Australian Securities Ltd v Ehrenfeld - [2023] WADC 121 (S)

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION:   PERTH
CITATION:   AUSTRALIAN SECURITIES LTD -v- EHRENFELD [2023] WADC 121 (S)
CORAM:   BARONE DCJ
HEARD:   28 NOVEMBER, 12 DECEMBER (SUBMISSIONS) & 13 DECEMBER 2023 (SUBMISSIONS)
DELIVERED          :   13 AUGUST 2024
PUBLISHED           :   10 SEPTEMBER 2024
FILE NO/S:   CIV 1960 of 2018
BETWEEN:   AUSTRALIAN SECURITIES LTD
Plaintiff

AND

DANIEL EHRENFELD
Defendant

DANIEL EHRENFELD
Plaintiff by counterclaim

AUSTRALIAN SECURITIES LTD
Defendant by counterclaim

Catchwords:

Leave to re-open after judgment - Costs - Interest after judgment

Legislation:

Civil Judgments Enforcement Act 2004 (WA)

Result:

Leave to re-open refused
Final orders made

Representation:

Counsel:

Plaintiff	:	Ms E C Hensler
Defendant	:	Mr T O Coyle
Plaintiff by counterclaim	:	Mr T O Coyle
Defendant by counterclaim	:	Ms E C Hensler

Solicitors:

Plaintiff	:	Lavan Legal
Defendant	:	McNally & Co
Plaintiff by counterclaim	:	McNally & Co
Defendant by counterclaim	:	Lavan Legal

Case(s) referred to in decision(s):

Australian Securities Ltd v Ehrenfeld [2023] WADC 121
Osborne v Landpower Developments Pty Ltd (in liq) [2003] WASCA 117
Rumball v Mortimore [2000] WASC 126
Westgem Investments Pty Ltd v Commonwealth Bank of Australia Ltd [No 5] [2019] WASC 310

BARONE DCJ:

Introduction

On 20 October 2023 the court published reasons in these proceedings.[1]
[1] Australian Securities Ltd v Ehrenfeld [2023] WADC 121.
The judgment indicated the court required the assistance of counsel to determine the numerical amount of the judgment sum that accorded with the published reasons. Therefore, no final orders were made at the time.
The plaintiff, ASL, proposed that a judgment sum in the amount of $303,983.20 plus interest at the rate of 10.88% per annum from 18 March 2021 to judgment date would accord with the published judgment.[2]
[2] Plaintiff's amended calculation of judgment sum dated 28 November 2023.
The defendant initially proposed a modified judgment sum of $264,896 plus interest at the rate of 10.88% per annum from 19 March 2021 to judgment date.[3] The defendant now proposes the judgment sum be calculated by reference to two schedules attached to the defendant's affidavit dated 13 December 2023.
[3] Defendant's minute of proposed orders and defendant's aide memoire calculation of judgment sum both dated 27 November 2023. However, taking into account errors made by the plaintiff in their initially proposed judgment sum calculation and a $400 error in the court's judgment at [342] and [360(a)(c)] the figure would be $266,480.20.
The defendant's proposed judgment sum is contingent upon the defendant being granted leave to re‑open and raise further matters in opposition to the plaintiff's quantification case.
For the reasons here expressed, I refuse leave for the defendant to re‑open as to the aspects of ASL's quantification case it now takes issue with.

Should the defendant be permitted to re-open?

