Tomanovic Multiown Pty Limited v Interlux Projects Pty Limited

Supreme Court of NSW|2021-06-11

Judgment

On 11 March 2021, I published my reasons for conclusions that I reached concerning a dispute arising out of a Deed of Loan dated 12 April 2011 (the Principal Reasons). [1] In these reasons, I shall use terms as defined in the Principal Reasons.
In the Principal Reasons, I concluded that there should be an order that the Deed of Loan not be enforced against Daniel and Jessica pursuant to the Review Act. I also concluded that there should be an order that the Deed of Loan not be enforced as against Interlux on the ground of undue influence brought to bear on Daniel and Jessica as directors of Interlux by Miroslav. I indicated that the position of Miroslav was somewhat more complicated and that Multiown may seek to rely on provisions of the Guarantee and Indemnity that might survive the orders made for the benefit of Interlux, Daniel and Jessica.
Accordingly, I directed that Interlux, Daniel and Jessica file and serve short minutes of proposed orders giving effect to the Principal Reasons and directed Multiown to indicate any dispute with the proposed orders. I also directed Multiown to file any further submissions that it wished to make as to the consequences of the orders in favour of Interlux, Daniel and Jessica and directed Miroslav to file any further submissions that he wished to make as to the consequences of those orders.
By notice of motion filed on behalf of Interlux, Daniel and Jessica on 6 May 2021 (the Costs Motion), those defendants sought an order that the proceedings against them be dismissed and that Multiown pay their costs on the indemnity basis. They also sought an order that Multiown pay a specified gross sum of $115,000 instead of assessed costs.
By notice of motion filed 26 May 2021 (the Reopening Motion), Multiown sought leave to reopen the hearing and for Multiown's sole director, Mr Tomanovic, to appear for Multiown. Multiown also sought an order that Miroslav pay directly to Interlux, Daniel and Jessica their costs in accordance with the Guarantee and Indemnity. The Reopening Motion also sought an order that Miroslav pay Multiown the total sum claimed in the amended statement of claim in accordance with the Guarantee and Indemnity and that Miroslav pay Multiown's legal costs in accordance with the Guarantee and Indemnity.

Reopening Motion

In his affidavit of 25 May 2021, Mr Tomanovic deposes as to matters and events that were the subject of evidence at the hearing. He purports to give evidence of a "correct recollection" of matters that were the subject of earlier affidavits. In his written submissions in support of the application to reopen, Mr Tomanovic says that the Court should allow the reopening of the proceedings to enable "the incorporation" into the final orders "of written submissions and evidence provided to the Court from 11 March 2021 to now". He asserts as follows: "The delivery of a fair and just outcome in the first instance will be more expedient/less costly to each party than the proceedings going to the Court of Appeal. It is evident that presently the priority of Defendants 1 - 3 is to see this case finalised ASAP… . The priority of [Multiown] is a fair and just outcome, even if this would require the case to be heard by the Court of Appeal … . [Multiown's] strong case supported by detailed facts and verified by evidence are clearly evident in this case… . The Fifth Defendant and mother of Daniel, Brenda Smart ("Brenda"), who was removed from these proceedings, was a key person in seeking urgent funds and in the implementation process of the proposed transaction …".
Mr Tomanovic's written submissions then make detailed assertions about the issues in the proceedings. Specifically, Mr Tomanovic contends that Daniel and Jessica did not pursue any of the options available to them as directors of Interlux and providers of guarantees because they trusted and were comfortable in the knowledge that Miroslav and Brenda would "take care of" the undertakings. He asserts that Daniel and Jessica "took a blasé approach to the signing of the Deed of Loan transaction and to their duties as Director and providers of Director's Personal Guarantees on [12 April 2011]". He asserts that that "blasé approach" was not due to the perceived undue influence from Miroslav but because they were comfortable in the knowledge that Daniel's wealthy parents, as guarantors, would "take care of" the undertakings. He asserts that Daniel and Jessica had an immediate financial benefit from assisting Daniel's parents to sustain and improve their financial position.
All of those contentions were in effect advanced on behalf of Multiown by counsel who appeared at the hearing. No justification has been advanced as to why Multiown should have a further attempt to persuade the Court to a different conclusion.
A further complaint that Mr Tomanovic appears to advance is the fact that, 6 days before the trial was fixed to begin, I directed that the evidence-in-chief be given viva voce rather than by affidavit. Mr Tomanovic asserts that Multiown was prejudiced by having the case determined by "verbal evidence in chief". No objection was raised on behalf of Multiown when the direction was made. Further, it is impossible to see how Multiown was prejudicially affected by the direction. No suggestion was made during the course of the taking of viva voce evidence that that evidence departed significantly from the affidavits such that Multiown was taken by surprise.
Multiown had ample opportunity to adduce such evidence as it wished to rely upon and to make such submissions as it wished in support of its case and against the case advanced on behalf of Interlux, Daniel and Jessica. Multiown was represented at all times by solicitors and experienced counsel. Mr Tomanovic participated in the hearing and had ample opportunity to give full instructions to the solicitors and counsel appearing for Multiown. In the circumstances, I am not persuaded that any basis has been demonstrated for giving leave to Multiown to reopen the hearing.

