MCLEAN and PERMANENT CUSTODIANS LTD - [2010] WASAT 127

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: CONSUMER CREDIT (WESTERN AUSTRALIA) CODE

CITATION: MCLEAN and PERMANENT CUSTODIANS LTD [2010] WASAT 127

MEMBER: JUSTICE J A CHANEY (PRESIDENT)

HEARD: 20 MAY 2010
21 MAY 2010

DELIVERED : 14 SEPTEMBER 2010

FILE NO/S: CC 86 of 2010

BETWEEN: SHONA DIMITY MCLEAN
Applicant
AND
PERMANENT CUSTODIANS LTD
Respondent

FILE NO/S :CC 87 of 2010

BETWEEN :SHONA DIMITY MCLEAN
Applicant
AND
ST GEORGE BANK LIMITED - A DIVISION OF WESPAC BANKING CORPORATION
Respondent

FILE NO/S :CC 88 of 2010

BETWEEN :SHONA DIMITY MCLEAN
Applicant
AND
WESTPAC BANKING CORPORATION
Respondent

FILE NO/S :CC 89 of 2010

BETWEEN :SHONA DIMITY MCLEAN
Applicant
AND
ADELAIDE BANK LIMITED
Respondent

Catchwords:

Consumer credit - Preliminary issues - Declaration as to purpose of loan being for investment or business purpose - Whether declaration false - Whether credit intended to be provided for personal, domestic or household purposes - Test to be applied to ascertain intended purpose - Allegation that falsity of declaration known to finance broker - Whether finance broker agent of lender - Earlier judgment obtained on loan agreement and mortgage in Supreme Court - Whether proceedings in Tribunal an abuse of process - Whether subsequent advance of funds constitutes fresh agreement - Whether declaration made in relation to initial advance effective in relation to subsequent advance

Legislation:

Australian Securities and Investments Commission Act 2001 (Cth), s 12CA, s 12CB
Commonwealth Constitution, s 109
Consumer Credit (Western Australia) Act 1996 (WA)
Consumer Credit (Western Australia) Code Regulations 1996 (WA), reg 10
Consumer Credit (Western Australia) Code, s 5, s 6, s 6(1)(b), s 6(5) s 8, s 11, s 11(2), s 11(3), s 70, s 71 s 176(1)
Property Law Act 1969 (WA)
Transfer of Land Act 1893 (WA)

Result:

Application CC 86, 87 and 89 of 2010 dismissed
Application CC 88 of 2010 referred to directions hearing for further directions as to substantive hearing

Category: A

Representation:

CC 86 of 2010

Counsel:

Applicant: Self-represented
Respondent: Mr GD Cobby

Solicitors:

Applicant: Self-represented
Respondent: Gadens Lawyers

CC 87 of 2010

Counsel:

Applicant: Self-Represented
Respondent: Mr GD Cobby

Solicitors:

Applicant: Self-represented
Respondent: Gadens Lawyers

CC 88 of 2010

Counsel:

Applicant: Self-represented
Respondent: Mr GD Cobby

Solicitors:

Applicant: Self-represented
Respondent: Gadens Lawyers

CC 89 of 2010

Counsel:

Applicant: Self-represented
Respondent: Mr M Diamond

Solicitors:

Applicant: Self-represented
Respondent: CWS Lawyers

Case(s) referred to in decision(s):

Australian Broadcasting Commission v O'Neill (2006) 227 CLR 57
Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44
Brott v Shtrambrandt [2009] VSC 467
Commissioner of Taxation (Cth) v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520
D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1
Esanda Finance Corporation Ltd v Spence Financial Group Pty Ltd [2006] WASC 177
Hunter v Chief Constable of the West Midlands Police (Birmingham Six case) [1982] AC 529; [1981] 3 All ER 727; [1981] 3 WLR 906
Jonsson v Arkway Pty Ltd (2003) 58 NSWLR 451
Linkenholt Pty Ltd v Quirk [2000] ASC 200, 334 (155 - 040), [2000] VSC 166
Park Avenue Nominees Pty Ltd v Boon [2001] NSWSC 700
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
Rafiqi v Wacal Investments Pty Ltd [1998] ASC 155-024
Shakespeare Haney Securities Ltd v Crawford [2009] 2 Qd R 156
Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd (1957) 98 CLR 93

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

Ms Shona Dimity McLean sought relief under s 70 of the Consumer Credit (Western Australia) Code against four lenders from whom she had borrowed money. Her applications sought to reopen the transaction in each case on the basis that it was unjust.
The Consumer Credit (Western Australia) Code applies only in relation to the provision of credit for personal, domestic or household purposes. In respect of each of the four matters before the Tribunal, Ms McLean had signed a declaration that the loans were sought for business or investment purposes. She claimed that those declarations were not true and that she in fact intended to use the funds borrowed for personal living expenses and travel. Where a business purpose declaration is signed, there is a 'conclusive' presumption that the credit is not provided wholly or predominately for personal, domestic or household purposes. The declaration is, however, ineffective, where the credit provider, or a finance broker through whom credit was obtained, knows that the credit is in fact to be applied wholly or predominately for personal, domestic or household purposes. Ms McLean contended that the brokers with whom she dealt in relation to the loans, all knew that she intended to use the funds for personal purposes.
The Tribunal considered whether, in fact, the declarations made by Ms McLean were, in each case, false. In respect of two of the matters, the Tribunal concluded that the funds were used predominately for business or investment purposes, and therefore Ms McLean's declarations were not false so that the presumption that the Consumer Credit (Western Australia) Code did not apply was effective. Accordingly, those two matters were dismissed. In the third matter, the Tribunal considered that, in the context of the evidence adduced at the hearing of the preliminary issues, it was not possible to say whether the funds were predominately used for personal as distinct from investment purposes, nor whether the agent of the lender knew of the intended purpose of the loan. Accordingly, it directed the matter be adjourned for directions to enable the substantive hearing to occur.
In the final matter, the Tribunal was unable to determine the actual use of the funds. That gave rise to a question as to the appropriate test to be applied in determining whether the credit was provided, or intended to be provided, for personal, domestic or household uses. It also gave rise to a question as to whether the broker involved in the transaction was the agent of the credit provider so that the broker's knowledge should be imputed to the credit provider. Having addressed those questions, the Tribunal concluded that, applying the appropriate tests, the requirement that the credit be provided, or be intended to be provided, so as to render the Consumer Credit (Western Australia) Code applicable to the transaction, was not met, and that the application should be dismissed.

