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- Raedel v Jezer Construction Group Pty Ltd[2007] QDC 49
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Raedel v Jezer Construction Group Pty Ltd[2007] QDC 49
Raedel v Jezer Construction Group Pty Ltd[2007] QDC 49
DISTRICT COURT OF QUEENSLAND
CITATION: | Raedel v Jezer Construction Group Pty Ltd & Ors [2007] QDC 049 |
PARTIES: | GREGORY MELVILLE RAEDEL and KATHLEEN THERESA RAEDEL (plaintiffs/respondents) v JEZER CONSTRUCTION GROUP PTY LTD (ACN 054 548 319) (first defendant/applicant) and COMPTON’S VILLAGE LIMTIED (ACN 072 993 987) (second defendant) and MICHAEL WAI-MAN CHOI, DORIS NGIE LIK CHOI (also known as DORIS TING) and PETER GRAHAM SCHMITH (third defendants/applicants) |
FILE NO/S: | BD1291/99 |
DIVISION: | Civil |
PROCEEDING: | Application |
ORIGINATING COURT: | District Court Brisbane |
DELIVERED ON: | 23 March 2007 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 30 January, 23 February 2007 |
JUDGE: | Rafter SC, DCJ |
ORDER: |
|
CATCHWORDS: | SUMMARY JUDGMENT – Review of interlocutory order – Assignment of book debts – Meaning of term ‘book debt’ – whether agreement to assignment of book debts effective to assign chose in action – Guarantee and indemnity – whether liability of guarantors dependent upon proved debt – Uniform Civil Procedure Rules 1999, rr 69, 293 |
COUNSEL: | Plaintiffs self-represented M Woodford for the first and third defendants |
SOLICITORS: | Plaintiffs self-represented Tucker & Cowen for the first and third defendants |
Introduction
- [1]This action was commenced on 1 April 1999 by Ramaville Pty Ltd ("Ramaville") against Jezer Construction Group Pty Ltd ("Jezer Construction") and Compton's Village Limited.
- [2]Ramaville claimed $80,897.38 pursuant to a subcontract agreement with Jezer Construction as reasonable remuneration for work done and material supplied at the request, and for the benefit of, Jezer Construction. It also claimed against both Jezer Construction and Compton's Village Limited that the sum was owed pursuant to the Subcontractors’ Charges Act 1974.
- [3]The claim was made in reliance upon a written agreement dated 7 August 1998 for the performance of landscaping services and the supply of materials at the site of Compton's Village at Caboolture.
- [4]Compton's Village Limited has taken no part in the proceedings apart from making a payment into court on 13 March 2002.
- [5]On 20 July 1999 Ramaville filed an amended plaint varying the claim to $77,403.38.
- [6]On 13 August 1999 Jezer Construction filed a defence and counter-claim contending, inter alia, that the work had not been performed in a workmanlike manner in accordance with all relevant drawings and specifications, and in the time nominated in the construction schedule. Jezer Construction counter-claimed a total sum of $278,580.55 for damages for breach of contract and liquidated damages.
- [7]On 10 August 2001 Ramaville filed a notice that it was no longer represented by solicitors.
- [8]On the same date an application was filed seeking orders that the present plaintiffs, Mr and Mrs Raedel be substituted for Ramaville. The affidavit of Mrs Raedel filed in support of that application stated that, on 14 September 2000 Ramaville assigned a debt owing by Jezer Construction to her and Mr Raedel. The affidavit stated that the sum of $77,403.38 (the amount claimed in the amended plaint) was owed to Ramaville trading as Sunshine Landscaping Supplies for landscaping works carried out at Compton's Village. The affidavit also stated that Ramaville had been wound up on 15 September 2000.
- [9]On 1 October 2001 Robin QC DCJ ordered that Mr and Mrs Raedel be substituted as plaintiffs in the action. On 20 November 2001 Mr and Mrs Raedel filed a further amended statement of claim by which they were named as plaintiffs. The further amended statement of claim also added the third defendants as parties, in reliance upon a deed of guarantee under indemnity, which it was said was entered into in March 2001. At that stage Mr and Mrs Raedel had not obtained an order permitting the joinder of the third defendants. They subsequently filed an application on 13 February 2002 seeking an order adding the third defendants to the action.
- [10]Mr and Mrs Raedel had not filed the further amended statement of claim within the time prescribed by r 74 Uniform Civil Procedure Rules 1999 ("UCPR"). On 25 February 2002 the further application by Mr and Mrs Raedel came before O'Sullivan DCJ. Her Honour made the following orders:-
- That Mr and Mrs Raedel be substituted as plaintiffs in the action.
- That Mr and Mrs Raedel be given leave to amend the claim to reflect the substitution of the parties.
- That the further amended statement of claim dated 23 December 2001 be set aside.[1]
- That the third defendants be added to the action.
- [11]The further amended statement of claim was filed on 7 March 2002. On 31 January 2007 the first and third defendants filed a further amended defence and counter-claim pursuant to leave granted on 30 January 2007. The total amount of the counter-claim was varied to $245,400.08. Mr and Mrs Raedel filed an amended reply and answer on 16 February 2007.
The application by the first and third defendants
- [12]The trial of this action was listed to commence on 30 January 2007. At the beginning of the trial counsel for the first and third defendants raised issues concerning the standing of Mr and Mrs Raedel to maintain the action and whether the third defendants had been properly joined as parties. The argument concerning the standing of Mr and Mrs Raedel to maintain the action involved a contention that there had been non-compliance with the requirement in s 199 Property Law Act 1974 for "express notice in writing" to be given to the debtor. It was also contended that the agreement dated 14 September 2000 between Ramaville and Mr and Mrs Raedel had not had the effect of assigning the present action because the property therein described included "book debts". It was argued that the disputed amount the subject of the action did not constitute a "book debt". In relation to the third defendants, it was argued that on a proper construction of the deed of guarantee and indemnity, it was premature for them to be joined as parties to the action.
- [13]Following argument it became clear that the trial could not proceed and the matter was adjourned to enable the first and third defendants to file an application. There were directions requiring the parties to file written submissions.
- [14]The application by the first and third defendants filed 9 February 2007 seeks the following orders:-
- That pursuant to UCPR r 293 judgment be entered for the first and third defendants on the claim;
- In the alternative, that pursuant to UCPR r 69 the plaintiffs be removed from the proceeding;
- That pursuant to UCPR rr 689 and 704 the plaintiffs pay the first and third defendants' costs of and incidental to the proceedings (being claim and counterclaim), including this application, on an indemnity basis; and
- Such further or other orders that the Court deems meet.
Power to review previous orders
- [15]The application seeking the removal of the plaintiffs from the proceeding effectively involves a review of the orders of Robin QC DCJ and O'Sullivan DCJ substituting Mr and Mrs Raedel for Ramaville.
- [16]When the matter came before Robin QC DCJ on 1 October 2001, the legal representative then appearing for Jezer Construction did not oppose the substitution of Mr and Mrs Raedel.
- [17]When the issue arose again before O'Sullivan DCJ the solicitor for the first and third defendants indicated that an oral application for their substitution, if made, would not be opposed.
- [18]The factors governing the circumstances in which an interlocutory order may be reconsidered are discussed in State Bank of New South Wales Ltd v Stenhouse Ltd & Ors.[2] Giles CJ, Commercial Division, as his Honour then was, said:
“The guiding considerations are oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice, and amongst the matters to which regard may be had are -
- (a)the importance of the issue in and to the earlier proceedings, including whether it is an evidentiary issue or ultimate issue;
- (b)the opportunity available and taken to fully litigate the issue;
- (c)the terms and finality of the finding as to the issue;
- (d)the identity between the relevant issues in the two proceedings;
- (e)any plea of fresh evidence, including the nature and significance of the evidence and the reason why it was not part of the earlier proceedings; all part of -
- (f)the extent of the oppression and unfairness to the other party if the issue is relitigated and the impact of the relitigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and
- (g)an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process."
- [19]It is clear that when O'Sullivan DCJ considered the issue of joinder of the third defendants on 25 February 2002, her Honour was not making a final decision. Her Honour said that the point was "arguable enough" to warrant the grant of leave to add the third defendants. However her Honour said to the solicitor then representing the third defendants: "If you want to come along before another chambers' judge on another day armed with full arguments that it should be struck out, then you can do that."[3] And the order made on that date expressly states; “Costs of the application today be reserved (pending later application re Third Defendant claim”). It is unfortunate that it was almost 5 years later on the first day of the trial that the application was made.
- [20]Having regard to the circumstances outlined in State Bank of New South Wales Ltd v Stenhouse Ltd, I consider that there is no impediment to the review of the order of O'Sullivan DCJ permitting the joinder of the third defendants. It is clear that there was limited opportunity to consider the matter and her Honour plainly left the issue open for reconsideration.
- [21]The orders permitting the substitution of Mr and Mrs Raedel for Ramaville were not opposed by Jezer Construction. In those circumstances, I would be reluctant to reconsider the orders of Robin QC DCJ and O'Sullivan DCJ substituting Mr and Mrs Raedel for Ramaville. In any event, I see no impediment to a proper consideration of the relevant issues in relation to the application by Jezer Construction for summary judgment pursuant to r 293 UCPR.
- [22]Rule 293 UCPR states:
- A defendant may, at any time after filing a notice of intention to defend apply to the court under this part for judgment against a plaintiff.
- If the court is satisfied-
- (a)the plaintiff has no real prospect of succeeding on all or a part of the plaintiff's claim; and
- (b)there is no need for a trial of the claim or the part of the claim;
- (a)
the court may give judgment for the defendant against the plaintiff for all or the part of the plaintiff's claim and may make any other order the court considers appropriate.
- [23]In Deputy Commissioner of Taxation v Salcedo Williams JA said:
“Summary judgment will not be obtained as a matter of course and the judge determining such an application is essentially called upon to determine whether the respondent to the application has established some real prospect of succeeding at trial; if that is established then the matter must go to trial.”[4]
Assignment from Ramaville to Mr and Mrs Raedel
- [24]As I have said, at the hearing on 30 January 2007 counsel for the first and third defendants relied upon what was said to be non-compliance with s 199 Property Law Act 1974, substantially because of the failure to give "express notice in writing" of the assignment to Jezer Construction. Mrs Raedel pointed out that in her affidavit filed 10 August 2001 she stated that debt had been assigned.[5] She pointed out that Mr Schmith, one of the third defendants, had sworn an affidavit filed 17 August 2001 in reply. Although Mr Schmith said that Jezer Construction had not been served with notice of the alleged assignment[6], Mrs Raedel contended that Jezer Construction clearly had notice of the assignment by reason of receipt by Mr Schmith of her affidavit filed 10 August 2001.
- [25]The written submissions filed by the first and third defendants on 9 February 2007 now accept that non-compliance with s 199 Property Law Act 1974 is immaterial to the plaintiffs standing to continue the action.[7]
Assignment in equity
- [26]The first and third defendants submit that the issue for determination is whether there has been an effective assignment of the proceedings in equity. The written submissions accept that: "Any clear expression of an intention by an assignor to assign a legal chose in action will be sufficient to assign it in equity; no particular form is required."[8]
- [27]Counsel for the first and third defendants argued that at the date of the agreement on 14 September 2000 there was no "book debt" capable of assignment because by that stage it was clear that the indebtedness was disputed by Jezer Construction; it had filed a defence and counter-claim on 13 August 1999.
- [28]Counsel placed considerable emphasis on the meaning to be ascribed to the expression "book debt", citing the following extract from Assignment of Choses in Action; "The accepted legal sense of book debt is that of debts owing to a business of the kind usually entered in books of account of the business, and in fact so entered although in certain cases the context of the particular statute concerned may not require the debts actually entered in the books of the business."[9]
- [29]
“The sale of business agreement does not define the term "book debts". Mr Hackett provided copies of' the entries in Strouds Judicial Dictionary (5th edition) and Words and Phrases Legally Defined (3rd edition). The former gives the following:
"All such debts as, in the ordinary course of carrying on business, would be entered in books, although not actually entered";
The latter provides a quote from Robertson v Grigg:
"[The phrase 'book debts] points to debts owing to a business, of a kind usually entered in books of account of the business and in fact so entered".
