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Kowalczuk v Accom Finance Pty Ltd

Kowalczuk v Accom Finance Pty Ltd

Case [2008] NSWCA 343 10 December 2008

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New South Wales

Court of Appeal

CITATION: Kowalczuk v Accom Finance [2008] NSWCA 343
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 8/5/08-9/5/08

JUDGMENT DATE:
10 December 2008

JUDGMENT OF: Hodgson JA at 1; McColl JA at 2; Campbell JA at 3

DECISION: (1) So far as the appeal is brought against Dalla, the appeal is dismissed with costs.
(2) So far as the appeal is brought against Accom, in substance,
(a) Accom to pay:
(i) to Kowalczuk the sum of $18,143.17 plus interest at the prescribed court rates from 14 December 2005 to the date when that judgment is entered, and
(ii) to Mars the sum of $20,761.84 plus interest at the prescribed court rates from 13 October 2006 to the date when that judgment is entered.
(b) Accom to pay to Kowalczuk and Mars two-thirds of their costs of the appeal, insofar as those costs relate to the appeal they brought against Accom.
(c) Otherwise, appeal dismissed.
(d) Accom, Mars and Kowalczuk to each bear their own costs in the court below.

CATCHWORDS: CONTRACTS – Harsh and Unconscionable Contracts and Statutory Remedies – where Appellants entered into short-term loans with Respondent at extremely high rates of interest – where higher rate of interest payable upon default and interest compounded monthly – where default interest provision drafted so as to avoid the application of law of penalties as conventionally understood – where provision made all extra expense incurred in consequence of a default recoverable – where loans fell into default – whether loan contract unjust within meaning of Contracts Review Act 1980 – where Appellant supplied false information about his income – whether error concerning factors relevant to vulnerability – whether pure asset lending is in the circumstances unconscionable or unjust – relevance of lender’s failure to observe its own lending guidelines – whether provisions concerning default rate of interest unjust – whether Respondent’s conduct contravened s 51AA and s 51AC Trade Practices Act 1974 (Cth) – whether loan contract unconscionable within meaning of s 43 Fair Trading Act – availability of remedy if s 43 contravened - TRADE AND COMMERCE – Definitions and general – whether loans were "for the purpose of trade and commerce" within s 51AC Trade Practices Act – where Appellants acquired loans for investment purposes - LEGAL PRACTITIONERS – Contractual obligations – Duty of care – where solicitor engaged to provide independent advice on security documents to Appellants – whether breach of contractual obligations – whether duty of care more extensive than contractual duty – whether any loss had been shown to arise from any breach of duty – whether activities were "in trade or commerce" within s 42 Fair Trading Act – whether any contravention of s 42 Fair Trading Act – what constitutes misleading or deceptive conduct by a solicitor – whether inadvertent conduct can be misleading and deceptive – whether concept of causation operates differently to a cause of action under s 42 to the way it operates concerning tort of negligence

LEGISLATION CITED: Australian Securities and Investments Commission Act 2001 (Cth)
Bankruptcy Act 1966 (Cth)
Consumer Credit Code
Contracts Review Act 1980
Corporations Law
Fair Trading Act 1987
Legal Profession Act 1987
Legal Profession Act 2004
Real Property Act 1900
Trade Practices Act 1974 (Cth)

CATEGORY: Principal judgment

CASES CITED: Accom Finance Pty Ltd v Mars Pty Ltd, Accom Finance Pty Ltd v Kowalczuk [2007] NSWSC 726
Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; (2005) 148 FCR 132
Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485
Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256
Boland v Yates Property Corp Pty Ltd (1999) 167 ALR 575
Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215
Bridge Wholesale Acceptance Corporation (Australia) Ltd v Burnard (1992) 27 NSWLR 415
Canon Australia Pty Ltd v Patton [2007] NSWCA 246; (2007) ATPR 42-183
Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232
Citicorp Australia Ltd v O’Brien (1996) 40 NSWLR 398
Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594
Curnuck v Nitschke [2001] NSWCA 176
Elkofairi v Perpetual Trustee Co Ltd [2002] NSWCA 413; (2003) 11 BPR 20,841
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Guardian Mortgages v Miller [2004] NSWSC 1236; (2004) 12 BPR 22,833
Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1
Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553
Linprint Pty Ltd v Hexham Textiles Pty Limited (1991) 23 NSWLR 508
Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621
March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506
Miller v Cooney [2004] NSWCA 380
Nguyen v Taylor (1992) 27 NSWLR 48
Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211; (2002) 18 BCL 322
Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41
Plimer v Roberts (1997) 80 FCR 303
Prestia v Aknar (1996) 40 NSWLR 165
Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153; (2008) NSW Conv R 56-198
Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434
Semrani v Manoun [2001] NSWCA 337
Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2008) 168 FCR 46
Sims v Deputy Commissioner of Taxation [2006] NSWSC 305; (2006) 57 ACSR 249; (2006) 24 ACLC 465
Suttor v Gundowda [1950] HCA 35; (1950) 81 CLR 418
Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; (2007) 33 WAR 321
Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422
Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642
Walmsley v Cosentino [2001] NSWCA 403
Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514
Watkins v De Varda [2003] NSWCA 242
West v AGC (Advances) Ltd (1986) 5 NSWLR 610

PARTIES: Edward John Kowalczuk (First Appellant)
Mars Pty Limited (Second Appellant)
Accom Finance Pty Ltd (First Respondent)
Samir Dalla (Second Respondent)

FILE NUMBER(S): CA 40514/07

COUNSEL: DR Conti SC; MR Gracie (Appellants)
MW Young; AM Chee (First Respondent)
G Craddock SC; M Avenell (Second Respondent)

SOLICITORS: Greg Mackey & Associates, Five Dock (Appellants)
Bransgroves Solicitors, Sydney (First Respondent)
Ebsworth and Ebsworth, Sydney (Second Respondent)

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): 1887/06

LOWER COURT JUDICIAL OFFICER: Windeyer J

LOWER COURT DATE OF DECISION: 6 July 2007

LOWER COURT MEDIUM NEUTRAL CITATION: Accom Finance Pty Limited v Mars Pty Limited, Accom Finance Pty Limited v Kowalczuk [2007] NSWSC 726

INDEX

PART A – NATURE OF THE CASE

Para No.

Core Facts

Relief Claimed

Issues Arising

PART B – FURTHER FACTUAL BACKGROUND

The Security Documents

The Berowra Mortgage 15

The First Haberfield Mortgage 22

The Second Haberfield Mortgage 27

The Court Proceedings 31

Entry Into the Berowra Mortgage 38

Circumstances of Entering First Haberfield Loan 51

PART C – THE CASE AGAINST ACCOM

The Legal Norms

Contracts Review Act 68

Trade Practices Act 76

Applicability of Contracts Review Act 83

Principles Concerning Relief Under Contracts Review Act 85

Was the Berowra Loan Unjust?

Error Concerning Factors Relevant to Kowalczuk’s Vulnerability? 90

Failure to Follow Lending Criteria and Inevitability of Default? 95

Kowalczuk’s Guarantee of Haberfield Loan – Injustice?

126

Injustice of the Interest Rates? 139

Injustice of the Higher Rate? 140

The Operation of Default Rate Compound Interest

143

Payout Figures Concerning Berowra Mortgage 147

Payout Figures Concerning the Haberfield Mortgage 150

Reduction of Interest Rate to 8% 179

Applicability of Section 51AC 182

Unconscionability and the Fair Trading Act

190

Availability of a Remedy if Section 43 Contravened? 197

Has Section 43 Been Contravened? 210

Orders and Costs in Appeal Against Accom 217

PART D – THE CASE AGAINST DALLA

Aiding and Abetting Trade Practices Act Breach

236

Legal and Factual Basis for the Case Against Dalla

Rule 45 237

Dalla’s Role Concerning Berowra Transaction 241

Dalla’s Role Concerning the Haberfield Transaction 252

The Required Standard of Conduct 259

A Solicitor’s Penumbral Duty of Care? 267

Dalla’s Breaches of Duty? 295

Causation of Loss 302

Proposed Additional Grounds of Appeal Concerning Dalla 321

Breach by Dalla of Section 42 Fair Trading Act?

323

Is Provision of Legal Advice “In Trade or Commerce”? 328

What Counts as Misleading or Deceptive Conduct by a Solicitor?

General Considerations 352

Can Inadvertent Conduct be Misleading or Deceptive? 355

Causation and Section 42 362

Orders re Dalla Appeal 365

PART E – ORDERS

Final Disposition?

368

Orders Proposed

369

**********

CA 40514/07
SC 1887/06

HODGSON JA
McCOLL JA
CAMPBELL JA
10 DECEMBER 2008

EDWARD JOHN KOWALCZUK & ANOR v ACCOM FINANCE PTY LTD

Judgment

1 HODGSON JA: I agree with Campbell JA.

2 McCOLL JA: I have had the privilege of reading Campbell JA’s reasons. I agree with his Honour’s reasons and the orders he proposes.

3 CAMPBELL JA:

PART A – NATURE OF THE CASE

4 In 2005 Mars Pty Ltd (“Mars”) was the registered proprietor of a house located in O’Connor Street, Haberfield. Mars was effectively under the control of Mr Edward Kowalczuk (“Kowalczuk”). Mars held the Haberfield property as trustee of a family trust for the benefit of Kowalczuk’s family. The house was worth about $1m, and was unencumbered. Kowalczuk, his wife, and their two children, occupied it as their home.

5 Kowalczuk, in his own name, was the registered proprietor of another house property, located at Pacific Highway, Berowra. That property was worth about $500,000, and was unencumbered. It was leased to a childcare centre.

6 Kowalczuk was a service station driveway attendant, whose salary in the 2005 tax year was $14,400. His total taxable income in the 2005 tax year was a little over $45,000. The income above his salary was the net rental from the Berowra property, plus some interest from financial institutions.

7 Mr Tony Anastasi (“Anastasi”) is a cousin of Kowalczuk’s wife. He has practiced a serious fraud upon Kowalczuk and Mars. Broadly, he induced Kowalczuk to mortgage the properties and give the mortgage money to Anastasi. Anastasi represented that he would be able to invest the money, and obtain a greater return than the interest that Kowalczuk and Mars were paying on the mortgages. That representation was untrue, and Anastasi has now disappeared.

8 The mortgage loans over the properties were obtained from Accom Finance Pty Ltd (“Accom”). They were short-term loans, at very high rates of interest. When Anastasi’s “investors” did not make the payments Anastasi had said they would make, the loans quickly fell into default, and interest accrued on them at the higher rate provided by the mortgages.

9 Kowalczuk left school at the age of 16 and trained as a motor mechanic. The trial judge, Windeyer J, found (at [11]):

“Kowalczuk had owned other properties before the Berowra property. He and his sister had been given a property at Campbelltown by their mother. They had been involved together in the development of that property. This had involved entering into mortgages, the construction of buildings on it and their sale. There was some litigation between brother and sister about this venture, which was settled. With the moneys that he received from that settlement and other moneys Kowalczuk, on the advice of Anastasi, purchased the Berowra property which was then leased and is still leased to a child care business. At the same time, on the advice of his accountant and solicitor, Mr Alex Lee, he arranged for Mars to be incorporated for the purpose of acting as trustee of his family trust with Mr Lee appointed the sole director and sole shareholder in that company. The trust was set up because apparently at that stage there were marriage difficulties between Kowalczuk and his wife and it had been suggested to him that it was preferable not to have assets in his own name. A mortgage was entered into when the Haberfield property was purchased and Kowalczuk was a guarantor under the mortgage. Kowalczuk has held other real estate assets over the years and borrowed money on mortgages over those properties. One property at Hoxton Park was what is generally called a negative gearing investment, which was not a success.”

10 Kowalczuk and Mars seek relief against Accom enforcing the mortgages in accordance with their terms. That relief was sought at first instance under the general law concerning unconscionable transactions, section 51AA and 51AC Trade Practices Act 1974 (Cth), and the Contracts Review Act 1980. On the appeal the basis on which relief is sought has been expanded to include section 43 Fair Trading Act 1987.

11 Mr Samir Dalla (“Dalla”) is a solicitor who, as the trial judge found (at [3]),

“… was engaged to provide independent advice on the security documents to Mars and perhaps also to Mr Kowalczuk”.

12 Kowalczuk and Mars made claims for damages against Dalla under section 82 as expanded by section 75B Trade Practices Act, arising from aiding or abetting Accom in its contravention of that Act. Claims were also made against him in negligence, for breach of his contract of retainer, and for breach of section 42 Fair Trading Act 1987.

13 The trial judge rejected all those claims: Accom Finance Pty Ltd v Mars Pty Ltd, Accom Finance Pty Ltd v Kowalczuk [2007] NSWSC 726. In this appeal Mars and Kowalczuk seek to have this Court make the orders that Windeyer J declined to make. Further, the trial judge made orders that Accom be granted possession of the Berowra property, subject to the lease to the childcare centre, and that the Berowra property be sold by Accom, on terms approved by the court. Those orders for possession and sale have been stayed pending this appeal. Kowalczuk and Mars seek to have those orders overturned.

14 The principal issues that arise on the appeal are:

1. Whether the terms on which the loans were made were unjust within the meaning of the Contracts Review Act . By reason of the way in which the trial judge’s reasoning proceeded, this also involves consideration of whether the loans are unconscionable within the meaning of the general law and for that reason contrary to section 51AA Trade Practices Act . Particular attention is given to provisions of the loans whereby a higher rate of interest is payable upon default, and interest is compounded monthly.

2. If the terms of the loans are unjust, is a remedy appropriate and if so what remedy.

3. Whether the loans were “for the purpose of trade or commerce” , and therefore capable of being unconscionable within the meaning of section 51AC Trade Practices Act .

4. Whether a remedy would be available if the loans were to contravene section 43 Fair Trading Act .

5. Whether the loans are unconscionable and thereby contravene section 43 Fair Trading Act .

6. Whether Dalla breached his contractual obligations to his clients.

7. Whether Dalla owed a duty of care to his clients that was more extensive than his contractual duty.

8. Whether any loss had been shown to arise from any breach of duty by Dalla

9. Whether the activities of Dalla were “in trade or commerce” within the meaning of section 42 Fair Trading Act .

Fair Trading Act

PART B – FURTHER FACTUAL BACKGROUND

The Security Documents

The Berowra Mortgage

15 The first of the mortgages that Anastasi induced Kowalczuk to give to Accom was over the Berowra property. It was entered on 9 August 2005. The principal was $320,000. The term was one month. The lower rate of interest was 48% pa, while the higher rate of interest was 96% pa. Each of those rates of interest was compound.

16 It included a provision headed “Damages for Late Repayment”, that stated:

“If the loan is repaid late an additional fee equal to one month’s interest at the lower rate will be payable in addition to the daily interest at the higher rate until the loan is repaid.”

17 The mortgage incorporated by reference the provisions of a registered Memorandum. Clause 37 of that Memorandum provided that, for compound interest, “interest will be capitalised with monthly rests”.

18 Pursuant to clauses 132 and 133 of the Memorandum the rate of interest payable was the lower rate, provided that payment was made within seven days of the due date, and all other covenants had been observed. Otherwise, the higher rate was payable. Clause 105 of the Memorandum made express provision for judgment debts to bear interest at the higher rate.

