Victorian Civil and Administrative Tribunal|2005-03-16|Before: Mr P

Director of Consumer Affairs Victoria v Geeveekay Pty Ltd (Credit) [2005] VCAT 555 (16 March 2005)

Credit - application to strike out claim - whether instalment (terms) contracts for sale of land involved to defer debt for purposes of code - whether these transactions are only terms contracts or are capable of being interpreted as loans - meaning of "deferred debt" - whether contention debts included in "deferred debt" - Consumer Credit (Victoria) Code ss4-6 and 11; Victorian Civil and Administrative Tribunal Act 1998 s75.

APPLICANT: Director of Consumer Affairs Victoria

RESPONDENT 1: Geeveekay Pty Ltd (ACN 075 918 277)

Pursuant to sections 75 and 109 of the Victorian Civil and Administrative Tribunal Act 1998 this Tribunal orders-

1. That the Respondent's application under section 75 of the Victorian Civil and Administrative Tribunal Act 1998 is dismissed.

2. The parties costs in relation to that application are reserved. The parties have liberty to apply on reasonable notice to the Tribunal and each other.

(1) I am now in a position to hand down this decision, and my decision is that the respondents' application to strike out or dismiss this proceeding is dismissed and I now give my reasons.

(2)

I will first deal with the history of the proceeding. In November 2004, the Director of Consumer Affairs Victoria ("the Director"), applied to this Tribunal against the respondents who are a company which I call Geeveekay, and two individuals whom I call the Keoghs.

(3)

In brief, the Director claims that the respondents have breached certain key requirements of the Consumer Credit (Victoria) Code, ("the Code"). Examples of these are requirements relating to the credit provider's name; the statement of the amount of credit; the statement of the annual percentage rate; and the method of calculation of interest. The Director asks the Tribunal to make declarations that these keys requirements have been breached, and to order the respondents to pay a civil penalty under Division 1 of Part 6 of the Code. The Director also asks for declarations that the respondents have breached certain other provisions of the Code.

(4)

The application relates to 46 contracts entered into between either Geeveekay or the Keoghs and various other people. The contracts relate to the sale of land by Geeveekay or the Keoghs to these people. The application deals with these contracts by category. Each category relates to a different group of contracts. Contracts with similar wording are grouped into the same category. Contracts for the sale by Geeveekay or the Keoghs of land purchased by them with finance from a particular lender are grouped into the same category.

(5)

The first part of the application is directed to what documents constituted the contracts between Geeveekay and the Keoghs, and the people who purchased the land from them. The second part of the application deals with how the contracts are claimed to breach the Code. Paragraph 70 of the application sets out various assumptions which the applicants make about what constituted the contracts, and the rest of the application then proceeds on the basis of these assumptions.

(6)

I now deal with the application to strike out or dismiss this claim. Before any further proceedings had been taken, the respondents applied to strike out or dismiss the claim. They do so on two bases. They say that the Code does not apply to the transactions because the respondents and those who purchased land from them are not governed by the Code in relation to these contracts. They say that since the application only seeks remedies concerning breaches of the Code, if the Code does not apply, the Tribunal has no jurisdiction to deal with the claim.

(7)

The alternative basis for the application is under s.75 of the Victorian Civil and Administrative Tribunal Act 1998, ("the VCAT Act"). The respondents say that the claim is misconceived or lacks substance because since the Code does not apply to the transactions concerned, the claim has no tenable basis. Accordingly, the respondents ask the Tribunal to strike out or dismiss the claim under s.75.

(8)

In my view, the correct way to approach the respondents' application is this. Under the VCAT Act, this Tribunal has original and review jurisdiction. Review jurisdiction relates to the review of decisions by decision makers. This claim is not of this kind. It is part of the Tribunal's original jurisdiction. Under the VCAT Act, the Tribunal's original jurisdiction is invoked, among other things, by a person entitled by or under an enabling enactment to do so, applying to the Tribunal in accordance with s.67 of the VCAT Act. The Tribunal then has the functions and powers conferred on it by or under the enabling enactment, the VCAT Act, and rules or regulations made under the VCAT Act. (See in particular ss 40 to 44 of the VCAT Act.)

(9)

An enabling enactment is an enactment under which jurisdiction is conferred on the Tribunal (see s.4 of the VCAT Act).

(10)

The Consumer Credit (Victoria) Act 1995 applies the Consumer Credit Code in the appendix to the Consumer Credit (Queensland) Act 1994, as enforced for the time being as a law of Victoria. Section 8 construes references to the court in the Code as in relation to certain specified sections, references to the Tribunal only, and otherwise as references to either the Tribunal or a court. Section 11(1) of the Code has the effect that if a person claims in a proceeding that the Code applies, it applies until established to the contrary.

