Wanis v Lifestyle Residences Hobsons Bay Pty Ltd

Supreme Court of NSW|2023-08-28|Before: Schmidt AJ

Solicitors: Heathfield Grosvenor Lawyers (Plaintiff) Welner Lawyers (First, Second and Third Defendants) Arnold Bloch Leibler (Fourth Defendant) Ark Legal (Fifth Defendant) File Number(s): 2022/167746

JUDGMENT

Mr John Wanis brought these proceedings in 2022, seeking to recover funds which he loaned in 2019 to Lifestyle Residences Hobsons Bay Pty Ltd, for the development of a property in Victoria, over which he had lodged caveats. The loan having become repayable in March 2020, but Lifestyle is now in receivership. The proceedings against the receiver, who is pursuing the sale of the property, have not yet advanced.
The claims advanced against Mr Van and Mr Harrison by the amended statement of claim are that they guaranteed repayment of the loan and the interest which it attracted, under separate deeds of guarantee which they each entered. They defend those claims.
The other defendants are ACapital Finance No.3 Pty Ltd, which holds a first registered mortgage over the property, having advanced Lifestyle some $18 million and Immuto Fleur Nominees Pty Ltd, another a lender, which holds a second registered mortgage over the property. But they are not active in the proceedings and if the property is sold, Mr Wanis' claims against them will necessarily fall away.
This judgment deals with Mr Wanis' May 2023 motion. Thereby he seeks orders under r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW) for the hearing of separate questions in relation to his claims against Mr Van and Mr Harrison, which they also oppose. The questions specified are: "a. Is the plaintiff entitled to a declaration that the second and third defendants (by reason of the Facility Agreement and General Security Agreement dated on or about 22 February 2019 and Deeds of Guarantee executed by each of them on 19 February 2019) are pursuant to that Deed of Guarantee jointly and severally liable to the plaintiff for the repayment by the first defendant of all monies owing to the plaintiff pursuant to the Facility Agreement and General Security Agreement. b. Is the plaintiff entitled to judgment with costs against the second and or third defendants jointly and severally in such amount that is owing to the plaintiff pursuant to the Facility Agreement, the General Security Agreement and the Deeds of Guarantee executed by the first and or second and third defendants on or about 19 February 2019."

Issues

What is not in issue includes that: 1. in 2019 Mr Wanis and Lifestyle entered the loan facility agreement, under which he obtained a charge over the land to secure the loan and he later placed caveats over the property, after Lifestyle acquired it; 2. Mr Van and Mr Harrison are parties to that agreement as guarantors. That they then also each entered separate deeds of guarantee is not admitted; 3. the loan, which was due to be repaid by March 2020, was not repaid despite repeated representations by Mr Van that repayment was imminent; 4. the receiver was appointed to Lifestyle in September 2022 and Mr Wanis has been kept informed of steps being pursued to refinance and sell the property; 5. Lifestyle, ACapital and Immuto are necessary parties to the proceedings, given their respective positions as proprietors of the property and holders of registered mortgages over it; 6. by the Court's 8 December 2022 orders Mr Van and Mr Harrison were required to file and serve the evidence on which they wished to rely in the proceedings by 14 April 2023. They filed no evidence; 7. on 27 April 2023 Mr Wanis was given leave to file a motion seeking a separate determination of his claims against Mr Van and Mr Harrison and that day their solicitors advised that they would not be filing evidence in the proceedings; 8. Mr Van and Mr Harrison have not filed any cross-claim, despite having given "notice" in their November 2022 defence that they intended to make an application under the Contracts Review Act 1980 (NSW) in relation to the loan facility agreement, seeking a declaration that various of its provisions are void, as well as unspecified variations; 9. the parties have not reached any agreement about the relevant facts; 10. the deeds of guarantee, facility agreement and general security agreement on which Mr Wanis' case is advanced are all in evidence and how they came into existence is explained in his affidavit. He can thus be cross-examined at any hearing of the separate questions; and 11. however the disputed agreements and deeds might be construed, or the agreements varied as to interest, Mr Wanis will at least be entitled to an order for repayment of the principal he advanced to Lifestyle.
Mr Wanis indicated at the hearing of the motion that he would seek to put on a further short affidavit about the execution of the deeds of guarantee, Mr Van and Mr Harrison still not admitting that they had executed them.
There was no issue that unless Mr Van and Mr Harrison file and serve affidavit evidence in response to Mr Wanis' further evidence, as they foreshadowed they might, determination of the dispute over their execution of the deeds of guarantee will depend on his evidence. Any inferences which can be drawn from the documents and the failure of Mr Van and Mr Harrison to give evidence, if that eventuates, will also be relevant to what lies in issue in relation to the deed of guarantee.
There was also no issue about the Court's discretion to make the orders sought, or the principles applicable to its exercise which have been discussed, for example, in Legge v Universal Hospitality Group Pty Ltd [2019] NSWSC 760 at [13]-[15]. They include that: 1. the questions which may be separately determined include questions of fact, or law, or partly of fact and partly of law; 2. the Court's discretion must be exercised cautiously and in accordance with the requirements of s 56 of the Civil Procedure Act 2005 (NSW), which specifies that the overriding purpose of the legislative scheme is "the just, quick and cheap resolution of the real issues in the proceedings"; 3. to further that purpose, the proceedings must be managed for the objects specified in subs 57(1) and the Court must act in accordance with what the dictates of justice require, having regard to the requirements of ss 56 and 57 and the matters specified in subs 58(2)(b). They are: (i) the degree of difficulty or complexity to which the issues in the proceedings give rise, (ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities, (iii) the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties, (iv) the degree to which the respective parties have fulfilled their duties under section 56 (3), (v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings, (vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, (vii) such other matters as the court considers relevant in the circumstances of the case; 1. it is for the moving party to satisfy the Court that it would be just and convenient for the order sought to be made, all questions of fact and law lying between the parties usually being determined at the one time; and 2. while each case has its own dynamics, factors relevant to the question of whether the discretion should be exercised include: 1. the saving of time and cost by substantially narrowing the issues for trial, or even leading to the disposal of the proceedings; 2. the possibility of contributing to the settlement of the litigation; 3. the attitude of the parties; 4. whether the necessary concrete facts, which would permit the dispute about the deeds of guarantee to be quelled, can be established on the evidence: Bass v Permanent Trustee Company Limited (1999) 198 CLR 334; [1999] HCA 9; and 5. the time likely to be taken in the hearing of the separate question and the availability of hearing dates for that purpose, by comparison to the time and expense of the substantive hearing and the length of time likely to elapse before such a hearing will take place.
What was in issue was thus whether in the present circumstances, these principles permit the exercise of the discretion to order the separate hearing of the questions Mr Wanis posed.