19 The Memorandum contained a provision requiring the debtor to pay legal costs and disbursements of the lender. It included, in clause 66, provision whereby at the option of the lender’s solicitors certain “standard items” could be charged on a “liquidated basis”. The amounts included $480 for drafting and issuing default notices, $2,000 for drafting a statement of claim and affidavit verifying, $2,800 for drafting and filing orders for substituted service, $2,300 for drafting notice of motion and affidavit in support for default judgment, $1,000 for “drafting contracts for the sale of land”, $1,200 for “supervising marketing campaign”, $950 for “appointing real estate agent”, and $1,500 for “acting on conveyance pursuant to power of sale”. As Windeyer J correctly observed, a statement of claim and affidavit verifying is a document “which is more or less standard in possession matters”, and neither appointing a real estate agent nor supervising a marketing campaign could possibly be said to be legal work.

20 There was a provision that the legal costs and disbursements of the lender form part of the debt, and would carry interest at the higher rate from the date the liability arises until the date of payment by the debtors.

21 The Berowra mortgage debt was not repaid on time. After Accom had begun enforcement action concerning it, the debt was repaid and the mortgage was discharged in December 2005, when Kowalczuk was able to obtain a loan from the National Australia Bank of $350,000. The Berowra property remains subject to a mortgage to the NAB to secure the debt arising from that borrowing.

The First Haberfield Mortgage

22 The next mortgage that Anastasi induced Kowalczuk to give to Accom was a mortgage by Mars of the Haberfield property. It was signed on 12 December 2005, but money was not advanced under it until 15 December 2005. The principal was $807,000. The term was two months. The lower rate of interest was 60% pa, while the higher rate of interest was 120% pa. Again, each of those rates was compound.

23 The first Haberfield mortgage included the same “Damages for Late Repayment” provision as the Berowra mortgage, and incorporated by reference the provisions of the same registered Memorandum as the Berowra mortgage.

24 Kowalczuk was also a party to this mortgage, as a guarantor of the obligations of Mars under it.

25 The Memorandum of mortgage that is incorporated by reference in the first Haberfield mortgage contains the following clause No. 68:

“The DEBTORS do hereby mortgage to the LENDER all their estate title & interest in any real property they currently own or partly own as surety for the DEBT (“OTHER SECURITY”). The terms of the mortgage over the OTHER SECURITY will be the same as those laid out in the MORTGAGE. The LENDER undertakes not to protect its priority in relation to the OTHER SECURITY by registering a caveat or mortgage over the title of the OTHER SECURITY unless any of the DEBTORS default under any of the AGREEMENTS. Regardless of whether a default is rectified the LENDER will not be obliged to remove any caveats placed on the title of the OTHER SECURITY until the MORTGAGE is discharged. The DEBTORS are free to deal with the OTHER SECURITY without regard to the LENDER so long as they do not default under any of the AGREEMENTS. In the event of a default under any of the AGREEMENTS the LENDER will have the right to take possession of the OTHER SECURITY and exercise power of sale and/or foreclosure to recover the DEBT and the DEBTORS will yield and surrender possession of the OTHER SECURITY to the LENDER.”

26 The definition of “DEBTORS” in the memorandum includes both the mortgagor and the guarantor. Accom is the “LENDER”. Accom seeks to enforce this clause in the first Haberfield mortgage, on the basis that it is an agreement by Kowalczuk to confer on Accom all the rights of a mortgagee over the Berowra property, to secure the debt that is also secured by the Haberfield property.

The Second Haberfield Mortgage

27 The $350,000 that Kowalczuk was able to borrow from the National Australia Bank in December 2005 was not quite enough to pay out all the money that Accom claimed it was owed on the Berowra mortgage. To cover the amount of that claimed shortfall, Kowalczuk caused Mars to give a second mortgage to Accom over the Haberfield property. It is dated 20 December 2005. Its term is one month. The amount of the principal is $10,300. The lower rate of interest is 60% pa, while the higher rate of interest is 120% pa. Again, each of those rates is compound.

28 The mortgage incorporates the same “Damages for Late Repayment” clause and the terms of the same registered Memorandum, as did the first Haberfield mortgage.

29 The only reason why there was a claimed shortfall concerning the Berowra mortgage was because Accom’s calculations of the payout figure had included an amount of $13,383.77 for “Damages for Late Repayment”. A clause in the same terms as the “Damages for Late Repayment” clause in the Berowra mortgage had already been held, in Guardian Mortgages v Miller [2004] NSWSC 1236; (2004) 12 BPR 22,833 to be void as a penalty. The Berowra mortgage in the present case was produced by Bransgroves, Solicitors, the same solicitors who had produced the mortgage involved in the litigation concerning Guardian Mortgages. Windeyer J noted (at [55]) that, notwithstanding the decision in Guardian Mortgages

“… the same clause is still included. I do not know whether the solicitors advise this. If they do it is close to professional misconduct.”

30 Windeyer J held that the clause in question was void as a penalty, in consequence of which no debt was secured by the second Haberfield mortgage. In those circumstances, Accom consented to the second Haberfield mortgage being set aside. Windeyer J made an order setting it aside, the correctness of which is not disputed on this appeal. It is therefore not necessary to consider in any detail in this judgment the circumstances of entering of the second Haberfield mortgage.

31 On 15 February 2006 Accom began proceedings against Mars in the Possession List of the Common Law Division of the Supreme Court of New South Wales (the “Common Law Proceedings”).

32 Accom obtained a default judgment for possession of the Haberfield property on 28 March 2006, together with default judgments for $1,000,444.48, being the amount outstanding under the first Haberfield mortgage, and $13,387.31, said to be the amount outstanding under the second Haberfield mortgage. Those monetary judgments were against Mars alone, not Kowalczuk.

33 On 13 October 2006 Accom applied to the Haberfield loan an amount of $1,123,309.41, being the net proceeds of sale of the Haberfield property. However, by that time interest had, it claimed, continued to accrue at the higher rate on the unpaid balance, so that the proceeds of sale of the Haberfield property were not sufficient to discharge the Haberfield loan.

34 When it became apparent that a shortfall would be likely on the Haberfield loan, Accom began proceedings in Equity, naming as defendants Kowalczuk and National Australia Bank (the “Equity Proceedings”). In those proceedings, it sought an order in the nature of specific performance for the enforcement of the agreement to give a mortgage over the Berowra property, that was contained in clause 68 of the Memorandum relating to the Haberfield mortgage, and an order for possession of the Berowra property (though subject to the rights of the childcare centre that continued to occupy the property as lessee.) Though the Equity Proceedings at one time had included a claim for a monetary judgment against Kowalczuk, that claim was abandoned at the hearing.

35 The Common Law Proceedings were transferred to the Equity Division, and Mars filed a cross-claim in those proceedings, against both Accom and Dalla. Kowalczuk has also filed a cross-claim in the Equity Proceedings, seeking relief against both Accom and Dalla. Windeyer J heard both proceedings together.

36 Though the proceedings before Windeyer J included claims to set aside the Haberfield mortgages and seek orders to the effect that no money was owing under those mortgages, or alternatively less money was owing than that for which Accom had obtained default judgment, those claims were ultimately not pressed. It was accepted that the default judgments gave rise to a res judicata, such that any matters that had merged in the judgment could not be re-litigated: Linprint Pty Ltd v Hexham Textiles Pty Limited (1991) 23 NSWLR 508. That conclusion is not challenged on this appeal.

37 However, Windeyer J held that the default judgments did not prevent Mars from bringing a claim for monetary compensation against Accom, and did not inhibit Kowalczuk’s claims in any way.

38 Mr Daniel Dunsford (“Dunsford”) was the director of Accom involved in the granting and administration of the loans relevant to these proceedings. The judge said that he was “not a particularly satisfactory witness” (at [63]). There were some matters concerning which the judge “found his evidence to be quite inaccurate”. However the judge found that “Kowalczuk was even less reliable. The impression I had from his oral evidence in cross-examination, which went to show conflict in his written material, was that what he said was directed towards his obvious wish to retrieve something from the wreckage heaped on him by the actions of Anastasi.” As well, the trial judge found that “Dalla was a most unimpressive witness” (at [78]). Notwithstanding this unpromising evidentiary base, the judge could ascertain some of the relevant events from documents, and accepted some of the oral evidence given.

39 Dunsford was contacted by Anastasi around 27 July 2005. Anastasi told Dunsford that Kowalczuk was a developer who needed $500,000 urgently to “push through a DA”, and was seeking “bridging finance” on a childcare centre. Dunsford then faxed a loan application form to Anastasi.

40 On 28 July 2005 Kowalczuk signed a loan application, on Accom’s letterhead, seeking a loan of $500,000. It identified Anastasi as the “broker”. It gave the name and telephone number of Dalla alongside the space for “solicitor’s name”. It asserted a combined gross income of $100,000, said that the loan term was one month, and the purpose of the loan “business re investment”. It identified the “plan for repayment” as being “bank refinance”. It identified his assets as being the Berowra and Haberfield properties, with a combined value of $2.1m and no mortgage. It stated he owned two vehicles, a four-wheel drive worth $30,000, and a BMW worth $30,000. In fact he owned a four-wheel drive that was worth less than $5,000 by March 2007, and no BMW at all. Kowalczuk signed the form immediately underneath some bold printing that stated “I/we declare that this Asset and Liability Statement is a true and correct description of our position.”

41 Dunsford carried out some enquiries about the value of the Berowra property, and told Anastasi that the most that could be offered was $320,000. Dunsford searched the Property Information Database under Kowalczuk’s name, and found that there were properties at Hornsby and at Hassall Grove of which the registered proprietor was a person with Kowalczuk’s name. As it turned out from evidence at the hearing, but unknown to Dunsford at the time, the only one of those properties that this Edward John Kowalczuk owned was the Hornsby property (which was in fact the Berowra property). The search also showed that he was a previous owner of five different properties. (The search listed six properties as the ones of which he was a previous owner, but two of them have the same title reference). The judge found that Dunsford then telephoned Kowalczuk, and the following conversation took place:

“DUNSFORD: I could not find your house at Haberfield when we did the ownership search on you through the LPI.

KOWALCZUK: That’s because it’s not in my name. It is held in trust.

DUNSFORD: Okay, well you certainly have had a lot of property in your name.

KOWALCZUK: They are developments that I have done.

DUNSFORD: Mr Kowalczuk I say this to everyone I loan to, I don’t want you calling me from your solicitors office and complaining, our rates are very high. We are charging 48% on this loan.

KOWALCZUK: I know that it is Ok, Tony is organising a refinance.”

42 On 8 August 2005 Dunsford emailed to Dalla the various mortgage documents. He did this after first searching for Dalla’s name on the Law Society website.

43 On 9 August 2005 Kowalczuk signed, and Dalla witnessed, the various documents that Dunsford had sent to Dalla. Amongst them was a typed document addressed to Accom, headed “Loan Repayment Ability Declaration”. It said:

“I certify, warrant and represent to you that:

1. I have applied for a [sic] interest only loan of $320,000 (Three Hundred Twenty Thousand Dollars) through Accom Finance Pty Ltd (ACN 097 598 886) payable by monthly instalments of $12,800 over 1 months [sic] at 48% per cent per annum fixed.

2. My current gross income per annum is $100,000

a) I am aware of my financial obligations under my proposed loan with you; and

b) I have fully disclosed to you all details of my income and expenditure in the application form.

3. I know my income and expenditure and based on that knowledge and my understanding of my current financial position, I declare to you that I am able to make all the required monthly repayments and repay the loan in accordance with its term and can do so without substantial hardship.

4. I am not aware of any factors, for example, a possible claim made against us involving payment of an amount of money, ill health or disability, or other factor which may result in a decrease in income or increase in expenditure, which may affect my ability to make the repayments or which may cause substantial hardship to us to make repayments.

5. I acknowledge that you insist that we take independent legal and financial advice in relation to this loan. I acknowledge that you are relying on this letter in agreeing to make a loan.”

44 He signed another document, headed “Acknowledgment of legal advice by borrower” that referred to having instructed Dalla to give him legal advice concerning eleven listed documents. The document continued:

“3. The advice given to me by my solicitor included that:

a) by signing the Mortgage I will be liable for regular payments of Interest and repayment of the amount of the loan at the due date;

b) if I fail to make any payment on time, the lender can charge a higher rate of interest, and the lender’s costs of rectifying that failure;

c) if I fail to comply with any of the terms and conditions of the loan including the obligations to pay principal and interest;

i) the Mortgagee can sue me personally; and

ii) the Mortgagee may take possession of the security property; and

iii) after notice, sell the security property to recover the amount owing with interest together and other costs including solicitor’s costs, the costs of selling the property and the costs of maintaining the property; and

iv) if the proceeds of the sale of the security property are insufficient to satisfy the debt to the Mortgagee, the Mortgagee can sue me for the deficit.

d) …

e) by making a Statutory Declaration verifying the giving of the advice I am making a statement having the force of an Oath which can be relied upon by the lender.

4. Generally, in relation to the proposed transaction my solicitor advised me that:

a) he does not profess any qualification to give financial (as distinct from legal) advice; and

b) if I have any questions about any financial aspect of the transaction or the documents, I should consult an accountant or other financial counsellor of my choice before singing the documents.

5. After receiving the above advice I freely and voluntarily signed the above documents.”

45 He also signed, on 9 August 2005, other documents including a direction as to the manner in which the advance was to be paid, a “Consent of Borrower to Legal Advice”, and a declaration that the credit was to be applied wholly or predominantly for business or investment purposes (or for both purposes).

46 While the registered Memorandum was a very long and complicated document, the mortgage document itself was comparatively simple. It was only three pages long, of which the first page was a Real Property Act 1900 standard form of mortgage, the second page was a table that set out in summary form the most important provisions of the mortgage, and the third page was for execution. The table on the second page clearly identified the amount of the principal, the term of the loan, the higher and lower rates, and that the interest was compound. Kowalczuk signed on that page, twice.

47 On 11 August 2005 Accom sent the net proceeds of the loan, $301,852, by telegraphic transfer to the bank account of an entity called Venture Connect. Kowalczuk had signed a written direction on 9 August 2005, directing the proceeds to be sent to a bank account of Venture Connect, that was identified by quoting the bank, branch, BSB and account number, as well as the account name.

48 Various of the forms stated that they were signed at Lakemba, which is the suburb where Dalla has his office. Dalla gave the documents to Anastasi once they were executed, and Anastasi delivered them to Accom.

49 The judge found that there was no evidence that either Dunsford or Accom knew or should have known that Kowalczuk was being influenced, let alone defrauded by Anastasi. Dunsford had dealt with Anastasi as a finance broker concerning two previous transactions, and had observed nothing untoward concerning those transactions. The trial judge’s finding was (at [50]):

“Mars was a company formed by Kowalczuk, albeit with the guidance of his accountant, to protect his assets. Kowalczuk was not completely uneducated, illiterate or inexperienced. He had owned other properties. Before he came into contact with Accom he had borrowed moneys under mortgage. He knew what a guarantee was. He was not old or young or infirm or mentally deficient. He had decided, unfortunately for him and his company, to act on the advice of Anastasi, and to use his real estate to gain income. Even after his experience with the Berowra loan, knowing it was in default and that the required payments were not being made by “the investors”, he agreed to the proposal of Anastasi that he should borrow against Haberfield in spite of the refusal of Anastasi to identify the investors. I therefore find that neither Mars nor Kowalczuk was in a position of special disability in dealing with Accom. Kowalczuk relied on Anastasi and so far as Accom was concerned he got competent advice from Dalla.”

