Supreme Court New South Wales Medium Neutral Citation: Credit Solutions Group Pty Ltd v Obelisk Ventures Pty Limited (No 3) [2019] NSWSC 1354 Hearing dates: 16 September 2019 Date of orders: 11 October 2019 Decision date: 11 October 2019 Jurisdiction: Common Law Before: Harrison AsJ Decision: The Court orders that: (1) The defendants are granted leave to withdraw the admissions made in the amended defence filed 16 May 2019. (2) With the exception of proposed paragraphs [42] and [43] inclusive, leave is granted to the defendants to file and serve a further amended defence within 14 days. (3) Costs are reserved. Catchwords: PRACTICE AND PROCEDURE – Leave – Whether to grant leave to withdraw admissions – Whether to grant leave to file an amended defence Legislation Cited: Corporations Act 2001 (Cth) s 127 Cases Cited: Credit Solutions Group Pty Ltd v Obelisk Ventures Pty Ltd [2019] NSWSC 50 SLE Worldwide Australia Pty Ltd v Wyatt Gallagher Bassett Pty Ltd [2005] NSWSC 816 Category: Procedural and other rulings Parties: Credit Solutions Group Pty Ltd (Plaintiff) Obelisk Ventures (formerly known as Markson Sparks!) Pty Limited (First Defendant) International Events & Speakers Pty Ltd (Second Defendant) Maxwell Daniel Markson (Third Defendant) Westpac Banking Corporation Limited (Fourth Defendant) Representation: Counsel: AW Smith (Plaintiff) EAJ Hyde (First to Third Defendants) Solicitors: Summer Lawyers (Plaintiff) DSA (First to Third Defendants) File Number(s): 2017/343959 Publication restriction: Nil Judgment 1. HER HONOUR: By notice of motion filed 8 July 2019, the first to third defendants seek firstly, an order that their further amended defence, filed 16 May 2019 in defence to the plaintiff's amended statement of claim ("ASC"), be struck out in its entirety; and secondly, an order that the first to third defendants be granted leave to file a defence to the amended statement of claim. 2. The plaintiff is Credit Solutions Group Pty Ltd ("Credit Solutions"). The first defendant is Obelisk Ventures (formerly known as Markson Sparks!) Pty Limited. The second defendant is International Events & Speakers Pty Ltd. The third defendant is Maxwell Daniel Markson. The fourth defendant is Westpac Banking Corporation Limited. To date, the fourth defendant has played no active role in these proceedings. The plaintiff relied upon the affidavit of David James Cacciola dated 20 May 2019, the affidavit of Andrew Hack dated 11 June 2019 and paragraphs [6] and [7] of the affidavit of Maxwell Daniel Markson dated 29 March 2019. The defendants relied on the affidavits of their solicitor Benjamin Ronald Franklin dated 8 July 2019 and 16 September 2019. 3. These proceedings have been on foot since 2017. They have not been listed for trial. The defendants have repaid the sum of $150,000 and have also lodged security of $150,000 with the Court. The defendants seek to file a further amended defence. The plaintiff opposes this application on the bases that, firstly, the proposed further amended defence seeks to withdraw admissions; secondly, the pleading in relation to the caveat has been previously withdrawn; and finally, paragraph [42(2)(g)] contains a series of allegations bundled into one paragraph. 4. But before I deal with the above issues in turn, I should refer to what I consider to be a fatal defect in the plaintiff's case as it currently stands. A copy of the deed of loan agreement and guarantee that is intended to prove the plaintiff's case is annexed as an exhibit DC1 to the affidavit of David Cacciola dated 20 May 2019. He deposes: "1. I am the director of Credit Solutions Group Pty Ltd ACN 104 529 875 ("the Plaintiff") the Plaintiff in this proceeding. 2. I am authorised to make this affidavit on behalf of the Plaintiff. BUSINESS RECORDS 3. The Plaintiff carries on the business of providing, amongst other things, intermediate brokerage services to businesses and trading corporations including secured lending. 4. In the course of and for the purposes of its business, the Plaintiff maintains files and records of information which are stored in either hard copy or electronic form. A separate file is maintained for each client of the Plaintiff. I have access to the business records of the Plaintiff. 5. The Plaintiff maintains a file in respect of the loan, mortgage and guarantee the subject of this Proceeding ("the Plaintiff's File"). 