Plaintiff v Defendant

2 The schedule to the demand describes the debt as follows:

Principal pursuant to the Deed of Loan between the Creditor and the Company dated 30 October 2014 ('Deed of Loan')

Interest as of the date hereof pursuant to the Deed of Loan

Creditor's legal costs in relation to preparation of Deed of Loan recoverable by the Creditor from the Company pursuant to the Deed of Loan

Creditor's legal costs in relation to breach of Deed of Loan recoverable by the Creditor from the Company pursuant to the Deed of Loan

3 Greenmint relies on affidavits of Joanna Kordos dated 13 April and 15 June 2015 and an affidavit of Patricia Oman dated 16 June 2015. In opposition to the application Mr O'Keeffe relies on his affidavit dated 5 June 2015 and affidavits of Carlos Quiroga dated 5 June 2015 and Michael Vertes dated 23 March 2015.

4 Greenmint contends that there is a genuine dispute in respect of the debt the subject of the demand.

Whether there has been service of the application in compliance with s 459G(1) of the Act

5 As a threshold issue, Mr O'Keeffe contends that the application has not been made within the time prescribed by s 459G(1) of the Act. In this regard, the evidence is that Greenmint received the statutory demand on 24 March 2015. In such circumstances, s 459G of the Act operates such that Greenmint had until 14 April 2015 to 'make' the application if it was to be within time. In order to make a valid application to set aside the statutory demand, Greenmint had to both file the originating process and supporting affidavit with the Court and serve them upon the address nominated in the demand by Mr O'Keeffe by that date. In his affidavit Mr O'Keeffe deposes that the application to set aside the demand was received via post at his solicitors' offices on 15 April 2015 under cover of a letter dated 14 April 2015.

6 The affidavit of Ms Oman which is relied upon by Greenmint deposes that a copy of the sealed originating process and the affidavit in support was served on Mr O'Keeffe's solicitors by facsimile transmission on 14 April 2015 at 12.25pm and by email transmission on the same day at 12.32pm. Ms Oman exhibits a copy of the facsimile transmission report that purports to show that the documents were successfully transmitted.[1] She also exhibits a copy of the email transmission sent on 14 April 2015 together with its attachments.[2] The facsimile was transmitted to Mr O'Keeffe's solicitors, JPM Law to the facsimile number noted in the notice of appearance filed by them which was also the physical address nominated in the demand for service of any application to set the demand aside. The facsimile number of JPM Law was not mentioned in the address for service of such applications in the demand as a mode by which such an application could be served, nor was the email address to which the documents were sent.

7 At the hearing of this matter, in response to a question from the Court, Mr Kohn, counsel for Mr O'Keeffe, conceded that the facsimile transmission, which included a copy of the sealed application and accompanying affidavit were received at his instructors' office on 14 April 2015 which was the physical address nominated in the statutory demand for service of any application to set aside the demand. Mr Kohn submitted that despite this, on an application of the relevant authorities, this did not constitute valid service under s 459G. Because of this, he submitted, Greenmint's application had not been made within time and that it should be dismissed. In support of that submission he placed primary reliance on the decision of Jagot J of the Federal Court of Australia in Opensoft Australia Pty Limited v Miller Street Pty Limited ('Opensoft').[3]

8 Opensoft involved an application to set aside a statutory demand under s 459G. On the last day for service of any application to set aside the statutory demand, an agent of the plaintiff's solicitors attended the registry of the Federal Court of Australia with the intention of filing an originating process together with the affidavit and accompanying exhibits. When the agent arrived at the registry however, she found it closed and informed the solicitor, Mr Price who had instructed her to attend to the filing of the documents. The solicitor then caused the documents to be filed through the Court's electronic lodgement facility. That lodgement occurred within time. The solicitor then took copies of the documents to an address nominated in the demand for service of applications and handed them to Mr Daoud at the reception desk. The documents handed over were the same documents that the agent had sought to file at the registry earlier that day but because filing had not occurred the copies handed over did not bear the seal of the Court, a proceeding number as allocated by the Court or a return date for the application. As such, they were copies of the documents filed electronically in an unfiled form. After a brief exchange with Mr Daoud the solicitor left the offices.

9 When the solicitor returned to his office that day he received an e-lodgement receipt by which he could access the documents lodged. He accessed the Federal Court of Australia registry's web address and printed out the documents which were marked with the Court's seal, proceeding number and the return date. He then emailed them to the director of the defendant creditor, Mr Tayles and circulated it to the email address of the agency nominated as being an address for service in the statutory demand for service of any application to set the demand aside although the email address was not included in the address for service in the demand. There was evidence that the creditor's agent received the email and opened it, read it and saw the documents that had been stamped by the Federal Court of Australia. The email was addressed to the creditor's director, not to the agency nominated on the statutory demand. But because it was sent to an email address the director had not used for some time, the director never received sealed copies of the documents.

10 Jagot J accepted that the application had been filed at Court on time electronically. However, her Honour stated at paragraph 30:

The issue, however, is whether the requirement of service set out in s 459G(3)(b) of the Corporations Act has been satisfied in circumstances where:-

(i) the statutory demand by [the creditor] specified in para 6, as required, an address for service of copies of any application and affidavit to have the demand set aside,

(ii) one address so specified in New South Wales was TW Agency, 251 Elizabeth Street, Sydney New South Wales,

(iii) there was delivered to TW Agency at that address copies of the originating process and affidavit in support in the form in which they were lodged for filing, but which did not bear the Court's seal, a proceeding number, or a return date,

(iv) on 11 May 2011 there was, against the background of the communications between Mr Price and Mr Daoud described above and set out in their affidavits, an email sent to Mr Daoud attaching copies of the originating process and affidavit in support as filed (that is, bearing the Court's seal, proceeding number and return date), and

(v) Mr Daoud, on what he described as his computer, opened the attachments and saw them, and also saw that the email had been sent to an email address for Mr Tayles, but

(vi) Mr Tayles did not receive that email or its attachments.

11 Her Honour reviewed a number of authorities which held that service of an unsealed copy of the application bearing no return date or file number were held not to be effective service for the purpose of that section. Her Honour stated at paragraph 41:

The requirements of s 459G are clear. Section 459G(1) enables an application to be made to a court to set aside a statutory demand. An application is made to a court once it has been accepted by that Court. Under s 459G(2), an application may only be made within the 21-day period specified. Section 459G(3) also specifies that an application is made in accordance with s 459G(1) only if within the same 21 days two things occur: namely, an affidavit supporting the application is filed with the Court; and a copy of the application and of the supporting affidavit are served on the person who served the demand on the company. On the ordinary meaning of these provisions, it is difficult to see how the application and supporting affidavit can be other than the application as filed and the supporting affidavit as filed.

