Abbott v Klein

District Court of NSW|2014-10-28|Before: Bruce J

A. Introduction

Peter Klein signed a Deed of Acknowledgement ("the Deed") in April 2003 guaranteeing payment of $100,000 to Adrian Abbott by 15 December 2012. He failed to pay any amount. He says that he is not obliged to pay because he was mistaken when signing the Deed in his belief that he owed $100,000.
I do not accept his account, and propose to give judgment for Mr Abbott, with interest.

B. Issues

Mr Klein pleads defences based upon common mistake, unilateral mistake, misleading conduct, misrepresentation and the Contracts Review Act 1980. Each of these causes of action is founded upon an assertion about Mr Klein's state of mind immediately prior to signing the Deed: that he believed he personally owed Mr Abbott $100,000. He says this belief was mistaken in that he did not owe Mr Abbott $100,000, because: 1. Mr Abbott did not perform $100,000 worth of work; 2. Mr Abbott performed the work not for Mr Klein but for Mr Klein's wholly or partly owned companies; or 3. any debt owing to Mr Abbott was extinguished by the Limitation Act 1969.
In Mr Klein's defences, the state of mind and conduct of Mr Abbott is also relevant: whether Mr Abbott shared the alleged mistake of Mr Klein, so as to constitute common mistake, whether Mr Abbott knew Mr Klein to be mistaken, so as to constitute unilateral mistake, whether Mr Abbott caused Mr Klein's asserted mistakes by misleading conduct or misrepresentation, and whether a basis for relief exists under the Contracts Review Act 1980.

C. Background

Mr Klein retained Mr Abbott, an accountant, in about 1988 to do accounting and financial advice work for him and his companies. This work included advice regarding Mr Klein's transactions with Mr Klein's interest in Australian Jewish Press ("AJP"). On 30 June 1991, Mr Abbott sold his practice to a larger firm and commenced employment with them, so in his own capacity he then ceased work for Mr Klein.
In April and December 1990 Mr Abbott sent invoices to Mr Klein for relatively small amounts in connection with preparing and lodging annual tax returns for Mr Klein's companies. On 23 August 1990, Mr Abbott wrote to Mr Klein. The letter attached an "office costing printout" showing $125,025 work performed, and disbursements of $2,022.47.
The letter also attached two bills issued to two of Mr Klein's companies, AJP and Rochester Communication Group Pty Ltd ("Rochester"), totalling $56,713.80, and referred to a further "[a]mount owing - to be discussed $62,783.67". The letter offered for the attached bills to be paid "at a monthly rate" "as you [Mr Klein] indicated recently".
Mr Klein made no payment in respect of the attached bills or the "amount owing".
Mr Klein accepted that he "spent a lot of time meeting with Mr Abbott in his office" in the months before and after April 1990, and that Mr Abbott's office costing printout records were consistent with Mr Klein's recollection. By 30 June 1991, Mr Abbott's office costing ledger in respect of Mr Klein recorded a total amount of $151,953.87.
From time to time after June 1991 Mr Abbott and Mr Klein met in relation to business matters. I accept that Mr Abbott had "been communicating" with Mr Klein "about the payment of money…back to [1991]" as Mr Abbott testified, and before and after August 1990, as he also testified, because it would have been a natural matter to discuss and because had it not been discussed it would more likely have been a matter of contention in later years when it was discussed. There was not, until recently, any disagreement expressed about the amount and the obligation to pay.
Because of Mr Klein's financial circumstances Mr Abbott did not press Mr Klein in respect of payment of the $150,000 approximately until August 1996.
On about 5 August 1996 Mr Abbott wrote to Mr Klein. The letter included the following passage: "I presume you still owe Keith about $50,000, and you owe me $150,000. Although I have not pressed you knowing the circumstances, I can tell you from the bottom of my heart that I would like that money sooner than later. I do not intend reducing that amount, mind you I am not seeking interest on it and am hopeful that we will never go to battle about it. By the way, I have issued already a number of bills making up probably $75,000 of the $150,000 and, as you might remember, one of those bills is for $48,000 to AJP. So in any settlement you no doubt have to consider the amount of money you will owe Judd, Rothman, Hurst, AMEV, the National Bank and last but not least me. There may even be others."
No payments were made to Mr Abbott from the settlement.
Mr Klein gave oral assurances to Mr Abbott that he would pay Mr Abbott when circumstances allowed. The precise content of these assurances, and when they were given in the period from 1991 to 2003, is not clear.
Written assurances were also given in letters dated 5 April 1999 and 20 November 2000. On 22 July 2002 Mr Abbott wrote in these terms: "Dear Peter … It is now coming up to two years since you wrote to me on 20 November 2000. I have been relying on your assurances for many years, but I think it is now time to actually put cold hard dollars and a date alongside it in writing. Accordingly, the amount owing by you and the Rochester Group of Companies approximates to $150,000 and that is without any interest component. Can you please set out a payment program, which you agree to adhere to. I then would like to start the repayment program on a regular agreed basis. I know you might say things are hard, but frankly I do not find things any easier either…"
On 3 September 2002 Mr Klein responded in writing in these terms: "Dear Adrian, Thank you for your recent letter. I apologise for not replying earlier… In regard to clearing up our outstanding account, I believe that I should be in a position to make a settlement offer to you before the end of this year. Maybe we can find a tax effective way to settle this account then. I will make a note to contact you no later than Nov 30 to discuss, if this is OK with you. By then I should know where I stand. If you wish to write back it is probably easier to write to my office address as below. Regards to Jackie".
In about January 2003 Mr Klein and Mr Abbott met and agreed that $150,000 in fees would be payable, that $50,000 would be paid immediately and that payment of the other $100,000 would be postponed for about 10 years, until 15 December 2012. A relatively contemporaneous record of this oral agreement is contained in a letter Mr Abbott wrote to Mr Klein on 7 January 2003, in these terms: "Dear Peter Thank you for having coffee with me the other day and reaching agreement for the payment of long outstanding Accounting Fees. The agreement reached is as follows: 1. I issue an invoice to Rochester Communications Pty Ltd for $150,000 for my Accounting Services rendered during the period of approximately 1988 through to approximately May of 1991. 2. Payment of the invoice will be by $50,000 payable now and the remaining $100,000 payable on 15th December 2012. 3. You personally guarantee the payment of the $100,000 on the above date. 4. The invoice for $150,000 and its payment including the delayed terms and conditions will not be disputed or litigated by Rochester Communications Pty Ltd or yourself. 5. I will have a solicitor draw up the Agreement to Pay by Rochester and the Guarantee by you. 6. If a company associated with you floats on the Stock Exchange before 2012, you will offer me an opportunity to obtain $100,000 of shares in the float without paying the $100,000 consideration and if I accept such an offer, then Rochester Communications and you will be relieved of paying me the $100,000 on 15th December 2012. 7. The Guarantee by you will be a continuing Guarantee and will attach to your heirs and assigns so that your death before 2012 will not extinguish your obligations as guarantor, but it is agreed that other members of your family, for example, your wife, will not be responsible for the debt in the event of your death. 8. Although not discussed at our meeting, I think it reasonable, that in the event of you defaulting on 15th December 2012, then not only would $100,000 be owing, but also interest for the period from 15th December 2002 to 15th December 2012 at the rate applicable to loans of less than $100,000 at Westpac Bank or equivalent. If you agree with the above, please initial below and I will send this letter to Norman Sarajinsky, Solicitor, who can draw up a very simple Agreement incorporating the Guarantee and the above terms. In the meantime, I attach my invoice and look forward to the downpayment of $50,000 on which I will pay $25,000 tax. Thank you. [Etc.]"
The letter included an invoice which stated: "INVOICE Rochester Communications Pty Ltd To: Peter Klein 4 Hercules Street Surry Hills 2010

To - Professional Services rendered for the period of approximately 1/1/1988 to 15/5/1991 in respect of Accounting Services for the preparation of Balance Sheets and Accounts and Income Tax Returns for the above Company and related Companies and in Discussions with the Directors involving the financial issues of the Company and the Directors generally over the period Fee as agreed $150,000.00 Payable by return: $50,000 Payable 15th December 2012: $100,000

THIS INVOICE IS NOT SUBJECT TO GST AS THE SERVICES WERE RENDERED PRIOR TO 30 JUNE 2000".

Mr Klein deleted clause 6 from a copy of the letter, initialled the deleted clause, and signed, dated and returned the copy letter. The signed copy of the letter was under a covering letter of 24 January 2003 in these terms: "Dear Adrian, Thank you for communication outlining our agreement. You will see from the attached signed copy that I have deleted Clause 6. Adrian, this is not what I meant in our discussions in regard to listing opportunities, which took place before we reached basic agreement on the overall terms etc. In any event I could not agree to this arrangement since I have partners in these companies who are not a party to our arrangements. However, what I did offer and will ensure, is that you will be offered shares at issue price for any public float that might take place from this Bioteq business. Please find attached my cheque for $50,000.00 as part payment of this invoice. I acknowledge that the balance of $100,000.00 will be payable on 15th December, 2012."
The cheque for $50,000 was also enclosed, signed by Mr Klein and drawn on the "Rochester Communications Group P/L" account.
Mr Abbott arranged for his solicitor to draft a deed. On 9 April 2003 the Deed was entered in the following terms: "DEED OF ACKNOWLEDGEMENT THIS DEED OF ACKNOWLEDGEMENT is made the 9 day of APRIL Two Thousand and Three BETWEEN: ADRIAN HOWARD ABBOTT, Chartered Accountant of 4 Sutherland Crescent, Darling Point in the State of New South Wales (hereinafter called the "Abbott") of the one part AND: ROCHESTER COMMUNICATIONS GROUP PTY LTD ACN 000 500 612 of 4 Hercules Street, Surry Hills in the State of New South Wales (hereinafter called the "Rochester") of the second part AND: PETER KLEIN of 4 Hercules Street, Surry Hills in the State of New South Wales (hereinafter called the "Guarantor") of the third part

WHEREAS: A. The Abbott has provided accountancy services to Rochester for periods from approximately 1988 through to approximately May 1991 the costs of such services amounting to One hundred and fifty thousand dollars ($150,000.00). B. Rochester has furnished Abbott with a part payment of Fifty thousand dollars ($50,000.00) on or about 24 January, 2003 and has requested an extension of time in relation to payment of the balance to 15 December, 2012. NOW THIS DEED WITNESSES: 1. Rochester acknowledges having a debt to Abbott of One hundred thousand dollars ($100,000.00) ("the debt"). 2 Rochester shall: (i) repay the debt on or before 15 December, 2012; and (ii) in the event of the debt not being paid by 15 December, 2012 then: (a) the entire debt shall be forthwith due and payable without any demand being required to be made by Abbott; and (b) interest shall be payable in respect of the said debt from 24 January 2003 up to and including the date of actual repayment of the debt at an interest rate applicable to personal loans of less then $100,000.00 at Westpac Banking Corporation or should that bank bear another name by amalgamation or otherwise then the rate applicable shall be obtained from the equivalent bank. 3. The Guarantor being a Director of Rochester guarantees and indemnifies to Abbott all of Rochester's obligations under this Deed and it is hereby agreed and declared that this guarantee and indemnity shall be a continuing guarantee and indemnity and shall not be affected by the death, bankruptcy, insolvency or liquidation of any of the parties and no time indulgence shall affect this guarantee and indemnify. 4. Any condition or agreement under this Deed on the part or in favour of two or more persons is deemed to bind them or be in favour of them jointly and each of them severally." [Formal and deleted parts omitted].

