Garden Estate Hackham Pty Ltd v Angas Securities Ltd - [2018] SASC 125

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
GARDEN ESTATE HACKHAM PTY LTD v ANGAS SECURITIES LTD
[2018] SASC 125
Judgment of The Honourable Justice Blue
5 September 2018
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PLEADINGS - GENERALLY
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - PLEADINGS - STRIKING OUT
LIMITATION OF ACTIONS - CONTRACTS, TORTS AND PERSONAL ACTIONS - APPLICATION OF THE STATUTES TO PARTICULAR CAUSES OF ACTION
LIMITATION OF ACTIONS - CONTRACTS, TORTS AND PERSONAL ACTIONS - WHEN TIME BEGINS TO RUN - PARTICULAR CAUSES OF ACTION
Application for permission to file a replacement statement of claim following the strike out of the original statement of claim.
The plaintiffs each entered into a loan contract with the first defendant to provide finance to assist in the purchase of properties intended to be used as retirement villages. The plaintiffs plead various causes of action in relation to the dealings between the parties.
The defendants object to permission being granted to include various paragraphs of the proposed statement of claim on the ground that the cause of action is statute barred and/or the cause of action sought to be pleaded is untenable.
Held:
1. There is no basis on which it can be concluded on the face of the proposed statement of claim that the pleaded causes of action of breach of contract, unconscionable conduct and misleading conduct in respect of the alleged refusal to produce duplicate certificates of title are statute barred by section 35 of the Limitation of Actions Act 1936 (SA) or section 12GF of the Australian Securities and Investments Commission Act 2001 (Cth) respectively. Permission to introduce these causes of action should be granted (at [34],[37] and [40]).
2. The pleading of an economic duress cause of action is on the face of the proposed statement of claim statute barred by section 35 of the Limitation of Actions Act 1936 (at [52]). The pleaded facts are incapable of supporting an extension of time under section 48 of the Limitation of Actions Act 1936 (SA) (at [62]). Permission to introduce this cause of action should be refused (at [63]). Permission to introduce a cause of action of unjust enrichment should be refused because it is common ground that its fate is dependent on the fate of the economic duress cause of action (at [63]).
3. The pleading of a cause of action based on the interest provisions of the loan contracts comprising penalties does not disclose a tenable cause of action. Permission to introduce this cause of action should be refused (at [70] and [71]).
4. The plaintiffs should bring forward a further pleading of the unconscionable conduct cause of action in respect of the interest provisions so that further consideration can be given to whether permission to introduce this cause of action should be granted (at [78]).
Australian Securities and Investments Commission Act 2001 (Cth) ss 12CB, 12DA, 12DC, 12ED, 12GF; Limitations of Actions Act 1936 (SA) ss 35, 48; Retirement Villages Act 1987 (SA) s 33; Supreme Court Civil Rules 2006 (SA) r 54, referred to.
Riches v Director of Public Prosecutions [1973] 1 WLR 1019, considered.

GARDEN ESTATE HACKHAM PTY LTD v ANGAS SECURITIES LTD
[2018] SASC 125
BLUE J:

This is an application for permission to file a replacement statement of claim following the strike out of the original statement of claim.
It is common ground that the test whether permission should be granted is whether the proposed statement of claim would if filed be amenable to being struck out.
Pleaded background
The facts below are drawn from the proposed statement of claim and are set out for the purpose of understanding the pleaded background to the impugned paragraphs of the proposed pleading. They may or may not be disputed in due course.
In October and November 2009, James Michalakas incorporated:
1the first plaintiff Garden Estate Hackham Pty Ltd (Hackham Co) to purchase a property at Hackham (the Hackham property) on which were constructed 95 one-bedroom units used as senior citizens’ rental accommodation;
2the second plaintiff Garden Estate Christies Pty Ltd (Christies Co) to purchase a property at Christies Beach (the Christies property) on which were constructed 50 one-bedroom units used as senior citizens’ rental accommodation.
