Permanent Trustee Company Limited v O'Donnell and Anor; Permanent Trustee Company Limited v Di Benedetto and Anor; Tonto Home Loans Australia Pty Limited v Tavares and Anor

[2009] NSWSC 271

CITATION:	Permanent Trustee Company Limited v O'Donnell and Anor; Permanent Trustee Company Limited v Di Benedetto and Anor; Tonto Home Loans Australia Pty Limited v Tavares and Anor [2009] NSWSC 271
HEARING DATE(S):	1 April 2009
JUDGMENT DATE :	6 April 2009
JURISDICTION:	Common Law
JUDGMENT OF:	Price J at 1
DECISION:	Offer of assistance from ASIC by way of exhibited material declined
CATCHWORDS:	Practice and Prodedure - Evidence - admissibility - intervention by ASIC - whether material subject to rules of evidence - whether material sufficiently convincing to be taken into account
LEGISLATION CITED:	Commonwealth Constitution s 51(vi) Acts Interpretation Act 1901 (Cth) s 15AB Australian Securities & Investment Commission Act 2001 (Cth) s 12A(2), s 12BC(1), s 12CC(1) Contracts Review Act 1980 s 9 Corporations Act 2001 (Cth) s 1330(2) Criminal Code (Cth) Subdiv 4 of Div 104 Evidence Act 1995 s 144 Interpretation Act 1987 s 34
CATEGORY:	Procedural and other rulings
CASES CITED:	Elkofari v Permanent Trustee Co Ltd (2003) 11 BPR 20,841 GPG (Australia Trading) Pty Ltd v GIO Holding (2001) 117 FCR 23 Permanent Trustee Co Ltd v Khoshaba [2006] NSWCA 41 Thomas v Mowbray (2008) 233 CLR 307 Woods v Multi-Sport Holdings Pty Ltd (2008) 208 CLR 460
PARTIES:	Permanent Trustee Company Limited (Plaintiff) Gillian O'Donnell & Anor (Defendant) Permanent Trustee Company Limited (Plaintiff) Maria Di Benedetto & Anor (Defendant) Tonto Home Loans Australia Pty Limited (Plaintiff) Jose De Carvalho E Rego Tavares & Anor (Defendant)
FILE NUMBER(S):	SC 12148/06; 12147/06; 15644/05
COUNSEL:	A.G. Bell SC / A.J. Abadee (Plaintiffs) P. Menzies QC / A. Fernon (Defendants) R. Wright SC / J.A. Arnott (Intervenor ASIC)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

Price J

6 April 2009

12148/06 Permanent Trustee Company Limited v Gillian O’Donnell & Anor
12147/06 Permanent Trustee Company Limited v Lawrence Di Benedetto & Anor
15644/05 Tonto Home Loans Australia Pty Limited v Jose Carvalho E Rego Tavares & Anor

1 HIS HONOUR: The Australian Securities and Investment Commission (ASIC) proposes to place material before the Court which is exhibited to an affidavit of William John Bennett (the Bennett affidavit) sworn 9 March 2009. ASIC has intervened in the proceedings in its role in upholding the public interest in the proper functioning of the Australian financial system. Pursuant to s 1330(2) of the Corporations Act 2001 (Cth), ASIC is taken to be a party to the proceedings and has all the rights, duties and liabilities of such a party.

2 The material exhibited to the Bennett affidavit includes ASIC Report 119 “Protecting wealth in the family home: An examination of refinancing in response to mortgage stress” and documents listed under the heading “Reports and Speeches” on page 44 of ASIC Report 119.

3 The purpose identified for the tender of the material was that it was said by Mr Wright SC to provide assistance in the construction of “market integrity” in s 12A(2) of the Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act), “conduct that is, in all the circumstances unconscionable” ss 12BC(1), 12CC(1) of the ASIC Act, and issues arising as to what is in “the public interest” under s 9 of the Contracts Review Act 1980. A further avenue of assistance identified was the development of the common law. None of the material, Mr Wright said, went to the facts in issue in the proceedings. The contention for ASIC is that the material is not governed by the rules of evidence.

4 ASIC’s contention is founded upon the five categories of fact identified by Heydon J in Thomas v Mowbray (2008) 233 CLR 307. Heydon J said at [614]:

‘The first group comprises facts which are facts in issue, or relevant to facts in issue. Dixon CJ described them as "ordinary questions of fact which arise between the parties because one asserts and the other denies that events have occurred bringing one of them within some criterion of liability or excuse set up by the law". The second group concerns facts going to the constitutional validity of statutes, other enactments, or executive acts done under those statutes or enactments. Dixon CJ sharply distinguished these facts from those in the first group in a respect set out below. The third concerns facts going to the construction of non-constitutional statutes. The fourth concerns facts going to the construction of constitutional statutes. The fifth concerns facts which relate to the content and development of the common law.’

