Toogood v Simpson
[2012] VSC 258
•22 June 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 9690 of 2008
| JULIANNE TOOGOOD | First Plaintiff |
| and | |
| JEZABEEL PTY LTD | Second Plaintiff |
| v | |
| PAUL GEORGE SIMPSON | First Defendant |
| and | |
| SIMPSON CONTRACTING PTY LTD | Second Defendant |
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JUDGE: | McMILLAN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 and 19 April 2012 | |
DATE OF JUDGMENT: | 22 June 2012 | |
CASE MAY BE CITED AS: | Toogood v Simpson | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 258 | |
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CONTRACT – Oral agreement – Whether agreement legally enforceable – Variation of agreement – Whether loss caused by breach.
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APPEARANCES: | Counsel | Solicitors |
| For the First Plaintiff | Ms E Swart | Kelly & Associates Family Lawyers |
| For the Second Plaintiff | No appearance | |
| For the First Defendant | Mr VG Peters | HBH Legal |
| For the Second Defendant | No appearance |
HER HONOUR:
Introduction
This proceeding concerns an action for damages caused by alleged breaches of an agreement between Mrs Toogood, the first plaintiff, and Mr Simpson, the first defendant, in relation to matters arising out of their domestic relationship.
Factual Background
Mrs Toogood and Mr Simpson were in a domestic relationship from June 1981 until April 1998. During the domestic relationship, Mrs Toogood and Mr Simpson conducted a range of businesses and as a result established a number of companies, a trust and a superannuation fund. Both Mrs Toogood and Mr Simpson were directors and shareholders of the various entities used to conduct the businesses (“the Entities”). It was agreed that Mrs Toogood did the book-keeping for the Entities.[1]
[1]The extent of Mrs Toogood’s involvement in the business entities was disputed by Mr Simpson, but it is not necessary to determine that issue.
The Entities included Simpson Contracting Pty Ltd (“Simpson Contracting”), the second defendant, which was incorporated in or about 1996. Mrs Toogood and Mr Simpson were the directors and shareholders of that company. At the hearing, counsel for Mr Simpson advised that Simpson Contracting is in receivership. No appearance was filed on its behalf. Each party conducted their case on the basis that Mr Simpson was at all material times the sole controlling mind of Simpson Contracting, but no evidence was tendered as to when, or whether, Mrs Toogood resigned as director.
Jezabeel Pty Ltd (“Jezabeel”), the second plaintiff, was established in or about September 1998 and was the trustee of the JG Investment Trust. Mrs Toogood was the sole director. Jezabeel was deregistered on 22 March 2008 and did not participate in this proceeding.
After the domestic relationship ended, the net asset position of the parties was $6,229,147, as evidenced by a statement of assets and liabilities as at 31 May 1998.[2]
[2]Exhibit JT-1 to the affidavit of Mrs Toogood sworn 15 March 2012.
Mrs Toogood alleged that after the relationship ended she entered into a series of agreements with Mr Simpson, commencing with an initial agreement which settled the various property, financial and domestic issues arising from the relationship. Mrs Toogood claimed that subsequent agreements were entered into between her and Mr Simpson varying that initial agreement. She claimed that on the basis of those agreements, various loans were obtained for which Mr Simpson agreed he would make all payments, including all repayments of the capital. The funds from those loans were partly applied to the purchase of two properties and partly for the benefit of Mr Simpson. Mrs Toogood alleged that Mr Simpson failed to comply with their agreements and, as a result, the loans went into default, judgment was entered against her and the properties were sold, with the entire proceeds of sale applied towards reduction of the outstanding loans.
Mr Simpson denied the existence of any undischarged agreement and, in the alternative, the existence of any agreements between the parties at all.
The October 1998 Agreement
Mrs Toogood gave evidence that on 8 October 1998, at a meeting with Mr Simpson in the presence of his accountant, Mr Christopher Beks, an oral agreement was reached, settling their respective property and financial interests as follows (“the October 1998 Agreement”):
(a) Mrs Toogood would retain her two motor vehicles, being a Toyota RAV and a Toyota Landcruiser.
(b) Mrs Toogood would receive a settlement package from Mr Simpson totalling $1 million, comprised of:
(i) Mr Simpson paying the sum of $580,000 towards the cost of a property purchased by Mrs Toogood known as 184 Gan Gan Road, Anna Bay (“the Gan Gan Road Property”), being:
(A) The balance of the deposit of the Gan Gan Road Property.
(B) Stamp duty.
(C) The balance of the purchase costs, either by way of vendor finance or a loan to be taken out and repaid by Mr Simpson.
(ii) The fees and costs to be incurred for the subdivision of the Gan Gan Road Property development, estimated at $300,000.
(iii) An amount totalling $100,000 for:
(A) Purchase of new furniture and household goods and chattels.
(B) Purchase of a Britz campervan ($30,000-35,000).
(C) Payment of $5,000 towards Mrs Toogood’s credit card debt.
(c) Mr Simpson would pay child support of $400 per week to Mrs Toogood.
(d) Mrs Toogood would make no further claims against Mr Simpson in respect of the various properties and the Entities.
(e) Mrs Toogood would resign as director of the Entities and transfer her shareholdings to Mr Simpson upon Mr Simpson making the payments as specified in the $1 million package.[3] Mrs Toogood would be paid director’s wages of $500 per week until this occurred.
[3]There was no evidence before the Court as to when, or whether, Mrs Toogood resigned as director of the Entities and neither party made submissions in relation to this matter. However, as noted in paragraph 3 above, the parties conducted their respective cases as though Mr Simpson were the sole director and Mrs Toogood had no role in Simpson Contracting after separation.
In an affidavit sworn 13 March 2012, Mr Beks referred to and exhibited his handwritten note of the 8 October 1998 meeting, which lists the items outlined above. Counsel for Mrs Toogood submitted that Mr Beks’ contemporaneous note supports Mrs Toogood’s claim that an agreement was reached between the parties.
In response, counsel for Mr Simpson submitted that the note itself cannot constitute an agreement, as it contains no particulars, no covenants from one party to the other and no consideration. Further, his counsel submitted that the document makes no sense and at best constituted no more than a proposal, certainly not a binding agreement.
