Federal Court of Australia

Mahommed v Cox as Administrator of the Deceased Estate of Dixon [2023] FCAFC 107

ORDERS

THE COURT ORDERS THAT:

1.    The appeal is dismissed.

2.    The appellant is to pay the respondent’s costs of the appeal to be agreed or taxed.

3.    Either party may apply to vary order (2) or may seek some different costs order, by filing short submissions not exceeding 3 pages and any affidavits in support within 7 days of the date of these orders.

4.    If any application is made pursuant to order (3) the party against whom the application is made may respond by filing short submissions not exceeding 3 pages and any affidavits in response within 7 days of receipt of the application.

5.    Subject to any further order of the Court, any application made pursuant to order (3) will be determined on the papers.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

1    By a notice of appeal filed on 25 August 2022, the appellant asserts 25 grounds of error (not including sub-grounds) by the primary judge who, for succinct reasons published on 29 July 2022, dismissed the appellant’s creditor’s petition presented in respect of the deceased estate of David William Dixon pursuant to s 244 of the Bankruptcy Act 1966  (Cth) (Act): Mahommed v Cox as Administrator of the Deceased Estate of Dixon [2022] FCA 886 (PJ).

2    The primary judge was not satisfied that the appellant is a creditor of the deceased estate and, in any event, reasoned that even if wrong in that conclusion his Honour would not exercise the discretion to grant the petition under s 244(11) and (12) of the Act.

3    Mr L Smits, solicitor, appeared for the appellant before the primary judge and upon the appeal. The notice of appeal is prolix, is riddled with double negatives and variously asserts error in the failure to make findings consistent with the appellant’s case as presented to the primary judge. Many of the grounds overlap for no discernible reason. Parts of it are unintelligible. As an example, ground 6 asserts error being a failure by the primary judge to make a finding against Ms Cox of “curial estoppel”. There is no estoppel of that character known to the law of Australia.

4    The document is an exemplar of how a notice of appeal should not be drafted and warrants criticism of the author who it is clear did not have regard to the overarching purpose at ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). Legal practitioners are obliged to limit the drafting of appeal grounds by focusing on errors that are of merit and by clearly identifying the grounds relied on. A notice of appeal which fails to conform with these basic requirements is not only irregular in form but is one that is unlikely to succeed: Huber v CellOS Software Ltd (in liq) (No 2) [2023] FCA 459 at [49]-[61], per McElwaine J.

5    The appellant’s outline of written submissions in support and in reply are each desultory in form and substance. They contain many conclusory assertions without supporting rational argument. Each is very difficult to read and comprehend. In some paragraphs, legal propositions are stated in self-evident language without exposition of the principle or analysis by application to this case. For example, a submission is made that the primary judge should have concluded that a conventional estoppel operated in favour of the appellant and against Ms Cox. The only reference to authority is a footnote to an academic article. The leading authority is only mentioned by reference to the article: Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur (Australia) Ltd (1986) 160 CLR 226. No attempt is made to identify the elements that must exist to found an estoppel of that character, other than by reference to generalised conclusions. Indeed a novel and courageous submission is made that estoppel by convention “does not have to be pleaded.”

6    In very many paragraphs in each written submission, Mr Smits employs unhelpful pejorative language, some of it to characterise the reasoning of the primary judge. It should be clearly understood that this conduct is entirely unsatisfactory, is distracting and only serves to obscure the appellant’s arguments. It is not consistent with the standards of advocacy that should apply in this Court where courtesy is a primary objective of the exercise of the Court’s jurisdiction.

7    Despite the multiplicity of appeal grounds and the unhelpful written submissions in support, Mr Smits in oral argument reduced the appellant’s complaints to three contentions of error by the primary judge:

(1)    error in not being satisfied that the appellant is a creditor as assignee of an obligation undertaken by Mr Dixon as a guarantor;

(2)    a failure to find that the respondent could not impartially exercise her duties as administrator of the estate of Mr Dixon; and

(3)    error in finding that the appellant had elected to pursue his claims through a proceeding in the Supreme Court of New South Wales.

8    The second and third contentions are relevant only to the discretionary grounds on which the petition was dismissed. It is regrettable that the notice of appeal was not drafted as limited to these issues.

9    In our view the first issue is dispositive of the appeal. The appellant did not establish that he is a creditor of the estate of Mr Dixon, the primary judge did not err in that conclusion and accordingly it is unnecessary to consider the discretionary matters. The appeal must be dismissed.

