Van Duren v Hammond and Roberts Pty Ltd [No 2] - [2019] WASC 246

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   VAN DUREN -v- HAMMOND & ROBERTS PTY LTD [No 2] [2019] WASC 246
CORAM:   KENNETH MARTIN J
HEARD:   ON THE PAPERS
DELIVERED          :   5 JULY 2019
FILE NO/S:   CIV 2270 of 2016
BETWEEN:   NATALIE BARBARA VAN DUREN
Plaintiff
AND
HAMMOND & ROBERTS PTY LTD
First Defendant
STEVEN JAMES ROBERTS
Second Defendant
STEVEN ROBERTS PTY LTD
Third Defendant
JEST NOMINEES PTY LTD
Fourth Defendant

Catchwords:

Contract - Settlement agreement - Interpretation - Question for express term - Surrounding circumstances - Determination on papers

Legislation:

Nil

Result:

Defendants' construction accepted

Category: B

Representation:

Counsel:

Plaintiff	:	No appearance
First Defendant	:	No appearance
Second Defendant	:	No appearance
Third Defendant	:	No appearance
Fourth Defendant	:	No appearance

Solicitors:

Plaintiff	:	Bennett + Co
First Defendant	:	Price Sierakowski
Second Defendant	:	Price Sierakowski
Third Defendant	:	Nova Legal
Fourth Defendant	:	Nova Legal

Case(s) referred to in decision(s):

Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219
Marindi Metals Ltd v Kidman Resources Ltd [2017] WASC 189
Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353
Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 16] [2017] WASC 340
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104

KENNETH MARTIN J:

Introduction

The parties to this proceeding have asked me to determine a matter of construction concerning their settlement agreement. The settlement agreement was reached during the course of the trial of this matter which was subsequently adjourned on the basis that the parties had reached a binding resolution of their dispute that would be documented by a deed. The disputed issue of construction is to be determined on the papers.
To that end I hold the parties' written settlement agreement of 28 November 2018 (the settlement agreement) which is appended to the affidavit of Clara Elisabeth Hagan sworn 6 May 2019 (the Hagan affidavit). The settlement reached between the parties was eventually perfected at 2.23 pm on 28 November 2018: see the email chain between the solicitors for the parties annexed to the Hagan affidavit at CEH‑2. At that time a two word email was sent by way of acceptance by the plaintiff's legal representative, Mr Bennett of Bennett + Co, to Mr Brett Molony of Price Sierakowski, the lawyers on record for the first and second defendants and copying in all parties.

The settlement agreement

Essentially the settlement agreement of 28 November 2018 is located across four pieces of written electronic communications of that day passing between the parties' legal representatives.
First in sequence is the communication sent by Mr Molony at 1.41 pm that day on behalf of all defendants to Mr Bennett. The covering email to that communication read:
Dear Martin,
Please see below attached our further letter reframing the proposal sent earlier this afternoon. (my emphasis)
Appended to that email was Price Sierakowski's letter which was marked as 'without prejudice save as to costs' (the 28 November 2018 Price Sierakowski communication).
The 'reframed' proposal made express reference to some prior passing without prejudice communications and emails (that I detail later) and then to the further discussions conducted between counsel that morning at court (the second listed day of the trial then running before me).
Relevantly, the 28 November 2018 Price Sierakowski communication had expressed itself in terms:
We confirm the offer made by the first to fourth defendants is as follows:
1.Payment to the plaintiff of the total amount of $82,634 (Settlement Sum) within 14 days from formal written acceptance of this offer (the party paying the Settlement Sum to be at the defendants' discretion);
2.In exchange for the Settlement Sum, the plaintiff will provide all duly executed documents necessary to give effect to:
(a)the transfer of all units held by her in the Hammond & Roberts Unit Trust to the fourth defendant or its nominee for nominal value (which payment is included in the Settlement Sum);
(b)the transfer of all shares held in Hammond & Roberts Financial Services Pty Ltd to the fourth defendant or its nominee for nominal value (which payment is included in the Settlement Sum); and
(c)her resignation as a director of Hammond & Roberts Financial Services Pty Ltd with immediate effect;
3.Acceptance of this offer will give rise to an immediately binding agreement, but the parties will enter into a formal deed of settlement to give further effect to the agreement within 14 days of acceptance of this offer.
4.…
The above communication gave rise to a responsive email from Mr Bennett for the plaintiff, copied to all parties, sent at 1.52 pm that same day and in the following terms:
Dear Colleagues
The letter attached to your email reflects terms generally that my client agrees subject to the following:
1.you haven't dealt with the existing proceedings, the parties should agree to adjourn the proceedings pending completion (within 14 days) at which time the parties will consent to the proceeding being discontinued with no order as to costs;
2.the obligation to pay my client is a joint and several obligation of the four defendants;
3.the Deed should be prepared on the basis that each side should bear its own costs in relation to the preparation and contain additional terms that my client's personal data is either returned to her or otherwise permanently removed from any access by your clients or any third party (such as Greenwich & Co).
Subject to these additional matters being confirmed by your clients, the matter can be agreed.
The third passing communication next sent was Mr Molony's responsive email to Mr Bennett at 2.21 pm that day, copied to the lawyers for the other parties, in the following terms:
Dear Martin
We respond as follows:
Item 1:agree save for the fact that proceedings will be dismissed with no orders as to costs, with the terms of the settlement as already agreed to remain confidential and the non disparagement clause in the deed to provide that no party misrepresent the dismissal of the proceedings so as to equate to a case where the plaintiff's claim was considered by the court and dismissed.
2.Agreed.
3.Agreed.
Fourth, some two minutes later, at 2.23 pm, Mr Bennett's two word responsive email (copied to the other parties) was despatched for the plaintiff in unequivocal terms:
Brett

Agreed

The dispute

Consequently, there is no dispute at all between the parties that the underlying litigation (which was then the subject of a running trial to resume on day two after a morning adjournment until 2.15 pm that afternoon) is finally settled - under the four component settlement agreement I have just outlined above. But a disputed issue of interpretation which the parties have now asked me to determine arising out of their settlement agreement has subsequently held up a formal dismissal of the action.
The parties find themselves divided over a temporal issue concerning the time at which the units held by the plaintiff in the Hammond & Roberts Unit Trust are to be transferred to the fourth defendant, or to the fourth defendant's nominee (for nominal value): see par 2(a) of the first 28 November 2018 Price Sierakowski communication.
The plaintiff contends as a matter of the proper construction of the parties' settlement agreement, that objectively assessed as a whole, the 'deal' reached was that the relevant transfer of the units was to be done on a basis that the effective date for transfer of the plaintiff's units was agreed as being at 21 April 2016 (the date Ms Van Duren, an accountant, had actually ceased working at the Hammond & Roberts accountancy business), alternatively at 30 June 2016 (the end of the most proximate financial year to her cessation of work).
The contrary interpretation, however, is submitted on behalf of all defendants. They submit that as a matter of the proper construction of the settlement agreement, by the text of the 28 November 2018 Price Sierakowski communication, particularly by pars 1 and 2, it clearly provided only for a transfer of the plaintiff's units in the Hammond & Roberts Unit Trust to occur proximately to the time the transfer of the units was to be exchanged - in order for the plaintiff to then receive, in return, the agreed settlement sum of $82,634.
The defendants contend there is no other sensible basis to interpret the settlement agreement - which is essentially otherwise silent on the now disputed issue. They say, in effect, that a transfer of units as was agreed to in November 2018 simply cannot be sensibly read as being an agreement to a transfer of units that would then be some two years retrospective, so as to take effect earlier at either 21 April or 30 June 2016, absent such a feature being expressly and clearly provided for. And it was not here, they say.

The parties' materials

To facilitate a resolution of the disputed issue of construction on the papers, I have received extensive written submissions from the parties, as follows. First, I hold the plaintiff's written submissions of 6 May 2019. Second are the third and fourth defendants' written submissions of 20 May 2019. (I note that the third and fourth defendants' written submissions were adopted in full by the first and second defendants who themselves did not file any further submissions). Last, I hold the plaintiff's submissions in reply of 31 May 2019.
From an evidentiary perspective, beyond materials appended to the Hagan affidavit to which I have now referred, I also hold an affidavit of Brett Molony sworn 20 May 2019 filed on behalf of the third and fourth defendants (the Molony affidavit). The Molony affidavit contains a range of material that essentially provides historic contextual evidence of passing attempted (unsuccessful) earlier settlement communications, but bearing upon the exercise in construction that is now required.

