Skalkos v Smiles and 5 Ors

[2004] NSWSC 34

CITATION:

Skalkos v Smiles & 5 Ors [2004] NSWSC 34

HEARING DATE(S):

17 December 2003

JUDGMENT DATE:

18 February 2004

JURISDICTION:

Common Law

JUDGMENT OF:

Master Harrison

DECISION:

(1) The sixth defendant's notice of motion filed 15 October 2002 is dismissed; (2) The sixth defendant is to pay the first defendant's costs.

CATCHWORDS:

Leave to file cross claim between first and sxith defendants

LEGISLATION CITED:

Bankruptcy Act - Part X

CASES CITED:

N/A

PARTIES :

John Skalkos
(plaintiff)

James John Smiles
(First Defendant)

Archibald eorge Poulos
(Second Defendant)

Smiles Poulos Services Pty Limited
(Third Defendant)

Taxcare Pty Limited
(Fourth Defendant)

Svelte Corporation Pty Limited
(Fifth Defendant)

Geoff Kotsakis
(Sixth Defendant)

FILE NUMBER(S):

SC 21033/1995

COUNSEL:

Mr M T Aldridge SC with
Mr R G Tregenza
(First Defendant)

Mr M Dempsey
(Sixth Defendant)

SOLICITORS:

Mr E Abreu of
Abreu & Associates
(First Defendant)

Home Wilkinson Lowry
(Sixth Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

MASTER HARRISON

WEDNESDAY, 18 FEBRUARY 2004

21033/1995 - JOHN SKALKOS v JAMES JOHN SMILES
& 5 ORS

JUDGMENT (Leave to file cross claim between
first and sixth defendants)

1 MASTER: By notice of motion filed 15 October 2002 the sixth defendant Geoff Kotsakis seeks an order granting leave to file a cross claim against the first defendant James John Smiles who relied upon his affidavit sworn 30 July 2003. The sixth defendant relied on the affidavit of Eva Velinova sworn 25 March 2003 and his affidavits sworn 17 July 2000 and 21 November 2000.

2 The plaintiff is John Skalkos. The first defendant/first and second cross defendant is James John Smiles. For convenience I shall refer to Mr Smiles as the first defendant. The second defendant/first, third and fourth cross claimant is Archibald George Poulos. The third defendant/second, third fourth cross claimant is Smiles Poulos Services Pty Limited. The fourth defendant/second, third and fourth cross claimant is Taxcare Pty Limited. The fifth defendant is Svelte Corporation Pty Limited. The sixth defendant and proposed cross defendant is Geoff Kotsakis. Likewise for convenience I shall refer to Mr Kotsakis as the sixth defendant.

3 On 23 June 2003 Greg James J by consent directed that the matter be referred for determination by the Master in the following terms:

“2. Directs with the consent of the first defendant and sixth defendant, the issue raised by the Notice of Appeal filed on 25 March 2003 and the issues pending determination under paragraph (2) of the 6th Defendants Notice of Motion filed on 15 October 2002, including issues of futility and prejudice may conveniently be determined on a hearing of paragraph 2 of the Motion filed on 15 October 2002.”

Nature of the case

4 The plaintiff sues the first and sixth defendant on loan agreements. The sixth defendant alleges that the first defendant agreed with him to repay the debt. The sixth defendant also alleges that he was discharged from liability under the loan agreements when the first defendant and the plaintiff entered into further agreements between themselves in respect of the debt. The sixth defendant now seeks leave to cross claim against the first defendant for any liability made against him.

5 The sixth defendant has previously sought to file a cross claim against the first defendant. I shall briefly refer to its history. On 30 September 2002 Registrar Whitehead delivered a judgment in relation to the first defendant seeking leave to file a cross claim against the sixth defendant. Paragraphs 1 to 9, 11 and 13 of that cross claim are identical to the cross claim now sought to be filed. In the current proposed cross claim there are essentially two additional paragraphs namely 10 and 12. They state:

10. It was an implied term of the First Repayment Agreement, the Second Repayment Agreement and the Third Repayment Agreement that the Fifth Cross Defendant would indemnify the Fifth Cross Claimant from and against any amounts that he might be called upon to repay to John Skalkos.
12. Further, and in the alternative:-
(a) the Fifth Cross Defendant represented to the Fifth Cross Claimant in trade or commerce that he would act in accordance with the First Repayment Agreement, the Second Repayment Agreement and the Third Repayment Agreement (“Representations”);
(b) the Representations were misleading and deceptive within the meaning of the Fair Trading Act 1987 (“the Act”);

Particulars
Section 41 of the Act
(c) acting in reliance upon the representations and induced thereby the Fifth Cross-Claimant took no steps to ensure that the Fifth Cross Defendant acted in accordance with the First Repayment Agreement, the Second Repayment and the Third Repayment Agreement;
(d) in consequence whereof the Fifth Cross Claimant will suffer loss and damage in the event that he is held to be personally liable to John Skalkos.”

