Judgment
1Mrs Karen Elizabeth Schwede, the third named plaintiff, is the sister of the second named defendant, Mrs Lynette Margaret de la Vega. Mrs Schwede and her husband, Mr Jason Schwede, are shareholders, and Mr Schwede is sole director, of the first named plaintiff, JKB Holdings Pty Ltd ("JKB"). Mrs de la Vega is married to Mr Alejandro Jose de la Vega, the first named defendant. Mr M Steele of counsel appears for the plaintiffs. Mr S Y Reuben of counsel appears for the defendants.
2JKB claims that it made the following loans to the defendants:
(1)a loan of $350,000 in June 2004 ("the First Loan");
(2)a loan of $120,000 in October 2004 ("the Second Loan");
(3)a loan of $30,000 in June and July 2007 ("the Third Loan"); and
(4)three small loans totalling $32,021.76 made in April 2010 ("the Small Loans"), being:
(a)$9,921.76 for BMW repairs;
(b)$10,000 for Blacksmith Developments Pty Ltd; and
(c)$12,300 for school fees in respect of the defendants' children.
3The defendants do not dispute that the loans to which I have referred were entered into and the monies advanced but dispute that the Small Loans and the Third Loan were to be added to the First and Second Loans, hence attracting interest. The defendants claim that these monies were lent by Mr Schwede and or Mrs Schwede and not JKB or on behalf of JKB. There is also an issue as to whether the rate of 20 per cent interest payable in respect of the First and Second Loan constitutes a penalty and whether the National Credit Code in Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth) applies to the Second Loan. There is a further issue about whether amounts paid by the defendants to Mr and Mrs Schwede were in fact made in repayment of the First and Second Loans or whether they were repayments made in respect of other somewhat complicated arrangements which I will explain in more detail.
4Recital A of the First Loan agreement is in the following terms (see Exhibit A4 at p 146):
"The parties have agreed that the Lender will make a loan to the Borrower of $350,000 (the "Loan") on the terms and conditions set out below. The Loan is to be secured by a second registered mortgage (the "Existing Mortgage") over the Borrower's residence at xxxxx xxxxxxxxx xxxx, Woollahra in the State of New South Wales (the "Property")."
Recital B of the Second Loan agreement is in the following terms (see Exhibit A4 at p 186):
"The parties have now agreed that the Lender will make a further loan to the Borrower of $120,000 (the "Loan") on the terms and conditions set out below. The Loan is to be secured by a second registered mortgage (the "Existing Mortgage") over the Borrower's residence at xxxxx xxxxxxxxx xxxx, Woollahra in the State of New South Wales."
I also set out cl 2 and cl 3 of the First and Second Loan agreements:
" 2.The Borrower agrees to pay interest on the Loan to the Lender at the rate of 17.5% per annum payable on or before [date].
3.In the event that interest for the period [date] to [date] has not been paid by [date] in accordance with par 2 above, the Borrower agrees to pay interest on the Loan to the Lender at the rate of 20% per annum from [date] until all outstanding interest and the Loan have been repaid."
The cross claim
5The cross claim by the defendants has two elements. The first is the National Credit Code issue to which I have already referred. The defendants also cross claim for compensation for pecuniary loss under s 74P of the Real Property Act 1900. Subsection 74P(1) relevantly provides:
"74P Compensation payable in certain cases
(1)Any person who, without reasonable cause:
(a)lodges a caveat with the Registrar-General under a provision of this Part,
(b)procures the lapsing of such a caveat, or
(c)being the caveator, refuses or fails to withdraw such a caveat after being requested to do so,
is liable to pay to any person who sustains pecuniary loss that is attributable to an act, refusal or failure referred to in paragraph (a), (b) or (c) compensation with respect to that loss."
6A caveat was lodged by JKB on 18 May 2010 on the title of a property which I shall refer to as "the Paddington Property", owned by the defendants (see Exhibit A5 at p 1725), which contained the following words:
"The Equitable Mortgage secures capital and interest totalling $780,588 as at the date hereof plus $258 daily thereafter owed by Alejandro de la Vega and Lynette Margaret de la Vega as Borrower and JKB Holdings Pty Ltd ACN 089 683 929 as Lender, the predominant purpose of which was to finance the purchase of the borrowers' residence (being the property the subject of this caveat) in May 2008." (emphasis added)
7The defendants contend that:
(1)they never agreed to grant a mortgage over the Paddington Property;
(2)the monies advanced by JKB were not for the purchase of the Paddington Property and hence the caveat involved a false statement made by Mr Schwede on behalf of JKB; and
(3)the plaintiffs' lodgement of caveat was without legal foundation.
8The defendants filed an objection to the caveat as a result of which JKB sought in this court an order extending the operation of the caveat. An order extending the operation of the caveat was made on 8 July 2010 by Pembroke J (see Exhibit A1 at p 53) but the order was not filed at the Land and Property Information division by closing time on 8 July 2010 and the caveat lapsed at 8.56:28am on 9 July 2010 (see par 690 of Mr Schwede's affidavit of 18 September 2011). On 9 July 2010, the Court was informed by counsel for JKB that the caveat had lapsed.
9On 8 July 2010, the defendants had signed an irrevocable authority addressed to Mr Henry Frydman, the solicitor acting for the defendants on the sale of the Paddington Property, to pay an amount of $800,000 to his trust account to hold until instructed jointly by the defendants and JKB's solicitors (see Exhibit A1 at p 56). On 9 July 2010, by means of consent orders, the plaintiffs and defendants agreed that the defendants would be released from their undertaking to provide the authority to Mr Frydman and that instead they would direct Mr Frydman to pay $791,000 into court pending court orders or agreement between the parties (see Exhibit A1 at pp 68 to 69).
10The plaintiffs do not admit that the caveat contained any false statements and assert that, given that the caveat lapsed and was known to have lapsed when the consent orders were made, the defendants in any event have suffered no loss by the lodgement of the caveat.
Amounts in dispute
11As I have noted, the defendants do not dispute that the loans for $350,000 and $120,000 (the First and Second Loans) were entered into and do not dispute that they have not repaid to JKB the total amount owing in respect of capital and interest. The plaintiffs agree that the defendants paid $52,000, $220,000 and $15,000 (in three $5000 instalments) in reduction of the JKB loans. The amount that is now owing is in dispute and the areas of dispute were these:
(1)JKB claimed that the interest rate to be applied was compound interest and if it did not have that construction the contract should be rectified. Both of these claims were abandoned during the hearing.
