Make It Raine Money Pty Ltd v Alvaro [No 2]
[2025] WASC 40
•14 FEBRUARY 2025
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: MAKE IT RAINE MONEY PTY LTD -v- ALVARO [No 2] [2025] WASC 40
CORAM: GETHING J
HEARD: 4 FEBRUARY 2025
DELIVERED : 14 FEBRUARY 2025
FILE NO/S: CIV 1966 of 2020
BETWEEN: MAKE IT RAINE MONEY PTY LTD
Plaintiff
AND
ROCCO DOMENIC ALVARO
Defendant
AND
ROCCO DOMENIC ALVARO
Plaintiff by counterclaim
AND
MAKE IT RAINE MONEY PTY LTD
Defendant by counterclaim
Catchwords:
Contracts - Penalties - Whether interest payable under a loan agreement was a primary or collateral stipulation - Whether mortgagee entitled to a full indemnity for costs under the mortgage - Turns on own facts
Legislation:
Nil
Result:
Mortgagee entitled for an order for possession
Mortgagee entitled to indemnity costs with a limited carve out
Category: B
Representation:
Original Action
Counsel:
| Plaintiff | : | Mr N Wallwork |
| Defendant | : | In person |
Solicitors:
| Plaintiff | : | Summer Lawyers |
| Defendant | : | In person |
Counterclaim
Counsel:
| Plaintiff by counterclaim | : | In person |
| Defendant by counterclaim | : | Mr N Wallwork |
Solicitors:
| Plaintiff by counterclaim | : | In person |
| Defendant by counterclaim | : | Summer Lawyers |
Cases referred to in decision(s):
Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30; (2012) 247 CLR 205
Boon v Burt [2020] WASC 64 (S)
Booth v Zhou [No 2] [2024] WASCA 128
Choice Constructions Pty Ltd v Janceski [No 3] [2011] WASC 358 (S)
Commercial N Pty Limited v Huang & Ors [2024] NSWSC 23
Esanda Finance Corp Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241
Glew v Frank Jasper Pty Ltd [2010] WASCA 87
Hanson Construction Materials Pty Ltd v Calabro [2024] WASC 338
Kakavas v Crown Melbourne Ltd [2013] HCA 25; [2013] 250 CLR 392
Make It Raine Money Pty Ltd v Alvaro [2023] WASCA 126
Mallonland Pty Ltd v Advanta Seeds Pty Ltd [2024] HCA 25
Manton Enterprises Pty Ltd as trustee for GPK No. 2 Trust v Lt Market St Pty Ltd [2021] WASC 4 (S)
Mavaddat v HSBC Bank Australia Ltd [No 2] [2016] WASCA 94
Minister for the Environment v Sharma [2022] FCAFC 35; (2022) 291 FCR 311
Moleirinho v Talbot & Olivier Lawyers Pty Ltd [2014] WASCA 65
Moran v Argonaut Equity Partners Pty Ltd [2021] WASCA 45
Neil v Nott [1994] HCA 23; (1994) 68 ALJR 509; (1994) 121 ALR 148
Nobarani v Mariconte [2018] HCA 36
Oak Capital Mortgage Fund Ltd v Dlakic [2019] NSWSC 1538
Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; (2016) 258 CLR 525
Quantum Asset Management Pty Ltd v Love Properties (WA) Pty Ltd [2017] WASC 167
Rayner v Australia and New Zealand Banking Group Ltd [2003] WASCA 264
Rumball v Mortimore [2000] WASC 126
Saraceni v Jones [2012] WASCA 59 (S)
Serventy v Commonwealth Bank of Australia [No 2] [2016] WASCA 223
Sethi v Bhavsar [2020] WASCA 52
Smart v Prisoner Review Board (WA) [2012] WASC 48
Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)
The State of Western Australia v Wood [2008] WASCA 81
Wentworth v Rogers (No 5) (1986) 6 NSWLR 534
Woodley v Woodley [2018] WASCA 149
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515
Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40
GETHING J:
Overview
On 25 June 2019, the plaintiff, Make It Raine Money Pty Ltd (MIRM), as lender, and the defendant, Rocco Domenic Alvaro (trading as Alvaro Design Consultants) as borrower, debtor and mortgagor, made an agreement whereby MIRM agreed to lend Mr Alvaro $112,831.26 (Agreement). On 2 July 2019, the principal sum, less an amount of retained interest and some costs, was advanced to Mr Alvaro. It was to be repaid on or before 2 July 2020. Mr Alvaro granted MIRM a registered mortgage over property he owned at 55 Wittenoom Road, High Wycombe (Property) to secure repayment of the amount owed.
The Agreement provided for two rates of interest. The 'Higher Interest Rate' was 4% per month. In broad terms, this was payable unless MIRM advised Mr Alvaro that the 'Lower Interest Rate' was payable, this being 1.95% per month.
Mr Alvaro did not make any interest payments after the retained interest period expired, nor did he repay the loan when due. On 3 August 2020 MIRM issued Mr Alvaro a notice of default and demand. This did not result in the repayment of the loan. Consequently, MIRM commenced the present action in the Supreme Court on 21 September 2021. It only seeks an order for possession of the Property and indemnity costs pursuant to the Agreement.
Mr Alvaro resists the action on the basis of a number of legal arguments. The central argument is that the Higher Interest Rate is unenforceable because it is a penalty. He also asserts that MIRM owed him a duty of care in relation to the provision of an accurate payout figure.
For the reasons which follow, MIRM did not owe Mr Alvaro a duty of care, the Higher Interest Rate is enforceable and MIRM is entitled to possession of the Property and its costs pursuant to the Agreement.
Case management and evidence
On 2 May 2024, a Registrar made the usual suite of orders programming the action through to trial. This included orders that:
(a)by 4.00 pm on 10 May 2024, MIRM file and serve any witness statements on which it intends to rely at trial;
(b)by 4.00 pm on 27 June 2024, Mr Alvaro file and serve any witness statements on which he intends to rely at trial; and
(c)by 4.00 pm on 11 July 2024, MIRM file and serve any witness statements in reply on which it intends to rely at trial.
No order was made precluding a party from relying on evidence at trial which was not the subject of a witness statement, though that outcome is implicit in the orders made.
On 21 May 2024, MIRM filed a witness statement of Andrew Raine, a director of MIRM (May Raine Statement).
On 19 July 2024 MIRM filed a second witness statement of Mr Raine, addressing the issues raised in the counterclaim (July Raine Statement).
Mr Alvaro did not file any witness statement.
On 29 August 2024 MIRM filed a book of documents. It then filed an amended book of documents on 22 November 2024.[1]
[1] Which I will refer to as the Trial Book or 'TB'.
On 19 September 2024, Archer J made orders programming the action through to trial, including that:
(a)if either party wished to make any interlocutory applications (including an application for further information), any such application had to be filed and served by 30 September 2024;
(b)if Mr Alvaro wished to amend his defence, he had to file and serve any amended defence by 17 October 2024;
(c)if Mr Alvaro wished to adduce any evidence from one or more witnesses (including himself) at the trial, he had to file and serve a witness statement for each such witness by 17 October 2024; and
(d)Mr Alvaro may not amend his defence or file further witness statements after 17 October 2024, unless leave is given by the court.
At a hearing on 22 October 2024, the time for compliance with the orders in [11](b) and (c) was extended to 12 November 2024. The trial was provisionally listed for 4 to 6 February 2025, which dates were confirmed at a hearing on 14 November 2024.
Mr Alvaro did not file any amended defence. Nor did he file any witness statement.
At a directions hearing on 19 November 2024, among other orders, MIRM was ordered to file and serve a statement of issues and a chronology. It filed both documents on 10 December 2020. The statement of issues was drawn from the Statement of Claim endorsed on the writ (SC), the Amended Defence (AD) and Amended Counterclaim (AC) filed 30 September 2021 and the Defence to Counterclaim filed 14 October 2024 (DCC).
At various points throughout the life of the Action, Mr Alvaro was represented. However, from 18 December 2024 he has been a litigant in person. Accordingly, at a directions hearing on 19 December 2024, at which Mr Alvaro appeared, Archer J adjusted the trial programming orders to reflect the fact that Mr Alvaro was a litigant in person. Her Honour also ordered that if Mr Alvaro wished to adduce the evidence in any previously filed affidavits, or any other evidence, he must bring an application for leave to adduce such evidence. From the transcript of this hearing, it is clear that her Honour explained the consequence of this order in some detail to Mr Alvaro. Her Honour also advised Mr Alvaro that he would be sent a document setting out how a trial works (which would be copied to the MIRM's lawyers). He was subsequently sent this document. Archer J then listed the action for directions before me as the trial judge on 22 January 2025.
At the hearing on 22 January 2025, I confirmed with counsel for MIRM and Mr Alvaro that they were in agreement that the issues outlined in the Plaintiff's Statement of Issues filed 10 December 2024 identified all the issues that I need to determine at the trial.
I also made orders that the May Raine Statement and the July Raine Statement stand as Mr Raine's evidence‑in‑chief in the action, subject to him verifying the contents under oath. I further directed that MIRM make Mr Raine available for cross-examination at the commencement of the trial on 4 February 2025.
At the trial on 4 February 2025, in his opening Mr Alvaro sought to raise issues going beyond the scope of the pleadings. I did not allow him to do so, and said that I would not allow him leave to amend his defence, giving short reasons.[2] The Trial Book was tendered.[3] Mr Raine gave evidence. He verified the truth of the contents of the May Raine Statement and the July Raine Statement.[4] He was cross‑examined by Mr Alvaro. I did not give Mr Alvaro the opportunity to give evidence. In light of the case management orders which I have described, I formed the view that Mr Alvaro had ample opportunity to file a witness statement and/or seek leave to rely on the evidence in the affidavit previously filed by him.
