Le Poidevin v Walker No. Scgrg-97-1721 Judgment No. S269
[1999] SASC 269
•16 July 1999
LE POIDEVIN v WALKER
[1999] SASC 269
Full Court: Olsson, Mullighan and Nyland JJ
OLSSON J I agree that this appeal must be dismissed, for the reasons expressed by Mullighan J.
MULLIGHAN J At all relevant times the appellant was a solicitor carrying on a private practice on his own account. The respondent was involved in a road accident in 1988 and the appellant acted for him in respect of recovering the cost of repairs to his motor vehicle.
The respondent could not afford to pay this cost and so the appellant agreed to lend to him the money required. On 31st August 1988 he lent $2,000 to the respondent and on 7th November 1988 he made a further loan of $500. At the time of the first advance, the appellant wrote on the cheque butt “Loan to Colin Walker 21% on $2,000 Cheque Dated 31/8/88”. It was signed by the respondent with the date 30.8.88 and thereunder is written by the appellant the words “Taken on 31/8/88”. The respondent made repayments of $100 on 13th December 1990, $100 on 10th May 1991 and $2,000 on 3rd October 1991 but no other payments. Proceedings were instituted by the appellant on behalf of the respondent for recovery of the cost of repairs to the motor vehicle. Judgment was entered but no money was recovered because the defendant in those proceedings absconded.
On 29th September 1997 the appellant issued a claim in the Magistrates Court (Civil Jurisdiction) against the respondent seeking $7,823.57 which, with the exception of $300, is for interest on the loan. The respondent filed a defence admitting the loans and the purpose for them. He also asserted that the loan transactions occurred in circumstances of undue influence and further that the appellant is estopped from bringing the claim and that it is statute-barred by reason of the Limitation of Actions Act 1936.
The action came to trial before a learned Magistrate. Both parties were unrepresented. The learned Magistrate found that the claim was not statute-barred, however, he dismissed the claim except as to $300. He held that the provisions of the Consumer Credit Act 1972 applied to the appellant and the loan transactions. He held that the appellant was a credit provider under the Act and therefore was required to be licensed under the Act. He also held that the loan transactions were credit contracts under the Act and as the appellant did not hold an appropriate licence, he was not entitled to interest on the loans as interest amounts to a credit which, in the circumstances, could not be recovered. The three hundred dollars was the balance of the loans after giving credit for deducting the amounts repaid.
The learned Magistrate also concluded that there were other reasons why the claim could not succeed, at least in its entirety. As has been seen, the claim was almost entirely for interest. A large proportion of that interest was acknowledged to be interest upon unpaid interest, which the learned Magistrate concluded was not part of the loan agreement. He allowed the claim as to $300 and interest on that amount since the proceedings commenced which he fixed at $10.
The appellant appealed against the judgment. The appeal was heard by a Judge of this Court on 10th February 1998 and was dismissed for the same reason. The appellant now appeals against that judgment.
The learned Magistrate found that not only did the appellant lend the money to the respondent when acting for him in the course of conducting the business of a solicitor, but he made loans to other clients who approached him for loans from time to time. The learned Magistrate went on to say:
“This loan by the plaintiff was not an isolated transaction. The plaintiff has produced his cheque book which is part of Exhibit P1. In that cheque book the $2,000 lent is documented to some extent. I can see at a quick glance four stamps on this cheque book all headed ‘Le Poidevin & Co Barristers & Solicitors, 1A Wattle Tce, Plympton Park’ giving a telephone number.
The stamp appears directly beneath the document which the defendant signed wherein he acknowledged the advance of money to the defendant and whereby the defendant agreed to pay interest at 21 per cent per annum. I conclude that this loan was a transaction which the plaintiff entered into with the defendant at a time when his business as a solicitor included the provision of credit. That being so, the claim for interest is void. The defendant has repaid $2,200. The balance outstanding is therefore $300.”
There was evidence before the learned Magistrate that on another earlier occasion, the appellant lent money to the respondent and charged interest.
The evidence of the appellant was that he worked from a small home office as both a solicitor and as an accountant. It is common ground that he had acted for the respondent for a period of eleven years. He undertook various work for him, including legal work and the preparation and filing of income tax returns. The appellant told the learned Magistrate that he advanced the money to the respondent by way of cheques drawn on a Visa card account. He said that at the time he had between six and ten credit cards at the time upon which he drew for private purposes. When the respondent asked him for a loan, he told him that the only money available was on a Visa card and that he would have to pay the interest on that card. He said there was no discussion as to how the loans would be repaid but it was implied that they were repayable upon demand, or “at call” as he put it. He then gave the following evidence in answer to questions of the learned Magistrate:
“Q.... I suppose clients from time to time make requests to you of this nature.
