Silver Chef Rentals Pty Ltd v Makong Australia Pty Ltd
[2019] VSC 703
•23 October 2019
IN THE SUPREME COURT OF VICTORIA
Not Restricted
AT MELBOURNE
COMMERCIAL COURT
S ECI 2018 01829
SILVER CHEF RENTALS PTY LTD
(ABN 33 112 241 522)
Plaintiff
v
MAKONG AUSTRALIA PTY LTD
(ABN 66 163 172 558) trading as HOT SPACE
First Defendant
JIEDI LI
Second Defendant
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JUDGE:
SLOSS J
WHERE HELD:
Melbourne
DATE OF HEARING:
30 July 2019 (supplementary affidavit filed on 9 August 2019)
DATE OF JUDGMENT:
23 October 2019 (first revision: 15 November 2019)
CASE MAY BE CITED AS:
Silver Chef Rentals Pty Ltd v Makong Australia Pty Ltd
MEDIUM NEUTRAL CITATION:
[2019] VSC 703
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PRACTICE AND PROCEDURE – Application for summary judgment – Where the plaintiff seeks summary judgment on claims for breaches of rental agreements and lease agreements – Whether defendants have real prospects of success on their defence – Whether in the interests of justice to grant summary judgment – Whether a full hearing on the merits is appropriate – Civil Procedure Act 2010 (Vic), ss 61, 63 and 64 – Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27 – Hausman v Abigroup Contractors Pty Ltd (2009) 29 VR 213.
CONTRACTS AND GUARANTEES – Where plaintiff entered into rental and lease agreements with the first defendant – Second defendant provided guarantees to the plaintiff in respect of the first defendant’s obligations under the lease agreements – Default of payment obligations under each of the rental agreements by first defendant – Default of payment obligations under each of the lease agreements by first defendant and second defendant – Certificates of indebtedness issued by the plaintiff under the respective agreements – Whether the certificates sufficiently evidence the indebtedness of the defendants to the plaintiff – Construction of certificate provisions – Dobbs v National Bank of Australasia Limited (1935) 53 CLR 643 – Bank of Western Australia v Abdul & Anor [2012] VSC 222.
CONTRACTS – Penalties – Whether liquidated damages clauses in rental and lease agreements constituted penalties – Onus of establishing a contractual stipulation is a penalty rests with the party asserting it – Whether defendants demonstrated liquidated damages clauses in rental and lease agreements constituted penalties – Paciocco v Australia & New Zealand Banking Group Ltd (2016) 258 CLR 525 – Arab Bank Australia Ltd v Sayde Developments Pty Ltd (2016) 93 NSWLR 231 – Australia Capital Finance Management Pty Ltd v Linfield Developments Pty Ltd [2017] NSWCA 99.
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APPEARANCES:
Counsel
Solicitors
For the Plaintiff
Mr D Christie of counsel
SLF Lawyers
For the Defendants
No appearance for the defendants
TABLE OF CONTENTS
Introduction 1
Summary of conclusions 2
Background 3
Procedural history 3
Claims as pleaded by Silver Chef 6
First Rental Agreement 6
Second Rental Agreement 8
First Lease Agreement 9
Second Lease Agreement 12
Silver Chef’s claim arising from Makong’s alleged default 13
Silver Chef’s claim arising from Ms Li’s alleged default 13
Silver Chef’s demands and failure of Makong and Ms Li to pay 14
Terms of the rental agreements 15
(a) The First Rental Agreement 15
(b) The Second Rental Agreement 17
Terms of the lease agreements 18
(a) The First Lease Agreement 18
(b) The Second Lease Agreement 23
Summary judgment - applicable principles 23
Material filed on behalf of Silver Chef 27
The Feaver affidavits 27
The Grace affidavit 33
Further affidavit material filed on behalf of Silver Chef 35
Material filed on behalf of Makong and Ms Li 35
Hearing of summary judgment application on 30 July 2019 37
Submissions made on behalf of Silver Chef 37
No oral submissions were made on behalf of Makong and Ms Li 41
Determination of the application 41
Whether the Court should nevertheless allow the matter to proceed to trial 44
Silver Chef’s costs of the proceeding 51
Summary of conclusions 52
HER HONOUR:
Introduction
1 This proceeding concerns a dispute between the plaintiff, Silver Chef Rentals Pty Ltd (‘Silver Chef’), and the first defendant, Makong Australia Pty Ltd trading as Hot Space (‘Makong’) and the second defendant, Ms Jiedi Li. Silver Chef is a company incorporated in Queensland, carrying on the business of hiring and leasing industrial kitchen equipment for use in restaurants. Makong is a company incorporated in Victoria which operated a Chinese hot pot restaurant called ‘Hot Space’ in Glen Waverly. Ms Li is a director of Makong.
2 The dispute between the parties arises in respect of two rental agreements and two finance lease agreements pertaining to industrial kitchen equipment. The two rental agreements were apparently entered into between Silver Chef and Makong on or about 30 June 2017 (‘First Rental Agreement’) and 23 June 2017 (‘Second Rental Agreement’) respectively. The two finance lease agreements were apparently entered into between Silver Chef, on the one hand, and Makong and Ms Li, on the other hand, on or about 4 February 2018 (‘First Lease Agreement’) and 19 February 2018 (‘Second Lease Agreement ’) respectively. Ms Li is named as the guarantor of Makong in respect of each of the leases.
3 Pursuant to the agreements, Silver Chef agreed to provide certain kitchen equipment, such as industrial gas burners, steamers, stock pots, woks, kitchen shelving and the like, to Makong for use in its restaurant. Silver Chef alleges that Makong failed to make certain of the payments required under each of the agreements within the timeframe specified, and that following Makong’s defaults under the leases, Ms Li has also failed to make the payments required of her as guarantor.
4 By summons filed on 22 March 2019 (’22 March 2019 summons’), Silver Chef made application for summary judgment pursuant to s 61 of the Civil Procedure Act 2010 (Vic) (‘CPA’) and for associated orders. Silver Chef’s application was initially listed for hearing on 9 April 2019 but it was unable to proceed that day primarily because of the late delivery of material by the defendants. Accordingly, the hearing of Silver Chef’s application was adjourned and the matter proceeded as a directions hearing only. The application was re-listed for hearing on 30 July 2019 and heard that day. The defendants did not appear at the hearing and judgment was reserved.
Summary of conclusions
5 For the reasons which follow, I have formed the view that the defence raised by the defendants has no real prospect of success. Further, having given consideration to the as yet unpleaded ‘penalty’ issue that was raised by the defendants in response to the summary judgment application, I am not satisfied that this case is one where it would be appropriate for the Court to exercise the discretion conferred by s 64 of the CPA and allow the matter to proceed to trial.
Background
Procedural history
6 This proceeding was commenced by writ indorsed with a statement of claim filed by Silver Chef on 18 October 2018. As indicated above, Silver Chef alleges Makong is in default of payments it was required to make at specified times under each of the rental agreements and the leases. Additionally, Silver Chef alleges that Ms Li has failed to make payments required of her as guarantor of Makong’s obligations under each of the leases. The terms of the respective agreements are set out below.
7 On 3 December 2018, the solicitors for Makong and Ms Li filed a defence to Silver Chef’s statement of claim. The defence contains a series of material admissions as to the existence of each of the agreements and their terms, the guarantees given by Ms Li, and the defaults by Makong and Ms Li in respect of their payment obligations under the various agreements.
8 Against the background of the admissions contained in Makong and Ms Li’s defence, Silver Chef proceeded by way of its 22 March 2019 summons to make application for summary judgment pursuant to s 61 of the CPA and for associated orders. Subsequently, orders were made listing Silver Chef’s summary judgment application for hearing on 9 April 2019 and fixing a timetable for the filing of material by the respective parties in advance of the hearing. Silver Chef filed its outline of submissions on 25 March 2019, and the defendants were required to file their responding material and outline of written submissions on 3 April 2019, but they failed to do so.
9 On the morning of 9 April 2019, shortly before the hearing commenced, the solicitors for Makong and Ms Li filed an affidavit of Ms Li and an outline of written submissions. Given the late provision of the defendants’ material, and the fact that the plaintiff had not had any opportunity to consider or respond to it, Silver Chef’s application for summary judgment was unable to proceed that day. However, the directions hearing which was also listed for hearing on that day did proceed. During the directions hearing, the Court raised with the parties what appeared to be some basic factual errors in the pleading of Silver Chef’s statement of claim.
10 Against that background, counsel for Silver Chef informed the Court that he wished to re-visit the pleading to consider the matters that had been raised in Court that morning. Additionally, counsel for Makong and Ms Li foreshadowed the making of an application to amend their defence, in order to withdraw certain admissions and to respond to any amended statement of claim filed by Silver Chef. In those circumstances, orders were made granting leave to Silver Chef to amend its statement of claim and fixing a timetable for any application to be made by Makong and Ms Li to amend their defence. Orders were also made adjourning Silver Chef’s summary judgment application for mention on 3 May 2019.
11 On 11 April 2019, Silver Chef filed its amended statement of claim. However, no application was filed by Makong and Ms Li to amend their defence. When the matter returned for mention on 3 May 2019, counsel for Makong and Ms Li asserted that Silver Chef’s amended statement of claim contained further deficiencies which had made it difficult for the defendants to plead to and as a result they had been unable to prepare an amended defence which responded to that pleading. Accordingly, orders were made fixing a date by which Makong and Ms Li were to file any request for further and better particulars of Silver Chef’s amended statement of claim and extending the timetable for Makong and Ms Li to make any application for leave to amend their defence. Leave was also granted to Silver Chef to file and serve a re-engrossed amended statement of claim incorporating any further and better particulars provided.
12 When the matter next returned for a directions hearing on 7 June 2019, no request for further and better particulars had been made by Makong and Ms Li nor had any application for leave to amend their defence been filed. At the directions hearing, the solicitor appearing for Makong and Ms Li sought a further extension of time within which to file any application for leave to amend their defence, but he also indicated that his firm was not currently in funds. In those circumstances, orders were made providing for a further extension of the date for the making of any such application to 17 June 2019. Those orders additionally provided that if no such application was filed within the time specified, Silver Chef’s summary judgment application was to be listed for mention on 21 June 2019.
13 As matters transpired, no application was filed on behalf of Makong and Ms Li and, on 19 June 2019, their solicitors, Lennon Lawyers, filed a notice of solicitor ceasing to act. At the mention hearing on 21 June 2019, neither Makong nor Ms Li appeared. Accordingly, at the request of Silver Chef, the Court set a final timetable for the filing of any further supporting material and outlines of submissions by the respective parties, and listed Silver Chef’s summary judgment application for hearing on 30 July 2019.
14 Silver Chef’s summary judgment application was heard on 30 July 2019. Prior to the hearing no additional supporting material or submissions were filed by or on behalf of Makong and Ms Li, and they did not appear at the hearing. Further, as Makong and Ms Li did not file any defence to Silver Chef’s re-engrossed amended statement of claim, rule 36.06 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (the ‘Rules’) operates such that they are taken to rely upon their original defence in answer to Silver Chef’s amended pleading.
