Cani Portfolio Pty Ltd v Badov - [2018] VSC 257

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

S CI 2017 02220

CANI PORTFOLIO PTY LTD	Plaintiff
v
ROMAN BADOV	Defendant

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JUDGE:	Ierodiaconou AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	23 April 2018
DATE OF JUDGMENT:	21 May 2018
CASE MAY BE CITED AS:	Cani Portfolio Pty Ltd v Badov
MEDIUM NEUTRAL CITATION:	[2018] VSC 257

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CONTRACT — Whether interest under deed of settlement to be calculated according to loan deed or statute — Uncertainty — Whether interest clause in settlement deed void for uncertainty — Penalty — Whether interest under settlement deed according to loan deed is a penalty — Interest rate held to be out of all proportion to the greatest loss that might follow from breach of loan agreement — Interest rate to be calculated under s 58 of Supreme Court Act 1986 — Application for costs on indemnity basis under deed of settlement, loan deed and mortgage — Exercise of discretion as to basis of award of costs.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr T Greenway
The Defendant appeared in person

HER HONOUR:

Cani Portfolio Pty Ltd (‘Cani’) is a moneylender. Mr Badov guaranteed monies loaned by Cani to his business, Free Spirit Airlines Pty Ltd (‘FSA’). Monies were initially advanced to FSA under a facility agreement. After default, monies were advanced under a loan agreement. Mr Badov provided a second mortgage on the family home[1] (‘the land’) as security for the monies advanced under the loan agreement. FSA defaulted on payments and Mr Badov did not meet his obligations as guarantor. After Cani commenced this proceeding, Mr Badov and FSA executed a Deed of Settlement and Release[2] (‘settlement deed’) with it to resolve this proceeding. However, they defaulted on payment of the settlement monies. The proceeding has now been reinstated. Cani seeks judgment in its favour. The principal amount outstanding is not in dispute, nor is Cani’s mortgage over the land. The only issues in dispute are the calculation of interest and costs. The interest clause[3] in the settlement deed provides that interest is to be calculated in accordance with the loan deed[4] or alternatively pursuant to statute. The costs clause[5] is similarly constructed.
[1]The land referred to is Lot 3447 on Plan of Subdivision 431531N and being the whole of the land contained in Certificate of Title Volume 10533, Folio 347: affidavit in support of summons of Laura Elise Hogg affirmed 1 December 2017; the mortgage over the land is referred to in the further affidavit of Laura Elise Hogg, affirmed 26 March 2018, exhibit LEH-2.
[2]Affidavit in support of summons of Laura Elise Hogg affirmed 1 December 2017, exhibit LEH-1.
[3]Settlement deed, recital I(c).
[4]The loan deed is contained in the further affidavit of Laura Elise Hogg affirmed 26 March 2018, exhibit LEH-1.
[5]Settlement deed, recital I(d).

The two questions for determination in this proceeding are as follows:

(a) How is the interest clause to be construed?

(b) How is the…

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.

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Details

Case: [2018] VSC 257
Decision Date: 21 May 2018

CaseChat Overview and Summary

Cani Portfolio Pty Ltd commenced proceedings against Badov in the Supreme Court, challenging the enforceability of certain clauses in a deed of settlement and the applicability of a penalty interest rate under the deed. The court was tasked with determining whether the interest under the deed of settlement should be calculated according to the terms of the loan deed or by statute. Additionally, the court had to consider if the interest clause in the settlement deed was void for uncertainty and if the interest rate stipulated under the settlement deed constituted a penalty.

The court found that the interest clause in the settlement deed was uncertain because it did not specify a clear rate of interest to be applied. Consequently, the court held that the interest under the settlement deed should be calculated in accordance with section 58 of the Supreme Court Act 1986. The court further determined that the interest rate specified in the settlement deed was a penalty, as it was out of all proportion to the greatest loss that might follow from a breach of the loan agreement. Given this finding, the court ordered that the interest rate should be calculated according to the statutory provision.

The court also considered the parties' application for costs on an indemnity basis, referencing the terms of the deed of settlement, the loan deed, and the mortgage. The court exercised its discretion and awarded costs on an indemnity basis, taking into account the conduct of both parties throughout the proceedings. This decision was made in light of the specific provisions in the various deeds and the overall conduct of the litigation.

Orders