Claremont Services Pty Ltd v Clifford - [2002] WADC 1

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: CLAREMONT SERVICES PTY LTD & ANOR -v- CLIFFORD & ANOR [2002] WADC 1

CORAM: DEPUTY REGISTRAR HEWITT

HEARD: 17 DECEMBER 2001

DELIVERED : 17 JANUARY 2002

FILE NO/S: CIV 2822 of 2000

BETWEEN: CLAREMONT SERVICES PTY LTD (ACN 008 897 998)
First Plaintiff
DESLEY MAY SANSONE
Second Plaintiff
AND
CHARLES IAN TIMOTHY CLIFFORD
First Defendant
ALLAN MERVYN MALLER
Second Defendant

Catchwords:

Practice and procedure - Western Australia - Application for summary judgment - Turns on its own facts

Legislation:

Nil

Result:

Judgment for the first and second plaintiffs against the first defendant

Representation:

Counsel:

First Plaintiff                :     Ms C Vernon
Second Plaintiff            :     Ms C Vernon
First Defendant             :     Mr T Mijatovic

Solicitors:

First Plaintiff                :     Metaxas & Vernon
Second Plaintiff            :     Metaxas & Vernon
First Defendant             :     TRM Legal Services

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

Nil

Case(s) also cited:

Nil

DEPUTY REGISTRAR HEWITT: In this matter the first and second plaintiffs apply for judgments against the first defendant.
The first issue to be disposed of is the fact that the applications for summary judgment have been brought out of time.
On that score the explanation given is that having filed an appearance the defendant failed to file a defence to the statement of claim which was endorsed upon the writ. Accordingly the solicitors for the plaintiffs filed a default judgment in respect of their claims and it was not for a considerable period after that that they became aware that for some reason the Court had not processed that judgment. At that point a summary judgment application against the second defendant was on foot and in any event the time for bringing a summary judgment application against the first defendant had passed. Ultimately the application was filed on 23 April 2001 and in my view the explanation for delay in bringing a summary judgment application is adequately explained and I grant leave to bring that application and now proceed to deal with the substantive application itself.
The plaintiffs have separate claims and each of them is fairly straightforward.
The claim by the first plaintiff against the first defendant is based upon a Deed under the terms of which the first plaintiff agreed to make loan advances to a company called Newmarket Corporation Pty Ltd and the first defendant and another guaranteed the repayment of those advances together with interest accruing on those monies.
The evidence establishes that something in the vicinity of $374,000 was advanced to Newmarket Corporation and that interest on those advances remains outstanding. Accordingly the first plaintiff sues the first defendant as one of the guarantors having previously obtained a summary judgment against the other of the guarantors.
The essentials of this claim are:
(a)the existence of the Deed of Guarantee;
(b)the advances; and
(c)the default in payment.
Each of those matters is deposed to satisfactorily and in respect of that claim it is necessary to turn to the materials filed by the first defendant to see if there is a defence on the merits or other reason for this matter to proceed to trial.
The claim by the second plaintiff against the first defendant is for the repayment of the balance of a loan advanced by her to him together with interest on that loan.
In par 7 of the statement of claim it is pleaded:
"By agreement in writing dated 27 November 1998 made between the second plaintiff as lender and the first defendant as the borrower:
7.1The first defendant acknowledged receipt of the sum of $35,000 from the second plaintiff paid to the first defendant by way of loan.
7.2The first defendant agreed that he would pay the second plaintiff interest on the said advance at the rate of 1% above the prime overdraft rate as prescribed by the Commonwealth Bank of Australia from time to time.
7.3The first defendant agreed to repay the advance on or before the 27^th November 1999."
Surprisingly the letter dated 27 November 1998 is not before me however the second plaintiff has exhibited a letter received from the first defendant which was written in response to the receipt of the writ of summons commencing these proceedings. In regard to the aspect of the claim which the second plaintiff pursues in these proceedings the first defendant has said "my loan with Desley is not disputed, just the payback period." There is a further comment concerning monies said to have been repaid and not taken into account in the amount of the claim set out in the writ.
To my mind and both matters are established to the level of a prima facie case by the materials filed in support and I therefore turn to the materials filed by the defendant to examine the nature of the defences which are offered to these claims.
In respect of the claim by the first plaintiff the first basis of defence advanced is that there was a compromise affected between these two parties. In order to understand the suggested compromise it is necessary to understand the relationship between the parties to this action. The second plaintiff and her husband Guiseppe are the directors and have effective control of the first plaintiff. The Sansones and the second defendant each have two shares in the company Newmarket Corporation Pty Ltd and the first defendant is the holder of the remaining four issued shares of that company. By a Deed dated 22 May 1998 all of these parties entered an agreement under the terms of which the first plaintiff agreed to lend a sum of money to Newmarket Corporation Pty Ltd and relevantly the first and second defendants agreed to guarantee the repayment of that loan and interest on it. The compromise agreement is expressed by the defendant in par 13 of his affidavit which was sworn on 28 May 2001 in the following terms:
"13.It was agreed as between the first plaintiff, Newmarket, the second plaintiff or Guiseppe Sansone or their solicitors Metaxas & Vernon and myself verbally in or about 1998-2000 on numerous occasions ('the compromise agreement') that:-
....
13.6I would provide substantial accounting services to the plaintiffs, Newmarket and Guiseppe Sansone in return for being released from the terms of the Deed which was compromised and not to be enforced against me."