15 Against that procedural background, I turn next to consider the claims as pleaded by Silver Chef and the defences raised by Makong and Ms Li.
Claims as pleaded by Silver Chef
First Rental Agreement
16 In respect of the First Rental Agreement, Silver Chef pleads that:
First Rental Agreement
2 [Silver Chef] and [Makong] entered into a written Silver Chef Rental Agreement (First Rental Agreement).
Particulars
. . .
3 The First Rental Agreement comprised:
(a) Rental Contract and Tax Invoice number 180248 dated 7 July 2017 signed by [Silver Chef] and [Makong] (First Schedule);
(b) Debit Request Authority signed by [Makong];
(c) Debit Request Authority Service Agreement;
(d) Rental Contract Standard Terms and Conditions version 3.4 (Rental Contract T & C).
4 Pursuant to the First Rental Agreement:
(a) [Silver Chef] purchased and hired out the equipment referred to in the First Schedule to [Makong];
(b) [Makong] agreed, among other things, to pay weekly rent of $46.77 by direct debit to [Silver Chef’s] nominated bank account;
(c) [Silver Chef] and [Makong] agreed, among other things, that:
(i) an event of default occurred if any money payable to [Silver Chef] pursuant to the First Rental Agreement was not paid by 7 days after the due date for payment [Rental Contract T & C, clause 26(e)(i)];
(ii) if an event of default occurred, [Silver Chef] may by notice in writing to [Makong] terminate the First Rental Agreement and immediately recover possession of the equipment referred to in the First Schedule [Rental Contract T & C, clause 26(f)];
(iii) if [Silver Chef] terminated the First Rental Agreement upon the occurrence of an event of default, [Silver Chef] was entitled to recover as liquidated and ascertained damages an amount equal to the sum of the following:
A any amount of money due and owing to [Silver Chef] pursuant to the First Rental Agreement as at the date of termination but unpaid by [Makong];
B interest on such unpaid amounts at the Interest Rate (as defined in the First Rental Agreement);
C the balance of Rent (as defined in the First Rental Agreement) payable for the Term (as defined in the First Rental Agreement) from the date of termination to the Rental Expiration Date (as defined in the First Rental Agreement); and
D all fees, charges, costs and expenses incurred by [Silver Chef] including legal fees on a full indemnity (solicitor and own client) basis, in:
I obtaining or attempting to obtain payment of such unpaid amounts;
II otherwise enforcing the terms of the First Rental Agreement;
III recovering or attempting to recover possession of the equipment referred to in the First Schedule; and
IV arranging for the equipment referred to in the First Schedule to be brought to the state required by clause 29(c) of the First Rental Agreement [Rental Contract T & C, clause 26(h)];
(iv) a statement in writing made up from the books of [Silver Chef] and signed by an authorised officer of [Silver Chef] evidencing the amount still owing by [Makong] at the date mentioned in such statement was evidence that the amount was due and owing pursuant to the First Rental Agreement and of all matters set out in the statement [Rental Contract T & C, clause 33(e)].
5 An event of default occurred under the First Rental Agreement in that money payable to [Silver Chef] pursuant to the First Rental Agreement was not paid by 7 days after the due date for payment (First Event of Default).
Particulars
. . .
6 As a result of the First Event of Default, [Silver Chef], by written notice to [Makong] of 8 October 2018, terminated the First Rental Agreement.
Particulars
. . .
17 As noted above, in circumstances where each of Makong and Ms Li did not file any amended defence within the time fixed by the Court, their defence filed on 30 November 2018 stands as their defence to the current statement of claim. Accordingly, in the defence, the defendants (relevantly Makong) have admitted entry into the First Rental Agreement and that the First Rental Agreement was partly comprised of a Rental Agreement and Tax Invoice and the Rental Agreement Standard Terms and Conditions. Further, save that it takes issue with Silver Chef’s pleading in relation to each of sub-clause 33(e) (and denies that a statement in writing is ‘conclusive proof’ of the amount owing), and sub-clause 37(e) (and denies that the indemnity extends to ‘all other liabilities’ incurred in connection with the First Rental Agreement), Makong otherwise admits the allegations made in paragraph 4 about the agreement and the Terms and Conditions. Makong also says that the amount of weekly rent that went unpaid was $46.77 but otherwise admits the allegations made in paragraphs 5 (that an event of default occurred) and 6 (that as a result of the First Event of Default, Silver Chef terminated the First Rental Agreement).
Second Rental Agreement
18 In respect of the Second Rental Agreement, Silver Chef pleads its claim in substantially the same terms as above, save that it relies on the Second Rental Agreement that bears the date of 14 July 2017 but was entered into on or about 23 June 2017 requiring Makong to make weekly rental payments of $72.61, and the ‘second event of default’ being Makong’s alleged failure to pay the weekly rental due on 21 July 2017 by 28 July 2017, as a result of which Silver Chef terminated the Second Rental Agreement by written notice dated 8 October 2018.
19 In the defence, the defendants have admitted entry into the Second Rental Agreement and that the Second Rental Agreement was partly comprised of a Rental Agreement and Tax Invoice and the Rental Agreement Standard Terms and Conditions. Further, save that they again take issue with the pleading in relation to each of sub-clause 33(e) (and deny that a statement in writing is ‘conclusive proof’ of the amount owing), and sub-clause 37(e) (and deny that the indemnity extends to ‘all other liabilities’ incurred in connection with the Second Rental Agreement), the defendants otherwise admit the allegations made in paragraph 9 about the agreement and the Terms and Conditions. The defendants also admit the allegations made in paragraphs 10 (that an event of default occurred) and 11 (that as a result of the Second Event of Default Silver Chef terminated the Second Rental Agreement).
First Lease Agreement
20 In respect of the First Lease Agreement, which was entered into on or about 28 August 2017 between Silver Chef and Makong, with Ms Li as guarantor, Silver Chef pleads its claim as follows:
First Lease Agreement
12 [Silver Chef] and [Makong] entered into a written Silver Chef Advantage Finance Lease (First Lease Agreement).
Particulars
. . .
13 The First Lease Agreement comprised:
(a) Silver Chef Advantage Finance Lease and Tax Invoice number 198604 dated 28 August 2017 signed by [Silver Chef], [Makong] and [Ms Li] (Third Schedule);
(b) Debit Request Authority;
(c) Debit Request Authority Service Agreement;
(d) Silver Chef Advantage Standard Terms and Conditions version 3.1 (Lease T & C).
14 Pursuant to the First Lease Agreement:
(a) [Silver Chef] purchased and leased the equipment referred to in the Third Schedule to [Makong];
(b) [Makong] agreed, among other things, to pay weekly instalments of $4,155.33 by direct debit to [Silver Chef’s] nominated bank account commencing on 26 February 2018;
(c) [Silver Chef] and [Makong] agreed, among other things, that:
(i) an event of default occurred if any money payable to [Silver Chef] pursuant to the First Lease Agreement was not paid by 7 days after the due date for payment [Lease T & C, clause 26(e)(i)];
(ii) if an event of default occurred, [Silver Chef] may by notice in writing to [Makong] terminate the First Lease Agreement and immediately retake possession of the equipment referred to in the Third Schedule [Lease T & C, clause 27(a)];
(iii) if [Silver Chef] terminated the First Lease Agreement upon the occurrence of an event of default, [Silver Chef] was entitled to recover as liquidated and ascertained damages an amount equal to the sum of the following:
A any Payments (as defined in the First Lease Agreement) or other amounts due and owing to [Silver Chef] under the First Lease Agreement as at the date of termination;
B interest on such unpaid amounts at the Interest Rate (as defined in the First Lease Agreement);
C the Payout Amount (as defined in the First Lease Agreement) in respect of the Equipment (as defined in the First Lease Agreement) as at the date of termination; and
D all fees, charges, costs and expenses incurred by [Silver Chef] including legal fees on a full indemnity (solicitor and own client) basis, in:
I obtaining or attempting to obtain payment of such unpaid amounts;
II otherwise enforcing the terms of the First Lease Agreement;
III recovering or attempting to recover possession of the Equipment (as defined in the First Lease Agreement); and
IV arranging for the Equipment (as defined in the First Lease Agreement) to be brought to the state required by clause 27(e) of the First Lease Agreement [Lease T & C, clause 27(c)];
(iv) a statement in writing made up from the books of [Silver Chef] and signed by an authorised officer of [Silver Chef] evidencing the amount still owing by [Makong] at the date mentioned in such statement was evidence that the amount was due and owing pursuant to the First Lease Agreement and of all matters set out in the statement [Lease T & C, clause 33(e)].
(d) [Ms Li]:
(i) guaranteed to [Silver Chef]:
A the due and punctual payment by [Makong] of the Payments (as defined in the First Lease Agreement);
B the due and punctual payment by [Makong] of every other amount payable by [Makong] under the First Lease Agreement;
C the performance and observance by [Makong] of all of the terms and conditions on the part of [Makong] under the First Lease Agreement [Lease T & C, clause 37(b)].
15 An event of default occurred under the First Lease Agreement in that money payable to [Silver Chef] pursuant to the First Lease Agreement was not paid by 7 days after the due date for payment (Third Event of Default).
Particulars
. . .
16 As a result of the Third Event of Default, [Silver Chef], by written notice to [Makong] terminated the First Lease Agreement.
Particulars
. . .
21 In their defence, the defendants have admitted entry into the First Lease Agreement and that the First Lease Agreement was partly comprised of a Rental Agreement and Tax Invoice and the Rental Agreement Standard Terms and Conditions. Further, save that they take issue with the pleading in relation to each of sub-clause 33(e) (and deny that a statement in writing is ‘conclusive proof’ of the amount owing), and sub-clause 37(e) (and deny that the indemnity extends to ‘all other liabilities’ incurred in connection with the First Lease Agreement), they otherwise admit the allegations made in paragraph 14 about the agreement and the Terms and Conditions. They also admit the allegations made in paragraphs 15 (that an event of default occurred) and 16 (that as a result of the Third Event of Default Silver Chef terminated the First Lease Agreement).
Second Lease Agreement
22 In respect of the second lease agreement, Silver Chef pleads its claim in substantially the same terms as above, save that it relies on the Second Lease Agreement that bears the date of 6 November 2017 but was entered into between it and Makong and Ms Li on or about 19 February 2018 requiring weekly instalments of $2,097.90 to be paid, and the ‘Fourth Event of Default’ being the alleged failure of either Makong or Ms Li to pay the weekly instalment of $2,097.90 due on 18 June 2018 by 25 June 2018, which default is continuing, and as a result of which Silver Chef terminated the Second Lease Agreement by letter (dated 8 October 2018).
23 Turning to the defence, it will be noted that the defendants’ pleaded response to paragraph 17 is incomplete and not capable of being understood. In response to paragraph 18, they admit that the Second Lease Agreement was partly comprised of a Rental Agreement and Tax Invoice and the Rental Agreement Standard Terms and Conditions. Further, save that they take issue with the pleading in relation to each of sub-clause 33(e) (and deny that a statement in writing is ‘conclusive proof’ of the amount owing), and sub-clause 37(e) (and deny that the indemnity extends to ‘all other liabilities’ incurred in connection with the Second Lease Agreement), they otherwise admit the allegations made in paragraph 19 about the agreement and the Terms and Conditions. They also admit the allegations made in paragraphs 20 (that an event of default occurred) and 21 (that as a result of the Fourth Event of Default Silver Chef terminated the Second Lease Agreement).
Silver Chef’s claim arising from Makong’s alleged default
24 Against the background of the pleading of each of the relevant agreements, Silver Chef pleads (in paragraphs 6, 11, 16 and 21) that by reason of the respective events of default, Silver Chef terminated each of the agreements by letter from its solicitors dated 8 October 2018, and (in paragraph 22) that upon the termination of the First Rental Agreement, the Second Rental Agreement, the First Lease Agreement and the Second Lease Agreement, Silver Chef became entitled to recover from Makong:
22(a) the sums of:
(i) $2,158.23 being the total of the amounts referred to in paragraphs 4(c)(iii)A and 4(c)(iii)C of this Amended Statement of Claim pursuant to the First Rental Agreement;
(ii) $3,403.81 being the total of the amounts referred to in paragraphs 9(c)(iii)A and 9(c)(iii)C of this Amended Statement of Claim pursuant to the Second Rental Agreement;
(iii) $618,412.93 being the total of the amounts referred to in paragraphs 14(c)(iii)A and 14(c)(iii)C of this Amended Statement of Claim pursuant to the First Lease Agreement;
(iv) $330,977.54 being the total of the amounts referred to in paragraphs 19(c)(iii)A and 19(c)(iii)C of this Amended Statement of Claim pursuant to the Second Lease Agreement;
totalling $954,952.51;
Particulars
. . .
22(b) interest on the sum of $954,952.51 at the rate published by the Australian Taxation Office as the general interest charge from time to time;
22(c) all fees, charges, costs and expenses incurred by [Silver Chef] including legal fees on a full indemnity (solicitor and own client) basis.
25 In their defence, the defendants ‘do not admit’ any of the allegations pleaded in paragraph 22.
Silver Chef’s claim arising from Ms Li’s alleged default
26 In the case of Ms Li, Silver Chef pleads (in paragraph 23) that pursuant to the First Lease Agreement and the Second Lease Agreement, Ms Li is liable, as guarantor, to pay to it:
23(a) the sums of:
(i) $618,412.93 being the total of the amounts referred to in paragraph 22(a)(iii) of this Amended Statement of Claim pursuant to the First Lease Agreement;
(ii) $330,977.54 being the total of the amounts referred to in paragraph 22(a)(iv) of this Amended Statement of Claim pursuant to the Second Lease Agreement;
totalling $949,390.47;
Particulars
. . .
23(b) interest on the sum of $949,390.47 at the rate published by the Australian Taxation Office as the general interest charge from time to time;
23(c) all fees, charges, costs and expenses incurred by [Silver Chef] including legal fees on a full indemnity (solicitor and own client) basis.
27 In their defence, the defendants (relevantly Ms Li) ‘do not admit’ any of the allegations that correspond with those now set out in paragraph 23 of the amended statement of claim.
Silver Chef’s demands and failure of Makong and Ms Li to pay
28 In paragraphs 24 and 25 of its amended statement of claim, Silver Chef pleads the demand made upon Makong and its failure to pay, as follows:
24 By way of the Letter, [Silver Chef] demanded from [Makong] payment of the sum of $954,952.51 within seven (7) days from 8 October 2018.
25 Despite demand, [Makong] failed refused or neglected to pay to [Silver Chef] the sum of $954,952.51 by 15 October 2018.
29 In their defence, the defendants admit the allegations that correspond with those now set out in paragraph 24, but do not admit those allegations that correspond with those now set out in paragraph 25 of the amended statement of claim.
30 Before turning to consider the arguments raised by Silver Chef it is convenient to set out the relevant terms of each of the rental agreements and the lease agreements.
Terms of the rental agreements
31 In each case, the contract for the rental agreement consists of the ‘Rental Contract Standard Terms and Conditions’ and the ‘Rental Contract & Tax Invoice’. Clause 2(b) of the standard terms and conditions provides that where there is any discrepancy or inconsistency between them and the Rental Contract & Tax Invoice (including any Special Conditions but not including the information set out as ‘Important Information’ therein) the Rental Contract & Tax Invoice prevails. In the case of the information set out as ‘Important Information’ in the Finance Lease & Tax Invoice, the standard terms and conditions prevail to the extent of any discrepancy or inconsistency.
(a) The First Rental Agreement
32 The Rental Contract & Tax Invoice pertaining to the First Rental Agreement, which bears the date of 7 July 2017, established a rental facility limit of $25,000.00 and provided for the hire by Makong from Silver Chef of specified kitchen equipment for a minimum term of 12 months, at a weekly rental of $46.77 (inclusive of GST).
33 There was no guarantor specified but Ms Li was recorded on the Rental Contract & Tax Invoice as the ‘Authorised Signatory’. Under the heading ‘Important Information’, it was also stated that Silver Chef could ‘take the Equipment back, at the Hirer’s cost, if any event occurs (such as Rent is not paid as agreed) which entitles Silver Chef to terminate the Equipment Rental Agreement’, in which event the ‘Hirer may still be required to pay a Termination Amount, even though it no longer has the Equipment.’ The ‘Termination Amount’ is defined in sub-clause 1(ll) of the Rental Contract Standard Terms & Conditions to mean ‘an amount calculated by Silver Chef including any fees and charges Silver Chef incurs such as return costs, repatriation costs, holding costs etc. in relation to the termination of the contract.’
34 Clause 4(c) of the Rental Contract Standard Terms & Conditions provides that ‘[t]he Rental may only be terminated in accordance with clauses 26, 27, 28 and 31. Clause 26 of that document specifies what constitutes an ‘event of default’. Relevantly, sub-clause 26(e)(i) provides that it is an event of default if ‘any money payable to Silver Chef pursuant to [the Rental Contract] is not paid by seven (7) clear days after the due date for payment.’ Upon the occurrence of an event of default, sub-clauses 26(f), (g) and (h) are enlivened such that Silver Chef may exercise or pursue any one of more of the following rights and remedies:
(f) Upon the occurrence of any one or more of the events described in sub-clause 26(e) Silver Chef may (at its option) by notice in writing to the Hirer terminate the Rental Facility and/or terminate the Rental (or any Month to Month Rental or holding over) and immediately recover possession of the Equipment.
(g) Upon termination of the Rental Facility pursuant to sub-clause 26(f), Silver Chef is entitled to recover as liquidated and ascertained damages an amount equal to all the fees, charges, costs and expenses incurred by Silver Chef, including legal fees on a full indemnity (solicitor and own client) basis, in enforcing the terms of this [Rental] Contract in respect of the Rental Facility.
(h) Upon termination of the Rental (or any Month to Month Rental or holding over) pursuant to sub-clause 26(f), Silver Chef is entitled to recover as liquidated and ascertained damages an amount equal to the sum of the following:
(i) any amount of money due and owing to Silver Chef pursuant to this [Rental] Contract as at the date of termination but unpaid by the Hirer;
(ii) interest on such unpaid amounts at the Interest Rate;
(iii) the balance of the Rent payable for the Term from the date of termination to the Rental Expiration Date; and
(iv) all fees, charges, costs and expenses incurred by Silver Chef, including legal fees on a full indemnity (solicitor and own client) basis, in:
(1) obtaining or attempting to obtain payment of such unpaid amounts;
(2) otherwise enforcing the terms of this [Rental] Contract;
(3) recovering or attempting to recover possession of the Equipment; and
(4) arranging for the Equipment to be brought to the state required in sub-clause 29(c).
35 The expression ‘Interest Rate’ is defined in sub-clause 1(r) to mean, unless the context otherwise requires:
. . . the rate published by the Australian Taxation Office as the general interest charge (“GIC”) from time to time PROVIDED THAT the Interest Rate applicable:
(i) from the date of termination of the Rental (or any Month to Month Rental or holding over) pursuant to sub-clause 26(f) until the earlier of the date the Hirer pays to Silver Chef all unpaid amounts due and owing pursuant to this [Rental] Contract or the date of any claim and statement of claim being filed in a court of law in respect of the amounts due and owing by the Hirer to Silver Chef pursuant to this [Rental] Contract, will be the GIC as at the date of termination; and
(ii) from the date of any claim and statement of claim being filed in a court of law in respect of amounts due and owing by the Hirer to Silver Chef pursuant to this [Rental] Contract until judgment is given by the court or the claim and statement of claim is discontinued, will be the GIC as at the date the claim and statement of claim is filed in the court.
36 Clause 33, which is headed ‘Miscellaneous’, contains provisions addressing matters such as ‘continuing obligation’, ‘entire agreement’, ‘governing law’, severability’, ‘amount owing’, ‘time of the essence’, ‘waiver’ etc. Relevantly, clause 33(e), which deals with ‘amount owing’, provides:
A statement in writing made up from the books of Silver Chef and signed by an authorised officer of Silver Chef evidencing the amount still owing by the Hirer at the date mentioned in such statement is evidence that the amount is due and owing pursuant to this [Rental] Contract and of all matters set out in the statement.
(b) The Second Rental Agreement
37 In similar fashion, the ‘Rental Contract & Tax Invoice’ pertaining to the Second Rental Agreement which bears the date of 14 July 2017, noted that a rental facility limit of $25,000.00 had been established, and it provided for the hire by Makong from Silver Chef of additional specified kitchen equipment for a minimum term of 12 months, at a weekly rental of $72.61 (inclusive of GST). The Second Rental Agreement contained (effectively) the same standard terms and conditions as apply to the First Rental Agreement.
Terms of the lease agreements
38 As to the First and Second Lease Agreements, the contract in each case consists of the ‘Silver Chef Advantage Standard Terms and Conditions’ and the ‘Silver Chef Advantage Finance Lease & Tax Invoice’. Clause 2(b) of the standard terms and conditions provides that where there is any discrepancy or inconsistency between them and the Finance Lease & Tax Invoice (including any Special Conditions but not including the information set out as ‘Important Information’ therein) the Finance Lease & Tax Invoice prevails. In the case of the information set out as ‘Important Information’ in the Finance Lease & Tax Invoice, the standard terms and conditions prevail to the extent of any discrepancy or inconsistency.
(a) The First Lease Agreement
39 Under the ‘Silver Chef Advantage Finance Lease & Tax Invoice’ pertaining to the First Lease Agreement, which bears the date of 28 August 2017, Silver Chef agreed to make available to Makong a ‘Finance Lease Facility’ to a limit of $754,581.61 in order for Silver Chef to purchase and immediately lease specified kitchen equipment to Makong for its business purposes, subject to the terms and conditions of the lease. The lease provided for a minimum term of 48 months, with the applicable GST payable at commencement and with instalments payable at the weekly intervals specified in the Payment Schedule.
40 The Silver Chef Advantage Finance Lease & Tax Invoice pertaining to the First Lease Agreement, in Item 3 under the heading ‘Guarantor’, named Ms Li as Guarantor of Makong as Lessee. In Item 7, under the heading ‘Payments’, it was stated that the Lessee is ‘responsible for making all payments and any fees incurred throughout the Term’, and that the ‘Weekly Payment is to be paid by direct debit to Silver Chef’s nominated bank account’. Under the heading ‘Important Information’ it was also stated that if the Lessee should ‘fail to pay for any payments, fees or charges, the Guarantor (if applicable), will become personally liable for all debts of the Lessee.’ The Finance Lease & Tax Invoice document also stated that the Lessee could ‘purchase the Equipment at any point in time during the Term’, and that Silver Chef could repossess the Equipment in the event of a termination of the lease, in which event the ‘Lessee will still be required to pay the payments until the Term expires, even though it no longer has the Equipment.’
41 Under clause 5 of the Silver Chef Advantage Standard Terms and Conditions pertaining to the First Lease Agreement, which is headed ‘Amounts Payable’, Makong as Lessee acknowledged and agreed that:
(a) all payments payable by [Makong] under this Contract must be made in the manner specified in Item 6 of the Schedule or in such other manner as Silver Chef may from time to time reasonably direct in writing;
(b) it is not entitled to withhold any payments or make any deductions from any payments where [Makong] claims to have a right of set-off or counterclaim; and
(c) if there is a Documentation Fee, [Makong] will pay the Documentation fee as directed by Silver Chef and it will be non-refundable.
42 Further, sub-clause 22(f) provided that:
[Makong] will pay to Silver Chef upon demand all fees, charges, costs and expenses incurred by Silver Chef in obtaining or attempting to obtain payment or money from [Makong] pursuant to this Lease or in otherwise enforcing the terms of this Lease. Silver Chef’s standard fees, charges, costs and expenses may be published by Silver Chef on its website from time to time.
43 Clause 26 deals with ‘Default’. Sub-clauses 26(d) and (e) relevantly provide:
. . .
(d) Should [Makong] fail to make any payment required by this Lease, then [Makong] shall pay interest at the Interest Rate to Silver Chef on the amount which is outstanding from the due date for payment until the date it is actually paid.
(e) Each of the following is an event of default (“Event of Default”), namely, if:
(i) any money payable to Silver Chef pursuant to this Lease is not paid by seven (7) clear days after the due date for payment;
. . .
44 Clause 27 deals with ‘Termination due to default’ and provides as follows:
(a) Upon the occurrence of an Event of Default, Silver Chef may (at its option) by notice in writing to [Makong] terminate the Finance Lease Facility and/or terminate the Finance Lease and immediately recover possession of the Equipment.
(b) Upon termination of the Finance Lease Facility pursuant to sub-clause 27(a), Silver Chef is entitled to recover as liquidated and ascertained damages (but not as a penalty) an amount equal to all the fees, charges, costs and expenses incurred by Silver Chef, including legal fees on a full indemnity (solicitor and own client) basis, in enforcing the terms of this Lease in respect of the Finance Lease Facility.
(c) Upon termination of the Finance Lease pursuant to sub-clause 27(a), Silver Chef is entitled to recover as liquidated and ascertained damages (but not as a penalty) an amount equal to the sum of the following:
(i) any Payments or other amounts due and owing to Silver Chef under this lease as at the date of termination;
(ii) interest on such unpaid amounts at the Interest Rate;
(iii) the Payout Amount in respect of the Equipment as at the date of termination; and
(iv) all fees, charges, costs and expenses incurred by Silver Chef, including legal fees on a full indemnity (solicitor and own client) basis, in:
(1) obtaining or attempting to obtain payment of such unpaid amounts;
(2) otherwise enforcing the terms of this Lease;
(3) recovering or attempting to recover possession of the Equipment; and
(4) arranging for the Equipment to be brought to the state required in sub-clause 27(e).
(d) Notwithstanding sub-clause 27(c)(iii), if Silver Chef recovers possession of the Equipment pursuant to this Lease, it may (in its absolute discretion) reduce its claim for liquidated and ascertained damages by the Recovery Value of the Equipment.
. . .
(g) To remove doubt, upon termination of the Finance Lease pursuant to sub-clause 27(a), Silver Chef will be entitled to retain all Payments and other amounts previously paid by the Lessee to Silver Chef under the Finance Lease.
45 Clause 33 contains a number of ‘Miscellaneous’ provisions, including sub-clause (e) which provides as follows:
(e) Amount owing: A statement in writing made up from the books of Silver Chef and signed by an authorised officer of Silver Chef evidencing the amount still owing by [Makong] at the date mentioned in such statement is evidence that the amount is due and owing pursuant to this Lease and of all matters set out in the statement.
46 Clause 37 contains the standard terms and conditions applicable to the ‘Guarantee’, relevantly as follows:
. . .
(b) In consideration of Silver Chef, at the request of [Ms Li], leasing the Equipment to [Makong] upon the terms and conditions contained in this Lease, [Ms Li] guarantees to Silver Chef:
(i) the due and punctual payment by [Makong] of the Payments in accordance with the terms of this Lease;
(ii) the due and punctual payment by [Makong] of every other amount payable by [Makong] under this Lease; and
(iii) the performance and observance by [Makong] of all the terms and conditions on the part of [Makong] under this Lease,
(‘Guaranteed Obligations’).
(c) The Guaranteed Obligations continue until all the Payments and other amounts payable pursuant to this Lease have been paid and until all other terms and conditions on the part of the Lessee have been performed, observed and satisfied . . .
. . .
(i) In order to give effect to this guarantee, the Guarantor declares that Silver Chef is at liberty to act as though the Guarantor were the Lessee (within the limits of this guarantee) and the Guarantor waives all and any of its rights as guarantor which may at any time be inconsistent with any of the foregoing provisions regardless of whether any demand, written or otherwise, has been made upon the Lessee to pay the amounts owing under this Lease. The Guarantor will not be entitled to call upon Silver Chef to establish that the Lessee is in default under this Lease and the amounts owing will be payable unless the Guarantor establishes that no default has occurred under this Lease.
. . .
(l) This guarantee will continue to be effective or will be reinstated, as the case may be, if at any time the whole or any part of any payment or satisfaction of the whole or any part of any of the Guaranteed Obligations:
(i) is avoided by the operation of any law; or
(ii) must be repaid or restored by Silver Chef or any other recipient of that payment, or beneficiary of that satisfaction, to the Lessee or Guarantor by reason of preference or for any other reason whatever;
and that payment or satisfaction is deemed not to have discharged any of the Guaranteed Obligations or part of them, as if that payment or satisfaction had not been made.
(b) The Second Lease Agreement
47 The Second Lease Agreement, which bears the date of 6 November 2017, recorded that Silver Chef had agreed to make available to Makong the ‘Finance Lease Facility’ to a limit of $754,581.61 which was established in order for Silver Chef to purchase and immediately lease specified kitchen equipment to Makong for its business purposes, subject to the terms and conditions of the lease. The lease provided for a minimum term of 48 months, with the applicable GST payable at commencement and with instalments payable at the weekly intervals specified in the Payment Schedule.
48 As with the First Lease Agreement, the Finance Lease & Tax Invoice pertaining to the Second Lease Agreement named Ms Li as Guarantor and provided that should Makong fail to pay for any payments, fees or charges, Ms Li as guarantor would become personally liable for all debts of Makong.
Summary judgment - applicable principles
49 The principles applicable to the grant of summary judgment are well-established.
50 In Victoria, the requirements which must be satisfied in order for a plaintiff to obtain summary judgment have recently been considered and aptly summarised by Matthews JR in Padella Pty Ltd v Elliott. For convenience, I have largely adopted those principles as distilled by Matthews JR, which are set out below.
51 Section 61 of the CPA permits a plaintiff to make an application for summary judgment on the ground that the defendant’s defence or part of that defence has no real prospect of success. Section 63 of the CPA provides that, subject to s 64, the Court may give summary judgment in a civil proceeding ‘if satisfied’ that a defence has ‘no real prospect of success’.
52 Section 64 of the CPA provides that:
Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because—
(a) it is not in the interests of justice to do so; or
(b) the dispute is of such a nature that only a full hearing on the merits is appropriate.
53 In Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd, the Court of Appeal stated the relevant test to be applied in determining an application for summary judgment made under ss 61 and 63, as follows:
(a) the test for summary judgment under s 63 of the [CPA] is whether the respondent to the application for summary judgment has a “real” as opposed to a “fanciful” chance of success;
(b) the test is to be applied by reference to its own language and without paraphrase or comparison with the “hopeless” or “bound to fail test” essayed in [General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125];
(c) it should be understood, however, that the test is to some degree a more liberal test than the “hopeless” or “bound to fail” test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
(d) at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.
54 Section 7(1) of the CPA sets out its overarching purpose, which is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute. Section 9 of the CPA requires the Court to have regard to these purposes in making any order or giving any direction in a civil proceeding.
55 Where a plaintiff in a civil proceeding seeks to bring an application for summary judgment under s 61 of the CPA, it must be made in accordance with Order 22 of the Rules.
56 Rule 22.04 of the Rules sets out the material required to be filed in support of an application for summary judgment. It provides as follows:
(1) An application shall be made by summons supported by an affidavit—
(a) verifying the facts on which the claim or the part of the claim to which the application relates is based; and
(b) stating that in the belief of the deponent the defence to the claim or the defence to the relevant part of the claim—
(i) has no real prospect of success; or
(ii) has no real prospect of success except as to the amount of the claim or as to the amount of the relevant part of the claim.
(2) Where a statement in a document tends to establish a fact within paragraph (1) and at the trial of the proceeding the document would be admissible by or under the Evidence (Miscellaneous Provisions) Act 1958, the Evidence Act 2008 or any other Act to verify the fact, the affidavit under paragraph (1) may set forth the statement.
(3) An affidavit under paragraph (1) may contain a statement of fact based on information and belief if the grounds are set out and, having regard to all the circumstances, the Court considers that the statement ought to be permitted.
(4) The plaintiff shall serve the summons and a copy of the affidavit or affidavits and of any exhibit referred to in the affidavit or affidavits on the defendant not less than 14 days before the day for hearing named in the summons.
57 Rule 22.05 of the Rules provides:
(1) The defendant may show cause against the application by affidavit or otherwise to the satisfaction of the Court.
(2) An affidavit under paragraph (1) may contain a statement of fact based on information and belief if the grounds are set out.
(3) Unless the Court otherwise orders, the defendant shall serve a copy of any affidavit and of any exhibit referred to in the affidavit or affidavits on the plaintiff not less than three days before the day for hearing named in the summons.
58 The requirements set out in rr 22.04 and 22.05 were considered by the Court of Appeal in Hausman v Abigroup Contractors Pty Ltd. In relation to an affidavit in support of an application for summary judgment, the Court of Appeal stated that what ‘must be verified are the facts necessary to establish a good cause of action’. Once the plaintiff has established the elements of its cause of action, there is ‘something akin’ to a shifting of the evidential burden to the defendant.
59 With regard to the equivalent of what is now r 22.05, the Court of Appeal stated as follows:
[62] … Assuming the plaintiff’s application is properly made, there will be judgment for the plaintiff unless the defendant shows cause against the application to the satisfaction of the court. The Rule provides that the defendant can show such cause ‘by affidavit or otherwise’.
[63] The defendant must satisfy the Court that, in respect of the claim to which the application for judgment relates, a question ought to be tried, or there ought for some other reason to be a trial of that claim. The Court, if so satisfied, will give the defendant leave to defend and the proceeding will continue to trial in the ordinary way. The Court will normally require an affidavit by, or on behalf of, the defendant before it will be satisfied that the defendant is entitled to leave to defend. The standard of diligence required of the defendant in preparing a case in opposition to the application, especially if under pressure of time, is perhaps not as high as that required in preparing for trial.
[64] Nonetheless, the defendant is required to use reasonable diligence to put before the Court, albeit in a summary form, all the evidence relied on in the defence. In that regard, it would generally be regarded as an injustice to the plaintiff to introduce for the first time, on appeal, evidence which was readily available for the hearing of the application, but was not produced. An affidavit filed by the defendant may contain a statement of fact based on information and belief.
[65] The authorities suggest that an affidavit in opposition to an application for summary judgment must provide sufficient particulars to enable the defence case to be properly understood. A bald denial that the defendant is indebted to the plaintiff will not suffice. The affidavit should, so far as practicable, deal specifically with the plaintiff’s claim and the facts set out in the supporting affidavit to establish that claim. It should state clearly and concisely what the defence is, and identify the facts relied upon in support of that defence.
60 Those principles from Hausman extracted above remain good law since the advent of the CPA.
Material filed on behalf of Silver Chef
61 I turn now to consider the material filed by Silver Chef in support of its application for summary judgment.
The Feaver affidavits
62 Ms Stacey Feaver, the group recoveries manager of Silver Chef, has sworn two affidavits in the proceeding, the first on 22 March 2019 (‘first Feaver affidavit’) and the second on 19 June 2019 (‘second Feaver affidavit’). During the hearing of Silver Chef’s application on 30 July 2019, its counsel informed the Court that the second Feaver affidavit was made in place of the first, and while it refers to terms defined in the first Feaver affidavit and the exhibits thereto, the ‘second affidavit really supersedes what’s in the first affidavit’ and it was intended that only the second Feaver affidavit be relied upon.
63 Ms Feaver describes the circumstances as to the entry into each of the agreements by the parties, the terms of the respective agreements, the defaults by Makong under each of the agreements, and the subsequent termination by Silver Chef of each of the agreements. In respect of these matters, Ms Feaver’s evidence reflects the matters as pleaded by Silver Chef.
64 The first Feaver affidavit exhibits a letter sent from Silver Chef’s solicitors to Makong dated 8 October 2018 in which Silver Chef notifies Makong that it is terminating each of the agreements. That letter states, amongst other things, as follows:
…
On behalf of our client, we hereby give the company notice that our client:
1 terminates the four (4) Rental Agreements;
2 intends to retake possession of the Goods,
Enclosed, pursuant to clause 33(e) of the Rental Agreements, is a signed Certificate dated 8 October 2018 (Certificate).
You must pay to our client the sum of $954,952.51 referred to in the Certificate.
…
65 As Ms Feaver explained in her first affidavit, the sum of $954,952.51 was the total of the applicable ‘payout’ amounts under each of the rental and lease agreements, as evidenced in the signed statements prepared by an authorised officer, Ms Alix Bradley, from the books of Silver Chef, calculated as at 8 October 2018, as follows:
Payout for the First Rental Agreement
$2,158.23
Payout for the Second Rental Agreement
$3,403.81
Payout for the First Lease Agreement
$618,412.93
Payout for the Second Lease Agreement
$330,977.54
$954,952.51
66 Ms Feaver deposes that the statements were:
(a) produced by the computer maintained by [Silver Chef] (Computer) on 8 October 2018;
(b) part of the records of and kept for the purposes of [Silver Chef’s] business.
67 Further, she says that on the day when the statements were produced:
(a) the Computer was used regularly to store and process information for the purposes of [Silver Chef’s] business carried on for profit.
(b) there was regularly supplied to the Computer in the ordinary course of [Silver Chef’s] business information of the kind contained in the Statements.
(c) the Computer was operating properly.
(d) the information supplied in the Statements reproduces and is derived from information supplied to the Computer in the ordinary course of [Silver Chef’s] business.
68 Ms Feaver also notes that the copies of the statements reproduced in exhibit F to her first affidavit bear the date when they were printed, being 21 March 2019, rather than the date of 8 October 2018 when they were produced. She explains that is because the ‘Word format’ programme automatically updates the date at the time when the statements are printed.
69 The first Feaver affidavit also exhibits a letter sent from Silver Chef’s solicitors to Ms Li on the same date in similar terms. That letter erroneously asserts that Ms Li is a guarantor of Silver Chef under each of the four agreements and is liable to pay Silver Chef the full amount due to it by Makong. This error was corrected in the second Feaver affidavit, where Ms Feaver acknowledges that Ms Li was a guarantor under the first and second lease agreements only, and hence Silver Chef says she is liable as guarantor to pay the (lesser) sum of $949,390.47 plus interest and associated fees, costs and charges incurred by Silver Chef.
70 The letters sent by Silver Chef’s solicitors to each of Makong and Ms Li also enclosed what was described as a ‘Certificate pursuant to clause 33(e) of the Rental Agreements’. Silver Chef sought, at least initially, to rely upon it as proof of the total debt owing by the defendants under the agreements. That certificate is dated 8 October 2018 and is signed by Ms Rebecca Fahey of SLF Lawyers, solicitors for Silver Chef. It provides as follows:
…
This is a Certificate pursuant to clause 33(e) of the Rental Agreements numbered 179877, 180248, 198604 & 198614 (Rental Agreements).
The amount of moneys due and owing by the Horer [sic] and the Guarantor to the Owner under the Rental Agreements as at 8 October 2019 is $954,952.51.
…
71 During the directions hearing on 9 April 2019, the Court raised with counsel for Silver Chef the fact that the certificate enclosed with the letter did not appear to comply with the requirements of clause 33(e) of the respective agreements, in that it was signed by Silver Chef’s solicitor rather than an authorised officer of Silver Chef. In those circumstances, at the substantive hearing on 30 July 2019 Silver Chef also sought to rely upon four fresh clause 33(e) certificates prepared by Mr Elton Grace, its Legal Recoveries Officer, each dated 9 July 2019. Silver Chef contends that each of the fresh certificates complies with the requirements of clause 33(e) of the respective agreements and evidences the amounts currently owing by the respective defendants. Those certificates are exhibited to the affidavit of Mr Grace sworn on 15 July 2019 (‘Grace affidavit’), discussed below.
72 In the second Feaver affidavit, Ms Feaver deposes as to four discrete events of default having occurred, with one under each of the respective agreements, as follows:
(a) The First Event of Default – which is said to have occurred under the First Rental Agreement when money payable to Silver Chef pursuant to the agreement was not paid by 7 days after the due date for payment, being the failure of Makong to pay the weekly rent of $46.77 due on 14 July 2017 by 21 July 2017, which default is continuing. As a result of the First Event of Default, Silver Chef terminated the First Rental Agreement.
(b) The Second Event of Default – which is said to have occurred under the Second Rental Agreement when money payable to Silver Chef pursuant to the agreement was not paid by 7 days after the due date for payment, being the failure of Makong to pay the weekly rent of $72.60 due on 21 July 2017 by 28 July 2017, which default is continuing. As a result of the Second Event of Default, Silver Chef terminated the Second Rental Agreement.
(c) The Third Event of Default – which is said to have occurred under the First Lease Agreement when money payable to Silver Chef pursuant to the agreement was not paid by 7 days after the due date for payment, being the failure of Makong to pay the weekly instalment of $4,155.30 due on 18 June 2018 by 25 June 2018, which default is continuing. As a result of the Third Event of Default, Silver Chef terminated the First Lease Agreement.
(d) The Fourth Event of Default – which is said to have occurred under the Second Lease Agreement when money payable to Silver Chef pursuant to the agreement was not paid by 7 days after the due date for payment, being the failure of Makong to pay the weekly instalment of $2,097.90 due on 18 June 2018 by 25 June 2018, which default is continuing. As a result of the Fourth Event of Default, Silver Chef terminated the Second Lease Agreement.
73 Further, in her second affidavit Ms Feaver asserts that, upon the termination of each of the agreements, effected by the notice dated 8 October 2018, Silver Chef became entitled to recover from Makong the following amounts:
(a) the sums of:
(i) $2,158.23 referred to in the Payout Quote for the First Rental Agreement bearing the [print] date, 21 March 2019 [but prepared on 8 October 2018] (First Rental Agreement Payout Quote);
(ii) $3,403.81 referred to in Payout Quote for the Second Rental Agreement bearing the [print] date, 21 March 2019 [but prepared on 8 October 2018] (Second Rental Agreement Payout Quote);
(iii) $618,412.93 referred to in Payout Quote for the First Lease Agreement bearing the [print] date, 21 March 2019 [but prepared on 8 October 2018] (First Lease Agreement Payout Quote);
(iv) $330,977.54 referred to in Payout Quote for the Second Lease Agreement bearing the [print] date, 21 March 2019 [but prepared on 8 October 2018] (Second Lease Agreement Payout Quote);
totalling $954,952.51;
(b) interest on the sum of $954,952.51 at the rate published by the Australian Tax Office as the general interest charge from time to time;
(c) all fees, charges, costs and expenses incurred by the Plaintiff [Silver Chef] including legal fees on a full indemnity (solicitor and own client) basis.
74 Additionally, Ms Feaver asserts that pursuant to the First and Second Lease Agreements, Ms Li, as guarantor, is liable to pay to Silver Chef the following amounts:
(a) the sums of:
(i) $618,412.93 referred to in the First Lease Agreement Payout Quote;
(ii) $330,977.54 referred to in the Second Lease Agreement Payout Quote;
totalling $949,390.47;
(b) interest on the sum of $949,390.47 at the rate published by the Australian Tax Office as the general interest charge from time to time;
(c) all fees, charges, costs and expenses incurred by the Plaintiff [Silver Chef] including legal fees on a full indemnity (solicitor and own client) basis.
75 Each of the respective ‘payout quotes’ referred to above sets out a payout amount, as calculated by Ms Bradley, for the equipment the subject of the relevant agreement, and the rental or lease arrears due to Silver Chef as at 8 October 2018. The sum of those amounts is denoted the ‘total payout quote’, which in the case of Makong is the total of the amounts referred to in paragraph 73(a) above and in the case of Ms Li is the total of the amounts referred to in paragraph 74(a) above.
76 On the basis of the information deposed to in the second Feaver affidavit, Ms Feaver contends that the defence advanced by each of Makong and Ms Li has no real prospects of success and that, accordingly, the Court should enter judgment against Makong and Ms Li for the amounts claimed in Silver Chef’s amended statement of claim (as referred to in paragraphs 73 and 74 respectively above.)
The Grace affidavit
77 As noted above, Silver Chef additionally relies upon an affidavit of Mr Elton Grace to establish the quantum of the indebtedness of the defendants as at the date of the hearing. Relevantly, in his affidavit, Mr Grace deposes that as the legal recoveries officer of Silver Chef he has access to and is familiar with its business records, and having perused the business records of Silver Chef, four fresh ‘clause 33(e) certificates’ have been prepared evidencing the respective amounts owing by Makong to Silver Chef under the First Rental Agreement, the Second Rental Agreement, the First Lease Agreement and the Second Lease Agreement.
78 The Grace affidavit exhibits fresh payout quotes for each of the agreements, prepared as at 9 July 2019. The fresh payout quotes exhibited to the Grace affidavit are denoted in each case ‘Certificate Pursuant to Clause 33(e)’ and are signed by Mr Grace, as required by clause 33(e) of each of the agreements. Mr Grace deposes that the payout quotes evidence the indebtedness of Makong to Silver Chef as at 9 July 2019, as follows:
(a) the amount owing by Makong to Silver Chef under Rental Agreement No. 179877, being $42,587.80 (comprised of arrears of $40,071.13 and payout of $2,516.67);
(b) the amount owing by Makong to Silver Chef under Rental Agreement No. 180248, being $2,825.68 (comprised of arrears of $1,216.02 and payout of $1,609.66);
(c) the amount owing by Makong to Silver Chef under Lease Agreement No. 198604, being $625,097.31 (comprised of arrears of $186,300.10 and payout of $438,797.21); and
(d) the amount owing by Makong to Silver Chef under Lease Agreement No. 198614, being $325,977.86 (comprised of arrears of $84,301.68 and payout of $241,676.18).
79 The total of the amounts Mr Grace states are owing by Makong to Silver Chef under the First and Second Rental Agreements and the First and Second Lease Agreements as at 9 July 2019 is $996,488.65.
80 To the extent that Ms Li is the named guarantor in respect of the First and Second Lease Agreements, in circumstances where Makong has failed to pay, it follows that the total of the amounts specified by Mr Grace above in relation to those two agreements, being $951,075.17, also evidences the alleged indebtedness of Ms Li to Silver Chef as at 9 July 2019.
81 Each of the clause 33(e) certificates exhibited to the Grace affidavit specifies the total ‘Payout Amount’ for the equipment the subject of the particular Rental or Lease Agreement, and states that ‘[u]pon payment of all monies owed, a letter transferring title of the equipment listed above will be forwarded to you.’
Further affidavit material filed on behalf of Silver Chef
82 Following the hearing, a further affidavit of Mr Christopher Yam, solicitor, was filed on behalf of Silver Chef (‘further Yam affidavit’). Therein, Mr Yam deposes as to the relevant interest charges, being the general interest charge rates as printed on the Australian Taxation Office’s website on 30 July 2019. He also deposes to his conversation with Ms Bronte Lyne, Silver Chef’s legal and collections shared services lead, on 9 August 2019 in which she confirmed that Silver Chef:
(a) has not recovered possession of:
(i) the equipment referred to in the First Schedule (as defined in Re-Engrossed Amended Statement of Claim filed by [Silver Chef] in the Court on 14 May 2019);
(ii) the equipment referred to in the Second Schedule (as defined in Re-Engrossed Amended Statement of Claim filed by [Silver Chef] in the Court on 14 May 2019);
(iii) the equipment referred to in the Third Schedule (as defined in Re-Engrossed Amended Statement of Claim filed by [Silver Chef] in the Court on 14 May 2019); and
(iv) the equipment referred to in the Fourth Schedule (as defined in Re-Engrossed Amended Statement of Claim filed by [Silver Chef] in the Court on 14 May 2019);
hereinafter referred to as Equipment;
(b) does not intend to recover possession of the Equipment.
Material filed on behalf of Makong and Ms Li
83 As mentioned earlier, on the morning of 9 April 2019, when Silver Chef’s summary judgment application was initially listed for hearing, Makong and Ms Li filed an outline of written submissions and an affidavit of Ms Li sworn on that date (‘Li affidavit’), upon which their counsel proposed to rely at the hearing. Given the late provision of material, however, the hearing of Silver Chef’s application was unable to proceed that day and Ms Li’s affidavit was not read in court. It remains the case that while the Li affidavit was filed, it has not been formally read or tendered on behalf of the defendants.
84 In her affidavit, Ms Li refers to dealings with third parties - Mr Kenny Nguyen of Canopy & Grease Cleaning purportedly as an agent or broker on behalf of Silver Chef, and Mr Scott Nicolai who is said to be a sales consultant of Silver Chef - in relation to the offer of loan funds, and representations allegedly made by one or other of them in connection with the ’loan’ agreements. For the most part, however, the matters Ms Li deposes to in her affidavit are not pleaded in the defendants’ defence and they contradict or are not consistent with the admissions made in their defence.
85 Similarly, the outline of submissions that was produced by counsel for the defendants at the initial hearing raises the issue, which has not been pleaded by the defendants, of whether the liquidated damages claimed by Silver Chef constitute a penalty. In that regard, the defendants refer to the decision of the High Court in Paciocco v Australia and New Zealand Banking Group Limited, where it was held that the bank’s late payment fee imposed under its ordinary credit card contracts was not a penalty. While noting that two of the judges in the majority in that case, Justices Gageler and Keane, separately rejected the ‘hitherto accepted but always rebuttable presumption’ that an amount will be held to be penal if it does not vary according to the seriousness of the breach, the defendants contend that in the present case ‘the extent of the disparity between damages incurred upon termination after 1 month of a 48 month term and 47 months of a term of the same length demonstrates that the liquidated damages clause in this case is clearly punitive in character.’ Accordingly, they submit:
The Court ought find that it is strongly arguable that liquidated damages equalling the whole of the consideration payable under a leasing arrangement regardless of the proportion of the term during which the lease runs are “out of all proportion” to the likely losses (in the widest sense) which [Silver Chef] might suffer as a result of the breaches. On this basis, the Court ought find that it is strongly arguable that the function of the liquidated damages clause is to punish debtors rather than to compensate [Silver Chef] by reference to its legitimate interests.
86 In their outline, the defendants also sought to raise purported defences of ‘misleading and deceptive conduct’, ‘unfair contract terms’, and to allege that a significant portion of the amount claimed by Silver Chef was not actually advanced to Makong. Here again, however, none of these matters is pleaded in the defence that was filed on behalf of the defendants.
87 Since that written outline was filed, neither Makong nor Ms Li has taken any step towards pleading the essence of their penalty argument as part of their defence nor has any affidavit evidence been filed by them directed to establishing their contention that specific clauses of the respective agreements are in the nature of penalties. In particular, they have not filed any application to amend their defence despite having foreshadowed an intention to do so. Furthermore, having been served with all of the relevant material relied upon by Silver Chef, neither Makong nor Ms Li appeared at the hearing on 30 July 2019.
Hearing of summary judgment application on 30 July 2019
Submissions made on behalf of Silver Chef
88 At the hearing, Mr Christie of counsel appeared on behalf of Silver Chef. At the outset, he adopted the written outline of submissions that had been filed on 10 July 2019, and then proceeded to elaborate orally upon particular aspects of those submissions. After taking the Court through the pleadings, he submitted that the only live issue on the pleadings was the amount of the debt owed by Makong and Ms Li, which is not admitted by them. In those circumstances, counsel referred to the affidavit material filed on behalf of Silver Chef and sought to invoke and rely upon sub-clause 33(e) of each of the agreements, and the payout statements which form exhibit F to the first Feaver affidavit (evidencing indebtedness as at 8 October 2018) and the certificates exhibited by Mr Grace (evidencing indebtedness as at 9 July 2019) as evidencing the respective indebtedness of each of Makong and Ms Li to Silver Chef.
89 Counsel for Silver Chef also referred the Court to the decision of the High Court in Dobbs v National Bank of Australasia Limited, where the court found that a clause expressed in terms similar to clause 33(e) of the rental and lease agreements in the present case was efficacious in proving the amount of the indebtedness. It will be recalled that in Dobbs, the plurality explained the operative effect of such a certificate, as follows:
The bank could recover without the production of a certificate if, by ordinary legal evidence, it proved the actual indebtedness of the customer. But the clause, if valid, enables the bank by producing a certificate to dispense with such proof. It means that, for the purpose of fixing the liability of a surety, the customer's indebtedness may be ascertained conclusively by a certificate. It was contended, however, for the appellant that, upon its true construction, the clause did not make the certificate conclusive of the legal existence of the debt but only of the amount. It is not easy to see how the amount can be certified unless the certifier forms some conclusion as to what items ought to be taken into account, and such a conclusion goes to the existence of the indebtedness. Perhaps such a clause should not be interpreted as covering all grounds which go to the validity of a debt; for instance, illegality, a matter considered in Swan v Blair, 3 Cl. & Fin. 610 at pp 632 and 635–6; 6 E.R. 1566 at pp 1574 and 1575–6; sub nom. Swan v Bank of Scotland, 10 Bli. (N.S.) 627, at pp 632, 637–8; 6 E.R. 231, at pp 233 and 234–5. But the manifest object of the clause was to provide a ready means of establishing the existence and amount of the guaranteed debt and avoiding an inquiry upon legal evidence into the debits going to make up the indebtedness. The clause means what it says, that a certificate of the balance due to the bank by the customer shall be conclusive evidence of his indebtedness to the bank.
90 Counsel for Silver Chef also referred the Court to the decision of Croft J in Bank of Western Australia v Abdul & Anor, and adopted the following principles which his Honour had distilled from Dobbs, namely:
(a) It is not necessary to rely on a certificate. A provision for a certificate merely provides a ready means of establishing indebtedness;
(b) The principle in Dobbs is evidentiary in operation. It facilitates proof of a material fact and thereby operates as an exception to the general rule in adversarial litigation that it is for the party alleging a material fact, when that fact is put in issue, to prove that fact;
(c) The purpose of a provision for a certificate is to enable the establishment of the indebtedness of a customer to a bank both expeditiously and finally;
(d) The effect of the certificate is to determine the incidence of burden of proof as to the matters permitted by the certificate;
(e) In recognising the effect of certificates of this kind, the courts are simply giving effect to the contractual bargain struck between the parties;
(f) Nothing in Dobbs confines its operation to clauses expressed in the same or substantially identical terms to the clause providing for a certificate which was considered in that case; as is demonstrated by the application of the same approach to certificates used in an unrelated context; and
(g) The principal task of the Court is always to construe and to give effect to the terms of the particular clause providing for such a certificate.
91 Counsel for Silver Chef submitted that the certificates signed by Mr Grace and produced under clause 33(e) are, in each case, statements in writing made up from the books of Silver Chef, evidencing the amounts owing by Makong to Silver Chef in respect of the First and Second Rental Agreements and in respect of the First and Second Lease Agreements as at 9 July 2019, and in the case of Ms Li, the amounts owing by her to Silver Chef in respect of the First and Second Lease Agreements as at 9 July 2019 in circumstances where Makong has failed to pay Silver Chef the amount owing. Being, in each case, certificates that have been prepared in conformity with clause 33(e) and the contractual bargain struck between the parties, counsel for Silver Chef contended that they may be relied upon by the Court as evidence establishing the current indebtedness of each of Makong and Ms Li.
92 Turning to the issue of penalty, counsel for Silver Chef submitted that it is a matter for the defendants to plead and prove on the balance of probabilities any allegation that the liquidated damages clause under each agreement is punitive in character or operates to impose a penalty. He observed that here the defendants have failed to plead and ‘have not, on the balance of probabilities, proved that the exception fees are a penalty.’
93 Further, counsel contended that each of the rental agreements and each of the lease agreements provides for the consequences of a default in payment, one of which is termination, and the parties have agreed about the amount that Silver Chef is entitled to recover upon termination as liquidated and ascertained damages. Counsel submitted that in those circumstances, particularly as Silver Chef’s application for summary judgment is ‘unopposed’, if the Court were to require a breakdown or separate articulation of the actual fees, charges, and costs and expenses incurred by Silver Chef, including its legal fees on a full indemnity basis, ‘it would make a mockery of the certificate clause because the purpose of the certificate clause, as articulated by the High Court in Dobbs and summarised by Justice Croft, is to avoid the necessity to do that.’ He confirmed that Silver Chef relies upon the statement made by Mr Grace in his affidavit to the effect that, having perused the business records of Silver Chef relevant to this proceeding, the signed certificates produced under clause 33(e) and signed by Mr Grace are, in each case, ‘statements in writing made up from the books of [Silver Chef]’, evidencing the amounts owing by Makong to Silver Chef in respect of the First and Second Rental Agreements and in respect of the First and Second Lease Agreements as at 9 July 2019. In the case of the interest due and owing on the certified amounts, Silver Chef relies upon the first Feaver affidavit and exhibit H thereto, the second Feaver affidavit, and the affidavit of Mr Yam sworn on 9 August 2019 and exhibit A thereto.
94 The certificates having been provided, and there being no evidence to the contrary, counsel for Silver Chef moved for orders that:
(a) Makong pay Silver Chef the sum of $996,488.65 (being the sum total of the four amounts set out in the certificates exhibited by Mr Grace), together with interest of $5,129.32;
(b) Ms Li pay Silver Chef the amount of $951,075.17 (being the sum total of the two amounts set out in the certificates exhibited by Mr Grace pertaining to the first and second lease agreements), together with interest of $4,895.56;
(c) Makong and Ms Li pay Silver Chef’s costs of this proceeding, including reserved costs, to be taxed by the Costs Court on an indemnity basis in the absence of agreement to the contrary.
No oral submissions were made on behalf of Makong and Ms Li
95 As there was no appearance for either Makong or Ms Li at the hearing of the application on 30 July 2019, no oral submissions were made on their behalf.
Determination of the application
96 Silver Chef’s case as presented at the hearing was essentially one where, in seeking to prove the respective events of default and termination of each of the rental and lease agreements, it sought to rely upon the admissions made by the defendants, and the fresh certificates provided pursuant to clause 33(e) as proof of the liquidated sums due under each of the agreements. Silver Chef contends that, having established the essential elements of each cause of action pleaded against the defendants, it is entitled to have judgment entered against each of them.
97 In circumstances where an application for summary judgment is properly made, the position is, as the Court of Appeal stated in Hausman v Abigroup, that ‘there will be judgment for the plaintiff unless the defendant shows cause against the application to the satisfaction of the court.’ A defendant wishing to ‘show cause’ can do so by affidavit or otherwise, but importantly, the defendant must use reasonable diligence to put before the Court all of the evidence relied upon and the affidavit should state clearly and concisely what the defence is and provide sufficient particulars to enable the defence case to be properly understood.
98 In the present case, when Silver Chef’s application for summary judgment was first listed for hearing on 9 April 2019 the defendants filed, somewhat belatedly, an affidavit of Ms Li and an outline of submissions. Counsel appearing for the defendants on that day indicated that they opposed judgment being entered on grounds including that the liquidated damages clause gave rise to a penalty, the agreements were procured by misleading and deceptive conduct and they contained clauses that were ‘unfair terms’ within the meaning of section 24 of the Australian Consumer Law. Since then, however, and despite the Court fixing a timetable for the amendment of the pleadings which included provision for the defendants to bring forward an application for leave to withdraw admissions and plead the ‘penalty’ issue raised in their outline, the defendants have failed to engage in any meaningful way with the court processes. In particular the defendants:
- failed to seek leave to withdraw the substantial admissions made in their defence and plead or articulate the ‘penalty’ and other issues raised in their outline; and
- failed to plead to Silver Chef’s amended statement of claim dated 11 April 2019.
99 In those circumstances, the defence as pleaded stands. Given the significant admissions made within it, and the other matters which the defendants ‘do not admit’, the pleaded defence is one that simply puts Silver Chef to proof of the amount of the alleged indebtedness of Makong (as hirer or lessee) and of Ms Li (as guarantor).
100 Further, both the affidavit of Ms Li and the defendants’ outline of submissions fail to state clearly and concisely what the additional (as yet unpleaded) defences are and the factual matters relied upon in support of them. In the case of the alleged ‘penalty’, the issue is said to arise ‘on the face of the material relied upon by the Plaintiff’ but the defendants’ outline fails to engage with, or construe, the relevant clauses of the respective rental and lease agreements or otherwise address the material filed by Silver Chef so as to enable the defence case to be understood.
101 Furthermore, by failing to appear at the hearing of the summary judgment application on 30 July 2019, the defendants have done little to advance their case or to assist the Court and Silver Chef to understand it. Accordingly, it is difficult to regard the defendants as having used ‘reasonable diligence’ to show cause against Silver Chef’s application or to view their defence as pleaded as having raised any substantive defence that is likely to have any real prospect of success.
102 In those circumstances, prima facie, it would be open to the Court to give summary judgment under s 63(1) of the CPA. However, the power in s 63 is one that is expressly made subject to s 64, which permits the Court to allow a matter to proceed to trial if the Court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because (a) it is not in the interests of justice to do so; or (b) the dispute is of such a nature that only a full hearing on the merits is appropriate. In Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd, the Court of Appeal also expressed the cautionary note that the power to terminate proceedings summarily is one that should be exercised with caution and should not be exercised unless it is clear that there is no real question to be tried.
103 In the present case, the primary issue raised by the defendants in their outline of submissions is whether the liquidated damages claimed by Silver Chef ‘are a penalty and so void’. Because the ‘penalty’ issue has been raised directly by the defendants in response to the plaintiff’s application for summary judgment, and is said to arise ‘on the face of the material relied upon by the Plaintiff’, it is appropriate for the Court to consider whether, notwithstanding that the defendants’ pleaded defence has no real prospect of success, there is nevertheless a question that ought to be tried or whether, for some other reason, there ought be a trial of Silver Chef’s claim.
Whether the Court should nevertheless allow the matter to proceed to trial
104 Silver Chef has taken the position that it is not required to engage with the penalty issue raised by Makong and Ms Li in their outline, first, because it has not been pleaded and secondly, because it is a matter on which the defendants bear the burden of proof. Indeed counsel for Silver Chef informed the Court that:
I have not asked my client to do what ANZ Bank have done in that case [Paciocco], which was to put on evidence establishing that the stipulated sum under clause 27(e), I think it is, was not extravagant and unconscionable. It – to do so, Your Honour, would be effectively trying to box in a hessian bag.
Because there is nothing to respond to. . . .
. . .
So what ANZ did [in Paciocco], was to depose to its financial structure and all of the costs that might conceivably be incurred in the enforcement fee that they sought to charge credit card holders. So coming back to this case, Your Honour – as I said, absent any evidence from the defendant as to why or what it says or what parts of the amount that's sought to be recovered are penal, there is and was no utility in seeking to put on evidence deposing to the fact that the amount that's sought to be recovered is out of all proportion to the interests affected by Silver Chef.
105 Any issue as to ‘penalty’ falls to be considered at the time the relevant agreement is entered into rather than at the time of breach. In Arab Bank Australia Ltd v Sayde Developments Pty Ltd, McDougall J (with whom Gleeson JA and Sackville AJA agreed) identified that proposition as having been affirmed in Paciocco in the following terms:
The analysis is to be made at the time, and taking into account the circumstances applicable, when the contract was made; not at the time of breach; the analysis is prospective, not retrospective (or as is said in some judgments, is ex ante, not ex post).
106 Similarly, in Australia Capital Finance Management Pty Ltd v Linfield Developments Pty Ltd, Ward JA (with whom McColl and Gleeson JJA agreed) held that ‘the penalties doctrine requires characterisation of an impugned stipulation by reference to the circumstances as at the time of entry into the contract’.
107 The authorities also make clear that the ‘evidentiary and persuasive onus’ of establishing that a contractual stipulation is a penalty rests with the person asserting it.
108 In the present case, the defendants have failed to make any meaningful attempt to articulate a coherent formulation of the alleged penalty issue by reference to particular provisions of the rental agreements or the lease agreements and the circumstances of the case as at the time of entry into the respective agreements. But even if the defendants were able to adequately articulate and prove that the liquidated damages clauses in the respective agreements were in the nature of penalties and so unenforceable, the commensurate effect of the efficacy of the certificates issued under clause 33(e) is unclear.
109 In Dobbs, in the context of dealing with the appellant’s contention that the certificate clause, upon its true construction, did not make the certificate conclusive of the legal existence of the debt but only of the amount, the plurality appeared to recognise, or at least leave open, that there may be some situations where a Dobbs certificate clause should not be interpreted as being wholly definitive. Their Honours observed:
Perhaps such a clause should not be interpreted as covering all grounds which go to the validity of a debt; for instance, illegality, a matter considered in Swan v Blair.
110 By adverting to the possibility of circumstances arising whereby a certificate issued under a clause in a contract which is rendered void ab initio by reason of infection with a vitiating factor, such as illegality, their Honours appear to suggest that a certificate issued thereunder could not stand as evidence of the existence or quantum of indebtedness arising under the contract.
111 While the effect of the characterisation of a contractual provision as a penalty is that it is unenforceable, rather than void ab initio as in the case of a vitiating factor such as illegality, it is unclear whether similar reasoning would apply in a case where a Dobbs certificate was sought to be used to recover an amount purportedly owing under a provision of a contract which it is contended gives rise to an unenforceable penalty. However, in the present case, as the defendants have failed to take any meaningful steps directed to establishing that any of the liquidated damages clauses in the respective agreements are penal, this issue does not arise for consideration by the Court.
112 It should also be noted that given the reliance that Silver Chef placed on the certificate point, its written submissions did not engage in any real consideration of the contractual provisions that give rise to the liquidated damages it claims. At the hearing, the Court raised with counsel for Silver Chef the issue of whether the Court was required to consider and construe the contractual provisions relied upon in order to form a view about whether the relief sought by Silver Chef accords with what it is entitled to recover following an event of termination under the respective agreements. Counsel responded to the effect that because Silver Chef relies upon the certificate clause, clause 33(e), as evidence of the amounts owing, it is not required to address any of the criteria specified in clause 27(c) of the standard terms and conditions pertaining to the lease agreement. He contended that ‘the bargain that the parties have struck is that the plaintiff, by its authorised officer, may provide a certificate’, and in this case Silver Chef relies on the certificates produced by Mr Grace. Further, counsel said he was relying upon the certificate clause as had been done in Dobbs and BankWest. He submitted that absent some basis not to accept it, the certificate is a ready means of establishing indebtedness; indeed the very purpose of the certificate clause is to avoid the necessity to provide a breakdown of the individual amounts and, as Croft J observed, ‘to enable the establishment of indebtedness of a customer to a bank expeditiously and finally’.
113 That is to say, relying on the decisions in Dodds and BankWest, counsel for Silver Chef effectively submitted that a certificate produced by an officer under clause 33(e) was proof of the indebtedness of the lessee following termination – in each case evidence of the ‘amount owing’ under the relevant agreement as at 9 July 2019 - without the need to resort to clause 27 or to consider the discrete heads of claim there set out and their operative dates.
114 While it is clear that a Dobbs certificate may be used as a ready means of proving indebtedness, the principal task of the Court in such a case is, as Croft J observed in BankWest ‘always to construe and to give effect to the terms of the particular clause providing for such a certificate.’
115 In the present case, clause 33(e) of each of the rental agreements and lease agreements differs from that under consideration in Dobbs and does not expressly state that the payout statement is ‘conclusive’ of the lessee’s indebtedness. Clause 33(e) provides:
A statement in writing made up from the books of Silver Chef and signed by an authorised officer of Silver Chef evidencing the amount still owing by the [Hirer or Lessee] at the date mentioned in such statement is evidence that the amount is due and owing pursuant to this [Contract or Lease] and of all matters set out in the statement.
116 Neither party advanced any submissions, oral or written, as to the proper construction of clause 33(e). In those circumstances, I propose to construe the provision according to the usual or ordinary rules of construction.
117 The certificate provision appears as part of the standard terms and conditions pertaining to the rental agreements and to the lease agreements, in each case, in a clause headed ‘Miscellaneous’. The language used in clause 33(e) suggests that the clause was intended to have a wide scope of operation, in the sense that its use is not expressly confined or limited to evidencing ‘the amount still owing’ by the hirer or lessee to Silver Chef under any particular clause of the agreement. Additionally, the terms in which the provisions of clause 33(e) are expressed do not limit the certificate to certification of particular types of ‘amounts still owing’ such as arrears of rental/outstanding lease payments, or interest or both. Nor (adopting the observations of Croft J about the counterpart provision in BankWest) do the provisions of clause 33(e) ‘prevent the certificate stating merely a single amount of money certified as payable, whether or not the components of that amount are, in effect, itemised on the face of the certificate.’
118 The requirement that the statement must be ‘made up from the books of Silver Chef’ and be ‘signed by an authorised officer of Silver Chef’ conveys the notion that production of the certificate is intended for purposes directed to or involving the business operations of Silver Chef and that the certificate must reflect or accord with what is stated in Silver Chef’s books and records. To the extent that other ‘matters’ may be set out in the statement, those matters should likewise reflect or accord with what is stated in Silver Chef’s books and records.
119 In my view, having regard to the standard terms and conditions pertaining to the rental and lease agreements in the present case, the parties must be taken to have intended that where a statement is duly prepared by reference to Silver Chef’s books and records and signed by an authorised officer in accordance with clause 33(e), it stands as sufficient evidence of the amount due and owing and payable by the lessee to Silver Chef.
120 In the case of the certificates prepared by Mr Grace, he deposes in his affidavit that as legal recoveries officer of Silver Chef he has access to and is familiar with the business records of Silver Chef relevant to the proceeding and has perused them. He then produces and exhibits copies of the statements in writing made up from the books of Silver Chef and signed by him evidencing the amounts owing by Makong to Silver Chef under the respective agreements. Each statement is dated 9 July 2019 and addressed to Makong, and relevantly states as follows:
Certificate Pursuant to Clause 33(e) of [the relevant] Agreement Number [#]
The Payout Amount for the equipment listed below under [the relevant] Agreement Number [#]is $ [amount] (Inclusive of GST).
The Payout Amount is calculated as follows:
Asset Description
Serial Number
Payout Quote
PAYOUT
$ [Amount]
ARREARS
$ [Amount]
TOTAL
$ [Amount]
For your convenience, payment options are listed on the following page.
Upon payment of all monies owed, a letter transferring title of the equipment listed above will be forwarded to you.
Please do not hesitate to call me with any questions on 1800 064 431.
[signed]
Yours sincerely,
Silver Chef Rentals Pty Ltd
Elton Grace
Legal Recoveries Officer
121 The page attached to the certificate is headed ‘Payment Authorisation Form’. It sets out ‘Payment Options’ (cheque, money order, credit card, direct deposit or direct debit request) in order for Makong to make payment to Silver Chef of the amount stated in the certificate.
122 Clause 33(e) states that a certificate or statement prepared in accordance with the clause is ‘evidence that the amount due is owing pursuant to [the relevant contract or lease] and of all matters set out in the statement. While the statements prepared by Mr Grace do not in terms specify an amount as ‘due or owing’, the certificate is dated 9 July 2019 and does specify a ‘Payout Amount’, and states that ‘[u]pon payment of all monies owed’, a letter transferring title of the listed equipment will be forwarded to Makong. In my view, having regard to the context in which they were issued, and in particular their denotation as clause 33(e) certificates, the purport of the statements is clear.
123 As noted earlier, as clause 33(e) does not expressly state that the certificates are ‘conclusive’, the defendants could seek to challenge them but they would bear the onus of proving that any certificate is incorrect or ineffective. In the present case, Makong and Ms Li have not undertaken that task, and I am not satisfied that there is any basis not to accept the certificates.
124 One matter that should be noted, however, is that the total of the amounts certified by Mr Grace as owing by Makong to Silver Chef under the first and second rental agreements and the first and second lease agreements as at 9 July 2019 is $996.488.65, and (implicitly) in the case of Ms Li as guarantor, it is $951,075.17. In each case, these amounts exceed the amounts claimed by Silver Chef as ‘a debt due and owing’ by Makong and Ms Li respectively in the prayer for relief set out in its amended statement of claim, being $954,952.51 in the case of Makong, and $949,390.47 in the case of Ms Li. Accordingly, it will be necessary to hear from the parties as to the precise form of judgment to be entered.
125 For the reasons discussed above, I am not satisfied that there is any question that ought to be tried or any other reason why there ought be a trial of Silver Chef’s claim. In those circumstances, there is no reason why the proceeding should not be disposed of summarily. In reaching that view, I have had regard to the CPA and its overarching purpose of facilitating the just, efficient, timely and cost-effective resolution of the real issues in dispute.
Silver Chef’s costs of the proceeding
126 Silver Chef also seeks an order to the effect that the defendants pay Silver Chef’s costs of this proceeding, including reserved costs, to be taxed by the Costs Court on the indemnity basis in the absence of agreement to the contrary. In this regard, they rely upon clause 26(h)(iv) of the rental agreements and clause 27(c)(iv) of the lease agreements, which relevantly provides in each case that Silver Chef is entitled to recover as liquidated and ascertained damages an amount equal to the sum of all fees, charges, costs and expenses incurred by it, including legal fees on a full indemnity (solicitor and own client) basis in: (1) obtaining or attempting to obtain payment of such unpaid amounts; (2) otherwise enforcing the terms of the contract; (3) recovering or attempting to recover possession of the equipment; and (4) arranging for the equipment to be brought to the required state or condition.
127 A similar provision was considered by Whelan J in Reading Entertainment Australia Pty Ltd v Burstone Victoria Pty Ltd (No 2). In dealing with the question of costs, his Honour, having reviewed the disparate authorities, referred to the lack of clarity as to the relationship between the operation of contractual provisions entitling a party to a costs indemnity and the Court’s discretion as to costs, and said:
My view, without having heard argument, is that the analysis of the New South Wales Court of Appeal in Abigroup Ltd v Sandtora Pty Ltd is correct and that the contractual right simply stands independently of the curial power and order.
128 His Honour then proceeded to consider the costs incurred by the plaintiff (Reading Australia) in litigating the issues pleaded in its statement of claim, which he noted were substantially admitted, and in resisting the set-off alleged by the defendants (plaintiffs by counterclaim) which were controversial and as to which the plaintiffs were only partially successful. His Honour found that the plaintiff’s costs incurred in litigating the issues pleaded and in successfully resisting the set-off fell within the contractual provisions, but should also reflect an entitlement to an indemnity basis as provided under the Rules, as follows:
As indicated, in my view, the exercise of my discretion on costs should reflect the contractual entitlement of Reading Australia. In that respect, it should also reflect an entitlement on an indemnity basis as provided for in Rule 63.30.1. That is what the contractual provisions require. This entitlement should, however, be confined to the costs of the claim and the costs of resisting set-off, and should exclude the costs of resisting the successful claims made on behalf of WPG.
129 In my view, a similar position applies in the present case, and it is appropriate that an order for costs on the indemnity basis be made along the lines sought by Silver Chef.
Summary of conclusions
130 For the foregoing reasons, the Court is of the view that the defendants’ defence has no real prospect of success and that it is appropriate that the proceeding be disposed of summarily. Accordingly, subject to hearing from the parties, orders will be made for judgment to be entered for the plaintiff against the respective defendants along the lines set out in the prayer for relief.
131 I will hear from the parties as to the precise form of judgment to be entered.
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