Vero Insurance Ltd v Jones
[2006] WADC 209
•21 DECEMBER 2006
VERO INSURANCE LTD -v- JONES & ANOR [2006] WADC 209
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WADC 209 | |
| Case No: | CIV:2428/2005 | 7 AUGUST 2006 | |
| Coram: | DEPUTY REGISTRAR HARMAN | 20/12/06 | |
| PERTH | |||
| 26 | Judgment Part: | 1 of 1 | |
| Result: | Application sucessful against each defendant | ||
| PDF Version |
| Parties: | VERO INSURANCE LTD (ACN 005 297 807) JENNIFER ANNE HARDEN JONES GILES HARDEN JONES |
Catchwords: | Practice Practice under the Rules of the Supreme Court of Western Australia 1971 Application for summary judgment Illegality Section 34 of the Insurance Act 1973 Duress Misleading and deceptive conduct Trade Practices Act 1974 Sufficiency of evidence Unconscionable conduct |
Legislation: | Home Building Contracts Act 1991 |
Case References: | Nil Associated Bulk Carriers Limited v Koch Shipping Inc [1978] 2 All ER 254 Australian Can Company Pty Ltd v Leven & Co Ltd [1947] WLR 332 Barlett v swan Television & Radio Broadcasters Pty Ltd (1995) ATPR 41-434 Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18 Custom Credit Corporation Ltd v Miller [1964] QWN 2 Dey v Victoria Railways Cmrs (1948) 78 CLR 62 Eng Mee Yong v Letchumanan [1980] AC 331 Evans v Bartlam [1937] AC 473 F & G Nominees Pty Ltd v Verdell Pty Ltd [2003] WASCA 290 Fancourt v Mercantile Credits Limited (1983) 154 CLR 87 General Steel Industires Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Jingellic Minerals NL v Abigroup Ltd (1992) 7 WAR 566 Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109 The State of Western Australia v Rothmans of Pall Mall (Aust) Ltd [2001] WASCA 25 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
JENNIFER ANNE HARDEN JONES
First Defendant
GILES HARDEN JONES
Second Defendant
Catchwords:
Practice - Practice under the Rules of the Supreme Court of Western Australia 1971 - Application for summary judgment - Illegality - Section 34 of the Insurance Act 1973 - Duress - Misleading and deceptive conduct - Trade Practices Act 1974 - Sufficiency of evidence - Unconscionable conduct
Legislation:
Home Building Contracts Act 1991
(Page 2)
Result:
Application sucessful against each defendant
Representation:
Counsel:
Plaintiff : Mr P McGowan
First Defendant : Mr T Clavey
Second Defendant : Mr T Clavey
Solicitors:
Plaintiff : Lavan Legal
First Defendant : Clavey Legal
Second Defendant : Clavey Legal
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
Associated Bulk Carriers Limited v Koch Shipping Inc [1978] 2 All ER 254
Australian Can Company Pty Ltd v Leven & Co Ltd [1947] WLR 332
Barlett v swan Television & Radio Broadcasters Pty Ltd (1995) ATPR 41-434
Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18
Custom Credit Corporation Ltd v Miller [1964] QWN 2
Dey v Victoria Railways Cmrs (1948) 78 CLR 62
Eng Mee Yong v Letchumanan [1980] AC 331
Evans v Bartlam [1937] AC 473
F & G Nominees Pty Ltd v Verdell Pty Ltd [2003] WASCA 290
Fancourt v Mercantile Credits Limited (1983) 154 CLR 87
General Steel Industires Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Jingellic Minerals NL v Abigroup Ltd (1992) 7 WAR 566
Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109
The State of Western Australia v Rothmans of Pall Mall (Aust) Ltd [2001] WASCA 25
(Page 3)
1 DEPUTY REGISTRAR HARMAN: The plaintiff's claim against each of the defendants is for damages for breach of a deed of indemnity. In each case the breach contended for is the defendant's failure to pay in response to the plaintiff's demand. By the application before me the plaintiff seeks summary judgment. There was no contest as to the sufficiency of the plaintiff's case.
2 The defendants' joint case against the application was that illegality would render the deeds unenforceable. The first defendant submitted that the circumstances of her execution of the deed to which she is a party were such that it would be unconscientious for the plaintiff to rely upon it. The second defendant submitted that he signed the deed to which he was a party under duress and that in the course of dealings prior to execution of the deeds the plaintiff had engaged in misleading and deceptive conduct contrary to the Trade Practices Act 1974.
3 Although O 14 r 3 may suggest that in a summary judgment application a defendant would carry a more significant onus than that carried by the respondent to an interlocutory application, I am satisfied that the more significant feature of the rule is that the relief for which it provides is expressed to be discretionary. Accordingly, a respondent carries no greater onus than that carried by a respondent in any interlocutory application; that is, to support any submission that it would care to make. It is the applicant who carries the onus of persuading the court that it is appropriate to grant the relief sought.
4 The issue as to the illegality of the deeds would reduce to the impact of the former s 34 of the Insurance Act 1973 and whether that impact is appropriately determined in the context of dealing with an application for interlocutory judgment.
5 The relevant parts of s 34 were expressed as follows:
"(1) Subject to this section, a body corporate authorized under this Act to carry on insurance business shall have arrangements, being arrangements approved by the Commissioner, for reinsurance of liabilities in respect of risks against which persons are, or are to be, insured by the body corporate in the course of its carrying on insurance business.
(2) The Commissioner shall not approve arrangements for reinsurance, made or proposed to be made, by a body corporate … under a contract of reinsurance ... unless the
- amount of the premium payable … is specified in the contract.
- (3) The Commissioner shall, in determining whether to approve arrangements for reinsurance made, or proposed to be made, by a body corporate, have regard to all matters that he considers relevant …
(4) The Commissioner may, by notice in writing given to the body corporate, approve arrangements for reinsurance.
(5) The Commissioner, having regard to such matters as he considers relevant … may … exempt the body corporate … from the requirements of this section."
6 The plaintiff does not concede that s 34 applies but was content that the application be determined on the basis that it did.
7 In my opinion there is nothing in the language of the provision which would indicate an intention to do more than to regulate the circumstances in which a party could engage with the particular market. It is patent that it does not purport to prohibit recovery under an instrument that had not been approved by the Commissioner.
8 The other issue for consideration is whether the hearing of an application to chambers is an appropriate context in which to assess parliamentary intention. I accept that in most instances where a question of interpretation arises in the course of an application for summary judgment the court would properly consider that the process by which parliamentary intention is revealed would be undertaken at trial. In this case the proposition that s 34 would prescribe recovery is clearly without any foundation. It would be appropriate to consider that the issue raised by the defendants should not to be an impediment to summary disposal of the action.
9 The second defendant's submission that he executed the deed under duress emerges from a context in which HBC Pty Ltd had applied to the plaintiff for it to be accorded status as proposer of Home Warranty Insurance cover for parties with whom it contracted for the construction of residential premises. That status would provide HBC Pty Ltd with a facility to enable it to comply with a requirement of the Home Building Contracts Act 1991. Its application had been submitted in early July 2001. A condition of the plaintiff's approval of the application communicated to HBC Pty Ltd on 10 October 2001 was that each of the
(Page 5)
- defendants would execute indemnities in its favour. The deeds were received by the second defendant on 11 October 2001 and on 6 November 2001 they were executed and returned to the plaintiff.
10 My understanding of the second defendant's submission is that prior to 10 October 2001 the applicant had experienced financial difficulties; that he had communicated those difficulties to the plaintiff; that delay in processing the application generated pressure on the applicant and thereby himself; and that the pressure was such that when he signed the deed he did so other than of his free will.
11 His affidavit discloses that he is a registered builder, an architect and at the relevant time was the sole director of HBC Pty Ltd. He deposes in part as follows:
"3. Prior to the year 2001 I had not experienced any difficulty in obtaining insurance required under the Home Building Contracts Act ('the Act') for my building activities because I entered the contract in my own name.
4. In the year 2001 I decided to operate my business as a builder through a company called HBC Pty Ltd.
…
6. HBC Pty Ltd was registered as a builder on or about 29 June 2001. It was a registered builder engaged in residential home building and extensions.
…
12. From about March 2001, when HIH Insurance collapsed, clients and potential clients would make enquiries of me from time to time about HBC Pty Ltd having an insurance facility in place for its building work. HBC Pty (sic) did not have that insurance in place and as such had not been able to finalise contracts for which it had in substance agreed to do for clients.
13. Not having the Home Warranty Insurance for HBC Pty Ltd made me reticent to market and develop the HBC Pty Ltd business. HBC Pty Ltd had suffered some cash flow problems as a result of it being owed a debt in the sum of $120,000 and the delay in obtaining the Home
- Warranty Insurance was causing significant cash flow problems, because HBC Pty Ltd could not commence work without that insurance.
- 14. On 4 September 2001 I wrote to (the plaintiff) explaining the difficulties being caused by the delay in the approval of the insurance. ...
…
18. On or about 24 September 2001 I telephoned Michelle Grey to clarify what was required to progress the application for Home Warranty Insurance.
…
25. Based on my conversation with Michelle, I understood that if I wanted to operate HBC Pty Ltd and continue in business I had no choice in the matter but to enter into the deed of indemnity and/or comply with whatever other requirements the insurer required or no insurance policy would be issued. I also understood that the deed represented a commitment made by me to stand by the business.
…
27. Given the delays that occurred between July and October 2001 (in obtaining approval of the application from the plaintiff) I was getting desperate and I had to make a decision as to either close my business or to accept the terms of the insurer.
…
29. On 11 October 2001 I received a copy of a facsimile from Michelle Gray and two general deeds of indemnity.
30. I quickly read the deeds. I did not read them carefully, because I considered that no matter what they contained I had little choice in the matter.
31. I spent some time between 11 October and 6 November 2001 trying to find ways to get around the requirement of providing any general indemnity to the Plaintiff. At the
- time my business was quite busy and I was involved in litigation trying to recover a significant debt owed to the company. I had contracts to build two houses and was desperate to get the work underway, especially given the cash flow problems my company was beginning to experience.
- …
33. In September, October and November 2001 my wife Jennifer was a stay at home mother who looked after our 22 month old boy Alex and our 3 month old baby girl Sophie. I had mentioned in passing to Jennifer the difficulties experienced by HBC Pty Ltd arising from its cash flow problems and the difficulties I was experiencing in securing Home Warranty Insurance. I had informed her that I had two significant contracts to be completed upon obtaining Home Warranty Insurance and that the delays in finalising the insurance arrangements were creating delays in finalising those contracts and starting work.
