Iris Management v Formula Uno Pty Ltd
[2010] VSC 434
•24 September 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 6986 of 2007
| IRIS MANAGEMENT PTY LTD BEACHFRONTS PTY LTD | Plaintiffs |
| v | |
| FORMULA UNO PTY LTD CARLO SAMMARRO REGISTRAR OF TITLES | Firstnamed Defendant Secondnamed Defendant Thirdnamed Defendant |
| MAXIMILLIAN JOSEPH SACHS | Third Party |
AND BETWEEN:
| FORMULA UNO PTY LTD CARLO SAMMARRO | Plaintiffs by Counterclaim |
| v | |
| IRIS MANAGEMENT PTY LTD BEACHFRONTS PTY LTD | Defendants by Counterclaim |
AND BETWEEN:
| DIGI DISKS & DUBS PTY LTD | Plaintiff by Counterclaim |
| v | |
| MAXIMILLIAN JOSEPH SACHS | Defendant by Counterclaim |
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JUDGE: | BEACH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 September 2010 | |
DATE OF JUDGMENT: | 24 September 2010 | |
CASE MAY BE CITED AS: | Iris Management & Anor v Formula Uno Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 434 | |
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PRACTICE AND PROCEDURE – Settlement of proceeding – Terms of settlement not complied with – Application by first plaintiff for judgment – Judgment for the first plaintiff.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs and Defendants by Counterclaim | Mr B.J. McCullagh | Sam Holt |
| For the First and Second Defendants and Plaintiffs by Counterclaim | No appearance | |
| For the Third Defendant | No appearance | |
| For the Third Party | Mr B.J. McCullagh | Sam Holt |
| For the Plaintiff by Counterclaim | No appearance | |
| For the Defendant by Counterclaim | Mr B.J. McCullagh | Sam Holt |
HIS HONOUR:
This proceeding came on for trial on 25 March this year. It was heard over five days, before terms of settlement were entered into and consent orders were made. The background to the proceeding is as follows.
On 11 February 2005, Formula Uno mortgaged a property owned by it and situated at 206 Jetty Road, Rosebud (“the property”).[1] On that day, Formula Uno entered into two mortgages as follows:
(a) A mortgage to Iris Management Pty Ltd to secure an advance of $400,000 (“the first mortgage”).
(b) A mortgage to Beachfronts Pty Ltd[2] to secure an alleged advance of $35,000 (“the second mortgage”).[3]
[1]More particularly, being all the land described in Certificate of Title Volume 9519, Folio 475.
[2]Referred to in some of the documents as Beachfront Pty Ltd.
[3]Whilst the second mortgage originally recorded the mortgagee as Beachfront Constructions Pty Ltd (a different company from Beachfronts Pty Ltd), the second mortgage was rectified by order of the Court made 31 March 2010.
Without going into the terms of the first and second mortgages, the mortgages provided that the due date was 11 February 2007. Iris Management and Beachfronts (who I will collectively refer to as “the plaintiffs”) claimed that as at the due date, Formula Uno was in default and this default was never remedied.
Formula Uno and the guarantor of each mortgage, Mr Carlo Sammarro, (whom I will collectively refer to as “the defendants”) disputed that there was any default as at the due date. The defendants said, to the contrary, they had made payments up to that time in excess of those required to be paid by the terms of the mortgages.
The parameters of the dispute between the parties were that on the one hand, the plaintiffs claimed that an amount of $813,966.26 inclusive of interest up to 26 March 2010 was owed by the defendants, whereas the defendants asserted that the balance owing as at 11 February 2007 was either $302,085.83; alternatively, $337,339.16; alternatively, $347,339.16.[4]
[4]See paragraph 1 of the plaintiffs’ proposed orders dated 25 March 2010 and paragraph 1 of what, at trial, were then the defendants’ proposed orders (undated).
Whilst the plaintiffs sought payment in the sum of $813,966.26 and possession of the property, the defendants (acknowledging that there was an outstanding balance) sought:
(a) an order that the first mortgage be discharged on condition that Formula Uno pay Iris Management the balance outstanding ($302,085.83 or $337,339.16 or $347,339.16) plus interest from 11 February 2007 to the present; and
(b) an order that the second mortgage be discharged.[5]
[5]See paragraphs 2 and 4 of what, at trial, were then the defendants’ proposed orders (undated).
