Ezy Global v Basil Street - [2020] VCC 1778

IN THE COUNTY COURT OF VICTORIA

AT Melbourne

COMMERCIAL DIVISION
General List

Revised
(Not) Restricted
Suitable for Publication

Case No. CI-19-05432

Ezy Global Ltd	Plaintiff
v
Basil Street Property Pty Ltd (ACN 615 567 498) as trustee for the Basil Street Property Trust (and others in the schedule attached)	Defendants

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JUDGE:	HER HONOUR JUDGE MARKS
WHERE HELD:	Melbourne
DATE OF HEARING:	10 September 2020
DATE OF JUDGMENT:	16 November 2020
CASE MAY BE CITED AS:	Ezy Global v Basil Street
MEDIUM NEUTRAL CITATION:	[2020] VCC 1778

REASONS FOR RULING
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PRACTICE AND PROCEDURE – SUMMARY JUDGMENT APPLICATION – Summary judgment sought by plaintiffs on claim and counterclaim – s61 Civil Procedure Act 2010 (Vic) – Whether defence and counterclaim have no real prospects of success – whether ‘cuttlefish’ defence as described by Asche CJ in Civil & Civic Pty Ltd v Pioneer Concrete (NT) Pty Ltd (1991) 1 NTLR 43, 53 – whether to exercise discretion to allow matter to go to trial under s64 Civil Procedure Act2010 (Vic) – summary judgment not granted

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APPEARANCES:	Counsel	Solicitors
For the plaintiff	M J Galvin QC with L P Wirth	Ascot Solicitors
For the first, second, third, fifth, seventh and ninth defendants	C H Truong QC with C J Hender	Dentons Lawyers

SCHEDULE OF PARTIES

Ezy Global Ltd

Plaintiff

and

Basil Street Property Pty Ltd

(ACN 615 567 498) as trustee of the Basil Street Property Trust

First Defendant

and

Miller Crescent Pty Ltd

(ACN 615 853 202) as trustee of the Miller Street Property Trust Second Defendant

and

504 Glenferrie Road Pty Ltd

(ACN 623 092 526) as trustee of the Glenferrie Road Property Trust Third Defendant

and

Vishal Patel

Fourth Defendant

and

Vijan Patel

Fifth Defendant

and

Kinjal Zaveri Sixth Defendant

and

Pratik Sarsavadia Seventh Defendant

and

Varun Zaveri Eighth Defendant

and

Pentagon Group Australia Pty Ltd

(ACN 608 477 041) Ninth Defendant

Contents

Introduction
The written loan agreements

Basil agreement
Miller agreement
Glenferrie agreement

Analysis
Next steps

HER HONOUR:

Introduction

Ezy Global Limited (Ezy) seeks summary judgment both on its claim, and on the counterclaim. It supports its claim with an affidavit sworn 15 May 2020 by one of its directors, Vishal Vora (Vora).
There are nine defendants. The corporate defendants signed the loan agreements Ezy relies on in its claim. Those four defendants are the first defendant, Basil Street Property Pty Ltd (Basil); the second defendant, Miller Crescent Pty Ltd (Miller); the third defendant, 504 Glenferrie Road Pty Ltd (Glenferrie); and the ninth defendant, Pentagon Group Australia Pty Ltd (Pentagon).
The other five defendants were the guarantors of the loan agreements. Those five are the fourth defendant, Vishal Patel (Vishal); the fifth defendant, Vijan Patel (Vijan); the sixth defendant, Kinjal Zaveri (Kinjal); the seventh defendant, Pratik Sarsavadia (Pratik); and the eighth defendant, Varun Zaveri (Varun).
Vishal, Kinjal and Varun were not represented at the summary judgment hearing, and did not file submissions. Ezy was required to establish its entitlement to summary judgment against them in any event. Where I refer below to what ‘the defendants’ say, I am referring to the allegations in the amended defence and counterclaim, which was filed for all defendants, and to arguments put in writing and orally by counsel who appeared for the other six defendants.
The defendants say that summary judgment should not be granted on either the claim or counterclaim.
The benefit of summary judgment is that it is far quicker and less expensive than having a trial. However, it must be appropriate. It is not to be lightly awarded. If the defendants’ defence and counterclaim have real prospects of success (as opposed to being fanciful) then they are entitled to have their case heard at trial, with all relevant evidence put forward and tested in cross examination. So the question I need to decide is - do the defendants’ defences, and the counterclaim, have any real prospects of success? This is the test to be applied in considering if summary judgment should be given: Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27 at [29].
Ezy has a relatively straightforward case, set out in the amended statement of claim. It alleges that it lent money in three separate written loan agreements to Basil, Miller, and Glenferrie (and/or Pentagon) and that the individual defendants guaranteed those loans. The loans each related to separate property developments. It says that the loans were each for 18 months; that time has expired; the money loaned, and interest is due. It has an alternative position in relation to $95,000 of the money advanced to Miller: that if that money was not lent under the written Miller agreement it was still a loan, and is due.
The defendants say that the basis on which Ezy advanced money, and the reality behind those written loan agreements is much more complex than Ezy claims. The defendants allege that Ezy and Pentagon had an overriding property development agreement, and/or were in a partnership. They say that Ezy and Pentagon agreed to ‘undertake as partners one or more property development projects together’; that three ‘special purpose vehicles’ (Basil, Miller and Glenferrie) were set up to hold three different parcels of land and develop them; that the money Ezy advanced to the corporate defendants was actually by way of equity investment rather than loans. They say Ezy and Pentagon agreed that each would contribute equally to the costs, and profits, of each project, and they would equally share the losses in each project.
They allege that the three written loan agreements were shams, designed to disguise the true agreement between Ezy and Pentagon, entered into for ‘audit purposes’, and designed to allow Ezy to invest in Australia without needing to satisfy the requirements of the Foreign Investment Review Board, or have its investment attract stamp duty and additional land tax or other taxes. They allege that the parties to them intended that each of those loan agreements not create the legal rights and obligations they gave the appearance of creating, and that the loan agreements are unenforceable.
Alternatively, the defendants argue that if money was loaned, it is not yet due to be repaid. They say that it was agreed that Ezy would be paid after the relevant properties had been developed and net profits established. That time has not yet come.
They argue that on the proper construction of the repayment clause of the loan agreements, Ezy is not entitled to be repaid until completion of each development, and subsequent sale of the relevant property.
Alternatively, the defendants say that Ezy is estopped from enforcing the terms of the loan agreement and demanding repayment prior to the completion and subsequent sale of the relevant properties. They say that Ezy told the corporate defendants that the loans to them only needed to be repaid after the properties were developed and profits made.
The amended counterclaim – brought by Pentagon alone – picks up on matters pleaded in the amended defence. Pentagon seeks an order that the alleged partnership between it and Ezy be dissolved and an accounting done; a declaration Ezy is jointly and severally liable for all debts and obligations of the partnership; and a declaration that partnership property be applied to pay for debts and liabilities of the partnership. It says that further, or alternatively, to its partnership claims, that it has suffered loss and damage as a result of Ezy breaching the property development agreement. It seeks to have Ezy contribute $400,000 as a result of the property development agreement.
As mentioned above, Vora swore an affidavit for Ezy. The defendants rely on affidavits of Vijan, affirmed 26 May 2020, and Pratik, affirmed 25 May 2020.
Vora’s affidavit is fairly brief, but the exhibits run to over 200 pages.
Vijan’s affidavit is 27 pages long, and has over 400 pages of exhibits. A complex history of dealings between Ezy and various defendants from 2016 to date is recounted.
Both sides filed written submissions, and made detailed oral submissions at the hearing.
Some idea of the complexity and detail of the evidence is shown by the fact that a detailed chronology provided by the defendants at the hearing is itself 16 pages long – and still does not refer to many relevant events, emails and other documents referred to in the affidavits and exhibits.
Ezy submits about the defences and counterclaim:

8. These elaborate and contrived allegations of partnership and sham transactions as bases for resisting Ezy Global’s simple debt claims were made for the first time in the Amended Defence and Counterclaim. The allegations were not pleaded in the defendants’ original defence. Nor were they ever raised previously, including in response to Ezy Global’s demands for payment. The new allegations were made after Ezy Global served its application for summary judgment.

