Abdi v Lu
[2020] FCCA 1307
•27 May 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ABDI & ANOR v LU | [2020] FCCA 1307 |
| Catchwords: CONSUMER LAW – Hire purchase agreement – amount owing – arrears – contract – compliance with National Consumer Credit Code – insurance coverage – traffic incidents – repairs and maintenance of vehicle – late payment fees –penalties – loan vehicle – repossession of vehicle – application allowed. |
| Legislation: Insurance Contracts Act 1984 (Cth), ss.39, 59 |
| Cases cited: Paciocco v Australia and New Zealand Banking Group Limited [2016] HCA 28 |
| First Applicant: | SULEKHA ABDI |
| Second Applicant: | BADRI MOHAMED |
| Respondent: | MING LU |
| File Number: | MLG 3608 of 2018 |
| Judgment of: | Judge Riethmuller |
| Hearing date: | 19 July and 6 August 2019 |
| Date of Last Submission: | 25 November 2019 |
| Delivered at: | Melbourne |
| Delivered on: | 27 May 2020 |
REPRESENTATION
| Counsel for the Applicants: | Mr Hancock |
| Solicitors for the Applicants: | Starnet Legal Pty Ltd |
| The Respondent appeared in person. |
ORDERS
Within 28 days the Respondent provide signed transfers of the registration of the Toyota Kluger vehicle (registration number 1FK2JI) to the applicant to enable her to register as the owner.
Within 60 days the Respondent pay the Applicant the sum of $2,429.66.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 3608 of 2018
| SULEKHA ABDI |
First Applicant
| BADRI MOHAMED |
Second Applicant
And
| MING LU |
Respondent
REASONS FOR JUDGMENT
Background
In 2015 Ms Abdi (‘the applicant’), an immigrant from Somalia, who is mother to 15 children and speaks little English, decided that she needed a car. A friend of the applicant referred her to Mr Lu (‘the respondent’) who operates a small car hire business, Mini Koala Car Rentals. It is apparent that English is not the first language for Mr Lu, although he did not require an interpreter during the proceedings.
The applicant said that she wanted to buy a new Toyota Kluger motor vehicle (the ‘Kluger’) on hire purchase to take the children to school and do her shopping. It seems that at this time her husband, the second applicant, was living and working in NSW. Mr Lu was unable to persuade her to consider a less expensive vehicle. It was never made clear how much income the applicant was receiving. At one stage she gave evidence that she was receiving $1,500 per fortnight, after deductions for rent and utilities, although on social security payments alone (taking into account family tax benefit payments), she must have been receiving considerably more income per annum (subject to her husband’s income, in which case the social security amounts would be less but the household income greater – although at this time they were living in different states). It is understandable that the applicant would want a large and reliable vehicle, and that she may have considered this a sufficient priority in the context of her financial circumstances. The applicant said in evidence, however, that she did not think about the repayments as she just wanted the car.
The parties entered into a hire purchase contract on 26 August 2015 for the applicant to purchase the Kluger for $50,400, financed at 12.5 per cent to be paid off at $700 per fortnight and for the payment of $60 per fortnight for comprehensive insurance on the vehicle. It was not suggested that the vehicle cost or insurance amount were above market value for the car or insurance, nor that the interest rate was unreasonable. There were no application fees or account keeping fees (as are commonly charged by large financiers) save for a monthly late payment fee.
Unlike most hire purchase cases the respondent is not a large corporation but a sole trader. The contract is brief and was drawn by the respondent. Whilst the grammar used in the contract contains errors, the terms are brief and appear to be quite easy to understand – far easier to read and understand than the lengthy contracts used by finance companies.
Although the applicant did not pay the entirety of the deposit, the respondent allowed her to take the vehicle on her promise to pay the balance of the deposit within a short time. The applicant did not pay the instalments on time, and was significantly in arrears throughout almost all of the term of the contract. The second applicant, the first applicant’s husband, had a collision when driving the vehicle as an Uber driver, resulting in significant damage to the Kluger and to the other vehicles involved in the collision. Later the applicant collided with another vehicle also causing damage. Eventually Mr Lu repossessed the vehicle, and then returned it when payments were made. The second time that Mr Lu repossessed the vehicle the applicant sought relief from the courts.
The described course of events give rise to a number of factual and legal issues about the dealings of the parties, detailed as follows:
a)The level of compliance with the National Consumer Credit Code (the ‘Credit Code’) (as set out in Schedule 1 of the National Consumer Credit Protection Act 2009 (Cth) (‘Consumer Protection Act’)) at the time of contracting, and the impact that non-compliance may have had on the applicant;
b)Whether the applicant effectively gave the respondent an oral Hardship Notice under the Credit Code, and if so, whether the respondent complied with the Credit Code;
c)Whether the insurance payments charged (although not paid) under the contract resulted in coverage by the insurance agreement being excluded;
d)Whether the insurance covered the first traffic accident (when the second applicant was using the car to work as an Uber driver), and if so, the level of indemnity required from the respondent;
e)Whether the vehicle supplied to the applicants during the period of repairs (following the second accident) was a hire arrangement or covered by the insurance;
f)Whether the insurance covered the second traffic accident when the applicant was using the car for private purposes, and if so, the level of indemnity required;
g)Whether the charges for repairs and maintenance were appropriate and must be met by the applicant;
h)Whether the first and second repossessions of the vehicle were in breach of the Credit Code, and if so, what consequences, if any, flow from those alleged breaches;
i)Whether the late payment fees are lawful or a penalty; and
j)Whether the court should alter the terms of the contract in the circumstances.
The case of each of the parties was presented in a rather haphazard manner, making it difficult to clearly identify the issues and relevant evidence. The respondent was unrepresented throughout. I have done the best that I can with the material that was put before the Court.
The evidence of the parties
Both applicants and the respondent gave evidence and were cross-examined. The applicants were represented by Counsel and Mr Lu was unrepresented throughout the proceedings.
The applicant required an interpreter when giving evidence, although it appeared she did have some level of English. The evidence of the applicants appeared vague at times and often tailored to suit their claim. Early in the proceedings the applicants seemed to prevaricate about whether they were using the car for Uber work, when it later became clear that they were doing so. It was apparent that the applicant simply wanted to obtain a vehicle and had no regard to the obligations that the arrangement would necessarily place upon her. Despite having an interpreter her evidence was often non-responsive and at times she changed her evidence, parts of her affidavit evidence was simply inflammatory and her own conduct at times plainly unreasonable, for example:
a)The applicant’s explanation for seeking a new vehicle rather than a far less expensive second hand vehicle was that she thought it would be less expensive. This makes no sense, but rather accords with her evidence that she just wanted a car.
b)In her affidavit the applicant claimed she had been ‘robbed’ by the respondent when there was no suggestion of a robbery, nor could the transaction have been categorised metaphorically as ‘robbery’. On the contrary she said that she believed she could never pay for the car but entered into the contract as she desperately needed a vehicle.
c)The applicant refused, until specifically directed by the court, to provide a statement to the insurer concerning the accident involving her husband, despite being named as the driver on a Coles Insurance policy.
d)The respondent maintained that the second applicant had been driving the car as part of his Uber business when the accident occurred, which was admitted after the second respondent was directed to download his Uber statements. Thereafter it was said that there was never any dispute as to this issue and Counsel for the applicants’ relied on less than clear statements in the applicant’s affidavits.
e)The applicant maintained that she signed the contract and took possession of the car on the first day she attended upon the respondent’s business. She initially said that he provided the car without her producing any papers (such as a driver’s licence), but later recounted that he copied her licence on the day she took the car. It would be incredible for the respondent to just happen to have a new Kluger vehicle in his yard on that day; and unrealistic to think that the respondent would provide a car without any identification documents, particularly as he clearly had to have her licence details to have provided them to Coles Insurance for the initial policy he took out. The first applicant’s evidence about the transaction was quite unreliable.
f)Despite her evidence that she believed that the respondent ‘robbed her’ she nonetheless referred two friends to the respondent (and obtained a $500 fee for the referrals) and her 25 year old son obtained a vehicle from the respondent.
The applicant said that she only ever paid her instalments on time on two occasions. At one point she found $20,000 to make a payment towards extensive arrears in December 2017. There was no satisfactory evidence as to the source of these funds, which is quite inconsistent with the proposition that she had no funds to meet the payments from time to time.
The respondent’s evidence was given without an interpreter. Whilst his English was not perfect (as is apparent from the contract document) he appeared to understand and be able to engage in a relatively nuanced way. He was generally very forthright in his evidence and submissions. He was clearly quite annoyed at the course of events and did little to hide his feelings in this regard.
Generally I do not accept that the applicants’ evidence was reliable or frank as to the details of the dealings with the respondent. I preferred the respondent’s evidence to that of the applicants where they differ directly.
The Contract
The written contract that the parties entered into was brief, covering only three pages. The first page has 5 clauses, which provide:
1. This hire purchase agreement (inc our trade margin) purchase price are: $50,400, All outstanding/remaining balance attract finance charge 12.5%pa. Annual account service fee $100/y (waived if no late payment happened)
2. Client paid a none-refund deposit of $5,000 (Paid), and additional of with fortnightly repayment of $760 ($700 repayment+ $60 general car insurance fee). Customer then pay all Applicable transfer cost such as RWC, transfer fee customer then fully owning the vehicle. Mini Koala then will transfer owner ship to above customer.
3. During Hire Purchase Agreement period, Mini Koala will only cover general service costs & Car insurance costs ONLY. It is client's responsibility to cover additional costs such as rego fee, repair, change tyres, toll charges and any other costs.
4. It is reminder that all other Mini Koala Car Rental standard terms and condition still apply. Like late payment fee $100/event, and maximum of $100/month cap will be apply. In the event repayment later than 60 days, this Purchase contact may get avoided customer must return our vehicle.
5. Mini Koala reserve rights of explanation to this agreement, furthermore, this agreement are treat separately to Mini Koala Car Rental's Rental Agreement. All our rights reserved!
A second page identified the vehicle, the respondent’s and applicant’s addresses and details, the weekly rate ($380) and insurance excess fees. The final page contains a further 9 clauses that appear more apt for a short term car rental, which provide:
l. TERMS AND CONDITION
The terms and conditions set out below from part of the Rental Agreement (RA) between the business identified in RA (“Us'', "We", “Our") and the Hirer ("You", "Your") to hire the vehicle identified in RA ("vehicle”). "Hirer" means the person / company named in the RA as the Hirer and any person / company who provides a Credit Card Authority to Us.
2. VEHICLE CONDITION
(1) You acknowledge receiving the vehicle from us:
(a) In a good and clean condition except as specified in the vehicle details and damage report; (b) with manufacturer supplied tools, tyres, any accessories and equipment, a street directory, key and other item specified on vehicle details and damage report or in the RA; (c) with check out odometer and fuel reading set out in the RA.
(2) You agree to maintain tyre pressure, engine oil And other fluid and fuel at the proper operating levels and to immediately report to us any defect.
3. RETURN OF VEHICLE
You agree to return the vehicle to us: (a) in the same condition in which you received it; (b) to return location which required by us and by return date and time in RA. (c) with a fuel reading at least equal to check out fuel reading in RA.
(1) We must be notified and agree to any extension of Period of hire, in advance of return dale. If you fail to return the vehicle to us by return due date & time, we Will report to police as stolen vehicle, full excess apply.
(2) You will be responsible for vehicle and the hire will continue until we make final inspection.
4. USE OF VEHICLE
(1) Persons who must not drive the vehicle, unless has been authorised by us in writing.
(2) All drivers must not drive vehicle if: (a) drive licensed not permit, not current, suspended, endorsed or cancelled. (b) last 5 years drive license had been cancel or suspend. (c) drink driving or any drug, toxic or illegal substance. (d) unsealed road. (c) Driver under 21 years of age.
(3) Not to carry any animal or pet.
(4) In contravention of any criminal legislation, any legislation involve a penalty, or for any illegal purpose whatsoever.
(5) Exchange vehicles terms condition still apply.
5. CHARGES
(1) All applicable GST, premium surcharge, stamp duty and other government charges, tax may apply.
(2) Our charge for adding fuel to the vehicle up to the Check out fuel reading which will include a service charge.
(3) Daily rates apply to each 24 hour period commencing from check out time.
(4) All tolls, lines, penalties and similar charges incurred received by our office or car returned very unclean will attract $33.00 fee per event/item.
6. INSURANCE AND ACCIDENT
(1) Insurance provided by us subject to terms and conditions of this RA. Breach of this agreement may results insurance not covered or cover reduced.
(2) We are self insured. Our rental office's liability pursuant to this clause under this contract shall be limited to maximum $100,000. Customer must indemnify our rental office in the event of claim not covered. Should you require further additional cover, you are advised seeking independent insurance co. obtain cover.
(3) Customer must notify us immediately when accident happen. (At event of accident, or with-in 24hrs)
7. EXCLUSIONS TO COVER
(1) You must not breach of any terms or conditions Contained in or implied by this RA.
(2) Any driver's age less 21 or payment is over due.
(3) Vehicle is left unlocked or unsecured or you not kept keys secure.
(4) Intention or misuse results vehicle mechanically Damage/breakdown. Also. Interior damage or require clean.
(5) Any overdue or outstanding payment of your account Such as rental fee, admin and toll charge.