The Deed was executed as a deed by Mr Abbott and Mr Klein before witnesses.
Mr Klein did not make the payment of $100,000 in accordance with the Deed, or at all.
Mr Klein did not dispute his liability to Mr Abbott prior to 2012. Rochester was wound up whilst solvent in 2012, then deregistered.
Mr Abbott commenced proceedings against Mr Klein for $100,000 plus interest from 16 December 2012, thereby waiving any entitlement he may have had under clause 2(ii)(b) of the Deed to interest from 24 January 2003.
The initial Defence of Mr Klein admitted the Deed and the absence of payment but, notwithstanding clause 1 of the Deed, denied that Rochester or Mr Klein were indebted to or liable to pay Mr Abbott "in [the] months leading up to 9 April 2003". The Amended Defence acknowledged services provided at the request of Mr Klein but denied any written agreement or discussion of costs estimates, the basis of charges and the attendances that would be charged. Mr Klein alleged that AJP alone was liable for some of the services, including the $48,000 invoice referred to in the letter of 23 August 1990. Mr Klein also asserted: "By 1 December 2012, pursuant to ss14 and 63 of the Limitation Act 1969 (NSW): a) Any right the plaintiff may have had at an earlier time to recover fees from the defendant for the provision of the Services was extinguished and no longer existed. b) Any action the plaintiff may have had at an earlier time to recover fees from the defendant for the provision of the Services was not maintainable."
In a subsequent iteration of the Defence, Mr Klein alleged that some of the charges were for time spent by Mr Abbott "for work which did not involve accounting services".
Mr Klein also filed a Cross-Claim seeking to recover $50,000 paid in 2003. The Cross-Claim was abandoned at trial, and should be dismissed with costs.
To the extent that Mr Abbott's recollection of conversations differs from Mr Klein's, I generally favour Mr Abbott's, because of Mr Klein's adjustments in later affidavits to his earlier affidavit evidence, his attempt to provide detail which I think was unlikely to be remembered after such a long time, and his account of the conversation in about January 2003 differs from the content of the contemporaneous letter in respect of his personal liability. But I do not regard either account of the detail of conversations as especially reliable given the time that has passed and the frailty of human memory, especially in respect of the precise content of conversations (see e.g. Watson v Foxman (1995) 49 NSWLR 315 at 318-319).

D. Jurisdiction

In respect of unilateral mistake, common mistake and misrepresentation, Mr Klein pleads in the Defence that the Deed "should be rescinded or set aside", and in respect of misleading conduct, "the Court should declare the Deed…void".
Mr Abbott submitted that the relief sought for mistake was available only in equity, and because the claimed damage exceeded $100,000 the claim was beyond the Court's jurisdiction by reason of s 134(1)(d) of the District Court Act 1973.
Section 134(1)(d) provides: "134 Jurisdiction in equity proceedings (1) The Court shall have the same jurisdiction as the Supreme Court, and may exercise all the powers and authority of the Supreme Court, in proceedings for: … (d) relief against fraud or mistake where the damage sustained or the estate or fund in respect of which relief is sought does not exceed $20,000 in amount or value, as determined by the Court, …"
Section 134 is not the only provision by which jurisdiction is conferred on the District Court. The primary jurisdictional provision is s 44(1)(a) of the District Court Act 1973, which provides: "44 Actions (1) Subject to this Act, the Court has jurisdiction to hear and dispose of the following actions: (a) any action of a kind: (i) which, if brought in the Supreme Court, would be assigned to the Common Law Division of that Court, and (ii) in which the amount (if any) claimed does not exceed the Court's jurisdictional limit, whether on a balance of account or after an admitted set-off or otherwise…"
Section 44(1)(a) of the District Court Act 1973 was enacted on 2 February 1998. On that date, whether a matter "would be assigned to the Common Law Division" of the Supreme Court was determined by s 53 of the Supreme Court Act 1970.
Section 53 of the Supreme Court Act 1970 includes the following provisions: "53 Assignment of business (1) Subject to the rules, there shall be assigned to each Division, other than the Family Law Division, the Administrative Law Division, the Criminal Division and the Commercial Division, all proceedings: (a) which are required by or under any Act from time to time in force to be commenced, heard or determined in that Division or in the corresponding former jurisdiction, or (b) which would have been commenced in the corresponding former jurisdiction if this Act had not been passed. (2) In subsection (1), the expression corresponding former jurisdiction means, in relation to any Division, other than the Family Law Division, specified in the Second Column in the Table in paragraph (b) of subsection (1) of section 8, the former jurisdiction specified opposite that Division in the First Column of that Table. (3) Without affecting the generality of subsection (1) in relation to the Equity Division, there shall, subject to the rules, be assigned to the Equity Division all proceedings for the following purposes: … (g) the rectification or setting aside or cancellation of deeds or other written instruments, … (3A) Subject to the rules, there shall be assigned to the Family Law Division… (3B) Subject to the rules: (a) there shall be assigned to the Administrative Law Division… (3D) Subject to the rules, there shall be assigned to the Criminal Division… (3E) Subject to the rules, there shall be assigned to the Commercial Division all proceedings of a commercial nature which are required by or under any Act, or by or in accordance with the rules, from time to time in force to be commenced, heard or determined in that Division. (3F) Subject to the rules, there are assigned to each Division proceedings for the punishment of contempt… (4) Subject to the rules, there shall be assigned to the Common Law Division all proceedings not assigned to another Division by the foregoing provisions of this section. …"
Another relevant provision is s 6 of the Law Reform (Law and Equity) Act 1972 (NSW) which provides: "6 Defence in inferior court Every inferior court shall in every proceeding before it give such and the like effect to every ground of Defence, equitable or legal, in as full and ample a manner as might and ought to be done in the like case by the Supreme Court under the Supreme Court Act 1970."
A number of questions are raised by Mr Abbott's challenge to the Court's jurisdiction. They include: 1. whether the claim by the defendant that the "court should rescind or set aside the Deed of Acknowledgment" for mistake is properly able to be pleaded in the Defence, or need it, to be maintained, to have been pleaded in the Cross-Claim; 2. whether the defence of mistake constitutes "proceedings" for the purpose of s 134 of the District Court Act 1973 or s 53 of the Supreme Court Act 1970, or an "action" within the meaning of s 44(1)(a) of the District Court Act 1973; and 3. whether the claim made by the plaintiff is within the jurisdiction of the District Court under s 44(1)(a).

(a) Cross-claims and Defences

Mr Klein submits that he is entitled to plead mistake as a defence. He relies upon Bitannia Pty Ltd v Parline Constructions Pty Ltd (2006) 67 NSWLR 9, Chetcuti v Scarf [2000] NSWSC 637, BHP Billiton v Bluestone [2013] SASC 133, Garrat's v Thangathurai [2001] NSWSC 945 and Flexman v Knox Street Apartments [2004] NSWSC 1154. These cases are not authority for the proposition submitted. Mistake was abandoned in BHP Billiton at [7] and in Flexman at [56]. The circumstance of mistake being pleaded in a Defence, no issue having been raised about it, does not render Chetcuti or Garrat's authority for its appropriateness. Bitannia does not concern mistake.
In Kelly v Mina [2014] NSWCA 9 at [60] Barrett JA (Ward and Leeming JJA agreeing) stated that an application to rescind or set aside a deed by reason of mistake "would normally be made by way of cross-claim rather than defence as such, since it entails the making of a positive determination and order by the court". The proposition that an application for positive orders would normally require a Cross-Claim must be uncontroversial (see also Bitannia Pty Ltd at [9]).
The form of the orders sought by Mr Klein, such as setting aside the Deed or declaring it to be void, are forms of positive relief that need to be the subject of a Cross-Claim. At least because no Cross-Claim has been filed seeking these orders, the Court cannot make orders in that form.
However, the substance of the Defence by Mr Klein is to resist the claim under the Deed, to "altogether deny the plaintiff's entitlement to a judgment, and so would be appropriate to be sought in a Defence" (see Bitannia Pty Ltd at [9]). The positive orders sought in the Defence are for no other purpose than to resist Mr Abbott's claim.
In my view, Mr Klein is entitled to seek to resist Mr Abbott's claim on the factual bases asserted even if he is not entitled to the positive orders sought.
To allow the defendant to maintain a defence of mistake in equity raises the application of s 6 of the Law Reform (Law and Equity) Act 1972 (NSW) quoted above.
The effect of this provision has been the subject of disagreement (see Wilson v Interhealth Energies Pty Limited and Anor [2008] NSWSC 1137 at [10]-[12], Taylor Farms (Aust) Pty Ltd v A Calkos Pty Ltd & Ors [1999] NSWSC 186 at [72]-[84], Yahl v Bridgeport Customs Pty Ltd (Supreme Court (NSW), Allen M, 31 July 1984, unrep), Batley v Local Court of New South Wales (Supreme Court (NSW), Bruce J, 4 February 1998, unrep) and Bitannia Pty Ltd at [9]).
In Bushby v Dixon Holmes du Pont Pty Ltd (2010) 78 NSWLR 111, Rein J dealt with this difference and favoured the wider view that s 6 allows all equitable defences, including those such as promissory estoppel that may be, in his Honour's view, pleaded as either a Defence or a Cross-Claim, depending on what relief is sought.
With respect, I agree with the reasoning of Rein J at [22]-[33]. It seems to me that the claim of mistake in equity is relevantly equivalent to promissory estoppel and can be maintained in a Defence so long as the defendant seeks no other relief other than to resist the plaintiff's claim. This situation - seeking no positive orders - is relevantly indistinguishable from the present case where positive relief is denied because it is not sought in a Cross-Claim.
In the result, s 6 allows this Court to determine the defence of mistake in equity, and to allow Mr Klein to seek to resist Mr Abbot's claim on the factual bases identified.

(b) Proceedings and actions

The purpose of a defence is to resist proceedings rather than to maintain them, indicating that the matters raised in the Defence do not properly reveal the purpose of the proceedings under s 53(3) of the Supreme Court Act 1970, nor reveal what relief proceedings are "for" under s 134 of the District Court Act 1973. Just as the place where proceedings are "required…to be commenced" is determined by the content of the Statement of Claim (see s 53(1) of the Supreme Court Act 1970), so also whether an "action of a kind" within the meaning of s 44 of the District Court Act 1973 would be assigned to the Common Law Division principally directs attention to the Statement of Claim. Otherwise a matter would be unable to be assigned to a Division at commencement, hardly a satisfactory or intended result consistent with the procedural purpose of these provisions of the Supreme Court At 1970 (see Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at [69], Certain Lloyd's Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378 at [23]-[25], Deputy Commissioner of Taxation v Zammitt [2014] NSWCA 104 at [67]). Further, s 44 focuses on where proceedings would be assigned "if brought" (i.e. if commenced) in the Supreme Court, again directing attention to the originating process rather than to the Defence.
For these reasons, I do not regard Mr Klein's Defence as being "proceedings" or an "action" so as to enliven the jurisdictional limitations identified in the previous paragraph.

(c) Would the plaintiff's proceedings be assigned to the Common Law Division under section 44(1)(a) of the District Court Act 1973

