Beaman v Higson

1. [1]

   In 2017 Local Court proceedings which Mr Higson had brought against Mr Beaman after he had resigned as a director of Central Coast Party Charter Pty Ltd, were settled. They had both been shareholders and directors of the company, together with Mr Abbott, as well as being involved in a partnership. Those proceedings were concerned with Mr Higson’s recovery of $42,271.80 which he claimed Mr Beaman had promised to pay him, on his resignation as a director in 2016.

2. [2]

   Those proceedings were settled with Mr Higson and Mr Beaman executing a deed of settlement containing terms which they negotiated with the assistance of their legal representatives. It provided in short that Mr Beaman would pay Mr Higson $40,618.00 and refinance partnership borrowings which Mr Higson had guaranteed; that Mr Higson would transfer his share in the company to Mr Beaman and forfeit his interest in the company and partnership; that he would also release Mr Beaman from other claims and not disparage him, the company or partnership.

3. [3]

   Consent orders were made in the Local Court, but Mr Beaman did not make the payment and Mr Higson did not transfer his share. Mr Higson pursued payment and eventually took further proceedings in the Local Court, to recover the agreed sum. Mr Beaman resisted his claim on the basis that they had later entered a further agreement under which Mr Higson was to take over the company, a defence which Price LCM rejected: Higson v Beaman (Local Court (NSW) 28 March 2021 unrep).

4. [4]

   Her Honour gave judgment for Mr Higson, ordering Mr Beaman to pay him $40,618.00, having concluded that Mr Higson was entitled to terminate their contract for non-performance and to be put in the same situation as if the contingent provision of the deed on which the issues lying between the parties turned, had been performed, applying Wenham & Anor b Ella (1972) 127 CLR 454 at 471; [1972] HCA 43 (1972), In that case, by the time the proceedings were commenced, it had become impossible for shares in a property the subject of the agreement in issue to be transferred, with the result that specific performance could not be ordered but, it was concluded, damages for breach of contract could be awarded.

5. [5]

   Those orders reflected her Honour’s conclusions on the disputed construction of the deed and her rejection of Mr Beaman’s defence, that the deed had been overtaken by a later agreement. The latter part of her Honour’s decision is not challenged on this appeal.

6. [6]

   To advance his appeal Mr Beaman not only submitted that her Honour erred on the construction of the deed, which it was said the appeal sank or swam on, the parties having joined issue over what a commercial construction of the deed was, but also sought to advance arguments which he had not raised in the Local Court, to establish that Mr Higson was not entitled to the orders made.

7. [7]

   What is now in issue is whether:

   1. (1)

      her Honour erred in construing the deed, which it was common ground while short, was in relevant respects ambiguous; and

   2. (2)

      Mr Beaman seeks impermissibly to advance matters on appeal which were not argued in the Local Court, which raise issues about which Mr Higson would have led evidence, had they there been advanced.

Were impermissible matters sought to be raised on appeal?

1. [8]

   I am satisfied that the new defence which Mr Beaman sought to advance on appeal did not turn only on the construction of the deed.

2. [9]

   It was a defence which he could have advanced at trial, by way of pleading or evidence, but he did not. Having advanced this aspect of his case only on appeal, it must be accepted that Mr Higson has been denied the opportunity he was entitled to receive below, to meet the arguments Mr Beaman sought to advance by evidence.

3. [10]

   On appeal Mr Beaman submitted that by the time of the Local Court hearing the company had been deregistered, albeit accepting that there was no evidence about this. Accordingly, Mr Higson could not then have transferred his share, which under the deed he ought to have transferred to Mr Beaman on or before 17 December 2017. In the result the orders made in the Local Court had unjustly enriched Mr Higson.

4. [11]

   Further, on one view a “more fair and commercially sensible outcome” would have been orders for the payment of the money and for the transfer of the share, but by 2020 the obligations in the deed were not performable. When the deed was construed as a whole, those obligations were performable on or before 21 December 2017, with the result when they were not performed, only the other obligations provided by the deed continued, such as the mutual releases and non-disparagement clause.

5. [12]

   On the proper construction of the deed Mr Higson had been obliged to transfer his share on or before 21 December 17, irrespective of whether Mr Beaman paid him. If he was not paid, Mr Higson’s remedy would have been to recover the share, or if Mr Beaman had obtained finance, to enforce the payment.

6. [13]

   Orally, it was accepted that there was no evidence of the deregistration and that in the Local Court it had not been argued that Mr Higson was in breach of his obligation to transfer his share to Mr Beaman, or unable to do so. Nor was there a submission that if Mr Higson was correct in his construction of the deed, orders that he should transfer his share to Mr Beaman had to be made.

7. [14]

   Mr Higson’s case was that the arguments about the transfer of his share impermissibly sought to raise a defence not relied on in the Local Court, contrary to Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438 and University of Wollongong v Metwally (No 2) [1985] HCA 258 59 ALJR 481 at 483.

8. [15]

   The issue that Mr Higson could not transfer his share to Mr Beaman was neither pleaded in his defence, nor dealt with in the evidence. Thus, what was observed in University of Wollongong v Metwally (No 2) at 483 applied:

9. [16]

   Ordinarily parties are thus bound by their pleadings and the cases which they pursue at first instance, which may have gone beyond their pleadings: O’Brien v Komesaroff (1982) 150 CLR 310; [1982] HCA 33 at [20]. It is when a question of law is raised for the first time on appeal on the construction of a document, or on facts either admitted or proved beyond controversy, that the question may be argued: at [21].

10. [17]

    Mr Higson contended that this does not apply to mixed questions of fact and law, such as those involved in whether he was in breach of his obligations under the deed, or otherwise not entitled to damages, because he failed, or was not in a position to transfer his share to Mr Beaman.

11. [18]

    In written submissions in reply Mr Beaman contended that it was not he who was in breach of his obligations under the deed, but Mr Higson.

12. [19]

    Mr Beaman also advanced a construction of the deed that Mr Higson was not obliged to transfer the share.

13. [20]

    The cases advanced in the Local Court rested on the parties’ pleadings, the evidence and arguments advanced.

14. [21]

    In the Local Court Mr Higson had pleaded:

15. [22]

    The pleaded defence was:

16. [23]

    There was no issue that Mr Beaman had never paid Mr Higson the agreed amount; that Mr Higson had never transferred his share to Mr Beaman; that he had pursued Mr Beaman for payment; and that the parties had discussed entering a further agreement.

17. [24]

    In his affidavit Mr Higson explained the email, letter of demand and communications he had pursued, seeking payment from Mr Beaman, who denied being liable to make the payment under the deed, with the result the commencement of the proceedings.

18. [25]

    In cross examination Mr Higson was asked:

19. [26]

    It was not put to Mr Higson that the company had been deregistered, or that he was unable to transfer his share to Mr Beaman. Nor were any arguments advanced about this.

20. [27]

    That is explained by the evidence Mr Beaman led. In his February 2020 affidavit Mr Beaman said that it was a condition of the deed that Mr Higson transfer his share on or before 21 December 2017; he was not aware of any attempt to comply with clause 5 of the deed; and that Mr Higson remained a shareholder of the company, annexing relevant ASIC records, They showed that strike off action was in progress; Mr Beaman was the only director; he, Mr Higson and Mr Abbott each still held one share; notices of proposed deregistration had twice been issued in 2018 and January 2020, but not that it had been deregistered.

21. [28]

    Mr Beaman also there said that Mr Higson had continued to be involved in the business after the deed was executed and that in February 2018 they had negotiated an agreement that he would transfer his share to Mr Higson.

22. [29]

    Mr Beaman was cross examined about this claimed post deed agreement, which he denied that he had fabricated, perceiving the weaknesses in his case. He was not asked about the deregistration of the company, about which there was no evidence.

23. [30]

    It follows that on the evidence in the Local Court, Mr Higson still held his share in the company and there was no evidence that it had been deregistered.

24. [31]

    In the Local Court there was no issue between the parties about Mr Higson’s ability to transfer his share, the deregistration of the company, or that the orders sought would unjustly enrich Mr Higson.

