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Supreme Court of the ACT Decisions |
IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
CRISPIN J
CONTRACT - claim
for specific performance or damages - claim to estop
defendant from denying agreement - whether failure to execute deed evinced
intention
not to be bound by agreement.
CONTRACT - consideration - forebearance to sue - adequate consideration if
claim made in good faith
- whether necessary for claim not to be vexatious or
frivolous - onus on party seeking to impugn consideration.
CONTRACT - agreement
and subsequent variation of term - acceptance inferred
from actions of parties.
Bankruptcy Act 1966 (Cth)
Family Law Act 1975 (Cth)
Domestic Relationships Act 1994
Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 361, considered
Butler v Fairclough [1917] HCA 9; (1917) 23 CLR 78 at 96, considered
Jayawickreme v Amarasuriya [1918] AC 869 at 873-874, considered
Binder v Alachouzos
[1972] 2 QB 151 at 159 & 160, considered
Miles v New Zealand Alford Estate Co (1886) 32 ChD 266 at 283-4, considered
Wigan v Edwards (1973) 1 ALR 497, applied
Commonwealth of Australia v Crothall Hospital Services (Aust) Ltd (1981) 36
ALR 567
at 500, considered
Brogden v Metropolitan Railway Co (1877) 2 AC 666 per Lord Blackburn at
693, considered
Carlill v Carbolic
Smoke Ball Co [1892] EWCA Civ 1; (1893) 1 QB 256 per Bowen LJ at 269-270,
considered
Gjergja v Cooper [1987] VR 167 per Ormiston J at 202-203, considered
CANBERRA, 9 and 12 march 1998 (hearing), 18 March 1998 (decision)
#DATE 18:03:1998
Appearances
Counsel
for the Plaintiff: Ms J Godtschalk
Instructing Solicitors: Sneddon Hall & Gallop
Counsel for the Defendant: Mr G
Clark
Instructing Solicitors: J G O'Halloran
Order:
1. Judgment for the plaintiff in the sum of $34,686.16.
2. Judgment for the plaintiff on the defendant's counter-claim.
CRISPIN J 1. In this matter the plaintiff
has sought an order requiring
specific performance of an agreement said to have been entered into between
the parties on or about
20 February 1991 and evidenced in writing. In the
alternative she seeks damages. During the course of the hearing I granted
leave
for the Statement of Claim to be amended to enable her to plead that the
defendant was estopped from denying the said agreement.
I also granted leave
for a further amendment permitting the plaintiff to rely upon alleged breaches
of a subsequent agreement pursuant
to which the mortgage referred to in the
initial agreement had been discharged and replaced by a further mortgage
securing a larger
sum advanced by a different bank.
2. The defendant seeks to maintain a counter-claim for an equitable
interest in the property
over which the said mortgage is secured.
3. In March 1984 the parties commenced to live together in what was
described in the
Statement of Claim as a de facto marriage relationship. The
plaintiff had previously been married and already had a daughter, Bridget
Claire Dainer, who had been born on 30 January 1981. A further daughter,
Brooke Edwina Ferguson was born to the parties on 22 July
1986. Shortly prior
to Brooke's birth the plaintiff bought a block of land at 12 Bromby Street,
Isaacs in the Australian Capital
Territory ("Isaacs") for the sum of $34,500,
those funds having been obtained from a property settlement following the
termination
of her marriage. The defendant subsequently borrowed an amount of
money from the Commonwealth Bank which the plaintiff thought was
about
$111,000 in order to finance the construction of a house on the land at
Isaacs. The house was duly constructed and the parties
and the two girls moved
in and continued to reside in it until the breakdown of the relationship in
January 1991.
4. In 1988 or
1989 the defendant refinanced the property by means of a
mortgage from the State Bank in the sum of $220,000. The additional funds
were
used to enable him to purchase a medical practice at Tuggeranong. At that time
he already operated a medical practice at Bawley
Point where he owned another
house. Thereafter he divided his time between the two medical practices.
5. The de facto relationship
substantially ceased on 6 January 1991 when,
after telling him that the relationship was over, the plaintiff returned to
Isaacs with
the two children. Thereafter the defendant lived separately.
Sometime after that date the defendant made a telephone call to the
plaintiff
in which he said that he had thought about the situation, that she loved her
home and "everything stays the same". He told
her to stay where she was.
Following this conversation she contacted her solicitor, Mr David Lardner, who
in turn contacted the defendant
and told him that the plaintiff wished to
obtain terms of settlement in writing. The defendant said in evidence that he
agreed to
those terms and that Mr Lardner subsequently sent him a copy in
writing. I assume from that evidence that the terms had been adequately
conveyed to him by telephone.
6. In any event, Mr Lardner subsequently wrote to him by letter dated 20
February 1991. That letter
stated, inter alia: "Mary would like all matters
put down by way of a written agreement and I thus write to you setting out
what
she understands the agreement to be. Should the terms set out herein be
acceptable to you then would you please sign the copy and
return it to me. At
that time I will convert the same into the form of a Deed for signing by both
of you."
He then proceeded
to set out what was described as background information
which had been supplied by the plaintiff. The letter then continued:
"[T]he terms of settlement as instructed are as follows: -
1. There will be a declaration that you have no right, title
or interest in
the Isaccs (sic) property.
2. You will continue to meet the repayments for the mortgage to the State
Bank.
3. That you will, from the proceeds of the sale of the Bawley Point
property, extinguish the loan with the State Bank relating to
the
establishment of your Hyperdome business.
4. That you will provide maintenance for your wife and child in the sum of
$400.00
per week. In addition you will continue to pay all other outgoings in
respect of the home as well as the school fees of the two girls.
That Mary
will retain the use of the motor vehicle and that you will maintain same.
5. That Mary has custody of Brooke and that
you have reasonable access to
not only Brooke but also Bridget, such access to be as agreed between Mary and
yourself.
I trust
the above is in accordance with your understanding of the agreement
and if it is I look forward to the return of the copy signed
by yourself."
8. The letter purported to be signed on behalf of Sneddon Hall and Gallop
and contained provision for an
acknowledgment by the defendant in the
following terms: "I Ian Leigh Ferguson acknowledge that the above terms of
settlement are
agreed to by me."
9. The defendant duly signed that acknowledgment, dated it 10th March 1991
and sent the letter back to Sneddon
Hall and Gallop with a covering letter of
the same date. The covering letter referred to various allegations which the
plaintiff
had made against him, protested his innocence, asserted that he and
the plaintiff still loved each other and that he was hopeful
that the
situation could be resolved in the future. He then continued "meanwhile I will
continue to support her and the children".
The letter also assured the
plaintiff's solicitors that the defendant's business at the Hyperdome was not
secured by "Mary's house",
that he was in the process of settling debts with
the State Bank and would soon pay the mortgage arrears on "her home". He
pointed
out that when that was done the bank would simply require loan
repayments on "her house" to be continued. He also enquired as to
the duration
of a court order which had apparently been made excluding him from the
precincts of "Mary's house".
10. The mortgage
on Isaacs subsequently fell into arrears and in August
1991 the plaintiff was obliged to borrow the sum of $24,000 from her mother
in
order to reduce them.
11. In July 1992 the plaintiff agreed to allow the defendant to again
refinance the mortgage on Isaacs
so that he could obtain further funds to pay
out unrelated debts. On 30 July 1992 the mortgage to the State Bank was
discharged following
the payment of $111,304.76 by Citibank which took a fresh
mortgage over the property to secure an advance of $196,000. An additional
sum
of $78,695.24 was said to have been applied to pay the defendant's debts but
the manner in which the remaining $6,000 was expended
was not explained.
12. The defendant executed a bill of sale to secure this further agreement
with the plaintiff. The special
conditions of that document confirm his
agreement to make all payments of principal and interest to Citibank and to
indemnify the
plaintiff in relation to any liability to Citibank arising under
the mortgage. It also required him to maintain a life insurance
policy in an
amount of $196,000 in which the plaintiff was the sole beneficiary.
13. The defendant's financial position remained
precarious and on 16
November 1993 he entered into a Deed of Arrangement under Part X of the
Bankruptcy Act 1966 (Cth).
14. On 24 October 1994 a Writ of Summons was issued against the plaintiff
by Citibank seeking possession of Isaacs as the
mortgage was substantially in
arrears. However the defendant subsequently paid the outstanding arrears on
the morning of the hearing
and the action was resolved.
