Blake v Leondiou - [2012] SASC 121

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Civil)
BLAKE v LEONDIOU & ANOR
[2012] SASC 121
Judgment of The Honourable Justice Blue
19 July 2012
INTEREST - RECOVERABILITY OF INTEREST - AWARD OF INTEREST AS DAMAGES
INTEREST - RATE OF INTEREST AND COMPOUND INTEREST - COMPOUND INTEREST
The plaintiff and first defendant agreed to purchase a house collectively to let out as a rooming house - The first defendant incorporated a company (the second defendant) to purchase and operate the property - The plaintiff and first defendant each contributed funds towards the purchase price - Both parties undertook works to improve the property and expended monies on the purchase of items for the property.
A dispute arose regarding the plaintiff and first defendant's respective interests in the property and the plaintiff commenced proceedings - The plaintiff sought a declaration that she had an 80% beneficial interest in the property (or in the company).
The parties reached agreement that consent judgment be entered in favour of the plaintiff against the defendants for $98,235 - leaving questions of interest and costs to be determined.
Held:
(1) The plaintiff is entitled to damages for loss of use of monies.
(2) In the alternative the plaintiff would have been entitled to interest as part of the restitution of the monies invested.
Supreme Court Act 1935 (SA) s 30C, referred to.
Hungerfords v Walker (1989) 171 CLR 125, applied.

BLAKE v LEONDIOU & ANOR
[2012] SASC 121
Civil:

JUSTICE BLUE: In this action the plaintiff Ms Blake sues the first defendant Mr Leondiou and the second defendant (“the Company”) in connection with the purchase and operation of a house property at Mile End.
On the first day of trial, the parties agreed on the principal relief, leaving issues involving interest and costs to be determined by me as trial Judge.
These reasons for judgment address the interest issues.
Background facts
In December 2007, Ms Blake and Mr Leondiou agreed to purchase collectively the property with a view to operating it as a residential rooming house.
In January 2008, it was agreed that the parties would use a company to be incorporated as their vehicle to purchase and operate the property. The second defendant (“the Company”) was incorporated by Mr Leondiou for this purpose.
It was in this action in dispute what proportionate interests Ms Blake and Mr Leondiou would have. Ms Blake’s case was that she was to have 80 per cent and Mr Leondiou 20 per cent. Mr Leondiou’s case was that the proportionate interest was to reflect the respective contributions of the parties.
In January 2008, Ms Blake paid, directly or indirectly, to the conveyancers acting for the purchaser a total of $94,239 towards the total purchase price of the property of $494,067.34 (including stamp duty, registration and fees). Mr Leondiou contributed $25,000 towards the purchase price. The balance was borrowed on a security of a first mortgage registered over the property and guaranteed by Mr Leondiou.
Settlement of the purchase took place…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Blake v Leondiou

Details

AGLC: Blake v Leondiou [2012] SASC 121
Case: [2012] SASC 121
Decision Date: 19 July 2012

CaseChat Overview and Summary

In the matter of Blake v Leondiou, the plaintiff, Ms Blake, sought to establish her 80 per cent beneficial interest in a property purchased jointly with the first defendant, Mr Leondiou, and the second defendant, a company incorporated by Mr Leondiou. The case before the court centred on the recoverability of interest on the principal sum awarded to Ms Blake, which was agreed to be $98,235. The dispute involved determining the basis for interest, the appropriate interest rate, and whether compound interest should apply.

The court had to decide whether the interest could be claimed as damages for the loss of use of monies, as part of restitution, or pursuant to section 30C of the Supreme Court Act 1925 (SA). The court also needed to determine the correct rate of interest and whether it should be compounded. Ms Blake argued for the recoverability of interest as damages for the loss of use of her funds, citing her evidence of borrowing from her daughter and the use of bank accounts and inheritance to fund her contribution.

The court concluded that it was appropriate to apply the Court interest rates rather than the cash management account rates. The Court interest rates were applied to the principal sum of $98,235 from 31 January 2008 to 19 July 2012, resulting in total interest of $21,846. The court found that compound interest was not appropriate in this case. The final orders of the court granted judgment in favour of Ms Blake for the total amount of $120,081, which included the principal sum and the calculated interest. The court reserved the question of costs for further discussion between the parties.

Orders

Orders of the court

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Background

Background to the litigation

These reasons for judgment address the interest issues.Background facts In December 2007, Ms Blake and Mr Leondiou agreed to purchase collectively the property with a view to operating it as a residential rooming house. In January 2008, it was agreed that the parties would use a company to be incorporated as their vehicle to purchase and operate the property. The second defendant (“the Company”) was incorporated by Mr Leondiou for this purpose. It was in this action in dispute what proportionate interests Ms Blake and Mr Leondiou would have. Ms Blake’s case was that she was to have 80 per cent and Mr Leondiou 20 per cent. Mr Leondiou’s case was that the proportionate interest was to reflect the respective contributions of the parties. In January 2008, Ms Blake paid, directly or indirectly, to the conveyancers acting for the purchaser a total of $94,239 towards the total purchase price of the property of $494,067.34 (including stamp duty, registration and fees). Mr Leondiou contributed $25,000 towards the purchase price. The balance was borrowed on a security of a first mortgage registered over the property and guaranteed by Mr Leondiou. Settlement of the purchase took place on 22 February 2008. During the next two weeks, Mr Leondiou and Ms Blake in succession undertook work for the purpose of improving the property and each expended monies on the purchase of furniture and fittings for the property. Over that two week period, there was major falling out between the parties, culminating it Mr Leondiou (and the Company of which he was sole director and shareholder) assuming sole control of the property and its operation as a rooming house. In March 2008, Mr Leondiou wrote to Ms Blake characterising her contribution to the property as a loan and foreshadowing an intention to return the loan to her. Various communications transpired between the parties or their representatives. On 4 June 2008, Ms Blake instituted this action against Mr Leondiou and the Company seeking a declaration that she had an 80 per cent beneficial interest in the property. On 4 July 2008, the Company served on Ms Blake a Notice of Payment into Court recording a payment into court of $94,239. The trial of the action was listed to commence before me on 17 July 2012. Negotiations took place between the parties, culminating in an agreement that a consent judgment be entered in favour of Ms Blake against Mr Leondiou and the Company for $98,235 (“the principal sum”), leaving aside the questions of interest and costs. At the trial, Ms Blake gave evidence, two affidavits by Mr Leondiou were tendered, and both parties tendered various documents. These are three bases on which Ms Blake might be entitled to “interest” on the principal sum:1. as damages for loss of use of monies;2.as part of restitution to Ms Blake of which the sum of $98,251 is the principal component; or3.as interest pursuant to section 30C of the Supreme Court Act 1925 (SA).Loss of use of monies The first basis which I consider is damages for loss of use of monies.[1] Ms Blake gave evidence that she borrowed $8,000 from her daughter on the footing that she would repay those monies with compensation for their use in due course. She gave evidence that she sourced the balance of the funds contributed to the property out of bank accounts. $64,000 of those monies were derived from an inheritance from her father. Her principal source of income was a disability pension paid by the Department of Social Security. She had also conducted some small businesses, but terminated them by mid 2008.[1] Hungerfords v Walker (1989) 171 CLR 125.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

In the circumstances, I consider that it is appropriate to use the Court interest rates as opposed to the cash management account rates. Application of the Court interest rates on the principal sum of $98,235 from 31 January 2008 to 19 July 2012 gives total interest of $21,846.Conclusion Accordingly, I propose to grant judgment in favour of the plaintiff against the defendants for $120,081 and to hear the parties on the question of costs

Ratio Decidendi

Legal Principle Established

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