Bell v Eleventh Klingon

SUPREME COURT OF VICTORIA COURT OF APPEAL
S EAPCI 2025 0062
TONY MARSHALL BELL	Applicant
v
ELEVENTH KLINGON PTY LTD (ACN 007 397 551)	Respondent

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JUDGES:	WALKER and RICHARDS JJA
WHERE HELD:	Melbourne
DATE OF HEARING:	31 July 2025
DATE OF JUDGMENT:	14 August 2025
MEDIUM NEUTRAL CITATION:	[2025] VSCA 183
JUDGMENT APPEALED FROM:	[2025] VCC 364 (Judge Robertson)

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PRACTICE AND PROCEDURE – Appeal – Finality of settlement – Where parties resolved dispute regarding loan agreements by settlement deed with right to reinstate proceedings to enforce the deed – Applicant failed to pay instalments under settlement deed and respondent successfully sought judgment – Applicant made arguments on appeal not made below, which could have been subject of evidence – Applicant argued settlement deed and loan agreements breached Australian Consumer Law and were sham arrangements to avoid National Credit Code – Whether judge erred in construing s 13 of National Credit Code – Leave to appeal refused.

National Consumer Credit Protection Act 2009 (Cth) sch 1 (‘National Credit Code’) ss 5(1), 13(2); Competition and Consumer Act 2010 (Cth) sch 2 (‘Australian Consumer Law’) ss 21, 22, 24(1).

Coulton v Holcombe (1986) 162 CLR 1; Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; Viterra Malt Pty Ltd v Cargill Australia Ltd (2023) 74 VR 1, applied.

Wigan v Edwards (1973) 1 ALR 497; Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471, considered.

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Counsel
Applicant:		Ms M J Harris
Respondent:		Mr G Lubofsky
Solicitors
Applicant:	Garland Hawthorn Brahe Lawyers
Respondent:	Meerkin & Apel

WALKER JA
RICHARDS JA:

On 27 September 2013, the applicant, Tony Bell, entered into a loan agreement with the respondent, Eleventh Klingon Pty Ltd, for $30,000 (the ‘first loan agreement’). The interest rate on the first loan agreement was three per cent per month, with default interest of 48 per cent per year (calculated daily and compounding). On 17 September 2014, Bell entered into a second loan agreement with Eleventh Klingon for $250,000 (the ‘second loan agreement’). The interest rate on the second loan agreement was three per cent per month, with default interest of three per cent per month capitalised monthly.
Bell defaulted on both loans. In March 2020, Eleventh Klingon commenced proceedings against Bell for a total of $1,606,392[1] plus interest and costs, on the basis that Bell had not repaid the amounts owing under the two loan agreements.
[1]Being $551,713.60 under the first loan agreement and $1,054,678.43 under the second loan agreement.
A mediation was conducted in December 2020, and on 21 December 2020 Bell and Eleventh Klingon executed a deed of settlement, by which they compromised the proceeding. Bell was legally represented at the mediation that led to the entry into the deed and during the drafting of the deed.
One of the terms of the deed was that Bell would pay Eleventh Klingon a total of $500,000 in certain specified instalments. Another term provided that, in the event of default by Bell, Eleventh Klingon was entitled to seek judgment for the agreed amount less any payments made, and costs on an indemnity basis. Following the execution of the deed, the proceeding was dismissed with a right of reinstatement reserved to Eleventh Klingon to enforce the deed.
Bell paid $240,000 pursuant to the deed, but failed to pay the final instalment of $260,000. In April 2024, Eleventh Klingon sought judgment for the outstanding sum of $260,000.
In May 2024, Bell objected to Eleventh Klingon’s application for judgment. The basis for his objection was set out in an affidavit (the ‘First Bell Affidavit’). In that affidavit Bell said that the two loan agreements were void or otherwise unenforceable because he had signed them as a result of misleading representations by Eleventh Klingon and following undue pressure from Bell’s own solicitors, to whom he owed a significant amount of money. Bell further said that the deed was ‘signed under a fundamental mistake’ and was unenforceable.
On 31 May 2024, a judicial registrar of the County Court made orders entering judgment in favour of the plaintiff pursuant to the deed, together with Eleventh Klingon’s costs on an indemnity basis. In the ‘Other Matters’ section of the orders, the judicial registrar said as follows:
Nothing in the [First Bell] affidavit provides evidence that would support judgment not being entered. The facts deposed to do not and could not amount to a fundamental mistake at law (as the first defendant believes to be the case [para 24 of the affidavit]) or to set aside the Deed dated 21 December 2020.
In July 2024, Bell sought review of the judicial registrar’s decision. He expressly abandoned a case based on mistake. Rather, his grounds of review were, in summary, as follows:
(a)the underlying loan agreements were unlawful and unenforceable by reason of the National Consumer Credit Protection Act 2009 (Cth) (the ‘NCCP Act’) and the National Credit Code (the ‘Code’),[2] thus the deed was unenforceable due to a lack of consideration and/or for reasons of public policy;
(b)the terms of the deed were unreasonable because the interest clause in the loan agreements constituted a penalty and therefore void under the general law and/or s 243 of the Australian Consumer Law (‘ACL’);[3]
(c)there had been a collateral agreement between Bell and Eleventh Klingon in respect of relief from interest payment obligations in consideration for debt recovery services provided by Bell (although this does not appear to have been developed in oral argument); and
(d)Eleventh Klingon’s application of Bell’s payments to the second loan agreement, rather than to the first loan agreement, caused a maximisation of the interest payable under the first loan agreement (which was 48 per cent per year if the loan was in default). This, Bell contended, was oppressive, unconscionable and void under the general law and/or s 22 of the ACL.
[2]The Code is Schedule 1 to the NCCP Act. The parties have referred to the Code, at times, as the ‘National Consumer Credit Code’.
[3]The ACL is Schedule 2 to the Competition and Consumer Act 2010 (Cth).
In further written submissions, filed after the hearing before the judge below, Bell also contended that the deed involved an attempt by Eleventh Klingon to obtain an unfair advantage over Bell. This submission was based on the decision in Creative Academy Group Pty Ltd v White Pointer Investments Pty Ltd.[4]
[4][2024] NSWCA 133.
In April 2025 a judge of the County Court confirmed the decision of the judicial registrar and ordered Bell to pay Eleventh Klingon’s costs of the review. In summary, the judge held as follows:
(a)The deed was valid and enforceable without the need for consideration.[5] Furthermore, if consideration was required, it was provided.[6]
(b)The deed did not involve an attempt by Eleventh Klingon to obtain an unfair advantage over Bell.[7] Its entry into the deed was a bona fide compromise of the dispute by it.[8]
(c)The Code did not apply to the provision of credit under the two loan agreements because the requirements of s 5(1) of the Code were not satisfied:
(i)neither loan was for a personal, domestic or household purpose, or to purchase, renovate or improve residential property for investment purposes (as required by s 5(1)(b));[9] and
(ii)Eleventh Klingon did not provide the credit ‘in the course of a business of providing credit’ or ‘as part of or incidentally to any other business’ of Eleventh Klingon (as required by s 5(1)(d)).[10]
Thus the contention that the deed was unenforceable because the underlying loan agreements were void or otherwise invalid or unenforceable because they did not comply with the Code failed.[11]
(d)The judge thus concluded that there were ‘no real prospects’ that the deed was not valid or was unenforceable.[12]
[5]Eleventh Klingon Pty Ltd v Bell [2025] VCC 364, [120] (‘Reasons’).
[6]Reasons, [121]–[124].
[7]Reasons, [126].
[8]Reasons, [136].
[9]Reasons, [153]–[165], [190], [193].
[10]Reasons, [173].
[11]Reasons, [193].
[12]Reasons, [196].
Bell now seeks leave to appeal the judge’s decision. He does so on grounds which, in summary, were as follows:
(a)Proposed ground 1: the judge erred in ordering the summary enforcement of the deed in circumstances where:
(i)Eleventh Klingon failed to apply Bell’s repayments against the oldest debt, so that the first loan agreement was not discharged before the proceeding commenced, and with the consequence that excessive default interest was owed under the first loan agreement;
(ii)each of the loan agreements was a credit contract under the Code;
(iii)each of the loan agreements was a ‘sham’ contract, which expressed an intention that the purpose of the credit was for non-Code purposes so as to avoid the Code regulating the contract;
(iv)Eleventh Klingon was entitled only to restitution for the amount advanced under each loan agreement and for interest under s 4 of the Penalty Interest Rates Act 1983, rather than the default interest it had claimed;
(v)the terms of the deed requiring Bell to pay $500,000 to Eleventh Klingon are, in the circumstances, unconscionable at general law and/or under ss 21 and 22 of the ACL and should be set aside; and
(vi)the terms of the deed contain unfair terms within s 24(1) of the ACL and should be set aside.
(b)Proposed ground 2: the judge erred in the proper construction of the NCCP Act and the Code, as follows:
(i)in her application of s 13(2) of the Code to the loan agreements;
(ii)in failing to conclude that the loan agreements were made for personal, domestic or household purposes; and
(iii)in failing to find that the loan agreements were shams designed to avoid the application of the Code.
At the hearing of the application for leave to appeal, Bell also sought leave to amend his application for leave to appeal to add a new proposed ground 3, which in summary challenged the judge’s conclusion that Eleventh Klingon did not provide credit to Bell in the course of a business providing credit or as part of or incidentally to any other business. That application for leave to amend was opposed by Eleventh Klingon. We reserved our decision whether to grant leave to amend.
In addition:
(a)Bell sought a stay of the judge’s order, on the basis that there is a real risk that if a stay is not granted, Eleventh Klingon will seek to bankrupt him, which would render a successful appeal nugatory; and
(b)Eleventh Klingon made an application for security for costs, on the basis that Bell is impecunious, his impecuniosity was not caused by Eleventh Klingon, his prospects of success are very low, and his appeal does not raise any issues of public importance.
The application for leave to appeal, the application for a stay and the application for security for costs were heard together by this Court. We would refuse leave to appeal on the basis that:
(a)proposed ground 1 raised arguments not raised before the judge and which could have been the subject of evidence by Eleventh Klingon; and
(b)neither proposed ground 2 nor proposed ground 3 (had leave been granted to amend the application for leave to appeal) has any prospect of success.
Given our decision to refuse leave to appeal, Bell’s application for a stay and Eleventh Klingon’s application for security for costs fall away. We would also refuse leave to amend the application for leave to appeal to add proposed ground 3, as there is no utility in such an order.
Our reasons for these conclusions are set out below.

