Rhyse Holdings Pty Ltd v McLaughlins
[2000] QSC 462
•14 December 2000
SUPREME COURT OF QUEENSLAND
File No 10865 of 1996
[2000] QSC 462
BETWEEN:
RHYSE HOLDINGS PTY LTD
ACN 051 910 500
First Plaintiff
AND:
MARGARET BAINBRIDGE
Second Plaintiff
AND:
OTTO SYROWATKA
Third Plaintiff
AND:
McLAUGHLINS (a firm)
First Defendant
AND:
McLAUGHLINS NOMINEES PTY LTD
ACN 010 668 845
Second Defendant
AND:
STANTON HILLIER PARKER (QLD) PTY LTD
ACN 010 508 826
Third Party
MOYNIHAN J – REASONS FOR JUDGMENT
DELIVERED ON: | 14 December 2000 |
HEARING DATE: | 15 November 2000 |
ORDER: | 1. Paragraphs 38(a)(ii), (iii), (v) and (vi) of the first and second defendants further amended statement of claim against the third party be struck out; 2. Defendants have leave to replead them within 14 days; 3. Any consequential amendments to the defence of the third party within 14 days of service of the amended statement of claim; and 4. Matter be placed on the Supervised Case List. |
CATCHWORDS: | PRACTICE – STATEMENT OF CLAIM – STRIKING OUT – application to strike out further amended statement of claim against third party – valuation in relation to a loan |
COUNSEL: | Mr DR Cooper SC for the applicant/third party Mr PH Morrison for the respondent/defendants |
SOLICITORS: | Craig Terril & Associates for the applicant/third party Minter Ellison for the respondent/defendants |
This is an application by the third party to strike out paras 32(c), 38 and 39(d)(ii)(A) and (B) of the defendants’ further amended statement of claim against the third party which was filed on 24 October 2000.
The action is one in which the plaintiffs sued their solicitors, the first defendant and the second defendant, a mortgage provider, for damages for negligence, breach of contract and of the Trade Practices Act 1974 (Cth) and for equitable compensation consequent on an improvident loan made by the second defendant with monies advanced to it by the plaintiffs.
The case against the third party is that it provided a negligent or misleading and deceptive valuation relied on by the second defendant in making the loan. The borrower defaulted and the second defendant exercised its rights under the mortgage and entered into possession.
By a deed entered into in June 1998, the plaintiffs compromised their action against the first and second defendants. The compromise involved the plaintiffs, in effect, purchasing the mortgaged property for an agreed value of $600,000 from the second defendant as mortgagee in possession. In addition, $1.6 million was paid to the plaintiffs, $1,592,500 of which was contributed by the defendants’ insurer and $7,500 by the defendants. The deed of compromise provided it could be pleaded in bar against the plaintiffs by the first and second defendants in respect of the dispute constituted by the litigation. The plaintiffs were required to discontinue their action against the defendants.
The third party was not a party to the compromise. It is clear enough from the pleading that the case the defendants seek to make against it, is that had it not breached its obligation, the second defendant would have loaned its available funds to another borrower on the same terms and conditions as it in fact did and that that borrower would have repaid in accordance with its obligations.
It is far from self evident that the defendants are precluded by the compromise from pleading and proving that they suffered loss and damage because of the third party’s breach of its obligations to them over and above their obligations to the plaintiffs consequent on the compromise. The position is different from a compromise which fixes the upper limit of an insurer’s obligation to indemnity which is the consideration in Unity Insurance Brokers Pty Limited v Rocco Pizzano Pty Limited (1998) 193 CLR 603 at 641 which was cited by the applicant. I therefore reject the applicant’s submission that the defendants’ claim against it cannot exceed the defendants’ liability under the compromise.
I am not prepared to deal with this application on the basis that the second defendant was no more than a conduit for the plaintiffs’ money with the consequence that it was the plaintiffs not the second defendant who suffered loss. This is far from clear. For example, it was the second defendant, not the plaintiffs, which was a party to the loan agreement and the mortgage to secure it.
I turn to the paragraphs the subject of the application. Paragraph 32 of the pleading is under the heading causation and follows para 31A which provides that at the relevant time, there “was greater demand for loans from McLaughlins Nominees than there were funds available for it to loan”. Paragraph 32(c) then provides:
“McLaughlins Nominees would have loaned the Plaintiff’s contributions of $1,300,000 to another borrower or borrowers on the same terms, namely:
(i) at a rate of 19% per annum compound interest; alternatively,
(ii) at a rate of 14% per annum compound interest for repayments made strictly in accordance with the loan agreement.”
Paragraph 38 relevantly provides:
“In the premises, by reason of the negligence of [the third party] and or the breach of the Trade Practices Act by [the third party]:
(a) McLaughlins Nominees and the Plaintiffs suffered loss and damage as follows:
(i) amount advanced to the Borrower; $1,300,000.00
(ii) compound interest at the rate of 19 % $2,142,990.67
per annum from 19 May 1995 to
10 July 2000;
(iii) alternatively, compound interest at the rate $1,368,484.44
of 14% from 19 May 1995 to 10 July 2000;
(iv) less benefit received from sale of Property: $600,000.00
(v) total (at 19% per annum) $2,842,990.67
or alternatively (at 14% per annum); $2,068,484.44
(vi) plus compound interest at the rate of 19%
per annum, or alternatively 14% per annum
from 11 July 2000 too the date of judgment.
(b) McLaughlins became exposed to a claim by the Plaintiffs for the amounts as set out above.
Paragraph 39 (d) provides:
(d) in the premises, McLaughlins and McLaughlins Nominees are entitled to:
(i) contribution from and or to be indemnified by (the third party) in respect of the sum of one million six hundred thousand dollars paid to the Plaintiffs in the terms provided by paragraphs 39(b) and (c) hereof;
(ii) interest on the amount paid by pursuant to the terms of the settlement as follows:
A. Interest at the rate of 10% per annum
B. Interest for the period since 16 July 1998 to 10 July 2000 being an amount of $317,808.22
(iii) Interest at the rate of 10% per annum for each subsequent day from 10 July 2000 until judgment.
The conclusions that the settlement agreement does not necessarily cap the defendants’ damages and that the application should not be disposed of on the basis that the second defendant was a more conduit disposer of a number of aspects of the application. The applicant’s complaint that the further amended statement of claim does not adequately plead the basis of a claim for compound interest is however in my view well founded. As I understand it, the defendants rely on the terms of the loan agreement and of the mortgage which provided for the capitalisation (in other words compounding) of interest at 19 or 14 per cent, depending on extingencies. If that is so, it is, in my view, that case is not properly pleaded; moreover there is nothing pleaded to establish an entitlement to compound interest against the third party who was a stranger to the loan agreement and the mortgage.
The claim for interest at 10 per cent made by para 39(d) of the pleading is founded on s 47 of the Supreme Court Act 1995 as is reasonably apparent from para 39(d)(iii). It appears 10 per cent is founded on the fact that that was the rate provided for in the deed of compromise; that is a matter of particularity rather than of pleading.
The applicant submits that para 38(b) is “plainly wrong” because of the terms of the settlement deed. As I have already said that does not apply between the defendants and the third party and it does not preclude the defendants from establishing a separate liability in damages or for indemnity against the third party.
The considerations being those that I have canvassed, I will strike out paras 38(a)(ii), (iii), (v) and (vi). I give the defendants leave to replead them within 14 days. Any consequential amendments to the defence of the third party within 14 days of service of the amended third party statement of claim. I direct that the matter be placed on the Supervised List.
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