Australian Management Consultants Pty Ltd v Direct Mortgage Funding Pty Ltd [2003] VSC 202

Supreme Court of Victoria|2003-06-17|Before: ASHLEY J.

APPEAL - Appeal from judgment and orders of Master - Re-hearing de novo - Whether conduct of plaintiff's solicitor had the effect that time was no longer of the essence of contract constituted by Terms of Settlement - Whether Terms imposed a penalty.

This is an appeal from the orders of a Master made on 21 November 2002 that the second defendant in this proceeding, Amerinaus Financial Resources Corporation Pty Ltd ("Amerinaus"), pay the plaintiff, Australian Management Consultants Pty Ltd ("Management"), $490,000 plus damages by way of interest of $24,513.41; that the fourth defendant, Steven Goldberg ("Goldberg"), pay the plaintiff $240,000 plus damages by way of interest of $12,006.57; and that Amerinaus and Goldberg pay the plaintiff's costs of the application on a solicitor and client basis. The orders were made upon a summons filed by the plaintiff on 11 July last year. That summons sought reinstatement of the within proceeding, and orders that the plaintiff be at liberty to enter judgment against Amerinaus and Goldberg, and for the costs of the application. The application was made in reliance upon terms of settlement entered into between the parties on 1 May last year.

In order to understand the matters argued on the appeal it is necessary to say something about the proceeding more generally. It was commenced in 1997 in the Queensland Supreme Court. It was cross-vested to this Court in mid-1999. There were at all times four defendants to the proceeding. In addition to Amerinaus and Goldberg there were Direct Mortgage Funding Pty Ltd ("Direct Mortgage") and Peter McKay ("McKay"). It is convenient in these Reasons to describe Amerinaus and Goldberg as "the defendants" and Direct Mortgage and McKay as "the other Defendants".

The Statement of Claim was amended on a number of occasions. By Further Amended Statement of Claim filed 1 March 2002 the plaintiff sought to recover damages arising out of the payment by it to Direct Mortgage and Amerinaus of an amount of $700,000 pursuant to agreement. The plaintiff sought damages in that sum together with interest. Alternatively, it sought repayment of that amount as moneys had and received or as moneys received on trust to repay in the circumstances which were alleged to have occurred. Claims were also raised against all defendants founded on alleged breaches of the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1985. Messrs McKay and Goldberg, it appears, were respectively directors of Direct Mortgage and Amerinaus.

The proceeding was settled between all the parties on 1 May 2002. Separate terms of settlement were signed between the plaintiff and the defendants and between the plaintiff and the other defendants. It is convenient to describe the former as "the terms of settlement," or "the Terms" and the latter as "the other terms of settlement".

"In consideration of the entry into these terms of settlement, the plaintiff and the second and fourth defendants ("Amerinaus" and "Goldberg") have agreed to settle the disputes and differences that they have with each other which is the subject matter of the proceeding on the following terms: 1. Amerinaus agrees to pay and the plaintiff agrees to accept the total sum of $700,000 in full and final settlement of all claims actions suits and demands that the plaintiff has against Amerinaus arising from or touching upon the subject matter of the proceeding. 2. Goldberg agrees to pay and the plaintiff agrees to accept the total sum of $250,000 in full and final settlement of all claims actions suits and demands that the plaintiff has against Goldberg arising from or touching upon the subject matter of the proceeding. 3. Provided that the payments set out hereunder are made not later than 2 business days after 4 pm on the date on which they are due the plaintiff will accept the payments in full and final satisfaction of the obligations set out in paragraphs 1 and 2 hereof. 4. The payments provided in clause 3 hereof (totalling $150,000) shall be made to the plaintiff's solicitors McKean and Park as follows:

(a) $10,000 on or before 8 May 2002;

(b) $15,000 on or before 1 July 2002;

(c) $25,000 on or before 1 August 2002;

(d) $35,000 on or before 2 September 2002;

(e) $35,000 on or before 1 October 2002;

(f) $30,000 on or before 2 December 2002;

