Krich v SYJ Pty Ltd [2012] NSWDC 291

District Court New South Wales

Medium Neutral Citation: Krich v SYJ Pty Ltd [2012] NSWDC 291 Decision date: 24 April 2012 Before: Cogswell SC DCJ Decision: Verdict and judgment for the plaintiff against the first and second defendant in the sum of $100,000. Catchwords: CIVIL LAW - Contract - vendor finance - loan agreement - irregular instalments - vendor sues for balance in District Court. Evidence - settlement of related proceedings in Federal Court - whether settlement agreement included binding arrangement precluding District Court claim? - insufficient evidence about terms of agreement reached. Estoppel - Issue estoppel - Anshun estoppel - insufficient evidence about Federal Court proceedings to establish issue estoppel - Promissory estoppel - lack of evidence about terms of agreement said to give rise to defence of estoppel - reliance on defence of estoppel not made out. Legislation Cited: Civil Procedure Act 2005, s 100. Cases Cited: Champerslife Pty Limited v Manojlovski (2010) 75 NSWLR 245. Masters v Cameron (1954) 91 CLR 353. Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589. Category: Principal judgment Parties: Mustafa Krich (Plaintiff) SYJ Pty Limited (Defendant) Representation: Solicitors: M. Ayache (Plaintiff) A. Sandroussi (Defendant) File Number(s): 2011/225389

Judgment 1In 2009 Mustafa Krich sold his restaurant business to Aiman Alkhair and Mr Alkhair's company, SYJ Pty Limited. There was an arrangement for Mr Krich to be paid some of the purchase price by instalments. In effect, it was a form of vendor finance. 2The instalments were irregular, and Mr Krich and Mr Alkhair, on behalf of his company, decided to formalise the arrangement by an agreement. They signed the agreement on 9 March 2010. Mr Alkhair and his company agreed to repay the outstanding balance of the vendor finance to Mr Krich until it was fully repaid. 3Once again, instalments were irregular and so Mr Krich sued Mr Alkhair and his company in the District Court for the outstanding balance of the vendor finance, namely $100,000. He commenced the case by filing a statement of claim in this Court on 12 July 2011. 4Between the loan agreement signed on 9 March 2010 and the commencement of this case on 12 July 2011, there was other litigation between the parties. Mr Krich had started up a new business. It seems that he used the word "Titanic" as part of the name of his new business. Mr Alkhair and his company claimed that that was in breach of the original arrangement under which they had bought the business from Mr Krich. So Mr Alkhair and his company brought proceedings in the Federal Court against Mr Krich. Those proceedings were listed for hearing on 28 February 2011. 5On the day before the case was to be heard, the parties and several other people met to discuss settlement of the Federal Court case. They agreed on the settlement. The settlement was recognised by the Federal Court in court orders. 6What Mr Alkhair and his company claim, in resisting this case brought against them by Mr Krich in the District Court, is that the issue of the payment of $100,000 by them to Mr Krich was effectively resolved by the Federal Court proceedings and the settlement discussions the night before. That defence to Mr Krich's claim is made appropriately clear in the defence filed on behalf of Mr Alkhair and his company on 5 August 2011. The defence refers to the Federal Court proceedings and says that Mr Alkhair and his company "rely on the doctrine of estoppel to request that the plaintiff's claim be dismissed with costs". 7Mr A Sandroussi, who appears for Mr Alkhair and his company, has argued just that before me today when the case was listed for hearing. He relies on issue estoppel, estoppel by conduct, promissory estoppel or what has come to be known as Anshun estoppel, following the High Court's decision in Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589. 8Mr Sandroussi argues that the orders made by the Federal Court, which are in evidence before me, reflect the agreement which was reached by the parties the night before on 27 February 2011. His assertion is that that agreement clearly included recognition of the fact that his clients were said to owe Mr Krich $100,000. 9One of the main difficulties Mr Sandroussi has and which, in my opinion, he has not overcome in presenting the argument, is evidence of what the agreement was that was reached the night before the Federal Court case was due to be heard. It is important for his case that the agreement included a binding arrangement regarding the $100,000 said to be owed to Mr Krich. However, there is little or no evidence of that fact. Indeed, Mr Alkhair said in his affidavit which became Exhibit 1 in this case, in paragraph 8, that "due to the fact that the amount of $100,000 did not form part of the claim by SYJ Pty Limited, it was agreed that a deed of release would be separately drafted to reflect that part of the agreement." 