Ivan Charles Price and 1 Ors v H.P. Mercantile Pty Limited

[2007] NSWSC 632

CITATION:	IVAN CHARLES PRICE & 1 ORS V H.P. MERCANTILE PTY LIMITED [2007] NSWSC 632
HEARING DATE(S):	21-22 May 2007
JUDGMENT DATE :	21 June 2007
JUDGMENT OF:	Fullerton J
DECISION:	See paragraph 52 of judgment.
CATCHWORDS:	CONTRACTS - Equitable and legal assignments - Debtor/creditor - Contractual interest - Statutory interest
LEGISLATION CITED:	Civil Procedure Act 2005 Conveyancing Act 1919 Local Court Act 1982
CASES CITED:	Dobbs v National Bank of Australasia 53 CLR 643 Flood v Shand Construction Ltd 54 ConLR 125 HP Mercantile Pty Limited v Meakes, Rein DCJ, 23 June 2004, unreported Hospital Products Ltd v United States Surgical Corporation 156 CLR 41 MS Fashions Ltd v Bank of Credit and Commerce International SA [1993] Ch 425 O’Brien v Komesaroff 150 CLR 310 R L & D Investments Pty Limited v Bisby [2002] NSWSC 1082 The King v Brown 14 CLR 17 Water Board v Moustakas 77 ALR 193 Yeandle v Wynn Realisations Ltd 47 ConLR 1
PARTIES:	Ivan Charles Price (First Appellant/Cross Defendant) Susan Joy Price (Second Appellant/Cross Defendant) HP Mercantile Pty Limited (Respondent/Cross Claimant)
FILE NUMBER(S):	SC 2006/12783
COUNSEL:	S Reuben (Appellants/Cross Defendants) P Stitz (Respondent/Cross Claimant)
SOLICITORS:	Cordato Partners (Appellants/Cross Defendants) Versace McKenzie (Respondent/Cross Claimant)
LOWER COURT JURISDICTION:	Local Court
LOWER COURT FILE NUMBER(S):	2005/87045
LOWER COURT JUDICIAL OFFICER :	Madgwick LCM
LOWER COURT DATE OF DECISION:	12 June 2006

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
CIVIL LIST

FULLERTON J

THURSDAY 21 JUNE 2007

2006/12783 IVAN CHARLES PRICE & 1 ORS v
HP MERCANTILE PTY LIMITED

JUDGMENT

HER HONOUR:

1 On 12 May 2006 her Honour Magistrate Madgwick gave judgment in favour of HP Mercantile Pty Limited (“Mercantile”) on a liquidated claim in the amount of $37,595.18. This included an amount of $19,377.43 calculated by reference to nominated clauses in Farming Agreements (“contractual interest”) with an additional $3,383.57 representing interest calculated by reference to s 100 of the Civil Procedure Act 2005 (“statutory interest”). The proceedings in the Local Court extended over four sitting days and involved the tender of voluminous materials and lengthy oral and written submissions.

2 This is an appeal from that decision by Ivan and Susan Price (Mr and Mrs Price), the defendants in the Local Court proceedings, who seek to have the judgment set aside and an order that the proceedings instituted by Mercantile be dismissed with costs. In the event that I dismiss the appeal on any or all of the filed grounds of appeal, the appellants submit that I should nevertheless allow an appeal from that part of the Magistrate’s order that includes the amount of $19,377.43 allowed as contractual interest and, even were I to refuse to allow the appeal on that limited basis, I should nevertheless set aside the order for interest at the statutory rate as constituting ‘interest on interest’ in breach of section 100(3)(b) Civil Procedure Act.

3 Mercantile, as respondents to the appeal, have filed a cross summons seeking that the orders in the Local Court be set aside but only in so far as concerns the calculation of contractual interest. In the statement of claim Mercantile claimed an entitlement to recover interest at the contractual rate for the period 30 June 1999 (the date upon which the debt accrued under contract) up to and including 12 May 2006 (the date of upon which judgment was entered). The Magistrate ordered contractual interest only up to 12 May 2005 (the date of filing of the statement of claim) and interest at the statutory rate thereafter. In substitution for the judgment debt of $37,595.18, Mercantile seeks the amount of $41,229.38.

4 Section 73(1) of the Local Court Act 1982 is relied upon by both parties to the appeal. Section 73(1) gives an appeal as of right on a question of law, whereas leave would be required under s 74(1) where the question is one of mixed fact and law. At one stage on the hearing of the appeal, it appeared that the appellants may have sought a grant of leave, however, in the result, no application was made since none of the three grounds of appeal to which argument has been directed involve any challenge to the facts as the Magistrate found them, or the adequacy of those facts to support the findings of fact upon which her ultimate decision was based.

5 Section 75(a) of the Local Court Act allows this Court to vary the terms of the Magistrate’s order or judgment. Mercantile, as cross claimant, is seeking relief of this kind, in so far as the calculation of contractual interest is concerned, and the appellants also seek the same relief in so far as their liability to pay both contractual and statutory interest is concerned. The liability to pay contractual interest only crystallised as an issue after the hearing of the appeal and in the course of an exchange of written submissions that were, at my direction, to be limited to the question as to how I should approach the interest calculations arithmetically.

6 Mercantile objected to that part of the appellants’ further written submissions that addressed the separate question of appellants’ liability to pay contractual interest. They asserted that it was not a question comprehended by any of the three grounds of appeal, and that it had been denied procedural fairness having had no opportunity to address the question in either written submissions or oral argument on the appeal.

7 In these circumstances I reconvened the Court in order to hear further argument.

8 In the result, I am satisfied that the appellants’ liability to pay contractual interest as a separate question was in issue between the parties in the Local Court proceedings. Mercantile pleaded it expressly in paragraphs 11 and 13 of the statement of claim and the appellants effectively denied liability to pay the contractual interest as part of their general denial of liability. Although it is not entirely free of doubt, it would also appear from the exchange between the Magistrate and the parties’ representatives on the date that she published her judgment, that argument had been directed in the course of final submissions to the appellants’ liability to pay contractual interest as a separate and discrete issue that would require determination in the event that their primary defence to liability failed.

9 While it is for the parties to define the issues to be litigated in proceedings at first instance, and for an appellant to identify explicitly those errors of law that are said to have infected the outcome of those proceedings, it is not the law that a narrow or technical view should be taken to deciding whether a point is raised for the first time on appeal (see Water Board v Moustakas 77 ALR 193 at 197 per McHugh). I am satisfied that even were the issue of the appellants’ liability to pay contractual interest not addressed in the Local Court in the way it is sought to be argued here, all facts relevant to resolving what is essentially a question of construction have been established and, for this reason, that the interests of justice dictate that the appellants be permitted to raise this question on this appeal, even if it be for the first time (O’Brien v Komesaroff (1982) 150 CLR 310 at 319 per Mason J).

10 Self evidently, if I am satisfied that the Magistrate’s findings as to the appellants’ primary liability are wrong in law, then no question as to their liability to pay contractual interest survives since the judgment entered in Mercantile’s favour will be set aside in its entirety. On the other hand, if I am satisfied that Magistrate has not erred in finding that the debts were legally assigned to Mercantile and that the appellants were liable to pay those debts, but I am also satisfied that there is an issue as to their liability to pay contractual interest, then the appeal may succeed, albeit on a limited basis.

The Local Court Proceedings

11 By reference to the statement of claim filed in the Local Court, Mercantile claimed the right to recover the liquidated sum on the basis of a legal assignment to it of debts arising under two Farming Agreements, and a right to contractual interest calculated in accordance with clauses 19.7 and 20.7 of the same Farming Agreements. It also claimed a statutory right to recover interest on the compound debt in accordance with s 100 of the Civil Procedure Act.

12 The Farming Agreements were entered into by the appellants on or about 30 June 1993 and 30 June 1994 as part of a tax incentive investment scheme set up by Tumut River Orchard Management Ltd (TROM). The scheme was offered to the investing public by prospectus. I note from the Magistrate’s reasons for judgment that Mr and Mrs Price were the joint principals of a financial planning firm and, in that capacity, assisted in the marketing and promotion of the scheme to the public. Her Honour was of the view that they were not novice investors.