Whilst I agree that the note does not constitute an agreement, I accept that it substantially supports and corroborates the existence of the October 1998 Agreement and Mrs Toogood’s version of the meeting held on 8 October 1998.
Mrs Toogood gave evidence that pursuant to, and in reliance on, the October 1998 Agreement, the following actions were taken:
(a) A mortgage in the amount of $400,000 was obtained from Liberty Funding Pty Ltd (“Liberty”) in the name of Jezabeel in its own right and as trustee of the JG Investment Trust (“the First Liberty Loan”). The First Liberty Loan was secured by a first mortgage over the Gan Gan Road Property and guaranteed by Mrs Toogood, Mr Simpson, and Simpson Contracting in its own right and on behalf of the other Entities.
(b) Mr Simpson paid the balance of the deposit, $53,000, together with $122,000 towards the purchase cost of the Gan Gan Road Property.[4] The First Liberty Loan was obtained to meet the balance of the purchase price.
(c) Mr Simpson made the interest only payments on the First Liberty Loan as they fell due, although occasionally in arrears.
[4]Jezabeel became registered proprietor of the property in April 1999.
Counsel for Mrs Toogood acknowledged that the October 1998 Agreement could have been documented more elegantly. However, she submitted that it nevertheless contained all the necessary requirements of a legally enforceable agreement, namely:
(a) The parties intended to enter into legal relations in order to settle the financial aspect of their domestic relationship.
(b) The parties agreed to settle all financial claims between them on the basis set out above,[5] and that agreement is supported by Mr Beks’ handwritten note.
(c) The context of the break down of the relationship itself provided the consideration, as in consideration for the $1 million package, Mrs Toogood agreed not to bring any proceedings against Mr Simpson in relation to the division of the property of the domestic relationship.
[5]See above paragraph 8.
It was further submitted on behalf of Mrs Toogood that the existence of the October 1998 Agreement is the only reasonable explanation as to why Mr Simpson and the Entities would have guaranteed the First Liberty Loan.
Mrs Toogood gave evidence that Mr Simpson failed to meet the balance of the payments totalling $1 million under the October 1998 Agreement, other than the amounts he paid towards the purchase of the Gan Gan Road Property and the interest payments on the First Liberty Loan.[6]
[6]See above, paragraph 12(b).
Mr Simpson did not deny that the actions and payments set out in paragraph 12 occurred. However, he denied the existence of the October 1998 Agreement and that any of these actions were done in reliance on it. Although initially counsel for Mr Simpson submitted that the October 1998 Agreement was unenforceable because there was a failure of consideration, this submission was not pressed in closing submissions. In any event, I do not accept it, for the reason set out in paragraph 19(d) below.
Counsel for Mr Simpson submitted that the loan payments were made by the Entities, rather than Mr Simpson personally, and that this indicated that Mr Simpson did not intend to be personally bound by any agreement reached between the parties.
In answer to this submission, counsel for Mrs Toogood highlighted the fact that a personal guarantee was also provided by Mr Simpson to Liberty, giving rise to a personal liability for the mortgage.
In my view, whether the payments were made by Mr Simpson personally or the Entities, the Entities were controlled by him and the payments are therefore consistent with an agreement entered into by, and binding on, Mr Simpson. I find that both Mr Simpson and Simpson Contracting entered into the October 1998 Agreement as alleged by Mrs Toogood, and that the October 1998 Agreement is a legally enforceable agreement. My conclusion is supported by the following facts:
(a) Mr Beks’ contemporaneous note supports that such an agreement was reached by the parties.
(b) The Gan Gan Road Property was purchased and payments were made by either Mr Simpson or Simpson Contracting, which facts are consistent with the terms of the October 1998 Agreement.
(c) Either Mr Simpson or Simpson Contracting made the interest payments due and payable under the First Liberty Loan. In the absence of any other evidence from Mr Simpson, the October 1998 Agreement is the only plausible explanation for this conduct.
(d) Mrs Toogood did not initiate proceedings in relation to the division of the property of the domestic relationship, which was the consideration for the October 1998 Agreement.
The Deed of Mutual Release
Mrs Toogood gave evidence that in September 2001, Mr Simpson telephoned and told her that he had been involved in discussions with the Australian Taxation Office (“the ATO”) and the Commonwealth Bank of Australia and that he had a document he needed her to sign urgently. He told Mrs Toogood that he needed to satisfy the ATO and the Commonwealth Bank that he and Mrs Toogood had settled their domestic property matters. Mrs Toogood gave evidence that he also told her that if she did not sign the document, she “would pay”, which she understood to be a threat, in light of previous incidents of violence in the relationship.
On 10 September 2001, Mr Simpson faxed a document titled Deed of Mutual Release (“the Deed of Mutual Release”) to Mrs Toogood, which she signed and returned to him. Mrs Toogood gave evidence that she did not obtain any legal advice in relation to the terms or effect of the document, because Mr Simpson had told her that it was imperative that he receive it immediately.
The Deed of Mutual Release included the following recitals:[7]
[7]In the copy provided to the Court, no recital G appeared.
F. Among other arrangements made between the parties at the time of separation:-
(a)[Mrs Toogood] purchased [the Gan Gan Road Property] and received for her sole use and benefit a 1991 Toyota Landcruiser and a 1996 Toyota RAV, together with other monies
(b)Simpson paid the deposit moneys and expenses in relation to the purchase of [the Gan Gan Road Property] and continues to service the mortgage in relation to [the Gan Gan Road Property].
(c)In relation to the following Companies, Trusts and Superannuation Fund (“the Entities”) [Mrs Toogood] resigned from any office holding and transferred to Simpson or his nominee her share holdings and any other beneficial entitlements …
H. The parties have a private agreement whereby Simpson contributes to the support of the children of the relationship.
I. The parties have for some years resolved a division of property between them and now wished to formally acknowledge that division of property between them by reference to the terms of this Deed of Mutual Release.
J. The parties wish to confirm the settlement of any issues in relation to the assets and liabilities of the parties and resolution of any claims which may have otherwise arisen as a result of the Property Law Act (Vic), equitable principles, constructive trusts and any other claim to property made out in law or in equity.