As a matter of purpose, moreover, compliance with s 459G, as the authorities make clear, requires that the documents as served inform the recipient that the proceeding has in fact been commenced through acceptance by the court of the originating process. They must also inform the recipient of what Santow J described in Benonyx as the "important fact" of the return date for the application.

12 Her Honour held that the delivery of the documents which did not bear a proceeding number, the seal of the Court or a return date of the application did not amount to service as required by s 459G(3)(b). With respect I agree.

13 At paragraphs [47]-[50] of her judgment, her Honour stated:

[47] In Woodgate v Garard Pty Ltd (2010) 239 FLR 339; [2010] NSWSC 508, Palmer J carried out a detailed analysis of the capacity for service to be effected for the purposes of s 459G and, in particular, of the decision in Howship Holdings Pty Ltd v Leslie (1996) 42 NSWLR 542. In that case, it was explained by Young J that:

Section 459G itself does not deal with what is service. The ordinary meaning of "service" is personal service, and personal service merely means that the document in question must come to the notice of the person for whom it is intended. The means by which that person obtains the document are usually immaterial... If this were not so, one would get the absurd situation referred to by McInerney J in Pino v Prosser [[1967] VR 835] (at 837), that the conclusion would be one which is: "...remarkable to the point of seeming absurdity, in that the defendant who, on his own affidavit admits that he received the writ... should be held not to have been served."

[48] Palmer J described this pragmatic approach (at [42]) as the "effective informal service rule", and noted that it had been applied in many subsequent decisions. His Honour then summarised the effect of those decisions at [44], and said (relevantly) that the "prescribed modes of service" - that is, the modes prescribed by s 109X of the Corporations Act and, for that matter, the equivalent provisions of the Acts Interpretation Act 1901 (Cth) - were not exclusive of other methods of service. According to Palmer J, whether good service has been effected:

...depends upon whether the serving party can prove to the Court's satisfaction that the document actually came to the attention of an officer of the company who was either expressly or implicitly authorised by the company to deal directly and responsibly with the document, or documents of that nature...

[49] His Honour went on to note (citations omitted) that:

there is no special exception to the "effective informal service rule" in the case of service by email or facsimile - the question remains whether that mode of service actually brought the document to the attention of a responsible officer.

[50] I was also referred to the decision of Austin J in Austar Finance Group Pty Ltd v Campbell (2007) 215 FLR 464; [2007] NSWSC 1493, in which his Honour dealt in detail with the electronic transmission of documents. His Honour said at [49] that, in his view:

...electronic transmission, whether by facsimile or e-mail, cannot constitute service for the purposes of s 459G(3) unless either:

• it is shown that the documents electronically transmitted had actually been received in a readable form by the person to be served; or
• the case falls within one of the special exceptions permitted by rules of court.

[53] The difficulty with the plaintiff's submissions, as the defendant has pointed out, is that s 459G(3)(b) of the Corporations Act requires a copy of the application and supporting affidavit to be "served on the person who served the demand on the company". The person who served the demand on the plaintiff in this case is the defendant, Miller Street, of which Mr Tayles is the sole director.

[54] As noted above, the statutory demand specified that the address of the creditor for service of copies of any application and affidavit was TW Agency, 251 Elizabeth Street, Sydney, New South Wales 2000. The creditor did not specify any electronic address for service. Furthermore, this is not a case in which Mr Tayles as director of the creditor received himself an email attaching copies of the documents as filed. Indeed, on the evidence available, Mr Tayles has never received copies of the documents as filed. As the defendant submitted, in the context of this statutory scheme, it is not the place of TW Agency or Mr Daoud as its principal to accept service by means other than those specified in the statutory demand itself. Even if TW Agency were authorised to do so, I do not see how the dealings between Mr Daoud and Mr Price could be seen to constitute any form of acceptance of service by email for the purposes of s 459G(3)(b) of the Corporations Act.

[55] The situation might have been different if Mr Tayles himself had received an email at the address for service specified in the statutory demand, opened the email, and read the attachments - thereby having brought to his actual attention the application and supporting affidavit as filed. However, that is not what occurred. Despite the efforts to which Mr Price went on 11 May 2011, I cannot see how what was done constituted compliance with s 459G(3)(b). I do not consider that anything in the relationship between the Corporations Act and the Federal Court (Corporations) Rules can lead to a different conclusion.

15 In Opensoft her Honour regarded it as being significant that s 459G(3)(b) required a copy of the application supporting affidavit to be served 'on the person who served the demand on the company' and that in this context that person was the defendant creditor itself (i.e. not its agent nominated in the address for service in the demand) who was not served with any sealed copies of the application. In addition, her Honour regarded it as being significant that the creditor did not specify any electronic address for service as the address for service of any copies of any application to set aside the demand. Her Honour considered that it was not the place of the agent or the director of the company as its principal to accept service by means other than those specified in the statutory demand.

16 With respect, I have to say that I disagree with her Honour's view in that regard and it seems at odds with the views expressed by Palmer J in Woodgate and Austin J in Austar Finance Group Pty Ltd v Campbell ('Austar')[4] which are referred to in her Honour's reasons. In this case it has been conceded on behalf of Mr O'Keeffe that there has been received, within the prescribed time, at the physical address for service, copies of the sealed application and affidavit in the form that they were filed in Court. Adopting the approach of Austin J in Austar which is extracted above, in this case it has been demonstrated that the documents electronically transmitted (at least the documents sent by facsimile transmission) have actually been received in a readable form by the person to be served, who in this context I consider to be the solicitors for Mr O'Keeffe at the physical address identified in the address for service in the demand or, adopting the formulation of Palmer J in Woodgate, Greenmint has proved to the Court's satisfaction that the documents actually came to the attention of Mr O'Keeffe's solicitors who were expressly authorised by Mr O'Keeffe to 'deal directly and responsibly with the document, or documents of that nature'[5] by reason of those solicitors being identified as being the address for service in the demand.