13 The Farming Agreements were in turn referrable to what are described as the Coonabarabran Orchard Project and the Queensland Orchard Project, where both peaches and nectarines were grown under the management, initially of TROM, and then later its successor in title, Treetop Projects Limited (Treetop), now in liquidation. In the Farming Agreements Mr and Mrs Price are referred to as ‘the Growers’ and TROM is referred to as ‘the Managers’.

14 The debt is said to arise from a construction of the contractual rights and obligations of the Managers to provide harvesting and marketing services for the financial years ended June 1999 and June 2000 on the one hand, and the obligation on the Growers to pay for the costs of those services on the other. It is these debts that were claimed to be the subject of assignment in the proceedings in the Local Court. On the appeal, the position was put slightly differently. Mr Stitz, counsel for Mercantile as respondent/cross claimant, submitted that it was open to regard the assignment as covering both the debt and the right to litigate to recover the debt as both were capable of assignment at law. Mr Rueben, for the appellants/cross defendants, submitted that even if the debts were assigned (which is challenged), the right to sue to establish the debts as a benefit of the Farming Agreements was not assigned and, that as a result, the proceedings in the Local Court were incompetent. This crystallised as one of the central issues on the appeal. I will return and develop both arguments later in this judgment.

15 The appellants answered the claim in the Local Court by denying the debt (and denying that they were liable for contractual interest). They did not contest the fact that the harvesting and marketing services were supplied by the Managers in each of the two fiscal years 1999 and 2000, but contended that on a proper construction of the operating clauses of the Farming Agreement, their liability to pay Treetops (as TROM’s successor in title) for the costs of those services did not accrue at any time prior to the date of any assignment. Accordingly, so it is argued, the debts were not able to be assigned. In the event that the debts did accrue, they contended there was no valid assignment of them under any of the three documents of assignment upon which Mercantile sought to rely. In addition, they argued that to the extent that the Third Assignment purported to assign the debts at law, all it succeeded in doing was to assign a bare right to litigate to establish the debts and that this was not assignable.

16 Contrary to the appellants’ arguments in the Local Court, the Magistrate found that the debts in the stated amounts accrued under each of the two Farming Agreements, and that the debts were legally assigned in accordance with s 12 of the Conveyancing Act 1919, thereby entitling Mercantile to recover the debts as assignee.

The Grounds of Appeal

17 The grounds of appeal (as amended) are as follows:

1. The Court below was in error in finding that there was in existence a pre-existing or crystallized debt in relation to harvesting and marketing costs capable of assignment (as referred to in the Judgment of the Court below at p4.27, p9.15 & p10.3).

2. The Court below was in error in finding that the provisions of section 12 of the Conveyancing Act had been complied with, such that a debt was due by the defendants to the plaintiff.

3. The Court below was in error in finding that there was a valid assignment of a debt owed by the defendants relating to harvesting and marketing costs to the plaintiff.

The Significance of the Three Assignments

18 In the Local Court proceedings the three documents of assignment were identified as follows:

· an Asset Sale Agreement between Treetop and Arnott-Smith Holdings Pty Limited dated 15 March 2000 (although the assignment did not take effect until “Completion” on 22 March 2000) (“the First Assignment”),

· an Asset Sale Agreement between Merilbah Investments Pty Limited (formerly `Arnott-Smith Holdings Pty Limited) and HP Mercantile Pty Limited dated 31 August 2001 (“the Second Assignment”) and

· a Deed of Assignment between Treetop and HP Mercantile Pty Limited dated 22 December 2004 (“the Third Assignment”).

19 Since the Local Court of New South Wales has limited civil jurisdiction, it was not open to Mercantile to rely upon an equitable assignment for its right to recover the debt (or its right to litigate for the debt under the Farming Agreement as a chose in action). I do note, however, that some considerable time was taken in the Local Court analysing the circumstances in which the First and Second Assignments were executed, and their capacity to effect a valid legal assignment. This was no doubt because Mercantile was not prepared to abandon reliance upon either assignment in seeking to make out its case on liability.

20 In determining whether there is error of the kind contended for in the second and third grounds of appeal, I made it clear to the parties that I intended only to concern myself with the Third Assignment, and, in particular, whether Clause 2 and Annexure C of that Deed operated as a valid statutory assignment of the legal rights of Treetop in relation harvesting and marketing costs. I have taken this approach on the basis that the First and Second Assignments operated, if at all, as equitable assignments of the harvesting and marketing costs and that the legal or proprietary interest remained in Treetops. Accordingly, neither the First nor Second Assignments could have provided the basis upon which the Magistrate found in Mercantile’s favour given that it was successful in proving the debt in the proceedings without having to join Treetops as the holder of the legal interest.

21 Although Mr Stitz does not concede the legal correctness of that construction (at least so far as the First Assignment is concerned) he has not sought to dissuade me from taking this approach on the appeal. I should make it clear that I have not heard detailed argument as to the correct legal characterisation of the First and Second Assignments but I am fortified in the approach I have taken by the reasoning of Rein DCJ in HP Mercantile Pty Limited v Meakes, 23 June 2004, unreported.

22 Limiting my consideration to the Third Assignment also has the virtue of enabling me to deal with the issues raised directly by the appeal without the necessity of reciting facts and circumstances that may have some historical significance but which do not fall, at this time, to be redetermined or reconsidered.

The First Ground of Appeal

23 The first ground of appeal is cast on the basis that the Magistrate was in error in holding that the appellants were contractually bound to pay the harvesting and marketing costs incurred by Treetops as managers of the orchards. This has been fairly described as the threshold question since, if there were no crystallised or pre-existing debt owed by the appellants as the Growers as at 24 December 2004, there was nothing for the Managers to assign to Mercantile under the Third Deed of Assignment.

Did the Debts Accrue

24 The Magistrate was satisfied that Treetop actually provided harvesting and marketing services to the appellants (as they were obliged to under the Farming Agreements) and that there were actual costs involved in the provision of those services. I am not satisfied that she was in error in coming to this conclusion. She recited in her reasons for judgment the detailed oral evidence and extensive documentary evidence on the basis of which those costs were calculated. Moreover, it would appear that this evidence was not genuinely in dispute in the proceedings and, in any event, cannot be the subject of challenge on this appeal since leave is not sought under s 74(1) of the Local Court Act. For that reason and despite the submissions of counsel for the appellants, I do not see the need to recite the evidence upon which the Magistrate relied in reaching the conclusion she did. Suffice to say that notwithstanding the fact that the Managers’ accounts were not audited, that the harvesting and marketing costs did not appear as a debt in Treetops’ books and that with the effluxion of time many of the source documents were unavailable to the plaintiffs when it came to the task of calculating the quantum of the debt many years later, I am satisfied these deficiencies (such as they are) did not render the evidence that was tendered an inadequate basis upon which the Magistrate proceeded to determine the judgment debt such as to give rise to an error of law (R L & D Investments Pty Limited v Bisby [2002] NSWSC 1082).

When Did the Debts Accrue

25 There is also said to be error in the conclusion the Magistrate reached to the effect that on a proper construction of the Farming Agreements and surrounding circumstances, a debt in the amount pleaded crystallised prior to assignment, thereby imposing on the appellants the obligation to pay the actual harvesting and marketing costs to Mercantile as assignee (see The King v Brown (1912) 14 CLR 17).

26 To the extent that the appellants advance the argument on the appeal that there was no evidence to support this finding, I note that Mr Purcell, the managing director of Treetop at the relevant time, gave evidence before the Magistrate that the harvesting and marketing services were provided in accordance with the terms of the Farming Agreements and that Mr Purcell was not challenged on this issue in cross-examination. It was not put to him that the work was not done, that the work that was done was not in furtherance of the Farming Agreements or that Treetop had failed to properly carry out its obligations under the Farming Agreements. To the extent that he was challenged about the allocation of items as harvesting and marketing costs in the Managers’ accounts the Magistrate accepted his evidence as both truthful and reliable. In the circumstances, it was not only open to the Magistrate to regard the question as to whether the work was done as not in issue, it is inappropriate for the appellant in these proceedings to seek to persuade me to the contrary.

The Construction of the Farming Agreements

27 The principal submission advanced by Mr Reuben is that those clauses of the Farming Agreements which operated to impose the obligation to pay harvesting and marketing costs were subject to a condition precedent which was not satisfied and, accordingly, the Magistrate was in error in finding that liability to pay the debts had been established. Mr Reuben took me to the evidence of both Mr Purcell and Mr Price’s statement (which was tendered in the proceedings) where they either volunteered or were asked their views both as to how they understood the relevant clauses in the Farming Agreements to have operated and, in a different but related context, whether the harvesting and marketing costs were a recourse or non-recourse cost. To the extent that evidence of this kind was relevant to any issue in the primary proceedings (which I very much doubt), I regard their views as wholly irrelevant to the determination I am asked to make namely, whether there is a demonstrated error in the way the Magistrate construed the Farming Agreements in genera,l and those clauses, in particular, said to operate as a condition precedent. The object of any construction of the terms of a written agreement is to ascertain the intention of the parties to the agreement. Contractual terms and their meaning are construed objectively: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 62.

28 Clauses 19.3 and 20.3 of the Coonabarabran Farming Agreement and Queensland Farming Agreement are in identical terms. Clause 19.3 provides:

In consideration for the Harvesting and Marketing Services to be undertaken by the Manager in each financial year for the term of this Agreement the Grower shall pay to the Manager an amount equivalent to the Actual Costs, payable on or before 30th June in such financial year.

29 Clause 27 of the Coonabarabran Farming Agreement, and the identical clause in the Queensland Farming Agreement, define Actual Costs as follows:

For the purposes of this Agreement the following definitions shall apply:-

Actual Costs means the actual costs and expenses incurred in providing the relevant services for the relevant financial year. For the purposes of this definition, a certificate under the hand of the Manager shall be prima facie evidence of the Actual Costs in any financial year.

30 It is submitted by the appellants that certification, as provided for in Clause 27, operates as a condition precedent to the obligation to pay the costs of harvesting and marketing under clause 19.3 (or 20.3). I do not regard that construction as open. The reference to a certificate under the hand of the Manager in the definition of ‘actual costs’ does not make the issuing of such a certificate a condition precedent to recovery of the debt. The obligation to pay the harvesting and marketing costs is extant on the Growers entering into the Farming Agreements. It is the performance of the harvesting and marketing services by the Managers that results in the existence of a debt. In Dobbs v National Bank of Australasia (1935) 53 CLR 643 at 651, a clause, such as that under consideration here, was held to be a type of evidentiary shortcut that did not prevent the debt being claimed and proved in the normal legal way. In the result, I am satisfied that the absence of a certificate under the hand of the Manager is irrelevant to the question whether a debt existed such as to be susceptible to assignment.

31 Furthermore, having regard to the terms of the Farming Agreements, it is clear that neither the raising of an invoice nor the issuing of a demand to pay was intended by the parties to operate as a condition precedent to the obligation imposed on the Growers to pay the costs of harvesting and marketing. It might be said that the quantum of the debt does not in a practical sense ‘crystallise’ until the amount that is due and owing is calculated and the Grower is informed of the precise amount that is due and payable, but that presents no legal impediment to the legal right of the Manager to be paid or his right to recover the costs as a debt. There was uncontradicted evidence before the Magistrate that no invoice was raised by Treetop as Manager at any time and that the only demand ever made for payment of the quantified harvesting and marketing costs for the 1999 and 2000 fiscal years was in correspondence that issued by Mercantile as assignee in October 2001 and November 2001. On the other hand, what were described as ‘Operating Statements’ for each of the orchard projects were sent to the Growers at the end of the financial years 1999 and 2000, or very soon thereafter. In these statements, harvesting and marketing costs were identified as a designated item of expenditure. While these costs were not certified, as they were not signed under the hand of the Manager, they do not differ markedly from the actual costs claimed as a debt due under the Farming Agreements in both the letters of demand and ultimately the statement of claim.

32 Irrespective of the reasons why no certified invoice or letter of demand issued at any time prior to late 2001, the question raised by the first ground of appeal is whether the absence of a demand for payment, or the issue of a certified invoice, operate as a legal impediment to the debt arising as at the date of the Third Assignment on 22 December 2004. The Magistrate addressed this question in her reasons for judgment and impliedly rejected the proposition that the issue of a demand or invoice operated as a condition precedent to the debt accruing. In this Court the appellants cited no authority in support of the proposition for which it contends. I am satisfied that there is clear authority to the contrary. In my view, the question is not whether the Growers were asked to pay but whether the costs were payable. As a general rule, once performance under a contract is due there is no requirement that the promisee demand performance from the promisor, and accordingly a debtor must pay a debt due under the contract even though the creditor has made no demand for payment: MS Fashions Ltd v Bank of Credit and Commerce International SA [1993] Ch 425 at 446.

33 In the result, I am not satisfied that the appellants have demonstrated that error infected the Magistrate’s conclusion that there was in existence a pre-existing or crystallized debt in relation to harvesting and marketing costs capable of assignment.

Can Mercantile Recover Contractual Interest Under the Farming Agreements?

34 The relevant provisions of the Farming Agreements provide in 19.7 and 20.7 respectively as follows:

In the event of any failure of the part of the Grower to make payments under clause 19 as and when required , subject to the operation of clause 30, interest shall accrue and be payable in respect of such unpaid amounts at the rate of 20% per annum calculated on a daily basis from the due date until payment (my emphasis).

35 It is submitted by the appellants that even if I were satisfied of the existence of pre-existing or crystallized debts in relation to harvesting and marketing costs that were capable of assignment, they were not liable to pay contractual interest since the phrase “as and when required” in clauses 19.7 and 20.7 above imposes an obligation on the Manager to issue a demand for payment before interest at the contractual rate accrues. I am not satisfied that this construction is correct. Consistent with being satisfied that there was no condition precedent to the obligation on the Growers to pay the costs of the harvesting and marketing services, I am also satisfied that the Growers were required to pay for these services in accordance with their obligations under clauses 19.3 (and 20.3), namely on or before 30 June in each financial year. It is not in dispute that they failed to make these payments. Clauses 20.7 (and 19.7), when properly construed, provide that a failure to make those payments by the due date will attract interest at 20% per annum on a daily basis from the due date until payment is made.

36 Since I am satisfied that there is no requirement that the costs of harvesting and marketing services must be the subject of a demand or certified invoice before they accrue, it is immaterial to the question of the appellants’ liability to pay the debt that the letters of demand by Mercantile issued at a time when there was no valid legal assignment of the debt. It is not without significance that the letters of demand made it clear to the appellants that they were liable to contractual interest in a given amount calculated by reference to nominated clauses in the Farming Agreements. What is also made clear in that correspondence is that Mercantile would not seek to recover contractual interest if payment of the principal amount was received within 14 days. The fact that the 14 days expired without receipt of any payment left the appellants exposed to the litigation that ultimately ensued.

The Second and Third Grounds of Appeal

37 Consistent with limiting my focus to the Third Assignment for the purpose of resolving the arguments advanced on the appeal, if I am satisfied that the provisions of s 12 of the Conveyancing Act were complied with in respect of the Third assignment, it will be unnecessary for me to consider whether the Magistrate was in error in finding that the provisions of s 12 of the Conveyancing Act had been complied with as regards the First and second Assignments.

38 Section 12 of the Conveyancing Act operates so as to impose various conditions on a valid legal assignment of a debt or chose in action. Those conditions are as follows:

(1) That the assignment (of the debt or chose in action) is absolute in that it is not subject to a condition precedent and it assigns the whole of the debt;

(2) That the assignment is in writing, ‘under the hand of the assignor; and

(3) That notice is given to the debtor.

