Claremont Services Pty Ltd v Clifford - [2001] WADC 68

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: CLAREMONT SERVICES PTY LTD & ANOR -v- CLIFFORD & ANOR [2001] WADC 68

CORAM: DEPUTY REGISTRAR HEWITT

HEARD: 15 MARCH 2001

DELIVERED : 29 MARCH 2001

FILE NO/S: CIV 2822 of 2000

BETWEEN: CLAREMONT SERVICES PTY LTD
First Plaintiff
DESLEY MAY SANSONE
Second Plaintiff
AND
CHARLES IAN TIMOTHY CLIFFORD
First Defendant
ALLAN MERVYN MALLER
Second Defendant

Catchwords:

Practice - Western Australia - Application for Summary Judgment

Legislation:

Nil

Result:

Judgment entered for the plaintiff

Representation:

Counsel:

First Plaintiff                  :     Mr A Metaxas
Second Plaintiff             :     Mr A Metaxas
First Defendant              :     Mr A Metaxas
Second Defendant         :     Mr B P Wheatley

Solicitors:

First Plaintiff                  :     Metaxas & Vernon
Second Plaintiff             :     Metaxas & Vernon
First Defendant              :     Metaxas & Vernon
Second Defendant         :     Murfett & Co

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

Nil

Case(s) also cited:

Jacka Nominees Pty Ltd (in Liq) & Anor v Edwards Karwacki Smith & Co Pty Ltd & Ors, unreported; SCt of WA; Library No 920512; 12 October 1992

