Mailpostie Pty Ltd v Kritas
[2013] VCC 506
•10 May 2013
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted |
AT MELBOURNE
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-11-01944
| MAILPOSTIE PTY LTD & ORS | Plaintiffs |
| v. | |
| PETER KRITAS & ANOR | Defendants |
---
JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 30 April 2013 | |
DATE OF JUDGMENT: | 10 May 2013 | |
CASE MAY BE CITED AS: | Mailpostie Pty Ltd & Ors v. Kritas & Anor | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 506 | |
REASONS FOR JUDGMENT
---
Catchwords: Practice and procedure – Default judgment – Application to set aside – Whether defence on the merits sufficiently demonstrated – No defence to claim based on guarantee – Foreshadowed cross-claim not adequately detailed in affidavit material – Judgment set aside only as to part.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr I. Percy | ComLaw |
| For the First Defendant | Mr P. Kritas (in person) |
HIS HONOUR:
1In June 2009, the second and third plaintiffs, Graeme and Monika Underwood, invested $1.525 million with the franchisor of the business known as “MailPost”, which involved the distribution of unaddressed mail. The first plaintiff, Mailpostie Pty Ltd, was used by Mr and Mrs Underwood as the vehicle for the investment.
2The franchisor, MailPost Australia Ltd, the associated company MailPost Postie Network Victoria Pty Ltd (“MPNVIC”) and the MailPost business had been established by the first defendant, Peter Kritas. The negotiations leading to the investment by Mr and Mrs Underwood had been conducted with Mr Kritas, and on occasion his wife Angela Kritas, who was the second defendant.
3In the proceeding, the plaintiffs sought damages primarily alleging misleading and deceptive conduct by Mr and Mrs Kritas which induced the Underwoods to invest in the MailPost business franchise.
4In about 2010 or 2011, Mr and Mrs Kritas separated. Mrs Kritas was served with the Writ and eventually defended the proceeding through solicitors. Difficulties were encountered by the plaintiffs in serving Mr Kritas. I granted an order for substituted service on 8 November 2011 permitting service on Mr Kritas by post addressed to what were believed to be his residential and business premises.
5Mr Kritas was served in accordance with my order. He failed to file an appearance and a default judgment for damages to be assessed was entered on 16 December 2011. Subsequently, a date was set for the hearing for the assessment of damages.
6On 6 March 2013, Mr Kritas issued a summons seeking to set aside the default judgment. On 13 March 2013, both the summons and the assessment for damages came on for hearing before me. Mr Kritas informed the Court that he needed time to engage a lawyer to appear for him upon the hearing of his application. The application and the hearing for the assessment of damages were both adjourned for hearing on 29 April 2013.
7The Court must determine whether the default judgment should be set aside. This will involve a consideration of:
a.whether Mr Kritas has shown that he has a defence on the merits in relation to the claim;
b.whether Mr Kritas has provided an explanation as to why he allowed judgment to be entered;
c.whether any delay by Mr Kritas in bringing the application to set aside judgment has caused prejudice to the plaintiff such that the Court in the exercise of its discretion considers that the judgment should not be set aside.
Explanation for the failure to file an appearance
8Mr Kritas was not served personally with the Writ. The order for substituted service provided for service by post at addresses identified as Mr Kritas’ residential and business addresses. Mr Kritas has sworn that he did not receive the documents. His movements after the separation from his wife are unclear. Mr Kritas said that he lived with his father for some time before he reconciled with his wife. Both he, and others, were wary about disclosing information because of the fallout from the collapse of the MailPost business and, apparently, also to protect his children.
9I do not propose to analyse the evidence in any more detail. Notwithstanding that Mr Kritas’ account, at times, seems unlikely, it is possible that for many months, even after his wife had been served with the Writ, he remained ignorant of the proceeding. Accordingly, the explanation given by Mr Kritas for his failure to file an appearance in the proceeding will have little importance in determining the application.
Delay by Mr Kritas in bringing the application
10The application to set aside the default judgment was filed on 6 March 2013. On 9 September 2012, Mr Kritas swore an affidavit in the proceeding on behalf of his wife, the second defendant, at the request of her solicitors. The affidavit was directed to the issue of whether the plaintiffs had made adequate discovery, particularly in relation to the plaintiffs’ “due diligence” undertaken in May and June 2009.
