Lake Maintenance (NSW) Pty Ltd v Bone

[2017] NSWSC 758

Supreme Court

New South Wales

Medium Neutral Citation:	Lake Maintenance (NSW) Pty Ltd v Bone [2017] NSWSC 758
Hearing dates:	8 June 2017
Date of orders:	21 June 2017
Decision date:	21 June 2017
Jurisdiction:	Common Law
Before:	Davies J
Decision:	(1)   The Defendant’s Notice of Motion filed 23 May 2017 is dismissed.  (2)   The Defendant should pay the Plaintiff’s costs.
Catchwords:	INJUNCTIONS – interlocutory injunctions – to stay enforcement of judgment – deed executed as settlement of proceedings – money to be paid by defendant to plaintiff - entitlement of plaintiff to enter judgment if money not paid on second anniversary of deed – provisions in deed for defendant to commence and pursue proceedings against third party – whether on proper construction of deed enforcement of judgment delayed until completion of third party proceedings – whether term implied into deed to delay enforcement – no serious question to be tried   ESTOPPEL – estoppel in pais – whether plaintiff estopped from enforcement of judgment by defendant’s mistaken belief in the construction of the deed
Legislation Cited:	Farm Debt Mediation Act 1994 (NSW)
Cases Cited:	BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; [1982] HCA 24 Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32 Jago v District Court of NSW (1989) 168 CLR 23; [1989] HCA 46
Category:	Procedural and other rulings
Parties:	Lake Maintenance (NSW) Pty Ltd (Plaintiff) David James Bone (Defendant)
Representation:	Counsel: B Katekar & P Hart (Plaintiff) D McClelland (Defendant)   Solicitors: Kilmurray Lawyers (Plaintiff) Platinum Lawyers (Defendant)
File Number(s):	2012/204547

Judgment

1. On 20 February 2015 the parties entered into a Deed to settle the present proceedings. Under that Deed the Plaintiff was entitled to enter judgment on 20 February 2017. Judgment was entered at that time and subsequently the Plaintiff issued a Bankruptcy Notice against the Defendant as a means of enforcing the judgment.

2. The Defendant has sought a stay of the Bankruptcy Notice in the Federal Circuit Court and at the same time has filed a Motion on 23 May 2017 in this Court seeking an injunction to prevent enforcement of the judgment, alternatively, a declaration that the Plaintiffs are estopped from taking enforcement action.

The Deed

3. It is necessary to set out the terms of the Deed of Settlement in its entirety so that the arguments on this application can be understood. The Deed provides:

BETWEEN:

David James Bone (Bone)

Lake Maintenance (NSW) Pty Ltd (Lake Maintenance)

Darren Nicholson (Nicholson)

Wallalong Land Developments Pty Ltd (Wallalong Land)

THE PARTIES AGREE:

1.   Upon exchange of this Deed, Bone and Lake Maintenance will sign consent orders under which Lake Maintenance is given judgment against Bone for $5,000,000, and otherwise disposing of the proceedings (the "Consent Orders") in the form annexed to this Deed and marked "A", plus alternative orders which may be applicable in the event that Bone pays Lake Maintenance $5,000,000 without the Consent Orders being filed, such alternative orders being in the form annexed to this Deed and marked "B" (the "Disposal Orders"). Each of the Consent Orders and the Disposal Orders are to be held by the solicitors for Lake Maintenance.

2.   The Consent Orders may only be filed in the Supreme Court of New South Wales by Lake Maintenance in accordance with the terms of this agreement.

3.   Bone will commence proceedings against Bankwest in respect of his other Maitland property by 20 May 2015 (the "Bankwest proceedings"). If that does not occur by the filing and service of the originating process for those proceedings by that date, Lake Maintenance shall be entitled to file the Consent Orders and enter judgment.

4.   Bone will provide to Lake Maintenance:

(a) A copy of the originating process (ie Statement of Claim or Summons as the case may be) within 14 days of filing;

(b) A copy of Bankwest's defence within 14 days of receipt.

(c)   Such information and copies of court documents as Lake Maintenance may reasonably request from time to time, such requests to be made no more than 5 times a year.

(d)   Lake Maintenance shall not be entitled to any privileged information;

(e)   Notice of any resolution or finalisation of the Bankwest proceedings within 3 days of such resolution or finalisation

5.   If Bone pays Lake Maintenance $5,000,000 at any time prior to the Consent Orders being filed in accordance with this Deed, Lake Maintenance shall provide the Disposal Orders to Bone in exchange for that payment, which orders must then be filed by Bone within 14 days.

