Accelerated Loans Pty Ltd v Forbes - [2024] WASC 504

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   ACCELERATED LOANS PTY LTD -v- FORBES [2024] WASC 504
CORAM:   LUNDBERG J
HEARD:   16 DECEMBER 2024
DELIVERED          :   23 DECEMBER 2024
FILE NO/S:   CIV 1443 of 2024
BETWEEN:   ACCELERATED LOANS PTY LTD
Plaintiff
AND
ANTHONY FORBES
First Defendant
JEAN CATHERINE FORBES
Second Defendant
ANTHONY FORBES
JEAN CATHERINE FORBES
Plaintiff by counterclaim
ACCELERATED LOANS PTY LTD
Defendant by counterclaim

Catchwords:

Practice and procedure - Summary judgment application brought by plaintiff lender - Summary judgment sought in respect of plaintiff's claim and defendants' counterclaims - Finance arrangements with borrowers at high interest rates – Defendants provided mortgage and personal guarantees as security for the finance arrangements – Defendants are the parents of the person principally responsible for the borrower companies – Alleged default on the finance arrangements – Plaintiff brings action for possession of the mortgaged property – Claims of unconscionability – Allegation that high interest rate is a penalty - Allegation that quantum of loan changed without guarantors' consent - Numerous contentious factual issues raised in the proceedings - Necessity for claims to be tested at trial – Turns on own facts

Practice and procedure – Proper compliance with the Rules of the Supreme Court 1971 (WA) – Failures to follow requirements applicable to affidavit preparation and filing

Legislation:

Australian Securities and Investments Commission Act 2001 (Cth), s 12BF(1), s 12CB(1)
Rules of the Supreme Court 1971 (WA), O 4AA r 1(1), O 13 r 7, O 14 r 1(1), O 16 r 1(1), O 37 r 2, O 37 r 5, O 37 r 6, O 37 r 9

Result:

Extension of time to bring the summary judgment application is refused.
Plaintiff's chamber summons for summary judgment be dismissed.

Defendants granted unconditional leave to defend the action and to continue the counterclaim.
Costs reserved.

Category: B

Representation:

Counsel:

Plaintiff	:	J C Yeldon
First Defendant	:	T J Langdon
Second Defendant	:	T J Langdon
Plaintiff by counterclaim	:	T J Langdon
Defendant by counterclaim	:	J C Yeldon

Solicitors:

Plaintiff	:	Parsons & Partners
First Defendant	:	Richards & Lally Lawyers
Second Defendant	:	Richards & Lally Lawyers
Plaintiff by counterclaim	:	Richards & Lally Lawyers
Defendant by counterclaim	:	Parsons & Partners

Case(s) referred to in decision(s):

Ankar Pty Ltd v National Westminster Finance (Aust) Limited [1987] HCA 15; (1987) 162 CLR 549
Australian Securities and Investments Commission v Kobelt [2019] HCA 18; (2019) 267 CLR 1
Gerovich v Gerovich [2018] WASC 153
King as Bankruptcy Trustee of Jose Fernandas De Silva v De Silva [2024] WASC 367
Paccioco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525
Permanent Trustee Company Ltd v Gillian; O'Donnell Permanent Trustee Company v Di Benedeggo [2009] NSWSC 902
Sampey v Doherty [2024] WASCA 105
Stubbings v Jams 2 Pty Ltd [2022] HCA 6; (2022) 276 CLR 1
Sutton Investments Pty Ltd v Realistic Investments Pty Ltd [2017] WASCA 14
Westpac Banking Corporation v Anderson [2017] WASC 106

Table of Contents

A. Preface

B. The proceedings

The plaintiff's claim

Summary judgment application

The defence and counterclaim

C. Relevant statutory provisions and principles

D. Disposition

Allegations as to unconscionability

Allegations as to penalty

Allegations as to the change in the loan and interest amounts

Joint tenancy issues

Lack of cogency in the plaintiff's affidavit material

E. Conclusion and orders

ATTACHMENT A

LUNDBERG J:

A. Preface

Western Australia has had its own Supreme Court since 1861. The procedural rules which presently govern civil matters in this Court are known as the Rules of the Supreme Court 1971 (WA) (RSC). The requirements imposed by those rules are not identical to those found in the rules which apply in other State superior courts. Nonetheless, they are our rules and they should be understood by practitioners who intend to practise in this Court - including those practitioners located in other States and Territories - when taking instructions to commence or defend matters in this Court.
The present matter, in which the Court is asked to award summary judgment and make an order for possession in favour of a financier in a 'mortgage action' (within the meaning of O 4AA r 1(1) RSC), is one which highlights some of the difficulties and inefficiencies which can arise when practitioners from other jurisdictions misunderstand the rules of this Court, or fail to review them.[1]
[1] By way of a recent similar example, I refer to the observations I made in King as Bankruptcy Trustee of Jose Fernandas De Silva v De Silva [2024] WASC 367 [2], concerning failures to comply with O 37 r 2 RSC.
These problems can be avoided by engaging or consulting a law firm which is familiar with this Court's practice and procedure, or briefing independent counsel from this jurisdiction, at an early juncture. To allow the ship to steer off course before it is too late for anyone to get to the wheelhouse, is simply unwise.
The broader interests of justice will tolerate inadvertent failures by practitioners to comply with the requirements of procedure, but persistent breaches which may prejudice an opponent, or which may unnecessarily add to the costs of a practitioner's own client, cannot simply be disregarded.
Lamentably, there are important matters of procedure which have gone awry in this matter. This became apparent at the directions hearing requested by the plaintiff, which was held on 7 November 2024, ahead of the originally listed substantive hearing on 13 November 2024. Further directions were made by the Court on 7 November 2024 to permit the filing of proper affidavit material and submissions, noting that some submissions had already been filed. The purpose of those directions was to get the application back on track and permit an efficient determination of the matter on 16 December 2024.
The first procedural non-compliance concerns the manner in which the plaintiff's affidavits were prepared and filed.[2] The affidavits manifest failures to comply with the form and procedural requirements for affidavits in O 37 r 2 and r 6 RSC. I have explained the issues in Attachment A. These are not matters of mere formality.
[2] I refer to the affidavits of Xudong Shen affirmed on 1 August 2024, 20 August 2024, 10 October 2024 and 15 November 2024. A fifth affidavit of Mr Shen, affirmed on 19 December 2024, does not suffer from the same vices.
There is an additional, important matter of substance arising from the nature of the plaintiff's affidavit evidence, which requires comment, in this regard. That is, those affidavits lack cogency, in my view. I have addressed this issue at [86] to [94] below.
The second matter which has gone awry is the insistence by the plaintiff's solicitors that the various matters in O 13 r 7 RSC should be addressed. These matters can be found in the third affidavit of Mr Shen affirmed on 10 October 2024.[3] I have also explained these issues in Attachment A.
[3] At [10] – [15].
With some force, counsel for the defendants opposed the plaintiff's application for leave to rely upon the non-compliant affidavits. I had considerable sympathy for that position. However, in this particular case, in order not to prejudice the plaintiff itself for the errors of its solicitors, I allowed the plaintiff leave to rely upon the non-compliant affidavits, pursuant to O 37 r 5(2) RSC. Had I declined that leave, the plaintiff's application for summary judgment would have inevitably failed. It should not need to be said by this Court that practitioners must ensure that affidavits are prepared in accordance with the requirements of O 37 RSC, particularly the form requirements in rule 2 and the requirements as to content found in rule 6.
There are costs consequences which will need to be considered in due course arising from these matters. However, the foregoing is sufficient by way of a procedural digression. Now, the essence of this action and the application can be shortly described.

