Investec Bank (Australia) Ltd v Colley
[2012] NSWSC 813
•17 July 2012
Supreme Court
New South Wales
Medium Neutral Citation: Investec Bank (Australia) Ltd v Colley [2012] NSWSC 813 Hearing dates: 19 June 2012 Decision date: 17 July 2012 Jurisdiction: Equity Division Before: Ward J Decision: Summary judgment on part of plaintiff's claim; leave to file amended defence; directions re filing of a further amended cross-claim
Catchwords: PRACTICE AND PROCEDURE - summary judgment application - principles as set out in General Steel Industries v Commissioner of Railways (1964) 112 CLR 125 - power to be exercised with utmost caution and only in the clearest of cases - application in respect of claims for monies payable under three loans - HELD - evidentiary burden satisfied in relation to monies payable under the three loans - application granted - enforcement of judgment stayed pending determination of cross-claim
PRACTICE AND PROCEDURE - application to amend defence and statement of cross-claim - proposed amendments to defence minor with no material effect - proposed amendments to cross-claim substantial and plead that plaintiff is vicariously liable for misleading and deceptive conduct of the loans originator - plaintiff opposes proposed amendment as failing to disclose a reasonable cause of action and/or as an embarrassing pleading - where unclear from proposed amended pleadings in cross-claim how the particular agency relationship gives rise to the alleged liability - HELD - leave to file amended defence granted - application to file amended statement of cross-claim in the form proposed dismissed - leave to file within 28 days an amended cross-claim addressing the pleading issues raised by the plaintiffLegislation Cited: Australian Securities and Investments Commission Act 2001 (Cth)
Civil Procedure Act 2005 (NSW)
Corporations Act 2001 (Cth)
Duties Act 1997 (NSW)
Fair Trading Act 1987 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)Cases Cited: Anakin Pty Ltd v Chatswood BBQ King Pty Ltd (2008) 250 ALR 620; [2008] FCA 1467
Bendigo and Adelaide Bank Ltd v Cairncross [2011] NSWSC 610
Brimson v Rocla Concrete Pipes Limited [1982] 2 NSWLR 937
Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Dey v Victorian Railways Commissioner (1949) 78 CLR 62
Drabsch v Switzerland General Insurance Co Ltd (Unreported, NSWSC, Santow J, 16 September 1996)
General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125
Hans Constructions Pty Ltd v Cassar [2009] NSWCA 230
Investec Bank (Australia) Ltd v Burge (No 2) [2011] NSWSC 1557
Karuah Local Aboriginal Land Council v Mymurra Pty Ltd (No 2) [2008] NSWCA 700
Mutual Life & Citizen Assurance Co Ltd v Evatt (1970) 122 CLR 628
Perpetual Trustees Australia Limited v Schmidt & Anor [2010] VSC 67
Premier Building and Consulting Pty Ltd (recs apptd) v Spotless Group Ltd [2007] VSC 377; (2007) 64 ACSR 114
Shaw v State of New South Wales [2012] NSWCA 102
Simmons v Protective Commissioner of NSW also known as NSW Trustee and Guardian [2012] NSWSC 455
South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541; 177 ALR 611
Spencer v Commonwealth of Australia (2010) 241 CLR 118
Tonto Home Loans Australia Pty Ltd v Tavares; Firstmac Ltd v Di Benedetto; Firstmac Ltd v O'Donnell [2011] NSWCA 389
Webster v Lampard (1993) 170 CLR 598
Woodcroft-Brown v Timbercorp Securities (No 2) [2011] VSC 526Texts Cited: G E Dal Pont Law of Agency (2nd edn, LexisNexis, 2008)
W A Seavey "The Rationale of Agency" (1919-1920) 29 Yale Law Journal 859
P Watts and F M B Reynolds, Bowstead and Reynolds on Agency (19th edn, Sweet & Maxwell, 2010)Category: Interlocutory applications Parties: Investec Bank (Australia) Ltd (Plaintiff/Respondent)
Peter Colley (Defendant/Applicant) (Appearing in person)Representation: Counsel
J M White (Plaintiff/Respondent)
Solicitors
Gadens (Plaintiff/Respondent)
File Number(s): 11/150895
Judgment
HER HONOUR: Before me for hearing on 19 June 2012 were two separate applications:
(i) an application by Notice of Motion filed on 9 December 2011 by the defendant (Mr Colley), seeking leave pursuant to s 64 of the Civil Procedure Act 2005 (NSW) and rule 19.5 of the Uniform Civil Procedure Rules 2005 (NSW) to file an Amended Defence and Amended Cross-Claim; and
(ii) an application by Amended Notice of Motion filed on 2 February 2012 by the plaintiff (Investec Bank (Australia) Ltd), seeking an order pursuant to Rule 13.1 of the Uniform Civil Procedure Rules for summary judgment against Mr Colley on part of the claims made in the Statement of Claim and an order pursuant to Rule 14.28 that the Cross-Claim filed on 16 August 2011 by Mr Colley be struck out (the latter arising only if leave to amend the cross-claim is not granted). Investec did not press for the relief sought in paragraphs 3 and 4 of the Amended Notice of Motion (for dismissal of the proceedings on the Cross-Claim and its costs of those proceedings).
By the time of the hearing of these applications, Mr Colley was self represented (the lawyers formerly acting for him in these proceedings having filed a Notice of Intention to File Notice of Ceasing to Act on 3 May 2012 and subsequently a Notice of Ceasing to Act on around 11 May 2012). On the hearing of the present applications (stood over from 21 May 2012), Mr Colley largely relied on the submissions that had been prepared by the lawyers previously acting for him in this matter.
Background facts
The substantive proceedings brought by Investec are for the recovery of monies alleged to be due to Investec by Mr Colley under various finance agreements entered into by him in connection with his investment in a number of managed investment schemes. Rewards Projects Limited (a company now in administration) (RPL) was the responsible entity for each of the schemes (and a party to the first two of the finance agreements). Mr Colley admits that he held an interest as a member in each of the managed investment schemes in question (although in his defence he does not admit entry into the primary agreements with RPL). He admits entry into the respective loan agreements.
There are five investments in respect of which loans were made to Mr Colley (to which I will refer, consistently with the definitions used in the Statement of Claim, as the Tropical Fruits Project 2004; the Sandalwood Project 5 Releases 1 and 3; the Teak Project 2006 Release 2 and the Sandalwood Project 2007 Release 1). Those investments related to the acquisition by Mr Colley of:
(i) 13 tropical fruit groves (in the Tropical Fruit Project 2004) in 2004, in connection with which, on or about 30 June 2004, Mr Colley entered into a terms payment agreement with RPL for a loan in an amount of $77,350;
(ii) a number of woodlots of sandalwood (in the Sandalwood Project 5 Release 1) in 2005, for the purpose of which Mr Colley entered into a terms payment agreement with RPL for an amount of $150,150 on or about 30 June 2005;
(iii) a further 20 woodlots of sandalwood (in the Sandalwood Project 5 Release 3) in connection with which, on or about 1 July 2006, Mr Colley entered into a finance agreement with Arrow Funding Pty Ltd (now known as Experien Nominees Pty Ltd) for an amount of $90,000;
(iv) a number of woodlots of teak in the Teak Project 2006 Release 2, in connection with which, or about 30 June 2007, Mr Colley entered into a finance agreement with Investec for the amount of $59,400; and
(v) a number of woodlots of sandalwood in the Sandalwood Project 2007 Release 1 project in 2007 in connection with which Mr Colley entered into another finance agreement with Investec on or about 30 June 2007 for the sum of $99,000.
