Plaintiff v Defendant [2018] VSC 355 | Case summary

Supreme Court of Victoria|2018-07-03|Before: CROFT J

The applicant's submission that cl 5.18.2 should not be construed in accordance with the ordinary principles applicable to commercial contracts and should be construed beneficially in his favour cannot be sustained. The deed of settlement was executed by a large number of parties in order to resolve litigation on a substantial scale involving the investment of very large sums of money in a series of managed investment schemes. If anything relevantly turns on the designation 'commercial', it is plain that, at least in so far as the actual parties who executed the deed are concerned, that designation is apt. Even accepting for present purposes that the binding force of the deed, in so far as group members other than the executing parties are concerned, flows from statute rather than from the deed itself, it cannot be the case that the deed merits a different description or, more fundamentally, that it attracts a different interpretation, in its application to those group members. If that were so, then provisions of the deed of settlement could conceivably bear different meanings in their application to plaintiffs on the one hand and group members on the other. That would be a very surprising consequence. There is a single deed of settlement, binding on a large range of persons, and it must be construed by reference to ordinary principles of construction of written instruments.
The fact that the deed emerged from proceedings in which certain matters were, and others were not, in issue, does not dictate any special approach to its construction. That is a commonplace occurrence when litigation is settled. As the respondent submitted, it would be wrong to approach the deed on the basis that it is to be assumed that it goes no further than to resolve issues that were previously in dispute in the group proceedings. Instead, the scope of the proceedings might be relevant in the construction of aspects of the deed, as part of the context in which it was executed. The circumstance that, as the applicant submitted, the existence of the loans in question was not litigated in the group proceedings is therefore a matter to be taken into consideration in applying ordinary principles of construction of contracts.

Other provisions of the deed of settlement make it clear that the ordinary meaning of 'the amount owing' is its intended meaning. ...

In light of these considerations, the fact that the group proceedings did not present for determination the question whether loans had in fact been advanced to group members is of little assistance in construing the deed of settlement. Given that the premise of the relevant provisions is that loans had been advanced, it is apparent that the parties resolved the proceedings on terms which travelled beyond the issues formally in issue in the litigation.

20 For present purposes, the critical issue in Pekell was the contention by the respondent to the Bank's claim that the Deed of Settlement "was only effective to resolve the common issues which comprised the foundation, and the ambit, of the Group Proceedings".[33] The appeal in Pekell was from the judgment of Randall AsJ on an application to set aside a statutory demand.[34] The respondent in those proceedings submitted that the statutory demand should be set aside because it was vitiated by defects and because there was a genuine dispute about the existence of the debt and an offsetting claim for misrepresentation. On appeal, the applicant Bank submitted that the effect of the Deed of Settlement and, particularly, cll 4.1.4, 4.1.10 and 4.1.13 precluded the respondent from raising defences or offsetting claims in respect of the loans.[35]

21 The respondent in Pekell sought to apply the reasoning of the High Court in Timbercorp, particularly the following explanation by French CJ, Kiefel, Keane and Nettle JJ:[36]

Part 4A creates its own kind of statutory estoppel. Section 33ZB requires that a judgment in a group proceeding identify the group members affected by it and, subject to a provision not presently relevant, provides that that judgment 'binds all persons who are such group members at the time the judgment is given'. In order to understand that to which the group members are bound, it is necessary to read s 33ZB in the context of Pt 4A as a whole and ss 33C(1) and 33H in particular. By that process it will be seen that group members are bound by the determination of the claims giving rise to the common questions.
The provisions of Pt 4A therefore confirm that a plaintiff in group proceedings represents group members only with respect to the claim the subject of that proceeding, but not with respect to their individual claims. The lead plaintiff is not a privy in interest with respect to the respondents' claims. This is so regardless of whether they should have been raised in the group proceeding. That leaves for consideration the question whether the respondents themselves are estopped from raising them in these proceedings.

Thus, as the Court of Appeal observed in Pekell:[37]

As elaborated further below, the respondent seeks to apply the above reasoning to the present case, permitting it to raise defences which were not the subject of the group proceedings. It argues that the plaintiffs could not settle the proceedings so as to bind group members in respect of the claims underlying such defences.

The Court of Appeal then considered the issue in Byrne, which was whether Javelin could take the benefit of the Deed of Settlement in respect of claims raised in a group proceeding to which it was not a party.[38] The Court of Appeal also said, in the context of considering the particular issues in Pekell, that:[39]

Byrne also established that it was permissible for a deed of settlement to go beyond the matters in issue in the group proceedings and that such a deed ought not to be construed on the assumption that it did not do so.

22 Critical for present purposes was the argument in Pekell that the orders made on 11 December 2014 approving the Deed of Settlement were in excess of jurisdiction. As to this, the Court of Appeal said:[40]

Secondly, and in any event, the argument that the orders of 11 December 2014 were made in excess of jurisdiction is without substance. It is true, as the respondent submitted, that in Timbercorp the plurality said:

The provisions of Pt 4A ... confirm that a plaintiff in group proceedings represents group members only with respect to the claim the subject of that proceeding, but not with respect to their individual claims. The lead plaintiff is not a privy in interest with respect to the respondents' claims.[41]

However, it does not follow from those propositions that a plaintiff in a group proceeding cannot settle that proceeding in a manner that affects the individual claims of group members. Part 4A protects the interests of group members by requiring that they be given notice of an application to approve a settlement.[42] Apart from the requirement in s 33V that any settlement of a group proceeding requires the Court's approval, s 33KA enables a group member to apply to the Court at any time before or after judgment for an order that the person ceases to be a group member (including on the basis that it is just and expedient to make such an order). Doubtless the fact that a proposed settlement will affect the individual claims of such members will provoke anxious consideration, as it did in the present case, by the judge asked to approve the settlement.[43] But nothing in pt 4A circumscribes the power of the Court to approve such a settlement. The respondent was not able to point to any provision having that effect. Its arguments proceeded on the erroneous assumption that the observations of the High Court in Timbercorp, a case in which the group proceeding went to judgment, apply with equal force to group proceedings which are settled.[44]
It would be highly surprising if pt 4A precluded parties to a group proceeding from resolving the common claims between them on terms which also bring finality to other issues outstanding between those parties or, in the case of a plaintiff, the group members that plaintiff represents. Full releases of all outstanding claims, whether at issue in the relevant proceedings or not, are not uncommon.[45] The respondent's submission, if correct, would impose a remarkable constraint on those negotiating settlements of group proceedings.
The respondent submitted that s 33ZF of the Supreme Court Act 1986, which empowers the Court to make any order it thinks 'appropriate or necessary to ensure that justice is done in the proceeding', is to be confined by its reference to justice being done 'in the proceeding'. However, that argument advances no further than repeating the assertion that the proceeding could not be settled so as to bind group members except in respect of the common claims. For the reasons given, there is no basis for that assertion. Instead, as explained in Byrne,[46] s 33ZF enables a Court approving a proposed settlement of a group proceeding to make orders binding a plaintiff, group members and other parties to the settlement or authorising a plaintiff to enter into and give effect to the settlement on behalf of group members. Such an order supplies the privity which, as the High Court observed in Timbercorp, is otherwise absent in respect of the individual claims of group members. This then enables the group proceeding to be settled on whatever terms the parties have agreed and the Court has approved. Because the privity which is absent in respect of a judgment is able to be provided by virtue of the Court's orders when approving a settlement, Timbercorp and Byrne are addressed to different situations. The respondent's submission that the decisions are inconsistent must therefore be rejected.
For each of the above reasons, the deed of settlement applies in accordance with its terms. To the extent it applies to the respondent, the deed is effective to preclude it from advancing the disputes and claims upon which it relies. The first two proposed grounds of appeal should be upheld.