Claim against Miroslav

I reserved to Multiown the opportunity of making further submissions in relation to the position of Miroslav. Once the liability of Interlux, Daniel and Jessica under the Deed of Loan was set aside and rendered unenforceable, it would follow that the accessory liability of Miroslav would also be discharged, unless there were an alternative basis for liability of Miroslav to Multiown. It is not uncommon to find provisions in guarantees whereby the obligation of the guarantor is to be treated as a principal obligation rather than as a secondary or accessory obligation. Alternatively, it may have been possible for some other cause of action to be alleged against Miroslav on the basis that the finding of the Court was that he was responsible for undue influence on Daniel and Jessica. However, no further contentions have been advanced on behalf of Multiown to support a claim that the liability of Miroslav survived the discharge of Interlux, Daniel and Jessica or alternatively that Miroslav had a liability by reason of his involvement in the completion of the documents by Interlux, Jessica and Daniel.

Costs

It follows that the claims against all four defendants, Interlux, Daniel, Jessica and Miroslav, should be dismissed. It is therefore necessary to consider the question of costs.
Interlux, Daniel and Jessica have been successful and there is no reason why their costs should not follow the event. However, they seek a special order as to their costs. There is credible evidence, in the form of tax invoices annexed to Jessica's affidavit of 6 May 2021 and tax invoices annexed to Mr Daryl Nguyen's affidavit of 3 June 2021, that the total of the costs incurred by them to date is in excess of $154,000 as follows: Amount Legal expenses up to 18 February 2020 $50,000.00 Legal expenses 19 February 2020 to 6 May 2021 $77,720.61 Legal expenses 7 May 2021 - 4 June 2021 $18,950.25 Disbursements up to 6 May 2021 $5,582.00 Disbursements 7 May 2021 - 4 June 2021 $2,226.09

No evidence was advanced on behalf of Multiown in response to the detailed evidence of tax invoices.