K. Each party has had the opportunity to receive independent legal advice.
The Deed of Mutual Release contained, inter alia, the following terms:
(a) Mr Simpson would indemnify and keep Mrs Toogood indemnified against all past, present, and future liabilities arising out of her involvement in the Entities.
(b) Mr Simpson would continue to service and be responsible for the mortgage in relation to Mrs Toogood’s home (being the Gan Gan Road Property).
(c) The provisions of the deed constituted the “full and final satisfaction of and in substitution for any rights which [Mr Simpson or Mrs Toogood] have or either of them may now have or may hereafter have to seek any Orders, declaration or relief against the other in respect of property now owned by both or either of them pursuant to the provisions of the Property Law Act (Vic) … [and] any other corresponding legislation or the common law”.
(d) Each party agreed not to bring any action against the other in respect of any claims arising out of their relationship, save for enforcing any compliance with the terms of the deed.
Counsel for Mrs Toogood submitted that the Deed of Mutual Release is significant because the terms of Recital F acknowledge the existence of a previous agreement between the parties, including that Mr Simpson was responsible for the mortgage over the Gan Gan Road Property. She submitted that the Deed of Mutual Release did not entirely document the terms of the October 1998 Agreement, despite Recital I stating that the parties wished to formally acknowledge the division of property matters agreed between them previously. Further, counsel noted that the Deed of Mutual Release left open the exact terms of that prior agreement and submitted that the only prior agreement at that stage was the October 1998 Agreement.
Mr Simpson admitted the existence of the Deed of Mutual Release, but he denied that the Deed of Mutual Release was legally enforceable. His counsel submitted that the deed is void for uncertainty for the following reasons:
(a) The deed does not limit the amount or duration of any liability.
(b) The subsequent variations to the loans supplanted any obligations that arose under the deed.
(c) The deed was only executed by Mr Simpson and Mrs Toogood personally, whereas many of the payments were made by or for the benefit of the corporate entities they controlled.
(d) The Entities were not bound by the Deed of Mutual Release, although they may have been the real parties to the October 1998 Agreement and may have been bound by the subsequent loans obtained from Liberty.
Counsel for Mr Simpson also contended that the real purpose of the Deed of Mutual Release was to give efficacy to business arrangements between the parties, rather than to reflect any division of their domestic property, or to bind the parties personally. No evidence was tendered in support of that submission and I do not accept it.
I make the following findings in relation to the Deed of Mutual Release:
(a) The deed corroborated the fact that the parties entered into the October 1998 Agreement.
(b) The deed was sufficiently clear as to the nature and extent of Mr Simpson’s obligation, namely, to service the loan in relation to the Gan Gan Road Property.
(c) In the deed, Mr Simpson acknowledged his liability and responsibility for the loan with respect to the Gan Gan Road Property, which at that time was the First Liberty Loan.
(d) After Mrs Toogood signed the deed, Mr Simpson continued to make, or cause to be made, the payments in respect of the First Liberty Loan.
(e) The deed was intended to, and did, bind the Entities, as well as Mr Simpson and Mrs Toogood. Mr Simpson conceded, in effect, that the Entities were bound by the October 1998 Agreement. This is also evidenced by the arrangements entered into with Liberty, namely, that Simpson Contracting was a party to those arrangements and made loan payments. Simpson Contracting and Jezabeel were at all times controlled by the parties and the parties’ conduct demonstrated that they considered that they were entitled to use these entities to conduct their personal affairs, when convenient.
(f) The fact that the deed was not executed by the corporate entities that Mr Simpson and Mrs Toogood controlled does not diminish or take away from Mrs Toogood’s submission that the deed supports the existence of the October 1998 Agreement.
The March 2002 Agreement
Mrs Toogood gave evidence that in early March 2002, just before the First Liberty Loan was due to be discharged, Mr Simpson telephoned and told her that he needed additional funds for the operating costs of the Entities. Mr Simpson said that those funds would have to come from a refinance of the First Liberty Loan secured over the Gan Gan Road Property. At that time, the First Liberty Loan was in arrears of $14,000.
Mrs Toogood gave evidence that Mr Simpson threatened that unless she contributed half of the mortgage arrears and agreed to the refinancing, he would not discharge the First Liberty Loan. He also made reference to the fact that Mrs Toogood would not be able to pay off the loan herself, that as a result she might lose the Gan Gan Road Property and, without the property, she would not be able to retain custody of the children. Mrs Toogood gave evidence that Mr Simpson said that if she agreed to the refinancing, he would continue to make the mortgage payments and would discharge the new loan in full when its term expired.
Mrs Toogood gave evidence that, as a result of this discussion, the parties entered into an oral agreement, which was never recorded in writing (“the March 2002 Agreement”). The terms of the March 2002 Agreement were:
(a) Mr Simpson could renegotiate with Liberty to discharge the First Liberty Loan and obtain an interest only loan of $812,000 for a 12 month term in both their names (“the Second Liberty Loan”).
(b) Mrs Toogood would receive the sum of $50,000 from the refinancing.
(c) Mr Simpson would receive the balance of the money to meet his business funding requirements.
(d) Mr Simpson and Mrs Toogood would each pay $7,000 to discharge the mortgage arrears on the First Liberty Loan.
(e) Mr Simpson would pay the monthly interest payments on the Second Liberty Loan and would discharge it in full on its due date for payment.
The First Liberty Loan was discharged and rolled into the Second Liberty Loan, which was secured by a registered mortgage over the Gan Gan Road Property and guaranteed by Simpson Contracting in its own right and as trustee of the Paul G Simpson Family Trust and by Jezabeel in its own right and as trustee of the JG Investment Trust. Mr Simpson and Mrs Toogood each contributed $7,000 to discharge the mortgage arrears.
Mr Simpson and the Entities received a sum of approximately $310,000 out of the Second Liberty Loan. Mr Simpson later paid $50,000 to Mrs Toogood. Counsel for Mrs Toogood submitted that this $50,000 constituted part of the $100,000 in miscellaneous payments agreed to in the October 1998 Agreement.[8]
[8]See above, paragraph 8(b)(iii).