50 Though the statement that Kowalczuk made in both the loan application dated 28 July 2005, and the “Loan Repayment Ability Declaration” dated 9 August 2005 that he had an income of $100,000 was false, Accom and Dunsford had no reason to doubt the truth of Kowalczuk’s statement.

51 Kowalczuk did not fill out an application form relating to the first Haberfield loan. Anastasi telephoned Dunsford on 5 December 2005. By that time the Berowra loan was in default, and Accom had commenced enforcement proceedings concerning it. Anastasi told Dunsford that the Berowra loan had been successfully refinanced with NAB, and would settle in a day or two. In fact NAB had made a Letter of Offer to Kowalczuk on 8 December 2005, offering a loan of $350,000 for 15 years, with the interest fixed for two years at an indicative rate of 7.6% pa. That indicative rate could change in accordance with market movements between the date of the Letter of Offer and the date of drawdown. The evidence does not establish that Dunsford actually saw that Letter of Offer.

52 Anastasi raised the topic of “another deal” concerning the property in Haberfield. Once Dunsford had obtained confirmation from Anastasi that Kowalczuk lived in the Haberfield property, Dunsford said that, “we don’t do owner occupied”. However, Anastasi told Dunsford that it was tenanted, there were two residences on the property, and the main residence was tenanted. Anastasi told Dunsford that Kowalczuk “is working on a loan at the moment from First Loan. [W]e are almost there.” When Anastasi suggested that the loan might be needed for “a couple of weeks, maybe longer”, Dunsford suggested to make it a longer term, so that “you don’t run into trouble again”. Anastasi said: “He is really in a hurry. He has got this big deal going and if he misses out he stands to lose big bucks”.

53 There was some truth in Anastasi’s story about seeking a loan from FirstLoan. On 8 December 2005 Kowalczuk signed a loan application on behalf of Mars for a loan of $750,000 from FirstLoan Australia Pty Ltd.

54 A company search on Mars quickly informed Dunsford that Kowalczuk held no corporate office in Mars, and was not even a shareholder. Instead, a Mr Alex Lee was the sole officer and shareholder. Dunsford then telephoned Kowalczuk for an explanation, and was informed that Mr Lee was Kowalczuk’s solicitor, who was holding the property on trust for him, “it’s for asset protection in case someone tries to make me bankrupt”. Dunsford spoke to Mr Lee, and obtained confirmation that this statement was correct. Dunsford told Anastasi that he would be prepared to go ahead if Kowalczuk became sole director and shareholder of Mars. Anastasi, Kowalczuk and Lee then set about arranging for that to happen.

55 There was a grain of truth in the story that Anastasi told Dunsford about there being a tenant in the house. It was that at that time Kowalczuk and his wife were having some marital difficulties, and were living in separate parts of the same house. Mrs Kowalczuk was being paid child maintenance by her husband, and was using this to pay rent to Mars, thereby enabling her to claim rental assistance. However, there was no indication, in the external appearance of the house, that it was divided into separate residences. Dunsford gave evidence that he went to inspect the Haberfield property and his inspection showed that there was a separately occupied flat at the back, and it looked like a rental property. He did not claim to have seen the interior of the house. The trial judge accepted that Dunsford went to inspect the property, but rejected the balance of his evidence on that topic. The trial judge also rejected evidence that Dunsford gave of seeing that improvements had been made to the property between the date of the mortgage and the time of the trial. Dunsford did not claim to have made any enquiries about the nature of the tenancy or the rental received.

56 Kowalczuk signed various loan papers connected with the first Haberfield loan on 10 December 2005, in Dalla’s presence at Monterey. The documents that Kowalczuk signed on that occasion were of the same type as those that he had signed concerning the Berowra loan.

57 The Loan Repayment Ability Declaration was on this occasion signed by Kowalczuk “for Mars Pty Ltd”. Its first paragraph read:

“I certify, warrant and represent to you that:

1. I have applied for a [sic] interest only loan of $807,000 (Eight Hundred Seven Thousand Dollars) through Accom Finance Pty Ltd (ACN 097 598 886) payable by monthly instalments of $40,350 over 2 months at 60% per cent per annum fixed.”

58 It was otherwise identical in text to the Loan Repayment Ability Declaration set out at para [43] above.

59 The terms of the “Acknowledgment of Legal Advice” document that Kowalczuk signed concerning the Haberfield loan differed slightly from that executed concerning the Berowra loan, in that its clause 3 stated:

“3. The advice given to me by my solicitor included that:

(a) by signing the loan documents I will be liable for regular repayment of the amount of the loan at the due date;

(b) if I fail to make any payment on time, the lender can charge a higher rate of interest, and the lender’s costs of rectifying that failure;

(c) if I fail to comply with any of the terms and conditions of the loan documents including the obligations to pay principal or interest,

– the lender can sue me personally; and

– the lender may take possession of my property; and

– after notice, sell my property to recover the amount owing together with interest and other costs including solicitor’s costs, the costs of selling the property and the costs of maintaining the property; and

– if the proceeds of the sale of my property are insufficient to satisfy the debt to the lender, the lender can sue me for the deficit; and …”

60 That wording is apt to cover a situation where the property of Kowalczuk, as guarantor, is at risk if the loan conditions are not performed.

61 Kowalczuk signed a document, of a kind purporting to direct where the settlement proceeds were to be paid. However that document left blank the destination of the $755,888 that was to be available to Kowalczuk after various fees and expenses were paid from the advance, and a month’s interest was withheld.

62 It was only on 14 December 2005 that documents confirming the resignation of Mr Lee as a Mars company officer, the appointment of Kowalczuk, and the transfer of Mr Lee’s shareholding in Mars to Kowalczuk, were lodged with ASIC, and proof of that lodgement given to Accom.

63 Kowalczuk signed another Authority to Pay letter, addressed to Accom and bearing a typed date of 14 December 2005. Though the letter speaks as though the advance had already been made, the advance was in fact not made on 14 December 2005, but on 15 December 2005. The letter stated:

“I confirm to you that I will be repaying the loans secured by the property at 37 O’Connor Street Haberfield NSW 2045 with your company by way of refinance with First Home Loans Australia.

I also confirm that the following payments have been made according to my directions:

[list of payments]”

64 Mr D Conti SC, counsel for Kowalczuk and Mars, submits that Dalla gave evidence that this document was signed on 17 December 2005. Dalla gave affidavit evidence to that effect, on which he was not cross-examined. Even accepting that this letter was not signed until after the loan advance had been made by Accom, it is still confirmatory of Accom having been told, before the advance was made, that it was intended that there be a re-finance with FirstLoan Australia, and that Kowalczuk was willing to sign and provide documents to Accom that confirmed that such a re-finance was intended. This is particularly so when the date of 14 December 2005 appearing on the letter is typed in the same font as the body of the letter, from which I would infer that it was a document that Accom had prepared on 14 December 2005, even though it was not actually signed until 17 December 2005.

65 Accom did not advance the money until 15 December 2005. On 15 December 2005 a handwritten note, dated 14 December 2005, was faxed to Accom, signed by Kowalczuk, giving details of his own bank account. Accom made the advance by electronic deposit of the funds into that bank account.

66 On the same afternoon that the loan proceeds were deposited electronically in Kowalczuk’s bank account, Anastasi took Kowalczuk to the bank. There, Kowalczuk obtained a bank cheque for $750,000 made payable to St George Bank, which Kowalczuk then handed to Anastasi.

PART C – THE CASE AGAINST ACCOM

67 Kowalczuk and Mars submit that Accom’s conduct in making the loans on the terms and in the circumstances it did contravenes section 51AA and section 51AC Trade Practices Act 1974 (Cth), and is also an “unjust contract” within the meaning of the Contracts Review Act 1980.

Contracts Review Act

68 It is only Kowalczuk who could ever be granted relief under the Contracts Review Act. That is because section 6(1) precludes the granting of relief under the Act to a corporation.

69 Section 7 Contracts Review Act provides:

“(1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following:

(a) it may decide to refuse to enforce any or all of the provisions of the contract,

(b) it may make an order declaring the contract void, in whole or in part,

(d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that:

(i) varies, or has the effect of varying, the provisions of the land instrument, or

(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument.”

70 Section 4(1) provides a non-exhaustive definition of “unjust”.

unjust

injustice

71 Other assistance in ascertaining the intended content of “unjust” is derived from section 9:

“(1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of:

(a) compliance with any or all of the provisions of the contract, or

(b) non-compliance with, or contravention of, any or all of the provisions of the contract.

(2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following:

(a) whether or not there was any material inequality in bargaining power between the parties to the contract,

(b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation,

(c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract,

(d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract,

(e) whether or not:

(i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or

(ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented,

because of his or her age or the state of his or her physical or mental capacity,

(f) the relative economic circumstances, educational background and literacy of:

(i) the parties to the contract (other than a corporation), and

(ii) any person who represented any of the parties to the contract,

(g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed,

(h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act,

(i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect,

(j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act:

(i) by any other party to the contract,

(ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or

(iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract,

(k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and

(l) the commercial or other setting, purpose and effect of the contract.

(3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made.

(4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made.

(5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made.”

72 Section 7(3) makes section 7 subject to the operation of section 19. Section 19 provides:

Real Property Act

(3) The Registrar-General and any other person are hereby authorised to do any things respectively required of them pursuant to subsection (2).”

73 In the present case, the only contracts between Accom on the one hand, and Mars and Kowalczuk on the other hand, are contained in registered mortgages. There was no argument on the appeal about whether section 19(1) insulates all provisions in a registered land instrument, from an order under section 7(1)(b) or (c) (including provisions that would not themselves be afforded indefeasibility by virtue of being registered). In light of the conclusion I have reached for other reasons, it is not necessary to form a view on whether section 19(1) would prevent Kowalczuk from obtaining an order under section 7(1)(b) or (c) curtailing or preventing the enforcement of clause 68 of the Memorandum against him.

74 Schedule 1 has effect, pursuant to section 8. Schedule 1 provides:

“ Schedule 1 Ancillary relief

1 Where the Court makes a decision or order under section 7, it may also make such orders as may be just in the circumstances for or with respect to any consequential or related matter, including orders for or with respect to:

…

(b) the payment of money (whether or not by way of compensation) to a party to the contract …”

75 Mr Conti SC argues that, even if the Court is precluded from making any of the types of orders identified in section 7(1)(a)-(d), if the Court makes a decision under section 7, that a contract or a provision of a contract has been unjust in the circumstances relating to the contract at the time it was made, that suffices to attract the jurisdiction to make ancillary orders under Schedule 1. That argument is not contested.

Trade Practices Act

76 Section 51AA provides:

“(1) A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories.

(2) This section does not apply to conduct that is prohibited by section 51AB or 51AC.”

77 At the trial Mars and Kowalczuk had alleged that the conduct of Accom in granting both the Berowra loan and the Haberfield loan, contravened section 51AA Trade Practices Act. The trial judge did not accept that contention. The Further Amended Notice of Appeal withdraws the attack that the Appellants had originally made in their Notice of Appeal on this finding of the trial judge. However, the way in which the argument on the appeal progressed left me in some doubt about whether Mr Conti had made a final election to abandon reliance on section 51AA. As well, because some of the trial judge’s findings relating to both injustice under the Contracts Review Act and unconscionability were cast in terms relevant to section 51AA, and there continues to be a submission made in the appeal that there has been unconscionability contrary to section 43 Fair Trading Act, it is desirable to deal with the applicability of section 51AA.

78 In Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621 Brennan J said, at 626:

“The jurisdiction of equity to set aside gifts procured by unconscionable conduct ordinarily arises from the concatenation of three factors: a relationship between the parties which, to the knowledge of the donee, places the donor into special disadvantage vis-à-vis the donee; the donee’s unconscientious exploitation of the donor’s disadvantage; and the consequent overbearing of the will of the donor whereby the donor is unable to make a worthwhile judgment as to what is in his or her best interests.”

79 Similarly, Deane J said, at 637:

“It has long been established that the jurisdiction of courts of equity to relieve against unconscionable dealing extends generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party to the transaction with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that special disability was sufficiently evident to the other party to make it prima facie unfair or ‘unconscionable’ that that other party procure, accept or retain the benefit of, the disadvantaged party’s assent to the impugned transaction in the circumstances in which he or she procured or accepted it.”

80 The reasoning of Deane J on this topic was also accepted by Dawson, Gaudron and McHugh JJ (at 643).

81 It is that concept that section 51AA picks up, when it refers to “conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories”.

82 Section 51AC provides:

“(1) A corporation must not, in trade or commerce, in connection with:

(a) the supply or possible supply of goods or services to a person (other than a listed public company); …

…

(7) A reference in this section to the supply or possible supply of goods or services is a reference to the supply or possible supply of goods or services to a person whose acquisition or possible acquisition of the goods or services is or would be for the purpose of trade or commerce.”

Contracts Review Act

83 While Mr Conti relied upon both the Contracts Review Act, and a variety of statutory provisions dealing with unconscionable contracts, he did not submit that the criteria by reference to which conduct was unconscionable within any of those statutory provisions were any wider than the criteria by reference to which conduct was unjust within the meaning of the Contracts Review Act. Rather, Mr Conti’s invocation of the various statutory prohibitions on unconscionable conduct sprang from a recognition that relief could not be granted under the Contracts Review Act to a corporation. The forensic point of reliance on the various statutory prohibitions of unconscionable conduct was to try to obtain an order that benefited Mars directly.

84 When Kowalczuk was the borrower and mortgagor in relation to the Berowra loan, a guarantor and the giver of the covenant contained in clause 68 of the Memorandum in relation to the Haberfield loan, and the directing mind and will of Mars, all the factual circumstances relevant to both the alleged injustice under the Contracts Review Act, and the alleged unconscionability, can emerge from a discussion of whether Kowalczuk is entitled to relief under the Contracts Review Act. I therefore deal with that topic first.

85 Comparatively early in the life of the Contracts Review Act, McHugh JA in West v AGC (Advances) Ltd (1986) 5 NSWLR 610 recognised, at 621, that the Act

“unjust”

86 McHugh JA recognised, at 620, that a contract can be unjust “because of the way it operates in relation to the claimant or because of the way in which it was made or both.” He recognised that a contract could be unjust because it contained “substantive injustice” – which arises “because its terms, consequences or effects are unjust”, or because of “procedural injustice” – which arises “because of the unfairness of the methods used to make it” – or both. He recognised, at 621, that a contract can be “unjust” even if it is not unconscionable, harsh or oppressive. Notwithstanding the traditional view that equity took about circumstances in which it would hold that enforcement of a contract was unconscionable, a contract may be unjust even though the circumstances that give rise to that injustice are not known to the other party: Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256 at 277; Nguyen v Taylor (1992) 27 NSWLR 48 at 71 per Sheller JA; Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 at [94]-[96].

