Bonel v Sutton & Anor [2013] QCAT 414

CITATION: Bonel v Sutton & Anor [2013] QCAT 414 PARTIES: Liberal John Bonel (Applicant) v Donald James Howard Sutton (First Respondent) Shialand Pty Ltd ACN 108309799 (Second Respondent) APPLICATION NUMBER: MCDO2902/12 MATTER TYPE: Other minor civil disputes matters HEARING DATE: 22 April and 9 May 2013 HEARD AT: Brisbane DECISION OF: Jeremy Gordon, Adjudicator DELIVERED ON: 31 July 2013 DELIVERED AT: Brisbane ORDERS MADE: 1. The First Respondent is ordered to pay to the Applicant the sum of $9,333.97 made up as follows:- Liquidated amount: $7,262.51 Interest: $1,973.46 Filing fee: $98.00 CATCHWORDS: CLAIM FOR BREACH OF COVENANT IN DEED – whether this is a claim for a debt or liquidated demand of money to give QCAT jurisdiction – whether overdue rates (being a statutory charge) are an encumbrance within the meaning of the deed – whether other parts of the deed preclude an award of damages Queensland Civil and Administrative Tribunal Act 2009, Schedule 3 Local Government Act 2009 s 95 Local Government Regulation 2012 ss 127, 132 Spain v Union Steamship Co of New Zealand Ltd (1923) 32 CLR 138 Rothenberger Australia Pty Ltd v Poulsen -- 1 of 9 -- 2 (2003) 58 NSWLR 288 Solar Energy Australia Group Pty Ltd v Bannink [2013] QCATA 100 Solahart Mackay & Ors v Summers [2013] QCATA 113 Davisbourne Pty Ltd v Kis (Australia Pty Ltd) [1985] 2 Qd.R. 341 Wallace v Love (1922) 31 CLR 156 Perpetual Trustees Australia Ltd v Bank of Western Australia Ltd & Others [2004] QCA 345 Repatriation Commission v Tsourounakis [2007] FCAFC 29 APPEARANCES and REPRESENTATION (if any): APPLICANT: In person RESPONDENT: In person, also representing the Second Respondent REASONS FOR DECISION [1] Under the terms of the bespoke agreement in a deed executed by the parties, did the Respondents agree to transfer certain properties to the Applicant free from overdue rates? If so, are the Respondents liable to pay the amount of such overdue rates to the Applicant? Does QCAT have jurisdiction to hear this matter? [2] This was not a typical land transfer. The properties were transferred to the Applicant fulfilling a legal obligation to do so in a deed dated 3 September 2010. That deed was drafted by lawyers and was executed by the parties. It was entitled “Deed of Compromise and Release” and this accurately described its purpose. [3] Some four years prior to this deed, the Applicant had lent to the Respondent money so that the Respondent could develop some land in Bundaberg. The Respondent failed to make the contractual repayments on that loan, and on 26 May 2009 the parties executed a deed entitled a “Deed of Suspension of Rights Agreement”. Under that earlier deed, the Respondents agreed to transfer certain properties upon the happening of certain events. [4] Although the triggering events occurred, the transfers which should have followed did not do so. Proceedings were started in the Supreme Court to enforce the deed. The proceedings were compromised and terms of settlement were set out in the Deed of Compromise and Release of 3 September 2010. -- 2 of 9 -- 3 [5] This deed provided for a transfer of the properties to the Applicant. This time the transfers did take place, indeed the transfers were effected on the same day as the deed was executed. But after the transfer had take place, the Applicant discovered that some rates with respect to these properties had been billed by Bundaberg Regional Council but remained unpaid. There were also some additional rates payable in respect of the properties up to the date of settlement. In a purchase proceeding in the usual way, such rates would have been apportioned to the date of settlement. The total rates due were $7,681.54. [6] The Applicant paid this amount to the Council, and had little choice but to do so. This is because by section 127 of the Local Government Regulation 2012 the current owner is liable for all rates even if they relate to a period prior to their ownership. And this is backed up by a statutory charge on the properties arising from the terms of section 95 of the Local Government Act 2009. This statutory charge arises automatically by the operation of section 95 if rates are overdue. [7] The clauses in the deed relied on by the Applicant are:- Clause 3(a) (the First Respondent) will “Execute all transfer documents and other documentation as may be necessary to convey the unencumbered title in the properties .. contemporaneously with the execution of this deed” Clause 6 “Each of the parties to this deed warrants that there is no impediment to the execution of this deed, they have full capacity to execute the same and that no charge, encumbrance, assignment or other impediment exists” Clause 8 “The Parties will promptly do and perform all further acts and execute and deliver all further documents required by law or reasonably requested by any other party to carry out and effect the intent and purpose of this deed” [8] The clauses relied on by the Respondents are:- Clause 5(a) (the Applicant) “hereby releases and discharges” (the Respondents) “from all actions statutory claims demands and liabilities including any claims which he may now have or at any time have but for the making of this Deed or might have against” (the Respondents) “in connection with directly or indirectly or incidental to Deed of Suspension of Rights or any moneys