Bradshaw v Hanna - [2015] WADC 143

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: BRADSHAW -v- HANNA [2015] WADC 143

CORAM: PRINCIPAL REGISTRAR MELVILLE

HEARD: 10 NOVEMBER 2015

DELIVERED : 3 DECEMBER 2015

FILE NO/S: CIV 1478 of 2015

BETWEEN: GILLIAN BRADSHAW
Plaintiff
AND
PAUL HANNA
First Defendant
PETER DAVE DICKINSON
Second Defendant

Catchwords:

Practice and procedure - Rules of the Supreme Court 1971 O 14 & O 30 and - Judgment on admissions - Summary judgment

Legislation:

Rules of the Supreme Court 1971

Result:

Application dismissed

Representation:

Counsel:

Plaintiff:     Mr C S Williams
First Defendant              :     In person
Second Defendant         :     No appearance

Solicitors:

Plaintiff:     Solomon Brothers
First Defendant              :     Not applicable
Second Defendant         :     Not applicable

Case(s) referred to in judgment(s):

Agar v Hyde (2000) 201 CLR 552
Attorney-General of Botswana v Aussie Diamond Products Pty Ltd [No 2] [2009] WASC 301
Damberg v Damberg (2001) 52 NSWLR 492
Shine v Williams [2007] WASCA 194
Webster v Lampard (1993) 177 CLR 598
Yarra Capital Group Pty Ltd v Sklash Pty Ltd [2006] VSCA 109

PRINCIPAL REGISTRAR MELVILLE:

Background

By writ dated 29 April 2015 the plaintiff commenced proceedings against the first defendant and the second defendant for the repayment of the sum of $35,000, being monies lent by herself and Mr Meyers to the defendants, or alternatively, damages in that amount, together with interest calculated at 20% per annum from 26 October 2006 ‑ 25 October 2007, being the date on which the monies were to be repaid, and thereafter at the rate of 22% per annum.
The plaintiff amended the writ of summons on 7 July 2015 by amending the name of the second defendant to its current form. The plaintiff again amended her statement of claim on 2 November 2015 to claim interest at the rate of 44% per annum from 27 October 2007.
It is alleged, and not disputed, that pursuant to Family Court orders Mr Meyer's rights under the loan agreement were assigned to the plaintiff.
The first defendant filed his defence in April 2015. There is not much to the defence. Essentially it distils to the following:
1.The first defendant confirmed having entered into a loan agreement with the plaintiff;
2.The agreement specifically provided that the provisions of the agreement would be governed in all respects and construed in accordance with the laws of the Republic of Indonesia;
3.An allegation that this court has no jurisdiction, the defence stating at par 4 'this is a matter for the courts of Indonesia as jurisdiction is in that country. Given this, I will defend this on the jurisdiction issue';
4.Allegations of some vaguely particularised counterclaim and equitable set‑off.
A defence was filed on 3 August 2015 by the second defendant, the contents of which are vague and difficult to understand. However, at par 2 of the defence he says 'the defendant admits that a loan agreement was initially entered into with Mr Peter Denis Meyers then later with his partner Gillian Bradshaw, the total amount every (sic) draw down was $120,000 AU$'.
Like the first defendant, he pleaded that the provisions of the agreement should be governed in accordance with the laws of the Republic of Indonesia and like the first defendant, alleges the existence of a second agreement with Peter Denis Meyers.
Since the defences were filed, the plaintiff has brought an application for judgment on what she alleges are admissions contained within the defences that each of the two defendants owes the money claimed. This application is made pursuant to the Rules of the Supreme Court 1971 (RSC) O 30 r 3.
In the alternative, the plaintiff brings an application for summary judgment on the ground that the defendants' have no defence to the claim. This application is brought pursuant to the RSC O 14.

Order 30 rule 3

The RSC O 30 r 3 allows a party at any stage of a cause or matter to apply to the court for judgment based on admissions of fact either made on the pleadings or otherwise. Order 30 goes on to provide that '… the court may on such application make such order or give such judgment as the court thinks just'.
Accordingly, there are several criteria that need to be satisfied in order to obtain judgment under this Rule, namely, has any admission of fact been made on the pleadings or otherwise, does that admission, or do those admissions constitute evidence of sufficient material facts to establish the cause of action and if so, having regard to the interest of justice, should the court exercise its discretion to give such judgment?
There are a number of relevant matters to consider in respect of admissions. Firstly, it seems to me they need to be clear and unequivocal. Further, it is recognised the parties should not be discouraged from making admissions out of fear they cannot be withdrawn and the court should be cautious about discouraging the process of parties making admissions by holding them too rigidly to the admissions so made. Shine v Williams [2007] WASCA 194. Further, a court is not bound to act on an admission where persuasive contradictory evidence is called at trial demonstrating the admission is wrong; Damberg v Damberg(2001) 52 NSWLR 492. Further, whether the court should act on an admission depends very much on the weight that should be given to the admission and the circumstances in which it was made.

