Reasonable Endeavours Pty Ltd v Dennehy

Reasonable Endeavours Pty Ltd v Dennehy - [2002] FCA 1472 - FCA 2002 case summary — Zoe

[10]

6 On 12 December 1997, the respondent made the first payment due under the settlement agreement in the amount of $100,000. The payment was made some two weeks late. The two further payments referred to in the agreement were never made. 7 The respondent asserted that in addition to the 1997 settlement agreement, there was an oral agreement between Mr Briggs and the respondent that shares would be placed by the respondent under the administration of the Asiaciti Trust group of companies (of which the applicant is one) to secure his obligations under the agreement. Furthermore, no dealing in the shares would occur without the consent of Mr Briggs. 8 On 2 December 1997, Asiaciti Corporate Services Pty Ltd of Singapore ("Asiaciti") incorporated Victoria International Holdings Limited ("Victoria International"), a Samoan corporation. The directors of Victoria International were Westco Directors Ltd and Westco Securities Ltd. 9 In June 1998, Asiaciti also arranged the establishment of a superannuation fund in Samoa known as Magellan. The trustee of the fund was to be IRSS Nominees ("IRSS"), a Samoan corporation controlled by Asiaciti. 10 Victoria International and Magellan were established in accordance with instructions given by the respondent. The companies were established for the respondent's benefit. At all material times, there was one share in Victoria International, held by the company itself, on trust for the respondent and the respondent was the only member of Magellan. 11 On 16 December 1997, the respondent sent a facsimile transmission to Mr Briggs, advising Mr Briggs that he would "start transferring securities to (his) control." The letter further advised that 19 December 1997 would be the last day for the payment of the second instalment of $300,000 pursuant to the 1997 settlement agreement. 12 No steps were taken at that time, by the respondent, for securities to be transferred to the control of any company associated with Mr Briggs or to Mr Briggs himself. 13 On 3 September 1998, the respondent wrote to Mr Briggs advising him that securities had begun to be transferred to his office "over the past couple of months" and that 600,000 shares in a company known as "Rystar" would be delivered to him by the end of September. 14 On Sunday 13 September 1998 at 5.11 pm (Vancouver time), the respondent sent a facsimile transmission to Mr Briggs from the office of his Canadian lawyers, Thomas, Rondeau. The transmission consisted of the following: · a cover sheet; · a letter dated 13 September 1998 on the respondent's personal letterhead addressed to Mr Briggs ("the 13 September letter"); and · a letter dated 11 September 1998 on Thomas, Rondeau letterhead addressed to Mr Briggs, enclosing a sale agreement and a draft resolution of the directors of Victoria International ("the 11 September letter").

[14]

"We have today forwarded to you Sale Agreements for shares in Rystar Communications Ltd for execution by Victoria International Holdings Ltd. Also forwarded to you is a Resolution for execution by the aforementioned party. The above documents must be completed and signed in the appropriate location in accord with the memorandum and articles of the company. If the signatory is a designated sole signatory, that also must be confirmed and certified. Upon completion, the documents must be delivered to this office. A fax confirming the Federal Express or DHL waybill must be received by 5:00 pm on Sunday, September 13, 1998. All times referred to above are Vancouver times." 17 The reference to the deadline of 5.00 pm, 13 September, Vancouver time is curious because the facsimile transmission was not sent until 5.11 pm, Vancouver time, on that same day. Clearly, Asiaciti was being requested to act urgently. At 5.11 pm on 13 September, Vancouver time, it would have been about 8.11 am, Monday 14 September in Singapore. 18 The sale agreement and accompanying resolutions were signed on behalf of the directors of Victoria International in Singapore and sent back to Thomas, Rondeau. 19 Mr Briggs was not present in Singapore at the time of receipt of the facsimile transmission from the respondent. Another officer of Asiaciti handled the transactions and attended to the facsimile transmission. There is no satisfactory admissible evidence that anyone at Asiaciti contacted the respondent about his letter dated 13 September 1998. 20 In his oral evidence before the Court, the respondent said that he did not want Victoria International to act on the proposed sale agreement and that he intended to tell Mr Briggs that he should not arrange the sale. The respondent said that he didn't telephone Mr Briggs about this because it was a Sunday. Yet he admitted that it would have been a Monday in Singapore. 21 I do not accept the respondent's evidence that he did not want the shares to be sold. It is inconsistent with his sending of the 11 September letter to Mr Briggs. That letter requested urgent action in relation to the sale. Further, I carefully observed the respondent's demeanour when giving his evidence that he did not want the shares to be sold and I was not convinced as to its truthfulness. 22 There is no reliable, admissible evidence as to what happened to the 600,000 Rystar shares. However, there is no evidence that the applicant benefited in any way from the sale. There is also no evidence that the applicant acted negligently or in breach of any fiduciary duty with respect to the sale. 23 I also do not accept that Mr Briggs or Asiaciti acted in breach of any fiduciary duty owed to the respondent in respect of the sale. The facsimile transmission required urgent action and that action was taken by Asiaciti. If the respondent had not wanted the sale agreement to be transacted he should not have sent the facsimile transmission or, at the very least, he should have said so in his 13 September letter. 24 The better view of the evidence is that the respondent intended the Rystar shares to be sold and so requested Asiaciti to expedite the facilitation of that sale. 25 On 29 May 1998, Mr Rondau wrote to Asiaciti enclosing an agreement by which the respondent purported to transfer 750,000 shares in a Canadian company called Terramin Resources Inc ("Terramin") to IRSS as trustee for Magellan, with the respondent as the beneficiary. 26 On 23 July 1998, Mr Rondau wrote to Asiaciti confirming approval by the Vancouver Stock Exchange of the transfer of the 750,000 Terramin shares and an additional 150,000 shares. 27 No documents were otherwise received by Asiaciti concerning Terramin (apart from the correspondence from Mr Rondau referred to in the two preceding paragraphs). 28 The applicant did not receive any documents concerning Terramin. Nor did it receive shares in Terramin. There is no evidence of any involvement in the transfer of the Terramin shares of the applicant, Mr Briggs, Asiaciti or any company in the Asiaciti group. There is, however, evidence that as at 8 May 1999, Magellan held Terramin shares in trust for the respondent.

[15]

The Supreme Court proceeding 29 On 23 November 2001, Pagone J in the Supreme Court of Victoria, granted the applicant leave to issue a warrant to execute the 1991 judgment; see Dennehy v Reasonable Endeavours Pty Ltd [2001] VSC 447 ("Dennehy"). Such leave was required because more than six years had elapsed since the 1991 judgment took effect. 30 At [4] of his judgment, Pagone J said: "There was no dispute between the parties concerning the quantum of the amount due. The orders of Ormiston, J. on 28 November 1991 were that the defendant pay the sum of $339,719.26 and the plaintiff's costs of and incidental to the proceeding: see Exhibit MJA 1 to Annell's affidavit of 8 May 2001. It was common ground that the defendant had paid the sum of $100,000 on 12 December 1997, and the amount calculated (and not contested) as being due as at 3 May 2001, was $610,348.35…" 31 At [15], his Honour said: "Mr. Bigmore Q.C., who appeared for the defendant with Mr Minahan, submitted that the proper construction of the settlement agreement was as an agreement by the plaintiff to accept the defendant's promises contained therein (partly executed and partly executory) in conditional satisfaction of the debts concerned, rather than an agreement by the plaintiff to accept nothing less than full performance. In my view, that is not the proper construction of the agreement. It is true that the agreement contains promises by the defendant, but in my view, the proper construction of the settlement agreement is that the plaintiff agreed to accept performance of the promises, rather than the mere giving of the promises, in conditional satisfaction of the debts concerned. It was also submitted for the defendant that the settlement agreement was characterisable as an "accord and conditional satisfaction" not as an "accord executory", and that the plaintiff had erroneously submitted that the defendant must establish an "accord and satisfaction" when (so it was said) establishment of an "accord and conditional satisfaction" is sufficient. If this construction of the settlement agreement is accepted for the purposes of argument, the question still left unanswered is what the settlement agreement so construed "is sufficient" for. If the proper construction of the settlement agreement leaves in force the judgment debt, a finding that its proper construction is that it is an "accord and conditional satisfaction" results in the settlement agreement being but one factor to take into account in the exercise of the Court's discretion in deciding whether to grant leave. Whether a settlement agreement properly characterised as an "accord and conditional satisfaction" will be sufficient to prevent leave to issue execution after six years must depend upon all of the circumstances relevant to the "accord and conditional satisfaction". In my view, the circumstances surrounding the performance of the settlement agreement would not justify a conclusion that it would be inequitable or unjust for execution to issue in the circumstances which obtain. The settlement agreement itself has not been performed by the defendant according to its terms. The best that may be said on behalf of the defendant is that some other arrangement was entered into in relation to the holding of securities but his conduct in relation to those securities does not give me confidence that equity or justice is on his side." 32 At [19], Pagone J said: "The parties have given some effect to the arrangement described in that letter. The initial payment was made, albeit late. Some securities owned or held for the benefit of Mr. Dennehy were placed under the administration of companies controlled or associated with Mr. Briggs and the plaintiff: shares in a company called Rystar were placed with Victorian International Holdings Limited ("V.I.H.L.") and shares in a company called Terramin Resources Inc. were placed on trust in a fund known as the Magellan Superannuation Fund ("Magellan"). V.I.H.L. and Magellan were established through Mr. Briggs for Mr. Dennehy as a means of providing either security or comfort for discharge of the obligations to pay the balance of the $500,000 offered in November 1997." 33 Order 3 of the orders made by Pagone J provided: "The Plaintiff is granted leave to issue a warrant of execution of the judgment of Justice Ormiston made 28 November 1991, for the amount of that order less $100,000.00 paid on 12 December 1997."