6. Unless otherwise indicated the documents annexed to this Affidavit have been collated from the Plaintiffs File. 7. Unless otherwise stated, the source of my knowledge of the matters deposed to in this affidavit are the business records of the Plaintiff and documents provided by the solicitors for the Plaintiff, Summer Lawyers. EXHIBIT 8. Exhibited to me at the time of swearing this Affidavit are a bundle of documents marked "Exhibit DC1". 9. In the course of this Affidavit, where I refer to a document 'at pages x to x of exhibit DC1'. I am referring to the document commencing on that page in exhibit DC1. LOAN FACILITY, GUARANTEE AND MORTGAGE 10 Locate at pages 1 to 20 of exhibit DC1 is a copy of a Deed of Loan and Guarantee between the Plaintiff as lender Markson Sparks! Pty Ltd ACN 003 641 398 (the First Defendant) and International Events & Speakers Pty Ltd ABN 96 114 298 529 (the Second Defendant) as Borrowers and Maxwell Daniel Markson ("the Third Defendant") as guarantor dated 19 September 2013 (the Deed of Loan and Guarantee)." 1. The deed of loan and guarantee dated 19 September 2013 ("the deed") located at p 1 of ex DC1 sets out the parties, namely Credit Solutions Group Pty Ltd ACN 104 259 875 (defined as "the lender"), Markson Sparks! Pty Limited ACN 003 641 398 and International Events & Speakers Pty Ltd ABN 96 714 529 (defined as "the borrowers") and Maxwell Daniel Markson (defined as "the guarantor"). The deed was signed, sealed and delivered for and on behalf of the lender, purportedly by its "director" pursuant to s 127 of the Corporations Act 2001 (Cth). The signature on the document was of an Anthony Cacciola. However, as at 19 September 2013, the sole director of the lender was David James Cacciola, not Anthony Cacciola (see ASIC extract snapshot – Credit Solutions Group, Ex 1). 2. The deed upon which the plaintiff relies to found its cause of action does not support the pleading in the ASC. There is another deed in ex DC1 commencing at p 60, between the same parties as those pleaded in the ASC. It too has been signed by Anthony Cacciola as director of Credit Solutions. Even if the latter deed is the correct one, David Cacciola, the author of the plaintiff's supporting affidavit, cannot swear the affidavit as a "director" of the plaintiff. 3. The defence that the defendants now seek to advance is as follows: 1. The plaintiff's execution of the loan agreement and guarantee were invalid, as they did not comply with s 127 of the Corporations Act; 2. The funds advanced to the first and second defendants were not provided by the plaintiff, but instead by a third party lender, which is not a party to the loan agreement or any collateral security provided under the loan agreement; 3. The third defendant's obligation under the guarantee was obtained unconscionably, including because the solicitor, who provided a certificate of legal advice for the purposes of the guarantee, included certifications which were false, and the falsity of which was known, or ought to have been known, by the plaintiff. That falsity arises for a number of reasons, including because the loan agreement and guarantee had undergone significant amendments, and the solicitor who provided the certification was not able to give independent legal advice to the third defendant as he was the solicitor for the plaintiff and/or lender; 4. On 13 March 2015, the plaintiff and defendants entered into a refinancing agreement with which the plaintiff has failed to comply, with the result that the first and second defendants are not liable for interest payments on and from 13 March 2015; 5. The defendants have made various payments to the plaintiff, and now into court; and 6. The mortgage in issue in the proceedings is not appropriately certified and is not in registrable form. (1) Whether leave should be granted to the defendant to withdraw admissions 1. In SLE Worldwide Australia Pty Ltd v Wyatt Gallagher Bassett Pty Ltd [2005] NSWSC 816 ("SLE Worldwide"), White J set out the principles that govern whether the court will grant leave to withdraw an admission. 2. In SLE Worldwide, White J referred with approval to the following propositions: (a) as a matter of principle, a party who has made an admission in a pleading should not be entitled to withdraw that admissions without good cause; (b) where a court is satisfied that admissions have been made after consideration and advice, and after a full opportunity for the relevant party to consider its case and whether the admissions should be made, admissions so made with deliberateness and formality would ordinarily not be permitted to be withdrawn; (c) A court will not lend its approval to the withdrawal of admissions where it is shown that the admission is contrary to the actual fact; (d) it will usually be appropriate to grant leave to withdraw an admission where it is shown that the admission is contrary to the actual facts; (e) leave may also be appropriate where circumstances show that the admission was made inadvertently or without due consideration of material matters; (f) it is legitimate, and it may be necessary, to consider, among other things, whether the party making the admission is so deliberately or in error and whether new evidence has come to light; and (g) a party opposing the withdrawal of the admissions need not necessarily adduce evidence of particular prejudice if leave to withdraw the admission is granted. The explanation 1. The defendants' current solicitor, Benjamin Franklin (Aff, 16 September 2019), deposed that he has been informed by Maxwell Markson, who is the third defendant and the sole director of the first and second defendants, that: "(a) at the time he provided instructions for the preparation of the Amended Defence and signing the affidavit verifying it dated 16.5.19 (an in relation to earlier versions of the Defence filed on behalf of the First to Third Defendants), his former solicitors Yates Beaggi did not: i. advise him of the fact that the Deed of Loan & Guarantee was not executed by a Director of the Plaintiff; ii. draw to his attention the emails which are referred to in the particulars to paragraph 19(3) of the Proposed Defence; iii. provide any advice to him as to the proper construction of the Deed of Loan & Guarantee in relation to the distinction between Advances, uncalled balances and the facilities limit; iv advise him as to what interest, if any, was outstanding at the Agreement Repayment Date; and v. provide him with advice in relation to the admissions (and the evidentiary basis for them), which are allegedly made in the Amended Defence; (b) the first time he became aware of the significance of the matters referred to in (i) to (v) above was during, and subsequent to, a conference with myself and Counsel on 26 June 2019; (c) he would not have given instructions for the preparation and filing of the Defence and the Amended Defence had he been aware of the matters referred to in (i) to (v) above. 3. Further, upon receiving instructions from Mr Markson and obtaining documents from his former lawyers, it did not appear that those solicitors had attended to the matters referred to in paragraph (2)(a)(i) to (v) above." 1. In other words, the defendants' explanation for now seeking to withdraw the admissions is that the defendants relied upon the legal advice of their former solicitors as to what should be pleaded in the amended defence. 2. Mr Markson (Aff, 29 March 2019 at [7]) deposed that on 29 July 2014, the first and second defendants repaid the sum of $150,000 towards the principal amount outstanding to the plaintiff, leaving an outstanding principal balance of $150,000. It was his understanding that this was the amount that the defendants had to pay to the plaintiff as a condition of serving amended pleadings pursuant to the judgment. I accept that this was his belief at the time when he was receiving legal advice from his former solicitors. 3. The plaintiff has submitted that certain paragraphs in the proposed amended defence seek to withdraw admissions made in the amended defence. I will set out first the relevant paragraphs of the ASC; second, the alleged admission in the amended defence; and third, the proposed amended paragraph. 4. This means that when the plaintiff is put to proof as to the contents of the agreement being sued upon, its case will fail unless these shortcoming are rectified. 5. The plaintiff pleads at paragraphs [9] and [10] of the ASC: "9. On or about 19 September, the plaintiff as the lender on one part, the First and Second Defendants as borrowers and the Third Defendant as guarantor entered into a documents styled Deed of Loan and Guarantee ("the Agreement"). Particulars (a) The Agreement is wholly in writing. (b) The Third Defendant executed the Agreement in his capacity as sole director of the First and Second Defendants and in his own capacity as guarantor of the Agreement. (c) The Agreement contained express terms. (d) The express terms of the Agreement are contained within the Agreement. 