Sacroug v VIP Home Services (Queensland) Pty Ltd
[2006] QDC 375
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- Sacroug v VIP Home Services (Queensland) Pty Ltd[2006] QDC 375
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Sacroug v VIP Home Services (Queensland) Pty Ltd[2006] QDC 375
Sacroug v VIP Home Services (Queensland) Pty Ltd[2006] QDC 375
![Sacroug v VIP Home Services (Queensland) Pty Ltd [2006] QDC 375](/judgmentview/image?name=316563.001.png&id=316563)
DISTRICT COURT OF QUEENSLAND
CITATION: | Sacroug & Anor – v – VIP Home Services (Queensland) Pty Ltd [2006] QDC 375 |
PARTIES: | SACROUG, Frederick and FREW, Robyn Ann Applicants Against VIP HOME SERVICES (QUEENSLAND) PTY LTD Respondent |
FILE NO: | 324/06 |
PROCEEDINGS: | Application |
DELIVERED ON: | 19 October 2006 |
DELIVERED AT: | Townsville |
HEARING DATE: | 13 October 2006 |
JUDGE: | C.F Wall Q.C |
ORDERS: |
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CATCHWORDS: | INFERIOR COURTS – District Court – Jurisdiction – Construction – agreement between parties – dispute – originating applcn – wh applcn within jurisdiction of District Court – wh any question of construction under the agreement arose within the meaning of s 68(1)(b)(xiii) District Court of Qld Act Cases referred to: Legal & General Life of Australia Ltd v A Hudson Pty Ltd [1985] 1 NSWLR 314 (FAA) WMC Resources Ltd v Leighton Contractors Pty Ltd, 20 WAR 489 (CON) Covecorp Constructions Pty Ltd v Indigo Projects Pty Ltd, unreported, [2002] QSC 322 (CON) Zeke Services Pty Ltd v Geaney & Ors, unreported, [2005] QSC 135 (CON) Legislation referred to: District Court of Queensland Act, ss. 68(1)(b)(xiii), 85(2) |
COUNSEL: | Mr M Jonsson for the Applicants Mr A Moon for the Respondent |
SOLICITORS: | Boulton Cleary & Kern for the Applicants Wilson Ryan Grose as town agents for Haarsmas Lawyers for the Respondent |
HIS HONOUR: This is an originating application by the applicants for the following relief:
"1. A declaration that on the true construction of a written agreement between the Applicants and the Respondent dated 10 May, 2005 ("the Agreement"), and in the events that have happened, the written determination prepared by Pickard Associates, Chartered Accounts, and dated 2 March, 2006:
- (a)constitutes a valuation of the Townsville business and the Cairns business undertaken by an independent valuer agreed upon between the parties in accordance with clauses 2, 3, 4 and of the Agreement;
- (b)is binding on the parties within the meaning and for the purposes of the Agreement.
- Further, or in the alternative, a declaration that on the true construction of the Agreement, and in the events that have happened, the written determination prepared by Pickards BDS, Chartered Accountants, and dated 6 June, 2006:
- (a)is not a valuation of the Townsville business and the Cairns business undertaken by an independent valuer agreed upon between the parties in accordance with clauses 2, 3, 4 and 5 of the Agreement;
- (b)is not binding on the parties within the meaning and for the purposes of the agreement.
- Such further or consequential orders (including orders for specific performance of the agreement and/or injunction) as the Court may deem meet."
The District Court is said by the applicants to have jurisdiction to hear and determine the application by reason of section 68(1)(b)(xiii) of the District Court of Queensland Act which confers jurisdiction on the District Court to hear and determine actions and matters:
"(xiii) for the determination of any question of construction arising under a deed, will or other written instrument, and for a declaration of the rights of the persons interested where the sum or the property in respect of which the declaration is sought does not exceed in amount or value the monetary limit."
The respondent contends that the application does not involve the determination of any question of construction arising under the agreement and therefore the Court does not have jurisdiction to hear and determine the application.
It is common ground that there was an antecedent dispute between the parties. There was a mediation and the mediation gave rise to the agreement referred to in the application. The agreement relates to the valuation of two franchise businesses and contains the following clauses of relevance to the present application:
"2. The parties agree that the Townsville business and the Cairns business will be valued by an independent valuer ("the Valuer") agreed upon by VIP and the master franchisees or in the absence of agreement, appointed by the President at the time of the Law Society of Queensland.
- The parties agree that the Townsville business and the Cairns business will be valued as at the date of this agreement and that in valuing the Townsville business and the Cairns business the Valuer shall not take into account any amounts paid by the franchisee to VIP under a franchise agreement entered into between VIP and the franchisee dated 2 October 1996 ("the Sacroug franchise agreement").
- The parties agree to co-operate fully with the Valuer and to provide to the Valuer all information and documents in the possession power or control of the parties that are requested by the Valuer including financial information and documents in the possession power or control of the parties.
