Export Industries Australia Pty Ltd & East v Larkshore Pty Ltd & Minstrel Pty Ltd [2009] QDC 160

DISTRICT COURT OF QUEENSLAND CITATION: Export Industries Australia Pty Ltd & East v Larkshore Pty Ltd & Minstrel Pty Ltd [2009] QDC 160 PARTIES: EXPORT INDUSTRIES AUSTRALIA PTY LTD (ACN 010 931 192) (Applicant) AND NORMAN HENRY EAST v LARKSHORE PTY LTD (ACN 063 764 081) (First Respondent) AND MINSTREL PTY LTD (ACN 103 523 567) (Second Respondent) FILE NO/S: D34/07 PROCEEDING: Application ORIGINATING COURT: District Court Southport DELIVERED ON: 18 June 2009 DELIVERED AT: Southport HEARING DATES: 9 June 2009 JUDGE: Newton DCJ ORDER: (a) Declare that the sum of $120,000.00 (as adjusted) plus interest accrued held by the first respondent in the first respondent’s solicitors trust account is properly payable as follows: (i) First, to the Australian Taxation Office an amount of the GST liability arising under the parcel 1. sale contract; (ii) Second, as to any balance then remaining to the second respondent. (b) Order that the first respondent be directed to pay: (i) The aforesaid sum of $120,000.00 (as adjusted) plus interest and penalties if any to the Australian Taxation Office; (ii) The balance then remaining to the second respondent. (c) The first respondent is to pay the applicants costs of and incidental to this application and action to be assessed. LEGISLATION: Uniform Civil Procedure Rules 1999 rule 292 and 293 -- 1 of 10 -- 2 CASES: Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99 Bolton Properties Pty Ltd v J K Investments (Australia) Pty Ltd [2009] QCA 135. Horton Geosciences Consultants Pty Ltd v Energy Minerals Pty Ltd [2005] QCA 169 Queensland University of Technology v Project Constructions (Aust) Pty Ltd (in Liq.) [2003] 1 Qd R 259 Winks v WH Heck and Sons Pty Ltd [1986] 2 Qd R 226 at 233. CATCHWORDS: PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PRACTICE UNDER RULES OF COURT – SUMMARY JUDGMENT – CONSTRUCTION OF RULES – APPLICABLE PRINCIPLES – UNIFORM CIVIL PROCEDURE RULES 1999 – rule 292. COUNSEL: Mr T Matthews for the applicants Mr P. D Tucker for the first respondent SOLICITORS: Cusack Galvin & James for the applicants Rudkin Hitchcock for the first respondent [1] This is an application pursuant to rule 292 of the Uniform Civil Procedure Rules 1999 (“UCPR”) for an order that judgment be entered for the applicants against the first respondent for the relief claimed in the further amended statement of claim and costs. [2] Rule 292 UCPR provides as follows: “(1) A plaintiff may, at any time after a defendant files a notice of intention to defend, apply to the court under this part for judgment against the defendant. (2) If the court is satisfied that- (a) the defendant has no real prospect of successfully defending all or a part of the plaintiff’s claim; and (b) there is no need for a trial of the claim or the part of the claim; the court may give judgment for the plaintiff against the defendant of all or the part of the plaintiff’s claim and may make any other order the court considers appropriate.” -- 2 of 10 -- 3 [3] In Bolton Properties Pty Ltd v J K Investments (Australia) Pty Ltd1 Holmes JA said: “[1] ……I do not agree, with respect, with his Honour’s reasons insofar as he equates a claim (or defence) which has “no real prospect of succeeding” with one which is “bound to fail”. I think that there is some difference between the two, although, as Chesterman JA says, they may be “elusively close”. While I doubt that the exploration of finer shades of meaning in this regard is really productive, because differences of opinion may reflect no more than entirely subjective perceptions of meaning, the first implies, to me at least, a conclusion reached after a hard-headed assessment, rejecting spurious arguments, while the second suggests a refusal to act unless complete conviction can be reached. [2] Whether that characterisation is sound or not, the test to which one must adhere is the “no real prospect” test in UCPR 292 and UCPR 293, and I do not think it can be safely paraphrased in the way Chesterman JA proposes. Of course, one must also observe the requirement that the court be satisfied that “there is no need for a trial of the claim or the part of the claim”; summary judgment cannot be granted without that confidence. My views remain as expressed in the passage from my judgment in Queensland University of Technology v Project Constructions (Aust) Pty Ltd (in Liq.) [2003] 1 Qd R 259 at 264-5, which Chesterman JA has quoted.” [4] Daubney J stated: “[66] Whilst I agree with Chesterman JA that this appeal should be dismissed I respectfully do not agree with his Honour’s interpretation of the “no real prospect of success” test postulated under Rules 292 and 293 of the Uniform Civil Procedure Rules in respect of summary judgment application by plaintiffs and defendants respectively…. [74] When considering this element in a plaintiff’s summary judgment application, however the question is not whether the defendant’s case is “hopeless” or “bound to fail”. As Holmes J (as her Honour then was) said 1 [2009] QCA 135. -- 3 of 10 -- 4 in Queensland University of Technology v Project Constructions (Aust) Pty Ltd (in Liq.) [2003] 1 Qd R 259 at 265: “The more appropriate inquiry is in terms of the Rule itself: that is, whether there exists a real, as opposed to a fanciful, prospect of success.”…. [77] There is, to my mind, a palpable difference between the former process of assessing whether a defendant had shown enough as at least to enable an inference to be drawn that the defendant might be able to establish a defence at trial, and the current requirement for the court to be satisfied that the defendant has a real, not fanciful, prospect of successfully defending the claim.” [5] By a written loan document dated 15 August 1997,2 the first applicant (Export Industries) borrowed monies from the first respondent’s predecessor in title (PCCR Nominees Pty Ltd). A mortgage was executed of certain real property to secure the loan. 3 [6] In August 1999 Export Industries defaulted under the loan and mortgage. On 1 September 2003 Export Industries entered into a contract for the sale of the property to Michael Eskander, or his nominee.4 The nominated purchase price in the contract was $1200,000. The contract provided as follows in relation to goods and services tax under special condition 45 contained in annexure A to the contract: “45. Goods and Services Tax (a) clause 34 of the Standard Conditions does not apply to this Contract; (b) For the purpose of this clause:- “GST Act” means Goods and Services Tax within the meaning of the GST Act. “GST Act” means A New Tax System (Goods and Services Tax) Act 1999 (Courthouse) as amended. Expressions used in this clause have the same meaning as those expressions in the GST Act. 2 Further amended statement of claim para 1(c); further amended defence para 2(a). 3 Further amended statement of claim para 1(f); further amended defence para 2 (a). 4 Further amended statement of claim para 1(e)(i); further amended defence para 2(c). -- 4 of 10 -- 5 (c) The Purchase Price payable under the Contract is exclusive of the GST and the Purchaser shall pay the Vendor the amount in addition to the Purchase Price equivalent to any GST imposed on any taxable supply made by the Vendor under this Contract. (d) The Vendor warrants that it is able and if required by the Purchaser must elect to apply the margin scheme pursuant on any supplies made pursuant to this Contract. (e) On completion, the Vendor must provide the Purchaser with a valid tax invoice pursuant to the GST Act. (f) Each part must comply with part VB of the Trade Practices Act 1974 and any guidelines issued under that Part.” [7] The contract was provided under cover of the applicants’ solicitors’ letter to the first respondent’s solicitor’s dated 4 September 2003.5 In response to that letter the solicitor’s for the first respondent wrote on 15 September 2003 to the solicitor’s for the first applicant stating that: “Our client does not oppose the sale price of $1,200,000.00 or provision for escalation of the monies payable under the contract provided settlement occurs no later than 15th March 2004 and that purchase price (adjusted only in relation to rates, land tax, GST and the $7,000.00 per month amount pursuant to special condition 41(c) and not reduced on any other basis, including special condition 37) is paid in full to our client (together with any other monies payable from the Purchaser to the Vendor) in partial satisfaction of the monies outstanding to our client, it being our client’s intention to reserve its rights to recover further monies outstanding from any one or more of the borrower/mortgagor/guarantors. Of course, it would be open to either of your clients to pursue litigation following settlement (but of course such litigation would be strenuously defended). The foregoing does not amount to any acknowledgment by our client that the sale price represents market value for the property.” [8] On 29 September 2003 the first respondent, by its solicitors again wrote to the solicitors for the first applicant stating that: 5 Exhibit WPC1-20 to the Affidavit of William Patrick Cusack filed 22 January 2004. -- 5 of 10 -- 6 “It seems to us that it is imperative that a contract on terms acceptable to all parties be exchanged as soon as possible. To this end, we would have thought that we should have been consulted on the terms of the contract prior to its being negotiated and reduced to writing. Be that as it may, out client has no intention of frustrating attempts to have a contract completed on essentially the negotiated terms, but the prime consideration is that there must be some certainty regarding