Lumby v Akbarian

HIS HONOUR: The plaintiff (Lumby) sues the defendants (respectively, Mr Akbarian and Sharjade) for amounts said to have been advanced by Lumby to Sharjade pursuant to a trade finance agreement dated 10 February 2000. Mr Akbarian, who was or is the principal of Sharjade, is sued as a guarantor.

The case that Lumby advances by its Commercial List statement is that as at 20 August 2001 the amount of the funds advanced by it to Sharjade pursuant to the trade finance agreement, together with interest, charges and fees, was $299,713.16. It says that it has demanded payment of that sum "when it was due" from Sharjade, and has likewise demanded it from Mr Akbarian pursuant to the guarantee.

The defendants' list response admits the making of the trade finance agreement and the guarantee and the fact of making the demands. However, the defendants say, they "repaid in full any moneys due and owing... in March 2001"; did not authorise, instruct, consent to or know of drawdowns thereafter; and did not receive any money or benefit from any transaction under the trade finance agreement after March 2001. Further, the defendants say the trade finance agreement was to terminate and did terminate on 9 or 10 February 2001.

Lumby's case is founded on invoices and bills of exchange bearing dates from 29 March 2001 onwards. There are a series of invoices addressed by Lumby to Sharjade, each referring to "various" suppliers of "services" and specifying a "supplier amount due". On the face of each invoice, the "supplier amount due" is a base figure to which is added a risk fee calculated at 4.5 per cent (presumably of the base figure), interest at the rate of 8.22 per cent (I think, but it is unclear for a period of about 120 days, or whatever other period is specified in the invoice), and "other charges".

In each case Lumby drew a bill of exchange on Sharjade to the order of St George Bank Ltd. In each case Sharjade accepted that bill of exchange. There are, if I have counted correctly, some ten such invoices and bills of exchange and they in total make up the amount (before interest) that is the subject of Lumby's claim in these proceedings.

The trade finance agreement was made on 10 February 2000. It provided for a "termination date" of twelve months after the specified commencement date of 10 February 2000. It contemplated that credit under the agreement might be provided by the drawing and acceptance of bills of exchange. Clause 3.1 specified that funds might be drawn from time to time. Clause 3.2 stated that funds could be made available "for the payment of invoices, bills of lading and other supplier documents rendered to [Sharjade] by its suppliers, or for any other purpose approved by [Lumby]".

Clause 3.3 provided for the giving of drawdown notices. Clause 3.4 specified some five requirements with which any draw down notice should comply.

Once a drawdown notice was received, Lumby might at its discretion "issue a bill of exchange in Australian dollars for the amount claimed in the Drawdown Notice" (cl 3.6). If a bill of exchange were "issued" it was to be sent to Sharjade, who was required to "execute" it by its authorised representative - in all cases, I think, Mr Akbarian (cl 3.8). Once the bill of exchange was "executed" it was to be returned to Lumby who would then "arrange for the drawdown amount to be paid to the supplier as nominated in the Drawdown Notice or to such other person as authorised by [Lumby]" (cl 3.9).

By cl 7.1 all money owing by Sharjade to Lumby was to be repaid on the "termination date" - either 9 or 10 February 2001. However, cl 7.2 and following provided for extension of the term of the trade finance agreement for a further period of twelve months from that termination date and "half-yearly thereafter" should Sharjade request it. There is no "pleaded" case of extension in the list statement.

In the present case there is no evidence of any draw down notice, either in the form specified by cl 3.4 or otherwise, in relation to any of the invoices or bills of exchange on which Lumby relies. Nor is there any evidence that any of the ten or so bills of exchange that have been proved has been presented for payment and dishonoured.

In truth, as I understand Lumby's case from the opening by Mr Cotman of senior counsel (who appeared with Mr Griscti of counsel for Lumby), the case is that the bills of exchange in question did not represent fresh draw-downs under the trade finance agreement (which, so far as the evidence goes, had not been extended) but were "role overs" of bills earlier drawn under the trade finance agreement and not repaid. That is not a case that is articulated in the list statement; nor is it any case based upon the bills of exchange. As Mr Cotman perceived, the difficulty with suing on the bills might lie in proving presentment and dishonour.