(2)JKB relies on the term of the contract that if the capital debt is not repaid within 12 months then the rate of interest increases to 20 per cent. The defendants assert that that clause is a "penalty" and that they should not be required to repay at the increased rate. I should note that JKB now accepts that the 20 per cent is only payable for the period after the first 12 months. It abandoned during final submissions a claim that as a matter of construction the 20 per cent was chargeable on the entire loan, rather than only the unpaid portion of the loan.
(3)The defendants claim that they have made repayments which should have been deducted from the JKB loan debt. The payments themselves are not in dispute but their character is disputed because of other transactions which took place between Mr Schwede, Mrs Schwede and the defendants, which I shall describe below.
(4)JKB says that the amount of $30,000 (the Third Loan) was lent by it to the defendants and that that loan was also subject to interest on the same terms. Mr Schwede says that if the loan was not made by JKB then it was made by him. Nothing turns on the identity of the lender except for the issue of interest.
(5)JKB claims the Small Loans were lent by it to the defendants and that they were also to be the subject of interest at the same rate as the First and Second Loans. The defendants do not dispute receipt of the Small Loans but assert that:
(a)they were lent by Mr or Mrs Schwede; and
(b)they were not the subject of any agreement concerning interest.
(6)The defendants claimed that the First and Second Loans (and the Third Loan, if it was held to be a JKB loan) were loans that fell within the National Credit Code legislation. During the hearing, the defendants abandoned the contention that the First Loan was caught by the National Credit Code. Little was said about the applicability of the Code to the Third Loan perhaps because the defendants contend that no interest was payable on it.
The other transactions
12There are two other loans which Mr Schwede made to Mr and Mrs de la Vega. The first was a short term loan of $75,000 made by Mr Schwede in March 2005 ("the March $75,000 Loan"). There is no dispute that it was repaid on 7 April 2005. On 19 July 2005, Mr de la Vega paid $8000 to Mr Schwede and Mr Schwede asserts that that amount was the interest due on the $75,000 for the period that the money was outstanding. Mr de la Vega asserts that there was no interest due on the March loan because Mr Schwede had said he would not charge interest, having regard to the extensive architectural work he (Mr de la Vega) had performed in relation to Mr and Mrs Schwede's Gold Coast property. Mr de la Vega claimed that he and his wife spent time to a value of $60,000 - $70,000 (his affidavit of 10 November 2011 at par 18(e)).
13The next loan was a loan made by Mr Schwede of $52,000 in August 2006 ("the August $52,000 Loan"). There is no dispute that the loan was made. Mr de la Vega admits that he had asked for a loan of $70,000 and that he offered to pay interest of $1000 a week for three weeks and thereafter $750 a week until it was repaid (see Mr de la Vega's email dated 30 August 2006 in Exhibit A4 at p 520). Mr de la Vega, however, asserts that Mr Schwede said that Mr de la Vega did not need to pay any interest on this loan either, for the same reasons as Mr de la Vega advanced in respect of the March $75,000 Loan.
14Mr Schwede disputes that Mr de la Vega had performed extensive architectural work for himself and his wife (he admits some limited work had been performed) and he denies that he agreed not to charge Mr de la Vega interest.
15The next transaction (or series of transactions) is an extraordinary one (as Mr Schwede himself conceded). Mr Schwede says that by July 2005 he found himself in difficulty so far as subcontractors on his Gold Coast property were concerned: see par 148 of his affidavit affirmed 18 September 2011. He says that because the de la Vegas had not repaid all the money borrowed from JKB, JKB (which was funded by the Schwedes) could not advance money to the Schwedes to meet the payments required for their building project. He was also having difficulties with the subcontractors beyond the availability of funds to pay them. Mr Schwede says he complained to Mr de la Vega about his lack of funds due to Mr de la Vega not having repaid them to JKB and that Mr de la Vega suggested that, as a temporary solution, de la Vega Architects Pty Ltd, a company owned by the first and second defendants, would pay for invoices relating to the house: see par 204 of Mr Schwede's affidavit of 18 September 2011. It seemed to be suggested initially by the plaintiffs that there may have been some advantage so far as GST was concerned (see T7.30), but the contention that GST was not paid by Mr de la Vega or de la Vega Architects, or was claimed back by them, was not pressed.
16Mr Schwede says that, in accordance with Mr de la Vega's proposal, he then directed subcontractors to address their invoices to de la Vega Architects and that de la Vega Architects did pay invoices on behalf of himself and Mrs Schwede. In August 2006, however, Mr de la Vega told Mr Schwede that de la Vega Architects had no money to pay any further invoices. Mr Schwede then forwarded to Mr de la Vega $9670 to enable de la Vega Architects to pay the outstanding accounts that had already been invoiced to them. It was at the same time that Mr de la Vega asked for the $70,000 to which I have earlier referred.
17Mr Schwede says that, accepting that he owed Mr de la Vega the total of the amounts paid by de la Vega Architects to the Gold Coast subcontractors at that point ($75,100, which is referred to as "$77,064" in Exhibit B) and that he was owed by Mr de la Vega the $52,000 and interest on that loan, it was agreed that the subsequent payment of $54,307 by Mr de la Vega to various payees nominated by Mrs Schwede would be a complete satisfaction of debts as between himself and Mr de la Vega; that is, he offset his debt of $75,100 against Mr de la Vega's debt of $52,000 plus interest due. Mr de la Vega disputes this characterisation and says that the $75,100 was a part repayment by himself and his wife of the JKB loans, as was the $54,307, although paid to creditors of Mrs Schwede at Mr or Mrs Schwede's direction. If Mr de la Vega's assertion is correct, then the $52,000 debt must be accounted for (leaving aside the question of interest).
Credibility of witnesses
Mr Schwede
18Mr Rueben in his written submissions referred to a matter relevant to Mr Schwede's credit relating to the amounts which had been declared to the Australian Taxation Office. Mr Schwede said that his amended tax returns "treated any money that was received from the de la Vegas as JKB's and paid the tax on it, including notional tax that we haven't received yet": see T104, T106 and T108.15 - 45. He said he had not declared the $8000 cash given to him on 19 July 2005 as received by him but had declared it through JKB: see T142.15 - 21 and see T211.20 - 40. He agreed at T142 - T143 that he should have declared the $8000 as money paid to him if it was repayment of a loan made by him (that is, the March $75,000 Loan) and that he had filed an amended return for the relevant year. Mr Reuben submitted that Mr Schwede could not be believed in relation to the $8000 payment since what he says he told the Australian Taxation Office was the opposite of what he now asserts. There was also a belated attempt to establish that what Mr Schwede says about an amended return was not true.
