Anvil Finance Pty Ltd v Vantage Capital Ltd

[2002] QDC 338

DISTRICT COURT OF QUEENSLAND

CITATION:	Anvil Finance Pty Ltd v Vantage Capital Limited & Ors [2002] QDC 338
PARTIES:	ANVIL FINANCE PTY LTD

Plaintiff

and

VANTAGE CAPITAL LIMITED

First Defendant

and

KONSTANTINOS SAKKAS

Second Defendant

and

DAVID LESLIE GILLARD

Third Defendant

and

WARREN BRAIN

Defendant by Counter-Claim

FILE NO/S: 

D1003/2002

DIVISION: 

District Court of Queensland

PROCEEDING: 

Application

ORIGINATING

COURT: 

Southport

DELIVERED ON:

DELIVERED AT: 

Southport

HEARING DATE: 

23 August 2002

JUDGE: 

Alan Wilson SC DCJ

ORDER: 

1.	Judgment for the plaintiff against the first and second defendants on the claim
2.	Strike out the first defendant’s counter-claim against the plaintiff, and the defendant by counter-claim.

CATCHWORDS: PRACTICE – SUMMARY JUDGMENT FOR THE PLAINTIFF – r 292 – whether defendants have any real prospect of succeeding – whether circumstances arise which ought to be investigated

Cases considered:

Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spare
Parts Pty Ltd (1992) 38 FCR 471
Gould v Vaggelas (1985) 157 CLR 215

White Industries v Flower & Hart (1998) 156 ALR 169

COUNSEL:	Mr J P Murphy for the applicant plaintiff Mr P Hackett for the respondent first and second defendants
SOLICITORS:	Porter Davies for the applicant plaintiff McCowans for the respondent first and second defendants

[1] This is an application by the plaintiff for summary judgment against the first and
second defendants under r 292 which provides:

292 Summary judgment for plaintiff

(1)	A plaintiff may, at any time after a defendant files a notice of intention to defend, apply to the court under this part for judgment against the defendant.
(2)	If the court is satisfied that- (a) the defendant has no real prospect of successfully defending all or a part of the plaintiff’s claim; and (b) there is no need for a trial of the claim or the part of the claim; the court may give judgment for the plaintiff against the defendant for all or the part of the plaintiff’s claim and may make any other order the court considers appropriate.

The plaintiff obtained judgment in default of a defence against the third defendant on 20 August 2002.

1. The plaintiff’s claim arises under an alleged contract in writing made with the first defendant and dated 2 April 2001 whereby the first defendant agreed to loan to the plaintiff $2,500,000.00 to acquire a residential unit in Sydney on or before 30 January 2002, on the condition that the plaintiff purchase a “Put Option” from the first defendant for $197,500.00. That sum was paid by the plaintiff to the first defendant on 12 April 2001. The claim against the first defendant is for monies due under the contract, i.e. the repayment of that sum; and, for damages for an alleged breach of the Trade Practices Act 1974. The claim against the second defendant is advanced on the grounds he was knowingly concerned in the first defendant’s breach of s 52 of that Act.

2. Under the contract the amount of $197,500.00 (which, as is not in dispute, was paid to the first defendant) was unavailable to that defendant until the real estate purchase was settled and, in particular, was to be refunded to the plaintiff in the event loan funds were not provided for any reason within 31 days of the plaintiff’s payment. These terms are set out in a letter signed by the third defendant, on the first defendant’s behalf, to Mr Warren Brain who was a director of the plaintiff, dated 2 April 2001:

   The main condition of the approval will be that the borrower will purchase a Put Option for the gross value of the project being $197,500.00. The Put Option funds will be deposited into a nominated bank account in the name of Vantage Capital Limited – Bellevue Hill Unit held in a bank account nominated by the lender. This Put Option fee is to be paid 30 days prior to the initial drawdown of funds. The Put Option funds will not be available to Vantage Capital Limited until the settlement is affected. If the loan does not proceed for any reason 31 days after lodgements of the abovementioned Put Option funds the borrower shall have the right to withdraw the said funds.

3. The letter also referred to certain conditions attached to the loan – relevantly:

   The loan will be made available subject to the legally binding security documentation, loan agreement and other requirements, which we will prepare, being completed to our satisfaction. This documentation will prevail over this letter.