Mr Kerr of counsel, who appeared for the defendants, made it perfectly plain both by his outline of submissions and by his conduct of the case that the defendants desired to hold Lumby to the "pleaded" case and for it to be decided on the issues that had been articulated by the list statement and the list response.

Lumby is in receivership. Its receiver, Mr Smith, swore affidavits in support of its claim. He was cross-examined briefly. In his cross-examination he was referred to an affidavit sworn by him in other proceedings between Sharjade and Lumby (2395/04 in this Division of this Court). In an affidavit sworn on 1 July 2004 Mr Smith referred to the trade finance agreement and said in respect of some acknowledgement opinion which Mr Akbarian had relied that: [t]he amounts to which that acknowledgement relates were amounts advanced to the plaintiff by the defendant prior to 16 March 2001. As at 16 March 2001 the plaintiff had repaid the amount owed pursuant to the trade finance agreement.

To avoid confusion, the "plaintiff" to whom Mr Smith referred was Sharjade and the "defendant" was Lumby.

In his cross-examination Mr Smith accepted that he had taken care to ensure that his affidavit was true and correct when he swore it and that he had reviewed all material that he thought was relevant to that purpose. He accepted that para 11 represented his understanding of the true position at the time he swore the affidavit.

Thus, Mr Kerr submitted, on such evidence as there was, the pleaded case must fail. (I use the term "pleaded" for convenience, notwithstanding its technical inaccuracy). That case he said was brought to recover amounts due under the trade finance agreement. Firstly, Mr Kerr submitted, there was no evidence that the term of the trade finance agreement had been extended. Secondly, he submitted, Mr Smith's evidence was that after the expiry of the twelve month term, and before the transactions on which Mr Cotman relied, all money due under the trade finance agreement had been repaid by Sharjade to Lumby. Thirdly, Mr Kerr submitted, the bills of exchange on which Mr Cotman relied (together with their associated invoices) to prove an amount owing did not demonstrate that they had been drawn pursuant to, or in furtherance of, the trade finance agreement. Finally, Mr Kerr submitted there was no evidence that any amount owing under any of those bills of exchange was in fact unpaid.

Mr Cotman's response was twofold. Firstly, he sought leave to amend to articulate a case based on the bills of exchange. Secondly, he sought leave to reopen to call Mr Smith.

I have not ruled on the first of those applications, because no draft amended list statement has yet been propounded. What I am saying should be taken therefore as applying only to the case that is presently articulated. However, as for recalling Mr Smith, it seemed to me to be of little utility to do so when, as Mr Cotman frankly conceded, he could not prove presentment and dishonour under the bills of exchange. At most Mr Smith's evidence might go to his understanding of the position under a case that has not yet been articulated.

In my view, each of the points that Mr Kerr takes, as I have outlined them, is correct. On the case that Lumby has sought to articulate, and on the issues raised by the defendants in answer to that case, Lumby must fail. On such evidence as there is, whatever was outstanding under the trade finance agreement after its stated termination date was repaid within a month or so. Although it is clear that there were further dealings between Lumby and Sharjade thereafter, and although those further dealings bear some resemblance to the course of dealings authorised by the trade finance agreement, there is no evidence that they were effected pursuant to draw down notices given by Sharjade to Lumby. That is not perhaps surprising if the true state of affairs is, as said by Mr Cotman in opening, that what was involved is not the fresh provision of credit for new transactions, but rather a provision of credit by way of "roll over" of earlier transactions.

Mr Cotman submitted that there was at least an implied admission of indebtedness on the bills, because the defendants had not asserted that there was nothing owing to Lumby under the bills. That is hardly surprising in circumstances where Lumby did not "plead" a case based on the bills.

It may very well be that there is some underlying indebtedness. All I am concerned with is whether there is indebtedness on the case articulated on the list statement. For the reasons that I have indicated, there is not.

It follows that the case as presently articulated should fail.