Context to the settlement agreement

I again point out that the first component of the settlement agreement, being the 28 November 2018 Price Sierakowski communication, called 'reframing' of an earlier proposal. This communication in turn had expressly referred to some earlier passing settlement communications.
There is no objection to me now having regard to earlier passing materials, including what were then without prejudice exchanges, by either side on a contextual basis.
The 28 November 2018 Price Sierakowski communication referred to the four (4) earlier passing communications with Bennett + Co, namely:
·your without prejudice letter to Messrs Cobby and Holler sent at 7:43 pm on 27 November 2018;
·the email from Raff Di Renzo to you in response to your letter sent at 9:26 am this morning;
·the email from you to Mr Di Renzo sent at 9.42 am this morning; and
·discussions between counsel for the third and fourth defendants, Mr Holler, and you and Mr Tharby in court this morning, leading to agreement in principle to the settlement amount put on behalf of all defendants, subject to that proposal (including its necessary terms and conditions) being put in writing.
These earlier passing communications as expressly identified by the 28 November 2018 Price Sierakowski communication to Bennett + Co, provide part of the surrounding context to be scrutinised and weighed for the purposes of resolving the contested interpretation issue currently under consideration. None of the exchanged respective written submissions suggest to the contrary.
To that end, the without prejudice letter of 27 November 2018 from Bennett + Co (as is referred to at the first dot point above) was provided as attachment BM‑1 to the Molony affidavit. The letter at BM‑1, in turn made reference to even earlier unconsumated without prejudice offers and exchanges passing between the parties of 8 March 2017, 16 June 2017, 23 June 2017, and 7 November 2018 ‑ also provided within the Molony affidavit as further attachments. They provide even more contextual background that is all relied upon. (I refer to the 2017 settlement communications a little later in these reasons.)
But returning to the 28 November 2018 Price Sierakowski communication, as seen, its second and third dot point references were to emails. They can be found as attachments within the Molony affidavit. The 9.26 am email from Mr Raff Di Renzo to Mr Bennett can be found as attachment BM‑2. Then, Mr Bennett's reply email of 9.42 am to Mr Di Renzo is located as attachment BM‑3 to the Molony affidavit.
There were also, of course, the verbal communications as referred to as between counsel at court. But there is no greater elaboration found concerning these discussions in the 28 November 2018 Price Sierakowski communication.
It is to be observed towards the three written communications referenced at the commencement of the 28 November 2018 Price Sierakowski communication, that they all precede that reframed communication (which was sent at 1.41 pm). Hence, some proper level of care must be taken towards not overplaying their contextual contribution given the 1.41 pm emailed communication was expressed to be a 'reframing' of the 'proposal sent earlier this afternoon'. [In fact, that reference to 'earlier this afternoon' was erroneous, as the earlier proposals in time, occurred either on the previous day, or earlier that morning. They then came, obviously, all to be 'reframed', during the afternoon of 28 November 2018].
But clearly proximate to and hence relevant to providing surrounding contemporary context, possibly bearing on the construction issue at hand, (without setting out its full content), is the Bennett + Co 27 November 2018 letter that is BM‑1. That three page letter of the previous evening had traced the history of the earlier without prejudice communications and in particular, it mentioned what were earlier (but unaccepted) Calderbank offers of 8 March 2017, 16 June 2017, then 23 June 2017, and finally, of 7 November 2018 (after an unsuccessful mediation conference).
The 27 November 2018 Bennett + Co letter had concluded under the heading 'Way forward' and read:
My client offers to settle this matter on the basis that the defendants commit to paying to her within 30 days from the date of this letter (or such longer period as the parties may mutually agree) the sum identified in Mr Roberts' witness statement, namely $49,900, plus interest at the rate of 6% per annum from 21 April 2016 (which we calculate to be $7,734). This is a total sum of $57,634.
In addition to this, my client will enter into a deed which essentially contains the terms previously mentioned by the parties – releases and agreements for tax purposes, trust balances being reduced to nil. My client would require a contribution to her legal costs (which vastly exceed the sum) of $100,000.