4. (sic) In the event that Amerinaus or Goldberg defaults in the payment of any of the sums set out in clause 3 then the plaintiff shall be at liberty to reinstate the proceeding and enter judgment by consent against: (a) Amerinaus for the sum of $700,000 together with interest pursuant to statute from the date of judgment together with costs of reinstatement of the proceeding and the entry of judgment on a solicitor client basis less any monies paid to the date of judgment by any of the defendants in the proceeding. (b) Goldberg for the sum of $250,000 together with interest pursuant to statute from the date of judgment together with costs of reinstatement of the proceeding and the entry of judgment on a solicitor client basis less any monies paid to the date of judgment by Goldberg or Amerinaus. 6. For the purpose of the entry of judgment the parties hereto hereby agree that these terms may be produced as evidence of the irrevocable consent to the entry of judgment in accordance with these terms provided that any application for judgment be supported by an affidavit sworn by the solicitor for the plaintiff attesting to the default relied upon. 7. Time shall be of the essence. 8. The parties will consent to an order that the proceeding be struck out with a right of reinstatement with no order as to costs. 9. The plaintiffs (sic) hereby agree to indemnify and hold harmless Amerinaus and Goldberg from all claims suits and demands howsoever arising from any claim by any of the persons who paid any monies to the plaintiff for the purpose of an investment in the proposed mushroom shed project to be operated by Peel Valley Mushrooms Pty Ltd. The plaintiff confirms that all investors in the said mushroom shed project have had any monies paid by them refunded or otherwise applied to their full satisfaction (whether by repayment or otherwise) prior to the execution of these terms. 10. The parties agree that they will not seek to enforce any outstanding costs orders made in the proceeding. 11. Subject to compliance with these terms the plaintiff hereby releases and forever discharges Goldberg and Amerinaus from all claims actions suits and demands arising from or touching upon the subject matter of the proceeding."

The other terms of settlement differed in two respects. First, each of Direct Mortgage and McKay agreed to pay $700,000 in settlement of the plaintiff's claim. Second, the plaintiff agreed to accept payments totalling $200,000 made over a shorter period of time than applied in the case of the defendants in satisfaction of the obligation to pay the agreed compromise sum.

In accordance with the terms of the settlement signed by all the parties, McDonald J ordered, on 1 May 2002, that:

"1. The proceedings (sic) is dismissed reserving to the plaintiff the right to apply on notice for an order that the proceedings be reinstated. 2. There be no order made as to costs."

Under paragraph 4 of the terms of settlement $10,000 was payable on or before May 2002, $15,000 on or before 1 July 2002 and $25,000 on or before 1 August 2002. It is not in debate that the first payment was made. Neither is it in debate that there was default in payment of the amount payable on 1 July 2002. The plaintiff's solicitors received a cheque for the pertinent amount on 2 July; but the cheque was dishonoured. A bank cheque in that amount was delivered to the plaintiff's solicitors on 10 July. It was thereafter returned. The third payment due, it is convenient to add, was thereafter tendered within time, but was rejected.

I noted earlier that the plaintiff agreed with the other defendants that it would accept payments totalling $200,000 in satisfaction of the larger amount agreed in settlement of the plaintiff's claim against those defendants. Before the Master, each of the solicitors for the plaintiff and the defendants were cross-examined upon affidavits which they had sworn in connection with the application. In the course of his cross-examination, the plaintiff's solicitor, Mr Whitby, gave evidence that $185,000 had been received from the other defendants in full satisfaction of their obligations, a discount of $15,000 having been agreed on about 5 May 2002. He agreed that the defendants had not been notified that a discount had been allowed to the other defendants. The matter was obliquely addressed in paragraphs 4 and 5 of Mr Whitby's affidavit sworn 6 August 2002; but it seems clear that the plaintiff's side did not unambiguously disclose the discount agreement until Mr Whitby gave evidence before the Master. I should not speculate whether the defendants had information from another source about the matter before that date. I will assume that they did not.

One other matter should be noted in the present connection. The amounts set out in the Master's orders were agreed between the parties after the Master had delivered his reasons. Those amounts treated the other defendants as having paid $200,000 to the plaintiff, and not the discounted amount of $185,000 which they had paid in fact.

It was not in debate either before the Master or before me that application by summons, supported by affidavit, to reinstate the proceedings and for the entry of consent judgment was an available procedure. It was the procedure adopted, I note, in Cameron v USB AG[1] . That matter was successively dealt with on the merits by a Master, Beach J, and then the Court of Appeal.

The consequence of the terms of settlement was that in the case of a default uncomplicated by other considerations it should only have been necessary for the plaintiff's solicitor to swear an affidavit exhibiting the terms of settlement, deposing to default by the defendants, and deposing also as to the total amount paid to date of judgment by all defendants, and by Goldberg or Amerinaus. In fact, however, there was a factual dispute, the ground covered by the affidavits was in consequence wider, and that led on to the cross-examination of the solicitors for the parties.

