Business Finance Pty Ltd (receiver & manager appointed) (in liquidation) v Casual Projects Pty Ltd as trustee for the GEM Family Trust

[2025] NSWSC 279

Supreme Court

New South Wales

Medium Neutral Citation:

Business Finance Pty Ltd (receiver & manager appointed) (in liquidation) v Casual Projects Pty Ltd as trustee for the GEM Family Trust [2025] NSWSC 279

Hearing dates:

14 March 2025

Date of orders:

27 March 2025

Decision date:

27 March 2025

Jurisdiction:

Equity - Real Property List

Before:

McGrath J

Decision:

See declarations and orders at [103]-[104]

Catchwords:

CONTRACTS – construction – interpretation – natural and ordinary meaning – definition of “secured money” – whether debt for unpaid interest under a mortgage, legal fees and costs judgment debt liability constitute “secured money” under written loan agreement

Legislation Cited:

Corporations Act 2001 (Cth), s 471B

Legal Profession Uniform Law Application Act 2014 (NSW), ss 70(1), 71, 74

Uniform Civil Procedure Rules 2005 (NSW), r 14.28

Cases Cited:

Business Finance Pty Ltd (in liq) v Casula Projects Pty Ltd [2024] NSWSC 252

Business Finance Pty Ltd v Casula Projects Pty Ltd [2022] NSWSC 1156

Business Finance Pty Ltd v Casula Projects Pty Ltd (No 2) [2022] NSWSC 1608

Leveraged Capital Pty Ltd v Modena Imports Pty Ltd [2009] NSWSC 509

Obrart v Grego (2017) 319 FLR 246; [2017] FCCA 929

Category:

Principal judgment

Parties:

Business Finance Pty Ltd (receiver & manager appointed) (in liquidation) (ACN 614 700 195) (First Plaintiff)

Marcus William Ayres trading as in his capacity as receiver & manager of Business Finance Pty Ltd (Second Plaintiff)

Casula Projects Pty Ltd (ACN 618 821 837) as trustee for the GEM Family Trust (Defendant)

Representation:

Counsel:
S Ipp (First and Second Plaintiff)
No appearance (Defendant)

Solicitors:
Corrs Chambers Westgarth (First and Second Plaintiff)
No appearance (Defendant)

File Number(s):

2023/00042678

Publication restriction:

Nil

JUDGMENT

INTRODUCTION

1. These proceedings have been brought by the plaintiffs, Business Finance Pty Ltd (receiver & manager appointed) (in liquidation) and Marcus William Ayres in his capacity as receiver and manager of Business Finance (Receiver), against the defendant, Casula Projects Pty Ltd as trustee for the GEM Family Trust.

2. In essence, the Receiver has brought these proceedings on behalf of Business Finance seeking to quantify and recover a debt owing by Casula Projects to Business Finance pursuant to a written Loan Agreement executed in October 2017 for $1.23 million, secured by a mortgage (Original Mortgage) over a property located in Surfers Paradise, Queensland (the Property), which was purported to be discharged on 14 November 2017.

3. The proceedings are a sequel to earlier proceedings in this court (proceedings 2021/00060376 between Business Finance and Casula Projects (Liability Proceedings)) in which Parker J gave an ex tempore judgment on 29 August 2022 after a contested five day hearing and later delivered written reasons on 14 September 2022: Business Finance Pty Ltd v Casula Projects Pty Ltd [2022] NSWSC 1156 (Liability Judgment).

4. In the Liability Judgment, Parker J held, amongst other things, that Casula Projects had repaid the principal amount of $1,199,900 in March 2019 pursuant to the Loan Agreement, but that interest and fees remained owing by Casula Projects under the Loan Agreement and so the Original Mortgage over the Property should be restored in favour of Business Finance. The mortgage was reinstated by registration on 11 November 2022 (New Mortgage). The New Mortgage was principally on the same terms as the Original Mortgage.

5. On 24 November 2022, Parker J gave judgment on the costs of the Liability Proceedings by ordering that Casula Projects pay the costs of Business Finance on the ordinary basis: Business Finance Pty Ltd v Casula Projects Pty Ltd (No 2) [2022] NSWSC 1608 (Costs Order). Those costs have now been determined following assessment, with a costs certificate issued and then registered to obtain judgment for the costs of $1,463,745.96 (proceedings 2025/00038448 between Business Finance and Casula Projects) (Costs Judgment).

6. Business Finance now seeks to have the amount of the debt and the related question of the amount secured by the New Mortgage determined.

7. Having earlier contested these proceedings, Casula Projects did not appear at the hearing of them before me, including after Casula Projects was called outside court. I am satisfied that Casula Projects was on notice of the hearing and that I should determine the issues in its absence.

8. I am also satisfied that the Receiver obtained the written consent of the Liquidators to prosecute these proceedings.

9. For the reasons set out below, I have determined that Business Finance should receive judgment in its favour for the amount of the debt which it contends, including the making of declarations that the New Mortgage secures the amount of the debt, the Costs Judgment and the legal fees it has incurred in these proceedings.

RELEVANT FACTS

Underlying factual matters

10. The underlying factual matters are those stated in the Liability Judgment, which can be summarised as follows:

1. Business Finance carried out lending operations at high interest rates to borrowers as part of the business ventures of Frankie McDad, which also included a company called Private Fund Pty Ltd.

2. In May 2017, Casula Projects was incorporated on the instructions of Mr McDad, with Mr McDad’s nephew (Nick Al Jayoush, who subsequently changed his name to Nick Mac Mokdad) as the sole director. Casula Projects became the trustee of the GEM Family Trust, a discretionary trust for the benefit of Mr Al Jayoush’s family.

3. In October 2017, Business Finance made a loan of $1.23 million to Casula Projects pursuant to the Loan Agreement with an interest rate of 24% per annum, compounding monthly.

4. The purpose of the loan was to fund the acquisition by Casula Projects, as trustee of the GEM Family Trust, of a townhouse in Surfers Paradise in Queensland (being the Property). One of the terms of the Loan Agreement was for Casula Projects to provide a first registered mortgage over the Property to Business Finance.

5. On 9 October 2017, the loan was drawn down, the purchase of the Property was completed, and the Original Mortgage over the Property was then registered.

6. On 14 November 2017, Mr McDad procured the discharge of the Original Mortgage over the Property, purportedly on the basis that the loan had been refinanced by Private Fund.

7. On 1 July 2019, Business Finance went into receivership.

8. On 23 December 2021, without the consent of Business Finance, Casula Projects granted a mortgage over the Property to Private Fund (Private Fund Mortgage).

Liability Judgment

11. In the Liability Judgment, Parker J found that:

1. during March 2019, Business Finance received payments of the loan principal totalling $1,199,900, comprising the amounts of $350,000 and $600,000, both received on 14 March 2019, and $249,900 received on 18 March 2019 (Liability Judgment at [27]–[30]);

2. interest, to be recalculated at the high interest rate of 24% per annum, compounding monthly, in the period up to and following June 2018, remained owing by Casula Projects to Business Finance for an amount of more than $500,000 (Liability Judgment at [8] and [43]–[44]); and

3. Business Finance was entitled to have the New Mortgage registered as security for the judgment and perhaps the costs of the Liability Proceedings (Liability Judgment at [46]).

12. On 14 September 2022, Parker J made several orders based on these findings in the Liability Judgment. Parker J made a declaration that for the purposes of the Original Mortgage, the quantum of the “Secured Money”, including interest and fees, as at 31 May 2018 was $1,199,900. Parker J made a further declaration that repayments of the “Secured Money” were made on the following dates:

1. $650,000 and $300,000 on 14 March 2019; and

2. $249,900 on 18 March 2019.

13. The correct amounts which should have been stated in the declaration are $600,000 and $350,000 respectively but as those payments total the same amount and were made on the same day, there is no consequence of them having been misstated.

New Mortgage

14. Following the Liability Judgment, on 3 November 2022, Casula Projects granted the New Mortgage over the Property in favour of Business Finance. On 8 November 2022, Business Finance by the Receiver executed the New Mortgage.

15. On 11 November 2022, the New Mortgage was registered on the title of the Property with the registration number 722101942.

Terms of the New Mortgage

16. The terms of the New Mortgage comprise the terms recorded in the schedules described as the “Schedule”, “Schedule A” and “Schedule B” of the New Mortgage and the standard terms of the mortgage memorandum recorded in the document titled “Summer Lawyers 2017 Memorandum”, registered with the Queensland Titles Registry numbered 718188316 (Memorandum).

17. The Memorandum is expressly incorporated into Schedule A and Schedule B of the New Mortgage.

18. The relevant terms of the New Mortgage may be summarised as follows:

1. Defined Terms (cl 1.1):

1. The “Lender”/“Mortgagee” is Business Finance, and the “Debtor”/“Borrower”/“Mortgagor” is Casula Projects.

2. The “Mortgaged Property” is the Property.

3. “Corporate Insolvency Event” includes the appointment of a receiver or receiver and manager to the corporation and/or the placing of the corporation into liquidation by whatever means.

4. “Costs and Expenses” includes:

1. any costs, expenses, fees, charges, disbursements including all Legal Fees incurred by the Lender arising from or in connection with, amongst other things, the exercise of any rights or powers under the New Mortgage, including but not limited to the taking of any Recovery Action; or the exercise by the Lender of any of its rights arising from any Event of Default; and

2. the costs, expenses, fees, charges, Legal Fees, disbursements or commissions of: the Lender; or any Receiver or agent appointed pursuant to the New Mortgage; or any real estate agent engaged or appointed to rent or sell the Mortgaged Property whether engaged or appointed by any Receiver or agent or by the Lender.

5. “Encumbrance” includes any interest created in any manner whatsoever in respect of, or over, the Mortgaged Property.

6. “Event of Default” means any of the events specified in cl 18 (which are set out in more detail below).

7. “Fees” means the fees listed and described in Schedule B (column A) which are payable by the Debtor to the Lender as specified in Schedule B (column C) and which fees form part of the Secured Money until they are paid to the Lender in full.

8. “Higher Interest Amount” means the interest amount calculated in accordance with the formula in cl 5.5.

9. “Higher Interest Rate” means the higher rate of interest specified in Schedule A as the “Higher Rate of Interest”.

10. “Insolvency Event” includes a Corporate Insolvency Event.

11. “Interest” means any interest payable by the Debtor to the Lender as calculated and accrued in accordance with the New Mortgage including but not limited to any interest on any of the Secured Money.

12. “Interest Regime A” means the interest regime referred to in cl 5.11.

13. “Legal Fees” means all solicitor’s costs, barrister’s fees and any disbursements on a full indemnity or solicitor and own client basis, whichever basis yields the higher amount.

14. “Lender’s Certificate” includes a certificate signed by the Lender as to any amount payable to the Lender under the New Mortgage.