Relevant Background

10    The appellant’s claim that he is the assignee of Mr Dixon’s obligation as a guarantor and is therefore a creditor in his deceased estate requires a little explanation. The starting point is a document in the form of a deed dated 22 December 2014 (Deed). To observe that the Deed is curiously drafted is an understatement. Mr Dixon is described as the assignor and Vestecorp Financial Services Pty Ltd as the assignee. The recitals provide (without correcting for spelling, punctuation or grammatical errors):

A.    Steven James Coughlin (“the Debtor”) of 713 Lovedale Road Allandale in the State of New south Wales (“the Lovedale Property”) entered into a Loan Agreement dated 25 April 2006 with Liberty Funding Pty Limited A.C.N. 018 982 872 (“Liberty”) (“the Loan Agreement”);

B.    On 23 August 2008 Judgment for $1,070,029.90 plus costs of $3,910.00 was entered in favour of Liberty as against the Debtor in Proceedings No. 14996 of 2007 in the Common Law Division of the Supreme Court of New South Wales, which indebtedness arose under and pursuant to the Loan Agreement (“the Debt”);

C.    On 6 March 2009, the Estate of the Debtor was made subject to a Sequestration Order under the Bankruptcy in Proceedings No NSW 2074/9/5/(estate-1) under the Bankruptcy Act 1966 (Cth) and the Official Receiver was appointed as Trustee of his Estate;

D.    On 26 June 2009 Liberty assigned and transferred all of its right, title and interest in the Debt, Loan Agreement and Mortgage Rd. No. AB415945 over the Lovedale Property (“the Mortgagee”) by Deed for $950,000.00 (“the Consideration”) to Dixon Investments Pty Limited A.C.N. ATF The Dixon Mortgage Trust No.1 (“DIP”);

E.    The Consideration was funded entirely by the Assignor and the Debt, Mortgage and Loan Agreement were held by DIP in a bare trust for the Assignor, through the Dixon Investments Trust of which DIP was the Trustee;

F.    At all material times, the Assignor was the sole member and director of DIP;

G.    The Assignor has agreed to assign absolutely unto the Assignee all of his right, title and interest in, in respect of and in relation to the Loan Agreement, the Mortgage, the Debt and all accrued interest and costs and all associated and incidental legal, equitable and statutory rights (“Assigned Property”) upon the terms and conditions stated below.

11    It is unnecessary in this appeal to grapple with the meaning or effect of Recitals E and F or how it can be that subsequent litigation was not brought in the name of or by joining the trustee, Dixon Investments Pty Ltd: cf Wily (as Trustee of the Bankrupt Estate of Fuller) v Fuller [2000] FCA 1512 at [46]-[47], per Hill J, for a succinct summary of why it is necessary for the trustee to be a party.

12    Clause 1 of the Deed relevantly provides:

The Assignor hereby assigns absolutely the Assigned Property to the Assignee:

a)    for the consideration comprised of an amount equivalent to the Judgment Debt, the value of which shall be ascertainable and estimated as being equivalent to the net amount recovered or recoverable by the Assignee from the Debtor and/or through his Bankrupt Estate, less any costs, charges and expenses incurred by the Assignee in recovering or realizing the Assigned Property;

b)    the Assignor has undertaken and hereby further undertakes to guarantee the payment of all moneys due, owing and payable by Loire Consultants Pty Limited (“Loire”) to the Assignor under the written Consultancy Agreement made between Loire and the Assignee;

c)    the consideration shall be paid or satisfied exclusively by offsetting any liability of the Assignee under those guarantees to the Assignor against the consideration;

d)    for the avoidance or reduction of doubts, the associated rights referred to in Recital G shall include:

i.    any rights of the Assignor at common law and in equity to call for the vesting of any distribution, estate, interest or entitlements under all or any of the said Trusts, including specifically the Loan Agreement, the Mortgage, the Debt and the Judgment Debt (“Specific Assets”);

ii.    any right or entitlement to reinstate or restore DIP to the Register of Companies in New South Wales;

iii.    any right or entitlement of the Assignor to call for, demand, request or require the Commonwealth or ASIC to transfer or assign any Specific Asset, held by it under the Corporations Law in trust pursuant to the de-registration of DIP and any said Trust, to the Assignee in lieu of the Assignor;

iv.    prove any entitlements, claims and debts of the Assignor in the Bankruptcy of the Debtor for the absolute benefit of the Assignee;

v.    take any action, suit, proceeding and steps as against Michael Charles Unicomb and any associated or related parties to declare, hold or make as being void, voidable, invalid, unenforceable, uncommercial or insolvent or for failure of consideration or breach of any fiduciary duty or breach of trust owed to the Assignor any unit, entitlement, estate, interest, distribution, investment or loan held by him or such party in or in relation to any Trust referred to herein; and

vi.    take or make any derivative or representational action, suit or proceeding in the name of DIP, subject to any leave being granted by any Court, in order to give full force and effect to this Deed.

