Hughes v Xie
[2020] WASC 220
•16 JUNE 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION: HUGHES -v- XIE [2020] WASC 220
CORAM: MASTER SANDERSON
HEARD: ON THE PAPERS
DELIVERED : 16 JUNE 2020
PUBLISHED : 16 JUNE 2020
FILE NO/S: CIV 1044 of 2020
BETWEEN: BRYAN KEVIN HUGHES
First Plaintiff
DANIEL JOHANNES BREDENKAMP
Second Plaintiff
MESA MINERALS LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)
Third Plaintiff
AND
YUZHENG XIE
Defendant
Catchwords:
Summary judgment - Action to enforce guarantee - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA)
Result:
Application granted
Category: B
Representation:
Counsel:
| First Plaintiff | : | No appearance |
| Second Plaintiff | : | No appearance |
| Third Plaintiff | : | No appearance |
| Defendant | : | No appearance |
Solicitors:
| First Plaintiff | : | Clayton Utz |
| Second Plaintiff | : | Clayton Utz |
| Third Plaintiff | : | Clayton Utz |
| Defendant | : | Justice Legal Pty Ltd |
Case(s) referred to in decision(s):
Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62
MASTER SANDERSON:
This is the plaintiffs' application for summary judgment against the defendant. A statement of claim was endorsed on the writ. The plaintiffs' claim is for the enforcement of a guarantee given by the defendant. The relevant uncontested facts are as follows. On 8 November 2018 the plaintiffs and Mighty River International Limited (Company) entered into a written agreement relating to the payment of four costs certificates in four separate actions.[1] On or about 14 February 2019 the defendant guaranteed the Company's performance of its obligations under the agreement.[2] Various demands were made of the defendant[3] and the amount of $270,000 remains unpaid. That is the subject of these proceedings.
[1] Writ of Summons – indorsement of claim filed 13.01.2020 [4].
[2] Writ of Summons – indorsement of claim filed 13.01.2020 [8].
[3] Writ of Summons – indorsement of claim filed 13.01.2020 [13].
The plaintiffs rely on two affidavits – one sworn by each of the first and second plaintiffs. These affidavits confirm the contents of the statement of claim and swear to the belief of the plaintiffs that there is no defence to the claim. Accordingly, the requirements of O 14 of the Rules of the Supreme Court 1971 (WA) have been satisfied and evidentiary onus shifts to the defendant. In opposition to the application the defendant relies on his affidavit affirmed 20 April 2020. (There was an earlier affidavit of the defendant affirmed 9 April 2020. While confirming his opposition to the application that affidavit does not materially advance the position).
In par 6 of his written submissions, counsel for the defendant sets out the basis upon which he says an order for summary judgment ought be refused. The grounds are as follows:
(a) The terms of the guarantee oblige the guarantor to pay only what the Company was obliged to pay;
(b)If the Company has available to it set-offs or counterclaims, the guarantor is entitled to rely on those matters for the purposes of resisting the summary judgment application;
(c)Evidence of the Company's set-offs against the second plaintiffs are attached to the Xie affidavit:
i) the Updated Legal Costs Proof of Debt; and
ii) the misleading and deceptive conduct claim;
(d)Together or separately, those claims would amount to a statutory set-off pursuant to the principles in s 553C of the Corporations Act applying by analogy to administration of the second plaintiff due to Sch 8A of the Corporations Regulations 2001;
(e) The enforcement of the guarantee in circumstances where:
i) the amount of the Updated Legal Costs Proof of Debt has been admitted without reduction in the administration of the second plaintiff;
ii) the first plaintiffs have not yet adjudicated the Updated MDC Claim Proof of debt, and the value of that claim (albeit currently contingent) would far exceed the amount claimed by the plaintiffs.
It is convenient at this point to set out the terms of the guarantee. It is as follows:
DIRECTOR'S GUARANTEE
I, YUZHENG XIE, of Level 3, 50 Kings Park Road, West Perth, Western Australia, being the director of MIGHTY RIVER INTERNATIONAL LIMITED (BVI Company NUMBER 1482079) (Company), unconditionally guarantee the performance of the Company with regards to the payment to:
(a) BRYAN KEVIN HUGHES and DANIEL JOHANNES BREDENKAMP as deed administrators of MESA MINERALS LIMITED (ACN 009 113 160) (subject to deed of company arrangement); and
(b) MESA MINERALS LIMITED (ACN 009 113160) (Subject to Deed of Company Arrangement)
(together the Receiving Parties)
regarding the Company's obligation to pay the Receiving Parties the amount of $270,000 on or before 30 April 2019 (Final Cost Payment). The Final Cost Payment being the amount ordered by REGISTRAR CJ BOYLE in respect of proceedings with court numbers COR 247 of 2016, COR 13 of 2017, CACV 30 of 2017 and CACV 31 of 2017 (attached as Attachments 1, 2 3 and 4) less amount already paid as recorded in the email dated 8 November 2018 from Ms Coulson (for the Receiving Parties) to Mr Reynolds (for the Paying Parties) (attached as Attachment 5).[4]
[4] Affidavit of Daniel Johannes Bredenkamp sworn 28.02.2020 [8]; Annexure DJB4
In his written submissions counsel for the defendant makes two important points. First, the guarantee is not a 'without set‑off' style clause which is often found in guarantees.[5] When such a clause is included a guarantor is required to make payment of the principal debt whether or not the primary debtor or the guarantor may have a claim against the holder of the guarantee. It is really a 'pay first argue later' provision. But that is not the case here. Second, the version of facts most favourable to the defendant must be assumed in determining the summary judgment application.[6] It is not to the point the defendant's argument may fail at trial. So long as the version of facts propounded by the defendant is not 'inherently incredible' it is that version of the facts which must be accepted in a summary judgment application.
[5] Defendant's outline of submissions in opposition to summary judgment filed 8.05.2020 [13].
[6] Defendant's outline of submissions in opposition to summary judgment filed 8.05.2020 [8].
In par 30 if his written submissions counsel for the defendant succinctly summarised the arguments put in the defendant's favour. That paragraph reads as follows:
30.In circumstances where:
(a) the second plaintiff is under administration pursuant to a DOCA;
(b) the Company lodged its proof of debts in 2016;
(c) the Updated Legal Costs Proof of Debt has been admitted without discount and no commensurate discount is offered to reduce the amount payable under the Agreement;
(d)the Updated MDC Claim Proof of Debt has yet to be adjudicated upon;
(e)if adjudicated in the Company's favour, the value of the Updated MDC Claim Proof of Debt would comfortably and undeniably exceed the amount owed by the Company under the Agreement,
it would be manifestly unjust of the plaintiffs to allow the plaintiff to enforce payment without taking into account the cross-claim: Young v National Australia Bank [2004] WASCA 298 at [1], [33].
In response the plaintiffs say the defendant's claim is a claim for the payment of a dividend from an insolvent deed administration. The claim is between the Company and the second defendant.[7] The plaintiffs say their claim is in respect of payment of certified costs orders by the Company the performance of which was guaranteed by the defendant. The claim then is between the Company and the second plaintiff and the first plaintiffs.[8] In these circumstances the plaintiffs say there is no mutuality between the two sets of claims and the set‑off under s 553C of the Corporations Act 2001 (Cth) must fail.[9]
[7] Plaintiffs' outline of further submissions filed 8.05.2020 [1].
[8] Plaintiffs' outline of further submissions filed 8.05.2020 [2].
[9] Plaintiffs' outline of further submissions filed 8.05.2020 [3].
In support of their position the plaintiffs rely on the decision of the Full Court in Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62. Kennedy J said (Malcolm CJ and Murray J agreeing):
…. However, one requirement of that category of equitable set‑off which is relied upon in this case, as established in the last century, was that the set‑off be essentially bound up with, or impeached the title of the other party …
… The first appellants' defence does not arise "out of the same transaction as the claim; or out of a transaction that is closely related to the claim" … Nor can the appellants' defence be characterised as "flowing out of and inseparately connected with the dealings and transactions which also give rise to" the respondent's claim … The mere existence of cross demands is not sufficient … I am quite unable to accept, as was ultimately contended on behalf of the appellants, that the test is no more than whether the set‑off is reasonable in the interests of justice and fair dealing.
The fatal flaw in the defendant's position here is the lack of mutuality between the defence and the claim. As was submitted by the plaintiffs, the defendant is unable to show the asserted claims between Mighty River and the second plaintiff bear any connection to each other or arise from the same transaction or closely related transaction. The necessary nexus does not exist. There is no basis for the defendant's contentions.
There will be an order for judgment in favour of the plaintiffs. The plaintiffs should bring in a minute which reflects the judgment. The defendant ought pay the plaintiffs' costs of the application including reserved costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson16 JUNE 2020
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