Appellant (First Defendant) : Michell Sillar McPhee

D Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10

Greer v Kettle [1937] 4 All ER 396

1 TEMPLEMAN J: I have had the advantage of reading the reasons to be published by Wheeler J. It was for those reasons that I joined in the decision, on 11 November 2000, to dismiss the appeal.

2 WHEELER J: On 28 June this year Master Sanderson gave summary judgment for the respondent for a sum of US$480,230 plus interest. On 11 November the court dismissed the appellant's appeal from that decision. These are my reasons for dismissing the appeal.

3 The facts are succinctly but adequately stated in the reasons for decision of Master Sanderson delivered on 5 June 2002 (First Industry Corp v Goh & Anor [2002] WASC 143). I do not propose to repeat that account of the facts, which should be read with these reasons.

4 The appeal relied essentially upon two matters. First, it was alleged, as it had been before the Master, that there was a case for rectification of the agreements upon which the respondent sued or that alternatively the parties had agreed to vary those agreements or that they had been discharged. As the appellant conceded, this argument went only to the quantum of the debt.

5 In my view, the learned Master was correct in his conclusion that there was simply no evidentiary basis for a claim of common mistake, or for a claim that there had been a unilateral mistake and attendant sharp practice on the part of the plaintiff, which would justify an order for rectification. Nor was there any evidentiary basis for a case of variation. The Master also drew attention to recital (h) of each agreement which was in effect a "whole understanding and agreement clause".

6 The only thing I would add to the Master's reasons in this respect is to note that the evidence of the appellant himself in his affidavit of 22 April 2002 in opposition to summary judgment is inconsistent with any mistaken belief on his part. At par 8(n) he simply asserts that, having received an Australian Dollar sum which it is conceded was the equivalent at the relevant time of the amount specified in United States Dollars in the written agreement between the parties, "I did not think about the currency ramifications of that transaction at the time". It appears that the only fact upon which the appellant relies in relation to this limb of his argument is that, the parties having after discussion expressly agreed to the terms of a written agreement describing a loan in United States Dollars and providing that the borrower "must repay and finally discharge the loan in United States Dollars", the sum actually received in the appellant's bank account was a sum in Australian Dollars. Given that the loan was for the

purpose of purchasing shares in Australia, so that it would have been necessary for the sum to have been converted to Australian Dollars at some stage, and given that the sum received was, as I have noted, the equivalent at the relevant time of the US Dollar sum specified in the agreement, this fact in my view cannot be seen as being inconsistent with terms of the written agreements or as giving rise to any inference inconsistent with their terms.

7 The second limb of the appellant's argument is to the effect that he has a good legal or equitable set off by reason of certain conduct of the respondent which it is alleged constitutes either breaches by the respondent of implied terms of the agreements upon which the respondent sues, or unconscionable conduct in trade and commerce, or potentially a civil conspiracy. Any of these would give rise to a claim for damages by the appellant against the respondent.

8 The Master observed that it was difficult to see just what it was that the appellant said provided him with such defences. I would respectfully agree with that observation, but I set out my understanding of the appellant's submissions below.

9 The facts upon which the appellant relies, many of which are disputed by the respondent, are broadly as follows. Over some time leading up to November 2001 there had been numerous disputes between the appellant and persons associated with the respondent concerning a company Sandford Securities Pty Ltd ("Sandford") of which the appellant was a director. Around November the appellant was pressed by persons associated with the respondent to sign documents in relation to Sandford's affairs which he considered to be incorrect, and to resign his position as a director. He asserts that C J Goh said to him that, if he did not act as he was being told do in his capacity as a director of Sandford, the respondent would not extend the term of the loan agreements, which by reason of the deeds of 10 April were repayable on or before 31 December 2001. As a result of that pressure, the appellant did resign his position as Director and thereby lost the opportunity to earn the salary of $156,669 attached to that position for the future. I now turn to the way in which the appellant seeks to characterise that conduct for the purposes of this appeal.

10 So far as breach of contract is concerned, the appellant alleges that a term was to be implied into the agreements between the appellant and the respondent to the effect that the respondent would:

(a) co-operate with the appellant to allow him the benefit of his part of the agreement.

(b) Not impair the basis of the agreement so that the appellant would be entitled to assume that the state of things which existed to the date of the contract would continue for the life of the agreement.

(c) Act in accordance with the contract objectives of both parties.

(d) Comply with the reasonable requests of the appellant in relation to the agreement.

11 In my view, whether or not some or all of these broadly stated terms can be implied into the contract, none of them is capable of being implied in such a way as to suggest that the conduct alleged on the part of the respondent is a breach of the term. Taking the alleged terms in turn, it seems to me that the position is:

(a) The "benefit" of the agreement to the appellant, when one considers the most recent deeds of 10 April 2001, was the benefit of having the term of the earlier loan agreements extended until December 2001. The "benefit" of the loan agreements was the obtaining of the loan. Nothing in the conduct of the respondent deprived or threatened to deprive the appellant of that benefit.

