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Capita Finance Pty Ltd v First Mortgage Company Home Loans Pty Ltd[2016] QDC 350

Capita Finance Pty Ltd v First Mortgage Company Home Loans Pty Ltd[2016] QDC 350

DISTRICT COURT OF QUEENSLAND

CITATION:

Capita Finance Pty Ltd v First Mortgage Company Home Loans & Anor [2016] QDC 350

PARTIES:

CAPITA FINANCE PTY LTD ACN 055 056 034

(plaintiff)

v

FIRST MORTGAGE COMPANY HOME LOANS PTY LTD ACN 104 268 448

(first defendant)

and

AUSTRALIAN FINANCIAL LOAN MANAGEMENT PTY LTD ACN 069 311 486

(second defendant)

FILE NO/S:

2045/14

DIVISION:

Civil

PROCEEDING:

Application

ORIGINATING COURT:

District Court at Brisbane

DELIVERED ON:

22 December 2016

DELIVERED AT:

Brisbane

HEARING DATE:

29 November 2016

JUDGE:

Muir DCJ

ORDER:

  1. The plaintiff’s claim against the first defendant is dismissed
  2. The plaintiff’s claim against the second defendant is dismissed

CATCHWORDS:

PROCEDURE – ENDING PROCEEDINGS EARLY – SUMMARY DISPOSAL – LEGAL QUESTION – where summary judgment is sought by the 1st and 2nd defendant – where plaintiff asserts title to bring claims against the 1st and 2nd defendant through two deeds of assignment – whether assignee had a pre-existing genuine commercial interest in the first deed of assignment by virtue of having the same shareholder as the plaintiff - whether there is a need for a trial.

Uniform Civil Procedures Rules 1999, r 293

Trade Practices Act 1974 (Cth), s 82

Bernstrom v National Australia Bank Ltd [2003] 1 Qd R 469, considered

Brownton Ltd v Edward Moore Inbucon Ltd [1985] 3 All ER 499, cited

Coldham-Fussell v Commissioner of Taxation (2011) 82 ACSR 439, considered

Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232, followed

Dover v Lewkovitz [2013] NSWCA 452, considered

Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498, considered

First City Corporation Ltd v Downsview Nominees Ltd [1989] 3 NZLR 710, considered

Insight SRC IP Holdings Pty Ltd v Australian Council For Educational Research Ltd (2013) 101 IPR 488, cited

Lanai Unit Holdings Pty Ltd v Mallesons Stephens Jacques [2016] QSC 242, followed

Raging Thunder Pty Ltd & Anor v Bank of Western Australia Ltd [2012] QSC 329, considered

Spencer v Commonwealth (2010) 241 CLR 118, considered

Theseus Exploration NL v Foyster (1972) 126 CLR 507, considered

Thomas v Balanced Securities Ltd [2012] 2 Qd R 482, considered

Trendex Trading Corporation v Credit Suisse [1982] AC 679, considered

Workcover Queensland v AMACA Pty Ltd [2013] 2 Qd R 276, followed

COUNSEL:

Mr N Ferrett for the plaintiff

Mr M Long for the first defendant

Mr C Wilson for the second defendant

SOLICITORS:

