YOO KEUN LEE v SURRY HILLS MUTUAL LOAN CLUB [2006] NSWSC 941 | Case summary

JUDGMENT 1 On or about 5 October 2001 a Korean club known as Surry Hills Mutual Loan Club came into existence. Mr Lee was then a member. The Club was an unincorporated association. During the period of its subsistence, the membership changed from time to time (there were in excess of 30 members). The club ceased to be in existence in August 2004. 2 For present purposes, it is unnecessary to dwell on the terms of membership. Members were required to make contributions on a monthly basis. Members received distributions and were required to make post distribution instalments. 3 On or about 5 November 2001, the defendant received a distribution. It is alleged that since 5 May 2003, the plaintiff has failed to make post distribution instalments. 4 Proceedings came to be commenced in the general division of the Local Court. The initiating process was a Statement of Liquidated Claim. The named plaintiff was "Surry Hills Mutual Loan Club, consisting of the parties referred to in Schedule "A" ". The process contained the following: "1. The plaintiff herein is made up of the parties detailed in Schedule "A" attached to this statement of claim. 2. All the parties detailed in schedule "A" are and were at all material times members of the "Surry Hills Mutual Loan Club" ("the Club")." Schedule A contained 28 names. 5 The process pleaded breach of an agreement made between the plaintiff and Mr Lee ("failure to pay post distribution instalments"). A claim was made for damages (in the sum of $32,160) together with interest and costs. 6 A dispute as to retainer came to pass. It was dealt with by Mr Lullam LCM. It brought about the filing of an Amended Statement of Liquidated Claim. It had a schedule "C" (in lieu of what had been schedule "A"). Four of the names that had appeared in schedule "A" were struck out. 7 The proceedings were defended and a Notice of Cross Claim was filed. 8 The proceedings came to hearing. They were heard by Mr Forbes LCM. He delivered an ex tempore judgment on 26 September 2005. 9 Leaving aside questions of the constitution of the proceedings, it was disputed that there was a liability to the club. Mr Lee took the stance that there had been personal dealings with Mr Yim (who was the manager and a member of the club) and that he had stopped making payments by way of set-off of a debt owed to him by Mr Yim. This debt was said to arise out of a different business dealing involving Australia Deer Park Pty Limited. 10 The Magistrate came to the view that Mr Lee was liable to pay the money claimed. He dealt with the matters that were argued concerning the constitution of the proceedings. He decided that the plaintiff was entitled to a verdict. A judgment was entered in favour of Surry Hills Mutual Loan Club. 11 He also dealt with the cross claim. It was dealt with summarily on application by the club. 12 The transcript contains the following:- " Insofar as dealing with the cross-claim is concerned, having read the cross-claim and listened to the submissions that have been made, and having read that rule, it's my view that the cross-claim is a separate proceeding, if it is a proceeding, as between Mr Lee and Mr Yim and it is not a part of the proceeding that I am called upon to determine - that is the original claim - but rather is something separate and it is my view that IN THIS MATTER THE CROSS-CLAIM SHOULD BE DISMISSED AND THERE SHOULD BE A VERDICT FOR THE PLAINTIFF-DEFENDANT IN THE CROSS-CLAIM. " 13 Mr Lee is now the plaintiff in proceedings in this court. He proceeds on an Amended Summons, filed on 21 June 2006. This process propounds a substantially different case to that which had been put in the original Summons. A challenge is brought to what the Magistrate decided both in relation to the proceedings brought in the name of Surry Hills Mutual Loan Club and the cross claim. 14 In respect to the proceedings brought in the name of Surry Hills Mutual Loan Club, broadly three areas of attack are made. Firstly, it is said that the proceedings were incompetent (because they were brought by an unincorporated association). Secondly, it is said that it was erroneous to treat the proceedings as being representative proceedings (because rule 7.4 of the Civil Procedure Rules 2005 (NSW) did not have application). Thirdly, it was said there was no evidence to support the finding of contract (because of lack of evidence as to identity of membership). 15 It is convenient at this stage to return to what is said about the issues and the judgment of His Honour. 16 The question of Surry Hills Mutual Loan Club being an unincorporated loan club was put in issue. There seemed to be common ground that the club had no legal personality and no entitlement to sue. The defendant says that, before the Magistrate, it adopted the position that the unincorporated association was not the party suing Mr Lee (it was the 24 members who were suing him). Further, it is said that the position was adopted that these members were not suing in a representative capacity (despite what appears on p. 80 of the transcript - "The members sue, they bring representative proceedings "). 