19The defendants have not established that what Mr Schwede said about an amended return to the Australian Taxation Office was untrue, but I agree that the manner in which Mr Schwede seeks to characterise the payments is inconsistent with documents prepared by himself or on behalf of JKB and to the way he treated the monies as described in par [18] above and to which I shall return.
20The blurring of distinctions between JKB on the one hand and the Schwedes on the other, when JKB was a family company of which Mr and Mrs Schwede were both, at different times, director, the strange dynamics of a business relationship between the Schwedes and the de la Vegas in the context of what was once a strong family connection (both Mr Schwede, at T145.43 and T174.12 for example, and Mr de la Vega, at T251.9 and T360.49, relying on this at different times), the attempt by JKB late in the piece to treat the loans as based on compound interest when there could be no proper basis for such a claim and other changes driven by accounting advice and taxation issues, have contributed to the very confused picture which has emerged, as has the rather convoluted nature of the arrangements between the parties over a long period of time and which matters induce doubt as to the accuracy of Mr Schwede's recollection a number of years later. There is no doubt that Mr Schwede feels strongly that Mr de la Vega has been far from honourable in his dealings with himself, his wife and JKB, which I think led him to display his emotion at times and he had some difficulty in restricting himself to answering the questions asked. In addition to the matters referred to in par [19] above, the evidence in his affidavit concerning the payment of $61,670 by him for the work on his Gold Coast home (see par 210 of his principal affidavit of 18 September 2011) does not sit comfortably with what he said at T169 and nor does the figure of $34,307.20 in par 210. His claim that Mr de la Vega made him a gift of $20,000 at a time when not all of the money owed by the de la Vegas to JKB had been repaid was implausible: see par [42] below. Overall, I approach his evidence with caution.
Mr St George, Mr Schneider and Mr Black
21There was no suggestion that Mr Daniel Robert St George and Mr Robert Henry Bruce Schneider, who were solicitors acting for Blacksmith Developments (which had loaned money to Mr and Mrs de la Vega in 2008 and obtained a mortgage over the de la Vegas' Paddington Property) were not totally credible witnesses and I accept their evidence without reservation.
22In respect of Mr Bran Black, who was a solicitor employed by Gadens, the firm instructed by the defendants in relation to the caveat proceedings in July 2010, there was no attack on his honesty but the accuracy of his recollection was called into question. I have no doubt he was doing his best to recall the events of 2010 as honestly as he could, but he was doing so without the benefit of any contemporaneous note of his conversation with Mr de la Vega or his attendance at court on 9 July 2010. Notwithstanding his firm recollection that Mr de la Vega and he knew that JKB had been unable to lodge the order extending the caveat obtained on 8 July 2010 from the Court before they went to court on 9 July 2010, I doubt that that is what occurred since it is unlikely that Mr de la Vega would have known about JKB's failure to lodge the order in time the night before unless Mr or Mrs Schwede told him, and there is no suggestion that they did: see also Exhibit A5 at pp 1828 - 1829.
Mr de la Vega
23Mr de la Vega was demonstrated to be a person who is prepared to do and say anything to extricate himself from an awkward situation, in particular:
(1)He admits that he lied to his solicitor Mr Charles Roth concerning the existence of a mortgage to JKB. He told Mr Roth that he had executed such a mortgage in 2008 when he had not, and he said this with the intention that Mr Roth would inform the representatives of Blacksmith Developments that he and his wife had granted a mortgage to JKB for $500,000. Mr Roth did communicate this false information to Blacksmith and it was acted on by Blacksmith because they entered into a loan agreement that recognised the JKB mortgage at $500,000 (see Exhibit A4 at pp 997 - 998 and see also pp 1116 - 1118 and 1272, the evidence of Mr St George at T248 - T254 and Mr Schneider at T255 - T266). Mr de la Vega later told Mr Roth that he could not find a copy of the document. Whilst literally true, that statement falsely implied that such a document existed when in truth it did not.
(2)He falsely dated a loan agreement, purportedly between himself and JKB by which he and his wife agreed to grant a mortgage to JKB, with the date 28 August 2008. He and his wife signed that document in 2010. He did not provide a copy of that document to JKB.
(3)He promised Mr and Mrs Schwede that he would grant a mortgage to JKB over a rural property he was purchasing ("Kangaloon") (see Exhibit A4 at p 594 / 1342) if they agreed to permit sale of the property at Woollahra referred to in the loan agreement, but he never did provide the document. He told the Schwedes that he had instructed Mr Roth to prepare that mortgage. He said at T354 that he believes he did give those instructions but the transcript at T354.48 - T356 records Mr de la Vega asserting that there were issues about the terms of the mortgage. There is no correspondence relating to issues about the terms of that mortgage. He said that he withdrew his instructions to Mr Roth to draft a mortgage. There is no correspondence in evidence showing that any mortgage over Kangaloon was prepared or that instructions were given for it to be prepared, nor is there any corroboration that he informed Mr Roth that the instructions were withdrawn.
(4)He asserted that he had not authorised the solicitor acting for him on the sale of the Paddington Property (Mr Frydman) to release the undertaking to JKB (T310.19 - T311.34) but had authorised release of an earlier version and when asked why he only authorised the release of the first version (admittedly one not at all onerous to himself and his wife), he said:
"Because I felt like it. What else?" (T314.9)
His assertion that he had not authorised release of the undertaking contradicted what had been said in opening by Mr Reuben: see T116 - T117.
(5)Mr de la Vega said at T281.45 that he had prepared the loan agreement falsely dated 28 August 2008 because he had agreed to give JKB security over the Paddington Property yet he never did provide a mortgage to JKB in 2008 or 2009. He said that the reason he prepared the document in 2010 was that he wanted to prevent Blacksmith Developments' advisers concluding that he had lied to them: see T281.40. His evidence at T350.48 - T354.12 was entirely unconvincing.
(6)He said at T280.15 that he wanted JKB to have a mortgage and he says that the reason he did not give them a mortgage was that they could not agree on the terms of it: see T280 and T282. That might have been true in 2010 but it is not an explanation for his failure to do so in 2008 and 2009.
(7)In relation to the events of 8 and 9 July 2010, Mr de la Vega, in his email to Mr Schwede (see Exhibit K), said that he was instructing Mr Frydman to hold $800,000 in his trust account - what he provided to Mr Frydman met that description (see Exhibit A5 at p 1815) but only in a literal sense because as first framed (and before JKB's solicitor made it clear that the form would have to be changed: see Exhibit J), it left it entirely at the de la Vegas' option to remove the money from Mr Frydman's account.
24There were some additional matters relevant to his credibility:
(1)Mr de la Vega said he had a conversation with Mr Schwede on 8 July 2010 around 4pm: see par 105(c) of his affidavit of 16 May 2011 and par 100(c) of his affidavit of 10 November 2011. In his affidavit of 10 November 2011, he said he had taken notes during and immediately after the conversation (see par 100(d)) and he annexed those notes to his affidavit. Later he said in cross examination that the notes were written during discussions with Mr Black in 2010, and he accepted that the notes were not contemporaneous: T299 - T300. Mr de la Vega said that the time of the conversation was after his conversation with Ms Stella Deligiorgis, solicitor for the plaintiffs, a conversation which he said occurred between 3.30pm and 4.00pm. At T268.45 - 48 he said the time of the conversation was between 1.40pm and 2.47pm. Mr Reuben had indicated at T197 that evidence of his client would be amended to refer to a later time, not an earlier time. Mr Steele submits that it should be inferred that that indication from Mr Reuben must have been given on instructions and I accept that submission. See also T322 - T325. Mr Schwede denies that he had a telephone conversation with Mr de la Vega and hence asserts that the notes of the "conversation" have been fabricated. I think that there is room for doubt as to the authenticity of the notes but I do not need to reach a concluded view on that aspect.
(2)He admitted that there were "inaccuracies" in his affidavit: see T285.46, T288.20 - 40 and T289 - T290.
(3)Although he has a degree in what he described as Built Environment in Architecture, he is not a qualified architect, and not permitted to describe himself as such: s 9 of the Architects Act 2003. On three occasions he is shown to have so described himself. I do not accept his explanation that, in signing that part of the documents in question (see Exhibit A4 at p 206 for example), he was signing as owner of the property (see T343 and T404 - T405) or signing on behalf of de la Vega Architects. What he signed were certifications by him, purportedly as an architect, of statements of environmental effects, which had to be given by an architect, town planner or the like: see p 206. It was submitted by Mr Reuben that Mr de la Vega genuinely believed he could sign the certification as an architect. That submission is not consistent with Mr de la Vega's assertion that he was signing as one of the owners of the property.
(4)Mr de la Vega, like Mr Schwede, became quite emotional and launched into an attack on Mr and Mrs Schwede, expressing his resentment about the fact that they and JKB had brought these proceedings against him. His conduct in the witness box led his own counsel to warn him to answer the questions asked of him, not to make speeches and to be civil to Mr Steele: see T311 - T315. Mr de la Vega did apologise for his conduct the following morning: T341.
25For these reasons I approach Mr de la Vega's evidence with considerable caution.
26Mrs de la Vega's affidavits were read but she was not cross examined. Essentially she left all financial dealings to Mr de la Vega.
Penalty
27The defendants contend that the interest clause is a penalty. The submissions on behalf of the defendants refer to the well known passage in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 at 86-87 that:
"2. The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage ...
3. The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach ...
4. To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive. Such are:
(a) It will be held to be penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach ...
(b) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid ...
(c) There is a presumption (but no more) that it is penalty when 'a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage'"
a passage cited in Ringrow Pty Ltd v BP Australia Pty Ltd [2005] HCA 71; (2005) 224 CLR 656 at [11]; 662 - 663.
28In Ringrow Pty Ltd v BP Australia Pty Ltd, the Court made it clear that for a provision to be a penalty there must be "something extravagant and unconscionable" in relation to the allegedly offending provision. At [31] - [32]; 669 the Court said:
"Thirdly, consideration of the purpose of the law of penalties shows why this must be so. The law of contract normally upholds the freedom of parties, with no relevant disability, to agree upon the terms of their future relationships. As Mason and Wilson JJ observed in AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 190:
[T]here is much to be said for the view that the courts should return to ... allowing parties to a contract greater latitude in determining what their rights and liabilities will be, so that an agreed sum is only characterised as a penalty if it is out of all proportion to damage likely to be suffered as a result of breach (Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 at 1447-1448; [1966] 3 All ER 128 at 142-143 and United Kingdom, Law Commission, Penalty Clauses and Forfeiture of Monies Paid, Working Paper No 61, (1975), pars 33, 42-44).
Exceptions from that freedom of contract require good reason to attract judicial intervention to set aside the bargains upon which parties of full capacity have agreed. That is why the law on penalties is, and is expressed to be, an exception from the general rule. It is why it is expressed in exceptional language. It explains why the propounded penalty must be judged "extravagant and unconscionable in amount". It is not enough that it should be lacking in proportion. It must be "out of all proportion". It would therefore be a reversal of longstanding authority to substitute a test expressed in terms of mere disproportionality. However helpful that concept may be in considering other legal questions (See eg Cunliffe v The Commonwealth (1994) 182 CLR 272 at 300, 324, 339-340, 387-388 and Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 567), it sits uncomfortably in the present context."
29I regard cl 2 and cl 3 of the First and Second Loans as simply imposing a different rate of interest for the first 12 month period in comparison to the subsequent periods that the loan and interest remained unpaid. It is not characterisable as a condition imposed for breach and in any event I do not regard the 2 ½ per cent increase in the rate as extravagant or unconscionable: see Kowalczuk v Accom Finance [2008] NSWCA 343 at [174] and see Yarra Capital Group Pty Ltd v Sklash Pty Ltd [2006] VSCA 109 and Yuwana Nominees Pty Ltd v Ong [2008] NSWSC 156; (2008) ASC ¶155-092.
By whom was the Third Loan made?
