Sydney Hoist and Scaffolding Pty Ltd v Diamond Sons Pty Ltd t/as Two Visions

Case •

[2022] NSWDC 377

•

29 August 2022

No judgment structure available for this case.

District Court


New South Wales

Medium Neutral Citation: Sydney Hoist and Scaffolding Pty Ltd v Diamond Sons Pty Ltd t/as Two Visions [2022] NSWDC 377
Hearing dates: 25 August 2022
Date of orders: 29 August 2022
Decision date: 29 August 2022
Jurisdiction:Civil
Before: Abadee DCJ
Decision:

See paragraph 86

Catchwords:

CIVIL PROCEDURE – application to enforce settlement agreement – scope of discretion - whether an inferior court, with limited equitable jurisdiction, can exercise discretion to take into account equitable principles to refuse enforcement of a compromise - Civil Procedure Act 2005 (NSW), s 73

CONTRACTS – time stipulation for payments expressed to be essential – whether on its proper construction, payments to be made within reasonable time – whether implied term permits late payment for unforeseen circumstances

EVIDENCE – application for summary enforcement of compromise – opposition to application raises questions of construction – defendant relies upon hearsay evidence of representations made by an overseas witness – whether missing witness ‘not available’ - whether ‘proceeding’ is ‘interlocutory’ - whether hearsay evidence admissible – Evidence Act 1995 (NSW), ss 61(1), 63(2), 75

Legislation Cited:

Civil Procedure Act 2005 (NSW) ss 56 – 60, 73, 98, 100

District Court Act 1973 (NSW) s 134

Evidence Act 1995 (NSW) ss 61, 63, 75, 192

Law Reform (Law and Equity) Act 1972 (NSW) ss 6, 7

Cases Cited:

Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570

Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No.3) (1996) 64 FCR 55

Armada Balnaves Pte Ltd v Woodside Energy Julimar Pty Ltd [2022] WASCA 69

BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266

Brickles v Snell [1916] 2 AC 599

Candy v GIO General Ltd [2013] NSWSC 810

Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337

Hoad v Swan (1920) 28 CLR 258

Hobhouse v Macarthur – Onslow [2022] NSWCA 158

Jingalong Pty Ltd v Todd [2015] NSWCA 7

Katter v Melhem (2015) 90 NSWLR 164

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104

Reid v Commonwealth Bank of Australia [2022] NSWCA 134

Stickney v Kibble [1915] AC 386 at 419

Sunbird Plaza Proprietary Limited v Maloney and Another (1989)166 CLR 245

Tsang Chi Ming v Uvanna Pty Ltd (t/as North West Immigration Services) (1996) 140 ALR 273

United Scientific v Burnley Borough Council [1978] AC 904

Yule v Smith [2013] NSWSC 209

Zivkovic & Ors v Parke [2022] VSCA 43

Texts Cited:

Ritchie’s Uniform Civil Procedure NSW (LexisNexis electronic version)

Category:Principal judgment
Parties: Sydney Hoist and Scaffolding Pty Ltd (ABN 38 117 792 149) (applicant)
Diamond Sons Pty Ltd t/as Two Visions (ABN 53 609 503 139) (respondent)
Representation: Mr S Stanton (Counsel) for the respondent
Mr S Ivanstoff (solicitor) for the applicant
File Number(s): 2020/00236081
Publication restriction: Nil

REASONS FOR Judgment

Background

  1. In this proceeding, which commenced on 13 August 2020, the plaintiff was a scaffolder. The defendant was a construction company. In September 2017, the parties entered into an agreement whereby the plaintiff would supply scaffold erection and hire services. The parties were in dispute about the extent of the scaffolding services supplied from September 2017 to July 2018. The plaintiff sued the defendant for the non-payment of invoices and claimed an entitlement to a residual amount owing in the sum of $116,585.11, plus interest (claimed under s 100 of the Civil Procedure Act 2005 (NSW) (the ‘CP Act’)) and legal costs (under the contract; not s 98 of the CP Act). The defendant denied liability and brought a cross-claim.

  2. There was a substantial amount of interlocutory disputation in the proceeding, including an application for default judgment which the defendant successfully applied to set aside in the middle of 2021. On at least one occasion, the parties attended a show cause hearing. The proceeding was eventually fixed for hearing and was scheduled to proceed on 13 July 2022.

  3. On 3 May 2022, consent orders were executed by both parties. The terms of those orders were as follows:

“2. Judgment on the Statement of Claim be granted in favour of the Plaintiff in the sum of $186,000 plus interest calculated in accordance with s 100 of the Civil Procedure Act.

3. The Defendant is to pay the Plaintiff’s costs in relation to the entire proceedings on an indemnity basis.”

  1. The consent orders were supplied to the Court’s Registry, and on 4 May 2022, the Court was informed of a settlement and application was made (by consent) to vacate the hearing date for 13 July 2022. The application to vacate was refused. Later, a range of procedural issues were identified with the consent orders which resulted in the Assistant Registrar declining to make orders in accordance with the consent orders that had been sent to the Court.

  2. On 8 July 2022 the plaintiff filed a notice of motion in which the primary prayer for relief was that judgment be given in accordance with a settlement between the parties.

  3. That motion was returnable for mention before me on 13 July 2022 in a week in which I was sitting as the Civil List Judge in Sydney. I made certain directions that day for the completion of evidence on the motion and for the service of submissions, and fixed the matter for hearing on 25 August 2022.

Evidence

The plaintiff’s evidence

  1. The plaintiff relied upon an affidavit of its solicitor, Mr Daniel Georges, sworn on 8 July 2022 (Exhibit A) and the exhibit to that affidavit (Exhibit B). In it, Mr Georges deposed to a settlement conference which occurred on 29 April 2022.

  2. On 3 May 2022, after forwarding a draft document the previous day, Mr Georges deposed that he received a settlement deed executed by the first defendant. Mr Georges then arranged for a staff member of his law practice to send to the first defendant’s solicitor, Mr Carlo Soliman, a version of the settlement deed executed by the plaintiff.

Relevant provisions of the settlement deed

  1. In the definitions section of the Settlement Deed were the following expressions:

  1. the “Amount Outstanding” was defined as the amount payable by the defendant (first defendant) to the plaintiff (plaintiff) $186,000, with interest accruing from 29 April 2022 until the date of payment and also the plaintiff’s costs of the proceeding calculated on an indemnity basis (including costs incurred on the cross-claim);

  2. ‘Judgment’ meant consent orders for judgment (annexure ‘C’ to the Settlement Deed). Annexure ‘C’ indicated that the consent orders were:

“2. Judgment on the Statement of Claim be granted in favour of the Plaintiff in the sum of $186,000 plus interest calculated in accordance with s 100 of the Civil Procedure Act 2005.

3. The Defendant is to pay the Plaintiff’s costs in relation to the entire proceedings on an indemnity basis.”

  1. The ‘Settlement Sum’ meant the sum of $140,000 payable by the defendant to the plaintiff.

  1. Clause 3.2 contained an acknowledgement by the defendant that the ‘Amount Outstanding’ was presently due and payable,

  2. Clause 3.3 of the settlement deed required the defendant (first defendant) to make payments of the Settlement Sum by instalment as follows:

  1. $50,000 on or before 14 May 2022;

  2. $45,000 on or before 14 June 2022; and

  3. $45,000 on or before 7 July 2022.

  1. It may be seen that the aggregate amount of the instalments over this period is $140,000, which constituted the ‘Settlement Sum’.

  2. Clause 3.4 provided for the mode of payment of the Settlement Sum.

  3. Clause 3.5 generally provided that if the defendant paid the Settlement Sum “strictly” in accordance with cll 3.3 and 3.4, the plaintiff would accept the Settlement Sum “in full and final settlement of its claims”.

  4. Clause 3.6 stipulated that “Time is of the essence for each payment required pursuant to clause 3.3”.

  5. Clause 3.7(b) provided that the plaintiff’s solicitors would hold the Consent orders for judgment (and Notice of Dismissal of the Proceedings) in escrow pending performance of the defendant’s obligations under cll 3.3 and 3.4 of the settlement deed.

  6. Clause 3.7(d) provided that if the defendant did not make payments of the Settlement Sum “strictly” in accordance with cll 3.3 and 3.4, the defendant irrevocably authorised and directed the plaintiff’s solicitors to file the Judgment without further notice to it.

  7. Clause 4.1 identified, as an ‘Event of Default’, the defendant’s breach of any of its obligations under the Settlement deed, including its failure to pay the Settlement Sum “strictly” in accordance with cll 3.3 and 3.4 of the Settlement Deed.

  8. Clause 4.2 provided (to paraphrase) that if the defendant committed an ‘Event of Default’, it agreed that:

  1. the plaintiff may enforce any or all of its rights pursuant to the Judgment;

  2. the plaintiff was entitled to an order for indemnity costs for all its legal costs incurred in relation to the District Court proceedings and in relation to enforcement of the Judgment, in addition to the amount of the Judgment;

  3. the defendant would not “defend, frustrate or in any way impede” action taken by the plaintiff to enforce the Judgment;

  4. any ‘Event of Default’ committed by the defendant would be “sufficiently and conclusively proven” if attested to in an affidavit sworn or affirmed by various persons with identified positions associated with the plaintiff;

  5. any such affidavit would be “conclusive proof” of the amount owing by the defendant.

  1. I agree with the plaintiff’s characterisation of cl 3.7 (read with cl 4.2(a)) as providing a mechanism for a form of ‘security’ for the plaintiff in case the defendant defaulted on its obligation to pay the settlement sum in the manner prescribed by the Settlement Deed.

  2. Clause 5 provided that whilst the defendant “strictly” complied with its obligations under the Settlement Deed, the plaintiff would forebear from enforcing its rights against it under the Deed.

  3. Clause 7.4 provided that variations of any of the terms of the settlement deed would be of no force or effect unless in writing and signed by each of the parties.

  4. Clause 7.5 provided for waiver. Its terms were as follows:

“(a)   In this clause the term waiver is intended to include an election between rights and remedies as well as conduct which might otherwise give rise to an estoppel.

(b)   Failure to exercise or enforce or a dela in exercising or enforcing or the partial exercise or enforcement of any right, power or remedy provided by law or under this document by a party will not in any way preclude, or operate as a waiver of, any exercise or enforcement, or further exercise or enforcement of that or any other right, power or remedy provided by law or under this agreement.

(c)   Any waiver or consent given by a party under this agreement will only be effective and binding on the relevant party if it is given or confirmed in writing.

