Supreme Court New South Wales Medium Neutral Citation: Cai v Tsang [2018] NSWSC 625 Hearing dates: 4 April 2018 Decision date: 09 May 2018 Jurisdiction: Common Law Before: R A Hulme J Decision: 1. The plaintiff's Notice of Motion filed on 14 March 2018 by which an order for summary judgment is sought is dismissed. 2. Unless a party makes an application in writing to my Associate within seven days for a different order, costs of and incidental to this application are to be costs in the cause. 3. Liberty to apply on three days' notice. Catchwords: CIVIL PROCEDURE – summary disposal – judgment for plaintiff – whether there is no arguable case – where defendant guaranteed loan made by plaintiff to defendant's company – where company defaulted on repayments – whether guarantee enforceable against defendant – whether terms void or unjust or unenforceable – whether plaintiff's conduct prevented performance – whether guarantee enforceable against third parties – not established that there is no arguable case – notice of motion dismissed Legislation Cited: Contracts Review Act 1980 (NSW) s 7 Uniform Civil Procedure Rules 2005 (NSW) r 13.1 Cases Cited: Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 Commonwealth of Australia v Griffiths (2007) 70 NSWLR 268; [2007] NSWCA 370 Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1 Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; [1983] HCA 25 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69 Spellson v George (1992) 26 NSWLR 666; [1992] NSWCA 254 Spencer v The Commonwealth (2010) 241 CLR 118; [2010] HCA 28 Webster v Lampard (1993) 177 CLR 598; [1993] HCA 57 Yerkey v Jones (1939) 63 CLR 649; [1939] HCA 3 Category: Principal judgment Parties: Weiming Cai (Plaintiff) Andrew Tsang (Defendant) Representation: Counsel: Mr R C Gration (Plaintiff) Mr J Cameron (Defendant) Solicitors: Jurisbridge Legal Johninfo Lawyers Pty Ltd File Number(s): 2017/312707 Judgment 1. HIS HONOUR: This is an application for summary judgment pursuant to r 13.1 of the Uniform Civil Procedure Rules 2005 (NSW). Procedural history 1. Weiming Cai ("the plaintiff") filed a Statement of Claim on 16 October 2017 by which judgment was sought for the principal sum of $3,500,000 (plus interests, costs etcetera) against Andrew Tsang, also known as Ronghuo Zeng ("the defendant"). The sum is said to be owing pursuant to a loan agreement in which the defendant was the guarantor of the principal sum. 2. The Statement of Claim was served personally upon the defendant on 2 November 2017. He did not file a defence. On 22 December 2017 the plaintiff filed a notice of motion seeking default judgment. The matter was listed before the Registrar on 9 February 2018 on which occasion there was an appearance on behalf of the defendant. Orders made by the Registrar included that a notice of appearance be filed by 16 February 2018 and the matter be relisted on 23 February 2018. 3. The defendant filed an appearance and a notice of appointment of solicitor on 23 February 2018. On that occasion the Registrar made orders including that the plaintiff's notice of motion filed on 22 December 2017 be dismissed and that the defendant file and serve any defence by 2 March 2018. The matter was to be relisted on 21 March 2018. 4. The defendant filed his Defence on 2 March 2018. 5. On 14 March 2018 the plaintiff filed a notice of motion seeking summary judgment. The Registrar ordered that the matter be listed before the Duty Judge on 4 April 2018. 6. The matter came before me as Duty Judge on that date. The plaintiff read affidavits affirmed by Xiaoqi Xu on 7 February 2018 and 14 March 2018 and tendered an ASIC search in relation to Xiang Rong (Australia) Investment Group Pty Ltd evidencing the cessation as directors as at 24 September 2015 of the plaintiff and Chun Xiang Zeng. The defendant did not rely upon any evidence. Background to the claim 1. On 29 December 2013, the plaintiff lent $3.5 million to Xiang Rong (Australia) Investment Group Pty Limited (now in liquidation) ("the Company"). The loan agreement made at that time ("the initial loan agreement") provided for the Company to make monthly interest-only payments at a rate of 6% per annum ($17,500 per month) and to repay the principal amount after four years. 2. At the time of the initial loan agreement the defendant was a shareholder of the Company and he and his wife, Chun Xiang Zeng, were the directors. The defendant agreed to guarantee the performance of the Company's obligations. 3. From 29 January 2014 to 2 March 2015 the Company defaulted in its obligations and made no interest payments to the plaintiff. On 2 March 2015 the plaintiff commenced proceedings in this Court against the Company to enforce the loan agreement. 4. The proceedings were settled on the basis set out in a deed executed on 20 March 2015 entitled "Loan Agreement and Deed of Guarantee and Indemnity" ("the second loan agreement"). The Company was required to pay by 29 May 2015 the unpaid interest payments of $297,500 and thereafter monthly interest payments of $17,500 until the $3.5 million principal was to be repaid by 29 December 2017. 