Bendigo and Adelaide Bank Ltd v Patel
[2018] QDC 84
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- Unreported Judgment
- Bendigo and Adelaide Bank Ltd v Patel[2018] QDC 84
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Bendigo and Adelaide Bank Ltd v Patel[2018] QDC 84
Bendigo and Adelaide Bank Ltd v Patel[2018] QDC 84
DISTRICT COURT OF QUEENSLAND
CITATION: | Bendigo and Adelaide Bank Ltd v Patel & Ors [2018] QDC 84 |
PARTIES: | BENDIGO AND ADELAIDE BANK LTD (appellant) v DIPEN PATEL (respondent) BENDIGO AND ADELAIDE BANK LTD (appellant) V ANDREW PAUL FERRIER (respondent) BENDIGO AND ADELAIDE BANK LTD (appellant) V CHARMAINE DEBRA LANGHAM (respondent) BENDIGO AND ADELAIDE BANK LTD (appellant) V ISMAIL ISIK (respondent) BENDIGO AND ADELAIDE BANK LTD (appellant) V HAISSAM KHABBAZ (respondent) |
FILE NO/S: | Appeals 4505, 4506, 4507, 4511 and 4512 of 2017; M53305, M53269, M52151 and M50536 of 2017, M4786 of 2016 |
DIVISION: | |
PROCEEDING: | Civil Appeals |
ORIGINATING COURT: | Magistrates Court at Brisbane |
DELIVERED ON: | 10 May 2018 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 1 May 2018 |
JUDGE: | McGill SC, DCJ |
ORDER: | In each matter appeal allowed, refusal to sign default judgment on the date of refusal in each matter set aside, and in lieu thereof judgment for the appellant against the respondent in each matter for the amount owing inclusive of interest and legal costs fixed at a particular sum in respect of the Magistrates Court proceeding. Order each respondent to pay the appellant’s costs of that appeal on the indemnity basis. |
CATCHWORDS: | PRACTICE – Default judgment – claim for debt including amount for compound interest – whether compound interest recoverable – relevance of merits – requirements of natural justice. UCPR r 283 ABL Custodian Services Pty Ltd v Taylor [2017] QDC 212 – cited. Egan v Posman [2018] QDC 53 – cited. Inland Revenue Commissioners v Oswald [1945] AC 360 – applied. John Holland Pty Ltd v Tac Pacific Pty Ltd [2010] 1 Qd R 302 – cited. |
COUNSEL: | P D Tucker for the appellant |
SOLICITORS: | Results Legal for the appellant |
- [1]These five appeals are brought from the refusal of a Magistrates Court to give default judgment under r 283. In each case, they raise the same issue: under the standard form contract on which the appellant was suing, it was entitled to interest compounding monthly on amounts payable but unpaid. That was the whole balance owing under the contract. No notice of intention to defend was filed, but a Magistrate, apparently acting on referral from a registrar, refused to give default judgment. That decision was wrong. On the material before the registrar, it was appropriate to give default judgment. The reasons given for refusing to give judgment reflect legal error. Accordingly when the appeals came on for hearing in each case I allowed the appeal, set aside the refusal and gave judgment for the relevant amount, adjusting the interest to the date of the judgment, 1 May 2018. I said I would publish reasons for those orders. These are the reasons.
Background
- [2]The same issue arises in all five matters, but it is convenient to deal with the facts by reference to the appeal filed first in time, the matter of Patel. On 3 July 2017 the solicitors for the appellant filed electronically in the Magistrates Court at Brisbane a claim and statement of claim by which the appellant claimed against the respondent $5,044.90 together with interest from 1 June 2017 until judgment, and the plaintiff’s costs on an indemnity basis. The amount claimed by way of costs was endorsed in a notice under r 150(3). The statement of claim set out in detail the circumstances giving rise to the claim.
- [3]Essentially another company lent some money to the respondent pursuant to a loan deed which contained provisions for repayment, that if payments were not made in accordance with the deed the lender was entitled to make the full amount immediately due and payable, and that interest on money payable but unpaid would accrue daily at a specified rate and capitalise monthly. It was also alleged that under the loan agreement the respondent would pay all costs and expenses incurred in relation to enforcement on an indemnity basis. The benefit of the loan agreement had subsequently been assigned by the original lender to the plaintiff, and notice of the assignment given to the respondent. The relief claimed was as I have indicated.
