Gomez v Kuhadas (No 2)

Case [2015] FCA 561

FEDERAL COURT OF AUSTRALIA

Gomez v Kuhadas (No 2) [2015] FCA 561

Citation: Gomez v Kuhadas (No 2) [2015] FCA 561
Appeal from: Kuhadas v Gomez [2014] FCCA 1130
Parties: KEVIN BENNETT GOMEZ v VIVEKANANDA KUHADAS
File number(s): NSD 622 of 2014
Judge(s): GLEESON J
Date of judgment: 5 June 2015
Catchwords:

BANKRUPTCY AND INSOLVENCY – whether bankruptcy notice should be set aside – where Singapore judgment registered in Supreme Court of New South Wales on application of appellant – where bankruptcy notice issued, founded upon orders of the Supreme Court of New South Wales – where appellant filed creditor’s bankruptcy application in Singapore based upon Singapore judgment – where parties made an agreement by which appellant promised to, and did, withdraw bankruptcy application for consideration – whether agreement discharged respondent’s obligation to perform Singapore judgment – decision to set aside bankruptcy notice upheld – Bankruptcy Act 1966  (Cth), s 30

CONTRACTS – construction of agreement – whether agreement amounted to accord and satisfaction by which Singapore judgment was discharged – where agreement did not explicitly address its effect on judgment – agreement intended to operate as accord and satisfaction – implied terms – whether term should be implied into agreement that respondent would be released of obligation to pay Singapore judgment debt upon coming into effect of agreement – where implied term would be reasonable and equitable – where alternative would not make commercial sense – where implied term consistent with express terms

EVIDENCE – application to adduce further evidence – where evidence was available at time of trial – where evidence not such that result would probably have been different – whether significance of evidence apparent at time of trial – whether proposed evidence is relevant – additional evidence not received on appeal – Federal Court of Australia Act 1976 (Cth), s 27

Legislation: Bankruptcy Act 1966 (Cth), s 30
Federal Court of Australia Act 1976 (Cth), s 27
Federal Court Rules 2011 (Cth), r 36.57
Foreign Judgments Act 1991 (Cth)
Cases cited: Ashton v Pratt [2015] NSWCA 12
Australian Securities and Investments Commission v Forge [2003] FCAFC 274; (2003) 133 FCR 487
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
British Russian Gazette and Trade Outlook Ltd v Associated Newspapers Ltd [1933] 2 KB 616
CDJ v VAJ (No 2) [1998] HCA 76; (1998) 197 CLR 172
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337
Commissioner of Taxation v Hadidi (1994) 51 FCR 453
Computer World (Victoria) Pty Ltd v Internet Centre of Excellence 2000 Pty Ltd [2006] FCA 752
Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Gay Choon Ing v Long Sze Ti Terence Peter [2009] SGCA 3
Marinchek v Cabport Pty Ltd [2010] NSWCA 334
McDermott v Black [1940] HCA 4; (1940) 63 CLR 161
Minah L Mande v Schneider [1998] SGHC 60
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AGLC
Gomez v Kuhadas (No 2) [2015] FCA 561
Case
[2015] FCA 561
Decision Date

CaseChat Overview and Summary

In the appeal Gomez v Kuhadas (No 2), the central issue before the court was whether the primary judge had erred in his construction of an agreement dated 22 February 2013, which was intended to resolve a dispute between Mr Gomez and Mr Kuhadas. The dispute revolved around the enforceability of a Singapore judgment and a subsequent bankruptcy application filed in Singapore by Mr Gomez based on that judgment. The primary judge had set aside a bankruptcy notice issued to Mr Kuhadas, finding that the 22 February 2013 agreement effectively discharged Mr Kuhadas from his obligation to satisfy the Singapore judgment. Mr Gomez appealed, challenging the primary judge's interpretation of the agreement and its effect on the Singapore judgment.

The legal issues before the court were primarily concerned with the construction of the 22 February 2013 agreement and whether it constituted an accord and satisfaction that discharged Mr Kuhadas’ obligation to pay the Singapore judgment debt. The court considered the language of the agreement, the surrounding circumstances, and the commercial purpose of the contract. The primary judge's interpretation of the agreement was that Mr Kuhadas would be released from his obligations under the Singapore judgment upon the performance of certain conditions in the agreement. Mr Gomez argued that the primary judge had erred in this interpretation and that the agreement did not have the effect of discharging Mr Kuhadas from the Singapore judgment.

