Phontos v Tresedar Pty Limited & Ors

Background 2The proceedings arise from the construction of residential property at Gordon and Turramurra. Those developments are the subject of other actions entered in the Technology and Construction List in this Division. For present purposes it is necessary to have regard to only one of those, namely the proceedings numbered 2009/298902 in which Tresedar, Tetbury and Mr Evanian are the plaintiffs and Property Builders (Constructions) Pty Ltd (PBC) is the defendant (the 2009 proceedings). To avoid confusion I shall refer to the plaintiff in the present case as Mr Phontos and the defendants in the present case collectively as the Tresedar parties. PBC is now in liquidation and Mr Phontos was, and is, a director of it. Mr Phontos was once a defendant to the 2009 suit, but the claim against him was discontinued. That discontinuance was made pursuant to the aforementioned Deed of Release.

Summons 3Leave was granted to file in Court an Amended Summons and an Amended Technology and Construction List Statement on 16 October 2013, the amendments being immaterial for the disposition of the present suit. The pleadings, such as they are, seek a declaration that a non-disparagement clause, set out below, is a term of the settlement of the 2009 proceedings between Mr Phontos and the Tresedar parties. Mr Phontos seeks to enforce that clause against the Tresedar parties by seeking a further declaration that he was disparaged by the third defendant at meetings of creditors of PBC and by the fact that the Tresedar parties have continued to prosecute the 2009 proceedings against PBC and continued to defend PBC's Cross-Claim in those proceedings. Injunctions are sought to restrain the Tresedar parties from (1) speaking ill of Mr Phontos, in breach of the non-disparagement clause; (2) prosecuting the main claim in the 2009 proceedings; (3) defending the Cross-Claim in those proceedings; and (4) taking any further step in those proceedings other than ending them with consent orders. Mandatory injunctions are sought which would require the Tresedar parties to consent to the striking out, in the 2009 proceedings, of their pleadings in the main claim and Cross-Claim, with the result that PBC would wholly succeed in the 2009 suit.

The Proceedings 4The matter was heard on a final basis on 16 October 2013, with Mr R P V Carey, of counsel, appearing for Mr Phontos (the plaintiff), and Mr G A Laughton SC, leading Mr R W Notley, of counsel, for the Tresedar parties (the defendants). On that day I dismissed the Amended Summons with costs, giving brief reasons. These are fuller reasons for decision.

The Deed 5The Deed of Release was entered into in October 2012. The parties to it are the Tresedar parties and LawCover Insurance Pty Limited, which was Mr Phontos' professional indemnity insurer for the purposes of his practice as a solicitor. Clause 5.1 of the deed provided as follows: Each of the Parties to this Deed agrees that they shall not disparage any other of the Parties to this Deed or Michael Phontos or the family of Michael Phontos in relation to any of the Release Events and the negotiations relating to the settlement as evidenced by this Deed. 6Clause 1.1 of the deed defined disparage thus: Disparage means to comment, in oral, written, electronic or other form, in the manner which either expressly or impliedly criticises, or seeks to discredit, a person. 7Relevantly, clause 1.4 defined "Release Events" as follows: [T]he 2009 Proceedings, including all facts, matters and circumstances the subject of all pleadings and affidavits in the 2009 Proceedings and any findings that may be made in future in any judgments delivered in the 2009 Proceedings. 8To interpose at this point, this last clause contemplates the 2009 proceedings continuing beyond their status at October 2012 because it refers to future judgments in the proceedings. That contemplates the proceedings continuing to, perhaps, final judgment. This is especially so given that clause 2.1 of the Deed required the parties to agree to entry of consent orders in the 2009 proceedings the very terms of which were annexed to the deed, the effect of which was to discontinue the proceedings against Mr Phontos and LawCover but not against PBC.

