National Australia Bank Limited v Gary Gordon Busby &
[2011] VCC 1009
•3 August 2011
Not restricted
| IN THE COUNTY COURT OF VICTORIA | Revised |
| AT MELBOURNE CIVIL DIVISION COMMERCIAL LIST BANKING AND FINANCE DIVISION |
Case No. CI-10-04315
| NATIONAL AUSTRALIA BANK LIMITED | Plaintiff |
| ABN: 12 004 044 937 | |
| v | |
| GARY GORDON BUSBY AND ORS | Defendants |
| (ACCORDING TO THE SCHEDULE ATTACHED) |
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| JUDGE: | HER HONOUR JUDGE KENNEDY |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 22 July 2011 |
| DATE OF JUDGMENT: | 3 August 2011 |
| CASE MAY BE CITED AS: | National Australia Bank Limited v Gary Gordon Busby & Ors. |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 1009 |
REASONS FOR JUDGMENT
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Catchwords: Guarantees- Application for summary judgment pursuant to ss61 and 63 Civil Procedure Act 2010 (CPA) and/or Order 22 County Court Civil Procedure Rules 2008 – whether defence has no real prospects of success- whether civil proceeding should not otherwise be disposed of summarily under s64 CPA
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D.McWilliams | Thomson Lawyers |
| For the First Defendant | Mr J.Pennell | Rothwell Lawyers Pty Ltd |
| For the Third Defendant | Mr M.Albert |
SCHEDULE OF PARTIES
BETWEEN
| NATIONAL AUSTRALIA BANK LIMITED | Plaintiff |
| ABN: 12 004 044 937 | |
| AND | |
| GARY GORDAN BUSBY | First Defendant |
| AND | |
| JIM HANS LEIGH | Second Defendant |
| AND | |
| STEPHEN GEOFFREY WALTERS | Third Defendant |
| AND | |
| WATER VALVES AUSTRALIA PTY LTD | Fourth Defendant |
| AND | |
| U_FIT DESIGN GROUP PTY LTD | Fifth Defendant |
| HER HONOUR: |
1 This is the return of a summons for summary judgment dated 20 May 2011 against the first defendant and the third defendant in the sum of $1,485,044.17. The plaintiff seeks the summary judgment pursuant to ss.61 and/or 63 of the Civil Procedure Act 2010 (the CPA) or Order 22 of the County Court Civil Procedure Rules 2008.[1]
[1] Judgments in default of appearance have been entered against the second, fourth and fifth defendants.
2 The plaintiff relies on three affidavits in support of its application; an affidavit of service of Sina Nguon of 19 May 2011; an affidavit of Liam Thomas Caffrey of 20 May 2011; and an affidavit of Jessica Bevacqua of 19 July 2011.
3 The first defendant relies on two affidavits of 12 and 20 July 2011 and the third defendant relies on two affidavits of 15 July 2011 and 21 July 2011.
4 The nature of the claim is relatively straightforward. The plaintiff claims an amount of $1,301.386.55 on the basis of two guarantees allegedly given to secure financial accommodation provided to Wise Wally Products Pty Ltd. The first guarantee was allegedly executed on 27 May 2004 up to a basic liability of $486,000; the second guarantee was allegedly executed on 13 September 2007 up to a limit of $700,000.
5 The first and third defendants were directors of Wise Wally; the first defendant being an accountant and the third defendant a solicitor.
6 Pursuant to ss.61 and 63 of the CPA a court may give summary judgment if satisfied that a defence has “no real prospect of success.”
7 In Matthews v SPI Electricity Pty Ltd [2] Forrest J stated that the following principles can be identified as being relevant to a summary judgment application:
[2] [2011] VSC 168 at [22].
(i)
if a court determines that a particular cause of action is hopeless or bound to fail, then it should be dismissed;
(ii)
a court may also dismiss a claim where it determines that it has no real prospect of success in the sense that such prospects are fanciful rather than realistic;
(iii)
the less complex the issue in a case then the easier it is for a court to take the view that such a proceeding is capable of being determined on summary judgment; and
(iv)
whatever the test to be applied the power to order summary dismissal of a claim must be exercised with care. This is particularly so where a case may involve issues of contested fact or where its consequences may affect a large number of persons.
8 The plaintiff has set out detailed evidence on which it substantiates its entitlement, prima facie, to judgment. It was also in a position to produce certificates which were “sufficient evidence” of amounts owing by the guarantors ( see clause 23 of the first guarantee and 20.3 of the second guarantee).
9 The real issue in the case, instead, was whether the defendants’ defences had “no real prospect of success”.
10 For reasons that will become apparent, it is appropriate to determine this issue by beginning with a consideration of the alleged defences to the second guarantee.
Second guarantee
third defendant
11 In his defence dated 21 July, the third defendant filed a “bare denial” defence.
12 However, in his affidavit of 15 July 2011 he refers to page 28 of a document entitled a Debtor Finance Facility Agreement (which document contained the second guarantee) and also purports to contain his signature. In paragraph 5 of his affidavit the third defendant categorically states that “that is not my signature.” He also states that he wishes to seek leave to amend his defence to allege that the signature on the guarantee is a forgery.
13 As properly conceded by Counsel for the plaintiff, for the purposes of this application, the authenticity of the third defendant’s signature on the second guarantee is a triable issue.
14 It follows that I am not satisfied that the third defendant has no real prospect of success in relation to the second guarantee.
first defendant
15 In paragraph 6 of his defence dated 13 December 2010, the first defendant says that at the time of the execution of the second guarantee he was advised that the document he was executing was a Debtor Financial Facility Agreement which he executed as director of the company.
