Wily v Terra Cresta Business Solutions Pty Ltd (No 2) [2006] NSWSC 1102

New South Wales Supreme Court

CITATION : Wily v Terra Cresta Business Solutions Pty Ltd (No 2) [2006] NSWSC 1102

HEARING DATE(S) : 10/10/06

JUDGMENT DATE : 19 October 2006

JURISDICTION : Equity Division

JUDGMENT OF : Young CJ in Eq

DECISION : Defendants to pay 80% of the plaintiff's costs of the expedited hearing. Costs of the interlocutory hearing and costs of the cross claim and all future costs are reserved.

CATCHWORDS : COSTS [553]- Costs follow the event- Plaintiff substantially successful at expedited hearing- However substantial part of case abandoned just prior to trial- Interlocutory hearing obviated by court fixing early hearing date- Evidence prepared for interlocutory hearing not relevant to expedited hearing but relevant to cross claim- Cross claim not heard at expedited hearing- Costs of interlocutory hearing and costs of cross claim and all future costs to be reserved- Otherwise defendants to pay 80% of plaintiff's costs.

Andrew Hugh Jenner Wily in his capacity as Liquidator of Business Australia Capital Mortgage Pty Ltd and Business Australia Capital Finance Pty Ltd (P) PARTIES : Terra Cresta Business Solutions Pty Ltd (D1) Richard Albarran and Geoffrey McDonald (D2)

FILE NUMBER(S) : SC 4200/06

COUNSEL : T S Hale SC (P) J E O'Sullivan (D)

SOLICITORS : M D Nikolaidis & Co (P) Etienne Lawyers (D)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

YOUNG CJ in EQ

Thursday 19 October 2006

4200/06 – WILY v TERRA CRESTA BUSINESS SOLUTIONS PTY LTD (NO 2) JUDGMENT 1 HIS HONOUR: I gave judgment in this matter on 21 September 2006. 2 The proceedings were commenced by summons on 10 August 2006. The initial summons sought declarations that the first defendant was not entitled to appoint receivers to Business Australia Capital Mortgage Pty Ltd (BACM) or Business Australia Capital Finance Pty Ltd (BACF) and an order that the defendants be restrained from taking any steps in relation to or incidental to certain Federal Court proceedings. 3 On 14 August 2006 the summons was amended to seek declarations that charges allegedly given by BACM and BACF were each void and for a declaration that the charge granted by BACM had been satisfied in addition to the orders previously sought. 4 On 17 August 2006 the plaintiff filed a statement of claim setting out the material facts on which he relied for the orders in the amended summons. 5 The defendants filed a cross claim and later amended the cross claim. The cross claim raised questions as to whether the liquidator should be removed and as to the propriety of entering into arrangements with a litigation funder. The proceedings on the cross claim were not expedited when Brereton J expedited the main questions in the suit and I declined to hear the cross claim because it would extend the time allotted for the expedited hearing. 6 I commenced the hearing on 18 September. There were two main issues: (a) whether the charges in favour of the first defendant by BACM and BACF were valid; and (b) if valid, how much was owing under them. 7 The statement of claim was further amended to remove other matters but this only occurred just before judgment was given on 21 September though the matters were forecast at the beginning of the hearing. 8 Up until the hearing commenced, the plaintiff had alleged that the BACF charge was void. He abandoned this at the hearing so that the only question involving BACF was the amount due under the charge. 9 As to BACM, I held the charge invalid because BACM was insolvent at the time it gave the charge and that was within six months of the commencement of the winding up. 10 The plaintiff, accordingly, won the case so far as BACM is concerned. 11 So far as BACF is concerned, the question was how much was due. The evidence was presented in a most unsatisfactory way, particularly by the defendants. Much of the material they would wish me to consider was presented in an inadmissible form. However, it appeared that the bulk of the claim was that another company, Numsbar Pty Ltd, had advanced a considerable sum of money to BACF on short term loan at a very high rate of interest. There was some suggestion and some material to back up the suggestion, that the books of the various enterprises were then written to record a repayment of the short term finance, a granting of longer term finance by Numsbar and a repayment by Numsbar of monies advanced by the first defendant. However, there was also some suggestion that the way the transaction was finalised was by Numsbar assigning its debt to the first defendant. At [44] and [69] to [71] of the judgment I suggested whilst it was contemplated that there was to be an assignment of the debt, this never happened. 12 The liquidator asked for a declaration that no more than $300,000 was owing. I was uncomfortable in making such a declaration because it seemed to me that I just did not have the material to be confident in so certifying. The making of a declaration is a discretionary matter and I did not consider in justice it would be appropriate to make the declaration. What I did was advise the liquidator that he could assume that the debt was $177,000 unless further evidence was presented to him. What I was intending was that the defendants would take the hint, and if it were possible, they would present the liquidator with material to show that there was a proper assignment or there was a repayment of the Numsbar debt and the creation of a new debt in favour of the first defendant. In fact neither of these things have happened. The excuse proffered by the defendants is that they do not have access to the books and records. The liquidator denies this, but I did not determine the matter, merely making sure that for the future the books and records would be inspected if the receivers wanted to look at them. 13 The situation at the trial in September was that: