E J Reeve & Son v Primac Ltd, Wilde & Harris [1996] QCA 127

IN THE COURT OF APPEAL [1996] QCA 127 SUPREME COURT OF QUEENSLAND Appeal No. 168 of 1995 Brisbane Before McPherson J.A. Davies J.A. Ambrose J. [E.J. Reeve & Son v. Primac Limited] BETWEEN E.J. REEVE & SON (a firm) Appellant (Plaintiff) AND PRIMAC LIMITED First Respondent (First Defendant) AND WILSON JOSEPH WILDE and ERNEST GEORGE HARRIS (Second Defendants) Second Respondents REASONS FOR JUDGMENT - OF THE COURT Judgment delivered the 10th day of May 1996 This is an appeal by the plaintiff E.J. Reeve & Son, a firm of which Mr Reeve (who appeared before us in person) and his mother are the partners, against an order made in action no. 58 of 1995 in the District Court at Toowoomba. The order stayed that action, which was brought by the plaintiffs against Primac Limited as first defendant for damages for breach of contract, and against Messieurs W.J. Wilde and E.G. Harris as second defendants for moneys had and received. Wilde and Harris are the liquidators of Darling Downs Grain Fed Beef Pty. Ltd., to which it is convenient to refer as Grain Fed, which was -- 1 of 15 -- 2 ordered to be wound up on 14 August 1989. They had earlier been appointed provisional liquidators of Grain Fed on 16 May 1989. Until their appointment, Mr Reeves was the managing director of Grain Fed, as he was of another company Darling Downs Stock Buyers (International) Pty. Ltd. ("Stock Buyers"), which on 2 February 1990 was also ordered to be wound up. Stock Buyers entered the narrative of events through having in 1989 executed in favour of Primac a stock mortgage over certain cattle which were bought with money lent by Primac. Stock Buyers having defaulted under that mortgage, Primac in the exercise of its powers as mortgagee took possession of the mortgaged cattle on 16 May 1989, which was doubtless the event that precipitated the appointment of Wilde and Harris as provisional liquidators on that date. The cattle were at that time depastured on a feedlot known as Balgowan, at Acland in Queensland. Although Primac as mortgagee took possession of them, the cattle themselves were left on the Balgowan feedlot, and remained there until removed for slaughter on 2 August 1989. Until then, they had to be and were fed to keep them alive and saleable. The question which, in one form or another, is raised by the litigation was and is who is entitled to be paid for their upkeep during that period. Mr Reeve claims it was the plaintiffs E.J. Reeve & Son who supplied feed for the mortgaged cattle and, in consequence, that it is they who are entitled to be paid for it by Primac. Their claim for feeding the cattle between 16 May and 2 August 1989 was originally quantified in the action at an amount of $187,544. Encouraged, however, by learning that in law title to the cattle had, under the stock mortgage, been transferred or assigned to Primac as mortgagee, the plaintiffs recently amended the amount of their claim in action no. 58 of 1995 to increase it to $317,495.00. The increase represents the value of feed -- 2 of 15 -- 3 or feedlot services alleged to have been supplied by the plaintiffs to or for the cattle before Primac took possession of them on 16 May 1989. The amendment treats Primac as at all times the "owner" of and as such responsible and liable for the upkeep of the cattle. It ignores the circumstance that a stock mortgage like this resembles an "old system" mortgage of land under which, although legal title is transferred, the mortgagor retains not only the equity of redemption until foreclosure or sale, but also possession of the property until default and seizure by the mortgagee. To understand some of what follows, it may be helpful to add that under cl.4(h) of the stock mortgage in favour of Primac (which is in a standard form) the mortgagee is, on taking possession upon default, authorised to expend money on agistment, etc., and to retain or reimburse itself for those expenses out of the proceeds of sale of the mortgaged property. Also by cl.4(q)(i) of the stock mortgage, the mortgagor covenanted to pay all costs, charges and expenses incurred by the mortgagee in respect of the mortgaged property or in consequence of the mortgagor's failure to perform the covenants under the stock mortgage. The result no doubt is that, in the event of a shortfall in the proceeds of sale, it is the