Supreme Court of the ACT|2003-04-04|Before: Beech J, Glass JA

Glover & Sheils v Roche & Roche [2003] ACTSC 19 (4 April 2003)

PETER RICHARD GLOVER, PETER LENNOX SHEILS v CHRISTOPHER ROCHE, BARRY JOSEPH ROCHE [2003] ACTSC 19 (4 April 2003)

PRACTICE AND PROCEDURE - application for summary judgment - requirements under Supreme Court Rules (ACT) - meaning of phrase "unless the Court is satisfied that there is a good defence to the action on the merits".

CONTRACT - construction of deed for sale of legal practice - whether performance would involve illegality or be contrary to public policy - estoppel by record - whether execution induced by misrepresentation - adequacy of evidence - estoppel by deed - estoppel by record - whether grounds for rescission - whether restitution possible.

Supreme Court Rules 1937 (ACT), O 15 r 1, sub r (2), (4), (5)

Evidence Act 1995 (Cth), s 138, subs (1)

Legal Practitioners Act 1970 (ACT), s 121, subs (4)

Singh & Anor v Varinder Kaur (1985) 61 ALR 720

Cloverdell Lumber Co Pty Ltd v Abbott [1924] HCA 4; (1924) 34 CLR 122

Australian Can Pty Ltd v Levin & Co Pty Ltd [1947] VicLawRp 47; [1947] VLR 332

Country Estates Pty Ltd v Leighton Contractors Pty Ltd (1975) 49 ALJR 173

Evans v Bartlam [1937] AC 473

Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109

Wallingford v Mutual Society (1880) 5 App Cas 685

Ritter v North Side Enterprises Pty Ltd [1975] HCA 18; (1975) 132 CLR 301

National Westminster Bank plc v Daniel [1994] 1 All ER 156

Commonwealth Bank of Australia v Wallace (1995) ATTR 41-387

Commonwealth Development Bank of Australia v Karastavrou (Supreme Court of Victoria No 4558/1995, 12 November 1996, unreported, BC9605500), Beech J

Archbolds (Freightage) Ltd v Spanglett Ltd [1961] 1 QB 374

Fitzgerald v F J Leonhardt Pty Ltd [1997] HCA 17; (1997) 189 CLR 215

Discount & Finance Ltd v Gehrig's NSW Wines Ltd (1940) 40 SR NSW 598

Greer v Kettle [1938] AC 156

Caboche & Bond v Ramsay (1993) 119 ALR 215

Offshore Oil NL v Southern Cross Exploration NL (1985) 3 NSWLR 337

Re Patrick Corp Ltd and the Companies Act [1981] 2 NSWLR 328

Victa Limited v Hawker de Havilland Australia & Anor (unreported), CA 406 of 1977, 19 October 1987 per Glass JA

Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507

Urquhart v MacPherson (1878) 3 App Cas 831

Newbigging v Adam (1886) 34 Ch D 582

O'Sullivan v Management Agency & Music Ltd [1985] QB 428

Vadasz v Pioneer Concrete (SA) Pty Ltd [1995] HCA 14; (1995) 184 CLR 102

Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100

Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130

Hughes v Metropolitan Railway Co (1877) 2 App Cas 439

Ajayi v R T Briscoe (Nigeria) Ltd [1964] 1 WLR 1326

Legione v Hateley [1983] HCA 11; (1983) 46 ALR 1

Bullen and Leake and Jacobs, Precedents of Pleadings, 13 Ed, 1990, Sweet & Maxwell, Chapter 1

1. the plaintiffs have leave to enter judgment in the sum of $448,897.21,

2. the counter claim be dismissed.1. This is an application for summary judgment.

2. The plaintiff claims the sum of $423,487.94 as the balance payable under a Deed of Agreement dated 6 July 1998 ("the Deed") pursuant to which the plaintiffs effectively sold their legal practice to the defendants. Clause 3 of the Deed provided as follows:

3.1 The Purchase Price for the Assets is payable by Watling Roche to Sheils & Glover or their nominee in cash or by bank cheque as to the aggregate of:

3.1.1 $1.00; and

3.1.2 the total Cost of the Inventory determined in accordance with Clause 4;

on the Completion Date.

3.2 The parties acknowledge that the Purchase Price is the total of the following amounts in respect of the following Assets:

3.2.1.1. the Industrial Property at the agreed value of $1.00; and

3.2.1.2. the Inventory at the total Cost of the Inventory determine in accordance with Clause 4.

3. The term "Inventory" referred to the stocks of stationery and office supplies held by the plaintiffs. The term "Industrial Property" was defined to mean "all of the Logo, the Business Name, technical information, advertising materials, publications, copyrights, client lists, financial and other commercial data and information and all other industrial property rights (whether or not registered or registrable) owned by Sheils & Glover in respect of the Partnership". There was no other provision referring to the value of the good will of the practice.

4. Clause 5.1 provided that as from the "Relevant Date", which was 3 August 1998, the defendants would be entitled to the full benefit of the Work in Progress, would assume responsibility for the completion of the relevant matters and would indemnify the plaintiffs against all liabilities which might be incurred by them in relation to those matters on or after the "Completion Date", which was also 3 August 1998.

Subject to Clause 5.4, Watling Roche shall pay to Sheils & Glover or as they direct the aggregate of the Fees and Sheils & Glover's Disbursements in relation to a Work in Progress Matter on the earlier to occur of:

5.3.1 60 days after the receipt by the relevant client or Watling Roche of monies paid pursuant to judgement or settlement of that Work in Progress Matter; and

5.3.2 fourth anniversary of the Relevant Date.

