Colonial Mortgage Funding v Bouhamdan - [2017] SASC 110

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
COLONIAL MORTGAGE FUNDING v BOUHAMDAN
[2017] SASC 110
Judgment of The Honourable Chief Justice Kourakis
28 July 2017
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSIDERATION - WHAT AMOUNTS TO CONSIDERATION
GUARANTEE AND INDEMNITY - ACTIONS AGAINST SURETY - GENERALLY - NOTICE OF DEFAULT, DEMANDS, ETC
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - ADMISSION OF FRESH EVIDENCE - IN GENERAL
Appeal against a decision of a Magistrate.
The respondent was the guarantor of a loan agreement between a lender which was related to the appellant and a company of which the respondent was the principal. The first loan agreement was replaced by a second loan with the appellant itself (the Credit Contract), which the respondent also guaranteed. The appellant’s evidence suggested that the purpose of the first loan was to replace the second. The lender in both agreements was nominally different but essentially the same. The respondent defaulted and the appellant purported to make a demand of the respondent as guarantor.
The Magistrate found that the Credit Contract was not supported by consideration as there was insufficient evidence to show that the money contemplated by the Credit Contract was ever advanced. The Magistrate also found that the demand of the respondent was not made in accordance with the terms required by the guarantee. The Magistrate dismissed the appellant’s claim under the guarantee.
The appellant appeals the finding that the Credit Contract was not supported by consideration and argues that the making of a demand was not a condition precedent to liability under the second guarantee.
In the course of appellate proceedings the appellant applied to adduce fresh evidence of making a demand of the respondent in the terms required by the guarantee.
Held per Kourakis CJ, dismissing the appeal:
1. The evidence shows that the Credit Contract was supported by consideration including the mutual obligations to lend and borrow and the advance of money discharging the first loan agreement (at [36]).
2. The Magistrate was correct to find that the appellant did not make a demand of the respondent in the terms required by the guarantee (at [39]).
3. The appellant’s application to adduce fresh evidence of the demand is refused as there is no explanation for failing to lead that evidence in the Magistrates Court; the application was made late in these proceedings; any application would require the determination of issues of fact not suitable for appellate proceedings (at [53]).
Re Taylor, Ex parte Century 21 Real Estate Corporation (1995) 130 ALR 723, applied.

COLONIAL MORTGAGE FUNDING v BOUHAMDAN
[2017] SASC 110
Magistrates Appeal: Civil

KOURAKIS CJ: This is an appeal against a judgment in the Magistrates Court dismissing a claim by the appellant, Colonial Mortgage Funding Company Pty Ltd (Colonial) on a guarantee (the Guarantee) given by Patrick Bouhamdan (Bouhamdan), the respondent. Bouhamdan was the principal of the company Tyger Lilly Pty Ltd (Tyger Lilly), a property developer which had entered into a Credit Contract with Colonial in the sum of $403,750.00. Colonial limited its claim to $99,308.57 even though it asserted that a larger amount was owed so that it would fall within the Magistrates Court jurisdiction. The Magistrate dismissed Colonial’s claim on the grounds that the loan made by Colonial to Tyger Lilly which Bouhamdan had guaranteed was unenforceable for want of consideration. The Magistrate also dismissed the claim brought by Colonial because it was a condition of liability under the guarantee that a demand first be made and no such demand had been made.
The Magistrate found that the Credit Contract was invalid for lack of consideration because it was not proved that Colonial had advanced the principal sum to Tyger Lilly. I have concluded that the Magistrate wrongly identified the relevant question as one of a lack of consideration when the loan agreement was supported on its face by the respective promises to lend and repay. The relevant issue was therefore whether or not Colonial had advanced money in accordance with its promise and whether or not any such amount remained unpaid. The evidence did establish that Colonial advanced Tyger Lilly the sum of $403,000 in a refinancing arrangement by discharging Tyger Lilly’s liability to the Whiteway House Super Fund, a financier related to Colonial, which had financed Tyger Lilly’s purchase of premises in Waymouth Street, Adelaide.
Mr Bouhamdan did not dispute the arithmetic calculation of the outstanding principal and interest based on an interest rate of two per cent per month which showed that a greater sum than that claimed was outstanding if Colonial had discharged the liability to the Whiteway House Super Funds.
