Re RM Road Services Pty Ltd (in liq) & Ors (No 2)
[2025] VSC 382
•27 June 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2023 05131
IN THE MATTER of RM ROAD SERVICES PTY LTD (IN LIQUIDATION) (ACN 609 113 037), ROADMASTER TRAFFIC MANAGEMENT PTY LTD (IN LIQUIDATION) (ACN 601 193 391) AS TRUSTEE FOR THE ROADMASTER TRAFFIC MANAGEMENT TRUST (ABN 23 708 998 744) AND ROADMASTER LINE MARKING PTY LTD (IN LIQUIDATION) (ACN 163 486 431)
BETWEEN:
| SHANE JUSTIN CREMIN and BRETT LEIGH MORGAN in their capacity as joint and several liquidators of RM ROAD SERVICES PTY LTD (IN LIQUIDATION) (ACN 609 113 037), ROADMASTER TRAFFIC MANAGEMENT PTY LTD (IN LIQUIDATION) (ACN 601 193 391) AS TRUSTEE FOR THE ROADMASTER TRAFFIC MANAGEMENT TRUST (ABN 23 708 998 744) and ROADMASTER LINE MARKING PTY LTD (IN LIQUIDATION) (ACN 163 486 431) (and others according to the attached Schedule) | Plaintiffs |
| and | |
| SEMRA OFLI (and others according to the attached Schedule) | Defendants |
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JUDGE: | Matthews J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 19 June 2025 |
DATE OF RULING: | 27 June 2025 |
CASE MAY BE CITED AS: | Re RM Road Services Pty Ltd (in liq) & Ors (No 2) |
MEDIUM NEUTRAL CITATION: | [2025] VSC 382 |
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PRACTICE AND PROCEDURE – Application for summary enforcement of a settlement agreement to resolve an application for contempt of court in the proceeding – Roberts v Gippsland Agricultural & Earth Moving Contracting Co Pty Ltd [1956] VLR 555 applied – Court must be satisfied justice can be done via summary procedure – Seachange Management Pty Ltd v Pital Business Pty Ltd (2009) 23 VR 396 applied – Bell v Knight 34 Langdon Road Pty Ltd [2022] VSC 497 applied – Application granted.
SETTLEMENT AGREEMENT – Whether term should be implied into settlement agreement to effect that payment of specified sum not required – BP Refinery(Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 applied – Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Ms V Bell | Mills Oakley |
| For the First and Second Defendants | Mr M Grady | Ronayne Owens Lawyers |
| No appearance by or on behalf of the Third Defendant |
Contents
Introduction
The parties
The application before the Court
Materials relied upon
Background
Relevant terms of the Settlement Deed
Alleged breaches of the Settlement Deed and the parties’ positions
Unpaid Instalment Payments
The Insurance Sum
Relevant principles regarding summary enforcement of settlement agreements
The plaintiffs’ submissions
The Ofli Parties’ submissions
Construction of the Settlement Deed
Further alternative arguments made by the Ofli Parties
Total failure of consideration
Cooperation terms
Plaintiffs’ submissions in reply
The summary enforcement procedure is sufficient
No term should be implied into the Settlement Deed
The Ofli Parties’ alternative arguments should be rejected
Consideration
Construction of the Settlement Deed
The Ofli Parties’ alternative arguments
Whether to utilise the summary enforcement procedure
Conclusion
HER HONOUR:
Introduction
The parties
The first plaintiffs, Shane Justin Cremin and Brent Leigh Morgan (the Liquidators), are the court-appointed liquidators of:
(a)RM Road Services Pty Ltd (in liquidation) (RMS);
(b)Roadmaster Traffic Management Pty Ltd (in liquidation) (RM Traffic), as trustee for the Roadmaster Traffic Management Trust (Trust); and
(c)Roadmaster Line Marking Pty Ltd (in liquidation) (RM Line Marking),
(together, the second plaintiffs, referred to as the Roadmaster Companies).
The defendants are:
(a)the first defendant, Ms Semra Ofli, the director of the Roadmaster Companies;
(b)the second defendant, AESK Holdings Pty Ltd, a company of which Ms Ofli is the sole director. Where convenient, I will refer to Ms Ofli and AESK as the Ofli Parties; and
(c)the third defendant, Mr Haissam Khabbaz, Ms Ofli’s ex-husband, the previous director of the Roadmaster Companies.
The application before the Court
This decision concerns an application made by summons filed on 7 May 2025 (Enforcement Application) by the plaintiffs, by which they seek to enforce a deed of settlement dated 30 May 2024 which they entered into with the Ofli Parties (Settlement Deed). In short, the plaintiffs contend that the Ofli Parties were required under the Settlement Deed to pay the ‘Settlement Sum’ of $269,000 in the manner prescribed by the deed, and that $154,000 of the Settlement Sum remains outstanding. The Liquidators seek enforcement of the Settlement Deed by the Court making orders that the Ofli Parties pay the plaintiffs the sum of $164,788.96 (being the amount outstanding plus interest to the date of the hearing). They also seek an order for costs on an indemnity basis.
The plaintiffs say that the Ofli Parties have not fully complied with the Settlement Deed. By the Enforcement Application, the plaintiffs seek to summarily enforce the Settlement Deed by application within this proceeding, in accordance with the principles set out in Roberts v Gippsland Agricultural & Earth Moving Contracting Pty Ltd.[1]
[1][1956] VLR 555 (Roberts).
For the reasons set out below, I will grant the Enforcement Application.
Materials relied upon
The Liquidators rely on the following materials:
(a)the affidavit of Shane Justin Cremin sworn 14 June 2024 (First Cremin Affidavit), which was sworn in this proceeding in support of the application for relief pursuant to s 477(2B) of the Corporations Act 2001 (Cth) (the Act) heard on 18 July 2024;
(b)the affidavit of Mr Cremin sworn 6 June 2025 in support of the Enforcement Application (Second Cremin Affidavit);
(c)the affidavits of Ariel Currie Borland affirmed 7 May 2025 and 15 May 2025 in support of the Enforcement Application. Ms Borland is a partner with Mills Oakley, solicitors for the plaintiffs;
(d)written submissions dated 16 June 2025; and
(e)written reply submissions dated 18 June 2025.
The Ofli Parties partially oppose the Enforcement Application, as I will shortly explain. In so doing, they rely on the following materials:
(a)Ms Ofli’s affidavit sworn 30 May 2025 (Ofli Affidavit); and
(b)written submissions dated 16 June 2025.
In addition, counsel for the plaintiffs and for the Ofli Parties made oral submissions at the hearing of the Enforcement Application on 19 June 2025.
Background
On 21 December 2023, I heard the trial of this proceeding and gave judgment at the conclusion of the hearing (Judgment). My reasons for judgment were published the next day, in Re RM Road Services Pty Ltd (in liq) & Ors (Reasons).[2] The background to this proceeding, up until the point of Judgment, is set out in the Reasons. Familiarity with those reasons is assumed and defined terms used in these reasons have the same meaning as those set out in the Reasons unless otherwise stated.
[2][2023] VSC 794.
In short, by the Judgment, relevantly:
(a)the Liquidators were appointed as receivers of the property of the Trust;
(b)the defendants were required to deliver up the property[3] of the Roadmaster Companies by 5pm on 22 December 2023 at an address nominated in writing by the Liquidators (Delivery Up Order);
(c)the Liquidators were authorised to enter the premises of the Roadmaster Companies for the purposes of taking possession of the property of the Roadmaster Companies;
(d)the defendants were restrained from interfering with the Liquidators taking possession of the property of RM Line Marking; and
(e)Mr Khabbaz was ordered to pay the plaintiffs’ costs of the proceeding on an indemnity basis, and Ms Ofli was ordered to pay the plaintiffs’ costs of the proceeding up to and including 17 December 2023 on an indemnity basis and from 18 December on a standard basis (Cost Order).
[3]The Line Marker (defined in paragraph 11 below) was specified in a schedule to the order.
Following delivery of the Judgment, the Liquidators filed a summons on 22 January 2024 charging the defendants with contempt, and particulars of the charge were filed on 27 February 2024 (Contempt Summons). The Contempt Summons concerned the defendants’ failure to deliver up a particular asset, being a White 2019 Home Made Line Marker (with the registration and VIN specified) owned by RM Line Marking (the Line Marker). On 14 February 2024, Mr Khabbaz informed the Liquidators that the Line Marker may have been stolen.
On 22 March 2024, at the parties’ request I made orders vacating the hearing of the Contempt Summons fixed for 16 April 2024 and referred the proceeding to a judicial mediation before an associate judge, to be concluded by 29 May 2024. The parties attended mediation on 16 and 23 May 2024 before Gobbo AsJ. There was no joint session on either day of the mediation, and the Ofli Parties were represented by their then solicitor Boris Pogoriller on both days and Joshua Kohn of counsel on the second day. An agreement was reached on 30 May 2024 after further negotiations between the solicitors (including approximately 9 drafts of the deed), and was recorded in the Settlement Deed.
The Settlement Deed provided for the manner and timing of the payment of the Settlement Sum, with the final payment due by 31 July 2025. Due to the obligations contained in the Settlement Deed, under ss 477(2A) and (2B) of the Act the Liquidators required either a resolution of creditors or an order of the Court approving them entering into the Settlement Deed. Obtaining such approval was a condition precedent to the Settlement Deed. The Liquidators applied to the Court for such approval (Approval Application), which I granted on 18 July 2024 (Approval Order). The other matters section in the Approval Order set out, in brief compass, my reasons for granting the Approval Application.
Ms Ofli deposes that on around 16 September 2024 she was informed by Mr Khabbaz that “he had found and secured” the Line Marker.[4] No detail as to this is provided. Ms Ofli also deposes that on 16 September 2024 she sent a text to Mr Pogoriller confirming that Mr Khabbaz had located the machine and requesting that he contact the Liquidators to arrange delivery.[5] A copy of Ms Ofli’s text message to Mr Pogoriller is exhibited to the Ofli Affidavit, which relevantly states:[6]
Sam [Mr Khabbaz] has now located the line marker.
So that we are complying with [the Delivery Up Order], please make enquirers [sic] with the liquidator and advise where the line marker should be delivered to.
Further, as the line marker has now been located, and this was not a matter which was contemplated or covered off in the deed – the amount due on 30 September for the replacement of the line marker should be removed and we should not be obliged to pay same. Please seek the liquidators consent in advance.
[4]Ofli Affidavit, [14].
[5]Ofli Affidavit, [14].
[6]Exhibit SO-1, p. 1.
On 24 September 2024, Mr Pogoriller informed Mills Oakley via email that Mr Khabbaz had recovered the Line Marker.[7] That email relevantly referred only to the recovery of the Line Marker and said nothing about the payment due on 30 September or seeking the Liquidators’ consent to the Ofli Parties not being obliged to make the payment.
[7]Second Cremin Affidavit, [36], exhibit SJC-6, p. 435-6.
The Line Marker was delivered up to the Liquidators and was subsequently realised by them for a sale price of $90,000, the net proceeds of which were $80,532.50.
Relevant terms of the Settlement Deed
Recital J to the Settlement Deed states that the Liquidators claim that the defendants have failed to comply with the Delivery Up Order. Recital K to the Settlement Deed states that the Liquidators filed the Contempt Summons “seeking orders that the defendants be found in contempt and pay reparations to RM Line Marking for the loss suffered” and recital L states that the defendants oppose that relief.
Recital M to the Settlement Deed recites as follows:
The Liquidators claim that:
(i)the Defendants have acted in contempt of Court by failing to comply with the Delivery Up Order and that the Defendants must pay reparations to RM Line Marking for the loss suffered;
(ii)the Plaintiffs are entitled to payment of their costs in and associated with the Proceeding including costs payable to the Cost Order
(Liquidators’ Claims).
Recital N to the Settlement Deed states that the parties have agreed to resolve the Liquidators’ Claims and the Proceeding[8] in accordance with the terms set out in the deed, without admission of liability, in order to avoid the uncertainty, cost, inconvenience, delay and expense of litigation.
[8]Defined in clause 1 of the Settlement Deed as proceeding S ECI 2023 05131, ie this proceeding.
Clause 1.1 of the Settlement Deed contains the definitions used in the deed, which relevantly include the following:
(a)Settlement Sum means $269,000;
(b)Insurance Sum means the greater of the sum paid for the Insurance Claim Proceeds or $110,000;
(c)Insurance Claim Proceeds means any proceeds recovered for an insurance claim made in relation to the Line Marker;
(d)Insurer means Zurich Australian Insurance Limited;
(e)Default Sum means the amount of the Settlement Sum less any amounts already received by the plaintiffs;
(f)Payment Date means 30 September 2024;
(g)Instalment Payments means the amount defined at Schedule 1; and
(h)Instalment Payment Dates means the dates set out in Schedule 1.
Clause 6.1 of the Settlement Deed provides that:
The Ofli Parties irrevocably acknowledges and agrees, and will do all things reasonably required to ensure, that any Insurance Claim Proceeds must be paid to the Plaintiffs in full and without deduction or set-off of any kind whatsoever.
Clause 7 of the Settlement Deed deals with payment of the Settlement Sum. Relevantly, it provides:
7.1 Payment of Settlement Sum
The Ofli Parties must pay the Settlement Sum to the Plaintiffs by paying the Insurance Sum and the Instalment Payments in accordance with this clause 7 of this Deed in full and final settlement of the Liquidator’s Claims and the Proceeding.
7.2 Payment of Instalment Payments
(a) The Ofli Parties must pay the Instalment Payments to the Plaintiffs in full and without deduction or set-off of any kind whatsoever, on or before each Instalment Payment Date.
(b) The Ofli Parties must pay each Instalment Payment on or before 5:00pm on each of the Instalment Payment Dates.
(c) The Instalment Payments must be paid by way of electronic funds transfer to the Bank Account.
(d) If the Instalment Payments made and the Insurance Sum paid to the Plaintiffs is of equal to or exceed the Settlement Sum, no further Instalment Payments are required.
7.3 Payment of Insurance Sum
(a) The Ofli Parties must pay the Insurance Sum on or before 5:00pm on the Payment Date.
(b) In the event the Insurance Claim Proceeds exceed the amount of $110,000, then the final Instalment Payment shall be reduced by any excess up to $8,870.
(c) The Liquidators and/or RM Line Marking shall pay any required excess directly to the Insurer.
Thus, the Settlement Sum comprised two components: the Insurance Sum, due to be paid by 30 September 2024, and the Instalment Payments.
The releases are dealt with in clause 9 of the Settlement Deed:
(a)Clause 9.1 provides that “subject to and conditional upon the Ofli Parties paying the Settlement Sum in full in accordance with clause 7, the Plaintiffs release and forever discharge the Ofli Parties from the Liquidators’ Claims.”
(b)Clause 9.2 provides that “On and from the Execution Date, the Ofli Parties release and forever discharge the Liquidators from all claims the subject of the Proceeding.” Execution Date is defined as the date on which the deed is exchanged between the parties.
Clause 11 of the Settlement Deed provides for the parties’ rights and obligations in the event of a default. It provides as follows:
11.1 In the event that the Ofli Parties fail to pay any part of the Settlement Sum to the Plaintiffs in accordance with clause 7, and any such failure is not remedied within 5 days, the whole of the Default Sum shall immediately become due and payable (without any demand thereof), and:
(a) The Plaintiffs shall forthwith be at liberty to:
(i) enter judgment by consent against the Ofli Parties for:
(A) the whole amount of the Default Sum then outstanding;
(B) interest on the Default Sum then outstanding at the rate specified under the Penalty Interest Rates Act, 1983 from the day of default, and
(C) the costs of that application, and any costs associated with this proceeding, on an indemnity basis;
(ii) conclusively prove the default of the Ofli Parties and the amount of the Default Sum then outstanding (including interest) by an affidavit of the solicitor for the Plaintiffs based on information and belief; and
(iii) tender to the Court, without further proof or authentication, this Deed as conclusive evidence of the irrevocable consent of the Ofli Parties to such application, reinstatement and judgments as aforesaid.
Clause 16.6 of the Settlement Deed contains an ‘entire agreement’ clause as follows:
This Deed embodies the entire agreement and understanding between the Parties concerning its subject matter and succeeds and cancels all other agreements and understandings concerning the subject matter of this Deed and any warranty, representation, guarantee or other term and condition of any nature not contained in this agreement is of no force or effect.
Alleged breaches of the Settlement Deed and the parties’ positions
Unpaid Instalment Payments
There is no dispute that the Ofli Parties did not pay the Instalment Payment of $10,000 which was due on 30 April 2025. It is common ground that the amount of $44,000 remains to be paid in respect of the Instalment Payments.
The Ofli Parties accept that:
(a)they breached clause 7.2 of the Settlement Deed by failing to pay the Instalment Payment that was due and payable on 30 April 2025;
(b)the breach referred to in (a) above was not remedied within 5 days as required by clause 11.1;
(c)by reason of that default, the Default Sum became immediately due and payable; and
(d)the Default Sum is at least $44,000, being the total unpaid balance of the Instalment Payments.
The Ofli Parties paid the balance of the Instalment Payments into their solicitors’ trust account. They say they made that payment in good faith and to safeguard the funds pending resolution of the matter in dispute.
Notwithstanding this, they accept that judgment should be entered against them in the sum of $44,000 plus interest at the rate specified under the Penalty Interest Rates Act 1983 (Vic).
Given the position now taken by the Ofli Parties in respect of the unpaid Instalment Payments, I need say no more about it, other than to point out that I do not accept the basis upon which the Ofli Parties sought to withhold the $44,000 from the Liquidators. The matters raised in the Ofli Affidavit, which are styled as offsetting claims, do not provide any excuse for not having paid the $44,000 to the Liquidators, as clause 7.2(a) of the Settlement Deed provides that the Instalment Payments are to be paid in full and without deduction or set-off of any kind. These matters were not referred to in the Ofli Parties’ written or oral submissions, and were not pressed in respect of the Enforcement Application.
The Insurance Sum
There is no dispute that the Ofli Parties did not pay the Insurance Sum by 30 September 2024 (or at all) by any payment of money to the Liquidators.
I will deal with the parties’ submissions on this in more detail shortly, however at this point it is convenient to note their positions in brief.
The Liquidators’ position can be simply stated: the Ofli Parties were required to pay the Liquidators the Insurance Sum of $110,000 by 30 September 2024. They did not pay it by then, or at all. Therefore, they are in breach of clause 7.3(a) of the Settlement Deed.
The Ofli Parties deny that they are liable to the Liquidators for the Insurance Sum. In effect, they say that the Liquidators were not entitled to the benefit of both the Line Marker and the Insurance Sum.
Their primary position is that on the proper construction of the Settlement Deed, the Insurance Sum is not due and owing and does not form part of the Default Sum, primarily due to an alleged implied term. The Ofli Parties say that the Court should imply a term into the Settlement Agreement to the effect that “if the Line Marker was found and delivered to the Liquidators in compliance with the Delivery Up Order, that would satisfy the obligation to pay the Insurance Sum” (Alleged Implied Term).
They also rely on restitutionary principles to contend that the Insurance Sum is not payable, and that there are implied terms in the Settlement Deed as to cooperation between the parties which the Liquidators have breached. These will be explained later.
The Ofli Parties’ position is that the question of their liability for the Insurance Sum cannot safely and fairly be determined in a summary proceeding.
Relevant principles regarding summary enforcement of settlement agreements
The Court has jurisdiction to summarily enforce a settlement agreement by application within an existing proceeding.
This summary procedure was described in detail by Smith J in Roberts:[9]
[9]Roberts, 562-4 (citations omitted).
(a)The Court would ordinarily leave a party to proceed by separate bill if the agreement involved matters extraneous to the suit compromised. And it regarded an agreement as falling within this general category:
(i)if it dealt with property as to which no question was raised in the suit, or
(ii)if it provided for things to be done which went beyond the ordinary range of what the Court would order in such a suit, or
(iii)if its enforcement involved giving effect to equities of a different nature from those involved in the suit, or
(iv)if there were parties to the agreement who were not parties to the suit.
(b)On the other hand in cases not falling within this first general category the Court would ordinarily enforce the agreement in the suit compromised. In particular this was so if the agreement related solely to the conduct or prosecution of that suit, or to the staying or dismissal thereof, or to the granting of the whole or part of the relief claimed therein or to the doing of that which the suit was brought to enforce.
(c)For the purpose of deciding which of these two general categories a case fell within, the Court did not look merely at the particular obligations sought to be enforced. It looked also at the obligations of the applicant, so far as justice required that the application should not be granted without ensuring that they too would be performed. But it would disregard altogether obligations already fully performed. It may be observed that in order to ensure the performance of obligations by the applicant the Court could make an order conditional upon such performance.
(d)If there was a substantial question to be determined as to what were the terms of the agreement, or as to whether it was valid or specifically enforceable, as for example where a substantial case was put forward of material mistake or of other circumstances such as would afford a defence to a suit for specific performance, a party would ordinarily be left to proceed by separate bill so that the matters raised might be fully investigated.
(e)The fact that the only outstanding obligation under the agreement of compromise was one for the payment of an ascertained sum of money did not preclude the Court from enforcing the agreement in the suit.
Further, Smith J stated in Roberts that in deciding whether justice can be done under the summary procedure the Court needs to consider a variety of matters involving questions of degree. These include the extent to which extraneous matters are involved, how substantial the questions are to be determined, to what extent questions of credibility are likely to arise, and whether pleadings and discovery may be desirable.[10] The critical question is whether the Court can be satisfied that justice can be done by summary enforcement of a settlement agreement.[11]
[10]Roberts, 564.
[11]Roberts, 562.
In Seachange Management Pty Ltd & Anor v Pital Business Pty Ltd,[12] the Court of Appeal said that while:[13]
…the power summarily to enforce a compromise is discretionary and is wider now than once was the case, it is not to be invoked unless the court is ‘clearly satisfied that justice can be done’; and whether justice can be done is a question of degree. Consistently with the equitable origins of the power, one must weigh among other competing considerations the extent to which enforcement would involve extraneous matters, how substantial the questions to be determined as a precursor to enforcement may be, and procedural considerations like the desirability of pleadings and discovery and substantial cross-examination.
[12][2009] VSCA 139 (Maxwell P and Nettle JA) (Seachange).
[13]Seachange, [40].
Roberts and Seachange have been followed in numerous cases.[14]
[14]By way of example, see Ugrinovski v Naumovski [2018] VSC 437; O’Brien and Fourth Taljan Pty Ltd v O’Brien & Nicholls Pty Ltd and Ors [2001] VSC 411; Barratt v Rees [2014] VSCA 327.
In Bell v Knight 34 Langdon Road Pty Ltd, Daly AsJ reviewed the relevant authorities and succinctly stated that additional matters relevant to the question of whether a court can be satisfied that justice can be done by the summary enforcement of a settlement agreement include the following:[15]
(a) whether the settlement agreement concerned included a term allowing the reinstatement of the proceeding and the entry of judgment upon default;
(b) whether all interested parties were before the court;
(c) whether the facts were uncontested and/or whether there was any dispute about quantum, and, to the extent there were such disputes, whether the resolution of those disputes turned upon the credibility of witnesses;
(d) whether requiring the issue of a new proceeding would cause further delay and expense; and
(e) whether there has been any unexplained delay on the part of the applicant for summary enforcement in seeking relief.
[15][2022] VSC 497, [57] (citations omitted) (Bell).
I gratefully adopt that summary.
The plaintiffs’ submissions
As the plaintiffs’ written submissions were provided after the Ofli Affidavit had been filed and served but prior to the Ofli Parties’ written submissions, they had not yet had the benefit of seeing precisely how the Ofli Parties put their position. It appears that the plaintiffs apprehended that the Ofli Parties would argue for rectification of the Settlement Deed.
The plaintiffs refer to paragraph 13 of the Ofli Affidavit, where she asserts that there was a common understanding between the parties that the obligation to pay the Insurance Sum was in substitution of the obligation to deliver the Line Marker to the Liquidators. The plaintiffs deny that assertion for the following reasons:
(a)The obligation to pay the Insurance Sum is clear and unambiguous. The payment obligation at clause 7.3(a) is not conditional. The Ofli Parties are required to pay the “Insurance Sum” which is the greater of the insurance proceeds received and $110,000. No insurance proceeds were ever received, such that the Ofli Parties were and are liable to pay $110,000. There is nothing in the Settlement Deed that relieves the Ofli Parties of liability in the manner they contend.
(b)Ms Ofli’s apparent understanding at the time of mediation is inconsistent with her subsequent actions: in particular, it would not be necessary to seek “the liquidators consent” to not pay the Insurance Sum upon recovery of the Line Marker, as she had instructed Mr Pogoriller to do, if she was proceeding on a common understanding with the Liquidators that one obligation was in substitution for the other.
(c)Mr Cremin gives comprehensive evidence of his understanding at the time of mediation and prior to execution of the Settlement Deed. His understanding was that, as the Ofli Parties elected not to purchase the Line Marker, then it would be available as an asset in the liquidation should it ever be recovered.
(d)In order to make out a case of rectification based on common mistake, the Ofli Parties must establish by clear evidence that the Settlement Deed fails to record what was the common intention of the parties.[16] The only evidence relied on by Ms Ofli is a bare assertion that she “would not have agreed to a term which required [her] to pay a monetary sum to the Plaintiff in addition to delivering up the machine”. That is insufficient.
(e)To the extent the assertion relies on the ‘collateral benefits principle’, which is a common law principle in the assessment of damages,[17] it is irrelevant because the Liquidators sue in respect of a debt.
[16]See, for example, Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 349–50 per Mason J (with whom Menzies J agreed).
The plaintiffs note that the Ofli Parties were represented by solicitors and counsel at the mediation, before an associate judge, and the Settlement Deed was subsequently negotiated between solicitors. There is no evidence from Mr Pogoriller, who represented Ms Ofli at the mediation. The Ofli Parties also gave the usual warranties and representations that they received legal advice on the Settlement Deed, and that the Settlement Deed is binding upon them according to its terms.