10The reference to "that part of the agreement" I infer was a reference to paragraph 6 of the same affidavit which purported to set out the terms of the agreement said to have been reached. However, Mr M Ayache, who appeared for Mr Krich in this case, objected to the admissibility of paragraph 6 of Mr Alkhair's affidavit and I upheld that objection. I ruled that the paragraph was inadmissible. That means that the words "to reflect that part of the agreement" do not carry significant or helpful meaning so far as Mr Sandroussi's argument is concerned. Indeed, as Mr Alkhair acknowledged in paragraph 8, the amount of $100,000 did not form part of the claim in the Federal Court. In paragraph 14, Mr Alkhair expressed his "understanding" that there would be a release from his obligation to pay the $100,000 to Mr Alkhair. 11So far as Mr Sandroussi's argument based on issue estoppel is concerned, I simply do not know from any evidence before me whether the issue about the liability of his clients to pay the claimed debt to Mr Ayache's client was an issue in the Federal Court proceedings or not. I cannot find that there is an issue estoppel. 12Mr Sandroussi argues that there is an estoppel by conduct or promissory estoppel, he says in the alternative, by having regard to the behaviour of the parties after the Federal Court proceedings were settled. He points to the order made in the Federal Court which noted that the parties, without admission, agreed to resolve the disputes by Mr Krich ceasing to use the word "Titanic" as part of any business name, and ceasing the use of that business name altogether by 1 June 2011. The order also provides that the Federal Court proceedings were dismissed. 13Mr Sandroussi argues that it is clear from the conduct of his client in agreeing to the dismissal of its case, and the cessation of the use of the word "Titanic" by Mr Krich, that the parties have impliedly promised - or conducted themselves in such a way which is inconsistent with Mr Krich's claim for $100,000 in this Court. Once again, I think his argument fails for a lack of evidence about the terms of the agreement reached the night before the court case in the Federal Court and any information about what was in issue in the Federal Court. Mr Sandroussi's argument is that the conduct supports his client's assertion of an agreement that the $100,000 alleged debt would be waived. The difficulty is that there is no evidence that an agreement to that effect had been reached the night before the Federal Court case. Indeed, as I will come to in a moment, the evidence is to the opposite effect. 14Mr Sandroussi then turned to his reliance upon an Anshun estoppel. In a joint judgment of Gibbs CJ, Mason J (as he then was) and Aickin J, their Honours said, over 602 to 603, the following: "In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings; eg expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few." 15As Giles JA acknowledged in Champerslife Pty Limited v Manojlovski (2010) 75 NSWLR 245 at 253 ([41]), "a question of Anshun estoppel can arise where a matter not raised as a defence is later raised as a cause of action". His Honour gave as an example Anshun itself. In this case, Mr Sandroussi argues that Mr Krich is raising, in relying upon the cause of action in his statement of claim, a matter which could have been raised in the Federal Court proceedings, and this therefore makes out his client's defence of estoppel. 16A number of observations can be made about this reliance. First, the High Court has said that for me to allow such a defence, I must be satisfied that "it would have been unreasonable" for Mr Krich to not to rely upon the issue of the $100,000 debt in the Federal Court proceedings. The second observation is that their Honours observed that there are a variety of circumstances why a party may justifiably refrain from litigating an issue. I make those observations because I have little or no evidence about the Federal Court proceedings. I do not have the pleadings. I do not know what relief was being sought by Mr Alkhair and his company. I do not know enough at all about the case to be able to conclude that it would have been unreasonable for Mr Krich not to have raised the issue of the debt. There may well have been a circumstance, as envisaged by the High Court, which resulted in Mr Krich making an informed decision not to raise the issue in the Federal Court. 17I mentioned earlier that I have little or no evidence about the terms of the agreement reached in the discussions the night before the Federal Court case. However, I do have a little evidence. In paragraph 21 of his affidavit, Mr Krich refers to the settlement discussions which occurred the night before the Federal Court was to hear the case. Mr Krich said that as "part of the settlement discussions, the defendants requested that I release them from the debt of $100,000 owing to me by the defendants." Mr Krich then went on to say that there was another issue about what he called "derogatory comments" made by Mr Alkhair about Mr Krich, and the effect that they had on his reputation. Mr Krich said in his affidavit that Mr Alkhair responded to these concerns by saying that "if anybody asks about the court settlement, I will say the dispute was resolved amicably and I purchased the name 'Titanic' off you." Mr Krich responded by saying "That is acceptable to me, but we need to have a written agreement so we don't have the same problems we did with the 'Titanic' name." 18The reference to problems with the Titanic name was, I infer, a reference to Mr Krich's commencement of a business with the word 'Titanic' in its name and the Federal Court proceedings which had been commenced, which contained an allegation of passing off. 19From what the evidence disclosed happened next, I infer that the parties agreed that the better way of proceeding was by way of written deed of release. There is evidence of a good deal of correspondence between the respective solicitors. Mr Krich's solicitor forwarded a draft of a deed of release to Mr Alkhair's solicitor, but it was never signed. Indeed, it got to the stage that Mr Ayache wrote to Mr Sandroussi a couple of months before issuing proceedings in the District Court, saying that his client had "no option but to conclude that your client does not intend on finalising this matter". He gave Mr Sandroussi's client a deadline, saying that if that was not met, he was "instructed to commence proceedings for the recovery of the $100,000 owing to my client". Those instructions were acted upon by the filing of the statement of claim in the case that I am giving judgment in. 20It seems from the evidence that the failure of Mr Alkhair to sign the agreement or the deed of release was a combination of inconvenience, but also a considered decision. Mr Alkhair said in his affidavit, which became Exhibit 1, that he "did not want to sign the deed until I became sure that the respondents would comply in full with their obligations in removing the name 'Titanic' and take all steps necessary and incidental to such removal, such as: advertising, letterheads, menu, telephone listing, to name but a few." (The reference to Mr Krich being a respondent was because the affidavit was originally filed to support a notice of motion in the District Court.) 21It seems clear to me that Mr Ayache is right in arguing that there is no evidence of any agreement reached between the parties on the matter of the $100,000. If I am wrong in that, I would accept his argument that this is a case where, as Dixon CJ, McTiernan and Kitto JJ said in Masters v Cameron (1954) 91 CLR 353 at 360, "parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt by a formal contract". 22I would agree with Mr Ayache that this circumstance would fall into the third category referred to by their Honours, which is described as being a case "in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract." To my mind, the evidence leads me to that conclusion regarding the discussions amongst the parties on 27 February 2011. 23I do not think that Mr Alkhair and his company have made out their reliance on their defence of estoppel, and I propose to allow Mr Krich's claim in this case, and I also propose to enter judgment for Mr Krich. 24The formal order which I make is this: I enter verdict and judgment for the plaintiff in the sum of $100,000. HIS HONOUR: Mr Ayache, what other orders? Costs? AYACHE: Could I clarify that that is against both defendants, your Honour? HIS HONOUR: Thank you. Yes, there will be verdict and judgment for the plaintiff against the first and second defendants in the sum of $100,000. AYACHE: Interest should follow. That is contained in prayer three of the orders sought. HIS HONOUR: Yes, it is. AYACHE: There was an error, and I would make an application to seek your leave, which I know you have, to give me leave to grant to amend the 7 July 2011 date. It should read 13 July 2010 in line with paragraph 2 of the statement of claim. HIS HONOUR: Yes, that seems right, Mr Sandroussi. I think it's consistent with the schedule, isn't it? 6/7/10 was the last payment and 13/7/10 is the week after that. That seems right, yes. 25Interest pursuant to s 100 of the Civil Procedure Act 2005 is payable on the judgment sum from 13 July 2010. HIS HONOUR: Now, defendants to pay the plaintiff's costs? AYACHE: Yes, I would seek it on an indemnity basis, your Honour, for this reason: Ample notice was given. The claim is pursuant to a written document. It is not one which can be disputed that it never existed. HIS HONOUR: I know that, but there is a real issue about the estoppel, the Federal Court proceedings. AYACHE: Well, in terms of the way the defendant presented the evidence, that is questionable, in my respectful submission, your Honour. HIS HONOUR: You are right, but the issue was raised and in the end - I mean if you had got an adjournment today, I probably would have ordered indemnity costs or something for the day thrown away, but, as it happened, you both took a professionally responsible decision to run the case and-- AYACHE: I'm in your Honour's hands. HIS HONOUR: Yes. AYACHE: Costs follow the event if it was just a simple party/party-- HIS HONOUR: Yes. AYACHE: The only order I would ask is that your Honour have regard to the costs reserved in relation to the notice of motion, which was decided also against the defendant. No costs order was made on that occasion. HIS HONOUR: They were reserved, weren't they? AYACHE: I apologise. A costs order was made, but I believe it was to follow the event or-- HIS HONOUR: I will just have a look at the Court file. Costs of the motion be costs in the cause, yes, okay. 26I order the defendants to pay the plaintiff's costs as agreed or assessed, and I note the order made on 27 January 2012 that costs of the motion were to be costs in the cause. HIS HONOUR: Yes, anything else? AYACHE: No, your Honour. HIS HONOUR: Mr Sandroussi? SANDROUSSI: Nothing, your Honour. HIS HONOUR: Okay.