Custom Credit Corporation Ltd v Lynch; Lynch v Custom Credit Corporation

[1993] HCATrans 162

6,

..

.

• ~

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M2 of 1993

B e t w e e n -

CUSTOM CREDIT CORPORATION

LIMITED

Applicant

and

KAREN JUNE LYNCH

Respondent

Office of the Registry

Melbourne No M28 of 1993

Between, -

KAREN JUNE LYNCH

Applicant

Lynch	1	18/6/93
DEANE J
TOOHEY J
McHUGH J

and

CUSTOM CREDIT CORPORATION

LIMITED

Respondent

Applications for special leave

to appeal

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 18 JUNE 1993, AT 2.01 PM

Copyright in the High Court of Australia

MR R. MERKEL, QC:  If the Court pleases, I appear with my

learned friend, MR S.M. ANDERSON, for the

applicant, that is, Custom Credit, in the first

matter, and the respondent in the second.

(instructed by Blake Dawson Waldron)

MR J BASTEN, QC:  If the Court pleases, I appear with my

learned friend, MS A.C. THACKER, for the respondent

in the first matter and the applicant in the

second, Ms Lynch.	(instructed by Western Suburbs
Legal Service)

DEANE J:	Mr Merkel?
MR MERKEL:	If the Court pleases. The application raises

the question of the proper construction of

section 36(1)(h) of the Credit Act, and I take

Your Honours straight to the section. The section

requires that a contract shall include:

if a commission charge is payable, a statement

to that effect -

Can I just stop there. A commission is defined

very widely at section 5, which is at page 5 of the

August 1989 reprint and is not restricted to commission strictly so-called but covers payments

by way of commission or in the nature of

commission, being an amount. Subparagraph (a) does

not give rise to a problem in the normal course

because one would expect the credit provider to be

aware of a commission charge under (a).

But under (b) a large range of payments would

be covered within the definition of a commission

charge because it is an amount in the nature of the

commission or commission paid or payable in

Lynch 2 18/6/93

connection with a contract that is connected with a

regulated contract and the consideration for which

is wholly or partly included in the amount

financed. The amount financed is the amount lent

and therefore any part of the borrowing which would

form part of the loan and is allocated to payment

of a commission in respect of a contract connected

with the regulated contract under section 36(l)(h)
would require to be disclosed on the construction

of the section put by the Full Court.

Can I take you to how the matter arises. The

contract itself is at page 161 of the application

book, and Your Honours will see part Fat the

bottom of the page, which provides that:

If this offer is accepted then:

F.l A commission charge is payable by Custom

Credit to:  Mr Cheap Caravans

There was known to Custom Credit a commission

payable to the dealer in respect of the matter and
there is in 2 and 3 provision for charges payable

to Custom Credit. Prior to the decision of the

Full Court the only decision dealing with the point

was that of Mr Justice O'Brien in the Full Court in

Lupi's case which was to the effect that a

commission charge was only required to be disclosed

if known to the credit provider. So that the

Full Court's decision, which, subject to appeal to

this Court, will settle the law in respect of the

matter, we would submit brought about a somewhat

radical change in this regard in the industry.

The point we make is that when one relates the

contract, which is in a standard form, to

section 36(l)(h) the question that arises is not

one of a false statement which, from time to time,

has attracted a strict liability approach but

requires a strict liability approach to a non-

disclosure of that which you do not know.

TOOHEY J:	The form does not necessarily presuppose that, does it, Mr Merkel, because it identifies as the
party to any of the transactions listed there
Cus~om Credit, whereas the commission here was
payable by Swann Insurance to the seller, Mr Cheap. under a misapprehension as to the operation of the
section.
MR MERKEL:	I accept that, Your Honour, but the point I am

making, which I had not probably expressed very

clearly was a different point, and that is that the
problem arising under section 36(l)(h), or

contracts of the kind that it applies to, is not a

Lynch 18/6/93

problem in relation to a strict liability for a

false statement. In other words, this is not a

statement that there is no other commission charge

payable but that which is disclosed. The liability

attaches to the act of non-disclosure, and the

Full Court said, and it said it very clearly, that

in respect of such non-disclosure there is a strict

liability and we say approached it, in effect, by

reference to the kind of principles that the courts

have sometimes acted upon with respect to false

statements, but which the courts have not acted

upon in respect of non-disclosure.

I really wanted to take Your Honours straight

away to two decisions of this Court as to how the

question of disclosure should be approached,

because we say that Their Honours were in error and

in a very fundamental respect in the approach that

they undertook.	Can I hand up to Your Honours four
cases which we will be relying upon.	The first is

Federal Commissioner of Taxation v Westgarth,

81 CLR 396. The relevant statutory provision is

set out at page 405 in the judgment of the

Chief Justice at point 6, where His Honour sets out

section 20, which provides for certain

consequences:

Where an administrator has not made to the

commissioner a full and true disclosure of all

the material facts -

What had occurred in this case is there was a

disclosure of what was believed to be the value and

it was later ascertained not to be the value. What

His Honour said at page 406, last paragraph, was:

The information which the Act requires to

be disclosed is information relating to the

description of the property included in the

estate and the value thereof .•... In the present case it is not disputed that the	administrators fully and truly stated what	they knew as to the items constituting the
estate and what their opinion was as to the
value of the house. It is contended, however,
that a material fact is the true value of the

- estate so that if a return does not state what

may ultimately be found to be the true value
of any item in the estate it follows that

there has not been a full and true disclosure.

His Honour then says:

Section 20 refers to "disclosure" of material

facts and not to statement of material facts.

Where the word "disclose" is used with reference to information to be provided it

Lynch 4 18/6/93

should in my opinion be understood as

requiring a statement of the relevant

information which is in the possession of the

person who is required to make the disclosure

for a particular purpose or to bring himself

within some particular statutory or other

provision. In other words, a person cannot be

said to fail to disclose something which he

never knew.

His Honour Mr Justice Fullagar deals with the

matter at page 415, last four lines, where

His Honour said:

The critical word in this sub-section is,

indeed, I think, the word "disclosure". Apart

from the ancient saying that "lex non cogit ad

impossibilia," both the etymology of the verb
"disclose" and its normal and popular use
involve, in such a context, the idea of
revealing to others something which is known
to oneself. If I honestly and reasonably

believe (perhaps even if I honestly but

unreasonably believe) that fact A exists, and

I accordingly assert that fact A exists, I may, when it is proved that fact A does not

exist, be properly said to have asserted

something which was not true. But I cannot,

if any regard is to be had either to natural

fairness or to propriety of language, be said

to have failed to disclose that fact A did not

exist.

The second case I wanted to take Your Honours very

briefly to was - - -

TOOHEY J: Just before you do that could you tell us,

Mr Merkel, do you accept the proposition that the credit provider was aware of a commission being

payable by A to B, neither A nor B being the credit

provider and the credit provider is aware that the

commission is payable, there is an obligation under

paragraph (h) to disclose it?

MR MERKEL:  As I understand the width of commission charge,

yes, Your Honour. That is the problem that arises.

TOOHEY J: So-your point is the narrower one that the

obligation can only arise if the credit provider

was aware that the commission is iri-fact payable.

MR MERKEL:  Yes, Your Honour. That is the only point and we

say that the affidavit material indicates to

Your Honours the extent of the problem of a strict

approach which Their Honours had not taken

cognizance of. Murphy v Farmer deals with what

His Honour Justice Fullagar had distinguished from

Lynch 18/6/93

a non-disclosure to a false statement, but even

there the majority, Your Honours Justices Deane,

Dawson and Gaudron at page 28 dealt with provisions

that are not dissimilar to those in the present

case, although it was based upon a false entry in a

customs form which attracted automatic forfeiture,

and I should say under section 36(l)(h) non-

compliance with the provision has two consequences.