The factual dispute was a narrow one: On 4 July 2002 did Mr Whitby, in conversation with Mr Coghlan, the defendants' solicitor, say words which had the effect in substance of removing the requirement that time be of the essence? The defendants contended that such a thing had been said. According to counsel's argument, it was then only necessary that the amount due on 1 July be paid within a reasonable time thereafter. If the plaintiff's side reinstated the requirement that time be of the essence, it did not do so until 9 July. The defendants should thereafter be taken to have had two business days within which to make the payment due on 1 July. In fact, payment had been tendered by bank cheque on 10 July.

Counsel for the defendants accepted that the factual controversy involved a defence to the plaintiff's application for a consent judgment; and that, in consequence, his clients bore both an evidentiary and the ultimate onus of proof.

Before me, counsel for the defendants orally pursued two submissions which assumed, contrary to his client's preferred position, that time had not ceased to be of the essence. He contended, first, that on about 5 May 2002 the plaintiff had engaged in conduct which was repudiatory of the contract constituted by the terms of settlement; that is, by agreeing with the other defendants to accept the discounted amount. He submitted, second, that the obligation cast upon the defendants by paragraphs 1, 2 and second 4 of the terms of settlement constituted a penalty, and was thus unenforceable. The plaintiff was not entitled to enter judgment in accordance with the last-mentioned paragraph in the event of a default by the defendants. That left standing a liability in the defendants to pay the plaintiff $150,000 less the payment that had been made already.

Subsequent to the hearing, counsel for the defendants informed me by Memorandum that he sought to withdraw the first of those submissions. I will say no more about it.

Plaintiff's counsel opposed each of the submissions left standing. I will refer to some of the arguments which he advanced in the course of these reasons.

Appeal from a judgment given or order made by a Master requires a re-hearing de novo. That is now so by operation of the rules.[2] But it was also the case at earlier times, for the reasons explained by Herring CJ in Tidswell v Tidswell.[3]

The nature of a judge's task generally on a re-hearing de novo was described by Glass JA in Turnbull v New South Wales Medical Board,[4] his Honour relevantly citing Sweeney v Fitzhardinge.[5] His Honour's description of the characteristics of the different forms of appeal was in turn cited with evident approval by McGarvie J in Weir Family Supermarket (Warracknabeal) Pty Ltd v Liquor Licensing Commission and Anor.[6] See also the remarks of Murphy J in that case.[7]

In the case of an appeal from a Master, the general approach is, I think, a little modified. In Southern Motors Pty Ltd v Australian Guarantee Corporation Limited[8] the Full Court said that:

"What is contemplated is ... a complete re-hearing, that is to say, the application is to be heard de novo in the sense that the party who was applicant before the Master is the party to begin, the appeal is determined on the evidence before the judge, no regard being had to the evidence placed before the Master, and the judge determines the appeal without being in any way fettered by the decision of the Master, but giving such weight to the decision of the Master as appears proper."[9]

Aside from what I have just said, another feature of appeals from masters might be said to be uncharacteristic of appeals by re-hearing de novo. There is a proscription against the receipt of new evidence save by grant of special leave. That does not alter the basis upon which the appeal must be considered. It means only that ordinarily the judge will consider afresh the material which was placed before the master; and no other material.

I go to the issue about which there was controversy on the evidence. Mr Whitby, swore four affidavits in support of the summons filed 11 July 2002. A director of the plaintiff, Mr Wood, also swore an affidavit that is relevant to the present dispute. The defendants' solicitor, Mr Coghlan, swore an affidavit in opposition.

The affidavits, exhibits thereto, and cross-examination of Messrs Whitby and Coghlan satisfy me of the following matters:

* On 2 July a cheque drawn on Yarra Capital Group Pty Ltd was hand delivered by Mr Coghlan to Mr Whitby (it is convenient now and hereafter to speak of communications between the particular solicitors rather than between the firms which represented the parties). It represented the second instalment due under the Terms.

* On 4 July Mr Whitby was informed by his firm's accountant that the cheque had been dishonoured. He made an unsuccessful attempt to obtain instructions from Mr Wood, at around noon.

* Mr Whitby made contact with Mr Wood at about 2.00 p.m. on 4 July. They discussed the fact of the default, and what could be done. Mr Wood's personal wish, as expressed, was "to wind up the company[10] and enforce the terms as soon as possible."[11] But he needed to speak to his co-directors. In the meantime, he instructed Mr Whitby to speak to the defendants' solicitors and advise them that the cheque had been dishonoured.[12]

* Subsequent to Mr Whitby's discussion with Mr Wood he had a telephone conversation with Mr Coghlan.[13] It is certain that he told Mr Coghlan that the cheque had been dishonoured. It is not in debate that in the course of the call he used the word "courtesy". Whether he said, however, that he was ringing "as a matter of courtesy rather than proceed under the terms so its a warning" - as Mr Coghlan deposed - is a question to be resolved.