5. The Company defaulted in the performance of its obligations under the second loan agreement from 29 December 2015 and defaulted on the obligation to repay the principal by 29 December 2017. 6. The plaintiff served a statutory demand on the Company on 21 February 2017. The Company did not comply. On 21 April 2017 the plaintiff filed a winding up application and on 17 July 2017 this Court ordered that the Company be wound up. Nothing has been paid to the plaintiff since then. 7. The plaintiff sues the defendant pursuant to a personal guarantee he gave in the second loan agreement. The second loan agreement 1. The second loan agreement was executed by the plaintiff as the "Lender", by the defendant and his wife as directors of the Company as the "Borrower", and by the defendant as the "Guarantor". 2. Provisions that are relevant to the present application are (with definitions of terms in square brackets): "2 Payment of Advance The parties agree that the Lender has paid to the Borrower the Advance [the $3,500,000.00 advanced by the Lender to the Borrower] on 29 December 2013. 3 Security 3.1 Grant of security The Borrower must grant or cause to be granted to the Lender as security for the repayment for the Secured Money [the balance from time to time of the Advance] each of the following securities: (a) on the date of the Advance an allotment of the Shares [3,500,000 ordinary shares in the Borrower]; (b) an unregistered second mortgage: (1) by Jessica Zhao over the property known as xxxx Killara being the land in certificate of title folio identifier xxxx; and (2) by the Guarantor (described on the titles as Ronghuo Zeng) and Chun Xiang Zeng over the properties known as xxxx Sydney and xxxx Sydney being the land contained in folio identifiers xxxx and xxxx; (c) personal guarantee from the Guarantor. 3.2 Caveats The Borrower and the Guarantor consents to the Lender causing a Caveat to be filed on the titles to each of the properties for the unregistered mortgages as specified in clause 3.1(b). … 11 Operation of Borrower Notwithstanding that the Lender has been allotted the Shares, the Lender must: (a) on the date of this agreement resign as a director of the Borrower; and (b) not use any rights under the Constitution of the Borrower by virtue of his shareholding in the Borrower to interfere in the conduct by the Borrower of its business; (c) not use his votes as a shareholder of the Borrower to appoint any liquidator or receiver or manager to the Borrower; (d) credit the value of any dividend received for the Shares against interest to be paid under this agreement of [sic] if applicable net of income tax against the Advance; and (e) transfer the Shares in the Borrower as required under clause 3.4. … 14 Default Events 14.1 What is a Default Event The following are default events ("the Default Events"): (a) … (b) the Borrower does (1) not do anything it is required to do (except that the failure to grant the security under clause 3.1(b) is not an Event of Default); or … 20 Guarantee 20.1 Borrower's obligations assumed by Guarantor The Guarantor agrees with the Lender to be jointly with the Borrower and separately liable to the Lender for the due and punctual observance and performance of the obligations of the Borrower under this agreement and any Security Interest [an interest as security for the performance of an obligation under this agreement] in accordance with the provisions of this guarantee and indemnity. 20.1 Guarantee The Guarantor unconditionally and irrevocably guarantees to the Lender the due and punctual payment by the Borrower of the Secured Money at the time or times and in the manner set out in this agreement and the due and punctual observance and performance of the obligations of the Borrower and covenants with the Lender that: (1) if the Borrower fails to make due and punctual payment as required under this agreement the Guarantor must immediately upon demand by the Borrower pay to the Borrower all such moneys which are outstanding; (2) if the Borrower fails to comply with any of its obligations to the Lender the Guarantor must at the option of the Lender either immediately ensure the performance of that obligation or pay to the Lender an amount equal to any losses, damages, costs, charges or expenses of whatsoever kind which the Lender may suffer or incur by reason of the failure of the Borrower to comply with that obligation; (3) this guarantee is a continuing guarantee and will remain in full force and effect until all the Secured Moneys have been paid and the Borrower has complied with all of its obligations to the Lender; (4) the Guarantor waives in favour of the Lender all rights whatsoever against the Lender, the Borrower and any other person or