30Mr Schwede says that the $30,000 Third Loan formed part of an original agreement by JKB to lend a total of $500,000 to the de la Vegas (see par 61 of his affidavit of 21 April 2011) - on 20 June 2004 this amount is first mentioned as the agreed total amount of the loan: see pars 47 and 48 of his affidavit of 21 April 2011. Mr de la Vega denies this: see pars 47 and 61 of his affidavit of 16 May 2011. However, in Exhibit A4 at p 145 / 191 there is an email of 20 June 2004 which Mr Schwede has referred to in his affidavit which confirms that Mr and Mrs Schwede would make $500,000 available, and which was followed on 28 June 2004 by the First Loan by JKB.
31I accept Mr Schwede's evidence that this loan was an extension of the First and Second Loans and was made by JKB. I accept his evidence that it was advanced on the same terms as the First and Second Loans: see T162.29 - 33. It is, as the plaintiffs submit, significant that a document dated 26 May 2008 and executed by the defendants, with the intention of it being provided to Blacksmith Developments, states as a recital:
"By agreement dated 4th July 2007 JKB advanced to de la Vega $30,000 by way of a loan on the same terms as those of the previous agreements dated 28th June 2004 and 18th October 2004."
32In reaching this conclusion I have taken into account the fact that in July 2010, when detailing JKB's claims against Mr and Mrs de la Vega, there was no reference to interest. Mr Schwede's evidence was that he hoped to achieve a quick resolution and was willing for JKB to forgo interest to achieve that resolution and that is why no reference was made as to interest. Accepting that explanation, the absence of a claim for interest is not helpful to the defendants, but even treating it as some evidence against JKB, I do not think it overcomes the evidence as to the genesis of the loan.
By whom were the Small Loans made?
33The Small Loans were made by Mrs Schwede. There is no evidence that Mr or Mrs Schwede sought, at the time the monies were advanced, to make those loans on behalf of JKB and no evidence which establishes that Mr or Mrs de la Vega accepted that the monies were advanced by JKB.
Applicability of the National Credit Code
34As I have noted, initially, the defendants contended that both the First and Second Loans were caught by the National Credit Code, but when it became clear that the First Loan was money borrowed principally for investment purposes, that assertion was abandoned. There was agreement that, due to transitional provisions in s 3 of the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 (Cth), the question of whether the loans are caught by the National Credit Code has to be determined by reference to s 6 of Consumer Credit (New South Wales) Code, that is, whether or not:
(1)the credit provider provided the credit in the course of a business of providing credit or as part of or incidentally to its other business; and
(2)the credit was provided or intended to be provided wholly or predominantly for personal, domestic or household purposes.
35The defendants pleaded contraventions of the notice provisions in ss 38 and 88 of the National Credit Code. They also pleaded contraventions of ss 14 and 15 of the New South Wales Code, although I assume they meant to plead contravention of s 16 of the National Credit Code, which is in similar terms and requires that a precontractual statement be provided which contains information detailing, inter alia, the method of calculation of interest rates and the frequency with which interest charges are to be debited (see s 17). The only relief now sought if the Code does apply is that the defendants maintain that the proceedings were commenced irregularly because leave was required and they also maintain that compensation pursuant to s 124 should be awarded for costs associated with the claim for compound interest (see T469.47 - T471.8). The plaintiffs submit that compensation should not be awarded as the defendants have not established any loss caused by the alleged breaches of ss 16, 38 and 88. The defendants resist the plaintiffs' assertion that the claim for compensation is statute barred by s 14(1)(d) of the Limitation Act 1969 because this was not specifically pleaded, as is required by s 68A(1) of the Limitation Act.
36So far as par 34 above is concerned, I am satisfied by virtue of the fact that JKB lent money to the defendants on a number of occasions prior to the First Loan that part of its business was the provision of credit. It does not matter that JKB was established to trade in securities - by 2004 it had branched out to providing credit for development projects undertaken by the de la Vegas.
37In relation to par 34 above, I understand the defendants' contention to be that because funds were used by them to buy property in which they resided, this has the result that the credit was wholly or predominantly for personal, domestic or household purposes. There is evidence (see p 189 of Exhibit C) which establishes that much of the $120,000 was used for business purposes. An aide memoire (MFI 7) handed up by Mr Steele summarises the business' payments of $94,662.68 paid between 21 October 2004 and 2 December 2004 (the $120,000 having been paid on 20 October 2004). The loan was not, therefore, predominantly for personal, domestic or household purposes. Another problem is that the de la Vegas were clearly operating a business project which included them purchasing houses in order to substantially renovate and then sell. That is evident in their correspondence: see for example Exhibit A4 at pp 121 - 122, 127 - 128, 140 and 759 and see par 42 of Mr Schwede's affidavit dated 21 April 2011). These were not ordinary purchases of a domestic property for residential purposes. I am not, in making that comment, to be taken as saying that Mr and Mrs de la Vega breached any taxation provisions but rather that, looking at their course of conduct, the loans were designed to help them renovate a property for on-sale: see particularly Exhibit A4 at pp 121 - 122, or meet liquidity problems arising from their property development activities. Mr de la Vega, according to Mr Schwede, told him that the Second Loan was "to cover ongoing loan repayments to the first mortgagee" (par 54 of Mr Schwede's affidavit of 21 April 2011).
38It follows, in my view, that the Second Loan was not caught by the National Credit Code, but if I am wrong in that conclusion, then I would regard it as appropriate to grant leave nunc pro tunc, pursuant to subs 88(5)(c) of the National Credit Code, to regularise the proceedings brought by JKB: see Monas v Perpetual Trustees Victoria Ltd [2011] NSWCA 417, although I would need to consider whether the claim for compound interest could be excised from that leave.
The Third Loan
39Given that the Third Loan was part of the original request for $500,000 and it has been accepted that the $350,000 was not for domestic or household purposes, I do not think it has been established that this loan was predominantly for such purposes. Very little, if anything, was said about the Third Loan after the concession was made about the First Loan.
The $8000, the $54,304 and the $77,064 payments
40The issue of treatment of these payments is linked to the March $75,000 Loan and the August $52,000 Loan. Exhibit B sets out lists of payments and by whom the parties contended the loans were made. Before expressing my conclusions on these matters, I need to draw attention to a series of documents (Exhibit C at pp 121 - 124) which are referred to as "snapshots" of the account between JKB and the de la Vegas as at 16 September 2005, 31 January 2006, 13 September 2007 and 27 October 2008. They were created by Mr Schwede on behalf of JKB and sent to Mr de la Vega. Mr de la Vega, having received them, did not challenge the contents of these snapshots. The snapshot of the position as at 27 October 2008 shows a total owing of $424,915 ($365,113 capital and $59,802 interest). The snapshot of the position as at 13 September 2007 shows a capital owing of $365,113 and interest of $42,533, a total of $407,646. Significantly, the 2008 snapshot shows a payment on 25 September 2007 of $54,307 and the 2007 snapshot shows payment of $8000 cash in 19 July 2005. The 2007 snapshot (Exhibit C at p 122) shows capital advance of $61,670 in August 2006. This clearly includes the $52,000 loan, and the calculation includes interest at $1000 per week for four weeks and the $750 per week thereafter.
