Le Poidevin v Walker No. Scgrg-97-1721 Judgment No. S6561

[1998] SASC 6561

LE POIDEVIN V COLIN WALKER

Magistrates Appeal

Bleby J

The appellant in 1988 was practising as a solicitor.  He acted for the respondent and, according to his evidence before the learned special magistrate, had done so for a number of years in respect of various personal matters.  In particular, he was acting at that time for the respondent in relation to the recovery of damages as a result of damage inflicted to the respondent’s motor vehicle. 

The respondent was unable, for financial reasons, to have his car repaired.  At the request of the respondent, the appellant agreed to grant the respondent a loan of moneys sufficient to cover the cost of repairs pending recovery of the damages from the other driver involved.  The loans were advanced as to $2,000 on or about 31 August 1988 and as to the sum of $500 on or about 7 November 1988. 

In evidence, before the learned special magistrate, the appellant submitted, and there was received into evidence, a memorandum signed by the respondent and dated by the respondent, 30 August 1988, which memorandum was in the following terms: “Loan to Colin Walker, 21% daily, on $2,000, cheque dated 31.8.88.” and signed “C Walker”.  There was no other written evidence before the learned magistrate in relation to the second instalment of the loan, but by consent of the respondent, I received in evidence before me, an affidavit of the appellant to which was exhibited a copy of a further similar document in relation to the advance of 7 November 1988, which reads: “Colin Walker, 21% interest daily, (signed) C Walker” and the figure of $500.  That was dated 7 November 1988.   In each case there was a reference to 21 percent “daily” on the respective amounts.  That could mean, of course, a daily rate of interest at 21 percent, or could mean interest at 21 percent per annum adjusted on the daily balance outstanding.  I assume it was intended as the latter, as the appellant did not suggest otherwise, and said in his evidence that it was not, in fact, merely 21 percent fixed, but was a rate that was linked to his Visa card account interest rate, on which account he himself had drawn in order to make the loan to the respondent.

The evidence showed that the respondent made repayments of the loan, as to $100 on 13 December 1990, a further $100 on 10 May 1991 and $2,000 on 3 October 1991.  However, it was plain from the appellant’s ledger, Exhibit P2, and from the calculation of the amount claimed on the summons, that the appellant considered that he was entitled to interest, at least, on the balance outstanding every six months or sometimes twelve months, according to the ledger, and that that balance included unpaid interest on which further amounts of interest were then charged at varying rates.  It was plain from the ledger that interest was therefore being charged upon unpaid interest.  The appellant also claimed that the interest payable was at a rate which varied from time to time above and below 21 percent.  It was not led in evidence as to how such variable rates were said to be justified, even if linked in some way to interest payable on outstanding amounts on ANZ Visa accounts.  There was no evidence led as to what the prevailing rates of interest were, from time to time, on such accounts. 

Both parties were unrepresented in the Magistrates Court.  During the course of his evidence, the appellant said that he made other loans of a similar nature to clients, as I understood it, on other Visa accounts.  He said he had made other loans to other people similar to this, and he was asked by the learned magistrate:

“Q...... Clients who had a short-term need for money and you would accommodate them if you were able to.

A...... ... if they're prepared to pay the interest on the Visa card and I don't mind drawing the funds on a Visa card and lend that money to them, but it's clearly not my money.”

Further in his evidence he said: “I think I had loans on about four different cards during most of that period.”, “that period” being apparently a period in the early 1990’s.  He was then asked a question:

“Q...... What do you mean other loans as well as this loan. 

A...... When I say Visa card money that I borrow on Visa cards I have about six, eight or ten Visa cards and Bankcards and I draw funds on different cards at different times. 

Q...... Did you hold a Credit Providers Licence under the Consumers Credit Act. 

A...... No.  This is just a private loan on drawing funds on my Visa card.  The thing was, he asked me for the loan and I told him the only money available was on the Visa card.”

Further in his evidence he said:

“A....... I was running about four loans.  I wasn't prepared to put all of these in evidence, I was just gathering them together and putting them in the file as I found them.  All they, I think, indicate was that I owed $8,000 on credit cards around 1994 but there are, at least, two sets of statements which I owe more money.   By December 1993, I owed $13,000 on Visa and Bankcard and Mastercard, which I have gradually paid off.'

That evidence might suggest to a casual reader that there were loans to other clients, although it might also be interpreted as meaning that there were other loans obtained by the appellant for his own purposes on various Visa/Bankcard accounts. 