Clause 4.2 of the Guarantee provided that Mr Bouhamdan would pay the Guarantee Money ‘on demand’ by Colonial. I uphold the Magistrate’s decision that clause 4.2, when considered in the context of the other clauses of the Guarantee, made the making of a formal demand a condition of liability. Colonial relied on an email exchange between Mr Bouhamdan and an agent at Colonial discussing what was outstanding, but did not lead any evidence of the making of a formal demand. The Magistrate correctly held that the email exchange did not constitute a demand for the purposes of the Guarantee.
On the appeal the appellant sought permission to lead further evidence that a demand was made by letter sent by pre-paid post. However the respondent denied that he received the letter and denied that the letter was sent to the proper address. The appellant’s unexplained failure to lead the evidence in the Magistrates Court, and the late stage at which the issue was raised on the appeal combine to make it inappropriate to allow the evidence to be led.
I would uphold the ground of appeal against the Magistrate’s finding that the Credit Contract was invalid for lack of consideration. The consideration for the Credit Contract was the reciprocal promises to lend and borrow. Money was advanced in accordance with the Credit Contract and was applied to discharge to Tyger Lilly’s liability under an earlier loan agreement with the Whiteway House Super Fund in what was essentially a refinancing arrangement.
I would dismiss the appeal against the finding that no demand was made pursuant to the Guarantee. Moreover, it is not in the interests of justice to allow further evidence to be adduced on that issue on this appeal.
The effect of my decision is that, even though the appeal against the judgment must be dismissed, the factual issue as to whether there was consideration for the loan agreement, and thereby the Guarantee, has been determined conclusively against the respondent. It will be for the appellant to determine whether to attempt to enforce the Guarantee afresh by making a demand in accordance with the Guarantee.
My reasons follow.
Overview of the Financing Arrangement
The Guarantee was entitled ‘Guarantee and Indemnity’ and dated 2 February 2009. Bouhamdan ‘unconditionally’ guaranteed the due and punctual payment of all monies payable at any time by Tyger Lilly under a Credit Contract between Colonial and Tyger Lilly. The Credit Contract was also dated 2 February 2009. By cl 2.1 of the Credit Contract, Colonial agreed to lend, and Tyger Lilly to borrow, the Principal Sum which was defined by the schedule to the agreement to be $403,750. Tyger Lilly also agreed to provide security over pieces of land situated at Lot 100 Waymouth Street, Adelaide; Britannia Parade, Hindmarsh Island; and, Matthew Flinders Drive, Encounter Bay. I will refer to the last two properties as the south coast properties. Security over the south coast properties was given by way of mortgages dated 2 February 2009. The Credit Contract appointed Orio Mortgage Finance Company Pty Ltd (‘Orio’) to be the Mortgage Manager. Pursuant to the Credit Contract, Orio was responsible for the day-to-day management of the loan. Mr Psevdos was the principal, and a director, of Orio.
The earlier loan
Tyger Lilly had entered into an earlier loan agreement on 2 June 2008 with the trustees of two superannuation funds, to which I refer for convenience, as the Whiteway House Super Funds (the 2008 loan agreement). The Credit Contract is in almost identical terms as the 2008 loan agreement. Orio was also the Mortgage Manager under the 2008 loan agreement. The only security provided for the 2008 loan agreement was a mortgage over Lot 100 Waymouth Street given to the Whiteway House Super Funds dated 3 June 2008.
The uncontradicted evidence before the Magistrate was that the Credit Contract was entered into as part of an ‘internal restructure’ in which it was convenient for the Whiteway House Super Funds to terminate the 2008 loan agreement and for Colonial to replace them as the financier of Tyger Lilly. The replacement of the Whiteway House Super Funds was simple to effect because as at 2 February 2009 the only amount outstanding was the principal sum because Tyger Lilly was up to date with its interest payments.
The stated purpose of the 2008 loan agreement was to finance the purchase of a commercial property by Tyger Lilly. Tyger Lilly’s address is recorded in the 2008 loan agreement as ‘C/- 294 Payneham Road, Payneham’. A settlement statement dated 3 June 2008 shows that $403,750 of the purchase price of Lot 100 Waymouth Street, Adelaide was to be sourced from mortgage funds. Settlement on the property was fixed for 20 April 2008.
