Derek v Klauser[2008] QDC 23

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   The first plaintiff makes application pursuant to UCPR 292 for summary judgment against the defendant in the sum of $42,000.

2. [2]
   The defendant seeks an order against the second plaintiff for security for costs pursuant to UCPR 670.

Background facts

3. [3]
   The defendant is the first plaintiff’s elderly uncle. He was 81 years old at the time he swore an affidavit on 18 June 2007. He resided with the first plaintiff and her partner Marshall Earl Pope between February 2002 and September 2006.

4. [4]
   On 21 October 2001 the first plaintiff separated from her husband. The former matrimonial home at Nerang was subject to a mortgage in favour of Provident Capital Limited.^[1]  In December 2002 the mortgage was “going into default”.^[2]  Prior to the separation the first plaintiff and her husband were endeavouring to proceed with a subdivision of the land on which the former matrimonial home was located.  The defendant contributed $340,000 which was apparently utilised for the purpose of progressing the subdivision.  Mr Pope borrowed a further sum of $170,000 from another source.  The Provident Capital mortgage was assigned to Mr Pope, who said that he held it on trust for the defendant.^[3]  The mortgage was later assigned to the second plaintiff.  The defendant was to receive the principal sum and interest at 13.2 percent per annum upon the sale of the former matrimonial home.^[4]  On 24 May 2007 the defendant was paid the sum of $560,668.73 by way of principal and interest. 

5. [5]
   The defendant’s funds were exhausted as a result of the $340,000 loan and further payments made by him.^[5] The present action concerns a claim made by the first plaintiff against the defendant for the repayment of two loans totalling $42,000 for the purpose of overseas travel and the acquisition of a motor vehicle.  There is also a claim by the second plaintiff for the sum of $7,560 in respect of loans made by it to the defendant.  There are also claims for interest pursuant to implied terms in the loan agreement.  The application for summary judgment is made only by the first plaintiff in respect of the loans totalling $42,000.

The respective cases as pleaded         

6. [6]
   The first plaintiff’s claim in respect of the first loan in the amount of $25,000 is as follows:

“6. In or about May/June 2005 the First Plaintiff advanced to the Defendant the sum of $25,000.00 for the purpose of overseas travel, with such sum to be repayable from the proceeds of the discharge of the mortgage held on Trust for the Defendant over the First Plaintiff’s Property.”^[6] 

7. [7]
   The particulars of the claim state that in May/June 2005 the first plaintiff, Mr Pope and the defendant were considering travelling to a medico-legal conference in Greece.  In one discussion in that period the defendant stated that he wished to borrow $35,000 for the purpose of travelling to Russia during the course of the trip.  The particulars state that that the first plaintiff said she would be able to obtain a personal loan of $25,000 for that purpose.  The defendant agreed to repay that money from the proceeds of the sale of the former matrimonial home.  The particulars state that the first plaintiff obtained a personal loan of $25,000 from the National Australia Bank which was given to the defendant for the purpose of his trip to Russia. 

8. [8]
   In respect of that claim the defendant’s defence states:

“11. The Defendant denies the allegation in paragraph 6 of the amended statement of claim because the sum of $25,000 was not advanced to the Defendant by the First Defendant (sic) but rather by Marshall Earl Pope, and was advanced pursuant to an agreement with Marshall Earl Pope to which agreement the First Defendant (sic) was not a party.  The Defendant does not plead to the particulars to paragraph 6.”^[7]

9. [9]
   The first plaintiff’s claim in respect of the second loan of $17,000 is as follows:

“8. On 12 May 2006 the First Plaintiff advanced to the Defendant the sum of $17,000.00 for the purposes of purchasing a motor vehicle, with such sum to be repaid by the Defendant from the proceeds of the realisation of the mortgage held over the First Plaintiff’s property on Trust for the Defendant.”^[8] 

10. [10]
    The particulars of that claim are that some time prior to 12 May 2006 the defendant told the first plaintiff and Mr Pope that he had paid a deposit on a VW motor vehicle. According to the particulars the defendant advised the first plaintiff and Mr Pope that the balance required to purchase the vehicle was $17,000. The first plaintiff provided the amount of $17,000 by utilising $5,000 from an account of her deceased mother to which the first plaintiff was entitled. She borrowed the balance of $12,000 from Rosalind Byrne. According to the particulars the two cheques were handed by Mr Pope to the VW dealer on 12 May 2006.