It is true that some of the matters in the amended defence and counterclaim were first pleaded in that amendment. Others had been alluded to, but not clearly stated. However, as discussed below, there is some contemporaneous evidence which provides support for some of the allegations. The fact that they were first pleaded in the amended defence and counterclaim does not mean that it follows there is nothing to them: it is, rather, a factor to consider in weighing up whether the allegations have real prospects of success.
Ezy also submits:
9. The defendants’ new case evokes the “cuttlefish defence” described by Asche CJ in Civil & Civic Pty Ltd v Pioneer Concrete (NT) Pty Ltd [(1991) 1 NTLR 43, 53]
I do not think the mere complexity or apparent complexity of the argument should automatically shut out the plaintiff from immediate relief. He faces the sanction of costs if he is unsuccessful; but if, ultimately, he shows clearly that there is no defence there is every sensible commercial reason why the case should go no further. Again with great respect to Parker LJ, his remarks may well serve to encourage ingenious counsel to adopt what one would have to call a “cuttlefish” defence. That sagacious mollusk [sic] endeavours to confuse and defeat its enemies by pouring forth clouds of inky blackness when attacked. So, resort to a welter of authorities and referral to esoteric points of law might be employed to persuade an overworked judge that the answer is too hard to find on summary proceedings; and the defence thereby gain a much desired breathing space; at the expense of the plaintiff.
I agree with Asche CJ that ‘the mere complexity or apparent complexity of the argument’ should not automatically shut out a plaintiff from obtaining summary judgment.
However, having carefully considered the pleadings, detailed evidence and submissions in this case, I do not consider this a case where summary judgment is appropriate.

The written loan agreements

Before turning to other evidence relevant to my decision not to give summary judgment, I will refer to the three written loan agreements Ezy relies on in its claim. Each has unusual clauses as to interest, and as to repayment.

Basil agreement

The relevant defendants signed the Basil agreement in about December 2016. Basil signed as borrower; Vishal, Vijan, Kinjal and Pratik signed as guarantors.
The Basil agreement provided (clause 2.1) for $150,000 being loaned on 15 December 2016 (the Commencement Date) and $100,000 on 1 March 2017. Clause 2.2 states that ‘The Borrower must apply the Loan solely for the purpose of the development of the Property’. The Property is defined as being the property at 2 Basil Street, Dromana.
Clause 4.1 of the Basil agreement states:
Subject to clause 5, the Borrower must repay and finally discharge all Outstanding Moneys and all other amounts payable under this agreement and unpaid on the Repayment Date in accordance with this clause 4.
Clause 1.1 sets out definitions.
The definition of ‘Repayment Date’ is as follows:
Repayment Date means the latest date that the Principal Outstanding together with Interest must be repaid by the Borrower to the Lender and being upon the expiry of 18 months on and from the Commencement Date provided that the Borrower may elect at its discretion to repay earlier than the expiry of 18 months from the Commencement Date
The definition of ‘Interest’ is unusual:
Interest means the greater of:
(a)$100,000; or
(b) an amount equal to 50% of the Net Profit from the sale of the
Property.