The parties' cases

Mr Wanis' case is that the separate questions can justly be determined, given that Mr Van and Mr Harrison are the only active parties and that while the facts are not agreed, his evidence and the documents on which he relies do establish the facts on which the parties' cases about the guarantees turn.
Mr Van and Mr Harrison's liability for what Lifestyle owes him depends on what they have not admitted, namely, that they are bound by the deeds of guarantee. That is a liability question which can justly be determined separately from the question of the amount which he is owed under the facility agreement. It being common ground that whatever is decided in relation to the disputed interest, he is entitled to have repaid the principal which he advanced to Lifestyle.
Mr Wanis accepted that if he fails to establish that Mr Van and Mr Harrison were bound by the deeds of guarantee, his claim against them will be dismissed. If he succeeds, final orders against them will depend on the later resolution of his claim against Lifestyle.
It is yet unknown whether Lifestyle will put liability or quantum in issue, or what claim Mr Van and Mr Harrison will pursue by their foreshadowed cross-claim in respect of the interest agreed under the facility agreement. They having only indicated at the hearing that they had given instructions that their foreshadowed cross-claim be filed within 14 days.
But resolution of the proper construction of that agreement, the claims already made about penalty interest and the foreshadowed claims under the Contracts Review Act, can all have no impact on whether Mr Van and Mr Harrison are bound by the deeds of guarantee.
For their part Mr Van and Mr Harrison still contended that the motion was misconceived. Their case was that it raised no clear case for determining the sperate questions posed, there being no agreed or concrete facts which would lead to the controversy between them and Mr Wanis being quelled. Nor would their determination end the litigation, or even substantially narrow the issues.
That was because more was put in issue by their defences than Mr Wanis acknowledged; that thereby he was put to proof that they were bound by the guarantees, they not having admitted they had executed them; questions of construction of the loan agreement also had to be determined; and a question arose as to whether the interest rates there provided were penal. It was also relevant that the loan agreement might be rewritten as the result of their cross-claim and these were all matters which they claimed they would be entitled to rely on at the hearing of the separate questions.
That was disputed by Mr Wanis.
He contended that all that was raised by the defence and might be put in issue by the cross-claim in relation to the loan facility agreement had no relevance to whether Mr Van and Mr Harrison had executed the deeds and were bound by their terms.

The defence

What the defence pleads includes, in summary, relevantly: 1. an admission that the loan agreement on which Mr Wanis relies was entered by Mr Van and Mr Harrison as guarantors on 8 March 2019; 2. admissions of various pleaded terms of the loan agreement; 3. a denial that the claimed security is given by the loan agreement, or that various of its terms have the effect Mr Wanis claims; 4. claims that some provisions of the loan agreement, including as to interest, are void for uncertainty and unenforceable, as well as penal in nature; 5. the foreshadowed cross-claim under the Contracts Review Act; 6. that the date for repayment of the loan has passed and that it is repayable; 7. that Mr Wanis had any right to register caveats over the property as he did is not admitted; 8. that the caveats are defective; 9. that the claimed breaches of the loan agreement caused the loss or damage claimed and that Mr Wanis is entitled to orders for repayment of the loan or interest claimed are denied; and 10. as to the deeds of guarantee: "Save that they say this if (which is not admitted) they signed Deeds of Guarantee, they did so by Deed dated 8 March 2019. They otherwise deny the allegations contained in paragraph 22."
It follows that on the current pleadings, resolution of what is owed under the loan agreement, even if Lifestyle remains inactive, will require the determination of its proper construction, as well as whether it provides for penal interest. That will not depend on any evidence given by Mr Van or Mr Harrison.
Unless the foreshadowed cross-claim is filed questions arising under the Contracts Review Act will also not arise for determination. If such a claim is pursued it will have to be supported by evidence and Mr Wanis will not only have an opportunity to file a defence to such a claim, but to lead evidence in relation to it. The onus will still fall on Mr Van and Mr Harrison to establish the case they thereby pursue.
By way of contrast, the claims which Mr Wanis advances in relation to the guarantees will require him to establish that Mr Van and Mr Harrison gave those guarantees and are bound by them. They have elected to lead no evidence to resist his case about that to this point.

