HIS HONOUR: This is an application brought by notice of motion filed by the second defendant, Mr Bhushan, for an order that "orders 2 and 8, so far as they concern him, be stayed until further order."
The orders referred to are orders made by Parker J on 31 October 2023 in the substantive proceedings in which the plaintiff, Mr Ryan, sued the first defendant (the Company) and Mr Bhushan for specific performance of a contract for the sale of land dated 18 January 2023 (the Contract), under which the plaintiff sold to the Company a large parcel of land at Box Hill in Sydney, for $39.5 million.
The contract was scheduled to be completed on 18 April 2023. The Company did not complete.
The plaintiff served a notice to complete requiring completion on 15 May 2023. There was apparently some problem with the notice to complete and a second one was served requiring completion on 9 October 2023. Completion did not occur.
The plaintiff then commenced these proceedings and on 29 September 2023, Parker J afforded them expedition and set them down for hearing before himself on 23 October 2023. His Honour delivered judgment on 31 October 2023: Ryan v UPG 322 Pty Ltd [2023] NSWSC 1293 (the October judgment).
By order 2, Parker J ordered that the contract be specifically performed by the defendants and carried into execution. Orders 3 to 7 are of a mechanical nature. Order 3 required the Company to complete the purchase on the PEXA Platform no later than 2pm on 13 November 2023. Order 8 is in the following terms:
Direct the Defendants to pay the balance of the moneys due under the Contract at the Settlement Date, inclusive of the balance of the purchase price, interest, and adjustment for Council rates to the Plaintiff or as the Plaintiff directs, in return for the Plaintiff conveying title to the Property to the First Defendant through PEXA.
Special condition 44 of the contract (which is extracted in the October judgment at [67]) to which I will refer as the guarantee, is in the following terms:
Guarantee and Indemnity
If the Purchaser of the property is a Company..., the officers or persons who execute this Contract on behalf of the Company or who attest the affixing of the seal of the Company to this Contract ("Guarantor"), hereby jointly and severally:
(i) unconditionally guarantee to the Vendor the performance of all obligations of the Purchaser under this Contract, including payment of all money payable by or recoverable from the Purchaser, notwithstanding this Contract is not enforceable against the Purchaser in whole or in part or is varied without notice to the Guarantor;
(ii) indemnify the Vendor in respect of any default of the Purchaser under this Contract; and
(iii) acknowledge the provisions of this clause shall be deemed to constitute the giving of a Deed by virtue of their execution of this Contract.
This guarantee and indemnity is given by each Guarantor as a principal and is not discharged or released by any release or variation of this Contract.
At no time did the defendants dispute the validity of the contract. Their defence was that specific performance should not be granted against either of them. However, at the hearing, the Company changed position, taking the stance that it did not oppose the making of an order for specific performance against it. As his Honour records at [16] of the October judgment, the main issue debated was whether orders for specific performance should be made against Mr Bhushan.
Before Parker J, Mr Bhushan's argument, relying on the well-known decision of the High Court in Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 (Sunbird), was that, the terms of the guarantee were indistinguishable from those in Sunbird and that, on their proper construction, Mr Bhushan did not promise to pay to the vendor a sum of money if the purchaser did not pay or complete the contract, but that the guarantee was of the type sometimes described as a "see to it" guarantee which obliged him to see to it that the Company performed its own obligations to the plaintiff, but did not impose on him an obligation to pay the balance of the purchase price, if the Company failed to do so. Breach of a "see to it" obligation exposes the guarantor to a claim for damages for breach, not to a decree for specific performance of the Contract.
The nature and extent of the obligations undertaken in the guarantee is a matter of construction of that particular instrument. In Sunbird, the High Court recognised that a guarantee could on its proper construction, of course, impose the type of obligation contended for by the vendor (and the plaintiff in this case): Sunbird at 267-268.
Parker J distinguished the guarantee in casu from the one in Sunbird on three bases, one (probably on his Honour's view the most important one) of which is that guarantee provides that the guarantor's obligation is as principal, which was not the case in Sunbird: see the October judgment at [71] and following.
Additionally, it is to be observed that the guarantee includes an indemnity (which on the face of things has become operative by reason of the admitted default of the Company under the Contract).
On 14 November 2023, Mr Bhushan filed a notice of intention to appeal orders 2 and 8 so far as they relate to him. No application for a stay of those orders was then made. Ultimately, a notice of appeal was filed on 18 January 2024. It is returnable for directions on 14 February 2024. It articulates only one ground of appeal (intended to ventilate the Sunbird point) in the following terms:
The primary judge erred in concluding at J[88] that the Appellant, as guarantor, could be jointly and severally liable to pay the purchase price together with contractual adjustments at the Settlement Date. The primary judge should have concluded that on the proper construction of Contract for Sale, the Appellant's liability to the Respondent upon default of the purchaser was for loss of bargain damages.
