1 MASTER SANDERSON: By summons dated 25 March 2002 the plaintiff sought summary judgment against the first and second defendants. The order sought against the defendants was as follows:

"1. Summary judgment be entered against the First and Second Defendants, jointly and severally for:

a) Pursuant to the First Agreement, payment of the sum of US$406,951.00;

b) Payment of the interest on the amount of US$406,951.00 in US Dollars from 1 January 2002 to date of judgment at 10% per annum compounded daily

c) Pursuant to the Second Agreement, payment of the sum of US$74,279.00

d) Payment of the interest on the amount of US$74,279.00 in US Dollars from 1 January 2002 to date of judgment at 10% per annum compounded daily."

2 The matter was originally listed for hearing on 7 May 2002. However, the time available was insufficient and the application was left part-heard. It was relisted again on 27 May 2002 and once again it was found that insufficient time had been allocated. By agreement of all parties it was determined that the application by the plaintiff against the first defendant should be dealt with, the application against the second defendant stood over to a later date. That is the way the matter has proceeded.

3 This application has produced a plethora of affidavits. The matter is confused somewhat by all of the deponents to the affidavits and all other relevant persons having the same surname. The affidavits filed in support of the application were sworn by Mr Chuen Jin Goh. This Mr Goh is no relation to either the first or the second defendant. The first defendant is the father of the second defendant. Mr Seng Huat Goh and Mr Seng Heng Goh are brothers, and cousins of Mr Chuen Jin Goh. In an attempt to avoid confusion I will refer to Mr Chuen Jin Goh as "CJ Goh", and to the first defendant and the second defendant.

4 On behalf of the plaintiff, four affidavits all sworn by CJ Goh were filed in support of the application. Five affidavits were filed by the first defendant and two affidavits were filed by the second defendant. These affidavits opposed the plaintiff's application. The number of affidavits meant that there was a large amount of material before the Court. Nonetheless, determination of the issues raised by the application is relatively straightforward.

5 The statement of claim pleads the plaintiff's case in the following way. The plaintiff, it is said, was incorporated in the British Virgin Islands on 25 February 1999. The officers of the company are in Singapore and it would appear that it is from Singapore that the company is controlled.

6 It is pleaded that on 10 April 2001 at Perth the defendants executed a deed of acknowledgement of debt and undertakings, pursuant to which the first defendant acknowledged that he had borrowed from the plaintiff the sum of US$329,000. The amount of the advance is described as "the First Loan". The written agreement is designated "the First Agreement". It is said that pursuant to the First Agreement the first defendant undertook to repay and discharge the loan on or before 31 December 2001, payment being made in US dollars, together with all accrued interest. It is said that the full amount repayable under the First Loan, as at 31 December 2001, was an amount of US$406,951. This amount is designated in the pleading as "the First Loan Amount". It is further pleaded that pursuant to the terms of the First Agreement if the First Loan Amount was not paid on or before 31 December 2001, the sum would accrue interest payable in US dollars from 1 January 2002 to the date of payment at the rate of 10 per cent calculated daily which, the plaintiff says, equates to an interest rate of 10 per cent per annum compounded daily.

7 It is alleged by the plaintiff and admitted by the first defendant that the First Loan Amount was not repaid on the due date. Furthermore, there is no challenge by the first defendant to the plaintiff's claim as to the rate of interest and the basis upon which it is to be charged.

8 The plaintiff further pleads that on 10 April 2001 the defendants executed another deed of acknowledgement of debt and undertakings which, in the pleadings, is referred to as "the Second Agreement". By this agreement it is said that the defendants acknowledged that the first defendant had borrowed from the plaintiff an amount of US$63,500. This sum is designated as "the Second Loan". The Second Agreement, it is alleged, is very much along the lines of the First Agreement. Repayment was to be made on or before 31 December 2001 and repayment was to be made in US dollars. The written agreement specified that the amount repayable would be US$74,279 ("the Second Loan Amount"). Once again it is said that if repayment was not made on 31 December 2001 then interest would accrue at the rate of 10 per cent per annum calculated and compounded daily.

9 Again there is no dispute that the Second Loan Amount has not been repaid, nor is there any dispute as to the rate of interest in the way that it has been calculated.

