Opteon Property (Western Australia) Pty Ltd v Orchard Holdings Pty Ltd
[2013] WADC 54
•22 APRIL 2013
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: OPTEON PROPERTY (WESTERN AUSTRALIA) PTY LTD -v- ORCHARD HOLDINGS PTY LTD [2013] WADC 54
CORAM: PRINCIPAL REGISTRAR GETHING
HEARD: 27 MARCH 2013
DELIVERED : 22 APRIL 2013
FILE NO/S: CIV 3383 of 2012
BETWEEN: OPTEON PROPERTY (WESTERN AUSTRALIA) PTY LTD (ACN 132 551 378)
Plaintiff
AND
ORCHARD HOLDINGS PTY LTD (ACN 009 472 780)
First DefendantKEITH ROBERT ANDERSON
Second Defendant
Catchwords:
Summary judgment - Parties to a contract - Estoppel
Legislation:
Rules of the Supreme Court 1971 (WA) O 14
Result:
Leave to defend granted on conditions
Representation:
Counsel:
Plaintiff: Mr A Metaxas
First Defendant : Mr S England
Second Defendant : Mr S England
Solicitors:
Plaintiff: Metaxas & Hager
First Defendant : Lawton Gillon
Second Defendant : Lawton Gillon
Case(s) referred to in judgment(s):
Air Tahiti Nui Pty Ltd v McKenzie [2009] NSWCA 429; (2009) 77 NSWLR 299
Alonso v SRS Investments (WA) Pty Ltd [2012] WASC 168
Ansearch Ltd v Wavtech Pty Ltd [2006] WASC 184
Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332
Australian Crime Commission v Gray [2003] NSWCA 318
Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98; (2009) 40 WAR 191
Bank of Western Australia v Stein [2005] WASC 43
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153
Branir Pty Ltd v Owston Nominees (No 2) [2001] FCA 1833; (2001) 117 FCR 424
City and Suburban Group Pty Ltd v Gambetta Holdings Pty Ltd [2011] WASCA 233
Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160
Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337
Commonwealth Bank of Australia v Hanley [1998] NSWSC 1032
Di Giovanni v Dark Horse Development Pty Ltd [No 2] [2013] WADC 23
DMS Shipping & Trading Co Ltd v Lionheart Asia Ltd [1996] 2 Qd R 20
Ermogenous v Greek Orthodox Community of SA Inc - [2002] HCA 8; (2002) 209 CLR 95
Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87
Fazio v Fazio [2012] WASCA 72
Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2] [2012] WASCA 27
Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458
Gelling v Crespin [1917] HCA 44; (1917) 23 CLR 443
General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125
Goss v Lord Nugent (1833) 5 B & Ad 58; (1833) 110 ER 713
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406
Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23; (2008) 35 WAR 520
Morgan v Pallister [2004] WASC 188
Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109
MV Yorke Motors (a firm) v Edwards [1982] 1 All ER 1024
Padstow Corporation Pty Ltd v Fleming (No 2) [2011] NSWSC 1572
Posgold (Big Bell) Pty Ltd v Placer (Western Australia) Pty Ltd [1999] WASCA 217; (1999) 21 WAR 350
QBE Insurance (Australia) Ltd v Taylor [2011] WADC 197
Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909
Shurmur v Young (1888) 5 TLR 155
Smith v Hughes (1871) LR 6 QB 597
State Bank of Victoria [1989] WAR 240
The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) and (No 10) [2008] WASC 239; [2009] WASC 107; (2008) 39 WAR 1 [3539]
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Wachmer v Jaksic [2007] WASC 313
Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387
Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598
Westwind Air Charter Pty Ltd v Hawker de Havilland Ltd (1990) 3 WAR 71
Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1971] 2 QB 23
PRINCIPAL REGISTRAR GETHING: Between February 2011 and September 2012 Opteon Property (Western Australia) Pty Ltd, the plaintiff, performed valuation services for Orchard Holdings Pty Ltd, the first defendant. The valuation services were provided in connection with an action in the Supreme Court, CIV 1762 of 2010. Opteon asserts that it has not been paid for these services and has commenced the present action in which it claims $77,201.90 together with interest and costs. Opteon also asserts that in September 2011 a separate agreement (September Agreement) was entered into between it and a director of Orchard, the second defendant Keith Anderson, pursuant to which Mr Anderson agreed to become personally responsible for the amounts due from Orchard.
Orchard asserts that pursuant to the September Agreement, Opteon agreed that Orchard could defer payment of the amounts owed until as soon as 'possible' after 'settlement' of the Supreme Court action in return for which it would pay interest. It asserts that there has not been a 'settlement' of the Supreme Court action as contemplated by the September Agreement and, consequently, its liability to pay has not been activated.
Mr Anderson disputes the existence of any agreement between him personally and Opteon. He says that he signed the September Agreement in, and only in, his capacity as director of Orchard.
By application filed 30 January 2012 Opteon sought summary judgment against both Orchard and Mr Anderson.
Opteon relied on an affidavit of Jeremy McGrade, one of its directors, sworn 4 January 2013, and an affidavit of Gregory Metaxas, an employee of its solicitors, sworn 30 January 2013.
Mr Anderson and Orchard relied on an affidavit of the former sworn 13 March 2013. Opteon objected to certain paragraphs of this affidavit. After hearing argument at the commencement of the hearing on 27 March 2013, I declined to strike out pars 8, 9 and 10 of Mr Anderson's affidavit. I was not persuaded that the facts in these paragraphs were irrelevant or otherwise inadmissible, in particular given the defence of estoppel foreshadowed by Mr Anderson and Orchard. I struck out pars 15 and 16 of the affidavit on the basis of relevance. Mr Anderson filed a second affidavit, sworn 9 April 2013, in which he provides information as to his financial position and that of Orchard.
What is not in dispute?
The general history of the interaction between Opteon and Orchard and Mr Anderson is not in dispute. On 11 February 2011, Lawton Gillon, as solicitors and agents for Orchard, sent a letter to Opteon in relation to the Supreme Court action, requesting Opteon to provide expert valuation evidence. Opteon was then known as Quantia Pty Ltd, changing its name on 24 June 2011.
On 16 February 2011, Duncan Cameron, a director of Opteon, as its agent, sent an email to Lawton Gillon providing an estimate of Opteon's fees to perform the valuation work requested. On or about 16 February 2011, unnamed agents of Opteon and Orchard verbally agreed that Opteon would perform the valuation work requested (February Agreement).
Between February and August 2011 Opteon performed certain valuation work for Orchard. It rendered three invoices, as follows:
Date
Invoice number
Amount
31/03/11
113442
$3,300
20/4/11
114104
$14,150
4/8/11
120572
$13,190
Total
$30,640
There is no dispute that Opteon performed the work the subject of these invoices and was entitled to charge Orchard on the basis set out in the invoices. Neither is there a dispute as to the quality of the work performed.
In his affidavit, Mr Anderson states:
(a)in early September 2011 he received a telephone call from a director of Opteon, Christopher Murphy;
(b)at that time the Supreme Court action had been listed for a nine day hearing commencing 17 October 2011;
(c)Mr Murphy told him that Opteon needed Orchard to sign a letter acknowledging Opteon's outstanding invoices and payment terms;
(d)he told Mr Murphy that Orchard's ability to pay Opteon for its valuation services 'depended upon the successful outcome of the Litigation Matter, which Mr Murphy acknowledged';
(e)shortly after the telephone conversation, he received a letter from Mr Murphy; and
(f)he signed the letter.
Mr McGrade's affidavit does not contradict this version of events.
The 9 September 2011 letter is significant to the determination of the present application, so it is instructive to quote it in full:
9 September 2011
Chris Murphy
Opteon (Western Australia) Pty Ltd
Level 1, 130 Hay Street,
SUBIACO WA 6008
Dear Chris,
Re:Outstanding Invoices for Valuation Consultancy Work
Supreme Court Action CIV 1762 of 2010
Parties: Orchard Holdings Pty Ltd & Ors v Paxhill Pty Ltd & Ors
Further to the letter of instruction issued by Lawton Gillon Lawyers dated 11 February 2011 and our recent telephone conversations, I acknowledge and confirm my personally liability for the outstanding invoices relating to your Company's valuation services prepared to date, in addition to the liability attached to Orchard Holdings Pty Ltd as detailed below:
Your Reference
Invoice No
Outstanding Invoice Amount
Q84907
114104
$14,150
Q84964
113442
$3,300
Q98047
120572
$13,190
Total
$30,640
In addition I personally acknowledge:
• Your quotation relating to the letter of instruction issued by Simon England from Lawton Gillon dated 9 September 2011 at $5,500 inclusive of GST plus searching costs (ie Certificates of Title, Strata Plans and Sale Transfer documents).
• The ongoing fees associated with the critique of another valuer's report, preparation and attendance for conferral meetings with other experts, barristers and solicitors and preparation and attendance at the Supreme Court (if required) will be charged at an hourly rate in addition to the above fees of $340 per hour inclusive of GST.
• Your company's standing terms of engagement as detailed within the invoices summarised above, requiring payment in full within a 14 days of issuance of the invoice.
• Liability in settling all outstanding fees upon settlement of the litigation matter as soon as possible.
• In the event the total accounts are unpaid by 31 December 2011, Opteon (Western Australia) Pty Ltd reserve the right to charge interest on any outstanding monies until the accounts are fully settled. Interest will be charged at the rate fixed by the ANZ Bank on overdrafts (interest rate applicable to the value commensurable with the outstanding balance in these invoices) plus 2% per annum, plus any costs incurred in recovering the debt.
Yours faithfully
Keith Anderson (signed)
Keith Anderson
Orchard Holdings Pty Ltd
72 Johnston Street
Mosman Park
It is not in dispute that the 9 September 2011 letter at least constitutes an agreement between Opteon and Orchard according to its terms, being what I have referred to as the September Agreement.
Between September 2011 and September 2012 Opteon performed certain further work for Orchard and rendered the following invoices:
Date
Invoice number
Amount
15/9/11
121263
$7,540
23/9/11
121425
$6,200
30/9/11
121536
$8,500
3/10/11
121562
$2,460
26/10/11
121933
$11,363,02
30/9/12
131845
$1,103.44
Total
$37,166.46
There is no dispute that Opteon performed the work the subject of these invoices and was entitled to charge Orchard on the basis set out in the invoices. Neither is there a dispute as to the quality of the work performed.
What issues need to be determined?
An applicant for summary judgment who complies with the requirements of Rules of the Supreme Court 1971 (WA) O 14 (RSC), establishes a prima facie right to summary judgment: Westwind Air Charter Pty Ltd v Hawker de Havilland Ltd (1990) 3 WAR 71, 74. Where a plaintiff has satisfied all the requirements of RSC O 14 so as to give it prima facie the right to an order in the terms asked, the burden shifts to the defendant to satisfy the court why judgment should not be given against it: Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109, 110; Westwind74. The defendant must satisfy the court 'with respect to the claim … that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim': RSC O 14 r 3(1). A defendant does not have to show a defence on the balance of probabilities, but must at least show cause why there is an arguable defence: Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2] [2012] WASCA 27 [4]. This is an evidentiary burden, the overall legal burden of persuasion remaining on the plaintiff as applicant: Morgan v Pallister [2004] WASC 188 [4].
In relation to Orchard, the issues to be determined are that:
(a)Is there a triable issue that the amounts owed by Orchard to Opteon are not yet due and payable due to the September Agreement?
(b)Is there a triable issue that Opteon is estopped from asserting that the amounts owed to it by Orchard are currently due and payable?
(c)Is Opteon entitled to charge compound interest to Orchard?
(d)Is Opteon entitled to summary judgment against Orchard?
In relation to Mr Anderson, the central issue to be determined is whether there is a triable issue that Mr Anderson was a not party to the September Agreement. If there is no triable issue, and it is clear that Mr Anderson was a party to the September Agreement, then three further issues follow:
(a)Is there a triable issue that the amounts owed by Mr Anderson to Opteon are not yet due and payable due to the February agreement?
(b)Is there a triable issue that Opteon is estopped from stating that the amounts owed to it by Mr Anderson are currently due and payable?
(c)Is Opteon entitled to summary judgment against Mr Anderson?
Having looked at the issues from the perspective of each defendant, I then consider what final orders are appropriate.
There is a preliminary issue to be determined which is whether Opteon should be granted leave to make its application out of time.
Should Opteon be granted leave to make its application out of time?