Additionally, Digi Disks and Dubs Pty Ltd,[6] a company associated with the defendants and a plaintiff by counterclaim, sought damages against Mr Maximillian Joseph Sachs, the third party and defendant to Digi Disks’ counterclaim. The basis of the counterclaim related to representations alleged to have been made by Mr Sachs that he was skilled in finance and that it would be financially advantageous for Digi Disks to follow his advice and directions. These representations were said to have been made in trade or commerce and/or under circumstances giving rise to a duty of care; were alleged to have been misleading and/or false and were alleged to have caused Digi Disks to suffer loss and damage as a result of Digi Disks following Mr Sachs’ advice and directions.
[6]Referred to in some of the documents as Digi Discs and Dubs Pty Ltd.
Whilst the trial was still part-heard, the parties (on 30 March 2010) settled the proceeding. The settlement provided for Beachfronts to lend Formula Uno the sum of $500,000 to discharge the first and second mortgages. The amount to be lent was to bear interest at the rate of 15% per annum payable monthly in arrears.[7] Interest was agreed to “neither be payable nor commence until 1 June 2010”.[8] $325,000 of this loan was to be repayable on or by 30 May 2010; and the balance of $175,000 was to be repayable on or before 30 September 2011. The loan was to be secured by a registered first mortgage (in the form recommended by the Law Institute of Victoria) over the property.
[7]Although, clause 1 of the terms provided that if the interest was paid within seven days of it becoming due, then interest was to be calculated at the rate of 10% per annum.
[8]Clause 2 of the terms of settlement.
On 31 March 2010, I ordered by consent, among other orders:
“A declaration that Formula Uno Pty Ltd is indebted to Iris Management Pty Ltd in the sum of $500,000 including interest to 31 March 2010 pursuant to [the first mortgage]”.
On 12 April 2010, the solicitor for the plaintiffs tendered an appropriate form of mortgage to the solicitor for Formula Uno. In breach of the terms of settlement, this mortgage has not been executed by Formula Uno. Further, Formula Uno has failed to pay the sum of $325,000 on or by 30 May 2010 (or any part thereof), and has failed to pay any interest.
On 22 June 2010, the solicitor for the plaintiffs “caused to be served by post addressed to Formula Uno … a demand in writing dated 22 June 2010 seeking … payment of $503,633.54 pursuant to [the first mortgage]”. The document was headed “Notice pursuant to s 76 of the Transfer of Land Act 1958”.
On 9 July 2010, the solicitor for the plaintiffs received a letter from the then solicitor for Iris Management acknowledging receipt of the “section 76 notice”, and contending that the notice was defective.[9] The letter went on:
“Our client has now received an unconditional offer to purchase the [property] in writing for the sum of $530,000 by a 5% deposit and the balance on or before 4/1/2011. Our client is proposing to accept this proposal on the basis that the money received would settle the loan outstanding.”
[9]One problem which appeared on the face of the document was the fact that whilst the notice suggests it was served in relation to the first mortgage, the loan arrears section of the document suggests that it was served pursuant to the mortgage referred to in the terms of settlement. That said, the interest rate of 10.25% from 1 June is neither the 15% nor the 10% rate referred to in the terms of settlement.
By summons filed 14 September 2010, the plaintiffs seek orders:
“1. That there be judgment for Iris Management Pty Ltd … against Formula Uno Pty Ltd … in the sum of $533,698.72.
2. That Formula Uno Pty Ltd deliver up possession of [the property].
3. That Formula Uno pay the costs of this application on a solicitor client basis in default of agreement to be taxed”.
The amount of $33,698.72 in the sum of $533,698.72 referred to in paragraph 1 of the plaintiffs’ summons, represents interest calculated at 15% per annum from 1 April 2010 to 10 September 2010. However, by clause 2 of the terms of settlement, interest was neither payable nor to commence until 1 June 2010.
In any event, no mortgage having been entered into as contemplated by the terms of settlement, the amount currently owed by Formula Uno is owed under the first mortgage and pursuant to the terms of settlement and declaration made on 31 March 2010 – viz, $500,000 plus interest (either in accordance with the terms of the first mortgage or pursuant to statute).
Iris Management is currently owed $500,000 plus interest, Notwithstanding the mortgage, the terms of settlement and the orders made on 31 March, Formula Uno has paid nothing and taken no step to honour its obligations. In my view, Iris Management is entitled to judgment in the sum of $500,000 plus interest at 10% per annum (being the penalty interest rate) from 1 April 2010 to date (being an additional amount of $24,246.57).
Accordingly, there will be judgment for Iris Management Pty Ltd against Formula Uno Pty Ltd in the sum of $524,246.57 inclusive of interest to date. Additionally, there will be an order that Formula Uno pay the costs of and incidental to this application on a solicitor/client basis, to be taxed in default of agreement.
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