6. The word, "Fees" was defined by Clause 1.1 of the Deed to mean,

In relation to a Work in Progress Matter, the amount of professional fees agreed by Sheils & Glover and Watling Roche as payable in relation to that matter as at the Relevant Date being those fees set out in Schedule 7 together with any additional fees for work done by Sheils & Glover after preparation of the information set out in Schedule 7 but before the Relevant Date.

7. Hence, the obligation imposed upon the defendants by Clause 5.3 was to pay the agreed amounts listed in Schedule 7 in respect of Work in Progress matters within 60 days of the receipt of judgment monies or, at the latest, by 3 August 2002.

8. That obligation was expressed to be subject only to the provisions of Clause 5.4, which contained provisions dealing with the manner in which amounts recovered by Watling Roche, prior to 3 August 2002, should be applied if they proved to be less than the aggregate of the fees and disbursements due to the plaintiffs and disbursements due to the defendants.

9. Clause 5.7 also provided that in addition to their personal obligations to pay the amounts owing to the plaintiffs, pursuant to the Deed, each defendant "jointly and severally undertakes in his or her capacity as a solicitor to pay those amounts to" the plaintiffs.

10. Restrictive covenants imposing limits on the plaintiffs' rights to practise were imposed by Clause 15.

11. Various warranties and representations were provided by the defendants in Clause 16 which was in the following terms:

16.1 Watling Roche warrants and represents to Sheils & Glover as at the Completion Date that:

16.1.1 it has entered into this Agreement after satisfactory inspection and investigation and with a full knowledge of the Partnership and has not in any way been prevented from inspecting and checking any books or records used by and incidental to the Partnership operated by Sheils & Glover;

16.1.2 it has agreed the amount set out in Clause 3.2 in respect of the specified Assets, that it is satisfied that those amounts reflect the existing value, quantity and quality of those Assets and that it will not make any claim or demand against the Vendor in respect of the value, quantity or quality of the Assets;

16.1.3 other than as contained in Clause 17, 18, 19 or 20, none of Sheils & Glover, the Employer, the Owner, the Land Owner or any person acting on any of their behalf has made any representation or given any warranty in respect of the Partnership or the Assets;

16.1.4 all necessary actions have been or will before the Completion Date be duly and effectively taken by Watling Roche in connection with the execution, delivery and performance of this Agreement; and

16.1.5 Watling Roche is empowered and authorised to execute and deliver this Agreement to Sheils & Glover and to perform its obligations under this Agreement and that such execution delivery and performance shall comply with all applicable laws, rules and regulations;

16.2 Watling Roche shall indemnify and keep Sheils & Glover harmless from and against all actions, claims, demands, losses, damages, proceedings, costs, charges and expenses which may be incurred by Sheils & Glover in connection with:

16.2.1 any breach of any of the warranties or representations contained in Clause 16.1; and

16.2.2 any liability arising out of any breach of contract, tort or breach of statute or other act or omission on the part of Watling Roche in or arising out of the conduct of the Partnership, occurring on or after the Relevant Date.

12. Conversely, the plaintiffs provided the warranties contained in Clause 17 which was in the following terms:

17.1 Sheils & Glover warrant and represent to Watling Roche as at the Completion Date that, save as otherwise provided for or disclosed in this Agreement in any manner:

17.1.1 Sheils & Glover at that time will have title in and to the Partnership and the Assets three small mortgages, charges, liens and other encumbrances whatsoever;

17.1.2 Sheils & Glover are entitled and competent and have absolute and complete authority, power and capacity to sell, transfer and assign the Partnership and the Assets to Watling Roche in accordance with the provisions for this Agreement.

17.2 Sheils & Glover shall indemnify and keep Watling Roche harmless from and against all actions, claims, demands, losses, damages, proceedings, costs, charges and expenses which may be incurred by Watling Roche in connection with:

17.2.1 any breach of any of the warranties or representations contained in Clause 17.1; and

17.2.2 any liability arising out of any breach of contract, tort or any breach of statute or any other act or omission on the part of Sheils & Glover in or arising out of the conduct of the Partnership occurring prior to the Relevant Date and not provided for in this Agreement.

13. The contract also provided for certain warranties by the "Owner", S & G Services Pty Ltd, and by the "Land Owner", Sheils Holdings Pty Ltd and Glover Nominees Pty Ltd as Joint Venturers, but it was not suggested that any of these warranties had any relevance to the proceedings before me.

This Agreement contains the entire agreement and understanding of the parties with respect to the subject matter to which this Agreement relates. There are no other prior or subsequent agreements, understandings, terms, conditions, warranties, representations, covenants, inducements, promises, arrangements or undertakings, oral or written, whether expressed or implied, between the parties extending, defining or otherwise relating to the provisions of this Agreement or binding on the parties with respect to the subject matter of this Agreement.

15. The case of the plaintiffs is a straight forward one. The defendants purchased the plaintiffs' practice on terms requiring the defendants to pay all outstanding amounts equal to the aggregate of fees and disbursements due to the plaintiffs in relation to a "Work in Progress Matter" by 3 August 2002 and they have not done so. Mr Sheils has deposed to the fact that he believes that there is no defence to the claim for the outstanding sum of $423,487.94. He has also deposed to his belief that the defence and counter claim was filed "purely for the purposes of delay so that they can dispose of or secure assets in order to defeat any judgment obtained in this matter".

