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- Unreported Judgment
Sword Holdings Pty Ltd v Skelton QDC 89
DISTRICT COURT OF QUEENSLAND
Sword Holdings Pty Ltd v Skelton  QDC 89
SWORD HOLDINGS PTY LTD
BRADLEY VICTOR SKELTON
District Court at Brisbane
31 May 2019
30 April 2019
McGill SC DCJ
Plaintiff to elect how to deal with issue of jurisdiction
INFERIOR COURTS – District Court – jurisdiction – monetary limit – interest under contract taken into account.
District Court of Queensland Act 1967 s 68(3)(c).
Platinum Investment Group Pty Ltd v Anderson & Ors  QSC 2 – considered.
S C Russell for the plaintiff
Scoglio Law for the plaintiff
- This is an application by the plaintiff for summary judgment under r 292. By a claim and statement of claim filed in this court on 13 November 2017 the plaintiff claimed money owing from the defendant pursuant to a deed of amendment of settlement and release, together with interest and costs. The defendant filed a notice of intention to defend and defence on 10 January 2018, and an application for summary judgment was filed on 22 March 2019.
- Most of the statement of claim was expressly admitted by the defendant in the defence he filed, though he disputed the amount claimed by the plaintiff for interest. The background to the matter, as it emerges from those parts of the statement of claim admitted by the defendant, is that on about 22 September 2014 the parties entered into a deed of settlement with respect to proceedings then pending between them in the Supreme Court at Brisbane. By those proceedings the plaintiff sought to enforce against the defendant guarantees provided by him to the plaintiff of the obligations of a company with which the defendant was associated under two registered leases.
- Under the deed the plaintiff accepted a settlement sum of $600,000 as full and final settlement of the proceeding and all obligations of the defendant to it under the guarantees (clause 2.1), provided that that sum was paid by instalment payments of not less than $10,000.00 per month over a period of 20 months, and a lump sum payment of $400,000.00 on 5 May 2016. The statement of claim further alleged that on or about 13 January 2017 the parties entered into a deed of amendment of the settlement and release which amended the original deed, and which provided for certain additional payments, and varied the lump sum payment to a payment of $371,050.71 due on 5 January 2018. The deed provided that in the event of default the sum of $915,562.34 plus interest and costs, less any payment received from the defendant, was immediately due and payable to the plaintiff.
- The defendant has prior to the commencement of the proceeding made payments to the plaintiff totalling $224,000.00, including payments of $8,000.00 pursuant to the amended deed in each of February and March 2017. However, there was an event of default in April 2017 as a result of the defendant’s failure to make a payment of at least $8,000.00 within three business days after 5 April 2017. No further payments have been made thereafter to the plaintiff under the amended deed.
- There is a sum of $11,065.71 as interest included in the amount claimed in the claim, and a further $142,244.58 was alleged to have accrued due under a clause of the original deed which was unaffected by the amendment deed. On the hearing a total of $208,854.95 was claimed as prejudgment interest under the deeds, in addition to the principle sum of $702,556.35. The defence denied the amount claimed as interest in the statement of claim, and sought the appointment of a forensic accountant to determine the amount properly payable under the deeds. If there is a substantial dispute between the parties as to the amount payable as interest in the light of the deeds of settlement, a situation might arise where there was a need for a trial of the claim, in order properly to quantify the amount of interest, and hence the total amount payable. In those circumstances the court would not be satisfied that there is no need for a trial of the claim, so the requirements of r 292(2) would not have both been met.
- An affidavit by a director of the plaintiff deposed that at the relevant time the plaintiff was the registered proprietor of two premises in Trade Street Lytton, both of which were leased to a company BV Skelton Pty Ltd, which went into liquidation in January 2013. Exhibit MM5 to that affidavit is a copy of a deed made between the parties dated 22 September 2014. The affidavit deposes to the fact that the defendant failed to pay the lump sum payment referred to in the original deed when it fell due, and that the parties entered into a further deed, the amended deed of settlement and release, a copy of which is Exhibit MM6 to the affidavit. This second deed operated as an agreement under seal to amend the original deed in various ways set out in a schedule to the second deed. The effect of this deed therefore was to amend the original deed, rather than produce a new agreement under seal in substitution for it.
Interpretation of the deeds
- The amendments included varying the definition of “Settlement Sum” from $600,000.00 to “$600,000.00 plus Interest.” In addition a definition of “Interest” was inserted in clause 1.1 of the original deed, which until then had no definition of interest; the definition provided that “Interest” meant “10 per cent calculated on the outstanding balance of the Outstanding Amount on a monthly basis and in arrears.” The provision for payment of the settlement sum was amended, so that, after the obligation to make instalment payments in a sum of no less than $10,000.00 per month for a period of 20 months, there was an obligation to make additional instalment payments in the sum of no less than $8,000.00 per month for a period of 12 months, followed by an obligation to make a lump sum payment of $371,050.71 on 5 January 2018, in lieu of the previous obligation to make a lump sum payment in May 2016. Former clauses 2.2(c) and (d) were amended to clauses 2.2(d) and (e).
- Clause 3, dealing with when the defendant would be in default, was amended to provide that it would occur if any additional instalment payment or the new lump sum payment was not paid when it fell due and for three days thereafter, as well as applying to any instalment payment. Clause 3.4 in the original claim provided: “The defendant acknowledges that in an Event of Default the full balance of the debt owing to the plaintiff by the defendant pursuant to the Guarantees and as claimed in the Proceedings (as well as any interest calculated in accordance with the claim and Costs) less any payments received from the defendant, is immediately due and payable to the plaintiff.” That clause was by the second deed deleted and replaced with the following: “The defendant acknowledges that in an Event of Default, the Liquidated Debt (as well as any interest and Costs) less any payments received from the defendant is immediately due and payable to the plaintiff.”
- The term “Liquidated Debt” was defined in the deed as amended, by a definition inserted by the second deed, as meaning “the sum of $915,562.34 (plus interest and Costs) owed by the defendant to the plaintiff pursuant to the Guarantees.” The term “Outstanding Amount” was itself defined, as a result of the operation of the second deed, as the sum of “$400,000.00 plus Interest.”
- Clause 1.3 of the schedule to the second deed also inserted a definition of “Repayment Schedule”, which was a reference to the document which was annexure A to the second deed. The significance of this is unclear; so far as I can see, the defined term “Repayment Schedule” is not used in the provisions inserted into the original deed by the second deed. It appears however to be a schedule listing the payments which were contemplated by the deed in its amended form.
- I do not think that I have any need of a forensic accountant to work out the effect of the deed, or indeed the amount payable under it. The deed in its original form provided an entitlement to interest “calculated in accordance with the claim” in the event of default under it. That was provided by Clause 3.4, and made it clear that the reference in that clause was to interest calculated in accordance with the claim in the then existing proceeding, namely the proceeding in the Supreme Court. The effect of the amendment to the deed however was to substitute an acknowledgment to pay “the Liquidated Debt (as well as any interest and costs) less any payment received from the defendant, ” The term “Liquidated Debt” was defined as the sum of $915,562.34 plus interest and costs owed by the defendant to the plaintiff pursuant to the guarantees.
- If the term “interest” in Clause 3.4 is a reference to the defined term “Interest”, the rate of ten per cent calculated on the outstanding balance of the outstanding amount on a monthly basis and in arrears, on the face of it this obligation produces two over-lapping entitlements to interest, one being interest payable on the liquidated sum pursuant to the guarantees, and one being interest payable on the outstanding amount, or so much of it is as is from time to time outstanding, at the rate specified in the deed as amended. It seems however that it could hardly be appropriate to interpret the settlement deed in a way which imposed an obligation to pay two amounts of interest cumulatively in respect of something. The submissions of counsel for the plaintiff sought interest in accordance with the deed as amended at the rate of ten per cent annum: para 18. This does not reflect the interest calculation set out at paragraph 12(b) and 14 of the statement of claim, which are calculated at a lower percentage, and on different amounts.
- The interpretation of the deed as amended is not clear if all references in the deed as amended to “interest” are references to “Interest” as defined. Apart from anything else, the reference to “interest” in the term “Liquidated Debt” as defined could not be a reference to “Interest” as defined, because it was expressly referable to interest payable under the guarantees. The explanation must be that the defined term was “Interest” and it applied only where the word was written with a capital. Where the word appeared in all lower case, it was just a reference to interest in a general sense. Approached on that basis, the amended deed is sensible and consistent in this respect.
- The question of the correct interpretation of the contract is a question of law, and in my view this is a matter which can be decided on an application for summary judgment. For reasons that will emerge later however it is not appropriate that I decide the matter finally. My preliminary view is that the definition of “Interest” operated in the way I have indicated. The effect of the deed as amended is to require instalment payments over a period of 20 months of $10,000 per month, additional instalment payments of $8,000 per month for a period of 12 months, on the fifth day of each month from January to December 2017, and a lump sum payment due on 5 January 2018. On the face of it therefore what was payable by way of a settlement sum under the deed is a fixed amount, $667,050.71. If that equals “$600,000.00 plus Interest” then the term “Interest” for practical purposes must mean something which produces the figure of $67,050.71.