(6) Damage or loss to tyres, such as punctures. cuts, abrasions or to windscreen such as chips, cracks and stars.
(7) Accident result person injury or damage loss personal property left in the vehicle before, during or after hire period.
8. PAYMENT & AUTHORISATION
(1) You agree to pay all cost include legal, investigation agency cost, interest which apply to this RA.
(2) You authorised us pay the overdue amount (inc. traffic fines) in full by automatically deduct from your credit card.
(3) Exceed your payment terms will attract immediately late payment fee which set ns $100 or 5% whichever is higher.
(4) We shall be entitled to list your payment default with Credit Reporting Bureau, which yon acknowledge this may Affect your credit rating.
(5) You authorise us to obtain a credit file of yours to Process This Car Rental Service application/contact.
9. GENERAL PROVISIONS
(1) None of our rights under this RA may be waived except in writing by one of our officer.
(2) Mini Koala reserve rights to cancel, suspend to this RA. Swap/change vehicles same condition applied.
(3) Mini Koala reserve rights of explanation of this RA
(4) We committed to protecting your privacy. We collect Personal information in order to process any application or service you have requested as per our terms and conditions.
Customer agrees to rent and fully read and understand of the terms and condition of this rental agreement & signed below:
Whilst the terms of the contract are not particularly clear, it nonetheless constitutes an enforceable contract at common law.
However, it is a contract that is regulated by the Credit Code. Section 9(1) of the Credit Code sets out that a contract of this type is to be regarded as a contract for a sale by instalments, and that as a result ‘is to be regarded as having been incurred, and credit provided’: see s.9(2). This leads back to s.5 of the Credit Code which applies the Code to the provision of credit, if the debtor is a natural person; the credit is predominately for domestic purposes; there is a charge for the credit and it is provided in the course of a business. If there were any doubt, s.13 creates a rebuttable presumption that the Credit Code applies. Sub-sections 9(3) and (4) then define various terms that appear in hire-purchase contracts in such a way as to permit the Credit Code provisions to operate with respect to those terms. They provide, as follows:
(3) Accordingly, if because of subsection 5(1) the contract is a credit contract, this Code (including Part 6) applies as if the contract had always been a sale of goods by instalments, and for that purpose:
(a) the amounts payable under the contract are the instalments; and
(b) the credit provider is the person who is to receive those payments; and
(c) the debtor is the person who is to make those payments; and
(d) the property of the supplier in the goods passes under the contract to the person to whom the goods are hired on delivery of the goods or the making of the contract, whichever occurs last; and
(e) the charge for providing the credit is the amount by which the charge that is or may be made for hiring the goods, together with any other amount payable under the contract (including an amount to purchase the goods or to exercise an option to do so), exceeds the cash price of the goods; and
(f) a mortgage containing the terms and conditions set out in the regulations is taken to have been entered into in writing between the person to whom the goods are hired under the contract and the supplier as security for payment to the supplier of the amount payable to the supplier by the person to whom the goods are hired under the contract; and
(g) any provision in the contract for hiring by virtue of which the supplier is empowered to take possession, or dispose, of the goods to which the contract relates is void.
(4) For the purposes of this section, the amount payable under the contract includes any agreed or residual value of the goods at the end of the hire period or on termination of the contract, but does not include the following amounts:
(a) any amount payable in respect of services that are incidental to the hire of goods under the contract;
(b) any amount that ceases to be payable on the termination of the contract following the exercise of a right of cancellation by the hirer at the earliest opportunity.
There is no evidence that the respondent provided a formal pre-contract disclosure document and he must therefore rely upon the three page contract for his compliance with ss.16 and 17 of the Credit Code Reliance upon the terms of the contract is open to a credit provider, having regard to reg.70 of the National Consumer Credit Protection Regulations 2010 (the ‘Regulations’), provided the contract documents contain the contents of Form 5 (a five page form appearing at p.162 of the Regulations). Clearly, much of the information in Form 5 is not in the 3 page contract. The applicants also point to circumstances said to show breaches of ss.32 to 34 of the Credit Code with respect to the lack of information provided to the applicants during the period of the contract. Although the respondent did not comply with all of the complex terms of the Credit Code, he did account for the various amounts in the credit contract at the hearing (as could have been ordered under s.37 of the Credit Code). I also accept that he did maintain a record, which is accurate and was produced at trial. I accept that he did follow up with the applicant with respect to her arrears. I am not persuaded that she sought a specific account of all transactions at any time. If she had sought such an account it was readily available from the manual running sheet kept by the respondent.
It was apparent that the respondent was unaware of the Credit Code and would be unlikely to understand it due to the dense language used in its drafting. There were numerous technical breaches as identified below. However, this is not a case involving a complex credit contract.
The course of events giving rise to the contract
The first applicant is a mother of fifteen children, of which thirteen live with her. She does not work and her sole income is provided by parent payments from Centrelink. The first applicant says she lived in a refugee camp in Kenya for ten years, and arrived in Australia with her husband and ten children on 9 September 2009. The first applicant says she cannot read or write in English and that has made it difficult for her to provide exact dates when recounting the events that occurred in relation to these proceedings.
The respondent operates the business Ming Lu t/a Mini Koala (ABN 36 314 774 281) in Preston, Victoria. He lives and works at his office. He says his main business is car rental, however he also offers customers the opportunity to purchase the vehicle they rent if they do so over a long period. He denies his business is a car dealership.
The first applicant says that in or around mid-2015 her friend told her about a man selling cars in her local area who did not check credit or income. She said that at the time she was desperate for a car to drive her children to school and to purchase groceries. She also had a bad credit rating, as she owed Optus $200. Her friend took her to the respondent in these proceedings, at his business in Preston.
The respondent was quite clear that whilst he raised with the applicant the possibility of much less expensive vehicles (some costing as little as $2,500) the applicant was adamant that she wanted a new Toyota Kluger vehicle. The respondent said that he asked for a deposit of $5,000 and that he then sourced the vehicle. I do not accept the applicant’s claim that only $3,500 was demanded as a deposit: the document refers to $5,000 and she paid $4,400.
It appears clear that only $4,400 was paid by way of deposit ($800 the first day and $3,600 the next day). The applicant did not pay the final $600 of the deposit, but the respondent released the vehicle to her as she promised to pay the amount. The outstanding $600 appears in the calculations of the respondent. It appears that no payment of this amount was made, the applicant simply commenced paying the fortnightly rate under the contract.
The parties both appeared to understand the terms of their arrangement: that the applicant was to make fortnightly payments of $760, of which $60 was for insurance. If payments were made the contract lasted for around three years. The interest rate was 12.5 per cent, and there is no suggestion that this is outside market place norms for motor vehicle credit contracts without security over other assets. There is no claim that the insurance sum was unreasonable, indeed, at one point the applicants’ Counsel referred to another policy in both applicant’s names providing for comprehensive insurance with a monthly premium of $150 and a far larger excess ($2,200). It also transpired that for the week in which the second applicant had a collision, he earned $756.40 driving the vehicle for Uber.
As previously stated the second applicant in these proceedings is the husband of the first applicant. When he first arrived in Australia with his wife he worked in a factory making chairs, then as a butcher, and most recently as a taxi driver. He says that he is now unemployed because he no longer has a taxi vehicle. He ultimately abandoned claims for loss of income as he produced no evidence of his income through the relevant periods. Similarly, the applicant produced no statements showing her income in any given period.
In relation to his wife’s arrangement with the respondent, the second applicant says (at [4] of his Affidavit filed 29 November 2018) the following:
4. In or around August 2015, while I was in Sydney working in an abattoir, my wife […] called and told me that she purchased a car from the respondent […].
Whilst the complex provisions of the Credit Code were not complied with, I am not persuaded that the applicant did not clearly understand the relatively simple terms of the contract in this case.
I do not accept her claim that the respondent had said that if she paid for the car within 3 years she could have it for $48,000. Such a claim makes no sense as it would leave the respondent losing money on an objectively risky transaction.
The arrangement provided for the respondent to service the car without charge to the applicant, and to insure the vehicle. As a result it was important for the applicant to bring the car to the respondent for servicing and insurance related repairs. The respondent said that she understood that all repairs had to be undertaken by the respondent. He was certainly content to undertake repairs, although I am not persuaded that he represented to the applicant that she had to use him for repairs. The applicant did have the respondent repair the vehicle and change tyres. There is no evidence to suggest that the fees charged for these services were unreasonable or greater than prices the applicant could have obtained elsewhere.
The respondent says that the following late payments and interest rates applied (at [8] to [10] of his Affidavit filed 17 December 2018) :
8. We calculate interest at 12.5% p.a. every half year and use an average balance to do this over the six month period. We calculate this by taking the outstanding balance and multiplying this by 0.0125 and then dividing it by two to get the interest amount. Where the customer is behind in their payments this can increase the interest charges that are applied under the contract and the length of time required to pay it off. The Statement Repayment Balance and Statement Hire Purchase Balance show how a repayment balance can fluctuate […].
9. We do not charge the customer a default interest fee but we do charge a late payment fee for any missed payment of $100 per event. We have only charged the customer a late payment fee of $100 per month rather than per missed repayment (fortnightly).
10. From the start the [first applicant] has been consistently behind in her repayments. [She] had agreed to pay the $5,000 deposit, however, when she attended the store on 26 August 2018 she only had a total of $4,400. She promised that she would shortly return with the $600 shortfall if we provided her with the Vehicle so we released it to her, however, she did not. Accordingly the account was in default from day one and actually in default for all but three of the required fortnightly repayments (26 December 2017, 26 January 2018 and 26 April 2018).
After the first applicant took possession of the vehicle she not only failed to pay the balance of the deposit, but also failed to pay the second fortnightly payment of $760. By May the following year she was nearly $6,500 in arrears (nearly $5,900 if one ignores the $600 owing on the deposit). By November 2017 the arears exceeded $16,000. The arrears figure includes the monthly administration charge of $100.
The applicant said that making the repayments was difficult for her, although at one point she was able to pay $22,000 within a couple of days to have the vehicle returned to her. She complains about not receiving receipts and not having an account sent to her, saying that the respondent would not tell her about her account.
In relation to the first applicant’s repayments and liabilities flowing from the arrangement, the respondent says the following:
20. When the [first applicant] made a payment we would record this immediately in the applicable Hire Purchase Costs & Repayment Record […].When the [first applicant] attended the office and made a payment in cash she would often ask for and be given a copy of this so that she was aware of the payments that had been made. Most of the time she would make the required payments by cash although she had the option to use electronic funds transfer or bank deposit which were utilised on occasion.
21. The [first applicant] was kept fully informed of her liabilities. As [she] was often behind in her payments we would need to inform her of this and try to chase payment. If we did not chase the payment we were concerned that we would not get paid. It was in our interest to keep her informed of her balance. The majority of the time this was done verbally when she would attend the office, however, sometimes we would call her on her phone and if she would not answer her phone we would attend her house to let her know.
22. We also issued a Final Reminder notice dated 27 September 2015 and a Final Reminder/Default Notice dated 30 December 2016. At this point the [first applicant] was $10,036.58 in arrears. We did not issue more notices as we kept [her] informed of her position orally and there was no need. We felt we had a fairly informal relationship. For example, sometimes if I needed to chase payment I would do this through the [first] applicant’s friends.
23. The [first applicant] also had a friend of hers, who I believe is an accountant, come to check over her account to ascertain her liabilities and obligations and make sure everything was ok. This happened a number of times including in later 2017. I believe she was satisfied with our accounts and records as after this she made a payment of approximately $22,000. This brought the account into credit of $5,716.82. This was one of the few times that the account was in credit.
I accept the respondent’s evidence in this regard
Hardship Notices
The applicants allege that on a number of occasions the first applicant effectively gave the respondent an oral ‘hardship notice’ under s.72 of the Credit Code, but that the respondent did not give the applicant a notice that he did not agree to change the credit contract under s.72(4) of the Credit Code. This claim was not pursued as the applicant was unable to particularise any oral or written notice.
Insurance agreement
The first applicant says in her affidavit (filed 18 December 2018) that in relation to the insurance agreement her understanding was as follows:
8. When I first entered into the Hire Purchase Agreement, the respondent never mentioned how my insurance works and if I am behind, whether I would be covered. The respondent told me I would be covered under full comprehensive insurance.
9. The respondent told me that he registered himself and I into an external insurance company. He told me he was charging me $60 per fortnight to cover this and was forwarding payment to the insurance company.
10. A few days after my accident on 30 July 2018, the respondent came to me and asked me to speak with an insurance company. The respondent said that this is the insurance that the vehicle is under and that he and I are listed on it. They asked me for my details such as address and date of birth, I could not understand the rest of what they were asking so I passed the phone onto my daughter who continued talking to them. I do not remember the name of the insurance company.
11. The respondent also at one stage provided me with a Coles Car Insurance letter. This might be the insurance that he mentioned that I was paying for over the last 3 years. I don't understand why I was paying for insurance continuously all that time but still not covered.
It is unclear whether the Coles insurance documents were provided at the outset, or whether they were provided in response to requests from the second applicant for copies of documents relating to the car, when he was registering to operate as an Uber driver. The Coles insurance schedule is in evidence and shows that the vehicle was insured, although on the schedule the document sets out a question and answer: ‘Used for business? No private use only’. The policy holder is described as Mr Lu.
