Esanda Finance Corporation Ltd v Spence Financial Group Pty Ltd
[2006] WASC 177
ESANDA FINANCE CORPORATION LTD -v- SPENCE FINANCIAL GROUP PTY LTD & ORS [2006] WASC 177
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WASC 177 | |
| Case No: | CIV:2405/2005 | 20 JUNE 2006 | |
| Coram: | MASTER NEWNES | 18/08/06 | |
| 27 | Judgment Part: | 1 of 1 | |
| Result: | Judgment for plaintiff | ||
| B | |||
| PDF Version |
| Parties: | ESANDA FINANCE CORPORATION LTD (ACN 004 346 043) SPENCE FINANCIAL GROUP PTY LTD (ACN 100 351 693) SEAN SPENCE MICHELLE JOY SPENCE |
Catchwords: | Practice and procedure Application by plaintiff for summary judgment Purchase of boat by first defendant Financed by plaintiff First defendant engaged finance broker to procure finance Finance broker allegedly represented that presettlement inquiries by plaintiff would reveal any encumbrances on title Whether finance broker was agent of plaintiff Whether conduct of plaintiff in settling finance transaction without completing title inquiries was unconscionable Meaning of "unconscionable conduct" in Trade Practices Acts 51AC, Australian Securities and Investments Commission Act 2001 s 12CB, s 12CC Relevant principles Whether matters calling for further investigation at trial Turns on own facts |
Legislation: | Australian Securities and Investments Commission Act 2001 (Cth), s 12CB, s 12CC Fair Trading Act 1987 (WA) Trade Practices Act 1974 (Cth), s 51AC |
Case References: | Agar v Hyde (2000) 201 CLR 552 Australia Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Ltd [2000] FCA 1365 Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332 Australian Competition and Consumer Commission v 4WD Systems Pty Ltd (2003) FCA 850 Australian Competition and Consumer Commission v Lux Pty Ltd [2004] FCA 926 Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226 Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27 Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552 Bridge v Campbell Discount Co Ltd [1962] AC 600 Burt v Australian and New Zealand Banking Group Ltd (1994) ATPR (Digest) 46–123 Cit Credit Pty Ltd v Blayn Norman Keable [2006] NSWCA 130 Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18 Custom Credit Corp Ltd v Luff, unreported; FCt SCt of Vic; 27 November 1990 Custom Credit Corporation Ltd v Lynch [1993] 2 VR 469 Eng Mee Yong v Letchumanan [1980] AC 331 Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 Hospital Contributions Fund of Australia v Hunt (1983) 44 ALR 365 Hurley v McDonald's Australia Ltd (2000) ATPR 41-741 Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284 Octapon Pty Ltd v Esanda Finance Corporation Ltd, unreported; SCt of NSW (Cole J); 3 February 1989 Petersen v Maloney (1951) 84 CLR 91 Scaffidi Nominees Pty Ltd v Scaffidi & Anor, unreported; FCt SCt of WA; Library No 960588; 11 October 1996 Steele-Smith v Liberty Financial Pty Ltd [2005] NSWSC 398 Toll (FGCT) Pty Ltd v Alpha Pharm Pty Ltd (2004) 219 CLR 165 Webster v Lampard (1993) 177 CLR 598 White v Johnston (1886) 8 ALT 53 Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2000) ATPR 41755 Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 Coggin v Telstar Finance Co (Q) Pty Ltd [2006] FCA 191 Erikson v Carr (1945) 46 SR (NSW) 9 Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41703 Legione v Hateley (1983) 152 CLR 406 Mullens v Miller (1882) 22 Ch D 194 Redgrave v Hurd (1881) 20 Ch D 1 Siglin v Choules [2002] WASCA 9 Stern v McArthur (1988) 165 CLR 489 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
SPENCE FINANCIAL GROUP PTY LTD (ACN 100 351 693)
First Defendant
SEAN SPENCE
MICHELLE JOY SPENCE
Second Defendants
Catchwords:
Practice and procedure - Application by plaintiff for summary judgment - Purchase of boat by first defendant - Financed by plaintiff - First defendant engaged finance broker to procure finance - Finance broker allegedly represented that presettlement inquiries by plaintiff would reveal any encumbrances on title - Whether finance broker was agent of plaintiff - Whether conduct of plaintiff in settling finance transaction without completing title inquiries was unconscionable - Meaning of "unconscionable conduct" in Trade
(Page 2)
Practices Acts 51AC, Australian Securities and Investments Commission Act 2001 s 12CB, s 12CC - Relevant principles - Whether matters calling for further investigation at trial - Turns on own facts
Legislation:
Australian Securities and Investments Commission Act 2001 (Cth), s 12CB, s 12CC
Fair Trading Act 1987 (WA)
Trade Practices Act 1974 (Cth), s 51AC
Result:
Judgment for plaintiff
Category: B
Representation:
Counsel:
Plaintiff : Mr M F Holler
First Defendant : Mr L A Tsaknis
Firstnamed Second Defendant : Mr L A Tsaknis
Secondnamed Second Defendant : No appearance
Solicitors:
Plaintiff : Deacons
First Defendant : Murfett & Co
Firstnamed Second Defendant : Murfett & Co
Secondnamed Second Defendant : No appearance
Case(s) referred to in judgment(s):
Agar v Hyde (2000) 201 CLR 552
Australia Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Ltd [2000] FCA 1365
Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332
(Page 3)
Australian Competition and Consumer Commission v 4WD Systems Pty Ltd (2003) FCA 850
Australian Competition and Consumer Commission v Lux Pty Ltd [2004] FCA 926
Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226
Baltic Shipping Co v Dillon (1991) 22 NSWLR 1
Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27
Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552
Bridge v Campbell Discount Co Ltd [1962] AC 600
Burt v Australian and New Zealand Banking Group Ltd (1994) ATPR (Digest) 46–123
Cit Credit Pty Ltd v Blayn Norman Keable [2006] NSWCA 130
Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226
Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18
Custom Credit Corporation Ltd v Luff, unreported; FCt SCt of Vic; 27 November 1990
Custom Credit Corporation Ltd v Lynch [1993] 2 VR 469
Eng Mee Yong v Letchumanan [1980] AC 331
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Hospital Contributions Fund of Australia v Hunt (1983) 44 ALR 365
Hurley v McDonald's Australia Ltd (2000) ATPR 41-741
Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284
Octapon Pty Ltd v Esanda Finance Corporation Ltd, unreported; SCt of NSW (Cole J); 3 February 1989
Petersen v Maloney (1951) 84 CLR 91
Scaffidi Nominees Pty Ltd v Scaffidi & Anor, unreported; FCt SCt of WA; Library No 960588; 11 October 1996
Steele-Smith v Liberty Financial Pty Ltd [2005] NSWSC 398
Toll (FGCT) Pty Ltd v Alpha Pharm Pty Ltd (2004) 219 CLR 165
Webster v Lampard (1993) 177 CLR 598
White v Johnston (1886) 8 ALT 53
Case(s) also cited:
Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2000) ATPR 41755
(Page 4)
Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51
Coggin v Telstar Finance Co (Q) Pty Ltd [2006] FCA 191
Erikson v Carr (1945) 46 SR (NSW) 9
Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41703
Legione v Hateley (1983) 152 CLR 406
Mullens v Miller (1882) 22 Ch D 194
Redgrave v Hurd (1881) 20 Ch D 1
Siglin v Choules [2002] WASCA 9
Stern v McArthur (1988) 165 CLR 489
(Page 5)
1 MASTER NEWNES: This is an application by the plaintiff for summary judgment against the first defendant and the first-named second defendant. The plaintiff claims the sum of $1,007,896 said to be the amount owing by the defendants pursuant to a chattel mortgage (the "mortgage") in respect of an advance made by the plaintiff for the purchase by the first defendant of a Sunseeker Renegade pleasure craft (the "boat"). The second defendants guaranteed the first defendant's obligations under the mortgage. Since the mortgage and guarantee were entered into a third party, GE Commercial Corporation (Australia) Pty Ltd ("GE") has taken possession of the boat on the ground that it has a prior security.
