Mijotabuki (Aust) Pty Ltd v Sharma - [2019] WADC 43

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION:   PERTH
CITATION:   MIJOTABUKI (AUST) PTY LTD -v- SHARMA [2019] WADC 43
CORAM:   DEPUTY REGISTRAR HEWITT
HEARD:   20 MARCH 2019
DELIVERED          :   4 APRIL 2019
FILE NO/S:   CIV 112 of 2018
BETWEEN:   MIJOTABUKI (AUST) PTY LTD
Plaintiff

AND

GYATRI DINESH SHARMA
JASJOT SINGH
Defendants

JASJOT SINGH
GYATRI DINESH SHARMA
Plaintiff by counterclaim

Catchwords:

Practice and procedure - Application to extend time to bring application and for summary judgment - Consideration of whether guarantors may raise a set-off arising from matters for which a company has a claim

Legislation:

Nil

Result:

Application for extension refused

Representation:

Counsel:

Plaintiff	:	Mr G J O'Shannessy
Defendants	:	In person
Plaintiff by counterclaim	:	In person

Solicitors:

Plaintiff	:	Murcia Petell Hillard
Defendants	:	Not applicable
Plaintiff by counterclaim	:	Not applicable

Case(s) referred to in decision(s):

Cellulose Products Pty Ltd v Truda (1970) 92 WN (NSW) 561

DEPUTY REGISTRAR HEWITT:

This action commenced by a writ filed on the 11 January 2018 and concerns a claim by the plaintiff for monies payable under the terms of a sub-lease undated but which took effect in possession and was expressed to expire on the 27 February 2015.
Associated with the sub-lease was a sale of business agreement apparently executed in October 2014. It would appear that the sub-lease took effect from approximately that date and it was as I have indicated due to expire on the 27 February 2015. It was clearly the intention of the parties that the sub-lease would be extended and that the business bought as a going concern from the plaintiff would continue its operations beyond the expiry date of the lease. The relevance of the expiry date of the lease was tied to the head lease and it is pleaded that the head lease was in due course renewed for a further period of five years. Additionally the sub-lease contained a term permitting the lessee to renew that lease for a further five years.
As the business was sold as a going concern there were a number of chattels included in the sale, those being the items which were within the premises and which were used for the business of a curry house together with conventional terms concerning a stocktake and matters of that kind.
Additionally, the defendants were guarantors of the terms of the sub‑lease and it is as guarantors that the present proceedings are brought against them. On the 4 December 2018 the plaintiff brought a summary judgment application. That application was very substantially out of time and in fact the defendants had already filed a defence and counterclaim on the 11 May. I take the view that a matter of some weight when considering whether an application for summary judgment filed out of time should be permitted to proceed is the strength of the case brought by the plaintiff. I see no point in burdening the court and the parties with the trial of a case in which the defendant is able to offer no defence. Accordingly, I shall commence my analysis within examination of the merits. In order to succeed the plaintiff must demonstrate that its case is clear cut and there is no issue to be tried.
The plaintiff has supported the application by the affidavit of Mr Malik Mascarenhas which was filed the 4 December 2018. That establishes that there were significant defaults by the defendant company in the payment of rent and outgoings. There is a peripheral issue as to whether or not the company Sharma Group Pty Ltd was in occupation of the premises after the expiration date in February pursuant a renewal of the sub-lease or alternatively as a tenant holding over. Nothing turns on that aspect of the matter and I shall not deal with it further. The materials filed by the plaintiff establish the breach to which I have referred and there is no doubt that a certain amount of rental money and other payments due to the plaintiff under the terms of the sub‑lease are outstanding and that those monies have not been paid is not in dispute. In those circumstances it is necessary to look to the materials filed by the defendants to ascertain if they have raised a defence on the merits. That process is not assisted by the fact that the defendants appear in person but notwithstanding the limitations which that places upon them they have made a reasonably good fist of articulating the issues which caused them concern and which they say constitute a defence to the claim.
The first defence is misleading and deceptive conduct. The company Sharma had in addition to the two defendants a third director called Sahil Thukral. He was a former employee of the plaintiff and a director of the company Sharma. The other two directors of the company were the present defendants.
The defendants allege that they were shown a spreadsheet apparently intended to give an accurate representation of the actual and potential trading success of the business which they were buying and the sub-lease which they were proposing to enter into. The defendants allege that Mr Thukral acted in collusion with the plaintiff in presenting this material to them. The other possibility is that he received the information from the plaintiff but it is not necessary for me to examine that issue with much rigor. It is clear from the materials that the spreadsheet emanated from the plaintiff, that the defendants relied upon it in making a decision to purchase the business and thereby to guarantee the payments under the sub-lease. They also allege that the information contained in the spreadsheet was grossly misleading and the company did not and never was able to generate an income even close to the figures they were shown. The remedies therefore which might be open to them are those under the Australian Consumer Law. Not only have the defendants exposed themselves to the action which they now face they also invested significant personal assets into the business and due to the poor performance of that business those monies are lost.
When dealing with litigants in person some latitude must be allowed and as a consequence I am of the view that the matters deposed to in the materials before me potentially disclose a defence to the claim based upon the provisions of the Australian Consumer Law.
The defendants have another string to their bow which is included in their defence and is described as a counterclaim. In truth the counterclaim is effectively a claim for damages under the Australian Consumer Law and also a claim based on the fact that the plaintiff has taken possession of and disposed of certain chattels which were found in the restaurant when the plaintiff repossessed it and for which the defendants say the plaintiff should account. These claims are framed as counterclaims. In my view they are not properly brought as counterclaims but there is authority which permits a guarantor to avail itself of a set-off against a claim under a guarantee, when the set-off arises from matters which in the ordinary course would be the exclusive right of the principal debtor, in this case Sharma. Such a right may only be exercised if the company itself is incapable of pursuing it. Ordinarily, such is proved by the fact that the company is in liquidation or wound up or otherwise fettered in its capacity to pursue a counterclaim. That is not the case here. What is the case here is the company, were it to pursue a counterclaim, would need to do so through the employed services of a solicitor in order to comply with the Rules of the Supreme Court 1971. There is ample evidence to show that the company is financially unable to pursue such an action by virtue of its lack of funds. In my view in such a circumstance guarantors may rely upon its rights and in reaching that conclusion I rely on Cellulose Products Pty Ltd v Truda (1970) 92 WN (NSW) 561. The right to pursue such matters is limited to raising a set-off and does not extend to claiming anything more than is required to extinguish or reduce the amount claimed by the plaintiff from the guarantors.
It is somewhat awkward that what probably amounts to a set-off has been pleaded as a counterclaim. It is not capable of being pursued as a counterclaim but the same facts are capable of supporting a set-off.
There are therefore two basis upon which I consider that these defendants have raised a triable issue. They are first their own claim relating to what is described as misleading and deceptive conduct in regard to the manner in which they were persuaded to enter the contract with the plaintiff as guarantors and the possibility of a set-off upon which they can rely in regard to firstly the disposal of assets which belong to the company and secondly the company's own misleading and deceptive conduct claim. For these reasons I am of the view that the defendants have established a sufficient ground to resist the summary judgment application. Accordingly, the application to extend the time for bringing the application will also be dismissed. I pause to mention however that the defence will need to be amended to reflect what I regard as the permissible basis upon which the company's claim may be raised as a set-off.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
AC
Court Officer
1 APRIL 2019