The defendant contends that judgment should be entered for an amount excluding:
(a)the receivership fees of $24,425.35;
(b)an amount of $3,534.40 said to be a shortfall between the total amount of the Macquarie bank balance and the amount applied out of that bank account to reduce the borrower's debt. The defendant refers to this amount as a shortfall in the refund of the retention sum to the borrower;
(c)an amount of $7,029 relating to legal fees incurred by the receivers and managers, that figure having been deducted from the proceeds of sale applied to reduce the borrower's debt; and
(d)the amount (not explicitly quantified by the defendant in the written submissions) claimed by ASL as interest on unpaid interest.
The defendant submits that the receivership fees were not demanded from the borrower and therefore not payable by the guarantor consistent with the court's findings at [327] ‑ [333] of the judgment. The defendant did not make such a submission at trial.
At trial ASL led evidence from Ms Humann (receiver) and Ms Bode (CEO of ASL) about the receivership fees. The defendant cross‑examined Ms Humann about the receivership fees, but the questions related broadly to the amount of work conducted by the receivers and by whom. The defendant cross‑examined Ms Bode but did not ask any specific questions relating to the receivership fees.
The defendant submits that ASL failed to prove at trial that the borrower was not entitled to the full deposit amount of the retention sum held in the Macquarie bank account plus accumulated interest. This is a factual matter that was not put in issue by the defendant at trial.
The defendant submits that the legal fees paid at settlement were not demanded from the borrower and therefore not payable by the guarantor consistent with the court's findings in [327] ‑ [333] of the judgment. The defendant did not make such a submission at trial.
Further, the defendant submits that 'absent … explanation as to why prior demand was not required' the plaintiff should not have deducted this amount from the gross sales proceeds.[4] Again, the defendant did not make such a submission at trial. To the contrary, at trial, the defendant conceded the figures said to be the principal sum and interest were accurate[5] and raised no dispute regarding the net proceeds of the sale amount applied to the borrower's debt and the resulting balance of the borrower's debt outstanding from which the interest calculations were then calculated. The concession that the interest calculation was correct necessarily therefore was a concession that the net proceeds applied after sale was correct.
[4] Defendant's submissions on final orders for judgment, pars 43 and 47.
[5] ts 732 - ts 735.
The defendant seeks to tender two additional documents in respect of the legal fees if permitted to re‑open but concedes it may need to revisit the calculations if the tentative settlement date reflected in those documents was not the actual settlement date.
The defendant submits that a proper construction of the terms of the loan agreement does not provide for automatic capitalisation of interest upon default. The defendant says that no demand was made to the borrower in respect of such capitalisation. Neither the construction of the relevant clauses or the failure of ASL to demand capitalisation of unpaid interest from the borrower were raised by the defendant at trial.
Ultimately, the defendant submits that it was through oversight that counsel did not clarify at trial that the defendant's position was that the onus was on ASL to prove its quantification items. The defendant says the matters he now advances only came to light from mid‑November 2023, although concedes he did argue at trial the no demand point in respect of the items dealt with by the court in the judgment.
The defendant submits that the reasons for judgment contemplate the parties could be heard in relation to the final orders to be made including those relating to quantum. The defendant says that a grant of leave to re‑open will not take up a substantial amount of court time or recourses, involve only a limited number of non‑contentious business records discovered by ASL, and relates to a significant amount of money in the context of the proceedings.
ASL opposes the defendant's application to re‑open. ASL submits it is not in the interests of justice to permit re‑opening given:
(a)the defendant's failure to challenge ASL's claim for the above amounts at trial does not arise from inadvertence, the defendant having specifically turned his mind to those amounts he said required a demand to have been made and his having conducted the trial, including the making of submissions, based thereon. Further, at hearing the defendant took no issue with the principal and interest sum calculations;[6]
(b)the re-opening proposed by the defendant would re‑open substantive issues between the parties, including the taking of further evidence from both witnesses who gave evidence at trial;
(c)it is contrary to the public interest and the interests of the parties in the finality of litigation; and
(d)the defendant's submissions in respect of each amount set out at [7] above are in any event unmeritorious. The quantum sought by ASL in reference to each of those amounts is justified at law, fact and upon a proper construction of the loan agreement and the guarantee and indemnity agreement.
[6] ts 732 - ts 735.
At trial, the defendant adopted a comprehensive and thorough approach in opposing ASL's case on quantification. For example:
(a)the defendant took issue with ASL's reliance upon any certificate issued under the loan agreement and/or guarantee and indemnity agreement in proof of quantum. Throughout the proceedings the defendant foreshadowed and pursued objection to the tender of certificates purporting to certify the amount owed to ASL,[7] ultimately not opposing the tender of Exhibit 6.7 on a considered basis.[8] This approach adopted by the defendant directly impacted the manner in which ASL led evidence regarding quantum.[9]
(b)the defendant filed two sets of written closing submissions relating to quantification, the first detailing its opposition to ASL's certificates, the second 'setting out the defendant's position in relation to the various items of loss and damage claimed by [ASL] in its aide memoire …';[10]
(c)in oral closing submissions on quantification, the defendant sought to reserve a point relating to unfair contract terms and certificates issued under the loan agreement and/or guarantee and indemnity agreement,[11] notwithstanding the fact the defendant also conceded that ASL had in any event proved each item in the tendered certificate[12] that it pressed by adducing the underlying business records;[13]
(d)during the trial (in the time between hearing days relating to liability and quantification) the defendant sought and was granted orders for further and better discovery in respect of quantification;
(e)the defendant sought and was granted (over opposition) an adjournment of the quantification portion of the trial to enable the defendant to be fully prepared in respect of quantification. The adjournment was for a period just over three months;
(f)the defendant's counsel expressed the view at the time of seeking the adjournment of the quantification portion of the trial that it would be quite surprising if the parties could not settle quantum,[14] and noting the significant (downward) shift in the quantum sought by ASL since the liability portion of the trial, stated that if no agreement could be reached then the defendant would go to trial with the obvious attendant risks.[15] Proceeding to further trial hearing days regarding quantification must necessarily therefore have been a considered decision by the defendant;
(g)in cross-examining Ms Bode, the defendant asked questions relating to inexpensive invoices for envelopes and postage. This ostensibly innocuous evidence was relevant to which invoices may or may not have been posted to the borrower and therefore relevant to whether demands had been made;
(h)the defendant's cross-examination of Ms Bode revealed that the defendant was specifically aware that numerous invoices had been internally generated by ASL and had not been sent to the borrower, and further that ASL had not reviewed their information prior to trial to determine, and hence prove, which invoices had actually been sent to the borrower and therefore demanded; and
(i)in oral closing submissions the defendant added an additional fee[16] to the list of discharge costs the defendant submitted that he was not liable to pay in his written submissions on quantification dated 25 June 2021.
[7] For example, ts 138 - ts 149.
[8] ts 728.
[9] At ts 601 counsel for ASL indicated it was approaching quantum on the basis that the defendant was putting the plaintiff to strict proof.
[10] Defendant's submissions on quantification dated 15 June 2021, par 1.
[11] ts 736.
[12] Exhibit 6.7.
[13] ts 736.
[14] ts 555 - ts 558.
[15] ts 558.
[16] Being the $55 resettlement fee claimed by ASL.
The defendant relies upon his affidavit sworn 13 December 2023 in support of an application for leave to re‑open. The defendant's affidavit reveals:
(a)the defendant conducted a detailed review of materials relating to quantification from mid-November 2023, being a time after judgment had been delivered and some two years after when his counsel made closing submissions on quantification;
(b)the materials the defendant reviewed were ASL's aide memoire dated 27 June 2021, a document that was before the court during the trial, and ASL's 'more recent quantification documents'. What those 'more recent quantification documents' are, what they specifically relate to, the date of those documents, or when they were received by the defendant were not deposed to;
(c)the defendant discussed with his counsel up to around 30 November 2023 areas that he considered the quantification claims might be incorrect and accordingly prepared schedules setting out the proposed judgment sum calculation on around 30 November 2023; and
(d)the documents the defendant would tender if leave to re‑open was granted are documents he was aware of, and possessed, prior to 28 June 2021, being the trial day the court heard evidence and submissions relating to quantification.
The principles governing applications to re‑open were usefully summarised in Westgem Investments Pty Ltd v Commonwealth Bank of Australia Ltd [No 5].[17] I adopt and incorporate those principles without repetition.
[17] Westgem Investments Pty Ltd v Commonwealth Bank of Australia Ltd [No 5] [2019] WASC 310.
Of course, an application for re‑opening must be assessed in the context of the case in which it arises, including by reference to the timing of the application and at what stage of the litigation the application is made. In this matter written reasons for judgment have been delivered but no formal orders have been made. Those reasons invited the parties to make further submissions regarding the rate of post judgment interest and costs. However, the reasons did not request further submissions regarding quantum. Rather the court required the assistance of the parties to conduct the calculation set out at [360(a)] of the judgment because the court did not easily have to hand the total of the interest amount referred to in [360(a)(d)].
Taking into account the exhaustive manner in which the defendant conducted the trial and the content of his affidavit, I am of the view that that the defendant has conducted a further consideration of the matter post the court's judgment being delivered and has belatedly searched for further matters that could potentially have been argued at trial to reduce the judgment sum. It is difficult to accept in all of the circumstances it was an inadvertent failure at the time of trial to argue such matters.
The defendant's cross-examination of Ms Bode revealed that the defendant was alive to the minutiae of which amounts had been demanded from the borrower. This detail was at the heart of the defendant's submission that ASL's claim for amounts that had not been demanded from the borrower should fail.
I am not of the view that the new matters/arguments now raised by the defendant will be inevitably successful. ASL has foreshadowed matters of law and fact that constitute a significant challenge to the arguments now advanced by the defendant.
The defendant suggests that a grant of leave will not take up a substantial amount of court time or resources and that the merits of the substantive arguments could essentially be determined by the court on the basis of the submissions now before it. I am not of the view the merits of the arguments advanced could be fully assessed by the court on the papers without further hearing, evidence, or oral submissions.
Notwithstanding the defendant's own submission, the defendant's written submissions indicate that he may seek leave to file further submissions addressing any arguments advanced by ASL,[18] indicates reservations about the defendant's own ability to have comprehensively made submissions regarding the issue of 'the judgment sum' on the papers,[19] is in part based upon an assumption regarding the scope of the arguments to be advanced by ASL,[20] an assumption which has proven to be incorrect,[21] and does not substantively engage with key aspects of the submissions made by ASL in response.
[18] Defendant's submissions on final orders for judgment, par 4.
[19] Defendant's submissions on final orders for judgment, pars 4 and 33.
[20] Defendant's submissions on final orders for judgment, par 24.
[21] Plaintiff's written submissions on judgment orders, par 21.
For example, the defendant's written submissions do not address ASL's submission regarding why receivership fees are payable without demand,[22] or the submission that several exhibits do prove that the receivership fees were validly demanded in any event,[23] or ASL's submission that what is said to be the retention sum shortfall was a valid deduction of a monthly loan payment,[24] or ASL's submission that the legal fees incurred by the receivers were in fact the borrower's own costs.[25]
[22] Plaintiff's written submissions on judgment orders, pars 8 - 10.
[23] Plaintiff's written submissions on judgment orders, pars 11 - 13.
[24] Plaintiff's written submissions on judgment orders, par 17.
[25] Plaintiff's written submissions on judgment orders, par 21.
The proceedings as a whole have already taken up substantial court resources. A further hearing will obviously further add to the cost and length of the litigation. Whilst obviously significant to the parties, the court must bear in the mind the total amount of the claim and the amount of deduction in the judgment sum now sought by the defendant with reference to the considerable resources already expended by the court and the parties.
ASL has foreshadowed further oral and documentary evidence not adduced at trial that it would now adduce if the defendant's application were allowed. The court would benefit from the assistance of responsive submissions in order to determine the merits of the defendant's substantive arguments. Such eventualities strike at the heart of the public interest in the finality of litigation.
The defendant seeks to now advance arguments that with the exercise of reasonable diligence[26] could have been argued at the original hearing. This is not a situation in which the defendant has by reflection in a timely manner after the close of evidence and submissions at trial noticed arguments it omitted to advance.
[26] Osborne v Landpower Developments Pty Ltd (in liq) [2003] WASCA 117.
In light of the above, taken as a whole, I am of the view that the justice of the case does not favour the grant of leave to re‑open. Leave is refused.

