ANZ Banking Group Ltd v Matthews
[2012] VCC 1600
•11 JULY 2012
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted |
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
Case No. CI-11-01749
| AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED | Plaintiff |
| v | |
| GRAEME STEPHEN MATTHEWS -and- MARILYN JEAN MATTHEWS | Defendant |
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JUDGE: | LACAVA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 6 JULY 2012 | |
DATE OF JUDGMENT: | 11 JULY 2012 | |
CASE MAY BE CITED AS: | ANZ Banking Group Ltd v Matthews | |
MEDIUM NEUTRAL CITATION: | [2012] VCC 1600 | |
REASONS FOR JUDGMENT
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Catchwords: Summons seeking summary judgment – whether the defence has no real prospects of success – application of sections 61, 63 and 64 of Civil Procedure Act 2010.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr. B Carew | Norton Rose |
| For the Defendant | Mr. A Morrison | Duffy & Simon |
HIS HONOUR:
1 This proceeding was commenced by Writ issued by the plaintiff against the defendants on 14 April 2011.
2 An amended statement of claim was delivered by the plaintiff pursuant to rule 36.03 on 13 December 2011. In that amended statement of claim the plaintiff claims from the first defendant $993,484.96 together with interest accruing pursuant to a lending agreement and pursuant to statute. It also claims possession of farm land and a residence registered in the name of the first defendant at Nar Nar Goon (“the land”).
3 The claim against second defendant is for the slightly lesser sum of $991,424.85 together with interest accruing pursuant to a lending agreement and pursuant to statute.
4 The first defendant was a director and secretary of a company operated by him known as G.S. Matthews Transport Pty Ltd (‘the company’). As its name suggests that company operated a small transport business. The defendants together operated a farming business on the land.
5 The company was a customer of the plaintiff and operated two accounts as loan facilities provided to it by the plaintiff. One facility was a business loan account and the other was overdraft account. The terms for each of these loan facilities by the plaintiff to the company varied over a number of years.
6 The plaintiff alleges that the loan facilities provided by it to the company were secured by a mortgage over the land and by joint and several personal guarantees by each defendant of the obligations of the company to repay any money loaned by the plaintiff to the company.
7 The defendants were also customers of the plaintiff and between them operated a separate business loan account provided by the plaintiff to them as individuals (“the individuals facility”).
8 The plaintiff alleges that by 14 December 2010 the amount loaned by the plaintiff to the company pursuant to the loan facilities to the company was $637,314.74. It also alleges that on 14 December 2010 it demanded in writing that the company repay any monies owing to it at that time. The plaintiff alleges that the company having failed to repay to it any money owing, on 24 March 2011, it demanded that the defendants repay any monies owing pursuant to a guarantee in writing given by each of them and pursuant to a mortgage and the defendants have failed to repay the amount claimed.
9 The company went into voluntary liquidation on or about 25 June 2010. The plaintiff alleges that this event had a material adverse effect on the defendants’ business triggering a default under the individual loan facility also provided by the plaintiff to the defendants as individuals.
10 The plaintiff alleges the amount owing by the defendants to it pursuant to the individuals facility as at 11 November 2011 was $269,046.98. The plaintiff alleges the defendants have failed to repay the amount owing by them pursuant to the individuals facility.
11 The defendants delivered a defence and counterclaim on 7 June 2011. In it the defendants admit that the plaintiff provided loan facilities to the company. They admit signing a guarantee and indemnity dated 5 November 1999 but they plead was limited to only securing the amount of the overdraft facility of $10,000.00 then provided by the plaintiff to the company. They plead they were induced to sign the guarantee by an oral representation by a representative of the plaintiff at the time (Ritchie) that the guarantee was limited to a maximum indemnity of only $10,000.00.
12 The defendants admit they granted a mortgage to the plaintiff but claim that the mortgage was only for the purpose of securing the individuals facility at that time and not for the purpose of securing any guarantee given by them for the debt of the company to the plaintiff.
13 The defendants admit the company defaulted under its facilities with the plaintiff. They plead the company consistently exceeded the limits on all finance facilities provided to it by the plaintiff and, notwithstanding this long history of excess the plaintiff, on a number of occasions between 2004 and 2007, increased the amount it was prepared to lend to the company from $100,000 in 2004 to $500,000.00 in 2007.
