French v Queensland Premier Mines Pty Ltd
[2008] VSC 118
•23 April 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
F5642
No. 4139 of 2002
| WALTER MURDOCH FRENCH | Plaintiff |
| v | |
| QUEENSLAND PREMIER MINES PTY LTD & ORS | Defendants |
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JUDGE: | HOLLINGWORTH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 25 February 2008 | |
DATE OF JUDGMENT: | 23 April 2008 | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 118 | |
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Loan agreements – Calculation of amounts owning under loan agreements – Whether certain payments made in reduction of indebtedness
Practice and procedure – Application for leave to amend defence to plead part-payment – Application made after completion of trial and appeals on liability – Prejudice – Potential for inconsistent findings – Delay – No legal basis for amendment – Application refused
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J B Davis | Norton Gledhill |
| For the 1st to 3rd Defendants | Mr T Davies, solicitor | Oakley Thompson & Co |
For the 4th Defendant | No appearance |
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HER HONOUR:
Introduction
On 17 January 2002, the plaintiff, Walter Murdoch (“Rusty”) French, commenced this proceeding against the first three defendants, Queensland Premier Mines Pty Ltd (“QPM”), Frank George Beckinsale and Helen Mary Beckinsale, seeking moneys owing to him under two loan agreements. He also sought declarations against the fourth defendant, Marminta Pty Ltd (“Marminta”), in respect of a related transaction.
On 18 August 2004, a judge of the trial division held that the effect of s62 of the Land Title Act 1994 (Qld) was that Mr French had transferred the right to recover under the loan agreements, when he transferred to Marminta the mortgages which had been provided by QPM as security for the loans.[1]
[1]French v Queensland Premier Mines and Beckinsale [2004] VSC 294. The first instance judgment is referred to in these reasons simply as “VSC”.
On 14 December 2006, that decision was overturned by the Court of Appeal, which set aside the trial judge’s orders and ordered, amongst other things, that there be judgment against QPM and the Beckinsales for the amounts owing under the loan agreements, and that QPM pay Mr French the amount he had spent on land tax and rates for the mortgaged properties, together with interest.[2] The Court of Appeal referred the matter back to the trial division, for assessment of the amounts owing.
[2]French v Queensland Premier Mines and Beckinsale [2006] VSCA 287; referred to in these reasons as “VSCA”.
On 22 December 2006, Mr French filed a summons seeking directions for such an assessment. Orders for the filing and serving of material were made on several occasions in 2007[3], and the assessment was initially set down for hearing in June 2007. However, that date was subsequently vacated and the assessment stayed, pending the result of the defendants’ appeal to the High Court. The High Court dismissed that appeal on 15 November 2007.[4] Accordingly, the court is now required to assess the amounts owing to Mr French, including interest.
[3]Directions for the delivery of material were made on 9 February, 1 June and 14 December 2007.
[4]Queensland Premier Mines Pty Ltd v French [2007] HCA 53; referred to in these reasons as “HCA”.
Background facts
By an agreement dated 30 October 1989, Seventeenth Febtor Pty Ltd (“Febtor”) agreed to lend QPM and the Beckinsales $410,000 (“the first loan agreement”). Febtor lent QPM a further sum of $560,000, by a loan agreement dated 24 November 1989 (“the second loan agreement”).
The relevant terms of the first and second loan agreements were identical, save that the principal sum under the first loan agreement was to be repaid by 21 January 1990, and under the second loan agreement by 21 February 1990. Interest ran on the principal sum at the rate of 24% per annum, calculated daily. If the principal sum and interest were not paid by the due date, the interest rate automatically increased to 30% per annum, calculated daily.
No repayment was made under either loan agreement before the relevant due date. Accordingly, interest runs on the principal sum at the higher rate, from 22 January 1990 under the first loan agreement, and from 22 February 1990 under the second loan agreement.
Both loan agreements were secured by mortgages of land at Yeppoon, Queensland, granted by QPM, the owner of the land (“the mortgages”). The mortgaged land was part of a larger parcel of land, which had potential for development as a shopping centre.
In December 1992, Febtor assigned the mortgages and loan agreements to Mr French.
By a series of letters exchanged in late 1999 and early 2000, Marminta and Mr French agreed that Marminta would buy the mortgages for $950,000 (“the Marminta agreement”). Marminta paid a deposit of $50,000 towards the purchase price under that agreement in late January 2000 (“the 2000 payment”). There is a dispute before me as to whether the 2000 payment should be treated as having reduced the amount owing under the first loan agreement.
In August 2002, QPM agreed to sell the Yeppoon site (including the mortgaged land) to Unison Properties Pty Ltd (“Unison”) for $2.44 million. Originally, settlement of that sale was due to take place on 30 September 2003. However, settlement was delayed until after the completion of litigation in the Supreme Court of Queensland, between Marminta and Mr French.
In the Queensland litigation, Marminta sought specific performance of the Marminta agreement, which Mr French was refusing to complete. On 13 December 2002, Dutney J held that the Marminta agreement had been abandoned; accordingly, his Honour dismissed Marminta’s claim and ordered Mr French to repay the 2000 payment.[5] On 5 December 2003, the Queensland Court of Appeal (Williams and Jerrard JJA and Philippides J) upheld Marminta’s appeal and ordered the parties to complete the Marminta agreement.[6]
[5]Marminta Pty Ltd v French [2002] QSC 423.
[6]Marminta Pty Ltd v French [2003] QCA 541.
Settlement of the Unison sale took place on 14 January 2004, after the Queensland Court of Appeal judgment. At settlement, Marminta paid Mr French $1,161,073.97, comprising $900,000, being the balance of the purchase price, plus interest thereon (“the 2004 payment”). There is a dispute before me as to whether the 2004 payment should be treated as having reduced the amount owing under the first loan agreement.
After deduction of that $1,161,073.97, the balance of the $2.44 million purchase price payable by Unison to QPM was $1,278,926.03. On 8 October 2004, Mr French was successful in obtaining a Mareva-type order, requiring QPM to pay the net proceeds of sale (less legal fees) into an interest-bearing solicitors’ trust account, pending the determination of this proceeding. In paragraph 8 of its orders made on 14 December 2006, the Victorian Court of Appeal ordered that the funds remain in the trust account until completion of the assessment of the amounts owing under the loan agreements.
In July 2007, the parties subsequently agreed that the trust account moneys would be released to Mr French, pending the determination of the High Court appeal. The terms on which they were released are recorded in orders made by me on 11 July 2007. In particular, it was acknowledged that any sum paid to Mr French under the orders would be applied by him “in reduction of any judgment sum that might be ordered in his favour against the defendants, firstly in reduction of interest, and second in reduction of principal.” On 18 July 2007, the sum of $1,021,249 was released to Mr French in accordance with those orders (“the 2007 payment”). The 2007 payment is not relevant to the assessment of the judgment sum. However, Mr French will have to make allowance for the 2007 payment in enforcing the judgment.
Calculation of the amounts owing under the loan agreements
Part‑payment arguments
As mentioned earlier, there is a dispute as to whether the 2000 and 2004 payments should be treated as having reduced the amount owing under the first loan agreement: the borrowers say they should; Mr French disputes that.
The borrowers argue that Mr French ought to account for the 2000 and 2004 payments, otherwise he will be unjustly enriched. The borrowers did not direct the court to any authority which would support this conclusion. Instead, they referred to “basic equitable principles” and argued that such an argument did not have to be pleaded.
The borrowers’ primary argument was that it was open to them on the current pleadings to rely on the 2000 and 2004 payments as part-payments. I disagree. As a matter of general principle, the assertion that a debtor’s liability to its creditor has been reduced by payments made by a third party is a material fact which should be specifically pleaded. That is particularly necessary where, as here, a contrary allegation is specifically pleaded by the debtor, namely, that the payments were made for a different reason (as consideration for an assignment).[7] The pleadings governed the evidence given at trial. No pleading or argument based on part‑payment was raised at trial or on appeal.
[7]See especially paras [15], [28]-[33] of the defence.
During the course of the hearing before me, the borrowers made an oral application for leave to amend the defence, if necessary, to add the following paragraph:
Further and in the alternative in the event that Section 62 of the Queensland Land Titles Act did not transfer to [Marminta] the benefit of the loans upon registration of the Transfer of Mortgages (which is not admitted) then [Mr French] ought account for the monies received upon the sale of mortgages to [QPM and the Beckinsales] as borrowers.
