Rent Plus Limited v Sorenson

[2010] NSWSC 564

CITATION:	RENT PLUS LIMITED v SORENSON [2010] NSWSC 564 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	19 May 2010
JUDGMENT DATE :	2 June 2010
JUDGMENT OF:	Hulme J at 1
DECISION:	1. Set aside the judgment herein entered on pursuant to orders made on 11 November 2009 and amended on 14 December 2009; 2. Order that the Judgment Creditor pay the Judgment debtors costs of the proceedings.
PARTIES:	RENT PLUS LIMITED MARK SORENSON DEANNA SORENSON
FILE NUMBER(S):	SC 2009/00296486
COUNSEL:	A Combe (Plaintiff) MW Sneddon/F Maghami (Defendant)
SOLICITORS:	Sally Nash & Co Spooner & Hall

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IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

No: 2009/296486
RS HULME J
Wednesday 2 June 2010

RENT PLUS LIMITED v MARK SORENSON AND DEANNA ANITA SORENSON


JUDGMENT

1 RS HULME J: The issue in these proceedings revolves around the operation to be given to a very short clause in a contract whereunder Rent Plus Limited (hereinafter referred to as “Rent Plus”) acquired certain assets from Finance Portfolio Limited (hereinafter referred to as “FPL”) and United Finance Limited (hereinafter referred to as “UFL”).

2 On 5 May 2005 Absolutely Flawless Limited (hereinafter referred to as “Flawless”) entered into an agreement – numbered 0007010963 - whereunder FPL leased to Flawless certain equipment from FPL, then trading under the name of Leasing Solutions Limited (herinafter referred to as “LSL”). During the course of the proceedings before me the agreement was described as a Hire Purchase Agreement but nothing turns on the difference. Mr and Mrs Sorenson guaranteed the performance of Flawless under that agreement.

3 On 10 September 2005 Flawless and FPL entered into an agreement whereby the rental payments under the agreement of 5 May were varied. It was a term of the Variation Agreement that:-

“LSL and the Customer acknowledge that terms and conditions of the Original Agreement continue to apply but as expressly varied by this Variation Agreement.”

4 Mr and Mrs Sorenson signed that Variation Agreement on behalf of Flawless but not in any capacity of guarantors. The form of the Variation Agreement does not envisage it would be signed by them as guarantors.

5 According to Mr Sorenson Flawless went into liquidation on 7 September 2007. It may be inferred it defaulted under the leasing agreement for on 9 May 2008 the District Court in New Zealand made an order for Summary Judgment against Mr and Mrs Sorenson for an amount of $161,876.68 together with interest and further costs. The order for Summary Judgment was “sealed” on 13 May 2008. The terms of the Summary Judgment record that the Judge took into account an Affidavit of Service of Colin David Bell sworn 3 April 2008.

6 That Affidavit of Mr Bell records service on Mr and Mrs Sorenson of a Statement of Claim which made clear that the claim was based upon the Agreement of 5 May 2005. I do not need to resolve the issue but Mr Bell says he effected service on 27 and 29 March 2008 in New Zealand. Mr Sorenson said he had moved to Australia on 12 February 2008.

7 The Agreement between FBL and UFL on the one hand and Rent Plus on the other is undated though it contains reference to an “effective date”, defined as meaning 31 May 2008. Other provisions of that agreement to which it is appropriate to have regard in determining the question posed for me are as follows:-