Opteon filed its summary judgment application on 30 January 2013, more than 21 days after Orchard and Mr Anderson filed their respective appearances (23 November 2012). Accordingly, pursuant to RSC O 14 r 1(1), Opteon is required to seek, and has sought, leave to bring the application.
Mr Metaxas, in his affidavit, explains that the reason for the delay in bringing the application was a delay in Mr McGrade being able to swear his affidavit, and a delay in the parties being able to confer, both seemingly due to the Christmas break. Counsel for Orchard and Mr Anderson was not able to identify any specific prejudice which they would suffer if leave were granted.
This is not an action in which the parties undertook a significant amount of work between when the summary judgment application ought to have been made and when it was actually made, work which would be thrown away if the application were successful. As will be apparent, the merits of the application support the grant of leave to bring the application. A grant of leave to bring the application in the present case is consistent with the principles laid down in authorities like Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458, 459 and Bank of Western Australia v Stein [2005] WASC 43 [53] ‑ [57].
I am prepared to grant Opteon leave to bring the application.
Is there a triable issue that the amounts owed by Orchard to Opteon are not yet due and payable due to the September Agreement?
The current status of the Supreme Court action is that:
(a)judgment was delivered on 27 July 2012;
(b)damages were assessed and awarded to Orchard in the amount of $225,000 against two separate defendants, totalling $450,000;
(c)Orchard was awarded its costs on 14 September 2012;
(d)the defendants appealed the costs award;
(e)the costs appeal is scheduled for hearing in the Court of Appeal in approximately August 2013; and
(f)Orchard has not yet taxed its costs.
Mr Anderson then deposes:
12.The First Defendant received part payment of the judgment sum from the defendants in the Litigation Matter in approximately September 2012. The First Defendant was obliged to pay this amount to a secured creditor who had loaned the First Defendant money in order to continue with the Litigation Matter.
13.The defendants in the Litigation Matter have withheld payment of the balance of the judgment sum pending determination of the costs appeal. For this reason it is not currently possible for the First Defendant to pay the Plaintiff.
14.I am advised by my lawyers that there are good prospects that the costs appeal will be determined in favour of the First Defendant. Once that occurs I consider, in accordance with my discussion with Mr Murphy and agreement with the Plaintiff, that the Litigation Matter will have been settled so it will be possible for the First Defendant to pay the Plaintiff.
Counsel for Opteon submitted that whatever else the phrase 'upon settlement of the litigation matter as soon as possible' means, it includes judgment being handed down in the action, which occurred on 27 July 2012.
Counsel for Orchard submitted that the phrase 'upon settlement of the litigation matter as soon as possible' needs to be interpreted in the light of the conversation between Mr Anderson and Mr Murphy shortly prior to the letter being received. This includes the rider that the action be settled 'such that it was possible for [Orchard] to pay [Opteon]'.
At a general level of principle, the High Court has affirmed that the rights and liabilities of the parties to a contract are to be determined objectively. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, the majority described the principle as follows ([46]):
This Court, in Pacific Carriers Ltd v BNP Paribas [[2004] HCA 35; (2004) 218 CLR 451], has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction ...
Once a contract has been reduced to writing, its proper construction is also to be determined objectively. In Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98; (2009) 40 WAR 191 [145], Buss JA summarised the principle as follows:
The construction of a written contract is concerned with ascertaining what a reasonable person would have understood the parties to mean. Consideration should ordinarily be given not only to the language of the document, but also to the surrounding circumstances known to the parties, and the apparent purpose and object of the transaction.
The parole evidence rule, which applies once a contract has been reduced to writing, reinforces the principle that the proper construction of the contract is to be determined objectively. This rule provides that where a contract has been reduced to writing, 'verbal evidence is not allowed to be given of what passed between the parties, either before the written instrument was made, or during the time it was in a state of preparation, so as to add to or subtract from, or in any manner vary or qualify the written contract': Goss v Lord Nugent (1833) 5 B & Ad 58, 64 – 65; (1833) 110 ER 713, 716; Gelling v Crespin [1917] HCA 44; (1917) 23 CLR 443; Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337, 347; Posgold (Big Bell) Pty Ltd v Placer (Western Australia) Pty Ltd[1999] WASCA 217; (1999) 21 WAR 350 [49] - [50]. Evidence of the actual intentions and expectations of the parties prior to the contract is thus not admissible: Wachmer v Jaksic [2007] WASC 313 [175].
When construing a contract, it is permissible for the parties to lead evidence of the prior negotiations. However, this evidence only goes to establishing the objective surrounding circumstances, and not to reflect the actual intentions and expectations of the parties. This proposition is seen in the following passage from the judgment of Mason J in Codelfa (352):
The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parole evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.
Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.
(See also Wachmer [177].)
The objective circumstances surrounding the entry into of the September Agreement were that:
(a)the Supreme Court action was to proceed to trial shortly after the September Agreement was executed;
(b)the February Agreement provided for Opteon to do the initial valuation work, but did not expressly quote for work done at the trial;
(c)Orchard wanted Opteon to provide further work as set out in the second bullet point in the September Agreement – [13] above; and
(d)Orchard had not paid Opteon's accounts for the work done prior to the September Agreement.
In this context, the September Agreement provided, in effect, for Opteon to defer taking action to recover its unpaid fees and agree to undertake additional work in return for Orchard paying for the additional work and paying interest on all amounts outstanding.
It is in this context that the phrase – 'Liability in settling all outstanding fees upon settlement of the litigation matter as soon as possible' in bullet point 4 of the September Agreement - falls to be interpreted.
There is nothing in the objective circumstances (on the material before me) to support an interpretation of this phrase to the effect that in event of an unsuccessful outcome in the Supreme Court action, Opteon would waive its fees. Opteon is a professional services firm, and there is no material before me to the effect that it is engaged in the business of litigation funding or has a practice of providing services on a 'no win – no fee' basis.
In the context of the objective circumstances set out above, in my view a reasonable person would have understood the parties to have meant the phrase 'upon settlement of the litigation matter' to refer to either:
(a)the settlement of the Supreme Court action between the parties by agreement; or
(b)the determination of the matter by the Supreme Court expressed in a judgment.