[2] ts 112, 4 February 2025.
[3] With its contents becoming exhibits 1 to 7.
[4] Which became exhibits 8 and 9.
In conducting the trial and determining the case, I was, and am, mindful that Mr Alvaro is a litigant in person. As a litigant in person, he is entitled to some leniency in relation to compliance with the court rules.[5] The court is required to approach the documents in which he articulates his case with some flexibility.[6] The court needs to be astute to ensure that, in a poorly expressed or unstructured document in which he sets out his case, there is no viable case which, with appropriate amendment or permissible assistance from the court, could be put into proper form.[7] A 'frequent consequence of self‑representation is that the court must assume the burden of endeavouring to ascertain the rights of parties which are obfuscated by their own advocacy'.[8]
[5] Glew v Frank Jasper Pty Ltd [2010] WASCA 87 [10] (judgment of the court).
[6] Wentworth v Rogers(No 5) (1986) 6 NSWLR 534, 536 ‑ 537 (Kirby P with whom Hope & Samuels JJA agreed); Smart v Prisoner Review Board (WA) [2012] WASC 48 [10] (Pritchard J).
[7] Sethi v Bhavsar [2020] WASCA 52 (Sethi) [27] (reasons of the court).
[8] Neil v Nott [1994] HCA 23 [5]; (1994) 68 ALJR 509, 510; (1994) 121 ALR 148, 150 (judgment of the court); Sethi [27].
One 'abiding difficulty' faced by the court is 'the tension between the duty of a … judge to ensure a fair and just trial and the requirement that the court maintain a position of neutrality and impartiality as between the parties'.[9] The court also needs to ensure that any latitude given to one party as a litigant in person does not deprive the other of their right to procedural fairness and a fair hearing.[10]The balance is ordinarily struck by limiting the assistance given to a litigant in person to that which is necessary to overcome, so far as is reasonably practicable, the procedural disadvantages a litigant in person faces by reason of not being legally trained.[11]
[9] Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40 (Zerjavic) [74] (judgment of the court).
[10] Nobarani v Mariconte [2018] HCA 36[47] (Kiefel CJ, Gageler, Nettle, Gordon and Edelman JJ); Woodley v Woodley [2018] WASCA 149 [76] (judgment of the court); Moleirinho v Talbot & Olivier Lawyers Pty Ltd [2014] WASCA 65 [51] (judgment of the court).
[11] Zerjavic [74] - [75].
Facts which are not in issue
On the pleadings most of the facts are not in issue. They are supported by Mr Raine's evidence. The facts which follow were not challenged in cross-examination aside from some minor factual issues which I have identified. On this basis, I find that MIRM has proven the facts in this part on the balance of probabilities.
MIRM is duly incorporated. Mr Raine is a director of MIRM and was authorised to give evidence on its behalf. Mr Raine has been involved in the practice of lending money on a private basis since January 2019. He established MIRM for the purpose of lending money to businesses, which it has done since it was incorporated in January 2019. It primarily writes loans to high-risk business borrowers for funding business startups and encouraging growth in juvenile businesses.
Mr Alvaro is, and was at all material times, the registered proprietor of the Property. The Certificate of Title confirmed this, and records that there is a first mortgage over the Property to Westpac Banking Corporation which was registered in 2003.[12]
[12] TB page 83.
As mentioned at [1], the Agreement was entered into on 25 June 2019. The documents which together comprise the Agreement, and which were executed on 25 June 2025 by at least Mr Alvaro, are:
(a)a real property mortgage in registrable form by Mr Alvaro in favour of MIRM over the Property (Mortgage);[13]
[13] TB pages 2 - 4.
(b)Schedule A (specifying the parties, mortgage and security particulars);[14]
(c)Schedule B (fee schedule);[15]
(d)Cheque Directions;[16]
(e)Authority & Direction;[17]
(f)Schedule C (Declaration by Mr Alvaro that the credit provided was to be applied wholly or predominantly for business purposes or investment other than investment in a residential property);[18]
(g)Schedule D (Debtors Advice Declaration);[19]
(h)Schedule E (Australian Legal Practitioner's Certificate);[20]
(i)Identity Verification Form;[21]
(j)All States Power of Attorney;[22] and
(k)Memorandum of Common Provisions (MCP).[23]
[14] TB pages 5 - 6.
[15] TB pages 7 - 9.
[16] TB page 10.
[17] TB page 11.
[18] TB page 12.
[19] TB page 13.
[20] TB page 14.
[21] TB page 15.
[22] TB page 17.
[23] TB page 18.
The Agreement provided that Mr Alvaro was to pay the 'Secured Money (or any part thereof)' to MIRM in accordance with the terms of the MCP and by the end of the term. In Schedule A, the final repayment date is 'on the same day which is 12 Months after the Commencement Date'. The Commencement Date is left blank in the Schedule A. However, in the definitions in the MCP, the Commencement Date is defined by reference to the date on which the principal amount was advanced. It is not in issue that the principal amount was advanced by electronic funds transfer on 2 July 2019, making this date the Commencement Date.[24] This had the effect that the Secured Money had to be repaid by 2 July 2020.
[24] TB page 86.
The payment of interest is dealt with in MCP cl 5. When read with the Mortgage, the Agreement provided for a 'Higher Interest Rate' of 4% per month and a 'Lower Interest Rate' of 1.95% per month. Given the issues in dispute, I will come back to these provisions in detail in pt 6. The Mortgage provided that six months interest of $13,201.26 was to be retained by MIRM from the principal amount. This amount is self-evidently calculated on the basis of the Lower Interest Rate. Interest was to be paid monthly on the same day of each month as the Commencement Date. This meant that the first payment of interest following the six months that was prepaid was due on 2 January 2020.
The sum of $112,831.26 advanced to Mr Alvaro was applied as follows:
Establishment Fee
$1,999.00
Retained Interest
$13,201.26
Loan Documentation Fee
$1,770.00
Disbursements
$880.00
Brokerage
$4,990.00
Council Rates
$1,827.82
Amount to Mr Alvaro
$88,172.18
On 21 July 2020, the Mortgage was registered.[25]
[25] TB page 59.
Mr Alvaro did not pay the interest which was due on 2 January 2020. Aside from the retained interest, he has not made any payment of interest or repayment of any amount of the principal advanced.
On or about 3 August 2020, the MIRM, by its solicitors Summer Lawyers issued, by standard post, statutory default notices to Mr Alvaro, demanding payment of $153,549.73 within 31 days (the Default Notices). The Default Notices were issued pursuant to Transfer of Land Act 1983 (WA) (TLA) s 106. One was issued to Mr Alvaro in his capacity as lender, the other in his capacity as mortgagor.
In his defence, Mr Alvaro denies being served with the Default Notices.[26] The address to which the Default Notices were sent was the address which is in Schedule A.[27] Mr Raine gave evidence that they were sent by MIRM's solicitors.[28] Mr Alvaro did not give evidence that he did not receive the Default Notices. I am satisfied on the balance of probabilities that Default Notices were sent on behalf of MIRM and received by Mr Alvaro.
[26] AD par 11.
[27] TB pages 61, 63.
[28] May Raine Statement, par 13.
Mr Alvaro also pleads in his defence that the amount in the Default Notices was incorrect. I will return to this issue in pt 5.
On 1 October 2020, MIRM's solicitors caused a letter to be given to the tenant of the Property. The letter provided:[29]
[29] TB page 70.
We act on for the mortgagee.
You are allegedly a tenant of the land [that is, the Property].
Enclosed by way of service is:
1. Notice for Payment of Rents requiring you to pay all rent you would usually pay the mortgagor to the mortgagee;
2. Title search for the lands;
3. Copy of the mortgage; and
4. Copy of s 111 of the Transfer of Land Act 1893 (WA)
Read the notice and highlighted legislation carefully.
Consequences of not complying with the notice are serious and can result in you having to pay double rent and/or the mortgagee evicting you from the land.
We require you to contact our office within 48 hours of receipt of this letter to confirm you agree to pay rent as directed in the notice.
If we do not hear from you, the mortgagee will assume that the land is vacant and we may be instructed to seize possession of it.
The mortgagee reserves all of its rights generally.
The letter contained a notice pursuant to TLA s 111, in the following terms:[30]
[30] TB page 71.
The mortgagor has/have defaulted under the mortgage.
Pursuant to s 111 of the Transfer of Land Act 1893 (WA) mortgagee is entitled to collect all rents paid in respect of the land.
You are directed to immediately cease paying rent to the mortgagor and pay all rent you usually would pay to your landlord to the mortgagee.
Please pay all future rents in relation the land to:
A/C Name: Summer Lawyers Solicitors Trust Account
Bank: Westpac
BSB: 032 060
A/C: xxxxxx
Ref: PR:AR:13256
On 17 November 2020, MIRM received the sum of $2,400 from the tenants of the Property. This money was placed into the trust account of Summers Partners where it remains.
Mr Alvaro raises some issues in the AD and AC about MIRM's interactions with the tenant of the Property, which I will come back to in pt 8.
Issues arising for determination
The Plaintiff's Statement of Issues filed on 10 December 2024 identified 12 issues for determination. Some further issues were identified during the course of the trial. I have re-organised the issues and restated them using the terminology which I have adopted in this judgment:
·Was Mr Alvaro's failure to repay the secured money by 2 July 2020 an 'Event of Default'?