Counsel for Mrs Toogood submitted that the March 2002 Agreement constituted a variation of the October 1998 Agreement, but that the core terms remained the same. These core terms were that Jezabeel would have ownership of the Gan Gan Road Property and that Mr Simpson, or Simpson Contracting,, would make all payments on the mortgage.
In his defence, Mr Simpson neither denied nor admitted the existence of the March 2002 Agreement, but did admit the Second Liberty Loan, the discharge of the First Liberty Loan and the payment made to him. Mr Simpson also admitted that he or Simpson Contracting made interest payments on the Second Liberty Loan. Counsel for Mr Simpson did not make any specific submissions in relation to the March 2002 Agreement.
I accept Mrs Toogood’s evidence with respect to the circumstances and terms of the March 2002 Agreement. I find that the March 2002 Agreement contained the same essential and consistent term as the October 1998 Agreement that Mr Simpson would make, or cause to be made, all of the payments on the loans, in this case, the Second Liberty Loan. In my view, the terms of the March 2002 Agreement are only clear if they are understood as variations of the October 1998 Agreement and the actions of the parties as a result of the March 2002 Agreement are consistent with this being the case.
The Sale by Mrs Toogood of Part of the Gan Gan Road Property
In June 2002, Mrs Toogood sold a one acre parcel of the Gan Gan Road Property listed on a separate title (“the One Acre Gan Gan Road Property”), for the sum of $600,000. Liberty’s approval was required for that sale and, as a condition of its approval, Liberty required payment of outstanding arrears of $33,806.19 on the Second Liberty Loan. After sale costs and the payment of those outstanding arrears by Mrs Toogood, she or Jezabeel received approximately $550,000 from the sale.
The August 2002 Loans
Mrs Toogood gave evidence that around this time, Mr Simpson told her that he needed funds to meet his business commitments. He said that if he did not have the funds, he would go bankrupt and would not be able to service the Second Liberty Loan. As a result of the sale of the One Acre Gan Gan Road Property, Mrs Toogood was able to advance to Mr Simpson a loan of $200,000 on 8 August 2002, and a further loan of $20,000 on 16 August 2002 (“the August 2002 Loans”).
Mr Simpson admitted that the August 2002 Loans were paid to him by Mrs Toogood, but denied that they constituted a loan. His counsel submitted that the $200,000 was paid to Mr Simpson by Mrs Toogood in consideration for his contribution towards the initial costs of the Gan Gan Road Property. With respect to the sum of $20,000, counsel for Mr Simpson said that it was the repayment of a loan previously extended by Mr Simpson to Mrs Toogood. Mr Simpson did not provide any evidence to support these submissions and Mrs Toogood was not cross-examined in relation to these matters.
As I accept Mrs Toogood’s evidence as to these facts and there was no evidence contradicting her account of matters, I find that the funds provided by Mrs Toogood to Mr Simpson in August 2002 were loans, with the expectation of repayment by him.
The August 2002 Agreement
In August 2002, Mrs Toogood entered into a contract to purchase a property at 91 Salamander Way, Anna Bay (“the Salamander Way Property”) in the name of Jezabeel for $880,000. Mrs Toogood paid a deposit of $44,000.
As a result, Mrs Toogood and Mr Simpson had a telephone conversation in which they discussed the financing of the Salamander Way Property. In that conversation, which was not recorded in writing, they agreed that (“the August 2002 Agreement”):
(a) The $1 million package agreed to in the October 1998 Agreement would now comprise of Mr Simpson paying $400,000 on the Second Liberty Loan, together with a new $616,000 loan to be secured over the Salamander Way Property in the names of Mr Simpson and Mrs Toogood for a term of 12 months (“the Third Liberty Loan”). Mr Simpson would have sole responsibility for the payment of the balance of the Second Liberty Loan and would discharge the Third Liberty Loan upon expiry.
(b) The initial payments made by Mr Simpson with respect to the Gan Gan Road Property totalling $200,000 would be offset against the August 2002 Loans. Mr Simpson would remain liable for the outstanding amount of $20,000.
(c) Mr Simpson would no longer have any liability to contribute the costs of the subdivision of the Gan Gan Road Property ($300,000), nor to make the $100,000 in miscellaneous payments.[9]
[9]See above, paragraphs 8(b)(ii) and (iii).
The Third Liberty Loan was secured by a first registered mortgage over the Salamander Way Property and guaranteed by Jezabeel as trustee for the JG Investment Trust. Mrs Toogood gave evidence that the total amount paid by her towards the purchase of the Salamander Way Property was $322,245.17.
Counsel for Mrs Toogood submitted that these arrangements constituted a further variation of the October 1998 Agreement, the March 2002 Agreement and the August 2002 Loans and that Mr Simpson’s conduct in entering into the Third Liberty Loan was consistent with the existence of the August 2002 Agreement.
Mr Simpson admitted the existence of the Third Liberty Loan, but not that it was obtained pursuant to the August 2002 Agreement.
In my view, the August 2002 Agreement was a further variation of the October 1998 Agreement, the March 2002 Agreement and the August 2002 Loans. Mr Simpson’s conduct in entering into the Third Liberty Loan was consistent with the existence of the August 2002 Agreement. Counsel for Mr Simpson provided no other reasonable explanation as to why he would have entered into the Third Liberty Loan.
In relation to the August 2002 Loans, I find that, as a result of the August 2002 Agreement, only the sum of $20,000 remained to be paid by Mr Simpson to Mrs Toogood.
The September 2003 Agreement
In September 2003, Mrs Toogood and Mr Simpson had a telephone conversation in which she informed him that she required $153,000 to enable her to purchase a property on Hamilton Island (“the Hamilton Island Property”).
Mrs Toogood stated that in that conversation, which was not recorded in writing, she and Mr Simpson agreed that (“the September 2003 Agreement”):
(a) The mortgage over the Salamander Way Property would be increased from $616,000 to $812,000 by way of an interest only loan for a term of 24 months.
(b) Mrs Toogood would receive $153,000 from this refinancing and Mr Simpson would receive the balance, after the deduction of fees and expenses.