So, interest is to be calculated as ‘the greater of’ a lump sum of $100,000, or 50% of the ‘Net Profit’ from the sale of the property. Calculating the Net Profit requires taking into account various matters associated with the development of the property, and can only be calculated after its sale:
Net Profit means the proceeds of the sale of the Property less all costs and expenses of the Borrower incurred in relation to Property including, but not limited to, the purchase price for the Property, the costs of development, taxes, fees, charges, all loans plus interests payable to any other lenders, and the Management Fee.
The ‘Management Fee’ there referred to is a fee payable to Pentagon:
Management Fee means an amount equal to 3.5% of the gross profit of the sale of the Property payable to Pentagon Group Australia for services rendered in the management of the Property.
Ezy advanced $150,000 to Basil on 14-15 December 2016, and another $200,000 on 20-21 November 2017. It claims $350,000 from Basil, which it says comprises the loan of $250,000 and interest of $100,000 (the lump sum referred to in paragraph (a) of the interest definition). On 3 July 3019, Ezy’s lawyer sent a letter demanding repayment of those sums.

Miller agreement

The relevant defendants signed the Miller agreement in about January 2017. Miller signed as borrower; and Vishal, Vijan, Kinjal and Pratik signed as guarantors.
The Miller agreement provided (clause 2.1) for $200,000 being loaned on 5 February 2017 (Commencement Date) and $150,000 on 5 May 2017. It provided at clause 2.2 that ‘The Borrower must apply the Loan solely for the purpose of the development of the Property’. The Property was defined as being the property at 5 Miller Crescent, Mount Waverley.
The Miller agreement is in much the same terms as the Basil agreement. The definitions of ‘Repayment Date’, ‘Net Profit’ and ‘Management Fee’ are the same.
There is a different lump sum referred to in paragraph (a) of the definition of ‘Interest’ – it is $105,000 (rather than $100,000, as in the Basil agreement). Otherwise the Interest definition is the same.
Ezy advanced $200,000 to Miller on about 9-10 February 2017; $125,000 on about 28-28 April 2017; and $120,000 on about 4-7 May 2018.
It pleads that it advanced $350,000 to Miller under the Miller agreement. It then pleads that Miller requested Ezy advance further funds to it for the purposes of developing the Miller property, and that it advanced an additional $95,000 on top of the $350,000 agreed to be lent under the Miller agreement. It says that this $95,000 was part of the $120,000 advanced on about 4 May 2018, and that it was either advanced under the definition of ‘Loan’ in the Miller agreement, or separately from the Miller agreement.
The ‘Loan’ definition is in Clause 1.1. It is:
Loan means the sum of $350,000 advanced or to be advanced by the Lender to the Borrower in accordance with the manner described at clause 2.1 or otherwise agreed by the parties from time to time.
Ezy claims that Miller has not repaid the outstanding sum due, being ‘as at 5 August 2018 the sum of $455,000 comprising the Loan and the Interest’. To arrive at that sum it has added the $350,000 and the lump sum amount of $105,000 in para (a) of the Interest definition. It claims in the prayer for relief in the amended statement of claim, that it is entitled to judgment for $550,000 under the Miller Agreement (this sum includes the extra $95,000 advanced in May 2018, as having been advanced under the Miller agreement). It alternatively claims the $95,000 as a separate loan, though this claim has not been replicated in the prayer for relief.

Glenferrie agreement

The Glenferrie agreement replicates some parts of the Basil and Miller agreements, but important changes have been made to particular clauses. It does not appear to have been finalised by a lawyer.
The relevant defendants signed the Glenferrie agreement in about May 2018. Pentagon signed as borrower. I note that there is an issue as to whether Glenferrie was also a borrower (alongside Pentagon), or alternatively, the borrower (instead of Pentagon). Ezy claims the borrower under the agreement was Pentagon ‘and/or’ Glenferrie. There is a confusing notation, both in the title page and the header to the agreement, stating under Pentagon’s name, ‘C/O 504 Glenferrie Road Pty Ltd…’. That same notation applies in the execution clause, which is signed by Vijan as ‘director/secretary’.
The Glenferrie agreement provided for $525,000 being loaned on 4 May 2018 (Commencement Date). It provided at clause 2.2 that ‘The Borrower must apply the Loan solely for the purpose of the development of the Property’. The Property was defined as being the property at 504 Glenferrie Road, Hawthorn.
The definition of ‘Repayment Date’ (as well as various other clauses) are the same as in the Basil and Miller agreements.
However, the ‘Interest’ definition is different to the other two agreements. The Glenferrie agreement definition is:
Interest means an amount equal to:
(a) 70% over 18 months or 15% from nett development profit

