Castles v Freidman

The High Court of Australia heard an appeal from the Supreme Court of New South Wales concerning an action by a money lender to recover on a promissory note. The defendant, the borrower, had pleaded facts alleging the plaintiff was a money lender and that the transaction was harsh, unconscionable, and involved excessive interest, thereby bringing the matter within the provisions of the *Money Lenders and Infants Loans Act 1905* (N.S.W.). The Supreme Court had sustained a demurrer to this plea, holding it to be bad in law.

The central legal issue before the High Court was whether the defendant's plea, which invoked the *Money Lenders and Infants Loans Act 1905*, was a valid defence to the money lender's claim on the promissory note, or if the common law rules of pleading, which generally require a plea to be a complete answer to the entire cause of action, should prevail. The Court also considered whether the Act permitted the borrower to seek relief within the existing action or required separate proceedings.

The High Court, in allowing the appeal, reasoned that the *Money Lenders and Infants Loans Act 1905* created a new jurisdiction and conferred new rights upon borrowers that were inconsistent with the strict application of common law pleading rules. The Court held that to effectively invoke the Act's provisions, a defendant must plead the facts bringing the case within its scope, and such a plea should not be struck out on demurrer. The Act's purpose is to allow the court to re-open transactions and take accounts, and the procedural rules must adapt to facilitate this remedial power. Therefore, a plea that alleges facts bringing the case within the Act, even if it does not confess and avoid the entire claim, is sufficient to raise the issue and prevent final judgment for the full amount claimed.

The High Court reversed the decision of the Supreme Court, finding that the demurrer should have been overruled. The Court ordered that the appeal be allowed and granted both parties leave to amend their pleadings as advised. The motion to rescind the special leave to appeal was dismissed.