41The 2007 snapshot is consistent with Mr Schwede's claim that he did not abandon interest on the $52,000. It is not consistent with his claim that the loan was one made by him rather than JKB. It would appear that the difference between the $52,000 and the $61,670 is made up of amounts set out in Exhibit B, that is, amounts of $5000, $2600, $400, $670 and $1000. These latter amounts were the monies paid by Mr Schwede to Mr de la Vega so that Mr de la Vega could pay subcontractors on the Gold Coast property. Those smaller amounts are what has been deducted from the $85,000 to produce the $77,064 figure on Exhibit B, said to be the total of payments made by Mr de la Vega through de la Vega Architects for the Gold Coast subcontractors.
42I have mentioned that the snapshot as at 17 October 2008 shows $54,307 paid off the JKB loans. It also includes payment of $77,064, which the plaintiffs accepted by Exhibit B was paid by Mr de la Vega or de la Vega Architects on behalf of Mr and Mrs Schwede between February and September 2006. It follows that the $8000, the $77,064 and the $54,307 have all been treated in these documents by JKB as repayment to it of the loans made by it to the de la Vegas. It follows that it is difficult to accept Mr Schwede's version of "the settlement" by which Mr de la Vega's loan to Mr Schwede and the payment of $54,307 was agreed to be offset against the August $52,000 Loan plus interest. I have already referred to the fact that Mr Schwede said that JKB had declared the receipt of the $8000 (see par [18] above and see also T106.25 where Mr Schwede confirmed that the $8000 had been taken into account in JKB's books and records). It is true that the March $75,000 Loan is not recorded as a loan but it was repaid within a month and it is not at all clear whether the loan was one made by Mr Schwede or by JKB. Yet another problem with Mr Schwede's evidence is that he claimed that $20,000 of the $54,307 was a "gift" from Mr de la Vega which he describes as arising out of the $2 M that Mr and Mrs de la Vega earnt from property transactions. Mr Schwede did not explain his calculations for the offset of the August $52,000 Loan and interest as against the $77,064 and $54,307 and the claim of a $20,000 "gift" did not seem at all convincing, particularly when on the plaintiffs' case not all the monies due to JKB had been repaid by the de la Vegas.
43This last point links to the further reason why I am unable to accept Mr Schwede's account as to how the $77,064 was to be treated. If the de la Vegas owed money to JKB, and Mr Schwede was complaining about the lack of repayments, it does not make sense that money paid by Mr de la Vega would not be treated as a reduction of the JKB loan but rather, as Mr Schwede would have it, as a loan by Mr de la Vega to Mr Schwede. This conclusion is reinforced by Mr Schwede's own evidence that Mr de la Vega introduced the contractor payments by suggesting a temporary solution to his failure to pay JKB all of the monies borrowed and interest due: see par 204 of Mr Schwede's affidavit of 18 February 2011, and by Mr Schwede's evidence that he had declared all monies received from the de la Vegas to be JKB money: see T104.10 and T211.40.
44Mr Steele in par 121 of the Plaintiff's Closing Submissions ("PCS") contended that the defendants' case does not make sense because it would mean that JKB was, through Mr Schwede, "effectively paying the defendants to reduce their debt to the first plaintiff". That submission was linked to a submission that payment to subcontractors was part of a separate arrangement "and related to the payment by [Mr Schwede] personally of amounts totalling $61,698". The argument suffers from a timing fallacy. First, it was only when Mr de la Vega said he had no further funds after paying approximately $77,064 to subcontractors that Mr Schwede started sending money to Mr de la Vega so that de la Vega Architects could pay the contractors (this is the shortfall of approximately $9670). At the time when Mr de la Vega or de la Vega Architects was paying the amounts totalling $77,000, the de la Vegas did not owe the $61,698 because the August $52,000 Loan had not been sought or lent and the $9670 had not been sent by Mr Schwede.
45Mr Steele in his submissions drew attention to and relied on the fact that in the variation of loan contract dated 26 May 2008 (pp 213 - 214 of Exhibit A4), Mr and Mrs de la Vega made reference to having repaid $52,000, $220,000 and $15,000 but do not mention the $54,307, $77,064 and $8000. This, it was said, corroborates the plaintiff's case that the repayments were not repayment of the JKB loans. The problem with that contention is that the same document refers to the de la Vega's agreement that, as at the date of this agreement (that is, the false date of 26 May 2008), "the outstanding loan and accrued interest are approximately $430,000". That figure of $430,000 is very close to the snapshot figure of $424,915 as at 27 October 2008: see Exhibit C at p 121. The snapshots, as I have indicated, treat the payments of the $8000, $54,307 and the $77,064 as repayment of the JKB loan. Given that the March $75,000 Loan and the August $52,000 Loan had been repaid by 2 August 2008, it is not surprising that JKB did not need to refer to those loans. Given that the purpose of the document was to persuade Blacksmith Developments that money was owing to JKB, there was no point in including debts that had been repaid.
46I have referred to the "$77,064" figure. That is the figure set out in Exhibit B as the total of the amounts which the plaintiffs contend were paid in respect of the Gold Coast property. There is, however, agreement in the closing submissions that a total of $84,770.40 was paid to subcontractors and agreement that $9670 of that was paid by Mr Schwede, which yields a figure of $75,100 (see Mr Reuben's closing submissions at par 41). It is the figure of $75,100 that I propose to adopt in the balance of these reasons.
47Mr de la Vega contends that the August $52,000 Loan was a loan made by JKB and, given my difficulty with Mr Schwede's evidence on this point and the inclusion of the $52,000 in the snapshot (see Exhibit C at p 122), I am inclined to accept that as reflecting the agreement of the parties, if not expressly, then implicitly. It follows that I accept that the $54,307, the $75,100 and the $8000 should all be treated as repayments of the JKB loans and it also follows that the August $52,000 Loan should be included as a JKB loan which had to be repaid to JKB.
