Commonwealth Bank of Australia v Tailings Treatment Pty Ltd
[2000] VSC 502
•30 November 2000
| SUPREME COURT OF VICTORIA | |
| PRACTICE COURT | Not Restricted |
No. 4874 of 2000
| COMMONWEALTH BANK OF AUSTRALIA | Plaintiff |
| v. | |
| TAILINGS TREATMENT PTY. LTD. AND OTHERS | Defendants |
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JUDGE: | BEACH, J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 20 NOVEMBER 2000 | |
DATE OF JUDGMENT: | 30 NOVEMBER 2000 | |
CASE MAY BE CITED AS: | COMMONWEALTH BANK OF AUSTRALIA v. TAILINGS TREATMENT PTY. LTD. & ORS. | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 502 | |
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CATCHWORDS: Summary judgment in favour of plaintiff – No arguable defence to claim.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr. J. Kewley | G.S. Ray |
| For the Second and Third Defendants | Mr. J. Arthur | Cahills |
HIS HONOUR:
This is an appeal by the plaintiff from the orders of a Master of the Court made on 14 November whereby the Master ordered that the second and third defendants have leave to defend the proceeding and made certain consequential orders in the proceeding.
The background to the appeal may be summarised as follows.
The second defendant Douglas Wakley Cahill is a solicitor of this Court practising as such in Bendigo.
The second defendant and the third defendant David John Wright are directors of the first defendant Tailings Treatment Pty. Ltd.
In about February 1996 the plaintiff granted a finance facility to Tailings Treatment. Repayment of the facility was guaranteed by the second and third defendants. The guarantees are dated 23 February 1996 and so far as are relevant for present purposes read:
"Whereas the Bank has granted or agreed to grant to the Debtor (Tailings Treatment) at the request of the Guarantor certain advances and accommodation AND for the purpose of securing to the Bank the payment of the moneys hereinafter mentioned the Guarantor has agreed to execute his Guarantee.
NOW THIS DEED WITNESSES that in consideration of the premises the Guarantor
HEREBY GUARANTEES to pay to the Bank on demand such of the moneys hereinafter mentioned which at any time and from time to time are not paid by the Debtor when due to be paid that is to say –
(a)all moneys (including moneys advanced by way of loan for fixed term or provided by way of overdraft) now or hereafter to become owing or payable to the Bank by the Debtor either alone or on joint or partnership account or on any other account whether as principal or surety."
In December 1998 the second and third defendants on behalf of Tailings Treatment sought and obtained an overdraft facility for Tailings Treatment in the sum of $500,000.
Approval of the overdraft facility was notified to the second and third defendants by letter of 28 December 1998.
Enclosed with the letter was (inter alia) a Terms Schedule. The Terms Schedule was executed by Tailings Treatment, the second and third defendants subscribing their names to the Terms Schedule as the directors of Tailings Treatment.
Attached to the Schedule was a Security Schedule. The Security Schedule reads:
"Description of Security
Debtor: TAILINGS TREATMENT PTY. LTD.
Security will consist of:
A Guarantee unlimited as to amount by DOUGLASS WAKLEY CAHILL supported by a First Registered Mortgage by DOUGLASS WAKLEY CAHILL over property situated at BLOWHOLES RD CAPE BRIDGEWATER VIC, a First Registered Mortgage by DOUGLASS WAKLEY CAHILL over property situated at BLOWHOLES ROAD CAPE BRIDGEWATER VIC.
A Guarantee unlimited as to amount by DAVID JOHN WRIGHT supported by an equitable charge over Term Deposit 3506 5020 7548.
A First Registered Mortgage by DOUGLASS WAKLEY CAHILL over rural property situated at BLOWHOLES RD CAPE BRIDGEWATER VIC.
A First Registered Equitable Mortgage by TAILINGS TREATMENT PTY. LTD. over the whole of its asset(s) and undertaking(s) including uncalled capital.
A First Equitable Charge by DAVID JOHN WRIGHT over Term Deposit 3506 5020 7548."
