Karliner v McCallum [2015] NSWDC 191

District Court New South Wales

Medium Neutral Citation: Karliner v McCallum [2015] NSWDC 191 Hearing dates: 5 August 2015 Date of orders: 05 August 2015 Decision date: 05 August 2015 Jurisdiction: Civil Before: Neilson DCJ Decision: Verdict and judgment for the plaintiff against the second defendant in the sum of $433,028.15 Catchwords: CIVIL PROCEDURE – Judgment against absent defendant pursuant to UCPR r 29.7(3) Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) Category: Procedural and other rulings Parties: Ofer Karliner (Plaintiff) Brett John McCallum (First defendant) Desmond George Seivewright (Second defendant) Representation: Solicitors: Cohen & Krass (Plaintiff) No appearance (First defendant) No appearance (Second defendant) File Number(s): 2014/97779 Publication restriction: No

Judgment 1. HIS HONOUR: By a statement of claim filed on 1 April 2014 the plaintiff claimed the following relief: "1. An order that the first and second defendants pay $250,000, being the face value of a Convertible Note plus accrued interest in the amount of $31,250 and legal fees in the amount of $2,967.25. 2. Costs." The total claim is then particularised as amounting to $285,670.25. 1. The proceedings were commenced against Brett John McCallum, the first defendant, and against Desmond George Seivewright, the second defendant. The plaintiff relies upon a convertible note dated 10 April 2013 between the plaintiff and Reeve Street Digital Pty Limited which was guaranteed by both the first defendant and the second defendant. The plaintiff has obtained default judgment against the first defendant. The matter comes before me for hearing of the plaintiff's claim against the second defendant. 2. The second defendant filed a defence on 30 June 2014. The substance of the defence is a plea of non est factum. However, the convertible note relied upon, while expressed to be a deed between the parties thereto, does not purport to be a deed of guarantee between the plaintiff and each of the defendants. The convertible note deed contains in cl 12 the guarantee. Subclause (d) contains 12 paragraphs. Two of those paragraphs are these: "(vi) The fact that this Deed is wholly or partially void, voidable or unenforceable; (vii) The non-execution of this Deed by one or more of the persons named as guarantor or the unenforceability of the guarantee or indemnity against one or more of the guarantors;…" 1. In any event, I am persuaded on the balance of probabilities by the evidence of Mr Andrew Wilkinson in two affidavits, the first sworn on 27 January 2015 and the second sworn on 16 January 2015, that the second defendant did execute the guarantee by signing his name as guarantor after the formal execution clause of the deed between the plaintiff and Reeve Street Digital Pty Limited. There is no dispute that at all relevant times the second defendant was a director of that company. 2. In any event, it is not necessary for the plaintiff to establish liability as such. The matter is being dealt pursuant to UCPR 29.7(3). UCPR 29.7 applies when a trial is called on and a party is absent. Subrule (3) is in the following terms: "If, in relation to a liquidated claim, the plaintiff appears, but a defendant does not appear, the court may, without proceeding to trial, give judgment against the defendant on evidence of: (a) the amount then due to the plaintiff in respect of the cause of action for which the proceedings were commenced; and (b) any payments made or credits accrued since the commencement of the proceedings in reduction of the amount of the plaintiff's claim or costs." 1. Clause 1(a) of the convertible note establishes that the face value of the convertible note is $250,000. Clause 1(b) provides that the maturity date is 12 months from the date of the convertible note, which was 10 April 2013. Clause 1(c) provides that interest is fixed at the rate of $3,125 per calendar month, paid monthly on the fourth day of each month after the commencement of the deed. Clause 1(d) of the convertible note provides that the final interest payment will be paid with the principal on the maturity date and will be pro-rata to the portion of the month since the penultimate interest payment date. Clause 5 of the deed provides that, in the event that the face value of the convertible note and interest is not paid upon the maturity date, interest continues to be charged on the outstanding balance at a rate of 15% per annum payable monthly. 2. The first payment due under the deed to be paid on 4 May 2013 was paid. Nothing has been paid since that time. 11 months of interest at $3,125 per month is the sum of $34,375. The convertible note value of $250,000 has not been repaid. The total of those two sums is $284,375. The interest on that sum at 15% for one year is $42,656.25. For the period from 10 April 2015 to today's date, 5 August 2015, the amount of interest accrued is $13,673.37. The total of those three sums which I have just quoted is $340,704.62. 3. Clause 14 of the convertible note provided that any legal expenses incurred by the holder as the result of default would be payable by the issuer. The plaintiff's costs have been established by an affidavit of Mr Warren Mark Krass, a solicitor. The costs incurred by the plaintiff to date, including the costs of these proceedings, amount to $92,323.53. I accept that the plaintiff has incurred those costs. When those costs are added to the last total sum to which I have referred, the sum payable by the second defendant to the plaintiff is $433,028.15. 4. The plaintiff submitted that there should be compound interest payable from 10 April 2015 on the interest for the year preceding that date, that is, the year from 10 April 2014 to 9 April 2015, but I can see no provision in the deed which allows the compounding of interest. 5. I should indicate that exhibit 1, put into evidence by me, is an email transmission from the second defendant to the Judicial Registrar attesting to his being aware that the matter is listed for hearing today and indicating that the second defendant was in Hong Kong and that he is seeking to try to settle the plaintiff's claim against him and that his defence to the substance of the claim was, in fact, the plea of non est factum. 6. For those reasons I give a verdict and judgment for the plaintiff against the second defendant in the sum of $433,028.15.