Proposed ground 1 of the application for leave to appeal

Proposed ground 1 of Bell’s application for leave to appeal is, ultimately, that the deed is unenforceable for two reasons:
(a)because it is unconscionable (either at general law or under ss 21–22 of the ACL); and/or
(b)because it contains an unfair term under s 24(1) of the ACL.
In addition, the orders sought appear to raise the question whether the deed should be set aside because it was the product of misleading or deceptive conduct in contravention of s 18 of the ACL.
As Bell conceded, none of these matters were raised by Bell before the primary judge. That is so even though Bell’s application to set aside the decision of the judicial registrar raised entirely new grounds from the ground relied upon before the judicial registrar and in Bell’s defence to the Eleventh Klingon proceeding. Furthermore, Bell was represented by counsel on the application to set aside the judicial registrar’s decision.
It is a fundamental principle that a party is bound by the conduct of its case at first instance, so that only in the ‘most exceptional circumstances’ might a party raise a new argument, or seek to rely on a new ground, which was not asserted at first instance.[13] In Coulton v Holcombe Gibbs CJ, Wilson, Brennan and Dawson JJ said this:
In a case where, had the issue been raised in the court below, evidence could have been given which by any possibility could have prevented the point from succeeding, this Court has firmly maintained the principle that the point cannot be taken afterwards.[14]
[13]Coulton v Holcombe(1986) 162 CLR 1, 7–8 (Gibbs CJ, Wilson, Brennan and Dawson JJ); [1986] HCA 33 (‘Coulton’); Suttor v Gundowda Pty Ltd(1950) 81 CLR 418, 438 (Latham CJ, Williams and Fullagar JJ); [1950] HCA 35 (‘Suttor’).
[14](1986) 162 CLR 1, 7–8; [1986] HCA 33, citing Suttor (1950) 81 CLR 418, 438 (Latham CJ, Williams and Fullagar JJ); [1950] HCA 35; University of Wollongong v Metwally[No 2] (1985) 59 ALJR 481, 483; [1985] HCA 28; Bloemen v The Commonwealth (1975) 49 ALJR 219. Mason CJ, Wilson, Brennan and Dawson JJ cited this passage from Coulton with approval: Water Board v Moustakas (1988) 180 CLR 491, 497; [1988] HCA 12. See also O’Brien v Komesaroff (1982) 150 CLR 310, 319; [1982] HCA 33; Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598, 1608 [51] (Gleeson CJ, McHugh and Gummow JJ); [2003] HCA 48.
Bell also accepted that, had the claims now identified in proposed ground 1 been raised before the judge, they could have been the subject of evidence adduced by Eleventh Klingon. For that reason, leave to appeal on proposed ground 1 must be refused.