any estate or asset including rights of subrogation, contribution and marshalling; (5) if the Guarantor becomes bankrupt or makes any arrangement, assignment or composition for the benefit of his creditors the Lender will be entitled to prove for the Secured Money and any other money payable by the Guarantor pursuant to a Security Interest; and (6) if the Borrower goes into liquidation, or if a receiver of [sic] provisional liquidator is appointed to the Borrower, the Lender will be entitled to prove for the Secured Money and the Guarantor must not prove in competition with the Lender and the Guarantor authorises the Lender to prove for all moneys which the Guarantor may have paid under this guarantee and indemnity and to appropriate all moneys so received until the Lender has received all moneys due to them pursuant to this agreement. 20.3 Indemnity The Guarantor agrees with the Lender as a separate and additional liability under this guarantee and indemnity: (1) to hold the Lender indemnified against all losses, damages, expenses and costs which the Lender may incur by reason of any failure on the part of the Borrower to pay the Secured Money or to comply with the obligations of the Borrower under a Security Interest or this agreement; and (2) to pay as principal debtor to the Lender immediately upon demand by the Lender an amount equal to any loss, damage, expense or cost which would otherwise be suffered or incurred by the Lender. 20.4 Liability of Guarantor not affected This guarantee and indemnity will not be abrogated, altered, prejudiced or affected in any way by: (1) the Lender neglecting to do anything in exercise of the rights, powers or discretions vested in the Lender by this agreement or any Security Interest; … (4) reason of any transaction or arrangement that may take place between the Lender and the Borrower or any other person. …" The Defence 1. The Defence filed on 2 March 2018 included admissions that the Company had breached the second loan agreement by failing to pay the plaintiff any further instalment of interest accrued monthly from 29 December 2015 and by failing to pay any overdue interest from 29 March 2016. It was also admitted that these were "Default Events" which immediately entitled the plaintiff to demand payment of the principal sum. 2. The Defence also included admissions as to the circumstances in which the Company was wound up and was under external administration. 3. The essence of the dispute between the parties was set out in paragraph 13 of the Defence which is in the following terms: "In respect to paragraph 7(f) of the statement of claim, the defendant says: a. Chun Xiang Zeng was not obligated to grant any interest over the said property under the terms of the agreement because she was not a party to the agreement and did not sign the agreement. b. The agreement provided for the provision of a second mortgage by Jessica Zhao over the property owned by her at unit 37,507 Pacific Highway, Killara, and as she did not sign the agreement and was not a party to the agreement, and was not obligated to grant any interest over the said property. c. The agreement provided that the defendant would cause to be granted security interests from the persons referred to in paragraph 13(a) and (b) above in circumstances where those persons did not sign the agreement, obtained no benefit from granting a security and in circumstances where no consideration passed from the plaintiff to either of those persons for granting of the securities so referred to. d. By reason of what is pleaded in paragraph 13(a), (b) and (c) of this defence, the terms of the agreement which provided for the provision of a mortgage, or the provision of any guarantee or indemnity are uncertain, harsh, oppressive, unfair and/or unjust and accordingly those terms of the agreement are void and/or unenforceable, and/or voidable and/or alternatively, by reason of the matters pleaded in this paragraph 13, the defendant seeks relief pursuant to section 7 of the Contracts Review Act 190, that the provisions of the agreement creating a guarantee and indemnity in respect to the defendant were unjust within the meaning of section 7 of the Contracts Review Act 1980 and the Court ought order that such provisions are void and unenforceable. PARTICULARS The agreement provided terms that the defendant was to obtained from Chun Xiang Zeng and Jessica Zhao mortgages to secure the payment of any money payable to the plaintiff under the agreement. The consequence of obtaining those mortgages would have been that those persons would be liable as co-sureties, for which the defendant could have reasonably anticipated a right of contribution and indemnity in respect to any payments obligations under the terms of the agreement. Because those co-sureties did not execute the agreement, Chun Xiang Zeng and Jessica Zhou [sic] were never bound to provide a mortgage to the plaintiff and therefore