Midstyle Nominees Pty Ltd v Smoothseas Pty Ltd - [2009] WASC 387

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: MIDSTYLE NOMINEES PTY LTD -v- SMOOTHSEAS PTY LTD [2009] WASC 387

CORAM: LE MIERE J

HEARD: 17 & 18 NOVEMBER 2009

DELIVERED : 16 DECEMBER 2009

FILE NO/S: COR 195 of 2009

MATTER :Smoothseas Pty Ltd (ACN 108 093 269)

BETWEEN: MIDSTYLE NOMINEES PTY LTD
Plaintiff
AND
SMOOTHSEAS PTY LTD
First Defendant
REGISTRAR OF TITLES
Second Defendant

Catchwords:

Contract - Variation of agreement - Whether plaintiff has wholly discharged its liability to the first defendant - Turns on own facts

Equity - Estoppel - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 269(1), s 1324(2)

Result:

Order that first defendant provide memorandum under Corporations Act 2001 (Cth) s 1324(2) acknowledging liability under charge has been discharged

Category: B

Representation:

Counsel:

Plaintiff:     Mr G R Donaldson SC
First Defendant             :     Mr P C S van Hattem SC
Second Defendant         :     No appearance

Solicitors:

Plaintiff:     Hotchkin Hanly
First Defendant             :     Murfett Legal
Second Defendant         :     No appearance

Case(s) referred to in judgment(s):

County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193

LE MIERE J:

Introduction

The plaintiff, Midstyle, was indebted to the first defendant, Smoothseas, for $2.95M plus GST with repayment due on or before 28 February 2008 under an agreement called the Side Agreement and secured by a mortgage and a charge over Midstyle's assets. By a deed entitled 'Deed of early discharge' (the Deed) Midstyle and Smoothseas agreed to a reduction in the amount to be repaid in exchange for an early payout. In mid‑November 2006 the parties negotiated a further reduction in the amount to be repaid in return for an accelerated repayment. Midstyle says that it was agreed that it would pay $1.1M plus GST on 4 December 2006 and $1.3M plus GST on 31 January 2007. On 4 December 2006 Midstyle paid $1.1M plus GST to Smoothseas. At a settlement on 31 January 2007 Midstyle paid Smoothseas $1.3M plus GST and Smoothseas delivered to Midstyle an executed discharge of mortgage, a notification of discharge of property from the charge and letters confirming that Smoothseas released Midstyle from its obligations under the Side Agreement and any further payments under the mortgage.
The notification of discharge of property from the charge had been executed by Smoothseas in November 2006 and when it was presented to the Australian Securities and Investments Commission (ASIC) in February 2007 ASIC rejected the notification because the document had been executed before the date of discharge. Midstyle asked Smoothseas to execute a substituted form of notification of discharge of property from the charge. Smoothseas refused to do so on the ground that Midstyle still owed Smoothseas money that was secured by the charge. Smoothseas claimed that the agreement made in mid‑November 2006 was that Midstyle would pay $1.1M plus GST on 4 December 2006 and $1.324M on 31 January 2007 and that Smoothseas' solicitors had delivered the discharge of mortgage, notification of discharge of property from charge and letters of release in exchange for $1.3M plus GST on 31 January 2007 contrary to Smoothseas instructions.
In October 2009 Midstyle commenced these proceedings for orders that Smoothseas remove caveats over certain land lodged by Smoothseas claiming an interest in the land arising from the charge and for an order that Smoothseas give to Midstyle a memorandum under s 269(1) of the Corporations Act 2001 (Cth) acknowledging that Midstyle's liability to Smoothseas has been discharged in whole.

Side Agreement

Smoothseas had an opportunity to enter into agreements with Forx Pty Ltd for the purchase of land near Mandurah (the Land) and a business of a restaurant function centre and short stay accommodation operated on the Land. Smoothseas agreed to allow Midstyle to enter into a contract as purchaser with the vendor of the land in consideration of Midstyle paying to Smoothseas $5.95M, of which $2.95M was to be paid by way of vendor finance. In June 2006 Smoothseas and Midstyle executed the Side Agreement. The Side Agreement provided that $2.95M of the consideration to be paid by Midstyle was to be paid on settlement of the contract by which Midstyle was to purchase the Land from the vendor but that Smoothseas would loan that amount to Midstyle for a period of 18 months or the earlier settlement of a sale of part of the Land. Midstyle was to pay interest at 15% per annum on the loan. The loan was secured by a mortgage. Later Midstyle also granted a charge over its assets to Smoothseas to secure the payment of the $2.95M loan and any other monies then, or in the future, due to Smoothseas in connection with the Side Agreement.

