Cardrona Property Pty Ltd v Cars.com.au Pty Ltd
[2016] QDC 93
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- Cardrona Property Pty Ltd v Cars.com.au Pty Ltd[2016] QDC 93
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Cardrona Property Pty Ltd v Cars.com.au Pty Ltd[2016] QDC 93
Cardrona Property Pty Ltd v Cars.com.au Pty Ltd[2016] QDC 93
DISTRICT COURT OF QUEENSLAND
CITATION: | Cardrona Property Pty Ltd v Cars.com.au Pty Ltd [2016] QDC 93 |
PARTIES: | CARDRONA PROPERTY PTY LTD (first plaintiff) and TAYSIDE PTY LTD (second plaintiff) and DANNY SAMMUT (third plaintiff) v CARS.COM.AU PTY LTD (first defendant) and MICHAEL JOHN NORRIS (second defendant) and LEANNE NORRIS (third defendant) |
FILE NO/S: | D 4887/2013 |
DIVISION: | |
PROCEEDING: | Civil Trial |
ORIGINATING COURT: | District Court at Brisbane |
DELIVERED ON: | 22 April 2016 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 10, 11 February 2016 |
JUDGE: | McGill SC DCJ |
ORDER: | Judgment that the defendants pay the first plaintiff $138,918.57; the second plaintiff $86,824.10; and the third plaintiff $43,412.05. |
CATCHWORDS: | CONTRACT – Conditional contract – settlement agreement – whether conditions satisfied – whether breach of agreement – whether breach of another agreement – whether contract procured by economic duress or unconscionable conduct. Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 – cited. Barton v Armstrong [1976] AC 104 – cited. Bridgewater v Leahy (1998) 194 CLR 457 – cited. Carr v Gilsenan [1946] St R Qd 44 – considered. Doggett v Commonwealth Bank of Australia [2015] VSCA 351 – cited. Dunwoodie v Teachers Mutual Bank Ltd [2014] NSWCA 24 – cited. Electricity Generation Corporation v Woodside Energy Ltd (2014) 88 ALJR 447 – applied. Electricity Generation Corporation v Woodside Energy Ltd [2013] WASCA 36 – applied. Garcia v National Australia Bank Ltd (1998) 194 CLR 395 – cited. MJ Arthurs Pty Ltd v Portfolio Housing Pty Ltd [2015] QCA 86 – applied. Magnacrete Ltd v Douglas-Hill (1988) 48 SASR 565 – cited. Maskell v Horner [1915] 3 KB 106 – cited. McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 – applied. Pico Holdings Inc v Wave Vistas Pty Ltd (2005) 79 ALJR 825 – applied. Queensland Alumina Ltd v Alinta DQP Pty Ltd [2006] QSC 391 – followed. Schultz v Bank of Queensland Ltd [2015] QCA 208 – cited. Smith v William Charlick Ltd (1924) 34 CLR 38 – applied. Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 – applied. Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (1936) 54 CLR 361 – applied. Yerkey v Jones (1939) 63 CLR 649 – cited. |
COUNSEL: | K W Wylie for the plaintiffs. The second defendant appeared for the defendants. |
SOLICITORS: | R B Flinders Lawyers for the plaintiffs. The defendants were not represented. |
- [1]On or about 15 March 2013 all of the parties to this proceeding executed a written agreement identified as a Deed of Settlement and Release: Exhibit 2. I will set out the terms of the document in more detail shortly, but in essence it provided that, on a date six months after the completion of another agreement, the first defendant would pay $120,000 to the first plaintiff, $75,000 to the second plaintiff and $37,500 to the third plaintiff. Those payments were guaranteed by the second and third defendants. They have never been made, and by this proceeding the plaintiffs seek to recover the respective amounts as money payable under that agreement. The defendants deny that they are liable to pay the plaintiffs these amounts, on the basis that certain terms of the agreement, and terms of other agreements, have not been complied with by the plaintiffs, or on the basis that the circumstances surrounding the execution of the agreement are such as to render it unenforceable against the defendants. The plaintiffs’ claims are relatively straightforward, and the real issue is whether any of the defences raised by the defendants are made out.
Background
- [2]The plaintiffs were persuaded to invest a significant amount of money in a business referred to as NSI[1] by the second defendant, which they said was on the basis of promises by the second defendant that the investment would greatly increase in value because a big investor was coming on board.[2] The project was to establish an internet based news service, and the plaintiffs were told that a large number of domain names had been acquired. They were supposed to have their investment in the project secured by having some of these domain names put into their names,[3] but the plaintiffs maintained that that never occurred, and indeed they never received any documentary proof of ownership of any shares in any company associated with the project. Eventually they made contact with other people who had also invested, and other people supposedly associated with NSI, and in time negotiations occurred for the amounts invested in the project to be repaid: p 12.
- [3]This was documented on the basis that the investors had entered into agreements to purchase shares in NSI from the first defendant, and some had entered into option agreements to purchase additional shares, but no transfers of such shares had been registered, the NSI group intended to sell its assets to a company registered in the British Virgin Islands, and, out of the proceeds of that sale, to pay (relevantly) the plaintiffs the amount of their investments in accordance with a deed of settlement and release: Exhibit 1. In addition, the third plaintiff and the individual associated with the first and second plaintiffs, Mr Smith, each entered into a confidentiality deed,[4] and finally the plaintiffs and the defendants entered into the deed of settlement and release for additional payments to be made to the plaintiffs: Exhibit 2. It is common ground that the repayment under Exhibit 1 of the amounts invested occurred, but the plaintiffs lost the use of this money for a period of some years, and the additional amounts payable under Exhibit 2 were sought as compensation for this (p 16), and for other loss sustained by the plaintiffs.
- [4]Mr Smith said in evidence essentially that this money had been obtained by various things said by the second defendant which were not true: (p 30), or at least the things that had been promised by the second defendant had not come about. The second defendant however asserted that he was a very successful business man, the managing director of and major shareholder in a company International News Network Limited based out of Hong Kong: p 103-4. He asserted that it was a decision made by him and his associates that the plaintiffs would not be involved in the new company to which the assets of NSI were to be transferred, and this led to the breakdown in the relationship between him and Mr Smith: p 104-5. The second defendant was not cross-examined on his credit, or indeed at all, on the basis that it was unnecessary for this factual dispute to be resolved in order to decide the matters in issue on the pleadings, which is correct.[5]
Deed of settlement and release Exhibit 2
- [5]This document is dated 15 March 2013. Its execution by all parties was admitted on the pleadings.[6] By clause 1 the deed was conditional upon and subject to completion of the Asset Sale Agreement, a term defined in clause 8.1 as the asset sale agreement and generally between NSI Holdings Pty Ltd and AustraliaNews.com.au Pty Ltd as vendors and INN Domains Pty Ltd as purchaser. It was admitted on the pleadings that completion of the Asset Sale Agreement occurred on 24 April 2013.[7]
- [6]Clause 2.1 of the agreement provided as follows:
“Subject to:
2.1.1 clause 1; and
2.1.2 the Sammut/Smith parties[8] executing the NSI Deed of Settlement and Release and the Confidentiality Deed;
2.1.3 the Sammut/Smith parties strictly complying in all respects with the terms of the NSI Deed of Settlement and Release and the Confidentiality Deed;
2.1.4 the Sammut/Smith parties strictly complying in all respects with the terms of this deed; and
2.1.5 receipt by Ihilani[9] of an invoice from the Sammut/Smith parties for the amounts referred to in this clause,
Ihilani agrees to make the following payments to the Sammut/Smith parties on the date that is (6) months after the date on which completion of the Assets Sale Agreement occurs:
2.1.6 Cardrona - $120,000;
2.1.7 Tayside - $75,000;
2.1.8 Sammut - $37,500.”
- [7]Clause 2.2 provided that the payments were made without admission of liability, in full and finial satisfaction of all claims which the Sammut/Smith parties have or may have in relation to the relevant matters, something defined in clause H of the recitals to the deed as matters arising out of the agreements to purchase NSI shares and options, and any other dealings that the Sammut/Smith parties have had with the second defendant’s companies.
- [8]I have already referred to the fact that on the pleadings it was admitted that clause 1 was satisfied. It was also admitted that the Sammut/Smith parties, that is to say, the plaintiffs, executed the NSI Deed of Settlement and Release (Exhibit 1) and the Confidentiality Deed.[10] Strictly speaking, there were two Confidentiality Deeds, one executed by Mr Smith (Exhibit 3) and one executed by Mr Sammut (Exhibit 8), although it was alleged in the Statement of Claim that Mr Smith entered into his on behalf of himself and the plaintiffs: clause 9E.
Alleged breaches of agreements
- [9]The defendants alleged that the plaintiffs had not complied in all respects with the terms of the confidentiality deeds; it was not alleged that the plaintiffs had failed to comply with any term of the NSI deed of settlement and release, Exhibit 1. The defendants alleged there was a breach of clause 2.4 of the confidentiality deeds, in that the plaintiffs has misrepresented that they had not made any disclosure of the identity of the third party investor prior to the date of the confidentiality deed, when in fact they had: defence para 6(b)(8)(A)(i).
- [10]There is however some divergence between the parties to the deed of settlement and release and the parties to the confidentiality deeds. The third plaintiff was a party to one of the confidentiality deeds, but the other was entered into between International News Network Limited[11] and Mr Smith, who was a director of each of the first and second plaintiffs, and effectively the person who acted on their behalf in the negotiations, but was not personally a party to the deed of settlement and release. Clause 2.1 of Exhibit 2 referred to “the Sammut/Smith parties”, defined on the cover and the first page as “the persons specified in schedule 1”, and schedule 1 listed just the plaintiffs. The first and second plaintiffs however were not parties to any confidentiality deed, so there could be no question of their complying in all respects with its terms. Such an interpretation would not deprive clause 2.1.3 of meaning, because the first and second plaintiffs were parties to the NSI deed of settlement and release, Exhibit 1, and the third plaintiff was a party to both documents.
- [11]There are other difficulties with the confidentiality deeds. Each deed recited that “the recipient”, that is the other party to the deed, has been informed of “the identity of a third party investor of the company” which is said to be extremely sensitive commercial information. The recipient’s obligation under the deed was to keep absolutely confidential “the confidential information”, defined in clause 1.1 as
“the identity of a third party investor of the company and all information directly or indirectly disclosed or made available by or on behalf of the company to the recipient (whether orally, electrically or in material form).”
- [12]Read literally that would extend to any information ever provided on any topic by International News Network Limited to the recipient, but bearing in mind the recitals to the deed, and clause 2.5 which spoke of the unique, extraordinary and intellectual character of the confidential information, which would hardly apply to any information on any topic whatever provided to the recipient by the company,[12] I consider that the definition of “confidential information” should be read down to mean information about the identity of a third party investor. The difficulty here is that nowhere in the deed is the identity of the relevant third party investor set out. I accept that it may be possible to show, by evidence as to the common understanding of the parties at the time the deed was executed, that this was a reference to a particular third party investor,[13] but there was no evidence to that effect.
- [13]Mr Smith’s evidence was that the second defendant had spoken at different times of a number of prominent organisations and individuals as potential investors in NSI,[14] but he did not know what investor was covered by the deed, and the second defendant in his evidence said nothing which could support a finding that there was a common understanding between the parties at the time the deed was executed as to the identity of the third party investor.[15] Indeed, he did not even disclose in his evidence whom he had in mind himself as the relevant third party investor. In these circumstances, it is impossible to prove the content of the information which was to be kept confidential under the confidentiality deeds, and therefore impossible to prove there has been any breach of them, either by Mr Smith or by one or other of the plaintiffs, even assuming that the deed bound the first or second plaintiffs, which on its face it did not.
- [14]I suppose it may be that the true construction of the confidentiality deeds is that they applied to the identity of any third party investor of the company, although that was not contended for by the defendants, and is contrary to the use of the singular in recital A of the deeds. That would overcome this difficulty, but not the others.
- [15]There is the further difficulty that there was no evidence of any disclosure of any confidential information by Mr Smith or Mr Sammut, or anyone else, prior to the execution of the confidentiality deed. There was simply no evidence to support the allegation that prior to the execution of the confidentiality deed there had been some disclosure of the identity of any third party investor to anyone which arguably was disclosable, so that non-disclosure was a breach of that deed, and hence a breach of clause 2.1 of the agreement.[16] The position therefore is that the defendants’ allegation that there was a breach of clause 2.4 of the confidentiality deeds was not made out.
- [16]The defendants also alleged that there was a breach of clause 2.1 of the confidentiality deed in that, after the date of the deed, the plaintiffs divulged the confidential information to persons other than as permitted in the confidentiality deed. The difficulties referred to earlier about the inability to identify the confidential information covered by the deed, and the issue of parties to the confidentiality deed, arise here as well, and again there was no evidence of any disclosure of any such information after the confidentiality deed was executed.[17] It was not clear from what the second defendant said what were the particular matters relied on as a breach of the confidentiality deed. At one point it seemed to be suggested that the letter sent by the third plaintiff on 15 November 2013 (Exhibit 10) amounted to a breach of the obligation of confidence, but there was nothing in that letter which could amount to confidential information for the purposes of the confidentiality deed. In any case, the only evidence was that it was received by and seen by the second defendant: p 114.[18] Presumably any information received from International News Network Limited must have come through the second defendant, so it could hardly be a breach of the deed to disclose information to the second defendant.
- [17]It was also alleged by the defendants that there was a breach of clause 6.1 of the agreement, by disclosing the existence of the agreement and its terms. This was alleged to have occurred during a conversation at a restaurant at Mermaid Beach on 30 November 2013, between the third plaintiff and Mr Smith and the son of the second and third defendants, within the hearing of other persons present in the restaurant. This conversation was also said to be a breach of clause 6.3 of the agreement. Clause 6.1 required the existence and terms of the deed of settlement and release Exhibit 2 to be kept strictly confidential, and clause 6.3 provided that the Sammut/Smith parties also agreed not to make any adverse, critical or disparaging statements, allegations or comments with respect to the conduct of any other party to this deed or the NSI deed of settlement or release. It may be noted that clause 6.1 allowed disclosure of the terms of the deed in the case of breach of any of the terms of the deed: 6.1.5. Once the obligation to make the payment had crystallised, and the payment was not made, there had been a breach of the terms of the deed by the defendants, with the result that the plaintiffs were no longer subject to the restriction in clause 6.1. On the view I take, that had occurred well before 30 November 2013. That however did not affect the restriction in clause 6.3.
- [18]There is no doubt that Mr Smith and the third plaintiff met Mr Christopher Norris at that restaurant on 30 November 2013.[19] Most of the conversation was recorded by Mr C. Norris, and the recording and transcript were put in evidence: Exhibits 4, 5. Among other things, Mr Smith said of the second defendant, and presumably his associates, “they ripped us off”, and of the second and third defendant, that they owed him money and had “stole money off us again”. The third plaintiff said various uncomplimentary things about Mr C. Norris, who does not have the protection of clause 6, but did at one point say “your dad owes money” and later that “they owe us money”, apparently referring to the second and third defendants. On the plaintiffs’ case of course that was a simple statement of fact, and as will be apparent from these reasons was correct, but I am not sure that clause 6.3 excludes critical or disparaging statements which happen to be true.
