Scook v Sims Construction Pty Ltd

[2005] HCATrans 563

[2005] HCATrans 563

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P82 of 2004

B e t w e e n -

DEAN GEORGE SCOOK

Applicant

and

SIMS CONSTRUCTION PTY LTD

Respondent

Application for special leave to appeal

GUMMOW J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

FROM PERTH BY VIDEO LINK TO CANBERRA

ON FRIDAY, 5 AUGUST 2005, AT 10.44 AM

Copyright in the High Court of Australia

MR W.S. MARTIN, QC:  If it please the Court, I appear on behalf of the applicant.  (instructed by Haydn Robinson)

MR A.R. PATERNOSTER:   May it please the Court, I appear for the respondent.  (instructed by Lane Buck & Higgins)

GUMMOW J:   Yes, Mr Martin.

MR MARTIN:   Your Honours, it must be conceded at the outset that the issue in this case concerns the proper construction of a unique document, the terms of which are unlikely to be replicated.  We do, however, submit that there are issues ‑ ‑ ‑

GUMMOW J:   I hope not.

MR MARTIN:   Notwithstanding that unpromising start, we do submit that there are issues of enduring importance that would arise in the context of the resolution of the construction issues, and those issues ‑ ‑ ‑

HAYNE J:   That have not been settled by long‑established decision of the Court?

MR MARTIN:   Your Honour, there are no crisp issues that would give rise to conflicts in previous authority, either at this Court or intermediate appellate level, that must be conceded, but there are issues that involve the sometimes elusive distinction between an agreement for compromise which has the effect of extinguishing the cause of action in return for the promises ‑ ‑ ‑

GUMMOW J:   We know the distinction is elusive.  That is why each document produces a unique result.

MR MARTIN:   Indeed.  Your Honour, in this case there was, however ‑ ‑ ‑

GUMMOW J:   Unless the words are expressly used.

MR MARTIN:   Indeed, but in this case, your Honour, there was resort to a hypothetical scenario in the Full Court.

GUMMOW J:   Yes.

MR MARTIN:   A scenario unsustained by any evidence; that scenario being relevantly in this case the assumption that the shares to be transferred would not fully satisfy the debt.  The problem with that hypothetical scenario is the terms of the deed itself, which your Honours would find in paragraph 4 of the judgment of the Full Court.  I am afraid my application book is not numbered, but it is paragraph 4 in the judgment of the Full Court.

Your Honours will see that the – and on page 3 of the judgment of the Full Court, basically the mechanism was that – if we go to clause 3 of the deed, there were two companies ‑ ‑ ‑

HAYNE J:   Page 27.

MR MARTIN:   Thank you, your Honour.  Watertight and Glenside were the sole shareholders in a company called Sailbird.  Sailbird in turn held “a 5% interest in the issued capital of Peak Hill Manganese”.  In the event of default by the principal creditors by clause 2(c), those two companies:

shall forfeit shares in Sailbird Holdings Pty Ltd to the Creditor to the value of the balance of the outstanding sum –

those words of course being words of imperative obligation and if we go then to the previous page in recital G where it is recited that those shares can fully satisfy the debt.

Now, it is in that context that the Full Court hypothesised without evidence that the shares may be insufficient in value contrary, we say, to the clear meaning of clause G, and on that basis drew the conclusion that it was not the intention of these parties that the covenants should replace the cause of action but that the cause of action should remain unaffected by the compromise until the compromise had been fully performed.

Your Honours, we say that was the essential error of the Full Court.  That does give rise to general questions of interpretation.  It may give rise to the vexed question of the proper balance between the literal approach and the pragmatic approach to the construction of commercial documents.

Your Honours, the construction of the deed for which the respondent contends would leave it with the capacity to proceed to bankrupt the applicant, notwithstanding that it has the benefit of the imperative obligation to transfer those shares in clause 2(c).  In our respectful submission, that cannot be a conclusion which the parties could have intended.  So, your Honour, those ‑ ‑ ‑

GUMMOW J:   What about the additional ground as to the form of the bankruptcy notice?

MR MARTIN:   I am sorry, your Honour?

GUMMOW J:   Which is the ground on which the appeal was allowed.

MR MARTIN:   Yes.  The appeal was allowed, but of course there is an issue estoppel in relation to the effect of the deed as between those parties, and that is the issue that would be ventilated by the grant of leave.

GUMMOW J:   Yes.  Thank you.

MR MARTIN:   Your Honours, our arguments will not get any better by being repeated.  Those are our submissions.

GUMMOW J:   Thank you, Mr Martin, we do not need to call on you, Mr Paternoster.

There are insufficient prospects of success on an appeal in this matter to support a grant of special leave.  Accordingly, special leave is refused with costs. 

AT 10.49 AM THE MATTER WAS CONCLUDED