Garfile Pty Ltd (ACN 057 990 075) (Receiver and Manager Appointed) v Illuminati Corporation Pty Ltd (ACN 137 331 769) (In Liquidation)

[2013] NSWDC 109

District Court

New South Wales

Medium Neutral Citation:

Garfile Pty Ltd (ACN 057 990 075) (Receiver and Manager Appointed) v Illuminati Corporation Pty Ltd (ACN 137 331 769) (In Liquidation) [2013] NSWDC 109

Hearing dates:

18 July 2013

Decision date:

18 July 2013

Jurisdiction:

Civil

Before:

Gibson

Decision:

(1) Second defendant, Natalie Sabbah, called three times outside Court 13D at 10:05am - no appearance.

(2) Second defendant, Natalie Sabbah, called three times a second time outside Court 13D at 10:32am - no appearance.

(3) Grant leave to the plaintiff to file in court an affidavit of Robert Michael Brennan sworn 16 July 2013.

(4) Judgment for the plaintiff against the second defendant in the sum of $347,547.87.

(5) Note that the calculation of this sum in order (3) includes a lump sum payment of legal costs ($60,648.00) and interest ($17,010.42).

(6) Exhibits retained for 28 days.

Catchwords:

GUARANTEE AND INDEMNITY - lease contained guarantee covenants - second defendant/guarantor files defence denying having signed the guarantee
PRACTICE AND PROCEDURE - second defendant/guarantor fails to file evidence or attend the hearing despite notification of the hearing date - circumstances in which claims may be heard in a party's absence

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 56
Uniform Civil Procedure Rules 2005 (NSW), Part 29 r 29.7

Cases Cited:

Kingdon v Kirk (1887) 37 Ch D 141
Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365
Stone v Smith (1887) 35 Ch D 188
Tim Barr Pty Ltd v Naurui Gold Coast Pty Ltd [2011] NSWSC 11

Texts Cited:

Ritchie's Uniform Civil Procedure (NSW)

Category:

Principal judgment

Parties:

Plaintiff: Garfile Pty Ltd (ACN 057 990 075) (Receiver and Manager Appointed)
First Defendant: Illuminati Corporation Pty Ltd (ACN 137 331 769) (In Liquidation)
Second Defendant: Natalie Sabbah
Third Defendant: Aaron Sabbah
Fourth Defendant: Melinda Grasso
Fifth Defendant: Pasquale Timothy Barbaro

Representation:

Plaintiff: Mr J Knackstredt
Second Defendant: No appearance
Plaintiff: Gillis Delaney Lawyers
Second Defendant: No appearance

File Number(s):

2011/7650

Publication restriction:

None

Judgment

1. The plaintiff by Amended Statement of Claim filed on 27 April 2012 brings proceedings for damages (including interest and legal costs) totalling $347,547.87.

1. These proceedings, which are listed for hearing before me on all issues of liability and quantum, arise out of the repudiatory breach of a commercial lease granted by the plaintiff to the first defendant (the "Lessee") over restaurant premises situated at Shop 7 University Hall, 281-285 Parramatta Road, Glebe NSW (the "Lease"). Contained within the Lease was a guarantee signed by the second defendant, pursuant to which the second defendant as Guarantor agreed to:

(a)   guarantee the payment of all moneys due under the Lease by the Lessee; and

(b)   indemnify the plaintiff from all loss it might suffer as a result of the breach of the Lease ("the Guarantee and Indemnity").

1. There were originally five defendants in these proceedings. The first defendant is in liquidation. Default judgment in the sum of $305,225.58 was assessed against the third defendant by Curtis DCJ on 4 June 2013. The plaintiff has been unable to serve the fourth and fifth defendants. The proceedings before me today relate solely to the liability of the second defendant for the Guarantee of payment of monies due under the Lease.

1. The second defendant was called outside the court twice at 10:05am and 10:32am. There has been no appearance. The first issue for determination is whether I should proceed with the hearing in her absence.

Can the application proceed in the absence of the second defendant?

1. The second defendant was represented by solicitors until comparatively recently, namely 12 June 2013. She has filed a Defence (Exhibit H) in which she denies guaranteeing the performance by the first defendant of all covenants, terms, provisions and conditions of the Lease, and of indemnifying the plaintiff as a result of any breach of the Lease, "because the second defendant never signed the lease" (Exhibit H, clause (b)). This denial of signing the Lease is repeated in paragraph 5(d). She also denies making the relevant representations (paragraphs 11-14 of the Lease).

1. These proceedings were previously listed for hearing on 30 March 2012. On that day, the hearing was vacated in consequence of evidence adduced on behalf of the second defendant in relation to the conduct of the third to fifth defendants in the events giving rise to these proceedings. An Amended Statement of Claim was subsequently filed, adding the third to fifth defendants to the proceedings and alleging a number of additional causes of action. The second defendant filed a Defence to the Amended Statement of Claim on 19 July 2012.

