Sincerity Australia Pty Ltd v Andrew Lloyd Hungerford, Shane Alan Roulston, Andel Enterprises Pty Ltd & Shilena Pty Ltd
[2016] ACTSC 125
•14 June 2016
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Sincerity Australia Pty Ltd v Andrew Lloyd Hungerford, Shane Alan Roulston, Andel Enterprises Pty Ltd & Shilena Pty Ltd |
Citation: | [2016] ACTSC 125 |
Hearing Date: | 24 May 2016 |
DecisionDate: | 14 June 2016 |
Before: | Robinson AJ |
Decision: | The appeal is dismissed. The Appellant pay the 1st and 2nd Respondent’s costs of the appeal. |
Catchwords: | APPEAL – contract, terms of settlement – construction and interpretation of contracts |
Legislation Cited: | Magistrates Court Act 1930 (ACT) Part 4.5 Court Procedures Rules 2006 (ACT) Division 2.11.6 |
Cases Cited: | Stekovic v Polyseal Waterproofing Technologies Pty Ltd [2013] ACTSC 195 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 89 ALJR 990 Westfield Management Ltd v AMP Capital Property Nominees Ltd (2012) 247 CLR 129 Electricity Generation Corporation v Woodside EnergyLtd (2014) 251 CLR 640 Federation Insurance Ltd v Wasson and Others (1987) 163 CLR 303 |
Texts Cited: | LexisNexis Butterworths, Civil Procedure: ACT, vol 1 (at Service 113) [1160.30] |
Parties: | Sincerity Australia Pty Ltd (Appellant) Andrew Lloyd Hungerford (First Respondent) Shane Alan Roulston (Second Respondent) Andel Enterprise Pty Ltd (Third Respondent) Shilena Pty Ltd (Fourth Respondent) |
Representation: | Counsel Mr C Hewitt (Appellant) Mr C Donohue (First and Second Respondents) No appearance (Third and Fourth Respondents) |
| Solicitors Moulis Legal (Appellant) Donohue & Co Lawyers (First and Second Respondents) | |
File Number(s): | SCA 90 of 2015 |
Decision under appeal: | Court: ACT Magistrates Court Before: Magistrate Morrison Date of Order: 15 September 2015 Case Title: Sincerity Australia P/L v Andrew Lloyd Hungerford, Shane Alan Roulston, Andel Enterprises Pty Ltd & Shilena Pty Ltd Court File Number: CS 12 174 |
ROBINSON AJ:
Appeal
This is an appeal from orders made on 15 September 2015 by Magistrate Morrison in consequence of an earlier judgment given by him where he determined the true construction of a hand-written document entitled “Terms of Settlement”. That document came into existence as a result of a court ordered mediation.
In the operative text of that document, the parties are described as defendants and it is necessary to refer to them as such when referring to the text of that document. The unsuccessful plaintiff is the Appellant.
Jurisdiction for the Supreme Court to hear an appeal from those orders is given by Pt 4.5 of the Magistrates Court Act1930 (ACT).
The appeal takes the form of a rehearing as reference is made to that term in Stekovic v Polyseal Waterproofing Technologies Pty Ltd [2013] ACTSC 195 at [10]–[12].
Background
The proceedings commenced on 1 March 2012. It was a claim for goods sold and delivered in the sum of $85,667.00 and involved only one defendant at that time.
However, by the date of the mediation, the initiating process had become the Further Amended Statement of Claim. In that document, the claim against the original defendant had been discontinued and four new defendants added. That discontinuance also brought an order for costs.
The claim against the now second and third defendants was for damages for conspiring not to pay the plaintiff, misleading and deceptive conduct as well as unconscionable conduct. The second and third defendants are the directors of the fourth and fifth defendants.
The claim against the now fourth and fifth defendants, which were corporations alleged to be partners, was for the cost of the goods sold. I was told from the bar table that these defendants have possession of the remaining goods sold. (This fact is relevant to the obligation in clause 1(c) of the Terms of Settlement set out below.)
The fourth and fifth defendants filed cross-claims alleging the goods supplied were defective and pleaded a set off and counterclaim.
Further, by the date of the mediation, the taxation of the order for costs in consequence of the discontinuance referred to above had commenced but had not been completed.
Before the Magistrate, the parties filed a document entitled “Agreed Statement of Factual Background” which set out more fully the context to the dispute. In this document, the parties also agreed to the formulation of a narrow issue:-
[15] That the written Settlement Agreement itself is the agreement to be construed as the final agreement.
[16] There are no further terms to be included in the Settlement Agreement.
[17] The Settlement Agreement is to be interpreted against the relevant factual background. That is, the relevant facts that are common to all parties as set out in this Agreed Statement of Factual Background, and any additional admissible material filed by the respective parties, but not including communications at the mediation.
[18] The only matter for determination is whether or not the second defendant and/or the third defendant have a personal liability for payment of the amounts in clauses (1)(a) and 1(b) of the Settlement Agreement.
The document signed at the mediation was in manuscript. I set out a typed version below.
The first matter to be noticed is that the Terms of Agreement purport to bind and dispose of accrued rights belonging to the [first] defendant although that defendant had finalised its position in the litigation as at the time of the mediation, subject only to the quantification of the order for costs against the plaintiff. However, it was not put to me that Hungerford and Roulston could not bind that defendant to the Terms of Agreement. Clauses 1(c) and 1(e) modify that defendant’s accrued rights.
Approach
The resolution of this case does not require an exploration of the controversial question of the resolution of ambiguity by extrinsic evidence. The approach, for present purposes, can be taken from the recent decision in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 89 ALJR 990 per French CJ, Nettle and Gordon JJ commencing at [46] and omitting footnotes-
[46] The rights and liabilities of parties under a provision of a contract are determined objectively, - 19 by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
[47] In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
[48] Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
[49] However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
[50] Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are (sic) events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.
[51] Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties … intended to produce a commercial result”. Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.
Clause 1(d)
Clause 1(d) is central to the resolution of the construction of the Terms of Agreement. Read alone, for the time being, this clause yields the result of entering judgments against the fourth and fifth defendants. The only sum for which this could be entered is $80,000.00, albeit to be paid in two designated instalments. This conclusion is consistent with clause 1(g).
Clause 1(d) also yields the result that the plaintiff must discontinue against the second and third defendants with no order as to costs. By hypothesis, a discontinuance by the plaintiff against the second and third defendants is incompatible with a judgment in any amount against them.
Discontinuance or withdrawal by a plaintiff is dealt with in Division 2.11.6 of the Court Procedures Rules 2006 (ACT). As the authors to the commentary to those Rules correctly point out, at [1160.30] of the LexisNexis Butterworths, Civil Procedure: ACT, the effect of a discontinuance is to terminate the action but is not a bar to a subsequent action for the same cause. It does not constitute a res judicata. However, a discontinuance which is entered into in the context of a settlement agreement, such as that in this case, may well have that practical effect.
I interpolate here to record that matters of law, such as the rules of court are properly considered as “background knowledge available to the parties at the time of the contract.” See Westfield Management Ltd v AMP Capital Property Nominees Ltd (2012) 247 CLR 129 at [36].
I should record that the Terms of Agreement do not require both the actual payment of the two sums of money and the actual delivery up of the goods prior to the entry of judgments and the filing of the notices of discontinuance. Had there been such a temporal requirement embodied in the terms then that may have strengthened the Appellant’s contentions. Here, the contrary is the case, as the last payment is to be made more than 2 ½ years after the making of the agreement.
It is, however, trite to say that clause 1(d) cannot be read alone. It must be read together with the balance of the agreement. The Court strives to find a construction that enables the various provisions to operate harmoniously and which accord with the purpose or aim of the transaction. See, for example, the result and reasoning process in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640.
Appellant’s Submissions on Construction
The Appellant starts from the proposition that the use of the words in the chapeau, “The plaintiff settles its claim against the defendants for the sum of $80,000.00 on the following terms... “, creates a joint obligation for all four defendants to pay that sum.
