KINDALE Consulting Group Pty Ltd v Harrison
[2003] WADC 115
•26 MAY 2003
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: KINDALE CONSULTING GROUP PTY LTD -v- HARRISON [2003] WADC 115
CORAM: REGISTRAR KINGSLEY
HEARD: 7 MAY 2003
DELIVERED : 26 MAY 2003
FILE NO/S: CIV 1691 of 2001
BETWEEN: KINDALE CONSULTING GROUP PTY LTD (ACN 008 861 303)
Plaintiff
AND
RAYMOND FRANCIS HARRISON
Defendant
Catchwords:
Practice - Order 14 Rules of the Supreme Court of Western Australia - Turns on own facts
Legislation:
Finance Brokers Control Act 1975
Rules of the Supreme Court of Western Australia
Result:
Plaintiff's application dismissed
Representation:
Counsel:
Plaintiff: Mr A C H Quahe
Defendant: Mr D A Creedan
Solicitors:
Plaintiff: Wojtowicz Kelly
Defendant: Tottle Christensen
Case(s) referred to in judgment(s):
Simto Resources Ltd v Normandy Capital Ltd & Anor 115 ALR 609
Case(s) also cited:
Avery v Worldwide Testing Services Pty Ltd (1990) 2 ACSR 834
Brick and Pipe Industries v Occidental Life Nominees Pty Ltd & Ors [1992] 2 VR 279
Chow Yoong Hong v Choong Fah Rubber Manufactory [1962] AC 209
Conlan v Registrar of Titles (2001) 24 WAR 299
Dieta Investments Pty Ltd v Sharp & MCL Print Pty Ltd [1968] WAR 86
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Handevel Pty Ltd v Comptroller of Stamps (Vic) (1985) 157 CLR 177
Helby v Matthews & Ors [1895] AC 471
K D Morris & Sons Pty Ltd (In Liq) v Bank of Queensland Ltd (1980) 146 CLR 165
Permanent Building Society (In Liq) v Wheeler & Ors (1993) 10 WAR 109
Perri & Anor v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
Re Curtain Dream Plc [1990] BCLC 925
Re Director of Public Prosecutions Reference (No 1 of 1944) 14 WAR 189
Re George Inglefield Ltd [1933] Ch 1
Re Securitibank Ltd (No 2) [1978] 2 NZLR 136
Webster & Anor v Lampard (1993) 177 CLR 598
REGISTRAR KINGSLEY: The plaintiff pleads that by a deed stamped 9 January 2001 the parties agreed the defendant would pay to the plaintiff the sum $65,000 together with interest from 31 March 2001. The plaintiff alleges that demand has been made but that the defendant has refused to pay the $65,000 or any sum to the plaintiff. The plaintiff has brought an application pursuant to O 14 of the Rules of the Supreme Court of Western Australia.
The defendant by affidavit sworn 28 October 2002 opposes the application. The essence of the defendant's contention is that the arrangement between the plaintiff and the defendant was a loan of money undertaken in the course of the plaintiff's business as a finance broker. That being the case, pursuant to s 43 of the Finance Brokers Control Act1975, the finance broker is not entitled to receive any commission or reward or other valuable consideration in respect of his services.
The plaintiff's counsel submits that by its very nature the document under consideration, entitled an "Agreement to Subscribe for Shares" is a sub-underwriting agreement and does not constitute a loan. By the agreement dated 16 September 1999 between the defendant and Chase Capital Management ("Chase") $350,000 was advanced to the defendant by Chase. In consideration of that advance the defendant was to subscribe for, and procure the issue of, $700,000 fully paid shares in Dynawest Enterprises Pty Ltd and hold the shares and all profits and dividends and benefits on trust for Chase absolutely.
Paragraph 7 of the agreement is a put option whereby Chase may give the defendant written notice requiring the defendant to purchase the shares at the purchase price of $1.00 per share if the Proton Proposal does not proceed by 15 October 1999. By par 8 of the agreement if the Proton Proposal proceeds then Harrison will transfer all the shares at a price of $1.425 per share and pay Chase the purchase price of $1.425 per share on transfer. The Proton Proposal was an arrangement whereby all issued shares in Dynawest Enterprises Pty Ltd would be acquired by a Malaysian company.
It is clear on the authorities that in construing the true nature of financial transactions it is essential to look at the substance of the transaction and not merely its form. The substance of the transaction must be ascertained by a consideration of the rights and obligations of the parties which is to be derived from the whole of the agreement between the parties. The court must ultimately consider the effect of the totalitary of the transaction to determine what on its true construction the transaction amounts to.
The agreement between the defendant and Chase discloses that there is a payment of a sum of money by Chase to the defendant, and an agreement that at some future time, that amount, together with an additional amount, would be paid by the defendant to Chase. In my opinion on the agreement it is arguable that the deed is in substance a loan for money.
Even if the agreement is a loan for money arranged by the plaintiff, this does not necessarily mean that the plaintiff is caught within the Finance Brokers Act. As shown by Simto Resources Ltd v Normandy Capital Ltd & Anor 115 ALR 609, Justice French at 267 comments that the statutory purpose of the Finance Brokers Control Act is directed to persons who carry on business as a Finance Broker. The Act is not directed to ad hoc negotiations or arrangements of a loan by a person on behalf of a third party, notwithstanding that negotiation or arrangement may occur in a commercial context. However, Justice French does go onto say that the circumstances surrounding a single transaction may indicate that it is part of a business of such transaction, albeit it maybe the first of its kind engaged in it by the broker.
The activity of arranging loans is not prima facie unlawful. The services which engage s 43 of the Finance Brokers Control Act are limited to services which are central to the business of a finance broker. That business is the negotiation or arrangement of loans of money for on or on behalf of other persons. On the evidence before me this was the first transaction that the plaintiff entered into. Subsequently the finance broking licence was granted. Having regard to the need to examine the evidentiary circumstances surrounding the transaction to determine if the transaction does fall within the Finance Brokers Control Act 1975 in my opinion there is an argument, which is not shadowy or lacking in substance, that warrants a full hearing.
Accordingly the plaintiff's application is dismissed. As there is no basis for the contrary, the cost will be costs in the cause.
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