Ostabridge Pty. Ltd. (In Liquidation)(Receiver & Manager Appointed) v Stafford

[2001] NSWCA 335

CITATION:	Ostabridge Pty. Ltd. (In Liquidation)(Receiver & Manager Appointed) v. Stafford & Ors. [2001] NSWCA 335
FILE NUMBER(S):	CA 40216/01
HEARING DATE(S):	12th September 2001
JUDGMENT DATE:	25 September 2001
PARTIES :	Ostabridge Pty. Ltd. (In Liquidation)(Receiver & Manager Appointed) - Appellant Wayne Albert Stafford - 1st respondent Garry Leslie Stafford - 2nd respondent Leslie Richard Stafford - 3rd respondent
JUDGMENT OF:	Powell JA at 1; Giles JA at 2; Hodgson JA at 6

LOWER COURT JURISDICTION :	Supreme Court
LOWER COURT FILE NUMBER(S) :	ED50058/00
LOWER COURT JUDICIAL OFFICER :	Rolfe J

COUNSEL:	Mr. T.E.F. Hughes QC with Ms. S. Dowling for appellant Mr. B. Coles QC with Mr. M. Ashhurst for respondents
SOLICITORS:	Smits Leslie, Camperdown for appellant M.D. Nikolaidis & Co., Sydney for respondents
CATCHWORDS:	CONTRACT - Settlement of claim by bank against guarantors - Assignment of bank's debt to one guarantor - Covenant by bank to take no further steps - Whether assignee took subject to that covenant - LIMITATION OF ACTIONS - Confirmation of cause of action - Acknowledgement - Settlement of dispute on terms involving payment to bank - Provision for judgment for greater sum if terms not complied with - Terms complied with - Whether cause of action for greater sum confirmed. D.
LEGISLATION CITED:	Limitation Act 1969 s.54(2)(a)
CASES CITED:	Bucknell v. The Commercial Banking Co. of Sydney Ltd. (1937) 58 CLR 155 Hepburn v. McDonnell (1918) 25 CLR 199 Surrendra Overseas Ltd. v. Government of Sri Lanka (1977) 2AllER 481 Stage Club Ltd. v. Millers Hotels Pty. Ltd. (1981) 150 CLR 535
DECISION:	Appeal dismissed with costs

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40216/01
ED 50058/00

POWELL JA

GILES JA

HODGSON JA

Tuesday 25 September 2001


OSTABRIDGE PTY. LTD. (In Liquidation) (Receiver & Manager Appointed) v. STAFFORD & ORS.

Judgment

: I agree with the reasons of Hodgson JA set out below.

: I have had the advantage of reading the reasons of Hodgson JA in draft. I draw upon what his Honour there says.

3 The appellant accepted that, if the covenant to take no further steps to enforce the Staffords’ guarantees took effect prior to the assignment, in taking as assignee subject to equities it took subject to the covenant and was itself unable to take steps to enforce the guarantees against the Staffords. For the reasons given by Hodgson JA, on the proper construction of the deed of release seen in the circumstances in which it was entered into the covenant was not limited in its operation to the time after the assignment. If it took effect only after the assignment, it would have no purpose, because Westpac had assigned the guarantees away and could not enforce them. Rather, it took effect in conjunction with the assignment, its purpose being to free the guarantors party to the deed of release from further action by Westpac while enhancing their ability to recover from the principal debtor and from the guarantors not party to the deed of release. The Staffords could rely on the covenant as a defence to the appellant’s claim.

4 It being unnecessary to do so, I would prefer not to decide whether there was confirmation.

5 I agree that the appeal should be dismissed with costs.

We are dealing with an appeal by Ostabridge Pty. Limited (In Liquidation) (Receiver & Manager Appointed) (which I will call “Ostabridge”), against the judgment of Rolfe J given on 12th March 2001, whereby Rolfe J dismissed proceedings brought by Ostabridge against Wayne Stafford, Garry Stafford and Leslie Stafford (who I will call “the Staffords”). Before considering the grounds of appeal, it is convenient to outline the circumstances giving rise to this appeal.

OUTLINE OF CIRCUMSTANCES

7 Prior to 3rd November 1995, Westpac Banking Corporation (Westpac) had provided financial accommodation to Stafford Quarries Pty. Limited (Stafford Quarries) and Kerstanne Pty. Limited (Kerstanne). Westpac had brought proceedings in the Supreme Court of New South Wales against Eric Yeung, Joseph Wong, David Nagle, the Staffords, and Daphne Stafford, claiming $2,141,080.94 plus interest and costs, on the basis that they were liable for that amount as guarantors of the debts of Stafford Quarries. The defendants to those proceedings denied that they were liable for these debts, and had put on a cross-claim against Westpac in the proceedings. Westpac had also made demands on two of the Staffords and on Mr. Yeung seeking repayment of moneys due pursuant to guarantees of the debts of Kerstanne; and those persons had denied that they were liable for those debts.

8 On 3rd November 1995, the parties to the Supreme Court proceedings (other than David Nagle) entered into a deed, which was entitled “Deed of Release”, to settle the proceedings and all issues between them relating to the provision of financial accommodation by Westpac to Stafford Quarries and Kerstanne.

9 The recitals and first six clauses of that deed were as follows:

RECITALS
A. The Bank has provided financial accommodation from time to time to the Debtors.