By consent of the respondent, I received, as I said, two further affidavits from the appellant, and in one of those he asserts that the only loans he had made in the past 20 years had been made to the defendant, being the two loans in question.  When the learned magistrate asked the appellant in evidence whether he had a Credit Providers Licence, that was the first time the issue of the Credit Providers Licence or issues under the Consumer Credit Act had arisen.  There had been no pleading by the respondent to the effect that the transaction was void or that the appellant was unable to recover interest by virtue of the provisions of the Consumer Credit Act. 

The matter was raised again in addresses by the learned magistrate, where the magistrate suggested that the appellant came within the definition of a credit provider in the Consumer Credit Act, to which the appellant's response was that they were merely “private” loans and that the money lent was really that of a bank or a financial institution providing the credit card funds.  There was no request at that time to reopen the case to lead further evidence on the question of the application of the Consumer Credit Act.  There was no complaint made by the appellant, at any stage in the course of the hearing, to the learned magistrate, that he had not been permitted to lead evidence relevant to that question. 

One of the grounds of appeal before me is that the appellant was denied an opportunity or did not have, because of the short notice, an opportunity adequately to lead evidence pertinent to that question.  I will deal with that when I come to the particular ground of appeal. 

The learned magistrate, in giving his reasons and in awarding judgment for the appellant in the sum of $300, being the amount of principal outstanding and unpaid by the respondent, having denied the appellant his claim for many thousands of dollars of interest, said this:

“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.”

He, therefore, proceeded to enter judgment for the appellant for that sum, plus a figure of $10 for interest and various items of costs to which I will refer in a moment. 

I turn then to the grounds of appeal before me.  The grounds are stated in rather lengthy and almost prolix terms, but I will do my best to summarise each one of them. 

The first ground, is that the magistrate was wrong in finding that the appellant was a credit provider and that he required a licence under the Consumer Credit Act, and that because he did not have such a licence he was unable to recover interest on the loan.  In my opinion this ground has no substance.  The definition of a credit provider in the Consumer Credit Act 1972, provided, at all times, as follows:

“‘Credit provider’ means -

(a)...... a person whose business is, or includes, the provision of credit, or who holds himself out in any way as carrying on that business.”

There is a further and inclusory part of the definition which is not relevant for present purposes.  The appellant was carrying on business at the relevant time as a solicitor.  I am prepared to accept for present purposes the qualification on his oral evidence contained in the affidavit, that he only made two loans to clients, namely the two loans in question to the present respondent.  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. 

Section 28(3) of the Consumer Credit Act provides:

“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.’”

Credit charge is defined in the Act as meaning “any interest or other amount.  (however, it may be described), or the value of any other benefit, in excess of the principal, that has been, or is to be, paid or given in consideration of, or otherwise in respect of, the provision of credit.”  In other words, it would include interest as commonly understood.  In those circumstances, if it was that the appellant in making the loan was required to hold a Credit Providers Licence, and if he was to recover interest on that loan, then he must have been able to establish that he held such a licence.  He was not able to do that, and the provisions of s28 provide that he has no right to recover those credit charges.  In my opinion, therefore, ground 1 of the notice of appeal fails. 

Ground 2 relates to that issue but has a different slant.  That relates to the allegation that the learned magistrate erred, in effect, in amending the respondent’s defence in the course of giving judgment, to enable the finding to be made that the appellant was not a credit provider and therefore was not able to recover interest.   The allegation is that the appellant was prejudiced in that he was unable to give evidence to show that there was no proper basis for the finding that he should have been so licensed.  It is true that the question of the requirement for a Credit Providers Licence arose late in the course of the hearing and without any prior pleading on the part of the respondent.  When it was raised, however, both in evidence and in the course of submissions, the appellant did not seek an opportunity at that time to lead further evidence.  He did seek an opportunity, to which the respondent consented, to place further evidence before me as to the frequency of the occasions on which such loans were made.  The appellant asserted before me that that was the evidence which he would have led before the magistrate if he had the opportunity.  He argued that because it was an isolated transaction, it did not constitute him a credit provider for the purposes of the Consumer Credit Act.  I have already held that one transaction of this nature would be sufficient, if done in the course of and in association with the appellant’s business as a solicitor.  It seems to me, therefore, that the evidence which the appellant wanted to lead and would have led before the magistrate, if he had had the appropriate opportunity, could not have improved his position in any way at all, because it still would have necessarily resulted in a finding by the learned magistrate that the appellant was a credit provider, and that he was unlicensed, with the same result that he was unable to recover any of the interest which he had claimed.   Therefore, I find that ground 2 is insufficient to justify any interference with the learned magistrate’s decision. 

Ground 3 criticises the magistrate’s assertion that the interest claimed by the appellant was compound interest or interest upon interest.  I do not accept that criticism.  The amount claimed by the appellant in the summons corresponded with the amount shown in the appellant’s ledger, Exhibit P2.  That clearly shows the calculation of interest upon the balance outstanding at particular times during the period that the ledger was kept.  The balance outstanding, on which such interest was claimed, included unpaid interest added to the outstanding principal.  It was clearly, therefore, a calculation of interest upon interest  which was part of the claim.  If there was, indeed, an agreement, as the appellant asserts, that the respondent should pay interest levied against him on his credit card, that, I have no doubt, also constituted the payment of interest upon interest.  But that is something which, with the blessing of the Commercial Tribunal, operators of revolving charge accounts, as they are defined in the Act, were able to do, and was a scheme designed to accommodate such credit providers.  But the appellant was not operating a revolving charge account and the provisions relating to those accounts did not affect ordinary credit providers such as the appellant in this case.  Section 42 of the Consumer Credit Act provides:

“(1).... Subject to subsection (2) of this section (which is not relevant for the present purposes) ‘Any credit contract shall be void in so far as it provides directly or indirectly for -

(a)...... payment of interest upon a credit charge; or,

(b)any increase in the rate at which a credit charge accrues....”

There are certain qualifications on that contained in the subsections that follow, but they are not relevant for present purposes.  Insofar as the agreement between the parties provided for the payment of interest upon interest, indeed, if it did so provide, the contract by virtue of s.42 of the Consumer Credit Act was void.  It plainly did not allow the recovery of any interest claimed by the appellant. 

Ground 4 was that the learned magistrate should have found that the rate of 21 percent simple interest was the rate applicable subject to variation upon a change by the ANZ Bank to its Visa card rates.  There was nothing in the memorandum signed by the respondent to suggest that it was a variable rate of interest.  But even if there were agreement as to a single rate of interest, even at simple interest, the appellant, by virtue of being a credit provider as defined in the Consumer Credit Act, was not entitled to recover any interest charges at all, whether simple or compound, and I have already dealt with that question.  However, even if there were an agreement to pay a variable interest rate and if even if that were sustainable in law, there was no attempt at the hearing before the learned magistrate to prove what the rates were from time to time, that is the rates charged by the ANZ  Bank on its various credit cards, other than what was contained in the appellant’s ledger.  That, of course, was a self-serving statement as to particular rates from time to time, and was not admissible to prove the actual ANZ bank rates.  But I need say no more about that ground because it is really covered by the fact that the appellant was unable to recover any interest at all. 

Ground 5 asserts that the learned magistrate erred in applying the law applicable to the transaction in 1988 but then went on to assert that he should have done so.  I found this a rather confusing ground and a confusing submission to support it.  It is plain, however, that there appears to have been no material change in the law in question, but quite obviously if there were such a change without specific restrospective alteration by Parliament, it could not affect rights which were available to the parties when these transactions were entered into in 1988.  It is quite clear that the law applicable to the contracts when they were entered into was the Consumer Credit Act, as it stood in 1988.  I have already dealt with that, what that law provided, and the effect of that law.  That remained the position for so long as the appellant might seek to recover interest on the loan that was made. 

Ground 6 alleges that the loans were used in and for the purposes of the respondent's agency business, and that for that reason the Consumer Credit Act did not apply.  That was a matter that was introduced in evidence by affidavit tendered before me with the consent of the respondent.  It was not a matter which was raised before the learned magistrate, but in any event, in my opinion it had no substance.  The fact that the loan was used by the respondent, if indeed it was so used, in and for the purpose of a business then being carried on by him, does not affect or could not affect whether the Act applied to the appellant in requiring him to have a Credit Providers Licence.  The only relevant exemption at that time was that the definition of ‘credit contract’ in the Consumer Credit Act provided that it did not apply to a contract where credit was provided to a person who was a body corporate.  The respondent was not a body corporate, but an individual, so the Act applied with its full force to that transaction. 

Ground 7 alleged that the learned magistrate failed to award the appellant’s full entitlement to court fees that he had paid, and also claimed that the interest awarded of $10 was inadequate.  However, in argument before me the appellant conceded that he could only succeed on that ground if he succeeded on the other grounds; namely, that the awarding of court fees and interest was dependent upon the amount actually recovered. 

As I do not propose to make any variation in the amount recovered, I do not propose to make any variation in the amount awarded by way of costs.  There is nothing further that needs to be said, therefore, in relation to that ground. 

The result of consideration of all the grounds of appeal is that the appeal must be dismissed. 

Are there any consequential orders that anyone seeks as a result of that?  (No response)

The appeal is dismissed.  No order as to costs.