Plaintiff v Defendant

Plaintiff v Defendant - [2010] VSC 504 - VSC 2010 case summary — Zoe

[52]

"Item 7

Repayment: The Borrower shall repay the principal sum in the manner and at the time stipulated in the repayment programme (which programme is set out in Schedule II) provided that the parties may by supplemental agreements vary the terms of the said repayment programme.

Item 8

Repayment date: The date upon which the last of the Borrower's obligations set out in Schedule II is completed."

"SCHEDULE II

(Repayment Programme)

Upon the execution of this agreement the sum of $1,000,000.00.

A. Within ninety (90) days of the date of this agreement the transfer to the Lender of Lots 1, 2 and 3 in Plan of Subdivision No 539137R and being more particularly the land described in Certificates of Title Volume 10957 Folio 554, Volume 10957 Folio 555 and Volume 10957 Folio 556. The consideration for each of the lots transferred will be $150,000.00 inclusive of GST by which amount the principal amount shall be reduced upon the completion of each transfer.

B. Within sixty (60) days of the sale by Peter Thomas Nolan to the Lender of the property situate at and known as 7647 Goulburn Valley Highway being the service station/roadhouse for the amount of $750,000.00 inclusive of GST. At settlement the Lender will pay up to a maximum of $620,000.00 to repay the loan to Peter Thomas Nolan from the National Australia Bank Limited currently secured by mortgage over that property and the difference between the loan amount and the sum of $750,000.00 will be reduced from the principal amount owing hereunder.

C. On a date in the discretion of the National Australia Bank as first mortgagee or upon the discharge of the first mortgage the transfer to the Lender of Lots 22, 23, 24, 25, 26, 27, 43, 44, 45, 46, 47 and 48 in Stage 2 and Lots 51 and 52 in Stage 3 of Plan of Subdivision No 539137R. The consideration for each of the lots transferred will be $150,000.00 inclusive of GST by which amount the principal amount shall be reduced upon the completion of each transfer.

D. As to any balance remaining after the transfer of the last of the Lots in accordance with clause C of this Schedule within six (6) months of that last transfer.

For the avoidance of doubt as to the balance which may be owed at any time the parties agree:-

[66]

36 On this basis Cave Investments advanced the proposition that as the guarantee imposed monetary obligations on the guarantors, and was intended, as is clear from the provisions of clause 4 of the 2006 Loan Agreement, to secure the obligations of Shepparton Projects under that agreement, it must follow that the obligations which are being secured by "monetary" guarantee must, themselves, be obligations of a monetary nature. Cave Investments submitted that this position is also reflected in clause 7, which provides for the enlivening of the guarantee and the acceleration of payments in the event of specified defaults. In particular, reference was made to the chapeau to clause 7 which includes the passage "the Guarantee shall become enforceable and the whole of the principal sum plus any accrued interest outstanding shall become forthwith repayable ...". It was submitted that what becomes repayable by the guarantors upon default pursuant to clause 7 is the "principal sum plus any accrued interest remaining outstanding". Cave Investments submitted that the "principal sum" is a sum of money; not blocks of land given nominal values in lieu of money. In doing so, it relied upon the definition "principal sum", and the reference to the sum of money constituting the "Present Advance" as set out in Item 5 of Schedule I of the 2006 Loan Agreement. Cave Investments further submitted that it would be nonsensical if, pursuant to the 2006 Loan Agreement, the guarantors became liable upon default by Shepparton Projects, to pay the "principal sum" by way of blocks of land given nominal values, where the guarantors did not own any of the blocks of land set out in paragraph C of Schedule II of the agreement - and thus were not in a position to control the ownership or transfer of these blocks of land to Cave Investments. In summary, it was said that what is enlivened by default under the provisions of clause 7 of the agreement is the immediate payment of money by the guarantors to Cave Investments, in the amount of the "principal sum" then outstanding.

[92]

56 In my opinion, the evidentiary matters relied upon by Shepparton Projects in support of its submissions as to the effect of the refusal by Cave Investments to accept transfers of the lots referred to in paragraph C of Schedule II of the 2006 Loan Agreement do not support the position for which it contends. The evidence upon which it relies goes to conversations with Mr Paul Cave on or before 10 July 2008 and prior to the extended date, namely 17 July 2008, upon which interest was payable under the 2006 Loan Agreement, as a result of the extension of time flowing from the 10 July 2008 letter. Consequently these conversations took place in an environment in which, apart from the monthly reporting requirements under clause 14 of the agreement, Shepparton Projects was not then in default and might have sought to rely upon the lot transfer provisions of paragraph C of Schedule II. However, during the course of the meeting on 17 July 2008, Shepparton Projects failed to pay interest then due and was, consequently, in default under the agreement. The evidence as to the precise content and timing of conversations on 17 July 2008 is not entirely clear from the witness statements which were relied upon in the course of the hearing, and the position was not clarified further as Cave Investments did not lead evidence. In this respect Shepparton Projects relied upon witness statement accounts of its own witnesses[21] and tendered a witness statement of Mr Paul Cave dated 10 September 2010 as an admission against interest. In this situation it would, in my view, be entirely artificial to conclude that Mr Cave's refusal of the tender of $70,000 by way of an interest payment, because it was not a payment in full of interest then due, took place before there was any discussion of the transfer of the lots and that, consequently, this conversation is to be taken as a reaffirmation of the then continued operation of paragraph C of Schedule II, or a waiver or some other indication that Cave Investments did not intend to rely upon its rights under the agreement, particularly under the acceleration provisions of clause 7.

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