District Court New South Wales Medium Neutral Citation: Tibbles v Ulladulla Creative Images Pty Ltd (No 1) [2021] NSWDC 404 Hearing dates: 31 May 2021, 01-02 June 2021 Date of orders: 02 June 2021 Decision date: 02 June 2021 Jurisdiction: Civil Before: Neilson DCJ Decision: See [38] Catchwords: CONTRACT – INTERPRETATION OF TERMS – Whether clause "The Company agrees that if it receives any further moneys from the Insurance Company…[they] shall be divided equally between the shareholders" was apt to apply to moneys paid by the insurer as "uninsured losses" on behalf of another insured who was a tortfeasor causing the Company's losses. Cases Cited: Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 Pacific Carriers Limited v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 Category: Principal judgment Parties: 1st Plaintiff – Ian Tibbles 2nd Plaintiff – Debbie Tibbles 1st Defendant – Ulladulla Creative Images Pty Ltd 2nd Defendant – John Corrin Representation: Counsel: Plaintiffs – M. Kalyk Defendants – G. Edwards Solicitors: Plaintiffs – M. Davidson (Paladin Law) Defendants – R. Ferguson (McNamara & Associates) File Number(s): 2019/00387037 Publication restriction: Nil. Judgment 1. HIS HONOUR: This is an action for damages for breach of contract. The contract bears date 14 February 2017. The parties to the contract were Deborah Ann Tibbles, the second plaintiff: Ian Gordon Tibbles, the first plaintiff: Karen Leanne Corrin, who is not a party to these proceedings: John Anthony Corrin, the second defendant, and Ulladulla Creative Images Pty Ltd, the first defendant. According to its terms, the completion of the contract was to occur on 1 March 2017 and it appears that that is what actually occurred. Background 1. The proceedings are, necessarily, an unhappy one. Mr Corrin has long since been divorced from Karen Leanne Corrin. Mr and Ms Tibbles are still married. Many years ago, Mr Corrin and Mr Tibbles worked together and formed a friendship. That led to their being shareholders in the first defendant. The current dispute represents a perhaps breaking-up of that earlier relationship between the Tibbles and the Corrins. The affidavit of Mr Corrin sworn on 28 October 2020, which is exhibit 1, contains this matter: "4. I am a French polisher by trade. Ian has the same trade and we met as apprentices when we were 15 years old and working for Chiswell Furniture in Moorebank. 5. In the 1990s Ian and I were both working for Key Kitchens in Ulladulla. I was going to leave to start my own business and I believe that the boss at Key Kitchens offered Ian the opportunity to buy their paint section. Ian and I decided to go out together so we established Ulladulla Creative Images Pty Ltd in August 1999 (hereinafter referred to as 'UCI' or 'the business') which specialises in the final finishing of kitchen cabinetry. 6. Ian and I both worked in the business in a hands-on role and we each drew a wage. Debbie was our bookkeeper and my then wife Karen Corrin (hereinafter referred to as 'Karen') was employed to do the pricing. Their roles changed over the years and from time to time we had other employees also." 1. The defendant company was incorporated on 16 August 1999. Originally each of Ian Tibbles, Debbie Tibbles, John Corrin and Karen Corrin were directors. The long-time legal adviser of the company was Mr John Cecil Hozack of Hozack Clisdell Lawyers at Ulladulla. In the beginning the defendant company, to which I shall hereafter refer like Mr Corrin said as "UCI", traded from premises rented from Key Kitchens in Deering Street in Ulladulla. In 2009 UCI bought a business unit located at Unit 8, 1-3 Coller Road, Ulladulla. The business moved to that location after that property was purchased. The affidavit of Mr Corrin continues thus: "11. Sometime in 2013 Ian and I started to have some discussions about me buying him out of the business. Ian is about 18 months older than me and he wanted to retire when he turned 50. 12. It was around this time that I was going through the breakdown of my marriage so I was feeling very stressed about both my home and work life. Karen and I were on and off again and at one stage I had moved out of our home and the next she took off to Wagga leaving me with the kids. Ian was not happy that I had to take hours off work to do things for my kids, especially my daughter who was doing her HSC at the time." 1. Mr Corrin then obtained a number of valuations which clearly were discussed with Mr Tibbles. Around Christmastime 2015 or early in 2016 Mr and Ms Tibbles went on leave. They left on a trip around Australia. According to Ms Tibbles they were travelling between February 2016 and February 2017. Nonetheless, she was doing work for the company remotely by using electronic means of communication. During this period there were, according to Mr Corrin, further negotiations about his purchasing the business. 