DJO Enterprises Pty Ltd v Premier Photo Imports International Pty Ltd

[2013] VCC 1820

IN THE COUNTY COURT OF VICTORIA Revised
(Not) Restricted

AT MELBOURNE

COMMERCIAL LIST
GENERAL DIVISION

Case No. CI-13-03610

DJO ENTERPRISES PTY LTD	Plaintiff
v.
PREMIER PHOTO IMPORTS INTERNATIONAL PTY LTD & ORS	Defendants

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	22 November 2013
DATE OF JUDGMENT:	27 November 2013
CASE MAY BE CITED AS:	DJO Enterprises Pty Ltd v. Premier Photo Imports International Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2013] VCC 1820

REASONS FOR JUDGMENT

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Catchwords:             Practice and procedure – Summary judgment application – Guarantor of loan agreement – Alleged repayment of loan.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr L. Magowan	Koornang Legal Services
For the First and Second Defendants	No appearance
For the Third Defendant	Ms P. Thomson in person
For the Fourth Defendant	No appearance

HIS HONOUR:

1The plaintiff seeks judgment in the proceeding:

a.against the first and second defendants, in default of appearance;

b.against the third defendant, as summary judgment;

c.against the fourth defendant, upon his trustee in bankruptcy indicating he does not oppose the relief sought by the plaintiff.

2The plaintiff also seeks interlocutory relief to restrain the second defendant from paying money to the third defendant, as a mortgagee, upon settlement of the sale of a property in Forest Hills, Victoria.

3The plaintiff sues the first, third and fourth defendants pursuant to a loan deed dated 13 December 2007. The plaintiff lent the first defendant $300,000 repayable by seven monthly instalments from 14 February 2008, with interest of 25% per annum and default interest of 30% per annum. The third and fourth defendants guaranteed the first defendant’s obligations under the loan deed and charged two properties in Mermaid Waters, Queensland as security. According to an affidavit sworn following the hearing of the application, it appears that one of the Mermaid Waters properties was sold in 2009.

4By a further deed dated 16 December 2009, the second defendant became a guarantor of the obligations of the first defendant to the plaintiff under the earlier loan deed and provided additional security by way of a mortgage over the property in Forest Hills. The plaintiff claims that as at 22 November 2013, the amount of the principal and interest owing pursuant to the loan deed dated 13 December 2007 was $610,160.36.

5The plaintiff claims that certain errors in the loan deed should be rectified to reflect the intention of the parties, or alternatively the Court should declare that these errors were corrected by amendment to the deed, pursuant to the plaintiff’s exercise of the powers granted to it by clause 4.6 of the deed appointing it “the true and lawful of the Guarantor while any part of the monies hereby secured remain owing”. The plaintiff in its amended statement of claim alleged that, by the pleading, it had amended the Loan Deed “to correct drafting errors”.

Claims against the first, second and fourth defendants

6The plaintiff should have judgment against the first, second and fourth defendants for the following relief:

a.a declaration that the loan deed dated 13 December 2007 be rectified so that:

i.clause 1.1 refers to “Item 3” rather than “Item 4”, and;

ii.clauses 4.3 and 4.4 refer to the “Guarantor” rather than the “Borrower”;

b.the first, second and fourth defendants must pay to the plaintiff the sum of $610,160.36;

7Against the fourth defendant, as guarantor; there shall also be judgment for possession of the property described in Queensland Certificate of Title 15951222, being more commonly known as Unit 2, 44 Oceanic Drive, Mermaid Waters, in the State of Queensland.

8It is clear from the terms of the loan deed that rectification is required. Clause 1.1 commences, “The Lender has advanced the sum specified in Item 4 of the Schedule…”. In the Schedule, Item 3 is, “The Loan Amount: $300,000” and Item 4 is, “The Guarantor: VAHE APAKIAN and PAMELA ANNE”. The intention of the parties was obviously that clause 1.1 should refer to “Item 3” and not “Item 4”.

9Clause 4.3 provides that, “An additional security for the due and punctual payment of the Monies Hereby Secured and the due and punctual performance and observance of the terms of this Deed, the Borrower hereby charged in favour of the Lender all of the Borrower’s right title and interest in and to the property specified in Item 8 of the Schedule (“The Charged Property”) and all property hereafter to be held of acquired by the Borrower in substitution or replacement of the charged property”.

10Clause 4.4 provides that, “The Borrower agrees to execute a Mortgage in the form specified by the Lender over all of the Charged Property in favour of the Lender”.

11At the time of the execution of the Loan Deed, the Guarantors, and not the Borrower, were the registered proprietors of the “property specified in Item 8 of the Schedule”. The three references to “Borrower” in clause 4.3 and the single reference in clause 4.4 should refer to “Guarantors”. There was a “mistake” in the document which should be rectified.