On 26 August 2016, the respondent provided the applicants with a document addressed to the first applicant alone with the heading ‘Certificate Motor Insurance Policy Schedule’, which set out that both applicants were listed as drivers with a ‘Full Comprehensive’ insurance policy with ‘Special Condition: Nil’, however this was after the relevant date for the first traffic accident.
The second applicant said, in his affidavit, that:
5. Around November 2015, I went to [the respondent] and I told him that because as I drive the car as well, I need to be on the insurance. He gave me a piece of paper which had insurance for [the first applicant], himself and I. I do not have a copy of this letter anymore and don't know where I put it.
Despite the second applicant saying that an earlier document was provided, and that he had provided that document to Uber, he did not produce an earlier document showing that the respondent had provided insurance cover to him. It seems surprising that he would not have been able to obtain that document form Uber, since he provided it to them in the first place, however, he also gave evidence that once a car is no longer in use it is deleted from the Uber system. There is no evidence that the parties had entered into an agreement for the respondent to cover the second applicant for personal liability he may incur when driving as an Uber driver.
None of the documents purport to cover the second applicant for personal liability to other parties with respect to the use of the vehicle. It is not suggested that the second applicant was acting as agent of the first applicant when using the vehicle as an Uber driver in his Uber business, when his collision occurred. There is nothing that appears to make the second respondent a party to the agreements, nor do the contracts provide for the second respondent’s personal liability to be indemnified.
In relation to the vehicle insurance, the respondent says the following:
11. We are self-insured and charge a combined fortnightly premium that includes cover for insurance but only if the customer is up to date with their payments. We do this as we are a small business and cash flow is very important to us. We do not operate on a big margin. Where there is money owing for outstanding hire payments we will not cover an insurance claim. We make this clear to the customer.
…
13. …the Applicant was provided with a Final Reminder Notice dated 27 September 2015 which noted that: “Further, more importantly, any late/overdue payment situation occur, any motor vehicle claim insurance ·will not be covered by our office.” This highlighted the already agreed terms and conditions.
A copy of this notice is annexed to the respondent’s affidavit at Annexure ‘M7’. I accept that the notice was sent to the applicant. That notice did not purport to cancel the insurance, and therefore the insurance contract was not cancelled: firstly because the notice did not set out that the insurance was cancelled, and secondly there was no notice required under s.59 of the Insurance Contracts Act 1984 (Cth) (‘Insurance Contracts Act’).
In this case, the contract contained an exclusion clause, excluding cover if payments were in arrears. Excluding cover in these circumstances appears to be within the meaning of s.39 of the Insurance Contracts Act which provides:
39 Instalment contracts of general insurance
Where a provision included in an instalment contract of general insurance has the effect of limiting the liability of the insurer by reference to non‑payment of an instalment of the premium, the insurer may not refuse to pay a claim, in whole or in part, by reason only of the operation of that provision unless:
(a) at least one instalment of the premium has remained unpaid for a period of at least 14 days; and
(b) before the contract was entered into, the insurer clearly informed the insured, in writing, of the effect of the provision.
There was no notice ‘explaining’ the effect of the relevant clause. Whilst the terms of the contract can in themselves be notice (provided they are read in advance), the section appears to contemplate more than merely drawing the term to the insured’s attention: a statement ‘explaining’ the effect of the clause was required. Thus, the respondent has not complied with s.39(b) of the Insurance Contracts Act and therefore cannot rely upon the limitation in cl.7(5) of the contract. I note that the respondent, in his first affidavit, sets out such disclosure statements made by major insurers: unfortunately he did not realise that such statements must be given separately from the contract and before the contract is signed.
There is nothing in the contract between the first applicant and the respondent that limited the use that could be made of the vehicle. The policy with Coles Insurance, given the terms of the contract between the parties, must be seen as a contract between the respondent and Coles, whereby he was insuring against losses he may incur. That is, the respondent is the principal insurer of the applicant on the terms set out in their contract (which limited liability to property damage to a maximum of $100,000). The terms upon which the respondent chose to insure against his potential liability to the applicant were a separate matter between him and his underwriter – in this case Coles Insurance.
Whilst the applicant was in arrears at the relevant times of the accidents and claims, the respondent is precluded from relying upon the exclusion clause as a result of the effect of s.39(b) of the Insurance Contracts Act. Therefore, the insurance agreement between the applicant and the respondent is not subject to the limitation due to non-payment of the premium from time to time. Thus, the respondent must indemnify the applicant with respect to her loss in each of the accidents, to the extent set out in the contract. The contract itself is less than clear on the extent of the indemnity provided, however the parties appear to have proceeded on the basis that it was comprehensive car insurance covering the applicant for damage to the vehicle and her potential liability to others if a collision occurred.
I therefore find that the respondent must indemnify the first applicant with respect to personal liability from traffic accidents and for repairs to the Kluger vehicle (whether being driven by her or the second applicant). There is no obligation to indemnify the second applicant for liability that he has to third persons.
First traffic Accident
The first traffic accident occurred on 21 May 2016.
In relation to the second applicant’s vehicle use the respondent says the following:
28. …I have concerns that the Vehicle is being used without proper insurance. I particularly have concerns that the Vehicle is being used as an Uber taxi without the proper insurance and that this puts the asset at risk of further damage and loss to me ….
29. I also believe that the Vehicle was to be used with Uber because the Second Applicant attended my office asking for insurance papers with his name on it for Uber driver registration purposes. Following the 30 July 2018 accident the Second Applicant also advised me that this accident occurred while he was doing his last Uber job. The Second Applicant also lists his position as an Uber drive in the Examination of a Judgment Debtor.
After the second applicant was forced to make discovery of his Uber documents, it transpired that the accident occurred during a time when he was carrying out an Uber job.
The second applicant claims that there is $25,072.12 owing by him to the Sheriff as a result of legal proceedings against him for the damages to other vehicles. He also says that his own car was repossessed by the Sheriff and sold for $4,125 (thereby reducing the outstanding claim to the Sheriff to that set out above).
At the time of this accident the first applicant was in arrears under the contract by around $4,700.
The difficulty for the second applicant is that he is not a party to the insurance contract between the applicant and the respondent. The contract does not set out that the respondent will indemnify anyone other than the applicant. To the extent that it is said that the respondent made representations to the second applicant, those representations, on the evidence produced, appear to be primarily the production of a document or documents. The respondent says that it was for the second applicant to attempt to become registered with Uber. The only relevant document that has been produced is the Coles Insurance Schedule (at least prior to the collisions). That schedule does not name the second applicant, although policies of that type ordinarily cover other drivers, if driving with the permission of the named driver or policy holder. Potentially the respondent may be estopped from denying that there was insurance in the terms set out in the Coles Insurance Schedule, on the grounds that he provided that document to the second applicant. The difficulty for the second applicant is that to the extent the provision of the Coles document was a part of any representation about him being covered by insurance, its terms were limited to personal use, and Uber driving is not ‘personal use’.