PARTICULARS
$50,000 received on or about 20 January 2000
$1,161,073.97 received on or about 14 January 2004
In support of the amendment application, the borrowers argued that it is simply “an equitable issue in relation to bringing to account the moneys received” by Mr French, and the amendment avoids the possibility of Mr French “double-dipping” and receiving double payment.
I agree with Mr French that the amendment application should be dismissed for several reasons: it was made too late, it is bound to fail and, if allowed, would cause prejudice that could not be overcome.
The principles applicable to the exercise of the court’s discretion to allow pleading amendments are well-settled. Amendments should ordinarily be allowed if they are necessary to determine the real questions in controversy between the parties and in order to avoid a multiplicity of proceedings. Ultimately, in determining an application, the court is required to consider whether the attainment of justice requires that leave be granted.
Here, the proposed amendment is embarrassing, as it does not identify a cause of action or defence known to the law. Nor did the borrowers’ solicitor articulate in oral submissions a proper basis for the alleged obligation to account.
There is no doubt that the amendment application was made very late in this case. The proceeding was commenced in 2002 (the same year as the Queensland proceeding), and some two years after the 2000 payment. A defence was delivered on 1 March 2004, some two months after the 2004 payment. Marminta filed its counterclaim on 31 May 2004. It has been obvious since the early days of this proceeding that Mr French claims to be entitled to retain the $950,000 plus interest under the Marminta agreement, as well as receive the full amounts under the loan agreements.
The defendants’ pleadings were drawn, and they were represented at trial and on both appeals, by very experienced senior counsel. They have had the same solicitors acting for them in this court since 2002.
At no stage during the trial or appeals was the possibility of amendment raised, despite the fact that the defendants had no reservations in attempting to withdraw a concession made at trial regarding the payment of rates and taxes, even as late as the High Court appeal.[8]
[8]The court refused to allow the defendants to do so - see paragraphs 52 and 53 of these reasons.
The borrowers have not offered any explanation for the delay, either by way of submissions or evidence.
Nevertheless, amendment, even at a late stage, will ordinarily be allowed, provided it can be done without causing such a degree of prejudice to the opposing parties that could not be compensated by the imposition of terms on the amendment, including, for example, an award of costs or an adjournment.
The biggest hurdle faced by the borrowers here is that, for the reasons which follow, to grant leave to amend would lead to the likelihood of inconsistent findings.
The borrowers’ argument based on general concepts of fairness had a strong “visceral”[9] appeal: that Mr French should recover $950,000 (plus interest) from Marminta, plus the full amounts owing under the loan agreements from the borrowers, has the initial appearance of unfair duplication. However, on closer examination, that seems to be the inevitable consequence of the way the defence was conducted, based on which relevant factual findings were made by the Court of Appeal and the High Court. It is also consistent with the way in which the Beckinsale interests ran their case, and the findings of the courts, in the Queensland litigation.
[9]To use the term adopted by Mr French’s counsel.
Mr French’s statement of claim at the original trial in this court referred to the 2000 and 2004 payments (being the moneys he had received from Marminta under the Marminta agreement), and asserted that he was still entitled to recover from the borrowers the full amounts owing under the loan agreements. The borrowers’ defence was that they were not liable to Mr French at all under the loan agreements, because Marminta had acquired the mortgages and therefore the underlying debts. At no stage did the borrowers propound an alternative defence, namely, that they were not liable to pay the full amounts owing under the loan agreements because the 2000 and 2004 payments were made by way of part-payment.
The learned trial judge noted that the borrowers failed to make any payments on the loans between 1989 and 2000. Her Honour otherwise made no relevant factual findings, given her Honour’s acceptance of the defendants’ primary defence.
In finding in favour of Mr French, several of the appellate judges also made general remarks about the fact that the borrowers had made no repayments under the loan agreements. For example, in the Court of Appeal, Maxwell P noted:
It is not in issue that the debtors have not paid any of the moneys owing under the loan agreements. It follows, in my opinion, that French is entitled to succeed in his claims against the respective debtors to recover the amounts due, with interest. I see no contractual or other obstacle to the enforcement of the loan agreements in accordance with their terms.[10]
[10]VSCA at [55].
