LDT O’Brien Property Group Pty Ltd v Trustworthy Nominees Pty Ltd (No 2)

Before the Court is a question of whether a settlement deed between the plaintiffs and the first defendant, Trustworthy Nominees Pty Ltd (Trustworthy), is binding between the parties or not.

Today, Mr O'Brien has appeared on behalf of the plaintiffs, the plaintiffs' former solicitors having been granted leave to cease to act for the plaintiffs on 13 November 2024. At the commencement of the hearing, the process was explained to Mr O'Brien, and he was given an opportunity to make the submissions he wished and to rely upon the documentation he had provided to the Court and to Trustworthy.

This matter has been on foot for some time. Much of the procedural history was described by Ball J in LDT O'Brien Property Group Pty Ltd v Trustworthy Nominees Pty Ltd [2023] NSWSC 1100, up until the date of that decision, which was 2 September 2023. His Honour, there, was dealing with a notice of motion, whereby the plaintiffs sought a number of orders, including:

In dealing with those matters, his Honour set out at a high level the factual contest between the parties. The following is a quote of various paragraphs from that judgment:

His Honour concluded, for various reasons set out, that there was insufficient reason to vacate Order 6. However, the amended pleading was allowed.

There is no dispute here that the parties signed a deed of settlement and release and exchanged copies by their solicitors. The plaintiffs' lawyers sent a signed copy to Trustworthy's lawyers at 10pm on 12 November 2024. Trustworthy's lawyers sent a counterpart signed copy at 5.30pm on 13 November 2024. Trustworthy appears to have immediately commenced performing its obligations under the deed, including by providing the Court with consent orders consistent with the deed and issuing a notice to the manager, terminating the management agreement.

There is no dispute that the parties intended to resolve these proceedings against each other. In fact, Mr O'Brien told the Court on the morning of 13 November 2024 that he had signed documents to resolve the matter the night before and that his solicitor was doing an "excellent job". On that day, Mr O'Brien expressly agreed that the plaintiff's solicitors ought be granted leave to cease acting.

However, by 15 November 2024, Mr O'Brien appears to no longer have wanted to be bound by the deed and, on 17 November 2024, he filed an affidavit in which he alleged that the deed was procured by "duress and bullying".

The law of duress was explained to Mr O'Brien by reference to the written submissions of Trustworthy, which he had received earlier. It was explained that, for an allegation of duress to succeed, there must be impermissible or unlawful conduct that pressures the person to sign a document. McHugh JA explained duress in Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 at 45-6 as follows:

Mr O'Brien in his oral submissions identified the particular duress as relating predominantly to Trustworthy having installed Mr Blackney and his company as the manager of the pub business at the property. He described that in various ways, but considered that event and Trustworthy's management through Mr Blackney's company as the reason why the plaintiffs have suffered losses as alleged and why he has been incredibly stressed by the litigation over many years.

I do not accept that Mr O'Brien's decision to have the deed signed was the result of duress, for the following reasons.

First, the final resolution was the result of negotiations over many months through the parties' lawyers. Mr O'Brien accepted that the email sent by his solicitors on 19 July 2024 accurately set out his concerns and was sent with his instructions. Having listed Mr O'Brien's concerns about the operation of the pub and the appointment of Mr Blackney and his company to manage the pub, including issues of fire safety insurance, Trustworthy's refusal to accept an offer in November 2020, the work and cost required to reinstate the kitchens and alleged loss of royalties, the email made an offer in view of those concerns that the plaintiffs pay Trustworthy $1.125 million "in full and final settlement of this proceeding". It was stated that this was "more than reasonable in the circumstances".

Notably, the parties agreed to the terms of the settlement deed in dispute here, that required the plaintiffs to pay Trustworthy $1.250 million, which was not a great deal more than Mr O'Brien's July 2024 offer. Further, I note that the July 2024 offer did not make settlement conditional upon inspection or valuation, though it did seek access for trades people to inspect to quote on works for the following week.

The evidence reveals that, between 19 July 2024 and the final version of the settlement deed, there were extensive communications between the lawyers as to the particular terms of the deed. It was not the case that Trustworthy did not compromise; both sides amended the deed until they landed on the final version that was acceptable to them all.

Secondly, I do not accept Mr O'Brien's oral assertions from the Bar table that he told his solicitors he did not want to pay Trustworthy any money. Those statements are inconsistent with:

Further, Mr O'Brien's oral assertions were unsupported by any documented communication between Mr O'Brien and his solicitors before signing the deed. In circumstances where his solicitors' files had been subpoenaed and contained 151 emails and 41 file notes, over which privilege has been claimed, Mr O'Brien could have chosen to waive privilege to demonstrate his assertion that he instructed his lawyers he did not want to pay the money in the deed. He has chosen not to do so. His various affidavits and annexed documents do not refer to any complaint concerning his lawyers at any time.

I do not accept the unsubstantiated criticisms of any lawyers involved in the negotiations that could lead to a conclusion that they acted without instructions or contrary to their clients' interests or that there was some form of collusion between the parties' lawyers.

Thirdly, I do not accept that Mr O'Brien did not understand the nature of the agreement in the deed. It came some four months after his solicitors made the first offer in evidence, and after three mediations. Mr O'Brien is an experienced businessman who understands concepts of intellectual property, ways of licencing that property and the operation of a pub business. He has further been involved in the sale of various properties. He is a director of various companies and was prepared to give a personal guarantee in relation to a loan secured by mortgage. I consider Mr O'Brien understood the deed would have the effect of either entitling his entities to purchase back the property from its mortgagee as is for a particular sum, or, alternatively, he was agreeing not to interfere with the mortgagee selling the secured asset.

I consider it is for that reason that Mr O'Brien told the Court that he had entered into the deed "in good faith" and that the allegation of duress is in essence a belated regret only. Such a conclusion is consistent with Mr O'Brien's statement to the Court on 18 November 2024, that he thought it was "unfair" because, after signing the deed, he was told "We can't fund this".

Fourthly, I reject Mr O'Brien's suggestion that he was somehow misled because he either had not inspected the property for four years or that he only belatedly found out the pub would not be returned to him as a going concern, and therefore he was unable to obtain finance to fund the settlement.

The evidence discloses that at the time of the execution of the deed, Mr O'Brien was aware of:

Further, from December 2021, pursuant to Rein J's orders, Mr O'Brien was entitled to have a Mr Flood inspect the premises and the records of the pub business once a week. The deed also includes an entitlement for the plaintiffs to carry out a valuation, but after the execution of the deed, and not before. Rather than seeking an inspection or valuation for the purposes of agreeing to the deed, cl 7 of the deed contains warranties, including those at 7.1 to 7.4:

I reject Mr O'Brien's submission that an inspection or valuation would, as a matter of construction, fall outside the meaning of those subclauses. Therefore, I consider by those subclauses the plaintiffs were warranting to Trustworthy that they had all of the information they required when executing the deed.

Further, there is no provision in the deed concerning the state of the pub building and the business located on the property. That is despite the fact that the July 2024 offer listed Mr O'Brien's concerns about those matters. I note that there is no pleading concerning those matters, and instead the pleading only concerns claims for breaches of intellectual property rights. Therefore, even if the final hearing had commenced today, Trustworthy was not going to be facing any claim that it was liable for matters raised in the July 2024 email or orally by Mr O'Brien.

Trustworthy has ostensibly complied with various requirements in the deed following its execution, including issuing a notice to the managing company to vacate the property and terminating the management agreement of May 2021. Pursuant to that agreement, Trustworthy agreed pursuant to cl 13 to sell the listed equipment of the manager at a reasonable price on any sale of the property. However, the management agreement does not deal with any stock or property beyond that listed. It is not apparent why the outgoing manager would not be entitled to remove its own goods. It is unclear why Mr O'Brien asserts that the manager seeking to remove its property amounts to a fact that vitiates his consent to the deed.

In conclusion, I therefore reject that Mr O'Brien is entitled to have the deed declared void for duress. For completeness, I note that the Court does not have a discretionary power to amend the deed to extend the time for payment of the agreed settlement sum, with or without the further conditions sought by Mr O'Brien in the current circumstances. Instead, the parties have agreed to compromise their claims with express releases, on particular terms they considered commercial and sensible and on legal advice.

For those reasons, I do not accept Mr O'Brien has made good the allegation of duress. Instead, I consider it appropriate to make orders in the form of those sought in the notice of motion numbered 1 through to 5, which give effect to the terms of the deed.

Trustworthy also seeks its costs of the notice of motion. Mr O'Brien submitted that he ought not be liable for the costs of the motion in circumstances where Trustworthy has access to the property to enforce its security. However, in circumstances where Trustworthy has been successful on a motion that was only necessary because of Mr O'Brien's assertion that the deed was unenforceable, I consider it appropriate to make such an order as sought in prayer for relief in the motion number 6.

The Court therefore makes the following orders: