Pioneer Credit Acquisition Services Pty Ltd v Hayes

1. The appeal is allowed.
2. The judgment of the Federal Circuit Court of Australia delivered on 16 May 2016 is set aside.
3. The matter is remitted to the Federal Circuit Court of Australia for a new trial.
4. The respondent pay the appellant's costs of the appeal. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

RANGIAH J: 1 This is an appeal against a judgment of the Federal Circuit Court of Australia dismissing the appellant's creditor's petition. 2 The creditor's petition was filed on 26 August 2015 and alleged that the respondent committed an act of bankruptcy by failing to comply with the requirements of a bankruptcy notice. The bankruptcy notice claimed that the respondent owed the appellant the amount of $63,329.63, consisting of a judgment debt of $63,241.27 and interest of $88.36 accrued since the judgment ("the debt"). 3 The hearing of the creditor's petition was adjourned to allow the respondent to apply to the Magistrates Court of Queensland to set aside the default judgment. On 4 September 2015, the respondent's application to set aside the judgment was dismissed. On 4 December 2015, the respondent's appeal to the District Court of Queensland was dismissed. On 5 February 2016, a second application to the Magistrates Court to set aside the judgment was dismissed. 4 On 8 February 2016, the respondent wrote to the appellant saying: With regard to the above account, you will be aware that at court on 4 February 2016 a ruling was handed down. Despite the belief of i that said ruling has been made against the facts in this matter i am unwilling to invest any further time and effort in having lawful justice prevail. To this end i will now be making payments to start to close this matter. Due to the financial hardship i am experiencing at this time, the maximum payment that i can make at this point in time is $100 per month. Enclosed is a cheque for the first payment. · When you provide the relevant details i will make sure that this payment is deposited at the·start of each month. Should the financial position of i change then i will advise of such and increase/decrease payments as i am able. (Punctuation as in the original) 5 The respondent's letter enclosed a money order in the amount of $100. The appellant banked the money order. The respondent subsequently sent further money orders which were not banked. 6 Before the Federal Circuit Court, the respondent argued that the parties had entered a contract which allowed him to pay off the debt in instalments. The primary judge found that there was such a contract and, on that basis, dismissed the creditor's petition. 7 His Honour's ex tempore reasons for judgment include the following passages: 4. …[T]he Respondent debtor wrote to the Applicant creditor, in effect, saying that whilst he did not agree with what had occurred in Court, he accepted that he was in debt and that he would start repaying the debt at $100.00 a month at a minimum and would pay whatever it is that he could pay from then on. … 6. The Respondent debtor submits that he entered into an agreement to pay the debt on the terms he outlined and, by banking his cheque, the Applicant creditor has accepted the contract. … 10. The Applicant creditor submitted that the company receives a huge amount of mail and gets cheques sent to them all the time and simply banked the cheque without looking at what the letter had said and had not understood what it was doing in banking the $100.00. 11. Whilst that may be an excuse as to why they banked the cheque, it really doesn't stand up as a reason to doubt that there had been an acceptance of the offer that the Respondent debtor had made. When one thinks that the Applicant creditor is a large and successful company, it beggars belief that they would ignore the contents of a letter and just simply bank the cheque. One would think that they would look at what they were doing before they act. 12. In any event, that scenario was simply a submission from the Bar table. There was no affidavit from the person who opened the letter to say why they ignored it or from anyone as to why they banked the cheque. In the absence of any proof to the contrary, I must accept that the Applicant creditor received the offer from the Respondent debtor and acted upon it. In banking the cheque, the Applicant creditor accepted the offer of the Respondent debtor. 13. So in my view there was an agreement. The argument the Applicant creditor makes is that such an agreement really is void because of the lack of consideration. 14. The Applicant creditor points to a long line of authority talking about a payment of a lesser sum not being sufficient to satisfy a debt for the whole of the sum. Whilst there is nothing in this matter that derogates from that line of authority, the authorities do look at what are the terms of the agreement. The agreement is not that I will "pay this and that will be the end of it,"; the agreement is, "I will keep paying this money until the debt is extinguished." 15. What has been said by the Applicant creditor, that even if there weren't interest that accrued, it would take something in the order of 60 years for such a payment to be made and, even at the interest rate of 8%, the interest payable would be $2,515.36 per annum which the $100.00 a month would not even cover. 16. Therefore, the Applicant says that such could not amount to consideration capable of supporting an agreement because, on the terms of the agreement, the payments would never reduce the principal debt as being owed. 17. There is much merit in what the Applicant says there. However, it does seem to me that that was something that should have been well and truly in the mind of the Applicant when it took the $100.00 and banked it. In this case, where there has been plenty of litigation made by Brett John Hayes, one would have thought that the Applicant would look very carefully at any correspondence sent by the Respondent debtor. The fact that the Applicant now claims (without any proof of such claims) that it did not look at the terms before it accepted the amount by Brett John Hayes is really a matter that they only have themselves to blame. 