Templer v Milford Hall Pty Ltd
[2016] VCC 1774
•25 November 2016
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| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-16-01065
| WILLIAM THOMAS TEMPLER and KENDRA TEMPLER | First Plaintiffs Second Plaintiff | Plaintiffs |
| v | ||
| MILFORD HALL PTY LTD (ACN 006 049 449) | First Defendant | First Defendant |
| and ANTHONY ANTONOPOULOS and STEPHEN ARVANITIS | Second Defendant Third Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10 November 2016 | |
DATE OF JUDGMENT: | 25 November 2016 | |
CASE MAY BE CITED AS: | Templer v Milford Hall Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2016] VCC 1774 | |
REASONS FOR JUDGMENT
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Subject: CONTRACT
Catchwords: Sale of nursing home; adjustments of entitlements at settlement – mistake – claim and set-off – restitution – claim for legal costs under costs agreement – whether reasonable
Legislation Cited: s52P-1 Aged Care Act 1997 (Cth)
Cases Cited:City Bank of Sydney v McLaughlin (1909) 9 CLR 615; Porter v Latec Finance (Qld) Pty Ltd (1964) 111 CLR 177; David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560; O3 Capital Pty Ltd v WY Properties Pty Ltd [2016] WASCA 82; Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234; Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635; Warner v Sampson [1959] 1 QB 297; Chen & Anor v Kevin McNamara & Son Pty Ltd (No 2) [2012] VSCA 229; Carbure Pty Ltd v Brile Pty Ltd(No 2) [2002] VSC 313; Macquarie International Health Clinic v Sydney South West Area Health Service (No 3) [2010] NSWSC 1139
Judgment: The parties to bring in short minutes to give effect to these reasons within 14 days
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J Foster | Fraser Barrett Baird |
| For the Defendants | Mr M T Settle | Nomikoudis & Associates |
HIS HONOUR:
Background
1 Milford Hall Pty Ltd (“Milford Hall”), the first defendant, operated an establishment known as “Chomley House” at 113-115 Chomley Street, Prahran, providing nursing home care in accordance with the provisions of the Aged Care Act 1997 (Commonwealth).
2 The Commonwealth statute provides for a funding or partial funding process whereby residents or their families lodge an accommodation bond, or “refundable deposit” as the statute describes it. The nursing home has access to all income generated by the bond, together with a limited entitlement to debit the principal sum.
3 The bond or the undrawn balance is refundable inter alia:
“…within 14 days after the day on which the provider [viz the nursing home proprietor] is shown the probate of the will of the care recipient or letters of administration of the estate …” (s52P-1)
4 The plaintiffs, Mr and Mrs Templer, held the shares in the capital of Milford Hall. Milford Hall acted as Trustee to Templer No 1 Family Trust.
5 By an agreement made 18 November 2014, Milford Hall, as Trustee of the Family Trust, and Mr and Mrs Templer, sold certain assets to the second and third defendants, Anthony Antonopoulos and Stephen Arvanitis. (Court Book “CB” 76ff)
6 The assets sold included the business which was defined as “the business of Chomley House conducted by the Vendor and includes the Allocated Places, the Provisional Places and the Assets”. The reference to Allocated Places and Provisional Places was to terms defined under the Commonwealth statute. The “Assets” were defined as follows:
“… the assets (save and except the Excluded Assets) of the Vendor legally owned by the Vendor and used in connection with the Business at the Business Premises and any other assets acquired by the Vendor in the ordinary course of conducting the Business from the Execution Date until Completion and includes the items set out in Schedule 2 and Asset has a corresponding meaning and includes the Intellectual Property and the Stock.”
7 Milford Hall, at the time of the agreement, had an entitlement to receive funding for some 38 Allocated Places under the Commonwealth statute. (CB 79) Chomley House also held an approval in principle by the Commonwealth Department for an allocation of 22 Provisional Places under the statute. The “Excluded Assets” were identified in Schedule 4. (CB 83) The Schedule was not put into evidence but the identity of the Excluded Assets was not an issue in this proceeding.
8 The purchase price was $6,300,000. (CB 85) This purchase price was allocated as $6,203,994 to goodwill, including the Allocated Places, and $96,006 to plant and equipment. (CB 90, Clause 5)
9 The contract provided for relatively elaborate adjustments of entitlements and obligations of the business as at “midnight on the day before Completion Date”. (CB 92, Clause 12) Amongst the items requiring adjustment were the balances of accommodation bonds.
10 The total face value of those bonds as at 30 November 2014, which was the eve of the Completion Date (viz 1 December 2014) was $7,639,644.08. (CB 194) Since the effect of the agreement was that Milford Hall, under the ownership of the second and third defendants, would be obliged in due course to refund those funds, an adjustment of that amount was made against Mr and Mrs Templer at settlement.
11 Included amongst the outstanding bond balances adjusted against Mr and Mrs Templer was the sum of $273,200 relative to Mrs Joyce Canning Williams, who had died on 14 October 2014. As a result of s52P-1 of the Aged Care Act, there was, as a result of her decease, an obligation to refund the balance of the bond 14 days after Milford Hall was shown the probate of her Will. The Will was admitted to probate on 12 February 2015, some two and a half months after the Completion Date. (CB 229)
12 According to Mr Templer, in March 2015 he received a telephone call from an employee of Chomley House who had worked at that establishment whilst he and his wife controlled Milford Hall. She said that there had been an approach from Mr Andrew Williams, who was the Executor of the Estate of the late Mrs Williams, relative to the refund of the balance of her accommodation bond.
