Eleventh Klingon Pty Ltd v Bell & Ors (Ruling)
[2025] VCC 364
•9 April 2025
[1]
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
| GENERAL LIST |
Case No. CI-20-01345
| ELEVENTH KLINGON PTY LTD (ACN 007 397 551) | Plaintiff |
| v | |
| TONY MARSHALL BELL | First Defendant |
| and | |
| OCTAVIUS SECURITIES AND INVESTMENTS PTY LTD (ACN 138 228 243) | Second Defendant |
| and | |
| WILLIAM KEFALIANOS | Third Defendant |
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JUDGE: | HER HONOUR JUDGE ROBERTSON | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 8 August 2024 | |
DATE OF RULING: | 9 April 2025 | |
CASE MAY BE CITED AS: | Eleventh Klingon Pty Ltd v Bell & Ors (Ruling) | |
MEDIUM NEUTRAL CITATION: | [2025] VCC 364 | |
RULING
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Subject:PRACTICE AND PROCEDURE – SUMMARY ENFORCEMENT OF TERMS OF SETTLEMENT – REVIEW BY JUDGE OF JUDICIAL REGISTRAR’S DECISON
Catchwords: Proceedings issued in relation to default under loan agreements –proceedings settled following mediation – Deed of Settlement executed by parties – default by first defendant in respect of final payment due under Deed of Settlement – plaintiff obtained judgment – first defendant objected and sought review of the decision of the Court constituted by a judicial registrar – basis for review – whether Deed of Settlement was not supported by consideration – whether Deed of Settlement was not a bona fide compromise – whether loan agreements underlying Deed of Settlement were unenforceable because there had been non-compliance with the National Consumer Credit Protection Act and the National Consumer Credit Code – interests of justice
Legislation Cited: Civil Procedure Act 2010 (Vic), s61 and s63; County Court Civil Procedure Rules 2018 (Vic), s84; National Consumer Credit Protection Act 2009 (Cth), s5, s16, s29, s334 and s180; National Consumer Credit Code, s5 and s13; Evidence Act 2008 (Vic), s91
Cases Cited: Roberts v Gippsland Agricultural & Earth Moving Contracting Co Pty Ltd [1956] VLR 555; Seachange Management Pty Ltd v Pital Business Pty Ltd (2009) 23 VR 396; Barratt v Rees [2014] VSCA 327; Australian Xinyangfeng Fertilizer Pty Ltd v Freshwater [2020] VSC 450; Bell v Knight 34 Langdon Road Pty Ltd [2022] VSC 497; Cam Nominees Pty Ltd v Ashby Mining Ltd [2023] VCC 1628; Laszczuk v Bendigo & Adelaide Bank Ltd (2020) 61 VR 1; Manton v Parabolic Pty Ltd and Ors (1985) 2 NSWLR 361; Richardson v Wagner [2021] QDC 24; Lee v Passiontree Velvet Pty Ltd & Ors [2019] NSWDC 710; Wigan v Edwards (1973) 1 ALR 497; McIntosh & Anor as T’ees of the Estate of Camm (A Bankrupt) v Linke Nominees P/L [2008] QSC 79; Devaynes v Noble (1816) 35 ER 781; Airservices Australia v Ferrier and Anor (1996) 185 CLR 483; C B Maintenance Pty Ltd v Alphington Pty Ltd [2013] VCAT 1964; Eleventh Klingon v Lalos [2016] VCC 800; Zhou v Haider [2024] ACTMC 7; Integrated Securities No 3 Pty Ltd v Creatrix Web Development & Online Marketing Solutions Pty Ltd [2021] NSWSC 596; Australian Securities and Investments Commission v Fast Access Finance Pty Ltd [2015] FCA 1055; Creative Academy Group Pty Ltd v White Pointer Investments Pty Ltd [2024] NSWCA 133; Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; Australian Securities and Investments Commission v Channic Pty Ltd (No 4) [2016] FCA 1174; Permanent Mortgages Pty Ltd v Cook [2006] NSWSC 1104; AF&L First Mortgages Ltd v Owens [2014] VCC 1190; Realestate.com.au Pty Ltd v Hardingham & Ors (2022) 277 CLR 115; Linkenholt Pty Ltd v Quirk [2000] VSC 166; Knowles v Victorian Mortgage Investments Ltd [2011] VSC 611; MAG Financial and Investment Ventures Pty Ltd & Anor v El-Saafin & Ors (2022) 70 VR 400; Lauvan Pty Limited & Anor v Bega & Ors (2018) 330 FLR 1; Kefalianos v Bell [2021] VCC 592; Boileau v Rutlin ((1849) 154 ER 657; Buckmaster v Meiklejohn (1853) 8 Exch 634; McKinlay v North Australian Co (1869) 3 SALR 135; Austin v Austin [1905] VLR 564; Perry v Woolcock [1917] SALR 216; Kleeners Pty Ltd v Lee Tim (1961) 78 WN (NSW) 746; Pearce v Hall (1989) 52 SASR 568; Damberg v Damberg & Ors (2001) 52 NSWLR 492; Australian Securities and Investments Commission v BHF Solutions Pty Ltd (2022) 293 FCR 330; Australian Securities and Investments Commission v BSF Solutions Pty Ltd [2023] FCA 1406:Australian Securities and Investments Commission v Rent 2 Own Cars Australia Pty Ltd & Ors (2020) 147 ACSR 598; Williams v ATM & CPA Projects Pty Ltd [2015] NSWSC 703
Ruling:Judicial Registrar’s decision of 31 May 2024 correct and affirmed. Plaintiff’s proposed orders appropriate. Order that first defendant pay plaintiff’s costs of and incidental to the application for review of Judicial Registrar’s decision made 31 May 2024.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G Lubofsky | Meerkin & Apel Lawyers |
| For the Defendants | Ms M Harris | Garland Hawthorn Brahe Lawyers |
Table of Contents
Introduction.......................................................................................................................................... 1
Procedural history............................................................................................................................... 2
Relevant provisions and effect of the Deed of Settlement........................................................... 3
Events following execution of the Deed of Settlement.................................................................. 5
The application and order for entry of judgment............................................................................ 6
The review of the decision of Judicial Registrar Muller................................................................ 7
Legal principles.................................................................................................................................... 7
Powers on review – rule 84.03 of the Rules.............................................................................. 7
Summary enforceability of a deed............................................................................................... 8
Terms of settlement contained within a deed.......................................................................... 12
Consideration................................................................................................................................ 13
Adequacy....................................................................................................................................... 13
Bona fide compromise of claim.................................................................................................. 13
Order of application of loan repayments.................................................................................. 14
Relevant provisions and application of the National Consumer Credit Protection Act 2009 (Cth) and the National Consumer Credit Code (Code).................................................................... 14
Submissions...................................................................................................................................... 16
Plaintiff’s submissions................................................................................................................. 16
The First Defendant’s submissions........................................................................................... 18
First Defendant’s supplementary submissions........................................................................ 22
Plaintiff’s supplementary submissions...................................................................................... 24
Evidence on review.......................................................................................................................... 28
Was there a requirement for consideration to be provided by the Plaintiff for the Deed of Settlement to be enforceable against the First Defendant?........................................................................... 33
If there was a requirement for consideration to be provided for the Deed of Settlement, was consideration provided?................................................................................................................... 34
Even if there was no requirement for consideration to support the Deed of Settlement, or consideration was provided, should the Deed of Settlement nevertheless be set aside as: (a) an attempt by the Plaintiff to obtain an unfair advantage over the First Defendant; or (b), because the underlying loan agreements were required to comply with the National Consumer Credit Protection Act 2009 (Cth) and the Code, but did not?................................................................................... 35
Was there an attempt by the Plaintiff to obtain an unfair advantage over the First Defendant such that the Deed of Settlement ought to be set aside?............................................................... 35
Should the Deed be set aside on the basis that the underlying loan agreements were required to comply with the Code, but did not?........................................................................................... 38
Did the Code apply to the First and Second Loan Agreements?......................................... 38
Effect of Section 13(1) and (2) of the Code............................................................................. 38
Are the pre-conditions in Section 5(1) of the Code met in relation to the First Loan Agreement?........................................................................................................................................................ 39
Are the pre-conditions in Section 5(1) met in relation to the Second Loan Agreement?. 46
Conclusion on application of the Code to the First and Second Loans.............................. 51
Conclusion......................................................................................................................................... 51
HER HONOUR:
Introduction
1By this application, pursuant to r84.03 of the County Court Civil Procedure Rules 2018 (Vic) (Rules), the first defendant seeks review of a decision of the Court constituted by a Judicial Registrar.
2On 31 May 2024, Judicial Registrar Muller entered judgment in favour of the plaintiff against the first defendant for $260,000 together with the plaintiff’s costs of and incidental to the application to enforce the terms of settlement, on an indemnity basis, to be taxed in default of agreement.
3The entry of judgment followed breach by the first defendant of the terms of a Deed of Settlement dated 21 December 2020 (Deed of Settlement). The Deed of Settlement compromised legal proceedings related to two loan agreements between the plaintiff and the first defendant.
4By the First Loan Agreement dated 27 September 2013, the plaintiff loaned the first defendant the sum of $30,000 (first loan) on the following terms:
(a) the first loan was to be repayable to the plaintiff on or before 27 March 2014;
(b) interest was to accrue at the rate of 3 per cent per calendar month on so much of the first loan as remained outstanding (clause 4.1); and
(c) where any sum payable under the First Loan Agreement was not paid, default interest was to accrue on the outstanding amount at the rate of 48 per cent per annum calculated daily and compounding monthly (clause 4.2).
(First Loan Agreement).
5By the Second Loan Agreement dated 17 September 2014, the plaintiff loaned the first defendant the sum of $250,000 (second loan) on the following terms:
(a) the second loan was to be repayable to the plaintiff on or before 16 September 2015;[2]
(b) interest was to accrue at the rate of 3 per cent per calendar month on so much of the second loan as remained outstanding (clause 4.1); and
(c) where any sum payable under the Second Loan Agreement was not paid, default interest was to accrue on the outstanding amount at the rate of 3 per cent per calendar month and capitalised monthly (clause 5.2).
(Second Loan Agreement).
[2]Clause 6.1 of the Agreement refers to the date 16 September 2014; however, the parties agreed the correct date was 16 September 2015
Procedural history
6By Writ and Statement of Claim dated 25 March 2020, the plaintiff commenced legal proceedings against the first defendant, and others not presently relevant, for amounts owing under two loan agreements between the first defendant and the plaintiff.
7The plaintiff claimed the first defendant failed to repay the first and second loans.
8Attached to the Statement of Claim was a document titled “Schedule A” which calculated the amount owing under the first loan, and a document titled “Schedule B” which calculated the amount owing under the second loan.
9A Notice of Defence dated 18 May 2020 was filed on behalf of the first defendant.
10A mediation was conducted on 15 and 16 December 2020.
11On 21 December 2020, the plaintiff and the first defendant (and also a company which is not presently relevant) executed the Deed of Settlement compromising the proceeding.