The applications

In each of these four matters, the applicant, Ms Shona Dimity McLean seeks to reopen a transaction that gave rise to a credit contract and a mortgage taken by each of the respondents respectively, on the basis that she asserts that the credit contract and the associated mortgage are unjust. The power for the Tribunal to reopen unjust transactions is found in s 70 of the Consumer Credit (Western Australia) Code (the Code) which, at the relevant times, applied as a law of Western Australia by virtue of the now repealed Consumer Credit (Western Australia) Act 1996 (WA).
In each case the respondents have raised as a preliminary issue the question of whether or not the provision of credit to the applicant under the relevant loan documents and mortgages is regulated by the Code, and specifically whether the credit was provided or intended to be provided by the applicant wholly or predominately for personal, domestic or household purposes within the meaning of s 6(1)(b) of the Code.
In relation to matter CC 86 of 2010, the respondent in those proceedings also submitted that the proceedings should be dismissed as an abuse of process because judgment had been obtained in the Supreme Court on the loan agreement and mortgage the subject of the application to the Tribunal prior to commencement of the application.
In CC 89 of 2010, the Adelaide Bank raised an additional contention that the application should be struck out as frivolous, vexatious, misconceived or lacking in substance, being used for improper purpose or otherwise was an abuse of process because the loan agreement and mortgage in that matter had been the subject of proceedings and determinations in the Federal Court.
Those issues were listed to be determined as preliminary issues, and it is those issues to which these reasons are directed.

Relevant statutory provisions

The Code regulates credit contracts which are defined as contracts under which credit is or may be provided - Code s 5. The kind of credit which is covered by the Code is identified in s 6. That section provides:
(1)This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of pre-contractual obligations) is proposed to be entered into -
(a)the debtor is a natural person ordinarily resident in this jurisdiction or a strata corporation formed in this jurisdiction; and
(b)the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes; and
(c)a charge is or may be made for providing the credit; and
(d)the credit provider provides the credit in the course of a business of providing credit or as part of or incidentally to any other business of the credit provider.
(2)If not all the debtors under a credit contract ordinarily reside, or are strata corporations formed, in this jurisdiction, this Code applies only if credit is first provided under the contract in this jurisdiction.
(3)If this Code applies to the provision of credit (and to the credit contract and related matters) -
(a)this Code applies in relation to all transactions or acts under the contract whether or not they take place in this jurisdiction; and
(b)this Code continues to apply even though the debtor ceases to be ordinarily resident in this jurisdiction.
(4)For the purposes of this section, investment by the debtor is not a personal, domestic or household purpose.
(5)For the purposes of this section, the predominant purpose for which credit is provided is -
(a)the purpose for which more than half of the credit is intended to be used; or
(b)if the credit is intended to be used to obtain goods or services for use for different purposes, the purpose for which the goods or services are intended to be most used.
The Code applies to a mortgage if it secures obligations under a credit contract and the mortgagor is a natural person - Code s 8.
A critical provision for the purposes of these matters is the requirement found in s 6(1)(b) which provides, in effect, that the Code applies to credit contracts if, when the credit contract is entered into, the credit is provided or intended to be provided wholly or predominately for personal, domestic or household purposes.
Section 11 creates presumptions relating to the application of the Code. It provides:
(1)In any proceedings (whether brought under this Code or not) in which a party claims that a credit contract, mortgage or guarantee is one to which this Code applies, it is presumed to be such unless the contrary is established.
(2)Credit is presumed conclusively for the purposes of this Code not to be provided wholly or predominantly for personal, domestic or household purposes if the debtor declares, before entering into the credit contract, that the credit is to be applied wholly or predominantly for business or investment purposes (or for both purposes).
(3)However, such a declaration is ineffective for the purposes of this section if the credit provider (or any other relevant person who obtained the declaration from the debtor) knew, or had reason to believe, at the time the declaration was made that the credit was in fact to be applied wholly or predominantly for personal, domestic or household purposes. For the purposes of this subsection, a relevant person is a person associated with the credit provider or a finance broker (or a person acting for a finance broker) through whom the credit was obtained.
(4)A declaration under this section is to be substantially in the form (if any) required by the regulations and is ineffective for the purposes of this section if it is not.
In each of these matters, Ms McLean signed a declaration of the kind described in s 11(2). She contends, however, that those declarations are ineffective by reason of the application of s 11(3). The respondents contend that the respective declarations have the effect of taking the agreements to which they relate outside the operation of the Code. If, contrary to that submission, they are unable to rely on the declaration by reason of s 11(3), they contend that, as a matter of fact, the credit was not provided or intended to be provided wholly or predominately for personal, domestic or household purposes, and the relevant agreements therefore fall outside the requirements of s 6(1)(b) even if the presumption under s 11(2) is unavailable. In other words, the respondents contend that, on the facts of each case, the presumption referred to in s 11(1) is displaced.

The hearing

Following mediation in the Tribunal, the issues described above were identified as preliminary issues, and were listed for hearing. No doubt that course was agreed by the parties in the belief that, if the respondents' contentions were made out, the necessity for a hearing on the merits could be avoided. Unfortunately, however, the preliminary questions require certain factual determinations on matters which were not agreed between the parties.
Various witness statements and bundles of documents were filed by the parties in relation to the preliminary issues. The witness statements filed by the respondents were mainly concerned with the identification of documents contained in the bundle filed with the Tribunal. Ms McLean did not wish to ask questions of any of those witnesses.
Ms McLean filed a witness statement which gave some background information as to her experience in relation to property matters, but did not deal with the individual transactions the subject of these proceedings. At the hearing, therefore, Ms McLean was given the opportunity to give additional oral evidence to support her contention that s 11(3) of the Code applied to the s 11(2) declarations which she had made in each case. This concession was made to Ms McLean despite her having been told in the clearest terms at an earlier directions hearing of the necessity to provide witness statements in advance of the hearing. A direction was given that evidence given in relation to each matter was to be evidence, to the extent relevant, in each other matter. Inevitably, the evidence overlapped evidence which would have been given in the context of a full hearing of the matter on the merits. In retrospect, it would have been preferable for all matters to have been dealt with at one hearing, so as to avoid the possibility of split hearings.

Ms McLean's background evidence

Until June 1997, Ms McLean worked for the Department of Social Security and had done so for 29 years. She took a redundancy package in June 1999. At that time she was residing at a property at 65B Langley Crescent, Innaloo, a property which she owned jointly with her parents.
Upon retirement, Ms McLean was in receipt of what she described as a 'small fortnightly income' by way of Commonwealth superannuation. She required additional income and began to seek education in different fields, including property.
In May 1998, Ms McLean purchased a shop in Mt Hawthorn known as 'Needful Nostalgia' which she operated as a sole owner until approximately 2001.
Following the death of her father in March 1999, a property at 65B Langley Crescent was transferred solely to Ms McLean's name. Properties at 38 Jones Street, Ledge Point, 12 Ewen Street, Scarborough and 18 Ewen Street, Scarborough were also transferred to her name. Ms McLean had in fact been living at 12 Ewen Street since 1998 when her father entered a nursing home. In December 2003 Ms McLean purchased a property at 4/15 Ewen Street, Scarborough. At around the same time she purchased a property at 93B Brighton Street, Scarborough. In 2008 she purchased a property at 180 Kent Street, Busselton.
In 2000, Ms McLean lent $50,000 to one Stephanie Mouchmore for use in a printing business which apparently subsequently collapsed with a result that Ms McLean was never repaid that debt.
At some time whilst operating Needful Nostalgia, Ms McLean met one Mr Barry Knop from an organisation known as Freedom Capital. Through discussions with Mr Knop, Ms McLean began to consider how she might use the equity in her property to derive income. She said that a Mr Peter HoganSmith, who was consulting to Freedom Capital 'presented an opportunity to loan $100,000 to Mr John Razile'. In her witness statement, Ms McLean says that she completed that loan, 'plus an additional loan of $100,000'. She said that both loans were secured by caveats over properties in South Perth and East Perth, but the borrower ultimately defaulted on the loans. Ms McLean said that she 'drew equity for these loans … through loans written by Freedom Capital', that is, she borrowed money through Freedom Capital to lend to Mr Razile. The mortgage produced by Ms McLean in relation to those transactions shows that the mortgagee was a company called Slick Nominees Pty Ltd of which Ms McLean and Ms Mouchmore were directors. The borrower was a company called Hi8 Asset Management Pty Ltd, with a guarantee by Mr Razile and a Mr Juwono. The interest was expressed to be an amount of $10,000 per calendar month on a principal sum secured of $100,000. That is an interest rate of 120% per annum, although provision for repayment was made after three months.
Ms McLean's witness statement then recounts numerous workshops and courses in relation to property investment or other business ventures which she attended between 2001 and 2008. Having recounted those matters, Ms McLean concluded:
Property has always been an interest for me. However as demonstrated by this statement I have interests in several other areas. I have always worked with people and in looking at sources of income all have an involvement with people. I would consider property to be only part of my sourcing of funds. I extended the portfolio that I inherited by careful purchases. During the property boom I would not make a purchase as the market was unpredictable.
Against that background, it is necessary to consider the evidence related to the individual transactions the subject of these proceedings.

Loan from Permanent Custodians Ltd - CC 86 of 2010

The loan application submitted to Permanent Custodians Ltd (Permanent) was completed by Ms McLean on 18 January 2008. It contained a business purposes declaration in the form prescribed by reg 10 of the Consumer Credit (Western Australia) Code Regulations 1996 (WA) for the purposes of s 11(2) of the Code. The declaration reads:
I / We declare that the credit to be provided to me / us by the credit provider is to be applied wholly or predominately for business or investment purposes (or for both purposes).
Important: You should not sign this declaration unless this loan is wholly or predominately for business or investment purposes. By signing this declaration you may lose your protection under the Consumer Credit Code.
The application form showed Ms McLean's residential address as 12 Ewen Street, Scarborough. An ABN number was inserted. Her 'nature of business' was shown as 'investor / consultant'. The employer details were shown as 'selfemployed'. The address of the security property was shown as '4/15 Ewen Street, Scarborough' being the property she purchased in 2003.

The statement of assets and liabilities contained on the application form revealed assets totalling $5,706,000, with liabilities totalling $1,659,888. Ms McLean's annual income was shown as $420,000 with rental income of $45,760.
The amount of the loan sought was $336,000 which was specified as being $284,000.00 to refinance an existing loan, and $52,000 for 'renovation'.
There were a number of other documents which were apparently in Permanent's possession at the relevant time, upon which Permanent relies to reinforce the proposition that it understood the loan to be for business or investment purposes. In a letter dated 7 January 2008, signed by Ms McLean, and addressed 'To whom it may concern', she explains the situation relating to some arrears in respect to other loan accounts. The letter recites that she 'found statements for [certain] accounts … for one of my investment property [sic] showing arrears'. She later says:
As a property investor who has worked hard to build my existing property portfolio and who is still keen on enlarging on this portfolio, I can only ask that you will look favourably upon my application and accept that the recent irregularities were through no direct action of my own but has [sic] been the result of a series of unfortunate mistakes from a third party.
In a letter dated 14 March 2008 concerning fees, Ms McLean says:
As I have been a professional investor for the past 10 years, I am well aware of the fees and charges that apply to obtaining a loan and that each lender has a different set of criteria.
On 8 April 2008, Ms McLean obtained a solicitor's certificate in relation to the loan from Permanent which confirmed that the solicitor had advised in relation to the loan contract and mortgage. That certificate does not take matters very far since there is no evidence that legal advice was provided in relation to the declaration as to purpose contained in the loan application.
In an office minute date 1 April 2008 recording a conversation between a Mr Savins of Permanent and Ms McLean concerning a delay in the provision of funds and fees, the file note records 'Ms McLean reinforced the urgency of this funding as she had already missed out on other investment opportunities'.
The loan agreement is in a form which is applicable both to contracts regulated by the Code and credit contacts that are not regulated. At page 12 of the loan agreement, certain notices appear. The notices are prefaced by the words:
The notes in the following box only apply to you if you are an individual and, at the time you sign this offer, you intend to use the loan amount wholly or predominately for personal, domestic or household purposes.
Ms McLean's signature appears below those notices but is located at the foot of what constitutes an offer to borrow money on the terms set out in the document. It is thus not a signature referable only to the notices which appear above it. The offer contains a declaration that 'all the information you have given us, or to the originator, the program manager or anyone else, is accurate and not misleading and that you are aware that we are relying on it'.
Ms McLean executed a further document on 16 February 2008. That document sets out that she has an income of $420,000 and rent receipts of $45,760, making a total income declared at $465,760. That document was apparently completed as part of the application for what is referred to as a 'low doc loan'. In her statement of issues facts and contentions, Ms McLean agreed that she completed that document and that the income figure 'is one that would meet lending requirements and was suggested to applicants [sic]'.
Ms McLean's response to the submissions made in relation to the documents referred to above was to identify what she considered to be various irregularities about the documents. In relation to the loan application, she suggested that the document as produced by the respondent was not a document which she completed, at least in its entirety. She said that she did complete a loan application form and she accepted that the page containing the declaration as to the purpose in the loan application produced from Permanent's records was a page of the application completed by her. She said, however, that she did not recognise the handwriting on the first four pages of the loan application produced by the respondent. She was unable to say whether the description of her as investor / consultant was the description she had written on the form which she completed. Similarly, she could not say whether the description 'selfemployed' is the description she had used, although she suggested that she normally describes herself as 'selfmaintained'. She pointed to certain errors in the document such as the description of the person named as her nearest relative as being her mother, when in fact the person named was her aunt. She suggested that the stipulation that, of the amount to be borrowed, $52,000 was described as 'renovation' was not accurate, as she said that she never intended to carry out any renovations to the secured property. While Ms McLean expressed some uncertainty as to who had completed the document which was ultimately forwarded to Permanent, she confirmed that she did complete an application which she expected her broker, Mortgage Ezy, to submit to Permanent seeking a loan secured against the property at 4/15 Ewen Street, Scarborough in the amount of $336,000.
In relation to the letter of 7 January 2008, Ms McLean said that she could not remember the purpose of that document, although she did not deny that it was her letter and signature. As to the sentence 'as a property investor who has worked hard to build my existing property portfolio and who is still keen on enlarging on this portfolio', Ms McLean said that that statement was not true, because she hadn't purchased any property since 2005, and before that, 2003. She said (at T: 86):
So to be a property investor also means that you're buying and selling properties constantly. That would be my interpretation and you're living on the income from that and I have actually only lived on the equity drawn down of the properties that I have. Now I have - at that time, I have had - I had seven properties. Four of these were inherited and two of those were purchased in 2003, one of which is the property at 4/15 Ewen Street, Scarborough. The eighth one was the property on I purchased in Busselton in - or settled on in February 2008 and the purpose of that was as a holiday home and that will come up in that particular case. So I really don't think that in the circumstances actually make me a full blown property investor living on the income from my property. Yes, I have lived on the equity, which is vastly different to income.
Ms McLean was unable to explain why she wrote that sentence given that she considered it to be untrue.
Ms McLean's statement in the letter of 14 March 2008 that she had 'been a professional investor for the past 10 years' was also not adequately explained. She said that that letter was written at the request of a mortgage broker, Mr Glen Miller. She said 'it states there that I have been a professional investor, but that doesn't refer specifically to property' and that 'I have invested in things, but whether have I have received any income from it is a separate issue'. When asked whether she was asserting that the statement was false, she responded 'It's a hard answer, because, yes, I have invested in different things' and that, 'Yes, I have invested. I'm not denying that, but I wouldn't say it's a profession.'
In relation to the loan agreement with Permanent, Ms McLean observed that the notes at page 12 where her signature appears, relate to individuals who intend to use the loan amount wholly or predominately for personal, domestic or household purposes, and said that by signing the document, she was agreeing to using the money for those purposes.
Ms McLean commented on the document dated 16 February 2008 which she signed declaring a total annual income of $465,760. She said 'What I am saying is that these income figures that were being included in these loans were such as to make the loans meet the lender's standards'. Ms McLean acknowledged that it was her signature on the document. She acknowledged that she knew that the figures were inaccurate and that the lender would rely on the figures in its decision to grant the loan. (T:96). She said: 'As I was living on my equity, I needed the funds, so in need, I would sign that I had that income, because also too in my peculiar way, … equity to me was what I was living on and it - could it be considered to be income?'
In relation to the telephone conversation recorded in Mr Savins' minute of 1 April 2008, Ms McLean said that she disputed the fact that she said that there were other investment opportunities open to her at that time and believed that she would not have said that to Mr Savins.
Settlement of the loan transaction with Permanent occurred on 7 May 2008. The loan proceeds were dispersed to meet a number of fees and charges, and an amount of $291,481.22 was used to pay off two loans to Perpetual Trustees Victoria Ltd. Ms McLean provided an affidavit regarding dispersal of funds advanced in relation to the loans the subject of these proceedings. The affidavit suggests that the loan from Permanent was used to refinance previous loans from the Adelaide Bank totalling $280,000. That is inconsistent with the documents relating to the settlement of the Permanent loan, and it would appear that the identity of the lender of the refinanced loans was an error. It is apparent, however, that the Permanent loan, and the loans which it refinances were all secured against 4/15 Ewen Street, Scarborough. According to Ms McLean's affidavit, the first of the refinanced loan in the sum of $160,000, was used for the purchase of 4/15 Ewen Street in November 2003. She suggests that the second refinanced loan of $120,000 was used for 'interest payments, living expenses'.
The balance of the Permanent loan after payment of the existing mortgages and all associated costs and expenses was just under $37,000, and that amount was paid into Ms McLean's National Australia bank account. Ms Mclean gave evidence that that sum was used for her personal, domestic and household use. In crossexamination, Ms McLean was unable to point to any document amongst those produced by Permanent which indicated the reason she wanted the money from Permanent was to live on the equity and use it for personal living expenses.