(d)   No waiver of a breach of any term of this agreement will operate as a waiver of another breach of that term or of a breach of any other term of this agreement.”

  1. Clause 7.6 provided that the Settlement Deed was not to be construed to the disadvantage of a party because the party was responsible for its preparation. It appears that the plaintiff’s lawyers had prepared the Settlement Deed.

  2. Clause 7.19 contained an express acknowledgement that the parties obtained independent legal advice.

Circumstances of payment

  1. Mr Georges deposed that from 13 May 2022 to 27 June 2022 the first defendant did pay a sum of money which amounted, in the aggregate, to $140,000 (and did so prior to 7 July 2022, the date the last instalment was payable), but deposed that the first defendant did not (strictly) pay in accordance with the dates set out in cl 3.3. Mr Georges supplied a breakdown as to when the payments were made, being:

  1. $50,000 on 13 May 2022;

  2. $20,000 on 15 June 2022;

  3. $10,000 on 16 June 2022;

  4. $15,000 on 16 June 2022;

  5. $20,000 on 27 June 2022;

  6. $25,000 on 27 June 2022.

  1. The plaintiff complains that contrary to cl 3.3(b) of the settlement deed, the payments made in (b), (c) and (d) referred in paragraph 22, were received after 14 June 2022.

  2. On 23 June 2022, Mr Georges sent an email to Mr Soliman requesting the execution of consent orders comprising Annexure C to Exhibit B, which had been corrected to address a procedural deficiency identified by the Court’s Registry (which, I was informed, was the omission to deal with the disposition of the cross-claim).

  3. On 5 July 2022, Mr Solimon emailed remittances of all payments made by the defendant to Mr Georges and indicated his refusal to sign consent orders for judgment.

The first defendant’s evidence

  1. The first defendant relied upon affidavits by its manager, Wissam Azzi (sworn 20 July 2022) and solicitor, Carlo Soliman (sworn 20 July 2022).

Mr Azzi’s affidavit

  1. Mr Azzi’s affidavit purported to explain the delay in payment of the $45,000 instalment stipulated to be paid on or before 14 June 2022. He deposed that Charbel Hawi (apparently the Managing Director of the first defendant) was incapacitated, through his suffering a kidney attack on 13 and 14 June, and was thereby unable to attend to the payment. He deposed, on information and belief, that Mr Hawi had overlooked the instalment to be paid on that date, until he realised, on 14 June 2022, that payment was due; but that he was unable to process payment through his mobile phone. He deposed further, on information and belief, that Mr Hawi attended Merrylands Medical Centre on both of those days.

  2. He further deposed that Mr Hawi had subsequently been hindered by periodic attacks of kidney pain, including whilst he was in Lebanon on 27 June 2022. Mr Azzi understood, from what Mr Hawi had informed him, that he was taking his family to Lebanon for the purpose of school holidays.

  3. Mr Hawi also informed Mr Azzi that he received surgery in a town in the north of Lebanon on 7 July 2022 but, as at the date of his affidavit, Mr Hawi could neither physically return to Australia nor explain his conduct otherwise than through the agency of Mr Azzi.

  4. Attached to Mr Azzi’s affidavit were:

  1. a letter (dated 11 July 2022) from the Practice Manager of a medical practice in Merrylands confirming some treatment of and general monitoring of Mr Hawi in the period from 13 to 20 June 2022;

  2. a travel itinerary (issued on 16 June 2022) for Mr Hawi’s travel to and from Lebanon from 27 June to 17 July 2022;

  3. an English-translation of a letter from Bsharri public hospital, recording treatment for Mr Hawi on 7 July 2022.

  1. Mr Azzi asked the Court to note that the balance of the instalments were made on 25 and 26 June 2022 which preceded the last of the three scheduled dates for payment (7 July 2022) set out in cl 3.3.

Mr Soliman’s affidavit

  1. Mr Soliman is the first defendant’s solicitor. He swore an affidavit dated 20 July 2022. He purported to support Mr Azzi’s evidence regarding Mr Hawi’s present whereabouts in Lebanon and kidney problems.

  2. He annexed to his affidavit remittances of the instalment payments made to the plaintiff’s solicitor.

  3. With reference to Mr Hawi’s kidney pain complaint and the remittances, Mr Soliman observed that payments were made at 4:55pm on 14 June 2022 ($20,000) and at 1:09am on 15 July 2022 ($10,000). On the basis of information disclosed to him by Mr Azzi, Mr Soliman deposed to his belief that Mr Azzi made these payments over these intervals due to inability to use his mobile phone to transfer a payment, or payments, earlier.

Objection to the defendant’s evidence

  1. Plainly, from the summary of the defendant’s affidavit evidence it is apparent that much of it is hearsay in nature; in the sense that reliance was placed on out of court representations made by Mr Hawi for the purpose of establishing the truth of their contents. At the hearing, the plaintiff’s legal representative objected to the evidence on that basis. I overruled the objection and indicated that I would give my reasons at the time I delivered the substantive judgment.

  2. Mr Stanton, the defendant’s Counsel argued for the admissibility of the evidence on the basis that various exceptions to the hearsay rule, contained in ss 61(1), 63(2) and/or s 75 of the Evidence Act 1995 (NSW) was or were engaged. Implicit in this, of course, was acceptance that the evidence of Mr Azzi and Mr Soliman about what Mr Hawi had said to them was admitted for the hearsay purpose.

