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[2013] NSWCA 269
Court of Appeal (NSW)
2013-08-13
Ward JA, Leeming JA, Hammerschlag J
Original judgment source is linked above.
Judgment 1Ward JA: I agree with Hammerschlag J. 2Leeming JA: I agree with Hammerschlag J. 3Hammerschlag J: This is an appeal against a judgment of the District Court of New South Wales (Olsson DCJ) given on 27 June 2012 in favour of the respondent against the appellant for $418,783 and costs ("the judgment").
BACKGROUND 4The appellant was the financial advisor to the respondent and her husband. He was the sole director and secretary of AME Investments Pty Ltd ("AME"), to which the respondent, at his suggestion, lent money. 5There were two loans. 6On or about 6 May 2005 the respondent advanced $125,000 to AME ("the first advance") pursuant to an oral agreement made in a conversation between the appellant and the respondent in which the appellant said words to the following effect: I know a builder that owns land at Speers Point. He is constructing Villas and looking for investors. The return is 12% paid monthly with the capital repaid in eight months. If you put $125,000 in there will be three investors, me, you and Steve Johnson. I will give you a personal guarantee securing the loan and payments. I will also transfer to you a share in my company which you can transfer back after repayment 7On 15 May 2005 the appellant and the respondent appended their signatures to a written agreement entitled "Deed of Loan" ("the first agreement") between the respondent as Lender and AME as Borrower. Clause 5 required repayment of the principal and interest on the Expiry Date or on termination of the facility, if earlier. No demand was required. 8The first agreement contains fairly comprehensive loan terms and conditions, extending well beyond the minimal terms of the earlier oral agreement. For example, it contains a provision which entitles the Borrower to prepay the whole of the Principal Outstanding at any time on certain conditions (cl 7) and a provision which entitles the Lender to assign its rights, but also provides that the Lender may not, without the Borrower's prior consent, disclose information about the Borrower and any guarantor (cl 15). 9The first agreement incorporates a "First Schedule". The First Schedule records, amongst others, the amount of the facility, its purpose (being to assist with the development of property located at 56 Thompson Road, Speers Point) and an Expiry Date of 31 October 2005. It contains three special conditions. Special Condition 3 is in the following terms: Paul Pannozzo of 6 Clements Street, Drummoyne NSW, sole director and secretary of AME Investments Pty Ltd hereby unconditionally guarantees performance of this Loan Agreement. 10The First Schedule includes an execution clause in the following form: Corporation: AME Investments PTY LTD (BORROWER) Authority: Section 127 of the Corporations Law Signature of authorised person: [appellant's signature appears here] Name of authorised person: [Paul Pannozzo] (handwritten) Office held: [Sole Director and Secretary] (handwritten) 11Neither the appellant's nor the respondent's signature was witnessed. 12It is not in dispute that the advance governed by the first agreement had already been made under the earlier oral agreement. To the extent that it was operative, the first agreement thus varied or novated the earlier oral one. 13From July 2005 until May 2006 the respondent received monthly interest payments on the first advance. The principal was not repaid on 31 October 2005 as required by the first agreement. 14The respondent thereafter contacted the appellant who said words to the effect "the project has not been completed. I will keep paying interest while you are waiting for your principal." 15The respondent received payments of principal on 12 July 2006, 13 July 2006, 18 July 2006 and on 5 October 2006 (all by way of deposit into her bank account) totalling $85,000. Beyond this, AME defaulted on the loan both as to principal and as to interest. 16A second advance of $270,000 ("the second advance") was made by the respondent to AME pursuant to a written agreement, also entitled "Deed of Loan" ("the second agreement") signed on 25 March 2008. The second agreement is in the same form. It too incorporates a First Schedule which records the amount of the facility, its purpose (to assist with the development of a property located at 147-149 Great North Road, FIVE DOCK NSW 2046) and an expiry date of 30 March 2009. 17It has the same form of execution clause. The appellant's signature appears above the handwritten word "Director". The respondent's signature has been witnessed. 18During the period June 2008 and May 2010 the respondent received interest payments on the second advance totalling $57,542.61. Beyond this, AME defaulted on the loan both as to principal and as to interest. 19AME was deregistered on 7 March 2009. Seemingly, the interest payments were thereafter made by the appellant. 20On 10 April 2011 the respondent sued the appellant in the District Court of New South Wales on his guarantee with respect only to the second advance. 21The appellant had a solicitor on the record in the District Court proceedings, being a Mr Adrian Holmes of Miller Noyce Solicitors. 