Romans & Romans Lawyers for the plaintiff

In-house representative for the first defendant

Forbes Dowling Lawyers for the second defendant

Relevant background

  1. [1]
    The plaintiff, Capita Finance Pty Ltd, is a financier. The first defendant, First Mortgage Company Home Loans Pty Ltd, is a commercial lender and the second defendant, Australian Financial Loan Management Pty Ltd, is a mortgage broker. It is uncontroversial that in August 2007, a company by the name of Sandee (Qld) Pty Ltd (Sandee) entered into a home loan with the first defendant in the sum of $345,000  for the construction (in part) of a house (loan agreement).  The second defendant[1] was described as the originator/manager of the home loan in the loan agreement.[2] 
  1. [2]
    By these proceedings, it is alleged by the plaintiff that the first defendant, as the lender, wrongly paid the sum of $56,000 to the builder engaged by Sandee, due to the error of the second defendant. The plaintiff has sued the first defendant (as successor in title to Sandee) for damages to be assessed for breach of the loan agreement and for negligence, and for unjust enrichment (restitution) in the sum of $56,000. As against the second defendant, the plaintiff claims damages to be assessed for negligence and for misleading and deceptive conduct in breach of the Trade Practices Act 1974 (Cth) (TPA).   
  1. [3]
    The plaintiff was not a party to the loan agreement or to any dealings with the first defendant but asserts title to bring the claims as assignee pursuant to two deeds of assignment. The first deed of assignment is dated 28 April 2012 between Sandee and a company called Capita Group (Operations) Pty Ltd (Oneport)[3] (the first deed of assignment).[4]
  1. [4]
    The second deed of assignment is dated 14 June 2012 and is between Oneport and the plaintiff.[5]
  1. [5]
    By their respective applications made pursuant to r 293 of the Uniform Civil Procedures Rules 1999 (“UCPR”), the first and second defendants apply for summary judgment against the plaintiff for all of the plaintiff’s claims. 
  1. [6]
    The first defendant sought an alternative order should it be unsuccessful in obtaining summary judgment on the plaintiff’s entire claim, that it be granted summary judgment for the plaintiff’s breach of contract claim.
  1. [7]
    The second defendant also sought an order that the plaintiff file and serve further and better particulars of the third amended statement of claim. This order was not pressed at the hearing.
  1. [8]
    The plaintiff conceded at the outset of the hearing, that its claim for damages against the second defendant pursuant to s 82 of the TPA was not assignable. [6]
  1. [9]
    It was not in issue at the hearing that the plaintiff:[7]
  1. (a)
    had a pre-existing genuine commercial interest in the second deed of  assignment because it had lent money to Sandee sometime around February 2009, for the purpose of allowing it to cope with the fall-out from the first defendant’s overpayment (which was solicited by the second defendant); and
  1. (b)
    had not been repaid these monies.
  1. [10]
    It was common ground at the hearing of the applications that the crucial question for determination was whether Oneport, as the assignee to the first deed of assignment, had a pre-existing genuine commercial interest sufficient to make the first deed of assignment effective.

Summary judgment principles

  1. [11]
    By virtue of r 293 UCPR, the Court is empowered with a discretion to give summary judgment where:
  1. (a)
    the plaintiff has no real prospect of succeeding on all or part of the plaintiff’s claim; and             
  1. (b)
    there is no need for a trial of the claim (or part of it). 
  1. [12]
    The same test applies to a defendant applying for summary judgment as applies to a plaintiff under r 292 UCPR.[8]  The words “no real prospect of success” speak for themselves with the word “real” requiring other than a fanciful prospect of success.[9] 
  1. [13]
    I accept that it is necessary to proceed with caution in a case where the facts are assumed so as not to improperly deprive a party of an opportunity for a trial of its claim.[10]  Whilst counsel for the plaintiff submitted that it was not a “good idea” to decide such questions divorced of the factual context which a trial might reveal he did not, apart from a reference to the general caution, seriously argue or press that there was a need for a trial of any facts to determine the legal question identified in the present circumstances.
  1. [14]
    The general caution in determining a difficult question of fact or law was observed by French CJ and Gummow J in Spencer v Commonwealth[11] as follows:

“Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law”. 

  1. [15]
    Certainly in some cases, the extent and complexity of questions of law may warrant a trial of certain issues.[12]  However in certain cases where the facts are not in dispute and the rights of the parties turn upon a question of law, the Court may give summary judgment even where the point of law is difficult.[13]
  1. [16]
    Rules 292 and 293 are to be applied, bearing in mind the overriding purpose of the UCPR being to facilitate the just and expeditious resolution of the real issues and civil proceedings at a minimum of expense.[14] 
  1. [17]
    In the present case, the arguments around the question of law to be decided in the context of uncontroversial facts (despite being characterised as a novel or exotic one by some of the parties), was fully ventilated in written and oral submissions at the hearing. Bearing in mind the overarching purpose of the UCPR and in light of the way the applications proceeded, I consider there to be no impediment to me summarily determining the legal question posed by the parties.