B. The Debtors have each failed to repay on time the financial accommodation provided by the Bank.

C. The Bank has commenced proceedings against Mr Wong, Mr Yeung, Mr W Stafford, Mr G Stafford, Mr L Stafford and Mrs Stafford (the "Sureties") in the Supreme Court of New South Wales (No 50236 of 1994), seeking the payment of $2,141,080.94 plus interest and costs pursuant to various securities for the debts of Stafford Quarries to the Bank (the "Proceedings").

D. The Sureties have denied that they are liable to pay any money to the Bank for the debts of Stafford Quarries.

E. The Bank has issued demands for payment on Mr W Stafford, Mr G Stafford and Mr Yeung seeking the repayment of moneys due pursuant to a guarantee for the debts of Kerstanne.

F. Mr W Stafford, Mr G Stafford and Mr Yeung have denied that they are liable to pay any money to the Bank under the guarantee for the debts of Kerstanne.

G The parties to this deed have agreed to settle the Proceedings and all issues between them relating to the provision of financial accommodation by the Bank to Stafford Quarries and Kerstanne on the terms of this deed.

OPERATIVE PART
1. DEFINITIONS AND INTERPRETATIONS
1.1 The following words have these meanings in this document:
" Agents and Employees" means, in relation to a person, its agents, attorneys, contractors, employees, officers and servants or any of those persons.

" Assignee" means Ostabridge Pty Limited ACN 003 611 194.

" Avoided Transaction" means any payment, settlement, transaction, transfer or other dealing referred to in clause 10.

"Banker's Undertaking" means the banker's undertaking between the Bank and Wingecarribee Shire Council dated 24 April 1990 for the sum of $25,000.

"Consent Orders" means the consent orders in the Proceedings in the form of schedule 1 to this deed.

"Co-Sureties" means Yaxley Pty Limited, Erolfield Pty Limited, Ostabridge Pty Limited, Stafford Mining Pty Limited, Olola Holdings Pty Limited, Ticwood Pty Limited and Marula Holdings Pty Limited and is a reference to each of them separately and to any two or more of them jointly.

"Debtors" means Stafford Quarries and Kerstanne jointly and each of Stafford Quarries and Kerstanne severally.

"Deed of Assignment" means the deed so entitled in or substantially in the form of schedule 2 to this deed.

"Event of Insolvency" means any of the following events:
(a) (corporation) in the case of a corporation:
(i) (wound up) the corporation is wound up or dissolved or an application is made to a court for that order;
(ii) (resolution to wind up) a meeting is convened, or a resolution is passed, for the corporation to be wound up or dissolved or for the appointment of an administrator, or notice of any such meeting or resolution is given;
(iii) (liquidator or administrator appointed) a liquidator, provisional liquidator, trustee or administrator is appointed in respect of the corporation or its assets or an application is made to a court for an order seeking any such appointment;
(iv) (scheme of arrangement) the corporation:
(A) except if approved by the Bank, resolves to enter into, or enters into, a scheme of arrangement, a deed of company arrangement or composition with its creditors or an assignment for their benefit;
(B) proposes or is subject to a moratorium of its debts; or
(C) takes proceedings or actions similar to those mentioned in this paragraph as a result of which the corporation's assets are, or are proposed to be, submitted to the control of its creditors;
(v) (protection from creditors) the corporation seeks, or is granted, protection from its creditors under any legislation;
(vi) (insolvent) the corporation:
(A) is unable to pay its debts as and when they become due and payable; or
(B) is, or is deemed to be, insolvent within the meaning of any applicable law;
(vii) (statement that insolvent) the corporation or a director (as that term is defined in section 60 of the Corporations Law) of the corporation states that the corporation cannot pay its debts as and when they become due and payable;
(viii) (attachment, distress) any attachment, distress, execution or other process is made or levied against any asset of the corporation; or
(ix) (cease business) the corporation ceases to carry on business; or
(b) (natural person) in the case of a natural person, the person:
(i) (dies) dies;
(ii) (incapable) becomes, or is declared to be, mentally or physically incapable of managing his or her affairs;
(iii) (cannot pay debts) is unable to pay all his or her debts as and when they become due and payable; or
(iv) (scheme of arrangement) attempts to enter into, or convenes any meeting for the purpose of entering into, an arrangement, assignment or composition with his or her creditors.


"First Stafford Quarries Guarantee" means the guarantee and indemnity dated 5 April 1990 between the Bank and Mr Wong, Mr Yeung, Mr W Stafford, Mr G Stafford and others.

"Further Securities" means:
(a) guarantee and indemnity dated 5 April 1990 between the Bank, Kerstanne, the Co-Sureties and Tri-City Mini Concrete pty Limited;
(b) guarantee and indemnity between the Bank and Stafford Quarries dated 1 May 1990.

"Guarantees" means the Kerstanne Guarantee, the First Stafford Quarries Guarantee, the Second Stafford Quarries Guarantee and the Third Stafford Quarries Guarantee jointly and each of them separately.

"Hanging Rock Mortgages" means the mortgages between the Bank and Stafford Quarries dated 5 April 1990, registered in the Land Titles Office of New South Wales and numbered 2315251 and 2315252.

"Hanging Rock Property" means the whole of the land contained in certificates of title folio identifiers 4/253462 and 5/253462 together with any improvements on that land.

"Kerstanne Debt" means the Bank's right title and interest in and to the repayment of money by Kerstanne pursuant to accounts numbered:
- 101069;
- 540635,
being all debts, liabilities and money, due, owing or payable to the Bank by Kerstanne as primary debtor (other than debts, liabilities and money due, owing or payable to the Bank by Kerstanne under this deed).

