Mounzer v Krishla Nominees P/L
[2014] SADC 99
•19 May 2014
District Court of South Australia
(Civil)
MOUNZER & ANOR v KRISHLA NOMINEES P/L & ANOR
[2014] SADC 99
Judgment of His Honour Judge Slattery (ex tempore)
19 May 2014
LANDLORD AND TENANT - RENT - BREACH OF COVENANT TO PAY - ACTIONS TO RECOVER RENT OR DAMAGES
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES
GUARANTEE AND INDEMNITY - THE CONTRACT OF GUARANTEE - CONSTRUCTION AND EFFECT - GENERALLY
Plaintiffs entered into an agreement as vendors with the first defendant for the sale and purchase of the business of the plaintiffs and a memorandum of lease in respect of business premises owned by the plaintiffs. Vendor loan agreement on sale of business. Loan agreement signed by both defendants and secured by a bill of sale. Bill of sale signed by the second defendant as guarantor. Second defendant gave a guarantee of the obligation of the first defendant under the lease.
First defendant breached the terms of the lease agreement by failing to make lease payments. Both defendants failed to comply with the terms of the loan agreement.
Defendants abandoned the leased premises and invited plaintiffs to re-enter the premises. Plaintiffs proceeded to re-enter the premises and subsequently commenced a new business at the premises. Consequences of abandonment and re-entry of leased premises with respect to damages considered.
Subsequently the first defendant (a company) was deregistered. Consequences of deregistration and s 601AD of the Corporations Act 2001 (Cth) considered.
Plaintiffs sought judgment against both defendants in default of appearance and proposed that orders be made for an amount of the judgment that comprised all unpaid lease payments and other expenses as well as orders against the second defendant on his guarantee.
Held:
1. Plaintiffs' claim allowed only in part.
2. Liability of the second defendant with respect to the guarantee crystallised at the date of re-entry of the leased premises by the plaintiffs.
3. Second defendant jointly liable under the loan agreement as a borrower and plaintiffs entitled to an order for payment by the second defendant of the amount due and owing under the loan agreement in the amount of $60,958.34 and in respect of the guarantee, for unpaid lease payments in an amount of $6,442.32.
4. Plaintiffs entitled to an elevated amount of interest on the unpaid sum of $67,400.66.
5. First defendant's cross-claim dismissed.
Corporations Act 2001 (Cth) s 601AD; Land and Business (Sale and Conveyancing) Act 1994 (SA) s 8; Bills of Sale Act 1886 (SA) s 15, s 17, referred to.
United Service Insurance Co Ltd v Lang (1935) 35 SR(NSW) 487; Hunter Valley Community Investment Pty Ltd v Bell (2001) 37 ACSR 326; Vitamins Australia Limited v Beta-Carotene Industries Pty Ltd (1987) 5 ACLC 802; Taylor v Sanders [1937] VLR 62; Belperio v Linehaul Holdings Pty Ltd (2004) 89 SASR 185; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, applied.
MOUNZER & ANOR v KRISHLA NOMINEES P/L & ANOR
[2014] SADC 99
At the time that this action was due to commence in this Court there was no appearance for the defendants and the plaintiffs appeared by counsel. An all courts call was made for the defendants and there was no response. Mr Ross-Smith of counsel appeared by leave on behalf of the defendants’ former solicitors and sought permission for those solicitors to be removed from the file as solicitors for the defendants. I gave that permission: I was satisfied that the defendants had failed to respond to the solicitor’s requests for instructions and that the solicitors were in the position of having no instructions from their clients despite their best efforts.
Counsel for the plaintiffs then sought judgment (default of appearance) on behalf of the plaintiffs against both of the defendants and proposed that orders be made for an amount of the judgment that comprised all unpaid lease payments (past and future) and other expenses as well as well as orders against the second defendant on his guarantee given to the plaintiffs.
