CEG Direct Securities Pty Ltd v Schnapper Point Plaster Pty Ltd
[2020] VSC 319
•5 June 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
MORTGAGE RECOVERY LIST
S ECI 2019 04713
| CEG DIRECT SECURITIES PTY LTD (ACN 150 878 587) | Plaintiff/Defendant by Counterclaim |
| v | |
| SCHNAPPER POINT PLASTER PTY LTD (ACN 088 910 454) | First Defendant/First Plaintiff by Counterclaim |
- and -
| NORMAN MURRAY BLACKMORE | Second Defendant/Second Plaintiff by Counterclaim |
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JUDICIAL OFFICER: | Matthews JR |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 21 April 2020 |
DATE OF RULING: | 5 June 2020 |
CASE MAY BE CITED AS: | CEG Direct Securities Pty Ltd v Schnapper Point Plaster Pty Ltd & Anor |
MEDIUM NEUTRAL CITATION: | [2020] VSC 319 |
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PRACTICE AND PROCEDURE – Summary judgment – Plaintiff seeks summary judgment on claim and counterclaim – Civil Procedure Act 2010 (Vic), ss 61, 62, 63 and 64 – Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42VR 27 – Padella Pty Ltd v Elliott [2018] VSC 301 – Israfoods (2006) Ltd v J & D Consortium Pty Ltd [2019] VSC 323 – Application for summary judgment refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff/Defendant by Counterclaim | Mr I Hristovski | Ronayne Owens Lawyers |
| For the Defendants/Plaintiffs by Counterclaim | Ms AV M Carruthers | Mornington Legal |
JUDICIAL REGISTRAR:
Introduction
By summons filed 2 March 2020, the plaintiff/defendant by counterclaim, CEG Direct Securities Pty Ltd (‘CEG’), applies for summary judgment on both its claim and the counterclaim (‘Application’).[1] The Application is made pursuant to ss 61, 62 and 63 of the Civil Procedure Act 2010 (‘CPA’), alternatively rr 22.03 and 22.16 of the Rules.
[1]By order made on the Court’s own motion, pursuant to r 84.04 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’) the Application has been referred to me for hearing and determination.
CEG relies on the affidavit of Lynette Doreen Dent sworn 27 February 2020 (‘Dent Affidavit’). Ms Dent is the chief financial officer of CEG.
The defendants/plaintiffs by counterclaim, Schnapper Point Plaster Pty Ltd (‘SPP’) and Norman Murray Blackmore, oppose the Application.
SPP and Mr Blackmore rely on the affidavit of Mr Blackmore sworn 30 March 2020 (‘Blackmore Affidavit’).
Pursuant to directions made by me on 21 February 2020 in respect of the (then foreshadowed) Application, both parties filed and served outlines of submissions.
For the reasons set out below, I will refuse the Application.
Background
The pleadings
The Statement of Claim
By this proceeding, CEG seeks to enforce a loan it entered into with SPP, a guarantee given to it by Mr Blackmore, and a mortgage given by Mr Blackmore over a property at 12 Vivian Way, Mount Martha, described in certificate of title volume 9884 folio 727 (‘Land’).
By its statement of claim dated 16 October 2019 (‘SOC’), CEG alleges that:
(a) It entered into a loan agreement dated 13 April 2018 by which it agreed to lend a sum of $50,000 to SPP (‘Loan Agreement’).
(b) The key terms of the Loan Agreement were:
(i) for the advance of $50,000 (‘Advance’);
(ii) interest would accrue to the loan at a rate of 6% per month, but while the borrower (i.e. SPP) was not in default, interest would accrue to the loan at the concessional rate of 3% per month;
(iii) SPP would repay the loan within 12 months from the date of the Loan Agreement (‘Repayment Date’);
(iv) at the Repayment Date, SPP would be liable to pay the principal sum; unpaid interest, fees and charges; further monies advanced under the Loan Agreement or any collateral agreement; and legal expenses in relation to the negotiation, preparation or enforcement of the Loan Agreement or collateral agreement (‘Debt’);
(v) as security for the Debt, Mr Blackmore agreed to provide a guarantee and indemnity, and a second ranking mortgage over the Land; and
(vi) it would be an event of default under the Loan Agreement if SPP failed to repay monthly interest or repay the Debt on the Repayment Date.
(c) On or about 13 April 2018, Mr Blackmore entered into a deed of guarantee and indemnity whereby he agreed to guarantee the obligations of SPP under the Loan Agreement (‘Guarantee’).
(d) By an instrument of mortgage registered on the title to the Land under dealing number AR405590Y, Mr Blackmore provided a mortgage over the Land in favour of SPP (‘Mortgage’).
(e) By letter dated 29 July 2019, CEG notified SPP that it had failed to repay the Debt by the Repayment Date and had therefore defaulted under the Loan Agreement (‘Default’); that as at that date, the Debt was $69,904.41; and gave SPP seven days after service of the letter to repay the Debt to CEG (‘SPP Demand’).