- [19]The short answer to these allegations is that prior to 30 November 2013 the obligation to make the payment under clause 2.1 had crystallised, so that it was not simply a contractual obligation to pay, but the amount referred to in that clause had become payable as a debt. Clause 2.1.3 does not identify the period during which there must be no breach of the terms of the NSI deed of settlement and release and the confidentiality deeds, and clause 2.1.4 does not identify any time during which there must be strict compliance with the terms of the deed of settlement and release, but these cannot be ongoing precedent obligations, otherwise the liability to make the payments referred to in clause 2.1 would never crystallise. There is another issue about the interpretation of clause 2.1 which I will deal with shortly, but prima facie the obligation to make the payments crystallised six months after the date of completion of the Asset Sale Agreement, which on the pleadings occurred on 24 April 2013.
- [20]By clause 7.14 of the deed any non-payment of the amount referred to in clause 2 was said to be conclusive proof of the debt due and immediately payable, and the parties agreed and acknowledged that a certificate provided by any of Sammut or Smith parties could be used as evidence of that for any court of law. That clause operates to make non-payment prima facie evidence of the debt being due and owing,[20] so strictly speaking all the plaintiffs have to prove are the execution of the agreement, the completion of the Asset Sale Agreement, and the failure to make the payments referred to in clause 2.1. There is an issue which I will deal with separately about the effect of clause 2.1.5, but on any view of the matter the obligation to make the payments crystallised on either 24 October 2013, or the first day after that date when an invoice satisfying clause 2.1.5 was received. For reasons I will state shortly, that occurred well before 30 November 2013, so by that date the obligation to make the payment had already crystallised and was owing as a debt. In those circumstances no breach of the contract by the other party, or even termination of the contract, is effective to discharge the obligation to make that payment.[21]
- [21]It was also alleged that clause 6.3 was breached because on 15 November 2013 a document was placed in the general letter box of the unit complex in which the second and third defendant reside, which was subsequently seen by the unit complex manager: defence clause 6(8)(d)(ii). The answer to this allegation is that there was no evidence that the unit complex manager saw that letter. This defence therefore fails. Overall therefore it has not been shown that the plaintiffs failed strictly to comply in all respect with the terms of the agreement Exhibit 2.
Invoice
- [22]Clause 2.1.5 required receipt by the first defendant of an invoice for the amounts referred to in the clause. There are two issues arising in relation to this requirement. The first is whether the invoice was required to be received prior to the date that was six months after the date of completion of the Asset Sale Agreement, and the second is whether an invoice was ever received by the first defendant.
- [23]As to the former question, clause 2.1 is expressed as an obligation on the part of the first defendant to make certain payments on a particular date, an obligation which is made subject to various things including receipt of the invoice. If the obligation to make the payment is subject to the receipt of the invoice, the payment can only be made on the particular date if the invoice is received on or before that date. On this basis it was argued that the natural reading of the clause is that the invoice must be received prior to the date which is six months after the date of completion of the Asset Sale Agreement. The real issue here however is whether a failure to receive an invoice on or before that date means that the first defendant is discharged from its obligation to make the payments under the deed, or whether the obligation is merely postponed until the invoice has been received.
- [24]The clause is a curious one, not just because there is no particular form of invoice specified by the agreement. An invoice is simply a document in writing setting out what amount is claimed as owing, though not necessarily immediately payable.[22] Given that the agreement was subject to the completion of the Asset Sale Agreement, which depended upon the actions of persons not parties of this agreement, it was always possible that the obligation to pay this money would never come about, and indeed until the Asset Sale Agreement was completed it would have been premature to issue an invoice in respect of money payable under this agreement.
- [25]There is the further consideration that the completion of the Asset Sale Agreement was something that would occur between the NSI group and the purchase of the assets, so that the plaintiffs would not necessarily know whether and when completion of that agreement had occurred. They would not be parties to it. It is true that under the other deed of settlement and release, Exhibit 1, NSI was required to pay the settlement amount, that is the amounts invested, to the plaintiffs (and others) on what was described as “the settlement date” (clause 1.1), a term defined as three business days after the date on which the Asset Sale Agreement was completed: clause 8.1. Hence if NSI complied with this deed according to its terms, it would be apparent to the plaintiffs from the fact of payment both that the Asset Sale Agreement had been completed, and when it had been completed. But that depended upon the proper observation, by a company which was not a party to the agreement Exhibit 2, of its obligations under a different deed, Exhibit 1, according to its terms.
- [26]The plaintiffs would not necessarily know the date of completion of the Asset Sale Agreement, and therefore would not necessarily know the date on which money became payable under the agreement Exhibit 2. That would apply strictly speaking even if the money payable under Exhibit 1 had been received, because they would not necessarily know whether it was paid on the third business day after the day on which the Asset Sale Agreement was actually settled.[23] It would in my opinion be an odd outcome if the clause on its true construction required the giving of an invoice by the plaintiffs prior to a particular date which the plaintiffs were not necessarily in a position to be able to identify.
- [27]There is also the consideration that if the intention had been that the invoice must be received prior to the date for the payment under clause 2.1, it would have been easy enough for clause 2.1.5 to have said so. As a general principle courts strive to interpret contracts in a practical, commercial, business-like way.[24] The function of this agreement was in essence to “top up” the payment to be made to the plaintiffs under the other deed Exhibit 1, on the basis that the plaintiffs alleged that the payments to be made under Exhibit 1 were not adequate to compensate them for the losses they had suffered. It was a type of settlement agreement, and settlement agreements should generally be interpreted in a way which facilitates carrying out the settlement.[25] In the light of all these considerations, I find that on the true construction of the agreement Exhibit 2 clause 2.1.5 did not impose an obligation to provide an invoice on or before the date for payment by the first defendant under clause 2.1. I do not interpret the agreement as providing that, if the invoice was not received on or before that date, the obligation to make the payments was discharged. It simply meant that the obligation to make the payment was deferred until the invoice was received.