Relevant provisions and effect of the Deed of Settlement
12The Deed of Settlement recited, amongst other things, that:
(a) by a Loan Agreement made on or about 27 September 2013, the plaintiff and the first defendant entered into the First Loan Agreement pursuant to which the plaintiff loaned $30,000 to the first defendant;[3]
(b) Pursuant to the First Loan Agreement, the first defendant agreed to repay the $30,000 by 27 March 2014, together with interest calculated at the rate of 3 per cent per calendar month on so much of the $30,000 as remained outstanding;[4]
(c) By a Loan Agreement made on or about 17 September 2014, the plaintiff and the first defendant entered into the Second Loan Agreement pursuant to which the plaintiff loaned $250,000 to the first defendant;[5]
(d) Pursuant to the Second Loan Agreement, the first defendant agreed to repay the $250,000 by 17 September 2015, together with interest calculated at the rate of 3 per cent per calendar month on so much of the $30,000 as remained outstanding;[6]
(e) The plaintiff had issued proceedings in the County Court of Victoria, being proceeding number CI-20-01345, to recover the First and Second Loan Agreement funds, together with interest accruing on the First and Second Loan Agreement funds;[7]
(f) The first defendant disputed the claims by the plaintiff in the proceedings;[8]
(g) The plaintiff and the first defendant agreed to resolve and compromise all matters between them which either party had, may have had, or may in the future have, arising out of or in any way related to the relationship between the plaintiff and the first defendant under the First Loan Agreement and the Second Loan Agreement on the terms set out in the Deed.[9]
[3] Recital A
[4] Recital B
[5] Recital C
[6] Recital D
[7] Recital E
[8] Recital F
[9] Recital G
13Clause 2.1 of the Deed of Settlement provided for the first defendant to pay to the plaintiff a total of $500,000 (Agreed Amount) by the following instalments:
(a) $40,000 by 30 March 2021;
(b) $50,000 by 30 April 2021;
(c) $150,000 by 30 June 2021; and
(d) $260,000 by either:
(i)the date two years and one week after the listing on the Australian Stock Exchange, via Initial Public Offering, of the company, AMD Resources Limited (ACN 602 696 873); or
(ii) 17 May 2023.
14By clause 2.3, the first defendant agreed and acknowledged that the Agreed Amount was presently owing to the plaintiff as at the date of the Deed of Settlement.
15By clause 3.1, the plaintiff agreed not to sue the first defendant for recovery of any amount arising directly or indirectly out of or related to the First or Second Loan Agreements and/or the subject matter of the proceedings.
16By clause 3.2, save for the plaintiff’s obligations arising under the Deed of Settlement, the first defendant released and discharged the plaintiff from any and all claims, suits, demands, causes of actions, damages, costs and expenses arising directly or indirectly out of or related to the First or Second Loan Agreements and/or the subject matter of the proceedings.
17Clause 5.1(a) made provision for the plaintiff to enforce its rights under the Deed of Settlement, including by entering judgment for the Agreed Amount together with the costs of the entry of judgment, on an indemnity basis, less any amount paid by the first defendant to the date of default. Sub-clause (b) detailed that an affidavit of the plaintiff’s lawyer as to the payments and amount then owing would be sufficient evidence for the purpose of any application to the Court for the entry of judgment. Sub-clause (c) noted that the Deed of Settlement could be relied on by the plaintiff as sufficient evidence of the first defendant’s consent to the entry of judgment.
18Clause 6 provided that the Deed of Settlement could be executed in any number of counterparts.[10]
[10]The Counterpart exhibited to the affidavit of Emanuel Tumino sworn 15 April 2024 was signed only by the first defendant. No issue was taken about the fact that was the only counterpart in evidence. The parties accepted the Deed of Settlement had been validly executed.
19Clause 7.1 identified that the Deed of Settlement constituted the entire agreement between the parties and superseded all prior written agreements, representations, statements and understandings.
20Clause 7.2 provided if any provision or part of the Deed of Settlement was held to be void, invalid or otherwise unenforceable, that provision, or part of the provision, shall be severed from the Deed and the remainder of the terms of the Deed shall continue in operation.
Events following execution of the Deed of Settlement
21Following entry into the Deed of Settlement, the proceeding was dismissed with a right of reinstatement reserved to the plaintiff to enforce the Deed of Settlement.
22It was not in contest that the first defendant paid $240,000 pursuant to the Deed of Settlement but failed to pay to the plaintiff the final instalment under the Deed of Settlement of $260,000.
The application and order for entry of judgment
23On 15 April 2024, the plaintiff applied for judgment for the outstanding sum of $260,000 pursuant to the Deed of Settlement. The application was supported by the affidavit of Emanuel Tumino sworn on 15 April 2024 (Tumino Affidavit) which exhibited the Deed of Settlement and deposed to the fact of non-payment.
24On 22 May 2024, the first defendant objected to the plaintiff’s application for judgment. The first defendant relied on an affidavit affirmed by him on 22 May 2024 (First Bell Affidavit).
25By the First Bell Affidavit, the first defendant deposed that the First and Second Loan Agreements were void or otherwise unenforceable because they were signed by the first defendant because of misleading representations by the plaintiff and following undue pressure from the first defendant’s own solicitors to whom he owed a significant amount of money. The first defendant’s evidence was the Deed of Settlement was “signed under a fundamental mistake and is unenforceable”.
26On 31 May 2024, Judicial Registrar Muller made orders entering judgment in favour of the plaintiff pursuant to the Deed of Settlement, together with the plaintiff’s costs on an indemnity basis.
27In the ‘Other Matters’ section of the orders, Judicial Registrar Muller noted, at paragraph G, that:
“Nothing in the [First Bell] affidavit provides evidence that would support judgment not being entered. The facts deposed to do not and could not amount to a fundamental mistake at law (as the first defendant believes to be the case [para 24 of the affidavit]) or to set aside the Deed dated 21 December 2020.”
The review of the decision of Judicial Registrar Muller
28On 1 July 2024, by Notice seeking review of the decision of the Court constituted by a Judicial Registrar dated 28 June 2024, the first defendant applied for a review of Judicial Muller’s decision pursuant to r84.03(3) of the Rules. The application was accompanied by a further affidavit of the first defendant affirmed 28 June 2024 (Second Bell Affidavit).
29The review was heard on 8 August 2024.
Legal principles
Powers on review – rule 84.03 of the Rules
30The power of a judge to review an order of the Court constituted by a judicial registrar is to be found in r84.03 of the Rules.
31Rule 84.03 provides:
“Review by Judge of judicial registrar determinations
(1AA) This Rule does not apply to an order of the Court constituted by a judicial registrar under Order 2A of Chapter III of the Rules of the County Court
Note
Rule 2A.8 of Chapter III of the Rules of the County Court provides for a review of such an order.
(1)An order of the Court constituted by a judicial registrar may be reviewed by the Court constituted by a Judge, on the Court’s own motion or on application by a party to the proceeding.
(2)If any party to a proceeding seeks a review of an order of the Court constituted by a judicial registrar, the Court constituted by a Judge, on the application of that party, may review the order.
(3)An application under paragraph (2) shall be made by notice filed with the Court, stating—
(a)whether the whole or part only and, if as to part, which part, of the determination is the subject of the review; and
(b)what determination is sought in place of the determination that is the subject of the review
(4)A copy of the notice under paragraph (3) shall be served on each other party to the proceeding within 14 days after the date of the decision
(5)A review under this Rule shall be conducted by way of hearing de novo
(6) In conducting a review in accordance with this Rule, the Judge may—
(a)exercise all the powers and discretions of the Court with respect to the subject matter of the review; and
(b)confirm, set aside or vary the order of the Court constituted by the judicial registrar or make such further or other order as may be necessary or as the case requires
(7)On the review, each party may, subject to any proper objections to admissibility—
(a)rely upon any affidavit used before the judicial registrar and upon any evidence given orally before the judicial registrar;
(b)by leave of the Court, rely upon any affidavit or oral evidence not used or given before the judicial registrar.
(8) Except so far as the Court constituted by a Judge otherwise orders, a review under this Rule shall not operate as a stay of execution or of proceedings under the order of the Court constituted by the judicial registrar to which the review relates.”
32A review hearing is conducted as a hearing de novo. Each party may, subject to any proper objections to admissibility, rely upon any affidavit or evidence given orally before the judicial registrar, and by leave of the Court, upon any further affidavit or oral evidence not used before the judicial registrar.
33In conducting the review, the judge may confirm, set aside or vary the order of the Court constituted by the judicial registrar or make such further or other order as may be necessary or as the case requires.
Summary enforceability of a deed
34The appropriate process to be adopted where an order is sought to summarily enforce the terms of a deed of settlement was considered by the Full Court of the Supreme Court of Victoria in Roberts v Gippsland Agricultural & Earth Moving Contracting Co Pty Ltd.[11] Justice Smith identified “certain rather vaguely defined rules of practice”, including:
“(a) The Court would ordinarily leave a party to proceed by separate bill if the agreement involved matters extraneous to the suit compromised. And it regarded an agreement as falling within this general category, (i) if it dealt with property as to which no question was raised in the suit, or (ii) if it provided for things to be done which went beyond the ordinary range of what the Court would order in such a suit, or (iii) if its enforcement involved giving effect to equities of a different nature from those involved in the suit, or (iv) if there were parties to the agreement who were not parties to the suit.
(b) On the other hand in cases not falling within this first general category the Court would ordinarily enforce the agreement in the suit compromised. In particular this was so if the agreement related solely to the conduct or prosecution of that suit, or to the staying or dismissal thereof, or to the granting of the whole or part of the relief claimed therein or to the doing of that which the suit was brought to enforce.
(c) For the purpose of deciding which of these two general categories a case fell within, the Court did not look merely at the particular obligations sought to be enforced. It looked also at the obligations of the applicant, so far as justice required that the application should not be granted without ensuring that they too would be performed. But it would disregard altogether obligations already fully performed. It may be observed that in order to ensure the performance of obligations by the applicant the Court could make an order conditional upon such performance.
(d) If there was a substantial question to be determined as to what were the terms of the agreement, or as to whether it was valid or specifically enforceable, as for example where a substantial case was put forward of material mistake or of other circumstances such as would afford a defence to a suit for specific performance, a party would ordinarily be left to proceed by separate bill so that the matters raised might be fully investigated.
(e) The fact that the only outstanding obligation under the agreement of compromise was one for the payment of an ascertained sum of money did not preclude the Court from enforcing the agreement in the suit. … .”[12]
[11] [1956] VLR 555 (“Roberts”)
[12]Roberts at 562-3
35His Honour considered it was necessary for the Court to consider a variety of matters involving questions of degree to determine whether justice could be done by adopting the summary procedure. The following matters were referred to:
“… the extent to which extraneous matters are involved, how substantial are the questions to be determined, to what extent questions of credibility are likely to arise, and whether pleadings and discovery may be desirable.”[13]
[13]Roberts at 564
36The authorities were subsequently considered and applied in Seachange Management Pty Ltd v Pital Business Pty Ltd.[14] Maxwell P and Nettle JA noted that the power summarily to enforce a compromise is discretionary. Their Honours observed:
“… although the power summarily to enforce a compromise is discretionary and is wider now than once was the case, it is not to be invoked unless the court is ‘clearly satisfied that justice can be done’; and whether justice can be done is a question of degree. Consistently with the equitable origins of the power, one must weigh among other competing considerations the extent to which enforcement would involve extraneous matters, how substantial the questions to be determined as a precursor to enforcement may be, and procedural considerations like the desirability of pleadings and discovery and substantial cross-examination.”[15]
[14] (2009) 23 VR 396 (“Seachange”)
[15] Seachange (ibid) at paragraph [40]
37To determine whether the procedure summarily to enforce a compromise is appropriate, requires the Court to be clearly satisfied that justice can be done on a summary application, as opposed to a usual trial process.
38More recently, the power summarily to enforce a compromise and the procedures required to do so have been considered further in Barratt v Rees,[16] Australian Xinyangfeng Fertilizer Pty Ltd v Freshwater[17] and Bell v Knight 34 Langdon Road Pty Ltd.[18]
[16] [2014] VSCA 327 (“Barratt v Rees”)
[17] [2020] VSC 450
[18] [2022] VSC 497 (“Bell v Knight”)
39In Bell v Knight,[19] Daly AsJ considered, in determining an application for summary enforcement of settlement terms, the court needs to be:
“… positively satisfied that the interests of justice require the enforcement of the agreement.”
[19] Ibid at paragraph [135]
40His Honour Judge Rozen, in Cam Nominees Pty Ltd v Ashby Mining Ltd,[20] noted the slight difference in the way the test was expressed in Bell v Knight from that expressed in Seachange; however, as his Honour pointed out, regardless of which form of words was used, the onus lay on the applicant for summary enforcement.
[20] [2023] VCC 1628 (“Cam Nominees”)
41His Honour then went on to comprehensively consider the reasoning of Daly AsJ in Bell v Knight and the principles applicable to summarily enforcing terms of settlement.[21]Specifically, his Honour noted the observations of Daly AsJ in Bell v Knight as to the circumstances in which a court may not be prepared to exercise the discretion to summarily enforce a settlement agreement including if there is a real prospect the other party to the settlement agreement could have a viable defence based on ordinary contractual or equitable principles. Conversely, as Daly AsJ noted, there would be no good reason not to enforce summarily the settlement agreement if a party seeking to enforce a settlement agreement were to be able to satisfy the court on a summary basis that the settlement agreement was valid and enforceable, that damages would be an inadequate remedy, that the applicant was ready, willing and able to perform their obligations under the settlement agreement and had come to court with clean hands, and that third parties would not be unduly prejudiced.[22]
[21] CAM Nominees (ibid) at paragraphs [28]-[38]
[22] Bell Knight (supra) at paragraph [89]
42His Honour then noted that Daly AsJ had also considered whether the claims of the party seeking to oppose the use of a summary procedure to enforce the terms of settlement met the test in s63 and s64 of the Civil Procedure Act 2010 (Vic). That is, did those claims have “a real prospect of success”. If not, then the summary enforcement procedure might be utilised. There is a strong public interest in upholding settlements entered into because of mediation.[23]
[23] See Barratt v Rees (supra) at paragraph [54]
43If, however, there was evidence which suggested there was a serious question to be tried that a settlement agreement had been procured by duress or fraud, or was tainted by unconscionable conduct, then all other things being equal, it would be expected a court would not exercise the discretion to enforce the settlement agreement summarily.
44The above principles must now be understood in light of the overarching purpose in s8(1) of the Civil Procedure Act 2010 (Vic) of facilitating the just, efficient, timely and cost-effective resolution of the real issues in dispute.[24]
[24] Australian Xinyangfeng Fertilizer Pty Ltd v Freshwater (supra) at paragraph [74]
Terms of settlement contained within a deed
45In Laszczuk v Bendigo & Adelaide Bank Ltd,[25] the Court of Appeal (Whelan, Hargrave and Emerton JJA) in a joint judgment, observed, in relation to the documentation of the terms of settlement as a deed, that:
“Deeds are a very ancient form of transaction by which a person legally binds themselves to an obligation. The nature of a deed is such that compliance with formalities is critical. In Morley v Boothby, Best CJ said:
‘The common law protected men against improvident contracts. If they bound themselves by deed, it was considered that they must have determined upon what they were about to do, before they made so solemn an engagement; and therefore it was not necessary to the validity of the instrument, that any consideration should appear on it.’”
[25] (2020) (2020) 61 VR 1 (“Laszczuk”) at paragraph [38]
46The Court of Appeal then referred to Manton v Parabolic Pty Ltd and Ors.[26] In that decision, Young J, sitting in the Equity Division, reviewed the nature of a deed in its historical context, and said:
“‘… Thus the substantial requirement of a deed is that it be intended by the party who does it to be the most solemn indication to the community that he really means to do what he is doing. The solemn indication is given by sealing a deed which witnesses to what has been done. … .’
[26] (1985) 2 NSWLR 361 (“Manton”)
So then, a deed is the most solemn act that a person can perform with respect to a particular property or contract involved, and the form of that deed is as laid down by the law from time to time.’”[27]
[27]Manton (ibid) at 367
47The Court of Appeal noted that:
“One consequence of the solemnity required in relation to deeds is that consideration is not required … ..”[28]
Consideration
[28]Laszczuk (supra) at paragraph [40]
Adequacy
48An agreement by a creditor to defer an immediate right to repayment of a debt or to forbear to sue constitutes adequate consideration.[29]
[29] Richardson v Wagner [2021] QDC 24, at paragraph [34]; Lee v Passiontree Velvet Pty Ltd & Ors [2019] NSWDC 710 at paragraph [34]
Bona fide compromise of claim
49Where a promisor is bound to perform an obligation under a pre-existing contract, and a dispute arises as to whether the promisor is bound to perform the obligation or has a cause of action under the contract, a settlement of the dispute on terms that the promisor does precisely what he had already bargained to do is nevertheless good consideration. The honest compromise of a bona fide disputed claim is good consideration, even if the claim would, in the end, fail. It would be pointless for the Court to examine for itself the correctness of the promisor’s claim when the new bargain demonstrates the promise regarded the fresh promise as a benefit.[30] If that were to occur, no settlement would be safe. As a matter of policy, courts support the freedom of parties to resolve disputes between them and are prepared to find a consideration where a dispute is compromised or there is a forbearance.
[30] Wigan v Edwards (1973) 1 ALR 497 at 512 (Mason J). This principle has been applied in many cases since. See for example McIntosh & Anor as T’ees of the Estate of Camm (A Bankrupt) v Linke Nominees P/L [2008] QSC 79 at paragraphs [60]-[63]
50The first defendant submitted that notwithstanding consideration is not required for a deed to be enforceable, the Court should not give effect to the Deed of Settlement because entry into the Deed of Settlement was not a bona fide compromise of the dispute by the plaintiff but rather was an attempt by the plaintiff to obtain an unfair advantage over the first defendant.
Order of application of loan repayments
51When repayments are made with respect to a loan, each payment is to be applied to the oldest debt owed at the time the payment was made.[31]
Relevant provisions and application of the National Consumer Credit Protection Act 2009 (Cth) and the National Consumer Credit Code (Code)
[31] Devaynes v Noble (Clayton’s Case) (1816) 35 ER 781; Airservices Australia v Ferrier and Anor (1996) 185 CLR 483
52Section 5 of the Code provides:
“5 Provision of credit to which this Code applies
(1) This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of precontractual obligations) is proposed to be entered into:
(a)the debtor is a natural person or a strata corporation; and
(b) the credit is provided or intended to be provided wholly or predominantly:
(i)for personal, domestic or household purposes; or
(ii) to purchase, renovate or improve residential property for investment purposes; or
(iii) …
(c)a charge is or may be made for providing the credit; and
(d)the credit provider provides the credit in the course of a business of providing credit carried on in this jurisdiction or as part of or incidentally to any other business of the credit provider carried on in this jurisdiction.
…
(4) For the purposes of this section, the predominant purpose for which credit is provided is:
(a)the purpose for which more than half of the credit is intended to be used; or
(b)if the credit is intended to be used to obtain goods or services for use for different purposes, the purpose for which the goods or services are intended to be most used.”
53Section 13 of the Code relevantly provides:
“13 Presumptions relating to application of the Code
(1)In any proceedings (whether brought under this Code or not) in which a party claims that a credit contract, mortgage or guarantee is one to which this Code applies, it is presumed to be such unless the contrary is established.
(2)It is presumed for the purposes of this Code that credit is not provided or intended to be provided under a contract wholly or predominantly for any or all of the following purposes (a Code purpose):
(a)for personal, domestic or household purposes;
(b) to purchase, renovate or improve residential property for investment purposes;
(c) to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes;
if the debtor declares, before entering the contract, that the credit is to be applied wholly or predominantly for a purpose that is not a Code purpose, unless the contrary is established.”
54Section 29(1) of the National Consumer Credit Protection Act 2009 (Cth) provides:
“29 Prohibition on engaging in credit activities without a licence
…
(1)A person must not engage in a credit activity if the person does not hold a licence authorising the person to engage in the credit activity.
… .”
55Section 180 of the National Consumer Credit Protection Act 2009 (Cth) relevantly provides:
“180 Orders in relation to unlawful credit activities
Court may make orders in relation to unlawful credit activities
(1) If:
(a)a person (the defendant) engages in a credit activity in relation to another person (the plaintiff); and
(b)the engaging in the activity contravenes any of the following:
(i) section 29 (which requires the holding of a licence);
…
the court may make such order as the court considers appropriate against the defendant:
(c)to prevent the defendant from profiting from the plaintiff by engaging in that activity; or
(d)to compensate the plaintiff, in whole or in part, for any loss or damage suffered as a result of the defendant engaging in that activity; or
(e) to prevent or reduce the loss or damage suffered, or likely to be suffered, by the plaintiff as a result of the defendant engaging in that activity.”
Submissions
Plaintiff’s submissions
56The plaintiff’s principal submission was that there was no serious question to be tried sufficient to reverse the summary enforcement of the Deed of Settlement.
57First, the Deed of Settlement was binding on the parties as a standalone contract. It was executed as a deed and was therefore valid and enforceable pursuant to its own terms without consideration. Even if the first defendant owed no money to the plaintiff, the Deed of Settlement would still be enforceable as a deed.
58Secondly, even if consideration were to be required, it was provided by the plaintiff. In consideration for the payment by the first defendant, the plaintiff released the first defendant from the claims it had pursuant to the loan agreements. The forbearance by the plaintiff to enter judgment at an earlier point in time was good consideration. The plaintiff submitted this is adequate consideration, though maintained that consideration is not necessary.
59Thirdly, contrary to the defendants’ submission, the Code[32] did not apply to the underlying loans. There was no evidence in the First Bell Affidavit as to the purpose of either the First or the Second Loan Agreement.
[32] Being Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth)
60Insofar as the first defendant sought to rely on the Second Bell Affidavit, it was out of time and leave ought not to be granted to rely upon it. Even if the Second Bell Affidavit were to be admitted, the evidence does not aid in determining the purpose of the First and Second Loan Agreements. The letter from the first defendant to David Lester (the person who controlled the plaintiff (within s16A of the National Consumer Credit Protection Act 2009 (Cth)) dated 17 September 2023 does not support a conclusion that the First Loan Agreement was entered into for a Code purpose. Further, the two cases referred to in the Second Bell Affidavit, C B Maintenance Pty Ltd v Alphington Pty Ltd[33] and Eleventh Klingon v Lalos,[34] are inadmissible pursuant to s91 of the Evidence Act to prove the existence of a fact that was in issue in that proceeding. Consequently, there was no evidence before the Court as to the purpose of the Second Loan Agreement.
[33][2013] VCAT 1964 (“C B Maintenance”)
[34][2016] VCC 800
61Fourthly, even if the Court were to determine that the loan agreements were subject to the Code or the National Consumer Credit Protection Act 2009 (Cth) and were unenforceable due to non-compliance, this would not affect the enforceability of the Deed of Settlement. There was nothing illegal about the Deed of Settlement. The first defendant owed the plaintiff money when the Deed of Settlement was executed, at a minimum based on principles of restitution. The plaintiff’s releases under the Deed of Settlement were therefore good consideration for the promises made by the first defendant to pay the settlement amount in instalments over time.
62Fifthly, there were equitable reasons for preventing the first defendant from relying on the arguments he now raises in respect of the National Consumer Credit Protection Act 2009 (Cth). He had not raised the arguments, and over ten years have now elapsed since the loans were granted. He part-performed the loan agreements by making repayments under them. He also part-performed the Deed of Settlement by making payments under it. He took the indulgences granted by the plaintiff in the Deed of Settlement by requiring the plaintiff to wait until April 2024 to enforce its rights under the Deed of Settlement, when the loan agreements would otherwise have been enforceable and recoverable many years prior to that time. The first defendant represented to the plaintiff, by signing the Deed of Settlement and partly performing it, that the Deed of Settlement was enforceable, and he was bound by its terms. In circumstances where the plaintiff acted to its detriment by not seeking to enforce its rights under the First and Second Loan Agreements, it would be unconscionable for the first defendant to have the benefit of the Deed of Settlement for many years and to now seek to set it aside. The first defendant is estopped from relying on the National Consumer Credit Protection Act 2009 (Cth). The first defendant has waived his right to rely on the Code.