12I accept that the schedule attached to the amended statement of claim, as updated by figures exhibited to a supplementary affidavit filed in the application, reflects the amount owing to the plaintiff under the Loan Deed.

13Clause 1.2 of the Loan Deed defines “the Monies Hereby Secured” as “the Principal together with any outstanding interest, charges and costs”. The plaintiff seeks an order for payment of “costs fixed at $34,823.45”. I do not propose to fix the costs of the plaintiff in the proceeding as part of the “monies owing” under the Loan Deed. I propose to order that the first, second and fourth defendants pay the plaintiff’s costs of the proceeding, including any reserved costs and the costs of the plaintiff’s summons filed 1 November 2013 and the hearings on 22 and 27 November 2013, to be assessed by the Costs Court in default of agreement.

Claims against the third defendant

14The third defendant, Pamela Anne Thomson, denied that the plaintiff was entitled to any relief against her. Ms Thomson represents herself in the proceeding. She filed a defence on 23 August 2013 and an affidavit in response to the plaintiff’s summary judgment application on 21 November 2013.

15      The matters of defence in those documents were as follows:

a.Ms Thomson was not involved in discussions with Superior Steel Products Pty Ltd (the name by which the plaintiff was known between 10 March 1999 and 6 April 2009) in relation to the loan of monies from that company, or with a related company, Fifth Smurf Nominees Pty Ltd;

b.Ms Thomson has never been a director of the first defendant. Currently, she appears to hold 10,000 of 33,333 Class B shares and 90,000 of 300,000 ordinary shares in the company. The fourth defendant was the sole director of the company and is currently listed as the holder of 23,333 Class B shares and 60,001 ordinary shares. The second defendant holds 149,999 ordinary shares;

c.Ms Thomson did not refer in her defence or affidavit to having signed the Loan Deed. In submissions, she admitted that the document bore her signature. She stated, although this matter was not in her defence or affidavit, that she was only shown the page of the Deed she signed and was never given a copy of the document;

d.all monies owing to either Fifth Smurf Nominees Pty Ltd or Superior Steel Products Pty Ltd “had been repaid”;

e.the repayments were made by Mr Apakian writing a cheque to the appropriate company; at first, Fifth Smurf Nominees Pty Ltd and later, Superior Steel Products Pty Ltd. Mr Apakian then went to the bank and used the cheque to obtain cash. This was placed in a sealed envelope and delivered to “Danny” (Mr David “Danny” Oberklajd) on behalf of the two companies. Ms Thomson had herself delivered the envelopes to Danny on two occasions, although she said that the envelopes were sealed and she did not know how much cash the envelopes contained;

f.in her affidavit, Ms Thomson referred to payments made to the two companies of $508,184.58, between May 2004 and September 2007, of which $135,959 was in cash “against loan documents totalling $270,000”;

g.further, from July 2007 to 13 August 2010, payments were made to Superior Steel Products Pty Ltd of $539,068; $263,708 by electronic transfer, $135,360 by cheque and $140,000 “to Mr Danny Oberklajd personally” (presumably in cash);

h.the information in paragraphs (f) and (g) is derived from certain “documents” Ms Thomson said that she had “since seen” and of which she had “been given copies”. Ms Thomson exhibited a number of documents without stating their source. There is a three page document; the first page is headed “Fifth Smurf cheques” and has a total at the foot of the page of $508,184.58; the second page is headed “Transfers to Superior Steel Products Super Fund” and has a total at the foot of $263,708; the third page has a heading “Superior Steel Products” with cheques listed totalling $135,360 and a heading “Danny Oberklajd” with two cheques listed totalling $140,000, and a total at the foot of the page (apparently for pages 2 and 3) of $539,068;

i.exhibited also are three “agreements” between the first defendant and Fifth Smurf Nominees Pty Ltd acknowledging loans of: $150,000 with the first repayment on 20 January 2006, $60,000 with the first repayment on 10 August 2006 and $60,000 with the first repayment on 30 September 2006. Only the first “agreement” is signed, apparently by Mr Apakian and Mr Oberklajd;

j.the affidavit exhibits 9 pages of 64 photocopy cheque butts. The payees are “Superior Super Fund” or similar names, “Fifth Smurf” and “D. Oberklajd”. Some butts have the notations “stock”, “wages” or “repay loan”;

k.the photocopy cheque butts, where Superior Steel Products Pty Ltd is the payee, include five cheque butts totalling $141,000. These include four of the five cheques on the third page of the summary lists under the heading “Superior Steel Products”. The fifth cheque, no. 4023 dated 3 August 2007, is shown on the cheque butt as payable to “Fifty Smurf Nominees”. The only other cheque butt payable to “Superior Superannuation Fund” is no. 4015 dated 13 July 2007 for $11,000, which is shown on the first page of the summary list under the heading “Fifth Smurf Cheques”;

l.only two of the four cheques on the third page, no. 4138 dated 15 February 2008 for $30,000 and no. 4359 dated 5 June 2009 for $20,000, post date the Loan Deed advances. Both of these payments are shown as “credits” (or payments received and deducted) in the calculation of the amount owing to the plaintiff in the schedule to the amended statement of claim and the exhibit to the supplementary affidavit;

m.there are five cheque butts where the payee is “D. Oberklajd”. However, one cheque butt (no. 4014) is photocopied twice. The four cheques total $201,225 and cover the period May 2005 to November 2007. This is prior to 13 December 2007, the date of the Loan Deed. Two cheques (both dated 19 November 2007) post-date 14 November 2007, the date in the schedule to the Loan Deed, stated as “The Loan Date” for the advance of the $300,000. The two earlier cheques are included on the first summary list page under the hearing “Fifth Smurf Cheques”, and the other two cheques (dated 19 November 2007) are on the third page under the heading “Danny Oberklajd”;

n.Ms Thomson said that she was told that the “loan documents” prepared by Superior Steel Products Pty Ltd, “would be ‘a Floating Loan Agreement’ for a ‘continuing loan’ if and when the need arose, up to an amount of $300,000”. The source of this information is not stated;

o.Ms Thomson said that she is “not aware of any funding received in that amount”. Clause 1.1 of the Loan Deed records that, “The Lender has advanced the sum specified in Item 4 [ie. Item 3] of the Schedule [specified as $300,000]…on the date specified in Item 5 of the Schedule [specified as ‘14^th day of November 2007’]”. The calculation of the amount owing shows that $120,000 was “drawndown” on 19 November 2007 and $180,000 was “drawndown” on 20 November 2007.

Assessment of matters of defence raised by the third defendant

16      The following findings and conclusions can be made:

a.Ms Thomson executed the Loan Deed dated 13 December 2007 as a guarantor;

b.at the time she was, and apparently still is, a significant shareholder in the Borrower, and, as she said, she was “there to run the business”;

c.the plaintiff was known as Superior Steel Products Pty Ltd between 10 March 1999 and 6 April 2009;

d.Fifth Smurf Nominees Pty Ltd appears to be a completely separate entity;

e.loans from Fifth Smurf Nominees Pty Ltd to the first defendant and payments by the first defendant to Fifth Smurf Nominees Pty Ltd would appear to be irrelevant to the matters involved in this proceeding;

f.on 19 and 20 November 2007, Superior Steel Products Pty Ltd advanced sums totalling $300,000 to the first defendant;

g.the first defendant made some repayments of the loan advances which are recorded in the calculation of the claim made by the plaintiff;

h.substantial interest charges have been incurred at the default rate of 30% per annum calculated monthly on the amount outstanding;

i.the sum of $610,160.36 was owing by the first defendant to the plaintiff pursuant to the Loan Deed on 22 November 2013;

j.Ms Thomson as a guarantor of the obligations of the first defendant is liable to pay the amount outstanding on demand and is separately obliged under the Loan Deed to indemnify the plaintiff;

k.Ms Thomson’s and the fourth defendant’s right, title and interest in the two Mermaid Waters properties was provided as security for the due performance of the obligations under the Loan Deed. One of these properties was sold in 2009.

17In the circumstances, it is appropriate that there be judgment for the plaintiff against the third defendant as follows:

a.a declaration that the loan deed dated 13 December 2007 be rectified so that:

i.clause 1.1 refers to “Item 3” rather than “Item 4”, and;

ii.clauses 4.3 and 4.4 refer to the “Guarantor” rather than the “Borrower”;

b.the third defendant must pay to the plaintiff the sum of $610,160.36;

c.possession of the property described in Queensland Certificate of Title 15951222, being more commonly known as Unit 2, 44 Oceanic Drive, Mermaid Waters, in the State of Queensland;

d.the third defendant must pay the plaintiff’s costs of the proceeding, including any reserved costs and the costs of the plaintiff’s summons filed 1 November 2013 and the hearings on 22 and 27 November 2013, to be assessed by the Costs Court in default of agreement.

Injunctive relief in respect of the Forest Hills property

18The plaintiff seeks interlocutory relief in respect of a mortgage from the second defendant to the third defendant over the second defendant’s property at Forest Hills.

19The second defendant is the registered proprietor of the property at Forest Hills. The title to the property records the following “encumbrances, caveats and notices”, in the following order:

a.mortgage to St George Bank Ltd;

b.mortgage to Bailey and Spackman;

c.mortgage to Ms Thomson registered 21 June 2013;

d.caveat lodged by the Conily interests;

e.caveat lodged by the plaintiff on 21 March 2012 in respect of the mortgage arising from the deed dated 16 December 2009;

f.caveat lodged by Ms Thomson on 17 May 2013 in respect of a claim dated 3 November 2004;

g.caveat lodged by Ms Thomson’s former lawyers on 27 May 2013.