Mr Michalakas intended to convert each property into a retirement village under the Retirement Villages Act 1987 (SA) (the Retirement Villages Act) by amongst other things applying to the Registrar-General for registration of a Retirement Village memorial on the title of each property.
The first defendant Angas Securities Ltd (Angas) is a publicly listed company carrying on business amongst other things as a financier.
In November 2009 Hackham Co entered into a contract to purchase the Hackham property for $4 million. In January 2010 Hackham Co entered into a contract with Angas (the Hackham loan agreement) under which Angas agreed to lend $2.6 million to Hackham Co for 12 months subject to extension secured amongst other things by first mortgage over the Hackham property and a fixed and floating charge over the assets of Hackham Co (the Hackham loan). In February 2010 Hackham Co settled the purchase of the property using amongst other things funds provided by Angas.
In about November 2009 Christies Co entered into a contract to purchase the Christies property for $3.5 million. In February 2010 Christies Co entered into a contract with Angas (the Christies loan agreement) under which Angas agreed to lend $2.125 million to Christies Co for 12 months subject to extension secured amongst other things by first mortgage over the Christies property and a fixed and floating charge over the assets of Christies Co (the Christies loan). In March 2010 Christies Co entered into a contract with Angas under which Angas agreed to pay $1 million to Christies Co in connection with the purchase of the Christies property (addressed in more detail below). In April 2010 Christies Co settled the purchase of the property using amongst other things funds provided by Angas.
Under each loan agreement, interest was payable monthly in advance at the rate of 22 per cent per annum (the Higher Rate) but Angas agreed to accept interest at the rate of 14 per cent per annum (the Lower Rate) during the first 12 months if amongst other things interest was paid on time and the borrower was not in default of any term of the loan agreement.
In September 2010 Hackham Co and Christies Co requested that Angas produce the duplicate certificates of title to the properties so that a Retirement Village memorial could be registered on the title of each property. Angas did not do so.
In May 2012 Angas appointed the second and third defendants as receivers and managers of the properties pursuant to the mortgage debentures.
On 21 September 2016 Hackham Co and Christies Co instituted this action against Angas and the receivers and managers. The statement of claim pleaded that Angas had breached implied terms of each loan contract that it would produce the duplicate certificate of title so that a Retirement Village memorial could be registered on the title and unconscionable and misleading conduct in relation thereto. It also pleaded that Angas failed to credit in favour of Hackham Co and Christies Co certain amounts such that they were not in fact in default when the receivers and managers were purportedly appointed. This latter claim is maintained in the proposed statement of claim but need not be considered further as no pleading issue is raised in relation to it by the defendants.
On 25 January 2018 the original statement of claim was struck out in contemplation that the plaintiffs would seek permission to file a replacement statement of claim. The plaintiffs seek permission to file a proposed statement of claim exhibited to an affidavit by their solicitor Mr O’Dea sworn on 15 August 2018. The defendants oppose various pleas contained in the proposed statement of claim.
Production of duplicate titles
The plaintiffs plead that Angas breached terms of the loan agreements and engaged in unconscionable and misleading conduct in relation to the production of the duplicate certificates of title so that a Retirement Village memorial could be registered on the title of each property.
Breach of contract
Angas objects to the proposed pleading of paragraphs 73, 77 and 78 which plead breach of implied terms. If permission is refused to include those paragraphs, it is agreed that the parties should be heard as to which other paragraphs would fall consequentially.
The plaintiffs plead in the proposed statement of claim three separate implied terms of each loan contract and plead that Angas breached them by refusing to produce the duplicate certificates of title so that a Retirement Village memorial could be registered on the title of each property. In respect of each loan contract, one implied term is pleaded as an ordinary implied term (paragraphs 24 and 41) (the common law term) and the other two implied terms are pleaded as being implied by subsection 12ED(2) of the Australian Securities and Investments Commission Act 2001 (Cth) (paragraphs 76.1 and 76.2) (the statutory terms). For ease of expression I refer to the pleas in the proposed statement of claim as if they were existing pleas, recognising that the plaintiffs need permission to file the proposed statement of claim.