10 Based on these two written agreements the plaintiff seeks summary judgment. On the face of it, the plaintiffs claim for judgment appears overwhelming. But the first defendant says he has a number of defences to the plaintiff's claim.

11 As I have indicated above, the first defendant filed five separate affidavits in opposition to this application. Two of these affidavits were filed to correct slight errors made in an earlier affidavit and one was filed to explain the late filing of another affidavit. The two affidavits upon which the first defendant principally relied were sworn respectively 22 April 2002 and 3 May 2002. In addition to these affidavits, counsel for the first defendant filed submissions which ran to 24 pages. Counsel supplemented these written submissions with over three hours of oral submissions. No-one could suggest that the first defendant's case was not put thoroughly and with great vigour by counsel. Essentially the first defendant's arguments rely upon the business relationship he had with CJ Goh and indirectly, the plaintiff. To understand the nature of the case put by the first defendant, it is necessary to say something more about this relationship.

12 In or about November 1996 a company known as Sanford Securities Pty Ltd was incorporated. The first defendant was one of the founding shareholders, as was CJ Goh. Between 1996 and 1999 the business of Sanford Securities was promoted both by the first defendant and CJ Goh. In May 1999 the company decided to undertake a rights issue pursuant to which three million shares would be offered at a price of 73.33 cents per share. Under the terms of the rights issue, the first defendant was entitled to take up a substantial parcel of shares. He discussed the matter with CJ Goh who also had an entitlement to take up shares. The upshot of the discussion was that the first defendant advised CJ Goh that he (the first defendant) did not have funds available to allow him to take up the share offer. CJ Goh offered to lend the first defendant the capital to allow him to take up the share offer. After some discussion the first defendant agreed to borrow the money to allow him to take up the shares. On 26 May 1999 a loan agreement which had been drawn up by the first defendant was executed. That document appears as annexure "G4" to the affidavit of CJ Goh sworn 25 March 2002.

13 This loan agreement is simple and straightforward. It acknowledges a loan from the plaintiff to the first defendant in an amount of US$329,000. Repayment was to be made on or before 26 May 1999. The agreement has been signed by the first defendant and is duly stamped. There is one clause of the agreement which is slightly unusual. That is cl 2. It is headed "Purpose and Security" and it reads as follows:

2.1 The Borrower will apply the loan to the purchase of shares in Sanford Securities Pty Limited ACN 076 515 930 of 8th Floor, 225 St Georges Terrace, Perth, Western Australia ('Sanford').

2.2 The loan will be secured by shares registered in the name of the Borrower or nominee in Sanford.

2.3 The nominee is Healthy Skin Pte Ltd of 9 Raffles #12-01, Republic Plaza, S048619."

14 It is common cause between the parties that when the provision of the loan was discussed, the first defendant offered to have the shares issued in Sanford Ltd, held by a third party. The nominated third party was Healthy Skin Pte Ltd ("Healthy Skin"). In fact, the shares were issued to Healthy Skin and it would appear are still held by them. It is not entirely clear from the terms of cl 2 whether or not the plaintiff had an entitlement to call for these shares from Healthy Skin in the event that repayment of the amount of the loan was not made. I will have more to say about this rather curious provision later in these reasons.

15 When money was advanced to the first defendant pursuant to the agreement it was advanced by a company known as Wuthelam (BVI) Ltd ("Wuthelam"). CJ Goh says that prior to the transfer the first defendant asked him to arrange for the funds to be converted from US dollars to Australian dollars and this was done. The amount was then paid into a bank account nominated by the first defendant. This is denied by the first defendant. He says that the only funds he ever received were Australian dollars. Based upon earlier discussions he had had with CJ Goh, he anticipated, so he says, that he was being loaned Australian dollars and that he would have to repay Australian dollars. It never occurred to him that he would have to make repayment in US dollars. This aspect of the transaction forms a central plank of the first defendant's defence and again I will revert to the issue later in these reasons.