The Deed

In October 2006 Smoothseas and Midstyle negotiated an acceleration of the repayment of the loan in consideration for a reduction in the principal amount to be repaid. On 3 November 2006 Smoothseas and Midstyle executed the Deed. Clause 2.1 of the Deed provided that Smoothseas would accept the sum of $2.564M plus GST in full satisfaction of all monies owing under the mortgage providing that Midstyle made the following payments:
(a)$100,000 upon execution of the Deed;
(b)$900,000 on or before 4 December 2006; and
(c)$1.564M on or before 31 January 2007.
Clause 3.2 of the Deed provides that upon receipt of the final payment of $1.564M plus GST on or before 31 January 2007 Smoothseas shall provide to Midstyle an executed discharge of mortgage, a discharge releasing all of the assets of Midstyle from the charge, a letter confirming that Smoothseas releases Midstyle and the guarantors from their obligations under the Side Agreement and a letter confirming release of the guarantors. Clause 3.3 provides:
Smoothseas acknowledges that upon receipt of the sum of $2,600,000 plus GST it totally releases [Midstyle] and the guarantors of all its obligations under the mortgage, fixed and floating charge and the Side Agreement.

Rectification

The sum specified in cl 2.1 of the Deed was originally $2.6M but that figure was crossed out and the figure of $2.564M was written in by hand and the alteration initialled by the parties. The figure in cl 2.1(c) was originally $1.6M but that figure was crossed out and the figure of $1.564M was handwritten and initialled by the parties.
Midstyle applies to rectify the Deed by substituting sum of $2.564M for the sum of $2.6M in cl 3.3. Midstyle says that the parties had agreed that upon receipt of $2.564M on the dates specified in cl 2.1 of the Deed Smoothseas would totally release Midstyle and the guarantors of their obligations under the mortgage, the charge and the Side Agreement but that by mistake they had omitted to change the sum of $2.6M to $2.564M in cl 3.3.
Rectification was initially opposed by Smoothseas. In the course of cross‑examination Mr Stathopoulos, the sole director of Smoothseas, admitted that it was an oversight that the figure of $2.6M in cl 3.3 of the Deed had not been amended to $2.564M. Subsequently, Smoothseas agreed to the plaintiff's application for rectification. Accordingly, cl 3.3 of the Deed will be rectified by substituting the figure of $2.564M for the sum of $2.6M.

The further variation

On 17 November 2006 Mr Black, on behalf of Midstyle, and Mr Stathopoulos, on behalf of Smoothseas, agreed to vary the agreement between them. The agreement was to increase the repayment due on 4 December 2006 and reduce the final repayment due on 31 January 2007. Midstyle says that the agreement was that the payment to be made on 31 January 2007 was $1.3M plus GST. Smoothseas says that the agreement was that the payment to be made on 31 January 2007 was $1.324M plus GST.

Settlement

On 4 December 2006 Midstyle paid to Smoothseas $1.1M plus GST. On 30 January 2007 Midstyle paid $800,000 to, or at the direction of, Smoothseas. A settlement occurred on 31 January 2007. Mr Black attended on behalf of Midstyle. David McDonald of McDonald Pynt, the solicitor for Smoothseas, attended on behalf of Smoothseas. Midstyle paid, including the payments made on 30 January 2007, a total of $1.43M ($1.3M plus GST) to Smoothseas. Smoothseas, by Mr McDonald, delivered to Midstyle a discharge of mortgage, a notification of discharge of property from charge, a letter confirming that Smoothseas had received all monies from Midstyle payable under the Side Agreement and released Midstyle and the guarantors from all obligations under the Side Agreement and a letter confirming that Smoothseas had received all monies from Midstyle payable under the mortgage and confirming that Midstyle and the guarantors were released from payment of the further monies payable under the mortgage.
Subsequently the mortgage was discharged. ASIC declined to register the notification of discharge of property from charge because the date of execution of the discharge form cannot be before the date of discharge. The notification of discharge of property from charge had been executed by Ms Mastrapas, who was then the sole director of Smoothseas, on 22 November 2006. Midstyle requested Smoothseas to execute a replacement notification of discharge form. Smoothseas refused on the ground that Midstyle still owed Smoothseas money that was secured by the charge.

