| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : HEMAT -v- SAYED [2014] WADC 30 CORAM : BOWDEN DCJ HEARD : 7 MARCH 2014 DELIVERED : 11 MARCH 2014 FILE NO/S : APP 55 of 2013 BETWEEN : GHULAM RASUL HEMAT Appellant
AND
ANWAR SHAW WAFIQ SAYED
Respondent
ON APPEAL FROM:
Jurisdiction : MAGISTRATES COURT OF WESTERN AUSTRALIA Coram : MAGISTRATE BOON Citation : PER-GCLM-5869-2010 Catchwords: Appeal from Magistrates Court - Limitation Act 1935 s 44(3) - Acknowledgement of debt - Company's financial statement - Affidavit used in default judgment proceedings Legislation: Limitation Act 1935 Result: Appeal dismissed
Representation: Counsel:
Appellant : Mr P McGowan
Respondent : Mr C Williams
Solicitors:
Appellant : Lewis Blyth & Hooper
Respondent : Solomon Brothers
Case(s) referred to in judgment(s):
Giacci v Giacci Holdings Pty Ltd [2010] WASCA 233
In Re Flynn DECD (No 2) [1969] 2 Ch 403
VL Finance Pty Ltd v Legudi [2003] VSC 57
1 BOWDEN DCJ: This is an appeal from a decision of her Honour, Magistrate Boon dismissing Mr Hemet's action, commenced on the 20 April 2010, to recover $31,000 being the balance of a loan he claimed to have made to Mr Sayed on or about 24 September 2001.
2 Her Honour dismissed Mr Hemat's claim because she found the limitation period imposed by s 38 of the Limitation Act 1935 (the Act) had expired before the issue of the summons. 3 It is not disputed the limitation period would have expired unless there was an acknowledgement of the debt pursuant to s 44 of the Act which revived the claim.
A brief overview of the claim in the Magistrates Court 4 Mr Hemat says that in early September 2001 he lent Mr Sayed $AUD200,000. In fact, he transferred $US100, 000 to Mr Sayed, on the appropriate conversion rate at that time and it amounted to $AUD203,000. 5 Mr Hemat and Mr Sayed and others set up a company, Hemat, Shir and Sayed Developments Pty Ltd (HSS) in approximately 2003 to buy, develop and sell properties. 6 Mr Hemat says Mr Sayed paid $AUD172,000 into the company account on 5 March 2004 as part payment of the loan, leaving $31,000 outstanding which he sought to recover by the action. 7 Mr Sayed says he requested a loan of $US100,000. He says that the $172,000 he paid into the company account was not part payment of the loan, but was paid on behalf of his brother, Saeid Haseed, for the purchase of two blocks of land in Canning Vale from the company. He claimed the loan has been fully repaid by way of deductions from amounts due to him from the profits the company made on the Canning Vale development. 8 Mr Hemat and Mr Sayed each claimed the other made admissions about the loan in the presence of others. 9 Part of Mr Sayed's defence was that the claim is statute barred under the Act. 10 The substantive issues at the trial included whether the loan was in Australian dollars (as alleged by Mr Hemat) or US dollars (as alleged by Mr Sayed), and the true characterisation of the payment of $172,000 on 5 March 2004.
The essential issue before her Honour 11 There was no argument that a six year limitation period pursuant to the Act applied, and that unless there has been an acknowledgement of the debt by virtue of s 44 of that Act, the debt would be statute barred. 12 Mr Hemat says there were two events constituting an acknowledgement of debt pursuant to s 44(3) of the Act. 13 The first was the signing by Mr Sayed of financial statements of HSS for the year ending 30 June 2004 (exhibit 1 at the trial). The date those accounts were signed, was not the subject of a specific finding by her Honour. 14 The second was the signing on 5 December 2011 by Mr Sayed of an affidavit in support of an application to set aside default judgment entered against him. 15 It is not disputed that if any of those events are an acknowledgment of debt, the limitation period has not expired and the matter should be remitted to her Honour to determine the other issues that arose at trial. It is not suggested that, if the appeal is successful, a new trial is required.
Her Honour's findings 16 Her Honour found there was no acknowledgement of the debt.
The appeal 17 The appeal is by way of a re-hearing and it is necessary for the appellant to demonstrate error in the primary court. 18 The sole ground of appeal is that the learned magistrate erred in law in finding that documents relied upon by the appellant were not capable of constituting acknowledgement of the respondent's liability to the appellant for the purposes of s 44(3) of the Act.
Section 44 of the Limitation Act 1935 44. Effect of acknowledgement, etc., preserved except in certain cases (1) Except as expressly provided in this Act, nothing in section 38 contained shall take away or lessen the effect of any acknowledgement or promise, or of any acknowledgement by part payment or satisfaction on account of principal or interest due, and except as aforesaid any such acknowledgement or promise shall have the same effect as if this Act had not been passed. (2) No indorsement or memorandum of any part payment or satisfaction written or made upon any bill of exchange, cheque, or promissory note by or on behalf of the person to whom such part payment or satisfaction is made, shall be deemed sufficient proof of such payment or satisfaction to take the case out of the operation of section 38(1). (3) In actions in the nature of actions founded upon simple contract, no acknowledgement or promise by words shall be deemed sufficient evidence of any new or continuing contract whereby to take any case out of the operation of section 38, or to deprive any party of the benefit thereof, unless such acknowledgement or promise is made or contained by or in some writing signed by the party chargeable, or by his agent duly authorised; and where there are 2 or more joint contractors, or executors or administrators of any contractor, no such joint contractor, executor or administrator shall lose the benefit of section 38 so as to be chargeable in respect or by reason only of any written acknowledgement or promise made and signed by any other or others of them: Provided that nothing herein contained shall alter or take away or lessen the effect of any payment of any principal or interest made by any person.
Acknowledgement of debt pursuant to s 44 of the Act 19 Her Honour correctly identified the applicable law as set out by the Court of Appeal in Giacci v GiacciHoldings Pty Ltd [2010] WASCA 233. 20 In that case, Newnes JA (Martin CJ agreeing) stated [34] – [39]: The principle that a promise to pay or an acknowledgement of a debt takes the debt outside the operation of a statutory limitation period and starts the period running afresh is one of considerable antiquity. It was, as Viscount Cave noted in Spencer v Hemmerde [1922] 2 AC 507, 512, 'originally judge made law', or as Lord Sumner put it perhaps rather more trenchantly, 'the result of … decisions of three centuries … decorously disregarding an Act of Parliament' (519). It is unnecessary to trace the development of the principle. Suffice it to say that in most jurisdictions it has long since received statutory recognition, and in many cases statutory modification. In this State, at the relevant time the statutory contribution was limited to the recognition of the principle in s 44(1) of the Act and the requirement in s 44(3) that in actions founded on a simple contract the acknowledgement or promise must be in writing, signed by the acknowledging party or their duly authorised agent. The relevant principles can be stated quite shortly. In order to take a debt out of the operation of s 38 of the Act, it is necessary that there be a promise by the debtor to pay the debt. A promise need not be express and a promise to pay will be implied from an unconditional acknowledgement of the debt: Hepburn v McDonnell [1918] HCA 43; (1918) 25 CLR 199, 210; Bucknell v Commercial Banking Co of Sydney Ltd (1937) 58 CLR 155, 163 - 165. In order to constitute such an acknowledgement there must, upon the fair construction of the words read in the light of the surrounding circumstances, be an admission that the debt is owed: Hepburn v McDonnell (210). But it is not necessary that the acknowledgement specify the precise amount of the debt so long as it is ascertainable from extrinsic evidence: Jones v Bellgrove Properties Ltd [1949] 2 KB 700, 704; Dungate v Dungate [1965] 1 WLR 1477, 1487. Nor need the acknowledgement be contained in a single document but a number of documents can be combined to make up an acknowledgement: McGuffie v Burleigh (1898) 78 LT 264; VL Finance Pty Ltd v Legudi [2003] VSC 57; (2003) 54 ATR 221 [60]. A promise to pay or acknowledgement of debt must be made to the creditor or the creditor's agent: Fuller v Redman (1859) 53 ER 1035, 1038 - 1039; Stamford, Spalding & Boston Banking Co v Smith [1892] 1 QB 765, 769; Bowring-Hanbury's Trustee v Bowring-Hanbury [1942] Ch 276, 277; on appeal [1943] 1 Ch 104, 109. Such a promise or acknowledgement need not be made direct to the creditor or the creditor's agent but it is sufficient that the debtor intends that it be communicated to the creditor or the creditor's agent as an admission of the debt: see Hipworth v Mahar (1952) 87 CLR 335, 344; Stage Club Ltd v Millers Hotels Pty Ltd [1981] HCA 71; (1981) 150 CLR 535, 548. It is clear from s 44(3) of the Act that an acknowledgement signed by an agent of the debtor is only effective if the agent is duly authorised to sign it. But it is not necessary that the agent have express authority to do so if it is within the agent's general authority: Chinnery v Evans (1864) 11 HL Cas 115; (1864) 11 ER 1274; Wright v Pepin [1954] 1 WLR 635. The authority of the agent is to be determined according to the ordinary principles of agency. Ultimately, what amounts to an acknowledgement is a question of construction in each case and previous cases are therefore of little assistance: Spencer v Hemmerde (519). 21 It has been recognised that 'the trend of authority is in favour of a relaxation of the requirements of an acknowledgement and therefore treating as acknowledgement an increasing array of documents signed by or on behalf of a debtor': VL Finance Pty Ltd v Legudi [2003] VSC 57. 22 However, it is clear that a document does not constitute an acknowledgement, unless it is in substance expressive of the debtor's intention to admit the debt and to have the document produced and used for that purpose: VL Finance Pty Ltd v Legudi [63].