Factual findings in CC 86 of 2010

Because the hearing was concerned with the determination of preliminary issues involving several questions of law, the evidence concerning the circumstances of the completion and submission of Ms McLean's application for finance to Permanent was limited to the production of the documents held by Permanent, and Ms McLean's oral evidence. The evidence left many unanswered questions concerning the completion of the critically important loan application document. It is apparent that pages of the loan application found in the files of Permanent were completed by someone other than Ms McLean. It is also clear on the evidence that Ms McLean herself completed a loan application. It is not clear whether the person who completed the application that was lodged with Permanent did so on Ms McLean's instructions, whether the contents of the document as submitted accurately reflected the contents of the application form which Ms McLean said she completed and how the application came to be submitted to Permanent. It is clear, however, that Ms McLean signed the declaration as to purpose with the intention that it be submitted as part of the application for finance from Permanent, and I so find.
I also find that, on the balance of probabilities, the information contained in the balance of the loan application reflects Ms McLean's instructions to the broker. Because of the consistency with other documents held by Permanent, I find that the description of Ms McLean as an investor / consultant is a description which she used. Despite her endeavours to deny that she was a property investor, apparently on the basis that she did not make a profit from property investments, documents provided lead me to conclude that that is how she described herself. In particular, her description of herself as a 'property investor' in her letter of 7 January 2008, and as a 'professional investor for the past 10 years' in her letter of 14 March 2008 demonstrate her tendency to so describe herself in the context of negotiations with lenders. If anything, the background evidence which Ms McLean gave in her written witness statement tends to bear out her tendency to so describe herself.
The question arises as to whether the funds advanced by Permanent were, in fact, applied wholly or predominately for investment or business purposes. Ms McLean's position was, of course, that the funds were used by her for personal, domestic or household purposes. She says that she was merely drawing against her equity to provide living expenses.
It is not easy to trace through the manner in which Ms McLean said she applied funds advanced in relation to the various loans the subject of these matters. As noted above, Ms McLean's written evidence was that, of the $336,000 advanced by Permanent, $160,000 was applied to a loan to the Adelaide Bank which had been used for the purchase of 4/15 Ewen Street in November 2003, and a loan of $120,000 from the Adelaide Bank raised in July 2004 and applied to 'interest payments, living expenses' in the sum of $56,000. The settlement documents produced by Permanent suggest however that, of the amount advanced, $291,481.00 was dispersed to Perpetual Trust Victoria Ltd to pay out two loans of $165,542.00 and $122,108.00 respectively, and I note that contrary to Ms McLean's written evidence on this point, she admits that payment in para 12 of her response to the respondent's statement of issues facts and contentions.
Ms McLean said in evidence that she had her laptop computer stolen at some point, and had then lost many of her financial records. It may well be that her suggestion that the loans paid out by Permanent had come from the Adelaide Bank was simply a mistake born of a lack of records. The amounts revealed in the settlement paper are very similar to the amounts identified by Ms McLean, and I am satisfied that the amount of $165,542.00 was used to refinance the debt used to purchase 4/15 Ewen Street, which is not a property, that, so far as the evidence indicates, Ms McLean has ever used as a residence. In my view, it is properly characterised as a property investment. Whether or not Ms Mclean has ever claimed a deduction for income tax purposes in relation to interest paid on that loan (as she asserts she has not) does not lead to the conclusion that the purchase of the property was not for investment purposes.
The evidence does not provide any break down as to the purpose for which the second loan discharged by Permanent was used. Ms McLean's schedule describes the use as being 'interest payments, living expenses'. It is apparent that Ms McLean did not have sufficient income either from her superannuation or from her rental income to service her various loans. To the extent that she utilised the equity in property to provide interest payments on the money used to purchase 4/15 Ewen Street, the funds used were, in my view, being used for investment or business purposes, rather than personal, domestic or household purposes.
Of the $337,810.00 advanced by Permanent, approximately $9,400.00 was applied to various fees associated with the transaction.
The evidence supports the conclusion that more than 50% of the funds advanced by Permanent were used for purposes associated with Ms McLean's investment activities. The payment of $165,542.00 to discharge the initial loan for the purchase of 4/15 Ewen Street, together with the fees associated with the borrowing of $9,400 themselves add up to more than half of the loan amount. When interest payments in relation to investment loans are added to that total, it is clear that more than half of the credit advanced was used, as a matter of fact, for purposes, which cannot be described as personal, domestic or household purposes.
It follows that I find that the declaration as to purpose made by Ms McLean accurately reflected the true position. In those circumstances, s 11(3) of the Code can have no operation. The fact that some of the funds were being used for living expenses and other private purposes does not result in the loan agreement being a credit contract for the purposes of the Code where more than half the credit is intended to be used for business or investment purposes - Code s 6(5). The presumption arising under s 11(2) takes the transaction outside the purview of the Code. For that reason, the application in CC 86 of 2010 should be dismissed since the loan agreement is not an agreement to which the Code applies.

