Gazzard v Hekeik

The application for summary judgment (Prayers 4 and 5)

1. The thrust of the Plaintiff's submission is that his claim is a simple claim for money that has not been repaid on a loan. He asserts that "the defendant has no defence to the claim" or no defence except as to the quantum of the debt. The Plaintiff relied on evidence that establishes that loan agreements ("the Loan Deeds") were entered, that money in four separate tranches was advanced, and on evidence (and admissions in the defence) that the money has not been repaid. I was taken to the affidavit of the Plaintiff's wife dated 8 July 2021 and to various annexures to that affidavit. This included emails between relevant parties and a spreadsheet setting out the main four advances as well as a number of other advances made over the time of the business relationship.
2. I accept the Plaintiff's submission that there can be little doubt that the money was advanced, that the parties entered deeds relating to the loans, and that the money remains outstanding. However, that it is not the end of the matter.
3. The Plaintiff took me to various paragraphs of the defence in which the defendants admitted the loans and the fact that repayment is yet to be made. By way of example, the statement of claim asserts in paragraphs 25-26: "25. On 3 March 2020, the plaintiff, via his lawyers issued notices to the first, second, third, fourth and fifth defendants demanding payment of the funds further advanced under Load Deed 2 (including those referred to in paragraphs 22 and 23 above) and interest accrued thereon, which at that point totalled $1,733,803.17 by no later than 17 March 2020. 26. None of the first second, third, fourth and fifth defendants have paid any money to the plaintiff after the demand [for] repayment referred to at paragraph 25 above."
4. The defence to those paragraphs was as follows: "25. As to paragraph 25, the Defendants admit the contents thereof but do not admit that the funds advanced and interest accrued thereon at that point totalled $1,733,803.17. 26. As to paragraph 26, the Defendants admit the contents thereof."
5. So much is not in dispute. However, the ensuing paragraphs of the pleadings are as follows: Statement of claim: "27. Failure to repay the advanced amounts constitutes a breach by the first and second defendants to the terms of Loan Deed 2. 28. Failure of the third, fourth and fifth defendants to repay the advanced amounts constitutes a breach by them of the terms of Loan Deed 2. 29. The plaintiff claims damages against each of the defendants for the breach of Loan Deed 2 equal to the principal sums advanced and the interest accrued under Loan Deed 2 until the date of judgment." Defence: "27. As to paragraph 27, the Defendants do not admit the contents thereof. 28. As to paragraph 28, the Defendants do not admit the contents thereof. 29. As to paragraph 29, the Defendants do not admit the contents thereof."
6. The defence goes on in paragraph 30.1 to assert: "30.1 The material pleaded in the Statement of Claim related to part only of an ongoing business dispute between the Plaintiff and a number of other parties including, inter alia, the First Defendant."
7. The "ongoing business dispute" was particularised in paragraphs 30.2 to 30.19 of the defence and the Defendant's affidavit. Paragraph 30.20 indicated that a cross-claim would be brought seeking an order that a company established by the parties be wound up, or a receiver appointed in respect of its property, and damages.
8. To reduce the defendants' position to its essentials, it is asserted that the parties were in the business of property development. Over time three properties were purchased and are in various stages of development. None has been sold and each is currently held in company names or trusts controlled by the Plaintiff. At some stage the Defendant ran out of money and borrowed the money subject of the Plaintiff's claim. As a consequence of his impecuniosity, the Defendant ceased to be a director of Badajoz Property Pty Ltd. The circumstances in which this occurred are set out in the Defendant's affidavit sworn 8 September 2021 at [14]-[16] and involved certain alleged representations as to the position taken by the Commonwealth Bank. In spite of the express terms of the Loan Deeds, which called for repayment on a date shortly after their execution, the agreement was that the money was to be repaid after the sale of the properties and once the profits of the developments were realised. Counsel for the Defendant put it in the following terms on the hearing of the notice of motion: "So we say that Mr Gazzard [the plaintiff and second cross-defendant] has effectively double-dipped. He has on the one hand excluded my client from a capacity to repay and is suing him for the moneys lent. On the other hand, because he has not repaid, he has caused a redemption of units, so that with the redemption of units, the Hekeik interests cease to have any possibility of a participation in the profits to be derived, the not insubstantial profits to be derived from the development itself. So the cross-claim in effect is seeking to set aside this redemption." [2]