2. According to Mr Corrin, in or around April 2016 he and Mr and Ms Tibbles reached a tentative agreement whereby the business would sell the property unit that it owned to the Tibbles for $270,000 and the business would pay out the mortgage on the unit which at that time was $90,000. Mr Corrin would buy the business by paying to each of Mr and Ms Tibbles $60,000 as well as his paying $60,000 to his estranged wife, Karen Corrin. He summarised this arrangement in this fashion: "In short, I had to pay out $270,000 in order to own the business and Ian and Debbie would pay $150,000 to own the unit that it traded from." 1. However, this tentative agreement did not proceed because on 19 May 2016 there was a fire at a neighbouring property "across the road" at 18 Coller Street, Ulladulla. The smoke from that fire was heavy and toxic. It damaged the stock in trade of UCI and made all its equipment "worthless". The business was no longer able to trade from its premises because the chemical residue brought in by the smoke reacted adversely with the products used by UCI. According to Mr Corrin's affidavit, "Virtually everything was contaminated." The business stopped trading, however, it reopened at other premises on 2 August 2016. Those premises were Unit 7, 233 Princes Highway, Ulladulla. Insurance 1. UCI had a business insurance policy that has been referred to as "Elders Insurance", and was taken out through Elders Insurance in Ulladulla. However, Elders Insurance (Underwriting Agency) Pty Ltd, is as its full title suggests, only an insurance agent and not an underwriter. It was writing business on behalf of QBE Insurance (Australia) Ltd which itself is a member of the QBE Insurance Group Ltd. The identity of the underwriter is disclosed in the "Business Insurance Policy Product Disclosure Statement", which is exhibit 3. There were a number of types of cover provided by that insurance policy. The relevant policy is contained in the Product Disclosure Statement and the Certificate of Insurance, otherwise known as the "Completed Business Insurance Renewal." The relevant period of insurance was from 1 September 2015 to 1 September 2016. 2. The policy provides 14 types of cover. Only four of those types of cover were taken out by UCI and the first was for property damage. The contents of the business premises were insured for $65,000. There was a $500 excess. There was a business interruption cover. The sum insured was $20,000 per 12 months with a $500 excess. There was a theft cover which is currently irrelevant and a broad form liability cover, which is also currently irrelevant but the extent of that cover was $10 million. It extended to product liability as well as personal liability. Following the fire UCI made a claim on its insurance policy. That, in fact, generated two claims - one for property damage and the other for business interruption. The insurance policy bore the number EBA782627BPK. The claim number for the property damage was EB0024009 and the claim number for the business interruption cover was EB0024010. Prior to the making of the contract currently relevant, certain payments had been made by the underwriter to or on behalf of the UCI. According to Mr Corrin's affidavit $20,000 was paid to UCI on 24 June 2016 for property damage. The business, as I said, reopened on 2 August 2016 at other premises. A week later there was a further payment of $48,949.67 and that, again, was for property damage. 3. According to Mr Corrin's affidavit things evolved in this fashion: "34. By September 2016 the business had been paid around $73,000 on the insurance claims, but I was confused about the amount for the loss of income claimed. We were insured for $20,000 but Crawfords [the insurer's loss adjuster] made a calculation that we should only get $5125.00. When I questioned Chris Dell [of Elders Ulladulla] about the figure he said, '$20,000 is over the whole year. You were only closed for a few months.' 35. I had been advised by the loss adjustor that we wouldn't be able to claim more than $80,000 so I pretty much accepted that would be about it even though the amount had not been finalised and we were short of the sum we were insured for. 36. One day toward the end of 2016 I was at the unit that the business owned and spoke to a lady called Dawn Burgess who was the assessor for the strata insurance. She was quite friendly and answered a lot of my questions about insurance. She said, 'Look, I wouldn't normally do this but I think you should get in touch with someone who can help you with your claim.' She gave me the contact details for Derek Jorgensen of Claim Partners Pty Ltd (hereinafter referred to as 'Derek'). 37. By this stage I had already agreed with Ian and Debbie that we could continue on with me buying the business. We had been discussing differences in how much I should pay and what the deal should look like. He and Debbie no longer wanted to buy the unit so I had to see if I could borrow some more money to get the deal done. 38. I first spoke to Derek in the middle of January 2017. He said, 'I'll go over the whole policy. It sounds like they have categorised you as a hobby and not a business. I'm sure we will be able to get you some more for your business interruption.' 