25. [32]

    Mr Higson’s case was that the deed was enforceable. While it contained provisions to enable Mr Beaman to obtain finance, it contained protections to ensure that he was paid, after which he was to transfer his share. He was thus entitled to bring the proceedings and to enforce the payment which Mr Beaman had failed to make.

26. [33]

    Mr Beaman’s case was that the deed was conditional, Mr Higson’s payment being subject to him obtaining finance and a breach of the obligation to seek finance had not been pleaded.

27. [34]

    Mr Beaman argued that Mr Higson’s case ignored the contingent precondition to the making of the payment, the obtaining of finance, for which no time frame was stipulated. It followed that finance not having been obtained, Mr Beaman had no obligation to pay Mr Higson and thus the deed was not enforceable.

28. [35]

    Mr Beaman advanced two possible constructions of the deed, contending that the proper construction was that he not having obtained finance, the deed was unenforceable and Mr Higson had no cause of action against him. In any event, the deed had been superseded by a later agreement.

29. [36]

    In reply in the Local Court it was explained for Mr Higson that on his case, the deed had been amended in cl 6 to protect him, in case Mr Beaman did not obtain the finance provided for in cl 2, to ensure that he would still be paid what he was owed.

30. [37]

    To that submission Mr Beaman was given the opportunity to respond, submitting that if the deed were read in the way contended for by Mr Higson, cl 6 would be found to be void for uncertainty, so that it had to be removed. That was not necessary, however, because a perfectly reasonable construction of the deed was that if Mr Beaman was unable to obtain finance, the debt did not remain due or payable.

31. [38]

    It follows that in the Local Court there was also no issue between the parties about the consequences of Mr Higson having failed to transfer his share.

32. [39]

    In these circumstances I am satisfied that it must be accepted that Mr Beaman is not entitled to rely on the new defence he sought to advance on appeal.

33. [40]

    First, there is no question that this new defence was not relied on at first instance and that it turns not only on the construction of the deed, but also on factual matters not addressed in the evidence, because the defence was not then raised or relied on by Mr Beaman. To the contrary, it was inconsistent with the case he advanced.

34. [41]

    Further, the defence is also inconsistent with the evidence which Mr Beaman led and relied on, ASIC records which showed that Mr Higson then remained a shareholder of the company, which had not been deregistered.

35. [42]

    When dealing with Mr Beaman’s claim that a further agreement had been entered after the deed was executed, her Honour explained why she concluded that no such agreement had been reached, despite the evidence about the further discussions which were pursued about such an agreement. They included discussions about the transfer of shares.

36. [43]

    It must thus also be accepted that if Mr Beaman had advanced this further defence at trial, other evidence may have been led by Mr Higson about the issues which it raised.

37. [44]

    In the result this new defence may not be raised for the first time on appeal, as Mr Beaman sought to do.

Did her Honour err in the construction of the deed?

1. [45]

   There is no question that the deed was ambiguous, providing as it did:

2. [46]

   The recitals established that its commercial purpose was to settle the dispute between Mr Higson and Mr Beaman which was the subject of the Local Court proceedings and the terms of the deed, that the its purpose was also to bring about the end of their dealings with each other.

3. [47]

   After explaining the background, the pleadings and the agreed facts, Price LCM identified the issues to be:

4. [48]

   Mr Beaman did not contend that her Honour had incorrectly identified what he put in issue

5. [49]

   Her Honour then turned to the competing evidence which Mr Higson, Mr Beaman and Mr Abbott had given, much of which concerned the disputed further agreement. Her Honour explained her conclusions about the witnesses’ credibility and reliability. She then turned to factual findings about that agreement, concluding that while one had been discussed, none was finally reached.

6. [50]

   Her Honour then turned to the law relevant to the construction of the deed, about which there is no dispute, observing:

7. [51]

   Her Honour then turned to consider the first issue, whether the deed was conditional on Mr Beaman obtaining finance.