I observe that this communication carries nothing of relevance to assist the currently disputed issue concerning the timing of the transfer date for the units of the plaintiff.
The email from Mr Di Renzo (the solicitor on record for the third and fourth defendants) of 9.26 am on Wednesday, 28 November 2018 (which is BM‑2) then rejected what was the offer contained in the Bennett + Co letter of 27 November 2018.
Nevertheless, a fresh settlement offer was then put by the defendants under that email from Mr Di Renzo, in the following terms which do address the plaintiff's units as part of its subject matter:
We are also instructed to put the following counter offer to settle these proceedings:
1.The defendants will pay the sum of $57,634 to the plaintiff;
2.The plaintiff is to return the units;
3.Each party bears their own costs;
4.The parties enter into a deed of settlement and release as previously mentioned including releases for tax purposes and the trust balance being reduced to nil.
That communication as now seen, says nothing to support a view that a retrospective transfer date of 2016 towards the plaintiff's units, was on the table.
At 9.42 am on Wednesday morning, 28 November 2018, a Bennett + Co email replying to Mr Di Renzo was sent in the following terms:
Thank you for the offer. You should be aware that the Trust has caused income tax returns for 2016 to be filed – these necessarily omit the provisions. My client accordingly is assessed for 'income' of $130,000 which her Trust has not received. On any settlement your client gets the benefit of taxed losses circa $60,000 - $80,000.
My client requires a payment towards her costs in addition to the offer below. My client will accept a payment of $50,000.
I await hearing from you.
I ascertain nothing in that communication to assist with the plaintiff's contended position over the now disputed unit transfer date issue.
The fourth of the precatory communications as identified in the 28 November 2018 Price Sierakowski communication, simply refers to discussions at court that morning between counsel, ie, between Mr Holler, Mr Bennett and Mr Tharby ‑ which were said to be 'leading to agreement in principle to the settlement amount put on behalf of all defendants, subject to that proposal (including its necessary terms and conditions being put in writing)'. But there is no assistance contextually or otherwise from that empty content reference towards the presently disputed issue of interpretation as regards the movement timing of the plaintiff's units.
Earlier, I have set out pars 1, 2 and 3 of the 'reframed' proposal in the 28 November 2018 Price Sierakowski communication. I did not then cite par 4. But now, contextually, and for completeness it is useful to see that further term of that passing communication, which read:
4.To that end, the deed of settlement will contain all terms necessary to provide for a full and final settlement of all issues in dispute in the Proceedings and all matters related to the plaintiff's involvement with the Hammond & Roberts Unit Trust and Hammond & Roberts business, including but not limited to terms concerning the following matters:
a.the plaintiff to agree the accounts of the Hammond & Roberts Unit Trust and Hammond & Roberts Financial Services Pty Ltd for taxed purposes;
b.the reduction of the plaintiff's beneficiary account with the Hammond & Roberts Unit Trust to a nil balance;
c.full mutual releases;
d.mutual assurances that all parties will do all things that may be necessary to give effect to this settlement;
e.that the deed be confidential to the parties; and
f.that none of the parties will disparage any of the others.
Again, I find nothing in par 4 above that assists upon the present disputed issue of construction over timing to advance the plaintiff's preferred construction.
It will now be seen having evaluated the contemporary surrounding materials references so far, that the question for a date of the transfer of the plaintiff's units in the Hammond & Roberts Unit Trust to take effect, is not addressed either expressly or otherwise in all this material.
Nor do I evaluate any of the terms under par 4 of the 28 November 2018 Price Sierakowski communication as providing any help or enlightenment upon the issue of a retrospective (ie 2016) date of transfer of the units, then still held by the plaintiff in the Hammond & Roberts Unit Trust. There is, of course, the expressed contemplation that a forthcoming future deed of settlement would deal with all issues in dispute and all matters relating to the plaintiff's involvement with Hammond & Roberts Unit Trust and the Hammond & Roberts business. But that formal horizon also does not assist me to a view that a transfer of the plaintiff's units would be expressed within that future deed on a basis that the unit transfer would by the terms of that future deed of settlement, be effected as at 21 April, or 30 June 2016.

