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John Hopkins Financial Services Pty Ltd v De Lene[2018] QDC 252

John Hopkins Financial Services Pty Ltd v De Lene[2018] QDC 252

DISTRICT COURT OF QUEENSLAND

CITATION:

John Hopkins Financial Services Pty Ltd v De Lene & Anor [2018] QDC 252

PARTIES:

JOHN HOPKINS FINANCIAL SERVICES PTY LTD (ACN 109 346 625)

(appellant)

v

DONALD JOHN DE LENE

(first respondent)

and

THE PUBLIC TRUSTEE OF QUEENSLAND as Executor of the Estate of Rita Jessie Leane, deceased

(second respondent)

FILE NO/S:

3787/18

DIVISION:

Trial Division

PROCEEDING:

Originating application

ORIGINATING COURT:

Brisbane

DELIVERED ON:

7 December 2018

DELIVERED AT:

Brisbane

HEARING DATE:

29 November 2018

JUDGE:

Everson DCJ

ORDER:

  1. It is declared that the first respondent is indebted to the applicant in accordance with the Deed of Acknowledgement referred to in the Affidavit of John Hopkins affirmed 19 October 2018 (“the Deed”) in the amount of $280,931.08. 
  1. It is declared that, by the Deed, all of the first respondent’s right, entitlement and interest in the Estate of the late Rita Jessie Leane (Deceased) (“the Estate”) is charged to the applicant.
  1. The second respondent is directed to pay such part of the Estate to which the first respondent would have been entitled, but for the Deed, as follows:
  1. (a)
    the second respondent’s costs of and incidental to the Application on the indemnity basis; and
  1. (b)
    the balance to the applicant.
  1. The first respondent is to pay the costs of the applicant of and incidental to this proceeding on the indemnity basis.

CATCHWORDS:

CONTRACTS – CONSTRUCTION OF PARTICULAR CONTRACTS – DEED – where the first respondent and the applicant had an agreement for the provision of bookkeeping services – where the first respondent overcharged the applicant by $280,931.08 – where the first respondent entered into a deed with the applicant assigning the first respondent’s interest in his mother’s estate to the applicant in satisfaction of the debt – where the first respondent subsequently alleged the deed was signed under duress

Colgate Palmolive Co. v Cussons Pty Ltd (1993) 43 FCR 225

Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40

FTV Holdings Cairns Pty Ltd v Smith [2014] QCA 217

COUNSEL:

Mr M Jones for the applicant

SOLICITORS:

Paxton-Hall Lawyers for the applicant

Introduction

  1. [1]
    In this proceeding the applicant seeks declarations and orders pursuant to a Deed of Acknowledgement entered into between the applicant and the first respondent on about 1 July 2015 (“the Deed”).
  1. [2]
    The first respondent, who appears on his own behalf, opposes the relief sought on the basis that he only signed the Deed under duress. The second respondent does not oppose the relief sought and did not appear on the hearing of the application.[1]
  1. [3]
    Although the Deed contained a clause that it would be governed by the law in Victoria and its courts and tribunals together with the Federal Court of Australia, the applicant and the first respondent expressly consented to the District Court of Queensland exercising jurisdiction in respect of this dispute in circumstances where the funds in respect of which the relief is sought are held in Queensland and the first respondent resides here.[2]  In not opposing the relief sought in this proceeding the second respondent implicitly also consented. 
  1. [4]
    In 1999 the applicant and a company controlled by the first respondent entered into an agreement whereby bookkeeping and associated financial services were provided to the applicant by the first respondent. In October 2013, Mr Hopkins, a director of the applicant became aware that the company controlled by the first respondent had overcharged the applicant for services, which had not been rendered, in the total amount of $280,931.08. The company controlled by the first respondent went into liquidation on 14 October 2013 and the applicant was unable to recover any of the debt. Negotiations began with the first respondent with a view to recovering the debt from him personally and in the course of these negotiations the first respondent raised the possibility of signing over his interest in his mother’s estate to the applicant.[3]  These negotiations led to the applicant and the first respondent entering into the Deed. 

The Deed

  1. [5]
    The first respondent is referred to as DLD in the Deed. Relevantly the Deed contained the following provisions:

“Recitals

A. In 1999, Albatross International Pty Ltd ACN 093 281 700 (“Albatross”) and John Hopkins entered into an agreement whereby Albatross would provide the services of DLD to John Hopkins to initially provide bookkeeping services, which evolved during the engagement period up to termination date to include oversight of the financial operations of John Hopkins and other general management duties (“the Agreement”).

