Perpetual Nominees v McGoldrick [2014] VSC 152

The lender sought summary judgment for the shortfall on its debt. The guarantors claimed negligence on the part of the administrators/liquidators appointed by the lender to handle the sale.

The court did not agree with the lender that the no setoff clause in the guarantee provided a complete answer to guarantors’ claims.

The court said:

The lender argued that the no setoff clause of the guarantee provided a complete answer to the defendants’ counterclaim. I am not so sure. There is the question of construction, and the extent to which such a contractual term operates to prevent the defence of setoff in a proceeding.

With respect to the judge these were both questions appropriate for a judge to consider on an interlocutory basis. Cases such as ANZ v RQA Accountants [2013] NSWSC 165 make clear that it is open to the courts to grant summary judgements on the basis of ‘no setoff’ clauses. Indeed if it were otherwise such clauses would have no utility.

As the judge explained he pretty much knew the case was hopeless (as a result of the ‘no setoff’ clause) but that he felt the ‘interest of justice’ would be served by it going to trial anyway.

One would be tempted to regard the judge as severely misguided, after all how can the ‘interests of justice’ be served if one party is doomed to lose. Is it not just an expensive way of delaying the inevitable. Worse, it results in the lender being saddled with unrecoverable legal fees to no purpose. Perhaps that is what the judge meant, perhaps he meant to say, “the lender will win I cannot prevent that, after all the law is the law, but I want him punished anyway, at least this way he can be punished with unrecoverable legal fees.

As it turns out it is unfair to label the judge as severely misguided because he based his decision on Section 64 of the Civil Procedure Act provides:

Court may allow a matter to proceed to trial

Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because—

(a) it is not in the interests of justice to do so; or

(b) the dispute is of such a nature that only a full hearing on the merits is appropriate.

It is more appropriate to refer to that provision as severely misguided for the same reasons.

Click here to read the full judgment

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