were never obligated as co-sureties for the payment obligations under the agreement. Chun Xiang Zeng and/or Jessica Zhao did not receive any consideration for granting the securities and did not receive any benefit from granting such securities. Chunxiang [sic] Zeng was the wife of the defendant, did not receive any tangible benefit from the transaction, did not sign the transaction and the plaintiff did not ensure that she signed the transaction or obtained independent legal advice, and thus to the extent that the agreement provided for the provision of a security or surety interest from her, that interest would be liable to be set aside in accordance with the principles in Yerkey v Jones. The consequence of the above resulted in the defendant being unable to ascertain the extent to which the right of contribution and indemnity existed in respect of other co-sureties envisaged under the agreement. The failure of the Company to meet its obligations under the agreements between December 2013 and 24 September 2015 were caused or contributed by the acts or omissions of the plaintiff. 1 in failing to cause the Company to pay amounts when due, as during this period, the plaintiff was the director of the Company; 2 as pleaded in subparagraph (e) below. e. The plaintiff by its conduct is prevented by operation of the prevention principle and/or by the operation of equitable principles from enforcing the terms of the agreement that relate to the guarantee and indemnity by the defendant as the plaintiff was the director of the Company between December 2013 and 24 September 2015, and during this period: i. The plaintiff, in its capacity of the director of the Company, failed, neglected or refused to ensure that the Company met its obligations to the plaintiff under the agreement. ii. The plaintiff allowed the Company to enter into the new loan agreement on 20 March 2015, in circumstance where the plaintiff knew or ought to have known that the Company was not in a financial position to meet the payment obligations under that new agreement, iii. the plaintiff in its capacity of director of the Company, did not ensure that the Company met its obligations as to payment under the agreement iv. the plaintiff was in a position to make reasonable enquiries as to the financial capacity of the Company, but did not make such inquiries, and/or had no regarded to the Company's ability to meet its payment obligation under the new agreement. PARTICULARS Clauses of the agreement which purport to create a guarantee and indemnity and ought be declared void are clause 3.1, clause 20.1, clause 20.2, clause 20.3 clause 20.4, clause 21 and clause 22 in so far as it refers to the defendant." 1. In relation to the guarantee and indemnity, it was pleaded (in paragraph 15 of the Defence): "[T]he provision of any guarantee or indemnity is unfair and/or unjust and/or void and/or unenforceable, and/or void or voidable on the basis of uncertainty." 1. In respect of paragraphs 20-22 of the Statement of Claim which appear under the heading, "The Defendant as Guarantor", the defendant admitted receiving letters of demand but otherwise denied being liable to the plaintiff for the reasons set out in paragraph 13 of the Defence. The plaintiff's submissions 1. The plaintiff pointed out in relation to that part of the Defence that is concerned with cl 3.1(b) of the second loan agreement (the provision of unregistered second mortgages as security) that the Statement of Claim is not seeking to enforce such security. The substance of the defendant's case appeared to the plaintiff to be that because the second loan agreement required the defendant to cause security interests to be granted over land owned by other persons (his wife and Ms Zhao) in circumstances where those persons were not parties to the agreement and obtained no benefit under the agreement, those terms of the second loan agreement (cl 3.1(b) and cl 3.2) "are void and/or unenforceable, and/or voidable and/or alternatively … the defendant seeks relief pursuant to section 7 of the Contracts Review Act 190 [sic]". 2. The plaintiff submitted that such a defence is misconceived for three reasons. 3. First, the plaintiff was not seeking to enforce either mortgage. He only sought to enforce the defendant's separate obligation under the personal guarantee he gave. 4. Secondly, the obligation under cl 3.1(b) was for the Company rather than the defendant to procure the unregistered second mortgages. It was submitted that if the Company (which was under the defendant's control as a director) failed to procure the consent of the defendant's wife and/or Ms Zhao to the creation of a second mortgage over their property, that was a matter that the defendant could take up with the liquidators of the Company. 