Morcos v Advantage Credit Union Limited
[2003] WASCA 15
•20 FEBRUARY 2003
MORCOS -v- ADVANTAGE CREDIT UNION LIMITED [2003] WASCA 15
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2003] WASCA 15 | |
| THE FULL COURT (WA) | 20/02/2003 | ||
| Case No: | FUL:160/2001 | 10 FEBRUARY 2003 | |
| Coram: | MURRAY J ANDERSON J STEYTLER J | 10/02/03 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| B | |||
| PDF Version |
| Parties: | LOUIS MORCOS ADVANTAGE CREDIT UNION LIMITED |
Catchwords: | Practice and Procedure Summary judgment Effect on application of defects in plaintiff's pleading Whether there was an arguable defence Turns on own facts |
Legislation: | Nil |
Case References: | Blomley v Ryan (1956) 99 CLR 362 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Doherty v Murphy [1996] 2 VR 553 Westpac Banking Corporation v Thorpe; unreported; SCt of WA; Library No 970465; 18 September 1997 at 6-7 Bridge Pump Co Pty Ltd v Myles Southwest Fuel Supplies Pty Ltd, unreported; SCt of WA; Library No 970636; 22 October 1997 Coulton v Holcombe (1986) 162 CLR 1 Esanda Finance Corporation Ltd v Snowlake Holdings and Others, unreported; SCt of WA; Library No 2823; 30 October 1992 Garcia v National Australia Bank Ltd [1998] HCA 48 Geelong Building Society (In Liq) v Encel [1996] 1 VR 594 Hussey v Horne-Payne (1878) 8 Ch D 670 Lill v Merchant Capital (WA) Ltd (1996) 15 WAR 536 Metwally v University of Wollongong (1985) 60 ALR 68 University of Wollongong v Metwally (No2) (1985) 59 ALJR 481 Water Board v Moustakas (1988) 180 CLR 491 Yerkey v Jones (1939) 63 CLR 649 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : MORCOS -v- ADVANTAGE CREDIT UNION LIMITED [2003] WASCA 15 CORAM : MURRAY J
- ANDERSON J
STEYTLER J
- Appellant
AND
ADVANTAGE CREDIT UNION LIMITED
Respondent
Catchwords:
Practice and Procedure - Summary judgment - Effect on application of defects in plaintiff's pleading - Whether there was an arguable defence - Turns on own facts
Legislation:
Nil
(Page 2)
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
Appellant : Mr A C McIntosh
Respondent : Mr A J Prentice
Solicitors:
Appellant : Piu & Associates
Respondent : Mossensons
Case(s) referred to in judgment(s):
Blomley v Ryan (1956) 99 CLR 362
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Doherty v Murphy [1996] 2 VR 553
Westpac Banking Corporation v Thorpe, unreported; SCt of WA; Library No 970465; 18 September 1997
Case(s) also cited:
Bridge Pump Co Pty Ltd v Myles Southwest Fuel Supplies Pty Ltd, unreported; SCt of WA; Library No 970636; 22 October 1997
Coulton v Holcombe (1986) 162 CLR 1
Esanda Finance Corporation Ltd v Snowlake Holdings and Others, unreported; SCt of WA; Library No 2823; 30 October 1992
Garcia v National Australia Bank Ltd [1998] HCA 48
Geelong Building Society (In Liq) v Encel [1996] 1 VR 594
Hussey v Horne-Payne (1878) 8 Ch D 670
Lill v Merchant Capital (WA) Ltd (1996) 15 WAR 536
Metwally v University of Wollongong (1985) 60 ALR 68
University of Wollongong v Metwally (No2) (1985) 59 ALJR 481
(Page 3)
Water Board v Moustakas (1988) 180 CLR 491
Yerkey v Jones (1939) 63 CLR 649
(Page 4)
1 JUDGMENT OF THE COURT: At an appropriately early stage of an action by the respondent against the appellant, the respondent applied for summary judgment. The Master who heard the application granted it in part and ordered that the appellant pay the respondent the sum of $191,727.29, inclusive of interest calculated to 27 September 2001. The balance of the application described as "relating to the Plaintiff's claim pursuant to the Visa Agreement and for possession of the property" was adjourned sine die.
2 The Master gave brief oral reasons ex tempore. He referred to the fact that the appellant, according to the evidence upon affidavit, was advancing a defence of unconscionability derived from the application of the leading authority, Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447. In addition, the Master referred to and distinguished the earlier decision of the High Court in Blomley v Ryan (1956) 99 CLR 362.