whichever is greater.
Although there is a sub-section (a), there is no sub-section (b) in the Interest definition.
‘Nett development profit’ (referred to in the ‘Interest’ definition) is not defined. There is however a definition of ‘Net Profit’. The definition of Net Profit is similar to, but not the same as the definition of ‘Net Profit’ in the Basil and Miller agreements:
Net Profit means the proceeds of the sale of the Property less all costs and expenses of the Borrower incurred in relation to Property including, but not limited to, the purchase price for the Property, the costs of development, Tax (excluding income tax), fees, charges, all loans payable to any other lenders but excluding the Management Fee.
Notable differences with the Net Profit clauses of the other agreements are that income tax is excluded as a cost to be taken into account, the loans to be taken into account are only those ‘payable to any other lenders’ and the Management Fee is also excluded as a cost to be taken into account.
But there is no definition – in this agreement – of ‘Management Fee’, although that phrase is mentioned in clause 1.1 (which is otherwise the definition section of the Glenferrie agreement), in a section which states:
Special Provision the Borrower provides confirmation that no more equity apart from this loan will be sought from the Lender. In case, the project requires further equity for any reason, the Developer shall arrange for the same
Management Fee will not be applicable on Lender’s 15% equity pool. The Lender will get paid their profit first and then Management Fee will apply on remaining 85% of the Net profit
I note the reference to the Lender’s ‘equity pool’. The phrase ‘equity pool’ is not used elsewhere in the agreement.
Unlike the other two agreements, the Glenferrie agreement has a charging clause.
Ezy advanced $525,000 on 9 May 2018. It claims $829,500 (comprising the $525,000 and $367,500 being 70% of that sum as interest) as at 4 November 2019.

Analysis

Pentagon runs an investment management business in Australia, specialising, relevantly, in residential real estate. Ezy is a Hong Kong based company in the business of importing, exporting, and trading construction materials and general household supplies. Prior to the events at issue in this case, Ezy had supplied windows, tiles and joinery to Pentagon in relation to development projects Pentagon was undertaking in Greensborough and Airport West.