39. Eventually Ian and I agreed on the old figures for the sale of the business but with me buying the unit once I knew I could get the finance. During the course of these discussions, I told him I was going to try and get a better outcome for the business interruption claim and that if I got some more from the insurance claim, I would make an allowance that I would share anything else that came in from claim equally with the other shareholders being Ian, Debbie and Karen. We agreed this could be tied up with the purchase of the business." 1. For some little time, Mr Corrin had been instructing Mr Peter Ryan of Ulladulla as his solicitor and indeed Mr Ryan had assisted him in his family law property settlement. However, it appears that Mr Ryan was not as interested in assisting Mr Corrin with the purchase of UCI. Eventually Mr Corrin agreed to allow Mr Hozack, who was acting for Mr and Ms Tibbles, to also act for him and his former or estranged wife. That led to Mr Hozack drawing the contract which is the subject of the current proceedings. The contract 1. As I sought to make clear at the commencement of these reasons, the four shareholders and UCI are each a party to the agreement. The recitals are these: "A. The Company carries on the business of kitchen renovations and designs trading as Ulladulla Creative Images Pty Ltd from the Premises at Ulladulla. B. Each of Debbie, Ian, Karen and John are each the registered, legal and beneficial owner of one ordinary share of $1.00 per share in the Company totalling four ordinary shares. C. Each of Debbie, Ian and Karen have agreed to sell and John has agreed to purchase from each of them their one ordinary share of $1.00 per share in the Company for the consideration and on the terms contained in this Agreement so that John will become the registered proprietor of all four ordinary shares in the Company." 1. The first clause of the agreement contains provisions relating to interpretation. Relevant to this is cl 1.6 which provides this, "words expressed in the singular include the plural and vice versa." The purchase price stipulated in cl 3.1 is the sum of $60,000 for each share, meaning that to buy the shares of each of Mr and Ms Tibbles and of his former or estranged wife Mr Corrin would have to expend $180,000. The completion date of the contract was stipulated to be 1 March 2017. Clause 5 is headed, "Entire agreement." Clause 5.1 is this: "This Agreement (as defined) constitutes the entire agreement between Debbie, Ian and Karen as Vendor and John as Purchaser relating to the sale of shares." 1. The presently relevant clause is cl 15. That bears a heading, "Insurance Claim." The two parts of the clause are these: "15.1 The Company has made a claim against the Company's Insurers for loss arising out of a fire that took place in the premises known as Unit 83 Collers Road, Ulladulla, being Lot 18 in Strata Plan 82760 (the 'Premises'). 15.2. The Company agrees that if it receives any further moneys from the Insurance Company beyond those moneys received up to the date of this Agreement then any such moneys shall be divided equally between the shareholders Debbie, Ian, Karen and John and paid to each of the parties within seven days from the date of receipt of any such moneys from the Insurance Company." 1. The plaintiffs sought to adduce evidence about that clause. That was vehemently objected to by the defendants who relied on the parol evidence rule. However, Counsel for the defendants then persisted in cross examining Mr Hozack, who was called in the plaintiff's case, about the meaning of a letter of advice that he sent to Mr Corrin on 20 April 2017, which raised the question of what was said at the meeting of the four parties when the agreement was signed. Up until then I had not permitted the plaintiffs to read pars 8 and 9 of the affidavit of John Cecil Hozack affirmed on 13 May 2021 which is exhibit C nor did I permit the reading of annexure B to that exhibit. However, following the cross-examination of Mr Hozack I permitted the plaintiff to read those paragraphs and that annexure and granted to Ms Edwards, who appeared for the defendants, a right to cross-examine Mr Hozack further. 2. The relevant paragraphs of Mr Hozack's affidavit are these: "7. On 14 February 2017 John, Karen Corrin, Ian and Debbie all met with me in my office to espouse an finalise the terms of the share sale. A copy of my diary note with respect to this meeting is annexed hereto and marked, 'annexure AA.' 8. I recall during this meeting the issue of insurance payments to UCI was raised, I think by either Debbie or Ian. I cannot recall the exact words but I can recall the effect of the views expressed by those at the meeting was that 'we do not know whether any plans made by the company will be successful but any further benefits received from any actions as a result of the fire would be shared equally.' Whilst all waited in my office, I amended the draft Agreement for Transfer and Sale of Shares to insert cl 15 of the Agreement on the instructions of those present. After I had amended the agreement, I had it approved by all parties, who then signed it and I witnessed each signature. 