Chu v Haddad

[2014] NSWSC 1720

Supreme Court

New South Wales

Medium Neutral Citation:

Chu v Haddad [2014] NSWSC 1720

Hearing dates:

2 December 2014

Decision date:

02 December 2014

Jurisdiction:

Common Law

Before:

Davies J

Decision:

1. Judgment for the Plaintiffs against the Defendant in the sum of the four loans totalling $800,000.00.

2. Interest on the respective four loans is calculated at the rate of interest of 2.5% per month on the respective loans, for the following period:

(a) 19/9/2006 - 19/3/2007 (1st loan)

(b) 25/9/2006 - 25/3/2007 (2nd loan)

(c) 29/1/2007 - 29/6/2007 (3rd loan)

(d) 2/5/2007 - 29/6/2007 (4th loan)

Thereafter, interest to be calculated at rate pursuant to s 100 Civil Procedure Act 2005 (NSW).

3. The Defendant to pay the Plaintiffs' costs of these proceedings, as agreed or assessed.

4. Any and all previous costs orders are discharged save for order 3 above.

Catchwords:

DEBT - loan agreements - parties agree on judgment for principal sum and interest for the period of loan agreements - whether interest thereafter payable at contract rates or pursuant to s 100 Civil Procedure Act - construction of loan agreements

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Cases Cited:

Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896
Maggbury Pty Ltd v Hafele Aust Pty Ltd [2001] HCA 70; 210 CLR 181

Category:

Principal judgment

Parties:

Chenny Chu ( First Plaintiff)
Christine Chu (Second Plaintiff)
John Haddad (Defendant)

Representation:

Counsel:
M Sneddon ( Plaintiffs)
P Afshar (Defendant)
Solicitors:
Mosca & Scott ( Plaintiffs)
Spinks Eagle Lawyers (Defendant)

File Number(s):

2013/83443

Judgment

1. These proceedings arose out of four loan agreements that were entered into, the first being on 19 September 2006 and thereafter on 25 September 2006, 29 January 2007 and 2 May 2007. Each of those loan agreements was in identical form except for the date of the making of the loan, the date for repayment of the loan and the sum loaned in each case.

1. The parties have now settled the whole of the proceedings but for the determination of the rate of interest that should be payable by the Defendant beyond the date of expiry in each case of the loan agreements. Under the loan agreements interest was to be payable at the rate of 2.5% per month.

1. The agreed judgment provides for the Defendant to pay the whole of the amounts loaned totalling $800,000. It also provides for the payment of interest at 2.5% per month from the date of the making of each loan until the date for repayment of each loan. What the parties cannot agree is what rate of interest should be payable after each of those repayment dates until the date of judgment.

1. The Plaintiffs contend that interest should be payable from the date of expiry of each of the loan agreements at the rate of 2.5% per month so that the matter is taken outside s 100 of the CivilProcedureAct 2005 (NSW). The Defendant says interest should only be payable pursuant to s 100.

1. Section 100(3)(b) provides that this section does not authorise the giving of interest on a debt in respect of any period for which interest is payable as a right, whether by virtue of an agreement or otherwise. Accordingly, if the terms of the loan agreements provide for interest beyond the repayment dates, s 100 will have no application.

1. The only evidence put forward on this issue was a copy of each loan agreement, together with two additional agreed facts, namely that the Plaintiffs borrowed the moneys in respect of which they made the loans to the Defendant from an accountant in Hong Kong at 2.5% interest per month and that they repaid the whole of those moneys in respect to each of the loans plus interest at 2.5% beginning on the, "loan begin date", of each of the loans by 29 June 2007. In other words, the Plaintiffs have satisfied their obligations to their lenders. The Plaintiffs are simply out of pocket for the principal amounts owing under each loan and the interest thereon that they were required to pay to their lenders in Hong Kong.

1. The loan agreements relevantly provide that the interest consideration is, "of no less than 30% per Annual (sic), i.e. at 2.5% per month". There is then a heading, "Associated Dates". The first of these is a loan begin date and I have already indicated what each of those dates is. The second Associated date is called a capital repayment date, which in the case of the first agreement was on or before 19 March 2007. The third such Associated date is called a duration date and alongside is written, "Of not more than six months from 19 September 2006". Under the heading Repayments the word "interest" appears and the agreement reads:

Monthly interest is to be paid at the beginning of each month period in advance, (that is, on or before 19th of each month) starting on 19 September 2006 and henceforth each month for the duration of the loan periods. (emphasis added)

1. The Plaintiffs argue that on a proper construction of that agreement interest should be payable from the expiry of the loan periods up to the date of judgment at 2.5%. My attention has been directed to what the High Court said in MaggburyPtyLtdvHafeleAust PtyLtd [2001] HCA 70: (2001) 210 CLR 181 at [11], where the judgment of Gleeson CJ, Gummow and Hayne JJ quoted Lord Hoffman in InvestorsCompensationScheme LtdvWestBromwichBuildingSociety [1998] 1 WLR 896 at 912 where he said:

the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

1. The Plaintiffs argue in particular that the reference to a 30% annual rate is an indication that it was anticipated the loans would not be repaid by the due date and that interest would continue to run at that same rate. Further, the Plaintiffs argue that loan periods should be construed as meaning any period during which the loan amount was outstanding.

1. In my opinion the Plaintiffs' arguments should not be accepted.

1. The reference to an annual rate does no more than indicate the rate of interest in the usual way. The reference in the repayment section of the agreement to the duration of the loan periods must be a reference to the time in which it was anticipated that the loan would be repaid. Force is given to that view by the use of the term "duration date" in the group of Associated dates. That duration date was the expiry date for the loan in each case.

1. It was open to the agreement to provide that interest was to be repayable at the particular rate identified until the loan was repaid. That is a common provision found in documents of this type.

1. I am strengthened in this particular view by the second of the agreed facts which discloses that the Plaintiffs repaid the money at the 2.5% interest rate by 29 June 2007 pursuant to their obligations to their lender. In those circumstances the Plaintiffs have not been required to pay a rate of 2.5% beyond 29 June 2007. If they now received such a rate they would, arguably be enriched.

1. In my view there is no right to interest beyond the period of the loan periods under the agreements to take the matter outside s 100. Interest should be payable from the expiry of the loan periods in each case at the rates made pursuant to s 100 of the Civil Procedure Act.

1. In those circumstances there will be judgment for the Plaintiffs against the Defendant in the sum of the four loans totalling $800,000. Interest is payable at the rate of 2.5% for the periods of each of the loan agreements, more particularly set out in paragraph 2 of the Short Minutes of Order. Interest is thereafter payable at the rates prescribed for the purposes of s 100 of the Civil Procedure Act.

1. The Defendant is to pay the Plaintiffs' costs of the proceedings as agreed or assessed and in that regard all previous costs orders are discharged.

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Decision last updated: 04 December 2014