9. Counsel submitted that it was, in essence, a claim in "unjust enrichment" although he acknowledged that the pleadings (the defence and cross-claim) were a little unclear that this is so. [3] Nor is there any clear pleading for relief in the nature of restitution, unless one considers the rescission of the redemption notices sought in the cross-claim to constitute such relief.
10. The difficulties confronting the Plaintiff (and cross-defendants) on their application for summary judgment was almost conceded in the course of their submissions in reply: "HIS HONOUR: What would be the upshot of a finding contrary to that evidence? MANCA: A finding contrary to the evidence that there was no oral agreement? HIS HONOUR: No, contrary to the evidence that you have just taken me to. In other words, the defendant gives evidence, as seems to be anticipated, that, 'Look, I was part of this somewhat complicated business structure involved in the development of three properties. For reasons that I explained, I was essentially cut out of that and, in the context of that it was agreed between us that I would repay the money that I had borrowed in the course of those dealings after the properties or profits were realised.' MANCA: Can I just address one of those premises, your Honour? That is in the context that your Honour has recited what my friend has told you, which is in the context of having been removed from the Cromer Trust there was this arrangement. There is an issue there with the temporal nexus because the alleged discussion about deferred loan arrangements took place in October 2017. The redemption of the units took place in April 2020. HIS HONOUR: Okay. MANCA: So it couldn't be in that context, your Honour, if that is the premise that is put. This is something that has happened afterwards to strap up the case, in my submission. Your Honour, just lastly, I don't want to really give too much credibility to this point because, as I say, it hasn't been raised on the pleadings. It is an issue that has been raised HIS HONOUR: You mightn't want to give it any credibility whatsoever, Mr Manca, but if you don't answer my last question, I am going to assume the answer won't help you. MANCA: I understand. HIS HONOUR: What if that evidence was accepted that there was an oral agreement that the money not be repaid until realisation of the profits from the sale of one, two or three of the properties? MANCA: So if that evidence was accepted, then my client would have an issue in respect of enforcement of his rights under the loan agreement and the collateral agreements. HIS HONOUR: Thank you. MANCA: But in the context of a summary judgment application, your Honour, I would still submit that the evidence is overwhelmingly in favour of the plaintiff and there couldn't be any basis to make that finding." [4]
11. It may be that the evidence is "overwhelmingly in favour of the Plaintiff". Certainly the timing and terms of the Loan Deeds suggest that it might be. However, the defendants are entitled to conduct their defence and not have Mr Hekeik's assertions dismissed at an interlocutory stage where none of the parties have been examined and cross-examined as to the precise nature of their dealings, conversations and agreements.
12. In Spencer v The Commonwealth (2010) 241 CLR 118; [2010] HCA 28, French CJ and Gummow J said at [24]: "The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action or on the basis that the action is frivolous or vexatious or an abuse of process. The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this Court in Fancourt v Mercantile Credits Ltd said: 'The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried.' More recently, in Batistatos v Roads and Traffic Authority (NSW) Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde which included the following: 'Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.'" [Citations and footnotes omitted.]
13. In Simmons v Henwood [2013] NSWCA 184, Emmett JA emphasised the stringency of the test to be applied at [95]: "Ordinarily a party should not be denied the opportunity to put his case before the court in the ordinary way, after taking advantage of available interlocutory processes. Before a party will be deprived of that opportunity, the court must have a high degree of certainty about the ultimate outcome of the proceeding, if it were to be allowed to go to trial in the ordinary way (see Agar v Hyde [2000] HCA 41; 201 CLR 552 at 575 - 576, [57]). The power to order summary dismissal should only be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried (see Fancourt v Mercantile Credits Ltd [1983] HCA 25; 154 CLR 87 at 99)."
14. Before proceedings are summarily disposed of the case must be "so obviously untenable that it cannot possibly succeed", "manifestly groundless" or "hopeless": see for example Dey v Victorian Railway Commissioners (1949) 78 CLR 62; [1949] HCA 1 at 91, General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69 at 129, Collier v Lancer (No 2) [2013] NSWCA 186 at [9]-[11] (Ward and Leeming JJA) and State of New South Wales v Williams [2014] NSWCA 177 at [71] (Emmett JA with whom Macfarlan JA and Simpson J agreed).
15. The defendants and cross-claimants have raised a triable issue and the application for summary judgment will be dismissed.

The application that the cross-claim be dismissed under s 22(2) of the Civil Procedure Act, or severed from the statement of claim proceedings and removed to the Corporations list (Prayers 1, 2 and 3 of the amended notice of motion).

1. Section 22 of the Civil Procedure Act 2005 (NSW) provides: 22 DEFENDANT'S RIGHT TO CROSS-CLAIM (1) Subject to subsection (2), the court may grant to the defendant in any proceedings ("the first proceedings") such relief against any person (whether or not a plaintiff in the proceedings) as the court might grant against that person in separate proceedings commenced by the defendant for that purpose. (2) Relief may not be granted under this section against a person who is not a plaintiff in the first proceedings unless the relief relates to, or is connected with, the subject of the first proceedings. (3) A person against whom a defendant makes a claim for relief under this section-- (a) has the same rights in respect of his or her defence against the claim as he or she would have in separate proceedings commenced against the person by the defendant, and (b) if not already a party to the first proceedings-- (i) becomes a party to the first proceedings, and (ii) unless the court otherwise orders, is bound by any judgment (including a judgment by consent or by default) or decision (including a decision by consent) on any claim for relief in the proceedings (including a claim for relief in any cross-claim in the proceedings).
2. The Plaintiff submitted that the relief sought in the cross-claim does not relate to, and is not connected with, the subject of his statement of claim. Accordingly, he submits that s 22(2) denies the Defendant of the relief sought in the cross-claim. Reliance was placed on the fact that two of the nominated cross-defendants (Badajoz Property Pty Ltd and Adrian Gazzard) are not parties to the proceedings commenced by statement of claim. He also referred to the fact that the pleadings and particulars referred to companies and trusts of which the Defendant was not a member or beneficiary. The Plaintiff disputed the standing of the Defendant to pursue parts of the relief sought in the cross-claim, particularly those arising under the civil penalties provisions of the Corporations Act 2001 (Cth). It was submitted that the issue of the redemption notices which lies at the heart of the cross-claim, "was an act performed by the first cross-defendant [Badajoz Property Pty Ltd] rather than the second and third cross-defendants [Richard and Adrian Gazzard]".
3. It was submitted, in the alternative, that "given the absence of any nexus between the relief sought in the cross-claim and the statement of claim proceedings" the cross-claim should be prosecuted separately. [5] One submission was that the cross-claim would ordinarily be dealt with in the Equity Division of this Court. While that is true, it is not a basis upon which the cross-claim should be "struck out and dismissed" or severed from the claim.
4. Another submission was: "The Statement of Claim proceedings are ready to be heard. Pleadings have closed, and all evidence has been served. The Cross Claim proceedings are far from being prepared for hearing and the legal and factual issues raised by it do not have any commonality to those raised in the Statement of Claim. Such that there would be no utility in having the proceedings heard at the same time, and indeed, to do so would likely offend s 56 of the Civil Procedure Act with respect to the Statement of Claim proceedings, given the readiness of those proceedings to be finally determined." [6]
5. Putting aside the question of the "commonality" of the issues, which is central to the Plaintiff's claim for interlocutory relief under Prayers 1 to 3, I was concerned about the potential delay that might arise if the proceedings were conducted together. I made inquiries of the Defendant's counsel as to when the matter would be ready to proceed, and also inquiries of the list clerk as to available dates for a one day hearing (the estimate provided by the parties). [7] Counsel indicated that the Defendant would be ready to proceed for hearing within one month: "HIS HONOUR: […] Mr Levet, I want to know when your cross-claim, if it is to proceed together with the substantive proceedings commenced by statement of claim in February, will be ready to proceed. LEVET: It could be ready in under a month, your Honour. HIS HONOUR: Do you undertake to the court that that is so? LEVET: Yes, your Honour." [8]
6. The list clerk indicated that the Court could accommodate the hearing on 22 March 2022 and both parties indicated they could accept such a date. However, that is a practical matter to which I will return.
7. While there is force in some of the submissions made by the Plaintiff (and cross-defendants), the fundamental issue is whether s 22(2) of the Civil Procedure Act is engaged to deny the Defendant the opportunity to pursue the remedies raised in the cross-claim in accordance with s 22(1). I have considered the pleadings in the "first proceedings", the terms of the cross-claim, and the evidence filed in the proceedings to date. I am satisfied that the relief sought by the Defendant in the cross-claim is connected with the subject of the proceeding commenced by the statement of claim. Accordingly, s 22(1) permits the Defendant to bring a cross-claim "against any person" including those who are not plaintiffs in the statement of claim. Accordingly, the relief sought in Prayer 1 of the amended statement of claim must be refused.
8. Contrary to the Plaintiff's submission made in relation to s 56 of the Civil Procedure Act, severance of the cross-claim and transferring the proceedings to the Equity Division Corporations List would be contrary to the overriding purpose in s 56. It would involve the Court hearing evidence twice in relation to the business structures, financial arrangements and property development activities of what are, when the corporate structures and trust arrangements are stripped away, the same parties and participants. The orders sought in Prayers 2 and 3 must also be refused.

Case management and costs

1. To ensure the Plaintiff receives a relatively early hearing date, I propose to list the matter for hearing on 22 March 2022 and to set a timetable that gives effect to the undertaking as to readiness provided by counsel for the Defendant. [9] As has been touched upon in passing, there may be some issues with the pleadings and relief sought by the defendants. I will incorporate into the case management orders a direction that enables the defendants to file amended process along with any additional evidence within around five weeks. The Plaintiff will have the opportunity to file any further pleadings and evidence around four weeks later. The matter will then be listed before the Registrar to make further orders as to the filing of court books, written submissions and notification of witnesses required for cross-examination early in the new year.
2. The costs of the motion should be the costs in the cause. While the Plaintiff has failed to obtain the orders sought in the notice of motion, its position on the merit of the defendants' defence and the Defendant's cross-claim may ultimately be vindicated. Further, there seem to be some issues with the defendants' pleadings which emerged in the course of argument and this may lead to amendments of both the defence and cross-claim.
3. Accordingly, the orders I make are these: 1. The relief sought in the amended notice of motion is refused and the notice of motion is dismissed. 2. List the matter for hearing on 22 March 2022. 3. The defendants and cross-claimant are to file and serve any amended defence or amended cross-claim on or before 12 November 2021. 4. The defendants and cross-claimant are to file and serve any additional evidence (including evidence as to quantum and expert evidence) upon which they intend to rely on or before 12 November 2021. 5. The plaintiff and cross-defendants are to file and serve any reply, and/or defence to the cross-claim, on or before 10 December 2021. 6. The plaintiff and cross-defendants are to file and serve any evidence in reply (including expert evidence and evidence as to quantum) on or before 10 December 2021. 7. The matter is listed before the Registrar on 13 December 2021 for further directions including orders for the filing of any additional evidence, provision of court books, and filing of written submissions. 8. The costs of the notice of motion will be the costs in the cause.

Endnotes

1. Tcpt, 6/10/2021, p 2.
2. Tcpt, 6/10/2021, p 22.
3. Tcpt, 6/10/2021, p 31.
4. Tcpt, 6/10/2021, pp 31 - 32.
5. Plaintiff's written submissions at para 32.
6. Plaintiff's written submissions at para 24.
7. Tcpt, 6/10/2021, p 5(32-36).
8. Tcpt, 06/10/2021, p 5.
9. See paragraph [25]-[26] above. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 October 2021