The first alleged acknowledgement - the financial accounts of HSS 23 Mr Hemat says the limitation period was revived as a result of Mr Sayed executing the financial accounts of HSS for the year ending 30 June 2004. 24 Those accounts were exhibit 1 of the trial and are attached to the appellant's outline of submissions. 25 Disclosed within those accounts under the heading 'Current Liabilities', is an unsecured loan to Mr Hemat for $3,012,000. 26 Mr Mucciarone, HSS's accountant's evidence was that the $3,012,000 credited to Mr Hemat loan account included $172,000 that had been paid into the company by Mr Sayed who instructed Mr Mucciarone to allocate that amount to 'Mr Hemat's loan account' (AB, page 30, 31). 27 Mr Hemat submits that the only conclusion that could be drawn is that the $172,000 was credited to his loan account because it was part repayment of the loan made by him to Mr Sayed. 28 It is also pointed out that it is not disputed that Mr Sayed claim at trial that the $172,000 was paid on behalf of his brother for the purchase of land from the company, was not mentioned to Mr Mucciarone at the time Mr Sayed instructed him to credit that amount to Mr Hemat's loan account. 29 Mr Hemat argues that there was a loan to Mr Sayed and therefore a debt immediately repayable to him, followed by part payment of the debt by Mr Sayed paying $172,000 into the company on 5 March 2004 (which cannot be relied upon as reviving the claim as it occurred more than 6 years before the issue of the writ). However, it is argued, Mr Sayed told Mr Mucciarone to credit that amount to Mr Hemat's loan account in the financial statements and that amount is part of the $3,012,000 credited to Mr Hemat's loan account, and therefore by signing those statements (post 30 June 2004), it constituted a written, signed acknowledgement sufficient to revive the claim. 30 Mr Hemat says the learned magistrate erred in law by taking the approach that 'the financial statements themselves contain no statement of an existing liability by Mr Sayed specifically to Mr Hemat' and by looking at the financial statements in isolation and not considering the financial statements coupled with the extrinsic evidence of Mr Mucciarone, inter alia, on matters relating to that entry. The submission being that Mr Mucciarone's evidence links the loan account with the money paid by Mr Sayed and is therefore crucial in considering whether there was an acknowledgement of debt. 31 Mr Sayed points out nothing was said to Mr Mucciarone's that the $172,000 was part payment of a debt to Mr Hemat or that he owed any other monies to Mr Hemat. The entirety of Mr Mucciarone's evidence on this point was that Mr Sayed told him to allocate the $172,000 to 'Mr Hemat's loan account'. 32 Mr Sayed submits that all the financial statements record is that HSS owes Mr Hemat $3,012,000. 33 Her Honour concluded 'The fact is that the financial statements themselves contain no statement of an existing liability by Mr Sayed specifically to Mr Hemat', and with respect, her Honour was entirely correct. 34 Whilst there is no doubt that an acknowledgement can be contained in a number of documents, which combine to make up the acknowledgement, there must be an acknowledgement of debt, and the signing of the financial statements do not constitute an acknowledgement of an existing liability by Mr Sayed to Mr Hemat. 35 The financial statements acknowledge money owing by HSS to Mr Hemat, but do not constitute an acknowledgement of any debt or existing liability from Mr Sayed to Mr Hemat and nothing in Mr Mucciarone's evidence can overcome that defect. No matter what link that or any other verbal evidence establishes, there is nothing in the written and signed financial statements that constitute an acknowledgement of any debt outstanding by Mr Sayed to Mr Hemat. Nothing in the surrounding circumstances can assist because the essential precondition that there be a written and signed acknowledgement of debt does not exist. 36 Her Honours conclusion that '… the financial statements themselves contain no statement of an existing liability by Mr Sayed specifically to Mr Hemat', was correct and no error of law has been shown.