5. Thirdly, the defendant agreed in cl 20.1 of the second loan agreement "to be jointly with the [Company] and separately liable to [the plaintiff] for the due and punctual observance and performance of the obligations of the [Company]". The plaintiff also referred to the agreement of the defendant to the terms of cl 20.4(1) and (4). Accordingly, it was submitted, the defendant agreed by deed that whether or not the plaintiff sought to enforce his rights under any other Security Interest, that did not affect the personal guarantee that the defendant had given. 6. In relation to the defendant's pleading in relation to the Contracts Review Act, it was submitted that it was "sparse and inadequately pleaded". No material facts were pleaded in support of the assertion that "the provisions of the agreement creating a guarantee and indemnity in respect to the defendant were unjust within the meaning of section 7" of the Contracts Review Act. 7. In any event, the plaintiff submitted that the defendant was wrong to assert that he, rather than the Company, was required to procure the relevant mortgages. Reference was made to the claim in the Defence that the defendant's wife and Ms Zhao did not receive any benefit from the transaction and therefore those security interests would be liable to be set aside in accordance with the principles in Yerkey v Jones (a reference to Yerkey v Jones (1939) 63 CLR 649; [1939] HCA 3) and the conclusion that was asserted to follow that the defendant was "unable to ascertain the extent to which the right of contribution and indemnity existed in respect of other co-sureties envisaged under the agreement". 8. The plaintiff submitted that, even if it were the case that a guarantor who is severally liable with another guarantor who has also provided a security for the same obligation could avoid their liability because of the failure of that other guarantor, s 7 of the Contracts Review Act requires a court to consider whether "a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made". Here, the failure by the Company subsequent to the making of the second loan agreement to perform its obligation to procure the granting of unregistered second mortgages by third parties was submitted to be irrelevant to a consideration of the circumstances relating to the contract at the time it was made. 9. The plaintiff also referred to the provisions of s 6(2) of the Contracts Review Act: "A person may not be granted relief under this Act in relation to a contract so far as the contract was entered into in the course of or for the purpose of a trade, business or profession carried on by the person or proposed to be carried on by the person …" 1. It was submitted that the purpose of the second loan agreement was to provide commercial funding to the Company which was engaged in the business of property development. To the extent that the defendant was a party to that agreement as guarantor, it was in the course of the business that he carried on as a director of the Company. Accordingly, it was submitted, relief was not available under the Contracts Review Act in such circumstances. 2. For these reasons, the plaintiff submitted that there was undisputed evidence upon which his claim is based and the matters relied upon in the Defence were untenable, manifestly faulty and incapable of succeeding. The defendant's submissions 1. The defendant's submissions were summarised in the following paragraphs of counsel's written outline: "The defence pleads that the guarantee is not enforceable against the defendant due to the failure of other co-sureties referred to in the agreement to either sign the agreement or provide guarantees or mortgages. In the alternative, the defence pleads that the terms of the loan agreement are void and/or unenforceable and/or harsh and unjust within the meaning of section 7 of the Contracts Review Act 1980 the defence pleads relief under section 7 of the Contracts Review Act. In the alternative the defence pleads the prevention principle." Principles in relation to summary judgment 1. The principles in relation to the determination of an application for summary judgment were not controversial as between the parties. Reference was made in submissions to the well-known authorities of Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69; Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41; and Commonwealth of Australia v Griffiths (2007) 70 NSWLR 268; [2007] NSWCA 370. 2. In Agar v Hyde, Gaudron, McHugh, Gummow and Hayne JJ (at [57]) described the test as one requiring "a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way". 3. It is necessary to be mindful of the "extreme care" that is required because "it is a very serious matter to deny to a litigant the right to have his or her case heard at trial": Spellson v George (1992) 26 NSWLR 666; [1992] NSWCA 254 at 678E (Young AJA). 