Rick v May [2017] NSWSC 769 | Case summary

"Debt or liquidated claim"

The phrase "debt or liquidated claim" in UCPR r 16.6 is a modernised version of the older phrase "debt or liquidated demand". The phrase has a long history. In Alexander v Ajax Insurance Co Ltd [1956] VLR 436, Sholl J traced that history back to the English Common Law Procedure Act 1852 (15 and 16 Vict, Ch 76). His Honour showed that the phrase had been used in the 1851 report of the Commissioners which preceded that Act and went on to undertake a comprehensive review of the pre-1851 law to ascertain its meaning.
Sholl J concluded at 445: Perhaps the best statement which can be attempted of the meaning of the expression "debt or liquidated demand (in money)", as used in 1851, is that it covered any claim:- (a) for which the action of debt would lie; (b) for which an indebitatus (or "common") count would lie -including those cases formerly covered by the quantum meruit or quantum valebat counts, notwithstanding that the only agreement implied between the parties in such cases was for payment at a "reasonable" rate; (c) for which covenant, or special assumpsit, would lie, provided that the claim was for a specific amount, not involving in the calculation thereof elements the selection whereof was dependent on the opinion of a jury.
In Spain v Union Steamship Co of New Zealand Ltd (1923) 32 CLR 138, the plaintiff sued the defendant in the District Court of New South Wales for the sum of £63 18s, representing the costs of solicitors who appeared for him in an inquiry in the Court of Marine Inquiry in New South Wales into the cause of the wreck of a ship of which he was the master, and in a preliminary inquiry held by the Superintendent of Navigation into the same matter. The claim was based on a clause of an award under which the defendant as employer was required to "pay any reasonable expenses of an employee incurred in the service or in the interests of the employer". The award expressly provided that this provision should apply to "inquiries as to casualties or as to the conduct of employees and to proceedings for any alleged breach of any maritime or port or other regulations unless the inquiry or the proceeding be due to the personal misconduct or negligence of the employee".
Knox CJ and Starke J said at 142: Process was issued under the provisions of the District Courts Act 1912, sec. 64, regulating actions for debts and liquidated demands in money; and it was said that this procedure was inappropriate because the plaintiff's right was to recover "reasonable expenses" and not a sum certain or any liquidated amount. The objection is untenable …. As is well said by Mr. Odgers (Pleading and Practice, 5th ed., p. 41), "whenever the amount to which the plaintiff is entitled ... can be ascertained by calculation or fixed by any scale of charges, or other positive data, it is ... liquidated".
Isaacs and Rich JJ said at 145: The learned District Court Judge properly overruled the objection. It is really not arguable. If the appellant is entitled to anything, it is to a sum payable instanter before action and in law ascertained.
Later their Honours said at 153-4: If, in the event, it does not appear that the officer has been adjudged guilty by the appropriate tribunal of personal misconduct or negligence, he has an instant right to payment of whatever expenses he has incurred, and to the extent that they are reasonable in amount. The question of reasonableness of amount, as it could not be considered by the tribunal, is of course an open question, just as a reasonable sum for work and labour or for goods would be; but the right to instant payment of the reasonable sum is the same in both cases.
Higgins J said at 158: I concur with the opinion that the claim is for a "debt or liquidated demand" within the meaning of sec. 64 of the District Courts Act 1912; and that the learned District Court Judge rightly overruled this objection.
Mr Rick's principal pleaded claim in relation to the District Court proceedings is for a contractual indemnity. He pleads a claim for contribution as well, but his counsel accepted that, having regard to gaps in Mr Rick's pleaded case, he could not rely on the contribution claim as an alternative justification for entering default judgment.
