Hill v RBG Holdings Group Pty Ltd

[2018] NSWSC 549

Supreme Court

New South Wales

Medium Neutral Citation:	Hill v RBG Holdings Group Pty Ltd [2018] NSWSC 549
Hearing dates:	27 April 2018
Decision date:	27 April 2018
Jurisdiction:	Equity - Commercial List
Before:	Stevenson J
Decision:	Plaintiff’s Notice of Motion filed 23 March 2018 is dismissed with costs
Catchwords:	PRACTICE AND PROCEDURE – disclosure sought prior to closure of evidence – whether exceptional circumstances shown
Category:	Procedural and other rulings
Parties:	Derry Bernard Hill (Plaintiff/Applicant) RBG Holdings Group Pty Ltd (First Defendant/Respondent) Erolcene Pty Ltd (Second Defendant/Respondent) McLaren Street Investments Pty Ltd (Third Defendant/Respondent)
Representation:	Counsel: A M B Cornish (Plaintiff/Applicant) G P Gee (First to Third Defendants/Respondents)   Solicitors: Bartier Perry (Plaintiff/Applicant) McCabes Lawyers (First to Third Defendants/Respondents)
File Number(s):	SC 2017/275365

EX TEMPORE Judgment (REVISED)

1. The plaintiff, Mr Derry Hill, alleges that on or about 30 May 2011 he and Mr Geoff Reed entered into an agreement whereby a number of the corporate defendants (referred to in the Commercial List Statement as "the Indemnifying Entities") agreed to indemnify Mr Hill from any claims made against Mr Hill by reason of him granting a guarantee and supporting mortgage to Westpac Banking Corporation, then known as St George Bank.

2. By that guarantee and mortgage, Mr Hill guaranteed to Westpac the obligations owed to Westpac by Reed Constructions Australia Pty Ltd (in liquidation) under a $7 million loan facility, referred to in the List Statement as the "Loan Facility".

3. In the List Statement Mr Hill alleges that his agreement with Mr Reed was comprised by a letter and conversations he had with Mr Reed.

4. The letter is dated 30 May 2011 and is headed "Funding - Reed Group Loan from DBH" (that is, I assume, Mr Hill). The letter is in the following form:

“Thank you for providing short term loan funds to the Group prior to the financial year end and the potential sale of 50% of the equity in Reed Building Group Pty Ltd.

I confirm the terms of the loan as follows:

1.   The interest rate payable at the end of the month is the mezzanine rate of 3.5% pa above the St George Bank charges.

2.   The loan is secured by a corporate guarantee from RBG [the first defendant, RBG Holdings Group Pty Ltd] and a personal guarantee for you; and

3.   Other security as may be agreed between us.”

5. In the List Statement Mr Hill alleges that the conversations took place "in about May 2011" and that their "substance and effect" comprise:

“…requests by Mr Reed to Mr Hill to agree to guarantee and provide security in respect of the Loan Facility to assist it to meet its obligations pending an anticipated sale of an interest in RBG to a third party purchaser."

6. Mr Hill has sworn an affidavit dated 26 March 2018.

7. In par 3 of that affidavit Mr Hill says:

“I believe the contents of this affidavit to be true to the best of my belief and based on the records that I have presently available to me. Those records are limited, however, and this affidavit consequently, is not a comprehensive account in respect of each of the matters addressed within it. I will provide a further affidavit once I have access to the relevant records.”

8. In pars 52 to 58 of the affidavit, Mr Hill gives this account of the conversations said to have given rise to the agreement for which he contends:

52.   In about late March or April 2011, Geoff Reed approached me and we had a conversation to the following effect:

[Mr Reed] said:   ‘Derry, let’s have a drink.’

[Mr Hill] said:   ‘Sure Geoff. Why don’t we meet at my house after work.’

53.   Later that day, Geoff Reed came to my house. We had a conversation to the following effect:

[Mr Reed] said:   ‘Your house at XXX is unencumbered. As you know, we have a problem with cash flow at the moment. We are owed all this money, and if you could just help us out for just a short period, to the past of end of June, it would allow us to get a loan. We’ve got people interested in buying Reed Constructions, Bougues, a French company. The payment schedules for the NSW Government jobs are putting us behind in cash flow, and it would be better for us to have 30 June figures that look better, and a deficit not showing on our P&L. This would mean that we could sell part of this company to Bougues.’