As can be seen from the above, only the last two of the five finance agreements were entered into directly with Investec as the financier. The other three were entered into with other parties (RPL, itself, for the first two and Arrow for the third), the rights under which were later the subject of assignment to Investec in the circumstances I outline in due course.
By reference to an ASIC names search in evidence before me, it is clear that the company now known as Experien Nominees Pty Ltd was formerly known as Target Funding Pty Ltd and before that was known as Arrow Funding Pty Ltd. References throughout these reasons to Experien, Target and Arrow are to the same entity (in whatever iteration the company was at the relevant time).
There is no challenge made by Mr Colley (in either his filed Defence and Cross-Claim or the amended versions of those pleadings which he now seeks leave to file) to the validity of the first three finance agreements. Instead, the allegations made in Mr Colley's existing Cross-Claim (and sought to be made in the proposed Amended Cross-Claim), by reason of which it is said that loan agreements are unenforceable, are confined to his investments in the Teak Project 2006 Release 2 and the Sandalwood Project 2007 Release 1.
The application by Investec for summary judgment is now pressed only in relation to its claim for the amounts outstanding on the first three loan agreements. Mr Colley does not admit liability for those amounts (thus Investec is required to establish its claim to those monies on its summary judgment application). Further, he seeks to set-off any amounts for which he may be liable under the first three agreements against his claims against Investec in respect of the others.
Investec contends, but Mr Colley does not admit, that the beneficial interest of RPL in the first and second of the terms payment agreements was assigned on about 10 November 2005 to Experien (the entity from whom finance for the 2006 Sandalwood Project 5 Release 3 was directly obtained). It is alleged that Experien subsequently assigned to Investec both its beneficial interest in the two RPL terms payment agreements and its right title and interest in the July 2006 (Sandalwood 5 Release 3) finance agreement. Notice of the assignment of the third (Arrow) loan agreement was given to Mr Colley on 14 March 2011. In relation to the first and second (RPL) terms payment agreements, it is alleged that RPL assigned to Investec on about 24 August 2010 its legal right title and interest therein and that notice of that assignment was sent to Mr Colley's nominated address for service by letter dated 25 August 2010. (The delay in notification is presumably due to the perfection of title clauses in the agreement pursuant to which the equitable interest in the loan facilities was initially assigned.)
Investec maintains that it is entitled to enforce the three earlier terms agreements, the benefit of and rights under which have been assigned to it. I consider in due course the evidence as to how those assignments were effected.
It is alleged that Mr Colley defaulted under each of the terms agreements at around the end of February 2011 by failing to pay the monthly interest then due. Failure to pay instalments when due amounted to an event of default under the terms of the relevant agreements. Notices of Demand were issued in relation to the initial defaults under the agreements (claiming the amounts necessary to bring the accounts back into order). When the defaults were not remedied within 14 days, Investec claimed the entire balance of the loans as immediately due under the default provisions of the relevant agreements.
These proceedings were commenced on 9 May 2011 for the whole of the outstanding balances plus interest at the rate payable under the loan agreements (10.95%). (Investec does not press a claim for interest at the default rate specified in the agreements.)
In his Defence, Mr Colley denies the various allegations of default (other than to admit receipt of the Notice of Default dated 14 March 2011 by which Investec notified Mr Colley of the overdue monthly repayments and demanded payment within 17 days, failing which it was said that the entire balance outstanding would become due and payable). Mr Colley also denies that he failed to remedy the defaults (although, as I understand it, it is not suggested by Mr Colley that he in fact paid to Investec the amounts so demanded and, indeed, the evidence for Investec on this application is that no amounts have been paid on any of the loans since early 2011).
Evidence
Before I turn to the particular applications before me, I note that during the course of argument on the summary judgment application I raised an issue as to the admissibility of the various documents under which the rights under the first three loan agreements were assigned to Investec. This was because there was no indication on the face of those documents that any stamp duty (assuming that any of the instruments was dutiable) had been paid thereon.
Section 304 of the Duties Act 1997 (NSW) prohibits the presentation in evidence of an instrument that effects a dutiable transaction or is chargeable with duty under the Act, unless stamped:
(1) An instrument that effects a dutiable transaction or is chargeable with duty under this Act is not available for use in law or equity for any purpose and may not be presented in evidence in a court or tribunal exercising civil jurisdiction unless:
(a) it is duly stamped, or
(b) it is stamped by the Chief Commissioner or in a manner approved by the Chief Commissioner.
(2) A court or tribunal may admit in evidence an instrument that effects a dutiable transaction, or is chargeable with duty in accordance with the provisions of this Act, and that does not comply with subsection (1):
(a) if the instrument is after its admission transmitted to the Chief Commissioner in accordance with arrangements approved by the court or tribunal, or
(b) if (where the person who produces the instrument is not the person liable to pay the duty) the name and address of the person so liable is forwarded, together with the instrument, to the Chief Commissioner in accordance with arrangements approved by the court or tribunal.
(3) A court or tribunal may admit in evidence an unexecuted copy of an instrument that effects a dutiable transaction, or is chargeable with duty in accordance with the provisions of this Act, if the court or tribunal is satisfied that:
(a) the instrument of which it is a copy is duly stamped, or is stamped in a manner approved by the Chief Commissioner, or
(b) the copy is duly stamped under section 299.
Counsel for Investec (Mr White) sought leave to adduce further evidence and to make further submissions (once he had had an opportunity to obtain instructions in relation to that issue). Therefore, I simply marked those documents for identification and gave leave for further submissions to be made by Investec once it had ascertained the stamp duty position in relation to those documents. Those submissions have since been received, together with an application to tender in evidence a further copy of the first of those instruments (on which stamp duty imprints are apparent) and for the documents previously marked for identification now to be admitted into evidence on the application. The documents in question are:
- a Loan Acquisition Agreement (MFI-1) dated 9 November 2005 to which, among others, Arrow, RPL and RPL's holding company (Rewards Group Ltd) were party;
- an agreement headed Sale of Purchased Loans and Receivables Agreement (MFI-2) dated 23 March 2007 to which Investec (as buyer) and Target (as seller) were party;
- an Assignment Agreement (MFI-3) made on 24 August 2010 between the administrators of RPL and Investec; and
- a Sale Agreement (MFI-4) dated 22 March 2007 between Investec and Target.
Of those documents, Investec accepts that the Loan Acquisition Agreement was liable to duty but submits that duty has in fact been paid thereon. It submits that duty is not payable on any of the remaining agreements.
