Raeburn v Loan WA Pty Ltd

[2023] WASC 134

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

CITATION:   RAEBURN -v- LOAN WA PTY LTD [2023] WASC 134

CORAM:   ACTING MASTER MCDONALD

HEARD:   20 JULY 2022

DELIVERED          :   28 APRIL 2023

PUBLISHED           :   28 APRIL 2023

FILE NO/S:   CIV 2240 of 2021

BETWEEN:   BRYAN MCMASTER RAEBURN

First Plaintiff

MIGUEL ANGEL MARON NICHOLS

Second Plaintiff

AND

LOAN WA PTY LTD

First Defendant

ASSET FINANCE AUSTRALIA PTY LTD

Second Defendant

Catchwords:

Practice and procedure ‑ Summary judgment ‑ Application for summary judgment brought by plaintiffs in respect of declaratory relief concerning contract of guarantee ‑ O 14 r 1 Rules of the Supreme Court 1971 (WA) ‑ Whether defendants have good defence on the merits ‑ Whether contract of guarantee a deed or whether supported by valid consideration ‑ Arguable defences established

Practice and procedure ‑ Pleadings - Strike-out application ‑ O 20 r 19(1)(b) Rules of the Supreme Court 1971 (WA) ‑ Application to strike out parts of the counterclaim asserting misleading or deceptive conduct claims ‑ Whether pleadings frivolous ‑ Pleadings disclose comprehensible causes of action

Legislation:

Australian Consumer Law (WA), s 18
Australian Securities and Investments Commission Act 2001 (Cth), s 12DA
Competition and Consumer Act 2010 (Cth), s 131A, s 140, Sch 2
Fair Trading Act 2010 (WA), s 19(2), s 36
Property Law Act 1969 (WA), s 9(1), s 9(4)
Rules of the Supreme Court 1971 (WA), O 3 r 3, O 14 r 1, O 14 r 8, O 20 r 19(1)(b)

Result:

Application for summary judgment dismissed
Application to strike-out paragraphs of counterclaim dismissed

Category:    B

Representation:

Counsel:

First Plaintiff	:	K A Dundo
Second Plaintiff	:	K A Dundo
First Defendant	:	S J Davis
Second Defendant	:	S J Davis

Solicitors:

First Plaintiff	:	KD Legal (Perth)
Second Plaintiff	:	KD Legal (Perth)
First Defendant	:	MGD Law
Second Defendant	:	MGD Law

Cases referred to in decision:

Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112

Beaton v McDivitt (1987) 13 NSWLR 162

Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304

Chappell v Goldspan Investments Pty Ltd [2021] WASCA 205

Coghlan v S H Lock (Aust) Ltd (1987) 8 NSWLR 88

Dean v Lloyd (1991) 3 WAR 235

Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847

Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87

HCK China Investments Ltd v Solar Honest Ltd [1999] FCA 1156

Matouk v The Entrance Seabreeze Pty Ltd [2010] NSWSC 649

McKay v National Australia Bank Ltd [1998] 1 VR 173

Mercantile Bank of Australia Ltd v Weigall (1895) 16 ALR 192

Morgan v Pallister [2004] WASC 188

Neilsen v Hempston Holdings Pty Ltd (1986) 65 ALR 302

New Standard Energy PEL 570 Pty Ltd v Outback Energy Hunter Pty Ltd [2019] SASCFC 132

NRW Contracting Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2002] WASCA 107

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 91

Re Rule of the Supreme Court 1971 (WA); Ex parte Gates [2018] WASC 213

Ridgepoint Corporation Pty Ltd v McCallum Donovan Sweeney [2011] WASC 167

SH Lock Discounts & Credits Pty Ltd v Miles [1963] VR 656

Smith v Passmore (1883) 4 LR (NSW) 274 (FC)

Sutton Investments Pty Ltd v Realistic Investments Pty Ltd [2017] WASCA 14

Westraint Resources Pty Ltd v BHP Iron Ore Pty Ltd [No 3] [2008] WASC 265

Wollongong Coal Ltd v Gujarat NRE India Pty Ltd [2019] NSWCA 135

Wormald v Maradaca Pty Ltd [2020] NSWCA 289

Zaghloul v Bayly [2021] WASCA 125

ACTING MASTER McDONALD:

Overview

1. The plaintiffs filed an Amended Chamber Summons for Summary Judgment and Strike-Out on 7 April 2022 (Application) seeking orders for summary judgment pursuant to O 14 r 1 of the Rules of the Supreme Court 1971 (RSC) and for orders to strike-out various paragraphs of the defendants' counterclaim pursuant to O 20 r 19(1)(b) RSC on the ground that those paragraphs are said to be frivolous.

2. For the reasons that follow the Application is dismissed in its entirety.  The only prayer for relief in respect of which the plaintiffs moved for summary judgment is a discretionary remedy, success on which necessarily involved the resolution of contested facts, and in respect of which the defendants have demonstrated an arguable defence.  Further, the narrow strike-out application, based solely on a contention that the misleading or deceptive conduct claims pleaded by the defendants by way of counterclaim are frivolous, are factually intensive and are not frivolous in that they are not so obviously unsustainable or untenable that they cannot possibly succeed.

Procedural History

Pleadings

1. The writ of summons was filed on 18 November 2021, accompanied by a general indorsement.  There were a number of amendments to the writ and to the pleading over the course of the two months that followed.  First, an amended writ of summons was filed on 16 December 2021.  A statement of claim was then filed on 10 January 2022, titled as an 'amended statement of claim' although no earlier version of that pleading had been filed (but it appears a version dated 22 December 2021 may have been served).  A second amended statement of claim was then filed on 17 January 2022, followed by a substituted second amended statement of claim filed on 28 January 2022 (Substituted SOC).

2. A defence and counterclaim was filed in response on 21 February 2022, which was superseded by an amended defence and counterclaim filed on 13 May 2022 (Amended Defence and Counterclaim). The Substituted SOC and the Amended Defence and Counterclaim represent the latest iterations of the parties' pleadings. 

Application

1. The application was originally filed on 21 January 2022 but was subsequently amended.  Orders were made by the court to timetable the plaintiffs' application and to allow for the pleadings to be amended and extend time for compliance. ^[1] 

   [1] On 25 January, 7 February 22, February, 7 April 2022, 6 May and1 June 2022.

2. The affidavits which were relied upon by the plaintiffs and the defendants at the hearing of the Application are detailed in the tables below:[2]

   [2] Several of the plaintiffs' affidavits had to be re‑sworn and re‑filed, having initially been sworn before a legal practitioner who was an excluded witness for the purposes of s 9(6)(b) and s 9(7) of the Oaths, Affidavits and Statutory Declarations Act 2005 (WA). See ts 3.

No.	Plaintiffs' Affidavits	Date
1	Miguel Angel Maron Nichols (First Nichols Affidavit)	15 Jun 2022[3]
2	Bryan McMaster Raeburn (First Raeburn Affidavit)	15 Jun 2022[4]
3	Frances Lai (Lai Affidavit)	4 Feb 2022
4	Miguel Angel Maron Nichols (Second Nichols Affidavit)	15 Jun 2022[5]
5	Bryan McMaster Raeburn (Second Raeburn Affidavit)	15 Jun 2022[6]
6	Miguel Angel Maron Nichols (Third Nichols Affidavit)	20 May 2022
7	Bryan McMaster Raeburn (Third Raeburn Affidavit)	19 May 2022

[3] Initially sworn on 24 January 2022.

[4] Initially sworn on 20 January 2022.

[5] Initially sworn on 16 March 2022.

[6] Initially sworn on 16 March 2022.

No.	Defendants' Affidavits	Date
1	Maria Gabriella Di Martino (Di Martino Affidavit)	22 March 2022
2	Roberto Diodato (Diodato Affidavit)	12 May 2022
3	Luke Natoli (Natoli Affidavit)	12 May 2022

1. The plaintiffs filed submissions in support of the Application on 25 May 2022 (Plaintiffs' Submissions), which were responded to by the defendants by written submissions dated 13 June 2022 (Defendants' Submissions). The plaintiffs filed responsive written submissions on 28 June 2022 (Plaintiffs' Responsive Submissions), and the matter came on for hearing before me on 20 July 2022.

Nature of the claims

1. The allegations which have been pleaded, and the matters which have been asserted in the various affidavits, as is usual in such applications, have not been tested under cross-examination and precede the usual interlocutory steps such as discovery and inspection.  They are therefore not capable of forming the basis of final findings of fact in this Application.  The summary below of the claims which have been advanced by the parties and these reasons in general, should be seen in this light. 

The Substituted SOC

1. The circumstance which gives rise to the present action stems from the advancement by the defendant companies of a sum of money to the Australian Minifootball Federation Ltd (AMF), a public company limited by guarantee which has since passed into liquidation.

2. The plaintiffs, Mr Raeburn and Mr Nichols, were the directors of AMF at all material times.[7]  In the financing instruments annexed to the affidavits sworn by the plaintiffs, Mr Nichols is identified as being the President of AMF and Mr Raeburn is identified as being the Vice President of AMF.[8] 

   [7] Substituted SOC [5]. Mr Miguel Angel Maron Nichols is referred to in some of the material which has been filed, including within the financing instruments, as Miguel Maron or Mr Maron.

   [8] First Raeburn Affidavit (10), (14), (18); First Nichols Affidavit (10), (14), (18).

3. Mr Diodato is the sole director and secretary of the first defendant (Loan WA).[9]  Mr Natoli is the sole director and secretary of the second defendant, Asset Finance Australia Pty Ltd (AFA).[10]  The entities Loan WA and AFA operate a partnership known as Loan WA Asset Finance and Leasing.[11] 

   [9] Substituted SOC [4]; Diodato Affidavit [1].

   [10] Substituted SOC [4]; Natoli Affidavit [1].

   [11] Natoli Affidavit [1].

4. In September 2019, AMF entered into a short term funding arrangement with the defendant companies for a loan of approximately $120,000 to be advanced by the defendants, with certain interest costs paid in advance by AMF.[12]  The purpose of the loan is stated to be 'To assist with the provision of a bank guarantee in favour of Tourism WA'.[13]  This statement is consistent with the assertion made by Mr Diodato in his affidavit that AMF required the funding to enable it to provide a bank guarantee to the agency known as Tourism WA, in order for Tourism WA to provide funding to AMF for a soccer tournament to be held in Perth in October 2019.[14]  

   [12] Substituted SOC [6]. The loan is stated to be for the sum of $134,400 with the sum of $120,000 advanced and the balance representing interest costs.

   [13] First Nichols Affidavit [8].

   [14] Diodato Affidavit [6].

5. There is a dispute between the parties as to the particular instrument which is said to embody the financial arrangement between them, and as to when a particular term was inserted or modified.  There is also a dispute between the parties as to the legal effect of the instruments.

6. Within the Substituted SOC, the plaintiffs plead a reference to the First Term Sheet, which they plead they both signed on 11 September 2019 (as President AMF and as Vice President AMF, and in the space above the word 'Guarantor').[15]  The plaintiffs then plead that they requested a copy of the First Term Sheet from Mr Diodato as they did not have a copy, but instead of providing a copy, Mr Diodato requested that the plaintiffs sign a copy of the document to be retained by the plaintiffs as their copy.[16]  The plaintiffs plead that they signed the copy on 25 September 2019 in the same manner they had signed the original.[17]  The plaintiffs refer to the second instrument as the Second Term Sheet, and plead that both the First Term Sheet and the Second Term Sheet were in the same terms, including as to the amount advanced.[18]  Among those terms, the plaintiffs plead that they were identified as the 'Guarantor(s)' in the instruments, and the Details of Security were described as:

   An unregistered caveat over 144 Gregory Street Wembley WA 6014.[19]

   [15] Substituted SOC [6].

   [16] Substituted SOC [7].

   [17] Substituted SOC [8].

   [18] Substituted SOC [10].

   [19] Substituted SOC [10]. The particulars to this plea consist of a reference to an email chain between Messrs Raeburn and Diodato and others ending 5 January 2021, which appears as aattachment D to the First Raeburn Affidavit. The email chain contains emails between Mr Diodato and Mr Raeburn over the period 17 November 2020 to 5 January 2021, which is after the date of the First Term Sheet or the Second Term Sheet. It is unclear how this forms a particular to the plea at par 10. The email communications relate more directly to the matters which emerge in par 11 of the pleading, which concerns a third instrument, referred to by the plaintiffs as the Disputed Term Sheet.