22On 5 July 2011 the appellant filed a Defence admitting the loan and non-repayment but denying, in bald terms, the allegation that he had given a guarantee. He made no positive averments. 23By letter dated 24 January 2012 from the respondent's solicitors to the appellant's solicitors (which was forwarded to the appellant), the appellant was given notice of a motion by the respondent to amend her Statement of Claim by including a claim based on a separate agreement first formed in May 2005. 24The respondent filed an Amended Statement of Claim on 10 February 2012. 25The appellant did not file any Amended Defence. 26It seems, from what the Court was informed from the Bar table during submissions (although there was no evidence), that the District Court proceedings were fixed by a registrar of that court on 13 March 2012 for hearing on 27 June 2012. 27The District Court proceedings came on before Olsson DCJ on 27 June 2012. 28Her Honour's reasons for judgment record that the defendant was called three times and that there was no appearance. They record that a Notice of Ceasing to Act was filed on 9 May 2012. Her Honour states that "[s]ince then, neither the Court, it appears, nor the plaintiff, have had any contact with the defendant". The trial proceeded in the appellant's absence and her Honour delivered the judgment ex tempore on the same day. 29Her Honour's reasons for judgment record that the respondent read an affidavit sworn 5 January 2012. 30As to the first agreement, her Honour's reasons for judgment include: (a)a description of the initial oral agreement and a finding that it was varied by the first agreement; (b)reference to various provisions of the first agreement, including Special Condition 3, and a finding that under it the appellant personally guaranteed the performance of the first agreement; (c)reference to the payments of interest and repayments of capital that were made; and (d)findings that the respondent made demand of the appellant under his guarantee, that in breach of the guarantee he had failed to pay the balance of the principal and interest, and that that amount was still owed. 31In error, her Honour states that the first agreement appears to have been witnessed. No witness signature is evident. Nothing, however, turns on this. 32As to the second agreement, her Honour's reasons for judgment include: (a)its salient terms; (b)reference to the payments of interest made over the period June 2008 to May 2010; (c)a finding that the principal was repayable on 30 March 2009 and that the appellant had not repaid the principal and any interest after May 2010; (d)a finding that AME was deregistered on 7 March 2009 and that notwithstanding that deregistration, it appeared that the appellant at least continued to make interest payments; and (e)a finding that the respondent had made demand of the appellant under his guarantee for the principal and interest and the appellant had not paid any of the principal, and that after May 2010 interest was still owing. 33Her Honour was satisfied that the respondent had made out her claims and entered judgment in her favour for $418,783 and costs. 34By Notice of Motion filed on 7 September 2012, the appellant moved the District Court to set aside the judgment. A Judicial Registrar dismissed the motion on 14 September 2012. The appellant filed a Summons in this Court seeking leave to appeal the Registrar's decision. That application was abandoned at the commencement of the present appeal. 35In support of the application in the District Court to set aside the judgment, the appellant swore an affidavit on 7 September 2012. His affidavit was tendered and admitted into evidence on this appeal without objection. 36In it, the appellant refers to having received the letter from the respondent's solicitors dated 24 January 2012 with the Notice of Motion seeking to file an Amended Statement of Claim, together with two affidavits and the proposed amended pleading. 37He says further that his solicitor also acted for a business associate of his, Mr Gee, and this appeared to give rise to a conflict of interest. He does not, however, say when this apparent conflict arose. 38He says further that by letter dated 9 May 2012, Mr Holmes served him with a Notice of Ceasing to Act, but after a discussion with his solicitor, he understood that the solicitor and Mr Gee were working to resolve the matter. He says that he received a letter from the respondent's solicitors dated 24 July 2012 advising him of the judgment which had been obtained against him, and that by letter dated 9 August 2012 he was served with an Examination Notice. He says that he then had a conversation with Mr Gee who said that he would speak with Mr Holmes. He says that between 14 August and early September, he had a number of discussions with Mr Gee and realised that the discussions were not leading to any resolution and he conferred with new solicitors who filed a Notice of Appointment. 39As to his failure to defend the proceedings, apart from what is recounted above, he says no more than that: I have not had the opportunity to defend the plaintiff's claims. 40As to his defence, he says no more than that: The plaintiff has pleaded that the deed contained a provision that I "unconditionally guaranteed the performance of the agreement by AME". I was not a party to that deed and that deed does not contain that provision.
THE APPEAL 41The appellant's submissions on the appeal fall into three categories: (a)complaints that the trial proceeded in his absence; (b)submissions that her Honour's conclusion that he was liable to the respondent was wrong in law; and (c)submissions that her Honour failed to give any or adequate reasons for her decision. 42Each category is dealt with in turn, although for reasons which will become apparent, the two latter categories overlap.
Trial in the appellant's absence 43It is a fundamental principle of natural justice that a person against whom a claim or charge is made must be given a reasonable opportunity of appearing and presenting his case. If this principle be not observed, the person affected is entitled, ex debito justitiae, to have any determination which affects him set aside; Cameron v Cole (1944) 68 CLR 571 at 589. 44First, the appellant submits that the trial was a nullity because it was held in his absence and he was not given a reasonable opportunity of appearing and presenting his case. 45This submission rests on the premise that the appellant did not have knowledge or notice of the hearing date. The submission must be rejected because that premise has not been made good. 46Somewhat remarkably, given the obvious centrality of the issue and notwithstanding that it is within his own power to produce, the appellant produced no evidence about the state of his own knowledge of the hearing date, or any evidence as to the knowledge of his former solicitor, Mr Holmes, as to the hearing date, or about any communications between them on that subject. No explanation for this omission was proffered. The only evidence produced was by way of his affidavit, which does not say that he did not know or have notice of the hearing date. It is to be inferred that his evidence of his own state of knowledge would not assist him; see Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418; Ho v Powell (2001) 51 NSWLR 572 at 576-577. 47Thus, not only has the appellant not established that he did not know or have notice of the hearing date, but the inference that his own evidence (as to the state of his own knowledge) would not assist him is tantamount to an inference that he knew or had notice of the hearing date. 48Uniform Civil Procedure Rules 2005 ("UCPR") Pt 29 r 29.7(1) and (2) provide as follows: (1) This rule applies when a trial is called on. (2) If any party is absent, the court: (a) may proceed with the trial generally or so far as concerns any claim for relief in the proceedings, or (b) may adjourn the trial. 49Second, the appellant submits that her Honour's decision that the trial proceed in his absence involved a miscarriage of the discretion given to the Court under UCPR Pt 29 r 29.7, sufficient for the Court to set aside the judgment that followed. 50The appellant submits that the facts (as recounted by her Honour) that his solicitors had filed a Notice of Ceasing to Act on 9 May 2012, and that between then and the trial date neither the Court nor the respondent had had any contact with the appellant, gave rise to the inference (which should have been plain to her Honour) that the appellant did not know of the hearing date. On this footing, he submits that the only proper courses open to her Honour were either to take steps to satisfy herself that the appellant did have notice of the trial date or to adjourn the proceedings. 51In my view, those facts did not (and do not) on their own give rise to the inference that the appellant did not know of the hearing date. However, even if it could be said that they did (or do), and that the exercise of her Honour's discretion to proceed in the appellant's absence miscarried, the critical factor to be considered by this Court in the determining whether the miscarriage was such as to warrant setting aside the judgment, is whether the appellant in fact knew or had notice of the hearing date. Thus, the appellant's second submission is also effectively premised on the proposition that he did not have knowledge or notice of the hearing date. As I have already said, that premise has not been made good. 52It is now not fairly open to him to submit that the trial was vitiated because an inference should have been drawn by the trial judge, or should now be drawn, that he did not have knowledge or notice of the trial date when the fact the subject of the proposed inference is one wholly within the appellant's own knowledge and he has failed to produce any evidence of it.
Substantive propositions 53The appellant puts that the judgment should be set aside because her Honour's finding of liability was wrong in law for a number of substantive reasons. 54This submission must be rejected because each of the matters raised is a matter which should have been specifically pleaded as a defence but was not. The issues now raised were not before the Court. No Amended Defence was filed, even though at the time of the Amended Statement of Claim the appellant had solicitors on the record. Moreover, had these matters been pleaded, the respondent might well have been able to provide answers to them. 55In any event, I am not satisfied that any of the matters raised was capable of succeeding. 56First, the appellant puts that Special Condition 3 in the First Schedule is not a guarantee by the appellant but an agreement on the part of AME to procure the appellant's guarantee. 57This submission is unsustainable. It is contrary to the clear words used in the condition that "Paul Pannozzo... hereby unconditionally guarantees the performance of this Loan Agreement". 58Next, he puts that his execution of both agreements was solely in the capacity as an officer of AME with the consequence that he did not personally bind himself to guarantee the performance of AME. 59The determination whether a signatory has assented to be personally bound turns on the objective intention as to that issue, having regard to the construction of the document as a whole and the surrounding circumstances; see Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1988) 21 NSWLR 160. 60The precise terms of Special Condition 3 leave no room for any conclusion other than that, by his signature, the appellant's intention, objectively ascertained, was to assent to be personally bound. The submission must accordingly be rejected. 61Next, he puts that any purported guarantee by him of AME's performance of the first agreement was unenforceable at law for want of consideration, the money the subject of the loan having already been advanced at the time of the giving of the guarantee. This submission is put on the footing that consideration was required because the first agreement was not operative as a deed for want of being witnessed; see Conveyancing Act 1919 (NSW) s 38. It may be accepted that the first agreement is not operative as a deed. 62The submission is unsustainable. The first agreement imposed obligations on the respondent in favour of the appellant (including those referred to above), which the earlier oral agreement did not do, sufficient to constitute consideration. Had this point been raised and had it been of substance, it may have been open to the respondent to fall back on the earlier oral agreement. 63Finally, in relation to the first agreement, he puts that the respondent had "varied the principal loan agreement by allowing the loan to continue after the Expiry Date, such variation not being the subject of the alleged guarantee", which varied obligation was outside the ambit of the guarantee, or discharged it. This variation was submitted to have arisen as a consequence of the respondent acceding to the appellant's statement after 31 October 2005 that the project had not been completed and he would keep paying interest while the respondent was waiting for her principal. 64The submission is unsustainable. The dealings relied upon disclose no agreement varying "the principal loan agreement". Rather they disclose default by both AME and the appellant. 65The allegation that there had been no lack of performance of the first agreement, as there was no evidence of a demand for the return of the principal, was not addressed in submissions and can be assumed not to have been pressed. It was unsustainable. There was no requirement for a demand to be made before the principal was to be paid under the first agreement.
Failure to give reasons 66The appellant submits that her Honour "failed to give any or any adequate reasons for his [sic] decision". 67First, he puts that her Honour's reasons for judgment were inadequate because they did not disclose any reasoning revealing why each of the substantive matters described above was not an answer to the respondent's case. This submission is untenable. 68Whether reasons are adequate depends on the particular case under consideration and the matters in issue; see Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 at [58] and the authorities cited there. Those matters now sought to be raised were not in issue before the District Court and reasons concerning them were not required. 69Even if there had been some inadequacy in the reasons, the only conclusion open on the evidence would have been the conclusion that none of them succeeded. There would be no warrant to order a new trial; see Pollard v RRR Corporation at [67] and the authorities cited there. 70Second, the appellant puts that her Honour's reasons for judgment did not reveal findings necessary or sufficient to found the conclusions she reached. This submission, too, is untenable. Her Honour's reasons for judgment are not in any way inadequate or insufficient. They disclose findings of the principal debts, the existence of the guarantees given by the appellant to the respondent for the obligations of the principal debtor to her, demand on him and failure to pay.
CONCLUSION 71The appellant's Summons for leave to appeal the decision of Judicial Registrar Smith of the District Court of 14 September 2012 is dismissed with costs. 72The appeal is dismissed with costs.
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: 23 August 2013
Pannozzo
Fowler