- [4]The plaintiff’s solicitor subsequently filed an affidavit which deposed to service of the claim and statement of claim and a Form 1 Notice under the Service and Execution of Process Act 1992 (Cth) in accordance with r 112(1)(a). For the purposes of a claim in the Magistrates Court, this was sufficient service: r 111. No notice of intention to defend and defence has ever been filed in the Magistrates Court or served on the solicitors for the appellant. On 8 September 2017 a request for default judgment was filed electronically in the Magistrates Court. That request noted that no payments had been received from the defendant since the commencement of the proceeding, which was verified by an affidavit of debt filed with the request. The request included the calculation of interest compounding monthly at the rate alleged in the statement of claim, and the amount of costs on the indemnity basis. Details of the costs were provided in the affidavit filed with the request, which said that the costs incurred by the appellant up to judgment amounted to $1,563.87 inclusive of GST. Tax invoices issued by the appellant’s solicitors were exhibited. A further amount of $196.50 was claimed for entering default judgment.
Refusal and reasons
- [5]On 4 October 2017 the Brisbane Magistrates Court Registry sent to the solicitors for the appellant a notice of refusal of the request for default judgment. The notice referred to the request for default judgment, said to have been lodged 11 September 2017, and continued:
“Magistrate Shearer has refused this judgment as per his endorsement on the court file as follows:
‘Application refused. The claim for compounding interest is unauthorised by the contract or legislation. The plaintiff is to recalculate the interest claim on a simple interest basis and resubmit the application.’”
- [6]The notice did not explain the involvement of a magistrate. Under r 283, if the plaintiff’s claim is for a debt or liquidated demand, as this was, and it files a request for judgment for an amount not more than the amount claimed, the “court as constituted by a registrar may give judgment.” On the face of it a request for default judgment under r 283 is to be decided by a registrar.[1] However, under r 982 “if a question arises in a matter before a registrar that the registrar considers appropriate for the decision of a judge or magistrate, the registrar may refer the matter to a judge or magistrate.” Presumably the application for default judgment in this case was seen as giving rise to a question to be considered by a magistrate, and hence was referred by a registrar to Magistrate Shearer. Under r 982(3) the magistrate may dispose of the matter or refer it back to the registrar with a direction. It appears that in this case the matter was in fact decided by the magistrate.
Merits irrelevant
- [7]Magistrate Shearer’s reasons for doing so were wrong, in each respect. In the first place, the reasons relate to the merits of the claim. By r 283(10) the court as constituted by a registrar is not required to consider the merits of the plaintiff’s claim against the defendant. On a default judgment under r 283 what matters is whether the relief claimed in the claim and statement of claim amounts to a debt or liquidated claim. If it does and the claim and statement of claim have been served in accordance with the rules, and no notice of intention to defend has been filed, judgment is to be given under r 283. It is not for a registrar to query the merits of the claim, or for that matter for them to be queried by a magistrate on reference from a registrar. It was therefore wrong for Magistrate Shearer even to consider whether the contract or statute gave rise to an entitlement to compound interest.
Contract for compound interest
- [8]Apart from that, as it happened in this case the contract was in evidence, a copy of it having been exhibited to the affidavit filed in support of the request for default judgment. The relevant clause, 5.2, provided as follows:
“Interest payable under clause 5.1(b) … may be capitalized by the lender on the last day of the month in which the interest became due (or any other day determined by the lender in its discretion).”
A clause in those terms provides for interest to compound monthly. That proposition is obvious from reading the clause, but if authority be needed it is to be found in the decision of the House of Lords in Inland Revenue Commissioners v Oswald [1945] AC 360. In that case there was a provision that interest in arrears might at the option of the mortgagee be capitalized and added to the principal.
- [9]Lord MacMillan, with whom Lord Russell agreed, said at page 372:
“The option to capitalize is an option to exact compound interest. The effect of an agreement to pay compound interest or to ‘capitalize’ interest … merely means that the interest at the stipulated rate as it falls due if it remains unpaid is added to the borrower’s indebtedness and itself yields interest at the stipulated rate.”
Lord Porter made the same point at page 379:
“Capitalisation means no more than that interest, which continues to be interest, shall be treated together with the capital sum due as itself interest-bearing but does not alter its quality as interest.”
- [10]Hence the contract in the present case provided expressly for interest to compound monthly. It is true that the use of the word “may” implied that the lender had the option to compound. That option was exercised, if not previously, by claiming interest calculated on that basis in the claim and statement of claim. Accordingly the proposition that compound interest was unauthorised by the contract was wrong in law, the question of interpretation of the contract being a question of law.
Relevant legislation
- [11]The reference to legislation is puzzling, but equally inappropriate. If it is a question of whether compound interest is permissible under r 283, there is nothing in the rule which confines interest under that rule in accordance with an agreement to simple interest. In the present case the debt or liquidated demand included interest because the interest was limited to the rate specified in and calculated in accordance with an agreement, as required by r 283(4)(a).