13    The guarantee obligation relied upon by the appellant is cl 1(b) which on its face is rather curious in its drafting in that Mr Dixon has provided a guarantee of amounts owing by Loire Consultants Pty Ltd to himself. For convenience, we refer to this as the Guarantee. The appellant argues that this clause contains a manifest error where the second reference to the “Assignor” should be read as a reference to the “Assignee” which the primary judge ought to have corrected even without a rectification suit: Fitzgerald v Masters (1956) 95 CLR 420 at 426-427, per Dixon CJ and Fullagar J, and Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317; [2019] NSWCA 11 (Seymour Whyte) at [8]-[10], per Leeming JA.

14    That is not the only difficulty with the Guarantee. The obligation assumed by Mr Dixon was to be responsible for the payment of all money due, owing and payable by Loire to Vestecorp “under the written Consultancy Agreement”. It is common ground that no such written agreement existed as at 22 December 2014. There is a later written consultancy agreement which the appellant relies upon dated 9 October 2015 between Loire as principal and Vestecorp as consultant with a stated effective date of 1 July 2014 (Consultancy Agreement). A further difficulty faced by the appellant concerns his ability to demonstrate that money became due under the Consultancy Agreement before presentation of the petition. We return to these matters later in our reasons.

15    To continue the factual narrative, we turn next to the Consultancy Agreement. Its drafting is obscure despite the first clause definition of “Agreement” which provides:

The contract between the Consultant and the Principal constituted by the Agreement Documents, which is clear in all understandings, representations and communications between the parties related to the subject matter of the agreement.

16    That objective was not achieved. There are clauses in the Consultancy Agreement that are Delphic in meaning. Loire engaged Vestecorp to perform “the Services” defined at item 1 of the schedule. Variously and unhelpfully this refers to, inter alia, planning, project identification, research and analysis, “asset recoupment assessment” and various operational tasks including “draft & finalise litigation briefs” together with instructing lawyers and accountants each for the purpose of undertaking “multiple projects” as follows:

I.    The exercise of the rights of indemnity of Loire Consultants Pty Ltd including its rights of reimbursement and recoupment in respect of the receivables collectable by it in respect of the acquisition, development and reallocation of 713 Lovedale Road, Allandale NSW;

II.    Previous Sale of the real estate property previously held by Loire Consultants Pty Ltd;

III.    Previous Settlement of the real estate property previously held by Loire Consultants Pty Ltd;

IV.    Previous Disbursement of proceeds from the real estate property previously held by Loire Consultants Pty Ltd;

V.    Management practices performed by previous Director/s of Loire Consultants Pty Ltd;

VI.    Advice and Performances of previous consultants and professional contracted to Loire Consultants Pty Ltd;

VII.    Prime accounting records of Loire Consultants Pty Ltd and associated entities;

17    For the provision of these services, cl 5.1 provides for payment:

In consideration of the provision of the Services, the Principal will pay the Consultant the Fee in the manner provided in item 4 of the Services and Agreement Information, subject to the conditions of this Agreement.

18    There is a “Services and Agreement Information” section in the form of a schedule. Item 4 specifies a fee of $9,500 “due and payable on a weekly basis”. However, by cl 5.2 the payment obligation is deferred:

The fee amount is payable weekly while actual payment is deferred as per item 6 of Services and Agreement Information.

19    Item 6 is titled “Timing of Payment”:

Payment is deferred until recoupment of assets from the recoveries processes as instigated by the Consultant and is payable out of the Principal’s Assets.

20    The Consultancy Agreement does not define what is meant by “the recoveries processes”, what processes were required to be “instigated” or what were “the Principal’s assets”.

21    Despite these difficulties, the appellant contended before the primary judge that an amount of $1,472,379.70 was owing by Loire to Vestecorp prior to the winding up of Loire on 3 July 2019 (the debt). These facts were deposed to by the appellant in an affidavit made by him on 30 July 2018 in order to verify a statutory demand for debt. The statutory demand incorporates a schedule which commences with an opening balance of $100,320 as at 1 September 2015 and concludes with a closing balance of $1,472,379.70 on 30 July 2018.

22    There is another assignment that is relevant. On 6 May 2021, Vestecorp as assignor entered into a deed of assignment with the appellant as assignee (Vestecorp assignment). The appellant is the director and the controlling shareholder of Vestecorp. It recites, amongst other things, that the appellant was engaged by Vestecorp to perform the services required by the Consultancy Agreement. A further recital asserts that Mr Dixon pursuant to the Deed guaranteed to Vestecorp all money due, owing and payable by Loire pursuant to the Consultancy Agreement. The assignment refers to various forms of property including “the benefit of the Dixon guarantee”. By cl 1, Vestecorp assigned to the appellant “absolutely” its entire “right, title and interest in, in respect of and in relation to”, the benefit of that guarantee, amongst other rights.

23    There are extant proceedings, commenced in 2020, in the Supreme Court of New South Wales (Supreme Court proceeding) between Roger Ward and the appellant as plaintiffs, and Westpac Banking Corporation Ltd, the Registrar-General of Titles and Ms Cox (as administrator) as the defendants.

