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  • Unreported Judgment

Octobay Pty Ltd v Thomas

 

[2012] QSC 362

 

 

SUPREME COURT OF QUEENSLAND

 

PARTIES:

FILE NO/S:

Trial

PROCEEDING:

Application

DELIVERED ON:

19 November 2012

DELIVERED AT:

Brisbane 

HEARING DATE:

12 and 19 November 2012

JUDGE:

Jackson J

ORDER:

1.The application for summary judgment on the claim is dismissed.

2.The application for summary judgment on the Counter-claim is allowed, to the extent that the plaintiff has judgment on that part of the counter-claim which is for damages for breach of contract.

3.The application for summary judgment on the counter-claim is otherwise dismissed.

4.The defendant pay into Court the sum of $270,000, or, alternatively, give security in that sum in a form acceptable to the Registrar within 28 days of this order, failing which the plaintiff be at liberty to enter judgment against the defendant for the amount of the claim together with interest and costs.

5.That the costs of the application, including reserved costs, be costs in the proceeding.

CATCHWORDS:

PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – SUMMARY JUDGMENT – where the plaintiff claims that it has demanded payment from the defendant of an amount outstanding under a loan facility agreement as amended by the variation agreement – where the defendant alleges that the variation agreement was not the written agreement relied upon by the plaintiff but was an oral agreement – where the defendant also counterclaims that the plaintiff represented to the defendant that it sought to enter into the oral variation agreement and that the making of that representation was conduct which was misleading and deceptive – whether the defendant has no real prospect of successfully defending the claim or, as plaintiff in the counterclaim, of successfully pleading its claim 

Supreme Court Act 1995 (Qld)

Uniform Civil Procedure Rules 1999 (Qld)

Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304, cited

Duhs v Pettett (2009) QSC 100, cited

Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471, considered

Hoyts Pty Ltd v  Spencer (1919) 27 CLR 133, cited

Pettett v Duhs (2009) QCA 347, cited

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, cited

COUNSEL:

M Black for the applicant/plaintiff

The defendant in person

SOLICITORS:

Mullins Lawyers for the applicant/plaintiff

 

[1] Jackson J: The plaintiff applies for summary judgment both on the claim and the counterclaim.  The claim is, on its face, for $1,094,277.29 as moneys due and owing pursuant to a guarantee together with interest.  The total amount which is proved is $1,384,817.46 in respect of the money lent and interest, and there is another sum claimed under the relevant facility agreement by way of costs or expenses in the sum of $11,441.92, totalling $1,396,259 and odd cents. 

[2] It is admitted that on or about 27 March 2009 the plaintiff entered into a written loan facility agreement with Wardell Street Investments Pty Ltd ACN 117 618 925, (receivers and managers appointed), (in liquidation), named the borrower, of which the defendant was a director and secretary. 

[3] It is also admitted that by a contract in writing dated 27 March 2009 the defendant entered into a guarantee in respect of the borrower's obligation to pay moneys due and owing pursuant to the facility agreement. 

[4] There is uncontradicted evidence that on or about 3 December 2009 the plaintiff and the borrower executed a written variation agreement of the facility agreement and that on or about 12 January 2010 the defendant executed a document, identified as the guarantor's acceptance of the variation agreement, which acknowledged and agreed that the guarantee remained in full force and effect and extended to the borrower's obligations under the agreement as amended by the variation agreement. 

[5] There is undisputed evidence that the borrower did not pay the moneys which were payable according to the terms of the facility agreement and the variation agreement.  However, the defendant disputes that the borrower was in default because of his contention as to the terms of the agreements between the parties to which I will come. 

[6] The plaintiff alleges that it has demanded payment from the defendant of the amount outstanding under the agreement as amended by the variation agreement.  The defendant disputes either that he has been given a demand or that the amount is outstanding, basing himself on his contention as to the terms of the agreements made between the parties or the representations made about them. 

[7] Thus the plaintiff has shown that the defendant has no real prospect of defending the plaintiff's claim unless he can do so by way of proving that the terms of the contracts were not those set out in the written agreements, or by setting off the damages that he claims by way of counterclaim.  The plaintiff has otherwise proved the matters of fact required for summary judgment on the claim based on the written facility agreement and guarantee, the written variation agreement, and the written guarantor's acceptance of the variation agreement. 

[8] The substance of the defendant's opposition to the claim and the first basis of the counterclaim is that the defendant contends that the terms of the variation agreement made in December 2009 were not as set out in the writing.  By paragraph 1 of the counterclaim, the defendant alleges that the variation agreement was not the written agreement relied upon by the plaintiff but was an oral agreement described as the "agreed variation agreement" made between Peter Marles, on behalf of the plaintiff, and the defendant, on behalf of the borrower and the defendant. 

[9] The oral terms of the alleged agreed variation agreement are said to have included: 

 

"(i) the plaintiff rescinding its entitlement to any claim or action against the borrower and or defendant save for an entitlement against The assets of the borrower for the secured quantum of the facility;

 

(ii) permitted (sic) the fixed security over the borrower and property assets of the TSV Trust to remain for the purpose of ensuring the principal of the plaintiff was not forfeited to a lower ranking security;

 

(iii) in consideration of the plaintiff rescinding its enforcement rights over the borrower and or plaintiff pursuant to the agreement and guarantee the borrower would gift in addition to any secured amounts 50 per cent of the development's net profits to a nominated entity of Peter Marles;

 

(iv) the exit fee as referred to in the agreement was to be included as a net fee inclusive in the 50/50 split of development profits;

 

(v) was (sic) for the period of the development to realisation of the asset in full by way of sale; and

 

(vi) any additional borrowings by the borrower from the plaintiff would require the increasing of the facility secured but not alter the agreed variation agreement."

[10] I note that the allegation of the contract in the particulars under paragraph 7 of the defence contains an additional term: "relinquished any indemnity provisions described under the guarantee and indemnity". 

[11] Alternatively, the defendant alleges that the plaintiff represented to the defendant in substance that it sought to enter into the agreed variation agreement and that the making of that representation was conduct which was misleading and deceptive. 

[12] The defendant alleges that the plaintiff's repudiation of the terms of the agreed variation agreement caused the defendant loss and damage. 

[13] Upon the plaintiff's application for summary judgment on the claim pursuant to UCPR 292 and summary judgment on the counterclaim pursuant to UCPR 293, the question is whether the defendant has no real prospect of successfully defending the claim, or, as plaintiff on the counterclaim, no real prospect of succeeding on its claims as to the terms of the variation agreement or misleading or deceptive conduct and the damages which are alleged to flow therefrom. 

[14] The points which have been the focus of the hearing of the application before me are whether the defendant has a real prospect of making out the terms of the alleged agreed variation agreement or a case of misleading or deceptive conduct based on a representation that the plaintiff sought to enter into such an agreement.

[15] The defendant is selfrepresented.  Notwithstanding that, he has shown some aptitude in responding to the application and in preparing relevant documents.  In particular, on 21 October 2012 he provided an amended defence raising the alleged agreed variation agreement and alleged misleading or deceptive conduct.  As well he has sworn numerous affidavits in support of his opposition to the application, I think now numbering seven.  Among the facts he relied on, most are set out in an affidavit filed on 5 November 2012, and they are now added to in an affidavit sworn 16 November 2012 which the defendant was granted leave to read and file today. 

[16] There is a substantial volume of documents exhibited to the affidavits.  The material responds to two affidavits by Peter Robert Marles, the plaintiff's director.  Notwithstanding this, there is nothing in the defendant's affidavits which directly swears to the terms of the alleged agreed variation agreement, and there is a corresponding lack of direct evidence as to the alleged representation that the plaintiff sought to enter into an agreement in those terms. 

[17] The best that the defendant could do initially was to point to page references in Exhibit MET2 to the affidavit of the defendant filed on 5 November 2012.  The relevant pages can be identified by reference to the paginated copy of that exhibit attached to the defendant's affidavit sworn 11 November 2012, and those pages were pages 1, 59, 61, 92 and 93. 

[18] Of those references there were two which caused most focus. First, an email from the defendant to Mr Marles dated 29 November 2009 which referred in an item numbered 14 to "JV's structures".  Secondly, a further email dated 1 December 2009 refers to "actionable points from yesterday's discussion points", and also refers to "JV's structures Marles to provide GB/MT with JV agreement". 

[19] By paragraphs 8 and 9 of his affidavit sworn 16 November 2012 the defendant reiterates, in the form of a statement that "the joint venture terms and details agreed to by the plaintiff, defendant, borrower and Marles were as follows...", the terms of the alleged agreed variation agreement.  He also says that the joint venture for the Ingham Road project came into effect on or about the end of November, early December 2009 and was witnessed by Mr Glen Bradford, meaning that Mr Bradford was present. 