that have been advanced” Clause 5(c) (the Applicants) “acknowledge that the transfer of the Land .. is accepted in full and final satisfaction of the debt owed by” (the Respondents) Clause 5(d) “This Agreement may be treated by either party as a bar to any actions, suits, claims, demands or legal proceedings instituted by either party against the other in -- 3 of 9 -- 4 respect of any matter referred to in this Deed” Clause 10 “This deed may be pleaded as a full and complete defence by either party to any actions, suits, or proceedings commenced, continued or taken by the other party or on its behalf in connection with any of the matters referred to in this deed” [9] Another relevant clause is:- Clause 5(e) “The parties must also ensure that neither they nor any company, partnership, organisation or person with whom they are associated or connected in any way, commences at any time, any action against the other party arising out of or in connection with any of the matters referred to in this Deed, save for proceedings instituted for breach of this Deed” Jurisdictional questions [10] By section 11 and Schedule 3 of the Queensland Civil and Administrative Act 2009, QCAT has jurisdiction over claims to recover a debt or a liquidated demand of money up to the prescribed amount. QCAT also has jurisdiction over claims which arise out of a contract between a consumer and a trader or between two traders (as defined in Schedule 3 of the QCAT Act). The parties here are not in that relationship. So QCAT only has jurisdiction over this claim if it is a claim to recover a debt or liquidated demand of money. [11] What is a liquidated demand of money? [12] These words have been construed over many years in the courts, since they come from many earlier statutes. They are not given a restricted meaning. For example in Spain v Union Steamship Co of New Zealand Ltd (1923) 32 CLR 138 at 142, a case often cited in QCAT appeals on this question, the High Court considered a claim by the master of a vessel against his employers for £63 18s legal expenses which he had paid to his lawyers who had represented him in a Marine Court hearing and in a preliminary inquiry following the running aground of his vessel in the Bass Straits. The claim was based on an Award which provided that an employer had to pay “any reasonable expenses of an employee incurred in the service or in the interests of the employer”. It was argued by the employer that this was not a claim for a “debt or a liquidated demand of money” as was required by the court process which the employee had followed. All five justices roundly rejected this submission. Knox CJ and Starke J approved a passage from Odgers Pleading and Practice stating that “whenever the amount to which the plaintiff is entitled ... can be ascertained by calculation or fixed by any scale of charges, or other positive data, it is ... liquidated”. -- 4 of 9 -- 5 [13] In saying that it was unarguable to say that this was not a debt or liquidated demand of money, Isaacs and Rich JJ said “if the appellant is entitled to anything, it is to a sum payable instanter before action and in law ascertained”. [14] A useful contrasting situation was posed by Knox CJ and Starke J. They said that a nice question would have arisen in this case if the Award had simply prescribed the payment of expenses incurred in the service or in the interests of the employer. They said that such a provision might possibly have limited the expenses to those incurred for and on behalf of the employer but that this did not apply because there was no room for doubt. What was being said here was that if the expenses were to be limited in this way so that there was some room for argument about the figure to be awarded, requiring some assessment to be carried out, then it might not be a debt or liquidated demand of money. But the wording of the Award meant that it was clear what amount should be ordered to be paid once liability was found. [15] It is sufficient if there is a formula for the court to follow, even if the data to be applied to the formula needs to be proved. So for example Barrett J in Rothenberger Australia Pty Ltd v Poulsen (2003) 58 NSWLR 288 at 297, considered that where a contract states that upon breach the seller may recover from the purchaser any deficiency on resale together with expenses of resale, this was a debt or liquidated demand of money. [16] And in Solar Energy Australia Group Pty Ltd v Bannink [2013] QCATA 100 an appeal decided by Justice Alan Wilson President, the data for the formula was contained in minutes of the company which recorded the agreement reached between the Applicant who had done work for the company and what he should be paid for it. Despite there being a number of versions of the minutes, which would have to be considered and one of them approved, this was a claim for a debt or liquidated demand of money. [17] This is to be contrasted with Solahart Mackay & Ors v Summers [2013] QCATA 113 another appeal heard by Justice Alan Wilson President which was a claim for payment for work done, which involved an assessment of fair recompense for work and labour done having regard to mistakes and errors of the worker. That was not a claim for a debt or a liquidated demand of money. [18] In the instant case, I am satisfied that I will not have to make any assessment of damages if I find