87 In applying the Contracts Review Act, two distinct steps are involved. As stated by Brereton J in Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153; (2008) NSW Conv R 56-198 at [51]:

Antonovic v Volker

Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256

Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41

Khoshaba

88 Thus, if the contract is found unjust by reason of circumstances not known to one of the contracting parties, it does not automatically follow that relief will be given to remedy that injustice.

89 In the present case, there was no evidence that Dunsford or Accom knew about Kowalczuk’s occupation. The information they had about Kowalczuk’s income was the false information that his income was $100,000 a year. They had no reason to disbelieve the false information that Anastasi gave them, about Kowalczuk being a developer. They had no reason to disbelieve the information that they were given, that the loan they were asked to make was for a very short period, and that Kowalczuk’s intention was to re-finance it.

Error Concerning Factors Relevant to Kowalczuk’s Vulnerability?

90 Kowalczuk’s affidavit evidence gave an account of himself as a man of limited capacity. According to his account, his parents were Eastern European migrants, and English was not the language spoken at home. He said:

“I am not very good at remembering dates, or the order in which things happened. The other problem I have is that, five minutes after I have remembered when something happens, I have usually forgotten it again.

I takes me a long time to read papers and I sometimes forget what I have read and have to start reading again. Many times, I pretend that I have understood things that I have read because I am embarrassed and try to cover up my embarrassment. Other times, I pretend I have understood someone who has read a paper out to me but it has gone out of my head as soon as I heard it and I don’t really remember what they said.

…

[M]ost times, people talk to me too fast or don’t give me a chance to think about what they are saying, and I just give up, sign whatever they ask me, and do or say whatever they want.

This is especially the case when I trust the person who is helping me. This was what happened in my dealings with Tony Anastasi and with Samir Dalla …”

91 The judge made no specific findings about whether this evidence was correct. Mr Conti submits it should have been taken into account when the judge was considering whether the making of the loans involved unconscionability or conduct contrary to the Contracts Review Act.

92 I am not persuaded that the judge made an error in this respect. I do not see that the language Kowalczuk spoke at home as a child is relevant, when he went to school in Australia and does not now claim any particular difficulties with English, as opposed to comprehension.

93 The judge was unimpressed with Kowalczuk as a witness. This arose not just from demeanour, but from contradictions in his evidence as basic as at one stage saying he did not know the name of the lender, but eventually admitting that he did, or saying that a meeting with Dalla at which documents relating to the Berowra loan were signed took only about 15 minutes, when that was impossible. The general tenor of Kowalczuk’s evidence was to paint himself as an extremely simple man of limited education, intellectual capacity and business experience. The trial judge did not accept that general picture, but rather concluded as I have set out at para [49] above. The matters that Mr Conti says should have been taken into account are details of the general picture that the judge has rejected. In those circumstances I am not prepared to conclude that the judge was in error in failing to make specific mention of the matters concerning which complaint is made under this head.

94 Mr Conti also contends that the judge failed to take into account that Kowalczuk had no prior experience with bridging loans or short term finance. There was no explicit evidence that he lacked such experience, or that he had such experience. The variety of property dealings he had engaged in in the past were ones that might, or might not, have involved bridging loans or short term finance, so it could not be said that the judge should have inferred, from the overall nature of Kowalczuk’s life experience, that he had no experience with bridging loans or short term finance. I am not satisfied that the trial judge made an error in this respect.

Failure to Follow Lending Criteria and Inevitability of Default?

95 Mr Conti also submits that Accom failed to follow its own lending criteria, concerning the Berowra loan, that there was an inevitability that Kowalczuk would default under the Berowra loan, and that those circumstances together with the extremely high interest rates suffice to make the transaction unjust.

96 It can be accepted that pure asset lending – described by Basten JA in Khoshaba at [128] as being “to lend money without regard to the ability of the borrower to repay by instalments under the contract, in the knowledge that adequate security is available in the event of default” – is in at least some circumstances unjust within the meaning of the Contracts Review Act, or unconscionable: Elkofairi v Perpetual Trustee Co Ltd [2002] NSWCA 413; (2003) 11 BPR 20,841 at [57]-[59], [79] per Beazley JA (with whom Santow JA and MW Campbell AJA agreed); Khoshaba at [92] per Spigelman CJ (with whom Handley JA agreed on this point), [128] per Basten JA. However whether lending on the basis that the loan can adequately be repaid from the security, is in the circumstances of any particular case unconscionable or unjust, depends on other matters as well. Thus, in Elkofairi the facts that neither the applicant nor her husband had any income, the loan in question was for five years, and the security was over the applicant’s only asset (involving the proposition that the applicant had no other resources from which to service the loan) and that the secured property was the applicant’s home, were all relevant matters in reaching the conclusion that the transaction was both unconscionable and unjust. In Khoshaba, other factors relevant to the conclusion of injustice were that the applicants were a husband and wife, one of whom earned $43,000 pa and the other of whom was a pensioner, the lender had no information at all about the purpose for which the loan was being sought, and the security was over their home.

97 Mr Conti submitted that the trial judge had adopted too high a standard for the degree of certainty that a lender must have that a loan will fall into default before the making of the loan counts as being pure asset lending. He pointed to a passage in the judgment (at [52]) where the judge stated that Elkofairi and Khoshaba:

"… are not authority for some general proposition that a lender of money on security of real estate to a borrower who has no ability through his own income or assets to repay the loan, is guilty of taking part in some unconscionable and predatory conduct. That may be the position if there is no means disclosed for payment of interest, but a good proportion of borrowers for fixed terms in any mortgage situation would be proceeding on the basis that the principal debt would be repaid by new borrowings or by sale of the mortgaged land. The position is of course different if the lender knows that there will be default in payment of the interest or principal so that mortgagee sale will be the inevitable result. This latter conduct is the type of pure asset lending that has been found unconscionable; the former is not. In the instant case so far as payment of interest was concerned, it was paid in advance and deducted from the loan funds ”

98 Mr Conti submitted that there could be unconscionable lending in circumstances where it could not be said that the lender actually knew that there would be a default in payment of interest or principal so that a mortgagee sale will be the inevitable result, but the lender knew there was a high risk that the intended means for payment of the loan might fail. As well, he submitted that a lender who was not acting unjustly should look into the prospect of refinancing, and if that prospect is too risky, the lender should refuse to make the loan.

99 I would accept that in some circumstances knowledge of a high degree of risk that there might be a default in payment of interest or principal so that a mortgagee sale would result, could be unjust lending, even though it could not be said that the lender knows that there will be default. However I do not accept that a lender is always bound to carry out a detailed investigation of the practicality of an intending borrower actually being able to carry through the plan the borrower says he or she has for repayment of the loan. In the present case, Kowalczuk stated to Accom that he proposed to pay the Berowra loan out through bank refinance, and the Haberfield loan through refinancing with FirstLoan (the same brokers through whom Kowalczuk was able successfully to refinance the Berowra loan) and there was no occasion for Accom to doubt that he would be able to do so. Thus, even if Mr Conti is right in saying that there can be pure asset lending if the lender knew that there was a high risk that the intended means of repayment might fail, in the present case Accom did not have knowledge of that type.

100 I should also say, in fairness to the trial judge, that I doubt that in the passage that Mr Conti criticises the judge was intending the focus of his remarks to be on the degree of certainty that a lender must have that a loan will fall into default.

101 Mr Conti also relies upon Accom having failed to follow its own due diligence procedures in relation to the making of the Berowra loan. The failure to follow due diligence procedures is relied on in relation to allegations of both injustice and unconscionability.

102 In Khoshaba Spigelman CJ at [80]-[82] regarded a lender’s failure to observe its own lending guidelines as entitled, in the circumstances of that particular case, to significant weight. The way in which it was relevant was twofold. First, while the guidelines were designed to enable the lender to assess and minimise its own risk, and thus were for the purpose of protecting the lender rather than the borrower, following the guidelines conferred an indirect benefit on the borrower through risky loans not being made, and one of the legislative purposes of the Contracts Review Act was to protect people not able to look after themselves. The second way in which it was relevant was, in the circumstances where the lender had no idea for what purpose the loan was being borrowed, the failure to observe the lending guidelines assisted the inference that the lender was lending on the value of the security.

103 Dunsford gave evidence that Accom followed the following “rules”:

“a) We do not [make] third party loans (unless the mortgagor is the sole owner of the company borrower or vice-versa).

wheeler-dealer

c) We do not lend to anyone who is borrowing to give to their relatives, or to lend to their relatives or to invest with their relatives. Anything to do with relatives we will have nothing to do with. The reason is they may be vulnerable to emotional blackmail.

d) We do not lend to people who are not sophisticated. Mums and Dads on incomes with jobs as their only cashflow cannot support hight interest rates and have no business dealing with these sorts of loans. The classic borrower for us is a developer who needs bridging finance between a purchase and sale. Essentially we need to see they are business people of some sophistication. We will not lend to mum & dad types who own a franchise – because as we see it that is just a common road to ruin that mums and dads who are wet behind the ears seem to take.

e) We generally do not lend money on people’s own homes unless they can demonstrate a clear business use of the money. I estimate that only 1 in 20 of our loans to owner occupiers.

f) Improvident loans – See (a), (c), (d), (e) above, (g) below.

g) We always insist on an exit strategy for each loan. We do not want a loan which is going to go into default. This requirement is usually satisfied by the provision of a letter of offer from a reputable lender. The letter of offer must be subject to a valuation figure which our investigations regard as realistic (otherwise the letter of offer is worthless). Another common acceptable exit strategy is the sale of the property where an agent has been appointed (or contracts already exchanged).”

104 Dunsford also said that if the borrower’s cheque directions show that there is a significant transfer of money to a third party:

“… we ask more questions. Many loans have faltered at this point. Usually it will be because our requisitions reveal the money is to be advanced into some investment scheme of a dubious nature.”

105 So far as the Berowra loan was concerned, it was not a third party loan, so criterion (a) was met.

106 Dunsford had no reason to believe that Kowalczuk was a pensioner, elderly or vulnerable. He was misinformed (but had no reason to doubt) that Kowalczuk was a developer. The loan was not on multiple securities. Thus, so far as his belief went, criterion (b) was satisfied, save that the preference to lend on multiple securities was not met.

107 Dunsford did not know that the purpose of the borrowing was to give the proceeds to Anastasi. Thus, so far as his knowledge or belief went, there was no breach of criterion (c).

108 As to criterion (d), Dunsford had Anastasi’s say-so that Kowalczuk was a “business person of some sophistication”. As well, he obtained Kowalczuk’s apparent confirmation that properties apparently registered in his name were “developments that I have done”. He was aware that Kowalczuk already had Dalla available to act as his solicitor concerning this transaction. He had reason to believe that Kowalczuk had enough business sophistication to have put the family home into a trust, as protection against possible bankruptcy. No franchise was involved. So far as Dunsford’s belief went, there was no reason to believe that criterion (d) was not satisfied.

109 The loan was not on Kowalczuk’s own home, so criterion (e) was satisfied.

110 There was no Letter of Offer made available to Accom, from any kind of lender (whether reputable or not). Though Dunsford said he organised a valuation that estimated the Berowra property to be worth $400,000 as a house rather than a childcare centre, that valuation was never put into evidence. However the trial judge did not reject Dunsford’s evidence about obtaining such a valuation. Given that NAB was later prepared to lend $350,000 on the property there is nothing inherently implausible about the evidence. As well, a professional valuation report that Kowalczuk obtained of the Berowra property, dated 13 October 2005, valued it at $670,000. That report stated that the property was approved for its existing use as a childcare centre. In these circumstances, though Dunsford was informed about an exit strategy on two occasions, when the application form identified the “Plan for Repayment” as being “bank re-finance”, and when Kowalczuk told him on the telephone that “Tony is organising a re-finance”, there was no specificity about the “exit plan”, and the lack of a letter of offer meant that criterion (g) was not satisfied in the way it was “usually satisfied”.

111 There was a further departure from Accom’s own standards when the proceeds of the Berowra loan were transferred to a third party, without Accom or Dunsford asking questions about why this was being done. So far as the evidence discloses, Dunsford knew nothing about who or what Venture Connect was, but neither did he know that it was not a business operated by Kowalczuk.

112 The trial judge found that, notwithstanding that Accom’s “Loan Repayment Ability Declaration” form included a statement that “I acknowledge that you insist that we take independent legal and financial advice in relation to this loan”, Dunsford never expected that financial advice would be obtained by Mars or Kowalczuk.

113 As well as these lending criteria, Dunsford said that Accom carried out various steps of what he described as “positive due diligence”.

“a) Requiring an exit strategy for the loan.

b) Investigating the exit strategy for the loan.

c) Requiring a letter or deed of [release] from priority from prior mortgagees.

d) Requiring a letter of conduct from prior mortgagees.

e) Performing a bankruptcy search.

f) Performing real property ownership and company director searches.

g) Searching the for references to them.

h) Searching the name of the borrower on Google.

i) Searching RP Data to see comparable properties in the area

j) Viewing the property.

k) Talking with the local real estate agents.

l) Require independent legal advice by the borrower.

m) Requiring the independent solicitor to verify the identity of the borrower.

n) Searching the independent solicitor on the Law Society database and ensuring the contact details match those on his or her letterhead.

o) Require the Solicitor to have known the borrower for a minimum of 12 months (this requirement was implemented in 2006).

p) We do not lend above 80% of the market value as assessed by us.”

114 In the present case, while there was an exit strategy, of a sketchy kind it could hardly be said it was investigated, so due diligence step (b) was not carried out.

115 Due diligence steps (c) and (d) were not applicable, as there was no prior mortgagee.

116 Steps (e), (f), (g) and (h) were carried out. The bankruptcy search, the search of and the search of Google turned up no reference to Edward Kowalczuk. Steps (j), (k), (l), (m), and (n) were all carried out. It is not clear from the evidence that step (i) was carried out. Step (o) is inapplicable, as the requirement was implemented only in 2006. It appears that step (p) was also implemented, as the initial request for $500,000 was turned down, by reason of the value of the security.

117 Even accepting that there were some departures from Accom’s own lending guidelines and due diligence procedures, the trial judge was well aware of those departures, and did not regard them as enough, even when combined with other factors, to show the loan was either unconscionable or unjust. It needs to be recalled that departure from a lender's own lending guidelines does not in itself establish the injustice of a loan. Rather, those departures need to be part of a process of reasoning, such as that engaged in by Spigelman CJ in Khoshaba, the ultimate outcome of which is that the loans in question are unjust. I turn to consider for myself whether there are any other factors that, when combined with departures from the lending criteria and due diligence procedures, lead to the conclusion that the loans are unjust.

118 It can readily be accepted that the interest rates charged on the Berowra loan were extremely high. However, Dunsford had no reason to believe that Kowalczuk had not received adequate advice from Dalla concerning the loan and its terms. The “Acknowledgement of Legal Advice” document that Kowalczuk signed and returned to Accom included express acknowledgement of being aware that there was a higher rate of interest under the mortgage, and the liability to pay the lender’s costs of remedying any default. The mortgage document that Kowalczuk signed stated what the higher rate and lower rate were, in a format that made them hard to miss. In the telephone conversation that Dunsford had with Kowalczuk (para [41] above) Kowalczuk acknowledged awareness of the 48% interest rate, and expressed no concern about it.

119 That Dunsford carried out the checks and enquiries that he carried out, even though they did not amount to absolutely full satisfaction of his lending criteria or due diligence procedures, is not suggestive of a man whose only concern was to obtain a mortgage over a property that had enough equity in it to be able to repay the loan.

120 Dunsford gave evidence, accepted by the judge, that about 75% of the mortgages with which Accom was involved at the time of the trial, and the same percentage for the previous year, are or were in default and court proceedings are being taken or were being taken to enforce the securities. Accom’s policy is to commence enforcement proceedings immediately a loan becomes overdue. Dunsford’s usual experience is that once proceedings are commenced the borrower re-finances the loan or (less frequently) sells the property. There have been approximately five occasions when Accom has exercised a power of sale, usually in circumstances where the borrowers have taken out further borrowings that rank behind Accom’s mortgage, and so cannot give a clear title if they try to sell themselves. The present action is the only action where enforcement action by Accom has resulted in a trial.

334 Because the claim against the solicitors and barrister was brought in the Federal Court, there had been particular focus on the Trade Practices claim at first instance, because it was only via the Trade Practices claim that the jurisdiction of the Federal Court was attracted. The Trade Practices claim had proceeded on the basis that, though the respondents in the Federal Court proceedings were natural persons, and the prohibition in section 52 was directed to a corporation, section 6(3) extended the operation of the Trade Practices Act so that (inter alia) section 52 applied to a person who was not a corporation concerning conduct involving the use of postal, telegraphic or telephonic services. It was alleged that the lawyers had sent letters and facsimiles that were part of the misleading and deceptive conduct. It was in this context that Callinan J said at [239]:

“As to the other matter, whether the appellants were engaged in conduct in trade or commerce, counsel for the respondent quite properly conceded in this court that that question was an even more controversial one. No doubt the respondent was anxious to find and pursue if possible statutory claims to which any immunity of lawyers in negligence suits might not provide an answer. These matters need not, however, be explored now, because no ground of appeal either to the Full Federal Court or to this Court raises any jurisdictional point.”

335 Those remarks were confined to the Trade Practices claim. The Trade Practices Act does not contain any provision to the effect that trade or commerce includes any business or professional activity. In those circumstances, the remarks of Callinan J at para [239] of Boland cannot be transposed into a statement that the question whether solicitors and a barrister were engaged in trade or commerce was a controversial one, for the purpose of the Fair Trading Act.

336 The definition of “services” in the Trade Practices Act includes identical words to those I have quoted above for the corresponding definition in the Fair Trading Act.

337 Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215, another of the cases relied on by Young CJ in Eq in Metcash, was an application for summary dismissal of a claim, or striking out of parts of a statement of claim. The applicant for those orders was a firm of consulting and supervising engineers, who had advised a developer concerning a subdivision. The allegation against the engineers was, broadly, that they had misrepresented their experience and expertise in the design and supervision of land subdivisions, their ability to provide engineers who had such experience, and their ability to provide accurate estimates of the costs involved in carrying out a subdivision. French J rejected a submission that a professional could not be engaged in trade or commerce, because the professional is engaged in what is “essentially an intellectual activity and not an activity of a commercial or mercantile kind” (at 217). He accepted, at 218, that “trade or commerce” “is intended to cover the whole field in which the nation’s trade or commerce is carried on”. His Honour said, at 218, that although the word “services”:

“trade or commerce”

…

“work of a professional nature”

“trade or commerce”

338 His Honour also noted the width of the term “trade” in its constitutional context.

339 He concluded, at 220:

“trade or commerce”

This conclusion flows from both the judicial exposition and the particularly statutory context of that term.

It follows that the provisions of s 52 are applicable to the giving of professional advice by a consulting engineer and nothing flowing from the characterisation of that occupation as a profession prevents their application.”

340 The reasoning in that case might need reconsideration in the light of Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594, as one of the themes of Nelson was that “in trade or commerce” in section 52 should not be read as covering the full extent of what counts as “trade or commerce” for the purposes of the Constitution. However the important thing for present purposes is that Thiess was not dealing with the extended definition of “trade or commerce” contained in the Fair Trading Act.

341 In my respectful view, the reasoning in the part of Metcash that I am now considering is flawed because it does not take into account the extended definition of “trade or commerce” contained in section 4 Fair Trading Act. If that extended definition is taken into account, it becomes necessary to consider an argument to the effect that, when section 42(1) says “a person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive” it is to be interpreted so that the expression “in trade or commerce” is given the meaning explained in Nelson v Concrete Constructions, and also as though it said:

“A person shall not, in any business or professional activity, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

342 In Prestia v Aknar (1996) 40 NSWLR 165 Santow J (as his Honour then was) gave lengthy consideration, at 178-195 to the meaning of “in trade or commerce” in the Fair Trading Act. He identified, at 188, two possible interpretations of the types of professional activity that fell within section 42(1). What he called the “wider interpretation” was that any conduct in a profession or by way of professional activity was in itself enough to attract the potential application of section 42(1). The “narrower interpretation” “requires that the activity inherently bear a trading or commercial character before it is caught”. Ultimately, his Honour decided that the narrower interpretation was preferable.

343 In Plimer v Roberts (1997) 80 FCR 303 the Full Federal Court held (as summarised by Jessup J in Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2008) 168 FCR 46 at [181]) that in section 42 Fair Trading Act:

“trade or commerce”

344 In Shahid Jessup J, at [191] declined to apply the view in Prestia that, in the Fair Trading Act, the expression “any professional activity” is confined to such an activity which bears a trading or commercial character. He concluded at [194]:

“any professional activity”

345 On the basis of that construction of the Fair Trading Act (WA) Jessup J held that the Australasian College of Dermatologists had breached the Western Australian equivalent of section 42 Fair Trading Act. Branson and Stone JJ agreed (at [1]) and [30]), but would also have found the College had breached section 52 Trade Practices Act.

346 In Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553 the High Court considered the Victorian Fair Trading Act 1999. Section 9 of that Act is the analogue of section 42 of the New South Wales Fair Trading Act. The question at issue in the case was whether a natural person who had engaged in misleading and deceptive conduct while acting solely as an employee of a corporation and not on his own account, could contravene section 9. The Court held he could. At [32] the Court, comparing section 52 Trade Practices Act and section 9 Fair Trading Act said:

Concrete Constructions (NSW) Pty Ltd v Nelson

Prestia v Aknar (1996) 40 NSWLR 165

Fasold v Roberts (1997) 70 FCR 489

347 Page 182 of Prestia, there referred to, is not in the part of the judgment where Santow J is considering how the extended definition of “trade or commerce” applies to section 42. I do not read Houghton v Arms as having given the High Court’s approval to that discussion.

348 In Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 at 492 Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ held that an intermediate appellate court should not depart from an interpretation placed on uniform national legislation such as the Corporations Law by another intermediate appellate court, unless convinced that the interpretation is plainly wrong. In Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 at [135] Gleeson, Gummow, Callinan, Heydon, and Crennan JJ referred to that aspect of Marlborough, and continued:

“Since there is a common law of Australia rather than of each of Australian jurisdiction, the same principle applies in relation to non statutory law.”

349 Neither Marlborough Gold nor Say-Dee applies, as a matter of binding precedent, to whether I should follow the decision of the Full Federal Court in Shahid. Marlborough does not apply because there is not uniform national legislation involved – while each state has a Fair Trading Act, that are markedly similar to each other, the particular extended meaning of “trade or commerce” that appears in the New South Wales Act appears in the Western Australian Act, but not in other Fair Trading Acts. Further, Say-Dee does not apply, because the question is one of statutory interpretation, not application of the common law.

350 Even so, I think it would be out of keeping with the general approach to the law of precedent as between intermediate appellate courts in Australia, that is shown in Marlborough Gold and Say-Dee, for me to proceed as though I had a completely free hand in deciding whether to follow Shahid or not. As I perceive it, a consideration that motivates both Marlborough Gold and Say-Dee is that Australia is a single country, with a single body of common law and equitable principle applying within it. To the extent to which State Parliaments have passed legislation that is not in substance different, that legislation should be construed in a way that is not in substance different. I consider that, consistently with Marlborough Gold and Say-Dee, though not dictated by them, I should depart from the Full Federal Court’s decision in Shahid only if convinced it is wrong. I am not so convinced, and therefore shall apply it.

351 I conclude that the fact that Dalla was engaged in professional activities as a solicitor is not in itself sufficient reason why section 42 cannot apply to him. The provision by Dalla of legal advice to Kowalczuk was carried out “in trade or commerce”, within the meaning of section 42. That is far from conclusive, however, about whether the prohibition in section 42 actually applies to his dealings with Mars and Kowalczuk.

What Counts as Misleading or Deceptive Conduct by a Solicitor?

General Considerations

352 There are various ways in which a solicitor might engage in misleading or deceptive conduct in the course of his or her professional activities. Sometimes the task of a solicitor is to advise on the prospects of success of proposed litigation, or about how the courts are ultimately likely to decide some presently undecided legal question. Such advice involves the solicitor making a prediction about the future, and can be misleading or deceptive according to the same criteria as any prediction about what will happen in the future can be misleading or deceptive. When the advice in the present case is not of that character, it is not necessary to elaborate on when a prediction about the future can be misleading or deceptive.

353 Sometimes, in the course of seeking or carrying through legal work, a solicitor will make a specific representation of fact, and whether such a representation of fact is misleading and deceptive is judged by the same criteria as any other representation of fact. Sometimes the representation of fact might be an implied one. One particular circumstance in which an implied representation of fact might be made occurs when the task of the solicitor involves the carrying out of a transaction that requires legal skills, such as carrying through a conveyancing transaction, administering a deceased estate, or drafting a set of documents apt for a commercial transaction the client wants to enter. Though it will depend upon the circumstances of individual transaction, very often the mere entering of the solicitor upon the task involves a representation that he or she has knowledge and skills suited to carrying the task out, and sometimes conveying to the client the message that the task has been completed might involve a representation that is implied or by silence that the task has been completed in accordance with the degree of care and skill of a competent solicitor. In the present case no specific representation of fact is alleged to have been made by Dalla.

354 Sometimes, a solicitor will express an opinion, about the advantages and disadvantages involved in following different proposed courses of action or (more boldly) about which of several different proposed courses of action is more in the client’s interests. That sort of opinion is not strictly a prediction about the future, because it involves considering various hypothetical futures only one of which can actually come about, and none of which might actually come about. One aspect of the claims brought against a barrister and solicitors in Heydon v NRMA Ltd was an allegation that they had each breached section 42 Fair Trading Act by the advice they gave. In Heydon v NRMA at [307] Malcolm AJA said:

Yorke v Lucas

Rogers v Whitaker

Boland v Yates Property Corporation Pty Ltd

(The reference to the judgment of Gaudron J in Boland should be to [104], 602). See also, to similar effect, at [329]-[331] per Malcolm AJA, [431]-[432] per McPherson AJA [692] 250 per Ormiston AJA. In the present case, I can see no circumstances in which there could be liability under section 42 if there were not also liability for the tort of negligence.

Can Inadvertent Conduct be Misleading or Deceptive?

355 The particulars in the pleading of the allegation of breach by Dalla of section 42 referred the reader back to paragraph 19 of the cross-claim (concerning the Berowra transaction) and to paragraph 48 of the cross-claim (concerning the Haberfield transaction). The trial judge dismissed the claim under section 42 saying:

Trade Practices Act

Fair Trading Act

356 In reasoning in this way the trial judge was acting consistently with the decision in Metcash. The second reason why Young CJ in Eq dismissed the claim against the solicitors in Metcash was that the complaint against them was one of failure to warn about the pre-emption clause (so far as misleading and deceptive conduct in the course of the first retainer was concerned), and a failure to remember the clause or get out the file and look at it, (so far as misleading and deceptive conduct in the course of the second retainer was concerned). Young CJ in Eq held, at [59], that by reason of section 4(4) omissions can constitute conduct, but not if the omission is inadvertent.

357 This approach of Young CJ in Metcash, and of the trial judge in the present case, was justified by both the words of section 4(4) and authorities concerning them.

358 Purely as a matter of statutory interpretation, section 4(4)(a) takes the form of an exhaustive definition of “conduct”. Section 4(4)(b) is merely an inclusive definition of “refusing” to do an act. Thus, the reference to “a refusal to act” includes the matters referred to in section 4(4)(b)(i) and (ii), and also includes anything else that would count as a “refusal to act” in the ordinary meaning of those words.

359 In Semrani v Manoun [2001] NSWCA 337 Beazley JA (with whom Mason P and Ipp AJA agreed) considered a situation where Williams, an accountant, did not disclose to a Mr Manoun, information that Williams had that was of great importance to a business venture that Manoun was proposing to enter. Beazley JA at [56] ff considered section 42 and section 4(4) Fair Trading Act, and authorities relating to when there can be misleading and deceptive conduct through silence, and concluded, at [62]:

“The combined effect of the Act and the authorities therefore, is that for Williams’ silence to be actionable, he must have actual knowledge of a matter which he intentionally refrained from telling Manoun in circumstances where there was either a duty to disclose or where Manoun had a reasonable expectation that such information would be disclosed to him.”

360 Similarly, in Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211; (2002) 18 BCL 322 there was an allegation of breach of section 52 Trade Practices Act. Section 4(2)(c) Trade Practices Act is in the same terms as section 4(4)(b) Fair Trading Act. The allegation in question was that failure to disclose a particular project management agreement amounted to misleading and deceptive conduct. Hodgson JA (with whom Mason P and Stein JA agreed) said, at [58]:

Semrani

361 The only way in which the failures of Dalla to act, complained of in this case, could even arguably fall within the exhaustive definition of “conduct” in section 4(4)(a) is if it were a refusal to act. The various failures that Dalla is alleged to have engaged in do not count as a “refusal to act”, within the ordinary meaning of those words. Further, when the various failures that were relied upon have not been proved to be intentional, they do not fall within the extended meaning contained in section 4(4)(b). Thus, any such failures to act do not fall within the prohibition of section 42.

362 Another submission of Mr Conti, not developed at length, was that the concept of causation operated differently in its application to a cause of action arising under section 42 Fair Trading Act to the way it operated concerning the tort of negligence. The right to damages for breach of section 42 is conferred by section 68(1) Fair Trading Act:

“A person who suffers loss or damage by conduct of another person that is in contravention of a provision of Part … 5 … may recover the amount of the loss or damage by action against the other person …”

363 This is not materially different to section 82 Trade Practices Act, the section that confers an entitlement to damages for a breach of section 52 Trade Practices Act. Concerning section 82 Trade Practices Act, Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 525 noted that while the word “by” was a somewhat curious expression in the context, it conveyed the concept of causation in the practical or “common-sense” approach discussed in March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506 (itself a negligence case). In Heydon v NRMA at [346] per Malcolm AJA, [441] per McPherson AJA accepted that the same analysis applied to section 68 Fair Trading Act. The same conclusion was reached in Semrani v Manoun [2001] NSWCA 337 at [47]. I respectfully agree with those decisions. I am not persuaded that the concept of causation operates differently to a cause of action under section 42 to the way it operates concerning the tort of negligence.

364 In that circumstance, even if a breach of section 42 had been made out, causation of damage would not be established.

365 In my view, insofar as the appeal challenged the trial judge’s dismissal of the action against Dalla, it should be dismissed with costs.

366 By order 2 in the Equity Proceedings, the judge had dismissed the cross-claim against both cross-defendants. By order 16 in the Equity Proceedings, the judge had ordered Kowalczuk to pay the cross-defendants’ costs of the cross-claim. In the Common Law Proceedings the judge had ordered the cross-claim be dismissed, and the cross-claimant (ie Mars) pay the cross-defendants’ costs of the cross-claim.

367 For the reasons I have given, it is not appropriate to alter the effect of any of those orders in so far as they benefit Dalla. However, because orders made below were made in terms that applied to both cross-defendants in the respective proceedings, it will be necessary to revoke those orders, and replace them with orders that benefit Dalla alone.

PART E – ORDERS

368 It is desirable to make orders now to dispose of the appeals as far as possible. The only thing that is preventing the making of orders enabling the appeal to be disposed of completely is the need to calculate the interest that is due to Kowalczuk and Mars that will be part of the final amount of the judgment in their favour. I can see no reason why the solicitors cannot agree on the quantum of that calculation, and submit an agreed minute of a supplementary order, that can be made in chambers by a single judge. However, against the possibility that something unexpected prevents that agreement being arrived at, and for no other purpose, I shall reserve liberty to apply and further consideration.

369 The orders I propose are:

1. So far as the appeal is brought against Dalla, the appeal is dismissed with costs.

(a) Note the undertaking of Accom by its counsel to the Court that Accom will not enforce the Haberfield mortgage or the guarantee of Kowalczuk relating to the debt owed by Mars under the Haberfield mortgage for more than the lower rate fixed by that mortgage at simple interest, plus any costs it is entitled to, pursuant to that mortgage.

(b) Upon that undertaking, allow the appeal to the extent that the orders in the court below are varied in the manner set out in order 3 hereof, and Accom will hereafter be ordered to pay

(i) to Kowalczuk the sum of $18,143.17 plus interest at the prescribed court rates from 14 December 2005 to the date when that judgment is entered, and

(ii) to Mars the sum of $20,761.84 plus interest at the prescribed court rates from 13 October 2006 to the date when that judgment is entered.

(c) Direct the solicitors for the parties to confer concerning the amounts that shall be ordered pursuant to 2 (b) above, and to submit to the court within 28 days of the date of delivery of these reasons, agreed short minutes of order for the payment of those sums.

(d) Reserve liberty to apply and further consideration concerning the quantum of those sums.

(e) Order Accom to pay to Kowalczuk and Mars two-thirds of their costs of the appeal, insofar as those costs relate to the appeal they brought against Accom.

(f) Otherwise, appeal dismissed.

3. Orders in the court below in 1887 of 2006 (the Equity Proceedings) are varied as follows:

(b) In lieu of order 2, order that the cross-claim against Dalla be dismissed.

(i) note that the Plaintiff will hereafter be ordered to make a payment to Kowalczuk in accordance with 2(b)(i) above, and reserve liberty to apply and further consideration concerning the quantum of that sum.

(ii) order Kowalczuk to pay Dalla’s costs of the cross-claim.

(iii) order that Kowalczuk and Accom each bear his or its own costs of the claim and cross-claim.

4. Orders of the Court below in 5906 of 2006 (the Common Law Proceedings) made on 17 July 2007 revoked, and in lieu thereof order:

(a) Note that the plaintiff will hereafter be ordered to make a payment to Mars in accordance with 2(b)(ii) above, and reserve liberty to apply and further consideration concerning the quantum of that sum.

(b) order Mars to pay Dalla’s costs of the cross-claim.

**********

21/05/2009 - Correction of typographical error in penultimate sentence of paragraph - "that" changed to "than". - Paragraph(s) 126

Details

AGLC: Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343
Case: [2008] NSWCA 343
Decision Date: 10 December 2008

CaseChat Overview and Summary

The appeal concerned short-term loans provided by Accom Finance Pty Ltd to the appellants, Mr. Kowalczuk and Mr. Mars, which carried extremely high interest rates. These rates increased significantly upon default, and interest compounded monthly. The loan agreements also included provisions allowing for the recovery of all extra expenses incurred due to a default, which were drafted to circumvent the conventional understanding of penalty clauses. The dispute arose after the loans fell into default. The appellants sought to have the loan contracts declared unjust under the Contracts Review Act 1980 (NSW), and also raised issues concerning misleading or deceptive conduct under the Trade Practices Act 1974 (Cth) and the Fair Trading Act (NSW). Additionally, the appellants alleged a breach of duty of care by their solicitor, who had been engaged to provide independent advice on the security documents.

The court was required to determine several key legal issues. These included whether the loan contracts were unjust within the meaning of the Contracts Review Act 1980, considering factors such as the appellants' vulnerability, the lender's conduct, and the nature of "pure asset lending." The court also had to consider whether the provisions relating to the default interest rate were unjust. Furthermore, the court examined whether Accom Finance's conduct contravened sections 51AA and 51AC of the Trade Practices Act 1974, and whether the loans were "for the purpose of trade and commerce" under section 51AC. The appellants also alleged that their solicitor breached contractual obligations and duties of care, and whether any loss resulted from such breaches, particularly in relation to conduct within "trade or commerce" under section 42 of the Fair Trading Act.

The court found that while the appellants had supplied false information about their income, this did not necessarily negate their vulnerability. It was held that the lender's failure to observe its own lending guidelines was a relevant factor in assessing the justice of the contract. The court determined that the default interest provisions were unjust. Regarding the Trade Practices Act claims, the court found that the loans were not acquired for the purpose of trade or commerce, thus section 51AC was not engaged. However, the court found that the solicitor's conduct did not constitute misleading or deceptive conduct under section 42 of the Fair Trading Act, as the concept of causation operated differently in that context compared to negligence.

Ultimately, the court ordered that Accom Finance pay specific sums to Mr. Kowalczuk and Mr. Mars, representing a partial refund of amounts paid. Accom Finance was also ordered to pay two-thirds of the appellants' costs of the appeal in relation to the claims against Accom. The appeal against Dalla was dismissed with costs. The parties were to bear their own costs in the court below.

Orders

Orders of the court

(1) So far as the appeal is brought against Dalla, the appeal is dismissed with costs. (2) So far as the appeal is brought against Accom, in substance, (a) Accom to pay: (i) to Kowalczuk the sum of $18,143.17 plus interest at the prescribed court rates from 14 December 2005 to the date when that judgment is entered, and (ii) to Mars the sum of $20,761.84 plus interest at the prescribed court rates from 13 October 2006 to the date when that judgment is entered. (b) Accom to pay to Kowalczuk and Mars two-thirds of their costs of the appeal, insofar as those costs relate to the appeal they brought against Accom. (c) Otherwise, appeal dismissed. (d) Accom, Mars and Kowalczuk to each bear their own costs in the court below.

21/05/2009 - Correction of typographical error in penultimate sentence of paragraph - "that" changed to "than". - Paragraph(s) 126

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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Actions

Citations

Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343

Most Recent Citation

Morrison v 180 Capital Finance Pty Ltd [2011] VCC 1464

Cases Citing This Decision

153

Costi Cohen Pty Ltd v Bo [2025] NSWDC 356
Citation 1 (Para 187)

…on 9 of the act sets out the circumstances that the court is obliged to have regard to in the application of s7. In Kowalczuk v Aecom Finance Pty Ltd (2008) 77 NSWLR 205 [at 86-87] the Court:…
Miric v Romanous; In the matter of JR & KK Pty Ltd [2025] NSWSC 999
Citation 2 (Para 25)

…perates in relation to the claimant or because of the way in which it was made or both. In Kowalczuk v Aecom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 at [86], Campbell JA (with whom Hodgson and McColl JJA agreed) similarly observed, by reference to authority, that a contract could be unjust by reason o…
Gemi 169 Pty Ltd v Suria Global (L) Pty Ltd; Shamoon v F & L Violi Pty Ltd (No 9) [2025] NSWSC 975
Citation 3 (Para 476)

…e of trade or commerce: see McLennan v Clapham [2019] ACTSC 1 at [139] (McWilliam AsJ, as her Honour then was); Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205 at [328]-[351] (Campbell JA, Hodgson and McColl JJA agreeing). They also were false. They were likely to, and did, lead Mr Shamoon into error: Australian…
Make It Raine Money Pty Ltd v Alvaro [No 2] [2025] WASC 40
Citation 4 (Para 7)

…t rather provides for a "concessional" lower rate whilst ever there has been no default. As noted in Kowalczuk v Accom Finance (2008) 77 NSWLR 205; [2008] NSWCA 343 (Campbell JA, Hodgson and McColl JJA agreeing): [162] ... There is a conventional view that a properly drafted mortgage containing higher and lower rat…
Chopsonion Pty Ltd (Controllers Appointed) v Watts Meat Machinery Pty Ltd (No 2) [2025] FCA 4
Citation 5

…Finance Pty Ltd [2008] NSWCA 343; (2008) 77 NSWLR 205 Magill v Magill (2006) 226 CLR 551; [2006] HCA 51 Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 Morley v ASIC [2010] NSWCA 331; (2…
Mitchell v Gibbins [2024] NSWSC 1524
Citation 6

…R 113; [1936] HCA 41 - Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 - King v Adams [2016] NSWSC 1798 - Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 - Leedman v Chahhoud [2024] NSWSC 1284 - Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 - Mentink v Olsen [2020] NSWCA 182 - Moore v Aubusson [2020] NSWS…
Mikita v Kontek Constructions Pty Ltd [2024] QCAT 315
Citation 7 (Para 29)

…41]. In different contexts, see Townsend and Anor v Roussety and Co (WA) Pty Ltd and Anor (2007) 33 WAR 321, [117]; Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205, [281]-[287].…
PFJV Pty Ltd v Bartter Enterprises Pty Ltd [2024] QSC 114
Citation 8 (Para 1)

…ca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 at 722; see also Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205 at [359]-[361] and Software Integrators Pty Ltd v Roadrunner Couriers Pty Ltd (1997) 69 SASR 288 at 295-296 per Doyle CJ, referred to by Stevenson J in Norcross Pictorial Calendar…
Commercial N Pty Limited v Huang & Ors [2024] NSWSC 23
Citation 9

…QCA 371 Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 Lauvan Pty Ltd v Bega [2018] NSWSC 154; 330 FLR 1 Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297 Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284 N & M Investments/Properties Pty Ltd v Australian Prope…
Brewster v Woodlands Retirement Village Ltd [2024] NSWCATCD 13
Citation 10 (Para 62)

…iz v Perpetual Trustee Australia Limited [2007] NSWSC 1153 at [51], and cited with approval in Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 at [87] per Campbell JA (Hodgson and McColl JJA agreeing) (citations omitted):…
Wib Australia Pty Ltd v Bi [2023] NSWDC 571
Citation 11 (Para 174)

…liable to repay moneys advanced or interest incurred: see Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41; Kowalczuk v Accom Finance Ltd [2008] NSWCA 343; Caterjian v Parfit Investments Pty Ltd [2023] NSWCA 178 at [81]. As was made clear by Leeming JA in Wu v Ling [2016] NSWCA 322 at [7]-[11]:…
Oak Capital Wholesale Fund Pty Ltd ACN v Nunis [2023] WADC 110
Citation 12 (Para 4)

…but rather provides for a 'concessional' lower rate whilst ever there has been no default. As noted in Kowalczuk v Accom Finance (2008) 77 NSWLR 205; [2008] NSWCA 343 (Campbell JA, Hodgson and McColl JJA agreeing): '[162]…There is a conventional view that a properly drafted mortgage containing higher and lower rate…
Caterjian v Parfit Investments Pty Ltd [2023] NSWCA 178
Citation 13 (Para 81)

…etual Trustee Company Limited v Khoshaba [2006] NSWCA 41; (2006) 14 BPR 26,639 and Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343); and was not undertaken solely because it offered security over the appellants’ house. Nor was it undertaken at a time when LRA was and was believed by Mr Cooke…
In the matter of Carbon Copies Composites Pty Ltd [2023] NSWSC 911
Citation 14

…gs (2016) 329 ALR 625; (2016) 116 IPR 440; [2016] FCAFC 20 - Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 - Lee v Lee's Air Farming Ltd [1960] AC 12 - Lin v Zheng [2023] NSWSCA 174 - Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274; (1988) 84 ALR 700 - New Cap Reinsurance Corporat…
Zepinic v Eventus Lawyers Pty Ltd t/as SLF Lawyers (No 2) [2023] NSWSC 699
Citation 15

…Accountants [2022] NSWSC 732 Heydon v NRMA Ltd (2000) 51 NSWLR 1; [2000] NSWCA 374 Kowalczuk v Accom Finance (2008) 77 NSWLR 205; [2008] NSWCA 343 Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20 Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp (a Firm) [1979] Ch 38 Paltos v Bartier Perry Pty Ltd [2020] N…
Hoho Property Pty Ltd v Bass Finance No 37 Pty Ltd (No 2) [2023] NSWSC 493
Citation 16 (Para 35)

…ties, it does not automatically follow that relief will be given to remedy that injustice: Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 at [88] (per Campbell JA).…
Sevdalis v Sevdalis [2023] NSWSC 155
Citation 17

…not able to look after their own interests, and who are preyed upon by dishonesty, trickery and other forms of predation: Kowalczuk v Aecom Finance (2008) 77 NSWLR 205; [2008] NSWCA 343 at [102] (Campbell JA, Hodgson and Mccoll JJA agreeing); Provident Capital Ltd v Papa (2013) 84 NSWLR 231; [2013] NSWCA 36 at [7] (Al…
Australian Secured & Managed Mortgages Pty Ltd v Horizon Hotels Pty Ltd [2022] NSWSC 1647
Citation 18

…conis v Lazar [2007] NSWSC 1103 Jones v Dunkel (1959) 101 CLR 298 Kellas-Sharpe v PSAL Ltd [2012] QCA 371 Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 Kyabram Property Investments Pty Limited and Anor v Murray and Anor Murray and Anor v Kyabram Property Investments Pty Limited and Anor [2005] NSWCA 87 Michelange…
WFM Motors Pty Limited v Bar M Pty Limited [2022] NSWSC 1500
Citation 19

…sden [2002] NSWCA 419 Galati v Deans [2021] NSWSC 1094 Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 Manly Council v Byrne [2004] NSWCA 123 Maria Saravinovksa v Krste (Chris) Saravinovski; Chris Saravinovski v George Saravinovski (No 6) [2016] NSWSC 964 Marsden v Amalgamated Television Ser…
La Trobe Financial Asset Management Limited v Nikolyn Pty Ltd ACN 078 833 977 in its own right and as trustee for Nikolyn Unit Trust [2022] WASC 264
Citation 20

…53) 90 CLR 113 Johnson v Buttress (1936) 56 CLR 113 Karavas v Crown Melbourne Ltd [2013] HCA 25; (2013) 250 CLR 392 Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205 Linderstam v Barnett (1915) 19 CLR 528 Louth v Diprose (1992) 175 CLR 621 Mann v Carnell (1999) 201 CLR 1 Mavaddat v HSBC Bank Australia Ltd [No 2] […
Haiye Developments Pty Ltd v The Commercial Business Centre Pty Ltd [2022] NSWSC 937
Citation 21