6.   Notwithstanding any other provision of this Deed, Lake Maintenance shall be entitled to file the Consent Orders and enter judgment on 20 February 2017, unless:

(a) Bone has paid Lake Maintenance $5,000,000 prior to that date; or

(b) Lake Maintenance has otherwise already been entitled to file the Consent Orders prior to that date, and has done so.

7.   Within 14 days, the parties will take all steps necessary to have these proceedings, including the cross-claim, adjourned or stayed until the entry of the Consent Orders or the Disposal Orders.

8.   Notwithstanding any other provision of this agreement, Lake Maintenance shall be entitled to file the Consent Order and enter judgment in the event that:

(a) the Bankwest proceedings are brought to an end for any reason, including a judgment at first instance or summary judgment;

(b) Bankwest makes payment to Bone of any amount payable following any judgment or settlement of the proceedings; and

(c)   Bone fails to pay to Lake Maintenance the net proceeds of any such settlement or judgment up to an amount of $5,000,000 with no interest within 7 days of receipt of payment by Bone from Bankwest.

9.   By the net proceeds referred to in paragraph 8(c) above is meant the amount received in cleared funds from Bankwest, but after payment of all proper and necessary legal costs to Bone's Solicitors.

10.   The amount of any such settlement or proceeds of judgment referred to above must be directed by Bone to be paid into his solicitor's trust account and not to be paid out until Lake Maintenance is paid $5,000,000 from that sum.

11.   Any failure of Bone to pay Lake Maintenance within 7 days of receipt by Bone of the amounts referred to above would entitle Lake Maintenance to file the aforesaid Consent Orders and obtain a judgment of the court thereof.

Background

4. The background to the dispute may be briefly stated.

5. The Defendant had borrowed money from Bankwest secured over a large parcel of land at Wallalong in the Hunter Valley. It seems that there must have been a default by the Defendant under that loan agreement and the default resulted in Bankwest appointing receivers to the property. The Receivers sold the property for about $4 million leaving a shortfall to Bankwest of about $4 million.

6. The Defendant asserts that the receivers sold the land in contravention of the Farm Debt Mediation Act 1994 (NSW) in that no mediation was held under that Act and no certificate had been issued under s 11 of that Act.

7. In or about June 2010 the Defendant borrowed $3 million from the Plaintiff, Lake Maintenance (NSW) Pty Ltd. That loan was repayable by 23 December 2011. The Defendant gave a mortgage over an adjoining property at 137 High Street, Wallalong.

8. The Defendant did not repay the loan to the Plaintiff by 23 December 2011 or at all. By that date the amount owing including interest was a little over $5 million.

9. On 28 June 2012 the Plaintiff commenced the present proceedings against the Defendant claiming the amount owing. On 20 February 2015 the parties attended a mediation which resulted in the settlement set out in the Deed of Settlement.

10. As the Deed of Settlement suggests, the amount agreed to the paid by the Defendant to the Plaintiff was to be sourced from a claim that the Defendant intended to make against Bankwest based on the asserted failure of Bankwest to comply with the Farm Debt Mediation Act. Accordingly, on 19 March 2015 the Defendant and a company that appeared to be concerned with the loan from Bankwest, Jelrol Pty Ltd (Receivers and Managers Appointed), commenced proceedings against the Commonwealth Bank trading as Bankwest together with two other persons being Receivers and Managers appointed by Bankwest. Those proceedings were commenced in the General List of the Equity Division but were later transferred to the Commercial List of that Division. They are set down for hearing on 7 August 2017 for ten days. The amount claimed is set to be between $48 million and $190 million. That is because the properties were said to be the subject of a town planning proposal which would result in those properties forming the centre of a new town in the Hunter Valley.

11. The solicitor for the Defendant swore an affidavit in support of the present application which in part said this:

5.   In reliance upon the terms of the Deed of Settlement my office was happy to partially speculate the outcome of the Bankwest proceedings given that Mr Bone's financial resources have been depleted.

6.   The firms (sic) current account in relation to the Bankwest proceedings is as at 5 June 2017 $779,826.64 as per the ledger which is exhibit "DLM 2" hereto.

7.   This office would not have allowed Mr Bone to incur any legal fees that were unable to be paid unless there was certainty in that the sum provided for the in the Deed was not going to be pursued until after the Bankwest proceedings had been decided.

