Empire Securities Group Pty Limited v Novus Capital Limited

1. [1]

   This is an appeal from the decision of the Local Court in Novus Capital Limited v Empire Securities Group Pty Limited and Gerald Farley (Local Court (NSW), Atkinson LCM, 29 April 2025, unrep), brought under Division 4 of Pt 3 of the Local Court Act 2007 (NSW).

2. [2]

   The first plaintiff, Empire Securities Group Pty Ltd, and the defendant, Novus Capital Limited, were parties to a “Corporate Authorised Representative and Conjunction Agreement for Share Trading and Corporate Advisory Services” dated 9 September 2013. The parties and primary Judge have referred to this agreement as the CAR Agreement; as will I. Through the CAR Agreement, Empire was appointed as a Corporate Authorised Representative of Novus, which was, at that time, a financial services provider and holder of an Australian Financial Services License.

3. [3]

   By late January 2021, a dispute had emerged between Empire and Novus regarding a sum of money said by Novus to be payable by Empire under the CAR Agreement. The details of this dispute are not the subject of any findings made by the primary Judge. However, the dispute was resolved by the parties through a Deed of Settlement and Release dated 10 February 2021.

4. [4]

   The Deed relevantly provided that:

5. [5]

   The reasons of the primary Judge record that the Deed also brought to an end the arrangement between the parties arising under the CAR Agreement. I do not think that this conclusion is strictly correct as a matter of law. However, the subsequent conduct of the parties – the subject of other findings made by the primary Judge – does suggest that Empire, for all practical purposes, ceased to act as a Corporate Authorised Representative of Novus at or around the time the Deed was executed.

6. [6]

   On 18 February 2021, Empire informed Novus that it had received a letter from an investor “wanting his money back” and “alleging misrepresentations” in connection with an investment made in a company described as Xinja Bank. Empire alluded to the need for either it or Novus to communicate with their insurer in relation to this potential claim.

7. [7]

   After receiving this communication, Novus notified its insurer and engaged Sparke Helmore Solicitors “to investigate and manage the claim”. The primary Judge was satisfied that Novus was entitled to incur legal costs investigating the potential claim. However, Novus’ decision to do so was made independently of Empire and without its knowledge.

8. [8]

   Novus received invoices from Sparke Helmore in connection with the work it undertook in investigating, managing and providing legal advice about the potential claim alluded to in Empire’s 18 February 2021 letter. I infer from the terms of the judgement ultimately entered by the primary Judge that the sum payable to Sparke Helmore under these invoices was in the order of $37,011.70; I will refer to this liability as the “investigation costs”.

9. [9]

   In the proceedings before the primary Judge, Novus sought to recover the investigation costs from Empire; asserting that it was entitled to do so by reason of cl 11.2 of the CAR Agreement, which provided:

10. [10]

    A number of defences were raised by Empire in the proceedings before the primary Judge. For present purposes, it is relevant only to note that, amongst them, was an assertion that cl 3.1 of the Deed operated as a complete bar to the claim being made by Novus.

11. [11]

    The primary Judge’s reasons for rejecting this defence are set out at [32]-[36] of her Honour’s reasons as follows:

12. [12]

    The plaintiffs bring this appeal on the single ground that the primary Judge erred in holding (at [36]) that cl 3.1(a) of the Deed did not operate as a bar to the proceedings and instead should have found that, by cl. 3.1(a) of the Deed, properly construed, Novus released them from the claims being advanced in the proceedings before the primary Judge.

Leave to appeal

1. [13]

   A threshold question arises as to whether the plaintiffs require leave to bring the appeal and, if so, whether leave should be granted.

2. [14]

   Division 4 of Pt 3 of the Local Court Act relevantly provides:

3. [15]

   The plaintiffs contended that their single ground of appeal raises a question of law and, therefore, an appeal lies as of right: s 39(1) Local Court Act. Novus disagreed, submitting that the single ground of appeal raises a question of mixed law and fact because “the Deed can only be ascertained by reference to the factual background and by assessing the evidence…”. On this basis, Novus said that leave is required to bring the appeal (pursuant to s 40 (1) Local Court Act) and should be refused.

4. [16]

   In Collector of Customs v Agfa-Gavaert Ltd (1996) 186 CLR 389 at 394; [1996] HCA 36 (“Agfa-Gavaert”), the High Court observed that, despite the efforts of many distinguished judges and jurists, no universally applicable test for distinguishing questions of law and fact had to that point been formulated. A more recent observation to similar effect was made in Director of Public Prosecutions (Cth) v JM (2013) 250 CLR 135; [2013] HCA 30 at [39]. Nevertheless, in Agfa-Gavaert, the Court (at 395) did describe as helpful the following taxonomic approach taken by the Full Federal Court in the context of construing a statute in Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 289; [1993] FCA 456:

5. [17]

   To the extent that the High Court in Agfa-Gavaert might be taken to have endorsed this taxonomic approach, that endorsement was qualified. The plurality made plain (at 396) that such expositions of the law lose a degree of their utility when the phrase or term in issue is complex and went on to observe (at 396-397):

6. [18]

   More recently in Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30, Edelman J noted at [127]:

7. [19]

   I draw from the above that a question as to the proper construction to be given to words used in a legal document – including a contract – will be a question of law. Applying that conclusion in the context of the plaintiffs’ single ground of appeal, I am satisfied that it raises a question of law. It: (i) contends that the primary Judge erred in construing cl 3.1 of the Deed; (ii) propounds what plaintiffs assert is the correct construction; and (iii) askes the Court to apply the clause – correctly construed – to the facts as found by the primary Judge. No challenge was made to any of the factual findings made by the primary Judge.

