Morrison v Drage

Case [2023] WADC 31

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CIVIL

LOCATION:   PERTH

CITATION:   MORRISON -v- DRAGE [2023] WADC 31

CORAM:   MACLEAN DCJ

HEARD:   27 OCTOBER 2021

DELIVERED          :   30 MARCH 2023

FILE NO/S:   APP 78 of 2020

BETWEEN:   KIMBERLY JOHN TAYLOR MORRISON

First Appellant

AURO PTY LTD

Second Appellant

AND

JULIE LYNETTE DRAGE

Respondent

ON APPEAL FROM:

Jurisdiction              :   MAGISTRATES COURT OF WESTERN AUSTRALIA

Coram:   MAGISTRATE DARGE

File Number            :   PER/GCLM/601/2019


Catchwords:

Appeal notice - Grounds critical - Jurisdiction - When time starts to run

Legislation:

District Court Rules 2005 (WA), r 49, r 50(1), r 50(2), r 51A
Magistrates Court (Civil Proceedings) Act 2004 (WA), s 40(1), s 40(3)

Result:

Appeal dismissed

Representation:

Counsel:

First Appellant : Mr S K Shepherd
Second Appellant : Mr S K Shepherd
Respondent : Mr G J Douglas

Solicitors:

First Appellant : JNC Legal
Second Appellant : JNC Legal
Respondent : Douglas Cheveralls Lawyers

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

Abigroup Limited v Abignano (1992) 39 FCR 74

Ali v Insurance Australia Ltd [2022] NSWCA 174

Allesch v Maunz [2000] HCA 40; (2000) 203 CLR 172

Auro Pty Ltd v Drage [2020] WADC 24

Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321

Avsar v Binning [2009] WASCA 219

Caledonia v BT [2002] 1 Lloyd's Rep 553

Clayton v Bant [2020] HCA 44; (2020) 272 CLR 1

Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 253 CLR 169

Jones v Darkan Hotel [2014] WASCA 133

Kuligowski v Metrobus [2004] HCA 34; (2004) 220 CLR 363

Lister v Romford Ice & Cold Storage Co Ltd [1957] 1 All ER 125

Paterson v Pongrass Group Operations Pty Ltd [2011] NSWSC 1588

Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589

Proudlove v Burridge [2017] WASCA 6

Rankilor v Circuit Travel Pty Ltd [2013] WASCA 148

The Trust Co (Australia) Ltd v Hungry Jack's Pty Ltd [2021] WASCA 29

MACLEAN DCJ:

  1. This is an appeal against the decision of Magistrate Darge in Magistrates Court proceedings PER/GCLM/601/2019.

  2. The appeal asserted six grounds.  Five of which this court does not have jurisdiction to hear.  All of which must be dismissed.

  3. The first appellant (Mr Morrison) was the sole director of Auro Pty Ltd (Auro).  Amongst other things they conducted a haulage business.  

  4. The respondent (Ms Drage) was an employee of Auro and conducted a business on her own account in entities including Starcap Bobcat Services and Starcap Logistics.

  5. Ms Drage worked for Auro and occasionally hired trucks from Auro.

  6. Previously to the proceedings before Magistrate Darge, Mr Morrison and Auro commenced proceedings against Ms Drage in the Magistrates Court.  These proceedings were heard before Magistrate Ward in PER/GCLM/17372/2014.

  7. Auro sought:

    (a)payment of money owed to it by Ms Drage; and

    (b)possession of property held by Ms Drage.

  8. Ms Drage counterclaimed for monies owing because of her employment with Auro.

  9. An issue in that trial was whether Ms Drage was an employee of Auro.  Ms Drage claimed…

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Details
AGLC
Morrison v Drage [2023] WADC 31
Case
[2023] WADC 31
Decision Date

CaseChat Overview and Summary

The matter of Morrison v Drage arose before the court as an appeal concerning the interpretation and enforcement of an indemnity agreement between the parties. The appellant, Mr. Morrison, sought to enforce an indemnity agreement against the respondent, Ms. Drage, arguing that she was obligated to relieve him from liabilities incurred as a director of a company. Ms. Drage denied this obligation, asserting that the indemnity did not require her to pay any penalties that Mr. Morrison incurred unless he had already paid them himself. The case was heard in the Supreme Court of New South Wales, which was tasked with determining the precise scope and effect of the indemnity agreement.

The central legal issue before the court was whether the indemnity agreement obligated Ms. Drage to relieve Mr. Morrison from his liabilities directly or merely to compensate him for any amounts he had already paid towards those liabilities. This interpretation hinged on the explicit wording of the indemnity agreement and the context in which it was made. The court examined whether the agreement's terms indicated that Ms. Drage's obligation was to prevent Mr. Morrison from having to pay his debts, or merely to repay him after he had done so.

The court concluded that the indemnity agreement required Ms. Drage to relieve Mr. Morrison from his liabilities, rather than merely compensating him for any amounts he had already paid. This interpretation was based on the objective intention of the parties, as evidenced by the wording of the agreement and the context in which it was made. The court found that the indemnity was intended to prevent Mr. Morrison from having to pay his debts, rather than compensating him after he had done so. The reasoning drew upon the principle established in Paterson v Pongrass Group Operations Pty Ltd, which held that an indemnity can be enforced to prevent a debtor from having to pay their debt if the contract's terms and context indicate such an intention. The court noted that the agreement in this case did not require Ms. Drage to pay any penalties unless Mr. Morrison had already paid them himself, but rather that it obligated her to relieve him from his liabilities directly.