Proposed ground 2 of the application for leave to appeal

Proposed ground 2 of the application for leave to appeal alleges the judge erred in her interpretation and application of the Code. In oral argument, Bell contended that if the Code applied to the two loan agreements, and if the loans were made in breach of the Code and were thus unlawful and unenforceable, then the legal consequence is that the deed is also unenforceable or liable to be set aside. Bell submitted that the deed could not ‘wash clean’ the unlawful loan agreements.
Bell’s argument that the deed cannot ‘wash clean’ the unlawful loan agreements has no prospect of success. That is because it is entirely permissible for parties to compromise a dispute concerning statutory entitlements. As this Court observed in Viterra Malt Pty Ltd v Cargill Australia Ltd, although a person cannot contract out of certain statutory rights or entitlements, it generally remains possible for parties to a dispute about such statutory rights to compromise the dispute. The distinction between the compromise of a dispute, through a settlement agreement, and the impermissible bargaining away of statutory rights, is well recognised.[15] These remarks apply as much to the statutory entitlements under the Code as they did to the statutory entitlements under the ACL at issue in Viterra Malt. As Bell accepted in oral argument, there are significant public policy reasons favouring the settlement of litigation that support the ability of parties to compromise proceedings, and the enforcement of such compromises, even where significant statutory rights are in play.
[15](2023) 74 VR 1, 66–67 [367]–[368] (Sifris, Walker and Whelan JJA); [2023] VSCA 157 (‘Viterra Malt’).
It may be accepted that the observations in Viterra Malt would not apply if the deed of settlement was not a bona fide compromise of a disputed claim.[16] But there was no suggestion on the appeal that the deed in the present case was other than a bona fide compromise of a disputed claim. It is significant that, in oral argument, Bell eschewed any suggestion that the deed was rendered unenforceable by reason of any conduct of Eleventh Klingon in relation to entry into the deed. He did not contend that Eleventh Klingon’s entry into the agreement was not bona fide. He relied solely on what he contended were the legal consequences of the alleged illegality of the two loan agreements as the basis for his argument.
[16]See, eg, Wigan v Edwards (1973) 1 ALR 497, 512 (Mason J); see also Creative Academy Group Pty Ltd v White Pointer Investments Pty Ltd [2024] NSWCA 133, [127]–[130] (Adamson JA).
Bell contended that, at the time he entered into the deed, he had not been aware that he might have had an argument concerning the operation of the Code. Even accepting that is so, it provides no basis for setting aside the deed in circumstances where his lack of awareness of a particular argument was not caused by, or contributed to by, Eleventh Klingon. It is not uncommon for parties to litigation to settle their dispute in a manner that resolves all of their claims against each other in circumstances where one party may not have a complete understanding of the potential legal arguments available to them. It is entirely permissible for such settlements to occur, and the public policy reasons for encouraging settlement of litigation, and for the enforcement of settlement agreements, apply equally to such settlements. The proposition that a person who, while legally represented, enters into a deed of settlement, could later have a basis to set aside that deed simply because they, or their lawyers, subsequently identified a new legal argument need only be stated to be dismissed. Such an approach to settlements would undermine the public policy of encouraging the effective, and final, settlement of litigation.
For this reason, we would refuse leave to appeal on proposed ground 2.
For completeness, we also consider that Bell’s argument that the judge erred in relation to the application of the Code to the two loan agreements has no prospect of success. Our reasons for that conclusion are set out below.

Relevant provisions of the Code

The Code regulates the provision of credit in certain limited circumstances. In that regard, s 5(1) of the Code provides as follows:
5 Provision of credit to which this Code applies
(1)This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of precontractual obligations) is proposed to be entered into:
(a)the debtor is a natural person or a strata corporation; and
(b)the credit is provided or intended to be provided wholly or predominantly:
(i)for personal, domestic or household purposes; or
(ii)to purchase, renovate or improve residential property for investment purposes; or
(iii)to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes; and
(c)a charge is or may be made for providing the credit; and
(d)the credit provider provides the credit in the course of a business of providing credit carried on in this jurisdiction or as part of or incidentally to any other business of the credit provider carried on in this jurisdiction.

In addition, s 13 relevantly provides as follows:
13 Presumptions relating to application of Code
(1)In any proceedings (whether brought under this Code or not) in which a party claims that a credit contract, mortgage or guarantee is one to which this Code applies, it is presumed to be such unless the contrary is established.
(2)It is presumed for the purposes of this Code that credit is not provided or intended to be provided under a contract wholly or predominantly for any or all of the following purposes (a Code purpose):
(a)for personal, domestic or household purposes;
(b)to purchase, renovate or improve residential property for investment purposes;
(c)to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes;
if the debtor declares, before entering the contract, that the credit is to be applied wholly or predominantly for a purpose that is not a Code purpose, unless the contrary is established.

