsome (1860) 2 Griff 272; Fry on Specific Performance (5th ed), pp 719 - 720; Seton on Judgments and Orders (7th ed) vol III, pp 2214 - 2215.
- (b) On the other hand in cases not falling within this first general category, the Court would ordinarily enforce the agreement in the suit compromised. In particular this was so if the agreement related solely to the conduct or prosecution of that suit, or to the staying or dismissal thereof, or to the granting of the whole or part of the relief claimed therein or to the doing of that which the suit was brought to enforce: Tebbitt v Potter (1845) 4 Hare 164; Pryer v Gribble (1875) LR 10 Ch 534.
(c) For the purpose of deciding which of these two general categories a case fell within, the Court did not look merely at the particular obligations sought to be enforced. It looked also at the obligations of the applicant, so far as justice required that the application should not be granted without ensuring that they too would be performed: Askew v Millington. But it would disregard altogether obligations already fully performed: Dawson v Newsome; Smythe v Smythe (1887) 18 QBD 544. It may be observed that in order to ensure the performance of obligations by the applicant, the Court would make an order conditional upon such performance: Dawson v Newsome.
(d) If there was a substantial question to be determined as to what were the terms of the agreement, or as to whether it was valid or specifically enforceable, as for example where a substantial case was put forward of material mistake or of other circumstances such as would afford a defence to a suit for specific performance, a party would ordinarily be left to proceed by separate bill so that the matters raised might be fully investigated: Askew v Millington; Richardson v Eyton;Edwards on Compromises, p 186; Fry on Specific Performance (6th ed) p 720.
(e) The fact that the only outstanding obligation under the agreement of compromise was one for the payment of an ascertained sum of money did not preclude the Court from enforcing the agreement in the suit: compare Dawson v Newsome; Smythe v Smythe.
(f) Circumstances which might dispose the Court to enforce in the suit compromised an agreement which otherwise would not have been so enforced included -
- (i) that the agreement contained an express stipulation that it should be made a rule of Court, or, presumably, an express stipulation that an order for its enforcement should be made in the suit: Dawson v Newsome; or
(ii) that immediate interference was essential in order to give effect to the agreement: see Fry on Specific Performance (6th ed) pp 719 - 720,
23 I now return to this case. This deed of settlement was not in the form of a Tomlin order, nor did it contain any express stipulation that it be made a rule of court. The only outstanding obligation so far as the plaintiff is concerned is the overdue payments of the two final instalments of money according to a timetable which the parties had agreed upon. It is therefore possible for the court to enforce the terms of this settlement in this summary jurisdiction and to do so would be consistent with the principles expressed by Smith J.
24 There are further considerations which require notice and attention. The nature of the justification asserted by the defendants for withholding payment of this $150,000 is the alleged breach by the plaintiff of covenant number 4 in this deed of settlement, by so-called conduct which might prejudice the conduct and continuation of the businesses. The first thing to say about that is that, despite submissions vigorously and conscientiously pursued by counsel for the defendants that the obligations to make payment of the instalments should be regarded as conditional upon the plaintiff observing the obligations cast upon her under covenant number 4, there is nothing express in the deed of settlement to acknowledge any such conditional obligation, nor does there appear to be any ambiguity. Submissions that by implication covenant 4 should be regarded as creating obligations, the performance of which was essential before payment of the money sums under covenant 3 was due, do not, in my opinion, appear to be reasonably arguable.
25 The next observation is that the conduct and alleged breach of covenants relied upon by the defendants are all subsequent in time to the obligations assumed under this deed and, therefore, provide no reasonable basis upon which it could be argued that this deed was void or voidable for fraud, misrepresentation or misleading or deceptive conduct. If the defendants were to make good the claims which they assert, namely, that the plaintiff has been in breach of covenant number 4, it would, as I have already intimated, give rise to a claim for unliquidated damages, and it may be that the damages are large. There is nothing in the evidence before me to indicate that they would not be substantial and it is possible
(Page 11)
- that they could overtop the claim for the outstanding instalments. Be that as it may, the question which then arises is whether such an unliquidated claim for damages provides any arguable basis for a set-off against the plaintiff's entitlement to the payment of instalments under the deed.
26 There can be no doubt at all that at law under the statutes of set-off, as they are adopted in Western Australia, an unliquidated claim for damages, however arising, cannot be set off against a liquidated debt. The question which then arises is whether or not this countervailing cross-claim for damages may constitute an equitable set-off which would be capable of reducing the plaintiff's claim pro tanto and which would, in the language of set-off, be a defence of substance and not of procedure.
27 The question of whether or not an equitable set-off could arise in these circumstances was submitted to be a contentious and complicated matter which could not and should not be decided in the summary jurisdiction, but I do not see why that should be so. If, as I have already said, the highest that the defendants' rights can ascend is to an unliquidated claim for damages for any one of more of several concurrent causes of action, the same questions arise in each instance as to whether or not any of them could be set off against the liquidated claim due under the deed.
28 The question of set-off in equity has been addressed extensively in recent authorities. I have been referred to the decision of the New South Wales Supreme Court in CSR Investments Pty Ltd v Alcan Northern Territory Alumina Pty Ltd [2003] NSWSC 1137. The topic was even more recently canvassed in Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 3] [2009] WASC 52. That case was subsequently reversed on appeal but not on any ground relating to the existence or otherwise of a set-off or the observations which I made in relation to a set-off at law or in equity. The question is, using the language of the authorities with all the inadequacies which it has been acknowledged to possess, whether or not the proposed cross claim or counterclaim impeaches the title of the claim being asserted and against which the set-off is being attempted.
29 In the Clambake case, I considered that the decision which came closest to an illustration of the nature of such impeachment, as it was called, was Connaught Restaurants Ltd v Indoor Leisure Ltd [1994] 1 WLR 501, but that nothing resembling such a nature existed on the Clambake facts. I am of the view that this proposed counterclaim, on whatever basis it may emerge from any cause of action for unliquidated damages, cannot impeach the plaintiff's claim for a money instalment due
(Page 12)
- under this contract which has already been partially performed and the fruits of which are retained by the first defendant. Accordingly, I am not persuaded that there is a reasonably arguable basis for an equitable set-off. It follows that I am prepared to give judgment for the plaintiff in the exercise of the summary jurisdiction as sought for $150,000 plus costs.
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