(c) Mr Simpson would meet the interest payments for the term of the loan in lieu of his child support obligations.
(d) When the loan fell due to be discharged, Mrs Toogood would repay the $153,000 and Mr Simpson would discharge the balance of the loan and his child support liability would resume.
(e) In all other respects, the August 2002 Agreement would continue to apply, such as Mr Simpson would remain liable for the loans due to Liberty.
Mrs Toogood gave evidence that, in reliance on the September 2003 Agreement, the Third Liberty Loan was discharged and an interest only loan of $805,000 was obtained in the names of Mrs Toogood and Mr Simpson (“the Fourth Liberty Loan”).[10] The Fourth Liberty Loan was secured by a first registered mortgage over the Salamander Way Property and guaranteed by Jezabeel in its own right and as trustee for the JG Investment Trust. Mrs Toogood received $153,000 from the Fourth Liberty Loan, which she applied towards the purchase of the Hamilton Island Property and Mr Simpson received the sum of approximately $10,000.
[10]No explanation was given for why the amount of the loan was less than the amount agreed, but nothing turns on this discrepancy and the amount of the Fourth Liberty Loan is documented in the Liberty statements, which were provided to the Court.
Counsel for Mrs Toogood submitted that the September 2003 Agreement constituted a further variation of the October 1998 Agreement.
Mr Simpson denied the existence of the September 2003 Agreement. No specific submissions were made by his counsel in relation to the circumstances of the September 2003 Agreement.
In light of the evidence of Mrs Toogood, which I accept, and given that there is no evidence to the contrary, I find that the parties entered into an agreement in the terms of the September 2003 Agreement, which constituted a further variation of the October 1998 Agreement. Mr Simpson’s conduct in entering into the Fourth Liberty Loan was consistent with the September 2003 Agreement and there is no other evidence as to why he would have entered into it.
The March 2004 Agreement
In March 2004, Mr Simpson telephoned Mrs Toogood and told her:
(a) He was in trouble with his taxation payments and that if he did not pay the ATO the sum of $250,000 within two weeks, he would be bankrupted and his companies liquidated.
(b) If he were bankrupted, he would have no way of repaying the Second and Fourth Liberty Loans and she would “get nothing”.
(c) He had other large company debts to repay.
(d) He wanted to refinance the Second Liberty Loan for as much as possible, so that he could repay the ATO and his other debts.
(e) He would meet all the interest payments as they fell due and would discharge the proposed loan before the term expired.
Mr Simpson admitted that he informed Mrs Toogood of his financial difficulties, but denied that he wanted her to agree to a refinance or that he agreed to meet the interest payments.
Mrs Toogood gave evidence that, during that conversation, Mr Simpson made various threats to her, including:
(a) If she did not agree to the refinancing, Liberty would foreclose on the mortgage over the Gan Gan Road Property and he would launch a family law claim for custody of their children. If she did not have a home, she would not be able to retain custody of their children.
(b) “I will make you pay if you don’t go ahead and sign the documents”, which Mrs Toogood understood to be a physical threat, rather than a reference to paying the mortgage.
(c) Talking about a gun he had at the time, which she also understood to be a reference to violence.
Mrs Toogood’s evidence was that she was desperate not to sign the documents, in part because of Mr Simpson’s history of falling into arrears, but that she felt she had no choice in all of the circumstances. On the basis of that telephone conversation, and in the circumstances as set out above, Mrs Toogood said that she and Mr Simpson agreed that (“the March 2004 Agreement”):
(a) The Second Liberty Loan would be increased to such further amount as Liberty would agree. Mrs Toogood gave evidence that she instructed the broker by telephone that regardless of the valuation of the Gan Gan Road Property, she would not agree to a refinance of any more than $1.2 million.
(b) The moneys available from the refinancing of the Second Liberty Loan would be made available to Mr Simpson to enable him to meet his personal and company debts.
(c) Mr Simpson would meet the interest payments on the refinancing of the Second Liberty Loan as they fell due and repay the principal sum when the loan expired.
(d) Mr Simpson would remain responsible for the mortgage repayments and eventual discharge of the Fourth Liberty Loan.
(e) Mrs Toogood would repay to Mr Simpson the $153,000 advanced to her from the proceeds of that loan by way of a suspension of Mr Simpson’s obligation to pay child support under the October 1998 Agreement.[11]
[11]See above paragraph 48.
As part of the process of obtaining the further loan from Liberty, a valuation was obtained for the Gan Gan Road Property. Mr Robert Wilfrid Tew, a property consultant at Morton Property Consultants Pty Ltd, gave evidence by affidavit that on 16 February 2004, he provided a valuation of $1.985 million for the Gan Gan Road Property, on the basis of a single “englobo parcel”, rather than as a proposed subdivision of five lots.
As a result of the March 2004 Agreement, an interest only loan in the sum of $1.2 million was obtained from Liberty in the names of Mrs Toogood and Mr Simpson for a term of 12 months (“the Fifth Liberty Loan”). The Fifth Liberty Loan was secured by registered mortgages over the Gan Gan Road Property and the Salamander Way Property, and was guaranteed by Jezabeel in its own right and as trustee of the JG Investment Trust, and by Simpson Contracting in its own right and as trustee of the Paul G Simpson Family Trust.
The Fifth Liberty Loan was cross-collateralised with the Fourth Liberty Loan. The Fifth Liberty Loan discharged the Second Liberty Loan, but not the Fourth Liberty Loan. The balance of the Fifth Liberty Loan, after discharge of the Second Liberty Loan and payment of fees and charges, was paid to Mr Simpson to enable repayment of his debts. Mrs Toogood did not receive any funds.
The disbursement authority with respect to the Fifth Liberty Loan shows that Liberty disbursed the sum of $250,000 from the loan settlement funds to the ATO. Counsel for Mrs Toogood submitted that this evidence supports Mrs Toogood’s account of the background of that loan. Counsel for Mrs Toogood also submitted that the March 2004 Agreement is the only reasonable explanation on the evidence as to why the parties obtained the Fifth Liberty Loan and why Mr Simpson accepted responsibility for meeting the payments under it.