54.   As part of my role as Chairman, I was aware that the Reed Group was experiencing a significant cash flow problem resulting from disputes over payment for services with the NSW Government (including works done for Roads and Maritime Services (RMS)). I believed that the group’s cash flow problem would be short term because, having been involved in many government and major civil projects most of my life, it is in my experience that most disputes that arise in the course of major projects are reconciled and settled.

55.   I then replied to Geoff words to the following effect:

[Mr Hill] said:   ‘Ok Geoff. I know that we’ve got a problem with cash flow. But let me sleep on it and get back to you.’

56.   I considered Geoff Reed’s request for about a week. After thinking about it, at the offices of Reed Constructions, Geoff and I had a conversation to the following effect:

[Mr Hill] said:   ‘Geoff, I am happy to help you because this is just a short term loan. We should get Mark Green to prepare proper documentation to support this arrangement.’

[Mr Reed] said:   ‘Yes, we’ll certainly do that.’

57.   On or around 30 May 2011, I received a letter from Geoff Reed dated 30 May 2011 (‘Agreement Letter’). …

58.   At the time, I was willing to proceed immediately without proper documentation because of my close relationship with Geoff Reed and because we had agreed that we would ask Mark Green to prepare proper documentation. Mark Green was the lawyer for the Reed Group, and he assisted the directors and the company in general with their legal matters.”

9. Despite what is stated in par 3 of the affidavit, Mr Hill does not suggest in any of these paragraphs that his account of what transpired between him and Mr Reed is not complete or that there were any further conversations relevant to his contentions concerning the alleged indemnity.

10. The first to third defendants by their Commercial List Response agree that there was an agreement between Mr Hill and Mr Reed on or about 30 May 2011 and that it was comprised of the 30 May 2011 letter, to which I have referred, and conversations that took place around then between Mr Hill and Mr Reed.

11. The first to third defendants deny that the indemnity that thereby resulted had the scope for which Mr Hill contends.

12. As I understand it, that is in substance what divides the parties in these proceedings.

13. The defendants have not yet been ordered to serve their evidence. Thus, it is not yet known whether Mr Reed will give evidence in reply to that of Mr Hill and, if he does, to what extent he will dispute Mr Hill's account of what was said.

14. Against that background Mr Hill, by Notice of Motion filed on 23 March 2018, seeks disclosure of documents from the defendants and leave to serve subpoenas on third parties to produce seven categories of documents.

15. As the evidence has not yet closed, Mr Cornish, who appears for Mr Hill, accepted before me that Mr Hill must show "exceptional circumstances" to justify either the proposed disclosure or leave to serve the defendants.

16. In my opinion he has failed to do so.

17. As I mentioned, disclosure is sought in respect of seven categories of documents.

Category 1

18. The documents sought in Category 1 are:

“All documents in the period March 2011 – June 2011 relating to the provision or proposed provision by Derry Hill of security for the provision of finance to Reed Constructions Australia Pty Ltd or the Reed Group.”

19. It appears that Mr Hill's application is actually directed to email correspondence that he recalls having had with Mr Reed at the time.

20. Thus Mr Hill's solicitor, Mr Ke, has deposed:

“Mr Hill believes there was email or other correspondence between Mr Reed and Mr Hill in relation to the May 2011 Agreement in advance of, and subsequent to, 30 May 2011. Mr Hill does not retain or have access to copies of that email correspondence.”

21. Mr Cornish submitted:

“Mr Hill recalls engaging in email correspondence in relation to the agreement in entering into the agreement, but has no access to that email correspondence, or to other contemporaneous records relating to the primary agreement.

In the absence of access to contemporaneous records which, in the ordinary course, would refresh his memory, Mr Hill’s substantive affidavit has omitted to give an account of his conversations with Mr Reed in relation to the terms of the primary agreement”.

22. Mr Hill's case is that the agreement for which he contends was comprised in the 30 May 2011 letter and the conversations to which he has deposed. He does not suggest in his affidavit that his account of what was said was incomplete. Nor does he suggest that any emails passing between he and Mr Reed at the time comprised any part of the agreement; or that some representation or other communication took place in emails which might be relevant to the cause of action for which he contends.

23. In those circumstances I see no exceptional circumstances justifying production of the materials sought at this stage.

Categories 2 and 3

24. It is common ground on the pleadings that on 23 December 2014 Mr Hill entered into a Deed of Settlement with Westpac pursuant to which he agreed to pay Westpac $6.25 million on account of his obligations to Westpac under the guarantee and mortgage concerning Reed Constructions to which I have referred.