"Kerstanne Guarantee" means the guarantee and indemnity dated 26 February 1990 between the Bank, Mr W Stafford, Mr G Stafford, Mr Yeung and ors.

"Mittagong Mortgage" means the mortgage between the Bank, Stafford Quarries and Mr L Stafford and Mrs Stafford dated 28 December 1990,registered in the Land Titles Office of New South Wales and numbered 2479229.

"Mittagong Property" means the whole of the land contained in certificate of title folio identifiers 4/35/1374,5/35/1374,6/35/1374, 7/35/1374 and 8/35/1374.

"Mortgages" means the Hanging Rock Mortgages, the Mittagong Mortgage and the Port Macquarie Mortgage jointly and each of them severally.

"Port Macquarie Mortgage" means the mortgage between the Bank, Stafford Quarries and Mr L Stafford and Mrs Stafford dated 9 December 1991, registered in the Land Titles Office and numbered E216949.

"Port Macquarie Property" means the whole of the land contained in certificate of title folio identifier 43/708575.

"Relevant Debts and Securities" means:
(a) the Stafford Quarries Debt;
(b ) the Kerstanne Debt;
(c) the Guarantees;
(d) the Hanging Rock Mortgages; and
(e) the Further Securities,
and is a reference to each of them separately and to any two or more of them jointly.

"Second Stafford Quarries Guarantee" means the guarantee and indemnity dated 5 April 1990 between the Bank, Stafford Quarries, Mr W Stafford, Mr G Stafford and Mr L Stafford.

"Security Interest" means any charge, mortgage, pledge, bill of sale, hypothecation, lien, arrangement concerning the deposit of documents evidencing title, trust or power, title retention arrangement or any other covenant or arrangement of any nature made to secure the payment of money or the performance or observance of any obligation or under which a creditor is entitled to claim that it has a right to receive payment, or to have any obligation owed to it satisfied, in priority to any other creditor.

"Stafford Quarries Debt" means the Bank's right title and interest in and to the repayment of money by Stafford Quarries pursuant to accounts numbered:
- 861308;
- 871573,
being all debts, liabilities and money, due, owing or payable to the Bank by Stafford Quarries as primary debtor (other than debts, liabilities and money due, owing or payable to the Bank by Stafford Quarries under this deed).

"Sureties" means Mr Wong, Mr Yeung, Mr W Stafford, Mr G Stafford, Mr L Stafford and Mrs Stafford jointly and each of them severally.

"Third Stafford Quarries Guarantee" means the guarantee and indemnity dated 5 April 1990 between the Bank, Stafford Quarries, Kerstanne Pty Ltd, Tri-City Mini Concrete Pty Ltd and the Co-Sureties.

"Westpac Group" means the Bank and all Agents or Employees of any of them and is a reference to them separately and to any two or more of them jointly.

1.2 In this document unless the contrary intention appears:
1.2.1 a reference to this document means this deed and includes any variation or replacement of it;
1.2.2 a reference to a statute or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements or any of them;
1.2.3 singular includes the plural number and vice versa;
1.2.4 a reference to any one gender includes each other gender (as the case may require);
1.2.5 the word "person" includes a firm, corporation, body corporate, unincorporated association or any governmental authority;
1.2.6 a reference to a person includes a reference to the person's executors, administrators, legal personal representatives, successors and permitted assigns;
1.2.7 an agreement on the part of, or in favour of, two or more persons binds or is for the benefit of them or any one or more of them jointly and severally;
1.2.8 a reference to the Sureties is a reference to Mr Wong, Mr Yeung, Mr W Stafford, Mr G Stafford, Mr L Stafford and Mrs Stafford severally and to any two or more of them jointly; and
1.2.9 a reference to a party means a person who is named as a party to, and is bound to observe the provisions of, this document.

1.3 All headings in this document have been inserted for the purpose of ease of reference only. They do not affect the meaning or interpretation of it.

2. JUDGMENT IN THE PROCEEDINGS
2.1 The Sureties agree that they will have their respective solicitors execute and deliver to the Bank's solicitors the Consent Orders in the Proceedings on or before the date of this document.

2.2 The Bank must not file the Consent Orders in the Supreme Court before 5.00 pm on 24 November 1995 but may file the Consent Orders after that time if the Sureties or the Debtors do not comply on time with their obligations under clauses 3 and 4 of this deed.

3. PAYMENT AND RETURN OF THE BANKERS UNDERTAKING
3.1 The Sureties must pay to the Bank the sum of $170,000 on or before the date of execution of this document, time being of the essence. The Sureties acknowledge that the said payment of $170,000 will be applied by the Bank in reduction of the Kerstanne Debt and will not be refundable by the Bank in any circumstances.

3.2 The Sureties must procure that:
3.2.1 Stafford Quarries completes a sale of the Hanging Rock Property for an amount greater than or equal to $350,000.00 and pays the purchase price to the Bank by bank cheque; and
3.2.2 the Assignee completes a purchase of the Relevant Debts and Securities (other than the Hanging Rock Mortgages) from the Bank for the sum of $10,000 in accordance with the Deed of Assignment; and
3.2.3 the Assignee pays the sum $1,170,000 to the Bank by bank cheque under the Third Stafford Quarries Guarantee, on or before 5.00 pm on 24 November 1995, time being of the essence.

