Perpetual Trustee Company Ltd v Burniston [No 2] - [2012] WASC 383

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: PERPETUAL TRUSTEE COMPANY LTD -v- BURNISTON [No 2] [2012] WASC 383

CORAM: EDELMAN J

HEARD: 5-8 JUNE & 15 AUGUST 2012

DELIVERED : 15 OCTOBER 2012

FILE NO/S: CIV 2900 of 2009

BETWEEN: PERPETUAL TRUSTEE COMPANY LTD
Plaintiff
AND
MICHAEL BURNISTON
ANN BURNISTON
Defendants
(BY ORIGINAL ACTION)
MICHAEL BURNISTON
ANN BURNISTON
Plaintiff
AND
PERPETUAL TRUSTEE COMPANY LTD
Defendant
(BY COUNTERCLAIM)

Catchwords:

Agency - Sub-agency - Whether finance broker was a sub-agent of the agent of a lender - Indicia of agency - Requirements for liability of sub-agent to be imputed to agent's principal - Operation of agency principles under the Australian Securities and Investments Commission Act 2001 (Cth) - Scope of any agency - No relationship of agency present

Vicarious liability - Relationship with agency - Need for recognised relationship such as employment to justify the policy basis for imposing vicarious liability - No vicarious liability for vicarious liability - No basis for vicarious liability

Property - Mortgages - Notice of demand - Error in an amount of total debt which was not part of the demand - Whether certificate of the debt due is required - Whether notice of default failed to identify the relevant breach - Notice of default valid

Trade practices - Misleading or deceptive conduct - Unconscionable conduct - Meaning of unconscionable conduct within the meaning of the unwritten law - Meaning of conduct which is in all the circumstances unconscionable - Relationship between different meanings of unconscionable conduct - Consideration of legislative indicia of unconscionable conduct - Conduct by lender was not unconscionable

Contract - Implication of terms - Necessity for implication of term to meet five requirements - Requirements of implication of term not met

Contract - Rectification - Common mistake - No basis for rectification either on the basis of objective intention or subjective intention

Torts - Negligence - Duty of care - Whether lender owes borrower a duty to warn of risks of fraud - Whether lender owes borrower a duty to warn or guard against risks of loss - Role of assumption of responsibility - No assumption of responsibility - Role of vulnerability - No vulnerability - No duty owed

Remedies - Terms upon which a declaration that contract is void should be made - Analogy with rescission - Any declaration should only be made on terms that borrower repay money lent with interest

Damages - Causation - Absence of sufficient evidence of causation of loss

Legislation:

Australian Securities and Investments Commission Act 2001 (Cth), s 12BB, s 12CA, s 12CB, s 12CC, s 12DA, s 12DF, s 12GF, s 12GH
Evidence Act 1906 (WA), s 79C(2a)
Trade Practices Act 1974 (Cth), s 84(2)

Result:

Possession to be ordered and judgment for the plaintiff in the amount of $364,971.49

Category: A

Representation:

Original Action

Counsel:

Plaintiff: Ms C H Thompson
Defendants: Mr C M Slater

Solicitors:

Plaintiff: Gadens Lawyers
Defendants: Legal Aid (WA)

Counterclaim

Counsel:

Plaintiff: Mr C M Slater
Defendant: Ms C H Thompson

Solicitors:

