Hooper v Crowe[2005] QDC 44

[2005] QDC 044

DISTRICT COURT

CIVIL JURISDICTION

JUDGE ROBIN QC

No 704 of 2004

SOUTHPORT

DATE 21/02/2005

ORDER

HIS HONOUR: This is a plaintiff's summary judgement application under Rule 292. At the outset, my impression was that the sparsity of the plaintiff's material was a commendation of it. At the end of the day, rightly or wrongly, I have been driven to a different view.

The plaintiff, pursuant to a deed dated 30th of June 2003, lent the first defendant $65,000 which he was apparently going to use in some development activity. The loan was repayable on the 29th of January 2004 with interest in the flat sum of $35,000. Security was to be given over property at Slade Point Road in Mackay.

There was a change to that by a deed of variation on a date in December 2003 whose identity seems to be obscured by Stamps Office markings indicating that ad valorem duty on the mortgage had already been accounted for. A different security was substituted by way of a registered first mortgage over land in Kate Street, Mackay.

The loan was not repaid. Mr Crowe's attention was diverted away from prospects in Mackay to a hotel in Warwick called the Parkview.

Mr Crowe's affidavit is challenged in some respects by Mr Bland, appearing for the plaintiff on the application, on the basis of its contradicting or seeking to explain written agreements by reference to oral statements, in particular, statements attributed to Robert Hooper, who is the plaintiff's brother, but presented in the filed defence as the agent of Mr Crowe.

There was argument about the extent to which authorities such as Codelfa 149 CLR 337 and B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman and Associates Pty Ltd (1994) 35 NSWLR 227 precluded or permitted reference to extrinsic material of the kind mentioned.

I do not think there is any difficulty, however, in the Court's having regard to assertions by Mr Crowe as to certain things that happened in relation to the hotel, which he claims to have acquired in reliance on some unexpressed forbearance by the plaintiff to insist on payment of her $100,000.

He says that Robert Hooper was approved as licensee of the hotel and that following the acquisition of it by the second defendant, a company which he controls, the plaintiff took an active part in the running of the hotel and contributed monies to the running expenses of it from early February 2004.

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HIS HONOUR: It was some months before the parties attended to getting their documentation in order.

There is a "deed of variation of the loan agreement" which was undated in the version exhibited by the plaintiff except for the month of July 2004. Mr Crowe suggested a date in August. That deed of variation in which the second defendant is guarantor, provides as follows:

WHEREAS:-

1. The Lender advanced the sum of SIXTY FIVE THOUSAND DOLLARS ($65,000.00) to the Borrower under the Loan Agreement dated the 30th day of June 2003 ("the loan") a copy whereof is annexed hereto marked "A".

2. The Loan Agreement was varied by Deed of Variation of Loan Agreement dated 15th December 2003 a copy whereof is annexed hereto marked "B".

3. At the request of the Borrower, the Lender has agreed to release the Mortgage registered over the property referred to in Annexure "B" hereto and to take as a substitute security a third registered mortgage over Lot 1 on RP198067 situate in the County of Merivale Parish of Warwick Title Reference 16622091 owned by the Guarantor.

4. The Lender and the Borrower have agreed to a further variation of the Loan Agreement in the terms set out in the letter dated the 20th July 2004 from the Borrower to the Lender's Solicitor a copy whereof is annexed hereto and marked "C" ("the Letter").

5. The Guarantor has, at the request of the Borrower, agreed to be bound by the provisions of the Letter.

NOW IN CONSIDERATION OF THE Lender agreeing to forebear to sue the Borrower immediately for payment of the Loan and of the premises IT IS AGREED by and between the parties as follows:-

1. The Security mentioned in Item 10 of the Loan Agreement is deleted and the following shall be inserted in lieu thereof:-

"Third Registered mortgage over property at The Parkview Hotel, 38 Palmerin Street, Warwick being described s Lot 1 on RP198067 situate in the County of Merivale Parish of Warwick contained in Title Reference 16622091.

2. The Lender hereby agrees to forebear to sue the Borrower immediately for the repayment of the Loan and the Borrower agrees to repay the Loan with interest pursuant to the provisions of the Letter annexed hereto marked "C".

The drafting of the letter leaves a lot to be desired; the mysteries regarding what the parties intended by it explain why the contest is on today. Annexure C is in the form of a letter on the company's letterhead dated the 20th of July 2004 and addressed to the plaintiff. It provides:

"We confirm we are in receipt of Mr Giancas' letter of the 19th July 2004 regarding the release of Lot 20 (5 Kate Street, Mackay) and furthermore the security we are offering you in substitution.

We confirm the following details:-

1. The Hotel Parkview at 38 Palmerin Street, Warwick is in the sole ownership of the company, Original Management Rights Services Pty Ltd and I, Clayton John Crowe, am the sole Director of that company.

2. We have agreed that a mortgage will be entered into between Original Management Rights Services Pty Ltd and yourself in the sum of $100,000.00 in substitution for the debt currently owing by Clayton John Crowe to you.

3. There is a First Mortgage to Sovereign Capital Limited in the sum of $220,000.00 with a variation to a maximum of $300,000.00 being an interest only loan with total drawdowns of $260,000.00 only by way of a first mortgage of $220,000.00 and a second mortgage of $40,000.00.

4. A valuation has been made of $385,000.00.

5. You are to receive a mortgage of $100,000.00 which represents over 25% of the current value less secured mortgages, ie. $385,000:00 current valuation less $26,000.00 liabilities to Sovereign equals $125,000.00 equity. This represents a 25% unencumbered transfer of interest to you.

6. We acknowledge that you have provided payments to the Hotel for up to $27,000.00 to date and we agree that this money plus any additional money from time to time that you may invest will be refunded in full from the proceeds of the sale of the Hotel.

7. We agree to pay you interest at 10% per annum from the date of this Joint Venture Agreement with all interest will be paid to you in full from the proceeds of the sale of the Hotel.

8. We agree that upon sale of the Hotel, the net profits (ie. Sale price less all costs including costs of acquisition, refurbishment and running costs, borrowing costs and interest) will be divided by way of:-

1/4 to yourself

3/8 to your brother Robert George Hooper

3.8 to Original Management Rights Services Pty Limited.

Would you please sign the acknowledgment at the foot of this letter and confirm your acceptance of this Joint Venture Agreement.

Yours faithfully

Original Management Rights Services Pty Ltd

Per

CLAYTON JOHN CROWE

Sole Director

SIGNED AND ACKNOWLEDGE BY MERRE-LYNNE HOOPER this day of July, 2004."

It was common ground that somehow the wrong version of paragraph 7 was included, the true arrangement in respect of interest, as set out in an enclosure to a fax from the defendants solicitors, being "from the 1st day of February 2004". In October 2004 upon the registration of the mortgage of the hotel property the plaintiff, by her solicitors, made demand for payment of the $100,000 together with interest which by that date was something in excess of $7,000. The proceeding was commenced soon afterwards.

The plaintiff contends that the only forbearance which she agreed to was in respect of suing "immediately". Mr Bland, for reasons that I think are obvious, did not make any particular submission as to how long the forbearance need be. He was, I think, constrained to say that it may have been for as brief a period as a day or a week. He also argued (and again, understandably), that the forbearance was uncertain. I find it unattractive to pursue that reasoning - not only in the light of the reluctance that Courts have, and ought to have, to find agreements uncertain but on the ground that the some kind of forbearance was plainly at the heart of what the parties thought they had agreed on.

The contention for the defendants presented by Mr McMeekin SC was that it is either clear, or sufficiently arguable, to justify a trial under rule 292, that the forbearance to sue was until the sale of the hotel. From the point of view of trying to show the Court that some commercially understandable arrangements were agreed upon, Mr McMeekin is in some difficulties. It is doubtful to what extent, if any, the plaintiff might be able to force a sale herself. The provisions in the letter may make her a co-owner for the purposes of section 33 and following sections of the Property Law Act 1974; there were no submissions about that.

Mr McMeekin was loath to commit his clients to the proposition that the plaintiff had an entitlement to receive $100,000 at any time. The opportunity is apparently being reserved to argue that the debt has gone - perhaps replaced by the one quarter interest in either the hotel or the net profits of sale. One must wonder why the letter talks of a substitute security if the debt is going.

Since I have reached the conclusion there ought not to be a judgement under rule 292 today, nothing that I might say will be binding upon me or any other judge. But I would think the likelihood is that the plaintiff's entitlement which was clear on the 29th of January 2004 would come within borrowing costs and interest" within paragraph 8.

It is also my preliminary view that the proceeding might well be resolved on the basis that the plaintiff has got herself in a situation, thanks to the deed of variation of the loan agreement, whereby she had to give reasonable notice of resiling from her position of forbearance to sue. She may well have done that when her solicitor sent the letter in October last year, making a demand.

I cannot accept that rule 292 justifies the Court's ordering summary judgement on the basis of what the judge hearing the application feels is likely to be the outcome. There are two things for the plaintiff to show under sub rule (2). The first is (a), the defendant has no real prospect of successfully defending all or part of the plaintiff's claim. If the plaintiff's claim is, as I take it to be, that she is entitled to be paid now as opposed to at some time in the future, I think the circumstances are ones in which it cannot be said there is no real prospect of a successful defence.

My view is that what would amount to reasonable notice that the forbearance to sue was at an end is sufficiently likely to depend on the factual matrix so that there ought to be more investigation of it than is possible on the present material and at a trial - so that the plaintiff fails to establish what she has to under rule 292(2)(b) in relation to there being "no need for a trial of the claim".

I think it emerges from the material that there is at least an issue about whether the hotel was not only to be taken over but also renovated for profitable resale. I don't think the Court should disregard the sibling relationship of the plaintiff and her brother who is obviously closely connected with the operations of the hotel as, on sworn material, the plaintiff has been herself.

I think the defendants ought to have the opportunity to argue at a trial that, assuming I am correct in my preliminary views about "reasonable notice" having to be given that has not happened. This situation is confusing.

One wonders why the plaintiff was interested in participating in arrangements documented in the unhelpful way they have been in the middle of 2004 which apparently were to give effect to things that had been happening over the proceeding months. On the basis of the figures in the letter the security available to the plaintiff, as far as an amount of it is concerned, seems problematic. Especially if her advances towards meeting the running costs of the hotel are taken into account. It is a hopeful sign that Mr Crowe says he has listed the property for sale at a much higher price.

Mr Bland is correct that the Court should not eschew difficult tasks of construing contractual arrangements on summary judgment applications.

The difficulty for me today is an unusual one. What the Court knows about the background circumstances makes them so unusual that I have reached a view that they have to be examined by the Court, or perhaps agreed on by the parties, before the Court can, with the degree of confidence required to act under rule 292, declare what it is that these parties have agreed to. I cannot say that the Plaintiff's family connection with Robert Hooper and for the various interests linking him with the Parkview Hotel do not bear on that issue.

There was some brief discussion as to the ability of the Court to impose conditions of "leave to defend", a thing which no longer exists under the UCPR. The matter was stood down so that Mr Bland's instructing solicitor's recollection of an order recently made by Holmes J could be checked. Although there is no longer any reference to leave to defend in rule 292, it is clear that the traditional practice, which

Holmes J's order in Benyon v Aikman Stoddart Accountants Pty Ltd (56194 of 2003, 28.9.04) did exemplify by requiring the payment of money into Court by a defendant, is still available under rule 298.

I probably should give Mr Bland an opportunity to be heard further, but I am not immediately attracted to his motion of requiring payment into Court by the defendants under present circumstances. As Mr McMeekin said, that would mean that although his clients win the application they really lose it. It is true there is no evidence on the point but it is probably a safe bet that his clients do not have the money ready. What I am strongly inclined to do is to give directions that will lead to a trial of this matter at the earliest possible time.

My suspicion is that the defence, which I am not prepared to say has no real prospect of success, is likely to prove to be essentially a delaying mechanism, although I hasten to say that I am not characterising the defendants as acting solely out of that kind of motive.

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HIS HONOUR: Leave to the defendants to amend their pleadings on or before the 28th of February 2005.

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HIS HONOUR: Any amended reply within four days.

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HIS HONOUR: Disclosure by exchange of lists on or before the 28th of February 2005 with any supplementary disclosure occasioned by amendment of pleadings forthwith.

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HIS HONOUR: The time in rule 469(4) will be reduced to five days for any date following which the party tendering a signed request for trial date may list the hearing of an application to dispense of signature on the other side.

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HIS HONOUR: Following the filing of a request for trial date, the proceeding shall be placed high on the civil call over list.

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HIS HONOUR: The costs of the application are the plaintiff's costs in the cause.