Beaman v Higson

Were impermissible matters sought to be raised on appeal?

1. I am satisfied that the new defence which Mr Beaman sought to advance on appeal did not turn only on the construction of the deed.
2. It was a defence which he could have advanced at trial, by way of pleading or evidence, but he did not. Having advanced this aspect of his case only on appeal, it must be accepted that Mr Higson has been denied the opportunity he was entitled to receive below, to meet the arguments Mr Beaman sought to advance by evidence.

The parties' cases

1. On appeal Mr Beaman submitted that by the time of the Local Court hearing the company had been deregistered, albeit accepting that there was no evidence about this. Accordingly, Mr Higson could not then have transferred his share, which under the deed he ought to have transferred to Mr Beaman on or before 17 December 2017. In the result the orders made in the Local Court had unjustly enriched Mr Higson.
2. Further, on one view a "more fair and commercially sensible outcome" would have been orders for the payment of the money and for the transfer of the share, but by 2020 the obligations in the deed were not performable. When the deed was construed as a whole, those obligations were performable on or before 21 December 2017, with the result when they were not performed, only the other obligations provided by the deed continued, such as the mutual releases and non-disparagement clause.
3. On the proper construction of the deed Mr Higson had been obliged to transfer his share on or before 21 December 17, irrespective of whether Mr Beaman paid him. If he was not paid, Mr Higson's remedy would have been to recover the share, or if Mr Beaman had obtained finance, to enforce the payment.
4. Orally, it was accepted that there was no evidence of the deregistration and that in the Local Court it had not been argued that Mr Higson was in breach of his obligation to transfer his share to Mr Beaman, or unable to do so. Nor was there a submission that if Mr Higson was correct in his construction of the deed, orders that he should transfer his share to Mr Beaman had to be made.
5. Mr Higson's case was that the arguments about the transfer of his share impermissibly sought to raise a defence not relied on in the Local Court, contrary to Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438 and University of Wollongong v Metwally (No 2) [1985] HCA 258 59 ALJR 481 at 483.
6. The issue that Mr Higson could not transfer his share to Mr Beaman was neither pleaded in his defence, nor dealt with in the evidence. Thus, what was observed in University of Wollongong v Metwally (No 2) at 483 applied: "It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so."
7. Ordinarily parties are thus bound by their pleadings and the cases which they pursue at first instance, which may have gone beyond their pleadings: O'Brien v Komesaroff (1982) 150 CLR 310; [1982] HCA 33 at [20]. It is when a question of law is raised for the first time on appeal on the construction of a document, or on facts either admitted or proved beyond controversy, that the question may be argued: at [21].
8. Mr Higson contended that this does not apply to mixed questions of fact and law, such as those involved in whether he was in breach of his obligations under the deed, or otherwise not entitled to damages, because he failed, or was not in a position to transfer his share to Mr Beaman.
9. In written submissions in reply Mr Beaman contended that it was not he who was in breach of his obligations under the deed, but Mr Higson.
10. Mr Beaman also advanced a construction of the deed that Mr Higson was not obliged to transfer the share.