B. The proceedings

The plaintiff's claim

The plaintiff to this action is a lender. The plaintiff commenced the action by writ of summons on 23 April 2024. The plaintiff loaned the sum of $232,608.70, on a short term basis, to three corporate borrowers (Borrowers) in around February 2023.[4] The Borrowers were:
(a)Forbes Heavy Vehicles Pty Ltd;
(b)Trojan Asset Management Pty Ltd; and
(c)Versatile Services Australia Pty Ltd.
[4] Writ of summons and statement of claim (SOC) dated 23 April 2024 [3], [4] and [6].
On any view, the loan arrangement was accompanied by quite high interest rates, in the order of 2.00% per month, rising to 3.90% per month, in the event of a default. The former rate is described as the 'discount rate' and the second rate is defined as the 'standard rate', which strike me as curious descriptors when the latter rate arises through a default. In any event, the 'standard rate' would equate to a rate of interest of 46.8% per annum, which is extraordinarily high on any objective view.
The amount now claimed by the plaintiff is $504,326.26. Thus, in a period of less than two years, the indebtedness has risen by around 217%.
The loan was secured by guarantees given by three individuals[5] and by a mortgage over a property in Kardinya (Kardinya Property).[6] The mortgage was granted over the Kardinya Property by an instrument dated 11 January 2023.[7] The mortgage is pleaded to be a second registered mortgage, which was registered on 6 February 2023.[8]
[5] SOC [4(c)], [4(d)] and [5].
[6] SOC [4(d)] and [10].
[7] SOC [4].
[8] SOC [10].
Two of the guarantors are the defendants, Mr Anthony Forbes and Mrs Jean Forbes. They are husband and wife. The other guarantor, Mr Aaron Forbes, is their son. He is not a party to this action. The defendants are also the registered proprietors, as joint tenants, of the Kardinya Property. Mr Aaron Forbes is the individual behind two of the Borrowers, being Trojan Asset Management Pty Ltd and Versatile Services Australia Pty Ltd. Mr Anthony Forbes is the director of the other Borrower, Forbes Heavy Vehicles Pty Ltd.
As explained below, there is no separate guarantee instrument.
The key 'agreement' relied upon by the plaintiff is the loan facility agreement entered into on or about 13 December 2022 (Loan Agreement). However, the Loan Agreement is in fact constituted by several documents, found in Mr Shen's affidavit affirmed on 1 August 2024,[9] being:
[9] Affidavit of Mr Shen affirmed 1 August 2024, [8] and pgs 23 - 63.
(a)a mortgage;
(b)a facility summary dated 13 December 2022;
(c)a fee schedule;
(d)a drawdown authority dated 11 January 2023;
(e)a memorandum of common provisions referred to in the mortgage;
(f)the borrower's legal advice declaration;
(g)the guarantor's legal advice declaration;
(h)a statutory declaration deposed to by Aaron Peter Forbes; and
(i)a certificate of independent financial advice.
With respect, this suite of documents is not easy to follow. This is largely because there is no obvious head instrument. The facility summary[10] might be the intended head instrument, but this is not clear.
[10] Affidavit of Mr Shen affirmed 1 August 2024, pages 27 - 34.
There are operative terms found in the short form memorandum of common provisions, including the substantive guarantee obligations.[11] In particular, there is an express term that the first and second defendants, as guarantors, guaranteed performance of the Borrowers' obligations under the Loan Agreement with the plaintiff, and indemnified the plaintiff with respect to that performance.[12]
[11] Affidavit of Mr Shen affirmed 1 August 2024, pages 43 - 53.
[12] SOC [5].
The facility summary appears to be signed by Mr Anthony Forbes and his son on behalf of the Borrowers, and witnessed by a solicitor, who has noted he was not present at the time, but witnessed the document by audio visual link.[13] I will refer to that solicitor as Solicitor A, who is based in Melbourne. There is a separate signing page for the guarantors. Both defendants appear to have signed, together with their son. Again, Solicitor A has witnessed two of the signatures by audio visual link, not in person. Mrs Forbes had her signature witnessed by a different solicitor, who I will refer to as Solicitor B, who is based in Rockingham.[14]
[13] Affidavit of Mr Shen affirmed 1 August 2024, pages 31 - 32. See the further execution clause by the borrowers on page 37 and 41.
[14] Affidavit of Mr Shen affirmed 1 August 2024, pages 33 - 34. See the further execution clause by the guarantors on pages 38 and 39.
It is alleged by the plaintiffs that the Borrowers defaulted on the loan, in that they failed to pay interest and failed to repay the facility by the payment date. The plaintiff duly gave notice to the defendants of its intention to exercise the power to enter upon and take possession of the Kardinya Property, and to exercise its power of sale as mortgagee.[15] The notice was in writing dated 3 July 2023.
[15] SOC [13] and [14].
The plaintiff asserts it has an immediate right of possession of the Kardinya Property, and seeks judgment for possession of that property and the costs of the action to be assessed, if not agreed.[16] The plaintiff pleads it has given notice to the present tenants as well.[17]

Summary judgment application

[16] SOC [16].

[17] SOC [17] - [18].

As just outlined, and as appears from the affidavits of Mr Shen, the plaintiff's claim is relatively anodyne. The plaintiff maintains the defendants have failed to repay any of the principal sum which is due and, on the face of the instruments, the plaintiff is entitled to judgment on a summary basis.
The plaintiff has, accordingly, filed summary judgment applications in respect of its claim, pursuant to O 14 r 1(1) RSC, and in respect of the defendants' counterclaims, pursuant to O 16 r 1(1) RSC.[18] The applications were filed out of time and require leave.

The defence and counterclaim

[18] Chamber summons dated 5 August 2024.

The defendants have filed defences and counterclaims which assert the plaintiff was aware of circumstances sufficient to ground an unconscionability finding, among other matters.[19] The defendants also allege the amount of the loan was changed after they signed the documentation, without their consent, and additionally, the interest rates should be struck down as penalties.
[19] Defence and counterclaim dated 17 June 2024.
The defendants strongly oppose the applications for summary judgment. Both defendants have sworn an affidavit in opposition to the summary relief which is sought. I refer to the affidavit of Mr Anthony Forbes sworn 28 November 2024 and the affidavit of Mrs Jean Catherine Forbes sworn 28 November 2024. There was no objection taken by the plaintiff to these affidavits. There are aspects of these affidavits which suffer from their generality and a lack of a proper factual foundation. For example, the beliefs expressed by Mrs Forbes in her affidavit at [11], [13], [14] and [16] are vague and not tethered to any sound basis for the beliefs which are stated. Counsel for the plaintiff made submissions as to the weight which should be attached to these matters, given the generality with which they have been expressed.
Mr Anthony Forbes swore an earlier affidavit, on 28 August 2024, which was not formally read at the hearing. Nonetheless, counsel for the plaintiff made reference to certain matters in that earlier affidavit to expose what were said to be discrepancies in the second affidavit. I will have regard to the first of the affidavits for this purpose.
The defendants assert a number of substantive responses to the claims. The broad compass of the dispute, as outlined by the defendants in their affidavits and submissions, reveals a series of contentious, fact-sensitive allegations which would require a trial before any findings and conclusions could be reached.
As to the headline contentions, four pillars of the defendants' response must be mentioned. First, the defendants contend that the plaintiff has engaged in unconscionable conduct (which also constitutes the defendants' counterclaim), contrary to s 12CB(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).
Second, the defendants contend that the terms of the loan (in particular, the default interest rate) are unenforceable penalties and/or unfair contracts terms under s 12BF of the ASIC Act.
Third, the defendants maintain the debt has been (or ought to have been) repaid from the proceeds of assets sold in the receiverships of two of the corporate borrowers.
Fourth, the defendants say the amount of the loan was increased without the defendants' consent after the guarantee and mortgage were executed, such that the guarantee and mortgage are unenforceable.
Additionally, there is a question whether orders for possession could be made as against Mr Forbes only, in the event the Court was not satisfied that such orders could be made against Mrs Forbes on a summary basis. This point arises because they hold the land as joint tenants. This issue emerged at the hearing on 16 December 2024, and was the subject of further written submissions filed with leave following the hearing.

C. Relevant statutory provisions and principles

The framework and principles by which summary judgment applications such as this are to be addressed are well understood and uncontentious. The relevant provisions of the Rules should first be mentioned.
Order 14 r 1(1) RSC provides:
Where in an action to which this Order applies a statement of claim has been served on a defendant and that defendant has entered an appearance, the plaintiff may, on the ground that that defendant has no defence to a claim included in the writ, or to a particular part of such claim, or has no defence to such a claim or part except as to the amount of any damages claimed, within 21 days after appearance or at any later time by leave of the Court, apply to the Court for judgment against that defendant. (emphasis added)
Order 14 r 3(1) RSC provides:
On the hearing of an application under rule 1 unless the Court dismisses the application, or the defendant satisfies the Court with respect to the claim, or the part of the claim, to which the application relates that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim or part, the Court may give such judgment for the plaintiff against the defendant on that claim or part thereof as may be just, having regard to the nature of the remedy or relief claimed. (emphasis added)
Order 16 r 1(1) RSC (which may be engaged by a defendant in respect of a counterclaim, as the counterclaim is an 'action' as explained by O 18 r 2(2) RSC) provides:
Any defendant to an action may within 21 days after appearance or at any later time by leave of the Court, apply to the Court for summary judgment, and the Court, if satisfied that the action is frivolous or vexatious, that the defendant has a good defence on the merits, or that the action should be disposed of summarily or without pleadings, may order —
(a) that judgment be entered for the defendant with or without costs; or
(b) that the plaintiff shall proceed to trial without pleadings,
or if all parties consent, may dispose of the action finally and without appeal in a summary manner. (emphasis added)
The general principles in relation to the jurisdiction of the court to grant summary judgment were stated by the Court of Appeal in Sutton Investments Pty Ltd v Realistic Investments Pty Ltd:[20]
Summary judgment will be granted only when there is no real question to be tried. The power to order summary judgment is one that should be exercised with great care: Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99. It is only in the clearest of cases, when there is a high degree of certainty about the ultimate outcome of the proceedings if it went to trial, that summary judgment ought properly be granted: Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 [57]; Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 [46]; Spencer v The Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118 [24], [53] - [55].
[20] Sutton Investments Pty Ltd v Realistic Investments Pty Ltd [2017] WASCA 14 [24].

The parties acknowledge the force of the foregoing principles. The parties also accept, properly, that the facts which are established must be conclusive such that it is possible to say, without doubt, that there is no question to be tried.
It is the party seeking summary judgment who bears the onus of persuading the Court that the claim is a good one and that there is no defence. If the affidavits in support of the application make out a prima facie case, an evidentiary burden will pass to the other party to show that there is a defence to the action. However, the overall legal burden remains with the party seeking summary judgment to persuade the Court that the relief should be granted: Westpac Banking Corporation v Anderson.[21]
[21] Westpac Banking Corporation v Anderson [2017] WASC 106 [102].
Further, if there is a conflict of evidence on the affidavits, the Court should approach the application for summary judgment on the assumption that the facts set out in the affidavits relied upon by the party resisting the application (in the present case, the defendants) will ultimately be accepted at trial: Gerovich v Gerovich.[22]
[22] Gerovich v Gerovich [2018] WASC 153 [32].
The foregoing principles reflect a central tenet of civil litigation that, ordinarily, a party's claims (or a party's defences and counterclaims) are to be assessed and determined at a final trial of the action. At the final trial, all such issues in the case are to be tried, subject to any determination that preliminary issues are appropriate or certain aspects of a case should be separately determined.
The final trial should only occur after the parties have had the opportunity to avail themselves of the usual interlocutory processes and steps permitted by the Rules, controlled in accordance with the goal and objects in O 1 r 4A and r 4B RSC.

D. Disposition

Given the fact-sensitive unconscionability and other allegations which have been pleaded and asserted by the defendants, it must be said the summary judgment applications brought by the plaintiff were rather ambitious.
For the reasons which follow, I have reached the view that this is not a proper case for judgment to be granted to the plaintiff in the absence of a trial. In the circumstances, the extension of time which the plaintiff seeks should be refused (given the lack of merit in the substantive applications) and the summary judgment applications should themselves be dismissed. The defendants should be granted unconditional leave to defend the action and to prosecute their counterclaims.
I will explain below why I have reached the above conclusions.