B. Pursuant to the Agreement, Albatross issued invoices to John Hopkins in respect of the services it purported to have provided to John Hopkins (“the Invoices”).

C. John Hopkins paid the Invoices as rendered.

D. On or about 14 October 2013, John Hopkins realised that:

  1. (a)
    many of the Invoices rendered to it by Albatross were in respect of services that DLD and/or Albatross had not provided; and
  1. (b)
    It was not liable to pay those Invoices even though it had paid them in full

E. The amount charged by Albatross in the Invoices in respect of which it has no entitlement is $280,931.08 including GST (“the Amount”)

F. John Hopkins has made a demand on Albatross to repay the Amount.

G. Albatross went into liquidation on 14 October 2013 and is unable to repay the Amount.

H. At all material times, DLD was director and officer in effective control of Albatross and the individual primarily providing the services through Albatross to John Hopkins.

I. By this Deed, DLD acknowledges that Albatross overcharged John Hopkins the Amount and undertakes to personally repay the Amount to John Hopkins as a debt due to John Hopkins (“the Debt”).

J. Among other things, DLD also agrees to charge his future interest to the Estate of his mother, Rita Jessie Leane, in favour of John Hopkins as security for payment of the Debt.

2. Acknowledgement of Debt

2.1 In consideration of:

  1. (a)
    John Hopkins agreeing not to take legal action within 30 days of the date of this Deed against DLD or Albatross for recovery of the Debt; and
  1. (b)
    other valuable consideration which DLD acknowledges receipt of,

DLD has agreed to enter into this Deed and to pay the Debt to John Hopkins in accordance with its terms.

2.2 Without in any way limiting clause 2.1, DLD acknowledges and agrees that he personally is indebted to John Hopkins for the Debt and agrees to repay it in accordance with the terms of this Deed.

4. Estate

4.1 Without in any way limiting the operation of clause 3, DLD agrees to charge his interest (whether current or future) in the Estate of his mother, Rita Jessie Leane (“Estate”) he may own or become entitled to (whether beneficially or otherwise) from time to time as security for payment of the Debt, Interest and the Costs.

4.2 DLD agrees to immediately notify John Hopkins when he receives any payment from the Estate.

5. Repayment of Debt

5.1 Subject to clauses 5.2 & 5.3, DLD agrees to pay the Debt, Costs and Interest to John Hopkins within 7 days of the earlier of:

  1. (a)
    John Hopkins serving written notice that it requires the Debt to be paid (which notice must not be served within 30 days of the date of this Deed pursuant to clause 2.1); or
  1. (b)
    the date that DLD receives any payment from the Estate.

5.2 DLD’s liability to pay the Debt, Costs and Interest will be extinguished on the 10th anniversary of the execution date of this Deed.

5.3 The maximum amount that DLD will be required to pay in respect of the Debt, Costs and Interest will be $600,000.

6. Legal Advice

6.1 DLD certifies that:

  1. (a)
    he has had the opportunity of taking independent legal advice in relation to the meaning and effect of this Deed; and
  1. (b)
    he enters into this Deed fully and voluntarily based on his own information and investigation.

7. Costs

7.1 DLD agrees to pay John Hopkins all of John Hopkins legal costs and disbursements, stamp duty and accounting fees:

  1. (a)
    in relation to an incidental to preparation of this Deed;

  1. (e)
    incurred by John Hopkins in observing or performing any covenants or agreements contained or implied in this Deed

14. Document Confidential

14.1 Each party must keep the terms of this Deed confidential and must not cause or permit any person to disclose the terms of this Deed without the consent of the other party except:

  1. (a)
    where necessary for the exercise of any right or compliance with any obligation under this Deed;

19. Entire Agreement

This Deed represents the entire agreement reached between the parties and no terms or representations not expressly included in this Deed will be deemed to apply.”

The absence of duress

  1. [6]
    The first respondent alleges that the applicant subjected him to “constant threats and pressure” which induced him to sign the Deed “under considerable duress”.[4]  He further alleges that “the threat of taking criminal action against me was always used as a weapon to get me to sign the deed”.[5]  The first respondent is effectively alleging that the Deed is void or voidable because his execution of it was procured as a consequence of economic duress.  The meaning of this term was explained in Crescendo Management Pty Ltd v Westpac Banking Corporation[6] by McHugh JA in the following terms:

“The proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate?  Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct.  But the categories are not closed.  Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress.”