23 The Deed of Settlement has also been considered at District Court level in other jurisdictions and found to be enforceable in accordance with its terms and to preclude defences and claims being brought by Group Members.[47]

24 For these reasons, the Defendant, as a Group Member, is bound by the provisions of the Deed of Settlement. It follows that he is not now able to dispute or deny the validity or enforceability of the Loan Deed by the Plaintiff.

25 The definition of "Loan Agreements" has been set out previously and is of particular relevance in the present circumstances. It will be recalled that the definition is of "the loan agreements under which monies were advanced to Scheme Members to finance their interest in managed investment schemes of which GSMAL... is or was the responsible entity" [Plaintiff's emphasis].[48] For the preceding reasons, consistently with Byrne and Pekell, it follows that the Defendant, as a Group Member, is bound by the provisions of the Deed of Settlement and cannot contest the making of the advance to him. In any event, the evidence of Mr Flamer-Smith is that the advance was made to the Defendant[49] and as to outstanding indebtedness.[50] Although the Defendant does dispute the veracity of this evidence,[51] I am of the opinion that having regard to the matters relied upon by Mr Flamer-Smith and in the context of the other evidence before the Court, this evidence should be accepted.

26 Again, the provisions of the Deed of Settlement are relevant, in this instance, the definition of "Loan Deeds". Under this definition, the term "Loan Deeds" means, relevantly, "the Loan Agreements the subject of the Group Proceedings... entered into between... Group Members... and ABL Nominees Pty Ltd, which were subsequently assigned by ABL Nominees to one or more of the BEN Parties" [Plaintiff's emphasis].[52] Again, for the preceding reasons and consistently with Byrne and Pekell, the Defendant as a Group Member cannot contest the assignment of his loan. In any event, the evidence of Mr Flamer-Smith provides details of the assignment and transfer of the loan.[53] Although the Defendant does dispute the veracity of this evidence,[54] I am of the opinion that having regard to the matters relied upon by Mr Flamer-Smith and in the context of the other evidence before the Court, this evidence should be accepted.

27 As the Plaintiff observes, it is not clear what point the Defendant seeks to make of the submission that paragraph [5] of the Statement of Claim which describes the assignment as between GSF and ABL Nominees and as between ABL Nominees and ABL does not plead to the fact that the assignments were made prior to the existence of any debt.[55] The Loan was, however, made and the debt incurred on or about 1 July 2006, and the Loan was assigned on or around 1 November 2006. In any event, as the Plaintiff submits, cl 2.10 of the Loan Sale and Servicing Deed[56] provides for the assignment of future loan rights in addition to those rights existing at the relevant "Cut-Off Date".[57]

28 For the preceding reasons, orders will be made in favour of the Plaintiff that:

(1) the Defendant pay the Plaintiff the amount of $475,541.44 and any further interest that should accrue after 21 June 2018; and

(2) the Defendant pay the Plaintiff's costs on an indemnity basis pursuant to cl 7.1(c) of the Defendant's Loan Deed.

[1] Exhibit SFS-13 to the Affidavit of Stephen Flamer-Smith (1 June 2018).

[2] Writ and Statement of Claim (8 June 2016), [3]; Defence (8 May 2018), [3].

[3] Writ and Statement of Claim (8 June 2016), [4].

[4] Defence (8 May 2018), [4]; Defendant's Outline of Submissions (14 June 2018), [11]-[13].

[5] Writ and Statement of Claim (8 June 2016), [5]; Defence (8 May 2018), [5].

[6] Writ and Statement of Claim (8 June 2016), [6].

[7] Writ and Statement of Claim (8 June 2016), [6](i)-(ii).

[9] Barratt v Rees [2014] VSCA 327, [10]-[18].

[10] Barratt v Rees [2014] VSCA 327, [12].

[11] [1956] VicLawRp 86; [1956] VLR 555; with reference also to O'Brien v O'Brien & Nicholls Pty Ltd [2001] VSC 411, [25].