8. [20]

   The possibility that it may be necessary and appropriate to have regard to any of those unchallenged findings of fact to resolve a constructional choice – in the sense discussed in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37 at [49] – does not result in the question raised becoming one of mixed law and fact.

9. [21]

   Accordingly, the plaintiffs’ appeal may be brought as of right.

The substantive appeal

1. [22]

   I note and adopt the useful summary of the principles to be applied when construing releases in Pharmacy Platform Pty Ltd v Millichamp [2025] NSWCA 213 at [44]-[46]:

2. [23]

   The answer to the question of construction raised in the present matter turns primarily on what is described in the above extract from Wardman v Macquarie Bank Ltd (2023) 322 IR 278; [2023] FCAFC 13 at [206]-[207] as the first principle.

3. [24]

   It was theoretically open to Novus to have released Empire from any future – and, therefore, unknown – claims arising under the CAR Agreement had it chosen to do so: Reid v Commonwealth Bank of Australia (2022) 109 NSWLR 149; [2022] NSWCA 134 at [36]; Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251 at [27]. However, to be effective this intention would ideally have been made clear in the text of the Deed and reflected in its recitals; it was not.

4. [25]

   The recitals to the Deed expressly identify the CAR Agreement. However, Recital D offers little assistance when it comes to ascertaining what the parties objectively intended to achieve through the Deed. At best, the recitals point to the existence of the contractual arrangements between the parties to the Deed and, implicitly, a desire to resolve a dispute of some description which had emerged between them by the payment of a sum of money. The nature or origin of that dispute is not revealed by the recitals.

5. [26]

   Relevantly, the recitals do not record an intention by the parties to terminate the CAR Agreement or otherwise bring their contractual arrangements to an end. The wider textual context provided by the Deed suggests that this was not the parties’ intention.

6. [27]

   Clause 2.1(b) of the Deed expressly provided that:

7. [28]

   As was pointed out by Ms Moussa, who appeared for Novus, this clause suggests that the parties to the Deed contemplated that the relevant contractual arrangements – including those arising under the CAR Agreement – would continue if Empire paid the Settlement Amount by the required date. Those continuing arrangements would logically have included the indemnities provided for in cl 11 of the CAR Agreement. The continuation of these arrangements – and the possibility that future obligations may arise under them – must be borne in mind when approaching the express terms of cl 3.1(a) and seeking to ascertain from them the parties’ objective intention. Those of the primary Judge’s findings, which suggest Empire ceased to act as a Corporate Authorised Representative of Novus after the Deed was executed, cannot be relied upon in construing its terms.

8. [29]

   When construing cl 3.1(a), the definition of “Claim” found in cl 1.1 must be read into its operative text: see Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pty Ltd [2024] NSWSC 18 at [107] and the cases cited therein. Approached in this way, the relevant release becomes:

9. [30]

   Nothing in the above words expressly points to an objective intention that Empire be released from any future claims that might arise under the CAR Agreement. While the words “in respect of any matter whatsoever” are extremely broad they do not, on their face, refer to matters which have not yet occurred. On the narrow construction that must be given to those words – see Reid v Commonwealth Bank of Australia (2022) 109 NSWLR 149; [2022] NSWCA 134 at [33] – an intention to provide a release from any future liabilities that might arise in the course of the parties’ future contractual arrangements cannot merely be implied.

10. [31]

    On this basis, the release in cl 3.1(a) is confined to such claims as might have existed as at the date of the Deed; that is, 10 February 2021. Neither the investigation costs nor Novus’ asserted entitlement to recover those costs under cl 11.2 of the CAR Agreement existed as at 10 February 2021. For this reason, the primary Judge was correct to hold that those costs lay beyond the reach of the release contained in cl. 3.1(a).

11. [32]

    Given the above conclusion, it is not necessary for me to consider whether the claim made by Novus in the proceedings before the primary Judge falls within the exception to the release contained in cl 3.1(c).

12. [33]

    As the claim made by Novus in the proceedings before the primary Judge was not captured by the release contained in cl 3.1(a) of the Deed, the plaintiffs’ single ground of appeal fails.

13. [34]

    The Court makes the following orders:

    1. (1)

       Proceedings dismissed.

    2. (2)

       The plaintiffs are to pay the defendant’s costs of the proceedings as agreed or assessed.

    3. (3)

       If either party contends for a different costs order to that which is provided for in Order 2, they should make an application to my Associate by 4pm 20 February 2026, whereupon I will vacate Order 2.

    4. (4)

       Should an application for a different costs order be made pursuant to Order 3: