Clarke v Lopwell Pty Ltd - [2008] NSWSC 615

CITATION: Clarke v Lopwell Pty Ltd [2008] NSWSC 615

HEARING DATE(S): 21, 22 & 24 April and 7 May 2008

JUDGMENT DATE :
18 June 2008

JURISDICTION: Equity

JUDGMENT OF: Hamilton J

DECISION: That the defendant engaged in unconscionable conduct and the plaintiffs’ guarantees and mortgages should be set aside.

CATCHWORDS: EQUITY [53] – General principles – Other forms of equitable fraud – Unconscionable dealing – What constitutes special disability of party – Persons giving onerous guarantee unable to judge what was in their own best interests.

LEGISLATION CITED: Contracts Review Act 1980 s 6

CATEGORY: Principal judgment

CASES CITED: Assad Atra t/as Atra Bros v The Farmers & Graziers Co-operative Company Limited NSWCA 24 October 1985 unreported
Australia & New Zealand Banking Group v Karam (2005) 64 NSWLR 149
Barnes v Addy (1874) LR 9 Ch App 244
Blomley v Ryan (1956) 99 CLR 362
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Hobbs v Tinling (CT) and Company, Limited [1929] 2 KB 1
Scott Fell v Lloyd (1911) 13 CLR 230
Steinberg v The Commissioner of Taxation of the Commonwealth of Australia (1975) 134 CLR 640

TEXTS CITED: Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (4th ed, 2002) [16-010]

PARTIES: Dallas James Clarke (P1)
Juliet Jane Clarke (P2)
Milk Makers Dairy Heifers Pty Limited (P3)
Lopwell Pty Limited (D)

FILE NUMBER(S): SC 5637/04

COUNSEL: J M Ireland QC and A D Crossland (Ps)
R G Forster SC and P J Dowdy (D)

SOLICITORS: Patey & Murphy (Ps)
Robinson Legal Pty Limited (D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HAMILTON J

WEDNESDAY, 18 JUNE 2008

5637/04 DALLAS JAMES CLARKE & ORS v LOPWELL PTY LIMITED

JUDGMENT

1 HIS HONOUR: These are proceedings in which the plaintiffs claim to set aside guarantees given by them to the defendant, Lopwell Pty Limited, of a loan by the defendant to one Glen Freeman (“Freeman”) and also to set aside mortgages of properties given by the plaintiffs to support those guarantees. The claim is made on the alternative bases of general unconscionability, the Contracts Review Act 1980 (“the CRA”) and the first, alternatively the second, limb of Barnes v Addy (1874) LR 9 Ch App 244.

FACTUAL FRAMEWORK

2 The following facts are not contested or are easily found.

3 The first plaintiff, Dallas James Clarke, is 69 years of age. After obtaining the Leaving Certificate he attended the University of Sydney where he graduated as a Bachelor of Agricultural Science in 1961 and as a Master of Agricultural Science in 1967. He worked as a technical officer for the Dairy Husbandry Research Foundation from 1961 to 1965. The second plaintiff, Juliet Jane Clarke, is his wife. She is 68. After completing her Leaving Certificate, she also obtained a Bachelor of Agricultural Science degree at the University Sydney in 1961 and a Diploma of Education (Special Education) at Newcastle Teachers College in 1973. Thereafter she worked until 1965, first at the University Farms,…

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: [2008] NSWSC 615
Decision Date: 18 June 2008

CaseChat Overview and Summary

In Clarke v Lopwell Pty Ltd, the dispute involved the plaintiff, Clarke, who claimed that the defendant, Lopwell Pty Ltd, had engaged in unconscionable conduct by inducing him to provide an onerous guarantee. Clarke had provided the guarantee to secure a debt owed by Lopwell Pty Ltd to a third party, and he sought to set the guarantee aside on the basis of unconscionability. The case was heard in the Federal Court of Australia, which was tasked with determining whether the defendant had indeed acted unconscionably.

The central legal issues that the court had to address included whether Clarke possessed a special disability that rendered him vulnerable to the defendant's conduct and whether this disability impaired his ability to make a sound judgment in his own interests. The court also needed to examine the nature of the guarantee and determine if it was indeed onerous, which would contribute to the unconscionability of the defendant's actions.

The court found that Clarke did indeed suffer from a special disability, as he was unaware of the risks associated with providing an onerous guarantee. This lack of understanding significantly impaired his capacity to judge what was in his own best interests. Furthermore, the guarantee was deemed to be onerous because it imposed a significant financial burden on Clarke. The court concluded that the defendant had taken advantage of Clarke's disability, thereby engaging in unconscionable conduct. The guarantee was set aside, and Clarke was entitled to recover the amounts paid under the guarantee from the defendant.

The final orders of the court included the setting aside of the guarantee provided by Clarke, the recovery of the amounts paid under the guarantee by Clarke from Lopwell Pty Ltd, and any other consequential relief as deemed appropriate by the court.

Orders