Jennings v Credit Corp Australia Pty Ltd - [2000] NSWSC 210 - NSWSC 2000 case summary — Zoe

NSWNSWSC

Jennings v Credit Corp Australia Pty Ltd

[2000] NSWSC 210

Supreme Court of NSW|2000-03-22|Before: Santow J, Carruthers J, Hedigan J

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Source facts

Court

Supreme Court of NSW

Decision date

2000-03-22

Before

Santow J, Carruthers J, Hedigan J

Source

Original judgment source is linked above.

Judgment (33 paragraphs)

[1]

INTRODUCTION 1 This is a case stated from a magistrate. It revisits a surprisingly still disputed area of the law, concerned with the Limitation Act 1969 (NSW). Does that Act bar enforcement action against a debtor because brought solely by an equitable assignee of a debt who only got in the legal estate after the limitation period expired? The initial enforcement action by the equitable assignee was brought within the limitation period. But it is said by the Appellant debtor to be a nullity, as the legal assignor was never joined; the Magistrate decided otherwise. 2 The case stated poses as an initial issue whether there was no evidence, or alternatively insufficient evidence, to enable the Magistrate's finding to be reached that there had been an assignment of the debt in question to the party originally bringing the action. The debtor was Louise Jennings the Appellant. 3 The Senior Civil Magistrate, Mr Dive, concluded first that there was an effective assignment in equity. He also concluded, following the decision of Scott J in the English case of Weddell & Anor v J A Pearce & Major & Anor [1988] 1 Ch 26, that the equitable assignee's action was not statute barred. He did so against the background of the well-settled principle that an assignment of a chose in action, here the debt, is ineffective at law until notice has been given to the debtor under s12 of the Conveyancing Act 1919 (NSW). 4 The Respondent's route to that latter conclusion was as follows. Any defect in the equitable assignee's cause of action was capable of being cured. It was cured by the giving of notice to the debtor thereby conferring legal title, even though that was after the limitation period had expired. Whilst the assignor in whom the legal title was vested ought to have been a party to the original action, an action commenced by the equitable assignee without the assignor was not a nullity, though liable to be stayed. Accordingly, the equitable assignee could not recover damages or a perpetual injunction until the assignor had been joined or notice given. But, the writ not being a nullity, it stopped time running either immediately upon its filing, or retroactively to the date of filing, once the defect was cured by getting in the legal title. 5 This issue arose in the context of an application by the Plaintiff/Respondent for substitution of the Plaintiff's name upon a statement of claim in the Magistrate's court. The application was made by notice of motion dated 4 September 1998. The Magistrate allowed the substitution, so that "Credit Corp Australia Pty Limited as Assignee from Citicorp Person to Person Financial Services Pty Limited" was replaced by "Credit Corp Australia Pty Limited ACN 056 664 183 as Assignee from Citicorp Person to Person Financial Services Pty Limited". That substitution follows two assignments of the debt and several changes of corporate name by both assignor and assignee; see Salient Facts below. The first assignment was in equity from the original creditor to a company Bousdale Pty Limited (subsequently re-named Credit Corp Australia Pty Limited retaining the ACN 002 841 821). Bousdale under its new name then actually brought the proceedings against the debtor, doing so the day before the limitation period expired. Service on the debtor however took place well after that. There was then a further assignment of the debt, from Credit Corp Australia Pty Limited to another corporation subsequently re-named Credit Corp Australia Pty Limited ACN 056 664 183. The latter company gave notice of the assignment of the relevant debts to the debtor Louise Jennings ("the Appellant") by a date after expiry of the limitation period. 6 The Appellant's contentions are twofold:

[6]