4. In Spencer v The Commonwealth (2010) 241 CLR 118; [2010] HCA 28 French CJ and Gummow J (at [24]) referred to the need for "caution" in the "exercise of powers to summarily terminate proceedings". Their Honours quoted what had been said in Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; [1983] HCA 25 at 99 about the power never being exercised "unless it is clear that there is no real question to be tried". "Exceptional caution" was the term used in Webster v Lampard (1993) 177 CLR 598; [1993] HCA 57 (Mason CJ, Deane and Dawson JJ). 5. A case involving complex issues might at first appear to be inapposite to summary judgment or dismissal. However, according to Dixon J in Dey v Victorian Railways Commissioners at 91, this does not disentitle a court to examine the issues to determine whether the respondent's case does amount to an abuse of process or is vexatious. Barwick CJ recognised in General Steel Industries Inc v Commissioner for Railways (NSW) at 130 that "argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed". His Honour was, of course, speaking in the context of a summary dismissal application but the same applies in the summary judgment context. An arguable defence? 1. There is some complexity in the argument raised in relation to the three asserted bases of the defendant's case; particularly as to the first issue concerning co-sureties and rights of contribution. As the authorities mentioned above indicate, that is not to say necessarily that the defendant has an arguable case. In the circumstances of this case, however, it points in that direction. 2. The third of the issues in the defendant's case is said to give rise to consideration of the prevention principle, or, according to paragraph 13(e) of the Defence, "the operation of equitable principles". It is more straightforward than the first issue. The defendant only needs to identify one basis for him having an arguable case for the plaintiff's application to fail. 3. The third issue raised in the Defence is said to be based upon the fact that the plaintiff was a director of the Company between the time the original loan was advanced (December 2013) through until 24 September 2015 (according to the ASIC search (Exhibit A)). 4. The defendant contends that in the plaintiff's position as a director he was in some respect at fault, in part, in failing to ensure by making inquiries or otherwise that the Company was in a position to meet its obligations under the second loan agreement and in allowing the Company to enter into the second loan agreement in circumstances where he ought to have known the Company was not in a position to meet its financial obligations under that agreement. 5. As more fully set out later in the written submissions (at [37]-[39]), the defendant contends that the plaintiff was a director of the Company up until 24 September 2015 and a 77% shareholder but made no attempt to ensure the Company was able to pay the debt or raise the capital. The plaintiff allowed the Company to enter into the second loan agreement notwithstanding he knew, or ought to have known, that it was not in a financial position to meet its obligations. 6. Further, the defendant contended that the plaintiff allowed the Company to continue in default and did nothing either in his capacity as a director or shareholder to repay the debt or to ensure the Company did not breach the agreement. He left this entirely to the defendant, a fellow director and minority (23%) shareholder to remedy. The plaintiff then sought to place the obligation solely upon the defendant by way of guarantee. 7. The defendant submitted that the plaintiff then sought to wind up the Company and sought to enforce the guarantee against the defendant as a consequence of breaches of the second loan agreement by the Company. 8. In dealing with this third issue, counsel for the plaintiff referred to cl 11 of the second loan agreement which provided that the plaintiff "must … on the date of this agreement resign as a director of the [Company]". Counsel asserted that the plaintiff understood that by signing the agreement "he had in fact resigned as a director". The problem is that there is no evidence of the plaintiff having had such an understanding. Moreover, whatever his understanding was, the fact was that the ASIC search indicated that he remained as a director until 24 September 2015. 9. The plaintiff was to continue as a shareholder of the Company. However, by the terms of other provisions in cl 11 of the second loan agreement he was prevented from, in effect, interfering in the conduct of the Company's business or from using his votes as a shareholder to appoint any liquidator, receiver or manager. Counsel submitted: "So, that clause 11 of the agreement makes clear that [the plaintiff] was not in the position of an ordinary shareholder and certainly, in his view, in his mind, as of the date he signed this agreement on 20 March [2015], he was no longer a director of the Company." 1. Again, the problem with the latter part of that submission is that it has no evidentiary foundation. 