I then gave permission to the plaintiffs to tender for my consideration the key transactional documents involved in this matter and I have had full regard to those documents in the expression of these reasons.
Although I considered that, in the ordinary course, I was entitled to enter a judgment in favour of the plaintiffs against a defendant in default of appearance, I was not prepared to enter judgment on that basis in the amounts sought by the plaintiffs. As will become clear later in these reasons, I was also then informed that the corporate defendant had been deregistered under the operation of the Corporations Act 2001 (Cth) and, it follows, that I was therefore not prepared to make any orders in respect of that company contrary to the requirements of that Act.
In this action the plaintiffs are natural persons. They are the registered proprietors of the property more commonly known as 176 Fletcher Road, Largs Bay, which is the land comprised in Certificate of Title Register Book Volume 5124 Folio 576 (“the premises”).The premises are comprised of a shop front and residential premises at the rear.
The first defendant is a company that is controlled by the second defendant. In this matter, the second defendant has provided a limited guarantee of the obligations of the first defendant to the plaintiffs. I will discuss the terms of the guarantee further in these reasons.
The plaintiffs operated from the premises a delicatessen business known as Rob's Deli (hereinafter called 'the business'). Prior to 22 November 2011, the first and second plaintiffs jointly owned and operated the business, which they commenced operating on 8 January 2007. The plaintiffs decided to place the business on the market for sale.
The plaintiffs advertised the business for sale, and the defendants, through the second defendant, Sri Krishna Missula (‘Kris’), responded to the advertisement.
Kris met with the plaintiffs and after receiving some information about the business he expressed an interest in purchasing the business.
On 5 November 2012 the plaintiffs entered into an agreement with the first defendant for the sale and purchase of the business to the first defendant. An agreement in writing was prepared and was executed on 2 November 2012. A Form 2 Vendor’s Statement, pursuant to s 8 of the Land and Business (Sale and Conveyancing) Act 1994 (SA), was delivered on 5 November 2012. The Vendor's Statement was dated 2 November 2012.
The purchase price for the business was in the amount of $144,000 comprised of goodwill at $110,000 and stock at $34,000. There is nothing to indicate to me that this is stock at valuation, rather it is a value of stock inclusive of GST.
Kris worked in the business between 5 November and 14 November 2013 and on each day of those relevant business days Kris signed a record of the day’s takings.
Settlement was set for 22 November 2012, and on that day settlement of the sale of the contract occurred as between the plaintiffs and the first defendant. In respect of the contract of sale, there were other associated forms of security given to the plaintiffs concerning the first defendant’s performance of its obligations under the agreement and I will specify those hereunder. Kris was named as a borrower jointly with the first defendant of an amount of vendor finance provided for the transaction. The details are as follows.
The first defendant paid a deposit of $10,000 on 5 November 2012, and then paid a further amount of $50,000 as portion of the purchase price at settlement. The remainder of the purchase price was subject to vendor finance under an agreement made between Kris as director of the company Krishla Nominees Pty Ltd (“Krishla Nominees”) and Chawki Mounzer and Shadia Mounzer, the plaintiffs, dated 23 November 2012. Under the terms of that agreement Kris and the company, Krishla Nominees, were jointly responsible to make repayment of the loan amount by monthly instalments of $2,708.33 per month, due on the 22nd day of each and every calendar month commencing 22 November 2012, and continuing for a period of 24 months.
The agreement also states that it creates a caveatable interest in favour of the lender, but the reason for that term and its effect is not clear to me and I will not comment upon it further.
At the same time, the parties entered into a memorandum of lease arrangement in respect of the premises. It is dated 22 November 2012 and expires on 21 November 2017.
Under this lease, the plaintiffs were the lessors and the company Krishla Nominees was the lessee and so under the terms of the lease, the primary obligations including the payment of rent fell upon Krishla Nominees. The rent payable under the lease was $2,500 per calendar month for the first six months, and thereafter $2,816.67 per calendar month, both of which were exclusive of GST.
The loan agreement that I have already described, that was signed by Kris and Krishla Nominees, was secured by a bill of sale under the Bills of Sale Act 1886 (SA). That agreement was signed by Kris as the sole director and secretary of Krishla Nominees as grantor, and the grantee signature is that of the first plaintiff.
From the information provided to me, it appears that the bill of sale is not registered. Sections 15 and 17 of the Bills of Sale Act 1886 (SA) requires that every bill of sale must be registered within 60 days of the date of execution of the bill of sale. And insofar as the bill is not registered, then the bill will fail as a priority security as against a trustee in bankruptcy or as against a liquidator. It is not necessary that I consider that matter further here.
Further security was given to the plaintiffs under a guarantee by Kris. The guarantee reads as follows:-
DIRECTORS GUARANTEE
TO: Shadia Mounzer and Chawki Mounzer
[of address]
IN CONSIDERATION of your having agreed to the request to accept Krishla Nominees Pty Ltd CAN 140395848 as the Lessee of the premises situated at 176 Fletcher Road, LARGS BAY SA 5016 in the State of South Australia being the whole of the land comprised in Certificate of Title Register Book Volume 5125 Folio 576 upon the terms and at the rental above set forth I,
Sri Krishna Missula of [address] in the said State Company Director HEREBY GUARANTEE the payment to you of the said rent and the performance and observance by the Lessee of the terms of the said Lease upon the following conditions:
1. If Krishla Nominees Pty Ltd shall make default in the payment of the said rent for the space of seven (7) days I will upon a written request by you pay to you the calendar month’s rent which shall be so in arrears.
2. If Krishla Nominees Pty Ltd shall make default in the performance or observance of any of the provisions on its part contained in the said Lease I will pay to you all losses, damages, expenses and costs which you shall be entitled to recover by reason of such default to the extent to which you shall be unable to recover them from Krishla Nominees Pty Ltd.
3. This guarantee shall continue for the full term of the said Lease and any extension thereof and extend to the acts and defaults of Krishla Nominees Pty Ltd during that period and during that period it shall not be recoverable or discharged by the death of any of me or by the liquidation of Krishla Nominees Pty Ltd.
4. If the said Lease shall be terminated by agreement or by re-entry or otherwise all future liability on my part shall cease as from the date of such determination or re-entry as the case may be.
The guarantee does not have a date, but it may be assumed that it was executed on or about 22 November 2012.
The first defendant breached the terms of the lease agreement in the period after 22 December 2012 because it failed to make the lease payments under the lease. Both defendants failed to comply with the terms of the loan agreement after the same date because of their default in making payments under it.
Between January and April 2013 the defendant made sporadic payments to the plaintiffs and I refer in particular to paragraph 36 of the Statement of Claim:-
36. Between January and April 2013, the First Defendant made the following payments only:
a.On 22 January 2013, the amount of $974.35;
b.On 1 February 2013, the amount of $1,000;
c.On 6 February 2013, the amount of $1,000;
d.On 15 February 2013, the amount of $1,000;
e.On 28 February 2013, the amount of $500;
f.On 16 March 2013, the amount of $500;
g.On 26 March 2013, the amount of $1,000;
h.On 16 April 2013, the amount of $300;
i.On 22 April 2013, the amount of $500.
The first defendant has made no further payments under the lease since 22 April 2013 and is thereby in breach of the lease. The defendants made no payments under the loan agreement since December 2012 which is now substantially in arrears.
By letter dated 30 May 2013 from Georgiadis Lawyers, as solicitors for Krishla Nominees and Kris, to AK Reeves & Associates, solicitors for the plaintiffs, Georgiadis Lawyers, informed the plaintiffs' solicitors that their clients were abandoning the premises at 7 p.m. on 28 May 2013, and invited the plaintiffs to re-enter the premises. The relevant parts of the letter are as follows:-
1. Closing of Business by My Client
1.1 At approximately 7:00 pm on the evening of 28 May 2013 (as set out in my letter of 20 May 2013) My Client securely closed and locked up the business premises.
