Garlick v Kerbaj (No 5)
[2024] VSC 614
•8 October 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2020 02573
| DARRYN GARLICK (as representative of the Estate of Jack John Erman) | Plaintiff |
| v | |
| DANIEL KERBAJ and ORS (according to the attached Schedule) | Defendants |
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JUDGE: | Ginnane J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 6 June 2024 |
DATE OF JUDGMENT: | 8 October 2024 |
CASE MAY BE CITED AS: | Garlick v Kerbaj (No 5) |
MEDIUM NEUTRAL CITATION: | [2024] VSC 614 |
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PRACTICE AND PROCEDURE – Joinder application to enable applicant to claim on funds in court – Whether applicant is a necessary party to proceeding – Whether there was a question just and convenient to determine between the applicant and other parties – Supreme Court (General Civil Procedure) Rules 2015 rr 1.13(1), 9.06, 9.07.
APPEAL – Associate Justice’s decision dismissing joinder application – Whether wrong test for joinder applied – Finding that applicant had not established a discernible cause of action entitling it to claim on the Fund – No error by Associate Justice – Appeal dismissed.
AGENCY – Whether agent can sue in own name to recover money loaned by principals.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant (Argyle Lending Pty Ltd) | Mr M Thomas | TLM Law |
| For the First Defendant | Mr S Clement | E C Legal |
| For the Fifth Defendant | Mr M Szary | MGA Lawyers |
HIS HONOUR:
On 18 October 2023, Associate Justice Daly dismissed a summons by Argyle Lending Pty Ltd (‘Argyle’) seeking to be joined as a party to this proceeding and ordered it to pay the first defendant’s costs of the application.[1]
[1]Garlick v Kerbaj (No 4) [2023] VSC 609 (‘Reasons’). References in this judgment to the Associate Justice are to Daly AsJ unless otherwise stated.
Argyle’s summons also sought that orders it be paid the amount of $194,330.36, which it described as the overpayment which Matthews AsJ had ordered to be repaid to the Supreme Court Fund (‘the overpayment’).
Argyle was a loan facilitator, or broker and Ms Jane Lennon was its director.
The proceeding now concerns claims to the Funds in Court, (‘the Fund’) which are the proceeds of the sale of a unit by the late Jack John Erman and which now exceed $558,000. The amount of $363,742.73 was paid into Court on 23 June 2020 and a further $194,330.36 was paid into Court pursuant to the orders of Matthews AsJ of 24 June 2022 to await the outcome of this proceeding.[2]
[2]Garlick v Kerbaj [2022] VSC 336 at [7].
Mr Erman died on 20 March 2022. Mr Darryn Garlick, the plaintiff, who is the representative of Mr Erman’s estate, did not participate in the joinder application. The Associate Justice inferred that Mr Garlick did not expect that any part of the Fund would be paid to Mr Erman’s estate once all claims by secured creditors had been met.[3]
[3]Reasons [26].
The ultimate issues in the proceeding are: first, whether each remaining defendant has a proprietary interest in the Fund; and secondly, the priority of those interests as between defendants, if they are established.
The Associate Justice concluded that Argyle had no discernible cause of action which would entitle it to claim on the Fund and that it was neither a ‘necessary or proper party’ in the proceeding.[4]
[4]Reasons [58].
Argyle appeals from the Associate Justice’s orders refusing its joinder application. The appeal is in the nature of a rehearing which requires Argyle to establish an error in the Associate Justice’s decision and orders.
The first defendant, Mr Daniel Kerbaj, opposed Argyle’s application. The fifth defendant, Mr Patrick Lennon, by his solicitor, informed the Court at the commencement of the hearing that he was remaining neutral and did not propose to put any submissions.
Argyle’s Grounds of Appeal
Argyle’s grounds of appeal are that:
1.Her Honour (‘the Associate Justice’) erred in law, and in fact, in dismissing Argyle’s joinder application by:
(a)limiting her Honour’s consideration to the question of whether she believed that Argyle had a tenable claim to the Fund;
(b)failing to appropriately consider, or consider at all, the relevant discretionary considerations applicable to a joinder application;
(c)failing to appropriately consider, or consider at all, the following matters set out in r 9.06(b) of the Supreme Court (General Civil Procedure) Rules 2015:
(i)whether Argyle’s presence before the Court was necessary to ensure that all questions in the proceeding were effectually and completely determined and adjudicated upon;
(ii)whether Argyle was a person between whom and any party to the proceeding, there may exist a question arising out of, or relating to, or connected with, any claim in the proceeding which it was just and convenient to determine as between Argyle and that party as well as between the parties to the proceeding.
2.Her Honour erred in law, and in fact, by finding that Argyle had no claim or interest upon the Fund.
3.Her Honour erred in law, and in fact, by finding that Grand Bollox Pty Ltd and AJTB Holdings Pty Ltd (‘the Principals’) had no claim upon the Fund.
4.Her Honour erred in fact, by finding that the Principals had been paid in full for all monies owing to them under the loan agreements.
Argyle sought orders including allowing the appeal and granting it leave to be joined as a party to the proceeding.
Notice of Contention
The first defendant, Mr Daniel Kerbaj, filed a notice of contention which stated:[5]
1.That the trial judge did not decide (but should have decided) that Argyle Lending Pty Ltd cannot be joined as a party to this proceeding in lieu of its alleged principals.
2. That the trial judge did not decide (but should have decided) that there are discretionary grounds which also support the refusal of the application to join Argyle Lending Pty Ltd as a party to this proceeding.
[5]Notice of Contention filed 17 May 2024, Court Book 311 (‘CB’).
Relevant rules
Rule 1.13(1) of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’) defines the term ‘question’ as:
[A]ny question, issue or matter for determination by the Court, whether of fact or law or of fact and law, raised by the pleadings or otherwise at any stage of a proceeding by the Court, by any party or by any person not a party who has a sufficient interest.
Rule 9.06 provides for the ‘Addition, removal, substitution of a party’ and states:
At any stage of a proceeding the Court may order that—
(a) any person who is not a proper or necessary party, whether or not that person was one originally, cease to be a party;
(b) any of the following persons be added as a party—
(i) a person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon; or
(ii) a person between whom and any party to the proceeding there may exist a question arising out of, or relating to, or connected with, any claim in the proceeding which it is just and convenient to determine as between that person and that party as well as between the parties to the proceeding;
(c) a person to whom paragraph (b) applies be substituted for one to whom paragraph (a) applies.
Rule 9.07 provides for the ‘Procedure for addition of party’ and states:
(1) A person shall not be added as a plaintiff without that person's consent signified in writing or in such other manner as the Court orders.
(2) Unless the Court otherwise orders, an application by a person for an order adding the person as a party shall be supported by an affidavit showing the person's interest in the questions in the proceeding or the question to be determined as between that person and any party to the proceeding.
(3) Without limiting Rule 9.06(b), where a person not a party to a proceeding for the recovery of land is in possession by himself or herself or by a tenant of the whole or any part of the land, the Court may order that the person be added as a defendant.
