ABL Custodian Services Pty Ltd & Anor v Wade [2013] VCC 878

4 The plaintiffs originally named GSF as second defendant. That required leave under s500 of the Corporations Act 2001. Associate Justice Efthim in the Supreme Court refused leave and the claim by the plaintiffs against GSF has been dismissed.[2]

5 The defendant applied to GSF for finance of $71,250.00 to invest in the project which was managed by Great Southern Managers Australia Limited ("GSMA").

6 It is not in contention that the defendant completed and signed an application for terms finance dated 3 May 2004 ("the application").[3] It is also not in contention that on 1 July 2004, GSF advanced the sum of $72,215.00 to GSMA as the manager of the project, on behalf of the defendant and that the defendant made monthly repayments until on or about 15 April 2009. The defendant pleads he did so under the mistaken view a loan deed that purports to have been executed on his behalf by his attorney was of full force and effect.[4] I will come to the terms of this loan deed later.

7 The plaintiffs' claim is for the balance of monies alleged to have been loaned by GSF to the defendant, and accumulated interest. The plaintiffs claim as the ultimate assignees of the loan from GSF. The assignment of the loan which the plaintiffs seek to recover is itself the subject of a complicated suite of documents. The fact of assignment is pleaded by the plaintiffs at paragraphs 8 and 9 of the Amended Statement of Claim. The assignment of any loan from GSF to the plaintiffs is not admitted by the defendant.[5]

8 The relationship between the defendant and GSMA and GSF is the subject of another complex suite of documents contained in the Court Book. In general, save where otherwise alluded to, the documents themselves are admitted. The legal effect of the documents is not admitted. The documents in the Court Book of two volumes were admitted into evidence unopposed as exhibit "D".[6] There was viva voce evidence from witnesses, that I will later discuss, that some of the documents in the Court Book form part of the business records of the plaintiffs for the purposes of s69 of the Evidence Act 2008.

9 There are thus a number of legal questions that have to be resolved in deciding whether or not the plaintiffs have proved the claim they bring against the defendant. The plaintiffs have the onus of proof. The defendant did not call evidence.

10 The terms of the application for terms finance signed by the defendant are important. If the plaintiffs' case is accepted in full, clause 6 of that document contains a binding power of attorney whereby the defendant appoints GSF to act as his attorney. The plaintiffs' case is that the loan deed upon which it now seeks to recover from the defendant is binding against the defendant because it was executed on his behalf by his properly appointed attorney.

11 The first question for resolution is whether or not clause 6 of the application for terms finance amounts to the proper exercise by the defendant of appointment of GSF as his attorney? If the answer to that question is that it is a proper exercise of appointment of an attorney, then was the appointment by deed? This latter question arises because the law requires a power of attorney to be created by deed if, by its terms, it purports to authorise the attorney to execute a deed on the principal's behalf.[7] The parties are agreed this is the position at law.

12 I have concluded that by completing clause 6 of the application for terms finance, the defendant did not appoint GSF as his attorney. In my view, on a proper analysis of the language used in clause 6(a) of the application for terms finance and, upon proper construction, clause 6(a) does not operate as a power of attorney. It follows that I find that the loan deed that purports to have been executed by the defendant by his attorney is unenforceable as against the defendant.

13 My reasons for this finding involve analysis of the language used in clause 6(a) and a proper construction of clause 6 of the application for terms finance. It is that document to which I now turn. The full terms of it are found at Tab 11 of the Court Book.[8] It includes a separate page that was added entitled "Vineyards Application Form" that was also completed by the applicant on 3 May 2004. The signatures of the defendant on each document appear to be almost identical.

14 Clause 6(a) of the application for terms finance is headed "Power of Attorney". The clause commences with the words "By signing the Application". It is immediately clear that the defendant did not sign a separate document that purported to be a power of attorney. He signed only an application for terms finance.

"[T]he borrower ... (Appointor) agree (sic) to appoint Great Southern Finance Pty Ltd (GSF) and each director, company secretary and attorney of GSF jointly and severally to be attorney for the Appointor (Attorney), in the Appointor's name, on the Appointor's behalf and as the Appointor's act and deed (Power of Attorney) on the terms specified below and to exercise the powers as follows."

**16 Clause 6(a) of the application for terms finance then sets out six powers numbered respectively 1 to 6. I will return to those powers shortly.

17 In my judgment, clause 6(a) of the application for terms finance does not amount to the exercise of an appointment at all. The use of the words "agree to appoint" in the first line of the clause has the effect that the clause operates only as an agreement to appoint. The document itself is worded in a prospective way and does not purport by the words used to extend to a grant of power as such. This may be contrasted by the words used in the second dot point under the heading "Risk Disclosure Statement & Declaration" where the application for terms finance appears to provide for clause 6(a) to operate as an authorisation to sign rather than a formal power of attorney. The dot point reads:**

"By signing the finance application, I/we authorise certain people to sign the Loan Deed (and other documents connected with, or related to, the Loan Deed) strictly in accordance with the provisions of part 6 of the finance application."

**18 Clause 6(a) of the application for terms finance refers to six numbered paragraphs which purport to contain powers that the applicant agrees the Appointor will have on appointment. In my judgment, the paragraphs in the application for terms finance do not assist with answering the question as to whether or not clause 6(a) itself amounts to a valid appointment of an attorney.

19 The plaintiffs make much of clause 6(h) of the application for terms finance which provides that "The Power of Attorney is executed as a deed".[9] In my view, that clause is not part of the purported exercise of the grant of power. Clause 6(h) is a clause in the application for terms finance. There is no power of attorney that could be said to have been "executed as a deed". At best the only document that is signed is the application for terms finance itself and that is all that the commencing words of clause 6(a) refer to.

20 The defendant submits that clause 6(a) of the application for terms finance does not amount to a proper power of attorney for other reasons. I turn to those arguments.

21 The defendant submits a power of attorney is a once signed instrument that is not, in any sense, a contract and therefore must be executed with the formalities required by the place where it is executed, ie Victoria.

22 The plaintiffs submit that the governing law of a transaction should generally be the jurisdiction with which the transaction is most closely associated. In this regard, they rely upon the observations of Justice Brennan in Oceanic Sun Line Special Shipping Co Inc v Fay.[10] The plaintiffs say that, in this case, the transaction is most closely associated with the law of Western Australia.

23 I do not accept the plaintiffs' submissions on this point. The appointment of the attorney under power was an important part of this transaction which took place in Victoria. In my view, a power of attorney is in the nature of an appointment of someone as an agent. The law applicable to it must be the place where the power to make the appointment is exercised. In this instance, in my judgment, the law governing the form of the power of attorney is the law of Victoria.

24 The defendant submits, and I agree, that the fact that a draft of the loan deed was attached to the application is not to the point. Although clause 23 of the loan deed applies the law of Western Australia as the governing law, that clause only applies to the loan deed itself once it is properly executed. It does not assist in determining whether the application for terms finance containing clause 6(a) when signed, amounts to the appointment of an attorney.

25 In Victoria, a power of attorney must comply with the relevant provisions of the Instruments Act 1958 (Vic). Section 106 of the Instruments Act provides:**

"(1) An instrument creating a power of attorney may be executed by, or by direction and in the presence of, the donor of the power.

(2) Where such an instrument is executed by a person by direction and in the presence of the donor of the power, two other persons shall be present as witnesses and shall attest the instrument."

26 Section 107 relevantly provides:

"(1) A general power of attorney in or to the effect of the form set out in Schedule 12 shall operate to confer -

(a) on the attorney under the power; or

(b) ...

authority to do on behalf of the donor anything (other than delegate his powers under the power of attorney) which he can lawfully do by an attorney."

**27 The form contained in Schedule 12 is in relatively simple terms. Clause 1 names a person who shall be the attorney and clause 2 authorises the attorney "to do on my behalf any thing that I may lawfully authorise an attorney to do". Importantly, the last line of the form reads: "SIGNED SEALED AND DELIVERED by."

28 By virtue of s73 of the Property Law Act 1958, an individual executes a deed by signing or placing his mark upon it, and sealing alone is not sufficient. Section 73A of the Property Law Act 1958 provides that-**

"An instrument executed by an individual on or after the date of commencement of section 4 of the Property Law (Deeds) Act 1977 expressed to be sealed by that individual but not so sealed shall for all purposes operate and take effect as if it had been so sealed."

29 The defendant submits the effect of the Victorian legislation is that a power of attorney properly made must be expressed as a deed and at least recite the words "signed, sealed and delivered" as referred to in Schedule 12 of the Instruments Act (Vic) 1958. The defendant relies upon what Justice Forrest said in the decision of Goshn v Principle Focus Pty Ltd & Ors (No 2)[11] as providing support to this submission, where his Honour said, inter alia:

"Section 107 of the Instruments Act gives effect to a general power of attorney provided it is 'in or to the effect of the form set out in Sch 12'."

(my emphasis)

**30 The defendant also refers to the position at common law. Dal Pont, in his work on Powers of Attorney at paragraph 4.19, says that at common law, the term "Power of Attorney" only applies to an authority conferred by deed. The authority for that proposition is Comptroller of Stamps (Vic) v Papalia.[12] I have read Papalia and agree, with respect to the learned author's statement of the common law position. In my view, clause 6(a) of the application for terms finance is not a deed.

31 I accept the defendant's submissions that clause 6(a) of the application for terms finance does not operate as a valid power of attorney. By the language used in the clause, upon signing the clause does not confer power as an agent. At best it is an agreement to appoint GSF without more. Further, clause 6(a) does not comply with the relevant provisions of the Instruments Act 1958 and cannot operate as a power of attorney. It follows that I find the loan deed that purports to have been executed by the defendant by his power of attorney is unenforceable against him.

32 This is not the end of the matter. If the loan deed is unenforceable against the defendant then the loan made by GSF to him was made without consideration. To overcome this, at paragraphs 19 to 28 of their Amended Statement of Claim, the plaintiffs plead a claim in restitution based upon a claim the defendant will have been unjustly enriched.

33 The defendant admits in his Defence that on or about 1 July 2004, GSF advanced the sum of $72,215.00 on his behalf to GSMA.[13] He also admits that he made monthly repayments of the loan until approximately the time when GSF went into liquidation.[14] In this regard, a loan repayment schedule produced by Stephen Flamer-Smith forming part of exhibit C shows that between 1 July 2005 and 1 June 2009, the defendant made 46 repayments of interest on the loan by direct debit on 46 occasions. The plaintiffs submit with some force that up until the time when the defendant stopped his repayments, he acknowledged the existence of the loan and his obligations to repay it.

34 The claim in restitution has a number of aspects to it.

35 The plaintiffs prove the assignment of the loan from GSF to themselves by the trail of elaborate documents found at Tab 17 to 23 of the Court Book. First, they rely on the affidavit of Bruce James Speirs sworn 15 October 2012 which went into evidence as exhibit A. Mr Speirs also gave evidence. In his affidavit, Mr Speirs produced the Loan Sale and Servicing Deed (CL) dated 25 June 2004, a copy of which is at Tab 17 as BJS-1, a Sale Notice dated 13 December 2004, a copy of which is at Tab 18 as BJS-2 and the settlement report attached as BJS-3 and a redacted settlement report BJS-4. He was cross-examined and conceded he had no personal knowledge of the transactions, but he did identify all of the documents he produced as part of the business records of the plaintiffs.[15]

36 Next, the plaintiffs rely on the affidavit and evidence of Nathanuel Stone. His affidavit, also sworn 15 October 2012, went into evidence as exhibit B. He deposed that on 7 March 2007, the plaintiffs entered into a Sale Agreement which he produced. A copy is at Tab 19 and is exhibit NS-1 to his affidavit. He also produced the sale notice issued pursuant to the Sale Agreement, a copy of which is at Tab 20 and is NS-2 to his affidavit. He deposed that in accordance with the Sale Agreement, the purchase price was paid, and he produced as exhibit NS-3, a screenshot from the general ledger relating to the payment of the sale price. He produced as NS-4, a redacted settlement report referring to the defendant's loan, a copy of which is found at page 79 of the documents at Tab 20. He identified each of these documents as forming part of the business records of the plaintiffs.[16]

37 The plaintiffs also rely upon the evidence of their Senior Legal Officer, Stephen Flamer-Smith, who swore an affidavit, exhibit C, and gave sworn evidence. The effect of his evidence was to update the amount alleged to be owing to the plaintiffs by the defendant which he deposed, as at 1 October 2012, was $95,597.52, at an interest rate of 14.5 per cent, amounting to interest accruing at $37.98 per day. He produced a statement of account which he said forms part of the business records of the plaintiffs.