The Supreme Court judgment

In view of the conclusion that I have reached concerning the application of the Code, it is not necessary for me to determine whether the proceedings constitute an abuse of process. That argument is based on the fact that Permanent obtained a Supreme Court judgment on 14 January 2010 against Ms McLean in relation to the same loan agreement and mortgage with which those proceeding are concerned. Although in their statement of issues, facts and contentions Permanent argued that principles of res judicata and issue estoppel applied, those contentions were not pursued at the hearing. However, because I heard full argument on the question of abuse of process, I will deal briefly with that argument.
The essence of Permanent's argument is that to permit the present proceedings to continue would amount to a direct or indirect challenge to the judgment obtained in the Supreme Court proceedings. The judgment was in terms that required Ms McLean to pay the plaintiff the sum of $393,729.80, and to give to Permanent possession of the land known as Unit 4/15, Ewen Street Scarborough. The judgment was obtained following an application by Permanent for summary judgment. The affidavit filed in support of the application for summary judgment makes clear that the claim was based upon enforcement of the loan contract with Permanent and the mortgage which are the subject of this application under s 70 of the Code.
The question of when a direct or indirect challenge to the final result of earlier litigation constitutes an abuse of process was discussed by the High Court in D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1. That case was concerned with the question of a barrister's immunity from suit. The Court adopted the explanation of abuse of process found in Hunter v Chief Constable of the West Midlands Police (Birmingham Six case) [1982] AC 529; [1981] 3 All ER 727; [1981] 3 WLR 906 where Lord Diplock described abuse of process as a misuse of the Court's procedure which would 'be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right thinking people'. The Court gave effect to the principle that decisions of the courts, unless satisfied or quashed, are to be accepted as incontrovertibly correct, at least to the parties to the proceedings in which the decision is given (at [79]). The joint judgment continued:
If that is right, it follows that no remedy is to be provided if its provision depends upon demonstrating that a different final result should have been reached in earlier litigation.
Ms McLean did not develop any argument as to what she proposed to do in relation to the Supreme Court judgment if she were to succeed in the proceedings before the Tribunal. During the course of the hearing, however, she indicated that her hope was that the proceedings would result in her being relieved of any obligation to pay anything.

Most, if not all, the remedies provided through s 71 of the Code would be directly inconsistent with the judgment already obtained by Permanent. Any order of the Tribunal reducing or setting aside Ms McLean's liability under the loan agreement and mortgage could not logically coexist with the Supreme Court judgment. Although Ms McLean gave no indication as to the mechanism by which she would seek to avoid liability under the Supreme Court judgment, the efficacy of any remedy obtained in the Tribunal would necessarily depend upon somehow setting aside the Supreme Court judgment.
It is the case, of course, that an action under s 70 of the Code can be pursued only in this Tribunal, and could not have been a remedy sought in the Supreme Court. In those circumstances, the appropriate course would have been, if Ms McLean wished to pursue a remedy under s 70 and s 71 of the Code, for her to have commenced proceedings in the Tribunal and sought a stay of the Supreme Court proceedings pending finalisation of the claim under the Code. There is no evidence that Ms McLean sought to take that course prior to the judgment being obtained, notwithstanding that she actively opposed the summary judgment application and filed an affidavit in opposition.
In substance and effect, these proceedings necessarily amount to a challenge to the finality of the judgment obtained by Permanent in the Supreme Court. Were it necessary for me to decide the point, I would have concluded that the proceeding in CC 86 of 2010 amount to an abuse of process.

Loan from St George Bank Ltd - CC 87 of 2010

On 18 December 2007, Ms McLean lodged a loan application with St George for a loan of $320,000. The loan application contained a section dealing with the purpose of the loan. The purposes identified were 'buy' and 'investment'. The details of the purpose were described as 'purchase vacant land to be developed for residential investments'. Ms McLean's occupation was shown as 'sales consultant / property manager' and her current employer was shown as 'selfShona D McLean T/as Need for Nostalgia', and the length of that employment is said to be 10 years five months. The application disclosed a base annual income of $450,000 and a weekly rental income of $630.
The applicant's financial position was set out in the application form and listed real estate assets, jewellery and a share portfolio.
On the penultimate page of the loan application, Ms McLean signed a business purpose declaration in the form prescribed for the purposes of s 11(2) of the Code.
On the final page of the application, Ms McLean signed a declaration that the application and the financial information supporting it are in all respects correct and complete, and an acknowledgment that the bank would rely on that information in deciding whether to lend funds to the applicant.
The application was accompanied by a contract in the form of an offer of acceptance for the purchase of a property at 1/180 Kent Street, Busselton. The purchase price of the property was $400,000. The contract was dated 17 March 2007. Annexure A to the offer and acceptance was a disclosure as to the existence of a tenancy of the property until July 2007 at a rental of $200 per week. The annexure, which was signed by Ms McLean, also contained an acknowledgment that the buyer did not require the seller to give the tenant notice to vacate the property.
The application for a loan was approved by St George. The residential loan agreement offer was prepared by St George for signature by Ms McLean. She signed that document on 1 February 2008. On the cover of that document, is a notice which reads:
As you have signed a Business Purpose Declaration for this loan, this agreement is not regulated by the Consumer Credit Code.
The loan category referred to in the offer document is 'residential investment loan'. In the section marked 'acceptance by borrower' there is a declaration that all information given by the borrower is accurate and not misleading and that the borrower is aware that St George is relying on it.
Ms McLean's signature appears on the final page, where the notice on the cover page as to the non-application of the Code is repeated.
The funds were advanced, and the purchase of the Kent Street property was completed. The National Australia Bank statements produced by Ms McLean at the hearing show that from 19 February 2008, payments were deposited into Ms McLean's account in multiples of $400 from time to time with the notation 'Kent Street Busselton Greaves Peter WA'. They were apparently payments of rent in accordance with the tenancy agreement referred to on the offer of acceptance which had obviously been extended beyond July 2007.
Ms McLean said that the reasons she purchased the Kent Street property was 'to have a residence that I could stay in for holiday purposes'. She said that the property was rented at the time but because of a delayed settlement she agreed with the tenant for the tenant to remain in place because 'I didn't consider that I was in the situation that I could deprive him of rent'. That explanation of course makes no sense, since Ms McLean could not have required the vendor to terminate the lease agreement prior to settlement in any event.
As for the payments received after settlement, Ms McLean said she agreed with the tenant, Mr Greaves, to allow a teacher from the United Kingdom (UK) who was undertaking an exchange with Mr Greaves, to stay in the house rather than have to search around looking for somewhere to stay. Ms McLean said that after the teacher from the UK vacated the premises, 'the issues arose with my loan, so I left the place tenanted because at least it's not empty'.
Ms McLean said that the loan application was most likely completed in the handwriting of a mortgage broker who had been recommended to her. She observed that some of the information contained in the document was not, in her view, accurate. For example, the reference to the purchase of vacant land to be developed for residential investments was not accurate because there was a duplex dwelling on the land as was clear from the offer and acceptance. She considered the reference to being employed as a sales consultant / property manager, and being employed in the business of Needful Nostalgia was 'confusing and a little mixed up'.
Ms McLean gave evidence that she did complete a loan application document, and sent it by facsimile to her broker. The last two pages of that document, including the business purpose declaration were, Ms McLean acknowledged, completed by her. She noted that those two pages bore a facsimile transmission endorsement dated 19 December 2007 from a pharmacy from which she said she sent the document. The other pages in the loan application do not bear that endorsement. Whatever might be the explanation for that, Ms McLean was unable to say that the document produced at the hearing was different in content from the document which she completed. All she was able to say of the document was that it was 'confused'.
In cross-examination, Ms McLean was unable to identify any document in those produced by St George or by her which referred to the proposal that she intended to use the Kent Street property as a holiday home. As to the notice on the loan application to the effect that the Code did not apply in light of the business purpose declaration, Ms McLean said that, whilst she read that notice, 'I wasn't aware of what the long term issues would be because at that stage I was also not aware of the power of the Consumer Credit Code'. She said that that had not been explained to her previously by any broker.
Ms McLean said that the business purpose declaration which she signed was in fact false. She explained, however, that she signed that false declaration for the same reason she made false assertions as to her income, namely because she thought that was what was necessary to get the loan. She acknowledged that she read the declaration in the loan application to the effect that all information that she provided was accurate and not misleading.