17 There was debate as to the application of rule 7.4. On behalf of Mr Lee, it was said that it was submitted that this rule had no application (because in this case the numerous persons did not have the same interest). 18 In his judgment, the Magistrate dealt with the submissions as follows: " In relation to the parties in this proceeding, I am simply of the view that it's adequately attended to within 7.4 and I can't see any difficulty in the association taking proceedings against somebody who hasn't paid money in accordance with his undertaking or agreement or arrangement or contractual obligation, and I don't really dwell on that further. Insofar as the reference that's made, none of these types of things come about if you are having a club which Mr Yim said was a friendship club if everybody pays. It only becomes a difficulty where there isn't a payment and that's what happened here. " 19 For completeness, I should add that steps have been taken in an endeavour to enforce judgment. A creditor's petition has been filed by Surry Hills Mutual Loan Club. There is now a dispute in the Federal Magistrate's Court of Australia. 20 The persons involved in the litigation may well now describe themselves as being the subject of a mess. The judgment that has been entered in the Local Court is not enforceable. It would seem not to be supported by the findings and it was contrary to the basis on which the case had been conducted before the Magistrate. Further, what was done in relation to the cross claim clearly went too far. 21 There is no need to dwell on the question of who was the plaintiff named in the proceedings. Whilst the content of the process may throw up some doubt, the preponderance of material may suggest that it was Surry Hills Mutual Loan Club. 22 It may be added that the process in its present form does have discordant features. Certain of the members named in Schedule "C" were not members at the time of the making of the alleged contract. It is for this reason that Mr Lee says that the named persons did not have the same interest. In the sense that it is used, the term "plaintiff' is not used consistently throughout the pleading. 23 Whilst the basis upon which the Magistrate came to deal with the question of competence of the proceedings might be thought to be debatable, at least in some respect he saw rule 7.4 as the solution. In his embracing of that provision, it may be thought that he treated the named members as representative parties. Despite that, he did not enter judgment for these parties on that basis. Instead, he entered judgment for Surry Hills Mutual Loan Club (an unincorporated association, which was not a legal entity, does not have the status to enforce the judgment and which came to an end in August 2004). The judgment is unsupportable and has to be set aside (Maritime Services Board of New South Wales v Australian Chamber of Shipping (1977) 1 NSWLR 648). 24 Whilst the argument that the rule does not have application may have force, it is unnecessary to decide it. Assuming that rule 7.4 does have application, the pleadings and the conduct of the proceedings did not allow the claim to be dealt with on the basis that it had been brought by representative parties. A finding that they should be so treated was contrary to the stance taken by both plaintiff and defendant. Further, any such finding does not support judgment that was entered. In the circumstances, it is unnecessary to address the no evidence point. 25 There was no hearing on the merits of the cross claim. The Magistrate was entitled to sever it from the proceedings brought by Surry Hills Mutual Loan Club. There was a lack of connection between the two claims. He was entitled to take the view that, if such a matter was to have been litigated, it should have been brought in fresh proceedings. He was entitled to dismiss it (or strike it out for at least not disclosing a reasonable cause of action), but he was not entitled to enter a verdict and judgment. 26 It is unfortunate that what has been done must now be set aside. Be that as it may, there is no alternative. 27 It may be that Mr Lee does not have an arguable defence to properly constituted proceedings (the Magistrate was of the understanding that there was no issue "that the money wasn't paid in accordance with that arrangement" - page 80 of the transcript) and that any problems of constitution can be rectified. If that be the case, the matter may be resolved by remitting it back to the Local Court. 28 Save for the order dismissing the cross-claim, the judgment, verdict and orders made by the Magistrate on 26 September 2005 are set aside. The proceedings are remitted back to the Local Court for determination according to law. Costs are reserved. Exhibits may be returned. ***************

YOO KEUN LEE v SURRY HILLS MUTUAL LOAN CLUB

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