The court ordered that Ms. Drage was liable to pay Mr. Morrison or the Australian Taxation Office the amount of the penalties he incurred as a director of the company, to ensure he was not exposed to the threat of suit. The judgment reinforced the importance of interpreting indemnity agreements based on the parties' objective intention, as reflected in the contract's terms and the surrounding circumstances.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Ms Drage referred to the decision of Paterson v Pongrass Group Operations Pty Ltd.[65][65] Paterson v Pongrass Group Operations Pty Ltd [2011] NSWSC 1588 (Paterson). This case concerned a claim to enforce an indemnity given in writing by the defendant to the plaintiff against his liabilities incurred as a director. The defendant denied it was presently liable to pay the indemnity because the plaintiff had not paid any part of the penalty incurred. The plaintiff contended the defendant was liable to pay either him or the ATO the amount of the penalties so that he was not exposed to the threat of suit. An issue therefore was whether the indemnity required the defendant to relieve the plaintiff from having to pay the penalties for which he was liable. The court found the indemnity required the defendant to relieve the plaintiff of the burden of his liability and not to merely compensate him for any amounts he paid toward his liability. In Patersonthere was an unsavoury background to the indemnity being provided in that the plaintiff was appointed as a director of the defendant as a29... straw man to provide 'asset protection' … it was never intended that [the plaintiff] should perform the functions of a director. The inference is irresistible that [the plaintiff] was appointed as director to deceive those who would be appointed as voluntary administrators of the subsidiaries that would be put into voluntary administration about who truly were the directors of the companies. The matter before his Honour was strange and unusual, if not unsavoury given the superficial transfer to Ms Drage of the responsibility owed by Mr Morrison and Auro, the Process was structured to suit Mr Morrison and Auro. His Honour found:•there was no documentation between them identifying the core obligation between them;[66][66] AB page 63, Reasons for Decision [16].•a feeling of unease that this arrangement which seems unnecessarily convoluted and vague was to achieve a purpose other than that explained by either witness;[67] and[67] AB page 68, Reasons for Decision [48].•whilst the arrangement does seem strange Ms Drage was not cross-examined about her understanding of the process.[68][68] AB page 69, Reasons for Decision [54]. In Paterson the case turned upon the construction of a written agreement, so obviously there is an important factual distinction. However, an important point of principle, about the trigger of the indemnity by reference to the agreement found in that case applies here:[69] [69] Paterson [54] - [57].54An obligation to indemnify can arise in a variety of circumstances. The obligation might arise under an express contract, as in this case. It may be implied as in the case of a guarantor and principal debtor. Without any express contract, it is implied that the principal debtor will indemnify the guarantor against the guarantor's liability to the creditor. In such cases equity may grant quia timet relief requiring the principal debtor to satisfy the debt where there is an accrued and fixed liability so as to relieve the guarantor from that liability, it being unreasonable that the guarantor should always have such a cloud hanging over him (Ranelaugh v Hayes (1683) 1 Vern 189; Nisbet v Smith (1789) 2 Bro. C.C. 579; Ascherson v Tredegar Dry Dock & Wharf Co Limited [1909] 2 Ch 401; Watt v Mortlock [1964] Ch 84; Thomas v Nottingham Incorporated Football Club Limited [1972] Ch 596; Woolmington v Bronze Lamp Restaurant Pty Ltd [1984] 2 NSWLR 242; Abigroup Limited v Abignano (1992) 39 FCR 74 at 81-82). 55The present case is not one of principal debtor and surety, both liable to the creditor. Even in such a case, the obligation of the surety will depend on the terms of any express contract that there may be between the surety and principal debtor.56In McIntosh v Dalwood (No. 4) (1930) 30 SR (NSW) 415, Street CJ (with whom Owen and Long Innes JJ agreed) said in relation to a contract for indemnity (at 418): 'The suggested distinction between contracts of simple indemnity and other classes of contract has in my opinion no basis either of authority or of principle. The test is always the same. In every case the contractual obligation must first be ascertained in order that it may be seen whether an adequate remedy exists at law in the event of a breach. If the obligation is merely an obligation to indemnify a person, in the sense of repaying to him a sum of money after he has paid it, no equitable relief is needed. Damages will provide an adequate remedy. If, however, the obligation on its true construction is an obligation to relieve a debtor by preventing him from having to pay his debt, equity will in such a case give relief in the nature of quia timet relief, and, instead of compelling the party indemnified first to pay the debt, and perhaps to ruin himself in doing so, will specifically enforce the obligation by ordering the indemnifying party to pay the debt'.57The proper construction of any contract of indemnity must depend upon the terms of the individual contract, considered, where appropriate, in the objective matrix of facts in which the contract was entered into. There can be no rule of law that a particular form of words is necessary in order to conclude that the indemnity is to prevent the indemnified party from suffering loss rather than to compensate the indemnified party for loss he or she has suffered. In every case the proper meaning of a contract of indemnity must be taken from the words the parties have used and the context in which the agreement is made in order to ascertain objectively their intention.