[20] Mr Marles denies having "considered entering into any agreement with the defendant or any of its associated entities in the nature of that arrangement particularised at paragraph 7 of his amended defence".  He goes further and says, "The relationship between myself (and entities associated with myself) and the defendant (and entities with which he is associated) has strictly been a commercial lender/borrower relationship."  There is, however, no explanation of any documents referring to a JV agreement, including those brought into existence only a couple of days before the variation agreement was entered into. 

[21] As well, as part of Exhibit MET6 to the affidavit of the defendant sworn 16 November 2012 there is a copy of a tax invoice from P R Marles Real Estate Services to Wardell Street Investments Pty Ltd as Trustee for the Main Beach Trust for an amount said to be balance due and payable of $550,000 dated 28 October 2009.

[22] The additional material provided by the defendant in his affidavit sworn 16 November 2012, however, still does not provide direct evidence of the alleged agreed variation agreement or of the alleged representation that the plaintiffs sought to enter into an agreement in those terms, in a satisfactory form. 

[23] As well as the absence of a clear factual foundation there are legal difficulties with the defendant's alleged agreed variation agreement which affect whether it amounts to a real prospect of success of defence or counterclaim. 

[24] The alleged agreement is an oral agreement alleged to have been made before or contemporaneously with the written variation agreement and the written guarantor's acceptance of the variation agreement relied upon by the plaintiff.  The oral terms relied upon are inconsistent with the written contracts to the extent that they allege that the entitlements to any claim against the borrower or the defendant were rescinded.

[25] There is an assertion which was made in submissions that the variation agreement and the guarantor's acceptance were a sham, but that allegation was not pleaded or pursued in argument.  There could be difficulties for the defendant had he participated in any sham in executing the relevant documents. 

[26] The law of contract has generally rejected that an oral contractual term by way of a collateral contract can contradict the terms of the contract between the parties.  See Hoyts Pty Ltd v  Spencer (1919) 27 CLR 133. 

[27] More recent authority may support the contention that the party claiming to have relied on such an oral assurance may be able to set it up as a promissory estoppel, which is a species of equitable estoppel.  See Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at page 401. 

[28] However, where the term relied on is, in effect, an oral nonrecourse agreement, the most relevant case is a recent decision of the High Court in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 at [32] [33].  There the High Court said: 

 

"It is and always has been common ground that each of the respondents executed a written loan agreement on 30 June 1989.  The respondents alleged that the 'operative agreement' was not contained in that writing.  It was said that the relevant agreement was reached earlier and was wholly oral, yet it was not said that the written agreement should be rectified.  It was not said that a defence of non est factum was available.  It was not said that the written agreement was executed by mistake or that its execution was procured by misrepresentation as to its contents or effect.  (The misrepresentation alleged was as to what had been said in the conversations, not what the document was or provided.)

 

The respondents each having executed a loan agreement, each is bound by it.  Having executed the document and not having been induced to do so by fraud, mistake or misrepresentation the respondents cannot now be heard to say that they are not bound by the agreement recorded in it.  The parol evidence rule, the limited operation of the defence of non est factum and the development of equitable remedy of rectification all proceed from the premise that a party executing a written agreement is bound by it.  Yet fundamental to the respondents’ case that the operative agreements between the parties were wholly oral and reached earlier than the execution of the written agreements was the proposition that the written agreements subsequently executed not only may be ignored, they must be.  That is not so.  Having executed the agreement each respondent is bound by it unless able to rely on a defence of non est factum or able to have it rectified.  The respondents have attempted neither." (Footnotes omitted).

[29] It must follow, in my view, that the defendant does not have a real prospect of success based on a contemporaneous or prior inconsistent oral agreement of the kind alleged in paragraph 7 of the amended defence and paragraph 1 of the counterclaim in the present case. 

[30] There is no plea of promissory estoppel in the present case, and as well there is no allegation in the defence or counterclaim of any detriment which the defendant suffered as a result of entering into the acknowledgement of guarantee, and I don't delay to consider a claim of that kind further. 

[31] The pleading of misleading or deceptive conduct and the matters raised in support of that claim by the defendant are also problematic.  First, as I've mentioned, there is no direct evidence that a representation was made that the plaintiff sought to enter into the alleged agreed variation agreement.  In substance, such a representation is one of fact, namely a representation as to an existing state of mind or present intention of the maker.  The conduct of making such a representation will usually consist of a statement or statements of the representor or a person for whose statements the representor is responsible made in the context of surrounding facts from which the making of the representation can be directly or inferentially proved.  In the present context that requires the defendant to identify facts which show a real prospect of proving it at trial. 