“The Vendor, among other things, carries on the business of financing by way of finance and operating leases, the acquisition of the Equipment.
The Vendor wishes to sell, and the Purchaser wishes to purchase, the Assets for the consideration and on the terms and conditions set out in this Agreement.
Defined terms
In this Agreement, unless the context requires otherwise:
Assets means:
(a) the Receivables;
(b) The Contracts and associated goodwill; and
(c) the Equipment.
Business records means all record and information held by the Vendor as at the Completion Date relating to the Contracts and the Assumed Liabilities, including, but not limited to, scanned copies of the customer files relating to the Customer Contracts, Broker Contracts and a copy of the Transfer Data.
Customer Contracts means the agreements listed in Appendix 1;
Effective Date means 31 May 2008.
Excluded Assets means all assets and undertaking (including goodwill) of the Vendor other than the “Assets” including (but not limited to):
(i) all fixed assets of the Vendor;
(ii) cash and cash equivalents on hand and in banks;
(iii) all Intellectual property of the Vendor; and
(iv) all contracts and other agreements of the Vendors other than the Contracts
Receivables means
(a) all amounts payable to the Vendor or its agents under the terms of the Customer Contracts which fall due and relate to periods following the Effective Date; and
(b) all amounts payable to the Vendor or its agents under the terms of the Customer Contracts which fell due prior to the Effective Date and remain unpaid as at the Effective Date; and
(c) any unpaid amounts under the Customer Contracts which have been written off in the Vendor’s accounts and which remain unpaid as at the Effective Date.
Agreement to Sell
The Vendor will sell, and the Purchaser will purchase, the Assets free of all Encumbrances on the terms and conditions set out in this Agreement.
No Other Liabilities
For the avoidance of doubt, no liabilities relating to the business of the Vendor shall be transferred to the Purchaser other than the Assumed Liabilities and any other liability expressly assumed by the Purchaser under this Agreement.
Assignment
On and from Completion, the Vendor assigns and transfer to the Purchaser (subject to clause 3.2(b)):
(a) the Receivables; and
(b) the Contracts, subject to the rights of the lessees of Equipment under those Contracts.
…
Vendor’s Name
The Purchaser undertakes to the Vendor that neither the Purchaser, nor any Related Company of the Purchaser, will carry on the same on business under:
(a) The names “Finance Portfolio” and/or “United”.
(b) …”

8 Appendix 1 to the Agreement listed something of the order of 350 contracts and one of these was the Flawless contract numbered 0007010963.

9 The nature of the document, its terms and the cover sheet indicate that the agreement was professionally drafted.

10 As an annexure to an affidavit of Karen Rawsthorne, there is a letter dated 21 July 2008, said to come from the business records of Rent Plus, that in terms is a Notice of Assignment of FPL’s interest in contract 7010963 to Rent Plus. Mr Sorenson said that he had never heard of Rent Plus until about 29 January 2010 but again I do not need to resolve any issue concerning notice of any assignment. Pursuant to the Property Law Act 2007 of New Zealand, which Act came into effect in respect of assignments made on or after 1 January 2008, there is no longer any requirement for notice to be given to a debtor for an absolute assignment of a debt to be effective.

11 On 8 October 2009 a Summons was filed in this court on behalf of Rent Plus seeking that the Judgment of the District Court in New Zealand be registered under Part 2 of the Foreign Judgments Act 1991 (Cth).

12 On 11 November 2009 an order, amended on 14 December 2009, was made to that effect. Further orders were also made for interest and costs and permitting Mr and Mrs Sorenson, within 14 days after service upon each of them of the notice of registration, permission to apply to set aside the registration. On or about 29 January 2010 a copy of the Judgment was served on Mr Sorenson who informed Mrs Sorenson of the contents of that letter.

13 On 13 April 2010 Mr and Mrs Sorenson filed a Notice of Motion seeking that the registration of the Judgment be set aside and that the Judgment be stayed pending determination of the Notice of Motion. There was no claim before me that Mr and Mrs Sorenson were out of time and accordingly I take no account of the fact.

14 Section 7(2)(a)(viii) of the Foreign Judgments’ Act requires the Court to set aside that judgment when application is made by the judgment debtor if the Court is satisfied that “rights under the judgment are not vested in the person by whom the application for registration was made’. In that connection it is important to bear in mind that a judgment creditor entitled to register a judgment includes, by definition under that Act, both the person in whose favour the judgment was given and “a person in whom the rights under the judgment have become vested by succession, assignment or otherwise”.

15 The written submissions advanced raised a number of issues that were not maintained during the course of oral argument. Some were indeed untenable and although not formally abandoned ultimately the question before me depends upon the question whether the agreement between FPL and Rent Plus was effective to assign to the latter FPL’s rights against Mr and Mrs Sorenson.

16 It is clear law that a cause of action which forms the foundation of a final judgment in a court of competent jurisdiction merges in that judgment and no longer has an independent existence – see Blair v Curran (1939) 62CLR 464 at 532; Spencer-Bower and Handley “Res Judicata”, 4^th ed. , paras 1.04, 19.02; Shiels v Blakeley (1986) 2 NZLR 262.

17 Under Clause 2.1 of the Agreement, FPL sold and Rent Plus purchased “the Assets” as defined – for present purposes the “Receivables” - and on behalf of Mr and Mrs Sorenson, it was submitted that in consequence of the principle of merger, at the time of the agreement there were, within the definition of paragraph (b) of Receivables, no “amounts payable to the Vendor… under the terms of the Customer Contracts” and which were payable by them: Such amounts as were payable to FPL by them were payable under the terms of the New Zealand District Court Judgment: The terms of the agreement were not appropriate to assign FPL’s rights under the Judgment and thus the agreement did not assign any rights FPL had against them.

18 The response of counsel for Rent Plus was, in effect, that attention should be concentrated on those parts of paragraph (b) of the definition of receivables as referred to “amounts … which fell due prior to the Effective Date and remain unpaid …”.

19 If clause 2.1 and the relevant part of the definition of Receivables are considered in isolation there is much to be said for the contention advanced on behalf of Mr and Mrs Sorenson. However, one must recognise there was included in Schedule 1 to the agreement reference to Flawless and contract 0007010963. According to ordinary principles of interpretation, that reference is, if possible, to be given some operation.

20 Had the New Zealand District Court Judgment been against not only Mr and Mrs Sorenson but also against Flawless, the only way to give those references in Schedule 1 some operation would be to regard the words in paragraph (b) as encompassing the moneys payable, not strictly under the terms of contract 0007010963, but payable under the terms of the judgment in consequence of that contract. However, the evidence before me indicates that that was not the situation and accordingly it is possible for the assignment to relate to rights against Flawless under contract 0007010963, leaving with FPL its rights against Mr and Mrs Sorenson under the New Zealand Judgment.

21 Such a situation would be unusual and calculated to create difficulties if both Flawless on the one hand and Mr and Mrs Sorenson on the other were successfully called upon to satisfy their liabilities to different creditors but is at least theoretically possible. Should that interpretation be adopted?

22 In my view it should. In the first place, to adopt the construction contended for on behalf of Rent Plus would involve just as much ignoring of the full terms of what was written as would ignoring the reference to contract 0007010963. It would be to read paragraph (b) of the definition of Receivables as if the words “under the terms of the Customer Contracts” were not included in the paragraph. In the second the agreement, and in particular the reference to “Excluded Assets” makes it clear that the sale to Rent Plus did not extend to all of the assets of the vendors or indeed all of the contracts in which they had an interest. Thirdly, I am much influenced by the fact that the agreement was legally drafted. One can reasonably expect in that situation that the definition of what was sold would be accurate and that the words in paragraph (b) of the definition of Receivables were intended to mean what they say.

23 No doubt if this conclusion does not reflect the intentions of the parties to the sale agreement, there should be no difficulty in having that agreement rectified. However, as things presently stand, the rights under the judgment in the New Zealand District Court are not vested in Rent Plus and the judgment Rent Plus has in this Court must be set aside, with costs.

24 Accordingly I order:-

1. Set aside the judgment herein entered on pursuant to orders made on 11 November 2009 and amended on 14 December 2009;
2. Order that the Judgment Creditor pay the Judgment debtors costs of the proceedings.

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16/06/2010 - Counsel name change - Paragraph(s) 0