14 In the circumstances pleaded in paragraphs 17 and 18 of the defence and counterclaim, the defendants claim that both they and, the company, were in a position of special disadvantage vis a vis the plaintiff such that the court should order that it would be unconscionable for the plaintiff to rely on the guarantee and mortgage for any amount over $10,000.00 and they seek a declaration to that effect.
15 By reply delivered and filed by the plaintiff dated 6 September 2011, the plaintiff denies the defendant’s allegations by way of defence and counterclaim. It relies on the terms of various letters of offer made by the plaintiff to the defendants and the terms of the loan agreements and guarantees signed by the defendants.
16 On 12 December 2011 Judge Anderson made various orders for the conduct of the proceeding. He set the proceeding down for hearing on 8 August 2012 as a cause on the basis it will occupy two days of hearing.
17 By summons issued by the plaintiff on 25 May 2012 the plaintiff seeks to have the defence and counterclaim struck out alleging a failure by the defendants to comply with section 46 of the Civil Procedure Act 2010 (‘the Act’). Alternatively, it seeks summary judgment pursuant to order 22 of the County Court Civil Procedure Rules 2008, alternatively pursuant to section 63 of the Act.
18 The relief sought pursuant to section 46 of the Act was not pursued, the defendants solicitors having filed the necessary certification required by sections 41 and 42 of the Act on 8 June 2011.
19 The question to be decided is whether or not the plaintiff is entitled at this stage of the proceeding to the relief it seeks in paragraph 2 of the summons.
20 The principles to be applied by a court in deciding such an application have been the subject of decision in the Supreme Court.
21 The Civil Procedure Act 2010 (”the CPA”) relevantly provides, inter alia, as follows:
61 Plaintiff may apply for summary judgment in proceeding
A plaintiff in a civil proceeding may apply to the court for summary judgment in the proceeding on the ground that a defendant's defence or part of that defence has no real prospect of success.
63 Summary judgment if no real prospect of success
(1)Subject to section 64, a court may give summary judgment in any civil proceeding if satisfied that a claim, a defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has no real prospect of success.
(2) … .
64 Court may allow a matter to proceed to trial
Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success, the civil proceeding should not be disposed of summarily because—
(a) it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only a full hearing on the merits is appropriate.
22 In Pearl Hill Pty Ltd v Concorp Construction Group (Vic) Pty Ltd [2011] VSCA 99, Hargrave AJA, with whom Tate JA agreed, stated, at paragraph 8, that since the Act came into force on 1 January 2011:
“… the test to be applied as to whether a plaintiff is entitled to summary judgment is that a defendant’s defence has ‘no real prospect of success’.”
23 The Court of Appeal was there concerned with an application by the plaintiff for summary judgment under s.16(2)(a)(i) of the Building and Construction Industry Security of Payment Act 2002 Act.
24 In Wheelahan v City of Casey (No 3) [2011] VSC 15, Osborn J stated, at paragraph 8:
“I accept that the test of ‘no real prospect of success’ may in some circumstances extend to cases not regarded as sufficiently hopeless to warrant striking out under the Rules.”
25 Osborn J continued:
“The appropriate enquiry is in terms of the section itself. In Swain v Hillman the Court of Appeal had to consider an English rule of court in similar terms. Lord Woolf MR said at p 92:
‘The words ‘no real prospect of succeeding’ do not need any amplification, they speak for themselves. The word ‘real’ distinguishes fanciful prospects of success or … they direct the Court to the need to see whether there is a ‘realistic’ as opposed to a ‘fanciful’ prospect of success.’
The power should be exercised in accordance with the overarching purpose of the Civil Procedure Act 2010.
The High Court has recently addressed the background to, and differing nature of, broadly analogous provisions in Spencer v Commonwealth (2010) 241 CLR 118.
French CJ and Gummow J emphasised that powers of this kind must be exercised with caution:
‘The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action or on the basis that the action is frivolous or vexatious or an abuse of process.’”
26 In Matthew v SPI Electricity Pty Ltd [2011] VSC 168 at paragraph [21] per Justice J Forrest set out the test for the court to apply as follows:
“From the above, I think that the following principles can be identified as relevant to this application:
1.If a court determines that a particular cause of action is hopeless or bound to fail, then it should be dismissed;
2.A court may also dismiss a claim where it determines that it has no real prospect of success in the sense that such prospects are fanciful rather than realistic;
3.The less complex the issue in a case then the easier it is for a court to take the view that such a proceeding is capable of being determined on summary judgment; and
4. Whatever the test to be applied, the power to order summary dismissal of a claim must be exercised with care. This is particularly so where a case may involve issues of contested fact, or where its consequences may affect a large number of persons.”