Allegations as to unconscionability

The defendants resist the plaintiff's enforcement action under the mortgage and guarantee on the basis the plaintiff engaged in unconscionable conduct within the meaning of s 12CB(1) of the ASIC Act. The pleaded allegations are focused on the 'ostensible contractual right in the Loan Agreement to impose interest on the loan at the standard rate of 48.6% per annum'.[23] That is, the allegations are directed at the interest rate clauses. Nonetheless, the evidence filed by the defendants and their submissions address the broader circumstances related to the entry into the finance arrangements, the nature of the arrangements, and the execution of the instruments. The factual background to the dispute, as deposed to by the defendants in their affidavits, and summarised in the defendants' submissions, paints a more complex and nuanced picture of the finance arrangements than is evident from Mr Shen's initial affidavits.
[23] Defence [4.8] and Counterclaim [8.3].
Statutory unconscionability requires an objective evaluation of the behaviour of the parties including the reasons for the behaviour and the effect, or likely effect, of that behaviour. There is no necessity to show the person has a pre-existing disability, vulnerability or disadvantage of which advantage was taken or that any particular person has been disadvantaged by the conduct. Further, it is necessary for the Court to undertake a comprehensive analysis of all underlying factual circumstances. These propositions were recently summarised by the Court of Appeal in Sampey v Doherty.[24]
[24] Sampey v Doherty [2024] WASCA 105 [362] – [367] (Buss P, Hall JA and Lundberg J).
As the defendants' correctly submit, there is no need to demonstrate that the conduct is 'morally repugnant' before it is capable of being characterised as unconscionable. The question is whether the conduct is 'so far outside societal norms of acceptable commercial behaviour', informed by values of certainty in commercial transactions, honesty and various other considerations, as explained by Gageler J (as his Honour then was) in Australian Securities and Investments Commission v Kobelt.[25]
[25] Australian Securities and Investments Commission v Kobelt [2019] HCA 18; (2019) 267 CLR 1 [91] – [93] (Gageler J).
With these principles in mind, let me turn to the facts identified by the defendants.
It is said by the defendants that the true purpose for the loan was to finance the purchase by one of the corporate borrowers, being Trojan Asset Management Pty Ltd, of a yard that another borrower (Versatile Services Australia Pty Ltd) used to store its equipment. Versatile Services Australia Pty Ltd appears to have run a drilling business. At the time the loan was entered into, the sole director of these entities was the defendants' son. His father, the first defendant, was an employee of one of the entities but his mother, the second defendant, is said to have had no involvement in the business.
The first defendant acknowledges he was a sole director and shareholder of another of the entities which was named as a Borrower, being Forbes Heavy Vehicles Pty Ltd, but the defendants contend that no funds were advanced to Forbes Heavy Vehicles Pty Ltd and that entity never carried on any business, never opened a bank account, and was deregistered on 24 December 2023. At the hearing, counsel for the defendants retreated from an initial submission that the inclusion of Forbes Heavy Vehicles Pty Ltd was a 'sham', but the point remains that the entity is said to be largely dormant and received no benefit.
Thus, the defendants contend that the loan was for the benefit of their son's company, Trojan Asset Management Pty Ltd, and neither of the defendants received any benefit from the transaction.
The defendants emphasise their personal circumstances as well. Neither of the defendants is highly educated. The first defendant left school after year 7. The second defendant left school at 15 years of age. In relation to the finance arrangements entered into with the plaintiff, the first defendant has deposed that he believed the yard itself, along with a mortgage over his son's home, should be sufficient security for the loan, he believed there was no risk that the plaintiff would ever enforce the mortgage because the plaintiff had other adequate security, and he believed that the guarantee was only for the principal sum, not interest.[26]
[26] DS [24].
I have already mentioned the circumstances alleged by the defendants concerning the receipt of legal and financial advice. The first defendant deposes that he only spoke to a lawyer, Solicitor A, by telephone and then through a videoconference arrangement. Solicitor A was based in Melbourne and was the solicitor acting for Mr Aaron Forbes' companies in relation to the loan. The first defendant deposes that Solicitor A did not advise him that there was a risk that his property would be sold if there was a default. The first defendant also states that he did not receive any financial advice. Counsel for the defendants submitted Solicitor A had something of a conflict of interest, if he was acting for the Borrowers and the guarantors.
The second defendant, Mrs Forbes, deposes that she had no involvement in her son's businesses. She believed the businesses were successful but knew nothing of the details of their operations. Mrs Forbes has deposed that she met Solicitor B, who showed her some documents. Mrs Forbes did not speak with Solicitor A at any time. Mrs Forbes deposes that she knew that if anything went wrong she would be liable under the guarantee, and she was aware of the existence of a high rate of interest but not aware of the specific rate. Mrs Forbes says she was not told about the power of attorney in the loan documents.
Further, she believed there was no risk that she would have to repay anything under the guarantee given the successful nature of the businesses and the existence of the other securities. It appears Mrs Forbes was not previously aware, but now is, that her son's businesses had a 'very large tax debt' which appears to have created financial difficulties she had not earlier foreseen.
Mrs Forbes also deposes that she did not receive any financial advice, whether from the finance broker or accountant who have been mentioned in the materials, or otherwise.
Taking up this last point, there are further factual matters emphasised by the defendants, concerning the role of the finance broker and the accountant who were involved in these transactions. These gentlemen are said by the first defendant to work closely together. The defendants submit that these two persons assumed a role as advocates on behalf of the plaintiff, to encourage the first defendant to agree to the guarantee and the mortgage, in the face of the first defendant's objections.[27] The evidence which links the finance broker and accountant to the plaintiff is quite sparse. The defendants point to a letter from the finance broker which states that 'we have lenders willing to advance funds for the following loan facilities' and which indicates that 'preliminary approvals are in place'. Mr Anthony Forbes deposes that the finance broker 'arranged everything' for his son, referring to the finance arrangements. The finance broker was arguably the conduit for the lender.
[27] DS [27].
The foregoing is said by the defendants to raise a question whether the role of these gentlemen was in fact as agents for the plaintiff, rather than the borrowers.[28] If established at trial, this is said by the defendants to impute their alleged unconscionable conduct to the plaintiff lender.[29]
[28] DS [27]. Reference is made by the defendants' counsel to Permanent Trustee Company Ltd v Gillian; O'Donnell Permanent Trustee Company v Di Benedeggo [2009] NSWSC 902, which holds that, in certain circumstances, a mortgage broker will be an agent of the lender.
[29] DS [29].
In general terms, but recalling that this is a summary judgment application (not a trial of the action), the defendants assert that pressure was placed on the first defendant to give the guarantee, that the risks were down-played, that they were taken advantage of by the finance broker and the accountant, and that they received limited legal advice which was given by a solicitor acting for the borrowers. It was not independent advice.[30]
[30] DS [28] and [30].
It does not appear to be in dispute that the present matter is a case of asset-based lending. The defendants draw attention to the decision of the High Court, in a similar factual setting, in Stubbings v Jams 2 Pty Ltd.[31] That was a case in which the loan was purely asset-based lending, made with no regard for whether Mr Stubbings or his company, could service the loan, and in which pro forma certificates of legal and accounting advice had been provided. Further, it was apparent Mr Stubbings did not understand the risks in the transaction.
[31] Stubbings v Jams 2 Pty Ltd [2022] HCA 6; (2022) 276 CLR 1.
Allied to the above matters, the defendants raise a complaint as to the circumstances in which the plaintiff, through the receivers appointed by it to Versatile Services Australia Pty Ltd, sold the assets of that company and applied the proceeds to the outstanding loans owed to the plaintiff.[32] The defendants say it would be unconscionable for the plaintiffs to enforce the present mortgage against them on the basis of a guarantee of a loan that may have been repaid in full but for the alleged breach of duty by the plaintiff or its appointees in selling the assets of that particular borrower.[33] Further, the defendants say the Court cannot be satisfied that the account as presented by the plaintiff is accurate, and the amount ought to have been reduced by the sale of the assets to which I have just referred.[34]
[32] DS [45] - [46].
[33] DS [35] – [36].
[34] DS [46].
The plaintiff rejects the allegations of unconscionability. The plaintiff makes the point that any conduct on the part of the finance broker and accountant cannot be attributed to it, and in the absence of such knowledge, the unconscionability allegations fall down.
On a summary judgment application, the Court must proceed on the basis that the defendants' evidence will ultimately be accepted, except where the Court is able to characterise that evidence as inherently implausible or lacking any substance. In the present matter, the evidence presented by the defendants does not meet those descriptions. The evidence must be accepted, in my view, on its face. When that point is reached, I consider the summary judgment application must inevitably fail.
The evidence reveals a circumstance which, on established authority, may arguably constitute unconscionable conduct that may be attributable to the plaintiff, or for which the plaintiff may be held responsible. The Court is in no position to make any positive finding in this regard, one way or another.
The plaintiff points to deficiencies in the evidence, including differences between the evidence deposed to by Mr Shen and the affidavit evidence of Mr Anthony Forbes, the first defendant. The plaintiff also highlights discrepancies between the first affidavit of Mr Anthony Forbes (which was not formally read on the application) and his later affidavit. On the face of the affidavits, there are differences and discrepancies. That can be accepted. But the Court is not in a position to resolve them on this application. It must be remembered that the grant of summary judgment is reserved for only the clearest of cases.
A trial of these issues will be required, after the parties have had the opportunity to pursue the interlocutory steps available to them under the Rules.
I observe that the pleaded basis for the unconscionability allegation is directed at the interest clauses in the Loan Agreement. It is not expressly pleaded that the Loan Agreement, and the finance arrangements as a whole, may be characterised as unconscionable, nor that the plaintiff's conduct generally would fit this statutory description. The plaintiff emphasises the narrowness of the unconscionability complaint.[35]
[35] PS [28] - [29].
However, I do not consider the Court can carve out this issue, and simply examine the balance of the plaintiff's claim (as to the payment of the principal) in isolation. Once the conclusion is reached that a material aspect of the Loan Agreement may arguably be found to be unconscionable, namely the interest rate clauses, it is appropriate in my view for the Court to treat the entirety of the financial arrangement as requiring assessment at a trial. Put another way, it is not simply a matter of concluding that the failure to repay the principal (excluding interest) by the due date entitles the plaintiff to an order for possession, and that any rights to interest can separately be assessed at a later stage.
The loan arrangements must be examined in their entirety, recognising that the imposition of high rates of interest in arguable circumstances of statutory unconscionability may have an effect on the Borrowers' repayment of the principal, and the consequential liabilities of the defendants.
As to the accuracy of the loan account produced by the plaintiff, the account is not adequately explained by Mr Shen in his affidavit and contains discrepancies on its face, which were apparent during the hearing.[36] Indeed, it is not apparent whether Mr Shen has any knowledge about the account at all. Further, the broader issue as to whether sale of the assets of one of the Borrowers should be taken into account, and ought to have been applied to the instant debt, which would materially impact the quantum of the loan account, is at least arguable and cannot be resolved on this application. The plaintiff has filed additional submissions on the issue (dated 20 December 2024) and a further affidavit from Mr Shen,[37] which are relatively persuasive on their face, but I simply cannot discount the contention which the defendants wish to advance at trial.