mortgagor Stock Buyers that, as between itself and Primac, is or will be legally liable for the costs and expenses of maintaining the cattle after 16 May 1989. But that consideration does not affect the fact that, before that date, it was the mortgagor Stock Buyers which was in possession of the cattle and responsible for their upkeep. It was not until on or after 16 May 1989, when possession passed to the mortgagee, that Primac as the person in possession became liable for the expense of feeding and looking after them. Questions which then arose were: (1) the amount which was to be paid for continuing to feed and maintain the mortgaged cattle; (2) the identity of the person who -- 3 of 15 -- 4 was going to pay it; and (3) the person to whom it was to be paid. Questions of that kind were, it seems, first considered at a meeting of interested parties held at the office of Messrs Wilde and Harris on 16 May 1989, which was attended by representatives of Primac and by Mr Reeve on behalf of the plaintiffs. A further meeting was held on 30 May 1989, at which those persons, together with the provisional liquidators, as they had by then become, and various creditors of Stock Buyers were present. In the course of that meeting, a rate of $2.00 per day for each head of cattle was fixed and agreed upon as the amount to be paid for feeding them. The plaintiffs' action no.58 of 1995 claims payment at that rate, and to that extent there appears to be no dispute. What is now in issue in the action is the identity of the person or entity who was to be paid at that rate. According to para.24 of the affidavit of Mr Reeve read in opposition to the application to stay the action, the provisional liquidator Mr E.G. Harris at the meeting on 30 May 1980 "explained it would be necessary to collect funds from each cattle owner, or alternatively to deduct funds from the sale of the investors' cattle, in order to pay the Plaintiff to feed the cattle, whilst they were disposed of in an orderly fashion". For present purposes it is not necessary to identify "the investors" referred to in para.24 of the affidavit further than to say that feedlotting of cattle at Acland was part of a more extensive arrangement designed to attract investment by persons interested in reducing the incidence of their income tax. What is critical to the action is that "the Plaintiff" to which reference is made in that paragraph is the plaintiffs in action no. 58 of 1995, who are E.J. Reeve & Son. If in fact Mr Harris did on that occasion identify the plaintiffs E.J. Reeve & Son as the persons who were to be paid for feeding the cattle pending their sale, then, subject to what follows, the plaintiffs would, on the face of it, be entitled to payment for performing that task from 16 May 1989, when possession was taken, until the cattle were removed for slaughter on 2 -- 4 of 15 -- 5 August 1989. It may be added that, again, there is apparently no dispute that, although the alleged agreement is said to have been made at the meeting on 30 May, it was to apply retrospectively to 16 May 1989, when possession was taken by Primac as mortgagee. If, at a trial of the action, Mr Reeve's account of what was said by Mr Harris at the meeting was accepted, it might be thought that the plaintiffs would be tolerably well placed to obtain judgment in action no. 58 of 1995 to recover the amount claimed, but not paid to them, for feeding the cattle between the two dates mentioned. It would be recoverable either as a debt due to the plaintiffs or, as their plaint would have it, as damages for breach of contract. Regrettably, there is little that can be said about events that took place at or about this time, or afterwards, that is not contested or at least confused. There is another and earlier affidavit by Mr Reeve in which he says that he attended the meeting of creditors of Grain Fed on 30 May 1989 as a creditor of that company and as its managing director. In para.7 of that affidavit he deposes that: "At the said meeting, it was agreed, amongst other things, that Primac would pay the sum of $2.00 per beast per day for feed supplied to its cattle at the Balgowan feed lot as and from the 16th day of May 1989. There was no agreement by [Stock Buyers] at the said meeting or otherwise to pay the Plaintiff for the said cattle feed." It will be recalled that, at that time, it was not Stock