And at [629]:

‘Hence the Court can receive evidence of constitutional facts which complies with the rules of admissibility applying to category one. But it is not limited to that material. Thus, for example, the Court may take judicial notice on conventional principles. However, many constitutional facts (and facts falling within categories three, four and five) are incapable of being judicially noticed by recourse either to common law principles or to statutory principles applying to facts in category one because they are controversial rather than beyond dispute. The Court may seek to draw inferences from the challenged legislation. It may, of course, rely on agreed facts, whether the agreement stems from admissions on the pleadings, or is reflected in a stated case, or arises from a formal admission, or has some other source. It may rely on the accuracy of allegations of fact made in a statement of claim to which the defendant has demurred. It has been said that it may require the parties to provide further factual material. But beyond these possibilities, all relevant material may be brought to the Court's attention, independently of any of the general law rules as to admissibility in relation to facts in issue.’

5 Mr Wright submitted that the exhibited material falls within Heydon J’s third and fifth categories as concerning facts “going to the construction of non-constitutional statutes” and “which relate to the content and development of the common law”. Included in the exhibited material are reports which emanate from public regulatory bodies such as ASIC and the Australian Prudential Regulation Authority (APRA) and from the House of Representatives Standing Committee on Economics, Finance and Public Administration. Report 119 which draws on a “qualitative examination” of a small number of transactions includes an analysis of the practice of ‘equity stripping’, where vulnerable borrowers in financial stress are refinanced by mortgage brokers on the fringe of the industry into loans the borrowers cannot afford in order that the brokers might earn substantial fees. Report 119 was published by ASIC in March 2008. Report 19, “A report to ASIC on the finance and mortgage broker industry”, by the Consumer Credit Legal Centre (NSW) Inc in March 2003 contains an analysis of the broker industry and identifies, inter alia, the range of problems being experienced by consumers through case studies and surveys. The “Report on Broker-Originated Lending” published by APRA in January 2003 presents the results and analysis of a survey of Australian Authorised Deposit Taking Institutions (ADTIs) into broker-originated lending. The report on “Home loan lending” resulted from the inquiry by the House of Representatives Standing Committee into home loan lending practices and processes used to deal with people in financial difficulty. The Committee’s report was published in September 2007. The Fujitsu-JP Morgan report entitled “Australian Mortgage Industry – Volume 2” published in October 2005 focuses on the growth of ‘Low-Doc Loans’ in the Australian Mortgage Industry and the “Wizard-Fujitsu Report on Predatory Home Lending” identifies and discusses predatory lending practices. This report was published in September 2007. A “Regulatory Impact Statement Discussion Paper” which canvassed possible regulatory approaches and proposals for a national regime of the broking market and invited submissions was published in 2004.

6 None of the exhibited material was published for the purpose of the present litigation. The reports published by ASIC, APRA, the House of Representatives Standing Committee and the Regulatory Impact Discussion Paper may be regarded as being of an official nature.

7 Mr Wright explained that ASIC was not seeking to rely on judicial notice or the common knowledge provisions of the Evidence Act 1995 (s 144) for the tender of the exhibited material nor was it suggested that it was extrinsic material to be used in the interpretation of the relevant Acts pursuant to s 15AB of the Acts Interpretation Act 1901 (Cth) or s 34 of the Interpretation Act 1987.

8 The plaintiffs objected to ASIC’s provision of assistance to the Court by way of the exhibited material. Mr Bell SC argued that the exhibited material was subject to the rules of evidence and was not otherwise admissible. Mr Bell referred to what was described as a clear and unresolved clash of opinions in Thomas v Mowbray of the Justices of the High Court who considered how constitutional facts may be established. Furthermore, to the extent that Heydon J ventured views upon proof of facts outside of the constitutional context, Mr Bell pointed out that he was the only judge who did so and Heydon J’s observations were obiter dicta.

9 The High Court in Thomas v Mowbray considered the validity of subdivision 4 of Division 104 of the Criminal Code (Cth) pursuant to which an interim control order had been made. The majority of the Court (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ) determined that the legislation was supported by s 51(vi) of the Commonwealth Constitution. Kirby, Callinan and Heydon JJ in the course of their judgments considered the establishment of constitutional facts.

