Catlin Pacific Pty Ltd v Yeatman

[2023] VCC 2022

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

Case No. CI-22-00437

Catlin Pacific Pty Ltd (ACN 628 325 655)	Plaintiff
v
James Samuel Yeatman	Defendant

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JUDGE:	JUDICIAL REGISTRAR MULLER
WHERE HELD:	Melbourne
DATE OF HEARING:	10 March 2023
DATE OF RULING:	8 November 2023
CASE MAY BE CITED AS:	Catlin Pacific Pty Ltd v Yeatman
MEDIUM NEUTRAL CITATION:	[2023] VCC 2022

RULING
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Subject:BREACH OF TERMS OF SETTLEMENT – LIQUIDATED DAMAGES – PENALTIES DOCTRINE

Catchwords:              Whether the defendant acknowledged the amount identified in the judgment debt as a present debt

Cases Cited:Legione v Hateley (1983) 152 CLR 406; Andrews v Australia and New Zealand Banking Group Limited [2012] HCA 30; O’Dea v Allstate Leasing System (WA) Pty Ltd (1983) 152 CLR 359; Australian Management Consultants Pty Ltd v Direct Mortgage Funding Pty Ltd [2003] VSC 202; Cameron v UBS AG [2000] VSC 222; Zenith Engineering Pty Ltd v Queensland Cane and Machinery Pty Ltd [2000] QCA 221; Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	--	Stephen Byrne, solicitor
For the Defendant	--	--

RULING:

Introduction

1In May 2022, the parties entered into a written settlement agreement providing for a settlement sum to be paid by the defendant to the plaintiff on 30 October 2022.  The defendant did not make the required payment, either then or at all.

2The plaintiff applied for summary judgment.  In response, the Court asked for submissions, stating in an email to the parties:

“The judicial registrar has considered the plaintiff's application and is concerned that the agreement as whole and in particular the cumulative effect of clauses 2, 5 and 6 result in the parties having reached a concluded agreement to pay $190,000 in forbearance of entering judgment with the claim dismissed and the right of re-instatement limited to enforce the terms of settlement with the result that the underlying claim has been compromised and therefore the amounts sought in the application for default judgment constitute a penalty rather than damages for breach of the terms of settlement”.

3In response, the plaintiff filed submissions dated 27 February 2023.  It had previously filed an affidavit by Stephen Byrne which exhibited the terms of settlement and deposed to non-payment by the defendant. 

4The issue that needs to be determined to resolve the question posed by the Court is: did the defendant acknowledge the amount identified in the judgment debt as a present debt?

Did the defendant acknowledge the amount identified in the judgment debt as a present debt?

A.What is a penalty and is the general principle qualified in respect of payment of a specified sum in full discharge of a debt?

5A penalty is a punishment for non-observance of a contractual stipulation and consists upon breach of the imposition of an additional or different liability.[1]

[1] Legione v Hateley (1983) 152 CLR 406 at 445.

6A stipulation, on its face, imposes a penalty if, as a matter of substance, it is collateral (or accessory) to a primary stipulation in favour of another party and upon the failure of the primary stipulation, imposes upon the first party an additional detriment to the benefit of the second party.[2]

[2] Andrews v Australia and New Zealand Banking Group Limited [2012] HCA 30 at [10].

7However, where a creditor agrees to accept payment of a specified sum in full discharge of a debt on the basis that certain conditions are met but the agreement stipulates that if the conditions are not met, the creditor is entitled to recover the whole sum.[3]

[3] O’Dea v Allstate Leasing System (WA) Pty Ltd (1983) 152 CLR 359 at 367.

8In those circumstances, the creditor must be able to point to an acknowledgment by the debtor of their liability to the creditor by entry into terms of settlement.[4]  The acknowledgment need not be express.[5]

[4] Australian Management Consultants Pty Ltd v Direct Mortgage Funding Pty Ltd [2003] VSC 202.

[5] Cameron v UBS AG [2000] VSC 222.

9Otherwise, it may be that as the claim had been settled, the amount owing under the claim was never established and therefore there was no debt, merely an amount claimed.[6]

[6] Zenith Engineering Pty Ltd v Queensland Cane and Machinery Pty Ltd [2000] QCA 221; [2001] 2 Qld R 114.

10Resolution of these issues requires examination of the claim and the terms of settlement.

B.            Does the defendant acknowledge liability to the plaintiff?

11In its statement of claim, the plaintiff claims money advanced under two loans to the defendant, and a loan establishment fee which total $78,120.00 plus interest pursuant to the two loan agreements.  At the time of issuing this proceeding in February 2022, these amounts totalled $184,665.00, all of which remain unpaid.  The plaintiff also claims interest and costs.

12In his defence, the defendant admits each of the loans but denies being indebted to the plaintiff.  That is not enough to constitute an acknowledgement of liability.

13The terms of settlement contain recitals (titled WHEREAS) and operative terms.  The recitals may be used as an admission by a party to the truth of the matter stated.[7]

[7] Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 at [380].

14Recital A states:

“The plaintiff loaned money to the defendant in the manner set out in the statement of claim (the ‘Claim’) commencing this County Court proceeding”.

15Recital B states:

“The defendant acknowledges the money loaned by the plaintiff is due and payable in the manner set out in the Claim (the ‘Debt’)”.

16Recital C states:

“The defendant:

(a) seeks time to pay the Debt; and

(b) says he would be inconvenienced by the plaintiff entering judgment immediately for the Debt”.

17Clause 2 of the operative provisions states:

“in consideration of the plaintiff’s forbearance to seek judgment the defendant will pay the plaintiff the Settlement Sum of $190,000”. 

18Clause 2, read with paragraph C of the recitals, makes clear that the intention of the parties was to provide time for the defendant to pay.  The discount applied by the plaintiff is to facilitate that indulgence rather than to compromise the amount because the defendant disputes that it is owing.

19Clauses 6 and 7 provide that the plaintiff does not release the defendant in respect of the Claim unless and until payment is made and expressly reserves its right, if the defendant defaults in his performance of any term or condition contained in the terms of settlement (which he did), to re-instate the proceeding for the full amount of the Claim, plus interest which has accumulated on the Claim and costs.

20Clearly, the defendant has acknowledged liability for the claimed amount.  That acknowledgment is complete and unqualified.  In these circumstances, there is no penalty and the plaintiff is entitled to recover the whole sum claimed.

Conclusion and orders

21The judgment of the Court is that the defendant pay the plaintiff the sum of $184,655.00 plus interest calculated pursuant to the loan agreements from 10 February 2022 to 8 November 2023, plus statutory interests from that date and costs. 

22In its submissions, the plaintiff sought to fix costs at $4,757.25 and submitted that this amount is clearly a manifestly underweight sum for legal costs.  I accept that submission and, making an allowance for further costs after the hearing, I propose to fix the plaintiff’s costs in the sum of $6,000.00 unless either party objects in writing with short reasons within 7 days of the date of this ruling.

23The plaintiff is directed to calculate interest pursuant to the loan agreements from 10 February 2022 to 8 November 2023 and within 7 days to provide to my chambers for authentication a judgment in accordance with Form 60A.