13 Mr Templer said that since Mrs Williams’ death had occurred before the Completion Date and before the date of the sale agreement, he regarded this obligation to refund as resting with him and his wife as Vendors and those in control of Chomley House as at the date of death. (T44, L21-26)
14 Mr Templer drew a cheque on a Westpac Business One account in the name of Milford Hall Pty Ltd in the sum of $273,800, dated 6 March 2015, which cheque was presented and debited to that account on 10 March. (CB 217, T50) This sum represented the balance of the accommodation bond plus interest of $600 calculated for the period from the date of probate to the date of payment; that is, a period of less than one month.
15 According to Mr Templer, whilst the account in question was in the name of Milford Hall Pty Ltd, it was not, as he understood it, amongst the assets sold under the agreement of 18 November 2014. As a result, he and his wife continued to be the sole signatories and therefore in control of the account. They regarded it as proper to regard the account as their personal property and saw themselves as entitled beneficially and unconditionally to all credit balances in the account. (T44, L7-12) To enable the payment to be made, he paid in on 9 March some $242,000 from a personal account designated “Westpac eSaver”. (CB 233; T47, L1-4)
16 Mr Templer said he arranged to deliver the cheque dated 6 March 2015 (CB 234) to Mr Williams personally. He secured the signature of Mr Williams on a standard form “Confirmation of Refund Repayment of Accommodation Bond” with the letterhead of Chomley House Aged Care Facility dated 5 March 2015. (CB 234) In fact, the delivery of the cheque and the signature was a day or two later because of Mr Williams’ initial unavailability. The document included the statement “This acknowledgement releases Chomley House from any further obligation”.
17 Some short time later, also during the course of March 2015, Mr Templer said he became aware, as a result of discussions in relation to the accommodation bond of another deceased former resident, Mr Marshall, that the bond balance for the late Mrs Williams had been adjusted against Mr Templer and his wife at settlement of the sale agreement. In the result, therefore, from their standpoint, the amount had been paid twice; first, by way of the adjustment and, secondly, by means of the cheque which was delivered to Mr Williams.
18 Failing to recover a refund of their outlay from the defendants, the plaintiffs commenced proceedings in the Magistrates’ Court seeking an amount of $97,280.12. In their proceeding, they acknowledged that under Clause 12 of the agreement, an adjustment of some $207,200 was payable by them to Milford Hall as an adjustment under Clause 12 of the sale with respect to resident Leonard Murphy’s accommodation bond. This left a net amount relative to accommodation bond payable to the plaintiffs, according to their claim, of $66,000.
19 They also claimed to recover some $8,800 in amounts rendered to them by their solicitors in attempted recovery of the amounts claimed. These were said to be owing under Clause 22.1 of the sale agreement, which provided:
“If the Purchaser [viz Messrs Arvanitis and Antonopoulos] makes default in payment of any sum of money due hereunder or in the conditions hereof and such default is not remedied within 14 days after notice specifying such default being served upon the Purchaser then the Purchaser shall pay:
(a)all reasonable expenses incurred by the Vendor and/or Share Vendor [Share Vendors are Mr and Mrs Templer] as a result of the breach;
(b)interest on any money overdue during the period of default in accordance with clause 30 [which provided for payment of interest at a rate of 2 per cent above the penalty interest rate specified in the Penalty Interest Rates Act 1983].”
20 The claim relative to the Murphy accommodation bond was relied on as set-off or counterclaim by the defendants and, as a result, the proceeding was uplifted to this Court.
21 In their Amended Statement of Claim filed pursuant to the Orders of Registrar Tran made 21 October this year, the plaintiffs claim a net amount of $66,000 relative to the bond; $11,287.56 fees relative to resident, Elizabeth Robinson; the amount of resident pre-payments of $3,732.75; interest of $7,459.81, relative to the above claim; and costs of recovery of $8,800. A total claim of $97,280.12. These same figures are shown in the further Amended Statement of claim filed following the trial to raise for the first time the issue of rectification.
22 The claim for the recovery of $273,800 netted against the liability relative to the Murphy bond was said to arise on the basis that the payment made by the plaintiff enriched Milford Hall at the expense of the plaintiffs and it would be unjust for Milford Hall to retain the benefit.
23 The issues relative to Elizabeth Robinson’s fees are not in dispute nor is the entitlement of the defendants to set-off or counterclaim the face value of the Murphy accommodation bond. The only matter which is in dispute is the entitlement of the plaintiffs to claim against the defendants or any of them their outlay of $273,800 and to claim an amount for legal costs in the sum of $8,800.
Defendants’ submissions
24 The defendants were represented by Mr Settle of counsel. In opposition to any entitlement by the plaintiffs to recover the $273,800, Mr Settle relied first upon the decision of the High Court of Australia in City Bank of Sydney v McLaughlin (1909) 9 CLR 615 in the judgment of Isaacs J. In that case, a proceeding had been brought in the Supreme Court of New South Wales by Mr McLaughlin seeking discharge of a mortgage of land and re-conveyance to him of the relevant land. The mortgage had been purportedly granted to the bank under power of attorney by Mrs McLaughlin during his insanity. The Supreme Court determined that in the circumstances the mortgage was void.
25 In the High Court, Griffith CJ and Barton J held that the decision of the Supreme Court of New South Wales should be discharged except insofar as it found the Deed of Mortgage given by Mrs McLaughlin to the bank to be null and void. They ordered that an account of monies paid by the bank on cheques drawn by Mrs McLaughlin, and whether these monies were drawn for the benefit of Mr McLaughlin or in discharge of his obligations, legal or equitable.
26 They ordered an inquiry whether Mr McLaughlin, having received the benefit of any of those payments “he afterwards, with knowledge of the payments, retained and continued to enjoy the benefit of them”. They also ordered an inquiry whether the plaintiff acknowledged that the bank had possession of the title deeds of his land and of their claims to retain them as security. He obtained advances from the bank and what balance was due to the bank for those advances. It was, however, the judgment of Isaacs J upon which Mr Settle relied.