16. On 4 March 2003, which was the first day of the hearing, I granted leave for the defendants to file an amended defence and counter claim. In response, both defendants filed affidavits and were permitted to give further evidence orally. They contended, in essence, that the agreement was void for illegality, or on the ground of public policy, or that they had been induced to enter into it as a consequence of misrepresentations by the plaintiffs and that they had effectively rescinded it by letter dated 28 February 2002. They also sought to raise other defences based upon allegations that, in some cases, amounts less than that agreed had been received in full satisfaction of their liability and that, in others, the amounts were not payable for various reasons.

17. The application is brought under O 15 r 1 of the Supreme Court Rules 1937 (ACT), which permits a plaintiff to make an application for leave to enter judgment when an originating application has been accompanied by a statement of claim and the defendant has entered a notice of appearance. Sub-rule (2) provides that the application must be supported by an affidavit or affidavits verifying the cause of action and, in the case of a claim for debt or a liquidated demand, verifying the amount claimed and stating that in the belief of the deponent there is no defence to the action.

On an application under this rule, the Court may make such order for the entry of judgment as it considers just having regard to the nature of the remedy or relief claimed, unless the Court is satisfied that -

(a) there is a good defence to the action on the merits; or

(b) sufficient facts are disclosed to entitle the defendant to defend the action generally; or

(c) sub rule (5) applies.

19. Sub-rule (5) applies only when a court considers that a statement of claim should not have been attached to the originating application and it was not suggested that it had any relevance to the present application.

20. In my opinion, once there is prima facie evidence of liability as required by sub-rule (2), the provisions of sub-rule (4) enable the Court to make orders for the entry of judgment if the defendant does not establish that there is at least an arguable defence or some other reason sufficient to entitle the defendant to defend the action generally. It has been held that an applicant for summary judgment in the Supreme Court of NSW must show that there is no real question to be tried: Singh & Anor v Varinder Kaur (1985) 61 ALR 720. However, Pt 13 of the Supreme Court Rules 1970 (NSW) contains no provisions comparable to those in sub-rule (4) and I do not accept that this principle applies to applications made to this Court.

21. Nonetheless, the onus that rests upon a defendant by virtue of this sub-rule is not a heavy one. A defendant need only establish a state of facts that displaces the prima facie effect of the sworn statement by the deponent of the affidavit filed in support of the application that he or she believes that there is no defence to the action: Cloverdell Lumber Co Pty Ltd v Abbott [1924] HCA 4; (1924) 34 CLR 122. It has even been suggested that it may be sufficient for a defendant to show that there is a real case to be investigated: Australian Can Pty Ltd v Levin & Co Pty Ltd [1947] VicLawRp 47; [1947] VLR 332. A defendant may file an affidavit setting out the material facts upon which a defence might be established without disclosing the evidence by which the defendant hopes to establish those facts: Country Estates Pty Ltd v Leighton Contractors Pty Ltd (1975) 49 ALJR 173. A court will not attempt to resolve disputed questions of fact on the basis of competing affidavits: Evans v Bartlam [1937] AC 473.

22. Nonetheless, a defendant cannot rely upon mere denials and must "condescend to particularity": see Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109; Wallingford v Mutual Society (1880) 5 App Cas 685; and Ritter v North Side Enterprises Pty Ltd [1975] HCA 18; (1975) 132 CLR 301. Furthermore, it has been suggested that if the evidence raising the defence is not credible, there is no reasonable probability of the defence being established and leave to defend should be refused: see National Westminster Bank plc v Daniel [1994] 1 All ER 156; Commonwealth Bank of Australia v Wallace (1995) ATTR 41-387. In Commonwealth Development Bank of Australia v Karastavrou (Supreme Court of Victoria No 4558/1995, 12 November 1996, unreported, BC9605500), Beech J suggested that the relevant question was:

Does the defendant's account of the facts have sufficient prima facie plausibility as to merit further investigation, or if it is so incredible or improbable that there is no fair or reasonable probability of the defendant setting up a defence to the plaintiff's claim?

23. In approaching an application of this kind, one must also be conscious of the note of caution sounded by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 at 575-6, albeit in the context of a case decided under the NSW Supreme Court Rules:

Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way (footnotes omitted).

24. The suggested defences must be considered in the context of these principles.

25. Mr Spinks, who appeared for the defendants, submitted that there was evidence of facts sufficient to establish an arguable case in respect of the defences pleaded.

26. The first of these defences alleged that the agreement had been made in contravention of r 59 of the Workers Compensation Rules (ACT) and, as a consequence, was illegal and unenforceable against the defendants. Mr Spinks argued that the defendants had been "contingently required" by the terms of Clause 5.4 to attempt to recover fees that, in some cases, would have been greater than those prescribed by the Workers Compensation Rules and that, since rule 59 then provided that a legal practitioner could not charge a client an amount in excess of the fees so prescribed, the agreement effectively required them to act illegally. Mr Spinks also maintained that Clause 5.5 sought to require the defendants to charge clients amounts that may have exceeded that lawfully chargeable. Hence, the agreement was void for illegality or at least unenforceable on the ground that it required a contravention of public policy.

27. This argument involved several misconceptions.

28. First, rule 59 of the Workers Compensation Rules then in force related to party-party rather than solicitor-client costs.

29. Second, Clause 5.4 of the Deed merely governed the manner in which "the amount recoverable" by the defendants in respect of a Work in Progress matter should be distributed when that amount proved to be less than the aggregate of the fees and disbursements owing to both the plaintiff and the defendant. It did not require the defendants to charge or attempt to recover any fees from any client. In any event, there was no reason to construe the phrase, "the amount recoverable", as meaning anything but the amount properly recoverable.

30. Third, the obligation imposed upon the defendant by Clause 5.5 to "do all things within its (sic) power" to ensure payment of the plaintiff's fees and disbursements, including, "without limitation" the matters stipulated in the ensuing sub-clauses, applied only in the event of a client changing solicitors and must be construed within the context of the apparent purpose of the clause in dealing with that contingency. The provisions of the succeeding sub-clauses make it plain that the clause was directed to ensuring that the defendants would do all they could to ensure that the plaintiffs would not be deprived of their entitlements if a matter was taken over by a new solicitor who was not contractually bound to account to them for fees incurred prior to 3 August 1998. Even in that context, it obviously required the defendants to do only those things properly within their power to ensure payment of the plaintiffs' fees. The words "without limitation" do not, in my opinion, imply that the defendants had undertaken a contractual obligation to act without regard to legal constraints or professional duty. They were presumably inserted to avoid any risk of the general obligation created by the opening words of the clause being construed ejusdem generis or otherwise being read down by reference to the more specific requirements that followed.

31. Fourth, the argument is dependent upon a construction of the Deed that is inconsistent with declarations made on 9 November 2001 in proceedings in which Mr Sheils was the first plaintiff, Mr Glover was the second plaintiff, Mr Christopher Roche was the first defendant and Mr Barry Roche was the second defendant. The declarations were in the following terms:

Upon the true construction of the written agreement of 6th July 1998, to which each of the parties to this proceeding is a party ...

1. In answer to question (a) of the said Application the aforesaid agreement does not constitute the First and Second Defendants the agents of the First and Second Plaintiffs to earn fees, being calculated with reference to transferred work-in-progress, becoming due from former clients of the Plaintiffs in the event of the successful conclusion.

2. In answer to question (b) of the said Application, the aforesaid agreement treats the aforesaid work-in-progress as a matter of rights sold and delivered by the Plaintiffs to the First and Second Defendants, for a price payable in certain events, without any obligation owing to the Plaintiffs on the part of the First and Second Defendants to seek fees from any retainer or charge fees respecting the work-in-progress or collect fees respecting the work-in-progress.

3. In answer to question (c), the aforesaid agreement means that the First and Second Defendants become indebted for the said price, referred to in paragraph 2 above, subject to certain allowances.

4. In answer to question (d), the aforesaid agreement imposes no obligation on the First and Second Plaintiffs to render an account to third persons, whether clients, former clients or otherwise, on behalf of the First and Second Plaintiffs.

32. In the face of these declarations, the defendants are estopped from asserting that the contract embodied in the Deed required them to attempt to recover fees from clients, whether in breach of rule 59 of the Workers Compensation Rules or not. The declarations establish that the defendants rather incurred a debt based upon what was described as the price payable for the rights in respect of the work-in-progress that had been sold to them. Mr Spinks submitted that the principle of res judicata did not apply because the declarations were apparently made by consent and there was no evidence that the plaintiffs had relied upon them. Neither submission is tenable. Res judicata applies when orders are made finally determining issues between the parties, irrespective of whether those orders are ultimately made by consent and irrespective of any subsequent reliance. In the course of their evidence, both defendants claimed to be unsure of having actually consented to the declarations in their final form, but did not suggest that they had been obtained fraudulently or that any application had been made to set them aside.

33. Fifth, even if the construction for which Mr Spinks contended had been reasonably open, it could not have supported the contention that the agreement was void or unenforceable. A contract is not unenforceable merely because it is possible that it might be performed illegally. As Devlin LJ said in Archbolds (Freightage) Ltd v Spanglett Ltd [1961] 1 QB 374 at 391:

It is a familiar principle of law that if a contract can be performed in one of two ways, that is, legally or illegally, it is not an illegal contract, though it may be unenforceable at the suit of a party who chooses to perform it illegally.

This passage was quoted with evident approval by McHugh and Gummow JJ in Fitzgerald v F J Leonhardt Pty Ltd [1997] HCA 17; (1997) 189 CLR 215 at 226.

34. There was nothing in the terms of the Deed that purported to require the defendants to attempt to extract from clients fees that were not properly payable or to otherwise act illegally or improperly and, even if the language employed in those terms had been sufficient to raise the possibility of such conduct being undertaken in purported performance of the agreement, that would not have invalidated the Deed or rendered it unenforceable. There is no triable issue in respect of this suggested defence.

35. The other grounds of defence that were strongly pressed on behalf of the defendants relied upon allegations that they were induced to enter into the Deed by various misrepresentations made to them by the plaintiffs and hence had been entitled to rescind the agreement, even if they had not purported to do so until a few days prior to the hearing of the application for summary judgment.

36. Dr O'Hair, who appeared for the plaintiffs, submitted that again there were a number of answers to these contentions.

37. First, the defendants were estopped by the terms of the Deed from advancing them. In an action on a deed, a party to it is estopped from disputing any distinct allegation of fact which he or she made in it. See, for example, Discount & Finance Ltd v Gehrig's NSW Wines Ltd (1940) 40 SR NSW 598 at 602. This rule of evidence is founded on the principle that a solemn and unambiguous statement or engagement in a deed must be taken as binding between the parties and their privies and therefore, as not admitting any contradictory proof: see Greer v Kettle [1938] AC 156 at 171; and Caboche & Bond v Ramsay (1993) 119 ALR 215 at 237. Whilst a statement of facts must be precise and unambiguous it need not be true for the principle to apply: see Offshore Oil NL v Southern Cross Exploration NL (1985) 3 NSWLR 337 at 341; Re Patrick Corp Ltd and the Companies Act [1981] 2 NSWLR 328 at 331-2.