Mr Rick's claim is relevantly pleaded as follows: 7. Rick on about 9 April 2015 executed on BDC's behalf a Call Option Agreement with Bridgehill (Milsons Point) Pty Ltd, whereby Bridgehill (Milsons Point) Pty Ltd granted to BDC a call option over the real property situate at 52 Alfred Street, Milsons Point. 8. By an indemnity agreement made in writing on 9 April 2015, May agreed that he would indemnify and release Rick from any or all obligations in relation to the Call Option Agreement fee of $250,000, concerning BDC's contemplated acquisition of property at 52 and 68 Alfred Street, Milsons Point, New South Wales. Particulars Email from May to Rick, dated 9 April 2015. … 11. On 23 September 2015, Sydney International Property Developments Pty Limited ('SIPD') and Ross Leslie Norton ('Norton') brought an action against Crowe Horwath, BDC, Fornasaro and Rick in the District Court of New South Wales (proceedings 2015/278713) to recover the sum of $275,000.00, which SIPD and Norton alleged was owing to them by Crowe Horwath, BDC, Fornasaro and Rick ('the SIPD proceedings'). 12. By affidavit sworn by him on 3 May 2016 in the SIPD proceedings, May admitted that the matters claimed by SIPD and Norton in the SIPD proceedings "relate[d] to matters that [May] had dealt with [SIPD and Norton] in a range of property developments that [May] was considering on account of other parties that [May had] deal[t] with prior to the incorporation of BDC and in [May's] own right." 13. In the circumstances, the admission set out in the preceding paragraph constituted an agreement by May that he would, in relation to the matters claimed against Rick in the SIPD proceedings, indemnify and save harmless Rick against any of the loss or damage incurred by Rick as a result of the SIPD proceedings. 14A By reason of the matters pleaded in paragraph 13, above, Rick did not file a defence in the SIPD proceedings. 14B On 6 April 2016, default judgment was entered against Rick for damages and costs, with damages to be assessed. 14C On 23 June 2016, Rick consented to judgment in favour of SIPD and Norton in the total sum of $355,000.00 inclusive of SIPD and Norton's costs. 15. In breach of the agreements and/or matters pleaded in paragraphs 8 and 12, above, May has not indemnified and saved harmless Rick against any of the loss or damage incurred by Rick as a result of the SIPD proceedings. 16. In consequence, Rick has been obliged to pay, and has paid, the judgment sum, the costs of SIPD and Norton, and Rick's own costs and expenses in and about defending the proceedings. Particulars i. Judgment against SIPD and Norton in the sum of $275,000.00; ii, SIPD's costs in the amount of $70,000.00; iii. SIPD and Norton's interest, agreed in the amount of $10,000.00; iv. Rick's legal costs, in the amount of $18,000.00.
As pleaded, Mr Rick's claim for an indemnity involves two stages. The first stage is the indemnity agreement pleaded in paragraph 8. The email said to constitute the agreement was not in evidence on this application. All the Court has is the summary of the alleged agreement as pleaded, namely an indemnity for Mr Rick against any or all "obligations in relation to the Call Option Agreement fee of $250,000".
The second stage is the "admission" in Mr May's affidavit of 3 May 2016 in the District Court proceedings. Again, the affidavit was not in evidence on this application. All the Court has is a purported quote from it and the allegation that the "admission" constituted an agreement to indemnify Mr Rick against "any of the loss or damage incurred by Rick as a result of" the District Court proceedings.
Counsel for Mr Rick did not contend the agreement pleaded in paragraph 8 was itself sufficient to establish a right to indemnity against the liabilities and expenses claimed; counsel presented the application on the basis that the second agreement pleaded as arising from the so called "admission" in Mr May's affidavit was necessary to establish the indemnity. Counsel characterised that second agreement as a variation of the first. This means that the variation must itself satisfy all of the requirements for a valid contract: GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 at 63 [226].
In my opinion, the Amended Statement of Claim does not adequately plead the contractual basis for the claim now made. The pleading does not assert that the "admission" was made with the intention of creating legal relations or what the consideration for the alleged promise contained in the "admission" was. In many circumstances, the context would be such as to allow the Court to conclude that there was an intention to create legal relations. However, I do not think that the filing and swearing of an affidavit in proceedings would necessarily give rise to that conclusion. A person swearing an affidavit, even if a party, is giving evidence as a witness and is not usually concerned to undertake legal obligations owed to the other party to the proceedings, and still less a third party.
Nor in my opinion do the facts alleged establish that the alleged promise in the "admission" was supported by consideration. In Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424 at 456-7, the High Court said: In cases of this class it is necessary, in order that a contract may be established, that it should be made to appear that the statement or announcement which is relied on as a promise was really offered as consideration for the doing of the act, and that the act was really done in consideration of a potential promise inherent in the statement or announcement. Between the statement or announcement, which is put forward as an offer capable of acceptance by the doing of an act, and the act which is put forward as the executed consideration for the alleged promise, there must subsist, so to speak, the relation of a quid pro quo.
The High Court was speaking of an alleged "unilateral" contract but the requirement of consideration is not limited to such cases. Here, there is no pleaded quid pro quo in the form of an executed consideration for the agreement allegedly constituted by the "admission".
Moreover, I do not see how the "admission" in the terms pleaded in paragraph 12 necessarily constitutes an agreement to indemnify Mr Rick against the costs of the District Court proceedings. The "admission" says nothing about the proceedings at all but is merely directed towards the general nature of activities undertaken by Mr May and Mr Rick. I do not see the "admission" as amounting to a promise to meet the cost of the proceedings at all.
There is a further question as to whether the claim is established merely as a matter of calculation from the pleaded facts. In Spain, the indemnity was specifically directed towards costs incurred in legal proceedings. This was in the context of an employment relationship where, having regard to the nature of the employment, involvement in such proceedings might reasonably be expected. In the present case, the formulation of the indemnity is much more general. If there is any doubt as to its meaning, it is to be read down: Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424 at 452 [67]-[68].
The Amended Statement of Claim does not say that Mr Rick was a party to the Call Option Agreement, whether as guarantor or otherwise. It contains no detail as to the basis on which Mr Rick was sued in the District Court. Furthermore, it appears from the pleading that default judgment was given against Mr Rick with interest and costs even before the "admission" was made. It is far from clear what link there was between the subject matter of the proceedings, and the liabilities allegedly incurred, on the one hand and the subject matter of the alleged indemnity and "admission" on the other hand.
Even if I had been persuaded that the alleged admission gave rise to some form of contractual promise, I would not have been satisfied that, on the form of the pleading, the sums claimed could be seen as following merely as a matter of calculation from that promise.
The plaintiff's case is not assisted by the affidavits filed in support. They contain a bare assertion of the quantum of the debt without any detail as to how the debt allegedly arose.
I conclude that the indemnity aspect of the claim does not comply with UCPR r 16.6. Failure to deny the Amended Statement of Claim does not amount to admissions which establish the existence of the debt claimed.
The remuneration claim is pleaded as follows: 19. … May has also neglected or refused to pay to Rick an agreed monthly amount of $10,000.00, plus superannuation benefits at the rate of 9.5% per annum.
In my opinion, the pleading of the remuneration claim is also inadequate to establish a "liquidated claim or debt" flowing merely as a matter of calculation from pleaded facts. In the first place, BDC would usually be responsible for remuneration of Mr Rick as its director and secretary. I do not read paragraph 19 of the Amended Statement of Claim as clearly and explicitly pleading an undertaking by Mr May, supported by consideration, to be personally liable for such remuneration.
Nor does the Amended Statement of Claim even plead that Mr Rick served as director and secretary for any particular period. An affidavit of Mr Glover, Mr Rick's solicitor in these proceedings, under the heading "Claim for unpaid salary" calculates the salary as covering "April 2015 to March 2016". This is said to amount to $110,000.00. However, the fact (if there was a fact) that Mr Rick served for this period is not something which would necessarily be in Mr Glover's personal knowledge, and in this regard the affidavit does not comply with UCPR r 16.6: see Arnold v Forsythe at [88(iii)]. Accordingly, the affidavit cannot fill the gap in the Amended Statement of Claim in this regard.
It follows that the remuneration claim also fails to comply with the requirements of UCPR r 16.6.

Rick v May

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