   If you do not comply with any of the conditions of this letter or if any circumstances occur which in our opinion makes completion of the matter undesirable, we have the right to cancel the approval in principle (whether or not you have signed the duplicate copy of this letter and returned it to us) without being liable for damages for doing so and you agree to reimburse us for any costs incurred by us.

4. An amended defence and counterclaim filed by the first and second defendants by leave on 9 August 2002, and an affidavit from the second defendant Mr Sakkas, and an affidavit from a Mr Andrew Murray (exhibited to an affidavit of the defendant’s solicitor Mr Crowther but never, itself, filed in the Court) assert that the first defendant’s business was conducted in such a way that it sells Put Options and invests the monies received from those sales with an investment banker in the United States (Mr Murray) to generate a return to fund the loan facility. It is alleged by Mr Sakkas that before the contract was entered into these terms were discussed with Mr Brain on behalf of the plaintiff, and orally acknowledged by him in terms which differ from the written contract. The particular variation said to arise from these conversations permitted the first defendant the immediate use of the sum of $197,500.00. The first defendant alleges this factual dispute cannot, and should not be determined in an application for summary judgment because it required the cross-examination of Mr Brain, and the third defendant; and, although Mr Brain was asked to be present for cross-examination, he did not attend Court.

5. Further, the first defendant asserts that because the plaintiff purported to terminate the contract and demand the immediate return of its funds, it suffered losses through investments arranged by Mr Murray in the United States Futures Market which are the subject of the counterclaim for $1,992,000.00 and an associated set- off.

6. As to the claim against the second defendant, it is asserted on his behalf that the plaintiff cannot prove he had knowledge of the contents of the letter 2 April 2001 containing the terms of the contract and, in any event, the variations mentioned above would negative the allegedly misleading nature of representations relied upon by the plaintiff for a remedy under the Trade Practices legislation.

7. These issues are, to a degree, clouded by additional matters raised in the amended defence and counterclaim in which it is alleged that before 4 April 2001 the plaintiff obtained three “Deposit Bonds” in sums of $210,000.000, $250,000.00, and $90,000.00 for the purpose of purchasing three parcels of real estate in New South Wales for which bonds, it is alleged, the third defendant purported to guarantee performance, by the plaintiff, on behalf of the first defendant. It is then alleged that Mr Brain, who was named as a defendant by the first and second defendant’s counterclaim, knew the third defendant did not have the authority of the first defendant to guarantee those bonds but conspired with Mr Brain to fraudulently write letters on the first defendant’s behalf, providing the guarantees, and dated 4 April and 11 April 2001. This exposes the first defendant, it is said, to those guarantees in the sum of $550,000.00.

8. The first defendant does not deny the monies paid by the plaintiff for the Put Option, $197,500.00, had never been repaid to it. It claims its alleged US Future’s Market losses of $1,992,000.00, less that sum, from the plaintiff by counterclaim, and damages “for conspiracy to injure and defraud” in the sum of $550,000.00. The first defendant separately claims the latter sum, again for “damages for conspiracy to injure and defraud” against Mr Brain personally.

9. The sum of $1,992,000.00 is also referred to in the amended defence, and asserted to be “costs”, in terms of the contract, incurred by the first defendant which, although not directly categorised as a set-off appears to be raised up in that fashion against the plaintiff.

10. The loan funds were never provided and, the plaintiff asserts, the sum of $197,500.00 became due and repayable to it 31 days after funds for the Put Option were provided i.e. by 13 May 2001 or, at the latest, on 31 July 2001 when the plaintiff demanded the return of that sum.

Alleged Variation of the Contract

1. The terms of the written contract 2 April 2001 alleged to have been varied are those set out in paragraphs 5(c) and (d) of the plaintiff’s statement of claim: namely, that pending settlement of the loan the first defendant would not have recourse to the sum of $197,5000.00 provided by the plaintiff, and that at any time after 31 days of the provision of that sum if the loan did not proceed the first defendant would, on demand, repay it to the plaintiff. Paragraph 2 of the amended defence of the first and second defendants asserts these terms were varied orally by Mr Brain, on behalf of the plaintiff and the third defendant on behalf of the first defendant in about April 2001 so as to permit the first defendant the immediate use of that sum to purchase the Put Option. This is said to have been recorded in two memoranda from the third defendant to the second defendant dated 1 June, and 11 July 2001.

