GROUNDS OF APPEAL 1 to 5 - COMPETENCY OF THE PROCEEDING
81 Grounds of appeal 1 to 5 raise the issue of whether Westpac was entitled to issue a bankruptcy notice upon default under the Deed of Settlement in reliance upon the original judgment debt or whether Westpac was required to issue fresh proceedings to obtain a judgment before the issue of a bankruptcy notice. The resolution of that issue turns on the correct construction of the Deed of Settlement.
82 In Findex Group Limited v McKay [2020] FCAFC 182, the Full Federal Court stated at [77]-[81]:
The Court should approach the task of construction on the basis that the parties intended to produce a commercial result, and one which makes commercial sense: Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 (Woodside Energy), [35]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; 261 CLR 544 (Ecosse Property), [17].
A commercial contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience: Woodside Energy, [35]; Zhu v Treasurer (NSW) [2004] HCA 56; 218 CLR 530, [83]; Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310, 313-314.
Commercial contracts must be interpreted fairly and broadly, without being too astute or subtle in finding defects: Pan Foods Company Importers and Distributors Pty Ltd v Australia and New Zealand Banking [2000] HCA 20; 170 ALR 579, [14]; Australasian Performing Right Association, 109-110.
A construction that avoids unreasonable results is to be preferred to one that does not, even though it may not be the most obvious, or the most grammatically accurate: Australasian Performing Right Association, 109-110.
Determining the meaning of a contractual term normally requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165, [40] (Toll); Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 350; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 (Pacific Carriers), [22]; Woodside Energy, [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 256 CLR 104 (Mount Bruce Mining), [47] and [49]-[50]; Ecosse Property, [17].
83 In Woodside Energy, French CJ, Hayne, Crennan and Kiefel JJ stated at [35]:
The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience".
(Citations omitted; emphasis added.)
84 Having regard to those well-established principles of construction, there is, in my view, no error in the primary judge's construction of the Deed of Settlement nor was there any error in the primary judge's finding that the appellants had defaulted in payment of the "Initial Settlement Sum" under cl 2.1.1 of the Deed of Settlement: see Primary Judgment, [51], [52], [57], [58], [63], [71]-[74]. This is so for the following reasons.
85 First, cl 2.1.1 identifies the obligation of the appellants to pay the respondent the "Initial Settlement Sum". Clause 2.1.1 relevantly states:
In full and final settlement of the Claims, the Proceeding and the Bankruptcy Proceeding insofar as it relates to the parties the subject of this Deed, Paras and Apperly agree to … pay to Westpac the sum of $1,015,000 ("Initial Settlement Sum") by way of [certain] instalments …
86 It was uncontroversial at trial that the amount of $15,000 was paid on execution on 10 May 2017. It was also uncontroversial at trial that the next instalment of the "Initial Settlement Sum", being a payment of $500,000, was not paid by the due date of 31 October 2018. As a consequence, Westpac was entitled to rely upon the default provisions in cl 6 of the Deed of Settlement. Clause 6.1 provided that, if the appellants "default on payment of any amount described in cl 2.1", Westpac "can immediately write to [the appellants] setting out the nature of the default … and demanding that any default be rectified by [the appellants] within five days of the date of such notice …". It is not in dispute that Westpac gave such notice. Clause 6.2 provided that, if the appellants failed to "rectify the defaults set out in the notice sent by Westpac in accordance with cl 6.1", then Westpac would be "entitled to proceed with bankruptcy proceedings against" the appellants and the appellants agreed "not to defend, contest or otherwise dispute a sequestration order being made against them". This is precisely the course of conduct followed by Westpac as the primary judge found at [35]-[36] of the Primary Judgment.
87 Second, the covenant not to sue in cl 5 of the Deed of Settlement makes plain that some rights and obligations of the parties arise "[u]pon execution of th[e] Deed [of Settlement]" and others arise "[u]pon receipt of the Initial Settlement Sum and the Final Settlement Sum in full".