In light of the defendants' failure to complete, the plaintiff moved the Court for orders in aid of enforcement.
On 20 December 2023, Parker J delivered a second judgment in which his Honour ordered that there be an examination of Mr Bhushan pursuant to s 108(1)(a) of the Civil Procedure Act 2005 (NSW) as to whether, and if so, what debts are owing to him, and whether he has any and, if so, what other property or other means of satisfying the judgment. Additionally, Parker J ordered Mr Bhushan to produce specified documents: Ryan v UPG 322 Pty Ltd (No 2) [2023] NSWSC 1629 (the December judgment). His Honour made the proceedings returnable before me on 2 February 2024. On that day, Mr Weinberger of counsel appeared for Mr Bhushan. He had not appeared at the original hearing or with respect to the orders in aid of enforcement.
In the substantive proceedings and at the hearing which resulted in the enforcement orders, the Company and Mr Bhushan were represented by Mr Sirtes SC with a junior. The plaintiff has throughout been represented by Mr McInerney SC, also with a junior.
On 2 February 2024, I fixed the examination to occur before me on 8 February 2024.
The plaintiff has on foot an application for additional orders including the appointment of receivers. Any further applications by the plaintiff are, however, to be dealt with after any examination takes place.
Mr Weinberger informed me that Mr Bhushan opposed the examination going ahead, as I understood it, on the sole basis that an examination was futile because neither the Company nor he, that is Mr Bhushan, had sufficient funds to complete the purchase of the property (as will emerge below this is no longer said to be the case).
As well, Mr Weinberger candidly informed the Court that no application for a stay of the substantive orders 2 or 8 had been made by Mr Bhushan, but should have been, presumably because, absent a stay, any proposition that the examination should not proceed would be insupportable, and further enforcement steps are apparently contemplated by the plaintiff .
I gave Mr Bhushan leave to file and serve a motion for a stay with supporting material by 5pm that day and to make it returnable today (being 6 February 2024). The supporting material was served out of time. The motion is supported by an affidavit sworn by Mr Bhushan's solicitor, Mr McDonald, on 5 February 2024. Mr McInerney did not oppose the stay application proceeding.
In paragraph 12 of his affidavit, Mr McDonald states " It has been communicated to the plaintiff and his solicitors on more than one occasion that the first defendant and the second defendant do not have sufficient funds to complete the purchase of the property". This is the primary admissible evidence before the Court on the question of their ability to complete.
But the position has now apparently changed.
At the hearing of the motion, Mr Bhushan was represented by Mr Sheldon of counsel. Mr Sheldon sought to read an affidavit of Mr Vijay Dhingara, a financial accountant employed by the Company, intended to provide some information about the Company's failure to abide the Court's orders and of its current financial position with respect to completing. No affidavit by Mr Bhushan was sought to be read.
Mr McInerney appropriately sought to cross-examine Mr Dhingra but he was not made available and the affidavit was accordingly rejected. The result is that Mr Bhushan has placed no information (beyond what is referred to immediately below) before the Court explaining the default in complying with the Court's orders and elucidating either the Company's or his own financial position.
Mr Sheldon tendered a document dated 2 February 2024 entitled "Term Sheet" from a Company called Alceon Group Pty Ltd to the Company, which he submitted was compelling evidence that the Company would be able to complete the sale by 15 March 2024. He informed me from the bar table that conveyancers separately instructed by the Company had notified the plaintiff that this was the proposed completion date on the PEXA platform.
The Term Sheet commences with a paragraph which includes the following words:
Please note that this Term Sheet does not constitute an offer of finance and remains subject to the satisfaction of the Conditions Precedent below.
The Facility Amount is 65% of the as-is with development approval land value, fully drawn on the commencement date, which is the date of initial draw-down "targeted to be 15 March 2024".
The Conditions Precedent include satisfactory completion of due diligence by the Lender and formal Alceon credit approval. Mr Sheldon did inform me from the bar table that the balance would be available from refinancing.
The second document tendered by Mr Sheldon is a valuation report from Egan National Valuers (NSW) which values the property as is with development approval at $35 million. Taking this valuation at face value, the facility amount under the Term Sheet is $22.75 million. This is $16.75 million less than the purchase price under the original Contract. No evidence was supplied as to how the Company might make up this shortfall, even if the Term Sheet was available but as I have said, Mr Sheldon informed me as to that matter from the bar table.
Mr Sheldon submitted that Mr Bhushan has a strong argument on appeal and that a stay should be granted (and the examination put off) because of the cost, expense and inconvenience that will be incurred (to both sides) of the examination, in circumstances where, additionally, the contract was highly likely to be completed by March 2024.
As to the completion of the Contract, it is perhaps somewhat ironic that the examination was originally resisted on the footing that it would be futile because neither the Company nor Mr Bhushan had the money to complete, and it is now resisted on the footing that they do.
Mr Sheldon argued that the appeal was of narrow compass and could be heard speedily. He said that Mr Bhushan would undertake to prosecute it speedily. It is also to be observed that if the Contract settles on 15 March 2024 as they say it will, there will be no need for any appeal.
I observe that there is no application, in terms, for a stay of the examination.
Mr Sheldon did not suggest that, by the examination going ahead, Mr Bhushan would lose the subject matter of his appeal or that it may be impaired. There was no evidence placed before the Court as to what costs may be incurred by Mr Bhushan in attending the proposed examination as ordered, or what costs have already been incurred with respect to it.
He did, however, make the point that Mr Bhushan might be exposed to proceedings for contempt, and that he was at risk of the examination being used as a "warm-up". He foreshadowed that Mr Bhushan might rely on self-incrimination privilege. These are matters that can be properly dealt with at the examination should the need arise. I was, however, informed from the bar table that documents had been produced pursuant to Parker J's orders.
Mr Sheldon candidly accepted that the failure by the Company or Mr Bhushan to explain their default in complying with the Court's orders and the delay with respect to prosecuting his appeal was not acceptable. He also accepted that if a stay was declined, the examination would proceed.
Mr McInerney argued that the appeal was hopeless, and that the "balance of convenience" was all one way against granting a stay.
He also made the argument that the appeal was practically inutile because, whatever else may be the case, Mr Bhushan was now exposed under the indemnity given in the guarantee, having regard to the Company's admitted default.
The starting point is that the plaintiff is entitled to the fruits of his judgment and it is for Mr Bhushan to identify circumstances which justify a departure from that general rule. The first requirement is to satisfy the Court that the appeal is arguable.
Whilst the guarantee is materially different from that considered in Sunbird, and whilst I find Parker J's reasoning clear and compelling, I do not consider that the argument proposed to be motivated by Mr Bhushan can be properly described as hopeless or futile. I proceed on the footing that the appeal is arguable.
However, I do not consider that Mr Bhushan has identified circumstances justifying the stay of orders 2 and 8. Rather, I consider that justice dictates that a stay should be refused.
The orders for examination were made by Parker J on 20 December 2023. No application for a stay of those orders has been made and indeed no application for a stay of the substantive orders was made until Friday last week.
Mr Bhushan has provided no explanation for his failure to comply with the orders of the Court and, on the face of them, is in default. This does not count in his favour.
The evidence proffered as to the ability of the Company (or Mr Bhushan) to complete is flimsy and unconvincing. The Term Sheet is not an offer and is heavily conditional. I do not think it is without significance that it is dated 2 February 2024, the date upon which the matter first came before me, and upon which the Court was informed for the first time of Mr Bhushan's intention to seek a stay. As I have said earlier, even if the Term Sheet were implemented, there is a significant shortfall in the money needed to pay the purchase price for the property.
Parker J observed in the December judgment that there was evidence about the group of which the Company is part and that its total assets at 30 June 2022 were over $2.9 billion and annual profit (after tax) was over $62.7 million.
As to the costs of the examination, whilst there are no doubt additional costs to be incurred, it is inevitable that the plaintiff has already incurred significant costs for the purpose of preparing for the examination, leaving aside costs already incurred by him in obtaining the enforcement orders. The plaintiff is plainly prepared and willing to incur the costs that will be attendant upon the examination. As I have said, there is no evidence about what costs are still to be incurred by Mr Bhushan in attending the examination.
A new date for settlement has not yet been fixed. The effect of a grant of a stay would be to suspend Mr Bhushan's obligation to complete in circumstances where there is no current settlement date and there has been a history of default and delay. Additionally, if I were to accept what was said on his behalf from the bar table (which I observe I do not), there is a high probability that settlement will occur in any event in March 2024.
I also observe that if the examination were not to proceed and the appeal to be dismissed, the plaintiff would have lost the opportunity of conducting the examination at this time with the attendant possibility of costs, which were incurred in preparation for the examination, being thrown away.
The application for a stay must be dismissed.
I note that had I granted a stay of orders 2 and 8, I would not have ordered a stay of the examination in any event.
After hearing brief submissions, the Court ordered that the second defendant pay the plaintiff's costs of the motion. The costs are to be assessable forthwith and payable immediately upon assessment.
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Decision last updated: 08 February 2024