·Was the imposition of the Higher Interest Rate of 4% per month unenforceable as a penalty?
·Was it unconscionable for MIRM to enforce the Higher Interest Rate?[31]
·Did MIRM unlawfully appropriate rent monies from tenants in occupation of the Property and if so, what consequences flow from that?
·Did MIRM owe to Mr Alvaro a duty of care and, if so, was it breached?
·If there was an Event of Default, is MIRM entitled to an order for possession of the Property?
·If there was an Event of Default, is MIRM entitled to costs on a full indemnity basis?
·What final orders are appropriate?
[31] CC par 1.2.
Was Mr Alvaro's failure to repay the secured money by 2 July 2020 an 'Event of Default'?
It is not in issue that Mr Alvaro did not repay any of money owing under the Agreement by 2 July 2020, or at all.[32]
[32] AD par 9.2.
MIRM asserts that this constitutes an 'Event of Default' under the Agreement.[33]
[33] SC par 10.
Events of Default are dealt with in MCP cl 18. So far as is relevant, it provides:[34]
18.1If any one or more events set out in clauses 18.2 occur, an Event of Default will have occurred or will be deemed to have occurred for the purposes of this Mortgage.
18.2The occurrence of any one or more of the following are Events of Default;
(a)the Debtor fails to pay any Secured Money in accordance with this Mortgage;
(b)the Debtor fails to comply with any of the Obligations;
…
[34] TB pages 46 and 47.
The term 'Secured Money' is defined in MCP cl 1 to be (relevantly):
The aggregate of all monies which the Debtor is, or at any time may become, actually or contingently liable to pay to the Lender for any reason or on any account whatsoever and includes, without limitation:
(a)the Principal Amount;
(b)any Interest;
(c)any Outstanding Interest;
(d)any Fees
(e)any Costs and Expenses;
…
The 'Principal Amount' is defined by reference to Schedule A to be the amount of $112,831.26. 'Interest' in effect is defined to mean any interest payable under the Loan Agreement. The 'Obligations' of Mr Alvaro included to pay the Secured Money, or any part thereof, to MIRM in accordance with the terms of the Mortgage (which include the MCP) by the end of the 'Term'.
The effect of these provisions is that the failure by Mr Alvaro to pay any of the principal amount by 2 July 2020, or any interest due on or prior to that date, constituted an 'Event of Default' under the Agreement.
Mr Alvaro asserts that his failure to pay was by reason of MIRM's failure to advise and/or communicate to him a correct payout figure amount under the Agreement. He asserts that the figure in the Default Notices was not accurate and that the correct figure was $95,000. Because of this he denied that there has been 'a wilful failure or default' on his part to repay the Secured Money amount or any amount. This in turn means that there has been no 'Event of Default'.[35]
[35] AD pars 9, 10 and 11.
There are three reasons why I do not accept these assertions.
The first is that Mr Alvaro has not proven on the balance of probabilities that MIRM failed to advise and/or communicate to him a correct payout figure amount under the Agreement. I have found (at [31]) that MIRM served the Default Notices on him, which contained a payout figure. Mr Alvaro did not provide any basis for his assertion that the correct figure was $95,000, whether in submissions or evidence.[36] The figure of $153,549.73 is consistent with the Schedule of Loan, Fees and Interest provided by MIRM, albeit at the Higher Interest Rate.[37] I am not persuaded that the figure in the Default Notices was not accurate.
[36] AD par 11.
[37] Schedule A attached to Plaintiff's outline of opening submissions filed 17 December 2024.
Mr Alvaro put to Mr Raine in cross-examination that, on a number of occasions, he had requested payout figures from a particular solicitor at MIRM's lawyers but had not been provided any. Mr Raine said that he was not aware of these communications. However, he did give evidence that he believed that Mr Alvaro had been given a number of payout figures, which figures he had no reason to believe were not correct.[38] Propositions put in questions asked in cross-examination are not evidence, only the answers.[39] As mentioned, Mr Alvaro did not give evidence. So there is no evidence that MIRM failed to advise and/or communicate to Mr Alvaro a correct payout figure amount under the Agreement. Rather, the evidence is that it did, at least in the Default Notices.
[38] ts 135 - 142, 4 February 2025.
[39] The State of Western Australia v Wood [2008] WASCA 81 [23] (Steytler P, with whom Pullin and Miller JJA agreed).
The second is that the obligation to repay under the Agreement is not conditional upon MIRM providing any information to Mr Raine.
The third that there is no term in the Agreement to the effect that an Event of Default only occurs if the breach by Mr Alvaro was 'wilful'.
It follows that MIRM has proven on the balance of probabilities that an 'Event of Default' occurred under the Agreement.
Was the imposition of the Higher Interest Rate of 4% per month unenforceable as a penalty?
Terms of the Agreement
As mentioned, the Agreement in Schedule A provides for a 'Lower Interest Rate' of 1.95% per month and a 'Higher Interest Rate' of 4% per month.
The payment of interest is dealt with in MCP cl 5, which so far as it is relevant provides:[40]
[40] TB pages 33 and 34.
5. The Payment of Interest and Fees
5.1Interest pursuant to this Mortgage is to be calculated and paid in accordance with clauses 5.2 to 5.15.
5.2 The Debtor shall pay interest to the Lender on the Date for the Payment of Interest
5.3 The Interest to be paid by the Debtor shall at all times be the Higher Interest Amount unless the Lender notifies the Debtor that the Lower Interest Amount is payable by the Debtor for any Interest Period.
5.4The Lender may notify the Debtor that a Lower Interest Amount is to be paid for any Interest Period and upon the Lender giving that notice the Interest to be paid for that Interest Period shall be the Lower Interest Amount.
…
5.7The Debtor shall pay the Higher Interest Amount for any interest Period where before the Date for the Payment of Interest for that Interest Period:
(a)the Debtor has failed to pay any amount due under this Mortgage by the due date for payment; or
(b)the Debtor has failed to comply with any of the Obligations; or
a)there is an Event of Default.
…
The 'Higher Interest Amount' is interest calculated by reference to the 'Higher Interest Rate', and likewise for the 'Lower Interest Amount'.
Mr Alvaro's position
In relation to the 'Higher Interest Rate' Mr Alvaro in the AD:
Admits the terms of the Agreement pleaded in paragraph 4 save and except for paragraph 4(d) but says that:
4.1 He denies he agreed to the imposition of the default of interest rate of 4 % per month pleaded in paragraph 4(d): which
(a) is a penalty, and accordingly is unenforceable; and
(b) is so iniquitous, extravagant and unconscionable a rate of interest as to be out of all proportion to and beyond what is necessary to protect the legitimate interests of the Plaintiff.
4.2 the agreed monthly interest rate was 1.95% per month which was to consist of $12,350 in prepaid interest for the first six months of the loan which was paid by the Defendant.
This plea is reiterated later in the AD in relation to MIRM's claim for ongoing interest.[41] It is also reiterated in the AC:[42]
The imposition of the rate of interest at 4 % per month under the mortgage:
2.1 is a penalty, and is unenforceable; and
2.2 is so iniquitous and extravagant a rate of interest so as to be unconscionable for the Plaintiff to rely upon as it is out of proportion and beyond what is necessary to protect the legitimate interests of the Plaintiff.
Mr Alvaro seeks a declaration to this effect.
MIRM's position
[41] AD par 15.
[42] AC par 2.
In the DCC, MIRM denies the allegation in [55] 'because the imposition of interest under the mortgage is not a penalty as there is no collateral stipulation, the (or a predominant) purpose of which is to punish the borrower for breach of a primary stipulation, and to compel performance of the primary stipulation'.
MIRM's primary contention is that the interest rate model incorporated in the Agreement is outside the purview of the penalty doctrine. This is because the imposition of interest under the Agreement is not a penalty as there is no collateral stipulation, the (or a predominant) purpose of which is to punish the borrower for breach of a primary stipulation, and to compel performance of the primary stipulation. Counsel invited the court to find that the higher/lower interest rate model in the present case is indistinguishable from those considered as falling outside the purview of the penalty doctrine in Oak Capital Mortgage Fund Ltd v Dlakic[43] and Commercial N Pty Limited v Huang & Ors.[44]
[43] Oak Capital Mortgage Fund Ltd v Dlakic [2019] NSWSC 1538 (Oak) [94] ‑ [97], [106] ‑ [107] (Fullerton J).
[44] Commercial N Pty Limited v Huang & Ors [2024] NSWSC 23 (Commercial) [198] - [225] (Henry J).
Its secondary contention is that Mr Alvaro, as the party seeking to be absolved of the liability imposed by the contractual stipulation as to interest, bears the onus of proving that the stipulation amounts to a penalty and has failed to satisfy that onus. This is because the interest sought to be protected by the higher interest rate was commensurate to the risk that MIRM was accepting as lender.
Principles
It is well settled that a term in a contract which imposes a penalty is unenforceable. A 'penalty is in the nature of a punishment for non‑observance of a contractual stipulation and consists, upon breach, of the imposition of an additional or different liability'.[45] The onus of showing that a term is a penalty is on the party resisting its enforcement.[46]
[45] Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30; (2012) 247 CLR 205 (Andrews) [9] (French CJ, Gummow, Crennan, Kiefel and Bell JJ).
[46] Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; (2016) 258 CLR 525 (Paciocco) [167] (Gageler J); Quantum Asset Management Pty Ltd v Love Properties (WA) Pty Ltd [2017] WASC 167 (Quantum Asset) [64] (Banks-Smith J).
The principles by which the court determines whether or not a clause is inside the purview of the penalty doctrine, and if so whether it constitutes a penalty, were recently considered by the Court of Appeal in Moran v Argonaut Equity Partners Pty Ltd.[47]The court commenced their discussion of the principles by quoting the following passage from the decision of the High Court Andrews v Australia and New Zealand Banking Group Ltd:[48]
In general terms, a stipulation prima facie imposes a penalty on a party ("the first party") if, as a matter of substance, it is collateral (or accessory) to a primary stipulation in favour of a second party and this collateral stipulation, upon the failure of the primary stipulation, imposes upon the first party an additional detriment, the penalty, to the benefit of the second party. In that sense, the collateral or accessory stipulation is described as being in the nature of a security for and in terrorem of the satisfaction of the primary stipulation. If compensation can be made to the second party for the prejudice suffered by failure of the primary stipulation, the collateral stipulation and the penalty are enforced only to the extent of that compensation. The first party is relieved to that degree from liability to satisfy the collateral stipulation.
[47] Moran v Argonaut Equity Partners Pty Ltd [2021] WASCA 45 (Moran).
[48] Andrews [10] (references omitted).
The court went on to say:[49]
In Paciocco v Australia and New Zealand Banking Group Ltd… Kiefel J (as her Honour then was) (French CJ agreeing) observed that threats and punishment were regarded as the essential characteristics of a penalty. A sum stipulated to be paid on default, 'which amounted to a threat to the person obliged to pay if the principal obligation was not performed, bore the character of a penalty, as did a sum stipulated to be paid which could not be accounted for other than as a punishment for default'…. Her Honour also said that a sum may not be stipulated for payment on default if it is stipulated 'as a threat over the person obliged to perform', or where the 'purpose and effect of requiring payment is to punish the defaulting party' …
The essence of a penalty, in circumstances such as those in this case, is that it is a collateral stipulation, the purpose of which (or at least, a predominant purpose of which) is to punish the borrower for breach, and thus to compel performance …
The question of whether the provisions of an agreement impose a penalty must be determined as a matter of substance, rather than mere form …
[49] Moran [78] - [80] (judgment of the court), referring to Paciocco [17] (Kiefel J with whom French CJ agreed). Other references have been omitted.
Another very instructive summary of the principles is that of Banks-Smith J in Quantum Asset:[50]
[50] Quantum Asset [64] (references omitted).
The following can be drawn from the authorities:
(a)the question whether a sum stipulated is a penalty or liquidated damages (that is, a genuine pre‑estimate) is to be judged as at the time of the making of the contract; …
(b)the party seeking to be absolved of the liability imposed by the stipulation bears the onus of proving that the stipulation constitutes an unenforceable penalty; …
(c)the critical issue is whether the sum agreed was commensurate with the interest protected by the bargain; …
(d)the nature of the interest sought to be protected is relevant. The sum agreed may be intended to protect an interest that is different from, and greater than, an interest in compensation for loss caused directly by the breach… . It may be intangible and unquantifiable. This is consistent with Lord Dunedin's statement in Dunlop that, 'the essence of liquidated damages is a genuine pre‑estimate of damage'. The reference to 'damage' as distinct from 'damages' is significant; …
(e)an interest may be of a business or financial nature; …
(f)a sum that is merely disproportionate to the loss suffered does not qualify as a penalty… . The penalty must be 'extravagant, exorbitant or unconscionable' and 'out of all proportion' to the interest of the party which it is the purpose of the provision to protect; ...
(g)the distinction between liquidated damages and a penalty, whilst useful, is not a limiting rule and does not mean that if no pre‑estimate is made at the time the contract was entered into, the sum agreed will be a penalty; …
(h)nor does it mean that a sum that reflects or attempts to reflect other types of loss or damage beyond those caused directly will be a penalty; …
(i)it may be that a reliable pre‑estimate is not possible or that damage caused by default is of such an uncertain nature that it cannot accurately be estimated or proved. In such a case a stipulated payment agreed by the parties may well be the true bargain and not a penalty; …
(j)where pre‑estimation of loss is difficult, precision may not be called for, bearing in mind the question is whether the stipulation is 'out of all proportion' to the interest said to be damaged by default; …
(k)the court will not lightly interfere with the bargain struck between the parties. The court requires good reason to attract judicial intervention to set aside the bargains upon which parties of full capacity have agreed. That is why the law on penalties is expressed as an exceptional rule and descriptors such as 'extravagant' and 'out of all proportion' are used in its application; ...
(l)the ultimate question in determining whether a stipulation is a penalty, is whether it is intended only to punish the defaulting party. Framed another way - does the innocent party's interest in the observance of the principal contractual obligation explain the agreed stipulation as having a purpose other than punishment; ...
(m)the conventional application of the doctrine of penalties arises when a stipulated sum is made payable upon breach. However, the rule as to penalties is not limited to cases arising out of breach of contract; … and
(n)whether a clause is a penalty invites attention to the proper construction of that clause, and the contract as a whole, but it is not solely a matter of contractual construction. The court is not limited to considering the terms of the contract and any background factual matrix evidence that would be admissible for the purposes of contractual construction … .
There are thus two questions:
(a)Is the clause in question inside the purview of the penalty doctrine; and, if so,
(b)Is it a penalty which the court should decline to enforce.
The facts of Moran are instructive on the issue of when a clause is inside the purview of the penalty doctrine. The first respondent, Argonaut Equity Partners Pty Ltd (AEP), as facility agent for a syndicate of lenders (which included AEP) (Lenders), commenced proceedings against the appellant (Mr Moran) in debt. The initial loan to Mr Moran was made on 11 June 2014 and was repayable on 31 July 2014. He did not repay the loan. He sought and obtained an extension, which was the subject of an amended loan agreement (Amended and Restated Loan Agreement). On the due date under extension, Mr Moran sought and obtained a further extension of time, documented in what was referred to as the 'First Extension Letter'. The court held that he was not contractually entitled to any further extension of the loan at that stage, and that the First Extension Letter was a further contract between the parties.[51] The effect of the First Extension Letter was that there was no event of default under the Amended and Restated Loan Agreement. The parties agreed that interest would accrue at the rate of 5% per month. The court held that this interest obligation did not arise 'on default' of the payment obligation under the amended loan agreement, and so was not an 'additional detriment imposed upon him by reason on a failure to pay'. The interest provision was not, in substance, a 'security for' or 'in terrorem of' the stipulation to pay the loan.[52] There was then a second extension letter (Second Extension Letter), to which the same observations applied.
[51] Moran [83].
[52] Moran [87] citing Andrews [10] and Paciocco [158].
The court concluded:[53]
As a matter of substance, the First and Second Extension Letters provided for the grant of new rights, additional to and different from those provided for in the Amended and Restated Loan Agreement. The First and Second Extension Letters provided for extensions of the time at which Mr Moran's payment obligation arose, which AEP was not obliged to grant. The price for AEP to do so was Mr Moran's agreement to pay interest at 5% per month from 11 June 2015. The price may be regarded as high. The prospect of an impending default under the Amended and Restated Loan Agreement, and the impact which such a default might have on Mr Moran's refinancing attempts, doubtlessly placed Mr Moran under commercial pressure to obtain the extensions. However, Mr Moran, through his solicitors, had requested the extensions. It was a matter for Mr Moran's commercial judgment as to whether the price for obtaining the extensions was too high. It was not suggested that the Extension Letters were shams. There was no claim that the Extension Letters were void or ought to be avoided on the grounds of economic duress… or unconscionable conduct… . Having executed the Extension Letters, Mr Moran was bound by them unless and until they were set aside… . The important point for present purposes is then that, as a matter of substance, Mr Moran's obligation to pay 5% interest per month was the contractual price for obtaining new rights conferred by the First and Second Extension Letters, rather than a consequence of any breach of the terms on which those rights were conferred.
Whilst it is correct that the question of whether the provisions imposed a penalty must be determined as a matter of substance rather than mere form, Mr Moran's submissions, in purporting to look beyond form, have, in our opinion, overlooked the substance of the variation contracts constituted by the Extension Letters. Mr Moran's submissions involve not characterising, but disregarding, the contractual relationship between the parties.
[53] Moran [89] - [90] (references omitted).
In the present case, there is a higher/lower interest rate mechanism in which the higher rate applied unless Mr Alvaro was advised that it did not. So the payment of the higher interest rate was not an additional or different liability which was imposed on a breach.
The two cases to which counsel for MIRM referred, Oak and Commercial, expressly considered whether a higher/lower interest rate mechanism falls inside the purview of the penalty doctrine.
In Oak, the loan agreement expressly provided two rates of interest, namely the 'Lower Rate of Interest' of 9.95% per annum and the 'Higher Rate of Interest' of 19.5% per annum. As to the operation of these rates of interest, the relevant clauses of the mortgage common provisions provided:[54]
The Interest to be paid by the Debtor shall at all times be the Higher Interest Amount unless the Lender notifies the Debtor that the Lower Interest Amount is payable by the Debtor for any Interest Period.
The Lender may notify the Debtor that a Lower Interest Amount is to be paid for any Interest Period and upon the Lender giving that notice the Interest to be paid for that Interest Period shall be that Lower Interest Amount. These quotes aren't the whole paras (any …'s needed?).
[54] Oak [94] - [95].
There was then a 'special condition' which qualified the operation of the foregoing provisions:
The Lender notifies the Debtor that Clause 5.4 applies whilst ever an Event of Default has not occurred (in the Lender's sole and absolute discretion) whereas clause 5.3 applies at all other times.
