Richards v MBA Finance Pty Ltd
[2020] TASSC 22
•1 June 2020
[2020] TASSC 22
COURT: SUPREME COURT OF TASMANIA
CITATION: Richards v MBA Finance Pty Ltd [2020] TASSC 22
PARTIES: RICHARDS, Dean Murray
v
MBA FINANCE PTY LTD
TSIAKIS, Steven
TASMANIAN FINANCE PTY LTD
FILE NO: 3063/2018
DELIVERED ON: 1 June 2020
DELIVERED AT: Hobart
HEARING DATES: 23 March, 25 May 2020
JUDGMENT OF: Estcourt J
CATCHWORDS:
Guarantee and Indemnity – The contract of guarantee – Construction and effect – Whether second defendant is guarantor of or substitute debtor under first defendant's loan agreement – Whether email communication stating second defendant has "taken responsibility for [first defendant's] loan and will refund" constitutes guarantee or intention to become substitute debtor – Not necessary that the word "guarantee" be used.
Mercantile Law Act 1935, s 6.
Electronic Transactions Act 2000, s 7.
Clohesy v Maher (1880) 6 VLR (L) 357; Leeman v Stocks [1951] 1 Ch 941; Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11, 166 CLR 245; Re Taylor; Ex parte Century 21 Real Estate Corp [1994] FCA 243, (1995) 130 ALR 723; Hampton v Minns [2002] 1 WLR 1, referred to.
Aus Dig Guarantee and Indemnity [8]
REPRESENTATION:
Counsel:
Plaintiff: Tom Cox
Defendant: In person
Solicitors:
Plaintiff: Roberts and Partners Lawyers
Judgment Number: [2020] TASSC 22
Number of paragraphs: 26
Serial No 22/2020
File No 3063/2018
DEAN MURRAY RICHARDS v MBA FINANCE PTY LTD,
STEVEN TSIAKIS and TASMANIAN FINANCE PTY LTD
REASONS FOR JUDGMENT ESTCOURT J
1 June 2020
The proceedings
This is an action to recover a loan debt of $50,000 plus an "upfront fee" of $5,000 and interest. With compound interest at the rate of 1% per annum, the amount claimed, calculated to 23 March 2020, totals $77,713.97. In addition interest is accruing at the rate of $24.88 per day until the date of judgment.
The terms of the Loan Agreement were as follows:
· Principal: $50,000
· Term: 60 days
· Interest rate: 1% per month
· Upfront fee: $5,000.
The plaintiff, Dean Murray Richards (Mr Richards), is the lender pursuant to the loan agreement which was concluded on 26 April 2017, with the loan principal paid on the following day.
The first defendant, MBA Finance Pty Ltd (MBA Finance), is the primary borrower under the loan agreement.
The second defendant, Steven Tsiakis (Mr Tsiakis), was at all material times a director of MBA Finance and of the third defendant.
The third defendant, Tasmanian Finance Pty Ltd (Tasmanian Finance), was added as a party on the basis of an affidavit sworn by Mr Tsiakis on 27 August 2019. Following service of a notice admitting certain matters, Tasmanian Finance became of limited significance in the proceedings. Tasmanian Finance was subsequently deregistered.
Evidence on the trial was ordered to be by affidavit. The affidavit of Mr Tsiakis was taken as read during a telephone hearing on 25 May 2020 as were the affidavits of Mr Richards sworn 13 June 2019, Denis James Reid sworn 28 August 2019, and Mr Richards sworn 15 October 2019.
Written submissions were provided on behalf of Mr Richards on 16 March 2020. It was agreed at a telephone hearing on 23 March 2020 that, following the provision of written submissions by Mr Tsiakis and written submissions in reply on behalf of Mr Richards, I would decide the action on the papers. This was confirmed by the parties during the telephone hearing on 25 May, which was held after those further written submissions had been provided.
On 6 March 2020, the defendants, MBA Finance and Tasmanian Finance, wrote to Mr Richards' solicitors making the formal admissions I have already referred to. Those admissions were, in effect:
"a.That the Loan Agreement was entered into by MBA Finance.
b.The terms of the Loan Agreement are as pleaded in the Amended Statement of Claim.
c.MBA Finance received the principal.
d.MBA Finance is in breach of the Loan Agreement for failing to repay the principal and interest."
The issues and the evidence
As a result of those admissions, the live issues in the proceedings concern only Mr Tsiakis' liability for the repayment of the loan. Relief is claimed against Mr Tsiakis on three bases:
(a)as guarantor of the loan agreement;
(b)alternatively, as substitute debtor under the loan agreement; and
(c)further in the alternative, for misleading and deceptive conduct.
Obviously, the loan was not repaid within 60 days. Discussions then took place between Mr Richards and Mr Tsiakis and emails were exchanged. The outcome was an email of 13 August 2018. In that email, which also refers to unrelated business ventures of Mr Tsiakis, he states: "Just to clarify my position following our many conversations … I have other sources of funds which I will call on, once [sic] restaurant is completed, within 60 days and pay you back. This is the worst case scenario … I have taken responsibility for loan and will refund as above."
The email was sent from the address [email protected], and was signed off "Kind Regards Steven Tsiakis" over the signature block – "Director MBA Finance".
Now it is submitted on behalf of Mr Richards that:
"This is unequivocal language confirming the position reached orally that Tsiakis would take personal responsibility for the loan upon MBA Finance's default. The agreement was reduced to writing, reflecting the solemnity and binding nature of the promise."
On the other hand, Mr Tsiakis submits:
"Tsiakis strongly denies that the email of 13 August 2018 from MBA to Richards evidences any intention, express or implied, that the words therein constitute a guarantee by Tsiakis to Richards. It is evident that the email covers many subjects and matters, however, what is clear is that the word 'guarantee' is not expressly stated, nor is there an express suggestion that Tsiakis will personally indemnify or absorb, or otherwise, be liable for any debt that MBA may owe Richards. The email is sent by MBA to Richards. Tsiakis is the Director of MBA and merely assures Richards that he will ensure MBA remains responsible for whatever residual debt is owed."
Discussion and disposition
I am wholly unable to accept Mr Tsiakis' characterisation of the email. To my mind, although signed over the signature block referred to above, this was a personal communication from Mr Tsiakis to Mr Richards, the former assuring the latter that he had assumed personal responsibility for repayment of the loan. Why else would there be any value in the assurance? It would be valueless if it was nothing more than MBA Finance assuring Mr Richards that MBA Finance had accepted responsibility for a loan that MBA Finance already had responsibility for.
I accept the submission made on behalf of Mr Richards that this was a promise to him as the creditor, to answer for the debt, default or miscarriage of MBA Finance and is therefore a guarantee (Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 254). This is a question of construction (Hampton v Minns [2002] 1 WLR 1 at [91] and [98]). It is not necessary that the word "guarantee" be used (Re Taylor; Ex parte Century 21 Real Estate Corp (1995) 130 ALR 723 at 725-730).
The email is a memorandum in writing for the purposes of s 6 of the Mercantile Law Act 1935. The email signature at the foot of the email is a sufficient signature: Electronic Transactions Act 2000, s 7. And the email signature was intended to authenticate the document: Clohesy v Maher (1880) 6 VLR (L) 357; Leeman v Stocks [1951] 1 Ch 941. Mr Tsiakis does not submit to the contrary.
Alternatively, it is submitted on behalf of Mr Richards that Mr Tsiakis had agreed by virtue of the email, to become a substitute debtor under the loan agreement. Although such agreement need not be reduced to writing pursuant to the Mercantile Law Act, it is evidenced by the email itself.
I am satisfied on the balance of probabilities that, by the email, Mr Tsiakis intended to and did become, either a substitute debtor under the loan agreement or a guarantor of MBA Finance's obligations under that agreement. In either case, the consideration was Mr Richards' forbearance to sue on the debt against MBA Finance, a company of which Mr Tsiakis was at all relevant times a director and shareholder.
I do not need to consider the further alternative claim against Mr Tsiakis based on misleading and deceptive conduct.
An asserted set-off
In his written submissions on behalf of the first and second defendants, dated 16 April 2020, Mr Tsiakis has raised for the first time, three matters not pleaded in these proceedings and not the subject of evidence. He sets out in some detail other asserted business transactions between the parties, which he refers to as the "Classic Bet Transaction", the "Repayment of $19,700" and the "Lauderdale Property Transaction".
He concludes:
"On the basis of the alleged debt owed by MBA to Richards, MBA asserts a claim against Richards for monies due and payable to MBA by Richards, including:
• the invoice owed by MBA to DLA Piper, in the amount of $14,650;
• the amount of the outstanding invoice issued by MBA to Richards of $14,800;
• reduction of the Loan amount on the basis of the repayment of $19,700 of the Loan on the instruction of Richards
• liability of MBA to 50% of the invoice owing to Butler, McIntyre & Butler, namely $4,125 (50% of the $8,250);
which payments and amounts total $53,275.00. This total does not include additional disbursements incurred by MBA to pursue these opportunities, as instructed by Richards, including air fares to Sydney and related expenses pursuing the Classic Bet opportunity."
In the written submissions in reply to Mr Tsiakis' submissions, Mr Richards' counsel, Mr Cox, submits that the three new matters raised are not pleaded and not in evidence and thus they should be disregarded.
There was no application to amend and I note that, although unrepresented on the hearings before me, Mr Tsiakis was represented until 6 March 2020, just a little over two weeks prior to the originally allocated trial date, and these matters were not raised in the pleadings or the evidence.
In deference to Mr Tsiakis' lack of representation before me, I should say that had an application to amend been made I would have refused it on the basis of the application of established case management principles. It was far too late to raise the new matters. The proceedings were commenced on 16 November 2018 and the trial of the action had been listed for 23 and 24 March 2020, and that date vacated due to COVID-19 restrictions. The action as pleaded was capable of being resolved at a short hearing dealing with submissions, if not on the papers, as it ultimately has been. No notices to cross-examine had been served. An expanded hearing to accommodate a trial of the new matters would require a trial in court and that would encounter the difficulties and uncertainties arising from the pandemic. Finally, if the first and second defendants have a valid claim against Mr Richards, which was denied, separate proceedings can be brought by them.
It follows from all I have said that there should be judgment for the plaintiff against all defendants, jointly and severally, for $79,430.69 plus costs to be taxed on a party and party basis. I order accordingly.
0
2
2