17 In the exchange which occurred between Mr Kohn and I at the hearing of this matter, I referred to the decision of Chernov J (as he then was) in Seventh Cameo Nominees Pty Ltd v Holdway Pty Ltd ('Seventh Cameo').[6] The facts of Seventh Cameo are on all fours with those under consideration in this case. The application to set aside the demand had been served within time by facsimile transmission to the creditor's solicitors. It was common ground, as here, that by the relevant date, the creditor (through its solicitors), had in its possession copies of the application and supporting affidavit. His Honour said this:

In my opinion, for the reasons given below, there has been proper service of the relevant documents on the respondent. Here, the statutory demand which is in the prescribed form was issued in accordance with s.459E. It provides, as I have said earlier, that the address of the creditor for service was to be the address of the solicitors. I agree with Lander J in Players Pty Ltd v Interior Projects (1996) 20 ACSR 189, that the combination of s.459E, the prescribed form of statutory demand under it, and s.459G, shows that the legislation contemplates that the application under s.459G(3) may be served on the creditor at the address shown on the statutory demand. A like conclusion was reached by Young J in Howship Holdings Pty Ltd v Leslie [1996] NSWSC 314; (1996) 21 ACSR 440 at 442.

In my view, it is sufficient for the purposes of s.459G(3) if copies of the application and affidavit are served at the relevant address, that being the address nominated by the giver of the statutory notice. Thus, service may be effected if copies of the relevant documents are left at the nominated address. In a sense, how they come to be left there is irrelevant (see Young J in Howship Holdings Pty Ltd v Leslie, at p.442). For instance, the copy documents may be left by someone attending at the address in question and leaving them there. If that had occurred in this case, then in my view, proper service would have been effected of the relevant documents. The same object is achieved if the copies arrive at that address as a result of being sent by way of a facsimile transmission. What is required by s.459G(3) is that the respondent should receive copies of the relevant documents at the address nominated by it. Once that has occurred, the requirement of s.459G(3) as to service of the relevant documents is satisfied. I agree with Lander J that the saving provisions of ss.109X and 220 of the Corporations Law do not mean that service of the application must be in accordance with the Supreme Court Rules.

Speaking generally, the purpose of the various rules which deal with service is to ensure that the respondent has proper notice of the application that is to be made against it. That seems to me to be the aim of s.459G(3).

It is not the object of the legislation and the rules governing service to allow a respondent who has the relevant application in his or her hands within the prescribed time, to avoid meeting a case brought against him or her, by recourse to technical arguments as to service. As Lander J in Players Pty Ltd v Interior Projects observed at p.193:

The intention is to facilitate the service of an application under s.459G, not to impede service or make service of such an application more difficult.

Further, as Young J in Howship Holdings Pty Ltd v Leslie, has pointed out at p.442:

Were it otherwise, one would get to the absurd situation referred to by McInerney J in Pino v Prosser & Hassan [1967] VicRp 107; [1967] VR 835 at 837, that the defendant who, on his own affidavit admits that he received the writ ... should be held not to have been served.

As I have said earlier, it is common ground that the respondent here received copies of the relevant documents within the 21-day period. That these copies were transmitted to it or were made available to it through a facsimile transmission, as distinct from someone attending at the relevant premises and leaving them there is, in my view, not relevant. What is critical is that copies of the relevant documents came into the possession of the respondent at the address nominated by it, within the prescribed time.

Consequently, the application to set aside the statutory demand was, in my view, properly served on the respondent and the applicant is entitled to pursue its case.[7]

18 I also note that the decision of Chernov J in Seventh Cameo was followed by Austin J in Austar. In my view the reasoning is compelling and I also intend to follow it.

19 I note that in none of the cases which have been referred to above, was there any remark made that service of the sealed copies under consideration (which were necessarily not originals but were either facsimile copies or PDF files sent by email) did not constitute service of 'a copy of the application and a copy of the supporting affidavit' as s 459G(3)(b) requires.

20 Mr Kohn referred me to the decision of Mandie J (as he then was) in Fingalbay Pty Ltd v Rengay Nominees Pty Ltd ('Fingalbay')[8] as authority for the proposition that a faxed copy of the sworn affidavit will not suffice for the purposes of service on the creditor. I reject that submission. In Fingalbay, the applicant in the application to set aside the demand had filed a faxed copy of the sworn affidavit in support with the Prothonotary. The original sworn affidavit had been sworn in South Australia and then sent by facsimile transmission to this state for the purposes of filing with the court, but Mandie J held that the facsimile copy, being an image of the original, was not an 'affidavit' for the purposes of filing an application with the court under s 459G(3)(a). In my view, Fingalbay is only authority for the proposition that the affidavit filed with the court must be an original, not a photocopy or facsimile copy. It does not relate to the issue of what is to be served on the creditor. There is no inconsistency at all between Seventh Cameo and Fingalbay as Mr Kohn contended; they deal with quite separate requirements of s 459G(3).

21 In my view the application has been made within time and the Court has jurisdiction to hear the application.

22 I now turn to the question of whether there is a genuine dispute in respect of the debt the subject of the demand. In this application, Greenmint bears the onus of establishing that it has a genuine dispute within the meaning of s 459G of the Act.

23 The principles to be applied in applications under the section were collected by the Court of Appeal in this state in Troutfarms Australia Pty Ltd v Perpetual Nominees Ltd.[9] At [5] Osborn JA stated:

The phrase 'a genuine dispute' uses ordinary English words and its meaning in any particular set of circumstances must be a question of fact. Nevertheless its application is illuminated by the authorities referred to by Robson J in Rhagodia Pty Ltd v National Australia Bank:

In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd Dodds-Streeton JA (with whom Neave and Kellam JJA concurred) said:

[56] The court, in the context of an application to set aside a statutory demand, must determine whether there is a genuine dispute about the existence or amount of the debt or whether the company has a genuine off-setting claim.

[57] No in-depth examination or determination of the merits of the alleged dispute is necessary, or indeed appropriate, as the application is akin to one for an interlocutory injunction. Moreover, the determination of the "ultimate question" of the existence of the debt should not be compromised.

[71] As the terms of s 459H (sic) of the Corporations Act 2001 and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or off-setting claim. It is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. As counsel for the appellant conceded however, it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something "between mere assertion and the proof that would be necessary in a court of law" may suffice. A selective focus on a part of the formulation in South Australia v Wall, divorced from its overall context, may obscure the flexibility of judicial approach appropriate in the present context if it suggests that the company must formally or comprehensively evidence the basis of its dispute or off-setting claim. The legislation requires something less.

In Eyota, McClelland CJ of the Supreme Court of New South Wales said:

It is, however, necessary to consider the meaning of the expression "genuine dispute" where it occurs in s 450H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the "serious question to be tried" criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit "however equivocal, lacking precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be" not having "sufficient prima facie plausibility to merit further investigation as to [its] truth" (cf Eng Mee Yong v Letchumanan), or "a patently feeble legal argument or an assertion of facts unsupported by evidence": cf South Australia v Wall.