11. [11]
    In respect of this claim the defence filed on behalf of the defendant states:

“15. The Defendant denies the allegations in paragraph 8 of the amended statement of claim because the agreement which the Defendant had for the purchase for and on behalf of the Defendant of a motor vehicle was an agreement between the Defendant and Marshall Earl Pope to which agreement the First Plaintiff was not a party.  The Defendant does not plead to the particulars to paragraph 8.”^[9]

The evidence

12. [12]
    In her affidavit filed 29 May 2007, the first plaintiff verified the facts contained in the Statement of Claim.^[10]  The first plaintiff was of course referring to the original claim filed 29 May 2007, but there is no material difference between that pleading and paragraphs 6 and 8 of the amended Statement of Claim filed 24 July 2007.  The amended Statement of Claim added the particulars referred to above.^[11] 

13. [13]
    The first plaintiff gave evidence on the hearing of this application. In respect of the $25,000 loan her evidence was broadly consistent with the particulars contained in the amended Statement of Claim filed 24 July 2007. She said that she borrowed $25,000 from the National Australia Bank which was paid into the defendant’s account. Her evidence in that respect was not challenged and nor was it contradicted by other evidence. There is a National Australia Bank personal loan statement exhibited to the affidavit of the first plaintiff filed 29 May 2007 that appears to indicate that a loan of approximately $25,000 was taken out on or about 25 May 2005.

14. [14]
    The second plaintiff’s evidence in relation to the $17,000 loan to the defendant was consistent with the particulars provided in paragraph 8 of the amended Statement of Claim filed 24 July 2007. There is documentary evidence that tends to support the first plaintiff’s evidence. There is a statutory declaration of Rosalind Mary Byrne exhibited to the affidavit of the first plaintiff filed 29 May 2007. In that statutory declaration made 21 May 2007 Ms Byrne states:

“1. At the request of Rita Derek I lent to her the sum of $12,000.00 for the purpose of advancing these monies towards a part purchase of a motor vehicle for Alfeo Klauser.

2. On 11 May 2006 I withdrew the sum of $12,000.00 from a Term Deposit and I converted same to a bank cheque made payable to Frizelles Automotive Group in the sum of $12,000.00.  I then gave that cheque to Rita Derek on the understanding that it was to be used in the part purchase of a motor vehicle costing $17,000.00 for Alfeo Klauser.”

15. [15]
    There is also a transaction record from the Bank of Queensland dated 12 May 2006 indicating that a cheque was drawn from the account of A. Santucci, presumably the first plaintiff’s mother. I note that in a facsimile to the defendant’s solicitors dated 6 June 2007, the solicitors for the plaintiffs advised that the first plaintiff’s mother died on 5 April 2005 and the first plaintiff was the sole beneficiary of her estate.^[12]  There is also a record indicating that a bank cheque was issued by the Bank of Queensland on 12 May 2006 in the sum of $5,000 in favour of James Frizelles Automotive.  Once again the evidence of the first plaintiff in this respect was not challenged or contradicted.

16. [16]
    I accept the evidence of the first plaintiff in relation to the circumstances surrounding the advances made to the defendant.

17. [17]
    Mr Pope also gave evidence. He accepted that he was involved in organising the loans but denied he was the lender of the amounts of $25,000 and $17,000 that are the subject of this application. He was cross-examined in relation to statements made in correspondence. For example, in a letter to the defendant dated 23 March 2006^[13] Mr Pope said:

“There remains payable to me in round figures E$33,000.00 for the personal loan I took out (I borrowed $25,000.00) so that you could have that money for your overseas trip, as well as additional costs that I spent on that trip for you, leaving in nett terms $25,000.00 in your hand, additional to your capital of $340,000.00.”  

