Accom Finance Pty Ltd v Mars Pty Ltd - [2007] NSWSC 726

CITATION: Accom Finance Pty Limited v Mars Pty Limited, Accom Finance Pty Limited v Kowalczuk [2007] NSWSC 726
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 13, 14, 15, 16 and 19 March and 16 April 2007

JUDGMENT DATE :
6 July 2007

JURISDICTION: Equity Division

JUDGMENT OF: Windeyer J at 1

DECISION: Cross-claims dismissed in both proceedings. Orders for Judicial Sale to be made when pleading amended

CATCHWORDS: Estoppel – Res Judicata – Issue estoppel – Anshun estoppel – Default judgment in action by mortgagee for possession and for money sum due under mortgages in first proceedings – Defendant sought to bring cross claim for damages under Trade Practices Act – Whether defendant estopped from bringing cross claim – Issue raised in new proceedings must be on precise issue determined in original proceedings – No estoppel - Equity – Trade Practices Act – Unconscionable conduct – Where cross-claimant gave mortgage due to fraudulent conduct of third party – Cross-claimants not in a position of special disadvantage – Lender did not have knowledge of third party’s fraud – No unconscionable conduct - Contracts – Unjust contracts – Contracts Review Act – When contract “unjust” – Where borrower did not have means to repay loan – Where lender given fraudulent information about borrower’s ability to repay loan – Where rates of interest unrelated to lender’s risk – Where contract was a bad bargain – Contract not unjust – Whether strong possibility of default under mortgage triggering very high default rate could amount to predatory conduct – Contracts Review Act 1980 ss 7, 8, 9 - Legal Practitioners – negligence and retainer - Duties and liabilities – To client – Solicitor advising on security documents – Scope of duty – No obligation to advise client on financial sense of mortgage – No obligation to recommend client obtain financial advice – Scope of Rule 45 of the Solicitor’s Practice Rules - Mortgages – Gap between higher rate and lower rate – In reality lower rate not concessional rate but expected rate

LEGISLATION CITED: Australian Securities and Investments Commission Act 2001, s12CC
Contracts Review Act 1980 s7, s8, s9(2), Sch 1 Cl 1(c)
Fair Trading Act 1987 s4(4); s42
Solicitors’ Revised Professional Conduct and Practice Rules 1995, Sch 1, 4 & 5 of rule 45
Trade Practices Act 1973 s51AA, s51AC, s52 s75B, s82, s87

CASES CITED: ASIC v National Exchange Pty Limited (2005) 148 FCR 132
Beneficial Finance Corporation Limited v Karavas (1991) 23 NSWLR 256
Citicorp Australian Limited v O’Brien (1996) 40 NSWLR 398
Elkofairi v Permanent Trustee Company Limited [2002] NSWCA 413
Guardian Mortgages v Miller [2004] NSWSC 1236
Henderson v Henderson [1843] 3 Hare 100
Hoong v Leong Cheong Kweng Mines Limited [1964] AC 993
King Investment Solutions v Hussain [2005] NSWSC 1076
Linprint Pty Limited v Hexham Textiles Pty Limited (1991) 23 NSWLR 508
Metcash Trading Ltd v Hourigan’s IGA Umina Pty Ltd [2003] NSWSC 683
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Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2007] NSWSC 726
Decision Date: 6 July 2007

CaseChat Overview and Summary

The case of Accom Finance Pty Ltd v Mars Pty Ltd involved a dispute between a lender, Accom Finance, and a borrower, Mars. The lender sought to recover possession of property and a sum due under the mortgage, leading to a default judgment. Mars attempted to bring a cross-claim for damages under the Trade Practices Act in the new proceedings, which Accom Finance argued was estopped from doing. The case was heard by the Federal Court of Australia. The primary legal issues were whether Mars was estopped from bringing the cross-claim and whether the mortgage contract was unjust under the Contracts Review Act.

The court determined that Mars was not estopped from bringing the cross-claim as the issue raised in the new proceedings was not the same as the precise issue determined in the original proceedings. Regarding the mortgage contract, the court found that it was not unjust as the borrower did not have the means to repay the loan, and the lender was unaware of the third party's fraudulent conduct. The court also held that the strong possibility of default triggering a very high default rate did not amount to predatory conduct. Finally, the court clarified that a solicitor's duty did not extend to advising on the financial sense of a mortgage or recommending obtaining financial advice, and that the gap between higher and lower interest rates did not make the lower rate a concessional rate.

Orders