24    Ms Cox, the respondent to the appeal, is the administrator of the estate of Mr Dixon who died on 7 March 2019. The amended statement of claim in the Supreme Court proceeding (also authored by Mr Smits) runs to 112 pages. Mr Ward claims security over 713 Lovedale Road Allandale in the State of New South Wales (the Lovedale Property) pursuant to an unregistered mortgage and the appellant claims that the Lovedale property was always held in trust, that Loire was the trustee, that Mr Dixon became the registered proprietor in consequence of a fraud effected by his accountant, a component of which involved a fraudulent borrowing in his name from Westpac which was knowingly involved in the fraud of the accountant and that in consequence a mortgage security registered by Westpac to secure the advance is defeasible. The interest which the appellant asserts in that proceeding requires acceptance that he is now the trustee of the trust of which Loire was the first appointed trustee and in consequence, is entitled to be the registered proprietor in place of the respondent as administrator of the estate of Mr Dixon. Why that should be accepted is complex and contentious.

25    Fortunately, we need not be further troubled with the detail of the Supreme Court proceeding save for how it is said that the Guarantee is relevant. Separately, the appellant claims against Ms Cox as administrator of the estate of Mr Dixon, $1,472,379.70 for debt plus interest, which is the amount claimed to be owing by Loire to Vestecorp pursuant to the Consultancy Agreement and the assignment of the benefit of the guarantee of that obligation to the appellant pursuant to the Vestecorp assignment. Ms Cox denies that claim. Mr Smits, without any apparent solid foundation, submits that her denial is incompetent or dishonest.

26    An order for security for costs was made in the Supreme Court proceeding on 4 April 2022 which required the plaintiffs to provide security in the amounts of $150,000 for the costs of Westpac and $125,000 for the costs of Ms Cox. An appeal against that order was dismissed by the Court of Appeal of the Supreme Court of New South Wales on 15 February 2023: Ward v Westpac Banking Corporation Ltd [2023] NSWCA 11. Security has not been provided and the Supreme Court proceeding is stayed. There is a cross-claim by Westpac for judgment for possession by reason of amounts outstanding pursuant to its mortgage. Mr Smits submitted to us that the effect of the security order is to stultify the proceeding.

The petition and the proceeding before the primary judge

27    By navigating from the Deed, through the Consultancy Agreement and ultimately to the Vestecorp assignment, the appellant claimed before the primary judge to be a creditor of the estate of Mr Dixon. He presented a creditor’s petition on 22 March 2022 for an order that the estate be administered in bankruptcy pursuant to s 244 of the Act. In that petition he asserted his creditor status in an amount of $5,845,545 “for or on account of debts assigned” to him “under or pursuant [sic] deeds of assignment” that he set out in his supporting affidavit. He asserted that the debt was due as at the date of death of Mr Dixon. Before the primary judge, the appellant confined his claim in oral submissions put by Mr Smits to be a creditor for the debt plus interest.

28    The primary judge was not satisfied that the appellant had standing to present the petition as a creditor. Section 244 of the Act relevantly provides:

(1)    Subject to this section, where:

(a)    a debt of not less than the statutory minimum was owing by a deceased person at the time of his or her death to a creditor, or debts amounting in the aggregate to not less than that amount were so owing to any 2 or more creditors;

(b)    a debt incurred by the legal personal representative of a deceased person of not less than the statutory minimum is owing to a creditor, or debts so incurred amounting in the aggregate to not less than that amount are owing to any 2 or more creditors; or

(c)    a debt of not less than the statutory minimum, or debts amounting in the aggregate to not less than that amount, which a deceased person would have been liable to pay to a creditor or any 2 or more creditors if he or she had not died becomes or become owing after his or her death;

the creditor or creditors to whom the debt or debts is or are owing may present a petition to the Court for an order for the administration of the estate of the deceased person (in this section referred to as the deceased debtor) under this Part.

29    The primary judge was unpersuaded that cl 1(b) of the Deed contains a manifest error by referencing a guarantee by the assignor of debts owed to the assignor. His Honour’s reasons are short, though compelling at PJ [37]-[40]:

I am not persuaded that the reference to “assignor” in cl 1(b) is a clear typographical error that should be set to one side, as Mr Mahommed contends. The Deed of Assignment is complex in its terms, and refers to numerous third parties and obligations that are not fully explained, either in the Deed itself or in the evidence. For instance, in the next clause after cl 1(b), it provides (emphasis added):

(c)     The consideration shall be paid or satisfied exclusively by offsetting any liability of the Assignee [Vestecorp] under those guarantees to the Assignor [the deceased] against the consideration;

It is entirely opaque what this clause means. However, the emphasised words “those guarantees to the Assignor” on one view suggest that it was indeed intended to be the Assignor who was the beneficiary of the guarantee in cl 1(b), “those guarantees” being the only guarantee mentioned so far in the document. The awkward language used is no doubt susceptible of other constructions, but Mr Mahommed made no submission in relation to sub-cl 1(c). Nor am I satisfied to the requisite level that the language of cl 1(b) is clearly a typographical error that admits of no other construction. Indeed, it is not at all self-evident that it is a typographical error or absurdity at all or, if it is, what the objective intention is to be taken to have been. If it was an error, was that error repeated in cl 1(c), or were there other guarantees to the assignor?