15. “Material Adverse Effect” includes, in the opinion of the Lender, a material adverse effect on any one or more matters including:

1. the ability of the Debtor to pay the Secured Money or any part thereof; or pay Interest; or perform any one or more of its Obligations, as and when they fall due for performance; or

2. the financial position or condition of the Debtor; and/or the business conducted by the Debtor.

16. “Outstanding Interest” means any Interest that is due for payment but has not been paid by the Debtor to the Lender by the Date for the Payment of Interest in accordance with the New Mortgage.

17. “Principal Amount” means the amount stipulated in Schedule A as the principal amount advanced by the Lender, which is $1,199,900, including interest and fees as at 31 May 2018, as determined by Parker J in the Liability Judgment.

18. “Recovery Action” means any step taken by the Lender, or by any Receiver appointed by the Lender, to exercise any rights or powers under the Memorandum or under the New Mortgage, including but not limited to any step taken in any Court or Tribunal.

19. “Secured Money” means the aggregate of all monies which the Debtor is, or at any time may become, actually or contingently liable to pay to the Lender for any reason or on any account whatsoever and includes, without limitation: the Principal Amount; any Interest; any Outstanding Interest; any Fees; and any Costs and Expenses.

20. “Term” of the loan is the period from the “Commencement Date” (18 September 2017) to the Final Repayment Date. The “Final Repayment Date” is the final day on which the Debtor is to pay to the Lender all of the Secured Money, being six months after the Commencement Date.

2. Creation of Security and Nature of the Mortgage:

1. Pursuant to cl 2.1 of the Memorandum, the Debtor grants to the Lender a mortgage over the Mortgaged Property to secure:

1. The payment (including the punctual payment) of the Secured Money or any part thereof; and

2. The performance, including the punctual performance, of the Debtor’s Obligations.

2. Under cl 4 of the Memorandum, the Lender’s rights under the New Mortgage continue following its discharge until such time as the Lender provides the Debtor with an unconditional release in writing.

3. Interest Regime and Calculation:

1. The payment of Interest is dealt with in cll 5.1–5.15 of the Memorandum.

2. The Specified Interest Regime applicable to the New Mortgage is “Interest Regime A”.

3. “Date for the Payment of Interest” means the 18^th day of each month following the Commencement Date.

4. The “Higher Rate of Interest” is 24% per annum.

5. The “Lower Rate of Interest” is 12% per annum.

6. Interest is to be calculated and paid in accordance with cl 5 of the Memorandum. By way of summary, the terms there provide that the Interest to be paid shall at all times be at the Higher Interest Amount (24%) unless the Lender notifies the Debtor that the Lower Interest Amount is payable by the Debtor for any Interest Period; Interest is to be paid monthly in advance of the Date for the Payment of Interest (18^th day of every month); and the Interest on the Outstanding Interest at the Higher Interest Rate compounds monthly on the Date for Payment of Interest until the Outstanding Interest is paid in full.

7. The Debtor shall pay the Higher Interest Amount for any Interest Period where, before the Date for the Payment of the Interest for the Interest Period, the Debtor has failed to pay any amount due under the New Mortgage by the due date; or the Debtor has failed to comply with any of its Obligations; or there is an Event of Default.

8. The Higher Interest Amount is to be calculated as follows: Balance x Higher Interest Rate ÷ 365 x number of days in the relevant Interest Period.

9. The Lower Interest Amount is to be calculated as follows: Balance x Lower Interest Rate ÷ 365 x number of days in the relevant Interest Period.

10. Any Interest not paid by the Debtor to the Lender by the Date for the Payment of Interest shall be capitalised immediately upon the Interest not being paid and the amount of unpaid Interest shall be Outstanding Interest and form part of the Secured Money.

4. Fees:

1. Under cl 5.16 of the Memorandum, the Debtor is liable to pay the Lender any of the Fees on the dates specified in column C of Schedule B.

2. Under Schedule B, a Loan Management Fee of $115 per month applies, payable on the Date for the Payment of Interest (18^th of each month).

3. Under Schedule B, a Default Loan Management Fee of $75 per day will apply once an Event of Default occurs, or is deemed to have occurred, if the Lender takes any step in connection with a Recovery Action. It is payable immediately upon demand by the Lender.

5. Event of Default: Under cl 18 of the Memorandum, an “Event of Default” will have occurred, or will be deemed to have occurred if, amongst other things:

1. the Debtor fails to pay any Secured Money in accordance with the New Mortgage; or

2. the Debtor fails to comply with any of its obligations arising under, or imposed by, the New Mortgage; or

3. if the Debtor creates, attempts to create or permits the creation of any Encumbrance over the Mortgaged Property, otherwise than with the written consent of the Lender (cl 18.2(k)).

6. Lender’s Certificate: Under cl 24 of the Memorandum, the Lender may rely on a Lender’s Certificate as conclusive evidence of any matter stated in it (unless the Debtor establishes that any information in the Lender’s Certificate is incorrect) and that Lender’s Certificate is binding on the Debtor in any proceedings brought by the Lender against the Debtor.

7. Appointment of Receiver: Under cl 19 of the Memorandum, the Lender may appoint a Receiver in respect of any or all of the Mortgaged Property if an Event of Default occurs or is deemed to have occurred. The Receiver may do anything they consider appropriate to recover the Secured Money, including commence and/or defend any proceedings.