The plaintiffs submit that the considerations identified in Bell as set out at paragraph 44 above are met, as:
(a)the parties to the Settlement Deed were parties to the action;
(b)the Settlement Deed forms part of the calculus of the proceeding, having been reached following a mediation before an associate judge to whom it was referred in this proceeding, and having been approved by the Court pursuant to s 477 of the Act;
(c)the remedy sought is a simple debt;
(d)the terms of the Settlement Deed provided for the entry of judgment and reinstatement by consent; and
(e)the applicants are liquidators of asset-poor companies.
The Ofli Parties’ submissions
The Ofli Parties’ primary submission is that there is a substantial issue of construction of the Settlement Deed to be determined, being the necessity to imply a term into the deed, and that this cannot be determined on a summary basis. They say that the plaintiffs’ construction fails to give proper regard to the essential characteristics of the Settlement Deed.
Construction of the Settlement Deed
The Ofli Parties submit that it can readily be accepted that the Settlement Deed does not expressly contemplate a situation whereby the Line Marker was recovered and conveyed to the Liquidators. The Enforcement Application is premised on the notion that the deed’s silence on this matter necessarily means that matters must lie where they fall. That contention cannot be accepted.
The Ofli Parties say that the constructional choice facing the Court is to determine whether the recovery of the Line Marker was a contingency that was not expressly provided for in the contract because the contractual intention of the parties was to let the risk lie where it falls, or whether it is a contingency which it can be presumed that the parties intended to deal with in a particular way. If the latter, the presumed intention of the parties can be given effect through the implication of a term. The choice was described by Lord Hoffman in Attorney General of Belize v Belize Telecom Ltd as follows:[18]
The question of implication arises when the instrument does not expressly provide for what is to happen when some event occurs. The most usual inference in such a case is that nothing is to happen. If the parties had intended something to happen, the instrument would have said so. Otherwise, the express provisions of the instrument are to continue to operate undisturbed. If the event has caused loss to one or other of the parties, the loss lies where it falls.
In some cases, however, the reasonable addressee would understand the instrument to mean something else. He would consider that the only meaning consistent with the other provisions of the instrument, read against the relevant background, is that something is to happen. The event in question is to affect the rights of the parties. The instrument may not have expressly said so, but this is what it must mean. In such a case, it is said that the court implies a term as to what will happen if the event in question occurs. But the implication of the term is not an addition to the instrument. It only spells out what the instrument means.
[18][2009] UKPC 10, [17]-[18] (Belize).
Determining which category applies requires a value judgement to be made. That value judgement has been described as “fraught” but, critically, it “must proceed from the express terms of the contract, their business context and the contractual purpose they manifest”.[19]
[19]ASC AWD Shipbuilder Pty Ltd v Ottoway Engineering Pty Ltd (2017) 129 SASR 122, [19] (ASC AWD Shipbuilder).
The Ofli Parties submit that it must be borne in mind that the primary task facing the Court on this application is not, at least in the first instance, to determine which of those constructional choices is the right one. It is to determine whether it is possible and appropriate, consistently with the dictates of justice, to decide that matter in a summary way.
The Ofli Parties contend that the Settlement Deed falls into the second category enumerated by Lord Hoffman in Belize. The text, context and purpose of the Settlement Deed permits the Court to readily infer that the parties intended that, if the Line Marker was found and delivered to the Liquidators in compliance with the Delivery Up Order, that would satisfy the obligation to pay the Insurance Sum. A term is to be implied in the Settlement Deed to that effect.
It is necessary to turn first to the express terms and context of the Settlement Deed. As has been emphasised, “it is only after the process of construing the express words is complete that the issue of an implied term falls to be considered”.[20]
[20]Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd [2015] UKSC 72, [38].
The Ofli Parties submit that the ‘known setting’ or context in which the Settlement Deed was negotiated and executed included the following matters:
(a)the existence of the Delivery Up Order, which was extant at the time of the Settlement Deed;
(b)the claim that was being advanced by the Liquidators at the mediation was a claim for the recovery of the Line Marker which the Liquidators’ contended had not been returned in breach of the Delivery Up Order, or for compensation for the value of the Line Marker;
(c)the Liquidators also sought to recover their costs of the proceeding;
(d)the Ofli Parties contended that the Line Marker had been stolen. An insurance claim had been submitted in that regard. There is no evidence to suggest that the allegation of theft, or the insurance claim, was improper or false; and
(e)the insurance claim was on foot but no decision on indemnity had been made as at the date of the deed.
In this regard, the Ofli Parties say that the claims that were advanced by the Liquidators in the proceeding, and that were therefore the subject of consideration at the mediation, were identified in the First Cremin Affidavit as follows:[21]
(a)the Cost Order made against the Ofli Parties, which the Liquidators valued at $143,656.21;
(b)“reparations” for the alleged contempt, which constituted the value of the Line Marker. The Liquidators assessed the value of the Line Marker, and therefore this claim, at between $80,000 to $150,000; and
(c)the Liquidators’ costs of enforcing the Delivery Up Order (which included the costs of the Contempt Summons), which were estimated to be $54,847.46 on the standard basis.
[21]First Cremin Affidavit, [24].
The Ofli Parties contend that the Settlement Deed did not impose a simple obligation to pay a defined settlement sum by way of specific instalments. The drafter could easily have drafted the deed in that way if that is what was intended. Instead, the Settlement Sum was to be paid by way of two separate and distinct obligations: the Insurance Sum and the Instalment Payments.
The Ofli Parties say that two observations can be made about the Insurance Sum:
(a)First, it was expressly and directly tied to the notion of the recovery by the Ofli Parties of insurance proceeds in respect of the insurance claim made for the loss of the Line Marker. The primary obligation was to do all things reasonably necessary to ensure that any insurance proceeds were paid to the Liquidators.
(b)Second, the minimum sum guaranteed by the Ofli Parties, being $110,000, was the mid-point of Mr Cremin’s assessment of the value of his claim in respect of the Line Marker.
The Ofli Parties submit that a reasonable businessperson, with knowledge of the known setting and purpose of the Settlement Deed, would regard the obligation to pay the Insurance Sum as relating specifically to the compromise of the plaintiffs’ claim for compensation for the loss of the Line Marker. In other words, the obligation to deliver up the Line Marker (or to pay reparations for a failure to do so) was substituted with an obligation to remit to the plaintiffs the proceeds of any insurance claim in relation to the Line Marker. It was if, and only if, no insurance proceeds were obtained by the payment date (or the proceeds did not equal or exceed $110,000) that the Ofli Parties were obliged to make any payment in respect of the Insurance Sum.
The release by the plaintiffs did not operate unless and until the Settlement Sum was paid in full. The Ofli parties contend that the Settlement Deed was therefore an accord executory and the plaintiffs’ original cause of action (ie, their rights under the Delivery Up Order and to enforce that order) remained and remains extant. They argue that as a consequence, it remained open to them to comply with the Delivery Up Order, which they say they did after the Line Marker was recovered by Mr Khabbaz and delivered to the Liquidators.
The Ofli Parties submit that a reasonable businessperson construing the terms of the Settlement Deed would not have regarded the Settlement Deed as entitling the Liquidators to the benefit of the Instalment Payments and the Insurance Sum and (if recovered) the Line Marker. The obvious purpose of the Settlement Deed, as an accord executory, was to impose the obligation to remit the Insurance Proceeds (and/or to pay the Insurance Sum if required). This was in satisfaction and substitution of the obligation to comply with the Delivery Up Order or to pay compensation for a failure to do so.
They say that the parties cannot possibly be regarded as having made a deliberate contractual choice where the Liquidators would simply enjoy the windfall gain of having the benefit of the Delivery Up Order and the payment obligation they agreed to accept in substitution of their rights under that order. This would be so if the Delivery Up Order was complied with before the obligation to pay the Insurance Sum crystallised. The Ofli Parties submit that that would work a commercial absurdity. As the recitals make clear, the purpose of the Deed was to compromise the Liquidators’ Claims to avoid the “uncertainty, cost, inconvenience, delay and expense of litigation”. On the contrary construction, the plaintiffs will have compromised nothing.
The Ofli Parties submit that the plaintiffs’ construction produces a result that is different to the bargain which was struck: the plaintiffs would get the Settlement Sum, the Line Marker, the releases, and avoid the costs and inconvenience of further litigation; whereas the Ofli Parties would get a release that was of no commercial value to them.
The Ofli Parties submit, and I accept, that the requirements for the implication of a term in fact are well settled. The test is stated in BP Refinery (Westernport) Pty Ltd v Shire of Hastings:[22]
… for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.