Angas contends that these three causes of action are on the face of the pleading barred by section 35(a) of the Limitations of Actions Act 1936 (SA) (the Act) and permission should therefore be refused to plead them. It is common ground that nothing turns on the amendments effectively made by the proposed statement of claim to the original statement of claim and that the relevant date on which this action was instituted for the purposes of the Act is 21 September 2016 when the original statement of claim was filed. The question is whether the causes of action arose before 21 September 2010.
Angas opposes permission being granted in respect of paragraph 73 which pleads breach of the alleged common law term and paragraphs 77 and 78 which plead breach of the two alleged statutory terms. It is common ground that the fate of paragraphs 77 and 78 hinges on the fate of paragraph 73 and for ease of expression I refer only to paragraph 73.
Section 35 of the Act gives rise to a defence if an action is instituted out of time rather than making it an element of a cause of action that the action is instituted within time. It might be thought therefore that a statement of claim cannot be struck out if the action is instituted out of time and instead the defendant should if so advised plead the defence and seek judgment either on a summary judgment application or at trial based on the defence. However, in Riches v Director of Public Prosecutions[1] it was held by the English Court of Appeal that, if a cause of action is clearly time-barred, this can be a ground of strike out. That decision has been followed by intermediate appellate courts in Australia (albeit it appears to have been common ground in those cases).[2] As it is common ground that I should follow this approach, I proceed on this basis.
[1] [1973] 1 WLR 1019 at 1024 per Davies LJ, 1026 per Stephenson LJ and 1027 per Lawton LJ.
[2] Jobbins v Capel CourtCorporation Limited (1989) 25 FCR 226 at 231 per Davies, Burchett and Hill JJ; Baker-Morrison v State of New South Wales [2009] NSWCA, (2009) 74 NSWLR 454 at [14] per Basten JA (with whom Ipp and Macfarlan JJA agreed).
The original statement of claim had pleaded breach of the alleged implied terms by refusal by Angas on (and after) 21 September 2010 to produce the duplicate certificates of title. There was no reference in the original statement claim to anything which occurred on 16 September 2010.
The plaintiffs plead by paragraph 51 of the proposed statement of claim that on 2 September 2010 they sought from Angas production of the duplicate certificates of title for the two properties to accompany applications to the Registrar-General to endorse memorials pursuant to subsection 33(2) of the Retirement Villages Act noting that each property was a retirement village.
The plaintiffs plead that:
·on 2 September 2010 Angelo at Angas informed the plaintiffs’ solicitor Cindy Hynes that there were issues with the production (paragraph 51);
·on 2 September 2010 Matthew Hower, Angas’ managing director, informed Mr Michalakas that the duplicate certificates of title would be produced by Angas (paragraph 51);
·on 13 September 2010 Angas by an email from its solicitors Hunt & Hunt to Ms Hynes said that the duplicate certificates of title would be produced and exchanged for payment of production fees totalling $515 at the time of production (paragraph 52(1);
·on 13 September 2010 Angas by a telephone conversation between Angelo and Ms Hynes said that the duplicate certificates of title would be produced and exchanged for payment of production fees totalling $515 at the time of production (paragraph 52(2);
·on 16 September 2010 John Smedley of Angas informed Ms Hynes by telephone that the duplicate certificates of title would not be produced (paragraph 53);
·on 16 September 2010 Ms Hynes wrote by email to Angas’ solicitors requesting confirmation that the duplicate certificates of title would not be produced (paragraph 54); and
·on 21 September 2010 Ms Hynes again wrote by email to Angas’ solicitors requesting confirmation that the duplicate certificates of title would not be produced (paragraph 54).
The plaintiffs plead by paragraph 55 that on 21 September 2010, by email from Mr Smedley to Ms Hynes, Angas refused to produce the duplicate certificates of title for the two properties.
The plaintiffs plead by paragraph 56 that Angas has at all times failed to produce the duplicate certificates of title.
The plaintiffs plead by paragraph 73 that, in breach of the alleged common law term of each loan agreement, Angas refused to produce the duplicate certificates of title for the two properties.
It is common ground that a cause of action for breach of contract accrues when the contract is breached. Angas contends that paragraph 53 of the proposed statement of claim pleads breach on 16 September 2010 when “John Smedley of Angas informed Hynes by telephone that the Certificates of Title for the GEH property and the GEC property would not be produced”. Angas contends that the contract causes of action are out of time because the action was not instituted until 21 September 2016, being six years and five days after the pleaded breach of 16 September 2010.
The plaintiffs contend that the first breach pleaded by them is contained in paragraph 55 which pleads that “on 21 September 2010, by email from John Smedley to Hynes, Angas refused to produce the Certificates of Title for the GEH property and the GEC property”.
The onus of proof of establishing a time limitation defence at trial or on a summary judgment application lies on the defendant and it follows that the onus of proof of establishing the existence of such a defence as a basis for striking out a statement of claim lies on the defendant.[3]
[3] Pullen v Gutteridge Haskins& Davey Pty Ltd[1993] 1 VR 27 at 72-74 per Brooking, Tadgell and Hayne JJ; Hawkins v Clayton(1986) 5 NSWLR 109 at 142B per McHugh JA; Cassis v Kalfus[2001] NSWCA 460 at [65] per Hodgson JA (with whom Powell and Heydon JJA agreed); Segal t/as Segal Litton & Chilton v Fleming[2002] NSWCA 262 at [27] per Hodgson JA (with whom Handley JA and Young CJ in Eq agreed); Baker-Morrison v State of New South Wales [2009] NSWCA , (2009) 74 NSWLR 454 at [14] per Basten JA (with whom Ipp and Macfarlan JJA agreed).
Angas has not adduced any evidence on the application. Rather it relies on the face of the plaintiffs’ pleading in the proposed statement of claim.
Paragraph 73 of the proposed statement of claim pleads that, in breach of the implied terms, “Angas refused to produce the Certificates of Title for the GEH property or the GEC property for them to be endorsed”. This wording correlates with paragraph 55 which pleads such a refusal on 21 September 2010.
The plea at paragraph 53 is not a plea of breach but is part of the background of the communications between the parties from 2 to 21 September 2010 that leads up to the plea of breach at paragraph 55. Paragraph 53 merely pleads that Mr Smedley said that the duplicate certificates of title would not be produced: it does not plead a refusal to produce. It cannot be said that on the face of the statement of claim a breach occurred on 16 September 2010.
In any event, it would be impossible to find merely on the face of the statement of claim that a breach occurred on 16 September 2010. It is not known from the pleading what words were said by Mr Smedley to Mr Hynes, how categorical Mr Smedley was or whether he had the authority on behalf of Angas to make a decision refusing to produce the duplicate certificates of title. This is especially so given that, on the face of the pleading, Angas by its managing director had previously told the plaintiffs only two weeks earlier, and by its solicitors had previously told the plaintiffs only three days earlier, that the duplicate certificates of title would be produced. Further it is pleaded that on 12 July 2010 Mr Hower, on behalf of Angas, had signed applications to the Registrar-General to endorse memorials pursuant to subsection 33(2) of the Retirement Villages Act that each property was a retirement village. In addition, on the face of the pleading, the plaintiffs did not treat the statement by Mr Smedley as definitive or final, seeking confirmation on 16 and 21 September 2010.
Given my conclusion, it is not necessary to consider the validity of the assumption made by Angas in its contention that, on the pleading, there was only a single breach as opposed to a continuous breach as a result of a continuing refusal to produce the duplicate certificates of title.
Angas’ challenge to the plea of breach of contract at paragraph 73 fails. Its challenges to the pleas of breach of contract at paragraphs 77 and 78 consequentially fail.
Unconscionable conduct
The plaintiffs plead by paragraph 93 (referring to paragraphs 1, 2 and 79 to 84 inclusive) of the proposed statement of claim that Angas engaged in unconscionable conduct in contravention of section 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) in its dealings with them in relation to production of the duplicate certificates of title.
It is common ground that subsection 12GF(2) of the ASIC Act provides that an action under subsection (1) by a person who suffers loss or damage by conduct of another person who contravenes section 12CB may be commenced within 6 years after the day on which the cause of action that relates to the conduct accrued. It is common ground that it is an element of the cause of action created by subsection 12GF(1) that the plaintiff suffers loss and damage caused by the unconscionable conduct.
It is common ground that the fate of this plea depends on the fate of paragraph 73. As Angas’ challenge to the plea of breach of contract at paragraph 73 fails, its challenge to the plea of unconscionable conduct at paragraph 93 consequentially fails.
Misleading conduct
The plaintiffs plead by paragraphs 97 to 101 of the proposed statement of claim that Angas engaged in misleading conduct in contravention of section 12DA and 12DC of the ASIC Act by representing that it would, after settlement, consent to the endorsement of a Retirement Village memorial on the title of each property and the plaintiffs have suffered loss or damage in reliance on the truth of the representations.

It is common ground that subsection 12GF(2) of the ASIC Act provides that an action under subsection (1) by a person who suffers loss or damage by conduct of another person who contravenes section 12DA or 12DC may be commenced within 6 years after the day on which the cause of action that relates to the conduct accrued. It is common ground that it is an element of the cause of action created by subsection 12GF(1) that the plaintiff suffers loss and damage caused by the misleading conduct.
It is common ground that the fate of this plea depends on the fate of paragraph 73. As Angas’ challenge to the plea of breach of contract at paragraph 73 fails, its challenge to the plea of misleading conduct at paragraphs 97 to 101 consequentially fails.
Economic duress and unjust enrichment
Angas objects to the proposed pleading of paragraphs 66 and 67 which plead economic duress and unjust enrichment. If permission is refused to include these paragraphs, it is agreed that the parties should be heard as to which other paragraphs would fall consequentially.
Economic duress
Christies Co pleads by paragraphs 43.1 and 44 of the proposed statement of claim that on 29 March 2010 Christies Co and Angas entered into a contract (the Contract of Sale) for the sale of a 30 per cent interest in the Christies property for $1 million with a deposit of the full purchase price payable on execution of the contract.
Christies Co pleads by paragraphs 43.2 and 45 that on 29 March 2010 Christies Co and Angas entered into a deed (the Option Deed) for the grant to each party of the option, exercisable by 29 March 2011 and for a fee of $1.6 million, to terminate the sale contract, in which event Christies Co was to repay to Angas the deposit of $1 million together with an additional amount of $600,000 and otherwise Angas was to discharge its mortgage over the Christies property.
Christies Co pleads by paragraphs 60 to 63 that on 31 March 2011, after the term of the Option Deed had expired, Angas purported to exercise the option but this was too late and Angas was obliged to discharge its mortgage over the Christies property.
Christies Co pleads by paragraphs 64 and 65 that on about 31 March 2011 Angas demanded that Christies Co execute a deed of forbearance agreeing not to enforce the relevant clause of the Option Deed and that Christies Co pay $1.6 million to Angas under the remaining clauses of the Option Deed, failing which Angas would commence foreclosure action against Christies Co and Hackham Co.
Christies Co pleads by paragraph 66 that on 22 June 2011, under economic duress induced by Angas’ threat to commence foreclosure action, Christies Co executed a Deed of Forbearance dated 29 March 2011 (the Deed of Forbearance)[4] and an agreement dated 22 June 2011 and paid $1.6 million to Angas sourced from a new borrowing from Angas of $2 million (the new loan agreement).
Time limitation
[4] Paragraph 66 appears to plead that the Deed of Forbearance was not executed until 22 June 2011 even though it was dated 29 March 2011.
