Mittag and Teware Pty Ltd v Harrison
[2012] VCC 1228
•20 September 2012
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised Not Restricted Suitable for Publication |
COMMERCIAL
GENERAL DIVISION
Case No. CI-10-05802
| ROBERT MITTAG | First Plaintiff |
| and | |
| TEWARE PTY LTD | Second Plaintiff |
| v | |
| ROBERT FRANK HARRISON | Defendant |
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JUDGE: | HIS HONOUR JUDGE SMITH | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 23 August 2012 | |
DATE OF JUDGMENT: | 20 September 2012 | |
CASE MAY BE CITED AS: | Mittag & Teware Pty Ltd v Harrison | |
MEDIUM NEUTRAL CITATION: | [2012] VCC 1228 | |
REASONS FOR JUDGMENT
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SUBJECT – PRACTICE AND PROCEDURE
CATCHWORDS – Application for summary judgment – whether or not there is a real prospect of successful defence
LEGISLATION CITED – Civil Procedure Act 2010, s63 and s64 – County Court County Court Civil Procedure Rules 2008, order 23.01
JUDGMENT – Summary judgment for the second-named plaintiff.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr C King | Coopers Lawyers (Aust) Pty Ltd |
| For the Defendant | Ms F O’Brien SC | - |
HIS HONOUR:
1 In this matter, the plaintiffs make application for summary judgment against the defendant in respect of part of the claim pleaded by them against the defendant.
2 In the Statement of Claim, they allege that, in June 2008, the defendant entered into an agreement with them whereby he would purchase the shareholding of Teware Pty Ltd (“Teware”) in Alan Patrick Pty Ltd (“Patrick”) for a price of $250,000. They allege that he has failed to proceed with that purchase and that none of the purchase price has been paid.
3 In support of the application for summary judgment, Mr Mittag has filed an affidavit sworn by him on 15 August 2012.[1] A number of documents were exhibited to that affidavit.
[1]Exhibit A
4 Mr Mittag’s affidavit, and the exhibits to it, establish the following:
(a) As at 4 June 2008, Mr Mittag was the sole director and shareholder of Teware.[2]
[2]Exhibit RM-1
(b) As at 4 June 2008, Teware and Mr Harrison each held one of two issued shares in Patrick.
(c) Mr Harrison was the sole director and secretary of Patrick.
(d) On 4 June 2008, Mr Mittag and Mr Harrison signed a written agreement that was headed with the words:
“Alan Patrick Pty Ltd
Loan Agreement and Sale of Interest”.[3]
(“the Written Agreement”).
[3]Exhibit RM-5
5 Insofar as is relevant, the Written Agreement provided as follows:
“1Loan:
Robert Mittag (“RM”) will loan to Alan Patrick Pty Limited (“AP”) the sum of $150,000 interest free for a period of four months. Repayment will be due on 1st October 2008.
2Consideration:
In consideration of RM providing the loan, Robert Harrison hereby agrees to:
-make best endeavours to refinance AP prior to 1st October 2008 based on the AP business and security provided by RH and his interests.
-AP will repay the loan from Teware of $85,000 by 1/10/08.
-AP will repay the loan of $150,000 on or before 1/10/08.
-Acquire Teware Pty Ltd’s Share in AP for $250,000 (which will be paid in equal instalments over a period of twelve months to 1/10/2009).
In the event RH sells the business of AP prior to payment in full of the sale proceeds, the balance will be due and payable immediately as at the date of sale.”
6 The Written Agreement contains other clauses which do not appear to be relevant to the issues before me in this application.
7 In his affidavit in support of the application, Mr Mittag deposed that, in accordance with the Written Agreement, he had loaned the sum of $150,000 to Patrick on or about 4 June 2008 and that no part of that loan had been repaid.
8 It is common ground between the parties that Mr Harrison has not purchased Teware’s shareholding in Patrick for $250,000 or any other amount. Teware remains a holder of one of the two issued shares in Patrick. Mr Harrison is the owner of the other share.
9 In his Amended Defence dated 24 April 2012, Mr Harrison pleads that there was an agreement entered into that was partly in writing and partly oral. To the extent it was in writing, he alleges that it was constituted by the Written Agreement.[4]
[4]Amended Defence, paragraph 2
10 To the extent that it was oral, he alleges that:
“… it was constituted by conversations between Mr Robert Mittag on his own behalf, and on behalf of the second defendant (sic) (‘Teware’) and Mr Robert Harrison on his own behalf and by both of them jointly on behalf of Alan Parker (sic) Pty Ltd shortly prior to 4 June 2008 to the effect that Allan (sic) Patrick would be liable for any loans to it.”[5]
[5]Amended Defence, paragraph 2
11 There are no other oral conversations alleged to have taken place that constitute any part of the agreement between the parties.
