SUBMISSIONS
41 In written submissions dated 22 March 2019 it was submitted that Touring's covenant to pay a return to Duxton was dependent upon Duxton's performance of its promise to pay its contributions to Touring by means of a deposit into a specified bank account held in Touring's name. Touring contended that Duxton "did not strictly perform, or adhere to, its obligations under the Investor Agreements". It was further submitted that Duxton's demand was founded on an alleged entitlement to contractual damages that did not have the character of a "debt". There could be no relevant "debt", it was submitted, because Duxton had made no payments to Touring so as to enliven Touring's promise to pay Duxton the investor benefits.
42 By its written submissions, Duxton contended that if the payment of its contributions into a bank account in the name of Production constituted a breach of each of the first IA and the second IA, then the breach was not such as to absolve Touring of its promise to pay the agreed returns. It was submitted that by the conduct of its director, Mr Rankine, Touring had affirmed the first IA or the second IA notwithstanding that Duxton had not made its contributions by the method the parties had contracted for.
43 Written submissions in reply were filed on behalf of Touring on 27 May 2019. By those submissions, Touring advanced a different case to that which had been originally put forward. In short, it was alleged that there had been a novation of the first IA and the second IA, such that it was Production and not Touring that was liable to pay the debt referred to in the statutory demand. In oral submissions before the Registrar it was submitted that Mr Rankine had, by [22] of his affidavit, accepted (as a director of Production) that Duxton had a claim against Production and that Touring was not to be regarded as "engaging in some sort of Machiavellian exercise".
44 In its written and oral submissions on this application for review, Touring did not emphasise its case founded on contractual principles of novation, nor was that aspect of its case expressly withdrawn. Counsel confirmed that Touring continued to rely on the written submissions advanced before the Registrar. In addition, to the case founded in novation, counsel submitted that the first IA had been "probably frustrated" and that the conduct of the parties was consistent with there being an "arrangement" between Duxton and Production in respect of the staging of the concerts. The latter submission, as I understood it, was that Touring was not liable to pay the debt whether or not Production was liable pursuant to a novated agreement.
45 It is convenient to deal first with the submission that there was a novation of the first IA and the second IA.
46 As the majority of the High Court said in ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue (NSW) (2012) 245 CLR 338, "A novation, in its simplest sense, refers to a circumstance where a new contract takes the place of the old". The majority continued (at [12]):
… It is not correct to describe novation as involving the succession of a third party to the rights of the purchaser under the original contract. Under the common law such a description comes closer to the effect of a transfer of rights by way of assignment. Nor is it correct to describe a third party undertaking the obligations of the purchaser under the original contract as a novation. The effect of a novation is upon the obligations of both parties to the original, executory, contract. The inquiry in determining whether there has been a novation is whether it has been agreed that a new contract is to be substituted for the old and the obligations of the parties under the old agreement are to be discharged.
47 Rescission of the original contract, their Honours said, is essential to is novation: ALH at [27]. Their Honours continued:
The term is applied to two classes of case: where the parties to a contract make a new contract, with new obligations, impliedly rescinding an existing contract; and, more commonly, to tripartite agreements, where 'the obligation of a third person is by express agreement accepted by one party to an existing contract with the consent of such third person and of the other party to the contract, in lieu of the obligation of such other party, who, by the new contract, is released from his obligation under the original contract.
(footnotes omitted)
48 As Powell J said in Scruples Imports Pty Ltd v Crabtree & Evelyn Pty Ltd (1983) 1 IPR 315 at 320:
Being, in essence, but a contract - albeit, perhaps, a special kind of contract - a novation, to be effective in law, must exhibit the usual phenomena of contract, that is, offer and acceptance, the fact of acceptance being communicated to the offeror, unless communication has been expressly or impliedly dispensed with.
49 See also SVI Systems Pty Ltd v Best & Less Pty Ltd (2001) 187 ALR 302 (Einfeld J).
50 I do not consider the affidavit of Mr Rankine to be sufficient to support a plausible contention founded on novation principles. In other words, the supporting affidavit does not demonstrate, to the requisite degree, that the words and conduct of the parties were such that there existed a tri-party agreement to the effect that Production and not Touring would perform the obligations of the Promoter under either the first IA or the second IA.
51 In accordance with the recitals to reach agreement, it was Touring that had negotiated the performance of the concerts with the relevant artist and it was Touring that had the obligation to stage them. The supporting affidavit does not suggest that the obligation to promote and stage the concerts was in fact performed by Production pursuant to the terms of any novated agreement. Nor is there anything to suggest that Mr Rankine in fact formed any state of mind concerning his own personal contractual obligations as guarantor of Touring's obligations, to the effect that he would guarantee the performance of the obligations by Production instead. Mr Rankine has not deposed to anything said or done by him from which the existence of any such agreement in his personal capacity may be inferred. His supporting affidavit is silent on the question. The submissions advanced on behalf of Touring do not identify the words or conduct said to constitute an offer, or the words or conduct said to constitute communication of the acceptance of any offer sufficient to form a new three or four party agreement.
52 The contention that there was a meeting of minds between those entities and Duxton in my view is an assertion founded solely upon the circumstance that Duxton made its agreed contributions to each concert in part by the deposit of funds into a bank account other than the bank account specified in each agreement. That circumstance may supply evidence of breach, but it is not sufficient to raise a plausible contention that there was a meeting of minds necessary for the formation of a novation agreement, whether by inference or otherwise.
53 It is also relevant to have regard to the written submissions originally filed on Touring's behalf presumably on the instructions of the sole director of both Touring and Production. Those submissions alleged a complete failure by Duxton to perform its obligation to pay contributions to Touring referable to each concert. Nothing is said of the existence of a new and substituted agreement pursuant to which the obligation to pay a return on Duxton's investment fell upon any entity other than Touring. In short, what is said in the principal submissions to be an act of breach is later said in the reply submissions to be an act from which an offer and acceptance necessary for the formation of a novated agreement might arguably be inferred. In my view, these alternative bases for relief are factually inconsistent. Proof of novation of the agreements would require evidence of some actual advertence to the formation of a new and substituted agreement to which Production would be bound but not Touring.
54 As a question of fact, Mr Rankine either formed an intention to bind Production and himself personally to such an agreement or he did not. Whether or not he formed that intention is a question of fact, to be objectively discerned from all of the circumstances. As I have said, it is unclear from the supporting affidavit and submissions which of the parties is said to have made an offer for the formation of a novated agreement, nor is it clear which of the parties is said to have communicated acceptance of any such offer. Mr Rankine does not identify any particular communication by which Duxton is said to have agreed to a novated agreement. The only conduct alleged against Duxton is the payment of money into an account other than the account specified in the agreements. Of itself, that conduct is not sufficient to support a plausible contention that there was a novation of the first IA and the second IA.
55 I now turn to consider whether the debt referred to in the statutory demand is a debt that is presently payable to Duxton by Touring.
56 Touring's submission that the asserted obligation to pay upon which the statutory demand is founded does not have the necessary character of "debt" should be rejected. A debt is a liquidated sum in money presently due, owing and payable by one person, called "the debtor" to another person called "the creditor": Rothwells Ltd v Nommack (No 100) Pty Ltd (1988) 13 ACLR 421 McPherson J (at 422).
57 In the present case, a "debt" arises because there is a contractual promise made by Touring to pay Duxton a sum the amount of which is ascertainable by reference to the terms of the contract. On the facts, the amount owing has been calculated by Touring in accordance with a contractual term requiring that the calculation be performed. As I have said, Touring has not disputed that the amount specified in the statutory demand is equivalent to the total amount that would in fact be payable under the first IA and the second IA if Touring presently has a contractual obligation to make good on its promise to pay.
58 As for the case founded on Duxton's "non-performance", the Court proceeds on the basis that Duxton did not observe the terms of either the first IA or the second IA in respect of the manner in which it promised to make its financial contributions toward each of the concerts. Rather than deposit funds into a bank account in the name of Touring, it deposited funds into a bank account in the name of Production. There can be no genuine dispute that Duxton did not comply with its obligations under the first IA and the second IA in that regard. But it does not follow that there exists a genuine dispute as to the existence of the debt specified in the statutory demand. On that enquiry, additional questions arise.
59 Before proceeding further, it is necessary to comment on the sums referred to in submissions as the "Bon Jovi roll over" or the "Shania Twain roll over". Evidence in relation to those sums is given by Ms Gricks. In his affidavit, no reference was made by Mr Rankine to the setting off of those sums against the contributions otherwise payable by Duxton under the agreements.
60 Having regard to s 459G(3) of the Corporations Act, I do not consider it to be available to Touring to assert a genuine dispute about the existence of the debts by reference to the fact or circumstances of the roll overs. Nonetheless, in oral submissions on this application for review, the existence of the roll overs was relied upon by Touring as evidence that it was Production and not Touring that was liable to perform the obligations of the "Promoter" under the agreements or otherwise to the effect that privity in the agreements was uncertain. Even if that argument were available to be made by reference to the supporting affidavit, I would not accept it. There can be no real dispute that by his email communications in connection with the applied figures, Mr Rankine acted both in his capacity as the sole director of Production and also in his capacity as the sole director of Touring. Similarly, it may be accepted that Ms Gricks, in respect of the Shania Twain roll over, acted on behalf of and with the authority of the Trust (to which a payment was owed). As I have said, Mr Rankine's supporting affidavit does not itself depose to any facts which these roll overs might be characterised. Nothing is said by Mr Rankine that would enable the Court to consider the roll over arrangements as anything other than an agreement by Touring (in writing and evidenced by the email communications) to receive Duxton's contribution other than by means of a deposit of money into Touring's bank account. Duxton and the Trust agreed to have money otherwise payable to it by Production applied to reduce the money payable by it to Duxton under the first IA and the second IA. The circumstance that that agreement necessarily required the consent of Production, Touring and the Trust does not of itself support a finding that Production was a party to either the first IA or the second IA. Nor does it plausibly support a finding that Touring was not liable to perform its obligation to pay the returns to Duxton. As I have said, the facts upon which Touring relied in its affidavit supporting its application to set aside the statutory demand did not include the fact of the application of the roll over sums. The "payment in part by Duxton of its contribution by that means was not asserted by Mr Rankine to constitute a breach of contract (whether novated or otherwise).
61 I return to the critical fact upon which Touring relied: the deposit by Duxton of payments into an account other than that specified in the agreements. Those deposits may evidence a breach, but the breach does not, of itself, define the legal relations between the parties from the time that the breach occurred. Whether or not the breach was such as to absolve Touring of its obligation to pay a return to Duxton is to be answered by reference to ordinary contractual principles.
62 For the purposes of what follows it will be assumed that non-performance by Duxton of its obligation to pay its contributions into a specified bank account was a breach giving rise to a right in Touring to terminate the first IA and the second IA. That right of termination is inconsistent with Touring's concurrent right to keep the agreements on foot. It was for Touring to elect between those inconsistent rights. As Gavan Duffy CJ and Starke J said in Wendt v Bruce (1931) 45 CLR 245 (at 253):
... a man who has his option whether he will affirm a particular act or contract must elect either to affirm or to disaffirm it altogether; he cannot adopt that part which is for his own benefit, and reject the rest: he cannot blow hot and cold. And the election once made is finally made.
63 See also Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 641 (Stephen J, McTiernan ACJ agreeing), 655 - 656 (Mason J).
64 In my view the email communications of Mr Rankine following the deposit by Duxton of funds into the Production bank account are entirely referable to the first IA and the second IA remaining on foot. The emails constitute express communication by Touring of its affirmation of the agreements notwithstanding Duxton's failure to strictly comply with the terms specifying the method of paying the contributions. Of particular importance is Mr Rankine's confirmation to Ms Gricks, following initial payments, that certain balances remained owing by Duxton in respect of the Supertramp concert and the Prodigy concert. If the initial payments made by Touring were not regarded as part-performance then Mr Rankine's confirmation that certain balances remained owing simply cannot be explained. Moreover, the concerts were in fact staged and there is no suggestion by Touring that the funds to finance each concert did not include the funds invested by Duxton. As has already been observed, the reconciliation of profits and losses and the reporting of the amount of money payable to Duxton following the staging of the concerts is consistent with the first IA and the second IA remaining on foot as an agreement binding on Touring.
65 Expressed another way, the communications show that Touring accepted Duxton's contributions as having been made in due performance of Duxton's obligation to pay them, notwithstanding that the payments were made by a method other than that which was contractually agreed. To the extent that express written agreement from Touring was required for payments to be made by alternative means, the express agreement is to be found in the affirmatory emails to which I have referred.
66 For the same reason, I would reject the contention that there is a genuine dispute as to whether Duxton's contributions were paid pursuant to an "arrangement" with Duxton, thus leaving the first IA and the second IA wholly unperformed by the original parties to them but terminated by neither of them. I confess to having some difficulty comprehending what the legal nature of the alternative arrangement might be and how its existence might be reconciled with the other legal arguments advanced on Touring's behalf. When pressed on the issue, Counsel for Touring submitted that the first IA and the second IA were, on this alternative scenario, "probably frustrated" but did not identify the frustrating event. I consider this alternative scenario to add little of substance to Touring's principal submissions, which I reject.
67 I conclude that the case founded on non-performance does not arise to the level of a plausible contention requiring investigation and so reject this aspect of Touring's case.