Aurora Chester & Ella Management Pty Ltd (ACN 625 618 939) v Wren Property Group Pty Ltd (ACN 643 825 656)
[2023] QDC 6
•30 January 2023 (ex tempore)
DISTRICT COURT OF QUEENSLAND
CITATION:
Aurora Chester & Ella Management Pty Ltd (ACN 625 618 939) v Wren Property Group Pty Ltd (ACN 643 825 656) [2023] QDC 6
PARTIES:
AURORA CHESTER & ELLA MANAGEMENT PTY LTD (ACN 625 618 939)
(Plaintiff)
WREN PROPERTY GROUP PTY LTD (ACN 643 825 656)
(Defendant)
FILE NO/S:
BD No 1081 of 2022
DIVISION:
Civil
PROCEEDING:
Trial
ORIGINATING COURT:
District Court at Brisbane
DELIVERED ON:
30 January 2023 (ex tempore)
DELIVERED AT:
Brisbane
HEARING DATE:
30 January 2023
JUDGE:
Porter KC DCJ
ORDER:
1. The defendant is to pay the plaintiff $493,438.29 (that amount being inclusive of interest to 30 January 2023); and
2. The defendant is to pay the plaintiff’s costs on the standard basis up to 12 December 2021 and thereafter on the indemnity basis.
CATCHWORDS:
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – where the parties entered into an agreement under which the plaintiff provided a bank guarantee to the defendant – where the defendant called on the bank guarantee and was paid a sum in excess of the amount to which it was entitled under the parties’ agreement – where the plaintiff claims the excess amount – where the defendant alleges an oral variation to the contract – whether the plaintiff is entitled to the amount paid to the defendant under the bank guarantee in excess of the defendant’s entitlement under the parties’ agreement
Legislation
Uniform Civil Procedure Rules 1999 (Qld) r 476(1)
COUNSEL:
M Downes for the plaintiff
No appearance for the defendant
SOLICITORS:
Mahoneys for the plaintiff
No appearance for the defendant
Introduction
The plaintiff is a company involved in the business of operating management agreements and group title schemes. One of its directors, and the guiding mind of the company in relation to its transaction with the defendant, is Ms Jian Xiong, also known as Jenny Xiong.
The defendant is involved in the development and sale of a group titles scheme at Chester Street in the New Farm area. It carries on that business as trustee for the EC Newstead Property Unit Trust (ECNPUT). The defendant is the successor in title to an earlier company which carried on the same business on behalf of the same trust. It is not in dispute on the pleadings that the defendant is the trustee of that trust now.
As will become clear, the plaintiff and the defendant were parties to a Management Rights Procurement Agreement (the MRA). That agreement was originally entered into between the plaintiff and the previous trustee of the ECNPUT. However, the current defendant has expressly adopted the rights and obligations under the Management Rights Agreement.
No point is raised by the defendant as to its liability arising out of its status as successor trustee in its pleading or elsewhere in the correspondence that I identified. As I will explain, the defendant did not appear, but most of this is identifiable from the pleadings. It is unnecessary to refer to this issue further. I will refer to the defendant as if it was the other party in all the relevant transactions, even though technically, that is not the case for the first two versions of the contract.
The Management Rights Agreement
The first and most extensive contract between the parties was the MRA entered into on 30 April 2018. The nature of the agreement is set out in the recitals to that agreement, which provide:
A.The [defendant] is the owner of the Land upon which the [defendant] is developing the Complex to be known by the name [Chester & Ella].
B.Following construction of the Complex the [defendant] intends to subdivide the Land in accordance with the Plan and record a Community Management Statement in the Department of Environment and Resource Management.
C.Upon Registration, the Body Corporate for the Scheme will come into existence.
…
E.The [plaintiff] wishes to be appointed the caretaker and letting agent pursuant to and in accordance with the Management Rights Agreements.
