Capital At Call P/L v Toumpas & Anor [2009] QCA 313

SUPREME COURT OF QUEENSLAND CITATION: Capital At Call P/L v Toumpas & Anor [2009] QCA 313 PARTIES: CAPITAL AT CALL PTD LTD ACN 123 327 417 (respondent/applicant) v KATHERINA TOUMPAS (appellant/first respondent) STEPHEN JOHN PAUL MITCHELL (appellant/second respondent) FILE NO/S: Appeal No 10387 of 2009 SC No 7456 of 2009 DIVISION: Court of Appeal PROCEEDING: Application for Security for Costs ORIGINATING COURT: Supreme Court at Brisbane DELIVERED EX TEMPORE ON: 16 October 2009 DELIVERED AT: Brisbane HEARING DATE: 16 October 2009 JUDGES: Muir JA Reasons for judgment and order ORDER: The respondents/appellants provide security on or before Friday 30 October 2009 to the satisfaction of the Registrar for the applicant/respondent's costs of the appeal in the sum of $12,000. CATCHWORDS: APPEAL AND NEW TRIAL – APPEAL - PRACTICE AND PROCEDURE – QUEENSLAND – SECURITY FOR COSTS – where respondents appeal against orders made upon the hearing of a summary judgment application in which the respondents were ordered to pay the applicant $612,511.76 – where respondents failed to satisfy primary judgment – where no dispute that some of the principal moneys are owing – where respondents alleged to be impecunious – whether security for costs should be provided Uniform Civil Procedure Rules 1999 (Qld), r 772 Ivory v Telstra Corp Ltd [2001] QCA 490, cited Luadaka v Dooley & Anor [2003] QCA 51, cited Natcraft Pty Ltd v Det Norske Veritas [2002] QCA 241, cited Thompson v Robinson [2005] QCA 253, cited -- 1 of 8 -- 2 COUNSEL: P Travis for the applicant No appearance for the respondents SOLICITORS: Elliot May Lawyers for the applicant No appearance for the respondents MUIR JA: The applicant/respondent applies, pursuant to r 772 of the Uniform Civil Procedure Rules 1999 (Qld) for an order that the respondents/appellants provide security for the applicant's costs of the appeal in the sum of $22,770. The appeal is from a judgment and orders of a judge of the trial division made on 24 August 2009 on the hearing of a summary judgment application by which the respondents were ordered to pay the applicant $612,511.76 including $469,853.52 interest. Costs were ordered against the respondents on an indemnity basis. In a claim filed on 16 July 2008, the applicant claimed against the respondents, recovery of possession of a parcel of land. It claimed against the first respondent for $409,653.88 in principal, interest and fees alleged to be owing by the first respondent to the applicant as at 7 July 2008, pursuant to a written loan agreement dated 4 March 2008. The same moneys were claimed against the second respondent as moneys owing under a Deed of Guarantee and Indemnity dated 5 March 2008. Interest on the sum of $409,653.88 at the rate of 7.5 per cent per month from 7 July 2008 until judgment, was also claimed. The allegations in the statement of claim may be summarised as follows: (a) The first respondent was the registered owner of the land as trustee; (b) The applicant was the mortgagee of the land under a mortgage dated 29 November 2007; (c) On or about 5 March 2008 the applicant advanced to the first respondent in her own capacity and as trustee of the trust, $311,141.31, pursuant to the terms of the loan agreement; (d) The loan was secured by the mortgage; (e) Under the loan agreement the first respondent agreed to: pay interest on the loan at the rate of 5.85 per cent per month and default interest at the rate of 7.5 per cent -- 2 of 8 -- 3 per month calculated on a daily basis and compounded monthly; repay the loan on 30 April 2008 and to pay and indemnify the applicant in respect of all costs, fees and expenses reasonably incurred by the applicant; (f) The first respondent failed to repay the outstanding principal sum of $346,487.93 on 30 April 2008 and has failed to deliver possession of the land to the applicant; (g) Pursuant to the Deed of Guarantee, the second respondent agreed to guarantee the payment to the applicant of the "Guaranteed Moneys" and to indemnify the applicant against any claim, action, damage, loss, liability, costs et cetera paid or incurred by the applicant in relation to the non-payment or non-recovery of the Guaranteed Moneys; (h) Despite demand the second respondent has failed to pay the Guaranteed Moneys to the applicant. The pleading is not a model of the pleader's art. For example, it uses in paragraph 6, the expression, "Secured Money" and in paragraphs 10 and 11 the term "Guaranteed Moneys" but leaves those terms undefined. Presumably, by going to the mortgage and guarantee, one can work out what is meant. The respondents who were self-represented, understood, or believed that they understood the allegations in the statement of claim, as most of them were admitted in an amended defence and counter claim filed on 3 July 2009. The amended