Mr Mahommed seeks to rely on Recital F in the Second Deed of Assignment to support his case that the guarantee in the Deed of Assignment was given to Vestecorp. However, Mr Dixon (the deceased) was not a party to the Second Deed of Assignment and it is difficult to see how a recital to that agreement can be binding on him or his estate.

These matters lead me to the view that Mr Mahommed has not demonstrated, as required by ss 244(1) and 244(11) of the Bankruptcy Act, that the Debt alleged was owed to him by the deceased at the time of his death or is still owing, because his case is entirely based on the existence of the guarantee.

(Original emphasis.)

30    Further, the primary judge was not persuaded that in any event money was due and payable under the Consultancy Agreement as at the date of Mr Dixon’s death. His Honour reasoned at PJ [41]-[44]:

Furthermore, the guarantee identified in the Deed of Assignment relies upon the terms of the written Consultancy Agreement between Loire and Vestecorp. The payment terms in cl 5, set out at [27] above, have not been shown to have arisen. In this regard Item 6 of the “Services and Agreement Information” provides that payment is deferred until recoupment of assets from the recoveries process as instigated by the Consultant and is payable out of the Principals’ Assets. There was no agreement to pay the fees on a weekly basis (although by cl 2 and item 4 they accrued weekly in the amount of $9,500). Rather, payment only arises upon the happening of the events described in Item 6.

I am not persuaded that the evidence of Mr Mahommed establishes that the events required to trigger payment took place. In his oral submissions in reply, Mr Mahommed contends that the deceased executed a trust transfer of the Lovedale property to Loire as trustee of the Lovedale Ranch Unit Trust (Lovedale Trust). However, that does not amount to evidence of the conditions precedent to payment for which Mr Mahommed contends.

Finally, on Mr Mahommed’s case the guarantee in cl 1(b) of the Deed of Assignment concerns obligations owed by Loire to Vestecorp “under the written Consultancy Agreement made between Loire and the Assignee”, being Vestecorp. The consultancy agreement so mentioned is not defined or otherwise identified in the Deed of Assignment. An ordinary reading of the clause suggests that it is referring to an extant agreement, yet none pre-dating the Deed of Assignment was identified in the evidence. It is by no means clear that the Consultancy Agreement which was entered almost 10 months later than the Deed of Assignment is that to which cl 1(b) refers. Indeed, at least on the basis of the present evidence I am not satisfied that it is the relevant agreement.

Accordingly, for these three separate reasons I am not satisfied that the requirements of s 244 of the Bankruptcy Act are satisfied.

The appeal

31    In summary, Mr Smits argues that the primary judge erred in concluding that the appellant had not established his status as a creditor at the time of death of Mr Dixon for five reasons. First, his Honour should have construed the second reference to the “Assignor” at cl 1(b) of the Deed as a reference to “Assignee” to “avoid absurdity and/or inconsistency.” On that argument it is unnecessary for the appellant to bring a rectification suit. Second, cl 1(c) is not, contrary to the conclusion of the primary judge, “entirely opaque”: PJ [38]. Properly construed according to the submission of Mr Smits and in answer to a question from the bench:

Well, your Honour, I would respectfully say that 1(c) – my view of 1(c) was that it was gibberish until I thought about it more, but it does make sense if you consider it the way that I tried to explain to your Honours. The sense of it is that if the assignee collects moneys under the guarantees given to him by the deceased, then that can be offset against his – the assignee’s liability to pay the consideration under 1(a). And that’s very sensible, and that is the effect that was intended by the parties. I don’t know how there could be any serious doubt about that. Otherwise it is gibberish or gobbledegook, but it’s void if it’s that.

32    Third, there can be no doubt that Loire owed money to Vestecorp under the Consultancy Agreement in that the debt founded the statutory demand on which Loire was wound up and Mr Dixon did not seek to set aside the statutory demand or otherwise oppose the winding up application.

33    Fourth, it matters not that the Guarantee clause refers to “the written Consultancy Agreement” which was not reduced to writing until 9 October 2015, as either the parties “might have thought” and therefore “might have been mistaken” in believing that there was a written agreement then in place or that they intended to subsequently execute one, which they did and provided for an earlier operative date.