18. [18]
    In a letter dated 5 October 2006 to the solicitors for the defendant Mr Pope said:

“In relation to the matters in your fourth paragraph: I had intended, in June 2005 to take the family, including your client, to a Medico Legal Conference in Greece.  I made tentative arrangements, but as the time grew close to departure, I formed the view that financially, the trip was too much of a burden.  Your client expressed the desire to travel with us to Greece and thereafter visit Russia, which he wanted to see during his life time and thereafter meet us in New York for the return to Australia.  I asked him to delay the Russian visit on the basis that we would all go to Russia with him the following year.  However, he was insistent to undertake the Russia trip.  With some misgivings, we all travelled overseas.  Your client asked for $35,000.00 spending money for his trip to Russia.  I had already paid the airfares and accommodation for the rest of the trip (for him included).  I told him that I could only raise $25,000.00 and in fact I took out a personal loan for $25,000.00, which amount I am still paying off today and I gave him the $25,000.00 for him to spend alone. 

…

As to the balance of your letter, there will be no change to documentation.  Your client will receive what is due to him, when it is due to him, on the sale of Nerang and I would remind you that he does owe me monies that I have advanced to him, not the least of which was for the purchase of his current motor vehicle.”^[14]

Mr Pope explained the statements in the correspondence as being attributable to the failure to use precise language in the context of a loan to a family member.  

19. [19]
    Mr Pope was cross-examined in relation to the circumstances surrounding a draft Deed of Settlement that had been prepared by the defendant’s solicitors in respect of debt claims made by him. The amounts the subject of the draft Deed of Settlement and Release were $33,000, $17,000 and $400 respectively. It was during negotiations in relation to the draft Deed of Settlement and Release that it emerged that Mr Pope was an undischarged bankrupt. The agreement was not finalised.

20. [20]
    The defendant’s evidence in relation to the loans is as follows:

“21. In late May 2005 at the invitation of the First Plaintiff and Pope, I travelled overseas to Europe with the First Plaintiff, her children, and Pope.  Until we arrived in Europe nothing was mentioned to me either Pope (sic) or by the First Plaintiff in relation to me having to pay or repay the whole or any part of the travelling expenses incurred in respect of my travel, until I said to Pope words to the effect “I would like to go to other parts of Europe on my own and I will need about $25,000” Pope replied in words to the effect “Okay Alf I will put it into your account”.

22. Some time after our return to Australian about a month later Pope said to me “You owe me $25,000, plus another $7500 for your expenses before you went off on your own”.
23. In about May 2006 I had a discussion with Pope in which I said words to the effect:

‘Matt, if you are going to only let me have the spare car to take the kids to school, I will have to get a car myself, I have seen one for $17,000.  I need to have $17,000 of my money back’

Pope replied in words to the effect: ‘Okay, I agree’, and a day or so later we went to the motor dealer and Pope handed over cheques totalling $17,000.”^[15]  

Summary judgment – the principles

21. [21]
    UCPR 292 requires a consideration of whether:

1. (a)
   The defendant has no real prospect of successfully defending all or a part of the plaintiff’s claim; and

2. (b)
   There is no need for a trial of the claim or the part of the claim. 

22. [22]
    In Deputy Commission of Taxation v Salcedo^[16] Williams JA said:

“That review of the authorities clearly establishes to my mind that there has been a significant change brought about by the implementation of r. 292 and r. 293 of the UCPR.  The test for summary judgment is different, and the court must apply the words found in the rule.  To use other language to define the test (as was contended for in this case by counsel for the appellant relying on the reasoning of Chesterman J. in Gray v. Morris) only diverts the decision-maker from the relevant considerations.  But, and this underlies all that is contained in the UCPR, ultimately the rules are there to facilitate the fair and just resolution of the matters in dispute.  Summary judgment will not be obtained as a matter of course and the judge determining such an application is essentially called upon to determine whether the respondent to the application has established some real prospect of succeeding at a trial; if that is established then the matter must go to trial.  In my view, the observations on summary judgment made by the judges of the High Court in Fancourt v. Mercantile Credits Ltd (1983) 154 CLR 87 at 99 are not incompatible with that application of r. 292 and r. 293; what is important is that in following the broad principle laid down by their Honours the test as defined by the rules is applied.”^[17] 