Firstly, it leads to automatic forfeiture of

credit charges, which is irrespective of the nature

of the non-compliance under section 42 and is an

offence under section 43, and the words used in

section 42(1)(b) for the automatic forfeiture of

credit charges and the words used in section 43 are

identical. In other words, it is not in accordance

with the division which includes section 36.	The
relevance of that to what Your Honours said in

Murphy's case of course comes from the passage at

the top of page 28, that even with respect to a

liability for a false statement Your Honours said

at the second line:

On the other hand, it seems to us to be more

strongly arguable that clear words should be

required before there is attributed to the

Parliament an intention to take the draconian

step of imposing automatic forfeiture as a

penalty for "any" wrong "entry invoice

declaration answer statement or

representation" regardless of whether the

wrong information was provided as the result

of an innocent mistake or excusable ignorance.

The effect of the penalty of automatic

forfeiture under s 229(l)(i) can be

devastating and quite disproportionate in that

it applies regardless of the value of the

goods or the importance or effect of the wrong

statement which was made.

Then at point 5 Your Honours said:

It is however, in our view, proper to approach

the construction of the actual words of the

Act on the basis that it is to be presumed

that clear words would have been used if it

-_were intended to impose automatic forfeiture

as the penalty for "any" wrong "answer"

regardless of whether it was k~owingly or

innocently given. Such a prima facie

presumption supports reading the word "false"

ins 229(l)(i) as meaning purposely or

intentionally untrue.

we say that that puts the case against us higher

than we say need be, for the reason I indicated to

Your Honours, namely, that the courts have not

Lynch 6 18/6/93

approached the question of disclosure in the same

way as a false statement and, indeed,

Justice Fullagar's quote would suggest the law does

not compel that which is impossible. We say that

that is the result of the Full Court's decision in

the present case. Justice Marks, in His Honour's

judgment, it is at pages 93 and 94 in respect of

the insurance in question. At line 15 at 93 said:

there was no evidence that the appellant knew
that Mr Cheap was an agent of Swann, nor how

the C.C.I. was effected.

Just by way of background, it formed no part of the role of Custom Credit in providing credit to either

require or even take into account the fact that

consumer credit insurance may or may not be taken

out. Then, at the bottom of the page, Their Honours

said:

In its reasons, the Tribunal purported to find

that the appellant "as a licensed credit

provider ..... would have had information

readily available that the insurance company,

Swann Insurance ..... paid commiss-ion to

suppliers of goods -

Then His Honour says:

For the reasons I have given, I do not

regard this statement as a relevant finding of

fact or that it is justified by the evidence

or properly the subject of "judicial notice".

So the present case starts on the basis that the applicant in this Court did not know that the

dealer was acting in any way in respect of the

taking out of insurance by the borrower from Swann,

nor -

DEANE J: That is not an accurate summary of what His Honour

says.

MR MERKEL: Sorry, Your Honour, I mean - - -

DEANE J: His Honour says that there was not evidence that

the-applicant knew non constat that there was

evidence that the applicant did not know.

MR MERKEL:  I am sorry, Your Honour. Your Honour is

correct; there was no evidence that the appellant

knew that Mr Cheap was an agent or how the CCI was

effected. We would say that, looked at in its

proper context and together with the denial of it
being open to the finding that there was any basis

for the tribunal to conclude that it would have had

some informqtion available, on a fair reading of

Lynch 7 18/6/93

the evidence we would put it higher, Your Honour;

there is no basis for any inference to be drawn

from the evidence that Custom Credit had any idea

that this had occurred because the files of Custom

Credit were tendered in court.

DEANE J: But what if - and I am not suggesting this is

possible - but what if the correct construction of
36(l)(h) was to require disclosure except in

circumstances where the credit provider did not

know or have readily available means of

information. Would not the onus then lie on the

credit provider?

MR MERKEL:  That would be so, Your Honour, and we would say

that looked at on the evidence in the present case,

that onus would have been discharged. But may I

say this, Your Honour: the question of importance

that arises is that that is not the way the

Full Court has dealt with the matter. The

Full Court has imposed an absolute liability,

knowledge or not having knowledge.

DEANE J: Yes, I follow that.

MR MERKEL:  Your Honour, we say that it is really that

problem that now besets us, particularly having

regard to the way in which this Court in

Marlborough Gold indicated appellate courts should

approach the question of construction of uniform

legislation. The effect, we say, of the

Full Court's decision is that other appellate

courts dealing with the Credit Act would be obliged

to apply the principles of this decision to	·
section 36(l)(h) unless they were capable of
forming the view that it was clearly wrong.	We

would submit that if it was within that category

this Court would grant special leave to appeal so

the matter could be dealt with in that way.	We
would submit that for the reasons we have

indicated, the question is one that is appropriate

for consideration by this Court. There is no

authority to support the Full Court's decision, nor

did they refer to any.

Thirdly, we say that with respect to the app!icant itself the evidence is that some $90

million worth of credit charges could be liable to

forfeiture because of the fact that there are all

these downstream commissions which ·are described in

the material which are connected with the contract

and form part of the amount lent, but which the

credit provider would have no knowledge of but,

even putting aside the question of this applicant,

it is clearly on the evidence, which is not

disputed, a matter that really would permeate this

problem throughout the whole of the industry. It

Lynch 18/6/93

is put by the court that the fact that you can

apply for reinstatement under section 85 somehow
produces a different construction.

What we have sought to say in our material is that we say that the provisions of section 85

operate and have been held by the Full Court in

Victoria in Gray's case to operate as a civil

penalty. We say that to say where you suffer the

civil penalty but are able to have it mitigated by

a judicial discretion should not produce the

extreme construction on section 36(l)(h), which is
applied in this case, particularly where the

provision in the same words is an offence under the

statute.

DEANE J: Well, now, in terms of the offence, is there any

discretionary power to relieve from that? Or is it

an offence, full stop?

MR MERKEL: Section 43 does not, as I understand it, have

any such discretion, Your Honour. There is a

penalty provided for - I should also indicate that

under this Act, because licensing is subject to

regulation the commission of any offences by credit
providers has quite substantial other effects on

its repute and also on its ability to maintain a

credit licence. All I say is that, as the material

demonstrates, a section 85 matter is not treated

lightly; it is in the nature of a civil penalty

which calls for an investigation of more than just
the particular matter but the overall conduct of

the credit provider in relation to credit

provision.	So we would submit that for those
reasons - - -

DEANE J: Did the Full Court say anything about that aspect

of it, because their judgment seems to largely turn

on section 85.

MR MERKEL:  Yes, it does, Your Honour. The Full Court dealt

with the question.

at pages 89 to 91 - His Honour dealt with it really His Honour Mr Justice Marks,

at line 22 at page 90, and then concluded at

line 25 at page 91:

The provision is thus consonant with a credit

--provider being strictly required to include a

statement as to the payability of commission

whether it knows about it or not. Ordinarily,

it would either know or have little difficulty

in finding out if it is payable. The

exceptional and unexpected case is catered for

bys 85.

Lynch 9 18/6/93

His Honour Justice Ormiston dealt with section 85 a little more fully at page 120, line 20, in the

reasons of His Honour. His Honour said:

I see no reason, in the light of the clear words of the statute, to read in the exception

as to want of knowledge as to a commission

charge -

Then, over the page at line 7 at 121 said:

Although non-compliance amounts to a criminal

offence with a penalty ..... it is clearly a

regulatory offence and on the authorities

there is no need to import any requirement of

mens rea.

