Aquamore Finance Pty Ltd v Horne

[2024] NSWSC 1160

Supreme Court

New South Wales

Medium Neutral Citation:

Aquamore Finance Pty Ltd v Horne [2024] NSWSC 1160

Hearing dates:

10 September 2024

Date of orders:

12 September 2024

Decision date:

12 September 2024

Jurisdiction:

Common Law

Before:

Harrison AsJ

Decision:

The defendant is to pay the plaintiff the sum of $2,449,420.76.

The Court Orders

(1)   The defendant pays the plaintiff’s costs of the proceedings on an indemnity basis.

(2)   The defendant pays the plaintiff post judgment interest costs from today at the rate of 20.95%.

Catchwords:

Money Claim – Guarantee – default – loan agreement

Legislation Cited:

Australian Consumer Law. s 21, s 237

Australian Securities and Investments Act 2001 (Cth). s 12CB, s 12GM

Contracts Review Act 1980 (NSW). s 7

Cases Cited:

L’Estrange v F Graucob Ltd (1934) 103 LJKB 730

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165; 79 ALJR 129; 211 ALR 342

Category:

Principal judgment

Parties:

Aquamore Finance PTY LTD (Plaintiff)
Benjamin John Horne (Defendant)

Representation:

Counsel:
P. Cutler (Plaintiff)
No Appearance

Solicitors:
Independent Legal (Plaintiff)
No Appearance

File Number(s):

2023/00460151-1

JUDGMENT

1. This judgment involves an order for money to be paid by a guarantor in the sum of $2,002,595.29 arising from a loan agreement in default.

2. The plaintiff Aquamore Finance Pty Ltd (‘Aquamore’) was represented by A. Cutler of counsel. The defendant, Benjamin John Horne (‘Mr Horne’) was called three times outside the Court. He did not appear.

3. By way of statement of claim filed 19 December 2023 the plaintiff seeks the following relief,

1. Judgment against the defendant in the sum of $2,002,595.29 to 19 December 2023.

2. Interest on the amount claimed in (1) above from 19 December 2023 at the rate of 20.95% per annum pursuant to the terms of the loan agreement and the guarantee.

3. Interest on the amounts claimed in (1) and (2) above from the date of judgment at the rate of 20.95% per annum pursuant to the terms of the loan agreement and the guarantee.

4. In the alternative to (3) above, interest pursuant to s 100 and or section 101 of the Civil Procedure Act 2005 (NSW).

5. Costs on a full indemnity basis.

Background

4. On 26 November 2021, Aquamore the lender and BBARC Pty Limited (‘BBARC’) the borrower entered into a loan agreement (‘loan agreement’) pursuant to which Aquamore agreed to advance the sum of $2,520,000.00. The loan agreement is in writing. (CB 66). For convenience, I will refer to the ‘Facility Overview’. At the hearing I was taken to the relevant contractual provision.

Facility Overview

1	Lender	Aquamore Finance Pty Ltd ACN 616 745 772
2	Borrower	BBARC Pty Ltd ACN 636 900 402
3	Loan Facility Amount	$2,520,000.00
4	Establishment Fee	$55,440Ai0
5	Introducer Fee	$83,160.00
6	Interest Rate	8.95% per annum, subject to clause 5.6
7	Prescribed Rate	20.95% per annum
8	Repayment Date of the Loan Facility	12 months from the Interest Commencement Date or such other date as the Lender and Borrower may in writing subsequently agree as the Repayment Date.
9	Interest Reserve	$112,764.96 (representing 6 months interest calculated at the Interest Rate)
10	Parties’ addresses for service	If to the Lender: Address:   Cl- Aquamore Capital Equities, Governor Phillip Tower, Suite 40.01, Level 40, 1 Farrer Place, Sydney NSW Attention:   Lending Manager Email:   lendinqaquamore.com.au
If to the Borrower: -   BBARC Pty Ltd ACN 636 900 402. of C/   Aqua Law Level 6, 111 Elizabeth Street Sydney NSW 2000 If to the Guarantors: -   Benjamin John Home of 3 Virginia Street Kensington NSW 2033 -   Aqua Law Pty Ltd ACN 630 530 111 of C/o Talbots Pty Ltd Level 1, 379 Kent Street Sydney NSW 2000
11	Date for first payment of Interest	The Interest Commencement Date.
12	Guarantors	-   Benjamin John Home -   Aqua Law Pty Ltd ACN 630 530 111
13	Security	a. Guarantee and indemnity from each of the Guarantors; b. First Registered Mortgage by BBARC Pty Ltd ACN 636 900 402 over all of the land comprised in Certificate   of   Title   Folio   Identifiers   1/203139, 1/576031 & 21576031 known as 1131-1133 Pacific Highway Cowan NSW 2081 and; c. General Security Agreement granted by the Borrower and the Guarantors.

5. Mr Horne and Aqua Law Pty Limited (‘Aqua Law’) are joint and several guarantors of BBARC’s obligations to Aquamore.

6. On 26 November 2021 and pursuant to the loan agreement, Aquamore advanced $2,520,000 to BBARC to assist in the refinance of a property located at XXXX Pacific Highway, Cowan NSW 2082 (‘the Cowan property’) and for cash out and project related expenses.

The mortgage

7. BBARC was the registered proprietor of the Cowan property which was subject to a mortgage to Keystone Capital. The funds from the loan agreement were used to discharge that mortgage.

8. Aquamore took a mortgage over the Cowan property as security.

9. Mr Horne signed the mortgage as sole director of BBARC. Mr Horne also signed the memorandum of common provisions, being Annexure “A” to the mortgage.

BBARC Defaults

10. BBARC did not make payment within 12 months of the loan agreement (being by 25 November 2022). This was an event of default under the loan agreement.

11. On 9 February 2023, Aquamore’s solicitors issued a notice of event of default to BBARC. The notice was served.

12. No payment was made by BBARC in response to the notice of event of default.

13. This resulted in:

1. The appointment of receivers and managers to BBARC and Aqua Law pursuant to Aquamore’s security documents; and

2. The sale of the Cowan property by the receivers and managers of BBARC.

14. Aquamore received net proceeds of $1,225,827.02 from the sale of the Cowan Property and applied it in partial reduction of the amount owing under the loan agreement. This sum was deducted from the amount outstanding loan agreement.

Deed of Guarantee and Indemnity

15. On 26 November 2021 (contemporaneously with the loan agreement), Mr Horne and Aqua Law (each of them as joint and several guarantors) entered into a deed of guarantee and indemnity (‘Guarantee’).

16. The guarantee was signed by Mr Horne.

17. The relevant clauses of the guarantee with page references to the court book at (CB 103) are set out in the table below.

Clause		Effect		EJ-1		GB (TBA)
Deed of Guarantee and Indemnity		128
3.1		The Guarantor jointly and severally and unconditionally and irrevocably guarantees the punctual payment of the Guaranteed Money.		135
3.2		Whole amount to paid on demand under the guarantee		136
3.3		Guarantor unconditionally and irrevocably indemnifies the lender against all damages, liabilities, losses and expenses		136
3.4		Guarantor to make payment on demand		136
3.5		Indemnity is a separate and principal obligation		136
4.4		Guarantor waives rights to be surrogated and shall not exercise any right of set off or counterclaim		138
Clause		Effect		EJ-1		GB (TBA)
Deed of Guarantee and Indemnity		128
3.1		The Guarantor jointly and severally and unconditionally and irrevocably guarantees the punctual payment of the Guaranteed Money.		135
3.2		Whole amount to paid on demand under the guarantee		136
3.3		Guarantor unconditionally and irrevocably indemnifies the lender against all damages, liabilities, losses and expenses		136
3.4		Guarantor to make payment on demand		136
3.5		Indemnity is a separate and principal obligation		136
4.4		Guarantor waives rights to be surrogated and shall not exercise any right of set off or counterclaim		138

Mr Horne’s guarantee called in.

