Volanne Pty Ltd v International Consulting and Business Management (ICBM) Pty Ltd (No 3)
[2017] ACTCA 43
•5 October 2017
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
COURT OF APPEAL
Case Title: | Volanne Pty Ltd v International Consulting and Business Management (ICBM) Pty Ltd (No 3) |
Citation: | [2017] ACTCA 43 |
Hearing Date: | 12 September 2017 |
DecisionDate: | 5 October 2017 |
Before: | Refshauge, Perry JJ and Walmsley AJ |
Decision: | 1. The Application in Proceedings dated 5 May 2017 is dismissed. 2. The Court declines to make an order under rule 1620(1) of the Court Procedures Rules 2006 (ACT). 3. The parties confer with a view to reaching agreement as to the orders to be made by the Court. 4. If agreement cannot be reached as to the orders to be made under Order 3, the parties file and serve within 14 days written submissions setting out in appropriate detail the calculations on which it or they rely with an explanation of those calculations sufficient for the Court to decide the issues of the judgment sum and costs without any further hearing. |
Catchwords: | APPEAL – GENERAL PRINCIPLES – Interlocutory application – fresh evidence – allegation rebutting usual presumption that repayments are first allocated to interest – issue was never in contest at trial – unfair prejudice – exceptional circumstances not demonstrated – application dismissed |
Legislation Cited: | Supreme Court Act 1933 (ACT) Court Procedures Rules 2006 (ACT), r 1620(1) |
Cases Cited: | Coulton v Holcombe (1986) 162 CLR 1 Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833 |
Parties: | Volanne Pty Ltd (ACN 077 412 232) (First Appellant/First John Fragopoulos (Second Appellant/Second Anthoula Fragopoulos (Third Appellant/Third Cross-Respondent) International Consulting and Business Management (ICBM) Skybase (Vic) Pty Ltd (ACN 067 591 955) (Second Respondent) |
Representation: | Counsel Mr J Sexton SC (Appellants/Cross-Respondents) Ms K Rees SC and Ms M O’Brien (Respondents/ |
| Solicitors Donohue & Co Solicitors (Appellants/Cross-Respondents) Namadgi Legal (Respondents/Cross-Appellant) | |
File Number: | ACTCA 54 of 2014 |
Decision under appeal: | Court: Supreme Court of the ACT Before: Harper M Date of Decision: 25 July 2014 Case Title: International Consulting and Business Management Pty Ltd & Anor v Volanne Pty Ltd & Ors Citation: [2014] ACTSC 175 |
THE COURT:
The Issues
On 25 July 2014, Master Harper found in favour of the first respondent on its claim for moneys lent and interest.
At trial, matters in issue included whether, assuming money had been lent, interest was payable and, if payable, the rate at which it was payable. Ultimately Master Harper found for the first respondent, his findings included that compound interest was payable from 1 July 2001 at the Westpac indicator lending rate plus two per cent. Having made those findings and after receiving further submissions from the parties, his Honour calculated the sum due and entered judgment for that sum in favour of the respondents. See International Consulting and Business Management Pty Ltd & Anor v Volanne Pty Ltd & Ors [2014] ACTSC 175.
On appeal the issues agitated were limited to whether his Honour had been correct in holding that interest had been payable, that the appropriate rate had been the Westpac indicator lending rate plus two per cent, and that interest had been payable on a compound basis.
In our judgment delivered on 30 September 2016, this Court held that his Honour had been correct in finding that interest had been payable on the loans and at the Westpac indicator lending rate plus two per cent: Volanne Pty Ltd v International Consulting and Business Management (ICBM) Pty Ltd [2016] ACTCA 49. Contrary to his Honour’s finding, this Court held that interest had been payable on a simple, rather than a compound, basis.
It therefore became necessary for the sum payable by the appellants to be adjusted to accord with a calculation of interest on a simple interest basis.
The parties were directed to confer, and, if possible, reach agreement on the orders necessary to give effect to our reasons.