Evidence of Assignment 10 No issue was taken by the Respondent that the Appellant's contention grounding the stated case went beyond the scope of s101 of the Justices Act, 1902 (NSW). This is insofar as it might be argued otherwise that the first contention, so far as it dealt with insufficiency of evidence, was not strictly a question of law. It is however open to a court dealing with a stated case to deal not only with a question of law but also, to the extent that an ultimate question of fact must be determined in order to reach that legal conclusion, that ultimate question of fact, An ultimate fact is distinct from evidentiary facts from which the ultimate fact is determined. 11 Furthermore, the construction of an instrument (the Assignment Agreement) is, as Davidson J said in the Australian Gaslight Co v The Valuer General (1940) 40 SR(NSW) 126 at 147, always a question of law. Here the stated case turns upon the proper construction of the Assignment Agreement dated 5 December 1985 between Citicorp Finance Pty Limited and Bousdale (as it was then called). If, as I conclude, it is ambiguous, then recourse must be had to its surrounding circumstances or factual matrix to determine its effect. 12 As to the no evidence for assignment contention, it is well-settled that provided such a no evidence argument is not merely colourable, but enjoys a real possibility of success, it does constitute a question of law as may properly be the subject of a stated case; see Lombardo v Federal Commissioner of Taxation (1979) 28 ALR 574 at 578 per Bowen CJ. I am satisfied that this no evidence argument is not colourable and is a question of law. 13 Context here is important. The Magistrate was determining the matter as an interlocutory application by notice of motion. He had to decide whether to permit substitution of the claimed ultimate assignee, Credit Corp Australia Pty Limited ACN 056 664 183, as plaintiff. He was thus only deciding the matter on a prima facie basis. He was doing so in circumstances where final determination of the relevant issues at trial would permit that matter to be re-canvassed in light of fuller evidence, if warranted. 14 In reviewing the Magistrate's determination, I am bound by well-settled authority not to disturb the Magistrate's interlocutory finding if the inference he draws leading to his conclusion is capable of being supported by the facts before him or by legitimate inference therefrom. For reasons elaborated below, I am satisfied it is so capable. 15 I start with the documentation. It is clear enough from the Assignment Agreement that there is no express reference to the relevant debt. Rather what is assigned are numerous accounts receivable referred to in Recital A as the "Loss Recovery Ledger" and "arising from the business in New South Wales of members of the Citicorp Group of lending money under various types of loan hiring and lease agreements relating to the provision of consumer finance. …..". 16 Recital A refers to all "the agreements between a member of the Citicorp Group and Borrowers [as earlier defined] which give rise to the Loss Recovery Ledger" as being "summarised in the First Schedule hereto". It is common ground that there is no first schedule to that agreement. 17 Recital B refers to the total face value of the Loss Recovery Ledger as being "not precisely ascertainable but is currently estimated to be $15,141,000 representing approximately 5,449 accounts". 18 The operative provision of the agreement commences following Recital C as follows: "In consideration of the amount of $2,787,300-00 (Australian currency) payable by Bousdale to Citicorp at 1 Margaret Street Sydney Citicorp as beneficial and absolute owner free from encumbrances of the Loss Recovery Ledger HEREBY ASSIGNS AND TRANSFERS ABSOLUTELY unto Bousdale all its rights title benefit and interest in and to and due or to become due from the same and the full benefits rights and obligations under the relevant agreements …"

[15]

But a subsequent assign giving the first notice obtains no priority over earlier assigns unless without notice of them and unless that subsequent assign gave value. 31 The Appellant then correctly contends that the interests of an equitable assignee are different from the interests of a legal owner of a chose in action. The legal owner whilst remaining such, is still entitled to enforce rights against the debtor, though as assignor holding the benefit of that enforcement for the assignee. 32 It is then contended that the Respondent as equitable assign only had rights against the assignor and not against the debtor. Yet the Respondent took none of the steps available to effectuate its rights, giving notice only after the limitation period expired. Thus the equitable assignee should ordinarily join the assignor either as plaintiff, if the assignor consents, or, if he does not, as defendant: Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1 (HL), Holt v Heatherfield Trust Ltd [1942] 2 KB 1; Weddell v J A Pearce & Major cf Compania Colombiana de Seguros v Pacific Steam Navigation Co [1965] 1 QB 101 at 127-9; [1964] 1 All ER 216 at 235-6 (Roskill J), which Scott J in Weddell's case declined to follow ([1987] 3 All ER at 637); also Pincus v Ord Minnett Ltd (SC (Vic), Hedigan J, 5 May 1994, unreported). 33 In the absence of such an order to join the assignor, the Appellant contends that an equitable assignee has no standing to enforce the legal contractual right vested in the equitable assignee. This is because the action brought by the equitable assignee alone is a nullity, incapable of stopping time from running for limitation purposes. The Respondent joins issue with the Appellant on that proposition. 34 The rationale for requiring the legal assignor to be joined is severalfold. First the debtor, deprived of notice of the assignment, should be protected against equities by way of set off or otherwise, as between debtor and assignor which arose prior to receipt of notice of the assignment or arose after but are sufficiently closely connected with a transaction pre-dating notice; see W J Gough Company Charges 2nd edition (Butterworths, 1996) at 281-90 and the cases there cited. 35 Then there is the real risk of duplication of claims both from the legal assignor and any competing assignees. Take firstly a claim by the legal assignor. The debtor may unwittingly pay the assignor and then face a claim from the equitable assignee who is able to give notice and get in the legal estate. Then there is potential for claim by any other assignee, who may become a legal assignee by giving the first notice and paying value thus gaining priority; see generally Meagher Gummow and Lehane (supra) at para 6.103; and Performing Right Society v London Theatre of Varieties Ltd [1924] AC 1 at 14, 19, 20 and 30, referred to in Weddell v Pearce at 633-5. Giles J in Showa Shoji Australia Pty Limited v Oceanic Life Ltd (1994) 34 NSWLR 548 at 561 concluded that an equitable assignee of an option could not exercise it. This was because as was said in Warner Bros v Rollgreen Ltd [1976] QB 430 the equitable assignee of the option may never become the legal assignee able to enforce against the grantor of the option. This is so though, as between assignor and assignee, the assignee's title is complete in equity (pace Denning LJ in Warner Bros at 442-3). 36 Thus says the Appellant, Bousdale (and the assignor) have neither of them given notice of the assignment to the debtor prior to the expiry of the Statute of Limitations so as to convert Bousdale to a legal assignee. Bousdale likewise failed within the limitation period (or at all) to join the legal owner in the absence of that notice. Therefore, it follows that the Respondent is now statute barred notwithstanding the subsequent acquisition of a legal interest by virtue of the later giving of notice, as that came after the limitation period had expired. 37 The critical question needs to be stated with some precision. It is whether the Statement of Liquidated Claim filed by the then equitable assignee on 25 July 1991, one day before the limitation period expired, then constituted, within the meaning of s63(2) of the Limitation Act 1969 (NSW): "An action ….. brought on the cause of action."

[16]

By "then constituted", I intend also to comprehend this possibility. That, consistent with the Local Court Rules for civil claims, later getting in of the legal estate had retroactive effect to the date of filing, though it occurred outside the limitation period. 38 The cause of action, for purposes of s63(2), is "a cause of action to recovery any debt damages or other money". 39 The question has been framed in terms of asking whether the action commenced by an equitable assignee without jointing the assignor is (or is not) "a nullity". Thus Scott J in Weddell v Pearce at 41 concludes: "In my judgment, therefore, it is clearly established that an action commenced by an equitable assignee without joining the assignor is not a nullity. It may be liable to be stayed until the proper parties have been joined, but it is not a nullity." 40 I would prefer to test the matter by analysing the nature of the defect in the Respondent's Statement of Liquidated Claim and then determining its consequences for the status of that claim in the context of the relevant rules as applicable to a Local Court dealing with a civil claim. It is only by so doing that one can answer the question whether, in the events that happened, "an action is brought on the cause of action" within the meaning of s63(2) of the Limitation Act 1969 (NSW), so as to be protected from extinguishment as statute barred. The analysis therefore requires consideration of the status of the equitable assignee's writ or claim. This is in circumstances where the debtor had not at any time moved to set the writ aside or stay the action, such that it might be said to be voidable but not void, as in the case of judicial review setting aside a determination for breach of rules of natural justice. In that analogous context, courts now generally favour a "relative" concept of invalidity. This allows courts to hold that a decision is "void ab initio", as if it had never been made, but only once a competent court declares that it was so made in breach of rules of natural justice. But even after avoidance the cases confirm that such a decision has practical and even legal effect, like the smile on the cheshire cat, lingering after the cat has vanished See Lewis Carroll: Alice's Adventures in Wonderland Ch 6: "I've often seen a cat without a grin", says Alice. "But a grin without a cat, that's the most curious thing I've ever seen in all my life."; see Aronson & Dyer "Judicial Review of Administrative Action" (LBC, 1996) at 485 and for a good example of such judicial treatment Forbes v Trotting Club (NSW) (1979) 143 CLR 242 at 277. The present case is stronger; there never was any setting aside nor even an application to do so on this ground before the legal estate was got in. There was simply resistance to the Plaintiff's substitution application when made after the legal estate was acquired and after a further assignment. 41 If the matter be considered purely in terms of procedural enforcement, the basis for any absolutist notion of voidness is clearly not made out; there are clearly exceptions to the bar on an equitable assignee enforcing against the debtor. The starting point is as Windeyer J put it in Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 29-30:

[20]

43 The context in which Lord MacNaghten made his observations are different from the present case. But they throw light upon the nature of proceedings which suffer from the defect of not joining the assignor where the proceedings are brought by the equitable assignee. In William Brandt's Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 the issue was whether the debtor (Dunlops) had received sufficient notice to make it liable to pay again, it having already paid the assignor, not the assignee. The debtor "disclaimed any wish to have [the assignor] present" (per Lord MacNaghten at 462). That may be invoked to distinguish the facts from those presently before me, for here the debtor did not so disclaim. But neither did the occasion arise where she might have disclaimed. She appears not at any stage to have either sought to set aside the proceedings as improperly constituted or short of that to stay them. The point of invalidity now arises after the legal estate was acquired by the equitable assignee and then only obliquely, in the context of the Respondent's interlocutory application to substitute the current name on the writ and the debtor's opposition to that. Thus, if it could be said that the original proceedings were vulnerable to such action to set aside, they never were set aside. They existed, and continue to exist, as extant proceedings capable of being permitted. This is so, though until the legal estate was got in, they were subject to being stayed on the ground of the non-joinder of the legal assignor. 44 Proceedings by an equitable assignee seeking some form of interlocutory injunction would not ordinarily be dismissed, but rather stayed. Indeed in Performing Right Society Ltd v London Theatre of Varieties Ltd (supra) the Court of Appeal did not dismiss the improperly constituted action of the equitable assignee of a copyright. Rather it gave the Plaintiff leave to amend its writ and subsequent pleadings by adding the legal owner as co-plaintiff, the House of Lords upholding that view of the matter. Thus Viscount Cave LC at 14: "That an equitable owner may commence proceedings alone, and may obtain interim protection in the form of an interlocutory injunction is not in doubt; but it was always the rule of the Court of Chancery, and is I think, the rule of the Supreme Court, that, in general , when a person has only an equitable right in the thing demanded, the person having the legal right to demand it must in due course be made a party to the action ….." [emphasis added]

[25]