27 His Honour was considering whether or not Mr McLaughlin could be said to have adopted certain payments said to have been made for his benefit.
28 The lengthy passage from his Honour’s judgment in City Bank of Sydney v McLaughlin relied upon by Mr Settle is as follows:
“Every one of these aspects is material here. The proposition is that stated by Lord Selborne L.C. (4), in these terms :—‘It is consistent with the general principle of equity, that those who pay legitimate demands which they are bound in some way or other to meet, and have had the benefit of other people’s money advanced to them for that purpose, shall not retain that benefit, so as, in substance, to make those other people pay their debt.’
In Bannatyne v. Maclver, Lord Collins (then Master of the Rolls) thought it sufficient to quote Lord Selborne’s words. Other learned Judges have stated the same thing in somewhat varying language. I am content to accept the rule propounded by the learned Lord Chancellor as containing all the essentials, and to examine and then apply it. The proposition when dissected imposes liability where the party charged (1) pays, (2) legitimate demands which he is bound to meet, (3) thus taking the benefit of other people’s money advanced to him for that purpose. If those conditions concur, then, having the benefit, he must recoup the other persons, so as not to make the latter pay his debts.
The expression ‘pays’ involves some election on the part of the person charged either to apply the money or to treat it as applied to the satisfaction of his liabilities. The mere fact that a benefit is conferred on him does not suffice to make him chargeable. The Privy Council said in Ram Tushul Singh v. Bieswar Lall Sahoo: ‘It is not in every case in which a man has benefited by the money of another, that an obligation to repay that money arises. The question is not to be determined by nice considerations of what may be fair or proper according to the highest morality. To support such a suit there must be an obligation, express or implied, to repay. It is well settled that there is no such obligation in the case of a voluntary payment by A. of B’s. debt.’
And so in Abdul Walud Khan v. Shaluka Bibi, a party was held by the Judicial Committee not liable for any portion of costs incurred by the other party and which resulted in the reversal of a decree against both, a reversal of which the party charged of course got the benefit. The Privy Council said : ‘The fact that the result was also a benefit to the plaintiffs does not create any implied contract or give the defendant any equity to be paid a share of the costs by the plaintiffs.’
The case of The Liddesdale is an instance of a person benefiting by another person’s outlay without any liability to recoup, because, having no power to reject the benefit without abandoning his property altogether, which he could not be expected to do, the circumstances raised no case of adoption or election or assent.
Consequently we have, in such a case as the present, to see whether the respondent directly or indirectly has so conducted himself as to have assented to the actual application of the money which was made in his name, and therefore, in fact, to have “paid” his obligations: Belshaw v. Bush; Kemp v. Balls; Keighly, Maxstead & Co v Durant. Unless there is something in the nature of adoption, the attempted payment is not really a payment, for the debtor might refuse to accept it, and insist on paying his debts himself, leaving the first person to get back his money as best he could.” (1909) 9 CLR 615, 631-633 (citations of supporting authorities omitted).
29 Next, Mr Settle took me to a passage in the judgment of Kitto J in the High Court’s judgment in Porter v Latec Finance (Qld) Pty Ltd (1964) 111 CLR 177 at 192. In that case, Porter lent £1,500 to Mr L H Gill on a fraudulent representation that he was one H H Gill, the owner and mortgagor of land. Porter used the money to pay off an existing mortgage and receive a mortgage discharge. L H Gill then executed a new mortgage over the land, forging the signature of H H Gill, which was lodged for registration. Porter demanded payment of the £1,500 plus interest. L H Gill then applied to Latec Finance (Qld) Pty Ltd (“Latec”) for a loan of £3,000, which was granted. Again, he represented that he was H H Gill. He forged H H Gill’s signature on a mortgage. Porter then advised Latec’s solicitors of the amount which he said was due to him, and upon payment of which he would hand over to Latec’s solicitors the certificate of title and mortgage. L H Gill again forged the signature of H H Gill and authorised Latec’s solicitors to pay Porter £1,592 2s 10d. Latec then sued Porter for the recovery of the money as money paid under a mistake. The majority of the Court, Barwick CJ, Taylor and Owen JJ, held that the payment of £1,592 2s 10d was made to Porter’s solicitors on behalf of L H Gill, and not on behalf of Latec, and consequently Latec could not succeed in a claim against Porter for its recovery as money paid under a mistake of fact. Kitto and Windeyer JJ dissented. Mr Settle relied on the following passage from the judgment of Kitto J:
“Next the appellant says that the money he received from the respondent was Lionel Herbert Gill's money and not the respondent's. Aiken v. Short (1856) 1 H &N 210 (156 ER 1180) would support a proposition that a payment of money by A. to B. on behalf of C., made with C.'s authority either antecedently given or created retrospectively by ratification, amounts to two payments, one by A. to C. and the other by C. to B.; so that even though A. made the payment under a mistake of fact he cannot recover it back from B., because the money was received by B. not as A.'s money but as C.'s money. But, where C. has neither authorized the payment beforehand nor made it his own by ratification, it is impossible to say that the money is received by C. otherwise than as A.'s and, that being so, the recoverability of the money by A. on the ground of mistake of fact must depend only upon the question whether it was fundamental to the payment by A. that a fact should have existed which A. believed to exist but which in truth did not exist.” (1964) 111 CLR 177 at 192
30 Mr Settle took me next to the High Court of Australia in David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353. In David Securities, a borrower made certain payments to the bank with respect to withholding tax under a covenant which the Court held was void as a result of s261 of the Income Tax Assessment Act 1936. The borrower sought to recover the amount so paid as monies paid under a mistake, and the principal issue for the Court was whether a mistake of law, as distinct from a mistake of fact, could form the basis for a successful claim for repayment. Mason CJ, Deane, Toohey, Gaudron and McHugh JJ said:
“47.The respondent's submission that the appellants must independently prove ‘unjustness’ over and above the mistake cannot therefore be sustained. The fact that the payment has been caused by a mistake is sufficient to give rise to a prima facie obligation on the part of the respondent to make restitution. Before that prima facie liability is displaced, the respondent must point to circumstances which the law recognizes would make an order for restitution unjust ((79) Westpac Banking Corporation (1988) 164 CLR, at p 673). There can be no restitution in such circumstances because the law will not provide for recovery except when the enrichment is unjust. It follows that the recipient of a payment, which is sought to be recovered on the ground of unjust enrichment, is entitled to raise by way of answer any matter or circumstance which shows that his or her receipt (or retention) of the payment is not unjust.
