SUPREME COURT OF QUEENSLAND
CITATION:
PSAL Ltd v Kellas-Sharpe & Ors [2012] QSC 31
PARTIES:
PSAL LIMITED ACN 118 825 120
(plaintiff)
v
WENDY KELLAS-SHARPE
(first defendant)
and
GOLDIWAY PTY LTD ACN 075 755 074
(second defendant)
and
OPM HOLDINGS QLD PTY LTD ACN 118 505 641
(third defendant)FILE NO:
BS 3700 of 2011
DIVISION:
Trial Division
PROCEEDING:
3700 of 2011
ORIGINATING COURT:
Supreme Court of Queensland
DELIVERED ON:
28 February 2012
DELIVERED AT:
Brisbane
HEARING DATE:
2, 3 and 10 February 2012
JUDGE:
Applegarth J
ORDERS:
1. Declare the provisions of the Loan Agreement dated 17 December 2009 made between the plaintiff and the first and second defendants (“the Loan Agreement”) insofar as its provisions require payment by the defendants of interest at a rate of 7.5 per cent per month and permit capitalisation of unpaid interest and payment of interest on unpaid interest to be unconscionable.
2. That the Loan Agreement and any collateral bills of mortgage be read and construed as if any reference to payment of interest on unpaid interest or capitalisation of interest were deleted from each of those documents.
3. That the Loan Agreement and any collateral bills of mortgage made between the plaintiff and the defendants be read and construed as if “Interest Rate” in the Schedule to the Loan Agreement entitled “Commercial Details” were deleted and the following substituted: “Interest Rate: The standard rate of 5% per month, but while the Borrower is not in default under the Facility, the Lender will accept interest at a concessional rate of 4% per month.”
4. Direct the plaintiff and the defendants calculate the debt outstanding to the plaintiff taking into account the interest rate provided for in the previous order, and any payments made by the defendants, as at 1 March 2012.
5. Upon payment by the defendants to the plaintiff of the sum so calculated, together with interest calculated thereon at the rate of five per cent per month to the date of payment, the plaintiff release any mortgages and other securities held by it over the defendants’ property.
6. Failing such payment within 28 days of the date of these orders, the plaintiff recover possession of the land described in paragraphs 1, 2 and 3 of the Claim.
7. Failing such payment within 28 days of the date of these orders, judgment be entered for the plaintiff against each defendant for the balance of the loan account calculated in accordance with paragraph 3 above.
CATCHWORDS:
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – Doctrine against penalties – high interest short term loan – where agreement provided for higher rate of “standard interest” and lower rate of “concessional interest” while the borrower was not in default – whether interest rate provision is void as a penalty
TRADE PRACTICES AND RELATED MATTERS – UNCONSCIONABLE CONDUCT – Trade Practices Act1974 (Cth) and Australian Securities and Investments Commission Act2001 (Cth) – where loan agreement provided for “standard interest” of 7.5% per month and for enforcement…
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- AGLC
- PSAL Ltd v Kellas-Sharpe [2012] QSC 31
- Case
- [2012] QSC 31
- Decision Date
CaseChat Overview and Summary
The primary legal issue before the court was whether the interest rate provision in the loan agreement, which required payment of interest at a rate of 7.5% per month, constituted an unenforceable penalty. The court also needed to determine if the exercise of the right to capitalise unpaid interest at the same rate was unconscionable. The court had to consider the doctrine against penalties and whether the interest rate provision was excessive and unjust, given the circumstances of the loan.
The court found that the interest rate provision was void as a penalty and unconscionable. The court reasoned that the interest rate was exorbitantly high, significantly exceeding what would be considered a fair and reasonable rate for such a loan. The court also held that the capitalisation of interest at the same rate over an extended period was unconscionable. As a result, the court declared the relevant provisions of the loan agreement to be unenforceable. The court further ordered that the loan agreement and any collateral bills of mortgage be read and construed as if references to payment of interest on unpaid interest or capitalisation of interest were deleted.
The court also ordered that the loan agreement and any collateral bills of mortgage be read and construed as if the interest rate provision was substituted with a standard rate of 5% per month, but a concessional rate of 4% per month while the borrower was not in default. The court directed the parties to calculate the debt outstanding, taking into account the modified interest rate, and any payments made by the defendants. The court ordered that upon payment of the calculated debt, the plaintiff release any mortgages and other securities held by it over the defendants' property. If the defendants failed to make the payment within 28 days, the court ordered that the plaintiff recover possession of the land described in the claim and enter judgment for the balance of the loan account.
Orders
Orders of the court
1. Declare the provisions of the Loan Agreement dated 17 December 2009 made between the plaintiff and the first and second defendants (“the Loan Agreement”) insofar as its provisions require payment by the defendants of interest at a rate of 7.5 per cent per month and permit capitalisation of unpaid interest and payment of interest on unpaid interest to be unconscionable.
2. That the Loan Agreement and any collateral bills of mortgage be read and construed as if any reference to payment of interest on unpaid interest or capitalisation of interest were deleted from each of those documents.
3. That the Loan Agreement and any collateral bills of mortgage made between the plaintiff and the defendants be read and construed as if “Interest Rate” in the Schedule to the Loan Agreement entitled “Commercial Details” were deleted and the following substituted: “Interest Rate: The standard rate of 5% per month, but while the Borrower is not in default under the Facility, the Lender will accept interest at a concessional rate of 4% per month.”
4. Direct the plaintiff and the defendants calculate the debt outstanding to the plaintiff taking into account the interest rate provided for in the previous order, and any payments made by the defendants, as at 1 March 2012.
5. Upon payment by the defendants to the plaintiff of the sum so calculated, together with interest calculated thereon at the rate of five per cent per month to the date of payment, the plaintiff release any mortgages and other securities held by it over the defendants’ property.
6. Failing such payment within 28 days of the date of these orders, the plaintiff recover possession of the land described in paragraphs 1, 2 and 3 of the Claim.
7. Failing such payment within 28 days of the date of these orders, judgment be entered for the plaintiff against each defendant for the balance of the loan account calculated in accordance with paragraph 3 above.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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