8. [52]

   She noted that Mr Beaman relied on Perri v Coolangatta Investments [1982] HCA 29, to submit that obtaining finance was a condition precedent to the performance of his obligation to pay Mr Higson, that not having been met, the deed was unenforceable; that the contract was silent on what might flow from non-fulfilment of that condition, which led to two possible results, waiver of the condition or a right to terminate the deed; and that he had fulfilled the condition, having sought finance, with the result that the deed was not enforceable. Even if Mr Higson’s position was accepted, cl 6 of the deed was void for uncertainty, because there was no time frame for the obligation to obtain finance, which could not be perpetual. While Mr Higson argued that a reasonable time was implied, on Mr Beaman’s case that provided an additional condition: at [85]-[87].

9. [53]

   Her Honour concluded:

10. [54]

    Mr Beaman’s case was that under cl 4 of the deed, Mr Higson was entitled only to transfer the shares on one of two dates, before 21 December 2017 if Mr Beaman had earlier paid the settlement sum, or 21 December if he had not. The deed did not stipulate what was to happen if the sum was not paid by 21 December.

11. [55]

    Clause 5 provided for Mr Higson to forfeit his shares in the company and interest in the partnership, which had obtained the borrowings dealt with in cl 3, which Mr Beaman was obliged to refinance. Mr Beaman argued that “It makes little sense for the shares in cl 5 to be the same shares which were to be the subject of the transfer in cl 4. It makes more sense to align cl 5 with cl 3. As above, cl 3 relates to the “refinance” of a loan which, it is clear, is a loan between the ANZ and a partnership “entity” which consists of those who are liable under the loan (i.e. Mr Abbott, Mr Beaman and Mr Higson)”.

12. [56]

    Clause 6 was originally drafted to provide:

13. [57]

    Mr Beaman thus submitted that:

14. [58]

    The logic of cl 6 was submitted to have been overtaken by the amendment, but still had to be interpreted harmoniously and commercially with the balance of the deed. In picking up the concept of finance in cl 2, it followed that cl 6 also picked up the time there stipulated, as well as that stipulated in cl 4 as to share transfer and cl 5 as to forfeiture, with the result that:

    1. (1)

       clause 6 obliged Mr Beaman to attempt to finance the settlement provided for in cl 2 and if he failed, to source the payment by other means in the period from July 2017 when the deed was signed, to 21 December 2017;

    2. (2)

       clause 6 imposed similar obligations in relation to the refinancing dealt with in cl 3;

    3. (3)

       but cl 6 should be read as operating in circumstances where the refinance cl 3 required had been obtained, but the finance which cl 2 required was not;

    4. (4)

       clause 6 also relieved Mr Higson of the obligation to transfer his shares after 21 December 2017; but

    5. (5)

       clause 6 did not relieve Mr Higson of the forfeiture of his interest and share after 21 December 2017, under cl 5.

15. [59]

    In the result the gist of the parties’ bargain was that performance by 21 December 2017 was an essential term, but neither party performed their obligations by that date, with the result that all that survived was the agreed mutual releases and non-disparagement clauses.

16. [60]

    Orally it was argued that if her Honour was correct in concluding that the contract remained enforceable, even though finance and refinance had not been obtained, that must mean that the contract as a whole was enforceable, not only the obligation on Mr Beaman to pay the judgment sum. Her Honour erred in not having regard to Mr Higson’s obligation to transfer the share, which was extant. When that was considered, it was clear that the contract could not have been enforceable as at the date of judgment.

17. [61]

    Her Honour thus erred in concluding that Mr Higson should be put in the position he would have been in, if the contingent provision of the deed had been performed, disregarding the position Mr Beaman then would have been in. That supported the conclusion that properly construed, all the obligations had to be performed by 21 December and there were no ongoing obligations afterwards.

18. [62]

    Mr Higson accepted that while the meaning of cll 4 and 5 had not arisen in the Local Court, that was available to be raised on appeal, that turning on the proper construction of the deed which had to be construed in its entirety. But to construe the deed in the way for which Mr Beaman contended was contrary to what the deed unambiguously provided, the settlement of the Local Court proceedings on terms that required Mr Beaman to pay him the agreed sum, before, on or within a reasonable time of 21 December 2017.

19. [63]

    Although the latter was not expressly provided for in cl 6, that had to be inferred, to give business efficacy to what was agreed: BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 282. It would be an uncommercial and absurd result for the deed to be construed as Mr Higson receiving no payment despite having foregone the claims he had advanced in the Local Court, forfeited his interest in his share and the partnership and remaining bound not to pursue the payment or any other claim against Mr Beaman, while remaining bound by the non-disparagement obligation.

20. [64]

    It followed that the implication of Mr Beaman’s obligation to make the payment within a reasonable time after 21 December 2017, was so obvious as to go without saying.

21. [65]

    In written submissions in reply Mr Beaman’s case was that it was not “objectively inconceivable that a party would agree to accept payment of a sum of money in full and final settlement of the dispute and immediately release the other party in respect of that dispute, without any immediately binding and enforceable payment obligation being imposed on that other party to pay the settlement sum”

22. [66]

    Mr Beaman also contended that having denied Mr Higson’s allegations and the deed having been entered on a non-admissions basis, the compromise arrived at did not involve a capitulation on his part. Thus objectively, it was conceivable that Mr Higson had settled for less than he had claimed. In fact, he had agreed to accept less, including by bearing his own costs in the Local Court, as well as giving up his share and his interest in the partnership. That reflecting that he did not have a particularly good claim, which was supported by his acceptance of the possibility that Mr Beaman would not be able to obtain the finance and refinance, while accepting only a conditional right to liquidated damages.

23. [67]

    As Price LCM explained, the parties’ rights and liabilities under the deed must be determined objectively, asking what a reasonable businessperson would have understood the terms agreed to mean, having in mind the language used, the circumstances addressed in the deed and its commercial purpose.

24. [68]

    Because the deed is ambiguous, there must be recourse to external events, namely, the genesis of the deed and its background and context, about which there was no dispute.

25. [69]

    This included that Mr Higson, Mr Beaman and Mr Abbott were directors and shareholders in the company, as well as partners who had borrowed from the ANZ; that Mr Higson and Mr Beaman had fallen out, with Mr Higson claiming that he had agreed to resign from his directorship in 2016, in return for an agreed payment from Mr Beaman; that after he resigned, Mr Higson had brought Local Court proceedings to enforce that agreement, Mr Beaman not having paid the sum he claimed had been agreed; and that Mr Beaman had there denied having made such an agreement.

26. [70]

    The parties agreed to settle those proceedings on execution of the deed, which essentially dealt with four things. First, Mr Beaman making the agreed payment to Mr Higson. Second, settling the Local Court proceedings on terms which resulted in Mr Higson bearing his own costs. Third, Mr Beaman refinancing the partnership’s borrowings, which would bring Mr Higson’s guarantee of current borrowings to an end. Fourth, bringing their involvement with each other to an end, by Mr Higson forfeiting his interest in the company and partnership and transferring his share to Mr Beaman, on the basis that he would in future make no defamatory or derogatory remarks about Mr Beaman, the company or partnership and they would make no further claims against each other.

27. [71]

    The commercial purpose of the deed was thus both to bring an end to the parties’ dealings with each other and to settle the Local Court proceedings.

28. [72]

    In construing the deed by which this purpose was sought to be achieved, the Court must assume that the parties intended to produce a commercial result and must avoid making commercial nonsense or inconvenience. That requires the whole of the deed to be read together. It may not be read piecemeal. If two constructions are open, that which must be preferred is the one which avoids capricious, unreasonable or unjust consequences, even if the other is grammatically open.

29. [73]

    So approaching the construction of the deed, it is apparent that her Honour was correct in concluding that a binding contract came into existence immediately on execution of the deed; that it was not void for uncertainty; that obtaining finance was not a condition precedent to the payment to Mr Higson agreed in cl 2, given what cl 6 provided; and that Mr Beaman not obtaining the finance, did not result in his obligation to make that payment lapsing.

30. [74]

    Mr Beaman did not challenge her Honour’s observation that where a contract does not specify a time frame, as cl 6 did not, what is provided for must be done within a reasonable time: at [98]. When such a condition is not complied with, the contract is voidable, but not void: Suttor at [15].

31. [75]

    What cl 6 thus provided for was that if Mr Beaman had not obtained the finance necessary for him to pay Mr Higson on or before 21 December, as cl 2 provided, he would “source other means of payment” within a reasonable time. Objectively, a reasonable businessperson could not have understood this to mean that if Mr Beaman did not source another means of payment within a reasonable time, the obligation to make the payment to Mr Higson ceased or became unenforceable.

32. [76]

    Her Honour also correctly concluded that the deed did not evidence an intention that the parties were not immediately bound when they executed it. To the contrary, it evidenced that this was their intention, the deed having annexed to it the executed consent orders to be filed in the Local Court.

33. [77]

    It follows that it also cannot be accepted that objectively, a reasonable businessperson would have understood the deed to mean that the obligation to pay Mr Higson became void or unenforceable, if Mr Beaman failed to obtain the finance by 21 December, or within a reasonable time.

34. [78]

    That is because the deed contemplated not only that by 21 December the consent orders would already have been made in the Local Court, but that on that date, If Mr Beaman had not already made the payment, under cl 6 he would have a further reasonable period to find other means of payment, while also having the ongoing benefit of:

    1. (1)

       Mr Higson:

    2. (2)

       he also having a further reasonable period to refinance the ANZ loan.

35. [79]

    To construe the deed in the way for which Mr Beaman contended is thus not grammatically open and would result in a capricious, unreasonable and unjust outcome, which the deed did not contemplate.

36. [80]

    That is because what the deed immediately provided for on execution was:

37. [81]

    As her Honour concluded, all of the provisions of the deed having to be read together, it thus did not contemplate that it would become void, if Mr Beaman did not obtain the finance which cll 2 and 6 dealt with. The obligation under those clauses was to make the payment within a reasonable time of 21 December 2017, if finance was not obtained on or before that date.

38. [82]

    The construction for which Mr Beaman contended plainly would not have been commercial. On his approach, if he did not pay Mr Higson the agreed amount, Mr Higson would have received nothing, despite having not only given up his right to pursue the Local Court proceedings and having born his own costs of those proceedings, but also giving up any other claim which he had but for execution of the deed, while still having an ongoing obligation in relation to disparagement. He would also have forfeited his interest in the company and partnership, even if he had not transferred his share, while remaining bound by the guarantee he had given in relation to the ANZ loan.

39. [83]

    Such a one-sided, uncommercial outcome clearly was not contemplated by the deed which the parties entered, given its terms.

40. [84]

    That conclusion was supported by the terms in which cl 6 was originally proposed for Mr Beaman:

41. [85]

    That would not have relieved Mr Beaman of the obligation to pay Mr Higson, although it would have brought the parties’ involvement with each other to an end, by the company being liquidated and the partnership dissolved. That would potentially also appear to trigger Mr Higson’s guarantee of the loan.

42. [86]

    Instead Mr Higson proposed, and Mr Beaman accepted the words which were adopted in cl 6, which gave Mr Beaman a further reasonable time to make the payment, while the company and partnership continued to operate without Mr Higson’s involvement and he also had the opportunity to seek other means of payment of the loan which he had agreed to refinance.

43. [87]

    I am satisfied that this reflected an intention to ensure that Mr Higson would be paid, even if finance had not been obtained by 21 December, not that Mr Beaman’s obligation to make the payment would cease, if he failed to obtain finance by then, or within a reasonable time of that date.

44. [88]

    In the result, Mr Higson’s case, that her Honour was correct in concluding that on the proper construction of the deed he was entitled to enforce the payment Mr Beaman had agreed to make to him, with the result a verdict and judgment for him for the agreed sum plus interest and costs, must be accepted and the appeal dismissed.

Costs

1. [89]

   The usual order under the Uniform Civil Procedure Rules 2005 (NSW) is that costs follow the event, which is an order that Mr Beaman must pay Mr Higson’s costs, as agreed or assessed.

2. [90]

   Unless the parties’ approach to be heard within 7 days, that will be the Court’s order.

Orders

1. [91]

   For these reasons I order that:

   1. (1)

      The appeal is dismissed;

   2. (2)

      Unless the parties’ approach to be heard within 7 days, Mr Beaman must pay Mr Higson’s costs, as agreed or assessed.