88 In this respect, the introductory words to cll 5.1 and 5.2 are "[u]pon execution of this Deed". By cl 5.1, "[u]pon execution of th[e] Deed [of Settlement]", the appellants agreed "to forever release and discharge Westpac from all actions, claims, costs, demands, proceedings, suits and/or writs arising from, or in connection with, the matters the subject of the Claims …". By cl 5.2, "[u]pon execution of th[e] Deed [of Settlement]", the appellants agreed "that they will not assist or cooperate with or instigate", on behalf of the relevant entity, Epping Fresh Food, any claim against Westpac.
89 The prefatory words to cl 5.3 are different: the obligations in cl 5.3 arose "[u]pon receipt of the Initial Settlement Sum and the Final Settlement Sum in full and subject to its retention by Westpac". By cl 5.3, "[u]pon receipt of the Initial Settlement Sum and the Final Settlement Sum in full", Westpac agreed to "release and discharge" the appellants "from all actions, claims, costs, demands, proceedings, suits and/or writs arising from or in connection with the matters the subject of the Claims".
90 In these circumstances, it is clear from the express terms of the Deed of Settlement that Westpac would only release and discharge the appellants "[u]pon receipt of the Initial Settlement Sum and the Final Settlement Sum in full and subject to its retention by Westpac". It is uncontroversial that the "Initial Settlement Sum" and the "Final Settlement Sum" were not paid. As a consequence, Westpac has not released the appellants from the judgment debt obtained by default judgment on 10 March 2016 in the sum of $8,350,791.96. The consequences which arose were expressly set out in cl 6.2 whereby Westpac "will be entitled to proceed with bankruptcy proceedings against [the appellants] and [the appellants] agree not to defend, contest or otherwise dispute a sequestration order being made against each of them". Westpac, in reliance upon the default provisions in cll 6.1 and 6.2, recommenced bankruptcy proceedings which are the subject of this appeal. That was something which Westpac was, in my view, entitled to do under the express terms of the Deed of Settlement. That was what the primary judge found in the Primary Judgment at [71]-[74].
91 Third, Recital J to the Deed of Settlement defines "Bankruptcy Proceeding" to include the creditor's petition filed in the Federal Circuit Court of Australia proceeding No. MLG210 of 2017 on 1 February 2017. By cl 4.1 of the Deed of Settlement, Westpac, "[u]pon execution of" the Deed of Settlement consented in the Bankruptcy Proceeding to withdrawing the creditor's petition with no order as to costs. The terms of the Deed of Settlement do not prohibit Westpac from relying upon the default judgment (in the amount of $8,350,791.96) and seeking to enforce that judgment by way of fresh bankruptcy proceedings. If that was what had been agreed between the parties, then it would have been expressly so stated in the terms of the Deed of Settlement.
92 In this respect, the construction of the Deed of Settlement advanced by the appellants has an air of unreality about it in that, on the appellants' construction, upon execution of the Deed of Settlement on 10 May 2017, Westpac was to be paid $15,000 (which was paid) and Westpac would give up an entitlement to a judgment debt of $8,350,791.96 in return for the mere promise to pay the "Initial Settlement Sum" of $1,015,000 and the "Final Settlement Sum", being an entitlement to 25% of the net proceeds of legal proceedings which had not yet been commenced against various entities by the appellants. It is, in my view, clear, on the express terms of the Deed of Settlement, that Westpac did not release the appellants from the judgment debt until the "Initial Settlement Sum" and the "Final Settlement Sum" had been received in full by Westpac. In my view, Westpac, under the Deed of Settlement, had an entitlement to issue a bankruptcy notice upon the appellants defaulting under the Deed of Settlement. There is no requirement by the express terms of the Deed of Settlement for Westpac to commence fresh proceedings and to obtain another judgment prior to issuing a bankruptcy notice. That much is clear from the express terms in cl 6.2 of the Deed of Settlement, as the primary judge found at [64] and [71] of the Primary Judgment.
93 For the reasons given, I reject the appellants' challenge to the competency of the proceeding raised by grounds of appeal 1 to 5.