Even earlier further contextual material

The Molony affidavit at pars 10 through 12, refutes a factual submission once asserted by the plaintiff to the effect that Hammond & Roberts Unit Trust financial statements for financial years subsequent to the 30 June 2016 financial year end were not provided to the plaintiff. Rejecting that suggestion, Mr Molony says at par 10:
Those financial statements have been provided to the plaintiff's representatives well prior to the Settlement Agreement and are attached as follows.
Paragraph 11 of Mr Molony's affidavit attached as BM‑4 (between pages 13 and 75) then refers to a series of documents, being:
(a)the Hammond & Roberts Unit Trust financial statements for the 2016/2017 financial year;
(b)the Hammond & Roberts Unit Trust tax return for that financial year;
(c)further documentation concerning Hammond & Roberts Financial Services financial statements and tax return for the 2016/2017 financial year; and
(d)MYOB ledgers and accounts for the 2016/2017 financial year.
At par 12, Mr Molony attaches as BM‑5, an email by him to Bennett + Co of 10 July 2018, attaching draft financial reports for the 2018 financial year (see pages 76 - 96 of the Molony affidavit). Those pages display the draft financial statements for the Hammonds & Roberts Unit Trust for the financial year ended 30 June 2018, including general ledger details for the Hammond & Roberts Unit Trust.
The financial materials as referred above as provided by Mr Molony, do establish most explicitly that financial statements in respect of the Hammond & Roberts Unit Trust were very much provided to the plaintiff (via her lawyers Bennett + Co) for the 2016/2017 financial year, and then later (in draft form), for the financial year ended 30 June 2018.
The reply written submissions of the plaintiff then seem to accept, in effect, that factual position as stated under Mr Molony's affidavit, on this issue.
Remaining contextual materials further provided under the Molony affidavit at pars 14 through 16, append some passing earlier Calderbank offers (see attachments BM‑6, BM‑7 and BM‑8) as were exchanged, but were obviously not then accepted, during March and June 2017.
The Calderbank offer from Price Sierakowski to Bennett + Co of 8 March 2018 is at BM-6 of the Molony affidavit. I note that under Item 5.6(c) of that Calderbank offer Mr Molony, amongst other terms, had dealt with the transfer of units issue, but without any hint therein of an earlier effective date of transfer for the units. He only said:
c.Your client will transfer her ordinary units and income units in the Trust to the Second Defendant upon receipt of the Settlement Sum.
Although the March 2017 proposal was not accepted, in a reply sent on 16 June 2017, Bennett + Co, on behalf of the plaintiff, then made a counter Calderbank proposal to the defendants. Under a heading 'Offer to settle proceedings' (on page 2 of that letter), it is said that Ms Van Duren was prepared to settle her action (to be formalised in a deed) under six as identified terms. Term 2 ‑ 3 read:
2.Ms Van Duren transfers units in the Hammond & Roberts Unit Trust (HRUT) and shares in Hammond & Roberts Financial Services Pty Ltd (HRFS) to the defendants' nominee(s) effective as at 30 June 2016. (my emphasis underlined)
3.Ms Van Duren resigns as a director of HRFS.
So under that earlier communication, the transfer of the units timing, being the subject of the present interpretive dispute, was there explicitly asked for (ie, at 16 June 2017) under that proposal as put then to the defendants. The counter proposal was left open for acceptance until Friday, 23 June 2017. But it was never accepted.
Instead, a counter‑proposal was despatched from Price Sierakowski of 23 June 2017 and expressly rejecting the 16 June 2017 offer. There was submitted a fresh counter proposal (see Molony affidavit BM‑8). This time under proposed terms 2, 3 and 4 of that 23 June 2017 the offer was put as follows:
2.based on her entitlement to the share of the net income of the Trust Fund for the accounting period ended 21 April 2016, your client accepts her share of the taxable net income of the Trust for the year ended 30 June 2016 shall be $110,262;
3.your client transfer her units in the Hammond [&] Roberts Unit Trust and shares in Hammond [&] Roberts Financial Services to our clients' nominee;
4.your client resigns as a director of Hammond [&] Roberts Financial Services Pty Ltd and transfers any shares held in any Hammond and Roberts entities to the defendants or their nominees;
As seen especially under proposed term 3 above, under this counter proposal from the defendants (which was to be left open for acceptance until 14 July 2017 - but apparently withdrawn some time earlier), the response did not accept par 2 of the 16 June 2017 Bennett + Co offer – namely to the effect that transfer of Ms Van Duren's units in the Hammond & Roberts Unit Trust and shares in Hammond & Roberts Financial Services Pty Ltd be effective as at 30 June 2016. Responses under pars 3 and 4 of the Price Sierakowski counterproposal of 23 June 2017 above did not then suggest or hint at any acceptance of a retrospective unit transfer timing proposal, either expressly or impliedly.
After the June 2017 exchanges the parties' settlement proposals look to have ground to a halt. That was until (as the 27 November 2018 Bennett + Co letter (BM‑1) discloses at page 3):
On 7 November 2018 a further offer to settle the matter was made by my client after the mediation to settle in the sum of $100,000 with costs in the sum of $150,000.
So, the 2017 calendar year settlement propposal position saw a 16 June 2017 Bennett + Co proposal as regards transfers of units and shares being made effective in 2016 not being accepted in 2017. Nor was a 2016 unit transfer timing term ever reincorporated under revived 2018 proposals by reference to any party picking up any of the parties' earlier proposal settlement terms.
The earlier 2017 exchanges are invoked as context to the Bennett + Co communication of 27 November 2018 (BM‑1). It, in turn, is itself only invoked as context.

A category 4 Masters v Cameron situation

I would assess that the settlement agreement reached here at 2.23 pm on 28 November 2018, the afternoon of what was effectively day two of the trial, saw these parties conclude then what may be referred to as a Masters v Cameron category 4, legally binding agreement (see Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353). A category 4 classification extends to parties envisaging a potentially of implementing later a more detailed and further negotiated wider agreement (ie, an as envisaged more detailed settlement deed), but by their mutual recognition that the essential terms of a binding bargain are already agreed as between them - to a point sufficient to constitute an enforceable bargain, least there be a subsequent failure by them to agree upon any greater augmentations to the skeletal essential terms as have already been agreed.
I can now turn to relate the parties' respective contingent positions, as regards the interpretative exercise I have been asked to undertake.

The plaintiff's submissions

There is no disagreement between the parties as regards the underlying contractual interpretation principles under Australian contract law. It may be accepted that evidence of prior negotiations, including negotiations conducted on a without prejudice basis, can, where relevant, be admitted as evidence of surrounding circumstances - to the extent those negotiations reveal (relevant) facts commonly known to the parties at the time of consummating their bargain, or alternatively were then notoriously known facts or circumstances.
These days, it is common to see an exercise in contractual interpretation of a written contract framed as a distilled reference to the need for a consideration of the 'text, context and purpose' of any contractual term requiring interpretation, and to be undertaken by applying an the objective approach to the interpretation of the textual language deployed by the parties under their written bargain. A court strives to apply a sensible commercial approach towards the interpretation of what is an underlying commercial bargain. Of course, the textual language of a contract must be evaluated as a whole. See generally Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104; Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219 and Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 16] [2017] WASC 340 [297] - [305]. See also Marindi Metals Ltd v Kidman Resources Ltd [2017] WASC 189 [56] – [68].
The essence of the present construction position as advocated by the plaintiff can be identified from under par 5 of her written submissions of 6 May 2019:
Ms Van Duren exited the Hammond & Roberts accountancy practice on 21 April 2016 and the proceedings were conducted on the basis that the relationship between Ms Van Duren and the defendants had terminated as at 21 April 2016, alternatively 30 June 2016. It follows logically that Ms Van Duren's units are to be transferred effective as at that date. (my emphasis)
The contention in the last sentence as seen above, towards a logistical result - requires some immediate interrogation, assessed within the context of underlying litigation settled by the parties' agreement in circumstances where that uneconomic litigation had reached a trial and was only then resolved at the commencement of the afternoon session of day two of that trial.
The underlying litigious dispute concerned circumstances around the plaintiff's exit from an accountancy practice, which to the external observer displayed many venerable hallmarks of an old-fashioned partnership, including use of the term 'partners'. However, the underlying commercial complexities seen deployed within the participant relationships were more modern ‑ involving uses of service companies, leases and income distributions made through multiple trusts. This all presented as a highly complex interrelationship of corporations, trusts and related interests. Unravelling then, what was no doubt a tax effective structural arrangement in good times, on the departure of Ms Van Duren from the 'practice' at 21 April 2016 posed a task far beyond a straightforward dissolved partnership winding up scenario - especially absent any working consensus over what were the core departure terms at the time.
Fundamentally, it is plain here, that Ms Van Duren did not voluntarily relinquish her minority unit holders interest held in the Hammond & Roberts Unit Trust at 21 April 2016. To the contrary, she held on to her units.
Because the parties could not agree terms at April 2016 and thereafter agree upon her exit strategy terms over some more time, Ms Van Duren kept her units and also her shares in the first defendant corporate entity. That of course was her right. But consequences flow from that chosen stance.
Had the parties been able to reach a workable exit consensus at the time, then a transfer of Ms Van Duren's interest at 21 April 2016, or alternatively at the end of the 2016 financial year, would have made commercial sense. But unfortunately, there was no agreement then. Hard ball was played on all sides and opposing positions then became entrenched, degenerating to litigation. There was something of a 'Mexican standoff' leading eventually to a grossly uneconomic trial fixed for some days duration in late November 2018.
So, the plaintiff's submission under par 5, that it 'follows logically that Ms Van Duren's units were to be transferred effective at either 21 April or 30 June 2016', is now something of an optimistic overstatement on my view. The plaintiff's deliberately chosen retention of her shares and units after she left, looks part of a perceived strategic advantage of her bargaining position in a drawn out exit terms fight, that culminated in this court.
A further argument was put on behalf of Ms Van Duren to the effect that because cl 2(a) and cl 2(b) of the 28 November 2018 Price Sierakowski communication did not use the phrase 'with immediate effect', by contrast to cl 2(c) as regards the issue of Ms Van Duren's resignation as a director of Hammond & Roberts Financial Services, that the omissions assists the plaintiff's interpretation. The submission is that an absence of the cl 2(c) phrase in cl 2(a) and 2(b) suggests that unit transfers were to take place at the April or June 2016 dates as is contended for. I disagree and am left wholly unmoved by that argument.
On my assessment, the submission pays inadequate respect to all of the express text in this bargain, particularly to the precatory text of cl 2. This says that in exchange for the settlement sum, the plaintiff will provide all duly executed documents necessary to give effect to the transfer of all units held by her in the Hammond & Roberts Unit Trust. I find no basis in those words to assess them in their context, as meaning the transfer of units by the plaintiff would be effective at a 21 April or 30 June 2016 date. An immediate effect of a resignation of a director makes perfect sense within the cl 2(c) subject matter environment, but without suggesting any wider repercussions to neighbouring environment topics, by the non‑use of that phrase here.
I would reach the same conclusion, even acknowledging as one historic surrounding circumstance, that back in June 2017 a Bennett + Co settlement offer at that time had expressly proposed a term which expressly specified the transfer of the plaintiff's units at 30 June 2016 (BM-7, page 106, cl 2 under the heading 'Offer to settle proceedings'). But that proposal was not accepted. But it lapsed then, in 2017, and was not revived. It might have been put again expressly in 2018, but it was not.