18. On 9 November 2023, Aquamore’s solicitors issued a notice of event of default to Mr Horne pursuant to the guarantee. It is not disputed that this default notice was served.

19. The amount demanded was $1,956,551.99.

20. To date, Mr Horne has made no payment in reduction of the amount owing by him as guarantor under the guarantee.

Amount currently owing.

21. The amount outstanding under the loan agreement and the guarantee as at 24 May 2024 is about $2,234,621.65

22. The outstanding amount referred to in the preceding paragraph includes some costs that Aquamore has paid.

23. As at today, the amount outstanding under the loan agreement and the guarantee is $2,449,420.76

Legal Framework

24. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165; 79 ALJR 129; 211 ALR 342 the High Court affirmed that,

“[45] It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Latham CJ put it, whatever they might be. That representation is even stronger where the signature appears below a perfectly legible written request to read the document before signing it.

[46] The statements in the above authorities accord with the well-known principle stated by Scrutton U in L’Estrange v F Graucob Ltd (“L’Estrange v Graucob”) that “[w]hen a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not.”

Plaintiff’s submissions

25. Mr Horne (who is a practising solicitor) signed the loan agreement, mortgage and the guarantee in his own capacity and as a director/shareholder of BBARC.

26. He is prima facie bound by what he signed.

27. Funds were advanced by Aquamore pursuant to the loan agreement. BBARC is in default under the loan agreement. The security property has been realised. There is a significant shortfall owing to Aquamore.

28. Mr Horne is the director and shareholder of the principal borrower as well as guarantor of its obligations.

29. Aquamore is entitled to judgment against Mr Horne (as guarantor) for the shortfall that is owing under the loan agreement and by Mr Horne as guarantor under the guarantee, including interest that has accrued pursuant to the provisions of the loan agreement and guarantee and Aquamore’s costs on a solicitor-client basis pursuant to clause 6.4 of the loan agreement and clause 7 of the guarantee.

The Defence

30. The defendant filed a defence on the 18 March 2024, It pleaded:

1. Admits to (1) of the relief claimed in the SOC at [2] of this judgment.

2. Admits to (2) of the relief claimed in the SOC in [2] of this judgment.

3. Admits to (3-7) of the relief claimed in the SOC in [2] of this judgment only in so far as he admits the loan agreement contained the provisions set out in those paragraphs. He otherwise denies those paragraphs and says:

1. The Interest rate of 20.95% was excessive. Although, in clause 5.3 of the loan agreement the high interest rate of 20.95% is referred to as a default interest rate. (CB 77)

2. The reduced rate of interest of 8.95% was excessive. Although this was actually the accepted interest rate as documented in the ‘facility overview’ table (CB 66).

3. Aquamore capitalised the arrears.

4. By entering into the loan agreement, mortgage and guarantee, Aquamore engaged in unconscionable conduct for the purposes of s 21 of the Australian Consumer Law (‘ACL’) or section 12CB of the Australian Securities and Investments Act 2001 (Cth) (‘ASIC Act’).

5. The loan agreement, mortgage and guarantee are void and unenforceable under s 237 of the ACL or section 12GM of the ASIC Act.

6. The guarantee is unjust, and the relevant provisions declared void, under section 7 of the Contracts Review Act 1980 (NSW) (‘CRA’) insofar as the guarantee for Horne to pay any and all amounts owed (or allegedly owed) to Aquamore under the Deed of Loan.

7. Denies [8-21] of the SOC filed 19 December 2023 inclusive.

8. Denies that he is indebted to the plaintiff for the amount claimed or at all.

9. Notes that the plaintiff and or its receivers sold the property at substantial undervalue.

10. Notes that the defendant intends to shortly file Cross-Claims against the plaintiff, its receivers and the valuer.

11. The defendant was ordered to serve his affidavit evidence in chief by 14 June 2024, but failed to do so.

Resolution

31. As stated above the defendant did not comply with the Courts directions. Aside from bare pleadings there is no evidence from the defendant to establish that he has an arguable case, particularly in relation to his claims of unconscionable conduct pursuant to s 21 of the ACL or s 12CB of the ASIC Act. Nor is there any evidence as to the defendants claim pursuant to s 7 of the CRA. Finally, he did not provide any evidence as to the property being sold under value by the receiver, nor did he file any cross claims. Without some primary evidence the defendant cannot establish these causes of action, I am satisfied that the defendant’s case is hopeless. In these circumstances defence should be struck out and judgment entered for the plaintiff against the defendant.

Result

32. I enter judgment for the plaintiff against the defendant in the sum of $2,449,420.76.

Costs

33. Costs are discretionary, normally costs follow the event. The defendant is to pay the plaintiff’s costs. The plaintiff seeks those costs of the proceedings be paid on an indemnity basis in accordance with clause 7 of the Deed of Guarantee and Indemnity. It reads,

“Costs and expenses

The Guarantor shall pay, and if paid by the Financier reimburse to the Financier:

(a) the Financier’s reasonable costs and expenses relating to the negotiation, preparation, execution and stamping of this document and any variation, replacement or discharge of it;

(b) the Financier’s costs and expenses in relation to the exercise or attempted exercise or the preservation of any rights of the Financier under this document; and

(c) any Taxes and registration or other fees (including fines and penalties) which are payable in relation to this document, any Collateral Security or any transaction contemplated by them.

A reference to costs and expenses in this clause includes, without limitation, legal costs and expenses on a full indemnity basis.” (CB 186-187) [my emphasis]

34. The plaintiff also seeks post judgment interest at the prescribed rate of 20.95% as in accordance with clause 5.4 of the loan agreement

“5.4 Default Interest

(a) The Borrower must pay interest on the Money Owing for the period from (and including) the date on which an Event of Default occurs until the end of the month the Event of Default is remedied to the satisfaction of the Lender.

(b) Interest payable under clause 5.3(a) accrues daily at the Prescribed Rate until the end of the month the Event of Default is remedied to the satisfaction of the Lender (acting reasonably), at which point it will revert to the Interest Rate from the first day of the following month.

(c) Interest calculated at the Prescribed Rate must be paid by the Borrower to the Lender on written demand by the Lender or may, to the extent that it has not been paid and at the sole option of the Lender, be capitalised at monthly intervals and added to the Money Owing.” (CB 77)

and as expressed contemporaneously within the deed of guarantee and indemnity in clause 6.1,

“6.1 Interest

The Guarantor shall pay interest on:

(a) any amount owing under this document other than under clause 1.2; and

(b) that part (if any) of the Guaranteed Money payable under clause 1.2 in relation to which there is no agreement between the Debtor and the Financier as to the payment of interest,

at the Applicable Interest Rate. Interest will accrue from day to day and must be paid by the Guarantor upon demand.” (CB 186) [my emphasis].

35. I note that this rate is over twice the interest rates specified by the Supreme Court. While I have some reluctance to grant this order, the defendant made at best one payment. The prescribed interest rate is specified in the loan agreement at 20.95%. The defendant is a practicing solicitor and should have been aware of this provision when he signed the loan agreement and the deed of guarantee and indemnity. Hence, I make the orders as to the indemnity costs and the post judgment interest rate.

Judgment

36. The defendant is to pay the plaintiff the sum of $2,449,420.76.

The Court Orders

1. The defendant pays the plaintiff’s costs of the proceedings on an indemnity basis.

2. The defendant pays the plaintiff post judgment interest costs from today at the rate of 20.95%.

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Decision last updated: 12 September 2024