Frinty v Landmax Developments

DECISION : Judgment in favour of the plaintiffs in the amount of $347,200.

CATCHWORDS : PRACTICE AND PROCEDURE - Application for judgment on the basis of admissions made by the other party - distinction between debt and contract

Civil Procedure Act 2005, s 56 Consolidated Equity Rules of 1902, r 130 LEGISLATION CITED : Supreme Court Rules 1970, Pt 18 r 3 Trade Practices Act 1974 (Cth), ss 52 and 82 Uniform Civil Procedures Rules, r 17.7

Kelly v Mawson [1981] 1 NSWLR 184 CASES CITED : Mantoufeh v Enterprise Finance Solutions Pty Ltd [2009] NSWSC 1144 Termijtelen v Van Arkel [1974] 1 NSWLR 525 Young v Queensland Trustees Ltd (1956) 99 CLR 560

Frinty Pty Limited ACN 097 245 219 (First Plaintiff) PARTIES : Joseph George Salim (Second Plaintiff) Landmax Developments Pty Ltd ACN 102 741 953 (First Defendant) Wei Xiong (Second Defendant)

J Baird (Plaintiffs) COUNSEL : D Smallbone (Defendants) Ms L J Friedwald (Defendants)

SOLICITORS : Yates Beaggi Lawyers (Plaintiffs) Haworth & Lexon Lawyers (Defendants)

• 6 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2009/290405 FRINTY PTY LTD v LANDMAX DEVELOPMENTS PTY LTD JUDGMENT 1 In this application, the first plaintiff seeks judgment against the first defendant for the sum of $347,200 pursuant to UCPR r 17.7. 2 The proceedings concern a property development in Merrylands. The development, which consisted of twenty residential apartments, was undertaken by the first defendant. The plaintiffs were investors in the development.

3 There is a dispute about the terms of the agreement on which the plaintiffs made their investment. The plaintiffs plead in their statement of claim that the agreement was partly express and partly implied. To the extent that it was express, it is said to be evidenced by a number of conversations between the second plaintiff on behalf of the first plaintiff and the second defendant on behalf of the first defendant, by minutes of the Annual General Meeting of the first defendant held on 2 December 2005 and by a number of balance sheets of the first defendant. So far as it is implied, it is said that it is to be implied from the parties previous conduct in relation to an earlier development, by the advance of funds by the first plaintiff to the first defendant, by the issue of shares in the first defendant to the plaintiffs and by partial repayment of the funds advanced by the first plaintiff to the first defendant.