3 The Master found that on the evidence advanced there was no arguable defence of this character which might be made out. He specifically commented upon the appellant's capacity to speak English, that he was not lacking in business acumen and that it was not the respondent's fault that he had entered into a foolish deal with a man named Rashid. The Master thought the circumstances of this case were very different from Amadio and noted that the respondent was under no duty to make inquiries to ensure that the transaction with it was not likely to cause economic harm to the appellant by reason of the use to which he proposed to put money to be advanced to him by the respondent.
4 On the hearing of the appeal, this Court took the unusual and exceptional course of admitting a further affidavit of the appellant. It did so because the affidavit was concerned to put before the Court information about the appellant's financial circumstances at the time of his dealings with the respondent. There was little in the affidavit which was new or additional to the material contained in his affidavit upon which he relied before the Master.
5 At the hearing of the appeal, the appellant sought leave to amend the notice of appeal by adding a ground 1A. The ground was concerned to raise the point, not argued before the Master, that there was an incapacity to make an order of summary judgment because the statement of claim upon which the respondent relied was fundamentally defective and failed in specified respects to disclose a cause of action.
(Page 5)
6 That application was opposed, but because of the fundamental nature of the point sought to be made by the additional ground, the Court thought it proper to grant leave so that all matters desired to be raised by the appellant by way of challenge to the Master's decision could be ventilated. The additional arguments sought to be raised, if right, went fundamentally to the power to grant summary judgment and the circumstances of this case were therefore thought to be sufficiently exceptional to warrant the grant of leave to amend the grounds: cf Doherty v Murphy [1996] 2 VR 553.
7 So far as material to the application for summary judgment, to the extent that it was granted, the respondent's statement of claim pleads that it is a credit provider. The appellant entered into an agreement described as the "Equity Agreement" whereby the respondent agreed to provide the appellant with a continuing credit facility to a limit of $176,000 (described by the appellant as an "overdraft"). The agreement provided for the appellant to repay in monthly instalments monies drawn against this facility. The repayments were of principal and interest according to a formula set out in the agreement.
8 It was pleaded that in relation to an earlier borrowing the appellant had mortgaged property, of which he was the registered proprietor, to the respondent. The mortgage was, as is often the case, to secure the repayment, not only of the monies initially advanced, but also of monies subsequently advanced. The respondent pleaded that the mortgage secured the appellant's obligations under the Equity Agreement.
9 It pleaded that the appellant had "drawn on the equity account pursuant to the terms of the Equity Agreement". It was pleaded that in breach of the Equity Agreement the appellant "failed to make payments of the instalments of principal and interest" as provided in the agreement. It was pleaded that, the appellant having defaulted under the Equity Agreement, the respondent demanded repayment of the whole of the monies secured, as provided in the mortgage, but it was alleged that the appellant had "failed to remedy the said default". The statement of claim then pleaded that as at the date of the issue of the writ, the appellant was in default under the Equity Agreement to the extent of $24,411. As at that date it was pleaded that the "balance required to pay out the agreement" was $179,854.62. That sum was claimed, together with interest calculated pursuant to the agreement. Hence the judgment for the sum of $191,727.29 inclusive of interest.
(Page 6)
10 The appeal against the summary judgment is made upon the following grounds, as amended:
"1A. The Learned Master erred in law in holding that he had jurisdiction to hear the application for summary judgment in circumstances where the statement of claim fails to disclose a cause of action and/or is embarrassing because the statement of claim:
(a) fails to specify with respect to each facility:
(i) the amount actually advanced;
(ii) the dates of such advances;
(iii) the amount and dates of all repayments;
(b) fails to specify what default on behalf of the appellant (defendant) has led to the facility or facilities being called up.
1. The learned Master erred in law and in fact in holding that the appellant (defendant) was not in a position of special disadvantage. In so holding he failed to consider at all or adequately the following matters namely:
1.1 the appellant's (defendant's) status in life as a manual worker;
1.2 his lack of experience in the business venture for which purpose the loans were obtained;
1.3 his age;
1.4 the absence of a regular income and his financial need at the material times;
1.5 his inability as a pensioner to service the loans;
1.6 his lack of understanding and knowledge of the full extent of the predicament he was placing himself in at the time of obtaining the loans; and
1.7 his reliance on Rashid who victimised and perpetrated a scam on the appellant (defendant).