As a result I am not persuaded that the contract (even taken with the representations to the second applicant) is sufficient to provide cover for the second applicant with respect to Uber driving. However, the contract did cover the applicant, and there is no question that she gave the second applicant permission to drive the car (and that the respondent was aware of this and acquiesced to the arrangement). Thus, the respondent must still indemnify the applicant for her losses. The losses of the applicant are with respect to the damage to the Kluger and any personal liability that she may have following the collisions. The liability for the second applicant to third parties, as a result of his collision, is not a loss of the applicant. Thus cover by the insurance is limited to the Kluger and personal liability for the applicant and does not extend to personal lability for the second applicant when he was Uber driving.
Supply of loan vehicle
The first applicant said (in her Affidavit filed 29 November 2018) while the Kluger was in repair in September 2018, the respondent gave her another car (‘the replacement car’) and then the following incident:
16. On 12 October 2018, he told me to come collect my original car and return the replacement. When I went into his office and he locked the door. He told me he was taking both cars back and was not going to give me any car. He twisted my arm to take the keys off me and his mother also hit me in the back of the head. The police arrived from Preston Station, I am still trying to get a police report for this incident. My husband came and picked me up and he left all the children's groceries that were in the car on the floor. My arm was sore for many days from his twisting. My husband came and drove me home.
The respondent said that he charged the applicant $2,000 for a loan vehicle for the period it took to repair the car following the accident, as she sought a replacement vehicle. The applicant maintains that payment was one that should be offset against her primary contract debt. In relation to the first applicant’s allegations regarding the vehicle replacement and taking of car keys, the respondent says the following:
18. Around 20 August 2018 the [first applicant] attended my office and asked for a replacement car. She wanted another Kluger. I told her that she could hire one while her repairs were being completed. She said that she did not have any money. I said we could work it out at the end. She agreed and I gave her another Kluger. She later attended my office when her Kruger was ready but refused to pay anything for the repairs or the replacement Kruger. I had hoped that we could work out a reasonable deal but she did not want to offer anything. The Police were called and she left my office but took the key to the replacement Kruger and refused to give it back. Because the [first applicant] refused to give the key back we had to disconnect the batter so that it could not be stolen. Because of this we could not rent out the replacement Kruger.
19. About a month later the Applicant showed up at our office with her friend and apologised for taking our key and gave me $2,000. I said that I would take the money to cover the cost of the replacement vehicle and the one month that we could not rent the replacement Kruger because she had taken the key. She agreed to this.
I prefer the respondent’s evidence. There was no provision in the insurance contract for the supply of a loan vehicle. On the evidence I am not persuaded that the applicant believed that the loan vehicle was not a rental car to be paid for, nor is there evidence indicating that the arrangement was unfair having regard to the vehicles and time periods.
The Second car accident
The second collision occurred on 20 July 2018 when the applicant failed to give way at an intersection. There is no suggestion that she was using the vehicle other than for private use. This collision appears to be within the nature of the cover provided in the contract, subject to the operation of the exclusion clause, as a result of her failure to pay premiums on time.
There is an outstanding claim by AAMI for $4,639.66 with respect to the damages to other vehicle.
As the respondent cannot rely upon the exclusion clause he must indemnify her for this collision.
Charges for Maintenance and repairs of vehicle
The respondent maintained the vehicle for the applicant, including replacement of tyres and other servicing. The applicant said that the respondent declined to accept payment, simply saying that he would add it to her account. I do not accept that the respondent would have declined any offer of payment in a situation where for the vast majority of the credit contract the applicant was in arrears.
The applicant said in evidence that she had wanted the car to be registered for a concession rate, which would have reduced the registration fee to $280 which she said she could pay. However, she did not pay this amount towards the contract, and it is not clear that she would be entitled to have a reduced registration rate if the car was being used for an Uber business.
Various documents and receipts were produced at trial about maintenance fees and charges. No specific challenge was made to the quantum of those fees or charges, which did not appear on their face to be unreasonable.
At the start of the trial toll charges were disputed by the applicants, however it was ultimately accepted that they were incurred when the applicant’s had possession of the vehicle.
I am not persuaded that any unnecessary charges were imposed, nor that the charges were excessive. It appears that the Credit Code was not complied with, to the extent that it required documentation to be provided to the applicant, however in the context of this case this does not appear to have led to any loss, nor any effective loss of opportunity to challenge the charges at trial. At no time was it suggested that the applicant would have had the work done elsewhere.
Repossessions of the Vehicle
The applicants also allege that the respondent was in breach of numerous sections of the Credit Code, relating to enforcement (at s.88) and taking possession: see s.91. The respondent repossessed the vehicle on two occasions.
The first applicant (in the November 2018 Affidavit) said the following occurred:
12. [The respondent] repossessed the Klugar from me three times without any warning. The first time was February 2017, I had given birth two days beforehand and I stepped outside my house in the morning and the car was not there. [The respondent] had kept keys to the car. He did not call me or warn me at all before he took the car and I was thinking of calling the police.
13. My friend Haweya helped me call him and translate between us. [The respondent] told her that he took the car because I owed money. We pleaded with him and my friend let me borrow $1,500 and I had another $1,500. We gave him the $3,000 and he gave the car back.
14. The second time he took the car was the start of 2018, he didn't call and I found the car missing. My daughter spoke to him as she speaks English well and he told her that he took the car because I owed him money again. I paid him $2,000 and he returned the car to me.
I got into an accident 30 July 2018. I told the police I do not speak English well but gave them [the respondent’s] number. [The respondent] came to the accident and towed the Klugar. The lady whose car I hit and [the respondent] exchanged details and I thought he would sort it out because I have insurance with him. However, I received a letter from AAMI Insurance dated 21 August 2018 regarding the accident.
In her December 2018 Affidavit, the first applicant further describes:
6. The respondent repossessed my car in October 2018 by entering my residence and taking the car from inside my front yard. In fact, sometime in early October before seizing the vehicle, my son saw the respondent walking around my front yard and mentioned it to me. I believe the respondent was planning to take the vehicle when he was sneaking around at that time.
Later that month the first applicant said a further agreement was signed:
17. Around 2 weeks, my friend Haweya and I went back to his dealership and she pleaded with him as she speaks good English. Haweya explained to him that I have so many kids, I do not work or speak English well. In order to get the car back he wrote some paper that I could not read or understand. He said if l don't sign this, I won't get my car back. Without being able to read it, I signed the paper and paid him $2000 and he gave me the replacement again.
The first applicant engaged a lawyer who sent a letter to the respondent dated 19 October 2018. On or around 22 October 2018 the first respondent said in the morning she woke up and her car was no longer at her property.