The caveat

By September 2009 the Land had been subdivided. On 25 September 2009 Smoothseas lodged a caveat over a number of the subdivided lots. By its caveat Smoothseas claimed an interest by virtue of the charge.
On 9 October 2009 Midstyle commenced these proceedings by originating process in which Midstyle claims:
1.A declaration that the liability of [Midstyle] to [Smoothseas] the subject of [the Charge] has been discharged in whole.
2.A declaration that [Smoothseas] has no legal or equitable interest in the properties [on which Smoothseas had lodged caveats].
3.An order under section 138(2) of the Transfer of Land Act1893 that [Smoothseas] do withdraw any caveat registered by it against any of the properties …
4.An order pursuant to section 1324(2) of the Corporations Act2001 requiring [Smoothseas] to immediately provide [Midstyle] with a written memorandum in accordance with section 269(1) of the Corporations Act2001 in the prescribed form acknowledging that [Midstyle's] liability to [Smoothseas] the subject of the Charge has been discharged in whole.
On 15 October 2009 by consent, the court ordered that Midstyle pay $800,000 into trust as a condition of removal of the caveats lodged by Smoothseas. Midstyle now seeks the relief claimed in its originating process except for the relief sought in [3] of its claim set out above.

The issues

At the commencement of the second day of the trial counsel for both parties agreed that the only issue remaining to be resolved is whether an agreement between Midstyle and Smoothseas was reached on 17 November 2006, and if so what the terms and effect of that agreement were. It emerged from counsels' closing submissions that there remains a second issue. Midstyle submits that Smoothseas should in any event be estopped from denying that Midstyle has discharged wholly its liability to Smoothseas in respect of the Side Agreement and the charge.