12 Further, in his Amended Defence, Mr Harrison alleges that there were terms of the agreement that:
“a. Mr Mittag would provide an interest free loan $150,000 to Alan Patrick which Alan Patrick was to repay by 1 October 2008;
b. Mr Harrison would use his best endeavours to refinance Alan Patrick prior to 1 October 2008, and if successful:
i.Alan Patrick would repay a loan from the second Plaintiff in the amount of $85,000 by 1 October 2008;
ii.Mr Harrison would purchase Teware’s share in Alan Patrick for $250,000, payable in equal instalments over a period of 12 months to 1 October 2009;
c. Upon acquisition of Teware’s share and not before, Mr Harrison would assume all liabilities and guarantees in relation to Alan Patrick, including responsibility for its loans and facilities.”[6]
[6]Amended Defence, paragraph 3
13 It is readily apparent that Mr Harrison alleges that there was more to the agreement than that set out in the Written Agreement.
14 At the hearing of the application, Mr Harrison was represented by Senior Counsel.
15 Notwithstanding the denial of the plaintiffs’ claim in the Amended Defence and the allegation of an agreement of a different nature, no affidavit material was filed by or on behalf of Mr Harrison in opposition to the application for Summary Judgment. No application was made on his behalf at or prior to the hearing for an adjournment of the application to enable such affidavit material to be filed.
16 Senior Counsel for Mr Harrison sought and was granted leave to cross-examine Mr Mittag as regards his affidavit. In oral evidence, Mr Mittag stated that as at early June 2008, Patrick had entered into a contract to supply tiles to Target stores throughout Australia. Potentially, this was a multi-million dollar contract from which Patrick stood to make a substantial profit. Mr Mittag stated that the $150,000 loaned to Patrick by him, and referred to in paragraph 1 of the Written Agreement, was monies needed by Patrick to obtain the tiles required for the first of the Target stores. At the time, Patrick did not have sufficient cash reserves to finance that supply.
17 Mr Mittag stated in evidence that by June 2008, he wanted to wholly sever his connection with Patrick. At that time, his company, Teware, held one of the two issued shares in Patrick. Patrick’s indebtedness to the National Australia Bank was secured, in part, by mortgages over Mr Mittag’s property.
18 In summary, his evidence was that he had agreed to lend Patrick an additional $150,000 for a relatively short period in consideration of the four matters set out in the Written Agreement. These included that Mr Harrison would make best endeavours to refinance Patrick in a way that its indebtedness was secured only by the business of Patrick itself, and other security provided by Mr Harrison and/or his interests. That is, to make endeavours to have the company refinanced in a manner that enabled a full release of Mr Mittag’s security. Mr Mittag said that, at that time, he well understood that such refinancing might not be possible, and that his property might not be released as security for Patrick’s debt.
19 Mr Mittag stated that the consideration of $250,000 for Teware’s share in Patrick was an estimate of what that share was worth. He stated that, if the Target contract had proceeded in full, with substantial resultant profits to Patrick, in hindsight that price may have looked cheap. On the other hand, if for any reason the Target contract did not proceed, that price may not have appeared to be so cheap after all.
20 Mr Mittag was later involved in some negotiations regarding the refinancing of the Patrick debt. He was aware that Mr Harrison had had discussions with a number of banks and financial institutions regarding refinancing. In the end, refinancing was achieved with the ANZ Bank, but not so as to result in a release of Mr Mittag’s property from that security.
21 At the present time, Mr Mittag has no role whatsoever in the administration of the Patrick business.
22 He stated that he was aware that one of the reasons why Patrick had difficulty in re-financing its debt was that various banks and financial institutions were not convinced that the Target contract was a secure one. In other words, it was not certain to proceed. As it turns out, that doubt appears to have been justified. The Target contract did not proceed as had been hoped.
23 In cross-examination, it was suggested to Mr Mittag that the arrangements referred to in the Written Agreement regarding the acquisition of Teware’s share in Patrick for $250,000 was contingent upon Patrick refinancing its debt in the manner earlier provided in the Written Agreement. Mr Mittag denied that there was any such arrangement or agreement reached between he and Mr Harrison, and denied that this was ever his intention. His evidence was that at the time, he wanted to sever his and Teware’s connection with Patrick. He wanted to arrange for Teware to dispose of its share in Patrick. In short, he said that the agreement between the parties was as set out in the Written Agreement. That is, that in consideration of him advancing a further sum of $150,000 to enable Patrick to proceed with the Target contract, Mr Harrison agreed to do a number of things. These were:
(a) to make best endeavours to refinance Patrick;
(b) to repay a loan of $85,000 to Teware;
(c) to repay the loan of $150,000 to Mr Mittag;
(d) to acquire Teware’s share in Patrick for $250,000.
24 Senior Counsel for Mr Harrison submitted that the Written Agreement should be interpreted in the following manner. She submitted that the agreement that Mr Harrison was to acquire Teware’s share in Patrick for $250,000 was conditional upon him succeeding in refinancing Patrick prior to 1 October 2008. I do not accept that the Written Agreement should be interpreted in that way. Firstly, I consider that the Written Agreement makes it plain that Mr Mittag is loaning an additional sum to Patrick in consideration of Mr Harrison doing the four nominated things referred to above.
25 I do not consider that there is any basis for interpreting the agreement in the manner suggested by Ms O’Brien. The agreement simply does not provide that the obligation to acquire Teware’s share for $250,000 was conditional upon anything other than the making of the loan of $150,000 to Patrick by Mr Mittag.
26 Further, although Mr Harrison’s Amended Defence filed in April 2012 alleges that the agreement to purchase Teware’s share depended upon the endeavours to refinance Patrick being successful, the Defence does not disclose the basis of any such agreement. Mr Harrison admits that on or about 4 June 2008, Mr Mittag agreed to loan $150,000 to Patrick on “certain terms”. He otherwise denies the allegations in paragraph 4 of the Statement of Claim. Mr Harrison provides particulars of the agreement as being partly in writing and partly oral. Insofar as they were in writing, they consist of the Written Agreement. To the extent that it was oral, Mr Harrison alleges that it was constituted by conversations between Mr Mittag on his own behalf and on behalf of Teware, and Mr Harrison on his own behalf and by both of them jointly on behalf of Patrick merely to the effect that Patrick would be liable for any loans to it.
27 I consider that the particulars provided in the Amended Defence are not consistent with the allegations to the effect that the agreement to purchase Teware’s share in Patrick was conditional upon the refinancing of Patrick.
28 In any event, the term “refinancing” is vague and uncertain, to the point where I consider that it is virtually meaningless.
29 Mr Harrison did not file any answering affidavit material in the application. He did not seek any adjournment to enable him to do so. Senior Counsel submits that the Written Agreement is, in itself, sufficiently uncertain as to warrant the dismissal of the application. I do not agree.
30 In a separate but related proceeding, CI-1106253,[7] in which Mr Mittag and Teware are plaintiffs and Patrick is defendant, I made findings that I was satisfied that Mr Mittag did make the said loan of $150,000 to Patrick and that no part of it had been repaid. In that proceeding, I ordered that there be summary judgment for Mr Mittag against Patrick in respect of that sum.
[7][2012] VCC 1182
31 I accept the evidence given by Mr Mittag in his affidavit and that given orally by him.
32 Although the summons seeking summary judgment in this proceeding does not expressly say so, I understand that the order sought by Mr Mittag is made under Rule 23.01 of the County Court Civil Procedure Rules 2008 and, in the alternative, pursuant to s61 of the Civil Procedure Act 2010 (“the Act”).
33 Rule 23.01(2) provides that:
“(2) Where the defence to any claim in a proceeding—
(a) does not disclose an answer; or
(b) is scandalous, frivolous or vexatious—
the Court may give judgment in the proceeding generally or in relation to any claim.”
34 The Court will not make an order under this rule unless it is clear on the pleadings or from extrinsic evidence that the defence is unsustainable in fact or in law. The burden lies on the party impeaching the defence; in this case, on Mr Mittag.
35 Section 61 of the Act provides as follows:
“A plaintiff in a civil proceeding may apply to the court for summary judgment in the proceeding on the ground that a defendant's defence or part of that defence has no real prospect of success.”
36 Section 63 of the Act provides:
“(1)Subject to section 64, a court may give summary judgment in any civil proceeding if satisfied that a claim, a defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has no real prospect of success.
(2)… .”
37 Section 64 of the Act provides:
“Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because—
(a) it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only a full hearing on the merits is appropriate.”
38 I find that there is no evidence supporting the matters alleged in paragraph 3 of the Amended Defence. The evidence provided by Mr Mittag in his affidavit and in his oral evidence is to the contrary. I accept that the Written Agreement means, and was intended to mean, that in consideration of Mr Mittag making the loan of $150,000 to Patrick, Mr Harrison would do four things. Of those four, the second, third and fourth of those obligations are, in my view, clear in meaning. The first obligation to use his best endeavours to refinance Patrick I consider to be vague and uncertain. Nevertheless, the uncertainty of the first of those obligations should not, in my view, affect Mr Harrison’s obligations to perform the second, third and fourth of those obligations. This application for summary judgment involves only the fourth of those obligations.
39 I am satisfied that the Amended Defence in respect of that part of the claim regarding the agreement to purchase Teware’s share in Patrick has no real prospect of success. There was no submission made by or on behalf of Mr Harrison that s64 of the Act should be applied. I find that there is no cause to apply it.
40 I am conscious of decisions of the courts emphasising that the power to order summary judgment or dismissal of a claim must be exercised with caution.[8]
[8]Spencer v Commonwealth of Australia (2010) 241 CLR 118; Matthews v SPI Electricity Pty Ltd & Anor (Ruling No 2) [2011] VSC 168
41 I am satisfied that this is an appropriate case in which summary judgment in respect of the agreement to purchase the share in Patrick should be given.
42 I accept that Teware is, and has at all material times, been prepared to and ready to transfer its share in Patrick to Mr Harrison. I accept that Mr Mittag, being the sole director and shareholder of Teware, is in effective control of it.
43 Accordingly, there will be summary judgment for the second-named plaintiff, Teware Pty Ltd, against the defendant, Robert Frank Harrison, in the sum of TWO HUNDRED AND FIFTY THOUSAND DOLLARS ($250,000.00).
44 I will hear submissions in relation to interest and costs.
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