The issues
2 There was no dispute that the first defendant, whose obligations the second defendants had guaranteed, has not made the monthly payments required by the terms of the mortgage.
3 The defendants contend that the first defendant is not obliged to make the payments and that the defendants are entitled to have the mortgage and the guarantee set aside. The defendants say it is at least arguable that the broker who arranged the finance provided by the plaintiff pursuant to the mortgage was at all material times acting as the agent of the plaintiff. In that capacity, it is alleged, the broker falsely represented that the plaintiff would ensure clear title before settlement of the transaction, with the result that the defendants are entitled to avoid, or to have set aside, the chattel mortgage and guarantee. The plaintiff denies that the broker was its agent and says that it was the first defendant's obligation to secure title to the boat.
4 In the alternative, the defendants say that in the circumstances it would be unconscionable for the plaintiff to enforce the mortgage or guarantee. The plaintiff says there is simply no basis for any contention that the plaintiff's conduct was unconscionable.
The facts
5 The circumstances of the transaction have been set out in some detail in an affidavit sworn by Sean Spence ("Mr Spence"), the first-named second defendant and the sole director of the first defendant. The second-named second defendant is Mr Spence's wife ("Mrs Spence").
6 Mr Spence says that, in or about April or early May 2005, he negotiated on behalf of the first defendant with one Joel Dullard of Boatworld Australia Pty Ltd ("Boatworld") for the purchase of the boat by the first defendant.
(Page 6)
7 On about 8 May 2005, the first defendant entered into a contract with Boatworld to purchase the boat for $1.65 million, less a deposit of $650,000 made up of an amount of $200,000 from the trade-in of a boat owned by the first defendant and the further sum of $450,000. It appears that the balance of the deposit of $450,000 was made up by what Mr Spence later described as "vendor finance". The contract of sale was prepared by Mr Dullard who, in the space for noting encumbrances, wrote "N/A". It was also verbally agreed between Mr Spence and Mr Dullard that sea trials of the boat would not be completed prior to settlement because Mr Dullard said that settlement on the boat was urgent as he and Boatworld were in financial difficulty. Mr Dullard said that the $200,000 would be returned to the first defendant until the sea trials were successfully completed as a form of guarantee bond.
8 The first defendant required finance to enable it to purchase the boat. Mr Dullard sent the contract of sale and a valuation of the boat to Ms Li Cheng Ng-D'Acunto ("Ms Li Cheng") of John Hughes Finance Broking Corp Pty Ltd ("John Hughes Finance"). On about 9 May 2006, Ms Li Cheng telephoned Mr Spence and confirmed that the first defendant wished to apply for finance through John Hughes Finance. A meeting was then arranged at Mr Spence's office. At that meeting, Ms Li Cheng provided Mr Spence with a number of documents for signature, including a finance application form. Mr Spence says he does not recall what other documents he signed. He says Ms Li Cheng told him that she and John Hughes Finance were very experienced in boat finance transactions. Ms Li Cheng also requested financial information about the first defendant, which Mr Spence subsequently sent to her.
9 A day to two later, Mr Spence was contacted by telephone by a Ms Penfold of John Hughes Finance, who told him that John Hughes Finance was trying to arrange a loan through Capital Finance and an answer should be available in three to four days. The same day, Ms Penfold requested further information to enable the first defendant's loan application to be processed. That information was provided to her.
10 A little later, Ms Li Cheng contacted Mr Spence to ask him how the sum of $450,000, which constituted part of the deposit, had been paid. Mr Spence told her that it had been done by way of vendor finance. Ms Li Cheng said that that would make things very difficult, but that she "would see what she could do to obtain finance for [the first defendant]". In a subsequent telephone conversation, Ms Li Cheng told Mr Spence that Esanda might approve a loan because of the relationship that she and John
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- Hughes Finance had with Esanda and the volume of business they did with it.
11 Shortly afterwards, Ms Li Cheng called Mr Spence to inform him that the loan had been approved by Esanda.
12 On 18 May 2005, the second defendants attended at the offices of John Hughes Finance where Mr Spence signed a chattel mortgage on behalf of the first defendant to secure the sum of $1,004,547.40 advanced by Esanda. The second defendants signed a guarantee of the first defendant's obligations under the chattel mortgage. Mr Spence says he was concerned that there were no identification numbers or description of the boat on the loan documents and they were asked to initial the blank spaces, which they did. Mr Spence says he asked Ms Penfold if she had conducted a "REVS" check ("REV" being a reference to the Register of Encumbered Vehicles) in Western Australia and New South Wales, to confirm the boat was unencumbered and that the first defendant was getting clear title. Mr Spence says he told Ms Penfold that Mr Dullard had a floor plan over all his boats with "GE" and Mr Spence was concerned that the boat might be part of the stock encumbered under the floor plan. Ms Penfold said that she was working on it and that, due to Esanda's procedures, settlement would not go through until clear title to the boat had been confirmed.