2. It is highly improbable the defendants could establish those variations. There is no affidavit from the third defendant. The two memoranda are unsigned. No consideration is pleaded, or alleged, for the alleged variations; and, neither can consideration be inferred from the allegations pleaded or deposed to by the defendants.

3. The second defendant in fact asserts, in para 7 of his affidavit, that in a conversation with Mr Brain in about January 2001 he told Brain that the funds provided for the Put Option would be used by Mr Murray to purchase financial instruments in the United States. In particular, the second defendant asserts he told Mr Brain that it was necessary for the first defendant to utilise the monies paid for the Put Option for a period of time before the loan advance was made. Mr Sakkas does not say, however, that Mr Brain actually agreed to this variation and deposes only that he “...appeared to understand all of that”.

4. In any event, and confusingly, paragraph 10 of the second defendant’s affidavit shows that, if the first defendant did enter into some kind of contract in the United States it did so in March 2001, well before the contract was formed, and before funds were provided by the plaintiff for the Put Option.

5. Even if the second defendant’s allegation, at para 7 of his affidavit, is construed to mean the plaintiff agreed the first defendant could use the funds prior to the loan draw-down, evidence of that kind would, ordinarily, be inadmissible to contradict the clear terms of the written contract.

6. In any event, even if these alleged variations are accepted the first defendant establishes, by them, nothing more than that the Put Option funds might go to the United States for the purposes alleged but it is neither asserted nor established that, by any variation, the provision that the funds provided for the Put Option were repayable to the plaintiff if loan funds were not available within 31 days is affected, or varied. Hence, even if a valid variation in the terms pleaded by the first defendant was proven by it, the term of the written contract that the sum of $197,500.00 was to be returned if the loan monies were not provided within 31 days is not, itself, varied in any way.

Apparent Set-Off

1. Paragraph 2 of the amended defence appears to plead some kind of contractual set- off arising out of the alleged oral variation. For the reasons set out above the first defendant cannot, in my opinion, rely upon those variations, even if proved because they leave, unaltered, the contractual term touching repayment within 31 days. Paragraphs 2(d) and (e) of the amended defence and counterclaim restate the contractual term set out earlier (to the effect the first defendant might cancel the contract if circumstances occurred which, in its opinion, made completion undesirable) whereupon the plaintiff was obliged to reimburse it for any costs incurred; and, assert undesirable circumstances did arise on 10 August 2001 following the plaintiff’s demand of 31 July for return of its money, a further oral demand by Mr Brain on 5 August 2001, and a threat by Mr Brain and his lawyer, when they attended the first defendant’s office on 7 August 2001, to appoint a liquidator to the first defendant. The term “costs” used in the contract is a legal term of art and, in the sense used in the contract, could only refer to legal costs and expenses of that kind, and not to damages – particularly when the word “damages” is used later, in the same sentence, in its usual legal sense.

2. Mr Murray’s affidavit (which has never been filed) abounds with confusing terminology which might be used in the marketplace in which he trades but there is no evidence from him, or otherwise on behalf of the first defendant, to support the bare allegations of alleged losses on the US Futures Market nor how, if they occurred, they are relevant to this action. In any event they could only, with reference to the contractual arrangements between the parties, be categorised as damages, and not as costs. Further, as noted earlier, if the first defendant did enter into some kind of contract in the US that arose before the relevant contract between the plaintiff and the first defendant was formed.

3. As the evidence presently stands it is impossible to see, firstly, how the first defendant could establish some liability in the plaintiff for the very large amount of the alleged set-off; and, secondly, the evidence adduced to support it is desultory, and unpersuasive.

Trade Practices Act Claims

1. The plaintiff alleges against the first defendant that on or about 26 March 2001 the second and third defendants orally represented to Mr Brain that if the plaintiff provided funds to the first defendant it would use those funds to secure finance through the United States; that the funds would however be available to be refunded to the plaintiff upon demand; that they would not be disbursed, and the first defendant would not have recourse to them; and, that if the funds were provided the first defendant would provide funds for a loan of $2,500,000.00. All of these terms are consonant with the first defendant’s letter of 2 April 2001. It is, therefore, inherently probable that those representations were made as part of the first defendant’s “sales pitch” and induced the plaintiff to enter into a contract in the terms of that letter. The second defendant’s own affidavit contains an acknowledgement that at least some of the pleaded representations were made and in my view these matters make the denial, at paragraph 4 of the defence that the contract of 2 April 2001 did not contain the representations pleaded, insupportable.