18. Brett John Hayes has been upfront from the start of this matter and has continued to make the payments and, having noted that there is an interest component, increased his $100.00 a month to $433.00 last month. In my view that indicates that there is an agreement to compromise the debt even though that agreement is well and truly weighted in the favour of Brett John Hayes. But I find that it is a valid agreement and so, therefore, I refuse to make the sequestration order. (Emphasis in the original.) 8 His Honour found that the respondent had offered to pay the debt in instalments of a minimum of $100 per month; and that the appellant had accepted that offer by its conduct in banking the respondent's $100 money order. His Honour, at least implicitly, found that the parties had made a binding agreement to compromise the debt and that the appellant could not resile from that agreement. 9 His Honour did not precisely articulate the basis upon which the creditor's petition was dismissed. However, it can be inferred that his Honour relied on s 52(1)(c) of the Bankruptcy Act 1966 (Cth). Under that provision there must be proof that "the debt or debts on which the petitioning creditor relies is or are still owing". His Honour seems to have concluded that no debt was owed at the time of the hearing as the parties had agreed that the debt would be paid in instalments and the instalments were up to date. 10 The appellant submits that the primary judge erred in finding that there was an agreement for the compromise of the debt and that the agreement was binding. More particularly, the appellant submits that his Honour erred in finding that: (a) the respondent made an offer to the appellant for the compromise of the debt; (b) the appellant accepted the offer by its conduct in banking the money order; (c) the agreement was supported by consideration. 11 The respondent, who was unrepresented in the appeal, filed written submissions. Those submissions are difficult to understand, but the respondent's contentions appear to be as follows: The judgment of the primary judge is correct in law for the reasons given by his Honour. The appeal cannot proceed as the Federal Court registry had failed to adequately respond to the respondent's complaints about being addressed as "Mr Hayes" in emails from a Deputy District Registrar. The respondent states that: By your use of title and style you are claiming that i am either a slave, your employee or a two dimensional entity/piece of paper/legal fiction/corporate entity and any other variations of this theme. (Punctuation as in the original.) The respondent is entitled to compensation arising from the appellant's actions in taking and progressing the proceedings below and in the appeal. The appellant should be declared a vexatious litigant. The appellant is required to appear at the hearing of the appeal - by which the respondent appears to mean that representatives of the appellant ought to appear at the hearing and make themselves available for cross-examination. 12 The first submission made by the appellant is that the primary judge erred in finding that the respondent made an offer for the compromise of the debt in his letter of 8 February 2016. 13 It is established that a mere statement of intention as to a future course of action, not put forward as an offer and not inviting acceptance or rejection, is not an offer: Wells v Matthews (1914) 18 CLR 440 at 444; Milne v Attorney-General Tasmania (1956) 95 CLR 460 at 472. 14 In the respondent's letter of 8 February 2016, he stated that he "will now be making payments to close this matter". He said "the maximum payment that i (sic) can make at this point in time is $100 per month". He stated that if his financial position changed, he would "advise of such and increase/decrease payments as i (sic) am able". The respondent enclosed a money order for an amount of $100. 15 The primary judge's statement that the respondent proposed to pay a minimum of $100 per month is incorrect. That was the maximum amount the respondent said he could pay. The effect of the respondent's letter was that he would pay as little as he chose over a time frame of his choosing. 16 The letter did not seek any response from the appellant, other than perhaps implicitly seeking the appellant's bank account details. The letter did not invite acceptance or rejection of the respondent's intended course. 17 The respondent's letter did not propose an offer for the compromise of the debt, but dictated the course of action he intended to take. The respondent failed to make any offer capable of being accepted. Consequently, the primary judge was wrong to find that there was an agreement between the appellant and the respondent. 18 Although this finding is enough to dispose of the appeal, I will consider the appellant's remaining submissions in case I am wrong. 19 The appellant's second submission is that the primary judge erred in finding that the appellant accepted the respondent's offer by its conduct in banking the money order. This submission requires me to assume, contrary to my finding, that the respondent did make an offer to the appellant to pay the debt in monthly instalments. 