Lake Maintenance (NSW) Pty Ltd v Bone

1. [1]

   On 20 February 2015 the parties entered into a Deed to settle the present proceedings. Under that Deed the Plaintiff was entitled to enter judgment on 20 February 2017. Judgment was entered at that time and subsequently the Plaintiff issued a Bankruptcy Notice against the Defendant as a means of enforcing the judgment.

2. [2]

   The Defendant has sought a stay of the Bankruptcy Notice in the Federal Circuit Court and at the same time has filed a Motion on 23 May 2017 in this Court seeking an injunction to prevent enforcement of the judgment, alternatively, a declaration that the Plaintiffs are estopped from taking enforcement action.

The Deed

1. [3]

   It is necessary to set out the terms of the Deed of Settlement in its entirety so that the arguments on this application can be understood. The Deed provides:

Background

1. [4]

   The background to the dispute may be briefly stated.

2. [5]

   The Defendant had borrowed money from Bankwest secured over a large parcel of land at Wallalong in the Hunter Valley. It seems that there must have been a default by the Defendant under that loan agreement and the default resulted in Bankwest appointing receivers to the property. The Receivers sold the property for about $4 million leaving a shortfall to Bankwest of about $4 million.

3. [6]

   The Defendant asserts that the receivers sold the land in contravention of the Farm Debt Mediation Act 1994 (NSW) in that no mediation was held under that Act and no certificate had been issued under s 11 of that Act.

4. [7]

   In or about June 2010 the Defendant borrowed $3 million from the Plaintiff, Lake Maintenance (NSW) Pty Ltd. That loan was repayable by 23 December 2011. The Defendant gave a mortgage over an adjoining property at 137 High Street, Wallalong.

5. [8]

   The Defendant did not repay the loan to the Plaintiff by 23 December 2011 or at all. By that date the amount owing including interest was a little over $5 million.

6. [9]

   On 28 June 2012 the Plaintiff commenced the present proceedings against the Defendant claiming the amount owing. On 20 February 2015 the parties attended a mediation which resulted in the settlement set out in the Deed of Settlement.

7. [10]

   As the Deed of Settlement suggests, the amount agreed to the paid by the Defendant to the Plaintiff was to be sourced from a claim that the Defendant intended to make against Bankwest based on the asserted failure of Bankwest to comply with the Farm Debt Mediation Act. Accordingly, on 19 March 2015 the Defendant and a company that appeared to be concerned with the loan from Bankwest, Jelrol Pty Ltd (Receivers and Managers Appointed), commenced proceedings against the Commonwealth Bank trading as Bankwest together with two other persons being Receivers and Managers appointed by Bankwest. Those proceedings were commenced in the General List of the Equity Division but were later transferred to the Commercial List of that Division. They are set down for hearing on 7 August 2017 for ten days. The amount claimed is set to be between $48 million and $190 million. That is because the properties were said to be the subject of a town planning proposal which would result in those properties forming the centre of a new town in the Hunter Valley.

8. [11]

   The solicitor for the Defendant swore an affidavit in support of the present application which in part said this:

Submissions

1. [12]

   The Defendant does not dispute the Plaintiff’s right to enter judgment. However, the Defendant submitted that on a proper construction of the Deed, because it was clear that the monies due under the Deed would be paid from the results of the Bankwest litigation, the Plaintiff was not entitled to enforce the judgment that it was able to enter on 17 February 2017. The Defendant submitted that he was entitled to rely on the terms of the Deed and in particular, clause 8, that the Plaintiff would not begin enforcement of the judgment until after the conclusion of the Bankwest proceedings.

2. [13]

   The Defendant initially relied on what was contained in paragraphs 5 to 7 of his solicitor’s affidavit but ultimately accepted that to raise an estoppel against the Plaintiff he could call in aid his solicitor’s reliance. The Defendant then submitted that he relied on the terms of the Deed in expending the $750,000 that had been incurred as identified in his solicitor’s affidavit.

3. [14]

   Finally, the Defendant asserted that it was an abuse of process for the Plaintiff to enforce the judgment. This was said to be because there was no utility in the Plaintiff seeking to enforce its judgment prior to the conclusion of the Bankwest proceedings and because the Defendant had warned the Plaintiff that seeking to enforce it amounted to an abuse of process but the Plaintiff pursued its enforcement nonetheless.

4. [15]

   The Plaintiff submitted that when properly construed the Deed gave a period of two years for the Defendant to pay the agreed amount of $5 million. If certain events occurred, those set out in paragraph 8 of the Deed, the Defendant might become liable to pay the agreed sum at an earlier time. However, the Plaintiff submitted, nothing in the Deed suggested that the Plaintiff, which was undoubtedly entitled to enter judgment on 20 February 2017, would not be able to enforce that judgment.

Consideration

1. [16]

   To obtain the interlocutory injunction the Defendant seeks he must show that there is a serious question to be tried and that the balance of convenience favours the making of such an injunction.