Should determination of the separate questions be ordered?

For the following reasons I have concluded on all the evidence that orders for decision of the two questions posed, separately from any other questions, should be ordered.
Such an order does not depend on those questions resolving all issues lying between the parties in the proceedings, but they will resolve the dispute about whether Mr Van and Mr Harrison are bound by the guarantee on which Mr Wanis relies.
Contrary to the case advanced for Mr Van and Mr Harrison, I am not persuaded that what is in issue in relation to the guarantees depends on the resolution of what is in issue in relation to the construction of the loan agreement and the interest for which it provides, or even the foreshadowed cross-claim.
Rather, I accept that what is in issue in relation to the loan agreement is truly distinct from what lies in issue in relation to the deeds of guarantee and that resolution of the proposed questions will significantly narrow what remains in issue between Mr Wanis, Mr Van and Mr Harrison.
I am also satisfied that the necessary concrete facts are established on the evidence, even though the facts have not been agreed.
In evidence are not only the documents which the parties all accept they executed, but also the deeds of guarantee which Mr Wanis claims that Mr Van and Mr Harrison executed. The evidence also explains: 1. how Mr Wanis came to advance the loan to Lifestyle, having been introduced to the opportunity to advance the funds by a financial adviser, Ms Ferris, who advised him of the proposed terms of the loan; 2. that it was not Mr Wanis who drafted or provided the documents which were later executed, they having been drafted by Mr Van, amended and provided by Ms Ferris and then executed without amendment by Mr Wanis; 3. that Mr Harrison was the son-in-law of Mr Burgess, the sole director, secretary and shareholder of Lifestyle; 4. that neither the principal nor interest was repaid to Mr Wanis in March 2020, when the loan finally fell due; 5. nor was payment made later, despite repeated representations made by Mr Van about imminent repayment, when Lifestyle obtained other borrowings; and 6. Mr Wanis' rejection of proposals made by Mr Van that he take an equity position in Lifestyle's development and still the loan was not repaid.
As was accepted for Mr Van and Mr Harrison, if they are bound by the deeds of guarantee, they will at least be liable for repayment of the principal advanced to Lifestyle, which was thereby guaranteed.
Finalisation of the rest of the money order to be made against them will depend on resolution of what lies in issue in relation to the interest specified in the loan agreement, as well as what is raised by any cross-claim which they file. But I am satisfied that those matters do not impact the resolution of what is in issue about the guarantees.
That a hearing about what remains in issue about other matters is still not imminent, must in all of the circumstances I have discussed, be accepted.
But I am satisfied that the just, quick and cheap resolution of the real issues in these proceedings will be advanced by the separate questions being determined beforehand. That the resolution of what is in issue in relation to the guarantee may also advance the possibility of a settlement of the remaining issues, is also apparent.
It follows that it must be concluded that Mr Wanis has met the onus which falls upon him to establish that the Court's discretion to make the orders which he seeks should be exercised.

Costs

The usual order under the Rules is that costs follow the event. The parties did not wish to be heard about this. Given the conclusions I have reached, that is an order in favour of Mr Wanis.

Further directions

The parties should now discuss the further orders necessary to prepare the matter for hearing of the separate questions.

Orders

For the reasons given I order that: 1. Pursuant to r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW) the following questions are to be determined separately from any other questions in the proceedings and before the trial of the other questions in the proceedings: "a. Is the plaintiff entitled to a declaration that the second and third defendants (by reason of the Facility Agreement and General Security Agreement dated on or about 22 February 2019 and Deeds of Guarantee executed by each of them on 19 February 2019) are pursuant to that Deed of Guarantee jointly and severally liable to the plaintiff for the repayment by the first defendant of all monies owing to the plaintiff pursuant to the Facility Agreement and General Security Agreement. b. Is the plaintiff entitled to judgment with costs against the second and or third defendants jointly and severally in such amount that is owing to the plaintiff pursuant to the Facility Agreement, the General Security Agreement and the Deeds of Guarantee executed by the first and or second and third defendants on or about 19 February 2019." 1. Mr Van and Mr Harrison are to bear Mr Wanis' costs of the motion, as agreed or assessed; and 2. The matter will come before me at 9.30 am on 12 September 2023 for further directions, about which they should confer beforehand.

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: 05 September 2023

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