13 Mr Spence says he was also told by a representative of John Hughes Finance (the name of whom he cannot now recall) that a physical inspection of the boat had been carried out to confirm the boat identification information. Much later, Mr Spence obtained a copy of an inspection report dated 16 May 2005, which had been completed by a Steven Ward of John Hughes Finance. The inspection report, which bears the name of the plaintiff at the top, appears to be a pro-forma document of the plaintiff which had been completed by Mr Ward and was signed by him on behalf of the "Broker".
14 On 18 May 2005, Ms Penfold wrote to Mr Dullard by facsimile requesting a tax invoice. The tax invoice provided noted the "HIN" (which I take to be an abbreviation for the "hull identification number") as 18360. It turned out that that was not the HIN, which would have had the prefix "AU/TWA" (which I understand to be an abbreviation for "Australia/Transport Western Australia"), but the "UVIN" (which I take to be an abbreviation for the "unique vessel identification number").
15 On the afternoon of 19 May 2005, Ms Penfold wrote to Mr Spence by facsimile in the following terms:
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- " … I am pulling every string possible to get this settled tonight. I still haven't received confirmation from them (Esanda) that the HIN/REVS issue is acceptable & this is the important mitigating factor.
Basically, as the vessel has not been registered with a HIN, Esanda cannot confirm clear title ie cannot confirm that no other person or financier holds an interest in the boat. The risk is naturally that if by chance another bank already had the boat under finance from a previous owner, Esanda would be out of pocket $1m. Whilst we may be comfortable that this is of course not the case, Esanda have to comply with standard protocol. They also cannot register their own interest with REVS at this stage, at least not until the boat has a HIN. I have also been in touch with NSW REVS & researched any potential legal ramifications & have submitted as much as I can to support settlement before the HIN is issued.
Personally I feel we will be fine & even if we don't settle tonight, it will be in the morning. There is however an outside chance that we will still encounter a problem but I am doing everything possible to over come it.
I will let you know the minute I hear one way or the other."
16 Mr Spence says that before settlement he discussed the matter again with Ms Penfold, who told him that additional searches in New South Wales had resolved the matter. That seems to refer to certain information which Ms Penfold conveyed by facsimile to Esanda on 19 May 2005, a copy of which facsimile the defendants have recently obtained. In that facsimile Ms Penfold said:
"Further to previous advices, I can confirm that the NSW registration [number omitted] & Engine Nos. [numbers omitted] are now registered with NSW REVS. I confirm that I have personally spoken with John (NSW REVS) on [number omitted] and there are no current encumbrances listed against these identifiers.
The identifier '18360' is the boat builders manufacturers own identifiers from pre-HIN days.
The transfer papers were signed & posted to NSW last night to transfer the boat from Joel's name to Spence Financial Group.
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- The papers are then sent back to Joel & at this stage he can proceed to obtain an HIN & thereafter register the boat in WA. He has advised me that this will be completed within 7 days.
I believe that it is unlikely we can register with WA REVS without a HIN, however we have the comfort of a fixed charge against the company. In his capacity as owner of Boat World, Joel Dullard does have a legal obligation to ensure clear title of a vessel he sells, particularly when it is currently registered in his personal name.
We should now have all other approval conditions complied (copy of Marriage certificate is being forwarded to Settlements now). Would you please advise if we are able to settle this afternoon so that funds will be with Boat World by Friday – there are various influential time factors including arrangements to move the vessel, penn [sic] fees etc etc …" [emphasis in original]
17 It seems that Ms Penfold wrote again to Esanda the same day confirming advice from the NSW Maritime Authority that the registration and engine details had been sent by "to REVS in NSW to be placed on their system." Ms Penfold said to Esanda that that would "enable us to obtain a NSW REVS certificate & register Esanda's interest with WA REVS."
18 According to Mr Spence, shortly before settlement Ms Penfold told him that she was under enormous pressure from Ms Li Cheng and Mr Dullard to effect settlement urgently "regardless of any technical issues or procedures which Esanda needed to follow". Mr Spence says that he was in no particular rush to settle and was therefore surprised to receive an email from Ms Penfold on 20 May 2005 to confirm that settlement had taken place.
19 After settlement, Mr Spence encountered some difficulties in registering the boat in Western Australia, due to what appeared to be discrepancies in the identification numbers. He received, however, explanations from Mr Dullard as to that and was satisfied with them.
20 On about 15 July 2005, Ms Li Cheng came to Mr Spence's office to discuss some issues relating to the boat and the possibility of his accounting practice referring business to John Hughes Finance. Mr Spence says that at the meeting Ms Li Cheng told him that she was concerned that Mr Dullard had not provided her with an HIN so that the transfer of the registration of the boat to the first defendant, and the registration of Esanda's encumbrance, could proceed. Ms Li Cheng said that the transaction would not have
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- proceeded without the close relationship she and John Hughes Finance had with Esanda. She said she had "gone out on a limb" to assure Esanda that settlement could proceed, even though there were settlement issues which, under Esanda's usual procedures, would normally have held up settlement. Ms Li Cheng said she was now under significant pressure from Esanda to rectify the problems and she asked for Mr Spence's help to get Mr Dullard to supply the transfer and the HIN.
21 Mr Spence says he was surprised to learn that Esanda had not registered its encumbrance over the boat at that stage, as he had been told by Ms Penfold when he signed the loan documents that Esanda's security over the boat would be registered at settlement. Mr Spence said that he thought that the problems were merely administrative and that the first defendant's and Esanda's positions were secure. He was told by Mr Dullard that the problem with the HIN were due to delays in getting the necessary paperwork from New South Wales.
22 On 6 September 2005, Mr Spence was informed by the owner of the mooring on which the boat was moored that representatives of GE were repossessing the boat. The following day, Mr Spence went with Mr Ward of John Hughes Finance to check the identification numbers on the boat. Mr Spence says that at that time Mr Ward told him that he (Ward) had not properly inspected the boat before settlement and had not adhered to Esanda's normal procedures.
23 Mr Spence says that at a meeting at the office of the defendants' solicitors later that day, Mr Ward said that Ms Li Cheng, the managing director of John Hughes Finance, had placed him under huge pressure to have settlement go through immediately. Mr Ward said he had been instructed by Esanda to undertake inquiries and complete a checklist prior to settlement to ensure that the tax invoice details corresponded with those on the boat. In fact, he had signed the inspection report without having verified the contents of the tax invoice. He had not, as he should have done, accessed the engine room, checked the engine serial numbers, sighted the HIN and sighted any registration number.