10. It was a term of the Agreement that the Plaintiff would advance the sum of $300,000.00 to the First and Second Defendants ("the Principal"). Particulars (a) Clauses 1.1 (Definitions of Advance, Borrower, Facility, Facility Limit, Lender, and Principal Sum), 2.1 and items 2, 3, 7 of the Schedule to the Agreement." 1. The deed of loan and guarantee dated 19 September 2013 is between the lender, the borrowers and the guarantor. 2. Clause 1.1 is entitled "Definitions". It relevantly reads: Advance means any drawdown of the Facility and any payment or liability which is deemed to be an Advance; … Facility Limit means subject to clause 5.3 the sum described in Item 7 of the schedule or such other amount as may from time to time be agreed between the parties in writing; Principal sum means the aggregate amount of all Advances for the time being outstanding; …" 1. "Advances" is set out at clause 2. It relevantly reads: "2.1 The Lender agrees with the Borrower that subject to the terms of this Deed, and to the Lender's availability of funds, it may in its absolute and unfettered discretion between the Commencing Date and the Final Repayment Date make Advances to the Borrower up to the Facility Limit. 2.2 Subject to the terms and conditions of this Deed the Borrower may from time to time give to the Lenders a Drawdown Notice advising that it wishes to draw down as an Advance part of the Uncalled Balance as specified in the Drawdown Notice and on the date stipulated in the said Drawdown Notice. …" 1. "Fees" is set out at clause 4. It reads: "4 Fees 4.1 The Borrower must in respect of the Facility pay to the Lender the fees (if any) described in Item 15 of the schedule at the time specified in the schedule and if no time is specified then on the first drawing of this loan facility. 4.2 Fees form part of Principal Sum." The disbursement authority 1. Under the heading "Disbursement Authority" is a document dated 19 September 2013, that has been executed by International Events & Speakers Pty Ltd ABN 91 114 298 529 and signed by Max Markson as its director. It reads: "To Credit Solutions Group Pty Ltd ACN 104 529 875 ("the Lender") And to: & LEGAL Re: Credit Solutions Group Pty Ltd ACN 104 529 875 advance to International Events & Speakers Pty Ltd ABN 91 114 298 529 and Markson Sparks! Pty Limited ACN 003 641 398 ("the Borrower") I refer to the amount of $300,000 agreed to be advanced by the Lender to the Borrower and hereby irrevocably authorise and direct you to disburse the same as follows: 1. To & Legal for Legal costs and disbursements as per the attached invoice and trust statement $8,071.25 2. To Credit Solutions Group Pty Ltd for interest $54,000.00 3. To Credit Solutions Group Pty Ltd for Syndication fee $13,200.000 4. To Spectrum Legal Trust Account for Stamp Duty $1,241.00 5. To (Balance) Dated 19 day of September 2013." 1. The defendants plead at paragraphs [9] and [10] of the amended defence: "9. In response to paragraph 9: (a) Admit that the Defendants executed the Agreement (as defined). (b) Deny that the Agreement is enforceable. (c) Otherwise admit the allegations. 10. In response to paragraph 10: (a) Admit that the principal advance under the Agreement was the sum of $300,000. (b) Deny that the Agreement is enforceable. (c) Refer to and repeat paragraph 9 above. (d) Otherwise admit the allegations." 1. Paragraphs [9] and [10] of the proposed amended defence read: "9. In answer to paragraph 9 the Defendants: (1) admit that they executed the Agreement on the date alleged; and (2) deny that the Plaintiff executed the Agreement on the date alleged or otherwise. PARTICULARS The Plaintiff's execution of the Agreement is invalid, in that, the requirements of s 127 of the Corporations Act 2001 (Cth) were not followed and the documents was not executed by a director of the Plaintiff. 10. In answer to paragraph 10, the Defendants: (1) repeat paragraph 9 above, and (2) admit the Agreement contained terms to the effect of that set out in the paragraph." 1. Paragraph [11] of the ASC pleads: "11. The First and Second Defendants were required to repay the Principal together with interest thereon and all other moneys payable by them to the Plaintiff within three (3) calendar months from the date of drawdown of the Principal. " 1. Paragraph [11] of the amended defence pleads: "11. In response to paragraph 11: (a) Deny that the Agreement is enforceable. (b) Refer to and repeat paragraph 9 above. (c) Otherwise admit the allegations." 1. Paragraph [11] of the proposed amended defence pleads: "11. In answer to paragraph 11, the Defendants: (1) repeat paragraph 9 above; (2) admit the agreement contained terms to the effect of that set out in the paragraph; and (3) say that: (a) the Agreement included the term that the Lender agreed with the Borrower that, subject to the terms of the Agreement and to the Lender's availability of funds, the Lender could in its absolute and unfettered discretion between the Commencing Date and the Final Repayment Date, make Advances to the Borrower up to the Facility Limited (that is, $300,000); (b) the First and Second Defendants only received $222,000 at the time of the Advance (that is, 19 September 2013). (c) after payment of the costs and fees claimed at the time of Advance referred to in subparagraph (b) above (which costs and fees are disputed by the Defendants), the sum of $54,000 was available for further Advance to the First and Second Defendants for the payment of interest on the interest Payment Dates (as those terms are defined in the Agreement)." 1. Paragraph [20] of the ASC pleads: "20. On or about 19 September 2013, in accordance with the Agreement, the Plaintiff advanced to the first and Second Defendants the Principal." 1. At paragraph [20] of the amended defence, the defendants admitted paragraph [20] of the ASC. 2. Paragraph [20] of the proposed amended defence pleads: "20. In answer to paragraph 21, the Defendants: (1) repeat paragraphs 9, 11 and 12 above; (2) admit that the Final Repayment Date (as that term is defined in the Agreement) is 19 December 2013; and (3) otherwise, deny the allegations made in the paragraph." 1. Paragraph [21] of the ASC pleads: "21. In the premise of paragraph [11] of this Claim above, the First and Second Defendants were obliged to repay the Principal together with interest thereon and all other moneys payable by them to the Plaintiff on or before 19 December 2013 ("the Agreement Repayment Date"). Particulars (a) Clauses 1.1 (Definitions of Borrower, Facility, Final Repayment Date, Lender, and Principal Sum), 1.4, 1.9, 2.1, 2.6, 3.1, 5.1, 12.2 and Items 2, 3, and 8 of the Schedule to the Agreement." 1. Paragraph [21] of the amended defence pleads: "21. In response to paragraph 21: (a) Deny that the Agreement is enforceable. (b) Refer to and repeat paragraph 9 above. (c) Otherwise do not admit the allegations." 1. Paragraph [20] of the proposed amended defence reads: "20. In answer to paragraph 21, the Defendants: (1) repeat paragraphs 9, 11 and 12 above; (2) admit that the Final Repayment Date (as that terms is defined in the Agreement) is 19 December 2013; and (3) otherwise, deny the allegations made in the paragraph." Conclusion 1. The defendants seek leave to withdraw these admissions on the basis that they were not given the correct advice by their former solicitors. Mr Markson has now identified the information which was not provided to him at the time he was given earlier legal advice that led to the filing of the amended defence. I am satisfied that these admissions cannot be said to have been made after consideration and advice, and after a full opportunity for the defendants to consider their case and whether the admissions should be made. I have also taken into account that this matter has not been set down for trial, and that moreover, the plaintiff's case is defective in its current form. It is my view that in these circumstances, the defendants should be granted leave to withdraw the admissions made in the amended defence. I make such an order. (2) Whether the caveat pleading has been disallowed 1. Paragraph [15(b)] of the proposed amended defence pleads that "the Lender agreed not to register any interest in the property known as XXXX, Dover Heights except in the event of default of the Agreement or the Collateral Security (as that term is defined in the agreement)." Further, the allegations at paragraph [21(3)] of the proposed defence plead that the lodgement of a "caveat was contrary to the terms of the Agreement, particularly clause 13." A similar form of pleading was advanced and rejected by Davies J in these proceedings. 