The trial judge, Fullerton J, quoted the passages from Andrews and Paciocco which I have referred to at [60] and [61]. Her Honour then observed:[55]
It follows from these authorities that a contractual clause will prima facie amount to a penalty where it imposes an additional or different contractual liability that arises upon the non-observance of a primary contractual obligation.
[55] Oak [100].
Her Honour then quoted the passage from Quantum Asset which I have quoted at [62].
Fullerton J rejected the submission that the higher interest rate charged under the loan agreement amounted to a contractual penalty and was therefore unlawful.[56] The relevant portion of her Honour's analysis was as follows:[57]
[56] Oak [97].
[57] Oak [102] - [108].
As noted above, the defendants as the parties seeking to be absolved of the liability imposed by the contractual stipulation as to interest, bear the onus of proving that the stipulation amounts to a penalty (see also Paciocco at [167]).
I am not persuaded that the defendants have discharged that burden …
No evidence was led to address whether the interest rate was commensurate with the interest protected by the bargain. In order to make such an assessment, I would require evidence of the value of the interest the plaintiff sought to protect through the imposition of the impugned provision and there was no evidence adduced permitting that assessment to be made.
Further, the defendants have failed to demonstrate that the Higher Interest Rate was inserted into the loan agreement as a "threat" or for the purpose of "punishing" [the] ... borrower in default (see Paciocco at [17]). Equally, nothing has been proffered to support the proposition that the Higher Interest Rate of 19.5% per annum is "extravagant and unconscionable" (see Paciocco at [51]).
In any event, it would appear that the interest rate model incorporated in the loan agreement is outside the purview of the penalty doctrine. Under the agreement, the default or Higher Interest Rate was the standard rate applicable under the loan and the Lower Interest Rate only applied if notice was given by the plaintiff, with notice deemed to have been given where there was no default. Accordingly, in a technical sense, the differential interest structure does not operate to penalise the borrower for breach 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 rates does not attract the law of penalties at all. That is because the law of penalties strikes down those provisions of a contract that state the consequences that will flow when there is a breach of contract, if those consequences are not a genuine pre-estimate of the damage likely to be suffered in consequence of that breach. If the mortgage is drafted so that the borrower agrees to pay a particular rate of interest, but the lender agrees to accept a lower rate of interest in full satisfaction of the borrower's obligation to pay interest at that particular rate provided that the lower rate of interest is paid timeously (and, sometimes, provided that there is no breach of any other provision of the mortgage) that provision is not one that states the consequences of a breach of contract, and hence the law of penalties does not apply to it.
Further, as noted by counsel for the plaintiff, a clause similar to that contained in the mortgage and memorandum was the subject of consideration by Campbell J (as his Honour then was) in the decision of King Investment Solutions Pty Limited v Hussain (2005) 64 NSWLR 441; [2005] NSWSC 1076. His Honour held that such a clause fell outside the ambit of the doctrine:
[138] One requirement for a provision in a contract being a penalty is that it states a consequence which is agreed to follow from breach of one of the provisions of the contract. The structure of the interest clause in the present case is not like that. Rather, the interest clause in the contract involves a promise by the mortgagors to pay interest at 118.8%, and a promise by the mortgagee that, if the mortgagors pay the interest on time, or no more than 7 days late, the mortgage will accept interest at 60%. A clause structured in that way is not regarded as a penalty. (Emphasis added)
The submission that the Higher Interest Rate amounted to an unlawful contractual penalty is rejected.
The second decision is that of Commercial. The case concerned a higher/lower rate interest clause of the same broad type as in Oak and in the present case. Henry J identified two primary issues:[58]
The first is whether the impugned provisions are susceptible to the application of the penalty doctrine at all. That is, whether there exists in the contract a collateral stipulation which, upon the failure or non-occurrence of a primary stipulation, imposes upon the defendants an additional detriment to the benefit of the plaintiff: Andrews at [10]. As the Court noted in Andrews at [15], this question (of whether the penalty doctrine is "engaged" at all) is "anterior" to the second, substantive inquiry, namely, whether the collateral stipulation is properly characterised as penal and, if it is, what the consequences might be …
[58] Commercial [206].
Her Honour concluded:[59]
Clause 5.12(a) requires the Debtor to pay Interest to the Lender monthly in arrears but does not specify what amount of Interest is payable under that clause.
As already noted, cl 5.3 provides that Interest shall at all times be the Higher Interest Amount (which is calculated by reference to the formula in cl 5.5) unless the Lender notifies that the Lower Interest Amount is payable for any Interest Period, and cl 5.4 provides that a Lower Interest Amount may be notified as the amount to be paid for any Interest Period. Thus, the Mortgage contemplated that different interest rates could apply for different Interest Periods.
Commercial N's POC asserts that notice had never been given to the borrowers under cl 5.3. While the Defendants do not admit that matter in their POD, they did not advance any submission that they had been notified in accordance with cl 5.3 or cl 5.4 that the Lower Interest Amount was payable for any particular Interest Period. However, it seems to me that notice may have been given by the email sent from Mutual Support to Ms Chien on 18 October (referred to at [147] above).
In any event, irrespective of whether notice had been given, I am not persuaded that interest at the Higher Interest Amount (calculated on the formula in cl 5.5) or at the Higher Interest Rate compounding monthly under cl 5.12(b) is a penalty, based on the recognised distinction between provisions in agreements, such as a mortgage or a guarantee, which incentivise prompt payment and clauses which increase the rate of interest upon failure to make prompt payment, where the latter may be held to be a penalty clause and the former are not ...
[59] Commercial [210] - [213].
Her Honour then referred to the reasoning of Fullerton J in Oak to which I have referred, then observing:[60]
In my view, Fullerton J's reasoning is apt in this case. Here, the primary contractual obligation was to pay the Higher Interest Amount, with the differential interest structure providing for a lower concessional rate of interest whilst there was no default, rather than operating to penalise the Defendants for breach. Applying that to the regime in cl 5.12, a Lower Interest Amount payable under cl 5.12(a) is a lower concessional rate available whilst there was no default. Where the concessional rate is not paid punctually, interest is payable on the Outstanding Interest at the Higher Interest Rate compounding monthly, and that interest becomes part of the Secured Money under cl 5.12(b).
In other words, the liability to pay interest at the Higher Interest Rate compounding monthly in cl 5.12(b) does not impose an additional or different contractual liability that arises upon the non-observance of the primary contractual obligation to pay the Higher Interest Amount, but rather is payable because the reduced rate has not been paid punctually … .
[60] Commercial [216] - [217].
In my view, the higher/lower interest regime in MCP cl 5 is the same in substance to that considered in Oak and Commercial. The primary contractual obligation was to pay the Higher Interest Rate, with the differential interest structure providing for a lower concessional rate of interest whilst there was no default, rather than operating to penalise Mr Alvaro for breach. The interest rate provisions fall outside the purview of the penalty doctrine.
Even if I am wrong in this view, I would not have characterised the Higher Interest Rate as being an unenforceable penalty in the present case. Mr Raine's evidence was that the Higher Interest Rate was necessary to protect the interests of MIRM in circumstances where:
(a)Mr Alvaro's business was a 'start up';
(b)the security available to MIRM was a second mortgage;
(c)the loan to value ratio was approximately 72%;
(d)the loan had been declined by two other private lending competitors of MIRM; and
(e)the higher rate of interest applicable took into account the 12‑month term of the loan, being a relatively short-term loan requiring a higher rate to ensure a return on investment.
Mr Raine was cross-examined by Mr Alvaro on the source of the information in [77](a) to (d). He gave evidence that the information in [77](a), (c) and (d) came from the broker with whom both MIRM and Mr Alvaro were working,[61] and I infer so did the information in [77](b). I find that the facts in [77](a) to (d) were Mr Raine's knowledge at the time MIRM entered into the Agreement. It is his knowledge that is relevant and not the 'truth' of the facts. In any event, there is no evidence that the information relied on by Mr Raine was not in fact true.
[61] ts 125 ‑ 127 and 164, 4 February 2025.
In these circumstances, I accept the submission of counsel for MIRM that the interest sought to be protected by the Higher Interest Rate was commensurate to the risk MIRM as lender was accepting. Mr Alvaro has failed to discharge the burden on him to prove that the Higher Interest Rate clauses amounted to a penalty.
Was it unconscionable for MIRM to enforce the Higher Interest Rate?
This issue arises from the reference in the AD and AC which I have quoted at [54] and [55] to the Higher Rate of Interest as being 'so iniquitous, extravagant and unconscionable a rate of interest as to be out of all proportion to and beyond what is necessary to protect the legitimate interests of the Plaintiff'.
Counsel for MIRM asserts that this is not a plea involving the equitable principle of unconscionable conduct. Rather, it is an elaboration of the argument that the Higher Rate of Interest is a penalty, being a direct quote from the decision in Quantum Asset (see par (f) of the quote at [62]). I agree. Moreover, the assertion in the AD and AC is not supported by the pleaded facts necessary to establish unconscionable conduct.
For completeness' sake, and as Mr Alvaro is in person, had I disagreed with counsel for MIRM, I would not have found that it was unconscionable in equity for MIRM to enforce the Higher Rate of Interest.
The circumstances in which the court will intervene in equity on the basis of unconscionable conduct were summarised by Michell JA (with whom Newnes JA agreed) the Court of Appeal in Mavaddat v HSBC Bank Australia Ltd [No 2]:[62]
… a court exercising equitable jurisdiction may set aside a transaction where a party makes unfair use of its superior position or bargaining power to the detriment of the other party, who suffers from some special disability or is placed in some special situation of disadvantage. For this purpose a special disability or disadvantage is one which seriously affects the ability of the innocent party to make a judgment as to his or her best interests. The first party will be held to take unfair use of the other's disability or disadvantage if it knows that the other party cannot make a judgment as to what is in his or her best interests, is aware that there is a possibility that such a situation may exist or is aware of facts that would raise that possibility in the mind of any reasonable person. The latter examples involve wilful ignorance rather than constructive knowledge. Equitable intervention to deprive a party of the benefit of its bargain on the basis that it was procured by unfair exploitation of the weakness of the other party requires proof of a predatory state of mind.
[62] Mavaddat v HSBC Bank Australia Ltd [No 2][2016] WASCA 94 [79] (Mitchell J, with whom Newnes JA agreed) (references omitted).
In Serventy v Commonwealth Bank of Australia the Court of Appeal observed:[63]
Unconscionable conduct occurs if one party (A) takes advantage of an inability on the part of another party (B) to make decisions in their own best interests, in circumstances where this inability was sufficiently evident to A to render A's conduct exploitative. B's special disability is sufficiently evident to A if and only if A actually knows of it or is wilfully blind to it; constructive knowledge is not sufficient. That is because unconscionable conduct involves a 'predatory state of mind' and exploitation or victimisation, albeit that, in this context, victimisation should not be narrowly understood.
Determining whether a party to a transaction has engaged in unconscionable conduct will entail 'a precise examination of the particular facts' and 'every connected circumstance' as well as 'a scrutiny of the exact relations established between the parties'. The evaluative, fact-sensitive nature of this enquiry reinforces the need for caution in the exercise of the power to grant summary judgment. That does not mean that an assertion of unconscionable conduct will be enough to preclude summary judgment.
[63] Serventy v Commonwealth Bank of Australia[No 2][2016] WASCA 223 [18] - [19] (reasons of the court) (references omitted).
In Booth v Zhou [No 2] the Court of Appeal reiterated the need for actual notice or wilful blindness for there to be unconscionable conduct, referring to the decision of the High Court in Kakavas v Crown Melbourne Ltd:[64]
… In Kakavas the High Court said constructive notice has no role to play in determining claims for relief against unconscionable conduct in equity and a person seeking relief against unconscionable conduct is required to prove that the alleged wrongdoer had actual knowledge (or wilful blindness) of the weakness of the other party to the impugned transaction. This requirement is imposed because equitable intervention to deprive a party of the benefit of its bargain on the basis that it was procured by unfair exploitation of the weakness of the other party requires proof of a predatory state of mind.
[64] Booth v Zhou [No 2][2024] WASCA 128 [55] (judgment of the court); Kakavas v Crown Melbourne Ltd [2013] HCA 25; [2013] 250 CLR 392 [152] ‑ [154] (French CJ, Hayne, Crennan, Kiefel, Bell, Gageler and Keane JJ).
There are five reasons why Mr Alvaro would not have been able to establish an entitlement to relief on the basis of unconscionable conduct.
The first is that there is no evidence in fact that Mr Alvaro has some disability or is placed in some special situation of disadvantage at all, much less one that seriously affected his ability to make a judgment as to his best interests.
The second is that, even if there had been such evidence, there is no evidence that Mr Raine had any actual knowledge of, or was wilfully blind to, any special disability or disadvantage of Mr Alvaro. There is no evidence that he had a 'predatory state of mind'. Nor was he cross‑examined to this effect.
The third is that there is nothing in the nature of the relationship between MIRM and Mr Alvaro which might raise a concern. They were at arm‑length, doing business through a broker. It was, as Mr Alvaro acknowledged in Schedule C, a loan for a business purpose or investment purpose other than investment in a residential property.[65] Mr Raine's knowledge was that it was a business start-up. Moreover, Mr Alvaro was getting the direct benefit of the loan, in contrast to cases in which the party asserting unconscionable conduct has signed a guarantee. Mr Alvaro signed a declaration to the following effect:[66]
[65] TB page 12.
[66] TB page 13.
I am the Debtor having agreed to enter into this Mortgage HEREBY ACKNOWLEDGE that: –
1.I understand the terms of this Mertgage (Mortgage) and my liability both financial and legal thereunder.
2.The Mortgage has been freely and voluntarily executed by me and without undue influence or pressure from any third party.
3.I have had the opportunity of obtaining and did obtain legal advice from an independent Australian legal practitioner prior to executing the Mortgage as to the legal effect of the Mortgage and my obligations under it.
4.It is on the basis of:
(a)the statements contained:
(i)this Mortgage; and
(ii)in this declaration; and
(b)my entering into this Mortgage –
that the Lender has agreed at my request and direction to enter into this Mortgage and to advance the Debtor the Principal Amount and that I am aware that the Lender relies on the truth of the statements contained in this declaration and in this Memorandum in entering into this Mortgage.
5.I have considered and understand that the provision of the Mortgage will have a financial impact upon me if the Mortgage is enforced by the Lender.
6.This declaration has been signed by me prior to executing this Mortgage.
The fourth is that Mr Alvaro obtained legal advice, recorded in an Australian Legal Practitioner's Certificate to the following effect:[67]
[67] TB page 14.
I, the Australian Legal Practitioner named above do hereby certify:
1.I am satisfied that the person named above and the person who has executed the Mortgage is the same person and my means of so identifying the signatory is contained within the attached Combined Appointment as Identifier Certificate and Identification Certificate.
2.I have explained to the signatory the nature and the effect of the Mortgage to be executed by him/her and each of its terms and the legal effect of the Mortgage and its terms.
3.That the signatory told me that he/she had:
(a)read and understood the effect of the Mortgage and its terms; and
(b)understood the financial risks to him/her of singing the Mortgage.
4.That the signatory told me that he/she signed the Mortgage of his/her own free will.
5.That following the steps in paragraphs 1 to 4 above, the Mortgage was then signed by the signatory in my presence and witnessed by me.
The fifth is that a monthly interest rate of 4% does not in itself make it unconscionable for MIRM to have entered into the Agreement with Mr Alvaro. In this regard, the following observations of Henry J in Commercial are apposite, though in the context of a statutory obligation not to engage in unconscionable conduct:[68]
I do not consider that the Higher Interest Rate of 1.36% per week or 70.72% per annum itself makes it unconscionable for Commercial N to enter into the Agreement and Deed of Variation. The rate of 70.72% per annum is very high relative to the lower interest rate, but there was no expert evidence provided by either party as to whether such a rate is excessive or even unusual in the context of a short term financing by way of a second mortgage and it is within the bounds of rates considered by the Court and found not to have unconscionable or unfair: See, for example, Guardian Mortgages Pty Ltd v Miller [2004] NSWSC 1236 at [104] (interest rates in a loan agreement of 14.5% per month (174% per annum) reducible to 12% per month (144% per annum)) and HomeSec Finance Express Pty Ltd v Richardson [2012] NSWSC 1375 ( HomeSec Finance v Richardson ) (default rate of interest of 144% per annum); First Mortgage Capital Pty Ltd v Westpac Banking Corp Ltd [2021] NSWSC 1143 at [55] (interest rate of 60% per annum in a loan and mortgage agreement). Accordingly, I am not satisfied that the Higher Interest Rate is exorbitant for a short term loan of this type by Commercial N.
[68] Commercial [302]; see also [282].
Her Honour had previously said of the statutory obligation:[69]
The statutory formulation of unconscionable conduct in the ACL and ASIC Act does not refer to knowledge of the attributes or circumstances of the recipient of the services and does not require actual or constructive knowledge of an alleged special disadvantage. However, actual knowledge or constructive knowledge of a special disadvantage may affect whether they have acted in good faith.
[69] Commercial [282].
Her Honour did go on to observe:[70]
… I consider that the capitalisation and monthly compounding on the Higher Interest Rate of 70.72% per annum (which the Defendants could expect to pay on default) on a loan of $430,000 for six months is inherently oppressive and unconscionable …
However, in the present case, MIRM does not claim compound interest.
[70] Commercial [304].
For these reasons, even if I am wrong in concluding that the defence does not raise unconscionable conduct in equity, had it done so, it would not have entitled Mr Alvaro to any relief.
Did MIRM unlawfully appropriate rent monies from tenants in occupation of the Property and if so, what consequences flow from that?
Mr Alvaro's position
In the CC, Mr Alvaro asserts that:
Appropriation of Rental Income
3. The Plaintiff has further unlawfully appropriated rent monies from tenants in occupation of the Land and has failed to provide a proper account of all rent monies received:
3.1 The Defendant is entitled to set-off its claim for rent received against the true and correct Secured Money amount due as at the loan maturity date.
3.2 If the Defendant is not entitled to the set-off as set out above, then the Defendant counterclaims damages and the relief claimed herein in the alternative to set-off.
In the prayer for relief in the AC, Mr Alvaro seeks an order that MIRM 'do provide an account of all rents received by the Plaintiff from tenants in occupation of the Land'. He also seeks a declaration that there should be a diminution in the amount the 'True and Correct Payout Figure' by the amount of rents collected by MIRM from the tenant in occupation of the Property.
MIRM's position
In the DCC, MIRM asserts that:
(a)on 7 October 2020, MIRM by its lawyers sent a notice to the property manager of the Property demanding that rent received from the tenants be paid directly to the mortgagee pursuant to TLA s 111;
(b)on 17 November 2020, it received the sum of $2,400 from the property manager or tenant;
(c)it has not received any further rent monies; and
(d)at all times accounted for the rent monies received by applying them to the balance outstanding pursuant to the terms of the Agreement.