[12] Roberts v Gippsland Agricultural & Earthmoving Contracting Co Pty Ltd [1956] VicLawRp 86; [1956] VLR 555 at 564; referred to by the Court of Appeal in Barratt v Rees [2014] VSCA 327, [13].

[13] Seachange Management Pty Ltd v Pital Business Pty Ltd [2009] VSCA 139; (2009) 23 VR 396 at 408 [40]; referred to by the Court of Appeal in Barratt v Rees [2014] VSCA 327, [14].

[14] Being the proceedings of which settlement was approved in Clarke (as Trustee of the Clarke Family Trust) v Great Southern Finance Pty Ltd (Receivers and Managers Appointed) (in liquidation) [2014] VSC 516.

[15] Exhibit SFS-40 to the Affidavit of Stephen Flamer-Smith (1 June 2018) ("the Deed of Settlement").

[16] Affidavit of Stephen Flamer-Smith (1 June 2018).

[17] Affidavit of Peter James Freer (6 June 2018).

[18] Plaintiff's Outline of Submissions (18 June 2018), [11]; see also Exhibit SFS-35 to the Affidavit of Stephen Flamer-Smith (1 June 2018), [2].

[19] Affidavit of Stephen Flamer-Smith (1 June 2018), [9]-[23].

[20] Affidavit of Stephen Flamer-Smith (1 June 2018), [11], [18]-[24]; cf Defendant's Outline of Submissions (14 June 2018), [14], [15] where this position is disputed; but having regard to the matters relied upon by Mr Flamer-Smith and in the context of other evidence before the Court, this evidence should be accepted.

[21] Affidavit of Stephen Flamer-Smith (1 June 2018), [25] and [26].

[23] The Deed of Settlement was approved by the Court under s 33V of the Supreme Court Act 1986 in Clarke (as Trustee of the Clarke Family Trust) v Great Southern Finance Pty Ltd (Receivers and Managers Appointed) (in liquidation) [2014] VSC 516.

[25] Clarke (as Trustee of the Clarke Family Trust) v Great Southern Finance Pty Ltd (Receivers and Managers Appointed) (in liquidation) [2014] VSC 516.

[28] [2011] VSC 526; (2011) 253 FLR 240; and on appeal to the Court of Appeal in Woodcroft-Brown v Timbercorp Securities Ltd (in liquidation) [2013] VSCA 284; (2013) 96 ACSR 307 and, in turn, to the High Court in Timbercorp Finance Pty Ltd (in liquidation) v Collins (2016) 259 CLR 212.

[29] See Byrne v Javelin Asset Management Pty Ltd [2016] VSCA 214, [11], [12].

[30] See Byrne v Javelin Asset Management Pty Ltd [2016] VSCA 214, [28].

[31] The BEN Parties are described in the Deed of Settlement as Bendigo and Adelaide Bank Limited and the other companies listed in Schedule 2 to that Deed. The Plaintiff in these proceedings is one of the companies listed in that Schedule.

[32] Byrne v Javelin Asset Management Pty Ltd [2016] VSCA 214, [31], [32], [35], [37].

[33] Pekell Delaire Holdings Pty Ltd v Bendigo and Adelaide Bank Limited [2016] VSC 570, [19].

[34] Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd [2017] VSCA 51; (2017) 118 ACSR 592.

[35] See Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd [2017] VSCA 51; (2017) 118 ACSR 592 at 597 [17], 598 [21].

[36] Timbercorp Finance Pty Ltd (in liquidation) v Collins (2016) 259 CLR 212 at 235-6 [52]-[53] as set out in the judgment of the Court of Appeal in Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd [2017] VSCA 51; (2017) 118 ACSR 592 at 600 [28], with a further reference by the Court of Appeal to Timbercorp Finance Pty Ltd (in liquidation) v Collins (2016) 259 CLR 212 at 254 [141]-[142] (Gordon J).

[37] Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd [2017] VSCA 51; (2017) 118 ACSR 592 at 600 [29].

[38] Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd [2017] VSCA 51; (2017) 118 ACSR 592 at 601-2 [31]-[34].

[39] Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd [2017] VSCA 51; (2017) 118 ACSR 592 at 603 [36]; referring to Byrne v Javelin Asset Management Pty Ltd [2016] VSCA 214, [32], [37].

[40] Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd [2017] VSCA 51; (2017) 118 ACSR 592 at 607-9 [55]-[59].

[41] (2016) 339 ALR 11, 23 [53] (French CJ, Kiefel, Keane, and Nettle JJ).

[42] Supreme Court Act 1986 s 33X(4). The Court may dispense with such notice if satisfied that it is just to do so.

[43] Clarke v GSF [2014] VSC 516, [87]-[132] (Croft J).

[44] Nor did anything in this Court's reasons in Timbercorp indicate that a group proceeding could not be settled on terms extending beyond the common issues. The Court disagreed with the reasons of Croft J in the course of approving the present settlement only 'to the extent' that those reasons suggested that failure to opt out of a group proceeding under pt 4A necessarily gave rise to an estoppel: [2016] VSCA 128 [186]-[187] (Warren CJ, Santamaria and McLeish JJA). On one reading of the relevant passage, the judge did not decide the point on that basis in any event: see Clarke v GSF [2014] VSC 516, [132].

[45] The same observation was made by Gordon J, in the course of approving a proposed settlement of a group proceeding, in Harrison v Sandhurst Trustees Ltd [2011] FCA 541 [26], which was cited with approval by Croft J in his reasons for making the 11 December 2014 orders: Clarke v GSF [2014] VSC 516 [101]. See also Byrne [2016] VSCA 214 [59] (Hansen, Ferguson and McLeish JJA).

[47] See Bendigo and Adelaide Bank Limited v Zipevski [2018] NSWDC 54; Bendigo and Adelaide Bank Limited v Gaedtke [2017] QDC 202; ABL Custodian Services Pty Ltd v Kunz [2016] SADC 145.

[48] Deed of Settlement, cl 1.1; Plaintiff's Outline of Submissions (18 June 2018), [20].

[49] Affidavit of Stephen Flamer-Smith (1 June 2018), [30]-[34].

[50] Affidavit of Stephen Flamer-Smith (1 June 2018), [67]-[69].

[51] Defendant's Outline of Submissions (14 June 2018), [11]-[13], [18].

[52] Deed of Settlement, cl 1.1; Plaintiff's Outline of Submissions (18 June 2018), [23].

[53] Affidavit of Stephen Flamer-Smith (1 June 2018), [35]-[53].

[54] Defendant's Outline of Submissions (14 June 2018), [17], [18].

[55] Defendant's Outline of Submissions (14 June 2018), [17].

[56] Exhibit SFS-21 to the Affidavit of Stephen Flamer-Smith (1 June 2018).

[57] Plaintiff's Outline of Submissions (18 June 2018), [26].

PRACTICE AND PROCEDURE - Deeds and other instruments - Enforcement of deed of settlement - whether summary procedure appropriate - Barratt v Rees [2014] VSCA 327 - Roberts v Gippsland Agricultural & Earthmoving Contracting Co Pty Ltd [1956] VicLawRp 86; [1956] VLR 555 - Seachange Management Pty Ltd v Pital Business Pty Ltd [2009] VSCA 139; (2009) 23 VR 396.

COURTS AND JUDICIAL SYSTEM - Group proceedings - Consequences of being a group member - Clarke (as Trustee of the Clarke Family Trust) v Great Southern Finance Pty Ltd (Receivers and Managers Appointed) (in liquidation) [2014] VSC 516 - Byrne v Javelin Asset Management Pty Ltd [2016] VSCA 214 - Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd (2017) 118 ACSR 592; [2017] VSCA 51 - Timbercorp Finance Pty Ltd (in liq) v Collins (2016) 259 CLR 212.

Plaintiff v Defendant

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