Further, the language of the September Agreement in the context of the objective circumstances, does not support an interpretation that 'as soon as possible' means 'as soon as it is possible given the financial position of Orchard'. In my view, a reasonable person would have understood the phrase 'as soon as possible' to mean within as short a period of time as could practically be achieved after the settlement of the litigation.
In the present case, Orchard received judgment in its favour in the amount of $450,000 on 20 August 2012. In my view, in the context of the objective circumstances, a reasonable person would construe this to comprise 'settlement of the litigation matter' for the purposes of the September Agreement. A reasonable person would further construe the phrase 'as soon as possible' to mean that any outstanding fees were to be paid within a short period of time after this occurred. It is sufficient for me to determine that this period had expired by 6 November 2012, the date on which the writ was filed.
This conclusion can be tested by inquiring what the position would have been had Orchard settled the action, prior to trial, pursuant to which it received an amount of, say, $30,000. This would clearly comprise 'settlement of the litigation matter'. In my view, a reasonable person would understand the parties to have meant that any outstanding fees were to be paid within a short period of time after this occurred. A reasonable person would not understand the parties to have meant that Orchard's obligation to pay did not arise until it had the funds available to pay Opteon, thereby making it financially 'possible' for Orchard to pay; on the scenario outlined, this may never happen. Likewise, if the defendants in the Supreme Court action had gone into external administration without paying anything to Orchard, I do not consider that a reasonable person would have the construed the September Agreement to have absolved Orchard from paying any amount to Opteon, ever.
I accept that, in a case involving the construction of a contract, summary judgment ought not be granted where there is a fairly arguable question of construction: Shurmur v Young (1888) 5 TLR 155; Commonwealth Bank of Australia v Hanley [1998] NSWSC 1032; QBE Insurance (Australia) Ltd v Taylor [2011] WADC 197 [19]. However, in my view the construction of the phrase – 'Liability in settling all outstanding fees upon settlement of the litigation matter as soon as possible' – advanced by Orchard is not fairly arguable; the construction it asserts simply does not make any commercial sense in the context in which it appears in the September Agreement or in the objective circumstances surrounding it.
Orchard has not satisfied me that 'with respect to the claim … that there is an issue or question in dispute which ought to be tried' that Opteon's outstanding fees are not due and payable pursuant to the September Agreement (RSC O 14 r 3(1)).
Is there a triable issue that Opteon is estopped from asserting that the amounts owed to it by Orchard are currently due and payable?
Orchard asserts that Opteon is estopped 'from asserting that payment is due before it is possible for the First Defendant to pay the Plaintiff'. This allegation is not yet in Orchard's defence, and is taken from its submissions (par 39(b)). For the estoppel to operate as asserted by Orchard, the word 'possible' in this quote must be taken to mean 'financially possible' as asserted in the construction of the September Agreement advanced by Orchard discussed above.
Orchard refers to the following passages from Mr Anderson's affidavit which it says create the factual basis for the estoppel:
6.Shortly before I received the Letter I received a telephone call from Christopher Murphy of the Plaintiff. Mr Murphy said to me during our telephone conversation words to the effect that the Plaintiff needed the First Defendant to sign a letter acknowledging the Plaintiff's outstanding invoices and payment terms.
7.During that telephone conversation I said to Mr Murphy words to the effect that the First Defendant's ability to pay the Plaintiff for its valuation services was dependent upon the successful outcome of the Litigation Matter, which Mr Murphy acknowledged.
8.Shortly after my telephone conversation with Mr Murphy I received the Letter. At the time I signed the Letter I thought I was acknowledging the indebtedness of the First Defendant and signed the Letter as a director of the First Defendant. I did not sign the Letter in my own personal capacity.
9.Also at the time I signed the Letter I believed by reference to my telephone conversation with Mr Murphy on behalf of the Plaintiff that the First Defendant's agreement with the Plaintiff was that the First Defendant would pay the Plaintiff once the Litigation Matter was settled such that it was possible for the First Defendant to pay the Plaintiff.
10.This is why the letter states ' … liability in settling all outstanding fees upon settlement of the litigation matter as soon as possible'.
A consideration of the law in relation to promissory estoppel traditionally begins with the summary of the law set out by Brennan J (as his Honour then was) in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, 428 ‑ 429:
In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.
This passage was accepted and applied by Owen J in The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) and (No 10) [2008] WASC 239; [2009] WASC 107; (2008) 39 WAR 1 [3539].
Orchard's position is that the elements of a promissory estoppel were satisfied in that:
(a)Mr Anderson, as agent for Orchard, was induced to adopt the assumption that Opteon would not require payment of the current and future invoices until it was possible (in the sense of being financially able) for Orchard to pay the invoices;
(b)Mr Murphy, as agent for Opteon, induced Orchard to adopt the assumption by sending Orchard the letter which became the September Agreement;
(c)Orchard acted in reliance on the assumption by signing the September Agreement, by its agent Mr Anderson;
(d)Mr Murphy, as agent for Opteon, knew or intended Orchard to sign the September Agreement on the basis of the assumption;
(e)Opteon's action in enforcing payment of all outstanding invoices prior to it being 'possible' for Orchard to pay the invoices, will occasion detriment (presumably having to defend the present action and, if unsuccessful face the risk of insolvency); and
(f)Opteon has failed to avoid the determent by deferring the present action until such time as Orchard had the funds to pay Opteon.
Opteon's application for summary judgment is to be determined on the basis that Mr Anderson's version of the facts, assuming that it is not inherently incredible, would ultimately be accepted at the trial of the action: Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598, 608. However, this principle is of minimal consequence in the present case as Opteon has not contested the version of the fact put forward by Mr Anderson as regards the telephone conversation with Mr Murphy.
Even accepting Mr Anderson's evidence, I am not satisfied on the evidence before me that the defence of estoppel is arguable. This is for two reasons.
