New South Wales Supreme Court CITATION : Perpetual Trustee Company Limited v Triprush Pty Limited [2010] NSWSC 861 HEARING DATE(S) : 28 July 2010 JUDGMENT DATE : 5 August 2010 JURISDICTION : Common Law JUDGMENT OF : Harrison AsJ (1) The amended defence filed 1 June 2010 is struck. DECISION : (2) Judgment is entered that the fourth defendant is to pay to the plaintiff the sum of $788,351.37. (3) Costs are reserved. CATCHWORDS : SUMMARY JUDGMENT - Guarantee LEGISLATION CITED : Uniform Civil Procedure Rules 2005 CATEGORY : Principal judgment Air Services Australia v Zarb (Court of Appeal, 26 August 1998, unreported) AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705 Commissioner for Railways (NSW) & Ors [1964] HCA 69; (1964) 112 CLR 125 Commonwealth Development Bank v Windemere Pastoral [1999] NSWSC 518 CASES CITED : Commonwealth of Australia v Griffiths & Anor [2007] NSWCA 370; [2007] 70 NSWLR 268 Dey v Victorian Railway Commissioners [1949] HCA 1; (1949) 78 CLR 62 Eureka 2 Holdings Pty Limited v Palasty [2010] NSWSC 526 Gomba Holdings UK Limited v Minories Finance Limited (No 2) [1993] Ch 171 Kyabram Property Investment Pty Ltd v Murray [2005] NSWCA 87 Webster & Anor v Lampard [1993] HCA 57; (1993) 177 CLR 598 Perpetual Trustee Company Limited (Plaintiff) PARTIES : Triprush Pty Limited (First Defendant) Gilsong Pty Limited (Second Defendant) Gary James Baker (Fourth Defendant) FILE NUMBER(S) : SC 2009/297366 COUNSEL : V Bedrossian (Plaintiff) D Neggo (Fourth Defendant) SOLICITORS : Norton Rose Australia (Plaintiff) Spinks Eagle Lawyers (Fourth Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION POSSESSION LIST ASSOCIATE JUSTICE HARRISON THURSDAY, 5 AUGUST 2010 2009/297366 PERPETUAL TRUSTEE COMPANY LIMITED v TRIPRUSH PTY LIMITED & 3 ORS JUDGMENT (Summary judgment – guarantee) 1 HER HONOUR: By notice of motion filed 16 June 2010, the plaintiff seeks, firstly, an order pursuant to rule 13.1 of the Uniform Civil Procedure Rules 2005 that there be judgment in favour of the plaintiff against the fourth defendant in the amount of $788,351.37; and secondly, an order that the fourth defendant pay the plaintiff's costs pursuant to clause 9.1 of the Deed of Guarantee dated 27 October 2006, being as assessed on a solicitor/client basis. The plaintiff relied on two affidavits of Michael John Vella sworn 16 June 2010 and 28 July 2010. 2 The plaintiff is Perpetual Trustee Company Limited ("Perpetual Trustee"). The first defendant is Triprush Pty Limited. The second defendant is Gilsong Pty Limited ("the borrowers"). The third defendant has been placed into liquidation and proceedings have been discontinued against it. The fourth defendant is Gary James Baker ("Mr Baker"). Mr Baker has not filed any affidavits. 3 On 20 October 2006, Perpetual Trustee loaned moneys to the borrowers as per written loan agreement. On 18 September 2006 Mr Baker provided a guarantee. The borrowers defaulted under that loan. Perpetual now sues Mr Baker in respect of the guarantee provided by him and seeks payment of the sum of $788,351.37. Summary judgment 4 Part 13 r 1(1) of the Uniform Civil Procedure Rules 2005 provides: 13.1 Summary judgment (cf SCR Part 13, rule 2; DCR Part 11A, rule 2; LCR Part 10A, rule 2) (1) If, on application by the plaintiff in relation to the plaintiff's claim for relief or any part of the plaintiff's claim for relief: (a) there is evidence of the facts on which the claim or part of the claim is based, and (b) there is evidence, given by the plaintiff or by some responsible person, that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part of the claim, or no defence except as to the amount of any damages claimed, the court may give such judgment for the plaintiff, or make such order on the claim or that part of the claim, as the case requires. (2) Without limiting subrule (1), the court may give judgment for the plaintiff for damages to be assessed. (3) In this rule, a reference to damages includes a reference to the value of goods. 5 Rule 13.4(1) of the Uniform Civil Procedure Rules provides that the court may dismiss proceedings generally, or in relation to any claim for relief, in three circumstances. These are, if the proceedings are frivolous or vexatious, or if no reasonable cause of action is disclosed, or if the proceedings are an abuse of the process of the court. 6 Rule 14.28(1) of the Uniform Civil Procedure Rules provides that the court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading, firstly, discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, secondly, has a tendency to cause prejudice, embarrassment or delay in the proceedings, or thirdly, is otherwise an abuse of the process of the court. 7 Rule 14.28(2) provides that the court may receive evidence on the hearing of an application for an order under subrule (1). 