  3. The evidence of Mr Azzi and Mr Soliman reported that what Mr Hawi had told them was relevant to arguments which the defendant wished to make that either (a) as a matter of construction of the provisions in the Settlement Deed, and/or as an implied term, it was agreed that payment of the instalments for settlement could be made late if there were unforeseen circumstances beyond the defendant’s control and/or (b) the breadth of the Court’s discretionary power in s 73 of the CP Act extended so as to allow the Court to refuse to enforce a compromise in the terms agreed by the party if a party’s breach of a term was insubstantial or excusable.

  4. I reject the submission that s 61(1) is engaged. That provision contains a cross-reference to s 13(1) of the Evidence Act. There is no evidence that Mr Hawi suffered any lack of competency in that context at the time he reported to Mr Azzi (or Mr Soliman).

  5. As to s 63(2), at paragraph 8 of his affidavit (sworn 20 July 2022), Mr Azzi deposed that Mr Hawi’s surgery (a fact which was proven in the annexures to his affidavit), and its outcome, had precluded his physical return to Australia. Although that affidavit appears somewhat dated now, and no more recent update has been given as to the state of his health, Mr Azzi was not challenged on his evidence. It strikes me that Mr Hawi would fit within the definition of a person who was “physically unable to give the evidence and it is not reasonably practicable to overcome that inability”, for the purposes of cl 4(1)(c) of Part 2 of the Dictionary to the Evidence Act; and accordingly, that s 63(2) is engaged. However, s 67 imports a ‘notice’ requirement which, the defendant’s Counsel accepted, had not been complied with; at least in the form prescribed by the relevant regulations. Nevertheless, having regard to the length of time that the plaintiff has had to consider Mr Azzi (and Mr Soliman’s) evidence, it is open for the Court to invoke s 192 of the Evidence Act to direct that s 63(2) applies, notwithstanding the failure to give the notice1. After the defendant’s Counsel raised his reliance upon s 63(2) and acknowledged no notice had been served, the plaintiff’s lawyer did not point to any prejudice if the requirement for notice had been dispensed with. To the contrary, as became later apparent in argument, the plaintiff was prepared to accept, for the purposes of argument, Mr Hawi’s explanation as to why he did not pay the amount by the stipulated time. In other words, the plaintiff’s case was such that it did not matter what explanation he supplied given the construction that the plaintiff advanced. On the other hand, to deny the defendant the opportunity to rely upon the hearsay evidence would remove the factual substratum it relies upon for its arguments. I direct, therefore, that the requirement for notice under s 67 is dispensed with. I further rule that the evidence of Mr Azzi and Mr Soliman, insofar as it is hearsay in nature, is permitted by the exception in s 63(2) of the Evidence Act.

  6. This relieves me of the need to decide whether s 75 was also engaged, but in case I am wrong about s 63(2), it is appropriate to consider this basis for objection briefly. As to s 75, most of the debate at the hearing turned on the question whether the ‘proceeding’ was ‘interlocutory’. I accept, as the plaintiff submitted, that the form of the application is not determinative. It is irrelevant that the application before the Court was brought by a notice of motion [1] .

    1. Tsang Chi Ming v Uvanna Pty Ltd (t/as North West Immigration Services) (1996) 140 ALR 273 per Hill J at 282

  1. The Court was not supplied with authority that addresses the point of whether a hearing of an application under s 73 of the Civil Procedure Act 2005 (NSW) is final or interlocutory. The plaintiff contended that the application was ‘final’ in nature and his solicitor argued, that what the Court determined on the present application was a final hearing. The defendant’s Counsel argued to the contrary. Indeed, he went so far as to suggest that if the Court ruled adversely to his client’s interests on the application, he could bring an application in the Supreme Court, on principles of relief against forfeiture, which, he accepted this Court did not have jurisdiction to decide (a matter of significance to which I will return later in these reasons).

  2. It was common ground that both sides were arguing, from different perspectives, that the Court was being asked to exercise power under s 73 of the Civil Procedure Act 2005 (NSW). As will be explained later in these reasons, the power comprehended by that provision contemplates different categories of situation. The first, but not the only, category of circumstance was the enforcement of a compromise (which is what the plaintiff seeks). However, another category comprises the determination of questions about a compromise which might arise (which is what the defendant raises). Logically, it seems to me conceivable that a Court may determine a question about a compromise in a way which does not finally determine the rights of the parties. Even though the defendant did not file the application, what it was doing, in substance, was to ask the Court for a determination of questions arising from the settlement. To effectively do that, or to put it another way, to give utility to that aspect of procedure under s 73, it was appropriate to allow hearsay evidence to be admitted; even if its weight might be affected by that circumstance.

  3. As I explain later in these reasons, s 73(2) of the CP Act does not preclude a party from commencing a separate proceeding to enforce a compromise, which might involve the full panoply of procedural incidents in civil proceedings, such as pleadings and particulars and discovery. But the parties here were content for the more summary procedure contemplated by s 73(1) to be invoked; presumably on a view that the facts were uncontroversial. As I noted in my ruling on s 63(2) exception to the hearsay rule, as it happens, the plaintiff does not seriously dispute the facts which the defendant wishes to rely upon.