1.2 It was My Client’s intention to have the keys to the business delivered that evening to Your Client’s address, however, following my discussion with you on the afternoon of 28 May 2013, it was agreed, that the writer would receive those keys and then have them delivered to you on the morning of 29 May 2013.
1.3 We enclose herewith all the keys that My Client was provided with from Your Client’s [sic] in relation to the business and the premises.
For reasons that are not readily apparent, upon abandonment of the premises by the defendants, the keys to the premises were delivered between solicitors, rather than matters being dealt with between plaintiffs and defendants.
The first defendant vacated the business premises on 28 May 2013, and on 30 or 31 May 2013 the plaintiffs re-entered the premises. I am informed today by plaintiffs' counsel, that the plaintiffs attempted to recommence the business, but were unable to do so. I formed the view that it was not necessary to receive viva voce evidence on this matter as a result of other matters upon which I received evidence. After giving further consideration to the use of the premises the plaintiffs have commenced a new business at the premises, being a take-away chicken shop. In order to do so they were required to borrow capital. Thus the plaintiffs have deliberately chosen to change the use of the premises in order to better commercialise their position as owners.
The question for my consideration is what orders may be made as against the defendants, they having failed to attend the proceedings before me today and upon me granting to the plaintiffs a judgement in default of appearance of the defendants.
I was provided with draft minutes of order in the following terms sought by the plaintiffs:-
DRAFT MINUTES OF ORDER
There being no attendance by the Defendants:
1. Pursuant to Rule 234(1), the Defendants’ cross-claim is dismissed;
2. Pursuant to Rule 234(2), judgment is entered for the plaintiffs in default of the First Defendant’s attendance in the amount of $224,626.85, being:
a. $60,958.34 being unpaid on the loan;
b. $170,442.86 being unpaid lease payments (58 months @ $2,938.67);
c. (less $6,774.35 being the amounts particularised in paragraph 36 of the Statement of Claim).
3. To the extent that the Plaintiffs are unable to recover from the First Defendant, the Plaintiffs have judgment against the Second Defendant in the amount of $170,442.86 pursuant to a guarantee.
4. The Defendants are to pay the Plaintiffs’ costs of both actions fixed in the amount of $10,000 plus disbursements including filing fees and trial fees.
Those draft minutes of order establish two principal claims. The first is for amounts unpaid on the loan in the sum of $60,958.34, and the second is for a sum of $170,442.86 being unpaid lease payments of 58 months at $2,938.67.
Paragraph 3 of the draft minutes seeks an order for judgment against the second defendant on the guarantee in the amount of $170,442.86 on the basis that the guarantee signed by Kris under the director's guarantee was in respect of the unpaid rent claim by the plaintiffs. An amount for costs is also sought. No evidence was received by me about any agreement about costs and I am not prepared to consider that matter further.
The plaintiffs tendered Exhibit P1, which was a tender book that contained the relevant documents leading up to the purchase of the business and a copy of the memorandum of lease (document 6), the loan agreement (document 7), the guarantee (document 8), and the bill of sale (document 9).
I was then also informed by the plaintiffs that Krishla Nominees had been deregistered. An inquiry was made of the ASIC register and that inquiry, which is now in the form of Exhibit P3, disclosed that Krishla Nominees was deregistered on 28 March 2014.
Under s 601AD of the Corporations Act 2001 (Cth) the effect of deregistration is that a company ceases to exist (s 601AD(1)). There is then an automatic vesting of property of that company in ASIC or the Commonwealth, depending upon the nature of the property, and the rights and powers in respect of that property are then determined according to the provisions of s 601AD(3).