24 According to Mr Spence, in a subsequent meeting at the offices of John Hughes Finance, Ms Penfold told him that she also had done things outside Esanda's normal policy and procedure for loans because of the pressure she was under both from Ms Li Cheng and Mr Dullard to effect an immediate settlement.
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25 Mr Spence says that, if in fact GE has a valid prior security over the boat, had the proper checks been done prior to settlement John Hughes Finance and Esanda would have learned of GE's charge over the boat and settlement would not have gone ahead.
26 GE has taken possession of the boat and is in the course of selling it. I should say that the defendants do not admit that GE has a valid prior security and intend to commence proceedings against GE for conversion of it. This application was argued, however, on the basis that GE does have a valid prior security.
27 In the meantime, the first defendant has not made payment to the plaintiff of instalments which have fallen due under the terms of the mortgage. The plaintiff alleges that the first defendant is in default under the mortgage.
28 The mortgage, relevantly, provides that the first defendant is to make 59 monthly payments of $14,190.50 each, commencing one month after settlement. It also provides that if legal title to the boat did not vest in the first defendant at or prior to execution of the mortgage, the first defendant would acquire legal title and possession of the boat free from all encumbrances. The legal title to the boat would vest in the plaintiff as mortgagee when the first defendant used the boat or when the first defendant made the first payment under the mortgage, whichever occurred first. The mortgage also provides that the first defendant would comply with all requirements of law relating to the boat or its possession or use, and if it was capable of being registered, the first defendant would register it. The mortgage further provided that the first defendant would not part with personal possession or control of the boat without the plaintiff's written consent.
29 The plaintiff alleges that the first defendant is in breach of the mortgage in that it has failed to make payments which are due and owing, it has failed to ensure it obtained legal title and possession of the boat, it has failed to acquire the boat free from all encumbrances, it has failed to register the boat in its name and it has parted with personal possession or control of the boat.
30 The plaintiff has brought this action to recover the whole of the amount payable under the mortgage. As I have mentioned, the defendants deny that the mortgage or the guarantee are enforceable against them.
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The defendants' submissions
31 The defendants say that John Hughes Finance was at all material times the agent of Esanda and, prior to settlement, falsely represented to the defendants that settlement would not proceed until clear title to the boat had been confirmed, that searches had resolved the issue of clear title, and that there were no prior encumbrances over the boat. The plaintiff is therefore liable for those misrepresentations. The defendants say that they were induced by the misrepresentations to enter into the mortgage and the guarantee.
32 It was submitted on behalf of the defendants that whether or not a person is the agent of another is to be determined as a matter of fact and substance, not nomenclature: Petersen v Maloney (1951) 84 CLR 91 at 94 - 95. Counsel argued that there was uncertainty as to the role of John Hughes Finance without further investigation of the facts. If, upon further investigation, John Hughes Finance was found to be the agent of the plaintiff, the mortgage and guarantee would not be enforceable against the defendants and the defendants would be entitled to have them set aside under the Trade Practices Act 1974 (Cth) (the "TPA"), the Fair Trading Act 1987 (WA) and the Australian Securities and Investments Commission Act 2001 (Cth) (the "ASIC" Act").
33 It was also submitted on behalf of the defendants that, questions of agency aside, the conduct of the plaintiff is unconscionable within the meaning of s 51AC of the TPA and s 12CB and s 12CC of the ASIC Act. Unconscionable conduct under those sections is wider than the traditional equitable notion of unconscionable conduct. It was submitted that the cases establish that conduct will be regarded as unconscionable if serious misconduct or something unfair or unreasonable can be demonstrated, or if what is done shows no regard for conscience or is irreconcilable with what is right or reasonable. Moreover, those formulations do not provide closed categories of unconscionable conduct, the categories of which will never be closed.
34 Counsel argued that if the conduct in which John Hughes Finance had engaged had been engaged in by the plaintiff, it is clear that the conduct would be unconscionable. It would equally be against conscience for the plaintiff to avoid that situation by the interposition of John Hughes Finance as a third party, so that the plaintiff could secure and take all the benefits of the conduct of the John Hughes Finance without being subject to any countervailing obligations and responsibilities.
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35 Counsel further submitted that, prior to the funds being advanced, Esanda knew that the first defendant was not in a position, if settlement occurred, to obtain clear title to the boat. Despite that, Esanda now seeks to recover the funds advanced, and to enforce the guarantee, in circumstances where there is no evidence that prior to advancing the funds Esanda received any confirmation that the boat was not subject to an encumbrance and where Esanda knew that, had the defendants been made aware that clear title had not been established, the defendants would not have proceeded to settlement. Esanda knew when it advanced the funds that any risk resulting from the boat being encumbered would fall on the defendants.
36 It was argued that in the circumstances it would be unconscionable for Esanda to proceed to settlement and to seek to enforce the agreement. At the least, it was necessary for there to be further investigation of the facts to ascertain the state of knowledge of Esanda at the time of the mortgage and guarantee were entered into and, in particular, whether Esanda was aware that the boat might be encumbered or that clear title had not been established at the time it advanced the funds.
The plaintiff's submissions
37 It was argued on behalf of the plaintiff that it was clear that in law John Hughes Finance was not the agent of the plaintiff. It was an "agent" only in the loose sense of a go-between, not in any legal sense. It was submitted that it will be rare for a broker to be the agent of a lender because of the clear conflict of interest that would arise. The fact that the broker dealt with the finance company and received a commission from it did not render the broker the agent of the financier. Counsel referred to Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 234 and Octapon Pty Ltd v Esanda Finance Corporation Ltd, unreported; SCt of NSW (Cole J); 3 February 1989 at 27 - 28 and Custom Credit Corporation Ltd v Lynch [1993] 2 VR 469 at 486.
38 Counsel submitted that, in any event, in this case the contract documents clearly excluded any agency. The Chattel Mortgage Terms and Conditions, which formed part of the offer by the defendants to Esanda and are acknowledged as having been received by the defendants prior to signing the chattel mortgage, contain an express acknowledgement by the defendants that the broker is not Esanda's agent.
39 In any event, the fact that Esanda had provided finance application and other forms to John Hughes Finance for completion, and that John Hughes Finance had been involved in liaising with Esanda and providing it with
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- information in relation to the first defendant's finance application, was irrelevant to the question of agency, quite apart from the defendants' express acknowledgement that the broker is not the agent of Esanda.