20 If an act is to constitute acceptance of an offer, the offeree must do the act "in reliance upon" or "on the faith of" the offer: see R v Clarke (1927) 40 CLR 227 at 235, 239, 244; Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Aust) Pty Ltd (1978) 139 CLR 231 at 272; Dalgety Australia Ltd v Harris [1977] 1 NSWLR 324 at 328, 331; Amos v Citibank Ltd [1996] QCA 129 at 5-6. This requirement has been described as a mental element involving the motivation, intention or purpose of the offeree: Dalgety at 330-331. Whether this element is satisfied is a question of fact. 21 The primary judge said: There was no affidavit from the person who opened the letter to say why they ignored it or from anyone as to why they banked the cheque. In the absence of proof to the contrary, I must accept that the Applicant creditor received the offer from the Respondent debtor and acted upon it. In banking the cheque, the Applicant creditor accepted the offer of the Respondent debtor. 22 In that passage, his Honour found that by banking the cheque the appellant had "acted upon" the offer, stating that there was no evidence to the contrary. That established the mental element required for the finding that the respondent's offer was accepted by the appellant. 23 However, his Honour appears to have overlooked the affidavit of Elle Cook, a manager employed by the appellant, sworn on 26 February 2016. Ms Cook deposed that Jonty Gibbs, an employee in the appellant's finance department, told her that on 11 February 2016 the appellant had received 1,802 payments, including the respondent's money order, from various customers. Mr Gibbs told her that as a matter of process, all payments received by the appellant are banked daily and allocated to the relevant customer's account, unless there are prior instructions not to do so. The money order had been banked and allocated to the respondent's account as a normal payment. 24 Although Ms Cook's evidence as to what she was told by Mr Gibbs was hearsay, her affidavit was admitted into evidence at the hearing before the primary judge without objection. Evidence may be given of the statements or conduct of offeree uncommunicated to the offeror to demonstrate that the offeree did not act in reliance upon or on the faith of the offer: R v Clarke at 244. Ms Cook's evidence was capable of leading to an inference that the money order was banked merely as part of the respondent's normal process and without any motivation, intention or purpose to accept any offer. The question of what inference was to be drawn was one for his Honour, but the evidence of Ms Cook ought to have been taken into account. His Honour erred in concluding that there was no evidence contradicting the inference that the appellant acted upon the offer. 25 The appellant's third submission is that his Honour erred in failing to find that any agreement for the compromise of the debt was unsupported by consideration and was therefore not binding on the appellant. 26 It is settled that generally the payment of a lesser sum in satisfaction of a debt is not good consideration: Pinnel's Case (1602) 5 Co Rep 117a; Foakes v Beer (1884) 9 App Cas 605. The primary judge sought to distinguish the facts of the present case on the basis that the agreement was for the payment of the whole of the debt, not merely part of it. 27 The debt was due and owing by the respondent when the respondent's offer was made. The agreement (which, for the purpose of considering the appellant's third submission, I must assume was made) was that the respondent would pay monthly instalments until the whole of the debt was satisfied. 28 In Foakes v Beer, a judgment debtor and creditor agreed that in consideration of the debtor paying part of the judgment debt and costs immediately and the remainder by instalments, the creditor would not take any proceedings whatsoever on the judgment. The debtor paid the whole of the judgment sum in accordance with the agreement, but the creditor then commenced proceedings for interest on the judgment. The House of Lords held that the debtor had provided no consideration for the agreement and that the creditor was not prevented from proceeding for payment of interest. 29 In Re Select Move Ltd [1995] 1 WLR 474, a company owed substantial amounts of tax. The company reached an agreement with the revenue authority to pay off the debt in monthly instalments. The Court of Appeal noted that where agreement is reached for the payment of a debt by instalments to accommodate the debtor, the creditor will no doubt have seen a practical advantage in so agreeing, but that is not good consideration. The Court of Appeal held that the agreement was unenforceable for want of consideration. 30 In Amos v Citibank, McPherson JA held at 8: In circumstances in which a contract of that character remains at least to some extent executory on both sides, it is not difficult to identify as the consideration the commercial benefit which results from having performance in fact carried out, or, conversely, the detriment likely to be suffered if it is not…But it is a different matter where, as here, the subject matter of agreement is not a contractual obligation which is still to be performed, but simply a debt which has arisen, become due, and is payable forthwith by one party to the other. 31 These cases demonstrate where a creditor agrees to allow a debtor to pay off an existing debt in instalments, the agreement is not binding on the creditor unless consideration is provided by the debtor (or unless the agreement is made by deed). In this case, the respondent provided no consideration. The primary judge erred to the extent that he found that the agreement was binding and that, by reason of the agreement, the respondent owed no debt to the appellant. 32 The remainder of the respondent's submissions are without substance. 33 The judgment of the primary judge must be set aside. The appellant did not submit that this Court should decide the creditor's petition for itself. Accordingly, it is appropriate to remit the matter to the Federal Circuit Court for a new trial. The respondent should pay the appellant's costs of the appeal. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rangiah.