Scook v Sims Construction Pty Ltd
[2004] FMCA 274
•5 May 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| SCOOK v SIMS CONSTRUCTION PTY LTD | [2004] FMCA 274 |
| BANKRUPTCY – Application to set aside Bankruptcy Notice – deed of settlement – whether accord executory or accord and satisfaction – whether discharge of debt. |
McDermott v Black (1940) 63 CLR 161
Ex parte Dawes re Moon [1886-90] All ER Rep 479
Darlington Futures Ltd v Delco Australia (1986) 161 CLR 500
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Jacob v Booths Distillery Co (1901) 85 LT 262
Australian Hardwoods Pty Ltd v The Commissioner for Railways [1961] 1 All ER 737
Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112
Greer v Kettle [1938] AC 156
Kleinwort Benson Australia v Crowl (1988) 165 CLR 71
| Applicant: | DEAN GEORGE SCOOK |
| Respondent: | SIMS CONSTRUCTION PTY LTD |
| File No: | WZ199 of 2003 |
| Delivered on: | 5 May 2004 |
| Delivered at: | Perth |
| Hearing Date: | 3 February 2004 |
| Judgment of: | McInnis FM |
REPRESENTATION
| Solicitor for the Applicant: | Mr H Robinson |
| Solicitors for the Applicant: | Haydn Robinson |
| Solicitor for the Respondent: | Mr A Paternoster |
| Solicitors for the Respondent: | Lane Buck & Higgins |
ORDERS
The application filed 8 December 2003 be dismissed.
The Applicant shall pay the Respondent’s costs to be taxed in default of agreement pursuant to Order 62 of the Federal Court Rules.
The time for compliance with the Bankruptcy Notice BN 246/03 be extended to 4 p.m. on 19 May 2004.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
WZ199 of 2003
| DEAN GEORGE SCOOK |
Applicant
And
| SIMS CONSTRUCTION PTY LTD |
Respondent
REASONS FOR JUDGMENT
This is an application by Dean George Scook (the applicant) seeking to set aside a Bankruptcy Notice No. 246/2003 which had been served on 18 November 2003. The applicant has relied upon an affidavit sworn by him on 8 December 2003 together with a supplementary affidavit sworn 18 February 2004.
Sims Construction Pty Ltd (the respondent) has relied upon an affidavit of Arthur Reginald Paternoster sworn 14 January 2004 and an affidavit of Bronwen Joy O’Sullivan sworn 14 April 2004.
Orders were made by the Court on 3 February 2004 that the application shall proceed on written submissions. Both parties were then ordered to provide an outline of submissions. The applicant filed submissions on or about 8 February 2004. The respondent filed submissions on 24 February 2004. Without the leave of the Court the applicant then filed “Supplementary Submissions by Applicant” on 26 February 2004. The supplementary submissions of the applicant led to further orders being made by the Court on 1st April 2004 granting leave to the applicant to rely upon the supplementary submissions together with the supplementary affidavit of the applicant referred to earlier. The respondent was then granted leave to file and serve any further affidavits and submissions. The respondent accordingly filed a document entitled, “Further Submissions by Respondent” on 16 April 2004 and the affidavit of Ms O’Sullivan.
It is common ground that the bankruptcy notice which is the subject of the application refers to a total debt owing of $146,680.67. That amount is claimed to be a judgment entered by consent between the applicant and the respondent in the District Court of Western Australia proceedings on 4 October 2001. In those proceedings the applicant was the second defendant and the respondent the first plaintiff.
In his affidavit sworn 8 December 2003 the applicant annexes a copy deed of settlement dated 12 May 2003 (the deed). The deed dated
12 May 2003 is between the applicant and the respondent. It is noted the deed also has been entered into by other parties. The deed recites that the respondent had entered into various deeds of loans with debtors including the applicant who had failed to make repayments pursuant to the deeds of loan. It is further recited that the respondent entered into a variation of contract with the debtors who then failed to make repayments pursuant to the variation of contract. In the recitals it is noted that, “The parties agree that the sum of $146,681.00 is currently owed by the debtors to the creditor”. As indicated one of the debtors is the applicant.
The deed including relevant recitals provides the following:-
“RECITALS
A.…
B.…
C.…
D.…
E.The parties agree that the sum of $146,681.00 is currently owed by the Debtors to the Creditor.
F.The Creditor and the Debtors have agreed to enter into this deed of settlement (‘Deed of Settlement’) with respect to the monies owed by the Debtors to the Creditor.
G.In consideration of the Creditors forbearing in requiring immediate payment, the Shareholders agree to guarantee the payment of the outstanding monies to the Creditor by the Debtor, which can be fully satisfied by the transfer of Sailbird Holdings Pty Ltd.
NOW THIS DEED WITNESSES as follows:
1.The Debtors acknowledge that as at the date of this Settlement Deed they owe the sum of $146,681.00 to the creditor.
2.The Creditor agrees not to enforce any legal rights that it currently has against the Debtors if the following terms and conditions are met:
(a)The Debtors will pay jointly and severally to the Creditor the following:-
(i)The current outstanding sum, being $146,681.00;
(ii)All legal costs on a solicitor/client basis incurred by the Creditor since the default of the Debtors with respect to the Deeds of Loan;
(iii)Interest at the rate of 8% per annum calculated quarterly in advance on the total amount outstanding from time to time with respect to 2(a)(i) and 2(a)(ii) above;
(iv)Payments are to be in sixteen quarterly amounts, with the first payment to be made by the Debtors within seven (7) days of receipt by Debtors of this Deed signed by the Creditors and each payment thereof on the 15th of April 2003 and each quarter thereafter until all monies due to the Creditor have been paid;
(v)Any further legal costs on a solicitor/client basis with respect to enforcing this Deed of Settlement or the Deeds of Loan incurred by the Creditor, such costs to be added to any amount outstanding at the date that the costs are incurred by the Creditor;
(b)Watertight Investments Pty Ltd and Glenside Enterprises Pty Ltd shall allow and consent to a fixed and floating charge to be placed over their shares in Sailbird Holdings Pty Ltd by the Creditor for the total amount of the debt.
(c)In the event of any default in the repayment of the outstanding amount as set out above Watertight Investments Pty Ltd and Glenside Enterprises Pty Ltd shall forfeit shares in Sailbird Holdings Pty Ltd to the Creditor to the value of the balance of the outstanding sum owed at the date of default as determined by the Creditor’s Accountants.
(d)The Debtors shall indemnify the Creditor for any further legal costs, fees, or costs on a solicitor/client basis incurred by the Creditor enforcing this Deed of Settlement and the Deeds of Loan.
3.Scook and Hardie warrant that:
(a)Watertight Investments Pty Ltd (ACN 058 483 042) and Glenside Enterprises Pty Ltd (ACN 064 082 462) are the sole shareholders in Sailbird Holdings Pty Ltd (ABN 12 067 072 253) of Unit 9, 154 Hampden Road, Nedlands, Western Australia;
(b)Sailbird Holdings Pty Ltd holds a 5% interest in the issued capital of Peak Hill Manganese Pty Ltd (CAN 091 867 426) of Unit 9, 154 Hampden Road, Nedlands, Western Australia;
(c)For the duration of this Settlement Deed and until the Creditor has been repaid in full, Scook and Hardie will procure Watertight Investments Pty Ltd and Glenside Enterprises Pty Ltd not to transfer or assign their shareholdings in Sailbird Holdings, and not to allow Sailbird Holdings to transfer or assign its shareholding in Peak Hill Manganese Pty Ltd.”
In the deed the Court notes that the “shareholders” are referred to as Watertight Investments Pty Ltd and Glenside Enterprises Pty Ltd who it is common ground at all material times were shareholders of the company Sailbird Holdings Pty Ltd.
The applicant in his affidavit sworn 8 December 2003 claims that “based on legal advice, the amount claimed in the Bankruptcy Notice and in the said judgment were compromised and fully satisfied by the said Deed with the result if any money is owed by me to the Respondent it is pursuant to the Deed and not the judgment”.
He deposes that the debtors described in the deed defaulted in payment of the monies as required by clause 2(a) of the deed set out above. It is contended by the applicant that the result of that default is “forfeiture of shares in Sailbird Holdings Pty Ltd to the value of the balance of the outstanding sum owed to the Respondent and thereby repayment of all monies owed by the debtors to the Respondent was made”.
He further contends in his affidavit that “forfeiture of the Sailbird Holdings Pty Ltd shares in exchange for the debt owed to the Respondent was the common intent of the parties to the said Deed”. The applicant otherwise denies being indebted to the respondent in the amount claimed or in any amount.
The affidavit of Arthur Reginald Paternoster sworn 14 January 2004 and relied upon by the respondent annexes certain correspondence and in part that material relates to the issue of service and other details concerning the Bankruptcy Notice. The affidavit however further refers to a letter dated 28 August 2002 from the respondent’s solicitors to the applicant. I note in passing it has the incorrect annexure identification. That letter however is claimed by Mr Paternoster to “set out the considerations in place prior to the execution of the deed of settlement”. The letter provides as follows:-
“Further to Dean Scook’s attendance at our office on the 26th August 2002, we confirm that our abovementioned clients are interested in the proposal set out by Dean Scook.
As we understand it the proposal is as follows:
1. The entire amount of money (that is principle and interest) that is due to each of our clients will be repaid in full to them;
2. All of our client’s legal costs will be repaid to them;
3. The monies set out in clause 1 and 2 will be repaid over a 48 month period, with 16 equal payments to be made each quarter.
4. The first payment will be made on or about the 10th January 2003;
5. Interest at the rate of 8% from the first payment, that is on or about the 10th January 2003 will be calculated, reducible on the amount of monies outstanding;
6. Security will be provided for our clients for the full amount owing to them. The type of security is yet to be confirmed.
7. Should a default occur, we confirm that judgment has already been entered against you by Lindsay and Sue Sims for the full amount less any amount of principle that may have been repaid already to you.
8. All legal costs with respect to enforcement of this agreement should it be necessary will be paid to you.
Please advise if this is a true reflection of the proposed agreement. We further request that you advise us with respect to the issue of security that you are willing to provide our clients and if the 8% is to be charged from the first payment as is set out above, or from an earlier date, such as January this year when the agreement with Lyford was made.
We have been further asked to request that you provide some information confirming the amount of manganese that can be mined on the project and also documentation confirming that there is not a native title issue with respect to this matter.
We look forward to hearing from you.”
The applicant had submitted that it is uncontested evidence that the debt which is the subject of the deed is the same debt which is the subject of the judgment in the District Court. It was submitted that the deed is in accord and satisfaction.
Reliance was placed upon the decision of Dixon J in McDermott v Black (1940) 63 CLR 161 at 183-5 where the Court states the following:
“The essence of accord and satisfaction is the acceptance by the plaintiff of something in place of his cause of action. What he takes is a matter depending on his own consent or agreement. It may be a promise or contract or it may be the act or thing promised. But, whatever it is, until it is provided and accepted the cause of action remains alive and unimpaired. The accord is the agreement or consent to accept the satisfaction. Until the satisfaction is given the accord remains executory and cannot bar the claim. The distinction between an accord executory and an accord and satisfaction remains as valid and as important as ever. An accord executory neither extinguishes the old cause of action nor affords a new one. The decision of the Court of Appeal in British Russian Gazette &c. Ltd. and Talbot v. Associated Newspapers Ltd, though doubtless some of the reasons display less zeal for principle than for reform, does not appear to me to be inconsistent with the received doctrine that no new cause of action is given by an accord executory. In that case, the agreement constituting the accord was made as a compromise of three several causes of action vested in three persons respectively. It was made by one of them purporting to act not only on his own behalf but also as agent for the other two. In fact he had no authority to do so, and he was held liable for damages for breach of warranty of authority. This result might perhaps be supported, even if the agreement were an accord executory, on the ground that, at all events, the opposite party had acted to some extent on his representation of authority, but the intention of the parties appears to have been that the agreement of compromise should itself have been accepted as in satisfaction of the causes of action, so amounting to an accord and satisfaction. The case, therefore, provides no more than a late illustration of the doctrine, finally established perhaps by Flockton v. Hall, that of accord and satisfaction there are two cases, one where the making of the agreement itself is what is stipulated for, and the other, where it is the doing of the things promised by the agreement. The distinction depends on what exactly is agreed to be taken in place of the existing cause of action or claim. An executory promise or series of promises given in consideration of the abandonment of the claim may be accepted in substitution or satisfaction of the existing liability. Or, on the other hand, promises may be given by the party liable that he will satisfy the claim by doing an act, making over a thing or paying an ascertained sum of money and the other party may agree to accept, not the promise, but the act, thing or money in satisfaction of his claim. If the agreement is to accept the promise in satisfaction, the discharge of the liability is immediate; if the performance, then there is no discharge unless and until the promise is performed.”
Reference was made to recital G in the deed which provides that the payment of outstanding monies “can be fully satisfied by the transfer of Sailbird Holdings Pty Ltd”.
Reliance was placed upon clause 2(c) of the deed which provides that in the event of any default in the repayment of the outstanding amount as set out above Watertight Investments Pty Ltd and Glenside Enterprises Pty Ltd shall forfeit shares in Sailbird Holdings Pty Ltd to the creditor to the value of the balance of the outstanding sum owed at the date of the default as determined by the creditor’s accountants.
The applicant submitted that recital G is in conflict with clause 2(c) of the deed. It was submitted that relevantly “can” versus “shall” and “transfer” of Sailbird Holdings Pty Ltd versus “forfeit (of) shares” in Sailbird to the value of the balance of the debt highlights the conflict.
The applicant relied upon the decision of Ex parte Dawes re Moon [1886-90] All ER Rep 479 at 483 per Lord Esher as follows:-
“If the recitals are clear and the operative part is ambiguous the recitals govern the construction. If the recitals are ambiguous and the operative part is clear the operative part must prevail. If both the recitals and the operative part are clear but they are inconsistent with each other the operative part is to be preferred.”
It was submitted that the result in the present case in applying the authority to which I have referred is that clause 2(c) is to be preferred. The use of “shall” indicates an obligation to act in accordance with the terms of the provision. It is plainly distinct according to the applicant’s submissions from the use of “can”.
The applicant submitted that the intent of the deed is to give the debtors the opportunity to pay the debt in money but if they do not then the debt will be paid by the forfeiture of Sailbird shares. If the deed contains ambiguous provisions then according to the applicant’s submissions they should be construed against the interests of the party which prepared the document under the contra proferentem principle (see Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 at p.510-511).
In the alternative it was submitted by the applicant that if the Court is satisfied the deed has a meaning to the parties but it is not clear what that meaning is the Court may admit extrinsic evidence to resolve doubts as to the intention of the parties (see Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337).
The applicant submitted that in the present case while the evidence of the applicant is fundamentally uncontested if it were to be contested it would appropriate for the disputed evidence to be resolved by affidavits (See Jacob v Booths Distillery Co (1901) 85 LT 262).
The applicant submitted that the deed has the effect of replacing the liability or promise by the debtors as described in the deed to pay money to the respondent with the forfeiture of shares in Sailbird. The agreement accepts the forfeiture of the Sailbird Shares in satisfaction of the debt and the discharge of liability or promise to pay money was immediate. The only reason it was submitted that shares in Sailbird have not been transferred to the respondent is that they have not asked for the shares to be transferred. According to the applicant’s submissions it is plain that the respondent is the one who has the obligation to make the required request because inter alia it requires a calculation by the respondents accountants. Accordingly it is claimed the respondent is in breach of the deed. In those circumstances the respondent cannot rely upon its own breach to enforce the deed (See Australian Hardwoods Pty Ltd v The Commissioner for Railways [1961] 1 All ER 737 at 742).
It was submitted by the applicant that the respondents residual cause of action against the applicant is limited to enforcement of the deed. The judgment debt upon which the bankruptcy notice is issued is no longer an executory judgment as it has been satisfied by the deed. If the respondent were to sue the applicant under the deed then it would fail because the applicant does not dispute the deed to be enforceable and the parties to the deed accepting for the respondent are ready willing and able to perform their obligations under the deed, that is the forfeiture of the Sailbird shares. If a contrary view is to be made then that could only be after a trial with pleadings, discovery, viva voce evidence, submissions and then judgment according to the applicant’s submissions.
The respondent in submissions filed 24 February 2004 after referring to the bankruptcy notice being based upon the judgment in the District Court and the acknowledgment of the debt in the deed referred to recital G as set out above. Reliance was placed upon clause 2 which is the operative part of the deed where the respondent agreed not to enforce any legal rights that it currently had against the debtors, including the applicant, upon terms. It is noted that clause 2(a)(iv) provides a repayment schedule and that it is not in dispute the repayment schedule has not been met.
The respondent submitted that there is nothing in the deed that operates by way of discharge to the discharge or release the applicant from further liability.
Reference was made to the decision of Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112 where it was held as a release of the giving up or abandoning either a claim or a right it should also be evident from the face of the deed that it is understood what the releasor is releasing and any consideration to the release. It was submitted there must be a capacity of object and subject matter. The respondent submitted that in the present case the document is not sufficiently worded to imply any release of the applicant. The deed does not provide any words which go to the question of a discharge of obligation by the applicant. Likewise there are no words that go to the question of releasing the applicant upon the execution of the deed or the happening of any event.
The respondent submits in answer to the claim by the applicant that there is provision for security in respect of the guarantee that upon a true construction of the deed the guarantors were not bound by the guarantee as the security for the charge on the shares was a condition precedent to the guarantee (see Greer v Kettle [1938] AC 156).
It should be noted there was an issue as to the failure of the applicant to stamp the deed and accordingly it is not admissible as evidence in the Court. Further issue was taken with the application not being properly supported by affidavit and it was submitted that it is not sufficient to swear the issue and that there has been a failure to comply with the rules as set out on the grounds and facts in relation to the application. As to any alleged irregularity in the bankruptcy notice it was submitted there was no reliance on facts which demonstrate substantial injustice caused by any defect or irregularity which cannot be remedied by order of the Court on the basis of Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71. The onus is on the applicant to establish there is some substantial injustice on the basis of some irregularity. Reliance was placed on evidence of the process server that in any event there is no irregularity as alleged. The issue had been raised as to the bankruptcy notice being undated and it was submitted that in fact the date was included in the bankruptcy notice according to the evidence. For the present purposes I accept that submission on this discreet issue and do not regard it as necessary to deal with that matter any further.
In the submissions of the respondent reference was made to a supplementary affidavit by the applicant which had been sworn initially without the leave of the Court on 18 February 2004. In that affidavit the applicant refers to the deed being prepared by the solicitors for the respondent and otherwise refers to negotiations for settlement. Reference was made to a letter dated 17 September 2002 where the applicant provided the respondent’s solicitors with information about a manganese mine owned by Peak Hill Manganese Pty Ltd. The letter refers to a meeting between the respondent’s solicitors and earlier correspondence and otherwise encloses reports “in relation to manganese for your information and perusal”. It is claimed that in the letter a reference to “Lindsay and Sue Sims” is equivalent to a reference to the respondent and the applicant deposes that “no money was owed to the Sims, instead money was owed to their company which is the respondent”. The applicant claims that on or about 19 December 2002 he orally agreed with the respondent’s solicitors that he would cause a company called Grand Enterprises Pty Ltd to transfer five shares in Peak Hill to Sailbird Pty Ltd “in anticipation of her clients agreeing to enter into the proposed deed of settlement”. It is claimed that the respondent’s solicitor “stipulated 500 shares would be required to provide the security her clients would want for them to enter into deeds of settlement in accordance with the terms of the deed we were at that time negotiating”. The applicant deposes that the value of 500 Peak Hill shares was calculated by the respondent’s solicitors to be in excess of the total of the debt payable to the respondent.
In his supplementary affidavit the applicant exhibits a further letter dated 21 March 2003 where further information was provided to the respondent’s solicitors.
The applicant reiterates in his supplementary affidavit that shares in Sailbird “have not been transferred to the respondent only because the respondent has not requested shares to be transferred to it”. The applicant claims to be a director of Sailbird and Watertight Investments Pty Ltd and Glenside Enterprises Pty Ltd and claims that each of those companies at all material times are ready willing and able to transfer shares in Sailbird to the respondent as required by the deed of settlement. In his supplementary affidavit the applicant states the following:
“14.I have always understood that purport and effect of the deed of settlement to be if the deed was not repaid to the respondent then the debt would be satisfied by the transfer of shares in Sailbird to the respondent and I believe that was the common intent of the respondent. Otherwise there was no point in me providing information to the respondent about Peak Hill and agreeing at the request of O’Sullivan to transfer 500 shares in Peak Hill to Sailbird”.
The supplementary affidavit of the applicant led to the filing of a further affidavit by Bronwen Joy O’Sullivan, the respondent’s solicitor. In her affidavit Ms O’Sullivan deposes that there was “no agreement oral or otherwise between myself or anyone on behalf of the respondent with the applicant that the applicant or the company called Grand Enterprises Pty Ltd to transfer 500 shares in Peak Hill to Sailbird Holdings Pty Ltd”. In her affidavit Ms O’Sullivan denies there was any discussion in relation to 500 shares or any other number of shares. It is claimed that on behalf of the respondent Ms O’Sullivan requested information in relation to “whether or not Sailbird Holdings Pty Ltd had assets” and it is claimed that Ms O’Sullivan has “never been provided with that information”. She received a copy of a State Revenue lodgment form which is annexed to her affidavit and then requested further information as the form did not provide her with any information as to “the actual assets”. However, it is claimed no further information was provided. Ms O’Sullivan claims that information relating to the assets of Sailbird Pty Ltd was requested “to ensure that the respondent had security should they enter into the agreement for repayments to the respondent as is set out in the deed”.
Ms O’Sullivan claims that as she was unsure of any assets owed by Sailbird she would have been unable to calculate the value of 500 shares. It is claimed that the deed was to relate to a creation of a payment schedule whereby the debtors would discharge their obligation to the respondent. Reference was made to a letter sent by Ms O’Sullivan to the applicant dated 28 August 2002. It is claimed that it is quite clear from that letter that the deed was to relate to the creation of a payment schedule whereby the debtors would discharge their obligation to the respondent.
I should interpolate that the letter to which reference has been made by Ms O’Sullivan seeks to confirm an interest in a proposal by the applicant and further asks for advice as to whether the details of the proposal could be described as a true reflection of the proposed agreement. It is noted that the proposal sets out, as deposed to by O’Sullivan, that a series of payments will be made over a 48 month period being 16 equal payments to be made each quarter. Reference in the correspondence is made to security being provided for the respondent for the full amount owing with the type of security to be confirmed. Ms O’Sullivan claims that at all times “the deed was to be a schedule for the repayment of the debt and was never intended that there was a discharge of the obligations of the debtor in the event of their default”. It is further claimed that if the applicant failed to meet the schedule of payments it was “always the position that the respondent would be able to enforce the judgment they had already obtained”.
Apart from the additional affidavit of Ms O’Sullivan filed by the respondent, it is noted that the respondent made further submissions where it is claimed that Ms O’Sullivan’s affidavit “clarifies a number of matters and confirms that the deed was at all times intended to be a repayment schedule and it is never intended to be any discharge of the applicant should he fail to comply with the repayment schedule.
Reasoning
There is no doubt that the deed referred to in the submissions acknowledges the sum of $146,681.00 is owed by the applicant to the respondent. Equally there is no doubt that there has been default in repayments pursuant to the deed. I am otherwise satisfied that despite the alleged error in relation to the date in the bankruptcy notice that the notice did have a date when served and relevantly refers to the total debt owing being the amount which was subject to the judgment entered by consent between the applicant and respondent in the District Court of Western Australia.
I accept that in the event that there is a conflict between recital clauses and the operative clauses of the deed then the operative part is to be preferred.
In this case there is clearly no inconsistency between the recitals and the operative part of the deed in terms of an acknowledgment that the amount of $146,681.00 is owed by the applicant to the respondent.
I accept however that there appears to be some conflict between recital G and clause 2(c). Recital G simply provides for the prospect that upon the creditors forbearing in requiring immediate payment the shareholders referred to in the deed as Watertight Investments Pty Ltd and Glenside Enterprises Pty Ltd agree to guarantee payments of the outstanding monies to the creditor by the debtor which can be fully satisfied by the transfer to Sailbird Holdings Pty Ltd. Clause 2(c) provides that in the event of default in the repayment of the outstanding monies as set out in the agreements then the shareholders “shall forfeit shares in Sailbird Holdings Pty Ltd” to the creditor to the value of the balance of the outstanding sum owed at the date of default as determined by the creditor’s accountants.
I find that clause 2(c) in the circumstances must prevail.
However that is not an end to the matter. In my view it is appropriate in examining a deed of this kind to consider whether as submitted by the applicant the deed could properly be regarded as an accord and satisfaction. I accept that the relevant and appropriate authority is the decision of Dixon J in McDermott v Black. In the present case on a proper analysis of the deed I am not satisfied that it necessarily provides anything more than an accord executory and that it would not extinguish either the old cause of action nor afford a new one. Whilst I have some reservations in reaching that conclusion I accept the submissions made for and behalf of the respondent that on an analysis of the deed there does not appear to be any specific reference to a discharge of obligations by the applicant. Rather the respondent has agreed not to enforce any legal rights that it currently had against the applicant “if the following terms and conditions are met” (see clause 2 of the deed). Clause 2(c) certainly provides for a default process but does not on a proper reading extinguish the rights of the respondent to enforce any legal rights it then has against the applicant. If the deed was intended to extinguish those rights and provide a new cause of action to replace the old cause of action then in my view the deed should clearly set out that objective. Instead it seems clear by the introductory words to clause 2 that the respondent agreed not to enforce legal rights only if the terms and conditions set out thereafter were met. There is no dispute that the payments pursuant to those terms were not made. The issue then remains whether clause 2(c) is operative to the extent that it replaces the cause of action or rights which the respondent then had against the applicant and in my view the cause does not clearly set out that intention.
On my interpretation of clause 2(c) it simply provides an additional form of security and payment. There is insufficient evidence to suggest that forfeiture of shares in Sailbird Holdings Pty Ltd would in any event satisfy the balance of the outstanding sum owed at the date of default as determined by the creditors accountants. The evidence including the affidavit of Ms O’Sullivan demonstrates that that issue was not fully or adequately explored.
In my view the deed may properly be described as an agreement to accept the satisfaction, that is payment by instalments with perhaps an additional option provided by clause 2(c). Until the debt has been satisfied then in my view the deed can properly be regarded as an accord executory which has not yet extinguished the old cause of action nor does it afford a new one.
The deed may properly be regarded as an accord executory without an express abandonment of the claim. In the absence of satisfaction of the claim it is unnecessary in my view to then further apply the contra proferentum principles. Nor do I believe it is necessary for me to admit extrinsic evidence to resolve the doubts of the intentions of the parties.
On my analysis of the deed as indicated it does not provide for an abandonment of the claim but rather can properly be described as an accord executory.
For those reasons it follows that the application should be dismissed with costs.
I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 5 May 2004
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