The second alleged acknowledgement - the affidavit 37 Mr Sayed's affidavit sworn 5 December 2011 was in support of his application to set aside the judgment that had been entered against him. 38 Mr Hemat says pars 15, 16, 23, 38, 39, 40, 45 and 46 of the affidavit are all relevant, but specifically par 40(a) – (d) constitute an acknowledgement of Mr Sayed of his indebtedness. 39 The affidavit provides (in part): … 38. In the absence of any express terms, I submit that the agreement contained the following implied terms by operation of common law. 39. In 2003, the Claimant and I agreed to vary the original agreement by agreeing that the $US 100,000 owing under the agreement would be paid from my share of the profits of HSS. 40. In late 2009, or early 2010, the Claimant and I conducted the Negotiation to further vary the original agreement with conditions as follows: (a) the $US 100,000 would be repaid in Australian dollars to be calculated in accordance with the exchange rate applicable at the time of the advance (being AUD $203,000); (b) the amount of AUD $172,000 paid by me on behalf of Haseed will be treated as a partial repayment of the AUD $203,000 owing by me to the Claimant; (c) the remaining amount of AUD $31,000 owing by me to the Claimant under this variation would be paid from my share of the profits of HSS; and (d) Hassed's purchase of land from HSS will be paid from my share of the profits of HSS without any effect on the rights of Hassed. … 45. By reason of the above, I submit that I have a right to set off the amount of AUD $172,000 against any amounts that I may be found as owing to the Claimant. 46. In light of the breakdown of the Negotiations, the Claimant's rights are limited to the original agreement as varied, in that the Claimant is entitled to repayment of US $100,000 without interest from my share of the profits of HSS. This right to repayment was lost by the Claimant when he frustrated my ability to repay, pursuant to the original agreement as varied by transferring my shares in HSS to himself and Shir without my authorisation or knowledge. 40 Mr Sayed says it is inherently highly improbable that an affidavit supporting an application to set aside a default judgment based on a claim for a debt could operate as an unqualified and unconditional acknowledgement that the debt is owed, as acknowledging the existence of the debt subject to the judgment, was inherently inconsistent with the function of the affidavit to set aside that judgment. 41 Mr Sayed submits that the affidavit, read as a whole, did not acknowledge a continuing liability to pay the claimed debt and particularly pars 45 and 46 make it clear that any liability rather than being acknowledged was disputed. 42 Her Honour found that the affidavit was not intended to acknowledge the debt, nor was there was any promise to pay which could be implied from an acknowledgement of the debt or any admission that Mr Sayed owed the money, nor any acknowledgement that the debt was outstanding and there was no unconditional or unqualified acknowledgement of the existence of the liability to pay the $31,000 claim, and it did not show an intent by Mr Sayed to admit the debt, or have the affidavit produced and used for that purposes. 43 With respect, her Honour is correct. The affidavit does not acknowledge a continuing liability to pay any claimed debt. 44 It specifically states at par 46, 'The right to repayment was lost …' and at par 50(a) 'I do not have any legal obligation to repay the US$100,000 to the appellant …' The affidavit makes it clear that liability is not acknowledged; on the contrary it is disputed. 45 The affidavit set out the history of the negotiations and disputes, but there is no acknowledgement within it that the debt still exists and pars 45 and 46 disputed that there is any current liability. 46 There must be an acknowledgement of existing liability, not merely an acknowledge of certain facts, which if taken in isolation, would give rise to liability but which are alleged by the person who is said to have given the acknowledgement not to give rise to liability by reason of other surrounding circumstances. Past cases have decided that pleadings in the nature of confession and avoidance cannot be treated as such that the confession is taken as an acknowledgment of debt and the avoidance is disregarded. The whole 'burden' of the pleading must be considered: In Re Flynn DECD (No 2) [1969] 2 Ch 403. This affidavit falls in exactly the same position, the whole of the affidavit must be considered and the whole of the affidavit is a denial of any existing debt. No error of law has been shown. 47 Her Honour was correct in her conclusions in relation to the affidavit. 48 The appeal is dismissed. 49 The appellant is ordered to pay the respondent's costs of the appeal.
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