  4. Further, I think that some analogy between what the Court is being asked to do under s 73 is found in the powers of summary judgment or dismissal of a proceeding. Decisions on applications of that kind are typically regarded as being interlocutory (thereby necessitating an application for leave to appeal) [2] .

    2. Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No.3) (1996) 64 FCR 55 at 58C

  5. If it was necessary to so conclude, I would have found that this hearing is interlocutory and the hearsay evidence was also admissible under s 75 of the Evidence Act.

  6. The plaintiff did not apply for the Court to exercise discretion to exclude or limit the evidence if the Court had determined that it was admissible as exceptions to the hearsay rule.

Submissions

The plaintiff’s submissions

  1. The plaintiff submitted that the only real issue was whether, properly construed, cll 3.3, 3.5 and 3.6 of the Settlement Deed made time for payment of each and every one of the instalments “of the essence”. The plaintiff submitted that the provisions expressly and unequivocally made time of the essence. The word ‘strictly’ was mentioned 6 times in the settlement deed. Where a contract stipulates time is of the essence for performance of an obligation, the obligation is strict (Stickney v Kibble [1915] AC 386 at 419). The plaintiff submitted that, putting the matter most favourably to the defendant, it was incontrovertible that the defendant did not pay the entirety of the sum of $45,000 which was required to be paid on 14 June 2022. This breached its obligation in cl 3.3.

  2. That being so, the defendant committed an event in default and by cl 4.2(a) and (b) of the Settlement Deed, the plaintiff was entitled to an order in the sum of $186,000 plus interest and legal costs (on an indemnity basis).

  3. Although, on the plaintiff’s case, it was unnecessary to engage with the defendant’s argument about the harshness or lack of reasonableness of the plaintiff’s position, the plaintiff’s solicitor argued in Court that it was plain from Mr Azzi’s evidence that Mr Hawi was conscious of the need to ensure that payments were made on time; as indicated by his instructions to Mr Azzi before he travelled to Lebanon. Further, he argued, there was nothing to prevent Mr Hawi ensuring payment of the second instalment was made on 13 June.

  4. In its written submissions, the plaintiff emphasised that it had also been agreed that the defendant would not defend, frustrate or impede action taken by the plaintiff to enforce the Judgment. Acting in accordance with its rights under the Deed, the plaintiff tried to file the Judgment orders, but this was attended by procedural error and the Court rejected the filing. Rather than accepting corrected orders put for its consideration, the defendant refused to sign them. The defendant is also in breach of its obligation in cl 4.2(c).

  5. Further, the plaintiff’s acceptance of the remaining instalments, and failure to take immediate action, did not constitute a waiver of its rights under the Deed. The plaintiff relied upon cll 5.4 and 7.5(b) of the Deed. Acceptance of the late payments did not amount to a waiver, absent an election being made (per Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570). There was no suggestion that any election was made.

The first defendant’s submissions

  1. Counsel for the defendant pointed to a passage in the judgment of Gaudron J in Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at [37] in support of a proposition that time stipulations ‘may be subject to contingencies’, such as where circumstances arise beyond a party’s control. An intention could not be imputed to the parties that in circumstances where payment may have been late, but was not inexcusably late and did not amounting to a contumacious disregard of the defendant’s obligations, the plaintiff was capable of obtaining judgment for the ‘Amount Outstanding’ ($186,000) as the plaintiff now claimed. Clauses 3.6 and 3.7(d) should not be construed strictly. It would be absurd to construe the time stipulations strictly so as to operate in circumstances of the present kind, relating to Mr Hawi’s ill-health and inability to transmit the funds through his mobile phone. To construe the provisions strictly would deprive the first defendant of the benefit of the compromise.

  2. Counsel argued that, on the authority of Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 (“Codelfa”), there was an implied term in the Settlement Deed to the effect that where the ability of the defendant to comply with the time stipulation was impaired because of circumstances not foreseen and beyond its control, the defendant was permitted to make payment a reasonable time thereafter.

  3. The defendant submitted that notwithstanding the time stipulations in cll 3.6 and 3.7(d), the Deed represented an ‘accord and satisfaction’ of the claim. The provisions did not preclude the first defendant from relying upon matters indicative of its incapacity, by reason of the ill-health of its Managing Director, Mr Hawi, to make payment strictly in accordance with the stipulations; but where payment was made the very next day.

  4. The defendant submitted that a court of equity could relieve against forfeiture and such power was also capable of being exercised under s 73 of the CP Act. He referred to several decisions to the effect that the power under s 73 could be exercised in a manner which, it was argued, indicated that the time stipulation should not be construed strictly. This included a decision of Sackar J in Yule v Smith [2013] NSWSC 209 and a decision of Campbell J in Candy v GIO General Ltd [2013] NSWSC 810.

  5. Section 73 of the Civil Procedure Act confers a discretion on the Court to exercise a power to give effect to the compromise and accommodate the delay. The defendant submitted that the power should be exercised against what is tantamount to forfeiture and/or the plaintiff’s reliance upon what is indicative of a penalty.

Consideration

The Court’s power under s 73 of the Civil Procedure Act

  1. In Katter v Melhem (2015) 90 NSWLR 164 J C Campbell JA (McColl JA and Leeming JA agreeing) observed (at [85]) that s 73(1) authorises the Court to determine questions as to whether, and on what terms, proceedings have compromised and what orders are appropriate to give effect to a compromise agreement in the same or existing proceeding; even if s 73(2) may preserve the discretion to require an enforcement claim to be brought in a separate proceeding.

  2. It has been commented that whether a Court contemplating the exercise of power under s 73 should do so in the existing proceeding, or whether such questions should be determined in separate proceedings, is influenced by: (i) the extent to which extraneous matters are involved; (ii) the nature of the issues to be determined; (iii) the extent to which questions of credibility are likely to arise; and (iv) whether pleadings and discovery may be desirable (Ritchie’s Uniform Civil Procedure NSW (LexisNexis electronic version [s 73.5]).

  3. The discretion in s 73 is also to be shaped by reference to case management objectives in ss 56-60 of the Civil Procedure Act and the underlying or cardinal requirement to determine procedural questions with reference to what is “quick, cheap and just disposal” of the real issues. I consider that the defendant’s grounds for opposition for what is effectively an application for a summary enforcement of a compromise are tolerably clear, at least at a factual level, such that there is no particular reason why the Court would require a separate proceeding to be commenced. The matters raised by the defendant, in particular, are not complex. Both parties urged the Court to exercise the discretion: the plaintiff to enforce the terms of the Settlement Deed; the defendant to determine questions about the terms of the Settlement Deed. It is unnecessary to expect the parties to commence a separate proceeding to enforce the settlement.

  4. As I read the defendant’s submissions (MFI 2), the questions which it wants determined concern:

  1. whether the Settlement Deed is characterised as an accord and satisfaction (or in some other way);

  2. the proper construction of cll 3.6 and 3.7(d) of the Settlement Deed and whether the time stipulations did not preclude the defendant from obtaining the benefit of the compromise if its delay in payment was excusable or insubstantial;

  3. whether there was an implied term (of fact) as the defendant propounded;

  4. whether, by analogy with equitable principles relating to relief against forfeiture, the Court might, in the exercise of the discretion in s 73 of the CP Act, decline to enforce the terms as applied for by the plaintiff.

Accord and satisfaction

  1. The defendant referred the Court to the expression of principles relating to accord and satisfaction from a decision of the New South Wales Court of Appeal in Jingalong Pty Ltd v Todd [2015] NSWCA 7 (“Jingalong”) and some Victorian authorities, including, principally, Zivkovic & Ors v Parke [2022] VSCA 43 (“Zivkovic”).

  2. I confess to difficulty in understanding the defendant’s reference to these cases. The defendant did not contend that the provisions of the Settlement Deed were not binding. Such contention would be problematic, if no other reason than cll 3.1(a) and 5.1 of the Settlement Deed. The plaintiff does not move on causes of action in its statement of claim. There was no issue, from the defendant’s perspective, as to why the plaintiff should or would be compelled to pursue its pre-existing cause or causes of action against the defendant prior to the Deed being entered into. Neither party questioned that the Settlement Deed was the “only repository of rights available to the parties” (Zivkovic per Kyrou JA at [79] (noting that Kyrou JA dissented in the outcome).

  3. When I asked Counsel for the defendant to explain how principles of ‘accord and satisfaction’ applied in the present context, his answer was that the express time stipulation was not a bar to the defendant arguing that it could be excused. This was no different, in substance, to his construction and implied term arguments now to be considered.

Construction of cll 3.3, 3.6, 3.7 & 4.1

  1. It is well-established that provisions in a contract are to be interpreted objectively, by reference to its text, context (the entire text of the contract as well as any other contract, document or statutory provision referred to in the text of the contract) and purpose: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [47]. Both parties referred to this decision in their submissions. About context and purpose, a similar description is to say that the Court is to take into account the “surrounding circumstances known to the parties and the objects the agreement is intended to secure”: Jingalong per Sackville JA (Meagher JA and Leeming JA agreeing) at [69].

  2. I understood the defendant to submit that properly construed, cl 3.3 was not a ‘condition’ in default of which the plaintiff was capable of exercising a right to procure the Court’s enforcement of consent orders (being in the form of Annexure C to the Deed), whereby the plaintiff would obtain a Judgment in its favour for the sum of $186,000 and an order for costs on an indemnity basis (for the entirety of the proceeding).

  3. This submission flies in the face of the text. Clause 3.6 expressly states that time was of the essence for the defendant’s performance of its obligation in cl 3.3. Read in the context of other provisions of the Settlement Deed, the strictness of the obligation is reinforced in cl 3.7(c) and again in cl 4.1. Read as a whole, cll 3 and 4 provide a careful structure for the staged payment of the Settlement Sum in instalments. Where there was default in the payment in accordance with those phases, cl 4 addressed the consequences of such default, including relevantly, the right to apply to enforce judgment (held in escrow) for the ‘Amount Outstanding’. The ‘Amount Outstanding’ was what the defendant agreed was “presently due and payable” (cl 3.2).

