Capers v PSR Refining Services PTY LTD

Background

1. On 5 June 1996, PSR refining was incorporated in New South Wales.
2. On 6 June 1996, Mr Hewines was appointed and remains one of the directors of PSR refining, together with Ms Maureen Hewines who also remains the secretary of PSR refining. Other directors were appointed and removed from time to time.
3. On or around 26 March 2009, PSR refining by Mr Hewines emailed Mr Capers a document styled memorandum of understanding ("MOU") in relation to a proposed 10% shareholding in PSR refining in the amount of USD 250,0002 (shareholding proposal).
4. The MOU included an attachment being a business plan, which provided for a monthly payment to Mr Capers of USD 3,0003 and annual dividends projected for 3 years.
5. On or around 14 April 2009, PSR refining by Mr Hewines informed Mr Capers that the shareholding proposal would not proceed. Subsequently, Mr Capers as lender and PSR refining as borrower entered into a loan agreement by which Mr Capers agreed to advance the sum of USD 250,000 with repayments to occur pursuant to the shareholding proposal ("the loan agreement"). The loan agreement was oral.
6. At the time of entering into the loan agreement, PSR refining by Mr Hewines informed Mr Capers that he "needed money to meet obligations due at the end of this month which have already been incurred".
7. On 25 April 2009, Mr Capers advanced the first loan payment to PSR refining in the amount of USD 24,990 pursuant to the loan agreement. The receipt of first loan payment is admitted by the defendant.
8. On 1 May 2009, Mr Capers advanced the second loan payment to PSR refining in the amount of USD 224,990 pursuant to the loan agreement. The receipt of the second loan payment is admitted by the defendant.
9. As at 30 June 2012, PSR refining had recorded a loan owing to J David Capers in its balance sheet. Of note the balance sheet also records the loan owing from as early as 30 June 2011. Financial statements for the years ended 30 June 2009 and 2010 were not produced pursuant to the subpoena issued to PSR refining's accountant.
10. On 18 September 2012, PSR refining by Mr Hewines emailed Mr Capers admitting a debt as follows (the loan agreement admission): "…If my memory serves me correctly, we owe you $108K in interest from 4/2009 to 4/2012 plus the $250K capital."
11. On 2 November 2012, PSR by Mr Hewines emailed Mr Capers which included the following (the Interest Term Admission): "…This will mean we have in effect paid you $126,000 - this representing agreed interest for three and a half years at US$3,000 per month."
12. Also, on or around 2 November 2012, PSR refining made a payment to Mr Capers in the amount of USD 90,000 (first interest payment). That payment is admitted by the defendant.
13. On or around 5 November 2012, PSR refining made a second payment to Mr Capers in the amount of USD 36,000 (second interest payment). That payment is admitted by the defendant.
14. On or around 24 December 2012, PSR contends that it made payment of USD 50,000 in reduction of the principal sum due pursuant to the loan agreement (the disputed payment). Although the plaintiff does not admit receiving that payment, he does not seek that amount in these proceedings.
15. On 13 March 2013, PSR by Mr Hewines emailed Mr Capers in relation to the payment of interest as follows (the first acknowledgement), "After we settle the tax bill, my first task it to pay you interest covering the 6-month period Oct 2012 thru Apr 2013 …. this will be as follows: Oct-Dec 2012 interest on $250,000 = $9,000 Jan - Mar 2013 interest on $200,000 = $7,200 Total 16,200 As we move into June, we are planning to give you another repayment on the capital owed. We would like to try and get the remaining $200,000 repaid and meet the associated interest payments by the end of 2013".
16. On 8 November 2018, PSR by Mr Hewines wrote to Mr Capers and said the following (the complete acknowledgment): "We acknowledge, and have always acknowledged, that we borrowed US$250,000 from you. We acknowledge, and have always acknowledged, that we agreed to pay you US$3,000 p.c.m. interest. … We have shown our intent to repay you through payments made of US$176,000 (US$126,000 received by you and, for another US $50,000, not received by you, but it is not disputed that it was paid). … We would dearly like to be financially able to make a payment to you today, but we do not have the money available to do so. The business does not have the money and I personally do not have the money nor do I have any assets that could be seized. There is absolutely nothing squirreled away. I only wish there was. … We would like to suggest the following. From January 2019, we will pay you $3,000 a month, so that we are keeping step with the interest payments and so that this debt does not get any worse. We have some current signed projects, but require until January to ensure that we have the cash flow certainty that enables us to meet this monthly obligation to you."
17. On 9 November 2018, Mr Capers replied and said the following, "Although this proposal does not provide the capital I really need, this gives me the basis for better certainty for my estate. I would like to copy out conversations to a local Australian solicitor who is helping with the Australian side of my estate. Since PSR is an Australian company, I am having to write two Wills - one in the US and one in Australia. So, if you don't mind, please print date and sign this last e-mail and send a copy to my address and to hers. That way, my children can have a more definitive description of our agreements."
18. On 11 November 2018, Mr Hewines replied with a version of the acknowledgment that he signed and impressed with the seal of PSR refining (the sealed and signed complete acknowledgement):
19. On or around 1 February 2019, PSR refining made a payment to Mr Capers in the amount of USD 36.00. This payment is admitted by the defendant. This payment will be called the first confirmation payment.
20. On or around 1 March 2019, PSR refining made a payment to Mr Capers in the amount of USD 2,980 This payment is admitted by the defendant. This payment will be called the second confirmation payment.
21. On 1 January 2023, Mr Capers filed his statement of claim.
22. On 26 September 2023 the plaintiff filed an amended statement of claim ("ASOC").
23. On 27 October 2023 the defendant filed a defence to the plaintiff's ASOC.
24. There are four issues before the Court: 1. Did Mr Capers and PSR refining enter into a loan agreement? 2. Does PSR have any defence under the law of Texas, on the assumption that the law of Texas is the substantive law of the loan agreement? 3. If the answer to the previous two questions is no, how much does PSR refining owe under the loan agreement? 4. An additional issue is, is Mr Capers' claim under the loan agreement barred by s 14 of the Limitation Act 1969 (NSW).

