Kelly v Hilton
[2021] WASC 369
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION: KELLY -v- HILTON [2021] WASC 369
CORAM: STRK J
HEARD: 26 JULY 2021
DELIVERED : 26 JULY 2021
PUBLISHED : 26 OCTOBER 2021
FILE NO/S: CIV 2228 of 2020
BETWEEN: ALLAN JOHN KELLY
First Plaintiff
ALLAN JOHN KELLY AS TRUSTEE FOR THE KELLY FAMILY TRUST
Second Plaintiff
XGS PTY LTD AS TRUSTEE FOR THE KELLY SUPERANNUATION FUND
Third Plaintiff
DEBNAL PTY LTD
Fourth Plaintiff
AND
JOHN CHARLES HILTON
Defendant
Catchwords:
Practice and procedure - Application for summary judgment made by the defendant - Leave required to bring the application out of time - Whether the defendant has a good or complete defence on the merits - Turns on own facts
Legislation:
Australian Consumer Law
Australian Consumer Law (WA)
Rules of the Supreme Court 1971 (WA), O 16(1)(a)
Result:
Leave to bring the application out of time granted
Application dismissed
Category: B
Representation:
Counsel:
| First Plaintiff | : | S Penglis SC & S B Nadilo |
| Second Plaintiff | : | S Penglis SC & S B Nadilo |
| Third Plaintiff | : | S Penglis SC & S B Nadilo |
| Fourth Plaintiff | : | S Penglis SC & S B Nadilo |
| Defendant | : | D J Pratt |
Solicitors:
| First Plaintiff | : | HHG Legal Group |
| Second Plaintiff | : | HHG Legal Group |
| Third Plaintiff | : | HHG Legal Group |
| Fourth Plaintiff | : | HHG Legal Group |
| Defendant | : | Bennett + Co |
Case(s) referred to in decision(s):
Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552
Anderson v Effexseven (1998) 10 ANZ Ins Cas 61-434
Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) CLR 256
Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219
Butler v St John of God Health Care Inc [2008] WASCA 174
Dey v Victorian Railway Commissioners (1949) CLR 62
Gerovich v Gerovich [2018] WASC 153
Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112
Jacka Nominees Pty Ltd (in liq) v Edwards Karwacki Smith & Co Pty Ltd (Unreported, WASC, Library No 920512, 12 October 1992)
Karam v ANZ Banking Group Ltd [2001] NSWSC 709
Lashansky v Legal Practice Board of Western Australia [No 3] [2013] WASCA 260
Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495
Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118
Zaghloul v Bayly [2021] WASCA 125
STRK J:
On 26 July 2021, I heard an application for summary judgment made by John Charles Hilton pursuant to the Rules of the Supreme Court 1971 (WA) (RSC) O 16 r 1(1)(a), alternatively pursuant to the inherent jurisdiction of the court. By the application, Mr Hilton sought leave to bring the application out of time and for judgment to be entered in his favour against Allan John Kelly in his own capacity, and Mr Kelly as trustee for the Kelly Family Trust (that is, against Mr Kelly as the first plaintiff and as the second plaintiff in this proceeding). While Mr Kelly neither consented to nor opposed the grant of leave, he opposed the entry of judgment.
At the conclusion of the hearing I informed counsel that the application would be dismissed for reasons that I would publish. These are my reasons.
Procedural history - overview
The pleadings
The proceeding was commenced by writ of summons indorsed with a statement of claim on 15 December 2020. The plaintiffs claim that they are entitled to damages or to a compensation order under s 236 and s 237 of the Australian Consumer Law and the Australian Consumer Law (WA) by reason of Mr Hilton's misleading or deceptive conduct, together with interest and costs.
The plaintiffs plead that nine separate representations were made by Mr Hilton to Mr Kelly; and that the making and repeating of the representations was conduct in trade or commerce for the purposes of s 18 of the Australian Consumer Law and the Australian Consumer Law (WA). In summary, the representations attributed to Mr Hilton are as follows:
(a)the Cambodian Tenements (being gold tenements in Cambodia applied for by Brighton Mining Group Limited (administrators appointed) (Brighton)), included three tenements which were located 'next to the 1 million-ounce Okvau Project' that was being developed by Emerald Resources Limited (Emerald) (described as the Ownership Representation);
(b)the Cambodian Tenements were 'about to be granted' by the Cambodian Government (described as the Timing Representation);
(c)Mr Hilton had negotiated a joint venture term sheet with Emerald with respect to the Cambodian Tenements (Emerald JV) pursuant to which Emerald would manage and fund exploration on those tenements, and that the grant of the Cambodian Tenements would trigger the commencement of the joint venture between Brighton and Emerald (described as the JV Representation);
(d)if Brighton was used as the vehicle for any project in respect of the Cambodian Tenements, Brighton could be 'relisted quickly', and by in or around February 2017 (described as the Relisting Representation);
(e)if the Cambodian Tenements were to be vended into Brighton, based on the value that Emerald had ascribed to those tenements for the purposes of the Emerald JV, it was appropriate to ascribe to the Cambodian Tenements a value in the order of AUD$4.5million (described as the Value Representation);
(f)Brighton had obtained environmental approval from the Cambodian Government, via the Cambodian Ministry of Environment (MOE), for its Kang Roland South project (KRS Project), which formed part of the Cambodian Tenements (described as the KRS Environmental Approval Representation);
(g)Cambodia Gold Pty Ltd had a local subsidiary company in Cambodia (Local SubCo Representation);
(h)Cambodia Gold Pty Ltd had made an application to the MME[1] for an exploration licence in respect of the Cambodian Tenements (including both the KRS Project and the Antrong Project) via its local subsidiary company. Further, Cambodia Gold Pty Ltd, via its local subsidiary, would be the holder of the exploration licences and ultimately the Cambodian Tenements, once the applications were granted (described as the CGPL Ownership Representation); and
(i)Justin Tremain and Morgan Hart of Emerald had attended a meeting with the Cambodian Ministry of Mines and Energy during which Emerald had pledged its support for Cambodia Gold Pty Ltd in respect of Cambodia Gold Pty Ltd's application for the Cambodian Tenements (described as the Emerald Support Representation).