But if it does mean that, except in such an extreme case, a court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments Hayne J said, after referring to the state of the law prior to the enactment of Div 3 of Pt 5.4 of the Corporations Law, and to the terms of Div 3:

These matters, taken in combination, suggest that at least in most cases, it is not expected that the court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute.

In Re Morris Catering (Aust) Pty Ltd Thomas J said:

There is little doubt that Div 3 ... prescribes a formula that requires the court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the court will examine the merits or settle the dispute. The specified limits of the court's examination are the ascertainment of whether there is a "genuine dispute" and whether there is a "genuine claim".

It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it), the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.

The essential task is relatively simple - to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).

I respectfully agree with those statements.

In TR Administration, Dodds-Streeton JA (with whom Neave and Kellam JJA concurred) cited this passage with apparent approval and noted it was also cited by the Full Federal Court in Spencer Constructions Pty Ltd v GAM Aldridge Pty Ltd.

[citations omitted]

24 In her affidavit of 13 April 2015 Ms Kordos, the sole director and secretary of Greenmint admits signing a document which records a loan agreement between the parties in respect of the sum of $60,000, but she states that she was never provided with a copy of that document. She states that she was never given any opportunity to read the document before she signed it and was asked to sign it on the designated pages. She states that she did so in good faith believing that it recorded the terms of the loan agreement which had been earlier discussed with a finance broker, Mr Quiroga.

25 Ms Kordos deposes that based on her discussions with Mr Quiroga which occurred in late 2014 she believed the document recorded a loan of $60,000 repayable within 10 weeks with a fixed amount of interest of $12,000. She states that she also agreed to secure the loan by agreeing to lodgement of a caveat over a property at 2 Lee Street, Noble Park. She has subsequently been provided with a copy of the document which is in the form of a deed, is unsigned and undated and bears the heading Deed of Loan ('the Deed').

26 Ms Kordos denies that Greenmint is indebted to Mr O'Keeffe for the sum demanded of $105,128. She admits that Greenmint has borrowed the sum of $60,000 from Mr O'Keeffe but disputes any liability for the rates of interest which are stated in the Deed.[10] I observe at this point that the Deed refers to a rate of interest of 173.33% per annum and offers a lower interest rate of 104% per annum provided that the plaintiff duly observed and performed each and every covenant of the Deed. I note that the rate of interest of 104% is the equivalent of $12,000 for interest on a $60,000 advance for 10 weeks.

27 Ms Kordos states that she never had any discussions with any person whereby she or Greenmint have agreed to pay such high rates of interest. She states that at the time of signing the Deed, she believed Greenmint would only be liable for interest in the agreed sum of $12,000. She asserts a belief that the interest rate in the Deed is grossly exorbitant, unfair, unconscionable and constitutes an unenforceable penalty.

28 Ms Kordos concludes by stating that Greenmint remains willing and able to pay the sum of $60,000 together with agreed fixed interest in the sum of $12,000 'as well as any other interest which is fair, just and reasonable in the circumstances'.[11] She contends that there is a genuine dispute in relation to the precise terms of any loan agreement, a genuine dispute in relation to the amount of any debt owed to Mr O'Keeffe referable to the quantum of interest and she contends that Mr O'Keeffe has acted unfairly, unreasonably and unconscionably in circumstances where Mr O'Keeffe's interests are already secured by a caveat over the property at Lee Street, Noble Park.

29 In his affidavit of 5 June 2015, Mr Quiroga deposes that he first met Ms Kordos, the sole director and secretary of Greenmint on or about 15 October 2014. They were both attending an inspection of a property in Abbotsford at the invitation of a mutual acquaintance.

30 Approximately a week later he met with Ms Kordos at her invitation at a café in the lobby of the residential apartment in which she resides. Ms Kordos enquired whether Mr Quiroga could assist her in obtaining a loan to provide funds to complete a property development she was undertaking at Lee Street, Noble Park. Ms Kordos advised Mr Quiroga that she needed a loan of $60,000 for no longer than 10 weeks and was prepared to pay interest in the amount of $12,000 for the 10 week period and to offer security for such loan by way of an equitable charge and a right to register a mortgage over the Lee Street property. Mr Quiroga indicated to Ms Kordos that he might be able to introduce her to persons who may be interested in providing her with a short term loan on those terms.

31 After that conversation Mr Quiroga approached Mr O'Keeffe and enquired as to whether he was interested in advancing money to Greenmint on those terms. Mr O'Keeffe agreed to provide a loan in the sum of $60,000 to Greenmint for a 10 week period with interest accruing at a standard rate of $2,000 per week (which is the equivalent of 173.33% per annum) and in the event that the money was repaid within the 10 week period interest would be charged at a reduced rate of $1200 per week (the equivalent of 104% per annum).

32 Mr Quiroga deposes that on or about 25 October 2014 he met with Ms Kordos at the same café. At that meeting he advised Ms Kordos of Mr O'Keeffe's terms with respect to interest on the loan. Mr Quiroga deposes that Ms Kordos seemed to fully understand those terms. She asked to convey to Mr O'Keeffe her preference for his solicitors to draft a loan agreement at the earliest opportunity as Ms Kordos wanted to receive the loan funds without delay.

33 Mr Quiroga then told Mr O'Keeffe to arrange for his solicitors to prepare a loan agreement on the terms agreed to by him and Ms Kordos on behalf of Greenmint.

34 On 30 October 2014, Mr Quiroga was provided with a Deed of Loan by the solicitors engaged by Mr O'Keeffe. An executed copy of the Deed is exhibited to Mr O'Keeffe's affidavit.[12]

35 On 30 October 2014, Mr Quiroga handed a copy of the Deed to Ms Kordos in person at the café. He advised her that the Deed had been prepared by Mr O'Keeffe's solicitors and that the terms reflected what had been agreed between Ms Kordos and Mr O'Keeffe. Mr Quiroga saw Ms Kordos read the Deed and proceed to execute it on behalf of Greenmint in front of him. He denies the allegation made in paragraph 6 of Ms Kordos' affidavit that she was not given any opportunity to read the document before it was signed. He states that at no time did he tell Ms Kordos that she had to sign the Deed immediately, nor did he deny her the opportunity to review the terms of the Deed . She did not ask for further time to review or sign the Deed, or have it reviewed by an independent lawyer.

36 Mr O'Keeffe in his affidavit of 5 June 2015 refers to the circumstances of the service of the statutory demand and the accompanying affidavit to which reference has already been made. He then makes reference to the Deed and also exhibits what is sometimes described as a Dobb's certificate[13] specifying the amount owing pursuant to the Deed. That certificate was generated pursuant to clause 9 of the Deed which provides:

Any certificate signed by the mortgagee specifying as at a particular date an amount owing or payable to the mortgagee under or pursuant to this deed or any collateral security or specifying any other matter of a factual nature which is relevant to any of the rights and obligations of the mortgagee under this deed or any collateral security shall be admissible in any proceedings and shall, in the absence of manifest error, be a prima facie evidence of the matter specified.[14]

37 Mr O'Keeffe then makes reference to Mr Quiroga's affidavit and states that the substance of the conversations between Mr Quiroga and himself deposed to in that affidavit are true and correct.

38 The Deed, a copy of which is exhibited to Mr O'Keeffe's affidavit is dated 30 October 2014 and is executed by Ms Kordos as a director of Greenmint.[15]

39 The schedule to the Deed defines the Principal sum as $60,000. The due date is stated to be 10 weeks from the Drawdown date which is in turn specified as being 30 October 2014.

40 In the second schedule to the Deed it provides as follows:

The mortgagor will pay interest to the mortgagee on the principal sum at the rate of 173.33% per annum calculated on a daily basis (on a year of 365 days) and payable on the due date, and shall accrue from the date upon which the principal sum is advanced to the mortgagor until repayment of the principal sum or part thereof. Provided always, and it is hereby agreed and declared, that if the mortgagor shall on every day on which interest is herein before made payable under this Deed pay to the mortgagor interest on the principal sum (or on so much thereof as shall for the time being remain unpaid) at the rate of 104% per annum, and shall also duly observe and perform each and every covenant on the mortgagor's part herein contained or implied, then the mortgagee shall accept interest on the principal sum (or so much thereof as shall for time being remain unpaid) at the rate of 104% per annum in lieu of 173.33% per annum. The third schedule to the Deed provides for collateral security being a mortgage over the land in Certificate of Title Volume 8262 Folio 433.

The mortgagor agrees, as an independent obligation which will not merge in any judgment or order, to pay interest on any judgment or order for the payment of all or any part of the money secured at the higher of the rate payable under the judgment or order or interest calculated at the rate and in the manner set out in the preceding sub-clause.

41 In this affidavit Ms Kordos takes issue with matters referred to in Mr Quiroga's affidavit. She states that she first met Mr Quiroga in early September 2014, not 15 October 2014. The introduction arose because Mr Quiroga told her that he would be able to source potential investors and/or lenders for a property development project being undertaken by Ms Kordos in Frankston. She states that they spoke regularly and she recalls that they had many meetings. He often attended her salon. He was given free haircuts and they were building up a business rapport. They began correspondence by email in or about 24 September 2014, before discussions about Mr O'Keeffe being a potential investor or lender.

42 Ms Kordos disputes the account of discussions alleged to have taken place on 21 October 2014 and says they are not true. She states that Mr Quiroga first approached Mr O'Keeffe in relation to investing in the Frankston project but Mr O'Keeffe did not want to loan a large sum of money, only $60,000. She states that she told Mr Quiroga that she did have a smaller building project that he could invest in at Lee Street, Noble Park where she was building a boarding house. She told Mr Quiroga that this money could be used towards the final stages of construction and business development on an almost complete project. She considers those discussions had already taken place between Mr Quiroga and herself by early October 2014.

43 Ms Kordos states that the details as to the loan were then discussed at Mr O'Keeffe's home. She recalls that she and Mr Quiroga went to Mr O'Keeffe's home and they sat together in his lounge room and had a beer. This was the first occasion she was introduced to Mr O'Keeffe who was moving out of his home at the time as he had just sold it. Mr O'Keeffe told her that he was awaiting funds to come through from the sale.

44 Ms Kordos deposes that the terms that were discussed were that Mr O'Keeffe would receive $72,000 and that the interest would be fixed at $12,000. There was no discussion of 'penalty interest' if the principal sum was not paid on time and there was no discussion of paying Mr O'Keeffe the equivalent of $2,000 a week in interest. She states that a few days later she was informed by Mr Quiroga that Mr O'Keeffe had agreed to provide the sum on the terms discussed and Mr Quiroga offered to use his lawyers to draft the loan agreement. He stated that his lawyers were JPL Law. She states that she did not realise these were the lawyers for Mr O'Keeffe until she was issued with the statutory demand from Mr O'Keeffe.

45 Ms Kordos states that it is not correct that she suggested that Mr Quiroga use Mr O'Keeffe's solicitors nor was she ever advised of the terms of the loan agreement as they were written in the document. She states that she did not know prior to signing the agreement that Mr O'Keeffe's solicitors were Mr Quiroga's solicitors and if she had known that they were Mr O'Keeffe's lawyers that were not looking out for her best interests she would have sought independent legal advice. I note that she does not state whose solicitors she supposed they were. On 18 October 2014 she received an invoice from JPL Legal for the cost of drawing the loan agreement.

46 Ms Kordos deposes that she was never provided with a written copy of the Deed by Mr Quiroga. She recalls that on 30 October 2014 she was expecting Mr Quiroga to come to her salon to drop off the document however he called to inform her that he was unable to come because he needed to urgently go to the airport. Instead Mr Quiroga's secretary attended the salon, she had no knowledge of the document and was not able to answer any of her questions in relation to it. She was only told to come there to get her signature on the document and then take it back to the office. She spoke to Mr Quiroga on the telephone about this and he assured her that the document was drafted according to the terms that they had discussed orally and that if she did not sign it that day, Mr O'Keeffe would not provide the money. She states that the secretary only had one copy of the document at the time which is the copy which she signed and took with her. The Deed was executed in front of Mr Quiroga's secretary in her salon but she does not know when Mr O'Keeffe signed the document.

47 Ms Kordos contends that despite the Deed being for $60,000 she only received $50,000 on the dates specified 7 and 10 November 2014[16]. She states that as she was the one paying Mr Quiroga for his work through a commission, she thought that Mr Quiroga was representing her. In or about September 2014, she had agreed that Mr Quiroga would be paid a commission of 10% of the principal sum borrowed from any loan sourced by him. Instead on or about 11 November 2014 Mr Quiroga asked for and received $6,500 from her. As the principal sum advanced was only $50,000 she paid him the equivalent of about 13% commission. She was only provided with an unexecuted copy of the loan agreement in December 2014 when Mr Quiroga emailed a copy to her.

48 I note at this point that while there are some differences in the evidence, it is clear that Ms Kordos was willing to enter into a transaction whereby she would take out a short term loan for $60,000 for 10 weeks and would pay $12,000 interest to Mr O'Keeffe. It is also accepted by her that she subsequently executed the Deed on behalf of Greenmint but did not read the document before doing so. Further, the sum advanced of $50,000, not $60,000 has not been repaid by the due date nor has any sum been paid for interest.

49 In his submissions, Mr Selimi contended that there were a number of factual issues in dispute which gave rise to the existence of a genuine dispute. These are detailed in his written submissions and include:

(a) Whether any misrepresentations were made concerning the meaning and effect of the Deed;

(c) The quantum of debt payable under the Deed;

(d) The actual quantum of money loaned by the lender;

(e) The quantum of interest payable under the Deed;

(g) At what annual percentage rate interest starts to accrue;

(h) Whether the defendant charged interest at $1200 per week or $2000 per week;

(i) Whether the parties had discussed and orally agreed to penalty interest charges;

(j) Whether it was explained to the plaintiff that the annual interest rate equivalent of interest was charged at $1200 per week (104%) or $2000 (173.33%);

(k) At what rate the interest is chargeable after 15 January 2015;

(l) How the Deed was executed by the plaintiff;

(m) Before whom the Deed was executed by the plaintiff;

(n) Whether the terms of the Deed were discussed prior to the preparation of the loan documents;

(o) Whether the terms of the Deed were discussed with the plaintiff after she was presented with a hard copy of the Deed;

(p) Whether the plaintiff was provided with an executed Deed;

(q) Whether the plaintiff had agreed to sign the Deed without independent legal advice;

(r) Whether the plaintiff had agreed to use the defendant's lawyers to prepare the Deed;

(s) Whether the defendant's lawyers are or were also the lawyers of Mr Quiroga.

50 In my view, when analysed, I do not consider that these factual issues give rise to a genuine dispute. There is a considerable variance in the respective accounts of how the Deed came to be executed but what is not in dispute is that Ms Kordos was in need of a loan advance of $60,000 for a period of 10 weeks and was prepared to pay interest for that period of $12,000, an effective interest rate of 104%. She accepts that she signed the Deed in order to obtain such an advance. She did not read the document before she signed it, but there is no evidence of any duress exerted on the occasion of her signing the document or her being prevented from reading it prior to her executing it, nor obtaining legal advice about it. Once this is accepted the principles of construction of documents then come in to play. Matters such as the terms and effect of the Deed, the debt payable under the Deed and many of the other matters referred to by Mr Selimi are matters for construction of the Deed.

51 The subject of the significance of signing of documents embodying contractual terms was considered by the High Court of Australia in Toll (FGCT) Pty Limited v Alphapharm Pty Limited and others ('Toll').[17] Because of its significance in relation to one of the alleged disputes in this matter, I will refer at length to the judgment of the Court. The High Court stated at paragraphs [42]-[57]:

[42] Consistent with this objective approach to the determination of the rights and liabilities of contracting parties is the significance which the law attaches to the signature (or execution) of a contractual document. In Parker v South Eastern Railway Co, Mellish LJ drew a significant distinction as follows:

In an ordinary case, where an action is brought on a written agreement which is signed by the defendant, the agreement is proved by proving his signature, and, in the absence of fraud, it is wholly immaterial that he has not read the agreement and does not know its contents. The parties may, however, reduce their agreement into writing, so that the writing constitutes the sole evidence of the agreement, without signing it; but in that case there must be evidence independently of the agreement itself to prove that the defendant has assented to it.

[43] More recently, in word that are apposite to the present case, in Wilton v Farnworth Latham CJ said:

In the absence of fraud or some other of the special circumstances of the character mentioned, a man cannot escape the consequences of signing a document by saying, and proving, that he did not understand it. Unless he was prepared to take the chance of being bound by the terms of the document, whatever they might be, it was for him to protect himself by abstaining from signing the document until he understood it and was satisfied with it. Any weakening of these principles would make chaos of every-day business transactions.

[44] In Oceanic Sun Line Special Shipping Company Inc v Fay, Brennan J said:

If a passenger signs and thereby binds himself to the terms of a contract of carriage containing a clause exempting the carrier from liability for loss arising out of the carriage, it is immaterial that the passenger did not trouble to discover the contents of the contract.

[45] It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Latham CJ put it, whatever they might be. That representation is even stronger where the signature appears below a perfectly legible written request to read the document before signing it.

[46] The statements in the above authorities accord with the well-known principle stated by Scrutton LJ in L'Estrange v F Graucob Ltd ('L'Estrange v Graucob') that "[w]hen a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not". Scrutton LJ, in turn, was repeating the substance of what had been said by Mellish LJ in Parker v South Eastern Railway Company. The principle was applied in Foreman v Great Western Railway Company. A consignor of cattle sent them for transportation by a railway company. They were put in the charge of a drover, who could not read. The drover signed a contract of carriage which contained an exclusion clause. The drover's employer was held to be bound by the clause. The Exchequer Division said that "the plaintiff who sends the [illiterate] servant to sign the document is in no better or worse position than if he had signed it himself without reading it." In his lecture published as "Form and Substance in Legal Reasoning: The Case of Contract", Professor Atiyah posed, with reference to L'Estrange v Graucob, the question why signatures are, within established limits, regarded as conclusive. He answered:

A signature is, and is widely recognized even by the general public as being a formal device, and its value would be greatly reduced if it could not be treated as a conclusive ground of contractual liability at least in all ordinary circumstances.

However, what is, I think, less clear is what is the underlying reason of substance in this kind of situation. The usual explanation for holding a signature to be conclusively binding is that it must be taken to show that the party signing has agreed to the contents of the document; but another possible explanation is that the other party can be treated as having relied upon the signature. It thus may be a mistake to ask, as H L A Hart once asked, whether the signature is merely conclusive evidence of agreement, or whether it is itself a criterion of agreement.

These themes appeared in the judgment of this Court in Petelin v Cullen. There, the Court upheld a plea of non est factum. Under the common law rules, a plea of non est factum was a plea of the general issue which put in issue that the defendant had executed the deed alleged in its declaration. In their joint judgment in Petelin, Barwick CJ, McTiernan, Gibbs, Stephen and Mason JJ said:

The principle which underlies the extension of the plea to cases in which a defendant has actually signed the instrument on which he is sued has not proved easy of precise formulation. The problem is that the principle must accommodate two policy considerations which pull in opposite directions: first, the injustice of holding a person to a bargain to which he has not brought a consenting mind; and, secondly, the necessity of holding a person who signs a document to that document, more particularly so as to protect innocent persons who rely on that signature when there is no reason to doubt its validity. The importance which the law assigns to the act of signing and to the protection of innocent persons who rely upon a signature is readily discerned in the statement that the plea is one "which must necessarily be kept within narrow limits" ... and in the qualifications attaching to the defence which are designed to achieve this objective.