Submissions

12. The Defendant does not dispute the Plaintiff’s right to enter judgment. However, the Defendant submitted that on a proper construction of the Deed, because it was clear that the monies due under the Deed would be paid from the results of the Bankwest litigation, the Plaintiff was not entitled to enforce the judgment that it was able to enter on 17 February 2017. The Defendant submitted that he was entitled to rely on the terms of the Deed and in particular, clause 8, that the Plaintiff would not begin enforcement of the judgment until after the conclusion of the Bankwest proceedings.

13. The Defendant initially relied on what was contained in paragraphs 5 to 7 of his solicitor’s affidavit but ultimately accepted that to raise an estoppel against the Plaintiff he could call in aid his solicitor’s reliance. The Defendant then submitted that he relied on the terms of the Deed in expending the $750,000 that had been incurred as identified in his solicitor’s affidavit.

14. Finally, the Defendant asserted that it was an abuse of process for the Plaintiff to enforce the judgment. This was said to be because there was no utility in the Plaintiff seeking to enforce its judgment prior to the conclusion of the Bankwest proceedings and because the Defendant had warned the Plaintiff that seeking to enforce it amounted to an abuse of process but the Plaintiff pursued its enforcement nonetheless.

15. The Plaintiff submitted that when properly construed the Deed gave a period of two years for the Defendant to pay the agreed amount of $5 million. If certain events occurred, those set out in paragraph 8 of the Deed, the Defendant might become liable to pay the agreed sum at an earlier time. However, the Plaintiff submitted, nothing in the Deed suggested that the Plaintiff, which was undoubtedly entitled to enter judgment on 20 February 2017, would not be able to enforce that judgment.

Consideration

16. To obtain the interlocutory injunction the Defendant seeks he must show that there is a serious question to be tried and that the balance of convenience favours the making of such an injunction.

17. On a plain reading, what the Deed provides for is this:

(a)   There are to be consent orders for the payment by the Defendant to the Plaintiff of $5 million (clause 1);

(b)   Judgment may be entered by the Plaintiff on 20 February 2017 (two years after the date of the Deed) unless the Defendant has paid the Plaintiff $5 million prior to that date (clause 6);

(c)   The Defendant is to commence proceedings against Bankwest by 20 May 2015. If that does not occur the Plaintiff can enter the judgment for $5 million against the Defendant (clause 3);

(d)   The other circumstances in which the judgment may be entered at an earlier time than 20 February 2017 are set out in clause 8. These circumstances concern the coming to an end of the Bankwest proceedings by abandonment, settlement or judgment.

(e)   The words “notwithstanding any other provision of this Deed” in clause 6 and “notwithstanding any other provision of this Agreement” in clause 8 have the effect that judgment can be entered by the Plaintiff at the conclusion of the Bankwest proceedings or on 20 February 2017 whichever is the later.

18. Nothing is said in the Deed about enforcement of any judgment. To the extent that any inference arises about whether a judgment entered could be enforced, it would ordinarily be inferred that a party entitled to enter judgment is also entitled to enforce it. In the ordinary course if a judgment is not to be enforceable until an event occurs or until certain time passes a further order is made that stays the judgment until that date passes or the event occurs.

19. In my opinion, the intention of the parties, inferred from the terms of the Deed, are that the Defendant had, at the outside, no more than two years to pay the agreed sum. There may be some circumstances in which the Defendant was required to pay it before that time but no circumstance was provided for enabling it to be paid after that time.

20. If that is the proper construction of the Deed, as I believe it is, then to the extent that the Defendant seeks to draw a distinction between the entry of judgment and enforcement of it there would need to be a term implied that, although the Plaintiff was entitled to enter judgment on 20 February 2017, enforcement was delayed until the conclusion of the Bankwest proceedings.

21. The authorities make clear that there is no bright line between construing a contract and the implication of a term: see for example Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; [1982] HCA 24 at 345, [3]; 353, [27]; Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32 at [22] and [25]. In the present case it is difficult to see how the Deed could be construed in the manner argued for by the Defendant without the implication of the further term.

22. As is well known, the conditions necessary to ground the implication of a term was summarised by the majority in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26. Those conditions are these:

(1)   it must be reasonable and equitable;

(2)   it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;

(3)   it must be so obvious that 'it goes without saying';

(4)   it must be capable of clear expression;

(5)   it must not contradict any express term of the contract.

23. The conditions for the implication of such a term in the present Deed are not present. Such a term would contradict clauses 6 and 8 of the Deed, it is not necessary to give business efficacy to the contract and it is not so obvious that it goes without saying. It is doubtful if it would be reasonable and equitable from the Plaintiff’s point of view because there would be no time limit for the conclusion of the Bankwest proceedings

24. On the matter of the proper construction of the Deed, whether by implication of a term or otherwise, the Plaintiff fails to show that there is a serious question to be tried. Consideration of the balance of convenience does not arise. If it had, I consider it would have favoured the Plaintiff. Allowing the Defendant to incur legal fees for a ten day hearing in the Commercial List of the Court when he is currently unable to pay the $5m and where the outcome of that case is unknown but any verdict may be shared with the other plaintiff in those proceedings is likely to diminish significantly any recovery on the Plaintiff’s part. The better course might involve the Defendant’s trustee in bankruptcy assessing the likely outcome of those proceedings to see if they are economically feasible. However, I do not have to decide that issue.

25. In relation to the claim for an estoppel, as I have mentioned, the Plaintiff sought, at least partly, to rely on the evidence in his solicitor’s affidavit where the solicitor said that he relied upon the belief that the Deed meant that the Plaintiff could not enforce the judgment until the determination of the Bankwest proceedings. Any detriment in that regard was said to be the solicitor’s because he said that his office would not have allowed the Defendant to incur any legal fees that were unable to be paid unless the enforcement was delayed until the determination of the Bankwest proceedings. That, in itself, was not a detriment the Defendant suffered.

26. In the written submissions put forward by the Defendant it is said that the Defendant relied on the terms of the Deed and the belief from clause 8 that enforcement proceedings would not be taken until the conclusion of the Bankwest proceedings by incurring the legal costs associated with the Bankwest proceedings to the extent at least of $750,000. There seem to me to be two difficulties with that submission.

27. First, the Defendant does not say that he so relied in his affidavit on the present application. All he says is:

14.   I was entitled to rely upon the terms of the Deed of Settlement insofar as other than the entry of the judgment in this case against me that no enforcement processes would occur prior to those events contemplated in clause 8.

In that regard, I have held that on a proper construction of the Deed clause 8 does not prevent enforcement proceedings from the time of entry of the judgment on 20 February 2017. It is not asserted that the Plaintiff made any other representation to the Defendant in that regard. A reliance by a person on a mistaken belief in the construction of a document does not, without more, give rise to an estoppel against the other party.

28. Secondly, the Defendant does not say that he incurred the costs to his lawyers relying on the fact that those costs would be payable out of the Bankwest proceedings. Nor could he say that he so relied because whether or not he recovers in the Bankwest proceedings is a contingency over which he has little control.

29. No estoppel in the present matter is raised against the Plaintiff to prevent enforcement of the judgment.

30. Finally, the Defendant relied on the doctrine of abuse of process. The Defendant made reference to what Mason CJ said in Jago v District Court of NSW (1989) 168 CLR 23; [1989] HCA 46 at 25 where his Honour said that Australian courts possess inherent jurisdiction to stay proceedings which are an abuse of process.

31. The abuse of process appears to be put, as far as can be discerned from the written submissions, on the basis that there is no utility in the Plaintiff seeking to enforce its judgment before the conclusion of the Bankwest proceedings. In circumstances where I have held on a proper construction of the Deed that there is no bar to enforcement, the lack of any utility cannot amount to an abuse of process.

32. This argument in particular, but in fact all of the Defendant’s arguments on the present application, tends to proceed on the assumption that the Defendant will be successful in the Bankwest proceedings. There is no basis for such an assumption. There was no attempt to put forward any material which might show that the Defendant’s claim against Bankwest was so overwhelming that it would be reasonable to make such an assumption. There is the further complication that the Defendant is only one of two plaintiffs in the Bankwest proceedings. The basis on which each such plaintiff proceeds is not known.

28. However, even if such evidence had been produced, it could not be said that taking enforcement proceedings, if the Plaintiff is otherwise entitled to do so, would amount to an abuse of process. There is no abuse of process unless, as a preliminary matter, the Plaintiff is not entitled to enforce the judgment

29. Accordingly, I make the following orders:

(1)   The Defendant’s Notice of Motion filed 23 May 2017 is dismissed.

(2)   The Defendant should pay the Plaintiff’s costs.

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Decision last updated: 21 June 2017