The witnesses

Evidence was adduced by affidavit and the deponents were cross‑examined. The principal witness for Midstyle was Russell Black, a director of the company. Mr Black swore four affidavits, on 9 October, 15 October, 6 November and 12 November 2009.
In his affidavit of 9 October 2009 Mr Black referred to a telephone conversation with Mr Stathopoulos prior to the execution of the Deed but did not refer to the Deed because he did not then remember that the parties had executed the Deed. Mr Black referred to further negotiations in October and November 2006 but did not refer to any particular telephone conversations or other communications with Mr Stathopoulos or Mr McDonald. In his affidavit of 15 October 2009 Mr Black provided more detail of his negotiations in October and November 2006 with Mr Stathopoulos. Mr Black referred to emails from Mr McDonald and two drafts of the Deed. Mr Black still did not refer to the executed Deed because he still did not remember that it had been executed. Mr Black referred to a telephone conversation with Mr Stathopoulos around mid‑November 2006 in which he says he and Mr Stathopoulos agreed that the total amount to be repaid by Midstyle would be decreased from the amount of $2.6M in the draft deed with the December 2006 instalment being increased from $900,000 plus GST to $1.1M plus GST and the 31 January 2007 instalment being decreased from $1.6M plus GST to $1.3M plus GST. Mr Black did not then remember that under the executed Deed the final payment on 31 January 2007 was to be $1.564M. Mr Black referred to the email he received from Mr McDonald at 11.11 am on 17 November 2006. Mr Black did not recall whether there were any revisions to the draft Deed after that email.
In his affidavit of 6 November 2009 Mr Black produced a copy of the executed Deed, which had been discovered by Smoothseas. Mr Black said that he did not have a separate copy of the signed deed, did not recall signing it prior to sighting it but accepted that it was his signature on the Deed.
Mr Black swore his affidavit of 12 November 2009 after he had read the contents of Mr Stathopoulos' affidavit. Mr Black swore:
10.1to the best of my recollection Mr Stathopoulos and I had a conversation on 16 November 2006 during which I said words to the effect: 'George, we can stretch to raise the extra $200,000.00 in December but only if the total is down to $2,500,000.00. So let's round it off at 2.5, and you can either have that deal or the original deal.' Mr Stathopoulos said words to the effect: 'I'll have to think about that. You've already had substantial discounts.'
10.2On 17 November 2006, prior to Mr McDonald's e‑mail to me at 11.11 am, Mr Stathopoulos said to me (I do not recall who called who) words to the effect: 'I'll have to accept the new deal. I need the $200,000.00.' I said words to the effect: 'Ok'.
Senior counsel for the defendant did not attack Mr Black's credibility. Senior counsel submitted that Mr Black's evidence was unreliable because he had endeavoured to reconstruct what had happened rather than to state his recollection and so his evidence is of no assistance.
Mr Black's account of his telephone conversations with Mr Stathopoulos on 16 and 17 November 2006 is a memory based upon documents he has recently read as well as memories pulled from his long term memory. His account of the conversations and communications he had with Mr Stathopoulos and Mr McDonald is a memory that has in part been revived by reading the Deed, emails and Mr Stathopolous' affidavit. Mr Black's account of those conversations and communications consists in part of assumptions and inferences he has drawn from the documents and chain of events. It is not right to disregard such evidence on the ground that it is reconstruction rather than memory uninfluenced by any other material. A person may have a clear understanding of what was agreed without necessarily being able to remember the precise conversation or the date it occurred. Of course, the court may reject such evidence and conclude that the person misunderstood the effect of what was said. Mr Black's evidence of his conversation with Mr Stathopoulos must be approached with caution and examined in the context of contemporaneous records but I do not disregard it on the ground that it is based in part upon the consideration of contemporaneous documents and is a memory that has in part been revived by reference to other materials.
The only witness for Smoothseas was George Stathopoulos. In 2006 the sole director and shareholder of Smoothseas was Mandy Mastrapas, Mr Stathopoulos' sister. Mr Stathopoulos was ineligible to be a director of Smoothseas because he had entered into a deed of arrangement or agreement under pt X of the Bankruptcy Act 1966 (Cth) and the agreement had not been completed. Mr Stathopoulos was a manager consultant employed by Smoothseas. He attended to the day‑to‑day affairs of the company and discussed most aspects of the company's business with his sister. Mr Stathopoulos had full and complete authority to act on behalf of Smoothseas. Mr Stathopoulos conducted all of the negotiations with Midstyle on behalf of Smoothseas. In his own words Mr Stathopoulos had control of these matters 'to the dollar'. Mr Stathopoulos became the sole shareholder and director of the company in about August 2009.
Senior counsel for Midstyle submitted that Mr Stathopoulos was a liar and a fraud. Senior counsel mounted the attack upon Mr Stathopoulos on a number of bases. Senior counsel for Midstyle submitted that Mr Stathopoulos' conduct in failing to tell his trustee of the fees he might earn from acting as manager consultant for Smoothseas and in borrowing money from Smoothseas to repay creditors was not the behaviour of an honest man. The evidence does not establish that Mr Stathopoulos breached any of his obligations or otherwise acted dishonestly in relation to his pt X arrangement.
Senior counsel for Midstyle put to Mr Stathopoulos that he had caused Smoothseas to claim it was owed money by Midstyle so as to enable it to put caveats over the subdivided lots for the purpose of assisting a business associate, Mr Durkin, who has entered into a contract to purchase one or more of the subdivided lots and does not wish to proceed with the purchase because the purchase price exceeds the current land valuation. Mr Stathopoulos denied that allegation. There is no evidence to establish the allegation.
In his evidence Mr Stathopoulos said that Midstyle currently owes Smoothseas $474,000 plus interest from 31 January 2007. That is because Midstyle failed to pay the amount due on 31 January 2007 under the Deed as varied by the agreement of 17 November 2006 and so Midstyle's obligation 'reverts back to the first deed', that is the Side Agreement, and the discounts for early repayment agreed under the Deed and the 17 November 2006 agreement no longer apply. Smoothseas has made no demand for payment of, and has taken no steps to recover, the amount it alleges it is owed by Midstyle. Mr Stathopoulos' explanation for that is that he has received legal advice that Smoothseas has seven years in which to pursue its claim. Smoothseas was deregistered by ASIC in 2008 for failing to pay ASIC fees. Mr Stathopoulos said that he was not a director at that time. However, Mr Stathopoulos conducted the day‑to‑day affairs of Smoothseas and it is surprising that he has not caused Smoothseas to take any steps to recover the amount he believes is owing to it by Midstyle, and allowed Smoothseas to be deregistered by ASIC in 2008. In re‑examination Mr Stathopoulos suggested another reason why Smoothseas has not taken action to recover what it says is owed to it by Midstyle. That is that the debt is incurring interest at 15% or 19% per annum. However, Mr Stathopoulos said that he sought the early repayment of the loan to Midstyle because he was concerned about Midstyle's financial position. There is no evidence that Midstyle's financial position became stronger after January 2007, or that Mr Stathopoulos believed that it did. In those circumstances Mr Stathopoulos' explanation for why he did not cause Smoothseas to take action to recover the amounts he says is owing to it by Midstyle is inadequate. That is another matter that causes me to approach Mr Stathopoulos' evidence with caution.
Senior counsel for Midstyle submitted that Mr Stathopoulos had deliberately failed to discover relevant documents because he knew that they would disclose that Mr Stathopoulos had instructed Mr McDonald to agree to accept a final repayment of $1.3M plus GST on 31 January 2007. Mr Stathopoulos swore an affidavit on 28 October 2009 verifying Smoothseas' discovery. Mr Stathopoulos swore a further affidavit on 13 November 2009 verifying a supplementary list of documents discovered by Smoothseas. The supplementary discovery was of documents from McDonald Pynt's file. In cross‑examination Mr Stathopoulos said that he had, together with his current Victorian solicitors, MGA Lawyers, examined the documents from the McDonald Pynt file two or three months ago. Many of the documents in the supplementary discovery are obviously discoverable. Mr Stathopoulos has given no satisfactory explanation why they were not discovered in the initial discovery.

Senior counsel for Smoothseas opened Smoothseas' case on the basis that under cl 3.3 of the Deed Smoothseas agreed to release Midstyle from all its obligations under the charge upon the receipt of $2.6M plus GST not the sum of $2.564M plus GST. Senior counsel submitted that the Deed should not be rectified by substituting $2.564M for $2.6M in cl 3.3 of the Deed because Midstyle had not established that the parties had agreed that Smoothseas would release Midstyle from all its obligations upon receipt of $2.564M plus GST and that it was a mistake that cl 3.3 stated the sum to be $2.6M plus GST. In cross‑examination Mr Stathopoulos agreed that the agreement was that Midstyle would be released from all its obligations to Smoothseas if it paid $2.564M and it was an oversight that the sum of $2.6M plus GST in cl 3.3 had not been changed to read $2.564M plus GST. Senior counsel for Midstyle submitted that Mr Stathopoulos' conduct in allowing senior counsel for Smoothseas to open the case the way he did was a matter going to his credit.
Mr Stathopoulos is the sole director and shareholder of Smoothseas. He is the only person giving instructions to Smoothseas' legal representatives. I do not think Mr Stathopoulos understood the construction argument that senior counsel for Smoothseas advanced in opening in relation to the effect of cl 3.3 of the Deed. Nevertheless, Mr Stathopoulos allowed senior counsel for Smoothseas to open Smoothseas' case on the basis that cl 3.3 of the Deed required $2.6M plus GST to be paid and that the Deed should not be rectified by substituting $2.564M for $2.6M in cl 3.3 of the Deed. Mr Stathopoulos' conduct in allowing those submissions to be made shows a catch‑as‑catch‑can attitude, that is, a willingness to take advantage of any opportunity to advance Smoothseas' claims, notwithstanding a lack of conviction that the point being pressed has merit.
Senior counsel for Midstyle submitted that a number of things said by Mr Stathopoulos in the course of his evidence were lies. I refer to one particular matter. In his affidavit of 9 November 2009 Mr Stathopoulos gave evidence of a telephone conversation with Mr Black. His evidence in his affidavit was:
18.1I said words to the effect that I was concerned with the plaintiff's financial position and wanted payment sooner, and so I was willing to give a small further discount of $40,000.00 plus GST if the 4 December 2006 payment was increased from $900,000.00 plus GST to $1.1M plus GST, and the first defendant would accept $1.324M plus GST by 31 January 2007 instead of $1.564M plus GST, being a discount of $40,000.00 plus GST.
In cross‑examination Mr Stathopoulos initially said that he had not said to Mr Black why he wanted payment sooner. When the statement in his affidavit was pointed out to him Mr Stathopoulos then changed his evidence. Mr Stathopoulos first said that the statement in his affidavit was correct. Then he said, in effect, that he was concerned with Midstyle's financial position and wanted payment sooner but did not say that to Mr Black. Finally, Mr Stathopoulos said that he may have said that to Mr Black but he was not sure. Mr Stathopoulos' evidence about what he said to Mr Black, at the least, casts doubt on the reliability of his memory of his conversations with Mr Black.
Senior counsel for Midstyle submitted that Mr Stathopoulos gave conflicting evidence about his attitude to Mr McDonald after he learned that Mr McDonald had accepted $1.3M plus GST at the settlement rather than $1.324M plus GST. Mr Stathopoulos initially said that when he learned that fact he was upset that Mr McDonald had handed over the documents and not done the calculations correctly. He agreed with senior counsel for Midstyle that after he learned what Mr McDonald had done he had nothing whatsoever else to do with McDonald Pynt. Senior counsel for Midstyle then demonstrated that Mr Stathopoulos had subsequently requested Mr McDonald to make a Landgate search of Midstyle's application to discharge the mortgage. Mr Stathopoulos qualified his evidence about his relationship with Mr McDonald after the evidence of the Landgate search had been brought to his attention. I find that Mr Stathopoulos was willing to state in evidence things that he thought would advance Smoothseas' case and then qualify that evidence when it was shown to be wrong.
On a number of occasions senior counsel for Midstyle put to Mr Stathopoulos that he was a liar or he had told lies. I do not make any finding that Mr Stathopoulos told lies. However, I have no confidence in the credibility or reliability of Mr Stathopoulos' evidence concerning his discussions with Mr Black and Mr McDonald. I do not accept Mr Stathopoulos' evidence about those communications unless it is corroborated by some independent evidence.
I find that neither Mr Black nor Mr Stathopolous has a reliable memory of the details, times or sequence of telephone conversations between them on 16 and 17 November 2006. Mr Black believes that he and Mr Stathopoulos agreed that Midstyle would make a final payment of $1.3M (plus GST) on 31 January 2007. However, Mr Black's memory is strongly influenced by emails, other documents and the chain of events which occurred from mid‑November 2006 to 31 January 2007. I would not accept Mr Black's evidence if it was contradicted by other reliable evidence. However, Mr Black's evidence is supported by other evidence to which I will refer. I find that Mr Black has a memory of what was finally agreed, although his recollections of the details, times and sequence of the discussions by which the agreement was reached are unreliable. Mr Black's evidence is some evidence tending to show what was agreed: see County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 (Spigelman CJ) [7] - [8].

