Dumayne Property Group Pty Ltd v Balanced Securities Ltd

[2016] VCC 1387

IN THE COUNTY COURT OF VICTORIA Revised
(Not) Restricted
Suitable for publication

AT MELBOURNE

COMMERCIAL DIVISION
GENERAL CASES LIST

Case No. CI-15-00798

DUMAYNE PROPERTY GROUP PTY LTD	Plaintiff
v.
BALANCED SECURITIES LTD	Defendant

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	20 September 2016
DATE OF JUDGMENT:	20 September 2016 (revised 21 September 2016)
CASE MAY BE CITED AS:	Dumayne Property Group Pty Ltd v. Balanced Securities Ltd
MEDIUM NEUTRAL CITATION:	[2016] VCC 1387

REASONS FOR JUDGMENT

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Catchwords:              Practice and procedure – Preliminary questions determined against defendant – Application for leave to appeal lodged by defendant – Subsequent summary judgment application consistent with decision on preliminary questions – Whether application should be adjourned until after the appeal process concludes or be determined on the presumption that the preliminary questions were correctly answered – Sections 61 and 63 Civil Procedure Act 2010 (Vic).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J. Tsalanidis of Counsel	Kalus Kenny Intelex
For the Defendant	Dr O. Bigos of Counsel	Thomson Geer

HIS HONOUR:

1Preliminary questions were determined in this proceeding by order made by Her Honour Judge Kennedy (as she then was) on 24 May 2016. The defendant (“Balanced”) has applied for leave to appeal the decision. The plaintiff (“Dumayne”) now seeks summary judgment against Balanced for sums totalling $521,509.05 which it says are recoverable by it on the basis of the decision of Judge Kennedy.

2The application for summary judgment is opposed by Balanced on two grounds:

a.Balanced, by seeking leave to appeal, has raised matters which demonstrate that it is not “fanciful” that the decision of Judge Kennedy might be reversed;

b.Balanced has by its counterclaim claimed for amounts totalling $404,062.50 which are open to it, even if the decision of Judge Kennedy were to stand.

3The dispute between the parties arose out of the provision of a $7.5m loan facility to Dumayne for a period of 18 months to finance a property development in Toorak. Dumayne executed a set of documents evidencing the loan facility on various dates between 24 January 2012 and 2 February 2012. The documents included an undated executed “facility agreement’ (“the first facility agreement”).

4No advances were made pursuant to the first facility agreement. Although it had been anticipated that advances would be made in January 2012, settlement was delayed. The first loan facility provided for the “capitalisation of interest”. In late February 2012, Dumayne realised it needed to reduce the capitalised interest amount, so that it would have more funds immediately available for other purposes. It proposed to Balanced that it save $300,000 in interest by reducing the term of the loan to 15 months.

5This was agreed by the parties and further documents were executed including a “facility agreement” dated 28 March 2012 (“the second facility agreement”).

6The first facility agreement provided as follows:

“accommodation period”	18 months after the earlier of “7 days after the despatch of mortgage documents to the borrower” or any advance, or as agreed later in writing
“interest allowance”	$1.2m
“repayment date”	the date of expiry of the accommodation period or as agreed.

7The second facility agreement provided as follows:

“accommodation period”	15 months after…[as in the first facility agreement]
“interest allowance”	$900,000
“repayment date”	[as in the first facility agreement]

8The preliminary questions that Judge Kennedy was to decide were:

“a.       what was the ‘Repayment Date’ (as defined) of the loan (Loan) made by Balanced … to Dumayne… which was repayable in 2013?

b.was the Loan repaid by the ‘Repayment Date’?”

Dumayne contended that the “Repayment Date” was 27 June 2013 and Balanced that the “Repayment Date” was 20 April 2013, apparently being 15 months after 7 days after Balanced’s solicitors had sent the bundle of documentation (including mortgage documents) on 13 January 2013 for the first facility agreement. This was also said to be the date upon which “funds were committed to the loan even if settlement was delayed”.

9Dumayne submitted before Judge Kennedy that “the second facility agreement replaced the first facility agreement”. Balanced submitted “there was only ever one ‘finance transaction’ [and] that the only amendments made were to the Accommodation Period (of 15 months) and the Interest Allowance (of $900,000)”. Judge Kennedy accepted Dumayne’s submission and determined that the “Repayment Date” was 27 June 2013, as it had contended.

10Judge Kennedy considered that the “structure” of the second facility “is such that it purports to wholly replace the first facility agreement… Thus rather than providing for discrete amendments (which would need to be read in conjunction with the first facility agreement) it embodies a wholly new consolidated version” (paragraph 57).

11Judge Kennedy referred to other provisions in the second facility agreement, including the recitals, certain clauses and definitions which were “consistent with a wholesale replacement”. These provisions included clause 21.4 of the second facility agreement which provided that it was “the entire complete and exclusive agreement and understanding between the parties hereto relating to the subject matter of this agreement”.

12Judge Kennedy rejected the conclusion that followed from Balanced’s submissions that, “if the first facility agreement is left as operative, there would be two agreements providing for a facility of $7.5 million”. Judge Kennedy said that this “was clearly not intended by the parties” (paragraph 60).

