Javelin Asset Management v Byrne

[2015] VSC 491

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S ECI 2015 000085

JAVELIN ASSET MANAGEMENT PTY LTD (ACN 136 367 194)	Plaintiff
v
GERARD LAURENCE BYRNE	Defendant

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JUDGE:	JUDD J
WHERE HELD:	Melbourne
DATE OF HEARING:	5 August 2015
DATE OF JUDGMENT:	17 September 2015
CASE MAY BE CITED AS:	Javelin Asset Management v Byrne
MEDIUM NEUTRAL CITATION:	[2015] VSC 491

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CORPORATIONS – Managed Investment Scheme – Group proceeding under Part 4A of the Supreme Court Act 1986 – Court approved compromise – Group member borrowers obliged to repay scheme loans – Recovery proceeding against defaulting borrower – Plaintiff a party to Deed of Settlement but not all relevant group proceedings – Entitlement of non-party to a group proceeding to enter judgment under Deed of Settlement of group proceedings.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M Costello	HWL Ebsworth Lawyers
For the Defendant	Mr M Stirling	Hunts Lawyers

HIS HONOUR:

1. By an Originating Motion filed on 26 March 2015 the plaintiff, Javelin Asset Management Pty Ltd, applied for judgment against the defendant, Gerard Laurence Byrne, under a Deed of Settlement and Release executed between the parties to the Great Southern Group proceeding on 23 July 2014.  The settlement, recorded in the Deed, was approved by the court on 11 December 2014.[1]

   [1][2014] VSC 584.

1. The defendant had entered into three loan agreements with Great Southern Finance Pty Ltd to fund his investment in managed investment schemes.  The schemes were the 2007 and 2008 High Value Timber Project; the 2007 and 2008 Diversified Olives Income Project; and the 2006 and 2007 Wine Grape Income Project.  The loans were for $126,333.33 (timber project); $551,795.83 (olive project) and $393,983.34 (wine grape project) respectively. 

1. By a Sale of Debt Agreement, dated 31 March 2009, the loans were assigned to the plaintiff.

1. Enforceability of grower loan agreements was challenged by the plaintiffs in the Group proceeding, which involved 16 separate proceedings, commenced under Part 4A of the Supreme Court Act 1986.  Each scheme in which the defendant invested was the subject matter of a proceeding, although the plaintiff was a defendant in only four proceedings.  They were:

(a)   S CI 02882/2010 (2005 and 2006 Plantations Project);

(b)   S CI 03993/2011 (2008 Almond project);

(c)    S CI 04135/2011 (the defendant’s olive project); and

(d)  S CI 04207/2011 (the defendant’s timber project).

1. The plaintiff was not joined as a defendant in the S CI 04916/2011 proceeding, which related to the wine grape project.

1. The defendant, as an investor in the timber project, the olive project and the wine grape project, was a Group Member in each proceeding within the meaning of Part 4A of the Act. He did not opt out under s 33J of the Act. While Javelin had not been joined as a defendant to the wine grape proceeding, the enforceability of the wine grape scheme grower loans were challenged in that proceeding. All proceedings were heard together, and Javelin participated in the trial.

1. Javelin was a party to the Deed of Settlement, as was the lead plaintiff in each Group proceeding.  Clause 4 of the Deed recorded the settlement of claims involving Javelin and another assignee, the Bendigo and Adelaide Bank Limited and associated entities, described as the ‘BEN Parties’:

4.1On and from the Approval Date, all Claims against the BEN Parties and Javelin and any of their respective Related Bodies Corporate, Related Entities or Related Persons will be settled as follows.

…

4.1.3Javelin will agree to vary the terms of the Loan Deeds of the Lead Plaintiffs and Group Members whose Loan Deeds were assigned to Javelin (collectively, Javelin Borrowers) in accordance with clause 5, whether or not a Javelin Borrower has ceased making repayments.

4.1.4The Lead Plaintiffs for and on behalf of themselves and all Group Members acknowledge and admit the validity and enforceability of the Lead Plaintiffs’ Loan Deeds and the Group Members’ Loan Deeds.

…

4.1.10The Lead Plaintiffs for and on behalf of themselves and on behalf of all Group Members release the BEN Parties and their Related Entities and Javelin and its Related Entities from all Claims.

