Farrow Mortgage Services Pty Ltd v Barker & Ors [1991] QSC 404

f' ' TRANSCRIPT OF PROCEEDINGS State Reporting Bureau, 4th-F1oor, The Law Courts, George Street, BRISBANE, 0. 4000 Tel. (C7} 227.4360 (Copyright in this transcript is vested in the Crown. Copies thereof must not be made- or sold without the written authority of the Director, State Repordng Bureau.) SUPREME COURT OF QUEENSLAND - , . .. -· . . - CHAMBERS WHITE MASTER No 1623 of 1991 FARROW MORTGAGE SERVICES PTY LTD (IN LIQUIDATION) Plaintiff and JACK ABBOT BARKER, WILLIAM GEORGE REDDROP, DAVID MURRAY HOADLEY, GLENDON J"OHN O'CONNOR AND JOHN WATSON QU:):NN Defendants BRISBANE .. DATE 10/12/91 .. . JUDGMENT 1 f REVtsEDCOP:.Es !SSUED · : ·couil Repor.iing Bureau f Da_te,~ 11>--/ 1 L •- . ' -- 1 of 8 -- ,r-, ( 10 101291 JUDGMENT This is an application for summary judgment brought by Farrow Mortgage Services Pty Ltd against the named defendants for whom Mr Lennon QC appears, except for John Watso.n Quinn. for wb,om Mr Savage appears. The action is to recover $905,500 from the defendants as guarantors. According to the writ, by the terms of a Bill of Mortgage between Tawilla Pty Ltd as lender and Melridge Mining and Exploration Pty Ltd as borrower made on 28 July 1989, Tawilla agreed to .lend to Melridge $675,000. On 28 ,] 10 20 20 30 July 1989, .Tawilla assigned all its rights as mortgagee to the plaintiff, Farrow. By an agreement in writing made.on the same day between Tawilla and Melridge, the defendants guaranteed the repayment of all ~oneys due by Melridge to Tawilla pursuant to.the mortgage. All rights under the guarantee were assigned to Farrow by Tawilla. Moneys were advanced to Melridge, from time to time. As from 1 March 1990,. Melridge defaulted in payments due under the mortgage. In default of 30 40 40 50 60 Melridge performing itE obligations, Farrow resorted to the defendants pursuant to the guarantee. Behind that simple pleading lies a complicated set of facts - that that is so is reflected.in the time which it has taken to hear this application - no less than five hours over two days, two hours of which were necessary for Mr Jackson QC to submit why judgment ought to be giv~n summarily, most of which time, if not all, was devoted to an analysis of the facts. Mr Savage.took an hour to analyse the exhibits to what was ominously described as the voluminous affidavit of his Govt. Printer, Old 2 50 60 -- 2 of 8 -- 0 101291 JUDGMENT client in other proceedings - a document of some 352 paragraphs and 179 exhibits. I mention this not to be critical o'f counsel, who clearly had a lot of material to deal with, but to indicate that there are many m~tters to which it will be quite impossible for me to refer in these reasons which I have had the opportunity of considering overnight. It seems that Melridge was desirous of purchasing a motel business and the loan was to cocie fiom Tawilla. Tawilla is 10 ~ 20 Mr Quinn's company. He was the solicitor for Melridge and Tawilla. Melridge is a company in which he is a minority shareholder and director and the other defendants are or were shareholders and directors. In fa6t, Tawiila borrowed $675,000 from Farrow which it on-lent to Melridge. The loan O 30 0 ) was secured by a first mortgage over the property. I have not been directed to any explanation as to why Melridge did not borrow from Farrow directly, but the voluminous· affidavit of Mr Quinn deposes to a long and close commercial relationship between himself, the companies which he controlled, and Farrow involving borro~ings of up to almost $15 million. The strong impression that I get from the material is that Mr Quinn was the moving mind and negotiator for Melridge with Farrow. Indeed, it is sought to be suggested that the other defendants were unaware that the money had come from Farrow, not Tawilla, which has consequences in their proposed defences. On 28 July 1989 I ll the documentation associated with the loan was executed. It included a first mortgage by Melridge over the mote~t~o_J 1 Tawilla, a registered mortgage debenture by Melridge to Govt. Printer, Qid. 3 40 50 60 -- 3 of 8 -- 10 20 101291 JUDGMENT Tawilla, guarantees ~Y each of the defendants, deeds of assignment of ..Tawilla' s interest in the .Bill of Mortgage and guarantees to Farrow and notices of .assignment and a deed in escrow between Farrow and Tawilla. The defendants allege that an agreement was reached with Farrow in October/November 1990 whereby they would be released from their guarantees as part of a restructuring of the Quinn group of companies' indebtedness to Farrow. The dealings .and correspondence J:?.etween Quinn and Farrow were extensive.between February 1990, the date of an earlier restructuring agreement between Quinn.and Farrow, and October 1990. L do not propose to set out that corr.espondence. . I wa:s. taken through it by Mr Jackson and :qy Mr Savage. Needless to say the emphasis, by each was on 10 20 30 30 AO 50 60 different documents. Mr Jackson contends that the promise to enter into the covenant not to sue on the guarantees contained in the correspondence from F~rrow, see JWQ167 et sequentia in No 769 of 1991, does not even arguably contain a referenge to the Melridge loan guarantees. Mr Savage has persuaded me that this is not so. Although reference is . ' often made to "the Quinn group of.companies" in the correspondence, this ~snot surprising because Mr Quinn had many companies.dealing with Farrow and the Melridge loan was the proverbial drop in the bucket. The loan dealing number given by Farrow to the Melridge loan appears often in this correspondence as. included i.n the restructuring proposals and the total indebtedness referred to includes the