We say that only exacerbates the situation. I

think that is how His Honour dealt with it, and
then His Honour said - there was a passage where

Their Honours seemed to take the section 85 route

as maybe being an easy way out, but the affidavit

material shows that that is not so. So we would

submit that Their Honours were, with respect, in

error and, indeed, the authorities of this Court

and Mr Justice O'Brien - which Their Honours did

not refer to, although they were referred to

Their Honours - would strongly support a contrary

view in respect of the way this section works.	We
would submit that for those reasons it is

appropriate that special leave to appeal be granted

on that point.

DEANE J: Mr Merkel, can I take you to 36(l)(h). I

appreciate the result for which you contend, but

how as a matter of construction of words do you

construe 36(1)(h) to reach that result?

MR MERKEL:  What we say, Your Honour, is firstly that the

implicit obligation in 36(l)(h) is an obligation of

disclosure. It requires a disclosure; even though

not used expressly, it is implicit. Secondly,

Your Honour, we say that therefore if that is part

of the implicit underlying obligation, it imports

into it a disclosure in accordance with the

principles I have put of that which you know. So

we would submit that on its proper construction the

requirement of disclosure in the cqntract of the

commission charge really is of that·which you know.

We then go to say that there is a second limb

to it, and I should indicate that strictly, as the

Full Court would have it against us, the first disclosure is not necessarily limited to a disclosure by either party; it just seems to be a

disclosure. If it is to be limited to the credit

Lynch 10 18/6/93

provider's disclosure then one gets it from the

next leg which is:

except in so far as the information is not

known by the credit provider or is not readily
available to the credit provider, a statement

of the person to whom and the person by whom

the commission charge is payable -

So what we say is, there is a requirement to

disclose that which you know and then, in so far as

you do not know who it is payable by or to whom and

that is not readily available, you are not required

to disclose anything further.

DEANE J: But if it is readily available, or the information

that a commission charge is payable is readily

available to the credit provider, you would say

that the credit provider has no duty to disclose?

MR MERKEL: That is so, Your Honour, because it does not

know it. The second leg is consequential upon the

first arising.

DEANE J:  In other words, on your construction the exception

is adding a burden to the credit provider.

MR MERKEL:  Once he knows.

DEANE J:  No. The exception is not restricting; it is

adding to the obligation to the credit provider, on

your construction.

MR MERKEL: Yes, Your Honour, but after the condition

precedent to its operation is satisfied.

DEANE J:  I follow that, but what the exception is doing is

imposing a further obligation.

MR MERKEL:	Yes, Your Honour.
DEANE J: It is a strange reading of the words.

MR MERKEL: Well, with respect, not, Your Honour, because

the first information is that a commission charge

is payable. One may query the utility of that

diselosure but we say that to make sense of it -

and we are confronted at the outset with a clause
that is not happily or easily drawn.on any view of

what it is seeking to achieve, but we are

confronted with that, Your Honour, and we say that

the obligation once you know a commission charge is

payable is to disclose the further information or

not disclose it at your peril if it is readily

available. So it does impose an added obligation

but that added obligation, Your Honour, gives

utility to the clause.

Lynch 11 18/6/93

McHUGH J:	It is certainly a curious paragraph. You do not appear even to have to specify the amount of the
commission.
MR MERKEL:	No, Your Honour, you do not.

McHUGH J: And the section seems to proceed on the basis

that you have got to state that the commission

charge is payable, even though you may not know the person to whom or the person by whom the commission charge is payable.

MR MERKEL:  Yes, Your Honour, and it is a horrendous problem

because the fact of the matter is if one can take this case, it is all very well for the commission

to be payable by Swann to Mr Cheap but if in fact

Mr Cheap paid one of its employees a commission for

arranging that insurance, that equally falls within

the definition of insurance and it is part of the

amount financed, because it is all part of the same

amount of commission. We say that to start

imposing that kind of obligation as a matter of

strict liability can really serve no statutory

purpose and for that reason we fell back on saying

that if our interpretation is wrong, an

interpretation consistent rather than i~consistent

with the purpose should be applied because it has

quite severe consequences because there are other

provisions of the Act. But if there was a false or

a wrong disclosure, if you wanted to take the

course of saying a commission is payable to avoid

the risk of falling under section 36(1)(h) as a

strict liability section, you would fall into the other pitfall of then disclosing information that

was not true.

McHUGH J: Yes, I was going to ask you about whether you

could avoid its operation by making such a

statement.

MR MERKEL:  It has been thought of, Your Honour, and credit

providers are twisting and turning but the decision

of the Full Court is a very severe one indeed,

having regard to the fact that this extends to

every credit contract which is entered into under

the Act, and having regard to the nature of credit

contracts going to cover a whole range of goods:

motor vehicles, caravans, accessories, insurance,

that the opportunity for strict application of

36(1)(h) is endless. I should indiqate that there

is no lack of reluctance on the part of the legal services involved to take such a point, and these points are taken. In fact, it has become a point of quite considerable importance. But that is all

I wish to say on the question of commission.

Lynch 12 18/6/93

There is a second leg which produces an

equally anomalous result, which is the second basis
on which we seek leave to appeal, and that is the

literal construction given by Their Honours to

36(l)(a). The facts are fairly simple. I do not

need to take Your Honours to the evidence, but

could I take Your Honours back to the contract at

page 161. What occurred in the present case is the dealer acted as agent in respect of this matter for

the borrower. She, at page 162, had the document

taken to her by the employee of Mr Cheap, and she

signed it, bottom left-hand corner, Karen Lynch, on

6 May, it would appear.

In evidence it just came out that she did not

believe she went on a Sunday and the Sunday
happened to be 8 May, so it appeared she signed it
on 6 May. It was then dated by her agent 8 May and

then witnessed by her agent and on 8 May sent as an

offer to Custom Credit which accepted it on 9 May.

Of course the fact that she did not sign it on

8 May could not possibly be within the knowledge of

the credit provider and we then get into the

conundrum under section 36(1)(a) which says that

the:

contract shall include:

(a) the date on which the contract, or an

offer to enter into the contract, was signed

by the debtor -

The conundrum is that when the debtor signed·

what I took Your Honours to, she signed it as a

document intending it would be an offer when

completed by her agent. It was not an offer on

6 May but an offer on 8 May, and I should indicate

the words in section 36(1)(a) are "offer to enter

into the contract", not the document which

ultimately constitutes the offer.	So that on a
strict view, it is impossible to comply with

section 36(l)(a) in the present case because it was

signed as a document on 6 May, only became an offer

on 8 May, but she did not sign it on 8 May. That

has been relied upon under sections 42 and 43 to

create an offence on the part of the credit

provider because it is an offence for the credit

provider to enter into a contract qther than in

accordance with the division.

We say to make any sense out of that, to avoid

the absurdity with which we are confronted by the

Full Court's decision that the date, whether

unknown and whether signed as an offer, but the

date on which the document is signed if not

properly entered falls into 36(1)(a), is clearly

wrong and we would submit that to avoid the

Lynch 13 18/6/93

literalism and absurdity which has confronted us,

what the section should be really indicating is

that it is the date on which the document which is

the offer and was signed became an offer as such.

So that the real date on which the offer to enter

into the contract can properly be said to be signed

in the sense of executed as an offer is not the

date it literally or physically was executed, but

the date it was in an executed form and stood as an

offer.

The other way in which we put it is to say

that this is a case if ever there was where the

doctrine of substantial compliance, as enunciated

by His Honour, as he then was, Justice Gibbs, in

Equipment Investments v Dowthwaite, should apply.