40 Counsel further submitted that there was nothing in the conduct of Esanda which could constitute unconscionable conduct in equity or under any statutory provision. The first defendant was represented by its sole director, who was a qualified accountant and tax agent, the terms of the chattel mortgage specifically provided that the borrower would ensure that it acquired the legal title and possession of the boat free from all encumbrances, no representations as to title had been made by Esanda, and Esanda advanced the finance having been assured by John Hughes Finance that there were no encumbrances. In circumstances where the borrower undertook to obtain unencumbered title and Esanda had been assured by the broker that there were no encumbrances, there could be nothing unconscionable about Esanda enforcing the mortgage and the guarantee.
The relevant principles
41 The principles applicable to an application of this sort are well known. The overall legal burden of persuading the Court that the claim is a good one and that the plaintiff is entitled to judgment rests throughout on the plaintiff. But once the plaintiff discharges the initial onus of satisfying the Court that in respect of its claim it would, upon the evidence adduced by it, be entitled to judgment, there is an evidentiary onus on the defendant to satisfy the Court that there is a triable issue or dispute between the parties or that for some other reason there ought to be a trial: Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18 at 23; Scaffidi Nominees Pty Ltd v Scaffidi & Anor, unreported; FCt SCt of WA; Library No 960588; 11 October 1996.
42 It is clear that the power to order summary judgment must be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87. In Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27, Gleeson CJ, Gummow, Hayne and Crennan JJ cited with approval the following passage from the judgment of Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde (2000) 201 CLR 552 at 575 - 576 [57]:
"It is, of course, well accepted that a court whose jurisdiction is regularly invoked … should not decide the issues raised in those proceedings in a summary way except in the clearest of cases. Ordinarily, a party is not to be denied the opportunity to place his
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- or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way."
43 The need for caution is nowhere more important than where the ultimate outcome turns upon the resolution of some disputed issue or issues of fact: Webster v Lampard (1993) 177 CLR 598. It was never intended that when the facts are in dispute, actions should be disposed of summarily: White v Johnston (1886) 8 ALT 53. The Court is not, however, bound to accept uncritically as raising a dispute of fact calling for further investigation every statement in an affidavit, however equivocal, lacking in precision or inconsistent with contemporary documents or other statements by the deponent: Eng Mee Yong v Letchumanan[1980] AC 331 at 341. But if after argument there remains real uncertainty as to the plaintiff's right to judgment without further investigation of the facts, summary judgment must be refused: Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332 at 335.
44 The Court should also be astute not to risk to avoid stifling the development of the law by summarily disposing of actions in respect of which there is a reasonable possibility that it will be found in the development of the law, still embryonic, that a defence does lie: Hospital Contributions Fund of Australia v Hunt (1983) 44 ALR 365 at 373.
Is the plaintiff entitled to judgment?
45 I will turn first to the issue of agency. The defendants say that there is a triable issue as to whether John Hughes Finance was the agent of the plaintiff. Counsel referred to the evidence of Mr Spence that representatives of John Hughes Finance asked Mr Spence for financial information of the kind ordinarily required by a financier to process and approve an application for finance; the finance application documents on the plaintiff's letterhead had been in the possession of John Hughes Finance and had been completed by the defendants at the offices of John Hughes Finance; that Ms Li Cheng had said that the loan would not have been approved without the close relationship that she and John Hughes Finance had with the plaintiff; that Ms Li Cheng had said she had gone out on a limb to ensure settlement proceeded although there were issues that would normally have held up settlement and she was under pressure to rectify these problems; that Mr Ward said he had not adhered to the plaintiff's
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- normal procedures in inspecting the boat; that Ms Penfold had said she had gone outside the plaintiff's normal policy and procedures for loans; that there was a commercial arrangement by which John Hughes Finance received a fee or commission for arranging the loan; and the only channel of communication between the defendants and the plaintiff was John Hughes Finance.
46 It was submitted that, in light of those matters, there was sufficient uncertainty to call for further investigation of the facts.
47 In Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41, Dixon J observed (at 50) in relation to agency:
"Some of the difficulties of the subject arise from the many senses in which the word 'agent' is employed. 'No word is more commonly and constantly abused than the word 'agent'. A person may be spoken of as an 'agent' and no doubt in the popular sense of the word may properly be said to be an 'agent', although when it is attempted to suggest that he is an 'agent' under such circumstances as create the legal obligations attaching to agency that use of the word is only misleading' (per Lord Herschell in Kennedy v De Trafford [1897] AC 180 at 188). Unfortunately, too, the expressions 'for', 'on behalf of', 'for the benefit of" and even 'authorize' are often used in relation to services which, although done for the advantage of a person who requests them, involve no representation."
48 It is, I think, clear that whether in any particular case a person is in law the agent of another, either generally or in any specific respect, must be determined on the facts of the case. The question is whether there is anything in the circumstances of the transaction in this case which is capable of establishing a relationship of principal and agent between John Hughes Finance and the plaintiff, or anything to indicate that such a relationship might emerge upon further investigation of the facts at a trial. The mere assertion by the defendants of an agency is not, of course, sufficient to establish a triable issue. There must appear to be some basis for it.
49 The starting point, it seems to me,is the agreement between the first defendant and the plaintiff.
50 By the chattel mortgage, signed on behalf of the first defendant by Mr Spence as the sole director of the first defendant and by Mrs Spence as a
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- shareholder, the first defendant acknowledged that prior to execution of the chattel mortgage it had received a copy of the "Esanda Chattel Mortgage Terms and Conditions". By cl 6 of those terms and conditions, among other things, the first defendant agreed that upon early termination of the chattel mortgage the plaintiff would be entitled to recover from it the amount of any unrecouped fee or commission paid to any dealer or broker and goes on:
"I [the first defendant] acknowledge that any such dealer or broker is not Esanda's agent and I agree to the payment of such commission by Esanda should it choose to do so."
52 In Toll (FGCT) Pty Ltd v Alpha Pharm Pty Ltd (2004) 219 CLR 165, in discussing the objective theory of contractual assent, the High Court said (at 180 - 181 [45]):
"It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Latham CJ put it, whatever they might be."
53 Moreover, when one turns to the circumstances of the transaction itself there is, in my view, nothing that is inconsistent with the acknowledgement the broker is not Esanda's agent and no reason why it should not be given effect.
54 In Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited (supra), the High Court said (at 234):
" … under the general principles of the law of agency, a broker is the agent of the assured, not the insurer … There will be rare circumstances in which a broker may also be an agent of the
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- insurer, but the courts will not readily infer such a relationship because a broker so placed faces a clear conflict of interest between his duty to the assured on the one hand and to the insurer on the other."