11Although Mr Kritas said in submissions that his wife’s solicitor had told him very little about the proceeding, it is clear that from early September 2012, Mr Kritas was aware a proceeding had been issued, that he was a party and the general nature of the allegations. The allegations included that the plaintiffs had been induced to make the investment as a result of the defendants’ representations. As a consequence, it was considered by Mrs Kritas’ solicitor, and Mr Kritas, that the due diligence undertaken by the plaintiffs was a relevant issue in the proceeding.
12Mr Kritas was served with Court documents in September 2012, including the default judgment and notice of the hearing for the assessment of damages. Mr Kritas consulted a solicitor, although apparently not one experienced in commercial litigation. Through intermediaries, Mr Kritas explored the possibility of resolving the dispute. No real explanation is offered as to why it took from September 2012 until March 2013 before the application to set aside judgment was issued.
13Plaintiffs’ counsel, Mr Percy, submitted that the plaintiffs had in the meantime suffered prejudice which could not be remedied, if the judgment were set aside. On 8 March 2013, the plaintiffs and the second defendant sought consent orders from the Court dismissing the claim against her with no order as to costs. A few days later, the summons issued by Mr Kritas on 6 March 2013 was served with the supporting affidavit on the plaintiffs.
14During submissions, Mr Percy asserted that the plaintiffs would not have settled with the second defendant if they had known of the application by Mr Kritas. These matters had not been referred to in the plaintiffs’ affidavit material. After taking instructions, Mr Percy declined the opportunity offered by the Court for him to make an application to call oral evidence of these matters. He submitted that the mere fact of the dismissal of the proceeding against the second defendant before service of Mr Kritas’ application was sufficient to establish prejudice to the plaintiff.
15In my view, the absence of evidence concerning the circumstances of the settlement with the second defendant makes it is impossible to say how that settlement impacts on the claim against Mr Kritas. Accordingly, the delay by Mr Kritas in bringing the application to set aside judgment would also not be a decisive matter in the determination of the application.
Representations alleged in the Statement of Claim
16Most of the representations alleged in the Statement of Claim, as founding the misleading and deceptive conduct causes of action, are said to have been made orally by Mr and Mrs Kritas to the Underwoods during meetings at a restaurant or at the Underwood’s home in May 2009. Examples of these representations include that MailPost Australia “is going well”, it “could not fail” because it had “all these smart and experienced people on board”, “the defendants have put everything they own into the MailPost business”, “the MailPost business would make all of the plaintiffs and defendants lots of money”, “the plaintiffs were investing in a new branch of a successful business that had already been launched” in other states.
17These statements, even if established, would arguably amount to no more than “puffery”. Further, there is clear evidence that the plaintiffs had carried out extensive due diligence before they invested in the business. The plaintiffs engaged an accountant, solicitors and a barrister who was a “specialist in start-up businesses and venture capital” to carry out this task. These circumstances, in my view, give rise to an arguable defence that would ordinarily be very persuasive in the determination of the application.
18However, the plaintiffs make further allegations of representations relating to a specific issue which was of particular concern to Mr and Mrs Underwood in reaching their decision to invest in the business.
19The Underwoods had entered into a contract for the purchase of a property at Mt Hotham. They did not wish to proceed with the purchase but were concerned that on the settlement date of 7 January 2010, they may be required to find the sum of about $762,500 plus GST to settle the transaction.
20In these circumstances, the Underwoods wanted to either limit their investment or put in place a mechanism by which they could be assured that the sum of $762,500 plus GST would be returned to them by the settlement date in January 2010.
21In the Statement of Claim it is alleged that in conversation at the Underwood’s home on 27 May 2009, the following matters were discussed:
a.Mr Kritas: “You are investing in a new branch of a successful business that had already been launched in New South Wales, South Australia, Western Australia and Queensland”;
b.Mr Kritas: “These other Agents of MailPost Australia are prospering and creating a good income, Victoria will do the same”;
c.Mr Kritas: The plaintiffs “would receive 4 million shares, that is 40% of the MailPost Postie Network Victoria”;
d.Mr Kritas: “I need another $1.525 million from you to make MailPost look good on the books and that this money would enable me to get the corporate business”;
e.Mr Kritas: The plaintiffs “had to invest $1,525,000 by making two separate deposits. Half prior to the new financial year and the other half after the 30 June”;
f.Mrs Underwood “raised with him concerns about investing so much money into the MailPost Business because of a Mt Hotham deal that was to settle”;
g.Mr Kritas: “You would receive the $762,500 whenever you need it to pay for the Mt Hotham block and if you don’t settle you will receive the money back regardless on the 7th January 2010”;
h.Mr Kritas: “With my hand on my heart and as my family as a guarantee, your overall investment would be $726,500”;
i.Mr Kritas: “I will leave open the option for you to buy all the 100 zones. We do have other investors that are keen to put money into MailPost to help the expansion and even to buy your stake of the company if you were to invest”;
j.Mr Kritas: “This would still leave the Plaintiffs with a big quantity of shares in MailPost Australia and MailPost Postie Network Victoria…I will personally guarantee the buy-back of half the zones you are buying”.
22Victoria had apparently been divided into 100 “Business Development Partner Zones”. The intention was that the plaintiffs would, by investing in the business, be able to sell the zones to other purchasers. Mr Kritas was offering that the vendor, MailPost Postie Network Victoria Pty Ltd, would buy back 50 zones in the event that they remained unsold, at an agreed purchase price to be paid in full by 7 January 2010 and payment pursuant to the buy-back would be personally guaranteed by Mr Kritas.
23Over the last days of June 2010, Mr Kritas forwarded written offers to the Underwood interests, written by him as “Chief Executive Officer” of MailPost Australia Limited. In the affidavit material filed in the application there were the following statements made about these offers:
a.in his affidavit sworn 13 March 2013, Mr Underwood stated: “I told Peter that I was reluctant to commit to a purchase of in the order of $1.69 million. I explained to him the risk that Monica and I might have to complete the purchase at Mount Hotham. Peter then proposed that the sale be split in two giving us a right to sell back 50 zones and that he would guarantee the repayment. This is recorded in Part C of the letter (Rev 4). Paragraph 12 states: “I will provide you with my personal guarantee for the due and punctual payment of the moneys detailed in paragraphs 10 and 11”. This personal insurance was significant and was the thing that decided us to proceed. Without this “personal guarantee” we would never have gone ahead”;
b.in his affidavit sworn 8 April 2013, Mr Kritas stated: “I say that the context of the conversation is wrong and that any guarantee I may have given was conditional. The structure of the splitting of the investment was to give meaning to the conditional guarantee and allow the ordered marketing and sale of the 50 areas. I cannot comment on the thoughts of Mr Underwood. As to the letter referred to as being (“Rev 4”), I enclose a true copy of the same and mark it as “PK4”. A closer reading of the said document shows that there is no paragraph 12, nor is there any mention in regards to “I will provide you with my personal guarantee for the due and punctual payment of the moneys detailed in paragraphs 10 and 11””;
c.in his affidavit sworn 26 April 2013, Mr Underwood stated: “The letter of offer went through various drafts. This occurred between 26 and 30 June 2009. Now produced and shown to me and marked with the letters “GEU-10” is a copy of Letter of Offer – Revised (2) dated 30 June 2009, signed and initialled by Peter Kritas. The Letter exhibited appears in the Court Book at pages 292 to 295. This Letter of Offer was received by me after the one exhibited at “PK4” to Mr Kritas’ Affidavit. The final version, “Revision (4)”, is exhibit “GEU-2” to my further affidavit sworn 8 April 2013. This was the letter we accepted and acted upon”.
24At the hearing of the application, Mr Kritas conceded that “Letter of Offer – Revision (4)” dated 30 June 2009 was the offer accepted by the plaintiffs. The letter dated 30 June 2009 contained the following terms and conditions under the heading “Part C”:
“You have informed us that you have terminated a deal to purchase a property at Mount Hotham but could be forced to complete the purchase amounting to $800,000.00 or thereabouts at settlement. To assist you with the cash-flow requirements for the settlement of that property, we agree to buy-back 50 BDP Zones as follows:
9.On the acceptance of the offer contained in this letter and your payment of all of the monies due, you consent to:
(i)MPNVIC progressively selling off fifty (50) BDP Zones as detailed in Cluster Nos. 11 to 20 (inclusive) in Annexure “A” herein; and
(ii)at a selling price (Agency Fee and SAF) to be determined solely by MPNVIC; and
(iii)on settlement of the sale of each Zone, the price paid to you for each Zone will be $15,250.00 plus GST inclusive of Agency Fee and SAF (“Purchase Price”).
