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Fitzsimon v Cafpa Pty Ltd[2016] QDC 230

Fitzsimon v Cafpa Pty Ltd[2016] QDC 230

 

DISTRICT COURT OF QUEENSLAND

 

CITATION:

Fitzsimon & another v Cafpa Pty Ltd & another [2016] QDC 230

PARTIES:

BERNARD JOSEPH FITZSIMON

(respondent-plaintiff)

and

DIANE THERESE NEVE

(respondent-plaintiff)

and

CAFPA PTY LTD

(defendant)

and

CON PAPAMITROS

(applicant-second defendant)

FILE NO/S:

1917 of 2015

DIVISION:

Civil

PROCEEDING:

Application

ORIGINATING COURT:

District Court

DELIVERED ON:

8 September 2016 – Ex Tempore

DELIVERED AT:

Brisbane

JUDGE:

RS Jones DCJ

ORDER:

  1. The application is dismissed.
  2. The Applicant is to pay the Respondents’ costs of the application, to be assessed on the standard basis. 

COUNSEL:

M de Waard for the respondents-plaintiffs

SOLICITORS:

Macpherson Kelley for the applicant- second defendant

DCL & Associates for the respondents-plaintiffs

  1. [1]
    HIS HONOUR: All right. Earlier today, I heard argument concerning an application to set aside a default judgment against the applicant entered on 23 March 2016. On that date, judgment was also made against the first defendant, Cafpa Proprietary Limited, as a corporate trustee, as I understand it. The applicant was and still is the sole director and shareholder of the first defendant. It is accepted that the judgment was regularly entered. After hearing submissions, I ordered that the application be dismissed, and told the parties that I would give more detailed reasons later today. These are those reasons. The short version that I gave after the conclusion of submissions was that I was not satisfied that the applicant had established a reasonable or plausible explanation for the failure to enter a defence or take some other appropriate step or action, and I also reached the conclusion that on the material before me, the applicant had not established a prima facie or plausible defence.
  1. [2]
    Also at the conclusion, and after I made an order dismissing the application, the respondent made an application for costs on an indemnity basis. The solicitors for the applicant did not oppose a cost order per se, being made against the applicant, but contended that the costs should be limited to being on the standard basis. It was agreed at the bar table that the relevant factors to be taken into account were first, whether a satisfactory explanation for the failure to enter a defence, or to take some other appropriate action or step, exists, second, whether there has been any unreasonable delay in bringing the application to have the judgment set aside, third and most importantly, has the defendant established a prima facie defence on the merits of the claim grounding the default judgment. As to the first of those matters, in his affidavit, the applicant in paragraphs 10 to 14 deposes as follows:

The failure of the first defendant’s business had an adverse effect on my health, both mentally and physically, and I was suffering from bad health because of, amongst other things, the business and financial stress caused.  Following the failure of the business, the first plaintiff, Mr Fitzsimon, on at least four occasions during 2015 visited me personally and threatening to harm me if I did not pay the money owed by the first defendant.  On one of those occasions, I recall Mr Fitzsimon saying that he will get the ‘bikies’ to sort me out, or words to that effect.  On all those occasions, I had to involve the police to have Mr Fitzsimon removed and to ensure my safety.  I was terrified and afraid of Mr Fitzsimon, but had no access to financial resources to oppose him.  I was under severe pressure while my health was failing, and found it hard to focus.  On or about 1 February 2016, I was served with the plaintiff’s claim and the statement of claim filed in these proceedings on 12 May 2015. 

I considered the plaintiff’s claim and statement of claim, and noted that the plaintiffs were claiming payment for moneys owing under the lease against both the first defendant and myself as guarantor.  I considered that the plaintiff’s claiming against me as a guarantor was improper, and must have been a mistake.  I recall my conversations with Mr Dracos, and knew that I did not guarantee the lease.  I thought it was just another attempt of Mr Fitzsimon to intimidate me, and that the court will throw the claim out.  I went to the court to inform the court that I did not guarantee the lease, and asked for the matter to be thrown out.  I was informed that I should seek legal advice on the matter and file a defence.  I had no financial resources to retain a lawyer, and the proceedings added to the deterioration of my health.  I could not focus.

  1. [3]
    It was contended on behalf of the applicant that it was a combination of the financial stress, fear and ill health that caused the applicant not to be able to focus to such an extent that he was unable and/or incapable of taking any rational steps in the action. On balance, I am unable to accept this explanation provides a satisfactory explanation for the failure to file a defence or to take some other reasonable steps prior to the judgment being entered. I have reached that conclusion for the following reasons: first, no medical certificate has been provided, nor any other evidence going to the appellant’s ill health. Second, his focus was not so affected as to prevent him from recalling a number of details about conversations he had with Mr Dracos, a solicitor at the time of the lease negotiations, and that to sue him as a guarantor was a mistake. Third, neither fear, nor ill health, prevented him from approaching the registry at some unspecified date and telling some person, who was not identified, that there had been a mistake, that there was no plausible action against him as a guarantor, and that – to use his words – “the case should be thrown out”.
  1. [4]
    Further, while I accept that the applicant might have been suffering from financial difficulties at the time and, indeed, feeling somewhat intimidated by Mr Fitzsimon, he made no attempt to seek Legal Aid or the assistance of, by way of example, bodies such as QPILCH, nor did he attempt to write to the respondent’s solicitors advising them of his situation and seeking an indulgence from them. No satisfactory explanation has been established, in my view.
  1. [5]
    I will leave the question of delay in bringing the application, as I do not consider it necessary to consider that matter, having regard to my conclusions concerning the defence asserted. In National Mutual Life, Association of Australia v Oasis Development Proprietary Limited (1983) 2 Queensland Reports 441 at 449, his Honour, Justice McPherson, as he then was, said:

Speaking generally, it may be said that it is the last of these considerations that is the most cogent.  It is not often that a defendant who has an apparently good ground of defence would be refused the opportunity of defending, even though a lengthy interval of time had elapsed, provided that no irreparable prejudice is thereby done to the plaintiff.

  1. [6]
    A draft defence is attached to the applicant’s affidavit, exhibit CP7. Paragraph 5 of the draft defence pleads as follows:

As to paragraph 6 and 7 of the statement of claim, the second defendant denies that he entered into a written guarantee and indemnity with the plaintiffs to guarantee the performance of the first defendant’s obligations under the lease, because:

  1. he was, and still is, the sole director of the defendant.
  2. the first defendant entered into a lease pleaded in paragraphs 3 and 4 of the statement of claim with the plaintiffs.
  3. he instituted the lease as director of the first defendant on 14 November 2013.
  4. he was not a party to the lease.
  5. he did not execute the lease as guarantor and
  6. he did not agree to guarantee the first defendant’s obligations under the lease.
  1. [7]
    In this context, the reference to paragraph 3 in paragraph 8 of the defence would appear to be an error or a typographical error. In paragraph 2 of his affidavit, the applicant states that he is the sole shareholder and director of the first defendant. In paragraphs 4, 5, 6, 7 and 8, the applicant deposes to the following:

On or about October, November 2013 I represented the first defendant in negotiating a lease with the plaintiffs of a premises located at part ground floor 13-15 Prospect Street, Fortitude Valley.  The first defendant required the premises to start up and conduct the business of a café.  The first defendant obtained legal advice and was represented in the negotiations of the lease by Mr Harry Dracos, of H. Dracos & Co.  At some point during negotiations, Mr Dracos informed me that the plaintiffs required me to guarantee the first defendant’s obligations under the lease.  I informed Mr Dracos that I was not agreeable to such a condition.  Mr Dracos then subsequently informed me that following further discussions, the plaintiff had agreed to proceed with the lease without the guarantee. 

On 14 November 2013, I executed a written lease on behalf of the first defendant as the lessee and the plaintiffs as lessor of the premises.  The lease was executed by the plaintiffs on 18 November 2013, and was for a period of five years, commencing on 12 November 2013 and ending 11 November 2018.  In accordance with the discussions I had with Mr Dracos, I was not required, nor was I asked, to execute a guarantee of the first defendant’s obligations under the lease.

  1. [8]
    At one stage during submissions being made on behalf of the applicant, it was submitted to the effect that at all material times Mr Dracos was acting solely for the benefit of the first defendant and not for the applicant. That submission cannot be accepted in circumstances where the applicant was the sole director and shareholder of the first defendant, and also, given the contents in paragraphs 4 and 5, 6 and 8 of his affidavit, and also, by reference to other documents to which I will refer in a moment. The defence is stated in the following terms in the applicant’s submissions in reply in paragraphs 17, 18 and 19:

The second defence is plain and simple.  He did not guarantee the obligations of the first defendant under the lease.  He was advised by the first defendant’s legal representative that lease would proceed without a guarantee, and executed the lease exclusively as representative of the first defendant.  He did not execute the lease in a personal capacity or capacity of guarantor.  The Delaney is distinguishable because it primarily relates to the severability of the lease and guarantee.  The approach the court should take was considered by Gibson DCJ in DND Property Holdings Pty Ltd and Dadovic Holdings Pty Ltd, where his Honour cited with approval the dictum of Giselle J in Padstow Corporation Pty Ltd and Flemming 2 (2011) NSW SC 1572 where it was stated, ‘the authorities make clear that the question whether a person has signed in a personal capacity is to be determined in accordance with the construction of the document as a whole, and on the basis of admissible surrounding circumstances known to the parties.’

  1. [9]
    With respect, even if that statement may be accepted, I fail to see how it assists the applicant in this case. I also fail to understand how the passage I was taken to in the DND Holding case, at paragraph 41, was of any assistance to the applicant in the circumstances of this case.  In my view, when regard is had to the relevant documents, it is clear that the defence has no prospect of succeeding.  The evidence falls well short of establishing any sort of prima facie case.
  1. [10]
    As I have already said, it is not in dispute that the applicant executed the lease as the sole director of the first defendant. Item 13 of the lease is headed “Guarantor”, and under that heading, reference is made to clause 28 of the lease, and the applicant’s name and address is stated. Clause 28.1 of the lease, under the heading “Guarantee and indemnity”, provides:

If guarantor details are inserted in item 13 of the reference schedule then –

(1) clauses 28.2 to 28.9 apply;

(2) the guarantor has requested the landlord to grant this lease to the tenant;  and

(3) the landlord grants this lease in consideration of this guarantee and indemnity.

  1. [11]
    As I have already identified, under item 13, the applicant’s name was clearly set out. Then, in clause 28.2, under the heading “Guarantee”, the following appears:

In consideration of the landlord granting the lease at the request of each guarantor, which request is acknowledged by their execution of this lease, each guarantor covenants with the landlord in accordance with the provisions of clause 28 of this lease, and guarantees to the landlord prompt performance of all of the tenant’s obligations contained or implied in this lease.  If the obligation is to pay money, the landlord may recover the money from the guarantor as a liquidated debt.

  1. [12]
    Clause 28.4, under the heading “Liability of guarantor”, sets out a number of factors which are said not to affect the guarantor’s liability. During the course of submissions, the applicant relied on subclause (7), which provides:

Non-execution of this lease by one or more of the persons named as guarantor, or the unenforceability of the guarantee, or indemnity against one or more of the guarantors.

  1. [13]
    I fail to understand, again, how that clause assists the applicants in the circumstances of this case. Finally, in this context, clause 28.5, under the heading “Sale of tenant’s business and assignment of lease”, the lease states:

If the tenant sells its business and, subject to clause 10, assigns this lease, the landlord agrees to release Con Papamitros,  from the guarantee provided under this clause from the date of the assignment.

  1. [14]
    Mr Papamitros is, of course, the applicant in this proceeding. The terms of the lease, whilst probably being sufficient in themselves, do not stand alone. In the affidavit of Mr Gosfold, relied on by the respondents, there’s a letter from Mr Dracos’s firm to the respondents’ then lawyers. That correspondence is marked as exhibit MG-1, and is dated 23 October 2013. Relevantly, in that correspondence, it is said:

We note the following:  (1) the name of the lessee is Cafpa Pty Ltd ATF, the Cafpa business trust, of 148 Hadrgrave Road, West End;  (2) the commencement of the lease will be the date of execution;  (3) we agree the lease term is for five years with one option of five years;  (4) it has been agreed that the bank guarantee clause will be deleted;  (5) the guarantor is Con Papamitros, 148 Hardgrave Road, West End 4101.

  1. [15]
    Exhibit MG-2 to the affidavit of Mr Gosfold also includes a response dated 12 November 2013, sent from the defendants’ then solicitors to Mr Dracos’ firm. It refers to the previous correspondence, and then sets out a number of matters that are said to be noted. One of those matters is referred to as being item 10, which provides:

See clause 28.5, which provides for the release of Con Papamitros upon the sale of the business and assignment of the lease (subject to compliance with clause 10).

  1. [16]
    The applicant executed the lease two days later, on 14 November 2013. If the facts were as the applicant deposed to, in my view, it is impossible to reconcile while, if during the course of negotiations matters such as bank guarantees and what would occur in the event of the sale of the premises were dealt with, how it could sensibly be explained how all of those terms and conditions involving the applicant as the guarantor – were not also dealt with and deleted from the lease agreement.
  1. [17]
    It goes further. Exhibit MG-3 is a document headed “Legal Advice Report”. It notes that the report is provided by Harold Stanley Dracos Solicitors, and it provides, to the effect that Harold Stanley Dracos Solicitors have provided advice to the prospective lessee assignee on a number of matters and, in particular, in respect of any special or unusual terms or conditions of the lease, and any repayable bonds or guarantees required. That document was signed by the applicant on the same day, 14 November 2013. Other financial documents are included in the affidavit of Mr Gosfold, but I do not think it is necessary to address them.
  1. [18]
    I should also note that the applicant has provided no material from either Mr Dracos or from anyone in his firm to support any of the assertions made by him concerning any negotiations between them or any other matter concerning Mr Dracos and/or his firm.
  1. [19]
    For the reasons given the application has to be dismissed. The observations of Macrossan SPJ as he then was, in Delaney v Purves [1930] QWN 6 seem to be entirely appropriate in the circumstances of this case.  His Honour, in dealing with facts quite similar to those involved here in a number of respects, said:

I am of the opinion that the document is one single and indivisible whole, and that the signatures of the defendants, even as directors merely, would be sufficient to bind them as sureties.  The question is not one of intention, but simply one of evidence against them.  The Court is in quest of evidence, under the hands of the defendants, that they, in fact, had entered into the contract of suretyship.  The documents signed by them and containing the contract are sufficient for that purpose.

  1. [20]
    I, with respect, agree with that reasoning, and consider this to be a case where it would be impossible for the applicant to avoid liability under the guarantee and indemnity provisions of the lease.
  1. [21]
    Turning, then to the question of costs, it is well recognised that cost orders are not meant to punish – save for in exceptional circumstances –the unsuccessful party, but to indemnify the successful party, as far as is practicable. By indemnifying them in respect of the costs of having to bring the legal proceedings to either defend an action against them or prosecute actions on their behalf. The question of indemnity costs has been recently considered by Justice Burns in 2040 Logan Road Proprietary Limited v The Body Corporate for Paddington Mews [2016] QSC 65, where his Honour referred to the well-known list of circumstances highlighted in the decision given by Justice Sheppard in Colgate-Palmolive Company and another v Cussons Proprietary Limited.  I do not intend to go into them in great detail, as they are very well-known and have been addressed in a number of cases.
  1. [22]
    On balance, I consider this to be one that is very finely balanced, for the reasons that I’ve already given. It should be obvious that I considered the defence that was intended to be raised as being one that was almost certainly unlikely to succeed. To put it bluntly, the applicant, in my view, was very likely to fail should this case have proceeded to trial, and the defence could very nearly be characterised as being one that was always doomed to fail.
  1. [23]
    That said, while I considered it to be a very closely run thing, I have decided to exercise my discretion and order that the applicant pay the costs of the application on the standard basis. Put simply, I have reached, as I said, after some hesitation, the conclusion that the features of this proceeding – by that, I mean the application – were not so unreasonable or contained other unusual features and/or other exceptional circumstances that would justify departing from the usual order that costs be calculated on the standard basis. For the reasons given, the orders concerning this application are: (1) the application is dismissed; (2) the applicant is to pay the respondent’s cost of the application, to be assessed on the standard basis. And I reserve my right to tidy up the reasons before publication. Anything arising?
  1. [24]
    MR DE WAARD: No. Thank you, your Honour.
Close

Editorial Notes

  • Published Case Name:

    Bernard Joseph Fitzsimon & anor v Cafpa Pty Ltd & another

  • Shortened Case Name:

    Fitzsimon v Cafpa Pty Ltd

  • MNC:

    [2016] QDC 230

  • Court:

    QDC

  • Judge(s):

    Jones DCJ

  • Date:

    08 Sep 2016

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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