Background
On 6 May 2020, Mr Erman entered into a contract of sale of his unit in Ivanhoe East, with settlement scheduled for 22 June 2020. Four caveats were registered on the title, including Mr Kerbaj’s. The other caveats were lodged by Ms M Cohen, Mr Erman’s partner, Mr George Ali and Ms Victoria Horner and Lightspeed Mortgage Management Pty Ltd. Mr Ali and Ms Horner were formerly the third and fourth defendants. Mr Kerbaj’s caveat post-dated their caveat.[6] Some of the caveats were connected to loans made to Mr Erman to renovate his property.
[6]Reasons [23]-[24].
Credit Corp Services Pty Ltd, the seventh defendant, had registered four warrants of seizure and sale on the title as a result of a Magistrates’ Court judgment in its favour against Mr Erman for $59,194.71 plus enforcement costs. Credit Corp has not recently played an active part in this proceeding.[7]
[7]Reasons [25].
On 16 June 2020, Mr Erman commenced this proceeding applying for the removal of Mr Kerbaj’s caveat. On 18 June 2020, Mr Erman by his solicitors, Lennon Lawyers, produced a draft settlement statement to the Court which detailed the amounts of the caveators’ claims.
Mr Ali’s and Ms Horner’s claim was listed as $350,000. Mr Patrick Lennon, as assignee of Mr Ali’s and Ms Horner’s claims, claimed unpaid interest on the principal debt as at the time of the caveat agreement, which is described below, the initial loan fee, and disbursements associated with the caveat removal application, totalling $71,767.78, plus the professional fees incurred by Mr Ali and Ms Horner pursuant to their retainer with Mr Lennon, which he estimated to be $350,000.[8]
[8]Reasons [24].
In an affidavit of 18 June 2020, Ms Jane Lennon, the director of Argyle, stated that she had facilitated three loans made by Mr Ali and Ms Horner to Mr Erman. The first loan which provided for further advances was secured by a caveat with a payout figure of approximately $310,000. She deposed that Argyle, Mr Ali and Ms Horner had incurred an estimated $30,000 to $40,000 in legal costs.[9] The statement that there were three loans was incorrect. Matthews AsJ found the statement to be a misrepresentation as well as finding that the affidavit was false and misleading.[10] In fact, Argyle brokered the following three loans from three lenders to Mr Erman, which were secured by mortgages, to fund renovations to his unit and only the first loan was provided by Mr Ali and Ms Horner:
[9]Reasons [7], [11].
[10]Garlick v Kerbaj [2022] 336 at [124]-[125].
(a) a loan on or about 27 June 2019 for $102,500.00 from Mr Ali and Ms Horner;
(b) a loan from ATJB Holdings Pty Ltd (‘AJTB’) on or about 28 August 2019 for $106,500.00 (‘AJTB Loan’); ATJB is the trustee of Mr Arthur McPhan’s self-managed superannuation fund;
(c) a loan from Grand Bollox Pty Ltd (‘GB’) on or about 20 November 2019 for $52,500 (‘GB Loan’). GB is the trustee of Mr Robin Settle’s self-managed superannuation fund.
AJTB and GB are sometimes referred to in this judgment as ‘the Principals’. Their loans entitled them to be repaid the principal loan amount in addition to interest of 18%, with an additional 2% interest payable to Argyle, and be paid any legal or other costs incurred by the Lenders as a result of the borrower’s default. While the principal under the loans has been repaid, Argyle claims that a significant amount of interest and costs remain unpaid.
On 19 June 2020, after the hearing in this Court, but prior to judgment, Mr Erman, Ms Cohen, Mr Ali, Ms Horner, Mr Kerbaj and Credit Corp entered into an agreement (‘the caveat agreement’) which allowed the settlement of the sale of the property to occur. The caveat agreement provided for specified sums be paid into court subject to a subsequent determination of the caveators’ respective interests in the property.
At the time the caveat agreement was made, Mr Kerbaj claimed that Mr Erman owed him $250,000 pursuant to a loan agreement. He claimed that the loan agreement documented a compromise of amounts that he had advanced to Mr Erman between 2015 and 2020 for purposes, including property renovations. When fees, interest and default costs were taken into account, the Associate Justice estimated the value of Mr Kerbaj’s claim as exceeding $500,000.[11]
[11]Reasons [23].
On 22 June 2020, Incerti J made orders by consent, including that the amount of $310,000 be paid to Mr Ali and Ms Horner, as a partial payment of their three purported loans.[12]
[12]Reasons [8].
The balance of sale proceeds were paid into court, thereby creating the Fund. Ms Cohen, Mr Kerbaj and Credit Corp did not receive any payment at the time of the settlement.[13]
[13]Reasons [9].
Mr McPhan (AJTB) and Mr Settle (GB) made affidavits stating that they relied on Argyle to facilitate and manage their loans. They also stated that in June 2020 their companies were repaid the monies advanced by them. Their affidavits were in similar form and, using Mr McPhan’s affidavit as the example, he stated, after describing his previous dealings with Argyle and how AJTB came to make a loan to Mr Erman, that:[14]
I also understood that the borrowers had agreed with Argyle that it was not necessary for any further caveats to be placed on the Property so as to minimise costs.
AJTB Holdings was repaid the monies advanced on 23 June 2020.
I was subsequently made aware in discussions with Mr Pat Lennon about the issues relating to the pay out of the AJTB Holdings loan. Traditionally, Argyle has undertaken any litigation relating to the loans on my behalf and I have given Argyle authorisation to act on my behalf in relation to the recovery of such loans and do so on an ongoing basis. My position was no different with this loan.
I have been advised that Argyle and/or Ali and Horner were obliged to repay the amount of $194,330.36 by virtue of the orders made in this Honourable Court on 24 June 2022.
I also understand that Argyle has subsequently paid $194,330.36 and is now applying for the monies to be repaid.
I have given full authority to Argyle to recover those amounts (effectively on behalf of AJTB Holdings to the extent the monies were paid to AJTB Holdings initially).
[14]Affidavit of Arthur McPhan sworn 25 August 2023, [8]–[13] CB 124-125.
The overpayment application
By summons of 17 February 2022, Mr Kerbaj sought orders that Mr Ali and Ms Horner, or alternatively Argyle, repay $194,330.36 to the Fund (‘the overpayment application’). The overpayment application followed the production of documents by third parties, including Argyle, pursuant to subpoenas issued by Mr Kerbaj. He alleged that the amount loaned by Mr Ali and Ms Horner to Mr Erman was only $102,500 pursuant to the first loan and that the second and third loans were provided by AJTB, which loaned $106,500 to Mr Erman, and GB, which loaned $52,500 to Mr Erman. The caveat agreement and the consent orders of 22 June 2020 had provided for $310,000 to be paid to Mr Ali and Ms Horner in partial payment of their purported loans to Mr Erman. These funds were in fact paid into Argyle’s bank account and the following amounts were paid from it: $6,741.32 to Mr Patrick Lennon, $115,669.64 to Mr Ali and Mr Horner, $120,668.43 to AJTB and $57,928.14 to GB.[15]
[15]Reasons [12].