2. [17]

   On a plain reading, what the Deed provides for is this:

3. [18]

   Nothing is said in the Deed about enforcement of any judgment. To the extent that any inference arises about whether a judgment entered could be enforced, it would ordinarily be inferred that a party entitled to enter judgment is also entitled to enforce it. In the ordinary course if a judgment is not to be enforceable until an event occurs or until certain time passes a further order is made that stays the judgment until that date passes or the event occurs.

4. [19]

   In my opinion, the intention of the parties, inferred from the terms of the Deed, are that the Defendant had, at the outside, no more than two years to pay the agreed sum. There may be some circumstances in which the Defendant was required to pay it before that time but no circumstance was provided for enabling it to be paid after that time.

5. [20]

   If that is the proper construction of the Deed, as I believe it is, then to the extent that the Defendant seeks to draw a distinction between the entry of judgment and enforcement of it there would need to be a term implied that, although the Plaintiff was entitled to enter judgment on 20 February 2017, enforcement was delayed until the conclusion of the Bankwest proceedings.

6. [21]

   The authorities make clear that there is no bright line between construing a contract and the implication of a term: see for example Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; [1982] HCA 24 at 345, [3]; 353, [27]; Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32 at [22] and [25]. In the present case it is difficult to see how the Deed could be construed in the manner argued for by the Defendant without the implication of the further term.

7. [22]

   As is well known, the conditions necessary to ground the implication of a term was summarised by the majority in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26. Those conditions are these:

8. [23]

   The conditions for the implication of such a term in the present Deed are not present. Such a term would contradict clauses 6 and 8 of the Deed, it is not necessary to give business efficacy to the contract and it is not so obvious that it goes without saying. It is doubtful if it would be reasonable and equitable from the Plaintiff’s point of view because there would be no time limit for the conclusion of the Bankwest proceedings

9. [24]

   On the matter of the proper construction of the Deed, whether by implication of a term or otherwise, the Plaintiff fails to show that there is a serious question to be tried. Consideration of the balance of convenience does not arise. If it had, I consider it would have favoured the Plaintiff. Allowing the Defendant to incur legal fees for a ten day hearing in the Commercial List of the Court when he is currently unable to pay the $5m and where the outcome of that case is unknown but any verdict may be shared with the other plaintiff in those proceedings is likely to diminish significantly any recovery on the Plaintiff’s part. The better course might involve the Defendant’s trustee in bankruptcy assessing the likely outcome of those proceedings to see if they are economically feasible. However, I do not have to decide that issue.

10. [25]

    In relation to the claim for an estoppel, as I have mentioned, the Plaintiff sought, at least partly, to rely on the evidence in his solicitor’s affidavit where the solicitor said that he relied upon the belief that the Deed meant that the Plaintiff could not enforce the judgment until the determination of the Bankwest proceedings. Any detriment in that regard was said to be the solicitor’s because he said that his office would not have allowed the Defendant to incur any legal fees that were unable to be paid unless the enforcement was delayed until the determination of the Bankwest proceedings. That, in itself, was not a detriment the Defendant suffered.

11. [26]

    In the written submissions put forward by the Defendant it is said that the Defendant relied on the terms of the Deed and the belief from clause 8 that enforcement proceedings would not be taken until the conclusion of the Bankwest proceedings by incurring the legal costs associated with the Bankwest proceedings to the extent at least of $750,000. There seem to me to be two difficulties with that submission.

12. [27]

    First, the Defendant does not say that he so relied in his affidavit on the present application. All he says is:

13. [28]

    Secondly, the Defendant does not say that he incurred the costs to his lawyers relying on the fact that those costs would be payable out of the Bankwest proceedings. Nor could he say that he so relied because whether or not he recovers in the Bankwest proceedings is a contingency over which he has little control.

14. [29]

    No estoppel in the present matter is raised against the Plaintiff to prevent enforcement of the judgment.

15. [30]

    Finally, the Defendant relied on the doctrine of abuse of process. The Defendant made reference to what Mason CJ said in Jago v District Court of NSW (1989) 168 CLR 23; [1989] HCA 46 at 25 where his Honour said that Australian courts possess inherent jurisdiction to stay proceedings which are an abuse of process.

16. [31]

    The abuse of process appears to be put, as far as can be discerned from the written submissions, on the basis that there is no utility in the Plaintiff seeking to enforce its judgment before the conclusion of the Bankwest proceedings. In circumstances where I have held on a proper construction of the Deed that there is no bar to enforcement, the lack of any utility cannot amount to an abuse of process.

17. [32]

    This argument in particular, but in fact all of the Defendant’s arguments on the present application, tends to proceed on the assumption that the Defendant will be successful in the Bankwest proceedings. There is no basis for such an assumption. There was no attempt to put forward any material which might show that the Defendant’s claim against Bankwest was so overwhelming that it would be reasonable to make such an assumption. There is the further complication that the Defendant is only one of two plaintiffs in the Bankwest proceedings. The basis on which each such plaintiff proceeds is not known.

18. [33]

    However, even if such evidence had been produced, it could not be said that taking enforcement proceedings, if the Plaintiff is otherwise entitled to do so, would amount to an abuse of process. There is no abuse of process unless, as a preliminary matter, the Plaintiff is not entitled to enforce the judgment

19. [34]

    Accordingly, I make the following orders: