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YIC Industrial Pty Ltd v SPA Investments Pty Ltd[2022] QCA 95

YIC Industrial Pty Ltd v SPA Investments Pty Ltd[2022] QCA 95

SUPREME COURT OF QUEENSLAND

CITATION:

YIC Industrial Pty Ltd & Anor v SPA Investments Pty Ltd & Ors [2022] QCA 95

PARTIES:

YIC INDUSTRIAL PTY LTD

ACN 139 276 627

(first plaintiff/appellant)

RORY ANN QUINN

(second plaintiff/fourth respondent)

v

SPA INVESTMENTS PTY LTD

ACN 134 314 631

(first defendant/respondent)

PIONEER AUSTRALIA PTY LTD

ACN 128 784 725

(second defendant/respondent)

GALL STANDFIELD & SMITH SOLICITORS

(third defendant/respondent)

FILE NO/S:

Appeal No 1279 of 2021

SC No 5692 of 2020

DIVISION:

Court of Appeal

PROCEEDING:

Application for Extension of Time/General Civil Appeal

ORIGINATING COURT:

Supreme Court at Brisbane - [2020] QSC 378 (Davis J)

DELIVERED ON:

27 May 2022

DELIVERED AT:

Brisbane

HEARING DATE:

1 June 2021

JUDGES:

Sofronoff P and Fraser JA and Flanagan J

ORDERS:

  1. Refuse the application for an extension of time within which to appeal.
  2. Dismiss the appeal, with costs.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – JUDGMENTS AND ORDERS – AMENDING, VARYING AND SETTING ASIDE JUDGMENTS AND ORDERS – ACTIONS TO REVIEW OR SET ASIDE JUDGMENT OR ORDER – WHERE FRAUD, MISREPRESENTATION OR SUPPRESSION OF MATERIAL FACTS – where the appellants brought a claim against the respondents seeking an order that judgments ordered in antecedent proceedings by Bond J in 2019 be set aside on the ground that they were obtained by fraud – where at the hearing of the respondents’ application for summary judgment dismissing that claim, the appellants relied upon a proposed amended statement of claim, alleging two different frauds and where the same proposed pleading is relied upon in the appeal – whether the respondents acted fraudulently in relation to the variation of the ACN appearing after the name “Pioneer Australia” on the mortgage – whether the respondents fraudulently commenced and took carriage of the antecedent proceedings in the name of Pioneer Company 1, rather than Pioneer Company 2

Corporations Act 2001 (Cth), s 127, s 601AD(1)

Federal Commissioner of Taxation v The Trustee for the Michael Hayes Family Trust (2019) 273 FCR 567; [2019] FCAFC 226, cited

Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47, cited

COUNSEL:

A J H Morris QC, with K E Stoyle, for the appellant

M D Martin QC, with D V Ferraro, for the respondent

SOLICITORS:

No appearance for the appellant

Gall Standfield & Smith for the respondent

  1. [1]
    SOFRONOFF P:  I agree with the reasons of Fraser JA and with the orders proposed by his Honour.
  2. [2]
    FRASER JA:  In May 2020, the appellants brought a claim against the respondents seeking an order that judgments ordered in antecedent proceedings by Bond J in 2019 be set aside on the ground that they were obtained by fraud.  Other relief sought by the appellants could be granted only if the appellants succeeded in having the judgments set aside.
  3. [3]
    In December 2020, the primary judge, Davis J, ordered summary judgment for the respondents on the appellants’ claim.  The ground upon which the primary judge found that the proceeding had no real prospect of success and there was no need for a trial was that there was no proper evidentiary basis identified from which the fraud alleged against the respondents could be inferred.
  4. [4]
    In these reasons I describe the unsuccessful plaintiffs as appellants, but they require an extension of time within which to appeal from the order made by the primary judge.  They have given an acceptable explanation for their relatively short delay in commencing the appeal and their application for an extension is opposed only upon the ground that the proposed appeal lacks merit.  If the appeal were meritorious, I would grant the extension of time.
  5. [5]
    I will first refer to the uncontroversial factual context in which the appellants commenced the subject claim.  In October 2009, the first appellant (YIC) executed a “Security Deed”.  That document includes a loan agreement, providing for a loan to YIC as “the Borrower” of $3,500,000.00 on security of a mortgage over land it owned.  The Security Deed also includes a guarantee, by which the second appellant, Mrs Rory Quinn, and Mr John Quinn guaranteed YIC’s obligations under the loan agreement.  The Security Deed described two lenders.  The mortgage contemplated by that deed and granted by YIC describes those lenders as the mortgagees.  The first respondent (SPA) is one of the lenders.  A fact of particular significance for the appellants’ claim is that the transaction documents describe the other lender as “Pioneer Australia Pty Ltd ACN 073 498 905”.
  6. [6]
    That description combines the name of a company (“Pioneer Australia Pty Ltd”) with the ACN of a former company which at the time of the transaction had been deregistered for some 16 months:
    1. (a)
      A company was incorporated in April 1996 with the name Pioneer Australia Pty Ltd and the ACN 073 498 905.  The primary judge described this company as “Pioneer Company 1”.  Pioneer Company 1 changed its name to its ACN on 5 December 2007.  It was deregistered in June 2008.  Mr Stefanowicz was the sole director and the secretary of Pioneer Company for many years up until it was deregistered.
    2. (b)
      The second respondent, which the primary judge described as “Pioneer Company 2”, was registered under the name Pioneer Australia Pty Ltd with the ACN 128 784 725 on 5 December 2007, which was also the date upon which Pioneer Company I changed its name from “Pioneer Australia” to its ACN.  Mr Stefanowicz was the sole director and secretary of Pioneer Company 2 upon registration and at all material times thereafter.
  7. [7]
    Mr Lester Gall of the third respondent, Gall Standfield & Smith Solicitors (a firm) (GSS), acted for the lenders in the transaction.  The loan money was advanced to YIC and the mortgage was duly registered.
  8. [8]
    In March 2010, Quinnco Pty Ltd (“Quinnco”), which was controlled by Mr and Mrs Quinn, sought to borrow $12,630,000.00 from Angas Securities Limited (“Angas”) upon the security of a mortgage ranking in priority after the registered first mortgage.  Mr Quinn sought to have SPA execute a deed of priority in favour of Angas which would limit the sum secured by the first mortgage.  Mr Stefanowicz was consulted and Mr Gall was instructed to act in relation to the deed of priority.
  9. [9]
    On 24 March 2010, Mr Ahern, the Queensland Operations Manager of Angas, sent an email to Mr Gall.  Mr Ahern stated that, to ensure that Angas had correct details for the proposed deed of priority, a company search of Pioneer Australia had been carried out, the attached search showed the company had changed its name to its ACN and was deregistered, and that conflicted with a copy of a registration confirmation statement and epitome of the first mortgage supplied to Angas by Mr Quinn.  Mr Ahern sought clarification.
  10. [10]
    Mr Gall replied to Mr Ahern on 25 March 2010 that a request to correct the ACN to 128 784 725 (Pioneer Company 2’s ACN) would be lodged at Titles Office.  On the same day Mr Ahern sent to Mr Quinn a draft deed of priority which identified Pioneer Company 2 (by its name and ACN) and SPA as tenants in common in equal parts as the “First Chargee”.
  11. [11]
    Mr Gall swore and lodged in the Titles Office a declaration in support of the request to record the correction of ACN.  Mr Gall described himself as the solicitor for Pioneer Company 2.  He declared that, in the mortgage lodged on 21 October 2009, the information in item 4 which described one of the mortgagees as “Pioneer Australia Pty Ltd ACN 073 498 905” was incorrect and the mortgagee should have been stated as “Pioneer Australia Pty Ltd ACN 128 784 725” (Pioneer Company 2).  He declared that deposited with the declaration was a company search for Pioneer Company 2 dated 25 March 2010, which evidenced the preceding statement in his declaration.  The request for the correction of the freehold land register accordingly was duly registered.
  12. [12]
    Also on 25 March 2010, Mr Quinn sent to Mr Anderson of SPA and Mr Gall an email which was copied to Mr Ahern.  The email referred to attached draft Deeds of Priority to be executed by SPA and Pioneer Australia Pty Ltd.  The draft deeds identified Pioneer Company 2 by its name and ACN as the relevant company.
  13. [13]
    On 26 March 2010, Mr Ahern sent to Mr Quinn an email containing a list of “Outstanding Items”, which included the following item:

