Credit Solutions Group Pty Ltd v Obelisk Ventures Pty Limited (No 3)

HER HONOUR: By notice of motion filed 8 July 2019, the first to third defendants seek firstly, an order that their further amended defence, filed 16 May 2019 in defence to the plaintiff’s amended statement of claim (“ASC”), be struck out in its entirety; and secondly, an order that the first to third defendants be granted leave to file a defence to the amended statement of claim.

The plaintiff is Credit Solutions Group Pty Ltd (“Credit Solutions”). The first defendant is Obelisk Ventures (formerly known as Markson Sparks!) Pty Limited. The second defendant is International Events & Speakers Pty Ltd. The third defendant is Maxwell Daniel Markson. The fourth defendant is Westpac Banking Corporation Limited. To date, the fourth defendant has played no active role in these proceedings. The plaintiff relied upon the affidavit of David James Cacciola dated 20 May 2019, the affidavit of Andrew Hack dated 11 June 2019 and paragraphs [6] and [7] of the affidavit of Maxwell Daniel Markson dated 29 March 2019. The defendants relied on the affidavits of their solicitor Benjamin Ronald Franklin dated 8 July 2019 and 16 September 2019.

These proceedings have been on foot since 2017. They have not been listed for trial. The defendants have repaid the sum of $150,000 and have also lodged security of $150,000 with the Court. The defendants seek to file a further amended defence. The plaintiff opposes this application on the bases that, firstly, the proposed further amended defence seeks to withdraw admissions; secondly, the pleading in relation to the caveat has been previously withdrawn; and finally, paragraph [42(2)(g)] contains a series of allegations bundled into one paragraph.

But before I deal with the above issues in turn, I should refer to what I consider to be a fatal defect in the plaintiff’s case as it currently stands. A copy of the deed of loan agreement and guarantee that is intended to prove the plaintiff’s case is annexed as an exhibit DC1 to the affidavit of David Cacciola dated 20 May 2019. He deposes:

The deed of loan and guarantee dated 19 September 2013 (“the deed”) located at p 1 of ex DC1 sets out the parties, namely Credit Solutions Group Pty Ltd ACN 104 259 875 (defined as “the lender”), Markson Sparks! Pty Limited ACN 003 641 398 and International Events & Speakers Pty Ltd ABN 96 714 529 (defined as “the borrowers”) and Maxwell Daniel Markson (defined as “the guarantor”). The deed was signed, sealed and delivered for and on behalf of the lender, purportedly by its “director” pursuant to s 127 of the Corporations Act 2001 (Cth). The signature on the document was of an Anthony Cacciola. However, as at 19 September 2013, the sole director of the lender was David James Cacciola, not Anthony Cacciola (see ASIC extract snapshot – Credit Solutions Group, Ex 1).

The deed upon which the plaintiff relies to found its cause of action does not support the pleading in the ASC. There is another deed in ex DC1 commencing at p 60, between the same parties as those pleaded in the ASC. It too has been signed by Anthony Cacciola as director of Credit Solutions. Even if the latter deed is the correct one, David Cacciola, the author of the plaintiff’s supporting affidavit, cannot swear the affidavit as a “director” of the plaintiff.

The defence that the defendants now seek to advance is as follows:

In SLE Worldwide Australia Pty Ltd v Wyatt Gallagher Bassett Pty Ltd [2005] NSWSC 816 (“SLE Worldwide”), White J set out the principles that govern whether the court will grant leave to withdraw an admission.

In SLE Worldwide, White J referred with approval to the following propositions:

The defendants’ current solicitor, Benjamin Franklin (Aff, 16 September 2019), deposed that he has been informed by Maxwell Markson, who is the third defendant and the sole director of the first and second defendants, that:

In other words, the defendants’ explanation for now seeking to withdraw the admissions is that the defendants relied upon the legal advice of their former solicitors as to what should be pleaded in the amended defence.

Mr Markson (Aff, 29 March 2019 at [7]) deposed that on 29 July 2014, the first and second defendants repaid the sum of $150,000 towards the principal amount outstanding to the plaintiff, leaving an outstanding principal balance of $150,000. It was his understanding that this was the amount that the defendants had to pay to the plaintiff as a condition of serving amended pleadings pursuant to the judgment. I accept that this was his belief at the time when he was receiving legal advice from his former solicitors.