Gallop J, considering the nature of a book debt in Rex Developments Ply Ltd (in liquidation) was even more succinct: "surely it is an entitlement to payment". Whatever definition one adopts, I have no doubt that the amounts as itemised in the statement of claim are properly characterised as book debts."[11]
- [30]It is clear that a sum of money payable upon a future contingency does not constitute a debt in the strict sense.[12] However I do not think that the fact that a debt is disputed necessarily means that the amount said to be owed no longer has the character of a “book debt.” In any event, I consider that the issue in this case is whether the agreement had the effect of assigning the cause of action to Mr and Mrs Raedel.
- [31]It is necessary to have regard to the terms of the agreement dated 14 September 2000.[13] Under the heading “Background”, the agreement states as follows (so far as is relevant):
“C. Raedels purchase from Ramaville Pty Ltd the Book Debts and the Plant & Equipment on the terms set out in this agreement
. . .
E. Ramaville Pty Ltd has agreed to sell the stock, equipment and book debts on the terms set out in this agreement."
- [32]The operative provisions of the agreement state at paragraph 3:
“3. Ramaville Pty Ltd hereby sells to the Raedels, the Book Debts for the sum of $4,000.00. Raedels agree to pay Ramaville Pty Ltd by 15 consecutive monthly instalments of $266.67 each."
Schedule C of the agreement lists the book debts the subject of the agreement and includes the following:
“Book Debts
Money owed to Ramaville Pty Ltd by Jezer Constructions - District court File No 1291/1999 - $77,000.00, with counterclaim of $278,000.00"
- [33]
“Interpretation of a written contract involves, as Lord Hoffmann has put it (in Investors Compensation Scheme Ltd v West Bromwich Building Society): "the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract."[15]
- [34]Their Honours also cited the remarks of Lord Diplock in Antaios Compania Naviera SA v Salen Rederierna AB[16]:
“if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense."[17]
- [35]Having regard to the circumstances surrounding the agreement and the terms of the agreement itself, it is evident that the parties intended that the subject matter of the action be assigned to Mr and Mrs Raedel. Schedule C refers to the District Court file no and the approximate amounts of the claim and counter-claim. I see no obstacle to giving effect to the clear intention of the parties.
- [36]That leads me to the conclusion that the applications by the first defendant for the removal of the plaintiffs and for summary judgment must be dismissed.
Application by the third defendants
- [37]The relevant clauses of the guarantee and indemnity are as follows:
"Guarantors Liability
- The Guarantor guarantees to each creditor of Jezer the payment by Jezer of the amount of any proved debt.
- In the event that Jezer fails to pay the amount of a proved debt to a creditor of Jezer within thirty (30) days after it becomes a proved debt, the Guarantor agrees to pay the amount of the proved debt to the creditor.
- The Guarantor agrees to indemnify each creditor of Jezer against any loss which such creditor may suffer because, for any reason:
- 10.1Jezer does not pay to such creditor any amount which Jezer owes to such creditor; or
- 10.2Any principle of law prevents such creditor from recovering the whole or any part of an amount which would otherwise be recoverable by such creditor from Jezer; or
- 10.3Any payment to such creditor is, or is claimed to be, void or voidable or a preference; or
- 10.4Jezer is wound up or becomes insolvent."
- [38]The expression "proved debt" is defined in cl 6:
“In this Deed, the expression proved debt means a debt owed by Jezer to the BSA or to a subcontractor or supplier, which:
6.1_ Is or becomes admitted by Jezer, in writing, to be due and payable; or
6.2 Is or becomes the subject of a judgment or order against Jezer in a court or tribunal of competent jurisdiction, whether in Queensland or elsewhere (in which event the expression proved debt includes the total amount of such judgment, including interest and costs); or
6.2_ (sic) In the event that Jezer is under external administration becomes admitted to proof by the external administrator of Jezer.”