It was at that stage when, for the first time in the litigation, the appellants, who had made some repayments on the loan, asserted that payments they had made had been treated by the first respondent, when received, as appropriated first to capital rather than interest. They acknowledged the principle in Falk v Haugh (1935) 53 CLR 163 at 173 that, absent any actual appropriation by a debtor or creditor of repayments in respect of debts comprising principal and interest, the repayments will be appropriated first to interest and secondly to principal, but they submitted that the facts showed an actual appropriation.
Also arising in the context of the drafting of orders to reflect the Court’s findings was a dispute about the rate of post-judgment interest to which the first respondent was entitled: the rate payable on judgments by virtue of the Supreme Court Act 1933 (ACT), or the contractual rate, being a higher rate that the statutory rate.
Both of these matters were significant, because:
(a) if payments by the appellants were first appropriated by the first respondent to interest, the sum payable by the appellants would be significantly greater than if the payments had been appropriated to capital;
(b) if the rate of post-judgment interest is the contractual, rather than the statutory rate, the sum payable would also be significantly greater; and
(c) in either event, there may be significant costs implications as a Calderbank offer was served by the respondents at a significant time.
The application before Refshauge J
When the parties could not agree on final orders, the appellants filed a motion seeking production of documents relevant to the issue at [9](a) above and an order that this Court not make the costs orders it proposed making when giving its judgment on 30 September 2016.
That application came before Refshauge J, who heard argument including as to referring matters to the originally constituted Court of Appeal.
The respondents submitted that the order seeking production of documents amounted to an application to re-open the case to put an argument not put to the Master: to permit this would be contrary to principle. The appellants submitted that it was the way this Court had determined the appeal which had made the appropriation issue relevant.
Refshauge J considered a case had been made out for referral of the matter to the three appeal judges and made directions for submissions: Volanne Pty Ltd v International Consulting and Business Management (ICBM) Pty Ltd (No 2) [2017] ACTCA 33.
The parties’ submissions
This Court has had the benefit of written submissions from the parties which were, on 12 September 2017, supplemented orally.
(a) The submissions for the appellant
In his written submissions, Mr J Sexton SC for the appellants, conceded that his clients had submitted on appeal that no interest had been payable at all, but submitted that there had been no issue about appropriation until the Court decided interest had been payable on a simple interest basis only.
Mr Sexton submitted that evidence which had been before the Master but not before this Court had rebutted the usual presumption that repayments were first allocated to interest.
He submitted that it was still open to the appellants to raise the issue as the Notice of Appeal had appropriately raised it. Alternatively, since no prejudice would arise if leave were given, he submitted that it would be open to the Court now to consider issues such as this one that the appellants had overlooked.
He submitted that the first respondent had had sufficient time to consider the matter, and that it would not be unfairly prejudiced by receiving a lesser sum than it might have expected, if the sum were now to be calculated in accordance with the facts.
To support the contention that the first respondent could not now be prejudiced, Mr Sexton pointed to evidence suggesting that the first respondent had actually turned its mind to allocation.
Further documents which the appellants wished to put into evidence now, he submitted, had been created by the respondents, so they would not cause the first respondent any surprise or prejudice.
Mr Sexton submitted that the application merely sought to regularise the position, so that evidence would be available to deal with an issue which only arose because of this Court’s findings.
By referral to evidence, such as tax returns, he submitted that the first respondent had not, in fact, allocated payments to interest first, but to capital, and that this Court would not countenance a position where a creditor had treated payments for income tax purposes on a different basis from its claim here. Mr Sexton further submitted that:
(a) it would not be a fair and just result, in the face of those facts, for this Court to apply the usual presumption to allocation, given the evidence to the contrary;
(b) nor could there be prejudice, given the evidence pointing to “the fact in question” and that the first respondent must have been aware of the position all along; and
(c) the additional evidence that the appellants now sought to adduce was sought “to ascertain the true position as to whether the interest declared in the First Respondent’s tax returns continued after the commencement of proceedings, to be much less than the payments which the Respondents now say should be presumed to have been appropriated to interest.”
Mr Sexton pointed to evidence at trial suggesting the first respondent had not allocated any of the repayments to interest in its tax returns.
He submitted that the appellants now sought tax returns from the first respondents from 2007 to date, which, he said, “may well show that the First Respondent continued the practice of not appropriating repayments first to interest”.