(11)

The effect of all this is, in my view, that VCAT's jurisdiction has been properly invoked by the making of the Director's application, and because that application claims that the Code applies for these transactions, it applies until the respondents establish otherwise. The Tribunal has jurisdiction to determine the claim and in doing so can determine the threshold question of whether the Code applies to the transaction.

(12)

One of the things which the VCAT Act permits is an application under s.75 to strike out or dismiss a proceeding because, among other things, the proceeding is misconceived or lacking in substance. The application can be made at any time. It is clear from cases such as Rabel v. State Electricity Commission of Victoria (1998) 1 V.R. 102, followed in many cases by this Tribunal, that this Tribunal must exercise its powers cautiously under the section. The section relates to the summary termination of proceedings; here, at a particularly early stage, and before, in this case, the hearing of evidence.

(13)

The striking out or dismissal of a claim under the section deprives the litigant of the chance to have the case heard in the ordinary course. The Tribunal should only strike out or dismiss a claim under this section where, for the reasons set out in the section, it is satisfied that the claim is manifestly hopeless, undoubtedly untenable, doomed to fail, or can, on no reasonable basis, justify relief. This higher threshold is reinforced in this case by the presumption in s.11(1) of the Code. The respondents must show so clearly that the Code does not apply as to satisfy me that the applicant's case is manifestly hopeless, and the presumption that the Code applies is displaced.

(14)

The respondents have rightly conducted this application on the basis of taking the Director's case at its highest, and assuming that what is asserted in the claim can be proved. For the purposes of this strike out application, I make the same assumptions as is set out in paragraph 70 of the application about how the various contracts are constituted.

(15)

I now deal with the nature of the claims in the Director's application. Although the contracts in the various categories in the application are worded somewhat differently and refer to different lenders, there are features common to all. It is sufficient for the purposes of this proceeding for me to summarise the common features. I can best do this by using the example given by counsel for the Director in oral submissions.

(16)

On 11 October 2001, the Keoghs settled the purchase of land at 12 Vampire Street, Hastings. The purchase price was $72,500. They paid this as the $70,000 of the price, by obtaining a loan from Interstar Securities, and by giving a mortgage to Interstar as a security for this loan. The mortgage was over the Hastings property. There was a loan agreement between Interstar as lender and the Keoghs as borrowers, providing for the payment of the loan by instalments over a fixed period.

(17)

On 17 September 2001 the Keoghs contracted to sell the Hastings property to Mr Lockwood. This contract is mentioned in Annexure 3 in the application. Under that contract, Mr Lockwood was to pay to the Keoghs 360 monthly payments of $691.61 each, totalling $248,979.60. It is clear from paragraph 7 of the claim that the borrower did not obtain title to the land until all payments were completed. Documentation given to the purchaser, which for the reasons I explained earlier I have assumed to be part of the contract, provided that all the terms of the loan document between Interstar and the Keoghs apply to and are enforceable upon, and bind Mr Lockwood, and that the terms and conditions of the mortgage between Interstar and the Keoghs apply to and are enforceable upon and bind Mr Lockwood with certain exceptions. There were reference provisions which construe references to the lender to be references to the vendor, and references to the borrower to be references to the purchaser.

(18)

The exceptions included the interest rate. The interest rate mentioned in the agreement between the Keoghs and Mr Lockwood specified a higher interest rate by some 3.2795 per cent than that of the loan between Interstar and the Keoghs.

(19)

A document given to Mr Lockwood by the Keoghs at the time of the sale and purchase provided, "The lender offers you a loan, (being a terms of contract for the purchase of land) on the terms and conditions of this loan offer, and by virtue of the contract of sale that you may enter into, you will be bound by the terms of the mortgage between the lender and their mortgagees contained in the additional loan terms and conditions contained in the Interstar loan terms and conditions booklet."

(20)

The amount of credit was shown in that document as $248,979.60; annual percentage rates were specified, and also the number of payments to be made, the period of those payments and their amount was specified. It would also appear that the contracts for the sale of land contained the terms mentioned in paragraph 31 of the claim. Among other things, that paragraph states that the terms and conditions of contracts in the category to which this contract belongs, which is called the "Interstar contracts- the first type" category, included terms by which the parties agreed that the consideration for the sale of land should be satisfied to the extent of any mortgage money owing at the date upon which the purchaser was entitled to possession, or receipt of the rents and profits of the land sold, by the purchaser assuming as from that date the obligations of the mortgagor under the mortgage.

(21)

The contracts in the other categories are structured in a similar way, although they refer to different lenders and the names of the publications containing relevant loan terms and conditions are different.

(22)

I now come to key issues and submissions. I first deal with the law in general terms.

(23)

The respondents argue that the Code does not apply. They say that the monthly payments under the relevant contracts are not debts or deferred debts for the purposes of the Code. A contrary argument is made for the Director.

(24)

Section 6(1) of the Code is headed "Provision of credit to which this Code applies." It begins, "(1) This Code applies to the provision of credit and to the credit contract and related matters...". The sub-section then goes on to list various conditions which must be satisfied before the Code will apply.

(25)

Those conditions are not relevant here. The only question here is whether the transaction to which this claim relates are incapable of constituting the provision of credit. Section 5 of the Code provides-

"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."

(26)

Section 4 is headed, "Meaning of credit and amount of credit." Section 4(1) provide-,

"(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)."

(27)

Sub-section 2 provides in part, "For the purposes of this Code, the "the amount" is the amount of the debt actually deferred." The rest of the sub-section is not relevant here.

(28)

For completeness, I should say that under Schedule 1, "credit provider" and "debtor" respectively include prospective credit provider and prospective debtor, and that debtor means a person other than a guarantor who is liable for, or to repay credit.

(29)

I now come to the submissions on the key issues. Is the application premature? It is submitted for the Director that this strike out application is premature. The application should not, it is said, to have been made before the Tribunal determines what exactly constitutes the transactions involved. I do not agree. Section 75 of the VCAT Act allows a strike out application to be made at any time in a proceeding. Although the claim asks for declarations from the Tribunal about what constitutes the relevant transactions, it also makes it clear that until then, the application proceeds on the various assumptions mentioned in paragraph 70. An application for a strike out at this stage must take the claim at its highest, including the assumptions mentioned in paragraph 70 of this particular claim.

DO THESE ARRANGEMENTS INVOLVE THE PROVISION OF CREDIT?

(30)

The respondents first argue that these arrangements are incapable of constituting the provision of credit, and that accordingly, the Code does not apply. Their argument assumes that these arrangements are nothing more than instalment contracts for the sale and purchase of land. Instalment contracts for the sale of land do not, they say, create debts or defer debts. The Code uses the word "debts" and "deferred debts" in the strict or absolute or common law sense. They do not cover conditional or contingent debts. The respondents say that generally speaking, the only debt to which these contracts give rise is the obligation of the purchaser to pay the final instalment of purchase money. But that obligation is a conditional or contingent one. It only arises if the vendor delivers to the purchaser a signed conveyance or a signed transfer in registrable form.

(31)

For this analysis, they rely on a passage in the judgment of Justice Dixon J in MacDonald v Denys Lascells Ltd [1933] HCA 25; (1933) 48 C.L.R 457 at pp.475-6, a passage with which Rich and McTiernan JJ agreed. His Honour, quoting from a judgment in an earlier case by Justice Salmond J says-

"As a general rule, on the failure or refusal of a purchaser to complete an executory contract for the purchase of land, the vendor is not entitled to sue for the purchase money for the debt. He is entitled merely to sue for specific performance or for damages for loss of his bargain. It is only when the contract has been completed by the execution and acceptance of a conveyance that unpaid purchase money may become a debt and can be recovered accordingly...The general rule, however, that in an executory contract for the sale of land, the vendor cannot sue for the price is excluded when a contrary intention is shown by the express terms of the contract. And it seems established by authority that a contrary intention is sufficient shown in all cases in which, by the express terms of the contract, purchase money or any part thereof is made payable on a fixed day, not being the agreed day for the completion of the contract by conveyance. In all cases, the purchase money or such part thereof becomes on the day so fixed for its payment, a debt immediately recoverable by the vendor irrespective of the question of whether a conveyance has been executed, and notwithstanding the fact that the purchaser may have repudiated the contract."

(32)

This reasoning was applied by the High Court in a case relating to purchase money under a cash contract for the sale of land, in the case of Sunbird Plaza v. Maloney (1988) 166 C.L.R. at p.245.

(33)

It is the Director's case that these agreements provided for the periodic payment of money payable on a fixed day. This may be a matter of dispute at the hearing, but I take the Director's case at its highest here and assume that this can be proved.

(34)

Applying the MacDonald analysis, each instalment is payable and recoverable as a debt on the due date for payment of that particular instalment. The exception to this would be the last instalment, the payment of which would not be due until completion by the vendor.

(35)

The respondents then argue that even if this is so, even if the instalments are payable on the dates due for their payment, they are not debts or deferred debts within the meaning of the Code. They only arise on the dates on which they respectively are due for payment. They are in fact a future debt payable on the date they are created. They are not an existing or deferred debt.

(36)

It is argued for the Director that these payments are capable of constituting deferred debts within the meaning of s.4 of the Code.

(37)

There is a diversity of academic opinion and the cases are far from clear on this point. (See, for example, Duggan & Lanyon, "Consumer Credit Law" Butterworths 1999 at pages 44 and following; D. McGill, "Land Contracts and the Consumer Credit Code", 1996, Consumer Credit Law Bulletin 11; Rafiqi v. Wacal Investments Pty Ltd [1998] ASC 155-024; McKinsey & Anor v. Smith and Anor [1998] ASC 155-025.)

(38)

The parties do not dispute that "debt" in s.4 of the Code has its common law meaning. At common law, money could be recovered as a debt if it was a sum certain and either immediately payable or there was a present obligation to pay it at some definite future time. (See Webb v. Stenton (1883) 11 Q.B.D 518 at p.526-8.)

(39)

In Rafiqi 's case, there was a suggestion that "incurs a deferred debt" in s.4 of the Code can include a probable future debt. But in McKinsey's case, deferred debt was given a more limited meaning excluding probable future debts and contingent or conditional debts. I prefer the view that a deferred debt is a debt the existence and deferral of which is provided for in the contract. It cannot include, in my view, a probable future debt, because that debt does not yet exist. It cannot include a contingent or conditional debt, because that debt does not exist until the contingency happens or the condition is met, and neither may ever occur.

(40)

The respondents argue that the instalments under these contracts are nothing more than future debts. It is argued for the Director that these agreements are capable of being interpreted as creating present obligations to pay definite sums at a future time. This is a matter of construction of the relevant contracts, none of which are before me. I am not prepared to say that the respondents have satisfied me that this claim by the Director is manifestly hopeless in this respect. Nor do I consider that MacDonald's case is authority for the proposition that all instalment contracts for the sale of land only create future debts with the debt constituted by each instalment when it becomes due. The debt, in other words, is only created on the date when the instalment is payable.

(41)

In my view, Dixon J was looking more at the recovery and payment of the instalment than at when the debt was first created or came into existence. Even at common law, present obligations to make payments in the future are recognised as debts. I should also add that I agree with the approach in McKinsey's case that the last instalment in the agreements, if payable on completion by the vendor, would be a contingent or a conditional debt and would not be covered by s.4 of the Code.

(42)

It is unnecessary for me to consider the other part of the reasoning in Rafiqi 's case, in which it was held that a deferred debt was created by the transformation of a right to pay the balance of purchase money after 30 days into a contract where there was an obligation to pay instalments over a period of some 15 years. Such a transformation is not claimed in this case.

(43)

There is another reason why I do not accept the respondents' submission that this claim is manifestly hopeless because there is no deferred debt. As I have said, the respondents' submissions proceeded on the basis that these transactions involved nothing more than an instalment contract for the sale and purchase of land. But this is not what the Director claims. The Director claims that these transactions were a loan offer by the respondents to the purchasers, that the loan offer was accepted by entry into the contract for the sale of land, that thereupon the purchasers would be bound by the terms of the lender's mortgage to the respondents, at least as between the respondents and the purchasers, that, with some exceptions, as between the respondents and the purchasers, the mortgages would operate as if reference in the mortgage to the lender were reference to the vender and to the borrowers for a reference to the purchaser.

(44)

It cannot be said that this is incapable of being the language of loan. The way in which these arrangements are alleged to be expressed also in my view supports the existence of a present obligation to make future payments, rather than a future obligation under the contract. I have taken two additional matters into account.

(45)

First, some of the contracts, for example the ANZ contracts category, are said to refer to the uniform Consumer Credit Code.

(46)

Second, the Code itself expressly mentions a sale of land by instalments; see s.15(B)(c). This relates to where the credit is provided by the supplier for the sale of land by instalments and requires there to be a description of the land and of its price.

(47)

There would be no need, it seems to me, for this provision if the code did not apply to any sale of land by instalments.

(48)

I now come to my conclusion. My conclusion is that the claim is not manifestly hopeless as the respondents argue. The respondents application should therefore be dismissed.

(49)

I make one final comment. It has been unnecessary for me to deal with an argument made on behalf of the Director which, if I understand it correctly, is that the instalments would be immediately payable when the purchaser first occupies or enters into possession of the land and that there is then a present obligation to pay all the instalments as a debt.

(50)

There are some difficulties with this argument, because it may well be that the instalments are referable not only to possession but to title itself. Such an argument would need to be supported by words in the particular contract itself.

(51)

That concludes my reasons for decision.

Civil and Administrative Tribunal Act 1998

Credit (Victoria) Act 1995

Consumer Credit (Queensland) Act 1994

Director of Consumer Affairs Victoria v Geeveekay Pty Ltd

At a glance

Court

Decision date

Before

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Judgment (65 paragraphs)

Director of Consumer Affairs Victoria v Geeveekay Pty Ltd (Credit) [2005] VCAT 555 (16 March 2005)

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Legislation Cited (3)