(f) By notice dated 29 July 2019 issued pursuant to s 76 of the Transfer of Land Act 1958 (Vic) (‘TLA’), CEG notified Mr Blackmore of the Default and the Debt amount as at that date; gave him seven days after service of the notice to repay the Debt; and stated that if he failed to repay it by then CEG would be entitled to commence proceedings to recover possession of the Land and sell it in accordance with s 77 of the TLA (‘Blackmore Demand’).
(g) Mr Blackmore has failed and continues to fail to pay the Debt.
(h) As a result of that failure, CEG is entitled to possession of the Land.
By the prayer for relief in the SOC, CEG claims against both defendants payment of the Debt amounting to $68,717.20 as of the date of filing, and costs on a solicitor and own client basis. In addition, CEG claims an order for possession of the Land as against Mr Blackmore.
The Defence
By their defence dated 18 December 2019 (‘Defence’), the Defendants:
(a) Say that the National Credit Code, being Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth) (‘NCC’) applies to CEG, SPP and Mr Blackmore, and to the transactions entered into.
(b) Say that the terms agreed to by the parties are contained in an offer document dated 26 March 2018 tendered by CEG and signed by the defendants (‘Loan Offer’).
(c) Admit that there is a written Loan Agreement dated 13 April 2018 and that CEG agreed to lend the defendants $50,000, but otherwise deny the terms of the Loan Agreement, as it does not reflect the terms agreed to by the parties, which are contained in the Loan Offer.
(d) Say that the key differences between the terms in the Loan Offer and the terms in the Loan Agreement are:
(vii) the borrower under the Loan Offer is Mr Blackmore, whereas the borrower under the Loan Agreement is SPP;
(viii) the estimated interest rate in the Loan Offer is ‘circa 2% pm’, whereas the Interest Rate in the Loan Agreement is 6% per month but 3% per month if the loan is not in default;
(ix)the loan was to be repaid within 12 months of the Advance, not within 12 months of the date of the Loan Agreement;
(x) the Loan Offer identified a more limited range of costs and expenses than were contained in the Loan Agreement; and
(xi)the default provisions contained in the Loan Agreement were not set out in the Loan Offer.
(e) Say that SPP agreed to provide a general security agreement (‘GSA’) and admit that Mr Blackmore agreed to grant a second ranking mortgage over the Land, but deny that Mr Blackmore agreed to provide a guarantee and indemnity.
(f) Say that the interest rate of 72% per annum, the terms, costs and expenses, the further security, and the default provisions in the Loan Agreement was not properly communicated to, understood by, or agreed to by the defendants.
(g) Admit that Mr Blackmore signed and returned the Guarantee, but say that under the Loan Offer he was to be the borrower and it was not the intention of the parties for him to be a guarantor.
(h) Admit the Mortgage.
(i) Admit the SPP Demand and the Blackmore Demand.
(j) Admit that Mr Blackmore has not paid the Debt, but say that sum is not payable.
(k) Deny that CEG is entitled to possession of the Land.
The Counterclaim
By the counterclaim filed with the Defence on 18 December 2020 (‘Counterclaim’), the defendants refer to and repeat the content of their Defence, and say that:
(a) in around March 2018, Mr Blackmore sought a loan of $50,000 from CEG, through a mortgage broker;
(b) at no time prior to providing the Loan Offer did CEG seek financial information from the defendants;
(c) the agreement between the parties on or around 26 March 2018 was that CEG would lend Mr Blackmore $50,000 under terms set out in the Loan Offer (or substantially similar to those terms); Mr Blackmore would grant a second mortgage over the Land; and SPP would provide a GSA;
(d) CEG represented to the defendants that the Loan Agreement would be the same or in substantially similar terms as the Loan Offer (‘Representation’). Insofar as the Representation was written, the Loan Offer states ‘Following are the indicative terms and conditions that will apply’;
(e) on or around 12 April 2018 CEG’s lawyers wrote to the defendants’ lawyers and enclosed documents including but not limited to the Loan Agreement (‘Letter’). The Letter did not disclose or explain any differences between the Loan Agreement and the Loan Offer; did not enclose any credit guide under the NCC or otherwise; and did not enclose any guarantor information statement, disclosure form or the like under the NCC or otherwise;
(f) on or around 13 April 2018 and in reliance on the Representation and induced thereby, the defendants executed documents including but not limited to the Loan Agreement and the Guarantee, with the reasonable expectation that they were consistent with the Loan Offer;
(g) the Loan Agreement is a provision of credit under the NCC and contains an interest rate exceeding 48% per annum, contrary to the NCC;
(h) pursuant to the NCC, the defendants are not liable to pay any fees or charges relating to the credit assistance (‘Improper Expenses’), and are entitled to recover them as a debt due from CEG;
(i) the Loan Agreement does not embody or contain the agreement reached between the parties; was executed and returned by the defendants in reliance on and induced by the Representation; was prepared and signed under a mutual mistake of fact; and the defendants never agreed to the terms contained in that document, including material errors relating to the identity of the parties, interest rates, and costs and expenses payable;
(j) in the alternative, CEG was aware that the Loan Agreement did not reflect the Loan Offer, and it caused the Loan Agreement to be provided to the defendants without notice that the document reflected a proposed new agreement;
(k) the making of the Representation by CEG constituted conduct in trade or commerce that was misleading and/or deceptive, or likely to mislead and/or deceive, in contravention of s 18 of the Australian Consumer Law (which is Schedule 2 to the Competition and Consumer Act 2010 (Cth)) (‘ACL’);
(l) by reason of these matters, the defendants have suffered and continue to suffer loss and damage, and are entitled under the ACL to recover their loss and damage from CEG; and
(m) SPP and Mr Blackmore therefore seek orders that the Loan Agreement and Guarantee be set aside; alternatively orders that the Loan Agreement be rectified to embody the Loan Offer and the Guarantee be set aside; and loss and damages, including the Improper Expenses.