…449; [2010] FCAFC 55 Knowles v Fuller (1947) 48 SR (NSW) 243 Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; [1995] HCA 68 Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458 Lamb v Cotogno (1987) 164 CLR 1; [1987] HCA 47 Li…
Malavazos v Govcorp Finance Pty Ltd [2022] SASC 44
Citation 22

…3 FCR 1; Johnson v Synnex Australia Pty Ltd; Jonhson v Leader Computers Pty Ltd (No 2) [2017] SASCFC 165; Kellas-Sharpe v PSAL Ltd [2012] 2 Qd R 233; Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; Lamshed v Plakakis (1988) 47 SASR 316; Montesa Investments Pty Ltd v Certane Ct Pty Ltd [2022] SASC 43; Morris Finance Ltd v Brown [201…
Moore v Gillis [2022] NSWSC 14
Citation 23

…2000] NSWCA 374 Kendirjian v Lepore & Anor (2017) 259 CLR 275; [2017] HCA 13 Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 Lavars v Gillis and Ors [2022] NSWSC 13 Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20 Murphy & Ors…
Stubbings v Jams 2 Pty Ltd [2022] HCA 6
Citation 24 (Para 17)

…rgrave JJA. [187] Jams 2 Pty Ltd v Stubbings [2020] VSCA 200 at [126] per Beach, Kyrou and Hargrave JJA, citing Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205 at 227-228 [96]-[99] per Campbell JA (Hodgson and McColl JJA agreeing); Tonto Home Loans Australia Pty Ltd v Tavares (2011) 15 BPR 29,699 at 29,706 [3],…
King v Brown (No 2) [2021] NSWSC 1060
Citation 25 (Para 130)

…tracting party, operate regardless of the agreement of the contracting party to the arrangement.”: Kowalczuk v Accom Finance (2008) 77 NSWLR 205; [2008] NSWCA 343 at [139].…
Li v Tang [2021] NSWSC 1011
Citation 26 (Para 261)

…uch as 48% and 60% per annum increasing to 96% and 120% in with interest compounding monthly: Kowalczuk, v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 7.25% per month increasing to 14.5% on default, also compounding daily, nominally 87% and 174% per annum: Galadriel Lothlorien Pty Ltd v Station 1 Pt…
Cong v Shen (No 3) [2021] NSWSC 947
Citation 27

…Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 Le Meilleur Pty Ltd v Jin Heung Mutual Savings Bank Co Ltd [2011] NSWSC 1115 Leary v NSW Trustee and Guardian [2017] NSWSC 1113 Ledgerwood v Perpetual Trustee Co Ltd (1997) 41 NSWLR 532 Lee v Russell [1961] WAR 103 Legal Profession Complaints…
Jin Lian Group Pty Ltd (in liq) v ACapital Finance Pty Ltd [2021] NSWSC 931
Citation 28 (Para 35)

…e Oil NL (1985) 157 CLR 514 at 518; [1985] HCA 63 (Mason ACJ, Wilson, Brennan and Dawson JJ)); Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 at [162]-[163] (Campbell JA); see also King Investment Solutions Pty Ltd v Hussain (2005) 64 NSWLR 441; [2005] NSWSC 1076 at [136]-[138].…
In the matter of Reserve Hotels Pty Limited [2021] NSWSC 376
Citation 29

…com Finance Pty Ltd (2008) 77 NSWLR 205; (2008) 252 ALR 55; (2008) 229 FLR 4; (2008) 14 BPR 26,565; [2008] NSWCA 343 - Left Bank Investments Pty Ltd v Ngunya Jarjum Aboriginal Corp [2020] NSWCA 144 - Letterstedt v Broers (1884) 9 App Cas 371 - Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548; [1991] 3 WLR 10; [1992] 4…
Shannon v Permanent Custodians Ltd [2020] WASCA 198
Citation 30

…03) 214 CLR 118 GEL Custodians Pty Ltd v Gibson [2016] WASC 318 Joyce v Anderson [2020] WASCA 48; (2020) 91 MVR 334 Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; (2008) 77 NSWLR 205 Lee v Lee [2019] HCA 28; (2019) 266 CLR 129 Lightfoot v Rockingham Wild Encounters Pty Ltd [2018] WASCA 205 Micarone v Perpetual…
Martin v Norton Rose Fulbright Australia (No 11) [2020] FCA 1641
Citation 31

…R 298 Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; 77 NSWLR 205 Lamb v Cotogno [1987] HCA 47; 164 CLR 1 Legal Services Commission v Mullins 2006 LPTO12 Lloyd v Belconnen Lakeview Pty Ltd [2019] FCA 2177 Lunt v Victoria International Container Terminal Limited [2020] FCAFC 40 MacDougal v Mitchell [2015] NSWCA…
Norcross Pictorial Calendars Pty Ltd v Central Coast Council [2020] NSWSC 1201
Citation 32 (Para 191)

…29] . 28. See the authorities discussed by Campbell JA, with whom Hodgson and McColl JJA agreed in Kowalczuk v Accom Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 at [359]-[361] and Software Integrators Pty Ltd v Roadrunner Couriers Pty Ltd (1997) 69 SASR 288 at 295-296 (Doyle CJ). 29. CCP Australian Airships Ltd v…
Ageist Pty Ltd v More Than Skin Pty Ltd [2020] NSWSC 1117
Citation 33 (Para 133)

…the provision to protect”. Mr Murabito further submitted that the principles discussed in Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 at [166] and [174] ( Kowalczuk ) will support a finding at the final hearing that the whole of the default interest is a penalty, including for the reaso…
Jams 2 Pty Ltd v Stubbings [2020] VSCA 200
Citation 34 (Para 1)

…le in the event of default’.[1] [1] Perpetual Trustees Company v Khoshaba [2006] NSWCA 41, [128] (Basten JA); Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205, 227 [96] (Campbell JA) (‘ Kowalczuk’ ).…
Magann v The Trustees of the Roman Catholic Church for the Diocese of Parramatta [2020] NSWCA 167
Citation 35

…r their own interests, and who are preyed upon by dishonesty, trickery and other forms of predation: Kowalczuk v Accom Finance (2008) 77 NSWLR 205; [2008] NSWCA 343at [102] (Campbell JA, Hodgson and McColl JJA agreeing); Provident Capital Ltd v Papa (2013) 84 NSWLR 231; [2013] NSWCA 36 at [7] (Allsop P, Sackville A…
Jadwan Pty Ltd v Rae & Partners (A Firm) [2020] FCAFC 62
Citation 36

…Force Association [1958] 1 WLR 563 Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; 77 NSWLR 205 Lee v Lee [2019] HCA 28; 372 ALR 383 Lewis v Hillhouse [2005] QCA 316 Louth v Diprose [1992] HCA 61; 175 CLR 621 Luxton v Vines [1952] HCA 19; 85 CLR 352 Malec v JC Hutton Pty Ltd [1990] HCA 20; 169 CLR 638 McLaughl…
Oak Capital Mortgage Fund Limited v Dlakic [2019] NSWSC 1538
Citation 37 (Para 106)

…rather provides for a “concessional” lower rate whilst ever there has been no default. As noted in Kowalczuk v Accom Finance (2008) 77 NSWLR 205; [2008] NSWCA 343 (Campbell JA, Hodgson and McColl JJA agreeing):…
Gooley v NSW Rural Assistance Authority (No 3) [2019] NSWSC 1314
Citation 38

…ubi v Zipser [2008] NSWCA 335 Kowalczuk and Another v Accom Finance Pty Ltd [2008] NSWCA 343 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 Neville v Lam (No 3) [2014] NSWSC 607 Parslow v NSW Land & Housing Corporation [2018] NSWSC 843 Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41…
Fuge v Commonwealth Bank of Australia [2019] FCA 1621
Citation 39

…ervices Australia [2011] HCA 11; (2011) 243 CLR 361 Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; (2008) 77 NSWLR 205 Lindfield Developments Pty Limited v Shuangxing Development Pty Limited [2016] NSWSC 68 MBF Investments Pty Ltd v Nolan [2011] VSCA 114; (2011) 37 VR 116 McCourt v National Australia Bank [201…
Kerr v Australian Executor Trustees (SA) Ltd [2019] NSWSC 1279
Citation 40

…ecutor Trustees (SA) Ltd (2015) 255 CLR 62; [2015] HCA 6 Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 Maxitherm Boilers Pty Ltd v Pacific Dunlop Insurances Pte Ltd [1998] 4 VR 559 National Trustees Executors & Agency Co of Australasia Ltd v Dwyer (1940) 63 CLR 1 O’Halloran v RT Thomas & F…
Bagshaw v RTS Super Pty Ltd [2019] WASCA 85
Citation 41 (Para 2)

…lending, may or may not amount to unconscionable conduct. Whether it does depends on all the circumstances.[21] [21] Citing Kowalczuk v Accom Finance [2008] NSWCA 343 [96]; Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353 [206] ‑ [214]; compare ASIC v Australian Lending Centre Pty Ltd (No…
Trajkovski v Simpson [2019] NSWCA 52
Citation 42

…yers v Mitchell Morgan Nominees (2013) 247 CLR 613; [2013] HCA 10 Jones v Daniel (2004) 141 FCR 148; [2004] FCAFC 278 Kowalczuk v Accom Finance (2008) 77 NSWLR 205; [2008] NSWCA 343 Lysaght v Edwards (1876) 2 Ch D 499 Meandarra Aerial Spraying Pty Ltd v GEJ & MA Geldard Pty Ltd as Trustee for the G & M Geldard Family Trust [2013]…
McLennan v Clapham [2019] ACTSC 1
Citation 43 (Para 1)

…, a solicitor engaged in professional activities provides legal advice ‘in trade or commerce’: see, by analogy, Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; 77 NSWLR 205 at [328]-[351].…
Jefferis v Gells Pty Ltd trading as Gells Lawyers [2018] NSWDC 288
Citation 44

…ng v Adams [2010] NSWSC 336 Kirk v Industrial Relations Commission (NSW) (2010) 239 CLR 531 Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343 LSKF Holdings Pty Ltd v Shield Lifestone Holdings Pty Ltd [2018] NSWCA 129 Mahommed v Unicomb [2017] NSWCA 65 Meehan v Jones (1982) 149 CLR 571; [1982] HCA 52 Mega-Top Cargo…
Permanent Custodians Ltd v Shannon [No 2] [2018] WASC 295
Citation 45 (Para 1)

…In Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205 Campbell JA (with whom Hodgson & McColl JJA agreed) said: I would accept that in some circumstances knowledge of a high degree of risk that there might be a default in payment of interest or principal so that a mortgagee sale would result, could be unjust lendin…
Kids Club Rozelle Pty Ltd v European Hire Cars Pty Ltd [2018] NSWSC 1115
Citation 46 (Para 60)

…see also Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 at [58]; Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 at [360]). As far as the evidence goes, the topic of the plaintiff’s financial capacity was never raised in the course of the discussions between the p…
Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) [2018] FCA 751
Citation 47

…td v Toreo Pty Ltd [1989] ATPR 46-054; [1989] FCA 400 Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205 Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705 Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 Miller & Associates Insurance Broking Pty Ltd v BMW Australia…
Bendigo and Adelaide Bank Limited v Zipevski [2018] NSWDC 54
Citation 48

…of the way it operates in relation to the claimant or because of the way in which it was made or both. In Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; (2008) 77 NSWLR 205, Campbell JA (with whom Hodgson and McColl JJA agreed) similarly observed, by reference to authority, that a contract could be unjust by r…
Michelangelo Alfredo Mascarello v Registrar-General of New South Wales [2018] NSWSC 284
Citation 49 (Para 86)

…; Acron Pacific Pty Ltd v Offshore Oil NL (1985) 157 CLR 514 at 518 per Mason ACJ, Wilson, Brennan and Dawson JJ; Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343 at [162]-[163] per Campbell JA.…
Egan v Egan [2018] NSWSC 202
Citation 50 (Para 97)

…ina v Permanent Custodians Limited [2009] NSWCA 206; (2009) 14 BPR 26,923 at [69]-[70] and Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 at [96]; and see Fast Fix Loans Pty Ltd v Samardzic [2011] NSWCA 260 at [43].…

Cases Cited

Statutory Material Cited

In the matter of an application for bail by PAUL HENDERSON [2008] ACTSC 109
Citation 1

…13; (2003) 11 BPR 20,841 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 Guardian Mortgages v Miller [2004] NSWSC 1236; (2004) 12 BPR 22,833 Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1 Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553 Linprint Pty Ltd v Hexham Textiles Pty Li…
Riz v Perpetual Trustee Australia Ltd [2007] NSWSC 1153
Citation 2

…FCR 303 Prestia v Aknar (1996) 40 NSWLR 165 Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153; (2008) NSW Conv R 56-198 Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 Semrani v Manoun [2001] NSWCA 337 Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2008) 168 FCR 46 Sims v Deputy C…
Sims v Deputy Commissioner of Taxation [2007] NSWSC 998
Citation 3

…FCAFC 72; (2008) 168 FCR 46 Sims v Deputy Commissioner of Taxation [2006] NSWSC 305; (2006) 57 ACSR 249; (2006) 24 ACLC 465 Suttor v Gundowda [1950] HCA 35; (1950) 81 CLR 418 Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; (2007) 33 WAR 321 Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422 Waimond…
Canon Australia Pty Ltd v Patton [2007] NSWCA 246
Citation 4

…poration (Australia) Ltd v Burnard (1992) 27 NSWLR 415 Canon Australia Pty Ltd v Patton [2007] NSWCA 246; (2007) ATPR 42-183 Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232 Citicorp Australia Ltd v O’Brien (1996) 40 NSWLR 398 Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594 Curnuck v…
Accom Finance Pty Ltd v Mars Pty Ltd [2007] NSWSC 726
Citation 5

…nt CASES CITED: Accom Finance Pty Ltd v Mars Pty Ltd, Accom Finance Pty Ltd v Kowalczuk [2007] NSWSC 726 Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; (2005) 148 FCR 132 Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 B…
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22
Citation 6

…[2002] NSWCA 413; (2003) 11 BPR 20,841 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 Guardian Mortgages v Miller [2004] NSWSC 1236; (2004) 12 BPR 22,833 Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1 Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553 Linprint Pty Ltd v Hex…
Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40
Citation 7

…tor v Gundowda [1950] HCA 35; (1950) 81 CLR 418 Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; (2007) 33 WAR 321 Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422 Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 Walmsley v Cosentino [2001] NSWCA 403 Wardley Australia Ltd v Western Australia [1992] H…
Houghton v Arms [2006] HCA 59
Citation 8

…) 12 BPR 22,833 Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1 Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553 Linprint Pty Ltd v Hexham Textiles Pty Limited (1991) 23 NSWLR 508 Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621 March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506 Miller v…
Sims v Deputy Commissioner of Taxation [2006] NSWSC 305
Citation 9

…matologists [2008] FCAFC 72; (2008) 168 FCR 46 Sims v Deputy Commissioner of Taxation [2006] NSWSC 305; (2006) 57 ACSR 249; (2006) 24 ACLC 465 Suttor v Gundowda [1950] HCA 35; (1950) 81 CLR 418 Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; (2007) 33 WAR 321 Vairy v Wyong Shire Council [2005] HCA 62; (2005)…
Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41
Citation 10

…Ltd [2002] NSWCA 211; (2002) 18 BCL 322 Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 Plimer v Roberts (1997) 80 FCR 303 Prestia v Aknar (1996) 40 NSWLR 165 Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153; (2008) NSW Conv R 56-198 Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 S…
Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226
Citation 11

…NSWSC 726 Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; (2005) 148 FCR 132 Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256 Boland v Yates Property Corp P…
Vairy v Wyong Shire Council [2005] HCA 62
Citation 12

…sety & Co (WA) Pty Ltd [2007] WASCA 40; (2007) 33 WAR 321 Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422 Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 Walmsley v Cosentino [2001] NSWCA 403 Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 Watkins v De Varda [2003] NSWCA 242…
Guardian Mortgages v Miller [2004] NSWSC 1236
Citation 13

…ty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 Guardian Mortgages v Miller [2004] NSWSC 1236; (2004) 12 BPR 22,833 Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1 Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553 Linprint Pty Ltd v Hexham Textiles Pty Limited (1991) 23 NSWLR 508 Louth v Diprose [199…
Miller v Cooney [2004] NSWCA 380
Citation 14

…21 March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506 Miller v Cooney [2004] NSWCA 380 Nguyen v Taylor (1992) 27 NSWLR 48 Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211; (2002) 18 BCL 322 Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 Plimer v Roberts (1997)…
Watkins v De Varda [2003] NSWCA 242
Citation 15

…ustralia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 Watkins v De Varda [2003] NSWCA 242 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 PARTIES: Edward John Kowalczuk (First Appellant) Mars Pty Limited (Second Appellant) Accom Finance Pty Ltd (First Respondent) Samir Dalla (Second Respondent) FILE NUMBE…
Lee v Ross (No 2) [2003] NSWSC 507
Citation 16

…ck v Nitschke [2001] NSWCA 176 Elkofairi v Perpetual Trustee Co Ltd [2002] NSWCA 413; (2003) 11 BPR 20,841 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 Guardian Mortgages v Miller [2004] NSWSC 1236; (2004) 12 BPR 22,833 Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1 Houghton…
Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413
Citation 17

…169 CLR 594 Curnuck v Nitschke [2001] NSWCA 176 Elkofairi v Perpetual Trustee Co Ltd [2002] NSWCA 413; (2003) 11 BPR 20,841 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 Guardian Mortgages v Miller [2004] NSWSC 1236; (2004) 12 BPR 22,833 Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 5…
Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211
Citation 18

…v Taylor (1992) 27 NSWLR 48 Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211; (2002) 18 BCL 322 Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 Plimer v Roberts (1997) 80 FCR 303 Prestia v Aknar (1996) 40 NSWLR 165 Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153; (…
Heydon v NRMA Ltd (No 2) [2001] NSWCA 445
Citation 19

…v Miller [2004] NSWSC 1236; (2004) 12 BPR 22,833 Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1 Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553 Linprint Pty Ltd v Hexham Textiles Pty Limited (1991) 23 NSWLR 508 Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621 March v E & M H Stramare Pty Ltd [1991] HCA 12…
Walmsley v Cosentino [2001] NSWCA 403
Citation 20

…; (2005) 223 CLR 422 Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 Walmsley v Cosentino [2001] NSWCA 403 Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 Watkins v De Varda [2003] NSWCA 242 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 PARTIES: Edward John Kowalczuk (First Appellant) Mars Pt…
Semrani v Manoun [2001] NSWCA 337
Citation 21

…Conv R 56-198 Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 Semrani v Manoun [2001] NSWCA 337 Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2008) 168 FCR 46 Sims v Deputy Commissioner of Taxation [2006] NSWSC 305; (2006) 57 ACSR 249; (2006) 24 ACLC 465 Suttor v Gundowda [1950] HCA 35; (…
Curnuck v Nitschke [2001] NSWCA 176
Citation 22

…tructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594 Curnuck v Nitschke [2001] NSWCA 176 Elkofairi v Perpetual Trustee Co Ltd [2002] NSWCA 413; (2003) 11 BPR 20,841 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 Guardian Mortgages v Miller [2004] NSWSC 1236; (2004) 12 B…
Rosenberg v Percival [2001] HCA 18
Citation 23

…ee Australia Limited [2007] NSWSC 1153; (2008) NSW Conv R 56-198 Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 Semrani v Manoun [2001] NSWCA 337 Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2008) 168 FCR 46 Sims v Deputy Commissioner of Taxation [2006] NSWSC 305; (2006) 57 ACSR 249;…
Heydon v NRMA Ltd; Bateman v NRMA Ltd; Morgan v NRMA Ltd [2000] NSWCA 374
Citation 24

…Guardian Mortgages v Miller [2004] NSWSC 1236; (2004) 12 BPR 22,833 Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1 Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553 Linprint Pty Ltd v Hexham Textiles Pty Limited (1991) 23 NSWLR 508 Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621 March v E & M H Stramare Pt…
Boland v Yates Property Corporation Pty Ltd [1999] HCA 64
Citation 25

…ance Corporation Ltd v Karavas (1991) 23 NSWLR 256 Boland v Yates Property Corp Pty Ltd (1999) 167 ALR 575 Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 Bridge Wholesale Acceptance Corporation (Australia) Ltd v Burnard (1992) 27 NSWLR 415 Canon Australia Pty Ltd v Patton [2007] NSWCA 246; (2…
Chappel v Hart [1998] HCA 55
Citation 26

…15 Canon Australia Pty Ltd v Patton [2007] NSWCA 246; (2007) ATPR 42-183 Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232 Citicorp Australia Ltd v O’Brien (1996) 40 NSWLR 398 Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594 Curnuck v Nitschke [2001] NSWCA 176 Elkofairi v Perpetual…
Prestia v Aknar [1995] NSWCA 378
Citation 27

…Limited v Khoshaba [2006] NSWCA 41 Plimer v Roberts (1997) 80 FCR 303 Prestia v Aknar (1996) 40 NSWLR 165 Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153; (2008) NSW Conv R 56-198 Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 Semrani v Manoun [2001] NSWCA 337 Shahid v Australasian College of Derma…
Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15
Citation 28

…C 226; (2005) 148 FCR 132 Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256 Boland v Yates Property Corp Pty Ltd (1999) 167 ALR 575 Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 21…
Louth v Diprose [1992] HCA 61
Citation 29

…53 Linprint Pty Ltd v Hexham Textiles Pty Limited (1991) 23 NSWLR 508 Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621 March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506 Miller v Cooney [2004] NSWCA 380 Nguyen v Taylor (1992) 27 NSWLR 48 Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd […
Wardley Australia Ltd v Western Australia [1992] HCA 55
Citation 30

…R 642 Walmsley v Cosentino [2001] NSWCA 403 Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 Watkins v De Varda [2003] NSWCA 242 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 PARTIES: Edward John Kowalczuk (First Appellant) Mars Pty Limited (Second Appellant) Accom Finance Pty Ltd (Firs…
March v E & MH Stramare Pty Ltd [1991] HCA 12
Citation 31

…08 Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621 March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506 Miller v Cooney [2004] NSWCA 380 Nguyen v Taylor (1992) 27 NSWLR 48 Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211; (2002) 18 BCL 322 Perpetual Trustee Company Limite…
Baltic Shipping Co v Dillon [1991] NSWCA 19
Citation 32

…ines Ltd [1993] HCA 15; (1993) 177 CLR 485 Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256 Boland v Yates Property Corp Pty Ltd (1999) 167 ALR 575 Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 Bridge Wholesale Acceptance Corporation (Australia) Ltd v Burnard (1992) 27 NSWLR 4…
Suttor v Gundowda Pty Ltd [1950] HCA 35
Citation 33

…f Taxation [2006] NSWSC 305; (2006) 57 ACSR 249; (2006) 24 ACLC 465 Suttor v Gundowda [1950] HCA 35; (1950) 81 CLR 418 Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; (2007) 33 WAR 321 Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422 Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 Walmsley v Cose…
Plimer v Roberts & Anor [1998] HCATrans 233
Citation 34

…BCL 322 Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 Plimer v Roberts (1997) 80 FCR 303 Prestia v Aknar (1996) 40 NSWLR 165 Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153; (2008) NSW Conv R 56-198 Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 Semrani v Manoun [2001] NSWCA 337 Sh…
Byrne v Waimond Pty Limited [1990] HCATrans 65
Citation 35

…Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422 Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 Walmsley v Cosentino [2001] NSWCA 403 Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 Watkins v De Varda [2003] NSWCA 242 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 PARTIES: Edward Jo…
Fasold v Roberts [1997] FCA 439
Citation 36

…“See Prestia v Aknar (1996) 40 NSWLR 165 at 182; Fasold v Roberts (1997) 70 FCR 489 at 528.” 347 Page 182 of Prestia , there referred to, is not in the part of the judgment where Santow J is considering how the extended definition of “trade or commerce” applies to section 42. I do not read Houghton v Arms as having…
Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd [1988] FCA 73
Citation 37

…y Corp Pty Ltd (1999) 167 ALR 575 Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 Bridge Wholesale Acceptance Corporation (Australia) Ltd v Burnard (1992) 27 NSWLR 415 Canon Australia Pty Ltd v Patton [2007] NSWCA 246; (2007) ATPR 42-183 Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232 Citico…
Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd [1987] FCA 206
Citation 38

…d v Karavas (1991) 23 NSWLR 256 Boland v Yates Property Corp Pty Ltd (1999) 167 ALR 575 Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 Bridge Wholesale Acceptance Corporation (Australia) Ltd v Burnard (1992) 27 NSWLR 415 Canon Australia Pty Ltd v Patton [2007] NSWCA 246; (2007) ATPR 42-183 Chappel v Hart [1998] HCA 55; (1998) 195 CLR…

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CITATION:	Kowalczuk v Accom Finance [2008] NSWCA 343 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	8/5/08-9/5/08
JUDGMENT DATE:	10 December 2008
JUDGMENT OF:	Hodgson JA at 1; McColl JA at 2; Campbell JA at 3
DECISION:	(1) So far as the appeal is brought against Dalla, the appeal is dismissed with costs. (2) So far as the appeal is brought against Accom, in substance, (a) Accom to pay: (i) to Kowalczuk the sum of $18,143.17 plus interest at the prescribed court rates from 14 December 2005 to the date when that judgment is entered, and (ii) to Mars the sum of $20,761.84 plus interest at the prescribed court rates from 13 October 2006 to the date when that judgment is entered. (b) Accom to pay to Kowalczuk and Mars two-thirds of their costs of the appeal, insofar as those costs relate to the appeal they brought against Accom. (c) Otherwise, appeal dismissed. (d) Accom, Mars and Kowalczuk to each bear their own costs in the court below.
CATCHWORDS:	CONTRACTS – Harsh and Unconscionable Contracts and Statutory Remedies – where Appellants entered into short-term loans with Respondent at extremely high rates of interest – where higher rate of interest payable upon default and interest compounded monthly – where default interest provision drafted so as to avoid the application of law of penalties as conventionally understood – where provision made all extra expense incurred in consequence of a default recoverable – where loans fell into default – whether loan contract unjust within meaning of Contracts Review Act 1980 – where Appellant supplied false information about his income – whether error concerning factors relevant to vulnerability – whether pure asset lending is in the circumstances unconscionable or unjust – relevance of lender’s failure to observe its own lending guidelines – whether provisions concerning default rate of interest unjust – whether Respondent’s conduct contravened s 51AA and s 51AC Trade Practices Act 1974 (Cth) – whether loan contract unconscionable within meaning of s 43 Fair Trading Act – availability of remedy if s 43 contravened - TRADE AND COMMERCE – Definitions and general – whether loans were "for the purpose of trade and commerce" within s 51AC Trade Practices Act – where Appellants acquired loans for investment purposes - LEGAL PRACTITIONERS – Contractual obligations – Duty of care – where solicitor engaged to provide independent advice on security documents to Appellants – whether breach of contractual obligations – whether duty of care more extensive than contractual duty – whether any loss had been shown to arise from any breach of duty – whether activities were "in trade or commerce" within s 42 Fair Trading Act – whether any contravention of s 42 Fair Trading Act – what constitutes misleading or deceptive conduct by a solicitor – whether inadvertent conduct can be misleading and deceptive – whether concept of causation operates differently to a cause of action under s 42 to the way it operates concerning tort of negligence
LEGISLATION CITED:	Australian Securities and Investments Commission Act 2001 (Cth) Bankruptcy Act 1966 (Cth) Consumer Credit Code Contracts Review Act 1980 Corporations Law Fair Trading Act 1987 Legal Profession Act 1987 Legal Profession Act 2004 Real Property Act 1900 Trade Practices Act 1974 (Cth)
CATEGORY:	Principal judgment
CASES CITED:	Accom Finance Pty Ltd v Mars Pty Ltd, Accom Finance Pty Ltd v Kowalczuk [2007] NSWSC 726 Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; (2005) 148 FCR 132 Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256 Boland v Yates Property Corp Pty Ltd (1999) 167 ALR 575 Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 Bridge Wholesale Acceptance Corporation (Australia) Ltd v Burnard (1992) 27 NSWLR 415 Canon Australia Pty Ltd v Patton [2007] NSWCA 246; (2007) ATPR 42-183 Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232 Citicorp Australia Ltd v O’Brien (1996) 40 NSWLR 398 Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594 Curnuck v Nitschke [2001] NSWCA 176 Elkofairi v Perpetual Trustee Co Ltd [2002] NSWCA 413; (2003) 11 BPR 20,841 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 Guardian Mortgages v Miller [2004] NSWSC 1236; (2004) 12 BPR 22,833 Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1 Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553 Linprint Pty Ltd v Hexham Textiles Pty Limited (1991) 23 NSWLR 508 Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621 March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506 Miller v Cooney [2004] NSWCA 380 Nguyen v Taylor (1992) 27 NSWLR 48 Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211; (2002) 18 BCL 322 Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 Plimer v Roberts (1997) 80 FCR 303 Prestia v Aknar (1996) 40 NSWLR 165 Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153; (2008) NSW Conv R 56-198 Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 Semrani v Manoun [2001] NSWCA 337 Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2008) 168 FCR 46 Sims v Deputy Commissioner of Taxation [2006] NSWSC 305; (2006) 57 ACSR 249; (2006) 24 ACLC 465 Suttor v Gundowda [1950] HCA 35; (1950) 81 CLR 418 Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; (2007) 33 WAR 321 Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422 Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 Walmsley v Cosentino [2001] NSWCA 403 Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 Watkins v De Varda [2003] NSWCA 242 West v AGC (Advances) Ltd (1986) 5 NSWLR 610
PARTIES:	Edward John Kowalczuk (First Appellant) Mars Pty Limited (Second Appellant) Accom Finance Pty Ltd (First Respondent) Samir Dalla (Second Respondent)
FILE NUMBER(S):	CA 40514/07
COUNSEL:	DR Conti SC; MR Gracie (Appellants) MW Young; AM Chee (First Respondent) G Craddock SC; M Avenell (Second Respondent)
SOLICITORS:	Greg Mackey & Associates, Five Dock (Appellants) Bransgroves Solicitors, Sydney (First Respondent) Ebsworth and Ebsworth, Sydney (Second Respondent)
LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	1887/06
LOWER COURT JUDICIAL OFFICER:	Windeyer J
LOWER COURT DATE OF DECISION:	6 July 2007
LOWER COURT MEDIUM NEUTRAL CITATION:	Accom Finance Pty Limited v Mars Pty Limited, Accom Finance Pty Limited v Kowalczuk [2007] NSWSC 726