Foyster v Green

Supreme Court of NSW|2000-03-07|Before: Windeyer J, Ms J

CITATION : Foyster v Green [2000] NSWSC 189 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 3039 of 1999 HEARING DATE(S) : 7 March 2000 JUDGMENT DATE : 22 March 2000

Lloyd Foyster (Plaintiff) PARTIES : John Duncan Green (First Defendant) Australian and New Zealand Banking Group Limited (Second Defendant) JUDGMENT OF : Windeyer J at 1

Ms R Sofroniou (Plaintiff) COUNSEL : submitting appearance (First Defendant) Mr A.W. Street SC with him Ms J Stuckey-Clarke (Second Defendant) G.H. Healey & Co - Newtown (Plaintiff) SOLICITORS : PricewaterhouseCoopers - Legal (First Defendant) Blake Dawson Waldron (Second Defendant) CATCHWORDS : EQUITY - rectification - agreement made on day written document signed and prepared by parties - need for clear proof - both parties had signed deed of confirmation but one did not give evidence of intention - whether third party rights affected - whether rectification purposeless LEGISLATION CITED : Bankruptcy Act 1966, s86, s232, Part X Trade Practices Act 1974 CASES CITED : Foyster v ANZ Banking Group Limited [1999] FCA 1043 DECISION : See paragraph 21-23

1 IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3039/99 LLOYD FOYSTER v JOHN DUNCAN GREEN & AUSTRALIAN AND NEW ZEALAND BANKING GROUP LIMITED

JUDGMENT General Outline 1 The plaintiff, Lloyd Foyster, seeks rectification of an agreement he made with the first defendant, Mr Green, who was the trustee of his divisible estate, pursuant to a deed of assignment under Part X of Bankruptcy Act 1966. Facts 2 Mr Foyster had banked with the ANZ Banking Group Limited (ANZ) for many years up to 1991. He was a director of Country Properties Pty Ltd which had entered into foreign exchange loans with ANZ, the obligations of that company as borrower being guaranteed by Mr Foyster. The first transactions took place in 1985. There were further borrowings in 1989. The foreign exchange transactions ended in a way which was not uncommon, namely that as a result of changes in currency values, Country Properties became indebted to the ANZ for a very large amount, the repayment of which was guaranteed by the plaintiff. 3 Mr Foyster brought actions in the District Court of New South Wales and in this Court against ANZ. It is not necessary to discuss the District Court action. The action in this Court was No. 13286 of 1991. The statement of claim was filed on 18 June 1991, but not served on the ANZ until 18 June 1993. 4 The deed of assignment under Part X was signed on 19 December 1991. The trustee's certificate that arrangements pursuant to the deed were completed was signed on 26 October 1992. The two actions I have referred to were choses in action which vested in the trustee under the assignment. They remained so vested when the deed came to an end. On 2 July 1993 ANZ issued a notice under s232 of Bankruptcy Act requiring the trustee to make an election about continuing the proceedings. No election was made. On 6 July 1993 the agreement in writing sought to be rectified was made between the plaintiff and the first defendant. The agreement, the effect of which would be an agreement for assignment, was signed at a meeting attended by Mr Foyster, Mr Green and Mr Booth. Mr Booth was an employee of Messrs. Hall Chadwick, Chartered Accountants, where Mr Green was a partner. The agreement was as follows: 6 July 1993 40 Thompson Street TWEED NEADS NSW 2485 John D Green Hall Chadwick Level 14 99 Mount Street NORTH SYDNEY NSW 2060

I wish to make an offer of $500.00 for the Right Title and Interest if any for the share holdings I used to own in respect of Country Properties Pty Ltd which as you know is under receivership. The offer will also include a Claim No. 5096 of 1991 filed in the District Court NSW in which the defendants are McMaster and the ANZ Banking Group Ltd, the claim is for an amount of $100,000.00. The offer of $500.00 also includes an action filed in the Supreme Court of NSW Sydney Registry Common Law Division No. 13286 of 1991 and the defendant in the matter is the Australia and New Zealand Banking Group. I will undertake to pay for the legal cost of any deed that you consider necessary to complete the transaction. Upon acceptance of the offer by you, I will pay the $500.00 forthwith. Yours faithfully, (signed) Lloyd Foyster I acknowledge receipt of $500.00 received from Lloyd Foyster for the abovementioned assets. (signed) J Green 5 On 2 August 1993 ANZ applied to have proceedings No. 13286 of 1991 dismissed. On 21 September 1993 the plaintiff by notice of motion sought leave to amend the statement of claim. The motions were heard by Master Malpass who gave judgment on 26 April 1994. He dismissed the proceedings and in doing so dismissed the notice of motion of the plaintiff. Under that notice of motion the plaintiff had sought to amend the statement of claim by raising a claim in fraud which had not been previously pleaded. The Master refused the amendment on a number of grounds, the one of significance being that the letter assigning the rights in the action did not assign any claim in fraud. An appeal from that decision was dismissed by Justice Simpson. 6 On 19 November 1993 the plaintiff and first defendant entered into a deed of confirmation. This recited the assignment of 19 December 1991, the certificate of release from the deed of assignment, the terms of the assignment, the application for leave to amend the statement of claim in No. 13286 of 1991 (defined as "the proceedings") and the submission of ANZ before the Master that the claims proposed to be made pursuant to the amendment sought had not been assigned by Mr Foyster to Mr Green. Recital F and the confirmatory part of the deed were as follows: F. Messrs Green and Foyster always intended that the agreement dated 6 July 1993 should include an assignment of all those rights in title to and causes of action relating to or in any way arising out of the dealings between Mr Foyster and ANZ in the period 1985 to 26 October 1992 including the matters raised in the proceedings and the matters raised in District Court of New South Wales proceedings number 5096 of 1991 including any amendments to either or both proceedings from time to time and also the matters now raised in the proposed Amended Statement of Claim in the proceedings which is Annexure A to the Notice of Motion dated 17 September 1993 in the proceedings. G. In order to remove any doubt as to the extent of the assignment of 6 July 1993 the parties have agreed to enter into this Deed. NOW THIS DEED CONFIRMS THAT The agreement dated 6 July 1993 between Messrs Green and Foyster always intended that the assignment should include an assignment of all those rights in, title to an causes of action relating to or in any way arising out of the dealings between Mr Foyster and ANZ in the period 1986 to 26 October 1992 including the matters raised in District Court of New South Wales proceedings number 5096 of 1991 including any amendments to either or both proceedings from time to time and also the matters now raised in the proposed Amended Statement of Claim in the proceedings which is Annexure A to the Notice of Motion dated 17 September 1993 in these proceedings. 7 On 3 October 1995 Mr Foyster filed a new statement of claim in this Court in proceedings No. 21004 of 1995 in the Common Law Division. The statement of claim was not served until October 1997. Between the filing of that statement of claim and its service Mr Foyster filed another statement of claim No. 21219 of 1996 which claimed almost identical relief to that claimed in proceedings No 13286 of 1991. For that reason Master Harrison dismissed proceedings No. 21219 of 1996 on 8 December 1997. 8 Proceedings No. 21004 of 1995 brought a claim which was in terms almost identical to the other two claims, apart from a claim of fraud based upon the representations upon which the claims in negligence were founded. An application was made for its dismissal before Hidden J and it is clear that as it then stood the claims in negligence would have been liable to be dismissed and in fact Hidden J said those claims would be struck out. The plaintiff however made an application to amend that statement of claim to add Country Properties Pty Ltd as a plaintiff and to bring a new claim in negligence and fraudulent misrepresentation, and under the Trade Practices Act 1974 based on certain additional borrowing transactions which took place in 1989. Hidden J delivered an interim judgment on 10 May 1999. The defendant argued before Hidden J that the assignment was an assignment of the action only and that had already been decided by Master Malpass and Simpson J. That appears to be clear. It seems however that the plaintiff relied on the deed of confirmation to assert that the assignment was always intended to embrace any cause of action arising from dealings between Mr Foyster and ANZ. The construction issue had already been determined before Master Malpass but it appears from paragraph 28 of the judgment of Hidden J that counsel for Mr Foyster wished to make an application to call evidence from the trustee that he would be prepared revest in the plaintiff the rights of action which he now wished to pursue. On what basis, if that were done, it could give an entitlement in the plaintiff to an amendment dated back to the date of the commencement of the action, I have difficulty in seeing. However that is a matter which I do not need to consider further because Hidden J did not determine it and allowed further argument on it. What he said so far as the fraud claims were concerned arising out of both the 1985 and 1989 transactions is in paragraph 42 of his judgment and is as follows:- I have said that the plaintiff should be able to pursue both claims of fraud if he is in a position to do so. Of course, he is not in that position unless the trustee revested in him those rights of action.

