Perczyk v McMicking

[2021] VCC 861

consu

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-20-01102

JERRY ANDREW PERCZYK	First Plaintiff
and
EAST GIPPSLAND RESOURCES PTY LTD (ACN 123 168 703)	Second Plaintiff
V
ROBERT CAMERON McMICKING	First Defendant
and
TROPAG PTY LTD (ACN 168 028 251)	Second Defendant

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JUDGE:	HER HONOUR JUDGE A RYAN
WHERE HELD:	Melbourne
DATE OF HEARING:	9 March 2021, further written submissions dated 23 March, 13 and 19 April 2021
DATE OF JUDGMENT:	30 June 2021
CASE MAY BE CITED AS:	Perczyk v McMicking
MEDIUM NEUTRAL CITATION:	[2021] VCC 861

REASONS FOR JUDGMENT
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Subject:CONTRACT

Catchwords:              Whether first defendant liable to repay three loans – alternative claims for moneys had and received – unjust enrichment – damages under the Australian Consumer Law

Legislation Cited:      Australian Consumer Law; Limitation of Actions Act 1958; Supreme Court Act 1986; Penalty Interest Rates Act 1983

Cases Cited:UGL Rail Pty Ltd v Wilkinson Murray Ltd [2014] NSWSC 1959; AJ Lucas Drilling Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2009] VSCA 310; David Leahey (Aust) Pty Ltd v McPherson’s Ltd [1991] 2 VR 367; Healthscope (Tasmania) Pty Ltd & Anor v Australian Hospital Care Pty Ltd & Anor (No 2) [2011] VSC 209

APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr A Donald	Longton Legal
For the First Defendant	In person
For the Second Defendant	Mr R Hart (director of the second defendant)

HER HONOUR:

1By this proceeding, the first plaintiff (“Perczyk”) seeks to recover moneys he lent to the first defendant (“McMicking”), by way of three advances.[1] The sums advanced were $200,000, $25,000, and $5,000 respectively.  A part repayment of $2,000 of the third advance occurred, reducing that debt to $3,000.

[1]        At the hearing, counsel for the plaintiffs informed the court that the second plaintiff had elected not to pursue any claim in the proceeding.

2For the reasons which follow, I am satisfied that Perczyk has established his claim against McMicking for the three debts claimed.  I was not persuaded on the evidence that an alternative claim for damages under the Australian Consumer Law (“ACL”) was made out against either of the defendants.

Background

3Perczyk is the director and shareholder of the second plaintiff (“East Gippsland Resources”).  East Gippsland Resources was the owner of a 320-acre beef farming property known as “Peat Park”, Pound Creek in the State of Victoria (“the property”).

4The second defendant (“TropAg”) was registered on 13 February 2014.  It was formerly known as Capricorn Irrigation Pty Ltd until 28 April 2014.  McMicking was the sole director of TropAg from 13 February 2014 up until he ceased being a director on 9 May 2017.  The current director of TropAg is Mr Robert Hart, who took over as sole director on 9 May 2017.  The defendants were represented by solicitors up until 21 December 2020.  Mr Hart swore an affidavit on 3 March 2021 seeking leave to represent TropAg in his personal capacity as director.  I gave him leave to appear on behalf of TropAg at the hearing.

First loan

5Perczyk decided to put the property on the market in 2013.  He thought he would be able to get a bit more for the property selling it through an outside agent rather than selling it locally.  Mr Perczyk’s son came across a website for Oz Farm Sales Pty Ltd, a company associated with McMicking.  After making contact, the two men entered into negotiations for the sale of the property.

6McMicking represented to Perczyk that if he made an unsecured loan to him of $100,000, which he would repay plus 100% within 12 months, then McMicking would be able to get a sale quickly.  McMicking subsequently requested a loan of $200,000.  After some further negotiations, Perczyk sent an email to McMicking on 10 January 2014 in which he agreed to advance him an interest free loan of AUD $200,000 over a six-month period contingent upon the sale of the property for an agreed value of AUD $1,300,000. 

7McMicking replied on 5 March 2014 by email in which he said:

“the critical part of the transaction is the UNSECURED loan of $200,000 in RETURN FOR WHICH we would purchase your farm at Pound Creek for $1,300,000, promising to pay you $1,500,000 within 6 months.”