[1] 'MME' is not defined in the statement of claim, but appears to be a reference to the Cambodian Ministry of Mines and Energy.
The plaintiffs plead that each representation was misleading or deceptive or likely to mislead or deceive within the meaning of s 18 of the Australian Consumer Law and the Australian Consumer Law (WA).
The plaintiffs also plead that in the negotiations as between Mr Kelly and Mr Hilton, only Mr Hilton knew or would know certain information regarding the Cambodian Tenements, including whether there was likely to be any legal or regulatory impediments to the grant of exploration licences for the KRS Project and the Antrong Project, but there was a deliberate failure on the part of Mr Hilton to disclose certain information despite there being a reasonable expectation of disclosure.
The plaintiffs plead that the non-disclosure by Mr Hilton was misleading or deceptive or likely to mislead or deceive within the meaning of s 18 of the Australian Consumer Law and the Australian Consumer Law (WA).
The plaintiffs further plead to having acted in reliance on the representations made and omissions by Mr Hilton, and to having suffered loss and damage.
An appearance was filed on behalf of Mr Hilton on 23 December 2020 and his defence was filed on 15 February 2021. The plaintiffs' reply was filed on 17 March 2021.
The application for summary judgment
Mr Hilton filed his application for summary judgment against all named plaintiffs on 16 April 2021. An amended chamber summons was filed on 26 July 2021, which confined the application to an application for judgment against Mr Kelly in his own capacity, and Mr Kelly as trustee for the Kelly Family Trust.
Integral to the application for summary judgment was a Deed of Settlement and Release dated May 2019 (Settlement Deed), entered into by Riversgold Limited (Riversgold) and Mr Kelly, by which Mr Kelly released Riversgold and its associated entities and their officers (which was said to include Mr Hilton) from all claims arising directly or indirectly out of Mr Kelly's employment by Riversgold or the alleged termination of it by Riversgold.
On behalf of Mr Hilton, it was submitted that the circumstances giving rise to the alleged termination of Mr Kelly's employment by Riversgold were as follows:
(a)Mr Kelly resigned his position as managing director of Doray Minerals Ltd (Doray) in order to take up an opportunity offered to him by Mr Hilton to exploit some Cambodian gold tenements, and Mr Kelly subsequently accepted a position as Managing Director and Chief Executive Officer of Riversgold;
(b)soon after taking up his position with Riversgold, Mr Kelly became concerned that Mr Hilton had engaged in misleading and deceptive conduct in connection with the tenements;
(c)Mr Kelly expressed his concerns regarding the conduct of Mr Hilton to the Board of Riversgold on a number of occasions;
(d)Mr Kelly was dissatisfied with the response he got from the Board of Riversgold and gave notice of his resignation;
(e)a dispute arose between Mr Kelly and Riversgold in relation to whether or not Mr Kelly had been dismissed from his employment with immediate effect;
(f)Mr Kelly issued a statutory demand to Riversgold for payment of accrued entitlements. Riversgold applied to set aside the statutory demand;[2] and
(g)the dispute between Riversgold and Mr Kelly was settled by the Settlement Deed.
[2] The proceeding by which Riversgold applied to set aside the statutory demand was known as Supreme Court COR 92 of 2019.
It was further submitted that the Settlement Deed contains releases and indemnities granted by Mr Kelly, and anyone claiming through him, in favour of Riversgold and its subsidiaries and their past and present officers, including Mr Hilton. It was Mr Hilton's contention that the releases extend to the claims the subject of this proceeding and are determinative of them.
The evidence
The application for summary judgment was supported by the affidavit of Shemali Marianne Samaraweera, sworn on 16 April 2021. Ms Samaraweera is a solicitor of the firm Bennett + Co, the solicitors for Mr Hilton. The application was filed with a memorandum of conferral pursuant to the RSC O 59 r 9(1). At the hearing of the application, counsel for Mr Hilton read the affidavit of Ms Samaraweera and also relied upon the written outline of submissions filed on 22 June 2021.
In opposition to the application, the plaintiffs filed the affidavit of Mr Kelly sworn on 17 May 2021, and the affidavit of Blair Daniel Campbell, sworn on 2 June 2021. Mr Campbell is a solicitor of the firm HHG Legal Group, the solicitors for the plaintiffs. At the hearing of the application, counsel read Mr Kelly's affidavit and the affidavit sworn by Mr Campbell, and relied upon the written outline of submissions filed on 5 July 2021.
Annexed to Mr Campbell's affidavit and marked 'BDC1' is a copy of an affidavit of Roderick John Webster sworn on 29 April 2019 (the Webster affidavit). The Webster affidavit was filed in Supreme Court action COR 92 of 2019 between Riversgold (as plaintiff), and Mr Kelly (as defendant). The Webster affidavit was sworn in support of the application by Riversgold to set aside a statutory demand issued by Mr Kelly.
Upon an application made by the first and second plaintiffs in this proceeding, on 3 June 2021 Master Sanderson ordered that the first and second plaintiffs be released from the obligation not to use the Webster affidavit for a purpose other than in connection with COR 92 of 2019, and leave was granted for the limited purpose of:
(a)providing the Webster affidavit to the third and fourth plaintiffs and to the defendant in this proceeding; and
(b)use by the plaintiffs in this proceeding.
Master Sanderson also ordered, among other things, that the costs of the first and second plaintiffs' application be in the cause of Mr Hilton's application for summary judgment.
Leave to bring the application out of time
An application for summary judgment pursuant to the RSC O 16 r 1(1) must be made within 21 days after appearance, or at any later time by leave of the court. Mr Hilton did not make his application within the time prescribed and sought leave.
It is well established that there are no set guidelines as when leave to apply for summary judgment out of time will be granted, and the burden is on the applicant to show the delay is justifiable in all of the circumstances.[3] Where an application has some merit, the requirements for leave will not ordinarily be demanding.[4]
[3] Jacka Nominees Pty Ltd (in liq) v Edwards Karwacki Smith & Co Pty Ltd (Unreported, WASC, Library No 920512, 12 October 1992) (Adams M).
[4] Lashansky v Legal Practice Board of Western Australia [No 3][2013] WASCA 260 [48] (Newnes JA).
The cause of the delay in bringing the application was addressed in the affidavit of Ms Samaraweera. Ms Samaraweera deposed to the fact that Mr Hilton's solicitors obtained a copy of the Settlement Deed on 26 February 2021, following production pursuant to a subpoena issued to Riversgold. Following receipt of the Settlement Deed, the parties conferred and Mr Hilton then promptly brought this application for summary judgment.
In considering whether it was appropriate to grant leave, I had regard to the fact that the application for summary judgment was grounded upon a Settlement Deed that was only obtained by subpoena after Mr Hilton's defence had been filed. I was not aware of any particular prejudice to the plaintiffs occasioned by the delay. The plaintiffs neither consented to nor opposed the grant of leave. On balance, I was satisfied that Mr Hilton should not be barred from applying for summary judgment as a result of what was an explained and not an inordinate delay, which caused no discernible prejudice to the plaintiffs.
Applicable principles
It was common ground between the parties that Mr Hilton's application for summary judgment was to be determined by reference to the principles summarised by Pritchard J in Gerovich v Gerovich [2018] WASC 153 at [26] - [33], which are reproduced below:
[26]Order 16 r 1 RSC requires the Court to be satisfied either that the action is frivolous or vexatious, or that the defendant has a good defence on the merits, or that the action should be disposed of summarily.
[27]The principles in relation to the determination of applications for summary judgment are well established. A party should not ordinarily be denied the opportunity to have his or her case determined following trial, and for that reason, the jurisdiction to grant summary judgment should be reserved for the clearest of cases, where there is a high degree of certainty about the ultimate outcome of the action if it were allowed to go to trial. In other words, the question is whether, on the material before the Court, it has been demonstrated that the plaintiff's action should not be permitted to proceed to trial because it is apparent that it must fail.
[28]However, that does not mean that summary judgment will be given only where the case is so hopeless as not to require argument. Extensive argument may be necessary to demonstrate that a party’s case is so clearly untenable that it cannot possibly succeed.
[29]A defendant bringing a summary judgment application bears the legal onus of establishing that there is no serious question to be tried on any cause of action raised by the plaintiff. Under O 16 r 1(2), the defendant is required to file an affidavit verifying the facts upon which the application is based.
[30]The plaintiff is also entitled, under O 16 r 2, to file an affidavit to show cause against the application. If the plaintiff shows cause against the application for summary judgment by filing an affidavit in response, the plaintiff may assume an evidentiary onus to show why summary judgment should not be given. In other words, the plaintiff needs to show, on the evidence, that there exists a 'triable issue'. In doing so, the affidavit must 'condescend upon particulars' - that is, it must set out facts which establish that it is reasonable to permit the plaintiff to pursue the action.
[31]However, while the plaintiff may assume an evidentiary onus, the defendant retains the legal onus of demonstrating that there is no real question to be tried.
[32]Actions should not be disposed of summarily when the facts are in dispute. Where there is a conflict on the affidavit evidence, the Court should approach the summary judgment application on the basis that the facts set out in the affidavits of the party resisting the application for summary judgment … will ultimately be accepted at trial.
[33]The Court has power, whether under O 16 RSC or pursuant to its inherent power, to summarily dismiss a part of a claim. (footnotes omitted)
In determining the defendant's application, I adopted and applied these principles. I proceeded on the basis that Mr Hilton bore the legal onus of establishing that there was no serious question to be tried on any cause of action raised by Mr Kelly, in his own capacity and as trustee of the Kelly Family Trust; and that the legal onus remained with Mr Hilton even where Mr Kelly, by filing affidavits in response, assumed an evidentiary onus to show why summary judgment should not be given. I also proceeded on the basis that once it appeared that there was a real question, whether of fact or law, on which the rights of the parties depended, the action should not be dismissed as frivolous or vexatious.[5]
[5] Dey v Victorian Railway Commissioners (1949) CLR 62, 91 (Dixon J); Anderson v Effexseven (1998) 10 ANZ Ins Cas 61-434, 74,757 (Parker J, Owen J agreeing).
The Settlement Deed
The parties to the Settlement Deed were Riversgold (described throughout the Settlement Deed as the Employer), and Mr Kelly (described as the Employee). The Settlement Deed included at cl 3 a release and indemnity clause. Given the significance of the release and indemnity clause to the summary judgment application, it is appropriate that it be reproduced here in full:[6]
[6] The Settlement Deed is annexed to the affidavit of AJ Kelly, see par 48, 'AJK25'; and to the affidavit of SM Samaraweera, see par 14, 'SMS-6' pages 216 - 226.
Release and Indemnity by the Employee
In consideration for payment of the Settlement Sum and the Employer's releases at clause 4, the Employee:
(a)unconditionally releases and discharges the Employer, its Associated Entities, and their past and present officers, employees and agents from all Claims;
(b)must not commence or seek to enforce any Claims against the Employer, its Associated Entities, or their past and present officers, employees and agents in relation to the Contract, the Employment, the Termination, or the Proceedings; and
(c)indemnifies and keeps indemnified the Employer, its Associated Entities, and their past and present officers, employees and agents in relation to any loss, cost, damage or expense (including but not limited to, legal fees) suffered by the Employer as a result of a Claim by the Employee in breach of this Deed.
3.1Bar to proceedings
The Employer, its Associated Entities, and their past and present officers, employees and agents may use this Deed as a bar to proceedings against any Claims and a full and complete defence to any Claims brought by the Employee or anyone claiming through the Employee in relation to the Contract, the Employment, the Termination or the Proceedings.
The Settlement Deed included a 'Dictionary' at cl 9, in which the terms 'Claims' and 'Associated Entities’ were defined. Clause 9 is reproduced below:
9. Dictionary
In this Deed, in addition to the short form of the Parties' names referred to above and the terms as defined in the Background, the following meanings will apply:
(a)Associate Entity has the meaning given by section 50AAA of the Corporations Act 2001 (Cth); and
(b)Claims means all actions, claims, demand, suits, proceedings, liabilities, damages, amounts of money and costs arising directly or indirectly from the Contract, the Employment, the Termination, the Proceedings and or any act or omission of either Party, including any claims arising out of common law, equity, statute, regulation, award, order, instrument, contract or otherwise but does not include any claim or liability in respect of statutory claims under applicable workers' compensation or superannuation legislation.
The Settlement Deed also included recitals (under the heading 'Background'), before the operative provisions, where the terms 'Employment', 'Contract', 'Termination', Statutory Demand' and 'Proceedings' were defined. The recitals are reproduced below:
BACKGROUND
A.On 6 June 2017, the Employee commenced employment with the Employer in the role of Managing Director (Employment).
B.The terms and conditions of the Employment were set out in an executive services agreement dated 6 June 2017 (Contract).
C.The Employee's position is that the Employer terminated his employment effective 26 March 2019 (Termination). The Employer disputes the Termination.
D.On 9 April 2019, the Employee served the Employer with a statutory demand dated 9 April 2019 in relation to payment in lieu of notice pursuant to clauses 11.2 and 11.3 of the Contract (Statutory Demand).
E.The Employer lodged an originating process to set aside the Statutory Demand (COR 92 of 2019) in the Supreme Court of Western Australia (Proceedings).
F.Without any admission of liability or wrongdoing, the Parties have agreed to resolve all matters arising out of or in connection with the Employment, the Termination and the Proceedings on the terms set out in this Deed.
The submissions made on behalf of Mr Hilton
In the determination of this application, I had the benefit of written and oral submissions made on behalf of Mr Hilton. What follows summarises the submissions made on behalf of Mr Hilton as a whole.
Construing the Settlement Deed - applicable principles
At the hearing of the application, having had the benefit of the written outline of submissions filed on behalf of Mr Kelly, counsel for Mr Hilton suggested that there was no real dispute as between the parties as to the principles to be applied in properly construing the Settlement Deed.[7] Counsel for Mr Hilton summarised the principles as follows.
[7] ts 3 (26 July 2021).
The principles that apply to the construction of contracts also apply to the construction of deeds.[8] The construction of a deed involves determination of the meaning of the words of the deed by reference to its text, context and purpose.[9]
[8] Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 [72] (Buss P).
[9] Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219 [42(2)] (Newnes JA, Murphy JA and Beech J).
The general words of a release in a deed should be understood in the context of the particular occasion on which they were used.[10] That will usually be apparent from the recitals to the deed.[11]
[10] Grant v John Grant & SonsPty Ltd (1954) 91 CLR 112, 123 (Dixon CJ, Fullager J , Kitto J and Taylor J).
[11] Grant v John Grant & Sons Pty Ltd, 123.
In equity, a releasee must not use the general words of a release as a means of escaping the fulfillment of obligations falling outside the true purpose of the transaction, as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question, and the actual intent of the releasor.[12]
Application of the principles
[12] Grant v John Grant & Sons Pty Ltd, 129 - 130; Butler v St John of God Health Care Inc [2008] WASCA 174 [3], [6] (Buss P) and [31] - [32] (Newnes JA and McLure JA agreeing at [1]).
It was submitted on behalf of Mr Hilton that his application for summary judgment relied upon three propositions. First, that Mr Hilton falls within the class of persons covered by the release in cl 3(a) of the Settlement Deed. Secondly, that the claims made by Mr Kelly as first and second plaintiff in this proceeding fall within the scope of the release in cl 3(a). Thirdly, that the claims now made by Mr Kelly and those claiming through him in this proceeding were within the contemplation of the parties at the time of entry into the Settlement Deed, and were properly released by it. Counsel submitted that these three propositions were made good as follows.
First proposition - Mr Hilton falls within the class of persons covered by cl 3(a)
By cl 3(a) of the Settlement Deed, Mr Kelly unconditionally released and discharged Riversgold (the Employer), its Associated Entities and their past and present officers, employees and agents. Mr Hilton contends that he is a past officer of an Associated Entity of Riversgold because:
(a)the term 'Associated Entity' bears the meaning in s 50AAA of the Corporations Act, and by s 50AAA(2) includes related bodies corporate;
(b)Mr Hilton was a director of Cambodia Gold Pty Ltd from 21 July 2016 to 8 November 2017; and
(c)Cambodia Gold Pty Ltd has been a subsidiary of Riversgold since 8 November 2018.
Second proposition - the plaintiffs' claims fall within the scope of the release in the Settlement Deed
By cl 3(a) of the Settlement Deed, Mr Kelly unconditionally released and discharged all 'Claims'. Counsel noted that the term 'Claims' was defined to mean all actions, claims, suits, proceedings (etc) arising directly or indirectly from the Contract; the Employment (being Mr Kelly's contract of employment with Riversgold commencing on 6 June 2017: see Recitals A and B); the Termination which was alleged to have occurred on 26 March 2019 (see Recital C); the Proceedings (being the Statutory Demand Proceedings: see Recital E); and/or any act or omission of either Party.
On behalf of Mr Hilton, it was submitted that the circumstances that led to the Termination of the Contract and the Employment on 26 March 2019 were as follows:
(a)on 15 March 2019, Mr Kelly emailed Mr Webster a notice of resignation and accompanying letter setting out the background to his decision to resign;[13]
(b)on 22 March 2019, Mr Kelly emailed Mr Webster a without prejudice offer stating that the terms of his offer was a genuine compromise considering the claims available to him and the financial losses incurred by him. The letter outlined the nature of the claims which Mr Kelly alleged were available to him as a result of Mr Hilton's alleged representations, and the losses incurred by him due to personal contributions for seed capital and during the initial public offering of Riversgold in 2017;[14] and
(c)following a board meeting on 26 March 2019, Riversgold purported to accept Mr Kelly's resignation as Managing Director and Chief Executive Officer of Riversgold.[15]
[13] Defendant's outline of submissions par 20.1, referencing the affidavit of AJ Kelly par 18, 'AJK3', pages 85 - 89.
[14] Defendant's outline of submissions par 20.2, referencing the affidavit of AJ Kelly par 21, 'AJK5', pages 91 - 96.
[15] Defendant's outline of submissions par 20.3, referencing the affidavit of AJ Kelly par 25(a), 'AJK8', page 100.
The allegations contained in the letter accompanying Mr Kelly's notice of resignation on 15 March 2019 were summarised by counsel for Mr Hilton as follows:[16]
(a)as a result of representations made by Mr Hilton about the Cambodian Tenements, Mr Kelly resigned from Doray and agreed to take on the role of Managing Director of Riversgold;
(b)there were issues with the disclosures made by Mr Hilton in relation to the Cambodian Tenements, including in the due diligence questionnaire; and
(c)the Board of Riversgold had not supported Mr Kelly in his complaints about those matters.
[16] Defendant's outline of submissions par 21, referencing the affidavit of AJ Kelly, 'AJK3', page 87; see also ts 4 - 6 (26 July 2021).
On behalf of Mr Hilton it was noted that Mr Kelly's letter of 22 March 2019, in which Mr Kelly outlined the nature of the claims available to him, alleged that:[17]
(a)Mr Hilton approached Mr Kelly whilst he was still employed by Doray with a proposal to combine Afranex's Alaskan Projects with exploration licences that Mr Hilton owned adjacent to the Okvau Gold Project in Cambodia;
(b)on the basis of representations made to Mr Kelly by Mr Hilton regarding the Cambodian projects, Mr Kelly agreed to the proposal to vend in the Alaskan projects via the sale of Afranex to Riversgold, as well as to take on the role of Managing Director of the new company;
(c)Mr Kelly personally contributed over $300,000 in seed capital during the Initial Public Offering during 2017;
(d)Mr Hilton's representations regarding the Cambodian projects were misleading and deceptive and Mr Kelly had suffered significant financial losses as a result of those representations;
(e)Mr Hilton had, at best, not disclosed all relevant information or, at worst, made false and/or misleading representations to Riversgold regarding the status of the Exploration Licences; and
(f)Mr Kelly had expressed his concerns to the Board of Rivergold several times but they were ignored or dismissed, or else blamed on Mr Kelly.
[17] Defendant's outline of submissions par 22, referencing the affidavit of AJ Kelly, 'AJK5', pages 91 - 96; see also ts 6 - 8 (26 July 2021).
Mr Kelly deposes to having sent the letter of 22 March 2019 for the purposes of a meeting that had been scheduled for 26 March 2019.[18]
[18] Affidavit of AJ Kelly par 21.
Mr Hilton says that the matters which led to the termination of Mr Kelly's contract and employment with Riversgold were Mr Kelly's concerns that Mr Hilton had engaged in misleading and deceptive conduct in relation to the Cambodian Tenements, and the Board of Riversgold's failure to support Mr Kelly in relation to those complaints. It was submitted that there was a high degree of overlap between the allegations made in the letter of 22 March 2019 and the facts pleaded in the statement of claim in this proceeding.[19] It was further submitted on behalf of Mr Hilton that in the circumstances, the claims in this proceeding can reasonably and properly be characterised as arising directly or indirectly out of:
(a)the Contract and the Employment (as those terms are defined in the Settlement Deed), in that it was the misleading and deceptive conduct of Mr Hilton which was alleged to have caused Mr Kelly to resign from Doray to pursue the opportunity which led to his employment by Riversgold in the first place; and
(b)the Termination of the Employment (as those terms are defined in the Settlement Deed), in that it was the Board of Riversgold's failure to support Mr Kelly in his complaints in relation to Mr Hilton which led to Mr Kelly giving his notice of resignation on 15 March 2019.
Third proposition - the present claims were within the contemplation of the parties at the time of entry into the Settlement Deed
[19] ts 8 (26 July 2021).
It was Mr Hilton's contention that far from involving any unconscientious reliance on general words in a deed of release, the events leading up to the termination of Mr Kelly's employment demonstrate that the releases in the Settlement Deed were intended to cover precisely the sort of claims which Mr Kelly had made in connection with the termination of his employment, and which he now seeks to pursue in this proceeding.
It was further submitted that the words 'arising directly or indirectly' and 'including any claims arising out' of the definition of 'Claims' in cl 9(b) are broad, and are indicative of the intended wide scope of the release. In this regard, counsel for Mr Hilton also referred to recital F (reproduced above) and cl 7.2, which provides as follows: [20]
7.2All Parties acknowledge that this Deed contains the complete agreement in relation to the settlement of all disputes arising out of or related directly or indirectly to the Contract, the Employment, the Termination and the Proceedings.
[20] ts 9 - 10 (26 July 2021).
Counsel for Mr Hilton further submitted that the extension of the release to Riversgold's 'Associated Entities', and their past and present officers, is a clear indication that the settlement was intended to cover claims against them, and not simply claims against Riversgold, and the Settlement Deed should be construed as giving the inclusion of 'Associated Entities' some work to do.[21]
[21] ts 10 (26 July 2021).
The submissions made on behalf of Mr Kelly
In the determination of this application, I also had the benefit of written and oral submissions made on behalf of Mr Kelly. What follows summarises the submissions made on behalf of Mr Kelly as a whole.
Mr Kelly contended that there was a serious question to be tried concerning the cause of action he pressed in his own capacity, and as a trustee of the Kelly Family Trust. He maintained that it was not apparent that by operation of the Settlement Deed, that his claim must fail.
Construing the Settlement Deed - applicable principles
Like counsel for Mr Hilton, counsel for Mr Kelly addressed the proper construction of the Settlement Deed. Counsel for Mr Kelly submitted that the court must begin with statements of principle by the High Court in Grant v John Grant & Sons Pty Ltd, which require a particular approach to deeds of release: Butler v St John of God Healthcare Inc [1] and [3] (Buss JA, McLure JA agreeing). Counsel submitted that the principles in Grant v John Grant & Sons Pty Ltd mandate that:
(a)the general words of a release in a deed are to be qualified by reference to the particular matters which the recitals show to be the particular occasion of the deed, and the general tenor of the deed: Grant v John Grant & Sons Pty Ltd, 123 and 131;
(b)the general words in a release are limited always to that thing or those things which were specifically in the contemplation of the parties at the time when the release was given: Grant v John Grant & Sons Pty Ltd, 123 - 124; and
(c)a court of equity may intervene where a releasee proposes to use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties, concerning the existence, character and extent of the liability in question and the actual intention of the releasor: Grant John Grant & Sons Pty Ltd, 129 - 130.
Counsel submitted that the court should ascribe to the release the meaning that the release in the Settlement Deed would convey to a reasonable person having all the background knowledge that would reasonably have been available to the parties, in this case Mr Kelly and Riversgold, at the time of signing the Settlement Deed: Karam v ANZ Banking Group Ltd [2001] NSWSC 709 [405] - [406].
Application of the principles
Of the three propositions advanced on behalf of Mr Hilton, summarised at [33] above, Mr Kelly did not take issue with the first. That is, it was accepted that Mr Hilton falls within the class of persons covered by the release in cl 3(a) of the Settlement Deed. The second and third propositions were however in issue.
As to the second proposition, in summary, it was submitted on behalf of Mr Kelly that the causes of action pleaded were independent of Mr Kelly's employment, his contract of employment, the termination of his employment, and the proceeding commenced by Riversgold to set aside the statutory demand. It was submitted that on the approach mandated by the High Court in Grant v John Grant & Sons Pty Ltd, the general release in cl 3(a) of the Settlement Deed does not operate to release Mr Hilton from any of the plaintiffs' claims in this proceeding. Rather, upon the proper construction of the Settlement Deed, the general release in cl 3(a) should:
(a)applying Grant v John Grant & Sons Pty Ltd, be restrained to matters in dispute within the meaning of the recitals to the Settlement Deed;
(b)alternatively, applying Grant v John Grant & Sons Pty Ltd, be restricted by reference to the subject matter of the dispute that existed between Mr Kelly and Riversgold; and/or
(c)be construed as having been given solely by Mr Kelly and not by the second, third and fourth plaintiffs who were not parties to the Settlement Deed.
As to the third proposition, in summary, it was submitted on behalf of Mr Kelly that the terms and nature of the Settlement Deed itself and the surrounding circumstances reveal that the dispute the subject of the Settlement Deed did not involve the claims now advanced by Mr Kelly against Mr Hilton. Rather, it related exclusively to the employer/employee relationship which existed between Mr Kelly and Riversgold.
Counsel on behalf of Mr Kelly submitted that on no reasonable basis could it be said that the claims by the second, third and fourth plaintiffs in this proceeding, who were not parties to the Settlement Deed, were within the reasonable contemplation of the parties to the Settlement Deed at the time it was executed. It was submitted that alternatively, this was a case where equity would intervene if, contrary to the plaintiffs' case, the Settlement Deed was found to operate as releasing the plaintiffs' claims in this proceeding.
It was submitted that Mr Kelly's position was made good by the following.
The occasion of the Settlement Deed is apparent from the recitals
On behalf of Mr Kelly it was submitted that the scope of the release in cl 3(a) of the Settlement Deed turns on the definition of 'Claims' in cl 9(b), where 'Claims' is defined to mean:
all actions, claims, demand, suits, proceedings, liabilities, damages, amounts of money and costs arising directly or indirectly from the Contract, the Employment, the Termination, the Proceedings and or any act or omission of either Party… (emphasis added)
It was submitted that, for a 'Claim' to come within cl 3(a) of the Settlement Deed, there must be a sufficient nexus between it and one or more of the 'Employment', the 'Contract', the 'Termination', the 'Statutory Demand', the 'Proceedings' and/or 'any act or omission of either Party', being Mr Kelly or Riversgold.[22]
[22] Plaintiffs' outline of submissions pars 18 - 19.
It was submitted that there is likely no easy test for the nature and extent of the causal relationship involved in the words 'arising directly or indirectly from', rather it is a question of judgment on the particular facts.[23]
[23] Butler v St John of God Healthcare Inc [1], [3], cited in the plaintiffs' outline of submissions par 20.
On behalf of Mr Kelly, it was submitted that the recitals to the Settlement Deed establish that Mr Kelly and Riversgold were in dispute about the Termination (as defined in Recital C) in respect of Mr Kelly's Employment (as defined in Recital A), which commenced on 6 June 2017, and the parties were concerned to resolve any issues between them in relation to Mr Kelly's role as employee of Riversgold.
It was further submitted that the backdrop to the Settlement Deed was the proceedings commenced by Riversgold in this court (COR 92 of 2019) to set aside the statutory demand served by Mr Kelly dated 9 April 2019. The term 'Proceeding' was defined in Recital E, and was referred to in cl 1.3 of the Settlement Deed, which clause provided for, among other things, the discontinuance of the Proceedings.
It was submitted that Recital D to the Settlement Deed records, consistently with the affidavit evidence of Mr Kelly,[24] that the statutory demand served by Mr Kelly was in relation to payment to which he said he was entitled in lieu of notice pursuant to cl 11.2 and cl 11.3 of the executive services agreement dated 6 June 2017 between him and Riversgold (being the Contract as defined in Recital B to the Settlement Deed).
[24] Affidavit of AJ Kelly 'AJK-15', pages 123 - 124.
It was further submitted that the operative provisions of the Settlement Deed are concerned with the Proceedings and the rights, entitlements, and obligations of the parties to the Settlement Deed in relation to the employer/employee relationship which existed between them. The following was raised by way of illustration and example:
(a)cl 1.3 provides for the withdrawal of the Statutory Demand (defined in Recital D) and the discontinuance of the proceedings;
(b)cl 1.4 provides for the publishing by Riversgold of an ASX announcement in respect of the Termination;
(c)cl 2 provides for the payment of the Settlement Sum 'in satisfaction of any and all amounts that [Riversgold] may owe [Mr Kelly] …';
(d)cl 3.1 enables the Settlement Deed to be used as a bar to proceedings by Mr Kelly or anyone claiming through him in relation to the Contract, the Employment, the Termination or the Proceedings;
(e)cl 4.1 enables the Settlement Deed to be used as a bar to proceedings by Riversgold or anyone claiming through Riversgold in relation to the Employment or the Termination;
(f)cl 7.2 contains an acknowledgement that the Settlement Deed contains the complete agreement in relation to the settlement of all disputes arising out of or related directly or indirectly to the Contract, the Employment, the Termination and the Proceedings; and
(g)cl 7.3 records the parties' agreement that the Settlement Deed contains the entire agreement between the parties about its subject matter.
