Frankston High-Tech Park P/L v Bayport Construction P/L

[1994] FCA 462

462       q 4

JUDGMENT No. , , , , , ~ .,-,,,,

IN THE FEDERAL COURT OF AUSTRALIA	)
)
VICTORIA DISTRICT REGISTRY	) No 3161 of 1994
)
GENERAL DIVISION	)

BETWEEN:  FRANKSTON HIGH-TECH PARK PTY LTD

(Applicants)

AND :  S BAYPORT CONSTRUCTION PTY LTD

(Respondents)

W:	Ryan J
Place:	Melbourne
Date:	27 June 1994

REASONS FOR JUDGMENT

RYAN J: On 13 April 1994 the applicant, Frankston High-Tech Park Pty Lcd, ("the Company"), was served with a demand pursuant to s.459E of the Corporations Lawclaiming $189,203.96 as owing by the Company to the respondent, Bayport Constructions Pty Ltd, ("Bayport").

It is not disputed that the Company was indebted to Bayport in the sum of $182,368.88 on 11 November 1993 when terms of settlement were executed between Bayport, the Company, and Messrs Stephenson and McComb who were directors of the Company and had guaranteed payment by it of a debt to the Company. The terms of settlement relevently provided:

Court of VictorLa agaanst Stephenson and McComb ("the wr~t") cla~ming,

"Whereas (A) Bayport commenced proceed~ng number 8010 of 1993 in the Supreme Courtpf Victorla seeking the wlndrng up of the company ("the windrng up application") for the non-payment by the company of the sum of $194,726.10 to Bayport.

(B) Bayport commenced proceeding number 8008 of 1993 in the Supreme

inter alia, damages from Stephenson and McComb pursuant to a guarantee
dated the 30th day of December 1990 ("the guarantee").

(C) As at the date hereof the company is indebted to Bayport for the sum of $182,368.88, or such other amount as maybe agreed, ("the debt").

(D) the parties hereto have agreed to settle and compromise the winding up application and the writ upon the terms and condrtions hereinafter

set out. Now these terms witness as follows:

(1) Bayport will withdraw the winding up application forthwrth and shall within seven (7) days of the date hereof file with the Supreme Court of Victoria and/or the Australian Securitres Commission any document or notice required to be filed in relation to the said withdrawal of the winding up application.

(2) In the premises and rn consideration of Bayport withdrawing the

winding up application the company shall -

(i) pay Bayport's legal costs incurred in relation to the winding up applrcatron and the wrrt. The amount to be paid by the company by way of costs shall be agreed upon by the solicitors acting-for Bayport and the solicito;~ acting for the company and shall be paid to Bayport's solrcrtors within thirty (30) days of agreement-having been reached or taxation thereof berng completed failrng agreement.

(ii) transfer to Bayport or its nomlnee within sixty (60) days of the date hereof or within thirty 30 days of the issue of the certificate of compliance, whichever date is the later, the propoeed lot 7 on Plan of Subdivision PS 331351X free from all encumbrances, save and except for all registered and appurtenant easements ("the land") on the date that the land is transferred to Bayport or its nominee an amount equal to the value of the land as determined rn accordance with clause 4 herein shall be deducted from the debt.

(iii) pay on or by the 11th day of March 1994 to Bayport the balance of the debt remarning outstanding as at that date together with interest which shall accrue on the debt pursuant to clause 3 herein.

(3) Interest shall accrue from the date hereof on the balance of the debt outstanding from time to time and adlusted monthly at the rate of 9 per centum (9%) per annum untrl such time as the debt has been paid

transfer to Bayport or its nominee shall, farling agreement by the	in full to Bayport. (4) The value to be attributed to the land as at the date of rts
parties, be determined by a registered valuer appointed jointly by Bayport and the company. In the event of any dispute as to the appointment of a registered valuer then Bayport and the company agree to request the president of the Real Estate and Stock Institute of Victoria to appoint a suitably qualrfred valuer. Any costs assocrated with the appointment of a valuer shall be said by the company.
( 5 ) In the event that the company fails to pay to Bayport all moneys
due to be paid it pursuant to these terms or falls to transfer the land to it as required and such default continues for a perlod of thrrty (30) days, then Stephenson and McComb shall consent to the entering of judgment agarnst them by Bayport pursuant to the writ for the balance of the moneys due to be pard to Bayport in accordance herewith, together with the legal costs rncurred by Ba port in entering ludgment, such costs to be calculated on a solicitorrclrent basrs. These terms of settlement shall be produced to the Supreme Court of Victoria as evidence of the irrevocable consent of Stephenson and McComb to the entering of Judgment by Bayport agarnst them.
(6) In the event that all moneys to be paid to Bayport in accordance with these terms are paid Bayport shall withdraw the writ and discontinue such proceeding agarnst Stephenson, McComb and Gregory John Stephenson.
(7) In the event that the writ is wrthdrawn pursuant to clause 6
herein then each party hereto mutually releases and forever discharges each other party from all claims, suits, actLons or causes of action that each party has against the other party or but for the execution of these terms of settlement may have had against each other party arrsrng out of the subject matter of the wrnding up applrcation or of the subject matter of the wrrt or of the guarantee.
( 8 ) The company covenants with Bayport that it shall do all such
things and seal all such documents and take all steps which may be necessary to give effect to these terms of settlement, including the obtaining of the certificate of compliance from the Crty of Frankston.
(9) Should Bayport or its nominee wish at any trme to sell the land at
a price less than the value attributed to rt rn clause 4 herein the company shall be given the first option at a price and on terms no less advantageous than those being offered by Bayport.
(10) A reference in these terms of settlement to Steuhenson or McComb ahail mean and include a reference to their respective heirs, executors, administrators, assignees, transferees, successors-in-title or trustee in bankruptcy.
(11) A reference in these terms of settlement to Frankston High-Tech Park Pty Ltd shall mean and rnclude a reference to its assignees, transferees, successors-in-title or liqurdator."