4 The plaintiffs plead that the following, among others, were terms of the agreement:

a The first defendant would undertake to develop and complete the project with funds to be provided by the first plaintiff and other investors; b The second defendant would manage the project; c The first plaintiff would advance moneys for the project to the first defendant upon the second defendant's request and the amount lent would be repaid on completion of the project together with interest at 6 per cent per annum. 5 The plaintiffs allege that the agreement was breached in a variety of ways by the defendants. They also bring a claim for damages under s 82 of the Trade Practices Act 1974 (Cth) for misleading and deceptive conduct in breach of s 52 of that Act. 6 Of particular relevance to the present application, the plaintiffs plead in para 8(b) of the statement of claim that the second defendant gave a direction to the plaintiffs to pay an amount of $84,000 for 56,000 shares in the capital of the first defendant and "$317,520 by way of shareholders loan from the First Plaintiff to the First Defendant". Paragraph 9 pleads that the first plaintiff transferred those amounts to the first defendant's bank account. In response to those paragraphs, the defendants, in paragraph 8 of their defence, admit that the second defendant directed the second plaintiff to issue a cheque in the sum of $401,520 and say that that amount "comprised of $84,000 in share capital and $317,520 in shareholder loan". In paragraph 9, the defendants admit that the amount of $401,520 was transferred from the first defendant's bank account to the bank account of the first plaintiff. However, the defendants deny the agreement as pleaded by the plaintiffs. In para 5 of their defence they say that the terms of the agreement were set out "in a Shareholder to Private Company Loan Deed dated 18 July 2004" (the Deed) and, in para 6(f), they say that the "the shareholder loan made by the first defendant" was repayable on 18 February 2010 in accordance with clause 1.1 and Item 4 of the Schedule of the Deed. The Deed is expressed to be between the first plaintiff and first defendant, but it appears that it was only ever executed by the first defendant. 7 UCPR r 17.7 provides: "(1) If admissions are made by a party, whether by his or her pleadings or otherwise, the court may, on the application of any other party, give any judgment or make any order to which the other party is entitled on the admissions. (2) The court may exercise its powers under this rule even if the other questions in the proceedings have not been determined." 8 There appears to be no decided case dealing with this rule. However, the predecessors to the rule are in substantially similar terms: see r 130 of the Consolidated Equity Rules of 1902, considered in Termijtelen v Van Arkel [1974] 1 NSWLR 525, and Pt 18 r 3 of the Supreme Court Rules 1970, considered in Kelly v Mawson [1981] 1 NSWLR 184. It is clear from those decisions that the power granted by UCPR r 17.7 is discretionary. In exercising that discretion, the court should take account of the nature and quality of the admission. In Termijtelen v Van Arkel, for example, the court refused the application where the admission was deemed to have been made in the absence of an appearance. 9 In exercising its discretion, the court must also now have regard to s 56 of the Civil Procedure Act 2005, which relevantly provides: "(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court." 10 It is clear from the paragraphs of the pleadings that I have referred to that the plaintiffs allege that the first plaintiff lent the first defendant $317,520 and the defendants admit that happened. The defendants do not assert that that amount has been repaid. What they do assert (in para 20 of the defence) is that that amount was repayable on 18 February 2010 in accordance with the Deed. 11 Mr Smallbone, who appeared for the defendants, submitted that the admission made by the defendants in relation to the $317,520 was not sufficient to justify giving judgment or making an order in respect of that amount under UCPR r 17.7 because the agreement on which the plaintiffs sue and the agreement in respect of which the admission is made are different. The plaintiffs sue on a broad agreement which, on the way it is pleaded at the moment, is not evidenced at all by the Deed. Under the terms of that agreement, the plaintiffs say the debt owing to the first plaintiff was due on completion of the project. On the other hand, the admission made by the defendants is an admission that an amount of $317,520 fell due under the Deed on 18 February 2010. Mr Smallbone says that the plaintiffs must elect. They can maintain their claims under the agreement on which they sue. No admission is made in respect of any amount payable under that agreement. Consequently, they are not entitled to relief under UCPR r 17.7. Alternatively, they can amend their claim to sue on the deed and obtain the benefit of the admission. However, in those circumstances, they would need to abandon their other claims under the agreement on which they currently sue. 12 I do not accept Mr Smallbone's submission. In my opinion, it confuses the debt owed by the first defendant with the contract between the parties. As the High Court explained in Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 567: "The common law does not and never did conceive of indebtedness in a sum certain for an executed consideration as a mere breach of contract: it is rather the detention of a sum of money and that was so whether the creditor enforced his demand by an action of debt or by indebitatus assumpsit."

And later (at 569): "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."

See also Mantoufeh v Enterprise Finance Solutions Pty Ltd [2009] NSWSC 1144.

13 It is clear from the statement of claim that the first plaintiff sues on the debt said to be owing to it. It also sues for breach of contract. But as the decision of the High Court makes clear, that is not the same cause of action as the action based on the debt. It is equally clear that the debt on which the first plaintiff sues is the same debt as the debt admitted by the defendants. The fact that the defendants say that that debt is repayable on a different date (which has passed) does not, in my opinion, make it a different debt. Finally, as the High Court also made clear in Young v Queensland Trustees Ltd, it is for the debtor to prove that the debt has been repaid. It is not for the creditor to prove that it has not been repaid. Consequently, although the defendants do not specifically admit that the debt has not been repaid, that itself does not seem to me to be fatal to an application under UCPR 17.7, since it is for the defendants to plead and prove that the debt has been repaid. There is no pleading to that effect. That is hardly surprising, since there is no suggestion that the money has been repaid. 14 In my opinion, this is an appropriate case in which to exercise the discretion conferred by UCPR r 17.7. The admission on which the plaintiffs rely arises from the defendants' pleading. That pleading contains a conscious, deliberate and clear admission by the defendants. The admission is sufficient to establish that the debt is due and payable now. 15 There are other reasons for making the order sought by the plaintiffs. Many of the claims brought by the plaintiffs seek to recover the $347,200 on other bases. For example, the plaintiffs seek to recover that amount as damages for breach of contract and as damages under s 82 of the Trade Practices Act. If an order is made, it is likely that it will simplify the proceedings significantly. That, in turn, is likely to save time and costs - which is a matter that is of particular relevance having regard to s 56 of the Civil Procedure Act 2005. 16 For those reasons, I think that it is appropriate to give judgment in favour of the first plaintiff in the amount of $347,200.

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