AHave made other loans to other people similar to this, yes.
Q...... Clients who had a short term need for money and you would accommodate them if you were able to.
AI mean, I have got limits on credit cards and obviously if they’re prepared to pay the interest on the Visa card I don’t mind drawing the funds on a Visa card and lend that money to them, but it’s clearly not my money. It’s the banks money, but in my experience they always take longer to repay than they promised. They say they will pay three months. You’re invariably waiting a year or more, but as long as they pay the full amount and pay the Visa card interest, it doesn’t really make that much difference to me.
It may be seen from this evidence that loans were made by him to clients. The appellant went on to say that he did charge the respondent interest on the interest due at the rate charged on the Visa account. The interest rate did not remain at 21% per annum but ranged between a low of 17% and a high of 25% charged on a daily basis which the appellant debited annually.
The respondent also gave evidence. He said that he did not recall whether he read the writing “21 per cent” on the cheque butt. He said he had no recollection of any discussion about an interest rate. He claimed to have been unable to repay the loan, as he had intended, due to losing his employment and his resultant poor financial position. Having received written demands for repayment, he eventually met the appellant in the city. He paid him $2,000 and told him that he could not pay any more. The appellant told him to get a job. It is not suggested that this amount was paid in full satisfaction of the amount owing.
As has been mentioned, it is implicit in the decision of the learned Magistrate that he held that the loans were credit contracts under the Act, that the interest obligations were credit charges and that the appellant was a credit provider. Pursuant to s5 of the Act, a credit provider is defined as meaning:
“.... a person whose business is, or includes, the provision of credit, or who holds himself out in any way as carrying on that business.”
S40 provides, inter alia, that a credit contract must be in writing and set out the terms and conditions upon which the credit is provided, in particular, the amount of the principal, the person to whom, and the place at which, repayment is to be made.
Also a credit contract must set out the total amount of the credit charge to be paid. Obviously the writing on the cheque does not meet the requirements. S40(8) provides as follows:
“40(8)....... If a credit contract to which this section applies does not comply with the provisions of this section, the credit provider shall not be entitled to any amount in respect of the credit charge payable under that contract.”
The learned Magistrate also had regard to s42 of the Act which provides, inter alia, that any credit contract shall be void in so far as it provides directly or indirectly for the payment of interest upon a credit charge. He described the loan transactions between the parties as “the very sort of transaction which s42 (of the Act) directs its mind towards”.
I also mention s28 of the Act (as it was at times relevant to this matter) although this provision was not referred to by the learned Magistrate in his reasons for judgment and does not appear to have played any part in his reasoning. The provisions of s28 are as follows:
“28.(1)...... A person shall not carry on business as a credit provider or hold himself out as carrying on business as a credit provider unless he is duly licensed as such under this Act.
Penalty:One thousand dollars.
(2)... For the purposes of this section, a person acts as, or holds himself out as being, a credit provider whether he does so personally or through the agency or instrumentality of other persons.
(3) Subject to subsection (4) of this section, a credit provider who is required to be licensed under this Act shall not be entitled to recover or retain any credit charge in respect of credit provided by him at any time at which he is unlicensed.
(4)... Where a credit charge, when reduced to a rate of interest in accordance with the regulations, does not exceed ten per centum per annum or such other rate as is, at the time the contract is made, prescribed for the purposes of section 6(1)(i) of this Act, that credit charge may, notwithstanding the provisions of subsection (3) of this section, be recovered and retained by the credit provider in pursuance of the credit contract.”
There were other matters which the learned Magistrate concluded stood in the way of the appellant recovering the amount claimed. He thought the long delay in seeking recovery could invoke the equitable principle of laches. As he made no decision about that matter and it was not considered by the Judge, it does not arise for consideration on this appeal. He expressed the view that the calculations of interest were incorrectly made which is undoubtedly correct as rates of interest other than 21 per cent were charged at times. Also, he said that if the Act did not apply, the appellant could only be entitled to simple interest of 21 per cent and not to any amount by way of compound interest.
Upon the appeal to the Judge, the appellant was permitted to supplement the evidence by the filing of two affidavits. He deposed that the only loans which he had made in the last 20 years were to the respondent. There was a loan in about 1984 which he claimed was probably made by a company. He said that he had never carried on business as a credit provider. Also, he said that when the learned Magistrate asked him if he had a credit provider’s licence, that was the first time issues under the Act had arisen. The matter was again raised by the learned Magistrate in the course of addresses before him. However, the appellant did not apply to re-open his case and lead any evidence about matters relevant to the application of the Act.
Both parties were again unrepresented upon the appeal before the learned Judge and on this appeal.