38. In the present case, as I have mentioned, the definition of "Fees" in Clause 1.1 included a representation that the amounts set out in Schedule 7 were "agreed". Clause 16.1 of the Deed contained an express warranty by the defendants that "neither of the purchasers or any person acting on their behalf had made any representation or given any warranty in relation to the partnership or the Assets". Clause 29 also provided, inter alia, that there were no other "prior . . . representations . . . inducements, promises, arrangements or undertakings, oral or written, whether express or implied between the parties . . . relating to the provisions of this Agreement or binding on the parties with respect to the subject matter of this Agreement". The defendants are bound by these statements to the effect that no representations concerning these matters were made and no contradictory evidence is admissible.

39. Mr Spinks submitted that the plaintiffs could not rely upon any such estoppel because it had not been pleaded. He also agued that if it had been pleaded it would have been necessary for them to demonstrate that they had relied upon the representations contained in the Deed. In my view, neither point is sustainable.

40. It is true that any allegation of estoppel should normally be pleaded. Pleadings form an important part of the system of justice pursuant to which civil actions are litigated. They enable the issues to be defined with precision, ensure that each party is given adequate notice of the case he or she has to meet, inform the court of the matters in issue and permit a permanent record to be made of the scope of the action so that future litigation upon the same issues may be avoided. See generally, Bullen and Leake and Jacobs, Precedents of Pleadings, 13 Ed, 1990, Sweet & Maxwell, Chapter 1. However, the inflexible strictures of earlier years are no longer observed and in some circumstances, a party will not be prevented from relying upon a principle of law if, notwithstanding the absence of strict pleading, a party has nonetheless been given adequate notice of the point and an adequate opportunity of dealing with it. See, for example, Victa Limited v Hawker de Havilland Australia & Anor (unreported), CA 406 of 1977, 19 October 1987 per Glass JA at 13, where his Honour observed:

The course of the trial was such as to put [the second defendant] for practical purposes in the same position he would have been in if a bailment case had been clearly raised against him in the statement of claim. Having been put upon notice of the case he had to meet, he could not object if evidence was tendered to support it. Evidence capable of proving a bailment to him had been given, no prejudice had been suffered because of any shortcoming in the pleadings and any deficiency which did exist was of less moment under the Judicature system than it would have been under the common law system of pleading.

41. In that case, the allegation of bailment was made only at the end of the plaintiff's case at the trial of the action and, not only effected a substantial change to the cause of action sued upon, but effectively reversed the onus of proof in relation to the crucial issue of whether the loss of an aeroplane was attributable to negligence on the part of the pilot. In the present case, the issue of estoppel has been raised only in answer to a suggested defence in an application for summary judgment.

42. Applications of that kind may be made and determined even when no defence has been filed and there is nothing in the rules to suggest that any reply must be filed before the hearing. Furthermore, as I have mentioned, I granted leave for an amended defence and counter claim to be filed in court on the first day of the hearing and the plaintiffs had little opportunity to consider amending the reply in response.

43. The defendants are both experienced lawyers and must be taken to have been well aware of the representations they made in the Deed that they executed in August 1998. The plaintiff's action was, of course, brought on the Deed in which the representations are contained and, whilst the statement of claim could not have been described as expansive, it should have alerted the defendants to the need to consider any terms of the Deed that might be relevant to that claim. The issue was clearly identified in oral argument on 4 and 5 March 2003 and they were given ample opportunity to deal with it in both oral and written submissions. It has not been suggested that they were deprived of any opportunity to call evidence relevant to this issue or that any prejudice has otherwise been suffered because of a failure to specifically plead the allegation of estoppel by deed in the reply. In these circumstances, I do not accept that the plaintiffs are precluded from raising the issue.

44. The contention that a party may only seek an estoppel by deed if he or she can prove reliance upon the relevant representations is, with respect, misconceived. Reliance may be an essential element of estoppel by conduct, but estoppel by deed arises because the parties are taken to have agreed to be bound by their representations irrespective of their truth. Clauses such as those relied upon in the present case are often inserted for the very purpose of avoiding any possibility of subsequent disputes based upon allegations of misrepresentation prior to the execution of the Deed. The parties agree, in effect, that the contract between them will not be subject to rescission or otherwise affected as a consequence of any such contention. Such estoppels may not apply in the face of actual fraud, but that was neither pleaded nor alleged in evidence. Mr Spinks relied upon the decision of the High Court of Australia in Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507, but that was not a case of estoppel by deed, but of estoppel by conduct. Furthermore, the plaintiffs did rely on the representations by entering into the Deed.

45. Second, the defendants not only represented but warranted that there had been no representations relating to the partnership or its assets and the assertion of such representations would constitute a breach of that warranty.

46. Third, there was no adequate evidence of misrepresentation as to any of the amounts listed in Schedule 7 and certainly no evidence that descended to any real particularity.

