Savage v Bianchino & Associates Savage v Bianchino Don [2011] NSWSC 140

Supreme Court New South Wales

Medium Neutral Citation: Savage v Bianchino & Associates Savage v Bianchino Don [2011] NSWSC 140 Hearing dates: 7 March 2011 Decision date: 07 March 2011 Before: Macready AsJ Decision: Accordingly, in each matter I order: 1. The creditors statutory demand served by the plaintiff on the defendant of 12 October 2010 be set aside. 2. Defendant to pay the plaintiff's costs of the proceedings. 3. I vary the order I have made for costs to add the words "except in respect of the costs of the directions hearing held before me on 4 March 2011 in respect of which I order the plaintiff to pay the defendant's costs of the day." Catchwords: Corporations law. Application to set aside statutory demand under s459G of the Corporations Act. Demand set aside. No matter of principle. Category: Principal judgment Parties: Savage Property Enterprises Pty Limited v Bianchino & AssociatesSavage Property Enterprises Pty Ltd v Don Bianchino Representation: Counsel: Mr CD Wood for plaintiff Mr S Duggan for defendant Solicitors: Harwood Andrews Lawyers for plaintiff Gadens Lawyers for defendant File Number(s): 2010/363543 2010/363544

Judgment 1HIS HONOUR: These are two applications under s 459G of the Corporations Act to set aside statutory demands. The two matters have been heard together as the same questions are involved in both matters. 2There are two debts involved: one for $1,550,000 owed by Savage Property Enterprises Pty Limited to Don Bianchino and $450,000 owed by Savage Property Enterprises Pty Limited to Bianchino & Associates Pty Limited. The demand in each case sought recovery of these amounts which were said to be due under deeds dated 7 April 2009, with a variation dated 23 April 2009. In each case the deeds contained similar relevant provisions. Under each deed of 7 April 2009 the principal sum became payable at any time after the expiration of 15 months from the date of the deed and within 30 days of receiving written demand from the lender. Security was provided for inter-alia in clauses 3 and 4 which are in these terms: "3.a) So long as any part of the sum of One Million Five Hundred and Fifty Thousand Dollars ($1,550,000.00) plus any further advances plus interest shall remain unpaid and notwithstanding that no demand for payment has been made, the Borrower will upon request of the Lender grant a mortgage over either the title to the land at Bower Street Manly NSW 2095 (Lot 3 SP 79141) (the "92 Land") OR Bower Street Manly NSW 2095 (Lot 27/DP 3806) (the "110 Land"). Such mortgage shall rank second in priority to the mortgage granted by the Borrower to any other primary banking or other lending institution and to contain such terms and conditions in accordance with annexure "A" hereto. b)The Borrower shall obtain an updated market valuation for the 92 Land within thirty (30) days from the date hereof and shall provide same to the Lender. c) The Lender shall notify the Borrower within fourteen (14) days of receiving the valuation referred to in clause 3(b) above which property he elects as security for the mortgage provided the property mortgaged must be the same property is elected pursuant to the Super Deed. d) The Borrower shall do all things reasonable to procure a Deed of Priority from the relevant first mortgagee within 30 days of the Lender electing the security property pursuant to clause 3(c) above. e) In the event that the Deed of Priority results in the available equity in the selected property being less than Two Million Two Hundred and Fifty Thousand Dollars ($2,250,000.00) the Lender may request the Borrower to refund such amount so that the loan amount does not exceed the available equity and the Borrower will refund such amount. 4.Nothing in this Deed shall prohibit the Borrower from granting to any other primary banking or other lending institution upon terms reasonably required by that Bank (or such other primary lending institution as the Borrower may choose), a mortgage over both the 92 Land and the 110 Land having priority to the mortgage granted to the Lender under this Deed." 3The deed of variation in each case was the election to take the second Bower Street land as security under the clause. 4The plaintiff is a company controlled by Mr Savage, who is a solicitor who has been admitted to practice since 1986. He is an experienced property developer. Mr Bianchino is apparently an architect and the two of them used to meet on a weekly basis to discuss the development of the second Bower Street project. 5On 4 August 2010 at a time when the first of the conditions precedent for repayment of the loan had been satisfied they met and had the following conversation: "He said:I am concerned about the progress of the Manly project (also known as second Bower Street project) and my security and delays. I am uncomfortable with my position and I would like some additional security. I would be more comfortable and happy to wait if you will give me additional security over your property at Bower Street, Manly (the first Bower Street project). I have consulted a lawyer and have prepared an acknowledgement by you for this. Mr Bianchino subsequently produced a letter dated 4 August 2010 (letter of 4 August 2010) and requested that I sign the letter. I said:[I read the document] .. I can't give you a registered second mortgage over (second Bower Street) Manly at the moment because St George Bank have the first mortgage and there is some outstanding interest to be paid before they would consider consenting and providing a deed of priority. He said:I really want you to sign this document I will then be able to 'relax about the situation' and then will wait until the Manly project is completed or refinancing comes through from 'Brockstar' [the financier] if there is a problem with Manly. I said: I am a bit taken off guard by this Don. Can we think about it and maybe meet with the lawyer? He said:[agitated] No, I want this done now. I want you to sign that document. I said:I want to give you comfort and if it means we can continue to pursue the Manly project and our refinancing with you appeased, then I can give you a caveat over 92 Bower Street on the basis that it is removed as soon as we have secured financing the (second Bower Street) project. He said: Yes, I am happy with that, will you sign the document. I said: The document isn't really accurate and it mixes the loans, we should get a lawyer to re-draft it. He said:[agitated] I really need you to sign that now, so I can put this to rest and I will speak to my lawyer. I said: ok [I signed the document]." 6For the purposes of this application I will, as required by authorities, accept that this occurred in these terms. 7The document which Mr Savage then signed was in this form: "4th August 2010 Don Bianchino 12 Dobroyd Parade DOBROYD POINT. NSW 2045 AND Mr Bianchino + Associates Pty Ltd Shop 11/25 Harvey Street PYRMONT. NSW 2009 RE: 110 BOWER STREET, MANLY. Despite the election made by you under clause 3 of the Deed of Loan between you and Savage Property Enterprises Pty Limited dated 7th April 2009 I hereby charge my interest in 92 Bower Street Manly with repayment to you of any and all monies owing to you under the 7th April 2009 Deed Of Loan and the Deed of Loan dated 5th March 2010 under which I owe you $400,000 plus interest at 10% per annum from 4th August 2010. Despite the foregoing I acknowledge that monies payable under the 5 March 2010 Deed of Loan remain payable to you on demand and I affirm that the 7th April 2009 Deed of Loan continues to operate in respect of moneys owing to you under that document. Mathew Ronald Savage Signed ______________ 39-41 Byng Street Orange. NSW 2800" 8Pursuant to this memorandum Mr Bianchino lodged caveats over the second of the Bower Street properties and on 2 September he made demands for repayment of both loans which satisfied the second condition for liability. After this period expired two statutory demands were served dated 12 October 2010. Proceedings were commenced within time on 2 November 2010. 9It was submitted that there was a genuine dispute about liability for the sums in question. I have had the benefit of having a number of submissions in respect of the principles to be applied and I think the most useful summation of what is a genuine dispute is that given by McLelland CJ in Eq in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669. At p 671 his Honour made the following comments in respect of the expression "genuine dispute": "It is, however, necessary to consider the meaning of the expression 'genuine dispute' where it occurs in s. 459H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the 'serious question to be tred' criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the Court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit 'however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be' not having 'sufficient prima-facie plausibility to merit further investigation as to (its) truth' (cf Eng Mee Yong v Letchumanan (1980) AC 331 at 341), or 'a patently feeble legal argument, or an assertion of facts unsupported by evidence' (cf South Australia v Wall (1980) 24 SASR 189 at 194). But it does mean that, except in such an extreme case, a Court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments (at ACLC 1066; ACSR 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Division 3 of Part 5.4 of the Corporations Law, and to the terms of Division 3: "These matters, taken in combination, suggest that at least in most cases, it is not expected that the Court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.' In Re Morris Catering (Australia) Pty Limited (1993) to 11ACLC 919 at 922; (1993) 11 ACSR 601 at 605 Thomas J said: 'There is little doubt that Division 3 ... prescribes a formula that requires the Court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the Court will examine the merits or settle the dispute. The specified limits of the Court's examination are the ascertainment of whether there is a "genuine dispute" and whether there is a "genuine claim". It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the Court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another. The essential task is relatively simply - to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).' 10I respectfully agree with those statements." 11The plaintiff relies on an agreement or representation that, if further security was given, the lender would be "appeased" and the loan would not be called upon until the project was complete or refinance was in place. The plaintiff submitted that it would put its case at trial in three alternative ways: (1) that the agreement constitutes a variation of the contract which occurred at the issuing of the demand, (2) estoppel, and (3) misleading or deceptive conduct.