(b) The "state of things" which existed between the appellant and respondent is in my view a term so uncertain that it could not be implied into the contract. As framed, it could for example be understood as requiring that the appellant and those associated with the respondent continued to be on good terms and in agreement concerning the management of the company Sandford Pty Ltd. The agreement was a simple one for the repayment of money, and it was not "impaired" by the conduct alleged by the appellant.

(c) Again, in my view the "contract objectives" appear from the contracts themselves. The purpose is said to be to enable the borrower, the appellant, to use the loan to purchase shares in Sandford. That was done.

(d) If it is intended to suggest that it is an implied term of the deeds that the respondent complied with reasonable requests by the appellant for the extension of the term of the loan, no such implied term can stand with the repayment clause of the deed, which specifies a date for repayment. The agreement makes no provision for rollover or extension, and in my view it is not arguable that such a term can be implied.

12 Alternatively, the appellant submits that the conduct of the respondent was unconscionable conduct in trade or commerce contrary to s 51AC of the Trade Practices Act. It is submitted by the appellant that the conduct was unconscionable in connection with the supply or possible supply of goods or services to another person. It is submitted that the provision of financial accommodation in the form of loans falls within the terms the "supply ... of services" and, as I understand it, it is submitted that the discussions between the appellant and others in relation to the rolling over or extension of the loan was capable of falling within the understanding of the "possible supply" of services.

13 One difficulty which the appellant faces is that the term "in connection with" used in s 51AC of the Trade Practices Act requires the allegedly unconscionable conduct to accompany or go with the supply of services: see Hurley v McDonald's Australia Ltd [1999] FCA 1728; (2000) ATPR 41-741, Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants [2001] ACLR 420. In this case, the service to which the agreements relate had already been provided by the respondent some considerable time prior to the conduct alleged. The two current deeds were entered into on 10 April 2001, and fixed the date for repayment, the amount of repayment, and the amount of interest. There was nothing further for the respondent to do in connection with those financial services.

14 However, the appellant argues that the potential "rolling over" of the loan, was capable of constituting the possible supply of goods and that there was unconscionable conduct in relation to that possible supply. Although it is not easy to discern from the affidavits of the appellant precisely how any such "rolling over" was first raised, and although it is not easy to see what would be in effect a waiver by the respondent of its contractual rights as a possible supply of services, I accept for the purpose of the present appeal that that question is arguable. However, even if arguable, it is my view that it is not capable of giving rise to a legal or equitable set off in the circumstances of the present case.

15 The first difficulty which faces the respondent in arguing any set off in the circumstances of this case is that the two deeds upon which the respondent sues each contain a clause to the effect that payment must be made to the lender "without set off or counter claim, free and clear of, and without, any deductions whatsoever". The clause would not appear to

preclude the appellant from bringing a separate action of its own against the respondent in relation to the unconscionable conduct alleged, but in a situation where the parties have expressly agreed that there should be no set off, it would appear that the appellant is precluded from raising a set off as a defence to a claim for the amount owing under the deed.

16 In any event, there is a further obstacle to regarding the potential Trade Practices Act claim as one giving rise to a set off, which was adverted to by the Master. The concept of a set off was examined in some detail in Westwind Air v Hawker De Havilland (1990) 3 WAR 71, by Murray J, particularly at 84 - 85. The conclusions expressed by his Honour, which in my view are applicable to the present case, are as follows. At law it has always been the case that a claim for an unliquidated sum could not be set off against a liquidated claim. That is what the appellant seeks to do here. So far as equitable set off is concerned, a defendant could establish it only by bringing forward a claim which "impeaches" that of the plaintiff. It is not sufficient that there be countervailing claims, nor that the claims be mutual, nor even that they arise out of the same transaction. As I have noted, the conduct of which the appellant complains was conduct which arose long after the original loan agreements (in May 1999) and significantly after the date of the April 2001 deeds upon which the respondent now sues. It is "connected" or bound up with those agreements only to the extent that the existence of the obligation to repay appears to have been a factor upon which it is alleged that persons connected with the respondent relied in pressing the appellant to act in a particular manner. In my view no equitable set off can arise in those circumstances. It appears to me that the civil conspiracy claim is also incapable of giving rise to any set off, and for the same reasons.

17 I should add that it appears to me that the grounds of appeal amount to a restatement of the arguments which were advanced to the learned Master and were rejected by him on behalf of the appellant. I have dealt with what I understood to be the principal thrust of the submissions advanced at the hearing of the appeal. However, to the extent that I have not traversed all of the issues dealt with by the learned Master, I should add that I am in agreement with the entirety of his reasons.

18 ROLFE AJ: I have had the advantage of reading in draft form the reasons of Wheeler J, with which I agree.