[32] Although evidence of that direct kind is absent, in paragraph 16 of his affidavit sworn 16 November 2012 the defendant deposes to a number of other statements made by Mr Marles for and on behalf of the plaintiff.  They included that the variation agreement was for the extension of funding and was a compliance requirement needed by Mr Marles and the plaintiff, that the variation agreement documented and increased the secured equity of the joint venture from lower security holders particularly in the increase of fees which were to act as an increase in security and not for the payment from the gross profits of the Ingham Road project, that the variation agreement was necessary to be recorded for the security documentation of the project so as to comply with the AFSL legislation, that the variation agreement in no way affected the joint venture, nor did it vary the nonenforceability of the guarantee by the plaintiff against him, and that it was the only way Mr Marles could extend funds needed for the payment of Ellerslie Road rental guarantee issues.

[33] A second problem with the misleading or deceptive conduct case, if the representation is sufficiently raised and it was misleading or deceptive, is that the defendant would be required to show that he suffered loss or damage by the contravening conduct.  (I note that relief under section 87 of the Trade Practices Act is not sought.)  That would require proof of causation as a fact, but the defendant has not, by any evidence, identified how he suffered loss by the alleged misrepresentation, at least specifically.

[34] However, in a number of places in his affidavit sworn 16 November 2012, the defendant hints that, had it not been for the representation and statements made by Mr Marles, he may have acted differently.  For example, in paragraph 17, he says, "Had it not been for the representations and inducement of Marles, for and on behalf of the plaintiff, I would never have entered into the variation agreement with the Ingham Road project, as it would have represented a deal that was both uncommercial and better funded by other means, with less risk personally."  That statement was made specifically by reference to the additional statements attributed by the defendant to Mr Marles that I've set out above.

[35] In some cases, a representation "calculated" to induce action will be held to have done so without direct evidence of reliance to show causation.  See, for example, Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [142] - [143].  However, in the present case, a question would be whether the defendant would have had any alternative but to execute the guarantor's acceptance of the variation agreement, even if no alleged representation had been made.  In other words, causation will be no simple matter, and so far it is only obliquely addressed at all.

[36] Notwithstanding those difficulties, I cannot be satisfied that the defendant does not have a real prospect of success on the claim to be relieved of any obligation upon the guarantee by reason of the set-off of damages suffered by reason of alleged misleading or deceptive conduct and it follows that the application should be dismissed, at least in part. 

[37] However, in my view, the misleading or deceptive conduct claim is aptly described as a shadowy defence and counter-claim. See Duhs v Pettett (2009) QSC 1600 at [43] and, on appeal, Pettett v Duhs (2009) QCA 347 at [11].

[38] I am prepared, therefore, to dismiss the application only on the basis that appropriate terms are imposed upon the defendant in relation to both the defence and counter-claim.  In this case, in my view, the appropriate terms are that the defendant secure the plaintiff against the further damage that it will suffer by reason of delay between the determination of this application and the hearing of the trial of the proceeding.  That period most likely will be not less than nine months.  The interest to which the plaintiff would be entitled under the facility agreement, the variation agreement and guarantee, for that period would be substantial, probably in excess of $270,000 at the agreed contractual rate.

[39] The orders I propose to make therefore, are that:

  1. The application for summary judgment on the claim is dismissed.
  2. The application for summary judgment on the Counter-claim is allowed, to the extent that the plaintiff have judgment on that part of the counter-claim which is for damages for breach of contract.
  3. The application for summary judgment on the counter-claim is otherwise dismissed.
  4. The defendant pay into Court the sum of $270,000, or, alternatively, give security in that sum in a form acceptable to the Registrar within 28 days of this order, failing which the plaintiff be at liberty to enter judgment against the defendant for the amount of the claim together with interest and costs.
  5. That the costs of the application, including reserved costs, be costs in the proceeding.
Close

Editorial Notes

  • Published Case Name:

    Octobay P/L v Thomas

  • Shortened Case Name:

    Octobay Pty Ltd v Thomas

  • MNC:

    [2012] QSC 362

  • Court:

    QSC

  • Judge(s):

    Jackson J

  • Date:

    19 Nov 2012

Litigation History

No Litigation History

Appeal Status

No Status