Although there is no affidavit evidence before me to this effect, counsel for the Bank informed me that at the time the overdraft facility was provided by the Bank to Tailings Treatment it was agreed by the parties that the guarantees given in February 1996 would be sufficient to cover the overdraft and that fresh guarantees would not be necessary.
That assertion was not challenged by counsel for the second and third defendants.
In my view it does not matter whether that be so or not. The 1996 guarantees are expressed in such a way as to cover an overdraft facility given to Tailings Treatment at a later point in time.
On 5 January 1999 the second defendant signed the following acknowledgement:
"The Manager
Commonwealth Bank of Australia
Bendigo Business Banking CentreI acknowledge that the Bank has granted or from time to time may be granting accommodation to Tailings Treatment Pty. Ltd. ACN 067 467 752 (the Debtor) or otherwise permitting the Debtor to incur liabilities to the Bank against the security(ies) I have given to the Bank and listed in the schedule below.
I further acknowledge, as security provider for the Debtor, that my present maximum liability to the Bank under those documents is $712,000, plus all interest and amounts payable for discounts, costs, charges and expenses which the Bank may debit and charge to the account of the Debtor, or for which I am liable under my security(ies).
Schedule
Guarantee dated 23 February 1996, liabilities under which are secured by Mortgage dated 8 October 1996 over property at Blowholes Road Cape Bridgewater, Mortgage dated 19 September 1996 over property at Blowholes Road Cape Bridgewater and Letter of Set-Off-On Demand/Term Deposit Account dated 1 June 1998 over Term Deposit account number 3506 50209973.
____________________________ )
Witness's Signature ) ____________________________
____________________________ ) Douglass Wakley Cahill
Witness's Name in Full ) Security ProviderNB Witness must be an adult and not be a party to the loan".
On the same day the third defendant signed the following acknowledgement:
"The Manager
Commonwealth Bank of Australia
Bendigo Business Banking CentreI acknowledge that the Bank has granted or from time to time may be granting accommodation to Tailings Treatment Pty. Ltd. ACN 067 467 752 (the Debtor) or otherwise permitting the Debtor to incur liabilities to the Bank against the security(ies) I have given to the Bank and listed in the schedule below.
I further acknowledge, as security provider for the Debtor, that my present maximum liability to the Bank under those documents is $712,000, plus all interest and amounts payable for discounts, costs, charges and expenses which the Bank may debit and charge to the account of the Debtor, or for which I am liable under my security(ies).
Schedule
Guarantee dated 23 February 1996.
____________________________ )
Witness's Signature ) ____________________________
____________________________ ) David John Wright
Witness's Name in Full ) Security ProviderNB Witness must be an adult and not be a party to the loan".
By letters of 10 November 1999 to each defendant the plaintiff demanded repayment of the sum of $656,510.32 which was then due and owing under the overdraft facility. The defendants did not comply with the demand.
On 31 March 2000 the plaintiff filed its writ in the proceeding whereby it sought to recover from the defendants the amount then due under the overdraft facility and a further sum of $13,632.35 then owing by the second defendant to the plaintiff pursuant to a Better Business Loan Agreement. The latter sum can be ignored for present purposes.
The plaintiff's statement of claim runs to some 28 paragraphs. For reasons which will become apparent in due course I only propose to set out paragraphs 6 and 7 in my reasons for judgment. They read:
"6.By a Guarantee in writing dated on or about 23rd February 1996 and signed by the Second Defendant ('the first Guarantee') the Second Defendant in consideration of the Plaintiff having at the request of the Second and Third Defendants agreed to provide banking facilities, lending facilities and financial accommodation namely, the Overdraft Agreement to the First Defendant unconditionally guaranteed to the Plaintiff on demand the due and punctual payment to the Plaintiff of all moneys due owing or payable at any time and or from time to time by the First Defendant to the Plaintiff on any account whatsoever.
PARTICULARS
The first Guarantee is in writing and dated on or about 23rd February 1996. A copy may be inspected by appointment at the office of the Solicitor for the Plaintiff.
7.By a Guarantee in writing dated on or abut 23rd February 1996 and signed by the Third Defendant ('the second Guarantee') the Third Defendant in consideration of the Plaintiff having at the request of the Second and Third Defendants agreed to provide banking facilities, lending facilities and financial accommodation namely, the Overdraft Agreement to the First Defendant unconditionally guaranteed to the Plaintiff on demand the due and punctual payment to the Plaintiff of all moneys due owing or payable at any time and or from time to time by the First Defendant to the Plaintiff on any account whatsoever.
PARTICULARS
The second Guarantee is in writing and dated on or about 23rd February 1996. A copy may be inspected by appointment at the office of the Solicitor for the Plaintiff."
It can be seen that as pleaded the guarantees were said to have been given in February 1996 in respect of the overdraft facility (made available in December 1998).
That is clearly not the situation. They were given to cover all moneys lent or to be lent by the plaintiff to Tailings Treatment including any money lent by way of loan for a fixed term, or by way of overdraft.
Having regard to the issues later raised on behalf of the second and third defendants it is instructive to note the original defence filed on behalf of the defendants on 4 May 2000. All the more so when one remembers that the second defendant is a solicitor of this Court.
The document is simply headed "Defence" and is stated to be filed on behalf of the defendant. It reads:
"The (sic) by way of defence to the endorsement on the writ standing as the plaintiff's statement of claim herein says as follows:
1.The Defendant company and the Second and Third Defendant denies that the total sum claimed is due and payable.
2.The Defendant company and the Second and Third Defendant requires discovery of all relevant documents.
3.The Defendant company and the Second and Third Defendant state that the sums claimed has been wrongly calculated and that the interest components are incorrect.
4.The Defendant company and the Second and Third Defendant require further and better particulars of the Plaintiff's Statement of Claim and calculations thereto.
5.
6.
7.
8.
Dated 3/5/00
………………..
CAHILLS
Solicitors for the First, Second and Third Defendants."
It is a remarkable thing that a practitioner of this Court could prepare and file such a document in a case of this nature.
On 1 June 2000 the second defendant paid a sum of $140,000 to the plaintiff to enable him to obtain discharges of the mortgages he had given to the Bank over the land at Blowholes Road, Cape Bridgewater. The discharges were registered in the Land Titles Office the following day. Part of the sum of $140,000 was used by the plaintiff to reduce the debit balance of the second defendant's Better Business loan to nil. The balance was credited to the account of Tailings Treatment.
On 9 August the plaintiff filed a summons in the Court seeking (inter alia) to have the defendants' defence struck out and seeking liberty to enter judgment against the defendants.
On 7 September 2000 a Master gave leave to the defendants to file an amended defence which they did on 7 September 2000.
The defendants' amended defence which was drawn by counsel deals specifically with each paragraph of the plaintiff's statement of claim and then raises further issues including allegations that the plaintiff made untrue, false and misleading representations to the second and third defendants to induce them to enter into the guarantees, was guilty of unconscionable behaviour, is estopped from relying on the guarantees, and by accepting the sum of $140,000 released and discharged the defendants from any liability under the overdraft agreement.
On 14 November 2000 the plaintiff's summons came before a Master.
At the conclusion of the hearing the Master entered judgment in favour of the plaintiff and against Tailings Treatment for $632,240.00 together with the plaintiff's costs of the proceeding as against that defendant.
However, the Master ordered that the second and third defendants have leave to defend the proceeding.
During the course of the proceeding before the Master counsel for the defendants made much of the point I earlier referred to concerning the content of paragraphs 6 and 7 of the statement of claim.
Counsel for the plaintiff informed the Master that the reference to the overdraft agreement in the two paragraphs was incorrect and sought and obtained leave from the Master to amend the plaintiff's statement of claim.
On 17 November 2000 the plaintiff filed its amended statement of claim deleting from paragraphs 7 and 8 the words "namely the Overdraft Agreement" where appearing in them.