The contentions of the parties

23. [23]
    Mr Green for the first plaintiff submitted that the defendant essentially admitted the salient features of the cause of action. He submitted that the only issue was the identity of the person with whom the agreements were made. Mr Green contended that having regard to the evidence it should be accepted that the agreements were reached between the first plaintiff, Mr Pope and the defendant in the context of a discussion involving all participants as members of a family. In the circumstances he submitted that it was unlikely that “technicalities as to the precise identity of the persons contracting and forming the agreement would be identified or the subject of scrutiny”.^[18]  Mr Green pointed out that the defendant admitted borrowing the sums of money and has not repaid those amounts. 

24. [24]
    Mr Colbron for the defendant submitted that “there are real issues as to whether any loan agreement was made with Mr Pope (and thus available now only to his Trustee in Bankruptcy) or directly with the first plaintiff.”^[19]

The contracting parties

25. [25]
    The identification of the contracting parties and the terms of the contracts must be determined by reference to the objective circumstances in which the agreements were made. In the context of a discussion in relation to the interpretation of a contract in Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales,^[20] Mason J (as he then was) said:

“Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties’ presumed intention in this setting.”^[21]

26. [26]
    The objective approach to the construction of a contract was reaffirmed by the High Court in Pacific Carriers Ltd v BNP Paribas.^[22] 

27. [27]
    And in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd^[23] the High Court said:

“It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations.  What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe.  References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement.  The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean.  That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.”^[24]

28. [28]
    Any doubt as the identity of the parties to a contract is capable of resolution: see for example Bennett & Ors v Stewart & Anor.^[25]  However in a particular case such doubt may have a bearing on the presence or absence of an intention to enter into a contract.^[26] 

29. [29]
    The lack of formality in a loan agreement between family members is not surprising. The source of the funds that were advanced to the defendant is not a decisive consideration but I regard it as an important factor in this case. The evidence of the first plaintiff and Mr Pope is that the first plaintiff borrowed $25,000 from the National Australia Bank which was paid to the defendant. Mr Pope explained the circumstances as follows:

“What happened was, I organised the loan, Rita borrowed it and I made the payments. The money was paid by the bank into our Alfie’s American Express card.”^[27] 

There is also no dispute that the first plaintiff raised the necessary funds for the acquisition of the motor vehicle. 

30. [30]
    The language employed by Mr Pope in his letters^[28] is consistent with the lack of formality surrounding an agreement between family members.  In any event the statements made by Mr Pope could not have the effect of displacing the objective conclusion that an agreement was reached between the first plaintiff and the defendant. 

31. [31]
    In the circumstances I am satisfied that the defendant has no real prospect of successfully defending the claim for $42,000 and there is no need for a trial of that part of the claim. Accordingly judgment will be entered for the first plaintiff against the defendant in the sum of $42,000 pursuant to UCPR 292. Mr Green also sought interest on that sum pursuant to s 47(1) Supreme Court Act 1995.  However he did not specify the rate of interest or the period for which it was claimed.  Moreover Mr Green submitted that in the event that judgment was entered for the first plaintiff, the balance of the action including a claim for interest pursuant to implied terms in the loan agreements should be remitted to the Magistrates Court at Southport.  According to paragraph 9 of the amended claim filed 24 July 2007 it was an implied term of the loan agreements that the defendant would pay interest at the rate of 13.2 percent.  Mr Green accepted that the claim for interest pursuant to the implied term was not sufficiently clear for the purpose of a summary judgment application.  Section 47(3) Supreme Court Act 1995 provides:

“This section-

…

2. (b)
   does not apply in respect of any debt on which interest is payable as of right whether by virtue of an agreement or otherwise.”