“Wrong ACN is on title for Pioneer (Company Search on the ACN currently on title shows the company is deregistered).  BA/JQ to discuss and find a solution.”

“BA” refers to Mr Ahern and “JQ” refers to Mr Quinn.

  1. [14]
    Later on the same day, Mr Gall sent to Mr Ahern and Mr Quinn an email stating that GSS had been instructed by Pioneer Australia Pty Ltd and SPA that they were not prepared to sign any Deeds of Priority and YIC was not in breach of the mortgage, which was due for repayment on 21 October 2010.
  2. [15]
    In a second email Mr Gall sent to Mr Ahern and Mr Quinn on 26 March 2010, he referred to YIC and advised of instructions by Pioneer Australia Pty Ltd and SPA:
  1. “1.There has been no variation to our client’s mortgage recorded against [the title reference number];
  1. 2.The mortgage secures an amount of $3,500,000.00;
  1. 3.Notice has been received that YIC Industrial Pty Ltd proposes to enter into a second mortgage with Angas Securities Ltd for $12,630,000.00;
  1. 4.Notice has been received that YIC Industrial Pty Ltd proposes to enter a third mortgage with Cardiff Capital Pty Ltd for $512,475.00.”
  1. [16]
    YIC did not repay the loan of $3,500,00.00 when it was due for repayment on 21 October 2010.  On that date, YIC as borrower, and Mr and Mrs Quinn as guarantors, agreed that in consideration of Pioneer Company 2 (identified by its name and ACN) and SPA, as mortgagee and lender, agreeing to extend the period of the loan from 12 months to 18 months upon payment of $235,000.00 in accordance with the request of the borrowers, the due date in the registered mortgage was extended to 21 April 2011.  That document was executed for YIC by Mrs Quinn.  It was executed also by Mr and Mrs Quinn in their personal capacities.
  2. [17]
    On 26 October 2010, YIC by Mrs Quinn executed a document which, upon registration, amended the mortgage to Pioneer Company 2 (identified by its name and ACN) and SPA to give effect to the agreed extension of time.  The document was executed by Pioneer Company 2 and SPA in November 2010.
  3. [18]
    YIC subsequently fell into default under the mortgage to Pioneer Company 2 and SPA.  YIC, by Mrs Quinn, and Mr Quinn and Mrs Quinn in their personal capacities, executed a deed of compromise and contribution dated 5 February 2013 between them and Pioneer Company 2 and SPA.  Under that deed, YIC was to pay Pioneer Company 2 (identified by its name and ACN) and SPA money in consideration for which those mortgagees agreed to forebear from taking recovery action under the mortgage and the loan agreement until 31 January 2014.
  4. [19]
    On 11 March 2014, Pioneer Company 2 and SPA exercised power of sale as mortgagees of the security property.  After the deduction of the proceeds of sale from the outstanding debt there remained a shortfall owing under the loan agreement.  GSS were instructed to commence proceedings for recovery of the outstanding debt against Mrs Quinn as guarantor (“the antecedent proceedings”).  By this time Mr Quinn had made an arrangement with his creditors under Part X of the Bankruptcy Act 1966 (Cth).
  5. [20]
    SPA was one of two plaintiffs in the antecedent proceedings. A significant fact for the appellants’ claim the subject of this appeal is that the other plaintiff was described as “Pioneer Australia Pty Ltd ACN 073 498 905”, as it had been described in the original transaction documents.
  6. [21]
    After a trial, in March 2019 Bond J made orders in favour of the plaintiffs giving judgment against Mrs Quinn under her guarantee and indemnity in respect of the loan to YIC.[1]  Bond J also ordered the dismissal of a counter-claim brought by Mrs Quinn and YIC against Pioneer Company 1 and SPA for damages of breach of duties owed by them when selling YIC’s land as mortgagee.  After hearing argument about costs, in April 2019 Bond J ordered Mrs Quinn and YIC to pay the costs of the proceedings, to be assessed on the indemnity basis, of SPA and Pioneer Company 1.
  7. [22]
    Although the evidence at the trial before Bond J included the post-transaction documents relating to the extension of the date for repayment of the loan, which described Pioneer Company 2 by its name and its ACN as the lender and mortgagee, the difference between that ACN and the ACN of the deregistered company attributed to the plaintiff Pioneer Australia Pty Ltd was not put in issue in those proceedings.  Nor, it seems, was this discrepancy put in issue in an appeal to the Court of Appeal, which was dismissed in November 2019.[2]
  8. [23]
    The appellants subsequently brought the claim in which they alleged that the judgment in the antecedent proceedings was induced by fraud.  At the hearing of the respondents’ application for summary judgment dismissing that claim, the appellants relied upon a proposed amended statement of claim.  They alleged two different frauds.  The same proposed pleading is relied upon in the appeal.

Alleged fraud in correction of the ACN

  1. [24]
    The first alleged fraud concerns the correction to the ACN on the transaction documents.  The essence of this part of the appellants’ pleaded case is as follows:
    1. (a)
      Mr Ahern had, by his email of 24 March 2010, informed Mr Gall, who therefore had “actual knowledge”, that Pioneer Company 1 was deregistered at all material times, yet Mr Gall did not tell YIC, Mrs Quinn, or Mr Quinn of that fact or of “the fact that [Pioneer Company 1] had purported to …enter into”[3] the mortgage and the guarantee.
    2. (b)
      The statement in the request for correction of the ACN of the mortgagee in the registered mortgage that “the name of the Mortgagee be corrected from [Pioneer Company 1] to [Pioneer Company 2] in accordance with the evidence deposited herewith”[4] and the statement in Mr Gall’s declaration that “[t]he information contained in item 4 of the Mortgage was shown incorrectly and the above Mortgagee [Pioneer Company 2] should have been stated as [Pioneer Company 2]”[5] were false because Pioneer Company 2 was not a party to and had no interest in the mortgage and the loan agreement, and the information in item 4 of the mortgage “showing [Pioneer Company 1] as the mortgagee was not incorrect”.[6]
    3. (c)
      GSS Solicitors prepared and lodged the request for a correction and the declaration knowing them to be false, upon the instructions of Mr Anderson and/or Mr Stefanowicz who knew them to be false, and with the intention of inducing Mrs Quinn into believing that the advance was secured by the mortgage and her guarantee was granted to guarantee the advance on that footing.
    4. (d)
      Mr Gall’s statement in his email of 26 March 2010 to Mr Ahern, and copied to Mr Quinn, that there had been “no variation to our client’s mortgage” falsely represented to Mr Quinn that “no emendation of the Mortgage had occurred, whether by the Purported Correction or otherwise”.[7]
    5. (e)
      At the time when the correction was registered on the title, GSS, through Mr Gall, “was concerned to prevent any chance of the Mortgage losing priority to any mortgage registered in favour of Angus Securities Limited”.[8]
  2. [25]
    At the hearing of the summary judgment application, senior counsel for the appellants acknowledged that it was “no part of our case” that “it was deliberate to put the wrong number on the mortgage” and informed the primary judge that the appellants accepted that “putting the wrong number on the mortgage was a mistake”.[9]  Senior counsel endorsed the primary judge’s re-statement of the concession that the appellants accepted that the respondents made a mistake “in that they had identified the dead company rather than the …live company on the documents”.[10]
  3. [26]
    The primary judge recited the appellants’ concession that the use of the wrong ACN was a mistake and observed that the concession was proper and appropriate.  The primary judge reasoned that the concession led to the conclusion that the plaintiffs’ solicitor also made a mistake; YIC intended to enter into a loan agreement with the company lending the money, it intended to mortgage its land to that company, and Mr and Mrs Quinn intended to guarantee the performance of YIC’s obligations to that company.  The primary judge concluded that, “By mutual mistake, the wrong ACN was placed on the documents, thus identifying the lender as Pioneer Company 1”, and this was therefore “a classic case for rectification … to correct the ACN, thus reflecting the true intention of the parties.”[11]
  4. [27]
    The appellants’ notice of appeal challenges both the primary judge’s finding that the appellants had conceded there had been a mistake in the preparation of the loan agreement, mortgage and guarantees and the primary judge’s conclusions described in the preceding paragraph.  The appellants supported that challenge by argument in various places in their outline of argument in this appeal.  At the hearing of the appeal, however, the appellants’ senior counsel acknowledged that the appellants had conceded before the primary judge that “putting the wrong number on the mortgage was a mistake”.[12]  Senior counsel reaffirmed the concession that Pioneer Company 1’s ACN was mistakenly used instead of Pioneer Company 2’s ACN.[13]  The appeal must proceed upon that basis.
  5. [28]
    The primary judge summarised his reasons for finding that the appellants had no real prospect of proving that Mr Gall acted fraudulently in relation to the variation of the ACN appearing after the name “Pioneer Australia” on the mortgage:
  1. “(a)
    It is obvious, and in fact now conceded by the plaintiffs, that the error in the description of Pioneer Company 2 as Pioneer Company 1 was an innocent mistake, clearly one under which all parties were labouring.
  1. (b)
    The error was identified by Mr Ahern and the statutory declaration of Mr Gall is undoubtedly correct and truthful, namely that Pioneer Australia Pty Ltd should have been described by ACN 128 784 725That is clearly so because that reflects the obvious mutual intention of the partiesThe alternative is that YIC and Mr and Mrs Quinn intended to contract with a deregistered company which could not, as a matter of law, contract with them or advance YIC funds.
  1. (c)
    The suggested motivation for the fraud, namely that it was feared that Spa and Pioneer Company 1 (in reality Pioneer Company 2) might lose their priority as mortgagees, is just baseless.  The priority was not under threat.  Mr Ahern pointed out the error to Mr Gall and it was remediedHad the error been pointed out to YIC and Mr and Mrs Quinn and they had objected to the correction, rectification would have been ordered.
  1. (d)
    The deed of priority was prepared identifying Pioneer Company 2 with its correct ACNThat document was sent to Mr Quinn.
  1. (e)
    The two deeds of extension prepared by Mr Gall described Pioneer Company 2 by its correct ACN and those documents were sent by Mr Gall to Mr QuinnMr Gall made no attempt to hide the fact that the ACN on the loan, mortgage and guarantee was wrong.
  1. (f)