9. A copy of my contemporaneous notes written during the meeting made when speaking with John and the others is annexed hereto and marked, 'Annexure B.' Note numbered 8 states, 'No further proceeds from Insurance Company - paid out as a complete loss.' Note numbered 9 states, 'Any further net proceeds to receive to be split four [ways].' Note numbered 10 states, 'Query action SE Power Lines Pty Ltd any action to be split four ways.' What this relates to is that I said words to the effect, 'If the insurance does not cover the loss, then Ulladulla Creative Images could sue the next door neighbour who caused the fire for negligence and they will refer the matter to their insurer.' I remember the parties at the time were not sure what form the action would take. Those present [at] the meeting stated words to the effect, 'the benefits of any action would be split equally.' That is consistent with my recollection as to why those present instructed me to include cl 15." 1. Mr Hozack was required for cross-examination and was cross-examined. He has been practising since 1977, that is for over 40 years. He agreed that he is a very experienced transactional lawyer but it is clear from his evidence that he has very little, if any, experience in litigation. For example, the initiating process was filed by his firm with his being formally the solicitor on the record. However, he made it clear that the initiating process was not drawn by him but by Ms Becky Baker, an employed solicitor in his office who had some familiarity with litigation. There is no reason whatever for me to reject the evidence of Mr Hozack. 2. True it is that on 20 September 2017 Mr Hozack wrote a letter to Mr Corrin seeking to finalise the transfer of the UCI company and business to Mr Corrin. On p 3 under the heading, "Insurance claim", is this: "We draw to your attention cl 15.2 of the agreement which provides for any insurance moneys that may be receivable by the Company following any claim for damages prior to completion, to be paid between the four shareholders, Ian, Deborah, you and Karen. Please advise if any moneys are paid." The first thing to note is that there is no reference in the contract to, "any claim for damages", or to, "a claim for damages", and it is to be noted that moneys payable by the company's insurance company were to be received after the date of contract were to be shared equally by the four prior shareholders and that the letter provided to Mr Corrin what Mr Hozack conceded was erroneous advice. Payments post-contract 1. In short, it is to be noted that on 5 October 2017 UCI received $14,875 from its underwriter in respect of the business interruption cover. On 23 September 2018 UCI received a further $30,000 from its insurer under the business interruption cover. Those sums were never divided between the four who were entitled to them. That was acknowledged by Mr Corrin in his affidavit. In [45] his affidavit he said this: "I realise now that I should have paid Ian, Debbie and Karen the sum of $11,218.75 each upon receipt of the extra amount from the insurance claim that was on foot at the time we signed the [contract]. I acknowledge that they are owed this amount in accordance with terms of the [contract]." The original affidavit referred to the contract as the "Deed", but is not formally a deed. The issue (1) 1. There was a further payment received by UCI on 20 December 2018. That was for the sum of $380,000. The question is: what is the nature of that payment and does it fall within cl 15 of the agreement? Shortly put that sum represents, "Uninsured losses", incurred by UCI that were paid to UCI by the insurer of a putative tortfeasor which, fortuitously, was insured by the same insurer that insured UCI. The putative tortfeasor has been referred to a number of ways. It has been referred to as South East Power Lines Pty Ltd, as SE Power Lines Pty Ltd and as South East Power Lines & Electrical. I shall merely refer to it as "the tortfeasor". There is no dispute that the tortfeasor was the occupier of 18 Coller Street, Ulladulla, that the fire broke out in its premises, that there was no actual fire in the premises owned by UCI, despite what the contract says, and that those premises were substantially damaged by toxic smoke and fumes emanating from the fire at the tortfeasor's premises. It is fortuitous that the same insurer to whom I shall refer merely as "QBE", insured both the first defendant, UCI, and the tortfeasor. Indeed, it took a long time for that position to be realised. The role of Mr Jorgensen 1. I have already quoted the affidavit of Mr Corrin in which he refers to retaining Mr Derek Jorgensen of Claim Partners Pty Ltd to act for UCI. It is clear from documentary evidence produced to the Court by Mr Jorgensen that contact was made between him and Mr Corrin on 14 and 15 December 2016 and then again in 2017. Amongst documents in exhibit F are tax invoices sent by Claim Partners Pty Ltd to UCI. Tax invoice 0124 shows a phone call on 14 December 2016 to, "interested parties", giving an affirmative to proceed with the project. That could only have been a telephone communication with Mr Corrin. The way in which Claim Partners Pty Ltd accounts are kept is unusual, however under the heading, "Discussions with client - phone", there was also a reference to speaking with the "insured" on 15 December 2016 and then again on 3 January, 19 January, 25 January, and 3 February 2017 and there is also reference to there being a meeting with Mr Corrin on 25 January 2017. All of these attendances were prior to the date of the contract. 