55 That was said in the context of an insurance broker but it has been applied to a finance broker: see, for example, Custom Credit Corporation Ltd v Lynch (supra); Octapon Pty Ltd v Esanda Finance Corporation Limited (supra).
56 In the United Kingdom, it had been the practice for finance companies in hire purchase transactions to purchase the goods from the retailer and then sell them to the customer by means of a hire purchase agreement entered into between the finance company and the customer. The question arose as to whether in those circumstances the retailer was the agent of the finance company.
57 In Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552, the majority of the House of Lords held that motor vehicle dealer was not the general agent of a hire purchase company simply because the dealer had the financier's forms, knew the terms on which the financier was prepared to do business and completed the application forms for finance. Lord Upjohn (with whom Lord Guest agreed) said (at 577 - 8):
"It is argued that in having possession of the finance company's forms and the ability to settle and fill in all these essential figures he showed that he [the dealer] was acting in the transaction generally as the agent of the finance company. But I do not myself think that this is a realistic approach. A motor dealer must have, if he is to be successful, one or more finance companies willing to enter into the ordinary bona fide hire-purchase agreements with purchasers, many of whom cannot pay the cash price. They must, therefore, supply him with forms and tell him as a matter of common sense the terms upon which they are prepared to do business, and this must include information upon the terms of their hiring charges, their minimum initial instalment and the maximum period of hire; probably this will be controlled by the relevant statutory regulations but if their terms differ no doubt they will inform him of their commercial practice. But I cannot see that this makes him an agent of the finance company. In any event, all he is doing is to fill in a document which he submits on behalf, as I think clear, of the would-be hirer which contains a proposal for hire-purchase finance. It is quite clear that
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- in law and fact the finance company are not bound to accept it. … I cannot see how, in fact, it is possible to spell out of this transaction that in these circumstances the dealer is in any way a general agent for the finance company."
58 Lord Morris of Borth-y-Gest considered that while the evidence in a particular case might demonstrate that the dealer was the agent of the finance company ad hoc for one purpose or another, the dealer's possession of the financier's forms did not establish an agency
59 Lord Wilberforce dissented, in an opinion with which Lord Reid concurred. His Lordship said (at 586 - 7) that, while accepting that in each case "something, much or little, must depend on the individual facts", he considered the normal conclusion should be that a dealer is the agent of the finance company unless there are facts displacing that conclusion. In arriving at this presumption of agency, Lord Wilberforce relied heavily on "the established mercantile background of hire-purchase transactions" or "mercantile reality".
60 There is a substantial body of authority in Australia which is consistent with the view expressed by the majority in that case.
61 In Octapon Pty Ltd v Esanda Finance Corporation Pty Ltd (supra), a finance broker had arranged hire purchase finance for the plaintiff for the purchase of a prime mover and trailer. The plaintiff had been referred to the broker after an application for finance to another financier was slow in being approved. The plaintiff's representative had asked the broker if he would arrange alternative finance. The broker prepared the finance application and submitted it to Esanda. The finance was approved by Esanda. Subsequently the prime mover and trailer were found to be subject to a prior security to a third party. A question arose as to whether the finance broker had acted as the agent of Esanda of the plaintiff in arranging the hire purchase finance. Cole J said:
"I am satisfied [the finance broker] was a broker acting as agent for Octapon for the purpose of arranging hire purchase finance. [The borrower] approached him on that basis. The circumstance that he received commission from Esanda for transactions which he introduced to that company, as well a fee from Octapon, does not render his position that of agent for Esanda. The fact that the broker approached a finance company, arranged for execution of documents, provided details of the vehicles and of Octapon's financial position, arranged for the obtaining of an invoice from
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- the supposed vendor, and otherwise took steps to enable the smooth application for and completion of the transaction, in no way constitutes him the agent of Esanda (see Con-stan [sic] Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226 at 234)."
62 That passage was referred to with approval by the Appeal Division of the Supreme Court of Victoria in Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284, per Fullagher J (with whom Brooking and Tadgell JJ agreed) at 308. The decision was also referred to by Palmer J in Steele-Smith v Liberty Financial Pty Ltd [2005] NSWSC 398, as authority for the proposition that the fact that a finance broker approaches a finance company for a loan to a client of the broker and assists in the execution of loan documentation is not sufficient to make the finance broker the agent of the finance company.
63 In Custom Credit Corporation Ltd v Luff, unreported; FCt SCt of Vic; 27 November 1990, a car dealer and a finance broker who operated from the offices of a car dealer and introduced their respective clients to finance companies were held not to be agents of the finance companies. Although the client expressly acknowledged in the agreement subsequently entered into that the dealer was not the finance company's agent for any purpose, the finding did not depend on that acknowledgment.
64 In Custom Credit Corporation Ltd v Lynch (supra), a dealer arranged finance through Custom Credit Corporation Ltd for the purchaser of a caravan, a Ms Lynch. Custom Credit took a "consumer mortgage" (within the meaning of s 5 of the Credit Act 1984 (Vic)) over the caravan from Ms Lynch as security for a loan and credit charges. The dealer was in possession of a stock of Custom Credit forms, filled in those that Ms Lynch signed, and received payment of commission from Custom Credit for introducing her. Ms Lynch successfully applied to the Credit Tribunal for a reopening of the loan contract on the statutory ground that it was "unconscionable, harsh or oppressive". Custom Credit successfully appealed. One of the questions on the appeal was whether the dealer was an agent of Custom Credit according to general law principles. It was held that the dealer was not. Marks J (with whom Fullagar J agreed) said that the position of the dealer might be considered to be analogous to an insurance broker: Con-Stan Industries Australia Pty Ltd v Norwich Winterthur Insurance (Aust) Ltd (supra). Marks J said that the possession of Custom Credit's forms, the filling in of them and the fact that commission was payable did not make the dealer the agent of Custom Credit. His Honour referred to Octapon Pty Ltd v Esanda Finance Corporation Pty Ltd
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- (supra) and Branwhite v Worcester Works Finance Ltd (supra). Marks J considered that what the dealer did, it did on behalf of Ms Lynch or, perhaps, on its own behalf. The reasoning of Ormiston J was to the same effect.
65 While, therefore, whether in any case a finance broker is the agent of the financier is a question which must be determined on the facts of the particular case, there is a strong body of authority which supports the view that such an agency will not readily be inferred and it is not sufficient simply to show that the broker possessed and completed the finance application form, provided to the financier information required by the financier and received a fee or commission from the financier.