Vijan is the fifth defendant, and also a director of Basil, Miller, Glenferrie and Pentagon. In his affidavit, Vijan deposes to a lengthy history of dealings with Vora (Ezy’s director) both leading up to the times money was advanced by Ezy and afterwards.
Pratik is the seventh defendant, and also a director of Basil, Miller, Glenferrie and Pentagon. In his affidavit, Pratik deposes to particular conversations he said he had with Vora, as well as other matters. I agree with the submissions made for Ezy that some of the assertions in Vijan and Pratik’s affidavits cannot be given any weight - for example, what Vijan or Pratik thought or understood as a result of things said to them. However, the affidavits also include matters which Vijan or Pratik assert was said to them in meetings by Vora. This includes references to Vora saying he wanted to be an ‘equity partner’ with Pentagon and that he wanted to be a ‘partner with Pentagon group rather than an investor’. Both Vijan and Pratik say that Vora agreed that there would be equal contributions to funding the projects and that returns would be paid at the end of the projects.
Vijan’s affidavit exhibits contemporaneous emails which go some way to supporting the defendants’ claims (as well as emails and other documents which support Ezy’s case).
There is evidence of the negotiations between the parties, and their dealings after money was advanced, which provides support for the assertions made by the defendants that the relationship between the parties was not simply one whereby Ezy lent money on the basis of the written loan agreements, and some support for the defendant’s assertions that even if the money was loaned, it is not repayable now (before the properties are developed). There is also evidence which provides some support for the estoppel claims made by the defendants.
Importantly, there are emails in evidence from Ezy’s director, Vora, which also provide, at least at first blush, some support for the allegations made by the defendants. Ezy has not put on affidavit evidence denying those assertions. If it had, such competing evidence would likely have needed to be tested at trial in any event.
On 25 November 2016, before any of the 3 written agreements were entered into, Vora wrote to Vijan attaching the business registration for Ezy in Hong Kong, and asking Vijan to ‘send me the agreement between Ezy and Pentagon - which would be the basis of our long term business relationship’. In that same email he asked for the final loan agreement document for the Basil property.
That email provides some support for the defendants’ allegations that there was a separate relationship between Ezy and Pentagon, distinct from the relationship with Basil set out in the Basil agreement, at least. There are later emails which also suggest a separate relationship with Pentagon, and which provide support for the defendants’ allegations generally.
Some nine or ten months after the Basil and Miller agreements were signed by the relevant defendants, on 28 October 2017, Vijan emailed Vora. Vijan referred to there being a ‘shortfall in equity’ of ‘250K’, stating, ‘and so equity to be inject from your side is $175,000’.
Vora emailed Vijan later that day:
Whatever we had discussed for both projects for investment is totally different
For mount Waverly we spoke abt 200-250k and Dromana also around 200k
In both the cases the investments have overshot by around 250K -300k total
We never spoke of such amounts
I might have tightness in cash flow if I have to shell out 375K at one time
Let me know how to do
The $375K does not appear to be referrable solely to any amounts outstanding under the written loan agreements.
On 16 November 2017, Vora emailed Vishal and Vijan, with an email whose header said ‘RE: Dromana & Mt Waverley’. He wrote:
…the total value of the project would be around 1.6-1.8 Million AUD (construction costs plus land).
If need to invest say 650-700K together we are investing 41% and rest is the loan
If we are going to invest 41 percent equity – the returns we had calculated would come down
To be very honest I had assumed my investment to be tune of 250K AUD now we r talking abt 350K
The prelims cost and the base stage which u anticipate to be around 400K – which we are going to shell out together –
When earliest we can get it back from the bank at least 75k additional which we r investing
…
On 17 November 2017, Vishal emailed Vora (copying in Vijan):
We understand the loan agreement was 250K investment however given the current construction costs and bank lending regulations, we collectively need to contribute towards the construction loan amount based on the banks evaluation of the overall development.
In relation to your point of investment of 350K vs 250K, you are our project partner and not just an investor taking fixed return. Hence the equal equity contribution to the project.
…
Ezy says that the loans were made in accordance with the loan agreements, that they fell within the scope of discussions and overtook them. It says that language such as ‘partners’ is not definitive. It points to the fact that the Basil and Miller loan agreements define ‘Interest’ at least in part by reference to profit. This may explain various later discussions about profit, and also give some explanation of Vora’s emails wanting detailed information about the money being spent on the developments, and his assistance with other investors being sought at one stage.
But – as against this – there are emails from Vora after the loan agreements were signed by the relevant defendants, which also provide some support for the defendants’ allegations.
The Glenferrie agreement (which the relevant defendants signed in May 2018), refers to the lender’s ‘equity pool’.
On 27 August 2018 Vora wrote that he just hopes he doesn’t start believing ‘it was a wrong decision on my part to be equity partner with pentagon’.
The Glenferrie agreement (which the relevant defendants signed in May 2018), refers to the lender’s ‘equity pool’ – in other words, Ezy’s equity pool.
And the circumstances in which Vora first requested the original loan agreements, and the discussion about how he might ‘exit’ from the projects also lends some support to the defendants’ version of events.
