Commonwealth Bank of Australia v John Horvat
[2012] NSWSC 243
•16 March 2012
Supreme Court
New South Wales
Medium Neutral Citation: Commonwealth Bank of Australia & Anor v John Horvat & Ors [2012] NSWSC 243 Hearing dates: 16 March 2012 Decision date: 16 March 2012 Jurisdiction: Common Law Before: Adamson J Decision: (1) In respect of the first defendant:
(a) judgment in favour of the first plaintiff in the sum of $2,337,610.88, which includes interest accrued in accordance with the terms of the First Defendant's Guarantee from 28 February 2011 to 15 March 2012;
(b) judgment in favour of the first plaintiff in the sum of $427,718.06, which includes interest accrued in accordance with the terms of the VLOC Facility from 28 February 2011 to 15 March 2012; and
(c) judgment in favour of the second plaintiff in the sum of $75,691.35, which includes interest accrued in accordance with the terms of the First Defendant's CBFC Guarantee from 28 February 2011 to 15 March 2012.
(2) In respect of the third defendant:
(a) judgment in favour of the first plaintiff in the sum of $2,337,610.88, which includes interest accrued in accordance with the terms of the Third Defendant's Guarantee from 28 February 2011 to 15 March 2012;
(b) judgment in favour of the first plaintiff in the sum of $200,000 in accordance with the terms of the Third Defendant's VLOC Guarantee;
(c) an order that the third defendant gives the first plaintiff possession of the property known as 59 Shepherd Street, Colyton NSW 2760 registered with folio identifier 20/244431 (Colyton Property); and
(d) leave to issue a writ of possession in respect of the Colyton Property.
(3) (3) An order pursuant to section 101 of the Civil Procedure Act 2005 that interest be payable on the judgment amounts obtained by the first plaintiff against the first defendant and the third defendant at the prescribed rate from the date of judgment on so much of the money as is from time to time unpaid.
(4) (4) An order pursuant to section 101 of the Civil Procedure Act 2005 that interest be payable on any judgment obtained by the second plaintiff against the first defendant at the prescribed rate from the date of judgment on so much of the money as is from time to time unpaid.
(5) Costs as against the first and third defendants on an indemnity basis.
Catchwords: PRACTICE AND PROCEDURE - application for summary judgment - whether any arguable defence or issue to be tried Legislation Cited: - Uniform Civil Procedure Rules 2005 Cases Cited: - Gomba Holdings (UK) Limited v Minories Finance Limited (No. 2) [1993] Ch 171 Category: Principal judgment Parties: Commonwealth Bank of Australia (First Plaintiff)
CBFC Limited (Second Plaintiff)
John Horvat (also known as John Palasty, First Defendant)
Mycorp Properties Pty Ltd (Second Defendant)
Ilona Horvat (Third Defendant)Representation: Counsel:
J Hynes (Plaintiffs)
D Currie (First and Third Defendants)
Solicitors:
Henry Davis York (Plaintiffs)
Proctor and Associates (First and Third Defendants)
File Number(s): 2011/00070236
Judgment
The first plaintiff seeks:
(1) Judgment against the first and third defendants for amounts owing under guarantees they gave in respect of amounts advanced to APID Pty Limited (in liquidation) (receivers and managers appointed) ( APID ) pursuant to an overdraft facility, and three bill facilities ( the Bill Facilities Guarantees );
(2) Judgment against the first and third defendants for amounts outstanding under a facility described as the "Veridian Line of Credit Facility" ( VLOC ) in respect of which the first defendant was the borrower and the third defendant was the guarantor of advances made to the first defendant pursuant to the VLOC Facility.
(3) An order for possession and a writ of possession against the third defendant in respect of a property at Colyton under the mortgage she granted to the first plaintiff to secure the VLOC.
The second plaintiff seeks judgment against the first defendant, as guarantor of APID's liability under a Hire Purchase Agreement Facility for the hire purchase of a Mercedes Benz motor vehicle ( HPA Facility ).
On 16 March 2012, after hearing the matter, I made orders for judgment which appear at the conclusion of these reasons and indicated to the parties that I would deliver reasons for those orders on 19 March 2012.
Procedural history
These proceedings were commenced by statement of claim filed on 3 March 2011. In August 2011 proceedings were concluded against the second defendant, a deregistered company.
The first and third defendants filed defences on 28 July 2011 which contained admissions, non-admissions and denials. The only indication of a substantive defence appears from paragraphs 4 and 8 which allege that the first and third defendants' liabilities to the plaintiff had been discharged.
On 7 September 2011 the plaintiffs filed a notice of motion seeking an order pursuant to UCPR 14.28 that the whole or parts of the first and third defendants' defence be struck out (which, if granted, would entitle them to enter default judgment) and, in the alternative, orders for judgment and possession of the Colyton property. The plaintiff filed an affidavit of Jo-Ann Giles sworn 15 September 2011 in support of the notice of motion which established the amounts owing by the first and third defendants by adducing detailed evidence of the agreements, the amounts of the facilities, various extensions of the facilities, the properties realised to discharge those facilities, the net proceeds of sale and how the monies were applied.
Directions were made regarding evidence on the motion, which was made returnable for hearing on 6 October 2011. On the morning of 6 October 2011, the first and third defendants provided the plaintiffs with a proposed amended defence and an affidavit sworn by the first defendant on 5 October 2011. The motion was accordingly stood over for hearing before the Duty Judge on 13 October 2011 and the plaintiff was directed to serve any evidence in reply to the affidavit of 5 October 2011 on or before 11 October 2011.
The first defendant swore an affidavit on 5 October 2011, to which he annexed various documents concerning the properties that the first plaintiff sold and applied to repayment of the APID Bill Facilities. The affidavit contained a table in which the sale price of various properties that had been sold was set out. The total of the sale prices listed was $16,679,425. There was no evidence of the net proceeds of sale. The affidavit concluded with the following two paragraphs:
"14. The guarantee to the plaintiff was for the sum of $12.7m. Once the sale prices referred to in the table above are subtracted, there remains a credit of $3,979,425 in favour of the borrower.
15. On or about 30 November 2010 the motor vehicle with registration number NX121T was sold for $30,909.09. If the mortgages were discharged, as I allege, I should receive a credit for the sale of the motor vehicle."
In response, the plaintiff filed a further affidavit of Ms Giles sworn on 11 October 2011 in which she deposed to the sales of the properties realised by the first plaintiff and to the sale of the motor vehicle by the second plaintiff. The evidence established that none of the properties that was sold was owned by either the first or the second defendant.
Ms Giles's second affidavit also contained the following paragraphs:
"64. I have read the Defence filed in this proceeding on 28 July 2011 and the proposed Amended Defence dated 5 October 2011 (Pleadings).
65. I do not believe that either of the Pleadings disclose a defence to the claims of the Bank [the first plaintiff] and CBFC [the second plaintiff] in this proceeding."
On 13 October 2011, the matter came before Simpson J. The first defendant relied on an affidavit sworn on 13 October 2011 in which he deposed to not having had time to "digest" the material in the affidavit of Ms Giles sworn 11 October 2011. He deposed to his need to engage a forensic accountant to ascertain the amounts advanced, due for repayment and actually repaid. He also deposed:
"5. I believe that the obligations secured by the guarantee I had given had been discharged by repayment.
6. Another matter that has become apparent to me is that I believed that a number of GST refunds had been deposited with the plaintiff by means of repayment and I could not see any record of this occurring in the records annexed to Ms Giles' latest affidavit. The GST refund amounts were over $311,000."
No basis for his belief in paragraph 5 appears from the affidavit or otherwise. The matter referred to in paragraph 6 set out above was addressed by a further affidavit of Ms Giles sworn 8 March 2012 and established that the GST amounts had been applied to reduce the debt.
Simpson J ordered that the defence filed on 28 July 2011 be struck out, granted leave to the first and third defendants to file and serve an amended defence and stood over the balance of the plaintiff's notice of motion filed on 7 September 2011 to the hearing of the proceedings.
On 18 October 2011, the first and third defendants filed an amended defence which, in addition to bare admissions, denials and non-admissions reiterated the allegations that all liabilities to the plaintiff had been discharged. It contained a new paragraph in the following terms:
"8. The First and Third Defendants say that their guarantee of the APID Facilities was limited to the amount of $12.7m plus enforcement expenses so that he was only liable to the extent the Plaintif did not recover the sum of $12.7m plus enforcement debts from APID."
As appears from the terms of paragraph 8 of the amended defence, the defence, if there be one, relates only to the guarantee of APID's indebtedness. It does not relate to the VLOC or the HPA Facility.
There was then a directions hearing before the Registrar on 27 October 2011 at which the proceedings were listed for hearing on 16 March 2011. There was no appearance for the defendants on that day but I am told by the plaintiffs' counsel that the plaintiffs' solicitors contacted the first and third defendants' solicitors to ascertain available dates before taking a hearing date. The matter was listed for hearing on 16 March 2011.
When the matter was called on for hearing on 16 March 2012, it became apparent that Mr Currie, who appeared for the first and third defendants, was under the mistaken apprehension that the matter was listed for hearing of the notice of motion only and not for final hearing. He applied for an adjournment of the hearing in the expectation that he would obtain instructions to do so from his solicitor, Mr Kekatos, who was not present at the hearing. I allowed him time to contact Mr Kekatos, who confirmed that he wished the matter to be adjourned and said that he would come to Court. The matter concluded at midday. Mr Kekatos had not yet arrived at court.
Since Mr Currie was at least prepared for the hearing of the motion, I invited Mr Hynes, who appeared for the plaintiffs, to open his case and adduce evidence since this would need to occur whether the matter proceeded by way of application for summary judgment or final hearing. Mr Hynes relied on the three affidavits of Ms Giles referred to above.
Mr Currie relied on the affidavits of the first defendant sworn 5 October 2011 and 13 October 2011 referred to above. He also relied on the affidavit of Mr Kekatos, sworn 16 March 2012 which sets out the steps which Mr Kekatos believes that he needs to conduct "in order to properly defend the proceedings". There is no explanation as to why these matters have not yet been attended to, notwithstanding that the proceedings were commenced more than a year ago.