Section 44 requires the Court to assess whether the matter, if brought in the Supreme Court, would be assigned to the Common Law Division. Section 44 does not specify the date when that hypothetical event - commencement in the Supreme Court - is deemed to have occurred. However, this issue has been decided by high authority.
The Court of Appeal in Forsyth v Deputy Commissioner of Taxation (2004) 62 NSWLR 132 ("Forsyth CA"), affirmed by the High Court in Forsyth v Deputy Commissioner of Taxation [2007] HCA 8 ("Forsyth HC"), decided that any variation to the provisions or effect of s 53 of the Supreme Court Act 1970 subsequent to the enactment of s 44(1) of the District Court Act 1973 did not operate to vary the jurisdiction of the District Court, see Forsyth CA at [35], Forsyth HC at [45]. Thus, s 44 has a "fixed in time", rather than an "ambulatory" construction. Commencement in the Supreme Court, for the purposes of s 44(1)(a), is considered not in 2012, when these proceedings were commenced, but as at 2 February 1998 when s 44(1)(a) in its current form was enacted.
The Court of Appeal referred to the time when "Section 44(1)(a) in its present form" was enacted (Forsyth CA at [9]). Yet it seems clear enough (see Forsyth HC at [45]) that subsequent amendments to s 44(1)(a)(ii) of the District Court Act 1973 do not affect the force of s 44(1)(a)(i) of the District Court Act 1973, which remains in the same form as originally enacted. Therefore, subsequent amendments to s 44(1)(a) have not altered the applicable date for determining whether proceedings would have been assigned to the Common Law Division under s 44(1)(a)(i) and thus would be within the jurisdiction of the District Court under s 44(1)(a).
Generally, s 53(1)(b) of the Supreme Court Act 1970, as it was on 2 February 1998, would, I infer, operate to assign to the Common Law Division a claim for moneys owing under a deed because Mr Abbott's claim for monies owing under a deed "would have been commenced in the…former jurisdiction", namely the "Common Law Jurisdiction" "corresponding" to the Common Law Division (see s 8(1)(b) Table in the Supreme Court Act 1970, as it then was).
Section 53(3)(g) assigns to the Equity Division proceedings for the purpose of setting aside deeds. Once it is accepted that the purpose of the proceedings is revealed by the relief sought in the Statement of Claim rather than the contents of the Defence, and that positive relief cannot be sought in a Defence, then the circumstance that the Defence seeks to set aside the Deed is insufficient to bring the matter within s 53(3)(g).
A greater problem arises from s 53. Although all proceedings not specifically assigned to another Division are assigned to the Common Law Division under s 53(4), nevertheless proceedings "of a commercial nature which are required…by or in accordance with the rules" to be commenced, heard or determined in the Commercial Division are assigned to the Commercial Division by s 53(3E). Are not proceedings to recover monies owing under a deed, and arising from accounting services, proceedings of a commercial nature, and thus, because they are assigned to the Commercial Division rather than the Common Law Division, beyond the jurisdiction of this Court?
Not only does s 53(3) direct an assignment to the Commercial Division to be "in accordance with the rules" but the assignment of proceedings to the various Divisions, under s 53, are in all cases "subject to the rules". Thus, provisions in the rules providing for the assignment of proceedings to Divisions prevail over the specific assignments mentioned in s 53.
Part 14 r 2 and Pt 12 r 7 of the Supreme Court Rules 1970 are relevant rules.
At the time Pt 14 r 2 of the Supreme Court Rules 1970 relevantly provided: "(2)…there shall be assigned to the Commercial Division proceedings in the Court: (a) arising out of commercial transaction; or (b) in which there is an issue that has importance in trade or commerce…" (3) 'issue' includes any question or issue in any proceedings whether of fact or law or both, and whether raised by pleadings, agreement of parties or otherwise".
Part 14 r 2(3) contemplated that an "issue" raised after commencement can determine the Division to which proceedings are assigned (at least under Pt 14 r 2). At least in some cases then, the issues that determine the Division to which matters are statutorily assigned are not revealed by the Statement of Claim. The issue of whether and in what circumstances a deed should be enforced (when entry into the Deed raises questions about mistake or misrepresentation) is certainly capable of being an issue of importance in trade or commerce. It is also arguable that the present proceedings arise out of a commercial transaction, namely, the execution of the Deed in 2003 or the commercial accounting work done by Mr Abbott in the period 1988 to 1991.
Part 12 r 7 of the Supreme Court Rules 1970 is also relevant. It provided that misleading conduct claims made under either the Fair Trading Act 1987 (a matter raised in the Defence) or the former Part V of the Trade Practices Act 1974 (Cth) "shall be assigned to the Common Law Division, the Equity Division or the Commercial Division as is appropriate to the nature of the proceedings" (underlining added).
These provisions indicate that on 2 February 1998 the assignment of business between the Common Law Division, the Equity Division and the Commercial Division was not demarcated according to some bright line rule but that there was some uncertainty as to which Division a proceeding, such as the present proceedings, would have been assigned. This uncertainty may have assisted flexibility in the Supreme Court in the allocation of matters to Divisions, in the transfer of matters between Divisions and in the decision as to where a matter was ultimately heard and determined, a flexibility reflected in s 54 of the Supreme Court Act 1970 which provided: "54 Transfer and retention (1) The Court in a Division, on application by a party or of its own motion, may, on terms, order that the whole or any part of any proceedings in that Division be transferred to another Division. (2) Proceedings may be retained in a Division whether or not the proceedings are assigned to that Division by this Act or by the rules."
Further, s 55 ensured that steps taken in a Division were valid even if the proceedings were not assigned to that Division.
Although the facilitative and remedial provisions in ss 54 and 55 of the Supreme Court Act 1970 had obvious practical benefits for the Supreme Court in conducting its business, they do not remove the uncertainty about the District Court's jurisdiction. That jurisdiction is dependent not on the Division where a matter can be validly heard or determined, but where it is "assigned".
Nevertheless, these features of flexibility in ss 54 and 55 of the Supreme Court Act 1970 and Pt 12 r 7 of the Supreme Court Rules 1970 may support a conclusion that the assignment rules in Pts 12 and 14 and s 53 did not statutorily assign a matter exclusively to one Division. If that is so, the fact that the proceedings may have been assigned to the Equity Division under s 53(3)(g) or Pt 12 r 7, or assigned to the Commercial Division under Pt 14 r 2 or Pt 12 r 7, did not prevent the proceedings being assigned to the Common Law Division under s 53(1)(b) or Pt 12 r 7. The disjunctive in Pt 12 r 7 is not supportive of this conclusion, but it is a conclusion that is otherwise justified by the statutory provisions in light of the "surer" guide to meaning provided by "the context, the general purpose and policy of a provision" including its fairness (see Project Blue Sky at [69], Certain Lloyd's Underwriters at [24]-[25], Zammitt at [67]).
If statutory "assignment" of proceedings to a Division is not exclusive, assignment of the action to the Equity Division or the Commercial Division is not fatal to jurisdiction under s 44 of the District Court Act 1973 so long as the action is also statutorily assigned to the Common Law Division.
Had a Cross-Claim been brought by Mr Klein seeking positive orders it may have been an action assigned to the Equity Division under s 53(3)(g). As the debt under the Deed is not disputed and the primary issue is whether the Deed should be enforced in circumstances of alleged mistake, if the matter were commenced in the Supreme Court it might be unsurprising for it to be heard in the Equity Division bearing in mind s 53(3)(g) of the Supreme Court Act 1970 (and the relatively modest size of the claim, which may have denied a hearing in the Commercial Division). But where a matter may be heard is not determinative of where it would have been "assigned".
The better view is that the proceedings would be "assigned" to the Common Law Division on the filing of Mr Abbott's Statement of Claim. After the Defence was filed those proceedings might potentially have been transferred to the Equity Division or the Commercial Division, under s 54 of the Supreme Court Act 1970, by reason of s 53(3)(g) of the Act or Pt 14 r 2 or Pt 12 r 7 of the Supreme Court Rules 1970. This does not affect the conclusion that the proceedings were "assigned" to the Common Law Division. Accordingly, the proceedings fall within the jurisdiction of this Court.
The jurisdiction questions are not without complications. It is not at all clear what evidence might be relevant to establish, for example, whether "there is an issue of importance in trade or commerce" (under Supreme Court Rules 1970 Pt 14 r 2) or what Division is "appropriate to the nature of the proceedings" (under Supreme Court Rules 1970 Pt 12 r 7). Both of these matters are jurisdictional facts under the rules, so far as the District Court's jurisdiction is concerned, because of the terms of s 44 of the District Court Act 1973.
A "higher level of certainty" (see Forsyth CA at [25]) about the jurisdiction of this Court may have resulted from the Forsyth HC decision preferring, in respect of s 44(1)(a)(ii), a "fixed in time" construction over an ambulatory construction. Nevertheless, considerable uncertainty remains as to how this Court is to determine jurisdiction when it depends, among other things, on whether by reason of the nature of the proceedings "it is appropriate" that they would have been assigned to one Division rather than another, of another court, had they been commenced in that other court at a time in the distant past. It might be thought unsatisfactory that the jurisdiction of the District Court of New South Wales remains mired in the uncertainty of a hypothetical assignment of business between the various Divisions of the Supreme Court that existed in February 1998. Certainly a clear express statutory provision is preferable. In view of the complications raised in this case, I respectfully endorse the comments of Rein J at [34] in Bushby in respect of necessary amendments to the District Court's jurisdiction.