Reply and Defence to Counterclaim
By its reply and defence to counterclaim dated 12 March 2020 (‘Reply’), CEG says that:
(a) The ACL does not apply to financial services.
(b) The borrower under the Loan Agreement was SPP, a corporation, and therefore the NCC does not apply to the Loan Agreement.
(c) The Loan Agreement accurately reflects the agreement reached by the parties.
(d) On 28 March 2018, CEG issued a letter of offer to SPP and Mr Blackmore (’Second Offer Letter’) which:
(xii) Named SPP as borrower and Mr Blackmore as guarantor; and
(xiii) The Second Offer Letter was subject to the Loan Agreement being signed.
(e) The Loan Agreement was signed by the defendants; reflects and encompasses the entire agreement between the parties; and there are no errors in it.
(f) By reason of the terms of the Loan Agreement, the defendants were on express notice as to the interest payable under it.
(g) Mr Blackmore received independent legal advice regarding the Loan Agreement from his solicitor, Mathew Peter Phaedonos of Phaedonos Law, before signing the Loan Agreement and Guarantee.
(h) Admits that SPP agreed to provide a GSA.
(i) Does not admit the Representation and says that the terms of the Loan Agreement are the same or substantially the same as that set out in the Second Offer Letter.
(j) CEG was not required to provide any information under the NCC as the NCC does not apply to the Loan Agreement and Guarantee.
(k) Denies that there has been a mutual mistake of fact or conduct contrary to the ACL.
Evidence
The plaintiff’s evidence
The elements to establish CEG’s cause of action against the defendants are established via the Dent Affidavit. The Dent Affidavit deposes to and exhibits the Loan Agreement,[2] the Guarantee,[3] the Mortgage,[4] the SPP Demand and the Blackmore Demand.[5] It also deposes to the Default,[6] and to the amount owing as at the date of the affidavit.[7] I observe that the Dent Affidavit contains the statements required by r 22.04(1)(b) of the Rules.[8]
[2]Dent Affidavit, [9]; pages 8-36 of Exhibit LDD-1.
[3]Dent Affidavit, [9]; pages 37-62 of Exhibit LDD-1.
[4]Dent Affidavit, [9]; pages 63-84 of Exhibit LDD-1.
[5]Dent Affidavit, [14]; pages 176-178 of Exhibit LDD-1.
[6]Dent Affidavit, [13].
[7]Dent Affidavit, [15]; page 179 of Exhibit LDD-1.
[8]Dent Affidavit, [17].
However, I note that while the Dent Affidavit exhibits a certificate of the amount owing to CEG at the date of the affidavit,[9] the SOC does not plead a failure by SPP to pay the Debt as demanded in the SPP Demand, either at that time or subsequently. Other than pleading notification to SPP that SPP was in default,[10] there is no pleading that SPP has failed and continues to fail to pay the amount said to be owing.[11]
[9]Dent Affidavit, [15]; page 179 of Exhibit LDD-1.
[10]SOC, [13].
[11]In contrast with the pleading in respect of Mr Blackmore’s failure to pay the Debt: SOC, [15].
In respect of the Defence and Counterclaim, Ms Dent deposes that:[12]
[12]Dent Affidavit, [16].
(a) at all times it was clear to CEG and it was the parties’ intention that SPP would be the borrower and CEG would be the guarantor;
(b) the interest rate is clearly set out in the Loan Agreement, which is consistent with the Second Offer Letter;
(c) the defendants were at all times represented by a solicitor, Mr Phaedonos;
(d) CEG relied on Mr Phaedonos having provided a solicitor’s certificate confirming that he explained the loan documents and given independent legal advice to Mr Blackmore (‘Solicitor’s Certificate’); and
(e) the Loan Agreement clearly sets out the fees and expenses which SPP as borrower would be liable to pay to CEG.
Ms Dent deposes to the Second Offer Letter, which she describes as an unconditional loan approval. Ms Dent says that on or about 28 March 2018, the defendants provided CEG with the executed Second Offer Letter, and she exhibits this signed document.[13]
[13]Dent Affidavit, [5]; pages 1-4 of Exhibit LDD-1.
Ms Dent deposes that the Second Offer Letter provided for:[14]
[14]Dent Affidavit, [8].
(a) the borrower was SPP;
(b) Mr Blackmore would provide a personal guarantee for the loan;
(c) the loan was for $50,000 and its term of the loan was 12 months;
(d) the advance of the loan would be subject to certain conditions, including the defendants entering into legally binding security documentation including a loan agreement; and
(e) security for the loan would be a guarantee from Mr Blackmore, a second-ranking mortgage over the Land, and a GSA from SPP.
While Ms Dent does not depose to the interest rate under the Second Offer Letter, I note that the Second Offer Letter refers to the interest rate as being 3% per month.[15]
[15]This is apparent on the face of the Second Offer Letter: page 1 of Exhibit LDD-1.
As at 27 February 2020, the amount said to be outstanding was $94,284.19.[16]
[16]Pages 83 and 179 of Exhibit LDD-1.
The defendants’ evidence
Mr Blackmore deposes that he is the sole director and shareholder of SPP and that he incorporated SPP on 2 August 1999 and it has traded since that time. He says that SPP does not and has never owned real property.[17]
[17]Blackmore Affidavit, [1], [6], [7].
Mr Blackmore deposes that he is the sole registered proprietor of the Land, upon which is built the home that he purchased and has lived in since May 2000. He says that there is a first-ranking mortgage, to Secure Finance, over the Land which was registered on 7 September 2015.[18]
[18]Blackmore Affidavit, [8]-[9].
Mr Blackmore is also the sole registered proprietor of a vacant block of land at Hollands Landing in Victoria, which he purchased in May 2017 (‘Beach Property’).[19] He says that prior to his relationship with CEG, the Beach Property was unencumbered.[20] I note from the certificate of title for the Beach Property that there are two registered caveats, the second of which was lodged on behalf of CEG claiming an interest as charge.[21] There was no other evidence (or submissions, for that matter) before me as to this alleged interest and the SOC does not appear to concern it.
[19]Blackmore Affidavit, [10]-[11].
[20]Blackmore Affidavit, [11].
[21]Exhibit NMB-2.
Mr Blackmore deposes that in around March 2018, he wanted to borrow $50,000 to build a small beach house on the Beach Property, for his personal use and enjoyment.[22] He disagrees with the statement in paragraph [4] of the Dent Affidavit that the purpose of the loan was “to construct residential property for investment purposes.” He says he wanted to build a modest dwelling for personal use.[23] I interpose here to observe that beyond that bare statement in Ms Dent’s affidavit, she does not refer to any document which stated the purpose of the loan. Rather, the Loan Offer states that the purpose of the loan is “funds to complete small holiday home”[24] and the Second Offer Letter does not list the purpose of the loan.[25]
[22]Blackmore Affidavit, [12].
[23]Blackmore Affidavit, [13].
[24]Exhibit NMB-3.
[25]Exhibit LDD-1, pages 1-4.
Mr Blackmore says that he spoke with Mark Grange, a mortgage broker he knew, to ask who to get a loan from, and that Mr Grange told him he could borrow it from CEG but SPP would have to give a GSA and he would have to give a mortgage over the Land. Mr Blackmore says he spoke to Mr Grange a few times but never spoke to anyone at CEG. Neither Mr Grange nor CEG sought financial information from him or SPP.[26]
[26]Blackmore Affidavit, [14]-[17].
Mr Blackmore says that on 26 March 2018 he was shown by Mr Grange and given a copy of the Loan Offer.[27] He then goes on to describe the terms of the Loan Offer,[28] which I have already summarised above.
[27]Blackmore Affidavit, [18]; Exhibit NMB-3.
[28]Blackmore Affidavit, [19].
Mr Blackmore deposes that prior to these proceedings, he does not believe that he has seen, received or signed the Second Offer Letter.[29]
[29]Blackmore Affidavit, [21].
In relation to the final documents (including the Loan Agreement, Guarantee and Mortgage), Mr Blackmore says he was told by Mr Grange that he would need to see a lawyer to finish signing the documents to get the loan. He met with a solicitor recommended to him by Mr Grange and believes it was on 13 April 2018. Mr Blackmore says that neither Mr Grange nor the solicitor told him there were significant differences between the Loan Offer and the final versions of the documents. He says he believed that the terms were all the same, based on the assurance of the Loan Offer that the final documents would be the same or substantially similar and since no one had told him about any changes.[30]
[30]Blackmore Affidavit, [22]-[24].
Mr Blackmore says he would not have signed the documents if he had known there were important differences, including to the parties, the interest rate, and additional charges.[31]
[31]Blackmore Affidavit, [26].