Mr Kerbaj sought orders for the repayment to the Fund of $194,330.36,[16] which appears to have been the difference between the amount of $310,000 ordered to be paid to Mr Ali and Ms Horner, and the amount of $115,669.64 to which they were actually entitled in accordance with their loan agreement with Mr Erman.
[16]Reasons [10],[15].
Though not a party to the proceeding, Argyle was served with the summons of 17 February 2022 and given an opportunity to be heard, but did not participate in the hearing.
Matthews AsJ, who heard the overpayment application, concluded that:[17]
In my view, it is patently clear that the Settlement Statement, the First Jane Lennon Affidavit and the Filed Loan Account Statement are false and misleading. They contain misrepresentations as to the true facts.
By the Settlement Statement, representations were made by Erman that Ali and Horner were owed $350,000. It is very clear now, as a result of the documents which have been painstakingly dragged out of Argyle, Mr McPhan and Grand Bollox, that Ali and Horner were not owed $350,000 but $102,500 plus interest and costs. Grand Bollox did not resist its subpoena and produced documents in a timely fashion, however Argyle was very slow to produce documents, and both Argyle and Mr McPhan, along with Erman, Ali and Horner, all objected to the subpoenas and notices to produce.
Accordingly, the representation in the Settlement Statement that Ali and Horner was owed $350,000 was false. It was therefore a misrepresentation as to the true facts.
There is still no acknowledgment by Erman (now Garlick), Ali and Horner that the representation was false. Indeed, it was submitted on their behalf that it was not false. At the most, it was conceded that there were three separate loans with three separate sets of lenders, but the Respondents maintained that this was immaterial as the amount owing pursuant to all three loans was around $350,000 when costs were included. In my view, such a position ignores the true facts and the reality that the representation in the Settlement Statement is a misrepresentation.
A similar misrepresentation was made in the First Jane Lennon Affidavit. At no stage in that affidavit is it mentioned that there were three separate sets of lenders. Instead, there is what I consider to be a carefully crafted and worded explanation designed to convey that there were three advances under the same loan facility (not three separate loans). Paragraph 5 of the affidavit refers to “the loan”, already described as the loan from Ali and Horner to Erman and Cohen, being secured by the Ali & Horner Caveat. It does not refer to “loans”. Paragraph 6 of the affidavit then states that the loan agreement provides for further advances. Paragraph 7 of the affidavit then refers to Ms Lennon facilitating two further advances. Paragraph 8 then states that the payout figure at settlement is nearly $310,000. Read together, these paragraphs represent that three advances of $102,500, $106,500 and $52,500 were made pursuant to the Ali and Horner Loan, that loan was secured by the Ali & Horner Caveat, and the payout figure to Ali and Horner was $310,000.
This content of the First Jane Lennon Affidavit constitutes a misrepresentation because it represents that in order for settlement of the Property to proceed, Ali and Horner were owed and had to be paid $310,000 plus costs so as to discharge their caveat. That is not the true case: Ali and Horner were owed $102,500 plus interest and costs. At settlement, they received $115,669.64.
[17]Garlick v Kerbaj [2022] VSC 336 at [119]-[124].
Matthews AsJ found that Mr Erman, Mr Ali and Ms Horner had breached their overarching obligations under ss 17, 18 and 21 of the Civil Procedure Act 2010 to not mislead and deceive and to have a proper basis for any claim made in a civil proceeding.[18] In respect of Argyle, her Honour stated:[19]
It is also appropriate that Argyle be ordered to pay the Overpayment into Court. Argyle received the $310,000 following settlement and disbursed it other than in accordance with the terms of the Agreement and the Consent Orders. It is simply incongruous to think that Argyle was not aware of those terms. It ought not have disbursed the money in the manner that it did. Argyle was on notice of the Application: the summons was addressed to it, amongst others (including its director, Ms Lennon). That summons clearly sought an order that Argyle pay the Overpayment. Pursuant to the orders which I made on 1 March 2022, Argyle had the opportunity to file affidavits and submissions in opposition to the Application. It did not do so. Even if the Second Jane Lennon Affidavit could be regarded as having been filed on behalf of Argyle, which I doubt given that it records on the front page that it was filed on behalf of Ms Lennon, it does not in terms provide any evidence as to why Argyle should not be ordered to pay the Overpayment. No written submissions were filed by or on behalf of Argyle, and no appearance was made at the hearing on or on behalf of Argyle. Therefore, Argyle has had the opportunity to be heard and it has chosen not to be. To the extent that it impliedly relies on the submissions and evidence of the Respondents, that evidence and submissions have not persuaded me that Argyle should not have to make the payment. Indeed, none of the Respondents’ submissions specifically addressed this issue: they simply went to why no repayment should be ordered at all.
Any unfairness or prejudice to Ali and Horner, if there is any, is mitigated by the fact that I will make orders that they and Argyle are to repay the Overpayment. It is then a matter for them to sort out with Argyle. The fact is that the Fund is deficient in the amount of approximately $194,000 as a result of the combined conduct of Argyle, Ali and Horner. In the interests of justice in respect of all claims on the Fund, the amount should be repaid. Whether any others, including Lennon Lawyers and Mr Lennon should be ordered to repay the Overpayment is a different question and not sought by the Application.
[18]Ibid [167]-[168], [171]- [173].
[19]Ibid [162]-[163].
On 24 June 2022, Matthews AsJ ordered that Mr Ali, Ms Horner and Argyle repay the overpayment of $194,330.36 to the Fund and that they were jointly and severally liable to do so. Her Honour rejected Mr Garlick, Mr Ali and Ms Horner’s submission that Mr Ali’s and Ms Horner’s caveat also secured the loans subsequently made by AJTB and GB, describing it as ‘patently and self-evidently nonsense’.[20]
[20]Ibid, [131].
No appeal was brought from Matthews AsJ’s orders.
Daly AsJ described Matthews AsJ’s findings in the following passage of her judgment:[21]
In her reasons delivered on 17 June 2022 (‘June 2022 reasons’) granting the relief sought in the overpayment application, Matthews AsJ found that the representations made by Ms Lennon on behalf of Mr Erman, Mr Ali and Ms Horner as to the amount of the loan made by Mr Ali and Ms Horner to Mr Erman were false and misleading, and that Mr Ali and Ms Horner were owed $102,500 plus interest and costs, not $350,000 as alleged in the settlement statement. The misrepresentations were made in the settlement statement, in Ms Lennon’s affidavit of 18 June 2020, and in the loan account statement filed on 19 July 2021. None of these documents stated that there were three separate lenders, but rather, the loan account statement and ‘other documents filed on [Mr Garlick, Mr Ali and Ms Horner’s] behalf continued, repeated and perpetuated the misrepresentations made during the caveat removal application’. Her Honour also found that Mr Kerbaj had agreed to the terms of the caveat agreement on the basis of the false and misleading representations.
[21]Reasons [13] (citations omitted).