Costs Order

19. On 24 November 2022, Parker J made the Costs Order.

November 2022 Fees Demand

20. On 25 November 2022, Business Finance (through its solicitors, Corrs Chambers Westgarth (CCW)) sent a letter to Casula Projects stating that there had been default under the New Mortgage. The events of default included Casula Projects’ failure to repay the Secured Money at the end of the Term and the lodgement of a caveat bearing registration number 721390851 (Caveat) in respect of the Property contrary to cl 18(k) of the Memorandum. The letter stated that Business Finance was entitled to take enforcement action and reserved all of its rights in respect of the events of default.

21. Also on 25 November 2022, Business Finance (through CCW) sent another letter to Casula Projects again stating that there had been events of default under the New Mortgage, including Casula Projects’ failure to repay the Secured Money at the end of the Term and the lodgement of the Caveat. This letter stipulated that Business Finance was entitled under the New Mortgage to charge the Default Loan Management Fee at the rate of $75 per day payable immediately upon demand and the Loan Management Fee from the Commencement Date at the rate of $115 per month payable monthly on the Date for the Payment of Interest. The letter demanded immediate payment of those fees calculated as of 25 November 2022, being $127,162.50 in Default Loan Management Fees and $7,015.00 on Loan Management Fees (November 2022 Fees Demand).

Sale of the Property

22. On 19 January 2023, Casula Projects entered into a contract for the sale of the Property to Ross and Kristen McRobert. Casula Projects did not obtain the consent of Business Finance to enter into the contract of sale.

February 2023 Certificate

23. On 23 February 2023, Business Finance (through CCW) sent a letter to Casula Projects, which attached a certificate pursuant to cl 24 of the Memorandum said to be conclusive evidence of any fact or matter stated in the certificate unless the contrary is established (February 2023 Certificate).

24. The February 2023 Certificate relevantly states:

1This is a certificate made under:

a. the Loan Agreement; and

b. the Mortgage.

2Capitalised terms used in this document that are not otherwise defined have the meaning attributed to them in the Memorandum.

3Pursuant to clause 24 of the Memorandum, a certificate which is signed by Business Finance is conclusive evidence of any fact or matter stated in the certificate (including, for example and without limitation, that an amount is due and payable by you to Business Finance under the Loan Agreement) unless the contrary is established.

4Business Finance, certifies that as at 9 February 2023:

a. the amount payable by You to Business Finance under the Loan Agreement and the Mortgage is $1,015,391.68; and

b. interest continues to accrue on the amount referred to in paragraph 4(b)(i) [sic] above at the Higher Interest Rate in accordance with the terms of the Loan Agreement and the Mortgage.

5   This notice does not include amounts payable by you in respect of the costs order made in Supreme Court of NSW proceeding number 2021/00060376 which are secured by the Mortgage.

February 2023 Demand

25. Also on 23 February 2023, Business Finance (through CCW) sent a letter of demand to Casula Projects (February 2023 Demand). The February 2023 Demand referred to the February 2023 Certificate and the November 2022 Fees Demand. The February 2023 Demand demanded that Casula Projects make immediate payment of $1,015,391.68. The February 2023 Demand was expressed to not include the amounts payable by Casula Projects to Business Finance in respect of the Liability Proceedings, and reserved all rights of Business Finance in respect of those amounts.

Receiver appointed

26. On 1 March 2023, Business Finance appointed the Receiver as the receiver of the Property in exercise of its rights under the New Mortgage.

Private Fund Mortgage

27. On 16 March 2023, Private Fund executed the Private Fund Mortgage.

28. On 17 March 2023, Private Fund purported to register the Private Fund Mortgage as a second ranking mortgage on the title of the Property.

Liquidator appointed to Business Finance

29. On 3 April 2023, Business Finance was wound up by order of this court and Andrew Sallway and Jeffrey Marsden were appointed as the liquidators of Business Finance (Liquidators).

Settlement of sale of the Property

30. On 14 April 2023, settlement of the sale of the Property occurred.

31. Following completion of the sale of the Property, the Receiver has held the net sale proceeds of the Property in an interest-bearing account.

32. Private Fund made a claim to the net sale proceeds. On 14 April 2023, the Receiver gave an undertaking to Private Fund to hold the Net Sale Proceeds in an interest-bearing account until such time as an order is made by a court in relation to them.

33. As at 28 February 2025, the amount of the net sale proceeds was $1,896,815.33 (Net Sale Proceeds).

Procedural history

34. On 8 February 2023, Business Finance commenced these proceedings against Casula Projects by filing the summons.

35. On 27 March 2023, Business Finance and the Receiver filed the statement of claim in these proceedings setting out the basis for the claims made against Casula Projects.

36. On 6 April 2023, the Liquidators provided their signed written consent to the Receiver continuing to prosecute these proceedings against Casula Projects as required by s 471B of the Corporations Act 2001 (Cth).

37. On 1 June 2023, Casula Projects filed the defence to the statement of claim and the first cross-claim, and a statement of cross-claim against Business Finance.

38. On 27 July 2023, Business Finance and the Receiver filed a notice of motion seeking an order pursuant to r 14.28 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) that particular parts of the defence be struck out, and an order pursuant to r 13.4(1) of the UCPR that the whole of the cross-claim be summarily dismissed, or alternatively an order pursuant to r 14.28 of the UCPR that nearly all of the paragraphs of the cross-claim be struck out (Strike Out Application).

39. On 4 August 2023, Casula Projects filed a notice of motion seeking leave to amend the cross-claim (Amendment Application).

40. On 25 September 2023, Casula Projects filed a notice of motion seeking leave to amend the defence, leave to amend the cross-claim and to strike out parts of the statement of claim.

41. On 31 October 2023, pursuant to leave granted by me, Casula Projects filed an amended notice of motion seeking leave to amend the defence, leave to amend the cross-claim and to strike out parts of the statement of claim (Second Amendment & Strike Out Application).

42. On 31 October 2023, I heard the Strike Out Application and the Second Amendment & Strike Out Application.

43. On 15 March 2024, I gave judgment in the Strike Out Application and the Second Amendment & Strike Out Application: Business Finance Pty Ltd (in liq) v Casula Projects Pty Ltd [2024] NSWSC 252 (Strike Out Judgment).

44. In the Strike Out Judgment, I concluded that:

1. the Second Amendment & Strike Out Application should be dismissed, such that no parts of the statement of claim should be summarily dismissed or struck out, Casula Projects should not granted leave to amend its defence, Casula Projects should not be granted leave to amend its cross-claim; and

2. the Strike Out Application should succeed such that the statement of cross-claim should be struck out.

45. On 15 March 2024, I made orders in accordance with the Strike Out Judgment, including that Casula Projects should pay the costs of Business Finance in respect of the Strike Out Application and the Second Amendment & Strike Out Application.

46. On 2 May 2024, Casula Projects’ then lawyers, Pointon Partners, ceased acting for it. Since that time, Casula Projects has been unrepresented and has not taken any procedural step in these proceedings since the Strike Out Judgment. There has been no notice of appearance filed by any new solicitors acting for Casula Projects.

47. On 24 June 2024, Business Finance served its application to amend the statement of claim on Casula Projects.

48. On 12 July 2024, Peden J granted leave to Business Finance to amend the statement of claim.

49. On 17 July 2024, Business Finance and the Receiver filed the amended statement of claim (ASOC).

50. On 18 July 2024, Business Finance and the Receiver served the ASOC on Casula Projects.

51. On 11 October 2024, Peden J made orders listing these proceedings for hearing on 14 March 2025, made the usual order for hearing and directed Business Finance to notify Casula Projects of the hearing and the orders made.

52. On 14 October 2024, Business Finance notified Casula Projects of the hearing on 14 March 2025 and the orders made on 11 October 2024.

June 2024 Certificate

53. On 3 June 2024, Business Finance (through CCW) sent a letter to Casula Projects, which attached a certificate pursuant to cl 24 of the Memorandum said to be conclusive evidence of any fact or matter stated in the certificate unless the contrary is established (June 2024 Certificate).

54. The June 2024 Certificate relevantly states:

1 This is a certificate made under:

a. the Loan Agreement;

b. the New Mortgage; and

c. the Equitable Mortgage.

2 Capitalised terms used in this document that are not otherwise defined have the meaning attributed to them in the Memorandum.

3 Pursuant to clause 24 of the Memorandum, a certificate which is signed by Business Finance is conclusive evidence of any fact or matter stated in the certificate (including, for example and without limitation, that an amount is due and payable by you to Business Finance under the Loan Agreement) unless the contrary is established.

4 Business Finance, certifies that as at 3 June 2024:

a. the amount payable by You to Business Finance under the Loan Agreement, the New Mortgage and the Equitable Mortgage is $1,203,456.06; and

b. interest continues to accrue on the amount referred to in paragraph 4(b)(i) [sic] above at the Higher Interest Rate in accordance with the terms of the Loan Agreement, the New Mortgage and the Equitable Mortgage.

5    This notice does not include amounts payable by you in respect of the costs order made in Supreme Court of NSW proceeding number 2021/00060376 which are secured by the New Mortgage and/or the Equitable Mortgage.

June 2024 Demand

55. Also on 3 June 2024, Business Finance (through CCW) sent a letter of demand to Casula Projects (June 2024 Demand). The June 2024 Demand referred to the November 2022 Fees Demand, the February 2023 Demand and the June 2024 Certificate. The June 2024 Demand demanded that Casula Projects make immediate payment of $1,203,456.06. The June 2024 Demand was expressed to not include the amounts payable by Casula Projects to Business Finance in respect of the Liability Proceedings, and reserved all rights of Business Finance in respect of those amounts.

September 2024 Certificate

56. On 11 September 2024, Business Finance (through CCW) sent a letter to Casula Projects, which attached a certificate pursuant to cl 24 of the Memorandum said to be conclusive evidence of any fact or matter stated in the certificate, unless the contrary is established (September 2024 Certificate).

57. The September 2024 Certificate relevantly states:

1This is a certificate made under:

a. the Loan Agreement;

b. the Mortgage.

2Capitalised terms used in this document that are not otherwise defined have the meaning attributed to them in the Memorandum.

3Pursuant to clause 24 of the Memorandum, a certificate which is signed by Business Finance is conclusive evidence of any fact or matter stated in the certificate (including, for example and without limitation, that an amount is due and payable by you to Business Finance under the Loan Agreement) unless the contrary is established.

4Business Finance, certifies that as at 9 August 2024:

a. the amount payable by You to Business Finance under the Loan Agreement and the Mortgage is $1,313,762.10; and

b. interest continues to accrue on the amount referred to in paragraph 4(b)(i) [sic] above at the Higher Interest Rate in accordance with the terms of the Loan Agreement and the Mortgage.

5   This notice does not include amounts payable by you in respect of:

a. any costs order/s made in Supreme Court of NSW proceeding number 2021/00060376; and

b. any costs order/s made in Supreme Court of NSW proceeding number 2023/00042678,

which are secured by the Mortgage.

Costs Judgment

58. As stated above, on 24 November 2022, Parker J made the Costs Order.

59. On 14 March 2024, Business Finance and the Receiver lodged an application pursuant to s 74 of the Legal Profession Uniform Law Application Act 2014 (NSW) (LPULA Act) for the assessment of its costs in the Liability Proceedings payable pursuant to the Costs Order.

60. On 21 January 2025, the assessor issued a certificate for determination of costs pursuant to ss 70(1) and 71 of the LPULA Act on terms that Casula Projects pay Business Finance and the Receiver the total amount of $1,463,745.96 (Costs Certificate).

61. On 31 January 2025, Business Finance and the Receiver registered the Costs Certificate by filing it in this court and obtaining the Costs Judgment in the amount of $1,463,745.96.

62. Casula Projects has not paid the amount of the Costs Judgment.

February 2025 Demand for Legal Fees

63. On 27 February 2025, Business Finance (through CCW) sent a letter to Casula Projects demanding payment of $615,305.50 as the costs of these proceedings (February 2025 Demand for Legal Fees). A breakdown of the calculation of that amount was attached to the February 2025 Demand for Legal Fees. The amount was stated to be owing under the New Mortgage as legal costs forming part of the Secured Money. The amount was also stated not to include the amounts payable by Casula Projects to Business Finance as set out in the February 2023 Demand and the June 2024 Demand.

5 and 14 March 2025 Certificates

64. On 5 March 2025, the Receiver issued a certificate pursuant to cl 24 of the Memorandum said to be conclusive evidence of any fact or matter stated in the certificate, unless the contrary is established (5 March 2025 Certificate).

65. The 5 March 2025 Certificate relevantly states:

1This is a certificate made under:

a. the Loan Agreement; and

b. the Mortgage.

2Capitalised terms used in this document that are not otherwise defined have the meaning attributed to them in the Memorandum.

3Pursuant to clause 24 of the Memorandum, a certificate which is signed by Business Finance is conclusive evidence of any fact or matter stated in the certificate (including, for example and without limitation, that an amount is due and payable by you to Business Finance under the Loan Agreement) unless the contrary is established.

4Business Finance, certifies that as at 5 March 2025:

a. the amount payable by You to Business Finance under the Loan Agreement and the Mortgage is $1,463,901.37; and

b. interest continues to accrue on the amount referred to in paragraph 4(b)(i) [sic] above at the Higher Interest Rate in accordance with the terms of the Loan Agreement and the Mortgage.

5   This notice does not include amounts payable by you in respect of:

a. any costs order/s made in Supreme Court of NSW proceeding number 2021/00060376; and

b. any costs order/s made in Supreme Court of NSW proceeding number 2023/00042678,

which are secured by the Mortgage.

66. On 14 March 2025, the Receiver issued a certificate pursuant to cl 24 of the Memorandum said to be conclusive evidence of any fact or matter stated in the certificate, unless the contrary is established (14 March 2025 Certificate).

67. The 14 March 2025 Certificate relevantly states:

1This is a certificate made under:

a. the Loan Agreement; and

b. the Mortgage.

2Capitalised terms used in this document that are not otherwise defined have the meaning attributed to them in the Memorandum.

3Pursuant to clause 24 of the Memorandum, a certificate which is signed by Business Finance is conclusive evidence of any fact or matter stated in the certificate (including, for example and without limitation, that an amount is due and payable by you to Business Finance under the Loan Agreement) unless the contrary is established.

4Business Finance, certifies that as at 15 March 2025:

a. the amount payable by You to Business Finance under the Loan Agreement and the Mortgage is $2,108,373.70; and

b. interest continues to accrue on the amount referred to in paragraph 4(b)(i) [sic] above at the Higher Interest Rate in accordance with the terms of the Loan Agreement and the Mortgage.

5   This notice does not include amounts payable by you in respect of any costs order/s made in Supreme Court of NSW proceeding number 2021/00060376, which are secured by the Mortgage.

RELIEF SOUGHT

68. The relief now sought by Business Finance is as follows:

1. A declaration that Casula Projects is indebted to Business Finance in the amount of $1,493,068.20 in principal and interest as at 14 March 2025 (Debt Amount).

2. A declaration that the Debt Amount forms part of the “Secured Money” (as defined in cl 1.1 of the Memorandum) pursuant to New Mortgage over the Property.

3. A declaration that the Casula Projects’ liability to pay a judgment debt in the amount of $1,463,745.96 from the Costs Judgment (Costs Judgment Amount) forms part of the “Secured Money” (as defined in cl 1.1 of the Memorandum) pursuant to the New Mortgage.

4. Order that Casula Projects pay Business Finance’s costs of these proceedings in the amount of $615,305.50 on a full indemnity or solicitor and own client basis (whichever basis yields the higher amount) pursuant to cl 3.1(a) of the Memorandum and the definitions of “Secured Money”, “Costs and Expenses”, “Legal Fees” and “Recovery Action” in cl 1.1 of the Memorandum (Legal Fees Amount).

5. A declaration that the Legal Fees Amount forms part of the “Secured Money” (as defined in cl 1.1 of the Memorandum) pursuant to the New Mortgage.

6. Judgment for Business Finance in the amount of $3,572,119.66, comprising the Debt Amount, the Costs Judgment Amount and the Legal Fees Amount.

69. Although in the ASOC Business Finance and the Receiver also sought declarations that Business Finance held an equitable mortgage over the Property to secure the amount outstanding under the Loan Agreement by reason of the Original Mortgage and its discharge, that relief was not sought in the hearing before me. Accordingly, I have set aside any further consideration of whether Business Finance held such an equitable mortgage.