The difficulty I have with the proposition is firstly it is so loosely expressed as to when it was reached and between whom it was reached. In addition to the consideration of providing the accounting services there are also mentioned a number of other matters said to be the consideration for the compromise agreement such as a payment of $10,000 to Newmarket, joining as a plaintiff in a Supreme Court action number 2111 of 2000 and appearing as a witness in that action, providing a personal guarantee to the National Australia Bank and a guarantee for various other purchases and so forth. The problem that I have is that these various matters which are described as the consideration for the release occurred at various intervals over the three-year period. In order for the first defendant to successfully contend that he entered an agreement releasing him from the obligations of the Deed which he entered, it is necessary for him to point with some credibility to an occasion when that was agreed. There must have been a stage, if what the first defendant says is to be accepted, at which an agreement had been reached releasing the first defendant from liability to the first plaintiff in respect of the Deed to which I have referred. What I have is a compendium of various events in a manner which gives no clue as to when precisely, if at all, the compromise was effective.
In order to have any effect on the first plaintiff's claim against him the first defendant must demonstrate that an arrangement was entered between the parties which could be characterised as contractually binding and which had the effect of relieving the first defendant from the obligations which he had undertaken when he signed the Deed on 22 May 1998. I find the propositions are so loosely expressed as to be unpersuasive that any agreement was reached between any parties which would have the effect of relieving the first defendant from his obligation under the Deed of 22 May 1998.
By way of illustration Messrs Metaxas & Vernon only began to act in respect of the Supreme Court proceedings in July 2001 and yet they are said to have been one of the alternative parties who contracted in the terms proposed with the first defendant. The matter is replete with difficulties from the first defendant's point of view since he must point to the existence of some contractually binding arrangement which relieved him from the liability which the first plaintiff now pursues against him. The whole proposition is bulging with contradictions, for instance the payment said to be part of the consideration for the Compromise Agreement was paid on 28 February 2000. Any agreement with Metaxas & Vernon must have taken place in or after July 2001. I am not informed when the personal guarantee to the National Australia Bank was entered into but it was likely to have been in 1998 or 1999. It is therefore difficult to understand how pursuant to a Compromise Agreement which on one version of interpretation could not have been made until July 2001 a payment of $10,000 could have been made on 28 February 2000. Likewise the guarantees were likely to have been given in 1998 and 1999 and it is hard to see how such guarantees could have been given pursuant to what is called the Compromise Agreement when it is obvious that that was unlikely to have existed at the relevant time. Also, although the first defendant says that pursuant to the Compromise Agreement he invested and incurred substantial time and effort at the New Market Inne and essentially became a hotel accountant and manager on almost a full-time basis in par 16, those efforts could not have been pursuant to a Compromise Agreement which on the face of it did not exist until fairly late in the piece.
I therefore find the first line of defence advanced by the first defendant, namely that there has been a compromise between himself and the first plaintiff such as to relieve him of obligations under the Deed to be without foundation. Additionally I note that the Deed in which the guarantee upon which the first plaintiff sues contains within it a clause as follows:
"The said Charles Ian Timothy Clifford and Allan Mervyn Maller shall individually provide all necessary management and administrative services, advice and expertise to the borrower in relation to the operation and management of the business and shall apply themselves diligently in the best interests of the business and the shareholders of the borrower …"
It would seem having an eye to those terms that there was already an obligation on the first defendant to apply himself diligently to the business of the company Newmarket Corporation Pty Ltd and that his activities in doing so were not due to the terms of any Compromise Agreement but the terms of the Deed which he had entered. Additionally it should be noted that the first defendant was a 40 per cent shareholder of the company Newmarket Corporation Pty Ltd and presumably its success and prosperity would advantage him personally.
The next line of defence advanced by the first defendant is that the Deed upon which the first plaintiff sues was unconscionable and void. On that point it is instructive to note that the first defendant was not only entering that Deed on his own behalf but also as a director of Newmarket Corporation Pty Ltd and the first defendant has subscribed the Deed in that capacity as well as his personal capacity as a guarantor.
The first defendant is a qualified chartered accountant with some 35 years in practice as such. He says that he received no independent legal or professional advice on the Deed, or his obligations as a guarantor under the Deed, or that he would be liable for any interest owed under the Deed by Newmarket, or that he was a guarantor and that the failure to bring those matters to his notice was a misrepresentation which had the effect of making the Deed unconscionable and liable to be set aside. The Deed is before me and it has, as I say, been signed by the first defendant not only in his capacity as a director of Newmarket Corporation Pty Ltd but also in a personal capacity. He is described on the cover page of the document and in the first page of it as a guarantor.
There is not as far as I am aware any law which requires a person of full capacity and substantial business experience and expertise as might be expected of a chartered accountant to have to have explained to him that by signing a document as a guarantor he might thereby incur liabilities. There are certainly some instances where persons less advantaged and informed as this first defendant might be able to avail themselves of such a defence but in my view the nature of the first defendant's involvement in the deal overall both as a director of Newmarket Corporation Pty Ltd and as a guarantor, his professional expertise and general competence in the area of business, as is witnessed by the account he has later rendered for professional fees rendered to the company, preclude any prospect of that aspect of the defence succeeding.