The Local Court proceedings

1. The cases advanced in the Local Court rested on the parties' pleadings, the evidence and arguments advanced.

The pleadings

1. In the Local Court Mr Higson had pleaded: "1. On 26 June 2017, the Plaintiff and the Defendant signed a Deed of Release (the "Deed") 2. Clause 2 of the Deed required the Defendant to pay to the Plaintiff the sum of $40,618.00 on or before 21 December 2017 (the "payment"), on condition that the Defendant obtain finance to make the payment. 3. Clause 6 of the Deed required the Defendant to source another means for the payment if he could not obtain finance. 4. The Defendant failed to pay the amount of $40,618.00 to the Plaintiff on or before 21 December 2017 or at all. 5. The Plaintiff has sent the Defendant letters of demand on 24 May 2019 and 1 July 2019. 6. The Plaintiff claims: a. Payment of $40,618.00 b. Interest pursuant to Section 100 of the Civil Procedure Act 2005 from 22 December 2017 to 1 August 2019."
2. The pleaded defence was: "The Defendant relies on the following facts and assertions: 1. The Defendant admits paragraphs 1, 2 and 5 of the Statement of Claim. 2. The Defendant denies paragraphs 3 and 4 of the Statement of Claim insofar as it pleads that the Defendant was under no obligation to pay the amount of $40,618.00 to the Plaintiff under the Deed of Release dated 26 June 2017 (the "Deed") and that a subsequent agreement was reached by the Plaintiff and Defendant. 3. The Defendant says in answer to paragraphs 3 and 4 of the Statement of Claim that the obligation of the Defendant to pay the Plaintiff the amount of $40,618.00 was conditional on the preconditions set out in clauses 2 and 6 of the Deed. 4. The Defendant says in answer to the whole of the Statement of Claim: (a) The Defendant is not indebted to the Plaintiff; (b) The Defendant made various attempts to secure finance between 26 June 2017 and 17 February 2018 and was unsuccessful; (c) On 18 February 2018, the Plaintiff and Defendant met with an associate Luke Abbott in Club Umina at Melbourne Ave, Umina Beach NSW 2257; (d) In the meeting of 18 February 2018, the Plaintiff and Defendant agreed that in full and final settlement of any claims between the parties and in place of any obligations in the Deed, the Plaintiff would accept ownership of the shares of the Defendant in the company Central Coast Party Charter Pty Ltd ("Subsequent Agreement"); (e) The terms of the Subsequent Agreement were reduced to writing with the original Subsequent Agreement in the possession of the Plaintiff; (f) In the meeting of 18 February 2018, the Plaintiff agreed to attend to organising documentation required to give effect to the share transfer; and (g) In the circumstances the Plaintiff is estopped from reliance on the terms of the Deed."
3. There was no issue that Mr Beaman had never paid Mr Higson the agreed amount; that Mr Higson had never transferred his share to Mr Beaman; that he had pursued Mr Beaman for payment; and that the parties had discussed entering a further agreement.

The evidence

1. In his affidavit Mr Higson explained the email, letter of demand and communications he had pursued, seeking payment from Mr Beaman, who denied being liable to make the payment under the deed, with the result the commencement of the proceedings.
2. In cross examination Mr Higson was asked: "…Q. In your affidavit at paragraph 19 you note that the last communication you had with the defendant in relation to this alleged debt was 5 November 2018, later that year. Is that correct? A. Yes. Q. And you agree that the defendant denied being liable in respect of the deed that was entered into at Parramatta Local Court? A. I believe I received no communication back. Q. But, you agree that in your evidence you say, "On this occasion he denied being liable in respect of the deed", correct? A. Yes. Q. Under that deed there were certain obligations on you in relation to that deed, weren't there? Is that correct? A. Yes, there was. Q. At clause 4 of that deed it says, and I will read it to you: "The plaintiff will transfer his shares in Central Coast Party Charters Pty Ltd to the defendant on 21 December 2017, or if the defendant pays the plaintiff earlier then on the date of payment." Is that correct? A. Yes. Q. You never transferred any shares or took any steps in relation to your obligations under that deed or your understanding of it? A. In regards to the deed I never received payment on that date or before that date. I was following the deed. Q. But, you never made any steps to do anything in relation - with the shares? A. Yes, I did. I contacted Mr Beaman for payment. That was my step."
3. It was not put to Mr Higson that the company had been deregistered, or that he was unable to transfer his share to Mr Beaman. Nor were any arguments advanced about this.
4. That is explained by the evidence Mr Beaman led. In his February 2020 affidavit Mr Beaman said that it was a condition of the deed that Mr Higson transfer his share on or before 21 December 2017; he was not aware of any attempt to comply with clause 5 of the deed; and that Mr Higson remained a shareholder of the company, annexing relevant ASIC records, They showed that strike off action was in progress; Mr Beaman was the only director; he, Mr Higson and Mr Abbott each still held one share; notices of proposed deregistration had twice been issued in 2018 and January 2020, but not that it had been deregistered.
5. Mr Beaman also there said that Mr Higson had continued to be involved in the business after the deed was executed and that in February 2018 they had negotiated an agreement that he would transfer his share to Mr Higson.
6. Mr Beaman was cross examined about this claimed post deed agreement, which he denied that he had fabricated, perceiving the weaknesses in his case. He was not asked about the deregistration of the company, about which there was no evidence.
7. It follows that on the evidence in the Local Court, Mr Higson still held his share in the company and there was no evidence that it had been deregistered.