48The next question in respect of the August $52,000 Loan is whether there was agreement on the rate of interest. Given the terms of Mr de la Vega's email, there can be no doubt that he was offering to pay $1000 per week for four weeks and then $750 per week in return for a loan of $70,000. It is clear that Mr Schwede told him that he could only obtain $52,000. Following that advice, Mr de la Vega did not seek to change the amount he had offered. I do not believe Mr de la Vega when he says that Mr Schwede told him that interest did not need to be paid for these reasons:
(1)Mr Schwede had to borrow the money to make the loan and he made that clear to Mr de la Vega;
(2)the fact that Mr Schwede had to borrow money to make the loan (either on his own behalf or on behalf of JKB) makes it inherently implausible that he would waive the need for interest and even more so after Mr de la Vega had agreed to pay such a high rate of interest on the $70,000;
(3)the snapshot makes it clear that Mr Schwede thought JKB was entitled to interest and Mr de la Vega did not dispute JKB's entitlement to interest on receipt of the snapshot (see par 92 (a) of Mr de la Vega's affidavit and see T388); and
(4)Mr de la Vega's reliability as a witness was so tarnished that I have difficulty in preferring his evidence to that of Mr Schwede's.
49Mr Reuben contended that since nothing was said between Mr Schwede and Mr de la Vega about the rate to be paid on the $52,000 as opposed to the $70,000 sought, the Court should conclude that interest was not payable at all. I am convinced from the correspondence and the acceptance by Mr de la Vega of the loan that the parties intended that interest would be payable and although Mr Schwede gave no evidence of discussions on the topic, Mr de la Vega said that he had "initially agreed" to "keep the arrangement" of paying interest of $1000 a week on the $52,000: see T373.24 - 35. As I have noted, Mr de la Vega maintains that Mr Schwede told him he did not need to pay interest. I am not satisfied that Mr de la Vega did extensive work to a value of $60,000 - $70,000 on the project (see T368 - T369 and Exhibit C at p 24 - 115) partly because the documentation is relatively meagre and partly because I do not think Mr de la Vega is a reliable witness and what Mr Schwede said about the work seemed to be inherently plausible. I am not persuaded that Mr Schwede said that no interest was required first because of the reasons referred to in par [48] above and secondly because I do not accept Mr de la Vega's evidence as to the value of work performed. Interest on the $52,000 should therefore be calculated on the rate of $1000 for the first four weeks and $750 per week thereafter until the payment of the $54,307.
50I say until the payment of the $54,307 because Mr Schwede treated that payment as related to the $52,000 loan, albeit in a different way. I think JKB should be taken as having, through its managing director, appropriated the payment of the $54,307 and the relevant portion of the $75,100 to pay off the interest and capital due on the August $52,000 Loan by 25 September 2007. I appreciate that there is an incongruity in this approach because it has the defendants' payment of $75,100 not all being applied to the existing JKB debt but it is consistent with the approach taken by Mr Schwede that by the time of payment of the $54,307 (see the snapshot in Exhibit C at p 121 and see also par 210 of Mr Schwede's affidavit of 18 September 2011), nothing further was owed by the de la Vegas on or in respect of the $52,000 August Loan. This is not a case where the debtor appropriated the payment to a particular debt (see the discussion of principles in Caltabiano v Electoral Commission of Queensland [2010] 1 Qd R 100 at 114 per Muir J) but in a sense the lender has appropriated the payment.
51I should note that counsel did, at the commencement of the hearing, agree that a document entitled "issues" reflected the dispute between the parties. Although Mr Reuben made reference in his written outline of submissions at the commencement of the proceedings to an argument that JKB was estopped from asserting that 20 per cent was due on monies lent after the first 12 months because JKB had provided snapshots in which the calculations were all performed on the basis of 17.5 per cent and not 20 per cent (see par 17), that issue was not added to the statement of issues: see T53.31 - T54.21. It was, however, pleaded at par 52(d) of the further amended defence to further amended statement of claim. It is not a matter which was mentioned in the closing written or oral submissions by Mr Reuben or Mr Steele other than by Mr Reuben stating in his closing written submissions that he relied on his opening written submissions. Mr Reuben offered no analysis of how the case fitted to the requirements for estoppel. I would add that Mr de la Vega gave no evidence of having relied on the representations contained in the snapshot, indeed his claim that Mr Schwede agreed that no interest would be charged on the March $75,000 Loan and the August $52,000 Loan is inconsistent with the snapshots and the fact is that he has not paid the money due as calculated in the snapshot or made any payment since the snapshot of 2008: see Exhibit C at p 121. Detrimental reliance is a necessary but not sufficient element of estoppel: see Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 406 per Mason CJ and Wilson J and see N C Seddon and M P Ellinghaus, Cheshire & Fifoot's Law of Contract, 9th Aust ed (2008), LexisNexis Butterworths at 2.10 and see Commonwealth v Verwayen (1990) 170 CLR 394.
How much is owed to the plaintiffs?
52At the close of submissions, I invited the parties to provide me with calculations of the amounts they each say are due from the defendants to JKB and or the Schwedes, those calculations to be performed on the basis that none of the $8000, $54,307 or $75,100 were treated as repayment of the JKB loan and excluding as a loan by JKB the August $52,000 Loan. The figures derived are not themselves now of importance but it is apparent that the approach to calculation of each side indicated a disparity of approach, beyond any of the matters to which I have already referred, that remain relevant and that I must also now determine.
53First, the defendants contend that interest is calculated only on the anniversary date of the loan so that any payment made before the anniversary date should not be treated as paying interest accrued as at the date of payment. I think it is implicit in that argument that no interest has accrued or is payable until the anniversary date. Reliance is placed on cl 2 of the First and Second Loans, which I have set out at par [4] above, which refers to interest being payable on a particular date. In my view, whilst it might be true that the defendants were not required to pay interest until the anniversary date, I do not think that clause carries the consequence that interest did not accrue on the loan through the entire period that the loan was not repaid. The defendants' argument entails the proposition that if all of the loan had been repaid on the day before the anniversary date, no interest was payable - a construction which I cannot accept as correct.