Order 14 – summary judgment

Unless an application of summary judgment is brought within 21 days after the appearance, a plaintiff requires leave to apply for judgment which ordinarily will require at the very least, an explanation for the delay. By O 14 r 3 the court again has a discretion to give judgment for the plaintiff as may be just unless the application is dismissed, or
… the defendant satisfies the court with respect to the claim or the part of the claim, to which the application relates that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim or part, …
In considering whether there is an issue to be tried, consideration must be given to any affidavit filed by the defendant. Where there is a dispute as to the facts between that affidavit and any affidavit filed by the plaintiff, for the purposes of the summary judgment application it should be assumed that the facts as deposed to by the defendant would be proven at trial, unless there is something inherently implausible in the affidavit or there is otherwise some compelling reason not to accept it: Webster v Lampard (1993) 177 CLR 598 (608).

The evidence

The plaintiff's application is supported by two affidavits filed by the plaintiff dated 4 September 2015 and 9 November 2015 together with an affidavit of Jaime Evelyn Greenacre affirmed 9 November 2015.
In her affidavit of 4 September 2015 the plaintiff annexes at GB‑1 a copy of the loan agreement entered into between the parties. It purports to be with Paul Hanna and Peter Dave Dickinson. There is nothing in the name of the parties so described to suggest that the contract for the loan was with a company. The agreement records that the total amount to be offered was $360,000, the first payment being in the amount of $120,000. By cl 5 of the agreement, it is provided that the funds would be transferred electronically 'to the first party's bank account' which is described as 'PT Soka Beach Management'.
The agreement provides that the loan was provided to 'fund stage 2 of Villa Taksu' being eight villas. It would appear that security for the loan was by way of eight shares in Soka Beach, which represented eight villas, which were to be held by the plaintiff.
By cl 9 of the contract it is provided:
This contract represents 3 + 3 + 2 shares in Soka Beach PMA AND WILL BE HELD BY THE Second party until all Loans are paid as per conditions of this contract.
I observe at this point in the evidence it is not clear to me whether the reference to shares was intended to mean shares in property owned by the defendants or shares in a company.
By cl 12 of the agreement it is provided 'this Agreement shall be governed in all respects by and construed in accordance with the laws of the Republic of Indonesia'. This is not in dispute.
At GB‑3 to that affidavit is evidence of a telegraphic transfer of the sum of $120,000 by the plaintiff to an account in the name of PT Soka Beach Management.
The evidence filed in opposition to the application is constituted by the affidavit of Paul Hanna. The salient points of that affidavit distil to the following, namely:
1.PT Soka Beach Management is a company incorporated in Indonesia.
2.The loan agreement was executed by the first defendant and the second defendant in their capacity as directors and shareholders of PT Soka Beach Management. In other words, the two defendants are not parties to the loan agreement even though their names appear in the contract and that they are described as the parties in the contract.
3.At par 11 of his affidavit, Mr Hanna gives evidence that in 2011 the plaintiff approached him and the second defendant seeking personal guarantees be put in place because she was unsure that PT Soka Beach Management had the capacity to repay.
In my view, this evidence, if accepted, would suggest that the plaintiff in her own mind was of the view and acknowledged that the contract was in fact between her and PT Soka Beach Management, a company, rather than between her and the two defendants. In other words, the evidence, if accepted, gives rise to an inference that she knew that the two defendants had contracted for and on behalf of the company rather than in their own personal capacities.
If the contract was between her and the two defendants as the plaintiff deposes, there was no need for a personal guarantee from the two defendants. Their word or agreement in providing the guarantee offered no greater protection to the plaintiff than the simple contractual obligation of the two defendants to repay the loan when it fell due and payable. It does nothing to advance or protect the plaintiff's position. The only way it is in the plaintiff's interests to obtain a guarantee from the two defendants is to guarantee the repayment of the loan made to the company.
In answer to this allegation the plaintiff in her affidavit of 9 November 2015, at par 7, denies having approached the defendants to provide a personal guarantee.
She says that, rather, on or about 8 April 2011 she had a meeting with the defendants in which she presented a document entitled 'Addendum to loan agreement stage 2 Taksu dated 19 October 2006' with the request that they sign the document, which they declined to do. That document is annexed to her affidavit at GB‑2.
The fact that Mr Hanna says the plaintiff sought a guarantee from them, an allegation the plaintiff denies, together with his evidence that the defendants contracted as directors of the company gives rise to a dispute as to the facts that is impossible to reconcile without going through the process of a trial. Further, the addendum to the loan agreement annexed to the affidavit of the plaintiff in any event appears to provide more questions than answers. It seeks to amend the original loan agreement in par 12, by deleting the provision that the agreement be governed in all respects by and construed in accordance with the laws of the Republic of Indonesia, and substituting the agreement be governed in all respects by and construed in accordance with the laws of Western Australia.
No explanation is provided as to why this was required. Whilst in the absence of any explanation, there is a limit to the inferences that can be drawn from the desire to change the law of the country that is to govern the contract, I nevertheless infer from this proposal that it was understood, at least by the plaintiff, that the laws of Western Australia were different to the laws of Indonesia and that she saw it as being in her interests that have the contract subject to the laws of Western Australia.
Annexure GB‑3 to the affidavit of the plaintiff dated 9 November 2015 is a sale and purchase agreement said to have been executed on 24 May 2006 (some five months prior to the agreement the subject of this claim). The agreement purports to be between the two defendants and Peter Denis Meyers. The two defendants are described as 'shareholder/owner developer PMA PT SOKA BEACH MANAGEMENT'. They are described as the 'First Party'.
In paragraph A of the Recital it says:
The First Party holds all the shares in a company to be established in Indonesia under the Investment Law No.1 of 1967 as amended, being PT SOKA BEACH MANAGEMENT, Hereinafter referred to as the 'PMA Company'.
The Recital goes on to state:
The PMA Company will hold rights to land … will develop a number of Villas …
And at paragraph C:
The Second Party wishes to purchase a share in the PMA to be part of the Project which will hold 24 shares in total.
Although the plaintiff is not described as a party to this agreement, there is said to be attached to sch 2, a copy of a statement by the nominee that 'she' holds all titles on trust for PT Soka Beach Management. There is no sch 2 attached to annexure GB‑3 and “she” is not otherwise described.
Annexure GB‑4 is yet another sale and purchase agreement between the defendants and, in this case, Peter Denis Meyers and the plaintiff. This one is dated the 12 September 2007. Again, there is reference to the 'PMA Company' in which the plaintiff seeks to purchase a share in the company. Again, on page 2 of that agreement, is said to be attached sch 2, being a copy of a statement by the nominee that 'she' holds all titles on trust for PT Soka Beach Management. Again, there is no sch 2 attached to the agreement.
Both the agreement of May 2006 and September 2007 at cl 5 refer to the land being ' …held in the name of an Indonesian citizen as requested by Indonesian law on behalf of the PMA Company'.
What is clear from the evidence filed is that the parties contemplated that moneys were to be lent so that a company, Soka Beach Management (which is described in a number of ways, such as PT Soka Beach Management, PMA Soka Beach Management, and PMA Company) could undertake property development in the Republic of Indonesia. It's a fact that companies raise money by either the issue of shares, or borrowings, or both. In this case the evidence is clear that the company needed money and security for the loan was to be provided in some form that is difficult to understand, particularly given the land appears to be held in the name of a natural person who is an Indonesian citizen, pursuant to the laws of the Republic of Indonesia. It is clear that the company had a bank account and that the plaintiff deposited $120,000 into that bank account. It is also the case that companies can act thought their duly authorised agents, which agents include their directors.
Hence there is nothing inherently implausible in the first defendant's affidavit that the transaction whereby $120,000 was borrowed was entered into in their capacity of directors. In so saying, I am alert to the possibility that the defendants could have borrowed the money in their own capacity with a view to on lending it to the company, with the payment into the company’s bank account being pursuant to their direction.