15. On 5 April 1996 the defendant wrote to the plaintiff informing her that
he had taken certain
advice from a solicitor, Mr Jack O'Halloran, and
indicating that he wished to make certain arrangements with her. The letter
included
the statement: "repayment of your house loan is to be completed over
the next 8 years to National Bank of Australia after their payout
of the
current Citibank loan of approximately $190,000 as soon as possible". It also
indicated that repayment of the plaintiff's
mother's loan could probably be
made upon demand but certainly "on a monthly basis" as soon as she was willing
to accept repayments.
The defendant said in the letter that the weekly
maintenance payments which he had made over the past five years had been
generous
as he had hoped that they could be reconstituted as a family. After
adverting to one or two other matters he continued "as time goes
by and my
indebtedness to you because of increased borrowings from Citibank to pay out
the State Bank of NSW to save your house decreases
I will require you
relinquish your Bill of Sale over my Nowra and Bawley Pt. practices and your
interest in my life assurance loan
taken out recently to secure your
interests".
16. The plaintiff gave evidence that the amount outstanding on the mortgage
secured
over Isaacs was $187,124.14 whilst the defendant asserted that he had
made one more payment since that figure had been obtained and
that the balance
was now about $186,000.00. The plaintiff also said that the defendant had
unilaterally reduced the amount of maintenance
payable from $400 per week to
$150 per week since April 1996 and had fallen behind in payment of school fees
and other expenses.
17. It was submitted on behalf of the defendant that no agreement had been
validly concluded in March 1991 either as a result
of the conversations
between the defendant and Mr Lardner or as a result of the exchange of
correspondence.
18. In particular,
it was submitted that the agreement should be treated as
a temporary or provisional agreement subject to the completion of a formal
agreement by means of a deed. Mr Clark, who appeared for the defendant,
submitted that it fell within the third class of case discussed
by Dixon CJ,
McTiernan and Kitto JJ in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 361 in that
the terms were not intended to have any binding effect on their own. He
conceded that the validity
of this submission was dependent upon the
construction of the terms in the letter but that, viewed as a whole, the
document evinced
an intention that the parties would not be bound by any
agreement until a deed embodying its precise terms had been executed.
19. In support of this contention Mr Clark adverted to the fact that the
letter of 20 February 1991 specifically foreshadowed the
creation of a deed
and that the defendant's letter of 10 March 1991 with which he returned it to
Mr Lardner included the statement,
"meanwhile I will continue to support her
and the children". It should be noted, however, that Mr Lardner's letter
purported to recount
what the plaintiff understood the agreement "to be". That
suggestion of an already subsisting agreement was followed by the words
"the
terms of settlement as instructed are as follows:" and the balance of the
passage which I have already quoted. The author then
stated that he trusted
that these terms were in accordance with the defendant's understanding "of the
agreement" and indicated that
if they were he looked forward to the return of
the signed copy. This language was, in my view, reflective of an antecedent
oral
agreement. In the acknowledgment which followed, the defendant
acknowledged that the terms set out above "are agreed to by me". Despite
the
use of the present tense, that seems to be to be broadly consistent with an
agreement that had previously been concluded but
remained on foot. I see
nothing in the language of the document to suggest that the agreement was to
be of a tentative nature and
subject to the terms of a deed to be drafted. On
the contrary, I think it is clear that the terms of the letter acknowledged
and,
to use the term employed in the Statement of Claim, `evidenced' an
antecedent agreement.
20. Even if that were not so, the acceptance
of the offer contained in the
letter by signing the acknowledgment would in any event have constituted a
fresh agreement in the terms
set out. Whilst it was no doubt intended that a
deed be prepared reflecting the agreement which had been already been reached
between
the parties I find that the agreement was nonetheless validly
concluded between the parties no later than 10 March 1991. The fact
that the
document was not actually signed by the plaintiff does not, in my view, create
any impediment to this conclusion. I accept
the defendant's evidence that he
intended obtaining legal advice as to the terms of the deed if and when he
received a draft. However,
an intention to seek legal advice as to the terms
of a document in which the provisions of an agreement are to be encapsulated
is
not necessarily incompatible with the earlier conclusion of that agreement.