- The parties agree to be bound by the value of the Townsville business ("the Townsville value") and the value of the Cairns business ("the Cairns value") as determined by the Valuer."
The following other background facts are agreed: The applicants had the right to purchase the master franchise business from the respondent at a price to be determined in accordance with clauses 2-5 of the agreement. The independent valuer agreed upon was Pickard Associates. The valuer prepared a valuation dated the 2nd of March 2006. The respondent challenged the valuer about that valuation and provided some further information to the valuer some of which the valuer accepted and on the 2nd of June 2006 the valuer provided a second or an amended valuation which was less favourable to the applicants. The first valuation was $71,900 and the second $6,600.
Mr Jonsson, for the applicants, variously articulated the question or questions of construction raised in the application as follows:
It asks your Honour to identify what the requirements of the contract are with respect to the determination by the valuer and the second question is does the valuation produced by the valuer fulfil those requirements? The critical question is was the valuation made in accordance with the terms of the contract, the question is not whether there is an error in the discretionary judgment of the valuer, it is whether the valuation complies with the terms of the contract.(P.10)
There is a question here as to the independence of the valuer, particularly in relation to the second valuation.(P.11)
There is also an issue as to the capacity of the valuer to reconsider once a complying valuation was produced.(P.11)
In relation to each valuation the threshold question is what are the relevant requirements of the contract, and that requires your Honour to interpret and apply the language of the contract to the events that have happened.(P.11)
Ultimately, in my submission, construction does not merely require interpretation of words in an abstract sense, it requires application of those words to concrete facts and circumstances.(P.14)
I'm submitting that the respondent breached its obligation to cooperate in two ways. Firstly, by imposing its subjective assertions upon the valuer and by requesting the valuer to reconsider its valuation in circumstances where the contractual authority of the valuer as a contractual decision maker had already been spent, had been extinguished. Now, I put that on either of two bases. Either that was in breach of that express obligation to cooperate or it was in breach of the implied obligation that's imposed as a matter of law to cooperate. The implication of an obligation such as that is much a matter of construction as the interpretation of express terms.(P.16)
And there's also the issue as to whether the respondent in this case has complied with the requirement of clause 5 of the contract in the sense that it has been bound by the complying valuation.(P.18)
An issue is whether or not the first valuation satisfied the requirements of the compromise agreement and I've submitted that it does. That requires your Honour to construe that valuation itself. So, it's not merely a matter of construing the compromise agreement but it's also a matter of construing the valuation.(P.18)
Another question is, does the compromise agreement permit the valuer to reconsider as he did?(P.19)
An implied obligation to cooperate involves a question of construction. This really is related to the independence issue.(P.19-20)
The question is whether the agreement permits the valuer to reconsider and revise an otherwise complying valuation for some apprehended error or mistake not amounting to a departure from the agreement.(P.29-30)
The first and critical question in each case is what are the relevant requirements of the contract with respect to the valuation?(P.32) The question of whether or not the contract permitted the valuer to revoke and replace or to revoke and amend, however the process can be characterised, the question of whether the contract permitted that requires an exercise of construction.(P.32-33)
The question of construction required by the application is whether the contract permits the valuer to reconsider and revise a valuation, namely the 2nd of March one.(P.37-38)
Mr Moon conceded an ongoing requirement for independence by the valuer and Mr Jonsson did not then pursue that as a question of construction.
Mr Jonsson initially agreed that if I concluded that there is a question of construction I need only then look at the agreement and that the facts and circumstances subsequent to the making of the agreement are not admissible in relation to that question. He then submitted (transcript page 41) that there is, "undeniably a question of construction arising out of the facts and circumstances or a number of them."
At the end of argument Mr Jonsson seemed to limit the question of construction to whether the agreement conferred power on the valuer to reconsider, amend or revise a valuation.
Mr Moon submitted that this did not involve a question of construction but if it did he would argue that the agreement contained an implied term that the valuer is able, in his discretion, for whatever reason, to revise his valuation.
Mr Moon's primary argument is that no question of construction arises under the agreement, on the contrary what the applicants really seek is a determination whether there has been a breach of the agreement. There is, he submits, no need to construe "independent" in clause 2; what the applicants really seek is a determination of whether or not the valuer was independent. Likewise, he submits, whether or not the valuer had the right to reconsider his opinion does not involve any question of construction; it does not involve construing any term of the agreement. He further submits that what the applicants really seek is relief related to the effect of certain terms of the agreement and whether or not those terms have been breached by the respondent and/or the valuer and that this is not a construction issue but an enforcement issue.
Both counsel are agreed that if any question of construction of this agreement is involved in this application then apart from the agreement the only other relevant evidence would be that there was a dispute between the parties, there was a mediation and the mediation gave rise to the agreement. This highlights the difficulty faced by the applicants. What they seek in paragraph 1 of the application is dependent on a determination of "events that have happened" (namely factual issues to be resolved) and a consideration of a valuation dated the 2nd of March 2006. In paragraph 2 similar considerations arise and it also involves a consideration of another valuation dated the 6th of June 2006 and probably whether that is part of the overall valuation of the business or a second or some other type of valuation. In my view there is substance in the submissions of Mr Moon. What is involved here are issues of fact not questions of construction of the agreement.
What the applicants ask me to do is not to construe what the agreement means but decide when a valuation is a valuation and how far the valuer was entitled to go in arriving at his valuation, what facts, matters, submissions, representations he could take into account, and which of the first or second valuations, assuming these are two separate valuations, is binding on the parties. Questions of fact relating to whether one of the parties improperly influenced the valuer, and why the valuer may have changed (if in fact he did) his valuation are also involved. There would also no doubt be issues involving the instructions given to the valuer and his interpretation of those instructions, that is, his contract, and whether the disputed valuation relates to the Townsville or the Cairns business or both. No provision of the agreement deals with these issues and no question of construction arises.
The written outline of submissions by Mr Jonsson also highlights the extent to which unresolved questions of fact are involved in the relief sought by the applicants. The extent to which the powers and role and skill and judgment of the valuer are involved is referred to in paragraph 16 where he submits that:
"...the parties agreed to entrust the quantification of an important incident of their transaction to the skill and judgment of a third party appointee."
Other issues of fact are referred to in paragraphs 22-52 including the contention in paragraphs 38-52 that the respondents are in breach of the agreement.
McHugh JA, then a member of the New South Wales Court of Appeal said in Legal & General Life of Australia Ltd v. A Hudson Pty Ltd [1985] 1 NSWLR 314 at 335-336:
"In my opinion the question whether a valuation is binding upon the parties depends in the first instance upon the terms of the contract, express or implied. It is easy to imply a term that a valuation must be made honestly and impartially. It will be difficult, and usually impossible, however, to imply a term that a valuation can be set aside on the ground of the valuer's mistake or because the valuation is unreasonable. The terms of the contract usually provide, as the lease in the present case does, that the decision of the valuer is "final and binding on the parties". By referring the decision to a valuer, the parties agree to accept his honest and impartial decision as to the appropriate amount of the valuation. They rely on his skill and judgment and agree to be bound by his decision. It is now settled that an action for damages for negligence will lie against a valuer to whom the parties have referred the question of valuation if one of them suffers loss as the result of his negligent valuation: Sutcliffe v. Thackrah (1974) AC 727; Arenson v. Arenson (1977) AC 405. But as between the parties to the main agreement the valuation can stand even though it was made negligently. While mistake or error on the part of the valuer is not by itself sufficient to invalidate the decision of the certificate of valuation, nevertheless, the mistake may be a kind which shows that the valuation is not in accordance with the contract. A mistake concerning the identity of the premises to be valued could seldom, if ever, comply with the terms of the agreement between the parties. But a valuation which is the result of the mistaken application of the principles of valuation may still be made in accordance with the terms of the agreement. In each case the critical question must always be: Was the valuation made in accordance with the terms of a contract? If it is, it is nothing to the point that the valuation may have proceeded on the basis of error or that it constitutes a gross over or under value. Nor is it relevant that the valuer has taken into consideration matters which he should not have taken into account or has failed to take into account matters which he should have taken into account. The question is not whether there is an error in the discretionary judgment of the valuer. It is whether the valuation complies with the terms of the contract."
This passage is, I think, quite apposite to the circumstances of the present case. The present agreement provides (clause 5) that the parties agree to be bound by the value of each business as determined by the valuer. What is alleged by the applicants here is effectively mistakes or errors by the valuer of a kind less than those which could be categorised as "not in accordance with the contract". Even if the mistakes or errors by the valuer could be said to be "not in accordance with the contract" it does not necessarily follow that such a conclusion involves a question of construction for the purposes of section 68(1)(b)(xiii). Whether the valuer proceeded by error or took into consideration matters which he should not have, such as further submissions or representations by the respondent, or erred in his discretionary judgment, are questions of fact not questions of construction arising under the agreement. Likewise a decision by the valuer to change his valuation for whatever reason does not involve any question of construction of the agreement.
See also WMC Resources Ltd v. Leighton Contractors Pty Ltd [1999] 20WAR 489 at 494-500, Covecorp Constructions Pty Ltd v. Indigo Projects Pty Ltd, unreported, [2002] QSC 322 at paras [29]-[36] per Muir J, and Zeke Services Pty Ltd v. Geaney & Ors, unreported, [2005] QSC 135 at paras [33] and [34] per Chesterman J.
For these reasons I am of the view that the present application does not involve the determination of any question of construction arising under the agreement between the parties dated the 10th of May 2005 and for that reason is not within the jurisdiction of the District Court to hear.
...
HIS HONOUR: I order that the applicants pay the respondent's costs of the hearing of the application to date in the District Court to be assessed on the standard basis unless agreed. Under section 85(2) of the District Court of Queensland Act I transfer the proceeding to the Supreme Court at Townsville.