Buyers that was in liquidation, and that the meeting in question was of creditors not of that company but of Grain Fed, which by 30 May 1989 had passed under the control of the provisional liquidators Wilde and Harris. The affidavit in which para.7 appears was filed in support of an application for summary judgment in another and quite separate action no. 2181 of 1991, which was brought by Grain Fed against Primac to recover $166,098 alleged to be due by Primac for the same cattle feed supplied by Grain Fed to the same cattle between 14 May and 2 August 1980 at the Balgowan feedlot. According to the allegation in para.8 of the plaint in that action no. -- 5 of 15 -- 6 2181 of 1991, the agreement made at the meeting on 30 May 1989 was that Primac would pay Grain Fed the daily sum of $2.00 per beast in consideration of Grain Fed's continuing to provide feed for the mortgaged cattle at Balgowan; as an alternative, the plaint in para.14(b) also, as part of an estoppel set up by para.14, alleged that the solicitor for Primac had at that meeting said that Primac would advance money to Stock Buyers to enable it to pay for feed for the mortgaged cattle. Elsewhere in the plaint it was alleged that it was Grain Fed that in fact provided the feed for the mortgaged cattle at Balgowan on and between the two dates in question. As matters turned out, the application by Grain Fed for summary judgment did not proceed to a hearing. Instead, action no. 2181 of 1991 was compromised by terms of settlement ex DMH9 signed by counsel and dated 20 February 1992. By those terms Primac forewent certain specified claims against Grain Fed and agreed to pay to Grain Fed a sum of $60,000 together with costs. Both parties agreed to forego all other claims against each other. It is accepted on all sides that the sum of $60,000 has been paid by Primac in accordance with the terms of settlement. For present purposes, it may be assumed that Primac would not have entered into the settlement, or paid that sum, if it had not believed that by doing so it was or would be quit of claims against it arising out of the feedlotting of the mortgaged cattle on and between 16 May and 2 August 1989. Primac claims that in doing so it was acting on a representation by Mr Reeve that the claim for feeding the mortgaged cattle during that period had been validly made by Grain Fed in its action no. 2181 of 1991 against Primac. Why otherwise, it asks, would Mr Reeve have supported the application for summary judgment by Grain Fed, to the extent even of swearing the affidavit, which he must have known would be relied on by Grain Fed, in para.7 of which he deposed -- 6 of 15 -- 7 that there was no agreement by the mortgagor Stock Buyers at the meeting on 30 May 1989, or otherwise, to pay Grain Fed for the cattle feed? If, it is submitted, a person so conducts himself as to lead another reasonably to believe that he is assenting to a certain state of affairs, and that other then acts to his detriment on that belief, the person so conducting himself is precluded or estopped from later asserting a state of affairs which differs from what was represented. See Freeman v. Cooke (1848) 2 Ex. 654, 663; 154 E.R. 652, 656; Smith v. Hughes (1871) L.R. 6 Q.B. 597, 607; Commonwealth v. Verwayen (1990) 170 C.L.R. 394, 413. Here the state of affairs said to have been assented to by Mr Reeve is that the feedlot money, as it may be called, was due and owing by Primac to Grain Fed, and not to the plaintiffs E.J. Reeve & Son in action no. 58 of 1995. In the court below the learned judge accepted Primac's submission to that effect. He held that the plaintiffs E.J. Reeve & Son were so plainly estopped by their or Mr Reeve's conduct that action no.58 of 1995 should be stayed, and accordingly he ordered a stay of it against all defendants. The question on this appeal is whether his Honour was correct in doing so, or whether, as Mr Reeve contends, the plaintiffs in the action no.58 of 1991 should have been permitted to proceed to trial. On the subject of staying an action on the basis of an estoppel, Walsh J. in Co-Ownership Land Development Pty. Ltd. v. Queensland Estates Pty. Ltd. (1973) 47 A.L.J.R. 519, 521-522, had this to say: "It has frequently been stated that a summary order which precludes a party from pursuing his claim according to the ordinary course of procedure should be made only in