F.[Jian Xiong] has agreed to guarantee the obligations of the [plaintiff] under this Agreement.
G.The [defendant] has agreed that in consideration of the [plaintiff] paying to the Developer the Procurement Sum and causing the Guarantor to provide the Personal Guarantee, the [defendant] will as original and sole proprietor of all of the lots in the Complex, cause the Body Corporate at its first General Meeting to resolve to enter into and execute the Management Rights Agreements with the [plaintiff].
The important part of the MRA for present purposes relates to how consideration for the MRA was to be paid by the plaintiff. It is efficient to summarise how the MRA worked in respect of payment by the plaintiff as follows:
(a) The consideration, called the procurement sum, was specified at $4.68 million plus GST; and
(b) A minimum procurement sum was specified at some $2.58 million.
The MRA provided for various adjustments to the consideration payable. It also provided detailed provisions as to how the procurement sum was to be paid on completion.
All that needs concern us here is how the sum known as the ‘retention amount’ under the MRA was to be dealt with. The retention amount was a variable component of the consideration ultimately to be paid to the defendant under the MRA. In short, while it was specified as part of the consideration for the MRA, the amount that the defendant would be entitled to from the retention amount varied depending on how many of the purchasers of the units in the scheme appointed the plaintiff’s nominee as managing agent.
The retention amount is dealt with in clause 9 of the MRA. That clause contains a complex series of formulas for calculating how much of the retention amount is, in fact, due to the defendant. In particular, the amount varies depending on how many of the one, two, three, and four-bedroom apartments are procured by the developer to be placed into the rental pool with the plaintiff’s agent as managing agent. Different amounts are payable for different kinds of apartments and there are various other adjustments. The complexities of this are unnecessary to consider in this judgment.
The MRA contemplated that the retention amount would be appropriated by the defendant at completion, but paid prior to completion. The MRA provided for the provision of a bank guarantee by the plaintiff in place of the retention amount being paid in cash. It is not in dispute that the retention amount was $1,767,773. It was provided in accordance with the MRA in the form of an unconditional bank guarantee issued by Westpac Bank on 26 October 2021. The bank guarantee, relevantly, provided by its operational provisions:
1 Purpose
The customer has asked us to give you this guarantee.
2 Guarantee
We irrevocably agree to pay on demand from you an amount up to the sum guaranteed.
We agree to make payment under this guarantee without set-off or counterclaim, and without referring to or obtaining the authority of the customer. This applies even if the customer or any other person has asked us not to pay you.
You can ask for payment of all or part of the sum guaranteed. If you ask for payment of only part of the sum guaranteed we’ll pay you the balance of the sum guaranteed on the same terms as this guarantee. However, we can only ever be required to pay out, in total, the sum guaranteed.
3 How to make a claim
To make a claim you have to do so in writing (signed by you or on your behalf) and attach the original of this guarantee.
Any claim needs to be received by us at:
·Any of our branches, or
·Our contact details set out in the Details,
Before this guarantee is cancelled or expires.
Before continuing, I need to note that there were two written variations of the MRA. The first was dated 9 July 2018. Its terms are not relevant. The second was dated 11 March 2021. Its terms are central to this dispute.
The second variation was in the form of a deed between the plaintiff and the defendant (the second deed of variation). The defendant was trustee by this stage and a party to the second deed of variation. It relevantly provided:
2.1From the date of this document, the terms of the Management Rights Procurement Agreement are further varied as set out in in (sic) this document.
2.2The parties agree to vary the Management Rights Procurement Agreement as follows:
(a)A following definitions (sic) be replaced with the following new definitions:
Adjustment Dates means the dates being every month for 24 months as extended and agreed to between the parties in writing.
It also contained the novation clause as follows:
The [defendant] and the [plaintiff] covenant to observe, perform and fulfil all the covenants conditions and stipulations in the Management Rights Procurement Agreement as varied by this document. The parties acknowledge that any variation to the Management Rights Procurement Agreement made by this document is intended to be read into and form part of the Management Rights Procurement Agreement. Other than as varied by this document, the parties affirm the provisions of the Management Rights Procurement Agreement.