8The deal struck eventually was that McMicking’s company, Capricorn Irrigation (now TropAg), would buy the property for $1,500,000, including the $200,000 loan and settle within 180 days, providing Perczyk lent him $200,000 unsecured and interest free for the same six months.  The deal was confirmed in an email sent by McMicking to Perczyk on 12 March 2014.  He also went on to say:

“In the event that we are not able to settle on the farm within 180 days, then I agree to repay your $200,000 loan plus a further $200,000 WITHIN 12 MONTHS.”         

9Perczyk gave evidence that he asked his solicitor to draw up a s 32 statement and a money lending agreement.  These were forwarded on to Piper Alderman, the lawyers acting for McMicking, but no response was given.  A letter was sent by the plaintiffs’ lawyers to Piper Alderman on 11 March 2014 requesting various information.  It is common ground that no contract of sale was ever prepared.

10McMicking sent an email to his solicitor, Alan Jessup at Piper Alderman, on 12 March 2014 confirming; “I am the borrower of $200,000 unsecured and interest free to be repaid in six months from the contract date”.  He also went on to say that if there was any (legal) interference about security for the loan, the deal was off.  Piper Alderman were seeking his instructions regarding the letter sent by Perczyk’s lawyers the day before.

11There is no dispute that the loan moneys were advanced by Perczyk.  The sum of $100,000 was deposited into the bank account of Oz Farm Sales Pty Ltd by Perczyk on 17 March 2014 and a further $100,000 the following day.[2]  As to the reason why the funds were deposited into Oz Farm Sales bank account, Mr Perczyk said that McMicking was the borrower but they were using this account as the receiving vehicle for the money and it was on that basis that he approved the loan.  The bank account details were provided by McMicking in his email dated 12 March 2014.

[2]        Court Book (“CB”) 50-51.

12The plaintiffs submitted that the first loan was to be repaid upon completion of the contract of sale, being six months from the date of execution of the contract.  This term was express and constituted by conversations, emails, and evidence.  If TropAg failed to enter the contract within a reasonable time or at all, the plaintiffs contended the whole of the first loan would become immediately due and repayable. 

13McMicking failed to cause TropAg to enter into the contract of sale within a reasonable time or at all, and has failed to repay the first loan.  In these circumstances, the plaintiffs submit the whole of the first loan became immediately due and repayable and the first loan remains unpaid. 

14Mr McMicking appeared in person at the hearing.  The only defence he pressed was that the borrower was Oz Farm Sales Pty Ltd which was deregistered on 24 June 2016.[3]  Yet despite this, McMicking made several admissions to the effect that he owed the money claimed.  It is clear from the documents and the evidence that McMicking acknowledged he was the borrower.  For example, in the email to his solicitor dated 12 March 2014 he stated he was the borrower.  Further, in his email to Perczyk dated 12 March 2014, he said:

“So that we are all singing from the same hymn book, this email is copied both to my solicitor and yours.

My company, Capricorn Irrigation Pty Ltd agrees to buy Peat Park for $1,500,000 (including the $200,000 loan later described herein) and settle within 180 days PROVIDING you lend me $200,000 UNSECURED & INTEREST FREE for the same 6 months. You say your solicitor has (wisely) suggested that you obtain security for the loan. But I am not offering security. If I was prepared to mortgage a property to the bank for a $200,000 loan, I would not need to buy the farm.” 

[3]        See paragraph 6(d) of the first defendant’s defence dated 2 June 2020.

15The simple fact is that the moneys were advanced to McMicking at his request and were paid into the bank account which he nominated.  He acknowledged receiving the funds in an email to Perczyk dated 28 May 2014.  There is no evidence which proves that Oz Farm Sales was the borrower.  The evidence clearly shows that McMicking was the intended borrower and he has made an acknowledgment to that effect. 