Plaintiff: Legal Aid (WA)
Defendant: Gadens Lawyers

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

Ackworth v Kempe (1778) 1 Doug 40; 99 ER 30
AG of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988
Astley v Austrust Ltd [1999] HCA 6; 197 CLR 1
Attorney General of New South Wales v World Best Holdings Ltd [2005] NSWCA 261; (2005) 63 NSWLR 557
Attorney-General (NSW) ex rel Tooth & Co Ltd v Brewery Employees' Union of NSW [1908] HCA 94; (1908) 6 CLR 469
Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51
Australian Competition and Consumer Commission v Maritime Union of Australia [2001] FCA 1549; (2001) 114 FCR 472
Barclay v Penberthy [2012] HCA 40
Bell v State of Western Australia [2004] WASCA 205; (2004) 28 WAR 555
Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256
Blackley Investments Pty Ltd v Burnie City Council [2011] TASFC 6
Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362
Body Bronze International Pty Ltd v Fehcorp Pty Ltd [2011] VSCA 196; (2011) 282 ALR 571
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Bridgewater v Leahy [1998] HCA 66; 194 CLR 457
Bunbury Foods Pty Ltd v National Bank of Australasia Ltd [1984] HCA 10; (1984) 153 CLR 491
Burnie Port Authority v General Jones Pty Ltd [1994] HCA 13; (1994) 179 CLR 520
Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253
Canon Australia Pty Ltd v Patton [2007] NSWCA 246; (2007) 244 ALR 759
Car & Universal Finance Co Ltd v Caldwell [1965] 1 QB 525
Chandler v Broughton (1832) 1 Cr & M 29; 149 ER 301
Citibank Ltd v Pilgrim [2001] WASC 129
Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337
Colonial Mutual Life Assurance Society Ltd v Producers & Citizens Cooperative Assurance Co of Australia Ltd [1931] HCA 53; (1931) 46 CLR 41
Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447
Commonwealth Bank of Australia v Shaddick [2011] WASC 205
Commonwealth v Connell (1986) 5 NSWLR 218
Con-stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited [1986] HCA 14; (1986) 160 CLR 226
Cook v Cook [1986] HCA 73; (1986) 162 CLR 376
Cowell v Corrective Services Commission of NSW (1988) 13 NSWLR 714
Credit Services Investments Ltd v Evans [1974] 2 NZLR 683
Custom Credit Corporation Ltd v Lynch [1993] 2 VR 469
Darling Island Stevedoring and Lighterage Company v Long [1957] HCA 26; (1957) 97 CLR 36
Davies v Adelaide Chemical and Fertilizer Co Ltd [1946] HCA 47; (1946) 74 CLR 541
De Bruyn v South Australia (1990) 54 SASR 231
De Bussche v Alt (1878) 8 ChD 286
Donohoe v The Director of Public Prosecutions (WA) [2011] WASCA 239
Durban Roodepoort Deep, Ltd v Newshore Nominees Pty Ltd [2005] WASCA 231
Durham v BAI (Run Off) Ltd [2012] UKSC 14
Errichetti Nominees Pty Ltd v Paterson Group Architects Pty Ltd [2007] WASC 77
Esanda Finance Corporation Ltd v Spence Financial Group Pty Ltd [2006] WASC 177
Fairworld Holdings Pty Ltd v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) [No 3] [2012] WASC 190
Fazio v Fazio [2012] WASCA 72
Ferguson v Wilson (1866) LR 2 Ch App 77
Gunn v Land Mortgage Bank of Victoria Ltd (1890) 12 ALT 49
Hall v Hall [2007] WASC 34
Hedley Byrne & Co Ltd v Heller & Partners Ltd (TA/s 'Hedley') [1964] AC 465
Henderson v Merrett Syndicates Ltd [1995] 2 AC 145
Hill v Van Erp [1997] HCA 9; (1997) 188 CLR 159
Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21
Hutchinson v The York, Newcastle and Berwick Railway Co (1850) 5 Exch 343; 155 ER 150
In re Eastgate ex parte Ward (1905) 1 KB 465
International Harvester Co of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Co [1958] HCA 16; (1958) 100 CLR 644
Investment Realty Pty Ltd v Capital Finance Australia Ltd [2010] NSWSC 993
Irving v Commissioner of Titles [1963] WAR 67
J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers Western Australian Branch (1992) 111 ALR 502
John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1
Jones v Bouffier [1911] HCA 7; (1911) 12 CLR 579
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Jones v Staveley Iron and Chemical Co Ltd [1955] 1 QB 474
Kable v State of New South Wales [2012] NSWCA 243