The provision relating to Indonesian law

The plaintiff says the plea by the defendants that the contract is governed by Indonesian law imposes an onus on the defendants to produce evidence of that law and how, having regard to that law, they have a defence.
In this regard the plaintiff refers to the comments of the Supreme Court in Attorney-General of Botswana v Aussie Diamond Products Pty Ltd [No 2] [2009] WASC 301 in which [19] it was said:
19. In the absence of evidence, the court will ordinarily assume that foreign law is identical to Australian law: Neilson v Overseas Projects Corporation of Victoria Ltd [2005] HCA 54; (2005) 223 CLR 331 [16], [45], [116], [125]. Foreign law is a question of fact to be pleaded, and proved by expert evidence, ordinarily by the party relying on it: Neilson v Overseas Projects [115], [185], [249]; Regie National des Usines Renault SA v Zhang[2002] HCA 10; (2002) 210 CLR 491 [68]. The defendant's plea of s 35 does not plead foreign law. The plaintiff had not pleaded any contract until 16 September 2009. Its further re-amended statement of claim of that date did not allege that the proper law of the contract on which it relied was Botswana law. Nor in the earlier versions of the plaintiff's pleading did the plaintiff raise a plea about the application of Botswana law, although I recognise that in the absence of a plea of contract, the occasion to plead its proper law did not strictly arise. Nevertheless, its seems to me that if the plaintiff had previously wished to assert the application of Botswana law, it should have done so. The defendant's plea of a law of the forum does not seem to me to raise a new issue of fact or, at least not one about which the plaintiff could be said to be taken by surprise.
However, in the evidence that was presented to me by the plaintiff in her affidavits it is clear that, notwithstanding she has not pleaded it, she relies on, for the purpose of establishing the defendants liability to her, the terms of a contract that is expressly stated to be governed by Indonesian law. Having regard to the matters referred to in [26] – [27] above I would infer that the foreign law is different to Australian law. To put it another way, having regard to those matters referred to in [26] – [27] above, this is not a case in which it can ordinarily be assumed that Indonesian law is identical to Australian law. As defendant's liability to the plaintiff can only be established having regard to the provisions of Indonesian Law, and having regard to the conclusion I have reached that Indonesian Law is different to Australian Law even though I'm not informed in what respects, like the plaintiff in the case of Attorney‑General of Botswana v Aussie Diamond Products Pty Ltd (No 2) it is my view the plaintiff here should have pleaded it.

Penalty Interest

The plaintiff claims interest at the rate of 20% per annum on the principal of $120,000 from the 31 October 2006, and from 27 October 2007 on the balance owing on the principal, at the rate of 44%. From 19 June 2008 the amount owing on the principal was $80,000 and from the 28 May 2009 it was $35,000. This means that over the period of nine years, the amount owing is now $308,373.15. Of this some $125,000 in interest has been accumulated on a balance of $35,000 since 31 May 2008 (these figures are taken from the plaintiff's counsel's calculations in the schedule to his submissions).
The defendants say they are not liable to pay this because it is a penalty. The plaintiff says it isn't and refers to a decision of the Victorian Court of Appeal in Yarra Capital Group Pty Ltd v Sklash Pty Ltd [2006] VSCA 109. In Yarra Capital the annualised interest rate was considerably more than 44% and not regarded as a penalty. The rates were calculated at various levels at various times between the ranges of 44% and 240%. The facts of that case appear to have been better exposed to that court than the facts of this case have been to me. The court in that case was able to find that the loans were made in a short term money market, were for only a few months, were effectively unsecured, were entered into by mature and sophisticated persons exercising free will and that it may have been a complex and expensive exercise to seek to establish with some form of precision the damage likely to be suffered by the plaintiff on the defendants failure to repay by the due date.
The court refused to overturn the initial decision of the Master to enter summary judgement for the plaintiff.

The cases put the onus on the defendant to show the interest rate is a penalty (Yarra Capital Group Pty Ltd v Sklash Pty Ltd [11]). The defendants need to show there is an argument that the interest is a penalty and that this is an issue to be tried. There is not a lot from the defendants. In his affidavit the first defendant describes his occupation as a 'consultant'. That information is unhelpful. However it is clear on his evidence, he is a director of a company that is building villas in Indonesia. That suggests some business acumen. On the other hand, the contracts in their manner and form suggest a lack of sophistication.
Nevertheless the contract involves a relatively short term business loan of 12 months to be applied to a property development in land in a foreign country, with uncertainty as to the nature and extent any security for it. It is a contract entered into by consenting adults who know why they agreed to a rate of 44%, but who do not tell me why. I do not know the circumstances of the lenders, or the fate to which they were exposed and the losses they would suffer in the event of default, nor what it would cost them to protect themselves in the event of a default. It may be the case, for all I know, that the lenders in turn would have had to borrow money on the short term money market at high rates in order to protect themselves, or sell property in a fire sale with significant losses, a risk they were prepared to take only if the interest rate was 44%.
In those circumstances I can see no evidence to support an argument that that the interest rate was not a genuine pre-estimate of the damage the plaintiff would suffer.