the completion (or otherwise) of the contract. The other issue relates to distribution of the proceeds of sale. As you are aware, the amount properly claimed by out client pursuant to the mortgage, far exceeds the sale price as no payments in respect of interest or principal have been received for many years; frankly we fail to see why our client should accept a lesser sum than that to which it is entitled.” [9] On 30 September 2003 the solicitors for the first respondent wrote to the solicitors for the first applicant stating that: “On completion of the contract, the mortgagee, (via this firm) is to receive the net proceeds of the sale absolutely (ie the entire purchase costs, plus or minus rate adjustments and less any reasonable legal costs and other properly incurred expenses of the mortgagor/vendor). It is noted that no agent is involved in the sale. We will require to sight and approve prior to settlement, an itemisation of all monies to be deducted from the sale price.” [10] On 13 May 2004 the solicitors for the first respondent wrote to the solicitors for the first applicant stating that: “As regards to your client’s request that our client extend its sunset date, we advise that our client is prepared to delay moving on with it’s own agenda as regards the property and wait until 15.06.04 for settlement to occur on the basis that: (a) The full purchase price of $1.2 million (adjusted only in relation to land tax, GST (ie plus GST if applicable) and (if applicable the $7,000 per month amount pursuant to special condition 41(c) and not reduced, including special condition 37) is paid in full to our client -- 6 of 10 -- 7 (together with any other monies payable from your client to the seller and also, if applicable, any interest earned on the deposit) in exchange for release of our client’s mortgage. (b) Although it is no concern to your client it is our client’s intention that such money will be received by our client (notwithstanding any release of the mortgage) in partial satisfaction of the monies outstanding to our client, it being our client’s intention to reserve its right to recover further monies outstanding from one or more of the borrower/mortgagor/guarantors.” [11] Argument ensued in July 2004 between the solicitors for the parties as to the GST payable under the contract. A temporary solution was arranged to enable the contract to be completed whereby the solicitors for the first respondent received and hold $120,000 from the monies paid by the second respondent under the contract pending resolution of the dispute. [12] In the further amended statement of claim the applicants contend that: • The first applicant relied upon the solicitors for the first respondent’s letters of 15 September 2003 and 30 September 2003 to the effect that the first respondent did not oppose a sale price for the property of $1,200,000 and required that the sale price (adjusted only in relation to rates, land tax and GST) to be paid in full to the first respondent; 6 • On 9 July 2004 the first respondent, by its solicitors, advised the first applicant for the first time that the first respondent demanded to be paid the GST component of the consideration payable under the contract;7 • The agreement between the first applicant and the first respondent concerning payment of monies arising from the purchase of the property under the contract did not extend to the payment of the GST component payable under the contract to the first respondent; 8 6 Further amended statement of claim paras 8,9,10 and 11. 7 Further amended statement of claim para 18. 8 Further amended statement of claim para 24(a). -- 7 of 10 -- 8 • The first respondent acted unconscionably when, knowing that GST was payable of the nominated purchase price, the first respondent failed to give the first applicant any proper notice as to the first respondent’s intentions in relation to its claim upon the GST;9 • The first respondent had no entitlement under the loan agreement or the mortgage to appropriate the GST payable under the contract. 10 [13] In its further amended defence the first respondent: • Admits the letters dated 15 September 2003 and 30 September 2003; • Admits that, by on or about 30 September 2003, the first applicant agreed to settle the contract on the basis that it would pay to the first respondent the purchase price, adjusted for rates, land tax and GST in partial satisfaction of monies owing to the first respondent by the first applicant; • Thereby entered into an agreement with the first applicant concerning the dispersal of the monies payable under the contract upon its settlement. 