It was submitted that it was clear from the terms of the Settlement Deed (or at least, for the purposes of Mr Hilton's application for summary judgment, patently arguable), that it was the intention of the parties that, by the Settlement Deed, Riversgold and its Associated Entities were to be discharged and released from the specific claims referred to in the Settlement Deed and other claims arising directly or indirectly from the employer/employee relationship which existed between Mr Kelly and Riversgold.
It was submitted on behalf of Mr Kelly that a reasonable person would not have understood the Settlement Deed as extending to the claims made against Mr Hilton in this proceeding. In support of the same, it was noted that the Settlement Deed is silent as to the existence of claims by Mr Kelly against Mr Hilton. Further, it was submitted that the claims made against Mr Hilton in this proceeding bear no connection to the employer/employee relationship which existed between Mr Kelly and Riversgold which commenced on 6 June 2017. Rather, it was submitted that the claims the subject of this proceeding are remote from the matters which the parties wished to address by the Settlement Deed.
On behalf of Mr Kelly it was submitted that consistently with Grant v John Grant & Sons Pty Ltd, the general release in cl 3(a) - which purports to capture a wide class of claims - must be qualified by reference to the subject matter of the Settlement Deed as expressed in the Settlement Deed itself.
No dispute existed between Mr Kelly and Riversgold about Mr Hilton
Counsel for Mr Kelly further observed that Mr Hilton's application for summary judgment relied upon matters that were raised by Mr Kelly in his notice of resignation dated 15 March 2019, and in a subsequent letter dated 22 March 2019, as evidencing a connection between the claims made in this proceeding and the Contract or the Termination as defined in the Settlement Deed.[25]
[25] The plaintiffs' outline of submissions par 29, referencing the defendant's outline of submissions pars 21 ‑ 23.
Counsel for Mr Kelly complain that this contention ignores the true nature of the dispute between Mr Kelly and Riversgold, and what was in the parties' contemplation at the time the parties entered into the Settlement Deed. It was submitted that quite apart from the terms of Settlement Deed, the evidence establishes that the Settlement Deed came about as a result of, and to settle, a dispute between Riversgold and Mr Kelly about the employee entitlements owed by Riversgold to Mr Kelly. In this regard, counsel for Mr Kelly made reference to the following:
(a)Mr Kelly gave his notice of resignation on 15 March 2019;[26]
(b)on 22 March 2019, Mr Kelly wrote to Riversgold and made a without prejudice offer to settle claims which he considered were available against Riversgold;[27]
(c)an administrative meeting was held between Mr Kelly and officers of Riversgold, Mr Webster and Mr Hart on 26 March 2019, during which the parties discussed payments to be made to Mr Kelly and outstanding jobs to be completed by him following his resignation;[28]
(d)on 28 March 2019, Mr Kelly wrote to Riversgold requesting payment of six months' salary in lieu of notice given under the Contract (as that term is defined in the Settlement Deed).[29] That same day, Mr Kelly's solicitors, MDC Legal, wrote to Riversgold to make the same request;[30]
(e)on 9 April 2019, Mr Kelly served on Riversgold a creditor's statutory demand and supporting affidavit.[31] The debt claimed in the statutory amount was for $120,968.75, which was described as 'payment in lieu of notice pursuant to cl 11.4.2 of the contract of employment dated 6 June 2017 between [Riversgold] and [Mr Kelly]';[32]
(f)on 29 April 2019, Riversgold commenced the proceeding known as COR 92 of 2019 to set aside the statutory demand served by Mr Kelly.[33] In the Webster affidavit, Mr Webster deposed to the dispute between Riversgold and Mr Kelly;[34]
(g)from 2 May 2019, until the Settlement Deed was signed, there were communications between the solicitors for Mr Kelly and Riversgold about the settlement of the dispute about the non‑payment of Mr Kelly's six months' salary.[35] The relevant correspondence is attached to the affidavit of Ms Samaraweera.[36]
[26] Affidavit of AJ Kelly par 18, 'AJK-3', pages 85 - 89.
[27] Affidavit of AJ Kelly par 21 'AJK-5', pages 91 - 96.
[28] Affidavit of AJ Kelly par 23 - 25, 'AJK-7', page 99.
[29] Affidavit of AJ Kelly par 32, 'AJK-13', pages 110 - 111.
[30] Affidavit of AJ Kelly par 34, 'AJK-15', pages 113 - 115.
[31] Affidavit of AJ Kelly par 40, 'AJK-18', pages 121 -154.
[32] Affidavit of AJ Kelly 'AJK-18', pages 123 and 124.
[33] Affidavit of AJ Kelly par 42, 'AJK-20', pages 157 - 160.
[34] Affidavit of BD Campbell 'BDC-1', pars 28 - 37 at pages 10 - 12.
[35] Affidavit of AJ Kelly par 47, 'AJK-15', pages 123 and 124.
[36] The plaintiffs refer in particular to 'SMS-6' of the affidavit of SM Samaraweera at pages 149 - 150, 156, 161, 167, 171, 172 and 215.
It was submitted that there is no suggestion in the evidence that the dispute between Mr Kelly and Riversgold referred to or were concerned in any way with claims that Mr Kelly or entities associated with him may have had against Mr Hilton. It was submitted that therefore, consistent with Grant v John Grant & Sons Pty Ltd, the general release in cl 3(a) of the Settlement Deed should be qualified by reference to the subject matter of the dispute between Mr Kelly and Riversgold at the time of the Settlement Deed.