He says that he remembers signing a number of documents where he was told to by the solicitor, that the meeting didn’t go for very long, and he doesn’t remember discussing anything important. He says he was not given copies of any of the signed documents.[32]
[32]Blackmore Affidavit, [27]-[28].
Mr Blackmore deposes that there has either been a significant mistake in the final version of the documents or there has been a misrepresentation made to him about what the loan was.[33]
[33]Blackmore Affidavit, [29].
Amongst other things, Mr Blackmore also deposes that on 1 June 2019 he entered into a contract of sale for the Land with an unrelated purchaser, which is unconditional and a deposit has been paid, and settlement is set to take place on 4 June 2020 (‘Sale’). The purchaser had asked for a long settlement date, which he had agreed to. Mr Blackmore says that after the first mortgagee is paid out, he expects there to be over $200,000 in equity (not including the deposit paid) remaining, which is more than enough to pay out CEG. He says that through his lawyers, he has told CEG about the Sale and expected surplus many times, including before these proceedings were issued.[34]
[34]Blackmore Affidavit, [30]-[33].
Mr Blackmore says that he is willing to sign a written loan agreement which correctly sets out the agreed loan, including the correct parties, interest rate and costs.[35]
[35]Blackmore Affidavit, [38].
Submissions
The plaintiff’s submissions
In addition to the documents described above, CEG also refers to two other documents signed by the defendants contemporaneously with them, being:
(a) a settlement instruction (‘Direction’) by which Mr Blackmore directed CEG to pay the Advance to SPP at its bank account held with the Commonwealth Bank, which was followed by CEG;[36] and
(b) a representation by mortgagor document (‘Blackmore Representations’), confirming that he had received independent legal advice, which was signed by Mr Blackmore and witnessed by Mr Phaedonos.
[36]Dent Affidavit, [10]; pages 153 and 171 of Exhibit LDD-1.
CEG submits that the Loan Agreement, the Guarantee, the Mortgage, the GSA, the Blackmore Representations and the Direction (‘Transaction Documents’) constitute the entire agreement between the parties. It says that the documents are signed by the defendants and where necessary witnessed by their solicitor, Mr Phaedonos, and that the defendants admit to signing each of the Loan Agreement, Guarantee, Mortgage and SGA. These documents supersede and encompass all previous discussions and negotiations leading up them being signed.
CEG says that there are no errors or mistakes in any of the Transaction Documents.
CEG relies on the defendants having been advised at all times by a solicitor, Mr Phaedonos. The unsigned Transaction Documents were sent to him by CEG’s solicitors, then they were signed by the defendants in the presence of and witnessed by Mr Phaedonos.
CEG also relies on the Solicitor’s Certificate, certifying that Mr Phaedonos had advised Mr Blackmore, which was also signed by Mr Blackmore confirming that he had received advice from Mr Phaedonos.
CEG submits that the NCC does not apply to the Loan Agreement and that therefore none of the defences of or allegations made by the defendants which rely on the NCC applying have any chance of success. The NCC is said not to apply because the borrower is a corporation, and the NCC provides that it only applies where the borrower is a natural person or strata corporation (which SPP is not).
Of the defendants’ allegations that the terms of the Loan Agreement were not properly communicated to, understood by or agreed to by them, CEG says that the terms of the Loan Agreement are clear on the face of the document. To the extent that it is relevant to the enforceability of the Loan Agreement, the Loan Offer and the Second Offer Letter are also consistent with the Loan Agreement. The document was explained to Mr Blackmore by his solicitor.
CEG also rejects the defendants’ allegations insofar as they rely on the proposition that CEG did not disclose or explain the differences between the Loan Offer and the Loan Agreement when the latter was forwarded to the defendants’ solicitor. CEG says that there is no obligation on CEG to explain the Transaction Documents to Mr Blackmore in circumstances where he is legally represented and has been provided with independent legal advice, and where the position regarding the loan is clear. To the extent there was any ambiguity in the wording of the Loan Offer, it was minor at best and was clarified with the Second Offer Letter and the Transaction Documents.
CEG rejects the allegation that Mr Blackmore did not agree to provide the Guarantee and that the parties did not intend for him to be a guarantor, saying that the intention of the parties is reflected in the documents signed, which include the Guarantee. A cursory review of the Guarantee would have revealed that Mr Blackmore was providing a guarantee, and he was advised by his solicitor in relation to the Guarantee.
Fundamentally, CEG rejects the defendants’ submission that the Loan Offer contains the terms of the true agreement between the parties.
First, CEG relies on the wording of the Loan Offer itself for the submission that it is clear that the Loan Offer was never intended to be the final agreement. This includes the following:
(a) the loan is said to have been ‘approved in principle’;
(b) the terms and conditions are said to be ‘indicative’;
(c) the interest rate is said to be ‘circa 2% pm’, and ‘this rate is only provided as an estimate, a definitive rate will be determined upon completion of the formal valuation and assessment’;
(d) the costs are said to be an estimate; and
(e) it contains the following statements:
Whilst this Letter of Offer sets out some of the general terms and conditions of the mortgage, full terms of the advance by the Mortgagee shall be outlined in the mortgage document subject of this loan, which will take precedence in all regards to this letter.