It was not until 7 September 2018 that Vora emailed asking for the three original loan agreements, and when he did, he said: ‘Need it for audit purpose’.
On 27 September 2018, at 3.40 pm, Vijan emailed Vora, discussing potential options for Ezy to have an ‘early exit’ from being an ‘equity partner’.
Vora replied at 5.25 pm that day, stating:
…For the early exit clause u are offering as a good will gesture – 2% which doesn’t even make any business sense
Kindly work out a better offer for all the 3 projects and let me know by which date and what is the returns that u would be offering – I shall consider if it is practical
On 9 October 2018, Vora wrote to Vijan, Pratik, Vishal, Varun and others, seeking an ‘amicable solution’ and saying it was ‘time for me to exit from all the 3 projects’. He said:
…I appreciate your offer of 24% per annum returns – I would request you and pentagon to kindly consider 30% which you have given to all ur other investors.
…
These percentage returns being discussed are not referrable to the three loan agreements.
There is far more evidence, both for and against the way the defendants put their case.
Many of Ezy’s submissions have significant force. For example, Ezy points to matters which supports its claims that the three loan agreements were genuine (and not a sham). They argue that the differences between the Basil and Miller agreements on the one hand, and the Glenferrie agreement on the other, point against the agreements being shams. If they were a sham, why bother detailing how profit would be calculated, and differentiating between the properties? Why have different guarantors to the different agreements if they were never intended to be enforced?
Ezy also points to the way various of the defendants defended a Supreme Court proceeding Ezy brought in 2019. The Supreme Court proceeding arose as a result of caveats Ezy had lodged over the Miller property. It was defended without the defendants in that case making any reference to the sham, or partnership, arguments now put. Those defendants were represented by the same solicitors and counsel as in this present case. (Mr Truong QC submitted at the hearing, that at the time of the Supreme Court case, evidence was still being gathered and instructions were still being taken. He argued that there was no need to go into those matters to successfully defend the caveat claim, and that full instructions needed to be obtained to found claims being made on a proper basis, as required under the Civil Procedure Act 2010.) Ezy also argues that some of Vishal’s evidence in the Supreme Court case runs against what Vishal now deposes to, and the case put for the defendants.
What is to be made of all this must be determined at trial.
I note that even if I were to accept, for the purposes of this application, that Ezy loaned money under the terms of the loan agreements, there would still be triable issues as to whether Ezy is entitled to be repaid now.
This arises as a question of construction of the agreements. As discussed above, all three agreements provide that:
Repayment Date means the latest date that the Principal Outstanding together with Interest must be repaid by the Borrower to the Lender and being upon the expiry of 18 months on and from the Commencement Date provided that the Borrower may elect at its discretion to repay earlier than the expiry of 18 months from the Commencement Date
The defendants submit that there is an issue as to what the Repayment Date means in each agreement, as a matter of construction, and that there were missing words in the definition. They do not have a rectification claim, but say that it arises as a matter of construction in any event. For example, in relation to Basil, they allege at paragraph 10 (b)(ix) of the amended defence that:
(ix)…alternatively, properly construed, the First Loan Agreement required that Outstanding Moneys be repaid upon the completion of construction at, and subsequent sale of, the Basil Property:
Particulars
The Defendants specifically rely on the definitions of “Interest”, “Net Profit”, “Repayment Date”: clause 1.1 and clauses 2, 3 and 4 and construction of the First Loan Agreement as a whole, having regard to the commercial purpose and known surrounding circumstances of the parties. The Defendants further reply on the principle in Fitzgerald v Masters (1956) 95 CLR 420 at 426-427. There were missing words in the definition of “Repayment Date” to the effect of “the later of settlement of and following the sale of the Property and 18 months on and from the Commencement Date”.
I accept that an issue arises as to when the money was repayable under this definition of Repayment Date (and those to like effect in the Miller and Glenferrie agreements), as a construction issue. It is arguable that given there is a reference to ‘latest date’, one might expect there then to follow in the clause a choice between at least two dates so that the ‘latest’ could then be identified. But in the definition, after the reference to ‘latest date’ only one date is able to be identified: ‘being upon the expiry of 18 months on and from the Commencement Date’.
The defendants point to the ‘Interest’ clause in each agreement as needing to be considered in this context. They argue that to work out what interest is payable it is necessary to work out what is 50% of the Net Profit from the sale of the property (for each of Basil and Miller agreements), and 15% of the nett development profit (for the Glenferrie agreement). Once these have been worked out, a comparison can be made of how that sum compares to the other way interest is to be calculated as set out in each clause, and the interest payable is to be the greater of those two amounts.
In the Basil agreement, the interest clause states:
Interest means the greater of:
(a) $100,000; or
(b) an amount equal to 50% of the Net Profit from the sale of the
Property.
In the Miller agreement, the interest clause states:
Interest means the greater of:
(a) $105,000; or
(b) an amount equal to 50% of the Net Profit from the sale of the
Property.
In the Glenferrie Agreement, the interest clause states:
Interest means an amount equal to:
(a) 70% over 18 months or 15% from nett development profit