That is, I think, the third in the folder of cases

we handed up to Your Honours. That is reported in

16 FLR 23 where His Honour was dealing with similar

strict compliance provisions of the Hire Purchase

Act, and at pages 30 to 31 His Honour, particularly

at the bottom of page 30, last seven lines -

His Honour was dealing with very much the same

problem as we have. At point 6 His Honour said:

The defendants relied upon the facts thats

3(1) provides that the statement shall be "in

accordance with the form" -

Very similar to 36(1)(a). And then the last eight lines at page 30:

This object might be achieved notwithstanding

the fact that the form was not strictly

followed, and it would be absurd to impute to

the legislature an intention that, for no

sensible reason, there should be so exact a

correspondence between the statement and the

form that the least disconformity - even the

addition of one word which in no way altered

the meaning - should result in the serious

consequences.

His Honour then at page 31 enunciated a test

which had regard to whether the legal effect

int~nded by the legislature was achieved, and we

say that that is an appropriate way in which to

approach section 36(l)(a) in a case such as the

present. The courts have not considered the

applicability of substantial compliance to the

Credit Act. Their Honours rejected it in respect

of a case that we say is appropriate for this Court

to consider it.

The third basis on which we put the 36(l)(a)

point is that it should have been saved by the de

minimis principle, what may be the last refuge, to

Lynch 14 18/6/93

avoid the absurdity. The final point, which we

reserved before the Full Court, was that we would

submit that notwithstanding the long line of

judicial decision that you cannot have estoppel in

the face of a statute, this is a case where that

line of authority should not be followed because of

the public policy reasoning underlying those cases.

The fourth case in our list, Kok Hoang v Leong Cheong Kweng Mines in the Privy Council, which has

been acted upon in Australia but not by this Court,

is saying that you cannot rely on estoppel in

respect of legislation such as the present because

the statute gives rights and the borrower cannot be

estopped from enforcing it. But at pages 1015 to

1017 Their Lordships discuss the principle but it

is essentially rooted in public policy, or social

policy, as it is set out in the middle of

page 1016.

We would submit that if we are wrong in all

our other submissions, the rigidity of such a rule,

in our submission, should not be maintained in the

light of what really is a Pandora's box of major

magnitude because there is no doubt that the date

on which a document was physically signed and the

date which it may ultimately be dated as having

been an offer is a problem that would not be unique

to this case, particularly given the difficulties

in respect of this legislation and problems that

borrowers are having and no doubt will have in

respect of obligations under their contracts. We

submit that both of those points, which are the two

points that we seek to raise on our application for

special leave, are appropriate to be dealt with by

this Court and we would submit that it is

appropriate that special leave be granted.

DEANE J: Thank you, Mr Merkel. Mr Basten?

MR BASTEN:  Your Honour, may I deal with the second point

first. The point raised illustrates a matter which

is of general importance in relation to how one

deals with this legislation and appears to have

been ignored. The point is that the credit

provider either prepares its own documents or, if it does not, it should ensure that its agents are properly versed in the legislation and are able to

carry out those responsibilities. ·'Fhat is a matter

which this credit provider fully appreciates

because if one goes to page 164, which is part of

the contract which is in evidence, there is a

statement required to be filled in in what might be

called a dealer contract, whereby the supplier

warrants, at about point 7 on the page in

paragraph 5, that, having identified certain

matters:

Lynch 15 18/6/93

in all other respects the Supplier has

complied with the requirements of any

applicable legislation relating to the

completion of such Offer and in particular The

Credit Act, 1984 -

and I perhaps should have addressed first

paragraph 1, which says that -

to the best of the Supplier's knowledge,

information and belief the information

contained in such Offer is correct.

So that the credit provider understands that when

it gives responsibility to a dealer then it needs

to make sure that the dealer appreciates the

significance of what is being done. It is also

clear from my friend's argument in relation to

Dowthwaite's case that the credit provider

appreciates the importance of at least substantial

compliance with all the provisions of section 36,
and that is acknowledged, I think, in paragraph 28

at page 150. In this case the date was wrong; it

was wrong by two days - - -

McHUGH J:  Was it? Why is not the proper view of it that

the signature was just in escrow and did not take

effect until the dealer filled in the date?

MR BASTEN: Well, that might have been a finding of fact

which was open to the Full Court.	It was not the
view they took of the facts.	They drew the

inferences. If that is the correct finding then so

be it. That is hardly, in my submission, a special

leave point for this Court though, and what my

friend seeks to raise is a much more basic

principle which affects the credit provider's

operations.

Might I say in passing that there are a number

of matters dealt with in section 36 which perhaps

are not easy to comply with, especially if the

dealer does not ensure that its own forms are

supplied and filled in in its officer's own
presence. What my friend says in relation to the

commission charge point - and I will come back to

it~ is that although the Act has its own method of

remedying errors in section 85, this is an

expensive means of dealing with th~ matter. There

are two answers to that; one is tha~ section 85 is

in the legislation and its significance is for the

question of statutory interpretation. Practical

difficulties which may arise can hardly be relevant

to the question of statutory interpretation.

Secondly, if there really are these practical

difficulties then the legislature in this State

Lynch 16 18/6/93

might well adopt a course which has been adopted in

other States whereby a credit provider can make an
ex parte application in relation to any number of

contracts where it says the error is minor and that

is a simple solution to the practical difficulties

which may arise.

May I turn then to the question of the

commission charge argument. The difficulty with

the interpretation which my friend seeks to place

upon 36(l)(h) is that he wishes to insert words in

the section and the words, as I understand it,

which he seeks to insert in relation to the

statement about a commission charge are to the

effect that the statement must be made if the

credit provider is aware. But is that really

sufficient? Why should it not also include a

requirement that the statement be made if the

credit provider should reasonably have been aware?

And, of course, once one goes down that line of

statutory rewriting it is instructive to note, as

the Court already has, that there are two limbs to

the section and it is a powerful argument against

my friend's position that precisely that leniency

is granted in relation to the information referred

to in the second limb and - - -

McHUGH J: Well, I know Mr Merkel threw the weight of his

argument on (h), but in a case like this, why is not the just solution of the problem through the

definition section, paragraph (b), and in paragraph

(a) the credit provider would be aware, one would

think, of the payment of the commission. This

particular commission is caught by paragraph (b),

is it not?

MR BASTEN: That is so.

McHUGH J:  Why do you not read paragraph (b)(ii) as saying,

"The consideration for which is wholly or partly

included by the credit provider within the amount

financed". So that it is not a commission charged

within the meaning of the definition, unless the

credit provider has included the consideration

within the amount financed.

MR BASTEN:  I accept entirely what Your Honour says. It

seems to me that 36(l)(h) is clear in its own terms

in the first limb, and the practical difficulty my

friend indicates does arise from the breadth of the

commission charge definition. If there is to be

some reading down of that definition, which is not

the point my friend puts, then again the question

is: How does one do that? In this case - I am

sorry, may I just note in passing that section 36

also requires a statement of the amount financed in

accordance with Schedule 4. Schedule 4 of the Act

Lynch 17 18/6/93

requires that where there are amounts included in

the amount financed on account of insurance

premiums, they must be separately disclosed.	Now,
that has been done in the present case, but -

McHUGH J: That is the figure of $2,120?

MR BASTEN:  And the figure of $441. I mean, there were two

insurance premiums included in this amount

financed. They are both separately stated by the

credit provider in its statement of the amount

financed. So that, even if what Your Honour put to

me was correct, and there may be much merit in it,

it is ·not this case. That leads me to a related

point because, Your Honour, the argument in

relation to this particular matter is dealt with at

page 91·by His Honour Mr Justice Marks, at line 28,

where he says, having considered the definition of

36(l)(h):

Ordinarily, it -

the credit provider -

would either know or have little difficulty in

finding out if it is -

that is, the commission, is -

payable. The exceptional and unexpected case

is catered for by s.85. The requirement is

that the loan contract includes a statement as

to all commissions payable.