…
35. I approached Jennifer and said words to the substance of which "the only way I'm going to get an insurance facility for Home Warranty Insurance to allow me to start my building projects was for you to sign this form".
36. I presented the deed of indemnity to her and then said words to the substance of which were "if I do not get the insurance I might as well close shop and everything that I have worked for the last 3 years will be lost".
…
45. At the time of deciding to execute the deed of indemnity I believed I had no choice but to agree to its terms or close HBC Pty Ltd which would impact directly on my financial position. I relied on Michelle Gray's statement as to the purpose of the deed and did not appreciate at all that if I signed the deed I could become liable to meet the cost of any claim made under the home building policy.”
(Page 8)
12 The content of annexures to the second defendant's affidavit is relevant to the defendant's submission. It reveals that HBC Pty Ltd had traded in the year to June 2000 and that in some manner had been exposed to the residential construction market. Even in the absence of evidence, that it had been active and had been so engaged is probably uncontroversial. The same sources of information may be taken to speak for the financial distress of HBC Pty Ltd in 2001. Whether it is appropriate to reach any such conclusion on the basis of that material is another matter. The affidavit does no more than introduce the annexures as communications between the parties; it has nothing to say as to their content.
13 It is fundamental to an appreciation of the second defendant's evidence that there is no evidence that prior to undertaking contractual commitments to Abersea Pty Ltd in December 2001 that HBC Pty Ltd operated as a builder. Whatever opportunities to engage in the residential construction market as a builder that may have been open to it prior to December 2001, the reason that it did not do so was that it would not then have been able to satisfy the statutory requirement for insurance. It is evident that in the year 2001 the second defendant was undertaking building activity. Consistent with the decision expressed at par 4 and the impediment expressed at par 12 he may have been undertaking all but residential construction work as HBC Pty Ltd. Presumably any work in the residential component of the construction market would have been undertaken in his own name. As for HBC Pty Ltd, all that I do know about its activities over the period canvassed by the evidence is that it was seeking to recover a debt or debts. All that I do know about its finances is that in what may have been two discrete periods in that year was it was experiencing a cash flow problem. One such period in which the second defendant characterises such a problem as emerging was that in which he had the unexecuted deeds in his possession.
14 The fundamental issue raised by the second defendant's evidence is whether it supports his submission that he signed the deed under duress.
15 The first of the features of the context that test its sufficiency to support the submission is that the second defendant gives no evidence as to whether and if so when he had implemented the decision expressed at par 4. The context in which it is expressed suggests that it may have been made as early as March 2001. The first step in its implementation of which I am aware was made prior to late June when it had sought registration as a builder. It was not until mid August that it forwarded the certificate of its registration to the plaintiff. Until the second defendant
(Page 9)
- was ready to finally implement the decision it would have been open to him to proceed as he had in the past and undertaken residential construction works in his own name. There is no reason to consider that subsequent to making the decision he had not done so. According to par 31, during the period that he had the unexecuted deeds in his possession he had contracts to build two houses.
16 I accept that the broader context within which evidence of those contracts appears may be taken to suggest that the second defendant intended that HBC Pty Ltd would be the builder; however the second defendant has not provided that evidence.
17 The second feature of the context that tests the sufficiency of the evidence is the extent of the period that the second defendant had the deeds in his possession prior to their execution; some 26 days. He deposes that he was then busy, which I interpret to mean that he had building work to perform in one or other capacity. There is no suggestion that any feature of business activity undertaken in his name was generating any pressure on him. There is no evidence as to the financial position of the second defendant in that period or indeed at any other time. In the case of the contracts to build two houses canvassed at par 31, if HBC Pty Ltd had been the contracting party, there is nothing to suggest that any pressure was being brought to bear upon it by the other party or parties. Otherwise it is conceivable that HBC Pty Ltd then had no market profile as a residential builder and that it had simply been waiting for the opportunity to enter the market whilst the second defendant was considering his options.
18 At par 31 the second defendant deposes that within that period a cash flow problem was beginning to emerge for his company. I take it that the second defendant is there referring to HBC Pty Ltd but there is nothing that gives any useful meaning to the term "cash flow problems my company was beginning to experience". At par 13, conceivably at an earlier point in the year the second defendant attributes "significant cash flow problems" to the inability of HBC Pty Ltd to participate in the market. I take it to be the case that reference is being made to the financial position of HBC Pty Ltd. Again there is no evidentiary basis provided to ascertain the significance of the cash flow problem there portrayed. I would add that I can understand that the removal of the impediment to the market entry of HBC Pty Ltd may have alleviated its cash flow problem but it could not have brought about that result. The desperation to which the second defendant deposes at par 31 is not founded upon any evidence other than the emerging cash flow problem. I
(Page 10)
- know nothing of either the dimensions of the problem at the time or when it would have been likely to have any significant impact.
19 In my opinion the extent of the period that the second defendant had the unexecuted deeds in his possession also reveals that at some level he would have recognised that it was open to him to deal personally with those that he may have regarded as being parties with whom HBC Pty Ltd would contract.
20 As to the proposition that there had been delay in dealing with the application, I accept that in the period from early August to late September 2001 the second defendant was communicating with the plaintiff relating to the progress of the application. He first refers to delay at par 13. The date of that attribution is not specified but the context would allow that it had been as early as mid August. According to par 14, on 4 September 2001 he communicated his perception that there had been delay to the plaintiff. The plaintiff responded to his concern and in the letter of its agent referred to delays being experienced: I infer, at least in the process of communication between the plaintiff and its agent. At par 27 the defendant conceivably refers to those instances of contended and conceded delay when he deposes to delays that occurred between July and October 2001. Those are the only references to delay either in the defendant's evidence or by the plaintiff.
