Instyle Estate Agents Gungahlin Pty Limited v Richard James Hambrook
[2023] ACTMC 4
•20 January 2023
MAGISTRATES COURT OF THE AUSTRALIAN CAPITAL TERRITORY
| Case Title: | Instyle Estate Agents Gungahlin Pty Limited v Richard James Hambrook |
| Citation: | [2023] ACTMC 4 |
| Hearing Date(s): | 6 July 2022 |
| DecisionDate: | 20 January 2023 |
| Before: | Magistrate Lawton |
| Decision: | Plaintiff’s claim is dismissed |
Catchwords: | CIVIL LAW – EVIDENCE – Finding of Fact – Deed of settlement and release – intention of the deed – parole evidence rule – unconscionable behaviour – equity – decision |
| Cases Cited: | ANZ v Mishra [2012] NSWSC 1333 at [12] – [30] |
| Parties: | Instyle Estate Agents Gungahlin Pty Limited ( Applicant) |
| Representation: | Counsel David Robens ( Applicant) John Masters ( Respondent) |
| File Number(s): | CS 180/2021 |
MAGISTRATE LAWTON:
Background
1․The Plaintiff is a shell, a corporation whose former business was as a real estate agency but no longer operates. It still exists for the purpose of litigating against the defendant. It ceased trading in mid-2017. Its assets are a bank account with approximately $3,000 and a Mini, still with current registration and the licence plate [redacted] (‘the Mini’).
2․The Mini was leased by the Plaintiff in 2016 (by the Defendant in his capacity as Director of the Plaintiff at the time). The Defendant in his personal capacity was named as guarantor for the lease agreement if the Plaintiff defaulted on payment. Volkswagen Financial Services (‘VFS’) was the lessor.
3․The Defendant is the original creator of the Plaintiff and its original director but was removed from the position on the 11th of September 2017 by the now directors of the Plaintiff, Mr Jaime Farrelly and Mr Jamie McDonnell.
4․This removal was not a happy one. Both parties commenced litigation against each other, and the hearing was listed to commence in the Supreme Court on the 26th of October 2020.
5․However, on the 27th of October 2020 the Plaintiff and the Defendant settled their litigation and entered into a deed of settlement and release (‘the Deed’).
6․As per the Deed, the Defendant was required to pay to the Plaintiff $170,000 on or before the 1st of April 2021. He made the following payments to the trust account of the Plaintiff’s solicitors:
a.$25,000.00 paid on the 29th of March 2021.
b.$60,000.00 paid on 31st of March 2021.
c.$52,346.88 paid on 1st of April 2021.
7․The amounts paid by the defendant to the Plaintiff’s solicitors did not total $170,000.
8․The shortfall, some $32,653.12, was paid directly to Volkswagen Financial Services (‘VFS’) by the Defendant to pay out the debt still owing on the Mini. The total payment made to VFS was $35,181.70. I am satisfied that this was paid by the Defendant by electronic transfer on the 31st of March 2021.
9․It is this sum, the $35,181.70, that the Plaintiff now litigates for.
Evidence and Findings of Fact
10․There are some troubling aspects to the Plaintiff’s case.
11․The first is that the only witness called, Mr McDonnell, proclaimed little or no knowledge as to the payment arrangements in respect to the Mini, or indeed the whereabouts of the Mini.
12․He conceded, when shown exhibit 2, being a copy of a search of the registration of the Mini on the Australian Financial Security Authority Personal Property Securities Register, together with a receipt from the Road Transport Authority, that the vehicle was still registered to the Plaintiff and that a photo annexed to the affidavit of the Defendant indicated that the Mini was adorned with the livery of ‘3 Property Group’, which he advised was a business in which his co-director, Mr Farrelly, was also a director.
13․Mr Farrelly did not give evidence. Mr Farrelly’s correspondence to the Defendant of 11 March 2021 was annexed to the affidavit of Mr McDonnell of the 10th of February 2022 at annexure “H”, and it made it clear that the Plaintiff intended to enforce the Deed and made no mention of the debt to VFS. Mr Farrelly said “make no mistake, if you don’t pay as agreed the debt enforcement will proceed on the 2nd of April 2021 and this time we will seek to bankrupt you without delay, without negotiation and without a settlement. As you might expect, we have already prepared to enforce non-payment.”
14․A further startling aspect of the Plaintiff’s case was that it produced no evidence as to the location of the Mini. The Defendant, by contrast, produced evidence that I have referred to above, that was shown to Mr McDonnell, and further evidence of REVS checks to establish that the Mini had not been sold prior to 1 April 2021. The Defendant also produced a Scott Mercantile report which recounted the many attempts made to locate the Mini. Of note is that the directors of the Plaintiff gave little or no assistance to the agents attempting to locate it.
15․It seems to me that the only reasonable inference I can draw in light of that evidence (namely the photo and the current registration status, and the agent recovery report) is that the Mini remains in the possession of the Plaintiff.
16․What is even more startling is that the Plaintiff in its additional bundle of evidence tendered correspondence that established that someone (and I do not need to make a finding as to whom) arranged for the lease payments to be made on behalf of the Plaintiff to VFS by a third party’s bank account in mid-2017.
17․This third party, Edson Group, only became aware of the unauthorised deductions in September of 2020 and notified the Plaintiff’s directors and the Defendant of the fact via email. It seems clear that VFS refunded the payments to Edson Group and the amount owing to VFS accordingly increased.
18․The significance of this is that the only reasonable finding I can make is that the debt to VFS was created as a result of the misconduct of the Plaintiff after the Defendant had been removed as director of the Plaintiff. Prior to his removal the payments had been made to VFS from the Plaintiff’s bank account. After his removal the payments were deducted from the Edson Group account.
19․I specifically reject the further troubling submission made by the Plaintiff at paragraph 26 of its submissions in reply that “He [the Defendant] left the company in a situation where it had a liability to VFS, of which he was aware as being the point for correspondence, with no assets to pay”.
20․As I have just pointed out, somebody, and certainly not the Defendant, arranged for those payments to be made from the account of Edson Group in 2017. Somebody knew of the continuing liability and made arrangements for it to be met after the Defendant had been removed as director.
21․A further finding that I make is that the actions of the Defendant, in paying the sum of $35,181.70 to VFS, means that the Mini is unencumbered by debt.
Defence Submissions
22․The position of the Defendant is that the Deed of Release settled all issues between the parties. The Mini, however, was an issue between the Plaintiff and VFS. As such, the Plaintiff was liable for the debt owing to VFS and the Defendant, having been advised that the debt had not been paid, had paid the sum directly to VFS. Similarly, the Defendant had issues with VFS as guarantor, but these were not removed by the Deed. The Defendant submits that the Deed is not ambiguous, and that the debt owed to VFS should be set off.
Plaintiff Submissions
23․The Plaintiff did not dispute that it was contractually required to pay the lease for the Mini. This seems at odds with the statement of claim, at paragraph 11, which stated “By the deed, the Defendant released the Plaintiff and its related parties from all liability associated with the Car”.
24․To distil the Plaintiff’s case to its essence:
a.The debt relating to the Mini was in the contemplation of the parties at the time of the Deed;
b.The Plaintiff did not agree to any reference to the Mini in the Deed;
c.The Defendant executed the Deed;
d.As a result, the Defendant waived any claim against the Plaintiff including any future claim for recovery of any sum he was required to pay to VFS if the Plaintiff defaulted on the lease (and which the Plaintiff was in default for at the time of the execution of the Deed).
25․Thus, the Plaintiff’s position is that the Deed entitled the Plaintiff to the sum of $170,000 and the option to default on its debt to VFS and the Defendant could not seek recovery of any amount paid to VFS in his capacity as guarantor by the virtue of the operation of the Deed.
26․I have to say I would describe the Plaintiff’s argument as troubling.
27․The Plaintiff in its submissions in reply made reference to the decision of ANZ v Mishra [2012] NSWSC 1333 at [12] – [30] (‘Mishra’) as supporting a proposition that “it is possible for contracting parties to reach a settlement and at the same time make accommodation for an anticipated contingent liability”.
28․This submission seems to contradict the Plaintiff’s earlier submissions that the Deed was in fact a ‘full release’. I have reviewed Mishra and it was clear that factually the parties were aware that the release proposed would not settle all issues between them. In Mishra, the discharge of mortgages (and the requirement for security of costs) did not involve a third party as in the present case.
29․Here, the Plaintiff asserts that the deed was a full release yet then asserts that it did not resolve all issues between the parties. Those submissions are contradictory.
30․The Plaintiff’s various positions are simply at odds with the intention of the deed. The Plaintiff did not produce any authority to support the proposition that the Deed could extinguish liabilities to third parties, such as VFS. VFS was not a party to the Deed, nor a related party as defined in the Deed. It is a third party.