On 19 March 2004, shortly after the Fifth Liberty Loan was obtained, Mrs Toogood typed a one page document reflecting the principal terms of the March 2004 Agreement. She gave evidence that she did this because she felt uneasy about the Fifth Liberty Loan. The document was signed by both Mr Simpson and Mrs Toogood on 19 March 2004 and stated:
AGREEMENT BETWEEN Paul George Simpson and [Mrs Toogood]
1.Jezabeel Pty Ltd is the registered owner of both properties 91 Salamander Way Salamander Bay and 184 Gan Gan Road and Julianne is the sole director of Jezabeel Pty Ltd (JG Investment Trust).
2.Paul Simpson is responsible for paying the mortgage payments for both properties.
3.Julianne has extended the mortgage on 91 Salamander Way to include a sum of $153,000 and will pay Paul Simpson back via the normal child maintenance payment of $400 per week. [To pay interest on the above less the $153,000]
4. In the event of the sale of any or part of 184 Gan Gan Road that necessitates the reduction in the mortgage, Julianne will pay out the sum of $800,000 and Paul Simpson will transfer his capital losses of approximately $500,000 to her to compensate. The $300,000 balance will be wiped out. The balance of $300,000 will be the responsibility of Paul Simpson to pay back to Julianne.
5.Paul Simpson acknowledges that he has received the sum of $200,000 from the sale of the house section of 184 Gan Gan Road (lot 51).
The words in square brackets in paragraph 3 of the document are a handwritten, initialled annotation by Mrs Toogood. Counsel for Mrs Toogood submitted that the annotation confirms Mrs Toogood’s understanding that she was to repay the $153,000 amount received by her from the proceeds of the Fourth Liberty Loan by foregoing any child support payments for the interest on that amount.
Either Mr Simpson or Simpson Contracting made payments in respect of the Fourth Liberty Loan and the Fifth Liberty Loan up to September 2004, but no payments were made after that date.
In addition to the loan payments, as further evidence that Mr Simpson accepted liability for the Liberty Loans, Mrs Toogood relied on the contents of a letter from Mr Simpson to Mrs Toogood’s solicitors dated 10 January 2011. In that letter, Mr Simpson stated:
As I have an agreement ready to take over the Liberty debt of approximately 1.7 million dollars I don’t see how the $200,000 you are claiming has any substance. You know from the mediations that I was negotiating with Liberty. …
Mrs Toogood placed similar reliance on the following passage of Mr Simpson’s affidavit dated 21 January 2011:
(a)I have independently negotiated with [Liberty] for the discharge of the debt for which I am liable;
(b)This negotiation was premised upon the liability of [Mrs Toogood] to pay to [Liberty] the sum of $200,000.00.
(c)The Deed of Agreement provides for me to make periodic payments each month for a period of five (5) years, as I do not have any capacity to make a significant lump sum payment for the foreseeable future.
Mr Simpson made no specific submissions in relation to these matters.
I find that Mr Simpson and Mrs Toogood entered into the March 2004 Agreement, which constituted a further variation of the October 1998 Agreement. The March 2004 Agreement is the only reasonable explanation for why the parties obtained the Fifth Liberty Loan and why Mr Simpson and Simpson Contracting accepted responsibility for making all payments under the loan. My finding is supported by the contemporaneous typed agreement dated 19 March 2004, Mr Simpson’s letter of 10 January 2004 and the contents of his affidavit dated 21 January 2011. In those documents, Mr Simpson acknowledges his responsibility for the payment of the debt to Liberty. I also find that the March 2004 Agreement bound Simpson Contracting and Jezabeel, which was evidenced by the fact that these entities guaranteed the Fifth Liberty Loan.
Sale of Mortgaged Properties to Repay the Liberty Loans
In October or November 2004, Mrs Toogood was contacted by Liberty, who advised that Mr Simpson had ceased to make any loan repayments and had told them to contact her. Mrs Toogood telephoned Mr Simpson in relation to his default on the loans and he told her: “my life is suffering by paying two mortgages and it is too hard. I deserve a life too”. Liberty told Mrs Toogood by telephone of its intention to take possession of both properties due to the mortgage arrears.
Mrs Toogood placed both the Gan Gan Road Property and the Salamander Way Property on the market. At this time, the Salamander Way Property was valued at $1.15 million.
Liberty advised Mrs Toogood that she needed their consent to sell the Salamander Way Property, because the Fourth Liberty Loan was cross-collateralised with the Fifth Liberty Loan, and that it would take and apply the entire sale proceeds towards both loans.
Mrs Toogood was also advised by Liberty during those discussions that she was required to sell the Gan Gan Road Property by 28 February 2005. As a result, Mrs Toogood did not have sufficient time to complete the proposed subdivision.
The sale of the Salamander Way Property was settled on 14 September 2005 at, according to Mrs Toogood, a “fire sale” price of $950,000. By this, I take her to mean in comparison to the $1.15 million valuation of the property obtained in October 2004.[12] After payment of agents and solicitors’ costs, rates and other adjustments, Liberty received $904,630.36. A balance of $13,000 remained owing on the Fifth Liberty Loan, which was transferred to the Fourth Liberty Loan.
[12]See above paragraph 69.
On 15 August 2008, Liberty issued proceedings in the Supreme Court of Victoria under its current registered name, Secure Funding Pty Ltd (“Secure Funding”) against Mrs Toogood and Mr Simpson with respect to the Fourth Liberty Loan (“the Secure Funding Proceeding”), seeking, inter alia, orders for:
(a) Judgment in the sum of $1,961,775.62 (as at 14 August 2008).
(b)Interest on $1,961,775.62 at 13% per annum or, alternatively, interest pursuant to statute.
(c)Enforcement expenses in accordance with the terms of the Liberty loans.
(d)Costs on a solicitor/client basis.
Secure Funding obtained judgment against Mr Simpson in default of appearance.
Mrs Toogood defended the Secure Funding Proceeding, but ultimately settled on the basis of a payment to Secure Funding of $200,000 in full and final settlement of her obligations to them.