The first reason is that there is no evidence that Mr Murphy did or said anything to induce Orchard to adopt an assumption that Opteon would not demand payment of the amounts due on the outstanding invoices until Orchard had the financial capacity to pay those invoices. It is not clear what, if any, representation was made by Mr Murphy. There is certainly not the kind of clear and unequivocal representation necessary to found an estoppel: Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406, 435 ‑ 437; Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce MarketingCo Ltd [1971] 2 QB 23, 60; Bell Group Ltd [3546] – [3549]. In Woodhouse, Lord Denning MR explained the importance of the representation being clear and unequivocal (60):
If the representation is put forward as a variation, and is fairly capable of one or other of two meanings, the judge will decide between those two meanings and say which is right. But, if it is put forward as an estoppel, the judge will not decide between the two meanings. He will reject it as an estoppel because it is not precise and unambiguous. There is good sense in this difference. When a contract is varied by correspondence, it is an agreed variation. It is the duty of the court to give effect to the agreement if it possibly can: and it does so by resolving ambiguities, no matter how difficult it may be. But, when a man is estopped, he has not agreed to anything. Quite the reverse. He is stopped from telling the truth. He should not be stopped on an ambiguity. To work an estoppel, the representation must be clear and unequivocal.
There is, however, authority to the effect that what is important is whether the representation is sufficiently clear to give rise to unconscionability: Australian Crime Commission v Gray [2003] NSWCA 318 [179] ‑ [208]. In the context of the present application, I should thus not consider it fatal to Orchard's argument that no clear and unequivocal representation by Mr Murphy has been identified.
There are two sources from which a representation could be inferred, so as to constitute the inducement asserted. The first is the telephone conversation. However, all Mr Anderson deposes is that 'Mr Murphy acknowledged' what he said about Orchard's financial capacity to pay. There is no evidence that Mr Murphy said anything about Opteon deferring making a demand for payment. There is not even evidence that Mr Murphy said something like - 'I think that'll be all right but I'll have to get instructions', which was the critical statement in Legione (416).
The second source from which a representation could be inferred is the September Agreement itself, in particular bullet point 4. For the reasons set about above in the context of construing the text of bullet point 4 ([26] - [43]), I do not think it is capable of being construed as an inducing Orchard to adopt the assumption claimed.
The second reason why I am not satisfied that the defence of estoppel is arguable is that, even if it is found that Orchard, through Mr Anderson, (subjectively) held the assumption asserted, there is simply no evidence that Mr Murphy knew or intended Orchard to act in reliance on the assumption asserted. Mr Murphy can be presumed to have the knowledge set out in the text of the September Agreement. However, as I have already found, the text of the September Agreement does not support the assumption asserted.
Orchard does not have to show a defence on the balance of probabilities, but it must at least show cause why there is an arguable defence: Field Camp Services [4]. However, in my view, the limited evidence put forward by Orchard does not give rise to an arguable defence. This is not a case in where, after argument, there still remains real uncertainty as to the Opteon's right to judgment without further investigation of the facts, such that summary judgment ought to be refused: Ansearch Ltd v Wavtech Pty Ltd [2006] WASC 184 [28]; Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332, 335.
I am not satisfied that there is 'with respect to the claim … that there is an issue or question in dispute which ought to be tried' in relation to a potential defence of promissory estoppel.
Is Opteon entitled to charge compound interest to Orchard?
There is no dispute that Opteon is entitled to charge Orchard interest pursuant to the last bullet point of the September Agreement on all invoices outstanding as at 31 December 2011 (that is, the amount of $67,806.46).
There is an issue as to whether the September Agreement entitles Opteon to charge compound interest.
In its invoices issued from 1 January 2012, Opteon has claimed compound interest. Each invoice records a calculation whereby interest at 2% above the ANZ Bank Overdraft rate is added to the total amount outstanding at the end of the month to which the invoice relates.
In my view, a reasonable person would interpret the final bullet point of the September Agreement as providing for simple interest only. That is, the interest is to be calculated by determining the period of time for which the fee was outstanding, and then to apply the relevant interest rate (as it fluctuated from time to time) over this period. In my view, a reasonable person would have expected the September Agreement to have made an express reference to compound interest, or to have provided a means of calculation to have made this clear, had this been intended.
Is Opteon entitled to summary judgment against Orchard?
Opteon submits that Mr McGrade in his affidavits has verified the facts on which each of its claims are based as required by O 14 r 2(1). Mr McGrade also deposes that he believes that neither Orchard nor Mr Anderson has a defence to the claim brought by Opteon, as required by O 14 r 2(1). I am satisfied that Opteon has established a prima facie right to summary judgment against Orchard: Westwind Air Charter [74].
Orchard has not discharged the evidential burden upon it to show, 'with respect to the claim … that there is an issue or question in dispute which ought to be tried': RSC O 14 r 3(1): Morgan [4]. Even exercising the 'great care' that I am required to, it is clear to me that there is no real question to be tried: Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99; General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, 129 – 130.
However, in the particular circumstances of this case, there is 'some other reason' for there to be a trial of the claim by Opteon against Orchard pursuant to RSC O 14 r 3(1). I will return to this issue having considered to issues regarding Mr Anderson.
Is there a triable issue that Mr Anderson was not a party to the September Agreement?
Opteon claims that Mr Anderson is a party to the September Agreement, pursuant to which he agreed to guarantee payment of the unpaid invoices rendered by Opteon.
In his defence, Mr Anderson asserts that:
(a)he signed the September Agreement as a director of Orchard and not in his personal capacity;
(b)if he was a party, he did not provide any consideration for his obligations under the September Agreement, rendering it unenforceable against him; and
(c)if he did provide consideration, it was only in respect of the past invoices, totalling $30,640.
As set out above, the rights and liabilities of the parties to a contract are to be determined objectively: Toll [46]. The objective approach also governs the questions of whether a contract has, in fact, been made between two parties. In Fazio v Fazio [2012] WASCA 72 [190], Murphy JA (with whom Pullin [13] and Newnes JJA [14] agreed), observed that, when considering whether or not a contract has been made, 'the question is whether the parties' conduct, viewed objectively, reveals a tacit understanding or agreement, or a manifestation of mutual assent, which evinces an intention to create legal relations' [190]. See also: Bell Group Ltd [2659]; Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23; (2008) 35 WAR 520 [204]; Branir Pty Ltd v Owston Nominees (No 2) [2001] FCA 1833; (2001) 117 FCR 424 [369]; Alonso v SRS Investments (WA) Pty Ltd [2012] WASC 168 [46] ‑ [66]. Thus, in Smith v Hughes (1871) LR 6 QB 597, 607, Blackburn J stated:
If, whatever a man's real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would equally be bound as if he had intended to agree to the other party's terms.