48.The two ‘defences’ upon which the respondent relies in this Court are, first, that the payments by the appellants were made for good consideration and, secondly, that in reliance upon receipt of the payments the respondent, in good faith, changed its position to its detriment. In the context of a mistake case, these ‘defences’ were included in the well-known formulation of Goff J. in Barclays Bank. His Lordship stated ((80) (1980) Q.B., at p 695):
‘(1) If a person pays money to another under a mistake of fact which causes him to make the payment, he is prima facie entitled to recover it as money paid under a mistake of fact. (2) His claim may however fail if (a) the payer intends that the payee shall have the money at all events, whether the fact be true or false, or is deemed in law so to intend; or (b) the payment is made for good consideration, in particular if the money is paid to discharge, and does discharge, a debt owed to the payee (or a principal on whose behalf he is authorised to receive the payment) by the payer or by a third party by whom he is authorised to discharge the debt; or (c) the payee has changed his position in good faith, or is deemed in law to have done so.’
The respondent argues that this is a case where the appellants, having accepted the benefit of performance by the respondent, now seek to recover part of the consideration promised for that performance, namely, the payments made referable to withholding tax. This argument and the respondent's attempt to analyze the facts on the broader basis of unjust enrichment rather than mistake specifically, already discussed, echo the view expressed by some writers that ‘the true basal principle which enables recovery of money paid under a mistake, whether of fact or law, is “failure of consideration”’ ((81) Butler, ‘Mistaken Payments, Change of Position and Restitution’, in Finn (ed.), Essays on Restitution, (1990), p 88. See also Matthews, ‘Money Paid Under Mistake of Fact’, (1980) New Law Journal 587; National Mutual Life Association v. Walsh (1987) 8 NSWLR 585, at pp 595-596). It is unnecessary in the present context to assess the merits of this argument because, as we have stated, the more traditional approach, exemplified by the judgment of Goff J. in Barclays Bank and the decision of this Court in Westpac Banking Corporation, specifically provides for the ‘defence’ of valuable consideration.”
31 Mr Settle then took me to the decision of the High Court of Australia in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560 and passages in the joint judgment of Hayne, Crennan, Kiefel, Bell and Keane JJ, and the separate judgment of Gageler J. In that case, Australian Financial Services and Leasing Pty Ltd (“AFSL”) was a provider of business finance. A director and shareholder of a company known as Total Concept Projects (“TCP”) created bogus invoices appearing to indicate that TCP had purchased equipment from Hills Industries Ltd (“Hills”) and Bosch Security Systems Pty Ltd (“Bosch”). He presented those invoices to AFSL, which agreed to buy the equipment and hire it back to TCP, paying the invoice amounts directly to Hills and Bosch. TCP owed money to Hills and Bosch, which took the payments from AFSL in reduction of those amounts and ceased recovery action against TCP. TCP eventually collapsed into insolvent liquidation and AFSL sought to recover the money which it had paid to Hills and Bosch, which resisted the claims based on an alleged change of position. The High Court accepted that Hills and Bosch were entitled to resist AFSL’s claim. The Court concluded that, upon these facts, there was no good consideration for the payments which might exclude the operation of the defence of change of position. Hayne, Crennan, Kiefel, Bell and Keane JJ said:
“In David Securities the respondent, in addition to a defence of change of position, relied upon a defence that the payments in question had been made for good consideration. It was noted with approval, that Goff J had included both defences in his formulation in Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd. It was there said that, although a person paying money to another under a mistake of fact is entitled prima facie to recover it, his claim may nevertheless fail, inter alia, if ‘the payment is made for good consideration, in particular if the money is paid to discharge, and does discharge, a debt owed to the payee (or a principal on whose behalf he is authorised to receive the payment) by the payer or by a third party by whom he is authorised to discharge the debt’.”
32 Gageler J said:
“Hills did not argue that any part of the debt owed to it by TCP was discharged merely by its receipt of the mistaken payment of $308,000 from AFSL. Nor did Hills argue that any part of that debt was discharged merely by its choice to credit that mistaken payment to the trading account TCP maintained with it. Hills accepted that payment of a debt by a third person (not jointly liable for the debt) does not discharge the debt unless the payment is made by the third person as agent for the debtor and with the debtor's prior authority or subsequent ratification. Hills also accepted that an uncommunicated book entry alone can be of no consequence. To the extent Bosch put arguments contrary to those principles, I would reject them.”
33 Finally, Mr Settle relied on a recent decision of the Western Australian Court of Appeal in O3 Capital Pty Ltd v WY Properties Pty Ltd [2016] WASCA 82:
“94 In Cleadon Trust, Clauson LJ (with whom, relevantly, Scott LJ agreed) referred with evident approval to B Liggett (Liverpool) Ltd v Barclays Bank Ltd. On Clauson LJ's analysis, this case involved a payment directly from the third party to the debtor's creditors, which had been directed or authorised by the debtor. In that case, Mr Liggett (A) drew, without authority, cheques on the account of the company (Company C) with Barclays Bank (B Bank). The cheques, drawn in favour of Company C's business creditors, were honoured by B Bank, and the money 'provided by [B] bank' to Company C's creditors was used to pay Company C's business debts. Company C was liable to give B Bank credit for the moneys so paid, because Mr Liggett (A) had Company C's authority to pay its debts, even though he had no authority to draw cheques on Company C's account.
95It is unnecessary to decide, for present purposes, the ambit of the circumstances from which the court may infer that the debtor has ‘used’ or ‘applied’ the third party's money to pay its debt. The equity would at least prima facie arise where the debtor authorises the payment in advance, or authorises the payment retrospectively by effectually adopting the payment in application to the satisfaction of the debt. See, for example, McLaughlin; Brasher; Hill v Ziymack; Crantrave Ltd v Lloyds Bank Plc; cf Public Trustee v Schultz. In this context, the observations of Isaacs J in McLaughlin concerning what constitutes 'payment' by the debtor are pertinent. His Honour's observations on this particular point are generally consistent with the more general observations of Griffiths CJ and Barton J referred to earlier. Isaacs J said:
‘The expression “pays” involves some election on the part of the person charged either to apply the money or to treat it as applied to the satisfaction of his liabilities. The mere fact that a benefit is conferred on him does not suffice to make him chargeable.
…
Consequently we have, in such a case as the present, to see whether the respondent directly or indirectly has so conducted himself as to have assented to and adopted the actual application of the money which was made in his name, and therefore, in fact, to have “paid” his obligations. … Unless there is something in the nature of adoption, the attempted payment is not really a payment, for the debtor might refuse to accept it, and insist on paying his debts himself, leaving the first person to get back his money as best he could.
Whether he did so conduct himself or not depends on the facts. Express assent is not necessary. Conduct, active or passive, may establish it. Silence, where there is a duty to speak, may be excellent evidence of assent.’
96Where the debtor has validly authorised (antecedently or retrospectively) the payment by the third party to its creditor, the money is in effect received by the debtor's creditor as the debtor's money: Porter v Latec Finance (Queensland) Pty Ltd; Australian Financial Services and Leasing Pty Ltd v Hills IndustriesLtd. Conversely, the third party payer, in that circumstance, would generally have no claim itself on the payee, ie, the debtor's creditor: David Securities Pty Ltd v Commonwealth Bank of Australia; Hills Industries Ltd.” (citations of supporting authorities omitted)
34 Based upon these authorities, Mr Settle submitted that it was the estate of the late Joyce Williams which was enriched by Mr and Mrs Templer’s payment of $273,800. There was no enrichment, he submitted, of Milford Hall. Accordingly, the claim should fail. He echoed the words of the Judicial Committee of the Privy Council quoted by Isaacs J in McLaughlin’s case where their Lordships said:
“The question is not to be determined by nice considerations of what may be fair or proper according to the highest morality.”
Mr Settle submitted that the estate of Mrs Williams was a necessary party to the proceeding and the responsibility for its non-joinder rested with the plaintiffs. In the absence of the estate as a party, the claim should fail.
Plaintiffs’ submissions
35 Mr Foster submitted that in the circumstances Milford Hall had been enriched. He referred to evidence given by Mr Antonopoulos in cross-examination. Where Mr Antonopoulos agreed that, to his knowledge and belief, $273,200 inclusive of $600 interest was paid from the Westpac Business One account of Milford Hall to the estate of Joyce Williams (T70, L22-28) and his further answer when it was put to him:
Q.“And you’re adopting that payment as a payment by Milford Hall to the estate of Joyce Williams, aren’t you?---
A.Well, the estate’s been paid so I don’t see why that should be paid twice.” (Ibid L29-T71, L1)
36 In Mr Foster’s submission, in accordance with the principles advanced by Mr Settle, the payment made by the plaintiffs had been adopted by the defendants and, accordingly, the plaintiffs’ claim should succeed.
Conclusions
37 It will be noted that this claim, based upon an alleged payment under mistake, is not the typical claim of that type. The typical claim is one where recovery is sought from the payee. The decision of the High Court in David Securities is an example of this typical case. Here, the claim was being made against parties other than the payee and different considerations may apply.
38 Where one party supplies services to another, or performs the obligation of another, in the absence of request, there is no restitutionary entitlement to recovery against the person benefiting — Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234, 238. Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635, 663-4 [8], O3 Capital Pty Ltd v WY Properties Pty Ltd [2016] WASCA 82 [71]. In the new edition of Mason and Carter’s Restitution Law in Australia (3rd edition 2016) the learned editors expressed doubt as to the generality of this principle, stating:
“The English cases show a general reluctance in the courts to allow reimbursement to a third party who pays another’s debt other than on request or under legal compulsion. Some of them illustrate the undoubtedly correct proposition that the bare fact of some conferral of a benefit will not establish an entitlement to restitution. Others are more problematical.” 316 [845]
In the following paragraph, the learned editors state:
“Several … English cases are strongly influenced by the failure to find evidence of the consent of the benefited debtor. Yet it is hard to see the relevance of this now that restitution theory is once again freed of a false contractual gloss. Supporters of the ‘free acceptance’ concept are probably no better placed.” Ibid 317 [846]
39 The O3 Capital case is the most recent authoritative treatment of this property in Australia. It comes from an intermediate Court of Appeal, the Western Australian Court of Appeal, and, in accordance with the High Court of Australia’s statements as to the authority of precedents, is prima facie binding upon this Court. In the O3 Capital proceedings commenced in the State Administrative Tribunal of Western Australia under the Commercial Tenancy (Retail Shops) Agreements Act 1985, the tenant, WY Properties Pty Ltd, alleged, and the tribunal found, that O3 Capital had made false statements before the lease was entered into and WY had thereby suffered pecuniary loss including in relation to rent. The tribunal found that damages could not be recovered relative to the payment of rent because the rent had in fact been paid not by the tenant, WY, but by an associated partnership. On appeal, Kenneth Martin J and the Western Australian Court of Appeal (Newnes and Murphy JJA and Mitchell J) held that the tribunal’s conclusion was incorrect. The Court of Appeal ordered that the matter be remitted to the tribunal for reconsideration based upon a consideration “as to whether WY was under an obligation to reimburse or indemnify Mr Luo and Ms Yuan [the persons who had paid the rent] in respect of the rental payments …”. Their Honours held on the basis of part of the passage relied on by Mr Settle for the defendants, “Where the debtor has validly authorised (antecedently or retrospectively) the payment by the third party to its creditor, the money is in effect received by the debtor’s creditor as the debtor’s money…Conversely, the third party payer, in that circumstance, would generally have no claim itself on the payee, ie the debtor’s creditor” (emphasis added). Their Honours also referred to the judgment of Isaacs J in McLaughlin’s case where his Honour said that a payment by a third party would not be binding upon the debtor himself “unless there is something in the nature of adoption”.
40 What, then, is the evidence of authorisation or adoption here? The issue of why it was that an employee of Milford Hall in its new incarnation under the control of Mr Antonopoulos and Mr Arvanitis came to raise the issue of repayment of Mrs Williams’ accommodation bond with Mr Templer was not explored. There was no suggestion that the lady in question was acting on behalf of the defendants. Accordingly, there is no question of any prospective request or authorisation by the defendants of the payment by the Templers. Mr Foster submitted that a retrospective authorisation could be found first in the evidence given and quoted above from Mr Antonopoulos that, in the manner he described, he had authorised the payment. Secondly, there was the fact, which was taken up in the relevant passage of cross-examination, that in face of the obligation imposed by the Commonwealth statute to repay the relevant accommodation bond within 14 days of having sighted the probate, in fact, the defendants have taken no action in that respect. Mr Foster implicitly submitted that, whilst Mr Antonopoulos says the liability is still to be found in Milford Hall’s account, this was a mere formality and not a substantive liability. As Mr Antonopoulos said, there was no reason to think that the accommodation bond should be repaid twice.
41 In the circumstances, I think it proper to find that, as a matter of reality, the defendants have treated the liability to the estate of the late Mrs Williams as cleared, and by that process have retrospectively authorised the payment made by the plaintiffs. In those circumstances, in accordance with the O3 Capital case, I believe a restitutionary obligation attaches to Milford Hall.
42 The other contested issue as to the sums claimed by the plaintiffs was the amount of $8,800, inclusive of Goods and Services Tax, representing costs rendered to the plaintiffs by their solicitors, Fraser Barrett Baird, in a bill dated 20 November 2015 (Exhibit J). The plaintiffs claimed an entitlement to recover this sum pursuant to clause 22.1 of the sale agreement, quoted above, as being “reasonable expenses incurred by [them] as a result of” a breach of the agreement by the defendants. As a result of a call made by Mr Settle during the cross-examination of the first plaintiff, the costs agreement, pursuant to which the relevant bill was rendered, was produced following the conclusion of the hearing. The agreement was entered into, it appears, on the day that a costs disclosure was made, viz 15 July 2015, providing for a lump sum charge of $8,800, inclusive of Goods and Services Tax, for out-of-court work involved in resolving the dispute between the parties as to adjustment and entitlements under the sale agreement. In a supplementary submission following the production of the costs agreement, the solicitors for the defendants stated:
“It is not possible to say whether the legal fees of FBB are reasonable having regard to the Costs Agreement and the invoice that was tendered.”
43 It does not seem to be in dispute that services were rendered to the plaintiffs by their solicitors or that the services constituted work out-of-court and are therefore not subject to the court’s general costs discretion relative to costs in the proceeding. Again, given the date of the agreement and the costs disclosure in the middle of July, and the rendering of the bill in late November, one may infer that the services rendered took place over a period of time and were more than merely perfunctory.
44 Counsel for the plaintiffs challenged the entitlement of the defendants to raise the issue of the “reasonableness” of the costs on the basis that the defendants “pleaded no matter in the Amended Defence which put the ‘reasonableness’ of the account in issue”.
45 I do not accept the validity of this pleading point. The claim for the legal costs was to be found in particular (e) of the plaintiffs’ Amended Statement of Claim. The defendants’ response was “deny each and every allegation in paragraph 20 thereof”. In Warner v Sampson [1959] 1 QB 297, the English Court of Appeal had to consider the effect of denials or “traverses” when a defendant tenant, responding to a claim by the landlord alleging breaches of covenant and claiming possession of the demised premises, pleaded specifically to the various allegations and closed the defence with a general denial. The trial judge held that the general denial constituted a denial of the landlord’s title, and that this ipso facto granted the landlord an entitlement to forfeit the lease — [1958] 1 QB 404. An appeal to the Court of Appeal was successful. Delivering the leading judgment, Lord Denning said:
“At one time the use of this general denial was said to be embarrassing … but since 1893 it has been recognised as convenient and permissible … Sometimes the pleader ‘denies,’ sometimes he ‘does not admit’ each and every allegation; but whatever phrase is used it all comes back to the same thing. The allegation is to be regarded ‘as if it were specifically set out and traversed seriatim.’ In short, it is a traverse, no more and no less. Now the effect of a traverse has been known to generations of pleaders. It ‘casts upon the plaintiff the burden of proving the allegations denied’: see Bullen and Leake on Precedents, (3rd ed., p. 436). So this general denial does no more than put the plaintiff to proof.” [1959] 1 QB 297, 311; and see Civil Procedure Victoria [1 13.12.15] 2928 Service 299
46 The defendants contend that, in the circumstances, it has not been proven that the costs, or “expenses” as the agreement describes them, were “reasonable”, a matter properly raised by a denial in accordance with the principles stated by Lord Denning in Warner v Sampson. In the present case, the plaintiffs claim the whole of the amount which they were charged by their solicitor. This claim is made with respect to out-of-court work.
47 In the context of mortgages, the learned editors of Fisher and Lightwood’s Law of Mortgage, Australian Edition (1995) state:
“The basic rule is that a mortgagee in a mortgage action is entitled to costs on a party and party basis, not solicitor and client basis … The general rule gives way to any agreement between the parties plainly and unambiguously providing for taxation on some other basis, (for example, the indemnity basis) but even such agreement cannot exclude the exercise of the court’s discretion.” [40.2] (supporting authorities omitted).
Reference to “party-party” costs should now be read as a reference to the standard basis of costs assessment. The result seems to be that there is a presumption, at least relative to litigious work, that a contractual covenant to pay another party’s legal costs is not to entitle the beneficiary to a simple reimbursement of the whole amount which he was charged by his own solicitor. One might think that words such as “all costs”, “costs on a full indemnity basis” would be required in that context to entitle the beneficiary of a contractual provision or covenant to a reimbursement of the entirety of his outlay.
48 As to the addition of the adjective “reasonable”, in Chen & Anor v Kevin McNamara & Son Pty Ltd (No 2) [2012] VSCA 229, Maxwell P and Redlich JA, with whom Robson AJA concurred, had to consider the effect of a clause in a building contract which obliged the owner to pay to the contractor “any costs and fees incurred by the contractor in enforcing or further securing its rights under this agreement”. The contractor claimed costs on a full indemnity basis. Their Honours said:
“An agreement to pay costs will be construed as an agreement to pay costs on a party and party basis, unless it is plain from its terms that costs are to be paid on a ‘special basis.’ Where the terms plainly and unambiguously provide for costs to be assessed on some special basis, the court will take such a provision into account but it is not bound to give effect to any extra-curial contract as to costs.” [8]
Their Honours concluded, in the circumstances, that there was no unequivocal contractual term identified which would justify the displacement of the general rule that costs should be on a party-party basis — [21]. Their Honours referred to a judgment of Balmford J in Carbure Pty Ltd v Brile Pty Ltd(No 2) [2002] VSC 313, where the lease in question obliged the tenant to “pay the landlord’s reasonable expenses of … any default by the tenant in observing the provisions of the lease”. In refusing to make an award of costs on a full indemnity basis, her Honour said at [17]:
“It does not seem to me that it is appropriate to decide that the addition of the adjective ‘reasonable’ requires the tenant to pay more of the landlord’s expenses than would have been the case without that addition, which would be the effect of an order for solicitor-client rather than party-party costs. One might have thought that the converse would apply.”
49 Her Honour thereby treated the word “reasonable” as not enlarging the scope or extent of the costs indemnity, but rather as moderating it. By way of contrast, in Macquarie International Health Clinic v Sydney South West Area Health Service (No 3) [2010] NSWSC 1139, another landlord and tenant case, Nicholas J of the Supreme Court of New South Wales considered an indemnity in favour of a landlord from a tenant “against any liability or loss arising and any reasonable cost incurred … in connection with the Tenant’s breach of this deed”. He referred to the various bases for taxation in New South Wales and noted that, even in a taxation upon a full indemnity basis, all amounts are to be allowed “except insofar as they are of an unreasonable amount or have been unreasonably incurred and … any doubt which the taxing officer may have as to whether the costs were reasonably incurred or were reasonable in amount should be resolved in favour of the [receiving] party”. His Honour concluded that the distinction between this basis of taxation and the others was ultimately one of onus. The criterion of `reasonableness’ applied to all taxations. He therefore concluded that an indemnity for reasonable costs was apt to encompass an entitlement to costs on a full indemnity basis.
50 Despite the approach in Macquarie’s case, I prefer the tentative view of Balmford J in Carbure v Brile that the word “reasonable” is a moderating factor and generally tends to point away from an entitlement on the part of the beneficiary of the relevant clause to an entire and unqualified indemnity for costs. Whichever way one looks at it, however, it is plain that the criterion of `reasonableness’ must be given effect to in some way. It is unnecessary to consider whether a clause, drafted in wide enough terms so as, by its words, to grant a beneficiary an entitlement to recover from a third party the whole of the costs which it incurs to its solicitor, could be subject to any challenge on taxation or assessment at the suit of a “third party payer”. In my view, the clause that I have to consider is not of that breadth, so the issue just described does not arise. The question here is whether the costs in question have been proven to be “reasonable”.
51 On behalf of the plaintiffs, Mr Foster submitted:
“In any event, having regard to:-
a.the detail of the matters identified in the Costs Agreement and the Disclosure Statement;
b.the evident complexity of the calculations and the transaction as a whole;
c.the $8,800 fee covering work by Fraser Barrett Baird between 15 July 2015 and 20 November 2015; and
d.the Plaintiffs payment of the sum of $8,800 without complaint,
the Court should be satisfied that the costs of $8,800 are reasonable.”