a very clear case. Various expressions, used to indicate the exceptional caution with which the power to make such an order should be exercised, are mentioned in the discussion of this question by Barwick C.J. in General Steel Inc. v. Commissioner for Railways (N.S.W.) (1964), 112 C.L.R. 125, at pp.129-130. -- 7 of 15 -- 8 In accordance with that principle, the question to be decided in this appeal is not the same as the question which would have been raised if the appellant had put on by way of defence a plea of issue estoppel to the whole of the statement of claim or to some of the allegations of fact contained in it, setting out the matters upon which the appellant relied to raise the estoppel and if the respondent had demurred to that plea. In that event the Court would be required to reach a definite conclusion on the question whether the facts asserted in the plea would establish, if proved, the estoppel alleged by it. In the present application the Supreme Court was not required to decide that question finally. To warrant the granting of the application, the Court had to be satisfied that it was very clear that the respondent had no claim which it was not precluded from pursuing. Unless so satisfied, the right course was to refuse the stay and to allow the question of estoppel to be resolved later in accordance with the normal course of the proceedings." To the same general effect are the remarks of Menzies J. in that case (47 A.L.J.R. 519, at 519 col.2E-F). Stephen J., who was the third member of the court, agreed (at 525) with both sets of reasons for judgment given by their Honours. The question before their Honours on that occasion was one of issue estoppel and not, as here, one of estoppel by representation. That, in my respectful opinion, can make no difference to the applicability of the principle stated by Walsh J. The degree of clarity and cogency expected of material relied on to found an estoppel by representation can hardly be less than for an issue estoppel which, primarily and ordinarily, may be expected to turn on the pleadings. From the reasons for judgment of Walsh J. in the decision cited, it will be seen that his Honour assimilated an order for a stay of the present kind with a summary order which precludes a party from pursuing his claim by striking out the action, which was the subject of consideration in General Steel Industries Inc. v. Commissioner for Rys. (N.S.W.) 1964) 112 C.L.R. 125, 129-130, to which his Honour referred. The question, then, is whether such a "very clear case" was shown as to attract a summary order of that kind here. -- 8 of 15 -- 9 I have reached the conclusion that it was not. Even if one were to admit to profound suspicion about a number of matters said by Mr Reeve, both in his affidavits and from the Bar table in the course of his submissions on appeal, there continues to be material before the court raising issues of fact for determination. In Mr Reeve's affidavit in action no. 58 of 1995 there is a statement that E.J. Reeve & Son conducted the feedlotting business, owned some of the equipment, and employed the staff at the feedlot. It does not appear to be contradicted anywhere in the material from Primac. In addition, there is the statement by Reeve in para.24 of the same affidavit to the effect that, at the meeting on 30 May 1989 attended by representatives of Primac, Harris explained that it was necessary to collect funds in order to pay the plaintiff, meaning E.J. Reeve & Son. Further, in para.27 of that affidavit, Mr Reeve deposed that, if Primac had not agreed at the meeting to pay $2.00 a day for feedlotting, "then the plaintiff would have stopped feeding the cattle". It is not suggested that this was communicated to those attending the meeting; but a similar thought must have been uppermost in the minds of everyone present. If the cattle, which were a valuable asset, were not fed, they would die. The real problem is that no one at the meeting seems to have turned their attention to the question of who would be entitled to the payment, if it was to be made, for the feed or for the services involved in feeding the cattle. It seems to have been assumed by the liquidators, perhaps without giving much thought to the matter, that it was Grain Fed that would be entitled to the payment. The invoices they sent out afterwards were addressed by Grain Fed to