* On 5 July Mr Whitby received instructions from Mr Wood, for the plaintiff, to enforce the settlement by obtaining judgment.

* On the same day Mr Coglan advised that a replacement cheque would be made available, and sought confirmation "that these arrangements are satisfactory".

* On 9 July Mr Whitby sent the plaintiff a copy of Mr Coghlan's letter of 5 July; and a copy of the proposed summons seeking judgment against the defendants.

* On the same day he sent Mr Coghlan a letter rejecting the arrangement which the latter had proposed on 5 July; and stating that he had instructions to immediately enforce the terms of settlement.

* On 10 July Mr Coghlan forwarded a replacement cheque for $15,000 to Mr Whitby.

* On 11 July, in accordance with instructions probably given by Mr Cooper,[14] a director of the plaintiff with whom Mr Whitby communicated in Mr Woods' absence, the summons seeking judgment against the defendants was filed, but not served.

* On 12 July Mr Whitby was instructed by Messrs Cooper and MacVicar to return the replacement cheque and proceed with the application for judgment.

* On 15 July the pertinent summons was served on the defendants' solicitors.

* On 30 July Mr Coghlan said this in a letter which he sent to Mr Whitby:

"Further, it would appear that your client waived strict compliance with the terms by providing our client time to rectify the problem with the original cheque".[15]

* On 31 July Mr Coghlan tendered a bank cheque for $25,000 to Mr Whitby, as representing the third instalment due under the terms.

* On 2 August Mr Whitby wrote to Mr Coghlan denying any suggestion of waiver; and returning the bank cheque for $25,000.

So much is clear. Beyond that, each of Mr Whitby and Mr Coghlan made a file note of their conversation on 4 July. Those file notes gave different accounts of what had been said. Further, when cross-examined before the Master, the two solicitors continued to give variant accounts of their conversation.

"Coghlan returned all (sic) advised cheque has bounced he'll check with client as to what happened and get back".

"Cheque has bounced he - I'm calling as a courtesy rather than proceed under the terms so its (sic) a warning I - I appreciate that, obviously the intention is to abide by the terms. I'll get on to my client and get back to you."

Mr Whitby conceded in cross-examination that his file notes for 4 July[16] were in some aspects deficient. He accepted that his very brief note of the critical conversation did not reflect all that he and Mr Coghlan said; and he accepted, subject to the very important qualification that he rejected Mr Coghlan's note so far as it alleged he had said that he was "calling as a courtesy rather than proceed under the terms so its a warning", that Mr Coghlan's note was a more accurate rendition of what had been said. His concession may be accepted. His note contains no reference to the word "courtesy", for example, although Mr Whitby recalled using that word. Again, Mr Whitby conceded, in substance, that the sequence of conversations and attempted contacts as recorded on Exhibits KJW16 was wrong - for his initial and unsuccessful attempt to contact Mr Coghlan had been made, according to his recollection, before he succeeded in speaking to Mr Wood. He agreed also that the note of his conversation with Mr Wood made no reference to the latter obtaining the opinion of his co-directors as to what should be done, the default having occurred; but rather, erroneously noted an apparently unequivocal instruction to proceed to enter judgment and wind up Amerinaus.

Cross-examination of Mr Coghlan was directed to two points: first, that Mr Coghlan's conduct subsequent to 4 July was inconsistent with Mr Whitby having said what Mr Coghlan attributed to him. Second, that whatever Mr Whitby had said had been ambiguous, uncertain, and had not culminated in any arrangement or agreement between the solicitors to vary the Terms; nor otherwise caused time to cease to be of the essence.

* agreed that on 4 July Mr Whitby had not allowed the defendants any particular period of time. There had been no discussion as to what extension the defendants would want.

* Agreed that in his letter of 5 July he had not referred to there being an arrangement that the Terms not apply so as to permit the plaintiff to obtain judgment; although if the parties had made such an arrangement the defendants would have been relieved of a potential liability for very large amounts.[17]

* In my opinion, provided no reason, if there was such an arrangement, or if the plaintiff had "waived" time being of the essence, why he should ask Mr Whitby in his letter of 5 July to confirm that arrangements he then proposed were satisfactory.

* In my opinion, provided no reason, if there was such an arrangement, or if the plaintiff had "waived" time being of the essence, why he did not say so in response to Mr Whitby's letter of 9 July which rejected the proposal made on 5 July.

* Provided no reason for the delay between the time of return of the replacement cheque and his letter of 30 July which asserted, inter alia, waiver of the requirement that time be of the essence.