Kennedy v De Trafford [1897] AC 180
Kirkpatrick v Kotis (2004) 62 NSWLR 567
Kison v Papasian (1994) 61 SASR 567
Kondis v State Transport Authority [1984] HCA 61; (1984) 154 CLR 672
Laugher v Pointer (1826) 2 B & C 547; 108 ER 204
Lisciandro v Official Trustee in Bankruptcy (1995) ATPR 40,897
Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449
Majrowski v Guy's & St Thomas's NHS Trust [2006] UKHL 34, [2007] 1 AC 224
Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494
Mayfair Trading Co Pty Ltd v Dreyer [1958] HCA 55; (1958) 101 CLR 428
McKay v Commissioner of Main Roads [No 2] [2010] WASC 153
Mears v Safecar Security Ltd [1983] QB 54
Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1
Middleton v Fowler (1699) 1 Salk 282; 91 ER 247
Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; (2010) 241 CLR 357
Moore v BNY Trust Company of Australia Ltd [2012] WASCA 188
Morgans v Launchbury [1973] AC 127
New South Wales v Ibbett [2006] HCA 57; (2006) 229 CLR 638
New South Wales v Lepore [2003] HCA 4; (2003) 212 CLR 511
NMFM Property Pty Ltd v Citibank Ltd (No 10) [2000] FCA 1558; (2000) 107 FCR 270
Nocton v Lord Ashburton [1914] AC 932
Northern Sandblasting Pty Ltd v Harris [1997] HCA 39; (1997) 188 CLR 313
O'Brien v Dawson [1942] HCA 8; (1942) 66 CLR 18
Octapon Pty Ltd v Esanda Finance Corporation Ltd (Unreported, NSWSC, 3 February 1989)
O'Keefe v London and Edinburgh Insurance Co Ltd [1927] NI 85
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Parker v Commonwealth [1965] HCA 12; (1965) 112 CLR 295
Pennington v Norris [1956] HCA 26; (1956) 96 CLR 10
Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353
Permanent Trustee Company Ltd v O'Donnell [2009] NSWSC 902
Perpetual Trustee Company Ltd v Burniston [No 2] [2012] WASC 383 (S)
Perpetual Trustees Australia Ltd v Schmidt [2010] VSC 67
Perpetual Trustees Victoria Ltd v Longobardi [2009] NSWSC 654
Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180
Pinkstone v The Queen [2004] HCA 23; (2004) 219 CLR 444
Pollard v Wilson [2010] NSWCA 68
R v Slator (1881) 8 QBD 267
Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271
Riz v Perpetual Trustee Australia Ltd [2007] NSWSC 1153
Rose v Plenty [1976] 1 WLR 141
Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603
Schellenberg v Tunnel Holdings Pty Ltd [2000] HCA 18; 200 CLR 121
Scott v Davis [2000] HCA 52; (2000) 204 CLR 333
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596
Shire of Manjimup v Cheetham [2010] WASCA 225
Smith v McCusker QC [No 7] [2011] WASC 88
Smith v Smith [2004] NSWSC 663
South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541; (2000) 177 ALR 611
Sweeney v Boylan Nominees Pty Ltd [2006] HCA 19; (2006) 226 CLR 161
Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422
The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 3] [2012] WASCA 157
The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1
The Finance Brokers Supervisory Board v Van Stokkum [2006] WASCA 97
Tilley v Bowman Ltd [1910] 1 KB 745
Tipperary Developments Pty Ltd v The State of Western Australia [2009] WASCA 126
Tipperary Developments Pty Ltd v The State of Western Australia [2010] HCATrans 136
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165
Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389
Tooth and Co Ltd v Tillyer [1956] HCA 49; (1956) 95 CLR 605
Trade Practices Commission v Queensland Aggregates Pty Ltd (No 3) (1982) 61 FLR 52
Trade Practices Commission v Tubemakers of Australia Ltd (No 2) (1983) 47 ALR 719
Transfield Pty Ltd v Arlo International Ltd [1980] HCA 15; (1980) 144 CLR 83
Tutt v Doyle (1997) 42 NSWLR 10
Walplan Pty Ltd v Wallace (1985) 8 FCR 27
We Are Here Pty Ltd v Zandata Pty Ltd [2010] NSWSC 262
Westpac Banking Corporation v The Bell Group Ltd (in liq) [No 3] [2012] WASCA 157
Whild v G E Mortgage Solutions Ltd [2012] VSC 212
Woodgate v Knatchbull (1787) 2 TR 148; 100 ER 80
Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 216 CLR 515
Yap Cheng See v Challenge Bank Ltd (Unreported, WASC, Library No 970695, 12 December 1997)
Young v Edward Box & Co Ltd [1951] 1 TLR 789

TABLE OF CONTENTS

Introduction
The structure of these reasons and the legal issues involved

Background

The Burnistons and their investments with Ms Thompson from 2006
The Burnistons appoint Mortgage Miracles as a finance broker in December 2007 and make offers to purchase property
Mortgage Miracles is 'accredited' by Collins Securities in June 2008
The sale of the Burnistons' Thornlie property in June 2008
The Burnistons' purchase of the Huntingdale property on 1 July 2008
The Burnistons obtain finance from Collins Securities on 17 July 2008
The Burnistons' 28 July 2008 deed of agreement with Ms Thompson
The 28 July 2008 payment to Ms Thompson by the Burnistons after the sale of their Thornlie property
The loan and mortgage from Perpetual drawn down on 4 August 2008
Ms Thompson ceases making payments to the Burnistons in September 2008
Suspension and termination of the appointment of Mortgage Miracles

Was default under the loan proved?

The quantum of the debt demanded in the default notices
Other alleged defects in the notices of demand
The quantum of the total debt
Conclusions on the default notices and the debt due

The documentary structure underlying the transaction

The Master Trust Deed
The Series Notice
The Sale, Origination and Servicing Agreement (SOS Agreement)
The Lending Manual
The Sub‑Originator Agreement and the power to appoint Mortgage Miracles

The Streetwise decision in the New South Wales Court of Appeal

The agency reasoning in the Streetwise litigation
The unconscionable conduct reasoning in the Streetwise litigation
The conclusions in the Streetwise appeals

The legal wrongdoing of Ms Thompson and Mortgage Miracles

The unconscionable conduct by Mortgage Miracles
The misleading or deceptive conduct by Mortgage Miracles

Agency and vicarious liability at common law

The common law and the statutory basis for an agent's liability
The meaning of agency
Attribution of acts or attribution of liability?
The acts of Ms Thompson which cannot be attributed to Mortgage Miracles
Can acts of Mortgage Miracles be attributed to Collins Securities or Perpetual?

(1)          The first obstacle: double attribution of acts
(2)          The second obstacle: no relationship of agency between Mortgage Miracles and Collins Securities
(3)          The third obstacle: any relationship of agency between Mortgage Miracles and Collins Securities did not extend to the relevant acts

Vicarious liability: can the liability of Mortgage Miracles be attributed to Collins Securities or Perpetual?

(1) The first obstacle: double attribution of liability
(2) The second obstacle: no recognised relationship for imposition of vicarious liability

Agency under the ASIC Act

Attribution of Ms Thompson's conduct to Mortgage Miracles
Attribution of the conduct of Mortgage Miracles to Perpetual

The first obstacle: the requirement that the conduct be 'on behalf of' Perpetual
The second obstacle: agency or acting by 'direction, consent or agreement' of an agent
Conclusions on attribution of the conduct of Mortgage Miracles to Perpetual under the ASIC Act

The misleading or deceptive conduct claims based on agency

The unconscionable conduct claim based on agency

The unconscionable conduct provisions in the ASIC Act
The plea based upon attribution of unconscionable conduct by agency

The direct claim of unconscionable conduct by Perpetual or Collins Securities
A duty of care to warn or to guard against risk of loss?
Contributory negligence
Incorporation of an oral term into the Loan Agreement
An implied term that Ms Thompson would make the loan repayments?

Rectification
Misrepresentation and mistake

Remedies

Declarations that the Loan Agreement is void in whole or in part

Damages

Conclusion
Schedule 1: Direct credit payments from the Broker to the Borrowers
Schedule 2: Cheques from Ms Thompson deposited by the Burnistons
Schedule 3: Direct credits to Collins Securities by Ms Thompson
Schedule 4: Direct credit from Collins Securities to the Burnistons

EDELMAN J:
Various names in these reasons were anonymised and a small number of sentences were suppressed for reasons I explained in Perpetual Trustee Company Ltd v Burniston [No 2] [2012] WASC 383 (S). The suppression was lifted on 23 April 2013.

Introduction

In the years following the Global Financial Crisis, courts have seen numerous cases involving misrepresentations and other legal wrongdoing which were not exposed until defaults occurred under loan agreements. Many of these cases involved a type of loan colloquially described as a 'low‑documentary' or 'lo‑doc' loan. Hindsight has shown that these loans, with little documentary information provided to the lender, bore a substantial risk of default and a real possibility of legal wrongdoing. These loans are often euphemistically described as falling within the category 'sub-prime'.
A common lending structure in cases which have reached the courts involves a lender appointing an 'originator' whose function is to introduce borrowers to the lender, ie to 'originate' loans. The originator sometimes appoints a sub‑originator. If, as in this case, the sub‑originator engages in unlawful conduct, then a host of legal issues arise. Are the originator and the lender responsible for the conduct of the sub‑originator? Is the sub‑originator an agent for the originator, or for the borrower? Is the lender independently liable? What relief should be given? Different results have been reached in different cases because different cases have often involved different transaction documents, different facts, different claims, and some States have different legislation.[1]
[1] Most notably the Contracts Review Act 1980 (NSW) which has no counterpart in Western Australia.
The defendants in this case are Mr and Mrs Burniston. They are pensioners. In 2004 they immigrated to Australia to be near their children and grandchildren. They are upstanding members of the community who give their time and energy to charities. It is hard not to have sympathy for the situation in which they find themselves.
From 2005 the Burnistons paid money to a woman named Ms Thompson who was not a witness in this case. The Burnistons were told by Ms Thompson that the money they invested with her was for loans that would generate a return for the Burnistons. Although there was no evidence concerning any such loan, it appeared to the Burnistons as though loans were made which generated substantial returns. Those returns were paid to the Burnistons by Ms Thompson. Enticed by this apparent success, in 2008 the Burnistons sold their only asset, their home, and invested $235,000 from the proceeds with Ms Thompson. The $235,000 was paid to her as part of an investment agreement which was documented in a deed in which Ms Thompson promised the Burnistons 17.5% return. The purpose of the return was to enable the Burnistons to repay a loan which they obtained from Perpetual Trustee Co Ltd (Perpetual) and which was used for the purchase of a new home.
The loan from Perpetual was also procured by misrepresentations. Ms Thompson, acting as an agent for a sub‑originator, Mortgage Miracles Pty Ltd, assisted the Burnistons to enter a loan agreement with Perpetual for $344,911.14, secured by a mortgage, for the purchase of a new home in Huntingdale. This lo‑doc loan was made by Perpetual after Ms Thompson made misrepresentations including that the Burnistons were self-employed and that they had substantial income.
Perpetual now seeks repayment of the money owing by the Burnistons, with interest, as well as an order for possession of the Huntingdale property. The Burnistons seek various remedies, primarily a declaration that the loan and mortgage should be declared void, with the consequence which they assumed to be that they would not have to repay to Perpetual any of the $344,911.14 which Perpetual paid to them, or any interest upon it.
At the heart of this litigation was the question of the extent to which Perpetual is responsible for the conduct of Mortgage Miracles. A litany of legal issues were cancatervated. The Burnistons submitted that Perpetual's demand for payment was defective; they alleged that statutory preconditions for payment were not met; they pleaded unconscionable conduct (in various different forms); they pleaded misleading or deceptive conduct; they sought rectification of the loan agreement; they pleaded that terms should be implied into the loan agreement; they pleaded that the loan agreement was partly oral and partly written; they pleaded a duty of care and negligence by Perpetual; they raised issues of agency and vicarious liability; and they relied upon an extended legislative concept of agency. Other issues upon which submissions were made, considered below, included contributory negligence, mistake and misrepresentation, and remedies.

Some of the issues raised by the Burnistons are of considerable legal importance. For instance, central issues in this case involved difficult questions of agency and vicarious liability. These concepts, and their interrelationship, remain unsettled in some respects. Both counsel made thorough submissions on these concepts. However, there are a number of insurmountable obstacles to the Burnistons' agency arguments. The failure in relation to agency and vicarious liability is one of the primary reasons why the Burnistons' case cannot succeed.
The submissions of the parties focused upon liability. There was little attention given to remedy. Even if the loan agreement had been held to be void, as the Burnistons sought, a further question would have been whether any conditions should attach to that relief.
The Burnistons obtained from Perpetual the benefit of $344,911.44 which was used for the purchase of their new home in which they have lived for more than four years. But the assumption upon which the Burnistons conducted this litigation was that if their loan agreement and mortgage with Perpetual were declared to be void then they could avoid repaying to Perpetual either all of the loan or at least $235,000 of it. That assumption is incorrect.
The $235,000 which the Burnistons invested with Ms Thompson developed from the Burnistons' relationship with her based upon the loans they made, investing money with her, in 2006 and 2007. The discussions which led to the Burnistons' sale of their house and their investment with Ms Thompson took place in late 2007. The Burnistons put their house on the market in November 2007. They entered a sale contract for their home in June 2008. They entered a contract to purchase a new property in Huntingdale on 1 July 2008. All of these events occurred before the Burnistons even contacted Collins Securities Pty Ltd, the agent of Perpetual, seeking finance on 8 July 2008.
Another difficulty with the Burnistons' assumption that $235,000 would be exempted from any condition to repay is that there is no evidence that Perpetual had any knowledge of the 28 June 2008 investment agreement between the Burnistons and Ms Thompson or the deed. A further difficulty is that the investment agreement was not between the Burnistons and Mortgage Miracles (whose conduct the Burnistons sought to attribute to Perpetual). It was between the Burnistons and Ms Thompson. The agreement was not, and has not been, rescinded ab initio.
Even if any relief could have been granted in this case, it would necessarily have been conditional upon repayment by the Burnistons to Perpetual of $344,911.44, with interest at commercial rates and rests, less the few repayments made to Perpetual which were not redrawn.

The structure of these reasons and the legal issues involved

These reasons, and the issues involved, are structured in the following way:
Background  [15] ‑ [104]
Was default under the loan proved?  [105] - [140]
The documentary structure of the transaction  [141] - [170]
The Streetwise decision in the NSW Court of Appeal           [171] - [187]
Legal wrongdoing of Ms Thompson and Mortgage Miracles [188] ‑ [205]
Agency and vicarious liability at common law  [206] - [273]
Agency under the ASIC Act  [274] - [293]
Misleading or deceptive conduct based on agency  [294]
Unconscionable conduct based on agency  [295] - [307]
Unconscionable conduct by Perpetual directly  [308] - [327]
Duty of care to warn or guard against risk of loss                 [328] - [353]
Contributory negligence  [354] - [362]
Incorporation of an oral term  [363] - [365]
An implied term  [366] - [378]
Rectification  [379] - [385]
Misrepresentation and mistake  [386] - [390]
Remedies  [391] - [410]

Background

The main witness at the trial was Mrs Burniston. In general terms I have no hesitation in accepting her evidence and that of her husband, Mr Burniston. Both gave evidence honestly and to the best of their ability. Much of the summary which follows derives from their witness statements and their evidence in cross‑examination. My findings of fact occasionally differ slightly from parts of the Burnistons' evidence because their evidence must be understood in context, particularly in the context of the documentary evidence. Mrs Burniston also frankly acknowledged on a number of occasions that her memory was not strong.[2] Wherever possible I have indicated the source upon which I rely for findings of fact.
[2] ts 277 (Mrs Burniston).
No oral evidence was called for Perpetual. In closing submissions, counsel for the Burnistons invited the court to draw adverse inferences based upon this failure to call evidence.[3] The inference suggested was that Collins Securities or Perpetual had actual knowledge of some matter after circumstances arose which might have raised some suspicion for Collins Securities.[4] I deal with this submission below, but it suffices to say that there was no pleading that Perpetual or Collins Securities had actual knowledge of any particular matter such as actual knowledge of the falsity of information in the Burnistons’ application for finance. Nor do any of the many documents in evidence, including email chains, suggest that Collins Securities had actual knowledge of any of these matters. I do not consider that the issues in the case, as thrown up in the pleadings and by the course of evidence, require any adverse inference of actual knowledge to be drawn from the failure to call witnesses.[5] As I explain in these reasons, any failings and carelessness of Perpetual and Collins Securities are manifest from the documentary evidence and the evidence given by Mr and Mrs Burniston.

The Burnistons and their investments with Ms Thompson from 2006

[3] Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298.

[4] ts 424 ‑ 425.

[5] Schellenberg v Tunnel Holdings Pty Ltd [2000] HCA 18; 200 CLR 121, 143 [51] (Gleeson CJ & McHugh J) quoting JD Heydon (ed), Cross on Evidence (6th Australian ed, 2000) [1215].

Mrs Burniston is 67 years old. She and Mr Burniston have been married for 35 years. In 2004, the Burnistons immigrated to Australia to be close to their children and grandchildren who were living here. The Burnistons sold their house in England and, once the funds from the sale had been received, purchased a new home in Perth in Consulate Court in Thornlie.
Some time after arriving in Australia, Mrs Burniston was introduced to Ms Thompson. Ms Thompson told Mrs Burniston that Ms Thompson knew people who needed short term loans as a result of funeral expenses or a shortage of funds while a will was being administered. Ms Thompson said that these people would pay interest on the short term loans at a greater rate than usual. Initially the Burnistons were not interested but, from early 2006 at the latest,[6] they provided money to Ms Thompson for what Ms Thompson claimed to be these loans.
[6] ts 356 (Mrs Burniston).
The Burnistons did not keep records of the money which they gave Ms Thompson for these alleged loans. Mrs Burniston kept track of the payments from bank statements. She never met any of the people to whom Ms Thompson said she was providing these loans. But she trusted Ms Thompson, particularly because of Ms Thompson's professed faith as a Mormon and also due to Ms Thompson's statements to Mrs Burniston that the loans were being made to people in the Mormon church.[7] The loans, and interest, were also regularly repaid to the Burnistons and the money was deposited into Mrs Burniston's United Credit Union account.
[7] Exhibit B (witness statement of Mrs Burniston) [24].
The total of these investments made by the Burnistons with, or through, Ms Thompson was $50,000.[8] Mrs Burniston was told by Ms Thompson that interest rates received were up to 30% per annum, although the repayments were made with interest over periods shorter than a year.[9] The repayments began in early January 2006. Schedules 1, 2 and 3 to these reasons show the repayments made by Ms Thompson in relation to these investments with her by the Burnistons.
[8] ts 353 (Mrs Burniston).
[9] ts 359 ‑ 361 (Mrs Burniston).
There was little documentation of the loans made by Ms Thompson with the money the Burnistons invested with her, but one typed letter, undated but probably sometime in 2006 or 2007,[10] from Ms Thompson to the Burnistons reads as follows:[11]
Just putting into writing a new arrangement regarding the $40,000.
I have received $15,000 back and have re lent it [sic] out $5,000 at 30% per annum.
And $10,000 at 10% per annum.
It will in effect mean that instead of receiving 500 per month, you will now receive 522.
Please note there is an additional $170 to be paid into your account and then new payments will begin on 15th on all 3 loans.
[10] ts 355 ‑ 356 (Mrs Burniston); exhibit 227.
[11] Exhibit 6.
Although this letter was written on the letterhead of Mortgage Miracles, a company for which Ms Thompson was a director and principal,[12] the evidence from Mrs Burniston, which I discuss below, shows that a reasonable person in the position of the Burnistons would have been aware that they were dealing with Ms Thompson personally; not with Mortgage Miracles. The Burnistons were aware of this, although their subjective understanding was not legally relevant. The relationship was between the Burnistons and Ms Thompson; it was not between the Burnistons and Mortgage Miracles.
[12] Exhibit 52, page 958.
Mrs Burniston said that Ms Thompson told her that the loans were for members of Ms Thompson's church. Ms Thompson's comments had the effect that the arrangements for the alleged loans were being made by Ms Thompson personally, not through her company Mortgage Miracles. Mrs Burniston also agreed that she did not expect that Ms Thompson was making any money from these arrangements which she was intermediating for people in her church. Mrs Burniston agreed that she thought Ms Thompson was doing this 'out of the goodness of her heart'.[13]
[13] ts 361 ‑ 362 (Mrs Burniston).
In late 2007, the Burnistons visited Ms Thompson's house. Mr Burniston admired the house. Ms Thompson told the Burnistons that there was a house 'just down the road very similar ... if [the Burnistons] were interested [Ms Thompson] would organise everything [and] there would be nothing to contribute from [the Burnistons]'.[14]
[14] Exhibit B (witness statement of Mrs Burniston) [34] - [35].
Ms Thompson proposed that if the Burnistons gave her more money then she (Ms Thompson) would arrange for the money to be invested so that the loan repayments could be made. Ms Thompson gave no details about how this would be done. The essence of what she said was that the money would be invested and that the return on the investment would pay the loan. Mrs Burniston was told that at any stage the Burnistons could get their money back.[15]
[15] Exhibit B (witness statement of Mrs Burniston) [33] - [37].
Ms Thompson assured the Burnistons that they would have more than enough money to meet the mortgage. She discussed with them the manner in which any surplus return from the investment should be used; the Burnistons thought it should be used to discharge the loan so that the loan could be repaid sooner.[16]
[16] Exhibit B (witness statement of Mrs Burniston) [39].
By the time of this conversation in late 2007 the Burnistons had developed considerable trust in Ms Thompson. Mr Burniston said that he trusted Ms Thompson due to his belief in her honesty with the earlier small loans which Ms Thompson had made as investments with their money.[17] Mrs Burniston was particularly impressed with the way Ms Thompson purported to show her calculations for financing, even though Mrs Burniston could not follow the calculations.
[17] Exhibit C (witness statement of Mr Burniston) [104].
Although Mrs Burniston was unsure of the details of the arrangement discussed in the late 2007 conversation, the effect of what Mrs Burniston was told was that if she paid money to Ms Thompson from the sale of her Thornlie house then that money would be invested so that the Burnistons would earn interest on it. Ms Thompson would also arrange a direct debit from the Burnistons' account to ensure that repayments for a new loan to the Burnistons were made automatically to the lender.[18]