13Judge Kennedy said that “the evident intention of the parties was for Balanced to be able to sue on the March agreement as a ‘stand-alone’ without any recourse to the first facility agreement. Put another way, there was nothing left in the (original) first facility agreement which was not wholly covered by the second facility agreement” (paragraph 60).

14Judge Kennedy found that the loan had been repaid by Dumayne by the Repayment Date of 27 June 2013. As a consequence of those findings, Dumayne now seeks summary judgment for four sums totalling $521,509.05. Those sums are as follows:

Rollover fee	$111,499.36
Loan discharge fee	$252,458.69
Additional interest charged	$107,551.00
Security for Balanced’s future legal fees	$50,000.00

15Dumayne’s counsel, Mr Tsalanidis took me through the proofs of each of these claims. There is no doubt that each of the sums was paid by Dumayne and that they were only paid so that Balanced would release Dumayne from the loan debt.

16The rollover fee of $111,499.36 was charged because Balanced asserted that the loan was required to be repaid on 20 April 2013. Therefore, as Dumayne was in default, a “rollover fee” was payable in accordance with clause 4.4(c) “of 1.5% (plus GST) of the principal outstanding”.

17Similarly, Balanced claimed $252,458.69 “interest on the principal outstanding at the repayment date for 2 months at the higher rate” (called by Dumayne in its claim as an “additional fee on discharge”) pursuant to clause 4.4(b) and, further interest at the higher rate (the acceptable rate of 14.95% plus 7%) pursuant to clause 4.4(a), which increased the interest payable by $107,551 because the higher rate was charged.

18Balanced also required a payment of $50,000 as security for its future legal costs pursuant to clause 6.2(a)(ii) for its “costs, expenses and outgoings of the Lender of and incidental to…any actual or contemplated enforcement of this agreement”.

19Dr Bigos, for Balanced, whilst not advancing any argument on the quantum of the first three claims, submitted that the sum of $50,000 was payable pursuant to the first facility agreement and related to the enforcement of recovery of the amounts sought by Balanced in its counterclaim.

20The sums sought by the counterclaim were the following amounts, claimed pursuant to the first facility agreement:

a.$123,750.00 as a loan approval fee of 1.5% (plus GST) of the principal outstanding of $7.5m pursuant to clause 4.4(c);

b.$280,312.50 as 3 months interest payable pursuant to clause 4.6, in addition to any interest paid in advance.

21The plaintiff paid both these sums, the first as the “rollover fee” and the second as interest (although not as “additional” interest) pursuant to the second facility agreement (although not as interest “in addition to any interest paid in advance”).

22If Judge Kennedy’s decision stands, inevitably, Dumayne must recover the first three sums it claims. Dr Bigos submitted that, as an application for leave to appeal had been lodged from the decision, the Court should not entertain the summary judgment application.

23I consider, however, that I should apply the generally applicable principle that “prima facie, a successful party is entitled to the benefit of the judgment obtained below and the presumption that the judgment is correct”.

24I do not consider that it would be appropriate for me to reason that, as it is possible that Judge Kennedy’s judgment might be set aside, that therefore Balanced has a “real prospect” of defending these claims, as that phase in sections 61 and 63 of the Civil Procedure Act 2010 (Vic) has been interpreted by the Court of Appeal.

25I was informed by the parties that last week Balanced initiated an application to the Court of Appeal for an order staying execution on Judge Kennedy’s order. At present, there is nothing to stay as Judge Kennedy simply answered two questions. Dr Bigos said that the stay application was made in response to the present application for summary judgment. If that be the case, it is my view that, if the inevitable result of the decision of Judge Kennedy is that summary judgment should be given for at least the first three claims, judgment should be entered. The Court of Appeal will then be able to determine whether that judgment should be stayed until the hearing and determination of the appeal.

26The second submission of Dr Bigos was that there was a counterclaim for $404,062.50 (or a set off of that sum) based on entitlements pursuant to the first facility agreement. Dr Bigos said that these claims were “real” and not “fanciful” and were available “regardless of the appeal”. I do not accept this submission. The entitlement of Balanced to sue on the first facility agreement is contrary to the path of reasoning which is the basis for Judge Kennedy’s decision.

27Dr Bigos submitted that Judge Kennedy had not decided that no party had any accrued rights under the first facility agreement. He pointed to footnote 4 to Judge Kennedy’s reasons for judgment where she noted, “I have also presumed that the first facility agreement was otherwise binding on the basis suggested by Balanced”.

28That comment was, however, made in the context of considering the identification of “which agreement was operative”. I have already quoted passages from Her Honour’s conclusions in relation to this issue. Judge Kennedy said that the second facility agreement was to “wholly replace” the first facility agreement and was to “stand-alone without any recourse to the first facility agreement” and “there was nothing in the (original) first facility agreement which was not wholly covered by the second facility agreement”.

29In these circumstances, in the light of Judge Kennedy’s judgment on the preliminary question, the counterclaim advanced by the defendant has no real prospect of success. This conclusion has equal application to the argument advanced in defence of the claim for $50,000. Accordingly, the plaintiff shall be entitled to enter judgment. Any such judgment shall be stayed until the Court of Appeal has determined the application made to it for a stay.

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Certificate

I certify that these 5 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 20 September 2016 and revised on 21 September 2016.

Dated: 21 September 2016

Mi-Lin Chen Yi Mei

Associate to His Honour Judge Anderson