DISPOSITION
33 The starting point is the proper characterisation of the deed of settlement and its proper construction. The trial judge based her conclusion in favour of the respondents upon a successful claim for damages. However, I consider that the only proper basis for recovery of the $180,000 by the respondents depended upon their establishing that they possessed, in terms of the notice of contention, an accrued right to receive payment of the debt on the stipulated date and time, such that the accepted repudiation of the deed of settlement did not vitiate that right. The respondents must also show that payment of the $180,000 was not dependent upon any continuing obligation to be performed by the respondents, specifically transfer of their shares.
34 The essence of the appellants' case was that the deed of settlement, following its termination by repudiation and acceptance, left no accrued and unconditional right to receive payment of the $180,000. The appellants instead sought to characterise the deed of settlement, despite its title, as essentially one for the sale of property (the shares owned by the respondents) in return for payment of the sum of $180,000, albeit with related other obligations pertaining to settlement of the litigation. They sought to invoke the principle enunciated by Dixon J in McDonald & Anor v Dennys Lascelles Ltd at 477; "the seller may [not] both retain what he has received, or recover overdue instalments, and at the same time treat himself as relieved from the obligation of transferring the property to the buyer".
35 The respondents for their part eschew any characterisation of the repudiated contract as fundamentally one of sale as distinct from a contract fundamentally to settle litigation. In that more general context, the respondents were left with an accrued right to receive payment of $180,000 at the time the deed of settlement came to an end by reason of the respondents' acceptance of the appellants' breach. The respondents invoke the principle earlier stated by Dixon J in Dennys Lascelles at 476-7:
"When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected."
36 The appellants also invoke the distinction drawn by Dixon J in McDermott v Black (1940) 63 CLR 161 at 184-5:
"…, that of accord and satisfaction there are two cases, one where the making of the agreement itself is what is stipulated for, and the other, where it is the doing of the things promised by the agreement. The distinction depends on what exactly is agreed to be taken in place of the existing cause of action or claim. An executory promise or series of promises given in consideration of the abandonment of the claim may be accepted in substitution or satisfaction of the existing liability. Or, on the other hand, promises may be given by the party liable that he will satisfy the claim by doing an act, making over a thing or paying an ascertained sum of money and the other party may agree to accept, not the promise, but the act, thing or money in satisfaction of his claim. If the agreement is to accept the promise in satisfaction, the discharge of the liability is immediate; if the performance, then there is no discharge unless and until the promise is performed."
37 The appellants contend the trial judge was in error as treating the Deed as demonstrating accord and satisfaction; judgment [50]. The appellants submit that the deed of settlement demonstrated "an accord executory" and that it "did not operate to discharge existing rights and duties unless and until the accord was performed"; appellants' written submissions dated 7 August 2006 at para 14 (Orange, 7).
38 The essence of the appellants' argument was therefore two pronged:
(a) (i) payment of the sum of $180,000 under the Deed was dependent upon transfer of the shares simultaneously, and
(ii) as the latter had not occurred, the discharge of the deed of settlement left the respondents with no accrued right of an unconditional kind to receive payment of the debt, and
(b) being an accord executory,
(i) failure by the appellants to pay the sum of $180,000 meant that so far as the respondents were concerned the accord was without satisfaction, thus
(ii) denied of legal effect, the only consequence was that the original cause of action in the Supreme Court proceedings was not discharged following the repudiation of the Deed of Settlement and its acceptance, so
(iii) leaving the respondents without recourse for the $180,000 but with the right to re-assert their original claim in the Supreme Court proceedings which they failed to do.
39 Turning to the deed of settlement itself, it is abundantly clear that its proper characterisation is a deed to settle litigious claims. That emerges not only from its title as a "deed of settlement" and its description of the parties as "Plaintiffs" and "Defendants" but from its recitals:
"The Plaintiffs commenced proceedings by Summons dated 8 May 1998 issued in the Supreme Court of New South Wales Equity Division matter number 2332/98 ("the Proceedings"). A Statement of Claim was filed on 9 July 1998 and an Amended Statement of Claim was filed in the Proceedings on 17 May 1999.
The Defendants defended the Proceedings and deny and continue to deny each of the allegations made by the Plaintiffs therein.
The Plaintiffs and the Defendants have agreed (where relevant denying liability) to settle the Proceedings on the terms set out in this Deed."
40 This is reinforced by what is said under the heading "Consideration" in clause 2 of the deed of settlement which, with the ensuing clause 3, renders payment of the Sum ($180,000) consideration for various releases. Thus clause 2 provides:
" CONSIDERATION
(a) The Defendants agree to pay to the Plaintiffs' solicitors the sum of one hundred and eighty thousand dollars ($180,000.00) ("the Sum") to be paid within ninety days being no later than 4:00pm 19 August 1999 in which regard time is of the essence.
(b) Upon payment of the Sum the Plaintiffs agree to relinquish all claims to any interest in the parties of the eighth and ninth Part to this Deed, and in the business and/or the property known as Palm Beach Cellars and Food Supplies Pty Limited and located at 1109 Barrenjoey Road, Palm Beach."
41 Clause 3 then provides that "in consideration of the payment of the Sum" the Plaintiffs release and discharge the Defendants in relation to claims, etc. based upon or in any way relating to the Proceedings (as defined). Significantly, clause 4, providing for the Defendants to give a similar release to the Plaintiffs operates immediately upon "execution of this Deed". Thus clause 4 is expressed to be not "in consideration of the payment of the Sum" but "in consideration of the execution of this Deed". The clause 4 release is in no way predicated on payment of the Sum nor indeed on transfer of the shares owned by the Plaintiffs in clause 5. Clause 5 is in these terms:
" CASTLEMOON AND PALM BEACH CELLARS
In further consideration of the payment of the Sum, LV agrees to:
(a) formally resign as a Director of Castlemoon by signing simultaneously with the execution of this Deed the Notice of Resignation annexed hereto and marked "A"; and
(b) the Plaintiffs agree to transfer all shares held by them in Castlemoon and Palm Beach Cellars to either BM, VM, JF and/or AF or a nominee of either of them by executing standard share transfer forms upon payment of the Sum."
42 It is not disputed that at no time has there been any direction or request from the appellants or on their behalf as to how the relevant shares are to be transferred as between the named individuals (the McIntosh's and the Flowers) or to a nominee of either of them. That means that clause 5(b) was never triggered by the appellants even if it were open them to do so.
43 Clause 6 places a further obligation on the Defendants. It is not said to be either deferred or in any way dependent upon the Plaintiffs transferring their shares. That obligation was in terms that the Defendants will cause to be released all securities and guarantees provided by the Plaintiffs and held by the NAB in respect of the indebtedness of Castlemoon and Palm Beach Cellars as well as an associated company Internet Wines Pty Limited. That was never done by the appellants either.
44 Finally, clause 7 emphasises again that the fundamental purpose of the deed of settlement was to terminate the proceedings launched by the respondents as plaintiffs:
" DISMISSAL OF PROCEEDINGS
The parties shall take all steps to seek and obtain orders dismissing the Proceedings with no order as to costs and to vacate any cost order previously made in the Proceedings by providing their solicitors with instructions to sign and file a Notice of Discontinuance in the form of annexure "B" and which Notice of Discontinuance shall be handed up to the Court upon payment of the Sum to the Plaintiffs' solicitor or the release of the securities and guarantees contemplated by paragraph 6 of this Deed whichever occurs the later."
45 Clause 2(b), in referring to the Plaintiffs agreeing to relinquish any interest in the two companies must be understood by reference to that commercial purpose of the deed of settlement. Clause 2(b) does not contemplate that the Plaintiffs give up their one-third interest in the two companies. Rather it contemplates their giving up "all claims" to any interest beyond that, namely the difference between a one-third interest and a half interest in those companies. They do so only "upon payment of the Sum". Otherwise, clause 5(b) would be redundant insofar as it provides expressly for the transfer of the relevant shares constituting the one-third existing interest held by the Plaintiffs in the two companies. Clause 5(b) is essentially concerned to dispose of the Plaintiffs' residual one-third interest; it is certainly not a central feature of the deed of settlement.
46 Thus the appellants' argument that the obligation to pay the sum of $180,000 in clause 2(a) was somehow conditioned upon transfer of the relevant shares finds no support in clause 2(b). This is quite apart from the fact that any obligation in clause 2(b) is predicated "upon payment of the Sum", it being of course the case that that Sum was never paid.
47 I have already drawn attention to the distinction expressly drawn between clause 3, where the Plaintiffs' release of the Defendants is predicated as being "in consideration of the payment of the Sum", and clause 4 where the reciprocal release from the Defendants is predicated as being "in consideration of the execution of this Deed". That clearly shows that the person drafting the document was conscious of the difference between clause 3, predicated upon performance of an act (payment of the $180,000), and clause 4, predicated upon making a promise (via execution of the deed).
48 The words "upon payment of the Sum" were said by the appellants to be synonymous with the word "simultaneously". The appellants did so with reference to the various possible constructions of the word "upon" brought out by Kirby P in Amco Wrangler Ltd v Sukkar (1985) 1 NSWLR 577 at 580 citing Jordan CJ in Re Murphy (1947) 47 SR(NSW) 433 at 436:
"… There is no substance in this [argument]. The word 'upon' in different cases, may undoubtedly either mean before the act done to which it relates, or simultaneously with the act done or after the act done, according as reason and good sense require the interpretation, with reference to the context, and subject matter of the enactment…. In its present context the word obviously means 'after': it would make nonsense of the sub-section to give it any other meaning."
49 Kirby P went on to conclude, as I would in the present case, that the word "upon" (in the relevant Supreme Court Rule) "dealt with the sequence of events and did not impose a peremptory condition as to time. Specifically … it did not mean 'immediately upon'".
50 I would similarly conclude that the reference to "upon payment of the Sum" where appearing both in clause 2(b) and later in clause 5(b) in each case carries a sequential meaning. That is to say the relevant obligation of the "Plaintiffs" is in each case predicated upon prior payment of the sum of $180,000. That is to say, the respondents were never obliged to give up their claim under clause 2(b) or to transfer their one-third interest under clause 5(b).
51 I therefore consider that clause 5(b) cannot be construed as conditioning the obligation to make payment of the sum of $180,000 upon the respondents' transfer of their shares constituting their one-third interest in Castlemoon and Palm Beach Cellars.
52 Rather, on the expiration of 4pm on 19 August 1999, the respondents possessed an accrued and unconditional right to receive payment of $180,000. That obligation was in no way dependent upon the obligation to transfer the Plaintiffs' shares in Castlemoon and Palm Beach Cellars in clause 5(b). There never was such an obligation under clause 2(b).
53 There are further considerations which support that interpretation were they needed. First, it has not been shown that the $180,000 bears any relationship to the value of a one-third interest in shares in Castlemoon and Palm Beach Cellars, whatever that value might have been. Certainly the agreement does not apportion the $180,000 between the value of the one-third interest in the shares and the value of the claims given up. There is indeed some suggestion that the trial judge found that value to be low. The trial judge referred to "significant financial losses to these companies [that] can only be explained by fraud" at [133]. However, (as suggested in argument on appeal) that the companies went into liquidation four years later is beside the point when it comes to their sale value at the time of the deed of settlement.
54 The second point is that the clause 5(b) obligation could not in any event operate until the respondents were directed or requested to execute the share transfer forms so as to indicate how the shares were to be held as between the named persons or the nominee. That never occurred.
55 There was some suggestion that a subsequent set of consent orders whereby the McIntoshes, indeed the McIntoshes only, agreed to pay interest to the Plaintiffs on the sum of $180,000 from 19 September 1999 somehow cancelled out the time of the essence obligation in clause 2(a). The short answer is that those orders (Blue, 52) post-date the deed of settlement. So they could not, under well-accepted principles of interpretation, affect its construction. In any event the orders relate only to two of the defendants so could not have any bearing on Mr and Mrs Flowers as third and fourth defendants.
56 It follows that the deed of settlement, though incidentally dealing with sale of the respondents' shares upon payment of $180,000, does not invoke the principle that an unpaid vendor is disentitled to enforce payment, yet retain his title to the property in question. Rather, it invokes the principle stated earlier by Dixon J in Dennys Lascelles that "rights are not divested or discharged which have already been unconditionally acquired" when a contract is discharged by acceptance of repudiation.
57 One may compare the present case by analogy to the instalment contract for the construction of a ship in Hyundai Heavy Industries Co ltd v Papadopoulos [1980] 1 WLR 1129. There too the contract gave rise to rights not divested or discharged by termination of the contract as those rights had been unconditionally acquired prior to that time. Thus the judgment of Lord Edmond-Davies at 1141 cites the passage from Dixon J's judgment in McDonald & Anor v Dennys Lascelles Ltd to which I have earlier made reference.
58 I do not consider there is any basis for disallowing the respondents' reliance on the notice of contention which it sought to file at the hearing of the appeal. As a matter of pleading, though the pleadings left something to be desired, clearly enough the plaintiffs claimed not only damages "arising from breach of deed" but, severally, $180,000; see para 20 of the Amended Statement of Claim.
59 The Amended Defence does not assist the appellants insofar as it takes issue with the claim of the respondents for $180,000 or in damages, doing so disjunctively. Moreover, it is clear from the submissions that the Plaintiffs' case was based upon, inter alia, accord and satisfaction (see, for example Black, 481). The latter's only relevance must be that the obligation had already accrued to pay the $180,000 and was in no way dependent upon any other obligation such as to transfer the shares.
60 Moreover, the Defendants at trial distinguished between the claim for $180,000, and damages, though the distinction could have been brought out more clearly (see, for example Black, 460-462).
61 The trial judge, with respect, did not dispel this source of confusion when referring by way of heading to "The Plaintiffs' claim for damages". That heading introduced paragraph [113] quoted below, and the following paragraphs, from which I quote [119].
"113. As indicated earlier in this judgment the plaintiffs' claim is for $180,000, being the sum payable under the deed, as well as damages arising from the breach of the deed of 19 May 1999. One of the problems with the case as presented by the Plaintiffs is that Mr Beale, in his written submissions of 10 August 2005, provided no submissions at all as to how any sum other than the $180,000 was claimed and effectively devoted about half a sentence (in paragraph 23) of his further submissions of 10 September 2005 to this point.