In Air Tahiti Nui Pty Ltd v McKenzie [2009] NSWCA 429; (2009) 77 NSWLR 299, Allsop P and Handley AJA (Hodgson JA agreeing) described the principles in the following manner ([28], references omitted):
The identity of the contracting party is to be determined looking at the matter objectively, examining and construing any relevant documents in the factual matrix in which they were created and ascertaining between whom the parties objectively intended to contract. This is, to point, a process of construction similar to the task of identifying whether a clearly contractual document (such as a bill of lading) is made with one party or another (such as a shipowner or time charterer)… Where the documents are silent or ambiguous, but there is undoubtedly a contract, the identity of the parties must be determined objectively from the surrounding circumstances…
This passage was adopted with approval by Murphy JA (with whom Hall J agreed [67]) in City and Suburban Group Pty Ltd v Gambetta Holdings Pty Ltd [2011] WASCA 233 [47] and by Wager DCJ in Di Giovanni v Dark Horse Development Pty Ltd [No 2] [2013] WADC 23 [45].
Or as Heydon JA (as his Honour then was) framed the question in Brambles Holdings Ltd v BathurstCity Council [2001] NSWCA 61; (2001) 53 NSWLR 153: 'What would a reasonable person in the position of [one party] and a reasonable person in the position of the [other party] think as to whether there was a concluded bargain?' [81], adopted in: Lighting by Design v Cannington [205]; Fazio [13], [14], [191].
This inquiry may take into account 'the subject matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances': Ermogenous v Greek Orthodox Community of SA Inc - [2002] HCA 8; (2002) 209 CLR 95, [24] ‑ [25]; Alonso [47].
This issue in the present case is similar to that which arose in Alonso. In that case, the issue was whether a director of the defendant, one Sara Sandford, executed the signature clause in a lease intending to be personally bound as a guarantor. (The relevant signature page was extracted at [12].) Ms Sandford signed the lease only once, within the signature block of the corporate lessee of which she was a director. Justice Edelman held that there was an objectively manifested intention for Ms Sandford to be legally bound as guarantor ([66]).
The key issue was identified by Justice Edelman in the following terms ([52] ‑ [53]):
It has been iterated, and reiterated, that in considering whether there is an intention to be legally bound, qualification attached to a signature is only one relevant factor: 'intention, or lack thereof, is to be found upon the construction of the document as a whole, including but not being limited to the qualification attached to the signature, in the light of the surrounding circumstances to the extent to which evidence thereof is permissible'.
For these reasons, the omission of a signature next to the words 'Signed as a deed by Sara Sandford' is not conclusive. Nor is the signature of Ms Sandford, with the qualification 'Director' attached to it, conclusive of an intention to be legally bound only in that capacity. The question is ultimately whether 'the parties' conduct, viewed objectively, reveals a tacit understanding or agreement, or a manifestation of mutual assent, which evinces an intention to create legal relations'.
(The two quotes in this passage being from the decisions in Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160, 174 and Fazio [190], respectively.)
Justice Edelman identified four cumulative reasons why the document, construed in its surrounding circumstances, manifested intention for Ms Sandford to be legally bound as guarantor, in summary terms being that:
(a)Ms Sandford was specifically identified in the particulars of the lease as being the guarantor;
(b)the signature page of the lease contained both a corporate signature block and an individual signature block, the latter of which was completed in the name of Ms Sandford, though she did not sign adjacent to it where indicated by a pencil mark cross;
(c)Ms Sandford made and initialled some handwritten changes to the lease, which did not include the guarantee and indemnity provisions, 'demonstrating an objectively manifested intention to the bound by those provisions' [62]; and
(d)Ms Sandford personally signed certain correspondence to the lessor shortly prior to executing the lease.
Justice Edelman referred to two other decisions in which a director of a company was held to have manifested an intention to be legally bound personally, notwithstanding that the signature block appeared to be a corporate one: Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909; Padstow Corporation Pty Ltd v Fleming (No 2) [2011] NSWSC 1572.
In Scottish Amicablethe appellant, Scottish Amicable Life Assurance Society, entered into an agency agreement with the first respondent, Reg Austin Insurances Pty Ltd (RAI). The issue was whether two directors of RAI, Mr and Mrs Austin, were bound by a personal indemnity provision in the agency agreement. This provision was mistakenly executed by RAI in the same way the agency agreement was executed, that is, using the corporate block of RAI. Mahoney and McHugh JJA held that the directors were bound, with Kirby P dissenting. The reasoning of McHugh JA is closest to the reasoning adopted by Western Australian Supreme Court and Court of Appeal set out above. The key facts relied on by McHugh JA in finding an objective intention for Mr and Mrs Austin to be bound were (925 ‑ 925):
(a)there was evidence of conversations and correspondence prior to the documents being signed that referred to the need for Mr and Mrs Austin to sign personal guarantees;
(b)the document contained an indemnity clause;
(c)the indemnity clause specifically referred to Mr and Mrs Austin by name;
(d)Mr and Mrs Austin signed the corporate signature block of RAI; and
(e)the arrangements between Scottish Amicable and RAI included the provision of finance for Mr and Mrs Austin's family home and car.
In Padstow, Padstow Corporation Pty Ltd leased a property to Hamola Crochet Pty Ltd. Hamola defaulted in payment of rent. Padstow sued the directors of Hamola under a guarantee in the lease. Mr Fleming, the director in question in the decision, asserted that he was not bound by the guarantee in the lease because he did not sign it in his personal capacity, but as a director of Hamola. Gzell J held that the director was bound as a guarantor. His Honour adopted the objective intention approach set out above ([27] ‑ [30]). The key facts relied upon by Gzell J were that ([27] ‑ [50]):
(a)the lease contained specific guarantee provisions;
(b)the lease identified Mr Fleming as being a guarantor; and
(c)immediately prior to execution, a solicitor retained by the director explained to him that he was about to execute an unlimited personal guarantee.