Refinancing by Colonial
On 29 January 2009, about a week before the Credit Contract, the Guarantee and the mortgages over the south coast properties were executed, Mr Psevdos sent an email to Mr Bouhamdan in which Mr Bouhamdan’s postal address is recorded to be the same address, 294 Payneham Road. The email is elliptical in that it assumes either earlier correspondence or discussions. The email refers to a change in financiers as follows, ‘this was the loan by Jon and Darcy’s Superfunds they have since transferred this to Colonial Mortgage Funding Company Pty Ltd’. The email informs Mr Bouhamdan that additional security is required on the loan in the form of the south coast properties.
Mr Bouhamdan testified that he was asked by Mr Psevdos to complete documents to give effect to a change of lenders from the Whiteway House Super Funds to Colonial. Mr Bouhamdan testified that Mr Psevdos said that ‘there was a relationship split and they were changing the loans to a new entity’. Mr Bouhamdan testified that he signed the documentation before Mr Psevdos who told him that they were just changing the lenders on the documents and that the documents ‘were exactly the same as the previous loan’. He testified that Mr Psevdos told him that Colonial wanted caveats or second mortgages over the south coast properties.
The Credit Contract provides that the purpose of the loan is to assist with the purchase of a commercial property. In Item 8 of the Schedule to the Credit Contract which is headed ‘Security’ there is a reference in bold type to ‘Loan Agreement dated 2 June 2008’. The reason for that notation was explained in evidence given before the Magistrate which I set out below. Save for that reference and the additional security, the Credit Contract between Colonial and Tyger Lilly is in the same form as the 2008 loan agreement. The guarantees given by Mr Bouhamdan are also in the same terms. The relevant terms of the Guarantee are:
4.Guarantee
4.1     I unconditionally guarantee the due and punctual payment of Guaranteed Money to the Lender in accordance with the Credit Contract.
4.2     If the Debtor does not pay the Guaranteed Money on time and in accordance with a Credit Contract then I will pay the Guaranteed Money on demand by the Lender.
…
6.2Other Security for the Credit Contract
(a)     This Guarantee and Indemnity is not affected by:
(i)the Lender failing to obtain any Security,
(ii)any Security being unenforceable or defective,
(iii)the discharge or assignment of any Security by the Lender,
(iv)the Lender granting priority to any security held by any other person as against any Security,
(v)the Lender obtaining any further Security for the Guaranteed Money whether from me or any other party,
(vi)the Lender failing to recover any of the Guaranteed Money from the enforcement of any Security,
(vii)any delay or mistakes by the Lender in enforcing its rights under the Credit Contract, a Security or this Guarantee.
…
8.Demands for Payment
A demand upon me for the payment of the Guaranteed Money will be effective even if the Lender is not required to give a demand to the Debtor or if the demand is given to the Debtor after the demand is given to me.
…
10.Notices
10.1 Statement of amount of the Guaranteed Money
A written statement by the Lender or by any Authorised Officer as to the amount of the Guaranteed Money is sufficient evidence of the fact, unless I prove the statement is wrong.
10.2 Method of Service
The Lender may give me notice by delivering it to me personally or by leaving it at or by sending it by post or facsimile to my residential or business address. For this purpose the Lender may use the last address recorded for me. Service by post may be effected by properly addressing, prepaying and posting the notices as a letter.
10.3 Signing of notices
If the notice is a demand for payment, it can be signed by the Lender or by any Authorised Officer. Any other form of notice need not be signed, unless required by law.
10.4 Change of name or address
If I change my name or address, I must notify the Lender in writing immediately specifying details of change.
A mortgage over the south coast properties was executed by Tyger Lilly through Mr Bouhamdan on 2 February 2009. On 24 September 2009 Colonial lodged a caveat over the Waymouth Street property claiming an equitable mortgage over the whole of Tyger Lilly’s interest in it pursuant to the Credit Contract.
Refinancing by Emparo
The Waymouth Street property was again refinanced by Tyger Lilly in 2010. The settlement statement, dated 9 February 2010, prepared by a land broker, Mr Paul Denny, shows that a loan was obtained from the Emparo Finance Group in the sum of $340,000. Fees for the loan were paid to the Emparo Finance Group and Greenway Brokers. In addition to the usual conveyancing charges, fees for the following Lands Titles Registration Office fees were charged:
Registration of Discharge of Mortgage $117.00
Registration of Mortgage $117.00
Registration of Withdrawal of Caveat $117.00.
