Hume Plasterboard Pty Ltd v Yi Hao Pty Ltd

[2022] NSWSC 183

Supreme Court

New South Wales

Medium Neutral Citation:

Hume Plasterboard Pty Ltd v Yi Hao Pty Ltd [2022] NSWSC 183

Hearing dates:

28 February 2022

Date of orders:

1 March 2022

Decision date:

01 March 2022

Jurisdiction:

Equity

Before:

Slattery J

Decision:

Judgment entered against the second defendant for $219,213.14 plus interest of $17,741.67. Second Defendant ordered to pay the Plaintiff’s costs of the proceedings.

Catchwords:

GUARANTEE – enforcement of guarantee – plaintiff supplies goods to the first defendant – the second defendant guarantees the first defendant’s financial obligations to the plaintiff – first defendant defaults on financial obligations to the plaintiff – first defendant goes into liquidation – whether the second defendant is liable as surety – quantification of the second defendant’s liability as surety.

CIVIL PROCEDURE – undefended hearing – plaintiff brings proceedings against the second defendant and other defendants in April 2020 – the first and second defendants filed a Defence to the Statement of Claim filed by a solicitor but the second defendant’s retainer of legal representation was thereafter terminated – where second defendant has not taken an active part in the proceedings after the termination of legal representation – whether adequate notice of hearing given to the second defendant – whether necessary to consider the second defendant’s pleaded defences.

Legislation Cited:

Civil Procedure Act 2005, s 100

Category:

Principal judgment

Parties:

Plaintiff: Hume Plasterboard Pty Ltd ABN 70 101 562 270
First Defendant: Yi Hao Pty Ltd ABN 84 636 111 325
Second Defendant: Jinbiao Xu
Third Defendant: Chujun Su
Fourth Defendant: Binbin Xu

Representation:

Counsel:
Plaintiff: Ms S. Hill

Solicitors:
Plaintiff: Giles Finney, CBD Law
First Defendant:
Second Defendant:
Third Defendant: Mr I. Kammoun, Kammoun Sukari Lawyers
Fourth Defendant: Mr I. Kammoun, Kammoun Sukari Lawyers

File Number(s):

2020/000108369

Publication restriction:

No

Judgment

1. The plaintiff, Hume Plasterboard Pty Ltd ABN 70 101 562 270 (“Hume Plasterboard”), applies for judgment upon a guarantee signed by the second defendant, Mr Jinbiao Xu guaranteeing the financial obligations of the first defendant, Yi Hao Pty Ltd ABN 84 636 111 325 (“Yi Hao”) to the plaintiff.

2. These proceedings and related proceedings were originally set down for five days commencing on Monday, 28 February 2022 against several other defendants. The other defendants were legally represented and they settled with the plaintiff on the first hearing day. But the second defendant did not appear, so Hume Plasterboard sought to proceed in his absence.

3. The Court is satisfied that the second defendant was served with notice of the hearing and the Court heard the plaintiff’s evidence in the second defendant’s absence. The Court is satisfied that Hume Plasterboard has made out its claim on the guarantee and this judgment gives the Court’s reasons for entering judgment with interest and costs against the second defendant.

4. This matter was commenced in the District Court and was transferred to this Court after equitable defences were raised. On 14 December 2020 these proceedings were ordered to be heard with related proceedings, Hume Plasterboard Pty Ltd v Australian Red Interior Pty Ltd. But those related proceedings settled on the first day of the combined hearing. The terms of that settlement are not relevant for present purposes.

5. The first defendant, Yi Hao, is in liquidation. The second defendant, Mr Jinbiao Xu, and the third defendant, another guarantor, Chujun Su, filed a cross-claim against Hume Plasterboard on 13 May 2020, seeking to set aside their respective guarantees. At the hearing on 28 February 2022 the third and fourth defendants were legally represented and reached a settlement with the plaintiff on the principal claim. At the same time the cross claim brought by the third defendant, as second cross claimant, was discontinued and dismissed by consent, with costs.

6. As result of that settlement the plaintiff also discontinued proceedings against the first, third and fourth defendant on 28 February 2022. Thus, the only proceedings remaining on foot are those the plaintiff brings against the second defendant.

7. The plaintiff’s claim may be shortly summarised. In an Amended Statement of Claim filed on 22 December 2021 the plaintiff claims: that the second defendant guaranteed the first defendant’s financial obligations to the plaintiff; that the first defendant defaulted on payments to the plaintiff for the supply of goods, materials and associated services between the months of December 2019 and February 2020; and that consequently $219,213.14 is due to the plaintiff under the terms of an executed Guarantee and Indemnity dated 28 October 2019 (“the Guarantee”).

8. And the plaintiff claims interest under Civil Procedure Act2005, s 100 in the sum of $219,213.14 together with interest and costs.

Service on the Defendants

9. The second defendant/first cross claimant did not appear at the hearing on 28 February 2022. Mr I. Kammoun, the solicitor who represented the third and fourth defendants, had also acted for the second defendant between 22 April 2020 and 15 May 2021, when he filed a Notice of Ceasing to Act. After Mr Kammoun’s retainer was terminated the second defendant did not appoint new solicitors to represent him. Nor has he appeared personally and any directions hearing since then.

