Suncorp Metway Advances Corporation Pty Ltd v Wharington
[2013] QSC 201
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- Unreported Judgment
- Suncorp Metway Advances Corporation Pty Ltd v Wharington[2013] QSC 201
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Suncorp Metway Advances Corporation Pty Ltd v Wharington[2013] QSC 201
Suncorp Metway Advances Corporation Pty Ltd v Wharington[2013] QSC 201
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO: | |
Trial Division | |
PROCEEDING: | Application for summary judgment |
DELIVERED ON: | 6 August 2013 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 11 July 2013 |
JUDGE: | Mullins J |
ORDER: | The application filed on 4 June 2013 is dismissed. |
CATCHWORDS: | PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – SUMMARY JUDGMENT – where the defendant was guarantor in respect of a loan made by the plaintiff to the borrower under a facility – where a settlement deed was entered into to finalise a dispute between the parties whereby the plaintiff was willing to accept about 58% of the total debt in full satisfaction of the repayment of the loan – where most of the obligations under the settlement deed were performed – where a remaining payment of about 6% of the total amount payable under the settlement deed was not paid by the borrower or the defendant on the specified date for payment – where the plaintiff sues the defendant for the total amount then outstanding under the facility without taking into account the reduction in the amount that the plaintiff was willing to forgo under the settlement deed – where the remaining payment was received by the plaintiff and credited against under the amount owing under the facility – where the plaintiff applies for summary judgment under rule 292 of the Uniform Civil Procedure Rules 1999 (Qld) – whether the late repayment of the remaining payment was made pursuant to the settlement deed – whether it was an appropriate case to be determined summarily Uniform Civil Procedure Rules 1999, r 292 Calcorp (Australia) Pty Ltd v 271 Collins Pty Ltd (2010) 29 VR 462, considered Donaldson v Bexton [2007] 1 Qd R 525, considered Neumann Contractors Pty Ltd v Traspunt No 5 Pty Ltd [2011] 2 Qd R 114, considered |
COUNSEL: | A C Stumer for the plaintiff D Butler for the defendant |
SOLICITORS: | Allens for the plaintiff Holding Redlich for the defendant |
[1] In this proceeding the plaintiff claims the amount of $696,222.02 pursuant to a guarantee given by the defendant in respect of loan obligations incurred by Wharington Properties Pty Ltd (the company) to the plaintiff under a facility in a chattel mortgage dated 4 July 2009. The defence relied upon by the defendant is that her obligations as guarantor were released under a settlement deed with the plaintiff and the other parties dated 23 November 2011.
[2] The plaintiff applies for summary judgment pursuant to r 292 of the Uniform Civil Procedure Rules 1999 on the basis the defendant has no real prospect of successfully defending the claim and there is no necessity for a trial. The defendant opposes summary judgment on the basis that the issues raised by her defence are arguable and are not appropriate for summary determination.
[3] It is common ground that the outcome of the application primarily depends on the construction of the settlement deed.
Settlement deed
[4] The plaintiff and a related company Suncorp-Metway Limited (SML) (to which the company had granted a fixed and floating charge on 30 June 2010) were in dispute with the company and the guarantors relating to the facility, the appointment by the plaintiff and SML of receivers and managers (the receivers) to the vessel Wild Thing which was the subject of the chattel mortgage and SML’s and/or the plaintiff’s claim in respect of another vessel Finesse owned by the company. The settlement deed was entered into to settle and finalise the matters in dispute between the parties and revolved around a contract for the sale by the company of Finesse for $721,000 which was referred to in the settlement deed as the “Contract”.
[5] Clause 2 of the settlement deed provided for the vacating of orders that had been made in the proceeding in this Court numbered 9437 of 2011 by the consent of the parties, and for the specified orders to be vacated on or before 4 pm on 25 November 2011 or such later date as may be agreed in writing by all of the parties. Clause 2.2(b) provided for the mechanism for reinstating the orders, if the Completion Date did not occur by the date provided for in clause 3.2.
[6] Clause 3.1 of the settlement deed set out the steps to occur at completion of the contract for the sale of Finesse. The “Completion Date” was defined in the settlement deed to mean “the date by which all the steps set out in clause 3.1(a) to 3.1(g) are completed.”
[7] Under clause 3.1(a) of the settlement deed, the balance of the purchase monies from the sale of Finesse in an amount of no less than $648,900 was required to be paid by bank cheque by the purchaser directly to the plaintiff. Under clause 3.1(b), the amount of $72,100 constituting the deposit under the contract, less the amount of commission which the selling agent was entitled to retain, was to be paid to the plaintiff.
[8] Clause 3.2 of the settlement deed provided:
“This Deed terminates if the Completion Date does not occur by 4pm on Friday, 25 November 2011, or such later date as may be agreed in writing by all of the Parties.”
[9] Clause 3.3 of the settlement deed set out the steps to occur following the Completion Date. Clause 3.3(b) of the settlement deed provided for the plaintiff to receive the remaining part of the deposit that it had not already received:
“By 4pm on 25 May 2012, the Company, Grant Wharington and Kylie Wharington must pay to SMAC the amount of $72,100, less any amount of the deposit paid under the Contract that is remitted to SMAC by the deposit holder under the Contract prior to that time.”
[10] Clause 4.1 of the settlement deed provided:
“For the purposes of this clause 4, the SMAC Conditions Precedent are as follows:
(a)compliance by the Company, Grant Wharington and Kylie Wharington with clauses 3.3(b) and 3.3(c) by the time specified in those clauses:
(b)SMAC having received payment in full of:
(i)the balance of the purchase monies referred to in clause
3.1(a); and
(ii)the balance of the deposit monies referred to in clause 3.1(b).”
[11] Clause 4.2 of the settlement deed set out the consequences that would flow from the date that the SMAC Conditions Precedent were fulfilled and, relevantly, provided in paragraph (c) that on and from that date of fulfilment “SMAC will release the Personal Guarantees” which was defined to mean the guarantee and indemnity provided by Mr Wharington and the defendant in favour of the plaintiff in respect of the facility dated 4 July 2009.
[12] Whereas the releases to be provided by the plaintiff, SML and the receivers to the company, Mr Wharington and the defendant would not take effect under clause 4.2 of the settlement deed until the SMAC Conditions Precedent were fulfilled, the releases and indemnities given by the company, Mr Wharington and the defendant in favour of the plaintiff, SML and the receivers under clauses 5 and 6.1 of the settlement deed took effect from the Completion Date. Under clause 6.2, the indemnity to be given by SML, the plaintiff and the receivers in favour of the company, Mr Wharington and the defendant would take effect only from the date the releases in clause 4.2(d) of the settlement deed took effect.
[13] Clause 7 of the settlement deed provided:
“If the Company, Grant Wharington and Kylie Wharington fail to comply with clause 3.3(b) or 3.3(c), then the Parties acknowledge and agree that SML can enforce the Charge and SMAC can enforce the Chattel Mortgage to recover the entirety of the debt owed to SMAC under the Facility.”
[14] Clause 8 of the settlement deed relevantly provided:
“On and from the Completion Date, and unless and until the release in clause 4.2(d) takes effect, SMAC will forbear from taking any steps to enforce the Chattel Mortgage until the earlier of:
(a)26 May 2012;
(b)the date of any default under this Deed by the Company, Grant Wharington or Kylie Wharington;
(c)…
(d)the date of Kylie Wharington being declared bankrupt.”
[15] There is no clause in the settlement deed expressly stating that time is of the essence of the obligations under the deed. There is no clause in the settlement deed containing an acknowledgment by the defendant of the full amount of the debt owed by her under the guarantee of the facility.
Relevant events
[16] Although the defendant does not admit in the defence that the company defaulted under the facility on 4 April 2011, the application proceeded on the basis that the defendant did not contend that the plaintiff could not prove the default. On 7 April 2011 the plaintiff gave notice to the company that, due to the default, the total amount of debt owing under the facility which was then $1,229,031.87 became due and payable and demanded payment. A copy of that written notice was sent to the defendant as a guarantor under the facility. Payment of the claimed debt was not made.
[17] On 22 August 2011 the plaintiff appointed the receivers to Wild Thing and a dispute arose concerning the proprietary rights in Wild Thing and Finesse. Shortly after, the company entered into the relevant contract to sell Finesse and this precipitated the parties’ agreement to resolve their disputes on the terms of the settlement deed.
[18] Immediately prior to the completion of the contract for the sale of Finesse, the purchaser demanded an ex gratia payment of $10,000. The plaintiff agreed with the company, Mr Wharington and the defendant that the plaintiff would arrange for $10,000 from the proceeds of settlement to be paid back to the purchaser and the company would make a payment to the plaintiff of $5,000. The settlement of the sale proceeded on 2 December 2011 (which I infer became the Completion Date by the agreement of the parties) on the basis of that agreed adjustment to the operation of the settlement deed.
[19] On 2 December 2011 the plaintiff received the amount of $671,344.48 which was made up of the sum of $648,900 pursuant to clause 3.1(a) of the settlement deed and the sum of $22,445 pursuant to clause 3.1(b) of the settlement deed, but less 52 cents due to a shortfall in the payment cheques received from the purchaser under the contract. The payment of $5,000 by the company was made on 2 December 2011 by a transfer of funds from the trust account of solicitors acting for the company, Mr Wharington and the defendant to the trust account of the plaintiff’s solicitors.
[20] By the settlement deed the plaintiff compromised the amount owed to it under the facility by a little less than half the full amount owed by the company. After completion on 2 December 2011, what remained to be done under clause 3.3(b) of the settlement deed was payment of the sum of $39,655 to the plaintiff by the company, Mr Wharington or the defendant by 4pm on 25 May 2012. That amount was not paid by 4pm on 25 May 2012. The outstanding amount of $39,655 was a much less significant sum than the amount received by the plaintiff on 2 December 2011, being about 6% of the total amount payable under the settlement deed.
[21] The plaintiff then served on the defendant a notice of demand on guarantor dated 7 June 2012 reciting that default had been made by the company under the facility dated 4 July 2009 and demanding payment from the defendant of the amount due by her as guarantor as at 29 May 2012 of $740,782.52. The notice advised if that amount was not paid in full before 4pm on 14 June 2012, the plaintiff would take such action as it may be advised for recovery of that amount. The amount of the debt was calculated on the basis that the settlement deed did not operate to release that part of the company’s debt that would have been released, if clause 4.2 of the settlement deed had taken effect.
[22] Since that demand, two additional payments have been received by the plaintiff which reduced the total amount owing under the facility. A GST refund in the amount of $10,224 was received by the plaintiff on 11 July 2012 from the receivers. An amount of $34,336.50 was received by the plaintiff by cheque on or about 28 December 2012 from the purchaser of Wild Thing (BC39 Pty Ltd) which calculated that after the GST refund there was an amount of $29,366.65 owing under the settlement deed and offered to pay that amount together with a further $5,000 for costs and interest in full and final settlement of all matters between the Wharingtons and the plaintiff. (There is a discrepancy between what the plaintiff states is the amount of the GST refund it received of $10,224 and the amount used by BC39 Pty Ltd in its calculations of $10,318.35, but the minimal difference in these figures has no relevance for this application.)
[23] The plaintiff’s solicitors responded to that offer from BC39 Pty Ltd by indicating the plaintiff’s willingness to accept payment of $34,336.50, but in exchange for a release of its security interest in Wild Thing. BC39 Pty Ltd disputed that the plaintiff had an effective security interest in Wild Thing. By that stage this proceeding had commenced and the plaintiff’s solicitors noted that the plaintiff may be willing to consider a separate offer to settle this proceeding against Mrs Wharington, but noted that the solicitors for BC39 Pty Ltd did not act for Mrs Wharington and therefore expected that any such offer Mrs Wharington may submit would be sent by her solicitors.
[24] A settlement deed was entered into between the plaintiff, BC39 Pty Ltd, the defendant and Mr Wharington on 24 December 2012. It provided for the payment of the sum of $34,336.50 by BC39 Pty Ltd and, upon unconditional receipt of that sum by the plaintiff, the plaintiff would release its security over Wild Thing. Clause 5 of this settlement deed incorporated an acknowledgement by the defendant and Mr Wharington as guarantors:
“The Guarantors consent to the release of the Security Interest by SMAC and agree that their liabilities under their respective Guarantees are not affected by the release of the Security Interest.”
This proceeding
[25] When this proceeding was commenced on 23 October 2012, the plaintiff claimed the sum of $740,782.52 as the amount owed by the defendant under the guarantee, in reliance on the company’s default under the facility and no reference was made whatsoever in the statement of claim to the settlement deed.
[26] The defendant’s defence filed on 18 December 2012 pleads the settlement deed and denies that the defendant is liable to the plaintiff for any amount owing under the guarantee on the basis of the settlement deed.
