There are two notices of motion before the court. The first was filed by the plaintiffs on 22 July 2024. The second was filed by the defendant on 15 August 2024.
The plaintiffs' motion seeks judgment in the sum of $3,700,000. The entitlement to judgment is said to arise from admissions made by the defendant (r 17.7 of the Uniform Civil Procedure Rules 2005 (NSW)).
The plaintiffs' motion is supported by an affidavit of Mr Kyle Bridge, dated 19 July 2024. Mr Bridge is a solicitor in the firm retained by the plaintiffs.
The defendant's notice of motion seeks leave, pursuant to r 12.6 to withdraw part of its defence "that operates for the benefit of another party". The motion also seeks leave, pursuant to s 64 of the Civil Procedure Act 2005 (NSW), to amend the defence.
The defendants motion is supported by an affidavit of Mr Nathan McEwen dated 15 August 2024. Mr McEwen is the defendant's solicitor. The proposed defence is Annexure 'A' to Mr McEwen's affidavit.
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Background
The statement of claim was filed on 6 March 2024. It asserts that the plaintiffs are the only surviving executors and trustees of the estate of Mr David Daley (the deceased) who died on 18 November 2023.
The plaintiffs are the deceased's daughters. They are endeavouring to collect monies owed to their late father and accordingly to his estate.
I was informed that the defendant was the principal of two motor vehicle dealerships in Nowra. He had originally been employed in the dealerships before 1998. The deceased and others had invested in the dealerships.
In 1998 the defendant took over the running of the dealerships and changed their financial status from parlous to profitable. Thereafter the deceased and the defendant were close friends.
According to the statement of claim the deceased made loans to the defendant, over a five-year period between 19 February 2013 and 23 March 2018 totalling $3,700,000. This figure was made up of five separate loans, each attracting interest at various agreed rates.
The loans have not been repaid although there have been payments of interest in the sum of $1,170,121.
The defence, filed on 17 April 2024, admits receipt of the five alleged payments but denies the loans remain payable to the plaintiffs.
The gravamen of the defence is contained in paras 18 and 19. Paragraph 18 asserts that the deceased, on terms, forgave the loans. Paragraph 19 says this was done because:
"19(a) the Defendant saved David Daley from suffering a substantial investment loss in Kinghorn Motor Group after the Defendant assumed management of the business;
(b) David Daley thought of the Defendant as a son that he did not have. (the "consideration for the loan forgiveness")
Particulars
(a) In or about September 1998 the Defendant took over the day to day management of Kinghorn Motor Group. In the following financial year, the Defendant became the dealer principle of the Kinghorn Motor Group, and turned a $900,000 trading loss into a $400,000 trading profit for that business, and shared by David Daley. The trading turnaround avoided the business falling into default with its financiers with the potential consequence of $3mlllion in financing being called in as against David Daley and others and the loss of dealership contracts with vehicle manufacturers."
Paragraph 20 then asserts that on the basis of the facts pleaded in paras 18 and 19, that an estoppel arises restraining the plaintiff from enforcing the loan.
The proposed amended defence is a little confusing, to the extent that it acknowledges the payment of interest (para 18(e)), but later seems to categorise the payments as "monthly payments" rather than interest. As I understand the proposed defence, the deceased and the defendant agreed at a series of luncheons in 2020 and 2021, that the deceased forgave the debt, effective upon his death, provided the defendant continued to pay a sum of money to the deceased every month until the deceased died.
The defendant says the payments were made and even continued after the deceased died (para 18(i)). There is no apparent reason for the continuation.
The proposed amended defence gives further detail to the facts pleaded in the original para 18 and then adds a number of paragraphs concerning an estoppel by convention. There is also an assertion of unconscionability at the end of the proposed defence.
The plaintiff's response is that the loan having been admitted, the purported defence and amended defence are futile and should not be allowed to stand in the way of a judgment in favour of the plaintiff.
The plaintiffs' futility point arises from their submission that there could not have been any consideration for the alleged variation of the terms of the loan, to the extent of the loan being forgiven upon the death of the deceased. According to the defendant, based on the original defence, the alleged consideration arises from his assistance to the deceased in 1998 and his relationship with the deceased whereby the deceased "thought of the Defendant as a son that he did not have."
The plaintiffs submitted that past consideration would not have assisted the defendant, because it had existed many years earlier. It had nothing to do with the new agreement that the defendant alleges occurred over a series of luncheon meetings in 2020 and 2021.
The plaintiffs submitted that their motion for judgment derived from the admissions "inspired" the defendant to come up with a better argument in relation to consideration.
The defendant did not accept that he had been inspired but did acknowledge that the nature of the consideration was different to that which had been pleaded in the original defence.
The 'new' categorisation of consideration was described by the defendant in this way:
"… the consideration moving from the Defendant under the proposed amended defence is the promise to pay monthly instalments of a sum of money defined by Mr Daley until his death in exchange for the forgiveness of the debt and manager of the obligation to pay interest on principle. The consideration is not past consideration. It is concurrent with the forgiveness."
According to the plaintiffs "the alleged variation would not provide any consideration moving from the defendant because on its own terms, the alleged variation maintained the status quo of the defendant continuing to pay exactly what he had been paying previously. He gave nothing in return for the release from the very considerable liability."
This brings me back to the point made above about the inconsistency in the defence concerning the payments continuing after the deceased's death. Annexure 'C' to Mr McEwen's affidavit is a document entitled "Schedule of Interest". The document lists all of the payments that have been made by the defendant since 19 March 2013. The plaintiffs pointed out that:
1. If the nature of the payments changed as a result of the agreements in 2020 and 2021 then they should not have continued to be described as "interest" payments.
2. The deceased died on 18 November 2023. There is a payment of $19,833 on the same date. This payment could be considered as consistent with an obligation to make payments until the deceased died.
3. There are however, four payments after the deceased died, on 18 December 2023 ($19,833), on 18 January 2024 ($19,833), on 18 February 2024 ($14,500) and on 18 March 2024 ($14,500).
As to the amount of the payments following the agreements in 2020 or 2021 being precisely the same as the interest payments, the defendant suggested this was a coincidence. Unless the evidence reveals that it was agreed that the payments should be of the same amount as the interest had been, then it is difficult to think of a more unlikely coincidence.
The plaintiffs further pointed out that there was no evidence from the defendant as to the detail of the agreements that had been made at the various luncheon meetings. There was nothing in writing, nothing 'on the back of a napkin' and no evidence from the defendant about what was said, let alone when and where. The plaintiff's referred me to the decision of the High Court in AON Risk Services Aust Ltd v Australian National University 239 CLR 175; [2009] HCA 27, in particular at [103]:
"The fact that an explanation had been offered for the delay in raising the defence was regarded as a relevant consideration in J L Holdings. Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for. The importance attached by r 21 to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. There can be no doubt that an explanation was required in this case."
This passage from AON is certainly relevant but perhaps not as forceful as it might have been had the present case involved delay. I think there should have been some evidence from the defendant giving detail of what occurred at the various meetings with the deceased, but I do not think its absence is necessarily fatal.
I am very sceptical of the defendant's assertions about the luncheon agreements and, even if accepted, about their validity in law, in particular having regard to the consideration question against the background of the payments continuing both in the same sum as interest and bearing the description of interest.
However, the defendant has proffered an arguable case on consideration, and I must recognise the possibility of the defendant being accepted in his evidence. This would properly be a decision for a trial judge. In addition, the defendant drew my attention to the decision of the New South Wales Court of Appeal in Moon v Mun [2013] NSWCA 217 at [43]:
"The power to award judgment on admissions on the pleadings is properly exercisable only where the court can see that a clear and unanswerable case is advanced on the pleadings, with the position so decisively depicted and the correct outcome so unambiguously obvious that there is simply no need for any issue to go to trial. The evaluative question relevant to exercise of the discretion is whether it is just to award judgment without regard to the merits of the parties' contentions."
There is an important distinction between weakness and futility. The former is a measure of the possibility of reaching an attainable result. The latter requires an incapacity to produce a viable result. In my view the defence in this case is weak, but I cannot say it is futile.
The statement of claim was filed on 6 March 2024. The matter has not yet progressed to the filing of evidence. The amendment of the defence is unlikely to cause any significant delay in the progress of the matter. The plaintiffs will not be prejudiced by the amendment.
The defendant's motion also seeks leave to withdraw his admissions. It was not precisely clear how this is manifested in the proposed defence. However, the defendant indicated that he would like to proceed on the proposed defence so I will not make any specific order in relation to the withdrawal of the admissions.
The two motions were effectively treated as one argument by the parties which I think was an appropriate course to take. I have done the same in my reasons to the extent that by rejecting the futility argument I do not think the plaintiffs are entitled to judgment and I think the defendant should be allowed to amend the defence.
I think the unified approach I have taken to the motions should carry over to the question of costs, at least to the extent that I do not think that the defendant should have a costs order in his favour in respect of the plaintiffs' motion. I also think there is probably a good deal of substance in the plaintiffs' submission that their motion, if not inspirational, at least generated the defendant's motion to amend.
At face value the defendant has succeeded on his motion. However, the defendant needed to seek the court's leave to make the amendment and has succeeded on the minimum of evidence and in the face of tenuous assertions of fact (concerning the nature of the payments) and law (concerning the identification of consideration).
I think the fair and just order in relation to costs is that the costs of the plaintiff's motion should be costs in the cause, but the defendant should pay the plaintiffs' costs of the defendant's motion including costs thrown away by the amendment.
I make the following orders:
1. The plaintiff's notice of motion filed on 22 July 2024 is dismissed.
2. On the defendant's notice of motion filed on 15 August 2024, the defendant has leave to file and serve an amended defence in the form annexed to the affidavit of Mr Nathan McEwen sworn 15 August 2024, within seven days.
3. The costs of the notice of motion filed by the plaintiff are to be costs in the cause.
4. The defendant is to pay the plaintiffs' costs of the defendant's notice of motion including costs thrown away by the amendment to the defence.
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Decision last updated: 19 November 2024