whichever is greater.
These unusual ‘Interest’ and ‘Repayment Date’ clauses in the agreements add to my view that the construction issues cannot be determined at a summary judgment level. Evidence of negotiations are relevant to construe these agreements. That evidence is also relevant to the estoppel defences. (Ezy says that it could choose to take the lower amount of interest set out in the clauses – and has done so by its claims - and so does not need to wait until Net Profit or nett development profit can be calculated, in order to sue for the return of its money. However, given these issues, and the evidence I have referred to, this is not a matter I consider should be determined at a summary judgment stage.)

There is no doubt that the amended counterclaim as pleaded has a number of difficulties. What is the ‘partnership property’ that is to be sold? Is it Miller, Basil and Glenferrie’s land and other assets (these companies having been allegedly incorporated as special purpose vehicles after the overriding partnership or property agreement was entered into?). If so, what is the legal relationship between those other companies, and Pentagon, and Ezy, that entitles their assets to be regarded as partnership property of Pentagon and Ezy?
At the hearing, I asked how relief could be sought in relation to property owned by Miller, Basil and Glenferrie without them being parties to the counterclaim. Mr Truong QC for the defendants indicated that that is a matter which will be considered.
As it is presently pleaded, I agree with Mr Galvin QC for Ezy that the counterclaim is so high level that it is more of an overriding concept - a ‘case theory’ - than a clear articulation of the underlying basis on which the matters claimed arise.
However, I will not exercise my discretion to give judgment on the counterclaim. The facts underlying the claims there brought - broadbrush though they are, and requiring further detailed pleadings - are inextricably linked with the matters relevant to the defences to the claims Ezy has brought. As discussed above, there are significant factual and legal disputes that need to be decided at trial.
If I were wrong in my analysis above (and the amended defence and amended counterclaim in fact had no real prospect of success), in any event I would not have been satisfied the matter is appropriate for summary judgment. This dispute is of such a nature that only a full hearing on the merits is appropriate. Had it been necessary, I would have ordered under s64 of the Civil Procedure Act 2010 that the proceeding should proceed to trial.

Next steps

The defendants have issued a summons seeking security for costs of defending the claim, which only needed to be decided if the application for summary judgment was unsuccessful and so has not yet been argued. The parties have filed submissions about that some time ago. The security for costs application should now be listed for hearing, unless the parties are content for it to be dealt with on the papers.
I direct the parties to consider the interlocutory orders, and costs orders that should be made as a result of these reasons, including what should happen with the security for costs application. A further summons seeking wasted costs of a mediation will also need to be dealt with in those orders. The parties should email either agreed orders, or submissions as to what they say should occur, by 4.30 pm on 20 November 2020.

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Certificate

I certify that these 20 pages are a true copy of the reasons for ruling of Her Honour Judge Marks, delivered on 16 November 2020, revised 19 November 2020.
Dated: 19 November 2020

Zeinab Ali

Associate to Her Honour Judge Marks