The respondent describes the repossessions by him as follows:
24. The [first applicant] states that the Vehicle was repossessed in February 2017, the start of 2018 and October 2018. I deny repossessing the Vehicle at the start of 2018. The account was in credit at this time. There was no need to repossess the Vehicle.
25. At the start of February 2017 the Vehicle was repossessed as the account had never been in credit at this point. This repossession occurred following the issue of the 30 December 2016 Default Notice. The Vehicle was later returned after the applicant made a number of repayments and promised to continue to do so.
26. In October 2018 the Vehicle was repossessed as the account had been in arrears since 26 May2018 and the Applicant had not made a repayment since 17 April 2018. Around this time the Applicant had $27,039 outstanding by reason of the missed repayments and the damage to the Vehicle.
27. I called the [first applicant] and informed her that I was taking the Vehicle back before the Vehicle was repossessed because of non-payment. [She] was also advised by text message […] on 24 October 2018 that: Contract will be cancelled by Tom5pm (f none satisfact01y response made. Final Warning! […] No satisfactory response was received to clear the outstanding debt. The Vehicle was then seized. The [first applicant] was then given notice that they had 30 days from 8 November 2018 to make the outstanding repayments. During this period we held the Vehicle at our office […] The Applicant did not make any further repayments during this period.
There was no compliance with the Credit Code with respect to the repossessions as the Code required:
88 Requirements to be met before credit provider can enforce credit contract or mortgage against defaulting debtor or mortgagor
Enforcement of credit contract
(1) A credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract unless:
(a) the debtor is in default under the credit contract; and
(b) the credit provider has given the debtor, and any guarantor, a default notice, complying with this section, allowing the debtor a period of at least 30 days from the date of the notice to remedy the default; and
(c) the default has not been remedied within that period; and
(d) if the credit contract is for a reverse mortgage, the credit provider has spoken to one of the following persons by telephone or in person in that period and has thus both confirmed that the debtor received the default notice and informed the person of the consequences of failure to remedy the default, or has made reasonable efforts to do so:
(i) the debtor;
(ii) a practising lawyer representing the debtor;
(iii) a person with a power of attorney relating to the debtor’s financial affairs.
Criminal penalty: 50 penalty units.
Note: If a debtor or guarantor has given a credit provider a hardship notice or a postponement request there may be extra requirements that the credit provider must comply with before beginning enforcement proceedings: see sections 89A and 94.
…
Default notice requirements
(3) A default notice must contain a prominent heading at its top stating that it is a default notice and specify:
(a) the default; and
(b) the action necessary to remedy the default; and
(c) a period for remedying the default; and
(d) the date after which enforcement proceedings in relation to the default, and, if relevant, repossession of mortgaged property
(e) that repossession and sale of mortgaged property may not extinguish the debtor’s liability; and
(f) the information prescribed by the regulations about the debtor’s right to:
(i) give a hardship notice under section 72; or
(ii) give a postponement request under section 94; or
(iii) make an application to the court under sections 74 and 96; and
(g) the information prescribed by the regulations about:
(i) the AFCA scheme; and
(ii) the debtor’s rights under that scheme; and
(h) that a subsequent default of the same kind that occurs during the period specified for remedying the original default may be the subject of enforcement proceedings without further notice if it is not remedied within the period; and
(i) that, under the Privacy Act 1988, a credit reporting body (within the meaning of that Act) may collect and hold default information (within the meaning of that Act) in relation to the default; and
(j) any other information prescribed by the regulations.
…
When default notice not required
(5) A credit provider is not required to give a default notice or to wait until the period specified in the default notice has elapsed, before beginning enforcement proceedings, if:
(a) the credit provider reasonably believes that it was induced by fraud on the part of the debtor or mortgagor to enter into the credit contract or mortgage; or
(b) the credit provider has made reasonable attempts to locate the debtor or mortgagor but without success; or
(c) the court authorises the credit provider to begin the enforcement proceedings; or
(d) the credit provider reasonably believes that the debtor or mortgagor has removed or disposed of mortgaged goods under a mortgage related to the credit contract or under the mortgage concerned, or intends to remove or dispose of mortgaged goods, without the credit provider’s permission or that urgent action is necessary to protect the mortgaged property.
…
However, in this case, whilst it is a breach of the code no specific damages were alleged to result from the conduct. This is not a prosecution under the code for penalties. There were significant arrears and relief was granted in the courts on the second occasion.
Late payment fees
The contract provided for the respondent to impose late payment fees of $100 per month. These fees did not cover interest on outstanding payments, as the interest rate was calculated on the overall outstanding amount. Whilst there were some administrative tasks involved in following up late payments with the applicant, I am not persuaded that the sum of $100 per month, reasonably represented the likely costs.
The clause was clearly a clause in the form generally described as a penalty clause. Such clauses are not permissible if they simply impose a penalty, but are permissible if they protect a legitimate interest of the party: see Paciocco v Australia and New Zealand Banking Group Limited [2016] HCA 28 at [69], [166], and [270]. The fact that this clause was a fixed fee per month is only weakly indicative: see [168]
As can be seen from reading Paciocco’s Case, there may be many aspects to a legitimate interest, for example the costs of enforcing arears, the costs of borrowings to sustain the loan (or use of the business capital) and the impact upon the cash flow of the business. In the present case there is no change to the interest rate, although interest does continue to accrue on monies not paid. The additional interest due to failure to pay for one month would be around $30. In this case no significant costs appear to have been incurred in contacting a person who paid late. There is no specific evidence as to the interests that the clause sought to protect.
The penalty amounts of $100 per month appear to me to be impermissible penalties and are therefore not claimable by the applicant.