Similarly, in the High Court, Kiefel J, who delivered the principal judgment, noted that “no moneys were repaid by QPM and the Beckinsales”.[11]
[11]HCA at [27].
Several appellate judges specifically considered why Marminta might have paid $950,000 to acquire the mortgages, without also acquiring the underlying debt. Callaway JA in the Court of Appeal, whose comments were expressly approved by Kirby J in the High Court,[12] said that: ”The transfer of the mortgages served a useful commercial purpose. It effectively disencumbered the land.”[13] Similarly, Kiefel J noted that:
In the present case the concern of Marminta, and the Beckinsales, was to acquire the mortgages, for what a purchaser would otherwise pay Mr French, and then to effect their release in order to sell the land, along with the balance of the development site, for commercial advantage.[14]
[12]HCA at [17].
[13]VSCA at [86].
[14]HCA at [57].
A fair reading of the various appellate reasons for decision, including the above passages, shows that the amounts paid under the Marminta agreement were clearly treated as having been paid as valuable consideration for the purchase of the mortgages. Although an arm’s‑length purchaser may not have been interested in paying that price to buy the mortgages, without also acquiring the underlying debt, Marminta was not an arm’s‑length purchaser. Like QPM, Marminta was a company owned and controlled by the Beckinsales.
The conclusions of the Victorian Court of Appeal and the High Court are also consistent with the position taken by the Beckinsale companies in the Queensland litigation. In paragraph 3 of its claim in that proceeding, Marminta alleged that it had offered to buy the mortgages and the moneys secured thereby for a purchase price of $950,000. Both at first instance and on appeal, the Queensland judges found that $950,000 was the agreed purchase price for the mortgages under the Marminta agreement, and that the deposit of $50,000 (the 2000 payment) had been paid under that agreement. QPM was added as an appellant by the Queensland Court of Appeal, and is therefore bound by that court’s findings of fact.
Having made a decision to, as Mr French’s counsel put it, “put all their eggs in one basket” during the liability trial and appeals, the borrowers cannot now seek to run a completely different case at the assessment of quantum. For the court to now characterise the 2000 and 2004 payments as having been made as part-payment under the first loan agreement, and not as the consideration for the purchase of the mortgages, would be inconsistent with the various findings discussed above. There is nothing the court could now do (by way of ordering costs, an adjournment or anything else) which could remove the prejudice caused in that situation.
For these reasons, the application for leave to amend must be refused.
Election argument
The borrowers raised an additional argument regarding the 2000 payment, arising from the fact that at one time Mr French treated the 2000 payment as having been made in reduction of the borrowers’ indebtedness under the first loan agreement.
In letters of demand from Mr French’s solicitors to the Beckinsales and QPM dated 14 and 15 January 2002, respectively, the “amount due” showed the following deduction: “less received from Marminta Pty Ltd ($50,000)”. The borrowers argue that the letters constitute a binding election that the funds received from Marminta must be applied in reduction of the borrowers’ liability under the loan agreement.
It seems that the 2000 payment went through a number of characterisations by Mr French. For example, in his reasons for decision, Dutney J noted that, on 26 April 2000, Mr Beckinsale on behalf of Marminta authorised Mr French to apply the $50,000 in part-satisfaction of the rates which Mr French had paid on the properties, for which rates Marminta as purchaser was liable. Of course, by the time of the January 2002 letters of demand, Mr French was denying the entire existence of the Marminta agreement, so presumably he had to account for the 2000 payment in some other way.
Like Dutney J, the Queensland Court of Appeal found that the 2000 payment was paid as the deposit under the Marminta agreement. The parties to that appeal (Marminta, QPM and Mr French) are now bound by that finding, no matter how they might have previously characterised the payment.
It follows that I reject the additional argument that Mr French is bound to treat the 2000 payment as having been made in part-payment of a loan agreement.
Interest calculations
There is no dispute as to the correctness of the following figures deposed to by Mr French’s solicitor:
(a) First loan agreement
Interest on $410,000 at 24% pa from 30/10/89 – 21/01/90 (being 83 days at $269.59 per day) = $22,375.97.
