Hume Plasterboard Pty Ltd v Lin Betty Building Group Pty Ltd

By notice of motion filed on 15 September 2021, Hume Plasterboard Pty Ltd (the plaintiff) seeks summary judgment in the sum of $1,331,240.64, being the amount alleged to be outstanding for goods and materials it supplied to Lin Betty Building Group Pty Ltd (the first defendant). It seeks summary judgment against the first defendant and against Xian Feng Lin (the second defendant) on the basis of a guarantee he executed on 30 June 2017 in favour of the plaintiff in respect of amounts owing by the first defendant to the plaintiff.

The plaintiff has excepted from its application for summary judgment, certain sums for interest and cost of recovery, about which it accepts there to be a triable issue. No application for summary judgment is made against Yang Xing (the third defendant) as it is common ground that the third defendant has raised a triable issue in her amended defence: namely, the enforceability of the guarantee having regard to the circumstances of its execution and her alleged lack of understanding of the transaction as a whole.

Rule 13.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) relevantly provides:

It was common ground that the evidentiary requirements of UCPR, r 13.1(1)(a) and (b) were satisfied.

Ms Hill, who appeared on behalf of the plaintiff, submitted that as there was no triable factual issue and the first and second defendants had no arguable defence, the plaintiff was entitled to summary judgment. Mr Lee, who appeared for the first and second defendants, submitted, first, that the first defendant had an arguable defence to the claim as pleaded because the contract alleged had come to an end. Second, he submitted that the second defendant had an arguable defence that he was no longer bound by the guarantee he executed in 2017 as it had been discharged by the payment to the plaintiff of $1,380,000 in settlement of earlier proceedings between the parties.

The plaintiff supplies building materials. The first defendant is a construction company; the second defendant is its principal. In 2017, the plaintiff and the first defendant entered into a contract whereby the plaintiff would supply to the first defendant goods and materials on certain conditions. The first defendant’s liability to the plaintiff was guaranteed by a guarantee executed by the second and third defendants (the 2017 Guarantee), which purported also to charge their property as security for the amounts owed by the first defendant to the plaintiff.

Clause 6 of the 2017 Guarantee provides:

At some time prior to 22 February 2019, a dispute arose between the plaintiff and the first defendant regarding outstanding amounts due to the plaintiff. On that day, the plaintiff commenced proceedings 2019/59841 (the 2019 Proceedings) in this Court to recover these amounts. These proceedings were resolved by the parties. It was common ground that the agreement provided that the proceedings would be resolved by the payment of $1,380,000 to the plaintiff and that this amount had been paid in full. The settlement was not brought to the attention of the Court. As no party to the proceedings had, for a period of over 5 months, taken any step in the proceedings, the Court, by notice dated 29 August 2019, notified the parties that it would dismiss the proceedings pursuant to UCPR, r 12.8 within 28 days unless a party lodged a notice showing cause why the proceedings ought not be dismissed. As no notice was lodged, the 2019 Proceedings were dismissed on or about 30 September 2019.

Subsequently, by letter dated 15 October 2019, the first defendant applied for credit from the plaintiff with respect to goods and materials to be supplied after that date. The plaintiff agreed to provide credit up to $1m on terms, which included the 2017 Guarantee from the second and third defendants, a copy of which was attached to the letter in response to the first defendant’s request. Further requests for an increase in credit were made and acceded to.

The first defendant has not paid the monies due to the plaintiff. Subject to a pleading point, Mr Lee accepts that the plaintiff is entitled to summary judgment against the first defendant.

The present proceedings were commenced by statement of claim filed on 8 December 2020. The plaintiff alleged that between July 2020 and November 2020 it sold to the first defendant, at the second defendant’s request, goods and materials to the value of $1,331,240.64. There is no issue between the parties to this application as to the sum claimed.

On 27 May 2021, the first and second defendants filed their defences. They alleged that the plaintiff had extended the period of credit and that the interest claimed amounted to a penalty. They did not rely on the settlement of the 2019 Proceedings as a defence to the present proceedings.

On 28 May 2021, the third defendant filed her defence. She alleged that the settlement of the 2019 Proceedings had the effect of discharging all debts owed by the first defendant to the plaintiff (including those claimed in the present proceedings). She further alleged that her liability under the 2017 Guarantee had been discharged by the settlement of the 2019 Proceedings.

As referred to above, the plaintiff filed its notice of motion for summary judgment on 15 September 2021, together with an affidavit of Cindy Williams in support, which met the requirements of UCPR, r 13.1(1)(a) and (b). The notice of motion was listed for hearing on 17 November 2021.

The motion was adjourned. On 29 November 2021, the plaintiff filed an amended statement of claim, which includes a claim for declaratory and other relief relating to an alleged charge over the real property of the second and third defendant arising from the 2019 Guarantee. In its defence to the amended statement of claim, the first defendant relied on the defence alleged by the third defendant in her defence referred to above.

The second defendant raised the same additional defence. He alleged as follows:

For completeness, I note that the third defendant raised, in her amended defence the unenforceability of the 2017 Guarantee against her for additional reasons.

As referred to above, Mr Lee accepted that the first defendant could not resist the plaintiff’s claim for summary judgment if the amended statement of claim was further amended to allege a new contract which was made after the settlement of the 2019 Proceedings. He contended that the plaintiff could not rely on the original agreement as the basis for its claim because the settlement of the 2019 Proceedings had brought the original contract to an end.

I reject this submission. The first defendant accepts that it is liable to the plaintiff and that it has no arguable defence to the plaintiff’s claim for the amount of $1,331,240.64. The first defendant is well aware of the basis of the plaintiff’s claim, not only from the pleading but also from the evidence of Ms Williams in support of the notice of motion. I am not persuaded that it is necessary, in these circumstances, to require the plaintiff to amend its statement of claim to put its claim differently or particularise it more comprehensively. When exercising powers under the Civil Procedure Act 2005 (NSW) or the UCPR, I am obliged to give effect to the overriding purpose of facilitating the just, quick and cheap resolution of the real issues in the proceedings: s 56 of the Civil Procedure Act. There is no real issue about the first defendant’s liability to the plaintiff in the sum of $1,331,240.64. Accordingly, the plaintiff is entitled to summary judgment against the first defendant in that amount.

In substance, Mr Lee argued that there was a triable issue whether the settlement of the 2019 Proceedings had discharged the 2017 Guarantee, which was the basis of the plaintiff’s claim against the second defendant. He submitted that there was no evidence as to the terms of the settlement and argued that the plaintiff had to prove that there was no triable defence before it was entitled to summary judgment.

He relied on the evidence of the second defendant as to the settlement of the 2019 Proceedings (in which he deposed to the payment of $1,380,000) and the following evidence in paragraph 16 of the second defendant’s affidavit of 16 November 2021 as follows:

In his affidavit of 27 January 2022, the second defendant also deposed:

I note that the second defendant has not sought to have a subpoena issued to the Australian Federal Police or served a notice to produce on the plaintiff for the evidence and documents referred to in his affidavit of 27 January 2022.

Mr Lee further submitted that I was bound, in an application for summary judgment, to take the second defendant’s defence as alleged unless evidence established it to be hopeless. He relied on Simmons v New South Wales Trustee and Guardian [2014] NSWCA 405 in which Gleeson JA (Beazley P and Barrett JA agreeing) said, at [200], as follows (I include [201] for completeness):

He argued that the same test applied to summary judgment as for summary dismissal. Thus, he contended that because the second defendant alleged that the 2017 Guarantee had been discharged by the settlement of the 2019 Proceedings, I was bound to accept that there was a triable issue and was required to reject the plaintiff’s application.

Mr Lee further argued that there was no onus on a defendant when resisting an application for summary judgment and that, accordingly, no inference adverse to the second defendant, on the basis of the lack of documentary evidence to establish that the 2017 Guarantee had been discharged could be drawn.

In addition to these arguments, Mr Lee submitted that there was nothing to be gained by ordering summary judgment in terms of the just, quick and cheap resolution of the real issues in the proceedings because the case would proceed to trial in respect of the third defendant, who had raised similar defences, although she had additional defences which were accepted not to be available to the first and second defendants (based on the allegation that the 2017 Guarantee was unjust in so far as it purported to bind her).

I am satisfied, on the basis of the arguments of Ms Hill, that the plaintiff is entitled to summary judgment against both the first defendant (for the reasons given above) and the second defendant, for the reasons set out below.

The amended defence filed by the second defendant relies only on the settlement of the 2019 Proceedings in support of the legal conclusion that the 2017 Guarantee was discharged. There is no issue about the correctness of the facts alleged in paragraph 10(a)-(e) or (h) of the second defendant’s amended defence. The issue is about what flows from them. The allegations in paragraph 10(f) and (g) comprise legal conclusions which are alleged, in terms, to flow from the settlement of the 2019 Proceedings by the payment of $1,380,000. Thus, whether the legal consequence said to flow from the settlement could, as a matter of law, without more, have that consequence can be determined on a summary basis. This question must be answered in the negative. The payment of a sum of money for past indebtedness, while sufficient to extinguish causes of action covered by the past debts, is insufficient at law, without more, to discharge a guarantee.

Section 23C of the Conveyancing Act 1919 (NSW) relevantly provides:

Section 7 of the Conveyancing Act defines “disposition” as including a release of property and provides that “dispose” has a corresponding meaning. As the 2017 Guarantee creates a charge, s 23C of the Conveyancing Act applies. There is no allegation that the second defendant signed a document withdrawing the guarantee which was given to the plaintiff. Nor has any allegation been made that cl 6 of the 2017 Guarantee has been complied with. The only basis on which it is alleged that the 2017 Guarantee is no longer binding is the agreement to settle the 2019 Proceedings by the payment of $1,380,000 to the plaintiff. This payment, without more, is ineffective to discharge the 2017 Guarantee. The second defendant’s belief that he was no longer bound by the 2017 Guarantee is insufficient at law to have that effect and does not bear on the issues between the plaintiff and the second defendant.

The payment of $1,380,000 is the only basis on which the second defendant alleges he has a defence to the plaintiff’s claim. This defence does not, for the reasons given above, give rise to a triable issue or an arguable defence to the plaintiff’s claim for $1,331,240.64. Accordingly, it is appropriate to order summary judgment against the second defendant, as well as the first defendant.

I am not persuaded that the availability to the third defendant of an arguable defence affords any reason to deprive the plaintiff of summary judgment for that part of its claim against the first and second defendants for which there is no arguable defence.

The parties agreed that there was no reason why costs ought not follow the event in accordance with the general rule: UCPR, r 42.1. Accordingly, the first and second defendants ought pay the plaintiff’s costs of the notice of motion.

For the reasons given above, I make the following orders and directions: