4.2.2.1 Construction of the Deed
112 The appellants' submissions sought to address the construction issue as if the matter was being heard at first instance. They failed to clearly articulate any alleged error in the primary judge's reasoning in holding that this was not an appropriate case in which to go behind the Supreme Court and Court of Appeal judgments.
113 The primary judge gave the following detailed reasons for declining to go behind those judgments which it is helpful to set out in full:
60 I am not persuaded that it would be appropriate to go behind the Judgment Debt in the circumstances of this case. The Judgment Debt was handed down after contested proceedings before the Supreme Court, in which Darke J had the benefit of more fulsome evidence including oral evidence that was tested before his Honour. On appeal, his Honour's construction of the Deed (which formed the underlying basis of the Judgment Debt) was upheld and it was rejected that the applicants were denied sufficient opportunity to present arguments that are now relied upon by the applicants. The SC Judgment is carefully reasoned and appears to be correct for the reasons that were given in that decision.
61 Many of the applicants' arguments appeared to be based upon claims that they propose to make for compensation. It has not been explained in adequate detail how and why they say that such claims obviate their liability in relation to the Judgment Debt. Counter-claims and cross demands do not negate the existence of a debt, although they may speak to amounts that may be set-off against it. Whilst references have generally been made to the Deed being void for illegality or public policy, such arguments have not been adequately developed by reference to case law.
62 As was submitted by the respondent, the Judgment Debt was founded upon a narrow issue. That issue was construction of the Deed as requiring payment by the applicants of a sum of $240,520 irrespective of that sum having actually been lawfully owing under the Agreement (whether by reference to GST, the services that were provided by the respondent, or otherwise). This was having regard to the context of the Deed provided by the Agreement and the surrounding communications between the parties, in respect of which the NSW Supreme Court had the benefit of additional evidence. This included oral evidence upon which Darke J made adverse credibility findings in respect of Mrs Edmonds' evidence as to why she contended that she had entered into the Deed. The construction of the validity of the Deed in the NSW Supreme Court proceedings was upheld on appeal, in the Appeal Judgment at [94]-[97]. Essentially, the purpose of the Deed was considered to be the provision of "commercial certainty" i.e. agreement of what was owed, irrespective of whether or not it had actually been owing or lawfully recoverable under the Agreement. The Deed, therefore, was not premised upon the correctness of the underlying Agreement.
63 In terms of the interest component, the following was stated at [73] to [75] of the SC Judgment:
73. By cl 2.1 of the Deed, the company and Mrs and Mr Edmonds jointly and severally undertook to repay the Debt to BWG on the earlier of various events. Debt is defined in cl 1.1 of the Deed to include the Service Fee plus all accruing interest. By Recital M, the Service Fee plus accrued interest calculated in accordance with the Agreement was stated to be $240,520 as at 12 April 2018. It is further stated in Recital M that interest continues to accrue on the Service Fee at the interest rate. The reference to the interest rate is plainly a reference to the interest rate that is specified in cl 7 of the Agreement (see Recital D)…
75. In these circumstances, it is my view that Mrs and Mr Edmonds are obliged to pay BWG $240,520 plus interest accrued on that amount after 12 April 2018 at the rate specified in cl 7 of the Agreement. That is a high rate of interest (2.5% per month compounding each month) but it has not been shown in the circumstances to be penal or unconscionable.
64 This was the basis upon which I was informed by the parties that the interest component of the Judgment Debt had been calculated i.e. by reference to the rate of interest set out in the Agreement. This followed from [89] of the Judgment, where it was stated:
89. BWG is entitled to a monetary judgment against both Mrs and Mr Edmonds for $240,520 plus interest. The Court will direct BWG to bring in an interest calculation to enable the appropriate judgment sum to be determined. The interest calculation will be directed to be served upon Mrs and Mr Edmonds, who will be given an opportunity to either agree to, or dispute, the calculation.
65 The applicants submitted that there was no entitlement on the part of the respondent to having interest calculated in the manner contemplated in the Agreement, in circumstances where separate liability under the Agreement had not been found. The applicants relied upon what was said in the Appeal Judgment at [96], where it was stated:
96. Thus, the Debt which is acknowledged and undertaken to be paid in clause 2.1 of the Deed, is at least the sum of $240,520.00 irrespective of what sums are actually found to have been owing under the Fee Agreement as at the date when the Deed was entered into or from time to time. In this regard, it was not contended before the primary judge or before this Court that the Debt in clause 1.1 also includes further sums by way of "accruing interest and amounts payable pursuant to the Agreement" (as stated in clause 1.1 of the Deed). It is thus unnecessary to consider whether the Debt, as defined in the Deed, is in fact a sum in excess of $240,520.00.
66 However, the Court of Appeal had not been asked to consider whether the interest component of the Judgment Debt had been correctly calculated. This is because the applicants do not appear to have challenged this component of the Judgment Debt on appeal, beyond the more general challenges that they pursued in relation to their liability under the Deed. The question, therefore, is whether there is sufficient reason to question this part of the Judgment Debt to warrant going behind it for the purposes of these proceedings.
67 I am not persuaded that this is the case. As was submitted for the respondent, its approach to calculation of the interest accorded with [73]-[75] of the SC Judgment, as well as the construction of the "Debt" for the purposes of the Deed as a term defined by reference to Recital M in both the SC Judgment and the Appeal Judgment. That definition was as follows:
M. As at 12 April 2018, the Service Fee plus accrued interest calculated in accordance with the Agreement totals $240,520.00 (the Debt), which continues to accrue at the Interest rate.
68 Clause 1.1 provided definitions in respect of which the words were stated to have "their corresponding meanings unless the context requires otherwise". In respect of the term "Debt" it was stated:
Debt means the Service Fee, plus all accruing interest and amounts payable pursuant to the Agreement.
69 Recital D of the Deed reproduced the interest rate provision from the Agreement.
70 Consistently with the approach to construction taken in the SC Judgment and the Appeal Judgment, under the Deed the "Debt" as at 12 April 2018 was defined in the amount of $240,520 by reference to Recital M. This was so regardless of any underlying liability for this amount under the Agreement. Recital M made clear the parties' intention that the amount owing would "continue… to accrue at the Interest rate". Clause 1.1 and Recital D applied the interest rate calculation methodology under the Agreement. As was stated in the SC Judgment, the "reference to the interest rate is plainly a reference to the interest rate that is specified in cl 7 of the Agreement (see Recital D)". This, therefore, applied by force of the Deed, notwithstanding that the applicants were not found to have otherwise owed the Service Fee under the Agreement.
71 Therefore, I am not persuaded that sufficient basis has been demonstrated for questioning the interest component of the Judgment Debt such as to warrant going behind it for the purposes of these proceedings. Even if there had been, I would have found, as was found in the SC Judgment at [73], that the applicants were required to pay interest at the rate specified in cl 7 of the Agreement.
72 I am also conscious that these proceedings concern an application to set aside a Bankruptcy Notice, which is not attended with the same adverse consequences as a sequestration order: Naumovic at [130]. Should the applicants wish to revisit and/or expand upon their arguments in this regard within the context of the sequestration proceedings, then it will be open to them to seek to do so.
73 Having regard to the above, I have declined to go behind the Judgment Debt.
114 I do not consider that any error has been established in the above reasoning and no alleged error was clearly identified. Aside from broad assertions of error, the appellants' approach was rather to argue the case as if there was no decision at first instance and the appeal was an opportunity to rerun the case at trial.