16 In the first defendant’s first affidavit he swears that he was advised by Mr Mitchelhill, the plaintiff’s manager, that it was the plaintiff’s requirement that the DFF be supported by a guarantee. He then refers to the Debtor Finance Facility Agreement and says he was not aware that the document actually included a guarantee and that he “believed it was the DFF only” ( at paragraphs 6- 7).
17 Although the plaintiff made criticisms of the plausibility of this suggestion I am unable to be satisfied that there is no real prospect of success on the basis of this alleged misapprehension.
18 In a proposed amended defence exhibited to the first defendant’s second affidavit he further sought to plead defences of fraud and/or breach of an implied term because he believed that the third defendant was signing the document which, in the result, has not occurred (at paragraphs 7-12). He also pleaded that he should be relieved of liability by reason of the plaintiff’s failure to operate the account in accordance with the terms of the facility and to thereby mitigate its loss (paragraphs 8-16).
19 In the first defendant’s first affidavit, he also claims that he expected the plaintiff to produce a guarantee for all three directors to sign. He says that this requirement was confirmed in writing by correspondence dated 11 September, 2007 from the plaintiff which requested securities which included guarantees from all three directors. He further says that if he was aware that the third defendant was not going to execute the second guarantee under no circumstances would he have executed it ( at paragraphs 8-11).
20 The plaintiff submitted that the first defendant’s surety is unaffected by the absence or unenforceability of another surety’s guarantee, relying on a specific clause in the guarantee.[3] However, there is also authority which suggests that where it is contemplated that the guarantee shall not be binding until all guarantors execute it, the other guarantors may be discharged from the operation of the entire guarantee if this does not occur (for example, where the guarantee is void against one of the parties because of forgery).[4]
[3] Clause 22.2.(c)(ii) is referred to in the plaintiff’s written submissions but it is assumed this should be a reference to clause 22.4(c) (ii).
[4] See James O’Donovan & John Phillips, The Modern Contract of Guarantee, (3rd edition) 1996 at pg 90 and cases therein cited.
21 In such circumstances, I am not satisfied that there is no real prospect of success.
First Guarantee
first defendant
22 In terms of the first guarantee, in the proposed amended defence, the first defendant admits entering into a guarantee of a limited amount, but denies the first guarantee and says that at the time of execution, “the first defendant was advised that the Company was indebted to the Plaintiff in the sum of $300,000 and the First Guarantee was to secure payment of this amount only.” (paragraph 5).
23 In his first affidavit, he also disputes that the amount owing under the guarantee is as claimed and “specifically recalls” that Mr Mitchelhill advised him that the guarantee was limited to the amount that the Company was borrowing, which at that time was $300,000 (at paragraph 3).
24 In his written submissions, the first defendant alleged that the representations of Mr Mitchelhill were false, misleading and deceptive, with the result that he was entitled to have the first guarantee set aside. In so saying he relied on the Competition and Consumer Act 2011- which must be read as a reference to the Trade Practices Act[5] - and/or the Australian Securities and Investments Commission Act 2011.[6]
[5] Item 6(1) of Schedule 7 of the Trade Practices Amendment (Consumer Law) Act No 2 2010 provides that the Trade Practices Act 1974 as in force immediately before the commencement of this item continues to apply in relation to acts or omissions that occurred before that commencement (being 1 January 2011)
[6] Outline of Defendant’s submissions at paragraph 6(a)(vi)
25 The plaintiff made a strong submission that in these circumstances there was no defence to a claim for $300,000. Thus the third defendant would never be entitled to damages beyond the difference between $300,000 and the actual limit of the first guarantee. In such a situation, it was appropriate that judgment be given for part of the claim in the sum of $300,000, with leave to defend the balance of the plaintiff’s claim.
26 However, the court has wide powers under the former s.87 of the Trade Practices Act and its counterparts which include orders rescinding/ varying the contract where there is misleading and deceptive conduct. [7] In circumstances where the plaintiff relies on a particular instrument to establish liability which instrument may be liable to be rescinded and/or varied, I am unable to be satisfied, at this stage, that the first defendant has no real prospects of success.
[7] See e.g. Trade Practices Act 1974 s87(2)(a) and (b); Australian Securities and Investments Commission Act 2001 (Cth) s12GM (7)(a) and (b)
27 Additionally, and even if there was no real prospect of success in relation to this part of the claim, I am not satisfied that the civil proceeding should be fragmented. Rather, the question of liability on the first guarantee should be considered in the context of all of the evidence on a full hearing on the merits. Given the interrelatedness of the various claims and connection of the parties it is not in the interests of justice to do so summarily. Accordingly, if it was necessary, I would be satisfied that the matter should proceed to trial on the basis of my residual powers in s64 of the CPA even if there was no real prospect of success.
third defendant
28 In terms of the first guarantee, in his second affidavit, the third defendant refers to Mr Busby’s affidavit and “confirms” that it is his recollection that the amount that the first guarantee was limited to was $300,000 (at paragraph 3).
29 The affidavit is somewhat unsatisfactory in form and the apparently belated recollection may be open to criticism at trial. However, the possibility that the first guarantee may be set aside on the basis of a representation means that it cannot be said that there is no real prospect of success.
30 Additionally, even if there was no real prospect of success, I would also be prepared to exercise my powers under s64 to allow the matter to proceed to trial, for reasons already given in relation to the first defendant.
Conclusion
31 The plaintiff’s summons will be dismissed and the first and third defendants given leave to defend.
32 I will hear from the parties as to appropriate orders to list this matter for trial as expeditiously as possible.
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Certificate
I certify that these 7 pages are a true copy of the reasons for decision of Her Honour Judge
Kennedy, delivered on 3 August 2011.
Dated: 3 August 2011
Sonja Mileska
Associate to Her Honour Judge Kennedy
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