Charter v Fast Access Finance (Beaudesert) Pty Ltd [2011] QCAT 525

CITATION: Carter and Anor v Fast Access Finance (Beaudesert) Pty Ltd and Anor [2011] QCAT 525 PARTIES: Rachael Carter Michael Sinclair (Applicants) v Fast Access Finance (Beaudesert) Pty Ltd Diamond Clearing House Pty Ltd (Respondents) APPLICATION NUMBER: 2512/10 MATTER TYPE: Other minor civil dispute matters HEARING DATE: 6 September 2011 HEARD AT: Brisbane DECISION OF: William LeMass, Adjudicator DELIVERED ON: 25 October 2011 DELIVERED AT: Brisbane ORDERS MADE: 1. The respondents pay to the applicant the sum of $1,500 within 14 days. CATCHWORDS: Pay day lenders – minimum interest rate – contravention Consumer Credit (Queensland) Act 1994 Consumer Credit Code APPEARANCES and REPRESENTATION (if any): APPLICANT: Caxton Legal Centre Solicitors Stannard and Burton Counsel Mr Cleary RESPONDENT: Counsel Mr McDonald REASONS FOR DECISION [1] Rachael Carter and Michael Sinclair are partners with two children, who had fallen behind substantially with their rental. On 5 November 2009, they attended the offices of Fast Access Finance (Beaudesert) Pty Ltd in order to obtain a loan of $1,000 to pay the rent. -- 1 of 9 -- 2 [2] They left sometime later having signed documentation, the full meaning of which we will explore later, that required them to repay the sum of $2,000 by weekly repayments of $98.00 over a period of some 5 months. [3] The sum of $1,000 was later deposited to their bank account. [4] Such transaction would ordinarily be considered a credit contract for the purposes of the Consumer Credit (Queensland) Act 1994 and the appendix being the Consumer Credit Code because of sections 4, 5, 6 and 11 of the Act.1 [5] With respect to section 6(1) set out below I find: (a) the debtor is a natural person ordinarily resident in this jurisdiction; and (b) the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes; and (c) a charge is or may be made for providing the credit; and (d) the credit provider provides the credit in the course of a business of providing credit or as part of or incidentally to any other business of the credit provider. [6] Clause 6(1)(a) above is clear, and (b) is satisfied because it is for rent. With respect to (d) above I refer to the affidavit of Joshua James Underwood wherein he annexes photographs of the respondents‘ business as well as a number of advertisements for the respondents and it is clear that they are carrying on the business as a credit provider. As to (c) the matter of whether a charge is or may be made for providing credit I 1 4.(1) For the purposes of this Code, ―credit‖ is provided if under a contract— (a) payment of a debt owed by one person (the debtor) to another (the credit provider) is deferred; or (b) one person (the debtor) incurs a deferred debt to another (the credit provider). Meaning of ―credit contract‖ 5. For the purposes of this Code, a ―credit contract‖ is a contract under which credit is or may be provided, being the provision of credit to which this Code applies. Provision of credit to which this Code applies 6.(1) This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of pre- contractual obligations) is proposed to be entered into— (a) the debtor is a natural person ordinarily resident in this jurisdiction or a strata corporation formed in this jurisdiction; and (b) the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes; and (c) a charge is or may be made for providing the credit; and (d) the credit provider provides the credit in the course of a business of providing credit or as part of or incidentally to any other business of the credit provider. 11.(1) In any proceedings (whether brought under this Code or not) in which a party claims that a credit contract, mortgage or guarantee is one to which this Code applies, it is presumed to be such unless the contrary is established. -- 2 of 9 -- 3 note that this is denied by the respondents and I will deal with that fully, but nevertheless I find that a charge is made and that this is a credit contract which should be regulated by the Act. [7] To rebut the presumption in section 11 Ms Tracy Reed, a Director of Fast Access Finance (Beaudesert) Pty Ltd, has sworn an affidavit in the proceedings as well as giving evidence. Relevantly as follows:  Ms Reed was the person who personally conducted the dealings with the applicants on 5 November 2009. Ms Reed took from the applicants exhibit TR1 in her handwriting which document is headed ‗Loan Application‘. This has the details of their names, addresses and personal contacts. The amount requested is $1,000 and that they can pay $98.00 weekly.  It says that they own a Holden Commodore 1993 to the value of $2,000.  It sets out their weekly budget and is signed by them.  Exhibit TR2 to Ms Reed‘s affidavit is the privacy consent form signed by the applicants which says ―I/We have made application to Fast Access Finance Beaudesert Pty Ltd lender to borrow a certain amount of money.‖ Exhibit TR10 to Ms Reed‘s affidavit is a loan forecast report that shows a loan amount of $2,000 and repayments of $98.00 per week with no interest payments.  