Melridge loan .amount. Govt. Printer, Qid. 4 50 60 -- 4 of 8 -- I, 101291 JUDGMENT Mr Jackson has taken·me through the cross-examination of Mr Quinn in certain Federal Court proceedings in which Mr Quinn makes ref~rence to the present proceedings with respect to which he has said that there iR no defence. I do not regard that as determinative of whetlic:r a triable issue 0 10 has now been able to be raised on the material. It may lead to an interesting cross-examination in due course. Accordingly, I have c6ncluded that a triable issue is raised on the material. Bearing in mind the authorities which, 0 20 0 altho.ugh stating that a Court hearing a summary judgment < application need not avoid deciding difficult matters in this· ... . . : ... . . '·· fashion, also state that ·a ~Court must only· do 'so if it is a-cclear case beyo d · a-rgument, see Fancourt v Mercantile Credits 48 ALR 1 and the • cases cited therein. Mr Lennon, for the other defendants 1 has raised other matters for consideration. He has submitted that the assignment was covered by the escrow and that arguably the· escrow has not ended because there has been no default 30 O 40 either by Tawilla or Melridge. This requires a particular interpretation of· "the mortgagor" in the escrow which would direct reference away from the motel land as security. I cannot say that this is so hopeless in interpretation that it should not be raised. Mr Lennon submitted that a conditional assignment could not fall within s 199 of the Property Law Act and it was _ conditional because placed in escrow. Mr Jackson's reference in reply to Chitty 26th Edition (1989) para 1396 and Grey v Go·,L Printer, O!d. 5 50 60 -- 5 of 8 -- 10 20 30 40 50 101291 JUDGMENT Australian Motorists and General Insurance Company Pty Ltd (1976) 1 NSWLR 669 would suggest that this submission is unlikely to be successful ultimately. A further submission on the assignment was that no. "express notice" 0f the assignment had been given. That was based on th.e earlier submission that no notice could be given of an assignment in escrow and further that it must be express and contain the date of the assignment. The cases relied upon by Mr Lennon have been.rather overtaken by at least.Van Lynn Developments. Limited v Pelia,$: Construction Pty Ltd (1969) 1 QB 607. Further,. as a matter of fact, Mr Kennedy, a solicitor for some of the defendants, has exhibited to one of his affidavits an express notice of assignment of the deed of mortgage and guarantee from Tawilla to Farrow dated 17 May 1991 directed to the defendants, by which time, according to Mr Jackson, default must have occurred. The defendants, other than Quinn, thro~gh their solicitor say that they had no knowledge of the contents of the security documents which they had signed at Quinn's behest and they rely upon observations of McPherson Jin Sunbird Plaza Pty Ltd v Boheto (1983) 2 QdR 248 at 261. I am not persuaded that the plaintiff .could not endorse its writ herein so as to take advantage of the O 18 procedure. It is conceded by Mr Jackso~ that if the plaintiff had to rely upon an equitable assignment rather than as 199 assignment this must be the consequence. Mr Lennon further foreshadowed that his clients would be Govt. Printer, Old 6 . ,'1 10 20 30 40 50 60 -- 6 of 8 -- 101291 JUDGMENT looking to explore the special relationship which arose because Tawilla was a debtor of Farrow and provided sureties to Farrow without that ~elationship being revealed fully by the creditor to the sureties. He also .;ould seek to advance defences under s 52 of the Trade Practices Act. He submits 10 10 that the complexities of the issues and his clients' non-involvmerit in the negotiation for the loan, and the fact Mr Quinn was the moving mind and their solicitor, and their non-involvment in sul::fsequent dealings with Farrow, have made it difficult in the time which ~as been available to advance w w 30 ,r, HJ 0 ) a firm defence. I accept that this is not an unreasonable submission in the circumstances before me. Mr Quinn has delivered a defence and proposes to deliver an amended defence if leave is given. Accordingly, the orders of the Court are as follows: summons to be dismissed; the dexendants have unconditional leave to defend. With respect to the question of costs, although r'will hear counsel in due course, my own thoughts are these: that the defences for the defendant~ other than Quinn had not be advanced prior to the summons being served and indeed, not even been advanced until the hearing of the summons and Mr Quinn's amended defence was proposed after the service of the summons so that an order that the costs of and incidental to the summons be costs in the cause seem tO me' not to be inappropriate. Govt. Printer, Oid, 7 30 40 50 6,, \,' -- 7 of 8 -- 10 101291 JUDGMENT MASTER: The order with respect to costs and bearing in mind the submissions Mr Brandis has made about the complexity of the issues and the requests that were made un behalf of his defendants, or some of them, it is, ordered that the applicant/plaintiff pay the defendants Reddrop and O'Connor's costs of and incidental to the application to be taxed. It is otherwise ordered the costs of and incidental to the application be costs in the cause. 1· 10 20 20 30 40 50 60 MA~;TER: Furth13r order (1) 'J:he de~fendant Quinn be at liberty to deli,/er an amended defence by 4 p.m. on 11 Deceml::er 1991. (2) All other defendants be at liberty to deliver a defence or amended defence as may be appropriate by 4 p.m. on 10 January 1992. ( 3) Plaintiff to deliver its reply by 7 February 1992. ( 4) Liberty to apply on four day~ notice in writing. G 214--Govt Printer, Qld. 8 30 40 50 60 -- 8 of 8 --