1. As the fourth and fifth defendants were never able to be served, the plaintiff obtained default judgment against the third defendant and on 5 March 2013 Judicial Registrar Howard fixed these proceedings for hearing for 18 July 2013. The second defendant was not present before the Judicial Registrar, and the matter was mentioned on her behalf by the plaintiff, with the consent of her solicitors. The plaintiff's solicitors forwarded an email to the solicitors for the second defendant on 5 March 2013 at 11:22am confirming the hearing date.

1. Attached to that email is a copy of the Short Minutes of Order which were made. That included a requirement for the defendants to file and serve their evidence by 17 May 2013. The plaintiff has done so but no affidavit evidence has been filed by the second defendant, so far as I am aware. Mr Knackstredt informed me from the bar table that his client had offered to have the signature on the Lease examined by a handwriting expert, but that this offer had not been taken up by the second defendant or those acting on her behalf. Those solicitors filed a Notice of Ceasing to Act on or about 12 June 2013.

1. Part 29 r 29.7 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") applies when a hearing is called on and any party is absent. In those circumstances, the court may proceed with the trial generally, as to any claim for relief in the proceedings, or may adjourn the hearing. If it is the defendant who fails to appear, then the plaintiff may prove its claim so far as the burden of proof lies upon it and, if it proves its claim, is entitled to the relief claimed and such other relief as is consistent with what is sought (see Ritchie's Uniform Civil Procedure (NSW), referring to Stone v Smith (1887) 35 Ch D 188 and Kingdon v Kirk (1887) 37 Ch D 141).

1. The absence of a party at the hearing raises problems for the trial judge. In the present case, this is not simply because a party who has filed a defence has failed to appear, but because the defence raises an issue of some seriousness, namely a claim that the second defendant did not sign the Guarantee, in circumstances where it would appear that an earlier hearing was vacated, at least in part, to explore allegations of misconduct by the fourth and fifth defendants, who have never been served.

1. In addition, the second defendant's solicitors have ceased to act (Exhibit G), and it would appear the second defendant has been, and may still be, overseas (Exhibit G).

1. The provisions of s 56 Civil Procedure Act 2005 (NSW), requiring justice to be just, cheap and quick, are generally referred to in such circumstances by the parties. Should a party be entitled to an adjournment because they have failed to attend court to argue their case, or to provide any explanation for their absence? Such decisions must turn on the facts of the case.

1. As counsel for the plaintiff's helpful written submission show, the second defendant has failed to comply with a number of steps in these proceedings, and not simply the latest order to file her evidence by the due date in the Short Minutes of Order made on the day that the matter was set down for hearing. Her first Defence, filed on 11 August 2011, was defective and the current Defence, which denies that she signed the Guarantee, does not append an attestation from her, and contains only an affidavit by a solicitor. She was ordered to serve her evidence by 9 December 2011 when the hearing date of 30 March 2012 was set down, but failed to comply. She brought a Notice of Motion seeking security for costs which was dismissed on 9 March 2012. The hearing date of 30 March 2012 having been vacated by reason of material in an affidavit sworn by the second defendant's solicitor, she took no further steps in order to put before the court the material upon which she asserted that she had not signed the Guarantee, including any expert evidence in relation to the signature.

1. What duty do the plaintiffs owe the court in the presentation of material where the defendants are absent? In Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365 Barrett J has helpfully reviewed and explained the duties owed to the court by the party who is present, and the approach the judge should take in such circumstances. I have put questions to the plaintiff's counsel about the issues raised in the defence, notification and the documents tendered in answer to those questions. Ultimately, however, as Barrett J notes at [64], in an adversarial system, the responsibility for conduct of a case rests with the party concerned. While allowances may be, and are, made for persons under a disability, self-represented parties, litigants with health problems or parties obliged to travel long distances, the second defendant does not appear to labour under any such disadvantage in terms of being able to attend and present her case today.

1. Having satisfied myself that the second defendant is aware of that these proceedings are listed for hearing today, and that it is appropriate for the hearing to proceed, I now set out the background to these proceedings and the sums claimed.

The factual background

1. These premises were used by the first defendant to conduct a restaurant business.

1. In around August 2009, Harry Londy, the director of the plaintiff, met with representatives of the Lessee to negotiate the terms of the Lease. During one of those meetings, Mr Londy met with the second defendant and showed her through the premises.

1. According to the affidavit of Harry Londy sworn 29 September 2011 (Exhibit D), he had a meeting with the second defendant as follows:

"4. I have met the second defendant Natalie Sabbah on one occasion, and recall personally showing her through the restaurant premises at Shop 7, University Hall, 281-285 Parramatta Road, Glebe.

5. I agreed with the second defendant's brother Aaron Sabbah and his business partner Pasquale Barbaro that the Lessee of those premises would be a company called Illuminati Corporation Pty Limited.

6. Mr Barbaro said to me the words to the effect, "Natalie will be the licensee and manager of the restaurant, and will also become a director of the Lessee, and provide her personal guarantee of the Lease."

7. Annexed hereto and marked "A" is a letter that I sent to Angelo Crones at Maunder & Jeffrey on 7 August 2009, which also attached a copy of a Bank Guarantee that was issued by Westpac Banking Corporation at the request of Natalie Sabbah as the customer, and which was given to me by Pasquale Barbaro."

1. On 7 August 2009, Mr Londy received a copy of a Bank Guarantee issued by Westpac at the request of the Guarantor. On 19 August 2009, the plaintiff's solicitors received a document entitled "Acknowledgement Authority and Undertaking", also signed by the second defendant as Guarantor.

1. On 1 September 2009, the plaintiff (as Lessor), the Lessee and the second defendant (as Guarantor) formally executed the Lease. The Lease contained the following:

"7. Damages

(1) Each of the covenants by the Lessee which are specified in this paragraph are essential terms of this Lease:

(i) (a) The covenant to pay rent and GST throughout the Lease term at a date not later than fourteen (14) days after the due date for the payment of each monthly instalment of current rent...

(b) The covenant to pay charges and other expenses and outgoings... within twenty-one (21) days of written demand from the Lessor...

23. Guarantee and Indemnity

(a) The Guarantor hereby guarantees to the lessor the due payment of all moneys hereby covenanted or agreed to be paid and the due performance, observance and fulfilment by the lessee of all of the covenants, terms, provisions and conditions herein contained or implied on the part of the lessee to be performed observed and fulfilled.

(b) The Guarantor hereby indemnifies the lessor and agrees at all times hereafter to keep the lessor indemnified from and against all damages and all claims costs losses and expenses or obligations direct or indirect which the lessor may suffer or incur consequent upon or arising directly or indirectly out of any breach or non-observance by the lessee of any of the covenants terms provisions or conditions contained or implied in this lease or any extension or renewal thereof and on the part of the lessee to be performed observed or fulfilled...

(d) Where used herein 'Guarantor' shall mean NATALI SABBAH[sic] and if more than one jointly and severally." [emphasis original]

1. The Lessee failed to make payment of rent and outgoings due on 1 April 2010 in the amount of $16,818.30. On 6 April 2010, Mr Brennan was appointed as receiver and manager of the plaintiff.

1. On 20 April 2010, a demand was sent by the plaintiff requiring the payment of the outstanding amount. That demand was left unsatisfied.

1. The Lessee also failed to make payment of rent and outgoings due on 1 May 2010 in the amount of $16,818.30. On 4 May 2010, the plaintiff's solicitors sent a further demand for payment of the unpaid amounts due on 1 April 2010 and 1 May 2010, which also indicated that the Lease would be terminated for failure to comply.

1. On 17 May 2010, the Lessee abandoned the premises. The Lease was terminated shortly thereafter by the plaintiff re-entering the premises.

1. Following a period of advertising, the plaintiff re-let the premises to a new lessee on 10 December 2010. However, rent was not payable under that new lease until 15 April 2011. As a result, the plaintiff suffered lost rent, outgoings and interest under the Lease between 1 April 2010 and 15 April 2011. It also incurred costs in attempting to recover those lost amounts (including the costs incurred in these proceedings).

Conclusions concerning the evidence

1. It is not in dispute that the Lessee has failed to pay the outstanding rent, outgoings and damages to the plaintiff, or that the second defendant has failed to make payment under the Guarantee and Indemnity. That failure constitutes a breach by the second defendant of clause 23(a) of the Lease. I note that the Guarantee and Indemnity continued to be in force notwithstanding the termination of the Lease, by operation of clause 23(c)(A)(vi) and (xi) and (B) of the Lease.

1. In addition, the plaintiff has incurred legal costs in commencing and prosecuting those proceedings, for which the second defendant as Guarantor is liable to indemnify the plaintiff pursuant to clause 23(b) of the Lease.

1. Precise details of the amounts outstanding in relation to rent are set out in the affidavit of Robert Michael Brennan sworn 16 July 2013 which is Exhibit A in these proceedings.

1. The amount sought by way of legal costs is set out in the affidavit of Robert Michael Brennan of 22 April 2013. Those legal costs have been estimated as being $40,889.80 as at 30 October 2012, plus further unbilled work in progress and hearing costs, as well as counsel fees, are set out in paragraph 3 of the affidavit which is Exhibit C. I note that attached to this affidavit are tax invoices for these sums. I am satisfied that these sums are reasonable charges (Tim Barr Pty Ltd v Naurui Gold Coast Pty Ltd [2011] NSWSC 11).

1. In addition, interest has been calculated up to today on the outstanding sums. The plaintiff is entitled to claim interest on the entire amount of its loss. As at 18 July 2013, that sum is $17,010.42.

1. Accordingly, the total amount recoverable by the plaintiff against the second defendant is $347,547.87.

Orders

(1)   Second defendant, Natalie Sabbah, called three times outside Court 13D at 10:05am - no appearance.

(2)   Second defendant, Natalie Sabbah, called three times a second time outside Court 13D at 10:32am - no appearance.

(3)   Grant leave to the plaintiff to file in court an affidavit of Robert Michael Brennan sworn 16 July 2013.

(4)   Judgment for the plaintiff against the second defendant in the sum of $347,547.87.

(5)   Note that the calculation of this sum in order (3) includes a lump sum payment of legal costs ($60,648.00) and interest ($17,010.42).

(6)   Exhibits retained for 28 days.

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Decision last updated: 18 July 2013