20Ms Thomson’s mortgage is dated 21 June 2013. It was lodged at the Victorian Land Registry by the fourth defendant. It records a “principal sum” of $340,000 and 10% per annum as the “rate of interest and how payable”. The mortgage was executed by the second defendant’s common seal being affixed in the presence of the directors, Mr and Mrs Apakian. In fact, Mr Apakian ceased to be a director of the second defendant on 30 May 2013, and on 21 June 2013 he became a bankrupt.

21Ms Thomson has exhibited to her affidavit four deeds of loan between Ms Thomson as lender and the first, second and fourth defendants as borrowers. The documents are in similar form. The first deed purports to be for a loan of $100,000 commencing on 30 November 2004. The deed provides that “no interest shall be payable on the loan providing that it is repaid on or before the repayment date” which is “within 30 days of demand in writing”. Pursuant to clause 6.4 of the deed, “As security for the payment of the loan and the secured money, the borrowers jointly and severely as beneficial owners charge in favour of the lenders all freehold and interests in land…which they now have or during the ­currency of this document may acquire”.

22      The other three deeds are for:

a.a loan of $100,000 commencing 24 July 2006;

b.a loan of $100,000 commencing 8 April 2006;

c.a loan of $140,000 commencing 7 July 2010.

23Ms Thomson said that the total of the loans ($440,000) was reduced by a purchase of “stock” by her, valued at $60,000. She said that in fact she was owed $360,000 and not $340,000.

24Ms Thomson has exhibited correspondence between the second defendant and the first mortgagee of the Forest Hills property, St George Bank Ltd, which shows that in February and March 2013, the second defendant was pursuing the registration of a subsequent mortgage; presumably the mortgage to Ms Thomson.

25Mr Oberklajd has exhibited a caveat to his affidavit in respect of Certificate of Title Volume 10998 Folio 190. He says that these are the title particulars of Ms Thomson’s property (presumably in Carnegie), although this is not clear. The caveat was lodged in the Land Titles Office by Mr Apakian on 6 September 2013.

26The caveat records that Mrs Apakian claims “an interest as chargee…pursuant to loan agreement dated 11^th July 2012 between Pamela Anne Thomson and Linda Kay Apakian”.

27Mr Oberklajd in his affidavit says, in relation to Ms Thomson’s mortgage dated 21 June 2013, “I do not believe that the mortgage supports a genuine loan. I have never been informed of such a loan. I am concerned that the defendants, through the bankrupt Mr Apakian, are seeking to dissipate assets and frustrate any judgment for the plaintiff in this proceeding”. The plaintiff was unable to register its own mortgage, granted by the second defendant by the deed dated 16 December 2009, in priority to Ms Thomson’s mortgage.

28Settlement of the sale of the second defendant’s property at Forest Hills is due to take place on 16 December 2013. The plaintiff is prepared to give an undertaking that it will bring a proceeding seeking an order that its mortgage should have priority over whatever rights Ms Thomson may have pursuant to her mortgage. The plaintiff is prepared to give an appropriate undertaking as to damages if interlocutory relief is granted.

29I accept that, in the circumstances, the plaintiff has established there is a triable issue as to whether its mortgage pursuant to the 16 December 2009 deed should take priority over the mortgage claimed by Ms Thomson. I consider that there is a significant risk that unless the second and third defendants are appropriately restrained, there will be a distribution of part of the proceeds of sale of the Forest Hills property to the third defendant and a likely dissipation of those monies to frustrate the plaintiff’s entitlement to execute on the judgment it will obtain in the proceeding.

30Accordingly, I will, upon appropriate undertakings being given by the plaintiff as to its liability for damages and the institution of a further proceeding, grant injunctive relief in the following terms:

a.On or before 4pm on 5 December 2013, the plaintiff must institute a proceeding against the second and third defendants seeking a declaration that the plaintiff’s mortgage from the second defendant, granted pursuant to the deed dated 16 December 2009, has priority over the third defendant’s mortgage from the second defendant dated 21 June 2010, both in relation to the Forest Hills property.

b.The plaintiff have leave to bring the proposed further proceeding by amendment, in the present action.

c.Until the hearing and determination of the proceeding to be instituted, or further order, the second defendant shall, upon settlement of the sale of the Forest Hills property, forthwith pay to the Registrar of the County Court the net proceeds of sale (after the discharge of the first and second registered mortgages, payment of the sale expenses and allowance of proper adjustments at settlement), such monies to be held in trust by the Registrar until further order of the Court.

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Certificate

I certify that these 10 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 27 November 2013.

Dated:      27 November 2013

Philippa Gilkes 

Associate to His Honour Judge Anderson