3.3 The Sureties must:
3.3.1 pay to the Bank by bank cheque the sum of $25,000; or
3.3.2 provide to the Bank written notice from Wingecarribee Shire Council that the sum which is the subject of the Banker's Undertaking is no longer required by Wingecarribee Shire Council and that no claim or demand against the Bank has been or will be made pursuant to the Banker's Undertaking; or
3.3.3 return the original of the Banker's Undertaking to the Bank, on or before 5.00 pm on 24 November 1995, time being of the essence.

4. RELEASE AND INDEMNITY TO THE WESTPAC GROUP
4.1 The Sureties and the Debtors by this document jointly and severally release the Westpac Group from all obligations, sums of money, actions, suits, causes of actions, proceedings, claims, accounts, costs and expenses whatsoever both at law or in equity which the Sureties or the Debtors (as the case may be), have or had or may have against the Westpac Group arising out of or related in any way either directly or indirectly with:
4.1.1 the subject matter of the Proceedings;
4.1.2 any of the matters, documents or transactions referred to or contemplated by this document or the recitals to this document, including without limitation:
(a) the Guarantees;
(b) the Mortgages;
(c) the Stafford Quarries Debt and the Kerstanne Debt; and
(d) the Further Securities; or

4.1.3 any sale of the Hanging Rock Property by Stafford Quarries;
4.1.4 any discharge of the Hanging Rock Mortgages; or
4.1.5 the banker customer relationship between the Bank and each of the Debtors.

4.2 The Sureties and the Debtors by this document jointly and severally indemnify the Westpac Group against any claims which may be made against the Westpac Group, any losses or liabilities sustained by the Westpac Group and all charges, costs and expenses incurred by the Westpac Group directly or indirectly in connection with:
4.2.1 the subject matter of the Proceedings;
4.2.2 the payment, omission to make payment or delay in making payment of any amount referred to in this document;
4.2.3 any payment, settlement, transaction, transfer or other dealing under this deed or the Deed of Assignment being an Avoided Transaction;
4.2.4 the obligation to pay any amount referred to in this document being unenforceable or that amount being irrecoverable because of any circumstance;
4.2.5 any acknowledgment, representation or warranty made by the Sureties or the Debtors in this document being untrue or misleading when made;
4.2.6 the exercise of the Bank's rights under this document;
4.2.7 any sale of the Hanging Rock Property by Stafford Quarries;
4.2.8 any discharge of the Hanging Rock Mortgages; or
4.2.9 all losses, damages, costs and expenses, claims, demands, actions or suits suffered or incurred by or made or instituted against the Bank as a result, directly or indirectly, of the Proceedings.

4.3 The Sureties and the Debtors must:
4.3.1 procure that Yaxley Pty Limited, Ostabridge Pty Limited and Erolfield Pty Limited provide the Bank with releases in or to the effect of clause 4.1 and clause 6.3 (save that references to the Sureties and the Debtors will be replaced by references to the relevant Co-Sureties); and

4.3.2 use their best endeavours to procure that the remaining Co-Sureties provide the Bank with releases to the same effect, on or before 5.00 pm on 24 November 1995, time being of the essence.

4.4 The Sureties and Stafford Quarries acknowledge that Kerstanne is in liquidation and jointly and severally undertake to use their best endeavours to procure that this deed is executed by Kerstanne by 5.00 pm on 24 November 1995, time being of the essence.

5. COVENANTS FROM THE BANK
5.1 Subject to the Bank's rights under clauses 10 and 11 and compliance by the Sureties and the Debtors on time with clauses 2, 3 and 4, the Bank covenants that it:
5.1.1 will promptly return the Consent Orders to the solicitors for Mr Wong and Mr Yeung, on the payment of all moneys due to the Bank under this deed and the Deed of Assignment;
5.1.2 will procure that its solicitors sign and file a notice of discontinuance of the Proceedings (with no order as to costs) such notice to be prepared and signed by the Sureties' solicitors;
5.1.3 will not take any further steps whatsoever to enforce the Guarantees or the Mortgages or the Further Securities;
5.1.4 will provide the solicitors for Stafford Quarries with a discharge of the Hanging Rock Mortgages in registrable form, together with the certificates of title for the Hanging Rock Property; and
5.1.5 will provide the solicitors for Mr L Stafford and Mrs Stafford with a discharge of the Port Macquarie Mortgage in registrable form together with certificate of title, folio identifier 43/708575; and
5.1.6 will provide the solicitors for Mr L Stafford and Mrs Stafford with a discharge of the Mittagong Mortgage in registrable form together with certificates of title, folio identifiers 4/35/1374, 5/35/1374, 6/35/1374, 7/35/1374 and 8/35/1374.

6. ASSIGNMENT OF THE RELEVANT DEBTS AND SECURITIES
6.1 Subject to the Bank's rights under clauses 10 and 11 and compliance by the Sureties and the Debtors on time with clauses 2, 3 and 4, the Bank agrees to transfer to the Assignee, the Bank's right title and interest in the Relevant Debts and Securities (other than the Hanging Rock Mortgages).

6.2 The assignment under clause 6.1 will be effected by the Deed of Assignment or a document in or substantially in the form of this instrument.