The findings in relation to the St George loan

As with the loan by Permanent, the circumstances giving rise to the completion of the loan application to St George are somewhat uncertain. It is not an issue, however, that Ms McLean completed an application which included a business purposes declaration which she intended to be provided to St George. The loan offer documents make clear that St George treated the loan as one to which the Code did not apply because of that declaration.
Ms McLean's case is that the declaration was untrue because in fact she proposed to use the funds to purchase the Kent Street property as a holiday home. I do not accept that assertion.
The loan application signed by Ms McLean identified the purpose of the loan as being for investment purposes. It is true that the reference to vacant land in the loan application did not reflect the actual situation. However, the application appended the offer and acceptance which disclosed the existence of a rental agreement. On the face of the offer and acceptance, the tenancy of the property was contemplated to continue after settlement. In fact that turned out to be the case. Ms McLean's explanation that she would have brought the tenancy to an end but for the teacher exchange arrangements made by the tenant are belied by the fact that the tenant apparently resumed occupation on return from the UK, well after the settlement date.
Ms McLean showed herself to be a person who was quite happy to mislead and deceive prospective lenders about her income level and intentions so that she could obtain loans which might otherwise not have been made. That propensity to dishonesty makes it difficult to accept her assertion as to her plans for the Busselton property, particularly when there is absolutely no documentary support for that assertion.
Accordingly, I find that Ms McLean's business declaration was not false, and that she intended to, and did, purchase the Busselton property for investment purposes. In any event, there is no evidence that either the lender or the broker engaged by Ms McLean to lodge the application, knew of her alleged intention to use the property as a holiday home. Accordingly, even if Ms McLean had some intention ultimately to use the property for personal purposes, s 11(3) of the Code does not does not apply, and the presumption under s 11(2) is effective.
It follows that the claim in CC 87 of 2010 must also be dismissed.

Loan from RAMS - CC 88 of 2010

On 30 June 2008, Ms McLean completed a loan application to RAMS. In this case, the application produced by the lender was completed in Ms McLean's handwriting. In relation to employment, Ms McLean describes herself as 'self-maintained' in the 'occupation / industry' of 'property'. Her job type is described as 'consultant' with a start date of that occupation at the year 2000. The occupation is described as 'full time'. The loan sought was $680,000, which is said to comprise $475,000 'refinance' and $205,000 as 'refinancing costs and investment property'. The term of the loan sought is 30 years with an interest only term of five years.
The security property described is 38 Jones Street, Ledge Point (Ledge Point property) to which is ascribed a value of $850,000.
On the third page of the application form, a business purpose declaration in the prescribed form for s 11(2) of the Code is signed by Ms McLean. Beneath that declaration is an acknowledgment that all statements made in the application are true and are made for the purpose of obtaining a loan.
The application resulted in a loan being advanced by RAMS in the amount of $560,000. Ms McLean signed the loan agreement on 31 July 2008. A mortgage of the Ledge Point property was executed and registered to secure the borrowing.
On 10 November 2008, Ms McLean applied to vary the RAMS loan by increasing it by an amount of $80,000. She completed an application form for that increase. She described herself as a property consultant being self-employed. The purpose of the increase was said to be 'investment property fees'. Appended to the application was a schedule of Ms McLean's real estate holdings, the mortgage balance in relation to each property and the lender. Added in handwriting to that schedule is the rent derived from various of the properties listed.
The variation to the loan was subsequently provided.
Ms McLean confirmed that the loan application form was in her handwriting, save that she said that the words 'refinancing costs and investment property' were not in her handwriting. She thought that those words had probably been written by a Julie Pilcher who was the person at RAMS with whom Ms McLean was dealing. She could not say whether the words were in the document at the time she signed it.
Ms McLean explained that her application for $680,000 was based on a figure of 80% of the value of the security property. She said that Ms Pilcher explained to her that initially she would only get 70%, but then in three months time it could be increased to 80%. That was why the subsequent loan application was completed in November 2008. Ms McLean acknowledged that the reference to the use of funds contained in the original application was applicable to the subsequent advance of $80,000 (T: 59, 21.05.10).
In the course of negotiating the increased loan, Ms McLean signed a document which declared her income before tax at $449,800, and asserted that she had been a property investor for 10 years and derived a rental income of $62,200.00. Although those figures were not written on the form by her, she has initialled alongside each of them. The statement of income, was, of course, a gross overstatement of the position.
The loan obtained from RAMS was what was referred to as a 'low doc loan'. Ms McLean was asked as to her understanding of that type of loan. She explained:
Well, my understanding is that you do not have to produce verification of your income. You make a statement that that is what your income is and there is no criteria to produce verification of it.
She confirmed that she had initialled the form and that the statements were not true. She said, however, that she did not fill in a similar form as part of the application for the initial advance.
Ms McLean's affidavit concerning the dispersal of funds provides her account of the borrowings against the Ledge Point property. The schedule in relation to that property reveals that she borrowed $50,000 in February 2002 via a private mortgage apparently for the purpose of lending those funds to a friend, Eileen Reed. In May 2002 she apparently borrowed $70,000 which appears to have been used to discharge the earlier mortgage, and to meet 'interest payments, living expenses, travel'.
On 23 November 2004 she borrowed $250,000 said to be for 'interest payments, living expenses, travel'. She was unable to identify the lender in relation to that borrowing. It would appear that the borrowing was used to repay the earlier private mortgage.
On 26 August 2005, a further borrowing of $336,000 from RAMS was undertaken. Those funds were used to pay out the previous loan secured over the Ledge Point property which then had a balance of $256,000. The balance of $80,000 was said to be for 'interest payment, living expenses, travel'.
The borrowing, the subject of this matter from RAMS in August 2008 was, according to Ms McLean's schedule, used to pay out a loan to 'RHG' in the sum of $180,000 with the balance of $460,000 being used for interest payments, living expenses, travel. However, the settlement details produced in relation to the first tranche of that loan suggests that $475,000 was used to refinance existing loans, with $85,000 being an equity release. That discrepancy was not addressed in the submissions of the hearing, and on the materials before the Tribunal, I am unable to identify confidently how the loan funds were distributed. To the extent that the funds were used to refinance earlier borrowings, the evidence does not enable me to characterise the application of the funds as being either for business purposes or for personal, domestic and household purposes.
Ms McLean's evidence was that the words 'refinance costs and investment property' on the loan application form were written by someone else, probably Ms Pilcher. Her evidence was 'the party who wrote this was aware that I was going to use this for personal uses'.

The findings in relation to CC 88 of 2010

The evidence establishes that Ms McLean signed the business purpose declaration in the initial loan application on 30 June 2008. The effect of Ms McLean's evidence is that that declaration was false, and that the person who assisted in completing the form, who she thinks was Ms Pilcher, knew that the funds were to be used for personal, domestic or household purposes.
Ms Pilcher was apparently an employee of RAMS. As such, her conduct is to be imputed to RAMS and taken to be RAMS' conduct - Code s 176(1). It follows that, if Ms McLean's evidence on that point is to be accepted, the presumption arising from the declaration as to purpose does not apply - Code 11(3).
Unlike in the earlier two matters, it is not possible to say in this case that the funds advance were, as a matter of fact, used wholly or predominately for business or investment purposes. Ms Pilcher was not called to give evidence, no doubt because of what was thought to be the limited evidentiary parameters associated with the preliminary issues. Although Ms McLean's evidence as to her intended purpose and use of the loan funds is inconsistent with the documents that she provided to the lender, I am not prepared to reject her oral evidence in the absence of a capacity to identify the purposes to which the funds were actually applied. On the other hand, I would not, at this preliminary stage, be prepared to accept Ms McLean's evidence as to her use of the funds, or more particularly as to Ms Pilcher's knowledge of her proposed use of the funds, without giving the respondent the opportunity to call Ms Pilcher and adduce any other evidence relevant to that issue.
If the declaration as to purpose is ineffective by reason of Ms Pilcher's knowledge of the proposed use of the funds, the presumption under s 11(1) of the Code, namely that the credit contract is one to which the Code applies, operates. Given that Ms Pilcher's knowledge of the proposed use (if that is what is ultimately found) is imputed to the lender, RAMS would have no basis for arguing that the requirement of s 6(1)(b) is not satisfied.
The appropriate course in relation to CC 88 of 2010 is that directions should be made for the final hearing of the matter. The question of whether the requirement of s 6(1)(b) is met remains open for further argument in the light of all further evidence that might be adduced as to the circumstances surrounding the signing by Ms McLean of the business purposes declaration, and the lender's knowledge as to her intended purpose. The final hearing will also need to deal with the substantive question of whether the loan agreement or mortgage were unjust and should be reopened.

Loan increase

An issue arises in relation to the RAMS' application as to whether the declaration as to purpose, if it is effective for the purposes of the initial loan, remained effective for the purposes of the further advance of $80,000.
In Commissioner of Taxation (Cth) v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520 (Sara Lee) at [22] it was said:
When the parties to an existing contract enter in a further contract by which they vary the original contract, then, by hypothesis, they have made two contracts. For one reason or another, it may be material to determine whether the effect of the second contract is to bring an end to the first contract and replace it with the second, or whether the effect is to leave the first contract standing, subject to the alteration. For example, something may turn upon the place, or the time, or the form, of the contract, and it may therefore be necessary to decide whether the original contract subsists. …

It is apparent that the proceedings in the Federal Court were interlocutory in nature only. The application for an injunction was dismissed. The dismissal of an interlocutory injunction does not finally determine the existence or otherwise of a cause of action, nor the issues arising in relation to any given cause of action. His Honour referred to the principles to be applied in the context of applications for interlocutory injunction as explained by Gummow and Hayne JJ in Australian Broadcasting Commission v O'Neill (2006) 227 CLR 57 at 81 - 82 at [65]. His Honour considered whether materials provided by Ms McLean demonstrated a prima facie case in the relevant sense, and the question of balance of convenience.
The proceedings in the Federal Court before Siopis J were quite different in nature from the proceedings in the Supreme Court between Ms McLean and Permanent which are discussed above in the context of CC 86 of 2010. The Federal Court proceedings did not finally determine any causes of action nor any issues arising in the present proceedings. Principles of res judicata or issue estoppel do not arise in the present circumstances. Nor do I consider that the fact that injunctive proceedings had been commenced in the Federal Court, of itself, renders the present proceedings an abuse of process. I would not, therefore, have dismissed matter CC 89 of 2010 on that basis.

Orders

CC 86 of 2010
The application is dismissed.
CC 87 of 2010
The application is dismissed.
CC 88 of 2010

The application is adjourned to a directions hearing to commence at 10.00 am on 28 September 2010 to further program the matter.
CC 89 of 2010
The application is dismissed.

I certify that this and the preceding [162] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUSTICE J A CHANEY, PRESIDENT