Reopening the Contract
The applicants asked that the court re-open the transaction under s.76 of the Credit Code on the basis that it was unjust. Section 76 requires consideration of numerous factors:
(2) In determining whether a term of a particular credit contract, mortgage or guarantee is unjust in the circumstances relating to it at the time it was entered into or changed, the court is to have regard to the public interest and to all the circumstances of the case and may have regard to the following:
(a) the consequences of compliance, or noncompliance, with all or any of the provisions of the contract, mortgage or guarantee;
(b) the relative bargaining power of the parties;
(c) whether or not, at the time the contract, mortgage or guarantee was entered into or changed, its provisions were the subject of negotiation;
(d) whether or not it was reasonably practicable for the applicant to negotiate for the alteration of, or to reject, any of the provisions of the contract, mortgage or guarantee or the change;
(e) whether or not any of the provisions of the contract, mortgage or guarantee impose conditions that are unreasonably difficult to comply with, or not reasonably necessary for the protection of the legitimate interests of a party to the contract, mortgage or guarantee;
(f) whether or not the debtor, mortgagor or guarantor, or a person who represented the debtor, mortgagor or guarantor, was reasonably able to protect the interests of the debtor, mortgagor or guarantor because of his or her age or physical or mental condition;
(g) the form of the contract, mortgage or guarantee and the intelligibility of the language in which it is expressed;
(h) whether or not, and if so when, independent legal or other expert advice was obtained by the debtor, mortgagor or guarantor;
(i) the extent to which the provisions of the contract, mortgage or guarantee or change and their legal and practical effect were accurately explained to the debtor, mortgagor or guarantor and whether or not the debtor, mortgagor or guarantor understood those provisions and their effect;
(j) whether the credit provider or any other person exerted or used unfair pressure, undue influence or unfair tactics on the debtor, mortgagor or guarantor and, if so, the nature and extent of that unfair pressure, undue influence or unfair tactics;
(k) whether the credit provider took measures to ensure that the debtor, mortgagor or guarantor understood the nature and implications of the transaction and, if so, the adequacy of those measures;
(l) whether at the time the contract, mortgage or guarantee was entered into or changed, the credit provider knew, or could have ascertained by reasonable inquiry at the time, that the debtor could not pay in accordance with its terms or not without substantial hardship;
(m) whether the terms of the transaction or the conduct of the credit provider is justified in the light of the risks undertaken by the credit provider;
(n) for a mortgage—any relevant purported provision of the mortgage that is void under section 50;
(o) the terms of other comparable transactions involving other credit providers and, if the injustice is alleged to result from excessive interest charges, the annual percentage rate or rates payable in comparable cases;
(p) any other relevant factor.
…
(5) In determining whether to grant relief in respect of a credit contract, mortgage or guarantee that it finds to be unjust, the court may have regard to the conduct of the parties to the proceedings in relation to the contract, mortgage or guarantee since it was entered into or changed.
In considering the numerous provisions to determine whether a clause of the contract is unjust, the relevant facts and circumstances are set out above. The consequences of non-compliance with the payment clause had the potential to impact upon the applicant’s insurance rights, however this did not occur due to the effect of the Insurance Contracts Act. To the extent that there are late payment penalties each month I have found that they amount to a penalty and cannot be enforced – in this respect the common law remedy is adequate without requiring a change in the terms and conditions.
Whilst no independent advice was obtained, it would be unusual for independent advice to be sought in such circumstances, nor would that advice have been likely to assist, save with respect to the penalty clause mentioned above. Whilst the explanations were, as best one can tell from the evidence, simple, the basic terms of the contract were relatively simple. I note that the applicant gave evidence with an interpreter, but she clearly has some English skills, at least enough for day to day transactions. She certainly understood enough to arrange repairs and servicing of the car. There is no suggestion that the respondent used any unfair pressure. The evidence is that he attempted to persuade her to consider a less expensive car. I am satisfied that the applicant understood the implications of the contract.
Subsection (l) asks whether the respondent could have ‘ascertained by reasonable inquiry at the time, that the debtor could not pay in accordance with its terms or not without substantial hardship’. This presents complex questions in this case as the applicant says that she needed a car to care for 15 children – she was clearly in hardship without a car. Clear evidence of her actual income has not been provided and I am not persuaded that her oral evidence alone is sufficient to understand her financial affairs in the context of the statutory rates for social security (for a person with 15 children) and her unexplained ability to find $20,000 at one point. Thus, I am not persuaded that in the context of this case she has demonstrated that she would have suffered substantial financial hardship as a consequence of the contract. Given the nature of the evidence presented at court, it is unrealistic to think that the respondent could have obtained better information from the applicant at the time of the contract. Whilst receipt of social security shows some degree of financial difficulties, it cannot be the case that a woman should be denied finance for a car simply because she is on a supporting parent’s benefit, as the balance of hardship between financial issues and lack of a motor vehicle is a matter for the individual. The applicant has now substantially paid for the car and I have earlier ordered that it be provided to her.
When one considers whether the terms of the transaction or the conduct of the credit provider were justified in the light of the risks undertaken by the credit provider it is difficult not to conclude that the risks to the respondent far outweighed the benefit that he would receive from the contract. The case highlights how small businesses in low socio-economic areas can offer finance to those with low incomes in circumstances were major lenders would not be prepared to assist.
There was a difference in bargaining position of the parties, although not so great as in cases with major lenders operating through car dealers.
The provisions of the contract were not the subject of negotiation, although this appears to have been largely because the applicant simply wanted a car. The terms themselves do not appear, on the evidence before the court, to be outside what the market would have offered more generally. Given the nature of the contract it does appear that terms would have been more negotiable in this arrangement than with most financiers who have lengthy standard form contracts. The contractual conditions in this case were remarkably brief. Whilst the English in the contract is not perfect the terms are all quite understandable and straightforward. There is nothing about the terms that would be likely to catch the unwary. There is nothing about the applicant (save her language skills) that would mean she required some degree of protection.
I am not persuaded that in the context of this case that the terms of the contract should be changed.
Conclusions
I accept that the statement of account at Annexure M3 of the respondent’s affidavit represents an accurate statement of account. The statement is a little difficult to follow, as the respondent has listed all of the payments and most expenses, then prepared a summary showing other items. However, it was accepted as an accurate calculation. This statement comes to $5,039 which was accepted as accurate in final addresses, after accounting for the insurance payments under the contract, interest charges, tolls and registration fees. There is a damages fee of $430 for a repair, but this is less than the insurance excess amount so payable by the applicant. The figure includes 32 months where a late payment fee was charged of $100, which I have found was not permissible. Thus the revised balance should be $1,839.
Pursuant to interim orders for the return of the vehicle to the applicant some $1,009 was paid by her to the respondent. Thus, the debt is only $830 under the terms of the contract.
As I have found that the respondent is obliged to indemnify the first applicant for her liability (not the second applicant’s liability) on both accidents, she must pay the excess of $660 on each occasion (a further $1,320). However, the respondent must indemnify the applicant for the damages claim against her from the second accident (the AAMI claim of $4,639.66). The effect of the insurance claims is that the respondent owes the applicant $3,319.66 with respect to the insurance claims. This should be set off against the contract amount, leaving a balance of $2,489.66 owing by the respondent to the applicant.
Thus the respondent owes the applicant $2,429.66.
I will therefore make orders that the respondent:
a)Provide signed transfers of the registration of the vehicle to the applicant to enable her to register as the owner; and
b)Pay the applicant the sum of $2,429.66
I certify that the preceding ninety-one (91) paragraphs are a true copy of the reasons for judgment of Judge Riethmuller
Associate:
Date: 27 May 2020
Key Legal Topics
Areas of Law
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Commercial Law
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Contract Law
Legal Concepts
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Breach
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Penalty
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Remedies
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Contract Formation
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