Allegations as to penalty

[36] Affidavit of Mr Shen affirmed on 1 August 2024, page 74.

[37] Affidavit of Mr Shen affirmed on 19 December 2024.

Given the foregoing conclusion, it is strictly unnecessary to consider the penalty argument. Some brief analysis is appropriate given the arguments of the parties.
The defendants plead the charging of interest at the standard rate (being the higher rate) was in substance an unlawful penalty and void ab initio.[38] The defendants' submissions also attack the inclusion of the 'Default Loan Management Fee' and the 'Default Correspondence Fee', neither of which is specifically pleaded.
[38] Defence [4.5] and Counterclaim [6].
The defendants submit that:
[39]Those amounts cannot be a genuine pre-estimate of the loss to the plaintiff of an event of default. The plaintiff took extensive security, and the risk of not recovering the principal was exceptionally low. That is, the only significant risk that the plaintiff could apprehend upon an event of default would be delay in repayment. It is prima facie implausible to suggest that an increase in the interest rate by 22.8% plus further fees and charges of over 13.6% per annum might be a genuine pre-estimate of loss due to delay.
…
[42]In this case, the substance of the “standard rate” and other default “fees” was to act as a collateral stipulation “in the nature of security for and in terrorem of the satisfaction of the primary stipulation”, being the obligation to repay the loan when it fell due. [citing Paccioco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525, [118] (Gageler J)].
[43] There is therefore a prima facie case that the default provisions are unenforceable - either in equity or under the unfair contract terms legislation - which would reduce the actual amount owing under the loan.
The defendants accept that this ground alone might not be sufficient to defeat a claim for possession (in that it would not extinguish the whole of the debt owing). Nonetheless, it is submitted that the argument works in combination with the challenge relating to whether the debt ought to have been repaid from the sale of assets.
The plaintiff rejects the allegation and points to the lack of particulars, among other matters, in support of the allegation.[39] Certainly, further detail could be provided, but I am satisfied on this application there is an arguable basis to conclude that the interest provisions constitute a penalty. The Court has evidence before it that the interest at the default rate would amount to 46.8% per annum, on a short term loan, with various forms of security already provided. The Court can see that, over the short life of the arrangement, the liability under the arrangement has more than doubled. There is an arguable basis to conclude that the imposition of the higher rate upon a default constitutes a collateral stipulation which imposes an additional detriment on the defendants and/or Borrowers, to the benefit of the plaintiff.
[39] PS [35].
The allegation that the interest rate regime constitutes an unlawful penalty requires a proper examination at a trial of the action and of the counterclaim. It cannot be assessed (and certainly cannot be rejected) at this summary judgment level.

Allegations as to the change in the loan and interest amounts

At the summary judgment hearing, the Court was taken to the evidence which concerns the assertion that the loan amount was changed from $200,000 to $232,608.70, without the consent of the defendants. The evidence also suggests the amount of the retained interest was altered, from $12,000 to $13,956.32, after the initial execution of the instruments. The changes can be seen most vividly in the mortgage instrument and the facility summary.[40]
[40] Affidavit of Mr Shen affirmed on 1 August 2024, pages 24 and 28.
At the hearing, counsel for each of the parties took the Court to the financing instruments and the emails from Solicitor A to the lawyers for the plaintiff. There is some evidence in the emails that Solicitor A informed the plaintiff's lawyers that the revised figures were approved by 'our clients'.[41] The language of the written communications, as to which clients and which particular documents are intended to be referred to, and the course of the events, are unclear, however. I also have before me evidence from the first defendant that he does not recall Solicitor A informing him about the increase in the loan amount.[42] The second defendant deposes that she 'never agreed to any increase to the loan'.[43]
[41] Affidavit of Mr Shen affirmed on 20 August 2024, pages 12 - 13.
[42] Affidavit of Anthony Forbes sworn 28 November 2024, [39].
[43] Affidavit of Jean Forbes sworn 28 November 2024, [18].
I would not be prepared to make any finding on these issues without the benefit of oral evidence from the material witnesses, including Solicitor A if he was available to give evidence. The plaintiff's solicitors attempted to gather evidence from Solicitor A which could be used in support of the application, but in the absence of consent, Solicitor A responded that he was precluded from disclosing the substance of any privileged communications. As matters stand, the Court has not heard directly from Solicitor A in relation to these matters.
The challenge raised by the defendants is at least arguable. If accepted at trial, the argument may lead to a discharge of the guarantee in its entirety, as explained in Ankar Pty Ltd v National Westminster Finance (Aust) Limited.[44]

Joint tenancy issues

[44] Ankar Pty Ltd v National Westminster Finance (Aust) Limited [1987] HCA 15; (1987) 162 CLR 549.

