Bloss Holdings Pty Ltd v Brackley Industries Pty Ltd [2006] NSWSC 56

New South Wales Supreme Court

CITATION : Bloss Holdings Pty Ltd v Brackley Industries Pty Ltd [2006] NSWSC 56

HEARING DATE(S) : 25 – 27 July, 22 & 23 September, 28 November and 14 December 2005

JUDGMENT DATE : 15 February 2006

JURISDICTION : Equity

JUDGMENT OF : Hamilton J

DECISION : Plaintiffs' claims barred by release.

CATCHWORDS : DEEDS [10] – Deed of release – General words of release – Matters in contemplation of parties - INTERPRETATION [26] – Admissibility of extrinsic evidence in relation to instruments – Matters particularly relating to contract – In general – Relevant principles.

Amaca Pty Ltd formerly known as James Hardie & Coy Pty Ltd v CSR Ltd [2001] NSWSC 324 Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 CASES CITED : Grant v John Grant & Sons Proprietary Limited (1954) 91 CLR 112 London & South Western Railway Co v Blackmore (1870) LR 4 HL 610 Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26 Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165

Bloss Holdings Pty Limited (P) PARTIES : Brackley Industries Pty Limited (D1) Lamajon Pty Limited (D2)

FILE NUMBER(S) : SC 3558/03

COUNSEL : G J Drake (P) M A Ashhurst (Ds)

SOLICITORS : Mark Phillip Symonds (P) Kemp Strang (Ds)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

HAMILTON J

WEDNESDAY, 15 FEBRUARY 2006

3558/03 BLOSS HOLDINGS PTY LIMITED v BRACKLEY INDUSTRIES PTY LIMITED & ANOR JUDGMENT 1 HIS HONOUR: ISSUE 2 Maria Vermunt (formerly Papadatos, nee Pates) was employed by the first defendant Brackley Industries Pty Ltd ("Brackley") as a sales manager. She found favour with Gary Abrams, the principal of Brackley. As a result, Brackley entered into an agreement whereby it promised that it would give to Bloss Holdings Pty Ltd ("Bloss Holdings"), a company of Mrs Vermunt, 10 per cent of the shares in Brackley and 10 per cent of its profits. Subsequently, relations between Mrs Vermunt and Mr Abrams cooled. By a further agreement Lamajon Pty Ltd ("Lamajon"), another company of Mr Abrams, agreed to pay to Bloss Holdings $150,000, but included in the agreement relating to this payment a release. The issue is whether that release released Brackley from its obligations to Bloss Holdings in respect of shares and profits. The determination of that issue requires the determination of factual questions as to the circumstances in which various documents were executed and what was said at the time and a question as to the construction of the release. FACTS 3 The following facts are undisputed or easily found, except where otherwise indicated. 4 Mrs Vermunt commenced employment with Brackley as a sales manager in February 1998. Mrs Vermunt was very successful at her job and found high favour with Mr Abrams. As a result, in October 1998, she was granted by agreement an opportunity to acquire an interest in Brackley ("the share and profit agreement"). 5 The terms of the share and profit agreement were that, if Mrs Vermunt remained as an employee of Brackley until 27 February 2000 ("the effective date") (and Mr Abrams was then still alive), Bloss Holdings would be entitled to receive 277 "A" class shares in Brackley (10 per cent of the issued share capital). Further, between the date of the share and profit agreement and 30 days after the effective date, Bloss Holdings was entitled to receive 10 per cent of the net profit of Brackley. 6 At the end of 1998, Mrs Vermunt continued in favour with Mr Abrams. She was at that time married to John Papadatos. He was known to Mr Abrams and, indeed, continues in a business partnership with Mr Abrams to this day. Mr Abrams agreed to provide an interest free loan of $550,000 to Mrs Vermunt so that she could purchase a new home. There is no dispute that this agreement ("the loan agreement") was entered into and, indeed, implemented. There is a dispute as to whether it was ever recorded in writing. But there is no doubt that the loan agreement contained terms that the house be purchased in Mrs Vermunt's name alone; that she reside in the house; and that Bloss Holdings forego any claim for profits under the share and profit agreement during the term of the loan. After initially denying the last mentioned term of the loan agreement, Mrs Vermunt eventually conceded it during cross examination. 7 Mr Abrams says that in April 1999 a written agreement recording the terms of the loan agreement was executed by him and Mrs Vermunt ("the written loan agreement"), but no copy can now be found. Mrs Vermunt denied the existence of the written loan agreement. As found below, the Court accepts that such a document was created and executed. However, this is of little moment (except as to credit), as there is no real controversy over the terms of the loan agreement and the loan has now been repaid. 8 The loan was advanced and Mrs Vermunt, with its assistance, bought a house in The Promenade, Sans Souci ("the Sans Souci house") and lived in it with Mr Papadatos. In August 2000 Mrs Vermunt left the Sans Souci house and Mr Papadatos. Mr Abrams advised her that she was therefore in breach of the terms of the loan agreement and requested that an amending deed be executed that gave Mrs Vermunt six months in which to return to the Sans Souci house or sell it. That deed was executed on 21 August 2000 by Mr Abrams, Mrs Vermunt and Mr Papadatos ("the deed of acknowledgment and variation"). It acknowledged the incorporation of the loan agreement in "a Deed of Loan/Loan Agreement in 1999" and the parties' obligations under that Deed/Agreement and proceeded to vary those obligations along the lines set out above. 9 Mr Abrams says that by the end of 2001 Mrs Vermunt's previously exemplary performance as an employee had become unsatisfactory. On 19 November 2001 he issued her with warnings in the form of a letter and a memorandum, both concerning her conduct. The allegations included absenting herself from work on false pretexts and telling untruths about her dealings with customers. Mrs Vermunt concedes the receipt of those warnings and concedes that at least some of the allegations made in them were correct. She claimed (for the first time) in cross examination that Mr Abrams subsequently recanted the effect of these warnings over a lunch. This he denies. 10 It was also stated in the warnings that she would not thereafter accompany Mr Abrams on overseas selling trips, as she had previously been accustomed to do. She claims that, despite this, she accompanied him on a trip to South Africa in 2002. However, he denies this and travel and immigration records appear not to verify, but to negate, this claim by her. 11 In January 2002 Mrs Vermunt asked Mr Abrams for assistance to pay credit card bills that she could not meet in the amount of $49,667. Mr Abrams says that he agreed to pay Mrs Vermunt $150,000 from which she could pay these debts, if she agreed to give up any claim that she and Bloss Holdings had against the defendants. Mrs Vermunt says that Mr Abrams offered to give her the $150,000 with nothing in exchange. This is the most critical conflict in the evidence in these proceedings. 12 The parties executed a written agreement dated 25 January 2002 in respect of the $49,667 credit card debt. That agreement was in the form of a letter of that date addressed to Mrs Vermunt with provision at the end for execution by various parties. Those who executed included Mrs Vermunt and Bloss Holdings. The document recorded the following: "You have requested Brackley Industries Pty Limited ("Brackley") to advance funds as below to enable you to retire personal debt ………