34    Fifth, and finally, the primary judge erred in not being satisfied that money was owing by Loire to Vestecorp despite the deferred payment clause in the Consultancy Agreement, because on 3 July 2017 Mr Dixon executed an application pursuant to the Real Property Act 1900 (NSW) (RP Act) that Loire be registered as proprietor of the Lovedale property which it is said amounts to a recoupment of assets within the meaning of item 6 of the schedule to the Consultancy Agreement.

35    Mr Allen, who appeared for the respondent, in very short submissions, essentially adopted the analysis of the primary judge.

Consideration

36    There is no merit in any of the appellant’s arguments. The primary judge well understood and correctly stated the principles which govern the correction of contractual language. Mr Smits does not submit that his Honour erred in his reference to Seymour Whyte at PJ [36] as correctly stating the governing principles where Leeming JA said, with the concurrence of Payne and White JJA at [8]-[10]:

Two conditions are necessary in order to correct the contractual language in this manner: (a) that the literal meaning of the contractual words is an absurdity and (b) that it is self-evident what the objective intention is to be taken to have been: see Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 at [117]-[119], approving National Australia Bank Ltd v Clowes [2013] NSWCA 179; 8 BFRA 600, where it was stated at [34]:

“Where both those elements are present ... ordinary processes of contractual construction displace an absurd literal meaning by a meaningful legal meaning.”

Likewise, in the United Kingdom, the court must be satisfied both as to the mistake and the nature of the correction: Pink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429 at [21] (Lord Neuberger); Arnold v Britton [2015] AC 1619; [2015] UKSC 36 at [78] (Lord Hodge).

The court must be satisfied of those matters to a high level of conviction. To use the language of Dixon CJ and Fullagar J in Fitzgerald v Masters at 426-427, it must be “clearly necessary in order to avoid absurdity or inconsistency”. As this Court said in Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297 at [18], the test of absurdity is not easily satisfied. Any question of absurdity or inconsistency must be identified according to established principles, by reference to the text of the agreement as understood in its factual and legal context: Wyllie v Tarrison Pty Ltd [2007] NSWCA 184 at [46]; Newey v Westpac Banking Corporation [2014] NSWCA 319 at [85]. Courts which are asked to delete, insert or rewrite part of a contract because of what is said to be an obvious error should bear steadily in mind that imperfections and infelicities and ambiguities in contractual language commonly reflect the give and take of negotiations, or the parties’ appreciation that some obscurities are incapable of resolution. As Lord Hoffmann explained, the court does “not readily accept that people have made mistakes in formal documents”: Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101; [2009] UKHL 38 at [23].

37    Seymour Whyte concerned a claim for a progress claim made under a building contract and whether a subsequent adjudication was infected with jurisdictional error. In cases concerning guarantees, another principle must be considered. Contracts of indemnity and guarantee are to be construed by resolving doubtful meaning in favour of the surety or indemnifier: Bofinger v Kingsway Group Ltd (2009) 239 CLR 269; [2009] HCA 44 at [53], per Gummow, Hayne, Heydon, Kiefel and Bell JJ. The question is whether there is a clear mistake in the drafting of cl 1(b) of the Deed such that the literal meaning is absurd and can be corrected to reflect the self-evident objective intent of the parties.

38    It is superficially attractive to embrace the argument that because a guarantor must promise to secure an obligation of a debtor to a creditor that therefore there is absurdity in the Deed by which Mr Dixon guarantees to Vestecorp to be responsible for money owed by Loire to himself. However, that argument overlooks that the construction approach on which the appellant relies operates to correct errors in order to give effect to the meaning of the contract as a whole: McVeigh v National Australia Bank Ltd (2000) 278 ALR 429; [2000] FCA 187 at [38]-[39], per Finkelstein J, and that the objective intention of the parties must be self-evident.

39    We are unable to accept that it is clearly necessary to read the second reference in cl 1(b) to the “Assignor” as “Assignee” in order to give effect to the Deed as a whole. Clause 1(a) provides that the consideration for the Deed is an amount equivalent to the judgment debt entered in favour of Liberty Funding Pty Ltd against Mr Coughlin on 23 August 2008 for $1,070,029.90, the value of which is then stated to be “ascertainable and estimated” as equivalent to the net amount recovered by Vestecorp from Mr Coughlin or his bankrupt estate, less certain recovery costs. How this consideration, as obscure as it is, relates to the Guarantee is entirely puzzling. So too is how the “absolute” assignment of the judgment debt and the associated loan agreement and mortgage are at all relevant to the Consultancy Agreement.

40    The Guarantee clause itself speaks to an obligation that Mr Dixon “has undertaken” as a premise for his “further” undertaking to guarantee payments due by Loire. No evidence was adduced to the primary judge about an anterior obligation of that character, apparently assumed by Mr Dixon. Next there is cl 1(c) which adds to the difficulty in construing the Guarantee. It requires by the use of mandatory language, that the consideration, which can only be a reference to cl 1(a), “shall be paid or satisfied exclusively” by “offsetting” any liability of Mr Dixon under “those guarantees to the Assignor”, which excites inquiry as to what other guarantee obligation(s) were either assumed by Mr Dixon (on the appellant’s case) or that he was the beneficiary of (which is the point made by the primary judge at PJ [38]).

41    The opaqueness of the Deed does not end there. Assuming that the absolute assignment of the “Assigned Property” at cl 1(a) was effective, one then turns to cl 1(d) which operates “for the avoidance or reduction of doubts” that the assignment of “the associated rights” referenced in Recital G includes any rights of Mr Dixon at common law or in equity to “call for the vesting of any distribution, estate, interest or entitlements” under, inter alia, the debt and the judgment debt incurred by and entered against Mr Coughlin. There is a further sub-clause which entitles the Assignee to take proceedings against the asserted fraudulent accountant or related parties in respect of all of the rights of redress of Mr Dixon. Then by cl 3 the assignment is stated in absolute terms: “all of the Assignor’s right, title and interest in, in respect of and in relation to the Assigned property.”

42    As is well understood, an assignment in that form vests in the assignee all of the rights of the assignor: Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 26, per Windeyer J. Ascertaining the objective intention of the parties to give effect to the whole of the Deed is not self-evident. Why, for example, would Mr Dixon assign all of his rights of recovery pursuant to the judgment debt to Vestecorp, in consideration of the estimated value of that debt, less the costs incurred by Vestecorp in recovering it, which consideration is to be offset against any liability of Mr Dixon to Vestecorp under “those guarantees” and in doing so fail to impose any express obligation on Vestecorp to pay the consideration?

43    The explanation proffered by Mr Smits to explain the meaning of cl 1(c) does not make sense. Vestecorp does not effect recovery (or to use the language of Mr Smits, “collect money”) under the Guarantee given by Mr Dixon. The Deed imposes no such obligation on Vestecorp. The only agreement in evidence before the primary judge which imposed any obligation on Vestecorp is the Consultancy Agreement to which Mr Dixon is not a party and which does not mention enforcement of the judgment debt as within the scope of the “multiple projects” in item 1 of the schedule.

44    There is an even more significant hurdle which confronts the appellant’s arguments. The Guarantee clause is explicitly limited to amounts due under “the” written Consultancy Agreement between Loire and Vetsecorp. The appellant failed to prove the existence of that agreement when the Deed was executed on 22 December 2014. The fact that Loire and Vestecorp, by entering into the Consultancy Agreement on 9 October 2015, provided for an effective date of 1 July 2014 did not have the effect of binding Mr Dixon as guarantor to its terms. Mr Dixon was not a party to the Consultancy Agreement and no evidence was adduced that the Deed was subsequently amended or varied so as to incorporate the subsequent agreement. There is no clause in the Deed to the effect that Mr Dixon will pay on demand all moneys which were then or which may thereafter be owing by Loire to Vestecorp. Clause 1(b) is limited and specific in operation to an agreement in writing which existed on 22 December 2014. The failure by the appellant to prove the existence of the agreement referred to is fatal to his reliance on it to establish his status as a creditor in the estate of Mr Dixon. Nor is his position improved by his reliance on the terms of the Vestecorp assignment, which states at Recital F that Mr Dixon had agreed pursuant to the Deed to guarantee all money due under the Consultancy Agreement: Mr Dixon was deceased at that time and the respondent is not a party to that document.

45    Another difficulty which the appellant’s first and second arguments encounter is that it is not simply cl 1(b) that requires attention if the contractual language is to be corrected. The arguments of Mr Smits do not engage with the references to the Assignee and Assignor in cl 1(c), which cannot stand if cl 1(b) is corrected.

46    Next we deal with the content of the Guarantee obligation on the assumption that cl 1(b) should be read as intending to refer to money due from Loire to the Assignee. This takes us into the territory of the Consultancy Agreement. The drafting of this document is obscure and in part impenetrable. Whilst cl 5.1 imposes an obligation on Loire to pay fees to Vestecorp as provided at item 4, being a weekly amount of $9,500, cl 5.2 operates to defer the payment obligation as specified at item 6. The consideration for the deferral is expressed at cl 5.3 as a requirement to pay monthly interest on “the outstanding fee” of 0%. Mr Smits submits that as no interest is payable in consideration of the deferral, that “it’s no good”. What that submission ignores is that deferral of the payment obligation does not require separate consideration, in addition to the consultancy fee.

47    As we have set out, item 6 defers the payment obligation until “recoupment” from the “recoveries processes” instigated by Vestecorp. There is no definition of what is meant by “recoupment” or the “recoveries processes”. Mr Smits submits that each is a reference to the list of management tasks to be undertaken by Vestecorp at item 1 of the schedule, numbered I-VII. Whilst it may be that this list gives some content to what objectively should be understood to be the intended objectives of asset recovery for Loire, we reject Mr Smits’ submission that the consultancy fee became payable within the meaning of cl 5.2 and item 6 on 3 July 2017, when Mr Dixon executed an application that Loire be recorded as the new registered proprietor of the Lovedale property pursuant to s 46C of the RP Act.

48    The effect of s 46C of the RP Act is that the Registrar-General may record a person as the registered proprietor of land where, by operation of statute, land becomes vested in a person other than the registered proprietor. The statute relied on is the Trustee Act 1925 (NSW) s 12(4), which applies where a new trustee is appointed. In that circumstance the new trustee is entitled to be registered as proprietor of land that is subject to a trust.

49    Loire was not registered as proprietor of the Lovedale property in consequence of that application before it was wound up on 3 July 2019, because Westpac as the registered mortgagee did not consent to the application. Despite the submission that the Supreme Court proceeding was initiated “as part of the recoupment process” the fact is that no recovery of the Lovedale property was achieved for Loire before it was wound up. As trustee, recovery of the asset comprising the Lovedale property can only mean restoration of its status as the registered proprietor as the beneficial interest in that property was never held by it.

50    No other asset recovery was pointed to by Mr Smits as triggering the payment obligation in accordance with item 6 of the schedule to the Consultancy Agreement. However, that does not conclude Mr Smits’ arguments. It was put to us that payment of accumulated consultancy fees became due in that the payment obligation was “accelerated” when the winding up order was made in respect of Loire. The short answer to that contention is that the Consultancy Agreement does not so provide. The entitlement to payment remained contingent upon proof that Vestecorp had managed to recoup an asset for the benefit of Loire.

51    It was also submitted that there “are multiple [other] ways” by which the consultancy fees became due and we were directed to paragraph 21 of the appellant’s written submissions. Here we see an admixture of various contentions expressed with little or no elaboration and without consideration of fundamental legal principles. There is no merit in any of the points made. Briefly, the Consultancy Agreement did not expire when Mr Dixon died on 7 March 2019, for the simple reason that he is not a party to it. For the same reason the fact that Ms Cox was appointed as administrator of his estate on 27 November 2020 did not affect the provisions of the Consultancy Agreement. The un-particularised assertion that Loire committed “fundamental or essential” breaches of conditions of the agreement fails for the self-evident reason that these matters were not put in issue and established before the primary judge.

52    The fact that Ms Cox remained silent in response to various demands made by the appellant for payment does not establish that the money as demanded was payable. Nor does it matter that Loire did not dispute the statutory demand of Vestecorp dated 30 July 2018, signed by the appellant, which claimed an amount of $1,472,379.70 as then due and did not resist the subsequent winding up application. Whilst these matters may evidence an acknowledgement or an admission binding on Loire, they did not bind Mr Dixon as the guarantor and who was not a party to the winding up application. The Deed does not contain a clause which binds the guarantor to determination of any amounts payable by the debtor to the creditor and nor does it contain a prima facie evidence certificate clause. Accordingly, the appellant was required to prove his status as a creditor in the estate of Mr Dixon: Begley v Attorney-General (NSW) (1910) 11 CLR 432; Re Kitchen, ex parte Young (1881) 17 Ch D 668.

53    The statutory demand itself raises another issue. The schedule specifies various invoices commencing in the amount of $100,320 on 1 September 2015. Even accepting the backdating of the effective date to 1 July 2014, at a weekly rate of $9,500 for a period of 56 weeks the total should be $532,000. The difficulties do not end there. Commencing 1 March 2016, the monthly invoiced amount is $140,110 which cannot be reconciled with a weekly fee of $9,500. When this was raised with Mr Smits in argument, he responded that he had not attempted “an analysis of the numbers” but then submitted that “on any view” the appellant was owed more than the prescribed amount to present a petition. We reject that submission as reflecting a fundamental misconception that it was not for the appellant to establish his creditor status to the satisfaction of the primary judge.

54    For these reasons, the primary judge was correct to conclude at PJ [38] that he could not discern as self-evident what the objective intention of the parties to the Deed should be taken to have been and therefore it was not open to correct the clear mistake asserted by the appellant. His Honour was also correct to conclude at PJ [44] that he was not satisfied that the appellant had established his status as a creditor.

Conclusion

55    There is no merit in the appeal and we order as follows:

1.    The appeal is dismissed.

2.    The appellant is to pay the respondent’s costs of the appeal to be agreed or taxed.

3.    Either party may apply to vary order (2) or may seek some different costs order, by filing short submissions not exceeding 3 pages and any affidavits in support within 7 days of the date of these orders.

4.    If any application is made pursuant to order (3) the party against whom the application is made may respond by filing short submissions not exceeding 3 pages and any affidavits in response within 7 days of receipt of the application.

5.    Subject to any further order of the Court, any application made pursuant to order (3) will be determined on the papers.

Associate:

Dated:    14 July 2023