[17]

· amount of judgment or order - $339,719.26; · interest accrued since date of judgment - $387,355.37; and · less payments made since the judgment - $100,000. 35 The interest amount was claimed pursuant to s 101(1) of the Supreme Court Act 1986 (Vic) ('Supreme Court Act') at applicable rates under the Penalty Interest Rates Act 1983 (Vic) and covered the period up to and including 5 December 2001. 36 By written contentions, counsel for the respondent submitted that the applicant did not have leave to issue a bankruptcy notice claiming more than the judgment amount less $100,000, that is, $239,719.26. It was submitted that, therefore, the bankruptcy notice is invalidated as the $627,074.63 specified in the notice, as the amount due to the applicant, exceeds the amount in fact due under the order of 16 November 2001. Counsel relied on the terms of the order of Pagone J, together with s 41(5) of the Bankruptcy Act. Section 41(5) provides that: "A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the mis-statement." 37 The order of Pagone J did not have the effect contended for by counsel for the respondent in that it did not give leave for a bankruptcy notice of a particular type to be issued. Rather, the order gave leave to the applicant to issue a warrant of execution of the 1991 judgment less the 12 December 1997 payment. 38 Interest on the judgment, as counsel for the applicant submitted, flows as a consequence of the provisions of s 101(1) of the Supreme Court Act. That sub-section relevantly provides that: "Every judgment debt carries interest at the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 from the time the judgment was given…" 39 I reject the contention of the respondent's counsel that a reasonable person in the position of the respondent would have been perplexed by the alleged inconsistency between general leave to execute and specific leave to execute for the amount of the judgment debt less $100,000.

[20]

and, if it is satisfied with the proof of those mattes, may make a sequestration order against the estate of the debtor." 43 I reject the respondent's submissions based on accord and (conditional) satisfaction. They are, in essence, submissions as to the proper construction of the settlement agreement, which were made to, and rejected, by Pagone J. I share his Honour's view and agree with the reasons for that view, which he stated at [15] and ff in Dennehy, that the applicant did not agree to anything less than full performance of the terms of the agreement, but rather, it agreed to accept the performance of the respondent's promises in conditional satisfaction of the debt. 44 Consequently, I agree with the submission put on behalf of the applicant that the 1997 settlement agreement did not constitute an agreement, the execution of which would release the respondent from the obligation under the judgment debt plus statutory interest. In the instant circumstances there was to be no discharge of the debt unless and until the respondent's promise, in particular to make all instalment payments, was performed; see McDermott v Black (1940) 63 CLR 161 at 184-185, per Dixon J. See also Commissioner of Taxation v Hadidi (1994) 51 FCR 453 at 459-460. 45 In my opinion, the 1997 settlement agreement did not contemplate that there would be a release of the judgment debt unless and until all three instalments were paid. 46 It follows from the above that I also necessarily reject the submission that the settlement agreement constitutes an accord and conditional satisfaction, giving the applicant a right of election in default. However, I accept the submission of counsel for the applicant that the action of the applicant in applying to the Supreme Court for the issue of a warrant of execution and to this Court for a sequestration order shows that it has elected to sue on the original obligations under the 1991 judgment, in a clear and unequivocal way. 47 I have no doubt, as a result of the foregoing analysis, that the judgment debt is "still owing".

