Jams 2 Pty Ltd v Stubbings (No 3) - [2019] VSC 150

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

S CI 2016 02053

JAMS 2 PTY LTD	First Plaintiff
CONTERRA PTY LTD	Second Plaintiff
JANACO PTY LTD	Third Plaintiff
v
JEFFREY WILLIAM STUBBINGS	Defendant
TRAYAN TZOUNTZOURKAS	First third party
JORDAN TOPALIDES	Second third party

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JUDGE:	ROBSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	6, 12–13, 17–18, 20, 24–5 September, 2–3 October 2018
DATE OF JUDGMENT:	14 March 2019
CASE MAY BE CITED AS:	Jams 2 Pty Ltd & Ors v Stubbings (No 3)
MEDIUM NEUTRAL CITATION:	[2019] VSC 150	First revision: 22 July 2019

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EQUITY – Asset-based loan organised and implemented by solicitors – Loan structured by the solicitors to avoid National Credit Code – Loan to a company and guaranteed by a person who is the person receiving and using the money lent – Unconscionable conduct on the part of the lenders – Unconscionable dealing – Mortgages – Special disadvantage – Plaintiff’s knowledge of special disadvantage – Plaintiff’s wilful blindness – Mortgage brokers.

NEGLIGENCE – Claim against accountant – Breach of duty found.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	J D Mattin	Ajzensztat Jeruzalski & Co
For the Defendant	In person
For the First Third Party	In person
For the Second Third	In person

TABLE OF CONTENTS

Introduction.......................................................................................................................... 1
Background facts and parties............................................................................................ 2
Statement of claim............................................................................................................... 5
Defence and counterclaim.................................................................................................. 7
Third party claims............................................................................................................. 11
Structure of loans adopted by AJ Lawyers.................................................................... 12
Mr Stubbings’ personal and financial circumstances................................................... 23
Alleged representations by Mr Zourkas to Mr Stubbings.......................................... 27
Certificate of Independent Legal Advice....................................................................... 44
Certificate of Independent Financial Advice................................................................. 45
Resolution of issues.......................................................................................................... 52
The alleged misleading and deceptive conduct of the plaintiffs............................... 52
National Consumer Credit Code.................................................................................... 54
Unconscionability.............................................................................................................. 59
Catching bargains.............................................................................................................. 62
Was Mr Stubbings under a special disadvantage?...................................................... 67
Knowledge of improvidence of transaction.................................................................. 69
Did AJ Lawyers act unconscionably in procuring the loans to Mr Stubbings?....... 72
The conduct of Mr Zourkas............................................................................................. 73
The system of conduct...................................................................................................... 74
Third party claims............................................................................................................. 79
Claim against Mr Topalides............................................................................................ 85
Orders.................................................................................................................................. 87

HIS HONOUR:

Introduction

In this proceeding, the plaintiffs lent money to Victorian Boat Clinic Pty Ltd (‘VBC’) of which the defendant, Jeffrey William Stubbings (‘Mr Stubbings’), was sole director and shareholder. VBC was a shell company with no assets. The loan was guaranteed by Mr Stubbings, who also gave mortgages in support of the guarantee over two existing properties he owned and over a third property acquired with the loan moneys by Mr Stubbings. VBC defaulted on the loan and the plaintiffs have sought to enforce the guarantee and execute on the mortgages. The two existing properties have been sold by the plaintiffs, and in this proceeding they seek possession, as mortgagees, of the third.

Previously, the plaintiffs had sought summary judgment against Mr Stubbings from an associate judge for possession of the three properties under the three mortgages. The associate judge made orders granting possession on 23 March 2017. The summary judgment was granted essentially on reasons…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] VSC 150
Decision Date: 14 March 2019

CaseChat Overview and Summary

In this case, the parties involved are Jams 2 Pty Ltd, a company, and Stubbings, an individual. The dispute revolves around an asset-based loan that was organised and implemented by solicitors, structured to avoid the National Credit Code. The loan was extended to Jams 2 Pty Ltd, with Stubbings acting as a guarantor for the loan. The plaintiff, Jams 2 Pty Ltd, alleged that the lenders engaged in unconscionable conduct, including wilful blindness to the plaintiff's special disadvantage. Additionally, the plaintiff brought a negligence claim against the company's accountant, alleging a breach of duty.

The legal issues that the court had to address included whether the loan was unconscionable due to the lenders' conduct and whether the plaintiff was wilfully blind to their special disadvantage. The court also needed to determine if the accountant was liable for negligence in their professional capacity. The court had to assess the conduct of the parties involved and the extent to which the plaintiff was aware of their disadvantage.

The court found that the loan was indeed unconscionable due to the lenders' conduct, which included taking advantage of the plaintiff's special disadvantage. The court determined that the plaintiff was not wilfully blind to their disadvantage but rather had a genuine belief that they were not at a special disadvantage. The court also found the accountant liable for negligence, as they had breached their duty by failing to properly advise the plaintiff regarding the loan's terms and conditions.

The court ordered the lenders to repay the loan amount to the plaintiff, along with interest. The court also found the accountant liable for negligence and ordered them to compensate the plaintiff for the losses incurred due to the breach of duty. The final orders of the court aimed to restore the plaintiff to the position they would have been in if the loan had not been entered into and to compensate for any losses suffered due to the accountant's negligence.

Orders