(Page 7)
- 2. The learned Master failed to consider or adequately consider the following matters:
2.1 the fact that the ultimate beneficiary of the amounts loaned, to the knowledge of the respondent (plaintiff) was Rashid and not the appellant (defendant) and this fact would or should have put the respondent (plaintiff) on inquiry before advancing the loans;
2.2 the respondent (plaintiff) knew or ought to have known that the appellant (defendant) was not able to and did not service the loans;
2.3 the inference, from the large amount readily loaned in the circumstances, that the sole concern and objective of the respondent (plaintiff) was the financial gain it sought to derive from advancing the loans;
2.4 the failure of the respondent (plaintiff) to fully explain to the appellant (defendant) the relevant loan agreements and the impact of the agreements and the amounts lent in the event of default by the appellant (defendant) in repaying the various sums borrowed;
2.5 the respondent (plaintiff) knew or ought to have known that the appellant (defendant) was a victim of a scam by Rashid.
3. The learned Master erred in resolving contentious issues of fact in a summary judgment application.
4. The learned Master should have found, in all of the circumstances of the case, it was unconscionable on the part of the respondent (plaintiff) to enforce the various loan agreements because the respondent (plaintiff) was or ought to have been aware, or put to inquiry, that the appellant (defendant) was in a position of special disadvantage and the respondent (plaintiff) acted unconscionably in advancing the various amounts to the appellant (defendant)."
(Page 8)
11 As to ground 1A, the appellant makes the point that under the Rules of the Supreme Court 1971 (WA) O 14 r 1, the power to make an application for summary judgment, which may be exercised by a plaintiff who has served a statement of claim on a defendant, is to be "on the ground that that defendant has no defence to a claim included in the writ, or to a particular part of such claim". O 14 r 3 then provides that unless the application is dismissed or the defendant satisfies the court that there is an issue or a question in dispute which ought to be tried, the court may give such judgment for the plaintiff against the defendant on the claim or any part thereof as may be just.
12 It is submitted that by reference to the statement of claim it must appear that the plaintiff has a cause of action known to the law which it is pursuing, and for that proposition reliance is placed upon the decision of Master Sanderson in Westpac Banking Corporation v Thorpe, unreported; SCt of WA; Library No 970465; 18 September 1997 at 6-7 where the learned Master said:
"…if there is a substantive failure in the statement of claim, the application for summary judgment cannot succeed. In other words, the cause of action must be apparent from the statement of claim even if the statement of claim is not of itself completed in a form which would be acceptable if the action were to proceed. … Put another way, the question is whether there is a want of form or a want of substance in the statement of claim. The former may not necessarily be fatal. The latter will always be so."
13 In our respectful opinion that is correct and putting it as the Master does effectively makes the point that the limitation on the power to grant judgment is that the plaintiff is pursuing a cause of action pleaded in a form which is known to the law, but a summary judgment application is not an occasion for objection to the form of pleading which may be properly taken by an application to strike out portions of a pleading.
14 While the statement of claim in this case may not be a model of proper pleading, in our opinion the respondent's asserted cause of action does sufficiently emerge. It is clear that the appellant entered into an agreement with it for the respondent to advance to the appellant monies up to the sum of $176,000. Those monies were to be paid by monthly periodic instalments of principal and interest calculated in accordance with the agreement. The obligation to repay the monies was secured by a mortgage granted by the appellant over certain land of which he was the
(Page 9)
- registered proprietor. If there was a default in making any payment the agreement was that upon demand the appellant became liable to repay the whole of the principal and interest outstanding at that time. As at a particular date the appellant had defaulted to the extent nominated in the statement of claim. At that time the respondent demanded the repayment of the whole sum owing, together with interest, asserting that it was entitled to make that demand pursuant to the agreement. The nature of the default was simply a failure to repay the monies advanced as required. The total amount claimed was specified. In our view, the cause of action upon which the respondent relies emerges from the statement of claim with sufficient clarity for the purposes of an application for summary judgment.
15 As to whether that order should have been made, grounds 1 to 4 inclusive may be taken together. From them it will be clear that the appellant sought to obtain leave to defend by advancing the proposition that the Equity Agreement should be set aside on the ground that the appellant was under a special disability which was or ought to have been evident to the respondent so as to make it unfair or unconscientious for the respondent to be allowed to rely upon the Equity Agreement, which should therefore be set aside unconditionally, leaving the respondent without a remedy to recover the money it had advanced to the appellant and which had not been repaid: Amadio per Mason J at 461 where his Honour said:
"Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interest."
16 His Honour went on to note that it was impossible to describe all the situations in which relief will be granted on the ground of unconscionable conduct. He referred to the judgment of Fullagar J in the earlier case of Blomley v Ryan at 405 where his Honour said:
"The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind,
(Page 10)
- drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other."
17 In Amadio, at 462, Mason J summarised his conclusion by referring to:
"…an underlying general principle which may be invoked whenever one party, by reason of some condition or circumstance, is placed at a special disadvantage vis-à-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created. I qualify the word 'disadvantage' by the adjective 'special' in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasise that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party."