2. In an earlier decision in these proceedings, Credit Solutions Group Pty Ltd v Obelisk Ventures Pty Ltd [2019] NSWSC 50, Davies J at [42] and [43] outlined a prior pleading as follows: "42 Sixthly, paragraph 33.7 pleads: The plaintiff would not register any interest in the Dover Heights property, except in the event of default. Paragraph 45 then provided: The caveat prevented Markson from obtaining a refinance of the Westpac first registered mortgage over the Dover Heights property. 43 The deed of loan provided for collateral security which included a: Mortgage over 12 Lola Road, Dover Heights from the guarantor to be registered only in the event of default under this agreement by the Borrower. Item 16 in the schedule to the deed provided: The lender agrees not to register any interest in the property known as 12 Lola Road, Dover Heights except in the event of a default of this or the Collateral Security." 1. Davies J stated at [44] that lodgement of a caveat is not a registration of an interest in the property. A caveat is a device to protect an interest that has already been created. The former barrister for the defendants accepted that he could not press the pleading concerning the caveat. 2. Counsel for the defendants submitted that the caveat issue was not fully argued before Davies J on the earlier occasion (T 39.44), and submitted that it was a former barrister, not the current one who stated that he could not press the pleading concerning the caveat. 3. I agree with Davies J that a caveat is not an interest in land. A caveat is a device to protect an interest that has already been created. The amendment set out in paragraph [15(b)] of the proposed amended defence is refused. (3) Inadequate pleading – unconscionable conduct 1. The plaintiff submitted that paragraph [42(2)(g)] of the proposed amended defence contains a series of allegations bundled into one paragraph, without substantiation or pleading of the necessary material facts, and without pleading or particularising the basis upon which the plaintiff is alleged to have had the knowledge attributed to it. The plaintiff argued submitted that those paragraphs ought to be disallowed. 2. Paragraphs [42(2)] and [42(g)] plead: "42. … (2) say that the Third Defendant's obligation under the Guarantee (as that term is defined in the Amended Statement of Claim) was obtained unconscionably by the Plaintiff, in so far as: (a) Mr Rod provided a certificate of legal advice that stated that the Third Defendant: (i) had the opportunity to read the said Guarantee: (ii) was aware and understand the effect of the Guarantee and the obligations contained in it; and (iii) signed the Guarantee as his own act and of his own free will, (the Certifications); … (g) The Plaintiff knew, or ought to have known, that the Defendants had been attempting to secure financial accommodation with the Proposed Lender for several months and had, due to the delays, found themselves urgently requiring funds, so much so that they were a vulnerable party and were not in a position to negotiate terms with the Plaintiff and the Lender; and …" 1. Paragraph [42(2)(g)] sets out one of the factors that the defendants alleged constitutes unconscionable conduct. It forms a particular, amongst others, of a claim of unconscionable conduct of the proposed further amended defence. In my view, the pleading in [42(2)(g)] should be allowed. 2. It is my view that the amendments in the proposed further amended defence are arguable but weak. The defendants should be entitled to a trial on their merits. Result 1. With the exception of paragraphs [42] and [43] inclusive, the defendants are granted leave to file a further amended defence. This defence should be filed and served within 14 days. Costs 1. Costs are discretionary. The appropriate order for costs is that costs are reserved. The Court orders that: (1) The defendants are granted leave to withdraw the admissions made in the amended defence filed 16 May 2019. (2) With the exception of proposed paragraphs [42] and [43] inclusive, leave is granted to the defendants to file and serve a further amended defence within 14 days. (3) Costs are reserved. ********** 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: 11 October 2019