16When the defendants previously had legal representation, a defence had been filed on behalf of McMicking which pleaded that the claim was statute barred,  the reason being that the statement of claim was dated 11 March 2020 and it was more than six years since the agreement was concluded, as the last email from the plaintiff was dated 6 March 2014.  It is trite law that a cause of action in contract accrues when a breach occurs.[4] The plaintiff’s case is that the breach occurred when McMicking failed to cause TropAg to enter into the contract of sale within a reasonable time from the making of the first loan contract, which is well within the six year limitation provided by s 5 of the Limitation of Actions Act1958 (Vic). In respect to the cause of action pleaded in the alternative under s 236 of the ACL, it requires contravention of a provision of the ACL and suffering loss or damage as a result of the contravention. Similarly, it is put that the loss or damage occurred well within the six year period provided by s 236(2) of the ACL. The breach of the loan agreement occurred when McMicking failed to repay the moneys advanced. The plaintiffs say the issue of what is a reasonable time for repayment was three months plus the six months under a contract of sale. In any event, the defendant’s argument that the time ran from the date of the agreement is misconceived. The relevant date is when the breach occurred, being the failure to repay, which on any view falls within the limitations period. I am satisfied the claim is not statute barred either at common law or under the ACL.

[4]        UGL Rail Pty Ltd v Wilkinson Murray Ltd [2014] NSWSC 1959, [264],

17If the court were to find the first loan contract was not a completed contract, alternative claims are made under the ACL, for moneys had and received and unjust enrichment. It was contended that Perczyk satisfied the elements required for a claim for unjust enrichment. Namely, McMicking received a benefit given he received the $200,000, that benefit was at Perczyk’s expense, there was an injustice as McMicking had Perczyk’s money and he had not returned it. In respect of a moneys had and received claim, there was a total failure of consideration as Perczyk received no part of McMicking’s or TropAg’s bargain for performance. I am satisfied that Perczyk could also recover, had it been necessary to decide, under the alternative claims made of moneys had and received and/or unjust enrichment.

18A claim was made under the ACL against both defendants. Counsel for the plaintiffs confirmed that no claim for compensatory damages was brought against TropAg for failing to enter into a contract of sale. The only loss claimed against TropAg was for the sum of $200,000, being the unsecured loan to McMicking. This claim was said to arise because of misrepresentations alleged to have been made by McMicking in his own right and on behalf of TropAg. The misrepresentations are pleaded in paragraphs 12 to 14 of the statement of claim. But merely because an event does not happen (here the failure to purchase the land) does not mean the representation made at the time was objectively misleading and deceptive. The fact that TropAg may have had little assets, had only recently been incorporated and was not trading does not establish of itself that the company had no intention of entering into a contract of sale to purchase the property. It could potentially have sourced the funds from elsewhere, but this remains unknown. There is simply insufficient evidence before the court to make a positive finding that TropAg or McMicking engaged in conduct that was misleading and deceptive under the ACL as alleged in the statement of claim. This aspect of the case was not proved to my satisfaction.

Second loan

19In November 2014, Perczyk agreed to lend McMicking the amount of $25,000 (“the second loan contract”).  This agreement was constituted by emails sent on 23 November 2014.  It was also contained in conversations between Perczyk and McMicking whereby Perczyk gave evidence of his agreement to lend McMicking the sum of $25,000 to give him some interim financial assistance.

20There is no dispute the sum of $25,000 was advanced to McMicking.  This loan was acknowledged by McMicking in an email where he stated:

“many thanks for you [sic] offer of $25,000 loan for a month.  As I have pointed out, we have been promised the first drawdown of US$10,000,000 by December 20, this year.  From these funds, our associated milk company will buy Peat Park for $1,500,000.  And from my commission of $2,500,000 paid initially to $1,250,000, I will pay you $50,000.00.”[5]

[5]        CB 56.

21The sum of $25,000 was due to be repaid within one month.  Perczyk has not been repaid this sum or any part of it. 

Third loan

22In December 2014, Perczyk agreed to lend $5,000 to McMicking to cover the cost of a business return airfare to Hong Kong (“the third loan contract”).  Once again, there is no dispute this sum was transferred to McMicking.  Perczyk gave evidence about it and the bank statement entry showed the transfer of funds in the sum of $5,000.[6]  McMicking has repaid part of this loan in the sum of $2,000 but $3,000 remains outstanding.

[6]        CB 89.

23The admission made by McMicking during the hearing was as follows:[7]

McMICKING:  “But, anyway I think the plaintiff through his barrister---”

HER HONOUR:  “Yes.”

McMICKING:  “established enough for you to find judgment against me.”

[7]        Transcript 74, lines 2-7.

24McMicking then went on to say: “I don’t agree with it but doesn’t matter.  It’s not my decision, it’s yours”.

25The plaintiff submits this was a clear and unequivocal admission by McMicking of his personal responsibility for each of the three loans.

26Even without this statement, I am satisfied that Perczyk has proved that each of the three loans were advanced to McMicking and for which he was personally liable.  These loans have not been repaid with the result that Perczyk is entitled to judgment on his claim.

27Following the hearing, the parties were invited to provide written closing submissions, if they wished to do so.  The plaintiffs filed closing submissions dated 23 March 2021 and reply submissions dated 19 April 2021.  McMicking provided a submission dated 13 April which dealt solely with the issue of interest.

28Objection was taken by McMicking to the calculations of interest made on behalf of the plaintiffs. The total sum sought by the plaintiffs was now $366,943.63, which included interest as calculated in the final submissions. The principal debt is $228,000. McMicking disputed that interest was payable under s 58 of the Supreme Court Act1986 (“the Act”) as claimed by the first plaintiff. If any interest were to be paid, it should be calculated pursuant to s 60 of the Act, being interest from the date of the commencement of the proceeding to judgment. It was said there was no demand made to the defendants for any of the alleged debts. Consequently, the first plaintiff was not entitled to claim interest from the date the alleged debt was due to be paid under s 58 of the Act, referring to AJ Lucas Drilling Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd.[8]

[8] [2009] VSCA 310.

29The plaintiffs’ reply submissions say there was a demand made within the meaning of s 58 contained in an email sent on 31 October 2015 by Perczyk to McMicking, a copy of which was attached to the submissions. The email from Perczyk said, inter alia, as follows:

“The time has now come for you to repay the money which you owe.

I have mentioned an effective Plan B which needs to be activated immediately.

Remember, Bob, getting to 10 November 2015 and shrugging your shoulders with no money for the debt will NOT be an acceptable solution. You know what you have to do…. Come up with the money. Very simple. You have had a “free ride” now for over 12 months. It’s time this came to an end.” 

30The first issue is whether the email constituted a “demand”.  The case law says that the word “demand” need not necessarily be used but the question is whether as a matter of construction, a demand is being made for payment.  It is not necessary to express a specific dollar amount as it is sufficient if the plaintiff recovers a debt or sum certain and there has been a demand for payment.[9]  On balance, I consider the email does constitute a demand for payment.

[9] Civil Procedure Victoria [670.27].

31But as s 58 makes clear, the court retains a discretion not to order interest if good cause is shown to the contrary. McMicking’s submission on interest points to the delay between making the demand on October 2015 and the issue of the writ nearly 5 years later in March 2020. Self-evidently, the calculation of interest over such a long period is considerable. The courts have refused interest under s 58 where there has been an inordinate and unexplained delay between the demand and the issue of the proceeding.[10]  The delay here is not explained and is clearly lengthy.  There is a balancing act between the legislative intent to compensate a plaintiff for being out of its money and causing unreasonable injury to a defendant if interest is allowed in full or in part.  In the circumstances, I consider it would unreasonable and inappropriate to allow interest for the period from October 2015 to the commencement of the proceedings.  In my view, McMicking should not be punished because of the plaintiffs’ dilatory conduct in issuing this recovery proceeding.

[10]        David Leahey (Aust) Pty Ltd v McPherson’s Ltd [1991] 2 VR 367; Healthscope (Tasmania) Pty Ltd & Anor v Australian Hospital Care Pty Ltd & Anor (No 2) [2011] VSC 209.

32Accordingly, I will not order interest pursuant to s 58. I will order interest instead under s 60 of the Act, being interest payable from the date of the commencement of the proceeding to the date of judgment.

Conclusion

33For the reasons set out above, I will enter judgment for Percyk against McMicking in the sum of $228,000 (being the aggregate of the three debts) together with interest from 16 March 2020 to 30 June 2021, calculated at the rate fixed from time to time under s 2 of the Penalty Interest Rates Act1983.

34The first plaintiff is directed to file and serve a minute setting out a revised calculation of interest payable in accordance with these reasons.

35As to the question of costs, unless any of the parties wish to submit otherwise, I propose ordering McMicking pay the plaintiffs’ costs of the proceeding, including any reserved costs, to be taxed on the standard basis, in default of agreement.

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Certificate

I certify that these 10 pages are a true copy of the Reasons for Judgment of Her Honour Judge A Ryan delivered on 30 June 2021.

Dated: 30 June 2021

Associate to Her Honour Judge A Ryan