I need to explain more about the place of the Adjustment Dates in the contractual arrangements. The Adjustment Dates were dates on which the plaintiff was required to make part payments to the defendant of the retention amount under the deed of variation. The MRA appears to have contemplated that such amounts would be calculated based on the extent to which the defendant succeeded in causing buyers of units in the group title scheme to appoint the plaintiff’s nominee as managing agent.
The MRA as originally signed, provided for Adjustment Dates more or less monthly, for up to 12 months after completion. The effect of the second deed of variation was to provide an additional 12 months for adjustments to be made.
The MRA provided no basis for the defendant to receive further sums, by way of consideration, referable to the retention amount, after the expiry of the Adjustment Date period. Importantly, nowhere in the correspondence from the defendant’s solicitors, nor in the pleading, does the defendant contend that it did have a right to further amounts, on account of retention amounts under the MRA, as amended, after the passing of the last of the Adjustment Dates.
Indeed, the defendant’s correspondence and defence, as I will describe later, is premised on an alleged oral agreement to further extend the Adjustment Date period. The defendant appears to presume the correctness of the proposition that without an oral variation it had no further entitlement to payment on account of the retention amount after the expiry of the period specified for Adjustment Dates under the MRA as varied.
More specifically, as to completion, the statement of claim alleges that the MRA completed on 15 September 2019 and that the effect of the second deed of variation was that the Adjustment Date period ended two years later on 12 December 2021. Those dates in the original statement of claim seem to be in error. I gave leave for the statement of claim to be amended on the morning of this trial to allege 13 December 2019 as the completion date, and 13 December 2021 as the final Adjustment Date at the end of the adjustment period.
While the defendant did not plead to the amended statement of claim because of its failure to appear (which I deal with below), it did plead to the almost identical allegations in a prior statement of claim. The defendant’s pleading did not, in substance, dispute the plaintiff’s allegation, except on the basis that there was an oral variation of the Adjustment Date after the second deed of variation.
In any event, the settlement statement is in evidence, showing settlement on 13 December 2019. I find that that was the date of settlement, and that under the second deed of variation the Adjustment Date was extended only to 13 December 2021. There is no injustice to the defendants in permitting that amendment now. Settlement on that date is consistent with the documents and not particularly material in the light of their pleading. I also note, as I will identify later, that the plaintiff attempted to serve on the defendant the trial bundle, which contains the settlement statement.
In any event, apart from the alleged oral variation, it is quite clear that clause 11.1 of the MRA provides that any claim by the defendant to further consideration, on account of the retention amount was at an end on the final Adjustment Date passing. As noted, the last day for adjustments benefiting the defendant under the MRA, following the amendment in the second deed of variation, was 13 December 2021.
The defendant calls on the Bank Guarantee
On about 15 December 2021, the defendant called on the bank guarantee, claiming the whole sum of some $1.7 million. It was paid out by the bank, in accordance with the terms of the guarantee, and given that there was a claim for the whole of the sum, it seems to me that the bank acted correctly in doing so.
I divert here to deal with an issue that arises on paragraph 8 of the statement of claim and the defence. Paragraph 8 of the statement of claim alleges that the MRA, as varied, had an implied term that:
“[t]he defendant would not call on the bank guarantee in excess of an amount to which it is lawfully entitled.”
The defendant denied that, and said that Westpac had required the entirety of the bank guarantee to be called upon. This is an odd allegation. Like the other allegations that purport to comprise a defence to the plaintiff’s claim (as I will explain, the defence does not properly plead a defence) it is not mentioned in the contentious correspondence around the time of the bank guarantee.