Interest on $410,000 at 30% pa since 22/01/90 is at a daily rate of $336.99 per day.
From 22/01/90 to 1/03/07 is 6,248 days. Interest for that period is therefore $2,105,513.52.
(b) Second loan agreement
Interest on $560,000 at 24% pa from 24/11/89 to 21/02/90 (being 89 days at $368.22 per day) = $32,771.58.
Interest on $560,000 at 30% pa since 22/02/90 is at a daily rate of $460.27 per day.
From 22/02/90 to 1/03/07 is 6,217 days. Interest for that period is therefore $2,861,498.59.
By my calculation, from 2/03/07 to 23/04/08 inclusive is 419 days.
The total interest payable under the first loan agreement from 30/10/89 to 23/04/08 is therefore:
30/10/89 – 21/01/90 22,375.97
22/01/90 – 01/03/07 2,105,513.32
02/03/07 – 23/04/08 141,198.81
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$2,269,088.10
The total interest payable under the second loan agreement from 24/11/89 to 23/04/08 is therefore:
24/11/89 – 21/02/90 32,771.58
22/02/90 – 01/03/07 2,861,498.59
02/03/07 – 23/04/08 192,853.13
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$3,087,123.30
Rates and taxes
The basis of the claim
Mr French paid some land tax and council rates on the mortgaged properties, after QPM had failed to pay them. He did so to avoid the properties being sold by the relevant authorities, pursuant to their statutory powers.
In his claim, Mr French sought the total sum of $296,988.15 (being $123,786.13 for land tax and $173,202.02 for rates) from QPM, based on various provisions of the mortgages and the common law doctrine of “practical compulsion”. Section 24 of the Land Tax Act 1915 (Qld) was claimed as an additional basis for repayment of the land tax payment. Alternatively, Mr French claimed some of that money from Marminta, on the basis that Marminta, as mortgagee in equity, had been unjustly enriched by some of the payments.
At first instance, the learned trial judge held that the sums claimed formed a part of the “moneys secured” under the loan agreements, and the right to recover the land tax payment and the rates payments had transferred to Marminta upon registration of the transfers of mortgages.[15] Accordingly, her Honour made no order for the payment of those sums to Mr French.
[15]VSC at [246] – [247].
The Court of Appeal disagreed with her conclusion that the right to recover had transferred to Marminta. All members of the Court of Appeal said that QPM was required to abide by its express concession at first instance,[16] that it would be liable in respect of the rates and taxes payments if Mr French succeeded in his claim under the loan agreements.[17]
[16]Noted in VSC at [244].
[17]VSCA at [70] and [81] per Maxwell P, at [88] per Callaway JA, at [94] per Redlich JA.
In the High Court, the defendants sought to resile from that concession. The High Court noted that the concession had been given effect to in the judgment below, and held that the defendants should not be permitted to withdraw it.[18]
[18]HCA at [61] per Kiefel J, with whom the rest of the court agreed.
In the Court of Appeal, the President, with whom Callaway and Redlich JJA agreed, noted that the total amount sought in respect of these payments was “almost $300,000”.[19] Unfortunately, when it came to making formal orders, the Court of Appeal only ordered that there be judgment for Mr French against QPM in “the sum of $173,202.02 in respect of rates and land tax and for interest thereon.”[20] It seems clear that the court’s mistake came about due to an error on the part of Mr French’s solicitor in drawing the notice of appeal, which only sought judgment for the rates payments of $173,202.02, rather than the combined rates and taxes payments figure of $296,988.15.[21] Unsurprisingly, the Court of Appeal’s original order simply reflected the notice of appeal.
[19]VSCA at [67] per Maxwell P.
[20]Para 3(c) of the orders of 14 December 2006.
[21]Deposed to by Mr French’s solicitor, Andrew John Green, by affidavit sworn 13 February 2008.
On 15 January 2007, Mr French’s solicitors wrote to the defendants’ solicitors, pointing out the error in the Court of Appeal’s orders, and asking whether QPM would consent to an order under the slip rule to substitute $296,988.15 for $173,202.02 in para 3(c) of the orders. QPM’s solicitors never replied.