10.Should you become liable to proceed with the Mount Hotham property purchase before we complete the sale of your fifty BDP Zones and subject to reasonable notice, we agree to buy back the remaining unsold Zones up to a maximum of fifty Zones (sales plus buy-backs) at the same Purchase Price for each Zone with payment to be made to you no later the 28 days from the date of written notice.
11.Notwithstanding the outcome of Mount Hotham, we agree to buy back the remaining unsold Zones up to a maximum of fifty Zones (sales plus buy-backs) at the same Purchase Price for each Zone by 31 December 2009 and the last date of payment to you by 7 January 2010.
12.I will provide you with my personal guarantee for the due and punctual payment of the monies detailed in Paragraphs 10 and 11 herein.”
25Following the investment of monies in the business by the plaintiffs, there was correspondence between Mr Kritas and Zenon Theocharous, the Senior Accountant of MailPost Australia Limited, and with the company’s accountants which relevantly read as follows:
a.email Mr Kritas to Mr Theocharous dated 2 July 2009:
“Graham [sic] has negotiated that 50 zones will be refunded as soon as 8 weeks if his hearing at the eom goes against him. I had to give a Personal Guarantee for the return of these funds and do not feel comfortable being in the hands of M.P.A. I will talk to you on Friday about this matter.
02/07/2009
SAFVIC
$220,000.00
02/07/20
LOAN REPAY MP
$83,000.00
02/07/2009
Underwood iPP Stock
$5,250.00
02/07/2009
Graham [sic] Guarantee Refund
$838,750.00
Can u send me a list of Creditors so I can review before our meeting and we can decide who to pay. As for Ken Pridmore can u tell me when his last Directors Fees were paid. Eg. $2200 monthly”;
b.letter Mr Theocharous to Mr Kritas, undated:
“In regards to the funds transferred out of MailPost Australia Limited on the 2nd July 2009 for $838,750 can you provide documentation as to whether the funds are being held, should this transaction have required board approval prior to occurring?
The funds should be held within a trust in MailPost Australia Limited or MailPost Postie Network Victoria Pty Ltd can you please organise the transfer of the funds into a new account for visibility if we do have to return the funds to Graeme Underwood in the foreseeable future”.
c.letter Mr Theocharous to H M & Associates, the companies’ accountants, dated 16 August 2009:
“Pursuant to our conversation please review the following.
MailPost Postie Network Victoria had entered into an agreement with Mailpostie Pty Ltd for the purchase of 50 BDP areas within Victoria for $838,750. This sale was booked as revenue on the 30th June 2009 with payment received on the 1st July 2009.
These funds were transferred and held in escrow by Peter Kritas on behalf of Graeme Underwood as the sale could be refunded on the 31st December 2009 as per his agreement.
In my opinion these funds should be returned to MailPost Australia Limited or MailPost Postie Network Victoria and held in trust for visibility if we do have to return these funds to Mr Underwood.
Can you please advise if this should be the correct treatment of this transaction?
If you require anything further please do not hesitate to contact me”.
26In the Statement of Claim, the plaintiffs have pleaded the terms contained in Part C of the letter of offer dated 30 June 2009 as representations by Mr Kritas, as follows:
“(a)that MPNV [MailPost Postie Network Victoria Pty Ltd] agreed to buy-back 50 Business Development Partner Zones in the event they remained unsold at a purchase price of $15,250 plus GST each by 31 December 2009 with the last date for payment to the first plaintiff being 7 January 2010;
(b)the First Defendant personally guaranteed the due and punctual payment of the sum of $762,500 (plus GST of $76,250)” (“the guarantee claim”).
27In my view, these representations are of a different nature to those relating to the likely success of the business and the financial returns if the plaintiffs were to invest. The matters relating to the plaintiffs’ need for money to settle the Mt Hotham purchase in early January 2010 had apparently been discussed as early as 27 May 2009.
