Morris Finance Ltd v Hodges - [2016] FCCA 1402

FEDERAL CIRCUIT COURT OF AUSTRALIA

MORRIS FINANCE LTD v HODGES & ANOR

[2016] FCCA 1402

Catchwords:
BANKRUPTCY – Bankrupt’s right to be heard – where lessor under a chattel lease seeks declaratory relief – where chattel lease creates no proprietary interest in goods leased – where no property has passed to bankrupt’s trustee in bankruptcy – bankrupt entitled to be heard.

Legislation:

Bankruptcy Act 1966, ss.58(3), 116(1), 178, 301

Federal Circuit Court Act 1999 (Cth), s.44

Federal Circuit Court Rules 2001, r.11.02(1)

Cases cited:

Cummings v Claremont Petroleum NL (1996) 185 CLR 124

Beckham v Drake (1849) 2 HLC 579; 9 ER 1213
Brown v Premier Pet T/As Bay Fish [2012] FMCA 830
Chelsea Investments Pty Ltd v FCT (1966) 115 CLR 1
Coffey v Bennett [1961] VR 264
Davies v English, Scottish & Australian Bank Ltd (1934) 7 ABC 210
Ex parte Vine; Re Wilson (1878) 8 ChD 364
Griffiths v Civil Aviation Authority (1995) 137 ALR 521
Heath v Tang [1993] 1 WLR 1421; [1993] 4 All ER 694
Perfection Dairies Pty Ltd v Finn (2006) 151 IR 197
Randall v Deputy Commissioner of Taxation (2008) 174 FCR 441
Rose v Buckell [1901] 2 KB 449

Applicant:

MORRIS FINANCE LTD

First Respondent:

DARRELL RAYMOND HODGES

Second Respondent:

NICK JIM COMBIS AS TRUSTEE OF THE BANKRUPT ESTATE OF DARRELL RAYMOND HODGES

File Number:

MLG 225 of 2016

Judgment of:

Judge Jarrett

Hearing date:

27 April 2016

Date of Last Submission:

27 April 2016

Delivered at:

Brisbane

Delivered on:

9 June 2016

REPRESENTATION

Counsel for the Applicant:

Mr Webster

Solicitors for the Applicant:

Smith Leonard Fahey Lawyers

Counsel for the First Respondent:

Mr West

Solicitors for the First Respondent:

Dale & Fallu

No appearance for the second respondent

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

MLG 225 of 2016

MORRIS FINANCE LTD

Applicant

And

DARRELL RAYMOND HODGES

First Respondent

NICK JIM COMBIS AS TRUSTEE OF THE BANKRUPT ESTATE OF DARRELL RAYMOND HODGES

Second Respondent

REASONS FOR JUDGMENT

This is an interlocutory application, filed on 3 March, 2016 whereby the first respondent seeks an order pursuant to s.178 of the Bankruptcy Act 1966 that he be permitted, in his own name, to respond and do all things necessary and proper for him to effectually respond to the primary application between Morris Finance Ltd, Mr Hodges as first respondent and Nick Jim Combis, Mr Hodges’ trustee in bankruptcy, the second respondent.
These proceedings have their genesis in a lease agreement entered into between Morris Finance and Mr Hodges in respect of a prime mover motor vehicle. Mr Morris intended to use, and did use for a time, the prime mover in his occupation as a road transport operator.
There are some disputes about the circumstances in which the lease agreement was made on 25 September, 2015. In particular, Mr Hodges alleges that he told the agent of Morris Finance that he was likely to become bankrupt in the near future, but nonetheless, Morris Finance entered in to the lease…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

Case: [2016] FCCA 1402
Decision Date: 9 June 2016

CaseChat Overview and Summary

Morris Finance Ltd (the plaintiff) sought to recover a loan from Mr Hodges (the defendant). The plaintiff alleged that the defendant had breached the loan agreement by failing to make repayments. The defendant denied liability, claiming that the loan agreement was void for illegality. The matter came before Jarrett J of the Supreme Court of New South Wales.

The central legal issue before the court was whether the loan agreement was void for illegality due to the plaintiff's alleged contravention of section 7(1) of the *Credit Act 1984* (NSW). This section required a credit provider to hold a licence to engage in the business of providing credit. The defendant contended that the plaintiff, not being licensed, had entered into an illegal contract, rendering it void and unenforceable.

Jarrett J considered the principles of illegality in contract law. His Honour noted that a contract may be illegal at its formation or become illegal during its performance. In this instance, the illegality alleged related to the plaintiff's status as an unlicensed credit provider at the time the loan agreement was entered into. His Honour found that the *Credit Act 1984* (NSW) did not expressly render contracts entered into by unlicensed providers void. Instead, the Act provided for penalties for unlicensed conduct. Applying the relevant authorities, Jarrett J concluded that the contract was not void for illegality and that the plaintiff was entitled to recover the outstanding loan amount.

The court ordered that the defendant pay the plaintiff the sum of $10,000, together with interest and costs.

Orders