Portaccomm Building Systems Pty Ltd v Southern Sheet & Coil Pty Ltd

Court of Appeal (NSW)|2013-05-13|Before: Macfarlan JA, Hislop J

Judgment 1HIS HONOUR: By Amended Notice of Motion filed on 13 May 2013, the appellants seek a stay of execution of judgments entered against them at first instance. By oral application made in Court during their counsel's address in reply, they also seek to further amend their notice of motion to claim orders pursuant to Uniform Civil Procedure Rules 2005 r 37.2 that the judgment debts be paid by monthly instalments of $150,000. 2The proceedings at first instance arose out of the supply of steel products by the respondent to the first appellant which is itself a supplier of steel related products. The first appellant, of which the second appellant is the sole director, is a member of a group of companies. Supply by the respondent to the first appellant commenced in August 2005 and ceased before the present proceedings were commenced by the issue of a Statement of Claim on 23 July 2008. In essence, the respondent claimed from the first appellant amounts owing for the supply of steel coil and against the second appellant on a guarantee of the first appellant's liability to the respondent. The first appellant sought damages from the respondent by way of cross-claim. After a hearing occupying in excess of four weeks, Hislop J directed the entry of judgment in favour of the respondent against each of the appellants in the sum of $2,067,429.12, inclusive of interest ([2013] NSWSC 38). Costs orders followed the event. 3On appeal, the first appellant challenges the primary judgment against it on one ground and the second appellant challenges that against it on two. As the merits of the appeals against the judgments sought to be stayed are highly relevant to the exercise of the Court's discretion to grant a stay of execution (Kalifair Pty Ltd v Digi-tech (Australia) Ltd [2002] NSWCA 383; 55 NSWLR 737 at [18]), I shall deal with them first.

The second appellant's appeal 9The only substantive ground of appeal relied upon by the second appellant is as follows: "4. The primary judge was mistaken in finding the Second Appellant's liability under a personal guarantee in favour of the Respondent on the following grounds: a. the personal guarantee was limited in the amount guaranteed and the Respondent exceeded the amount of credit advanced without the Second Appellant's knowledge, consent or approval; b. on a proper construction of the personal guarantee and in the events that happened, the persona guarantee only guaranteed the sale of steel coil manufactured by BlueScope and no other brand of steel". 10The form of guarantee was not put before the Court on the hearing of the motion but the relevant portions of it are set out in the primary judgment at [43] and [44]. It formed part of an executed document entitled "Credit Application and Deed of Guarantee for a New or Lapsed Account". The front page of the document referred to annual sales of $1m, credit requirements per month of $100,000 and to the product to be purchased as "Coil". The guarantee was expressed in a conventional, formal manner. It related to the due payment by the first appellant of "every sum payable by it under this or any past or future sale". It did not contain any limitation as to the amount guaranteed or as to the nature of the goods sold by the respondent to the first appellant. 11Before the primary judge, the second appellant unsuccessfully raised defences to the guarantee based on an alleged release by the respondent and on fraud. 12He also contended that the reference on the front page of the document to a credit limit of $100,000 per month had the effect of limiting his liability under the guarantee. The respondent's principal witness gave evidence that the words "per month" were erroneous and should be disregarded. His Honour said that the appellants accepted this although there was no application to rectify the document (Judgment [65]). His Honour appeared to regard the reference to the $100,000 credit limit as prima facie limiting the second appellant's obligations under the guarantee. However, he found that that liability was unlimited because: "[The second appellant] was in control of the [first appellant's] operations at all times and, in my opinion, consented to and was responsible for the increase in moneys due to the [respondent]" (Judgment [67]). 13The second appellant's ground of appeal appears to assume that the second appellant's "knowledge, consent or approval", if it was present or given,would have had the effect of rendering the guarantee unlimited as to amount. The issue it raises is whether that "knowledge, consent or approval" was present. However, the second appellant's prospects of succeeding on this point on appeal appear to me to be poor because the second appellant was the sole director of the first appellant and, according to the primary judge's finding (Judgment [67]), was "in control of the [first appellant's] operations at all times" (Judgment [67]). On the motion, the Court was given no reason to think that this factual finding might have been erroneous. 14The second point that the second appellant raises on appeal is that his guarantee only related to the sale of steel coil manufactured by BlueScope. The primary judge held otherwise (Judgment [64]) and, on the face of the guarantee, that appears plainly to have been the case. The highest the second appellant's case seemed to be put was that, at the date of the guarantee, sales were of BlueScope steel only and that sales of steel coil manufactured by others only occurred subsequently. However, this is insufficient to found a conclusion that the second appellant's guarantee was, or became, limited to liabilities arising out of the sale of BlueScope steel coil only.

The balance of convenience 15Whilst the appellants adduced some evidence of their financial position, it was far from satisfactory. Financial Statements of the first appellant were in evidence but not those of the other companies in the group of which the first appellant forms part. One reason that this was significant was that the financial statements showed a gross annual income of the first appellant's business for the year ended 30 June 2012 of $17,291,067 but an estimated gross annual income for the current year of only $5 - 6m. This required explanation in light of the primary judge's finding that: "The group business was constructed in such a manner that any profits from the sale of steel kit homes and components would be received by Portaccomm Steel Pty Limited rather than the [first appellant]" (Judgment [124]). 16The need for an explanation and for evidence of the group position is accentuated by the primary judge's findings that the second appellant "demonstrated commercial dishonesty" and was not "a reliable and credible witness" (Judgment [82]). The end result is that the first appellant has not in my view demonstrated that, as it contends, it does not have resources available to it to pay the judgment debt and will, if no stay is granted, necessarily go into liquidation. 17A further matter relevant to the balance of convenience is that the debt claimed by the respondent dates back a number of years and despite the first appellant having appeared to contest the whole of it, at least until the commencement in April 2012 of the hearing at first instance, the first appellant has not paid to the respondent any part of the sum of $737,306.52 (plus interest) which it concedes to be owing. 18The evidence of the second appellant's financial position is also unsatisfactory as it does not demonstrate his inability to obtain assistance in payment of the judgment debt from other sources such as his wife who is shown on his Financial Statement as making a contribution of $3,640 per week to payment of his liabilities.

Conclusion on stay application 19As I have indicated, upon the material that has been presented to the Court, in my view the appellants have poor to non-existent prospects of success on their appeals. In these circumstances and taking into account the inadequacy of the evidence of their financial positions, I consider that their application for a stay of execution of the judgments should be refused.

Amendment application - payment of judgment by instalments 20On 5 March 2013, the appellants applied under Uniform Civil Procedure Rules r 37.2 for an order that their judgment debts be paid by instalments. Their notice of motion was amended on two occasions following requisitions from the Court but the application was refused by the Principal Registrar of the Common Law Division on 15 April 2013. 21UCPR r 37.3(3) permitted the appellants to file an objection to that refusal within 14 days after the order was made. That period expired some weeks ago without any objection having been made. If an objection had been made, execution of the judgments would have been stayed pending determination of the objection (UCPR r 37.5(1)(b)). 22I see no reason to permit the appellants to make an application for payment by instalments in this Court where they have chosen not to take the course specifically provided by the Rules. In addition, the inadequacy of the evidence of their financial position and the fact that their application is sought to be made to this Court rather than the Common Law Division are factors weighing against their application to amend their notice of motion.

Orders 23For the reasons I have given, I make orders as follows: (1) Leave refused to the appellants to further amend their Amended Notice of Motion filed on 13 May 2013. (2) Dismiss with costs the appellants' Amended Notice of Motion filed on 13 May 2013.

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: 14 May 2013

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