The First Defendant’s submissions
63The first defendant, in seeking review of Judicial Registrar Muller’s decision, submitted that by application of the principles in Roberts,[35] the plaintiff could not satisfy the Court the Deed of Settlement should be enforced summarily under s61 and s63 of the Civil Procedure Act 2010 (Vic).[36]
[35] Supra
[36]Bell v Knight (supra); Cam Nominees (supra) at paragraphs [36]-[37]
64The first defendant’s submission started from the premise that each of the loans made pursuant to the First and Second Loan Agreements were loans to which the National Consumer Credit Protection Act and the Code applied. The first defendant submitted the plaintiff had engaged in unlawful credit activities, rendering each of the loans unenforceable under the National Consumer Credit Protection Act 2009 (Cth).
65First, there was a statutory presumption by s13(1) of the Code, that each of the loans was a “credit contract” (within the meaning of that term within s5 of the National Consumer Credit Protection Act 2009 (Cth)) unless the plaintiff proved otherwise. The plaintiff did not lead evidence which displaced the presumption.
66Second, the Code applied to the provision of credit, either because it was presumed to apply unless the contrary was established, or because the criteria in s5(1) of the Code was met. The first defendant did not make a declaration that the credit was to be applied wholly or predominantly for a purpose that was not a Code purpose[37] before entering the loans.
[37]A Code purpose being, amongst other things, for personal, domestic or household purposes; to purchase, renovate or improve residential property for investment purposes
67The first defendant was a natural person.
68The loans were provided wholly or predominantly for a Code purpose. In respect of the First Loan Agreement, the Code purpose described by the first defendant in his letter dated 17 September 2013 to David Lester. Specifically, the First Loan Agreement was necessary for the first defendant to “support my family”.[38] Similarly, for the Second Loan Agreement, the Code purpose was to pay for domestic renovations and/or to refinance to pay for domestic renovations following the decision of C B Maintenance.[39]
[38] Second Bell Affidavit, Exhibit “TMB-2”
[39]Supra
69A charge was made for providing credit.
70The plaintiff carried on business as the provider of credit facilities within the National Consumer Credit Protection Act 2009 (Cth), and the plaintiff was not licensed under s29 of the National Consumer Credit Protection Act 2009 (Cth).
71Further, the statutory presumption that the Code applied to the loans was not displaced because, before executing each of the loan agreements, the first defendant had not made a written declaration (in the form prescribed by the regulations) that the purpose of the money was not wholly or predominantly for personal, domestic or household purposes, or to renovate or improve residential property for investment purposes.
72Recital E in the Deed of Settlement did not constitute a declaration. Recital E could not have that effect because it was not a pre-contractual declaration. Further, if Recital E was an attempt to declare that the purpose of the money was not for a Code purpose, the declaration was ineffective, because it was an attempt to contract out of the Code and the National Consumer Credit Protection Act 2009 (Cth), which is prohibited under s334 of that Act. Similarly, any clauses in the Second Loan Agreement by which the plaintiff might have sought to assert as a declaration did not satisfy s13(2) or (3) of the Code. They were not pre-contractual, and they were not in the prescribed form.[40] Therefore, the Code was presumed to apply.
[40]Because a person commits an offence if a declaration is false or misleading in a material particular, which attracts a penalty of up to two years’ imprisonment for breach, it was contended it was not merely a procedural provision
73Even if a valid declaration were to be produced in respect of either of the loans, the plaintiff was aware both loans were made for Code purposes. Consequently, any declaration would be “ineffective” for the purpose of s13(3) of the Code to establish that the Code did not apply.
74The Code therefore applied to the loans.
75Third, the plaintiff engaged in credit activities without a licence contrary to the Code. Consequently, by s180 of the National Consumer Credit Protection Act 2009 (Cth), each of the two loans was unenforceable.[41]
[41] Zhou v Haider [2024] ACTMC 7; Integrated Securities No 3 Pty Ltd v Creatrix Web Development & Online Marketing Solutions Pty Ltd [2021] NSWSC 596 (“Integrated Securities”); Australian Securities and Investments Commission v Fast Access Finance Pty Ltd [2015] FCA 1055
76Fourth, because the loans were unenforceable, no consideration could or did pass in respect of the loans for the purposes of the Deed of Settlement.
77Fifth, even if consideration did pass, or was not necessary to make the Deed of Settlement enforceable, the Deed of Settlement could not “wash clean” the otherwise “dirty” loan agreements. It would be contrary to public policy[42] to summarily enforce the Deed of Settlement because each of the First and Second Loan Agreements were unenforceable at law by operation of the National Consumer Credit Protection Act 2009 (Cth). Reference was made to the Creative Academy[43] decision.
[42] Creative Academy Group Pty Ltd v White Pointer Investments Pty Ltd [2024] NSWCA 133 (“Creative Academy”)
[43] Ibid
78Further, summary enforcement of the Deed of Settlement ought not occur where the circumstances in which each of the First and Second Loan Agreements came into existence were tainted with unconscionability[44] or unjustness within s76 of the Code.[45] The first defendant submitted the plaintiff knew the loan transactions were improvident. The first defendant had no employment or means to repay the loans. He was in default under the loans, and he was clearly financially vulnerable.[46]
[44]The first defendant said this was regardless of whether, at general law, under s21 and 22 of the Australian Consumer Law, or if the loan was provided as a financial service, then s12CB of the Australian Securities and Investments Commission Act 2001 (Cth). See Integrated Securities (supra) at paragraph [98] per Rein J, citing Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1
[45] Australian Securities and Investments Commission v Channic Pty Ltd (No 4) [2016] FCA 1174 at 1845-1846; Permanent Mortgages Pty Ltd v Cook [2006] NSWSC 1104; AF&L First Mortgages Ltd v Owens [2014] VCC 1190
[46]Integrated Securities (supra) at paragraph [99]
79It was conceded by the first defendant that even if the loan agreements were unenforceable, when principles of restitution were applied, the first defendant still had an obligation to repay any monies he received pursuant to the First and the Second Loan Agreements. The first defendant also had an obligation to pay interest on the outstanding money pursuant to the Penalty Interest Rates Act 1983 (Vic). On the assumption the loan accounts were treated as running accounts, interest should properly have been applied to repay the oldest loan first. That was not how the plaintiff applied the interest. Had interest been applied in the proper manner, and a proper accounting performed, the first defendant contended it would not have had any obligation to pay the plaintiff, and the plaintiff would not have been entitled to judgment. The first defendant submitted that once the repayments under the loan agreements were applied to the oldest loan agreement first, the outcome was that the plaintiff owed the first defendant money. In those circumstances, the Court should not summarily enforce the Deed of Settlement.
80At the conclusion of the review hearing, the first defendant sought leave to file further submissions in relation to how payments to running accounts were to be treated and addressing the decision of Creative Academy,[47] which it said was relevant to the argument the first defendant wished to make about how running accounts should be treated and why it would be unfair to allow the Deed of Settlement to stand. The Court indicated it would be assisted by provision of the authority, and if there was a specific part of Creative Academy the first defendant wished to rely upon, the first defendant could send a note about that to my chambers. I indicated plainly to the parties that it was “not open slather to send me a whole set of other submissions”.[48] Notwithstanding that warning to counsel, following the review hearing, each party provided further written submissions. As the outcome of the review hearing is directed at ascertaining the interests of justice, I have considered the parties’ further submissions.
[47] Supra
[48] T110, L8-9
First Defendant’s supplementary submissions
81It was submitted by the first defendant that summary enforcement of a deed ought not be granted where the plaintiff could not satisfy the statutory test for summary judgement. The first defendant pointed to the Roberts principles outlined by Judge Rozens in Cam Nominees and argued the plaintiff could not satisfy the statutory test for summary judgment because it could not satisfy the Court the settlement agreement was valid and enforceable. This submission was put on the basis that consideration under the Deed of Settlement could not pass because the First Loan Agreement was discharged on 1 July 2016 and further, the First Loan Agreement and Second Loan Agreement were tainted with illegality, unconscionability,[49] or unjustness within s76 of the Code.[50] Because of that, summary enforcement of the Deed of Settlement should not occur under s61 and s63 of the Civil Procedure Act 2010 (Vic).[51] Reference was made to the decision in Creative Academy.
[49]The first defendant submitted this was regardless of whether, at general law, under s21 and 22 of the Australian Consumer Law, or if the loan was provided as a financial service, then s12CB of the Australian Securities and Investments Commission Act 2001 (Cth). See Integrated Securities (supra) at paragraph [98] per Rein J, citing Australian Securities and Investments Commission v Kobelt (supra)
[50]Australian Securities and Investments Commission v Channic Pty Ltd (No 4) (supra) at 1845-1846; Permanent Mortgages Pty Ltd v Cook (supra); AF&L First Mortgages Ltd v Owens (supra)
[51] The first defendant relied upon Bell v Knight (supra), and Cam Nominees (supra) at paragraphs [36]-[37]
82The thrust of the first defendant’s supplementary submission was that if the First and Second Loan Agreements were to be deemed unenforceable, and if that resulted in the Deed of Settlement also being unenforceable, the plaintiff would still be entitled to restitution of the principal amounts borrowed, along with accrued simple interest. The amount payable to the plaintiff by way of restitution should be calculated by attributing repayments to the oldest loan first. This meant repayments made by the first defendant should be applied to the oldest debt owed to the plaintiff at the time the payment was made. In that way, the first defendant contended the repayments ought to have been applied first to the First Loan Agreement and should only have been applied to the Second Loan Agreement after the First loan Agreement was discharged.
83Further, if the loan agreements were unenforceable, there would be no applicable contractual interest rate, so the interest on the money lent should be charged at the rate prescribed by s4 of the Penalty Interest Rates Act 1983 (Vic).
84The first defendant submitted, under the First Loan Agreement, the principal sum was $30,000. Interest accrued in accordance with s4 of the Penalty Interest Rates Act 1983 (Vic) as applicable from time to time up to 1 July 2016, when the first defendant said a payment was made which fully discharged the outstanding balance due under the First Loan Agreement. The first defendant contended there was consequently no bona fide dispute in respect of the First Loan Agreement that could have been compromised.
85In respect of the Second Loan Agreement, the first defendant submitted that at the date the Writ was issued in the proceeding, the sum of $194,371.56 was owed to the plaintiff by the first defendant. It was submitted the alleged compromise sum of $500,000 had no characteristic of compromise, as the amount exceeded the actual liability recoverable at law. There was therefore a bona fide dispute as to the amount owed. The fresh promise meant the plaintiff gained an unfair advantage.
86Additionally, each payment made by the first defendant should have been applied to the oldest debt owed to the plaintiff at the time the payment was made; however, that was not how payments were applied. The first defendant attached Appendix B to its supplementary submissions, which contained two tables outlining the first defendant’s calculations of the outstanding principal and interest for each loan. I pause at this point to note that although that table was contained in submissions, it was not evidence before the Court on the application.
87The first defendant noted the Deed of Settlement was executed on 21 December 2020. The first defendant asserted, at that date, the amount owing to the plaintiff was $194,371.56. Further repayments were made subsequently. The first defendant contended the result was that the loan under the Second Loan Agreement was repaid, and the Second Loan Agreement discharged on 29 July 2021. As a result, the first defendant asserted he had overpaid interest to the plaintiff totalling $57,622.43.
Plaintiff’s supplementary submissions
88In response, the plaintiff submitted that even accepting the calculations and submissions of the first defendant, there was still no arguable defence to the enforcement by the plaintiff of the Deed of Settlement.
89First, the first defendant had not explained how the Settlement Deed required consideration to be enforceable against the first defendant. The plaintiff said it did not. The Deed of Settlement stood apart. It was separate from the First and Second Loan Agreements. Whether there was valid consideration for the Deed of Settlement was not relevant as there was no requirement that there be consideration for a deed to be enforceable. The only time a deed could not be enforced in the absence of consideration was in equity. The plaintiff’s claim was a claim for debt or for damages for breach of contract. It was a common law claim. No equitable remedies were sought. The Deed of Settlement was binding on the first defendant, with the result that even if the first defendant were to invalidate the First or Second Loan Agreements, the Deed of Settlement would be unaffected.
90Secondly, if the Court finds consideration is required to enforce the Deed of Settlement, in any event, there was good consideration provided by the plaintiff for entry into the Deed of Settlement. The plaintiff honestly compromised a bona fide claim it had. The first defendant did not contend otherwise. Both parties were represented, and understood the plaintiff’s entitlement against the first defendant at the date of entry into the Deed of Settlement far eclipsed the amount of the $500,000 compromise. Even if the plaintiff’s claim would have failed ultimately, the honest compromise of the claim, by entry into the Deed of Settlement, was good consideration in and of itself regardless of any subsequent conclusion as to the enforceability of the First and Second Loan Agreements.
91Even if the first defendant promised to pay a greater amount than he would have owed the plaintiff if the First and Second Loan Agreements had been unenforceable, the plaintiff’s agreement to extend time for repayment by the first defendant over a period of two-and-a-half years was a benefit to the first defendant who would otherwise have been liable to pay $194,371.56 plus costs immediately. The first defendant obtained an indulgence to pay a higher amount over a longer time, but the plaintiff lost the benefit of immediate payment. The agreement by the plaintiff to defer an immediate right to repayment of a debt or to forbear to sue was adequate consideration.
92Finally, if the first defendant did owe the plaintiff only $194,371.56 at the date of mediation yet agreed to pay the plaintiff more than that sum, that might have been an imprudent bargain on the part of the first defendant. However, the Court is not concerned with the prudence of parties’ bargains, only whether real consideration flows from them. The honest compromise of the plaintiff’s bona fide claim and/or the deferral by the plaintiff of its immediate entitlement to repayment, were good consideration.
93Third, although the first defendant claimed the amount of $194,371.56 was the amount he owed the plaintiff under the Second Loan Agreement at the date of the Deed of Settlement, the sum of $194,371.56 did not take account of the plaintiff’s legal costs. Legal costs to the point of mediation could have been conservatively estimated at $50,000.
94The key question raised by the submissions of the parties is whether the Deed of Settlement operates independently of the underlying loans or whether its validity is vitiated if the First and Second Loan Agreements underpinning the Deed of Settlement were invalid or otherwise unenforceable.
95Resolution of this question raises the following issues:
(a) First, whether the settlement agreement reached in the Deed of Settlement was binding on the parties without the need for consideration;
(b) Secondly, if consideration were to be required, whether it was provided by the plaintiff;
(c) Thirdly, even if there was no requirement for consideration to support the Deed of Settlement:
(i)should the Deed of Settlement nevertheless be set aside as an attempt by the plaintiff to obtain an unfair advantage over the first defendant on the basis that the terms of the Deed of Settlement were not a bona fide compromise of the dispute between the plaintiff and the first defendant;
(ii)Alternatively, should the Deed of Settlement nevertheless be set aside on the basis that the underlying First and Second Loan Agreements were required to comply with the National Consumer Credit Protection Act 2009 (Cth) and the Code but did not.
96Resolution of this question requires assessment, first, whether there was a need for the Deed of Settlement to be supported by consideration, to be effective. If not, then the settlement agreement cannot be invalid or unenforceable for this reason. Any assessment of whether a new agreement, in the context of a pre-existing contract, amounts to consideration would not arise for consideration. Similarly, it would be unnecessary to consider whether there had been a bona fide compromise of a disputed claim and, if so, whether the general rule that a promise to perform an existing duty is no consideration should be qualified.
97Secondly, even if the Deed of Settlement was valid, either because it was supported by adequate consideration or because consideration was unnecessary, the question remains whether it was nonetheless invalidated or rendered unenforceable for other reasons.
98The first defendant suggested the Deed of Settlement was invalidated or rendered unenforceable because the underlying loan transactions were themselves invalid or unenforceable. There were two bases for that contention: the First and Second Loan Agreements were required to, but did not, comply with the Code, and the money owing under the First and Second Loan Agreements, and the repayments made by the first defendant in respect of both loans, had been calculated inaccurately by the plaintiff and in a way which would make it unconscionable,[52] or unjust within s76 of the Code,[53] for the first defendant to be required to make further payments under the Deed of Settlement. The first defendant had already made payments which exceeded the sum the first defendant would have been required to pay the plaintiff by way of restitution of the capital lent and interest under the Penalty Interest Rates Act 1983 (Vic). It would be improvident to require the first defendant to make further payments.
[52]Under the Code, s21 and s22 of the Australian Consumer Law or if the loan was provided as a financial service, then s12CB of the Australian Securities and Investments Commission Act
[53]Australian Securities and Investments Commission v Channic Pty Ltd (No 4) (supra) at 1845-1846; Permanent Mortgages Pty Ltd v Cook (supra); AF&L First Mortgages Ltd v Owens (supra)
99I will deal with each of these issues in order.
Evidence on review
100Upon the review, the plaintiff sought to rely on the following
(a) Tumino Affidavit and exhibit thereto (1);
(b) written submissions dated 1 August 2024;
(c) written submissions in reply dated 7 August 2024;
(d) written supplementary submissions in reply dated 19 August 2024 and extracts from “Seddon on Deeds”, and;
(e) oral submissions.
101The first defendant sought to rely on the following:
(a) the First Bell Affidavit;
(b) the Affidavit of John Norman Price sworn 6 August 2024 (Price Affidavit);
(c) written submissions dated 6 August 2024;
(d) the notice seeking review of the decision of the Court constituted by a Judicial Registrar;
(e) supplementary written submissions dated 14 August 2024;
(f) Oral submissions.
102The first defendant also sought leave to rely on the Second Bell Affidavit.
103Both the Second Bell Affidavit and the Price Affidavit were filed late and were not in compliance with the Commercial Division Omnibus Practice Note. The plaintiff objected to the tender of both affidavits.
104The Second Bell Affidavit was a short affidavit which contained one exhibit - Exhibit TMB-2. Exhibit TMB-2 comprised four documents: a letter from the first defendant to David Lester dated 17 September 2013;[54] the reasons for decision of the Victorian Civil and Administrative Tribunal (VCAT) Vice President Macnamara in C B Maintenance;[55] the reasons for decision of his Honour Judge Cosgrave (as his Honour then was) in Eleventh Klingon v Lalos,[56] and a one-page document titled “Schedule A”.
[54] Second Bell Affidavit, Exhibit TMB-2, pages 4-5
[55] Supra; found at Second Bell Affidavit, Exhibit TMB-2, pages 6-27
[56] Supra; found at Second Bell Affidavit, Exhibit TMB-2, pages 28-63
105I grant leave for the second defendant to rely upon the Second Bell Affidavit, but not all pages of the exhibit.
106The letter from the first defendant to David Lester dated 17 September 2013 pre-dated both the First Loan Agreement and the Second Loan Agreement. The first defendant sought to rely upon it to establish the purpose of the First Loan Agreement. It is unlikely the contents of this letter could have any impact on the terms of the First Loan Agreement which superseded it, however, out of an abundance of caution, I will admit this letter.
107Pages 6 to 63 of Exhibit TMB-2 to the Second Bell Affidavit were respectively the reasons for decision of Vice President Macnamara in C B Maintenance[57] and the reasons for decision of his Honour Judge Cosgrave (as his Honour then was) in Eleventh Klingon v Lalos.[58]The plaintiff submitted those decisions were inadmissible under s91 of the Evidence Act 2008 (Vic), which states:
“91 Exclusion of evidence of judgments and convictions
(1) Evidence of the decision, or of a finding of fact, in an Australian or overseas proceeding is not admissible to prove the existence of a fact that was in issue in that proceeding.
(2) Evidence that, under this Part, is not admissible to prove the existence of a fact may not be used to prove that fact even if it is relevant for another purpose.”
[57] Supra
[58] Supra
108The first defendant submitted the loans provided under the First and Second Loan Agreements were loans to which the National Consumer Credit Protection Act 2009 (Cth) and the Code applied. The decisions in C B Maintenance[59] and in Eleventh Klingon v Lalos[60] would enable the Court to determine the purpose of the loans. I disagree. A view of a different court or tribunal, in this instance VCAT, cannot assist this Court to determine the purpose of loans in this case. That is exactly the vice that s91 seeks to avoid.
[59] Supra
[60] Supra
109Further, if these decisions were relevant, the first defendant had ample opportunity to raise them earlier. He was legally represented throughout, including when the proceedings were compromised.
110Additionally, following default in payment under the Deed of Settlement, the first defendant was notified that judgment could be sought by the plaintiff. Before the judgment was entered, he was given an opportunity to object to the application of the summary enforcement process and to put forward any material in opposition to the application for judgment in breach of settlement terms. The first defendant opposed the summary enforcement of the Deed of Settlement and filed the First Bell Affidavit in opposition. He did not raise either of the two decisions.
111Further, even after the judgment was entered by the judicial registrar and the first defendant sought a review, he failed to comply with the Practice Note or explain the relevance of these decisions. Given these factors, I do not admit C B Maintenance[61] and Eleventh Klingon v Lalos.[62]
[61] Supra
[62] Supra
112Page 64 of Exhibit TMB-2 to the Second Bell Affidavit is a one-page schedule of payments the first defendant claims to have made to the plaintiff. Page 64 is relevant to the question of the first defendant’s restitutionary liability.
113Even if the First and Second Loan Agreements, as well as the Deed of Settlement, were unenforceable, the first defendant could still be liable to the plaintiff on a restitutionary basis. The first defendant’s contention was that he had repaid the plaintiff $30,000 and $250,000 sufficient to discharge any restitutionary liability owing under the loan agreements, leaving no judgment debt to enforce. To assess this claim, it is appropriate to admit page 64 of Exhibit TMB-2.
114The Price Affidavit contained one exhibit, JNP-1, which comprised over 300 pages of material not before the judicial registrar. I admit the Price Affidavit subject to the following exclusions:
(a) Pages 7 to 14 of Exhibit JNP-1 to the Price Affidavit comprised a Notice seeking review of the decision of the Court constituted by a judicial registrar. I do not propose to admit that document as evidence. At best it is an aid to the case the first defendant wished to put before the Court upon review. I have treated it as such, noting that the first defendant also had an opportunity to make written and oral submissions at a de novo hearing, and to provide further material to the Court after the hearing was complete;
(b) Pages 15 to 114 of Exhibit JNP-1 to the Price Affidavit comprised correspondence in relation to the filing and service of the Notice of Review. At the hearing, because no issue was taken by the plaintiff as to the late filing and service of the application for review of the judicial registrar’s decision (although originally foreshadowed as an issue), that evidence is no longer relevant; however, it was relevant for that purpose, and it has been admitted on that basis;
(c) Pages 115 to 250 of Exhibit JNP-1 to the Price Affidavit comprised a copy of the First Bell Affidavit. The First Bell Affidavit was already in evidence. I do not admit pages 115 to 250 of Exhibit JNP-1 to the Price Affidavit because there is no need for those pages to be tendered again;
(d) Pages 251 to 313 of Exhibit JNP-1 to the Price Affidavit is a copy of the Second Bell Affidavit. This affidavit, and the parts of the exhibit I have allowed to be admitted, is already in evidence. I do not admit pages 251 to 313 of Exhibit JNP-1 to the Price Affidavit;
(e) Similarly, pages 315 and 316 of Exhibit JNP-1 to the Price Affidavit, are duplicates of pages 254 and 255 (which are also part of Exhibit TMB-2 to the Second Bell Affidavit). I do not admit pages 315 and 316 of Exhibit JNP-1 to the Price Affidavit;
(f) Pages 317 to 324 of Exhibit JNP-1 to the Price Affidavit comprised the First Loan Agreement. If the first defendant’s argument has any merit it will be based on an assessment of the terms of the First Loan Agreement. For that reason, I am satisfied it is appropriate the First Loan Agreement be admitted into evidence;
(g) Pages 325 to 350 of Exhibit JNP-1 to the Price Affidavit comprised the Second Loan Agreement. As with the terms of the First Loan Agreement, it is appropriate the Second Loan Agreement be tendered to enable a proper assessment of the merits of the first defendant’s alleged defence;
(h) Pages 351 to 357 of Exhibit JNP-1 to the Price Affidavit comprised the Deed of Settlement. This was already before the Court at pages 5 to 11 of Exhibit ET to Tumino Affidavit. It is unnecessary to duplicate the Deed of Settlement, and I do not admit it;
(i) Page 358 of Exhibit JNP-1 to the Price Affidavit was an email chain between Tony Bell and David Lester on 17 and 18 September 2013. The relevance of this email chain was not entirely clear, however, out of an abundance of caution, I admit page 358 of Exhibit JNP-1 to the Price Affidavit;
(j) Page 359 to 360 of Exhibit JNP-1 to the Price Affidavit Exhibit are a duplicate of pages 254 and 255 and also pages 315 and 316 of Exhibit JNP-1 to the Price Affidavit. The same pages are also contained within Exhibit TMB-2 to the Second Bell Affidavit. Consequently, I do not admit pages 359 to 360 of Exhibit JNP-1 to the Price Affidavit;
(k) Pages 361 to 363 of Exhibit JNP-1 to the Price Affidavit comprised an email dated 29 October 2014 between David Lester and Tony Bell; an email dated 3 May 2016 between David Lester and Terence Grundy, and an email dated 14 June 2024 from Terence Grundy to John Price. I have determined that these should be admitted.