Now, in relation to insurance premiums, that of

course is true, and His Honour continues on the

next page, line 6:

In the present case, the appellant knew,

because it was in the offer which it accepted,

about the c.c.I. contract between the

respondent and Swann. It was a simple matter

to find out, if it did not know, whether

commission was payable to Swann's agent,

Mr Cheap.

TOOHEY J:  I find that passage a bit curious really. It

seems to blur the responsibility under both limbs

of paragraph (h).

MR BASTEN:  It may do, but the argument being put is that it

is an intolerable and absurd burden to place upon

the credit provider in a case such as this to
require it to disclose that commission charge. My

point is that in this case it is not, and if there

are other cases where there is an absurd or

unreasonable burden,, then they might be dealt with

Lynch 18 18/6/93

by looking back at the definition of commission

charges Justice McHugh suggested.

TOOHEY J: It is rather unreal, Mr Basten, is it not, to see

the way in which paragraph (h) apparently operates,

that to comply with that paragraph, if commission

and charge is payable, there has to be a statement

to that effect, presumably devoid of any detail,

but nevertheless that would comply with paragraph (h), and the detail is only required - well, some

detail, that being the person to whom and the

person by whom the charge is payable, need only be

inserted if it is known, or readily available?

MR BASTEN:  What Your Honour is suggesting is that, I think,

a slight practical absurdity, and suggesting that

the fact might be known and the other details not

readily available. That may be so. There may be,
hypothetically, cases in which a dealer is prepared

to disclose the fact, but says, "The amount of the

commission and precisely whom it is paid to is a

matter for me, and it is confidential trade

information and I am not going to tell you". There

is no reason why a dealer might not take that

position in relation to the identity of the payee,
perhaps a subsidiary company or a broker, not the

dealer himself, or itself, and there is nothing

inherently evil about taking that position. The

credit provider should continue with such a dealer
without any qualms, but cannot obtain all the

information.

TOOHEY J:  No, it is not an argument against the

construction for which you contend. It was really

a comment on the way in which the Full Court

approached the matter.

MR BASTEN:  The Full Court dealt with the matter fairly

briefly. In my submission their ultimate

conclusion is right.	I accept what Your Honour
says in relation to some of the reasoning.
I was going to move on to another point, which

was simply to say, if I might, one further word in

relation to the interrelationship between the

credit provider and the dealer. Under section 32,
there are obligations imposed not only upon the
credit provider, but by an agent a~thorized to

receive an offer to the credit provider, or a

supplier who is linked with a credit provider

in 32(1); the obligation there is that the offer

shall include a notice in the "prescribed" form.

In 32(2) there is an obligation not to give:

an offer in writing signed by or on behalf of

the credit provider -

Lynch 19 18/6/93

without the required information, and in 32(3) a

"true copy" of the offer is to be provided. So

that the interrelationship and responsibility is

placed by the Act on the trader's side - if I may

call it that - and it clearly acknowledges that

there will be agencies and dealerships involved in

these sort of transactions. And ultimately of

course, as my friend notes, section 43 imposes a

direct obligation on the credit provider not to

enter into a contract which is not in accordance

with a division.	My friend says, "Well, if that is
the case one must read down the requirements".	But

another answer might be that one must take careful

note as to what level of mens rea, or defence of
honest and reasonable mistake of fact, might be

available in relation to an offence under that

section. That is not a question which is before
this Court because no charge has been laid, and as
far as I know, no charge has ever been laid under

this Act. Those are my submissions.

DEANE J:  Mr Basten, the convenient course is obviously to

deal with the two applications together, so if you
could just proceed with the next one. That is,
unless your approach is that you do not wish to
proceed with the cross-application unless leave is

granted in the first application.

MR BASTEN:	Your Honours, there is, as my friend has not noted, an outstanding application for extension of
time in relation to this application, as there was
in relation to his.  Some thought was given as to
whether this could be dealt with by
cross-application after special leave had been
determined.  It was thought appropriate to put on a
separate application. I am happy to deal with it
as a separate application, but perhaps they might
be, as we anticipated, heard together if that is a convenient course. It is not technically a
cross-application.
DEANE J: What I was saying was this: if you do not wish to

proceed with your application unless leave is

granted in Mr Merkel's application, it would be

convenient to deal with Mr Merkel's application

first. But if you wish to proceed with yours in

any_-event, they should obviously be dealt with

together.

MR BASTEN:  I think that is correct, Your Honour. All I was

trying to explain was why we had not waited and we
did wish to have the matter dealt with in any

event.

DEANE J: Both applications are out of time, are they?

Lynch	20	18/6/93
MR BASTEN:	Yes, they are.	Well, on one view of it there is

a question of construction under the rules as to

whether time does run during the vacation. I do

not know whether I need trouble Your Honours with

that question, but technically if it does my

friends are slightly out of time; ours is
considerably out of time. Unless the point is

taken, perhaps I can leave it for the moment.

DEANE J: Well, you proceed with the application.

MR BASTEN:  Your Honours, the grounds upon which we seek

special leave are set out at pages 170 to 180 of

the application book, and the principal ground is

one which, in my submission, is of central

importance to the scope of the statutory

provisions. It is the point which was agitated

this morning in relation to whether or not, in

determining unjustness, it is necessary to find

circumstances which affect the conscience of the

credit provider and it is a matter which, in my

submission, goes to the very difference at the

heart of the statutory provisions which Your Honour legislation" in West's case. Clearly that must

have been wrong if the common law principles of

unconscionability are simply picked up unchanged

and unextended.

It is our submission that, in that respect, it

is clear that the legislation does extend the test

which was applied under the common law principles

and I will come to that in a moment, if I may.

McHUGH J:  Do you not have the same problem that arose in

Westerdorp, that you have got a problem on the

facts of this case, the finding that Mr Cheap was

an agent for Miss Lynch, not for Custom Credit?

MR BASTEN:  The argument on the facts, Your Honour, is in

our favour, in my submission. It is that the facts

clearly illustrate the difficulty in the approach	taken by the Victorian Full Court. What happened
was that the Full Court expressly found unfair
tactics on the part of Mr Cheap. That is stated in
emphatic terms, at page 95 of the appeal papers.
At line 3:

there appears to be no contest·that, if the

respondent was told that she was obliged to

borrow an amount which was greater in fact

than she would have borrowed if she had been

told the truth, the making of this
representation was capable of amounting to an

"unfair tactic" or "pressure" within the

meaning of - ·

Lynch 21 18/6/93

the provisions. The issue, then, is: what was

Mr Cheap's role in making that representation and,

at page 107 at line 20, in a different form, the

same statement is made:

On the assumptions that Ryan told the

respondent -

and there was a finding of fact that he did -

that C.C.I. was compulsory when it was not and

that this was the reason why $2,021 was

included in the amount financed, there was, in

my view, an unfair tactic exerted on or used

against the respondent.

And the unfairness followed from the fact that the

consumer credit insurance, which was said to be

compulsory, was something not permitted by the Act.

Now, if there was that unfairness, then it raises

starkly whether or not it matters whether Mr Cheap

was an agent of the credit provider. If he were

not then, in my submission, under the New South

Wales Court of Appeal decisions there would,

nevertheless, be unjustness and the court would so

find. The court did not find unjustness. Under

the court of appeal decisions in New South Wales it

would then be a matter for discretion as to whether

relief should be granted. There is, of course, an

important distinction between the two stages which

are required to be considered, and the

distinction - - -

DEANE J: Are you assuming that "unjust" has a wider meaning

than (a) and (b) of section 145?

MR BASTEN:  I am not assuming that point, Your Honour.