Thus, on 8 March 2019, Interlux, Jessica and Daniel offered to pay Multiown the sum of $50,000 in consideration for a release and discharge of them from all claims that Multiown has against them. The offer of settlement remained open for 14 days. On 22 January 2020, a further offer was made. The offer of 22 January 2020 outlined the basis upon which it was contended that Multiown's claim against Interlux, Jessica and Daniel would not succeed. Interlux, Jessica and Daniel offered to pay the sum of $75,000 in full and final settlement within 14 days of execution of a deed of settlement. In consideration for that payment, Multiown was to release Interlux, Jessica and Daniel from all claims arising out of the Deed of Loan. The offer was made several weeks before the hearing fixed before Parker J and remained open for nine days. On 4 February 2020, a further offer was made to pay the sum of $100,000 in full and final settlement on the basis that it would be paid within 30 days of the execution of a deed of settlement. Finally, on 18 February 2020, following the vacation of the hearing fixed for 6 February 2020, Interlux, Jessica and Daniel again offered to pay the sum of $100,000 in full and final settlement in consideration of the execution of a deed of settlement. None of those offers was accepted by Multiown. In the circumstances, Interlux, Jessica and Daniel have achieved a result much more favourable to them than any of the offers.
However, the defences based on the Review Act were not filed until 20 February 2020, although leave to rely on the Review Act had been granted by Parker J on 6 February 2020. [2] At that stage, the costs incurred by Interlux, Jessica and Daniel were in the order of $50,000. In the circumstances, I consider that the appropriate order would have been to order Multiown to pay the costs of Interlux, Jessica and Daniel on the ordinary basis up to 18 February 2020 and on the indemnity basis thereafter. However, as I have said, they seek an order that Multiown pay their costs in a specified gross sum instead of assessed costs.
Under s 98(4)(c) of the Civil Procedure Act 2005 (NSW), the Court may order a party to pay costs in a specified gross sum instead of assessed costs. The power to make such an order should not be exercised unless the Court considers that it can do so fairly between the parties. That includes having sufficient confidence in arriving at an appropriate sum on the materials available. [3] A further consideration is the desirability of avoiding the expense, delay and aggravation likely to be involved in contested costs assessments following a lengthy or complex case. [4] It may also be desirable to make a gross sum order in the interests of finality of litigation if it is likely that referral for costs assessment will lead to further litigation. [5]
Interlux, Daniel and Jessica rely on several matters in support of the application for a specified gross sum order. They assert that the proceedings have already been relatively long and protracted having regard to the amount claimed. Multiown's original statement of claim was filed in August 2018 and sought payment of the sum of $375,000 plus interest at the rate of 176% per annum. That claim for interest was abandoned. A hearing before Parker J in February 2020 was vacated because the single day allocated was not regarded as sufficient for completion of the hearing. [6] Parker J took the view that all parties were to blame for the loss of the first hearing date. Interlux, Jessica and Daniel assert that they have lived with the proceedings for two and half years and have had to make numerous personal sacrifices as a result.
In her affidavit, Jessica asserts that the proceedings have caused her significant hardship, stress and uncertainty and refers to the offers to settle. Jessica asserts that she and Daniel have been unable to plan their lives fully as a family because the proceedings have been pending for some years. The possibility of facing bankruptcy if Multiown's claims were successful caused them considerable restriction in their ability to make financial and family decisions freely. She points to the fact that she and Daniel have been pursuing fertility treatment during the period and the litigation has caused her stress. Shortly after an unsuccessful mediation, Jessica lost a baby at 15 weeks after many years of infertility. At the time of swearing her affidavit, Jessica was 23 weeks pregnant with twins.
Proceedings for assessment of costs would be likely to prolong matters and involve more expense. Interlux, Jessica and Daniel point to the action undertaken on behalf of Multiown following the publication of the Principal Reasons by filing the Reopening Motion in circumstances where no proper basis for doing so has been shown. Mr Daryl Nguyen, the solicitor for Interlux, Jessica and Daniel, in an affidavit sworn on 6 May 2021, estimates that additional costs of between $10,000 and $15,000 would be incurred if an assessment is required.
Having regard to the matters outlined above, I consider that this is an appropriate case for the making of an order for a specified gross sum. On the basis of the figures briefly set out above, the professional costs up to 18 February 2020 were approximately $50,000. The professional costs incurred after that date were approximately $97,000. It would be appropriate to discount the sum of $50,000 by 30% and the sum of $97,000 by 15% giving a total of approximately $117,000, to which should be added the disbursements of approximately $8,000. On that basis, I consider that an appropriate sum would be $124,000. That is not the result of a precise calculation but an assessment of the figure that I consider is fair in the light of the offers made and the ultimate result. I have arrived at that figure after considering assertions made by Mr Tomanovic in submissions dated 4 June 2021 referring to promises to pay for which no evidence has been advanced.
Miroslav has been successful and, ordinarily, costs would follow that event. However, Miroslav was unrepresented by any lawyers at the hearing and does not seek any order for costs as against Multiown. Nevertheless, the question is whether any special order should be made in the light of the part that Miroslav played in the execution of the Deed of Loan by Interlux, Daniel and Jessica.
In the Principal Reasons, I concluded that the Deed of Loan should be set aside as against Interlux. However, I should make it clear that it would not follow that the monies that have been repaid to Multiown purportedly in pursuance of the Deed of Loan would be recoverable by Interlux. Multiown has not recovered the amount that would be payable if the Deed of Loan were to be enforced according to its terms. On the other hand, as indicated in the Principal Reasons, Multiown has been paid some moneys as follows: The Principal - $300,000 Plus the Sum - $530,000 Repayment Amount - $830,000 Less payment on 14 March 2013 - $300,000 Less benefit from purchase of Kingaroy Lots - $168,000 Balance - $362,000 Plus the amount of stamp duty - $9,555 Net amount claimed - $371,555.
In essence, that claim should be enforceable against Miroslav. However, as I have indicated, no alternative basis has been advanced in support of a claim against Miroslav under his guarantee.
Notwithstanding the absence of any further formal claim against Miroslav by Multiown, I consider that the justice of the case requires an order that Miroslav contribute to the costs that Multiown is ordered to pay to Interlux, Daniel and Jessica. On the other hand, some of those costs would not have been incurred had Multiown accepted the offer made on 18 February 2020. I consider that the appropriate order is for Miroslav to pay 60% of the costs that Multiown is ordered to pay to Interlux, Daniel and Jessica.
Accordingly, I propose to make the following orders:
Order, pursuant to section 7(1)(a) of the Contracts Review Act 1980 (NSW) that the Deed of Loan dated 12 April 2011 between the plaintiff as "Lender" the first defendant, as "Borrower" and the second and third defendants, as "Guarantor" ("the Deed of Loan") not be enforced and is unenforceable against the second and third defendants.
Order that the Deed of Loan not be enforced further against the first defendant. 3 Order that the proceedings against the first, second, third and fourth defendants are otherwise dismissed. 4 Order pursuant to section 98(4)(c) of the Civil Procedure Act 2005 (NSW), that the plaintiff pay the first, second, and third defendants' costs in the specified gross sum of $124,000.
Order that the fourth defendant pay to the plaintiff 60% of the sum paid by the plaintiff in performance of Order 4.

Endnotes

Tomanovic Multiown Pty Ltd v Interlux Projects Pty Ltd [2021] NSWSC 190.
See Tomanovic Multiown Pty Limited v Interlux Projects Pty Limited [2020] NSWSC 48.
See Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [22].
See Hamod v State of New South Wales [2011] NSWCA 375 at [813]-[820].
See Ghougassian v Fairfax Community Newspapers Pty Ltd [2015] NSWCA 307.
See Tomanovic Multiown Pty Ltd v Interlux Projects Pty Ltd [2020] NSWSC 48 at [11]-[13]. 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: 29 July 2021

At a glance

Court

Decision date

Source

Judgment (7 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (6)

Cited By (1)