38 I accept that the plaintiffs have proved the assignment of the defendant's loan to them.

39 The defendant makes two arguments concerning the assignments. Firstly, he argues that where the assignments provided inter partes for conditions precedent to be satisfied, the plaintiffs must prove that those conditions precedent have been met. I reject this argument. In my view, whether or not conditions imposed in an agreement have been complied with is irrelevant to this claim. I accept the plaintiffs do not have to prove satisfaction of the conditions precedent. They are conditions between the seller and the purchaser and it is not for a third party such as the defendant to question the validity of the assignment by insisting on proof of each of the conditions precedent.

40 The second issue that needs to be resolved is whether or not the plaintiffs, as ultimate assignees of the loan to the defendant, can enforce the claim now made on a restitutionary basis.

41 The plaintiffs claim that assignments to them of rights against the defendant under the loan deed which I have now found to be unenforceable includes any rights in restitution which may exist.

42 The defendant argues that absent any clause in either the Loan Sale and Servicing Deed and the Sale Agreement which amounts to an assignment of restitutionary remedies, then the plaintiffs do not have a restitutionary claim against the defendant. Put simply, the defendant contends the plaintiffs have no standing to bring a claim in restitution.

43 In Equuscorp Pty Ltd v Haxton,[17] the High Court held that a restitutionary claim for money had and received under an unenforceable loan agreement is inescapably linked to the performance of the agreement, such that it is not assigned as a bare cause of action if assigned along with contractual rights, and the assignment of the purported contractual rights for value indicates a legitimate commercial interest on the part of the assignee in acquiring the restitutionary rights should the contract be found to be unenforceable. At paragraph 53, the High Court concluded that the question arises in any case as to whether the restitutionary rights were in fact assigned.

44 The plaintiffs here rely upon the language of the assignment documents. The Loan Sale and Servicing Deed at Tab 17 assigns the seller's (GSF's) "entire right, title and interest in" the loan to the defendant including "all monies, present and future, actual or contingent, owing at any time in respect of or in connection with each loan".[18] In my view, this includes restitutionary rights, and the plaintiffs have the right to pursue them in this proceeding.

45 Here, the evidence shows the defendant made application for terms finance, and completed the application. The loan was granted and the monies advanced by GSF on his behalf to GSMA on his behalf. The defendant thus acquired an interest in the project financed by the loan from GSF. The defendant acknowledged the existence of the interest by claiming a taxation deduction for expenses relating to his investment in the project and he repaid money to GSF in accordance with conditions of the loan up until the time a liquidator was appointed to GSF. The repayments were facilitated by direct debit from the defendant's bank account. In these circumstances, and where the defendant has clearly benefitted from the loan and has previously acknowledged the existence of the loan, it is my view it would be unconscionable were the defendant not compelled to repay the loan to the plaintiffs on a restitution basis. I therefore find in favour of the plaintiffs with regard to their claim on a restitutionary basis.

46 There will be judgment for the plaintiffs on the claim.

47 I will hear the parties on the form of the orders, interest and costs.

[1] See Product Disclosure Statement dated 30 March 2004 at Court Book ("CB") [10]

[3] CB [11] and admission in paragraph 3 of the Defence to the Amended Statement of Claim

[4] Defence to Amended Statement of Claim, paragraphs 6 and 24(b)(ii)

[5] Defence to Amended Statement of Claim, paragraphs 8 and 9

[7] Dal Pont, G E Powers of Attorney (2011, at [4.1]-[4.4])

[10] [1988] HCA 32; (1988) 165 CLR 197 at 224-225

[11] [2008] VSC 574 at footnote 26

[12] (1982) 82 ATC 4080 at 4082 per Crockett J

[13] CB 12, paragraphs 6(a) and 24(b)(i)

[14] CB 12, paragraphs 22(b)(iii) and 24(b)(ii)

[17] [2012] HCA 7 at paragraphs [46] to [53]