There was considerable discussion on the hearing of the Company's application to set aside the statutory demand as to whether those terms of settlement embodied an accord and satisfaction extinguishingthe antecedent debt or whether they merely required performance of the original contract. The presumption is in

Engl ish ( 1 9 4 7 ) , VLR 445 where Fullagar J observed at 452: favour of the latter construction; see, for example, Scott v "As Dixon J says an McDermott v Black (1940) 63 CLR 161 at 184:

"The accord is the agreement or consent to accept the satisfaction. Until the satrsfaction is glven the accord remarns executory and cannot frle the claim."

Then after pointing out that the drstinction between accord executory and accord and satisfaction as still vital and important, he says:

"The distrnction depends on what exactly is agreed to be taken in place of the exrsting cause of action or claim. An executory promise or series of promises given in consideration of the abandonment of the clarm may be accepted in substrtut~on or satisfaction of the existrng liability or, on the other hand, promises may be given by the party lrable that he will sat~sfy

the clarm by doing an act, making over a thrng or paying an ascertained sum of money, and the other patty may agree to accept not the promise but the act, thing or money in satisfaction of has clarm. If the agreement rs to accept the promise in satisfaction the discharge of the liability is immediate; if the performance, then there is no discharge unless and until the promise is performed.'

Sir William Holdsworth points out that the distinction is due to "causes of a technical kind" in legal history, but it also of course rests on a sound basis of common sense because as the same learned author also points out "as such agreements generally embody concessrons to debtors they are generally made with a view to performance and not to the obtaining of a counter promise from the debtor which may very likely only lead to fresh litigation". There is justification I think for saying, as he said in Salmon and Wznfzeld, that 'prima facze the offer of the creditor is to accept in satisfaction actual payment and not the mere promise of payment.'

The essence of the matter may be said to be that a mere "accord" is not a contract at all. But, if we find rn any particular case that there is a contract - a promise accepted in "satisfaction" agarnst a promisee

- our problem is not neceeaarrly at an end. We have still, I think, in

some cases to construe the contract to see whether its effect is to discharge the orrginal cause of action absolutely sothat the plarntiff can never thereafter sue on it but can only sue on the new contract, or whether it effects only a conditional discharge merely suspending the original cauee of action so that if it is not performed by the defendant according to its tenor the plaintiff may still maintain that original cause of action. See the passage in the judgment of Park B [l8471 1 Exch. 601 in Evans v Powers, [l8471 601 at 607-608 quoted above. (There may even be a third class of case where the original obligation is not discharged at all but a counter claim may be maintained on the new contract - see Ford v Beech, [1848], 11 QB 852, but I should think that such cases must be very rare). The question is likely to arise wherever a time is fixed for performance of the defendant's promise. In the present case, where a time is so fixed, if the compromrae is a mere accord, the plarntiff could sue on the original cause of actron at any time before acceptance of performance; he would not be bound to accept performance. If, on the other hand, the compromise rs a new contract he cannot sue on the origrnal cause of action unless the time for performance has passed and there is no performance. But, if the trme for performance by the defendant has passed and there is no performance, can he sue only on the new contract, the original cause of actaon berng absolutely discharged by the new contract, or can he, at his optron, sue for breach of the new

of action? The question, I thrnk, is to be decided as a matter of contract or, rescrnding the new contract, proceed on his original cause construction of the new contract."

Construing the terms of settlement as a whole and having regard to their identification as "the debt", of the antecedent debt on which Bayport's winding up application had been founded, I am inclined to regard the terms as providing merely for a different mode of performance of the original contract under which the acknowledged debt had arisen. I am reinforced in that view by the language of clause 7 of the terms of settlement which

stipulates that a release and discharge is to only take effect when the writ is withdrawn pursuant to clause 6, which event, in turn, is conditioned on all moneys being paid to Bayport in accordance with the terms of settlement themselves.

However, it is unnecessary to reach a concluded view on this question because I am not satisfied as required by s.459H(l)(a) of the Corporations Law that there is a genuine dispute about the existence or amount of a debt owed by the company to Bayport. The only dispute on the evidence is as to whether the company can still satisfy part of the debt by transferring to Bayport the land specified in clause (ii) of the terms of settlement. It is common ground that the certificate of compliance has not yet been issued by the City of Frankston. However, the evidence discloses that the subject land has been valued by a valuer, apparently acceptable to both sides, in the sum of $45,000. No attempt has been made by the company to tender the amount of the acknowledged debt less the sum of $45,000 attributable to the value of the land. I do not regard it as reasonably arguable that at least

that amount was not due to the company on 11 March 1994.

By contrast with the law which applied previously, the scheme of Division 3 of Part 5.4 of the Corporations Law requires the Court to calculate "the substantiated amount" of a demand which is expressed in s.459H to be "the admitted total minus offsetting total". On the evidence and the construction of the terms of settlement which I favour, the admitted total is the acknowledged debt plus interest less the ascertained value of the relevant land, being $45,000. I am not satisfied that there is any

genuine dispute about that admitted total. Since no other ground afforded by s.459J for setting aside the demand has been pointed to, it follows that the application must be dismissed with costs including any reserved costs.

I certify that this and the preceding

five (5) pages are a true copy of the reasons for judgment of his Honour Mr

Justice Ryan ,	-
Associate:

Date:  /&L4.+ W

Counsel for the applicants:	Mr A Flower
Solicitor for the applicants:	J Stephenson
Counsel for the respondents:	Mr L Warren
Solicitor for the respondents:	Taylor Splatt & Partners