Pollard v Cole

[2010] WADC 171

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CHAMBERS

LOCATION:   PERTH

CITATION:   POLLARD -v- COLE [2010] WADC 171

CORAM:   REGISTRAR KINGSLEY

HEARD:   6 OCTOBER 2010

DELIVERED          :   23 NOVEMBER 2010

FILE NO/S:   CIV 1749 of 2010

BETWEEN:   ARLYN BRENT POLLARD

First Plaintiff

LLEWELLYN GRANT POLLARD
Second Plaintiff

AND

GERHARD JOSEPH COLE
Defendant

Catchwords:

Practice O 14 Rules of the Supreme Court 1971 and O 16 Rules of the Supreme Court  - Whether letter constitutes a valid demand - Turns on own facts

Legislation:

Nil

Result:

Order 14 Rules of the Supreme Court application dismissed
Order 16 Rules of the Supreme Court application dismissed

Representation:

Counsel:

First Plaintiff                :     Mr M Aherns

Second Plaintiff            :     Mr M Aherns

Defendant:     In person

Solicitors:

First Plaintiff                :     Aherns Lawyers

Second Plaintiff            :     Aherns Lawyers

Defendant:     Not applicable

Case(s) referred to in judgment(s):

Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332

Dey v Victorian Railways Commissioners (1949) 78 CLR 62

Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87

Hospital Contribution Fund of Australia v Hunt (1982) 44 ALR 365

Jones v Stone [1894] AC 122

Mannai Ltd v Eagle Star Life Assurance Co Ltd [1997] 3 All ER 352

Wright Prosecting Pty Ltd v Hancock Prospecting Pty Ltd (No 9) [2010] WASC 33

REGISTRAR KINGSLEY: 

Background

1. It is common cause that there are two loan agreements, the first being between the first plaintiff and the defendant and is dated 18 February 2008.  By this loan agreement the defendant borrowed $119,000 for a period of three months at 10% interest but if the interest is paid within three days of each interest payment day then a lower rate of 4% applied.  The second agreement is between the second plaintiff and the defendant and is in the same terms except the amount is $114,000 and is dated 28 March 2008.  

2. Clause 8 of both loan agreements is headed default and cl 8.1 in both loan agreements provides that the principal sum with interest will become immediately due and payable in full if the borrower defaults in the due and punctual payment of the principal sum or interest, or the borrower defaults in observing or performing any of his obligations, or a default occurs under any collateral security.  There is also a default provision where the borrower is a corporation but that provision is irrelevant in these circumstances. 

3. Clause 8.2 of the loan agreements provide:

   Upon the occurrence of and in event of default referred to in clause 8.1, the lender must give written notice to the borrower of that event of default requiring the borrower to remedy the default and, if the borrower fails to do so within the period specified in the notice, the principal sum with interest will be due and payable in full without the need for further notice.

4. It is common ground that the principal sum and interest were not paid at the expiration of the term at the first agreement (18 May 2008) nor upon expiration of the term of the second agreement (28 June 2008). 

The pleadings

1. Both the first plaintiff and second plaintiff plead the terms of their individual agreements and the first plaintiff pleads that the defendant made one payment in the sum of $19,000 on 22 April 2008 to the first plaintiff pursuant to the first loan deed.  Both the first plaintiff and second plaintiff claim interest at 10%, on the first plaintiff's part from 18 May 2008, and on the second plaintiff's part from 28 May 2008. 

The O 14 and O 16 Rules of the Supreme Court 1971 applications

1. On 28 July 2010, the plaintiffs brought an application for summary judgment, claiming on the first plaintiff's part $100,000 together with interest totalling $983,470.63, and on the second plaintiff's part claiming the sum of $114,000 together with interest of $1,121,156.46. The first plaintiff's application is supported by an affidavit sworn by Arlyn Brent Pollard sworn 26 July 2010. The affidavit verifies the statement of claim and the deponent verily believes the defendant has no defence to the action. The affidavit prima face entitles the first plaintiff to judgment. The second plaintiff supports the O 14 Rules of the Supreme Court (RSC) application by an affidavit sworn 26 July 2010.  That affidavit, prima face, entitles the second plaintiff to judgment. 

2. By an application filed 3 September 2010, the defendant has brought an application for summary judgment against the plaintiffs.  That application is supported by an affidavit sworn by Gerhard Joseph Cole on 3 September 2010.  Broadly, Cole in his affidavit says that the defendant is not in default and no default notice has been issued in accordance with cl 8 of the loan agreement. 

3. Additional affidavits have been filed:

   By Cole dated 17 September 2010;

   By Marcus John Ahern, the solicitor for the plaintiffs, sworn 28 September 2010;

   By Cole sworn 1 October 2010;

   By Cole sworn 4 October 2010. 

The O 14 RSC application

1. In considering an application for summary judgment the criterion to be applied by the court is that after the matter has been explained to the court there must be real uncertainties without full argument or further investigation on the facts, as to the plaintiff's right to judgment (Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332). The summary judgment procedure is 'a peculiar proceeding intended to apply to cases where there is no reasonable doubt that a plaintiff is entitled to judgment' (Jones v Stone [1894] AC 122, 124) and that the power to order summary judgment should only be exercised with great care (Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87).

2. The purported notice of default is dated 31 March 2010 and is addressed to the defendant's then solicitors.  The letter is an open letter and refers to the defendant's offer set out in an email dated 19 March 2010.  The 31 March 2010 letter then goes on to state:

   As you are aware, pursuant to the terms of separate written loan agreements between your client, Gerhard Joseph Cole, and our clients, Llewellyn Pollard and Arlyn Pollard, your client is indebted to our clients for the sum of $387,600 as at 28 March 2010 and $397,500 as at 18 March 2010 respectively. 