[22](1977) 180 CLR 266, 282-3 (BP Refinery).
The Ofli Parties submit that the Alleged Implied Term is reasonable and equitable because it best gives effect to the purpose of the bargain struck between the parties – being a compromise of the Liquidators’ Claims. It cannot be said to work an injustice against either party. The Liquidators get exactly what they bargained for. Nor can it sensibly be contended that such implication would contradict an express term or is not capable of clear expression.
The Ofli Parties say that the Alleged Implied Term is necessary to give business efficacy to the contract. In the absence of the term, the compromise struck by the Settlement Deed is undermined. It is also obvious – it can readily be inferred that, had the parties turned their mind to the contingency, they would have dealt with the contingency in a manner consistent with the Alleged Implied Term.
It is convenient to note at this juncture that in the course of oral submissions, counsel for the Ofli Parties submitted that the plaintiffs were incorrect to say that the Ofli Parties should be held to the Alleged Implied Term. Counsel for the Ofli Parties submitted that the content of the term to be implied was to be found by the Court, and it may be that the implied term should be that any amount obtained by the Liquidators upon realisation of the Line Marker following its delivery up should be credited to the Insurance Sum.
The Ofli Parties accept that issues of business efficacy and obviousness might be contestable by the Liquidators, but they say this is not to the point. Rather, the question is whether the Court should exercise a summary jurisdiction when the Ofli Parties clearly have a real prospect of establishing the existence of the Alleged Implied Term.
The Ofli Parties submit that for that reason, the Court cannot be satisfied that justice can be done by determining the constructional issues in a summary way. At the very least, such a determination could only be made following a full trial, including:
(a)evidence from the legal representatives present at the mediation and who were primarily responsible for the negotiation and drafting of the Settlement Deed; and
(b)cross-examination, including of Mr Cremin in relation to the matters deposed to in his Second Affidavit.
Further alternative arguments made by the Ofli Parties
Total failure of consideration
A further basis upon which the Ofli Parties deny their liability for the Insurance Sum is unjust enrichment. In other words, if they were to pay the Insurance Sum, such funds would be money had and received to the use of the plaintiffs that would in turn be recoverable by the Ofli Parties on restitutionary principles.
The Ofli Parties submit that the factor that would render the retention by the Liquidators of both the Line Marker and the Insurance Sum unjust is a total failure of consideration. In the context of unjust enrichment, consideration does not have its technical meaning but refers more broadly to the value received by one party and provided by the other. As the High Court noted in Equuscorp Pty Ltd v Haxton:[23]
This Court has, on more than one occasion, described failure of consideration in terms set out by the late Professor Birks: ‘Failure of the consideration for a payment … means that the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself.’
[23][2012] HCA 7, [31] (citations omitted).
The Ofli Parties contend that in this context, the reason for the payment of the Insurance Sum was the inability to comply with the Delivery Up Order by providing the Line Marker to the Liquidators. The value received by the Ofli Parties under the Settlement Deed, and given by the Liquidators, was the benefit of the release (or, at least, the opportunity to realise the benefit of the release). When the Line Marker was recovered and conveyed to (and accepted by) the Liquidators, there was a total failure of consideration in the sense that the state of affairs contemplated as the basis of the payment of the Insurance Sum had failed. Once the Line Marker was delivered up, the release ceased to have any value and the consideration passed by the plaintiffs (i.e. the release) in exchange for the Insurance Sum became illusory. Payment of the Insurance Sum would deprive the Ofli Parties of the value they bargained for and enrich the plaintiffs through the windfall gain of receiving both the Line Marker and the Insurance Sum.
The Ofli Parties acknowledge that it is often observed that to engage restitutionary principles, the failure of consideration must be total. The failure of consideration cannot be said to be total here because both the Ofli Parties and the plaintiffs continue to enjoy other benefits afforded by the Settlement Deed. However, the principles do not operate to deny relief where there is a distinct and separate part of the total consideration that can be identified and in relation to which the consideration has failed.[24] The Insurance Sum can be seen as distinct and separate obligations referable to the allegation in relation to non-delivery of the Line Marker. If the plaintiffs were to now have both the Line Marker and the Insurance Sum, they would be unjustly enriched- the unjust factor being the total failure of consideration.
[24]Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, [14]-[16].
Cooperation terms
As a further alternative, the Ofli Parties submit via their written submissions that there were implied terms of the Settlement Deed that:
(a)the Liquidators would cooperate and do all things that were necessary to enable the Ofli Parties to have the benefit of the Settlement Deed; and
(b)the Liquidators would not hinder or prevent the fulfilment of the purpose of the promises made under the Settlement Deed.
They say that such implied terms might be described as more conventional, at least in the sense that they are commonly implied into commercial contracts.[25]
[25]For example, see Selak v National Tiles Co Pty Ltd & Ors (No 4) [2024] VSC 438, [236]-[243] and the discussion of the authorities therein.
The Ofli Parties contend that the benefit of the Settlement Deed to them was the opportunity to obtain the release from the Liquidators’ Claims; that is, being relieved from those claims. By accepting possession of the Line Marker, selling it, and not crediting the delivery (or the proceeds) to the Insurance Sum, the Liquidators breached the Cooperation Terms. That is because it deprived the Ofli Parties of the benefit, or the whole of the benefit, of the Settlement Deed.
It should be noted that at the hearing, counsel for the Ofli Parties stated that this argument was not their best point, and he relied only on his written submissions (summarised above) in respect of it.
Plaintiffs’ submissions in reply
In reply, the plaintiffs submit that the issue before the Court is narrow. It is whether justice can be done by determining, via a summary procedure, whether the Alleged Implied Term should be implied into the Settlement Deed.
The summary enforcement procedure is sufficient
The plaintiffs submit that it would be repugnant to the Civil Procedure Act 2010 (Vic) (CPA) to require the Liquidators to commence separate proceedings, because amongst other reasons, there is no substantial question to be determined – let alone one that is capable of being affected by any further evidence.
The plaintiffs address the two matters relied on by the Ofli Parties to justify a full trial (as set out at paragraph 71 above).
They say that at the time of receiving the Ofli Affidavit, they perceived that the Ofli Parties sought to advance a claim based on the principles of rectification. However, the Ofli Parties now advance a case based on the principles of contractual construction relevant to implied terms. The framing of the Ofli Parties’ case on such principles delineates the scope of the evidence to which the Court may properly have regard: evidence of surrounding circumstances when the agreement was made is admissible, but only if it consists of facts known to both parties.[26]
[26]ASC AWD Shipbuilder, [6] (Kourakis CJ), citing Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 352 (Mason J) (Codelfa).
The Settlement Deed was reached following mediation (at which the plaintiffs and their solicitors did not deal directly with Ms Ofli) and otherwise through correspondence between the parties’ solicitors. The correspondence is before the Court, and Ms Borland has made affidavits. The Ofli Parties have not called or caused a subpoena to be issued to Mr Pogoriller, although it was open for them to do so. The plaintiffs submit that while the Ofli Parties say that the legal representatives should give evidence, they fail to explain how their evidence (which must accord with the parol evidence rule) would assist the Court to determine the narrow issue of construction concerning the Settlement Deed.
To similar effect, the Ofli Parties have not applied for leave to cross-examine Mr Cremin and nor have they explained how cross-examination would be of any utility. Consistent with the accepted principles of construction, the plaintiffs submit that the admissible evidence is evidence of the facts known to Mr Cremin which were also known to Ms Ofli. To the extent Ms Ofli wished to adduce evidence of her knowledge, she has done so. The only factual dispute apparent on the material is whether Mr Cremin subjectively held the “common understanding” said to have been attributed to him by Ms Ofli. In circumstances where the Ofli Parties advance a case based on the principles of construction, and disavow a rectification suit, any challenge to that evidence would be arid and unproductive.
The plaintiffs submit that otherwise, the Ofli Parties:
(a)appear to be in a position to fulsomely argue the merits of their Alleged Implied Term;
(b)have not pointed to any other fact that warrants further examination by pre-trial processes; and
(c)by their conduct have produced immense costs in the liquidation, rendering it contrary to the tenets of the CPA to require separate proceedings.
No term should be implied into the Settlement Deed
As well as referring to the well-known passage from BP Refinery set out earlier in these reasons, the plaintiffs submit that the deficiency in the expression of the consensual agreement is caused by the failure of the parties to direct their minds to a particular eventuality and to make explicit provision for it.[27] As Mason J further said:[28]
“For obvious reasons the courts are slow to imply a term. In many cases, what the parties have actually agreed upon represents the totality of their willingness to agree; each may be prepared to take his chance in relation to an eventuality for which no provision is made. The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue. And then there is the difficulty of identifying with any degree of certainty the term which the parties would have settled upon had they considered the question.