Stock Buyers. Addressing them to Stock Buyers was not consistent with the claim later made by Grain Fed in action no. 2181 of 1991 against Primac. It may well have been that feature, taken with the alternative claim by Grain Fed in para.14(b) of its plaint in that action, that explains why on settlement Grain Fed accepted a reduction in the -- 9 of 15 -- 10 claim against Primac to one third of the amount originally claimed. If in fact the offer by Primac's solicitor at that meeting was to make a loan to Stock Buyers to continue paying for the feed, it cannot have been intended that Primac would be incurring the liability for feed to the person (whoever it was) who was to provide it. If Mr Reeve is telling the truth, he was entitled to assume that the discussion at the meeting was directed to the question who would pay E.J. Reeve & Son for the feed to be supplied, without unduly concerning himself about the precise mechanism by which that result would be achieved. Against this is put the incontrovertible fact that, when Grain Fed sued for the amount due at the daily rate of $2.00 per head, Mr Reeve assisted its claim by deposing that the agreement was that Primac would pay, and, further, that there was never at any time an agreement that Stock Buyers would do so. The statement in para.7 of Reeve's affidavit does not directly touch the point in issue here because the question in dispute in action no. 2181 of 1991 was not whether it was Grain Fed or E.J. Reeve & Son who was entitled to be paid for feeding the cattle. It was whether it was Primac or Stock Buyers that was liable to pay it. Paragraph 7 of Mr Reeve's affidavit in support of the summary judgment application in that action has to be read in that context. It does not say that Grain Fed is entitled to payment, but simply that there was no agreement by Stock Buyers to pay. Of course, it may be asked why, if E.J. Reeve & Son were entitled to the payment, Mr Reeve elected not merely to stand back and allow Grain Fed to sue for it, but positively assisted that company by providing his affidavit in support of its claim to payment. He meets, or seeks to meet, this weakness in his case by saying that he understood that the liquidators were to receive the payment on behalf of E.J. Reeve & Son. In para.30 of his affidavit in action no.58 of 1995, he says that on "numerous occasions" he asked Mr Roach, who was an employee or agent of the liquidators, as well as a Mr Beale also acting -- 10 of 15 -- 11 on their behalf, to inform him of the outcome of the litigation against Primac. They refused to tell him, and he says he did not know about it until he read the affidavit filed by Primac in support of the application to stay the present action by E.J. Reeve & Son. It is true that there was no reason why Primac should have supposed that Grain Fed or its liquidators or legal representatives had the authority of E.J. Reeve & Son to settle any claim it might have had against Primac for supplying feed to the mortgaged cattle; but, as it happens, it is not suggested that Primac did believe that Grain Fed had the authority of E.J. Reeve & Son to make the settlement contained in the document ex DMH9. What we are asked to assume is that Primac believed that E.J. Reeve & Son had no claim at all to payment for the feed supplied for the mortgaged cattle. Whether or not Primac in fact entertained such a belief, or was acting reasonably in doing so, is not something that was capable of being resolved on the available material on an application such as this. There is no statement from Primac or its relevant officer deposing to the state of its or his belief, or to the extent of their knowledge at the relevant time. For all we know, the Primac officer who attended the meeting on 30 May 1989 may have formed an impression of what was said there that was completely at odds with that held by Primac's counsel when he agreed to the settlement contained in ex DMH9. Evidence at trial may show that, because of what was said at the meeting or otherwise, Primac at all times knew, or ought reasonably to have known, that the supplier of the feedlot services was not Grain Fed but E.J. Reeve & Son. In this state of the evidence, or lack of it, it is simply not possible to reach a conclusion with the degree of confidence required to deny to E.J. Reeve & Son their right to a trial of the action. On the