The settlement statement records that a balance of $328.995.50 was payable to Tyger Lilly on settlement of the loan. A document received at trial which records a running account of the loans made by both the Whiteway House Super Funds and Colonial shows that on 25 February 2010 a repayment of $322,067.64 was made on the loan under the Credit Contract. An earlier repayment in the sum of $48,958.07 on 13 October 2009 is also recorded.
I infer that:
·the discharge of the mortgage referred to in the settlement statement was a discharge of the mortgage given to the Whiteway House Super Funds as security for the 2008 loan agreement;
·the registration fee was for the registration of a mortgage to the Emparo Finance Group;
·the fee for the registration of the withdrawal of a caveat was for the withdrawal of the caveat lodged by Colonial when it became Tyger Lilly’s financier (dated 24 September 2009);
Mr Bouhamdan gave the following evidence about the settlement of the refinancing arrangement with Emparo:
AWell who would give me the money. There’s a loan on the property. It goes to whoever the lender is. You know, someone would have attended a settlement room. Paul Denny would have gone on behalf of those guys, he would have picked up a title, he would have picked up a title, he would handed over a cheque and then transfers would have happened. Like I don’t get no input, I’m not in the middle of this, I don’t grab a cheque and someone trusts me with the kind of money.
The handover of the cheque Mr Bouhamdan referred to must have been a cheque from Emparo to Colonial. The consensual and contemporaneous discharge of the mortgage to Whiteway House Super Funds mortgage is strong evidence that its loan had been repaid by the money advanced by Colonial to Tyger Lilly, which was in turn repaid in part by the funds advanced by Emparo.
Colonial’s evidence at trial
Mr Psevdos testified that the words ‘Loan Agreement dated 2 June 2008’ referred to in [17] above were inserted in bold in the Credit Contract to identify it as an internal refinancing. He also testified that the lenders were known to each other and that the principals of the lenders were the same natural people.
It was put to Mr Psevdos that the words were intended to ‘incorporate the loan agreement of 2 June 2008’. It is not clear to me what the meaning or legal significance of ‘incorporate’ is in this context. In any event, Mr Psevdos denied that that was so. It was then put to Mr Psevdos that ‘the 2009 Agreement was not used to repay the 2008 Agreement’. Mr Psevdos answered, ‘Yes, it was. That’s why there’s a second loan agreement’.
Two statements of account relating to the Tyger Lilly loans were received into evidence. They are both headed Colonial Mortgage Funding Company Pty Ltd. One is Exhibit D1 which is the Statement of Account as at 10 November 2010. The other statement of account which is dated 7 February 2014 appears at page 104 of P1. On both documents:
·the borrower is shown as Tyger Lilly and the lender as Colonial;
·the security is the Britannia Parade property; and
·the principal loan amount is $403,750.
The ‘loan date’ and the ‘start date’ with an opening balance of $403,750 is recorded as 3 June 2008 on the Statement of Account Exhibit D1. Yet, for reasons which are not explained, on the document which is in P1, the ‘loan date’ is 2 June 2008 and the ‘advance date’ is 5 June 2008 – there is no ‘start date’.
On the document which is in P1, for each month thereafter until 8 January 2009 interest only is paid and the balance therefore remains at $403,750. On 2 February 2009 there is a notation which reads transfer to CMFC P/L. Thereafter the opening balance as of 4 February 2009 is $403,750 and interest is paid monthly in the sum of $8,075 maintaining the same loan balance. On 13 October 2009 a payment of $48,958.07 is made reducing the principal outstanding to $354,791.93. Payments of interest in the sum of $7,095.84 are thereafter made monthly until a payment of $322,067.64 on 25 February 2010. By that payment the loan balance is reduced to $38,089.91. Only spasmodic payments of monthly interest are made thereafter. As of 2 March 2014, the outstanding principal and interest is $93,535.46.
Mr Dean testified that he was the principal of Whiteway House Number 102 Pty Ltd, which was the trustee of the Whiteway House Super Funds as well as a director of Colonial. The Credit Contract was executed on behalf of Colonial by Mr Dean. Mr Dean had also executed the 2008 loan agreement on behalf of the Whiteway House Super Funds.