70. The relief sought gives rise to the following issues for me to determine in these proceedings.

ISSUE 1: THE AMOUNT OF THE DEBT

71. Business Finance claims that the amount of the debt owing under the Loan Agreement is $1,493,068.20 in principal and interest as at 14 March 2025.

Interest

72. While the principal owing under the Original Mortgage had been repaid, Interest remained owing: Liability Judgment [43]–[45]. The last payment of Interest by Casula Projects was on 26 April 2018. Casula Projects has also failed to make any Interest payments since the Receiver was appointed on 1 March 2023.

73. Interest is owing by Casula Projects to Business Finance in accordance with the regime in cl 5 of the New Mortgage as outlined above. That regime requires Interest to be paid at the Higher Rate of Interest of 24% per annum, compounding monthly. The unpaid Interest forms part of the Secured Money under the New Mortgage because it is an amount that Casula Projects is actually liable to pay Business Finance.

74. In the February 2023 Demand and the June 2024 Demand, Business Finance made demands that Casula Projects pay the amounts owing under the New Mortgage. Those demands were not met.

75. The failure to pay Interest constitutes an Event of Default under cl 18.2(a) of the Memorandum because it is a failure to pay Secured Money.

Loan Management Fee

76. Casula Projects is liable to pay a monthly Loan Management Fee of $115 on the Date for the Payment of Interest under the New Mortgage, being that specified in Schedule B of the Memorandum.

77. The definition of Fees in cl 1.1 of the Memorandum makes it clear that the Fees listed and described in Schedule B (which include the Loan Management Fee) form part of the Secured Money until they are paid in full by Casula Projects.

78. Casula Projects has failed to pay Loan Management Fees after 31 May 2018. In addition, the Loan Management Fees form part of the Secured Money under the New Mortgage because Casula Projects is actually liable to pay them to Business Finance.

79. On 25 November 2022, Business Finance made the November 2022 Fees Demand, which included demand for payment of the Loan Management Fees. Casula Projects made no payment in response to the November 2022 Fees Demand.

80. The failure to pay the Loan Management Fees constitutes an Event of Default under cl 18.2(a) of the Memorandum because it is a failure to pay Secured Money.

Default Loan Management Fee

81. Casula Projects is liable to pay a Default Loan Management Fee if it commits an Event of Default as specified in Schedule B of the Memorandum. Casula Projects has failed to pay Interest and has therefore committed an Event of Default. As a result, the Default Loan Management Fee is payable at $75 per day from the date of the default and it is payable immediately upon demand by Business Finance.

82. For the same reason as stated above, the definition of Fees in cl 1.1 of the Memorandum makes it clear that the Fees listed and described in Schedule B (which include the Default Loan Management Fee) form part of the Secured Money until they are paid in full by Casula Projects.

83. Casula Projects has failed to pay Default Loan Management Fees after 9 April 2018. In addition, the Default Loan Management Fees form part of the Secured Money under the New Mortgage because Casula Projects is actually liable to pay them to Business Finance.

84. On 25 November 2022, Business Finance made the November 2022 Fees Demand, which included demand for payment of the Default Loan Management Fees. Casula Projects made no payment in response to the November 2022 Fees Demand.

85. The failure to pay the Default Loan Management Fees constitutes an Event of Default under cl 18.2(a) of the Memorandum because it is a failure to pay Secured Money.

Calculation of the debt as part of the Secured Money

86. I have been provided with a spreadsheet calculating the amount of Interest, Loan Management Fees and Default Loan Management Fees to 14 March 2025. I am satisfied that the total of those amounts is $1,493,068.20 as at 14 March 2025, which is the amount of the debt owing by Casula Projects for which Business Finance and the Receiver seek a declaration.

86. For the reasons stated in respect of the Interest, the Loan Management Fees and the Default Loan Management Fees, I am also satisfied that the total amount of the debt of $1,493,068.20 as at 14 March 2025 is Secured Money under the New Mortgage.

ISSUE 2: THE COSTS JUDGMENT AS SECURED MONEY

88. Upon the making of the Costs Order, Casula Projects owed a contingent liability to Business Finance for an amount yet to be determined because it made Business Finance, the party in whose favour the Costs Order was made, a contingent creditor of Casula Projects for an amount yet to be quantified: Leveraged Capital Pty Ltd v Modena Imports Pty Ltd [2009] NSWSC 509, Brereton J at [22].

89. The contingent liability of Casula Projects to pay Business Finance was converted to an actual liability by operation of law once the Costs Order was quantified: Obrart v Grego (2017) 319 FLR 246; [2017] FCCA 929, at [66]. The Costs Order was quantified when the Costs Certificate was issued and the Costs Judgment was made in the amount of $1,463,745.96.

90. Casula Projects’ liability to pay the amount of the Costs Judgment ($1,463,745.96) falls within the natural and ordinary meaning of the expression “all monies which the Debtor is, or at any time may become, actually or contingently liable to pay the Lender” in the chapeau of the definition of Secured Money (cl 1.1 of the Memorandum) under the New Mortgage.

91. The natural and ordinary meaning of the phrase “for any reason” is to establish a causal connection between the amount in question and the actual or contingent liability of Casula Projects to pay money to Business Finance.

92. In my opinion, the actual liability of Casula Projects to pay the amount of the Costs Judgment of $1,463,745.96 clearly falls within the definition of Secured Money under the New Mortgage because the Costs Judgment provides the reason for that liability.

