Commonwealth Bank of Australia v Susan Hannaford Pty Ltd

EX TEMPORE Judgment 1The plaintiff, the Commonwealth Bank of Australia, is seeking judgment against the third defendant, Ms Susan Hannaford, on a written guarantee she gave in respect of a debt incurred by a company which she controlled, Susan Hannaford Pty Ltd, the first defendant in these proceedings. 2Earlier today the third defendant appeared by counsel to seek an adjournment of the proceedings, or at least a stay of them. I refused that application for reasons I gave in a judgment delivered ex tempore at the conclusion of the application. 3After my refusal of the third defendant's application, counsel, who had indicated to me that this retainer was strictly limited - that is to say he was instructed to appear to make his application but not to appear on the claim if the application was refused - withdrew. In support of that application, counsel had read an affidavit of the third defendant sworn 20 August 2013. From that affidavit it is apparent that the third defendant is currently residing in the State of California, United States of America. The affidavit was drawn by the third defendant personally, having terminated, according to her affidavit, the retainer of the solicitor previously acting. Given this affidavit was read in support of an application either for an adjournment or a stay, it was clear that the third defendant was fully aware of the hearing today. Indeed, in paragraph 3 of that affidavit she swears: This affidavit is written in support of my application to stay/postpone the hearing date of 22 August 2013. In paragraph 23 of the same affidavit, she swears: The third defendant is in no position to have the case heard... on 22 August 2013. 4There can be no question that the third defendant has notice that today is the day fixed for the hearing of the Bank's claim on the guarantee. 5I should observe that learned counsel who appeared for the third defendant was instructed by a person in Court, whom I understood to be the third defendant's daughter, formerly the second defendant in these proceedings. That person withdrew with counsel after I refused the application. Whether I am right or wrong about her identity, after counsel's withdrawal I caused the third defendant's name to be called outside the Court three times in accordance with the usual custom and there was no appearance on by her, or on her behalf. 6I am satisfied, as I have said, that the third defendant had notice of today's hearing date and has absented herself from the hearing. That matter is of some significance because, quite apart from the Bank's claim on the guarantee, there is an extant cross-claim brought by the third defendant, a matter to which I will return. 7In the absence of the third defendant and in those circumstances, the Bank's claim has proceeded before me today ex parte. 8The Bank seeks judgment in the sum of $4,651,041.90 from the third defendant in her capacity as guarantor of the obligations of the company. As I observed in my earlier judgment, the company is in liquidation and accordingly the Bank's claim against it for the balance of the debt is stayed under s 471B Corporations Act 2001 (Cth). 9Exhibit A before me is a bundle of correspondence passing between the Bank's solicitors and the liquidator in which the liquidator makes clear that the company has no funds to brief counsel to appear. It is clear that the company does not wish to be heard in any way in relation to the present application. In any event, it hardly could be heard given that the only claim proceeding today is the claim on the personal guarantee given by the third defendant in her own capacity. 10Mr White of counsel who appears for the bank has read a number of affidavits: (a)part of three affidavits of Ms Helen Denkha, being paras 1, 2, 3, 7, 9 and 10 of her affidavit sworn 13 May 2011; paragraphs 1 to 9, 11 to 14, and 18 to 22 of her affidavit sworn 31 May 2011; and paras 1, 2 and 4 of her affidavit sworn 19 December 2011; (b)the affidavit of Mr Bill Batziolas sworn 20 August 2013. 11Annexed to these affidavits are a number of documents to which counsel took me in the presentation of his case, including a company search relating to the first defendant, the Consumer Credit Contract Schedule signed by the third defendant, the written terms and conditions on which the loan was advanced, the registered mortgage over the secured property and the Deed of Guarantee executed by the third defendant on 7 May 2004. 12Reference was made to the default notice given to the first defendant under s 57(2)(b) Real Property Act 1900 (NSW) and to the demand for payment made to the guarantor on 21 December 2009. 13The amount of the current debt was quantified by reference to bank statements relating to the first defendant annexed to the affidavits of Ms Denkha and Mr Batziolas. Further documents annexed to Mr Batziolas affidavit quantify the plaintiff's claim. 