Assignment of causes of action

  1. [18]
    Traditionally, the assignment of causes of action unconnected with some property right, that is ‘bare’ causes of action, were often said to be void.[15]
  1. [19]
    It is uncontroversial that the law has evolved such that an assignment of a cause of action for damages in contract and negligence is lawful where the assignee has a genuine and substantial commercial interest in enforcing the claim.[16]
  1. [20]
    Two characteristics for sufficiency as a genuine interest were identified by Gotterson JA in Workcover Queensland v AMACA Pty Ltd:[17]
  1. (a)
    First, where an assignee relies on a genuine commercial interest to sustain an assignment, that interest must be one that has come into existence prior to that assignment. A commercial interest merely in exploiting the assigned right, even to recoup an amount paid in exchange for the assignment, would not suffice as it would tend to taint the assignment as savouring maintenance or as champertous.[18]
  1. (b)
    Second, the pre-existing commercial interest need not be an interest which itself is enforceable at law or in equity. 
  1. [21]
    The uncontroverted evidence was that Oneport and the plaintiff (i.e. the assignees to the first and second deeds of assignments respectively) were each ultimately held by the same company having the same single shareholder, namely Global Asset Management (Operations) Pty Ltd.[19] The evidence was that the shares in this company were owned by Ms Patricia Mary Paris.[20]
  1. [22]
    The issue of a genuine commercial interest between Oneport and Sandee was not raised on the pleadings apart from the second further amended defence of the first defendant, where it is alleged inter alia that Oneport did not and does not have a genuine commercial interest in the purported assignment from Sandee to Oneport such that the rights to bring the plaintiff’s claims were incapable of being assigned from Sandee to Oneport at law or in equity.[21]
  1. [23]
    As set out in the first defendant’s written submissions,[22] the relevant operative provisions of the first deed of assignment are:
  1. (a)
    by clause 2.1: “[Oneport] has agreed to pay or credit the [sic] Sandee (or an entity nominated by Sandee the sum of $1 for the ass. [sic]”; and
  1. (b)
    by clause 2.2: “Sandee [w]ill assign to [Oneport] absolutely and irrevocable, all rights, title and interests in the Action”. The “Action” is defined in clause 1.1.2 as “the rights to a potential claim by Sandee against First Mortgage Home Loans Pty Ltd[23] and Home Loan Centre Australia”.
  1. [24]
    During the course of the hearing, counsel for the plaintiff conceded that the price paid for an assignment cannot itself create a genuine commercial interest in the cause of action that is being purchased.[24]
  1. [25]
    As is evident from the following extract of the transcript, the plaintiff’s contention was that the genuine pre-existing commercial interest of Oneport in the first deed of assignment was based solely on the fact that a company (the plaintiff), who had the same shareholder as Oneport, was owed money by Sandee (the assignor to the first deed of assignment):[25]

MR FERRETT:   It is the same as the one that I mention in paragraph 16 for – sorry, let me put that differently.  It has an interest because the related company has an interest of the kind articulated in paragraph 16 of my submissions, and because ultimately both of those – sorry – the interest of the related company enures to the benefit of the ultimate shareholder.  And the question of – sorry, when your Honour’s ready.

HER HONOUR:   So is that – the interest of the plaintiff that’s set out in the – in correspondence from your solicitor of the 25th of October that it’s – the genuine commercial interest is the right to recover interest and charges incurred as a result of Sandy [sic] obtaining a loan from the plaintiff to cover the shortfall   

MR FERRETT:   That is the genuine interest of the plaintiff.

HER HONOUR:   The plaintiff.