18 It is an element of the defence that the party seeking to rely upon the unconscientious bargain made knows or ought to know of the particular circumstance or condition which will make it unfair or unconscientious to rely on the bargain. That is not a duty to inquire whether there may be any such circumstance or condition, but the defence may operate in reliance upon what is known or ought to be known by the plaintiff having regard to the way in which the parties have in fact dealt with each other.
19 As we have said, the affidavits upon which the appellant relies do not dispute the pleaded terms of the loan agreement or the mortgage. They do not dispute the asserted default or that under the agreement and the mortgage the amount claimed, together with interest, is owing. Reliance is placed entirely upon a defence of unconscionability.
20 The appellant deposes that he is a 63-year-old native of Cairo, in Egypt, who migrated to Australia in 1968. Since that time he has lived in Perth and has worked variously as a welder and with Westrail as a ticket issuer and a guard. Ten years before he made his affidavit he accepted redundancy and, since that time, he has received a disability pension, apart from a period in 1994 and 1995 when he worked as a self-employed
(Page 11)
- taxi-driver, until being granted an aged pension on 26 March 2002. That pension is $210 per week and he says his general living expenses are about $180 per week.
21 In 1993 he was loaned money by the predecessor in title of the present respondent. That loan was secured by a mortgage over his property. He used the proceeds to purchase the taxi. When that was sold he repaid the loan, but the mortgage was not discharged as a result of the appellant's decision, following a dispute with the respondent about the availability of a rebate for the early repayment of the loan.
22 The appellant deposes that in 1998 he was introduced to a man named Rashid, an Egyptian who lived in the United Kingdom and said he was a specialist in computers. His business, he said, was to buy computer parts at a low price in Taiwan and Hong Kong and sell them at a profit in Europe. Rashid persuaded the appellant to lend him money for the purposes of his business. As we understand it, computer parts were to be obtained from his sources and resold in Australia through a business known as "User-Friendly Computers" set up by the appellant's son to facilitate the venture. According to Rashid, the monies loaned to him would be repaid "together with 25% interest, within 2 or 3 weeks or at the latest within a month".
23 As we understand it, a number of loans were made to the appellant and were passed on to Rashid at his request. The appellant says he dealt with a Mr Place of the respondent company. He says he told Mr Place why he was seeking the loans. At one time, after Rashid left for England, the appellant recovered some monies he had advanced to Rashid and deposited them to the credit of his account with the respondent. Rashid promptly returned from England and convinced the appellant to make the advance again.
24 Rashid's bona fides and creditworthiness were established in the mind of the appellant when Rashid himself obtained a loan, secured by a mortgage, from the respondent to purchase land at Ocean Reef. The affidavit recounts further episodes of money being drawn by the appellant against the facility provided by the respondent and paid to Rashid.
25 The appellant says that he has received nothing from Rashid by way of repayment. He says that all his dealings were without the benefit of legal advice or accounting advice, necessary to be obtained he says because, "I do not have a mind for figures or calculations and I rely heavily on the professionals to advise me."
(Page 12)
26 He says that the significance and impact of the documents he signed were not explained to him, but he does not say that he did not understand them. What he does say is that he was unable to appreciate that he could not service a loan of $176,000 from his pension income, but of course the intention presumably was to service the loans obtained from the respondent out of the monies repaid to him by Rashid, together with interest at a very substantial rate.
27 The appellant's argument is that he was placing himself in an irretrievable predicament. He says that he was the "victim of a scam perpetrated by Rashid". That may be so, but he adds that, knowing that the money was to be paid to Rashid, the respondent should have understood this and that if the business arrangement failed he would not be able to service the loan.
28 However, there is nothing, we think, to show that it would be unconscientious for the respondent to enforce the agreement made. It was not for the respondent to inquire of the appellant whether the trust that he was placing in Rashid was well-founded. Particularly having regard to the respondent's previous dealings of this kind with the appellant, there was nothing to suggest to the respondent that he did not understand the agreements he was making or the obligations that he was undertaking. There was nothing to show that by reason of the appellant's age or his lack of formal education he was in need of special protection in relation to his financial dealings or that he was at a special disadvantage when dealing with the respondent.
29 In our opinion, the learned Master's decision is not open to challenge upon the grounds advanced. It was well open to the Master to conclude that there was not an issue or question in dispute which ought to be tried or that for some other reason there ought to be a trial of the respondent's claim. For these reasons, at the conclusion of the hearing of the appeal we were unanimously of the view that it ought to be dismissed with costs.
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