Alderton v Prudential Assurance Co Ltd - [1993] FCA 164

Re: KEVIN JAMES ALDERTON and KATHLEEN ZENA ALDERTON
And: THE PRUDENTIAL ASSURANCE COMPANY LIMITED
No. Q G85 of 1992
FED No. 164
Number of pages - 27
Guarantee - Trade Practices - Unconscionable Conduct
(1993) ATPR 41-230
(1993) 41 FCR 435

COURT

IN THE FEDERAL COURT OF AUSTRALIA

MELBOURNE DISTRICT REGISTRY
GENERAL DIVISION
Heerey J.(1)

CATCHWORDS

Guarantee - mortgage by sister and brother-in-law of insurance agent to support "agency development loan" - creditor entrusting to principal debtor arranging of surety's signature - misrepresentation of terms of loan by principal debtor - lack of independent advice - disadvantageous transaction - whether protected class.

Trade Practices - liability for misrepresentations of agent - ss.52 and 84(2).

Unconscionable Conduct - disadvantageous transaction - absence of independent advice - unusual terms.

Trade Practices Act 1974 - ss.52 and 84(2)

Avon Finance Co Ltd v Bridger (1985) 2 All ER 281.

Bank of Credit and Commerce International SA v Aboody (1990) 1 QB 923.

Barclays Bank PLC v O'Brien (1992) 3 WLR 593.

Briess v Woolley (1954) AC 334.

Chaplin and Co Ltd v Brammall (1908) 1 KB 233.

Coldunell Ltd v Gallon (1986) QB 1184.

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447.

Contractors Bonding Ltd v Snee (1992) 2 NZLR 157.

Kings North Trust Ltd v Bell (1986) 1 WLR 119.

Louth v Diprose (1992) 67 ALJR 95.

Turnbull and Co. v Duval (1902) AC 429

Walplan Pty Ltd v Wallace (1985) 8 FCR 27.

Yerkey v Jones (1939) 63 CLR 649.

HEARING

BRISBANE, 15-17 February 1993

#DATE 29:3:1993, MELBOURNE

Counsel for the applicant: Mr J.S. Douglas QC with Mr E. Morzone

Solicitor for the applicant: Feez Ruthning

Counsel for the respondent: Mr P. Lyons QC with Mr N. Thompson

Solicitor for the respondent: Drake, Walker and Leahy

ORDER

1. Bill of mortgage number K307677V dated 24 May 1990 made between

the applicants as mortgagors and the respondent as mortgagee be set aside.

2. The respondent be restrained from enforcing the powers conferred

by the mortgage against the applicants or from dealing with the property the subject of the mortgage.

3. Liberty to apply be reserved.

4. The respondent pay the applicants' costs, including reserved

costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

JUDGE1

HEEREY J. On 24 May 1990 the applicants Kevin James Alderton (Mr Alderton) and Kathleen Zena Alderton (Mrs Alderton) executed a bill of mortgage in favour of the respondent The Prudential Assurance Company Limited (Prudential) over a flat which they owned in Surfers Paradise. The mortgage was to secure $150,000 lent by Prudential to St Andrews Financial Consultancy Pty Ltd (SAFC), a company controlled by Mrs Alderton's brother, John Charles Urquhart (Mr Urquhart).

In this application Mr and Mrs Alderton seek orders setting aside the mortgage on a number of grounds.

The Applicants
3. Mr Alderton was born in Victoria in 1940. He left…

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: [1993] FCA 164
Decision Date: 29 MARCH 1993

CaseChat Overview and Summary

In the case of Alderton v Prudential Assurance Co Ltd, the applicants, who are the sister and brother-in-law of an insurance agent, sought to have a mortgage set aside that they had entered into to support a loan for what was described as an "agency development loan". The respondent, Prudential Assurance Co Ltd, is the mortgagee. The applicants argued that they had been induced into the transaction by misrepresentations made by the insurance agent, who was the principal debtor. The applicants also claimed that they had not received independent advice and that the transaction was disadvantageous to them, leading them to seek protection under the law.

The central legal issues the court had to address were whether the applicants were part of a protected class under the relevant legislation and whether the misrepresentations and lack of independent advice rendered the transaction voidable. The applicants argued that they were within a protected class due to their relationship with the insurance agent and that the misrepresentations and lack of independent advice constituted grounds for setting the mortgage aside. The court needed to determine if these factors were sufficient to invalidate the mortgage.

The court found that the applicants were indeed within a protected class, given their familial relationship with the insurance agent. It was also established that the insurance agent had misrepresented the terms of the loan, and the applicants had not received independent advice regarding the transaction. These factors combined were sufficient to conclude that the transaction was disadvantageous to the applicants and that the mortgage was therefore voidable. The court ordered the mortgage to be set aside, restrained the mortgagee from enforcing the powers conferred by the mortgage, and granted liberty to apply for further relief. Finally, the court ordered the mortgagee to pay the applicants' costs, including reserved costs.

Orders

Orders of the court

1. Bill of mortgage number K307677V dated 24 May 1990 made between

the applicants as mortgagors and the respondent as mortgagee be set aside.

2. The respondent be restrained from enforcing the powers conferred

by the mortgage against the applicants or from dealing with the property the subject of the mortgage.

3. Liberty to apply be reserved.

4. The respondent pay the applicants' costs, including reserved

costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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