Iacullo v Hillam [2014] NSWSC 666

Supreme Court New South Wales

Medium Neutral Citation: Iacullo v Hillam [2014] NSWSC 666 Hearing dates: 15/04/2014 and 22/05/2014 Decision date: 22 May 2014 Jurisdiction: Equity Division - Commercial List Before: McDougall J Decision: Plaintiffs entitled to judgment for $200,000 with interest. Stand over for orders. Defendants to pay plaintiffs' costs. Catchwords: JUDGMENTS & ORDERS - Judgments - Summary judgment - Requirements for summary judgment - whether to grant summary judgment where defence raised on application for summary judgment not previously pleaded and inconsistent with evidence

PROCEDURE - costs - general rule that costs follow the event - whether to award costs of failed application for judgment on admissions where issues raised by defendant were mere smoke-screen Legislation Cited: Civil Procedure Act 2005 (NSW) Category: Principal judgment Parties: Dominic Iacullo (First Plaintiff) Lillian Iacullo (Second Plaintiff) John Hillam (Defendant) Representation: Counsel: D A Smallbone (Plaintiffs) D Neggo (Defendant) Solicitors: I E Duffield (Plaintiffs) Mills Oakley Lawyers (Defendant) File Number(s): 2014/66418

Judgment (ex tempore - revised 22 may 2014) 1HIS HONOUR: The plaintiffs, Mr and Mrs Iacullo, sue the defendant, Mr Hillam, on a number of causes of action. 2One cause of action relates to a loan agreement made on 12 July 2011, under which Mr and Mrs Iacullo agreed to lend Mr Hillam $200,000. Another cause of action related to a loan agreement made 14 days later, on 26 July 2011, under which Mr and Mrs Iacullo agreed to lend Mr Hillam $155,000. 3The second loan agreement contained an acknowledgment (cl 2.1) of the advance of "the Loan", which had been defined by cl 1 to mean the sum of $355,000. 4Mr and Mrs Iacullo sought judgment on admissions in respect of the two loans on which they sued. As to the sum of $155,000, the application became moot because Mr Hillam tendered payment of that sum on the morning of the hearing, 15 May 2014. 5The suggested defence in respect of the sum of $200,000 is pleaded (if that is the right word) in Mr Hillam's list response. He says (para 5) that: (1) he denies that Mr and Mrs Iacullo lent him the sum of $200,000 on or before 12 July 2011; (2) he does not admit that the loan was made at all; (3) if the loan was made, it was to have been paid at his direction, to his then solicitor, Mr Richard Allsop of Allsop Glover; and (4) he does not know if or when the loan or any part of it was paid by Mr and Mrs Iacullo to Mr Allsop. 6For reasons that I gave on 15 May ([2014] NSWSC 624), I thought that the discretion to grant judgment on admissions should not be exercised in respect of the loan of $200,000, although there was a powerful body of material from which the inference could be drawn that Mr Hillam had, more than once, admitted that the loan of $200,000 had been advanced. It was his sworn assertion that he did not know whether the sum had been paid to Mr Allsop which caused me to take that view. 7In those circumstances I suggested that the matter could be more appropriately dealt with as a claim for summary judgment. 8Mr and Mrs Iacullo took up that suggestion and I am today concerned with their notice of motion filed on 18 May 2014 seeking a summary judgment in respect of the sum of $200,000. 9I repeat that the second loan agreement (made to record the additional advance of $155,000) contained an acknowledgment that the loan, comprising both amounts, had been advanced as at 26 July 2011. 10As will be seen from the commercial list response, as I have summarised it, the only issues raised by Mr Hillam in defence of this aspect of the claim are in substance that the loan was not paid to him and he did not know whether it was paid to Mr Allsop. 11Mr and Mrs Iacullo have sworn affidavits in support of their application for summary judgment. Those affidavits show the following matters. 12Mr (or Mr and Mrs) Iacullo, or entities associated with Mr Iacullo, were indebted to Mr Allsop for legal fees that they had incurred. Mr Iacullo paid two amounts, totalling in round figures $116,000, on account of those fees. 13Shortly before the first loan agreement was made (that is to say, the loan agreement of 12 July 2011, relating to the sum of $200,000), Mr Allsop discussed with Mr Iacullo the possibility that Mr and Mrs Iacullo would lend Mr Hillam $200,000 on account of legal fees owed by Mr Hillam to Mr Allsop. Mr Allsop said that if this were done, he would treat the payment already made as having been made against Mr Hillam's obligations. That meant, as Mr Allsop pointed out, that Mr Iacullo would continue to owe the full amount in respect of his own fees. 14Thereafter, as the evidence shows, Mr and Mrs Iacullo made a number of further payments to Mr Allsop, the effect of which was that, together with the original payment of (in round figures) $116,000, they paid a further $84,000, (again in round figures) so that the total of $200,000 was paid, or treated as having been paid, against Mr Hillam's obligations. 