The Gan Gan Road Property was ultimately sold in February 2009 as a result of the Secure Funding Proceeding and the sale proceeds of $485,000, were applied against the outstanding balance of the Fourth Liberty Loan.
The settlement of $200,000 due from Mrs Toogood to Secure Funding was initially due to be paid on 1 December 2010, but Secure Funding agreed to an extension of time to pay the funds. However, due to ongoing non-payment, consent orders were made on 7 November 2011 that Mrs Toogood pay Secure Funding the sum of $1,756,807.14 plus interest at 13% and costs (“the Secure Funding Judgment”).
Counsel for Mrs Toogood referred to and relied on an outline of evidence of Mr Terrence Bradley Walker, an asset realisation officer employed by Secure Funding, filed in the Secure Funding Proceeding. Counsel submitted that this showed that Mr Simpson accepted liability for the amounts owed to Secure Funding. In the outline of evidence, Mr Walker stated that he would give evidence that:
(a)Mr Simpson entered into a deed of compromise with Secure Funding on 13 September 2008, in which he agreed to pay $100,000 on 16 September 2008, $100,000 on 14 October 2008, and $500,000 by 31 October 2008. Mr Simpson failed to make that final payment and Secure Funding obtained judgment against him on 24 November 2008.
(b)The loan statement disclosed that Mr Simpson paid the following amounts to Secure Funding:
(i)$10,000 on 29 July 2009.
(ii)$16,000 on 2 October 2009.
(iii)$13,000 on 28 October 2009.
(iv)$13,000 on 8 December 2009.
(c)Liberty received the sums of $439,465.55 and $30,221.50 on 24 and 25 March 2009 from the sale of the Gan Gan Road Property.
Mrs Toogood also relied on Mr Simpson’s affidavit of 21 January 2011, in which he deposed that he had reached a “tentative agreement” with Secure Funding involving periodic payments over a period of five years. That agreement was premised on Mrs Toogood paying to Secure Funding the sum of $200,000, despite the fact that she was not a party to those negotiations. Mr Simpson deposed that he had not yet signed any deed of agreement with Secure Funding as at 21 January 2011. Counsel for Mrs Toogood submitted that the significant feature of this evidence was that Mr Simpson acknowledged his liability for the entire debt.
Counsel for Mr Simpson submitted that Mr Simpson was attempting to negotiate with Secure Funding to assume responsibility for the full amount of the judgment obtained in the Secure Funding Proceedings against both himself and Mrs Toogood. Counsel for Mr Simpson was denied leave to tender a statement of account from Secure Funding, which apparently showed that Mr Simpson had made various payments in reduction of the outstanding debt to Secure Funding. He sought to rely on the statement of account to show that in the event that the Deed of Mutual Release constituted a binding agreement between the parties, the amounts paid by Mr Simpson to Secure Funding more than covered any liability to Mrs Toogood pursuant to the deed. I did not admit the statement of account into evidence, as it would not have assisted the Court in any way. In my view, the Secure Funding Judgment is the best evidence of the loss suffered by Mrs Toogood as a result of the failure by Mr Simpson or Simpson Contracting to meet the mortgage payments pursuant to the October 1998 Agreement, as varied, between the parties.
In my view, the findings above support the conclusion that the variations of the October 1998 Agreement after the Deed of Mutual Release extended the obligations of Mr Simpson and Simpson Contracting beyond those contained in the Deed of Mutual Release.
Findings as to Damages Claimed for Breach of the Agreement
The October 1998 Agreement entered into between Mrs Toogood and Jezabeel on the one part and Mr Simpson and Simpson Contracting on the other part, as varied, consistently contained the term that Mr Simpson would make, or cause to be made, all of the payments pursuant to each relevant Liberty Loan when they fell due. I find that the parties contemplated at the time of entering into the October 1998 Agreement, and subsequently each time the agreement was varied over the course of their dealings, that if Mr Simpson or Simpson Contracting failed to meet the payments to Liberty, it would have the right to exercise its rights under the mortgages to recover the outstanding amounts.
As a result of the breaches by Mr Simpson and Simpson Contracting, the Fourth Liberty Loan and the Fifth Liberty Loan were foreclosed, the two properties were sold and the net proceeds were applied towards reduction of those loans. The amount outstanding under the Fourth and Fifth Liberty Loans resulted in the Secure Funding Judgment against Mrs Toogood. I find that this was a direct consequence of Mr Simpson and Simpson Contracting breaching the term that they would make all of the payments pursuant to the Fourth and Fifth Liberty Loans.
Counsel for Mrs Toogood submitted that Mr Simpson was liable for damages as a result of those breaches. It was submitted that the damages caused by the breaches are:
(a) $20,000 in relation to the August 2002 Loans.[13]
[13]Referred to in paragraph 46 above.
(b) $33,806.19 in relation to the arrears required to be paid to Liberty to secure its consent to the sale of the One Acre Gan Gan Road Property, which was the responsibility of Mr Simpson pursuant to the March 2002 Agreement.[14]
[14]Referred to in paragraph 36 above.
(c) $1,985,000 in relation to the loss of the Gan Gan Road Property, being the value of the property as at 16 February 2004.[15]
[15]Referred to in paragraph 57 above.
(d) $1,150,000 in relation to the loss of the Salamander Way Property, being the value of the property as at 6 October 2004.[16]
(e) $2,037,750 in respect of the Secure Funding Judgment.[17]
(f) Interest on the above, pursuant to statute, and costs.
[16]Referred to in paragraph 69 above.
[17]Referred to in paragraph 77 above.
Counsel for Mrs Toogood submitted that Simpson Contracting was also liable to pay damages to Mrs Toogood for the amounts referred to above, apart from the August 2002 Loans, because it was a party to the agreement and guaranteed the Fourth Liberty Loan and the Fifth Liberty Loan.
The Claim for $20,000
As stated above, I accept the evidence of Mrs Toogood with respect to the circumstances in which the $20,000 was paid to Mr Simpson.[18] Mr Simpson has failed to repay that sum pursuant to the August 2002 Loans. Therefore, I find that Mr Simpson is liable to pay that sum to Mrs Toogood as compensation for the breach.