The bank guarantee, as set out above, expressly provided for more than one call, up to the total amount of the guarantee. It might be a little unfair to conclude that the bank did not advise as pleaded in the defence, in the absence of evidence from the defendant’s witnesses on the subject. However, it does strike me, objectively, as an extremely unlikely thing for an experienced commercial bank to do in circumstances where the guarantee expressly provides for a call on part or all of the guarantee. I do not see why any bank officer would give such advice to a person calling on the guarantee of the bank’s own customer.
The problem that sometimes exists with guarantees without such an express provision is that, depending on the construction of the terms of the guarantee, there can only be one call made on a guarantee, and if the holder of the guarantee does not call the whole of the sum, the guarantee becomes spent on one (partial) call. That is not the case here. For an allegation like that to appear out of nowhere, in terms of the correspondence, and in the commercial context I have just described, gives one real cause for a degree of cynicism about the defence. In any event, I suppose it is theoretically possible that someone at the bank who did not know what they are doing might have given the alleged advice. I move on.
As I have already found, the final Adjustment Date under the MRA, as amended, was 13 December 2021. It cannot be a coincidence that on or about 15 December 2021, apparently without notice, the defendant called on the bank guarantee, claiming the whole sum of some $1.7 million. It was paid out by the bank in accordance with the terms of the guarantee. The plaintiff was notified by the bank, not by the defendant, and immediately queried with the defendant the basis for the drawing of the bank guarantee.
It is odd that it was drawn without notice, on or about the day that no further adjustments were permitted. It is also odd that the whole amount was drawn. I have already dealt with that. It was evident, from subsequent correspondence, that even the defendant never contended it was entitled to anything like the full amount.
The plaintiff demands repayment
Ms Xiong sent an email on the evening the guarantee was called on, to Ms Bolton of the defendant, offering to permit the defendant to retain from the $1.7 million some $268,000. Ms Xiong accepted that that amount was due under three invoices sent prior to the last Adjustment Date. Those invoices were labelled invoices 61, 62 and 63.
There is an allegation in the correspondence, subsequently, that Ms Xiong was wrongly failing to pay these invoices at the time the guarantee was drawn but I do not have a proper basis to conclude that. In any event, from the day the bank guarantee was drawn in full, Ms Xiong, without any prompting it seems, agreed that the defendant could keep the amounts due under invoices 61, 62 and 63, and called for the repayment of the balance of the proceeds of the call on the bank guarantee.
Prima facie, she was entitled under the amended MRA to require payment of that balance. The defendant had no future right to obtain payments on account of the retention amount whether the defendant procured further appointments of the plaintiff’s agent or not.
Ms Xiong received a response from Ms Bolton, on 17 December 2021, in which she says:
Hi Jenny,
I can confirm that we did receive and deposit a Bank Cheque yesterday. I was advised by the Bank that the funds would take 3-5 days to clear at which point we will return the excess funds to you.
In the meantime, I would like to speak to address a number of items.
Would you be free to talk today at midday?
Cheers
It is notable that this email does not suggest there is an entitlement to more than the amounts due under invoices 61 to 63. It also asks Ms Xiong to discuss matters. Ms Xiong gave evidence that she did not speak to Ms Bolton from October 2021, until she called Ms Bolton at lunchtime on 17 December 2021 about her response to this email. There is nothing in the emails before the Court from around that time to suggest the contrary. Ms Xiong gave evidence that, in that call, Ms Bolton complained about the performance of one of Ms Xiong’s staff, but said she was happy, nonetheless, to keep referring buyers to the plaintiff. Ms Bolton then asked Ms Xiong to agree on a six-month extension of the Adjustment Date period, in exchange for the defendant granting the plaintiff management rights over another building apparently being developed by the defendant.
Ms Xiong gave evidence that she rejected that proposal. That evidence was consistent with the contemporaneous correspondence. The correspondence is solicitors’ correspondence after this point, apart from a couple of emails from Ms Bolton in early February that I will come to. That is because Ms Xiong said, after her phone call with Ms Bolton, she put the matter in the hands of her solicitors.
That afternoon, on 17 December, Mahoneys, the plaintiff’s solicitors, sent a demand for the return of the balance of the bank guarantee sum, less the amount recognised as due under invoices 61 to 63 being, as I said, an amount of some $268,000. The first substantive response from the defendant’s solicitors was a letter of 21 December 2021. Given the defence later pleaded, this letter is important. It relevantly provides:
We refer to your letter dated 21 December 2021 and have instructions to respond as follow:
1. The bank cheque has still not cleared but our client expects the bank cheque to be cleared by tomorrow or the latest by 24 December 2021. It has always been our client’s intention to repay Aurora when the cleared funds are received.
2. Legal fees of approximately $25,000 have been incurred by our client as a result of Aurora’s failure to pay monies owed to our client. Aurora’s breach necessitated numerous demands for payment, legal correspondences between the respective lawyers and as a last resort, calling on the bank guarantee. This amount must be deducted from the funds held as the legal fees could have been avoided if Aurora has acted without delay and satisfied its obligation to pay our client on time.
3. Despite our client expressing its dissatisfaction with Aurora’s performance in managing the Chester & Ella building, Margaret Bolton of Kokoda Property has communicated to Jenny of Aurora that our client has proposed the following for Aurora’s consideration:
a)The Management Rights and Procurement Agreement dated 30 April 2018 (as varied) (Procurement Agreement) be extended for a further 6 months commencing from 11 December 2021. In return, our client will provide Aurora with the following additional Chester & Ella apartments to be added to the management pool:
i)22 additional 1 & 2 bedroom apartments which have been sold and are due to settle by end February 2022 (sic); and
ii)6 additional 3 & 4 bedroom apartments to be leased at 7% pa.
Please refer to attached schedule (sic) which outlines the apartments that have sold and those which will be available for lease. You will note that the future management rights value of these 28 apartments amount to $439,190.49 (including GST).
b)The sum of $490,190.49 will be retained in LNG Legal’s trust account as guarantee for payment of management rights due to our client. Payment for each settled or leased apartment with an appointment secured will be disbursed by LNG Legal as stakeholder upon:
i)the issue of a tax invoice to Aurora; and
ii)in accordance with the terms of the Procurement Agreement.
c)With the sum of $430,190.49 retained in LNG Legal’s trust account, our client will waive further requirement for Aurora to provide a bank guarantee as security under the Procurement Agreement. This is a practical outcome as it assures our client of getting paid when it is entitled to the management fee. It also frees up the security for Aurora to utilize.
d)Our client undertakes to pay the sum of $1,034,859.79 (calculated: $1,499,050.28 less legal fees of $25,000 and future management rights of $439,190.49) into the bank account nominated by Aurora immediately upon cleared funds being received; and
e)Kokoda’s project known as The Ambrose located in Milton is due to complete in July 2022. Our client will agree to give Aurora the first right of refusal to buy the management rights at the Ambrose.
4.It is noted that our client has paid Aurora mare than $150,000 in letting/management fees over the past 16 months for Chester & Ella. Accordingly, our client believes the proposal outlined in paragraph 3 above is a commercially good outcome for both parties.
We look forward to your client’s acceptance of our client’s proposal. If you have any questions, please do not hesitate to contact me.
Yours Faithfully,
LNG Legal
The letter had attached to it a schedule said to justify the $439,190.49 claimed on top of the amounts which Ms Xiong recognised were due in respect of invoices 61 to 63. The schedule listed some 28 units, 26 of which were to settle at the end of January or February 2022, and which on referral, would justify the amount claimed. Ms Xiong gave evidence that to her recollection only a few of those units ever signed letting agreements with the plaintiff’s agent, because most of them were owner occupier purchases. She estimated in the witness box that about three came into the pool, but later agreed that Invoice 66 from 31 January 2021 showed a further five units. I also note that a couple more units were referred to in another email.
It is unclear how many units were signed up to agreements with the plaintiff after the bank guarantee was drawn on in December 2021. However, there is no evidence that anything like the number in the schedule attached to the 21 December 2021 solicitor’s letter ever occurred, and there is no assertion from the defendant that anything like that ever did occur.
On 24 December 2021, the defendant repaid some $1,034,859.79 to the plaintiff from the bank guarantee sum, retaining some $732,913.97. Subsequently the correspondence shows (so far as it is relevant to amounts that the defendant could conceivably be entitled to) an email from Ms Bolton to Ms Xiong, dated 14 January 2022, identifying two apartments, a one-bedroom apartment and a two-bedroom apartment, which had signed letting agreements with the plaintiff’s nominee. That email attached an invoice in respect of the management rights for those two apartments, and relevantly said: “You will note from the invoice that this has been marked as paid. This is from funds received in December 2021.” I assume Ms Bolton is referring to the amounts drawn from the bank guarantee and retained.
On 1 February 2022, Ms Bolton sent another email, which attached an invoice in respect of five further apartments. She again made the comment: “You will note from the invoice this has been marked as paid. This is from funds received in December 2021.” Importantly, she also said this:
Further, I am reaching out with an aim to resolve the outstanding litigation before it escalates. In good faith, we have been happy to continue to add stock to the management rights pool. This is in exchange for credit from the amount received in December.
If, however, you are not prepared to offer compensation for these lots, then we will no longer add any new lots to the management rights pool, and we will revert existing/new lessees to our new provider.
I would appreciate clarity on this point.
Feel free to call me directly to resolve.
Importantly, these emails:
(a)Do not assert any agreement to extend the Adjustment Date. That is consistent with Ms Xiong’s evidence of her conversation with Ms Bolton on 17 December 2021;
(b) Recognise that Ms Xiong disputes any entitlement to payment for further referrals after the last Adjustment Date in the varied MRA; and
(c) Refer, in the second email, to Ms Bolton’s decision not to refer any further units to the plaintiff if an agreement could not be made with the plaintiff about the payment of compensation.
All of this is implicitly, if not directly, inconsistent with the suggestion that there had, at some time earlier, been an oral agreement to extend the Adjustment Date period. For the avoidance of doubt, Ms Xiong’s solicitor responded, rejecting any right to retain funds from the further units.
The defects in the defence
Proceedings were commenced on 12 May 2022. The plaintiff’s case, though varied slightly on the details, has remained simple. The plaintiff alleges that the defendant was not entitled to any amount from the bank guarantee funds, other than those due under invoices 61 to 63, which Ms Xiong has conceded could be appropriated from the bank guarantee funds almost from the beginning. The defence raises only one point in response. It pleads, by paragraph 14:
Save to say that the Bank Guarantee was provided by the plaintiff to the defendant as security for payment in accordance with the Deed of Variation of Management Rights Procurement Agreement, the defendant otherwise denies the allegations in paragraph 14. The defendant says further:
a)it was a term of the Deed of Variation of Management Rights Procurement Agreement that all Appointments be paid for by the plaintiff.
b)The plaintiff agreed to an extension of the Deed of Variation of Management Rights Procurement Agreement for Appointments beyond 12 December 2021.
PARTICULARS
Ms Bolton of the defendant had numerous telephone conversations with the director of the plaintiff between October 2021 and December 2021 in relation to extending the Deed of Variation of Management Rights Procurement Agreement beyond 12 December 2021. By those discussions, the parties agreed to extend the operation of the Deed of Variation of Management Rights Procurement Agreement to all Appointments beyond 12 December 2021.
Pursuant to that agreement, the plaintiff accepted Appointments after 12 December 2021.
It is notable that the above allegation is inadequately particularised and in objectionable form. The thrust of the point is clear enough, though. Ms Xiong gave evidence that no such conversations occurred. There is no suggestion in the correspondence that they did. Indeed, as I have explained, the character of the correspondence from the defendant after December 2021 is implicitly to the contrary. That correspondence indicates that an agreement was required if the Adjustment Dates were to be extended. There is another fundamental problem with the defence. It does not plead any fact which sustains the claim to the balance of the $732,913.97 retained from the bank guarantee sum, other than the three invoices which Ms Xiong, from the beginning, agreed could be deducted
As to the balance of $469,113.78, there is no fact pleaded which justifies retaining that amount. To this extent, the defence does not appear to plead any defence to the claim at all and the defence has never been amended in this respect.
On one view of the defence, the plaintiff might have been entitled to judgment on the pleadings, even ignoring the effect of the deemed admissions that arise from the non-compliant way that denials were pleaded. In any event, the plaintiff (for what seemed to me, good cause) pressed ahead to try to get a judgment on the merits.
Conduct of the trial
At this point, I will turn to the way this trial was conducted. The history is as follows. The defendant was represented by solicitors, Robert James Lawyers, until 16 January 2023. At that point, the defendant company purported to file a notice of party acting in person. That document, which is Court Document 15, does not identify who filed it, but one can infer that it was Ms Bolton as a director of the defendant and Mr Stevens as the company’s shareholder because their email addresses are provided.
The address for service, and the telephone number, are Victorian. That notice of party acting in person was, it seems, provoked by the efforts of Mahoneys, solicitors for the plaintiffs, to comply with the directions I made for the conduct of this trial.
It is worth noting that on 24 November 2022, the matter came before me. That was an application for the matter to be placed on the commercial list. Robert James Lawyers appeared through a Mr Fawcett for the defendant and Mr Downes, who appeared at the trial today, appeared for the plaintiff. I made directions for the regularisation of pleadings, and for the matter to be listed for review on 16 December, to set trial dates.
The matter came before me again on 16 December, my last act of 2022, and I listed the matter for trial for two days commencing today. I made my usual order for a written opening of not more than 10 pages, identifying the key issues.
Importantly, Ms Gotthard of counsel appeared on that date. There is no reason whatsoever to think that the guiding mind and will of the persons behind the defendant did not know the matter had been set down for trial. True it is that the trial came on quickly, but there was no resistance to that by the defendant and it was self-evident from the pleadings it was the kind of case which this commercial list should deal with promptly, because it largely turned on the question of whether there had been an oral variation extending the Adjustment Date.
I have before me an affidavit of Anders James Mahoney of Mahoneys lawyers which sets out the steps taken by that firm on behalf of the plaintiff in the lead up to this trial.
On 16 January, Mr Mahoney of Mahoneys clearly sought to try to get things moving for the trial, which was two weeks away. He called Ms Derby from Robert James Lawyers. She told Mr Mahoney the defendant would be filing a notice of party acting in person. That was provided to Mr Mahoney from Ms Derby that afternoon.
Later that afternoon, Mr Mahoney sent an email to the two email addresses on the notice of party acting in person (which I note was filed on 20 January), attaching an electronic copy of the trial bundle. In doing so, he was doing what he was required to do, which is seek to agree on a tender bundle of documents for the trial. I am comforted to see that he was trying to do it well before the due date, at least for January.
There was no response to that email. On 25 January, Mr Mahoney took the step of trying to call the Brisbane office of Kokoda Property, which is plainly, from the email addresses, a company associated with Mr Stevens and Ms Bolton. The message greeting was generic, something like ‘we are unavailable to take your call, please leave a message.’ He left a message identifying himself, saying he was calling in respect of these proceedings, and seeking to be called by Margaret Bolton.
On the morning of 27 January, three days before the trial, he tried the Brisbane office of Kokoda Property. The call went unanswered and went to a message service. He had not received, by today, any replies to his email or to his calls. I note, importantly, that the email to the Stevens and Bolton email addresses of 16 January contained a letter referring to the imminent trial.