11 [14] It is submitted on behalf of the first respondent that, accordingly, the first respondent apprehends that the applicants contend that the agreement did not require the first applicant to pay to the first respondent, in satisfaction of the first applicant’s outstanding obligations under the loan and mortgage, the GST payable under the contract by the second respondent. [15] The submission made on behalf of the applicants is that the letter of 15 September 2003 could have no other meaning than that there were to be no reductions from the gross proceeds of sale apart from those matters identified as is made clear by the use of the words “and not reduced on any other basis”. Counsel for the applicants submits that there can be no occasion for a mortgagee whether in possession or not and whether or not the mortgagor is in default to retain for its own benefit from the proceeds of sale of the security property a specific component paid in addition to the 9 Further amended statement of claim para 24(b). 10 Further amended statement of claim para 24(c). -- 8 of 10 -- 9 contractually agreed purchase price for GST. Thus, it was submitted, the letter of 15 September 2003, written in the context of a consideration of the specific terms of special condition 45 of the contract entered into on 1 September 2003 can mean nothing other than the GST component paid on the purchase price by the purchaser to the first applicant as vendor ought to have been and is properly payable to the first applicant, which will be obliged to remit the same to the Australian Taxation Office. [16] In these circumstances, it is submitted on behalf of the applicants that the defence has no real prospect of success and that the argument advanced by the first respondent in 2003 and then in 2004, and continued in the course of the first respondent’s defence, does not warrant a trial of the proceeding. [17] In Australian Broadcasting Commission v Australasian Performing Right Association Limited12 Gibbs J (as he then was) stated: “It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust…” 13 [18] It should be kept in mind that special condition 45(c) contained in Annexure A provides that “the Purchase Price payable under this Contract is exclusive of GST 11 Further amended defence paras 9 and 10. 12 (1973) 129 CLR 99 -- 9 of 10 -- 10 and the Purchaser shall pay the Vendor an amount in addition to the Purchase Price equivalent to any GST imposed on any taxable supply made by the Vendor under this Contact.” The Purchase Price is expressed in Item N of the Items Schedule of the Contract as $1,200,000. In my view, the clear meaning of the specific provisions of special condition 45 of the Contract is that the GST component paid on the Purchase Price by the first respondent is properly payable to the first applicant who is required to remit that amount of $120,000 to the Australian Taxation Office. The words used in special condition 45(c) are unambiguous and this court accordingly must give effect to them. There is nothing in the language used in the special condition which is susceptible of more than one meaning which would require evidence of the surrounding matrix of facts to be considered in order to assist in the interpretation of the contract. 14 Nor is the nature of the agreement itself in issue thus requiring the court to have regard to the behaviour of the parties following the formation of the contract in determining what the true contract is. 15 [19] The letter of 15 September 2003 from the solicitors for the first respondent correctly, in my view, stated the intention of the parties namely that the first respondent as mortgagee was entitled to the receipt of the entire proceeds of sale except for rates, land tax, GST and the $7,000 per month amount pursuant to special condition 41(c).16 [20] I am satisfied that the first respondent does not have a real as opposed to a fanciful prospect of successfully defending the claim of the first applicant and that, accordingly, a trial of the proceeding is not warranted. I therefore order that judgment be entered for the applicants against the first respondent for the relief claimed in the further amended statement of claim. The first respondent is to pay the costs of the applicants of and incidental to the application and the action. 13 Ibid at p109. 14 Horton Geosciences Consultants Pty Ltd v Energy Minerals Pty Ltd [2005] QCA 169 15 Winks v WH Heck and Sons Pty Ltd [1086] 2 Qd R 226 at 233. 16 Special condition 41(c) in Annexure A to the contract provides that “The Purchaser may at its election, in the event of delays mentioned in 41(a) and (b) occur; by giving written notice to the Vendor on or before the Date for Completion extend the Date for Completion for any period on any number of occasions up to a maximum period of sixty (60) days from the Date for Completion pursuant to clause 41(a) in consideration for the Purchaser paying to the Vendor on the Date for Completion the sum of $7,000 per month or part thereof for each month the Date for Completion is extended beyond the Date for Completion pursuant to clause 41(a).” -- 10 of 10 --