  1. [7]
    Mr Hopkins who gave evidence on behalf of the applicant flatly denies ever threatening the first respondent with criminal prosecution.[7]  He also corrected a reference to the Deed being entered into in consideration of the applicant “not reporting the overcharging to the police” in paragraph 11 of his affidavit, stating that this was incorrect as the Deed does not express itself in these terms.[8]  His evidence in this regard is correct as there is no reference of the Deed being in consideration of the overcharging recorded therein not being referred to the police.[9]  Correspondence surrounding the negotiation of the Deed was tendered.[10]  This correspondence together with other correspondence exhibited to the affidavits of Mr Hopkins and the first respondent filed in this proceeding does not either disclose any threats of the overcharging being referred to the police or any conduct which in my view could be viewed as illegitimate as defined in Crescendo Management Pty Ltd v Westpac quoted above.  Rather the conduct of the applicant to the first respondent is reflective of the evidence of Mr Hopkins that he considered the first respondent a close and reliable friend “in a very personal sense as well as a business sense”.[11]  I accept without reservation the evidence of Mr Hopkins.  I found him to be both an honest and reliable witness.
  1. [8]
    Conversely I found the evidence of the first respondent most unconvincing and I do not accept his evidence except where it is corroborated by the written record before the court or the testimony of Mr Hopkins. Despite the applicant discovering the gross betrayal of trust of the first respondent and the significant misappropriation of its money to the benefit of the first respondent in October 2018, the Deed was not finalised and signed by the first respondent until almost two years later. The negotiations were handled tactfully and respectfully. It was the first respondent who nominated the expectancy of his inheritance from the estate of his mother as a means of reimbursing the applicant and this enabled him to offer something to the applicant which ultimately avoided recovery proceedings and possible bankruptcy, in circumstances where he readily admitted he was completely impecunious and unable to pay back the money which he had misappropriated.[12]  I also observe that it was entirely foreseeable that, had the matter been referred to police, a criminal prosecution would have likely resulted in the first respondent serving a not inconsequential custodial sentence.  The first respondent was also successful in negotiating the inclusion of cls 5.2 and 5.3 into the Deed which placed a ten year sunset clause on his liability to repay the money which he had misappropriated, interest thereon and costs and capped his exposure at $600,000.[13]
  1. [9]
    It is therefore disingenuous for the first respondent to now assert that many clauses of the Deed were “totally incomprehensible to me, especially the clauses covering Security for the debt”.[14]  When I pressed him as to what he meant by this he conceded that it was a bit nonsensical.[15]  Ultimately he conceded that the security offered was “part of my mother’s estate, all of it, if I was in a position to hand it all over at that point of time”.[16]  Effectively the first respondent purported to have offered a security which he contends he should be allowed to revoke at his election.  He asserts that “it was not my intent to necessarily commit all of my inheritance towards the Debt, although that was a possible future option”.[17]  This is not what the Deed says and not what was intended by the parties when regard is had to the negotiations leading up to the signing of it.
  1. [10]
    Curiously despite the first respondent expressly acknowledging in the Deed that he had been responsible for overcharging the applicant to the extent of $280,931.08, he now asserts that this figure is incorrect. He claims that the amount was overstated by $90,000. However, in circumstances where the inheritance he is to receive from the estate is limited to $157,443.58 this assertion is of no consequence.[18]  In any event, I find that the amount misappropriated through the actions of the first respondent was correctly stated in the Deed.
  1. [11]
    There is no evidence before me which I accept of any illegitimate pressure placed upon the first respondent which could conceivably found a defence of duress.

The Deed created an equitable assignment

  1. [12]
    I accept the evidence of Mr Hopkins that upon the death of the first respondent’s mother, the first respondent became evasive about her estate and that it was necessary for the applicant to contact the executor, namely the second respondent, to make it aware of the Deed.[19]  I find that this was entirely appropriate and permissible pursuant to cl 14.1 of the Deed.  This occurred in circumstances where cl 4.1 of the Deed operated as an equitable assignment of the amount of the prospective inheritance of the first respondent which was sufficient to cover the amount the first respondent was obliged to pay pursuant to the Deed.  As Fraser JA observed, albeit in a different context, in FTV Holdings Cairns Pty Ltd v Smith:[20]

“In Palmer v Carey the Privy Council approved a statement in Rodick v Gandell that “an agreement between a debtor and a creditor that the debt owing shall be paid out of a specific fund coming to the debtor, or an order given by a debtor to his creditor upon a person owing money or holding funds belonging to the giver of the order, directing such person to pay such funds to the creditor, will create a valid equitable charge upon such fund, in other words, will operate as an equitable assignment of the debts or fund to which the order refers.”  That is the effect of the agreement upon the terms of the Authority between the appellant and the borrowers.  The borrowers did not merely promise that they would fund payment of the appellant’s debt from the proceeds of the sale of their house.  The borrowers agreed to appropriate the proceeds of sale to the appellant to the extent necessary to discharge the appellant’s debt.”