54Secondly, there appears to be a contention by the defendants (which was also advanced in submissions) that interest, however calculated, should not run beyond 9 July 2010, when funds were paid into court. The defendants' assessment relies on the fact of payment into court and asserts that since the defendants paid money into court, the plaintiffs' claim for contractual interest should end there. This submission confuses two quite separate issues. The plaintiffs are entitled to interest up until judgment. The money paid into court is not the plaintiffs' money - it will only become the plaintiffs' money if and insofar as an order is made that it can be released to them for the contractual claim. Interest does not cease to run until judgment is entered. If the defendants have a legitimate claim that the monies paid into court were paid by reason of conduct of the plaintiffs which entitles the defendants to compensation, then that claim can be considered as an offset against any amount to which the plaintiffs are entitled. I will consider that claim below.
55Another matter which needs to be taken into account is that the Small Loans have not been repaid. Those loans, I have found, were not the subject of an agreement for interest, but that does not mean that Mrs Schwede is not entitled to interest in accordance with s 100 of the Civil Procedure Act 2005. Subsection 100(1) provides:
"100 Interest up to judgment
(1) In proceedings for the recovery of money (including any debt or damages or the value of any goods), the court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the court thinks fit:
(a) on the whole or any part of the money, and
(b) for the whole or any part of the period from the time the cause of action arose until the time the judgment takes effect."
56In my view, where the defendants desperately needed funds and Mrs Schwede provided those funds promptly and the monies lent have remained unpaid for a long time, I can see no reason why interest should not be charged at the rate specified in Practice Note SC Gen 16.
The caveat claim
57The defendants contend that they should not have been required to pay $791,000 into court on 9 July 2010 and would not have done so but for the improperly lodged caveat. There are three issues which arise on this case:
(1)Did JKB lodge a caveat without reasonable cause?
(2)Have the defendants sustained pecuniary loss attributable to that act?
(3)If yes to (1) and (2), what compensation should be paid to the defendants?
58It is important to note that the question of whether JKB lodged a caveat without reasonable cause is not the same question as whether the caveat was in bad form. The Court of Appeal in Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459 indicated that to succeed against a caveator, the owner must establish that:
(1)the caveator had no caveatable interest; and
(2)the caveator had no honest belief that she or he enjoyed such an interest.
Further, the honest belief must be shown to be objectively not reasonable: see Lee v Ross (No 2) [2003] NSWSC 507.
59I accept Mr Reuben's submission that the fact that the caveat had lapsed is not determinative of whether the caveat was causally linked to the payment of the money ($800,000) by Mr de la Vega to his solicitor. One problem, however, for Mr and Mrs de la Vega is that Mr de la Vega must have known at least when the matter came on again before Pembroke J on 9 July 20910 that the caveat had lapsed and the second difficulty is his evidence was that he did not instruct his solicitor to release the undertaking to JKB's solicitors.
60In my view, JKB did have an interest in the property which entitled it to lodge a caveat pursuant to s 74F of the Real Property Act. It was based on Mr de la Vega's promise that he would give a mortgage. That promise is found in an email of 13 May 2008 (see Exhibit A4 at p 784), implicitly affirmed in Mr de la Vega's email of 16 July 2008 (see Exhibit A4 at p 803) and repeated in a conversation to which Mr Schwede deposes: see Exhibit A1 at pp 623 - 4, par 445. Further, Mr de la Vega told Mr Roth that he and his wife had granted a mortgage to JKB and Mr Roth, as I have noted, told the solicitors for Blacksmith Developments that they had.
61I accept Mr Reuben's submission that no right to a mortgage is established by virtue of the document falsely dated 28 August 2008 executed by the de la Vegas or out of the exchange of correspondence in 2010. However, the email of 13 May 2008 to which I have referred sought the agreement of JKB that monies owing rather than being repaid could be used to purchase the Paddington Property. It is true that the original purpose of the loan was not to buy the Paddington Property but given the terms of Mr de la Vega's email, it is at least arguable that as at May 2008 it had that character and I do not think it could be said that Mr Schwede, on behalf of JKB, was not entitled to treat the de la Vegas as having promised to grant a mortgage. A promise to give a mortgage is an equitable mortgage (see Theodore v Mistford Pty Ltd (2005) 221 CLR 612 at 644) and that founds a caveatable interest (see In re the Caveat of Dixon (1922) 39 WN (NSW) 89 and S Lindsay, Caveats against dealings in Australia and New Zealand (1995) Federation Press at p 114). The de la Vegas have the onus of proof on this claim and not only have they not persuaded me that Mr Schwede did not have a reasonable belief that JKB had a caveatable interest, they have not persuaded me that JKB did not have a caveatable interest (whether or not the caveat was correctly expressed and accepting that the amount claimed was not calculated in accordance with the loan contracts) and accordingly I do not need to consider the second and third issues at par [57] above.
62I note that even if the lodgement was without reasonable cause and even if it is shown that without the caveat the defendants would not have paid money into court, there are obstacles in the path of establishing loss. First, the plaintiffs are entitled to the amount calculated in accordance with par [63] below. The defendants will not have suffered any loss to the extent that the plaintiffs are paid out of the $791,000. Secondly, no evidence establishes that the defendants would be entitled to more interest on the difference between $791,000 and the amount determined in accordance with par [63] below, than the rate the money (or the defendants' relevant proportion of it) has been earning as money left with the Court.
Conclusion
63I conclude that:
(1)the first plaintiff is entitled to interest on the First, Second and Third Loans at 17.5 per cent for the first year and 20 per cent thereafter;
(2)the 20 per cent interest clause is not a penalty;
(3)the payment of $8000, $75,100 and $54,304 are repayments by Mr and Mrs de la Vega in reduction of the First, Second and Third Loans and the August $52,000 Loan with the repayment to be applied first to the $52,000 loan and interest;
(4)interest should be calculated on an annual basis but accruing daily and repayments should be deducted from interest owing first and then capital;
(5)interest payable to Mrs Schwede on the Small Loans will need to be calculated pursuant to UCPR Schedule 5 till 30 June 2010 and thereafter in accordance with Practice Note SC Gen 16 and added to the capital; and
(6)the figures should be calculated to the date that judgment is entered, which should preferably be within the next seven days, if not today.
64Calculations will need to be brought in to reflect these conclusions.
Costs and ancillary orders
65The parties asked me to defer dealing with the issues of costs until after I have delivered judgment on the issues dealt with in these reasons. Proposed orders in respect of the monies held in court will also need to be prepared.