Monetary Solutions Pty Ltd v Bell Building Projects Pty Ltd

The plaintiffs seek monetary judgment against the three defendants arising from their default to a loan agreement and two subsequent variations to that agreement.

The loan was secured by an unregistered third mortgage over a property in Collaroy (“the Collaroy Property”). The loan fell to be repaid on 19 February 2023. It is not in dispute that the plaintiffs failed to pay any part of the loan on or before that date and remain in default up to the present day. Indeed, little is in dispute between the parties. I am indebted to Mr O’Sullivan who appeared on behalf of the defendants and to Mr Young SC who appeared on behalf of the plaintiffs for the collaborative and efficient manner in which they conducted the proceedings.

The plaintiffs read the following affidavits in the proceedings, without objection:-

The defendants relied on no evidence.

The following can be gleaned from the pleadings and the affidavits read in the proceedings.

The plaintiffs in the proceedings are Monetary Solutions Pty Ltd (the first plaintiff) and Priscilla Stamatakos (the second plaintiff). Ms Stamatakos is a client of Monetary Solutions, a mortgage broker who arranges loans between private individuals willing to loan money on security of a mortgage to borrowers.

The defendants in these proceedings are Bell Building Projects Pty Ltd (the first defendant), Mr Jason Bell (the second defendant) and his wife Ms Diana Bell (the third defendant). Mr and Ms Bell are the directors of the first plaintiff and the registered proprietors of the Collaroy Property.

The defendants’ business involves purchasing properties, developing them, and re-selling them at a profit. The Collaroy Property was one such property that the defendants purchased for redevelopment and resale.

On 31 May 2022, Ms Bell contacted the first plaintiff enquiring about a loan of $500,000 plus capitalised interest on security of a third mortgage to facilitate the completion of major renovations at the Collaroy Property.

On 3 June 2022, the first plaintiff made a loan offer of $600,000 for six months at an interest rate of 24% per annum. After deducting interest in advance of $72,000 and brokerage and lenders fees, the defendants were to be left with approximately $500,000.

The loan transaction and related documents were executed and signed on 14 June 2022. These documents were in evidence before me and included, relevantly:-

There is no dispute that the effect of those loan documents (“the Original Loan Agreement”) was that the plaintiffs agreed to lend $600,000 to the first plaintiff on security of a third unregistered mortgage over the Collaroy Property, and that these funds were advanced to the defendants. There is also no dispute that the second and third defendants agreed to guarantee the obligations of the first plaintiff under the Original Loan Agreement.

At the time of the Original Loan Agreement, two mortgages were registered on the Collaroy Property. These mortgages were both discharged on 14 September 2022. On that same day, Mr and Ms Bell granted two new mortgages over the Collaroy Property; the first to Perpetual Finance Company Ltd (“Perpetual”) securing a loan of $3,468,700 and the second to Australian Agrivision Pty Ltd (“Agrivision”) securing a loan of $356,846. Both mortgages were registered on 14 September 2022.

These mortgages were able to be registered because the plaintiffs had not lodged a caveat on the title to the Collaroy Property. The total value of the two new loans secured by the Collaroy Property was $3,825,547. Each new mortgage was negotiated and registered without the knowledge of the plaintiffs.

The plaintiffs made two further loans to the defendants on the security of the Collaroy Property. In both the Defence to the Amended Statement of Claim and in oral submissions, the defendants accepted that these further loan agreements were made by way of variations to the Original Loan Agreement. That the two subsequent loans were variations rather than new loan agreements is significant for reasons that will follow.

On 7 November 2022, the parties agreed that the plaintiffs would loan a further $55,000 to the first defendant (“the First Variation”). On 19 December 2022, the parties agreed that the plaintiffs would loan a further $97,000 to the first defendant (“the Second Variation”). Both the First and Second Variations were noted to be a “loan advance [as] an extension to the mortgage advanced on 14 June 2022.” Both the First and Second Variations noted that the second and third defendants were “Directors/Guarantors” and both were signed by the second and third defendants. Under both signatures were the words “Director Bell Building Projects Pty Limited”. I observe here that the second and third defendants were the registered proprietors of the Collaroy Property, and were parties to the mortgage referred to above.

It is not in dispute that these additional loan funds were advanced to the defendants. It is also not in dispute that the loan funds (now totalling $752,000) were never repaid. Neither was any interest (other than interest in advance) ever paid.