- [12]It is true that the Civil Proceedings Act 2011, s 58 does not authorise the giving of interest on interest: s 58(4)(a). However, that section does not apply to a proceeding for the payment of money on which interest is payable as of right, including because of an agreement: s 58(2)(b). If the reference to legislation in the endorsement of reasons by Magistrate Shearer was a reference to the Civil Proceedings Act 2011, s 58, that was also an error because that section is irrelevant to the appellant’s entitlement to recover interest in the circumstances of this case. The reasons given for refusing default judgment were therefore comprehensively wrong.
- [13]I have in each case examined the material which was before the registrar and hence before the magistrate. On that material the appellant had satisfied the requirements of r 283 and was entitled to default judgment. It is unnecessary to go through the details of the other four matters. In substance the same thing happened each time.[2] It follows that in each case the decision of the magistrate was wrong, for the same reasons. Accordingly in each case I gave the judgment which ought to have been given by the registrar, adjusted for the additional interest accrued since then.
Breach of natural justice
- [14]The appellant also argued that there had been a breach of the rules of natural justice, in that the magistrate refused to hear submissions in relation to the point. That was true. It is unnecessary to set out the details of the exchanges recorded in the affidavit material before me about what passed between the solicitors for the appellant and the various officers in the Magistrates Court registry who were in the difficult situation of having to act on misconceived and inappropriate directions from a magistrate. It is sufficient to say that if a situation arises where it appears on a reference to a magistrate such as this that there is a legal deficiency in the claim, the appropriate course is to draw that deficiency to the attention of the solicitors for the plaintiff and invite submissions on the issue.[3] It is a course I have followed myself in the past when a request for default judgment was referred to me by a registrar under r 983.
- [15]If that course had been followed, the magistrate would have received submissions which ought to have directed him to the correct legal position. Had he followed that course he would have had the opportunity to avoid the errors into which he has fallen. Not only did he act without inviting submissions first, but it is evident from the course of correspondence that he subsequently refused to hear submissions from the solicitors for the appellant in relation to the matter.[4] Had he accepted such submissions, that may well have overcome any breach of the rules of natural justice which had occurred up until then. That breach was perpetuated by that refusal to receive submissions. It is however unnecessary for the appellant to rely on this further ground, as the decisions of the magistrate are appropriately set aside anyway.
Costs of the appeals
- [16]There is one most unfortunate consequence of this series of events. In each case the appellant sought and was plainly entitled to recover the costs of the appeal. Those costs were recoverable as between the parties to the proceeding pursuant to the contract. The fact that they are to be borne by the unfortunate respondent in each case was however in no way his or her fault. If a respondent had applied I would unhesitatingly have given that respondent an indemnity certificate under the Appeal Costs Fund Act 1973 s 15(2), because it is a tragedy that the innocent respondents should have to bear the costs of the magistrate’s errors of law. However, I cannot give an indemnity certificate unless an application is made to the court, and no application has been made, as no respondent appeared on the hearing of the appeal.[5]
- [17]The costs of each appeal assessed on the indemnity basis are going to be substantial, and it is in my view a tragedy that these costs will have to be borne by the innocent respondents. If an indemnity certificate had been given under the Appeal Costs Fund Act, they would ultimately have been paid out of consolidated revenue, since the Appeal Costs Fund as such no longer exists, and amounts payable under the Act are paid from consolidated revenue. In the circumstances, I consider it only just that the government should give serious consideration simply to paying these costs anyway on an ex gratia basis to prevent their falling unjustly on the individual defendants. To that end, I propose to send a copy of these reasons to the Attorney-General.
- [18]There is one other matter which strikes me as somewhat curious. In each of these five matters, it appears that the reference by the registrar under r 982 was made to Magistrate Shearer. I have no idea how it came about that all of these matters were referred to Magistrate Shearer, all I can say is that it was unfortunate that that course was followed, because it meant that the same error occurred in all of these cases.
Footnotes
[1] Although a judge or magistrate may still have power to give judgment under that rule on an application is made to the court: Egan v Posman [2018] QDC 53 at [24].
[2] Personal service of the claim and statement of claim was effected in Ferrier and Langham, and in Isik and Khabbaz, there was substituted service. In Ferrier the reasons for refusal stated simply that “the plaintiff is not entitled to compounding interest”.
[3] John Holland Pty Ltd v Tac Pacific Pty Ltd [2010] 1 Qd R 302.
[4] Despite the fact that on 9 August 2017 one of my colleagues drew attention to a similar error by Magistrate Shearer in relation to a default judgment he had wrongly refused: ABL Custodian Services Pty Ltd v Taylor [2017] QDC 212.
[5] As well no application was made by the appellant under that Act s 17.