Costs orders

The figure proposed by the plaintiff as the judgment sum of $303,983.20 plus interest, does not include any amount for legal fees incurred by ASL prior to the commencement of proceedings against the guarantor.
ASL's updated aide memoire on quantum referred to the amount sought as being the 'total ASL non-legal costs outstanding as at 18 March 2021'.
ASL did not seek to prove any pre‑proceedings enforcement costs incurred by ASL as forming part of the guaranteed money/judgment sum sought.[27] It was open for ASL to do so.[28]
[27] Counsel confirmed this position on 28 June 2021 at ts 697 and on 28 November 2023, ts 800.
[28] See cl 4.1 and cl 4.3 of the guarantee and indemnity agreement.
Rather, ASL seeks a costs order that the defendant pay ASL its other legal costs of enforcing the guarantee and indemnity made by the parties and dated 12 December 2013 and related loan agreement dated 12 December 2023.[29]
[29] Plaintiff's minute of proposed orders on judgement dated 12 December 2023, par 43.

ASL seeks that in default of agreement, these costs (and any costs of and incidental to the claim and counterclaim, including any reserved costs and costs thrown away) be paid on a solicitor/client basis so that ASL shall be indemnified by the defendant for all its costs in a reasonable amount that have been reasonably incurred.[30]
[30] Plaintiff's minute of proposed orders on judgement dated 12 December 2023, par 44.
Any obligation to pay those costs is contractual as between ASL (as lender) and the borrower and as between ASL and the defendant (as guarantor). Those costs form part of the contractual liability owed by the defendant and are not costs of and incidental to the proceedings.
ASL submits the orders it seeks would be consistent with the terms of the loan agreement and the guarantee and indemnity agreement.[31] ASL relies upon Rumball v Mortimore[32] in this respect. However, the loan agreement and the guarantee and indemnity agreement are not harmonious as to what enforcement expenses are recoverable and on what basis.[33]
[31] Par 36 of the plaintiff's outline of submissions on quantum dated 12 March 2021.
[32] More particularly, Rumball v Mortimore [2000] WASC 126 [14] - [17].
[33] Contrast for example cl 11.1 of the loan agreement with cl 4.1 and cl 4.3 of the guarantee and indemnity agreement.
Therefore, I am not of the view that the parties to this action (being ASL and the guarantor) are also parties to a contract which contains plain and unambiguous provisions allowing for costs to be paid on a certain basis, such that the court should exercise its discretion in the manner contended for.
For clarity, it is my intention that the costs order I make extends to ASL's costs of responding to the defendant's application to re‑open.
ASL has foreshadowed that if the court is not minded to order costs on a solicitor/client basis, it will apply for special costs orders. I will deal with any such application if it is made.

