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  4. KDV-Sport Pty Ltd v Lighthouse Industries (Qld) Pty Ltd - [2022] QDC 199

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KDV-Sport Pty Ltd v Lighthouse Industries (Qld) Pty Ltd[2022] QDC 199

KDV-Sport Pty Ltd v Lighthouse Industries (Qld) Pty Ltd[2022] QDC 199

DISTRICT COURT OF QUEENSLAND

CITATION:

KDV-Sport Pty Ltd v Lighthouse Industries (Qld) Pty Ltd & another [2022] QDC 199

PARTIES:

KDV-SPORT PTY LTD

ACN 149 913 333

(Plaintiff)

v

LIGHTHOUSE INDUSTRIES (QLD) PTY LTD

ACN 130 672 909 

(First Defendant)

And

NICHOLAS DAVID CRESSWELL

(Second Defendant)

FILE NO:

1367/21

DIVISION:

Civil

PROCEEDING:

Trial

ORIGINATING COURT:

Brisbane District Court

DELIVERED ON:

24 August 2022 (ex tempore)

DELIVERED AT:

Brisbane

HEARING DATE:

22, 23 & 24 August 2022

JUDGE:

Porter QC DCJ

ORDER:

  1. Judgment be entered for the plaintiff against the first and second defendants in the amount of $251,619.27

CATCHWORDS:

CONTRACTS – DEEDS, GUAREENTEES AND INDEMNITIES – BREACH OF EXPRESS TERMS – REPRESENTATIONS –   where the plaintiff paid money to the first defendant – where the plaintiff and first defendant  signed a Deed of Loan for the sum advanced – where the first defendant refused to repay the money upon demand – where the first defendant alleged representations that the loan was executed to facilitate payment by the plaintiff to the first defendant of a sum owed by a third party – whether there was an agreement or representation which had the effect of relieving the first defendant from its obligation to repay the amount of the loan deed.

CONTRACTS – DEEDS AND OTHER INSTRUMENTS – FORM AND EXECUTION – Whether the second defendant signed the guarantee.

COUNSEL:

S. Armitage for the Plaintiff

N. Cresswell in person for the Defendants

SOLICITORS:

McInnes Wilson Lawyers for the Plaintiff

Summary

  1. [1]
    The plaintiff (KDV) claims that it lent $251,619.27 to the first defendant (Lighthouse) pursuant to a deed of loan dated 10 December 2019 (the Loan Deed) and that on the same day, the second defendant (Mr Cresswell) signed a guarantee and indemnity for that advance (the Guarantee).  KDV claims that the loan was not repaid in accordance with the Loan Deed and that despite demand, Mr Cresswell has not honoured the guarantee.  Accordingly, KDV seeks judgment on the Loan Deed against Lighthouse and on the Guarantee against Mr Cresswell for the sum advanced.
  2. [2]
    The defendants defend the claim on the Loan Deed on the basis that it was not intended by the parties for it to take effect in accordance with its terms.  They allege that it had been agreed with KDV that it would pay $251,619.27 owed to Lighthouse by a head contractor, Muggeridge Constructions Pty Ltd (Muggeridge), in return for completing works left incomplete by Muggeridge and that KDV had represented that the Loan Deed was merely a device to facilitate payment and would never be enforced.  Further, Mr Cresswell separately denies that he signed the guarantee.
  3. [3]
    For the reasons that follow, I find that no basis has been established by the defendants which prevents KDV relying on the terms of the Loan Deed and I find that Mr Cresswell did sign the guarantee.  I order judgment in favour of the plaintiff against the defendants.

Background to the proceedings

  1. [4]
    Since around 2017, KDV has been constructing and operating a sporting facility at Carrara on the Gold Coast.  The facility includes tennis courts, a golf course and gym.  The facility was developed in two stages.  This proceeding concerns stage two, which involved the construction of an accommodation facility, primarily with athletes who might use the sports facilities in mind.
  2. [5]
    KDV is related to a business based in Russia which manufactures confectionary.  KDV appears to have been an expansion in the scope of the activities of that business into facilities, construction, and management in Australia.  The general manager of KDV is Yulia (or Julia for the linguistically inflexible) Shtengelova. Her brother is one of the guiding minds behind the KDV companies and one of the directors of KDV (or at least he was at relevant times).  There is another director. Ms Shtengelova is not a director; however, she came to Australia from Russia for the purpose of managing the KDV development.  She managed the first stage of the development, which appears to have been successfully completed, and had some experience in that kind of work before coming to Australia.
  3. [6]
    In about mid-2017, KDV engaged Muggeridge to carry out the stage 2 construction works at Carrara (the Works), that is, the student accommodation now described, it seems, as a hotel.  At that time, Ms Shtengelova had the assistance of an architect and a project manager in carrying out stage 2.  The architect recommended Muggeridge to do the work and it was for that reason that Ms Shtengelova retained that company.
  4. [7]
    On about 25 October 2017, Lighthouse entered into a subcontract with Muggeridge in connection with the Project.[1]  The subcontract provided for Lighthouse to complete air conditioning works.  Mr Cresswell was and is a director of Lighthouse. Another company relevant to these proceedings is Multi 21 Pty Ltd (Multi 21).  Mr Cresswell is also director of that company. It holds, and held at various times, various forms of building licences.  Its general manager is Mr Hanley, who gave evidence at trial.
  5. [8]
    The Works did not proceed satisfactorily, at least for the parties to these proceedings.  Ms Shtengelova said that she was able to observe the site because it was close to the existing facilities and she observed that by about mid-2018, work appeared to have stalled.   The project manager acting as superintendent under the contract was also having difficulties in the relationship with Muggeridge.  So much so that it terminated its retainer.  At that time, KDV also had the assistance of a quantity surveyor, Mr Paul Noonan.  For a time, Ms Shtengelova seems to have relied on Mr Noonan for advice on the progress of the Works.
  6. [9]
    Mr Cresswell, for his part, considered that Muggeridge had failed to pay a substantial sum due under the subcontract with Lighthouse, in the amount of about $251,000, which ultimately became the subject of the Loan Deed.  He also considered that this debt related to equipment which had been installed on site but not paid for.

The August 2018 meeting

  1. [10]
    In about August 2018, a meeting occurred at a café on the Gold Coast.  It appears that the initiative for the meeting came from Mr Cresswell and/or other subcontractors on the site.  They appear to have approached Mr Noonan and asked if Ms Shtengelova would attend a meeting away from the KDV offices.  Ms Shtengelova agreed.
  2. [11]
    That meeting occurred on or about 18 August 2018.  While the detail of what was said by the parties is in some respects disputed, the evidence is consistent to this extent:
    1. (a)
      The meeting was attended by at least Ms Shtengelova and Mr Noonan for KDV, Mr Cresswell for Lighthouse, and Ms Young and Mr Adam Giddens for Young Plumbing and Excavation (‘YPE’), another subcontractor on site;
    2. (b)
      At the meeting, someone on behalf of the subcontractors warned Ms Shtengelova that Muggeridge was not paying its subcontractors and they were significantly out of pocket. And further, that Mr Muggeridge, the principal of Muggeridge, had told them he did not intend to honour the contract; and
    3. (c)
      There was likely some discussion about the future of Muggeridge as the head contractor on site.
  3. [12]
    Mr Muggeridge was not here to give his version of events.  This judgment is not intended to be a criticism of him or his company. I merely recite the matters which the evidence established were said by the parties which are relevant to the events in this case. 
  4. [13]
    Beyond that, there is little agreement on what further was said.  However, nothing was pleaded by the defendants suggesting that any agreement or understanding that Lighthouse would be paid its claim by Muggeridge or that it would do so as a condition for Lighthouse or some associate of Lighthouse taking over the principal works.  Despite that, for the first time in written opening, the defendants contended that at this meeting, the payment by KDV of the money owed to Lighthouse (according to Mr Cresswell) by Muggeridge was discussed.   I reject that suggestion:
    1. (a)
      First, the evidence of Mr Cresswell as to what was actually said was very vague; 
    2. (b)
      Second, there was no diary notes taken of the meeting, so the suggestion first raised at trial relates to events seemingly dug up from Mr Cresswell’s recollection four years after the event;
    3. (c)
      Third, while it is possible that Mr Cresswell said that Lighthouse wished to be paid, it is highly improbable that Ms Shtengelova would have been making any kind of firm statement about the future of the Works at that meeting, much less that she said anything about payment by KDV to Lighthouse.  She gave evidence that the meeting was quite a shock to her and that she needed to think about what had been said.  That evidence makes perfect sense given the situation she was in at the time, having heard about the subcontractors’ complaints for the first time at the meeting; and
    4. (d)
      Fourth, other matters alleged in the written opening were also demonstrably wrong.  For example, the suggestion in the opening that the removal of Muggeridge would be set in motion was a ridiculous one given Ms Shtengelova’s state of mind at the time. 
  5. [14]
    In my view, Mr Cresswell was not drawing on specific recollection of events at that meeting when giving evidence about the discussion at the 18 August meeting about KDV paying Lighthouse.  The fact that he drafted a self-serving opening statement to that effect and gave evidence about it reflects poorly on his reliability as a historian.

Mr Giddens 

  1. [15]
    Mr Giddens enters the narrative at this point.  Mr Giddens is a construction claims consultant.  He has done that work for about 7 years.  Before that he had worked as a builder.  At the time of the first meeting, Mr Giddens was advising Kelly Young of YPE.  It was in that role that he was invited to the 18 August meeting.  He gave evidence he had not met Ms Shtengelova nor Mr Cresswell before.  It was suggested in cross examination he had met Mr Cresswell a month earlier at Broadbeach, but Mr Cresswell did not give that evidence and Mr Giddens said he thought that meeting happened after the 18 August meeting which seems consistent with other uncontentious facts.  Mr Giddens had a limited recollection of the 18 August meeting.  I do not find that surprising.  He went to the meeting without any prior involvement with KDV and was invited by Ms Young. 
  2. [16]
    After the 18 August meeting, Mr Giddens formed the opinion that a dispute was brewing between KDV and Muggeridge and, I infer, formed the opinion that KDV was ill prepared to meet it.  If that was his opinion, then on the facts as they emerged at the trial, that opinion was well-founded.  Ms Shtengelova had lost her superintendent’s representative and was relying on her quantity surveyor for advice and, as I will explain, did not have her own experience in handling construction disputes.
  3. [17]
    A day or so after that meeting, Mr Giddens called on Ms Shtengelova and offered his assistance in dealing with the impending dispute.  The result of that overture was that Mr Giddens began to advise KDV, through Ms Shtengelova, as a claims consultant in respect of the circumstances arising under the Works contract.  His retainer was informal, with Mr Giddens providing advice and assistance on payment claims, payment schedules and co-ordination with lawyers, experts and so on.  He also provided advice on steps to be taken to progress the Works.  He issued monthly invoices to KDV.  He continues to do so. Ms Shtengelova gave evidence that over the four years that she has dealt with him, he had built up a relationship of trust and confidence with her. 
  4. [18]
    At one stage, the defendants seemed to suggest that Mr Giddens had effectively taken over as the guiding mind of KDV in relation to the project, and that Ms Shtengelova simply signed what he put in front of her and adopted his suggestions and advice.  That is not an accurate picture of his role, nor of Ms Shtengelova’s role.  Mr Giddens clearly had a very significant role in advising Ms Shtengelova on the management of the Works after August 2018.  That role was important for two reasons: because of the mess in which the project was in because of the dispute with Muggeridge and because of Ms Shtengelova’s limited knowledge and experience in contract administration and building disputes.
  5. [19]
    However, Ms Shtengelova gave evidence that when Mr Giddens prepared documents and gave them to her to sign, she read them through carefully and understood them.  In my view, it was evident from the way she spoke to and about some documents in evidence that she had a reasonable understanding of their contents and purpose.  Mr Giddens, for his part, also said that Ms Shtengelova read and understood correspondence he drafted, indeed he insisted on it occurring.   I accept he did so insist.  Subject to the limitations in her experience, Ms Shtengelova appeared to be in charge of the day-to-day management of KDV, albeit relying on Mr Giddens for advice.

Disputes with Muggeridge

  1. [20]
    In the ensuring weeks, disputes were formalised between Lighthouse and KDV against Muggeridge.  Lighthouse, for its part, delivered notices under the Subcontractors’ Charges Act 1974 (‘SCA’) and on 14 September 2018, commenced proceedings in this Court to enforce the charges against Muggeridge and KDV as principal. They claimed the amount of $251,619.27 on 28 October 2018. Muggeridge filed a defence which alleged by counterclaim that Lighthouse owed it $106,000 for overpayments.  Mr Cresswell said he did not know about the counterclaim and did not read the defence and counterclaim until recently.  Oddly, Lighthouse filed an answer to the counterclaim which includes a specific factual admission and someone presumably gave instructions for at least that matter on behalf of Lighthouse to the solicitors preparing that pleading.  It is likely Mr Cresswell’s recollection about this is mistaken.
  2. [21]
    It was suggested to Mr Giddens that he had a role in counselling the SCA proceedings and he accepted he might have made a suggestion to that effect and suggested solicitors who could handle the matter.  I see nothing sinister in that.  KDV and Lighthouse were co-operating to manage the difficulties each separately had with Muggeridge and to secure their separate interests.
  3. [22]
    At the same time KDV was taking steps to take the work out of the hands of Muggeridge and succeeded in doing so by notice on 26 October 2018. That left KDV with incomplete and seemingly defective Works. 

Multi 21 takes over the Works and the alleged agreement

  1. [23]
    The first priority for KDV was to repair the defects and the next was to complete the Works.  There is no doubt that in discussions with Mr Cresswell over the period after August 2018, Mr Cresswell suggested to Mr Giddens that Mr Cresswell’s other company, Multi 21, could take over the Works.  Mr Giddens gave evidence that that seemed to be a good idea, given the familiarity of Mr Cresswell with the Works and the familiarity of Mr Hanley with aspects of the project.  The so-called defects contract was the first one entered with Multi 21.  It was entered into in about January 2019 for the purpose of getting the Works into a condition for recommencement of construction and for repairing existing defects.  Subsequently, the Construction Works project, designed to bring the Works to completion, was entered into in about May 2019.  It was a much larger contract.
  2. [24]
    The defendants plead that, in about early 2019, Mr Giddens and Mr Cresswell had a meeting, at which Mr Cresswell agreed to have Multi 21 takeover the head contract in place of Muggeridge if its outstanding sum due from Muggeridge was paid by KDV.  That sum appears to have been consistently claimed as $251,619.27. It is pleaded that Mr Giddens agreed to this as agent for KDV.  Mr Giddens denied any such conversation took place. 
  3. [25]
    The defendants’ opening did not allege any such specific agreement at that time.  Rather, it articulated in general terms that in December 2018 when Multi 21 was asked to provide a price to complete the Works, that there were discussions raising the agreement said to have been already made in August 2018.  I have rejected the suggestion there was any such agreement in August 2018 in paragraph [13] above.
  4. [26]
    Further, when giving evidence-in-chief, Mr Cresswell did not give evidence of any specific discussion of the kind pleaded. Rather, Mr Cresswell gave evidence, in broad terms, of general discussions in the period of October to November 2018 with Mr Giddens in which Mr Cresswell raised how Lighthouse was to get paid for funds owed by Muggeridge and that Mr Giddens said words to the effect that it would be sorted out once the major works were underway.  This is nothing like what was pleaded.  Further, importantly, it contains no express promise to pay, nor that payment would be made if Multi 21 undertook the major works contract. This is another example of the inconsistency and reformulation of the key allegations by the defendants, late in the piece, and in a way which did not make good the ultimate case.
  5. [27]
    Thereafter, the work was carried out under the contracts, apparently satisfactorily, over February 2019 to February 2020. Towards the end of that period, in about November 2019, KDV agreed to pay an amount of about $251,000 to Lighthouse.  The circumstances of that payment are at the heart of that dispute.

The Loan Deed

  1. [28]
    Mr Giddens gave evidence that in late 2019, Mr Cresswell asked him if KDV could lend Lighthouse money.  Mr Giddens said the request developed in the course of numerous conversations in which cashflow problems arose from time to time.  Mr Giddens said that he thought it would be reasonable for KDV to lend this money because of the help Multi 21 had given to KDV in completing the project. I infer from that that work under the two contracts was proceeding satisfactorily. 
  2. [29]
    He said Ms Shtengelova was much harder to convince.  However, she gave evidence that she ultimately agreed to lend the funds to Lighthouse. KDV had their solicitors, McInnes Wilson, prepare the Loan Deed and Guarantee.  It is an orthodox example of those kinds of instruments, providing for a loan payment on demand with interest at CPI and a guarantee by Mr Cresswell. Mr Cresswell submitted that the loan was not on commercial terms.  It is true that the interest rate was generous, but if the loan was to help out for cashflow reasons, that rate might be understandable. 
  3. [30]
    The Loan Deed was sent in an unexecuted form by email to Mr Cresswell.  Although he does not concede it, it is highly likely (given the form of exhibit 16) that the Guarantee was included as well. Not only is that likely for that reason, but it is highly likely that, when the solicitors prepared the documents, they would have sent them together as would be the ordinary practice if a solicitor was preparing a guarantee and a loan deed that were complementary. 
  4. [31]
    On 19 November 2019, Mr Cresswell sent a text to Mr Giddens saying he had signed the documents and asking where he wanted them. Mr Giddens says he went on site on 19 November.  He said he received the documents.  He said he noticed that the Guarantee was unsigned.  He and Mr Cresswell then involved Mr Murphy in witnessing the Guarantee as Mr Cresswell signed it.

Guarantee was executed by Mr Cresswell

  1. [32]
    The original signed Loan Deed and Guarantee are in evidence.  The signature, which the plaintiff says is Mr Cresswell’s, looks very similar to authentic signatures admitted by him. Even in the absence of expert evidence, I would have been inclined to accept, looking at the signatures, that it was his signature on the Guarantee.
  2. [33]
    Despite that, Mr Cresswell has maintained consistently that he did not sign the Guarantee despite accepting that he signed the Loan Deed and indeed, most of the other documents which bear his signature and were put in evidence at the trial.  I find that he did sign the Guarantee for the following reasons.
  3. [34]
    First, Mr Murphy gave evidence that he witnessed Mr Cresswell’s signature, as appears on the face of the Guarantee.  Mr Murphy was an employee of Multi 21. It was not disputed that he was working on the site at that time.  He had every opportunity to witness the document on the date it bears. He has no interest in the outcome of the trial.  No credible reason was suggested as to why I should reject his evidence.  I accept it.  That alone is sufficient reason to find that Mr Cresswell signed the document.
  4. [35]
    Second, Mr Giddens said he was present when the signing occurred.  Not only did he give that evidence, but his presence there was part of a logical narrative about attending the site to collect the documents and then attending the signature of the overlooked Guarantee.  
  5. [36]
    Third, Mr Heath, a well-known expert in document analysis, expressed the opinion that the document was signed by Mr Cresswell, and nothing in cross‑examination gave me any reason to reject that evidence. 
  6. [37]
    Fourth, the signature on the original looks identical to Mr Cresswell’s signature.
  7. [38]
    Fifth, a copy of the executed Loan Deed and Guarantee was emailed to Mr Cresswell after Ms Shtengelova signed the Loan Deed in early December 2019. Mr Cresswell did not raise any objection or express any surprise about the signed Loan Deed at that time.
  8. [39]
    There is no doubt in my mind that Mr Cresswell signed the Guarantee. 
  9. [40]
    That is not the end of it, however.  Mr Cresswell has consistently maintained that he did not sign the Guarantee.  He maintained it up until the end of trial, despite hearing all the above evidence and Ms Armitage’s address which raised most, if not all, of the points I have set out in this judgment.  His determination to deny signing the Guarantee reveals a capacity for reconstructing the past in a manner which suits his beliefs and sticking to that reconstruction, no matter how improbable.  That impacts on his reliability as a witness.

The alleged agreement and representations about the Loan Deed sum

  1. [41]
    It is not in dispute that the sum identified in the Loan Deed was advanced, that there was a demand for repayment from Lighthouse and a demand was made under the Guarantee. It is not disputed that these things happened in January and February of 2021 and that the money has not been repaid.  That leaves one question only: whether by reason of any statements by Mr Giddens, there was an agreement and/or representation which had the effect of relieving Lighthouse from the express obligations in the Loan Deed.
  2. [42]
    The defence alleges that in various conversations over the period February 2019 to November 2019, the following exchange occurred:[2]

Second defendant: “You promised that the $250,000 owed to Lighthouse would be paid by KDV when Multi 21 took over the Project. That money has not been paid. When can I expect payment?”

Giddens:   “Julia Shtengelova (“Julia”) is the director of the plaintiff and I have been talking to her about making that payment to Lighthouse. However, for the payment to be made Lighthouse will need to withdraw its Subcontractor’s Charge and the associated court proceedings”

Second defendant:  “I will ensure that the Subcontractor’s Charge is withdrawn, and the Proceedings are discontinued if the full payment is made to Lighthouse.”

Giddens:   “The plaintiff is having difficulty with opening a bank account and receiving EFT machines because of the Subcontractor’s charge and related court proceedings. For KDV to be able to pay Lighthouse the payment will need to be recorded in writing as a “loan” (“The Purported Loan Arrangement”) which is never to be called upon (“The Second Representation”). If Lighthouse agrees to that, Julia will be satisfied with KDV making payment of the $250,000 odd owed to Lighthouse”.

Second defendant  “If structuring it as a loan, which is never to be repaid, is what it takes to get the payment by KDV to Lighthouse, then let’s do it”

  1. [43]
    In the defendants’ opening, a different account was given:
    1. During the month of November 2019, Mr Giddens was pressing for the Form 15 and 16 documents required for final certification of the buildings mechanical services systems.
    1. a.
      LHI informed Mr Giddens that these would not be provided without the original payment agreement being honoured.
    1. b.
      Mr Giddens some days later offered a loan agreement “that would never be called upon” to satisfy the monies owed and meet the original agreement.
    1. On 19 November 2019 the loan agreement only was executed. No payment was made.
    2. Further pressure was applied by Mr Giddens regarding the compliance certificates required, to which he was met with a strict “NO” due to KDV failing to pay the agreement.
    3. 12 December 2019, KDV made payment of the funds.
  2. [44]
    In evidence-in-chief, Mr Cresswell explained the conversations broadly in this manner.  He said:
    1. (a)
      Through 2019, he kept asking Mr Giddens, “Where we are with payment of Lighthouse’s funds? and Mr Giddens said words to the effect that, “We are sorting through it, Julia is struggling to find a way to get money out of KDV”.
    2. (b)
      On or about 18 November 2019, Mr Giddens arranged a meeting at The Coffee Club at Carrara to deliver the Loan Deed.  At that meeting Mr Giddens said that the Loan Deed was an instrument to transfer the funds out of KDV and would never be called upon.
  3. [45]
    There was no mention of the use of necessary building certification to compel the production of the Loan Deed nor the refusal to provide certificates because of the failure to pay the promised sum in his evidence, nor in the defence. Although reasonable minds might differ about whether those matters necessarily had to be pleaded, in any event, those matters were opened as key facts relevant to the issues in dispute without objection.
  4. [46]
    Not only was there no mention of that issue in the defence, but it was evident from documents tendered in cross-examination that the Form 11 Certificate of Classification was provided by Mr Hanley to KDV on behalf of Multi 21.  There is no suggestion of any resistance to providing it without payment of the money in the covering email under which it was provided.  The form was provided just two days after the Loan Deed and Guarantee were signed. Importantly, however, it was before the documents were signed by Ms Shtengelova.  This did not happen until 10 December 2019, and before the money was paid, which occurred on 12 December 2019.  Further, to provide the form on 21 November, other necessary forms had to be provided before that date.
  5. [47]
    In that factual context, the idea that Multi 21 was holding out until payment of the allegedly promised funds before providing certificates is unsustainable. It provides no basis whatsoever for support for either the agreement alleged, or the representation alleged.  In cross-examination on this, Mr Cresswell conceded that he had been mistaken on the timing of these events.  However, that tends to highlight that a case which was opened, raised just before trial, four years after the events, was plainly wrong and the result of reconstruction.

The discontinuance of Lighthouse’s proceedings against KDV

  1. [48]
    In about mid-December, a Notice of Discontinuance (NOD) of the SCA proceedings against KDV was filed.  Mr Cresswell gave evidence that this occurred in the following manner.  He said that Mr Giddens sought him out with a NOD which had already been drafted.  Mr Cresswell said Mr Giddens insisted it be signed immediately and that Mr Cresswell signed it in a large utility truck with a particular provision in the dash that permitted it to be signed against a hard background.  He said Mr Giddens insisted on the document being signed because KDV had honoured its side of the agreement.
  2. [49]
    It is difficult to know what Mr Giddens would have said to this very specific version of events, as he was not cross-examined about it.  Ms Shtengelova was cross-examined about the obtaining of the NOD, but she gave evidence that she was not familiar with the phrase or the document.  Mr Giddens was extensively cross-examined as to the advantage to KDV of the discontinuance of Lighthouse’s SCA proceedings against KDV (they remained on foot against Muggeridge).  He conceded only that it avoided the cost of being involved in the ongoing proceedings.  It might be correct that Mr Giddens insisted on obtaining the NOD once the money was paid, but that is as consistent with the NOD being a quid pro quo for lending the money as it is a quid pro quo for for gifting the money.
  3. [50]
    Mr Cresswell’s cross-examination of Mr Giddens was directed at establishing that KDV obtained much more significant advantages from the NOD in respect to the SCA proceedings than just avoiding the legal costs of being involved.  The foundation of that cross examination seemed to be Mr Cresswell’s belief that if the proceedings had continued, KDV would have been liable for the whole of the claim advanced against Muggeridge.  There are two reasons why that belief was mistaken: 
    1. (a)
      First, KDV was a second defendant in the Lighthouse SCA proceedings only as principal.  Its liability to Lighthouse would have been limited to amounts payable to Muggeridge, if any, under the head contract.  By December 2019, after the costs incurred by defect rectification, and the costs flowing from taking over the Works, it was unlikely KDV had much exposure, if any, in that regard.  While I cannot be certain about that, there is no suggestion the liquidator of Muggeridge is pursuing KDV for money due to Muggeridge.  (Muggeridge was wound up in September 2019);
    2. (b)
      Second, Muggeridge had defended the claim and cross claimed for $106,000.  It is impossible to know if those defences and cross claim would have succeeded, but they certainly created a question over the entitlement to the sum claimed, at least from KDV’s perspective. 
  4. [51]
    Mr Cresswell’s cross-examination on this issue was misconceived.  He appeared to have little understanding of the Lighthouse SCA proceedings or their prospects.  It is difficult to avoid the inference that this misunderstanding (adopted in ignorance) informed his evidence that Mr Giddens was determined to obtain the NOD because of some fundamental advantage to KDV which simply did not exist.  This view of the proceedings serves the narrative of the defence.  I think it likely Mr Cresswell has reconstructed his evidence placing the NOD at the centre of Mr Giddens’ objectives for KDV to serve that narrative. 

The dispute over the final payment

  1. [52]
    After the payment of the money and the discontinuance of the SCA proceedings against KDV, the next relevant event was the finalisation of the construction contract.   In late December 2019, Multi 21 delivered its so-called final claim.  On 23 March 2020, Ms Shtengelova sent an offer to settle all claims under the contract.   On 24 March 2020, Mr Cresswell sent an email to Ms Shtengelova. I note in passing that this email was sent directly to Ms Shtengelova, not through Mr Giddens.  It reveals a willingness in Mr Cresswell to approach Ms Shtengelova directly when at a crisis in the commercial relationship with KDV. 
  2. [53]
    Given that occurred in relation to the final payment issue, it begs the question why none of the discussions about the alleged agreement to pay money owed to Lighthouse by Meggeridge was not ever raised with her despite Mr Cresswell’s evidence about his frustration with Mr Gidden’s delay about the matter and despite the evidence from the defendants suggesting that they believed Mr Giddens was not dealing entirely honestly with Ms Shtengelova. (I should say that I am not persuaded of any such dealing by Mr Giddens). In any event, the 24 March email ventilated Mr Cresswell’s concerns at the time about the final payment.
  3. [54]
    Ms Shtengelova responded, seemingly within a day or two. That response indicates her own clear understanding of the issues at the time in the commercial relationship with Mr Cresswell’s companies.  Ms Shtengelova annotated Mr Cresswell’s comments with her own in red.  Of key importance to this proceeding is the following:[3]

[Cresswell] Despite the fact that during all of this work Adam has placed KDV in breach of contract 3 times (yet we never acted) given from the outset my offer was to see us both through stresses and hardship forced upon us by Bruce. I’m not asking to be paid for anything we haven’t done, nor am I asking you for anything I don’t think is fair and reasonable, but I will accept your offer on the basis that I refuse to see you pay Adam Giddens another dollar for his services given he has acted so unprofessionally and improper over the past 5 months.

[Shtengelova] Please explain what you mean by, “Adam has placed KDV in breach of contract 3 times?”

Nick it feels like since your company has been caught being fraudulent you are trying to make me unhappy with Adam so in the end you can get more money from me. You do know how hard Adam worked to convince me to Loan LHi the money, when in the end there was no requirement for KDV to pay or do anything for your subcontractors charge. I’m really not happy about this.

[underlining added, coloured text in original]

  1. [55]
    With Ms Shtengelova’s annotations included , the email is only two pages.  It is difficult to see how Mr Cresswell could have overlooked the startling comment from Ms Shtengelova (at least on Mr Cresswell’s case) that KDV had lent money to Lighthouse and, perhaps just as startling, that there was “no requirement for KDV to pay or do anything for your subcontractors’ charge”.
  2. [56]
    That communicated loud and clear that the person who was managing KDV had an understanding of the Loan Deed which was a complete rejection of the entire premise of the case now run by the defendants.
  3. [57]
    The response to Ms Shtengelova’s email was Mr Cresswell’s email at exhibit 25. That email was sent a day or two after Ms Shtengelova’s response.  It was sent by Mr Cresswell. He accepted he would have taken a night to think about the offer from KDV which was referred to in the email from Ms Shtengelova.  His email accepted the offer that has been earlier made.  Importantly, his email said nothing to challenge Ms Shtengelova’s position on the Loan Deed or the entitlements, if any, of Lighthouse to look to KDV to pay money allegedly due under the charge.  No credible explanation for his failure to challenge Ms Shtengelova’s position on the Loan Deed was given by Mr Cresswell.

Lighthouse’s proof in the Muggeridge liquidation

  1. [58]
    The last stage in the narrative is the proof of debt lodged by Lighthouse in the winding up of Muggeridge. On 13 January 2020, Mr Cresswell lodged a proof of debt on behalf of Lighthouse claiming the $251,000 amount.
  2. [59]
    The proof of debt relevantly provides:
    1. (a)
      By paragraph 1, that the proof, “is to state that the company was on 19 September 2019 and still is, justly and truly indebted to [Lighthouse] for that sum;
    2. (b)
      By paragraph 2, that to Mr Cresswell’s knowledge or belief, Lighthouse “has not, nor has any person by the creditors order, had or received any satisfaction or security for the sum or any part of it…”
  3. [60]
    On the defendant’s case, both propositions were untrue, though they were certified as true by Mr Cresswell in signing the proof.  The defendants’ contention is that KDV had paid Lighthouse the $251,000 amount on account of that liability they asserted in Muggeridge.  So, on Lighthouse’s case in this Court, as at the date of the proof, there was no longer a debt due to Lighthouse. When challenged on this inconsistently in cross-examination, Mr Cresswell gave two responses.
  4. [61]
    First, he said that he had not read the first paragraph and just read the first part referring to being indebted “on 19 September 2019”, without reading the following three words, “and still is”.
  5. [62]
    Second, he said that he lodged the proof for the benefit of KDV so that if there were any recoveries from Muggeridge, he would pay them to KDV.  He further said that “the agreement was to pay” such recoveries to KDV.
  6. [63]
    Both responses are not credible:
    1. (a)
      First, I do not accept that Mr Cresswell did not read the words “and still is”.  Even if he did not, I do not accept he did not realise that asserting a proof of debt in a liquidation for a debt which had been paid would be misleading and wrong. I think the first response was invented in the witness box under the pressure of trying to explain the inconsistency between the proof and the defendants’ case.
    2. (b)
      Second, the suggestion that there was an agreement to pay over recoveries to KDV was a new allegation which had never, so far as I could tell, been mentioned before.  It was not suggested to Ms Shtengelova nor to Mr Giddens.  It was never pleaded.  It was not opened. I think the second response was invented in the witness box under the pressure of trying to explain the proof.

Analysis of the defendants’ case on the Loan Deed

  1. [64]
    Having completed the narrative of events and having analysed specific aspects of the evidence along the way, I now turn to addressing directly the defendants’ principal contentions on the Loan Deed.
  2. [65]
    The principal contentions can be summarised in this way: the defendants contend that an agreement was reached with KDV that it would pay to Lighthouse the amount of its claim against Muggeridge, as a condition of the related company Multi 21 completing the Works after the departure of Muggeridge from the site.  Further, they contend that Mr Giddens represented on behalf of KDV that the Loan Deed was required because of internal accounting difficulties at KDV in paying the promised money and that it would never be enforced.
  3. [66]
    I am not persuaded that any such agreement was ever reached, nor that any such representation was ever made by Mr Giddens.  I have reached that conclusion for the following reasons.
  4. [67]
    First, as I explained in paragraph [13] above, I do not accept that anything was said or done at the 18 August meeting which could give rise to any such agreement.
  5. [68]
    Second, I accept Ms Shtengelova’s evidence that she would not have entered into any such agreement and saw no reason to do so.  Further, I accept her evidence that from her perspective, she made the loan because she understood from Mr Giddens that Lighthouse needed some financial support to meet licensing requirements and decided, reluctantly, to provide that support.
  6. [69]
    Ms Shtengelova presented as a credible and reliable witness.  She made several concessions favourable to the defendants without hesitation, including recognising the correspondence between the loan sum and the Lighthouse SCA claim and confirming her understanding that that is where the amount came from. She also had credible reasons for saying she felt no financial obligation to Lighthouse.  That was because in her view, she had already paid Muggeridge for the work which Lighthouse was saying was unpaid.  “Why”, she asked rhetorically, would she “pay for something twice?”  Further, she conducted herself as a person would if they were advancing money, having a deed prepared, obtaining the security of a guarantee, and ensuring proper execution.  Then there are the plain terms of her email of March 2020.
  7. [70]
    Third, the defendants’ case depends on the making of the express agreement that they would undertake the defects and completion works in exchange for a promise to pay the outstanding amounts claimed against Muggeridge and making of the representation as to the unenforceable nature of the Loan Deed.  This required the pleading and proof of actual words and conduct to make good those propositions. However, the pleading, opening and evidence of the statements relied upon by the defendants to make out the agreement and representations was hopelessly inconsistent and vague.  I have already explained the various iterations, inconsistencies, and reconstructions in the witness box which affect the credibility of the defendants’ case. I do not accept that any words were said, or conduct undertaken to sustain either the alleged agreement or alleged the representation.
  8. [71]
    Fourth, Mr Cresswell was not a reliable witness.  I have explained in various places already throughout these reasons some of the reconstructions, errors, and weaknesses in his evidence.  Perhaps the most compelling are the following:
    1. (a)
      His unsustainable insistence that he did not sign the Guarantee;
    2. (b)
      His failure to respond to Ms Shtengelova’s comments in the March 2020 email;
    3. (c)
      His insistence on his misconceived view that KDV was somehow liable for the Lighthouse SCA claim, despite having no basis to belief that; and
    4. (d)
      His evidence in respect of the proof of debt.
  9. [72]
    I should add a further point on the Guarantee.  Ms Armitage, who appeared for the plaintiff, pointed out that Mr Cresswell only objected to his signature on the Guarantee.  The Guarantee provided security for recovery of the debt. Mr Cresswell cannot have been ignorant of that.  Acceptance that he signed the Guarantee would have made it extremely difficult to maintain the case that he believed the Loan Deed was effectively a sham.  There was a powerful inducement to reconstruct in respect of signing the Guarantee.
  10. [73]
    Fifth, the idea that the Loan Deed was required because of some difficulties with the banking arrangements or financing arrangements in KDV was not credible.  While that does not necessarily mean that it might not have been said, it makes it less likely it was said by Mr Giddens, given that it was plainly untrue.
  11. [74]
    Sixth, despite the way the case was opened, Mr Hanley gave no evidence of either the agreement or the representations alleged.
  12. [75]
    Seventh, the explanation given by Mr Giddens for the making of the advance was likely on the evidence.  It was plain from exhibit 20 that the idea that a payment from KDV could help with issues with the Queensland Building and Construction Commission (‘QBCC’) was not a foreign one to Mr Cresswell.  Further, it is evident that there was considerable activity in the licences of both Multi 21 and Lighthouse that affected their need to demonstrate an acceptable balance sheet in accordance with the particular requirements under the QBCC Act.  Although that was more relevant for Multi 21, the precise circumstances of the licences from time to time was difficult to confirm.  It was certainly understandable that Mr Giddens would have accepted that he was told there was a need for funding for that reason.  Finally, it is to be observed that it was Mr Cresswell telling Mr Giddens of the need for funding, at least on Mr Giddens’ evidence.  That would have sounded credible to Mr Giddens.  That does not mean what he was told had to be true.
  13. [76]
    Eighth, much of the defendants’ case was directed at casting Mr Giddens in a negative light as someone who was consistently misleading Ms Shtengelova by directing Mr Hanley to adjust amounts claimed by Multi 21.  To the extent any words were said to have been spoken after 18 August, they were attributed to Mr Giddens.  Much of what was dealt with in the evidence about this related to issues going solely to credit.  The key allegations of misconduct were not put to Mr Giddens, though one might confidently predict he would have rejected them. 
  14. [77]
    Mr Hanley spoke about Mr Giddens’ role in directing the inclusion of sums seemingly in the wrong place and for the wrong purpose.  To the extent Mr Hanley gave any relevant evidence, he gave the impression of someone trying to speak from recollection. The problem, however, is that the facts he appears to recall which underpinned the allegations of misconduct could just as easily relate to things which happened but were not sinister in the least, which were later built up to seem sinister afterwards to serve a narrative which Mr Hanley’s close colleague, Mr Cresswell, had convinced himself was justified.  Ultimately, it is difficult to reach any final view on these issues because of the disordered way they were litigated. 
  15. [78]
    However, the real question is whether I accept Mr Giddens’ evidence rejecting the core propositions advanced by the defendants about the discussions with him said to support the agreement and representations about the Loan Deed, to the extent there was evidence given by the defendants about those matters.  I was persuaded that Mr Gidden’s evidence in that regard was credible and reliable.  Nothing in the documentary record is inconsistent with his version of events.  Nothing in Ms Shtengelova’s evidence is inconsistent with his version.  No part of the cross-examination established any reason to reject his evidence. And of course, there is a great deal which impugns the version of Mr Cresswell. 
  16. [79]
    The plaintiff has succeeded on its claim against both defendants.  I order judgment be entered for the plaintiff against the first and second defendants in the amount of $251,619.27. I will hear the parties as to interest and costs.

Footnotes

[1] Though the statement of claim in the subcontractor’s charge proceedings says December 2017.

[2] Defence at paragraph 5

[3] Exhibit 10 page 2

Close

Editorial Notes

  • Published Case Name:

    KDV-Sport Pty Ltd v Lighthouse Industries (Qld) Pty Ltd & another

  • Shortened Case Name:

    KDV-Sport Pty Ltd v Lighthouse Industries (Qld) Pty Ltd

  • MNC:

    [2022] QDC 199

  • Court:

    QDC

  • Judge(s):

    Porter QC DCJ

  • Date:

    24 Aug 2022

Appeal Status

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

Cases Cited

No judgments cited by this judgment.

Cases Citing

Case NameFull CitationFrequency
KDV-Sport Pty Ltd v Lighthouse Industries (Qld) Pty Ltd [2022] QDC 2381 citation
1

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