8 In Commonwealth of Australia v Griffiths & Anor [2007] NSWCA 370; [2007] 70 NSWLR 268 Beazley JA, with whom Mason agreed, said: "11 The general principles relating to the summary disposal of proceedings are well-known: see General Steel Industries Inc v Commissioner for Railways (NSW) & Ors [1964] HCA 69; (1964) 112 CLR 125 at 129. If it is demonstrated that there is a real question to be tried, the matter is inappropriate for the entry of summary judgment: Dey v Victorian Railway Commissioners [1949] HCA 1; (1949) 78 CLR 62. The tests stated in the authorities as to whether it is appropriate that a case be disposed of by the entry of summary judgment include statements such as that the matter is "so obviously untenable that it cannot possibly succeed"; "manifestly groundless" or "would involve useless expense": see General Steel Industries at 129. 12 The summary disposal of proceedings or part thereof deprives a party of the right to a contested hearing. For that reason it is said that the requirement for establishing that there is no triable issue is demanding: Air Services Australia v Zarb (Court of Appeal, 26 August 1998, unreported). In Webster & Anor v Lampard [1993] HCA 57; (1993) 177 CLR 598, Mason CJ, Deane and Dawson JJ said at 602: '… the issue before the learned Master on the application for summary judgment was not whether [the plaintiffs] would probably succeed in their action against [the defendant]. It was whether the material before the Master demonstrated that that action should not be permitted to go to trial in the ordinary way because it was apparent that it must fail. The power to order summary judgment must be exercised with 'exceptional caution' and 'should never be exercised unless it is clear that there is no real question to be tried.' (Citations omitted)" The pleadings 9 On 15 December 2009, Perpetual Trustee filed its statement of claim claiming the amount of $704,535.75. As at 15 June 2010, the amount owing under the loan was $788,351.57. For the purposes of this application Perpetual Trustee seeks summary judgment for the sum of $788,351.57 only and does not claim the interest that has accrued between 15 June 2010 to date. 10 By amended defence filed 1 June 2010, Mr Baker admits, firstly, that there was a loan agreement between the plaintiff and the borrowers (S/C [2]; Amended Def [2]); secondly, that he guaranteed the obligations of the two borrowers under their loan agreement by executing a guarantee dated 26 October 2006 (S/C [4]; Amended Def [2]); thirdly, that the two borrowers committed defaults in respect of their obligations to Perpetual Trustee under their loan agreement (S/C [9]; Amended Def [2]); and fourthly, that Triprush Pty Limited remains in default of its loan obligations to Perpetual Trustee (S/C [17]; Amended Def [2]). Mr Baker pleads equitable set off (Amended Def [3], [4] [7] and [10]). I shall refer to the claim for equitable set off in more detail later in this judgment. Terms of the guarantee 11 On 27 October 2006, Mr Baker executed a deed of guarantee. The terms of the guarantee provided by Mr Baker included the following: (a) The guarantee was an irrevocable and continuing guarantee and gave rise to an entitlement on the part of Perpetual Trustee to make claim against Mr Baker whether or not any action had first been taken against any of the borrowers or under any security (clauses 2 and 3); (b) The guarantee formed an independent and principal obligation on the part of Mr Baker and was enforceable irrespective of whether or not any other obligations between the borrowers and Perpetual Trustee were/are enforceable (clause 5.1); (c) The guarantee included a liability of Mr Baker for interest on the debt owed by the borrowers to Perpetual Trustee (clause 8.1); (d) Mr Baker was obliged to pay Perpetual Trustee's costs incurred in respect of the guarantee ("including legal costs as between solicitor and client") (clause 9.1); (e) Mr Baker agreed that monies payable under the guarantee could not be reduced by reason of any set-off (clause 9.5); and (f) Perpetual Trustee was/is under no obligation to provide notice to Mr Baker of any default by the borrowers with respect to the loan (clause 9.14). Nevertheless, on 21 October 2009, Perpetual Trustee did give notice to Mr Baker of the borrowers' default, it's termination of the loan facility and of Mr Baker's immediate obligation to repay the amount of $688,147.40 which was the amount owing as at a date prior to the date of the notice of default. (g) Mr Baker received independent legal advice regarding the guarantee executed by him on or about 27 October 2006. (h) There is provision for the issue of Lender's Certificate. 12 Clause 9.3 of the Deed of Guarantee reads: "9.3 Lender's certificate A certificate signed by or on behalf of the Lender or its solicitors as to a matter or as to an amount payable to the Lender in connection with this Guarantee in the absence of manifest error is conclusive and binding on the Guarantor as to the amount stated in it or any other matter of a factual nature unless the matter or amount is capable of determination by the Lender in its discretion in which case the Lender must not act arbitrarily, capriciously, or unreasonably in exercising that discretion." The Certificate 13 On 16 June 2010, Mr Vella signed a certificate. It reads as follows: "TO WHOM IT MAY CONCERN LOAN FACILITY TO TRIPRUSH PTY LTD, GUARANTEED BY Gary Baker and Gilsong Pty Ltd I certify that the amount payable by the Guarantor, Mr Gary Baker, under the Guarantee executed by him and dated 27 th October 2006 in relation to the above Facility is as follows: 1. The amount payable as at 21 st October 2009 at the time the Default Notice and Letter of Demand was sent to Mr Baker was $688,147.40 2. The amount payable as at 30 th November 2009 was $704,535.75 3. The amount payable as at 15 th June 2010 was $788,351.57 I am authorised to make this certification" 14 Mr Vella has admitted that the figure provided by him in paragraph 2 of the Certificate contains an error. The amount of $704,535.75 is incorrect and should be $704,535.19. 15 Counsel for Mr Baker submitted that the document above does not constitute a Lender's certificate pursuant to clause 9.3 of the Deed of Guarantee because, firstly, it has not been signed by Perpetual Trustee as the lender or its solicitors; secondly, there is no evidence that it has been signed by Mr Vella on Perpetual Trustee's behalf; and thirdly, it was not open to inference that Mr Vella signed the document on perpetual Trustee's behalf in circumstances where (a) Mr Vella is not an officer or employee of Perpetual Trustee, (b) the document is on "Balmain AQUA Pty Limited" letterhead, Mr Vella's employer and (c) there is no evidence of any relationship between Balmain AQUA and Perpetual Trustee which would properly give rise to such an inference and, finally, the Certificate contained a manifest error namely that paragraph 2 of the amount was incorrect by the sum of 56 cents. 16 The loan document referred to the borrower as Triprush Pty Limited and Gilsong Pty Ltd. The lender/mortgagee was described as Perpetual Trustee Company Limited as custodian for the JF AQUA Mezzanine Debt Pool. The responsible entity was described as James Fielding Funds Management Limited and the responsible entity was the operator of the mortgage trust scheme funding the loan. The investment manager of the fund was described as JF AQUA Pty Limited. 17 While the role of JF AQUA Pty Limited was explained in the loan document, the Deed of Guarantee document does make any reference to JF AQUA Pty Limited as being the investment manager. JF AQUA Pty Limited had changed its name as set out in an ASIC search. 18 Mr Vella deposed that (Aff 28/7/10) he signed the Certificate and at that time he signed it he was authorised to do so by Perpetual Trustee. He says that his authorisation to sign the Certificate arose from the role and responsibility of Balmain AQUA Pty Ltd as the investment manager of the mortgage fund scheme. 19 Counsel for Perpetual Trustee submitted that paragraph 3 of the Certificate is the operative one as it is what is relied upon to ground the statement of claim. Further, Perpetual Trustee says that the error contained in paragraph 2 of the Certificate can hardly be described as "manifest". Perpetual Trustee submitted that clause 9.3 only requires that the Certificate be "signed by or on behalf of the Lenders or its solicitors" and Mr Vella was authorised and did sign on behalf of the Lender. 20 There is no mention to the lender Perpetual Trustee contained in the Certificate. Nor does Mr Vella state the source of his authorisation to act for perpetual Trustee in the Certificate. It is my view that it is at least arguable that the Certificate does not comply with Clause 9.3 of the Deed of Guarantee. However, Perpetual Trustee does not need to rely upon the Certificate. The records of the account are in evidence and they disclose that the sum of $788,351.37 is owed as at 16 June 2010. That is sufficient evidence to show the amount that is due and payable under the Deed of Guarantee. Equitable set off 21 Mr Baker's claim for set off is said to arise from moneys claimed by Mr Baker in a cross-claim filed in Supreme Court proceedings No 2009/297367 ("the Montpensier proceedings"). The Montpensier proceedings involve a separate claim by Perpetual Trustee against a borrower (Montpensier Pty Ltd) and against Mr Baker as guarantor of that loan facility. 22 In the Montpensier proceedings, Mr Baker's cross claim makes various allegations against each of the cross defendants, including Perpetual Trustee and the valuer. The cross claim pleads the nature and extent of the damages, which are alleged to have been suffered by him as a result of the conduct of the various cross-defendants. He pleads that the damages he "has suffered damage equal to the liability accrued to him by reason of the guarantee" and that he "has suffered loss and damage equal to the amount of his liability pursuant to the guarantee". So even if Mr Baker is entirely successful in his cross claim in the Montpensier proceedings, such success could only possibly result in him being relieved of liability under his guarantee of the loan relevant to those proceedings (the Montpensier loan). Therefore, on his own cross claim there will not be any 'surplus' funds available to him which would constitute the basis for an equitable set off for the purpose of these proceedings. In my view pleading the equitable set off raised in the amended defence in these proceedings is doomed to failure. 23 According to Perpetual Trustee, even if there was the potential for there to be some surplus funds coming to Mr Baker by reason of his cross claim in the Montpensier proceedings, his assertion of an available equitable set off in these proceedings suffers from three further flaws, namely, the agreement between the parties as recorded in the guarantee dated 27 October 2006 expressly excludes any right of set off on the part of Mr Baker (see clause 9.10); secondly, that it is well established that a right to a set off could be excluded by agreement between the parties (see Eureka 2 Holdings Pty Limited v Palasty [2010] NSWSC 526 at [24] per Price J); and finally, a claim for a set off must arise from a claim that is sufficiently closely connected to the initial claim, such that having regard to that closeness and to the general conduct of the parties, it would be unjust or inequitable for the plaintiff to be able to bring its claim (see, for example, AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705 at 712 and Commonwealth Development Bank v Windemere Pastoral [1999] NSWSC 518 at [58]-[59] per Rolfe J). 24 Perpetual Trustee submitted that there is insufficient closeness or connection between the Plaintiffs claim in these proceedings and Mr Baker's cross claim in the Montpensier proceedings for an equitable set off to exist. They are two separate claims in respect of entirely different loan transactions. 25 As the damage claimed in the cross claim will not give rise to a surplus it is unnecessary to decide whether there is a close connection between these proceedings and the Montpensier proceedings. 26 It is my view that Mr Baker's defence is doomed to failure. The defence should be struck out. Judgment should be entered in favour of Perpetual Trustee in the sum of $788,351.37. Costs 27 Perpetual Trustee seeks costs pursuant to clause 9.1 of the Deed of Guarantee dated 27 October 2006. Clause 9.1 reads: "9.1 Costs and expenses The Guarantor upon demand by the Lender must pay all costs (including legal costs as between solicitor and client) expenses and other amounts incurred or paid by the Lender in respect of this Guarantee and the Documents (including those arising in consequence or on account of the exercise or purported or attempted exercise of any of the Lender's rights or powers or for the preservation of or in any manner in reference to this Guarantee and/or the Documents including the reasonable internal administration costs of the Lender and the Lender's offers) and any stamp duty loan duty or other duty including duties and taxes on receipts or payments and any fines or penalties arising directly or indirectly in respect of this Guarantee and/or the Documents." 28 Perpetual Trustee submitted that should be awarded against Mr Baker on a solicitor and own client basis and that Mr Baker agreed to such a costs order by his execution of clause 9.1 of the Deed of Guarantee. 29 Perpetual Trustee referred to Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87 at [14], Beazley JA (with whom Hodgson and Ipp JJA agreed) confirmed by the citation with apparent approval of the judgment of the English Court of Appeal in Gomba Holdings UK Limited v Minories Finance Limited (No. 2) [1993] Ch 171 that the making of an order for costs is always discretionary but " … (ii) where there is a contractual right to the costs, the discretion should ordinarily be exercised so as to reflect that contractual right. … (v) a mortgagee is not ... to be deprived of a contractual or equitable right to costs to the security merely by reason of an order for payment of costs made without reference to the mortgagee's contractual or equitable rights and without any adjudication as to whether or not the mortgagee should be deprived of those costs." 30 If Perpetual Trustee had proceeded solely on the Certificate, it would fail in its application for summary judgment. It was only when a further affidavit of Mr Vella was filed on the morning of the hearing that it became apparent that it was not relying upon the Certificate and had other evidence that established the amount owing under the Deed of Guarantee. Hence costs are reserved. 31 The amended defence filed 1 June 2010 is struck out. I enter judgment that the fourth defendant is to pay to the plaintiff the sum of $788,351.37. The Court orders: (1) The amended defence filed 1 June 2010 is struck out. (2) Judgment is entered that the fourth defendant is to pay to the plaintiff the sum of $788,351.37. (3) Cost are reserved. ********** 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. 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