The events of November 2006

Mr Stathopoulos telephoned Mr Black on, or shortly before, 13 November 2006. Mr Stathopoulos said, in effect, that Smoothseas was willing to give a discount on the total amount to be repaid if Midstyle increased the payment due on 4 December 2006 from $900,000 plus GST to $1.1M plus GST. Mr Stathopoulos says that he said that Smoothseas would reduce the amount due on 31 January 2007 from $1.564M plus GST to $1.324M plus GST. Mr Stathopoulos then gave instructions to Mr McDonald to confirm his offer by email to Mr Black. Mr Stathopoulos says he told Mr McDonald words to the effect that no further discounts would be offered or accepted.
On 13 November 2006 Mr McDonald sent an email to Mr Black in which he said:
On behalf of our client we make the following offer
If Midstyle Nominees agrees to pay $1,100,000 plus GST on or before 4 December 2006 Smoothseas will accept a final payment of $1,324,000 instead of the current payment of $1,564,000.
Please advise this is acceptable.
The email says nothing to the effect that no further discounts would be offered or accepted. There is no contemporaneous record of Mr Stathopoulos having made any such statement to Mr McDonald. I am not persuaded that Mr Stathopoulos made such a statement.
On 16 November 2006 at 5.31 pm Mr Black sent an email to Mr McDonald stating:
David,
Sorry, can't meet the revised timeframe.
At 11.11 am on 17 November 2006 Mr McDonald sent an email to Mr Black stating:
$1,100,000 plus GST on 4 December 2006 and $1,300,000 plus GST on 31 January 2007.
Do you want the documentation modified?
I will provide the tax invoice and on the 4th of December in exchange for the Bank Cheque give a partial discharge for $1,200,000 of the mortgage.
Do you require anything else?
Mr Black says that the conversations set out in [20] above occurred after his email of 5.31 pm on 16 November 2006 and before Mr McDonald's email of 11.11 am on 17 November 2006. Mr Stathopoulos denies that the conversation was in those terms. Mr Stathopoulos said that on 17 November 2006 he had a conversation with Mr Black to the following effect:
21.1Mr Black said words to the effect that the Plaintiff could arrange the $1.1M plus GST payment for 4 December 2006 and that he would 'take up my offer', thanked me for being 'fair' with my approach to this matter, and asked me to arrange an appropriate tax invoice.
21.2I said words to the effect that the final payment due on 31 January 2007 of $1,324,000.00 plus GST would definitely not be discounted any further and no more extensions would be given.
21.3Mr Black said 'don't worry about whether I can make the final payment until after the $1.1M payment is made', or words to that effect.
21.4I said words to the effect that the First Defendant's solicitors, David McDonald of McDonald Pynt, had been instructed that the First Defendant would not entertain any further discounts.
The ordinary and natural meaning of McDonald's email of 11.11 am on 17 November 2006, in the context of the earlier communications between Mr McDonald and Mr Black, is that Mr McDonald was confirming an agreement that had been made not putting forward a proposal or offer. The inference is open from the email that Mr Stathopoulos had instructed Mr McDonald that he had agreed with Mr Black that Midstyle would pay $1.1M plus GST on 4 December 2006 and $1.3M plus GST on 31 January 2007 in full satisfaction of all amounts owing to Smoothseas.
On 31 January 2007 Mr McDonald sent an email to Mr Black in which he confirmed that the cheques required for settlement that day were in the amounts and in favour of the payees stated. The payments, together with an amount of $800,000 which had been paid on 30 January 2007, totalled $1.43M, that is $1.3M plus GST. The inference is open that Mr McDonald had been instructed by Mr Stathopoulos that the amount to be paid by Midstyle at the settlement on 31 January 2007 was $1.3M plus GST.
At the settlement on 31 January 2007 Mr McDonald delivered to Mr Black a discharge of mortgage, a notification of discharge of property from charge, a letter confirming that Smoothseas had received all monies from Midstyle payable under the Side Agreement and a letter confirming that Smoothseas had received all monies payable under the mortgage in exchange for cheques, which together with the $800,000 paid on 30 January 2007, totalled $1.43M. The inference is open that Mr McDonald did that on the instructions of Mr Stathopoulos.
Senior counsel for Smoothseas, on behalf of Smoothseas, admitted that Mr McDonald had full and complete authority to act on behalf of Smoothseas. But, Mr Stathopoulos denies that he instructed Mr McDonald that he had agreed with Mr Black that Midstyle pay $1.1M plus GST on 4 December 2006 and $1.3M plus GST on 31 January 2007 in full satisfaction of all monies owing by Midstyle to Smoothseas and denies that he instructed Mr McDonald to deliver a discharge of mortgage, notification of discharge of property from charge and the letters of release in exchange for the payment of $1.3M plus GST on 31 January 2007.
Mr McDonald did not give evidence. It would be natural for Smoothseas to have called Mr McDonald. Mr McDonald could have given direct evidence of the instructions he was given by Mr Stathopoulos, why he stated in his email of 31 January 2007 that the cheques required for settlement were as set out in that email and why he accepted at settlement on 31 January 2007 cheques, which together with the amounts paid on 30 January 2007, totalled $1.43M in exchange for the discharges and letters of release he delivered to Mr Black. This is not a case where the evidence not given is privileged. Smoothseas waived privilege in relation to the relevant communications between Mr Stathopoulos and Mr McDonald. Smoothseas discovered, although belatedly, Mr McDonald's notes of communications with Mr Stathopoulos. Mr Stathopoulos gave evidence of his communications with Mr McDonald. Smoothseas failure to call Mr McDonald is unexplained. Senior counsel for Smoothseas did not attempt to explain the failure of Smoothseas to call Mr McDonald. Senior counsel accepted that if inferences adverse to Smoothseas were open then they might more readily be drawn because Smoothseas had failed to call Mr McDonald. Senior counsel submitted that the inferences to which I have referred were not open to be drawn.
I find that the inferences to which I have referred were open to be drawn and may more readily be drawn because Smoothseas did not call Mr McDonald to give evidence. I do draw those inferences. They are consistent with the evidence of Mr Black and are not contradicted by any document or any other evidence, except for the evidence of Mr Stathopoulos.
Senior counsel for Midstyle submitted that Midstyle's case is supported by, and Smoothseas case contradicted by, Mr McDonald's note of 16 November 2006 which reads:
Russell Black Smoothseas 1983/418
16/11
Prepared payout figure is 1.3 million ‑
8k grant of interest
George left message
George ‑ do the deal
→ Next Thursday ‑ $1,100,000
→ 23rd of November or 24th ‑
‑ if no ‑ ask GS
Russell
Senior counsel for Midstyle submits that the inference to be drawn from the note is that Mr Stathopoulos instructed Mr McDonald to 'do the deal', that is make an agreement with Mr Black and that the agreement was that which was confirmed by Mr McDonald's email at 11.11 am on 17 November 2006. I do not draw that inference. The evidence of each of Mr Black and Mr Stathopoulos is that an agreement was reached between them. Neither gave evidence that the agreement was made by Mr McDonald notifying Mr Black of acceptance of an offer by Midstyle. The notes 'do the deal' and 'if no ‑ ask GS' appear to be an instruction to put an offer and get further instructions from Mr Stathopoulos if it is not accepted. It might be that the reference to 'next Thursday ‑ $1,100,000 ‑ 23rd of November or 24th' is a reference to an offer which involved Midstyle paying $1.1M on 23 or 24 November 2006. It is possible that Mr Black's email to Mr McDonald at 5.31 pm on 16 November 2006 in which he said 'sorry, can't meet the revised timeframe' is a response to a proposal by Mr McDonald that $1.1M plus GST be paid on 23 or 24 November 2006. However, that is mere speculation because neither Mr Stathopoulos nor Mr Black gave evidence of any such proposal ever having been made. I am unable to draw any inference from Mr McDonald's note of 16 November 2006.
The only evidence that Mr Stathopoulos and Mr Black agreed that the final payment due on 31 January 2007 would be $1.324M plus GST is the evidence of Mr Stathopoulos. Mr Stathopoulos has inspected Mr McDonald's file. There is no document on Mr McDonald's file to support Mr Black and Mr Stathopoulos having agreed that the final payment due on 31 January 2007 be $1.324M plus GST. There is no document in evidence and no document referred to by any witness that supports Mr Stathopoulos' contention. I do not accept Mr Stathopoulos' evidence that on 17 November 2006 he and Mr Black agreed that the final payment due on 31 January 2007 would be $1.324M plus GST.
I find that on 17 November 2006 Mr Black agreed with Mr Stathopoulos that Midstyle would pay to Smoothseas $1.1M plus GST on 4 December 2006 and $1.3M plus GST on 31 January 2007 in full satisfaction of all monies owing by Midstyle to Smoothseas under the Side Agreement, the mortgage and the charge and that in consideration for those payments Smoothseas would release Midstyle from all further obligations.

Estoppel

It is strictly unnecessary to consider Midstyle's estoppel argument. However, in case the matter should go on appeal, I will briefly set out my findings on that issue.
There are three elements required to set up an estoppel:
1.the party claiming the estoppel must have adopted an assumption as the basis of an act or omission;
2.the claimant, upon the basis of the assumption, must have so acted or abstained from acting that a detriment will be suffered if the person against whom the estoppel is asserted is afterwards allowed to set up rights inconsistent with it; and
3.the party against whom the estoppel is alleged must have played such a part in the adoption of, or persistence in, the assumption that freedom to act otherwise than in a manner consistent with it would be unfair or unjust: The Laws of Australia [35.6.630].
I find that on and after 4 December 2006 Midstyle assumed that upon paying to Smoothseas $1.1M plus GST on 4 December 2006 and $1.3M plus GST on 31 January 2007 Smoothseas would discharge the mortgage, discharge the charge and release Midstyle from all obligations under the Side Agreement, the mortgage and the charge. Mr Black's evidence, which I accept, is that the payments made by him, on behalf of Midstyle, to Smoothseas in December 2006 and January 2007 were made pursuant to, and in reliance upon, his assumption that on payment of those amounts Midstyle would have discharged the whole of its liability to Smoothseas in respect of the Side Agreement and the charge and Smoothseas would give to Midstyle a discharge of mortgage, a notification of discharge of property from charge and the letters of release specified in the Deed.
Midstyle made the payments on 4 December 2006 and 31 January 2007, and abstained from making any further payment to Smoothseas, upon the basis of the assumption. Midstyle will suffer a detriment if Smoothseas is allowed to set up rights inconsistent with the assumption. Midstyle paid $1.1M plus GST on 4 December 2006 which is more than it was obliged to pay if the agreement it believes it made with Smoothseas on 17 November 2006 was not made or was not a legally binding agreement. Furthermore, by paying $1.3M plus GST and not a greater sum on 31 January 2007 Midstyle will have incurred liabilities it would not otherwise have incurred. The liabilities include the payment of interest at the rate of 15% per annum on the outstanding debt in accordance with the terms of the Side Agreement. Furthermore, Smoothseas asserts that by failing to pay the amount due on 31 January 2007 Midstyle became liable to pay the whole of the sum due under the Side Agreement and not the sum due under the Deed. That is a further detriment.
Smoothseas played such a part in the adoption of, or persistence in, the assumption by Midstyle that it would be unfair or unjust for Smoothseas to act inconsistently with the assumption. On 31 January 2007, before the settlement, Mr McDonald confirmed the amounts that were required for the 'settlement'. At the settlement Mr McDonald delivered to Mr Black, in exchange for payments which together with the $800,000 paid on 30 January 2007 totalled $1.43M, a discharge of mortgage, a notification of discharge of property from the charge and letters confirming that Smoothseas had received all monies from Midstyle payable under the Side Agreement and released Midstyle from all obligations under the Side Agreement and the mortgage.

Conclusion

I find that Midstyle and Smoothseas made an agreement on 17 November 2006. The terms of the agreement are that Midstyle would pay to Smoothseas $1.1M plus GST on 4 December 2006 and $1.3M plus GST on 31 January 2007 in full satisfaction of all monies owing by Midstyle to Smoothseas under the Side Agreement and the charge and Smoothseas would provide a discharge of the mortgage, a notification of discharge of property from the charge and release Midstyle from all obligations under the Side Agreement. Alternatively, Smoothseas is estopped from denying that agreement. It is common ground that Midstyle paid to, or at the direction of, Smoothseas those amounts on 4 December 2006 and 31 January 2007.
The parties agreed that upon those findings Midstyle is entitled to an order pursuant to s 1324(2) of the Corporations Act 2001 (WA) requiring Smoothseas to immediately provide Midstyle with a written memorandum in accordance with s 269(1) of the Corporations Act 2001 in the prescribed form acknowledging that Midstyle's liability to Smoothseas the subject of the charge has been discharged in whole.