2. On 23 January 2017 Mr Jorgensen sent an email to Elders Insurance at Ulladulla following upon a telephone discussion earlier in the day. That confirmed that Claim Partners Pty Ltd had been retained by UCI to assist in settlement of its material damage and business interruption claims made against the "Elders Insurance underwritten by QBE Insurance (Australia) Limited." In that email Mr Jorgensen asked Elders to advise him of the details of the solicitor appointed by QBE to pursue a recovery action against "the responsible party", namely the tortfeasor. That brought a response later on that day from Elders at Ulladulla giving details of the claims and details of the person by whom they were handled other than at Ulladulla. 3. On 25 January 2017 at 5.09pm, obviously after the meeting that was held earlier that day with Mr Corrin, Mr Jorgensen sent a letter to QBE to what Mr Jorgensen referred to as its "material damage department", that states a number of things. They are these: "Further to my conversations with your respective officers, I confirm that on the date of the event, the owner of Ulladulla Creative Images, John Corrin, reported the presence of the fire (and associated smoke) to Shoalhaven City Council. I am advised by Mr Corrin that following his call, Greg Howarth - Shoalhaven City Council Environmental Officer - attended the site of the fire and discovered smoke was still coming from the site. Mr Corrin advised that Greg Howarth said that he gave the offenders a 'stern talking to', about the fire and the smoke, but did not issue any fines. I understand that Greg Howarth can be contacted on [telephone number] or [email addresses]. I have also found a mobile number for him at [redacted], but that is on a 2014 document. I am aware of claims that may be in excess of $500,000 between your respective policies plus uninsured losses. Given that it would appear that there is no conflict between your respective positions, can I suggest that you have a factual investigator attend to the interview of both Greg Howarth and John Corrin in relation to events on the day so that any recovery prospects are not jeopardised should either be unavailable later on." Clearly, Mr Corrin was giving instructions to Mr Jorgensen about the circumstances of the fire and giving him details of relevant witnesses who might be able to give evidence at the hearing of an action against the tortfeasor. Clearly, Mr Corrin had also advised Mr Jorgensen that the actual losses of the defendant might be $0.5 million and that included "uninsured losses." Clearly, the purpose of giving details relating to the tortfeasor's liability was to seek to recover "uninsured losses." 1. It is to be recalled that that is prior to the meeting at Mr Hozack's office on 14 February 2016 at which the contract was signed. On 2 February 2017 QBE sent an email to Mr Jorgensen in which they advised that they had not yet appointed a solicitor to act for them in recovery proceedings because they needed the claim to be finalised before they would start the recovery process and appoint a solicitor. Before I go further, I should point out that the reference in the email of Mr Jorgensen of 25 January 2017 at 5.09pm to a "conflict of interest" refers to the fact that the email was also copied to the loss adjustor for the strata plan, Ms Dawn Burgess, whom I have earlier mentioned, and who was the lady who suggested to Mr Corrin that he retain Mr Jorgensen. 2. It is clear that there must have been communication between Mr Corrin and Mr Jorgensen about trying to recover uninsured losses from the tortfeasor by using the services of the insurer of UCI. That is completely understandable when one has regard to the principles of subrogation and indeed in the product disclosure statement on p 86 is this: "Subrogation If you've suffered loss that wasn't covered by your Policy as a result of the incident, we may offer to attempt to recover this. You may also specifically ask us to recover this for you. You'll need to give us documents supporting your loss. Before we include any uninsured loss in the recovery action, we'll also ask you to agree to the basis on which we'll handle your recovery action. You may need to contribute to legal costs in some circumstances." It appears that on any objective basis Mr Corrin would have been given certain advice by Mr Jorgenson about recovering "uninsured losses", from a potential third party and, according to Mr Hozack, this was raised at the meeting on 14 February 2017 which led to the signing of the contract. 