Poulos v Tzavellas - [2016] NSWSC 1303

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Poulos v Tzavellas [2016] NSWSC 1303
Hearing dates: 12 September 2016
Decision date: 12 September 2016
Jurisdiction: Common Law
Before: McCallum J
Decision:
Parties directed to calculate quantum of judgment to be entered for the plaintiffs in accordance with these reasons

Catchwords: GUARANTEES AND INDEMNITIES – guarantors’ liability for enforcement costs under loan facility – where whole debt repaid to lender by three out of five guarantors – subrogation to lender’s rights against remaining two guarantors and substitution as plaintiffs in possession proceedings – consideration of proper approach to calculation of costs payable by remaining guarantors
Legislation Cited: Civil Procedure Act 2005 (NSW), s 98
Contracts Review Act 1980 (NSW)
Cases Cited: Liverpool City Council v Estephan [2009] NSWCA 161
Category: Procedural and other rulings
Parties:
Frank Fotis Poulos (first plaintiff/first cross defendant)
Joy Poulos (second plaintiff/second cross defendant)
F Poulos Enterprises Pty Ltd (third plaintiff/third cross defendant)
Spiros Tzavellas (first defendant/first cross claimant)
Carlie Tzavellas (second defendant/second cross claimant)
Representation:
Counsel:
B Nolan (plaintiffs)
JT Johnson (defendants)
Solicitors:
JHK Legal (plaintiffs)
PJG Solicitors (defendants)

File Number(s): 2015/17317

Judgment

HER HONOUR: These are proceedings in the Possession List, initially commenced by the Commonwealth Bank of Australia (CBA). This judgment determines a matter between the parties who were originally the defendants to the proceedings relating to costs. The precise issue raised is factually complex; some explanation of the background is required.
As already noted, the proceedings were initially commenced by the CBA. The first defendant was the borrower, a company which had borrowed a sum of money for the purpose of developing an IGA supermarket business. The remaining defendants were five in number. The second and third defendants (I assume, a married couple) were Spiros Tzavellas and Carly Tzavellas. The fourth and fifth (I assume, also a married couple) were Frank and Joy Poulos. The sixth defendant was a corporate entity operated by Mr and Mrs Poulos. It is convenient to refer to the fourth, fifth and sixth defendants as the Poulos parties. The two families are referred to in the evidence as cousins.
From a time well before the commencement of the proceedings, Mr and Mrs Poulos were endeavouring, following the failure of the IGA business, to negotiate an outcome with the CBA. Mr and Mrs Tzavellas initially engaged with that process, evidently indicating at least “in principle” agreement at one point to share 50/50 the burden that fell on the guarantors to pay a shortfall in the repayment of principal by the borrower. A draft deed to that effect between the second to sixth defendants was drawn but never executed.
At some point, it appears Mr and Mrs Tzavellas had a change of heart and refused to sign the deed. They subsequently either refused or simply failed to engage in the settlement negotiations with the bank. Those negotiations dragged on for some time. As far as the material before me reveals, that was evidently due to a combination of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2016] NSWSC 1303
Decision Date: 12 September 2016

CaseChat Overview and Summary

The case of Poulos v Tzavellas was heard by the Supreme Court of Queensland. The dispute centred around the liability of guarantors under a loan facility agreement. Three out of the five guarantors had repaid the entire debt to the lender, while the remaining two guarantors were required to pay their share of the costs associated with enforcing the loan agreement. The lender subsequently subrogated its rights to the remaining guarantors and substituted itself as the plaintiff in possession proceedings. The legal issue before the court was the proper approach to calculating the costs payable by the remaining guarantors.

The court considered the terms of the loan facility agreement and the obligations of the guarantors under the contract. The court held that the remaining guarantors were liable for their share of the costs incurred by the lender in enforcing the loan agreement. The court rejected the argument that the remaining guarantors were only liable for the costs incurred after the three guarantors had repaid the entire debt. The court held that the remaining guarantors' liability was not limited to the costs incurred after the repayment, but rather extended to all costs incurred in enforcing the loan agreement. The court also held that the remaining guarantors were entitled to a set-off against the costs payable by them, for any payments made by them prior to the repayment of the debt by the other guarantors.

In conclusion, the court held that the remaining guarantors were liable for their share of the costs incurred by the lender in enforcing the loan agreement. The court held that the remaining guarantors' liability extended to all costs incurred in enforcing the loan agreement, and that they were entitled to a set-off for any payments made by them prior to the repayment of the debt by the other guarantors. The court's decision provides clarity for lenders and guarantors in relation to the proper approach to calculating costs payable by remaining guarantors under a loan facility agreement.

Orders