Mr Dean was taken to the statement of account at page 104 of P1 and confirmed that it was a statement of accounts of the loan made by Colonial. He confirmed its accuracy.
Mr Dean testified that Orio would investigate matters on his instructions and then report back to him. Mr Dean was also shown Exhibit D1. He testified that it was a document prepared by him to keep himself personally updated. Mr Dean testified that in 2009 he was advised to liquidate the assets of his superannuation fund and to make loans through another entity. Mr Dean testified that the Credit Contract was entered into for the following reasons:
A. I believe the first agreement was to superannuation funds and I, I, because of the global financial situation that was taking affect [sic] back in 2009 my advisor advised me to get out of certain loans. Basically to put my money, to put my superannuation money into cash investments and so, so we decided to end that agreement and come up with a new one.
In short the evidence of both Mr Psevdos and Mr Dean is that the Whiteway House Super Funds loan was repaid by the advance made by Colonial.
The consideration for the Credit Contract

The Magistrate found that the Credit Contract ‘was neither a novation of the first loan agreement nor an assignment of the first loan agreement, it was a new contract’.
So much can be accepted, but nothing turns on it. Her Honour’s finding appears to be addressed to Colonial’s pleading that the Credit Contract was a ‘replacement loan’, and Mr Bouhamdan’s denial of that plea on the grounds that the lenders and the required security were different. However, the only point of legal significance in Colonial’s plea was that the purpose of the loan was to discharge Tyger Lilly’s liability under the 2008 loan agreement. The Magistrate determined that Mr Bouhamdan’s denial that it was a ‘replacement loan’ was wide enough to put in issue the question of consideration even though Mr Bouhamdan had not pleaded expressly, and had not led any evidence that, his liability under the 2008 loan agreement had not been discharged.
The Magistrate then determined that issue in favour of Mr Bouhamdan for the following reasons:
[118]However, there was no evidence that the plaintiff in fact ever lent any sum of money to the Borrower on any date. Similarly no documentation was produced, nor was there any evidence called to establish that any exchange of funds occurred between the First Lender and the plaintiff on or about 2 February 2009, to reflect the fact of a ‘change in lender’.
[119]The only evidence at all relevant to the question of consideration was a denial by Mr Psevdos to two questions put to him in cross examination that ‘the 2009 money was not utilised to repay the 2008 agreement’. However that was simply not borne out by any documentary evidence.
The Magistrate’s assessment of the evidence in those paragraphs is mistaken. The testimony of Mr Psevdos was more than a denial. He expressly stated that the money advanced under the Credit Contract discharged the liability under the 2008 loan agreement. As the principal of the Mortgage Manager for both loan agreements Mr Psevdos was in a position to so testify. Further, Mr Dean’s testimony, and the Statement of Accounts he maintained, also evidences the advance by Colonial and its application to discharge Tyger Lilly’s liability to the Whiteway House Super Funds.
The Magistrate continued:
[122]Further, although the Settlement Statement refers to the registration of a Discharge of Mortgage it does not contain any information to identify which mortgage was in fact discharged, there was no registered Discharge of Mortgage tendered and no oral evidence confirming which mortgage was in fact discharged.
[123]The contention set forth in para.8 of the Plaintiff’s Further Submissions that the Settlement Statement establishes that monies advanced under the second loan agreement were used to discharge the mortgage supporting the first loan agreement cannot be sustained. The monies referred to therein came from a third party financier.
[124]There was no evidence before the court to support a finding that since the date of execution of the second loan agreement the First Lender had made any attempt to recover any sum purportedly owed to it by the Borrower pursuant to the first loan agreement. However there was also no evidence that the first loan agreement had ever been discharged, such that it may be arguable that the discharge of the first loan agreement somehow represents consideration for the second. Although it may be inferred from the evidence of Mr Psevdos and Mr Dean (and possibly the defendant) that all relevant parties appear to have assumed that the fact of the second loan agreement somehow operated to discharge the first, this was not an issue ever properly explored at trial.
The Magistrate appears to have thought it necessary that there be a degree of formality for the discharge of liability under the 2008 loan agreement to be effective. There was not. On the trial of a claim by the Whiteway House Super Funds for recovery of the 2008 loan, the evidence of Mr Psevdos, the Statement of Accounts, the testimony of Mr Dean and the discharge of the Whiteway House Super Funds mortgage over to Waymouth Street premises would undoubtedly prove that the loan was discharged. Whiteway House Super Funds could not, after making those admissions, escape liability because the discharge was not more formally recorded. I therefore uphold the ground of appeal that the Magistrate erred in concluding that the credit contract was not supported by any consideration. I find that it was and that Colonial advanced to Tyger Lilly the sum of $407,750.00.