As seen, then, no request for that 2017 unit transfer timing term was made again during the parties' November 2018 exchanges.
Further, there is nothing in the 2017 proposal exchanges to indicate that a transfer of units retrospective dates at April or in June 2016 was then uncontroversially accepted at that time by the defendants. Quite the contrary, in fact. As seen, all the 2017 exchanged settlement proposals were either rejected or lapsed, by the end of the 2017 Calderbank exchanges. Their terms did not live on past then unless that was made to happen expressly. It did not.
Accepting that Ms Van Duren had physically left working at the Hammond & Roberts practice at 21 April 2016 as uncontroversial, such bare fact does not assist to resolve the present construction issue. The problem is posed candidly even under par 16 of Ms Van Duren's submissions of 6 May 2019:
Ms Van Duren did not transfer her units in HRUT on or shortly after 21 April 2016, as the parties were unable to agree on appropriate terms for the acquisition of Ms Van Duren's units and the payment of her entitlements, leading to the commencement of the proceedings.
That statement does not support, contextually assisted or otherwise, the interpretation of the parties' 2018 settlement agreement, particularly by cl 2 of the 28 November 2018 Price Sierakowski communication, as somehow meaning that the plaintiff's units (if ever finally to be a subject of an agreement at November 2018 as regards their transfer) were to be transferred with effect over two years earlier, at 21 April or 30 June 2016. Such a construction contention at November 2018 is essentially a wishful overreach, in my view by the plaintiff.
A further argument put for Ms Van Duren was to the effect that her construction date transfer contention is supported by a feature that the defendants had once pleaded that she had held her units on trust for Jest Nominees Pty Ltd in its capacity as trustee of the Stephen Roberts Family Trust - by reference to par 6.3.5 of a further reamended defence of the first and second defendants dated 9 October 2018.
Again, however, the fact that a pleaded contention of an actual or constructive trust was once put in a pleading of the first and second defendants as regards the HRUT units, is not enough to influence the present issue. That is particularly the case towards circumstances where the financial accounts for both a post‑2016 financial year (ended 30 June 2017) and the draft accounts for the financial year ended 30 June 2018 were prepared and provided to the lawyers for Ms Van Duren. Those financial accounts effectively showed (as they had to, given her steadfast retention of her units then), Ms Van Duren as a continuing unit holder in that Trust. The outcome was a product of a deliberate retention of the units over the ensuring subsequent period. The as exchanged financial accounts are not consistent with the proposition that the plaintiff held no beneficial interest in the units after 30 June 2016.
I would reiterate that this now disputed date of transfer issue was perfectly capable of being implemented if it had been expressly agreed to, as indeed the Bennett + Co Calderbank proposal of June 2017 had sought. But as seen, that 2017 proposal was not then accepted. Negotiations then lapsed for over a year thereafter, until November 2018. There is nothing I can find in the 2018 settlement documents, or in their 2018 context, to infer that the disputed temporal unit transfer date issue - which in November 2018 would inject elements of unit transfer retrospectivity to the arrangements as regards a transfer of the units - was addressed expressly or impliedly in November 2018.
An even further argument as put for Ms Van Duren sought to advance a series of suggested adverse pragmatic economic consequences from her remaining a unit holder - as a negative factor against the constructional choice as advocated by the defendants - by a transfer effective at the time of payment of the settlement sum. Under par 24.1 of her submissions, Ms Van Duren contends:
[I]t would be necessary for her to review and approve HRUT's financial statements for the subsequent financial years, which have not been provided to her.
However, as I have already explained now, the factual contention about such financial statements not being provided to Ms Van Duren was in error and was corrected under the Molony affidavit at par 10 and following. The materials which he provides via pars 11 through to 12 and to which I have already referred, are strongly to the contrary, as a matter of fact.
Next, it is also put at par 24.2 for the plaintiff, that:
Ms Van Duren may be liable to pay tax if amounts are notionally distributed to her after the 2016 financial year, even though she exited the business on 21 April 2016.
In short, I am again left unmoved by such a potential negative tax exposure submission. So be it. If it is really a consequence of Ms Van Duren's deliberate and sustained retention of her units subsequent to April and June 2016, as a part of her exit bargaining strategy, then any adverse tax consequences to her that flow from such a deliberate decision are now what they are. Adverse unilateral revenue consequences realised for one participant side to a contractual bargain cannot drive the objective interpretation of a settlement agreement as a whole. That would be a case of a 'tail wagging the dog'.
After receipt of the written submissions of the third and fourth defendants (filed 20 May 2019) Ms Van Duren filed some further submissions by her reply of 31 May 2019 (reply submissions). They do not take matters much further.
At par 2 of those reply submissions, Ms Van Duren submits in part:
The fact is, the Settlement Agreement is silent as to the date of the transfers and while one might assume the transfers were to happen at settlement if the Settlement Agreement is considered in a vacuum, that is not the correct approach to the construction of contracts.
At par 5, after now accepting she received the post 2016 final year accounts as referenced in the Molony affidavit as provided, it is then submitted:
The phrase that the parties were 'to agree' the accounts refers to the parties agreeing that the 2016 accounts would be amended to give effect to the other terms of settlement. The parties were not 'agreeing to agree' all of the accounts at some point in the future but nor were they agreeing to draft accounts that had not been given any consideration and that would require significant amendment.

Again, I am wholly left unmoved by this argument. It seeks to read far too much into the agreed terms of settlement under the 28 November 2018 Price Sierakowski communication. As seen from par 4(a) of that communication, via the chapeau reference to completion of an envisaged deed of settlement containing all terms necessary to provide for a full and final settlement of all issues in dispute and all matters related to the plaintiff's involvement in the Hammond & Roberts Unit Trust and Hammond & Roberts business, was an ensuing reference to that Deed addressing the need for:
(a)[T]he plaintiff to agree the accounts of the Hammond & Roberts Unit Trust and Hammond & Roberts Financial Services Pty Ltd for tax purposes.
I can extract nothing from that expressed term which limits its scope to amending the 2016 accounts. The cl 4(a) wide words are what they are. They appear to carry a general significance to an obligation on the plaintiff to cooperate and to agree such accounts as are necessary to perfect the parties' settlement bargain at 28 November 2018.
Nor am I moved by as contended absurd or uncommercial results, as suggested under par 6 of the plaintiff's reply written submissions as regards the defendants' contended interpretation of transfer date arrangements concerning the plaintiff's units in the Unit Trust and thereby rendering the plaintiff indirectly liable for 30% of HRUT's legal expenses - in circumstances where the defendants agreed to contribute towards her costs. Given all the underlying complexities involved in unravelling these parties' elaborate relational corporate and trust arrangements, a search for wholly perfect commercial outcomes at all levels at the end of an exit deal is unrealistic, in my view. Unscrambling this commercial omelette was always going to involve some degree of commercial indigestion.

The third and fourth defendants' written submissions

As mentioned, the third and fourth defendants filed written submissions on 20 May 2019, that were adopted by the first and second defendants.
I would not accept the contended construction of the third and fourth defendants propounded as regards the effect of the words 'with immediate effect' as extending wider than just to the cl 2(c) subject matter (namely beyond Ms Van Duren's resignation as a director of Hammond & Roberts Financial Services Pty Ltd with immediate effect). Otherwise, however, I do accept in substance the balance of the third and fourth defendants' construction arguments. They are essentially to the effect that the specified unit and share transfers by cl 2(a) and cl 2(b) will take effect at the time that the unit and share transfer documents are executed and exchanged for the agreed settlement sum, as is specified under the chapeau to cl 2 of the 28 November 2018 Price Sierakowski communication.
That, in my view, is the explicit textual meaning of the parties as deployed text. That clear meaning is not changed or modified by any contextual surrounding circumstances. The construction contention as regards Ms Van Duren's transfers of her units being prepared on a basis that they would take effect retrospectively at either 21 April or 30 June 2016 is a temporal specification of retrospectivity towards the envisaged unit transfer that is so far away from the plain text of cl 2, as to effectively contend for a result that is inconsistent with the plain meaning of that text.
The position of the defendants is found expressed at the chapeau text to the written submissions of the third and fourth defendant which (apart from the use of the word 'presumption' which I would qualify) and I would accept:
In the absence of clear words indicating that the unit and share transfers are to take effect at a date prior to the actual date the unit and share transfer documents are executed, the natural presumption is the unit and share transfers take effect not earlier than the date of execution of the transfers.
Subject to replacing the word 'presumption' used above with the word 'meaning' (in reference to the chosen text of the parties' settlement agreement particularly cl 1 and cl 2 of the terms of the 28 November 2018 Price Sierakowski communication), I would otherwise accept that submission. It delivers a constructional choice outcome by which the contended meaning advocated by the plaintiff, simply cannot be accepted.

Conclusion

Accordingly, I reject the constructional choice towards the parties settlement agreement terms as advocated by the plaintiff. Instead, I accept the rival position as advocated under the submissions of the third and fourth defendants (adopted in full by the first and second defendants). I would declare accordingly to that end.
The plaintiff, as the unsuccessful party to the disputed issue of construction now resolved on the papers, must prima facie bear the taxed costs of the exercise. Absent agreement upon those costs, they should be taxed in accordance with applicable scales.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DW
Associate to the Honourable Justice Martin
5 JULY 2019