The next matter raised by way of defence is a counterclaim which has been brought by the first defendant.
The first defendant has taken the view that in the event that the Compromise Agreement upon which he relies is not available then he is entitled to charge for the work he has undertaken in regard to the company Newmarket Corporation Pty Ltd and the business operated by it. He has therefore prepared an account of some $356,000 which he says accurately reflects the proper charges which he is entitled to levy in respect of the work he has undertaken and he has delivered an account dated 10 May 2001 to variously the first plaintiff and the second plaintiff and her husband Guiseppe.
I have earlier mentioned the terms of the Deed which required the first defendant to use his best endeavours and expertise to promote the business of the company Newmarket Corporation Pty Ltd and would have thought that to be a problem in advancing the case proposed by the first defendant by way of counterclaim. I am unable however to perceive any basis upon which the first defendant would be entitled to render an account for the work which he undertook to the plaintiff. The plaintiff was a lender and Newmarket Corporation Pty Ltd a borrower. The first defendant was a director of Newmarket Corporation Pty Ltd. I am utterly unable to perceive a basis upon which the plaintiff or Mr and Mrs Sansone could possibly be personally liable to pay the first defendant any amount for work which he undertook on behalf of Newmarket Corporation Pty Ltd as either a director or as an accountant. Counsel for the first defendant was at some pains to explain the basis upon which this link could be drawn but I was quite unable to perceive it. Furthermore the fact that the account upon which the counterclaim relies was only delivered after this action had been brought and indeed after this summary judgment application had been brought tends, in my view, to place it under something of a cloud. The precise manner in which the sum of $356,000 has been calculated appears to be a very broad-brush affair and appears to include a proposition that some recognition of the first defendant's shareholding in the company should be recognised. That to my mind seems to me to be tantamount to the proposition that the proper party to pay any fees which might be payable to the first defendant would be Newmarket Corporation Pty Ltd. There is also no effort whatever that I can see to distil from the account of $356,000 what portion might be payable by the first plaintiff, what portion by the second plaintiff and what portion by her husband. I am also quite unable to perceive how it can be that they would all be jointly liable for the full amount of $356,000. I do not accept $356,000 is a reliable estimate of the value of the work performed by the first defendant nor do I accept that it is payable by the first plaintiff, the second plaintiff or her husband. It appears to me that the work which was undertaken by the first defendant was pursuant to the Deed under the terms of which he covenanted to do so and there was no mention in that Deed of any entitlement to payment save for a management fee referred to in par 4 of the Deed of $2,000 per calendar month payable in the case of the first defendant in his capacity as principal of Messrs Charles Clifford & Co. It is to be noted that the accounts rendered are in the name of Messrs Charles Clifford & Co.
The evidence establishes that some payments of $2,000 per month were paid but that there has been default in others. If the first defendant has put in the work which he claims it seems to me that what he is entitled to is the payment of $2,000 per month which was agreed under the terms of the Deed. That amount would be payable by Newmarket Corporation Pty Ltd and I am unable to see any basis which would make that sum payable by either the plaintiff or any of the other parties to whom his account is addressed.
The next issue raised by way of defence is that under the terms of the Deed the first plaintiff covenanted to advance $425,000 and in fact a lesser sum was advanced. It was argued by counsel for the first defendant that the failure to advance the full amount of the $425,000 constitutes a breach rendering the guarantee unenforceable. The difficulty I have with the proposition which is advanced is that the loan sum is defined by the Deed to mean the sum of $425,000 or such other sum as shall be lent by the lender to the borrower pursuant to the Deed. There is contained within the Deed a schedule of instalment payments required to be made and a provision that there will be interest on payments on the amounts advanced at 7.25 per cent.
Clause 2.6 of the Deed states that in the event that the borrower (Newmarket Corporation Pty Ltd) is unable or otherwise fails to pay any or all of the interest payments referred to in clauses 2.4 and 2.5 the guarantor shall be liable for and shall pay the lender the required interest payments without deduction and in certain proportions elsewhere described in the Deed. It is therefore within the contemplation of the Deed that interest will begin to run and will be payable by the guarantors in the event of default by Newmarket Corporation Pty Ltd before a full $425,000 has been advanced. Only $374,000 or thereabouts has been advanced but I am unable to see that the proposed defence by the first defendant has any merit. He undertook to pay the interest payments as and when they fell due and the Deed contemplated those interest payments would be due even though the full amount of the loan had yet to be advanced. For that reason I do not think that aspect of the defence has merit.
The next matter is that it is argued that the interest was only repayable on the date of completion of a refurbishment of the relevant hotel, that refurbishment has not been completed, and therefore no interest is due.
The relevant terms are contained in par 2.5 of the Deed and in my view the argument is without merit. The terms of the Deed provided that the interest of 7.25 per cent per annum would be grossed up to 10 per cent per annum from the date of the completion of the refurbishment and the guarantors would be liable for that additional interest in certain circumstances. It is clear that until the refurbishment of the hotel was complete the extra interest could not be claimed. It has not been claimed and in my view there is no basis of defence advanced by the first defendant on that issue.