* Agreed that the proceeding which had been settled on 1 May 2002 had been hard fought to the doors of the court; and agreed also that on his account the plaintiff had very shortly thereafter given up a contractual right established by the settlement in an amount of up to $500,000.

* Agreed with the learned Master as at 4 July he was not sure of the indulgence he was being given; for which reason he put a proposal on the following day.

In my opinion it is improbable, notwithstanding Mr Coghlan's file note, that on 4 July Mr Whitby said anything to convey that his client did not intend to seek judgment in accordance with the Terms. Evidence was received without objection that before he spoke with Mr Coghlan he had been instructed by Mr Wood that the latter's personal view was that the plaintiff should proceed to judgment and wind up Amerinaus; but that Mr Wood had told him that he needed to speak to his co-directors, pending which Mr Whitby should simply advise the defendants' solicitors that the cheque had been dishonoured. It seems very unlikely to me that within, say, 45 minutes of that conversation Mr Whitby would tell Mr Coghlan something quite different.

Counsel for the defendants sought to make something of the fact that Mr Whitby's note of his conversation with Mr Wood indicated a clear instruction to proceed to judgment rather than the more limited instructions deposed to by Mr Whitby and Mr Wood.[18] I do not see that this matter much assists the defendants. If the instructions were as deposed to by Messrs Whitby and Wood then the file note was inaccurate. Why should that make it unlikely that Mr Whiby said what he asserted was the case? If the note was accurate, then the instructions deposed to by Messrs Whitby and Wood were inaccurate. But then there was even less reason for Mr Whitby to have said what Mr Coghlan attributed to him.

Whether Mr Wood's instructions were as deposed to, or as noted by Mr Whitby, the latter knew, as the plaintiffs' solicitor, that two months earlier hard-fought litigation had been settled at the door of the court. He also knew that at the defendants' behest a period of two days' grace for payment of instalments had been provided for by the Terms. It was also the case that the defendants had not simply failed to pay an instalment; but had "paid" it by a cheque which had been dishonoured. It seems improbable in the circumstances described, whether his instructions were final or interim, that Mr Whitby would have volunteered his client's present non-reliance upon the right to enforce the settlement by judgment.

Counsel for the defendants sought to make something of the fact that Mr Whitby rang Mr Coghlan at all on 4 July. The gist of his submission was that no point was served by Mr Whitby simply telling Mr Coghlan that the cheque had been dishonoured. I am not persuaded that the point was a good one. Mr Whitby deposed that he acted on instructions. Mr Wood confirmed those instructions. In any event, it was the fact that the cheque had been dishonoured; and simply to communicate that fact to the defendants' solicitor was both understandable and neutral.

I mention next the form of Mr Coghlan's letter of 5 July. To my mind it is inconsistent with Mr Whitby having said on 4 July that the plaintiff, in substance, would not move to obtain judgment by reason of the defendants' default; or at least inconsistent with Mr Coghlan understanding that such a concession had been made. But it is not the strongest matter weighing in favour of the plaintiff.

Then there is Mr Coghlan's response to Mr Whitby's letter of 9 July rejecting the proposals made on 5 July and communicating instructions "to immediately enforce the Terms of Settlement". It seems to me unlikely, if Mr Coghlan understood Mr Whitby to have previously given up the plaintiff's entitlement to move for judgment, even temporarily, that he would not have responded by saying so.

The defendants sought to make something of the retention of the replacement cheque until 18 July. I think that there was no point to be made. On any view, firm instructions to obtain a judgment had been given to Mr Whitby on 5 July. Nonetheless, when a replacement cheque was provided it was at least desirable for Mr Whitby to ensure that all the directors of the plaintiff were resolved to return it.

I mention also, as running in the plaintiff's favour, Mr Coghlan's failure to respond to the return of the replacement cheque until 30 July; and the language in which waiver was there asserted. In my view that delay and that language do not support a conclusion that on 4 July Mr Whitby said what Mr Coghlan attributed to him; or a conclusion that Mr Coghlan so understood whatever was said.

Some of the matters to which I have referred bear on the likelihood of Mr Whitby having said what Mr Coghlan's file note attributes to him. Other of those matters bear on Mr Coghlan's own understanding, in July 2002, of what Mr Whitby had said. Looked at from either standpoint, the probability is that the file note did not accurately recall what Mr Whitby said - which is not to say that Mr Coghlan deliberately set down an erroneous account of the conversation.

I have concluded that Mr Whitby did not tell Mr Coghlan what the latter attributed to him. As a corollary, I accept Mr Whitby's account of what he said; simply, that as a matter of courtesy he was advising Mr Coghlan that the defendants' cheque had been dishonoured. I have reached those conclusions positively, as if the plaintiff carried the evidentiary and ultimate onus of showing what was said; this notwithstanding the concession made by counsel for the defendants that his clients bore the onus of each kind.