…
The summary set out above and in the attached Schedule(s) is an indication only of the principal terms which may apply if your loan is proceeded with. It is not a Loan Agreement it is an offer to enter into a loan. The loan will be made available subject to the legally binding security documentation, loan agreement and other requirements, which we will prepare. Once completed to our satisfaction, that documentation will be ancillary to this letter.
Second, two days after the Loan Offer, the Second Offer Letter was sent to the defendants. That letter referred to the loan as being unconditionally approved. It was signed by Mr Blackmore, identifies the borrower as SPP, the guarantor as Mr Blackmore, and the interest rate as being 3% per month. The Second Offer Letter states the following:
The loan will be made available subject to legally binding security documentation, loan agreement and other requirements, which we will prepare. Once completed to our satisfaction, that documentation will be ancillary to this letter.
CEG submits that, in any event, the Transaction Documents are consistent with the Loan Offer and the Second Offer Letter. They clearly set out that the final documentation, in the form of the executed Transaction Documents, will be binding. Even if there are inconsistencies, CEG says that this does not impugn the enforceability of the Loan Agreement, as it is that document which is legally binding.
CEG rejects of the defendants’ allegations as to the Representation and the breaches of the ACL in respect of misleading and deceptive conduct.
First, CEG says that the ACL does not apply to the supply, or possible supply, of a financial service or financial product.[37] The Loan Agreement is a financial product for the purposes of the Australian Securities and Investments Commission Act 2001 (Cth) (‘ASIC Act’), and as such is excluded from the operation of the ACL.[38] The defendants accept this.[39] However they say that financial products and financial services fall within the ASIC Act and that the misleading and deceptive conduct provisions under the ACL and the ASIC Act are comparable in many respects, and that the substance of their allegations are clear from the pleadings and the Blackmore Affidavit. If the Application is refused, the defendants say they will seek leave to amend their Defence and Counterclaim so as to refer specifically to the applicable sections of the ASIC Act.[40]
[37]ACL, s 131A.
[38]ACL, s 131A.
[39]Defendants’ Outline, [18].
[40]Defendants’ Outline, [19]-[20].
Second, CEG says that even so, there was no misleading or deceptive conduct on behalf of CEG. It says that the indicative and approximate nature of the Loan Offer is clear on its terms; and there are no inconsistencies between the Loan Offer, what is set out in more detail in the Second Offer Letter, and the terms finally encapsulated in the binding Loan Agreement, Guarantee and Mortgage.
Third, CEG says that it is clear from the Second Offer Letter and the Loan Agreement who the borrower was, who the guarantor was, and what the interest rate was.
CEG submits that there is no basis upon which the Loan Agreement can be rectified, as there is no basis for the allegation that the terms of the Loan Agreement and the Guarantee were entered into by mistake. It is ‘mutual mistake’ which is pleaded by the defendants, such that the Loan Agreement and Guarantee do not reflect the common intention of the parties, that is, both parties were mistaken in thinking that they did.
CEG is adamant that it has not made any mistake and that the mistake cannot be mutual.
Further, while the defendants do not plead unilateral mistake, CEG contends that the defendants cannot obtain rectification for unilateral mistake as (a) the defendants cannot have been mistaken because the Transaction Documents were clear on their face and were explained by the defendants’ solicitor; (b) the defendants cannot show that CEG was aware they were labouring under a mistake; and (c) the defendants cannot show that CEG took advantage of the defendants’ mistake.
The Defendants’ submissions
The defendants say that the Transaction Documents do not reflect the original written agreement in critical ways, including identity of the parties, among other material defects. They say that there has either been a mutual mistake (all parties signing the final documents in error) or there has been misleading and deceptive conduct (CEG being aware that the final documents did not reflect the agreement but induced the defendants to sign them). Further, they say that the true agreement between the parties is reflected in the Loan Offer, and not in the subsequent documents.
They oppose the Application on the basis that the Defence and Counterclaim have a real prospect of success and that elements of the Defence and Counterclaim, such as mistake and misleading and deceptive conduct, cannot reasonably be adjudicated on summarily in the present factual matrix, and will require the exchange of discovery, cross examination of witnesses, and a full hearing on the merits.
The defendants submit that CEG does not acknowledge that at any time the loan was to be between it and Mr Blackmore, and CEG offers no explanation as to how, when or why multiple fundamental changes were made to the agreement between the Loan Offer and the Loan Agreement. The changes relied on in respect of this submission are those as pleaded in the Defence and Counterclaim.
In addition, the defendants submit that the change in borrower from Mr Blackmore to SPP raise issues as to whether the NCC ought to apply, and if it does, the resulting consequences for CEG if the loan is not compliant with the NCC.