7. The pleading then moves forward a year, to November 2020, and pleads that Mr Diodato handed to Mr Raeburn a document which purported to be a copy of the First Term Sheet but which contained a difference in wording under the heading Details of Security.[20]  This instrument, being the third instrument referred to in the Substituted SOC, is defined by the plaintiffs as the Disputed Term Sheet.  The changed wording is as follows:

   An unregistered caveat over 73 Elvira Street Palmyra.[21] 

   [20] Substituted SOC [11].

   [21] Substituted SOC [11].

8. The plaintiffs plead that they immediately disputed with Mr Natoli the inclusion of the Palmyra property, in place of the original Wembley property.[22]  It appears the property in Wembley was the location from which the plaintiffs operated the AMF business, but it was not owned by them or by AMF, rather it was owned by the Town of Cambridge.[23]  Importantly, the Palmyra property appears to be land in respect of which Mr Raeburn has an interest as registered proprietor (the Raeburn Property).

   [22] Substituted SOC [12].

   [23] Second Raeburn Affidavit [20].

9. The plaintiffs plead that they never received any director fees, wages or remuneration from AMF and never received any consideration or monies from AMF (or from the defendants) for executing the First Term Sheet or the Second Term Sheet.[24] Further, they plead they never received any consideration or monies for any guarantee given in connection with AMF's borrowings from the defendants, or for any security or caveatable interest or right given by the first plaintiff (Mr Raeburn) to the defendants in respect of the Raeburn Property.[25]

   [24] First Nichols Affidavit [14]; First Raeburn Affidavit [13].

   [25] Substituted SOC [13]. The term 'Raeburn Property' is used in the Substituted SOC and appears to be a reference to the Palmyra property.

10. The plaintiffs plead that AMF was a private company limited by guarantee which had no shareholders, was a non‑profit making organisation, was not permitted to pay dividends, and plead that the plaintiffs never received any dividends in any form from AMF.[26]  These matters are not admitted by the defendants.[27]

    [26] Substituted SOC [14].

    [27] Amended Defence and Counterclaim [10].

11. Next, the plaintiffs plead that the parties did not objectively have the intention to sign either the First Term Sheet or the Second Term Sheet as formal deeds, and plead that those instruments were not attested by a witness who was not a party to the documents in accordance with s 9 of the Property Law Act 1969 (WA) (PLA).[28]  The plaintiffs then plead that any gratuitous promise or promise made by the plaintiffs to the defendants to guarantee AMF's borrowings from the defendants and any caveatable interest/right given to the defendants by the first plaintiff in respect of the Raeburn Property is 'void and not enforceable, as any such promise was not given by way of deed and there was no consideration given for the same'.[29]   These allegations are denied by the defendants.[30]

    [28] Substituted SOC [15(a)] and [15(b)].

    [29] Substituted SOC [15(c)].

    [30] Amended Defence and Counterclaim [11].

12. The pleading next includes an allegation that the default interest provision included in the First Term Sheet is extravagant, unconscionable, and was not a genuine pre‑estimate of the relevant loss and damage.[31]  These contentions are denied by the defendants.[32]

    [31] Substituted SOC [16] and [17].

    [32] Amended Defence and Counterclaim [12] and [13].

13. Finally, it is pleaded that the defendants registered a caveat over the first plaintiff's interest in the Raeburn Property.[33] The defendants admit that they caused the caveat to be registered against the first plaintiff's interest in the Raeburn Property but say that the caveat lapsed and 'the defendants have not sought or obtained, and do not intend to seek or obtain, leave under s 138D(1) [of the Transfer of Land Act 1893 (WA)] to lodge a further caveat in respect of the Raeburn Property'.[34]

    [33] Substituted SOC [18].

    [34] Substituted SOC [A] ‑ [D]; Amended Defence and Counterclaim [14].

14. The Substituted SOC then pleads the following by way of a prayer for relief (all of which is denied by the defendants):[35]

    [35] Amended Defence and Counterclaim [16] (with underlining and other emphasis removed).

    A.A declaration that no Defendant or Defendants (jointly and/or separably) have any equitable or caveatable interest/right in the Raeburn Property (and the First Plaintiff's share thereof);

    B.A declaration that:

    (i) the guarantee(s), referred to in the Term Sheets and/or the Disputed Term Sheet, are void and unenforceable; and

    (ii) the First Plaintiff and the Second Plaintiff (jointly and/or separably) are not indebted and have no liability to any Defendant or Defendants (jointly and/or separably) under the Terms Sheets and/or the Disputed Term Sheet;

    C.Or alternatively to paragraph B:

    (i) a declaration that the Default Interest (and any terms thereof under the Term Sheets and/or Disputed Term Sheet) is void and unenforceable; and

    (ii) a declaration that the Interest Costs (and any terms thereof under the Term Sheets and/or Disputed Term Sheet) did not accrue after 31 December 2019 or after expiry of the Term of Loan;

    D.The First Defendant and the Second Defendant be ordered to withdraw the registered caveat, O855826;

15. The Substituted SOC seeks from this Court declaratory relief and an order for a removal of a caveat designed to head off the defendants' claim for recovery on the two forms of security which appear on the face of the financing instruments (namely, the guarantee and the additional caveat security). 

16. The stated basis for the relief which is sought is that the instrument(s) executed by the plaintiffs did not, they contend, make reference to the first plaintiff's Raeburn Property, and so the defendants had and have no enforceable right to lodge a caveat on that property.  Further, the plaintiffs say that the instruments are not deeds and must therefore be supported by consideration, but point to an absence of valid consideration (and so contend that the guarantee cannot be enforced by the defendants as against the plaintiffs as a matter of law).  Even if the instruments are enforceable, the plaintiffs challenge the validity of the default interest provision on the basis it is a penalty. 

The Amended Defence and Counterclaim

1. In addition to those parts of the defendants' pleaded response to the Substituted SOC already referred to, the defendants expressly admit that a term sheet was signed on 11 September 2019 which is defined by the defendants as the '11 September Term Sheet'.[36]  The defendants allege that this instrument included a principal amount of $50,000, not $134,400 as contended for by the plaintiffs.[37] 

   [36] Amended Defence and Counterclaim [4].

   [37] Amended Defence and Counterclaim [4(a)].

2. The defendants then plead that a further instrument was signed by the plaintiffs on 25 September 2019, being a document emailed by Mr Diodato to Mr Raeburn on 25 September 2019 and delivered by Mr Natoli to the plaintiffs on the same date. This instrument is defined as the '25 September Term Sheet'. The amount of the loan was $134,400, less interest costs to be paid in advance.  The defendants plead that the parties to the instrument which was signed on 25 September 2019 were the defendants as lenders, AMF as the borrower, and the plaintiffs as guarantors.[38]

   [38] Amended Defence and Counterclaim [4(b)], [4(c)], [5], [6] and [7].

1. The defendants plead that the sum of $120,000 was paid to a bank account nominated by the plaintiffs, and other than an amount of $6,100, the loan remains unpaid.[39]   The defendants plead that $1,000 of the total amount repaid was paid by Area 5, which I infer was the reference used when the funds were transferred.  The defendants plead that there is an entity known as Area 5 Football Pty Ltd and allege that the plaintiffs were directors of that entity for certain periods of time.[40]

   [39] Amended Defence and Counterclaim [4(d)] and [4(f)].

   [40] Amended Defence and Counterclaim [4(g)].  The pleading appears to raise an issue that at least some of the funds paid to the defendants by way of repayment of the loan originated from the entity 'Area 5 Football Pty Ltd', an entity of which the plaintiffs were the directors.

2. The defendants plead a bare denial of par 11 and par 12 of the Substituted SOC and say nothing more about the allegation that a further copy of the Disputed Term Sheet included a modified clause concerning the Details of Security and then challenged by the plaintiffs over a telephone call.[41]

   [41] Amended Defence and Counterclaim [9]. There is an allegation in par 8(b) of the Amended Defence and Counterclaim that the Town of Cambridge is, and was at all material times, the registered proprietor of the property at 144 Gregory Street in Wembley, being the property identified in the 'First Term Sheet' as pleaded by the plaintiffs.

3. The Counterclaim filed by the defendants advances several claims against the plaintiffs, which may be briefly summarised:

   1.A claim in contract pursuant to the guarantee provided by the plaintiffs in the instrument dated 25 September 2019, in the amount of $332,740.54 (which includes an amount for interest of $204,440.54).  The claim is made by Loan WA Asset Finance and Leasing, being the partnership of which the defendants are partners.[42]

   2.Further or in the alternative, a claim for misleading or deceptive conduct contrary to s 18 of the Australian Consumer Law 2010 (WA) (ACL (WA)) applicable pursuant to the Fair Trading Act 2010 (WA) (FTA), arising from certain representations allegedly made by the plaintiffs to Mr Diodato and Mr Natoli between 5 and 25 September 2019, to the effect that regardless of what happened, they would personally guarantee and be liable for the repayment of the Loaned Funds[43] (Representations). The defendants plead that the Representations were as to future matters and the plaintiffs did not have reasonable grounds for making them, which in effect places the onus of proof on the plaintiffs to identify and prove any reasonable grounds.[44]

   3.Further, a claim for misleading or deceptive conduct contrary to s 18 of the ACL (WA) pursuant to the FTA, arising from an implied representation. The implied representation is said to be apparent from the terms of the instrument dated 25 September 2019[45] that the plaintiffs would personally guarantee and be liable for the repayment of the Loaned Funds and of all interest payable on the Loaned Funds in accordance with the 25 September Term Sheet[46] (Implied Guarantor Representation). Again, the defendants plead this representation was as to a future matter.[47]

   4.Further or in the alternative to the foregoing, the defendants plead a claim for misleading or deceptive conduct contrary to s 18 of the ACL (WA) applicable pursuant to the FTA, arising from a further implied representation. This implied representation is said to be that by the inclusion of the Charging Clause in the instrument dated 25 September 2019 which referred to the Wembley property,[48] the plaintiff’s impliedly represented that the plaintiffs had sufficient ownership, authority and/or control over the Wembley property to allow the defendants to register a caveat over it (the Implied Caveat Representation).[49] The defendants plead that the first plaintiff had no authority to agree to the registration of a caveat over the Wembley Property and had no authority to agree to the Charging Clause.[50]  The defendants assert that the Charging Clause provided no security to the defendants for the Loaned Funds or interest thereon.[51]  The defendants plead there was a reasonable expectation on the part of the defendants that the plaintiffs would have disclosed to them that the first plaintiff was not the registered proprietor of the Wembley property and that they had no authority to agree to the registration of a caveat over that property.[52]  In reliance of the Implied Caveat Representation the defendants advanced the Loaned Funds.[53]

   [42] Amended Defence and Counterclaim [18] ‑ [21].

   [43] Amended Defence and Counterclaim [22], [24] ‑ [28].

   [44] Amended Defence and Counterclaim [27].

   [45] Namely, that the instrument identified the plaintiffs as 'Guarantor(s)' and the plaintiffs signed the instrument above their name and the word 'Guarantor'. 

   [46] Amended Defence and Counterclaim [23] and [24] ‑ [28].

   [47] Amended Defence and Counterclaim [27].

   [48] Amended Defence and Counterclaim at [30] ‑ [38].

   [49] Amended Defence and Counterclaim at [33].

   [50] Amended Defence and Counterclaim at [31].

   [51] Amended Defence and Counterclaim at [32].

   [52] Amended Defence and Counterclaim at [34].

   [53] Amended Defence and Counterclaim at [36].

Application ‑ Summary Judgment

Scope of the Application

1. The Application itself sought leave to apply for summary judgment on the apparent basis that the chamber summons had been filed out of time.[54] At the hearing, I raised with counsel for the plaintiffs whether leave was in fact required given the operation of O 3 r 3 RSC and the manner in which time is calculated for the purposes of the Rules during the period from 24 December and 15 January.[55]  Counsel for the plaintiffs and the defendants ultimately accepted that leave was not required.  This procedural issue accordingly falls away. ^[56]

   [54] Application [1];  Plaintiff's Submissions [5] ‑ [10].

   [55] ts  15 - 16 (noting the defendants filed an appearance on 20 December 2021 and the Application was filed on 21 January 2022).

   [56] ts  16, 44 ‑ 45.

2. At least initially, the plaintiffs sought leave within the Application to cross-examine 'in respect of paragraphs 11 and 12 of the Statement of Claim and the matters in reasonable connection thereof', but abandoned this proposal when the Application was amended in April 2022.[57]

   [57] Application [2].

3. By par 2 of the Application, the plaintiffs sought summary judgment as to par A and par B of the prayer for relief in the Substituted SOC.  At the hearing before me, counsel for the plaintiffs did not press the summary judgment application in respect of par A of the prayer for relief (which is the declaration that the defendants have no equitable or caveatable interest or right in the Raeburn Property).[58]

   [58] ts 33.