32. [32]
    In the circumstances I consider that it is inappropriate to make an award for interest pursuant to s 47(1) Supreme Court Act 1995.

Application by the defendant for security for costs

33. [33]
    By application filed 18 June 2007 the defendant seeks an order pursuant to UCPR 670 that “the First and Second Defendants” (sic) provide security for the costs of the first defendant. The application is clearly directed towards the first and second plaintiffs, rather than the first and second defendants as stated in the application. However in his oral submissions Mr Colbron for the defendant confined the application to the second plaintiff.

34. [34]
    The summary judgment in favour of the first plaintiff in the sum of $42,000 means that the remaining issues relate to the claim by the second plaintiff for $7,560 and the claims by both plaintiffs for interest pursuant to implied terms in the loan agreements.

35. [35]
    UCPR 671(a) provides that a Court may order a plaintiff to give security for costs, if the Court is satisfied the plaintiff is a corporation and there is reason to believe the plaintiff will not be able to pay the defendant’s cost if ordered to pay them.

36. [36]
    The first plaintiff Ms Derek is the sole director of the second plaintiff Pope Developments Pty Ltd. Mr Pope apparently resigned as a director of the company in 2007, although he was declared bankrupt on 7 July 2006.^[29]  He apparently believed that his accountants had removed him from the directorship.^[30] 

37. [37]
    The company Pope Developments Pty Ltd has an interest in the real property and business of a gelati shop at Brunswick Street, Fortitude Valley.  However at the time of the hearing the transfer of title had not been registered.  There is also a charge in favour of the Westpac Banking Corporation which at the time of the hearing Mr Pope estimated stood at $500,000. 

38. [38]
    In Programmed Solutions Pty Ltd v Dectar Pty Ltd^[31] the Court of Appeal refused leave to appeal against an order of the District Court at Cairns whereby an application for security for costs by the defendant was dismissed.  The learned primary judge refused the application because the plaintiff’s claim was regarded as relatively simple and the defence as pleaded was somewhat speculative.

39. [39]
    The approach to be taken to an application for security for costs is well established.^[32]

40. [40]
    In my view the most important consideration in the present matter is the fact that the claim made by the second plaintiff is relatively small ($7,560) and quite simple. Moreover Mr Pope has offered to undertake to satisfy any costs order against the second plaintiff. The solicitors for the plaintiffs wrote to the solicitors for the defendant on 21 June 2007 stating:

“Mr Pope is, as you are aware, a practicing Barrister in Queensland.  He instructs that he is also prepared to undertake to satisfy in (sic) Costs Orders which might be made against either of our clients.”^[33]   

Mr Pope emphasised that he has a significant income and repeated that he was prepared to underwrite a costs order made against the second plaintiff, although he qualified that slightly, by adding that he would do so if that was what the Court decided.  He said that he did not require the consent of his Trustee in Bankruptcy to provide such an undertaking.  Mr Colbron for the defendant doubted whether an undischarged bankrupt could offer such an undertaking, but he did not cite any statutory provision or authority to support that contention.  It would be surprising if the solicitors for the plaintiffs and Mr Pope offered such an undertaking when it was inappropriate to do so.  However, neither party made submissions with reference to the relevant provisions of the Bankruptcy Act 1966.  In the circumstances it is not appropriate to direct that Mr Pope provide the undertaking.  However the offer is one of the factors I have taken into consideration. 

41. [41]
    In the circumstances particularly having regard to the relatively small quantum of the claim I consider that it is inappropriate to order the second plaintiff to pay security for costs. Accordingly the application is dismissed with costs.

Claim by second plaintiff and claims for interest by both plaintiffs

42. [42]
    It was agreed that if summary judgment was entered in favour of the first plaintiff the balance of the action should be remitted to the Magistrates Court at Southport for further hearing.