Koufos v Kailahi

HIS HONOUR: On or about 23 November 2018, Jim George Koufos lent Hosanna Followers Group Pty Ltd $300,000.00 for a term of 75 days at an interest rate of 6% per month or 10% per month in the event of default. By his amended statement of claim filed on 2 July 2024, Mr Koufos commenced the present proceedings to recover that loan plus interest, now amounting to something in excess of $2.5 million. Moana Kailahi, also known as Moana Vanessa Keepa, is named as the second defendant. She is sued upon the basis that she guaranteed the obligations of Hosanna Followers Group Pty Ltd, described in the loan agreement as “the Borrower”. That company has long since gone into liquidation and plays no part in these proceedings.

Ms Keepa is described in a schedule to the loan agreement as one of two guarantors. Whether or not she was ever, or has somehow become, liable as a guarantor of “the performance of the Borrower’s obligations under” the loan agreement is an issue that is central to the plaintiff’s current application before me. In short, Mr Koufos asks for leave to amend the already once amended statement of claim seeking either rectification of the loan agreement on which he sues to give effect to what he maintains was the parties’ intention that Ms Keepa be included as a guarantor or alternatively that she be required to execute a guarantee now.

It seems to be uncontroversial that the loan agreement contains no specific provision that could be described as a usual guarantee clause. Clause 1.1.5 defines “Guarantor” to mean “the person shown in the Schedule and any other person who has guaranteed or who in the future guarantees, the performance of the Borrower’s obligations under” the loan agreement. Ms Keepa is listed in the schedule along with the first defendant under the word “GUARANTORS”.

Clause 3 is headed “Security”. Clause 3.2 is as follows:

That somewhat curious clause would appear to impose an obligation on Hosanna Followers Group as the Borrower, “when required by the Lender”, to “cause to be executed and delivered to” Mr Koufos “such documents signed by the Guarantors … to guarantee the performance of” Hosanna Followers Group’s “obligations under the agreement”. As far as I am able to determine, Mr Koufos did not “require” Hosanna Followers Group to cause anyone to execute anything, and there is no evidence before me in support of the present application that he did so. With the exception of the letter referred to at [7] below, there is certainly no evidence that Ms Keepa was ever asked by the Borrower to execute any “such documents”. In addition, and importantly, whatever else cl 3.2 does, if anything at all, it does not in terms or by implication impose any obligation upon Ms Keepa to sign any document with which she might have been presented or somehow otherwise to make her liable for the performance of the Borrower’s obligations.

Indeed, it is on the contrary quite clear that any “Guarantor” described as such in the schedule to the loan agreement would not and could not become liable for the performance of the Borrower’s obligations unless and until he or she “signed” documents, the particular terms of which are nowhere described in the loan agreement, at the Borrower’s request. In that respect it seems equally obvious that securing or obtaining Ms Keepa’s signature on “such documents” as the Borrower may require her to sign operates as a condition precedent to the creation of any such liability. However, the loan agreement contains no mechanism by which any prospective guarantor could be required or compelled (“caused”) to execute or to sign anything. The end result arguably seems in my view to be that Ms Keepa is not now liable, whether as a guarantor or in any other capacity, for the Borrower’s obligations under the loan agreement. Ms Keepa’s defence filed in the proceedings reflects that fact.

In the apparently unambiguous recognition of these difficulties, Mr Koufos’ solicitor somewhat audaciously wrote to Ms Keepa’s solicitor on 25 March 2026 in the following terms:

That letter elicited an emphatic response dated 8 April 2026 which outlines in rather more expansive terms the gist of the matters to which I have already somewhat compendiously made reference. It refers as well to several additional matters of some importance for present purposes. It is as follows:

By his notice of motion filed on 8 April 2026, Mr Koufos now seeks leave further to amend his amended statement of claim to include prayers for rectification of the loan agreement and the joinder of Mr Arcuri, the solicitor who acted for Mr Koufos on the loan transaction, as a fourth defendant. In support of that application, Mr Fernon of senior counsel for Mr Koufos tendered the affidavit of Betty Boustani sworn on 11 June 2025 and filed for Ms Keepa in the principal proceedings. It is sufficient for present purposes to observe that Ms Boustani is the former solicitor for Ms Keepa and acted for her under supervision with respect to the loan agreement. Ms Boustani annexes a considerable amount of documentation that touches and concerns the execution of the loan agreement covering correspondence and events between about 20 November 2018 and June 2019. No objection was taken by counsel for Ms Keepa to the use of these documents, notwithstanding that they have not been included in or as part of any evidence upon which it appears Mr Koufos proposed to rely at the hearing. It is sufficient to note that, by reference to these contemporaneous documents, Mr Koufos maintains that the common intention of the parties was that Ms Keepa should become a guarantor of the Borrower’s obligations under the loan agreement.

The issue for me to decide is whether in the circumstances of this case, Mr Koufos should be permitted to amend the amended statement of claim in the way he proposes, accepting as he does that to do so would require the vacation of the hearing of the principal proceedings which is scheduled to commence before McGrath J on 25 May 2026 with an estimate of three days.

In my opinion, leave to amend to plead rectification and to add the solicitor alleged to have breached his duty of care to Mr Koufos with respect to preparation of the loan agreement as the fourth defendant, should be refused. This is for the following reasons.

The first and perhaps most obvious reason is that the application is just too late. No satisfactory explanation for the delay is provided. Mr Koufos’ present solicitor deposes to having received the original file from previous solicitors on 29 October 2025. He completed his consideration of it in late November that year and obtained the advice of senior counsel on 23 December 2025. By 22 January 2026 he had already put Mr Arcuri’s insurer on notice. Despite all of this, it was not until 8 April 2026 that the motion was filed.

Mr Koufos’ own evidence demonstrates that the alleged defects in the documentation have long been known or were at least discoverable for many years. The manifold problems and deficiencies with the contention that Ms Keepa is liable as a guarantor in accordance with the terms of the loan agreement were referred to by Ms Keepa’s solicitor as early as the letter from Mason Parkes Lawyers, Ms Keepa’s solicitors, to Matthew Rowland dated 18 September 2023. Mr Koufos has been on notice that Ms Keepa challenged the assertion that she was liable as a guarantor at least since then if not beforehand. And yet nothing appears to have been done by Mr Koufos about it.

The loan agreement was executed in November 2018, which is now 7 years and 5 months ago. The proceedings were given the hearing date by Pike J on 19 September 2025. No application to rectify the agreement was ever made before the proceedings were commenced and the present application was only made thereafter by Mr Koufos’ notice of motion filed 21 days ago on 8 April 2026. It was not foreshadowed when Pike J listed the matter for hearing. Ms Keepa had filed her defence to the claim on 14 August 2024 and presumably was prepared to go to trial on the allegations in the amended statement of claim.

The proposed amendment is also not a mere refinement of the current pleading. It is what Ms Keepa’s counsel has described as a wholesale recasting of the proceedings. This reflects Mr Koufos’ attempt to avoid the well-understood consequences of the defects in the loan agreement by changing the nature of the claim, enlarging the factual controversy, introducing a new party and vacating the hearing.

The proposed amendment is also prejudicial in the forensic sense. All the evidence has been filed. Ms Keepa has prepared her case to meet the current pleading. Mr Koufos now wishes to substitute the long foreshadowed litigious controversy with a different one involving rectification, the conduct and knowledge of a former solicitor and an entirely new professional negligence claim against Mr Arcuri. As Mr Morahan points out, that is precisely the kind of late disruption which Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 says should not be permitted in the absence of compelling reasons.

The High Court emphasised in that case that a party does not have an entitlement to reshape its case at a late stage simply because the amendment may suggest a claim that is arguable. Considerations such as disruption to the hearing date, wasted costs, delay and the public interest in the efficient use of scarce judicial resources all need to be considered.

This is not a case in which an order for costs can be promoted as a salve for every practical and prejudicial disruption and inconvenience that this application would cause if allowed. I have already indicated that it must be dismissed with costs.

I have earlier adverted to Ms Keepa’s notice of motion filed on 21 April 2026 seeking dismissal of Mr Koufos’ claims pursuant to UCPR 13.4 and security for costs. Even accepting Ms Keepa’s contention that the current claim against her is weak or doomed to fail, it remains on one view at least arguable, if only remotely so. Mr Koufos’ enthusiasm to amend his amended statement of claim to avoid the consequences of these apparent defects may well have been inspired by such a view but that cannot ever be a relevant, far less decisive, consideration. It is unnecessary for me to give any indication of my attitude to the question of whether or not Mr Koufos’ contentions about rectification are arguable, in the context of Ms Keepa’s application to dispose of the proceedings pursuant to UCPR 13.4. So far as the viability of Mr Koufos’ claim as currently formulated, I indicated to Mr Morahan during submissions that I would not be prepared to accede to that application and I remain of that view.

Finally, as Mr Morahan properly concedes, there is no evidence before me concerning the financial status of Mr Koufos and the application for security for costs was not ultimately pressed.

Ms Keepa’s applications should therefore also be dismissed with costs.

It remains for me only to confirm the hearing of the proceedings scheduled to commence before McGrath J on 25 May 2026.