It is common ground that the cause of action for economic duress accrued on 22 June 2011 and that pursuant to section 35(c) of the Act a proceeding for economic duress was required to be commenced by 22 June 2017. It is also common ground that a claim for economic duress or in respect of the Deed of Forbearance or the 22 June 2011 agreement was not notified to Angas until not before 20 April 2018.
Rule 54(7)(a)
Christies Co contends that the economic duress claim arises out of substantially the same facts as were pleaded in the original statement of claim and is permissible pursuant to rule 54(7)(a) of the Supreme Court Civil Rules 2006 (SA) (the Rules).
Rule 54 relevantly provides:
54—Amendment
(1)A party may amend a document filed by the party.
(4)An amendment may be made—
(a)with the Court's permission; or
(b)with the consent of all other parties; or
(c)as authorised by subrule (5).
(5)A party is authorised to amend without the consent of the other parties or the Court's permission if—
(a)the amendment is made within the period allowed for disclosure of documents or a further 14 calendar days from the end of that period; and
(b)the party has not exercised the right to amend under this subrule on an earlier occasion.
(6)However, an amendment cannot be made without the Court's permission or the consent of the other parties if the effect of the amendment is—
(a)to withdraw an admission; or
(b)to add or substitute a cause of action that is statute barred; or
(c)to introduce a defendant against whom a fresh action would be statute barred.
(7)The Court's power to grant permission for amendment under subrule (6) is subject to the following qualifications—
(a)the Court may only grant permission for the addition or substitution of a cause of action that is statute barred if the new cause of action arises out of substantially the same facts as the original cause of action;
(8) For the avoidance of doubt, nothing in this rule prevents the Court permitting an amendment to add a cause of action that is statute barred or introduce a defendant against whom a fresh action would be statute barred on the basis that that the amendment not relate back to the commencement of the action and the addition or introduction be subject to the subsequent t granting of an extension of time under section 48 of the Limitations of Actions Act 1936 or other statutory power.
Note— See Brook v Flinders University of South Australia (1988) 47 SASR 119.
Christies Co concedes that prima facie an amendment to introduce the new cause of action of economic duress is precluded by rule 54(6)(b) unless the exception in rule 54(7)(a) applies.
The test prescribed by rule 54(7)(a) is whether the new cause of action “arises out of substantially the same facts as the original cause of action”. The original causes of action pleaded by Christies Co in the original statement of claim were confined to breach of contract and unconscionable and misleading conduct as summarised above. There was no plea of any of the facts summarised at [42] to [46] above (other than the bare fact that Angas provided $1 million by way of loan which was used by Christies Co to settle on the purchase of the Christies property). In these circumstances, it is clear that the new cause of action does not arise out of substantially the same facts as the original causes of action.
Christies Co contends that, because the matters sought to be pleaded as summarised at [42] to [46] above are essential steps in the chronological history of the accumulation of the debt and in proving the pleaded invalidity of the appointment of the receivers and managers, the new cause of action arises out of substantially the same facts as the original causes of action. This is not the test for the application of rule 54(7)(a). Rule 54(7)(a) has no application to the proposed plea of economic duress.
Extension of time
Christies Co contends in the alternative that its pleading of the economic duress cause of action should not be struck out because it seeks an extension of time pursuant to subsection 48(3) of the Act.
Christies Co pleads by paragraph 113 of the proposed statement of claim that, insofar as may be necessary, it seeks an extension of time in respect of the economic duress cause of action.
Christies Co by paragraph 114 repeats the pleas at paragraphs 60 to 67 that are summarised at [44] to [46] above.
Christies Co by paragraph 115 pleads that at no time in March 2011 or subsequently did Angas acknowledge or bring to account to the credit of Christies Co:
3the fact that interest had accrued and continued to accrue (at the Higher Rate) on the Christies loan because Angas had not produced the duplicate certificate of title,[5]
4the fact that Christies Co had no obligation to pay interest on the Christies loan by reason of the failure by Angas to exercise the option under the Option Deed.