There was no demand
Pursuant to clause 4 of the Guarantee, the promise of the Guarantor is to pay on demand by the lender. It is established that a term of that kind in a guarantee conditions the guarantor’s liability on a demand being made before taking action.[1]
[1] Re Taylor, Ex parte Century 21 Real Estate Corporation (1995) 130 ALR 723 at 725-727 per Burchett J.
On the failure to make a demand, the Magistrate found:
[168]The plaintiff submitted in the ‘Plaintiff’s Reply’ that the bundle of emails tendered as Exhibit D2 made ‘it clear that the plaintiff was suing under the guarantee’. However there is no document in Exhibit D2 which contains a written statement that a particular sum of money is due and payable under the second loan agreement.
[169]The only document in evidence in the nature of any demand or request by the plaintiff to the Borrower and/or the defendant with respect to payment is that set forth in the email from Mr Dean to the defendant dated 6 March 2014 (copy included in Exhibit D2).
[170]In that email Mr Dean stated:
…In addition, CMFC require the finalisation of our business with Tyger & yourself being the matter of Brittania Dve, Hindmarsh Island. We are running the book now invoking the full (higher) interest rate but if you wish to pay out the remainder of this loan immediately I will discuss with Darcy about reducing the interest rate to the lower amount for the full term of the loan. This would result in a saving of approx. $15,000 to you…
[171]That email did not refer to the balance owed pursuant to either the first or second loan agreement as at that date, nor did it attach any document outlining details of any sum outstanding.
[172]As previously stated, included in Exhibit D2 is a copy of an email from the defendant to Mr Dean dated 11 March 2014 (which has been reproduced as if it is a response to Mr Dean’s email of 6 March 2014 but whether there was any other response is uncertain). That email states:
Jon,
Am I going to get my documentation or am I going to wait to go to court and advise the courts that you refuse to provide me anything especially as you seem to want to sue me under a guarantee.
I have had no notification as a guarantor of any debt owed by me.
I hear now that what you are claiming through your lawyer is not what the last statement you provided.
NO response is unacceptable.
[173]It is apparent from this email that as at 11 March 2014 the defendant was aware that the plaintiff was intending to enforce either the first or the second Guarantee and Indemnity (albeit how or when he became so aware was not in evidence).
[174]I have previously referred in detail to the very limited evidence before the court as to how the plaintiff (and/or Orio) informed the Borrower (and/or the defendant) from time to time as to what sum was outstanding pursuant to the second loan agreement. There was no evidence to establish that the Borrower (and/or the defendant) was sent regular statements of account informing it as to what if any amount was outstanding pursuant to the second loan agreement.
[175]In my view, the terms of the second Guarantee and Indemnity constitute an obligation upon the guarantor to pay a collateral sum, being the ‘Guaranteed Monies’. As such, in my view, in the absence of a written demand to the defendant, identifying the ‘Guaranteed Monies’ (as defined), no cause of action arises.
[176]I find that there was no evidence of any written demand for payment by the defendant of any specific sum pursuant to the second loan agreement. In the absence of there being evidence of a proper demand pursuant to the second Guarantee and Indemnity, no cause of action arises.
(emphasis in original)
The Magistrate was correct to find that a demand for a specified amount was a precondition to Mr Bouhamdan’s liability under the contract and that no demand had been made. A reference to there being an outstanding liability and an offer to reduce that liability if immediate payment is made, is not a demand for payment.
Further evidence
On the appeal the applicant sought permission to adduce further evidence to show that the notice was sent. The application was not made in the notice of appeal and was raised only late in the course of the proceedings in this Court.
On 16 December 2016, when this appeal was first called on, I raised with counsel whether they had considered what the practical result of the appeal may be depending on how the two primary issues were determined. Specifically, if the appeal were upheld only on the basis that the appellant had failed to make a demand for repayment, the appellant might succeed on the subsequent enforcement of a fresh demand. Alternatively, if the decision below were upheld on the basis that there was no consideration for the credit contract, the 2008 loan agreement might be enforced by the earlier financiers. In either event, there might be no conclusive result and therefore the prospect of further litigation. The matter was adjourned for a period of time so that the parties could consider the practical consequences of the appeal and explore settlement.