The next issue concerns an account issued by the first defendant to Mr and Mrs Sansone for fees for accounting services. Of that account the sum of $1,385 relates to services provided to the plaintiff company and $190 for services to Mr and Mrs Sansone. In my view each of these sums is capable of being treated as a set-off. Since Mr and Mrs Sansone are the directors of the plaintiff company, and there is nothing in the materials to show they accepted personal liability for work undertaken for the company, the sum of $1,385 should relate to the first plaintiff's claim against the first defendant. Although not clear on the materials, I am prepared to infer that Mrs Sansone was jointly and severally liable with her husband for the payment of the remainder of the account and accordingly the sum of $190 should be regarded as a set-off against her claim.
A final matter to consider relates to a payment made by the first defendant to establish a TAB account for Newmarket Corporation Pty Ltd. That payment is said by the first defendant to have been made as a part of the consideration for the compromise of his obligations under the Deed in par 12 of his affidavit sworn 28 May 2001. I have already dealt with the defence based on that compromise. However, in his affidavit dated 6 July 2001, the first defendant has explained that payment in somewhat different terms. It is instructive to examine the two passages together.
Affidavit of 28 May 2001, par 12:
"12.I advanced and paid a sum of $10,000.00 on 28 February 2000 for and on behalf of the first plaintiff into the account of Newmarket and have not been paid the principal or interest on this payment. I made this payment under the instructions of the directors of the first plaintiff based on the agreement specified below as they were in desperate need for funds to be paid to Newmarket due to a substantial legal dispute with Kee-Vee."
Affidavit of 6 July 2001, pars 20, 21, 22 and 23:
"20.I paid the sum of $10,000.00 to Newmarket as sworn in paragraph 12 of my affidavit sworn 28 May 2001. It is nonsense to suggest that I paid this sum to Newmarket of which I was a director and a shareholder. It was paid at the directions of the first plaintiff on the direct verbal request and authority of the second plaintiff and Guiseppe Sansone and is owed to me by the first plaintiff together with interest.
21.I have never been repaid the sum of $10,000.00 by the first plaintiff despite demand and request. I had no obligation to make this payment and were it not for the first plaintiff's directors directions to me to make this payment to Newmarket, I would never have made the payment and I have still not recovered this sum or been repaid this sum of $10,000.00.
22.The plaintiffs and Guiseppe Sansone were required to make a payment of $10,000.00 to Newmarket to establish a TAB account which the first plaintiff was obliged to pay to Newmarket as it was agreed that the first plaintiff was the company that the second plaintiff and her husband would utilise to meet and pay for the liabilities of Newmarket.
23.As the first plaintiff could no longer meet and pay for the liabilities of Newmarket, I was requested by the first plaintiff's directors to make this payment on their behalf for the first plaintiff's liability to Newmarket. I had no such obligation or liability to make such payment and made the payment as a loan owed to me by the first plaintiff for the first plaintiff who directed me to make the payment on its behalf."
I comment:
(a)There is nothing in the materials before me to show that the first plaintiff and the Sansones were ever obliged to make the $10,000 payment.
(b)The money was paid to Newmarket Corporation Pty Ltd.
(c)There are no materials to show that the Sansones were ever in a position to "direct" (which I interpret to be a request enforceable if refused) the first defendant to make the payment.
(d)There is nothing that I can see which would make either the first or second plaintiff liable to repay the monies which were advanced to Newmarket Corporation Pty Ltd.
(e)The only consideration which would elevate the arrangement to a contract is the compromise agreement earlier discussed.
Having considered the various matters raised by the first defendant by way of defence I am satisfied that there is no arguable defence available to him save to set-off his outstanding account and I am of the view that a summary judgment should be entered in favour of the first plaintiff for the amount of the interest accrued due and unpaid less the amount of the account.
The next matter to consider is the second plaintiff's claim against the first defendant.
I have already referred to a letter which is exhibited to the affidavit in support of that aspect of the summary judgment application and that appears to me to be an acknowledgment of debt. The basis of defence of that claim is that an agreement was struck between the second plaintiff and the first defendant.
In that regard the second defendant in an affidavit sworn 6 July 2001 says in pars 5 and 6:
"5.Further I personally know and swear that the sum of $35,000 was paid to me by the second plaintiff but that it was not agreed that I repay this sum to the second defendant (sic) or anyone else as alleged in the statement of claim by the second plaintiff, which has not been verified by affidavit.
6.Further I further personally know and swear that the sum was provided to me as a loan verbally agreed between myself and the second plaintiff of which only $20,700.00 remains outstanding as verified in my previous affidavit and the verbally agreed terms of repayment of which were that the sum of $35,000 was not repayable on demand (which was never agreed or even discussed) repayable 'as and when I could' and at my absolute discretion and in consideration of substantial fees and disbursements in relation to my work for the plaintiffs."
It is here to be noted that the consideration for the terms of the loan appeared to be the same in part at least as that for the waiver of the guarantee. The same might be said of the proposition contained in par 10 that says that the variation of the loan agreement was in consideration of the services as an accountant for which he has issued an account for $356,125.
Elsewhere in an earlier affidavit it is alleged that the first defendant tendered payment of some $25,000 for cash and bank cheques on 11 September 2000 however it is clear from correspondence which the first defendant directed to the solicitors for the plaintiffs shortly thereafter that the tender was in fact an offer to assign a debt of $50,000 for an immediate payment of $25,000 and that was intended to be full and final settlement of the loan. Furthermore it appears from the letter that the first defendant did not deal with the second plaintiff directly but with one Alex Thomasar. These comments appear in a letter dated 31 October 2000 which is Exhibit AM14 to the affidavit of Arthur Metaxas. Following the comments about the tender there is a further comment:
"This loan is fully admitted by me, and I will honour my commitment to Desley, in consideration for time to pay. Desley and Joe well know of how financially 'strapped' I am, and the reasons why. I will not let them down on this repayment in full."
On my understanding when a sum of money is advanced to another by way of loan it becomes repayable on demand. I am unable to perceive that there is pleaded any consideration which would be effective to entitle the first defendant to pay by instalments as and when he sees fit. I accept however that there is an arguable issue as to whether or not the amount of the loan is as claimed or $20,700 as is calculated by the first defendant and furthermore there is no basis that I can perceive to support the second plaintiff's claim for interest on those monies pursuant to the terms of any agreement to pay it. Nor have I been directed to any document which contains any promise to repay the loan by the date which is pleaded in the statement of claim. Therefore insofar as the second plaintiff's claims against the first defendant for the amount of the loan in my view there should be a judgment for the sum of $20,700 less the outstanding account owed by the second plaintiff in favour of the second plaintiff against the first defendant and the first defendant should have leave to defend the balance of that claim.
Since the amount remaining in issue between the plaintiffs and first defendant by virtue of these judgments is only a small sum it would appear to me to be appropriate to remit the action to the Local Court for determination.
There should however be no remittance until the existing appeal by the second defendant is determined and any appeal brought by the first defendant likewise determined.