25. By that Deed of Settlement, Mr Hill also agreed to pay Westpac an amount, estimated in the List Statement to be $2.65 million, in relation to an unrelated obligation that he, personally, had to Westpac.

26. Mr Hill accepts that the indemnity for which he contends would not respond to that part of the $6.25 million as relates to Mr Hill's personal obligations to Westpac. I understand this to be common ground.

27. In those circumstances Mr Hill seeks disclosure of:

“All documents in the period January 2014 – March 2015 relating to the settlement of Westpac Banking Corporation’s claim against Derry Hill under the Guarantee and Indemnity dated 31 May 2011.

All documents in the period February 2014 – December 2014 relating to Westpac Banking Corporation’s claim against Derry Hill in respect of the facility agreement entered into with St George Bank by Derry Hill on or about 14 August 2008.”

28. Mr Cornish submitted that these documents are relevant to the question of what proportion of the $6.25 million for which Mr Hill was liable to Westpac would enliven the indemnity which Mr Hill contends.

29. Mr Cornish submitted:

“It is incumbent upon Mr Hill to prove his indemnified loss. Proving the component of the Bank Settlement Sum referable to his Guarantee obligation in respect of Reed Construction Australia’s facility is a central element of that proof.

…

Mr Hill does not have access to documents pertaining to the negotiation of the Settlement Agreement.”

30. Mr Hill will have to prove, in due course, exactly what proportion of the $6.25 million due to Westpac related to his personal obligations to Westpac. Presumably an enquiry made by him to his then banker, Westpac, should elicit that information. However, I do not see the fact that Mr Hill cannot presently pinpoint the precise figure constitutes exceptional circumstances such as to justify the disclosure in the subpoena now sought.

31. If Mr Hill proves that he cannot obtain this information from Westpac it may be that he will be given leave to issue a more focussed subpoena to Westpac than is currently proposed.

32. But not now.

Categories 4 to 7

33. In circumstances not necessary to recount here, Mr Hill's obligations to Westpac were ultimately discharged by a company called Kirkoswald Investments Pty Ltd using funds it borrowed from another company, Manassen Holdings Pty Ltd.

34. In due course Manassen assigned its rights under that loan contract to another company, Verekers Administration Pty Ltd.

35. Mr Hill executed documents by which, in effect, he guaranteed repayment of that loan.

36. On 16 January 2017 Mr Hill discharged that loan (then an amount of $8,742,867.16) using the proceeds of sale of his home. He has proved those matters in his affidavit.

37. It is this payment, or a part of it, that is the foundation of Mr Hill's claim under the alleged indemnity.

38. As I understand it, Mr Hill claims that the indemnity for which he contends responds to that portion of the amount he paid Verekers that represents that portion of the $6.25 million he agreed to pay Westpac as represents the "Reed Portion" as referred to in the List Statement; that is the debt to Westpac of Reed Constructions that Mr Hill guaranteed; as opposed to the amount that Mr Hill himself owed Westpac at the time.

39. In those somewhat complex circumstances, Mr Hill seeks disclosure of the following categories of documents:

“(4)   All documents in the period January 2014 – April 2015 relating to the incorporation of Kirkoswald Investments Pty Ltd.

(5)   All documents in the period January 2014 – January 2015 in relation to the provision or proposed provision of finance to Kirkoswald Investments Pty Ltd by Manassen Holdings Pty Ltd, or its repayment or proposed repayment.

(6)   All documents in the period January 2014 – January 2015 in relation to the provision to Manassen Holdings Pty Ltd by Derry Hill of security in respect of the provision of finance to Kirkoswald Investments Pty Ltd by Manassen Holdings Pty Ltd.”

40. Mr Hill will need to prove in due course to what portion, if any, of the amount he paid Verekers the indemnity for which he contends responds.

41. I do not see how that justifies calling for disclosure at this stage, of the broad range of documents now sought. It most certainly does not constitute exceptional circumstances to justify production of any document at this stage.

42. Further Mr Gee, who appeared for the defendants, pointed out that Mr Hill has annexed to his affidavit every document alleged in the List Statement with the exception only of the documents for which he guaranteed Kirkoswald's obligation to Verekers.

43. Mr Gee informed me, and I accept, that none of the defendants have a copy of that document.

44. In all those circumstances, my conclusion is that the application for disclosure is brought prematurely and should be dismissed.

45. The order I make is that the plaintiff's Notice of Motion of 23 March 2018 is dismissed with costs.

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Decision last updated: 30 April 2018