Was there a requirement for consideration to be provided by the Plaintiff for the Deed of Settlement to be enforceable against the First Defendant?
115The first issue is whether there was a need for the Deed of Settlement to be supported by consideration.
116The first defendant contended that consideration for the Deed of Settlement was required and, because it was not given, the Deed of Settlement was invalid. The first defendant pointed to Creative Academy[63] and contended that when the first defendant executed the Deed of Settlement, the plaintiff was asking the first defendant to perform obligations it already had to perform under the First and Second Loan Agreements, namely repayments under the loan. The consideration for entry into the Deed of Settlement was therefore illusory.
[63]Supra
117The plaintiff submitted that when the Deed of Settlement was executed, a new agreement was formed between the plaintiff and the first defendant. Because the terms of settlement were contained within a deed, consideration for the Deed of Settlement was not required. Therefore, the Deed of Settlement is valid without consideration.
118First, a deed of settlement constitutes a distinct agreement between the parties, separate from the First and Second Loan Agreements. The plaintiff is not attempting to enforce the loan agreements; rather, it is seeking to enforce the Deed of Settlement. The law is pellucid: consideration is not required for a deed to be enforceable, and the absence of any expressed consideration does not affect the validity of the deed. The Deed of Settlement now governs the relationship between the parties and the covenants contained in a deed are binding in the absence of consideration.
119Secondly, the first defendant has not explained how the Deed of Settlement required consideration to be enforceable against the first defendant in any event.
120I am satisfied that the Deed of Settlement was executed by both parties with the necessary formality and intent. The first defendant has not raised any argument or evidence to suggest otherwise. Consequently, prima facie, the Deed of Settlement is valid and enforceable without a need for consideration, and the plaintiff is entitled to recover the outstanding balance of $260,000 in accordance with its terms.
If there was a requirement for consideration to be provided for the Deed of Settlement, was consideration provided?
121In my view, consideration was provided by the plaintiff for the first defendant’s entry into the Deed of Settlement.
122First, even if the first defendant appeared to be doing what he was already bound to do under the First and Second Loan Agreements – that is, repaying amounts ostensibly owed under those agreements – in the absence of evidence the plaintiff lacked good faith, a submission that the plaintiff did not honestly compromise a bona fide claim, lacks foundation. The First and Second Loan Agreements had been in existence for many years prior to the execution of the Deed of Settlement. No argument had been raised by the first defendant that the First and Second Loan Agreements lacked consideration. Both parties were legally represented at the mediation and when the Deed of Settlement was executed. Again, no suggestion was made by either party that the plaintiff was not honestly compromising a genuine claim.
123Even if the Court were to later find that the First and Second Loan Agreements were unenforceable, that would not affect the fact that at the time the Deed of Settlement was entered, the plaintiff honestly compromised a bona fide claim. The Court should not interfere or otherwise examine the merits of settlements voluntarily entered in good faith by parties, particularly where the parties are represented.
124Second, it was sufficient consideration for entry into the Deed by the plaintiff that the Deed of Settlement made provision for the first defendant to repay the settlement sum by way of instalments over a period of two-and-a-half years. But for entry into the Deed of Settlement, the amount owing under the Second Loan Agreement would have been immediately payable. Further, the plaintiff granted the first defendant a forbearance to seek judgment in respect of the sum owing. Those matters provided adequate consideration for entry into the Deed of Settlement.
Even if there was no requirement for consideration to support the Deed of Settlement, or consideration was provided, should the Deed of Settlement nevertheless be set aside as: (a) an attempt by the Plaintiff to obtain an unfair advantage over the First Defendant; or (b), because the underlying loan agreements were required to comply with the National Consumer Credit Protection Act 2009 (Cth) and the Code, but did not?
125It is strictly unnecessary for me to go further. However, in deference to the parties’ arguments, and because this application is focused on ascertaining whether the first defendant has a real prospect of success of any defence, I will consider whether, even if the Deed of Settlement was valid, it should nevertheless be set aside as an attempt by the plaintiff to obtain an unfair advantage over the first defendant or because the underlying First and Second Loan Agreements were required to comply with the National Consumer Credit Protection Act 2009 (Cth) and the Code, but did not.
Was there an attempt by the Plaintiff to obtain an unfair advantage over the First Defendant such that the Deed of Settlement ought to be set aside?
126I do not accept the Deed of Settlement should be set aside as an attempt by the plaintiff to obtain an unfair advantage over the first defendant.
127First, as I have found, the evidence did not support a finding the plaintiff had not honestly compromised a bona fide claim so as to give rise to an unfair advantage. Additionally, the agreement by the plaintiff to allow the first defendant to repay the sum owed under the Deed of Settlement by instalments over a period of two-and-a-half years, and the plaintiff’s forbearance to seek judgment in respect of the sum owing, were adequate consideration for entry into the Deed of Settlement.
128Secondly, the decision of Creative Academy[64] does not assist the first defendant. In that decision, as the first defendant identified in his supplementary submissions, the appellant agreed to pay the respondent the sum of $2,000 for each property site in New South Wales and the ACT that was suitable for use as a childcare centre (“Moncur Agreement”). Subsequently, after the respondent had started introducing suitable sites, the appellant proposed a different arrangement, for a lesser amount per site to be paid in advance, which the respondent was going to be obliged to repay if a relevant childcare centre did not open (“settlement proposal”). The appellant alleged, and the primary judge accepted, that the respondent had agreed to the settlement proposal; however, the primary judge found that the settlement proposal was not binding as it was not supported by consideration.
[64]Supra
129The appellants also claimed restitution of all amounts paid to the respondent on two bases. First, that the amounts had been paid based on the appellant’s mistaken belief that the respondents had all the requisite licences and could enforce any claim for commission or fees against the appellants. Second, that the agreement was illegal, unenforceable or ineffectual as it was incongruous with public policy and the purpose of the relevant legislation.
130On appeal from the primary judge’s findings, the New South Wales Court of Appeal[65] determined that the settlement proposal was an attempt by the appellants to gain an unfair advantage over the respondent. The appellants contended they were entitled to refunds in circumstances where they must have known the agreement did not incorporate such entitlements. Any dispute as to the terms of the agreement had been manufactured by the appellants and was, accordingly, not bona fide. At the time they made the settlement proposal, the appellants knew the respondent was cash strapped. The appellants were found to have dressed up their part-performance of an existing obligation as a valuable concession.
[65] Meagher, White and Adamson JJA
131The first defendant submitted the CreativeAcademy decision applied in the same way in this case. The plaintiff was not acting bona fide in entering the Deed of Settlement.
132I disagree that the Creative Academy decision has application.
133First, Creative Academy involved entry into terms of settlement distinct from a deed of settlement. In comparison, in this case, the parties executed the Deed of Settlement. As identified, a deed is a separate and distinct stand-alone agreement. The obligations contained within a deed do not require consideration. The Deed of Settlement is different from the First and Second Loan Agreements.
134Second, in Creative Academy, it was argued that the appellant’s settlement proposal – a reduction in the amount to be paid to the respondent per site – was an attempt by the appellants to gain an unfair advantage over the respondents. That is different to this case. Here, the first defendant was seeking an indulgence from the plaintiff. It was not a situation where the plaintiff approached the first defendant with a proposal that the first defendant make greater payments. Creative can be distinguished on that basis.
135Third, CreativeAcademy also involved legislation pertaining to providers of real estate agent services, and facts that were distinct from this case. It was a different case which is a further reason to distinguish it.
136I consider the plaintiff’s entry into the Deed of Settlement was a bona fide compromise of the dispute by the plaintiff. It was not an attempt by the plaintiff to obtain an unfair advantage over the first defendant. I find any application of the principles in Creative Academy does not result in the Deed of Settlement in this case being rendered invalid or unenforceable.
Should the Deed be set aside on the basis that the underlying loan agreements were required to comply with the Code, but did not?
Did the Code apply to the First and Second Loan Agreements?
137The first defendant’s principal argument at the review hearing was that the First and Second Loan Agreements were required to comply with the Code but did not. Consequently, they were each unenforceable. If the National Consumer Credit Protection Act 2009 (Cth) or the Code applied to the loans, the plaintiff would have been bound to have met the requirements of the Code before entering into the loan agreements. If the requirements of the Code were not met, this may have resulted in the invalidity or unenforceability of the First and Second Loan Agreements. In turn, the first defendant’s submission was that this may have affected the validity of the Deed of Settlement.
138The first defendant’s argument was that, notwithstanding what may have been written in the First Loan Agreement, there was a presumption contained in s13(1) of the Code, that the credit contract was one to which the Code applied. By virtue of s13(2) of the Code, only if a debtor declared, before entering into the contract, that the credit was to be applied wholly or predominantly for a purpose which was not a Code purpose would it be presumed the credit was not provided for a Code purpose and that the credit contract was one to which the Code did not apply.
Effect of Section 13(1) and (2) of the Code
139The words of s13(1) of the Code do not, by their plain terms, limit displacement of the presumption to situations where the debtor has made a declaration before entry into the contract that credit is to be applied wholly or predominantly for a non-Code purpose. The aim or purpose of the amendment to s13 of the Code, as explained in the Explanatory Memorandum to the National Consumer Credit Protection Bill 2009 (Cth), was to “make the business purpose declaration presumptive rather than conclusive”.[66] In those circumstances, the presumption in s13(1) applies unless “the contrary is established”.
[66] Explanatory Memorandum to the National Consumer Credit Protection Bill 2009, clause 8.22, page 244
140The first defendant’s argument is premised upon the contrary being established in any situation where a declaration is not made before a credit contract is entered into; however, that is not what the words of s13(1) say. Nor is it what they were intended to mean.
141For the purposes of s13(1) of the Code, if a declaration is not made before a contract is entered into, the starting point will be that the credit contract will be presumed to be subject to the Code; however, that is a presumption only. It is not conclusive and applies “unless the contrary is established”.
142The consequence is that the plaintiff will bear the onus of persuading the Court that the First Loan Agreement and/or the Second Loan Agreement are not “credit contracts” as defined in the National Consumer Credit Protection Act 2009 (Cth). To determine this issue requires consideration of whether the pre-conditions in s5(1) are met in relation to each of the two loans.
Are the pre-conditions in Section 5(1) of the Code met in relation to the First Loan Agreement?
143The first defendant was a natural person. The requirement of s5(1)(a) was met.
144In assessing the purpose of the First Loan as required in s5(1)(b), the starting point is consideration of the terms of the First Loan Agreement.
145Where a term of an agreement is an express term, as Steward and Edelman JJ noted in Realestate.com.au Pty Ltd v Hardingham & Ors,[67] because language may be imperfect:
“… the implication, from the words in their context, is ‘included in and part of that which is expressed’, is ‘contained in the express words of the contract’, or is a necessary supplement to the words of the term.