4. Accordingly, whether summary judgment should be granted on par B of the prayer for relief remained as the only contested issue on the Application, insofar as summary dismissal was concerned.  Paragraph B provides:

   B.A declaration that:

   (i) the guarantee(s), referred to in the Term Sheets and/or the Disputed Term Sheet, are void and unenforceable; and

   (ii) the First Plaintiff and the Second Plaintiff (jointly and/or separably) are not indebted and have no liability to any Defendant or Defendants (jointly and/or separably) under the Terms Sheets and/or the Disputed Term Sheet;

Affidavit evidence

1. The affidavit evidence, in brief, is as follows.

2. Mr Raeburn deposes that he and Mr Nichols signed a term sheet on 11 September 2019 with respect to borrowings of AMF from the defendants.  The meeting occurred at The Re Store in Leederville.  He deposes that neither he nor Mr Nichols retained a copy of that document.[59]  He describes this as the First Term Sheet.  Mr Raeburn deposes that he did not realise that AMF could not grant a caveat to the defendants in the manner contemplated in this document (i.e., in respect of the Wembley property).[60]  He deposes that he read the document very quickly and felt rushed.[61]

   [59] First Raeburn Affidavit [3]; Second Raeburn Affidavit [4]; First Nichols Affidavit [3]; and Second Nichols Affidavit [3], [4].

   [60] Second Raeburn Affidavit [13].

   [61] Third Raeburn Affidavit [3(d)].

3. Mr Raeburn deposes that he did not initiate contact with Mr Diodato, rather he was cold‑called by Mr Diodato.[62]  Mr Raeburn deposes there were some discussions in the lead up to the signing of the document, primarily with Mr Diodato, but no discussions as to any security or caveat, and no discussions about Mr Raeburn giving a guarantee.[63]  That said, Mr Raeburn states there were some discussions by mobile text message with Mr Diodato on or about 9 to 11 September 2019 as to Mr Raeburn's ex‑partner giving a guarantee for the proposed loan.  The text messages appear to record Mr Raeburn rejecting this proposal.[64] 

   [62] Third Raeburn Affidavit [3(b)].

   [63] Second Raeburn Affidavit [6], [8]; Third Raeburn Affidavit [3(g)]. Mr Nichols deposes in similar terms: Second Nichols Affidavit [10].

   [64] Second Raeburn Affidavit [7], attachment A.

4. Mr Raeburn deposes that he and Mr Nichols then requested a copy of the term sheet from Mr Diodato, but were told that they would need to re-sign the document and retain that as a copy.  That document was emailed to Mr Raeburn on 25 September 2019.[65]  A hard copy was then hand delivered to Mr Raeburn and Mr Nichols by Mr Diodato at a sporting event, also dated 25 September 2019, which they all signed.[66]  Mr Raeburn deposes that he signed this document only for the purpose of obtaining a copy of the first document he had signed.[67]

   [65] First Raeburn Affidavit [4], [5], attachment A; First Nichols Affidavit [4], attachment A.

   [66] First Raeburn Affidavit [6], [7], attachment B; First Nichols Affidavit [5], [6], attachment B.

   [67] Second Raeburn Affidavit [16], [17].  Mr Nichols deposes in similar terms: Second Nichols Affidavit [7] ‑ [8].

5. Mr Nichols deposes that AMF received the sum of $120,000 from the defendants sometime after the First Term Sheet was signed.[68] 

   [68] First Nichols Affidavit [7]; Second Nichols Affidavit [17], attachment B.

6. Mr Raeburn deposes that he was later handed another document by Mr Diodato, on 23 November 2020, at Mr Diodato's office in Osborne Park.  Mr Raeburn says he did not read the document initially but did so when he left the office and went to his vehicle.  He says he immediately rang Mr Natoli and said words to the effect, 'Luke … what is this all about … the address for the caveat has changed'.[69]  Mr Raeburn comments that he never agreed to change the address of the property in the Details of Security section of the instrument from the Wembley property to the Raeburn property.[70]  He states this was the only difference between the instruments.[71] He then refers to certain email communications passing between the parties.[72]  Mr Nichols also deposes that he did not authorise any amendment to the term sheets.[73]

   [69] First Raeburn Affidavit [8], [9], attachment C; First Nichols Affidavit [8] ‑ [9].

   [70] Mr Raeburn deposes that he has an interest in the property located at 73 Elvira Street, Palmyra: see First Raeburn Affidavit [16], attachment E.

   [71] First Raeburn Affidavit [10] – [11].

   [72] First Raeburn Affidavit [12].

   [73] First Nichols Affidavit [12].

7. Both Mr Raeburn and Mr Nichols depose that they managed AMF, which was a non‑profit making organisation, which had the purpose of developing community-based mini‑football leagues and matches or cups.  They depose that the business relied on sponsorship funds to pay for these events.  They both depose that they did not receive any remuneration from AMF as directors, nor any monies or remuneration for any employment services to AMF.  They state they did not receive any monies, value or consideration from the defendants or AMF in relation to any borrowings made by AMF from the defendants.  They state that the proceeds of the loan from the defendants were used by AMF to conduct a sporting event.  They also state that AMF could not pay any dividends to shareholders and neither of them received any distribution of profits from AMF.[74]

   [74] First Raeburn Affidavit [13]; and First Nichols Affidavit [14].

8. Mr Diodato deposes that he was first introduced to the plaintiffs in or about November 2018, through their accountant.[75]  Relevantly to the present dispute, Mr Diodato states that he and Mr Natoli met with the plaintiffs at the offices of Loan WA on or about 5 September 2019.  He deposes that Mr Raeburn asked whether the defendants would loan funds to AMF to provide a bank guarantee in favour of Tourism WA, which was needed for a soccer event to be held in Perth in October 2019.[76]  Mr Diodato sets out some detail regarding the conversation at the meeting, to the effect that the plaintiffs indicated they had secured $30,000 in funding already and were confident of securing $70,000 from another lender, but needed a further $50,000 to cover the total sum of $150,000 required by Tourism WA.  Mr Diodato deposes that he agreed to loan the sum of $50,000 and he made it clear to the plaintiffs that a personal guarantee from the plaintiffs would be required.[77]  He deposes that both plaintiffs said words to the effect that 'regardless of what happened with [AMF] and the Event, they wholeheartedly agreed to be personally liable to repay the amount borrowed' and 'everything would be fine and there would be no problems' and then the parties shook hands.[78]

   [75] Diodato Affidavit [4].

   [76] Diodato Affidavit [5] - [6].

   [77] Diodato Affidavit [7] - [9].

   [78] Diodato Affidavit [10] - [11].

9. Mr Diodato deposes that he provided a term sheet to the plaintiffs on 11 September 2019, which he says he went through with the plaintiffs in some detail.[79]  He deposes that the plaintiffs repeated the words mentioned above, as to being personally liable.[80]  The term sheet was signed, but immediately after doing so, according to Mr Diodato, the plaintiffs said they actually needed $120,000 as the funds they had earlier been confident of raising had not come through.[81]

   [79] Diodato Affidavit [12] - [13]

   [80] Diodato Affidavit [14].

   [81] Diodato Affidavit [15].

10. Mr Diodato deposes that he and Mr Natoli agreed to increase the loan to $120,000 on the same conditions, including a personal guarantee, and further deposes that the plaintiffs agreed to this.[82]  Mr Diodato states he did not keep a copy of the term sheet for $50,000 as that had in effect been superseded by the discussion between the parties.  It was later, on 25 September 2019, that Mr Diodato says he prepared the term sheet which included the sum of $120,000 as the loan amount.[83]  This later term sheet was then signed (as the first instrument) and the funds were thereafter transferred to the bank account nominated by the plaintiffs.[84] 

    [82] Diodato Affidavit [16].

    [83] Diodato Affidavit [17] - [18],d attachment RD1.

    [84] Diodato Affidavit [20] - [22].

11. In agreeing to lend the funds, Mr Diodato deposes that he relied heavily on the promise from the plaintiffs to guarantee AMF's liability to repay the money, and would not have otherwise advanced the funds.[85]

    [85] Diodato Affidavit [23] - [24].

12. Mr Natoli deposes that he had read Mr Diodato's affidavit and with some additional context which appears in his own affidavit, he verifies that the contents of Mr Diodato's affidavit are correct.[86]  Mr Natoli deposes that he attended several meetings with the plaintiffs in September 2019 and had known the plaintiffs for a number of years.[87]  He deposes that at the meeting with the plaintiffs on 11 September 2019 Mr Diodato said words to the effect: 'Guys you're not going to f… us here are you?  You will pay us back?', to which the plaintiffs both responded 'We will pay you back'.[88]

    [86] Natoli Affidavit [4].

    [87] Natoli Affidavit [5] - [6].

    [88] Natoli Affidavit [9] - [11].

13. Neither Mr Diodato nor Mr Natoli provide any explanation as to how the reference to the Raeburn Property came to be inserted into the term sheet.

Plaintiffs' Submissions

1. Within the Plaintiffs' Submissions, it was contended that the defendants had provided no evidence to dispute the matters in the plaintiffs' evidence as to the Disputed Term Sheet.[89] 

   [89] Plaintiffs' Submissions [16].

2. The plaintiffs placed reliance on attachment B to the Second Raeburn Affidavit,[90] which consisted of an email exchange between Mr Raeburn and Mr Diodato on 5 January 2021, over a year after the instruments were apparently signed.[91]  The exchange between the parties focuses on the addition of the Raeburn Property in place of the Wembley property.  Mr Raeburn states in one email that he 'would never have signed a document on [sic] relation to 73 Elivra Street for anything'.[92]  Mr Diodato urges Mr Raeburn to focus on making arrangements to pay the outstanding loan and criticises Mr Raeburn for signing a 'loan contract fully knowing it was wrong and impossible for you to provide the security'.[93]  In the emails, the plaintiffs also emphasise their concern at the caveat lodged by the defendants on the Raeburn Property and refer to correspondence from the defendants' solicitor on this issue. 

   [90] Plaintiffs' Submissions [17].

   [91] Second Raeburn Affidavit, attachment B.

   [92] Second Raeburn Affidavit, attachment B (8).

   [93] Second Raeburn Affidavit, attachment B (7).

3. The plaintiffs submit that the evidence shows that the defendants provided the Disputed Term Sheet to the plaintiffs for the purposes of extending the term sheet to the Raeburn Property because only the Wembley property had initially been referred to in the term sheet.[94]  The plaintiffs submit that the defendants lodged a caveat over the Raeburn Property in reliance on the Disputed Term Sheet.[95]  The plaintiffs also make a number of submissions regarding inconsistencies in the defendants’ pleadings and evidence as to status of 'the $50,000 term sheet', in distinction to the First Term Sheet and the Second Term Sheet.[96]  I take the reference to 'the $50,000 term sheet', to be a reference to the term sheet deposed to by the defendants for the initial amount of $50,000.[97] 

   [94] Second Raeburn Affidavit [19].

   [95] Second Raeburn Affidavit [22].

   [96] Plaintiffs’ Submissions [20] - [25].

   [97] Amended Defence and Counterclaim [4(a)].

4. The ultimate submissions made by the plaintiffs in support of the summary judgment application are that:

   1.The plaintiffs did not receive any monies or consideration in relation to AMF's borrowings from the defendants (in respect of any of the term sheets), and say that these statements have not been challenged by the defendants.  The plaintiffs submit that the defendants provided no consideration to the plaintiffs for any guarantee under or in connection with the term sheets.[98]

   2.None of the instruments signed by the plaintiffs were executed or attested in the manner required for the instruments to be characterised as deeds, as opposed to simple contracts. The plaintiffs refer to s 9(1) of the PLA and Dean v Lloyd (1991) 3 WAR 235.[99] 

   3.If the instruments cannot be characterised as deeds, that is contracts under seal, the plaintiffs submit that, in order to be valid and enforceable, the contracts of guarantee within the instruments must be supported by consideration, and the onus of proving that there is consideration is on the party who seeks to rely upon the contract.  The plaintiffs refer to HCK China Investments Ltd v Solar Honest Ltd [1999] FCA 1156 [231], McKay v National Australia Bank Ltd [1998] 1 VR 173, 177 (which refers to O'Donovan and Phillips, The Modern Contract of Guarantee, 3^rd ed (1996) at pages 52-53), and Beaton v McDivitt (1987) 13 NSWLR 162, 167.[100] 

   4.The plaintiffs submit there was:

   no consideration paid to the Plaintiffs for the alleged guarantee for the AMF loan on the 'face' of the terms sheets nor did the Plaintiffs ever receive any consideration for the alleged guarantee.  As a consequence, the guarantees are void and not enforceable.[101]

   5.Finally, the plaintiffs submit that the guarantee promise is a separable promise and it is possible to declare the guarantee as being unenforceable without declaring the whole document void.[102]

Defendants' submissions

[98] Plaintiffs' Submissions [24] - [25].