There is no reason, whatsoever, to think that the persons purporting to act for the defendant did not know that today was the day, nor is there any reason to doubt that they have chosen to not be here, which might be understandable, in the light of the problems with the defence which I have identified.
In that context, on the day of trial, no one appeared for the defendant. The defendant was called and no one appeared. Mr Downes, on behalf of the plaintiff, had a choice. He could have sought judgment in default of appearance, or sought to proceed under Uniform Civil Procedure Rules 1999 (Qld) r 476(1).
The method he proposed for the conduct of the trial was to tender correspondence through the affidavit of Mr Mahoney, to call Ms Xiong (the only other person who would give evidence at the trial), and to have her lead evidence about the relevant documents, and address the matters raised in the defence. That seemed to me to be an appropriate method to proceed.
I heard Ms Xiong’s evidence and adjourned to review the material and consider what, if any, basis suggested itself for me to properly question her account. Frankly, none emerged. Her account was consistent with the contemporaneous documents and indeed, nothing in the defendant’s pleaded case is, itself, consistent with those documents. I accept her evidence.
Conclusion
I find there was no oral agreement to vary the second deed of variation to extend the Adjustment Date past 13 December 2021. However, even if there had been, the defendant has not pleaded, much less proved, any basis to retain the $478,000 which is claimed by the plaintiff from the defendant. There is some question as to the legal basis of the claim, whether in contract or in restitution. There can be no doubt that one way or another, the plaintiff is entitled to that part of the bank guarantee not covered by the amounts (conceded quite promptly by Ms Xiong) in invoices 61 to 63.
To the extent it matters, it seems to me the basis of the claim is in contract because the bank guarantee was drawn on for its whole sum in breach of that contract. Alternatively, there was an implied term that any sum not required on drawing of the bank guarantee would be repaid. It seems to me it was a breach of the contract not to immediately repay the whole amount retained after the $1 million tranche was repaid, other than the amount referrable to invoices 61 to 63. On that basis, the plaintiff is entitled to judgment in the amount claimed of $469,113.78.
I also recall the entirely unjustified assertion of an entitlement to $25,000 in legal fees made in the correspondence. It is difficult to avoid to the conclusion, given that nothing in the contract seemed to sustain it, and that that allegation sank without a trace, and that that asserted entitlement was improperly made.
Costs
The plaintiff seeks costs on an indemnity basis from 12 December 2022. That is the date that on which the period for acceptance of a Calderbank offer expired. The offer contained a modest amount of compromise, but it was made in the context of very modest prospects of success of the defendant’s case. The offer more or less explained the difficulties of the defendant’s case in light of the contemporaneous correspondence, which was frankly evident to me as a very significant, if not unavoidable barrier to the success of the claim.
There are other factors that influence my discretion as well. One is that, after this offer, those in charge of the defendant took no steps to bring the matter to trial or properly defend it. They did not appear today. For the reasons I have articulated in respect of the defence, and on the material put before me, there does not seem to have ever been a basis to defend the claim other than that which was, let us say, manufactured in the schedule attached to the letter of 21 December 2021.
Even apart from the Calderbank offer, the continuance of this litigation, at least after issues were joined and the trial was looming in late December, has the hallmarks of an abuse of process. A fortiori where there was an offer explaining the obvious shortfalls in the case, even on the evidence and pleadings at that time. As I have said, that offer had a limited amount of compromise, but frankly, was not a bad offer in the circumstances.
Orders
For all those reasons, I order the defendant pay the plaintiff’s costs in the proceedings on a standard basis until 12 December 2022, and thereafter on an indemnity basis.
I also order that the defendant pay the plaintiff $493,438.21, that amount being inclusive of interest as specified in the order handed to me by Mr Downes, which I initial and place with the papers.
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