In interpreting an express term, implications derived from and ‘underlying the words’ make sense of the ‘parties’ expressed intentions, however obscure and ambiguous the language that may have been used, to give a reasonable meaning to that language if it can do so without doing complete violence to it’. The process is still one of interpreting the words expressed between the parties. The term as a whole — including any implications from the words — remains an express term.
It is only when an implication is sufficiently independent of the express terms, and can be seen as the subject of an entire term, that it will be treated as an implied term.”[68]
[67] (2022) 277 CLR 115
[68]Ibid at paragraphs [103]-[105]
146The application of a statute is to be determined objectively in all the circumstances. Statements made by the parties in pre-contractual documents are generally not regarded as determinative of purpose; however, such statements may, in appropriate circumstances, form part of the factual matrix to be taken into account.
147In determining the purpose of credit, the Court may consider what the money was used for and the “substance and reality of the transaction”.[69]
[69] Linkenholt Pty Ltd v Quirk [2000] VSC 166 at paragraphs [98] and [121] per Gillard J; applied and accepted in Knowles v Victorian Mortgage Investments Ltd [2011] VSC 611 at paragraph [47]
148In MAG Financial and Investment Ventures Pty Ltd & Anor v El-Saafin & Ors,[70] the Court of Appeal considered an appeal concerning the proper construction and application of s5(1)(b) of the Code. The lender submitted the focus of s5(1)(b)(ii) was the provision of credit to the borrower and the necessary or required use of the funds by the borrower. The test as to purpose was objective. On the contrary, the borrower submitted that the Consumer Credit legislation was beneficial legislation, and the critical issue was the use to which the credit was to be put. The purpose attached to the credit and not to the borrower.
[70] (2022) 70 VR 400 at paragraph [139]
149The Court of Appeal determined that it was necessary to focus on the purpose of the loan as between the borrower and the lender.[71] The focus had to be on the substance of the transaction and required an objective assessment of whether the provision of credit had the relevant immediate purpose.[72]
[71]Ibid at paragraph [115]
[72]Ibid at paragraph [118]
150In Lauvan Pty Limited & Anor v Bega & Ors,[73] Gleeson JA determined the relevant purpose by considering the recitals and the definition of “purpose” in a facility agreement. The purpose for which the loan was made in that case, was the purpose for which it was requested, which was for the loan to be used for short-term on-lending to family members for commercial investment opportunities. The use for which the credit was provided was a commercial purpose and not a personal, domestic or household purpose.
[73] (2018) 330 FLR 1
151Here, the first defendant contended that the First Loan Agreement was for a Code purpose. The first defendant relied on the letter dated 17 September 2013 from the first defendant to Mr David Lester. It submitted that the contents of the letter revealed the contemporaneous purpose of the First Loan, namely that the loan was to borrow money to enable the first defendant to support his family rather than for business purposes.
152The letter provided relevantly:
“To confirm our discussion yesterday, I am seeking funding so that I can project manage the recovery of your funds from Spring Villa/Stephen Wharton/Muranna Park.
…
In order to continue to project manage the recovery process for Octavius and yourself I need funding. The simple reason for this is that I am between projects and therefore need to necessarily generate income to support my family and commercial projects.
… .”
153The purpose of the first loan, as stated in clause 2.2 of the First Loan Agreement,[74] was in relation to the first defendant’s “business activities”. That was an express term of the First Loan Agreement. It was not ambiguous or obscure. It did not require the Court to “make sense” of what was intended. There was no need for implication of any terms to understand what the phrase meant. Prima facie, the purpose of the First Loan Agreement was not for personal, domestic or household purposes or to purchase, renovate or improve residential property for investment purposes. It was for “business purposes”.
[74] Price Affidavit at paragraph [12] and Exhibit JNP-1 at page 318
154Even if there were to be some ambiguity, it is unclear on any understanding of the phrase “business activities”, how those words, when used in the First Loan Agreement, could reasonably and sensibly have been intended to incorporate personal, domestic or household purposes or the purchase, renovation or improvement of residential property for investment purposes.
155Further, consideration of the letter dated 17 September 2013[75] does not result in the outcome contended for by the first defendant. The letter dated 17 September 2013 clearly states that the purpose of seeking funding by way of the First Loan Agreement was to “project manage the recovery of … [Mr Lester’s] funds from Spring Villa/Stephen Wharton/Muranna Park”. That was a business purpose.
[75] Second Bell Affidavit, page 4
156Insofar as the letter suggested the first defendant needed to generate income to support his family, that was not the purpose of the loan. The generation of income to support his family was a personal need of the first defendant, which he hoped would be achieved. It was not the reason the first defendant entered into the First Loan Agreement.
157Additionally, notwithstanding the first defendant’s contention, the first defendant did not depose that the First Loan Agreement was for personal, domestic or household purposes or for the purchase, renovation or improvement of residential property for investment purposes as required under the Code.
158In the First Bell Affidavit,[76] the first defendant said:
“The reason David retained me to help call in some loans owed to Eleventh Klingon was because he wanted the loans repaid, he was not achieving that up until then, … he offered to reduce the amount I owed to Eleventh Klingon for my efforts to help call in loans.”
[76]At paragraph [8]
159The reference to “retained” in that paragraph suggests a retainer and a business purpose.
160Further, the Second Bell Affidavit makes no reference to the purpose of the First Loan Agreement.
161Insofar as Mr Bell also relied on an affidavit affirmed 17 June 2022 by him in the matter of Kefalianos v Bell,[77] that affidavit related to an entirely different proceeding to which the plaintiff was not a party. Neither the affidavit affirmed 17 June 2022 nor the pleadings in it referred to the First Loan Agreement. I find that affidavit to be of little assistance in determining the purpose of the First Loan in this case.
[77][2021] VCC 592. Affidavit of Tony Bell affirmed 17 June 2022, being Exhibit TMB-1, pages 120-136 to the First Bell Affidavit
162The first defendant submitted that the Court should have regard to the decision in the C B Maintenance[78] in determining the purpose of the provision of credit. It was suggested the factual context of what was happening at the time the First Loan Agreement was entered into was referred to in that decision. I have ruled that decision to be inadmissible to prove the truth of the factual matters referred to in this proceeding. I have not had regard to it.
[78]Supra
163The first defendant further submitted that the pleading exhibited to the First Bell Affidavit set out the circumstances of the loan and the Court should take those matters into account in determining the purpose of the loan. I disagree. The pleading was created for the purposes of a different proceeding. It comprised a series of facts. Those facts were binding on the first defendant for the purposes of that other proceeding; however, they cannot, in a subsequent proceeding, be regarded as an admission of the truth[79] unless the pleading was sworn, signed or otherwise adopted by the party.[80] Because there is no evidence before the Court that the pleading was sworn, signed or otherwise adopted by the first defendant, I am not prepared to take the matters contained within the pleading into account.
[79] Boileau v Rutlin (1849) 154 ER 657; Buckmaster v Meiklejohn (1853) 8 Exch 634; McKinlay v North Australian Co (1869) 3 SALR 135; Austin v Austin [1905] VLR 564; Perry v Woolcock [1917] SALawRp 14; [1917] SALR 216; Kleeners Pty Ltd v Lee Tim (1961) 78 WN (NSW) 746
[80]Kleeners Pty Ltd v Lee Tim (ibid) at 748; Pearce v Hall (1989) 52 SASR 568 (King CJ). See also Damberg v Damberg & Ors (2001) 52 NSWLR 492 at 519
164Finally, even if the first defendant’s submission were to be accepted, that the purpose of the loan was to enable the first defendant to support his family, for the criteria in s5(1)(b) of the Code to be met, the statutory requirement is that the identified purpose of the credit be the sole or at least the predominant purpose.[81] When all the evidence is considered, the provision of credit under the First Loan Agreement was not solely or even predominantly for the purpose of personal, domestic or household purposes or the purchase, renovation or improvement of residential property for investment purposes.
[81]Australian Securities and Investments Commission v BHF Solutions Pty Ltd (2022) 293 FCR 330 at paragraph [166]
165I find therefore that the Code does not apply to the provision of credit pursuant to the First Loan Agreement.
166If, contrary to my finding, the purpose of the First Loan Agreement was a Code purpose, for the Code to apply to the provision of credit pursuant to the First Loan Agreement, the first defendant would still need to establish that the remaining criteria in s5(1)(c) were met. Namely, that “a charge is or may be made for providing the credit”.
167The first defendant contended that interest was charged under the loan and that constituted a “charge” for providing credit for the purpose of s5(1)(c) of the National Consumer Credit ProtectionAct 2009 (Cth).
168There is no definition of “charge” in the Code. In Australian Securities and Investments Commission v BHF Solutions Pty Ltd,[82] the Full Federal Court construed the expression “charge … made for providing the credit” in s(5)(c) of the Code (being Schedule 1 to the National Consumer Credit ProtectionAct 2009 (Cth). Their Honours in giving the statutory language its full ordinary meaning:[83]
“… the Code would apply if a charge is made in exchange for, on account of or by reason of the provision of credit, applied in a commercially practical manner. There is nothing strained in construing the preposition “for” in s 5(1)(c) in that manner. The construction requires a direct relationship between the charge and the provision of credit by looking to the circumstances in which, or conditions on which, the charge is made or imposed and the reason for the charge. It looks to the substance of the credit arrangements rather than their contractual form and ensures that the remedial provisions of the Code are not easily avoided by carefully structured credit arrangements.”
[82] Ibid
[83] Ibid at paragraph [72]
169In Australian Securities and Investments Commission v BSF Solutions Pty Ltd,[84] Jackman J considered a “charge” for the purposes of the Code to be:
“In ASIC v BHF Solutions Pty Ltd, the Full Federal Court construed the expression “charge … made for providing the credit” in s (5)(c) of the National Credit Code (the Code) (being Sch 1 to the Credit Act) as a charge that is made in exchange for, on account of or by reason of the provision of credit on an assessment of all relevant facts in a practical commercial sense, looking to the substance of the credit arrangements rather than their contractual form, and is not determined by analysing whether as a matter of the law of contract the charge is the contractual consideration for the provision of credit: see [171]-[172], [179], [182]-[183] (O’Bryan J, with whom Besanko and Lee JJ agreed)].”
[84] [2023] FCA 1406, paragraph [16]
170Interest is a charge for the provision of credit for the purposes of s5(1)(c) of the Code.[85] Consequently, had the analysis reached the stage where s5(1)(c) of the Code was relevant, I would have found that it was met.
[85] Australian Securities and Investments Commission v Rent 2 Own Cars Australia Pty Ltd & Ors (2020) 147 ACSR 598 at paragraph [402]
171It was submitted by the first defendant that the plaintiff was in the business of providing credit. The first defendant relied on the evidence of his observations of the plaintiff referred to in his affidavit.[86] He said:
“My observation of Eleventh Klingon was that it carried on business as an unregulated money lender. The basis of my observation is because of the two loans I have obtained from Eleventh Klingon and because in about September 2013, David retained me (‘the retainer’) to speak with borrowers who had defaulted in repayment of their loans. … .”
[86] First Bell Affidavit at paragraph [7]
172In Lauvan Pty Limited & Anor v Bega & Ors,[87] Gleeson JA (as her Honour then was) noted that s5(1)(d) of the Code had three limbs. First, whether the credit was provided in the course of a business of providing credit carried on by the credit provider; or, secondly, as part of another business carried on by the credit provider or; thirdly, incidentally to another business carried on by the credit provider. Her Honour noted that:
“Whether a person carries on a business is a question of fact. The expression ‘in the course of a business carried on’ should be given a similar meaning to the well-known expression ‘carrying on a business’. That latter expression has been held to require ‘repetition, and continuity of the activities which characterise the business’: Williams v ATM & CPA Projects Pty Ltd[2015] NSWSC 703 at [70] (Ball J) and the cases cited therein.”