- [28]The plaintiffs’ pleadings relied on invoices in the form of demands in writing by Mr Smith on behalf of the first and second plaintiffs on 13 October 2013, and by the third plaintiff on that date, and on demands in writing by a firm of solicitors on behalf of all three plaintiffs on 23 October 2013. The evidence was, however, more complicated than that. Mr Smith said that he wrote out an invoice which he sent by post addressed to the second defendant: p 21. He was vague about the date on which this was sent, but he did say he sent it a few days after the date for payment.[26] The second defendant denied that he had received that invoice: p 114. Mr Smith did not keep a copy, and there was no evidence as to the content of the invoice except that it referred to both the first and second plaintiffs: p 75. In these circumstances I am not prepared to accept this as evidence that an invoice stating anything in particular was sent at that time. I do not find that this was an invoice satisfying clause 2.1.5.
- [29]The third plaintiff said that in the week or so after payment was due he provided the second defendant with an invoice. He said he went to the house where the second defendant lived, and pressed the intercom button: p 96. A woman answered and he asked “Is that Leanne Norris?”, she said yes, he said “I have a document for you”, and she came down and met him at the gate and he handed it to her. A copy of this document was made Exhibit 9. The document was addressed to the second defendant, and said “note the following amount is due on the 29/10/13 as per document. The amount due $37,500 Danny Sammut” and it was signed by the third plaintiff.
- [30]It was not suggested to the third plaintiff in cross-examination that the document had not been handed in at the Norris residence that day, but the third defendant was called and said that she had never taken anything from Mr Sammut, and had never seen the invoice, Exhibit 9, before: p 129.[27] Neither witness was cross-examined about this in any detail, and there is, on the face of it, no reason to reject the evidence of either. Both as parties have an interest in the outcome of the proceeding. It occurs to me that the evidence of the witnesses could be reconciled on the basis that there was no evidence that the third defendant was actually known personally to the third plaintiff, and it could have been a woman other than the third defendant who came to the gate and took the document from the third plaintiff: p 96.
- [31]Given that the third plaintiff had gone to the trouble of preparing this document, and that the second and third defendants lived close to where the third plaintiff lived, I consider that the third plaintiff’s evidence is inherently plausible, and, essentially for this reason, prefer the evidence of the third plaintiff and accept that the invoice, Exhibit 9, was hand delivered to the second defendant’s residence. The alternative explanation is that the third plaintiff has fabricated the document and the account of hand delivering it in order to avoid an argument about the absence of an invoice, but that does not strike me as plausible, if only because, if this account had been fabricated in order to meet the defence of the absence of an invoice, I would have expected the third plaintiff to have said that the invoice was delivered prior to the date which was six months after completion of the Asset Sale Agreement, and to have been addressed to the first defendant.
- [32]The difficulty with this document is that, on the face of it, it is not an invoice to the first defendant, and under the agreement the responsibility for the payment fell on the first defendant, with the second and third defendants being responsible only as guarantors. In those circumstances, I consider that an invoice to satisfy clause 2.1.5 ought to have been addressed to the first defendant, and Exhibit 9 was not.
- [33]By letters dated 23 October 2013 solicitors for the plaintiffs wrote to each defendant demanding payment of the money payable under the agreement.[28] Each letter to the first defendant was addressed relevantly to “Mr Michael John Norris, Cars.com.au Pty Ltd” followed by the residential address of the second defendant. The second defendant executed the agreement, Exhibit 2, as director and as secretary of the first defendant,[29] and in those circumstances I consider that sending a document to him amounted to sending it to the first defendant, and receipt of these letters by the second defendant was receipt of them by the first defendant. He acknowledged receipt of the letters.[30] There was some dispute as to whether a copy of Exhibit 2 had been enclosed with the letters.[31] The letter on behalf of the third plaintiff amounted to a demand for payment of $37,500. There was also a demand for payment of an amount of costs, but I do not think this matters; it constituted a written document seeking payment of the amount payable under the agreement, and satisfied the requirement for an invoice received by the first defendant, for the payment to the third plaintiff.
- [34]In the case of the letter in relation to the first and second plaintiff, the heading referred only to “Debts due to Tayside Pty Ltd” and advised that the solicitors acted for that company, but it claimed payment of $195,000 said to be owing to “Tayside and Cardrona”. I do not think that this limited reference to the first plaintiff matters. Clause 2.1.5 did not require an invoice from each of the plaintiffs for the amount payable to that plaintiff, but merely “an invoice from the Sammut/Smith parties for the amounts referred to in this clause”. The singular words in the agreement include the plural[32] so there could be one or more invoices from one or more of the Sammut/Smith parties for the amount or amounts referred to in the clause, and this amounted to one invoice for two amounts, the amount of $120,000 payable to the first plaintiff and the amount of $75,000 payable to the second plaintiff. It therefore also satisfied the requirement of clause 2.1.5. Upon receipt of Exhibit 6, the obligation to make the payments under clause 2.1 crystalized.
- [35]There was a further document prepared by the third plaintiff and delivered to the second defendant on 14 November 2013: Exhibit 10; p 97. This was put in the mailbox at the units where the defendants lived. This document was purportedly given on behalf of both the third plaintiff and Mr Smith, but was addressed to only the second and third defendants, and therefore suffered from the same difficulty as Exhibit 9. It also referred to the full amounts in the letters from the solicitors, not just the amounts payable under the agreement. I accept that it was sent, and the second defendant’s evidence was that it was received by him and hence by the first defendant,[33] but I do not consider that it qualifies as an invoice to the first defendant.
Duress and unconscionability
- [36]The defendants further pleaded that the guarantee of the third defendant was unenforceable because there was no consideration provided to her to support the promise to guarantee performance by the first defendant of its obligation under the agreement: para 8(c). This is not a good defence as a matter of law. It is not necessary for the consideration flowing from the plaintiffs to pass to the third defendant in order to make the contract enforceable against the third defendant; all that is required is that the plaintiffs give some consideration for the third defendant’s promise: Pico Holdings Inc v Wave Vistas Pty Ltd (2005) 79 ALJR 825 at [66], per curiam.
- [37]It was further alleged by the defendants that the agreement was void or unenforceable because it was signed under duress, because the plaintiffs engaged in unconscionable conduct by using undue harassment, pressure, unfair tactics and coercion to induce the defendants to enter into the agreement: para 8A. The evidence in support of this allegation came from the second and third defendants. The second defendant said that Mr Smith had said that he would be away for two and a half weeks so that if he was to sign the Deed of Settlement and Release Exhibit 1 before he left Australia it would be necessary for this further Agreement, Exhibit 2 to be put in place before that occurred.[34] This gave the defendants only a very short time, in effect one day, to prepare the document and to have it executed in order to meet this deadline.[35]
- [38]There was however nothing unconscionable or unreasonable about any pressure that this put the defendants under. Insofar as there was some urgency from their point of view in getting Exhibits 1 and 2 signed, it arose because of their desire to complete the Asset Sale Agreement, which they were evidently unable to do until Exhibit 1 was signed. The fact that for commercial reasons which really had nothing to do with the plaintiffs the defendants wanted to have the Asset Sale Agreement completed, and were therefore under some commercial pressure to obtain the execution of Exhibit 1, and hence Exhibit 2, may mean that with Mr Smith going overseas for some time there was some practical pressure on the defendants to get Exhibit 2 executed before he left, but that pressure did not come from the plaintiffs; rather it came from the defendants’ desire to complete the Asset Sale Agreement as soon as possible.[36] There was in my opinion clearly nothing unconscionable in the plaintiffs’ insisting on the execution of Exhibit 2 before they would agree to enter into Exhibit 1.
- [39]There was clearly no duress in the traditional sense, of immediate threat of physical violence.[37] The defendants in substance were arguing for the ground of economic duress, but that arises ordinarily only in circumstances where a party refuses to comply with an existing contractual obligation except in return for some additional benefit, or refuses to give effect to some right, except in return for a payment the defendant is not entitled to demand.[38]
- [40]One example where economic duress was found is Carr v Gilsenan [1946] St R Qd 44, a decision of the Full Court. The plaintiff contracted for the purchase of a car at the price permitted by the National Security (Prices) Regulations, but after settlement of the transaction the vendor refused to execute a transfer of registration form unless an additional sum was paid. The plaintiff paid that sum but after he had received the signed transfer sued to recover the money. A judgment in his favour was upheld by the Full Court, on the basis that it was paid involuntarily and under undue pressure by the defendant: p 46.
- [41]This was because the defendant was under a contractual duty to do all things necessary to enable the plaintiff to obtain registration of the car, and if money is paid to induce another to perform a duty which should be performed anyway the money paid can be recovered. Another example is a situation where the goods of the plaintiff are wrongfully detained and the plaintiff has to pay an amount of money to secure their release; if the detention was wrongful, money paid to secure the release of the goods will be recoverable.[39]
- [42]On the other hand, there is authority for the proposition that there is no right to recover money which is paid in order to induce the other party to do something which it was under no legal obligation to do: Smith v William Charlick Ltd (1924) 34 CLR 38 at 51 per Knox CJ. In that matter Isaacs J said at p 56:
“It is clear that duress created by persons or circumstances unconnected with a party to a contract is no cause for impeaching the bargain with him. Refusal to relieve from business difficulties is not the creation of those difficulties. It is not the same thing as wielding the whip or the rod.”
- [43]The passage in the judgment of Isaacs J was applied in Magnacrete Ltd v Douglas-Hill (1988) 48 SASR 565 at 593. Rich J at p 68 said:
“Once it is conceded… that there was no obligation on the Board… to enter into business relations with the respondent, there was nothing in the facts which made the respondent’s payment involuntary in the legal sense.”
- [44]Starke J at p 70 said:
“The money was, no doubt, paid unwillingly, and the payment was dictated by the trade interests of the petitioner. But it was, nevertheless, paid voluntarily, in the legal sense, and with full knowledge of the facts and without any unlawful compulsion, extortion, undue influence, or the abuse of any duty which the Wheat Board owed to the petitioner.”
- [45]The same point arose recently in litigation in Western Australia in relation to certain contracts for the supply of gas: Electricity Generation Corporation v Woodside Energy Ltd [2013] WASCA 36. In that matter the parties had entered into a contract for the provision of natural gas in what was said to be a long term supply agreement, one term of which in effect obliged the sellers to use reasonable endeavours to make available a certain additional amount of gas per day. In the event the sellers declined to make available the additional amount of gas unless the buyers agreed to pay the then current market price for such gas, and the buyers paid that price under protest, and then sought to recover the amount paid as money paid under economic duress. The claim succeeded in the Court of Appeal of Western Australia, on the basis that there was a breach of the contractual obligation by the sellers, so that they had applied illegitimate pressure in securing the higher price, although no cause of action arose for unjust enrichment unless and until the short term gas supply agreements (for supply at the higher price) were rescinded: see [33], [44], [201]-[206].
- [46]The matter however went on appeal to the High Court: (2014) 88 ALJR 447. There it was held that there had been no breach of the long term supply agreement by the sellers, with the result that the foundation of the conclusion of the Western Australian Court of Appeal fell away. The effect of this on a claim for economic duress was not debated in the High Court, it being agreed between the parties that, if that interpretation of the contract were correct, there was no claim available based on economic duress, but the outcome is consistent with the approach in Smith v William Charlick Limited (supra), that there was no economic duress in a threat not to do something which there was no legal obligation to do.
- [47]In the Court of Appeal of Western Australia, McLure P stated that for the common law doctrine of economic duress it was necessary to show that illegitimate pressure had been applied, and that pressure which was not unlawful, (including in breach of a contract) would only be illegitimate if there was no reasonable or justifiable connection between the pressure being applied and the demand which that pressure supported: [24]-[26]. This analysis has since been cited in the Court of Appeal of Victoria: Doggett v Commonwealth Bank of Australia [2015] VSCA 351 at [73]. See also Dunwoodie v Teachers Mutual Bank Ltd [2014] NSWCA 24.
- [48]In the present case, there was no evidence that the plaintiffs were aware of any pressure being placed on the defendants by anyone else in relation to the completion of the Asset Sale Agreement, or the NSI Deed of Settlement and Release. There is the further consideration that, as pointed out in the submissions on behalf of the plaintiffs, there was no prompt avoidance of the agreement by the defendants after the alleged economic duress ceased to be applied.[40] The proposition that the agreement was void was not raised until the Amended Defence was filed on 7 July 2015. The defendants had previously, in an earlier defence, sought to rely on the plaintiffs’ failure to comply with certain terms of the agreement,[41] which is inconsistent with asserting that the agreement was void, and in those circumstances, if they had a right to avoid the agreement, they would have lost it.
- [49]I consider however that it is clear that there was no economic duress in the present case, because there was a reasonable connection between what the plaintiffs were seeking to achieve through the execution of the Exhibit 2 and the pressure being applied in not executing Exhibit 1 without Exhibit 2. The latter provided for compensation for the loss of use of the money invested, and once they executed Exhibit 1, they would give up any right to claim for that amount in the future: clause 2.1 of Exhibit 1.
- [50]It is not clear whether there was some allegation that there was unconscionable conduct on the part of the plaintiffs other than in the form of economic duress, but unconscionability arises in circumstances where one party is placed at a special disadvantage vis a vis another and unfair or unconscientious advantage is taken of the opportunity thereby created.[42] This does not arise simply because of some inequality of bargaining power.[43] There was in the present case no pleading of any relevant special disadvantage, and on the face of it there was no ground for imputing any special disadvantage to the second defendant, who on his own evidence was a very successful business man.
- [51]As to the position of the third defendant, the mere fact that she was the second defendant’s wife does not necessarily give rise to any relevant special disadvantage. Her evidence was that on the afternoon on which she signed the agreement Exhibit 2 the second defendant had told her that there was a problem with the deal going through and that she had to sign a document as a guarantor otherwise it would not go through: p 128. She said that she was not happy with that but when told the deal would not go through without it and that the document had to be signed immediately otherwise Mr Smith would be going overseas, she signed. There was no evidence that she did not properly understand the implications of signing as guarantor, and any pressure on her to sign arose because she was desirous of ensuring that “the deal” went through. She specifically said she was not told by her husband she had to sign the document: p 128.
- [52]There was no proper background laid for a finding of special disadvantage on her part. On the face of it she simply decided that it was sufficiently in her interest for the deal to go through for her to be willing to sign the guarantee without further consideration and without taking time to obtain legal advice. There was no evidence that the absence of legal advice led to her executing the document under any relevant misapprehension as to its terms or effect.[44] Overall I am not persuaded that there has been any unconscionable conduct on the part of the plaintiffs in relation to the execution by the defendants of the agreement Exhibit 2, and therefore no ground on which it could be avoided on the basis of unconscionability. This defence also fails.
- [53]It follows that none of the defences pleaded by the defendants in this matter are made out. The plaintiffs are therefore entitled to judgment against the first defendant under the agreement for the debts, and against each of the second and third defendants, as guarantors. The payment to the plaintiffs crystallised upon receipt of the letter from the solicitors; this was dated 23 October but on the evidence was actually posted on 25 October 2013.[45] It had to come from Melbourne to the Gold Coast, but I am prepared to find that it was delivered and hence received by the first defendant on or before 30 October 2013. The payments under the agreement therefore became due on that date, and the plaintiffs are entitled to interest from that date.
- [54]Exhibit 2 contains no provision for interest. In those circumstances interest may be ordered under the Civil Proceedings Act 2011 s 58. I will allow interest in accordance with the practice direction, which in the case of the amount payable to the first plaintiff comes to $18,918.57 to the date of judgment, in the case of the amount payable to the second plaintiff, $11,824.10 to the date of judgment and in the case of the amount payable to the third plaintiff, $5,912.05 to the date of judgment. Therefore I give judgment that the defendants pay the first plaintiff $138,918.57 including $18,918.57 by way of interest, the second plaintiff $86,824.10 including $11,824.10 by way of interest, and the third plaintiff $43,412.05 including $5,912.05 by way of interest. I assume that costs will follow the event, but will receive submissions on costs when these reasons are published.
Footnotes
[1] News and Sport International Ltd, an Australian registered company.
[2] Smith p 8.
[3] Smith p 9.
[4] Exhibit 8 (third plaintiff); Exhibit 3 (Smith).
[5] Nevertheless, I note that the second defendant does not have one thing which in my experience a very successful business man always has: lawyers.
[6] Second further amended statement of claim filed 21 January 2015 (“statement of claim”) para 8; amended defence filed 7 July 2015 (“defence”) para 4.
[7] Statement of claim para 9C; defence para 6(10).
[8] That is, the plaintiffs.
[9] That is, the first defendant.
[10] Statement of claim para 9D, 9E; defence para 6(b)(2).
[11] Said to be a company registered in the British Virgin Islands.
[12] There was in any case no evidence of what information had been disclosed by International News Network Ltd, rather than by the second defendant, or the first defendant.
[13]Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40].
[14] But not as investors of International News Network Ltd. See Smith p 9 (Fairfax); p 10 (2 others not named); p 12 (James Packer and a Mr Walker); p 13 (Gina Rinehart). He did say at one point that he had been told by Norris not to tell anyone about Gina Rinehart: p 13.
[15] He said he always referred to that person as “party X”: p 110.
[16] The defendants’ position was that because no names had been disclosed in Schedule 2 of Exhibits 3 and 8, these must have been breaches: p 112.
[17] Mr Smith denied any disclosure to anyone ever: pp 18-9. He was not crossexamined on this.
[18] The effect of the evidence at p 114 lines 19-30 was that he received Exhibit 10 but did not receive Exhibit 9.
[19] Smith p 19, p 69; C Norris p 121.
[20]Property Law Act 1974 s 57.
[21]McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-7; Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (1936) 54 CLR 361 at 379-80; MJ Arthurs Pty Ltd v Portfolio Housing Pty Ltd [2015] QCA 86 at [10].
[22] Originally a list of goods shipped with prices and charges: Jowitt’s Dictionary of English Law (2nd Ed 1977) Vol 1 p 1008. That would not apply here – no goods.
[23] According to the second defendant, the payments under Exhibit 1 were in fact made on the date the Asset Sale Agreement was completed: Norris p 111. That would have suggested the wrong date as the date of completion.
[24]Electricity Generation Corporation v Woodside Energy Ltd (2014) 88 ALJR 447 at [35]; Queensland Alumina Ltd v Alinta DQP Pty Ltd [2006] QSC 391 at [77].
[25] Foskett on Compromise (8th Ed 2015) p 69.
[26] Smith pp21, 23. He did not clarify when he then thought the date for payment was. Exhibit 6 suggests that he then had the date wrong.
[27] Oddly, this came out in cross-examination; the second defendant did not lead this in evidence in chief.
[28] Exhibit 6; Gdanski p 77.
[29] A presumption of continuance applies; there was no evidence he did not still hold these positions.
[30] Norris p 114. His copies of the letters became Exhibit 11: p 115.
[31] I do not think this matters, but if I had to decide it I would find that the copy of Exhibit 2 was not enclosed with the letter.
[32] Clause 8.2.10 of Exhibit 2.
[33] Norris p 114.
[34] Norris p 107, 8; Smith p 25.
[35] For the timeline, see Norris pp 109, 110.
[36] Norris pp 107, 8. Smith said his offer to enter into (in effect) Exhibit 2 had been “on the table” for two weeks: p 16, p 23.
[37]Barton v Armstrong [1976] AC 104.
[38] See generally Seddon and Ellinghaus, “Cheshire and Fifoot’s Law of Contract” (9th Aust Ed 2005) para 13.7 et seq.
[39]Maskell v Horner [1915] 3 KB 106.
[40] The court in Dunwoodie (supra) also confirmed that a contract entered into under duress is voidable, not void: [55].
[41] Defence filed 211 February 2014 para 6(b)(8)(C) and (D). These allegations remain in the current defence.
[42]Bridgewater v Leahy (1998) 194 CLR 457 at [75].
[43]Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at [11], [55], [56].
[44] Hence there was no basis for the application of the rule in Yerkey v Jones (1939) 63 CLR 649. See Garcia v National Australia Bank Ltd (1998) 194 CLR 395, at 409; Schultz v Bank of Queensland Ltd [2015] QCA 208.
[45] Exhibit 7; Gdanski p 78; Exhibit 11, postmark on envelope.