DEANE J: Well, if you are not, why would the contract be

unconscionable, harsh or oppressive, as between

these parties?

MR BASTEN:  I can come to that, Your Honour, but the point I

am making is that there is a clear finding of fact

by the Full Court that such unjustness did arise in

thi$ case. The question was rather whether the

credit provider was responsible for it. So that,

unless there is some wish to reopen that question

then, in my first submission, I would not need to

deal with it. The point - - -

McHUGH J: But, Mr Basten, you seem to be saying that once

you get a finding of unfair tactics, in the sense

that they are at large, then it is a matter for

discretion. Is that your point?

MR BASTEN:  Yes.

Lynch 22 18/6/93

McHUGH J: But that is a difficult argument to accept,

having regard to the fact that 147(2)(i)

specifically limits unfair tactics and so on to

three categories of persons.

MR BASTEN:  Your Honour, the question becomes - it may be

that one needs to fall within that subparagraph, it

may be that one does not. The important point for

present purposes is that the court treated itself
as limited to considerations which affected the

conscience of the credit provider - - -

McHUGH J: That is a different point.

MR BASTEN:  It is a different point, but it means, in my

respectful submission, that Their Honours excluded

consideration of this material immediately they

were satisfied that the credit provider had no

actual or constructive knowledge of the material,

and that is an error of law. What the precise

consequences might be would require further

analysis of the facts that Their Honours found.

McHUGH J:  But Their Honours would be entitled to do that,

unless the case came within one of the three

categories, would they not?

MR BASTEN: Well, there are two indications - in my

submission, no, because the case which was referred

to this morning, I think, not by name, of

St Clair v Petricevic - I think Your Honour

Justice McHugh might have been in it.

McHUGH J: Yes, I was.

MR BASTEN:	It was one in which there was no conduct by anyone except the defendant who, as it turned out,
suffered from an illness which the plaintiff did
not know about, and in Nguyen v Taylor, to which
Mr Merkel adverted, acting for the other corporate
credit provider this morning, was a case in which
the unfairness was by the agent of the applicant,
not by anybody with any relationship to the
respondent.  He said that the contract was not
reopened in Nguyen v Taylor, but with respect that
obfuscates the distinction in a way which the Full
Court does in the present case.

The contract was found by Their Honours to be

unjust. What their Honours then said was that no

relief should be granted in the circumstances of

the case. And that may not be an unimportant

distinction, because if one turns to the precise

terminology of section 146, it may be noted that

although it is the contract which must be unjust,

it is the transaction giving rise to the contract

which is reopened.

Lynch 23 18/6/93

McHUGH J: That is different from New South Wales, is it?

It does not matter.

MR BASTEN:	I am not sure whether that is so or not.
McHUGH J:	I think it is, from recollection.
MR BASTEN:	Yes, but the point, I suppose, that I seek to

make, is that the second stage, the discretionary
stage as to relief, may involve consideration of

wider matters than may the first stage. So, it is

important to determine in separate stages whether

or not there is an unjust contract and then to

consider whether, given the normal equitable rules, one should grant any relief in the particular case.

Your Honour Justice Deane asked me, "Where

does the unjustness lie?" Well, it lies, and it is

clear from the Full Court's decision that it would

lie, in a number of circumstances if one were

concerned with them, which the court was not. But

at page 89, at line 15 there are various matters

concerning the conduct of the parties which suggest

that quite significant unjustness arose in this

case. Not simply was it a matter of $2,000 being

borrowed which on one view was not required to be

borrowed, and which added significantly to the cost

of the lending, but it was borrowed on a policy

which the applicant was never shown; it was

borrowed on a policy which, in fact, provided cover

she was never told of, nor did she want, and there

may be many other related aspects of that which go

to the substantive question of whether the

unjustness would lead to relief if the contract

were considered unjust.

May I say two other things in relation to the

grounds on which we would seek special leave in

relation to this point. It is our submission that

the approach adopted by the Full Court was wrong in

law. It is also our submission that there is an

acute conflict with the New South Wales decisions,

especially with respect to what I might

respectfully say is the undoubtedly correct part of

Your Honour's judgment in West, in which

Your Honour acknowledged that there could be

consideration of facts which were not known to the

parties, and that appears in (1986) 5 NSWLR 610,

and the passage to which I refer appears at

page 620 in the second paragraph at about letter D,

where Your Honour considered expressly whether or

not:

the court is able to consider circumstances

which were not known to the party against whom

relief is sought.

Lynch 24 18/6/93

The passage which I think Your Honour said is often

cited is probably taken out of context and may be

incorrect - it appears at the top of page 622 -

and, in my submission, with respect, it is taken

out of context because there is no doubt that what

Your Honour was saying at page 620D is that one

could take account of circumstances not known to

the credit provider and, indeed, at page 625, at

letter B, Your Honour went on to analyse precisely

those circumstances. At 624F Your Honour had

analysed the circumstances which were known to AGC;

at 625B Your Honour turned to those which were not

known. But if there is confusion which has arisen

from the part of Your Honour's judgment at 622 then

it might well appear to be an important matter to

be clarified by this Court.

McHUGH J:  The passage at 622 was really dealing with a

question of unfairness as a criterion of

invalidating a contract.

MR BASTEN:  Yes. I think it may have been read out of

context in that sense, that it has been used by

those -

McHUGH J: It is seven years ago since it was written, but

when I saw it again this morning it occurred to me

that perhaps it was a bit loose.

MR BASTEN:  I am happy to adopt any submission in that

regard which Your Honour would put to me, but it is

a matter which obviously has given rise to a very

real concern between the two courts. Might I

anticipate an argument, Your Honours, which was put this morning and which no doubt will be put against

me this afternoon, namely that there are

significant differences between the legislation in

terms of the New South Wales Contracts Review Act

and the Credit Act, both in this State and in

New South Wales. May I hand up a copy of the

supreme court decision in Custom Credit Corporation
Ltd v Lupi, (1992) 1 VR at 99.	I have only copied

certain parts of the judgment. They are those

which I will take Your Honours to very briefly. At

page 115, which I think is the second page in the
photocopy, there is the commencement of a

discussion at about line 25 of the history of

section 146, and Your Honours will see at line 30

the submission by the plaintiff:

that the tribunal may only take into account

the conduct of the credit provider and those

persons for whose conduct the credit provider

may be legally responsible -

a similar argument which was accepted in this case

by the Full Court. Their Honours then discuss

Lynch 25 18/6/93

certain matters which I need not take the Court to,

then at page 117, at line 20, Mr Justice O'Bryan

says:

I propose to examine now the legislative history of certain sections in Pt IX .....

The genesis of s.146 is, apparently, s.24 of the Hire-Purchase Act 1959 -

which related to "harsh and unconscionable"

transactions.

The genesis of s.147 is s.9 of the

Contracts Review Act 1980 -

which His Honour then sets out. At page 118 he

deals with West v AGC at some length, and then if I

may take Your Honours to the passage beginning at

line 10 on 119:

This decision, counsel for the tribunal

and the owners contended, is of no assistance

in considering Pt IX of the Credit Act,

particularly s. 146, because the legislation

upon which it was founded is different in

material respect to the Credit Act, and

focuses upon the narrower question -

as it is said -

formulated by McHugh J.A.

The strength of this submission is

undermined, however, by recent decisions of

the Supreme Court ·of New South Wales.

Then at line 26, referring to the decision of

Mr Justice Hunt in Esanda v Murphy, Mr Justice Hunt

is quoted to the effect that:

Part 9 of the Credit Act ..... was clearly

modelled on the provisions of the contracts
Review Act 1980, so as to give to the Tribunal

much the same jurisdiction •..•. as the courts

_ exercise in relation to contracts generally.

The relief to be granted "is very siimilar",

line 32. Section 147(2) is "in almost identical

terms", and then, noting one or two minor

differences, at line 40 says, all the matters

contained in the omitted criterion are picked up

elsewhere. Line 42:

It follows that the decision of the Court of

Appeal - - -

Lynch 26 18/6/93

DEANE J:	Mr Basten, where does all this lead us?
MR BASTEN:	It leads to the conclusion, Your Honour, on the

next page, that the distinctions between

section 146 to 7 and the Contracts Review Act

firstly are of no significance, and this Full Court

has so held, and secondly, that there is an

important principle of conformity which would

require that the provisions be interpreted in the

same way.

DEANE J:  So you are saying that if we grant leave we should

decide whether the New South Wales decisions are

correct.

MR BASTEN:  No, what I am saying is that my friend says

that - - -

DEANE J:  I would have thought we would go out of our way to

say, "In view of the clear distinctions between the

two Acts we were not dealing with the New South

Wales decisions".

MR BASTEN:  I think the point I was seeking to meet was that

there are distinctions which mean that the New

South Wales authorities are not of assistance, in so far as they differ in the approach to this

central issue, namely whether or not it is

necessary for the conscience of the credit provider

to be directly affected in determining unjustness.

It is a point in reply perhaps, that I was

anticipating and seeking to meet at, perhaps,

unnecessary length.

Your Honours, if the question of unjustness is

appropriately determined on the basis that there is

no need to find constructive or actual knowledge in

the credit provider, then the question of agency,

which is referred to in the second of the grounds

raised, may well not arise. But if the question is

to arise, then we say with respect the Full Court

put the argument, it is that there is no doubt that	got it wrong in this regard, and if I may summarily
the dealer in this case was a conduit for information between the parties. It is apparent that the dealer dealt with Custom Credit regularly;
it had bulk standard contract forms in its
possession which it used. The dealer advised the
borrower of the Custom Credit requirements with respect to mortgaged property insurance, which
could be compulsory under the Act, and importantly
it was responsible for completing the contract
forms which is a responsibility imposed by
section 32 jointly in terms of the legislative
requirements on a dealer and on the credit
provider, and I will not go back to those provisions.

Lynch 27 18/6/93

But if that be right, it also follows that there may be difficulties in saying that the dealer

is the agent of the borrowers, because section 124

of the legislation appears to impose a restraint

upon any person who is associated with a credit

provider and who is authorized in relation to

entering into an offer to agree to act as the agent

of the borrower. And, in my respectful submission,

it is clear that the dealer, whatever his other

conduct might amount to, is capable of being, appearing or purporting to be an agent of the

credit provider for the limited purpose of

conveying to the borrowers the requirements of the

credit provider in relation to the lending of the

money. And if that is correct, and perhaps it is a

point which I should not enlarge upon at this

stage, then we would say that the approach adopted

in relation to section 147(2) set out at page 100
through to 101, by His Honour, is one with which we

would not agree.

The test which His Honour Mr Justice Marks

accepts is an objective one, namely that, if there

is an appearance of dealing with a person who is an

agent, then that in itself is sufficient in order

to satisfy the requirements of section 147(2).

That we do not dispute. The question is whether,

in the circumstances of the legislative structure

of the Credit Act, including the provisions I

referred to, it is incorrect to treat a person who

performs the role that the dealer did, on common

ground in this case, as someone who cannot be

someone falling within section 147(2) and, in our·

submission, the court was incorrect in the approach

that - - -

DEANE J: But that is really a question of fact, is it not?

I mean, you are coming down to the minutiae of fact

and disclosing that if we do get involved in this

we would be expected to go down every factual

corridor that there is on the case.

MR BASTEN: Well, my submission primarily was, if

Your Honours were minded to consider the first

submission, this would not arise, because implicit

in what I was saying, it does not matter what the

relationship between the dealer and the credit

provider is, because one does not ~eed to find

agency in order to find an unjust contract.

DEANE J: But would you dispute that regardless of whether

one talks in terms of conscience of the credit

provider, ultimately the question must be whether
the contract between your client and the credit

provider was unjust in whatever sense that means,

as between the parties to it?

Lynch 28 18/6/93

MR BASTEN:  No, I do not dispute that, if Your Honour

pleases. My point is merely that that unjustness

can arise without the credit provider being aware.

DEANE J:  I follow that, but at the end of the day the

question, even if you succeed, will be whether the

fact that your client's agent misrepresented to her

the obligation in relation to insurance, with the

consequences that it had, means that this contract

was unjust in that sense?

MR BASTEN:	It may be a matter, Your Honour, in which the Full Court, having taken a particular view which
precluded it from reaching that conclusion, did not adequately address the facts which would allow this
Court, were it minded to correct the error of law,
to reach that conclusion. That would simply result in a remittal, in my submission. It is open, on
the findings that there was undisputed evidence
that the respondent was given to believe something
which was untrue as a matter of fact and law, and
which was strenuously adverse to her interests - that was not common ground - and which resulted in
her borrowing more money that she needed; perhaps
thereby materially affecting her ability to repay.
That matter, in my submission, could amount to
unjustness, and the relief granted by the tribunal
was to set aside so much of the contract as related to that part of amount financed.
DEANE J:	Can I just try to spell out what you say would be

involved, and I want to confine it to matters of

principle, including construction in principle,

just for the sake of the present exercise. There are two questions of construction of section 145,

is that correct; one is whether it is an inclusive

definition, the other is whether "unjust", as

defined, carries with it, or is confined to

something relating to the conscience of the credit

provider?

MR BASTEN:  The latter question; yes, Your Honour. I did

not put - Mr Finkelstein, I think, put the first
question this morning. In my submission, the
better approach in relation to the first question

is to say that whatever the meaning of the terms

under section 145, they must be determined, I think

as Your Honour Justice Toohey was ~aying, in the

context of the following provisions; and in that
context they are not limited to the old common law

concepts.

DEANE J: Well now, what other question of principle in that

broad sense do you say is involved?

MR BASTEN:  I do not, Your Honour.

Lynch 29 18/6/93

DEANE J:  If you succeed on that question of principle,

where do you say the Court would go from there?

MR BASTEN:  I would say, Your Honour, that the Court would

be able to say, on the material in the Full Court

decision, that there was unjustness. It would then

need to remit the matter for consideration of

appropriate relief.

DEANE J:  Why would we be able to say there was unjustness,

because your client's agent misrepresented to her

the contractual obligations in relation to

insurance?

MR BASTEN:  May I call him Mr Cheap because there is a

dispute as to whether she is my client's agent or

not. The unjust - - -

DEANE J:  I thought the court below had held that he was

your client's agent.

MR BASTEN:  He may have been. Section 124 may preclude that

finding, but I am not disputing that it may be put.

I am happy to accept that.

DEANE J:  Is what your saying that we go from there, or do

we go from there to the question of fact whether he

was or was not your client's agent?

MR BASTEN:  No, I did not wish to be seen in answering

Your Honour's question in that way to be conceding

something. Accepting the way Your Honour puts it,

what we would say is that based upon the material

in Justice Marks' judgment at page 89 line 15 to

which I took Your Honour, at page lines 5 to 10,

at page 107 line 20 - all of which I took

Your Honours to - at page 114 line 10 which says

that it was:

undisputed that the Tribunal was entitled to	find that the respondent was given by Mr Cheap
to believe that the CCI was compulsory -

and at page 129 in the judgment of

Justice Ormiston, it is clear that an untrue and

misleading statement was made, acted upon to

detriment and to that extent there was unjustness.

That, in a nutshell, is the submis~ion.

DEANE J: Unjustness as between credit provider and your

client?

MR BASTEN:  Yes. Even if the credit provider knew not of

that fact?

DEANE J:  I follow the way you put it, yes.

Lynch	30	18/6/93
MR BASTEN:	Thank you.	If Your Honours please.

DEANE J: Thank you, Mr Basten. Mr Merkel.

MR MERKEL:  Your Honours, my learned friend suffers from the

problems of Westendorp, probably in a sense even

more so.	Can I just go to his very last comment in
answer to Your Honour and presiding judge.	He
said, "It was acted upon and acted upon to

detriment." That is precisely what the Full Court

said is not able to be established by the evidence

and, indeed, the Full Court has made findings

against my learned friend's argument that would say

the proper answer to Your Honour's question was

that if you found on the question of construction

in his favour, you would not be able to find

injustice on the factual findings of the

Full Court. He would have to undermine most of

those findings, because those findings were not as

he said.

He indicated to Your Honours that there was a

finding of unfair conduct. That is not correct at

all - or an unfair tactic. At page 107

Mr Justice Marks - the finding was that she was

told consumer credit insurance was required but

Mr Justice Marks dealt with the matter on the

assumptions that Ryan told respondent that consumer

credit was compulsory when it was not, and that it

was the reason why the money was included in the

amount financed.

Their Honours found that there was absolutely

no evidence whatsoever that there was a causal link

between the representation and the inclusion in the

amount financed.

So that my learned friend, on a proper

analysis of the case, falls at most of the hurdles

that we were discussing this morning in Westendorp.

Their Honours found that Mr Cheap not only was not

the agent but, on the evidence, was not within

147(2)(i) because was not appearing or purporting

to act as agent. Can I indicate, Your Honours,

that Mr Justice Marks found that at page 111 and

page 113 and Mr Justice Ormiston dealt with it at

127-to 128. The actual meaning of the

representation was said by His Honour

Mr Justice Marks at page 113 to be ·quite ambiguous.

It was not clear, as His Honour said at the bottom

at line 26:

Mr North submitted that when Mr Cheap

told the respondent that the CCI was required,

it must be inferred that Mr Cheap meant that

CCI was required by the appellant. In my

Lynch 31 18/6/93

opinion, such an inference is one only of many

which are at least equally competing -

and then His Honour sets out other possibilities.

And then His Honour said:

The Tribunal was not entitled to draw the

inference for which Mr North contended and it

is significant that it did not do so.

So that the very representation that was relied
upon is not able to be made out. Their Honours

also found that the representation, in any event,

was not reasonably foreseeable under section 147(4)
and therefore that is an additional basis upon
which it would not be able to be had regard to.

Their Honours then found at 116 to 117 that there was just no evidence of any consequential

injustice. What we have done, Your Honours, in the

affidavit - do Your Honours have the affidavit of

Ann Valos which we swore in opposition to the

application?

DEANE J: Yes, we have that.

MR MERKEL: That, Your Honours, seeks to set out the

evidentiary response to my learned friend's

submissions. At page 2, paragraph 2(a), there is

the question that the evidence was that the applicant fully understood the terms of the

contractual obligations. (b) at page 3, the

evidence was that she could:

afford clearly to meet the terms of the
loan ..... (c) ..... the evidence did not support

a finding of agency, or of "acting for", or of

"purporting" or "appearing" to act for "the

lender" -

so that he does not fall within the widest view of

147(2)(i). Further:	The Full Court found there was no evidence
that Lynch believed that Mr Cheap was acting
for Custom Credit.

-(d) The Full Court found that there was no

evidence to support a finding .that the

actions ..... were reasonably fo~eseeable.

(e) There was no evidence that Custom Credit

had the required knowledge of the unfair

tactic.

(f) Although the Full Court found that Lynch

was led to believe that her borrowing had to

Lynch 32 18/6/93

include an amount to pay for consumer credit insurance, the Full Court found there was no

evidence as to what effect this had on Lynch

and as to how it made the loan contract

unjust.

I will not read the passage set out at page 4 but we say that the hurdles my learned friend confronts are cumulative, the last one being that set out at

page 4 which indicates that my learned friend's
point that she acted to her detriment is just not

able to be made out on the evidence. So that we

would, with respect, submit that, as with

Westendorp, this is yet another case where the

factual findings would not really lead to the
points that are sought to be agitated on the proper

construction of section 147 being arrived at.

Finally, we would say that if for some reason

we were wrong and the Court did get into these

matters, there is the final hur~le that she really

is relying on a misrepresentation by her own agent

which, as I indicated to the Court this morning, is

yet to find itself the subject of the grant of
relief under the Contracts Review Act or the

Credit Act.

So we would say it would be a somewhat futile

and barren exercise, even if all our other

submissions were wrong. So for those reasons, it

is our submission the factual hurdles are

inescapable for my learned friends. He did finally

take you to the cases about the Contracts Review
Act decisions, but for reasons that we have already
put to Your Honours, we say that they are

misleading as to the proper construction of Part 9

and really, on any view, whether it be a narrow or

a wide one of section 145, the factual findings

make this an inappropriate vehicle for that matter

to be dealt with by Your Honours.

The last matter is it was suggested we were

out of time on our application. That is the first

I have heard of it, but we believe it is wrong.

The decision was handed down on 18 December and our

app~ication was filed on 8 January which is in

accordance with the rules. My learned friend does

have an application for being some months out of time and we indicate that he needs ~eave and the

evidence would not support that application.

I had not replied to what my learned friend

submitted in respect of our application and I

was - - -

DEANE J:  I think we are really au fait with it.

Lynch 33 18/6/93

MR MERKEL:  Yes, Your Honour, I do not wish to add anything

further on that. Thank you, Your Honours.

DEANE J:  Mr Basten.

MR BASTEN:  Only one point, Your Honours. At the bottom of

page 113 the speculation of His Honour is not that

there was not a deliberate intent to induce

Ms Lynch to take out the insurance but that it

might have been required by Mr Cheap itself. There

is inducing conduct clearly. She acted on that

conduct. It is sufficient if that is a

contributing factor to her taking out the insurance suffered. She does not need to apply a "but for"
as Your Honour Justice McHugh said in St Clair v

test. If Your Honours please.

DEANE J: Thank you, Mr Basten. The Court will take a short

adjournment to consider the course it will take in

this matter.

AT 3.29 PM SHORT ADJOURNMENT

UPON RESUMING AT 3.32 PM:

DEANE J:  An appeal by Custom Credit Corporation Limited in

this case would involve questions of statutory

construction bereft of any real issues of general

principle. While the·construction favoured by the

Appeal Division of the Supreme Court of Victoria is

productive of some anomolous consequences which may

call for consideration by the Victorian Parliament, we are not, in the light of the arguments advanced,

persuaded that it is wrong. In these

circumstances, it would not be appropriate to grant

special leave to Custom Credit to appeal.

As regards the application for leave to appeal

by Ms Lynch, we do not consider that, on the

findings of fact made by the Appeal Division, an

appeal would enjoy sufficient prospect of ultimate
success to warrant a grant of special leave to
appeal. Nor, in these circumstances, do we

consider that it would be appropriate to grant

special leave to appeal in this case so that

this Court could embark on a review of the Appeal

Division's findings of fact.

Accordingly, Custom Credit's application for

special leave to appeal is refused and Ms Lynch's

Lynch 18/6/93

application for an extension of time is also

refused.

Mr Basten, I would make clear that the refusal

of the application of an extension of time is only

because an application for special leave to appeal

would not succeed.

I presume costs are just best left alone?

MR MERKEL: Yes, Your Honour.

AT 3.35 PM THE MATTER WAS ADJOURNED SINE DIE

Lynch 35 18/6/93