52 Here, the costs agreement is not, as modern costs agreements seem today more typically to be, on the basis of time costing with a disclosure of the charge-out rates for the various practitioners anticipated to be engaged on the client’s work. Unless one has some ground for doubting the number of hours charged for, the reasonableness of the arrangement can be judged simply by a comparison of the charge-out rates with what is known or proven as to going rates in the market for legal services. Here, the uncertainty is as to how many hours of practitioners’ time will be taken up in the work described in the costs agreement. A judgment as to whether costs, agreed as a lump sum at the outset, are “reasonable” should presumably be made with foresight of what was in the reasonable contemplation of the parties to the agreement rather than on the basis of hindsight. Treating the matter as one of foresight, it may be accepted that agreement to a relatively high sum as the proper charge for the work might be regarded as disadvantageous to the client in circumstances where the work required might turn out to be substantially less than anticipated. On the other hand, the client, in entering this obligation and incurring the potential disadvantage, secures the advantage, which might be regarded as offsetting, of protection from very much higher charges should the work turn out to be far more extensive than is contemplated at the time. This is how lump sum charges for a variety of conveyancing transactions have been justified over the years on the basis according to the old saying that what is gained on the swings is lost on the roundabout. It should be noted, however, that these fixed lump sum charges were, quite a few years ago now, abandoned for vendor purchaser conveyancing transactions in favour of a regime of item remuneration under a costs agreement or a practitioner remuneration order. In the present case, it would have been relatively easy for the plaintiffs to provide evidence in a somewhat detailed form as to what work was contemplated as likely to be undertaken by their solicitors and how many hours of practitioner time was in fact taken up. That it was not seems to me likely to be explained by the concentration upon argument as to the law of restitution which has taken up most of this judgment. With some hesitation, I am prepared to accept the plaintiffs’ submission on this point given that a survey of the pleadings shows that there were substantially more matters of accounting between the parties than have been the subject of disputation at trial on the basis that these matters have, for the most part, come to be the subject of admission. Again, the provisions in the agreement as to adjustments as at the date of completion are intrinsically complex and argument about them going beyond an odd item is intrinsically complex and time consuming.
53 Finally, the willingness of the plaintiffs, themselves, to make payment is also an indication that they regarded the charges as being reasonable. This payment by the plaintiffs, themselves, carries with it a conviction that the simple withholding of amounts from a counter-party at a settlement would not. Recovery of the amounts claimed has required the plaintiffs to go to trial and their willingness to make the payment themselves before the matter went to trial indicates a confidence on their part that the charge was reasonable.
54 It follows that there should be judgment for the plaintiffs against the defendant for the net sum of $97,280.12 described above.
The rectification issue
55 In the course of the trial, it became evident that the source of the plaintiffs’ repayment of the Williams accommodation bond was an account in the name of the first defendant, Milford Hall. The analysis of the agreement conducted above demonstrated in Mr Foster’s submission that the Templers were correct in treating the credit balance in this account as being beneficially their property. I note that the agreement for sale of the nursing home business describes Milford Hall as being “trustee for the Templer No 1 Family Trust”. Whilst the share capital in Milford Hall Pty Ltd was sold by the Templers to Messrs Arvanitis and Antonopoulos (clauses 7.1‒7.3, Court Book 90‒91), there seems to be no express provision as to the continuing status of the Templer No 1 Family Trust. Family trusts are customarily discretionary trusts. It seems inherently unlikely that the trust estate of a family discretionary trust (as distinct from a unit trust) would be transferred in circumstances such as this. It might be thought likely that, as part of the settlement, Milford Hall would be replaced as trustee of the Templer Family Trust. Conceivably, it might be appointed as trustee of a trust controlled by Messrs Arvanitis and Antonopoulos, perhaps a unit trust, the units in which might be held by discretionary trusts created in favour of Mr Arvanitis’ and Mr Antonopoulos’ families. It might be in those sorts of trust issues that the true fate of the Milford Hall bank account which was retained under the control of the Templers could be found. None of these matters was canvassed in evidence and none is more than hinted at by the agreement for sale, itself. In a late amendment to the plaintiffs’ statement of claim, which I authorised in the face of a response of neither consent nor opposition from the defendants, Mr Foster sought rectification of the agreement of 18 November 2014 such that, in substance, the relevant Milford Hall bank account was excluded from sale either by exclusion from the definition of assets or by a provision for adjustment under clause 12 of the agreement. He sought in paragraph G of the Prayer for Relief rectification of the sale agreement to:
“(i)amend the definition of Excluded Assets to insert the words ‘and the Westpac Business One Account (Account No 033-000 26-4971)’ after the words ‘means the assets listed in Schedule 4’; or alternatively
(ii)amend clause 12.1 to insert the following words at the end of that clause:-
‘(e) the credit amount in the Westpac Business One Account (Account No 033-000 26-4971) as at 1 December 2014’.”
56 Nothing was said on behalf of the defendants in opposition to rectification, effectively preserving the credit balance in the relevant account for the benefit of the plaintiff. Analysis of the agreement in its unrectified form, particularly by reference to the apportionment of assets, supports the view that the credit balance in this account was not intended by either party to be made over to the defendants as at the Completion Date. Ultimately, the evidence showed the account in question was closed when the bank and the defendant objected to the Templers continuing to operate an account in the name of a company which they no longer owned. Accordingly, the alternative proposed rectification, which gives effect to the parties’ common intention by adjustment, would appear to be the appropriate remedy.
Disposition
57 I will direct the parties to bring in short minutes to give effect to these reasons within 14 days.
Costs
58 I have heard no submissions on the question of costs so I will reserve them.
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