93. Under cl 3.1 of the Memorandum, Casula Projects is obliged to pay the Secured Money to Business Finance.

94. The failure to pay the amount of the Cost Judgment constitutes an Event of Default under cl 18.2(a) of the Memorandum because it is a failure to pay Secured Money.

ISSUE 3: THE COSTS OF THESE PROCEEDINGS

95. Casula Projects seeks the payment of its legal fees in these proceedings in the amount of $615,305.50 as part of the judgment sought.

96. In my opinion, Casula Projects is indebted to Business Finance for that amount by operation of the definitions of Legal Fees, Costs and Expenses and Recovery Action in the Memorandum.

97. Legal Fees are defined in cl 1.1 of the Memorandum to mean all solicitor’s costs, barrister’s fees and any disbursements on a full indemnity or solicitor and own client basis whichever basis yields the higher amount. I am satisfied that the amount of $615,305.50 comes within the definition of Legal Fees.

98. By reason of being Legal Fees, the amount of $615,305.50 also falls within the definition of Costs and Expenses in cl 1.1 of the Memorandum for the following reasons:

1. The Legal Fees were incurred by Business Finance arising from or in connection with the exercise of any rights or powers under the New Mortgage, including but not limited to the taking of any Recovery Action.

2. Recovery Action is defined in clause 1.1 of the Memorandum to mean any step taken by Business Finance or by any receiver appointed by Business Finance to exercise any rights or powers under the Memorandum or under the New Mortgage, including but not limited to any step taken in any court or tribunal.

3. These proceedings are a step taken in a court pursuant to which Business Finance and the Receiver are exercising rights and powers under the New Mortgage.

99. Costs and Expenses fall within the definition of Secured Money in cl 1.1 of the Memorandum. Under cl 3.1 of the Memorandum, Casula Projects is liable to pay the Secured Money to Business Finance.

100. On 27 February 2025, Business Finance made the February 2025 Demand for Legal Fees. Casula Projects has failed to meet that demand.

101. As a result, in my opinion Casula Projects is indebted to Business Finance for Legal Fees of $615,350.50 pursuant to the New Mortgage. The failure to pay the amount of $615,305.50 demanded in the February 2025 Demand for Legal Fees constitutes an Event of Default under cl 18.2(a) of the Memorandum because it is a failure to pay Secured Money.

ISSUE 4: OTHER EVENTS OF DEFAULT

102. Submissions were made by Business Finance and the Receiver in relation to other events said to constitute Events of Default under the New Mortgage. In light of the findings that I have made above concerning the existence of Events of Default and the form of the declarations that have been sought, it is not strictly necessary for me to make any further findings about other Events of Default.

103. I am, however, satisfied that the other Events of Default include:

1. The appointment of the Receiver to the Property (cl 18.2(o)(iii) of the Memorandum), which is also an Insolvency Event (cl 18.2(q) of the Memorandum).

2. The granting of the Private Fund Mortgage without the consent of Business Finance (cl 18.2(k) of the Memorandum).

ISSUE 5: SECURED MONEY IMMEDIATELY DUE AND PAYABLE

104. On the occurrence of the Events of Default outlined above, Business Finance was entitled to demand the immediate payment to it of the Secured Money which Casula Projects was obliged to repay in full in accordance with cl 18.3(a) of the Memorandum. Casula Projects has failed to meet the February 2023 Demand, the June 2024 Demand and the February 2025 Demand for Legal Fees such that the Secured Money remains immediately due and payable to Business Finance by Casula Projects.

ORDERS

105. By operation of cl 24 of the Memorandum, the 14 March 2025 Certificate provides conclusive evidence that the amount stated $2,108,373.70 (which is the total of the amount of the debt from principal and interest of $1,493,068.20 and legal fees in these proceedings of $615,305.50) is due and payable by Casula Projects to Business Finance under the Loan Agreement.

106. For the reasons set out above, I propose to make the following declarations and orders:

1. A declaration that the defendant is indebted to the first plaintiff in the amount of $1,493,068.20 in principal and interest as at 14 March 2025 (Debt Amount).

2. A declaration that the Debt Amount forms part of the “Secured Money” (as defined in cl 1.1 of the memorandum having registered dealing number 718188316 (Memorandum)) pursuant to the registered mortgage number 722101942 (New Mortgage) over the property at Lot 631 on Registered Plan 115799 known as 88 Salerno Street, Surfers Paradise, Queensland 4217 (Property).

3. A declaration that the defendant’s liability to pay a judgment debt in the amount of $1,463,745.96 from the judgment dated 31 January 2025 in Supreme Court of New South Wales proceedings 2025/00038448 (Costs Judgment Amount) forms part of the “Secured Money” (as defined in cl 1.1 of the Memorandum) pursuant to the New Mortgage.

4. Order that the defendant pay the plaintiffs’ costs of these proceedings in the amount of $615,305.50 on a full indemnity basis pursuant to cl 3.1(a) of the Memorandum and the definitions of “Secured Money”, “Costs and Expenses”, “Legal Fees” and “Recovery Action” in cl 1.1 of the Memorandum (Legal Fees Amount).

5. A declaration that the Legal Fees Amount forms part of the “Secured Money” (as defined in cl 1.1 of the Memorandum) pursuant to the New Mortgage.

6. Judgment for the first plaintiff in the amount of $3,572,119.66, comprising the Debt Amount, the Costs Judgment Amount and the Legal Fees Amount.

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Decision last updated: 27 March 2025