[18]See above paragraph 39.
Arrears in the Amount of $33,806.19
This amount represented arrears of interest under the Second Liberty Loan that remained unpaid as at August 2002. The payment of this amount was the responsibility of either Mr Simpson or Simpson Contracting pursuant to the March 2002 Agreement as they were jointly and severally liable for the payments due under the Second Liberty Loan. I accept that the $33,806.19 was paid by Mrs Toogood to Liberty as the price to obtain approval for the sale of the One Acre Gan Gan Road Property.
Mr Simpson and Simpson Contracting were responsible for the payment of the arrears of interest under the Second Liberty Loan. Had the August 2002 Agreement been performed, either Mr Simpson or Simpson Contracting should have paid that amount, and not Mrs Toogood. I find that this amount is a loss to Mrs Toogood caused by the breach by Mr Simpson and Simpson Contracting of the August 2002 Agreement. The amount should be repaid to Mrs Toogood as damages for that breach.
Loss of the Gan Gan Road Property and the Salamander Way Property
Counsel for Mrs Toogood submitted that her claim for the unencumbered value of the Gan Gan Road Property and the Salamander Way Property is premised on the basis that the agreement between her and Mr Simpson was that the loans with respect to the properties would be paid by Mr Simpson or the Entities.
Counsel for Mrs Toogood also submitted that if the mortgage payments had been paid and the loans repaid when they fell due, Jezabeel would have owned two unencumbered properties and Mrs Toogood would not have been liable to pay the Secure Funding Judgment obtained against her. This means, according to counsel for Mrs Toogood, that her damages should be the unencumbered value of the two properties.
Counsel for Mr Simpson did not make any specific submissions as to Mrs Toogood’s claim to damages, but argued that the obligations of Mr Simpson were insufficiently clear to make a finding that he was liable in the amounts claimed. I reject that argument on the basis of my findings above.[19]
[19]See, for example, above paragraphs 19 and 27.
In respect of the claim for damages for the loss of the two properties, Mrs Toogood relied on the 2004 valuations of Mr Tew. Those valuations were $1.15 million for the Salamander Way Property and $1.985 million for the Gan Gan Road Property, a total of $3.135 million. There was no challenge to the valuations by counsel for Mr Simpson.
In my view, however, the subsequent sales of both properties establish that these 2004 valuations were not sustainable.
As a result of the default on the Fourth and Fifth Liberty Loans, the Salamander Way Property was sold in September 2005 for $950,000 and the Gan Gan Road Property was sold in March 2009 for $485,000, a total of $1.435 million. Thus, the sale values of the two properties establish that Mrs Toogood has lost the sum of $1.435 million, and not the sum of $3.135 million as claimed by her.
The purpose of damages for breach of contract is to compensate the plaintiff for the breach.[20] Where a party sustains a loss by reason of a breach of contract, he or she is, so far as money can, to be placed in the same situation with respect to damages, as if the contract had been performed.
[20]Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 80 per Mason CJ and Dawson J, 98 per Brennan J, 116 per Deane J, 134 per Toohey J, 148 per Gaudron J, 161 per McHugh J (in dissent, but not as to the general principle) (all citing Robinson v Harmon (1848) 1 Ex 850).
The consequence of the breaches of Mr Simpson and Simpson Contracting was that Liberty was entitled to sell the Gan Gan Road Property and the Salamander Way Property and to apply the sale proceeds towards the outstanding loans. In reality, the monetary amount that Mrs Toogood lost is the sum of $1.435 million. In my view, the sum of $3.135 million does not represent the damage which might fairly and reasonably be considered to arise from the breaches by Mr Simpson and Simpson Contracting, or may reasonably be supposed to have been in the contemplation of the parties when they made the agreements, as the probable result of it.[21]
[21]Hadley v Baxendale (1854) 9 Ex 341, 354.
In my view, the loss that Mrs Toogood has suffered as a result of the loss of the Gan Gan Road Property and the Salamander Way Property is the sum of $1.435 million.
The Secure Funding Judgment
In respect of the Secure Funding Judgment against Mrs Toogood, I find that it was caused by the failure of Mr Simpson and Simpson Contracting to meet the payments due under the Fourth Liberty Loan and the Fifth Liberty Loan. The Secure Funding Judgment was a foreseeable outcome of the failure to meet those payments.
There was some argument as to whether the Secure Funding Judgment should be discounted by reference to the payments made by Mr Simpson referred to above.[22] In my view, those payments are not relevant to the outcome of this proceeding, because when the Secure Funding Judgment is enforced, Secure Funding will be required to deduct any amounts that have been paid from its enforcement of the judgment amount.
[22]See above paragraph 78(b).
Accordingly, I find that Mrs Toogood is entitled to damages in the amount of $2,037,750 in respect of the Secure Funding Judgment, together with any increased amount due as a result of the non-payment of the Secure Funding Judgment.
Simpson Contracting
With respect to the failure by Simpson Contracting to make payments on the Fourth Liberty Loan and the Fifth Liberty Loan, I find that it was the intention of all parties that Simpson Contracting would be bound by the October 1998 Agreement and the subsequent variations and that it would be joint and severally liable for the Fourth Liberty Loan and the Fifth Liberty Loan. Therefore, it is liable to Mrs Toogood in respect the losses caused by that breach referred to above.[23]
[23]See above paragraphs 87-100.
Conclusion
Accordingly, Mrs Toogood is entitled to judgment against Mr Simpson for the following amounts:
(a) $20,000 in relation to the August 2002 Loans.
(b) $33,806.19 in relation to the arrears paid to Liberty.
(c) $950,000 in relation to the loss of the Gan Gan Road Property, being the amount for which the property was sold in February 2009.
(d) $485,000 in relation to the loss of the Salamander Way Property, being the amount for which the property was sold in September 2005.
(e) $2,037,750 in respect of the Secure Funding Judgment, together with any increased amount due as a result of the non-payment of the Secure Funding Judgment.
In respect of Simpson Contracting, I find that Mrs Toogood is entitled to judgment in the same amounts, except for the $20,000 owing under the August 2002 Loans.
I will hear counsel as to the form of final orders and costs.
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