39 Despite the fact that in written submissions the appellants sought to argue that the Third Assignment was defective because of a failure to meet the requirement that the debt was ascertainable, in the final analysis this was not an argument that was pressed. Similarly, I am not invited by the appellants to find that there is any defect in the notice requirements imposed under s 12 of the Conveyancing Act. Rather, I am invited to find that the Third Assignment failed because on a proper construction of the Deed it did not assign the right to litigate to ascertain or establish the debt, it merely assigned the debt, represented by the amount owed by the Growers to the Managers under the Farming Agreements.

The Third Deed of Assignment

40 The relevant parts of the Third Deed of Assignment are as follows:

Recital A refers to the first assignment and the fact that moneys due and owing to Treetops from the growers who invested in the orchard projects were the subject of the asset sale (nothing turns on this given the approach I have taken to considering the issues raised by the grounds of appeal).

Recital D refers to the schedules of the debts owing to Treetops from the growers who invested in the projects which debts are relevantly described as “Growers Account Receivables”.

Recital F notes that in the process of Mercantile recovering the amounts owing under the Growers Account Receivables pursuant to the first assignment, it has been met with the claim that the first assignment failed to effect a legal assignment which claim is disputed by Mercantile (for the same reason as noted above this is immaterial to the issues on appeal).

41 Against this background the parties, namely Treetops (in liquidation) and Mercantile, agree, in Clause 2 of the Deed, that Treetops…”absolutely and immediately assigns to HPM (Mercantile) all and any residual rights, title and interest it has in the … the Growers Account Receivables including but not limited to legal title…(my emphasis).

42 The Growers Account Receivables are identified in Annexure C to the Deed and include all the Growers account debts owed to Treetop by its management of the orchard projects, including the amounts owing under each project for harvesting and marketing costs incurred or falling due and payable during the period 30 June 1998 and 23 March 1998, and which remain unpaid. The debtors for each project are identified as the Coonabarabran Orchard Project and the Queensland Orchard Project. The amount owing by each debtor for harvesting and marketing costs is calculated by reference to a formula which is specified in a Schedule to the Deed. I note that this formula was utilised by Mr Purcell in calculating the amount of the debts owed for the purposes of the Local Court proceedings, and that these amounts were specified in the statement of claim.

43 Mr Reuben referred me to a line of English authority where the distinction was drawn between an assignment of a debt that arises under contract, carrying with it an entitlement to sue to claim for the amounts owed, and an assignment of the benefit of the contract (under which the debt arose) which would entitle the assignee to litigate to determine whether a debt is due at all. He submits that on a proper construction of the operating words of Clause 2 of the Deed italicised above, all that has been assigned is the right to recover the debt comprised by the Growers Account Receivables, and that the Deed did not assign the rights under the Farming Agreement to sue to establish that debt (see Yeandle v Wynn Realisations Ltd (1995) 47 Con LR 1 followed in Flood v Shand Construction Ltd 54 Con LR 125 and the discussion at pages 181ff in G Tolhurst, The Assignment of Contractual Rights (2006) Oregon, Hart Publishing).

44 The distinction for which he contends appears to have been drawn in each of the English cases to which I was referred by reason of the construction given a particular clause in a contract common to both cases. For this reason, as was emphasised in Yeandle, the issue for the Court was one of construction. Yeandle concerned a contract between a contractor and a subcontractor under which the subcontractor was prohibited from assigning the benefit of the contract without consent but could assign “any sum which is or may become due and payable” under the subcontract without consent. Accordingly, the subcontractor could deal only in debts arising under the subcontract. The assignment expressly assigned ‘debts’ arising under the subcontract and did not refer to the general benefit of the contract. That is, there was a contractual separation of debts arising under the contract from the general benefit of the contract, a separation which was imposed by the express terms of the contract. The assignee wished to challenge a decision made by an engineer pursuant to the subcontract concerning whether a sum of money was payable under the contract. It was held that the assignee could not take the action as it was not vested with the benefit of the contract or, more precisely, the right to performance of the contract.

45 Accepting that the distinction in both Yeandle and Flood between an assignment of the debt and the assignment of the benefit of a contract was a distinction properly drawn, the question on this appeal is whether Mercantile instituted proceedings to recover the debt represented by the Growers Accounts Receivables in accordance with its assigned rights or whether it was suing to establish the debt.

46 It is uncontroversial that in the case of a legal assignment, the operation of s 12 of the Conveyancing Act vests in the assignee all remedies in respect of the legal right that is assigned. It follows that the assignee can bring an action in debt against the debtor. In my view, that is what occurred in the Local Court. Mercantile, as the plaintiff/assignee in those proceedings, claimed a liquidated sum represented by the amount of the debt that fell due under the Farming Agreements. They did not seek a determination as to whether the amount sued for was due under the Farming Agreements. The issue as to whether the debt accrued was argued in the Local Court but at the urging of the appellants who sought to put that in issue as a defence to the action.

47 In disposing of the first ground of appeal, I was satisfied that the defendants did not put in contest in the Local Court the quantum of the debt owed, and did not seriously contend that the liability to pay for the harvesting and marketing services rendered under contract was in doubt. I was also satisfied that the debt accrued as at the date of the Third Assignment, that the liability to pay contractual interest was extent at that time and, accordingly, that both the debt and the liability to pay interest were assignable. In addition, and to the extent that it is material to dispose of the second and third grounds of appeal, I am also satisfied that the Third Assignment operated to validly assign the legal interest that Treetop as Managers had in the debt owed to it by the Growers and, that as of the 22 December 2004, the legal and equitable interests effectively merged such as to entitle Mercantile to bring the proceedings to recover the debt on its own behalf without the need to join Treetops as a party to the proceedings.

48 Since I have found that on a proper construction of the claim brought in the Local Court Mercantile sued to recover those sums as a debt, I am accordingly satisfied that no error of the kind comprehended by the second or third grounds of appeal has been made out.

The Cross Claim and the Application of s 100(3)(b) Civil Procedure Act

49 Mercantile submits that it was entitled to have interest assessed at the contractual rate for the periods ended 30 June 1999 and June 2000 (the date upon which the debts accrued under the Farming Agreements) up to and including 12 May 2006 (the date of upon which judgment was entered in its favour) and that the Magistrate erred in ordering contractual interest calculated only up to the date of filing of the statement of claim. I note that contractual interest was sought on the basis now claimed when the parties appeared before the Magistrate on the date that she delivered her judgment. Despite the fact that she appeared to accept the submission advanced by Mercantile, this was not reflected in the order she made.

50 I am satisfied that contractual interest for the period from the date of filing of the statement of claim should have been ordered from the date the debt accrued up to the date of judgement. In fact, as I have observed, I am inclined to the view that this is what the Magistrate intended to order.

51 In so far, as the issue of statutory interest is concerned, and despite the fact that the Magistrate was referred to s 101 of the Civil Procedure Act as grounding the basis upon which statutory interest should be imposed, the transcript records the learned Magistrate ordering statutory interest by reference to s 100 of the Civil Procedure Act. Since the judgment debt includes an amount for contractual interest, calculated as and from June 1999 and June 2000, s 100(3)(b) operated as a statutory prohibition on the Court awarding interest under s 100.

Orders

52 In disposing of the appeal and the cross claim the orders I make are as follows:

1. The appeal is dismissed, subject only to setting aside that part of the Magistrate’s order dated 12 May 2006 that awards interest in favour of the respondent pursuant to s 100 of the Civil Procedure Act.

2. The orders sought in paragraph 2 of the cross claim are granted and in lieu of the order made by the Magistrate as to the cross defendants’ liability to pay contractual interest, I order that the cross defendants pay interest at the prescribed rate of 20 per cent per annum for the period 13 May 2005 to the date of judgment being 12 May 2006. I note that this will result in a judgment debt in favour of the cross claimant/respondent in the amount of $41,229.38

3. The appellants/cross defendants are ordered to pay the costs of these proceedings.