The copy of the Loan Acquisition Agreement, which was tendered and marked MFI-1, was partially redacted. Tendered by Investec as a business record on this application (and which I have now marked Exhibit 1) was an extract from another copy of the Loan Acquisition Agreement on which there appear two separate stamp duty imprints indicating that duty in two amounts of $200 each was assessed and paid on that instrument on 8 February 2006.
Each of the imprints refers to s 58(1) of the Act, which provides that duty is chargeable in respect of an instrument executed in New South Wales that declares a trust over New South Wales property none of which is dutiable property. (Mr White notes that, since 2008, the amount of such duty has been $500.00 but that prior thereto the relevant amount of duty was $200.00.)
Mr White submits that the Loan Acquisition Agreement was liable to duty in those amounts because it provided, by clauses 3.6 and 6.1 thereof (the latter being redacted in the copy of the agreement which was MFI-1), for the establishment of two trusts over New South Wales property that was not dutiable property. From the document now tendered it is apparent that clause 6 provides for the establishment of a "Project Trust".
Section 289 of the Duties Act provides that an instrument is duly stamped if it is stamped in accordance with the Act. Section 297 provides that the stamping of the instrument is taken to be an assessment of duty payable upon the instrument "or the dutiable transaction effected or evidenced by that instrument".
Mr White submits that although there is no direct evidence of strict compliance with the requirements for stamping (by reference to ss 287, 288 and 289A of the Act) it should be inferred from the stamp duty imprints that the Loan Acquisition Agreement was assessed for duty in respect of two transactions (each contained within the same instrument); that duty of $200 was charged on each occasion; and that the duty so assessed was paid.
My attention was drawn to the decision in Anakin Pty Ltd v Chatswood BBQ King Pty Ltd (2008) 250 ALR 620; [2008] FCA 1467 where Branson J found the stamp on the face of the agreement insufficient to conclude that the agreement had been "duly stamped" (in that it did not indicate that a specific amount of duty had been paid and the document duly stamped [14]-[18]). Mr White submits that this decision is distinguishable since the stamp appearing on the face of that agreement (unlike the imprints in the present case) included no entry for the amount of duty paid, nor did it refer to the basis on which duty was apparently assessed.
I would infer, from the imprints appearing on the Loan Acquisition Agreement (which nominate both the amount of duty and the section pursuant to which duty has apparently been assessed), that the document has been duly stamped. On that basis there is no prohibition on its admission into evidence. Therefore, I have now admitted the document formerly marked as MFI-1 as Exhibit 1.
For completeness, I note that Mr White indicated that if (which is not the case) I were not satisfied that the document had been duly stamped (so as to satisfy the requirements of s 304), then Investec would (without prejudice to its contention that the document had been properly stamped) undertake to transmit the Loan Acquisition Agreement to the Commissioner in the manner envisaged in s 304(2)(b) of the Act, together with the details of those who may be liable for duty (complemented by the undertaking by person "not liable" set out in Part 31 r 13(2) of the Uniform Civil Procedure Rules, namely that "the party will, within a time specified by the court, forward to the Chief Commissioner of State Revenue the name and address of the person liable to pay duty on the instrument under that Act together with the instrument"), noting that on any view Investec (which was not party to that agreement) was not the party liable to pay duty on the instrument. As it is, such an undertaking will not be necessary.
As to the balance of the agreements that were marked for identification, Mr White submits that none of those instruments effected a dutiable transaction or is otherwise chargeable with duty under the Act. He notes that MFI-2 and MFI-4 effect the sale of rights under various loan agreements and that MFI-3 effects the legal assignment to Investec of debts that have previously been the subject of an equitable assignment to it.
Having regard to the definition in s 8(1) of the Act of dutiable transactions and the definition of "dutiable property" in s 11 of the Act, I accept that the agreements in question do not effect any dutiable transaction nor do they deal with dutiable property. On that basis, I have now admitted the agreements formerly marked as MFI-2 to MFI-4, respectively, as Exhibits 2 to 4.
I turn then to the respective applications before me.
(i) Investec's application for summary judgment
This was ultimately pressed, as noted above, only in relation to the claims for monies claimed to be outstanding in respect of the first three of the five loan agreements (and not the loans in respect of the Teak Project 2006 Release 2 and the Sandalwood Project 2007 Release 1).
Rule 13.1(1) of the Uniform Civil Procedure Rules provides as follows:
(1) If, on application by the plaintiff in relation to the plaintiff's claim for relief or any part of the plaintiff's claim for relief:
(a) there is evidence of the facts on which the claim or part of the claim is based, and
(b) there is evidence, given by the plaintiff or by some responsible person, that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part of the claim, or no defence except as to the amount of any damages claimed,
the court may give such judgment for the plaintiff, or make such order on the claim or that part of the claim, as the case requires.
In circumstances where Mr Colley does not raise a positive defence (or make any challenge in his cross-claim to the agreements giving rise) to the claims made under the first three loan agreements, the question is whether, on the evidence before the Court, Investec has sufficiently established its claims in relation thereto in order to permit the entry of summary judgment. (As adverted to above, Mr Colley does, however, plead in his defence that in the event that he is liable to Investec in the terms alleged in respect of the Tropical Fruits Project 2004 or the Sandalwood Project 5 or at all, which he denies, he is entitled to set off, in extinction or diminution of any such liability, the loss and damage referred to in his Cross-Claim.)
The evidence in relation to the three loans the subject of the summary judgment application is largely contained in the first affidavit of Mr Robert Westgarth, the manager within Investec with responsibility for managing Mr Colley's loan accounts, though that is supplemented by a later affidavit by Mr Westgarth updating the amounts outstanding.
- Tropical Fruits Project Loan
By application dated 17 May 2004, Mr Colley subscribed for 13 retail groves in this Project, electing to have a 7 year term payment option. His application for finance in relation to the acquisition formed part of the application for the investment itself.
That application was in due course accepted, as appears from the Tropical Fruits Project 2004 Terms Agreement dated 31 May 2004 between RPL and each several applicant whose application under an Offer Document has been accepted (defined as the Grower). Mr Colley was identified in Schedule 3 to the agreement as an applicant whose application for terms had been accepted (in an amount corresponding to his initial application). By letter dated 31 May 2004, Mr Colley was advised by RPL that his application for subscription had been accepted.
Recital A to the Terms Agreement records that RPL has established the managed investment scheme called Rewards Group Tropical Fruits Project 2004 (identifying its ARSN) and has issued the Offer Documents to invite applications for Retail Groves and Wholesale Groves in that Scheme.
Recital E to the Terms Agreement acknowledges that RPL has accepted the Grower's (ie, here, Mr Colley's) application for a terms payment option. Clause 2.1 provides that:
The Grower will pay to RPL the Principal Amount plus interest in the amount and manner set out in the terms payment option selected on the Application Form and as further set out in this Agreement.
Interest will be calculated at the rate referred to in the terms payment option selected on the Application form on the Principal Amount outstanding calculated on the daily balance for the actual number of days elapsed from and including the Commencement Date to, but excluding, the day on which the Principal Amount has been repaid in full.
The terms payment option selected by Mr Colley for this investment was the 7 year term payment option (3 year interest only and 4 year principal and interest) being 36 equal monthly instalments of a stated amount inclusive of interest and then a further 48 equal monthly instalments of a higher amount again inclusive of interest. (The loan was thus nearing maturity when the first default in repayment occurred.)
Clause 2.3 of the terms agreement makes provision for interest on overdue payments at a higher rate and for such interest to be capitalised. (As noted earlier, Investec does not press for interest at any penalty rate but simply at the rate provided for at the time of application for the loan.)
Clause 6, headed Default, specifies those events that amount to an event of default and the rights of the parties on such default. Clause 6.2 provides that if the Grower is in default due to one of the events in clause 6.1 (and provided that RPL has given 14 days' written notice to remedy the default and it remains unremedied by the end of that time) then (among other things) the Outstanding Amount becomes immediately due and payable by the Grower to RPL and the Security is immediately enforceable. Clause 6.5 obliges the Grower, on demand, to pay or reimburse RPL for all costs and expenses incurred by RPL in enforcing its rights under the agreement and that any amount so demanded is a debt forming part of the Outstanding Amount. It provides that "RPL's right to recover such a debt is an express right under this Agreement".
Clause 7 deals with Costs and Charges and sub-clause (b) relevantly provides that:
(b) The Grower will also pay to RPL on demand the costs and expenses incurred by RPL in relation to and incidental to:
...
(ii) the enforcement of any rights under this Agreement ...
Clause 8.1 permits notice to be given to the Grower by personal delivery, post, facsimile or email transmission at the address or number on the register of the Scheme in respect of that Grower.
Clause 8.3 deals with assignment and provides, relevantly, that:
(a) RPL may transfer, assign or novate any of its rights or obligations under this Agreement without the consent of the Grower.
The Terms Agreement is expressly governed by and to be construed in accordance with the laws of Western Australia and the parties submit to the non-exclusive jurisdiction of the courts of that State (Clause 8.8).
The Terms Agreement was signed pursuant to a Power of Attorney granted by Mr Colley at the time of the investment application, the terms of which were summarised in the Product Disclosure Statement. In particular, the attorney (a director for the time being of RPL) was authorised in the name of the applicant and on the applicant's behalf to do everything necessary or expedient, inter alia, to execute the Agreements and Terms Agreements summarised in the Produce Disclosure Statement and to complete blanks and make amendments alterations or additions to the Agreements, terms Agreement or Loan Agreement as considered necessary or desirable by the attorney.
- Sandalwood Project 5 Release 1
There is similar documentation in relation to the Terms Agreement entered into by Mr Colley (again, pursuant to a Power of Attorney granted to RPL) with RPL in relation to the Sandalwood Project 5 Release 1. In evidence there was an (admittedly incomplete) copy of the investment application lodged by Mr Colley. The form is signed by Mr Colley and again nominates a term of 7 years (3 year interest and 4 year principal plus interest). It is dated 7 June 2005. By an undated letter, Mr Colley was advised that his terms application had been accepted and the details of that investment were confirmed.
The Terms Agreement in connection with this loan is, in substance, in the same terms as that for the Tropical Fruit Project investment. Mr Colley is identified as a Grower whose application has been accepted (consistent with the application form). The relevant clauses are the same as those summarised above.
- Sandalwood Project 5 Release 3
Again, a copy of Mr Colley's application for this investment was in evidence before me. That application was dated 27 June 2006 and was for the purchase of 20 woodlots (for the sum of $90,000). Mr Colley elected to apply for a loan on the basis that it would be 3 years interest only and then 7 years principal and interest. Part 5 of that application document is headed Finance Agreement. The Lender is defined as Arrow Funding Pty Limited (which later became Experien Nominees).
Clause 2 obliges the Borrower to pay each instalment amount in accordance with the schedule of monthly payments set out in the written confirmation sent by the lender pursuant to item 2.1 of the Finance Application.
Item 2.1 of the Finance Application provides that if the borrower's application is accepted the lender will write to confirm acceptance of the application and to advise as to the instalment amounts payable. Mr White notes that by letter dated 30 June 2006, RPL confirmed Mr Colley's acceptance into this Project, setting out details of the investment and noting the date of acceptance as 30 June 2006 and the number of woodlots as 20. There was no specific reference to acceptance of the finance application.
Clause 2.7 provides that if the Borrower fails to pay an amount due under the Loan Documents on time then interest on the late payment is payable for every day that the relevant payment is outstanding and permits the lender, in effect, to capitalise the unpaid interest amounts.
Clause 10 sets out the Events of Default including the failure by the borrower to pay when payable any Secured Money or any other money which the borrower is liable to pay to the lender (10.1(a)). Clause 11 sets out the consequences of an Event of Default, including the obligation of the borrower (if the lender so demands) immediately to pay the whole of the Secured Money (11.1(a)).
- Assignment of the RPL loans to Arrow (now Experien) and then Investec
By the Loan Acquisition Agreement dated 9 November 2005 (now Exhibit 1), (to which each of Arrow, each originator, Rewards Group and Arrow Capital Ltd was party), the parties agreed the terms upon which Arrow was to be entitled to purchase Loan Rights from each Originator. The term "Loan Rights" is defined as meaning, in relation to a Loan, all of the rights, entitlements and benefits of the relevant Originator under and in connection with the respective Loan Records. Originator is defined as including, relevantly, RPL.
Clause 3 contains provision whereby the Originator might offer Loans to Arrow. Clause 3.1 provides that:
From time to time an Originator may deliver to the Purchaser a Loan Offer complying with, and accompanied by the materials required by, the terms of this Agreement.
Pursuant to clause 3.2, a Loan Offer is to be substantially in the form in schedule 4. Clause 3.3, headed Nature of Loan Offer, provides that:
The delivery to the Purchaser of a Loan Offer constitutes an irrevocable offer by the relevant Originator to sell to the Purchaser all of the Originator's beneficial right, title and interest in the Loans specified in that Loan Offer and in the respective Loan Records and Loan Rights in consideration of the payment by the Purchaser of the aggregate Purchase Price for those Loans. (my emphasis)
Clause 3.4 provides for the acceptance of a Loan Offer. Relevantly, the Purchaser is only permitted to accept a Loan Offer, and the Loan Offer is stated only to be capable of acceptance, by payment to the relevant Originator of the Purchase Price referred to in clause 3.3 of the Loan specified in that Loan Offer in accordance with the terms of the Loan Acquisition Agreement. Clause 3.4(b) makes it clear that nothing else done by the Purchaser (including without limitation the signing or execution of the Loan Acquisition Agreement) "shall be capable of being construed as an acceptance of any Loan Offer" and that no one was authorised on behalf of the Purchaser to accept any Loan Offer other than in accordance with clause 3.4(b).
