Luman v Mayes[2022] QDC 129

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   This is an application for leave to appeal and if leave is granted an appeal from an order of the Magistrates Court at Southport made on 29 November 2021.
2. [2]
   The learned Magistrate dismissed the appellant’s claim for summary judgment.

Nature of the appeal

3. [3]
   The appeal is pursuant to section 45 of the Magistrates Courts Act 1921 (Qld) (“the MCA”) which provides for a right of appeal for parties dissatisfied with the judgment or order of a Magistrates Court to appeal to the District Court.  However, in this matter leave is required for two reasons.
4. [4]
   First, leave is required because there has been delay.  The Uniform Civil Procedure Rules 1999 (“UCPR”) provide that a notice of appeal must be filed within 28 days after the date of the decision appealed from. ^[1] Here, the notice of appeal was required to have been filed by 28 December 2021 but was not filed until 15 February 2022. The delay was explained in the affidavit of Mr Laws filed 11 March 2022.  The parties were unaware of the decision until 24 January 2022 despite it being made on 29 November 2021.  I am satisfied that there is a reasonable explanation for the delay in bringing the appeal - it was brought within 28 days of being notified of the decision.  I would grant leave in this respect.
5. [5]
   Secondly, the amount claimed in the amended statement of claim was $20, 093.92 plus interest and costs. Section 45 (2) of the MCA provides that where the amount claimed is not more than the minor civil dispute limit, a party wishing to appeal will require leave from a District Court Judge who must be satisfied “that some important principle of law or justice is involved”. Pursuant to the Queensland Civil and Administrative Tribunal Act 2009, the limit is currently $25,000. ^[2] 
6. [6]
   Judge Cash QC recently discussed this requirement in Peter Carter Transport Pty Ltd v Swansway No 2 Pty Ltd [2021] QDC 109 at [16] in the following terms:

“Mere error on the part of the court at first instance will not usually be sufficient. The test has been likened to that required for special leave to appeal to the High Court. To involve an important principle of justice, the case must be one of gravity, public importance or be of a very substantial character; or involve some important question of law or affect property of considerable value. It has been said that an important principle of justice requires that there be a question going beyond the consequences of the decision for the immediate parties to the proceedings.” (Footnotes omitted)

7. [7]
   In the present case, it is alleged that the learned Magistrate took into account several matters claimed to be irrelevant.  More fundamental in my view is the question as to whether his Honour erred in construing an agreement between, amongst others, the appellant and the respondent, providing, in effect, for the separating of previously common business interests between them.  While, in my view, there is no obviously important issue of justice, as opposed to simply a question of construction between the parties, this issue really dictates the outcome of the underlying claim in the Magistrates Court such that if there is merit in the point it would be appropriate to grant leave to appeal.  Thus, I will turn to consider the merits of the appeal.

Grounds of appeal

8. [8]
   By the notice of appeal filed 15 February 2022 it is contended that the learned Magistrate erred in law by failing to grant summary judgment to the appellant under rule 292(2) of the UCPR because he:

   1. (a)
      Considered facts, matters and circumstances that were not pleaded in the defendant’s case;
   2. (b)
      Failed to consider admissions made by the defendant; and
   3. (c)
      Interpreted clause 4 of the separation agreement as providing a release of this claim by the appellant in favour of the respondent.
9. [9]
   Thus, as can be seen, it is alleged, in effect, that the learned Magistrate erred in taking into account irrelevant considerations, failing to take into account a relevant consideration and misconstruing the centrally important agreement.

Submissions on the appeal

The appellant

10. [10]
    The appellant submits that:

    1. (a)
       As is uncontroversial, he and the respondent were joint and several guarantors under a lease entered on 3 April 2022 between Karzon Investments Pty Ltd, as lessor, and TML Group Pty Ltd (“TML Group”) (a company of which, at that time, the appellant and the respondent were each directors and equal shareholders), as lessee;
    2. (b)
       As is uncontroversial, at least for present purposes, the appellant made payments for rent and interest to the lessor totalling $40,187.83 pursuant to the terms of the guarantee;
    3. (c)
       The learned Magistrate incorrectly interpreted rule 292 of the UCPR when he said in paragraph [11], “A defendant may defend an application for summary judgment by raising a defence or by pointing to a deficiency in the plaintiff’s case”. In this respect the appellant relies on a passage from the reasons for judgment of Justice White (with whom de Jersey CJ and McMurdo P agreed) in Coldham-Fussell v Commissioner of Taxation [2011] QCA 45 at [98]:

“The key expressions are “no real prospect” in the defence of a claim and “there is no need for the trial of the claim”. Rule 292 is expressed in clear and plain language. It requires no judicial gloss to understand its meaning.”