On 20 November the plaintiff's appeal came before me in the Practice Court.
When one is confronted with a defence such as the amended defence filed on behalf of the defendants one's instinctive reaction is to say "There must surely be issues in this proceeding which require a trial of the proceeding".
However, on a closer examination of the facts that may not necessarily prove to be the case.
In the first place it is necessary to have regard to some of the content of the affidavit sworn by the second defendant on behalf of all defendants on 18 October 2000.
The paragraphs relevant for present purposes are paragraphs 11, 12, 13, 14, 15, 16, 17, 19, 20 and 21 which read:
"11. In or about February 1996 Wright and myself had discussions with Bill Young ('Young') who was then area manager of the Bank at the Regional Office of the Bank, 14 King Street, Bendigo. We discussed with Young the business of Tailings Treatment and what its requirements were for financial accommodation. The Bank was to provide funding for its tailings treatment operation at Tomingley, New South Wales. The Bank was provided with all projections, a business plan and details of the project prior to agreeing to provide facilities for Tailings Treatment. I was informed by Young at the time and believe the Bank and its experts accepted the projections and that the project was economically viable.
12.During these discussions Wright and I informed Young that (and Young acknowledged) that Wright did not have any assets and could not provide any security. Young stated to us that we should not worry about signing the purported guarantees as they were only a formality. Young also informed us that the value of Tailings Treatments' plant, equipment and its tailings, that is, the project itself, together with the Portland titles, were sufficient security for the loan facilities to be granted by the Bank to Tailings Treatment.
13.A rehabilitation guarantee was required by the New South Wales Department of Mines to cover any rehabilitation which was not completed by Tailings Treatment at the end of the project. The Bank agreed to provide a bank guarantee to cover such rehabilitation. The amount of such rehabilitation guarantee was $149,000. Young stated that the provision by me of the Portland titles as security for the purposes of the rehabilitation guarantee was also sufficient to cover my commitment under the purported guarantee and/or the mortgage.
14.Young also told us that there would be no need for any increase in the interest rate from what it was initially. He said that increasing the interest rate would not help anyone.
15.Based on what Young had told us, we each entered into the purported guarantees and I executed the mortgages.
16.Based upon what we had been told by Young we assumed and expected that the Bank would allow the realisation of the assets of Tailings Treatment to occur without the need to enforce the purported guarantees. Contrary to what we had been told by Young, the Bank is now seeking to enforce the purported guarantees in this proceeding. It has also sought to enforce the purported guarantees without seeking to realise the assets of Tailings Treatment.
17.The Bank has also purported to charge a rate of interest in excess of what the initial interest rate was.
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19.In or about December 1997 the Bank, through its area manager Young, informed the Defendants that it had agreed to our proposal for Hillgrove Gold NL ('Hillgrove Gold') to lease the plant and equipment owned by Tailings Treatment and remove the same to its tailings treatment operation at Hillgrove, NSW, for a monthly rental of $25,000 per month until the loan to Tailings Treatment was paid in full ('the Hillgrove agreement'). This agreement was made by Young orally in discussions held at the Bank's regional office at 14 King Street, Bendigo.
20.By reason of the agreement referred to, Wright and myself assumed or expected that the Bank would not seek to enforce the purported guarantees but would permit the Hillgrove agreement to be effectuated.
21.Although there has been some delay in proceeding with the Hillgrove agreement by reason of delays experienced by Hillgrove in commencement of its operation, Hillgrove is still willing to lease the plant and equipment."
I deal first with what the second defendant swore that Young told him and the third defendant in or about February 1996 and assume for present purposes that his account of what was said is accurate.
In my opinion whatever Young said to the second and third defendants in or about February 1996 concerning the facility then being made available to Tailings Treatment can have little or no relevance to the overdraft of $500,000 made available to Tailings Treatment in December 1998.
Even if the plaintiff had informed the second and third defendants in February 1998 that they should not worry about signing the guarantees as they were only a formality, such a statement could not be construed as a representation that the plaintiff would not enforce the guarantees if the need to do so arose let alone be described as untrue, false and/or misleading.
As to the complaint concerning the interest rate on the earlier facility, I simply point out that there is no claim in this action concerning the 1996 facility.
It is not to the point that the second and third defendants assumed and expected that the Bank would realise the assets of Tailings Treatment before taking action against them under the guarantees. The plaintiff made no representation to them to that effect and is entitled to pursue the second and third defendants in relation to the outstanding debt.
As to the broad allegation relating to the interest rate charged by the plaintiff I simply say that there is no evidence to that effect.
As with most bank guarantees, each of the guarantees in this case contain a clause to the effect that a statement in writing made up from the books of the plaintiff and signed by an authorised officer of the plaintiff of the amount due or owing of the moneys secured by the guarantee shall be prima facie evidence that such amount is due or owing. The plaintiff has produced, and relies upon, such a statement.
The second and third defendants contend that by allowing the second defendant to discharge the mortgages over the Bridgewater land all defendants were discharged from their liability under the overdraft agreement.
In my opinion that contention simply has no merit.
A creditor is entitled to release part of its security if a debtor repays to it a part of the moneys the debtor borrowed In the absence of a specific agreement to that effect the mere repayment of part of a loan in exchange for the release of part of the security held by the lender does not release the debtor from his obligation to repay the balance of the loan.
In his affidavits filed in opposition to the plaintiff's application the second defendant has sworn on more than one occasion that the guarantees in this case were not given by the second and third defendants to the plaintiff but were in fact given to the Commonwealth Development Bank of Australia.
They were not. See exhibits "KL3" and "KL4" to the affidavit of Kathleen Ledney sworn 9 August 2000. They were given to the Commonwealth Bank of Australia ACN 123 123 124.
The ACN number of the Commonwealth Bank of Australia is 123 123 124. See exhibit "KL1" of Ledney's affidavit of 9 August.
A number of other matters was raised by counsel for the second and third defendants during the course of his submissions. I shall enumerate them as I deal with them.
1. Kathleen Ledney swore two affidavits on behalf of the plaintiff. In the first affidavit her surname is spelt Ledney – in the second it is spelt Ledeney. Because of the discrepancy the affidavit should not be received in evidence.
It is clear from an examination of the deponent's signature that both affidavits were made by the same person. In my opinion the discrepancy does not render them inadmissible.
2. In paragraph 7 of her affidavit of 9 August Ledney has sworn that the letters of acknowledgement to which I earlier referred were dated 5 January 1991 when in fact they were dated 5 January 1999. In the light of that error the letters cannot be relied upon.
In my opinion they can. The second and third defendants have not challenged the fact that they signed the acknowledgements on 5 January 1999.
3. That having regard to the original pleading in paragraphs 6 and 7 of the plaintiff's statement of claim and the amendments subsequently made to the paragraphs the plaintiff should have been required to seek leave to make a fresh application for summary judgment rather than have pursued its appeal.
I disagree. The amendments were necessary to enable the statement of claim to accord with the undisputed facts. A new cause of action was not raised by the amendments nor were the defendants taken by surprise by them. In my opinion it was open to the plaintiff to pursue the matter by way of appeal.
If one looks at the defendants' amended defence numerous allegations are made concerning the execution of the two guarantees. The matters were not pursued during the hearing of the appeal and properly so. They are baseless.
In my opinion it is abundantly clear that the second and third defendants have no defence to the plaintiff's claim and are doing no more than attempting to delay the inevitable. If they did have any defence why did they sign the acknowledgement they did on 1 January 1999.
The appeal will be allowed.
Paragraphs 2, 4 and 5 of the Master's order of 14 November 2000 are set aside.
There will be judgment for the plaintiff against the second and third defendants for the amount of $637,082.56.
I order that the second and third defendants pay the plaintiff's costs of the proceeding including the costs of this appeal.
Stay of 30 days.
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