Clause 3.5 provides that:
Upon acceptance of a Loan Offer and without any further act or instrument by any person, the Originator's entire beneficial right, title and interest in the Loans specified in that Loan Offer and the respective Loan Records and Loan Rights shall be transferred and assigned absolutely to the Purchaser free from all Encumbrances, Adverse Claims and other third party rights and interests whatsoever, whereupon the Loans shall constitute Purchased Loans. (my emphasis)
Relevantly, clause 3.6, headed "Transfer in equity only", provides that:
(a) The transfer and assignment of a Loan and the respective Loan Records and Loan Rights to the Purchaser as contemplated by this Agreement shall be equitable only, unless and until the Purchaser perfects its legal title thereto in accordance with clause 12. Pending such perfection, and subject to this Agreement, any remaining interest that the relevant Originator holds in any Purchased Loan and the respective Loan Records and Loan Rights shall be held by the Originator on trust for the Purchaser.
(b) The relevant Originator shall not give notice (in any form) to any Obligor that a Loan owed by that Obligor has been transferred and assigned to the Purchaser, without the written consent of the Purchaser.
(c) The Purchaser shall not give notice (in any form) to any Obligor that a Loan owed by that Obligor has been transferred and assigned to the Purchase [sic] except in accordance with this Agreement.
Clause 12 deals with perfection of the Purchaser's title and irrevocably authorises the Purchaser at any time after the occurrence of a Perfection of Title Event to do certain things (including to notify each obligor under a Purchased Loan acquired pursuant to clause 3.4(a) of the purchase by the Purchaser of the Originator's right title and interest in the Purchased Loan and that payment of all amounts thereunder in respect of the Purchased Loan shall be made direct to the Purchaser or its nominee.
The Loan Acquisition Agreement is governed by and to be construed in accordance with New South Wales law.
By letter dated 10 November 2005, Rewards Group wrote to Arrow and notified it that, pursuant to clause 3.1 of the Loan Acquisition Agreement, Rewards Group offered to sell to Arrow (on the terms set forth in the Loan Acquisition Agreement) the Loans referred to in an attached spreadsheet. Rewards Group certified, inter alia, that each Loan listed in the spreadsheet was an eligible loan and that no Perfection of Title Event had occurred. Itemised in the schedule to that letter were the Tropical Fruits Project loan of $77,659.40 to Mr Colley and the Sandalwood Project 5 Release 1 loan of $150,750.80 to Mr Colley. As noted earlier, pursuant to clause 3.4 of the Loan Acquisition Agreement, acceptance of that offer could only be made by payment of the relevant price. Further, the provisions recorded above make it clear that, on acceptance of that offer, only a beneficial interest in the loan rights would be transferred to Arrow.
I interpose to note that there is a potential issue arising from the fact that the offer (although substantially in the form of that in Schedule 4 as required under the agreement) was made in its terms by Rewards Group as offeror, when RPL was the relevant Originator. Nevertheless, having regard to the recitals contained in the agreement by which RPL later assigned to Investec the legal interest in the said loans, whereby RPL expressly acknowledged the holding by Investec of beneficial title in the said loans, it would not be open to RPL now to dispute that the full title in the loans had passed to Investec (presumably by reason of RPL having adopted the purported offer by Rewards Group to Arrow as having been made on its behalf and having adopted the assignment constituted by the latter's acceptance of that offer.)
By agreement dated 23 March 2007 and headed "Sale of Purchased Loans and Receivables" to which Investec (as buyer) and Target (as seller) were party (Exhibit 2), the beneficial rights the subject of the 2005 agreement were assigned to Investec.
The Background recorded in that agreement is that:
The Seller [Target] has applied for finance to the Buyer [Investec] and the Buyer has agreed to finance the Seller by way of a debt factoring arrangement.
The Seller has agreed to assign and the Buyer has agreed to accept an assignment of all right, title and interest of the Seller in the Assets on the terms contained in this agreement.
Clause 2.1 of the agreement provides, relevantly, that:
2.1 Sale of Assets
(a) On the Commencement Date [defined as the date of the agreement], the Seller must sell and the Buyer must buy the Seller's right, title and interest in:
(1) the Assets ...
(b) On each target Date, the Seller must sell and the Buyer must buy the Seller's right, title and interest in the Debtor Contracts nominated by the Buyer in a Notice given in the form set out in schedule 2 on that Transfer Date and all related Receivables and Related Security pursuant to the terms of this agreement.
(c) The Buyer agrees to pay the Purchase Price to the Seller on the Commencement Date.
(d) The Seller and the Buyer acknowledge that each sale of Assets in this clause 2.1 constitutes a transfer and assignment by the Seller to the Buyer of all of the Seller's right and interest in the Assets including, but not limited to, the right to receive, as beneficial owner, all moneys otherwise payable to the Seller under any Receivable.
The term "Assets" is defined as including all the rights, title and interest of the Seller under the Loan Acquisition Agreement, each other Transaction Document and any Purchased Loan Receivable and Related Security, located in or taken for the purposes of any stamp duty legislation to be locater in the Nominated Jurisdictions (that term including New South Wales).
The term "Purchased Loan" is defined as having the meaning under the Loan Acquisition Agreement but excluded any Purchased Loan that had been repurchased by an Originator under the Loan Acquisition Agreement. (There is nothing to suggest that by this time either of Mr Colley's loans had been repurchased by RPL.)
Pursuant to clause 7.2, the Buyer (Investec) is liable to pay any duty in respect of the delivery and performance of the agreement and any document entered into, signed or effected under the terms of this agreement.
In its terms, this agreement therefore operated to transfer to Investec the beneficial rights under the first two loan agreements then held by Arrow (with RPL still retaining the legal title until such time as there was a perfection of title).
Subsequently, by an Assignment Agreement made on 24 August 2010, (Exhibit 3) (entered into following the appointment of administrators to RPL pursuant to s 436A of the Corporations Act 2001 (Cth)), RPL agreed to transfer and assign its entire legal right, title and interest in and to the Loans, the Loan Rights and Loan Records to Investec for the sum of $1 on the terms and conditions of that agreement. Relevantly, the agreement contained an acknowledgment by the parties that the Assignors (including RPL) held legal title to the Loans, Loan Rights and Loan Records and that the Assignee (Investec) held the entire beneficial right, title and interest thereto.
The term "Loan" or "Loans" is defined, relevantly, as meaning each debt owing by an Obligor to an Assignor under a Loan Agreement from time to time and which was the subject of a loan offer contemplated by a Loan Acquisition Agreement (clause 1.1). (Relevantly, therefore, the loans the subject of the assignment covered by this agreement are described by reference to the loan offers made under the Loan Acquisition Agreement.)
Clause 2.1 provides for the assignment with effect on and from the Assignment Date, by each assignor of its entire legal right title and interest in and to each Loan and its respective Loan Rights and Loan Records. Clause 2.2 contains an agreement by the parties that the Assignee would, as soon as reasonably practicable thereafter, deliver to each Obligor a duly executed Assignment Notice.
Mr White submits that since (under the Loan Acquisition Agreement) a loan offer was capable of acceptance only by payment, the inference should be drawn (by reference to the definition of "Loan or Loans" in the Assignment Agreement read together with the acknowledgement in Recital C and the fact that only a dollar was paid in 2007 for the loans), that the beneficial interest in those loans had in fact been purchased by Arrow pursuant to the 2005 Loan Offer (ie that the requisite payment of monies had been made to the assignor) and hence that as at 2007 RPL held the legal interest and Arrow the beneficial in relation to the loans. I accept that such an inference should be drawn.
- Assignment by Arrow to Investec
As to the third of the loan agreements (in respect of which Experien was the original financier), Investec relies on a Sale Agreement dated 22 March 2007 between it and Target (Exhibit 4).
The Background section to the Sale Agreement is the same as contained in the Sale of Purchased Loans and Receivables Agreement (to which RPL was a party). In the Sale Agreement, the term "Assets" is defined in clause 1.1 as being the interest of the Seller in the Debtor Contract; Receivable; and Related Security (each as defined in the agreement).
The Sandalwood Project 5 Release 3 loan (of $90,000) to Mr Colley is listed in Schedule 1 to the agreement.
Clause 2, providing for the Sale of the Assets, is in similar terms to that in the Sale of Purchased Loans and Receivables Agreement. It requires the Buyer to nominate the loans to be sold by the issue of one or more notices in the terms contained in Schedule 3. A notice was issued to Target, for and on behalf the "Buyer" (Investec), expressly pursuant to 2.1 of the Sale Agreement, listing the Assets the Seller must sell on the Commencement Date (that being 22 March 2007) by reference to attached spreadsheets. The relevant spreadsheet again identifies Mr Colley's loan.
The Default Notice and Demand ultimately issued to Mr Colley on 14 March 2011 in relation to the outstanding repayments was accompanied by a Notice of Assignment to Investec of the various loan facilities therein specified. The Lenders were defined as RPL (by then subject to a deed of company arrangement), Investec and Arrow (by then known as Experien Nominees). The notice informed Mr Colley that the Lenders "have assigned to Investec, among other things, their right to recover the outstanding balances of the respective facilities set out in the attached notice".
The Default Notice and Demand contains a schedule identifying each of the outstanding loans. The amounts there identified as outstanding in respect of the loans for which summary judgment is now claimed are the Tropical Fruits Project 2004 loan by RPL (with an overdue amount of $1,997.32 and total due as at 11 March 2011 of $10,339); the Sandalwood Project 5 Release 1 loan by RPL (with an overdue amount of $3,877.17 and total due as at 11 March 2011 of $62,364.44); and the Sandalwood Project 5 Release 3 loan by Arrow (with an overdue amount of $1,538.60 and total due as at 11 March 2011 of $76,105.53);
The evidence discloses that the Demand and Notice of Assignment was sent in the same form to various addresses. Mr White notes that on 23 March 2011 Mr Colley forwarded an email to Investec, copied to its lawyers, advising that he and his wife were cancelling the direct debit arrangements (for payments in relation to the loans). From the timing and content of that communication I am asked to (and do) infer, that Mr Colley has implicitly acknowledged receipt of the demand from at least one of the addresses to which the letters were sent.
- Evidence of defaults
As to the evidence of the defaults (those having been denied by Mr Colley), Investec relies on loan statements issued in relation to the respective projects (copies of which were in evidence).
Mr Westgarth has deposed (at [45]-[53]) to his review of the loan statements for the respective projects for the relevant period up to 31 July 2011 and as to Investec's records from 31 July 2011, on the basis of which review he deposes that Mr Colley has failed to make:
(i) the scheduled monthly repayments due between 28 February 2011 and 31 July 2011 in respect of the Tropical Fruits Project loan (at which point the loan matured);
(ii) the scheduled monthly repayments due between 28 February 2011 and 31 January 2012 in respect of the 2005 Sandalwood loan (and to the fact that it has remained in arrears as from 31 January 2012 with no further payments having been made thereon); and
(iii) the scheduled monthly repayments due between 28 February 2011 and 31 July 2011 in respect of the 2006 Sandalwood loan and again that it has remained in arrears as from 31 January 2012 with no further payments having been made thereon).
Mr Westgarth's evidence was not challenged in this respect. Mr White notes that the loan statements up to February 2011 for the Tropical Fruits Project loan show that the loan was within terms at that time but that the loan management system statements from 28 February 2011 indicate a series of dishonours of the monthly direct debit amounts (perhaps not surprisingly in light of the communication by Mr Colley in March 2011 of his intention to cancel those debit arrangement). Similar documents are exhibited for the 2005 Sandalwood loan and for the 2006 Sandalwood loan.
The outstanding amounts (updated as at 15 June 2012 for the three loans as set out in Mr Westgarth's 15 June 2012 affidavit) total just under $170,000 (as evidenced by further extracts from the project loan statements).
Mr Westgarth has deposed (in compliance with Part 13 Rule 1) that in respect of these particular loans he believes that Mr Colley has no defence.
Applicable principles
Mr White accepts that the test generally applied on applications for summary disposal of part of all of proceedings is that set out in General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 at 128-9. In General Steel, Barwick CJ, in considering the circumstances in which a party ought be denied access to a final hearing on the claims made in the proceedings, noted the various descriptions given in the authorities of the test to be applied in identifying whether there is a real cause of action (or, as applied to the present case, whether there is a real defence to the claim):
... The test to be applied has been variously expressed; "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them" (the pleadings) "to stand would involve useless expense".
The power summarily to dispose of a claim should be exercised with the utmost caution and only in very clear cases (General Steel; see also Webster v Lampard (1993) 170 CLR 598 at 602-3 and Brimson v Rocla Concrete Pipes Limited [1982] 2 NSWLR 937 at 942). In Dey v Victorian Railways Commissioner (1949) 78 CLR 62 at 91 it was said that it must be clear that there is no real question to be tried. Mr White accepts that there is a high burden on Investec on its summary judgment application.
On the evidence before me, I am satisfied that Investec has met that burden in relation to the claims made against Mr Colley for the monies payable under each of the three loans identified and that summary judgment should be entered in the sums claimed in favour of Investec.
Mr White also accepts that Part 13 Rule 2 empowers the Court to stay enforcement of such a judgment if there is a cross-claim pending. Mr Colley indicated that if there were to be summary judgment entered against him on the three loans referred to above, he would seek a stay of enforcement pending the determination of his cross-claim. I consider this to be warranted (assuming that a reasonably arguable cause of action is able to be pleaded by way of cross-claim).
(ii) Mr Colley's application for leave to amend his Defence and Cross-Claim (Investec's application to strike out existing cross-claim)
Mr Colley's application for leave to amend both his Defence and his Cross-Claim is brought pursuant to s 64 of the Civil Procedure Act 2005 (NSW) which permits the making of all necessary amendments for the purpose of determining the real issues in dispute in proceedings.
It is noted for Mr Colley that the proceedings are at an early interlocutory stage (Mr Colley's cross-claim having been filed on 16 August 2011). It is said that the proposed amendments to the pleadings arise from the production (after the filing of the existing Cross-Claim) of the Origination Deed dated 16 February 2007, between Investec and RPL, which resulted in the identification of a new agency relationship between Investec and Rewards for the purposes of origination of loans. For Mr Colley, it is said that this deed had not been produced by Investec at the time he filed his original defence and cross-claim on 16 August 2011, and that Mr Colley was not aware of the existence of this deed at that time (this being the explanation for the subsequent need for the amendment).
Mr White notes (and I do not understand this to be disputed) that s 64 is expressly made subject to s 58, which requires the Court to follow the dictates of justice. The Court must have regard to the just, quick and cheap resolution of the real issues in the proceedings (s 56) and the efficient disposal of Court business and the efficient use of judicial resources (s 57). As made clear in Hans Constructions Pty Ltd v Cassar [2009] NSWCA 230, compliance with these requirements is mandatory.
Insofar as case management principles need to be taken into account when deciding whether to allow a party to amend its pleadings, in the submissions filed for Mr Colley reference is made to what was said by Young JA in Karuah Local Aboriginal Land Council v Mymurra Pty Ltd (No 2) [2008] NSWCA 700 at [12]:
...when reassessing the submissions, and even bearing in mind what the Court of Appeal said in Dennis' case, one must bear in mind that even though there is an overriding purpose that proceedings be dealt with justly, quickly and cheaply, this does not completely trump the principles which have been laid down for many years that unless there has been unacceptable prejudice to other parties, all amendments which can be met should be allowed.
Mr White in effect concedes that, although the matter commenced some time ago (by the filing in the District Court on 9 May 2011 of a Statement of Claim), responsibility for the time taken to date cannot solely be sheeted home to the defendant and ultimately he did not submit that the matter had reached such a stage that no further leave ought to be granted in relation to the pleadings at this stage (assuming a reasonably arguable cause of action could be properly pleaded).
I turn to the respective amendments.
- Defence
While Investec also opposed the filing of the proposed Amended Defence, its principal complaint, as I understand it, is as to the proposed amendments to the Cross-Claim. As to the Defence, the changes sought to be made to the defence are relatively minor: in paragraphs [12(c)] and [15(c)] the verb "admits" is sought to be amended to "says"; there is some change to the wording of particulars, and there is a reference to the Amended Cross-Claim in place of reference to the Cross-Claim. As to the change in terminology from "admits" to "says", if this were to be taken as a withdrawal of an admission, then compliance with the test in Drabsch v Switzerland General Insurance Co Ltd (Unreported, NSWSC, Santow J, 16 September 1996) would be necessary. However, as the pleading would seem equally to be an admission if worded as "says", I see no material change in that proposed amendment (rather I assume it reflects closer attention to the pleading to which it responds).
I consider that leave should be given for the filing of the Amended Defence.
- Cross-Claim
In essence, the real complaint made is as to the proposed amendment to the Cross-Claim. For Mr Colley, the nub of that claim is said to be the misleading and deceptive conduct (by silence) of RPL as Investec's agent for which it is contended that Investec is liable. Mr White concedes that (on the submissions filed for Mr Colley) a basis has been identified on which a claim could arguably be pleaded that Investec is liable as principal in respect of conduct by RPL (to the extent that the relevant conduct was in RPL's capacity as agent for Investec). Nevertheless, it is submitted by Mr White that the proposed Amended Cross-Claim does not clearly identify the basis on which any vicarious liability is said to have arisen and, in particular, what (if any) knowledge on the part of RPL is said to be attributed to Investec and how that is said to give rise to such liability on the part of Investec.
Existing cross-claim
The proposed Amended Cross-Claim can perhaps most conveniently be seen in the context of the existing pleadings (which Investec moves to strike out if leave to amend is not granted on Mr Colley's application). (I note that in this section of my reasons and when dealing with the allegations contained in the proposed Amended Cross-Claim, I have in places emboldened the name of the relevant entity (RPL or Investec) as the case may be in order to highlight the particular entity in respect of whom the allegations are made.)
Under the Cross-Claim as initially filed, Mr Colley seeks orders that Investec: was "involved" in a contravention of s 601FC(5) of the Corporations Act; contravened or was "involved" in a contravention of s 1041H of that Act; and contravened s 12DA of the ASIC Act.
An order is sought under s 1325 of the Corporations Act and s 12GM of the Australian Securities and Investments CommissionAct 2001 (Cth) that Mr Colley is not liable for any loans, fees or costs in connection with the Teak Project 2006 Scheme and the Sandalwood Project 2007 Scheme or the funding agreements entered into with Investec relating to those projects "which as a result of a breach of statutory duty are void or otherwise unenforceable". Damages are sought pursuant to ss 1041I of the Corporations Act and 12GF of the ASIC Act.
The proposed Amended Cross-Claim in its terms does not seek to maintain the claims as to the alleged contraventions (or involvement in contraventions) by Investec of s 601FC(5) or s 1041H of the Corporations Act; but continues to allege a contravention by Investec of s 12DA of the ASIC Act (though now seeking not an order but a declaration in relation to that contravention). The claim for orders under s 1325 of the Corporations Act and s 12GM of the ASICAct is maintained. There is also included a claim for a declaration as to contravention by Investec of s 12CC of the ASIC Act. Claims for damages are made pursuant to s 1041I (as before) but also there is a claim for damages at common law. No claim for damages under s 12GF of the ASIC Act is still made.
The application to strike out the existing Cross-Claim (pressed only if leave to amend is not granted) is made pursuant to Part 14 Rule 2(8)(1)(a) and (b). Part 14.28(1) provides:
14.28 Circumstances in which court may strike out pleadings
(1) The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading:
(a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or
(b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or
(c) is otherwise an abuse of the process of the court.
The generally applicable test on a strike-out application is again that set out in General Steel. The General Steel test was recently endorsed and applied by the Court of Appeal in Shaw v State of New South Wales [2012] NSWCA 102 at [32], where Barrett JA (with whom Beazley, McColl, Macfarlan JJA and McClellan CJ at CL agreed) stated:
The question is...whether the claims in question are so obviously untenable or groundless that there is "a high degree of certainty" that they will fail if allowed to go to trial; and whether this is one of the "clearest of cases" in which the court may accordingly intervene to prevent the claims being litigated.
There is a suggestion that this test has been modified by the current legislative regime in relation to the conduct of litigation in this Court. Hammerschlag J, in Simmons v Protective Commissioner of NSW also known as NSW Trustee and Guardian [2012] NSWSC 455, expressed the view, in obiter, that a reasonable cause of action was one giving rise to real issues requiring resolution by the Court (such that proceedings need not be hopeless or bound to fail in order to be struck out as disclosing no reasonable cause of action), referring to the approach in Spencer v Commonwealth of Australia (2010) 241 CLR 118.
For present purposes, it is sufficient to note that Mr White accepts that there is a high test to be met by Investec in order for a strike-out application to succeed.