14I should record that Hidden J granted the Bank summary judgment for possession of the secured property on 24 August 2012. And on the basis of Mr Batziolas' affidavit I am satisfied that the property was sold at auction on 13th May 2013. The net proceeds of sale were in the sum of $3,046,98.01, which has been credited into the account of the principle borrower, the first defendant. From the evidence I am satisfied that the amount presently outstanding is the amount claimed by the Bank as set out above. 15I make the following findings: (a)The company executed an investment home loan agreement on 7th May 2004 and pursuant to that agreement the Bank advanced the sum of $5,500,000.00. (b)Interest fees and charges were payable under the loan and the agreement provided for repayment in 347 monthly instalments of $34,357, with a final payment of $33,382.02. (c)Clause 9 of the loan agreement provided that the company defaulted under the agreement if it did not pay on time any amount payable under the agreement. If the default was not remedied within further time which the Bank may by notice permit, the Bank could determine without further notice that all money owing under the loan was due and payable immediately. (d)The third defendant executed a Deed of Guarantee on 7th May 2004 securing all amounts owed by the company to the Bank under the loan agreement to the maximum sum of $5,500,000.00 plus the Bank's reasonable expenses, if any, of enforcing the guarantee. (e)By its terms, the contract of guarantee continued until all amounts owed by the company were repaid: See cl. 1.1 of the Agreement. 16The guarantee requires the third defendant to pay any amount the company has borrowed and has not paid when due under the loan agreement. There is also a separately expressed indemnity provided by cl. 2.1 of the agreement covering the Bank for any loss suffered by the company's default. 17The guarantee obligations undertaken by the third defendant under the Deed of Guarantee are expressed to be joint and several. And the Bank's rights of enforcement of those obligations are independent of, and not affected by, the fact of any release from, or loss of the benefit of, another guarantee: cl. 10.1(c). 18By cl. 11(a), whilst moneys are owed under the loan agreement, the guarantor may not, without the Bank's consent, reduce her liability under the guarantee by claiming, amongst other things, any rights, set-off or counter claim. 19I am further satisfied on the basis of the evidence of the following matters: (i)The loan fell into default in August 2008 and has remained in default ever since. (ii)The Bank gave notice to the first defendant as the borrower under s 57 Real Property Act on or about 9 November 2009, demanding payment of the amounts then due, which default the borrower failed to rectify. (iii)The Bank accordingly decided to treat the entire amount payable under the loan agreement as due. (iv)On 21 December 2009 the Bank, by its solicitors, made a demand upon the third defendant for payment under the guarantee, which demand she has failed to satisfy. (v)As I have said, the amount currently due is $4,651.041.90. 20On the facts, I am satisfied that the Bank is entitled to judgment in that amount. 21It is necessary for me to refer to matters said to have been raised by way of defence and cross-claim. Given the absence of the third defendant, I propose to exercise my powers under r 29.7(4) Uniform Civil Procedure Rules (NSW) to dismiss the cross-claim to which the third defendant is now the only active party. It seems to me that such a dismissal engages s 91 Civil Procedure Act 2005 (NSW) to the effect that, subject to the operation of the Limitation Act 1969 (NSW), such an order does not prevent the third defendant from claiming the same relief in fresh proceedings. I do not regard a dismissal under the rule as involving a determination of the cross-claim on the merits. 22Moreover, it seems to me that the matters raised by the third defendant, to which I will make some brief reference in a moment, are matters which, if they run at all, run by way of confession and avoidance. It is notable that in the amended defence, as I commented in my earlier judgment, the traverse relating to the guarantee is expressed in weak language. It is said that the third defendant does not deny nor admit paras 11 and 13 of the statement of claim. It is paragraph 11 of the statement of claim which pleads the guarantee against the third defendant. This language is unusually neutral. 23However that may be, it seems to me, that to the extent to which these matters are raised by way of set-off, the maxim "she who asserts must prove" applies, and the third defendant carries an evidential onus, at least, to point to evidence properly introduced in the proceedings supporting the case she wishes to advance in that regard. There is no such evidence and it is not necessary for the Bank to introduce such evidence as might assist or favour the absent third defendant in a case like the present, which is a simple action on a contract of guarantee. 24Moreover, in my view, given that the matter appears to fall into the category of confession and avoidance, the legal onus to make good the avoidance of the consequence of the confession falls upon the third defendant: Currie v Dempsey [1967] 2 NSWR 532. 25But I should however refer to some additional arguments advanced by Mr White, out of deference to the care with which he has presented the Bank's case. There are essentially three matters possibly arising on the pleading of the defence and cross-claim. The first matter has been referred to as a 'switching agreement" which the defendants assert was an arrangement whereby the Bank agreed to permit the defendants to change the nature of their obligations from repayments of principal and interest to an interest only for a period of time. 26I am not satisfied that it is open to the third defendant to raise this matter at all. Although Hidden J granted relief sought only against the first defendant, it seems to me that the third defendant is bound by the decision he made. It was an indispensable aspect of his Honour's reasoning process in granting the Bank an order for possession that the so-called switching agreement was entirely unarguable. 27I accept the argument advanced by Mr White that accordingly it is not open to the third defendant to run that case, had she been here, for one of two reasons. The first reason in my view is that she was a party to that decision, is bound by it, and is bound by it by operation of that part of the doctrine of res judicata relating to issue estoppel. Against the possibility that I am wrong about that, I also agree with Mr White's argument based upon Thomas v Balanced Securities Ltd [2011] QCA 258; 2 Qd R 482. 28To put this matter in context, I should also point out that - by reference to the company search introduced into evidence as an annexure to Ms Denkha's affidavit of 31 May 2011 - the third defendant as at the date of Hidden J's decision was the sole director of the first defendant, and accordingly, and clearly, its guiding mind. Moreover, she enjoyed a majority shareholding, being entitled to three of the four issued shares in the company. On this basis, applying, as I am bound to, the decision of the Queensland Court of Appeal in Thomas (White JA, Margaret Wilson JA and Martin J agreeing), in my judgment to permit the third defendant to re-ventilate the switching agreement argument would "constitute an abuse of the Court's processes in light of [her] close identification with [the company] and the earlier proceedings" rather than by way of an estoppel. (See Thomas at 497 [49]). 29Two other possible bases for disputing the amount due under the guarantee - rather than its validity - were raised on the pleading. 30The second is that Bank acted unconscionably by refusing to consent to a transfer of title from the company to the second and third defendants in about 2007. There is simply no evidence before me to support this. The third is that the Bank acted unconscionably by refusing to consent to a purported lease of the property in about 2007 for a fixed term of five years at a monthly rental, somewhat in excess of the repayments due under the loan. Once again, there is simply no evidence before me to prove the basic facts necessary to support the argument. Given an absence of evidence, it is unnecessary for me in this judgment to consider the effect of cl. 11 of the Deed of Guarantee, which appears to be in the form of a so-called preservation clause of a kind discussed by Ward JA in O'Brien v Bank of Western Australia Limited [2013] NSWCA 71 at [72] - [80]. I note however that Mr White argues that that clause makes these arguments not maintainable. 31I should also record that although the liquidator, in the correspondence to which I have made reference, was anxious to let it be known they did not intend to be discourteous to the Court by his non-appearance today, I thought it appropriate to have the company name called outside court before pronouncing orders. As expected there was no appearance on behalf of the company. 32Accordingly, I make the following orders: (1)Judgment in favour of the plaintiff as against the third defendant in her capacity as guarantor of the obligations of the first defendant in the sum of $4,651,041.90. (2)Under r. 29.7(4) Uniform Civil Procedure Rules 2005 I dismiss the first cross-claim dated 21 September 2001. (3)I order the third defendant pay the plaintiff's costs of and incidental to the proceedings forthwith after they have been agreed or assessed. (4)I direct entry of judgment forthwith. (5)Declare that the plaintiff's claim against the first defendant in debt is stayed pursuant to the provisions of s 471B Corporations Act 2001 of the Commonwealth.