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Steffan v North Queensland Fuel Pty Ltd[2018] QDC 261

Steffan v North Queensland Fuel Pty Ltd[2018] QDC 261

DISTRICT COURT OF QUEENSLAND

CITATION:

Steffan & Anor v North Queenland Fuel PTY LTD & Anor [2018] QDC 261

PARTIES:

WERNER STEFFEN & CHRISTINA STEFFEN

(plaintiffs)

v

NORTH QUEENSLAND FUEL PTY LTD

(ACN 101 887 941)

(first defendant)

AND

DREW KELLAHAN

(second defendant)

FILE NO/S:

127 of 2018

DIVISION:

Civil

PROCEEDING:

Application

ORIGINATING COURT:

District Court at Cairns

DELIVERED ON:

13 December 2018

DELIVERED AT:

Brisbane

HEARING DATE:

29 November 2018

JUDGE:

Clare SC DCJ

ORDER:

1. The plaintiffs’ application for summary judgment in respect of the claim against the first defendant is granted. The first defendant is to pay the plaintiffs $84,275.87 ( including $6,275.87 interest)

2. The plaintiff’s application for summary judgment in respect of the claim against the second defendant is refused. 

CATCHWORDS:

PROCEDURE – PROCEDURE UNDER UNIFORM

CIVIL PROCEDURE RULES–

SUMMARY JUDGMENT – Where the plaintiffs apply for

summary judgment pursuant to r 292 of the Uniform Civil

Procedure Rules 1999 in respect of their claim against the first defendant for non repayment of a loan, and against the second defendant as guarantor – Where loan contract admitted – where guarantee disputed for want of consideration and acceptance

COUNSEL:

Mr D Topp for the Plaintiffs

Mr C Ryall for the first and second defendants

SOLICITORS:

O'Connor Law for the plaintiffs

This was an application by the plaintiffs for summary judgment. Key facts were not controversial.  The plaintiffs loaned the first defendant, North Queensland Fuel Pty Ltd, $ 100,000.  The second defendant, Drew Kellahan negotiated the loan for the company and then a variation of the contract when the loan was not repaid.  He also executed a written offer for a further variation with a personal guarantee. There remains a shortfall in the cash repayments.

The plaintiffs claim $ 78,000 plus a sum of interest from the first defendant for breach of the loan contract and from the second defendant pursuant to the guarantee. The defence was jointly pleaded. The defendants resisted the application for summary judgment on grounds that the written offer by Drew Kellahan was not enforceable and the first defendant was entitled to  set off against the claim, amounts said to be owed by the plaintiffs for services provided by a third party.

While the case against Drew Kellahan calls for a summary trial to determine a dispute about acceptance of, and consideration for, his written offer, the claim against the first defendant is more straightforward.  The first defendant has no prospect of defeating it.

The test

Pursuant to Rule 292 of the Uniform Civil Procedure Rules ( UCPR), a Court may give summary judgment to a plaintiff when the defendant has “no real prospect of successfully defending all or a part of the plaintiff’s claim” and there is “no need for a trial of the claim or part of the claim”.  The test is well established:

“…summary judgment for a plaintiff should be granted where it is clear that any available defence has no prospects of success, in the sense that there is no real question to be tried, or because a defence would be bound to fail. The standard against which the defence must be measured is whether it has a real, as opposed to fanciful prospect of success…

…the court may draw inferences from the available material and surrounding circumstances.”[1]

The pleadings

While Drew Kellahan was not a party to the loan agreement, the first defendant appears to have acted entirely through him for its dealings with  the plaintiffs. The obvious inference from the defendants’ joint pleadings and the supporting affidavit of Drew Kellahan is that Drew Kellahan acted with the authority of the first defendant. It is common ground that after negotiation by Drew Kellahan,  the plaintiffs and the first defendant entered into the loan contract on 13 December 2013.  The agreed interest rate was 15% per annum. If the loan was not repaid by March 2014, it was to be secured by a mortgage over the first defendant’s property.  When the first defendant failed to repay the money in March 2014, the parties varied the contract in writing by allowing a further 2 months for repayment, deferring registration of the mortgage and specifying interest at 15 per cent was payable monthly in advance, from 13 December 2013.

The Amended defence admitted those terms.  It also admitted total cash payments made to the plaintiffs under the loan contract did not exceed $ 59,500.  Clearly that amount fell well short of the first defendant’s contractual liability.  Therefore the plaintiffs would be entitled to judgment against the first defendant unless they and the first defendant were parties to an agreement to discharge or reduce the debt or unless the plaintiffs were estopped from enforcing their rights.

Paragraph [8] of the Amended Defence pleaded that all payments made by the defendants were made in reduction of the principal.  The same bald assertion was made in Drew Kellahan’s affidavit, but it is unsustainable.  The defendants admitted their agreement to pay the 15 per cent interest monthly in advance, from the commencement of the loan.  The plaintiff’s contention about an agreement in March 2017 to, inter alia, forgo interest from March 2017, was expressly denied by the defendants.  No other agreement to forgo interest was pleaded, or even raised in any material. Whether Drew Kellahan’s letter of March 2017 reflected a binding agreement or went no further than a proposal, it was itself an acknowledgment of the first defendant’s liability to pay the agreed interest and in advance.  It follows that on the agreement as pleaded by either of the parties, interest continued to accrue at a rate of 15 per cent, at least to March 2017.  The compounding interest would have added close to $60,000 to the debt.

The defendants pleaded a “services agreement” between the defendants and  the plaintiffs. It was said to include an express provision that services provided by the defendants to Mr Steffan “and his related business ventures”, and any disbursements in provision of those services, would offset the first defendant’s liability under the loan contract.

The “set off”

The defendants relied upon Drew Kellahan’s affidavit to detail the said services agreement and the provision of “consultancy services” by another company, Allsorts NQ Pty Ltd.  Allsorts was the employer of Drew Kellahan and a shareholder of the first defendant.  The defendants contended the services agreement was made in March 2014, thereafter the defendants provided services as requested by the plaintiffs through Allsorts and Allsorts retained solicitors to provide legal assistance.  A table within the Amended Defence nominated 355 hours of work at a rate of $100 per hour, plus a bonus payment of $ 5,000.  In short, it is alleged that in excess of $40,000 worth of services were provided to the plaintiffs over the 3 year period, albeit without any identifiable accounting process for any of it.

The defendants’ particularised components of the 355 hours of service in a table using vague subject headings such as “Brace claim” for $ 15,000 (plus another $ 5000 Drew Kellahan claimed he was promised from the settlement sum);  $ 2000 for “requisitions on Smithfield land” and $ 600 in respect of the wills of the plaintiffs.  Those descriptions tend to suggest legal services.  The defendants admitted they were prohibited by law from claiming for any services by them in the course of engaging in legal practice, but they denied they engaged in legal practice.  Whether the claim for services did contravention s 24 of the Legal Profession Act 2007 could only be determined by consideration of the true nature of the work, rather than the defendants’ classification of it.

The defendants imply that no accounts were kept and no invoice was ever rendered by either of the defendants or Allsorts.  The cross claim purports to be some kind of reconstruction from “emails, documents and correspondence found on Drew Kellahan’s server”.   The plaintiffs’s solicitors sent the letter of demand on 1 May 2018.  On 9 May 2018 Drew Kellahan wrote that he would provide “a full account of all works performed”.  It is now 6 months on and a “full account” has yet to be produced.  The Statement of Claim was filed on 19 July 2018.  A meaningless Defence was filed after a bizarre series of contradictory explanations for its lateness.  The Amended Defence was filed on the eve of the hearing, 28 November 2018.  It pleaded that the search for evidence of more services performed was ongoing.  Similarly, Drew Kellahan’s affidavit noted at paragraph [30] that the 355 hours was “not an exhaustive list of the consultancy works performed for Werner as the search of my server to 18 November 2018 has not produced all documents.”  Then in paragraph [31]: “I need to find and continue to look for all email, notes of our numerous meetings, letters and other documents over the 3 year period”.

Paragraph [65] of Drew Kellahan’s affidavit indicated Allsorts is yet to invoice anyone for any part of the 3 years of services now claimed.  Curiously, an “Allsorts consultancy invoice” was exhibited to the affidavit.  The invoice was unrelated to the present case.  Perhaps the intention was to demonstrate Allsort’s general system of invoicing, but it only reinforces the glaring omission of any accounting process in respect of a services agreement, by an entity with an established system of invoicing. According to paragraph [44], when Allsorts received invoices on behalf of its clients, Allsorts would invoice the relevant entity “at the appropriate time for reimbursement”.

Paragraph [40] of Drew Kellahan’s affidavit makes a statement in general terms: “we paid invoices on behalf of Werner”.   2 invoices from law firms, totalling $ 3,627.55 were attached.  Paragraph [24] of the Amended Defence claimed that the defendants arranged for payment for legal services for the plaintiffs at a cost of $3,627.55, but there was no assertion by the defendants (in either the pleadings or the supporting affidavit) that the plaintiffs had not already reimbursed Allsorts for those 2 solicitors invoices. In fact, paragraph [41] of the affidavit declared Drew Kellahan would engage solicitors on Mr Steffan’s behalf and “Werner would reimburse Allsorts ( or whichever entity was charged by the law firm for the costs”.

It seems no service agreement was recorded by writing.  None is pleaded. A purely oral agreement would be an anomaly in the admitted history of the contract.  The defence allege the service agreement was made in March 2014.  That would be at about the time of the variation of the loan agreement. That variation was in writing, as was the original contract and the later proposed guarantee in 2017.  The first known written reference to any set off was on 9 May 2018, when Drew Kellahan replied to a letter of demand by calling it a “ a distorted view of the truth and the facts”.

More significantly, services rendered were not mentioned in the exchange of correspondence about outstanding loan monies in March 2017.  According to the Amended Defence, the 355 hours of services to be set off against the loan had already been performed.  According to Drew Kellahan’s affidavit, he had provided most, if not all, of the services for the plaintiff over the preceding 3 years.  Yet, on 15 March 2017, when offering the plaintiff a personal guarantee, his letter acknowledged that none of the principal had been repaid and that the full $ 100,000 remained outstanding.   The Amended Defence admitted the signed letter was Drew Kellahan’s document.  Notwithstanding the issues of acceptance and consideration , the defence admitted the document was “executed” by Drew Kellahan as a proposed variation and guarantee.  Paragraph [29] claimed in effect that it was done in good faith. Consequently, Drew Kellahan’s formal acknowledgement of the $100,000  still owing as at 15 March 2017 was unexplained by the defence case.  If, as the defendants contended, Drew Kellahan and Mr Steffan agreed in March 2014 for “Consultancy Works” to be offset against the loan and interest,  and that thereafter for 3 years, Drew Kellahan was involved in the provision of more than 355 hours of such works, why did his letter of 15 March 2017 only refer to  $ 32,500 in interest payments, omit any reference to services performed, and expressly assert that the full $ 100,000 was still owing?  There is no rational answer.  The Kellahan letter of 15 March 2017 thereby deproves the current set off defence of any credibility.

Apart from the issue of mutuality, even if sufficient connection between the services performed by Allsorts and the loan contract were accepted, even if the first defendant was taken to be asserting that legal bills paid by it on behalf of the plaintiff were not reimbursed, and even if the first defendant was not precluded from compensation by the Legal Profession Act, the claim of an offset agreement is firmly contradicted by the defendants’ own conduct in March 2017.

Conclusion

The defence of the first defendant is bound to fail. A trial is not neither necessary. It is an appropriate case for the exercise of the discretion. Accordingly, the application for summary judgment against the first defendant will be granted.

It is common ground that after 15 March 2017, and Drew Kellahan’s formal acknowledgement of a continuing debt of $ 100,000, the defendants repaid a total of $22,000. The plaintiffs do not seek arrears of interest prior to that date, and claim only for interest from 31 October 2017 to judgment. The balance of $ 78,000 plus interest of $6,275.87 comes to $ 84,275.87.

Orders

  1. The plaintiffs’ application for summary judgment in respect of the claim against the first defendant is granted. The first defendant is to pay to the plaintiffs the sum of $84,275.87 (including $6,275.87 interest)
  1. The plaintiff’s application for summary judgment in respect of the claim against the second defendant is dismissed. 

Footnotes

[1] Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232, Bolton Properties P/L v J K Investments (Australia) P/L [2009] 2 Qd R 202.

Close

Editorial Notes

  • Published Case Name:

    Steffan & Anor v North Queensland Fuel Pty Ltd & Anor

  • Shortened Case Name:

    Steffan v North Queensland Fuel Pty Ltd

  • MNC:

    [2018] QDC 261

  • Court:

    QDC

  • Judge(s):

    Clare SC DCJ

  • Date:

    13 Dec 2018

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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