I was told by counsel without objection that there had been further argument before Hidden J who reserved his decision on 30 July 1999. 9 Presumably because the solicitor for Mr Foyster anticipated some problems with the claims in the 1995 action he wrote to the solicitor for Mr Green on 29 May 1998 seeking confirmation that "Mr Green believed the property in the causes of action was assigned to Mr Foyster pursuant to The Deed and the Deed of Confirmation" and asked insofar as it might be necessary for confirmation that he consented to the amended statement of claim being filed and the action being continued: see Exhibit C. The solicitor for Mr Green responded by letter of 8 July 1998 (Exhibit A) saying that: We are instructed that the deed of confirmation states what the parties intended by the original assignment in July 1983. There is no ambiguity in relation to its intention. Accordingly, any belief that the parties held as to the effect of the deed of confirmation appears to be irrelevant. Our client confirms that the intention of the deed of confirmation is as stated in the deed. 10 In the meantime on 7 July 1999 the plaintiff commenced these proceedings seeking a declaration that the document dated 6 July 1993, does not express the true agreement between the parties and was executed under a mistake, together with an order that the "agreement" be rectified so as to express the true agreement by adding after the words "an action filed in the Supreme Court of New South Wales, Sydney Registry Common Law Division No. 13288 of 1991 and the defendant in the matter is the Australia and New Zealand Banking Group Ltd" the words "and all rights in, title to and causes of action relating to or in any way arising out of the dealings between Mr Foyster and ANZ in the period 1985 to 26 October 1992". ANZ sought to be joined as a defendant in these proceedings. That application was refused by Master McLaughlin but was allowed on appeal by Justice Bergin. Mr Green, the first defendant, filed a submitting appearance. The question of mistake 11 The affidavit evidence of Mr Foyster before me was that at the meeting with Mr Green, to which I have referred in paragraph 4, Mr Green had said to him words to the effect of: You can buy from me all the causes of action against ANZ and the shares you previously held in Country Properties Pty Ltd for the sum of $500.00. Then you are free to pursue all actions without me being involved. 12 In cross-examination of Mr Foyster by Mr Street, SC, for ANZ the following passages appear: Page T4.4. Q. Were there some other proceedings that were discussed between you and Mr Green or Mr Booth on that day prior to the creation of this document? A. Yes there was. Q. Are you able to tell the court what was said and by whom? A: The discussion involved -- Q. Not what it involved, who said what? A. I said to Mr Green - I filed against the bank in the District Court a statement of claim a little longer than a month ago and that was against the bank and also the bank manager, Mr McMaster, the second defendant, and both Mr McMaster and the bank put on a statement of defence in that matter. I thought the same circumstances would apply in relation to this matter. I said to Mr Green - there is also proceedings against the bank by Country Properties Pty Ltd and there is issues between the bank and myself which I wish to, in relation to which I wish to, have action taken. Mr Green said to me - that he could sell to me the causes of action that I had against the bank and that I would then be in a position to prosecute those actions in my own right and that he would draw up a document to give effect to that, and that he would charge me $500 for the assets and that it was also, I raised the question of shares in Country Property. Q. What did he say? A. Mr Green said - I will sell you the shares in Country Properties also. Q. What else was said? Do you recall anything else? A. That was the text of what was said, except I recall it was discussed that he had been aware previously of the matters concerning the bank. Q. He said that to you, did he? A. Yes he did. Q. What did you understand him to mean by him being aware previously of matters concerning the bank? A. The previous discussions which had been held with Mr Green in relation to causes of action claimed by me against the bank.

Page T8.4 Q. You have given some evidence this morning about what Mr Green said to you prior to the document being signed by you, which is annexure A. Other than what you have told the court about this morning and what is in your affidavit do you recall any conversation that took place on 6 July about the document before you signed it? A. Yes, Mr Green said that he would assign the cause of action to me an[sic] that he would have no further thing to do with the matter and it was up to me, it was in my hands then, to be in a position to pursue the actions I had against the bank. Q. And that is something he said to you before you signed the documents that is annexure A? A. Yes he did. Q. Was anything else said to you by Mr green prior to you signing that document about that matter? A. Basically that was what was said. There was - it was not just as simple as that. I mean Mr Green informed me, he said, that I was entitled, that he was entitled to sell causes of action to me, and that he would prepare documentation to that effect and that I was then, and that I would then be in a position to proceed with actions and he was no longer involved and he said, there was general discussion and he said - that is my advice. I probably asked him was he sure. He assured me and he said - yes, the firm will be charging for that advice, separate to him doing it as the trustee.

Page T13.2 Q. When you read the document that you have in front of you, annexure A, you would agree it was apparent to you that was a document drawn so as to make an offer by you to Mr Green as the trustee? Is that correct? A It is to a certain extent. It is further reflected by a letter I wrote to Mr Green about the matter on 27 July, which is attached to my affidavit. Q. You, when you read this document, appreciated this was a document containing an offer by you to the trustee? A. Prepared by Mr Green and Mr Booth representing to me that it included all of the actions and causes of actions against the bank, and that he would no longer be involved, and that I was then totally involved. He need not be, and I was in a position to proceed against the bank without any further ado, which did not happen, much to my displeasure, because I went to great lengths to try and persuade Mr Green, in my letter dated the 27th, which reflects a lot of the history in relation to this matter. 13 The letter of 27 July 1993 complains that the solicitors for ANZ did not accept that the Supreme Court action was vested in Mr Foyster. On 7 July 1993, Mr Green wrote to Messrs Blake Dawson Waldron the solicitors acting for ANZ stating that he had accepted $500.00 from Mr Foyster for various assets including the action No. 13286 of 1991 and saying "would you please note that the action is now vested with Mr Lloyd Foyster and I am no longer a party to any of the proceedings listed above". On 9 July 1993 Hall Chadwick sent an account to Mr Foyster for $564 for "Professional Services rendered on Tuesday 6 July 1993 in connection with the sale of legal proceedings and letters to Blake Dawson Waldron and advice concerning your Deed of Assignment". On 28 July 1993 Mr Foyster sent a facsimile to Mr Gary King solicitor of Messrs. Blake Dawson Waldron acting for ANZ in the District Court and Supreme Court proceedings referring to the agreement dated 6 July 1993 and the letter from Mr Green dated 7 July 1993 to Messrs Blake Dawson Waldron. In that fax Mr Foyster stated that Mr Booth and Mr Green had confirmed to him he could prosecute both actions as they were not stayed and were vested in him and asked for a concession to be made that this was accepted to be the position. Rectification 14 The question to be decided is whether the document dated 6 July 1993 put into words the true agreement between the parties or whether it failed to do so because it failed to refer to any causes of action which Foyster might have against ANZ in relation to his transactions with ANZ between 1985 and 1992. While the document on its face is an offer by Foyster by letter sent from Tweed Heads to Mr Green the fact is that the letter was typed out in Mr Green's office. The parties were there together discussing the assignment and this is not a case of their having come to an agreement and their advisers failing to incorporate the true agreement in the written document. What was agreed to be assigned by the document was perfectly clear. 15 A rectification case requires cogent and compelling or clear and convincing proof of the mistake and of the true agreement. It follows that the party seeking rectification should bring forward all the evidence which it is possible to bring forward to support his claim. The evidence before the court relevant to the "intention" is that of the plaintiff, the admission of Mr Green in the Deed of Confirmation and the letters Exhibits A and C. 16 The evidence of Mr Foyster as to his intention was not altogether compelling. Laymen do not usually go around talking of "causes of action". They talk about "claims" and I did have the impression that the plaintiff's evidence about "causes of action" was rather calculated. It is not easy to accept that there was a mistake in a document so clear in its terms, considering how it came into existence. The other question is whether the evidence satisfies me as to the intention of Mr Green, who filed a submitting appearance. No reason was put forward to explain why no affidavit by him was filed and read or why no oral evidence was adduced from him. That would have been far more cogent than the admission in the Deed of Confirmation, particularly after ANZ was added as a party as the deed was not admissible against it. Further, there is no corroborative evidence when, on the evidence of Mr Foyster, such evidence would have been available from Mr Booth. The invoice referring to "sale of legal proceedings" does not support the rectification claim. It is also relevant to consider the delay in bringing this claim. Ever since Master Malpass gave judgment in 1994 refusing the application for amendment, the mistake in the assignment, if there was one, has been clear. The right of Mr Foyster to bring the additional claim he wishes to make depended upon these claims not being vested in Mr Green, but vested in him. They were not so vested on the proper construction of the assignment. Thus as he could only sue as assignee, his claim would fail in the absence of rectification of the assignment agreement. This action was commenced on 7 July 1999, five years after the requirement for rectification would have been apparent. That in itself places some doubt on the claim, although I would come to the same conclusion without it. Further if it were correct that the plaintiff had been discussing his claims against ANZ, other than the actions on foot, with Mr Green, one would have expected Mr Green to have made some inquiries about the strength of those claims before agreeing to assign them, with other assets, for $500. Those claims were not mentioned in the list of assets of Mr Foyster in his statement of affairs given to the Trustee under the Part X assignment which shows a liability to ANZ of $9,863,127. Mr Green admitted a proof of debt of ANZ for $10,863,022. It is of course possible he considered there was nothing to assign in view of the set off pursuant to s86 of Bankruptcy Act but that is a different matter. I am not satisfied there is sufficient proof of the intention Mr Green. I have doubts about the intention of Mr Foyster. In the circumstances I am not satisfied the claim for rectification is made out. 17 It is not strictly necessary to deal with the other arguments for ANZ against rectification, but I should deal with them quickly. I do not accept that rectification should be refused because ANZ has acquired rights as a result of the unrectified instrument. It is not in a position analogous of that of a bona fide purchaser for value. ANZ has not acquired anything from either Mr Foyster or Mr Green. The benefits of the orders for costs obtained from Master Malpass and Simpson J are not benefits which could be lost as a result of rectification. Counsel for ANZ suggested those benefits could somehow be lost, but I am quite unable to see how that could be the position and he was not able to suggest any ground on which the costs order could be set aside. It was also put that ANZ as at the present time has a right to maintain the causes of action in the proceedings No. 21004 of 1995 are not vested in the plaintiff. That however is just like saying that a defendant to an action has an interest in maintaining that the plaintiff has no cause of action. That in itself could not justify refusal of rectification. 18 A more substantial argument against rectification put forward by ANZ is that which is said to arise under s86 of Bankruptcy Act. The argument is that there would have been a set off at the date of the Part X assignment of any claim which Mr Foyster may have against ANZ against the claim which ANZ has against him for an admitted sum of about $10 million (Mr Foyster now challenges that figure). It is said that there is no basis on which it could be thought the value of the claim which the plaintiff wishes to bring against ANZ could amount to that figure and accordingly there was nothing to assign. That may well be right, and as the only purpose of rectification is to enable an action to be brought against ANZ then if such an action would fail rectification would be purposeless. The s86 argument was accepted by Emmett J when he refused the application of Mr Foyster to set aside a bankruptcy notice issued by ANZ founded on the judgment for costs: Foyster v ANZ Banking Group Limited [1999] FCA 1043. The same argument has been put to Hidden J on the application for amendment upon which his decision is reserved. Mr Foyster, in the amended statement of claim he seeks to file in matter No. 21004 of 1995, in respect of which application Hidden J has reserved his decision, no longer makes any claim for relief other than a claim for damages. No claim is made under that document to set aside the guarantee from him to ANZ, no doubt because liability under that guarantee was brought to an end by the Part X assignment. I am of the view that the provisions of s86 as to set off would apply to the claim of ANZ against Mr Foyster and any action he may have against ANZ, so that the amendment sought to the assignment agreement would not bring about anything of value to Mr Foyster. If that were not so I consider that as a matter of discretion it would not be equitable to ANZ to order rectification the result of which would be to allow Mr Foyster to maintain an action against ANZ in its full amount when the claim which ANZ had against Mr Foyster has been reduced to a dividend as a result of the Part X assignment. 19 There was also put forward delay as a ground for refusing relief, but in my view there is nothing to support that argument. 20 In all the circumstances the claim should be dismissed. Orders 21 The summons be dismissed. 22 The plaintiff pay the costs of the defendants, those of the first defendant on a submitting basis. 23 The exhibits be returned.

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