31․As such, the Deed did what it intended. That is, as set out in Recital G, to settle all matters between the parties – that is, the Plaintiff and the Defendant. It did not relieve the Plaintiff of its obligations to VFS. It did not relieve the Defendant of his obligations to VFS as guarantor.
32․I find the Deed is unambiguous. As such, there is no need to consider evidence as to the intentions of the parties, known as the parole evidence rule, where the Deed’s meaning is plain.
33․For the sake of completeness, however, I note that had I found the Deed ambiguous, that having regard to the parole evidence adduced, it would still be my conclusion that the issues pertaining to the debt to VFS for the Mini would still not have been included in the remit of the Deed.
34․There is a straightforward reason for this. The correspondence between the parties in the hours prior to settlement make it clear the debt of the Mini was being contemplated. However, the Plaintiff specifically sought to exclude the debt relating to the Mini from the Deed and refused it being incorporated.
35․At paragraph 35 of its submissions in reply the Plaintiff asserts that as a result “on balance, it appears the amount of $170,000 was agreed considering the Defendant was to bear the debt for the Mini”.
36․I do not agree with that proposed finding. My finding is the opposite. As discussed above, the debt was between the Plaintiff and VFS. The debt accrued after the Defendant had been removed as a director for the Plaintiff.
37․Both parties knew the Plaintiff was in default at the time of executing the Deed. By excluding the Mini from the Deed, the Plaintiff’s obligations to VFS remained live, and the Defendant did not assume any responsibility for it, other than his existing role as guarantor. It seems to me that the Deed, if it were to have dealt with the debt to VFS and which party was to bear that debt, needed to explicitly refer to it. Yet that is the very thing the Plaintiff refused to do.
38․It is clear that the Defendant breached the terms of the Deed. He did not strictly pay the full amount required by the Deed into the Plaintiff’s solicitor’s trust fund. He did however, pay the full amount and the interest that had accrued under the Deed.
39․The amount that he did not pay into the trust account, he used to discharge the debt owed by the Plaintiff to VFS, which I again state had accrued to VFS in the time since he had been removed as a director.
40․The Plaintiff asserts that in doing so the Defendant acted in breach of the Deed unilaterally and deprived the plaintiff company “of its decision making, to dispute the quantum of the claimed debt, to enter a new lease for the Mini as needed, or to allow VFS to proceed with enforcement action.”
41․Yet the Plaintiff produced no evidence to suggest that it had attempted any of these actions prior to the 1st of April 2021. Indeed, there is no evidence before me to suggest the Plaintiff did anything in respect to the debt even after being advised by the Defendant and the third party as to its liability in 2020.
42․Rather the evidence before me, including the email of Mr Farrelly and the Scott Mercantile report annexed to the Defendant’s affidavit of 28 March 2022, make it clear that once aware that VFS was attempting to recover the vehicle the Plaintiff did little or nothing to assist, despite the vehicle still being registered to it. This all leads me to a finding that the Plaintiff had no intention to meet its obligations under the lease with VFS, instead seeking to allow VFS to enforce against the Defendant as guarantor, all the while keeping the Mini.
43․This is plainly unjust. The Plaintiff’s behaviour is unconscionable.
44․In the final paragraph of the Plaintiff’s first set of submissions, the Plaintiff asserted that the Defendant had ‘fallen short of a reasonable level of proof’ in respect to the payment of the outstanding balance to VFS. I find to the contrary. I am satisfied the Defendant did discharge the debt to VFS owed by the Plaintiff.
45․In the same paragraph, the Plaintiff submitted that there “would be no place for Equity to intervene and allow the set off, if the construction of the Deed is that there was not a full release”.
46․As I have held, the Deed is not ambiguous. The debt of the Plaintiff to VFS was not covered by the Deed. Therefore, to use the terms of the Plaintiff’s submissions, there was not a full release.
47․To paraphrase and apply the principle espoused in Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112 at [129], equity will intervene to ensure that the Plaintiff does not use the general words of the Deed as a means of escaping the fulfilment of its obligations to VFS which fall outside of the true purpose of the Deed.
48․It is therefore appropriate in equity to allow the set off of the debt to VFS, noting the many troubling actions of the Plaintiff I have recounted above.
49․Accordingly, the Plaintiff’s claim is dismissed. I will hear the parties as to costs.
| I certify that the preceding forty-nine [49] numbered paragraphs are a true copy of the Reasons for Decision of His Honour Magistrate Lawton. Date: 01.03.2023 |
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