    Mr Ahern sent the first 26 March email to Mr Quinn which clearly pointed out that the ACN on the mortgage document related to a deregistered company and that the issue was being sortedThe email contemplates Mr Ahern and Mr Quinn discussing the error and how to remedy it.  Mr Quinn says that if he read that part of the email, he did not understand the significance of it.  Importantly, though, the issue was being openly discussed between Mr Gall and Mr Ahern and Mr Ahern intended to speak to Mr Quinn about the error.  Certainly, Mr Ahern did not think that it was a secret and neither did Mr Gall as he sent various documents to Mr Quinn thereafter all clearly showing the correct ACN for Pioneer Company 2.
  1. (g)
    The second 26 March email is, in context, not falseYes, it asserts that there has been no variation to the mortgage while in fact the register has been correctedHowever, the email was one sent to Mr Ahern and cc' d to Mr Quinn.  Mr Ahern knew that the register was being corrected.  Mr Gall told him that on 25 March 2010.  Mr Ahern is the agent for an incoming second mortgagee who is taking security behind Spa and Pioneer Company 2.  Of course, Mr Ahern needs to know whether there have been any variations to the terms of the mortgage which takes priority over Angas's second mortgageObviously, as the email is properly understood, Mr Gall is telling Mr Ahern that there have been no variations to the terms.  He is not pretending, contrary to his email the very day before, that the ACN has not been altered on the register.
  1. (h)
    There is also nothing mysterious or sinister about Mr Gall not informing Ms Quinn of the correction to the register.  The mistake with the ACN's was an obvious one, one of no moment, and Mr Gall was correcting it so that the advance from Angas could proceed.”[14]
  1. [29]
    This part of the appellants’ fraud case has no real prospect of success because, as I would hold, upon the proper construction of the security deed and the mortgage in their original forms Pioneer Company 2 is one of the two lenders and mortgagees described in those documents.  It is submitted for the appellants that the primary judge did not decide the application for summary judgment upon this ground and we were reminded that the point was not the subject of a notice of contention, but the Court was not asked to refrain from deciding it.  Nor was it submitted that resolution of the point might be affected by any evidence that was not before the primary judge.
  2. [30]
    The essence of the appellants’ argument upon this construction point is that there is no ambiguity in the transaction documents because they “accurately describe an entity which did exist, although it had gone out of existence.”[15]  Accepting that the ambiguity may be classified as latent, rather than patent, the description of the relevant lender and mortgagee in the transaction documents is undoubtedly ambiguous in so far as it includes both the name of the then extant Pioneer Company 2 and the ACN of the then deregistered Pioneer Company 1.
  3. [31]
    On the execution page of the security deed, Mr Stefanowicz’s signature appears above the text “Sole Director” and opposite the text, “Signed by” Pioneer Australia Pty Ltd CAN 073 498 905 in accordance with s 127 of the Corporations Act.  The relevant provision is in s 127(1)(c) of the Corporations Act: “A company may execute a document without using a common seal if the document is signed by … for a proprietary company that has a sole director – that director, if: the director is also the sole company secretary ...”  The execution clause conveys that the relevant party is an existing company of which Mr Stefanowicz is the sole director.  It was in evidence before the primary judge and not contentious that Mr Stefanowicz was the sole director and the secretary of Pioneer Company 2.  As is to be expected, the search of Pioneer Company 1, which was also in evidence before the primary judge and not contentious, shows that Mr Stefanowicz ceased to be a director and the secretary of that company in June 2008, when it was deregistered.  That was to be expected because Pioneer Company 1 ceased to exist when it was deregistered: Corporations Act, s 601AD(1).
  4. [32]
    Any reasonable person in the position of the contracting parties must be taken to have intended the security deed and the mortgage to have legal effect.  The inevitable conclusion is that the name of the registered Pioneer Company 2 on the security deed and mortgage accurately describes the relevant lender and mortgagee, and the use of the ACN of the non-existent Pioneer Company 1, rather than the ACN of Pioneer Company 2, is to be disregarded as a mere misnomer.
  5. [33]
    The court’s power to correct a self-evident absurdity in the literal meaning of part of a contract is not confined by any requirement for a patent ambiguity.  The applicable principles were recently restated by Steward J, with whose reasons Griffiths and Derrington JJ agreed, in Federal Commissioner of Taxation v The Trustee for the Michael Hayes Family Trust[16]:
  1. “34The correction of obvious errors by an application of the ordinary principles of construction is well known. As Dixon CJ and Fullagar J said in Fitzgerald v Masters (1956) 95 CLR 420 at 426-427:

Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency.

In that case, the word “inconsistent” was read as meaning “consistent” in a contract for sale.

  1. 35The principle is premised on absurdity and not ambiguity. Indeed, it is applicable even where the language is unambiguous:  National Australia Bank Ltd v Clowes (2013) 8 BFRA 600 at [34]-[35] per Leeming JA, citing Westpac Banking Corporation v Tanzone Pty Ltd (2000) 9 BPR 17,521 at [21] per Priestley, Fitzgerald JJA and Foster AJA and Noon v Bondi Beach Astra Retirement Village Pty Ltd (2010) 15 BPR 28,221 at [46] per Giles JA (with whom Macfarlan JA agreed).
  1. 36Once again, I turn to Leeming JA for the most recent expression of the principle. In Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317, his Honour said at [6]-[10]:

Rectification by construction.