liability proved, because the rates paid to Bundaberg Regional Council which have been paid by the Applicant are known and fixed. Accordingly this is a claim for a debt or a liquidated demand of money. I have jurisdiction to hear the claim. -- 5 of 9 -- 6 Effect of Clause 3(a) [19] Central to this claim is Clause 3(a) of the deed which requires that the First Respondent “execute all transfer documents and other documentation as may be necessary to convey the unencumbered title in the properties”. [20] There are no definitions in the deed to assist to construe the phrase “unencumbered title”. The question arises whether a statutory debt owned to the local authority which is also a charge by the operation of statute is within the words. [21] It is submitted by the Respondents that Clause 3(a) only requires that the properties are transferred with such title as is capable of registration. And it is submitted that only a registered charge can be an encumbrance within the meaning of Clause 3(a). It is common ground that this statutory charge was not registered. [22] The Respondents cite Davisbourne Pty Ltd v Kis (Australia Pty Ltd) [1985] 2 Qd.R. 341, a decision of Shepherdson J in the Supreme Court in support of this submission. In that case the contract of sale in clause 2 required a transfer "free from encumbrances". It was held that “free from encumbrances” did not mean “free from unregistered statutory charges for unpaid rates and land taxes”. The main reasoning for this was that the contract contained provisions for apportionment on settlement in the usual way, and this showed an intention that unpaid rates and land taxes at the time of settlement (where the statutory charge was not registered) should be dealt with by apportionment rather than treating them as a breach of the contract of sale. To find otherwise would obviously have introduced a considerable complication in everyday conveyancing practice. [23] The deed which I am considering is quite different. The deed provides that transfers would be contemporaneous with the execution of the deed itself. There was no provision for apportionment of any amounts which would normally be apportioned on settlement. The deed is silent about outstanding rates and charges on the land. Therefore the approach of Shepherdson J in Davisbourne does not really assist. [24] Megarry and Wade, the Law of Real Property says:- “The term „incumbrances‟ covers all subsisting third party rights such as leases, rentcharges, mortgages easements and restrictive covenants. It also includes statutory liabilities, if they are not merely potential or imposed on property (or a particular class of property) generally”.1 [25] The word encumbrance might in some contexts refer to debts which are either secured or unsecured2. But in a real property context it would 1 Para [15-082] 8th Edition 2012. 2 As was the view of the majority of the High Court in Wallace v Love (1922) 31 CLR 156 at 164 in the case of a Will which required an estate not to be distributed until it was freed from all encumbrances. -- 6 of 9 -- 7 ordinarily refer to charge upon the property “lessening its value to the owner”3. And it was said by Chief Justice de Jersey in Perpetual Trustees Australia Ltd v Bank of Western Australia Ltd & Others [2004] QCA 345 at [11] that the character of an encumbrance is “ordinarily proprietary”, in other words it refers to a debts enforceable against the property itself. [26] In the deed in this case, this requirement is emphasised by the requirement that a transfer of the “unencumbered title” of the properties would be achieved, rather a requirement that the properties be transferred “unencumbered”. This tends to suggest that it was expected that the properties would be transferred without any security interest on them. [27] Turning to the Respondents submissions that an encumbrance would need to be registered to come within Clause 3(a), it is noteworthy that under section 95 of the Local Government Act 2009, the registration of the statutory charge for overdue rates would give it priority over other encumbrances. But by section 95(6) the remedies of the local authority to recover the overdue rates are preserved. Part 12 of the Local Government Regulation 2012 provides various ways the local authority can recover the overdue rates. The choice is between court proceedings for the rates as a debt, or serving a notice of intention to sell the land and then placing the land for auction, or (if the overdue rates exceed the value of the land) the local authority can acquire the land for itself. These latter processes clearly lessen the value of the land to the owner where there is a statutory charge for overdue rates. [28] It is significant that all these methods of enforcement can be pursued by the local authority even if the statutory charge is not registered. Therefore the effect on the land and on the owner is the same whether or not the statutory charge is registered. Therefore I do not agree with the Respondents’ submission that Clause 3(a) is limited to a registered charge and that the words do not encompass an unregistered statutory charge. [29] In the light of this analysis, to my mind the parties intended by Clause 3(a) that the transferee would obtain absolute title to the properties transferred without any security interest upon them, and that includes the absence of