Clark v Gallop Reserve Pty Ltd [2016] QCA 146

SUPREME COURT OF QUEENSLAND CITATION: Clark v Gallop Reserve Pty Ltd [2016] QCA 146 PARTIES: STEPHEN ROSS CLARK (appellant) v GALLOP RESERVE PTY LTD ACN 010 759 421 (respondent) FILE NO/S: Appeal No 40 of 2016 SC No 13441 of 2010 DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: Supreme Court at Brisbane – [2015] QSC 353 DELIVERED ON: 7 June 2016 DELIVERED AT: Brisbane HEARING DATE: 31 May 2016 JUDGES: Gotterson and Philip McMurdo JJA and Atkinson J Separate reasons for judgment of each member of the Court, each concurring as to the orders made ORDERS: 1. Appeal dismissed. 2. Appellant pay the respondent’s costs of the appeal. CATCHWORDS: CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where the respondent is the transferee of a loan agreement between a bank and a third party to which the appellant was guarantor – where the bank obtained default judgment against the appellant in 2011 – where the bank and the respondent entered a deed of transfer in April 2013 transferring to the respondent all present and future money owing to the bank “under or in connection with” the loan agreement – where the respondent sought the court’s leave to enforce the default judgment against the appellant pursuant to r 799 of the Uniform Civil Procedure Rules 1999 (Qld) – where the appellant contended that the default judgment was not assigned to the respondent – where the learned primary judge held that the phrase “in connection with” was sufficiently wide to include the judgment and granted leave to enforce the judgment – where the appellant contends the learned trial judge erred in construing the deed – -- 1 of 8 -- 2 whether, on the correct construction of the deed, the phrase “under or in connection with” includes the default judgment Fraser v The Irish Restaurant & Bar Company Pty Ltd [2008] QCA 270, cited Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508, cited Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45, cited Westpac Banking Corporation v Clark & Ors; ex parte Gallop Reserve Pty Ltd [2015] QSC 353, affirmed COUNSEL: N H Ferret for the appellant M T de Waard for the respondent SOLICITORS: Broadley Rees Hogan for the appellant Rostron Carlyle for the respondent [1] GOTTERSON JA: I agree with the orders proposed by Philip McMurdo JA and with the reasons given by his Honour. [2] PHILIP McMURDO JA: The original plaintiff in this proceeding, Westpac Banking Corporation, obtained a default judgment against the first defendant, Mr Clark, for an amount in excess of $800,000. Mr Clark had not defended Westpac’s claim, which was for money owing under a guarantee. [3] The respondent to this appeal, Gallop Reserve Pty Ltd, claims to be the creditor under this judgment, on the basis of an assignment to it from Westpac. To enforce the judgment, it required the court’s leave because there had been “a change in an enforcement creditor … by assignment”, in the terms of r 799 of the Uniform Civil Procedure Rules 1999 (Qld). [4] The respondent’s application for leave under that rule was opposed by Mr Clark. He argued that the judgment debt against him had not been assigned. The question was whether there had been an assignment, on the proper construction of a so called Deed of Transfer and Acknowledgment (which I will call the Deed). Martin J held that by the Deed, the judgment debt had been assigned to the respondent and granted it leave to commence enforcement proceedings.1 By this appeal, Mr Clark argues that his Honour misconstrued the Deed and that there had been no assignment. The issue in this court, as it was before the primary judge, is limited to the proper construction of the Deed. The Deed [5] The parties to the Deed were Westpac, the respondent (described as “Transferee”), shareholders of the respondent, the relevant borrower from Westpac (described as “Debtor”) and a Mr Kenward (another guarantor). The appellant was not a party to the Deed. [6] The Deed recited that the Debtor was indebted to Westpac for the “Westpac Debt” under the “Westpac Facility”. It further recited that the parties had requested Westpac to transfer to the present respondent “all of its rights and obligations in connection with the Westpac Debt, the Westpac Finance Documents and the Westpac Guarantees”, which Westpac had agreed to do. 1 Westpac Banking Corporation v Clark & Ors; ex parte Gallop Reserve Pty Ltd [2015] QSC 353. -- 2 of 8 -- 3 [7] The Deed contained, relevantly, these definitions: “‘Guarantor’ means each of: (a) Mark Kenward; and (b) Stephen Clark; ‘Obligor’ means the following entities: (a) the Debtor; and (b) each Guarantor; ‘Transfer’ means the transfer of all Westpac’s right, title and interest (including any obligations and liabilities) to the Transferee as set out in this deed; ‘Transfer Consideration’ means $400,000; ‘Westpac Debt’ means all present and future money owing by the Obligors to Westpac under or in connection with the Westpac Facility (including the outstanding principal plus all interest, fees, charges and expenses payable, costs of preparation of this deed and settlement costs); ‘Westpac Facility’ means the