6 For convenience, I shall refer to paragraph 10 as an “implied term” pleading and paragraph 12 as the “FTA” pleading.

7 The learned Registrar in his judgment considered the effect of composition under Part X of the Bankruptcy Act. At paragraphs [29] and [30] the Registrar stated:

“[29] Put at its highest the argument by Smiles is that he was liable to the plaintiff on the draft cross-claim and that contractual obligation was extinguished by the composition made by Smiles on 1 May 1996. The last date alleged by the plaintiff of a demand for repayment is 1995. Even if that was 31 December 1995, on the present pleadings the debt was due and payable to the plaintiff at the time the composition was made. Further, Smiles says that the contractual agreement alleged by Kotsakis was breached by Smiles at that time. Accordingly, that contractual obligation was extinguished by the composition. Thus, Smile argues that the amendment is in relation to a debt that no longer exists.
[30] The cause of action pleaded by Kotsakis sounds very much in the way of an agreement to indemnify. However, that has not been pleaded by Kotsakis in this cross-claim. Mr Simpkins says that Kotsakis intends to amend to plead an obligation on the part of Smiles to indemnify Kotsakis in respect of any liability he may have to the plaintiff. That may be the case but I am dealing with the proposed pleading in the form it is annexed to the notice of motion. There has been no application to amend the proposed cross-claim. I consider that a claim for indemnity may have a greater chance of success against the argument by Smiles. But as presently pleaded I do not consider that the proposed pleading has any chance of success and should not be allowed.”

8 The cross defendant filed an appeal against the Registrar’s decision. On 26 February 2003 Master Malpass dismissed the appeal. Master Malpass in his reasons stated at paragraphs 5 to 11:

“5 The court has a discretionary power to grant the relief that is sought by Kotsakis. The power is exercised having regard to the relevant circumstances of the particular case before the court and so that justice is best served. The onus rests with the party seeking relief.

6 The applicant is now well out of time. He does not put forward any affidavit material to explain or justify the delay. It was frankly conceded that nothing could be put forward to satisfactorily explain the delay.

7 In his reasons, the Registrar appears to have accepted a submission to the effect that delay alone is not enough to deny leave in the present case.

8 In my view, that is not the correct approach. Each case will turn on its own particular circumstances. In this case the delay is of a high order and it cannot be the subject of a satisfactory explanation. Further, that delay can give rise to presumed prejudice. I consider these matters are of considerable weight and in the appropriate case may lead to failure of an application.

9 The Registrar has accepted a submission that it would be futile to grant the present application. The futility argument arises from Smiles making a composition under Pt X of the Bankruptcy Act 1966 on 1 May 1996 and the operation of provisions of that Act (including s 82).

10 The reasons also record that counsel for Kotsakis informed the court of an intention to amend the proposed Cross-Claim so as to plead an agreement to indemnify. The Registrar correctly took the course of dealing with the application that was before him and not proceeding on the basis of some intention to amend in the future.

11 It seems to me, that a review of the decision reveals no basis for the disturbing of it. Accordingly, I confirm the decision and dismiss the present application…”

9 The sixth defendant has now sought to plead the indemnity issue alluded to by the Registrar in his judgment. The sixth defendant submitted that there was no prejudice and it is just quick and convenient to have this cross claim heard in these proceedings. In essence, I can only determine the new paragraphs and reinstate the operative parts of the cross claim, as the other paragraphs have been the subject of a judgment of Master Malpass and there is an appeal from that decision. A Judge must determine the paragraphs of the notice of motion that seek to appeal the decision of Master Malpass.

10 In relation to the “FTA” and “implied term” pleadings the conversations and document called the “third plan” which gave rise to them occurred some 10 years ago. Mr Kotsakis deposed that Mr Nemes was the only relevant witness that he knew of, apart from himself (and I interpellate the first defendant), who could assist his solicitor with evidence to defendant the sixth defendant’s allegations in the proposed cross claim. Mr Nemes is the solicitor on record for Mr Kotsakis in these proceedings. Mr Kotsakis deposes to the alleged conversation about the plan at paragraph 39 of his affidavit sworn 17 July 2000. It is not known whether Mr Nemes, if he was present during the conversation, has any recall of it or has any notes relating to that conversation now some 10 years after it occurred. Nor has a satisfactory explanation been provided for the delay in filing essentially the same the cross claim as before – see comments of Master Malpass at paragraph 8 of his judgment (reproduced earlier). The additional grounds pleaded have little chance of success. For these reasons, in the exercise of my discretion, I refuse leave for the sixth defendant to the cross claim seeking indemnity and raising the FTA.

11 Costs are discretionary. Costs normally follow the event. The sixth defendant is to pay the first defendant’s costs.

12 The court orders:

(1) The sixth defendant’s notice of motion filed 15 October 2002 is dismissed.

(2) The sixth defendant is to pay the first defendant’s costs.
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Last Modified: 02/19/2004