There was no evidence before me that as at 28 March 2014 there were any assets in Krishla Nominees that may have been vested in ASIC. The important matter for my consideration is that one of the consequences of deregistration generally is that the company is treated as dissolved by the court.[1] Because the company ceases to be a legal person it cannot commence a proceeding and proceedings instituted against it or on its behalf cannot be continued.[2] Because the company ceases to exist, its debts and liabilities cease to exist insofar as any unsecured creditor would seek to bring recovery or enforcement against the company. Any security over the company assets and any claim based upon any security which has been given over the company’s property remains but only to the extent of the security.[3] In my opinion there is another potential issue here concerning the assets of the company and the enforceability of any charge on company assets. This involves the time period between the date of the granting of any form of registrable security over company assets and the date that the company is deregistered as well as the state of solvency of that company at the date that it granted security. Because of the other matters that are pertinent here concerning the personal liability of Kris to the plaintiffs it is not necessary to consider that matter further.
[1] United Service Insurance Co Ltd v Lang (1935) 35 SR(NSW) 487.
[2] Hunter Valley Community Investment Pty Ltd v Bell (2001) 37 ACSR 326.
[3] S 601AE(3) Corporations Act 2001; Vitamins Australia Limited v Beta-Carotene Industries Pty Ltd (1987) 5 ACLC 802 at 808.
The position of the company as discussed above does not affect the liability of a person who has indemnified the company against its liabilities on an obligation still to be discharged.[4] I refer in particular to the very clear discussion of this topic that is to be found in the text: HAJ Ford, RP Austin and IM Ramsay, Ford’s Principles of Corporations Law, (2012) at paragraphs 27.700-27.710. This position is so well settled that it needs no further elucidation by me here.
[4] Taylor v Sanders [1937] VLR 62.
The lease executed by Krishla Nominees provided for certain rights in the company which were mutual covenants. They are set out in paragraph 6 of the lease (Exhibit P2, p.86). The lessee’s obligations to pay rent are covered in clause 6(b) of the lease (P2, p.87, et seq). Under that clause and sub-clause, as well as there being an obligation on the lessee to pay rent there is also an obligation on the lessee to compensate the lessor for loss or damage suffered by reason of any repudiation or breach of the lease. This obligation includes to pay damages suffered by the lessors as a result of any repudiation or breach of covenant by the lessees and for damages including the loss or damage suffered by the lessors during the entire term of the lease. The plaintiffs contend that the lease purports to reserve to them the right to claim the whole of the unpaid lease payments to the end of the lease irrespective of the recoveries made by the lessors, even though, in the interim, they may change the use of the premises as has occurred here or they may have been able to re lease the premises for rental income. Although they are usually questions of fact and degree, if the contentions of the plaintiffs were correct, some consideration must be given to the enforceability of such a term.
Importantly, the effect of the plaintiffs’ submissions is that clause abrogates the common law in relation to surrender of leases. I refer to WD Duncan, Commercial Leases in Australia, (6th ed, 2012), at paragraphs 14.13, 14.50 and 14.60. In particular, I refer to the passages under paragraph 14.60 at p.436 where the learned author says as follows:-
If a lessee abandons possession, this will usually constitute a breach of the lease. The mere fact of abandonment will not automatically bring the lease to an end. If the lessor elects to accept the abandonment as a repudiation of the lease by the lessee, and to bring about a forfeiture, the lease will be brought to an end. In the absence of such a positive election, the lessor’s acts must be considered to determine whether they amount to an acceptance of the abandonment as a repudiation by the lessee.[5]
The acts may amount to an acceptance of the abandonment of the lessee as a surrender of the lease and, separately, as acceptance of the repudiation of the lessee’s obligations under the lease ... to obviate any possibility of waiver a lessor should reserve his or her rights to sue for damages for breach of an essential term before accepting an act of abandonment as a surrender of the lease.[6]
[5] Belperio v Linehaul Holdings Pty Ltd (2004) 89 SASR 185.
[6] Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 49-50 per Brennan J.
Notwithstanding that the plaintiffs claim that as lessors they had an entitlement under the contract of lease to recover damages against the lessee arising from the repudiation of the lease for the damage suffered by them during the entire term of the lease, the question of what damages have been suffered and are claimable by them is dependent upon whether or not there has been an act by them accepting the abandonment of the lease. If it is the case that there has been an acceptance of the abandonment of the lease as constituting an act of repudiation by the lessee and following which there has been a re-entry, then the calculation of damages suffered by the lessors and claimable by them fall within the common law principles as set out above.
Based upon the whole of the evidence before me today, my opinion is that there has been a re-entry of the leased premises by the plaintiffs as lessors on the basis that at the time that they re-entered, the plaintiff lessors intended to and did recommence the deli business. As a result of the failure of that attempt, which failure became quickly apparent to the plaintiffs, the plaintiffs have now commenced a new type of business in the premises as a change of use of the premises. At that time of re-entry the rent arrears were in an amount of $6,442.32.
The plaintiffs submitted that there has to be a distinction made between an act of mitigation and an act of re-entry. Although I accept that submission, I am unable to accept that distinction in this case because in the circumstances, there is always an obligation for a party to a contract who seeks damages for its breach to mitigate their loss, except in very particular and special circumstances which do not apply here. The plaintiffs conceded that in these circumstances the right to damages is limited to the period prior to the plaintiffs embarking upon an alternative use of the premises after re-entry. In my view, the rights of the plaintiffs are narrower than that concession. The obligation in relation to mitigation does not affect the fact that it is a question of fact and degree how a court would interpret the steps taken by particular lessors in and about the preservation of their rights to damages.
However, it seems to me that at one level that discussion is neither fruitful nor helpful. The plaintiffs contend that clause 6(b)(4) of the lease contemplates a damages claim being available to them in respect of the entire term of the lease. Therefore, the plaintiffs contend, the drafters of the lease plainly had in mind the operation of the common law of Australia in relation to the rights of the lessors under the lease in the event the lease was breached by the defendant company, which plainly has occurred.
The defendant company is deregistered. It has no legal existence (s 601AD Corporations Act 2001 (Cth)) and therefore all rights in respect of the plaintiffs as they pertain to the conduct of the company Krishla Nominees, however they are quantified, depend upon there being some collateral security in respect of the obligation. That brings me to a discussion of the director's guarantee.
The terms of that guarantee have been outlined above. The questions for my consideration on the operation of this guarantee and the obligations of the guarantor under it are, first, whether the company, Krishla Nominees has made default in the payment of rent for a space of seven days. If that has occurred there then needs to be a written request to pay the rent made to the guarantor. There is no evidence of any request being made to pay the rent, but I will assume for current purposes that such a request has been upon Krishla Nominees. It seems obvious enough that having regard to the exchanges occurring between solicitors, that such a request has been made. Again, at one level, having regard to the obligations of lessors and lessees, it is unnecessary for the request to be made, but that is another matter.
The second question involves a consideration of paragraphs 2, 3 and 4 of the guarantee. Paragraph 2 of the guarantee reads as follows:-
If the company, Krishla Nominees, makes default in the performance or observance of the provisions of the lease, then Kris will pay all losses, damages, expenses and costs which you shall be entitled to recover by reason of such default.
I again refer to clause 6(b)(4) of the lease, which I have addressed above.
Paragraph 3 of the guarantee reads as follows:-
The guarantee shall continue for the full term of the lease and any extension thereof and the extent of the acts and defaults of Krishla Nominees during that period and it shall not be revokable or discharged by the death of Kris or by the liquidation of Krishla Nominees.
Paragraph 4 is plainly a key clause. It reads as follows:-
If the lease is terminated by agreement or by re-entry or otherwise, then all future liability on the part of Kris shall cease as and from that date of such determination or re-entry as the case may be.
For the reasons that I have already set out above, I am of the opinion that re-entry occurred on 31 May 2013. I find that the liability of Kris under the guarantee crystallised at that date. The amount claimable by the assured under the guarantee is the amount of rent unpaid as at that date.
The plaintiffs’ counsel has informed me today that on such a method of calculation, the maximum amount of rent that would be payable under the terms of the director's guarantee by Kris is in the sum of $6,442.32 (despite the plaintiffs’ contention that the Court could make a calculation of their claim in an amount of 16 months' rent at $2,600 per month, a total of $41,600). He informed me that the unpaid rent to 31 May 2014 is in the further amount $14,693.35 but a judgement in that amount would require a finding of liability irrespective of re-entry and the plaintiffs’ conduct after that time. For the reasons already expressed, I am not prepared to accede to that request. A proper calculation of the maximum amount of rent that would be payable under the terms of the director’s guarantee by Kris would be an amount of $6,442.32.
It remains the case that Kris is liable under the loan agreement because he is jointly liable as a borrower under the terms of that agreement. The plaintiffs are entitled to an order that Kris pay to them the amount that remains due and owing under the loan agreement. I am also satisfied that these are wholly liquidated claims and as a result the plaintiffs are entitled to a calculation of interest at an elevated rate of interest according to applicable overdraft rates. I will include such an entitlement in the orders that I am prepared to make in this matter.
It is also necessary that I formally deal with the first defendant’s cross-claim. It is inappropriate that the cross-claim be ‘left in the ether’ because of the de-registration of the first defendant. As I have outlined previously, the first defendant company is deregistered and therefore has no legal existence pursuant to s 601AD of the Corporations Act 2001 (Cth). It follows from this that because the first defendant ceases to be a company and therefore ceases to be a legal person, it cannot commence or continue a proceeding on its behalf, including any cross-claim against the plaintiffs nor for that matter could any claim be commenced or continued against it.[7] On a proper understanding of the effect of these provisions, it is open to the Court in these current circumstances to make an order for the dismissal of the cross-claim. In my opinion, such an order does not fall within the usual prohibitions that pertain to commencing or pursuing an action against a company in that position. These prohibitions are directed at the preservation of assets for (unsecured) creditors consistent with the “pari passu” approach. In my view the striking out of a cross-claim of a company that has no legal existence is not inconsistent with those principles.
[7] See Hunter Valley Community Investment Pty Ltd v Bell (2001) 37 ACSR 326.
I am therefore prepared to make orders for the dismissal of the defendant's cross-claim for following reasons. Firstly, due to the first defendant ceasing to be a company and therefore being unable to commence or continue a proceeding; and secondly due to the failure by the defendants to appear at trial. I consequently order entry of judgment in favour of the plaintiffs for the amount of $60,958.34 in respect of the loan agreement and an amount of $6,442.32 being the arrears payable under the guarantee by Kris up until the time of re-entry.
I therefore make the following orders:-
1. Pursuant to Rule 234 of the District Court Rules 2006, the first defendant's cross-claim be dismissed.
2. Pursuant to Rule 234(2) of the District Court Rules 2006, judgment is entered for the plaintiffs against the defendant, Sri Krishna Missula in the following amounts:-
a. In respect of the loan agreement dated 23 November 2012 the sum of $60,958.34.
b. In respect of the guarantee by Sri Krishna Missula of the obligations of Krishla Nominees Pty Ltd under the director's guarantee executed on or about 22 November 2012 the sum of $6,442.32.
c. That the defendant, Sri Krishna Missula pay interest to the plaintiff on the amounts being the total of $60,958.34 and $6,442.32 ($67400.66) applicable and payable at the corporate overdraft reference rate as calculated and published from time to time by the Commonwealth Bank of Australia for the period between 2012 and today's date.
d. That the defendant Sri Krishna Missula pay the plaintiff's costs of action to be taxed or agreed.
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