MR FERRETT:   And then there is the extension that I just articulated for Oneport.  In other words, that because they are ultimately held by the one shareholder, that is sufficient to ground the other subsidiary with a genuine commercial interest. [Emphasis added]

  1. [26]
    The plaintiff could not point to any authority to support such a proposition but argued through its counsel that there was no authority precluding it.
  1. [27]
    The plaintiff identified the critical question in determining whether a particular interest will be regarded as genuine to be whether the putative assignee can be regarded as simply intermeddling as distinct from litigating for some substantial purpose.[26]  It is uncontroversial that the prima facie prohibition against the assignment of bare rights of action is founded upon public policy of precluding trafficking in litigation.[27]
  1. [28]
    The plaintiff placed some reliance upon the New Zealand High Court decision of First City Corporation Ltd v Downsview Nominees Ltd[28] where Gault J held that a cause of action in tort relating to a debenture could be assigned by a parent company to a subsidiary and did not offend policy considerations in play.
  1. [29]
    The present case is distinguishable from the decision in First City Corporation Ltd in a number of ways. First, that decision considered a vertical relationship within a corporate structure[29] as opposed to the horizontal relationship which exists in the present instance. Second, unlike the present circumstances, there was evidence that the assignment was part of a restructuring program by a parent company.
  1. [30]
    Ultimately the plaintiff’s argument, as articulated by its counsel, was that the first deed of assignment ought not be prohibited as promoting mere trafficking in litigation for no related commercial purpose because:

“…it was thought convenient, for whatever reason, to assign it to a different member of the corporate group, but that doesn’t change the fact that ultimately the ultimate shareholder gets to decide what happens to the proceeds of the litigation, admittedly constrained by that irrevocable authority.”

  1. [31]
    This contention fails to recognise that, despite the fact that Oneport and the plaintiff had the same shareholder, they nevertheless remain separate legal identities.
  1. [32]
    It was impressed upon me by counsel for the second defendant that if I took the step urged upon me by the plaintiff, the door would be open notwithstanding the careful and incremental growth in the cases up until now, to essentially a wholesale ability to assign what are otherwise not assignable causes of action as between companies in a corporate group, where the only connection is that they reside in that corporate group.[30]  In my view there is some force in this argument and that indeed it would be potentially offending the very principle espoused by the plaintiff – promoting trafficking in litigation for no related commercial purpose.  Take for example the situation where there was a common shareholder of two major banks. It would be an absurd result if this fact alone was considered sufficient to ground a genuine commercial interest in an assignment of a cause of action in contract and negligence.
  1. [33]
    Ultimately, each case turns on its own facts.[31]  The Court is required to examine the totality of the transaction under consideration.[32]
  1. [34]
    The first deed of assignment is in the barest terms. It identifies only a potential claim against the first and second defendants. It does not descend into any detail of why that assignment was being undertaken. The irrevocable authority attached to the first deed of assignment,[33] which is in evidence, specifically deals with what is to happen with the proceeds of the litigation and flies in the face of the plaintiff’s contention.  It provides that Oneport was taking the benefit of the cause of action for the price of $1 and if there were any proceeds of that litigation, it would first be repaid any legal costs that it had incurred.   Oneport would then receive 75 per cent of the net proceeds after the legal costs had been reimbursed with the balance of 25 per cent to be returned to Sandee.
  1. [35]
    The plaintiff upon the hearings of the summary judgment applications did not suggest that further factual evidence needed to be advanced at trial. Counsel for the first defendant submitted (with no argument or objection from the plaintiff) that “the evidence is as good as it is going to get”.[34]
  1. [36]
    I accept there may well be occasions where the fact of an assignee being a member of a corporate group in combination with other factors may be enough to sustain an assignment. In my view, the present case is not such an occasion.
  1. [37]
    The plaintiff did not adduce evidence that there was some greater corporate group strategy whereby Oneport would sue for the benefit of Global Asset Management Pty Ltd, and by extension, the plaintiff. As I have said, the evidence was to the contrary as by the first deed of assignment Oneport was to sue and would retain at least 75 per cent of the proceeds. In my view, the parties to the first deed of assignment were trading in litigation.
  1. [38]
    In the present circumstances, I consider there is no need for a trial. The mere fact that Oneport and the plaintiff had the same shareholder is not sufficient to show that Oneport had a pre-existing genuine commercial interest in the first deed of assignment. There is therefore no interest to validate the first deed of assignment.

Conclusion

  1. [39]
    The first and second defendants are entitled to summary judgment for all of the plaintiff’s claim against them, respectively.
  1. [40]
    Given my conclusion, I do not need to consider the first defendant’s alternative claim for summary judgment.
  1. [41]
    Accordingly, I order that:
  1. The plaintiff’s claim against the first defendant be dismissed.
  1. The plaintiff’s claim against the second defendant be dismissed.
  1. [42]
    Given my findings, ordinarily costs would follow the event and the plaintiff would be ordered to pay the first and second defendants costs, including costs of the application and reserved costs, to be assessed.
  1. [43]
    I had intimated at the hearing, that given the time of year, I would allow the parties the opportunity to provide written submissions as to costs. That being so, I will allow the parties until 4.00pm Friday 27 January 2017 to provide any such submissions. If no submissions are received by this time, the cost orders foreshadowed above will be made. In the meantime, if the parties are able to agree on the form of costs orders they should be forwarded to my Associate.

Footnotes

[1]  Known as Home Loan Centre Management Pty Ltd ACN 069 311 486 at this time.

[2]  A copy of the unsigned loan agreement is located at Exhibit KB-8 to the affidavit of Katrina Ann Bills sworn 10 November 2016.

[3]  It was uncontroversial that this company was later renamed One Port Operations Pty Ltd.

[4]  A copy of the first deed of assignment is located at Exhibit BB-11 to the affidavit of Brian Boyd filed 24 November 2016.

[5]  A copy of the second deed of assignment is located at Exhibit BB-14 to the affidavit of Brian Boyd filed 24 November 2016. 

[6]  Following the judgment in Lanai Unit Holdings Pty Ltd v Mallesons Stephens Jacques [2016] QSC 242, at [7]-[9].

[7]  Transcript 1-6 ll 39-44; the evidence being at para 14 of the affidavit of Brian Boyd sworn 24 November 2016 and para 2-3 of the affidavit of Brian Boyd sworn 29 November 2016.

[8] Raging Thunder Pty Ltd & Anor v Bank of Western Australia Ltd [2012] QSC 329 at [11] per Applegarth J with reference to Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232; see also Coldham-Fussell v Commissioner of Taxation (2011) 82 ACSR 439 at [97]. 

[9] Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232. 

[10] Raging Thunder Pty Ltd & Anor v Bank of Western Australia Ltd [2012] QSC 329 at [12] per Applegarth J.

[11]         (2010) 241 CLR 118 at p 132 at [25].

[12] Theseus Exploration NL v Foyster (1972) 126 CLR 507. 

[13] Raging Thunder Pty Ltd & Anor v Bank of Western Australia Ltd [2012] QSC 329 at [13] and [16] per Applegarth J.

[14] Bernstrom v National Australia Bank Ltd [2003] 1 Qd R 469 at [38]; Salcedo at [3], [17] and [45]; Coldham-Fussell at [101]; Thomas v Balanced Securities Ltd [2012] 2 Qd R 482 at [69]. 

[15]  J D Heydon, M J Leeming and P G Turner, Meagher Gummow & Lehane’s Equity: Doctrines & Remedies (LexisNexis Butterworths, 5th ed, 2014) at 290 [6]-[470].

[16] Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498 per French CJ, Crennan and Kiefel JJ; Workcover Queensland v AMACA Pty Ltd [2013] 2 Qd R 276 at 299 [65] [Gotterson JA] citing with approval Lloyd LJ in Brownton Ltd v Edward Moore Inbucon Ltd [1985] 3 All ER 499 at 509; Trendex Trading Corporation v Credit Suisse [1982] AC 679, 703.

[17]  Ibid Workcover v Amaca at p 299 at [65]-[67].

