Supreme Court New South Wales Medium Neutral Citation: Statewide Secured Investments Pty Ltd v Hillington Valley Pty Ltd; Statewide Secured Investments Pty Ltd v Hillington Valley Pty Ltd [2015] NSWSC 681 Hearing dates: 1 June 2015 Date of orders: 02 June 2015 Decision date: 02 June 2015 Jurisdiction: Common Law Before: Wilson J Decision: 1) The Plaintiff's Notice of Motion is dismissed 2) Costs of these proceedings are reserved. 3) Matter listed before the Common Law Registrar on 5 June 2015 to fix a hearing date, with expedition, for a half to full day estimate 4) Defendants have leave to file any cross-claim or amended cross claim within 7 days. Catchwords: PROCEDURE – order seeking a summary judgment - deed of settlement – construction of deed Legislation Cited: Uniform Civil Procedure Rules 2005 Cases Cited: FAI General Insurance Co Ltd v Maracorp Financial Services Ltd [1994] 1 VR 455 Hume v Rundle (1825) 2 Sim & St 174,177; 57 ER 311, 312 Category: Procedural and other rulings Parties: 2011/118538 Statewide Secured Investments Ltd (Plaintiff) Hillington Valley Pty Ltd (First Defendant) Anthony Rupert Watson (Second Defendant) Pericoota Boat Club Investments Pty Ltd (Third Defendant) Gary Michael Bares (Fourth Defendant) Paul Graeme Jarman (Sixth Defendant) 2011/118541 Statewide Secured Investments Ltd (Plaintiff) Hillington Valley Pty Ltd (First Defendant) Anthony Rupert Watson (Second Defendant) Gary Michael Bares (Third Defendant) Representation: Counsel: D Barnett, B Michael (Statewide Investments) M Pesman SC (Hillington Valley Pty Ltd & Gary Michael Bares) D Briggs (Anthony Rupert Watson and Paul Graeme Jarman in 2011/118538 proceedings) Solicitors: Ashurst (Statewide Investments) Dandanis & Associates (Hillington Valley Pty Ltd & Gary Michael Bares) BizLaw (Anthony Rupert Watson and Paul Graeme Jarman in 2011/118538 proceedings) File Number(s): 2011/118538 / 2011/118541 Judgment 1. The proceedings before the Court relate to two separate, but related, claims which were commenced by two Statements of Claim against, respectively, the first, second, and third defendants, and the first to sixth defendants. The claims related to loan monies advanced by the plaintiff ("Statewide") to the first and second defendants, and guaranteed by the third defendant; and to the first to third defendants, guaranteed by the fourth to sixth defendants. The plaintiff sought to recover the loan monies plus interest by an order for judgment and possession of lands used as security and collateral security against the loans. 2. By amended Notice of Motion filed with leave on 1 June 2015 the plaintiff seeks an order for summary judgment against the first, second, and third defendants pursuant to r 13.1 of the Uniform Civil Procedure Rules (UCPR) 2005 for an amount of $84,131.59, or such other amount as the Court orders. 3. The defendants oppose an order for summary judgment, contending at the hearing of the matter on 1 June 2015 that, there being issues of fact to determine, it is not appropriate to order judgment summarily. 4. During argument before the Court it became clear that, depending upon the construction placed upon a Deed of Settlement entered into by the plaintiff and some of the defendants in August 2011, there were factual issues to be determined and, accordingly, orders could not be made summarily, without the parties having the opportunity to call evidence and make submissions on the facts to be found by the Court. 5. The parties agreeing that such was the position, the question for the Court to determine at this stage is the construction of the Deed of Settlement. The Parties 1. Since there are two separate proceedings, and a number of defendants, it is useful to be clear at the outset as to the identity of the defendants in the separate actions. 2. The defendants to the first proceedings, being file 2011/118538, (the 128B loan, and the Lot 16 claim) are: 1. Hillington Valley Pty Limited (Hillington) as borrower; 2. Anthony Rupert Watson (Mr. Watson) as borrower; 3. Perricoota Boat Club Investments Pty Limited (PBCI) as borrower; 4. Gary Michael Bares (Mr. Bares) as guarantor; 5. Jayne Maree Bares (Mrs Bares), against whom action has been discontinued; and 6. Paul Graeme Jarman (Mr. Jarman) as guarantor. 1. The defendants to the second proceedings, being file 2011/118541, (loan 127B, or the Moorings claim) are: 1. Hillington as borrower; 2. Mr. Watson as borrower; and 3. Mr. Bares as guarantor. A Brief History of the Matter 1. In July 2007 the plaintiff advanced loan monies (the 128B loan) to Hillington Valley P/L, Mr. Watson, and the Perricoota Boat Club Investments P/L. Security for the loan was provided by mortgages over properties granted by the first to third defendants. Mr. Bares and Mr. Jarman, the fourth and sixth defendants respectively, acted as guarantors of the loans. 2. A second loan was made by the plaintiff in that same month to the first and second defendants ("the 127B loan"). That loan was secured by mortgages over properties granted by the first to third defendants; the fourth defendant acted as guarantor. 3. The loans fell into default and the plaintiff commenced action in this Court in 2011 to recover the loan monies. File 2011/118538 relates to the 128B loan whilst file 2011/118541 relates to the 127B loan. 4. Subsequently, the plaintiff and the first, second and fourth defendants entered into a Deed of Settlement (the Deed). The Deed provided for the plaintiff to take possession of a number of properties which had been used as security for the loans, and for the orderly sale of the properties to discharge the loan facilities. In the Deed the relevant properties were divided into two groups, referred to as the "1st Tranche Properties" and the "2nd Tranche Properties". 5. Consent orders for judgment and possession in the file relevant to the 127B loan, consistent with the Deed, were obtained in August 2011. The First Tranche properties were subsequently sold, and the proceeds of the sales were applied to the 127B loan. 6. In August 2013 Lot 16 was sold and the proceeds applied to the 128B loan. 7. In February 2013 consent orders were made in relation to the 2nd Tranche Properties, and the properties were sold within a year. The proceeds of the sales were applied in part to the 128B loan and in part to the 127B loan 8. There is an issue between the parties as to whether the sale monies were applied as between the two loans in accordance with the Deed. Currently the amounts outstanding are $361,494.10 in relation to the 128B loan, and $84,131.59 in relation to the 127B loan. 9. The plaintiff argues that, however the monies were applied between the two debts, there would be no difference in the overall indebtedness of the defendants. The defendants contend that there is a difference in the overall outcome to them, potentially of both liability and quantum, depending on how the monies received from the sales of the properties were applied against the two loans. 10. The construction of the Deed is relevant to determining that dispute. Mr. Barnett for the plaintiff contends that there is nothing in the Deed to prevent the sale monies being applied broadly to the debts, without any particular order or ratio for the application of the monies to the two debts. Mr. Pesman SC for the first and fourth defendants, and with whom Mr. Briggs for the third and sixth defendants agrees, submits that the references in the Deed to "the debt" properly construed require the application of the sale monies to the debts in a particular, sequential, way, starting with loan 127B. The Deed 1. A copy of the Deed entered by the parties is before the Court as Annexure AJS 8 of the affidavit of Alison Staines of 16 December 2014. 2. The parties to the Deed are nominated as Statewide, Hillington, Mr. Watson, and Mr. Bares. 3. Included in the Background of the Deed is an acknowledgement that Hillington and Mr. Watson are indebted to Statewide for loan monies, interest, and costs (cl. A). There is a further acknowledgement that Mr. Bares provided a personal guarantee for the loan monies (cl. B). The securities for the loan monies advanced are set out, being (in summary) properties mortgaged by Hillington and Mr. Watson, and (as collateral security) a further property mortgaged by Hillington, Mr. Watson, and PBCI (cl. C). 4. The amount of indebtedness as at 2 August 2011 was noted (cl. D), and the proceedings taken by Statewide in this Court against Hillington, Mr. Watson and Mr. Bares were nominated as those designated by the Court file number "2011/118541". 5. The Operative Provisions of the Deed contain nine clauses, which set out the agreement of Hillington, Mr. Watson and Mr. Bares to judgment for possession of the 1st Tranche Properties, leave for Statewide to issue writs of possession with respect to those properties, judgment for possession for the 2nd Tranche Properties, and the disposition of the funds obtained by the sale of the properties. 6. Further provisions deal with valuation of property, the properties which are collateral security in relation to the proceedings to which the Court's file 2011/118538 relates, exchange of copies, and so on. The only provisions relevant specifically to construction of the Deed are cl. 6 and cl. 8, which deal with the operation of the laws of this State, and the use of singular and plural pronouns, and references to gender. The Construction of the Deed 1. The principles that apply to the construction of a document are well established and uncontroversial. 2. It is important to determine the meaning or legal effect of a particular clause or term by reference to the whole of the document: Hume v Rundle (1825) 2 Sim & St 174,177; 57 ER 311, 312. A common sense approach is to be taken, and it must be assumed that the parties did not intend the document to operate in an unreasonable way. The words used in the document should ordinarily be given their plain meaning so, in most cases, determination of meaning should require no more than reading the document in light of its context: FAI General Insurance Co Ltd v Maracorp Financial Services Ltd [1994] 1 VR 455 at [469]-[470]. 3. The document is to be read in its particular context. The context of the Deed is the intention of the parties to settle the outstanding litigation relevant to the outstanding debts, and to provide for an orderly disposition of the securities provided against the loan monies, and the discharge of the loan facilities, as expeditiously as possible. 4. In endeavouring to give the Deed its proper construction, particularly insofar as it is relevant to the particular issue before the Court, some clauses are of particular interest. 5. Clause D of the Background provides: "The indebtedness of Anthony Rupert Watson and Hillington Valley as at 2 August 2011 was $1,322,626.47 including interest and costs which debt is acknowledged by Anthony Rupert Watson, Hillington Valley and Gary Michael Bares ("the debt"). 1. Clause 1d of the Operative Provisions provides: "In the event the amount recovered from the sale of the 1st tranche properties is insufficient to discharge the debt owed to Statewide including interest and costs incurred after 2 August 2011 Hillington Valley, Anthony Rupert Watson and Gary Michael Bares will pay to Statewide the shortfall within 28 days of completion of the sale of the last of the 1st tranche properties." 1. Clause 2d of the Operative Provisions provides: "In the event that the net proceeds of sale of the 1st tranche properties does not fully discharge the debt and interest and costs thereafter incurred, and in the event that Anthony Rupert Watson, Hillington Valley and Gary Michael Bares do not comply with 1.d above, Statewide will enter the orders for possession of the 2nd tranche properties and will thereafter sell each property sequentially until the debt, interest and costs are paid in full. Thereafter the balance of any remaining titles after the debt interest and costs incurred after 2 August 2011 are paid is to be returned to Hillington Valley and Anthony Rupert Watson." 1. Clause 4 of the Operative Provisions provides: "The parties acknowledge the properties listed in 1.a and 1.d above are also collateral security in relation to a loan the subject of proceedings commenced in the Supreme Court of New South Wales in its Common Law Division number: 2011/118538 secured by Lot 17/270076. In the event sufficient funds are not recovered from the sale of Lot 17/270076 to satisfy this debt together with interest and costs Statewide will seek to recover the balance under its collateral securities." 1. Critical to the determination of the issue between the parties is what is meant in the Deed by the reference to "the debt", and how that affects the discharge of the loan facilities 127B and 128B. 2. Reading the provisions of the Deed in the overall context of the document, and giving the language its ordinary meaning, it seems clear that the phrase "the debt", as it is used in the Deed can only refer to the debt outstanding in relation to loan 127B. It cannot and does not have a meaning which encompasses both loan facilities, or either facility interchangeably. 3. The persons and entities identified as the parties in the relevant section of the Deed is consistent with that meaning, since the parties to the Deed are also the debtors and guarantor relevant to loan 127B. 4. The securities identified at cl. C of the Background are also consistent with that construction, since they are the securities relevant to loan 127B. 5. The amount owed as at 2 August 2011 (cl. D) is similarly consistent with the debt owed in relation to loan 127B. 6. Significantly, "the debt" is specifically referred to in cl. E of the Background as that in relation to which proceedings were initiated in this Court bearing file number 2011/118541. That can only be a reference to the 127B loan and, in my view, puts the construction of the Deed beyond question. 7. If more were required, it is provided by clause 4 of the Operative Provisions, which draws a further distinction between loan 127B and loan 128B, by reference to the file number of this Court relating to proceedings to recover the debt relevant to loan 128B, that being file number 2011/00118538. 8. The Operative Provisions set out above at [30] to [31] provide for the disposition of the monies applied sequentially. That is, upon the sale of the 1st Tranche Properties, the monies are to be applied to discharge loan 127B (cl.1d). 9. Should the funds be insufficient for that purpose, Hillington, Mr. Watson and Mr. Bares are obliged to pay any shortfall (cl.1d) and, should they fail in that, they are taken to consent to judgment in favour of Statewide for possession of the 2nd Tranche Properties. Clause 2d of the Operative Provisions provides for the sequential sale of the 2nd Tranche Properties until the debt, interests and costs are paid in full. 10. Insofar as Statewide has applied the sale proceeds of the properties to loan 128B before loan 127B, it is contrary to the provisions of the Deed. Orders 1. The Court makes the following orders: 1. The Plaintiff's Notice of Motion is dismissed. 2. Costs of these proceedings are reserved. 3. Matter listed before the Common Law Registrar on 5 June 2015 to fix a hearing date, with expedition, for a half to full day estimate. 4. Defendants have leave to file any defences or cross-claim within 7 days. ********** 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. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 June 2015