- [39]The third defendants submit that they have been prematurely joined in the action because there is no "proved debt" at this stage and accordingly cl 8 and cl 9 have no application. It is argued that cl 10 must be construed in the context of the whole of the agreement which essentially provides that the liability of the third defendants crystallises after the expiration of thirty days from the date that the amount becomes a "proved debt".
- [40]Mr and Mrs Raedel argue that cl 10 can be read independently of cl 8 and cl 9 and thereby creates liability, notwithstanding that there is not a "proved debt" at this stage.
- [41]It is necessary to have regard to the context in which the deed of guarantee and indemnity came into existence. The document recites that Jezer Construction was the holder of a contractor's licence granted by the Queensland Building Services Authority ("BSA"). By letter dated 21 February 2001 the BSA gave notice of the imposition of a condition on the licence held by Jezer Construction. Subsequently, Jezer Construction commenced proceedings in the Queensland Building Tribunal seeking a reversal of the imposition of the condition. The BSA had imposed the condition on the ground that it believed Jezer Construction may have insufficient financial resources to meet possible liabilities in relation to building works. Jezer Construction disputed that, and filed reports from a chartered accountant expressing the opinion that Jezer Construction was solvent and able to pay its debts when they fell due. It was against that background that the deed of guarantee and indemnity was entered into. The parties to the deed of guarantee were each of the third defendants, and Jezer Construction, and the Queensland Building Services Authority.
- [42]In a letter to the Court dated 18 February 2007, Mrs Raedel stated that she wished to subpoena a representative of the BSA to explain their intention in relation to the deed of guarantee and indemnity. However, at the hearing on 23 February 2007, she did not persist with that, recognising that even if that course was permitted, it would inevitably lead to the third defendants giving evidence as to their intention.
- [43]Mrs Raedel filed further affidavits on 16 February and 21 February 2007. It appears from a letter dated 20 February 2007 from the solicitors for the first and third defendants[18] that an issue had arisen as a result of Mrs Raedel having exhibited a privileged communication. In the end, it was not necessary to resolve that issue because Mrs Raedel did not contend that the document assisted in establishing that the debt was a “proved debt.” In the circumstances, it is not necessary to elaborate on the precise nature of the documentation.
- [44]The issue for determination is whether clause 10.1 applies. I do not consider that clause 10.2 has any application and clauses 10.3 and 10.4 clearly do not arise. Mr Woodford argued that clause 10.1 has operation where Jezer Construction “owes” a sum of money to a creditor. He said that a sum of money is not owed unless there is an obligation to pay. Mr Woodford argued that the definition of “creditor” in clause 5 (“… a person who is currently, or at any future time, is owed money by Jezer, whether or not the debt is disputed …”) was internally inconsistent and ambiguous.
- [45]
“A debt of its nature, is not a debt if there is a “dispute” as to whether or not there is a present entitlement. Similarly, a sum of money being “owed” is inconsistent with there being a “dispute”. Owed is consistent with “debt”, a debt being a present entitlement to a certain sum, that is, a sum certain that is owed.”
- [46]Mr Woodford referred to Ankar Pty Ltd v National Westminster Finance (Aust) Ltd[20] for the approach to be adopted in the construction of the guarantee and indemnity:
“At law, as in equity, the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety.”[21]
- [47]That statement has been described as a “settled principle governing the interpretation of contracts of guarantee.”[22]
- [48]Nevertheless, as Fryberg J pointed out in MSW Property Pty Ltd v Law Mortgages Queensland Pty Ltd:[23]
“On the other hand, in a passage cited by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW, Knox CJ said, “…experience shows that the words of many, if not most, documents inter partes are reasonably capable of more than one meaning.”
The passage cited from Ankar should not be construed as if it were contained in a statute”.[24]
- [49]My view is that clauses 8 and 9 were clearly intended to apply to the present circumstances. I do not think that clause 10 was intended to apply to precisely the same debt. By clause 10.1, the third defendants have agreed to indemnify creditors for any loss suffered because Jezer Construction does not pay any amount owed to such creditors.