The cases advanced

1. In the Local Court there was no issue between the parties about Mr Higson's ability to transfer his share, the deregistration of the company, or that the orders sought would unjustly enrich Mr Higson.
2. Mr Higson's case was that the deed was enforceable. While it contained provisions to enable Mr Beaman to obtain finance, it contained protections to ensure that he was paid, after which he was to transfer his share. He was thus entitled to bring the proceedings and to enforce the payment which Mr Beaman had failed to make.
3. Mr Beaman's case was that the deed was conditional, Mr Higson's payment being subject to him obtaining finance and a breach of the obligation to seek finance had not been pleaded.
4. Mr Beaman argued that Mr Higson's case ignored the contingent precondition to the making of the payment, the obtaining of finance, for which no time frame was stipulated. It followed that finance not having been obtained, Mr Beaman had no obligation to pay Mr Higson and thus the deed was not enforceable.
5. Mr Beaman advanced two possible constructions of the deed, contending that the proper construction was that he not having obtained finance, the deed was unenforceable and Mr Higson had no cause of action against him. In any event, the deed had been superseded by a later agreement.
6. In reply in the Local Court it was explained for Mr Higson that on his case, the deed had been amended in cl 6 to protect him, in case Mr Beaman did not obtain the finance provided for in cl 2, to ensure that he would still be paid what he was owed.
7. To that submission Mr Beaman was given the opportunity to respond, submitting that if the deed were read in the way contended for by Mr Higson, cl 6 would be found to be void for uncertainty, so that it had to be removed. That was not necessary, however, because a perfectly reasonable construction of the deed was that if Mr Beaman was unable to obtain finance, the debt did not remain due or payable.
8. It follows that in the Local Court there was also no issue between the parties about the consequences of Mr Higson having failed to transfer his share.

The new defence is thus not available on appeal

1. In these circumstances I am satisfied that it must be accepted that Mr Beaman is not entitled to rely on the new defence he sought to advance on appeal.
2. First, there is no question that this new defence was not relied on at first instance and that it turns not only on the construction of the deed, but also on factual matters not addressed in the evidence, because the defence was not then raised or relied on by Mr Beaman. To the contrary, it was inconsistent with the case he advanced.
3. Further, the defence is also inconsistent with the evidence which Mr Beaman led and relied on, ASIC records which showed that Mr Higson then remained a shareholder of the company, which had not been deregistered.
4. When dealing with Mr Beaman's claim that a further agreement had been entered after the deed was executed, her Honour explained why she concluded that no such agreement had been reached, despite the evidence about the further discussions which were pursued about such an agreement. They included discussions about the transfer of shares.
5. It must thus also be accepted that if Mr Beaman had advanced this further defence at trial, other evidence may have been led by Mr Higson about the issues which it raised.
6. In the result this new defence may not be raised for the first time on appeal, as Mr Beaman sought to do.

Did her Honour err in the construction of the deed?

1. There is no question that the deed was ambiguous, providing as it did: Recitals "A. David Warren Higson (the plaintiff) claim from Damien Beaman (the defendant) for purpose of a claim in respect to a verbal agreement. B. The defendant denies the plaintiff's allegations. C. On or about 30 January 2017, the plaintiff commenced proceedings no.2017/00029560 in the Local Court of New South Wales (the proceedings). D. The amount sought by the plaintiff in the proceedings was $42 271 .80, plus interest and costs. E. The parties wish to settle all disputes between them arising out of the issue of the proceedings (the dispute). Operative Part 1. This deed is entered into by the parties without admissions of any kind. 2. The defendant will pay to the plaintiff the sum of $40,618.00 in full and final settlement of the dispute between them on or before 21 December 2017. On condition the Defendant obtain finance to make the payment. 3. The Defendant will release the Plaintiff of his liability to the loan due and owing to the ANZ Bank in respect of the partnership. On condition that the Defendant obtains approval of the refinance of the ANZ loan. 4. The Plaintiff will transfer his shares in Central Coast Party Charters Pty Ltd to the Defendant on 21 December 2017 or if the Defendant pays the Plaintiff earlier then on the date of payment. 5. The Plaintiff will forfeit his shares and interest in the company and partnership on 21 December 2017 or if payment is made earlier by the Defendant then on the date of the payment. 6. In the event that the Defendant cannot obtain the finance and the refinance of the ANZ loan reflected in paragraph 2 and 3 then the parties agree to liquidate the company Central Coast Party Charters Pty Ltd and dissolve the partnership that the Defendant will source other means of payment. 7. The parties have executed the consent orders in the proceedings in the form of schedule 1 to this deed (the consent orders) 8. The defendant hereby releases the plaintiff from all claims, actions, suits, demands, costs, damages and expenses which it may have had but for the execution of this deed by reason of or arising from the dispute. 9. The plaintiff hereby releases the defendant from all claims, actions, suits, demands, costs, damages and expenses which it may have had but for the execution of this deed by reason of or arising from the dispute. 10. The plaintiff will make no defamatory or derogatory remarks of the Defendant or the company Central Coast Party Charters Pty Ltd or the partnership."
2. The recitals established that its commercial purpose was to settle the dispute between Mr Higson and Mr Beaman which was the subject of the Local Court proceedings and the terms of the deed, that the its purpose was also to bring about the end of their dealings with each other.

The conclusions reached in the Local Court

1. After explaining the background, the pleadings and the agreed facts, Price LCM identified the issues to be: "1. The nature of the deed itself, and whether the terms were conditional 2. Whether there was an agreement on the 18th of February 2018 which varied the deed."
2. Mr Beaman did not contend that her Honour had incorrectly identified what he put in issue
3. Her Honour then turned to the competing evidence which Mr Higson, Mr Beaman and Mr Abbott had given, much of which concerned the disputed further agreement. Her Honour explained her conclusions about the witnesses' credibility and reliability. She then turned to factual findings about that agreement, concluding that while one had been discussed, none was finally reached.
4. Her Honour then turned to the law relevant to the construction of the deed, about which there is no dispute, observing: "82. The ·general principles of contractual interpretation apply when considering the deed of release, subject to certain special principles. 83. The principles of contractual interpretation were summarised by French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37 at paragraph 46 and following (footnotes omitted): 46. The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. 47. In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. 48. Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. 49. However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". It may be necessary in determining the proper construction where there is a constructional choice... 50. Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations. 51. Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption "that the parties ... intended to produce a commercial result". Put another way, a commercial contract should be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". 52. These observations are not intended to state any departure from the law as set out in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales and Electricity Generation Corporation v Woodside Energy Ltd. We agree with the observations of Kiefel and Keane JJ with respect to Western Export Services Inc v Jireh International Pty Ltd. 84. Those principles, reflected and expanded upon the principles outlined in earlier decisions, including that of the High Court in Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36 per Gibbs J at [3]: It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course, the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, "even though the construction adopted is not the most obvious, or the most grammatically accurate", to use the words from earlier authority cited in Locke v. Dunlop [1888] UKLawRpCh 140; (1888) 39 Ch D 387, at p 393, which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case [1880] UKLawRpCh 258; (1880) 16 Ch D 681, at p 686."
5. Her Honour then turned to consider the first issue, whether the deed was conditional on Mr Beaman obtaining finance.
6. She noted that Mr Beaman relied on Perri v Coolangatta Investments [1982] HCA 29, to submit that obtaining finance was a condition precedent to the performance of his obligation to pay Mr Higson, that not having been met, the deed was unenforceable; that the contract was silent on what might flow from non-fulfilment of that condition, which led to two possible results, waiver of the condition or a right to terminate the deed; and that he had fulfilled the condition, having sought finance, with the result that the deed was not enforceable. Even if Mr Higson's position was accepted, cl 6 of the deed was void for uncertainty, because there was no time frame for the obligation to obtain finance, which could not be perpetual. While Mr Higson argued that a reasonable time was implied, on Mr Beaman's case that provided an additional condition: at [85]-[87].
7. Her Honour concluded: "89. It is not in dispute that the deed was signed, and that the money has not been repaid. The deed was signed and prepared by a solicitor, and was the basis made for consent orders by the court. It is clear that the parties intended to enter into a contract. 90. These matters engage the principle that, where the parties intend to enter into a contract, the Court should endeavour to give effect to that intention by overcoming any difficulties of construction that might arise. 91. In considering what a reasonable businessperson would have understood those terms to mean, it is relevant to consider that the commercial purpose of the deed was to put an end to the dispute. The recitals define the context - that is with reference to the Local Court proceedings and the agreement of the parties to resolve that proceeding. In the present case, it is clear that the parties intended to enter into the Deed of Release for a sum of money to be paid in order to settle the legal action. 92. The mere fact that a contract is expressed as "on condition " does not mean that there is no binding contract until the condition has been satisfied. It is well established that conditions precedent to the formation of a contract are distinguished from conditions precedent to performance of the contract. In the case of the latter, a binding contract is immediately created but performance of obligations under the contract may be delayed until satisfaction of the condition. It is a matter of construction, which of the two types was intended by the parties. The authorities indicate that unless it is clearly expressed by the parties that a condition precedent is one which is precedent to the formation of the contract, such conditions will be construed as conditions subsequent, or conditions precedent to performance. 93. I am satisfied that a binding contract came into existence immediately upon the entry into the deed of release, and that the parties to it were from that moment subject to certain obligations. 94. The defendant's evidence was that he was unsuccessful in obtaining finance, and although he tried to obtain other means of payment, he was unsuccessful. That evidence was not challenged. The conclusion to be drawn is that the condition was unable to be met - in other words, he did not obtain another means of payment. 95. The particular paragraphs in contention concerning the operative part of the Deed of Release are paragraphs 2 and 6. There are two possible interpretations open on those paragraphs. Namely: (1) That the promised payment by the defendant was subject to the pre-condition of obtaining finance (condition 2) or other means of payment (condition 6) and if the defendant was unsuccessful in obtaining finance of some kind by 21 December 2017, the obligation lapsed; and (2) That the promised payment by the defendant on or before 21 December 2017 was subject to the pre-condition of obtaining finance (condition 2), but if the defendant was unable to obtain finance as per condition 2, then the defendant would source another means of payment (condition 6) - with condition 6 not being limited by a time period. 96. Reading the operative part as a whole, it is clear that the terms were designed as means of the defendant paying the sum agreed. I am not satisfied that condition 6 was limited to the time frame in condition 2, noting it was a fallback position designed to ensure that the settlement sum was ultimately paid. 97. I am not satisfied that the conditions were void for uncertainty. The deed has certainly been poorly drafted. However, in circumstances where it is clear that the parties intended to enter into an agreement, the court will endeavour to give effect to that intention by overcoming, if possible, any difficulties of construction. In doing so, the court will give effect to the substance, and not the mere form, of the contract. The wording of the deed is sufficiently clear to achieve the purpose as set out in the recital. It follows that the deed is not void for uncertainty. 98. It is well established that where a contract does not specify a time frame, it must be done within a reasonable time. However, even in circumstances where a contingent condition has not been fulfilled by the due date, or within a reasonable time, but neither party then terminates the contract, the contract remains on foot. As per the High Court decision of Suttor v Gundowda [1950] HCA 35, the court stated at paragraph 15: The provision in question is to be construed as making the contract not void but voidable. The question of who may avoid it depends on what happens. If one party has by his default brought about the happening of the event, the other party alone has option of avoiding the contract. If the event has happened without default on either side, then either may avoid the contract. But neither need do so, and, if one party having a right to avoid it does not clearly exercise that right the other party may enforce the contract against him. 99. I am not satisfied that the terms of the deed provided that upon non-fulfilment of a contingent condition, the contract would be deemed to come to an end. Accordingly, the contract remains enforceable."

The parties' cases on appeal

1. Mr Beaman's case was that under cl 4 of the deed, Mr Higson was entitled only to transfer the shares on one of two dates, before 21 December 2017 if Mr Beaman had earlier paid the settlement sum, or 21 December if he had not. The deed did not stipulate what was to happen if the sum was not paid by 21 December.
2. Clause 5 provided for Mr Higson to forfeit his shares in the company and interest in the partnership, which had obtained the borrowings dealt with in cl 3, which Mr Beaman was obliged to refinance. Mr Beaman argued that "It makes little sense for the shares in cl 5 to be the same shares which were to be the subject of the transfer in cl 4. It makes more sense to align cl 5 with cl 3. As above, cl 3 relates to the "refinance" of a loan which, it is clear, is a loan between the ANZ and a partnership "entity" which consists of those who are liable under the loan (i.e. Mr Abbott, Mr Beaman and Mr Higson)".
3. Clause 6 was originally drafted to provide: "In the event that the Defendant cannot obtain the finance and the refinance of the ANZ loan reflected in paragraph 2 and 3 then the parties agree to liquidate the company Central Coast Charters Pty Ltd and dissolve the partnership."
4. Mr Beaman thus submitted that: "The perceived tension with cl 6 flows from the amendment made to it. Original cl 6, which was struck through….. contemplated that if there was no "finance" or "refinance" then "the parties agree to liquidate the [Charter Company] and dissolve the partnership." Whilst cl 6 in those terms is clearly not operative (as it was struck through), it evidences that there was intended to be a "hard stop" to the dilemmas that the Charter Company / shareholders / partnership / partners had been encountering. The substituted part of cl 6 also reveals a degree of harmony in the drafting. It ties together the finance in cl 2, the refinance in cl 3, the share transfer in cl 4 and the forfeiture in cl 5 and operated to wash away all of problems through the mechanism of liquidation and dissolution."
5. The logic of cl 6 was submitted to have been overtaken by the amendment, but still had to be interpreted harmoniously and commercially with the balance of the deed. In picking up the concept of finance in cl 2, it followed that cl 6 also picked up the time there stipulated, as well as that stipulated in cl 4 as to share transfer and cl 5 as to forfeiture, with the result that: 1. clause 6 obliged Mr Beaman to attempt to finance the settlement provided for in cl 2 and if he failed, to source the payment by other means in the period from July 2017 when the deed was signed, to 21 December 2017; 2. clause 6 imposed similar obligations in relation to the refinancing dealt with in cl 3; 3. but cl 6 should be read as operating in circumstances where the refinance cl 3 required had been obtained, but the finance which cl 2 required was not; 4. clause 6 also relieved Mr Higson of the obligation to transfer his shares after 21 December 2017; but 5. clause 6 did not relieve Mr Higson of the forfeiture of his interest and share after 21 December 2017, under cl 5.
6. In the result the gist of the parties' bargain was that performance by 21 December 2017 was an essential term, but neither party performed their obligations by that date, with the result that all that survived was the agreed mutual releases and non-disparagement clauses.
7. Orally it was argued that if her Honour was correct in concluding that the contract remained enforceable, even though finance and refinance had not been obtained, that must mean that the contract as a whole was enforceable, not only the obligation on Mr Beaman to pay the judgment sum. Her Honour erred in not having regard to Mr Higson's obligation to transfer the share, which was extant. When that was considered, it was clear that the contract could not have been enforceable as at the date of judgment.
8. Her Honour thus erred in concluding that Mr Higson should be put in the position he would have been in, if the contingent provision of the deed had been performed, disregarding the position Mr Beaman then would have been in. That supported the conclusion that properly construed, all the obligations had to be performed by 21 December and there were no ongoing obligations afterwards.
9. Mr Higson accepted that while the meaning of cll 4 and 5 had not arisen in the Local Court, that was available to be raised on appeal, that turning on the proper construction of the deed which had to be construed in its entirety. But to construe the deed in the way for which Mr Beaman contended was contrary to what the deed unambiguously provided, the settlement of the Local Court proceedings on terms that required Mr Beaman to pay him the agreed sum, before, on or within a reasonable time of 21 December 2017.
10. Although the latter was not expressly provided for in cl 6, that had to be inferred, to give business efficacy to what was agreed: BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 282. It would be an uncommercial and absurd result for the deed to be construed as Mr Higson receiving no payment despite having foregone the claims he had advanced in the Local Court, forfeited his interest in his share and the partnership and remaining bound not to pursue the payment or any other claim against Mr Beaman, while remaining bound by the non-disparagement obligation.
11. It followed that the implication of Mr Beaman's obligation to make the payment within a reasonable time after 21 December 2017, was so obvious as to go without saying.
12. In written submissions in reply Mr Beaman's case was that it was not "objectively inconceivable that a party would agree to accept payment of a sum of money in full and final settlement of the dispute and immediately release the other party in respect of that dispute, without any immediately binding and enforceable payment obligation being imposed on that other party to pay the settlement sum"
13. Mr Beaman also contended that having denied Mr Higson's allegations and the deed having been entered on a non-admissions basis, the compromise arrived at did not involve a capitulation on his part. Thus objectively, it was conceivable that Mr Higson had settled for less than he had claimed. In fact, he had agreed to accept less, including by bearing his own costs in the Local Court, as well as giving up his share and his interest in the partnership. That reflecting that he did not have a particularly good claim, which was supported by his acceptance of the possibility that Mr Beaman would not be able to obtain the finance and refinance, while accepting only a conditional right to liquidated damages.

