Oberto v Ferguson[2012] QDC 39

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   In this matter the plaintiff makes application for summary judgment on its claim and alternatively for the defence, or parts of it, to be struck out.^[1]

2. [2]
   The plaintiff’s claim was filed on 10 June 2009. In essence the claim is for the payment of:

3. [3]
   From the claim and statement of claim, it is clear that the plaintiff’s cause of action is derived from section 76 of the Cheques Act, which relevantly provides:

4. [4]
   Accordingly, the plaintiff pleads that the defendant drew two cheques, respectively dated 31 March 2008 for $50,000 and 31 July 2008 for $100,000, each payable to him and that each cheque was dishonoured on presentation.

5. [5]
   In this regard, it can be noted that section 58 of the Cheques Act states a primary rule that “a person who is the drawer or an indorser of a cheque is not liable on the cheque unless the cheque is duly presented for payment” and that the liability of the drawer of a cheque is relevantly stated in section 71, as follows:

6. [6]
   By notice of intention to defend and a defence filed on 13 August 2009, the defendant admits the drawing, presentation and dishonour of each cheque but, in each instance, denies liability for the same reason, stated as follows:

The Summary Judgment Application

7. [7]
   The application for summary judgment is brought pursuant to UCPR 292. Accordingly the plaintiff bears the onus of satisfying the court that:-

8. [8]
   In Bolton Properties Pty Ltd v JK Investments (Australia) Pty Ltd,^[2] one of the more recent occasions upon which the Court of Appeal has dealt with the interpretation and application of this rule, it was reaffirmed that the rule is to be applied according to its language and that the phrase “no real prospect of successfully defending” was meant to distinguish from a fanciful prospect of success and that there is an additional requirement that there is no need for a trial of the claim or a part of the claim, before the discretion of the court may be exercised.  The defendant draws particular attention to the observations of Daubney J (at [78]):

“[78] …. Rule 292 also requires the judge to be satisfied that there is no need for a trial, and then, once the discretion arises, to exercise the discretion so conferred. The need to be satisfied in respect of this second element and, in any event, the proper judicial exercise of the discretion to grant or deny summary judgment are each matters which invoke the necessity for a judge to exercise great care, and proceed with appropriate caution, having regard to the patent seriousness of a decision to summarily terminate a proceeding by effectively denying a party the opportunity to present its case at a trial ‘in the ordinary way, and after taking advantage of the usual interlocutory processes’”

9. [9]
   Whilst the onus in respect of the application remains throughout on the plaintiff, where the plaintiff produces evidence supporting the key elements of its claim, it will usually entitle the plaintiff to its judgment, at least in the absence of demonstration by a defendant that it has a valid defence to the action.^[3]  Simple allegations as to a defence may not be sufficient and it may be necessary for a defendant to put before the court enough supporting material to show that there is an issue that requires a trial.^[4]

10. [10]
    It is, however, necessary to keep in mind the observation of McMurdo P in Deputy Commissioner of Taxation v Salcedo^[5]:

The Contentions

11. [11]
    The plaintiff provides evidence as to the necessary context in which he came into possession of these cheques, in that on or by 19 December 2007, the parties executed a deed by which the plaintiff agreed to sell his shares in two companies: EMerchants Holdings Pty Ltd (“EMerchants”) and Emerio Pty Ltd, to the defendant and the defendant agreed to make payment in three instalments. The defendant paid the first instalment by deposit of funds to the plaintiff’s account and provided the plaintiff with two post-dated cheques, for the amounts of the second and third instalments.^[6]

12. [12]
    The operative part of that deed was expressed as follows:-

13. [13]
    As the plaintiff deposes,^[7] reference to the records held by the Australian Securities and Investments Commission confirmed that by 8 November 2006 he held 720,000 shares in EMerchants and that the same number of shares were held by Simon Beitz, as a trustee.  The plaintiff claims that his entitlement to sell a total of 1,440,000 EMerchant shares is predicated upon an agreement which he made, on or about 31 January 2007 with Simon and Elaine Beitz, as trustees for the Beitz Family Trust and formalised in writing on 16 March 2007, as follow:

“Contract of sale of shares between Claudio Sandro Oberto and Simon and Elaine Betz as trustees for the Betz family trust

The Betz Family Trust of 760 Mt Cotton Road, Sheldon, Queensland, Australia, 4157 holds approximately eight percent (8%) of EMerchants Holdings Pty Ltd, the holding company for EMerchants Australia Pty Ltd.

Claudio Oberto undertakes to buy three percent (3%) of the eight percent (8%) held in EMerchants Holdings Pty Ltd from the Beitz Family Trust at a full price of eighteen thousand dollars (18,000.00 AUD) including any filing fees required by ASIC.

Claudio Oberto undertakes to pay an ‘extra’ four thousand Australian Dollars (4,000.00 AUD) as an option premium to secure an option over the remaining five percent (5%) shareholding held by the Beitz Family Trust in EMerchants Holdings Pty Ltd.  The option exercise/expiry date will be eighteen (18) months from the signing of this contract.  Claudio Oberto will have a right to exercise the option at any time up to the expiry date.

On the exercise of the option, Claudio Oberto will pay ten thousand Australian Dollars (AUD 10,000.00) for each one percent (1%) held by the Beitz Family Trust.”

14. [14]
    The defendant seeks to challenge the title of the plaintiff to the shares which were the subject of the agreement with the Beitz Family Trust. Although and as the plaintiff correctly points out, in his affidavit filed on 22 December 2011 (at [4]) the defendant only goes as far as to attest to:

 “My case in defence being, in short compass, a doubt in my mind that the plaintiff actually owns the full 1,440,000 shares that were to be exchanged between us for the sum of $200,000.00.”

 It can also be noted that the defendant in his further affidavit filed by leave on 23 December 2011, attests to his having told the plaintiff on or around 31 March 2008 that he “was not satisfied that he actually owned all of the 1,440,000 shares”.

15. [15]
    Essentially the plaintiff relies upon his rights of action based on the dishonoured cheques themselves. In this regard he points to the observations in decided cases at common law in respect of such a bill of exchange, such as those of Lord Russell in Nova (Jersey) Knit Ltd v Kammgarn Spinnerei GMBH:^[8]

“The bill is itself a contract separate from the contract of sale.  Its purpose is not merely to serve as a negotiable instrument, it is also to avoid postponement of the purchaser’s liability to the vendor himself, a postponement grounded upon some allegation of failure in some respect by the vendor under the underlying contract, unless it be total or quantified partial failure of consideration.”

and also from the judgment of Lord Wilberforce (at 720):

“I take it to be clear law that unliquidated cross-claims cannot be relied upon by way of extinguishing set-off against a claim on a bill of exchange … As between the immediate parties, a partial failure of consideration may be relied upon as a pro tanto defence, but only when the amount involved is ascertained and liquidated … When one person buys goods from another, it is often, one would think generally, important for the seller to be sure of his price: he may (as indeed the appellants here) have bought the goods from someone else whom he has to pay.  He may demand payment in cash; but if the buyer cannot provide this at once, he may agree to take bills of exchange payable at future dates.  These are taken as equivalent to deferred instalments of cash.  Unless they are to be treated as unconditionally payable instruments (as the Bills of Exchange Act 1882, s 3, says, ‘an unconditional order in writing’), which the seller can negotiate for cash, the seller might just as well give credit.  And it is for this reason that English law (and German law appears to be no different) does not allow cross-claims, or defences, except such limited defences as those based on fraud, invalidity or failure of consideration, to be made.  I fear that the Court of Appeal’s decision, if it had been allowed to stand, would have made a very substantial inroad upon the commercial principle on which bills of exchange have always rested.”

16. [16]
    Further, reference is also made to the judgment of Sachs J in Cebora SNC v SIP (Industrial Products) Ltd:^[9]

“Any erosion of the certainties of the application by our Courts of the law merchant relating to bills of exchange is likely to work to the detriment of this country, which depends on the international trade to a degree that needs no emphasis.  For some generations one of those certainties has been that the bona fide holder for value of a bill of exchange is entitled, save in truly exceptional circumstances, on its maturity to have it treated as cash, so that in an action upon it the Court will refuse to regard either as a defence or as grounds for a stay of execution any set off, legal or equitable, or any counterclaim, whether arising on the particular transaction upon which the bill of exchange came into existence, or, a fortiori, arising in any other way.  This rule of practice is thus, in effect, pay up on the bill of exchange first and pursue claims later.”

17. [17]
    Consistently with the import of those observations, some aspects of the Cheques Act can be noted:

18. [18]
    In response to this application, the defendant contends that he has real, as opposed to fanciful prospects of his success in defending the claim or, at least, that there needs to be a trial of the claim, in that:

1. (a)
   Section 76 of the Cheques Act operates on the basis of recovery from a person “liable on the cheque”;

2. (b)
   The concept of liability in section 76 (as defined in section 71) depends on the concept of “due presentment for payment”, which concept depends, in turn, on there having been “delivery of the cheque”;

3. (c)
   Whilst “delivery” in relation to a cheque is defined, in section 3, to mean “the transfer of possession of the cheque from one person to another”, the usual completion of the contract, by delivery of a cheque, does not apply in the circumstances set out in section 27 and section 28 of the Cheques Act; and

4. (d)
   Those are the provisions addressed by the pleading in his defence.^[12]

19. [19]
    It is then useful to set out the relevant provisions of sections 26, 27 and 28 of the Cheques Act (section 26 providing some context for the provisions in the latter two sections):

Discussion

20. [20]
    The defendant contends that it essentially emerges on the plaintiff’s own material that the cheques in issue were delivered for a special purpose (the acquisition of shares) and conditionally upon the plaintiff being able to pass title in the shares. It is submitted that the “case theory in defence is that the plaintiff would not present the cheques until such time as he transferred 1,440,000 shares … in the company EMerchants Holdings Pty Ltd … to the defendant”. Accordingly, it is contended that the right of the plaintiff to have presented the cheques is denied.

21. [21]
    As the plaintiff recognised in argument, there is also the potentiality of an issue of failure (at least partial) of consideration, that may arise and in this regard sought to emphasise the observations of Lord Wilberforce^[13] as to the need for the amount involved to be ascertained and liquidated.

22. [22]
    The Cheques Act deals with the concept of consideration as follows:

23. [23]
    The defendant’s contentions arise because:

24. [24]
    In essence, the plaintiff’s application rests primarily upon the facts that the cheques that have been delivered and dishonoured are, necessarily, on their face, unconditional instruments. To the extent that issues are raised about the plaintiff’s title to or ability to transfer the Beitz shares, it was contended that the determination as to whether title in those shares had passed to the plaintiff, was ultimately a question of law and that there had, at least, been substantial compliance with the requirements of the Shareholders Agreement.

25. [25]
    Whilst the plaintiff produces copies of emails dating back to 2006^[15], between various persons, including Tony Ferguson,^[16] Simon Beitz and himself, in respect of the proposed sale of the Beitz shares, it must otherwise be noted that the agreement of 19 March 2007,^[17] is complicated by being partially in respect of an option to purchase the larger part of those shares.  However, the plaintiff attests to having exercised that option on 2 July 2007 and also produces correspondence (dated prior to his agreement with the defendant) to other shareholders and to and from Tony Ferguson^[18], to demonstrate awareness of his dealings in respect of the Beitz shares and desire and intention to sell a parcel of 1,440,000 shares in EMerchants. 

26. [26]
    However, the defendant contends that the requirements under the Shareholders Agreement were as to consent rather than awareness and points out that the plaintiff’s material does not provide any sufficient basis for concluding that there has been any advance on the position stated by Tony Ferguson in a letter dated 12 April 2007,^[19] refusing a request to transfer shares from the Beitz Family Trust to the plaintiff and raising the lack of compliance with the Shareholders Agreement.  The defendant further relies on the affidavit of Tony Ferguson, filed by him in this application and confirming this state of affairs and particularly the absence of consent of other shareholders to any sale of the Beitz shares to the plaintiff and otherwise points out that no evidence has been produced from Mr Beitz, as to his compliance with the requirements for the sale of these shares, substantial or otherwise.

27. [27]
    In these circumstances, it is not possible to conclude that all of the necessary facts are before the court such as to allow for any conclusions as to whether there has been compliance (substantial or otherwise) with the Shareholders Agreement or that all of the facts which will be germane to the defences which the defendant has flagged under the Cheques Act, have been identified.

28. [28]
    Given the particular focus of this application upon the circumstances of the purported transfer of the Beitz shares to the plaintiff, what remains somewhat unclear are the precise circumstances in which the plaintiff and defendant executed their later agreement.  This is so particularly having regard to the obvious closeness of associations between a relatively small number of shareholders in this private company and also the defendant.^[20]  Also, contentions which appear in the plaintiff’s affidavit under the heading “Estoppel, waiver and affirmation of deed by defendant”, are not the subject of any pleading^[21] and may be unnecessary once the essential issues are properly distilled.

29. [29]
    Such considerations are not supportive of an exercise of discretion to grant summary judgment, as there appears to be the prospect that additional facts may be required before it could be determined that the plaintiff had the title to and ability to transfer the shares which were the subject of his agreement with the defendant, at least at the time he presented the cheques in issue.

30. [30]
    Whilst the analysis of the defendant’s contentions, (set out above) demonstrates that there appears to be a basis for the defendant to seek to defend this claim, an assessment as to whether or not there are real, as opposed to fanciful, prospects of successfully doing so, is more problematic. To an extent, this is a product of the state of the pleading in the defence^[22] and the consequence that all issues for a trial are yet to be fully defined. 

31. [31]
    On the state of the material, it is not possible to conclude that the plaintiff has established that the defendant has no real prospects of successfully defending this claim. More particularly, it is not established that there is no need for a trial of the claim.

Application to strike out the defence

32. [32]
    Although the plaintiff applies, in the first instance, that all of the defence be struck out, it is apparent that the real thrust of the alternative claim is for the striking out of those parts of the defence which fail to:

33. [33]
    It is contended that in these respects the pleading is embarrassing and should be struck out. From the reasons set out above, it is apparent that the defence is terse in reference to the matters arising under sections 27 and 28 of the Cheques Act and that it is also apparent that there are related and additional considerations arising under other sections of that Act and which relate to the entitlement claimed by the plaintiff pursuant to section 76 and that these considerations involve matters upon which the defendant will bear the onus of rebutting statutory presumptions.

34. [34]
    In support of this application, the plaintiff points to his request made of the defendant for the provision of further and better particulars as to references made in the defence to the “Condition “and “Special Purpose” alleged to have been attached to the delivery of the cheques and the allegations that the plaintiff was not the owner of the shares and could not convey the shares to the defendant, in letters dated 1 April 2010, 5 May 2010, and 11 November 2010^[24] and which have not elicited any response. 

35. [35]
    Pursuant to UCPR 171, a pleading or part of a pleading may be struck out if it “has a tendency to prejudice or delay the fair trial of the proceeding” or “is otherwise an abuse of the process of the court”. To the extent that the pleading is in the current form^[25], it can be concluded that it fails to properly plead all material facts, as required by UCPR 149(1)(b) and/or particulars as required by UCPR 157 and to that extent, at least, has a tendency to prejudice the fair trial of the proceeding and is otherwise an abuse of the process of the court.

36. [36]
    Accordingly, the plaintiff is prima facie entitled to an order striking out those parts of the defence which should be further supported by the pleading of material facts and/or particulars.  However, on the hearing of the application and subject to the outcome of the primary application for summary judgment, the defendant accepted the need to effect amendments to the defence, in order to properly comply with the rules and undertook to do so, if the plaintiff’s summary judgment application failed.

Conclusions

37. [37]
    In this case, and as matters stand, I am not satisfied that it would be appropriate to exercise the discretion provided in UCPR 292, in favour of the plaintiff. In particular, I am not satisfied, on the present material, that there is no need for a trial of the claim. Accordingly, the application of the plaintiff for summary judgment is dismissed.

38. [38]
    As to the alternative application, the defendant accepts the necessity for amendment of the defence and implicitly, therefore, what has been identified as the prima facie entitlement of the plaintiff to an order striking out parts of the defence but otherwise undertakes to amend the defence to remedy the defects.

39. [39]
    Therefore, I will hear the parties further as to appropriate orders and as to costs.