(a) Personal liability

Mr Klein claims that he was mistaken in believing, or that he was misled into believing, immediately prior to entry into the Deed, that he personally owed Mr Abbott $100,000 for accounting work. This claimed belief is not supported by his evidence and contrary to the terms of the Deed.
The Deed provides that "Abbott has provided accountancy services to Rochester", that "Rochester acknowledges having a debt to Abbott", and that Mr Klein "guarantees…all of Rochester's obligations". These statements indicate that Mr Klein's liability arose from him being a guarantor, rather than having a primary liability. Mr Klein did not allege that he misunderstood the terms of the Deed. That, and his conduct in making corrections to the letter recording the terms of the agreement to be reflected in the Deed manifests that Mr Klein took note of and understood the terms of the Deed and that his belief was in accordance with the indications in the Deed.
Nor does Mr Klein's affidavit evidence provide support for his asserted belief.
Mr Klein's initial affidavit dated 4 November 2013 stated that: "I believed Mr [Abbott]…had done over $150,000 of work for me. …I believed that I was liable to Mr Abbott for over $150,000 in respect of the work. … I did not turn my mind to whether I was personally liable for the work…or alternatively whether Australian Jewish Press Pty Ltd was liable for some of the work."
Those statements do not sit comfortably together. Without more I would read the initial two sentences as subject to the final sentence and that his belief did not distinguish his personal position from that of his companies.
Mr Klein affirmed a subsequent affidavit dated 28 February 2014 where he deposed: "When I engaged Mr Abbott to do work for a company that operated or carried on a business, as far as I was aware the company, and not me personally, was liable to pay Mr Abbott's fees. This was my belief at the time" and "I am certain that we never had a conversation in which he [Mr Abbott] proposed that: a) I would be personally liable to pay his fees…" and "on reflection I did not turn my mind to the entity (whether Rochester…or [AJP] or another entity or me personally) or entities which were liable to pay Mr Abbott's fees for the work…" "I believed that the companies or entities for which Mr Abbott did work had primary responsibility for Mr Abbott's fees. However, at the meeting [in December 2002] Mr Abbott proposed, and I agreed, that I give a personal guarantee in respect of the debt."
None of this evidence supports a belief in Mr Klein of personal liability.
Mr Klein's pleading also elides the difference between his liabilities and that of his companies. The Second Further Amended Defence at paragraphs 23 and 25 states that Mr Klein "mistakenly believed that he or one or more of the Klein companies had a debt to the plaintiff" [underlining in original] (cf [22(b)]).
In these circumstances, I was not persuaded of Mr Klein's asserted belief or any particular belief about his legal liability in the period preceding the execution of the Deed. I do not accept that Mr Klein entered the Deed under a mistaken belief that he was personally liable for the debt. On the contrary, in my view, Mr Klein entered the Deed because he was willing to concede that his private company, Rochester, owed $150,000 to Mr Abbott, and he was willing to guarantee the obligations of Rochester. He rightly regarded obtaining a further period of 10 years to pay the bulk of the debt as an arrangement favourable to him.

(b) Work not performed

Mr Klein claims that at the time of signing the Deed he mistakenly believed Mr Abbott had done the work for which charges were levied. The Defence is unclear in this respect as it alleges that Mr Abbott "did not tell" Mr Klein that Mr Klein would be charged for work "which did not involve the provision of accounting services" (Second Further Amended Defence at [9A(a)(iii)]) and yet Mr Klein had "forgotten [this matter]" (Second Further Amended Defence at [23(a)]). How Mr Klein managed to forget something that he was not told was not explained in the pleading or subsequently.
I accept that Mr Klein at all times believed that Mr Abbott properly charged him for accounting services. The circumstance that for more than 20 years he made no complaint about the charges is evidence supporting such a belief. It is also evidence that tends to confirm that the charges were appropriate and I am not persuaded that they were not.
Mr Klein's assertions that some discussions may have related to personal difficulties and pressures on Mr Klein arising from his financial situation, or that Mr Abbott assisted Mr Klein with negotiations, does not establish that Mr Abbott's charges were misplaced. In addition, Mr Klein was present and thus aware of these discussions and negotiations and of the nature of these activities undertaken by Mr Abbott. He was not mistaken about these matters when he came to sign the Deed.

The third mistake alleged by Mr Klein is that he was mistaken about the impact of the Limitation Act 1969. He said he was unaware that the debt "might be past the statutory time limit", and that if he had been aware that "the original debt was well past the statutory time limit for collection of debts of this nature" he would not have agreed to the proposal or signed the Deed.
Mr Klein was an experienced businessman, engaging in large commercial deals including those involving his interest in AJP. He had managed AJP for several years. Mr Klein knew that about 12 years had passed since the work had been done by Mr Abbott. In my view, the circumstance that a substantial period of time had passed was of no significance to him. He did not turn his mind to whether an action by Mr Abbott could be resisted, because he was not interested in resisting an action. He was minded to pay Mr Abbott, in view of Mr Abbott's work and patience in waiting for payment.
Mr Klein's prospects of resisting Mr Abbott's claim by reason of limitation provisions, or because he was not personally liable, or because the account in 1991 might have included charges for some "non-accounting work", are matters that came to his mind in 2012 and not because he was previously mistaken but because the day for payment had arrived. He gave no evidence of the nature of his belief concerning old or stale debts, or his belief concerning "the statutory time limit" or that his belief changed in 2012. His evidence that he sent Mr Abbott an email in December 2012 about being recently advised by his lawyer about the "debt being well past the statutory time limit" in 2003 does not explain his knowledge in 2003 or 2012, nor does it persuade me that at any time he was labouring under a mistake.
In these circumstances, I do not accept that Mr Klein was ignorant of the possible effect of the passage of time or that Mr Klein was unaware that debts can become stale over time, even if he was not fully conversant with the relevant statutory provisions.

(d) Conclusion on mistake

In 2003 Mr Klein wanted to avoid litigation, either against himself or his company, Rochester. He was anxious to take advantage of the further 10-year interest-free period offered to him, and he felt morally obliged to pay the fees for the work done at his request by Mr Abbott after Mr Abbott had waited 12 years and was offering to wait another 10.
By executing the Deed, Mr Klein undertook the personal liability of a guarantor but not because he believed he was personally liable in any event. On the contrary, which of himself, AJP, Rochester or his other private companies or any of them remained liable was not of significance to him. He knew Mr Abbott had been extremely patient in waiting for his fees to be paid. Mr Klein had benefitted from that delay and, given that payment was to be postponed another 10 years, he was willing to be responsible for payment whatever the precise legal position may be.
Accordingly, Mr Klein made no mistake about his legal entitlements.
I have rejected Mr Klein's claim that he was mistaken.
There may be another reason why Mr Klein's claim of mistake fails. In Taylor v Johnson (1983) 151 CLR 422, 432 the majority of the High Court stated the test of mistake: "a party who has entered into a written contract under a serious mistake about its contents in relation to a fundamental term" will in some circumstances be entitled to an order of rescission. In this case, Mr Klein was not mistaken at all about the content of the Deed. He knew that execution of the Deed obliged him to pay $100,000 whether he was or was not, or might not have been otherwise liable. This would suggest that there was no mistake by Mr Klein as to a fundamental term. Mr Abbott also believed that the Deed would resolve any uncertainty about the status of the debt: he had written to Mr Klein in 1996 that he was "hopeful that we will never go to battle about [the debt]".
However, as this question depends on the particular mistake made and I have found no mistake I reach no final conclusion on this point.

F. Liability for the $100,000

My findings about mistake also remove some of the need to make findings about whether Mr Klein was liable to Mr Abbott in 2003 in the absence of the Deed. However, as this issue was debated and also because the issue may be relevant to the Contracts Review Act 1980 claim, I should make some comments about it.

(a) The limitation question - were the debts statute-barred in 2003?

Whether Mr Abbott was entitled to enforce a debt in 2003 in the absence of the Deed does not arise directly in the proceedings. He relies on the Deed, and pleads a cause of action based upon the Deed. Any action based on contract in the absence of the Deed is thus necessarily hypothetical.
But s 14 of the Limitation Act 1969 is not concerned with hypothetical actions. It is concerned with "[a]n action on any of the following causes of action". It requires an action. As no proceedings were commenced in 2003, there was no "action" which could be statute-barred.
Any claimed entitlement of Mr Abbott in 2003 to recover fees may have been based on a debt arising from a contract. Such an action may have been statute-barred. But it might also have been based on misleading conduct constituted by Mr Klein's assurances that may have led Mr Abbott to postpone litigation. Assurances that a debtor will pay are at least potentially representations in trade and commerce about future conduct. If so, they would be deemed to be misleading under the Fair Trading Act 1987 unless proved to be based on reasonable grounds. Mr Abbott appears to have postponed action in reliance on those assurances. Thus, Mr Abbott had a basis to mount a successful claim on a cause of action which was outside the ambit of ss 14 or 63 of the Limitation Act 1969. As such a claim was not litigated before me, I can make no final determination about it. But it is doubtful whether all claims which Mr Abbott may have brought in the absence of the Deed in 2003 would be statute-barred.
Further, any limitation defence would need to be pleaded. It was not raised in 2003, at the time of the Deed, so there is no necessary inference that it would have been raised in pleadings in 2003. There was no evidence to support the assertion that such a defence would have been pleaded. And if it was not pleaded, the lapse of time would be of no legal significance in resisting the claim by Mr Abbott.
All that can be said is that had a claim been made by Mr Abbott in the absence of the Deed, a limitation question may have arisen. But Mr Abbott was not without some prospect of recovering the unpaid amounts, or an amount equivalent to them.

(b) Personal liability - was Mr Klein the debtor?

Mr Klein asserted he was never personally liable for Mr Abbott's fees. Although the Deed is evidence that Rochester was liable for the debt, it does not establish whether or not Mr Klein was also liable prior to execution of the Deed.
Mr Klein requested Mr Abbott to do the work. He thereby became liable for the reasonable cost and expenses of that work, in the absence of other evidence. There was no evidence that he was acting merely as an agent for his company, that the company alone was liable or that Mr Abbott agreed to an exclusion of personal liability. On the contrary, there is evidence from Mr Klein that no discussion about personal liability had occurred.
Mr Klein, after the work was done, gave directions to Mr Abbott as to the entity to whom the bill should be addressed. These decisions were post-contractual. They do not deny the personal liability of Mr Klein. They manifest an arrangement that Mr Klein would nominate which of his companies would pay for the work but do not evidence an arrangement that allowed Mr Klein to limit liability to the entity nominated by him.
If an individual retains someone to do work that benefits the individual's private companies, the individual is not relieved of personal liability merely because his companies are benefited. There must be some express words or necessary inference from the circumstances that personal liability does not attach. That inference is not established by evidence of an invoice being issued to one of those companies as a result of the post-contractual instructions of Mr Klein.
By retaining Mr Abbott to do work Mr Klein undertook responsibility for Mr Abbott's fees, irrespective of which of his companies, or himself, were the primary and direct beneficiaries of the services of Mr Abbott.

G. Other actions

The failure of Mr Klein to establish a mistaken belief is fatal not only to his claim of mistake, but also to his misrepresentation and misleading conduct claims. The element of reliance is absent if Mr Klein did not have the belief he alleges was occasioned by the representation. In the circumstances of this case, Mr Abbott's words in 1996 or at any other time to Mr Klein that "you owe me $150,000" did not tell Mr Klein anything new, or cause him to take a different view of Mr Abbott's entitlements. Mr Klein knew about the fees, and the work that had led to them.
Whilst Mr Abbott's words were encouragement to Mr Klein to pay the outstanding amount, they did not constitute a representation about the limitation period or whether the fees were wholly for what might strictly be termed accounting work. Nor did these words represent that Mr Klein was personally liable, particularly in a context where Mr Abbott provided a draft deed indicating the contrary. Mr Abbott was representing the sum which approximated the total amount of his fees. That representation was correct.
It follows that there was no mistake, unilateral or common, by Mr Klein, nor was there any misrepresentation or misleading conduct by Mr Abbott.

H. Contracts Review Act 1980

The considerations for injustice in the Act are found in s 9(2) of the Contracts Review Act 1980. Mr Klein submitted that the elements of injustice that justified relief under the Act were: 1. No debt existed at the time of the Deed. 2. Mr Klein was not liable for all of the debt which did exist. 3. The debt was substantially less than $100,000. 4. Mr Klein was mistaken about the existence of the debt and whether he was personally liable. 5. Mr Abbott believed his claim was barred by the Limitation Act 1969. 6. Mr Abbott made misrepresentations inducing Mr Klein to sign the Deed. 7. Mr Klein did not obtain legal advice. 8. Mr Klein's state of mind at the time he signed the Deed. 9. Mr Abbott took a risk on his fees because of the financial difficulties in 1998 to 1991 of Mr Klein and his companies.
I have already dealt with several of these matters. I do not accept matters (b) to (f) and (h) for reasons given above.
As to (a), whilst I accept that any debt which existed in 1992 may have been extinguished by s 63 of the Limitation Act 1969, I am not persuaded that Mr Abbott had no arguable claim for recovery of his lost entitlement, or that, in the circumstances of this case, that constituted an injustice to Mr Klein.
As to (g), there was no evidence that Mr Klein used the services of a lawyer when signing the Deed. But he nevertheless well understood its terms, sufficient to make corrections to the letter of agreement. Mr Klein did not submit he lacked any understanding of the effect of the Deed. The absence of legal advice is not a feature of injustice in circumstances where Mr Klein needed no assistance to, and did, understand the Deed.
As to (i), it is true that Mr Abbott took a risk on the payment of his fees. The circumstance that he has not been paid for some 25 years shows that at least some component of that risk has eventuated. This does not render Mr Klein's promise to pay, under seal, as unjust.
In these circumstances, I can find nothing unjust in the Deed, and I accordingly decline to make any orders under the Contracts Review Act 1980.

I. Conclusion

Mr Klein has been favoured with an interest-free period of almost 25 years to pay certain fees owing to Mr Abbott. The last 10 of those years resulted from the Deed. These circumstances indicate a significant level of patience and goodwill extended by Mr Abbott. It has not been repaid in kind.
The plaintiff shall have judgment for $100,000 plus interest from 15 December 2012.
Uniform Civil Procedure Rule 42.1 indicates that the plaintiff should receive an order for costs but at the request of the parties I shall hear them before making any formal order.

J. Orders

The orders of the Court are: 1. Judgment for the plaintiff in the sum of $115,610. 2. Cross-claim dismissed. 3. Matter listed for any argument in respect of costs on a date to be fixed within the next four weeks, convenient to the parties.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 April 2015

Trade Practices Act 1974(Cth)

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