The appeal must be dismissed

1. As Price LCM explained, the parties' rights and liabilities under the deed must be determined objectively, asking what a reasonable businessperson would have understood the terms agreed to mean, having in mind the language used, the circumstances addressed in the deed and its commercial purpose.
2. Because the deed is ambiguous, there must be recourse to external events, namely, the genesis of the deed and its background and context, about which there was no dispute.
3. This included that Mr Higson, Mr Beaman and Mr Abbott were directors and shareholders in the company, as well as partners who had borrowed from the ANZ; that Mr Higson and Mr Beaman had fallen out, with Mr Higson claiming that he had agreed to resign from his directorship in 2016, in return for an agreed payment from Mr Beaman; that after he resigned, Mr Higson had brought Local Court proceedings to enforce that agreement, Mr Beaman not having paid the sum he claimed had been agreed; and that Mr Beaman had there denied having made such an agreement.
4. The parties agreed to settle those proceedings on execution of the deed, which essentially dealt with four things. First, Mr Beaman making the agreed payment to Mr Higson. Second, settling the Local Court proceedings on terms which resulted in Mr Higson bearing his own costs. Third, Mr Beaman refinancing the partnership's borrowings, which would bring Mr Higson's guarantee of current borrowings to an end. Fourth, bringing their involvement with each other to an end, by Mr Higson forfeiting his interest in the company and partnership and transferring his share to Mr Beaman, on the basis that he would in future make no defamatory or derogatory remarks about Mr Beaman, the company or partnership and they would make no further claims against each other.
5. The commercial purpose of the deed was thus both to bring an end to the parties' dealings with each other and to settle the Local Court proceedings.
6. In construing the deed by which this purpose was sought to be achieved, the Court must assume that the parties intended to produce a commercial result and must avoid making commercial nonsense or inconvenience. That requires the whole of the deed to be read together. It may not be read piecemeal. If two constructions are open, that which must be preferred is the one which avoids capricious, unreasonable or unjust consequences, even if the other is grammatically open.
7. So approaching the construction of the deed, it is apparent that her Honour was correct in concluding that a binding contract came into existence immediately on execution of the deed; that it was not void for uncertainty; that obtaining finance was not a condition precedent to the payment to Mr Higson agreed in cl 2, given what cl 6 provided; and that Mr Beaman not obtaining the finance, did not result in his obligation to make that payment lapsing.
8. Mr Beaman did not challenge her Honour's observation that where a contract does not specify a time frame, as cl 6 did not, what is provided for must be done within a reasonable time: at [98]. When such a condition is not complied with, the contract is voidable, but not void: Suttor at [15].
9. What cl 6 thus provided for was that if Mr Beaman had not obtained the finance necessary for him to pay Mr Higson on or before 21 December, as cl 2 provided, he would "source other means of payment" within a reasonable time. Objectively, a reasonable businessperson could not have understood this to mean that if Mr Beaman did not source another means of payment within a reasonable time, the obligation to make the payment to Mr Higson ceased or became unenforceable.
10. Her Honour also correctly concluded that the deed did not evidence an intention that the parties were not immediately bound when they executed it. To the contrary, it evidenced that this was their intention, the deed having annexed to it the executed consent orders to be filed in the Local Court.
11. It follows that it also cannot be accepted that objectively, a reasonable businessperson would have understood the deed to mean that the obligation to pay Mr Higson became void or unenforceable, if Mr Beaman failed to obtain the finance by 21 December, or within a reasonable time.
12. That is because the deed contemplated not only that by 21 December the consent orders would already have been made in the Local Court, but that on that date, If Mr Beaman had not already made the payment, under cl 6 he would have a further reasonable period to find other means of payment, while also having the ongoing benefit of: 1. Mr Higson: 1. transferring his share under cl 4 and forfeiting his share in the company and interest in the partnership on that date under cl 5; 2. releasing him from further claims under cl 9; and 3. agreeing to make no derogatory or disparaging remarks in future under cl 10. 1. he also having a further reasonable period to refinance the ANZ loan.
13. To construe the deed in the way for which Mr Beaman contended is thus not grammatically open and would result in a capricious, unreasonable and unjust outcome, which the deed did not contemplate.
14. That is because what the deed immediately provided for on execution was:

• under cl 2, that Mr Beaman would pay Mr Higson the agreed sum, on or before 21 December, on condition that he obtain finance and if not obtained by then, under cl 6 having a reasonable time after that date to source other means of making that payment;
• under cl 3, that Mr Beaman would release Mr Higson from his liability under the ANZ loan, on condition that he obtain approval of the refinance of the loan, and if not obtained, under cl 6 having a reasonable time to source other means of payment of the loan;
• under cl 4, Mr Higson transferring his share to Mr Beaman on 21 December, or earlier if Mr Beaman paid him under cl 2;
• under cl 5, Mr Higson also forfeiting his share and interest in the company on 21 December, or earlier if Mr Beaman paid him under cl 2;
• under cl 7 the Local Court proceedings being brought to an end by making of the consent orders which the parties had executed;
• under cl 8 and 9, Mr Higson and Mr Beaman releasing each other from all claims they might have had against the other, but for execution of the deed; and
• under cl 10, after execution of the deed, Mr Higson making no defamatory or derogatory remarks about Mr Beaman, the company or partnership.

1. As her Honour concluded, all of the provisions of the deed having to be read together, it thus did not contemplate that it would become void, if Mr Beaman did not obtain the finance which cll 2 and 6 dealt with. The obligation under those clauses was to make the payment within a reasonable time of 21 December 2017, if finance was not obtained on or before that date.
2. The construction for which Mr Beaman contended plainly would not have been commercial. On his approach, if he did not pay Mr Higson the agreed amount, Mr Higson would have received nothing, despite having not only given up his right to pursue the Local Court proceedings and having born his own costs of those proceedings, but also giving up any other claim which he had but for execution of the deed, while still having an ongoing obligation in relation to disparagement. He would also have forfeited his interest in the company and partnership, even if he had not transferred his share, while remaining bound by the guarantee he had given in relation to the ANZ loan.
3. Such a one-sided, uncommercial outcome clearly was not contemplated by the deed which the parties entered, given its terms.
4. That conclusion was supported by the terms in which cl 6 was originally proposed for Mr Beaman: "In the event that the Defendant cannot obtain the finance and the refinance of the ANZ loan reflected in paragraph 2 and 3 then the parties agree to liquidate the company Central Coast Charters Pty Ltd and dissolve the partnership."
5. That would not have relieved Mr Beaman of the obligation to pay Mr Higson, although it would have brought the parties' involvement with each other to an end, by the company being liquidated and the partnership dissolved. That would potentially also appear to trigger Mr Higson's guarantee of the loan.
6. Instead Mr Higson proposed, and Mr Beaman accepted the words which were adopted in cl 6, which gave Mr Beaman a further reasonable time to make the payment, while the company and partnership continued to operate without Mr Higson's involvement and he also had the opportunity to seek other means of payment of the loan which he had agreed to refinance.
7. I am satisfied that this reflected an intention to ensure that Mr Higson would be paid, even if finance had not been obtained by 21 December, not that Mr Beaman's obligation to make the payment would cease, if he failed to obtain finance by then, or within a reasonable time of that date.
8. In the result, Mr Higson's case, that her Honour was correct in concluding that on the proper construction of the deed he was entitled to enforce the payment Mr Beaman had agreed to make to him, with the result a verdict and judgment for him for the agreed sum plus interest and costs, must be accepted and the appeal dismissed.

Costs

1. The usual order under the Uniform Civil Procedure Rules 2005 (NSW) is that costs follow the event, which is an order that Mr Beaman must pay Mr Higson's costs, as agreed or assessed.
2. Unless the parties' approach to be heard within 7 days, that will be the Court's order.

Orders

1. For these reasons I order that: 1. The appeal is dismissed; 2. Unless the parties' approach to be heard within 7 days, Mr Beaman must pay Mr Higson's costs, as agreed or assessed.

---

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: 30 July 2021