DEPUTY REGISTRAR HEWITT: The case before me for determination is the plaintiffs' application for summary judgment by chamber summons filed on 11 January 2001. Supplementary to that application is an application that leave be granted to bring the summary judgment application out of time.
The plaintiff seeks summary judgment against the second defendant alone and its cause of action arises under the terms of a deed dated 28 May 1998 under the terms of which the plaintiff, as a lender, advanced moneys to Newmarket Corporation Pty Ltd, as the borrower, the terms of which were guaranteed by various parties including the second defendant.
There is before me an affidavit of Desley May Sansone who is a director of the plaintiff who:
(a)verifies the truth of the allegations contained in the statement of claim; and
(b)exhibits a copy of the deed upon which the plaintiff relies in seeking relief against the second defendant. The copy deed is not stamped however a stamped copy has been produced exhibited to a subsequent affidavit and therefore the question of stamping presents no obstacle to the plaintiff on the hearing of this application.
A challenge has been made to the sufficiency of the affidavit in support. In particular it is alleged that certain documents, for instance copies of cheques by which the advances from the plaintiff to the company Newmarket Corporation Pty Ltd were made, were not exhibited to her affidavit and effect of that it is said is to impugn the worth of the affidavit to the extent that judgment should not be allowed.
In my view there is ample evidence that the advances which the plaintiff claims were made to the company Newmarket Corporation Pty Ltd were in fact made and references to the advances are scattered throughout the various affidavits which have been filed by the defendant and responsive affidavits filed by the plaintiff.
To my mind the plaintiff's claim is verified to a satisfactory standard by the materials to which I have referred and I therefore turn to the issues which are raised by the defendant to establish if there is a defence on the merits which is raised by those materials or other sufficient reason to justify this matter going to trial. A number of issues have been raised by the defendant in opposition to the summary judgment. The first matter raised is the proposition that the plaintiff company has not been demonstrated to be incorporated. In regard to that issue I rely on:
(a) the sworn testimony of D M Sansone that she is a director of the relevant company;
(b)the company extract exhibited by the second defendant to his affidavit in opposition dated 28 February 2001; and
(c)the minute of proposed defence admitting the incorporation of the company,
as a sufficient basis to conclude that this ground of defence is without merit.
The next basis of defence is the proposition that the plaintiff has not complied with the terms of the deed of loan and guarantee and as a consequence has lost the right to rely upon the guarantee by the second defendant upon which it sues.
The alleged breaches arise from the terms of the contract commencing with par 2.2. The preamble to which reads as follows:
"The Loan Sum shall be advanced by way of progressive payments to the trust account of Messrs Grant Milner & Associates as and when requested by the Borrower PROVIDED THAT the Borrower shall request such funds at such times and in such amounts as the Borrower reasonably determines in order to fulfil its obligations under the Contract and to carry out and complete the Refurbishment. The parties acknowledge and agree that, subject to the Borrower's obligations under the Contract, the Loan Sum will be advanced to the Borrower in the following manner: -
… "
Thereafter follow a number of items indicating the dates upon which certain payments are to be made. It is clear from the materials before me that the advances made by the lender to the borrower did not follow the timetable which was included in par 2.2.1 and following. To my mind that is of no account since it is clear from the reading of par 2.2 as a whole that the schedule of the payments is subordinate to the borrower's right to request funds at such times and in such amounts as it reasonably determines. Therefore whilst the funds were not advanced at the times nominated in the clause in my view the clause clearly permits the parties to depart from that timetable if the circumstances justify. There is nothing before me to suggest that the departure was in any way a breach of the terms of the contract.
The next point of objection is that the funds were not advanced to the trust account of Messrs Grant Milner & Associates. In some instances that is definitely the case and the bulk of the moneys appeared to have flowed to the borrower directly. Were that departure from the terms of the deed have led to some loss or default or burden being imposed upon the other parties to the deed I would have agreed that the departure from the terms of the deed was of significance in the plaintiff's attempts to enforce the terms of his guarantee against the second defendant. On my reading of the papers before me there is no evidence to suggest that in departing from that regime any harm has befallen the guarantor. There is also evidence in the form of the minutes of the borrower company, signed by the second defendant, dated 10 July 1998 to suggest that the second defendant acquiesced in that state of affairs.
In any event the moneys held by Messrs Grant Milner & Associates would have been held on trust for the borrower and payable to it by Messrs Grant Milner & Associates upon demand and I am unable to see that there has been a breach of any kind which would be capable of discharging the second defendant's liability under the terms of his guarantee to the plaintiff company by reason of the default, if indeed there was a default.
The next matter raised is that the first two payments were made by cheques apparently drawn by D M Sansone on a personal account as appears from the copies of those cheques exhibited to her affidavit sworn 13 March 2001.
Mrs Sansone has previously sworn on oath that the plaintiff made the various advances referred to in the statement of claim to the company Newmarket Corporation Pty Ltd. I am unable to see that that proposition is disturbed or disrupted by establishing the fact that those payments were made by personal cheques drawn by Mrs Sansone on her private account.
The next matter raised is that the plaintiff has not demonstrated that the funds it did advance, were used for the specific purposes of purchase and refurbishment of the Newmarket Tavern which is recited as the purpose for the loan.
It appears to me that the lender is not under an obligation to ensure that the final destination of the funds is for such purposes. Once the lender makes the advance to the borrower then it loses control of the moneys advanced and does not have any further say as to the manner in which they are to be applied. I cannot see that it is appropriate in a case such as this for the lender to be required to prove that the party to whom it loaned the money used the money for the purpose of the purchase or refurbishment of the relevant hotel. It is however abundantly clear that some figure in excess of $255,000 was expended on the purchase or costs associated with the purchase.
The next matter raised is that early payment was made. It is suggested in the summary of argument that a sum less than the $250,000 paid on settlement was in fact then due. The difficulty I have with the argument advanced by the second defendant is there is no evidence whatsoever as to what sum was due on the settlement date. There is a proposed schedule of payment in the terms of the loan agreement with a power to vary from that regime under the provisions of 2.2 which I previously quoted. No party has placed the contract for the purchase of the business before me but as far as I am concerned there is absolutely no evidence that there was early payment. Additionally it is clear that the borrower requested the moneys which were utilised to settle the contract. In those circumstances it appears to me that the quoted words of par 2.2 would apply and there was no early payment.