[5] There is also a plea that Angas did not acknowledge or bring to account to the credit of Hackham Co the fact that interest had accrued and continued to accrue (at the Higher Rate) on the Hackham Co loan because Angas had not produced the duplicate certificate of title. It is not clear what is the relevance of this to the application for an extension of time for Christies Co is to serve for economic duress but in any event the same considerations apply in respect of the Hackham Co loan as they do to the Christies Co loan.
Christies Co pleads by paragraphs 116 and 117 that Angas’ claims of Christies Co’s indebtedness from about April 2011 were accordingly inflated by the new loan agreement insofar as it involved a loan of $1.6 million and by interest thereon and any statements of Christies Co’ indebtedness were accordingly misleadingly overstated.
Christies Co pleads by paragraph 118 that the matters pleaded in paragraphs 114 to 117 summarised above were representations or conduct of Angas as to the effect of the Option Deed, the Contract of Sale and the Deed of Forbearance and as to the alleged indebtedness of Christies Co.
Section 48 of the Act relevantly provides:
48—General power to extend periods of limitation
(1)Subject to this section, where an Act, regulation, rule or by-law prescribes or limits the time for—
(a)instituting an action; or
…
a court may extend the time so prescribed or limited to such an extent, and upon such terms (if any) as the justice of the case may require.
(3)This section does not—
…
(b) empower a court to extend a limitation of time prescribed by this Act unless it is satisfied—
…
(ii)that the plaintiff's failure to institute the action within the period of the limitation resulted from representations or conduct of the defendant, or a person whom the plaintiff reasonably believed to be acting on behalf of the defendant, and was reasonable in view of those representations or that conduct and any other relevant circumstances,
and that in all the circumstances of the case it is just to grant the extension of time.
The elements of the prerequisite to the Court’s power to extend prescribed by section 48(3)(b)(ii) are:
5representations or conduct by the defendant (or a person whom the plaintiff reasonably believed to be acting on behalf of the defendant);
6the plaintiff's failure to institute the action within the period of the limitation resulted from the representations or conduct, ie the representations or conduct were a cause of the plaintiff not instituting the action within the limitation period;
7that failure was reasonable in view of the representations or conduct and any other relevant circumstances.
Christies Co pleads the first element, namely representations by Angas to Christies Co and Angas does not contend that this plea is unsatisfactory.
Christies Co does not plead the second element. There is no plea that the representations or other conduct caused it not to institute an action for economic duress by 22 June 2017. In the absence of such a plea, there is no pleaded basis for an application for an extension of time.
Permission to plead paragraphs 66 and 113 to 120 of the proposed statement of claim should be refused. I will hear the parties as to which other paragraphs fall consequentially.
Unjust enrichment
Paragraph 67.1 of the proposed statement of claim pleads that the effect of the transactions pleaded at paragraph 66 (as summarised at [46] above) was to unjustly enrich Angas in the sum of $1.6 million.
It is common ground that the fate of paragraph 67.1 depends on the fate of paragraph 66. Accordingly, permission to plead paragraph 67.1 of the proposed statement of claim should be refused. I will hear the parties as to which other paragraphs fall consequentially.
Penalty
Angas objects to the proposed pleading of paragraphs 81 and 82 which plead that the interest provisions in the loan agreements were void as penalties. If permission is refused to include these paragraphs, it is agreed that the parties should be heard as to which other paragraphs would fall consequentially.
The plaintiffs plead by paragraphs 21 and 22 and 37 to 39 respectively of the proposed statement of claim that the Hackham and Christies loan agreements included terms that:
·interest was payable monthly in advance at 22 per cent per annum (the Higher Rate) but Angas agreed to accept interest at 14 per cent per annum (the Lower Rate) during the first 12 months if interest was paid on time and the borrower was not in default of any term;
·the amount of the Higher Rate and the Lower Rate could be unilaterally adjusted by Angas without giving any reason subject to a limit of three per cent in any one notice;
·any interest unpaid at the end of the month, together with any costs or expenses incurred by Angas, could be added to the amount of the loan and would bear interest at the Higher Rate.
The plaintiffs plead by paragraphs 81 and 82 that the interest provisions comprised unenforceable penalties because the effective rate of interest charged was 57 per cent per annum and was exorbitant and out of all proportion to the amount necessary or reasonable to compensate Angas in the event of breach and punished the borrowers and was not a protection of Angas’ legitimate interests in due payment of interest. The plaintiffs plead that, if Angas is entitled to any interest, it is only at the prevailing Reserve Bank cash rate or 10 year Australian Government Bond yield rate (these rates are not referred to in the loan agreements).
Tenable plea invoking penalty doctrine
Angas accepts that, while it would contend otherwise at trial, it would not be untenable for the plaintiffs to plead that the differential of 8 per cent between the Lower Rate and the Higher Rate comprises a penalty but contends that in that event the Lower Rate of 14 per cent per annum would nevertheless be payable. Angas notes that the pleading does not articulate how an interest rate of 22 per cent per annum is said to equate to an effective rate of interest of 57 per cent. Angas contends that ordinarily the doctrine of penalties is not invoked merely because the parties agree on an interest rate that might be regarded as high.
I uphold Angas’ contentions. There is nothing in paragraphs 81 and 82 that would render the interest rate provisions penalties merely because a rate of 22 per cent per annum is regarded as high. This is not to say that the plaintiffs could not plead facts which it is reasonably arguable would invoke the doctrine of penalties but they have not done so by their present pleading.
Permission to plead paragraphs 81 and 82 of the proposed statement of claim should be refused.
Unconscionable conduct
Angas objects to the proposed pleading of paragraphs 94 to 96 which plead that the imposition of the interest provisions in the loan agreements comprised unconscionable conduct in contravention of section 12CB of the ASIC Act. If permission is refused to include these paragraphs, it is agreed that the parties should be heard as to which other paragraphs would fall consequentially.
The plaintiffs plead by paragraph 94 that Angas engaged in unconscionable conduct in entering into the loan agreements because the interest rates were excessive and penalties for the reasons pleaded in respect of the penalty cause of action and Angas had a unilateral ability to increase the interest rates by up to three per cent per notice without providing a reason and without limit to the number of notices Angas might issue.
The plaintiffs plead by paragraph 95 that Angas enforced the interest rate provisions and charged interest every month at the Higher Rate and Angas’ unconscionable conduct caused them to suffer loss and damage.
Time limitation
As observed above, subsection 12GF(2) of the ASIC Act provides that an action under subsection (1) by a person who suffers loss or damage by conduct of another person that contravenes section 12CB may be commenced within 6 years after the day on which the cause of action that relates to the conduct accrued.
Angas contends that the plaintiffs suffered loss and damage on their case and the cause of action accrued on the plaintiffs’ case either when the parties entered into the relevant loan agreement or in any event at least at the end of the first month in which interest was charged. In the case of Hackham Co this was apparently the end of February 2010 and in the case of Christies Co this was apparently April 2010. This was more than six years before institution of the action in September 2016.
The plaintiffs contend that they did not suffer loss and damage until the principal component of the loans became due under the terms of the loan agreements in February 2011 in the case of Hackham Co and March 2011 in the case of Christies Co. This was less than six years before institution of the action in September 2016.
The question when the plaintiffs suffered loss and damage is a complex one. It is unlikely that the position is so clear that the plea should be struck out on the ground that a time limitation defence is bound to succeed. However, the plaintiffs do not plead how much interest they were charged (and how it was calculated) or how much they paid from February 2010 onwards. This should be done before I make a final decision in respect of this cause of action.
Conclusion
Permission will be refused to include paragraphs 66, 67, 81, 82 and 113 to 120. I will hear the parties as to the appropriate orders to reflect my reasons for judgment.