Under the existing Cross-Claim, there are three broad bases for the relief claimed against Investec:
(i) a claim that it is vicariously liable for conduct of its agent (RPL) (pleaded in [2]-[7]);
(ii) a claim (no longer pressed) that Investec contravened s 601FC(5) of the Corporations Act by reason of RPL's breach of its statutory duties as responsible entity for the schemes ([8]-[18]); and
(iii) a misleading and deceptive conduct claim against Investec based on RPL's failure to inform Mr Colley of certain matters ([19]-[28]).
(i) Vicarious Liability
The vicarious liability allegation in the existing Cross-Claim is based on an agency alleging arising out of the alleged authorisation by Investec for RPL to represent it (or alternatively to act for or on its behalf) in procuring Mr Colley (and other investors) to make investments in the two projects for which Investec was the financier (as opposed to the projects in which it was the assignee of rights under the earlier loan agreements) (the Teak 2006 and Sandalwood 2007 projects) and to enter into the funding agreements in relation to those investments ([2] of the Cross-Claim). The agency relationship is particularised by reference, inter alia, to the Project Disclosure Statements and applications for finance in relation to each of the projects and, in relation to the Teak project, the identification of Investec as the "preferred lender". It is alleged that the finance offered by Investec was "specifically tied to and contingent upon" Mr Colley making application to RPL to become an investor in the projects ([4]).
The Cross-Claim then alleges matters that it is said that Investec knew (such knowledge said to be inferred from the agency) including that RPL owed statutory duties to potential investors ([5]); alleges that Investec had a commercial interest in investors making application to invest in the projects and utilising the offer made by Investec through the agency of RPL to provide finance for the investment ([6]); and alleges that "[i]n the premises" the conduct of RPL (alleged in [9], [16], [19] and [20]) was engaged in by RPL within the scope of the agency and in the course of the execution of the agency "in consequence whereof Investec is vicariously liable" for RPL's conduct. (As will be seen from the summary below, the reference to the conduct of RPL in [9], [16], [19] and [20], encompasses a mixture of the breach of statutory duty allegations made against RPL and the misleading and deceptive conduct allegations against both RPL and Investec.)
If confined to the claims made directly against Investec as a result of knowledge said to be imputed to it (identifying the relevant knowledge and the basis on which it is said that it should be imputed to Investec) and any vicarious liability claimed against Investec for the conduct of RPL as its agent (identifying not simply the facts matters and circumstances on which the allegation of an agency relationship is based by the scope of the particular agency relationship and on which Mr Colley relies for the allegation that the conduct of RPL that is the subject of complaint is conduct that falls within the scope of the agency relationship, then it would seem to me that the pleading would not be embarrassing and would disclose a reasonably arguable cause of action.
As to the allegations based on s 12DA, I have reservations as to the maintainability of the foreshadowed claim for vicarious liability for a breach by RPL of that section (assuming that this is what Mr Colley is seeking to allege), having regard to the apparent nexus between the representations (or omissions) in the Product Disclosure Statements and the cause of action now sought to be raised and having regard to the authorities as to the comprehensive nature of the code set out in the Corporations Act for misleading and deceptive conduct. Nevertheless, if what is sought to be argued is that this case falls outside the strictures identified in the authorities in this area, or that those authorities should not be followed, it seems to me that it is not so unarguable as to warrant precluding such a claim being raised at this stage.
Therefore, I consider that the appropriate course is not to permit the filing of the proposed Amended Cross-Claim but to give leave for the filing of an amended Cross-Claim within 28 days. If the amended pleading, as then filed, satisfactorily addresses the pleading issues raised in this application, then the matter will proceed in the normal course. If Investec contends that any new amended Cross-Claim suffers from the same or other deficiencies then it can move to have that pleading struck out. If an Amended Cross-Claim is not filed within 28 days then the existing Cross-Claim will be struck out and the stay on enforcement of the orders for summary judgment will cease to operate.
The proposed amended defence is not in my view problematic (other than that it refers to an amended cross-claim that, in light of the above orders, has not yet been filed). I will give leave for that to be filed within 28 days (with a view to both documents being filed at the same time).
Orders
For the reasons set out above, I consider that the appropriate orders will be as follows:
On Investec's Amended Notice of Motion of 2 February 2012, summary judgment be entered against Mr Colley as follows:
1. Order that the defendant pay the plaintiff the following amounts:
(a) $11,179.38 being the entire balance outstanding under the Tropical Fruits Loan as at 15 June 2012;
(b) $71,291.18 being the entire balance outstanding under the Sandalwood 2005 Loan as at 15 June 2012;
(c) $86,999.10 being the entire balance outstanding under the Sandalwood 2006 Loan as at 15 June 2012; and
(d) interest on the amounts referred to above (being the entire balance outstanding under each of the said Loan Agreements as at 15 June 2012) from that date at a rate of 13.95% per annum calculated daily and compounding monthly from 12 April 2011 until today's date.
(e) Interest on the judgment amount at the rate provided for in s 100 of the Civil Procedure Act 2005 (NSW) from the date of judgment to the date of payment.
2. Stay the enforcement of the judgments in Order 1 above, pending the determination of the Cross-Claim (as may be amended in accordance with the orders below) in these proceedings.
On Mr Colley's Notice of Motion of 9 December 2012:
3. Grant leave to file the Amended Defence within 28 days in the form of the Amended Defence exhibited to the affidavit of Sanin Pasagic sworn 17 December 2011 in these proceedings (save that the reference to an Amended Cross-Claim is only to be made if one is filed in accordance with order 4 below).
4. Dismiss Mr Colley's application for leave to file an amended Cross-Claim in the form contained in the exhibit to the affidavit of Sanin Pasagic sworn 17 December 2011 in these proceedings but in lieu thereof grant leave to Mr Colley to file within 28 days an Amended Cross-Claim that identifies the matters in respect of which vicarious liability on the part of Investec for conduct or omissions on the part of its alleged agent is alleged (including, in relation to each such claim, the particular basis on which it is said that such vicarious liability arises) and, in relation to any liability on the part of Investec (vicarious or otherwise) arising out of knowledge said to be imputed to it from its alleged agent, identifying with precision the knowledge said to be held by the agent; the facts matters and circumstances on which Mr Colley relies for the allegation that it is to be imputed to Investec; and the basis on which it is alleged that this knowledge gives rise to a cause of action against Investec as principal.
As to costs, on the claims the subject of the summary judgment in Investec's favour, I consider that Mr Colley should pay the costs of Investec as costs following the event. In light of the provisions contained in the respective agreements (see for example clause 6.5 of the Tropical Fruits project loan agreement), those costs should be paid on a solicitor/client basis. On the application for leave to amend, Mr Colley should pay the costs thrown away by reason of the amendments for which leave has been granted.
As these reasons are being published in chambers I will give the parties the opportunity to make any brief submissions as to the form of the proposed orders (or as to the proposed costs orders) within 7 days and liberty to approach my associate for that purpose (after consideration of which, or failing any such submissions within that time), I will make final orders in these proceedings. For that purpose I direct Investec to forward to my associate a draft form of the orders.
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Decision last updated: 18 July 2012
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