...

[49] To speak of the operation of the law of contract with respect to the signature of the document containing cl 6 requires attention both to the significance attached by the law to the presence of the signature and also to the absence of any grounds, such as a plea of non est factum, which at common law would render the contract void and of any grounds, such as misrepresentation, which might attract equitable relief, or which might elicit curial dispensation under a statutory regime. ...

...

[54] ...There are circumstances in which it is material to ask whether a person who has signed a document was given reasonable notice of what was in it. Cases where misrepresentation is alleged, or where mistake is claimed, provide examples. No one suggests that the fact that a document has been signed is for all purposes conclusive as to its legal effect. At the same time, where a person has signed a document, which is intended to affect legal relations, and there is no question of misrepresentation, duress, mistake, or any other vitiating element, the fact that the person has signed the document without reading it does not put the other party in the position of having to show that due notice was given of its terms. Furthermore, it may be asked, where would this leave a third party into whose hands the document might come?

[55] In L'Estrange v Graucob, Scrutton LJ said that the problem in that case was different from what he described as "the railway passenger and cloak-room ticket cases, such as Richardson, Spence & Co v Rowntree", where "there is no signature to the contractual document, the document being simply handed by the one party to the other." His Lordship said:

In cases in which the contract is contained in a railway ticket or other unsigned document, it is necessary to prove that an alleged party was aware, or ought to have been aware, of its terms and conditions. These cases have no application when the document has been signed.

...

[57] If there is a claim of misrepresentation, or non est factum, or if there is an issue as to whether a document was intended to affect legal relations or whether, on the other hand, it was tendered as a mere memorandum of a pre-existing contract, or a receipt, or if there is a claim for equitable or statutory relief, then even in the case of a signed document it may be material to know whether a person who has signed it was given sufficient notice of its contents. The general rule, which applies in the present case, is that where there is no suggested vitiating element, and no claim for equitable or statutory relief, a person who signs a document which is known by that person to contain contractual terms, and to affect legal relations, is bound by those terms, and it is immaterial that the person has not read the document. L'Estrange v Graucob explicitly rejected an attempt to import the principles relating to ticket cases into the area of signed contracts. It was not argued, either in this Court or in the Court of Appeal, that L'Estrange v Graucob should not be followed.

[citations omitted]

52 The High Court also considered the general issue of the significance of signatures being appended to written contracts in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd ('Equuscorp').[18] At [33]-[35] the High Court stated:

[33] The respondents each having executed a loan agreement, each is bound by it. Having executed the document, and not having been induced to do so by fraud, mistake, or misrepresentation, the respondents cannot now be heard to say that they are not bound by the agreement recorded in it. The parol evidence rule, the limited operation of the defence of non est factum and the development of the equitable remedy of rectification, all proceed from the premise that a party executing a written agreement is bound by it. Yet fundamental to the respondents' case that the operative agreements between the parties were wholly oral, and reached earlier than the execution of the written agreements, was the proposition that the written agreements subsequently executed not only may be ignored, they must be. That is not so. Having executed the agreement, each respondent is bound by it unless able to rely on a defence of non est factum, or able to have it rectified. The respondents attempted neither.

[34] There are reasons why the law adopts this position. First, it accords with the "general test of objectivity [that] is of pervasive influence in the law of contract". The legal rights and obligations of the parties turn upon what their words and conduct would be reasonably understood to convey, not upon actual beliefs or intentions.

[35] Secondly, in the nature of things, oral agreements will sometimes be disputable. Resolving such disputation is commonly difficult, time consuming, expensive and problematic. Where parties enter into a written agreement, the Court will generally hold them to the obligations which they have assumed by that agreement. At least, it will do so unless relief is afforded by the operation of statute or some other legal or equitable principle applicable to the case. Different questions may arise where the execution of the written agreement is contested; but that is not the case here. In a time of growing international trade with parties in legal systems having the same or even stronger deference to the obligations of written agreements (and frequently communicating in different languages and from the standpoint of different cultures) this is not a time to ignore the rules of the common law upholding obligations undertaken in written agreements. It is a time to maintain those rules. They are not unbending. They allow for exceptions. But the exceptions must be proved according to established categories. The obligations of written agreements between parties cannot simply be ignored or brushed aside.

[citations omitted]

53 In this instance there were, as one would expect, discussions leading up to the execution of the Deed whereby Mr O'Keeffe agreed to make the 10 week advance in return for a fixed amount of interest of $12,000. The Deed which is ultimately signed provides for such a loan that includes a term that expresses that amount for interest, not in terms of a monetary fixed amount but at an equivalent annualised rate of interest of 104%. There is no doubt that the Deed was intended to create legal relations between the parties and Ms Kordos signed the agreement without reading it. I do not consider it can be plausibly contended by her that if she did not repay the advance and the interest at the end of the term of the loan that she would not have expected that there would be provision in the Deed about interest as indeed there was, at a higher rate than that which was payable if payment was made on time.

54 On the basis of her own evidence about the circumstances I am not able to accept that there has been a misrepresentation such as would vitiate the agreement. She knew she was entering into an agreement which involved payment of what most would regard as an usurious rate of interest, 104%. The fact that she did not read the document to ascertain what the position was if she did not make a timely payment is, on an application of what the High Court has said in Toll and Equuscorp, not a reason for relieving her of the burden of the agreement.

Were the interest rates payable under the Deed a penalty?

55 Mr Selimi also contended that the issue as to whether the rates of interest applying under the interest rate clause extracted above at paragraph [36] give rise to the existence of a genuine dispute by reason that they constitute penalties. The clause concerning interest provides for a higher rate of interest but an agreement that if there is timely payment under the Deed, a lower rate will be accepted and discharge the borrowers obligations.

56 In my view, a clause of that type does not constitute a penalty. The authorities in that regard were recently collected and considered by the Court of Appeal in the Supreme Court of Queensland in Kellas-Sharpe v PSAL Limited ('Kellas-Sharpe').[19] In Kellas-Sharpe, Gotterson JA was considering the terms of a loan agreement containing provisions very similar to those here. In Kellas-Sharpe the 'interest rate' was defined in the schedules to the loan agreement to mean:

The standard rate of 7.50% per month, but while the Borrower is not in default under the Facility, the Lender will accept interest at the concessional rate of 4. 00% per month.

