Plaintiffs v Defendants

Supreme Court of Victoria|2011-08-10|Before: Pagone J

PRACTICE & PROCEDURE - Summary judgment - Loan agreement - Whether 'no real prospect of success' - Existence of a real question to be tried.

1 This is an appeal from orders made by Zammit AsJ on the return of the plaintiffs' amended summons filed 25 March 2011 seeking summary judgment pursuant to rule 22.02(1) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) and, alternatively, and of the (Vic). It is unnecessary to set out the facts in any great detail as they are adequately contained for the purposes of these reasons in the reasons of her Honour and in the several written submissions filed by the parties.

2 The plaintiffs' principal contention is that the defendants are bound by a loan agreement pursuant to which the plaintiffs are entitled to judgment for $1.25 million plus interest of either $1,050,727.30 or $1,118,864.71 (dependent upon the basis upon which interest is to be calculated). On 1 July 2002 a loan agreement was entered into between the late Theo Post as lendor and Jolimont Grange Pty Ltd and Phillip G. Spark & Associates, as borrowers, and Phillip Gregory Spark as guarantor. The firm described as Phillip G. Spark & Associates, one of the borrowers, was the firm name of Mr Spark's legal practice of which he was the sole member. Mr Spark was, therefore, both borrower and guarantor under the loan agreement. A further $172,500 was paid to a company of which Mr Spark and Mr Matthew Matheson were directors. Mr Matheson is the late Mr Post's grandson and was also Mr Spark's articled clerk at about the time of the making of the loan agreement.

3 The plaintiffs' statement of claim pleads the loan agreement against the defendants and maintains that the defendants were indebted to the deceased as lendor. The defendants maintain that no debt under the loan agreement has been established and that such debt as may currently have been proven is a debt to Finton Properties Pty Ltd ("Finton Properties", a defendant by counterclaim in the proceeding). Finton Properties is pleaded by the defendants (being the plaintiffs in the counterclaim) to have been the trustee of two trusts connected with the late Mr Post, namely, the Post Discretionary Family Trust and the Tekla Superannuation Fund.

4 Paragraph 6 of the plaintiffs' statement of claim pleads the loan agreement to which I have previously referred. Paragraph 7 of the statement of claim pleads some of its terms and paragraph 8 pleads:

Pursuant to the Loan Agreement, the Deceased advanced or procured to be advanced a total amount of $1.25 million ("the advance") to the Borrower.

The lendor has advanced or will advance upon the request of the Borrower the advance to the Borrower which will be payable by way of Bank Cheque payable to the Borrower or as the Borrower directs in writing.

The advance referred to in this clause was that defined in recital A as an agreement "to provide a loan facility to the borrower [namely, Jolimont Grange Pty Ltd and Phillip G. Spark & Associates] the principal amount which was not to exceed one million two hundred and fifty thousand dollars."

5 The defendants contend that the present application for summary judgment must fail, if for no other reason, because the plaintiffs have not established the indebtedness under the loan agreement in the amount pleaded. For the purposes of that contention it may be accepted that the written terms of the loan agreement govern the rights between the parties to the agreement in the absence of defences which are not raised against the written document.[1] What must be established, however, is that the lendor, namely the late Mr Post, "advanced", or is otherwise taken to have advanced, the money claimed as due from the defendants. Paragraph 8 of the statement of claim asserts that the late Mr Post advanced money but the defendants deny that assertion. The defendants do not deny that money was advanced by someone but maintain, rather, that it was not the late Mr Post. In an affidavit sworn by Mr Spark on behalf of the defendants he accepts that monies were paid from Finton Properties but not by the late Mr Post. That assertion does not gainsay the loan agreement but does contest the defendants' liability to the plaintiffs. The loan agreement itself is not an acknowledgement of an identified debt. It provided for a loan which either had been made or which would be made. The existence of an earlier debt is at best assumed and has yet to be established by the plaintiffs as the amount claimed from the defendants. That is not to say that they might not be able to do so (as the defendants' senior counsel candidly indicated that they might succeed in doing) but that they have not yet done so.

6 There is clearly a factual dispute about who advanced monies and what amounts may or may not be payable under the loan agreement. Finton Properties was not a party to the loan agreement and the loan agreement does not on its terms seek to convert any debts owed by the defendants to Finton Properties as debts owed to the late Mr Post as lendor. The plaintiffs' statement of claim pleaded that the late Mr Post had either advanced "or procured to be advanced" the amount of $1.25 million but the plaintiffs do not establish the case that debts which might otherwise have been due by the defendants to Finton Properties had been converted in some way as debts to the late Mr Post.

7 The test for summary judgment is whether a party has "no real prospect of success".[2] The learned Associate Justice determined upon a careful review of the materials (including upon some issues not agitated before me) that the defendants could not be said to have "no real prospect of success." I agree that it cannot be said on the evidence before me that the defendants' position has no real prospects of success. The defendants' contention of a lack of indebtedness to the late Mr Post for money advanced under the loan agreement is, on the evidence before me, realistic and not fanciful.[3] They maintain that monies were advanced by Finton Properties and that any indebtedness is and was to Finton Properties. That assertion may not ultimately succeed but it is a matter which ought to go to trial. Significantly different consequences may flow from which versions of the facts is found to be correct. Debts due to Finton Properties do not cease to be its debts by virtue of the loan agreement: at least the loan agreement does not expressly purport to do so. The evidence of Mr Spark that the debts were due to Finton Properties is not fanciful or unrealistic. His evidence that the late Mr Post did not have significant funds to lend at the time of the loan agreement is plausible and, indeed, is consistent with the plaintiffs' contention that the loan agreement was to apply to, and to govern, the previous loans made by Finton Properties. The loan agreement does not purport to have that effect on its face and whether advances by Finton Properties are debts due to the late Mr Post is not yet established. That conclusion is inconsistent with the (as yet) untested evidence of Mr Spark, some contemporaneous emails from Mr Matheson and at least one document in the accounts of Finton Properties in its capacity as trustee of the Tekla Superannuation Fund.

8 The defendants also maintain some payments having been made to Finton Properties and a course of dealings with the late Mr Post's grandson, Mr Matthew Matheson. The additional loan of $172,500 to which I have previously referred was said by Mr Spark to have been in connection with a Dubai transaction and to have been repaid. There is contemporaneous evidence tending to support the defendants' claim that any debt is due to Finton Properties. The loan agreement may be taken to be effective without carrying the necessary conclusion that any money due to Finton Properties became the money due to the late Mr Post and, therefore, to the deceased's estate as pleaded. Accordingly I will dismiss the plaintiffs' appeal with costs.

[1] Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471, 482-3 (Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ).

[2] Civil Procedure Act 2010 (Vic) ss 61 and 63; Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118, [34] (French CJ and Gummow J).

[3] Wheelahan v City of Casey [2011] VSC 15, [9].

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