16 As at 25 May 2000 the first defendant was not in a position to make repayment of the loan. He contacted CJ Goh and asked for an extension. An agreement was reached and the loan was extended to 26 March 2001. As at March 2001 the first defendant was still not in a position to make repayment of the loan. He sought a further extension from the plaintiff. The plaintiff agreed and that led to the First Agreement. The First Agreement contained a clause similar to cl 2 found in the earlier agreement. However, there is a difference and it is worth quoting cl 2 of the First Agreement in full, see annexure "G2" GJ Goh sworn 25 March 2002:

2.1 The Borrower and: Healthy Skin Pte Ltd of 9 Raffles Place #12-01, Republic Plaza, S048619, Singapore ('Healthy Skin') used the Loan to purchase shares in Sanford Limited of Level 6, 225 St George's Tce, Perth WA 6000 Australia in May 1999.

2.2 If requested by the Lender, the Borrower will arrange for the Loan to be secured by shares registered in the name of the Borrower or Healthy Skin in Sanford Limited. The number of Sanford Limited Shares held by Healthy Skin is 681,818.

2.3 The Guarantor irrevocably guarantees to the Lender the due and punctual payment by the Borrower to the Lender in the manner and at the times agreed upon between the Borrower and the Lender in this Deed (and failing agreement upon demand) of all money which is now or may hereafter from time to time be owing by the Borrower pursuant to the Deed provided that the liability of the Guarantor hereunder shall not exceed USD 329,000 plus all interests accrued."

17 The Second Loan was along similar lines to the first. Around 20 February 2000 the plaintiff agreed to lend the first defendant the sum of US$63,500. It was evidenced by a written agreement which appears as annexure "G8" to the affidavit of CJ Goh sworn 25 March 2002. The repayment date as specified in cl 4.1 of the agreement was 20 February 2001. It is common ground between the parties that on 26 May 2000, at the first defendant's request, the plaintiff agreed to extend the loan until 26 March 2001. Repayment was not made on that date and an agreement for further extension was reached. That led to the Second Agreement. Repayment of both loans was then due on the same day.

18 Between par 36 and par 126 of his affidavit of 22 April 2002, the first defendant details the steadily deteriorating relationship between him, CJ Goh, Seng Huat Goh and Seng Heng Goh. I do not propose to canvas this evidence in detail. It is apparent the first defendant takes the view that he was forced out first as a director of Sanford Securities Ltd and subsequently as an employee of the company because of dissatisfaction on the part of each of the Gohs as to how he was exercising his duties as a director. Much of this evidence is contested by the plaintiff and, of course, I am not in a position to resolve conflicts of evidence apparent from the affidavits. I must assume a version of the facts most favourable to the first defendant and which is not inherently incredible: see Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598 per Mason CJ, Deane and Dawson JJ at 604. But in my view, even accepting the first defendant's version of the facts when there is a conflict on the affidavit evidence, the affidavit material discloses no defence to this action.

19 It was argued on behalf of the first defendant that he was entitled to bring an action for rectification. It was said that he was entitled to have the contracts rectified so as to express the amount to be repaid in Australian dollars, rather than in US dollars. In my view, there is no basis whatever for suggesting the first defendant has an action for rectification. Even accepting the broad formulation of principle set out by Kennedy J in Anfrank Nominees Pty Ltd v Connell (1989) 1 ACSR 365 at 367 - 368, there can be no suggestion in this case there was a common mistake. There is simply no evidentiary basis for such a claim. Furthermore, in my view it cannot be said that there has been unilateral mistake and attendant sharp practice on the part of the plaintiff which would justify an order for rectification: see Taylor v Johnson [1983] HCA 5; (1982) 151 CLR 422.

20 Furthermore, I find it very difficult to accept the evidence of the first defendant on this issue. To adapt what was said in Webster v Lampard (supra) the evidence seems to me to be inherently incredible. At all relevant times the first defendant was a director of a company which was moving towards listing on the Australian Stock Exchange. His curriculum vitae, which is to be found at pages 41 - 42 of his affidavit of 22 April 2002 bespeaks a man of considerable intelligence and business experience. It was he who drafted the agreements which expressly required repayment of loans made in US dollars. I find it impossible to accept that in all the circumstances the first defendant was mistaken as to the currency in which repayment was to be made.

21 But even if that conclusion is wrong, it does not alter the fact that rectification does not lie on the facts of this case. It can provide no defence to the plaintiff's claim.

22 Nor is there any basis for saying that the loan contracts between the plaintiff and the first defendant have, in some way, been varied. Not only does the evidence not support the proposition that the parties reached agreement to vary the contracts so that repayment was to be in Australian dollars, even if such an agreement had been reached, it is a collateral agreement and it could not stand against the terms of the written instruments: see Hoyt's Pty Ltd v Spencer [1919] HCA 64; (1919) 27 CLR 133. If that is not enough, recital H of both the First Agreement and the Second Agreement is what is sometimes called a "whole understanding and agreement clause": see Marks v Hunt Bros (Sydney) Pty Ltd (1958) SR(NSW) 380 at 384 - 385. Moreover, there is also a lack of consideration for any alleged variation of the contracts. No alleged variation can provide a defence to this claim.

23 The first defendant sought further to rely on s 51AC of the Trade Practices Act. This section deals with unconscionable conduct in relation to the supply of goods and services. As submitted by counsel for the plaintiff, the term "in connection with" used in s 51AC requires the impugned conduct to "accompany" or "go with" the supply of services. Here the supply of services was the provision of the loan by the plaintiff to the first defendant. There is no allegation made by the first defendant that at the time he entered into the Loan Agreements there was any unconscionable conduct on the part of the plaintiff. That effectively disposes of any claim under the Trade Practices Act. The Act can provide no defence to the plaintiff's claim.

24 That then leaves the question of what the first defendant says is its set-off or counterclaim. There is a fundamental difficulty with this argument. The plaintiff is suing on two agreements which impose no obligations upon it. Contractual obligations imposed by these agreements are imposed upon the first defendant - he was to repay the money loaned to him, together with interest, on the specified date. Any alleged set-off does not impeach the title of the plaintiff's claim and cannot provide an answer to this application: see Westwind Air Charter Pty Ltd v Hawker de Havilland Ltd (1990) 3 WAR 71 per Murray J at 84 - 86. Without more that, in my view, would be a sufficient basis for saying that any alleged set-off raised by the first defendant is an answer to the plaintiff's claim.

25 Even leaving that point to one side, it is difficult to see just what it is that the first defendant says provides him with a defence to the plaintiff's claim. Counsel referred to a "civil conspiracy" by the plaintiff, CJ Goh, Seng Heng Goh, Seng Huat Goh and possibly others. I am unable to ascertain what that conspiracy may be. During the course of his submissions counsel for the first defendant suggested that the actions of the plaintiff and others associated with the plaintiff amounted to "blackmail". With respect I can see no justification for that assertion. It is clear that CJ Goh and others disagreed with the way in which the first defendant conducted himself within the Sanford business. But such disagreements are not in and of themselves improper. They certainly do not lead to any suggestion that an agreement to repay a loan, which arises independently of any action taken by any party but rather pursuant to an agreement some how gives rise to undue pressure and hence a claim.

26 That then leaves the question of what is to be made of the "Purpose and Security" provision of both loan agreements. The first defendant has approached Healthy Skin and demanded that the shares in Sanford Securities Ltd be transferred to him. He has received no response. The first defendant now says that he is in the position where not only is he being called upon to repay the loan which allowed him to acquire the shares in Sanford Securities Ltd, but he is unable to obtain the shares themselves. He says there is a close connection between Healthy Skin and the plaintiff and it would be unfair to require him to make repayment of the loans unless and until the shares are transferred to him.

27 It is not easy to characterise the effect of cl 2 in the agreements. The wording of the clauses does not suggest a standard mortgage of shares, a common form of security provided by a borrower. The Loan Agreements do not suggest the plaintiff has any right to call upon the shares as security if the loan was not repaid by the first defendant. In my view, Healthy Skin can be properly regarded as being in a position similar to that of a stakeholder. It has legal title to the shares but the beneficial interest is held by the first defendant. He is in the position where, having called for the shares to be transferred to him, equity would enforce that right. It is difficult to see how any similar right is held by the plaintiff. The wording of the agreements does not provide it with any legal rights and it has not sought to argue it has have any equitable entitlement to the shares. That being the case, the provisions of cl 2 do not impact upon the outcome of this application and can be put to one side.

28 In my view, the first defendant has no defence to this application. There should be judgment against the first defendant for the plaintiff in terms of the chamber summons.

First Industry Corp v Goh & Anor [2002] WASC 143

At a glance

Court

Decision date

Before

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Source

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Judgment (71 paragraphs)

First Industry Corp v Goh & Anor [2002] WASC 143 (5 June 2002)

Parties

Cases Cited (15)