I noted earlier that on appeal from a judgment given or order made by a Master it is for the judge to decide matters afresh, "but giving such weight to the decision of the Master as appears proper". It is convenient to say that in the present case the learned Master did not resolve the conflict between the solicitors' accounts of what was said on 4 July. He decided the matter on assumption that Mr Coghlan's account was correct. So there is nothing in the Master's Reasons to which I could relevantly have recourse.

My factual conclusions doom the defendants' first submission. But for completeness sake I should say something about the argument which was founded on Mr Coghlan's account of what Mr Whitby said on 4 July.

The argument, it should first be said, was not that an agreement was reached between the parties on 4 July to vary the terms of settlement. The Master, I interpolate, apparently understood defendants' counsel to have advanced such an argument. Be that as may, counsel submitted that what the plaintiff had done, via Mr Whitby, was to give the defendants time to fix the default. What was said had been enough to do away with time being of the essence. That remained the situation unless and until the plaintiff stipulated a fresh time for compliance. Mr Whitby's letter of 9 July could have had that effect. It did not specify a new time for compliance, but in the circumstances a time for compliance 48 hours thereafter was reasonable and might be implied. The replacement cheque was tendered within that period.

In pursuing this submission counsel relied upon Thornton v Bassett.[19] He described the plaintiff's alleged giving of time to the defendants to remedy their default as the granting of an indulgence. He did not think, he said, that the conduct attributed to Mr Whitby "strictly meets the equitable criteria of waiver".

Counsel for the plaintiff submitted that if there is to be a waiver or an estoppel, there must be an unambiguous or unequivocal statement; to establish waiver there must be an unequivocal statement of intention to elect between varying and different courses. Here not even Mr Coghlan had an understanding that there had been such an election. Waiver, counsel added, has now "been subsumed by the doctrine of election". He referred to Sargeant v RSL Developments Ltd.[20] Thornton, he submitted, was not in point. There was no conduct in the present case of the kind which arose for consideration in that case.

There is a great deal of debate whether "waiver" has a distinct place in the law; or whether it is simply a word describing different concepts - such as election between existing rights, and estoppel.[21] It is unnecessary to dwell upon that debate. For it seems to me that Thornton, relied upon by counsel for the defendants, was a case in which, on the facts, a purchaser satisfied the court that for a certain period of time the vendor had waived his contractual right to rely upon time being of the essence, in the sense that he had chosen not to so rely when he might have chosen otherwise. Pape J described the position this way:

"It is clear law that if time is an essential condition, to extend it does not waive the effect of the stipulation as a condition ... But to enable this principle to be invoked, it must appear that there was a mere extension of time and nothing more, for if after the date fixed for the payment, the parties go on negotiating for the completion of the contract, that will amount to a waiver, and time is no longer of the essence in respect of that payment".[22]

"repeated requests for payment of amounts long overdue [which] were, in the circumstances, inconsistent with the contractual stipulation as to time still being essential".[23]

In the present case, if Mr Coghlan's account of events on 4 July be accepted, there was a very short conversation between he and Mr Whitby in which the latter said that the defendants' cheque had bounced, and that he was "calling as a courtesy rather than proceed under the Terms so its a warning". There was thus a single utterance, in my opinion replete with ambiguity. What was meant by "not proceeding under the Terms"? In the event of default the plaintiff could have taken several courses under the Terms. What course was being eschewed? Is Mr Whitby to be taken to have denied his client the right at any time to sue in respect of the contractual breach, or to seek to enter judgment in consequence thereby? Then, as to warning, a warning of what? That if the payment past due was not made immediately the plaintiff would seek judgment; or that if some other instalment was not paid on time the plaintiff might seek relief; or that if the payment was not immediately made the plaintiff would sue for the contractual breach?

In my opinion, all in all it could not be said that Mr Whitby's alleged remarks constituted an unequivocal election to treat time as not being of the essence in respect of the payment due on 1 July 2002. For that reason, even if I had concluded that Mr Coghlan's evidence should be accepted, I would reject the defendants' argument that time ceased to be of essence in respect of that payment.

I turn to the submission for the defendants that, viewed as a matter of substance and not form, the terms of settlement constituted a penalty; the consequences of which was that paragraphs 1 and 2 and (second) 4 of the Terms were not enforceable, and the plaintiff was limited to suit based upon paragraph (first) 4 thereof. Counsel submitted that it is the substance of the matter which is vital. He cited O'Dea & Ors v Allstates Leasing System (WA) Pty Ltd & Ors.[24] He submitted that Cameron v UBS AG[25] was distinguishable. Here, by contrast with Cameron, there had been no adjudication on the merits of the plaintiff's underlying claim; there were merely rights created by the Terms. In the Terms there was no express or implied acknowledgment of the defendants' liability to the plaintiff. In Cameron, moreover, time was of the essence; and no issue of waiver arose there.

Counsel for the plaintiff submitted that the Terms did not constitute a penalty. The circumstances were of the kind which arose in Thompson v Hudson.[26] Counsel argued that the indebtedness of the defendants was created and acknowledged by the Terms. He referred to paragraphs 1 and 2 thereof. This was not a case of a penalty; but of a concession. The fact that there was a considerable disparity between the plaintiff's true entitlement and the amount which it was prepared to accept was not to the point. As was said in Cameron, there might be many commercial reasons why the plaintiff was prepared to accept such a sum at that time.

In my opinion, paragraphs 1, 2 and (second) 4 of the Terms did not singly or in combination constitute a penalty. The circumstances culminating in their execution provide the necessary framework in which they should be considered. The plaintiff claimed an amount of $700,000 from each of the defendants and the other defendants. The proceedings having been initiated in 1997, had the plaintiff succeeded in full it would also have been entitled to a substantial amount of interest; and to costs. The claim was contested by the defendants and the other defendants. To say that a claim was raised and was disputed says nothing about its merits. Eventually there was compromise of the proceeding between the plaintiff and all defendants. It seems to have been arrived at on the day fixed for trial. On the face of it, the plaintiff settled overall with the defendants and the other defendants for $700,000 "all in". That was a compromise, for the amount was only the amount of the claim, and added nothing for interest or costs. Moreover, the Terms, and the terms referable to the other defendants, provided a mechanism evidently designed to ensure that the plaintiff could not recover more than the overall settlement amount. Specifically concerning the defendants, the compromise with Amerinaus was in an amount of $700,000; whilst the compromise with Mr Goldberg was in an amount of $250,000.

On the face of it, the Terms provided the defendants with an indulgence: the plaintiff would accept payment by the defendants of a series of instalments totalling much less than $700,000 in full discharge of their respective greater liabilities to the plaintiff. But if the defendants defaulted, the plaintiff should be entitled to recover from them the amounts for which they had settled, giving credit for payments made.[27]

In my view, the situation falls within the class of case epitomised by Thompson v Hudson, an authority often cited,[28] and recently applied in Cameron. The facts are not quite the same as in Cameron. But the question is one of principle, not identity of facts. As a matter of principle it seems to me that there is no essential difference between terms of settlement which arise out of a plaintiff's disputed claim to enforce a foreign judgment and terms arising out of a plaintiff's disputed entitlement to a money sum or damages in connection with a commercial dispute. In either event it is open for a defendant, in substance, to acknowledge his liability to a plaintiff by entry into terms of settlement. That is what happened in Cameron.

"By entering into the deed the appellant implicitly acknowledged that the judgment debt was due and payable by his agreement that, if he did not meet the conditions upon which the indulgence was granted to him, he would submit to judgment in the amount of such judgment debt; thereby giving up any defences which he claimed to have. In my opinion, there is nothing inequitable or penal about such a compromise. In substance it amounts to a concession by the appellant that the debt is owed and will be paid if he fails to meet the terms of the indulgence granted by the respondent. All the advantages of amount and time were with the appellant provided that he complied with those terms. In these circumstances it seems to me to be of little moment that the appellant, prior to the execution of the compromise, was disputing the background against which the compromise was made."

"Immediately before the terms of settlement there was a dispute about the enforceability of the Swiss judgment and so about the amount owing by the defendant under it; but, as I see it that dispute was finally resolved by the terms themselves and the deed. From that point onwards, the defendant was acknowledging his liability in respect of the Swiss judgment subject only to this: that if he paid a lesser sum according to cl 2 he could have a release from the larger sum. In those circumstances, according to the cases to which I have referred, the provision in cl 3 for consent to judgment is not a penalty."

I should refer also to the observations of Buchanan JA:

"In my opinion the case is to be equated with those in which a creditor agrees to accept payment of part of his debt in full discharge if certain conditions are met but stipulates that if the conditions are not met, he will be entitled to recover the original debt. At one end of the spectrum covered by those cases is an undisputed judgment debt. Further towards the middle of the range is a sum ascertained in a suit in Chancery before a final decree has been made. At the other end of the spectrum, but still within it in my view, is the present case where the debt is the subject matter of a claim which is disputed but is not suggested to be a colourable device."