  4. The context, more generally, does not indicate anything to the contrary. This included that the agreement was entered into through the process of alternative dispute resolution, in which the parties were legally represented. Further, they received independent advice about the Settlement Deed – the last fact being a matter which the defendant acknowledged in the Settlement Deed. The parties thus received advice about their respective rights and liabilities, which were subsequently reduced to an arm’s length bargain. I see no reason why contextual matters would displace the ordinary and plain meaning of the obligations which, relevantly, were that breach of the time stipulation went to the root of the agreement; no matter what the insubstantiality or triviality of the lack of timeliness constituted by the defendant’s delay. As the Privy Council said in Brickles v Snell [1916] 2 AC 599 at 604, the plaintiff is entitled to “stand upon the ‘letter of his bond’”; followed in Hoad v Swan (1920) 28 CLR 258 at 263. Clause 3.6, in particular, removes any doubt: United Scientific v Burnley Borough Council [1978] AC 904 per Lord Diplock at 936. These principles are solidly entrenched in both the common law and in equity: Armada Balnaves Pte Ltd v Woodside Energy Julimar Pty Ltd [2022] WASCA 69 at [557]-[558].

  5. The defendant’s submission that principles regarding the enforcement of essential time stipulations were qualified by Gaudron J in Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245, is misconceived. In that case the vendor sued a guarantor following the purchaser’s omission to pay the balance of the purchase price prior to completion of the conveyance. There was no contractual provision contrary to the general position that the balance of the purchase price was payable at completion. Amongst other things, the guarantors raised the point, in their defence, that the vendor was itself in anticipatory breach, which thereby entitled the purchaser to terminate the contract. Although her honour referred to Hoad v Swan, that was not in the course of addressing the present point in issue; being whether a party in breach of what was expressed to be an essential time stipulation could be excused from the legal consequences on the basis that the breach was trivial or insubstantial.

  6. As to purpose, one object, or purpose, was that although the parties agreed that the defendant’s liability to the plaintiff should be quantified at the sum of $186,000, inducement was offered to the defendant to receive a substantial (nearly 25%) discount, being the sum of $140,000, if that could be paid off in the period from 29 April 2022 to 7 July 2022 (a period of nearly 10 weeks), in accordance with closely regulated stages. Whilst this yielded incentive to the defendant to pay, it also assisted the plaintiff, in getting the settlement sum paid expeditiously and consequently obviating its need for a drawn out process in which it would have to enforce the settlement sum by other means. In this way, the provisions instilled certainty. But another and arguably predominant purpose, or object of the settlement Deed, was to instil the inherently related value of finality in the parties’ positions; and to minimize, to the extent possible, further recourse to litigation.

  7. It is understandable that the defendant would say that a substantial compliance with the dates for payment was not inconsistent with the purpose of the agreement to give incentive to pay a discounted settlement sum as soon as possible, but its construction subverts the main, or at least very important, purpose of the agreement of instilling finality or certainty; since it was an inherently uncertain notion to construe the obligation to pay by reference to what was ‘reasonable’. It has also subverted the other purpose of ensuring expeditious payment of the settlement sum since its construction creates uncertainty as to when, and in what circumstances, the time stipulations for payment by instalment could be altered.

  8. I reject the defendant’s argument that the construction that the plaintiff argues for, and which I accept – giving effect to the ordinary and plain meaning of the defendant’s obligations in cll 3 and 4 – would be absurd or impracticable. To the contrary, it is readily understandable in the context that the agreement was made and consistent with its objects.

The implied term argument

  1. This argument founders for at least one simple reason. The defendant did not explain how the test for implication of fact satisfied all of the requirements of BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-283. Apart from anything else, the suggested implication was plainly contrary to the express terms of the Settlement Deed importing essentiality to the time stipulation.

The forfeiture analogy

  1. For the purpose of determining this application, I accept, as the plaintiff’s solicitor advocate did, that the first defendant’s managing director was unwell on the date that the second instalment of payment of the settlement sum was due.

  2. This Court, one of limited statutory jurisdiction, has especially limited jurisdiction in equity. The defendant’s Counsel accepted that the defendant could not be relieved from strict compliance with its contractual obligation through the exercise of this Court’s equitable jurisdiction under s 134 of the District Court Act 1973 (NSW). Nor did he suggest that relief against forfeiture principles might be the subject of a defence which this Court could consider under s 6 of the Law Reform (Law and Equity) Act 1972 (NSW).

  1. This left the defendant to argue that principles consistent with, or analogous to, the equitable grant of relief against forfeiture (or penalties) should be exercised by the Court in its discretion under s 73 of the Civil Procedure Act.

  2. This strikes me as being offensive in principle and subverting the Court’s limited jurisdiction in equity. It is not appropriate to enlarge this Court’s equitable jurisdiction under the guise of exercising a discretion under s 73 of the Civil Procedure Act. Put another way, where this Court is asked to exercise a procedural power under the Civil Procedure Act, it does so in a context of its existing jurisdiction to determine the controversy in the proceeding in the Court. Simply because parties to litigation commenced in this Court have reached a compromise, and an issue has arisen as to the enforcement of that compromise and s 73 facilitates this Court’s capacity to determine a dispute about that compromise, does not create or enlarge the Court’s jurisdiction which it does not otherwise have. Neither of the two authorities (Yule v Smith and Candy v GIO) relied upon by the defendant to illustrate the breadth of the discretion in s 73 of the Civil Procedure Act suggest that the Court’s discretion extends this far. The appropriate course for the defendant, if it wished to invoke equitable principles regarding forfeiture, was for it to invoke s 7 of the Law Reform (Law and Equity) Act and effectively have its argument considered in the Supreme Court (or perhaps have the Supreme Court re-transfer the matter here, which might have supplied equitable jurisdiction otherwise absent [3] ).