[27] By the reply filed on 17 January 2003, the plaintiff alleges that the defendant’s denial of liability cannot be sustained because the settlement deed contained a condition precedent (clause 3.3(b)) that remains unsatisfied.
[28] The defendant filed a rejoinder on 8 July 2013 in which she alleges that the amount payable under clause 3.3(b) of the settlement deed was satisfied by the payment made to the plaintiff of $10,224 on 11 July 2012 and the sum of $34,336.50 on 28 December 2012.
[29] In paragraph 1(b) of the rejoinder the defendant pleads that if the SMAC conditions precedent under clause 4.1 were not satisfied, then properly construed, the amount outstanding from the defendant under the guarantee is limited to the sum of $39,655 due under clause 3.3(b) of the settlement deed and not the amount claimed by the plaintiff in this proceeding.
[30] The defendant also pleads an alternative defence in paragraph 1(c) of the rejoinder that clause 7 of the settlement deed is a penalty and unenforceable. In the particulars given of paragraph 1(c)(i) of the rejoinder, it is stated that “At the time of entering into the Deed, the amount outstanding under the Facility was $1,205,056.71 (clause 1.1 of the Deed).
Issues
[31] The defendant’s contention is that late payment was made of the amount due to the plaintiff under clause 3.3(b) of the settlement deed and that, despite the payment being late, all conditions precedent to the release of the defendant’s guarantee were satisfied and her liability was released pursuant to clause 4.2 of the settlement deed. The defendant argues that when the defendant was late in making payment, if the plaintiff wished to preclude a late payment being made, the plaintiff had to elect to terminate the settlement deed, but did not do so before the late payment was made. The defendant therefore submits that condition 3.3(b) was satisfied late and the settlement deed could no longer be terminated.
[32] The plaintiff contends that the payment of $34,336.50 was not a payment under clause 3.3(b) of the settlement deed, but a payment under a different settlement deed in order to secure the release of the plaintiff’s security over Wild Thing.
[33] The plaintiff argues that on the plain construction of the terms of the settlement deed (and particularly clauses 4.1(a), 7 and 8) the late payment of the amount required under clause 3.3(b) did not satisfy the SMAC Conditions Precedent and that clause 4.2(c) has never, and could never, take effect.
[34] Another way of expressing the plaintiff’s argument is that time was of the essence of the settlement deed and the failure of any of the company, Mr Wharington or the defendant to pay the sum of $39,655 to the plaintiff by 4 pm on 25 May 2012 resulted in the settlement deed operating according to its terms without any action necessary on the plaintiff’s part. This meant that the release under clause 4.2(c) did not take effect and the defendant continued to be liable under the terms of her guarantee for the full amount owed by the company under the facility which was enforceable under clause 7 of the settlement deed.
[35] The main issues can therefore be summarised as:
(a)were the outstanding obligations under the settlement deed capable of fulfilment when clause 3.3(b) was not complied with on 25 May 2012?
(b)if so, were outstanding obligations under the settlement deed capable of being fulfilled on 28 December 2012?
(c)were the payments of $10,244 on 10 July 2012 and $34,336.50 on 28 December 2012 made under clause 3.3(b) of the settlement deed or can they be treated as being made under clause 3.3(b)?
Could the payment under clause 3.3(b) be made after 25 May 2012?
[36] Mr Butler of counsel who appears on behalf of the defendant relies on dicta extracted in Donaldson v Bexton [2007] 1 Qd R 525 at [5] and [41] from other authorities to the effect where a party under a contract was not in default, but had the right to avoid the contract for the non-fulfilment of a condition by the other party, the right of the party not in default to terminate the contract could be lost, if the other party satisfied the condition late, but before the party not in default had a elected to terminate.
[37] To the extent that the defendant relies on these dicta, the defendant has not pleaded that on the breach by the company, Mr Wharington and the defendant of clause 3.3 (b) of the settlement deed an election accrued to the plaintiff to terminate the settlement deed and that the payments relied on by the defendant as fulfilling clause 3.3(b) were made before any such election was exercised.
[38] Mr Stumer of counsel who appears on behalf of the plaintiff responded with the argument that if election by the plaintiff to bring the settlement deed to an end was required, that was done in substance by the giving of the notice to the defendant dated 7 June 2012 seeking to recover the full amount then owing under the facility (and the defendant’s guarantee). The exercise of such an election, however, is not pleaded by the plaintiff.
[39] Donaldson and the authorities canvassed in that decision were concerned with the fulfilment of a condition before the vendor and purchaser were required to complete the sale and purchase of the subject real property. The parties’ major obligations under the contract remained to be performed. In contrast, few obligations remained to be performed under the settlement deed when the time specified for payment of the amount under clause 3.3(b) arose. It does not reflect the stage that performance of the obligations under the settlement deed had reached to refer to termination of the settlement deed on default under clause 3.3(b), as the provisions of the deed to which effect had been given, such as releases of the plaintiff and SMAC, would remain effective.
[40] In considering what rights accrued to the plaintiff when the payment under clause 3.3(b) was not made on the specified date and how they could be exercised, the nature of the time requirement under the clause is relevant. Although the issue of whether time was of the essence under the settlement deed was raised during the hearing of this application, neither party has expressly pleaded the issue. In the absence of an express term that time is of the essence of the obligations under the settlement deed, it is a matter of construction of the deed to determine whether the specified date in clause 3.3(b) for payment of the amount required under that clause was an essential aspect of the obligation under that clause. This has to be considered in the context that most of the obligations under the settlement deed had been performed or took effect upon the Completion Date. The payment of the remaining payment of due under clause 3.3(b) was not required until about six months after the Completion date and was a significantly lesser sum than was paid on the Completion Date, being about 6% of the total amount payable under the settlement deed. Despite the specification of the date for payment in clause 3.3(b), it is arguable that the time for the payment was of subsidiary importance and unlikely to have been intended by the parties to require performance on the specified date and no other. It is not a settlement deed of the type incorporating an acknowledgment of debt and the mechanism for entering judgment for the full amount of the acknowledged debt on default being made in the payment of an instalment: cf Calcorp (Australia) Pty Ltd v 271 Collins Pty Ltd (2010) 29 VR 462. All that clause 7 of the settlement deed provides for on the default under clause 3.3(b) is for SML and the plaintiff to be at liberty respectively to enforce the charge and the facility agreement, and that does not address whether on the construction of the settlement deed as a whole compliance with clause 3.3(b) can still occur after the date specified in the clause.
[41] The defendant has raised an arguable case that the remaining payment under clause 3.3(b) was able to be paid after 25 May 2012. How long after before it would be too late would need to be considered in all the circumstances and this was not the basis on which the case was presented for summary judgment by the plaintiff.
[42] It is therefore not necessary to consider the defendant’s defence based on the operation of clause 7 amounting to a penalty.
How should the payments made in July and December 2012 be characterised?
[43] Under clause 3.3(b) of the settlement deed, the payment had to be made by (or on behalf) of the company, Mr Wharington or the defendant. The remission by the receivers (who presumably were the agents of the company) of the GST refund is arguably a payment on behalf of the company. Although the plaintiff entered into a settlement deed with BC39 Pty Ltd in respect of the payment made on 28 December 2012, the payment was credited by the plaintiff to the amount owing under the facility agreement. It is also arguably a payment made on behalf of or for the benefit of the plaintiff for the purpose of clause 3.3(b) of the settlement deed, even though the making of the payment was documented by the plaintiff with BC39 Pty Ltd. Clause 5 of the BC39 Pty Ltd settlement deed is merely an acknowledgment that the release of the security interest over Wild Thing does not affect the liabilities under the guarantees of Mr Wharington and the defendant. That clause does not preclude the arguments advance by the defendant in reliance on the payment made by BC39 Pty Ltd that reduced the debt owed to the plaintiff under the facility.
Should the plaintiff obtain summary judgment?
[44] There was no dispute as to the principles to be applied on a summary judgment application: Neumann Contractors Pty Ltd v Traspunt No 5 Pty Ltd [2011] 2 Qd R 114 at [80]-[81].
[45] Some of the arguments traversed on the hearing of this application were not reflected in the parties’ pleadings. Although the matter may be characterised as largely based on the construction of the settlement deed, the unusual aspects of the operation of the settlement deed in the circumstances were not able to be fully explored on the summary judgment hearing and suggest prudence should be exercised in not disposing of the construction of the settlement deed on a summary basis in the absence of evidence of all the circumstances that may have a bearing on the construction and operation of the settlement deed. The defendant is therefore successful in resisting summary judgment.
[46] It follows that the application filed on 4 June 2013 should be dismissed. I will give the parties an opportunity to make submissions as to the appropriate costs order.