I see no reason why paragraph 1 of the Terms should not be treated at least as an acknowledgment of Amerinaus' liability to the plaintiff in respect of the plaintiff's claim in an amount of $700,000 subject to this: that if it paid a lesser amount in accordance with paragraphs 3 and (first) 4 of the Terms it would have a release from the larger amount. Nor do I see any reason why the Terms should not be similarly treated in the case of Mr Goldberg, though in respect of a smaller settlement amount.

If there was some reason to conclude, on an examination of the circumstances, that the apparent settlement amounts were not truly an acknowledgment by the defendants of their liability to the plaintiff in such amounts, the principle developed in and from Thompson would not apply. It could be said that the only liability acknowledged by the defendants was in an amount of $150,000; in which case the larger amounts payable in the event of default should be treated as a penalty. But here there is no reason why the apparent settlement amounts should be regarded as bogus. Each of them was less, having regard to interest and costs, than the amount claimed. They differentiated between the defendants. Taken in tandem with the compromise effected between the plaintiff and the other defendants there was still a discount on the plaintiff's claim. There was, by intent, a preclusion against the plaintiff double-dipping. The fact that the defendants had contested the plaintiff's claim tells nothing as to its strength. The fact that there was a disparity between the amount which the plaintiff was prepared to accept in order to release the defendants and the other defendants from liability for the overall settlement amount might readily be explained by commercial considerations. In fact, the plaintiff stood to receive by instalments from the defendants and the other defendants, in combination, $350,000 - that is, 50% of the amount which it claimed, exclusive of interest and costs. Comparisons being invidious, I note nonetheless that in Camerson the defendant agreed to pay $1M, "all in" by instalments, and in the event of default a sum exceeding $8.4M.

I should add this concerning the penalty argument: the learned Master addressed the issue at paragraphs 20-37 of his careful Reasons. It is evident that the arguments raised before him and before me did not wholly coincide. That said, in my respectful opinion his resolution of the core issue was correct, essentially for the reasons which he gave.

In the event, the plaintiff is entitled to judgment against the defendants in accordance with paragraph (second) 4 of the Terms. The amounts of interest payable in accordance with that paragraph require re-calculation. They are no longer the amounts referred to in the judgment entered on 25 November 2002.[29]

Having regard to the need to recalculate interest, the appeal against the Master's decision, formally, must be allowed. That is also necessary because, the proceeding having been struck out with right of reinstatement, an order for its reinstatement is required before judgment is entered. So far as I can see, the learned Master made no order for reinstatement.

[3] (No. 2) [1958] VicRp 95; [1958] VR 601 particularly at 605.

[9] At 190, my underlining; see also Tidswell at 606, citing Evans v Bartram [1937] AC 473 at 478 per Lord Atkin.

[11] Mr Whitby's affidavit sworn 10 September 2002, paragraph 13.

[12] Both Mr Whitby and Mr Wood deposed to this effect. Mr Whitby agreed in cross-examination that his affidavit of 6 August 2002 was in error insofar as it asserted that Mr Wood had simply instructed him on 4 July to recover all moneys outstanding under the Terms.

[13] He had earlier made an unsuccessful attempt to contact Mr Coghlan. Cross-examined, Mr Whitby said that according to his recollection he had attempted to do so before he spoke with Mr Wood, and that his file note, Exhibit KJW16 to his affidavit sworn 10 September 2002, was not in correct sequence.

[14] Mr Whitby deposed that he had been given instructions by Mr MacVicar, another director. He conceded in cross-examination that he had made an error in so deposing.

[15] See Exh KJW22 to Mr Whitby's affidavit sworn 10 September 2002.

[16] Exhibits KJW 15 and 16 to the affidavit sworn 10 September 2002.

[17] $500,000 in the case of Amerinaus; $100,000 in the case of Mr Goldberg

[18] The latter of whom was not cross-examined.

[21] See, e.g. Commonwealth v Verwayen (1990) 170 CLR 394 and Meaguer, Gummow and Lehane's Equity Doctrines and Remedies, 4th ed., para 17-140.

[24] [1983] HCA 3; (1983) 152 CLR 359, particularly per Gibbs CJ at 368-369.

[27] Although different payments in the case of Amerinaus and Mr Goldberg.

[28] See, eg, O'Dea at 367 per Gibbs CJ, at 380 per Wilson J and at 386 per Brennan J; and the commentary in Meagher, Gummow & Lehane Equity Doctrines and Remedies, 4th ed at para 18-080.

At a glance

Court

Decision date

Before

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Judgment (113 paragraphs)

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Cases Cited (4)