Equity may intervene in any event
Counsel for Mr Kelly further submitted that to the extent it is necessary to do so, a court of equity can intervene to prevent Mr Hilton, as a releasee, from using the general words of the release in cl 3(a) of the Settlement Deed as a means of escaping the fulfillment of obligations falling outside the true purpose of the transaction documented in that deed.[37]
[37] Grant v John Grant & Sons Pty Ltd, pages 129 - 130, as referenced in the plaintiffs' outline of submissions at pars 34 - 37.
Mr Kelly contends that the true purpose of the transaction recorded in the Settlement Deed is evident from:
(a)the nature of the Settlement Deed itself shown in the recitals and the operative provisions;[38] and
(b)the surrounding circumstances shown in the chronology and contemporaneous documents.[39]
[38] Plaintiff's outline of submissions par 35.1 and as outlined above at pars [53] - [62].
[39] Plaintiff's outline of submissions par 35.2 and as outlined above at pars [63] - [65].
It was submitted that the true purpose of the transaction was, plainly, to settle the specific claims referred to in the recitals to the Settlement Deed and other claims arising directly or indirectly from the employer/employee relationship which existed between Mr Kelly and Riversgold. Counsel for Mr Kelly submitted that the purpose of the transaction was not to settle claims by Mr Kelly against Mr Hilton, nor to settle any claims by persons other than Mr Kelly.
It was Mr Kelly's position that in the circumstances, the equitable principles set out in Grantv John Grant & Sons Pty Ltd would restrain Mr Hilton from an unconscientious reliance on any legal rights which the court may find available on the proper construction of the Settlement Deed.
Second, third and fourth plaintiffs are not parties to the Settlement Deed
Finally, counsel for the plaintiffs noted in their written submissions that the doctrine of privity of contract operates such that a person who is not a party to a contract can neither enforce the contract nor incur obligations under it.[40] Counsel for Mr Kelly observed that Mr Hilton does not identify how he seeks to enforce the Settlement Deed in circumstances where he is not a party. Counsel further submitted that, more fundamentally, Mr Hilton does not explain how he seeks to enforce the promises made and obligations assumed by Mr Kelly as against the second, third and fourth plaintiffs who were not parties to the Settlement Deed and who gave no contractual promises under it. In summary, counsel for the plaintiffs say that no basis exists by which the second, third or further parties are bound by the Settlement Deed.
[40] Plaintiffs' outline of submissions pars 38 - 41.
Disposition
The critical question to be determined on the application made on behalf of Mr Hilton was whether it was clear that there was no question to be tried.
In these reasons, I have set out in considerable detail the competing submissions made on behalf of Mr Hilton and Mr Kelly as to the proper construction of the Settlement Deed, and whether the Settlement Deed affords Mr Hilton a complete defence to the claims made in this proceeding by Mr Kelly as first plaintiff and as second plaintiff.
Having given careful consideration to the documents before me, and having had regard to the authorities cited and to the detailed submissions advanced by counsel at the hearing of application, I concluded that it had not been demonstrated that by operation of the Settlement Deed, Mr Kelly's claim, made in his own capacity and as trustee for the Kelly Family Trust, should not proceed to trial because it was apparent that the claim must fail.
I was satisfied that the construction of the Settlement Deed advanced on behalf of the plaintiffs was arguable, having regard to the statements of principle pronounced by the High Court in Grant v John Grant & Sons Pty Ltd, and by the Court of Appeal in Butler v St John of God Healthcare Inc.
Further, if the Settlement Deed was to be construed as Mr Hilton contended, I was not satisfied that there was no triable issue as to whether equity would intervene in favour of Mr Kelly, should Mr Kelly's preferred construction fail.
The application before me was an application for summary judgment in favour of the defendant, not a trial of a preliminary issue. This was not the occasion to decide that equity would not intervene to assist Mr Kelly. The outcome of this application reflects that it is only in the clearest of cases, where there is a high degree of certainty about the outcome if the proceeding were allowed to go to trial, that summary judgment ought properly be granted.[41] In dismissing the application, I was cognisant that the exercise of powers to summarily terminate a proceeding must always be attended with caution.[42]
[41] Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 [57]; Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) CLR 256 [46], cited by the Court of Appeal in Zaghloul v Bayly [2021] WASCA 125 [116].
[42] Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118 [24], cited by the Court of Appeal in Zaghloul v Bayly [2021] WASCA 125 [116].
Mr Hilton bore the legal onus of establishing that there was no serious question to be tried on any cause of action raised by Mr Kelly, on his own behalf and as trustee for the Kelly Family Trust. While there was considerable force in the submissions made on behalf of Mr Hilton, at least arguably, the release in cl 3(a) of the Settlement Deed does not operate to release Mr Hilton from Mr Kelly's claims in this proceeding. The scope and effect of the Settlement Deed will no doubt be matters agitated at trial. However, on the application before me, I was not satisfied that Mr Hilton discharged his onus.
As there will be a trial of these issues, it is unnecessary and inappropriate to determine the point of construction that arises in relation to the Settlement Deed. I do not express any concluded views as to the claims of Mr Kelly (or the other plaintiffs), the defences available to Mr Hilton, nor the proper construction of the Settlement Deed. It is sufficient to note that I concluded that an alternative construction of the Settlement Deed as advanced by Mr Kelly was reasonably open, as was the potential for equity to intervene if Mr Kelly's construction was not ultimately preferred.
Conclusion
On the affidavits read and having given careful consideration to the detailed written and oral submissions made on behalf of the parties, I concluded that it was not apparent that the first and second plaintiffs' action must fail. Leave was granted to Mr Hilton to bring his amended application for summary judgment as against the first and second plaintiffs out of time, but the application was dismissed.
At the conclusion of the hearing, I informed the parties that I would deliver these reasons and, after receipt of the same, I would hear them as to costs. I now invite the parties to confer as to a form of order that reflects these reasons and to confer in relation to the costs of the application. The costs order should include reference to the costs of the application made by the first and second plaintiffs to the Master, heard on 3 June 2021.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MH
Associate to Justice Strk
26 OCTOBER 2021
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