1. There are further things that Mr Corrin did to pursue the "uninsured losses." QBE appointed Austral Mercantile Collections Pty Ltd to pursue recovery of its payout to UCI and potentially to pursue recovery of UCI's uninsured losses. On Monday 30 July 2018 Mr Claggett of Austral Mercantile Collections wrote to Mr Jorgensen and said this: "Further to my previous update to QBE, would you please have your client check if 18 Coller Road is now unoccupied (the insured's business is nearby) and also provide any other details they have for South East Power Lines (owner/operator names) to help me locate a 100% address for them?" That led Mr Jorgensen to speak with someone at UCI, most probably Mr Corrin, and on 30 July 2018 some four and a half hours later Mr Jorgenson advised Mr Claggett that the business at 18 Coller Road had now closed and the owner was thought to be travelling around Australia. In an email to Mr Jorgensen on 1 August 2018 Mr Corrin's daughter, Chloe, who appears to have been acting as the typist for him, advised that UCI had been able to track down the mobile telephone numbers of two owners of South East Power Lines. Their names are provided and their mobile telephone numbers are provided and for one of the two gentlemen concerned UCI advised that he was residing in Mollymook. Later that day that information was transferred by Mr Jorgensen to Mr Claggett. 1. On 14 August 2018 Mr Jorgensen advised Mr Claggett suggesting to him that he contact Mr Gary Cox of LJ Hooker, Ulladulla, to discuss the sale of the property formerly owned by South East Power Lines, the tortfeasor. Mr Jorgensen also advised that the trading name for the tortfeasor had also been sold. It is unclear as to the source of the intelligence that Mr Jorgensen had that he was conveying to Mr Claggett but again may have come from Mr Corrin. 2. On 3 October 2018 Chloe Corrin wrote this to Mr Jorgensen: "We have just gone to the bank to try and get an overdraft but even the bank cannot do anything for us. We are doing it extremely tough at the moment and our business may soon go broke and we may be forced to close our doors. At this point in the time the only thing that can save us is this insurance payout. We say this with great urgency. We need the matter pushed or we may have to contact an ombudsman because this has just gone on for too long and we do not want to lose our business." In his oral evidence Mr Corrin confirmed that they were indeed "doing it tough", financially in October 2018. I again point out that the last payment made under the policy was 23 April 2018, so all that can be referred to as an "insurance payout", was the recovery of uninsured losses by use of a recovery action brought by UCI's insurer. 1. On 1 November 2018 a statement about the fire was sent by UCI to Mr Jorgensen. The email enclosing it is headed, "Recollection of 19 May 2016." It can only be the recollection of Mr Corrin. It was clearly attaching a statement of Mr Corrin and the email attaching the statement refers to attempts to obtain relevant photographs. Later on that day Mr Jorgensen sent an email to both John and Chloe Corrin which states this: "I have rewritten that statement and would ask that it be reviewed and added to (see items in Red)." Clearly Mr Jorgensen was probably redoing the statement to make it in terms that would be acceptable for use in Court, no doubt because of his extensive background in loss adjusting, he made certain suggestions. Later the same day Mr John Corrin replied to Mr Jorgensen that he had fixed up the statement to the best of his knowledge and clearly returning the redone statement. In other words, he was actively pursuing the recovery action. The issue (2) 1. The question is: was this subject, the potential recovery of uninsured losses, the subject of discussion at the meeting on 14 February 2017: whether the insurance clause, cl 15 inserted by Mr Hozack, was inserted to cover that situation and, if so, whether there was consensus ad idem. In his affidavit of 28 October 2020, exhibit 1 in these proceedings, Mr Corrin said this at [42]: "I do recall that when we were signing the Deed [the contract] Mr Hozack said, 'You know you could probably try and get some money from a third party for the fire', and I replied, 'I'm not even going near that. This has been stressful enough as it is. Let me just sign the deal off and get out of here." In his affidavit, which is exhibit C, Mr Hozack said this. "10. I have read the affidavit of John sworn 28 October 2020. I cannot recall saying the words attributed to me in paragraph 42 of that affidavit. If they were said, it does not change my recollection as set out above." By what he set out above he was referring to [8] and [9] of his affidavit which I previously cited. It may be that Mr Corrin was reluctant to commence proceedings in Court against a tortfeasor but he certainly was not reluctant to pursue the insurer for it to recover uninsured losses on his behalf. I therefore accept, as I previously said, the evidence of Mr Hozack about the meeting and in particular what is referred to in [8] and [9] of his affidavit which I have quoted above, confirmed by the contemporaneous note he made which is annexure B to his affidavit. I therefore accept that it was intended by each of the four parties that any further moneys recovered would be shared equally between the four individuals who were party to the agreement of the 14 February 2017. 