The court held that the primary judge's interpretation of the agreement was consistent with the objective approach to contract construction. The court found that the agreement did not expressly address its effect on the Singapore judgment but that it would be "commercial nonsense" for the parties to have intended that Mr Gomez could reissue the bankruptcy application or take enforcement action in relation to the Singapore judgment debt at any time. The court concluded that the primary judge's interpretation was consistent with the commercial purpose of the contract and that it would be reasonable and equitable to imply a term that upon the coming into effect of the agreement, Mr Kuhadas would be released of his obligation to pay the Singapore judgment.

In dismissing the appeal, the court also addressed Mr Gomez's application to adduce further evidence, which he sought to rely on to challenge the primary judge's findings. The court found that the proposed evidence was not such that the result would probably have been different and that the evidence was not relevant to the issues on appeal. Therefore, the court declined to receive the additional evidence.

The final order of the court was to dismiss the appeal with costs, affirming the primary judge's decision that the 22 February 2013 agreement effectively discharged Mr Kuhadas from his obligation to pay the Singapore judgment debt.

Orders

Orders of the court

1. The appeal be dismissed with costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

The notice of appeal contains six grounds of appeal. They are that the primary judge erred:(1)in finding that the 22 February 2013 agreement discharged Mr Kuhadas of his obligation to pay the Singapore judgment debt;(2)in finding that the words “to withdraw the bankruptcy application” in the 22 February 2013 agreement are to be construed as “to withdraw the bankruptcy application and thereby release you from your obligation to pay the judgment on which the bankruptcy application is based”;(3)in failing to give the words “in consideration of the same, our client is agreeable to withdraw the bankruptcy application” their plain meaning;(4)in implying into the 22 February 2013 agreement the words “and thereby release you from your obligation to pay the judgment on which the bankruptcy application is based”;(5)in finding that it would be fair and equitable to imply a term that upon the coming into effect of the 22 February 2013 agreement, Mr Kuhadas would be released of his obligation to pay the Singapore judgment;(6)in finding that an implied term in the 22 February 2013 agreement that, upon the coming into effect of the agreement Mr Kuhadas would be released of his obligation to pay the Singapore judgment, would not contradict any express term of that agreement.MR GOMEZ’S APPLICATION TO ADDUCE FURTHER EVIDENCE In his written submissions, Mr Gomez (who represented himself on the appeal) foreshadowed an application to adduce further evidence comprising:(a)The full set of 19 emails exchanged between Mr Boey and Mr Kuhadas leading to the emails of 22 February 2013;(b)Transaction reports said to relate to Mr Kuhadas’ disposal of assets in Singapore “thus negating the effectiveness of the 1st BA” (a reference to bankruptcy proceedings against Mr Kuhadas in Singapore that were withdrawn by Mr Gomez);(c)An email communication between Mr Kuhadas and his travel agent dated 8 December 2012. At the hearing, Mr Gomez sought to tender two other documents, being correspondence from two banks in Singapore dated in January 2013 concerning garnishee orders directed to the banks at Mr Gomez’s request. Section 27 of the Federal Court of Australia Act 1976 (Cth) provides relevantly:In an appeal, the Court shall have regard to the evidence given in the proceedings out of which the appeal arose, and has power to draw inferences of fact and, in its discretion, to receive further evidence, which evidence may be taken: (a) on affidavit; or (b) by video link, audio link or other appropriate means in accordance with another provision of this Act or another law of the Commonwealth; or (c) by oral examination before the Court or a Judge; or (d) otherwise in accordance with section 46. The discretion to receive further evidence on appeal is a wide one, but must be exercised judicially: Computer World (Victoria) Pty Ltd v Internet Centre of Excellence 2000 Pty Ltd [2006] FCA 752 at [15] citing CDJ v VAJ (No 2) [1998] HCA 76; (1998) 197 CLR 172 at 185. In Computer World, Weinberg J identified finality, discoverability of the evidence and its likely effect on the orders made as factors that are usually relevant to the exercise of the discretion.