66 On the evidence before me, John Hughes Finance was engaged by the defendants to assist the first defendant to obtain finance to enable it to purchase the boat. Initially, John Hughes Finance attempted to arrange finance with a different financier but, when that was unsuccessful, suggested that an application be made to the plaintiff. The fact that at that stage representatives of John Hughes Finance referred to the close relationship they had, and the amount of business they did, with the plaintiff, does not, in my view, suggest an agency relationship. Nor does the fact that John Hughes Finance had, and completed, the finance application form and submitted it, together with financial and other information required by the plaintiff, to the plaintiff. All that is consistent with its role as the finance broker for the defendants. And, as I have said, by the terms of the mortgage the first defendant, by the second defendants, expressly acknowledged that John Hughes Finance was not the agent of Esanda.
67 In my view, there is, in the end, nothing in the evidence that might suggest, or that could reasonably have suggested to the defendants, that John Hughes Finance was acting as an agent of the plaintiff.
68 I do not consider there is any triable issue as to whether John Hughes Finance was the agent of the plaintiff, either generally or specifically in any relevant respect, in connection with the transaction. Nor, in my view, is there anything to suggest that a fuller investigation of the facts at a trial might lead to a finding that there was such an agency. In relation to the latter, it is not sufficient to speculate that if the defendants were afforded the detailed examination of the facts that a trial would permit there is always a chance that something might turn up. There must be some proper basis upon which a trial of the action is warranted and, in respect of the agency issue, on the material before me I do not consider there is any such basis.
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69 It is necessary, then, to turn to the defence based on unconscionable conduct. Counsel for the defendants stressed that this defence did not depend upon an agency being found, but was maintainable independently of any agency. The defendants rely upon s 51AC of the TPA,and s 12CB and s 12CC of the ASIC Act.
70 Section 51AC of the TPA provides, in effect, that a person must not, in trade or commerce, in connection with the supply or possible supply of services to another person, engage in conduct that is, in all the circumstances, unconscionable. Section 51AC(3) sets out a number of matters to which the Court may have regard for the purpose of determining whether a person has contravened s 51AC(1). Those matters include, by s 51AC(3)(i), the extent to which the supplier unreasonably failed to disclose to the service recipient any intended conduct of the supplier that might affect the interests of the service recipient and any risks to the service recipient arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the service recipient) and, by s 51AC(3)(k), the extent to which the supplier and the service recipient acted in good faith.
71 Section 12CC of the ASIC Act, save that it applies to the supply of financial services rather than simply services, is for all relevant purposes in the same terms as s 51AC of the TPA. Section 12CB of the ASIC Act is to the same effect but is limited to financial services of a kind ordinarily acquired for personal, domestic or household use.
72 The meaning of "unconscionable" under s 51AC of the TPA has been the subject of considerable judicial consideration.
73 In Hurley v McDonald's Australia Ltd (2000) ATPR 41-741 at 4,585, the Full Court of the Federal Court, in an oft-quoted passage, said in relation to s 51AC:
"For conduct to be regarded as unconscionable, serious misconduct or something clearly unfair or unreasonable, must be demonstrated … Whatever unconscionable means in s 51AB and s 51AC, the term carries the meaning given by the Shorter Oxford Dictionary, namely, actions showing no regard for conscience, or that are irreconcilable with what is right or reasonable … The various synonyms used in relation to the term 'unconscionable' import a pejorative moral judgment …"
74 In Australia Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Ltd [2000] FCA 1365, Sundberg J considered
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- that, whatever might be its precise ambit in s 51AA, "unconscionable" in s 51AC is not limited to the cases of equitable or unwritten law unconscionability which are the subject of s 51AA. His Honour considered that that follows from the (non-exhaustive) list of factors to which s 51AC(3) permits the Court to have regard, some of the listed factors describing conduct that goes beyond what would constitute unconscionability in equity. Sundberg J concluded that whether conduct is unconscionable for the purposes of s 51AC is at large. See also Australian Competition and Consumer Commission v Lux Pty Ltd [2004] FCA 926 at [98]; Australian Competition and Consumer Commission v 4WD Systems Pty Ltd (2003) FCA 850.
75 But a finding that a supplier has engaged in unconscionable conduct will not be made lightly. As the Federal Court observed in Hurley v McDonald's Australia Ltd (supra), "unconscionable" imports a pejorative moral judgment.
76 In Australian Competition and Consumer Commission v 4WD Systems Pty Ltd (supra), after referring to the earlier cited passage from Hurley v McDonald's Australia Ltd, Selway J said in relation to s 51AC:
"In order to find that conduct is 'unconscionable' it is necessary to do more than merely show that the behaviour is misleading or deceptive, or otherwise in breach of some other provision of the TPA. What is necessary is to show that the conduct is so unacceptable that it can properly be described as 'unconscionable'. Normally it might be expected that behaviour would only be 'unconscionable' if some moral fault or responsibility is involved. Normally it might be expected that this would involve either a deliberate act, or at least a reckless act. Mere unreasonableness or unfairness may not be sufficient, at least in the absence of some moral fault. This is why it was critical to the conclusion he reached in Simply No-Knead that Sundberg J was able to find an 'overwhelming case of unreasonable, unfair, bullying and thuggish behaviour'. Of course, those words are not a definition of 'unconscionable'. But having made that finding it is quite apparent that the behaviour could properly be characterised as 'unconscionable'."
77 Selway J pointed out that s 51AC of the TPA is not to be "treated as a 'catch all' provision applicable to each and every inappropriate business practice adopted by a trading corporation in relation to the supply of goods.
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- The relevant conduct must be conduct which can be characterised as 'unconscionable'."
78 Similarly, Viscount Simonds warned in Bridge v Campbell Discount Co Ltd [1962] AC 600 at 626, that " '[u]nconscionable' must not be taken to be a panacea for adjusting any contract between competent persons when it shows a rough edge to one side or the other". Although that was said in relation to unconscionability in equity, in my view it is equally pertinent to "unconscionable conduct" under the statutory provisions relied upon in this case.
79 In Burt v Australian and New Zealand Banking Group Ltd (1994) ATPR (Digest) 46–123 at 53,597, Bryson J said:
"Unconscionability is not a slight matter, and behaviour is only unconscionable where there is some real and substantial ground based on conscience for preventing a person from relying on what are, in terms of the general law, that person’s legal rights."