…

4.1.12Each of the Lead Plaintiffs for and on behalf of themselves and on behalf of all Group Members and each of the M+K Counterclaim Claimants agree that they will not bring or pursue, or procure that a third party bring or pursue, a Claim against the BEN Parties or their Related Entities and Javelin and its Related Entities.

4.1.13Each of the BEN Parties and their Related Entities and Javelin and its Related Entities may plead this Deed as a bar or defence to any claim or action (including a claim for costs) brought by any of the Lead Plaintiffs, the Group Members or the M+K Counterclaim Claimants relating to a Claim.

…

4.1.16Each of GSMAL and its Related Entities and Javelin and its Related Entities release each other respectively from all Claims.

…

4.1.18Each of the Directors (on the one hand) and the BEN Parties and their Related Entities (on the other) release each other respectively from all Claims.

1. The defendant was included within the definition of ‘Javelin Borrower’.  Clause 5 provided:

5.1For the purposes of clauses 5.2 to 5.19, a Javelin Borrower’s loan balance is the current loan balance as at 1 May 2014 (Javelin Loan Balance).

5.2Each Javelin Borrower (whether their loans assigned to Javelin be principal and interest loans or GST loans) must within 28 days of the Approval Date, advise Javelin in writing whether he or she or it selects Option 1, 2, or 3 (as set out below at clauses 5.5, 5.6 and 5.8 and 5.11, 5.12 and 5.14 respectively) (Election);

…

1. Under the Deed, three repayment options were available to Javelin Borrowers.  Group member borrowers were required to select one option and notify Javelin in writing within 28 days from the Approval Date.  Time expired on 8 January 2015.

1. The Deed contained a default provision, under which Javelin brought this proceeding:

5.16Should a Javelin Borrower fail to make a payment or otherwise default in the performance of any of the terms at clauses 5.4 to 5.15 above (expressly including a default of the Original Loan Terms if clause 5.3.1 applies and/or the failure to provide a direct debt authority as required by clause 5.3.2), such event or events will constitute a default.

5.17If such default is not rectified within 7 days of Javelin giving notice to the relevant Javelin Borrower, Javelin will be entitled to make application to enter judgment against that Javelin Borrower (Default Judgment Provision).

5.18Should the Default Judgment Provision be enlivened:

5.18.1Javelin will be entitled to enter judgment for the Javelin Loan Balance (as defined at clause 5.1 of this Deed) prior to the application of any discount less any amounts received after 1 April 2014, plus interest from the date of default and indemnity costs of and incidental to the default and the application to enter judgment;

5.18.2Proof of the amount owing will be sufficiently evidenced by an affidavit from Javelin’s solicitors; and

5.18.3On Settlement Approval, this Deed will constitute each Javelin Borrower’s irrevocable and unequivocal consent to judgment.

5.19For the purposes only of enforcing the Default Judgment Provision, Javelin will be entitled to make application to enter judgment in either Victoria or Western Australia, at its discretion.[2]

[2]Emphasis added.

1. ‘Loan Deeds’ was defined to mean the Loan Agreements the subject of the Group proceedings and expressly included loan agreements with Group members that had been assigned by Great Southern Finance to Javelin.

1. A ‘Claim’ was defined to mean:

… any claim, demand, action, suit or proceeding for damages, debt, restitution, equitable compensation, account, injunctive relief, specific performance, declaratory relief or any other remedy, whether by original claim, cross‑claim, claim for contribution or otherwise whether presently known or unknown and whether arising at common law, in equity, under statute or otherwise and whether involving a third party or party to this Agreement and all liabilities, losses, damages, costs (including legal costs on a full indemnity basis), interest, fees, and penalties of whatever description (whether actual, contingent or prospective) arising out of, or in connection with the contents of or in the facts giving rise to, the PDSs, the Loan Agreements and or the allegations made in or the facts giving rise to each of the Proceedings.

1. The defendant failed to select any repayment option, and Javelin gave notice of default under clause 5.17.  The default was not rectified within the prescribed time, or at all.  Javelin claimed a right to move for judgment under clause 5.18. 

1. In order to establish the Javelin loan balance under clause 5.1, Javelin’s solicitor filed an affidavit in which she produced statements of account from the electronic business records of Great Southern Finance and Javelin for each of the defendants’ loans. 