Further, the defendants say that the Reply and the Dent Affidavit raise contradictions with the defendants’ pleadings and evidence, presenting new issues which warrant further investigation, such that the proceeding should not be disposed of summarily. These include:
(a) Ms Dent says that the purpose for the loan was to construct residential property for investment purposes, without setting out any basis for that belief or any supporting contemporaneous document. It is left unexplained why Ms Dent asserts that a company which in its 20 years of incorporation has never owned property sought a $50,000 loan to build an investment property. On the other hand, Mr Blackmore gives evidence that he owns the Property, he sought the loan, and he wanted to build a small beach house for his personal use and enjoyment;
(b) Ms Dent says that the applicable interest rate is set out in the Loan Agreement and is consistent with the Second Offer Letter, whereas the Loan Offer states interest will be ‘circa 2% pm’, the Second Offer Letter states interest will be ‘3% pm’, and the Loan Agreement has a standard rate of 6% per month and refers to a concessional rate of 3% per month when the borrower is not in default; and
(c) the defendants say that at no time did CEG ask for financial information from them. CEG’s Reply contains a bare denial to this allegation, and it did not file any evidence responsive to the Blackmore Affidavit. In the absence of discovery and cross examination, CEG has not offered any support of its apparent argument that it conducted any form of due diligence in relation to the loan.
Mr Blackmore submits that he would suffer serious prejudice if the proceeding was dealt with summarily, due to the effect of that on the Sale. CEG seeks possession of the Land and payment of an amount which is disputed, which if ordered summarily, may risk the completion of the Sale. This is said to be a manifest risk which cannot be fixed by an order for costs. A significant surplus is anticipated, which could be lost if the Sale is disrupted, all for enforcing a $50,000 loan. This asserted prejudice was said to be a relevant consideration under s 64 of the CPA, as a proceeding should not be disposed of summarily if it is not in the interests of justice to do so. Prejudice is said to be relevant to consideration of the interests of justice.
CEG submits that the Sale is irrelevant to the Application. Further, it says that the Sale has a really long settlement, which raises questions about it, such as whether it is at arm’s length and for market value.
As noted at paragraph 47 above, the defendants concede that the ACL does not apply, but intend to amend their pleadings so as to rely on similar provisions prohibiting misleading and deceptive conduct in the ASIC Act, which does apply.
Applicable law
Section 61 of the CPA permits a plaintiff to make an application for summary judgment on the ground that the defendant’s defence (or part thereof) has no real prospect of success. Relevantly, s 62 of the CPA permits a defendant by counterclaim to make an application for summary judgment on the ground that the counterclaim (or part thereof) has no real prospect of success. Section 63 of the CPA provides (subject to s 64) that the Court may give summary judgment in a civil proceeding if it is satisfied that a claim, defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has ‘no real prospect of success’.
Section 64 of the CPA provides that:
Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because—
(a) it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only a full hearing on the merits is appropriate.
The principles applicable to applications for summary judgment are well known and were set out by the Court of Appeal in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd.[41] I have previously summarised the principles applicable to summary judgment in Padella Pty Ltd v Elliott,[42] which were adopted by Sloss J in Israfoods (2006) Ltd v J & D Consortium Pty Ltd.[43] There is no need for me to repeat these here: suffice to say, this is the approach I have followed.
[41](2013) 42 VR 27, 40 [35] (‘Lysaght’).
[42][2018] VSC 301, [19]-[28].
[43][2019] VSC 323, [41].
Consideration
I do not accept CEG’s submissions that the Loan Offer, the Second Offer Letter and the Loan Agreement are consistent in their terms. In particular, I consider the following to be material differences:
(a) the interest rate. Even if the difference is only between ‘circa 2% pm’ and ‘3% pm’, that is a difference of 12% over the course of 12 months (leaving aside any compounding effects through the application of the additional 1% per month, which can only increase the ultimate payable on account of interest). I cannot see how such a difference is not inconsistent. Further, neither the Loan Offer nor the Second Offer Letter say anything about two rates of interest: one a standard rate of 6% per month, with a concessional rate of 3% per month if the borrower is not in default, as contained in the Loan Agreement. Those earlier documents say nothing about interest being higher than 2% or 3% per month, as the case may be, if the borrower is in default. Interest over a 12 month period being 24% or 36%, as opposed to 72%, could not be regarded as being consistent;
(b) the identity of the borrower. If the borrower is Mr Blackmore, then arguably the NCC applies, and Mr Blackmore may be able to rely on the NCC to found his Defence and Counterclaim. While it is the case that Mr Blackmore was always going to give a mortgage over the Property to secure the loan of $50,000, regardless as to whether this was as primary obligor/borrower or via the Guarantee, the applicability of the NCC is an issue in respect of what terms apply to the loan, particularly in relation to interest and charges/fees/costs; and
(c) possibly, the charges/fees and costs, although the differences were not fully set out in the submissions, so I do not place much (if any) emphasis on these for the purposes of this Application.