6.3 The Sureties and the Debtors by this document jointly and severally release the Westpac Group from all obligations, sums of money, actions, suits, causes of action, proceedings, claims, accounts, costs and expenses whatsoever, both at law or in equity which the Sureties or the Debtors, (as the case may be), have or had or may have against the Westpac Group, arising out of or in any way related directly or indirectly to:
6.3.1 the adequacy, due execution, enforceability, legality, recoverability, title, assignability or validity of the Relevant Debts and Securities;
6.3.2 the enforcement (or attempted enforcement) by the Assignee of the Relevant Debts and Securities;
6.3.3 any matter having or which may have an affect, beneficial or otherwise on the Hanging Rock Property or the yield from the Property, including, without limitation:
(a) the nature, quality, state of repair, value or condition of the Hanging Rock Property;
(b) the suitability for any use or purpose of the Hanging Rock Property;
(c) any contamination, pollution, defect, dilapidation and infestation (whether latent or patent) in or in connection with the Hanging Rock Property; and
(d) the rights attaching to or affecting the Hanging Rock Property;
6.3.4 the assignment or attempted assignment by the Bank of the Relevant Debts and Securities to the Assignee; or

6.3.5 the subject matter of this document and any matters, instruments or transaction contemplated by it (including without limitation, the Deed of Assignment).

6.4 The Sureties and the Debtors by this document jointly and severally indemnify the Westpac Group against any claims which may be made against the Westpac Group by any person, any losses or liabilities sustained by the Westpac Group and all charges, costs and expenses incurred by any of them directly or indirectly in connection with:
6.4.1 the entry by the Bank into this document;
6.4.2 the performance by the Bank of its obligations under this document, including without limitation any transfer or attempted transfer of the Relevant Debts and Securities to the Assignee;
6.4.3 any enforcement or attempted enforcement by the Assignee of the Relevant Debts and Securities;
6.4.4 the subject matter of this document and any matters, instruments or transactions referred to in it or contemplated by it;
6.4.5 any of the other matters referred to in clause 6.3.1 to 6.3.5; or
6.4.6 any proceedings against the Westpac Group with respect to any or the matters referred to in clauses 6.4.1 - 6.4.5 above.

6.5 The Bank warrants that it is the legal and beneficial owner of the Relevant Debts and Securities and has good title to the Relevant Debts and Securities free of any encumbrances.

10 Clauses 10 and 11 of the deed, referred to in cls.5 and 6, provided for the reversal of the transactions in the event of default or if for some other reason they could not be satisfactorily completed.

11 The consent orders referred to in cl.2.1 of the deed provided for judgment in favour of Westpac against those defendants to the proceedings who were parties to the deed for $2,141.080.94 plus interest from 7th October 1994 to date at 12.75% per annum, for dismissal of their cross-claim in the proceedings and for the costs of the proceedings.

12 Schedule 2 of the deed of release set out the terms of the proposed deed of assignment referred to in cl.3.2.2 of the deed. Those terms contained a recital of entry into the deed of release, and also included the following clauses 2-5:

2. ASSIGNMENT OF THE RELEVANT DEBTS AND SECURITIES
2.1 In consideration of the payment of the sum of $10,000 the receipt of which is hereby acknowledged, the Bank hereby assigns to the Assignee its right title and interest in the Relevant Debts and Securities (other than the Hanging Rock Mortgages).

2.2 The Bank and the Assignee must each do and perform all such other acts, matters and things as may be necessary or convenient to complete the transfer of the Relevant Debts and Securities (other than the Hanging Rock Mortgages) to the Assignee, as contemplated by the provisions of this document.

2.3 The Bank warrants that it is the legal and beneficial owner of the Relevant Debts and Securities (other than the Hanging Rock Mortgages) and has good title to the Relevant Debts and Securities (other than the Hanging Rock Mortgages) free of any encumbrances.

2.4 The Assignee must give written notice of the assignment under this deed to each Debtor forthwith upon its execution of this deed.

3. ACKNOWLEDGMENTS TO THE BANK
3.1 The Assignee acknowledges and agrees that it has not entered into this document in reliance on or as a result of any statement or conduct of any kind or on behalf of the Bank but has entered into this document fully and voluntarily upon its own information and investigation and has taken independent legal advice as to the nature, effect and extent of this document and the Relevant Debts and Securities and has independently satisfied itself on all matters.

3.2 Without limiting clause 3.1 above, the Assignee acknowledges to the Bank and agrees that:

3.2.1 any transfer of any of the Relevant Debts and Securities is without warranty or representation from the Bank as to the adequacy, due execution, enforceability, legality, recoverability, title, assignability or validity of the Relevant Debts and Securities or any of them;

3.2.2 any transfer of any of the Relevant Debts and Securities is without warranty or representation from the Bank as to the entitlement of the Assignee or any other person to recover the Stafford Quarries Debt or the Kerstanne Debt;

3.2.3 the Assignee has made its own independent investigations of the Assignee's entitlement to enforce any of the Relevant Debts and Securities or to otherwise recover the Kerstanne Debt and the Stafford Quarries Debt; and

3.2.4 this document and any discharge of the Hanging Rock Mortgage are without warranty or representation from the Bank as to:
(a) the nature, quality, state of repair, value or condition of the Hanging Rock Property;
(b) the suitability for any use or purpose of the Hanging Rock Property;
(c) the rights attaching to or affecting the Hanging Rock Property; and
(d) any other matter having or which may have effect beneficial or otherwise on the Hanging Rock Property or the yield from the Hanging Rock Property (including, without limitation any contamination, pollution, defect, dilapidation and infestation whether latent or patent).


4. RELEASE TO THE WESTPAC GROUP
4.1 The Assignee by this document releases the Westpac Group from all obligations, sums of money, actions, suits, causes of action, proceedings, claims, accounts, costs and expenses whatsoever, both at law or in equity which the Assignee has or had or may have against the Westpac Group arising out of or in any way related directly or indirectly to:

4.1.1 the adequacy, due execution, enforceability, legality, recoverability, title, assignability or validity of the Relevant Debts and Securities;

4.1.2 the enforcement (or attempted enforcement) by the Assignee of the Relevant Debts and Securities;

4.1.3 any matter having or which may have an affect, beneficial otherwise on the Hanging Rock Property or the yield from the Property , including, without limitation:
(a) the nature, quality, state of repair, value or condition of the Hanging Rock Property;
(b) the suitability for any use or purpose of the Hanging Rock Property;
(c) any contamination, pollution, defect, dilapidation and infestation (whether latent or patent) in or in connection with the Hanging Rock Property; and
(d) the rights attaching to or affecting the Hanging Rock Property;


4.1.4 the assignment or attempted assignment by the Bank of any of the Relevant Debts and Securities; or

4.1.5 the subject matter of this document and the Deed of Release and any matters, instruments or transactions referred to or contemplated by either of them.

5. INDEMN1TIES TO THE WESTPAC GROUP
5.1 The Assignee by this document indemnifies the Westpac Group against any claims which may be made against the Westpac Group by any person, any losses or liabilities sustained by the Westpac Group and all charges, costs and expenses incurred by any of them directly or indirectly in connection with:

5.1.1 any payment, settlement, transaction, transfer or other dealing under this deed or the Deed of Release being an Avoided Transaction;

5.1.2 the obligation to pay any amount referred to in this document being unenforceable or that amount being irrecoverable because of any circumstance;

5.1.3 any acknowledgment, representation or warranty made by the Assignee in this document being untrue or misleading when made;

5.1.4 the exercise of the Bank's rights under this document;

5.1.5 the entry by the Bank into this document and the Deed of Release;

5.1.6 the performance by the Bank of its obligations under this document and the Deed of Release including without limitation any transfer or attempted transfer of the Relevant Debts and Securities;

5.1.7 any enforcement or attempted enforcement by the Assignee of the Relevant Debts and Securities;

5.1.8 the subject matter of this document and any matters, instruments or transactions referred to in it or contemplated by it;

5.1.9 any of the other matters referred to in clause 4.1.1 to 4.1.5; or

5.1.10 any proceedings against the Westpac Group with respect to any of the matters referred to in clauses 5.1.1 - 5.1.9 above.

5.2 The Assignee must forthwith pay on demand to the Bank any amount certified by the Bank to be the sum payable under clause 5.1.

13 It appears that the obligations of the sureties and debtors under cls.3 and 4 of the deed were complied with by 10th November 1993, and the assignment to Ostabridge contemplated by cl.3.2.2 of the deed was effected by a deed of assignment in the same form as provided in Schedule 2 of the deed of release, such deed of assignment being executed on behalf of Ostabridge by Wayne Stafford and Joseph Yeung.

14 Subsequently, Ostabridge gave notice to the Staffords of the assignment, and commenced proceedings against them claiming $2,141,080.94 plus interest from 21st November 1995. The Staffords defended the proceedings on a number of grounds of which the following are still relevant:

1. They denied that they owed a debt to Westpac in the first place.
2. They claimed that the amount of the debt had been reduced by about $1.7 million paid to Westpac on or about 10th November 1995.
3. They claimed that Ostabridge was bound by Westpac’s covenant not to take further steps in relation to the debt contained in cl.5.1.3 of the deed of release.
4. They claimed that Ostabridge’s claim was statute-barred.

15 Rolfe J found that, at least prior to any reduction of the debt which may have occurred on or about 10th November 1995, no less than $2,141.080.94 had been owing by Stafford Quarries to Westpac, and he noted that the Staffords admitted that they guaranteed the obligations of Stafford Quarries to Westpac. Accordingly, the first basis of defence was rejected. There have been no attempts in this appeal to rely on that basis of defence.

16 In the event, Rolfe J did not deal with the question of whether this debt was reduced by some or all of the amounts paid to Westpac on or about 10th November 1995: it is now common ground that, if the appeal is upheld, this Court should permit both parties to make further submissions on this question.

17 Rolfe J upheld the third matter of defence, to which I have referred. As regards the fourth, Ostabridge conceded that the debt would be statute-barred unless it had been confirmed by the Staffords on 3rd November 1995 (when the deed of release was entered into) or 10th November 1995 (when the obligations under the deed were completed); and Rolfe J found that there had been no such confirmation. Accordingly, he found in favour of the Staffords on this basis also.

GROUNDS OF APPEAL

18 Ostabridge has appealed from Rolfe J’s decision on the following grounds:

1. The trial Judge erred in his construction of Clause 5.1.3 of the Deed of Release executed on 3 November 1995 by the parties.

2. The trial Judge erred in his conclusion that Clause 5.1.3 of the Deed of Release constituted a “covenant not to sue” which prevented the Appellant from enforcing guarantees given by the Respondents to Westpac Banking Corporation and assigned to the Appellant.

3. The trial Judge erred in his construction of Clause 6 of the Deed of Release.

4. The trial judge erred in his view of the effect of the Deed of Assignment executed on 10 November 1995.

5. The trial Judge erred in his conclusion that the Deed of Release and the unconditional consent orders provided by the Respondents to Westpac Banking Corporation pursuant to the Deed of Release did not constitute a confirmation by the Respondents of their indebtedness to Westpac Banking Corporation for the purposes of s.54 of the Limitation Act 1969.

19 I will deal in turn with the grounds 1 to 4, which in general terms relate to the construction and effect of cl.5.1.3, and ground 5 relating to confirmation.