Judgment under O 30

The first question is whether there are any admissions made in the defence filed by the two defendants that would enliven the discretion to enter judgment. I am mindful that the defendants are acting in person and are not likely to express themselves with the clarity that might be expected from a legal practitioner and that I should take some care to ensure that the presentation of an unrepresented litigant's case is not obfuscated by his or her own inadequate advocacy.
This can be problematic when lay people are engaged in discussion of matters that directly or implicitly involve abstract legal concepts such as the nature and extent to which companies are regarded as separate legal entities and the nature of agents, how they obtain their authority and the nature and extent of that authority. For example, it is not inconceivable that an agent contracting on behalf of a disclosed principle would describe himself as having contracted with the third party even though, strictly speaking, the contract is between the agent's principle and the third party. So, in answer to the proposition that the agent had contracted with the third party, it is conceivable he would answer yes. In one sense the answer is correct. This apparent admission, however, falls short of constituting an admission that the contractual liabilities are between he and the third party.
The nature and extent of any perceived admission, and so the weight to be given to it, is very much dependent on the circumstances and background in which it is found. A factual background where the first defendant provides evidence on affidavit that he was contracting on behalf of a company, casts the 'admission' in the pleading that he had 'entered into a loan agreement with the plaintiff' in a different light. It suggests the purported admission that he entered in to the loan agreement with the plaintiff is really an admission that he entered into the loan agreement with the plaintiff as an agent for a third party, namely the company. The legal consequences of what is being admitted are very different.
Nor is it uncommon to see lay persons conflate their interests as shareholders in companies with the idea that they 'own' the company. But in the eyes of the law, at least Australian law, a company is a separate legal entity and its property is its own, not its shareholders, and its rights and obligations in respect of those strangers who deal with it are very different to the rights and obligations as between the company and its shareholders, a company and its directors, and a company's directors and its shareholders. Thus a degree of circumspection needs to be given to purported admissions by those who are shareholders or directors of a company, when they say that 'they' have been the recipients of a loan when it was the company that was the recipient of the loan.
In those circumstances I am not convinced the alleged express admission, or any admissions implied by a failure to expressly deny some discrete paragraphs of the statement of claim by either the first defendant or the second defendant, is an unequivocal admission that the contract was entered into between them and the plaintiff in their own personal capacity as distinct from agent for a company, or that payment of the loaned money was made to them in their personal capacity rather than to the company.
If I am wrong in coming to this view, and even if strictly speaking the pleadings in the defence should be seen as either an express admission or a deemed admission of these material facts, given they are made by unrepresented defendants together with affidavit evidence that the contract was not with the defendants but with the company, that they never received the loan monies and the first defendant wanted to amend his defence (I infer from the first defendant's submissions, so as to withdraw the alleged express or deemed admissions), I do not consider it just to order judgment for the plaintiff. The just outcome, in my view, is that the defendants should be allowed to bring an application to amend their defence so as to accord with the defence deposed to in the affidavit of the first defendant.

Order 14 summary judgment

In considering an application for summary judgment brought by a plaintiff it is necessary to bear in mind the comments of Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde (2000) 201 CLR 552, 575 – 576 where it was said, in slightly different circumstances:
Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways (63), but all of the verbal formulae which have been used are intended to describe a high degree of certainly about the ultimate outcome of the proceedings if it were allowed to go to trial in the ordinary way.
For similar reasons as expressed for refusing to enter judgment pursuant to O 30, it is my view being that there is a triable issue as to who are the contracting parties. After hearing this application, I cannot say I have a high degree of certainty about the ultimate outcome of the proceedings if this matter was allowed to go to trial in the ordinary way.
I also consider that the question of whether the defendants are liable to the plaintiff under the provisions of Indonesian law gives rise to an issue or question in dispute which ought to be tried.
Accordingly I give the defendants unconditional leave to defend.