A further issue emerged at the hearing, as to whether, if one of the defendants, namely Mrs Forbes, could establish a serious question to be tried, but Mr Anthony Forbes could not, the plaintiff would still be entitled to orders for possession of the land under the mortgage. Submissions were filed by both parties after the hearing, with leave.[45]
[45] Plaintiff's submissions dated 20 December 2024 and defendants' submissions dated 20 December 2024.
The plaintiff submits that, in the absence of severance, the mortgage attaches to the first defendant's interest in the property and the plaintiff would be entitled to possession in the circumstances I have mentioned. The defendants point to the need for order for partition or sale of the land, being matters which the plaintiff has not addressed in its application.
It is unnecessary to address these novel issues in any detail in these reasons, as I am satisfied both defendants have established a serious question to be tried in respect of the claim for possession, quite apart from the joint tenancy issue.

Lack of cogency in the plaintiff's affidavit material

Several affidavits have been filed by the plaintiff in support of its applications. All of the affidavits have been sworn by Mr Shen, an employee of the law firm which represents the plaintiff in this action. There are a number of procedural deficiencies evident in Mr Shen's affidavits, some of which I have already mentioned. There is a deeper evidentiary issue apparent from the affidavits, though, which has been emphasised by the defendants.
First, it should be noted that an affidavit for the purposes of a summary judgment application may be sworn on information and belief, subject to the grounds being stated. It should also be noted that the law firm which employs Mr Shen was involved in the preparation of the loan documentation which underpins this action. Many of the financing documents relevant to this action were in fact signed by a lawyer at Parsons & Partners, on behalf of the plaintiff. So, it would not be unusual perhaps for a solicitor from the firm involved in the finance arrangements to swear an affidavit deposing to the circumstances surrounding the preparation of the financing documentation and its execution.
However, the permissibility of swearing affidavits on information and belief does not immunise those affidavits from an attack on the ground that they lack cogency. In the present case, Mr Shen's role and seniority at the law firm is not mentioned in the affidavits and there is no evidence that Mr Shen himself was personally involved in the finance arrangements in any way. He does not say so in terms. The basis on which Mr Shen deposes to matters of fact in his affidavit is thus unclear, and the dogmatic statements in the opening paragraph of each of his affidavits are not something I can accept on face value. Let me turn to the affidavits. There are three matters which are the subject of the opening paragraphs of each of his five affidavits.
First, Mr Shen deposes that he is duly authorised to make each of the affidavits on behalf of the plaintiff lender. This is not disputed by the defendants.
Second, Mr Shen deposes that he is 'able to affirm positively to the facts hereinafter set fourth [sic] from [his] own knowledge save where otherwise indicated'. I cannot discern the basis on which Mr Shen makes this assertion.
Third, Mr Shen deposes that, where he affirms this affidavit on the basis of information supplied to me, he believes such information to be correct.[46] Only in Mr Shen's final affidavit, affirmed on 19 December 2024, has Mr Shen expressly deposed to matters on the basis of information and belief. In his first affidavits, Mr Shen deposes to various matters without indicating they are deposed to on information and belief. For example, I refer to Mr Shen's affidavit affirmed on 1 August 2024 at [10], [12], [13], [14] and [15], and in Mr Shen's affidavit affirmed on 10 October 2024 at [10] to [15].
[46] Affidavit of Mr Shen affirmed 1 August 2024 [1],
As to the substance of the affidavits, other than addressing written communications with which Mr Shen was involved, there is no evidentiary foundation apparent in the affidavits for any of the further matters of fact to which he deposes, in his capacity as a legal practitioner acting for the plaintiff. Much of the affidavit material consists of references to documents and unnecessary commentary on the terms of those documents.
It is somewhat unusual, at least in my experience, to embark on a summary judgment application such as this, which was always likely to traverse some measure of factual disputation, without adducing an affidavit sworn by a director, senior employee or other internal representative of the party seeking summary judgment. It is significant that no director, senior employee or other internal representative of Accelerated Loans Pty Ltd, the plaintiff lender in this action, has sworn any affidavit in support of the application. Alternatively, a partner at the law firm who was directly involved in the transaction may have sworn a supporting affidavit, but has not.
Where there are disputed questions of fact, which might be capable of resolution on an application such as this, the absence of persuasive affidavit material from a person on the plaintiff's side with direct knowledge of the facts strikes me as highly detrimental to the ability of the plaintiff to demonstrate that summary judgment ought be granted. For example, there is no evidence from the plaintiff as to the relationship it has with the finance broker and the accountant, or as to steps it took to assure itself that the parties to the transaction received independent legal and financial advice, or as to the usual processes it implements in financial transactions such as this which have high rates of interest and are in the nature of asset-based lending.
The affidavits of the defendants also suffer from deficiencies, which I have already noted. The difficulty for the plaintiff is that it bears the legal onus on this application and, although the defendants' affidavits may lack weight, I must take them at their highest on this application.

E. Conclusion and orders

For the foregoing reasons, the Court is of the view that there are serious questions to be tried in this action, having regard to the factual and legal defences which have been raised and verified by the defendants, and that there is also some other reason for a trial of the plaintiff's action. Further, it cannot be said the defendants' counterclaim is frivolous or vexatious.
As to the 'some other reason' point, I have in mind the combined force of the contentions raised by the defendants and the lack of cogent affidavit evidence adduced by the plaintiff in response, all of which leaves the Court in a position that it cannot presently be said that this is one of the 'clearest of cases' which is reserved for summary judgment where the Court is able to make a certain and concluded determination that the plaintiff would succeed.
It is axiomatic that the power to grant summary judgment should be exercised with great care. In my respectful view, the Court should not grant final relief in this case until after the usual interlocutory steps are taken, and following a trial of the action and the counterclaim, with the parties having the full opportunity to lead evidence and cross-examine relevant witnesses.
The Court will dismiss the plaintiff's applications and grant the defendants unconditional leave to defend the action and to prosecute their counterclaim. Nothing in these reasons should, obviously, be taken to anticipate the outcome of the present action or the counterclaim.
As these reasons are being published administratively without the need for any appearance, the Court will liaise with the parties to list the matter for a directions hearing at which counsel can address the Court as to:
(a)the costs orders which should be made;
(b)whether the action should be admitted to the CMC List; and
(c)the further directions which should be made for the efficient case management of the action through to mediation, and then to trial if necessary.