[87] Supra at paragraph [262]
173From the evidence produced on the review application, it is questionable whether the plaintiff was carrying on a business of providing credit. The first defendant glossed over this requirement in his submissions, but, in my view, the evidence was of two loans having been made by the plaintiff to the first defendant. The loans were arguably only sporadic and not sufficiently “systematic, continuous or repetitious to be characterised as a course of business of providing credit”[88] by the plaintiff.
[88]Ibid at paragraph [268]. See also Williams v ATM & CPA Projects Pty Ltd [2015] NSWSC 703 at paragraph [70]
174As to the second limb of s5(1)(d), I do not consider that the credit provided by the plaintiff was made as part of another business operated by the plaintiff. The evidence did not suggest the existence of such a business. Nor, for that reason, was the third limb of s5(1)(d) met. Again, had the analysis reached this stage, I would have found that s5(1)(d) was not met.
175For the above reasons, I do not consider the First Loan Agreement was subject to the Code.
Are the pre-conditions in Section 5(1) met in relation to the Second Loan Agreement?
176The first defendant is a natural person. Therefore, the requirement in s5(1)(a) of the Code is met.
177As identified, there is a presumption that a credit contract will be subject to the Code “unless the contrary is established”. The starting point is the purpose of the Second Loan which is set out in clause 2.3 of the Second Loan Agreement. Clause 2.3 provides:
“The Borrower must first use the Loan Amount for the purpose of satisfying all unpaid legal judgements, including enforcement costs, against the Property Owner and any costs payable under this agreement. Any additional funds left over after satisfying all unpaid legal judgements may be used at the discretion of the Borrower.”
178The plain words of the Second Loan Agreement do not support the plaintiff’s contention that the Second Loan Agreement was for a Code purpose. The purpose of the loan as stated in clause 2.3 was, prima facie, “to satisfy… all unpaid legal judgements, including enforcement costs”.
179The first defendant submitted that notwithstanding the stated purpose of the Second Loan, consideration of the Further Amended Defence and Amended Counterclaim filed in the matter of Kefalianos v Bell[89] referred to in the First Bell Affidavit,[90], as well as the circumstances deposed to at paragraphs 43 to 86 of Mr Bell’s affidavit affirmed 17 June 2022[91] and filed in the Kefalianos v Bell proceeding disclosed that the substance and reality of the provision of credit was for personal, domestic or household purposes.
[89]Supra
[90] First Bell Affidavit at paragraph [18]
[91]Affidavit of Tony Bell affirmed 17 June 2022, being Exhibit TMB-1, pages 120-136 to the First Bell Affidavit
180As I have already found, a pleading created for the purposes of a different proceeding is not binding for the purposes of another subsequent proceeding and cannot be regarded as an admission of the truth in the subsequent proceeding[92] unless the pleading was sworn, signed or otherwise adopted by the party.[93] The Further Amended Defence and Amended Counterclaim filed in the matter of Kefalianos v Bell was not signed or sworn by the first defendant. It was however, referred to and relied upon in paragraph 18 of the First Bell Affidavit.
[92]Boileau v Rutlin (supra); Buckmaster v Meiklejohn (supra); McKinlay v North Australian Company (supra); Austin v Austin (supra); Perry v Woolcock (supra); Kleeners Pty Ltd v Lee Tim (supra)
[93]Kleeners Pty Ltd v Lee Tim (supra) at 748; Pearce v Hall (supra). See also Damberg v Damberg (supra) at 519
181To enable the interests of justice to be properly determined with respect to the Second Loan, I have had regard to the Further Amended Defence and Amended Counterclaim filed in the matter of Kefalianos v Bell. I have also considered Mr Bell’s affidavit affirmed 17 June 2022[94] filed in the Kefalianos v Bell proceeding, specifically paragraphs 43 to 86.
[94]Affidavit of Tony Bell affirmed 17 June 2022, being Exhibit TMB-1, pages 120-136, to the First Bell Affidavit
182The Further Amended Defence and Amended Counterclaim filed in the matter of Kefalianos v Bell did not assist the first defendant to establish that the Second Loan was for personal, domestic or household purposes or the purchase, renovation or improvement of residential property for investment purposes. If anything, it pointed in the opposite direction.
183Paragraph 90 of the Counterclaim states that, amongst other things:
“…
Bell procured a loan of $250,000.00 from Eleventh Klingon Pty Ltd (Eleventh Klingon loan) to pay the judgment debt, interest that accrued on the judgment sum and legal costs of which Bell was the borrower.”
184According to paragraph 88 of the Counterclaim, the judgment debt referred to in paragraph 90, was a judgment debt entered by VCAT in favour of the builder, in the sum of $210,651.56 inclusive of interest and costs. In paragraph 87, the builder was defined as being C B Maintenance Pty Ltd.
185The First Bell Affidavit also did not support a conclusion that the Second Loan was for personal, domestic or household purposes or the purchase, renovation or improvement of residential property for investment purposes. In paragraph 18 of the First Bell Affidavit, Mr Bell deposed that in the Kefalianos proceedings, he had deposed, at paragraphs 43 to 86 of his affidavit affirmed 17 June 2022, to the circumstances in which the Second Loan came into being.[95]
[95]Affidavit of Tony Bell affirmed 17 June 2022, being Exhibit TMB-1, pages 120-136, to the First Bell Affidavit
186In paragraph 43 of the First Bell Affidavit,[96] he deposed as follows:
“I refer to paragraph 55 of the proposed defence, which responds to paragraph 55 of the ASOC. In 2008, I was on the verge of bankruptcy. William Kefalianos, an accountant, and person I knew socially, advised me to have Florence Bell to sell the Property to a corporate trustee (yet to be registered) of a yet to be settled trust and finance the purchase by borrowing money from a bank. The loan funds would be used to discharge all the registered interests against the Property (Advice). This Advice was given so that my family and I could continue to live in the Property if and when I went bankrupt. Keeping the family home at that very difficult time was important, as my marriage was on the rocks, and the family unit was at real risk of breaking apart. … .”
[96]Affidavit of Tony Bell affirmed 17 June 2022, being Exhibit TMB-1, pages 120-136, to the First Bell Affidavit
187He further deposed:
(a) He was “unemployed and bankrupt”;[97]
(b) The property was said to be the only asset of the Alphington Property Trust. The Trust did not have means to repay the Bank of Queensland loan unless it let the Property to Mr Bell, and he paid the mortgage;
(c) He said to William Kefalianos that he “would pay rent to live in the Property in the amount of the mortgage payments and other property expenses such as land tax and rates to Alphington Manor. No formal residential tenancy agreement was entered into”;[98]
(d) In 2011, renovations were carried out on the Property. The builder was to be repaid from monies which William Kefalianos said he owed the Trust, and those monies would be received when a shop development at Toolern was sold;[99]
(e) “The monies which William Kefalianos said he owed the Trust were a loan of $120,000.00 (which is referred to as the Southage Loan in the proposed defence) and $144,000.00 owed to the Trust”;[100]
(f) William Kefalianos never paid any money to the Trust upon the sale of the Toolern shop development;
(g) The builder was to be paid from refinancing the Property;[101]
(h) William Kefalianos was unable to procure financing;[102]
(i) The builder commenced VCAT proceedings and judgment was awarded in favour of the builder.[103]
[97]Affidavit of Tony Bell affirmed 17 June 2022, at paragraph [44], being Exhibit TMB-1, page 127, to the First Bell Affidavit
[98]Affidavit of Tony Bell affirmed 17 June 2022, at paragraph [44], being Exhibit TMB-1, page 127, to the First Bell Affidavit
[99]Affidavit of Tony Bell affirmed 17 June 2022, being Exhibit TMB-1, page 129, to the First Bell Affidavit
[100]Affidavit of Tony Bell affirmed 17 June 2022, being Exhibit TMB-1, page 129, to the First Bell Affidavit
[101]Affidavit of Tony Bell affirmed 17 June 2022, being Exhibit TMB-1, page 129, to the First Bell Affidavit
[102]Affidavit of Tony Bell affirmed 17 June 2022, being Exhibit TMB-1, page 130, to the First Bell Affidavit
[103]Affidavit of Tony Bell affirmed 17 June 2022, being Exhibit TMB-1, page 130, to the First Bell Affidavit
188The statutory question in s5(1)(b) as to the purpose of the provision of credit, is not directed to the ultimate use of the funds. It is directed to the immediate purpose of the loan. The ultimate use to which funds are put may be relevant to ascertain the purpose of the loan, but it is not determinative.
189The objective immediate purpose of the loan from clause 2.3 of the Second Loan Agreement, was to satisfy unpaid legal judgements including enforcement costs. Because that was the objective immediate purpose of the loan, it did not matter that the ultimate purpose may have been to pay a builder money in respect of renovation work or to support the first defendant’s family.
190I have reached the conclusion that the purpose of the Second Loan Agreement is not for personal, domestic or household purposes or to purchase, renovate or improve residential property for investment purposes. Consequently, the Second Loan Agreement is not subject to the Code.
191Similarly to the position in respect of the First Loan Agreement, because the Second Loan Agreement made provision for payment of interest and interest is a charge for the provision of credit for the purposes of s5(1)(c) of the Code,[104] had it been necessary to consider s5(1)(c) of the Code, I would have found s5(1)(c) is met.
[104]Australian Securities and Investments Commission v Rent 2 Own Cars Australia Pty Ltd & Ors (supra) at paragraph [402]; Australian Securities and Investments Commission v BHF Solutions Pty Ltd & Anor (2022) 293 FCR 330 at paragraphs [4] and [178]-[179]
192For the same reasons I have expressed in relation to the application of s5(1)(d) of the Code to the First Loan Agreement, I do not consider s5(1)(d) of the Code would be met with respect to the Second Loan Agreement.
Conclusion on application of the Code to the First and Second Loan Agreements
193I have found that the purpose of both the First Loan Agreement and the Second Loan Agreement was not for personal, domestic or household purposes or to purchase, renovate or improve residential property for investment purposes. I have also found the evidence did not support the conclusion that the plaintiff provided credit in the course of a business providing credit. The conclusions I have reached are that the First Loan Agreement and the Second Loan Agreement are not subject to the Code. The contention that the Deed of Settlement was unenforceable because the underlying First Loan Agreement and Second Loan Agreement were void or otherwise invalid/unenforceable because they did not comply with the Code falls away.
Conclusion
194For each of the reasons I have expressed, I do not consider any arguments by the first defendant as to the enforceability of the Deed of Settlement or the underlying First or Second Loan Agreements have a real prospect of success.
195In determining whether it is appropriate to adopt the summary enforcement procedure, I have considered the conclusion I have reached as to whether the issue of the enforceability of the Deed of Settlement or the underlying First or Second Loan Agreements have “a real prospect of success”.
196I have considered whether the first defendant could have a viable defence on ordinary contractual or equitable principles. In my view, there are no real prospects the Deed of Settlement was not valid or was unenforceable. However, before finally determining whether the interests of justice require the enforcement of the agreement summarily, I have also taken account of the overarching purpose in s8(1) of the Civil Procedure Act 2010 (Vic) of facilitating the just, efficient, timely and cost-effective resolution of the real issues in dispute.[105] Additionally, I have weighed the extent to which enforcement would involve extraneous matters, how substantial the questions to be determined as a precursor to enforcement may be, and other procedural considerations like the desirability of pleadings and discovery and substantial cross-examination. I have also considered the requirement for settlements reached at mediation not to be unduly scrutinised. I do not consider that any of the matters I am required to balance means that I must exercise my discretion to refuse use of the summary enforcement procedure. I am positively satisfied that the interests of justice require the enforcement of the agreement summarily.
[105] Australian Xinyangfeng Fertilizer Pty Ltd v Freshwater (supra)
197In all the circumstances, Judicial Registrar Muller’s decision was correct and should be affirmed. The plaintiff’s proposed orders are appropriate. I will also add a further order that the first defendant pay the plaintiff’s costs of and incidental to the application for review of Judicial Muller’s decision made 31 May 2024.
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