TR 4 is the security documentation charging the applicants‘ motor vehicle.  Exhibit TR11 to Ms Reed‘s affidavit is a consumer report for Rachael Carter showing at page 2 that Fast Access Finance made a consumer credit enquiry with VEDA Advantage for $1,000, a chattel mortgage for a co borrower with spouse on 5 November 2009. It is understood that VEDA Advantage is a credit reporting agency. [8] It would appear that having produced these documents and made these enquiries Ms Reed then decided that she would advance the funds to the applicants and she printed the necessary documentation for signature. Now the above documentation is uncontroversial with respect to a loan but the following documents which were produced for execution are not:  Ms Reed produced firstly exhibit TR3 to her affidavit which is a sales agreement and says on its face that the applicants Mr Sinclair and Ms Carter are the buyers from Fast Access Finance (Beaudesert) Pty Ltd of ―8 x loose modern brilliant cut diamonds, 0.10 cts, colour ―H‖, clarity p1‖.  The price of these diamonds is said to be deposit $0, balance $2,000. -- 3 of 9 -- 4  A second document was prepared and printed by Ms Reed and presented to Ms Carter and Mr Sinclair for signing. This document is headed ―Diamond Clearing House Pty Ltd Purchase Agreement‖. It says that ―Michael Sinclair and Rachael Carter are the sellers of diamonds to the said Diamond Clearing House Pty Ltd and they have sold 8 x loose modern brilliant cut diamond, 0.10 cts, colour ―H‖, clarity p1‖. This is precisely the same description as the sales agreement.  They are all produced by Ms Reed in one event, that is, whilst it is said that the buyers of the diamonds are independent, documentation for the purchase and sale are all produced by Ms Reed for signing at one time.  Further the sale documentation contains the details of the applicants‘ bank account in that it contains its ID, BSB and account number and says that the purchaser shall pay the price of the diamonds in full to the vendor‘s nominated bank account which presumably must have been shared by Fast Access Finance (Beaudesert) Pty Ltd with the independent buyer of the diamonds. [9] These and the other documents were presented by Ms Reed to the applicants whilst they were in the office. The applicants have signed both of the above sale and purchase documents and their signatures appear to have been witnessed by Ms Reed. It is conceded by both sides that the issue of the sale and purchase of diamonds by the applicant was not mentioned or discussed prior to signing and that no diamonds were ever shown or displayed to the applicants and indeed no diamonds were ever present in the premises of the respondents. [10] I find that because Ms Reed was able to make all arrangements on behalf of the first and second respondents that they are related by partnership agency or other relevant agreement and I note that the second respondent has not appeared in this matter or was represented at the hearing. [11] The applicants say that they did not see these documents or discuss them in any way with Ms Reed rather they say that they signed the documents by Ms Reed holding the documents and pointing out to them where to sign without them having any ability to read the documents. They say and Ms Reed confirms that she was cautious to show them the amount payable and the minimum weekly payments and to ensure that they understood the payments. The applicants were agreeable with this. The documents were not given to the applicants at that time but must have been given to them at some time as Ms Carter eventually read them and was confused about the diamonds. [12] The respondents say that because of the existence of these documents the arrangement is not one regulated by the Code and that therefore they do not need to comply with all of the sections of the Code concerning disclosure, provision of documents and the requirement of charging a -- 4 of 9 -- 5 maximum interest rate of 48%. The respondents say this, because whilst they agree that all the provisions in section 6 above apply they did not apply a charge for credit under section 6(1)(c) and further for the purposes of section 10B: “Application of code to particular contracts for the sale of goods by instalments” The amount payable to purchase the goods being $2,000 does not – section 10B(1)(b) ―exceed the cash price of the goods‖. [13] Evidence was given by Mr Robert Legat for the respondents who provided an affidavit dated 6 September 2011 where he is described as a Director of Fast Access Finance Pty Ltd. The relationship of Fast Access Finance Pty Ltd to Fast Access Finance (Beaudesert) Pty Ltd is not described. It may be by franchise or agency but they are related. Mr Legat provides copies of valuations for each of 8 diamonds of the description in the contract. Ms Carter made enquiries of Fast Access Finance by email on 2 December 2009. The enquiry concerned early repayment of the loan. [14] Ms Carter received a reply on the same day from Mr Legat who describes himself