The 2009 Proceedings 9Is it a disparagement of Mr Phontos for the Tresedar parties to continue to sue PBC? No. This is so for four reasons. First, the parties to the deed never intended to stop the suit against PBC. They contemplate that case continuing and terminating, if necessary, in a final judgment. Indeed, in the course of submissions, Mr Carey said that the defendants had "unwittingly" released PBC from the claims against it. They did no such thing. They released Mr Phontos and LawCover, but not PBC. The deed contemplates the continuation of that suit. 10Secondly, the causes of action against Mr Phontos and PBC were not the same. Therefore, it cannot be said that a suit against PBC is a disparagement of Mr Phontos. It is said that, for these purposes, Mr Phontos and PBC are one and the same, because the plaintiff was the controlling mind of PBC. In truth, Mr Phontos was sued in equity in his capacity as the Tresedar parties' former solicitor for breaches of his fiduciary duties, and in tort, for breaches of his duty of care. These breaches were constituted by Mr Phontos' failure to advise the Tresedar parties of certain matters. The claims against PBC were for breach of contract and misleading or deceptive conduct. They related to the construction of the projects in question and claims for payment other than in accordance with an oral agreement. The causes of action were not the same against PBC and Mr Phontos. Their liabilities were not co-ordinate, and to this I shall return below. 11Thirdly, to sue PBC is not to disparage Mr Phontos. They have, at law and in reality, entirely separate personalities and reputations. True it is that Mr Phontos was involved in the management of PBC, and that PBC cannot act, other than through natural persons, and that the actions of individuals may be attributed to companies. But here it is the suing in and of itself which is complained of. The suit is against PBC, not Mr Phontos. Therefore, there is no disparagement of Mr Phontos in the defendants continuing the 2009 suit. 12Finally, the proper construction of the deed does not bear out Mr Phontos' argument. The deed forbids the Tresedar parties from disparaging Mr Phontos "in relation to" the 2009 proceedings including all matters in the affidavits and pleadings in those proceedings. This appears to be directed at preventing the Tresedar parties from saying or publishing comments critical of Mr Phontos which arise from the facts and subject matter of the 2009 proceedings, in a situation which is outside the litigious arena. It carves out the 2009 suit itself from being disparagement.

Release 13By releasing the plaintiff from the claims against him have the defendants, "possibly unwittingly", released PBC for their claims against him? No. First, because the claims against each are not the same, therefore a release of claims for breaches of fiduciary and tortious duties could not be a release for breaches of contract or statutory duties not to mislead or deceive. 14Secondly, the liabilities of the plaintiff and PBC are not co-ordinate. In Carr v Thomas [2009] NSWCA 208 the Court of Appeal said that the general rule is that the release of one who is jointly and severally liable with another is a release of the other. But that is always subject to the correct construction of the instrument granting the release. It is perfectly possible to release one without releasing the other, where each is jointly liable, if the instrument so provides. In Duck v Mayeu [1892] 2 QB 511 at 513 it was said that a covenant not to sue one of two joint tortfeasors is not a release of the other joint tortfeasor. 15The words which grant the release must be construed in context. As Dixon CJ, Fullagar, Kitto and Taylor JJ said in Grant v John Grant & Sons Pty Limited (1954) 91 CLR 112 at 129-130: [E]quity proceeded upon the principle that a releasee must not use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor. 16Although that case was different from the present case in that there the question was whether certain obligations owed by a party had been released, not whether one party had been released by the release of another party, the principle is tolerably clear. The document must be properly construed to decide whether it is a release or a covenant not to sue: Duck v Mayeu at 514. Equity will read releases strictly. It will consider all the surrounding circumstances and the terms of the deed to arrive at its proper construction. As Lord Langdale MR said in Lindo v Lindo (1839) 1 Beav 496 at 506; 48 ER 1032 at 1036: [T]he general words of a release are to be restrained by the contract and intention of the parties, that contract and intention appearing by the deed itself or from any other proper evidence that may be adduced upon the occasion. 17Where two people are jointly liable, two results can obtain. Either a release of one is a discharge of the other from the entire obligation. Or, there is merely a covenant not to sue one person on the joint liability while the claims can still be pursued against the other. So much was made clear by Collins LJ in Re EWA [1901] 2 KB 642 at 648-649. It all depends on how one construes the relevant documents: Commercial Bank of Tasmania v Jones [1893] AC 313 at 316. It was submitted for the plaintiff that there was no "reservation in relation to the [Tresedar] Parties' position as against PBC" in the Deed of Release, therefore "the effect of the release [in clause 5.1 of the Deed] was also to release PBC from all claims made against it for misleading and [sic] deceptive conduct." The problem with that submission is that it is not necessary to expressly reserve the Tresedar parties' rights against PBC. It is not as though the only way a person can continue to sue another is by agreeing that he can so do. Nor is it necessary to say so when releasing another. The fact that the Deed contemplates the further conduct of the 2009 suit is sufficient to preserve the Tresedar parties' causes of action against PBC. Also, there are claims for breach of contract in the 2009 suit, which stand separately from the statutory cause of action under the statute then known as the Trade Practices Act 1974 (Cth). Therefore the Deed operates as a bar to the Tresedar parties proceeding further against Mr Phontos, but not as a release of PBC. 18Even if I am wrong in saying that Mr Phontos' and PBC's liabilities are not coordinate, the construction of the deed at which I have arrived points squarely to the intention not to release PBC from its liabilities.

Disparagement in Pleadings 19Do pleadings amount to disparagement? As the Tresedar parties submitted, they are unproven allegations. Although the party putting the pleadings swears to their accuracy, the very point of litigation is to have decided, by a court, which pleading is correct. 20To pleadings is attached an absolute privilege, such that the party making the pleading cannot be sued for libel. So much was made clear in Lord Beauchamps v Croft (1595) 3 Dyer 285a; 73 ER 639. That was a case concerning an action for scandalum magnatum, an action for "[w]ords spoken in derogation of a peer, a judge, or other great officer of the realm" (Tomlins, The Law-Dictionary, Explaining the Rise, Progress, and Present State of the British Law (1835, 4th ed)), which it was held could not lie for the issue of a writ (of forger of false deeds) at the instance of the defendant against the plaintiff. That principle has been held to be good in relation to ordinary libel and slander actions since: Lilley v Roney (1892) 61 LJ (QB) 727; Lincoln v Daniels [1962] 1 QB 237 at 257 per Devlin LJ; Mann v O'Neill (1997) 191 CLR 204 at 211 per Brennan CJ, Dawson, Toohey and Gaudron JJ; O'Shane v Harbour Radio Pty Ltd [2013] NSWCA 315 at [51] per Beazley P. Although this present suit is not a defamation case, the deed relied upon prevents actions which are akin to defamatory acts. True it is that the deed defines disparage, partly, as to comment in written form in a manner which impliedly criticised Mr Phontos. But the purpose of the non-disparagement clause is not to release PBC from its liability in contract or under statute, but to protect the reputation of Mr Phontos and other members of his family in a way additional to the libel and slander laws. To that extent, the pleading is immune from attack based on any implied allegation it might make against Mr Phontos. 21Therefore, allegations in pleadings do not amount to disparagement within the meaning of the deed. 22Reference was made to Allsop P's judgment in Fermiscan Pty Ltd v James (2009) 261 ALR 408, which considered a non-disparagement clause. The clause under consideration there was differently worded from that in the present case. To that extent, it is not helpful in construing the meaning of the clause in this deed.

Damages 23Even if I am incorrect on the above matters, the plaintiff has not shown why damages are an inadequate remedy such as to merit the granting of perpetual injunctions. One form of disparagement complained of was comments made by the third defendant at meetings of creditors of PBC. No damages for those apparent breaches of the non-disparagement clause have been sought. It is not clear why not.

Discretion 24If I am wrong regarding the aforementioned matters, as a matter of discretion I would refuse the injunctions because the 2009 proceedings ought to be brought to their finality, one way or another, and that will test the claims made therein, rather than having them cut off at the pass by a person who is no longer party to them, and who is not a party to the deed on which this action is founded. There is no reason to stop different parties finishing their litigation, either by compromising it or by final judgment. It is not appropriate, in this case, to stop another related but different suit by collateral attack here.

Conclusion 25Accordingly, I dismiss the Amended Summons with costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 November 2013