10. When acting for the second defendant Mr Kammoun filed a defence and cross claim to the Statement of Claim. The Court is satisfied therefore that the second defendant was duly served with the Statement of Claim.

11. The second defendant was notified by mail of the 28 February 2022 hearing of these proceedings. The plaintiff’s solicitor, Mr Giles Finney sent by express post a letter to two of the second defendant’s known addresses in Auburn and Merrylands. These two addresses were taken respectively from an affidavit signed by the second defendant in the proceedings when he was legally represented, and from Mr Kammoun’s Notice of Ceasing to Act for the second defendant.

12. These letters notified the second defendant that these proceedings were listed for hearing in this Court on 28 February 2022 and warned that the plaintiff would seek to proceed in the second defendant’s absence. The Court is satisfied that the second defendant has been sufficiently notified of the hearing.

13. On 28 February 2022, when the Court convened the second defendant was not present in Court. The matter was called outside Court but there was no appearance for the second defendant and the matter proceeded.

Business between Hume Plasterboard and Yi Hao

14. The relevant facts are in a narrow compass. On 28 October 2019, a representative of Yi Hao signed Hume Plasterboard’s ‘Confidential Credit Application Form’, which contained a form of Guarantee that was signed by the second and third defendants. On 4 November 2019 the plaintiff established an account to permit the first defendant to obtain goods and materials from the plaintiff on credit. Hume Plasterboard sent a letter to the second defendant on 4 November 2019, confirming that the account (account number ‘YH07’) had been opened with the plaintiff with a credit limit of $300,000.00. The body of that letter re-affirmed that the second defendant was a personal guarantor of the first defendant’s financial obligations to the plaintiff. Hume Plasterboard’s ‘Credit Account Terms and Conditions’ (“Hume Plasterboard’s Account Terms”) and a copy of the Guarantee were attached to the letter. The second defendant’s signature is affixed to page 4 of the credit application form. The second defendant also signed an ‘Email Consent Form’ on 28 October 2019, authorising Hume Plasterboard to issue invoices and statements of account to the second defendant’s nominated email address.

15. The first defendant commenced receiving goods and materials from the plaintiff on credit, on 30-day payment terms from the statement issue date. Monthly statements were issued as and from December 2019. On 24 February 2020, Zac Wang, an account manager for the plaintiff company, met with Mr Binbin Xu on behalf of the first defendant. Mr Binbin Xu is the second defendant’s cousin. At the time of the meeting, the first defendant’s account had already reached an outstanding amount of approximately $265,000, without the plaintiff receiving any substantial repayment. Mr Binbin Xu proposed a payment plan for the first defendant company involving the payment of between $32,000 and $50,000 within the week, and $50,000 to $70,000 before the end of March. This plan was recorded the same day in an email from Mr Wang to Ms Cindy Williams, Hume Plasterboard’s credit controller.

16. On 2 March, the second defendant sent a letter to Ms Williams proposing a further repayment plan. The repayment plan was as follows:

“On 28/02/20, I’ve paid $30,000 and then I will pay $70,000 on 09/03/20 and $90,000 on 15/03/20 to clear the 90 days payment and another $90,000 on 02/04/20 to clear the 60 days payment.”

17. The 2 March payment plan was not honoured. On 18 March 2020, Mr Wang met with Mr Binbin Xu. A third payment plan was proposed on behalf of the first defendant, under which it would make payments of $50,000 on 24 March 2020 and 31 March 2020, a payment of $70,000 on 15 April 2020 and a payment of $100,000 on 30 April 2020. This plan was also recorded in an email from Mr Wang to Ms Williams on the same day. This plan was also not honoured. On 24 March 2020, the first defendant’s account accrued its first interest charge. On 25 March 2020 the first defendant’s account received its first and last substantial repayment, a sum of $50,000, apparently made from a credit card.

18. On 20 March 2020 a Final Notice was sent by Ms Williams on behalf of the plaintiff to the first defendant, as well as the second and third defendants as guarantors. The final notice demanded payment of the balance of the first defendant’s outstanding account as at 31 March 2020, in a total amount of $219,213.14. The Court is satisfied this amount was and has remained outstanding from the first defendant to the plaintiff from 31 March 2020. On or around 1 April 2020, the plaintiff engaged CMSA Pty Ltd, a debt-recovery service, to assist in the recovery of amounts owing to the first defendant and guaranteed by the second and third defendants.

The Effect of Hume Plasterboard’s Account Terms and the Guarantee

19. Hume Plasterboard’s Account Terms set out the terms for the operation of the account and the terms for overdue accounts. Some relevant terms are extracted below:

1.         TERMS OF ACCOUNT

a)

   Should your application be approved, payment of your account must be made by the due date being 30 days from the end of the month.

…

If you fail to observe any of the above terms, or you have made a misrepresentation to the Supplier or given information which is untrue, credit facilities may be withdrawn and all charges made to your account will become due immediately.

…

2.         OVERDUE ACCOUNTS

a)   Any amount not paid by the due date will, at the discretion of the Supplier, be subject to interest charged at 1.5% per month.

The parties agree that this amount is a genuine pre-estimate of the Supplier’s damages and is not a penalty.

b)   The Customer grants to the Supplier express legal and equitable charge over the customer’s freehold and leasehold property for the amounts due on all overdue accounts…”

20. The plaintiff’s statement of account dated 1 April 2020 shows that as of 31 January 2020, the day after the December monthly account of $158,718.19 had fallen due, none of the outstanding money had been repaid. The second defendant therefore was in default under Hume Plasterboard’s Account Terms, clause 1(a) on 31 January 2020 and the account was due and payable from that day. As of 31 March 2020, an account statement shows that $219,213.14 remained as the net balance outstanding on the account. The first defendant has remained in default to the plaintiff in this sum.

21. The Guarantee forms part of Hume Plasterboard’s Account Terms. The key terms within the Guarantee are extracted below:

“1.   I will indemnify the Supplier against any losses, costs, charges and the expenses of any nature, which it might incur as a result of any default by the Customer or arising under the Guarantee. I agree that I will pay any stamp duty assessed on the Guarantee.

2.   I will also be responsible to the Supplier for all outstanding monies due now or at any time in the future for Goods supplied by the Supplier to the Customer from time to time.

3.   Both my Indemnity and my Guarantee are continuing security and will not be affected [the Guarantee here sets out a number of events that are not relevant to the matters in issue] …

…

4.   I agree that each application for credit made by the Customer to any related body corporate of the Supplier is deemed to have been accepted from the date of the first invoice to the Customer; and without further notice to me, the Guarantee extends to all liabilities from the Customer to that related body corporate.

5.   The Guarantee and Indemnity extends to credit given to the Customer in the future by a company which is not now, but at the same time which the credit is extended, has become a related body corporate of the Supplier and may in such case be enforced by the Supplier.

…

9. The Guarantor hereby agrees to charge all the equitable interest in freehold and leasehold property. The Guarantor agrees to deliver to the Supplier. Within seven (7) days of demand, a properly executed Memorandum of Mortgage… which includes a covenant providing that interest may be charged on all outstanding monies at rates set from time to time by Section 94 pf the Supreme Court Act 1970 (NSW)…

CERTIFICATE OF GUARANTEE

EXECUTED AS A DEED

Agreement to Terms of the Personal Guarantee and Indemnity

By signing below as Guarantor, in the presence of a Witness, I certify that I have read the terms of the Personal Guarantee and Indemnity Agreement and understand its terms and that it is an important legal document…”

22. The plaintiff’s evidence and the form of the document itself show that the second defendant signed the certificate of guarantee. Moreover, the second defendant admits on the pleadings filed on his behalf whilst Mr Kammoun was acting for him, that he guaranteed amounts owing to the plaintiff by the first defendant, subject to various defences. The second defendant did not file a defence to the Amended Statement of Claim. The second defendant’s defence to the original Statement of Claim pleaded that although he signed the Guarantee, he could not read or write English, could not read the Guarantee, and that the plaintiff did not adequately explain the Guarantee to him. It also pleaded that he did not receive any legal advice and was ‘mistaken as to the nature, force and effect of the Guarantee’.

23. But the second defendant did not appear at the hearing to propound or support any of these defences. The Court can act on the admission on the pleadings and the other evidence that the second defendant signed the Guarantee. The second defendant is bound by the Guarantee under which he both indemnified and guaranteed the plaintiff against losses as a result of the financial default of the first defendant to the plaintiff. The default and losses, being the first defendant’s outstanding liability to the plaintiff from 31 March 2020 in the sum of $219,213.14 have been established to the Court’s satisfaction.

Calculation of interest

24. The plaintiff seeks interest on the monies owed in accordance with Civil Procedure Act 2005, s 100. The plaintiff has provided a table of the claim for interest on $219,213.14 that is calculated in accordance with the following schedule:

Start Date	End Date	Days	Rate	Amount Per Day	Total
31/03/2020	30/06/2020	92	4.75%	$28.4498	$2617.38
01/07/2020	31/12/2020	184	4.25%	$25.4551	$4683.73
01/01/2021	30/06/2021	181	4.1%	$24.6239	$4456.93
01/07/2021	31/12/2021	184	4.1%	$24.6239	$4530.81
01/01/2022	28/02/2022	59	4.1%	$24.6239	$1452.81
Total	700	$17741.67

25. The Court is satisfied that these interest calculations are correct.

Conclusion and Orders

26. For these reasons the Court makes the following judgments and orders:

1. Judgment for the Plaintiff against the Second Defendant in the sum of $219,213.14.

2. Judgment for interest against the Second Defendant calculated from 31 March 2020 to 28 February 2022 in accordance with s 100 of the Civil Procedure Act 2005 in the amount of $17,741.67.

3. Order that the Second Defendant pay the Plaintiff’s costs of these proceedings.

4. Direct the solicitors for the plaintiff to forward a copy of these reasons to the two street addresses of the Second Defendant at which notice of the hearing on 28 February 2022 was given.

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Decision last updated: 01 March 2022