The Agrivision mortgage was discharged on 30 June 2023. On the same day, Mr and Ms Bell granted a second mortgage to Hastings Capital Australia Pty Ltd (“Hastings”) securing a loan advance of $725,000. The Hastings mortgage was registered on 30 September 2023.

The effect of this new mortgage was that the combined loans of Perpetual, Hastings and the plaintiffs amounted to $4,940,700, approximately $140,700 more than the value of the Collaroy Property.

On 1 May 2024, the plaintiffs lodged a caveat on the Collaroy Property claiming an interest in the land as equitable mortgagees. The caveat was removed upon registration of the plaintiffs’ mortgage on 27 September 2024.

On 1 October 2024, the plaintiffs served a notice to the defendants pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW). The plaintiffs filed the initiating Amended Statement of Claim in this Court on 12 November 2024, seeking possession of the Collaroy Property and a monetary judgment against the defendants in the sum of $1,092,940.

On 15 August 2025, Hastings was granted judgment for possession of the Collaroy Property. As a result, only the plaintiffs’ monetary claim needs to be determined in these proceedings.

As at the date of hearing, the total debt, inclusive of interest, owed to the plaintiffs by the defendants is $1,255,156.49. That amount is not in dispute.

A court book of two volumes, containing the pleadings and the affidavits was before me. The exhibits to Mr Carter’s and Mr Koovousis’s affidavits included, among other things, the Deed of Loan, the Deed of Guarantee and Indemnity for the Original Loan Agreement, and the Deeds of Loan for the First and Second Variations. Also in evidence were voluminous email exchanges between the plaintiffs and the defendants.

The Deed of Loan for the Original Loan Agreement names Bell Building Projects Pty Ltd (the first defendant) as the Borrower, and Mr and Ms Bell (the second and third defendants) as the guarantors. That document contains the following relevant clauses:

The Original Loan Agreement is also comprised of a Deed of Guarantee and Indemnity, again naming the plaintiffs as the lenders and the second and third defendants as the guarantors. It contains the following relevant clauses:-

There are apparently three issues in dispute between the parties. The first is whether Mr and Ms Bell personally guaranteed the loan amounts in the First and Second Variations at the time that those variations were entered into, bearing in mind that the word “Director” appears beneath their signatures.

The second issue is whether Mr and Ms Bell guaranteed the loan amounts of the First and Second Variations under the terms of the Deed of Guarantee and Indemnity which they signed at the time of the Original Loan Agreement.

The third issue, if Mr and Ms Bell are found not to have guaranteed the amounts in the First and Second Variations, is whether they consented to the variation of the amounts guaranteed (from $600,000 to an additional $55,000 and then an additional $97,000). If they are found not to have consented, the issue is whether those variations had the effect of vitiating the guarantee in the Original Loan Agreement such that Mr and Ms Bell are also no longer personally liable for the original $600,000 loan.

The plaintiffs rely upon the documents for their full force and effect. They submitted that on a plain reading of the Original Loan Agreement and the First and Second Variations, each of the defendants is liable for the sum of $1,255,156.49.

Anticipating (correctly) the defendants’ arguments, it was submitted that the first and second defendants guaranteed the First and Second Variations at the time they were executed. It was submitted that their conduct indicates the acceptance by them of the second plaintiff’s offer.

As to the capacity in which the defendants’ executed the variations, Mr Young relied on TW Timber Treatment Pty Limited v Giddings [2022] VSCA 147, where, in a joint judgment, McLeish, T Forrest and Macaulay JJA said at [49]-[51]:-

The plaintiffs submitted that objectively construed, the variations evince an intention that the first and second defendants personally guaranteed the subsequent loans.

So far as the anticipated argument that the first and second defendants did not guarantee the variations pursuant to the terms of the Original Loan Agreements, the plaintiffs rely upon the plain meaning of the clauses I have extracted above. It was submitted that even if I were to find that new guarantees were not provided pursuant to the First and Second Variations, cll 1, 2 and 25 of the original Deed of Guarantee and Indemnity would operate to secure the variations.

