Reid v Interarch Australia Pty Limited

REASONS FOR JUDGMENT 1 These proceedings were instituted by an application filed on 17 September 1998. It is not necessary for consideration to be given to the position of the first applicant, because it is proposed that the proceedings should be dismissed so far as claims for relief by the first applicant are concerned. 2 The Statement of Claim alleges that the second applicant retained the first respondent to give advice, and to render certain services, in connection with the establishment and operation of a pharmaceutical wholesaling and dispensing business at Wetherill Park in New South Wales, and at Dandenong in Victoria. The services included the obtaining of all necessary council approvals to enable the establishment and operation of the businesses in question. 3 The applicant's case is that the first respondent represented that the requisite council approvals had been obtained, when in truth they had not. On the faith of those representations, the second applicant claims to have incurred costs and to have expended monies in relation to the premises at Wetherill Park and Dandenong, and thus to have suffered loss. 4 The Statement of Claim pleads: - against the first respondent, a claim for damages for misleading and deceptive conduct under ss 52 and 82 of the Trade Practices Act 1974 (Cth) ("the Act"), a claim for damages for breach of express terms of the contract of retainer, and a claim for damages for breach of an implied obligation to exercise reasonable care and skill in the performance of the retainer; - against the second respondent, a claim for damages under ss 75B and 82 of the Act on the basis that the second respondent was a person involved in the misleading and deceptive conduct of the first respondent. 5 An expert retained by the second applicant assessed its loss, on certain assumptions, at $505,385, and, on other assumptions, at $744,687. 6 On 22 April 1999 Jirsch Sutherland was appointed trustee of the bankrupt estate of the second respondent. In a report to creditors on 4 April 2000, the trustee said that he had been advised that the second applicant's claim is not provable in the bankruptcy. If the claim is successful, the debt will constitute, so it was said, a post bankruptcy debt, and the second applicant will be capable of attempting recovery from the bankrupt, post bankruptcy. On that basis, the trustee projected that the claims of the secured creditors, and all provable debts would be paid in full, with a surplus available for return to the bankrupt. 7 On 28 April 2000 the second applicant lodged a motion seeking summary judgment, after the respondents had failed to file evidence in accordance with the timetable which I had directed. The motion was adjourned, and on 11 August 2000 a Deed of Settlement was entered into between the first and second applicants and the first and second respondents. 8 The Deed recited various matters in relation to the proceedings, and concluded with a recital, that without admission by any party, the parties had agreed to resolve their disputes, and these proceedings, on the terms set out in the Deed. 9 The Deed provides that in return for releases, the first respondent and the second respondent jointly and severally agree to pay to the second applicant the sum of $150,000 by three instalments of $50,000 on specified dates. Clause 6 of the Deed provides that in the event that payment of any of the instalments is not made by the specified date, the releases shall be void, and the full amount claimed by the second applicant, as evidenced in its expert's report, being the amount of $500,000, together with interest and costs, shall become immediately jointly and severally due and payable by the first respondent and by the second respondent. Clause 6(c) of the Deed provides that the first and second respondents: "... shall not take any steps to defend and will consent to summary judgment being entered against each of them for the amount of $500,000 ..., together with interest and costs, in respect of the Proceedings." 10 The respondents failed to pay the first of the instalments referred to in the Deed by the specified date or at all, and on 1 September 2000 the second applicant applied by Notice of Motion in these proceedings, for an order that judgment be entered against each of the first respondent and the second respondent in favour of the second applicant in the amount of $500,000 together with interest pursuant to s 52 of the Federal Court of Australia Act 1976 (Cth). The motion also sought dismissal of the summary judgment application lodged on 28 April 2000, and dismissal of the proceedings insofar as claims for relief made by the first applicant are concerned. 11 By Notice of Motion dated 7 September 2000 the first and second respondents sought orders that the proceedings be stayed, and alternatively an order that the Deed of Settlement dated 11 August 2000 between the parties be set aside. 12 The respondents contend that the second applicant's claim against the second respondent is a debt provable in his bankruptcy. If that is so, then: - from and after 22 April 1999 the second applicant was not entitled to take a fresh step in these proceedings, without the leave of the Court (s 58(3) Bankruptcy Act 1958 (Cth) ("the Act")). Such leave has not been given, and the second applicant does not seek it; - the power to make a compromise with a person claiming to be a creditor in respect of a debt provable in the bankruptcy resides with the trustee (s 134(1)(f)), hence the settlement deed was ineffective, at least so far as it purported to compromise the claim made by the second applicant against the second respondent: Re Alston (1899) 16 WN (NSW) 22. 13 The respondents also contend that whilst the Court has power to entertain a motion in these proceedings for the enforcement of a settlement agreement reached in relation to the proceedings (Darling Downs Investments Pty Limited v Ellwood (1988) 18 FCR 510), the Court should, in the exercise of its discretion, decline to entertain the applicant's motion, because it raises issues foreign to those raised in the these proceedings, namely issues associated with the validity of the Deed of Settlement, and the circumstances of the second respondent's bankruptcy: see Phillips v Walsh (1990) 20 NSWLR 206. 14 Mr Crouch, a representative of the trustee, gave evidence to the effect that the trustee has no objection to orders being made in terms of par 6(c) of the Deed of Settlement. The trustee is waiting on a clearance from the Tax Office to complete his administration. Subject to the receipt of that clearance, and to no new matters emerging, the expectation is that on payment of the secured creditor the bankruptcy will be annulled pursuant to s 153A of the Act. That section provides that if the trustee is satisfied that all the bankrupt's debts have been paid in full, the bankruptcy is annulled, by force of the sub-section, on the date on which the last such payment was made. At the risk of stating the obvious, the Trustee is not a party to these proceedings.