Avco Financial Services Ltd, Re [1993] QSC 423

IN THE SUPREME COURT OF QUEENSLAND No. 1265 of 1993 IN THE MATTER of the "The Credit Act 1987" and IN THE .MATTER of AVCO FINANCIAL SERVICES LIMITED of 910 Pacific Highway, Gordon, in the . State of New South Wales JUDGMENT- WILLIAMS J. Judgment delivered 17th December, 1993 CATCHWORDS: Counsel: Solicitors: Hearing date: Credit Act - s. 38(1)(c) - statement of "credit charge" - use of term ~predetermined" not necessary - s. 38(1)(h) - generic reference to group of companies held to be sufficient compliance. D.F. Jackson Q.C. and P. O'Shea for Applicant Blake Dawson Waldron for Applicant 14th December, 1993 -- 1 of 9 -- 0 () 0 IN THE SUPREME COURT OF QUEENSLAND Before Mr justice Williams No. 1265 of 1993 IN THE MATTER of the "The Credit Act 1987'' and IN THE MATTER of A VCO FINANCIAL SERVICES LIMITED of 910 Pacific Highway, Gordon, in the State of New South Wales JUDGMENT- WILLIAMS ]. Delivered the Seventeenth day of December, 1993 This is an application for declarations with respect to a regulated loan contract made between A vco Financial Services Limited, the applicant, on the one hand and J .and M. Humphries on the other. The contract relates to a loan made to the Humphries 0 on 26th June 1989. Questions have been raised as to whether or not the loan contract complies with the requirements of the Credit Act 1987; in particular the assertion has been made that it does not comply with s. 38(1)(c) and s. 38(1)(h) of that Act. As there are potentially both criminal and contractual penalties involved where the Act has not been complied with, the applicant has sought from this Court declarations confirming that in the circumstances the Act has been complied with. Section 38(1)(c) provides: "A loan contract shall include - -- 2 of 9 -- ·. 2 (c) a statement of the credit charge in accordance with Schedule 5." The term "loan contract" is defined in s. 7 and there is no doubt that here the contract in question was caught by that definition; itis also accepted that the contract is caught by the definition of "regulated loan contract". "Credit Charge" is defined in s. 7 by reference to s. 13(1) of the Act. Relevantly that latter section defines "credit charge" as follows: · "In relation to ... a loan contract - is a reference to the amount by which the amount payable under the contract by the debtor to the credit O provider or a person on the debtor's behalf (not including amounts of deferrai charges, default charges or enforcement expenses) exceeds the amount financed." It is significant for present purposes that "credit charge" is essentially defined as an 0 "amount" of money. Section 38(l)(c) then directs the reader to Schedule 5 of the Act. Relevantly cl. l(a) thereof provides: "A statement of the credit charge- (a) shall, where at the relevant date it is possible to express the whole or any part of the credit charge as an amount of money, state separately- (i) the amount of the minimum credit charge (if any); and (ii) the amount of the predetermined credit charge (if any); and (Hi) · the amount of the estimated credit charge (if any) that can be so expressed at the relevant date." Again it is significant for present purposes that the requirement is to state the "credit charge" as an "amount". Further, there is nothing in Schedule 5 which requires the term "predetermined" to be specifically used in the "loan contract" where in fact the- relevant "amount" is with respect to a "predetermined credit charge". That latter phrase is defined in s. 7 of the Act as follows: "in relation to a credit contract that specifies a fixed amount as the whole or part of the credit charge (not being a minimum 0 0 -- 3 of 9 -- 0 0 0 0 3 credit charge), means that fixed amount." Again the use of the term "amount" should be noted. Before turning to the facts of this particular case certain other provisions of the Act and of the Credit Regulations 1988 should be considered. Section 124 of the Act is in these terms so far as is relevant: "The regulations may require the use of specified descriptive terms in a regulated contract ... ". One then goes, for present purposes, to Regulation 19(2) which provides: "In a regulated loan contract a matter specified in Column 1 of the Fourth Schedule hereto shall be described or referred to by the termsspecified opposite that matter in Column 2 of the Fourth Schedule hereto." In the Fourth Schedule there is set out as item 2 in Column 1: "The credit charge expressed in accordance with Schedule 5 to the Act" and in Column 2 the descriptive term "Credit charge". In my view that makes it clear that any of the three amounts specified in cl. 1 of Schedule 5 may be referred to as the "Credit charge". Certainly a consequence of Regulation 19(2) and item 2 in the Fourth Schedule to the regulations is that it is not necessary to use the term "predetermined" when stating the amount in the regulated loan contract of the "predetermined credit charge". All of the provisions to which I have referred clearly establish that it is sufficient if the words "credit charge" are used and an "amount" is stated. But having said that I should refer to an unreported decision of Mackenzie J. which may lend some support to a contrary argument (Re Application of State Bank of New South Wales, Motion 211 of 1991, judgment 8th October 1991). On the facts of. that case it was submitted that there had been a breach of s. 38(1)(c) because the word "predetermined" was not used in defining the "credit charge". Given the layout of the -- 4 of 9 -- 4 contract before him, his Honour held that the statement therein of the credit charge was r~ferable to s. 38(1)(d) and not to s. 38(1)(c). He therefore held that s. 38(1)(c) had not been complied with. Inferentially it may well be that his Honour was holding that the term "predetermined" should be used in all cases where the amount of the credit charge was predetermined, but there is no reference in the reasons for judgment to s. 124 of the Act, Regulation 19(2), or the Fourth Schedule to the Regulations. The decision can, and in my view should, be limited to the particular facts of the contract there under consideration. 0 For the reasons I have given I am of the view that the Act does not specifically require the use of the term "predetermined" when setting out the amount of Q predetermined credit charges; it is sufficient if the amount is specified as being for credit charges. The loan in question here was in the amount of $2,916.39 (and other sums) for a period of 5 years. It was repayable with interest by 60 monthly instalments of $120 each. The principal amount of the loan was referred to in the contract as the "Amount 0 Financed". Clause 3 of the contract provided: ·"You will repay the. Amount Financed and the Credit Charge by instalments set out below. On the date the final instalment is due, you will pay all amounts payable but unpaid under this Loan Contract." If the borrower should default under the contract then cl. 5 made it clear that there was an additional amount payable, called in the agreement a "default charge". In the statement of particulars incorporated into the regulated loan contract the amount "$3,594.11 is stated to be the "Credit Charge". That cannot, given the setting out used in this contract, be said to be referable to s. 38(1)(d). It is clearly a statement of a "credit charge" and is in an amount which clearly, when the contract is read as a 0 -- 5 of 9 -- .. 5 whole, constitutes a fixed amount for the whole of the credit charge. Given my interpretation of the Act and Regulations there is here no breach of s. 38(1)(c). The applicant is entitled to a declaration that the description of the predetermined credit charge as "Credit Charge" did not constitute a breach of s. 38 of The Credit Act. I now turn to consider whether or not there has been a breach of s. 38( 1)(h) of the Act. It provides that a "loan contract" shall include where "a commission charge is Q payable - a statement to that effect and except in so far as the information is not known by the credit provider or is not readily available to the credit provider, a Q statement of the person to whom and the person by whom the commission charge is payable". Before going further I should note the decision of the Appeal Division of the Supreme Court of Victoria in Custom Credit Corporation Ltd v. Lynch (1993) 2 V.R. 469. The Victorian equivalent of our s. 38 is s. 36. Speaking of that section Marks J. Q (with the concurrence of Fullagar J .) said at 476 that there were strong indications in the Act that "strict compliance with s. 36 is required". In their view where there was Q substantial, but not strict, compliance the matter should be dealt with under the Victorian equivalent to our ss. 86 or 87 A. Those provisions give the court power to relieve a credit provider from the consequences of non-compliance with the Act. The third member of that court, (Ormiston J .) at 491 also expressed the view that strict compliance with the section was required. In his view even where there was a "highly technical breach" the credit provider should apply for relief. The judgments stress the importance of credit providers giving details of the matters specified in the section, which are clearly for the protection of borrowers. -- 6 of 9 -- 6 I would not dissent from the broad proposition. that a credit provider should be required to comply strictly with the requirements of s. 