28The importance of these matters to the plaintiffs is apparent from the fact that in the discussions in the last few days before an agreement was reached, the terms of Mr Kritas’ written offer included a more precise mechanism for the buy-back and the personal guarantee of Mr Kritas.
29These representations could not be regarded as “puffery”, and the “due diligence” undertaken by the Underwoods had only passing relevance. A claim is also made in contract to enforce the personal guarantee of Mr Kritas in respect of the buy-back of the unsold Business Development Partner Zones. It is important therefore to analyse the possible defences raised by Mr Kritas to this part of the claim. Mr Kritas has not filed a draft defence (or counterclaim) and it has been necessary to examine with care the affidavits he filed to see what possible defences might arise from the facts deposed to.
30It would appear Mr Kritas contends that:
a.the guarantee was “conditional”. Upon what his guarantee was conditional is not clearly stated. Mr Kritas submitted upon the hearing of the application that it was necessary the buy-back should be a viable option at the time it was required;
b.prior to the date upon which the buy-back was required, MailPost Postie Network Victoria Pty Ltd had had an external administrator appointed (23 December 2009) and was deregistered on 15 June 2012;
c.by December 2009, it was not possible to sell the Business Development Partner Zones because there had been an ACCC investigation of the business commencing in the second half of 2009 which had been required to be disclosed to potential purchasers and therefore no sales had been possible;
d.Mr Underwood resigned as a director of MailPost Postie Network Victoria Pty Ltd on 11 December 2009. He was replaced later in December 2009 by Mr Glen Davis. Mr Kritas said that Mr Davis was put up by Mr Underwood and it was their intention to put the company into liquidation so that Mr Underwood and others could pursue similar business interests in a postal business, EziPost, without the competition of MailPost Australia Limited.
31The first plaintiff had made the following payments to MailPost Australia Limited following agreement between the parties:
a.on 30 June 2009, $873,850 (inclusive of GST);
b.on 1 July 2009, $795,850 (inclusive of GST).
32The ACCC investigation resulted in a Federal Court proceeding in 2009 with MailPost Australia Limited, MailPost Postie Network Victoria Pty Ltd and Mr Kritas as respondents. Breaches of the Trade Practices Act were alleged in relation to the sale of franchises in MailPost Australia Limited and MailPost Postie Network Victoria Pty Ltd. The proceeding was concluded in April 2010 with orders apparently made against Mr Kritas preventing him from further participating in the MailPost business or any other franchise business for a period of five years.
33Pursuant to clause 10 of the offer forming part of the agreement reached on 30 June 2009, the plaintiffs on 17 November 2009 gave notice that they required MailPost Australia Limited and/or MailPost Postie Network Victoria Pty Ltd to buy-back 50 Business Development Partner Zones for a purchase price of $834,850 (inclusive of GST). By clause 10, payment was required to be made “no later the [sic] 28 days from the date of written notice”. The payment was not made.
34An external administrator was appointed to MailPost Australia Limited on 4 January 2010. The company was deregistered on 9 May 2011.
Alleged breach of franchising arrangements
35In the Statement of Claim, the plaintiffs allege a breach of the Franchising Code of Conduct in “the promotion of the MailPost business by the defendants to the plaintiffs”. As a consequence, it is said that the investment agreement “is rendered void and unenforceable” and the plaintiffs are entitled to have their investment repaid.
36Mr Kritas said that during the course of the plaintiffs’ due diligence, “the breach of the franchising code was discovered and brought up”. The matter was investigated by MailPost’s in-house counsel and “with an outside law firm before an investment was made by the plaintiffs. This discovery did not discourage the plaintiffs from any investment” as the breach was rectified.
37In relation to this claim by the plaintiffs, I consider that Mr Kritas has raised an arguable defence.
Cross-claim proposed by Mr Kritas
38Mr Kritas alleges that, “The plaintiffs in the manner of their behaviour created a situation that put them into a conflict of interest with their investment and they manufactured the financial demise of MPA and MPNVIC [MailPost Australia Limited and MailPost Postie Network Victoria Pty Ltd] and to the detriment of the first defendant [Mr Kritas], MPA and MPNVIC”.