[22]

Termination in futuro 49 At paras 30 and 31 of their written contentions, counsel for the respondent submitted that: "Further and alternatively, the purported reliance on the original obligation by the applicant amounts to more than mere termination of the Settlement Agreement in futuro since it seeks to revive a right pre-existing the Settlement Agreement rather than merely maintain an action for damages arising out of the alleged repudiation of the Settlement Agreement. The applicant seeks in effect to rescind the Settlement Agreement ab initio or treat it as a nullity (with the possible self serving exception of seeking to treat it as providing some form of acknowledgement). However, it is submitted that it is not an arrangement which can simply be dealt with by means of bringing the obligations to perform to an end since there are on-going incidents, including the absolute releases granted by the terms of the Settlement Agreement and the transfer of shares to, and their subsequent disposal by the applicants agents and/or nominees. As a matter of principle in cases where a party seeks to rescind a contract, in effect, the circumstances must permit restitutio in integrum (Fullers' Theatres Ltd v Musgrove (1923) 31 CLR 524. Carter par [1040]. Further the principle applies in another way, in so far as a party seeking to terminate may not act in a manner inconsistent with termination by seeking to retain benefits accruing pursuant to the agreement in question. Here the applicant and its nominees, the Briggs Group, retain the assets still held and do not account in respect of the Rystar sale. It is no answer to say no worth was received in respect of that sale since that is to say nothing more than that the applicant and the Briggs Group failed to ensure that the asset were not released without authority or payment." 50 I consider that those submissions are misplaced. Indeed they were not developed beyond the written contentions. No additional funds have been paid to the applicant other than the payment of $100,000 on 12 December 1997. The mere placing of securities under the administration of Asiaciti interests does not displace the obligation to pay the $400,000, a figure constituted by the unpaid second and third instalments referred to in the 1997 settlement agreement.

[24]

Overstatement of interest 52 It was submitted on behalf of the respondent that the bankruptcy notice overstates the claim in respect of which the applicant is entitled to issue execution by about five years' worth of interest. That submission is grounded in the provisions of s 5(7) of the Limitation of Actions Act 1958 (Vic) ("the Limitation Act"). 53 Section 5(7) of the Limitation Actprovides that: "Save as otherwise expressly provided an action shall not be brought to recover any arrears of interest in respect of any sum of money whether payable in respect of a specialty, judgment, legacy, mortgage or otherwise, or any damages in respect of such arrears, after the expiration of six years after they became due." 54 Section 3(1) of the Limitation Act defines the term "action" to include "any proceeding in a court of law". Counsel for the applicant submitted that a bankruptcy notice is not a proceeding in a court of law. He referred to the judgment of Lockhart J in Re Maddox; Ex parte the Debtor (1979) 24 ALR 279 at 283-284 to support that submission. Lockhart J held that the issue of a bankruptcy notice by a Registrar is not a step in a proceeding. Similarly, it was contended that the issuing of a bankruptcy notice by the Insolvency and Trustee Service, Australia, on behalf of the Official Receiver in Bankruptcy, is not an "action" for the purposes of the Limitation Act. 55 It was further submitted by counsel for the applicant that the issue of the creditor's petition in the Court is an action as so defined in the Limitation Act, but it is not an action to recover any arrears of interest in respect of a judgment. It is, counsel submitted, an action which seeks the making of sequestration order against the respondent, which may not necessarily result in any arrears of interest in respect of a judgment being recovered. 56 In response, counsel for the respondent contended that the critical question is whether s 5(7) of the Limitation Actdisentitles the applicant to issue execution in respect of part of the interest on the judgment in the applicant's favour. To support the submission, counsel relied upon my observations in Reasonable Endeavours Pty Ltd v Dennehy (2001) 107 FCR 144 at [16] to [20] in the context of a creditor being in a position to issue immediate execution upon a final judgment. 57 The issue addressed in my earlier reasons is not an issue which is relevant to the instant matter. The critical question is whether the bankruptcy notice wrongly states the amount of interest owing. It is said, on the respondent's behalf, that it does so wrongly state because s 5(7) of the Limitation Act only allows a claim to be made with respect to interest on a judgment debt for a period of six years after the judgment. I do not consider that to be a correct statement of the effect of s 5(7) of the Limitation Act. It speaks of "an action" not being "brought". As the bankruptcy notice is not an action, it is not prevented from being "brought" by anything contained in s 5(7). The creditor's petition is not an action of the type referred to in s 5(7), but one that seeks the sequestration of an estate. The role of the Court in hearing such a petition is to determine whether an act of bankruptcy has occurred and not whether arrears of interest can be received; see Re Moss; Ex parte Tour Finance Ltd (1969) 13 FLR 101 at 105 to 106; see also Re Maddox at 284 per Lockhart J. For an illustration of another type of proceeding not affected by s 5(7), see Commonwealth Bank of Australia v Sammut [2000] VSC 374.

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