Commercial Loan Agreement dated 12 December 2007 between Westpac, the Debtor and Guarantors and any variations thereto; ‘Westpac Guarantees’ means the guarantee and indemnity given by the Guarantors in favour of Westpac in support of the obligation of the Debtor as documented under the terms of the Westpac Facility;” [8] Clause 3.1 of the Deed was as follows: “3.1 In consideration of the Transferee paying Westpac the Transfer Consideration, Westpac: 3.1.1 assigns to the Transferee all of Westpac’s full, absolute and entire legal and beneficial interest, right and title in and to the Westpac Debt, the Westpac Finance Documents and the Westpac Guarantees; and 3.1.2 transfers to the Transferee all of Westpac’s obligations and liabilities under the Westpac Finance Documents, the Westpac Guarantee or otherwise in connection with the Westpac Debt.” [9] By clause 5.1, it was agreed that the Deed represented notice to the Debtor and Mr Kenward of the assignment of the Westpac Debt for the purposes of s 199 of the Property Law Act 1974 (Qld). As to a notice to be given to the appellant, clause 5.2 provided as follows: “5.2 Westpac agrees with the Transferee to provide notice to Stephen Clark of the Transfer effected by this deed. The notice will be: 5.2.1 substantially in the form of schedule 1; and 5.2.2 delivered to Stephen Clark no later than one week after the Effective Date.” -- 3 of 8 -- 4 [10] Schedule 1 of the Deed contained a form of notice of assignment which was relevantly as follows: “We refer to the Commercial Loan Agreement dated 12 December 2007 entered into by Westpac Banking Corporation ABN 33 007 457 141 (‘Westpac’), Matton Developments Pty Limited ACN 100 028 340 (‘Debtor’) and others (‘Westpac Facility’). We inform you that all debt Matton Developments Pty Limited ACN 100 028 340 owes Westpac under the Westpac Facility has been assigned to Gallop Reserve Pty Limited ACN 010 759 421 (‘Transferee’) for valuable consideration. We also inform you that the benefit of the finance documents listed in the schedule to this letter (‘Westpac Finance Documents’) has been transferred to the Transferee together with the debt. Any obligation of Westpac in connection with the debt or under the Westpac Finance Documents has been assumed by the Transferee. Payment Instructions From the date of this notice all payments to be made by you under the Westpac Finance Documents (including under the guarantee and indemnity provided by you pursuant to the terms of the Westpac Facility) must be paid directly to the Transferee into the following account (or into such other account as the Transferee may direct from timed to time): Account name: Gallop Reserve Pty Ltd … List of finance documents: 1. Commercial Loan Agreement dated 12 December 2007 between Westpac and the Debtor (and which includes a guarantee and indemnity from you in favour of Westpac). …”. [11] The default judgment against the appellant, which had been entered in August 2011 (nearly three years prior to the Deed), was not referred to in the Deed. But the respondent’s argument has been and is that the judgment debt was within the expression “Westpac Debt”, because at the date of the Deed it was money owing by the respondent to Westpac “under or in connection with the Westpac Facility”. The appellant’s argument has been and is that the judgment debt was neither money owing under the Westpac Facility nor in connection with it. [12] For the appellant it is argued that the existence of the judgment debt is a fact which should not be considered in the process of construction of the Deed. It is said that the relevant provisions of the Deed are not ambiguous or capable of more than one meaning, so that there is no basis for recourse to that extrinsic fact. For present purposes I will assume that is correct. Upon that premise, the existence of the judgment debt cannot be used in the identification of the intention of the parties as that intention objectively appears from the Deed. [13] Nevertheless it is necessary to consider the nature of the judgment, by reference to the claim for which Westpac was given judgment, for a different purpose, namely to determine whether the judgment debt had the requisite “connection with the Westpac -- 4 of 8 -- 5 Facility”. For the same reason, the terms of the Westpac Facility, meaning the Commercial Loan Agreement dated 12 December 2007, must be considered. [14] The parties to the loan agreement were Westpac, the borrower and several guarantors including the appellant. It recorded an advance of $1.075 million to be repaid over five years from the advance which was in December 2007. It recorded the agreement of each guarantor “to be bound by and to perform the terms and conditions on the part of the Guarantor as set out in the Conditions”, which were defined to mean those conditions within a certain standard form used by Westpac and which the guarantors acknowledged they had read. The loan agreement document was signed by the appellant and the other guarantors. [15] In its statement of claim, Westpac pleaded the loan agreement and that: “By a guarantee and indemnity dated on or around 12 December 2007, [the appellant and others there described as the Guarantors] agreed to guarantee all present and future liabilities and obligations of the Borrower under the Loan Agreement …”. Westpac pleaded that the borrower had defaulted and that Westpac had issued a notice of demand to the guarantors for the whole of the principal and interest owing plus costs under the loan agreement, which the guarantors had failed to pay. Against all defendants (the appellant and the other guarantors) Westpac claimed payment of $821,097.86 as the amount for which the guarantors were then indebted. [16] The appellant did not file a defence and Westpac was given a default judgment by the Registrar in an amount of $832,607.32, which included components for interest and costs. The decision of the primary judge [17] Martin J referred to the fact that in an endeavour to enforce the judgment debt, the present respondent had commenced a separate proceeding against the appellant, which it had not prosecuted. Martin J, correctly in my view, attributed no relevance to that other proceeding. The only issue was one of the proper construction of the Deed and it was irrelevant to consider whether the present respondent had in some way acted inconsistently with the construction for which it contended. [18] His Honour referred to the apparent breadth of the terms of clause 3.1.1 saying: “[12] Clause 3.1.1 creates an assignment of all of ‘Westpac’s full, absolute and entire legal and beneficial interest, right and title in and to the Westpac Debt’. It would be difficult to conceive of a more compendious description of what was being transferred so far as the Westpac Debt was concerned. The assignee got everything.” His Honour referred to a submission for the appellant that the absence of any reference to the judgment in the Deed was inconsistent with the construction for which the respondent contended. His Honour thought that the absence of that reference was “unusual” but “by itself … not sufficient to demand the construction advanced on behalf of Mr Clark.” He then referred to a related submission for the appellant, namely that the absence of any reference to the judgment was telling, because the parties had identified “other critical instruments” in the Deed. At that point his Honour commented: -- 5 of 8 -- 6 “[17] The construction advanced for Mr Clark would mean that, as the cause of action had merged in the judgment and, as there was no other amount owing under the Westpac Facility, then the Deed assigned nothing to Gallop.” The appellant’s argument makes a particular criticism of the reasoning in that paragraph. On the appellant’s argument, the primary judge there impermissibly considered the fact and circumstances of the judgment as an aid to the construction of the Deed. Further, it is argued that his Honour had no evidentiary basis for concluding that all of Westpac’s relevant rights “under or in connection with the Westpac Facility” had merged in the judgment. [19] Martin J referred to some of undoubtedly the many cases which have considered the meaning of the expression “in connection with”, in the particular context of a certain statute or an instrument.2 His Honour commented that: “[19] Expressions such as ‘in connection with’ generally mean that a broad connection, but not necessarily causal, is sufficient.” [20] His Honour then referred to the submission that the form of notice of assignment which was attached to the Deed was in terms which demonstrated the absence of an intention to transfer the benefit of the judgment. His Honour reasoned that the form of notice:3 “… should be seen as a ‘shorthand’ description of the transaction rather than an attempt to accurately capture all aspects of the assignment.” [21] Martin J concluded that the expression “in connection with”, in the definition of Westpac Debt was sufficiently wide to include the judgment debt and therefore to result in an assignment of that debt to the present respondent. The appellant’s arguments [22] The appellant submits that within the definition of Westpac Debt, there were two classes of choses in action, namely money owing under the Westpac Facility and money owing in connection with the Westpac Facility, and that the respondent’s case could be founded only upon the second of those alternatives. That submission should be accepted: money owing under the Westpac Facility was money for which the obligation to pay was imposed by the Westpac Facility, meaning the loan agreement. Prior to the judgment, money was owing by the appellant under the loan agreement because it contained his guarantee. But that cause of action merged in the judgment.4 The obligation to pay the judgment debt was imposed by the court’s order, rather than by the loan agreement. [23] As the appellant then submits, the question is what constitutes a sufficient nexus between the loan agreement and the debt, in order for the debt to be money owing in connection with that instrument. In the consideration of that question, the appellant’s argument identifies two factors which are said to favour his case. [24] The first is clause 4.1.5 of the Deed. Clause 4.1 provides, in part, as follows: 2 Referring to Fraser v The Irish Restaurant & Bar Company Pty Ltd [2008] QCA 270, [40]-[43] and the cases there discussed. 3 [2015] QSC 353, [24]. 4 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, 597. This applies also to a default judgment: Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508, 517-521, 526. -- 6 of 8 -- 7 “4.1 On and from the Effective Date, the parties agree that: 4.1.1 title to the Westpac Debt, the Westpac Finance Documents and the Westpac Guarantees passes to the Transferee; 4.1.2 risk in the Westpac Debt, the Westpac Finance Documents and the Westpac Guarantees passes to the Transferee; 4.1.3 the Transferee will replace Westpac under the Westpac Finance Documents and the Westpac Guarantees; 4.1.4 a reference to Westpac in the Westpac Finance Documents or the Westpac Guarantees must be read as a reference to the Transferee; 4.1.5 the Obligors must be required to comply with the Westpac Finance Documents and the Westpac Guarantees on the basis that the Transferee is party to the Westpac Finance Documents and the Westpac Guarantees in the place of Westpac and the Westpac Debt has become monies owing by the Obligors to the Transferee secured by the Westpac Securities and supported by the Westpac Guarantees. …”. Clause 4.1.5 describes the Westpac Debt as being secured by the Westpac Securities and supported by the Westpac Guarantees. The appellant’s argument is that this confines the ambit of debts within the expression Westpac Debt to debts which are so secured and supported. [25] On one view, clause 4.1 could provide some support for the appellant’s construction of the definition of Westpac Debt. But on another view, which is the better view, it provided no support, because it can be understood as referring to the Westpac Debt where it is constituted by money owing under the Westpac Facility. [26] The second factor is the form of the notice which is attached to the Deed. It is argued that the primary judge ought not to have dismissed the form of notice, in its description of the subject matter of the assignment, as “shorthand”. [27] There is an apparent inconsistency between the definition of Westpac Debt and the form of notice. The form identified the subject matter of the assignment as the principal debt and contained an instruction to the guarantors that all payments were to be made directly to the transferee. If read alone, the form of notice would convey that what had been assigned was any money owing under the loan agreement. The form did not refer to the second type of debt within the Westpac Debt, namely money owing in connection with the loan agreement. [28] The appellant does not argue that the form of notice altered the meaning of Westpac Debt, so that it would be confined to money owing under the commercial loan agreement. Consequently, the form of notice can be seen then as a misdescription of the subject matter of the assignment. [29] The appellant’s argument concedes that the lack of any specific reference in the Deed to the judgment, of itself, would have limited weight. But it is said to be at least consistent with the appellant’s argument, based upon those two factors. And as already noted, the appellant challenges the primary judge’s reasons at [17] of the judgment. -- 7 of 8 -- 8 The judgment debt assigned [30] Necessarily, the phrase “in connection with” will have an effect according to the context of the statute or instrument in which it appears. The phrase requires some nexus, in this case, between the loan agreement and money owing to Westpac. Because it is employed in describing an alternative to money owing under that agreement, it refers to a connection which is necessarily less direct than the money being then owed by the legal force of the loan agreement. [31] There is a connection between the judgment debt and the loan agreement, in that the judgment was obtained upon a cause of action of which the loan agreement and its non-performance were elements. In that way, there was a substantial and logical connection between the two, such that the judgment debt comfortably falls within the expression “money owing … in connection with the Westpac Facility”. [32] There is nothing from the Deed itself, or (if they be relevant) other circumstances, which indicates a reason why the parties would have intended to exclude a judgment debt, obtained on a claim for money owing under the Westpac Facility, from the rights and entitlements to be assigned. Rather, the contrary is apparent from the Deed as a whole: it was apparently intended that Westpac would not retain the benefit of any of its rights which had come from the transaction which was the subject of the loan agreement. Conclusion and orders [33] The primary judge was correct in construing the Deed as effecting an assignment of the judgment debt and in giving leave to the respondent to start enforcement proceedings. I would order that the appeal be dismissed and that the appellant pay the respondent’s costs of the appeal. [34] ATKINSON J: I agree with the reasons for judgment of Philip McMurdo JA and with the orders proposed by his Honour. -- 8 of 8 --