   As you are aware, pursuant to the terms of the loan agreement, interest is payable at the rate of 10% per month in the event there is a default in the making of the payments. 

   We are instructed that there has been such default and that no payment has been received since 2009. 

3. The letter goes on to refer to existing security by the plaintiffs over land in Shelley, which appears to be in the process of being sub-divided.  The letter of 31 March 2010 refers to the defendant's offer of $200,000 plus interest in satisfaction of the plaintiffs' debt.   The plaintiffs' solicitor notes that this offer appears to fail to take into account any proceeds the defendant may receive from the sale of the sub-divided lots.  Further, the letter of 31 March 2010 suggests the defendant's offer has failed to take into account sums the defendant will be receiving from arbitration proceedings. 

4. The letter of 31 March 2010 concludes by stating that the defendant's offer is extremely inadequate and suggests that a more favourable offer could be made.  The penultimate paragraph of the 31 March 2010 letter states:

   Any proposal requiring further accommodation by way of time, from our client must include a proposal for security and must take into account that our clients are not prepared to grant any further indulgence to yours which does not include a provision of specific and adequate security for repayment, if the terms of the repayment are for repayment during any period longer than 14 days. 

5. The plaintiff's solicitor submits that the letter of 31 March 2010 is an adequate notice.  Citing Mannai Ltd v Eagle Star Life Assurance Co Ltd [1997] 3 All ER 352 plaintiff's counsel submits that whilst the person giving contractual notice must strictly comply with the requirements of the default clause, what is contained in the substance of the notice must be construed on the basis of what it would convey to a reasonable person in the position of the person receiving the notice:

   In determining the meaning of the language of a commercial contract, and unilateral contractual notices, the law therefore generally favours a commercially sensible construction.  The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties.  Words are therefore interpreted in a way in which a reasonable commercial person would construe them and the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language (Mannaie Steyn LJ at 771).

6. This approach was cited with approval in Wright Prosecting Pty Ltd v Hancock Prospecting Pty Ltd [No 9] [2010] WASC 44 where Murray J approves the above quotation from Steyn LJ's reasons [85] . Murray J goes on to say [89]:

   The question of the proper approach to the construction of commercial agreements was ventilated before the Court of Appeal in Home Building Society Ltd v Pourzand [2005] WASCA 242. The principal reasons were those of McClure JA, with whom Wheeler JA agreed. At [25] – [33] her Honour reviewed relevant decisions of the High Court before concluding that although it was unnecessary, in her Honour's view, to resolve the question in that case, 'The implication in the above statements of principle is that surrounding circumstances can be used in the interpretation of contracts whether or not an ambiguity is found to exist' [32].

7. At [90] Murray J said to properly resolve ambiguity in terms of a deed, evidence of the surrounding circumstances and evidence of the factual matrix are matters which may reveal what reasonable person in the position of the parties would have understood they meant by the words used in their agreement.  Thus at [91] Murray J states that he admitted much evidence concerning what led up to the various agreements and what were the relationships between the parties at the time and those agreements having been made that the parties or those who represented their guiding mind would understand what the effect of the contracts that they had made.

8. What Wright Prospecting and Mannai indicate is that the surrounding circumstances can be examined to determine and resolve any ambiguities.  What emerges from Cole's affidavit sworn 17 September 2010 is that, certainly in March 2010, there were negotiations with the plaintiffs to try and settle the outstanding claims.  In an email dated 19 March 2010, from the defendant's then solicitor to the plaintiffs' solicitor a proposal for payment was put.  It is that proposal that was rejected in the letter of 31 March 2010.  In the context of there being a proposal being put by the defendant to the plaintiffs and a response to that proposal by way of rejection, but opening the door for the defendant to present a more favourable offer, and suggestive of terms in relation to any offer forthcoming from the defendant, then it is open for the letter of 31 March 2010 to be construed not as a letter of demand but as a response to the 19 March 2010 offer of settlement and inviting a further offer of settlement from the defendant. 

9. For these reasons I am of the opinion that the plaintiffs have not made out their case that the letter of 31 March 2010 constitutes a demand within the meaning of cl 8.2 of the deed. The plaintiffs' application pursuant to O 14 RSC is dismissed.

The O 16 RSC application

1. Turning to the defendant's application pursuant to O 16 RSC it is for the defendant to satisfy the court that the plaintiffs' claim is frivolous or vexatious, that the defendant has a good defence on the merits or that the action should be disposed of summarily. The defendant has the task of showing to the court that there is the serious question to be tried on the cause of action raised by the plaintiff.

2. In my opinion the defendant has not satisfied me that, under the three heads referred to above, he is entitled to judgment.  A very clear case must be shown before a court will intervene and dismiss a claim on the basis it is frivolous and vexatious.  Once it appears there is a real question to be tried – whether of fact or law – and parties rights depend on that fact or issue of law then a court will not dismiss the action (Dey v Victorian Railways Commissioners (1949) 78 CLR 62).

3. Fancourt and Hospital Contribution Fund of Australia v Hunt (1982) 44 ALR 365 are authorities for the proposition that it must be very clear indeed that there is no real question to be tried and that if there is a reasonable possibility that a cause of action does lie then the action should not be summarily disposed of.

4. Finally the defendant has not put forward any other reason  to justify the summary intervention of the court. 

5. In my opinion the issue for hearing is whether the letter of 31 March 2010 constitutes a notice under cl 8.2 of the first plaintiff's deed. That issue is not frivolous or vexatious, nor does it constitute a good defence on the merits as contemplated on O 16 RSC. Accordingly the defendant's application is dismissed.

6. I will hear counsel for the plaintiffs and the defendant on any further applications that may be made having regard to my reasons and to costs.