in the email as the ―legal director for Fast Access Finance Group‖. In the email Mr Legat advises as follows: “Fast Access Finance (Beaudesert) Pty Ltd does not provide consumer loans. They are a diamond retailer, and may occasionally provide business loans. Diamonds are sold in two ways; for cash or on an instalment plan. The purchase price is paid over time usually by weekly or fortnightly instalments, no interest and no fees are charged. Customers may then deal with the diamonds as they see fit. We have an agency agreement with the company who will buy diamonds from our customer for cash at wholesale rates.” The cost of this loan [15] If this loan is regulated by the Consumer Credit Code, I have been given a document as part of the applicants‘ case headed Consumer Credit (Queensland) Special Provisions Regulation 2008 and at section 3 of that regulation it says the maximum annual percentage rate for a credit contract to which the code applies is 48% and shall be calculated in accordance with clause 4. [16] Clause 4(2) sets out an algorithm for the calculation of this amount which I can not read let alone understand. This is dealt with in the affidavit of Ms Bridget Ann Burton, Solicitor for the applicant who says that she has calculated the interest rate charged by Fast Access Finance (Beaudesert) Pty Ltd as if it were a regulated credit contract under the Code. She says that her calculation is not in accordance with the algorithm as they do not have access to the actuarial software necessary to complete that calculation and nor could they afford to instruct an expert to do so but that -- 5 of 9 -- 6 she has applied a loan amortisation schedule used in the Microsoft Excel program and says that it is near enough to approximately correct and even if it is not, that is not an issue here. In paragraph 12B of her affidavit she says that the approximate annual percentage rate charged by Fast Access Finance (Beaudesert) Pty Ltd is 318.07% compared with the allowable rate quoted above as 48%. I accept that no matter the difficulties of calculation, that the amount charged is well in excess of that which would have otherwise been allowed. [17] The above is a contravention of the Code entitling the applicants to restitution or compensation pursuant to section 114 of the Code. [18] Ms Carter at and from paragraph 52 of her affidavit says that as a result of this transaction she and her husband suffered. She was approximately 20 years of age at the time and had 2 children. She says that in December 2009, a month later, Michael lost his job and could not get Centrelink immediately. She had difficulty paying the rent. I paraphrase that evidence as follows: It was a difficult choice because if I did not pay for the loan our car would be taken by Fast Access Finance Pty Ltd and without a car Michael could not have looked for more work. I decided to pay the loan and rapidly fell behind in the rent again. Because I could not pay the rent I spoke to the Real Estate Agent and told them I wanted to move out and break the lease. I ended up with a $3,000 debt to the Real Estate Agent because I broke the lease. After breaking the lease Michael, my children and I moved into Michael’s mothers house. I received frequent phone calls from Fast Access Finance. She said words to the effect of if you do not make the repayments we can come and take the car. After a short time my children and I moved in with Mum while Michael moved in with my brother. Mum let us live in her house rent free and helped take care with the expenses for the kids. My mum helped me with other things so I could pay off this loan and the debt to the Real Estate Agent. If I had known about the diamonds and what Fast Access Finance is now saying is the nature of the transaction that took place on 5 November 2009, I would not have gone ahead and got the loan, I would have been suspicious and not want to get myself into something that is weird and that I did not understand. We could have gone to another lender instead. Conclusion -- 6 of 9 -- 7 [19] The agreement between the parties needs to be construed either as a contract for the sale and purchase of diamonds or as a contract for the provision of credit which would be regulated by the Code. [20] Where terms of a contract are anomalous or difficult to construe one must look at the whole of the transaction and the intention of the parties: AGC v Balding.2 Isaac J said: “The hiring agreement on which the question at issue arises is in a form which introduces considerable complication, because, read literally as isolated provisions, several of its clauses are irreconcilable. What is the proper course for the Court to take in such a case? In Helby v Matthews it is distinctly stated that the substance of the agreement must be looked at as a whole. That is true of every agreement. ... “Coming then to the examination of the agreement, I quite concede that the agreement must be regarded as a whole – its substance must be looked at. The parties cannot, by the insertion of any mere words, defeat the effect of the transaction as appearing from the whole of the agreement into which they have entered … you must look at the agreement as a whole and see what it’s substantial effect is.”” [21] This was cited by Justice Matthews of our Supreme Court in Stradbroke Waters Co Owners Cooperative Society Ltd v Taylor [1988] 1 QDR 595 at 598. At 598: “When one has words in one part of an agreement which point in one direction and words in another part which point in a different direction, the agreement as a whole should be considered and the substantial effect of it so ascertained.” [22] The applicants contend that they attended Fast Access Finance (Beaudesert) Pty Ltd on 5 November in order to obtain a loan for $1,000 in order to pay their rent. [23] They obtained $1,000, were advised in the meeting that they would need to repay monies in excess of $1,000 at the rate of $98.00 per week and they were no doubt pleased when they left to have their accommodation problems solved. [24] Submissions on behalf of the respondents say ―it is contended that the applicants did not go to FAF Beaudesert with the primary purpose of applying for a loan. Their primary purposes was to get their hands on the sum of $1,000.‖ [25] The respondents contend and submit that the agreement as a whole ―is not a consumer credit contract as regulated under the code‖ (by virtue of section 6 and 10B) and in section 3 of their submissions they say this is because pursuant to section 6 there was no charge for the credit and 2 Australian Guarantee Corporation Ltd v Balding [1930] HCA 10; (1930) 43 CLR 140. -- 7 of 9 -- 8 pursuant to section 10B the price for the goods was no greater than the cash price for the goods. [26] The respondents‘ submissions and indeed the correspondence of Mr Legat would have one believe that the genuine nature of the transaction between the parties was one of the sale and purchase of diamonds. Mr Legat in his correspondence and in the applicants‘ submissions suggests that Mr Sinclair and Ms Carter attended their office for the purpose of purchasing diamonds and immediately reselling those diamonds as an essential part of that transaction so that as the net result they could lose $1,000. They would never see the diamonds which they contracted to purchase and nor would they get any benefit for example by Ms Carter being able to wear the diamonds. [27] I find that the characterisation of the transaction in that manner is so highly unlikely, improbable and implausible as to be a complete fiction. It is ridiculous that a person would wish to enter a business premises in order to buy a product no matter what it be, to sell it immediately and make a loss. [28] That was not the intention of the parties and the respondents have not overcome the presumption in section 11 that this is a credit contract. As said by the High Court, ―the substance of the agreement must be looked at as a whole‖3. [29] This is a contract whereby Ms Carter and Mr Sinclair obtained a loan which in accordance with section 6 of the Code:  Was a loan to a natural person, resident within the jurisdiction;  For the purposes of personal, domestic or household purposes, that is the payment of rent;  For which a charge is made being the difference between the $1,000 they received and the $2,000 they had to repay; and  Where the credit provider provides the credit in the course of a business of providing credit. [30] Looked at as a whole the transaction is one on all fours with that described as being regulated by the Code. [31] When enacting this legislation the government set out to protect vulnerable persons by providing that they should have copies of documents, explanation of provisions and applying maximum interest rates. The late Hon Tom Burns upon introducing the Act in its second reading to Parliament says: “one of the key elements of the Consumer Credit Code is to ensure that there is truth in lending, this means that a consumer can make an informed choice between credit providers as to the nature of credit 3 Australian Guarantee Corporation Ltd v Balding [1930] HCA 10 (1930) 43 CLR 140. -- 8 of 9 -- 9 being offered as well as the comparative costs between credit providers.” [32] Ms Carter says in her affidavit that had she ever been informed about the transaction and the diamonds she was purchasing, she would have been put on notice and looked elsewhere. [33] The applicants have requested the respondents on many occasions to produce accounts showing receipts and payments. The respondents have had the opportunity in this hearing of producing the accounts which would show precisely what was paid and they have not taken any opportunity to do so. [34] This transaction breaches the Code in many respects, pursuant to section 70 it is reopened and I find the respondents are not entitled to any interest, credit charge or profit. As they have not produced any evidence or statement of account then I accept the evidence of the applicant that they have paid $2,500 to repay the loan of $1,000 and I order that the respondents pay to the applicants the sum of $1,500 within 14 days. -- 9 of 9 --