10 Kirby J said at [228]:

‘It is important to understand the distinction that may arise, in this context, between facts of which this Court may take "judicial notice", and "constitutional facts". If the form of the power makes the existence of some special or particular state of fact a condition of its exercise, then, no doubt, the existence of that state of fact may be proved or disproved by evidence like any other matter of fact. But ordinarily the court does not go beyond matters of which it may take judicial notice. This means that for its facts the court must depend upon matters of general public knowledge. It may be that in this respect the field open to the court is wider than has been commonly supposed.’

11 Callinan J observed at [526]:

‘A comprehensive and satisfactory definition of constitutional facts is not easy to state. In my view, constitutional facts in cases of contested constitutional powers should be taken to be facts justifying, or calling for, the exercise of the relevant power, and as to which its exercise is reasonably capable of applying. They are, if in controversy, no less required to be established, than any other facts in issue. This means they must be proved in the same way as other facts are proved, or be sufficiently notorious to be within judicial notice, or ascertainable by reference to indisputably
reputable and broadly accepted historical writings, or within a special category which I would describe as "official facts", being, for example, official published statistics, scrupulously collected and compiled, information contained in parliamentary reports, explanatory memoranda, Second Reading Speeches, reports and findings of Commissions of Inquiry, and, in exceptional circumstances, materials generated by organs of the Executive. A deal of care needs to be taken with respect to "official facts" which of course the Court will not be bound to accept in any or all cases.’

12 During submissions in the present proceedings there was some discussion of an apparent disagreement between McHugh J and Callinan J in Woods v Multi-Sport Holdings Pty Limited (2002) 208 CLR 460 on the caution to be employed by courts in relation to judicial notice of “legislative facts” (facts which help a court determine the content of law and policy) and to the exercise of discretion or judgment in determining what course of action to take: Woods v Multi-Sport Holdings Pty Limited per McHugh J at [65]; Cross on Evidence, 7th Aust ed. 145. It is unnecessary for present purposes to explore this issue as ASIC does not ask the Court to take “judicial notice“ of the exhibited material as legislative facts but places reliance on the third and fifth categories of evidence enunciated by Heydon J in Thomas v Mowbray.

13 It is to be noted that Heydon J at footnote 863 in Thomas v Mowbray referred to Woods v Multi-Sport Holdings Pty Limited as being a case concerning facts within the fifth category and observed (footnote 862) that it is relevant to bear in mind the cautious approach advocated by Callinan J in relation to category five facts. Callinan J said in Thomas v Mowbray at [529]:

“In Woods v Multi-Sport Holdings Pty Ltd, although it was not a constitutional case, I expressed my concern that the statistics relied upon by McHugh J were by no means probative of the state of affairs said to justify the conclusions of fact and law reached by his Honour, and the risk of unfairness to which their use gave rise.”

14 Heydon J in Thomas v Mowbray recognised that there are limits on the capacity of a court to take constitutional facts into account if there was no need to comply with the rules of evidence. Heydon J said at [639]:

“Important questions remain. If the rules of evidence need not be complied with, what limits are there on the capacity of the Court to take constitutional facts into account? The material ought to be sufficiently convincing to justify the conclusion that it supports a material constitutional fact, but does any more restrictive rule exist?”

15 Whilst posing further questions for consideration, his Honour reserved “them for resolution in further cases”. It seems, however, that for facts which are said to fall within categories three and five, the material must not only be relevant but sufficiently convincing to justify a court taking them into account although the rules of evidence need not be complied with.

16 I am informed that ASIC in its role as intervenor has not previously adopted an approach such as the present. Although matters of legal complexity and uncertainty have been raised in argument, it seems to me that the question for the Court’s determination is capable of simple resolution.

17 The purpose of the proposed tender is to provide the assistance which has been described at [3] above. Issues of public interest, principles of unconscionable conduct and the meaning of the unwritten law have been the subject of many judicial decisions: see, for example, Elkofari v Permanent Trustee Company Limited (2003) 11 BPR 20,841; GPG (Australia Trading) Pty Limited v GIO Holdings (2001) 117 FCR 23 and Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41. A perusal of the exhibited material which amounts to 551 pages and is mostly of a background nature leads me to conclude that it provides little assistance in the construction of the identified sections in the ASIC Act and the Contracts Review Act nor does it materially assist with issues of public interest or the development of the common law. The material is not sufficiently convincing to be considered of assistance to the Court. It seems to me in the present proceedings unnecessary to go beyond the adjudicative facts.

18 For the foregoing reasons I decline ASIC’s offer of assistance by way of the exhibited material.

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