- [50]I have reached the conclusion that the circumstances of the present case are covered by clauses 8 and 9. I do not consider that clause 10.1 has any application. It may be that clause 10.1 would apply to consequential losses arising from non payment by Jezer Construction of amounts owing to creditors.
- [51]I therefore accept the argument for the third defendants that they have been prematurely joined in the action and accordingly I would dismiss the plaintiffs' action against them. In their written submissions filed on 16 February 2007, Mr and Mrs Raedel sought an order that the action against the third defendants be adjourned. However, I consider that would be an unsatisfactory outcome.
Costs
- [52]At the further hearing on 23 February 2007, Mr Woodford for Jezer Construction accepted that if the first defendant’s application was dismissed, it was appropriate to order that it pay the plaintiffs' costs. Notwithstanding that the plaintiffs represent themselves, they have no doubt incurred outlays in connection with the application, which they are entitled to recover. Accordingly I would order that Jezer Construction pay the costs of Mr and Mrs Raedel in relation to the application for their removal from the action and the application for summary judgment by Jezer Construction.
- [53]Mr Woodford made written submissions in relation to costs being awarded on an indemnity basis. As I understood the written submissions, he primarily sought costs on that basis in the event that it was held that Mr and Mrs Raedel did not have standing to be substituted as plaintiffs for Ramaville. I have rejected that argument.
- [54]In relation to the application by the third defendants I see no basis for an award of costs on an indemnity basis. Accordingly I would order that Mr and Mrs Raedel pay the third defendants' costs including the costs of the application for summary judgment and the costs reserved by O'Sullivan DCJ on 25 February 2002.
Footnotes
[1] The date of 23 December 2001 seems to be an error. The further amended Statement of Claim had been filed on 20 November 2001. The transcript of proceedings on 25 February 2002 indicates that the further amended Statement of Claim filed 20 November was to be set aside (p 15)
[2] (1997) Aust Torts Reports 81-423 at (64,089).
[3] Transcript of proceedings District Court Brisbane 25 February 2002 page 21 line 10.
[4] [2005] 2 QdR 232 at 236-237 para [17].
[5] Affidavit of Kathleen Teresa Raedel filed 10 August 2001, para 2.
[6] Affidavit of Peter Graham Schmith filed 17 August 2001 para 3.
[7]Thomas v National Australia Bank Limited [2000] 2 Qd R 448.
[8]William Brandt's Sons Co v Dunlop Rubber Co Ltd [1905] AC 454, J V Property Syndicates Pty Ltd v Croakybill Pty Ltd (2006) Q Conv R 54-642, [2005] QCA 479, Norman v Federal Commissioner of Taxation (1963) 109 CLR 9.
[9] Assignment of Choses in Action (1972), Butterworths, J G Starke QC at 79.
[10] [2002] QSC 269.
[11] [2002] QSC 269 at [30].
[12] Assignment of Choses in Action (1972), Butterworths, JG Starke QC at 77, Bakewell v Deputy Federal Commissioner of Taxation (SA) (1937) 58 CLR 743 at 754, Day & Dent Constructions Pty Ltd (in liquidation) v North Australian Property Pty Ltd (1982) 150 CLR 85 at 109.
[13] ex KTR 1 to the affidavit of Kathleen Teresa Raedel filed 17 August 2001.
[14] (2001) 210 CLR 181.
[15] (2001) 210 CLR 181 at 188 [11].
[16] [1985] AC 191 at 201.
[17]Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at 198 [43]; see also JV Property Syndicates Pty Ltd v Croakybill Ltd (2006) Q Conv R 54-642 per de Jersey CJ at [18]-[19].
[18] ex KR 1 to Affidavit of Kathleen Teresa Raedel filed 21 February 2007
[19] Written submissions for the first and third defendants filed 9 February 2007 at p 15.
[20] (1987) 162 CLR 549
[21] (1987) 162 CLR 549 at 561
[22] Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 256; Andar Transport Pty Ltd v Brambles Ltd (2004) 78 ALJR 907 at 911
[23] [2003] QCA 487
[24] [2003] QCA 487 at [57]-[58]