2. Reference was made to the ASIC search evidencing that the plaintiff and the defendant's wife ceased as directors of the Company as at 24 September 2015. But counsel intimated that this was not necessarily the date that the plaintiff ceased as a director; it was simply the date that the defendant told ASIC that the cessation took effect. The problem with this is that there is no evidence of any alternative date of the resignation. Clause 11 of the second loan agreement required the plaintiff to resign as a director but there is no evidence presently before the Court to indicate that he did in fact resign and when, aside from what is asserted in Exhibit A. Nevertheless, the point counsel sought to make, as I apprehend it, was that with payments having been made in May and July 2015, the default that occurred was subsequent to the plaintiff's cessation as a director. 3. The plaintiff submitted that "there was no prevention on the part of the plaintiff that prevented the defendant or the Company from performing its obligations". The reference in the defendant's written submissions to the plaintiff not attempting to ensure the Company was able to pay the debt was met with the retort that the debt was already in existence at the time the second loan agreement was signed. As to the assertion that the plaintiff allowed the Company to enter into the second loan agreement notwithstanding he knew or ought to have known that the Company was not in a financial position to meet its obligations, the plaintiff submitted that the Company was already in a position where it had to meet its obligations. That might be so, but it appears the defendant's point was more concerned with the knowledge the plaintiff should have had of the Company's capacity to meet its obligations in the future. 4. Counsel for the plaintiff indicated that there could be criticism that the plaintiff was unduly generous; he should have immediately sought to have the Company wound up by reason of its failure to make payments of interest in 2014. But such generosity was vindicated by the fact the Company was able to make payments of interest including in advance to 28 December 2015. On this basis it was submitted to be "somewhat disingenuous and misleading" for the defendant to submit that "the plaintiff allowed the Company to continue in default and did nothing … to repay the debt or to ensure the Company did not breach the loan agreement". Assuming it to be correct that the plaintiff's resignation as a director occurred in September 2015, at that time the Company was not in default. Such default took place subsequent to December 2015 when the defendant was the sole director. 5. There is a superficial attractiveness to the plaintiff's arguments. However, what was the financial position of the Company, and what prospect was discernible as to its ability to meet its obligations in the future, at the time the second loan agreement was executed? The evidence before me is completely silent. That being the case, together with the other aspects of the plaintiff's argument that were not soundly based in evidence, it cannot be said that this is a clear case in which there is no possibility of the defendant having an arguable case. 6. In these circumstances it will suffice to express my views as to the other two issues raised by the defendant in a summary way. The more convoluted arguments presented in relation to the first issue (the "co-sureties and rights of contribution" issue) suggests to me that this is not a case that is appropriate for a detailed analysis in order to determine the viability or otherwise of the defence. As a matter of discretion I would decline to do so as an interlocutory, albeit potentially final, step in the process of the litigation. 7. The second issue (the Contracts Review Act defence) appears to be quite tenuous. Because of the view I have reached in relation to the other issues I do not propose to delve into it to the point of resolution. Conclusion 1. In relation to the third of the three issues raised by the Defence the plaintiff has not established that there is no arguable case. Whether he has established that there is no arguable case in relation to the first issue is something that I decline to determine in the exercise of discretion for the reasons indicated above. Whether he has established no arguable case in relation to the second issue is something that I consider quite likely, but again I do not propose to analyse the issue to the point of expressing a concluded view. Orders 1. I make the following orders: (1) The plaintiff's Notice of Motion filed on 14 March 2018 by which an order for summary judgment is sought is dismissed. (2) Unless a party makes an application in writing to my Associate within seven days for a different order, costs of and incidental to this application are to be costs in the cause. (3) Liberty to apply on three days' notice. ********** 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: 09 May 2018