Equititrust Limited v Gamp Developments P/L & Ors

[1] The plaintiff applies for summary judgment against the first and third defendants and for a judgment in default of a Notice of Intention to Defend against the second defendant.

[2] The plaintiff's claim is for the recovery of monies lent to the first defendant together with interest and other charges. It claims the same amounts from the second and third defendants as guarantors. It commenced these proceedings last June. The first and third defendants promptly filed a Defence. The second defendant is yet to file a defence but there is a question as to whether he has been duly served, to which I will return.

[3] The first and third defendants put much in issue by their pleading. And they pleaded that the provision for interest relied upon by the plaintiff was a penalty and that another charge, described as an "exit fee", was not payable because of some dealing between the parties by which the date for repayment of the loan was extended. The plaintiff pleaded that the outstanding principal was $15,485,000 to which these defendants pleaded a non-admission, on the basis that they were:

"embarrassed by lack of particularity as to ... the basis upon which the alleged principal sum is calculated, or otherwise determined [and as to] when and how the alleged principal amount was allegedly advanced to the first defendant".

[4] But any doubt as to whether the first defendant had borrowed an amount of money of that order no longer existed by 18 September 2008, when all three defendants acknowledged in writing that:

"(a) as at 19 September 2008, the amount of $19,424,983.16 ($15,517,527.08 of which is principal)... $528,960.74 of which is expiry fee and $3,378,495.34 (which is interest at the higher rate) is owing by the [first defendant] to [the plaintiff] under the Loan Facility;

(b) interest continues to accrue on that at the higher rate ...".

That acknowledgement was contained in a letter of agreement dated

18 September 2008 although the acknowledgement was in terms of an amount said to be due as at 19 September 2008. The respondent defendants do not seek to make anything of that difference. If the reference to 19 September should not be understood as an intended reference to 18 September (which in my view it should be) nevertheless there was an unequivocal acknowledgement that that was the state of the account on or about 18 September.

[5] By this September 2008 agreement, the loan agreement was varied to provide, amongst other things, that the date for repayment of the principal would be extended to 30 April 2010 and that the plaintiff would discharge its mortgage over some of the secured property upon completion of a contract of sale which had been entered into by the first defendant "notwithstanding that the proposed sale price will be insufficient to repay our debt in full."

[6] As well as the letter of 18 September, which was signed by each of the parties, there was a Deed of Variation executed by all parties dated 19 September 2008 and a further Deed of Guarantee and Indemnity executed by the plaintiff and the second and third defendants of the same date.

[7] By the letter, it was agreed that the first and third defendants would provide a Notice of Withdrawal of their Notice of Intention to Defend within two business days of that letter. It was a further term that so long as there was strict compliance with the terms and conditions set out in the letter, the plaintiff would not take any steps in these proceedings and in particular, it would not seek step to enter judgment. However, the first and third defendants did not provide that withdrawal of their Defence, despite several requests through their then solicitors that they do so. Clearly then there was a breach of that term. The plaintiff contends that there were further breaches of the agreement of September 2008 but for present purposes relies only upon this breach.

[8] By the Deed of Variation, the documents together described as The Principal Security were varied in several respects, one being that the letter of 18 September 2008 became part of the "Security" as defined in the original Credit Facility Deed between the parties, which was the original loan agreement made in 2004. By cl 8 of the Credit Facility Deed, it was provided that the borrower and each "Security Provider", which included the guarantors, should at the option of the plaintiff be immediately in default without the necessity for any notice or demand upon the occurrence of an event of default including where "the Borrower and/or the Security Provider fails or neglects to observe or perform any of the covenants, conditions or agreements contained in this Credit Facility Deed or any Security". Because the letter of agreement of September 2008 became a "Security", the failure of the first and third defendants to withdraw their Defence in these proceedings constituted a failure to perform an agreement contained in a Security and thereby an event of default under the Credit Facility Deed. By cl 9.1 of that Deed, all money secured was to become immediately payable at any time after the occurrence of an event of default "at the discretion of the Lender".

[9] Accordingly the plaintiff has proved that the failure to withdraw the Defence entitled it to accelerate the date for repayment of the principal sum. No substantial argument was offered to the contrary.

[10] The principal argument for the first and third defendants was that the plaintiff cannot be given judgment upon its present Statement of Claim, because that makes no reference to the agreement of September 2008 or to the default in the performance of the obligation under that agreement to withdraw the Defence. It is argued that the plaintiff is now suing upon a cause or causes of action which have not been pleaded.

[11] At least in so far as the claim against the first defendant is concerned, that argument cannot be accepted. The plaintiff's cause of action is for a debt, arising from a loan or loans of money. It is not an action for damages for breach of contract. That was not affected by the variation of the terms of the loan. In Golding v Russell,[1] a plaintiff sued to recover a loan which was repayable by monthly instalments, but which in the event of a default, was repayable immediately at the lender's option. No demand was made before the issue of the writ and on this basis the defendant argued that the plaintiff's cause of action was not complete at that point. McPherson J held that no demand was necessary, because, referring to what was said in Young v Queensland Trustees Ltd,[2] he said the cause of action was constituted by the debt which arose immediately upon the making of the loan. In Young v Queensland Trustees Ltd, Dixon CJ, McTiernan and Taylor JJ said:[3]

"A debt recoverable under an indebitatus count was not and is not now conceived of simply as a cause of action for breach of duty or obligation. In other words it is a mistake to regard the liability to pay a debt of a kind formerly recoverable in debt or indebitatus assumpsit as no more than the result of a breach of contract, a breach which the creditor must affirmatively allege and prove."

Accordingly, the plaintiff's cause of action against the first defendant remained the same, which is for the recovery of its debt.

[12] The power to give summary judgment to a plaintiff is according to the terms of r 292. The rule requires attention to a plaintiff's claim. It does not expressly refer to a plaintiff's pleading. A plaintiff's claim must be that within the document by which the proceedings were commenced or as that has been amended with the leave of the court or a registrar.[4] A plaintiff cannot seek summary judgment for relief which is not within its claim as filed or as duly amended. There is no express requirement within r 292 for the plaintiff's case for that relief to be entirely according to its pleading. But ordinarily that would be required because a defendant is entitled to be fairly informed of the case against it. And because summary judgment may be sought only after a Defence is filed,[5] an application for judgment upon an unpleaded case might be considered premature. Nevertheless they are discretionary considerations. In my view the rule does not limit the power to give summary judgment to instances where the plaintiff's argument precisely accords with its pleading. In the present case, there could be no disadvantage to the first defendant in not having an amended statement of claim which pleads the September 2008 agreement and the default under that agreement. To the extent that the plaintiff's argument goes further than its pleading, this provides no basis for not giving judgment if the plaintiff establishes that there is no real prospect of defending all or part of its claim and there is no need for a trial of the claim or part of the claim.

[13] Then it is argued that the plaintiff's evidence does not disclose "any prima facie entitlement to judgment", because the Statement of Claim refers to a number of documents, including variations to the original agreement, not all of which are in evidence upon this application. It is said that this presents the court with difficulties in assessing the plaintiff's case, an example of which is that there is a reference in the original Credit Facility Deed to another document, providing for something called an Interest Provision Limit, but that the document is not in evidence. From this the respondents argue that the plaintiff has not proved its case.

[14] This is a bold submission on behalf of parties who unambiguously acknowledged the existence of the debt and their liability for payment of principal, interest and other expenses within the documents which they signed last September and which are in evidence. With one exception which is in relation to an interest rate, it is not said that those documents were the subject of any collateral promise or representation which would deny them effect according to their terms. Nor is there any attempt to explain how or why the debt in such a precise sum was acknowledged if that was not in fact the case.

[15] In an affidavit sworn by the third defendant, there is evidence which does raise a triable issue as to the interest rate to apply from last September. He says that he was told by a representative of the plaintiff "when we were offered the September agreement" that if monthly payments of $52,000 were made (equivalent to an interest rate of about 12 per cent) then "that will be fine but we will charge you higher if you are in default" and that "all rights are reserved". However, the defendants did not make those monthly payments. After September 2008, there were two payments totalling $52,000 towards the end of October, and a further $32,000 paid on or about November 2008 but after that nothing was paid. The result is that even on the defendants' case, they were not entitled to some lower rate of interest, at least after October 2008. However, it is not possible for me to assess from the arguments which is the precise amount of interest to which the plaintiff is now entitled.

[16] There is also an issue as to whether the charging of the higher rate would constitute a penalty. As already mentioned, the defendants pleaded that the provision for a higher rate of interest was a penalty. It may be that they are precluded from continuing to make that contention by the terms of the September 2008 agreement, at least in relation to the interest which had accrued to the date of that agreement. One of the terms of that agreement was for the application of different interest rates but still within the interest provisions of the original Credit Facility Agreement. Accordingly, there would be the same issue in relation to interest which has accrued since last September. There was not any argument on these applications as to whether this provision for a higher rate of interest was a penalty.

[17] In the circumstances, I am not satisfied that there should be judgment for interest in the amount which is sought. Anticipating this, counsel for the plaintiff submitted that judgment could be given for that part of the claim constituted by the outstanding principal. I am satisfied that the plaintiff should have judgment against the first defendant on that part of its claim, which is an amount of $5,428,227.61.

[18] For the third defendant there is a further argument. According to the Deed of Guarantee and Indemnity which he and the second defendant executed last September, his liability is to "upon demand immediately pay to the Lender the Money Secured". There is no evidence of a demand upon him. On 4 March 2009, the plaintiff's solicitors wrote to the solicitors who were then on the record for the first and third defendants, referring to defaults under the "variation agreement" and advising that unless those defaults (which included the failure to withdraw the Defence) were remedied by 10 March 2009, "our client will proceed to take all steps required to have judgment against our clients in the proceeding without further notice to you". However, that was not in the terms of a demand for immediate payment.

[19] The case of a guarantee which requires a demand is different from that, which I have discussed, in relation to a present debt expressed to be payable by the principal debtor on demand. A demand upon guarantor is essential because in the case of a sum of money payable under a collateral agreement, no cause of action arises until the demand is made: see Phillips & O'Donovan, The Modern Contract of Guarantee (2004, 4th ed) at [10.1710] and the cases there cited.

[20] Of course the third defendant had also acknowledged an indebtedness within the September 2008 agreement. But that was an acknowledgement of the indebtedness of the borrower. In my view the third defendant's argument must be accepted, and according to the Deed of Indemnity and Guarantee, the plaintiff must take the formal step of making a demand upon the guarantors. The point precludes the grant of summary judgment against the third defendant at least until there is such a demand. I was not asked to adjourn the application to enable that demand to be made. Therefore this application for summary judgment against the third defendant must be dismissed. This will not preclude the making of another application for summary judgment when the demand is made.

[21] There is then the application for a default judgment against the second defendant. There are two reasons why that application must be dismissed. The first is the same as that for the dismissal of the summary judgment application against the third defendant. The second is that, in any case, the Claim and Statement of Claim are not proved to have been duly served upon the second defendant. It is said that they were served upon solicitors who were instructed to accept service. There is evidence that those solicitors did tell the plaintiff's solicitors that they held those instructions. However, when the Claim and Statement of Claim were sent to those solicitors, for whatever reason they did not make a note upon the documents as required by r 115(2). The plaintiff's solicitors sought that notation but it was not forthcoming.

[22] The result of these applications is that there will be judgment for the first defendant, on part of the claim against it, in the amount of $5,428,226.61. The applications against the second and third defendants will be dismissed. I will hear the parties as to costs.

[1] [1983] 1 Qd R 53.

[2] [1956] HCA 51; (1956) 99 CLR 560, 566 (Dixon CJ, McTiernan and Taylor JJ).

[3] [1956] HCA 51; (1956) 99 CLR 560, 569.

[4] Leave being required by r 377 of the UCPR.