[18]  “Maintenance is the support, by means of finance or exertion, of an action by a person who has no interest in it…Champerty arises where the maintainer seeks to make a profit out of another person’s litigation by taking all or part of its proceeds.” J D Heydon, M J Leeming and P G Turner, Meagher Gummow & Lehane’s Equity: Doctrines & Remedies (LexisNexis Butterworths, 5th ed, 2014) at 290 [6]-[470].

[19]  The company search of the plaintiff is located at BB-1 to the affidavit of Brian Boyd sworn 24 November 2016 and the company search of Oneport is located at BB-3.

[20]  A copy of the company search of Global Asset management (Operations) Pty Ltd is located at exhibit Ml-1 to the affidavit of Madison Lodder sworn 29 November 2016.

[21]  Para 14 of the second further amended defence of the first defendant.

[22]  At paragraph 15.

[23]  It is noted though nothing turns on it in this instance, the word ‘Company’ is missing before the words Mortgage and Home in the first defendant’s name. The recitals have the correct name of the first defendant.

[24]  Transcript 1-9, ll 34-38.

[25]  Transcript 1-28 ll 1-19.

[26]  Paragraph 18 of the plaintiff’s written submission; Transcript 1-30 ll 5-24.

[27] Dover v Lewkovitz [2013] NSWCA 452 at [23].

[28]  [1989] 3 NZLR 710 at 757.

[29]  Cases such as Insight SRC IP Holdings Pty Ltd v Australian Council For Educational Research Ltd (2013) 101 IPR 488 and Dover v Lewkovitz [2013] NSWCA 452 also considered  assignments as part of a vertical corporate structure. 

[30]  Transcript 1-26 ll 2-10.

[31]  See, for example, the detailed discussion of a number of relevant authorities in Dover v Lewkovitz [2013] NSWCA 452 at [14]-[25].

[32] Trendex Trading Corporation v Credit Suisse [1982] AC 679.

[33]  Exhibit BB-11 affidavit of Brian Boyd filed 24 November 2016. 

[34]  Transcript 1-11, ll 26- 27.

Close

Editorial Notes

  • Published Case Name:

    Capita Finance Pty Ltd v First Mortgage Company Home Loans & Anor

  • Shortened Case Name:

    Capita Finance Pty Ltd v First Mortgage Company Home Loans Pty Ltd

  • MNC:

    [2016] QDC 350

  • Court:

    QDC

  • Judge(s):

    Muir DCJ

  • Date:

    22 Dec 2016

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Bernstrom v National Australia Bank Ltd[2003] 1 Qd R 469; [2002] QCA 231
2 citations
Brownton Ltd v Edward Moore Inbucon Ltd [1985] 3 All ER 499
2 citations
Coldham-Fussell v Commissioner of Taxation (2011) 82 ACSR 439
2 citations
Deputy Commissioner of Taxation v Salcedo[2005] 2 Qd R 232; [2005] QCA 227
4 citations
Dover v Lewkovitz [2013] NSWCA 452
4 citations
Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498
2 citations
First City Corporation Ltd v Downsview Nominees Ltd [1989] 3 NZLR 710
2 citations
Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 2)[2017] 2 Qd R 456; [2016] QSC 242
2 citations
Raging Thunder Pty Ltd v Bank of Western Australia Ltd [2012] QSC 329
4 citations
Spencer v The Commonwealth (2010) 241 CLR 118
2 citations
SRC IP Holdings Pty Ltd v Australian Council For Educational Research Ltd (2013) 101 IPR 488
2 citations
Theseus Exploration NL v Foyster (1972) 126 CLR 507
2 citations
Thomas v Balanced Securities Limited[2012] 2 Qd R 482; [2011] QCA 258
2 citations
Trendtex Trading Corporation v Credit Suisse (1982) AC 679
3 citations
WorkCover Queensland v AMACA Pty Limited[2013] 2 Qd R 276; [2012] QCA 240
2 citations

Cases Citing

Case NameFull CitationFrequency
Capita Finance Pty Ltd v First Mortgage Company Home Loans [2017] QDC 371 citation
1

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