In circumstances where CEG adamantly denies that it made any mistake in the terms of the Transaction Documents, in particular the Loan Agreement, it seems to me that a defence or counterclaim based on mutual mistake is highly unlikely to have any real prospect of success. Even if the common intention of the parties is determined objectively rather than subjectively, it is still likely to be very difficult to establish that both CEG and the defendants were mistaken as to whether the final documents (i.e. those relied upon by CEG in this enforcement action) reflected that common intention.
The fact that the defendants erroneously rely on the ACL for their misleading and deceptive conduct claim does not of itself mean that the Defence and Counterclaim have no real prospects of success. As pointed out by the defendants in submissions, this can be dealt with via leave to amend so as to rely on the ASIC Act instead. Summary judgment ought not to be granted in circumstances where an amendment to the pleading can deal with a technical defect of this type.[44]
[44]As noted in Lysaght at [35(d)], if the summary judgment is based on there being no reasonable cause of action in the pleadings, then a relevant consideration is whether any defect can be cured by amendment.
I do not consider that it can be said that the defendants have no real prospect of success in relation to a claim of misleading and deceptive conduct under the ASIC Act.
In circumstances where it is arguable that there are inconsistencies between the Loan Offer and the Loan Agreement, and where Mr Blackmore’s evidence is that prior to these proceedings he does not believe he has seen, received or signed the Second Offer Letter (see paragraph 26 above), he may be able to establish the Representation. In large part, that will depend on how the evidence comes out – which is not something that can be done on a summary basis.
Even if CEG is right that the Second Offer Letter effectively replaced the Loan Offer, in circumstances where it is arguable that there are inconsistencies between the Second Offer Letter and the Loan Agreement, then it cannot be said that the defendants have no real prospect of succeeding on their Defence and Counterclaim.
It may well be very difficult for the defendants to succeed in their allegations that the true agreement between the parties is reflected in the Loan Offer, due to that document clearly stating that it is indicative and to be followed by legally binding documents. However, both the Loan Offer and the Second Offer Letter refer to the final legally binding documents as being ‘ancillary to this letter’, which may suggest that the Loan Offer and/or the Second Offer Letter still have some work to do. I cannot say that the defendants’ arguments in this respect have no real prospect of success. Against that, the defendants have to overcome the clear and signed Transaction Documents, and the allegations that they entered into them with the benefit of having received independent legal advice.
The allegations in the Counterclaim that the Loan Agreement is not able to be enforced according to its terms by reason of the NCC depend either on the defendants succeeding on their misleading and deceptive conduct claim or their claim that the Loan Offer represents the true agreement between the parties. For the same reasons as set out above, it cannot be said that the allegation that the NCC applies has no real prospect of success.
Finally, even if I was not correct in my analysis that it cannot be said that the Defence and Counterclaim have no real prospect of success, in the circumstances of this case I would not grant summary judgment due to s 64 of the CPA. I consider that this case should not be disposed of summarily as it is not clear that there is no real question to be tried.[45] Further, there are factual matters which cannot be resolved without examination and cross-examination of witnesses, such that it is not in the interests of justice to dispose of the proceeding summarily.
[45]Lysaght, [35(d)].
Given this conclusion, I do not need to consider the defendants’ submissions that granting the Application would not be in the interests of justice due to the asserted prejudice in respect of the possible impact of summary judgment on the Sale. In any event, the asserted prejudice is just that, asserted. There is no evidence about it, other than the existence of the Sale. For example, apart from Mr Blackmore’s evidence that he had informed CEG about the Sale and the expected surplus,[46] there is no evidence before me as to whether CEG has stated that if it obtained possession of the Land prior to the completion of the Sale, it would not complete the Sale itself.
[46]See paragraph 31 above.
Further, I was not taken to any authorities exploring the proposition that this type of prejudice is a factor when considering s 64 of the CPA. While not therefore expressing a final view formed with the benefit of full submissions on the issue, my inclination is that this prejudice is not something falling within s 64 of the CPA. To the extent that granting an order for possession is prejudicial to the Sale, it is the timing of the making of that order which creates the prejudice, not the manner in which it came to be made. In my view, s 64 of the CPA is concerned with the way in which judgment is arrived at, either summarily or after a trial, not what the judgment itself is.
Given the disposition of the Application for the reasons set out above, I do not consider it appropriate for me to go into any further detail or analysis as to the merits of the case. The views I have expressed have been formed, of necessity, in the context of the summary nature of an application of this type and without the benefit of a trial, where evidence is likely to be taken from a variety of witnesses who are subject to cross examination.
Conclusion
For the reasons set out above, the Application will be dismissed.
The proceeding will be listed for directions before me on 12 June 2020, for the making of orders following the delivery of this ruling electronically and for directions for the further conduct of the proceeding.
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