The first ground of appeal before the learned Judge was that the learned Magistrate was wrong in finding that the appellant was a credit provider and required a licence under the Act. The learned Judge was prepared to resolve this issue on the basis that the appellant had only ever made two loans, namely the subject loans to the respondent. With respect, I think that basis is contrary to the evidence and the findings on the evidence by the learned Magistrate. I return to that matter shortly. The Judge said of these loans:
“They were plainly made in the course of his business, and by virtue of the fact, as it would appear, that the appellant was acting for the respondent. It does not matter, in my opinion, that the appellant himself had to borrow money to provide the loan to the respondent, or that in doing so he did not anticipate making any profit out of that transaction. The appellant was carrying on business as a solicitor which included, in this instance, the provision of credit to a client. The definition of a credit provider does not say that it means a person whose business is or includes the business of the provision of credit. It seems to me that on a proper construction of the definition the provision of credit on one occasion in the course of carrying on the business of a solicitor would be sufficient to bring the person within the definition of a credit provider.”
The learned Judge held that the provisions of s28(3) applied and interest could not be recovered as it is a credit charge by definition: see s5. He held that as the appellant did not hold a credit provider’s licence, his claim must fail.
The evidence did not establish that the business of the appellant was the provision of credit or that he held himself out in any way as carrying on such a business. The issue is whether his business, as a solicitor or accountant, included the provision of credit. I have some doubt about the correctness of the conclusion reached by the learned Judge on the factual basis which he adopted. Two loans to one person a few months apart does not suggest that the appellant’s business included the provision of credit. I do not think it is enough to establish that a loan has been made to a client on one or even two occasions. It is necessary to establish that the business includes the provision of credit which, in my view, means an ongoing facility of that nature even though it may only be used once. In all other respects, I agree with the conclusions of the learned Judge.
However, the factual basis disclosed in the evidence is a different matter. As has been seen, the appellant acknowledged in his evidence that other clients requested, and received, loans from him. That evidence was put to the appellant by the learned Magistrate during the course of addresses and the specific issue was put to him, “Didn’t your business, whether you categorised it as that of a solicitor or that of an accountant, include the provision of credit?” The answer of the appellant was not directly responsive. He characterised the drawing of a cheque on a Visa card as a form of private loan. He submitted that he was not advancing loans on a regular basis.
It is inconceivable that the appellant misunderstood the proposition which was put to him. He not only said in evidence that he made loans to other clients, but he explained how he did so by drawing money from credit card facilities which was lent to the borrower. At no time before the learned Magistrate in evidence or in addresses did the appellant put a different case.
The evidence of the appellant before the learned Magistrate justified the conclusion which he reached. Not only had he lent money to the respondent on occasions but also to other clients. That evidence is unequivocal.
In a separate, but related, ground of appeal before the Judge, the appellant contended that the learned Magistrate erred in raising the issue of his not holding a credit provider’s licence and, in effect, amending the Defence at the end of the trial. As has been mentioned, this question of whether the Act applied was raised with the appellant during his evidence and his final addresses and he did not seek an adjournment or to prepare submissions or to lead evidence to contest the application of the Act. When the affidavits were placed before the Judge, the appellant asserted that they contained the evidence which he would have placed before the learned Magistrate had he been given the opportunity. As has been seen, the learned Judge considered that the evidence would not have made any difference as even on that factual basis the Act applied. Consequently, he found that the complaint in this ground of appeal could not justify interference with the decision of the learned Magistrate.
I approach this matter in a different way. The appellant is a legal practitioner of some years standing although currently under suspension. The respondent was unrepresented. He drew his own Defence. The learned Magistrate was obliged to raise any relevant defence disclosed by the evidence and he did so. He was also obliged to ensure that the appellant was made aware of any possible defence. The learned Magistrate discharged that obligation and in a timely manner. This was a very short trial. The parties were the only witnesses. The only other evidence was comprised of some documents. There was no procedural unfairness to the appellant in the learned Magistrate raising the possible defence when he did. He gave the appellant the opportunity to give evidence about it, which he did, and to make submissions. The submissions did not assist the learned Magistrate.
The appellant had a right of appeal to a Judge of this Court but, unlike in the criminal jurisdiction, the Judge did not have an unfettered discretion to re-hear any witnesses or receive fresh evidence in the interests of justice: see s42(4) of the Magistrates Court Act 1991. In the civil jurisdiction, reception of fresh evidence depends upon well-recognised and understood rules which would not justify the reception of the material which the appellant placed before the Judge by affidavit. Furthermore, the appellant could not present a different factual case on appeal than that presented at trial as he sought to do. It was a factual case which gave the appearance of tailoring the evidence to meet the obstacle raised by the learned Magistrate. Also, if the new evidence was to be received, the respondent was entitled to test it by having the appellant recalled and cross-examined and to give full discovery of his practice records. The unrepresented respondent could not be expected to appreciate and insist upon his procedural rights and, in the circumstances, his lack of objection to the affidavits being placed before the learned Judge is of no significance.
In my view, this evidence should not have been received and acted upon even for the limited purpose indicated by the learned Judge. It is unlikely that the appellant could have been wrong when he said he lent money to other clients at their request. I make a further observation. The fact that clients made such requests is a matter of considerable significance. It is evidence from which it could be inferred that loans were part of the business of the appellant. It is likely that the clients would have to know of that facility in order to make the requests. After all, money lending is not a routine or well known aspect of the practice of a solicitor or an accountant.
In my view, the learned Magistrate was correct in his conclusion that the Consumer Credit Act applied, and because the appellant did not have the requisite licence and the loan agreements did not conform with the Act, the claim must fail with the exception of the outstanding balance of $300.
The next ground of appeal is that the learned Judge erred in his conclusion that the learned Magistrate was correct in finding that the interest claimed by the appellant was compound interest or interest upon interest. The evidence could admit of no other conclusion. At the end of the first year, interest was added to the principal. The total sum due then became the principal sum and the process was repeated each year. Plainly, such a process involved charging interest upon unpaid interest. Such a process is prohibited by s42(1) of the Act as the learned Judge correctly concluded.
The fourth ground was that the learned Judge erred in rejecting the contention that the learned Magistrate should have found that the rate of 21 per cent simple interest was the rate applicable to the loan transactions subject to variations upon a charge by the ANZ Bank to its Visa card rates. There is no evidence to support such a conclusion. At all events, it is a matter of no consequence in view of the conclusion that the Act prevents recovery of interest as the learned Judge so decided. Also, he was correct when he observed that if there was an agreement between the parties to pay a variable interest rate and which was actionable in law, there was no attempt to prove the various rates from time to time. The learned Judge was correct in rejecting this ground.
The fifth ground of appeal is that the learned Judge erred in not concluding that the Act, as it was in 1988 when the loans were made, had no application. The Act has since been amended by repealing various relevant provisions and the appellant contends that it is the Act in its present form which must be applied. The learned Judge correctly rejected that contention. The legal relationship between the parties and their respective rights and obligations are to be determined by the law as it was when the credit contracts were made unless Parliament expressed a contrary intention. No such intention is evident.
The sixth ground was that the learned Judge erred in concluding that the Act applied as the loans were made to the respondent for the purpose of repairing his motor vehicle was used in his insurance agency business, so the Act did not apply to the loans. This matter was introduced by the appellant for the first time before the learned Judge in one of his affidavits. The learned Judge rejected this ground. He held, correctly in my view, that the only exception at the relevant time, as now, is that the Act did not apply where credit was provided to a body corporate. The respondent was not a body corporate but an individual and so the Act applied to the loans.
The seventh ground argued before us was that the learned Magistrate should not have amended the defence and consequently the action should be remitted to the learned Magistrate for re-trial. I reject this ground. The appellant seemed to suggest that he had difficulty in interrupting the learned Magistrate at that time and seek an adjournment. As has been mentioned, the appellant is a legal practitioner and is, or should be, aware of basic matters of procedure. There is simply no reason why he could not have sought time to consider his position and to object to the amendment. His evidence about loans to clients was unequivocal. Even before the learned Judge, he did not seek to introduce documentary evidence which could show that he was mistaken in his evidence. Any adjournment could not have made any difference. However, the fact remains that he did not seek an adjournment.
The next ground does no more than reiterate the points made by other grounds of appeal, namely, that in the circumstances, the Act did not apply to these loans. The appellant contended that the loans were made by him to the respondent because of their relationship as friends not because of the relationship of solicitor and client or any other business relationship. The findings of the learned Magistrate and the conclusions of the learned Judge are to the contrary. There is no reason to disturb those findings which were made in accordance with the evidence.
The last ground argued was that as the learned Judge had accepted the evidence in the affidavits of the appellant, it had been established that these loans were the only loans over a period of 20 years and consequently it is an error to conclude that he was, at the relevant time, a credit provider and therefore needed a licence. That is not what the learned Judge accepted. What he said was that even if that evidence is correct, the appellant was none the less a credit provider, the transactions were caught by the Act and, for the reasons mentioned, the claim for interest could not be sustained.
In my view, none of the grounds of appeal is established and the appeal should be dismissed.
NYLAND J I agree that the appeal must be dismissed for the reasons expressed by Mullighan J.
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