defence admits: the allegations concerning the entering into and terms of the loan agreement, mortgage and guarantee; that the principal sum due on 30 April 2008 was $311,141.31; interest at the rate of 5.85 per cent per month was payable on that sum and that the amount of such interest due on 30 April 2008 was $35,346.62. The amended defence alleged that: the land was sold by the applicant in the exercise of a power of sale for a price of $952,750; "the proceeds of sale .. were at least $89,370.48" and that $124,599.78 was paid by the respondents to the applicant in reduction of the debt. -- 3 of 8 -- 4 It is alleged that the sum claimed by the applicant for default interest is "a penalty; unconscionable, and that s 12CA of the Australian Securities and Investment Commission Act 2001" has been breached because the interest claim: " (f) (i) is claimed at a rate of 7.5% per month, calculated daily and compounding monthly; (ii) comprises a rate that is equivalent to 90% calculated daily and compounded monthly; (iii) comprises a rate that is equivalent to more than 100% p.a. simple interest; (iv) is claimed in addition to 'additional default management fees and costs' under the loan agreement; and (v) is not a genuine pre-estimate of the damage likely to be suffered by the plaintiff being unpaid. " The respondents' counterclaim against the applicant repeated the allegations in the defence and alleged that in making the loan the applicant was engaged in: trade or commerce; conduct in relation to "financial services" and the supply or possible supply of "financial services". On the hearing of the summary judgment application the respondents, who were represented by senior counsel instructed by QPILCH, argued that the sum of $54,000 referred to in the defence, having been appropriated in reduction of the loan, could not be reappropriated by the applicant to another account. The applicant's counsel conceded that point. He informed the Court that the applicant had abandoned its claim for interest at the penalty rate and the respondents' senior counsel accepted that there was no longer a defence based on any payment of or claim for penalty interest. The remaining ground of defence relied on in senior counsel's address was unconscionability. In that regard he submitted that having regard to the "extraordinary rate of interest .. the fact that there was .. no suggestion of legal advice or any drawing attention to the particular interest rate and. .. this was all done in the scheme that there was another .. longer term transaction which was to replace it .. there is at least a reasonable -- 4 of 8 -- 5 argument that 5.85 per cent compounding daily, because that's another term that wasn't drawn to the client's attention .. is an extraordinary circumstance which .. may justify the intervention of a Court." There was no dispute after conclusion of submissions that the principal sum of $142,658.24 was due and owing subject to the unconscionability argument. The only evidence adduced on behalf of the respondents was an affidavit of the first respondent in which she relevantly swore: (a) Mr Ambrose [the person in control of the applicant] on behalf of the applicant at the time the subject documents were signed, said that he would arrange a further long-term facility; (b) The respondents did not "pay too much attention to the interest rate specified in the documents or how it was calculated, because it was only to be a short term facility .."; (c) Mr Ambrose did not mention the interest rate or draw attention to it; (d) Mr Ambrose did not arrange a further long-term loan; and {e) At about the time the subject documents were signed the general mortgage rate was approximately 7 per cent, the rate of interest on small business loans 9 per cent, and interest on monies owing under credit cards 15 per cent. The defence did not rely on any failure on the part of the applicant to replace the subject loan with a long-term loan. There was no allegation or evidence of reliance by the respondents on the applicant. Senior counsel for the respondents did not draw the attention of the learned primary judge to any authorities, statutory provisions or principles in support of his submissions concerning unconscionability. It is therefore unsurprising that the primary judge gave judgment for the applicant. It is submitted on behalf of the applicant that the respondents' impecuniosity is implicitly admitted by: their acknowledgement that the principal sum of $142,658.24 was owing and their failure to pay it; the respondents' ability to qualify for assistance from QPILCH -- 5 of 8 -- 6 in the defence of a summary judgment application; the existence of legal proceedings against the respondents by a person claiming to be owed $9,302.50; the respondents' failure to file a defence to the claim in those proceedings and the evidence revealing