39Mr Kritas has only given sketchy details of this cross-claim. No draft pleading has been prepared. The affidavits of Mr Kritas allege that:
a.“The first plaintiff [Mailpostie Pty Ltd] acted against the interests of the shareholders in MPNVIC in preferring their interests against other shareholders”;
b.Mr Underwood “did not fulfil fiduciary duties” [and] “was negligent as a director of MPNVIC…in not acting as a second signatory to the bank account, fulfilling his director’s statutory obligations and taking some responsibility for the misappropriation of funds by the second director of MPNVIC”.
40Mr Kritas also asserted that Mr Underwood was involved in the business “EziPost” in association with Mr Mike Keegan and other persons. Mr Kritas described EziPost as “a lateral mail aggregation system, which was an add-on to the MailPost business”. Mr Kritas said that the concept of EziPost had been “worked on” by him and Mr Keegan to “roll it out in Melbourne in conjunction with MPNVIC and with the involvement of the plaintiffs”.
41The specific allegations by Mr Kritas against the plaintiffs are confusing. They appear to include that:
a.in about September 2009, “the plaintiffs and Mike Keegan registered EziPost…without my knowledge”;
b.the plaintiffs “manufactured the collapse of MPNVIC” and Mr Underwood placed “MPNV into liquidation on 26 December 2009”;
c.in about December 2009, the plaintiffs, “using their greater bargaining strength and power and as the landlord of MPNVIC, made an ultimatum to [Mr Kritas] to become a Director of MPNVIC or else the plaintiffs would liquidate the MPNVIC…The plaintiffs’ undue influence and unfair tactics amounted to unconscionable conduct to manoeuvre [Mr Kritas] into a vulnerable legal position”;
d.“Privileged information” was used to set up the EziPost business “from the associated parties and remnants of MPNVIC”;
e.the plaintiffs made “threats to close the MPNVIC business and transfer it to two new corporate entities and continue trading as EziPost, without any recompense to [Mr Kritas] or shareholders of MPNVIC or MPA”;
f.Mr Underwood “set up two new competing entities to occupy the former MailPost premises, people and other assets…[in] breach of existing non-competition agreements”;
g.“the plaintiffs conspired to strip the assets and intellectual property of MPNVIC and the MailPost business”;
h.“the plaintiffs failed to financially support MPNVIC so that they could extract the intellectual property and assets of the MailPost and the EziPost concept, without having to pay to the intellectual property owners or the liquidators of MPA or MPNVIC”;
i.“MPA, MPNVIC and myself [Mr Kritas] have therefore been cheated out of revenue and profits from the success of the EziPost concept. Furthermore, significant damage was caused to the MailPost business and its future profits and value from these actions”.
42In response to these allegations, the plaintiffs filed an answering affidavit from Mr Underwood. These affidavits denied the factual matters raised by Mr Kritas and provided further detail about the collapse of the MailPost business and the establishment of the EziPost business as follows:
a.Mr Underwood said that, “Almost immediately after I was appointed [a director of MailPost Postie Network Victoria Pty Ltd on 1 July 2009] I became aware that there was not enough working capital available from the company and that there were constant issues with unpaid creditors”;
b.Mr Dion Elliot, the manager of the company “resigned abruptly taking with him money which he said was entitled to for unpaid wages or commissions. This effectively paralysed the company”;
c.Mr Underwood resigned on 11 December 2009 and Mr Glen Davis was appointed in his place. An external administrator was appointed to the company on 23 December 2009.
43These matters are referred to, not for the purpose of attempting to assess the weight of assertion and counter-assertion, but to indicate the further material that had been provided to the Court when Mr Kritas swore his later affidavit on 26 April 2013. That affidavit refers to the following matters:
a.Mr Underwood “had been fully informed about the financial status of MPNVIC before he invested”;
b.Mr Underwood, although a director, did nothing about Mr Elliot absconding with funds of MailPost Postie Network Victoria Pty Ltd;
c.Mr Kritas had given Mike Keegan and the MailPost network written material “setting out the EziPost business structure” and Mr Keegan had later “replicated the strategies and business concepts from MailPost intellectual property strategy”;
d.“Glen Davis was and is an associate of Mr Underwood who was used to liquidate MPNVIC on behalf of Mr Underwood”.