2. Under s 51A of the Trade Practices Act the defendant bears the onus of proving a reasonable basis for representations about the future. I do not see how the pleaded representations could be categorised as anything other than representations of that kind. Nothing in the second defendant’s evidence shows he had a reasonable basis for making those representations which, as he at least partly agrees, were advanced by him.

3. In my view there is, then, no meaningful prospect that the first defendant can succeed in establishing the denials at paragraphs 3 and 4 of the defence and it cannot, therefore, discharge the evidential onus under the Act.

4. Even if that view is wrong there is no realistic prospect or possibility that the first defendant can succeed in avoiding its clear contractual obligation to return funds after 31 days, or upon demand. For these reasons, I am persuaded the plaintiff is entitled to summary judgment against the first defendant.

Second Defendant

1. It is asserted, simply, against the second defendant that he was knowingly concerned in the first defendant’s breaches of s 52 of the Trade Practices Act. A simple comparison of paragraph 11 of the statement of claim with paragraph 7 of the second defendant’s affidavit shows that (contrary to the denials in the amended defence), he made at least some of the representations alleged. In particular there is not, for the reasons set out above, any real basis for doubting a representation concerning promises to affect repayment in the terms stipulated in the written contract (and, of course, confirmed by it).

2. It is sufficient in this claim against either defendant that the alleged representations played only a part, even a minor part, in inducing the respondent to enter the contracts which caused the loss: Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spare Parts Pty Ltd (1992) 38 FCR 471 (applying the common law test from Gould v Vaggelas (1985) 157 CLR 215, at 236). Although Mr Brain’s affidavit is terse it clearly and logically follows, from the matters set out above, that the plaintiff would encounter no difficulty establishing inducement.

3. I am satisfied the second defendant does not have a realistic prospect of resisting this claim; and, if he has any prospect at all, it is fanciful. Nor do I think the matters he raises give rise to a need for a trial of this part of the claim.

Judgment for Plaintiff against First and Second Defendants

1. The plaintiff is, then, entitled to judgment against both defendants. For the sake of completeness, I am not persuaded by any of the defendants’ material that, for some other reason, there is any compelling need for a trial of the claim, or part of the claim.

Counterclaim

1. The “US Futures” aspect of the counterclaim suffers from the same clear contractual, and evidentiary defects as it does when advanced, in the form of an apparent set-off, in the defence.

2. Otherwise, the counterclaim in respect of the deposit bonds is framed in tort of which, of course, damages are the gist of the action. As matters touching those deposit bonds are pleaded, however, there is no evidence that loss is inevitable once the impugned step was taken. No cause of action could accrue until the deposit bonds were used and the first defendant was called upon to honour its guarantee. There is no allegation in the counterclaim the defendant has ever suffered any actual loss and on its face that pleading discloses no cause of action.

3. Even if a cause of action is conceded, two of the deposit bonds show on their face that they expired on 6 April 2002. I expunged a passage in Mr Brain’s affidavit containing an assertion that the third would not be called upon because the subject of property has settled but, even without that evidence, there is nothing to establish any immediate, or possible future contingent liability.

4. Further, the counterclaim alleges that Mr Brain knew the third defendant did not have authority to sign the deposit bonds. This is an uncomfortable pleading, even granting a right to the first defendant to plead in the alternative, in the face of the admission in paragraph 1 of the defence that the third defendant had actual authority to enter into a loan contract, on the first defendant’s behalf, for $2,500,000.00. Further, it is alleged the third defendant and Mr Brain unlawfully conspired to defraud the first defendant but, given the nature of this very serious allegation, it is insufficiently particularised. It makes very serious but completely bare allegations of a fraudulent conspiracy of a kind which amount, in my opinion, to an abuse of process: White Industries v Flower & Hart (1998) 156 ALR 169.

1. The plaintiff, and the defendant by counterclaim applied for a summary judgment on the counterclaim but had not filed a pleading in response to it and that, as counsel for those parties properly conceded, was a bar to summary judgment on the counterclaim. For the reasons set out I am, however, persuaded the counterclaim is unsustainable and ought to be struck out.

2. I will hear submissions concerning costs.

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