It is next said by the second defendant that it was a condition of the contract that he would be involved in the management of the business. The relevant clause relied upon is clause three and that is framed in the following terms:
"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 notwithstanding that the Borrower shall at all times employ a full time manager to conduct the day to day management of the Business."
It is clear from those terms that the obligation contained in par 3 of the deed was for the second defendant to provide his time and expertise towards the betterment of the business. There is nothing in that clause which invested him with any kind of entitlement to control of the business and indeed that would be plainly so due to the fact that the business was run by a company in which he was a minority shareholder and one of four directors.
The second defendant in pars 12 and 13 of his affidavit states as follows:
"12. Subsequently, it was agreed that Mr & Mrs Sansone, Mr Clifford and I would join together to acquire the hotel business, licence and goodwill (not the freehold land and buildings) comprising the Newmarket Inne at Rockingham Road, corner Cockburn Road, South Fremantle, Western Australia ('the Hotel').
13.It was clearly agreed at the time that, amongst other things:
13.1Mr Clifford would provide the financial, accounting and administrative support to the project, which he informed me he was expert in. Indeed he said he was Bill Muh's accountant (a prominent hotel owner in the 1970's and 1980's) which I have also found out was untrue.
13.2I would be given sole responsibility to oversee, direct and manage the Hotel business and a role in assisting with the extensive refurbishment of the Hotel which was required to be undertaken as a part of the agreement with the hotel's landlord under which a long lease was to be offered ('the Refurbishment'). I was to have a 20% interest in the project (and management fees – see below) for doing so.
13.3I would provide the hotel management services referred to in paragraph 13.2 above myself and/or through the auspices of White & Associates and that I or Mr White, as the case may be, would be paid for doing so. The project would have a full time hotel manager and staff which I would oversee.
13.3Mr & Mrs Sansone, who (like Mr Clifford) had no expertise in owning, operating or managing licensed premises, would be the financial partners and would contribute all necessary funds to the project and would not be directly involved in the operation of the Hotel or its management."
I find the status of the propositions which the second defendant states were "clearly agreed" to have no contractual significance. The parties formalised their relationship in the subsequent deed. The terms of the deed differ from the proposals which are quoted in the affidavit and those proposals to my mind are not impressed with the necessary characteristics to make them formal contractual requirements. Indeed it appears to me that at the best those arrangements were simply discussions as to the sharing of the responsibility for the running of the business to be purchased and there was no abrogation of the company's right to conduct its own affairs.
The next matter raised by the second defendant is that the obligation to pay interest is uncertain and therefore unenforceable. The relevant clause imposing an obligation to pay interest is to be found at par 2.4 of the deed which is expressed in the following terms:
"The Borrower shall pay to the Lender interest on the Loan Sum or on so much thereof as shall from time to time remain outstanding at the rate of 7.25% per annum such interest to be calculated from the date of each advance and shall be paid quarterly in arrears."
The argument advanced by the second defendant is that the clause raises an issue to be determined namely the proper interpretation of the clause. It was propounded on behalf of the second defendant that the clause referred to interest being payable on that portion of the agreed total advance ($425,000) as was at the date of interest calculation unadvanced. The implication which would follow from this interpretation is that before the plaintiff had advanced any money at all it was entitled to interest at 7.25 per cent on the full amount of $425,000 and when it had advanced the full amount of $425,000 it would have lost any entitlement to interest. To my mind the clause is perfectly clear. The clause requires interest to be paid on so much of the agreed sum as has been advanced and remains outstanding. I see no difficulty requiring interpretation.
The next matter requiring attention is the proposition advanced by the second defendant that there was a compromise effected between the second defendant, the first defendant and Mr and Mrs Sansone under the terms of which the second defendant was to pay $30,000 in complete settlement and satisfaction of all claims by Newmarket Mr and Mrs Sansone and the plaintiff against the second defendant. These propositions are contained in pars 36, 37 and 38 of the affidavit.
There is controversy as to whether or not the agreement was ever finalised or progressed beyond the stage of negotiation however it is to be noted that a deed was prepared by Messrs Richard Payne & Associates who represented parties other than the second defendant. Under the terms of that draft agreement a provision was made for the payment of a sum of $30,000. In that agreement certain documents were defined as relevant agreements. Those agreements appear in par 5.1 of the deed. None of the agreements that are defined as relevant are the agreements upon which the plaintiff's claim is based. The definition of claim under par 5.1 relates to those claims arising under the relevant agreement and it follows therefore that the release which is referred to in par 5.2 would be confined to a release of the claims arising under those agreements.
Therefore even if I accept everything that the second defendant states in regard to the proposed release of himself from liability by the other parties including the first plaintiff it is clear from the terms of the draft deed that release was not to extend to operate in his favour to release him from his obligations as a guarantor under the terms of the deed dated 28 May 1998 upon which the plaintiff claims. For that reason I take the view that the proposal advanced by the second defendant that there has been an accord and satisfaction in relation to the plaintiff's claim in this action is unsound.
Having first found the plaintiff had established a prime facie case and having analysed the various propositions advanced by the second defendant in opposition to the summary judgment claim and finding each wanting I am of the view that the plaintiff should be entitled to a judgment against the second defendant. The exact amount of that judgment is debatable on the information which is before me. The claim relates to interest which has accrued under the terms of the loans and it is to be noted that the papers referred to at least one modest payment in reduction of the interest by Newmarket Corporation Pty Ltd. There will therefore need to be a fairly careful calculation of the amount which is due by the second defendant to the plaintiff. I also note in passing that on the information before me the claim against the second defendant falls considerably below $25,000 and as a consequence prima facie it appears to me that the plaintiff should not be entitled to costs or disbursements on a District Court scale.