- If this is the correct interpretation, the meaning of the defined term “Interest” does not matter very much now, because it is apparent from the other provisions of the deed that it must mean a calculation which produces that particular result. What matters for present purposes is whether the defined term “Interest” is of any relevance if there is an event of default under the deed as amended. That in turn depends on what is meant by the somewhat obscure provision which was inserted as Clause 3.4 by the amending deed, “the Liquidated Debt (as well as any interest and costs) less any payments received”, in circumstances where the term “Liquidated Debt” is itself defined as a particular sum “plus interest and costs”. I expect that this is simply bad drafting, that there is only one entitlement to recover interest, and this is a reference to the amount of interest owing pursuant to the guarantees. What matters is not the definition of “Interest” in the deed as amended, but how interest is calculated under the guarantees.
- Clause 22.1(3) provided that the guarantor would “pay to the landlord interest at the stipulated rate from the time of any rent or other monies respectively falling due to the date of payment….” The stipulated rate was defined in clause 2.1(23) to mean “a percentage interest rate per annum equal to the prime lending rate charged by the landlord’s bank plus five per centum.” This definition appeared in both leases. There is no evidence of the prime lending rate charged by the landlord’s bank at the relevant times, and therefore no evidence as to what the stipulated rate of interest was. There is no evidence as to whether it corresponds to the rates claimed in the statement of claim. In these circumstances, the short answer to the application is that the plaintiff has not proved its case, as to the claim for interest. The defendant has disputed that the amount claimed as interest is correct, and the plaintiff has failed to show that it is.
- There is however a more fundamental difficulty confronting the plaintiff. By the claim the plaintiff seeks judgment for an amount which, inclusive of interest, exceeds the monetary limit of the District Court. The plaintiff in written submissions relied on the proposition that, when determining the court’s civil jurisdiction, “no account shall be taken of any amount awarded or liable to be awarded in the action by way of interest on any amount”: District Court of Queensland Act 1967 s 68(3)(c). There is however a decision of the Supreme Court that this provision does not apply to interest under a contract. I hesitate to disagree with a Supreme Court judge, particularly one who has arrived at that conclusion after a comprehensive review of the history of s 68(3)(c) and the various authorities touching on the issue, particularly in a situation where, after I drew this decision to the attention of counsel for the plaintiff, he advised that he did not seek to argue that it was not correct.
- His response however was to seek interest under the Civil Proceedings Act 2011 s 58, since the point of the judgment was that interest under that provision is the interest that is not to be taken into account under s 68(3)(c). The difficulty with that argument however is that there is no entitlement to interest under the Civil Proceedings Act 2011 s 58, because there is in this case a contractual entitlement to interest, so the operation of that section is excluded: s 58(2)(b). The position therefore is that it is contractual interest or nothing.
- It would be open to the plaintiff to deal with the matter by abandoning the excess, or I could transfer the proceeding to the Supreme Court under the Civil Proceedings Act 2011 s 28(2). This possibility was raised during the hearing, but no definite conclusion was arrived at. It seems to me however that these are the only possible options at the present time. I cannot give judgment for the plaintiff on the summary judgment application as it stands, and indeed if the court does not have jurisdiction I cannot even consider it. For this reason, it is unnecessary for me to address the other matters raised in the defence of the defendant, or in his affidavit or oral submissions. The purpose of analysing the plaintiff’s claim up until now has simply been to decide the question of jurisdiction. But in my view the plaintiff must either abandon the excess in accordance with the Act, and prove what the amount owing for interest is, to show that (as I expect) it is appropriate to give judgment for the monetary limit, or have the proceeding transferred to the Supreme Court. I propose to put the plaintiff to its election in this regard after these reasons are published.
 Submissions in writing for the plaintiff para 21. It includes interest accrued after the issue of the claim.
 Reminiscent of the distinction between “Court” and “court” in the Corporations Act 2001 (Cth).
 Platinum Investment Group Pty Ltd v Anderson & Ors  QSC 2.
 District Court of Queensland Act 1967 s 73: this must be endorsed on the claim.
- Published Case Name:
Sword Holdings Pty Ltd v Bradley Victor Skelton
- Shortened Case Name:
Sword Holdings Pty Ltd v Skelton
 QDC 89
31 May 2019