A relevant decision in which the director was not held to be personally liable a guarantors is the decision in Clark Equipment. The agreement in question was one for the factoring of the debts of Clark in which Kiyose agreed to purchase certain debts from Clark if not paid within 90 days. It contained a guarantee clause which identified the two directors of Kiyose by name. The agreement only contained a corporate signature block, which was executed by Kiyose, by the directors. Giles J used the objective approach set out above (174). His Honour found that there was no objective intention on the part of the directors to be bound as guarantors. In coming to this decision, his Honour placed weight on the following facts (175):
(a)nothing in the execution clause suggested a personal undertaking on the part of either director;
(b)the same form of words was used for the execution clauses of both Clark and Kiyose, there being no suggestion that the agreement would give rise to personal liability for the representatives of Clark who executed it;
(c)the addition of the common seal of Kiyose pointed to the directors having simply signed in the capacity as directors;
(d)the same execution clause was found in a further agreement executed by the parties at the same time, there being no suggestion that this agreement gave rise to personal liability on the part of the directors.
Reading these authorities together, the question that needs to be determined is: What would a reasonable person in the position of Mr Anderson and a reasonable person in the position of Opteon, having regard to the words and conduct of the parties, the surrounding circumstances known to the parties and the purpose and object of the transaction, think as to whether there was a concluded bargain between the two of them?
At [34] above, I set out the relevant surrounding circumstances, including the purpose and object of the transaction.
Counsel for Mr Anderson submitted that there are five factors which lead to the conclusion that, objectively determined, it is arguable that there is an issue to be tried as to the capacity in which Mr Anderson signed the September Agreement, being (par 28 of their submissions):
By reference to:
(a)the telephone conversation the Second Defendant had with a Mr Christopher Murphy, during which Mr Murphy said to the Second Defendant words to the effect that the Plaintiff needed the first Defendant to sign a letter acknowledging the Plaintiff's outstanding invoices and payment terms (see paragraph 6 of Mr Anderson's Affidavit);
(b)that telephone conversation taking place shortly prior to the second defendant receiving the Plaintiff's letter;
(c)the Plaintiff having prepared the Plaintiff's letter;
(d)the Second Defendant being a director of the First Defendant, and
(e)the name of the First Defendant appearing beneath the name of the Second Defendant in the Plaintiff's letter.
it is submitted that objectively determined, it is arguable and there is an issue to be tried that the Second Defendant only signed the Plaintiff's letter in his capacity as a director of the First Defendant.
In relation to par (a), for the purposes of determining whether to grant summary judgment I need to accept the following evidence of Mr Anderson (which in any event is not contested in the affidavit of Mr McGrade):
6.Shortly before I received the Letter I received a telephone call from Christopher Murphy of the Plaintiff. Mr Murphy said to me during our telephone conversation words to the effect that the Plaintiff needed the First Defendant to sign a letter acknowledging the Plaintiff's outstanding invoices and payment terms.
7.During that telephone conversation I said to Mr Murphy words to the effect that the First Defendant's ability to pay the Plaintiff for its valuation services was dependent upon the successful outcome of the Litigation Matter, which Mr Murphy acknowledged.
There are two distinct phrases in the September Agreement which are suggestive of Mr Anderson being a party to it personally: 'I acknowledge and confirm my personally liability for the outstanding invoices' and 'In addition I personally acknowledge'. However, the signature block is a corporate signature block. Counsel for Mr Anderson submitted that one would normally expect two signature blocks – one corporate and one individual – if it were indeed the case that both Mr Anderson and Orchard were parties to the September Agreement.
In my view, Mr Anderson has identified a question to be tried. It is that set out at [79]: What would a reasonable person in the position of Mr Anderson and a reasonable person in the position of Opteon, having regard to the words and conduct of the parties, the surrounding circumstances known to the parties and the purpose and object of the transaction, think as to whether there was a concluded bargain between the two of them? The facts of the present case are not as clear as those in Alfonso, Scottish Amicable and Padstow, in each of which there was an express term in the agreement creating the guarantee/indemnity, though even that was not sufficient in Clark.
Given the 'great care' that I am required to exercise in determining an application for summary judgment, I am not satisfied that it is clear that there is no real question to be tried as to whether Mr Anderson personally is a party to the September Agreement: Fancourt (99); General Steel Industries (129 – 130).
Given this finding, it is not necessary for me to consider the two remaining contractual defences raised by Mr Anderson, namely that:
(a)if he was a party, he did not provide any consideration for his obligations under the September Agreement, rendering it unenforceable against him; and
(b)if he did provide consideration, it was only in respect of the past invoices, totalling $30,640.
Neither is it necessary for me to consider the argument raised by Mr Anderson in the submissions filed on his behalf (par 29) that Opteon is estopped from asserting that he signed the September Agreement in his personal capacity.
Is Opteon entitled to summary judgment against Mr Anderson?
For the reasons set out above, on the evidence currently before me, I am of the view that there is an issue or question in dispute which ought to be tried as to whether Mr Anderson is a party to the September Agreement. He ought to have leave to defend to action.
The residual issue is how this finding impacts on the issue of summary judgment being awarded against Orchard and what, if any, conditions ought to be imposed on the grant of leave and.
What final orders ought to be made?
Having formed the view that Mr Anderson ought to have leave to defend the action, this creates a difficulty in awarding summary judgment against Orchard. This is because in defending the action as against him, Mr Anderson will be entitled to, and inevitably will, lead evidence and make submissions on the issue of the proper construction of the phrase - 'upon settlement of the litigation matter as soon as possible' and the question of estoppel. The judge undertaking the trial will thus be called on to review a more comprehensive body of evidence than is before me. This gives rise to a risk that, on the different suite of evidence before the trial judge, the trial judge will come to a different conclusion on these two issues than I have done on the evidence before me. This in turn leads to a risk that there will be inconsistent judgments as between Orchard (on the summary judgment application) and Mr Anderson (following trial). It seems to me that this risk constitutes 'some other reason' for there to be a trial of the claim by Opteon against Orchard pursuant to RSC O 14 r 3(1).
That is not the end of the matter. The court has the power to 'give a defendant against whom such an application is made leave to defend the action with respect to the claim, either unconditionally or on such terms as to giving security or time or mode of trial or otherwise as it thinks fit': RSC O 14 r 4(3).
In relation to Mr Anderson, the power to grant leave to defend on a conditional basis in RSC O 14 r 4(3) is enlivened notwithstanding that I am of the view that 'there is an issue or question in dispute which ought to be tried' in relation to his defence for the purposes of RSC O 14 r 3(1). This finding merely precludes the court from giving judgment for Opteon against Mr Anderson.
In the present case, because it is the potential for inconsistency with the findings at trial on the defence of Mr Anderson which prevents me from giving judgment for Opteon against Orchard, it is just that there be a condition placed on the grant of leave to defendant by Mr Anderson.
One option open to me is to grant leave to defend conditional upon the payment of the amount of the claim into court: State Bank of Victoria [1989] WAR 240, 246; Hazart Pty Ltd v Rademaker (1993) 11 WAR 26, 31 - 32; DMS Shipping & Trading Co Ltd v Lionheart Asia Ltd [1996] 2 Qd R 20, 23, MV Yorke Motors (a firm) v Edwards [1982] 1 All ER 1024, 1027, 1028.
In Hazart, Anderson J with whom Malcolm CJ and Scott J agreed, stated the following about the grant of conditional leave to defend (31 ‑ 32):
In my experience of the practice in this Court, when the Court concludes that the bona fides of a defence and/or counterclaim are in doubt, the Court will usually require that the defendant provide some security. This is to ensure that a defence that appears to be very weak on its merits is at least being put forward in good faith. Unless the court was prepared to take this step in appropriate cases, injustice often would be done to plaintiffs pursuing good causes of action against debtors playing for time. When the plaintiff's claim appears clear cut, as, for example, in the case of the sale and delivery of goods for an agreed price, and the Court is left in real doubt about the defendant's good faith (although not able to say for certain there is no triable issue) it is not unusual for the Court to order, as a condition of leave to defend, that the full amount of the claim be secured. This will usually be by payment into court. If to do so would impose hardship on the defendant, the court may order that less than the full amount be paid in.
In DMS Shipping Thomas J stated the following of this discretion to (23):
… the Rules of the Supreme Court [give] the judge an unfettered discretion, when leave to defend is granted, to impose such terms as to giving security as the judge may think fit. Commonly the discretion is exercised when the judge perceives the defence to be 'shadowy', 'insubstantial', 'tricky', 'suspicious' or 'almost one in which summary judgment should be ordered'.
…
In my view, it is sometimes appropriate that in a dubious case that security be provided as a condition of the advantage thereby secured of delaying the plaintiff, of running up costs which are probably going to be wasted and of giving a commercial advantage to a defendant who has faintly arguable defence. Such factors namely the perception of the strength of the defence, influence many forms of pre-trial execution, such as Mareva injunctions, applications for security for costs and the imposition of a condition of the present kind which is in effect a security for judgment. The apprehension of the strength of the case or of the flimsiness of the defence may be a relevant basis for the exercise of the discretion and of course questions of degree are involved.
In Hazart Anderson J, went on to state that the court should not order payment into court of the amount of the claim where the defendant was able to show that 'compliance with such condition would be so onerous as to practically deny the defendant a real opportunity to present his defence' (32). It is thus usual for the defendant to be given an opportunity to produce evidence as to its financial position to assist the court with the exercise of its discretion. In the present case, I made directions for this to occur following the hearing of the application, along with an opportunity for the parties to file submissions on the point.
Pursuant to those directions, Mr Anderson swore and filed an affidavit dated 9 April 2013. Submissions were filed on behalf of Mr Anderson and Orchard. Submissions were also filed on behalf of Opteon.
Orchard's financial position may be summarised as being that:
•It has no bank account.
•It does not trade.
•Its only significant asset is the proceeds of the Supreme Court action, estimated to be around $460,000.
•In addition to Opteon's fees, it has liabilities for legal fees (including unbilled work in progress) of $635,000.
Mr Anderson's financial position may be summarised as being that he:
•Works as a project manager earning approximately $5,600 per month after tax.
•Owes $2,200,000 to Westpac Bank by way of registered mortgage against his house at 72 Johnson Street, Mosman Park.
•Has no savings nor access to any other finance.
•Has no capacity to make a payment into court of any amount.
From the information before me it appears that neither Mr Anderson nor Orchard has the financial capacity to pay an amount of $70,000 or so into court as a condition of the grant of leave to defend. I am satisfied that an order for the immediate payment of this amount into court would be so onerous as to practically deny Mr Anderson and Orchard a real opportunity to present their defence. The condition of leave to defend should not be immediate payment of the amount of the claim into court.
It is clear that Orchard's only means to satisfy any judgment against Opteon is from the proceeds of the Supreme Court action. In my view, the balance of the risk of injustice is best set in the present case by granting both Orchard and Mr Anderson leave to defend on a conditional basis. The condition on which leave should be granted is that as soon as sufficient funds become available from the Supreme Court action to satisfy the claim by Opteon, the funds should be paid into the District Court. This should occur by Orchard executing:
(a)an undertaking to the District Court to pay into the District Court a set amount from any amount received from the defendants in the Supreme Court action after the date of the order in priority to any other disposition of those funds; and
(b)to give effect to (a), an irrevocable direction (subject only variation by the court) to its solicitors in the Supreme Court action to pay into the District Court a set amount from any amount received from the defendants in the Supreme Court action after the date of the order in priority to any other disposition of those funds.
The amount is to be the amount of the invoices of $67,806 (exclusive of interest), together with interest to the date of this order, calculated in accordance with the reasons.
If Orchard and Mr Anderson are to defend the action, they will need to amend their defences at least to raise the claim of estoppel. This should occur as soon as practicable.
My preliminary views on the appropriate final orders are thus as follows:
(a)Opteon have leave to bring the application;
(b)each defendant have leave to defend the claim on condition that by [date] the first defendant (Orchard) execute an undertaking to the court in terms of Annexure A and an irrevocable direction to its solicitors in Supreme Court action CIV 1762 of 2010 in terms of Annexure B;
(c)in the event that Orchard fails to comply with par 1 by [date], there be judgment for the plaintiff against each defendant in the amount of $67,806 together with interest to be fixed and costs to be taxed;
(d)there be liberty to apply in relation to the implementation of the order in par (a) and the disposition of any funds paid into court as a result of the documents annexed to this order;
(e)each defendant file and serve an amended or substituted statement of claim by [date];
(f)the action be listed for a directors hearing on [date - seven days after the date on which the defences are served]; and
(g)the entry for trial milestone be extended to seven days after the next directions hearing.
The terms of the undertaking and direction should be attached to the order. I will hear from counsel as to the terms of both documents. It would be of assistance if counsel were to provide a draft of each document.
I will hear from counsel as to costs and any further consequential orders.
0
37
1