36. But, notwithstanding the reference ins. 87A of the Act to matters constituting a "minor error", I am of .the view that the question whether or not there has been strict compliance with the requirements of the section must be answered by adopting a common sense construction of the expressions used in the. contract, and against the background of the legislative intent that the borrower should be fully informed on all the matters particularised in s. 36. In this particular case there is. no doubt that a "commission charge" within the Q definition found ins. 7 of the Act was involved, and in consequence the credit provider was obliged to set out· the· particulars mentioned in s. 38(1)(h). The contract here showed that "Consumer Credit Insurance" was taken out with Hallmark General Insurance Co. Ltd. and the amount of premium and stamp duty was specified. It also indicated that "Unemployment Insurance" was taken out with that same company and again the amount of premium and stamp duty was specified. Then 0 the contract stated that· "Life Insurance" had been taken out with Hallmark Life 0 Insurance Company Ltd. specifying the amount of premium and stamp duty. lri order then to comply with the requirements of s. 38(l)(h) the following Q statement was inserted in the loan contract: "A Commission Charge is payable by Hallmark Insurance to Avco". In fact, as the agreement exhibited to the affidavit of S.N. Oosterom establishes, the commission was payable by both Hallmark General Insurance Co. Ltd. and Hallmark Life Insurance Company Ltd. The question arises whether in those circumstances the use of the generic description "Hallmark Insurance" is adequate compliance with the requirements of the Act. -- 7 of 9 -- " . ' 7 It is probably not unfair to the general community to say that most borrowers (being all those without legal or commercial training and experience) would not understand that there were different legal entities involved when referring to Hallmark General Insurance Co. Ltd. and Hallmark Life Insurance Company Ltd. Most ordinary borrowers would, in my view, themselves refer to those two legal entities by using an expression such as "Hallmark Insurance". Counsel for the applicant sought to rely on that line of authority in which courts Q have recognised that parties to a contract may use "their own dictionary", and words and phrases used in the contract must be construed in the light thereof (e.g. Re Sassoon Q (1933) 1 Ch. 858 at 890-1; Re Birks (1900) 1 Ch. 417 at 419; and Van Der Waal v. Goodenough (1983) 1 N.S.W. L.R. 81 at 88-9). In my view that approach cannot be adopted here. The expression "Hallmark Insurance" is only used on the one occasion in the loan contract and that is not sufficient to indicate that the parties have agreed upon their own dictionary. 0 Counsel also referred to the test applied in the misnomer cases: "How would a reasonable man receiving the document take it?" He referred to Bridge Shipping Pty. Q Limited v. Grand Shipping S.A. (1991) 173 C.L.R. 231. Reference in that regard could also be made to the decision of the Full Court in Greguric v. Department of Works Queensland (1988) 2 Qd. R. ·545. Those cases do provide some support for the approach which I have adopted to the resolution of this problem. It must be remembered that the court is here concerned with a contract. There is an obligation on the credit provider to comply with the terms of s. 38 of the Act, but the court will construe the terms of the contract, including those inserted in order to comply with the statute, according to general principles. Gibbs J. in Australian -- 8 of 9 -- "--"" ____ " _________________ _ 8 Broadcasting Commission v. Australasian Performing Right Association Ltd. (1973) 129 C.L.R. 99 at 109 said: "It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious all with another". That passage is apposite here. When all the references in the document to a company or body having "Hallmark" as part of its name are considered, it is clear in my view that the words "Hallmark Insurance" are a reference to both of the companies. Any .. , 0 reasonable borrower receiving the contract would read it in that way. Q It follows that in my view there has not been any failure to comply with the requirements of s. 38(1)(h) of the Act. I will therefore declare that the matters referred to hereunder did not result in the Loan Contract made between Avco Financial Services Limited and John Humphries and Margaret Humphries dated 26th June i989, not being in accordance with s. 38 of Q The Credit Act: (i) the description of the predetermined credit charge as "Credit Charge"; 0 and (ii) the statement "A Commission Charge is payable by Hallmark Insurance to Avco". -- 9 of 9 --