New South Wales Supreme Court CITATION : Purchas (in his capacity as Administrator of Highwatch Pty Limited) v Shonoda [2007] NSWSC 1431 HEARING DATE(S) : 10 December 2007 JUDGMENT DATE : 12 December 2007 JURISDICTION : Common Law JUDGMENT OF : Associate Justice Malpass DECISION : (1) I direct the entry of judgment for the plaintiff in a sum to be ascertained. (2) The defendant is to pay the costs of the plaintiff's Notice of Motion. (3) Leave to file the proposed cross-claim is refused. (4) The defendant is to pay the costs of her Notice of Motion. (5) The exhibits may be returned. CATCHWORDS : COMMON LAW - summary judgment - leave to file cross-claim - pleading LEGISLATION CITED : Uniform Civil Procedure Rules CASES CITED : Commercial Bank of Australia v Amadio (1983) 151 CLR 447 PARTIES : Ian James Purchas (in his capacity as Administrator of Highwatch Pty Limited) (Pl) Eman Shonoda (Def) FILE NUMBER(S) : SC 11250/07 COUNSEL : Ms V Whittaker (Pl) In Person (Def) SOLICITORS : Kemp Strang (Pl) - 6 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ASSOCIATE JUSTICE MALPASS 12 DECEMBER 2007 11250/07 Ian James Purchas in his capacity as Administrator of Highwatch Pty Limited v Eman Shonoda JUDGMENT 1 HIS HONOUR: On 9 March 2007, the plaintiff filed a Statement of Claim. It is founded on the provisions of a Deed of Company Arrangement (the deed) and a Deed of Guarantee and Indemnity (the guarantee). Both were executed on 4 June 2004. 2 The plaintiff is one of the two appointed administrators of Highwatch Pty Limited (the company). The other administrator has since resigned. The deed was made between the administrators and the company. The deed contained a covenant from the company to pay moneys to the administrators. The covenant was supported by the guarantee. The guarantee was given, inter alia, by the defendant. 3 The sum of $1,362,290.11 is claimed as being payable under the covenant and the administrators have demanded payment of that sum from the defendant. She has not made payment pursuant to the guarantee. The Statement of Claim claims those moneys, together with interest and costs. 4 On 26 April 2007, the defendant filed a defence. It alleges that the deed and guarantee are unenforceable by reason of, inter alia, unconscionable conduct. I shall look at the defence in more detail in due course. 5 On 31 August 2007, the defendant filed a Notice of Motion. It seeks leave, inter alia, to file a cross-claim. On 13 September 2007, the plaintiff filed a Notice of Motion. It, in effect, seeks summary judgment. 6 The Notices of Motion were listed for hearing on 10 December 2007. Both Notices of Motion were heard on that day. The plaintiff was represented by Counsel. The defendant appeared in person. She was assisted by her husband (Mr Mhanna). 7 The plaintiff has sworn two affidavits. The affidavits exhibited two large bundles of material. The defendant has sworn an affidavit in support of her Notice of Motion. It deposes to matters that have taken place subsequent to the commencement of proceedings. She also tendered documentation (Exhibit 1). 8 Before proceeding further, I should briefly refer to certain background material. 9 The defendant came to be both a director and the secretary of the company. The company was engaged in property development (inter alia, involving fifty-two units at Chiswick). It had borrowed moneys from Sovereign Capital Limited (Sovereign), inter alia, on the security of the property at Chiswick (the property). The company fell into financial difficulties. It owed Sovereign in the order of $8 M. Winding-up proceedings were commenced by Gavcon Building & Construction Pty Limited. Receivers were appointed to the company. On 5 March 2004, the administrators were appointed pursuant to the security had by Sovereign. 10 The defendant was then legally represented (Mr Johns of Malcolm Johns & Company). In addition to the deed and guarantee, the defendant also executed a Deed of Deferral. The signature to each of them was witnessed by Mr Johns. This documentation was in a form that had been proposed by him. 11 The aim was to raise funds to enable payment of the Sovereign debt and the debts of unsecured creditors and to allow the company to continue trading. The effect of the Deed of Deferral was to make the defendant a non-participating, unsecured creditor. Her claims of indebtedness against the company were to be deferred. 12 An offer of finance was obtained from Shakespeare Haney Securities Ltd (Shakespeare) to refinance existing debt and provide construction finance (in a total of $14 M). The offer was open for ten days only. It was not accepted. 13 There was an unresolved dispute between the company and Sovereign as to the amount required to be paid out in order to effect a discharge of the security held by the latter. 14 There have been three applications by the defendant to the Federal Court. The first came before Hely J and was directed to a resolution of the dispute between the company and Sovereign. The second application was made to Sackville J and was also brought against Sovereign. The third application came before Stone J. It was an abortive attempt to restrain the administrators from proceeding with a meeting of creditors scheduled for 24 September 2004. The defendant instructed Mr Johns in all of these matters. 15 I shall first direct attention to the Notice of Motion that has been brought by the plaintiff. 16 The Court has a discretionary power to grant summary relief. The discretion is exercised having regard to the relevant circumstances of the particular case and so that the dictates of justice are best served. The onus rests with the plaintiff. There is well-established authority to the effect that relief is only granted in what have been described as clear cases. 17 Whilst the onus remains with the plaintiff, the defendant has made her task very difficult by putting but limited material before the Court. Such material as there is does not give rise to any arguable alleged defence. 18 The primary challenge is one of unenforceability of the deed and guarantee (there are nine particulars of unconscionable conduct). Curiously, there is no challenge to the Deed of Deferral. It is left unmentioned. 19 There is an absence of material to give any suggestion that the principles of unconscionable conduct (see, inter alia, Commercial Bank of Australia v Amadio (1983) 151 CLR 447) could have any application in this case. There is no evidence of special disadvantage and there is no evidence of unfair advantage. The purpose of the transactions was to stave off liquidation and to enable the company to continue trading. The defendant had business experience and was legally represented. 20 None of the controversial particulars have evidentiary support. Indeed, certain of them stand in conflict with material that is before the Court. Leaving aside any question of evidentiary sustainability, none of them would appear to support a claim for unconscionable conduct. 21 The defence also attacks the resolution of creditors that approved the deed (it is alleged that the resolution was irregularly obtained) and there is also an allegation of partiality in respect of the interest of Sovereign. Leaving aside the question of whether either of these matters could give rise to a defence to the claim of the plaintiff, these matters are also devoid of factual support. 22 The evidence relied on by the plaintiff makes out a clear entitlement to the relief sought. As the material before the Court does not raise any argument that the matters relied on by the defendant could constitute a defence to that claim, it seems to me that the plaintiff has demonstrated a clear entitlement to summary relief and that the discretion should be exercised in his favour. 23 I shall now move to the matter of the cross-claim. In substance, its contents have similarity to what is sought to be raised by the defence. It seeks to propound a claim in the sum of $3.9 M (which is the claim for indebtedness that she makes against the company and which is the subject of the Deed of Deferral). 24 It repeats the material concerning the unenforceability of the deed and the guarantee. The last particular thereof makes a factually unsustainable allegation that the plaintiff insisted on the execution of the deed and guarantee and that, by so doing, he was not acting in the best interest of all creditors of the company. It proceeds with an allegation that by "submitting" the deed and guarantee the plaintiff was in breach of a duty of care to the company, its directors, shareholders and creditors (see paragraph 10 of the cross-claim). 25 It is convenient to pause at this point and make certain observations as to the form of the cross-claim. Parts 14 and 15 of the Uniform Civil Procedure Rules (the rules) impose pleading requirements. The proposed cross-claim does not meet those requirements (inter alia, it fails to plead material facts). For this reason alone, leave should not be given. 26 There was a failure to both identify and spell out the nature of the duty of care. There was a failure to plead with precision the alleged breach of whatever the duty of care may be. There is an absence of the particulars required by the rules. 27 The allegation of breach made in paragraph 10 is followed by an erroneous allegation that the plaintiff was obliged to adjudicate upon the proofs of debt submitted by, inter alia, the defendant. By reason of the contents of the Deed of Deferral, this assertion is misconceived. 28 The alleged refusal to adjudicate upon proofs of debt is then said to be "wrongfully and in breach of statutory and common law duties". Again, there is a failure to identify and spell out what these duties are and to specify with precision the nature of the alleged breach. Also, there is an absence of the requisite particulars. Similar observations may be made concerning a further allegation of failure to obtain payout figures for all secured and unsecured creditors. 29 The proposed cross-claim concludes with further unsustainable allegations. One is that, because of an unspecified breach, the company lost the opportunity to refinance its assets and pay amounts due to Sovereign and unsecured creditors. Another is that the plaintiff caused or permitted Sovereign to become mortgagee in possession and the cross-claimant thereby lost the opportunity to receive a dividend in respect of the loan sum of $3.9 M. These misconceived allegations fly in the face of established matters. Firstly, Sovereign acted pursuant to the security held by it. Secondly, the Deed of Deferral is ignored. Also, there is confusion between the entitlements of the company on the one hand and the defendant on the other hand. 30 It was said by the defendant that the proposed cross-claim was drafted by lawyers. Whether or not that be the case, the document itself is a defective pleading and, in my view, should not be the subject of leave. If filed, it would be liable to be struck out. 31 I direct the entry of judgment for the plaintiff in a sum to be ascertained. The defendant is to pay the costs of the plaintiff's Notice of Motion. Leave to file the proposed cross-claim is refused. The defendant is to pay the costs of her Notice of Motion. The exhibits may be returned. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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