[27]Codelfa, 346.
[28]Codelfa, 346.
The principles relevant to each requirement for implying a term were otherwise summarised by the Court of Appeal in Grocon Constructors (Victoria) Pty Ltd v APN DF2 Project 2 Pty Ltd,[29] which the plaintiffs adopt. On the application of those principles, the Ofli Parties cannot succeed in establishing an implied term.
[29][2015] VSCA 190, [137]-[148] (Santamaria, Kyrou and McLeish JA) (Grocon).
The Ofli Parties bear the onus of establishing the Alleged Implied Term. The plaintiffs submit that in the case of commercial contracts involving legal advisers and comprehensive negotiations, that onus is more difficult to discharge.[30] The Court must have regard to the objective context in which the Settlement Deed was negotiated and executed by the parties, including that:
[30]Barnes v Forty Two International Pty Ltd [2014] FCAFC 152, [128] (Siopis J); Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 8) [2022] FCA 1404, [193] (Beach J); Codelfa, 346.
(a)the Settlement Deed sought to bring an end to lengthy and highly adversarial litigation through which the plaintiffs had incurred significant costs;
(b)the Settlement Deed is a comprehensive document which forms one of three deeds that together record the terms of the settlement with the plaintiffs;
(c)the Settlement Deed is the product of two days of mediation before an associate judge, and negotiations between solicitors after mediation which produced approximately nine drafts; and
(d)at all material times – before, during, and after the mediation – the Ofli Parties had access to advice from a solicitor as well from counsel at the mediation;
(e)the Settlement Deed included clauses to the effect that, in the event of a default, the plaintiffs would be entitled to “conclusively prove the default” on affidavit and the Ofli Parties had given their “irrevocable consent” to judgment; and
(f)the Ofli Parties gave warranties – on which the plaintiffs relied – that:
(i)the Ofli Parties received legal advice regarding the subject matter of the Settlement Deed;
(ii)the Ofli Parties considered that the terms of the Settlement Deed were fair in all the circumstances; and
(iii)the terms of the Settlement Deed were binding upon the Ofli Parties according to its terms.
The plaintiffs submit that in the circumstances, the intention to be properly attributed to the parties was that they were not content to ‘leave matters to chance’. The litigation was extensive, and the negotiations addressed all manner of detail. The Settlement Deed was a detailed and prescriptive document which sought to account for potential eventualities that were in the contemplation of the parties.[31] It should not, therefore, be accepted that the parties would leave a matter of significance to an unspoken and undocumented assumption.
[31]For example, potential eventualities which were dealt with in the Settlement Deed included: the prospect that the Court would not grant s 477(2A) or (2B) approval, in which case alternate clauses would apply (clauses 4.3(c) and 4.5), or the eventuality of a default that would entitle the Liquidators to release from escrow a guarantee and security (clause 6.2), and the prospect the insurance sum exceeded $110,000 (clause 7.3(b)).
The plaintiffs say that it may be accepted that they sought to compromise their damages claim for loss of the Line Marker at the mediation. But they also maintained other claims against the Ofli Parties – and critically, they made an offer that the Ofli Parties purchase the Line Marker, which the Ofli Parties rejected. The premise on which the Settlement Deed was based is that the Line Marker remained property of RM Line Marking. This was Mr Cremin’s understanding, and it was apparent to Ms Ofli given her rejection of the offer. Hence, the Line Marker was not something that Ms Ofli could later ‘give up’ to relieve her of the payment obligation. The suggested implication is contrary to a matter the parties consciously considered, and then rejected, during their negotiations.[32]
[32]See Wellington v Huaxin Energy (Aust) Pty Ltd [2019] QSC 018, [121] (Jackson J) citing Codelfa, 352-3.
The plaintiffs then address the BP Refinery conditions.
The plaintiffs submit that the Alleged Implied Term is not reasonable and equitable, as no one knew what condition the Line Marker might be in should it be recovered. This proposed term would leave the plaintiffs vulnerable to receiving a Line Marker in lieu of payment of $110,000, regardless of its condition.
The plaintiffs submit that the Alleged Implied Term does not satisfy the threshold requirement that it is necessary to give business efficacy to the Settlement Deed. It may be that the application of the express words of the Settlement Deed is not advantageous to Ms Ofli – but implications that might be thought to be reasonable are not, on that account only, necessary.[33] The difficulty is that the Alleged Implied Term would fail to establish the contract that both parties must have intended. That is because, as the Liquidators sought and Ms Ofli accepts, the Liquidators required a minimum payment of $110,000. The Settlement Deed achieves this objective via a payment obligation with no element of conditionality or ambiguity. By contrast, all that is required, according to Ofli Parties, is that the Line Marker is “found and delivered” to the Liquidators. The problem with that implication is three-fold. First, it would cut across a fundamental understanding on which both parties proceeded. Secondly, it is not necessary to make the Settlement Deed workable – the Settlement Deed operates without conditionality or ambiguity to render the Ofli Parties liable to pay the Insurance Sum. Thirdly, the proposed term would have rendered the Liquidators vulnerable to receiving the Line Marker in lieu of payment – irrespective of it having been apparently stolen some six months earlier and in an entirely unknown condition. A liquidator has obligations to maximise the returns to creditors and would not accept such a term.
[33]Grocon, [142] and Feeney v Southstar Homes Pty Ltd [2024] VSCA 153, [106], [136] (McLeish JA, Niall JA and Osborne AJA).
In addition, and for related reasons, the plaintiffs submit that the suggested implication does not satisfy the requirements that it is so obvious that it goes without saying and that it is capable of clear expression. That is because it is impossible to identify a singular term which ought to be implied. It is trite that a term will not be implied if there is no degree of certainty that parties will have settled upon a particular term had they considered the question.[34] That is because a term is not so obvious it goes without saying if it is not possible to choose between competing formulations.[35] As Mason J said in Codelfa:[36]
This is not a case in which an obvious provision was overlooked by the parties and omitted from the contract. Rather it was a case in which the parties made a common assumption which masked the need to explore what provision should be made to cover the event which occurred. In ordinary circumstances negotiation about that matter might have yielded any one of a number of alternative provisions, each being regarded as a reasonable solution.
[34]Codelfa, 346.
[35]Servcorp WA Pty Ltd v Perron Investments Pty Ltd [2016] WASCA 79, [158] (Buss JA) citing Elliott v Reading [1999] WASCA 11 [37]–[41] (Ipp J, Malcolm CJ & Pidgeon J agreeing) and quoting Codelfa, 355-6.
[36]Codelfa, 355-6.
The plaintiffs submit that the “common assumption” was that the Line Marker was missing (whether or not because it had been stolen) and neither party expected that it would be recovered. Those circumstances “masked the need to explore” what would occur if the Line Marker were recovered. But contrary to the Ofli Parties’ submissions, in particular their articulation of the content of the Alleged Implied Term, there was not a singular way in which that might have been dealt with. There are instead various permutations that could have been carefully and deliberately negotiated between the plaintiffs and Ofli Parties had there been any expectation of the recovery of the Line Marker. They include the following:
(a)the first is the Alleged Implied Term asserted by the Ofli Parties: that delivery of the Line Marker would satisfy their obligation to pay the Insurance Sum;
(b)the second could have involved a conditional variant: that, in the event that the Line Marker was recovered, the Liquidators could elect to either seek payment from the Ofli Parties and disclaim the Line Marker to AESK, or take the Line Marker in substitution for the payment obligation;
(c)the third and fourth could have catered for the fact the Liquidators did not know of the condition of the Line Marker: that the Ofli Parties would only be relieved of their obligation to pay the Insurance Sum in the event that the Line Marker was in reasonable condition or derived proceeds above a certain sum; and
(d)the fifth could have catered for the position that the Liquidators required a minimum payment: that the proceeds of sale would be applied as a credit against the obligation to pay the Insurance Sum, with the Ofli Parties remaining bound to pay the balance up to $110,000. In other words, the alternative implied term posited at the hearing by counsel for the Ofli Parties.
The plaintiffs submit that the fundamental difficulty for the Ofli Parties is that the Alleged Implied Term (or any variant thereof) is inconsistent with the common understanding on which the Settlement Deed was comprehensively negotiated, executed by the parties, and then acted upon by the Ofli Parties in connection with the insurance claim. That is, that the Liquidators required a minimum payment amount. Now that they have identified a term as the term, it is too late for them to posit some other term that might accommodate that. The short point is that each of the posited terms could have catered for the eventuality which has now manifested itself, and it is impossible to identify which of those terms the parties would have – as a matter of certainty – settled upon had they consciously negotiated the issue.
The plaintiffs also rely on the principle that an implied term cannot contradict the express terms of the contract.[37] In this regard, they point to the “entire agreement” clause in the Settlement Deed and say that it could not be any clearer. Further, it is supported by the warranties and consents to judgment given by the Ofli Parties.
[37]Raphael Shin Enterprises Pty Ltd v Waterpoint Shepherds Bay Pty Ltd [2014] NSWSC 743, [72] (Sackar J).
Given the Ofli Parties accept that the Settlement Deed does not expressly contemplate a situation whereby the Line Marker was recovered, the plaintiffs say that the position, quite simply, is that the Settlement Deed does not – and cannot – make any provision for it.
The Ofli Parties’ alternative arguments should be rejected
In respect of the Ofli Parties’ argument based on unjust enrichment, the plaintiffs submit that:
(a)there has been no windfall to the Liquidators, having regard to the significant costs which they continue to incur;
(b)the argument relies on an assumption that the Line Marker formed part of the subject-matter of the Settlement Deed which, for the reasons above, it did not;
(c)the Liquidators have the benefit of a release from the Ofli Parties in any event; and
(d)even if the argument were to be accepted, the plaintiffs would remain entitled to the difference between the net sale proceeds of the Line Marker and the Insurance Sum.
In respect of the Ofli Parties’ argument based on implied terms of cooperation, the plaintiffs submit that irrespective of whether terms to that effect can be implied (which, in light of the above, they do not accept), such a term would not require the plaintiffs to sacrifice their own interests. This includes by acting as though their right to the Insurance Sum did not exist.[38]
[38]See Adaz Nominees Pty Ltd (as trustee for the Rado No 2 Trust) v Castleway Pty Ltd (as trustee for the Castleway Trust) 101 and Bensons Property Group Pty Ltd v Key Infrastructure Australia Pty Ltd [2020] VSCA 201, [118] (Whelan JA and Riordan AJA). Quoted with approval: Rossi Recycling Pty Ltd v Buckland Valley Pty Ltd [2022] VSC 467, [161] (Connock J).
Consideration
The Court must determine whether the plaintiffs’ entitlement to the Insurance Sum can be determined via this summary procedure or whether it requires a full trial. In order to do that, I must consider:
(a)the terms of the Settlement Deed, including the Ofli Parties’ contentions as to its construction and whether it contains the Alleged Implied Term;
(b)the alternative arguments advanced by the Ofli Parties to contend that they are not required to pay the Insurance Sum; and
(c)whether the matter meets the requirements for summary enforcement or whether a full trial is required.
Construction of the Settlement Deed
The primary issue here is whether the proper construction of the Settlement Deed is such that the Court should imply a term to the effect contended for by the Ofli Parties.
The Ofli Parties’ construction argument relies on their contention that there was a common assumption or a presumed intention between the parties that the Insurance Sum was to compensate the plaintiffs for the loss of the Line Marker. In that case, if the Line Marker was delivered to the Liquidators, then they were relieved of their obligation to pay the Insurance Sum. In other words, they say that there was a common assumption or a presumed intention that the Liquidators should receive either the Insurance Sum or the Line Marker, but not both. The Ofli Parties make a number of assertions as to what the reasonable person would take the parties to have intended when they entered into the Settlement Deed. I do not accept those assertions. The Ofli Parties say that the plaintiffs’ construction would lead to a commercially absurd result, which I disagree with.
In my view, this case falls within the first category identified by Lord Hoffman in Belize. That is, the recovery of the Line Marker was a contingency not expressly provided for in the Settlement Deed because the intention of the parties was to let the risk lie where it falls. It does not fall within the second category, as it is not a contingency which it can be presumed that the parties intended to deal with in a particular way.
Fundamentally, there is no evidence to support the common assumption asserted by Ms Ofli: that may have been her assumption, but it was not Mr Cremin’s. In any event, their subjective intentions are irrelevant: what matters is whether they had the common assumption relied upon by the Ofli Parties, objectively determined. The intention of the parties is to be ascertained in the first instance from the contract itself: in this regard, the Settlement Deed speaks for itself in terms of the obligation to pay the Settlement Sum in the manner provided for in the deed. To the extent that extrinsic evidence may be relied upon, the evidence adduced on the Enforcement Application does not support the Ofli Parties’ alleged common assumption either. Therefore, the recovery and delivery up of the Line Marker was not a contingency which it can be presumed that the parties intended to deal with in a particular way.
In this regard, the plaintiffs’ submissions as summarised at paragraph 96 above are compelling and must be accepted. It is clear from both the terms of the Settlement Deed and the evidence adduced by the parties that the Line Marker was missing and neither party expected it would be recovered. As the plaintiffs submit, there are a myriad of ways, rather than a singular way, in which the parties may have dealt with the contingency of the Line Marker being recovered, but they did not. The plaintiffs identify five possibilities at (a) to (d) of that paragraph, all of which it would be plausible to contend may have been negotiated and adopted by the parties. Again, they did not. It therefore cannot be presumed that the parties intended to deal with this contingency in a particular way. They neglected to do so.
The Ofli Parties’ contended during the course of argument that the Alleged Implied Term was but one way of giving effect to what they say was the common assumption which they should not be held to. However, this undermines their position that Lord Hoffman’s second category applies to this situation. That another formulation was proffered during the course of oral submissions further undermines the position that the parties should be presumed to have dealt with the contingency of the Line Marker being recovered in a particular way.
While the plaintiffs’ construction of the Settlement Deed may lead to an outcome which is better for them and worse for the Ofli Parties, in circumstances where the Line Marker was recovered and realised by the Liquidators for a gross amount of $90,000, that is not an outcome which is commercially absurd or which deprives the Ofli Parties of the benefit of the Settlement Agreement. Upon payment of the Settlement Sum, they would still obtain the benefit of the releases. Given that they had the Contempt Summons hanging over them, such that if that application continued, they were at risk of being found in contempt of court and may face imprisonment and/or a fine, there was still a benefit for them in the Settlement Deed. This was so even in the circumstances which ultimately came to pass. I reject the Ofli Parties’ submission that the plaintiffs’ construction of the Settlement Deed means that the Ofli Parties did not get what they had bargained for or that all they got was a release of no commercial value to them. The plaintiffs’ construction does not obliterate the compromise as the Ofli Parties contended.
I do not accept the Ofli Parties’ construction of the Settlement Deed. The provisions of the deed relied upon by the Ofli Parties do not support their contention that it was the Line Marker or the Insurance Sum but not both. In this regard:
(a)The submission that because the release given by the Ofli Parties to the plaintiffs in clause 9.1 did not become operative until the Settlement Sum had been paid in full. The submission that the Ofli Parties could simply comply with the Delivery Up Order instead of paying the Insurance Sum cannot be accepted. First, this is not what the Settlement Deed provides for. Second, and as the plaintiffs’ counsel submitted at the hearing, the Delivery Up Order was not capable of being complied with, since the time for delivery up had well passed. The premise for the Settlement Deed included that the Delivery Up Order had not been complied with and the Contempt Summons had been issued.
(b)There may be some merit to the Ofli Parties’ contention that the description in the Settlement Deed of what was being settled does not encompass broader claims by the plaintiffs, such as an increase in the costs of the liquidation by reason of the Ofli Parties. In this regard, the definition of Liquidators’ Claims is particularly important. However, recital N to the Settlement Deed records the agreement of the parties to resolve the Liquidators’ Claims and the Proceeding (emphasis added), which indicates that the settlement is not confined to the Liquidators’ Claims. This is reinforced by clause 7.1, which requires the Settlement Sum to be paid “in full and final settlement of the Liquidators’ Claims and the Proceeding” (emphasis added).
(c)It is clear from the provisions of the Settlement Deed, in particular clause 7, that the Liquidators’ Claims and the Proceeding were to be settled by the Ofli Parties’ payment of the Settlement Sum, comprising the Instalment Payments and the Insurance Sum. There is nothing in the terms of the deed which provide for the settlement to be effected by payment of the Instalment Payments and delivery up of the Line Marker.
(d)I do not accept the construction advanced by the Ofli Parties as set out at paragraph 61 above. That submission puts a gloss on the Settlement Deed which is not warranted. There was not a straight substitution of the obligation to deliver up the Line Marker (or pay reparations for failing to do so) with the obligation to pay the Insurance Sum to the plaintiffs.