material now before us, the case is, to adopt the words of Walsh J., not so "very clear" as to justify the summary order made below precluding those -- 11 of 15 -- 12 plaintiffs from pursuing their claim according to the ordinary course of procedure. The question of estoppel ought to be resolved at trial in the ordinary way. The appeal should therefore be allowed. What has been said here about the claim for payment for feeding the cattle on and between 16 May and 2 August 1989 has no application to that portion of the amended claim in action no. 58 of 1991, which relates to feed supplied before the first of those dates. That part of the claim in the action is based on a complete misapprehension by Mr Reeve of the nature of a stock mortgage and the basis on which a stock mortgagee, who takes possession of the mortgaged property, may be held liable for the cost of preserving it. To that extent the stay ordered below should be left in place. As regards the claim by E.J. Reeve & Son against Messrs. Wilde and Harris as liquidators, the action must fail altogether. If the sum of $60,000 has in fact been paid by Primac, it was received by them on behalf of the company Grain Fed, whose liquidators they were. The money was paid in pursuance of the compromise of a claim in an action brought by that company and was accordingly received by it in that character. The claim now made by E.J. Reeve & Son to recover that payment as moneys had and received can be made and enforced, if at all, only against Grain Fed as the recipient and not against the liquidators personally. So far as concerns the second defendants Wilde and Harris, the action against them was rightly stayed. It cannot succeed against them on the pleadings as they stand, nor on any other ground advanced before us on the appeal. To that extent the appeal must be dismissed with costs. Otherwise the appeal should be allowed by varying the order below to confine the stay of action no. 58 of 1995 to the claim of the plaintiff firm E.J. Reeve & Son against the first defendant Primac Limited for payment for feedlotting services provided for the mortgaged cattle before 16 May 1989. -- 12 of 15 -- 13 Both the costs of the appeal against the order staying the action against Primac Limited and the costs in the court below of the application for that stay should be costs in the cause no.58 of 1995 in the District Court at Toowoomba. -- 13 of 15 -- IN THE COURT OF APPEAL SUPREME COURT OF QUEENSLAND Appeal No. 168 of 1995 Brisbane [E.J.Reeve & Son v. Primac Limited] BETWEEN E.J. REEVE & SON (a firm) Appellant (Plaintiff) AND PRIMAC LIMITED First Respondent (First Defendant) AND WILSON JOSEPH WILDE and ERNEST GEORGE HARRIS (Second Defendants) Second Respondents McPherson J.A. Davies J.A. Ambrose J. Judgment delivered 10/05/96 Reasons for judgment by the Court APPEAL ALLOWED BY VARYING THE ORDER BELOW TO CONFINE THE STAY OF ACTION NO. 58 OF 1995 TO THE CLAIM OF THE PLAINTIFF FIRM E.J. REEVE & SON AGAINST THE FIRST DEFENDANT PRIMAC LIMITED FOR PAYMENT FOR FEEDLOTTING SERVICES PROVIDED FOR THE MORTGAGED CATTLE BEFORE 16 MAY 1989. BOTH THE COSTS OF THE APPEAL AGAINST THE ORDER STAYING THE ACTION AGAINST PRIMAC LIMITED AND THE COSTS IN THE COURT BELOW OF THE APPLICATION FOR THAT STAY SHOULD BE COSTS IN THE CAUSE NO.58 OF 1995 IN THE DISTRICT COURT AT TOOWOOMBA. WITH RESPECT TO THE PROCEEDINGS AGAINST THE SECOND DEFENDANTS WILDE & HARRIS, THE STAY IS UPHELD AND THE APPEAL IS DISMISSED WITH COSTS. CATCHWORDS PRACTICE - STAY OF PROCEEDINGS - Whether estoppel by representation should found a stay of the plaintiff's action. EQUITY - Estoppel by representation - Whether estoppel by representation should found a stay of the plaintiff's action. Freeman v. Cooke (1848) 2 Ex. 654, 663; 154 E.R. 652; Smith v. Hughes (1871) L.R. 6 Q.B. 597, 607; Commonwealth v. Verwayen (1990) 170 C.L.R. 394; Co-Ownership Land Development Pty. Ltd. v. Queensland Estates Pty. Ltd. (1973) 47 A.L.J.R. 519; General Steel Industries Inc.. v. Commissioner for Railways (N.S.W.) (1964), 112 C.L.R. 125. Counsel: Mr Reeve ( a partner in the firm of E.J. Reeve & Son) was granted leave to appear for the appellant A.B. Crowe for the first respondent I Perkins for the second respondent Solicitors: Clayton Utz for the first respondent -- 14 of 15 -- Minter Ellison for the second respondent Hearing Date: 26 March 1996 -- 15 of 15 --