Daly AsJ stated that, at settlement, Argyle received the funds payable to Mr Ali and Ms Horner in accordance with the caveat agreement, and disbursed them to clients in full, or in the case of Mr Ali and Ms Horner, in partial satisfaction of the amounts that Mr Erman owed them.[22] However, she said that Matthews AsJ held that the funds paid to AJTB and GB were procured by a misrepresentation by Ms Lennon to the effect that the sums advanced by all three lenders were advanced by Mr Ali and Ms Horner alone.[23] This action had the effect of overcoming the arguably disentitling conduct of AJTB and GB in failing to lodge caveats to protect their equitable interests in the property when they made loans to Mr Erman.[24]
[22]Reasons [36].
[23]Ibid.
[24]Ibid.
Daly AsJ also stated:[25]
Accordingly, Ms Lennon’s misrepresentation had the effect of removing the need for AJTB and Grand Bollox to make their own applications in this proceeding to make a claim on the fund, and as such, provided them with a priority they were not necessarily entitled to, given that Mr Kerbaj had lodged his caveat prior to the caveat agreement being made, and no caveats had been lodged by AJTB and Grand Bollox to provide the general public with notice of their claims to an equitable interest in the property.
[25]Ibid, [37].
The previous application to join Argyle as a party
Daly AsJ recorded by way of background that by summons of 20 July 2022, Mr Garlick, the plaintiff, and the then third and fourth defendants, Mr Ali and Ms Horner, applied to join Argyle as a party to the proceeding. At a hearing on 14 October 2022 before Matthews AsJ, Mr Lennon, while acting for Mr Garlick, Mr Ali and Ms Horner, but not for Argyle, informed the Court that the application to join Argyle would be withdrawn and that Argyle would not seek to be joined to the proceeding.[26] Mr Lennon said that Argyle would not be joined because ‘they don’t have a stake in the claim’ and it ‘doesn't have any separate standing’ and ‘it won’t be taking any further part in the proceeding’.[27]
[26]Ibid, [29].
[27]Transcript of Proceedings, Garlick as representative of the estate of Jack John Erman v Kerbaj (Supreme Court of Victoria S ECI 2020 02573), Matthews AsJ, 14 October 2022, T40-43.
Associate Justice Daly’s decision
Her Honour stated that Argyle’s joinder application was not a conventional joinder application, but was in effect an application for leave to bring a claim against the Fund. If the joinder application was refused, Argyle would be shut out from advancing its claim against the Fund.
Her Honour considered that the principles generally applicable to applications for summary judgment ought to apply to the determination of whether Argyle was a necessary or proper party to the proceeding. The Court should only refuse to grant the joinder application, if satisfied that Argyle’s claim to be refunded the overpayment from the Fund had no real prospects of success.[28] The question to be decided was whether Argyle’s claim had a tenable legal and factual basis which had any real prospects of success, in circumstances where Argyle was never a creditor, secured or otherwise, of Mr Erman.[29] If so, joinder should be granted; if not, it should be refused.[30]
[28]Reasons [32].
[29]Reasons [33].
[30]Reasons [28].
The Associate Justice first considered the issue of Argyle’s standing based on its role as an agent bringing claims on behalf of AJTB and GB. Her Honour noted Brereton J’s statement in Steinecke v Wayne,[31] that ‘an attorney has no cause of action’ and that ‘only the principal [has] a cause of action’ and ‘that it must therefore be the principal, and not the attorney, who brings the proceedings on the cause of action’. However, her Honour also noted observations of Professor Dal Pont that an agent is able to sue a third party to recover money paid to that third party on the principal’s behalf where the ‘principal would have been entitled to recover that money. In such a case, either the principal or the agent is entitled to sue on grounds of unjust enrichment or in equity depending on the circumstances ’.[32] Her Honour concluded that: [33]
Arguably then, given that the repayment of the overpayment to the fund could be considered to be a payment made to a third party, it may be permissible for Argyle Lending to make a claim to the overpayment on behalf of AJTB and Grand Bollox.
[31][2011] NSWSC 428 [6]; Reasons [44].
[32] G E Dal Pont, Law of Agency (LexisNexis Butterworths, 4th Ed, 2020) (‘Dal Pont’) [23.9].
[33]Reasons [47].
However, her Honour described as a more fundamental difficulty to the joinder application, the fact that, even if Argyle was permitted to sue on behalf of AJTB or GB, they had no claims on the Fund. Prior to 23 June 2020, they each held equitable mortgages over the property, entitling a claim, but since the repayment of their loans, their mortgages no longer secured any interest.[34]
[34]Reasons [48].
Her Honour accepted that AJTB and GB had equitable mortgages or charges over the property which arguably predated Mr Kerbaj’s equitable interest. However, their failure to lodge caveats might be postponing conduct precluding their claims on the Fund even if they had not been paid the overpayment.[35] Her Honour stated that Argyle’s arguments based on its authorisation to bring claims on behalf of AJTB and GB, and the possibility that it had standing to claim funds paid by it to a third party, did not overcome the fact that AJTB and GB had no claims upon the Fund.[36] Her Honour concluded that the joinder of Argyle to the proceeding could not be in the interests of justice if it had no viable claim to the Fund.[37]
[35]Reasons [56(c)].
[36]Reasons [56(e)].
[37]Reasons [56(f)].
Her Honour concluded that:[38]
Argyle Lending was not a creditor of Mr Ermin, let alone a secured creditor. Argyle Lending has not pointed to any other cause of action entitling it to make a claim upon the fund. It has merely contended that it, or possibly AJTB and Grand Bollox, have claims upon the fund for an amount equivalent to the overpayment. And no cause of action which would otherwise support a claim to the fund is discernible from the evidence. There was no suggestion that the overpayment was repaid by mistake, or on some other basis that would give rise to restitutionary relief in favour of Argyle Lending. And, while it could be contended that Argyle Lending’s repayment of the overpayment could result in one or more of the remaining claimants to the fund (being Mr Lennon and Mr Kerbaj) being unjustly enriched, the High Court has made it clear on a number of occasions that there is no free-standing cause of action based upon unjust enrichment.[39]
What Argyle Lending is (implicitly) is that it should not have been required to make the overpayment by the 24 June orders, but it did so, and now it seeks to be recompensed for complying with the 24 June orders. I can understand why it would say that it should not have been required to repay the overpayment. It received no (direct) commercial benefit from the overpayment, as the bulk of the overpayment was disbursed by it to AJTB and Grand Bollox. There was no evidence of the terms upon which Argyle Lending arranged the relevant loans on behalf of AJTB and Grand Bollox, such that I do not know whether it has any right to recover the funds paid by it from either or both of them. In any event, it is clear from the evidence that it has taken no steps to do so to date.[40]
…
Argyle Lending has no discernible cause of action which would entitle it to claim on the fund. Further, even if it were permitted to bring a claim upon the fund on behalf of its clients, those principals have no claim upon the fund as the loans made by them had been paid in full. Accordingly, Argyle Lending is neither a necessary or proper party to the proceeding, and the joinder application should be dismissed.[41]
[38]Reasons [50].
[39]Reasons [50].
[40]Reasons [51].
[41]Reasons [58].
Her Honour stated that Argyle must bear the consequences of its commercial decisions being:[42]
[42]Reasons [57].
(a) its decisions not to lodge caveats over the property on behalf of AJTB and GB;
(b) its decision in the lead up to the caveat removal application to represent to Mr Karbaj and the Court that the funds lent to Mr Erman to AJTB and GB were lent by Mr Ali and Ms Horner;
(c) its decision to disburse the overpayment to AJTB and GB immediately after the settlement of the sale of the property;
(d) its decision not to appear and make submissions at the hearing of the overpayment application, despite having been provided with the opportunity to do so; and
(e) its decision to repay the overpayment from its own funds without seeking or obtaining any contribution from Mr Ali and Ms Horner or AJTB and GB or any of them.
Her Honour also considered that Argyle should not be permitted to, in effect, relitigate the issues decided by Matthews AsJ in the overpayment application by bringing its own claim against the Fund for an amount equivalent to the overpayment. Allowing to it to do so would arguably be facilitating an abuse of process.[43]
First Ground of Appeal
[43]Reasons [55].
Argyle’s submissions
Argyle sought to be joined as agent to bring claims for AJTB and GB, who had lent money to Mr Erman through their self-managed superannuation funds. Argyle sought to be ‘in the courtroom’[44] when the court decided on a final basis how the funds in court should be distributed. Argyle’s joinder would assist the Court.
[44]Transcript of Proceedings, Garlick as representative of the estate of Jack John Erman v Kerbaj (Supreme Court of Victoria S ECI 2020 02573), Ginnane J, 6 June 2024, (SCV), T 13.
Argyle contended that her Honour should have concluded that:
(a) the presence of Argyle before the Court was necessary to ensure that all questions as to who had an interest in the Funds were effectually and completely determined and adjudicated upon. This was particularly so as AJTB and GB had given Argyle authority to act on their behalf to recover monies payable under the loans;
(b) the questions Argyle sought to be determined on a final basis were central to the proceeding and it was just and convenient to determine Argyle’s claim on the Funds together with those of other defendants;
(c) there should be no final determination of Argyle, AJTB and GB’s rights in respect of the Fund until there was fulsome evidence before the Court, which had not been presented for the purposes of the interlocutory joinder application.
Argyle submitted that, at the time the Associate Justice dismissed its joinder application, it had a good and arguable case on behalf of AJTB and GB. The Associate Justice had wrongly expected a standard of evidence to be presented in support of the joinder application that was only appropriate or necessary at the final hearing.
Argyle accepted that the strength of its case was a relevant consideration in deciding its joinder application and relied on Batt JA’s statement in Boral Resources (Vic) Pty Ltd v Robak Engineering and Construction Pty Ltd:[45]
… [T]hat when addition is under consideration it is sufficient on this matter that there be shown a case that is not hopeless. Frequently that is done by hearsay evidence. Here the affidavit material was quite sufficient.
[45][1999] 2 VR 507, 511 [13].
However, Argyle asserted that the Associate Justice had erred by converting the application into a summary judgment determination of its, and the Principals’, substantive rights in respect of the Fund without notice to it. Her Honour treated the application as a final hearing and therefore wrongly limited her consideration to whether Argyle had a tenable claim on the Fund and ignored other relevant discretionary considerations. She had denied Argyle procedural fairness in so acting. Her Honour should have considered the matters contained in r 9.06(b) and exercised the Court’s procedural powers to give effect to the overarching purpose in s 7 of the Civil Procedure Act 2010. There should have been no final determination of Argyle, AJTB and GB’s rights in the Fund until there was full evidence before the Court. As her Honour noted, if the joinder application was refused, Argyle would be shut out from advancing its claim upon the Fund.[46]
[46]Reasons [32].
AJTB and GB had given Argyle authority to act on their behalf to recover monies payable under the loans. Argyle relied on Professor Dal Pont’s statement that:[47]
It is conceivable that the agent could authorised in express terms to commence proceedings in his or her own name on behalf of the principal although this is unusual.
[47]Dal Pont, [19.28]-[19.28] (citations omitted).
Argyle relied on Mr McPhan and Mr Settle’s affidavits as evidence of such an express authorisation. AJTB and GB were unsophisticated organisations and relied on Argyle. Her Honour did not consider those affidavits.
Argyle also argued that it had an interest in the Fund because it had repaid the amount of $194,330.36 to the Fund. It claimed the proprietary interest of a depositor.
Argyle argued that the Associate Justice should have found under r 9.06(b)(ii) that it was a person between whom and any party to the proceeding, there may exist a question arising out of, or relating to, or connected with, any claim in the proceeding which it was just and convenient to determine as between Argyle and that party as well as between the parties to the proceeding.
Mr Kerbaj’s submissions
Mr Kerbaj argued that Argyle had no interest sufficient for it to be joined as a party and no interest in any question before the Court within the meaning of r 9.06(2). It was not a proper or necessary party to the proceeding because the proceeding did not affect its rights.
Argyle did not have any proprietary interest in the Funds in Court derived from a security interest in Mr Erman’s property prior to its sale. If the Principals had a genuine claim, which was denied, then they would be the proper parties to bring it. Persons are not joined as parties so that they can provide evidence on behalf of existing parties.
Argyle was obliged to present its evidence at the joinder application hearing, and could not now complain about its own failure to do so.
Argyle had repaid the amount ordered by Matthews AsJ, and thereby demonstrated that it had no interest in the Fund. To allow Argyle to be joined as a party to make a claim on the Fund on its own behalf, would be to challenge Matthews AsJ’s orders, from which there had been no appeal.
The joinder of Argyle would not facilitate the just, efficient, timely and cost‑effective resolution of the real issues in dispute in the proceeding.
Mr Kerbaj also relied on Professor Dal Pont’s Law of Agency,[48] in particular the following passage:
So where an agent contracts on behalf of a disclosed principal, it is the principal alone who can sue and be sued on the contract. The agent cannot be liable under the contract. The agent can only bring proceedings if he or she is authorised by the terms of the agency to do so, and then only in the name of the principal. It is conceivable that the agent could be authorised in express terms to commence proceedings in his or her own name on behalf of the principal, although this is unusual. Conversely, where on the face of the contract, an agent contracts personally, without disclosing that he or she acts for a principal, the general law discussed elsewhere dictates that the agent can sue and be sued on the contract.
[48]Ibid [19.28]-[19.28] (citations omitted).
Mr Kerbaj argued that Argyle, being the agent of the Principals, was not a proper party. The case did not come within the exception to the rule noted by Young J in Netage Pty Ltd v Cantley,[49] an authority cited by Professor Dal Pont, that ‘normally however without special words an agent does not have authority to exercise discretions but merely to act ministerially’.[50]
[49](1985) 6 IPR 200.
[50]Ibid 213. Mr Kerbaj also referred to Spellson v George (1987) 11 NSWLR 300 at 313.
Mr McPhan’s and Mr Settle’s affidavits, which stated that they had given ‘full authority’ to Argyle ‘to recover those moneys’ were not ‘explicit and clear authority’ to Argyle to commence proceedings in its own name.
Analysis of First Ground of Appeal
Argyle bore the onus of establishing that it had a sufficient interest in the proceeding to justify a joinder order under r 9.06. The questions that the applicant seeks to raise must directly affect its rights or liabilities.[51]
[51]News Ltd v Australian Rugby League Football Ltd (1996) 64 FCR 410 at 525 (Lockhart, von Doussa and Sackville JJ).
I deal first with Argyle’s argument that the Associate Justice erred by applying a summary judgment test in deciding the joinder application. Her Honour approached the application on the basis that she should only refuse it if satisfied that Argyle’s claim to be refunded the overpayment from the Fund had no real prospects of success.[52] Her Honour mentioned during the hearing that the application was ‘almost a summary judgment application’.[53] Her Honour also made clear during the hearing the standard against which she would decide the joinder application, being whether Argyle had no real prospect of establishing that it had an equitable interest in the Funds in Court. Her Honour accepted that if the application was refused, Argyle would be shut out from advancing its claim against the Fund.[54] She also said that there was nothing to stop the lenders applying to be joined as parties.[55]
[52]Reasons [32].
[53]CB 51.
[54]Reasons [32].
[55]CB 42.
The Court is justified in refusing to permit the joinder of a person when the applicant’s case is futile or obviously bad in law. This requirement has been expressed in different ways and I will mention a few of them. In Boral Resources (Vic) Pty Ltd v Robak Engineering and Construction Pty Ltd,[56] an authority on which Argyle relied, Batt JA accepted that there must be shown a case that was not hopeless.[57] Tadgell JA stated that before making an order under r 9.06(b)(ii), the Court ought to be satisfied that there was substance to the applicant’s contention ‘so that there may exist a question’ as is contemplated by the rule.[58]
[56][1999] 2 VR 507.
[57]Ibid, 511.
[58]Ibid, 510.
In Hutchinson Pty Ltd v Port Melbourne Land Custodians Pty Ltd,[59] Riordan J stated that the Court may decide not to exercise its discretion to permit joinder when the proposed claims are futile or bad in law, for instance if they would not survive an application for summary judgment. His Honour stated:[60]
With respect to the question of futility, it had been held that an applicant must show that it has “an arguable case against the proposed respondents, at least to the standard of being able to resist an application for summary judgment by the proposed respondent had he or she been sued in separate proceedings”.
Pursuant to s 63 of the Civil Procedure Act, a claim may be summarily dismissed if it has no real prospect of success. It makes good sense that a court would not permit the joinder of a defendant for the purpose of determining a claim that has no real prospect of success. However, if not satisfied there is a real prospect of success, a court may nonetheless permit a joinder if it is satisfied that:
(a) it is in the interests of justice to do so; or
(b) the dispute is of such a nature that only a full hearing on the merits is appropriate.
[59][2022] VSC 339.
[60]Ibid [36]-[37] citing Review Australia Pty Ltd v Redberry Enterprise Pty Ltd (2003) 58 IPR 366 [5] (Heerey J).
In S Pirrie Equities Pty Ltd v Venetian Media Group Pty Ltd,[61] Elliott J stated:[62]
Under either limb of rule 9.06(b), ordinarily the merits or prospects of the claim sought to be brought against a party are not relevant to the question of whether they ought to be joined. However, where the claims made against a party that is proposed to be joined under rule 9.06(b) are “obviously bad in law or futile” or have “no real prospects of success”, the application will usually be refused.
[61][2023] VSC 253.
[62]Ibid [79] (citations omitted).
Argyle did not submit that it was inappropriate for the Associate Justice to have regard to the strength or weakness of its claims in considering the requirement that the joinder should be ‘just’ as well as ‘convenient’.[63] An applicant for a joinder order does not necessarily have to provide evidence to establish its interest or the strength of its case, sometimes a pleading setting out the facts demonstrating the applicant’s involvement in the proposed cause of action will suffice. Much will depend on the circumstances. But the fact that the applicant for joinder would be unable to resist a summary judgment application, or a finding that the applicant’s proposed case would be obviously bad in law or futile, will justify the Court in refusing the joinder application. In this case, her Honour concluded, after taking into account the history of the proceeding and the findings made by Matthews AsJ, that Argyle had no discernible cause of action.
[63]Argyle’s submissions, 3 May 2024, [20].
Her Honour concluded that:[64]
Argyle Lending has no discernible cause of action which would entitle it to a claim on the fund. Further, even if it were permitted to bring a claim upon the fund on behalf of its clients, those principals have no claim upon the fund, as the loans made by them have been paid in full. Accordingly, Argyle Lending is neither a necessary or proper party to this proceeding, and the joinder application should be dismissed.
[64]Reasons [58].
Her Honour’s conclusions were reached in circumstances where Argyle had repaid the $194,330.36 in accordance with Matthews AsJ’s order and no appeal was brought from that order. Argyle made this joinder application to seek to recover that amount, relying on the interests of AJTB and GB whom it has already repaid for the loans that they made to Mr Erman. I consider Argyle’s objective in bringing this application is an important factor against allowing it to be joined as a party, because, at least indirectly, it is seeking to alter the effect of Matthews AsJ's orders.
I do not consider that Argyle has established that the Associate Justice erred in her approach to the requirements of the joinder application.
Nor, as I next discuss, did her Honour err by failing to appropriately consider the relevant discretionary considerations applicable to a joinder application.
Argyle submitted that it did not have to establish an interest to be joined as a party under r 9.06(b)(i). However, the applicant must establish that it ought to have been joined as party and that its presence before the Court was necessary to ensure that all questions in the proceeding were effectually and completely determined and adjudicated upon.
Her Honour found that Argyle was not a necessary party, which is a requirement of r 9.06(b)(i).[65] To demonstrate why her Honour was correct in that conclusion, it is of assistance to refer to the judgment of Dawson J in Australian Tape Manufacturers Association Ltd v The Commonwealth,[66] when considering the requirements of the equivalent High Court rule to r 9.06(b)(i). Although Dawson J was dealing with a case where the applicant for joinder was seeking to assist the case of an existing party to the proceeding, his judgment is of considerable guidance in the application of r 9.06(b)(i).
[65]Ibid.
[66](1990) 64 ALJR 530 (‘Australian Tape Manufacturers Case’).
Dawson J described the real question posed by the language of the rule as:[67]
…whether the joinder of the persons seeking to be joined as parties ‘may be necessary in order to enable the Court or Justice effectually or completely to adjudicate upon and settle all the questions arising.
[67]Ibid, 531-2.
His Honour referred to the applicant’s wish to support the defendant in its contentions, in particular by calling evidence in support of its case and in ensuring that the case in favour of the validity of the legislation, which was challenged in the proceeding, was adequately presented. His Honour stated:[68]
…the mere fact that a person claims to be in a better position to call relevant evidence and to make submissions in support of a case which an existing party already seeks to make is plainly insufficient to justify the joinder of that person as a party. However desirable his presence may be to advance the presentation of the existing party’s case, he is not for that reason a person whose presence may be necessary before the Court as a party.
[68]Ibid, 532 (emphasis in the original).
Like the applicant for joinder in the Australian Tape Manufacturers Association Case, Argyle did not suggest that, if its application is unsuccessful, it would not make available to AJTB or GB its evidence and expert knowledge for the purpose of advancing their cases, were they to seek to be joined as parties.[69]
[69]Ibid, 532.
I also consider that Argyle has not established that the Associate Justice erred in the application of the discretion contained in r 9.06(b)(ii). Her Honour explained why it was not in the interests of justice to allow Argyle’s joinder, which included that it had no viable claim to the Fund.[70] In those circumstances it could not be just and convenient to allow the joinder under r 9.06(b)(ii). As her Honour said ‘in those circumstances, questions of expediency and efficiency do not rise for consideration’.[71]
[70]Reasons [56(f)].
[71]Ibid. That conclusion particularly relates to r 9.06(b)(i).
Her Honour also found that Argyle was seeking to relitigate the issues in the overpayment application by bringing its own claim against the Fund for an amount equivalent to the overpayment. She concluded that allowing it to do so would arguably be facilitating an abuse of process.[72]
[72]Reasons [55].
The second argument raised by Mr Kerbaj in his notice of contention suggested that the Associate Justice did not decide, but should have decided, that there were discretionary grounds that also supported the refusal to join Argyle as a party. But I consider that her Honour took into account all the considerations relevant to the exercise of her discretion in refusing to permit Argyle to be joined as a party.
Argyle’s presence as a party in the proceeding was not necessary within the meaning of r 9.06(b)(i). No question might exist arising out of, or relating to, or connected with, any claim in the proceeding which it is just and convenient to determine as between Argyle and any other party or parties to the proceeding within the meaning of r 9.06(b)(ii).
I add that I have not based my decision on the findings made by Matthews AsJ about the actions of Ms Lennon, Mr Ali and Ms Horner, as I do not consider that they are directly relevant to the exercise of the discretion conferred by r 9.06(b).
Ground one is not established.
Second Ground of Appeal
Argyle’s submissions
Argyle contended that her Honour erred in law and in fact by finding at that each of Argyle, AJTB and GB had no claim or interest in the Fund. If the finding that the Principals had been paid in full was set aside, Matthews AsJ’s conclusions about the AJTB and GB loans would apply. They were:[73]
I do not accept Kerbaj’s submission that the [GB loan and AJTB loan] were unsecured…
The loan agreements for the [GB loan and AJTB loan] did contain charging clauses and therefore AJTB and Grand Bollox had, if all relevant elements can be established, equitable charges over the Property as security for their loans.
[73]Garlick v Kerbaj [2022] VSC 336 at [135].
Under the loan agreements AJTB and GB were entitled to recover interest and legal costs that they had incurred.[74]
[74]Argyle relied on cl 6 of the loan agreements.
Mr Kerbaj’s submissions
Mr Kerbaj submitted that it was peculiar that Argyle, by its summons, sought the return of the sum of $194,330.36 which amount Matthews AsJ had ordered him to pay into Court. No appeal had been brought from Matthews AsJ’s orders. Therefore, the summons was akin to an indirect appeal and was improper. This proceeding relates only to funds which were secured money resulting from the sale of the property and to which claimants made claims based on proprietary interests recorded on title or, in the case of Credit Corp, made a claim pursuant to warrants of seizure and sale.[75]
[75]Mr Kerbaj’s submissions, 17 May 2024, [21].
Mr Kerbaj argued that Argyle sought to be joined to the proceeding as proxy for, and in lieu of, its Principals AJTB and GB. If they have arguable claims, then they are the proper parties to be joined. Granting Argyle’s application would permit a special purpose entity to act as nominee plaintiff in lieu of the proper parties, enabling it to litigate by proxy without the risks and costs inherent in litigation. Parties cannot authorise a nominee to run litigation for them and Argyle is not a necessary party to this proceeding. The fact that a person claims to be in a better position to call evidence, and to make submissions in support of an existing party’s case, is insufficient to justify joinder. If Argyle could bring the claim on behalf on the Principals, they might revoke Argyle’s authority to act their behalf, costs orders could not be made against them and a plea of res judicata could not be raised against them.[76]
[76]Ibid [41]-[42].
Analysis of Second Ground of Appeal
Ground two challenged the Associate Justice’s finding that Argyle had no claim or interest ‘upon the fund’. The Fund was created so that persons with a proprietary interest in the property could have their claims determined.
Argyle’s claim is based first on its role in brokering the loans to Mr Erman, which it says gave it information that would assist the Court in deciding the ultimate issues in the proceeding. It asserted that it should therefore be before the Court when the ultimate questions in the proceeding are asked and answered.
Argyle also claimed that it had authority to act on behalf of the Principals, but that claim does not by itself give it an interest in the Fund.
Normally, an agent cannot sue in the name, or on behalf, of a disclosed principal,[77] although it has been suggested that it is conceivable that an agent can do so, when given express authority by its principal.[78]
[77]Spellson v George (1987) 11 NSWLR 300 at 313.
[78]Dal Pont [19.28]-[19.29].
I do not consider that AGTB or GB gave Argyle express authority to commence proceedings in its name on their behalf. The directors’ affidavits giving Argyle ‘full authority to recover those monies effectively on behalf of AJTB (or GB) to the extent that the monies were paid to (AJTB or GB) initially)’, did not provide express authority to commence proceedings in its own name on behalf of the Principals. Those parts of Mr McPhan’s and Mr Settle’s affidavits from which I have quoted in the previous sentence are preceded by paragraphs stating (quoting from Mr McPhan’s affidavit):
AJTB Holdings was repaid the monies advanced on 23 June 2020.
I was subsequently made aware in discussions with Pat Lennon about the issues relating to the payout of the AJTB Holdings loan. Traditionally, Argyle has undertaken any litigation relating to the loans on my behalf and I have given Argyle authorisation to act on my behalf in relation to the recovery of such loans and to do so on an ongoing basis. My position was no different with this loan.
I have been advised that Argyle and/or Ali and Horner were obliged to repay an amount of $194,330.36 by virtue of the orders made in this Honourable Court on 24 June 2022.
I also understand that Argyle has subsequently paid $194,330.36 into Court and is now applying for the monies to repaid.
Those paragraphs do not suggest that AJTB and GB assert any claim to the amount of $194,330.36, which has been repaid to them, nor expressly authorise Argyle to commence a Court application in its own name on their behalf to recover that sum. Those paragraphs do not demonstrate that Argyle, AJTB or GB have any interest in the Fund, for $194,330.36, or any other amount. Rather those paragraphs demonstrate that Argyle is seeking to be joined to the proceeding to attempt to recover the amount which Matthews AsJ ordered it to pay into court.
I therefore accept Mr Kerbaj’s first argument in his notice of contention that Argyle could not be joined as a party to the proceeding in lieu of the Principals. Like the Associate Justice however, even if I had concluded that Argyle could be joined to sue in its name on behalf of the Principals, I would still have refused its joinder. This is because I consider that Argyle, AJTB and GB do not have a discernible cause of action to claim on the Fund. As I discuss in considering appeal grounds three and four, they have been repaid more than the amounts they loaned.
Argyle also claimed an interest as a depositor which it argued gave it a proprietary interest. But that cannot be correct because it loaned nothing and repaid the $194,330.36 pursuant to the Court order from its own funds. Argyle does not have an interest, secured or unsecured, in the Fund.
Argyle presented no arguable basis for a conclusion that it had a proprietary interest in the Fund or the $194,330.36 which it was ordered to repay.
Ground two is not established.
Third Ground of Appeal
Argyle’s submissions
As I have summarised in respect of ground two, Argyle argued that AJBT and GB did have claims of interest and legal costs arising from their loans to Mr Erman. They had authorised Argyle to recover the amounts of those claims. In addition, Argyle had the interest of a depositor having paid the amount of $194,330.36 into court.
Mr Kerbaj’s submissions
Mr Kerbaj submitted that the Associate Justice correctly found that the Principals had no claim to the Funds and so Argyle’s joinder would be futile. On 23 June 2020, Argyle repaid AJTB and GB the monies they had advanced to Mr Erman. Accordingly, their mortgages secured nothing.
Argyle has repaid them the amount they loaned and more from its own funds. There was no evidence that the Principals were owed interest or could recover legal costs, which they were liable to pay to Mr Lennon. Mr McPhan and Mr Settle’s affidavits acknowledged that their loans have been repaid. If further amounts were owing they would have said so in their affidavits.
Analysis of Third Ground of Appeal
Ground three challenges the Associate Justice’s finding that AJTB and GB ‘had no claims ‘upon the fund’. As explained below in the consideration of ground four, neither company has claimed that it is owed any sum which might entitle it to claim on the Fund.
There is no inconsistency between Matthews AsJ’s statement that she did not accept that the ‘second and third loans’, i.e. AJTB’s and GB’s loans, were unsecured,[79] and Daly AsJ’s conclusions that they had been repaid. Matthews AsJ made no findings about interest or costs that might be payable to AJTB and GB.
[79]Garlick v Kerbaj [2022] VSC 336 at [135].
Argyle contended that under cl 6 of the loan agreements, AJTB and GB could claim as secured monies, any legal or other costs that they had incurred in connection with the loans. But the existence of any such costs was not even arguably established by any evidence.
Argyle, the loan broker, repaid AJTB’s and GB’s loans. It was not suggested that they could sue again and be paid twice, but rather that they were still owed interest and costs under the loan agreements. The amounts that they might possibly claim were not quantified. Mr McPhan and Mr Settle did not refer to any such amounts in their affidavits and Argyle did not seek to lead any evidence of such amounts before the Associate Justice or upon this appeal hearing. If AJTB and GB claim to be owed any further amounts, they are the appropriate persons to pursue them. There is no basis for Argyle to be joined as a party.
Ground three is not established.
Fourth Ground of Appeal
Argyle’s submissions
As mentioned, Argyle submitted that the Associate Justice erred by finding that the Principals had been paid in full all monies owing to them under the loan agreements. It contended that there was no, or insufficient, evidence for such a finding. The detriment caused by this finding by the Associate Justice was that it imperilled the recovery of monies that are actually unpaid under the loan agreements, namely interest and legal costs, which AJTB and GB are entitled to recover and have authorised Argyle to recover.
Mr Kerbaj’s submissions
Mr James Woods, a solicitor acting for Mr Kerbaj, made an affidavit exhibiting financial records subpoenaed from Mr McPhan. Mr Kerbaj submitted that those records established that the Principals were paid more than the amount of their loan amounts. Thus:[80]
[80]Mr Kerbaj’s submissions 17 May 2024 [48].
(a) AJTB advanced a loan of $106,500 on 27 August 2019.
(b) GB advanced a loan of $52,500 on 20 November 2019.
(c)At least some interest payments were made by the borrower to each Principal during the loan term. The payment receipts specifically identify as being payments for the “Ermani” loans (being an alternate spelling of Mr Erman).
(d)Leading up to the June 2020 payout of the loans, it was made clear by Ms Lennon of Argyle that the payment to the lenders would be for both the principal and interest.
(e)On 22 June 2020, the amount of $310,000 was paid to Argyle, which was then used to pay out the Principals’ loans. Relevantly, there were payments to: (1) AJTB in the amount of $120,668.43; and (2) GB in the amount of $57,928.14. Those amounts were greater than the loans they had advanced.
(f)By email on 2 September 2021, Mr Settle, director of GB stated to Mr Kerbaj’s solicitor: ‘I can confirm that Grand Bollox did receive the amount you refer to below in full repayment of the loan made.’ Mr Settle’s evidence on oath in this application was that ‘Grand Bollox was repaid the monies advanced on 24 June 2020’.
(g)Mr McPhan’s evidence on oath in this application on behalf of AJTB was that ‘AJTB Holdings was repaid the monies advanced on 23 June 2020’.
(h)Neither Mr Settle nor Mr McPhan nor Ms Lennon gave any evidence of any unpaid interest or costs in respect of those loans.
Argyle did not provide any calculation of the amount of interest or costs that it contended that AJTB and GB were owed. The inference is that Argyle received interest payments from the borrowers throughout the loan, given its role in then paying the lenders. It follows that no further sum is owed to the Principals.
Analysisof Fourth Ground of Appeal
Ground four challenges the Associate Justice’s finding that the Principals have been paid in full all monies owing to them under the loan agreements. Argyle suggested in oral submissions that interest and legal costs remained owing to them. This contention was only briefly put to her Honour and no details of any amounts claimed were provided to her or on appeal.
As mentioned, Mr Kerbaj relied on bank records, exhibited to his solicitor’s affidavit, which appeared to demonstrate that interest payments had been made to Argyle seemingly in respect of the loans made by AJTB and GB. Mr Kerbaj submitted that the loans had been repaid.
There was evidence of interest being repaid to AJTB and GB. The amounts repaid to them in June 2020 were greater than the amounts that they had loaned, suggesting that some interest was included in the repayments.[81] Neither Mr McPhan, Mr Settle or Ms Lennon, who controlled Argyle, gave evidence of any unpaid interest, or costs owing in respect of the loans.
[81]SCV T 71-78.
Ground four is not established.
Conclusion
Argyle has not established any error in Associate Justice Daly’s reasons or orders. Argyle’s appeal is dismissed.
I will hear the parties about costs.
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SCHEDULE OF PARTIES
BETWEEN: DARRYN GARLICK (as Representative of the Estate of Jack John Erman) First Plaintiff and DANIEL KERBAJ First Defendant PATRICK LENNON Fifth Defendant CREDIT CORP SERVICES PTY LTD (ACN 082 928 572) Seventh Defendant and Other Party ARGYLE LENDING PTY LTD Other Party/Appellant
0
5
0