In the event that the Court found that the first and second defendants have guaranteed the First and Second Variations, the plaintiff submitted that the argument that the variations were entered into without the second and third defendants’ consent and that this vitiated their guarantees as part of the Original Loan Agreement falls away. In any event, it was submitted that the documents demonstrate that the defendants did consent to the execution of the variation, as in each case the third defendant sent emails to Mr Koovousis requesting the additional loans and then both defendants signed both documents. Further, it was submitted that there was no arguable case that the indemnities contained in the Original Loan Agreement were vitiated as the law relating to the vitiation of guarantees (an accessorial obligation) does not extend into the field of indemnities (a principal obligation): see Canty v Paperlinx Australia Pty Ltd [2014] NSWCA 309 at [3] per Emmett JA.

Mr O’Sullivan’s primary submission was to the effect that on a proper construction of the documents, it was clear that the second and third defendants had signed the First and Second Variation in their capacity as directors, rather than as guarantors. This, he submitted, could be gleaned from a variety of documents in the evidence in which the second and third defendants had signed documents in their separate capacities as directors and guarantors. He said that throughout the dealings the parties had taken pains to specify the capacity in which the various documents were signed. It therefore followed, in his submission, that the first and second defendants had signed the First and Second Variations solely in their capacity as directors, as their signatures appeared above the designation “Director, Bell Building Projects Pty Ltd”, and that it was the first defendant only who was responsible for the sums advanced pursuant to the First and Second Variations.

Mr O’Sullivan further submitted that, properly construed, the clauses in the Original Loan Agreement and Deed of Guarantee and Indemnity extracted above did not apply to the First and Second Variations. Finally, he submitted that the defendants in their personal capacity never consented to the First and Second Variations so that the guarantees in the Original Loan Agreements were vitiated, and that any indemnity was indistinguishable from the guarantee and was likewise vitiated. He relied on Lee v ATL (Australia) Pty Ltd [2023] NSWCA 327 at [82] per Gleeson JA, with whom Meagher JA and Griffiths AJA agreed.

Looking at the documents establishing the variations objectively, in my opinion the second and third defendants guaranteed the sums advanced pursuant to the First and Second Variations. I make this finding for the following reasons.

First, the documents (which have not been drafted with particular sophistication taking into account the haste in which the funds were required to be advanced) identify the first defendant as the borrower and the second and third defendants as both Directors and Guarantors, notwithstanding that the second and third defendants’ signatures appear above the designation “Director, Bell Building Projects Pty Limited”. Second, both documents note that, as security, “this loan advance is an extension to the mortgage advanced on the 14th June 2022”. That security was the Collaroy Property, which was owned by the second and third defendants and in which the first defendant had no interest. In my opinion, upon consideration of the variation documents themselves objectively construed, and notwithstanding the qualification attached to their signatures, the second and third defendants intended to guarantee the funds advanced in both the First and Second Variation.

Against the possibility that I am wrong, in my opinion the various clauses of the Original Loan Agreement and the Deed of Guarantee and Indemnity which have been set out above expressly anticipate a variation (as occurred in this case on two occasions). These clauses have the effect that the second and third defendant guaranteed all future loan liabilities of the first defendant to the plaintiffs.

The vitiation argument does not therefore arise. However I observe that, objectively construed, the second and third defendants consented to the execution of the First and Second Variation, as is clear from the correspondence between the third defendant and Mr Koovousis. In any event, in my view, cl 25 of the Deed of Guarantee and Indemnity, reproduced above, has the effect that the guarantee was not released by any subsequent variation irrespective of the consent or knowledge of the guarantors of that variation. Furthermore, the indemnities in the Original Loan Agreement, which would have the same practical effect on the indebtedness of the second and third defendants would not be affected even if the guarantees were vitiated. I therefore reject the defendants’ argument on this issue.

In all of the circumstances, therefore, the defendants are liable to the plaintiffs for the sum of $1255,156.49.

Mr Young submitted that the defendants should pay the plaintiffs’ costs on an indemnity basis, and he relied on several clauses of four documents in evidence relevant to the question of costs.

Clause 4 of the Memorandum Q860000, incorporated by reference into the mortgage, provides:-

Clause 17 of annexure “A” to the mortgage provides:-

Clause 11 of the Original Deed of Loan provides:-

Clause 14 of the Deed of Guarantee and Indemnity provides:-

Mr O’Sullivan appropriately did not dispute that the effect of these clauses was such that his clients were liable for the plaintiffs’ costs on an indemnity basis.

I make the following orders:-