44Further affidavit material was filed by Mr Underwood and Mr Keegan denying the matters raised in Mr Kritas’ later affidavit. Mr Keegan said:
a.in September 2009, he had made a formal presentation to Mr Kritas and the MailPost Australia Limited board about the EziPost concept in an attempt to interest them in a “partnership opportunity”;
b.Mr Kritas and MailPost “had no interest in EziPost”. Mr Keegan “held the intellectual property rights in the EziPost concept. Any privileged or confidential information about EziPost was provided by me to Peter [Kritas] and the board and not the other way round”;
c.in late September 2009, Mr Keegan registered EziPost although it “did not commence full-time operations until February 2010”;
d.in April 2010, Mr Keegan approached Mr Underwood “with a view to leasing a warehouse…I knew Graeme had had an interest in”. In May 2010 a lease was entered into;
e.in return for Mr Underwood “providing a favourable lease arrangement” one of his companies was issued 5 shares [a 5% interest] in the EziPost company later in 2010;
f.he met Mr Kritas in December 2012. Neither at the meeting, or at any other time, had Mr Kritas “made any claims that I have done anything wrong through the establishment of EziPost [or] threatened to commence any proceedings against me or EziPost nor has any such suggestion been made by the administrators of any of the MailPost companies”.
45Mr Kritas did not respond to these matters. The basis for the cross-claim upon which he wishes to rely in defence of the plaintiffs’ claim consists of generalised unsupported assertions. The cross-claim has never been articulated in a formal pleading. In the present application, and notwithstanding the opportunity to do so, Mr Kritas has failed to provide sufficient detail of the proposed claim which might satisfy the Court that there may be an arguable defence on the merits to the guarantee claim.
46No such claim has been raised or pursued by the administrators of MailPost Australia Limited or MailPost Postie Network Victoria Pty Ltd. Mr Kritas does not need the default judgment against him in the present proceeding set aside in order for him to be able to pursue a claim against Mr Underwood, Mr Keegan or others.
Conclusions
47In the circumstances, I consider that Mr Kritas has not shown any meritorious defence to the guarantee claim “to which the Court should pay heed” (Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 34 at para 5 per Winneke P).
48It is necessary then to determine the appropriate order to make, particularly as the guarantee claim was one of a number of claims made in the proceeding. I had considered the possibility of making the setting aside of the default judgment conditional upon the defendant paying into Court the sum of $838,750 (inclusive of GST).
49This approach seemed appropriate, particularly in light of the correspondence involving Mr Theocharous soon after the investment was made by the plaintiffs. Rather than part of the investment money being held by MailPost Australia Limited and/or MailPost Postie Network Victoria Pty Ltd on trust for the plaintiffs, the money was transferred out of MailPost Australia Limited and “held in escrow by Peter Kritas on behalf of Graeme Underwood”.
50However, I consider the more appropriate course is to set aside the default judgment entered, save in relation to the “guarantee claim” judgment which should remain. I shall then proceed to assess the damages in relation to that claim. Those damages may depend upon a consideration of whether the plaintiffs would have entered into the investment at all, or would have only proceeded with a partial investment. That will be a matter of evidence. Depending upon the result of the damages assessment, I would, if necessary, give directions for the determination of the remaining claims in the proceeding.
Orders
51In the circumstances, I will make the following orders:
1. Save for the claim made by the plaintiffs in paragraphs 1, 2, 4-6, 9-13, 14(i), (j), (l), (m) and (n), 15, 16, 17(a) and (b), 18-21, 23-27 (“the guarantee claim”), the judgment entered by the plaintiffs against the first defendant on 16 December 2011 is set aside.
2.The plaintiffs’ damages in respect of the guarantee claim shall be assessed by the Court on 27 May 2013 at 10am before His Honour Judge Anderson.
3.The first defendant must pay the plaintiffs’ costs of the first defendant’s summons filed 6 March 2013, including any reserved costs, to be taxed in default of agreement.
4.Reserve liberty to apply.
---
Certificate
I certify that these 16 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 10 May 2013.
Dated: 10 May 2013
Catherine Kusiak
Associate to His Honour Judge Anderson
0
0
0