    3. For a recent example, see Reid v Commonwealth Bank of Australia [2022] NSWCA 134

  3. If I might venture to suggest, if I am wrong in my view of the limitation of the Court’s discretion in s 73, for jurisdictional reasons, it is far from obvious to me that a superior court would accept the defendant’s invocation of equitable principle at any rate. In Hobhouse v Macarthur – Onslow [2022] NSWCA 158 Macfarlan JA (Ward P and White JA agreeing) recently observed:

“33.In certain situations equity exercises jurisdiction to relieve against penalties and forfeitures, the distinction between these concepts being described in Legione v Hateley (1983) 152 CLR 406 at 445; [1983] HCA 11 (Mason and Deane JJ) as follows:

“A penalty, as its name suggests, is in the nature of a punishment for non-observance of a contractual stipulation; it consists of the imposition of an additional or different liability upon breach of the contractual stipulation... On the other hand, forfeiture involves the loss or determination of an estate or interest in property or a proprietary right, e.g., a lease, in consequence of a failure to perform a covenant” (citation omitted).

34. In relation to forfeiture, the plurality in Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57 at [58] described the “special heads of fraud, accident, mistake or surprise” as identifying “in a broad sense” the circumstances that made it inequitable for the vendors in that case to rely upon their termination of the purchaser Tanwar’s contracts as an answer to Tanwar’s claim for specific performance. Their Honours indicated that those “special heads” do not necessarily delimit the extent of the equitable jurisdiction. Their Honours at [59] then cited the statement of Deane and Dawson JJ in Stern v McArthur (1988) 165 CLR 489 at 526; [1988] HCA 51, that the “circumstances must be such as to make it plain that it is necessary to intervene to avoid injustice or, what is the same thing, to relieve against unconscionable – or, more accurately, unconscientious – conduct”. Mason CJ however emphasised in Stern that “the jurisdiction to grant relief against forfeiture does not authorise a court to reshape contractual relations into a form the court thinks more reasonable or fair where subsequent events have rendered one side’s situation more favourable” (at 503). The plurality in Tanwar referred to this statement with approval (at [58]) and the High Court made a statement to similar effect in Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367; [2003] HCA 58 at [24].

35. As to the concept of “accident”, the plurality in Tanwar referred to relevant texts and continued:

“[66] [T]he learned writers on the subject emphasise and put to one side those situations where the event which has come to pass is one for which an express exculpatory provision might have been made, but was not sought or was not agreed to, and where to relieve against its consequences after it has occurred would deprive the other party to the contract of an essential right. In particular, equity will not relieve where ‘the possibility of the accident may fairly be considered to have been within the contemplation of the contracting parties’” (citations omitted).

36. In Tanwar itself the purchaser was unable to complete contracts for the sale of land due to a delay in it obtaining finance. The High Court denied relief against forfeiture on the basis that “[t]hat there might be a failure by a third party to provide the finance was reasonably within the contemplation of Tanwar” (at [67]).”

  1. If it was necessary to express any view, the possibility that an officer of a corporate litigant, who happened to be indisposed or incapacitated and was unable to put the wheels in motion within his company to ensure that it fulfilled essential time stipulations in an agreement, would appear to be the type of scenario that was within the contemplation of the contracting parties such that it would not amount to an ‘accident’. In this regard, cl 3.4 of the Settlement Deed indicated that payments of the settlement sum were to be by electronic funds transfer. It is not apparent why the defendant could not have arranged for scheduled funds transfers to be performed in the future on or by the stipulated due dates; rather than leaving, rather haphazardly, arrangements for transfers to be performed manually in a way dependent upon the managing director’s personal circumstances. At any rate, there is nothing to suggest, generally, any exploitative conduct by the plaintiff which betokened an unconscientious reliance upon its legal rights simply because, to adapt what Mason CJ said in Stern, “subsequent events have rendered (the plaintiff’s) situation more favourable”.

  2. Although the plaintiff itself discussed waiver, and the provisions in cl 7.5 which deal with that topic, the defendant did not raise argument about it.

  3. No other persuasive reason is supplied as to why the Court should not accede to the plaintiff’s application for summary enforcement of the Settlement Deed.

  4. I find that the defendant breached an essential time stipulation in cl 3.3(a)(ii) and committed an event of default. The plaintiff is entitled to enforce its rights to have the consent judgment enforced and to have its costs of the District Court proceeding and the enforcement of that judgment (including the costs of the present motion) paid on an indemnity basis, in accordance with the Settlement Deed.

order

  1. The Court orders:

  1. Judgment on the Statement of Claim be given in favour of the plaintiff against the defendant in the sum of $186,000.00;

  2. The cross-claim filed in these proceedings be dismissed;

  3. The defendant is to pay the plaintiff interest calculated pursuant to s 100 of the Civil Procedure Act 2005 (NSW) in the amount of $919.30;

  4. The defendant is to pay the plaintiff’s costs of the entire proceedings (including the cross-claim and the plaintiff’s costs of the notice of motion filed 8 July 2022) on an indemnity basis.

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Endnotes

Decision last updated: 29 August 2022

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Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57
Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57
Hardel Pty Ltd v Burrell & Family Pty Ltd [2009] SASC 77