Furthermore, when asked why he had entered into the agreement
the defendant
did not claim that he had done so in the belief that it was only provisional
or would not be binding until a deed had
been prepared and executed. Both
parties thereafter acted on its terms. I do not accept that the document
should be construed in
the manner suggested. Nor do I accept that either of
the parties believed that it had such a limited effect.
21. Alternatively,
it was submitted that the agreement was not supported by
any consideration. Mr Clark submitted that the plaintiff had no entitlement
to
maintenance under the Family Law Act 1975 (Cth) (Family Law Act) and no legal
entitlements arising under the Domestic Relationships Act 1994 since the
relationship between the parties had terminated prior to its enactment. He
also submitted that the plaintiff had no entitlement
to maintenance from the
defendant for her older daughter, Bridget and that any agreement involving
maintenance of the younger daughter,
Brooke, other than one approved by the
Family Court of Australia, would have been contrary to public policy and hence
void.
22.
Notwithstanding these submissions, I am satisfied that the facts proven
in evidence do not provide any basis upon which the agreement
might be
impugned for lack of consideration. The argument was apparently predicated
upon the assumption that the settlement of a
dispute between parties at arm's
length may be struck down if it can subsequently be demonstrated that, as a
matter of law, one of
them lacked any legally enforceable rights. In my view,
this assumption was incorrect. The adequacy of consideration for a contract
cannot be negated merely by demonstrating, with the benefit of hindsight, that
none of the causes of action contemplated by the parties
could have been
sustained. The older authorities suggest some difference of view as to whether
the principle that the relinquishment
of a claim may provide adequate
consideration for a contract is qualified only by the requirement that the
claim be made in good
faith or whether it is also necessary that the claim not
be vexatious or frivolous. The former position seems to have been taken
by
Isaacs J in Butler v Fairclough [1917] HCA 9; (1917) 23 CLR 78 at 96; Lord Atkinson in
Jayawickreme v Amarasuriya [1918] AC 869 at 873-874, Phillimore and Roskill
LJJ in Binder
v Alachouzos [1972] 2 QB 151 at 159 & 160 and Cotton LJ in
Miles v New Zealand Alford Estate Co (1886) 32 ChD 266 at 283-4. The
latter
position was taken by Bowen LJ in Miles at 291 and is accepted by the authors
of the Australian edition of Cheshire and Fifoot's
`Law of Contract'. In most
cases at least, this distinction may prove largely immaterial. Indeed in
Miles, Fry LJ expressed the view,
at 297, that there was no difference in the
views of the other members of the court. This comment may have been somewhat
overstated
but in Wigan v Edwards (1973) 1 ALR 497 Mason J said, at 513, that
the "different expressions of the principle do not reflect an
important
conceptual difference. There will be few cases involving an honest or bona
fide belief in a claim which is vexatious or
frivolous."
23. Whatever test is applied, the evidence fails to establish the absence
of any consideration adequate to support
the agreement. Even at common law a
long standing de facto relationship is likely be attended by circumstances
giving rise to legal
and/or equitable claims. In the present case, for
example, it was common ground that apart from the sums borrowed to build the
house
on the land at Isaacs the plaintiff had committed the defendant to
borrow further funds secured over that land in order to fund the
purchase of a
medical practice in Tuggeranong. The precise circumstances in which this
occurred were not explored in evidence and
no attempt was made to demonstrate
the existence of any implied or constructive trust. However, the agreement
referred to `terms
of settlement', presumably in the context of the overall
financial dealings between the parties, and it was in my view incumbent
upon
the party seeking to impugn it to demonstrate the lack of consideration
alleged. The evidence does not establish that there
could not have been any
bona fide claims in relation to which a forbearance to sue was capable of
constituting adequate consideration
for the agreement. Nor does it suggest
that any such claims would have been vexatious or frivolous.
24. In any event, there can
be no doubt that the plaintiff had a viable
claim for maintenance in respect for the younger daughter Brooke. No defence
has been
pleaded alleging that the agreement is void for public policy on the
ground that it infringes any provision of the Family Law Act. This omission
was pointed out during the course of the hearing but no application was made
for leave to amend the defence in order
to raise it. Accordingly, this issue
does not arise for determination. In any event, whilst section 87 of the
Family Law Act does make certain maintenance agreements enforceable only if
approved by the Family Court of Australia, that section applies only
in
relation to maintenance agreements which purport to provide that the
agreements shall operate in substitution for any of the rights
which the
parties may have under Part VIII of the Family Law Act. The present agreement
contains no such provision.
25. Ms Godtschalk, who appeared for the plaintiff, also submitted that the
defendant's acceptance of the agreement could be inferred from the fact that
both parties acted in a manner which demonstrated that
they considered
themselves bound. She relied upon the decision of the Federal Court of
Australia in Commonwealth of Australia v Crothall
Hospital Services (Aust) Ltd
(1981) 36 ALR 567 at 500 where Ellicott J held that making a payment in
accordance with a claim constituted
an acceptance of an offer to vary an
agreement. It is clear that acceptance can be inferred from circumstances see
Brogden v Metropolitan
Railway Co (1877) 2 AC 666 per Lord Blackburn at 693,
Carlill v Carbolic Smoke Ball Co [1892] EWCA Civ 1; (1893) 1 QB 256 per Bowen LJ at 269-270 and
Gjergja v Cooper [1987] VR 167 per Ormiston J at 202-203. However, in the
present case
it seems to me that the defendant's acceptance is so clearly
established from his own evidence and that provided by the written
acknowledgment
of 10 March 1991 that it is unnecessary for the plaintiff to
rely upon acceptance by conduct.
26. Mr Clark nonetheless argued
that the agreement could not be accepted as
binding because the plaintiff had said in her evidence that she had not
accepted `paragraph
3'. The term set out in that paragraph required the
defendant to repay from the proceeds of the sale of the property at Bawley
Point
the loan relating to the establishment of his practice at the
Tuggeranong Hyperdome. Only part of the funds then secured by the mortgage
had
been expended in relation to that practice. In contrast, the subsequent
agreement in 1992 did not require the defendant to discharge
any portion of
the loan but did provide that the defendant would meet all payments of
principal and interest. The plaintiff impressed
me as a person who was easily
confused especially when giving evidence about events that occurred five or
six years earlier and I
think that this aspect of her evidence reflected some
confusion. The letter from Mr Lardner purports to reflect her instructions
and
I accept that it did so with due accuracy. It is certainly clear that she and
the defendant both acted on the basis of the agreement
as a whole. In any
event, the relevant clause is one which is entirely in her favour and any
waiver or disavowal of it could not
render the balance of agreement
unenforceable.
27. Mr Clark initially raised a further agreement to the effect that the
agreement
should be struck down as unconscionable. Again, this contention had
not been raised on the pleadings and it was not ultimately pursued.
The
evidence would not have supported such a conclusion.
28. It is true that the plaintiff had failed to accept an offer of a
job
and had failed to seek other employment. She explained that she frequently had
to take Brooke to consultations with medical practitioners
and that there
would have been correspondingly frequent absences from any employment. Brooke
had experienced significant health problems.
It had been thought that she had
been born with a hole in the heart, though this was subsequently `covered up'
and she proved generally
healthy. However she had a hidden cleft palate and as
a result had been unable to speak until an operation carried out when she was
six years of age. In all she had undergone four operations involving the use
of grommets and her hearing had substantially deteriorated
as a consequence.
It had also been necessary to treat her with growth hormones for eight years.
In my view no issue of conscionability
could arise in relation to this
assertion.
29. The defendant said that he entered into the agreement because it seemed
reasonable
at the time, he wanted to press on with earning a living and he had
no time for legal rearrangements. He added that he hoped for
a reconciliation
with the with the plaintiff. I accept this evidence. I also think it likely
that the defendant wished to ensure
that adequate provision was made for
Brooke's care. Again, however, I am unable to see how any issue of
conscionability could arise
from these facts.
30. It was suggested that, at least in hindsight, it was clear that the
agreement was overly generous to the
plaintiff. However, even if it were, that
fact would not justify any conclusion that the agreement was unconscionable.
The defendant
was a mature, well educated and intelligent man. If he chose to
enter into an otherwise valid agreement to make generous financial
provision
for his former de facto wife and his daughter he cannot now escape its
obligations by pointing to subsequent disappointment,
whether in love or
finance.
31. Mr Clark mentioned that some consideration had been given to whether
the agreement might have
been void for uncertainty but it had been decided not
to raise any argument to that effect.
32. Having considered all of the issues
raised by the parties I find that
the agreement is valid and subsisting.
33. In view of this finding it is not necessary for me
to resolve the
interesting questions of estoppel raised by Ms Godtschalk and dependent upon
the subsequent course of dealings between
the parties.
34. Mr Clark also contended that some of the terms of the agreement should
be construed as being of limited duration.
Insofar as the agreement relates to
school fees that submission is obviously correct. Bridget is now in year 12
and the defendant's
obligation to pay school fees for her will come to an end
at the close of the current school year.
35. However it seems clear
that the term providing for a declaration that
the defendant would have no right, title or interest in the Isaacs property
should
be construed as permanently barring any such claim.
36. Similarly, it seems to me that in the context of the agreement the
second
term providing for the defendant to continue meeting the repayments for
the mortgage to the State Bank gave rise to an obligation
that would have
continued until such time as the mortgage had been wholly discharged. That
conclusion is confirmed by the fact that
a substantial amount of the debt
secured by the mortgage on Isaacs as at the date of the agreement related to
funds which had been
expended by the defendant on the purchase of a medical
practice. In any event, the effect of this clause has now been supplanted
by
the subsequent agreement permitting the defendant to further encumber the
house in order to discharge his debts. That subsequent
agreement which is
reflected in the special conditions to the Bill of Sale dated 21 August 1992
requires the defendant to fully repay
the loans secured over the property in
question.
37. On the other hand, I accept Mr Clark's submission that the covenant to
pay
the sum of $400 per week maintenance for the plaintiff and Brooke should
be construed as a covenant to pay maintenance at that rate
only whilst Brooke
remains a minor. Strictly speaking, that issue does not arise for
determination in the present proceedings because
she is only eleven years of
age and there can be no question about the application of the relevant term
during the period to which
the breaches of contract alleged by the plaintiff
relate. Nonetheless, since Mr Clark's request that I determine this issue was
not
opposed, I think it is appropriate that I record my finding to that
effect.
38. So far as damages are concerned the plaintiff
claimed the arrears of
maintenance, various amounts for Telstra accounts, water and sewerage
accounts, electricity, rates, insurance,
car registration, school fees, motor
vehicle insurance, travel costs, dentist and pharmaceutical expenses, the cost
of a school excursion,
Girls Brigade fees, music lessons and repairs both to
the phone and to the motor vehicle. The only items disputed by Mr Clark were
those relating to the travel costs, the dental and pharmaceutical expenses,
the school excursion, the Girls Brigade expenses and
the music lessons. Ms
Godtschalk conceded these items. Accordingly, I allow the other amounts set
out on the schedule of payments
tendered in evidence. They are as follows:
Arrears of maintenance $17,650.00
Telstra accounts $957.94
Water and sewerage
account $828.00
Electricity charges $923.00
General rates $1,061.99
General insurances $772.33
Car registration $933.50
School fees $11,180.55
Motor vehicle insurance $148.65
House repair $100.00
Car repair $130.20
39. There
will be judgment for the plaintiff in the sum of $34,686.16.
40. So far as the counter-claim is concerned, I find that the term
in the
agreement providing for a declaration that the defendant would have no right
title or interest in the property at Isaacs effectively
bars any claim for an
equitable interest. There will be judgment for the plaintiff on the
counter-claim.
41. I was not asked to
make a declaration in the terms foreshadowed by the
agreement and in view of the findings which I have made it seems unnecessary
for me to do so.
42. It is true that the verdict for the plaintiff is less than $50,000 and
in these circumstances costs would
not normally be awarded at the full rate
prescribed by the Supreme Court scale. However, the case was attended by some
complexity
and in the counter claim the defendant sought declarations that he
was entitled to various equitable interests in the property at
Isaacs. In
these circumstances, in the absence of any other consideration that may be
urged upon me by counsel I propose to order
that the defendant pay the
plaintiff's costs on the full Supreme Court scale.
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