ATTACHMENT A

Compliance with O 37 r 2 and r 6 RSC

The first procedural non-compliance concerns the manner in which the plaintiff's affidavits have been prepared and filed. I refer to the affidavits of Mr Xudong Shen which were affirmed on 1 August 2024, on 20 August 2024 and on 10 October 2024.
Mr Shen is a legal practitioner and an employee of Parson & Partners, the Sydney law firm which represents the plaintiff in this action. These affidavits manifest failures to comply with the form and procedural requirements for affidavits in O 37 r 2 and r 6 RSC. Each of the affidavits referred to a single 'exhibit', consisting of numerous pages and several documents. Each such document ought to have been an attachment, individually marked and identified in the index. This is particularly important in a case in which the plaintiff is relying on a suite of financing documents which should each be separately identified in an affidavit as an attachment, rather than attached as simply one document without delineation.
The affidavits were also filed without the so called 'exhibit'.[47] Surprisingly, only the bodies of the affidavits had been filed with the Court.
[47] Contrary to O 37 r 2(7) - (9) and O 37 r 13(1) RSC.
Order 37 r 2 RSC provides:
2. Form of affidavits
(1) Every affidavit must be expressed in the first person and must state the place of residence and occupation of the deponent, and if he has no occupation his description must be stated. Vague occupations or descriptions must not be used.
(2) If the deponent is, or is employed by, a party to the cause or matter in which the affidavit is sworn, the affidavit must state so.
(3) Every affidavit must be divided into paragraphs numbered consecutively, and each paragraph must be confined, as far as possible to a distinct portion of the subject.
(4) Dates, sums, and other numbers must be expressed in an affidavit in figures and not in words.
[(5) deleted]
(6)Where an affidavit —
(a)consists of more than one page; or
(b) has attachments,
each page of the affidavit and attachments must be numbered consecutively in the upper right hand corner.
(7) If an affidavit has one or more attachments, an index which refers to the affidavit and lists each attachment, its page numbers and a short description of it, must be bound with the affidavit.
(8) Subject to rule 9(1), a document that is to be used in conjunction with an affidavit must be attached to the affidavit and be referred to in the affidavit as being attached.
(9) Subject to rule 9(1), attachments to an affidavit must be bound with it in one or more volumes as may be necessary.
(9A) If 1 or more volumes of an affidavit and its attachments are filed electronically, subrule (9) does not require them to be bound.
(10) Except in a case where the Court allows otherwise, the thickness of a volume of an affidavit and its attachments, if not filed electronically, must not exceed 40 mm.
(11) An affidavit and its attachments may be filed electronically if the size of each electronic file to be filed is less than 200 megabytes.
Order 37 r 6 RSC provides:
6.Contents of affidavits
(1)An affidavit must be confined to such facts as the deponent is able of his or her own knowledge to prove.
(2)Despite subrule (1), an affidavit may contain statements of information or belief if —
(a)the affidavit is made under, and for the purposes of proceedings under, a written law that permits it to contain such statements; or
(b)the affidavit is made under a provision of these rules that permits it to contain such statements; or
(c)the affidavit is made for the purposes of interlocutory proceedings; or
(d)the Court has made an order permitting the affidavit to contain such statements.
(3A) An affidavit containing statements of information or belief must set out the sources or grounds of that information or belief unless —
(a)the affidavit is made under, and for the purposes of proceedings under, a written law that —
(i)prevents the deponent from disclosing those sources or grounds or information material to them; or
(ii) does not permit those sources or grounds or information material to them to be made public;
or
(b)the Court has made an order permitting the affidavit to omit the sources or grounds.
(3)The costs of an affidavit which unnecessarily sets forth matters of hearsay, argumentative matter or copies of or extracts from documents, shall be paid by the party filing the affidavit.

Finally, O 37 r 9 RSC provides:
9. Exhibits
(1) A bound register, an account book or other book or any document of an unusual size must not be attached to the affidavit or referred to therein as being attached, but must be referred to as an exhibit.
(2) An exhibit to an affidavit must be identified by a certificate of the person before whom the affidavit is sworn or taken, and the certificate must have indorsed on it the short title of the cause or matter and its number, if any.
(3) An exhibit to an affidavit cannot be filed electronically.
The court pointed the deficiencies out to the plaintiff's solicitors by email on 6 November 2024 and also at the directions hearing on 7 November 2024. The earlier-filed affidavits were then re-filed by the plaintiff's solicitors, this time with the 'exhibits' included, but not otherwise properly corrected to accord with the rules.
A further affidavit was filed by the plaintiff's solicitors on 14 November 2024. I refer to the affidavit of Mr Shen affirmed on that date. That affidavit is also, unfortunately, non-compliant.

Erroneous references to O 13 r 7 RSC

The second matter which has gone awry is the insistence on the part of the plaintiff's solicitors in addressing the various matters in O 13 r 7 RSC. This can be found in the third affidavit of Mr Shen affirmed on 10 October 2024.[48] To be fair, these matters were addressed as a result of a misguided indication from the defendants' solicitors that the plaintiff's solicitors had overlooked the necessity to deal with these matters.
[48] At [10] – [15].
However, the requirements found in O 13 r 7 RSC apply where default judgment is sought in respect of a 'mortgage action', within the meaning of O 4AA r 1(1) RSC. The applications before the Court are, noticeably, not for default judgment under O 13 RSC, but rather for summary judgment under O 14 RSC and under O 16 RSC. The references to the matters in O 13 RSC were simply unnecessary.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
LM
Associate to the Honourable Justice Lundberg
23 DECEMBER 2024