The matter came before me again on 16 January 2017. At that time, the parties indicated that they had come closer to resolving the matter without any further litigation. The matter was again adjourned.
On 3 April 2017 I heard argument from the parties on the two primary issues. At the conclusion of the hearing the matter was adjourned to give the appellant an opportunity to adduce further evidence that a demand had been made on the respondent in the appropriate form. The respondent was given the opportunity to consider his position after notice of the proposed further evidence was given.
The appellant’s solicitor filed an affidavit on 10 May 2017. The respondent filed an affidavit in response on 7 June 2017. On 8 June 2017 the matter came on again to determine the appellant’s application to adduce further evidence.
In an affidavit filed by the appellant’s solicitor he deposed that on 18 February 2014 he sent a letter of demand by posting the same by pre-paid post to Mr Bouhamdan at 294 Payneham Road, Payneham, SA, 5070. The letter stated that the solicitor acted for Colonial. It referred to the fact that Mr Bouhamdan was the guarantor of the credit contract. It asserted that Mr Bouhamdan was indebted in the sum of $93,535.46 pursuant to the guarantee. It sought a further amount of $385 for legal fees. It then provided:
Our client requires payment in the sum of $93,920.46 by way of bank cheque payable to our client sent to this office by no later than 5.00pm on Wednesday 12 March 2014.
I am satisfied that the letter made a demand for the purposes of the Guarantee.
However, the respondent disputed that the letter was sent to his residential or business address being the ‘last address recorded for me’ pursuant to clause 10.2 of the Guarantee.
I observe first that counsel for Colonial conceded in the course of argument that the letter was not sent by the appellant’s solicitor personally. It was sent by his clerk. To that extent therefore, the deposition of the appellant’s solicitor that the letter had been sent was strictly hearsay. When that problem emerged, the appellant’s counsel informed the Court that the solicitor’s secretary could be called and could depose to the sending of the letter on the basis of the placement of an unsigned copy of it on the solicitor’s file. In the result therefore, if further evidence were to be allowed on this issue yet a further adjournment would have been required. Moreover, the respondent’s counsel indicated that the reliability of the secretary’s evidence would be contested and cross-examination would therefore be necessary. It emerged in the course of submissions that the solicitor did not keep a postage book that might have allowed the sending of the letter to be proved by a business record.
The appellant’s solicitor also deposed that within weeks of posting the letter, on 11 March 2014, the appellant sent to Mr Dean an email saying in part ‘I hear now that what you are claiming through your lawyer is not what the last statement is provided’. I would not infer from that statement alone, without hearing all of the evidence, that Mr Bouhamdan personally received the letter. In particular, the use of the word ‘hear’ may refer to second-hand information passed on to him orally.
In an affidavit of Mr Bouhamdan he deposed that he did not receive the letter of demand. Of course that assertion could only be tested by cross-examination. More importantly, Mr Bouhamdan denied that the Payneham Road address was the last address recorded for him. In particular, a mortgage dated 10 October 2012 exhibited to his affidavit securing another loan in which a mortgagee was another of John Dean’s superannuation funds, the address of Tyger Investment Group Pty Ltd was recorded as … Queens Road, Melbourne, Victoria, 3004. Mr Bouhamdan deposed that the Payneham Road address was the address of his former accountants and that the address in Melbourne was the address of solicitors. Be that as it may, both addresses relate to addresses for Tyger Lilly and not Mr Bouhamdan.
In summary, proof of service of the notice of demand pursuant to clause 10 of the Guarantee was likely to be protracted.
The appellant’s solicitor’s affidavit did not explain why the application to adduce the further evidence I have described was not made in the Magistrates Court and made only late in the course of these appellate proceedings.
I hold that it is not in the interests of justice to give permission to adduce further evidence because:
·the failure to lead the evidence in the Magistrates Court is unexplained;
·the application was only made late in the appellate proceedings; and
·the issue of fact raised by the further evidence would require the calling of witnesses, cross-examination, and a hearing of a protracted nature which is not suitable for determination in appellate proceedings.
Conclusion
The appeal is dismissed.