At common law, if the error is clear, and it is also clear what a reasonable person would have understood the parties to have meant, then the mistake may be corrected as a matter of construction. This is old law. Lord St Leonards said in Wilson v Wilson (1854) 5 HL Cas 40 at 66-67; 10 ER 811 at 822:

“Now it is a great mistake if it is supposed that even a Court of Law cannot correct a mistake, or error, on the face of an instrument: there is no magic in words. If you find a clear mistake, and it admits of no other construction, a Court of Law, as well as a Court of Equity, without impugning any doctrine about correcting those things which can only be shown by parol evidence to be mistakes – without, I say, going into those cases at all, both Courts of Law and of Equity may correct an obvious mistake on the face of an instrument without the slightest difficulty.”

Examples may be found in linguistic errors, such as “inconsistent” being read as “consistent” in Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53, or conceptual errors, such as “lessor” being read as “lessee” in McHugh Holdings Pty Ltd v Newtown Colonial Hotel Pty Ltd (2008) 73 NSWLR 53; [2008] NSWSC 542. The language of a contract is not read like a computer program, such that any slip is fatal.

Two conditions are necessary in order to correct the contractual language in this manner: (a) that the literal meaning of the contractual words is an absurdity and (b) that it is self-evident what the objective intention is to be taken to have been: see Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 at [117]-[119], approving National Australia Bank Ltd v Clowes [2013] NSWCA 179; 8 BFRA 600, where it was stated at [34]:

“Where both those elements are present ... ordinary processes of contractual construction displace an absurd literal meaning by a meaningful legal meaning.”

Likewise, in the United Kingdom, the court must be satisfied both as to the mistake and the nature of the correction: Pink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429; [2011] 1 WLR 770 at [21] (Lord Neuberger); Arnold v Britton [2015] AC 1619; [2015] UKSC 36 at [78] (Lord Hodge).

The court must be satisfied of those matters to a high level of conviction. To use the language of Dixon CJ and Fullagar J in Fitzgerald v Masters at 426-427, it must be “clearly necessary in order to avoid absurdity or inconsistency”. As this Court said in Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297 at [18], the test of absurdity is not easily satisfied. Any question of absurdity or inconsistency must be identified according to established principles, by reference to the text of the agreement as understood in its factual and legal context: Wyllie v Tarrison Pty Ltd [2007] NSWCA 184 at [46]; Newey v Westpac Banking Corporation [2014] NSWCA 319 at [85]. Courts which are asked to delete, insert or rewrite part of a contract because of what is said to be an obvious error should bear steadily in mind that imperfections and infelicities and ambiguities in contractual language commonly reflect the give and take of negotiations, or the parties’ appreciation that some obscurities are incapable of resolution. As Lord Hoffmann explained, the court does “not readily accept that people have made mistakes in formal documents”: Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101; [2009] UKHL 38 at [23].

  1. 37I note the expression of the test as involving two conditions which must be satisfied, namely:
  1. (1)
    that the literal meaning of the contractual words is an absurdity; and
  1. (2)
    that it is self-evident what the objective intention is to be taken to have been.

The level of satisfaction about these matters must be “high”.

  1. 38See also Perpetual Limited v Myer Pty Ltd [2019] VSCA 98 at [122]-[127] per Whelan, Niall and Hargrave JJA and Tokio Marine & Nichido Fire Insurance Co Ltd v Hans Bo Kristian Holgersson [2019] WASCA 114 at [77] per Buss P, Beech and Pritchard JJA.
  1. 39The foregoing principle of construction has often been used when an instrument mistakenly refers to the wrong party or to a non-existent entity. In In re Fish; Ingham v Rayner [1894] 2 Ch 83 a testator left his residuary estate to his “niece Eliza Waterhouse”. He had no such niece. But his wife did have two grandnieces with that name (one of whom was illegitimate). The English Court of Appeal construed these words as referring to the legitimate grandniece. In F Goldsmith (Sicklesmere) Ltd v Baxter [1970] Ch 85, an agreement for the sale of land referred to a non-existent entity called “Goldsmith Coaches (Sicklesmere) Ltd”. Applying the “known facts”, Stamp J construed this “beyond peradventure” as “no more nor - less an inaccurate description of the plaintiff company, F. Goldsmith (Sicklesmere) Ltd” (at 91). Nittan (UK) Ltd v Solent Steel Fabrication Ltd [1981] 1 Lloyd’s Rep 633 was another case in which a company had been incorrectly identified in an insurance policy. Lord Denning MR said:

In this court we are very used to dealing with misnomers. We do not allow people to take advantage of a misnomer when everyone knows what was intended.

In my view, this Court should take the same approach.”

  1. [34]
    The appellants rely upon the entries in the company names register for their argument that they have been victims of fraud, but those entries are not confined to ACNs.  Companies may also be identifiable by entries on the register of their names, and by other entries, including the names of company officers between specified dates. Reference to the register in this case makes abundantly clear the absurdity of treating the ACN on the transaction documents as an identification of Pioneer Company 1 as the lender and mortgagee.  It is demonstrably clear that the parties’ objective intention must be taken to have been the name “Pioneer Australia Pty Ltd” identified as the lender and mortgagee the existing company, Pioneer Company 2, rather than a non-existent company, Pioneer Company 1.
  2. [35]
    Pioneer Company 2 was therefore one of the two lenders and mortgagees described in the security deed and the mortgage.  The subsequent correction of the ACN on the amended mortgage and on other documents was merely a formality.  It follows that, as the primary judge concluded, each of the statements described in [24] of these reasons which the appellants allege was false was accurate.  For that reason, the appellants’ pleaded fraud claim could not succeed and summary judgment was rightly given in favour of the respondents.
  3. [36]
    Furthermore, summary judgment in the respondents’ favour was also justified by the absence of any real prospect of success or any need for a trial of the appellants’ claim that the respondents acted fraudulently in making the allegedly false statements.
  4. [37]
    The primary judge set out the presently relevant principles concerning what a plaintiff needs to plead and prove in a case of this kind:[17]

“In Wentworth v Rogers (No. 5), Kirby P identified six principles relevant to setting aside judgment on the basis of fraud.  It is unnecessary to go to any but the first which was expressed by his Honour in these terms:

“First, the essence of the action is fraud.  As in all actions based on fraud, particulars of the fraud claimed must be exactly given and the allegations must be established by the strict proof which such a charge requires: Jonesco v Beard [1930] AC 298 at 301; McHarg v Woods Radio Pty Ltd (at 497).”

In Clones Pty Ltd v Players Pty Ltd (in liq), a question before the High Court was whether “…the power of a court to set aside its perfected judgment extends to…misconduct by the party who succeeded at trial which does not amount to fraud”.  In answering that question in the negative, the court held:

“55. The general power to set aside a judgment on the ground of fraud required actual fraud.  The ‘essence of the action [was] fraud’.  The general ground of fraud was not diluted to allow, for instance, the judgment to be set aside for misconduct, accident, surprise, or mistake.  This point was made pellucidly in 1867 in Patch v Ward.  In that case, as Lord Cairns LJ observed, the application was not brought on the basis of either category of the bill of review – either error of law or fresh evidence discovered since the decree.  Rather, it was brought upon the basis that the decree was obtained by fraud.  His Lordship explained that it was necessary that the fraud be ‘actual fraud…the person chargeable with it…acting in order to take an undue advantage of some other person for the purpose of actually and knowingly defrauding him’.  Similarly, Sir John Rolt LJ, after observing that a particular ground of review in cases of foreclosure was inapplicable, remarked of the claim to set aside the order for fraud:

“I think, for the reasons which have been given by my learned brother, that the fraud must be actual positive fraud, a mediated and intentional contrivance to keep the parties and the Court in ignorance of the real facts of the case, and obtaining that decree by that contrivance.  Mere constructive fraud not originating in actual contrivance, but consisting of acts tending possibly to deceive or mislead without any such intention or contrivance, would probably not be sufficient – at all events I think would not, after such delay as has occurred in this case, be deemed sufficient – to set aside the order which has been made.  What, therefore, the Appellant has to do is satisfy the Court that the decree was obtained by the positive and actual fraud and contrivance of the party obtaining it.”  (emphasis added).

And later:

“57. The narrow scope of the general power of a court to rescind a judgment for fraud was reiterated after the Supreme Court of Judicature Act in The Ampthill Peerage.  In the course of considering whether a declaration of legitimacy could be set aside, Lord Wilberforce compared an application to a court to set aside its own judgment and said that equitable fraud or ‘lack of frankness’ would not suffice to set aside a judgment and that ‘only fraud in a strict legal sense will do’.  Similarly, Lord Simon of Glaisdale said that ‘lack of frankness or an ulterior or oblique or indirect motive is insufficient’.” (emphasis added).”

  1. [38]
    The allegation quoted in [24](a) that Mr Gall had “actual knowledge” is apparently intended to be related to the pleaded conclusion that Pioneer Company 1 purported to enter into the mortgage and guarantee.  The pleading appears to assume that the state of mind of the respondents must be regarded as having accorded with what the appellants allege are the correct conclusions.  I have reached the opposite conclusion to that which is pleaded.  If the conclusion I prefer is wrong, the pleaded conclusion is nevertheless at least contestable.  Yet the pleading does not identify a ground for inferring that Mr Gall’s state of mind accorded with the pleaded conclusion.  In my view, there is no sufficient basis for the allegations of dishonesty described in [24](c) in relation to the statements identified in [24](b) of these reasons.
  2. [39]
    As to the case described in [24](d) of these reasons:
    1. (a)
      Mr Gall’s reference in his email of 26 March 2010 to his firm’s client can sensibly be understood only as a reference to Pioneer Company 2:
      1. When Mr Gall sent that email, Pioneer Company 1 had been deregistered for some 20 months.
      2. The recipient to whom the email was addressed, Mr Ahern, then knew that company had been deregistered.
      3. Mr Ahern had recently drawn that fact to Mr Gall’s attention.
      4. Mr Gall had recently informed Mr Ahern that he would request a change of the ACN on the mortgage to the ACN of Pioneer Company 2.
      5. Mr Ahern had recently sent to Mr Gall a draft document identifying Pioneer 2 by its name and ACN.
      6. Mr Quinn, to whom Mr Gall’s email to Mr Ahern was copied, had recently sent to Mr Gall, and copied to Mr Ahern, an email which attached draft documents also identifying Pioneer Company 2.
      7. Mr Ahern had recently sent an email to Mr Quinn stating that the wrong ACN for Pioneer was on the title, that was the ACN of a deregistered company, and Mr Ahern and Mr Quinn were to discuss that issue and find a solution.
    2. (b)
      In those circumstances, Mr Gall’s statement that there had been “no variation” to GSS’s client’s mortgage does not convey that the ACN of “Pioneer Australia” on the mortgage was not or would not be changed to the ACN of Pioneer Company 2.
  3. [40]
    Furthermore, the proposed amended statement of claim does not allege that Mr Gall acted dishonestly in making that statement.  A fundamental flaw in this part of the appellants’ case is the absence of any allegation, or any reasonable basis for an allegation, that Mr Gall used the expression “no variation to our client’s mortgage”[18] intending to convey or believing those words would be understood to convey something that was inconsistent with his state of mind.  There is, for example, no pleaded fact and no evidence capable of justifying an inference that Mr Gall did not think that the ACN was an obvious mistake which could and should be corrected to give effect to the parties’ common intention.
  4. [41]
    The appellants’ allegation described in [24](e) of these reasons describes a proper concern by a solicitor in Mr Gall’s position.  It is innocuous in the absence of a viable case that Mr Gall dishonestly said or did something in connection with the alleged concern.
  5. [42]
    At the hearing of the summary judgment application the appellants relied upon affidavits sworn by Mrs Quinn and Mr Quinn.  Mr Quinn acknowledged that the ACN of Pioneer Company 2 appeared on the draft deed of priority sent to him by Mr Ahern on 25 March 2010, which Mr Quinn sent to Mr Anderson and Mr Gall, with copies to Mr Stefanowicz and Mr Ahern.  He also acknowledged that on 26 March 2010 he received the email from Mr Ahern which included dot point eight, noting that “Wrong ACN is on title for Pioneer (Company Search) on the ACN currently on title shows the company is deregistered).  BA/JQ to discuss and find a solution”.  Mr Quinn deposed he did not then notice that the ACN for Pioneer had changed from its ACN number in the mortgage, and the first time he became aware of that dot point was in July 2020, when a redacted copy of the email was sent to him by Gall Standfield & Smith.  He deposed he first became aware in March 2020 of the deregistration of Pioneer Company 1 and that Mr Gall had prepared and lodged the request to correct the name of the Pioneer company and his declaration in support of the request in March 2010.  Mrs Quinn deposed she agreed with the affidavit of Mr Quinn and that before 19 March 2020 she was not aware that Pioneer Company 1 was deregistered.
  6. [43]
    Mr Quinn and Mrs Quinn’s affidavits are to the effect that they did not notice either the change to Pioneer Company’s ACN on the various security documents or that the email of 26 March 2010 to Mr Quinn referred to the discovery that the wrong ACN was on the title for Pioneer.  Mr Quinn also expressed various opinions about the states of mind of other people.  That evidence is irrelevant to the issue whether there is an arguable basis for any of the appellants’ claims that the respondents acted dishonestly.  Mr Quinn and Mrs Quinn’s evidence supplies no support for the appellants’ fraud claims.
  7. [44]
    It is not necessary to decide whether, upon the hypothesis that the construction of the transaction documents I prefer is wrong, rectification should be ordered to correct the ACN.  In light of the arguments upon the point, however, I will set out my conclusions:
    1. (a)
      The necessary analysis of the parties’ words and actions[19] demonstrates that each of them must have intended the Pioneer Company lender and mortgagee to be a registered company, for which GSS acted in the transaction, and which would advance its share of the loan.  The use of the ACN of Pioneer Company 1 is thus a mistake.
    2. (b)
      The mistake by GSS in the preparation of the documents with the wrong ACN resulted in the same mistake being made by the other respondents and by the appellants when executing the documents with that wrong ACN.  That is not inconsistent with the circumstance that the appellants (presumably) believed they were contracting with the Pioneer Australia entity described as the mortgagee and lender.  It is sufficient that, as is the obvious inference, if someone had pointed out that the draft transaction documents identified the name of Pioneer Company 2 as lender and mortgagee but identified as its ACN the ACN of the deregistered Pioneer Company 1, the parties would have corrected the ACN to that of Pioneer Company 2.[20]
    3. (c)
      This was therefore a case of a “common mistake”[21] in the insertion on the transaction documents of the ACN of the deregistered company, rather than the ACN of Mr Gall’s client, Pioneer Company 2, such as to justify rectification of those documents.

Alleged fraud in the naming of a plaintiff

  1. [45]
    The second fraud alleged to have been committed by the respondents concerns the commencement and carriage of the antecedent proceedings in the name of Pioneer Company 1, rather than Pioneer Company 2.
  2. [46]
    The essence of the appellants’ pleading of this claim is as follows:
    1. (a)
      In the antecedent proceedings, SPA as a plaintiff and Pioneer Company 1 as a plaintiff made various allegations, all of which were premised upon Pioneer Company 1 being the Pioneer Australia Company named as the lender and mortgagee in the transaction documents.
    2. (b)
      Those statements were false because, as a deregistered company, it had no lawful capacity to do any of the things it had purported to do.
    3. (c)
      Each of the alleged statements was known to be false by GSS, Mr Anderson, and Mr Stefanowicz (or one of them) at the time it was made.
    4. (d)
      The plaintiffs in the antecedent proceedings did not plead, disclose, tender, give evidence of, or mention the purported correction of the mortgage or the declaration by Mr Gall.
    5. (e)
      The conduct described in the above paragraphs was committed with the intent of inducing Mrs Quinn into believing that the advance was secured by the mortgage, a guarantee was granted to guarantee the advance on that footing, and Pioneer Company 1 or Pioneer Company 2 had standing to enforce the guarantee in the antecedent proceedings.
  3. [47]
    Mr Reynolds, a solicitor in the employ of Gall Standfield & Smith, swore an affidavit.  He deposed that when he prepared the claim and statement of claim in the antecedent proceedings he mistakenly recorded the wrong ACN for Pioneer Australia Pty Ltd.  He deposed that no issue was taken about this in that proceeding and the original loan agreement, guarantee and mortgage dated 21 October 2009 were admitted.  Mr Gall had retired from practice before the antecedent proceedings were commenced.[22]
  4. [48]
    The primary judge rejected this part of the claim for these reasons:
    1. (a)
      The alleged conspiracy was to enforce the security documents in the name of the deregistered Pioneer Company 1, and prosecute at trial and defend on appeal, proceedings in the name of that company to cover up the error in the description of the lender.
    2. (b)
      This alleged conspiracy was alleged to have been pursued despite the correspondence between Mr Ahern and Mr Gall openly discussing the error, notwithstanding that documents bearing the correct ACN had been prepared and sent to Mr Quinn, and despite the concession properly made by the appellants’ senior counsel that the inclusion of the wrong ACN in the security documents was a genuine error.
    3. (c)
      The fact, as had been submitted for the appellants, that Mr Reynolds did not explain how the error came about and there was no affidavit of Mr Gall, was not important.  They did not need to explain the obvious, and it was now admitted by the appellants that Mr Gall had made a mistake in recording the ACN.
    4. (d)
      The alternate inference - that Mr Reynolds deliberately launched and prosecuted proceedings on behalf of a deregistered company which would result in any judgment being worthless - is absurd.
    5. (e)
      The omission of any disclosure in the Antecedent Proceedings of Mr Gall’s declaration and the request for correction of the mortgage was not significant because those documents were not obliged to be disclosed because they were not directly relevant to an issue in that proceeding.[23]
    6. (f)
      In any event, the documents describing the ACN for Pioneer Company 2 (notably the deeds of extension) were disclosed and there was no evidence of a cover up.
  5. [49]
    The nub of the appellants’ case, as it was explained in submissions in the appeal, is that GSS deliberately avoided drawing attention to the admitted error in the transaction documents in the hope that no one would notice in the trial division or on appeal, and they succeeded.[24]
  6. [50]
    For the reasons already given in relation to the transaction documents, the use in the antecedent proceedings of the ACN of Pioneer Company 1 as the ACN of Pioneer Company 2 as a plaintiff is an obvious misnomer.  The plaintiff always was Pioneer Company 2, despite that mistake.  For that reason, the allegedly false statements upon which the appellants’ allegation of fraud in the antecedent proceedings depends are instead true.  This part of the claim also has no real prospect of success and there is no need for a trial.
  7. [51]
    Furthermore, upon the contrary premise that the relevant plaintiff was Pioneer Company 1, the appellants’ arguments do not identify error in the primary judge’s analysis.  I respectfully share the view of the primary judge that the proposition that Mr Reynolds deliberately brought and prosecuted proceedings on behalf of a deregistered company, rather than on behalf of the actual client of the firm, is patently absurd.  No fact is pleaded from which such a remarkable inference of fraud could reasonably be justified.  There is nothing capable of displacing the obvious inference that the inclusion of the deregistered company’s ACN was a mistake, rather than part of the elaborate, self-defeating conspiracy alleged by the appellants.

Proposed orders

  1. [52]
    In light of my conclusions about the elements of falsity and dishonesty in each of the two categories of fraud alleged by the appellants, I do not find it necessary to discuss the further question whether the pleaded case could in any event be capable of making out a case of fraud which might justify an order setting aside the judgment in the anterior proceeding.
  2. [53]
    The respondents filed a notice of contention and argued that Mrs Quinn did not have standing to prosecute the fraud claim because it was commenced after she was declared bankrupt on 20 January 2020.  As the respondents argued, upon bankruptcy Mrs Quinn’s property, which included any right to bring the claim to set aside the judgments in the antecedent proceeding, vested in her trustee in bankruptcy under s 58 of the Bankruptcy Act 1966 (Cth).  The respondents also contended and argued that YIC’s claim to set aside the judgment in the antecedent proceeding should have been dismissed upon the additional ground that the fraud allegations were not relevant to the counter-claim it and Mrs Quinn brought against the plaintiffs.
  3. [54]
    The appellants’ argument addressed the second contention.  The appellants did not identify a basis upon which Mrs Quinn could be regarded as having standing to prosecute the fraud claim despite her bankruptcy.  I would accept that this is another ground upon which Mrs Quinn’s claim to set aside the judgment in the antecedent proceeding should be dismissed.  It does not seem to me necessary to adjudicate upon the more complicated question whether YIC’s claim must fail upon the additional ground that its allegations of fraud are not relevant to the basis upon which its counter-claim was dismissed.

Proposed orders

  1. [55]
    I would refuse the application for an extension of time within which to appeal and dismiss the appeal, with costs.
  2. [56]
    FLANAGAN J:  I agree with Fraser JA.

Footnotes

[1] Pioneer Australia Pty Ltd & Anor v Quinn [2019] QSC 72.

[2] Quinn & Anor v Pioneer Australia Pty Ltd & Anor [2019] QCA 266.

[3]  Proposed amended statement of claim, para 35C(b).

[4]  Proposed amended statement of claim, para 37(c).

[5]  Proposed amended statement of claim, para 38.

[6]  Proposed amended statement of claim, paras 39 and 40.

[7]  Proposed amended statement of claim, para 41A(c).

[8]  Proposed amended statement of claim, para 41B(c).

[9]  Transcript 12 August 2020 at 1-14, and to the same effect at 1-15.

[10]  Transcript 12 August 2020 at 1-16.

[11]  Reasons [55], citing Frederick E Rose (London) Ltd v William H Pim Junior & Co Ltd [1953] 2 QB 450 at 461; Hooker Town Developments Pty Ltd v Director of War Service Homes (1973) 47 ALJR 320 at 323-4; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336; Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85.

[12]  Transcript 1 June 2021 at p 1 - 12.

[13]  Transcript 1 June 2021 at p 1 – 16.

[14]  Reasons [72].

[15]  Transcript 1 June 2021 at 1 – 40.

[16]  (2019) 273 FCR 567.

[17] Reasons [40] – [41].

[18]  Proposed amended statement of claim, paragraphs 41A(a) and (c).

[19]  See Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85 at [42] – [43] (Kiefel J), and at [103] – [104] and [117] (Gageler, Nettle and Gordon JJ).

[20]  See Simic v New South Wales Land and Housing Corporation at [50] (Kiefel J), and at [108] – [111] (particularly the third and last sentences) and [117] (Gageler, Nettle and Gordon JJ).

[21]  See Simic v New South Wales Land and Housing Corporation at [103] (Gageler, Nettle and Gordon JJ).

[22]  Reasons at [27].

[23] Uniform Civil Procedure Rules 1999, r 211.

[24]  Transcript 1 June 2021 at 1 – 19.

Close

Editorial Notes

  • Published Case Name:

    YIC Industrial Pty Ltd & Anor v SPA Investments Pty Ltd & Ors

  • Shortened Case Name:

    YIC Industrial Pty Ltd v SPA Investments Pty Ltd

  • MNC:

    [2022] QCA 95

  • Court:

    QCA

  • Judge(s):

    Sofronoff P, Fraser JA, Flanagan J

  • Date:

    27 May 2022

  • Selected for Reporting:

    Editor's Note

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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