Mr Sexton also argued that the costs of the appeal could not be determined until the allocation argument was resolved. It was first necessary to decide the judgment sum. There was a Calderbank offer by the respondents which would not be effective if the appellants’ arguments were accepted.
In any event, he submitted, the first respondent had failed at trial on some significant issues, so that, in the circumstances, it would be appropriate for there to be no order as to costs on the appeal.
(b) The first respondent’s submissions
Senior counsel for the first respondent, Ms K Rees SC, read an affidavit of its solicitor which provided strong support for the first respondent on the issue of prejudice.
In opposing the orders sought by the appellants, Ms Rees argued that a party is bound by the way it has conducted its case, and:
[e]xcept in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so …
Metwally v University of Wollongong (1985) 60 ALR 68 at 71.
Ms Rees also relied on Coulton v Holcombe (1986) 162 CLR 1 at 11, for the proposition that it would not be fair for the first respondent now to be subjected at this stage of proceedings to an issue which had not been litigated before. Were the appellants to be permitted to re-open this topic, the interests of expedition, finality and justice would be denied.
Ms Rees submitted that exceptional circumstances had not been demonstrated.
Referring to the appellants’ pleaded defence, Ms Rees submitted that it had been open to the appellants to plead the allocation argument as an alternative to an argument that no interest had been payable at all, but had not done so and, further, that they had never challenged calculations relied on at trial based on the assumption that payments had been first allocated to interest.
Ms Rees pointed out that, after Master Harper had delivered his reasons and it had become necessary for new calculations to be made to reflect them, the new calculations had been made on the assumption that repayments had first been allocated to interest. The appellants, when given the opportunity to be heard, took no issue with those calculations, and the Master had proceeded accordingly. Although it might have been open to make this submission then to his Honour, no such submission had been made.
In her submission, the allocation issue was simply never in contest at the trial.
Ms Rees referred the Court to Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833 at [37] per Allsop J, where his Honour said:
It is beyond question that if a new matter is raised and evidence could have been given which by any possibility could have prevented the point from succeeding, the point cannot be taken.
(emphasis added)
The first respondent submitted that, if this matter had been raised at trial, it could and would have called evidence to deal with it, including calling the accountant who had prepared the tax returns. It may also have considered joining the accountant to the proceedings. Advice obtained then on the allocation issue may have caused it to conduct the litigation differently. It was now too late to join the accountant, assuming it were to suffer loss by reason of his advice as to allocation.
Further, the first respondent submitted as follows:
(a) Mr Brendan Godfrey, its director, who had given evidence at trial, mentioned this issue on four occasions and transcript citations were provided to the Court. In these passages, Mr Godfrey explained that the advice he had received was that payments made by the appellants were applied first to interest and then to capital, being assertions that were not challenged in the cross-examination of him.
(b) The appellants had never raised this issue on the appeal, confining themselves to the rate at which interest had been payable and whether it had been payable at compound rates.
(c) The appellants’ grounds of appeal had not referred to the appropriation issue, nor could they have without leave, since it had never been an issue before Master Harper. Material relevant to the appropriation issue had, accordingly, not been included in the appeal books.
(d) The appellants themselves had had a report prepared at trial on the assumption that repayments had been first applied to interest. They had been put on notice by the accountant retained to consider the calculations that the elements of the calculations should be reviewed by a specialist, but had not had this done.
(e) The first respondent would need to call additional evidence on the issue if it were to be agitated. In O’Brien v Komesaroff (1982) 150 CLR 310 at 319, Mason J said that, in the absence of exceptional circumstances, a party will generally only be permitted to raise a new issue in relation to a question of law where the facts are admitted or are beyond controversy.
(f) Here, however, there would need to be further evidence called on the issue. Because it was not an issue at trial, the respondents had called no evidence on it at trial. It would be grossly unfair for the issue to be decided now on the incomplete evidence on the issue which was before Master Harper.
(g) Further costs would be incurred to meet the issue, and the appellants’ financial circumstances showed that the first respondent would not be protected for those costs.
(h) The events occurred a very long time ago. The loan agreement was made in 2000. Advances were made from 2001 to 2004. The proceedings began in 2007. The hearing occurred before Master Harper in 2012. His Honour gave judgment in 2014, observing he had no confidence in the ability of any of the witnesses to recall conversations. The appeal was heard in 2015 and this Court’s judgment was given in 2016.
(i) The first respondent’s working papers were no longer available.
(j) There was no evidence from anyone representing the appellants that the issue was overlooked. It appears simply to be something thought up recently.
Thus, the first respondent submitted, the application should be dismissed.
(c) The appellants submissions in reply
In submissions in reply, Mr Sexton submitted that the appellants were not seeking to
re-open the appeal; merely to put in evidence to show how the judgment sum should be calculated.
He submitted, alternatively, that if it was doing more, exceptional circumstances existed here. It was always implicit in the appellants’ defence that no interest was payable, that payments made had been appropriated to principal.
In oral argument before us on 12 September 2017, Mr Sexton relied emphatically on evidence he submitted pointed strongly towards the conclusion the first respondent had at all relevant times allocated payments first to capital. He submitted that this evidence was so compelling that there could be no answer to it. He said that, as a matter of fairness, the appellants should be given leave to adduce additional evidence, to the intent that the Court then adjudicate finally on the appeal making the assumption payments had been allocated first to capital.
In that context, Mr Sexton drew our attention in particular to certain of the first respondent’s tax returns and profit and loss statements.
Mr Sexton conceded that there was powerful legal principle in the way of his submission but submitted that this was an exceptional case.
Consideration
It is true that the documents to which Mr Sexton took us suggest strongly that payments were, at least for a period, allocated first to capital.
A careful analysis of the case’s chronology shows that from when the current version of the respondents’ pleading was filed, throughout the trial and the appeal, the parties at all times conducted the litigation on the premise that payments had been first allocated to interest and that the appellants took no issue with that premise.
It may very well be, as Mr Sexton now submits, that, after an examination of the whole issue, including an exploration of all payments made and when and how they were treated by the first respondent, it could be concluded that payments were all allocated first to capital.
At this stage, several years after the trial and after the appeal had been heard, however, we do not consider it would be just to permit the issue to be opened and examined for the first time.
We are persuaded by the evidence of the first respondent that there would be significant prejudice to it if we did as asked by the appellants. We also consider that there is a possibility that, when examined, the evidence may not be as persuasive as Mr Sexton submitted that it was. For example, tax returns and company documents are at times amended to reflect a taxpayer’s true intentions, after errors have been exposed. We are not saying there was error here, though the evidence suggested a difference of view between what the first respondent’s director had said in evidence and the tax returns and accounts. We simply say that, in the light of the evidence, it is a possibility which the appellants could not disprove.
It is too late for that issue and matters such as that to be explored. We consider it would be unfair to the first respondent. We are not persuaded exceptional circumstances have been made out.
Accordingly, the application must be dismissed with costs. The first respondent will, as it undertook to do, consider whether any of its documents, such as tax returns, need to be amended as a consequence.
As to the question of post-judgment interest, we do not consider that we should make an order under r 1620(1) of the Court Procedures Rules 2006 (ACT) that the interest rate on any unpaid amount of the judgment sum be other than the rate prescribed in the Rules. The rate was not an issue before the Master who did not order that the contractual rate apply and there was no Notice of Contention filed by the respondents raising this issue. In any event, we are not persuaded that the terms of the contract ousted the well-known rule in Ex parte Fewings; In re Sneyd [1883] 25 Ch D 338 at 355 that a covenant to pay interest on a loan merges on judgment.
As before, we invite the parties to confer and, on the basis of the original decision and these reasons, endeavour to agree on the amount of the judgment that should be entered and the appropriate order as to costs. These reasons should have made the exercise entirely mathematical.
If agreement cannot be reached within seven days, the parties should file written submissions within 14 days, explaining why agreement cannot be reached and, in appropriate detail, the calculations on which they rely and the explanation of those calculations sufficient for the Court to decide the issue of the judgment sum and costs without any further hearing.
| We certify that the preceding fifty-two [52] numbered paragraphs are a true copy of the Reasons for Judgment of the Court. Associate: Date: 5 October 2017 |
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