1. The question then becomes, is it legally permissible to construe the terms of the contract in accordance with the intention that can be inferred from what was said at the meeting and what on the evidence of Mr Hozack was agreed to? I turn to consider cl 15.1. As I have said, there is an interpretation clause which permits words in the singular number to be read as if they be in the plural number and vice versa. Therefore, cl 15.1 could be read as follows: "The company has made claims against the Company's Insurer for loss arising out of a fire that took place in the premises known as Unit 83 Collers Road, Ulladulla being Lot 18 in the Strata Plan 82760 (the Premises)." As I have already pointed out, Mr Hozack appears to have conflated two things. Firstly, UCI's property was Unit 8, 1-3 Coller Road and the fire had actually taken place at 13 Collers Road. I understand that the lot number in the strata plan relates to the defendant's premises rather than the tortfeasor's premises. It is unfortunate that the draftsman should have referred in cl 15.1 to the company's "insurer", but then used different words in cl 15.2, namely, "insurance company". Clearly, the same insurer is meant, the insurer we now know to be QBE. 1. The question then becomes whether cl 15.2 should be read strictly or narrowly, or broadly. The defendant submits that the words, "Any further moneys", refer to moneys received under the claims that had been made upon UCI's insurer and that those moneys would clearly be coming from that insurer. In other words, further moneys does not mean any additional moneys at all but any further moneys under the claims that had already been made upon the insurer. The plaintiff submits that the words, "any further moneys", means any additional moneys and the words, "from the insurance company", is capable of meaning obtained by the insurer for the insured UCI, that is, is wide enough to encompass moneys for "uninsured losses" collected by the insurer pursuant to its right of subrogation. 2. Clearly cl 15.1 is little more than a recital. The question is whether the words, "any further moneys from the insurance company", ought be read as meaning, "any further moneys under the claims already made upon the insurance company and from the insurance company", or whether it refers to, "Any additional moneys that might be recovered by the insurance company for the benefit of the insured." It is capable of such an interpretation. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 a unanimous judgment of Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ said this at [40]: "The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction." That dictum was cited with approval in International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 at [8] Gleeson CJ said: "In giving a commercial contract a businesslike interpretation, it is necessary to consider the language used by the parties, the circumstances addressed by the contract, and the objects which it is intended to secure. An appreciation of the commercial purpose of a contract calls for an understanding of the genesis of the transaction, the background, and the market. This is a case in which the Court's general understanding of background and purpose is supplemented by specific information as to the genesis of the transaction. The Agreement has a history; and that history is part of the context in which the contract takes its meaning." 1. In Toll, [40] ends with observation that the terms of a contract are to be interpreted: "normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties and the purpose and the object of the transaction." I must point out that the parties to this agreement were two gentlemen who by trade are French polishers and the wife of one of them and the estranged or former wife of the other and a small propriety company that those four persons had until that time owned. This was not a "commercial contract", in the normal sense, of the type for example that was the subject of litigation in Toll and in International Air Transport Association v Ansett Australia Holdings or of the type considered in Pacific Carriers Limited v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at [22] nor the type of case considered in Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337. For example, Mr Corrin does not know the difference between a deed and a contract. Most people do not, however every lawyer does. There is generally in popular usage verbiage such as, "insurance claim", and, "insurance payout." That is used to refer to a number of things which can refer to an insurance payment by an insurer to its insured or by the insurer of a third party who was a tortfeasor and from whom the payee recovers damages. For example, it is very common in this country for general members of the public to refer to a payment of motor vehicle accident damages as an "insurance payout", or the settlement of a claim for damages for an industrial accident or the settlement of a claim for workers compensation as an "insurance payout." 1. A lawyer ought not express himself in such fashion yet those are the very terms of both the statement of claim and the defence. I have little doubt that both Mr and Ms Corrin and Mr and Ms Tibbles would believe that the $380,000 paid to UCI on 20 December 2018 was an "insurance payout", and in my view it is correct to include it in cl 15.2 of the contract here in question. After all, the fire and the damage it caused, caused losses to the company which reduced the value of its shares but also the value of its goodwill and, had the fire not occurred, the value of the shares, the value of the goodwill of the company and the moneys receivable by the company would have been larger. 2. One can readily accept that the four shareholders at the time of the fire and the commencement of the losses would have expected to share in the proceeds not only of their own insurance policy but any moneys that their insurer could collect on their behalf. It is fortuitous, as I said, that it was only realised on 17 September 2018 that the insurer of the tortfeasor was in fact the insurer of UCI. In exhibit F is an email from Mr Jorgensen to QBEs "Adelaide recoveries office", stating this: "…I was in contact with the recoveries firm, Austral Mercantile Collections Pty Ltd, this afternoon and was advised that this matter has now been closed in their office (as of 13 September 2018) as both the insured [UCI] and the party responsible for the fire that damaged the insured's property were insured by QBE. Can I ask you to contact me to advise how this matter is to proceed as the insured has a significant un-insured loss that needs to be recovered against the party responsible for the loss." That led Mr Jorgensen to negotiate with QBE and reach an agreement to settle the claim for UCI's uninsured losses in the sum of $380,000 on instructions given to Mr Jorgensen by Mr Corrin. 1. In summary, therefore, I hold that in the circumstances of this case the cl 15.2 of the contract of the 14 February 2017 is apt to include the $380,000 received by UCI on 20 December 2018. 2. I had asked earlier through counsel for the plaintiff for the solicitors to work out any interest on the three amounts recovered by UCI that ought be distributed to each of the plaintiffs. MFI #3 DOCUMENT SHOWING CALCULATIONS All right. I am not a mathematician. So you will need to assist me. Now the first sum was $14,875, correct? KALYK: Yes, your Honour. HIS HONOUR: Multiply that by 1.23 equals how much? KALYK: Is $18,296.25, your Honour. HIS HONOUR: Thank you. Now the second sum was $30,000 and we multiply that by 1.22 and what do we get? KALYK: $36,600, your Honour. HIS HONOUR: And the fourth sum was 380,000 multiply that by 1.12 and you get what? KALYK: $425,600. HIS HONOUR: $425,600. Add all those together I get, if my mathematics be correct the total of those three sums is $480,496.25. KALYK: Yes, your Honour, that's right. HIS HONOUR: All right. Now divide that by four gives you $120,124.06? KALYK: Yes, your Honour. HIS HONOUR: You agree with those mathematics, Ms Ferguson? FERGUSON: Yes, I do. HIS HONOUR: Thank you very much. Now, it appears to me that I should enter judgment for each plaintiff against the first defendant for that sum. That is what you want, isn't it? It had to be that way. All right. Now, does anyone want any further reasons for judgment? KALYK: No, your Honour. HIS HONOUR: Ms Ferguson? FERGUSON: No, thank you, your Honour. 1. HIS HONOUR: I have inquired of the representatives of the parties if any further reasons for judgment are required. I am told that none is so required. For those reasons I give verdict and judgment for the first plaintiff against the first defendant for $120,124.06. I give verdict and judgment for the second plaintiff against the first defendant for $120,124.06. I give verdict and judgment for the second defendant against the plaintiffs. I order the first defendant to pay the costs of the plaintiffs. Any other orders sought other than I will just give reasons for making the third order? KALYK: No, your Honour. HIS HONOUR: I have directed that there be verdict and judgment for the second defendant against the plaintiffs because it appears to me that the joinder of the second defendant was unnecessary and was an attempt to raise the veil of incorporation. It is clear that the moneys were paid by QBE to UCI and not to Mr Corrin personally. Although Mr Corrin as a director of UCI had a legal obligation to advise UCI to distribute the moneys received from QBE, that does not mean that he is personally liable under the contract because the promising party in cl 15.2 of the contract is the company. That is why I have given judgment for the second defendant. Anything else? [Further submissions] HIS HONOUR: Exhibits to be retained for 28 days. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 August 2021