any statutory charge with respect to outstanding rates or land tax. This did not happen. Therefore there is a breach of Clause 3(a). The release clauses [30] As for the terms of the release clauses, Clauses 5(a) and 5(c) clearly are a release of the Respondents in respect of the outstanding loan and also the obligations under the earlier deed. They do not stop this claim. As for Clauses 5(d) and 10, both these clauses refer to a “matter referred to in this deed”. Having regard to the recitals of the deed which extensively set out the history of the matter and the unfulfilled obligations of the Respondents, it seems to me that these clauses are intended to 3 A description given by the Federal Court of Appeal in Repatriation Commission v Tsourounakis [2007] FCAFC 29 in paragraph [114]. -- 7 of 9 -- 8 emphasise the Respondents’ release from those obligations. To my mind they do not act to release the Respondents from having to comply with their obligation under this deed. To do so would mean that the Respondents had agreed to do something in Clause 3(a) but then agreed elsewhere in the deed that they did not have to do it. This is very unlikely to have been the intention. The terms of Clause 5(e) tend to show that this is not the intention. In any case there is a rule of construction of deeds that if an earlier clause is followed by a subsequent clause which destroys the obligation created by the earlier clause, the latter clause is to be rejected as repugnant and the earlier clause prevails4. Quantum of the award [31] As for the quantum of the claim, section 95 of the Local Government Act 2009 applies the charge on the land only in respect of overdue charges. Overdue charges are defined in section 132 of the Local Government Regulation 2012 as being those rates or charges which are not paid by the due date for payment stated in the rate notice. [32] On the date when Clause 3(a) should have been complied with (3 September 2010) the rates which were overdue within section 132 (and therefore an encumbrance) were as follows:- Lot 1 $1,573.99 Lot 26 $1,899.15 Lot 40 $1,872.51 Lot 75 $1,916.86 $7,262.51 [33] This amount was paid by the Applicant. The Applicant is entitled to be placed in the same financial position that he would have been in if Clause 3(a) had been complied with. The correct award therefore is $7,262.51 in the Applicant’s favour. [34] The Applicant did also pay some smaller amounts in respect of rates on these lots – some $419.03, but this was for the period 1 July 2010 to 3 September 2010 and this would not have been billed by the Council by 3 September 2010. Therefore these amounts were not “overdue” within the meaning of section 132 of the Local Government Regulation 2012. And so there would be no statutory charge because of these amounts. If only these amounts had been outstanding, Clause 3(a) would not have been breached. Accordingly it would be wrong to add these amounts to the award. [35] Clause 3(a) only imposes an obligation on the First Respondent so the order will only be against that party. 4 See Halsbury’s Laws of Australia “Deeds and Other Instruments” paragraph [140-595]. -- 8 of 9 -- 9 [36] As for interest, this is claimed at 10% over a period of 777 days. This means the claim for interest starts on 27 August 20105. However it would be wrong to award interest in this case starting before any payment was made. On 15 October 2010 the Applicant’s solicitors wrote to the Respondents’ solicitors enclosing copies of the rate accounts and requesting settlement of the rates due prior to the date of settlement, but to no avail. This was sufficient notice to the Respondents that the Applicant would have to pay the overdue rates, tending to make it fair to award interest from the date when the Applicant did so. As for that date, the Respondents have provided later correspondence which shows that on the balance of probabilities the Applicants paid the rates by 1 November 2010 which was the Council’s new “due date” for payment. [37] As for the period of interest, I need to take into account that the claim did not progress with the speed which would normally be expected. It was not until 24 October 2012 that this application to the Tribunal was made. This delay would usually restrict the period over which an award of interest would be appropriate. However the letter of 15 October 2010 was not answered by the Respondents’ solicitors at all, and on 27 September 2011 and again on 14 September 2012 the Applicant’s solicitors made an open offer to settle for the full amount of the claim without any interest, and as things have turned out this offer should have been accepted. [38] I therefore award interest from 1 November 2010 to the date of this decision, and I shall award this at the Supreme Court money order rate which was 10% up to 18 April 2013, then 9% to 30 June 2013 then 8.75%. This is calculated at $1,973.46. [39] I shall also order the Respondent to pay the filing fee paid by the Applicant of $98. A company search fee was also incurred, but I do not think this should be awarded since the correct Respondent was always the First Respondent rather than the Second Respondent company. [40] The award is therefore $7,262.51 plus interest of $1,973.46 plus the filing fee of $98. 5 This is calculated working back from the date of signing of the application on 12 October 2012. -- 9 of 9 --