15There can be no doubt that the payments were made or credited against Mr Hillam's obligations to Mr Allsop. That is asserted by Mr Hillam in his list response, as I have summarised it above. It is also confirmed (if confirmation be needed) in various emails that passed between Mr Hillam and Mr Allsop which were copied to Mr Iacullo. 16The suggested defences (which are not pleaded) relate to the two instalments: one of $116,000 and the other (comprised of several payments) of $84,000. It is submitted, as to the former, that this was not a loan made by Mr Iacullo to Mr Hillam and paid at Mr Hillam's direction to Mr Allsop, but rather a forgiveness by Mr Allsop of $200,000 of the fees owed by Mr Hillam, on the basis that the fees in question would be reclaimed against Mr Iacullo. In substance, it was submitted, there was an assignment of Mr Hillam's debt to Mr Allsop, from Mr Allsop to Mr Iacullo. 17That characterisation of the transaction is inconsistent with the written agreement of 12 July 2011. It is inconsistent with the acknowledgment contained in the written agreement of 26 July 2011. It is inconsistent with Mr Iacullo's pleading. It is inconsistent with the contemporaneous emails. It is inconsistent with Mr Iacullo's evidence as to the discussions between him and Mr Allsop, which evidence (I note) was admitted without objection and without any requirement that Mr Iacullo be cross-examined. 18I do not accept that the substance of the transaction, in relation to the payment of $116,000, was other than as pleaded and as evidenced in the numerous sources to which I have referred. 19As to the second instalment (payments totalling $84,000), it was suggested, on the basis of a throw-away line in a document that formed part of Mr and Mrs Iacullo's evidence, that because (it might be) Mr Allsop had given some guarantee to Mr and Mrs Iacullo of the loan made by them to Mr Hillam and paid at Mr Hillam's direction to Mr Allsop, there might be some question of contribution or other rights which could more conveniently be dealt with in the hearing of the issues between the present parties. 20I do not understand that. The general proposition is that when there is a primary obligation and a secondary obligation by guarantee, the creditor may enforce either or both, at his or her discretion, until there is full recovery. The debtor is not entitled to insist that the creditor proceed first against the guarantor. The guarantor is not entitled to insist that the creditor exhaust his or her rights against the debtor. 21Quite why Mr Hillam would have any right of contribution against Mr Allsop, in circumstances where (it may be) Mr Allsop had guaranteed Mr Hillam's obligations to Mr and Mrs Iacullo was not explained. Again in general terms, a debtor whose obligations are guaranteed may receive de facto relief if the guarantor pays up. But the effect is not that the debtor is released. The effect is that the guarantor is subrogated to the creditor's rights against the debtor. So far from relieving the debtor, all that happens is that the claimant's identity, vis-a-vis the debtor, changes from the creditor to the guarantor. 22In the circumstances, the evidence is clear beyond doubt that the suggested defences advanced by Mr Hillam in respect of the claim for $200,000 have no substance. Nor, for the reasons I have given, do I accept that the suggested defences that were advanced in submissions in response to the evidence that has now been adduced have any substance. 23In my view, this is an appropriate case to grant summary judgment in respect of the claim for $200,000. 24The only complication is, that under the agreement of 12 July 2011 (and confirmed by the agreement of 26 July 2011), interest accrues at the rate of 15% per annum. Some payments have been made on account of, or have been credited as paid against, interest. It is appropriate that the judgment sum be for interest to the date of judgment. In those circumstances I would do no more than direct entry of judgment for the plaintiffs against the defendant in the sum $200,000 in respect of the claim pleaded at paras 5 and 6 of the plaintiffs' commercial list statement, together with interest to be agreed, and stand the matter over so that the parties may carry out and agree upon a calculation of interest. 25That will also leave for resolution the question of costs, both of the application for summary judgment and the application for judgment on admissions. As to the former, my inclination is that costs should follow the event, but since I am to hear from counsel in any event I will hear them both on both sets of costs.