I should note immediately, I do not think his Honour meant to state anything other than that if a defendant is able to point to a deficiency in the claim or a defence which is open then an applicant will not, in such circumstances, have established the two necessary preconditions to enlivening the discretion to grant summary judgment.  That seems perfectly orthodox to me; 

4. (d)
   The learned Magistrate erred by considering:

   1. That the lease appeared to envisage the making of a demand as a pre-condition engaging the obligation to make good on the guarantee;^[3]
   2. The absence of evidence that the lessee defaulted under the lease;^[4] and
   3. That the fact there was an absence of evidence that the lessee defaulted under the lease left open the possibility that TML Group was able to pay;^[5]
5. (e)
   The learned Magistrate failed to consider admissions made by the respondent;
6. (f)
   His Honour wrongly failed to take into account the only issue in dispute among the parties as there was nothing in the reasons that interpreted the sole ground of the respondent’s defence,^[6] being that the relevant clause of the separation agreement provided a release.  I do not consider it accurate to say that his Honour did not consider the issue.  It is clear from paragraph 16 that he considered that the clause at least arguably meant that the respondent was not liable to contribute in respect of rent incurred after he ceased to have anything to do with the business;
7. (g)
   Critical to appellant’s appeal (and prospects in the claim below), the subject agreement only provides for a release by TML Group and not by the appellant.

The respondent

11. [11]
    The respondent relies on clause 4 of the separation agreement as is clear from the defence.

Consideration

12. [12]
    Ultimately, this matter turns on the construction of clause 4 of the separation agreement. It is evident that the learned Magistrate did consider the separation agreement to be relevant.  While his Honours reasons are brief his Honour must have considered that the proper construction may be such that the respondent was not liable to the appellant as a co-guarantor under the lease.
13. [13]
    The principles in relation to the construction of commercial contracts are clear.  The High Court observed in Electricity Corp v Woodside Energy (2014) 251 CLR 640 at [35] that the Court should:

“…approach the task of giving a commercial contact a businesslike interpretation on the assumption “that the parties … intended to produce a commercial result”.^[7]

14. [14]
    In Mount Bruce Mining Limited v Wright Prospecting Pty Limited and Anor (2015) 256 CLR 104 at [120] French CJ, Kiefel, Bell, Gageler, Keane, Nettle and Gordon JJ said:

“that the proper interpretation of each of those terms is to be determined by reference to what reasonable businesspersons having all the background knowledge then reasonably available to the parties would have understood those terms to have meant”^[8]

15. [15]
    The leading authorities are also clear that the commercial result or purpose to be achieved by entering into a particular commercial agreement may be more easily discerned by an understanding of the genesis of the transaction and that a construction which avoids absurd or incongruous results should be preferred to one which does not. As to the genesis of this transaction, the following passage from the transcript of oral submissions before his Honour is relevant. Mr Laws there said “ there was, for whatever reason, a decision that the parties separate and TML, as part of the separation agreement, for consideration, provided releases.” As will be apparent from what I have said already and those matters I will address in a moment I do not accept that that is the appropriate contrition of the agreement. But it is clear that the genesis of this agreement was a decision that the parties, for whatever reasons, decided to separate their business interests.
16. [16]
    The separation agreement relevantly provides at clause 4 that “[the respondent] will be released from all liability and future expense in relation to [TML Group] from the date of settlement”.  That date was 31 December 2018. TML Group, the appellant and the respondent are, amongst others, all parties to this contract. As can be seen that clause seeks to release the respondent from all liability and future expenses in relation to TML Group.  It does not on its face only seek to release the respondent in respect of expenses of TML Group.  The broad expression in relation to TML Group was adopted instead.  That choice of words would cover a debt for which the respondent would otherwise be liable as guarantor in relation to the obligations of TML Group under the lease whether to the lessor or to his co-surety, to whom he had transferred his shares.  In other words, the phrase adopted clearly covers what might otherwise be an amount owing to the appellant as co-surety. 
17. [17]
    It is no answer to claim, as the appellant does, that the release is only by TML Group rather than the appellant.  In my view, that is plainly incorrect.  The clause does not provide that “TML Group hereby releases the respondent” or some other familiar form of words adopted where but one of the parties to an agreement purports to release another.  Instead, the clause simply states the respondent will be released.  All parties, including the appellant, agree that will occur.  There is no reason why effect should not be given to those plain words.
18. [18]
    A construction of the separation agreement which provided for the appellant to be the beneficiary of a transfer of the respondent’s shares while the respondent remained liable for the expenses of the business would, in my respectful opinion, be absurd.  It would be contrary to a business-like interpretation of the clause.  The appellant would get all the potential benefit while having the respondent continue to contribute to a business he has no remaining interest in.
19. [19]
    Here the respondent had resigned as director of the TML Group and transferred his shares to the appellant.  Clearly enough, both parties intended that the respondent be removed from commercial involvement with the appellant. It is difficult to see why the respondent would nonetheless become liable to his former fellow director for future expenses of a business he was not involved in. 
20. [20]
    The payments made by the appellant as a guarantor were for rent payable from February 2021 to August 2021.   This is after the date the separation came into effect.
21. [21]
    I do not consider it necessary to express any concluded view on the matters other than the construction issue, given that the construction I prefer requires the appeal be dismissed in any case. I am inclined to the view that his Honour did not fall into error in considering these issues, given the appellant needed to establish he had been liable qua guarantor.

Disposition

22. [22]
    I do not consider that the learned Magistrate fell into error in not granting summary judgment. It cannot be said that the respondent does not have a real prospect of successfully defending all or part of the appellant’s claim and that there is no need for a trial.^[9]  In my view, to the contrary, the prospects of defending the claim as presently framed are very real.
23. [23]
    As I have mentioned, any grant of leave ought to depend upon the merit of the appeal.  I regard the appeal as having no merit and thus decline to grant leave.
24. [24]
    The order will be:

1. Leave to appeal is refused.