Accordingly the second respondent holds this amount on trust for the applicant.

  1. [13]
    For the sake of completeness I observe that by letter dated 16 August 2018 to the first respondent, the applicant’s solicitors unsuccessfully made a demand for payment of the debt pursuant to cl 5.1(a) of the Deed so the amount owing by the first respondent became payable within the 7 day period specified therein.[21]

Conclusion

  1. [14]
    It is appropriate that I make the declarations and orders in the terms sought by the applicant. Accordingly:
  1. It is declared that the first respondent is indebted to the applicant in accordance with the Deed of Acknowledgement referred to in the Affidavit of John Hopkins affirmed 19 October 2018 (“the Deed”) in the amount of $280,931.08. 
  2. It is declared that, by the Deed, all of the first respondent’s right, entitlement and interest in the Estate of the late Rita Jessie Leane (Deceased) (“the Estate”) is charged to the applicant.
  3. The second respondent is directed to pay such part of the Estate to which the first respondent would have been entitled, but for the Deed, as follows:
  1. (a)
    the second respondent’s costs of and incidental to the Application on the indemnity basis; and
  1. (b)
    the balance to the applicant.

Costs

  1. [15]
    The applicant seeks its costs of an incidental to the application on the indemnity basis both pursuant to cl 7.1 of the Deed and because the conduct of the first respondent constitutes a groundless challenge to both the debt pursuant to the Deed and the enforceability of the Deed.[22]  It also seeks to be reimbursed for the costs of the Public Trustee which will be deducted from the proceeds of the estate as these will be deducted from the amount payable to the first respondent.  Clause 7.1 of the Deed effectively provides for the awarding of indemnity costs incurred by the applicant in observing or performing any covenants or agreements contemplated or implied by the Deed.  It is appropriate to order the costs of the applicant be paid on the indemnity basis both pursuant to the Deed and because of the groundless contentions of the first respondent. In my view, however, cl 7.1 does not extend to the costs of the Public Trustee. Furthermore the Public Trustee does not seek an order in respect of its costs.  I therefore order the first respondent to pay the applicant’s costs of an incidental to this application on the indemnity basis.

Footnotes

[1]Affidavit of Emily Kate Brigginshaw, filed 29 November 2018 Exhibit “EKB1”.

[2]Affidavit of Mr John Stephen Hopkins filed 22 October 2018, para 37 and T1-3.

[3]Affidavit of Mr Hopkins paras 4-8; Affidavit of the first respondent filed 21 November 2018, paras 4-7.

[4]T1-60 ll 5-10.

[5]T1-60 ll 10-11.

[6](1988) 19 NSWLR 40 at 46.

[7]T1-36 ll 15-30.

[8]T1-29 ll 30-40.

[9]Deed cl 2.1.

[10]Exhibits 1-5.

[11]T1-30 ll 19-20.

[12]Affidavit of the first respondent filed 21 November 2018, para 7.

[13]Ibid at para 17.

[14]Ibid at para 15.

[15]T1-56 ll 20-35.

[16]T1-59 ll 45-46.

[17]Affidavit of first respondent filed 21 November 2018 para 12.

[18]Affidavit of Emily Kate Brigginshaw filed 29 November 2018, Exhibit “EKB-1”, p 32.

[19]Affidavit of Mr Hopkins filed 22 October 2018, paras 18-27. 

[20][2014] QCA 217 at [42].

[21]Affidavit of Mr Hopkins filed 22 October 2018, para 28.

[22]Colgate Palmolive Co. v Cussons Pty Ltd (1993) 43 FCR 225 at 232-234.

Close

Editorial Notes

  • Published Case Name:

    John Hopkins Financial Services Pty Ltd v Donald De Lene & The Public Trustee of Queensland

  • Shortened Case Name:

    John Hopkins Financial Services Pty Ltd v De Lene

  • MNC:

    [2018] QDC 252

  • Court:

    QDC

  • Judge(s):

    Everson DCJ

  • Date:

    07 Dec 2018

Appeal Status

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

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