21 As I have observed, it was not until mid August that the applicant forwarded its registration certificate to the plaintiff. Any delay generated in the period after 11 October was a result of the deeds not having been executed. The fact that the second defendant was not prepared to sign the deeds prior to 6 November would cast some doubt on the proposition that a period of prior delay would have had an impact on the circumstances of their execution. I am not assisted in understanding that part of the defendant's case by any useful evidence. In my opinion the second defendant's focus on delay on the part of the plaintiff prior to 11 October 2001 has brought with it a failure to recognise that until 6 November 2001 he had not been prepared to commit to his decision to conduct residential building operations via HBC Pty Ltd.
22 On the evidence before me it is relatively easy to discern that any pressure that had operated on the second defendant was generated by considerations that created some tension about the maintenance and implementation of the determination that he expresses at par 4 of his affidavit. The extent to which that decision was actually tested is revealed by the length of the period that the unexecuted deeds were in his
(Page 11)
- possession. I note that the desperation to which the second defendant refers at par 27 and par 31 it is not reflected in the evidence of conversations that the second defendant had with his wife that he relates at par 33 and par 35.
23 The deponent is free to depose as he chose's. His difficulty emerges at the point where the court is called upon to assess the validity and significance of his characterisations and attributions. Ultimately the second defendant carries the onus of founding the submission that there was pressure that operated upon him at the point that he executed the deed. In my opinion the evidence is inadequate for that purpose and he has failed to give evidence of any difficulty that he would have had in providing evidence. I ought to be satisfied that there is nothing in the evidence provided at the hearing of the application upon which the court could find a basis to nullify the plaintiff's entitlement established under the deed. At no point in the analysis of the second defendant's evidence am I satisfied that there is sufficient to sustain his submission that he signed the deed under duress.
24 The proposed amended defence attached to the defendants' solicitor's affidavit provides an additional datum for consideration of aspects of the second defendant's submission.
25 According to par 5.10, "by October" 2001 HBC Pty Ltd had agreed with a named party to construct residential premises subject to it obtaining insurance cover. The name of that party is the same as that with whom HBC Pty Ltd entered into a contract on 12 December 2001. To the extent that the proposed allegation is supported by evidence, it is perhaps found at par 31 of the second defendant's affidavit in which he deposes that in the period that he had the unexecuted deeds in his possession he had contracts to build two houses. I have no difficulty with the prospect that the evidence and the proposed allegation relate to the same proposed building works. The scope for considering that the pleading is any advance on the case made out on the evidence is that the defendants commit to HBC Pty Ltd being the builder. That commitment provides no more than some definition at the particular point. Otherwise at that point the pleading tends to detract from the second defendant's evidence insofar as it raises the prospect that any contract to which he refers at par 31 had not been concluded.
26 Other features of the proposed pleading also add to the confusion that emerges from the evidence.
(Page 12)
27 At par 5.1 the defendants propose that in an unspecified period described as "at all material times" HBC Pty Ltd engaged in the residential construction market. That it did so prior to December 2001 when it had complied with the statutory requirement is contradicted by par 5.2 where they recite the relevant statutory requirement under which HBC Pty Ltd would have particular insurance in place prior to engaging in residential construction.
28 At par 5.4 the defendants would contend that in the period from July to 4 September 2001 the plaintiff delayed either confirming acceptance of the application of HBC Pty Ltd or issuing a contract of insurance. There is no evidence that within that period the plaintiff had accepted the application. On all of the evidence and every other source of information before me it is clear that it had not.
29 At par 5.9 the defendants plead that on 24 September 2001 the plaintiff induced an assumption on the part of the second defendant that he had no choice but to accept the deed of indemnity or close the business conducted by HBC Pty Ltd. On the case before me the scope of the plaintiff's influence is limited to the ability of HBC Pty Ltd to engage in the residential construction market. There is no basis upon which to I could conclude that HBC Pty Ltd was then so engaged. Whatever the meaning of pleading, the choice for the second defendant was to continue to operate in the relevant part of the market as he had done previously or to implement his decision to do so via HBC Pty Ltd. What appears to me to have been a simple choice, to operate as he had done or to sign the indemnity would have been revealed to him when he reflected upon his telephone conversation with the plaintiff of 24 September 2001.
30 At par 10 the defendants propose to plead as follows:
"Further and in the alternative to paragraphs 6 to 9 hereof, by reason of the matters pleaded in paragraph 5.1 to 5.20 hereof and in particular:
- 10.1 the delay caused by the plaintiff and or its agent between the period early July 2001 and October 2001;
10.2 the Plaintiff's knowledge that the Second Defendant's business operated by HBC Pty Ltd had began to experience cash flow problems as a result of the delay;
- 10.3 the Plaintiff's knowledge that HBC Pty Ltd had significant residential building works to undertake pending the issue of a contract by the Plaintiff;
10.4 the Plaintiff's agent informing the Second Defendant that he had no choice other than to agree to the terms of the Deeds of Indemnity so as to secure an insurance contract as required by the Act;
10.5 the representation pleaded in par 5.8 and the assumption induced as pleaded in par 5.9;
10.6 the matters pleaded in par 5.20 above,
it is unconscionable for the Plaintiff to insist that the Defendants indemnify the Plaintiff pursuant to the Deeds of Indemnity."
31 As to par 10.1, it does not provide any useful additional datum for consideration of either the evidence or the balance of the proposed pleading. That said, the only other allegations of delay in the pleading are at par 5.4 and par 5.5. As I have noted, the delay expressed at par 5.4 was in either confirming acceptance of the application or issuing a contract of insurance. That at par 5.5 is expressed as in the processing of the application. Whatever it was that was delayed as alleged at par 10.1 is not specified. The period of the delay expressed at par 10.1 extends beyond that pleaded at par 5.4 and par 5.5 from 4 September to October 2001.
32 As to par 10.2, I accept the communication of the cash flow problems of HBC Pty Ltd to the plaintiff by its letter of 4 September 2001. The letter does not attribute that problem to any period of contended delay. As I have recorded there is no evidentiary basis for the proposition that delay had resulted in that problem. Paragraph 10.2 suggests that there had only been one period of cash flow problems for HBC Pty Ltd and that the problem had begun to emerge in the period expressed in par 10.1; that is, between July and October 2001. According to the evidence, the problem had begun to be experienced in the period October and November 2001.
33 As to par 10.3, I take it to be the case that the process of communication whereby the plaintiff was informed of the building works was the applicant's letter of 4 September 2001. Any significance that would attach to the plaintiff's knowledge of the applicants opportunities would be undermined to the point that it would be of little moment by the
(Page 14)
- fact that it took the second defendant until early November 2001 to make a commitment to the decision that I am satisfied that he had implemented in part prior to July 2001.
34 As to the content of par 10.4, it was accepted by the plaintiff that the second defendant had no choice than to accept or reject its proposal.
35 As to the allegation at par 10.5, I accept that to the extent that it draws upon par 5.8 that it is supported by evidence. The difficulty that I have with par 5.8 is in perceiving how the agent's representation departs from the reality that then confronted the second defendant. The assumption that the content of par 5.7 and par 5.8 is pleaded to have induced is expressed at par 5.9. It is that the second defendant had no choice but to accept the proposal or close the business of HBC Pty Ltd. Whatever business that was I am satisfied that it was not an engagement in the residential construction market. It is not possible to discern how it was that the plaintiff could possibly dictate the fate of HBC Pty Ltd other than in the residential construction market. The second defendant does not articulate any connection that he made between the plaintiff and HBC Pty Ltd that would found the plaintiff's omnipotence.
36 As to par 10.6, the defendants draw upon par 5 and express that the plaintiff did not take any adequate steps to ensure that the defendants understood the substance and effect of the deeds. The first observation that I would make is that at the hearing the second defendant disclaimed any reliance upon the defence articulated at the conclusion of par 10. Be that as it may, if the plaintiff had been interposed at the point of his execution of the deed it would have noted that the second defendant had had the deed in his possession for 26 days. If it had enquired as to whether he had read it, the response from the defendant would have been affirmative. If it had enquired whether the second defendant understood its import, I am confident that on the whole of the evidence before me that his answer would have also been affirmative.
37 On a summary judgment application, to the extent that an allegation of material fact is not clearly supported by evidence it ought not to be viewed uncritically. I accept that the proposed pleading was filed after the defendant's evidence but that is incidental.
38 In my opinion the only issue of significance is whether in light of the second defendant's evidence the plaintiff's case is sufficiently clear to warrant judgment being entered against the second defendant in the context of the application. It is my assessment of my dealing with the
(Page 15)
- second defendant's case that it clearly discloses that he has no case in support of the proposition that he executed the deed under duress.
39 According to par 5.8 of the proposed defence the representation the subject of the submission that the plaintiff engaged in misleading and deceptive conduct contrary to the Trade Practices Act 1974 was that the plaintiff required the second defendant to sign an indemnity to ensure that he stood by HBC Pty Ltd.
40 In order to consider whether that conduct can be characterised as capable of founding relief it is appropriate to examine the words said in the light of the circumstances surrounding their expression and what has transpired.
41 The relevant evidence of the second defendant is as follows:
"18 On or about 24 September 2001 I telephoned Michelle Gray to clarify what was required to progress the application for Home Warranty Insurance.
19. Michelle said words the substance of which you will have to sign a deed of indemnity …
20. I considered that Home Warranty Insurance was issued to provide some protection to me, because the company was effectively my alter ego. It seemed to me to be unfair that the insurer should effectively require me to assume the risk indirectly by a deed of indemnity when that risk was the risk intended to be covered by the home building insurance policy.
21. I said words to her to the effect that I thought that that situation was unfair.
22. Michelle said to me words to the effect that the purpose of the deed was to ensure that building companies had some backing and that those behind the company made a commitment to stand by their company. I understood this to mean that the owners of corporate builders made a commitment to the successful operation of their businesses.
(Page 16)
- 23. I enquired why I was paying so much for an insurance policy when the insurer required some form of deed of indemnity …
24. Michelle said to me words to the effect that “the deed of indemnity is company policy do you want the insurance or not”? I requested that she send copies of the deed of indemnity to me. The conversation ended after that.
25. Based on my conversation with Michelle, I understood that if I wanted to operate HBC Pty Ltd and continue in business I had no choice in the matter but to enter into the deed of indemnity and/or comply with whatever other requirements the insurer required or no insurance policy would be issued. I also understood that the deed represented a commitment made by me to stand by the business.
26. At no time did Michelle Gray, nor anyone else, explain to me what the deed of indemnity involved and did not explain to me how the deed of indemnity and its terms would operate.
…
45. At the time of deciding to execute the deed of indemnity I believed I had no choice but to agree to its terms or close HBC Pty Ltd which would impact directly on my financial position. I relied on Michelle Gray's statement as to the purpose of the deed and did not appreciate at all that if I signed the deed I could become liable to meet the cost of any claim made under the home building policy.”
(Page 17)
- protection to parties with whom he had contracted. Absent any evidence to suggest otherwise, in my opinion it is appropriate to consider that he understood that to be the purpose of the statutory requirement. He does not explain why it was that he considered that such a policy for building works undertaken by HBC Pty Ltd would accord any protection to him. The evidence that he was the alter ego of the company suggests to me that he accepted that he would be aligned with the builder rather than with the party accorded protection under such a policy. I accept that the application the subject of the second defendant's evidence was not for such a policy however in making the application HBC Pty Ltd intended to put a facility in place so that it could hold itself out an entity that would operate within the statutory framework.
43 Turning to the representation, the plaintiff's agent expressed to the defendant that circumstances called for him to sign an indemnity and that the function of that instrument would be to demonstrate his support for HBC Pty Ltd. At par 25 he gives his understanding of the deed. That understanding does not convey that there would be any limit upon his support of HBC Pty Ltd. My assessment of the second defendant's evidence is that it conveys that he did understand the impact of the indemnity.
44 It is a matter of considering whether the words attributed to the plaintiff were misleading. My observation is that they were made at a time and in a context where the second defendant appreciated that the interests of the parties were at least potentially adverse and that the plaintiff was expressing its perspective of a context that it confronted which included its risk. In my opinion the reason why a director who had signed an indemnity may be inclined to support a company is because he would appreciate that if he failed to do so then he would be exposed under the indemnity in the event of a claim being made under a policy.
45 The defendants propose to allege at par 5.9 that by the representation the plaintiff induced an assumption on the part of the second defendant that he had no choice but to accept the deed of indemnity or close the business conducted by HBC Pty Ltd. It is difficult to understand how the representation could ground a perception that would produce the result asserted. The relevant evidence presents a more complicated proposition. At par 25 the second defendant's understanding is portrayed as being:
"… that if I wanted to operate HBC Pty Ltd and continue in business I had no choice in the matter but to enter into the deed."
(Page 18)
46 There is no evidentiary basis to support either the proposition that the plaintiff could have had any impact on HBC Pty Ltd or that if the second defendant had sought insurance cover for contracts that he entered into as a residential builder, such cover would not be provided.
47 At par 5.16 the defendants propose to allege that the second defendant signed the indemnity in reliance on the representation pleaded at par 5.8 which representation had induced by the assumption pleaded at par 5.9. The period between the date of the representation and execution of the deeds was over one month. Although at par 26 the second defendant expresses that he received no other explanation as to the content or effect of the deed there is nothing to indicate what he gleaned from the process of considering its content. At par 30 he deposes as follows:
"30. I quickly read the deeds. I did not read them carefully, because I considered that no matter what they contained I had little choice in the matter."
48 It seems to me that the evidence is intended to convey that the reason for the second defendant executing the deed was that he considered that he had no option but to do so. That observation also draws into consideration that the statutory provision determined that builders had insurance. As I have concluded at the point of considering the evidence at par 20 of the second defendant's affidavit, it is evident that he understood the consequences of his execution of the indemnity. In my opinion there is insufficient evidence to found any case for the second defendant to seek relief under the Trade Practices Act 1974. The plaintiff's case in the application remains clear.
49 The first defendant submitted that the circumstances surrounding her execution of the deed would render unconscionable the plaintiff's enforcement of its entitlements. On the evidence there was no point of direct contact between the plaintiff and the first defendant other than via its printed form of indemnity. Any contact beyond that point would be established by the mediation of her husband the second defendant.
50 The relevant evidence of the second defendant is as follows:
"7. My wife Jennifer, the First Defendant was not involved in any operational matter concerning HBC Pty Ltd. She operated and controlled Harden Jones Architects, a separate company.
…
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- 20. I considered that Home Warranty Insurance was issued to provide some protection to me, because the company was effectively my alter ego. It seemed to me to be unfair that the insurer should effectively require me to assume the risk indirectly by a deed of indemnity when that risk was the risk intended to be covered by the home building insurance policy.
…
25. Based on my conversation with Michelle, I understood that if I wanted to operate HBC Pty Ltd and continue in business I had no choice in the matter but to enter into the deed of indemnity and/or comply with whatever other requirements the insurer required or no insurance policy would be issued. I also understood that the deed represented a commitment made by me to stand by the business.
26. At no time did Michelle Gray, nor anyone else, explain to me what the deed of indemnity involved and did not explain to me how the deed of indemnity and its terms would operate.
…
29. On 11 October 2001 I received a copy of a facsimile from Michelle Gray and two general deeds of indemnity. …
30. I quickly read the deeds. I did not read them carefully, because I considered that no matter what they contained I had little choice in the matter.
…
32. I was not informed by Michelle Gray to secure independent advice with respect to the terms of the deed or its effect.
33. In September, October and November 2001 my wife Jennifer was a stay at home mother who looked after our 22 month old boy Alex and our 3 month old baby girl Sophie. I had mentioned in passing to Jennifer the difficulties experienced by HBC Pty Ltd arising from its
- cash flow problems and the difficulties I was experiencing in securing Home Warranty Insurance. I had informed her that I had two significant contracts to be completed upon obtaining Home Warranty Insurance and that the delays in finalising the insurance arrangements were creating delays in finalising those contracts and starting work.
- 34. On 6 November 2001 I saw my wife Jennifer at the offices Harden Jones Architects which was next to the office operated by HBC Pty Ltd. She was with our new born daughter Sophie.
35. I approached Jennifer and said words to the substance of which “the only way I'm going to get an insurance facility for Home Warranty Insurance to allow me to start my building projects was for you to sign this form”.
36. I presented the deed of indemnity to her and then said words to the substance of which were “if I do not get the insurance I might as well close shop and everything that I've worked for the last 3 years will be lost”.
37. I flipped the deed of indemnity to the last page and told her to sign it. I told her that she had to sign the document because I was about to close on the Clement Street deal and to complete that deal I required HIA insurance.
38. At the time I did not know or appreciate that by Jennifer signing the document her assets would be exposed to any claim the insurer might seek to make under the deed. My general understanding of the terms of the deed of indemnity was that the insurer wanted builders to stand by their business.
39. I did not give Jennifer any time to consider her position. I recall that Jennifer signed the deed and did not read it."
51 The two significant issues that emerge from that evidence are the second defendant's understanding of the effect of the deed and what may be drawn from the circumstances of its execution by the first defendant.
52 As to the first, it may be the case that in the period that the second defendant had the unexecuted deeds in his possession that he did not
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- obtain any advice or read them to any greater extent than he deposes at par 30. Be that as it may, he may have had some confidence in his understanding of their import as he attributes what may be characterised as his delay in attending to their execution to trying to get around the need that they be signed.
53 At par 20 of his affidavit the second defendant's expresses that on 24 September 2001, some 40 days prior to him asking his wife to sign the indemnity, he understood that by him signing an indemnity he would assume the plaintiff's risk. There is no logical reason why an indemnity signed by his wife would have any different result. Yet without any explanation he gives the evidence at the first sentence of par 38.
54 As for the second sentence of par 38, the second defendant deposes that his understanding of the effect of the deed was that he would stand by the company through which he would undertake future business. It is obvious that his wife could not be characterised as a builder standing by her business but rather as the wife of a builder standing beside her husband's business or perhaps as expressed by him at par 25, making a commitment to do so. I am not assisted by any evidence in understanding the distinction that the second defendant appears to draw between making a commitment to stand by a business and exposing ones assets to the prospect that it may stumble.
55 In light of the evidence at par 37 it is my impression that there is a real prospect that the second defendant was either promoting what he perceived to be his own interests over those of his wife or was indifferent to the consequences of her execution of the deed. Conceivably he simply did not consider that the risk would ever be realised.
56 The first defendant was an architect operating her own professional business via what I take to have been a corporation. At least she describes herself as a company director and the director of Harden Jones Architects. She was a shareholder in HBC Pty Ltd. She deposes as follows:
"3 The Hammersley Building Company Pty Ltd (HBC) was a company operated by my husband the Second Defendant.
4 I was not a director of HBC in October or November 2001. My husband started the business operating by HBC in about 1999.
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- 5 I knew very little of the operational aspects of HBC and became only generally aware of a legislative requirement that a builder was required to have building insurance which was referred to as home building insurance.
6 I had nothing to do with the insurance arrangements for HBC.
7 In about October or November 2001 I became generally aware that my husband Giles had experienced difficulties securing home building insurance for HBC.
8 I recall that Giles had mentioned to me in passing that he had been experiencing this difficulty.
9 He informed and I believed that he had several building contracts waiting to be put into effect but could not proceed with them because he was unable to secure the required insurance.
10 On 6 November 2001 I attended the office of Harden Jones Architects which had an office next to the office of HBC. Whilst in the office my husband Giles presented to me a facsimile document and said words to the substance of which was that "the insurance application has come through and they say you have to sign this document".
11 He presented the facsimile document to me and asked that I sign it. He then said words to the effect that if I did not sign the document “he could not continue to operate the building company and all his work would be lost.”
12 I recall that I asked Giles why I had to sign this document because I am not a company director of HBC.
13 I recall Giles said words to the effect of "I have discussed the matter with Michelle at HIA and I have complained about you having to sign this document. Michelle said that without your signature the insurance would not come through".
14 Giles said words to me the substance of which was he had read the form and had no choice but for me to sign it because without my signature the insurance policy would
- not issue. He seemed to have an understanding as to the necessity for my signing the form and I trusted him.
- 15 I had previously been informed by Giles that he had clients waiting for him to execute contracts and start work and start building for them and as a result he was under financial pressure.
16 Based on the matters deposed above it was my understanding that Giles could not secure insurance unless I signed the document. At the time I had my 3 month old daughter Sophie in my arms and was occupied attending to her.
17 Giles asked me to sign the document immediately. This left me in the position that I felt I had to sign the document.
18 I felt Giles was depending on me and I felt obliged to sign the document so that he could continue his business.
19 I did not read the document and signed it. I signed the document immediately and handed it back to him. I did not keep a copy.
20 Giles did not give me an opportunity to read or consider the contents of the document and I did not know the meaning of the agreement. I did not know that I was being exposed to liabilities to indemnify HBC's insurer.
21 My husband I keep our assets separate and I would not have signed the document which I now know to be a deed of indemnity, if I had known that it exposed my assets to a claim by an insurer of HBC Pty Ltd. I did not stand to benefit from the transaction and would not have agreed to signing the deed, if it had been explained to me that by executing the deed my property and assets would be exposed to HBC Pty Ltd's business risks by the terms of the deed."
57 The flavour of the first defendant's evidence is such that it is difficult to promote prospects that prior to her execution of the deed that she had been aware that it was for her execution and that it had then been in her husband's possession for almost four weeks. Be that as it may, there is no
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- evidence that would exclude them. The evidence at pars 7 to 9 inclusive suggests that the process of communication with her husband was one way; that is without any questioning by herself. Although features of the evidence of communications between the defendants may speak to the prospect of them having been only in general terms it would be open to the court to draw inferences from the fact that she was an architect and that she operated her own professional business. The environment in which architects operate is such that it is difficult to accept that she would not be regularly exposed to a market where contracts determine actions an their consequences and where deadlines and taking external advice would not be unfamiliar events. The scope for drawing such inferences is considerable and any such inference would tend to diminish any significance that would attach to the proposition that the first defendant had simply been influenced by the second. That she operated a business in such an environment provides a significant underpinning for the perception that her decision to comply with her husband's demand was as foolhardy as her decision not to read the document before she did so.
58 At par 20 she deposes:
"… I did not know the meaning of the agreement. I did not know that I was being exposed to liabilities to indemnify HBC's insurer."
59 Although the first defendant may not have appreciated the mechanism by which her liability would be engaged, on the whole of the evidence I am satisfied that she would have appreciated that by signing the deed she would somehow be exposed to the contractual obligations of HBC Pty Ltd. That conclusion is founded upon 4 propositions. The first is that as the first defendant had no connection with HBC Pty Ltd other than as a shareholder, she would have apprehended that there was no reason for her to engage in any process relating to the insurance arrangements for HBC Pty Ltd. The second is that she was aware that HBC Pty Ltd had made the application. As she had not joined in making that application logic alone would have revealed that its processing by the plaintiff would not have required her facilitation. It would also reveal that any need for her involvement after the "the application had come through" would somehow be ancillary to the process by which it had applied. The third is that there is little scope for doubt that she appreciated that the application had reached its conclusion. In addition to what I have just cited from par 10 of her affidavit, that conclusion would be consistent with her evidence at par 13 that "… without your signature the insurance will not come through"; at par 14 that "… without my signature the
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- insurance policy will not issue"; and at par 16 that "Giles could not secure insurance unless I signed the document." The fourth is that she does not express what she had then considered the effect of the document to have been. In my opinion it was those or similar conclusions that led her to enquire as she expresses that she did at par 12 as to why she had to sign as she was not a director.
60 The analysis that I have undertaken is consistent with pars 5 to 9 inclusive of the first defendant's affidavit. It is also consistent with the second defendant's evidence of his wife being informed of the difficulties he was experiencing in obtaining Home Warranty Insurance. If she had not been aware of how he had previously run his business and of the change that he was implementing, no doubt she would have been so informed in order that she could understand why the difficulties then being experienced had not emerged in previous years.
61 The first defendant contends for protection from the consequences of her execution of the deed on the basis of a context that would draw in the prospect of her distraction from the task then at hand. That she had been distracted is revealed by the fact that after she questioned why she had to sign, it is evident that she allowed her husband to avoid answering her specific question.
62 The defendants' evidence provides some support for the submission that it would be unconscionable or unconscientious for the plaintiff for it to obtain the remedy provided by the deed. It is not the role of the court on a summary judgment application to seek to determine the sufficiency of a defendant's case, only to determine upon consideration of all of the evidence whether the applicant's case for judgment is clear.
63 Returning to the paradigm that I utilised for analysis of any reliance of the second defendant upon the same submission, it is clear that the first defendant's answer to whether she had read the claim would be negative and that her answer to whether she understood the content of the deed would not be succinctly and perhaps not clearly expressed. Of themselves the circumstances of her execution of the deed would not speak to the proposition that a court would consider that it would have been appropriate for the plaintiff to inform the first defendant of its content. It is only in the context of the relationship between the parties that would promote the prospect of them founding relief. The consideration that would work against that result is the fact that the first defendant operated a professional business. In my opinion the latter considerably diminishes the significance of the former.
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64 In his submissions the defendants' solicitor said of the cases presented by his clients that it was sufficient that the court would perceive that there were issues presented by them that would require attention in the context of the interlocutory processes and ultimately at trial. Such opportunities would follow upon the failure of the application. That prospect is not a reason to refuse a proper result in favour of an applicant. I am satisfied that at trial the same issues that I have isolated would be before the court for consideration and that the marriage of the defendants would remain the only basis for the contention that the first defendant be protected from the consequences of her action. In my opinion it is presently clear that the relationship between the defendants would not be sufficient to overcome the considerations that would work against that result. Knowing what I do of the first defendant's case I am satisfied that the circumstances would not suggest that the plaintiff would question the first defendant at all.
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