Grewal v Layton

[2018] NSWSC 1634

Supreme Court

New South Wales

Medium Neutral Citation:

Grewal v Layton [2018] NSWSC 1634

Hearing dates:

17 October 2018

Decision date:

01 November 2018

Jurisdiction:

Equity - Commercial List

Before:

Ball J

Decision:

(1)   Judgment for the plaintiff against the first defendant in the sum of $204,871.66.

 

(2)   Subject to orders (3) and (4), the first defendant to pay the plaintiff’s costs of the proceedings.

 

(3)   Order (2) is stayed for a period of 21 days.

 (4)   Liberty to either party to make an application to vary order (2) by relisting the matter by contacting my Associate within 21 days of today’s date.

Catchwords:

CONTRACTS – Construction – Interpretation – No issue of principle

Cases Cited:

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35
Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52

Category:

Principal judgment

Parties:

Manvinder Grewal (Plaintiff)
Stephen James Layton (First Defendant)
Furnmart Australia Pty Ltd (In Liquidation) ACN 150 948 799) (Second Defendant)

Representation:

Counsel:
J Dooley (Plaintiff)
Litigant in Person (First Defendant)

  Solicitors:
Clyde & Co (Plaintiff)
Litigant in Person (First Defendant)

File Number(s):

2018/44464

Publication restriction:

None

Judgment

Introduction

1. In these proceedings, the plaintiff, Mr Manvinder Grewal, seeks to recover a loan of $175,000 he made pursuant to an agreement entered into through an exchange of SMS messages with the first defendant, Mr Stephen Layton, together with interest on the amount lent at Court rates. The only question in the proceedings is whether the agreement was made with Mr Layton or the second defendant, Furnmart Australia Pty Limited (Furnmart). At the time the loan was made, Furnmart was controlled by Mr Layton. It is now in liquidation.

2. The question before the Court is to be answered objectively - that is, it is to be answered by reference to the conclusions a reasonable person would reach from the facts known to the parties, including the purpose and object of the transaction: see Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 at [54] per Campbell JA (with whom Beazley and Basten JJA agreed); Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 at [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 at [40].

Background facts

3. Mr Grewal and Mr Layton have known one another since February 2015, when Mr Grewal commenced working as a consultant for Mr Layton in relation to a new retail business venture Mr Layton was seeking to establish at the time. That business involved the online sale of furniture. It was established through a company known as Objekt Retail Pty Ltd (Objekt), in which Mr Layton appears to have held a 60 per cent interest through a company known as Golspire Nominees Pty Ltd. Mr Grewal, through a company known as Fewston Pty Ltd, obtained a 20 per cent interest in Objekt. It was also proposed pursuant to a shareholders agreement relating to Objekt that Mr Grewal would be appointed its Chief Executive Officer and be paid a salary of $350,000 per annum.

4. At the time, Mr Layton had an interest in a number of other businesses including one that operated under the name “Balducci”, another which operated under the name “Smart Motion Ergonomics” and a third operating in Hong Kong and China under the name “MTA Industries”. Mr Layton was also a director and the Chief Executive Officer of Furnmart.

5. By around 14 July 2016, Furnmart was experiencing financial difficulties. It had bought furniture in China from a company trading under the name JBM, which it had supplied to Objekt on credit and for which it had not paid JBM in full.

6. On 14 July 2016, Mr Anton Whiley from MTA Industries Limited, a company incorporated in Hong Kong, sent an email to Mr Layton and Mr Grewal in relation to the money owed to JBM by Furnmart. The relationship between the parties is not entirely clear from the evidence. However, it appears that, at the time the email was sent, Mr Layton, Mr Grewal and Mr Whiley had arranged to visit JBM in China. The effect of the email was that that visit would have to be postponed because Furnmart had not paid JBM.

7. Mr Layton replied to that email on the same day. In that reply, which was also sent to Mr Grewal, he said:

Ok, I will postpone the trip until next week. The Balducci sale funds have caused me problems, I have been promised that these were being paid, but still not received, they have gone quiet on me. I will update you later today.

Can you also confirm that the US$30,000 that Furnmart paid MTA last week has been paid to JBM? The balance owing was US$67K. Thanks.

8. Following that email, there was an exchange of SMS messages between Mr Grewal (MG) and Mr Layton (SL) on 14 and 15 July 2016 in the following terms:

MG:   Let me know if you need any short term funding as I can use some of the money I have in the bank from my uk house sale.

SL:   If you are comfortable with doing that, for a few days. Let me know how much you can spare.

MG:   I can spare $175k aussie.

SL:   Ok, can you transfer to Furnmart Australia, do you have account details?

MG:   Send me the account details, I’ll probably need to go to the bank to do this as can’t transfer that much online.

SL:   Ok

SL:   Just emailed you.

MG:   ok, just got it. trying to find a bank thats [sic] still open, may have to be first thing the morning.

…

MG:   Ok. Can’t find any branches open after 4pm. Will transfer the funds first thing in the morning and let you know as soon as I have done so. Hopefully you can avoid the drama with PP?

SL:   Yes, I thing [sic] Anton is being a little dramatic.

MG:   What’s the address for Furnmart Australia Pty Ltd? Just at the bank now

SL:   112 Lower St Georges Crescent, Drummoyne 2047

MG:   Hi Steve, done an RTGS transfer so cleared funds should hit your account in a couple of hours I expect

SL:   Thanks Manny, appreciate your support.

MG:   No worries, we are partners in this. Will you be able to return this when your balducci monies come through? Or Queensland settlement whichever is the earlier?

SL:   Yes for sure, whichever is first. …

It appears to be common ground that the reference to “Queensland settlement” was a reference to the settlement of the sale of a property owned in Queensland by Mr Layton or a company associated with him.

9. It is also common ground that the $175,000 was paid by Mr Grewal to Furnmart.

10. Mr Grewal gives evidence of various requests he made to be repaid and of various assurances made by Mr Layton that he would be repaid once the sale of his shares in Balducci had settled or he had completed the negotiations for the sale of his interests in a property in China.

11. On 13 January 2017, Mr Grewal sent Mr Layton an email in the following terms:

I am now owed over $650k made up of the following:

•  175k loan made to Furnmart in good faith to help you out of a hole.

•  $30k plus of expenses owing to me, the vast majority of which are business expenses relating to Sleep & Co and Smart Motion that I gave paid out of my own pocket

•  $450k of back pay from the end of May 2015 to the end of November 2016 – I continue to work full time on the business and am happy to not be paid going forward till the business starts generating enough cash but I need to be paid for all the work performed as agreed by you and Josh.

I am now in arrears by 2 months on my mortgage and am drawn to the hilt on all my credit cards. I have a tax bill of $175k that the ATO are chasing me up on as well.

I can’t operate any longer like this without a firm commitment from you on how and when you are going to clear the monies owing to me. As things stand, I have effectively funded the whole Objekt business including the stock with the $650k I’m owed.

Ali doesn’t know about the full extent of debt owing to me and I haven’t mentioned the $175k to Josh or him as I have kept things private between you and me but I’m beginning to really worry. Sleep & Co still owes monies to various suppliers including Orange Bicycle and Jo amongst others and not paying them is slowing down things.

Please let me know your detailed plan to resolve this situation asap. How can I trust what you say about paying me when in the past you have promised to pay me a certain day and you have never followed through on it?

12. Despite a number of subsequent requests, Mr Grewal was not paid. He commenced these proceedings originally in the District Court on 9 February 2018. They were transferred to this Court by an order made on 28 September 2018.

Consideration

13. Mr Layton contends that the loan was made to Furnmart, not to him.

14. In support of that contention, he points out that Mr Grewal’s SMS message offering short-term funding was sent after the exchange of emails between him (Mr Layton) and Mr Whiley relating to the postponement of the trip to China. That exchange of emails referred to delays in Furnmart paying the debt that it owed; and it was in response to that difficulty that Mr Grewal made his offer. Mr Grewal conceded in cross-examination that when addressing Mr Layton, he frequently used the pronoun “you” to refer to Furnmart. Mr Layton submitted that that is how the word “you” is to be interpreted in the exchange of SMS messages. That conclusion is reinforced by the fact that, as both parties knew, the debt owed by Furnmart arose in respect of the purchase of furniture that it had supplied to Objekt on credit and the fact that Mr Grewal had an interest in Objekt. The purpose of the loan was to protect the value of Mr Grewal’s interest in that company.

15. Mr Layton also contends that Mr Grewal acknowledged that the debt was owed by Furnmart in his email dated 13 January 2017.

16. I do not accept those submissions.

17. The exchange of SMS messages that gave rise to the loan was between Mr Grewal and Mr Layton. Absent clear words in the SMS messages, the parties must have intended to deal with one another and not on behalf of one or more companies in which they had an interest.

18. The offer was an offer of $175,000 and the expectation was that the amount lent would be repaid “when your balducci monies come through [or] Queensland settlement whichever is the earlier”. Neither the amount lent nor the expected sources of repayment were obviously connected with Furnmart. On the evidence, the immediate need Furnmart had for money was for the payment of the balance of a debt of USD67,000 after the payment “last week” of USD30,000. The expected source of repayment of the loan made by Mr Grewal was from other assets held by Mr Layton, not from assets of Furnmart.

19. It is true that on occasions, Mr Grewal used the pronoun “you” to refer interchangeably to Mr Layton and companies he controlled including Furnmart. But the use of the word “you” in the SMS messages was not obviously a reference to Furnmart, and in some cases could not have been a reference to that company. So, for example, when Mr Grewal said “[w]ill you be able to return this when your balducci monies come through”, the references to “you” and “your” were clearly references to Mr Layton and what belonged to him, not to Furnmart and what belonged to it.

20. These points are not undermined by the direction to pay the $175,000 to Furnmart. It is common for borrowers to direct payment of the borrowed money to a third party.

21. Nor do I think that the objective background supports Mr Layton’s submissions. It is difficult to follow why Mr Grewal had an interest in providing short-term assistance to Furnmart in particular. It is true that Furnmart had supplied furniture to Objekt. But it is common ground that the debt to JBM was owed by Furnmart. How Furnmart’s failure to pay that debt would have had any direct effect on Objekt was not explained. On the other hand, Mr Grewal and Mr Layton had embarked on a joint enterprise through Objekt – as Mr Grewal said in one of his SMS messages, “we are partners in this” – and it is easy to see how Mr Grewal would want to assist Mr Layton in connection with that joint enterprise by lending him money for a few days while he (Mr Layton) waited to receive money from other sources.

22. The email Mr Grewal sent Mr Layton on 13 January 2017 does not change the position. The email appears to draw a distinction between Furnmart and “you”, meaning Mr Layton. It speaks of a “$175k loan made to Furnmart”, but much of the rest of the email appears to be concerned with what “your [that is, what Mr Layton’s] detailed plan to resolve the situation asap” was. The reference to a loan made to Furnmart appears to be a reference to the fact that the money was actually paid to Furnmart. The balance of the email is directed at seeking repayment from Mr Layton. That is consistent with the loan being made to him. In any event, for the reasons just given, the email cannot be regarded as an unequivocal admission that the money was lent to Furnmart and not Mr Layton.

Conclusion and orders

23. It follows that Mr Grewal is entitled to judgment against Mr Layton for $175,000.

24. Mr Grewal claims interest from 29 July 2016 on the basis that the loan was repayable in “a few days” from the date that it was made (15 July 2016) and, on any view, a few days after that date could not be later than 29 July 2016. Mr Layton does not take issue with that submission, and I accept it. It follows that Mr Grewal is entitled to interest at court rates from 29 July 2016 to today’s date – which is $29,871.66, making a total of $204,871.66.

25. Mr Grewal has been successful. There appears to be no reason why he should not have his costs. However, neither party made submissions in relation to costs and they should be given an opportunity to do so if they wish.

26. The orders of the Court therefore are:

1. Judgment for the plaintiff against the first defendant in the sum of $204,871.66.

2. Subject to orders (3) and (4), the first defendant to pay the plaintiff’s costs of the proceedings.

3. Order (2) is stayed for a period of 21 days.

4. Liberty to either party to make an application to vary order (2) by relisting the matter by contacting my Associate within 21 days of today’s date.

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Decision last updated: 01 November 2018