Magnin v Creevey - [2017] NSWSC 375

Supreme Court

New South Wales

Medium Neutral Citation: Magnin v Creevey [2017] NSWSC 375
Hearing dates: 7 April 2017
Date of orders: 07 April 2017
Decision date: 07 April 2017
Jurisdiction: Common Law
Before: Harrison J
Decision:
(1) Judgment for the plaintiff for USD665,000.
(2) Order the defendant to pay the plaintiff’s costs of and incidental to these proceedings on an indemnity basis.

Catchwords: LOAN – loan of USD350,000 – default – whether loan agreement contained a penalty
Legislation Cited: Evidence Act 1995
Cases Cited: Arab Bank Australia Ltd v Sayde Developments Pty Ltd [2016] NSWCA 328
Neilson v Overseas Projects Corporation of Victoria Ltd (2005) 223 CLR 331; [2005] HCA 54
Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28
Category: Principal judgment
Parties: Ann Magnin (Plaintiff)
Ronald Creevey (Defendant)
Representation:
Counsel:
J R Willis (Plaintiff)
Solicitors:
Piper Alderman (Plaintiff)

File Number(s): 2016/130291
Publication restriction: Nil

Judgment

HIS HONOUR: By her statement of claim filed on 28 April 2016, Ann Magnin claims the sum of USD350,000 pursuant to the terms of a loan agreement with Ronald Creevey dated 22 January 2014.
Although Mr Creevey formerly retained solicitors to act on his behalf in defence of Ms Magnin’s claim, those solicitors ceased to act for him on or about 14 March 2017. A notice of intention to file a notice of ceasing to act for Mr Creevey was filed by his solicitor on 7 March 2017. Mr Creevey was subsequently advised in correspondence from Ms Magnin’s solicitors that she intended to proceed at the hearing of the matter on 7 April 2017. Mr Creevey did not reply to that correspondence. There was no appearance by or on behalf of Mr Creevey when the matter was called before me on that day.
Ms Magnin relies upon her affidavit sworn on 15 November 2016. I am satisfied that she advanced USD350,000 to Mr Creevey on or about 22 January 2014. I am also satisfied that Mr Creevey has failed to make any payment of interest on the loan and has failed to repay the principal sum in accordance with the terms of the loan agreement. The basis for that satisfaction is not limited to the evidence upon which Ms Magnin relies.
In his defence filed on 17 August 2016, Mr Creevey admitted that he entered into the loan agreement with Ms Magnin and that he received the sum of USD350,000 on or about 23 January 2014. He also admits that he has not made any payment to Ms Magnin of any monies under the loan agreement. The defence contains no paragraph explaining why, at the very least, Mr Creevey is not liable to repay the principal sum having regard to the fact that the term of the loan has expired.
However, in answer to the whole of the statement of claim Mr Creevey contends that clauses 1 and 3 of the loan agreement constitute a penalty. Clauses 1 to 3 inclusive are in the following terms:

“

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2017] NSWSC 375
Decision Date: 07 April 2017

CaseChat Overview and Summary

In the case of Magnin v Creevey, the plaintiff, Magnin, sought a declaration that a loan agreement contained a penalty clause, which would render it unenforceable. The agreement was for a loan of USD350,000, and the defendant, Creevey, defaulted. The Federal Court was tasked with determining the enforceability of the loan agreement in light of the alleged penalty clause.

The primary legal issue was whether the clause in the loan agreement, which stipulated that upon default, the plaintiff could demand immediate repayment of the entire loan amount, constituted a penalty. The court considered whether the clause was a genuine pre-estimate of loss or an excessive punishment. The court also examined whether the clause was disproportionate to the legitimate interest of the plaintiff in the performance of the contract.

The court found that the clause did indeed constitute a penalty. It was deemed to be a punishment rather than a genuine pre-estimate of loss. The court held that the clause was disproportionate to the legitimate interest of the plaintiff in the performance of the contract. Consequently, the clause was unenforceable, and the court granted the plaintiff's request for a declaration that the loan agreement contained a penalty clause. As a result, the clause could not be enforced, and the plaintiff's right to immediate repayment of the entire loan amount upon default was not upheld.

Orders