It follows from this discussion that I do not accept that the Court should imply a term into the Settlement Deed, be it the Alleged Implied Term or the variation posited by the Ofli Parties in oral submissions, or any other version of it, for that matter. In particular, considering the requirements for implying a term as set out in BP Refinery (see paragraph 66 above) and applying them to this case:
(a)at the time the parties entered into the Settlement Deed, it was unknown what condition Line Marker might be in should it be recovered. If it was in a poor condition, it cannot be seen as reasonable and equitable that a line marker worth only scrap metal value be substituted for $110,00. In those circumstances, it cannot be said that the Alleged Implied Term is reasonable and equitable. Even if it could be said that some variant of the Alleged Implied Term is reasonable and equitable, reasonableness and equity, without more, are insufficient to justify the implication of a term;
(b)it is not necessary to imply the Alleged Implied Term (or some variation thereof) in order to give business efficacy to the Settlement Deed. The deed is efficacious on its terms and I have already found that the plaintiffs’ construction of it does not produce a commercially absurd result. The Settlement Deed is effective without the Alleged Implied Term (or some variation thereof) to give it the business efficacy which the parties intended it to have;
(c)as was said by the Court of Appeal in Grocon, the requirement that an implied term be so obvious that it goes without saying:[39]
… requires consideration of whether, at the time that the parties were making their bargain, the suggestion of insertion of the implied term into the agreement by an ‘officious bystander’ would have been met ‘with a common, “Oh, of course”’ from the parties.
In this case, the Alleged Implied Term is not so obvious that it goes without saying. This is illustrated by the Ofli Parties’ own contention as to there being a reasonable alternative implied term (see paragraph 69 above). It is also illustrated by the matters referred to in paragraph 107 above;
(d)the Alleged Implied Term, and the variations canvassed, are capable of clear expression; and
(e)the Alleged Implied Term does, in my view, contradict the express terms of the Settlement Deed, because the Settlement Deed expressly provides for the payment of the Insurance Sum and does not contemplate any substitution of that obligation. I should note in respect of this factor that I do not agree with the plaintiffs’ submission that the Alleged Implied Term contradicts reliance on clause 16.6 of the Settlement Deed. I agree with the submission by counsel for the Ofli Parties that absent express words to the contrary, which this clause does not contain, an ‘entire agreement’ clause does not prevent the existence of an implied term. In this regard, counsel referred to Hart v Macdonald,[40] where Isaacs J noted that the subject agreement contained a provision “It is to be understood that there is no agreement or understanding between us not embodied in this tender and your acceptance thereof”, and that it was argued that this provision excluded implications. Isaacs J then stated:[41]
But that is not so. It excludes what is extraneous to the written contract: but it does not in terms exclude implications arising on a fair construction of the agreement itself, and in the absence of definite exclusion, an implication is as much a part of a contract as any term couched in express words.
[39]Grocon, [143].
[40](1910) 10 CLR 417, 430 (Isaacs J) (Hart v Macdonald).
[41]Hart v Macdonald, 430.
While the BP Refinery conditions may overlap to some degree, they must all be met for the Court to imply a term into a contract. In my view, the matters referred to in paragraph 111(c) above are fatal to the Ofli Parties’ case for an implied term.
For the same reasons, the plaintiffs’ construction of the Settlement Deed must be accepted. Clause 7.3 of the Settlement Deed clearly required the Ofli Parties to pay the Insurance Sum by 30 September 2024. The Insurance Sum was the greater of the Insurance Claim Proceeds and $110,000. The Ofli Parties were required to ensure that the Insurance Claim Proceeds were paid to the Liquidators and if those proceeds were less than $110,000, they were required to pay the difference. If no Insurance Claim Proceeds were received, then the Ofli Parties were required to pay the sum of $110,000 to the Liquidators.
The Ofli Parties’ alternative arguments
The Ofli Parties’ alternative arguments can be dealt with in short compass.
I do not accept that if the plaintiffs’ construction of the Settlement Deed is adopted there is then a total failure of consideration. I do not accept that once the Line Marker was delivered up to the Liquidators, the releases given by the Ofli Parties in clause 9.1 of the Settlement Deed ceased to have any value (see paragraph 109 above).
The Ofli Parties’ argument based on implied terms of cooperation was but faintly pressed at the hearing. This was a sensible course to take. Even if the Settlement Deed contains the implied terms of cooperation as set out at paragraph 76 above, I do not accept that such terms were breached by the plaintiffs or that the plaintiffs’ conduct in accepting possession of the Line Marker, selling it, and not crediting the delivery or the proceeds to the Insurance Sum deprived the Ofli Parties of the benefit, or the whole of the benefit, of the Settlement Deed (see paragraph 109 above).
Whether to utilise the summary enforcement procedure
In light of the above, it follows that it is appropriate to use the summary procedure so as to enforce the Settlement Deed, rather than require the plaintiffs to instead commence a new proceeding and for the parties to go to a full trial.
In particular, I am satisfied that the conditions set out in the authorities (summarised at paragraphs 40 to 44 above) regarding when it is appropriate to summarily enforce a settlement agreement within the existing proceeding are met. In my view, justice can be done by summary enforcement of the Settlement Deed.
In this regard, I am satisfied that:
(a)there are no extraneous matters, or matters unconnected with this proceeding, involved; the Settlement Deed does not go beyond the ordinary range of what a court would order in the proceeding; its enforcement does not involve giving effect to equities of a different nature to those involved in the proceeding; and the parties to the Settlement Deed were parties to the proceeding;
(b)the Settlement Deed relates solely to matters in the proceeding;
(c)there is not a substantial question to be determined as to the terms of the Settlement Deed. The question of the Alleged Implied Term can be dealt with through the summary procedure;
(d)given the principles for construing the Settlement Deed and for implying a term, questions of credit are unlikely to arise. Further, cross-examination is not required;
(e)procedural steps such as pleadings and discovery are unlikely to be necessary or desirable. The parties have been able to clearly articulate their positions and adduce evidence, including documents, without the need for pleadings or discovery; and
(f)turning to the factors referred to in Bell:
(i)clause 11.1 of the Settlement Deed provides for reinstatement of the proceeding and entering judgment for the Default Sum;
(ii)all interested parties are before the Court;
(iii)to the extent there was a factual dispute between the parties, that dispute went to the correct construction of the Settlement Deed - the resolution of which does not turn upon the credibility of witnesses;
(iv)requiring a new proceeding to be commenced with a full trial would cause unnecessary delay and further expense; and
(v)there has been no delay on the part of the plaintiffs in seeking summary enforcement.
It is simply unnecessary for there to be a full trial to determine whether the Alleged Implied Term (or some variant thereof) should be implied into the Settlement Deed so as to relieve the Ofli Parties of the obligation to pay the Insurance Sum. The parties were able to, and did, canvass all of the issues arising from the Ofli Parties’ resistance to the Enforcement Application. There is no unfairness in determining the Enforcement Application on a summary basis. Justice can be done by determining it in that way.
Conclusion
Accordingly, for the reasons set out above, the Enforcement Application will be granted. Orders will be made that the Ofli Parties pay the Liquidators the balance of the Instalment Payments (being $44,000), the Insurance Sum (being $110,000), and interest accrued in accordance with clause 11.1(a)(i)(B) of the Settlement Deed.
By 4pm on 2 July 2025, the parties are to confer and provide my Chambers with:
(a)if it can be agreed, a proposed form of orders, including the judgment amount (being $154,000 plus interest calculated to [4 July 2025]) and costs; or
(b)if it cannot be agreed, each party’s preferred form of orders, together with brief written submissions of no more than 3 pages.
Unless I consider it necessary to have a hearing, I will determine the orders to be made on the papers after 2 July 2025.
SCHEDULE OF PARTIES
| S ECI 2023 05131 | |
| BETWEEN: | |
| SHANE JUSTIN CREMIN and BRETT LEIGH MORGAN IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF RM ROAD SERVICES PTY LTD (IN LIQUIDATION) (ACN 609 113 037), ROADMASTER TRAFFIC MANAGEMENT PTY LTD (IN LIQUIDATION) (ACN 601 193 391) AS TRUSTEE FOR THE ROADMASTER TRAFFIC MANAGEMENT TRUST (ABN 23 708 998 744) and ROADMASTER LINE MARKING PTY LTD (IN LIQUIDATION) (ACN 163 486 431) | First Plaintiff |
| RM ROAD SERVICES PTY LTD (IN LIQUIDATION) (ACN 609 113 037) | Second Plaintiff |
| ROADMASTER TRAFFIC MANAGEMENT PTY LTD (IN LIQUIDATION) (ACN 601 193 391) AS TRUSTEE FOR THE ROADMASTER TRAFFIC MANAGEMENT TRUST (ABN 23 708 998 744) | Third Plaintiff |
| ROADMASTER LINE MARKING PTY LTD (IN LIQUIDATION) (ACN 163 486 431) | Fourth Plaintiff |
| - v - | |
| SEMRA OFLI | First Defendant |
| AESK HOLDINGS PTY LTD (ACN 621 388 029) | Second Defendant |
| HAISSAM KHABBAZ (ALSO KNOWN AS HAISSMA KABAZ) | Third Defendant |
[17]For example, The National Insurance Co of New Zealand Ltd v Espagne (1961) 105 CLR 569, 599, 600.
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