[99] Plaintiffs' Submissions [30] - [33].

[100] Plaintiffs' Submissions [26] - [28].

[101] Plaintiffs' Submissions [29].

[102] Plaintiffs' Submissions [34] - [37], referring to Wollongong Coal Ltd v Gujarat NRE India Pty Ltd [2019] NSWCA 135 [41] and New Standard Energy PEL 570 Pty Ltd v Outback Energy Hunter Pty Ltd [2019] SASCFC 132 [121].

1. The defendants submit that, at least for the purposes of the Application, the difference in wording between the term sheets is somewhat irrelevant as the operative wording relating to the guarantee is identical.  The defendants note that the only difference in wording concerned the property which could be the subject of a caveat and this was only relevant to whether the defendants have a caveatable interest in the Raeburn Property.  As to this issue, the defendants observed in their submissions that the caveat had lapsed and the defendants had made clear their intention not to seek leave to lodge a further caveat.  As already noted, the plaintiffs did not seek summary judgment in relation to par A of the prayer for relief, so the issue falls away for present purposes.[103]

   [103] Defendants' Submissions [9] - [12].

2. As to par B of the prayer for relief, the defendants resist the application for summary judgment for the following reasons.

   1.Summary judgment is reserved for the clearest of cases, where there is a high degree of certainty about the outcome if the proceedings were allowed to go to trial.[104]

   2.Whether or not the term sheets may be characterised as formal deeds is a matter of intention and context, and not an issue appropriate for summary determination.[105]  The defendants dispute the plaintiffs' assertion that the term sheets cannot be characterised as deeds.

   3.Even if the term sheets are not characterised as deeds, they will nonetheless be valid and enforceable as contracts if they are in writing and supported by valid consideration.[106]

   4.The defendants submit that while consideration must move from the promisee (in this case, the defendants) it need not move to the promisor (the plaintiffs), and may move to a third party (i.e. the borrower, AMF).  A common form of consideration for a guarantee, the defendants submit, is the creditor entering into the principal transaction with the debtor, including by way of making advances to the debtor or agreeing to do so.  The defendants refer to Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847,853 per Viscount Haldane LC; The Laws of Australia, Westlaw Online at [8.6.450]; Smith v Passmore (1883) 4 LR (NSW) 274 (FC); SH Lock Discounts & Credits Pty Ltd v Miles [1963] VR 656; and Mercantile Bank of Australia Ltd v Weigall (1895) 16 ALR 192 (VSC).[107]

   5.Building on the foregoing submission, the defendants submit that the guarantee given by the plaintiffs was arguably supported by valid consideration moving from the defendants as promisees to AMF as the principal debtor, being the advance of the loan funds pursuant to the relevant term sheet.[108]

   6.Finally, the defendants say that it is at least arguable as a matter of proper construction of the term sheets that the plaintiffs gave the defendants a guarantee.[109]

Disposition

[104] Defendants' Submissions [5].

[105] Defendants' Submissions [15].

[106] Defendants' Submissions [13], [18].

[107] Defendants' Submissions [18] - [19].

[108] Defendants' Submissions [21].

[109] Defendants' Submissions [22].

1. The principles to be applied on an application for summary judgment are well established and were recently restated by the Court of Appeal in Zaghloul v Bayly [2021] WASCA 125 [116] (Murphy, Mitchell and Vaughan JJA), referring to Sutton Investments Pty Ltd v Realistic Investments Pty Ltd [2017] WASCA 14 [24] and Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99, among other authorities.[110]  Their Honours stated:

   The critical issue is whether it is clear that there is no real question to be tried.  The issue is framed in this manner as it is only in the clearest of cases, where there is a high degree of certainty about the outcome if the proceedings were allowed to go to trial, that summary judgment ought properly to be granted.  The exercise of powers to summarily terminate proceedings must always be attended with caution.

   [110] See also NRW Contracting Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2020] WASCA 107 [43] ‑ [55] and Civil Procedure Western Australia, Vol 1 (LexisNexis 1990) [14.0.2].

2. The plaintiffs contended, wrongly in my view, that the defendants carried an overall onus on the issue of summary judgment.[111]  The plaintiffs carry the burden of persuading the Court that the claim is a good one, that there is no defence to it, that leave to defend should not be granted, and that judgment should be given for the plaintiffs.  The defendants assumed an evidentiary burden, but the overall legal burden of persuasion remained on the plaintiffs as applicants for summary judgment.[112]

   [111] ts 7 and Plaintiffs' Submissions [26] ‑ [28] and [32].

   [112] Morgan v Pallister [2004] WASC 188 [4] (Pullin J).

3. On the Application, the plaintiffs seek a discretionary form of relief, in final terms, from this Court.  More specifically, the plaintiffs seek a declaration that the guarantees referred to in the term sheets and/or the Disputed Term Sheet are void and unenforceable and the plaintiffs are not indebted and have no liability to the defendants under those instruments (jointly or separably).  The declaratory relief sought would finally determine, assuming the plaintiffs' case is accepted, whether the instruments they signed created any enforceable obligations as against them in their personal capacities (and would in effect preclude the defendants enforcing part of their counterclaim on the instruments for repayment of the debt through the guarantees).  

4. When seen in the foregoing context and noting the disputes which are apparent on the affidavits filed by the parties, there are several compelling reasons why summary judgment in the terms sought by the plaintiffs should not be entered.

5. First, there is a dispute on the affidavit material as to which instrument represents the final document by which the parties agreed to be bound and whether the terms of that instrument included the Wembley or the Raeburn Property as the applicable land over which a caveat might be lodged.[113]  While the pleaded relief as to the caveat issue is no longer pressed on this Application (in the sense that summary judgment is not sought), and so a finding as to whether the Raeburn Property was included with the authority of the parties is not presently needed, it is critical that a finding as to which instrument (if any) was binding on the parties in order to be able to fashion a declaration as to the plaintiffs' liability to the defendants.  The declaration sought by the plaintiffs is drafted by reference to the guarantees referred to in the term sheets and/or the Disputed Term Sheet.  Without being able to make a finding in this regard, given the conflicting affidavit evidence, I am unable to make a declaration in the terms sought by the plaintiffs.

   [113] The pleadings, affidavit evidence, and submissions make reference to six differently defined instruments, namely the '$50,000 term sheet', the 'First Term Sheet', the 'Second Term Sheet', the 'Disputed Term Sheet', the '25 September Term Sheet' and the '$120,000 term sheet'.

6. Second, the declaration sought by the plaintiffs requires that I be satisfied, to the requisite standard, that the instruments were not formal deeds and there was an absence of valid consideration passing between the parties. As to the first of these issues, even on an interlocutory basis, the proposition that these instruments might be characterised as deeds is weak. However, all the circumstances by which the instruments came into existence must be examined and this in effect requires that the defendants be given an opportunity to lead full evidence on this issue at trial. It would also be necessary to then consider the operation of s 9(4) PLA in some detail, as to whether the instrument purported to be a deed or an agreement under seal.[114] 

   [114] The application of s 9(4) PLA was examined by Le Miere J in Westraint Resources Pty Ltd v BHP Iron Ore Pty Ltd [No 3] [2008] WASC 265 [23] - [42]. On the facts of that case, his Honour was able to dispose of the question on an interlocutory basis.

7. Third, it is at least arguable the guarantees expressed in the term sheets were supported by valid consideration which passed from the defendants to AMF upon the provision of the loan funds and such consideration is sufficient to support the personal guarantees provided by the plaintiffs.  In this regard, I accept the relevant submissions made by the defendants, both as to the matters of fact and matters of law, as being arguable.[115]  Without finally deciding the issue, I note the following matters:

   [115] Defendants' Submissions [13] - [23].

   1.The plaintiffs placed reliance on authorities such as McKay v National Australia Bank Ltd to support their contention that consideration was lacking.  This reliance is misplaced, in the present circumstances.  In McKay v National Australia Bank Ltd, a new guarantee was put in place which was expressed to be in consideration of the bank 'providing banking accommodation' to the principal debtor and/or 'forbearing to enforce immediate payment' of moneys owing by the principal debtor to the bank.  However, no new financial accommodation was in fact provided when this new guarantee was given, and nor had the bank made any demand for payment.  The Victorian Court of Appeal held the guarantee was unenforceable, as there was no forbearance to sue and no provision of financial accommodation when the guarantee was given.[116]  Put another way, the mere continuation of the credit facility was not valid consideration for a promise by way of guarantee where there was no undertaking or request from the putative guarantors.

   2.In circumstances where funds are advanced in response to a request which is made contemporaneously with, or prior to, the giving of the guarantee, the payment of those funds to the principal debtor may be sufficient consideration at law to support the guarantee.  Authorities such as Smith v Passmore (1883) 4 LR (NSW) 274, S H Lock Discounts & Credits Pty Ltd v Miles [1963] VR 656 and Coghlan v S H Lock (Australia) Ltd (1987) 8 NSWLR 88 provide support for this proposition. The analysis in this regard focuses on the connection between the act in question (the advancing of funds by the promisee) and the request to perform the act (the undertaking or request from the guarantor). The point also finds support in O'Donovan & Phillips, The Modern Contract of Guarantee, Thomson Reuters, at [2.1100] and Cheshire & Fifoot, Law of Contract, 12^th Australian Edition at [4.3].[117]

   3.The foregoing analysis was employed by Ward J (as her Honour then was) in Matouk v The Entrance Seabreeze Pty Ltd [2010] NSWSC 649. In that case, her Honour considered whether an instrument incorporating a guarantee would be enforceable as a contract if not enforceable as a deed. Her Honour was presented with an instrument which contained a tripartite arrangement, namely a loan from Mr Matouk to the company Seabreeze, and an alleged guarantee between the individual directors of Seabreeze and Mr Matouk. It was contended by the directors that the guarantee was not supported by consideration. Her Honour dealt with the submission from counsel for the directors, Mr Loukas, as follows:[118]

   [63]Mr Loukas relied upon the principles outlined in Phillips and O'Donovan, The Modern Contract of Guarantee, 3^rd ed, LBC Information Services, 1996, to the effect that unless the contract of guarantee is under seal, it must be supported by consideration; that the onus of proof is on the party seeking to enforce the guarantee to establish that there is sufficient consideration; and that consideration for the guarantee must move from the person to whom the guarantee is given. Mr Loukas noted that, in the context of a guarantee, consideration will usually be in the form of a creditor incurring some detriment in reliance on the promise of the guarantee rather than conferring a benefit upon the guarantor.  Mr Loukas submitted that it was not sufficient for consideration for the party receiving the guarantee to point to consideration supporting the making of the loan itself.  He therefore submits that some additional consideration must be found.

   [64] I note, however, that after the passage to which my attention was drawn in Phillips and O'Donovan, the authors go on to state that 'the usual form of consideration provided by the creditor is his action of entering into the principal transaction', giving by way of example the making of advances to the principal (there referring to Smith v Parsmore (1883) 4 LR (NSW) 274; S H Lock Discounts and Credits Pty Ltd v Miles [1963] VR 656; West Head v Sprosen (1861) 6 H&N 728; 158 ER 301.) It is noted that in cases where the consideration is the actual act of entry into the principal transaction, the guarantee will only become binding when the act occurs.

   [65]It seems to me that in circumstances where the lender (Mr Matouk) has agreed to make a loan to the borrower (Seabreeze) at the request, or for the ultimate benefit through their interest in the company, of the guarantors, then the fact that the arrangement is documented in the one deed of loan does not mean that the only consideration there evidenced is between lender and borrower and that no consideration has passed from the lender to the guarantor to support the making of the guarantee. Mr Beshara was cross-examined and conceded that the circumstances in which the loan was provided were that the development project at The Entrance was in trouble and that there needed to be a refinancing of the project (T 38.4) and that part of that refinance was the loan given by Mr Matouk (T 38.7).  He said that he was not aware at that time that Mr Matouk was only prepared to lend the money on the giving of personal guarantees (T 38.11) but nevertheless accepted that Mr Matouk had lent the money to the company.  He accepted that he had signed the guarantee and had signed it in front of a solicitor, Mr Doyle; he conceded that Mr Doyle had explained it to him (T 38.28) (though he insisted that Mr Doyle was not an independent legal adviser because he was the company's solicitor); while he insisted that Mr Doyle was not independent, he nevertheless understood that unless he signed the guarantee, no money would be provided by Mr  Matouk  to the company (T 38.47, 50) and he accepted that he understood that that was part of 'what the deal was' (T 39.3).

   4.Having reached the conclusion that it is arguable that counter‑performance by a promisee involving the making of future advances to the principal debtor is a good and sufficient consideration to support a guarantee, the affidavit evidence does at least arguably demonstrate that the plaintiffs requested the provision of financial accommodation from the defendants, to be paid to the company of which they were directors.  While the purpose for the provision of those funds may have been other than profit driven, namely for the holding of a community sporting event, and the plaintiffs say they received no monetary consideration or reward as directors or for arranging the borrowing from the defendants, I do not consider that this matters for present purposes.  What is important is that there was a request for the provision of the funds, the parties then entered into an instrument or instruments which embodied the guarantee, and the funds were thereafter transferred to the principal debtor (i.e., AMF). 

   5.I am satisfied there is material before me which is arguably sufficient to demonstrate the existence of valid consideration for the giving of the guarantees (assuming for the sake of argument that the instruments cannot be characterised as deeds). 

   [116] McKay v National Australia Bank Ltd [183] (McHugh J); [186] - [187] (Ormiston JA), referring to the 'peculiar' facts in the case.

   [117] 'For example, in a contract of guarantee, the consideration of the guarantor's promise is the lender's promise of, or the actual making of, the loan to a third-party borrower.  This is not necessarily a benefit to the guarantor (though in many commercial transactions it is) but it is a detriment to the promisee lender' in Cheshire & Fifoot, Law of Contract, 12^th Australian Edition at [4.3].

   [118] Matouk v The Entrance Seabreeze Pty Ltd [63] ‑ [65].

8. Fourth, the declaratory relief sought by the plaintiffs is discretionary in nature (and, the giving of judgment on a summary judgment application is discretionary in any event).[119]  I am not satisfied that this is a case in which such broad discretionary relief should be given at this early stage of the proceedings.  I say this because of the existence of counterclaims which assert independent bases for liability against the plaintiffs, and the declaration sought by the plaintiffs may be seen as inconsistent with the defendants' counterclaims (to the extent the plaintiffs seek a declaration that they have no liability to the defendants under the instruments).  It would not be appropriate, in the exercise of my discretion, to make final, broad declarations in favour of the plaintiffs which might (even arguably) shut out the defendants from prosecuting their counterclaims.

   [119] Order 14 r3(1) RSC.

9. Fifth, and allied to the preceding point, the plaintiffs are moving for a final order which will bind all the parties.  The jurisdiction to make such a final order should be exercised cautiously. 

10. It therefore cannot be said at this stage with the high degree of certainty needed on a summary judgment application that the plaintiffs are entitled to a declaration that the guarantees are void and unenforceable, and that the plaintiffs are not indebted and have no liability to the defendants.  The application for summary judgment will be dismissed.

Application ‑ Strike-out

Scope of the Application

1. The Application seeks an order that par [18] to par [21], par [22], par [23], par [24] to par [28] and par [30] to par [38] be struck out on the ground they are frivolous (pursuant to O 20 r 19(1)(b) RSC),[120] the defendants be denied leave to replead, and the counterclaim be dismissed.[121]  In substance, the Application is for summary dismissal of the counterclaim, with no opportunity for the defendants to rearticulate the claims. 

   [120] Initially, the strike‑out application was based on each of the grounds in O 20 r 19(1) RSC. The plaintiffs then confined the basis of the attack to par (b).

   [121] Application [3].

2. What constitutes  frivolous in the context of a strike out application was discussed by Vaughan J in Re Rule of the Supreme Court 1971 (WA); Ex parte Gates [2018] WASC 213 [31]:

   An action is frivolous when it is not worthy of serious consideration, is insupportable in law, discloses no cause of action or is groundless. So too a matter that is without substance or is fanciful is frivolous.  The term is apt to describe proceedings in which the plaintiff's claim is so obviously untenable that it cannot possibly succeed or in which there is no serious question to be tried.  An action is vexatious if it has no reasonable prospects of success.  The term has also been said to be apt to describe an action which is a sham and which cannot possibly succeed.

3. I deal first with the proposed strike-out of the defendants' contractual claim on the guarantee.[122]  The plaintiffs submit that the defendants' contractual claim on the guarantee is frivolous by reference to the same submissions which were said to support the summary judgment application.[123]  Having regard to my reasons and conclusion on the summary judgment issue this aspect of the strike‑out application must also fail.  The defendants' claim on the guarantees contained in the instrument described as the 25 September Term Sheet cannot be said to be so obviously unsustainable or untenable that it cannot possibly succeed.

   [122] Amended Defence and Counterclaim [18] ‑ [21].

   [123] Plaintiffs' Submissions [39].

1. I will now address the remainder of the strike‑out application.

Plaintiffs' submissions

1. The plaintiffs submit that the Representations and the Implied Guarantor Representation pleaded by the defendants did not take place.[124]  The plaintiffs also submit that I should accept the plaintiffs' evidence on this Application that the Second Term Sheet was merely a copy provided for administrative convenience, and so the defendants could not have been led into error or have had any expectation the plaintiffs would disclose anything in this regard.[125]  These are both  matters for trial and cannot be determined on a strike‑out application. 

   [124] Plaintiffs' Submissions [40].

   [125] Plaintiffs' Submissions [60] ‑ [61] (and so the 'Implied Caveat Representation' should be struck out, according to the plaintiffs).

2. The plaintiffs then appear to advance six submissions to justify the contention that the identified paragraphs of the Amended Defence and Counterclaim are frivolous: 

   1.The plaintiffs assert that if the Representations and the Implied Guarantor Representation were made, the fact the plaintiffs did in fact subsequently sign a document as guarantors is evidence that they intended to give the guarantee,[126] and whether or not the guarantee is enforceable or not is irrelevant. The plaintiffs submit that the defendants 'cannot be misled by a promise made by the Plaintiffs in the past, where it was subsequently shown (by the Plaintiffs signing the First Term Sheet) that the Plaintiffs, at the time of the promise, intended to honour it'.[127]  Further, the plaintiffs say that the defendants 'have not provided any evidence to suggest (or pleaded) that the Plaintiffs made the Representations with reckless indifference to their truth or absence of their belief'.[128]

   2.As to the Implied Guarantor Representation, the plaintiffs submit that this is a contractual representation and to the extent the guarantee was void and of no effect is a misconception of the defendants' own making.[129]  The plaintiffs assert that the defendants' belief that the Implied Guarantor Representation could be relied upon was erroneous and a false assumption which 'flowed from, or was caused by, a misconception of law'.[130]

   3.As to the Implied Guarantor Representation, the plaintiffs submit that the defendants' conduct was below the bounds of ordinary care and the plaintiffs' conduct was not so dominant in the causal chain as to be properly regarded as the real and effective cause of the loss claimed.[131]  The plaintiffs point to the following matters: the assertion that the defendants failed to prepare a formal deed; the assertion that the defendants were professional financiers and should have known that guarantees needed to be signed by deed; the assertion that an error was present on the face of the document; the assertion that the defendants requested that the plaintiffs make the guarantee representation and induced the error; the assertion that the error was not caused by the conduct of the plaintiffs; and, the admission that the second defendant did not read the term sheets.[132]

   4.As to the Implied Caveat Representation, the plaintiffs submit that the defendants ought to have realised that AMF did not own the Wembley property, given it was the defendants who prepared the caveat clause, given information about ownership of the property was in the public domain, and given the defendants were sophisticated investors.[133]  The plaintiffs go so far as to submit that the defendants knew that AMF did not own the Wembley property, by reference to matters deposed to by Mr Raeburn and Mr Nichols.[134]  Those matters are plainly contentious and cannot sustain the submission of actual knowledge on this interlocutory application.

   5.As to the Implied Caveat Representation, the plaintiffs submit that the affidavit evidence does not sustain the defendants' allegation that they would not have entered into the transaction had they known that AMF could not grant a caveat over the Wembley property.[135]  The plaintiffs submit that the defendants 'would have still entered into the transaction despite the alleged Implied Caveat Representation, particularly given the reliance on the guarantee and the absence of any substitute security'.[136]  Again, this is plainly a contestable issue that cannot be resolved on this Application.

   6.In respect of each of the pleaded representations, all of which rely upon the ACL (WA), the plaintiffs submit that the defendants have overlooked the terms of s 131A(2)(a) of the Competition and Consumer Act 2010 (Cth) (CCA).  The plaintiffs assert that ACL (WA) does not apply in relation to a financial service, and the conduct in question falls within that concept.[137]

Defendants' submissions

[126] Plaintiffs' Submissions [46].

[127] Plaintiffs' Submissions [47]. See also the Plaintiffs' Responsive Submissions [3] - [10].

[128] Plaintiffs' Submissions [48]. The plaintiffs' reference to representations being made with reckless indifference to their truth is simply unnecessary ‑ there is no pleading or submission to this effect made by the defendants (which, I note, would amount to a pleading of fraud).

[129] Plaintiffs' Submissions [49] ‑ [53].

[130] Plaintiffs' Submissions [54]. A similar submission is made in relation to the 'Implied Caveat Representation' in the Plaintiffs' Responsive Submissions at [16].

[131] Plaintiffs' Submissions [55] ‑ [59].

[132] Plaintiffs' Submissions [59].

[133] Plaintiffs' Submissions [62] ‑ [68].

[134] Plaintiffs' Submissions [69], referring to the Third Raeburn Affidavit at [6] and the Third Nichols Affidavit at [6].

[135] Plaintiffs' Submissions [70] ‑ [72]. 

[136] Plaintiffs' Submissions [73]. See also Plaintiffs' Responsive Submissions [16].

[137] Plaintiffs' Submissions [74] ‑ [80].

1. The defendants submit that the causes of action pleaded in the Counterclaim are arguable, and have been pleaded with the necessary particularity, clarity and precision to allow the plaintiffs to know the case they have to meet.[138]  The defendants emphasise that cases involving misleading or deceptive conduct claims are inherently fact intensive, and the plaintiffs' evidence of conflicting versions of events serves only to illustrate the inherently factual nature of the claims, and the need for cross‑examination of the witnesses.[139] 

   [138] Defendants' Submissions [28] ‑ [29].

   [139] Defendants' Submissions [30] ‑ [31].

2. The defendants refer to the observations of Kenneth Martin J in Ridgepoint Corporation Pty Ltd v McCallum Donovan Sweeney (A Firm) [2011] WASC 167 to the effect that assessments of this nature are inherently factual and it is dangerous to reach final conclusions outside the environment of a trial (at [49] & [50]).[140] 

   [140] Defendants' Submissions [32].

3. As to the specific issue raised by the plaintiffs concerning s 131A(2)(a) CCA, the defendants answer this by observing that they advance causes of action pursuant to the FTA, not the CCA. The defendants submit that the FTA does not exclude the application of s 18 of the ACL to financial services or financial products. It is therefore unnecessary, according to the defendants, to plead reliance on s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), as is suggested by the plaintiffs.  In any event, the defendants say this issue would not justify a strike‑out but could be cured by amendment.[141] 

Disposition

[141] Defendants' Submissions [34] ‑ [36].

1. In my view, in addition to the contractual claim I have already addressed above, the Amended Defence and Counterclaim pleads three separate causes of action which are arguable and cannot be characterised as frivolous at this interlocutory stage. The claims are presented in a relatively orthodox manner, based on verbal representations allegedly made by the plaintiffs at certain meetings,[142] and on the terms of the instruments which were signed by the plaintiffs.[143] 

   [142] Amended Defence and Counterclaim [22].

   [143] Amended Defence and Counterclaim [23] and [33].

2. Misleading or deceptive conduct claims are typically based upon verbal representations but may also be structured as implied representations arising from contractual terms.  In Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304, French CJ observed that:[144]    

   The term 'conduct which is misleading or deceptive or likely to mislead or deceive' is apt to cover a large variety of possible circumstances in which the conduct of one has a tendency to lead another into error.  There is no reason in principle why the fact that a false statement is contained in a contractual document thereby takes the use of that statement in the document out of the scope of 'misleading or deceptive conduct'.  Whether the proffering of a contractual document containing a false statement amounts to a misrepresentation or to misleading or deceptive conduct, is a matter of fact to be determined by reference to all the circumstances.  The circumstance that such a representation is the subject of a contractual warranty does not, as a matter of law, exclude the making of it from the purview of the statutory prohibition.

   [144] Campbell v Backoffice Investments Pty Ltd [35].

3. In the present case, the defendants plead that the description of the plaintiffs as guarantors within the 25 September Term Sheet, combined with the act of signing the document above the word Guarantor, conveyed an implied representation to the defendants that they would personally guarantee and be liable for repayment of the loan and all interest payable.[145]  The defendants say this alleged representation is not answered by the mere fact the plaintiffs entered into the instrument in question (and by doing so, according to the plaintiffs, fulfilled the promise).  In my view, the cause of action is not so untenable that I would strike it out.  In addition, the surrounding circumstances, and any reasonable inferences, assumptions and expectations, will need to be examined as part of the contextual enquiry in considering whether the representation should be found to have been made, and whether it was in fact misleading.[146]

   [145] Amended Defence and Counterclaim [23].

   [146] Ridgepoint Corporation Pty Ltd v McCallum Donovan Sweeney (A Firm) [50] (Kenneth Martin J).

4. The defendants also plead that the plaintiffs' conduct in signing the '25 September Term Sheet' with the 'Charging Clause', in combination with the asserted failure to disclose that the Town of Cambridge was the registered proprietor of the Wembley property and the first plaintiff was not, and had no authority to agree to registration of a caveat over that property, carries an implied representation that the first plaintiff had sufficient ownership, authority and/or control over the Wembley property to allow the defendants to register a caveat.[147]  The factual responses articulated by the plaintiffs cannot definitively answer this plea, at this interlocutory stage, where there are disputes on the evidence.  It is enough to say that the cause of action is not so untenable that I would strike it out. 

   [147] Amended Defence and Counterclaim [33].

5. Under the heading Reasonable Care, the plaintiffs made a number of submissions directed to whether the defendants should be regarded as responsible for their own misfortune, having failed to take reasonable or ordinary care.[148]  These submissions were directed at both the Implied Guarantor Representation and the Implied Caveat Representation.  The source of these submissions, as a matter of law, is said to be the observations of Gibbs CJ in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191,199:

   The heavy burdens which the section creates cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests.

   [148] Plaintiffs' Submissions [55] ‑ [59] and [62] ‑ [69].

6. The plaintiffs observe that this broad statement must be seen in light of later authorities such as Neilsen v Hempston Holdings Pty Ltd (1986) 65 ALR 302, 309 (Pincus J), Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112, 138 (Hill J), and Wormald v Maradaca Pty Ltd [2020] NSWCA 289 [119] (Bell P).[149]  A review of these authorities tends to undermine, not support, the ultimate submission advanced by the plaintiffs in the context of this application. 

   [149] Plaintiffs' Submissions [57] ‑ [58].

7. In essence, the generally accepted position is that an unreasonable failure to take care for one's own interests is relevant only insofar as it is the operative cause of a severable part of the loss to which the contravention did not materially contribute.  Further, a plaintiff's conduct must be so dominant in the causal chain as to be properly regarded as the real or effective cause of the loss claimed.  Put another way, the failure to make reasonable inquiries does not automatically defeat a statutory claim for damages for misleading or deceptive conduct, but is a circumstance relevant to a consideration as to whether a failure to make disclosure is correctly characterised as misleading. 

8. As to the issue raised by the plaintiffs concerning the operation of the CCA and the need for the defendants to invoke the ASIC Act, I agree with the submissions advanced by the defendants. The Amended Defence and Counterclaim raises misleading or deceptive conduct claims pursuant to the ACL (WA), as applied by the FTA rather than by operation of pt XI of the CCA (and it is within pt XI that s 131A is found). The manner in which this regime operates was recently explained by Buss P and Mitchell JA in Paul Susan Chappell as Executor of the Estate of Robert Hastings Hitchcock v Goldspan Investments Pty Ltd [2021] WASCA 205 [83] ‑ [89].

9. In short, s 1 of the ACL, which is a schedule to the CCA, provides that the ACL applies to the extent provided by pt XI of the CCA or an 'application law'. Section 2 of the ACL provides that the term 'application law' has the same meaning as in s 140 of the CCA. Section 140 of the CCA defines 'application law' to mean, relevantly, a law of a 'participating jurisdiction' (which, as defined in s 140, includes Western Australia) that applies the applied ACL, either with or without modifications, as a law of the participating jurisdiction.

10. Then, by s 19(2)(a) FTA (as originally enacted), sch 2 to the CCA as in force on 1 January 2011 (but as modified by s 36 of the FTA), was applied as a law of Western Australia.

11. Thus, the FTA is an 'application law' for the purposes of s 1 of the ACL, and the operation of pt XI of the CCA does not arise in this context. Accordingly, the exclusions which appear in s 131A of the CCA have no application in the present case. It follows that s 18 of the ACL (WA) is not precluded from applying, through the FTA, to 'conduct engaged in in relation to financial services' or the 'supply, or possible supply, of services that are financial services, or of financial products'.

12. I therefore propose to dismiss the Application insofar as it seeks to strike‑out paragraphs of the Amended Defence and Counterclaim.  In doing so, I reiterate that I am not expressing any view as to the merits of the defendants' causes of action, other than to say that they are not obviously unsustainable nor an abuse of the processes of this Court.  

Costs

1. At the conclusion of the hearing I indicated that I would deal with the question of costs on the delivery of these reasons.  The defendants have foreshadowed in their submissions that they will seek their costs on an indemnity basis in the event the plaintiffs are unsuccessful.[150]  I will give the plaintiffs seven days in which to file brief submissions to respond to the defendants' submissions on costs,

   [150] Defendants' Submissions [38] ‑ [47].

Orders

1. I propose to order as follows:

   1.The plaintiffs' Amended Chamber Summons for Summary Judgment and Strike‑Out filed 7 April 2022 be dismissed.

   2.Within seven days of the making of these orders, the plaintiffs are to file and serve written submissions (of no more than three pages) in relation to the costs of the Application and as to the basis of assessment of any costs order and whether those costs should be payable on an indemnity basis or forthwith.

   3.Within seven days thereafter, the defendants are to file and serve written submissions (of no more than three pages) in response to the plaintiffs' submissions.

   4.The determination of the costs issues be undertaken on the papers.

Mediation

1. Given the sum of money involved and the nature of the issues arising on the pleadings, the possibility of early resolution of the competing claims should be explored. I will make a direction that requires the parties to confer in relation to the making of mediation orders to progress this matter to a mediation in the near future. 

   5.Within 28 days of the making of these orders, the parties confer with a view to providing the Court with a proposed minute of directions to timetable a mediation before the Court pursuant to pt VI of the Supreme Court Act 1935 (WA).

   6.The matter otherwise be adjourned to a directions hearing on a date to be fixed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

CM
Associate

28 APRIL 2023

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION: RAEBURN -v- LOAN WA PTY LTD [2023] WASC 134 (S)

CORAM:   ACTING MASTER MCDONALD

HEARD:   ON THE PAPERS

DELIVERED          :   6 JULY 2023

FILE NO/S:   CIV 2240 of 2021

BETWEEN:   BRYAN MCMASTER RAEBURN

First Plaintiff

MIGUEL ANGEL MARON NICHOLS

Second Plaintiff

AND

LOAN WA PTY LTD

First Defendant

ASSET FINANCE AUSTRALIA PTY LTD

Second Defendant

Catchwords:

Costs - Plaintiffs' application for summary judgement and strike-out unsuccessful - Defendants' application for indemnity costs - Whether exceptional circumstances - Costs orders in summary judgment applications - Whether basis to depart from usual orders - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Application for indemnity costs refused

The plaintiffs pay the defendants costs to be taxed if not agreed

Representation:

Counsel:

First Plaintiff	:	K A Dundo
Second Plaintiff	:	K A Dundo
First Defendant	:	S J Davis
Second Defendant	:	S J Davis

Solicitors:

First Plaintiff	:	KD Legal (Perth)
Second Plaintiff	:	KD Legal (Perth)
First Defendant	:	MGD Law
Second Defendant	:	MGD Law

Cases referred to in decision:

Ben-Pelech v Royle [2020] WASCA 168 (S)

Huntingdale Village Pty Ltd (Receivers and Managers Appointed) atf Huntingdale Village Unit Trust v Perpetual Nominees Ltd [2013] WASC 352 (S)

InterTAN Inc v DSE (Holdings) Pty Ltd [2005] FCAFC 54

Knights Capital Group Ltd v Bajada and Associates Pty Ltd [2016] WASC 69 (S)

McKay v National Australia Bank Ltd [1998] 1 VR 173

Paul Susan Chappell as Executor of the Estate of Robert Hastings Hitchcock v Goldspan Investments Pty Ltd [2021] WASCA 205

Raeburn v Loan WA Pty Ltd [2023] WASC 134

Re Malley SM; Ex parte Gardner [2001] WASCA 83

Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)

Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598

ACTING MASTER MCDONALD:

Overview

1. On 28 April 2023 I published reasons for dismissing the plaintiffs' summary judgment application pursuant to O 14 r 1 Rules of the Supreme Court 1971 (WA) (RSC) and strike-out application pursuant to O 20 r 19(1)(b) RSC made by amended chamber summons dated 7 April 2022.[151]  I dismissed the summary judgment application on the basis that the defendants had demonstrated an arguable defence and I dismissed the application to strike-out parts of the defendants' counterclaim on the basis that the relevant passages were not so obviously unsustainable or untenable on merits to be frivolous.  These reasons should be read together with those reasons for decision. 

   [151] Raeburn v Loan WA Pty Ltd [2023] WASC 134.

1. The defendants foreshadowed in their submissions that they intended to seek costs on an indemnity basis in the event the plaintiffs' were unsuccessful.[152]  I made orders that the parties were to file and serve written submissions in relation to costs and ordered that the determination of the costs issue be undertaken on the papers.[153]

   [152] Raeburn v Loan WA Pty Ltd [84]; See defendants' submissions filed on 25 May 2022 [38] - [47].

   [153] Raeburn v Loan WA Pty Ltd [85]. 

2. For the reasons set out below, I am not persuaded that an order for indemnity costs should be made. 

Background to the application

1. I have provided a more comprehensive factual background of the dispute between the parties in my reasons published on 28 April 2023.  The following background is relevant to the costs determination.

2. By writ of summons dated 18 November 2021 the plaintiffs commenced this action seeking declarations that the defendants have no equitable or caveatable interest in the first plaintiff's property (the Raeburn property)[154] pursuant to the contested term sheets of a loan. The plaintiffs filed a statement of claim on 10 January 2022 and an amended statement of claim on 17 January 2022. The plaintiffs filed a summons for summary judgment on 21 January 2022 with a Memorandum of Conferral pursuant to O 59 r 9(1) RSC. This first iteration of the summary judgment application sought judgment in terms of paragraphs A, B and D of the prayer for relief of the amended statement of claim, namely declarations that the defendants had no equitable or caveatable interest in the Raeburn property, that the terms sheets are void and unenforceable, that the plaintiffs are not indebted or under any liability to pay the defendants under the terms sheets and for an order that the caveat over the Raeburn property be withdrawn.

   [154] This term appears to refer to the property defined as the 'Palmyra property' in Raeburn v Loan WA Pty Ltd, see Raeburn v Loan WA Pty Ltd [16] - [17].

3. The plaintiffs filed a substituted statement of claim on 28 January 2022 (Substituted SOC).  The defendants filed a defence and counterclaim on 21 February 2022 and subsequently an amended defence and counterclaim on 13 May 2022 (Amended Defence and Counterclaim) in response to the Substituted SOC.  In the Amended Defence and Counterclaim the defendants admit they caused a caveat to be registered over the Raeburn property but say the caveat lapsed and they have not sought or intend to seek leave to lodge a further caveat[155].

   [155] Amended Defence and Counterclaim [14].

4. The plaintiffs filed an Amended Chamber Summons for Summary Judgment and Strike-Out on 7 April 2022 (the Application) pursuant to orders made by Master Sanderson on the same date.  The requirement for a supplementary memorandum of conferral was waived.  The amended summary judgment application included a strike-out application. 

5. The plaintiffs filed their submissions on 25 May 2022 (Plaintiffs' Submissions).  The defendant filed their submissions on 13 June 2022 (Defendants' Submissions) and the plaintiffs filed submissions in reply on 28 June 2022 (Plaintiffs' Responsive Submissions).  On 18 July 2022, two days prior to the hearing, the plaintiffs advised by email that they would not be pressing paragraphs [55] to [59] and [62] to [80] of the Plaintiffs' Submissions.

6. The contested issue in the summary judgment application was limited to whether the guarantees allegedly given by the plaintiffs to the defendant in 'term sheets' were void and unenforceable as they were not deeds, nor were they supported by consideration.[156]  

   [156] Raeburn v Loan WA Pty Ltd [24].

7. The strike-out application relied on the same submission, as well as the submission that the representations and implied representations said to be made by the plaintiffs and relied upon by the defendants in their counterclaim were unsupportable and therefore frivolous.  These representations were that the plaintiffs would personally guarantee and be liable for the repayment of the loaned funds, and that the first plaintiff had sufficient ownership and authority over a Wembley property to allow the defendants to registrar a caveat over it. 

8. Both applications were dismissed.

Legal principles

Costs orders in summary judgment applications

1. The principles applicable to costs orders where an application for summary judgment is unsuccessful were summarised by Hill J in Chalmsbury Nominees Pty Ltd v Alita Resources Ltd (Receivers and Managers Appointed) (Subject to Deed of Company Arrangement) [2023] WASC 97 (S) as follows:

   [6]The usual order where an application for summary judgment is dismissed is that the costs of the application are in the cause.  It is only in exceptional cases that costs will be awarded to the party who successfully opposed the application (Whitehall Holdings Pty Ltd v Custom Credit Corporation Ltd (Full Court, Supreme Court of WA, Lib No 920347, 19 June 1992).

   [7]There has been some discussion as to whether this 'ordinary rule' should be reconsidered given modern case management practices (See Ridgepoint Corporation Pty Ltd v McCallum Donovan Sweeney (A Firm) [2011] WASC 167 (S)). In NRW Contracting Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd, the Court of Appeal held there was no basis to doubt the correctness of the ordinary rule.  However, it was noted that while this is the ordinary rule, it is not fixed or inviolable (NRW Contracting Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2020] WASCA 107 [113] (Murphy JA, Beech and Vaughan JJA agreeing).

   [8]Where a reasonable party ought to have known it had no reasonable prospects of success of obtaining summary judgment, it may not be just for the applicant, even if successful at trial, to have the costs of the failed interlocutory application (NRW Contracting Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [112]).

2. By O 66 r 10(1) of the RSC:

   Costs may be dealt with by the Court at any stage of the proceedings or after the conclusion of the proceedings, and any order of the Court for the payment of costs may require the costs to be paid forthwith notwithstanding that the proceedings are not concluded.

3. The general rule where an order for costs is to be made against a party in interlocutory proceedings is that the costs will be fixed and ordered to be paid forthwith or by a particular date.[157]

   [157] Consolidated Practice Directions, 4.7.1(3).

4. In Huntingdale Village Pty Ltd (Receivers and Managers Appointed) atf Huntingdale Village Unit Trust v Perpetual Nominees Ltd [2013] WASC 352 (S), Le Miere J said at [17]:

   Any order for the payment of costs may require the costs to be paid forthwith notwithstanding that the proceedings are not concluded:  Rules of the Supreme Court 1971 (WA) O 66 r 10(1). Consolidated Practice Direction 4.7.1(3) provides that as a general rule, where an order for costs is to be made against a party in interlocutory proceedings, the costs will be fixed and ordered to be paid forthwith or by a particular date. The Practice Direction explains that there are a number of reasons for that general rule. The second reason is that:

   'the historical practice of ordering costs to be paid 'in any event' does not sufficiently serve the purpose of discouraging ill‑considered or needless interlocutory applications.  The overwhelming majority of actions settle and the orders are not enforced.  The apparent benefit to parties in whose favour such orders are made is illusory.'

   Whilst the Practice Direction refers to 'discouraging ill-considered or needless interlocutory applications', the same principle applies to non‑compliance with the rules or pleadings that otherwise necessitate a pleading summons or the conduct of a party in resisting an application which should have been conceded.  The Practice Direction concludes at 4.7.1(7) that 'the Court will generally order that interlocutory costs ordered to be paid by a party are to be paid forthwith or by a particular date, rather than in any event'.  There is no good reason for departing from what is now the general practice in this court of ordering that interlocutory costs be paid forthwith.

Indemnity costs

1. The principles in relation to orders for costs on an indemnity basis were summarised by the Court of Appeal in Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S). Pullin JA and Kenneth Martin J restated that an order for indemnity costs is only to be made in 'exceptional circumstances'[158] and went on to outline the relevant principles as follows:[159]

   [158] Swansdale Pty Ltd v Whitcrest Pty Ltd [7] referring to Re Malley SM; Ex parte Gardner [2001] WASCA 83.

   [159] Swansdale Pty Ltd v Whitcrest Pty Ltd [10].

   1.A superior court, in its inherent jurisdiction, may make an indemnity costs order (see also Supreme Court Act 1935 s 37, and Legal Profession Act 2008 s 280).

   2.An indemnity costs order departs from the usual costs disposition order, whereby costs are awarded on a party/party basis: EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59.

   3.The court's discretion as to the making of an indemnity costs order is a discretion that must be exercised judicially.  In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397, 400 Woodward J said:

   Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases, where 'there is some special or unusual feature in the case to justify the court exercising its discretion in that way'.  (emphasis added)

   4.To obtain an indemnity costs order, it is not the case that the successful party needs to show a collateral purpose, or establish some species of fraud against the unsuccessful party.  In J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 303 French J by reference to the observations of Woodward J in Fountain Selected Meats, said:

   It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case. 

   5.Furthermore, in Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (Unreported, FCA, 3 May 1991) (referred to by Ipp J in Unioil International Pty Ltd v Deloitte Touche Tohmatsu (No 2) (1997) 18 WAR 190, 191) French J observed:

   The categories in which the discretion may be exercised are not closed. 

   6.Competing principles need to be balanced in assessing the making of a potential award of indemnity costs.  In Quancorp Pty Ltd v MacDonald [1999] WASCA 101 [7], Wheeler J observed:

   On the one hand, a party should not be discouraged, by the prospect of an unusual costs order, from persisting in an action where its success is not certain.  Uncertainty is inherent in many areas of law, and the law changes with changing circumstances.  It is inappropriate that a case be too readily characterised as 'hopeless' so as to justify an award of indemnity costs to the successful party.  However, where a party has by its conduct unnecessarily increased the cost of litigation, it is appropriate that the party so acting should bear that increased cost.  Persisting in a case which can only be characterised as 'hopeless' is an example of the type of conduct which may lead the court to a view that the party whose conduct gave rise to the costs should bear them in full. 

   7.An indemnity costs order may be appropriate in situations which are shown to involve some element of improper, or at least unreasonable, conduct by a party or the party's legal advisers: see Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225, 233 (Sheppard J), referred to by Pullin J in Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 [9].

   8.A properly crafted special costs order may obviate the need for an indemnity costs order, where components of cost scale items are allowed above the applicable scale ceiling: see Flotilla [20] ‑ [24].

   9.An indemnity costs order may not be appropriate if the claimed costs would be likely to be recovered under the standard order for party and party costs, or under a special order raising or removing a scale ceiling allowance: Flotilla [11]. In Unioil (No.  2) (193), Ipp J observed:

   However, counsel for the plaintiffs was unable to identify any costs so incurred that would not be covered by an order for party and party costs.  An order for indemnity costs on this ground is therefore not warranted. 

   10.Nonetheless, an indemnity costs order will constitute an appropriate sanction marking the disapproval of improper or unreasonable conduct: see Brookvista Pty Ltd v Meloni [2009] WASCA 180 [32], Flotilla [25]. In Flotilla Pullin J said [26]:

   A solicitor should not, in my view, resort to an application for an indemnity costs order merely to secure the recovery which could be achieved by a properly formulated special costs order, unless the unsuccessful party's conduct is genuinely to be impugned by the successful party.

2. I consider the following additional principles as identified by Pritchard J in Knights Capital Group Ltd v Bajada and Associates Pty Ltd [2016] WASC 69 (S) at [26] - [27] are also relevant to the application before me (citations omitted):

   [26]An order for costs on an indemnity basis may be made on the basis that an action was 'hopeless' in the sense that the action was 'commenced or continued in circumstances where the plaintiff, properly advised, should have known that the action had no prospect of success'.  An action which appears to have been commenced or continued in circumstances where the applicant, properly advised, should have known that he or she had no chance of success, may be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of known facts or clearly established law.  In assessing whether a party engaged in improper or unreasonable conduct, attention needs to be focused on what the party knew, or ought reasonably to have known, in the circumstances. 

   [27]Finally, it must also be borne in mind that simply because a case is weak or marginal, or unlikely to succeed, does not make it a 'hopeless' case which merits the sanction of an indemnity costs order.

3. More recently, in Ben-Pelech v Royle [2020] WASCA 168 (S) the Court of Appeal confirmed that it is sufficient to enliven the discretion to award indemnity costs when, for whatever reason, a party persists in what should, on a proper consideration, have been seen to be a hopeless case. Their Honours said:[160]

   Relevantly, while the categories of cases in which an indemnity costs order may be made are not closed, one category where indemnity costs are appropriate is where the action has been commenced or continued in circumstances where the applicant, properly advised, should have known that it had no chance of success.  Whether that is so is determined objectively ‑ it does not direct attention to the actual legal advice given to the party.  The court should not be too quick to characterise a case as hopeless ‑ parties should not be discouraged from persisting in an action merely because success is uncertain.  Whether a case was hopeless must be judged without the benefit of hindsight. 

   [160] Ben-Pelech v Royle [7].

Parties' Submissions

The Plaintiffs' Costs Submissions

1. The plaintiffs filed their submissions on costs of dismissal of an interlocutory application on 5 May 2023 (Plaintiffs' Costs Submissions). 

2. In their submissions the plaintiffs drew a distinction between 'a claim which was pursued in circumstances where it was obvious it was hopeless and a claim that is ultimately dismissed in the exercise of the Court's discretion, after hearing'.[161]  They submitted that an assessment of indemnity costs should therefore be made without the benefit of hindsight.[162]

   [161] Plaintiffs' Costs Submissions [2].

   [162] Plaintiffs' Costs Submissions [2].

3. The plaintiffs dealt first with the costs arising from the summary judgment application.  They submitted an application for summary judgment must be resolved on the basis that the version of the facts put forward by the defendant, assuming that it is not inherently incredible, would ultimately be accepted at the trial of the action.[163]

   [163] Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598, 608.

1. The plaintiffs then referred to the reasons in the Application and my observation that 'there is a dispute on the affidavit material as to which instrument represents the final document by which the parties agreed to be bound.'[164]  The plaintiffs submit that the defendants' version of facts were inherently incredible with reference to the following issues:

   (a)the $50,000.00 term sheet was not pleaded by the defendants until 13 May 2022 by way of an amendment made approximately two months prior to the hearing of the Application and filed after the plaintiffs had lodged their supporting and supplementary affidavits;[165]

   (b)it was reasonable for the plaintiffs to take the view that Mr Diodato's comment 'to the effect' that 'he didn't keep a copy of the $50,000.00 term sheet' was not credible because that statement was:[166]

   (i)inconsistent with the presence of two sets of signatures on two separate term sheets (the Disputed Term Sheet and the Second Term Sheet);

   (ii)inconsistent with the $134,000.00 quantum of the First Term Sheet that was stated in the defendant's own subsequent letters; and

   (iii)inconsistent with the subsequent lodgement of the caveat that secured a term sheet dated 11 September 2019. 

   [164] Raeburn v Loan WA Pty Ltd [57].

   [165] Plaintiffs' Costs Submissions [5].

   [166] Plaintiffs' Costs Submissions [6].

2. The plaintiffs submit that it was reasonable to seek a declaration in the form sought, namely, that the guarantees referred to in the Term Sheets and the Disputed Term Sheet are void and unenforceable and that the defendants (jointly and/or separately) have no liability to the defendants given the 'potentially incredible nature' of the defendants' evidence in relation to the $50,000.00 term sheet.[167]

   [167] Plaintiffs' Costs Submissions [7].

3. Further, the plaintiffs referred to my characterisation of the defendants' proposition, that the term sheets in dispute might be characterised as deeds, was 'weak', and going against the proposition that the plaintiffs' application was 'hopeless'.[168]

   [168] Plaintiff's Costs Submissions [8].

4. The plaintiffs also submit that the cases referred to in the reasons at [59.2] are distinguishable from the current factual scenario due to there being an 'alternative security' available in the form of a caveat, and that the defendants relied upon the caveat as security rather than the guarantee.[169]  The relevant passage refers to the proposition that in circumstances where funds are advanced in response to a request that is made contemporaneously, or prior to, the giving of the guarantee, the payment of those funds to the principal debtor may be sufficient consideration at law to support the guarantee.[170]

   [169] Plaintiffs' Costs Submissions [9]; See also ts 7.

   [170] Raeburn v Loan WA Pty Ltd [59.2].

5. The plaintiffs also relied on the fact that they did not receive the defendants' submissions until 13 June 2022.[171]

   [171] Plaintiffs' Costs Submissions [10].

6. In relation to indemnity costs arising from the strike-out application, the plaintiffs say that dismissal of those parts of the Application was an exercise of the discretion and 'does not speak to hopelessness'.[172]  In support of this the plaintiffs made the following two points:[173]

   (a)it was reasonable for the plaintiffs to raise the strike-out application on the defendants' own factual case and in relation to the legal conclusion that the defendants were seeking the Court to make; and

   (b)the legal principles asserted by the plaintiffs in relation to the Implied Guarantor Representation[174] 'were not novel or unsupported'.

   [172] Plaintiffs' Costs Submissions [12].

   [173] Plaintiffs' Costs Submissions [11].

   [174] See Raeburn v Loan WA Pty Ltd [29.3].

1. The plaintiffs rely on the fact that they sent an email to the Master advising they were not relying on those paragraphs of their submissions that dealt with whether reasonable care was taken by the defendants in relation to the Implied Guarantor Representation and Implied Caveat Representation.[175]

   [175] Plaintiffs' Costs Submissions [13]; See Raeburn v Loan WA Pty Ltd [29.4].

2. In their submissions the plaintiffs also referred to costs accrued by the first plaintiff in connection with removing a caveat lodged by the defendants over the Raeburn property.[176]  The plaintiffs concede that this matter was not pressed at the hearing.[177]

   [176] Plaintiffs' Costs Submissions [14] - [18].

   [177] Plaintiffs' Costs Submissions [18].

The Defendants' Submissions and the Defendants' Costs Submissions

1. The defendants foreshadowed their intention to seek an indemnity costs order against the plaintiffs in the Defendants' Submissions,[178] and filed an additional outline of submissions on costs dated 11 May 2023 (Defendants' Costs Submissions).

   [178] Defendants' Submissions, [38] - [47].

2. The defendants submit that that the appropriate order is that the plaintiffs pay the defendants' costs of the application on an indemnity basis so that the defendants are fully indemnified for their costs except insofar as the costs may have been unreasonably incurred or are unreasonable in amount.[179]

   [179] Defendants' Costs Submissions [7].

3. In the Defendants' Costs Submissions the defendants say that the Application 'could only ever be characterised as hopeless',[180] having previously submitted that the action was 'self-evidently … not appropriate for either summary judgment or strike-out'[181] and that the plaintiffs were 'repeatedly put on notice' of this during the early stages of the Application.[182]

   [180] Defendants' Costs Submissions [2].

   [181] Defendants' Submissions [38].

   [182] Defendants' Submissions [38] referring to email correspondence sent from the defendants' solicitors to the plaintiffs' solicitors and attached to the affidavit of Maria Gabriella Di Martino dated 22 March 2022 at 'MGDM3' and 'MGDM6', and a reply from the plaintiffs' solicitors at 'MGDM7'.

4. The defendants submitted that the plaintiffs also disregarded their obligation to conduct this case efficiently, expeditiously and proportionately in line with modern case management principles and added that '[t]he plaintiffs' attitude in this regard should be deterred by an adverse costs order'.[183]

   [183] Defendants' Submissions [40] - 41]. 

5. The defendants referred to Swansdale Pty Ltd v Whitcrest Pty Ltd and submitted that persisting with a case that can only be characterised as hopeless and thereby increasing the costs of litigation is recognised as a ground to award indemnity costs.[184]

   [184] Defendant's Submissions [45] referring to Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) [10].

6. In relation to indemnity costs arising from the summary judgment application, the defendants submit:

   (a)they referred to the 'compelling' reasons why summary judgment in the terms sought by the plaintiffs should not be entered as outlined in my reasons in Raeburn v Loan WA Pty Ltd at [56] - [62];[185]

   (b)the jurisdiction to make a final order in light of the relief sought should be exercised carefully;[186]

   (c)there are 'obvious triable issues, of fact and law, arising from the pleadings' and the plaintiffs had been made aware that the defendants 'rely on contentions that would entitle them to unconditional leave to defend.'[187]  In support of this submission the defendants referred to their Amended Defence and Counterclaim, and to the email correspondence attached to the affidavit of Maria Gabriella Di Martino dated 22 March 2022 (Di Martino Affidavit) at 'MGDM3' and 'MGDM6'.  The defendants say that these matters were raised 'in the early stages of the application to highlight its lack of merit' and they received a 'curt response' from the plaintiffs;[188]

   (d)the evidence relating to Mr Diodato not having kept a copy of an earlier term sheet because it was superseded and say that this evidence did not make it clear that there was no real question to be tried.  They say that the plaintiffs' view that evidence rebutting the Application was 'potentially incredible' did not justify persisting with their hopeless application.  Inconsistencies between competing versions of the facts are for testing in cross-examination at trial;[189] and

   (e)the deficiencies in the Application were obvious prior to the filing of the Amended Defence and Counterclaim, the affidavit of Roberto Diodato dated 12 May 2022 (Diodato Affidavit) and the Defendants' Submissions.  The defendants further submit that after those documents were filed the plaintiffs still had ample time to reconsider the application before the hearing.[190]

   [185] Defendants' Costs Submissions [3(a)].

   [186] Defendants' Costs Submissions [3(b)] referring to Raeburn v Loan WA Pty Ltd [61].

   [187] Defendants' Submissions [46].

   [188] Defendants' Costs Submissions [3(c)] - [3(d)].

   [189] Defendants' Costs Submissions [3(e)].

   [190] Defendants' Costs Submissions [3(f)].

7. In relation to the strike-out application the defendants referred to specific paragraphs in the reasons[191] and say that these paragraphs demonstrate 'a clear indication that the misleading and deceptive conduct claims … are not frivolous, require consideration at trial and are not determinable on a strike-out application'.[192]  The defendants made specific reference to my view that the Application dealt with matters that were 'plainly contentious' and 'plainly a contestable issue'.[193]

   [191] Raeburn v Loan WA Pty Ltd [2], [67, [68.4], [68.5], [72] and [74]. See Defendants' Costs Submissions [4].

   [192] Defendants' Costs Submissions [4].

   [193] Defendants' Costs Submissions [5], referring to Raeburn v Loan WA Pty Ltd [68.4] - [68.5].

8. The defendants say that the reference to costs incurred by the plaintiffs in applying for the removal of the caveat over the Raeburn property are irrelevant and require no response, as they relate to the caveat in respect of which the application was not pressed.[194]

   [194] Defendants' Costs Submissions [6], referring to Plaintiffs' Costs Submissions [14] - [18].

Disposition

1. I have formed the view that an order for indemnity cost should not be made for the following reasons.

2. First, on the key issue in the summary judgment application, namely whether the terms sheets were void and unenforceable, while I could not find for the plaintiffs that the term sheets were not deeds, I did find that the proposition that the term sheets could be characterised as deeds was weak.  In relation to the submission that the guarantees were not supported by consideration I found the plaintiffs' reliance on McKay v National Australia Bank Ltd [1998] 1 VR 173 was misplaced. Neither of these findings would necessarily mean the application had 'no chance of success', was 'hopeless', 'unnecessary' or brought to achieve 'an ulterior or extraneous purpose', was commenced in wilful disregard of known facts or law, or indicated there was some relevant delinquency on the part of the unsuccessful party.[195]

   [195] InterTAN Inc v DSE (Holdings) Pty Ltd [2005] FCAFC 54 [11].

3. Secondly, the conferral relied upon by the defendants did not descend to the level of particularity necessary to find that the plaintiffs' pressed on despite being fully aware of the legal deficiencies in the Application.  At the time of filing the Application the defendants had filed the Di Martino Affidavit that referred to and attached various correspondence between the parties in relation to the Application.  In attachments 'MGDM3' and 'MGDM6' of the Di Martino Affidavit, the solicitor for the defendants wrote to the solicitor for the plaintiffs and outlined the defendants' position.[196]

   [196] Di Martino Affidavit 'MGDM6' (29).

4. In the conferral correspondence, the defendants contended there were questions and issues that ought to be tried.  Further, the defendants submitted that the application is contrary to the overriding objective of case management, inconsistent with the efficient and expeditious conduct of the matter and disproportionate to the subject matter in dispute.  Further, the conferral disputed that the paragraphs sought to be struck-out were frivolous.[197]  On 16 March 2022, the defendants' solicitor provided a more detailed letter outlining the objections to the Application and those issues that would require consideration of the parties' evidence of the events that led them to signing the terms sheets as well as identifying those issues that involve complex issues of law. 

   [197] Di Martino Affidavit 'MGDM3'.

5. I do not disagree with the defendants' characterisation, however the conferral did not engage with the legal issues in the detail required to make a finding that the plaintiff persisted in blatant disregard of the submissions made against them such as to warrant an indemnity costs order. 

6. Thirdly, after the defendants filed their submissions on 13 June 2022, some concessions were made by the plaintiffs in response.  They no longer sought summary judgment in relation to paragraph A in the prayer for relief[198] and the submissions on 'reasonable care' were abandoned.[199]

   [198] Plaintiffs' Costs Submissions [18]; ts 32 - 33.

   [199] Plaintiffs' Costs Submissions [13].

7. Fourthly, in relation to the number of contestable issues not determinable on a summary judgment application, at best it could be said that it should have been obvious that the prospects of the plaintiffs succeeding in the application were poor.  One of the key reasons the application for summary judgment was dismissed was the existence of a dispute on the affidavit material as to which instrument represented the final document by which the parties agreed to be bound.  At the time of making the Application the plaintiffs did not have the benefit of the Diodato Affidavit, the affidavit of Luke Natoli dated 12 May 2022 or the Amended Defence and Counterclaim in which the existence of the $50,000 term sheet was raised for the first time.  Hence the plaintiffs' submission that the defendants' version of events was incredible.  This, together with the defendants' bare denial of the pleading relating to: how the details contained in the Disputed Term Sheet came to be changed; how the reference to the Raeburn property came to be substituted for the Wembley property as security; and, the discussion between the parties that ensued, may have given the plaintiffs some optimism that the defendants' version of events would be found to be incredible and there was no real question to be tried.

8. While ultimately the plaintiffs' optimism was unfounded, I am not convinced that the action was commenced or continued in circumstances where the applicant, properly advised, should have known that they had no chance of success, and may be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of known facts or clearly established law.

9. Fifthly, in relation to the strike-out application, to the extent it relied on the same submissions in support of the summary judgment application, for the reasons given above I do not consider an indemnity costs order is appropriate.

10. As to the balance of the strike-out application, without forming a view as to the merits of the defendants' case, I found the Amended Defence and Counterclaim and the defendants' cause of action were not so obviously unsustainable nor an abuse of process of this Court so as to be frivolous.  The threshold of a case being considered 'hopeless' is distinct from a case that is weak or marginal, or unlikely to succeed.[200]

    [200] Knights Capital Group Ltd v Bajada and Associates Pty Ltd [27].

11. While ultimately unmeritorious the bringing of the strike-out application is not such that it would warrant the court's mark of disapproval by an indemnity costs order.

12. However, this is a case in which it is appropriate to depart from the usual costs order following an unsuccessful summary judgment application that costs be in the cause.  That is because it should have been clear to the plaintiff that the causes of action raised by the defendants were factually intensive.  The declaratory relief sought depended on the resolution of plainly contestable facts.  Summary determination of an action is reserved for the clearest of cases and striking out pleadings on the basis they are frivolous should not be invoked where the pleading advances causes of action known to law based on triable issues of fact and law.

13. Further, the plaintiffs misconstrued the regime concerning the operation of the Competition and Consumer Act 2010 (Cth) and the need to invoke the Australian Securities and Investments Commission Act 2001 (Cth). The defendants' case pursuant to the Australian Consumer Law 2010 (WA) as applied by the Fair Trading Act 2010 (WA) had been explained by the Court of Appeal in Paul Susan Chappell as Executor of the Estate of Robert Hastings Hitchcock v Goldspan Investments Pty Ltd [2021] WASCA 205 [83] ‑ [89].[201]  Finally, a not insignificant section of the plaintiffs' submissions was abandoned only two days prior to the hearing.

    [201] See Raeburn v Loan WA Pty Ltd [79]. 

14. For those reasons I do not consider it is just for the plaintiffs, if successful at trial, to have the costs of the failed Application.  The appropriate costs order is that the plaintiffs pay the defendants' costs of the summary judgment application and the application to strike-out the Amended Defence and Counterclaim, to be taxed if not agreed.  I have not added 'in any event' as if the parties must wait until the conclusion of the matter the apparent benefit to the defendants may prove to be illusory.[202]  The costs should be paid forthwith.

    [202] CPD, 4.7.1(3).

15. The following orders will be made:

    1.The plaintiffs' Amended Chamber Summons for Summary Judgment and Strike-Out filed 7 April 2022 be dismissed.

    2.The plaintiff pay the defendants' costs of the summary judgment application and the application to strike-out the Amended Defence and Counterclaim, forthwith, to be taxed if not agreed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

CM
Associate to the Acting Master

6 JULY 2023