47. Whilst Mr Barry Roche did complain of the magnitude of the fees claimed by the plaintiffs for Work in Progress undertaken on behalf of one client, Ms Felix, neither defendant suggested in evidence that during the time in which they had the carriage of the matters they had discovered that any of the amounts listed in Schedule 7 of the Deed as the value of the Work in Progress had been exaggerated or did not fairly reflect the value of the work done. There were no affidavits suggesting that such exaggeration had been detected by members of the defendants' former staff or by independent costs assessors in Brisbane said to have been engaged to review files obtained from the plaintiffs to ensure that the amounts charged were fair to clients given the billing practises of the defendants. Neither defendant even went so far as to assert that there had been a single occasion on which the process of taxing or negotiating agreements as to costs after the resolution of claims had revealed any question as to the reasonableness of the amounts claimed in respect of the work done by the plaintiffs. On the contrary, each claimed to have become aware of the alleged falsity of the representations only during the course of discussions with Mr Ron Travers in December 2002, more than four years after taking over the files.

48. The defendants did file an affidavit from Mr Blumer, who had become a partner in the firm formerly conducted by the defendants on 1 November 2001, in which he deposed to the fact that in some matters he had assessed the amount properly payable in respect of work done by the plaintiffs at amounts "greatly less than the amounts claimed" by the plaintiffs. However, the matters were not identified or even shown to have been amongst those listed in Schedule 7 of the Deed, the files were not produced, the basis of the assessments was not disclosed and whatever information was so obtained apparently had not led either of the defendants to conclude that there had been any misrepresentation prior to the discussion with Mr Travers.

49. Accordingly, the allegation that the agreed amounts were not reasonably chargeable to the respective clients was almost wholly dependent upon the evidence of Mr Travers. His evidence was received subject to objection based upon issues of estoppel and questions of relevance. He said that he had been appointed by the ACT Law Society to conduct the affairs of the plaintiffs and that between the time of his appointment, which he thought was in June 2000, and December 2002 he had examined some files which had been referred from the plaintiffs to the defendants pursuant to the Deed. He had noted that there had been an "update of WIP" in about November 1987 and that "there was an amount that didn't seem to be in all cases justified by the work that had been done in the file to that point in time".

50. Having now had the opportunity of considering the matter, I am satisfied that the objection to Mr Travers' evidence should be sustained. I accept Dr O'Hair's submission that, having regard to the terms of the Deed, the defendants are estopped both from challenging the correctness of the amounts stated in Schedule 7 and from asserting any misrepresentation in relation to those amounts.

51. I also accept his submission that the evidence was irrelevant. Even if Mr Travers were to be accepted as an expert in this field, and no attempt was made to qualify him as such, evidence of his opinion could not be relevant unless the primary facts upon which it was based were proven in evidence. No attempt was made to adduce any such evidence. No files were produced and no documents evidencing any dispute about the quantum of fees properly payable to the plaintiffs by any particular clients were tendered. There was not even any hearsay evidence of these matters. Mr Travers did not nominate a single file in relation to which he claimed that there had been an excessive amount attributed to the value of the Work in Progress by an entry in Schedule 7 to the Deed. Nor did he attempt to quantify the amount of any alleged overstatement of the value of Work in Progress, either for any particular file or more generally in relation to the files that he had examined.

52. Furthermore, whilst the precise point was not taken at the time, it does appear that the evidence should have been excluded pursuant to s 138 of the Evidence Act 1995 (Cth). The statements made to the defendants by Mr Travers appear to have been made in contravention of s 121 of the Legal Practitioners Act 1970 (ACT) which provides, inter alia, that an investigator shall not, without reasonable excuse, make an unauthorised disclosure of any matter that comes to his or her knowledge in the course of an investigation. A breach of this provision is an offence punishable by fifty penalty units, imprisonment for six months, or both. Mr Travers did not explain why he had acted in that manner, though he did say that his appointment as investigator had been terminated by the Law Society and he believed that this had occurred as a result of a complaint about his conduct by Mr Sheils. I should point out that Mr Travers has not been charged, yet alone convicted, of an offence and that, since he is not a party to these proceedings, he has not even had the opportunity of addressing any such allegation. Nonetheless, he did not give evidence of any reasonable excuse for the disclosure and, for present purposes and on the basis of the evidence presently available to me, I am obliged to conclude that the disclosures did involve a breach of the section.

53. At the hearing of the application there was some discussion about whether Mr Travers might contravene s 121 by giving evidence, but I accepted Mr Spinks' submission that no offence would be committed because subs 121(4) provides that a disclosure may not be an unauthorised disclosure if made "in or for the purposes of proceedings in a court". However, the test for admissibility posited by subs 138(1) of the Evidence Act 1995 raises other issues. That subsection provides that:

Evidence that was obtained:

(a) improperly or in contravention of an Australian law; or

(b) in consequence of an impropriety or of a contravention of an Australian law;

is not to be admitted unless the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained.

54. It may be noted that this section applies not only to evidence that was obtained illegally, but to evidence obtained as a consequence of an illegal or improper act and, unlike the comparable common law principle, it applies to civil as well as criminal proceedings. In the present case, the evidence given by Mr Barry Roche and Mr Christopher Roche concerning alleged misrepresentation was based directly upon the statements made to them by Mr Travers in apparent contravention of s 121 of the Legal Practitioners Act. Furthermore, Mr Travers was presumably called to give evidence only because, as a consequence of the statements he had made to them, the defendants were aware of the fact that he had examined a number of the files in question and of the opinions he had formed in relation to them. In these circumstances, it would appear that subs 138(1) of the Evidence Act required its exclusion unless the desirability of admitting the evidence could be said to have been outweighed by the undesirability of admitting evidence obtained in that way. In my opinion, there was no basis for such a conclusion. However, the point was not taken at the time and may be of little practical consequence, since I would, in any event, have excluded the evidence for the reasons given earlier.

55. Furthermore, even if, notwithstanding these objections, Mr Travers' evidence had been admissible, it would, nonetheless, have been insufficient to establish an arguable defence based upon misrepresentation. His opinion evidence was based solely upon the perceived paucity of documents on the files he examined and, even on that basis, would not have supported an assertion that there had been misrepresentations in relation to all or even a majority of the amounts in question. It could, at most, have raised some issue relating to the quantum of the amount due to the plaintiffs but, even in that respect, it was extremely vague and generalised. For example, it provided no basis for any contention that the aggregate amounts listed on Schedule 7 of the Deed must have been overstated by at least a certain figure. It plainly did not descend to any real particularity.

56. I am not satisfied that, even if the evidence had been admissible, it would have established a state of facts sufficient to displace the prima facie effect of Mr Sheils' evidence that he believed there was no defence to the action.

57. I note, in passing, that neither of the defendants claimed to have been moved by Mr Travers' assertions to attempt to identify the cases to which he had referred and review the files with a view to providing more concrete evidence of misrepresentation, or to have sought access to the files to determine for themselves whether there were any valid grounds for such an allegation and, if so, to form some impression of the extent to which they might have been effectively overcharged. Nor did they suggest that they intended to do so. The proceedings were already on foot in December 2002 when the conversation with Mr Travers occurred and if they had genuinely believed that there was a case to be investigated I would have expected some evidence of an attempt to carry out such an investigation. Furthermore, I regret to say that, having had the opportunity of observing both defendants in the witness box, I was unable to accept that either had any bone fide belief in the validity of their contentions that they had been the victims of misrepresentation or that they had been induced to enter into the Deed as a consequence.

58. Fourth, the defendants were equally estopped from asserting that they had been the victim of a misrepresentation to the effect that written retainer agreements for all Work in Progress matters existed or would exist at the time the Deed was executed. Furthermore, even if they had not been so estopped, the contention could not have been supported because the evidence as to both the making of any such representation and as to the absence of written agreements at the relevant date was, in my opinion, far too vague and unsatisfactory.

59. Fifth, even if there had been evidence to suggest that the defendants may have entered into the Deed as a result of misrepresentation, the passage of time and the obvious impossibility of restitutio integrum, or even an offer to pay the true value of the Work in Progress referred to in Schedule 7, would have prevented any order for rescission. It has long been accepted that rescission will not be ordered unless the parties can be returned at least substantially to the status quo that existed prior to the agreement between them: see, for example, Urquhart v MacPherson (1878) 3 App Cas 831; Newbigging v Adam (1886) 34 Ch D 582; and Brown v Smitt [1924] HCA 11; (1924) 34 CLR 160.

60. In the present case, the transaction not only involved the sale of the assets of the plaintiffs' legal firm, but the closure of that firm and the provision of restrictive covenants limiting their right to practise for a period of four years, which has now elapsed. It would be impossible to determine what income they might have derived had they retained the files and other assets and maintained their legal practice since August 1998, or what value that practice might now have had.

61. The position taken by the defendants seemed to be that they should be permitted to keep the benefits provided by the Deed, but to have the court relieve them from the obligations they had undertaken in return. As Dunn LJ observed in O'Sullivan v Management Agency & Music Ltd [1985] QB 428 at 458 a contract may be set aside in equity only if "it is possible to achieve what is practically just by granting recision and restitution together with orders for accounts". See also Vadasz v Pioneer Concrete (SA) Pty Ltd [1995] HCA 14; (1995) 184 CLR 102. It would not be "practically just" to order rescission in the circumstances of this case.

62. I should, perhaps, mention Dr O'Hair's argument that a claim for rescission could not be maintained in the face of the declarations made on 20 November 2001, because of the doctrine of res judicata. Unlike the principle in Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100, the doctrine applies even in the face of new evidence that could not have been ascertained with reasonable diligence or evidence of facts and circumstances which did not exist at the time of the judgment. Mr Spinks submitted, on the contrary, that judgment granted on what he described as a "construction summons" could not give rise to a res judicata, forever barring any later challenge to a contract. I accept that submission. The parties are, of course, bound by the declarations. Hence, as I have mentioned, it was not open to the defendants to assert a construction of the agreement contrary to the declaration that they became indebted for the "price" payable for rights in respect of the Work in Progress, subject to certain allowances. However, the declaration that they were so indebted to the plaintiffs under the Deed in November 2001, could not, of itself, have provided a bar to subsequent rescission if adequate grounds had been established.

63. Dr O'Hair raised a number of other issues in answer to the suggested grounds for rescission, but I have found it unnecessary to examine them. The defences are in my opinion plainly untenable.

64. The defendants also raised issues as to the amounts properly payable under the Deed in respect of various matters. However, the evidence did not, in my opinion, raise a sufficiently plausible case to require further investigation. Whilst both defendants filed affidavits and gave supplementary oral evidence, neither nominated a single case in which it was alleged that the amounts now claimed by the plaintiffs exceeded the value of the Work in Progress at the time of the agreement. The amended defence contained an allegation that if the agreement was enforceable only $34,000 was owing to the plaintiffs, but Mr Barry Roche did not make any attempt to rebut Mr Sheils' evidence as to the amount owing and the evidence of Mr Christopher Roche was limited to a statement in his affidavit that "the amount claimed by the plaintiffs is not correct" and the provision of a schedule apparently relating to the matters in question. The last two columns on the right of that schedule were headed respectively, "Money not yet paid to SSG (WIP & disbursements)" and "Value of WIP & disbursements in WR/SSG Agreement on files not yet settled". The amounts listed in these columns purportedly totalled $45,147.80 and $120,825.33 respectively and, since all amounts became payable to the plaintiffs by 3 August 2002 irrespective of whether the cases had been settled, these figures apparently conceded a debt of at least $165,973.13. However many of the items not included in these figures were accompanied by terse notations suggesting some matter which would not have relieved the defendants of their obligations to the plaintiffs, such as "To Capital Lawyers" or "All WIP W/off". Mr Roche did not purport to either explain or verify the truth of the assertions contained in the schedule. Nor did he offer to pay the amounts that were effectively undisputed or even to pay them into court pending the resolution of other issues of liability.

65. Furthermore, whilst the affidavit amending the schedule was re-sworn on 4 March 2003, it had initially been dated 20 February 2003 and, in an affidavit sworn on 3 March 2003, Mr Sheils deposed to having re-checked files in the light of the affidavit and the schedule and conceded various amounts. Having made these concessions, he swore to his belief that there was no defence to the plaintiffs' claim for the sum of $423,487.94 which was still owing. There was no cross-examination of Mr Sheils in response to this evidence to suggest that this figure might be wrong, that he had failed to take some matters into account or that the reduction in the claim that he had conceded had been inadequate. Mr Roche gave further evidence orally but did not take further issue with this revised figure and Mr Spinks did not challenge it during the course of his subsequent submissions. Accordingly, I have no reason to doubt the accuracy of Mr Sheils' evidence.

66. Finally, the defendants sought to assert a defence based upon promissory estoppel. It was alleged that "the defendant, Peter Glover," (sic) represented that the monies paid by the defendants in respect of settled matters had been received in full and final payment in respect of those matters. The principle of promissory estoppel which came to prominence in the so-called High Trees case (see Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130) reflects a long standing principle that if one party to a contractual relationship leads another to suppose that his or her rights will not be enforced or will be held in abeyance, then the former will not be allowed to enforce those rights where it would be inequitable to do so, having regard to the dealings between the parties: see, for example, Hughes v Metropolitan Railway Co (1877) 2 App Cas 439. In Ajayi v R T Briscoe (Nigeria) Ltd [1964] 1 WLR 1326 at 1330, the Judicial Committee of the Privy Council explained that the principle was that "when one party to a contract in the absence of fresh consideration agrees not to enforce his rights an equity will be raised in favour of the other party." Their Lordships suggested three qualifications: the other party must have altered his or her position, the promisor could resile from the promise on giving reasonable notice to enable the other party to resume the earlier position and the promise becomes final and irrevocable only if he or she cannot do so. In Legione v Hateley [1983] HCA 11; (1983) 46 ALR 1 at 21-22, Mason and Deane JJ stressed that the representation must be clear before it could found an estoppel in pais and that it will not arise unless the other party has, as a consequence, placed himself or herself in a position of material disadvantage if departure from an assumption based upon the representation is permitted.

67. In the present case, no particulars of the representation were provided and no evidence was adduced to confirm that it had ever been made. The only evidence as to this issue was given by Mr Sheils who said that the suggestion of such a representation was inconsistent with the discussion he had had with Mr Glover, with the relevant correspondence and with the terms of subsequent demands for payment. He was not challenged in cross-examination as to the truth of this evidence.

68. The defendants also filed a counter-claim, but it was again based upon allegations of misrepresentation which, in my opinion, they are estopped from raising and which, in any event, the evidence before me does not support. Furthermore, the only relief sought consisted of declarations, interest and costs. For reasons previously given, I am satisfied that the claims for declaratory relief are plainly untenable. Damages were not sought and it was not explained how interest could be awarded on declaratory relief.

69. Even on an application of this kind, relief should not be denied to a plaintiff with an apparently valid claim unless the Court is satisfied that there are bone fide defences which, as mentioned earlier, are at least sufficiently credible to warrant further investigation. In the present case, the defences put forward by the defendants do not, in my opinion, satisfy even this test. Having observed each of them give supplementary evidence-in-chief and be cross-examined about the issues raised in the amended defence, I was unable to be satisfied that there was a bone fide dispute as to their liability under the Deed or, at least after Mr Sheils had re-checked the figures and conceded certain amounts, even as to the balance owing to the plaintiffs. On the contrary, I was left with the distinct impression that the defences had been raised only to delay judgment and, perhaps, provide some scope for negotiation.

70. I am satisfied that the plaintiffs are entitled to summary judgment on their claim for the sum of $423,487.94 plus interest since 3 August 1998 at 9% per annum, which amounts to $25,409.27. There will be judgment in their favour for the sum of $448,897.21. The counter claim will be dismissed.

I certify that the preceding seventy-one (71) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Crispin.

Solicitor for the defendants: Elrington Boardman Allport

Practitioners Act 1970

Glover & Sheils v Roche & Roche [2003] ACTSC 19

At a glance

Court

Decision date

Before

Source

Judgment (124 paragraphs)

Glover & Sheils v Roche & Roche [2003] ACTSC 19 (4 April 2003)

Parties

Legislation Cited (2)

Cases Cited (12)