MERTON & SUTTON

The parties to this proceeding were Merton and Sutton. The dispute concerned the interpretation of a clause within a deed of settlement, specifically whether it imposed a personal obligation on Sutton to pay a sum of money to Merton, or whether the obligation was solely on a company, Merton Pty Ltd. The matter came before Foster J of the Supreme Court of New South Wales.

The central legal issue before the Court was whether the wording of the settlement deed created a personal covenant by Sutton to pay Merton, or if the payment obligation was confined to the company, Merton Pty Ltd. This required the Court to consider the principles of contractual interpretation, particularly in relation to identifying whether a party had undertaken a personal liability distinct from their role as a director or representative of a company.

Foster J's reasoning focused on the precise language used in the deed. His Honour examined the structure of the clause and the placement of Sutton's signature and the company's signature. The Court applied the principle that clear and unambiguous language is required to impose a personal obligation on an individual when they are acting in a representative capacity. In this instance, the Court found that the deed did not contain sufficiently clear words to establish a personal covenant by Sutton to pay Merton. The obligation was found to rest with the company.

The Court therefore ordered that Sutton was not personally liable for the payment.