CLAUSE 5.1.3

20 Rolfe J held that the rights assigned to Ostabridge were subject to equities binding Westpac, including the covenant not to take any further steps to enforce the relevant guarantees. In so holding, Rolfe J referred to Redman v. The Permanent Trustee of NSW Ltd. (1916) 22 CLR 84 at 91-2; The Southern British National Trust Ltd. (In Liquidation) v. Pither (1937) 57 CLR 89 at 108; National Executors & Trustees Co. of Tasmania Ltd. v. Hurburg [1959] TasSR 25; Re Harry Simpson & Co. Pty. Ltd. [1964-5] NSWR 603; and Provident Finance Corporation Pty. Ltd. [1978] VR 312.

21 Ostabridge had contended that this would rob the assignment of effect, because the covenant not to take further steps was not in terms limited to those guarantors who were parties to the deed, and guarantors who were not parties to the deed could take advantage of the deed under s.36C of the Conveyancing Act. Rolfe J held that, on its true construction, cl.5.1.3 was for the benefit only of the parties to the deed, as suggested by the circumstance that the provision was in the form of a covenant to take no further steps rather than in the form of a release; and Rolfe J referred to Concrete Constructions Pty. Ltd. v. GIO of NSW (1966) 85 WN(NSW) 104.

22 Before this Court, Mr. Hughes QC for Ostabridge submitted that the deed of release disclosed an intention that the assignment could not be subject to equities created by Westpac’s covenant to take no further steps.

23 His primary argument was that Westpac’s covenant not to take further steps was by cl.5.1 made subject to and conditional upon compliance by the sureties and the debtors on time with cls.2, 3 and 4: that is, the covenant would not take effect unless and until cl.3.2.2, among other clauses, had been complied with, that is unless and until Ostabridge had completed the purchase of the debt in question from Westpac for $10,000.00. Since Westpac’s covenant to take no further steps did not take effect until this had happened, the assignment must have been effected before Westpac became bound by its covenant to take no further steps, and thus the assignment could not itself have been subject to and affected by that covenant.

24 Mr. Hughes submitted that this was confirmed by other aspects of the deed of release and the assignment. Ostabridge was paying a substantial amount in this settlement, so it is reasonable to construe the instruments so as to give substantial rights to Ostabridge. Clause 5.1.3, in its terms, only protected the respondents against action by the Westpac itself, and indeed only against “further steps”, meaning steps additional to the proceedings already brought by Westpac against the respondents. Finally, cl.2.3 of the deed of assignment contained a warranty by Westpac that it had title to the debts being assigned “free of any encumbrances”; and that indicated that what was assigned was not encumbered by Westpac’s covenant to take no further steps.

25 It is to be noted that the deed of assignment was executed on behalf of Ostabridge by one of the Staffords and by Mr. Yeung; and it seems an inevitable inference that Ostabridge was, at the time of these transactions, under the control of at least some of the parties to the deed of release other than Westpac. It might be inferred from that circumstance that it was not the subjective intention of those parties that Ostabridge be able subsequently to sue those parties. However, as submitted by Mr. Hughes, the effect of the documents has to be worked out having regard to the terms of the document, construed where necessary in the light of the factual matrix in which the documents were created; and Ostabridge was then, and certainly is now, a separate legal entity whose rights must be considered separately. At one stage, there was a suggestion in discussions with the Court that, if the construction contended for by the respondents was correct, the transactions would have involved the use of Ostabridge’s money to gain a disproportionate benefit for persons having fiduciary duties towards Ostabridge; but it seems clear, and I believe it was accepted, that a submission along those lines could only be advanced if such a contention had been made at the first instance hearing, and if an opportunity had been given to the respondents to deal with it factually, if necessary.

26 In my opinion, there is considerable force in Mr. Hughes’ submission concerning the dependence of Westpac’s covenant to take no further steps upon compliance, apparently prior compliance, with the requirement that an assignment to Ostabridge take place. However, as pointed out by Mr. Coles QC for the respondents, Westpac’s obligation to effect such an assignment is itself, in cl.6 of the deed of release, likewise made conditional upon performance of the respondents’ obligations under cls.2, 3 and 4. Mr. Coles also submitted that the other parties to the deed of release became fully entitled to the benefit of Westpac’s covenants in both cl.5 and cl.6 of the deed once they had done everything which on their part was to be done, to the extent of tendering or causing to be tendered to Westpac the consent orders required by cl.2, the money required by cl.3, the assignment required by cl.3.2.2, the matters required by cl.3.3, and the releases required by cl.4.3. At that stage, Westpac could not avoid its obligations under cl.5 by failing on its part to execute the assignment referred to in cl.3.2.2 and cl.6. On this approach, what was contemplated was a settlement in which the mutual obligations on both sides would be discharged simultaneously. On that basis, Mr. Coles submitted, there was nothing incongruous or inappropriate in treating the assignment required of the Bank by cl.6 being subject to the equities created by the covenant to take no further steps in cl.5.1.3.

27 On the whole, although the matter is not free from doubt, I prefer the view put forward by Mr. Coles. If Mr. Hughes’ approach was correct, cl.5.1.3 would be pure surplusage, because it would arise only after Westpac no longer had any interest in the guarantees or mortgages or further securities which it could enforce, and thus would not in any event be able to take any further steps to enforce them. On the other hand, the assignment of the debts to Ostabridge, even if they could not be enforced against the other parties to the deed, would have some utility in giving to Ostabridge remedies against the principal debtors and against other guarantors, including those described in the deed of release as co-sureties (apart from Ostabridge itself): cf Deanplan v. Mahmoud [1992] 3 AllER 945 at 959-60. I accept Mr. Coles’ submission that Wespac’s warranty that its title was free from encumbrances is correctly understood as relating to encumbrances of the nature of charges to third parties rather than restraints against taking steps against other parties to these very transactions, contained in the documentation of the transactions themselves.

28 Accordingly, in my opinion, Rolfe J’s decision on this aspect of the matter was correct.

CONFIRMATION

29 The issue here turns on s.54(2)(a) of the Limitation Act, which is in the following terms:

54(2) For the purposes of this section:
(a) a person confirms a cause of action if, but only if, the person:
(i) acknowledges, to a person having (either solely or with other persons) the cause of action, the right or title of the person to whom the acknowledgment is made, or
(ii) makes, to a person having (either solely or with other persons) the cause of action, a payment in respect of the right or title of the person to whom the payment is made,

30 Before Rolfe J, Ostabridge sought to rely as being confirmation on payments of $170,000.00 made under cl.3.1 and $25,000.00 made under c.3.3.1. However, as held by Rolfe J, the payment of $170,000.00 was in respect of the Kerstanne debt, which is a different debt from that the subject of these proceedings; and it was not proved that $25,000.00 had in fact been paid pursuant to cl.3.3.1 (there were other ways of satisfying cl.3.3). No challenge is made to those findings of Rolfe J.

31 Rolfe J held that neither the deed of release nor the terms of settlement executed pursuant to those terms amounted to a confirmation, because those terms of settlement would take effect only on the satisfaction of certain conditions, which were not in fact satisfied; and Rolfe J referred to Bucknell v. The Commercial Banking Co. of Sydney Ltd. (1937) 58 CLR 155 at 163-4.

32 Mr. Hughes submitted that the consent orders, signed on behalf of the parties to the deed including the Staffords, were in terms an unconditional acknowledgement of Westpac’s cause of action on the relevant guarantees. He submitted that recital D in the deed of release was not a present denial of that cause of action but a recital of past denials, which were erased by the terms of the deed and the consent order. He submitted that the fact of agreement to a contractual regime of payment of a sum less than the consent order did not invest the consent order with any conditional quality. Finally, he submitted that, fairly construed, the whole transaction amounted to an acknowledgement of liability to Westpac, upon which Ostabridge could now rely.

33 Mr. Coles submitted that, although it was no longer necessary to find an implied promise to discharge the liability or debt acknowledged, nevertheless it was still necessary, if an acknowledgement was conditional, that the condition be fulfilled: Bucknell at 163-4, Hepburn v. McDonnell (1918) 25 CLR 199 at 207-210. In this case, any acknowledgement made by the consent orders was conditional on certain events not happening, and those events did happen. Furthermore, Mr. Coles submitted, the consent orders had to be evaluated in the light of the whole transaction; and in that light, they acknowledged no greater liability than that which was in fact discharged: cf. Surrendra Overseas Ltd. v. Government of Sri Lanka [1977] 2 AllER 481. The recital of a past dispute did not suggest that the dispute was no longer agitated, but rather that it was being resolved by the compromise agreement being entered into.

34 Mr. Hughes in reply submitted that the acknowledgement should not be construed narrowly or pedantically: see Stage Club Ltd. v. Millers Hotels Pty. Ltd. (1981) 150 CLR 535 at 561. He submitted that the transaction being entered into involved both a stick and a carrot. The stick was the admission of liability contained in the consent orders, which Westpac needed to ensure that, if the scheme foundered, it could obtain final judgment for the amount claimed on the strength of the consent orders. The carrot was the opportunity to the guarantors to discharge their liability by a lesser payment. The mutual intent was that, if the scheme should fall apart, Westpac should be entitled to file the consent orders; and they could be a vehicle for final judgment only if they amounted to an unconditional acknowledgement of indebtedness. The fact that they were to be used only in certain circumstances did not make them conditional.

35 I accept Mr. Hughes’ submission that, if the scheme fell apart, the consent orders would then amount to an unconditional acknowledgement of indebtedness in the full sum claimed by Westpac, so as to justify entry of judgment. However, in my opinion that would be because a condition attaching to the acknowledgement would have been satisfied. I think the better view of the acknowledgement contained in the transaction is that the recital of past denials should fairly be read as asserting a dispute continuing up to the time of the arrangement, which dispute was being resolved by the compromise agreement itself; and that the liability acknowledged by the compromise agreement was precisely that provided by the agreement itself, and no more. That is, the liability acknowledged was a liability to perform obligations, and, if such obligations were not performed, to admit and be subject to judgment for the full amount claimed. In fact, the liability provided by the agreement was fully performed, and in my opinion that left no further acknowledgement of liability outstanding.

36 In my opinion, the situation is analogous to that in Surrendra, where the defendant had admitted a claim of the plaintiff subject to a set-off, and had paid the admitted balance. Kerr J in the Queens Bench Division held that there was no acknowledgement over and above that of the liability which the defendant had discharged.

37 I accept that where an acknowledgement is of a liability of indefinite extent or of a debt less than that which a plaintiff presently claims, this may relevantly be an acknowledgement of “the cause of action, the right or title” then relied on by that plaintiff. However, where the acknowledgement is of some precise liability or amount which is fully and precisely discharged, I do not think it can be regarded as an acknowledgement of some greater liability or amount.

38 For those reasons, in my opinion Rolfe J was correct on this aspect also.

CONCLUSION

39 For those reasons, I propose the following order: appeal dismissed with costs.

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