The issue was not raised again until after the High Court’s decision at the end of 2007. By summons filed 13 February 2008, Mr French sought an order under r36.07 of the Supreme Court (General Civil Procedure) Rules2005, amending the Court of Appeal’s order to change the figure to $296,988.15 plus interest (“the slip rule application”). QPM neither opposed nor consented to the slip rule application.
The reference in r36.07 to an “accidental slip or omission” can include both accidental slips and omissions made by the court and, as is the case here, errors made by solicitors in asking for the court to provide something which, had the court’s attention been drawn to it at the time, would have been granted.[22]
[22]Fritz v Hobson (1880) 14 Ch D 542 at 560–1; [1874–80] All ER Rep 75; Re Inchcape; Craigmyle v Inchcape [1942] Ch 394; [1942] 2 All ER 157; Coppins v Helmers; Brambles Constructions Pty Ltd (third party) [1969] 2 NSWR 279 at 281–2; (1969) 72 SR (NSW) 273 at 277.
QPM did not dispute that the court’s power to amend an order, pursuant to r36.07 and in the court’s inherent jurisdiction, is not limited to the judge who made the original order and may be exercised by any judge of the court. However, after giving the matter further consideration, I was not persuaded that a single judge has the power to correct an order of the Court of Appeal. Accordingly, on 13 March 2008, I referred the slip rule application to the Court of Appeal.
On 21 April 2008, the Court of Appeal amended its original order under the slip rule and ordered that there be judgment for Mr French against QPM in the total sum of $296,988.15 for rates and land tax.
Interest on rates and taxes
Mr French claimed interest on this sum pursuant to s58 of the Supreme Court Act 1986 (Vic), which relevantly provides:
If in a proceeding a debt or sum certain is recovered, the Court must on application, unless good cause is shown to the contrary, allow interest to the creditor on the debt or sum at a rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 (Vic), from the time when the debt or sum was payable (if payable by virtue of some written instrument and at a date or time certain) or, if payable otherwise, then from the time when demand of payment was made.
The rates payments were made as follows:
(a) $127,154.11 was paid on 12 October 1999. A further sum of $21,734.52 was paid on 22 June 2001. Both sums (which total $148,888.63) were demanded on 15 January 2002.[23] Interest is claimed from the date of demand; and
(b) $24,313.39 was paid on 8 November 2002 and demanded by the amended statement of claim in this proceeding, dated 1 July 2004. Interest is claimed from the date of the amended statement of claim.
[23]The letter of demand only demanded $148,529, not $148,888.63, but QPM takes no point about that.
The affidavit of Mr French’s solicitor includes a calculation of interest on each of the above sums to 1 March 2007, and provides a daily rate for future payments. QPM does not dispute the interest calculations, the daily interest figure, or the basis of its obligation to pay interest.
I will order that the following interest be paid on the rates payments up to and including 23 April 2008:
(a) Interest on the sum of $148,888.63 (daily rate of $48.94)
15/01/02 to 1/03/07 $87,902.92
2/03/07 to 23/04/08 $20,505.85
(b) Interest on the sum of $24,313.39 (daily rate of $7.99)
8/11/02 to 1/03/07 $7,477.51
2/03/07 to 23/04/08 $3,347.81
That gives a total of $119,234.09 for interest on rates.
Interest is claimed on the land tax payment from the date of payment, namely 1 August 2003. Mr French’s solicitor has calculated the interest from 1 August 2003 to 1 March 2007 as $50,832.45, with a daily rate of $40.69 for the 419 days since then. Again, neither the claim for interest nor the calculation has been disputed, and so I will order interest accordingly. That gives a total of $67,881.56 for interest on the land tax payment.
Conclusion
There will be orders in the following terms:
(1)The application by the first to third defendants for leave to further amend their defence is refused.
(2)The first to third defendants pay the plaintiff the sum of $410,000, together with interest thereon in the sum of $2,269,088.10.
(3)The first defendant pay the plaintiff the sum of $560,000, together with interest thereon in the sum of $3,087,123.30.
(4)The first defendant pay the plaintiff the sum of $296,988.15 for rates and land taxes, together with interest thereon in the sum of $187,115.65.
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