Whether judgment ought be ordered against the first and third defendants
I do not consider that any basis has been shown for the allegations in the amended defence that the first and third defendants have discharged their liabilities to the plaintiff.
Nor do I consider that the "defence" raised in paragraph 8 of the amended defence is a defence to the first plaintiff's claim. The guarantees signed by the first and third defendants provide that they are liable to the first plaintiff for amounts owing by APID unless they have paid out the first plaintiff by repaying the lesser of all the amounts then outstanding and the "maximum amount" which was agreed to be $12.7m (clause 7.1).
The guarantees provide that the first and third defendants have the following obligations to the first plaintiff under the guarantee:
(1) To guarantee payment of all amounts owing by the borrower (clause 1.1);
(2) To pay any amount due by the borrower even if the first plaintiff has not asked the borrower first (clause 1.2) up to the maximum amount of $12.7m (clause 3);
(3) To pay reasonable enforcement expenses (clause 5).
Even if the first defendant's evidence as to sum of the sale prices of properties sold by the plaintiffs to reduce the debt was correct, it would not assist either the first or the third defendants. The evidence does not establish that they have paid any amount to the plaintiffs, much less that they have paid out the guarantee by paying either the total amount outstanding or the maximum amount of $12.7m. Indeed the evidence establishes that the properties that were sold were all owned by persons other than the first and third defendants.
I find that the first defendant's belief that his liabilities to the plaintiffs have been discharged is misguided insofar as it depends on a construction of the guarantee which relieves him of liability if more than $12.7m is paid to the first plaintiff by any third party. His liability under the guarantee properly construed is limited to $12.7m, only if he is the one who makes the payments up to that amount. If his belief is based on any other ground then no evidence has been adduced to reveal it. Insofar as he believes that he is entitled to credit for the proceeds of sale of the motor vehicle, he is correct, but Ms Giles' evidence establishes that such credit has been given. The same can be said of the amounts referable to GST.
I am satisfied that the plaintiffs are entitled to judgment. The first and second defendants' amended defences are liable to be struck out since they do not, upon a proper analysis, disclose a defence. Further, there is evidence that establishes the plaintiff's claim and evidence from Ms Giles that she does not believe that they have a defence. I find that neither the first nor the third defendants has any arguable defence to the plaintiffs' claim. Accordingly, the plaintiffs are entitled to summary judgment in respect of each of their claims.
I am also satisfied that it is appropriate to order that the plaintiffs costs be paid on an indemnity basis. The agreements relied upon provide that the first and third defendants are liable for their costs of enforcement together with legal costs. I consider that in the instant case the costs orders ought reflect the legal obligations undertaken by the first and third defendants: Gomba Holdings (UK) Limited v Minories Finance Limited (No. 2) [1993] Ch 171 at 194.
For the foregoing reasons there was, in my view, no issue to be tried and no reason to allow the matter to proceed to final hearing when it could properly be determined on a summary basis. Accordingly, there would have been no utility in granting Mr Currie's application for adjournment even had there been grounds to do so, and therefore no need to determine such application which was, in any event, unsupported by evidence.
For completeness the orders which I made on 16 March 2012 are set out below:
(1) In respect of the first defendant:
(a) judgment in favour of the first plaintiff in the sum of $2,337,610.88, which includes interest accrued in accordance with the terms of the First Defendant's Guarantee from 28 February 2011 to 15 March 2012;
(b) judgment in favour of the first plaintiff in the sum of $427,718.06, which includes interest accrued in accordance with the terms of the VLOC Facility from 28 February 2011 to 15 March 2012; and
(c) judgment in favour of the second plaintiff in the sum of $75,691.35, which includes interest accrued in accordance with the terms of the First Defendant's CBFC Guarantee from 28 February 2011 to 15 March 2012.
(2) In respect of the third defendant:
(a) judgment in favour of the first plaintiff in the sum of $2,337,610.88, which includes interest accrued in accordance with the terms of the Third Defendant's Guarantee from 28 February 2011 to 15 March 2012;
(b) judgment in favour of the first plaintiff in the sum of $200,000 in accordance with the terms of the Third Defendant's VLOC Guarantee;
(c) an order that the third defendant gives the first plaintiff possession of the property known as 59 Shepherd Street, Colyton NSW 2760 registered with folio identifier 20/244431 (Colyton Property); and
(d) leave to issue a writ of possession in respect of the Colyton Property.
(3) An order pursuant to section 101 of the Civil Procedure Act 2005 that interest be payable on the judgment amounts obtained by the first plaintiff against the first defendant and the third defendant at the prescribed rate from the date of judgment on so much of the money as is from time to time unpaid.
(4) An order pursuant to section 101 of the Civil Procedure Act 2005 that interest be payable on any judgment obtained by the second plaintiff against the first defendant at the prescribed rate from the date of judgment on so much of the money as is from time to time unpaid.
(5) Costs as against the first and third defendants on an indemnity basis.
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Decision last updated: 19 March 2012
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