27 In deciding the questions raised by the plaintiff’s summons I have applied these principles.
28 In support of its summons the plaintiff relies upon an affidavit of Glynn Robert Sadler sworn 25 May 2012 together with some 27 exhibits attached to and referred to therein. The plaintiff also relies upon a supplementary affidavit of Glynn Robert Sadler sworn 6 July 2012 and two further exhibits attached to and referred to therein.
29 In opposing the relief sought in the summons the defendants rely upon affidavits of each of the defendants sworn respectively on 2nd July 2012.
30 There is no dispute here that the defendants have signed the documentation that the plaintiff relies upon to prove its case. There is also no dispute that the company defaulted in its obligations to repay money loaned to it by the plaintiff and there is no dispute as to the amount alleged to be owing at the time of default by the company to the plaintiff.
31 The area of dispute may be summarised I think as follows. Firstly, what was the extent of the defendants personal liability under the terms of each of the personal guarantees given by them? Secondly, having regard to all of the circumstances of the lending arrangements between the plaintiff and the company and the defendants, was the company and the defendants in a position of special disadvantage vis a vis the plaintiff such that the court should order that it would be unconscionable for the plaintiff to rely on the guarantee and mortgage for any amount over $10,000.00?
32 Put another way, in terms of the test which I must apply, is there no real prospect of the success of the defence and counterclaim.
33 Mr Carew who appeared on behalf of the plaintiff spent some time taking me through relevant parts of the plaintiff’s security documentation signed by the defendants. In particular he referred to GRS-4 where the defendants signed acknowledging the guarantee was security for all of the company’s obligations to the plaintiff. Mr Carew argued that when all of the letters of offer that constitute exhibit GRS-4 are studied it is clear that the defendants knew that the amount of the facilities provided from time to time by the plaintiff to the company was varied and increasing substantially.
34 Mr Carew referred to exhibit GRS-5 which is the loan agreement actually sued upon by the plaintiff. This he said, made it clear that the guarantee was an all monies guarantee. Mr Carew argued it was nonsense to suggest (as the first defendant deposed to) that he did not have advanced notice of increased offers of funding from the plaintiff to the company.
35 Mr Carew argued there is no evidence of any unconscionable conduct on the part of the plaintiff and the defendants were not in a position of special disadvantage. The defendants, he argued, could be shown by the admitted documents and from their own affidavit material, to be carrying on a substantial business, partly through the company, and the second defendant was an educated trained kindergarten teacher.
36 Mr Carew argued that the history as deposed to by the first defendant as to the dealings by him and his wife with the plaintiff was not born out by the documents themselves. Any representation in 1999 that liability of the defendants under the terms of the guarantee was to be limited was contrary to what is actually contained in the document which he argued clearly provides for it to be an unlimited guarantee. In this regard he specifically referred to exhibit GRS-7. He pointed out that the defendants have not been able to point to any corroborative evidence in the face of a large bundle of binding documents which are in terms contrary to what they now say. Importantly, he argued there is no explanation by the defendants as to why they repeatedly over a number of years when new documentation was signed, acknowledged that their guarantees were unlimited.
37 Mr Carew acknowledged that from time to time when offers of new facilities were made by the plaintiff the company had already exceeded the terms of the facility then operating. That is it’s spending exceeded the levels of the accounts operating the facilities. Mr Carew argued that plaintiff made offers of new facilities which permitted the company to borrow more money in order that the company would then be charged a lesser rate of interest rather than a higher rate which would apply were the facility continued to operated over the then stated limit. Mr Carew submitted there was no objective evidence that the plaintiff had engaged in ‘asset lending’ within that expression as used in a line of cases such as Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413.
38 Mr Carew submitted that the objective facts here all point to the unlikelihood of the evidence deposed to by the defendants. In short, he submitted, the evidence does not match that which is pleaded by the defendants. He relied upon what he described as five objective facts which he submitted supported his submission. Firstly, he submitted there are in total five separate letters of offer. Secondly, each letter of offer increased the amount of the facility offered to the company or the defendants. Thirdly, each letter of offer was signed by the defendants accepting the conditions upon which each respective offer was made. Fourthly, each letter of offer was signed by the defendants individually as a guarantor. Fifthly, until the plaintiff made demand for repayment there was no complaint from the defendants that the plaintiff had increased the money loaned to the company without there being a proper basis for doing so.
39 In his affidavit sworn 2 July 2012, the first defendant swears in paragraph 9 that when he attended upon representatives of the plaintiff in 1999 to sign security documents he was told “you are limited to $10,000.00 and it is to be in the form of an overdraft” and “try not to go over the $10,000.00 limit because you will get penalty charges for overdrawing”. He also swears that he was not told to get legal advice as to the legal consequences and effect of the documentation he was signing. All this evidence is denied by the plaintiff and its relevant employees who have produced diary notes made contemporaneously to the contrary.
40 At paragraph 10 of his affidavit the first defendant swears he was not aware that the guarantee he signed in 1999 was for a sum greater than $10,000.00. and he says, “I did not know that the guarantee guaranteed all of GS Matthew’s liabilities to the Bank in the future. I did not know what the implications were of a guarantee of unlimited liability.” At paragraph 11 he deposes that at no time did the plaintiff or its representatives say to him either expressly or by implication that what he was signing was an unlimited guarantee and explain the ramifications of signing such a document.
41 At paragraph 21 of his affidavit the first defendant sets out when the overdraft to the company was increased from time to time and by how much. At paragraph 22 he deposes that even though the company regularly exceeded its overdraft limit the plaintiff did not raise any concerns with him or the company. In the following paragraphs he deposes to further advances made by the plaintiff to the company and to he and his wife between 2005 and 2007. Referring to letters of offer by the plaintiff to the company in February 2005 and April 2005 at paragraphs 28 and 29 which offered further increases in the overdraft facility to the company notwithstanding it was then in breach of its overdraft arrangements with the plaintiff, the first defendant deposes “I wasn’t consulted by the bank before this was sent.”
42 Mr Morrison of counsel who appeared on behalf of the defendants filed a helpful written outline of submissions. It is not necessary that I refer to the outline in detail here. Relevantly, in defending the summons the defendants argue two points. They are, that the affidavit evidence filed by the defendants raises an estoppel by representation which prevents the plaintiff from relying on the defendants’ guarantee of the company as an all monies guarantee. Secondly, the defendants argue that the plaintiff, with full knowledge of the business of the company and the defendants and the fact the company was continuously in default of existing finance facility arrangements, nonetheless repeatedly made available further finance by way of increasing the amount it loaned to the company. The defendants argue in so doing the plaintiff engaged in unconscionable “asset based lending” of the kind dealt with in Elkofairi v Permanent Trustee Co Ltd (supra).
43 The estoppel point will be determined on the facts. Presently there is a contest on the facts between what the defendants have deposed to as to the oral representations allegedly made to them by representatives of the plaintiff at the time of signing the guarantee. The plaintiff denies the representations alleged by the defendants and calls in aide the diary notes above referred to and the fact there was never any complaint from the defendants until the company was liquidated. The plaintiff also relies on the express terms of the guarantee signed and, the terms of the various letters of offer repeatedly made. Whilst the plaintiff’s case on this point could properly be described as strong, in my view the defendant’s case, on the evidence as it presently stands could not be described as having no real prospect of success. Much will turn upon the Court’s assessment of the witnesses. I do not have to make this assessment at this stage.
44 As to the defendant’s argument the plaintiff’s conduct in repeatedly advancing funds when the company had clearly demonstrated an inability to repay debt or, to trade within the terms of existing financial arrangements, thereby engaging in “asset based lending”, in my judgment, it cannot be properly argued at this time that the defence and counterclaim has no real prospects of success. In my view, the concession made by the plaintiff that it offered more money by way of increased overdraft limits to the company so that the company would not be paying interest at the higher rate is a telling factor in assessing whether or not the defence argued has real prospects of success. I cannot say the defence raised has no real prospect of success at this stage. The defence argued cannot be described as fanciful. It is alive on the facts and in my view must be decided at trial.
45 Therefore, in my judgment, the plaintiff’s summons must fail. I add that all of the affidavit material shows there were many years of continuous lending by the plaintiff to the company which had clearly demonstrated an inability to trade within the terms of the financial facilities then in place. In my view this raises at the very least an issue as to whether the plaintiff acted appropriately as a bank in its dealings with the defendants and, in my judgment, it is not in the interest of justice that the proceeding be disposed of summarily. In my judgment only a full hearing of all the issues at trial within section 64 of the Act is appropriate.
46 Accordingly the plaintiff’s summons dated 25 May 2012 is dismissed.
47 I will hear the parties on costs.
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