Smits v Cugola

Case [2021] QSC 164

SUPREME COURT OF QUEENSLAND

CITATION:

Smits v Cugola & Ors [2021] QSC 164

PARTIES:

LEONARDUS GERARDUS SMITS

(Plaintiff)

v
DAVID WILLIAM CUGOLA

(First Defendant)

AND

SUZANNE MARGARET CUGOLA

(Second Defendant)

AND

ANDRE WERNER DE WIT

(Third Defendant)

AND

KAREN JOHANNA ELIZABETH DE WIT
(Fourth Defendant)

FILE NO/S:

BS 9469 of 2020

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED EX TEMPORE ON:

Orders made and reasons delivered on 10 June 2021

DELIVERED AT:

Brisbane

HEARING DATE:

10 June 2021

JUDGE:

Jackson J

ORDER:

The order of the court is that:

1.   The plaintiff’s applications filed on 21 January 2021 and 7 May 2021 are dismissed.

2.   The plaintiff’s claim against the second defendant is dismissed.

3.   The plaintiff’s claim against the third and fourth defendants is dismissed.

4.   The following parts of the plaintiff’s claim against the first defendant are dismissed:

a.   The claim to stand in place of the Bank of Queensland Limited or to be subrogated to the rights of the Bank of Queensland Limited against the first defendant;

b.   The claim for contribution as a co-surety by the plaintiff against the first defendant; and

c.   The claims in paragraph 6 of the amended claim.

5.   Caveat 720427532 be removed.

6.   Leave is granted to the third and fourth defendants to bring an application to remove caveat 720427533.

7.   Caveat 720427533 be removed.

8.   The parties make written submissions as to costs in no more than five pages on or before 16 June 2021.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – ENDING PROCEEDINGS EARLY – SUMMARY DISPOSAL – GENERALLY – where the plaintiff and the first and third defendants orally arranged to purchase land in Yeppoon in 2007 – where Blue Chip Properties (Queensland) Pty Ltd (“BCP”) agreed to purchase the land and to borrow $7.24 million from the Bank of Queensland Limited (“BOQ”) under loan facilities secured by first mortgage over the land – where the plaintiff guaranteed payment of $3 million advanced under the loan facilities and lodged a $3 million deposit with BOQ – where each defendant guaranteed payment of the full principal amount of $7.24 million – where BCP borrowed $600,000 from the plaintiff under a loan facility agreement secured by second mortgage over the land – where the first and third defendants guaranteed the loan facility agreement - where BCP defaulted in 2008 in repayment of the BOQ loan facilities and in October 2008 BOQ appropriated the plaintiff’s $3 million deposit under his guarantee and subsequently appointed receivers and managers to BCP’s assets – where there was a settlement between the plaintiff and the third and fourth defendants in February 2012 – where the plaintiff purchased the land from BOQ selling as mortgagee – where there were settlements between BOQ and the plaintiff, between BOQ and the first and second defendants, and between BOQ and the third and fourth defendants between 2012 and 2014 – whether, on the plaintiff’s applications for summary judgment, the defendants…

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AGLC
Smits v Cugola [2021] QSC 164
Case
[2021] QSC 164
Decision Date

CaseChat Overview and Summary

In the case of Smits v Cugola, the plaintiff, Smits, brought claims against Cugola and others for amounts owed under various loan facilities and guarantees. The defendants argued that the claims were barred by limitation or that there was no real prospect of success. The case was heard in the Supreme Court of Queensland, where the court was required to decide on several legal issues, including whether the plaintiff had a real prospect of success on his claims, whether the claims were subject to limitation periods, and whether certain caveats should be removed.

The court found that the plaintiff's claims to stand in the place of the Bank of Queensland or to be subrogated to its rights against the first and second defendants were barred because the plaintiff had not fully paid the debt, which is a legal requirement for such claims. The court also found that these claims were subject to a 12-year limitation period, which had expired. Furthermore, the court held that the plaintiff's claims against the third and fourth defendants and the claim to stand in the place of the Bank of Queensland against the first defendant were dismissed because they were barred by limitation or had no real prospect of success.

The court also addressed the issue of caveats placed by the plaintiff over the defendants' properties. The court found that the caveat over the first and second defendants' home should be removed because there was no real prospect of success on the claims against them. However, the court granted leave to the third and fourth defendants to apply for the removal of the caveat over their home. The court found that the caveat against the third and fourth defendants' home had lapsed because the proceeding against them was not started until 19 February 2021.

The orders of the court included dismissing the plaintiff's applications for summary judgment, dismissing certain claims against the defendants, and ordering the removal of the caveats. The court also directed the parties to make written submissions on costs.

Orders

Orders of the court

The order of the court is that:

1. The plaintiff’s applications filed on 21 January 2021 and 7 May 2021 are dismissed.

2. The plaintiff’s claim against the second defendant is dismissed.

3. The plaintiff’s claim against the third and fourth defendants is dismissed.

4. The following parts of the plaintiff’s claim against the first defendant are dismissed:

a. The claim to stand in place of the Bank of Queensland Limited or to be subrogated to the rights of the Bank of Queensland Limited against the first defendant;

b. The claim for contribution as a co-surety by the plaintiff against the first defendant; and

c. The claims in paragraph 6 of the amended claim.

5. Caveat 720427532 be removed.

6. Leave is granted to the third and fourth defendants to bring an application to remove caveat 720427533.

7. Caveat 720427533 be removed.

8. The parties make written submissions as to costs in no more than five pages on or before 16 June 2021.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

It follows that the plaintiff’s applications for summary judgment must be dismissed.First and second defendants’ application for summary judgment The first and second defendants apply for summary judgment on the whole of the plaintiff’s claim, based on a number of grounds, but I will only deal with those it is necessary to decide. It is convenient to separate the plaintiff’s claims based on being entitled to stand in the place of BOQ under s 4(1) of the Mercantile Act 1867 (Qld) or as subrogated in equity to BOQ’s rights and remedies, which I will refer to as the “BOQ Stand-in Claims”, from those based on the Plaintiff’s Loan Agreement, including as allegedly varied, and any claim based on equitable contribution alone.BOQ Stand-in Claims As discussed in the analysis of the plaintiff’s applications for summary judgment, the plaintiff does not allege that he has fully paid the BCP debt to BOQ under the BOQ Facilities, and the evidence is that in October 2014, BOQ wrote-off over $7 million of that debt that was unpaid by crediting that amount to BCP’s account. For the reasons already discussed, it is a prerequisite in law to the plaintiff’s entitlement to stand in place of BOQ under s 4 of the Mercantile Act 1867 (Qld) or by subrogation in equity that the BOQ debt is paid fully. In my view, on this ground the plaintiff has no real prospect of success on the parts of his claim for the BOQ Stand-in Claims.Limitation defence – BOQ Stand-in Claims Also as to the BOQ Stand-in Claims, there is a ground of defence of limitation raised. It may be assumed for this analysis that the plaintiff is otherwise entitled to be subrogated to BOQ’s debt claim against the first and second defendants and that such claims are not answered by releases made by BOQ in the 2014 BOQ-Cugola Deed of Settlement. On the plaintiff’s case, as previously discussed, it is alleged and assumed that the first and second defendants were indebted to BOQ upon their guarantees for the BOQ Facilities as at 13 May 2012. A question arises when time on the BOQ Stand-in Claims started to run and what provision of the Limitation of Actions Act 1974 (Qld) (“LAA”), if any, applies to it. In Barber v De Prima (2018) 126 ACSR 253 at 297, it was held, in effect, that the relevant limitation period that applies in respect of claims by subrogation and under s 4 of the Mercantile Act 1867 (Qld) is the limitation period that would apply to a claim by BOQ on the subrogated rights and remedies. So far as that is a claim to a debt under one of the BOQ guarantees, it would be under s 10(3) of the LAA as an action upon a specialty, being 12 years from the date on which the cause of action accrued because the BOQ guarantees were executed under seal. As to the date when the cause of action accrued, cl 4.5 of the BOQ guarantees given by the first and second defendants provided that “if we ask, you must pay us any amount which the debtor does not pay us when it is due…”. That provision made the guaranteed amount payable upon demand. See Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491 at 503 as to the effect of a demand. The principal debt of BCP was in default from 2008, because the due amounts were not paid. But the fact to be proved to establish when the cause of action accrued against the first and second defendants as guarantors of BCP’s debt to BOQ is when BOQ asked for payment from them under their BOQ guarantees.

Ratio Decidendi

Legal Principle Established

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