It otherwise denies the allegations which I have set out at [95].
Determination
I have set out at [33] - [35] the facts relating to this aspect of the claim which are not in issue, including the terms of the notice sent by MIRM.
In cross-examination, Mr Raine gave the following additional evidence:[71]
ALVARO, MR: And did the tenants and the property manager send you the money that you demanded?---One occasion.
And why only on one occasion?---I was - through a discussion that I had with somebody - that I can recall with somebody at Summers Lawyers - was that the real estate agent was not - I think the terminology was that they "weren't comfortable" with the order that they had received, and they were going to continue to forward the money to you, sir.
And would you be surprised that no money was forwarded to me, but it was stated that all rents were paid to your lawyers?---There was no rent paid to my lawyers, sir.
…
GETHING J: Well, again, Mr - I will just note, for the record, Mr Wallwork is rising. There's two things here - two levels here. The first level with permissible questions is what Mr Raine did or didn't do. Now, his evidence is that, on one occasion - or that there was a notice issued to the real estate agent to pay it. Then he has been told, after that, through his lawyer, that the real estate agent was going to challenge that. I think the other question is - and maybe, to complete it - what decision was made after the conversation with the lawyer to which you just referred?---The decision was made that we would take this to - to this conclusion, your Honour.
Right. Was any decision made in relation to whether or not Make It Raine would continue to press the tenants for rent?---No. We decided that we would not do that.
[71] ts 144 - 145, 4 February 2025.
Mr Raine's evidence was that the amount of $2,400 was the only amount MIRM ever received from the tenants of the Property.
There is no evidence to contradict Mr Raine's evidence at [99] and [100], so I find in terms of his evidence.
TLA s 111 provides:
111. Remedies of mortgagee or annuitant in cases of default
Subject to the provisions of section 112A the mortgagee or annuitant or his transferees upon default in payment of the principal sum or interest or annuity or any part thereof respectively at the time mentioned in the mortgage or charge may enter into possession of the mortgaged or charged land by receiving the rents and profits thereof and may distrain upon the occupier or tenant of the land under the power to distrain hereinafter contained or may bring an action of ejectment to recover the land either before or after entering into the receipt of the rents and profits thereof or making any distress and either before or after any sale of such land shall be effected under the power of sale aforesaid in the same manner in which he or they might have brought such action if the mortgage money or annuity had been secured to him or them by an assurance of the legal estate in the land mortgaged or charged; and any mortgagee or his transferees shall be entitled to foreclose the right of the mortgagor or his transferees to redeem the mortgaged land in manner hereinafter provided.
TLA s 111 empowered MIRM to direct the tenant of the Property to pay the rent due to it. However, as I have mentioned, MIRM accepts that the money it did receive should be credited against the money owed to it by Mr Alvaro. There is no need for a declaration to this effect.
On the evidence before the court, the only amount received by MIRM from the tenants of the Property was $2,400. This was not 'unlawfully appropriated'. There is no basis for an order that MIRM account for the rents received by it. Mr Alvaro is not entitled to any relief in relation to the rent received by MIRM.
Did MIRM owe to Mr Alvaro a duty of care and, if so, was it breached?
Mr Alvaro's position
Mr Alvaro's assertion that MIRM owed him a duty of care which it breached is set out in the AC in the following terms:[72]
[72] AC pars 4 to 7.
Breach of Duty of Care
4. The Plaintiff at all material times owed to the Defendant a civil duty of care in tort to:
4.1 provide a payout figure and discharge.
4.2 take steps preparatory to granting a discharge such as responding to a request made by the Defendant for a discharge and accurately quoting the figure to be paid as soon as practicable following a request made by the Defendant for details of the payout figure.
5. Such civil duty in tort arose in circumstances where:
5.1 the Plaintiff and the Defendant were in a relationship of proximity.
5.2 it was obvious and went without saying that a failure or refusal by the Plaintiff to promptly take steps preparatory to granting a discharge by responding to a request for discharge quickly and accurately quoting the figure to be paid as soon as practicable (following a request made by the Defendant for details of the payout figure) would result in the Defendant owing more than what was outstanding at the time of the request.
5.3 the regulated nature of the relationship between the Plaintiff (as Mortgagee) and the Defendant (as Mortgagor) was suggestive of the existence of such a duty as pleaded in paragraph 4.
6. The Plaintiff negligently and in breach of the duty of care pleaded in paragraph 4 has since July 2020 failed to take steps preparatory to granting a discharge by responding to requests made by the Defendant or on the Defendants behalf for a discharge quickly and accurately quoting the figure to be paid.
7. By reason of the Plaintiff's breach (as pleaded in paragraph 6) of the duty of care pleaded in paragraph 4:
7.1 the Plaintiff is now claiming sums of money that are considerably in excess of what was outstanding at the time of the requests made by the Defendant.
7.2 the Defendant has by reason of the matters in paragraph 7.1 suffered loss and damage.
Particulars
These proceedings have further dramatically affected the Defendant's credit rating and thereby his ability to obtain mortgage finance at normal commercial rates elsewhere as a result of these proceedings. In particular:
(a) prior to the commencement of this action the Defendant enjoyed a clean credit score of 829; and
(b) since the commencement of these proceedings and the notification and reporting of this action to every credit reporting agency in Australia, the Defendant's credit score has dropped to 220.
Further particulars will be provided before trial.
No further particulars were provided.
MIRM's position
In the DCC, MIRM denies AC paragraphs 4 to 6. As to AC paragraph 7, it denies that it at any time sought to recover from Mr Alvaro monies in excess of which it was owed and otherwise does not admit the allegations. It develops this position in its submissions, referring to authorities which I consider below.
Determination
There are a number of fundamental deficiencies with Mr Alvaro's assertion that MIRM owed him a duty of care which it breached.
The first is that, as I have already found at ([46] ‑ [47]), Mr Alvaro has not proven that MIRM in fact failed to respond to any request by him to provide an accurate and timely payout figure, nor that the payout figure in the Default Notices was not accurate. So the factual basis for the alleged breach of duty of care has not been established. His claim fails on that basis alone.
The second is that I accept the submission made by counsel for MIRM that what is pleaded is not, in substance, a duty of care. Rather, it is a positive obligation to provide accurate and timely information. It is not even pleaded as a duty to ensure that the information that was provided, was accurate (in other words, a negligent misstatement).
The third is that even if the obligation which Mr Alvaro seeks to impose on MIRM could somehow be reformulated as a duty of care, I would not have been persuaded that it was a duty of care recognised by law. Any such duty of care would be a duty to avoid causing pure economic loss. The principles governing the existence of a duty of care to avoid causing pure economic loss were recently summarised by the plurality in Mallonland Pty Ltd v Advanta Seeds Pty Ltd, in the following terms:[73]
An essential element of the tort of negligence is that the defendant owes the plaintiff a duty to take reasonable care when engaging in an activity to avoid causing the plaintiff a particular type of damage or loss that is reasonably foreseeable… . "A man is entitled to be as negligent as he pleases towards the whole world if he owes no duty to them."…
As a general rule, damages are not recoverable in negligence for pure economic loss, that is, for loss that is not consequential upon injury to person or property… . Ordinarily, a person does not owe a duty to take reasonable care to avoid causing reasonably foreseeable pure economic loss to another…
This general rule reflects the well-established position at common law that the infliction of economic loss does not, by itself, infringe any right or legally protected interest of the plaintiff… . The general rule is also said to reflect policy concerns about the potentially excessive scope of liability for financial loss, referred to by Cardozo CJ as liability "in an indeterminate amount for an indeterminate time to an indeterminate class"... . Another policy reason said to justify the general rule is a concern to avoid infringing upon the legitimate pursuit of personal advantage…
A consequence of the general rule is that damages for pure economic loss are not recoverable if all that is shown is that the defendant's negligence was a cause of the loss and the loss was reasonably foreseeable… . That is, reasonable foreseeability is a necessary but not sufficient criterion for the existence of a duty of care to avoid causing pure economic loss… . Furthermore, indeterminacy of liability, in the sense that the defendant's liability cannot be realistically calculated, will ordinarily deny the existence of such a duty of care…
[73] Mallonland Pty Ltd v Advanta Seeds Pty Ltd [2024] HCA 25 (Mallonland) [29] ‑ [32] (Gageler CJ, Gordon, Steward, Gleeson, Jagot and Beech-Jones JJ) (references omitted).
Mr Alvaro must therefore prove that this case falls within a recognised exception to the general rule that damages are not recoverable in negligence for pure economic loss, that is, for loss that is not consequential upon injury to person or property. One such recognised class of exception is negligent misstatement,[74] which is not what Mr Alvaro asserts.
[74] See generally: Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 (Woolcock) [23] ‑ [24] (Gleeson CJ, Gummow, Hayne and Heydon JJ).
Esanda Finance Corp Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241, 252 - 253 (Dawson J).
Another recognised class of exception where a duty of care may be established is where a defendant has assumed a responsibility towards the plaintiff to take reasonable care to avoid economic loss to the plaintiff.[75] In relation to this class of case, the plurality in Mallonland observed: [76]
The term "assumption of responsibility" has been criticised as "imprecise and beguiling but deceptively simple"… . An assumption of responsibility is best understood as an undertaking (whether express or implied) by a person to take on a task or job for another person or class of persons, from which it can be inferred that the first person accepted that he or she would take reasonable care when engaging in that task or job… .
[75] Mallonland [33].
[76] Mallonland [33] (references omitted).
In no way can the duty of care asserted by Mr Alvaro be characterised as one in which MIRM assumed responsibility toward him in the sense described by the High Court; it did not 'take on a task or job' for him.
Absent a recognised class of exception, the issue of determining whether the relationship between the parties gives rise to a duty of care to avoid causing pure economic loss involves a principled evaluation by the court of the factors which tend for or against that conclusion.[77] This approach is 'intended to assist an examination of a relationship to determine whether there exist in the relationship the requisite closeness, control and vulnerability' to give rise to a duty of care.[78]
[77] Mallonland [36], also [93] - [94] (Edelman J).
[78] Minister for the Environment v Sharma [2022] FCAFC 35; (2022) 291 FCR 311 at 385 [211] (Allsop CJ, Beach J and Wheelahan J agreeing), cited with approval by Edelman J in Malonland [93].
In relation to the element of vulnerability, the plurality of the High Court in Woolcock observed:[79]
Since Caltex Oil, and most notably in Perre v Apand Pty Ltd, the vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed. "Vulnerability", in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, "vulnerability" is to be understood as a reference to the plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant …
[79] Woolcock [23] (Gleeson CJ, Gummow, Hayne and Heydon JJ).
Again, in no way can it be said that Mr Alvaro was not able to protect himself from any failure by MIRM to provide the information sought. He was just as able as MIRM to calculate the amount of capital and interest payable.
Mr Alvaro's plea that his relationship with MIRM was 'regulated' does not add anything to the analysis. As mentioned, he signed a declaration that the money advanced was to be applied wholly or predominantly for business purposes or investment purposes other than investment in residential property.[80] This had the effect that the loan was excluded from the application of the National Credit Code.[81] No other particulars are given as to which regulatory regime Mr Alvaro is referring to and why it imposes either a duty of care or positive obligation to provide information.
[80] Schedule C, TB page 12.
[81] National Consumer Credit Protection Act 2009 (Cth), Schedule 1, s 5.
The fourth is that there is no evidence that any failure by MIRM to provide timely and accurate information to Mr Alvaro caused him to suffer any loss. His loss was caused by his failure to comply with the terms of the Agreement. And there is no evidence of refinancing efforts by him, again noting that his questions in cross-examination of Mr Raine are not evidence.
If there was an Event of Default, is MIRM entitled to an order for possession of the Property?
I have found that an Event of Default has occurred (at [50]).
The powers of MIRM where an Event of Default occurs are set out in MCP cl 18.3, which relevantly provides:
18.3 If an event of Default occurs, or is deemed to have occurred:
(a)the Lender may demand the immediate payment to it of the Secured Money and the Debtor is obliged to repay the Secured Money in full to the Lender in accordance with that demand;
(b)the Lender may exercise any right, power or privilege conferred on it as a Mortgagee by this Mortgage, whether under any Legislation or at common law, or in equity;
(c)the Lender may:
i.take possession of and eject any occupants from the Mortgaged Property; and
ii.sell, assign, transfer, dispose of, or exchange the Mortgaged Property, or grant options in respect of or over the Mortgaged Property;
…
By cl 18.3(c), MIRM is entitled to take possession of the Property and sell it. It is entitled to an order to this effect.
If there was an Event of Default, is MIRM entitled to costs on a full indemnity basis?
MIRM's position
MIRM claims in its prayer for relief 'costs on a full indemnity basis'.
Mr Alvaro's position
Mr Alvaro denies that he is liable to pay any costs incurred after 2 July 2020. Specifically:[82]
[82] AD par 14 (there is no par 14.1).
As to paragraph 14:
14.2 denies that he is indebted to the Plaintiff in the sum of $167,676.67;
14.3 says that the Correct Payout Figure Amount as at the time the loan had matured and was due for repayment on 2 July 2020 was approximately $95,000;
14.4 says he has at all material times (since 2 July 2020) been ready willing and able to pay and has even tendered payment of the Correct Payout Figure Amount;
14.5 denies that he is liable to pay any interest, fees, charges and enforcement expenses incurred after 2 July 2020 and says that:
(a) the costs claimed have been unreasonably and unnecessarily incurred and should accordingly be borne by the Plaintiff (at the Plaintiff's expense) and not by the Defendant; and
(b) these proceedings are the result of the Plaintiff having unreasonably in breach of the duty of care pleaded in paragraph 4 failing to take steps to mitigate the quantum of the amount claimed by informing the Defendant of the Correct Payout Figure Amount as at the loan maturity date.
Determination
My findings in relation to the duty of care remove this argument as a basis for denying costs. His assertion about being ready, willing and able to pay the (correct) amount outstanding, is not supported by any evidence. In any event, the fact is that he did not pay, and that is a sufficient basis to constitute an Event of Default.
Another consequence of my finding that an Event of Default has occurred is that MIRM is entitled to demand the immediate payment to it of the Secured Money (MCP cl 18.3(b)).
The term 'Secured Money' includes 'any Costs and Expenses'. The term 'Costs and Expenses' includes:[83]
(a)any costs, expenses, fees, charges, disbursements including all Legal Fees incurred by the Lender arising from or in connection with:
…
(ii)the exercise of any rights or powers under this Mortgage, including but not limited to the taking of any Recovery Action;
(iii)the exercise by the Lender of any of its rights arising from any Event of Default.
…
'Legal Fees' is defined to mean 'all solicitor's costs, barrister's fees, and any disbursements on a full indemnity or solicitor and own client basis whichever basis yields the higher amount'.[84]
[83] TB page 22.
[84] TB page 25.
Counsel for MIRM accepted that the phrase 'full indemnity' referred to the usual terms of an indemnity costs order. This is that the paying party is pay all of the costs of the claiming party except in so far as they have been unreasonably incurred or are of an unreasonable amount, so that subject to those exceptions the claiming party is completely indemnified for its costs.[85] This concession was appropriate.[86]
[85] Saraceni v Jones [2012] WASCA 59 (S) [7] (judgment of the court); Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) (Swansdale) [17] (reasons of the court).
[86] Choice Constructions Pty Ltd v Janceski [No 3] [2011] WASC 358 (S) [61] - [69] (Simmonds J).
The court has a wide discretion in relation to costs, set out in Supreme Court Act 1935 (WA) s 37(1) (so far as is relevant):
Subject to the provisions of this Act and to the rules of court…the costs of and incidental to all proceedings in the Supreme Court, including the administration of estates and trusts, shall be in the discretion of the Court or judge, and the Court or judge shall have full power to determine by whom or out of what estate, fund, or property, and to what extent such costs are to be paid.
RSC O 66 r 1(1) provides that subject to the express provisions of any statute and of the rules of court, and without limiting the generality of the discretion to make a costs order, the court will generally order that the successful party to any action or matter recovers its costs. MIRM is the successful party.
Consistent with the general position, the usual order is for the costs of the successful party to be assessed on a party and party basis.[87] MIRM seeks to persuade the court to depart from this general position by reference to the terms of the Agreement.
[87] Swansdale [10].
The position where a contract provides for costs to be paid was set out by Owen J in Rumball v Mortimore:[88]
The Court has a broad discretion over the basis upon which it orders the costs of an action. However, where the parties to an action are also parties to a contract which contains plain and unambiguous provisions allowing for cost to be paid on a certain basis, the Court should ordinarily exercise its discretion in a manner consistent with the contractual provisions.
[88] Rumball v Mortimore [2000] WASC 126 [15] (Owen J). See also: Rayner v Australia and New Zealand Banking Group Ltd [No 5] [2003] WASCA 264 at [25] - [26] (judgment of the court); Hanson Construction Materials Pty Ltd v Calabro [2024] WASC 338 [19] (Whitby J); Manton Enterprises Pty Ltd as trustee for GPK No. 2 Trust v Lt Market St Pty Ltd [2021] WASC 4 (S) (Manton) [17] ‑ [18] (Strk AM); Boon v Burt [2020] WASC 64 (S) [4] (Curthoys J).
The rationale for this approach is to avoid satellite litigation over the contractual provision.[89]
[89] Manton [17].
However, as Strk AM observed in Manton:[90]
Notwithstanding the provisions of the agreement, the court still retains a discretion such that the contractual provisions will not be binding. Circumstances may exist which render an indemnity costs order inappropriate, even where there is an agreement between the parties.
[90] Manton[18].
With two exceptions, MIRM is entitled to its costs of and incidental to the action except in so far as they have been unreasonably incurred or are of an unreasonable amount, so that subject to those exceptions it is completely indemnified for its costs.
The two exceptions relate to the costs order flowing from MIRM's unsuccessful application for summary judgment. At first instance, after dismissing the application, Master Sanderson ordered that the 'costs be the defendant's in the cause'. After dismissing the appeal,[91] the Court of Appeal ordered that there be no order as to the costs of the appeal. MIRM is not entitled to these costs.
[91] Make It Raine Money Pty Ltd v Alvaro [2023] WASCA 126 [1] (reasons of the court).
What final orders are appropriate?
In summary, MIRM is entitled to an order for possession of the Property.
It is also entitled to an order that Mr Alvaro pay its costs of and incidental to the action except:
(a)insofar as those costs are of, or incidental to, its application for summary judgment and appeal; and
(b)except in so far as those costs have been unreasonably incurred or are of an unreasonable amount,
so that subject to those exceptions it is completely indemnified for its costs.
I will hear from the parties as to the final form of the order.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
OS
Associate to the Honourable Justice Gething
14 FEBRUARY 2025
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