If the Borrower after the Advance Date fails within 3 Business Days to take all action requested of it by the Lender to facilitate the registration of the Lender's interest in any Security, the interest rate payable by the Borrower will be 3.50% per month higher than interest rate which would otherwise prevail.[20]

57 I note that in Kellas-Sharpe, the respective interest rates on an annualised basis were 90% and 48%. It was argued in the appeal that such a provision in the loan agreement amounted to a penalty. Gotterson JA reviewed the authorities in regard to the construction of such provisions in loan agreements at [32]-[36].

[32] The learned judge described the rule that he applied as "well-established" in Australian law. His use of that epithet is justified. In Brett v Barr Smith, Isaacs J, citing Lord Hatherley's exposition of it in Wallingford v Mutual Society, referred to the rule as "firmly established". His Lordship had said:

The other question which was much argued before your Lordships was the question of penalty. I apprehend that there again the case is quite clear. The illustration of the form adopted in mortgages is a very good illustration, I think, of what the true principle is. The form adopted long since - I do not know whether it is still continued or not - in mortgages, was when you wished to reserve in reality interest at 4 per cent., to reserve the interest by contract at 5 per cent., but to mitigate the severity of that contract in the event of the money being paid by a certain day. It is not a penalty on non-payment (though it seems a fine distinction) when you say that your contract shall be made for interest at 5 per cent. to be reduced, in the event of your punctual payment, to 4 per cent.; but it is a relaxation of the terms of that original contract, not taking it by way of penalty at all, but a relaxation of your contract which you would merit and purchase by paying at a definite and fixed time. If that definite and fixed time were exceeded, then the original contract revived in all its force. Sometimes mortgage deeds, being somewhat unskilfully drawn, interest at 4 per cent. was reserved by the contract to be raised to 5 per cent. if there was non-payment at a particular day; and although that brings the case to an extremely fine and nice distinction, it all the better illustrates the rule which has been applied at all times by the Courts, with reference to this question of penalty. If there had been indulgence at any time upon given terms, as long as those terms are observed, the indulgence lasts. When those terms are departed from the indulgence at once fails, and the original contract is revived in full force ...

[33] Later, in O'Dea v Allstates Leasing System (WA) Pty Ltd, Gibbs CJ stated that "... there is no penalty where it is agreed to charge a certain rate of interest on condition that if payment is made punctually the rate will be reduced ..." His Honour cited as authority for the rule the decision in Astley v Weldon where Heath J had observed:

... It is a well-known rule in equity, that if a mortgage covenant be to pay 5l. per cent. and if the interest be paid on certain days then to be reduced to 4l. per cent. the Court of Chancery will not relieve if the early day be suffered to pass without payment; but if the covenant be to pay 4l. per cent. and if the party do not pay at a certain time it shall be raised to 5l. there the Court of Chancery will relieve ...

[34] In Acron Pacific Ltd v Offshore Oil NL, Mason ACJ, Wilson, Brennan and Dawson JJ cited that part of the judgment of Gibbs CJ in O'Dea which contains the statement which I have quoted in the course of enunciating the proposition that "there is no penalty if the provisions of the moratorium deed simply grant an indulgence for the payment of a debt that is due and payable."

[35] The rule has been recognised by intermediate courts of appeal in Australia. In David Securities Pty Ltd v Commonwealth Bank of Australia, a Full Court of the Federal Court (Lockhart, Beaumont and Gummow JJ) described the distinction reflected in the rule as a "well-known, if not much praised". They continued:

... A proviso in a contract of loan or mortgage may stipulate a reduction of the rate of interest if interest be paid punctually. This provides an incentive to punctual payment, time being of the essence. On the other hand, a provision, that, if there be a failure in punctual payment, the rate of interest is increased with effect over the period in respect of which the interest is charged, has been regarded as a penalty ...

[36] In Kowalczuk v Accom Finance Pty Ltd, Campbell JA of the New South Wales Court of Appeal (with whom Hodgson and McColl JJA agreed) noted that there is a "conventional view that a properly drafted mortgage containing higher and lower rates does not attract the law of penalties at all". His Honour explained the rationale for his reference to a "properly drafted" mortgage. It is one that is drafted with the following consideration in mind:

... If the mortgage is drafted so that the borrower agrees to pay a particular rate of interest, but the lender agrees to accept a lower rate of interest in full satisfaction of the borrower's obligation to pay interest at that particular rate provided that the lower rate of interest is paid timeously (and, sometimes, provided that there is no breach of any other provision of the mortgage) that provision is not one that states the consequences of a breach of contract, and hence the law of penalties does not apply to it.

58 Despite senior counsel for the appellants in Kellas-Sharpe inviting the Queensland Court of Appeal to 'consign the rule to history' and not to apply it, the Court of Appeal declined to do so.

59 I do not consider that the legal question of whether the interest provision in the Deed constitutes a penalty is, on the application of High Court and intermediate appellant court authority, arguable so as to give rise to a genuine dispute.

60 As I have observed, it was accepted by Mr O'Keeffe's counsel that only $50,000 and not $60,000 had been advanced. I requested the parties to agree upon a computation of what would be owing under the demand having regard to this and my Associate has been provided with an agreed statement computing such amounts. I will need to hear counsel further on the computation of quantum for the purpose of varying the amount of the demand. I will pronounce orders when counsel have addressed me on that subject but those orders will involve a variation of the demand to take into account the advance being only $50,000. Interest was payable on the advance if it was paid on time at 104% for the term of the loan. It was not repaid on time or indeed at all and therefore the higher rate is payable under the Deed. Interest will therefore be computed at a rate of 173.33% to the date of the demand. The legal costs of $4098.65 which are also claimed in the demand were in my view established to be payable by the certificate referred to in paragraph 36 of these reasons.

[3] [2011] FCA 653.

[4] [2007] NSWSC 1493; (2007) 215 FLR 464.

[5] Woodgate v Garard Pty Ltd [2010] NSWSC 508; (2010) 78 ACSR 468 at [44]. .

[6] Unreported decision of Chernov J, Supreme Court of Victoria, 24 April 1998.

[8] Unreported decision of Mandie J, Supreme Court of Victoria, 12 December 1997.

[9] [2013] VSCA 176.

[10] At the hearing of this proceeding, it was common ground that only $50,000 has been advanced to Greenmint.

[11] Affidavit of Joanna Kordos of 13 April 2015, paragraph 10.

[13] See Dobbs v National Bank of Australasia Limited [1935] HCA 49; (1935) 53 CLR 643.

[16] Affidavit of Joanna Kordos of 15 June 2015, para 11.

[18] [2004] HCA 55 at [33]-[35].

[19] [2012] QCA 371.