The judge’s decision concerning s 13 of the Code

The judge commenced by considering the operation and effect of s 13 of the Code. There was no suggestion that Bell had made a declaration under s 13(2). He contended before the judge (and before this Court) that the statutory presumption in s 13(1) is displaced ‘only if’ Bell made a s 13(2) declaration.[17]
[17]Reasons, [138].
The judge rejected that submission. She observed that the effect of s 13(1) of the Code is that, unless a declaration is made under s 13(2) before the contract is entered into, the starting point will be that the credit contract will be presumed to be subject to the Code; however, that is a presumption only. That presumption is not conclusive and applies ‘unless the contrary is established’.[18]

Bell’s contentions about s 13 in this Court

[18]Reasons, [141].

By proposed ground 2, Bell sought to challenge the correctness of the judge’s decision about the operation and effect of s 13 of the Code. In oral argument, Bell confirmed that ground 2 of his appeal turns on the s 13 argument and that ground 2 could not succeed if this aspect of his case failed.
Bell contended, as he had before the judge, that the presumption in s 13(1) could be displaced only by a declaration under s 13(2). He advanced his argument by reference to the section considered as a whole. He pointed to ss 13(3), (4), (5) and (6) as demonstrating the significance that the legislature has attached to the making of a declaration. However, he was unable to cite any authority in support of his construction of s 13.
Bell further submitted that where, as here, there has been no declaration, that is the equivalent to there being an ineffective declaration under s 13(3). He submitted that Eleventh Klingon knew, or had reason to believe, that the credit was to be provided for a Code purpose, so as to trigger the operation of s 13(3). The effect of that was, he said, that by reason of s 13(4), paragraph 5(1)(b) of the Code is taken to be satisfied in relation to the loan agreements.

Consideration of the s 13 argument

Bell’s argument concerning the operation and effect of s 13 of the Code has no prospects of success. The judge’s decision in that regard was plainly correct.
A s 13(2) declaration triggers a presumption that credit provided is not provided for a Code purpose. That is a separate (and opposite) presumption from that contained in s 13(1). The making of a valid s 13(2) declaration will displace the presumption in s 13(1), but that is not the only means by which the s 13(1) presumption may be displaced. The express words of s 13(1) provide for the presumption to be displaced by the lender establishing to the contrary. That leaves open the possibility that there will be evidence that establishes that the purpose of the loan was not a Code purpose. There is no basis to read s 13(1) as requiring that, in order to establish the contrary, there was a declaration under s 13(2).
As for the proposition that the absence of a declaration under s 13(2) is, in substance, equivalent to there being an ineffective declaration, and that s 13(3) was satisfied in this case, this submission overlooked the words in s 13(3) ‘the declaration is ineffective if, when the declaration was made …’. That is, s 13(3) expressly operates only where a declaration has been made. It has no operation where there has been no declaration.
The judge was thus correct to approach the matter on the basis that the presumption in s 13(1) applied (so that the Code applied to Eleventh Klingon’s provision of credit to Bell) unless Eleventh Klingon established to the contrary. That, as the judge correctly concluded, required consideration of whether Eleventh Klingon had ‘established to the contrary’ by demonstrating that the pre-conditions in s 5(1) were not met in relation to the two loan agreements.[19]
[19]Reasons, [142].
In oral argument Bell did not advance any argument concerning the judge’s conclusions about the preconditions in s 5(1). He accepted that s 13 was the key to ground 2 and that ground 2 could not succeed if this aspect of his case failed. It is thus unnecessary to deal with the judge’s conclusion that the conditions in s 5(1) were not satisfied.

A final matter

For completeness, we also note that ground 2 purported to raise an additional argument concerning the validity of the two loan agreements, namely that they were shams designed to avoid the application of the Code.
As the High Court explained in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd:
‘Sham’ is an expression which has a well-understood legal meaning. It refers to steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences.[20]
[20]Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471, 487 [46] (Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ); [2004] HCA 55, citing Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449; [1988] FCA 289.
No contention that the loan agreements or parts of them were shams was advanced before the trial judge. Rather, Bell had contended before the judge that Recital E in the first loan agreement was an attempt to contract out of the Code and thus void by reason of s 334 of the NCCP Act. That is quite a different proposition from the contention that the loan agreements, or parts of them, were sham contracts. Like ground 1, had an argument based on the doctrine of sham been advanced below, it could have been the subject of evidence. Thus leave to appeal on this basis must be refused.

Conclusion

For the foregoing reasons, we would refuse leave to appeal.
In light of our decision to refuse leave to appeal, it is unnecessary to consider whether to grant Bell’s application for a stay of the judge’s order or whether to grant Eleventh Klingon’s application for an order for security for costs.
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[2025] VSCA 183

14 August 2025