1. The defendant resisted judgment on three grounds:

(1)Javelin had not established a right to sue for the loan, because there was no evidence that it had paid the price for the assignment under clause 4.1(a) of the Sale of Debt Agreement.  The defendant contended that an obligation to pay the purchase price for the loans by 31 March 2009 did not mean that the purchase price had in fact been paid.  Proof of actual payment was necessary.  He contended that in the absence of such proof, Javelin had failed to establish its right to sue.  He so contended even though, under clause 4.4 of the Sale of Debt Agreement, title to the debt passed to Javelin on the ‘Assignment Date’, which was defined as the date of the Agreement or a later date agreed by the parties in writing.

(2)Javelin had not established that money had in fact been advanced under the Loan Agreement with Great Southern Finance.  Accordingly, it had failed to prove the Javelin Loan Balance.  The defendant acknowledged that there was some evidence of a loan balance, but not the best evidence.  He contended that the business records exhibited by Javelin’s solicitor to her affidavit were inadequate and ought to be rejected.

(3)Javelin had not been joined as a defendant in the wine grape proceeding, and therefore had no legitimate role as a participant in the settlement of the proceeding relating to the wine grape loan agreement.  Consequently, Javelin had no right to bring a claim under the Deed in respect of that loan.

1. Under the Sale of Debt Agreement, the right title and interest in the assigned debts passed to Javelin on the Assignment Date.  Its right to sue did not depend upon proof that it paid the purchase price for the debts.  In any event, under clause 4.1.4 of the Deed, ‘all Group Members’ acknowledged and admitted the validity and enforceability of their loan deeds.  Subject to establishing the loan balance, Javelin claimed to be entitled to rely upon the consent of each Group Members under clause 5.18.3 to move for judgment.

1. Some evidence was required to establish the Javelin Loan Balance.  Javelin produced its business records.  The accuracy of the business records, and the calculation of balances and interest, was not challenged.  The defendant contended that in the absence of proof of advances made by Great Southern Finance, the indebtedness had not been established.  The business records of Great Southern Finance and Javelin were, according to the defendant, not the best available evidence. 

1. The documents tendered by Javelin conformed with the requirements of s 69 of the Evidence Act 2008.  Furthermore, clause 5.18.2 of the Deed expressly provided that evidence by affidavit from Javelin’s solicitors was sufficient evidence of the amount owing.  Such proof was advanced, and adequate for the purpose.

1. Finally, the defendant contended, in effect, that it was not possible for Javelin and the lead plaintiff in the wine grape proceeding to compromise their dispute, because Javelin had not been made a party to the particular proceeding.  He argued that the Deed should be construed as not extending beyond the compromise of claims between parties to proceedings.

1. In the wine grape proceeding, the lead plaintiff sought to avoid the loan obligation.  The defendant in this proceeding was a Group Member.  Great Southern Finance was a party but, unlike the other proceedings, Javelin had not been joined as the assignee of the debt.

1. In my opinion, merely because Javelin had not been joined as a party to proceeding S CI 2011 04916 (wine grape proceeding) did not prevent its participation as a party to terms of settlement which dealt with the recoverability under all loan agreements with Group Members.  The defendant’s contention that, because Javelin had not been joined as a named defendant in the wine grape proceeding, it acquired no rights under the Deed in relation to the wine grape scheme loan deed, is without substance.  The lead plaintiffs all agreed that Javelin would participate as a party to the Deed, on terms set out in the Deed.

1. The defendant could point to no authority or principle to support the proposition that parties to a proceeding could not agree upon terms of settlement with a non‑party, so as to compromise an issue in the proceeding that involved the non‑party.  Had there been any question of Javelin’s capacity to compromise claims made in the wine grape proceeding Javelin might, at any stage, have been added as a defendant.  After all, Javelin participated fully in the trial.  The defendant also had an opportunity to object to court approval of the Deed of Settlement.  Ultimately, the court approved the Deed under which the defendant became bound to repay his loans assigned to Javelin.

1. Under clause 5.18.1, Javelin is entitled to enter judgment against a defaulting Group Member in the prescribed circumstances.  The issues in the Group proceedings have merged in the Deed.  Once approved by the court, the Deed is enforceable in its terms.  Accordingly, there will be judgment for the plaintiff against the defendant in the sum of $1,073,750.92.  I will hear from the parties on interest and costs.