Decision

Reasons for decision

Similarly, Dixon J (with whom McTiernan J agreed) said at 186:It would be futile for Black to withdraw allegations which he was to be at liberty to revive. The purpose of the withdrawal was not that of social amenity but to complete and close a business transaction.Appeal grounds 1 to 4: whether the 22 February 2013 agreement discharged Mr Kuhadas’ obligation to pay the Singapore judgment debt The primary judge’s precise finding was not that the 22 February 2013 agreement discharged Mr Kuhadas of his obligation to pay the Singapore judgment debt. Rather, it was that the Singapore judgment debt was released as a result of the 22 February 2013 agreement and Mr Kuhadas’ satisfying items 1, 3 and 4 of Mr Boey’s email (at [10] above). The primary judge recognised (at [49]-[51] of the reasons for judgment) that the 22 February 2013 agreement did not expressly address the effect of that agreement on the Singapore judgment, either by reserving Mr Gomez’s rights under the judgment or by releasing Mr Kuhadas from his obligations under the judgment. I agree with the primary judge that, in the circumstances of this contract, it would be “commercial nonsense” for the parties to have agreed that Mr Gomez would withdraw the bankruptcy application upon the basis that he was free to reissue another bankruptcy application, or to take enforcement action in relation to the Singapore judgment debt at any time. If that was the agreement, all that Mr Kuhadas gained was a delay of the date of his bankruptcy, because Mr Gomez would be required to make a new bankruptcy application in order to secure that bankruptcy. There is nothing in the language of the 22 February 2013 agreement or the surrounding circumstances to suggest that such a delay could have benefited Mr Kuhadas in any significant way. In his written submissions to this Court, Mr Gomez suggested that the mere withdrawal of the bankruptcy application conferred a benefit on Mr Kuhadas, saying “it was done out of goodwill to aid Mr Kuhadas’ sale of the [Ballota Park unit] without impacting the other joint owners of the property”. However, the only evidence about the purpose of the sale of the Ballota Park unit is Mr Boey’s 7 March 2013 email (at [11] above), which indicates that the sale was intended to raise funds to pay Mr Gomez the second S$25,000 payment. There is no evidence that Mr Kuhadas would benefit from the sale and, as the primary judge found, it is reasonable to infer that Mr Kuhadas had no equity in the property beyond the S$25,000 he agreed to pay to Mr Gomez. If the bankruptcy application was withdrawn to facilitate the sale of the Ballota Park unit, the person who benefited from that withdrawal was Mr Gomez. The primary judge identified three matters which, in his Honour’s view, supported a conclusion that the parties intended that Mr Kuhadas was to be released from the Singapore judgment upon his performance of the matters set out in items 1, 3 and 4 of Mr Boey’s email. These were:(1)The agreement that Mr Gomez would retain the S$50,000 cheque as security for the second S$25,000 payment;(2)The requirement that Mr Kuhadas pay interest of 10% per annum on the second S$25,000 payment;(3)The construction contended for by Mr Gomez would have left it open to Mr Gomez to seek to enforce the Singapore judgment immediately after he withdrew the bankruptcy application.

Ratio Decidendi

Legal Principle Established

In those circumstances, given that the emails were available to be tendered at the FCC hearing and that I do not accept Mr Gomez’s explanation for why they were not tendered, in my view, I should not allow this additional evidence to be received on the appeal.CONSIDERATIONNature of appeal The power to set aside a bankruptcy notice arises from s 30 of the Bankruptcy Act 1966 (Cth), which specifies the general powers of courts in bankruptcy. The Act confers no general discretion to set aside a bankruptcy notice that is valid in form and not an abuse of process: Re Briggs; Ex Parte Briggs v Deputy Commissioner of Taxation (WA) (1986) 12 FCR 310 at 311-312; Re Athans; Ex Parte Athans (1991) 29 FCR 302 at 310; Australian Securities and Investments Commission v Forge [2003] FCAFC 274; (2003) 133 FCR 487 at [27]. The primary judge was satisfied that the FCC had power to set aside a bankruptcy notice based on a foreign judgment registered under s 6 of the Foreign Judgments Act, and that the FCC would exercise that power where the judgment debtor has given substantial reasons for questioning whether in truth and reality the foreign judgment ought to have been registered, or for questioning whether its registration “could withstand being set aside under s 7(2)(a) of [the Foreign Judgments] Act”. Mr Gomez did not appeal against these parts of the primary judge’s reasons. Accordingly, the issue on the appeal is whether the primary judge erred in his construction of the 22 February 2013 agreement and, in particular whether, by reason of the 22 February 2013 agreement, Mr Kuhadas’ obligation to satisfy the Singapore judgment has been discharged.Construction of the 22 February 2013 agreementRelevant principles In Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at [35], French CJ, Hayne, Crennan and Kiefel JJ stated:…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 those 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 (in rec) [[2009] EWCA Civ 633 at [28]], 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”. (Citations omitted.)