49 While it is true that the present Respondent has not sought such an order in those precise terms, it could readily have done so. But in any event the order for substitution has equivalent effect. Thus if the Plaintiff were to apply for such an order, on the basis that it had become entitled to sue in a further capacity, namely that of legal assignee, by virtue of the earlier notice, such an application could be expected ordinarily to be allowed. There is no demonstrated prejudice to the Defendant debtor, who has not been required to pay twice and, knows to whom she must pay. 50 Indeed the situation is analogous to proceedings commenced by an agent without authority. In circumstances where proceedings have been commenced in the name of the principal by an agent without the authority of the principal, and where the absence of authority may be remedied by a proper authority subsequently being given, the institution of the proceedings is not a nullity in any sense. To misquote Lewis Carroll, the cheshire cat remains, smile intact. Rather the bringing of the action is capable of ratification and such ratification too relates back to the institution of the proceedings. Provided the proceedings are commenced prior to the expiry of the limitation period, ratification after the expiry of that period is valid, as the ratification takes effect from the commencement of the proceedings and not from the date of ratification: Dillon v Baltic Shipping Co ("The Mikhail Lermontov No. 2") (SC(NSW), Carruthers J, 28 May 1993, unreported) and see also Omega Estates Pty Ltd v Ganke (1962) 80 WN(NSW) 1218. 51 Furthermore, while the joinder of the assignor would have added an additional party, so as to bring into play Pt 6 r11(3) of the Local Courts (Civil Claims) Rules with the result that the amendment is taken to be the date of the filing of the statement of claim amended, that rule does not apply in respect of an amendment made under Pt 16 r4(3) (Drinan v Hickey (1987) 11 NSWLR 744 and, by parity of reasoning, Pt 16 r4(4). See also Fernance v Nominal Defendant (1989) 17 NSWLR 710 per Gleeson CJ in relation to the equivalent provisions of Pt 8 of Supreme Court Rules. Here, the equitable assignee has at no point sought to join the assignor, so that issue simply does not arise. 52 As was said by Rogers J in Australia & New Zealand Banking Group Ltd v Larcos (1987) 13 NSWLR 286, regarding the comparable provision of Pt 20 r4 of Supreme Court Rules, it is the rules of court which determine when an action is taken to be brought for limitation purposes. It is not the limitation statute, which itself is a procedural not substantive law; McKain v R W Miller & Co (SA) Pty Ltd (1991) 174 CLR 1. Thus in permitting a cross-claim to be amended and thereby pursuant to Pt 20 r4 causing the amendment to take effect from the time of the original pleading, he pointed out there was no inconsistency between the (Commonwealth) limitation statute and the relevant court rule (at 295): "The rule accepts fully the dictate of the Commonwealth legislation that proceedings should be commenced within three years from accrual of the cause of action. The rule deals merely with a procedural matter which, as a matter of law, then has an impact on what is to be taken as the date of commencement of proceedings. The two regulatory provisions operate in different fields and are therefore not inconsistent."

[27]

54 In truth, the propositions cannot co-exist if the latter proposition be expressed in absolute terms. Thus it is clear that procedural rule does for some purposes give the equitable assignee rights against the debtor; in particular to obtain interim relief or where the debtor waives the right for the legal assignor to be present. In that sense there is a false dichotomy between procedural and substantive. For within the interstices of that accommodating procedure, substantive law is secreted, in the form of these two exceptions. In each case the equitable assignee exercises a contractual right against the debtor. Nonetheless the second proposition has in its absolute form been adopted in at least one New Zealand case. In Mountain Road No. (9) v Michael Edgley Corporation Pty Ltd [1999] 1 NZLR 335 at 345 the New Zealand Court of Appeal concludes, "…. notice to the person liable is required before an assignee (whether legal or equitable) can enforce the cause of action assigned", basing the conclusion on Warner Bros Records Inc v Rollgreen Ltd. 55 To the direct contrary however is a decision of the Queensland Court of Appeal, Thomas v National Australia Bank Ltd (SC No. 237 of 1996, 21 December 1999, unreported). The principal judgment was written by Pincus JA who declined to follow the New Zealand Court of Appeal. He pointed out that there are authorities tending both ways but considered that the weight of authority so far as Australia is concerned favoured the appellant. He cites in support Dixon J in Comptroller of Stamps (Vict) v Howard Smith (1936) 54 CLR 614 at 622, though Dixon J was there dealing with a bilateral situation where there was no third party directly involved analogous to the debtor: "….. communication to the trustee or person in whom the legal title of the property is vested is not required in order effectually to assign the equitable property. Notice to the trustee may be important to bind him in respect of the assignment and in order to preserve priorities."

Parties

Applicant/Plaintiff:

Jennings

Respondent/Defendant:

Credit Corp Australia Pty Ltd

Legislation Cited (2)

Limitation Act 1969(NSW)

Conveyancing Act 1919(NSW)

Cases Cited (11)

CITATION : Jennings v Credit Corp Australia Pty Ltd [2000] NSWSC 210 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 4970/99 HEARING DATE(S) : 03/03/00 JUDGMENT DATE : 22 March 2000

COUNSEL : J M Hennessy (Plaintiff/Appellant) L Tyndall (Defendant/Respondent) SOLICITORS : Eddy & Molony (Plaintiff/Appellant) CATCHWORDS : PROPERTY - Equity - Practice and Procedure - Case stated from magistrate - Relevant principles - Sufficiency of evidence that was an effective assignment - Limitation Act 1969 (NSW) does not bar enforcement action against a debtor brought by an equitable assignee without joining the legal assignor though legal estate only got in after limitation period expired - effect of Local Court Rules for civil claims. Conveyancing Act 1919 (NSW), s12 LEGISLATION CITED : Justices Act, 1902 (NSW), s101 Limitation Act 1969 (NSW), s63 Australia & New Zealand Banking Group Ltd v Larcos (1987) 13 NSWLR 286 Australian Gaslight Co v The Valuer General (1940) 40 SR(NSW) 126 Compania Colombiana de Seguros v Pacific Steam Navigation Co [1965] 1 QB 101; [1964] 1 All ER 216 Comptroller of Stamps (Vict) v Howard Smith (1936) 54 CLR 614 Dillon v Baltic Shipping Co ("The Mikhail Lermontov No. 2") (SC(NSW), Carruthers J, 28 May 1993, unreported) Fernance v Nominal Defendant (1989) 17 NSWLR 710 Forbes v Trotting Club (NSW) (1979) 143 CLR 242 Holt v Heatherfield Trust Ltd [1942] 2 KB 1 Lombardo v Federal Commissioner of Taxation (1979) 28 ALR 574 Long Leys Co Pty Ltd v Silkdale Pty Ltd (1991) 5 BPR 11,512 McKain v R W Miller & Co (SA) Pty Ltd (1991) 174 CLR 1 CASES CITED : Marchant v Morton Down & Co [1901] 2 KB 829 Mountain Road No. (9) v Michael Edgley Corporation Pty Ltd [1999] 1 NZLR 335 National Mutual Life Nominees Ltd v National Capital Development Commission (1975) 6 ACTR 1 Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 Omega Estates Pty Ltd v Ganke (1962) 80 WN(NSW) 1218 Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1 (HL) Pincus v Ord Minnett Ltd (SC (Vic), Hedigan J, 5 May 1994, unreported) Showa Shoji Australia Pty Limited v Oceanic Life Ltd (1994) 34 NSWLR 548 Thomas v National Australia Bank Ltd (SC No. 237 of 1996, 21 December 1999, unreported) Warner Bros v Rollgreen Ltd [1976] QB 430 Weddell & Anor v J A Pearce & Major & Anor [1988] 1 Ch 26 William Brandt's Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 DECISION : Magistrate's decision upheld via stated case.

(1987) 13 NSWLR 286

(1936) 54 CLR 614

(1989) 17 NSWLR 710

(1979) 143 CLR 242

(1979) 28 ALR 574

(1991) 174 CLR 1

(1963) 109 CLR 9

(1994) 34 NSWLR 548

(1987) 11 NSWLR 744