that the $9,302 claim had been filed on 17 August 2009 in the District Court to establish the interest claimed under caveats lodged by the respondents' former counsel in the proceeding. No defence had been filed. The absence of a defence would not seem to establish much, as the material does not indicate the date on which the search was conducted. The applicant also relied on the failure on the part of the respondents to respond to a letter from the applicant's solicitors to the respondents' then solicitors dated 22 September 2009 raising the matters listed above, or some of them, including their failure to satisfy the judgment given at first instance in the sum of $612,511.76 and their failure to provide proof that the respondents had net assets sufficient to satisfy any costs order in favour of the applicant. Under r 772 of the Uniform Civil Procedure Rules 1999 (Qld) the Court of Appeal may order that an appellant give security "for the prosecution of the appeal without delay and for payment of any costs the Court of Appeal may award to a respondent." The discretion is unfettered but must be exercised judicially with regard to relevant considerations. In this case it is relevant that the respondents lost at first instance after advancing a less than compelling defence.1 There is good reason to believe that the respondents will be unable to pay the applicant's costs if the appeal fails2 and the respondents' modest prospects of success on appeal are also relevant considerations.3 That an appellant's impecuniousity might stifle the action if security for costs is ordered is "of much less importance on appeal" than at first instance.4 1 See Natcraft Pty Ltd v Det Norske Veritas [2002] QCA 241 and Ivory v Telstra Corp Ltd [2001] QCA 490. 2 See Natcraft Pty Ltd v Det Norske Veritas [2002] QCA 241 and Ivory v Telstra Corp Ltd [2001] QCA 490. 3 Natcraft Pty Ltd v Det Norske Veritas [2002] QCA 241. 4 Thompson v Robinson [2005] QCA 253 at [6]; Luadaka v Dooley & Anor [2003] QCA 51 at [5]. -- 6 of 8 -- 7 The appeal would seem doomed to failure, at least in part, as there is no dispute that some of the principal moneys are owing. Once again, no reasoned argument has been put forward to support the claim of unconscionability but, having regard to the usurious interest rate, I am unable to conclude that the respondents have no argument on the merits to advance. The applicant's solicitor swears that he was admitted as a solicitor in 2002 and has held an unrestricted principal’s practising certificate for more than three years. His estimate of the costs and disbursements of the appeal is $22,770 but his expertise in costs assessment and experience in that area is unknown. Security for costs orders are not normally intended as a full indemnity and it is inappropriate to order an impecunious appellant to provide greater security than is absolutely necessary. Taking these matters into account I regard $12,000 as an appropriate figure to order. I should mention that when the matter came on for hearing after a considerable delay due to the failure of the digital recording equipment to operate, or perhaps more accurately to be switched on and then to be made to operate, there was no appearance by the respondents. Their solicitor on the record appeared and informed the Court that he had no instructions. He provided the Court with a copy of a signed notice that the respondents were acting in person. That document will be made Exhibit A. ADMITTED AND MARKED "EXHIBIT A" The matter was called but the respondents did not appear. The order is that the respondents/appellants provide security on or before Friday 30 October 2009 to the satisfaction of the Registrar for the applicant/respondent's costs of the appeal in the sum of $12,000. By operation of the rules if that security is not provided the proceeding will be stayed. MR TRAVIS: Yes. Your Honour, just a couple of things, if I may? MR TRAVIS: Thank you, your Honour, and if it's - and it may - if it's appropriate, your Honour, just on the issue of the form of the order, I'd submit, on behalf of my client, that an order perhaps staying the proceeding until the security is paid by October 30 and then -- 7 of 8 -- 8 providing a guillotine type order for the dismissal of the notice of appeal if it's not paid by that date? It might be appropriate only because otherwise we're going to have to bring another application, I suspect, for - to this----- HIS HONOUR: Yes, except I'd be reluctant to make such an order in the absence of the respondents though. That wasn't flagged to them----- MR TRAVIS: Yes. HIS HONOUR: -----and so I don't think it would be appropriate to take that course so that at the moment, absent payment within the 14 days, there'll be a stay and I'm afraid you'll have to take it from there. MR TRAVIS: Thank you, your Honour. HIS HONOUR: Thank you. -- 8 of 8 --