The plaintiff has submitted that certain paragraphs in the proposed amended defence seek to withdraw admissions made in the amended defence. I will set out first the relevant paragraphs of the ASC; second, the alleged admission in the amended defence; and third, the proposed amended paragraph.

This means that when the plaintiff is put to proof as to the contents of the agreement being sued upon, its case will fail unless these shortcoming are rectified.

The plaintiff pleads at paragraphs [9] and [10] of the ASC:

The deed of loan and guarantee dated 19 September 2013 is between the lender, the borrowers and the guarantor.

Clause 1.1 is entitled “Definitions”. It relevantly reads:

“Advances” is set out at clause 2. It relevantly reads:

“Fees” is set out at clause 4. It reads:

Under the heading “Disbursement Authority” is a document dated 19 September 2013, that has been executed by International Events & Speakers Pty Ltd ABN 91 114 298 529 and signed by Max Markson as its director. It reads:

The defendants plead at paragraphs [9] and [10] of the amended defence:

Paragraphs [9] and [10] of the proposed amended defence read:

Paragraph [11] of the ASC pleads:

Paragraph [11] of the amended defence pleads:

Paragraph [11] of the proposed amended defence pleads:

Paragraph [20] of the ASC pleads:

At paragraph [20] of the amended defence, the defendants admitted paragraph [20] of the ASC.

Paragraph [20] of the proposed amended defence pleads:

Paragraph [21] of the ASC pleads:

Paragraph [21] of the amended defence pleads:

Paragraph [20] of the proposed amended defence reads:

The defendants seek leave to withdraw these admissions on the basis that they were not given the correct advice by their former solicitors. Mr Markson has now identified the information which was not provided to him at the time he was given earlier legal advice that led to the filing of the amended defence. I am satisfied that these admissions cannot be said to have been made after consideration and advice, and after a full opportunity for the defendants to consider their case and whether the admissions should be made. I have also taken into account that this matter has not been set down for trial, and that moreover, the plaintiff’s case is defective in its current form. It is my view that in these circumstances, the defendants should be granted leave to withdraw the admissions made in the amended defence. I make such an order.

Paragraph [15(b)] of the proposed amended defence pleads that “the Lender agreed not to register any interest in the property known as XXXX, Dover Heights except in the event of default of the Agreement or the Collateral Security (as that term is defined in the agreement).” Further, the allegations at paragraph [21(3)] of the proposed defence plead that the lodgement of a “caveat was contrary to the terms of the Agreement, particularly clause 13.” A similar form of pleading was advanced and rejected by Davies J in these proceedings.

In an earlier decision in these proceedings, Credit Solutions Group Pty Ltd v Obelisk Ventures Pty Ltd [2019] NSWSC 50, Davies J at [42] and [43] outlined a prior pleading as follows:

Davies J stated at [44] that lodgement of a caveat is not a registration of an interest in the property. A caveat is a device to protect an interest that has already been created. The former barrister for the defendants accepted that he could not press the pleading concerning the caveat.

Counsel for the defendants submitted that the caveat issue was not fully argued before Davies J on the earlier occasion (T 39.44), and submitted that it was a former barrister, not the current one who stated that he could not press the pleading concerning the caveat.

I agree with Davies J that a caveat is not an interest in land. A caveat is a device to protect an interest that has already been created. The amendment set out in paragraph [15(b)] of the proposed amended defence is refused.

The plaintiff submitted that paragraph [42(2)(g)] of the proposed amended defence contains a series of allegations bundled into one paragraph, without substantiation or pleading of the necessary material facts, and without pleading or particularising the basis upon which the plaintiff is alleged to have had the knowledge attributed to it. The plaintiff argued submitted that those paragraphs ought to be disallowed.

Paragraphs [42(2)] and [42(g)] plead:

Paragraph [42(2)(g)] sets out one of the factors that the defendants alleged constitutes unconscionable conduct. It forms a particular, amongst others, of a claim of unconscionable conduct of the proposed further amended defence. In my view, the pleading in [42(2)(g)] should be allowed.

It is my view that the amendments in the proposed further amended defence are arguable but weak. The defendants should be entitled to a trial on their merits.

With the exception of paragraphs [42] and [43] inclusive, the defendants are granted leave to file a further amended defence. This defence should be filed and served within 14 days.

Costs are discretionary. The appropriate order for costs is that costs are reserved.