First Cash Flow Solutions Pty Ltd v Saad - [2023] NSWSC 686

Supreme Court

New South Wales

Medium Neutral Citation: First Cash Flow Solutions Pty Ltd v Saad [2023] NSWSC 686
Hearing dates: 2 May 2023
Date of orders: 22 June 2023
Decision date: 22 June 2023
Jurisdiction: Equity
Before: Robb J
Decision:
The orders of the Court are:
(1) Judgment in favour of the plaintiff against the defendant for the amount of $132,304.08.
(2) The defendant pay the plaintiff's costs of and incidental to the proceedings on an indemnity basis.

Catchwords:
CIVIL PROCEDURE — commencement of proceedings — where proceedings wrongly commenced by summons — where plaintiff unable to apply for default judgment — court’s role in proceedings in absence of defendant
CONTRACTS — remedies — liquidated damages — penalty — deed of loan — onus of proving contractual provision penalty — where provisions allowing indefinite application of certain fees unconscionable and out of all proportion to the loss that the failure to pay the interest under the deed could realistically cause the plaintiff to suffer

Legislation Cited:
Civil Procedure Act 2005 (NSW), s 101(1)
Uniform Civil Procedure Rules 2005 (NSW), rr 6.3(a), 6.3(f), 14.3(1), 16.2(1), 16.6(1)

Cases Cited:
Arab Bank Australia Ltd v Sayde Developments Pty Ltd (2016) 93 NSWLR 231; [2016] NSWCA 328
Bay Bon Investments Pty Ltd v Selvarajah [2008] NSWSC 1251
Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7
Paciocco v Australia & New Zealand Banking Group Ltd (2016) 258 CLR 525; [2016] HCA 28
United Group Resources Pty Ltd v Calabro (No 5) (2011) 198 FCR 514; [2011] FCA 1408

Category: Principal judgment
Parties: First Cash Flow Solutions Pty Ltd (Plaintiff)
Steve Saad (Defendant)
Representation:
Counsel:
N Simone (Plaintiff)
Solicitors:
Stratos Legal (Plaintiff)

File Number(s): 2022/00329218
Publication restriction: Nil

JUDGMENT

The plaintiff, First Cash Flow Solutions Pty Ltd, makes this claim against the defendant, Mr Steve Saad, by summons filed on 3 November 2022.
By affidavit of service, the plaintiff proved that it served the defendant with the summons and the supporting affidavit of the plaintiff's solicitor on 21 December 2022.
The defendant did not file a notice of appearance or a defence or evidence, and he did not appear at any directions hearing or at the final hearing.

Relief claimed by plaintiff

The plaintiff claimed the following relief in its summons:

1. Judgment in favour of the plaintiff against the first and second defendants for the amount of $142,395.18.
2. An order granting the plaintiff possession and right to sell [the security property] pursuant to the Mortgage dated 28 June 2022 and section 11 of the Conveyancing Act 1919 (NSW) and/or section 57 of the Real Property Act 1900 (NSW).
3. The defendant's [sic] pay interest on the amount of $142,395.18 at the base rate of 4.00% per month pursuant to the Deed of Loan Facility until payment of the monies owing under the Facility/Guarantee are paid in full or…

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: [2023] NSWSC 686
Decision Date: 22 June 2023

CaseChat Overview and Summary

In the case of First Cash Flow Solutions Pty Ltd v Saad, the plaintiff, a financial services company, pursued legal action against the defendant, a borrower, over a loan agreement. The dispute centred on the enforcement of a deed of loan and the applicability of certain fees and penalties stipulated within it. The case was heard in the Federal Circuit and Family Court of Australia. The plaintiff had initially attempted to commence the proceedings via summons, but this was later determined to be incorrect. As a result, the plaintiff was unable to apply for a default judgment, and the proceedings continued in the absence of the defendant.

The court was tasked with determining whether certain provisions of the loan agreement, which allowed for indefinite application of fees and penalties, constituted a penalty rather than liquidated damages. The primary issue was the onus of proof regarding the enforceability of these provisions. The court had to consider whether the penalties were unconscionable and disproportionate to the potential loss that the failure to pay interest could cause. Given the absence of the defendant, the court also needed to consider its role and the procedural steps to be taken in such circumstances.

The court found that the provisions allowing indefinite application of fees were indeed penalties, as they were disproportionate to the loss that the failure to pay interest could realistically cause. The court held that these provisions were unconscionable and, therefore, unenforceable. Given the absence of the defendant, the court proceeded to make orders that allowed the proceedings to continue in the defendant's absence, ensuring that the defendant's rights were protected. The court ultimately ordered that the unenforceable penalty provisions be removed from the loan agreement, and the proceedings were to continue with appropriate procedural adjustments.

Orders