Interest after judgment

The parties were given the opportunity to make further submissions regarding the rate of interest that should apply on any unpaid amount of the judgment sum from the date of judgment.
ASL maintains its submission that the court should set the rate of interest at 10.88% per annum.
Whilst the defendant accepts that an express term providing for interest on a judgment to accrue at a rate higher than the rate prescribed in the Civil Judgments Enforcement Act 2004 (WA) may be enforceable, the defendant says that in this instance the guarantee and indemnity does not specifically provide for a different rate of interest to prevail after entry of judgment.
Whilst the guarantee and indemnity agreement does not contain a clause expressly addressing the rate of interest applicable to a judgment sum, I am satisfied that the terms of the guarantee and indemnity agreement make it clear that the parties contemplated the guarantor's obligation to pay interest at the higher contractual rate should survive the entry of judgment.
The loan agreement between ASL and the borrower expressly and unambiguously provides for a higher rate of interest to apply in displacement of the statutory rate. Clause 5.8 provides that should ASL obtain judgment for all or any of the money secured such judgment shall, until satisfied, bear interest at a higher interest rate. The relevant rate being 10.88% per annum.[34]
[34] See cl 5.8 and item 9A of the loan agreement, Exhibit 1.3; Exhibit 1.10; Australian Securities Ltd v Ehrenfeld [77] ‑ [85].
The terms of the guarantee and indemnity agreement sets the guarantor's obligation to pay as referrable to the borrower's obligation to pay. Clause 4.3 expressly provides that the liability of the guarantor under the guarantee and indemnity is the borrower's liability under the loan agreement. Clause 4.1 provides that the guaranteed money is all monies the borrower owes ASL now or in the future under or in relation to the loan agreement.
The terms of the guarantee and indemnity agreement expressly provides for some exception to this referability. By its terms cl 4.3 specifically contemplates that whilst the guarantor's liability is the same as the borrower's liability under the loan agreement, the enforcement expenses of the guarantee and indemnity are to be assessed on a different basis to that provided in the loan agreement.[35]
[35] Clause 11.1(a) of the loan agreement expressly provides that the borrower will pay ASL's legal costs on a full indemnity basis, or a solicitor and own client basis, whichever is the greater, whereas cl 4.3 of the guarantee and indemnity provides the guarantor will pay all reasonable enforcement expenses reasonably incurred by ASL to enforce the agreement.
Further, cl 4.1 specifically provides that whilst the guaranteed money is all monies the borrower owes now or in the future under or in relation to the loan agreement, the obligation of the guarantor to pay ASL's loan agreement enforcement expenses extends only to 'reasonable enforcement expenses reasonably incurred by ASL to enforce the [loan agreement]' as opposed to how such loan agreement enforcement expenses would be calculated under the terms of the loan agreement itself.[36]
[36] Again, see cl 11.1(a) of the loan agreement.
No such carve-out/exception was included in the guarantee and indemnity agreement in respect of the guarantor's other liabilities, such as the liability to pay post judgment interest. The express inclusion of exceptions indicates an intention that no other exceptions apply.
When read together, I am satisfied these clauses indicate the parties intended that the higher contractual rate would apply notwithstanding that any obligation to pay is merged in a judgment of the court.

Error in published judgment

The published judgment in this matter contains an error. Paragraphs [342] and [360(a)(c)] erroneously state that invoice 68743 was for an amount of $475. It is not in dispute between the parties that this invoice was for $75. The plaintiff has calculated the judgment sum figure of $303,983.20 based on this correction.

Conclusion and orders

In accordance with these reasons, the final orders are:
1.There be judgment for the plaintiff in the sum of $303,983.20 plus interest at the rate of 10.88% per annum from 18 March 2021 to the date of judgment.
2.The defendant's counterclaim be dismissed.
3.Interest be payable on the judgment sum from the date of judgment until payment at the rate of 10.88% per annum pursuant to s 8(1)(b) of the Civil Judgments Enforcement Act 2004 (WA).
4.The defendant pay the plaintiff's costs of and incidental to the claim and counterclaim, including any reserved costs and any costs thrown away, to be taxed if not agreed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
DM
Associate to Judge Barone
10 SEPTEMBER 2024