The second plank to that submission is that clause 1(d) is only concerned with the mechanism as to how the proceedings will be brought to an end against the defendants. As against the fourth and fifth defendants, this will be accomplished by a consent judgment. As against the second and third defendants, this will be accomplished by the plaintiff filing a notice of discontinuance. It is also said in relation to this plank that there is nothing novel in simply entering a judgment for a plaintiff with no monetary sum. Neither is it novel, it is submitted, to bring an action to an end by the use of a notice of discontinuance.
A third plank to the submission is that the obligations between, effectively, the six participants in the Terms of Agreement are a mixture of joint and several obligations which can exist in one contract. Counsel referred to the case of Federation Insurance Ltd v Wasson and Others (1987) 163 CLR 303 at 317-319 per Gaudron J as authority for that proposition.
It followed from these matters that the proper construction to be accorded to the Terms of Agreement, focussing on the relationship between the plaintiff and the second and third defendants for the present, was that, in return for the second and third defendants joining with in with the joint obligation to pay $80,000.00 together with two others, the second and third defendants would receive the benefit of the filing of a notice of discontinuance to terminate their involvement in the proceedings.
Counsel for the Appellant also made the submission that:
“Because this is an agreement between parties, and the contract requires them to be able to provide consideration. It requires them to – for them to be able to receive a benefit they have to provide consideration.”
I understood counsel to be submitting that, if there existed no obligation for the second and third defendants to pay the sum of $80,000.00, then the contract lacked consideration.
Discernment
In my view the conclusion contended for by the Appellant cannot be accepted.
I accept that the words in the chapeau referred to in paragraph 21 above are capable of being construed as a joint obligation on the part of all four defendants to pay the sum of $80,000. Whether the chapeau, in fact, creates such a joint obligation needs to be considered against the entire agreement.
I do not think the second plank of the submission can be correct as a matter of construction. The meaning of clause 1(d), taken alone, I have set out at paragraph 15 – 17. I do not accept that clause 1(d) can be intended by the parties to provide only a means of terminating the proceedings. The meaning, of course, is to be determined by what a reasonable person would have understood those terms and language to mean. A “consent judgment against the second and third defendants” but not in any sum of money and without a proviso of damages to be assessed, may have an idiosyncratic meaning but it does not have the meaning contended for by the Appellant on the objective test. It is not novel to terminate proceedings by the filing of a notice of discontinuance by the plaintiff, but, on the objective test, that implies that no money is payable to the plaintiff.
It is beyond doubt that a contract may have a mixture of joint and several obligations and joint and several liabilities. I accept that that is the case here. For example, the defendants have a joint obligation, from clause 1(c), to procure the release of the remaining goods the subject of the claim “to the plaintiff by arrangement”.
It does not follow that the use of the term defendants in the context of the chapeau creates a joint obligation. Whether it does or does not depends upon the entire document. In my opinion the balance of the document does not create a joint obligation to pay $80,000.00.
The Terms of Agreement do not lack consideration on the part of the second and third defendants. This is so on two levels. First, all defendants have entered into a global scheme for settlement where there are mutual promises, bargains and consideration. Secondly, the second and third defendants are foregoing their rights to obtain a costs order in respect of the Notice of Discontinuance to be filed by the plaintiff as part of the settlement. See Rule 1163 of the Court Procedure Rules 2006 (ACT).
As I told the parties at the hearing of the appeal, I had not read the Magistrate’s decision prior to coming onto the bench, preferring first to identify my own provisional views on the written document. During the hearing of the appeal no attention was given to the Magistrate’s actual reasons. The parties directed attention to the text of the document afresh. Since writing this judgement, I have read the decision below. The Magistrate comes to no different conclusion than I have, although his reasoning process possibly follows the course and the emphasis of the submissions made before him below. The orders he made to give effect to his decision were appropriate and some of the ancillary orders as to the delivery up of the goods and the interest component were not contentious.
Order
The appeal is dismissed.
The Appellant pay the 1st and 2nd Respondent’s costs of the appeal.
| I certify that the preceding thirty four [34] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Justice Robinson. Associate: Date: 14 June 2016 |
0
5
2