ISSUE 1 - Did Mr Capers and PSR enter into a loan agreement?

1. Mr Capers and PSR refining entered into a loan agreement in April 2009.
2. In Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102 ("Stellar Vision") the Court of Appeal (Bell CJ, Hammerschlag CJ in Eq and Adamson JA) summarised the legal principles relevant to whether an agreement between the parties is binding as follows, [64] Whether parties intend to create binding legal relations is ascertained objectively, that is, by determining whether a reasonable person in the position of the parties would have taken them to have intended to contract. The presence (or absence) of that intention is fact-based, to be found in all the circumstances, including by drawing inferences from their words and their conduct in making their agreement. In ascertaining their intention, whether from a series of communications or from a single document, regard can be had to the commercial circumstances in which the parties exchanged their communications and to the subject matter of the supposed contract [citations omitted].
3. Mr Capers and PSR refining entering into a loan agreement in 2009 is the only rational explanation for why Mr Capers paid PSR refining the sum of about USD 250,000 in 2009 and why Mr Hewines emailed Mr Capers on 8 November 2018 saying that "We acknowledge, and have always acknowledged, that we borrowed US$250,000 from you. We acknowledge, and have always acknowledged, that we agreed to pay you US$3,000 p.c.m. interest."
4. Mr Capers' evidence as to the existence of the loan agreement is also unchallenged.

ISSUE 2 - Is there a defence under the law in Texas?

1. The plaintiff submitted that there is no defence under the law of Texas to Mr Capers' claim. It is uncontroversial that the defendant seeking to rely on a foreign law as a defence to the plaintiff's claim to allege and prove that law as an "exculpatory fact". There is no evidence in these proceedings of the law of Texas and in those circumstances the "presumption" that foreign law is the same as the law of the forum "comes into play". Accordingly, because the law of New South Wales must be taken to be the substantive law of the contract, the defence under the law of Texas fails.
2. The defendant in his defence to the ASOC focuses on the applicable law of the State of Texas, as business was conducted in Texas and the plaintiff was a citizen and a resident in the state of Texas.
3. The agreement was an oral one. In the first acknowledgement written document and the complete acknowledgement written document there is no mention as to the applicable law.
4. In Regie Nationale des Usines Renault SA v Zhang [2002] CLR 491 HCA 10, the High Court stated at [70] "The first question is whether it is necessary for the plaintiff to plead the foreign law in order to establish a cause of action. The answer preferred by Dicey is in the negative. In Walker v W A Pickles Pty Ltd, Hutley JA explained: 'An action of tort may be brought in New South Wales courts irrespective of where the facts founding the action may have occurred, even if they occurred in a place where there may be no law at all: see Mostyn v Fabrigas. A pleading of a cause of action in tort which did not allege that the facts occurred in any particular law district would be formally valid. On the basis that the utmost economy is enjoined by the rules, it would seem to me that pleading of a foreign element in the initiating process in a claim in tort can never be necessary. … This approach is reinforced by the principle that foreign law, which is, except between the States and the Territories of the Commonwealth, a fact, is presumed to be the same as local law; and a fact presumed to be true does not have to be pleaded: See Supreme Court Rules, Pt 15, r 10(a).' On the other hand, if the defendant seeks to rely upon a foreign lex causae, then, in the ordinary way, it is for the defendant to allege and prove that law as an exculpatory fact."
5. There is no evidence to demonstrate that the law of Texas is the applicable law.
6. While the defendant seeks to rely upon foreign law, namely the state of Texas, he has not proved that the law of Texas as an exculpatory fact.

ISSUE 3 - What is the quantum of the debt?

1. The quantum of the debt is USD 640,964.
2. Mr Capers paid PSR refining the sum of USD 249,980. 38.
3. The following table captures payments by PSR refining and interest accrual, No Month from Month To Number of Months Interest (USD) Total (USD) 1 May 2009 October 2012 42 126,000.00 126,000.00 2 2 November 2012 N/A N/A (90,000.00) 36,000.00 3 5 November 2012 N/A N/A (36,000.00) 0.00 4 November 2012 February 2019 76 228,000.00 228,000.00 5 1 February 2019 N/A N/A (36.00) 227,964.00 6 1 March 2019 N/A N/A (2,980.00) 224,984.00 7 March 2019 December 2022 46 138,000.00 362,984.00 8 January 2023 February 2025 26 78,000 440,984.00

1. Further to the above, Mr Capers is giving credit to the defendant for allegedly making a repayment of USD 50,000.
2. Adding the sum of USD 440,984 to USD 249,980, and deducting USD 50,000, equals USD 640,964.
3. I accept the plaintiff's calculations. It is my view that the defendant owes the plaintiff USD 640,964.

Additional Issue - Is the claim statute banned?

1. The plaintiff submits that, Mr Capers' claim under the loan agreement is not statute-barred.
2. Mr Capers and PSR refining entered into the loan agreement in April 2009. At the very least, the limitation period in relation to suing under the loan agreement was extended by the first acknowledgement on 13 March 2013 and the sealed and signed complete acknowledgment on 8 November 2018.
3. Section 54 of the Limitation Act 1969 (NSW) relevantly reads, 54 Confirmation (1) Where, after a limitation period fixed by or under this Act for a cause of action commences to run but before the expiration of the limitation period, a person against whom (either solely or with other persons) the cause of action lies confirms the cause of action, the time during which the limitation period runs before the date of the confirmation does not count in the reckoning of the limitation period for an action on the cause of action by a person having the benefit of the confirmation against a person bound by the confirmation. (2) For the purposes of this section - (a) a person confirms a cause of action if, but only if, the person - (i) acknowledges, to a person having (either solely or with other persons) the cause of action, the right or title of the person to whom the acknowledgment is made, or (ii) makes, to a person having (either solely or with other persons) the cause of action, a payment in respect of the right or title of the person to whom the payment is made, (b) a confirmation of a cause of action to recover interest on principal money operates also as a confirmation of a cause of action to recover the principal money, and (c) a confirmation of a cause of action to recover income falling due at any time operates also as a confirmation of a cause of action to recover income falling due at a later time on the same account.… (4) An acknowledgment for the purposes of this section must be in writing and signed by the maker. (5) For the purposes of this section a person has the benefit of a confirmation if, but only if, the confirmation is made to the person or to a person through whom the person claims. (6) For the purposes of this section a person is bound by a confirmation if, but only if - (a) the person is a maker of the confirmation
4. The seal and signed complete acknowledgement occurred on 8 November 2018. The proceedings are not statute barred. On 11 January 2023 the plaintiff filed his statement of claim. The statement of claim is within the requisite 6-year limitation period. I note that the defendant has not pleaded that the claim is statute barred in its defence.
5. Mr Capers commenced these proceedings before the expiration of the six-year limitation period pursuant to s 14 of the Limitations Act 1969 (NSW).

Result

1. The defence to the plaintiff's amended statement of claim is hopeless. It should be dismissed. Judgment is to be entered in favour of the plaintiff against the defendant in the sum of USD 640,964.00.

Costs

1. The plaintiff has been successful, normally costs follow the event. As the plaintiff has been successful, the defendant is to pay the plaintiff's costs of the proceedings. Additionally, the plaintiff seeks his costs be awarded on an indemnity basis and costs be payable as a gross lump sum of $24,106.67

Indemnity costs

1. Section 98 of the Civil Procedure Act 2005 (NSW) relevantly reads, 98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.
2. In Oshlack v Richmond River Council (1998) 193 CLR 72, McHugh J stated at [67] "The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation."
3. The plaintiff incurred unnecessary costs in enforcing the judgment as the defendant put on a defence raising the law of the state of Texas in the United States of America without any evidence and did not appear at the hearing, the plaintiff incurred costs in meeting that allegation. In these circumstances it is my view that the defendant pays costs on an indemnity basis

Gross Lump sum basis

1. In Bechara trading as Bechara and Company v Bates [2016] NSWCA 294 per Beazley P; Meagher JA; Payne JA at [12]-[15] "The power to award a lump-sum should only be exercised when the Court considers that it can do so fairly between the parties and where an appropriate sum can be determined from the available materials: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at 742-723 [21]-[22]; Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 123. The power may also be exercised where a party's conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings: Hamod v New South Wales [2011] NSWCA 375 at [818] per Beazley JA (Giles and Whealy JJA agreeing). A "broad brush" approach is appropriate. To require the same or similar level of detail as in a formal costs assessment would defeat the purpose of the lump sum order: Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1; [1999] FCA 673 at 5 [16]; Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [7]. The courts have typically applied a discount in assessing costs on a gross sum basis: Hamod v New South Wales at [814]."
2. The plaintiff seeks the gross lump sum of $24,106.67. This comprises of, 1. Solicitors Costs: $16,391.43 2. Counsel Fees $3,663.00 3. Other disbursements: $4,052.24
3. The solicitor's costs have been discounted by 10%.
4. I have examined the solicitor's costs and disbursements set out in "Ex. B" and they are appropriate.
5. It is my view that the gross lump sum payments for costs is assessed at $24,106.67.

Judgment

1. The defendant is to pay the plaintiff the sum of USD 640,964.00.

The Court Orders that 1. The defendant is to pay the plaintiff's costs on an indemnity basis the gross lump sum of $24,106.67 AUD

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 February 2025