80 In Cit Credit Pty Ltd v Blayn Norman Keable [2006] NSWCA 130, Spigelman CJ (with whom Giles JA and Gzell J agreed)described as readily adaptable to the issue of statutory unconscionability, the statement of Gleeson CJ in Baltic Shipping Co v Dillon(1991) 22 NSWLR 1 (at 9), a case under the Contracts Review Act 1980 (NSW), that " … the general policy of the law is that people should honour their contracts. That policy forms part of our idea of what is just".
81 In my view, the cases to which I have referred are equally applicable to s 12CB and s 12CC of the ASIC Act. In Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226, the Full Court of the Federal Court held (at [30]) that s 12CC is not limited to the concept of unconscionable conduct under the unwritten law. The Court said that, as with s 51AC of the TPA, the provision was intended to build on and not be constrained by the general law cases. "Unconscionable conduct", in its ordinary and natural interpretation, means doing what should not be done in good conscience. The Court held (at [39] - [40]) that the question is whether the conduct was "unconscionable" according to the natural and ordinary meaning of that term, having regard to the list of statutory considerations, those factors being weighed and considered as a whole and not being treated as exhaustive. The Court said (at [43]) that "[t]he law is not, of course, intended to protect the reckless or the unreasonable and, as Spigelman CJ stated in Attorney-General (NSW) v
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- World Best Holdings Ltd [2005] NSWCA 261 at [121], '[u]conscionability is a concept which requires a high level of moral obloquy'."
82 There is nothing in the material that has been put before me that, in my view, is capable of suggesting that the conduct of the plaintiff was unconscionable. Nor is there anything to suggest that that might change upon a more detailed examination of the facts at a trial. The evidence does not indicate that the plaintiff might have been aware that the first defendant would not be able to obtain clear title at or after settlement. There is also no evidence that the plaintiff might have been aware that - as I understand the defendants to contend was in fact the case - the defendants were relying on the plaintiff to ensure that clear title to the boat was obtained. Nor is there any evidence that the plaintiff might have been aware that, as alleged by Mr Spence, representations had been made by John Hughes Finance that the plaintiff's checks and inquiries would ensure that settlement would not go ahead if the first defendant would not obtain clear title.
83 The mortgage itself expressly provided that it was the first defendant's obligation to ensure that it obtained good title to the boat. It was nevertheless obviously in the plaintiff's interests to take such steps as it considered necessary to ensure that there were no prior encumbrances that might affect its security interest and to that end it required that certain checks and inquiries be conducted, and that it be informed of certain matters, before it would settle the financing transaction. But that is not to cast upon the plaintiff the burden of ensuring that there were no prior encumbrances over the boat. There is no evidence of any representation to that effect by the plaintiff and there was an express term of the mortgage that put the onus on the first defendant to acquire title to the boat free from all encumbrances.
84 This was not, moreover, a case where it should have been apparent to the plaintiff that the defendants would, or might, be reliant upon the plaintiff to ensure that there were no prior encumbrances. The information provided to the plaintiff in connection with the loan application revealed that first defendant was represented by its sole director, Mr Spence, who has a Bachelor of Business degree and is a qualified accountant and tax agent. Mrs Spence has a Bachelor of Commerce degree with honours. According to the financial statements provided to the plaintiff by Mr Spence, the business of the first defendant had a net profit of $325,796 for the 10 months to 30 April 2005. Mr and Mrs Spence had net assets of $1,100,000, including at least one investment property. The boat was being purchased by the first defendant for the total sum of $1.65m. The tax invoice issued by Boatworld showed a deposit of $650,000 had been paid
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- by the first defendant. The first defendant had traded in a boat worth $200,000 and so was apparently not coming to nautical matters for the first time.
85 On the basis of the information provided to the plaintiff, the defendants appeared competent and experienced in commercial matters and to have some familiarity with boats. They were involved in a substantial purchase where it was reasonable to expect that they could, and would, take all necessary steps to ensure that their interests were adequately protected. There was nothing to suggest that the defendants would be unable to comply with the term of the mortgage which required the first defendant to ensure it obtained good title to the boat, or to suggest that the defendants were, or might be, depending upon the plaintiff to ensure that good title was obtained.
86 In those circumstances, it is not to the point that the plaintiff may have proceeded to settlement before some of its usual inquiries had been completed. Certainly, absent any reason to believe that the defendants might be relying on the plaintiff to ensure that good title was obtained, the plaintiff was entitled to proceed on the basis that the first defendant had obtained, or would obtain, good title in the boat that it was providing by way of security.
87 Counsel for the defendants placed particular emphasis on the following passage in the facsimile from John Hughes Finance to the plaintiff of 19 May 2005 (which I have set out in full above) as evidence that the plaintiff knew that corners were being cut and that the plaintiff permitted that to occur only because it would not bear the burden if anything went wrong:
"I believe that it is unlikely we can register with WA REVS without a HIN, however we have the comfort of a fixed charge against the company. In his capacity as owner of Boat World, Joel Dullard does have a legal obligation to ensure clear title of a vessel he sells, particularly when it is currently registered in his personal name."
88 I do not consider that that assists the defendants' case. It is not clear what "fixed charge" is being referred to but there is no evidence of a fixed charge over its assets being provided by the first defendant and it appears to refer to a charge over the assets of Boatworld. When read in its context, I consider it is clear that John Hughes Finance, in its capacity as broker, was simply seeking to provide additional reassurance to the plaintiff to persuade
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- it to settle the transaction while certain apparently administrative matters remain outstanding. I do not consider it is capable of demonstrating that the plaintiff knew that the interests of the defendants were being put at unnecessary, and so far as the defendants were concerned unappreciated, risk.
89 On the material before me, there is nothing to indicate conduct of the plaintiff which might be found to be capable of constituting unconscionable conduct, having regard to the statutory considerations.
90 It follows, in my view, that the defence based on unconscionable conduct must fail. I do not consider there is any real question to be tried or that there are matters which require the further inquiry that would be afforded by a trial. Once again, it is not sufficient simply to speculate that if the action went to trial there is always a chance that something might turn up. A sounder basis than that must exist to warrant the time and cost of going to trial.
91 Whilst one can sympathise with the defendants in the predicament in which now find themselves, in my view any legal remedy they may have lies elsewhere.
92 Accordingly, I consider the plaintiff is entitled to judgment against the first defendant and the first-named second defendant. I did not understand there to be any issue as to the claim for the sum of $1,007,896, but it appears there may be an issue as to the rate of interest payable on that sum.
93 I will therefore hear the parties on the amount for which judgment should be entered.
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