The Burnistons appoint Mortgage Miracles as a finance broker in December 2007 and make offers to purchase property

[18] Exhibit B (witness statement of Mrs Burniston) [40].

Around November 2007, the Burnistons placed their Thornlie property on the market for sale.[19] It is likely that this occurred after their late 2007 discussion with Ms Thompson about investment of the proceeds of sale.
[19] ts 307 (Mrs Burniston).
At about this time, in November 2007, the Burnistons also made an offer on a property in Canning Vale. The Burnistons were told by Mr Chris Sandford from Mortgage Miracles that he did not think they would obtain a loan to purchase the new property; Mrs Burniston responded saying that Ms Thompson had said that they would get approval.[20]
[20] Exhibit B (witness statement of Mrs Burniston) [57].
The Burnistons' application for finance was refused by the Commonwealth Bank, and they were unable to complete the purchase of the Canning Vale property.[21]
[21] Exhibit B (witness statement of Mrs Burniston) [63] - [64].
On 4 December 2007, the Burnistons signed a 'WA Finance Brokers Contract and Appointment to Act' with Mortgage Miracles.[22] The services promised by Mortgage Miracles were as follows:
We [Mortgage Miracles] will provide you [the Burnistons] with information on a broad range of lenders and loans. Once you have chosen a loan that is suitable for you, we will help you obtain an approval.
[22] Exhibit 10.
The appointment contract also provided that the Burnistons wanted a loan of $657,000 plus costs in order to purchase a property. The appointment contract said that the Burnistons intended to provide a first or second mortgage over their Thornlie property (which was false) and that they wanted finance by 13 December 2007.
Mr Sandford explained this appointment contract to the Burnistons. He was thorough. And he expressed surprise that they wanted to borrow so much money on their limited pension.[23]
[23] ts 294 (Mrs Burniston).
Clause 4 of the contract provided as follows:
We are obliged to act in your best interests and give you undivided loyalty unaffected by any of our interests. However, we also represent lenders and have obligations to them, in particular not to provide any information we know is misleading or deceptive. We also have obligations under the law to report any fraud, forgery, or other illegal activities. By signing this agreement you confirm that you understand that we have these obligations to the lender and under the law. If you have any questions about our role, please ask before you sign.
Clause 2 contained the following statement:
Before you accept your loan offer, please make sure you read the credit contract/loan agreement carefully to find full details of the loan. Warning: You should check the loan agreement/credit contract to ensure that the terms of the loan do not vary from what you require. If they do, please inform us immediately so that we can assist you. (original emphasis).
In March 2008 the Burnistons received an offer to purchase their Thornlie property. In turn, they made an offer to purchase a property in Southern River. But these transactions were not completed.
About this time, Ms Thompson also told the Burnistons that they needed to apply for an Australian Business Number.[24] The Burnistons trusted Ms Thompson and their inexperience in business matters meant that their suspicions were not raised by the request that they obtain an Australian Business Number despite not having a business.
[24] Exhibit B (witness statement of Mrs Burniston) [81]; exhibit 60.
On 31 March 2008, in relation to the Southern River property purchase, the Burnistons signed a different 'WA Finance Brokers Contract and Appointment to Act' as well as a 'Risk of Borrowing' document and a consent to disclosure of personal information document.[25] An application was then made to Suncorp for finance by Mortgage Miracles on behalf of the Burnistons.[26]
[25] Exhibit 35; exhibit 38; exhibit 38A.
[26] Exhibit 39.
On 8 April 2008, Suncorp wrote to the Burnistons informing them that they had been granted preliminary approval for finance subject to the sale of their Thornlie property.[27] Suncorp explained that several validations were required for final approval.
[27] Exhibit 41.
The validations required by Suncorp included clarification of the Burnistons' employment 'via an accountant - application states over 4 years in current business however ABN numbers active since only end of March 2008'. Suncorp also asked for clarification of how the Burnistons 'intend to repay home loan debt once they reach retirement age - application indicates no second way out other than sale of property'.
Mrs Burniston probably received the letter from Suncorp.[28] But I find that neither she nor Mr Burniston read the letter beyond the first few lines because the statements by Suncorp concerning the validations which were required would otherwise have alerted them to misrepresentations which were being made on their behalf. The letter from Suncorp also referred to contact that Suncorp had with Mr Murrie of Mortgage Miracles.
[28] Exhibit B (witness statement of Mrs Burniston) [91].
Subsequently, Mr Murrie, acting on behalf of Ms Thompson at Mortgage Miracles, sent a fax to Suncorp which contained numerous misrepresentations.[29]
[29] Exhibit 45.
The fax sent to Suncorp on behalf of Ms Thompson represented (falsely) that the Burnistons had told Ms Thompson that they had been self‑employed for four years. A low doc declaration was also included with the fax which said that the Burnistons had an annual income of $74,000.
The Burnistons signed the low doc declaration for Suncorp but I am satisfied that they did not include the annual income figure in that document, nor did they know that it was included, nor did they tell anyone at Mortgage Miracles that they had income of that amount.[30] Although I find that the Burnistons did not read the low doc declaration before signing it, I consider that on the balance of probabilities the income figure was included after they had signed the low doc declaration.
[30] Exhibit B (witness statement of Mrs Burniston) [93] - [98].
Although finance was approved by Suncorp, the purchase of the Southern River property was never completed.
Ms Thompson made other applications for finance on behalf of the Burnistons, again containing falsehoods. An application for finance to PowerLoans (Australia) said that the Burnistons were self‑employed as contract couriers.[31] That application is signed by Mr and Mrs Burniston but I am satisfied that either they did not read the references to the alleged self‑employment or that those references were inserted after their signature and without their knowledge. They would not have signed documents which they knew to contain such false information.

Mortgage Miracles is 'accredited' by Collins Securities in June 2008

[31] Exhibit 44.

On 4 June 2008, Ms Thompson made enquiries about becoming 'accredited' with Collins Securities. She was told that Mortgage Miracles could become accredited but that it would have to complete some paperwork and enter a Sub‑Originator Agreement. Ms Thompson was told what paperwork and attachments were required.[32]
[32] Exhibit 51.
Ms Thompson completed an application form on 10 June 2008 which included the names of the two directors of Mortgage Miracles, as well as professional indemnity insurance details for Mortgage Miracles, the period of operation of Mortgage Miracles (five years) and the number of staff employed at Mortgage Miracles (six).[33] Ms Thompson's home address in Canning Vale was also included and certificates including Ms Thompson's Finance Broker's Licence, Mortgage Miracles' membership in the Mortgage Finance Association of Australia and the Credit Ombudsman Service were attached.
[33] Exhibit 52.

Collins Securities approved the application by Mortgage Miracles the same day. On the next day, 11 June 2008, Collins Securities replied with a Sub‑Originator Agreement.[34] The Sub‑Originator Agreement was signed on 18 June 2008 between Collins Securities and Mortgage Miracles.[35]

The sale of the Burnistons' Thornlie property in June 2008

[34] Exhibit 53.

[35] Exhibit 54.

Some time in June 2008, after an agreement to sell the Burnistons' Thornlie property for $465,000 had failed to complete,[36] the Burnistons accepted another offer on their Thornlie property.[37] On 22 July 2008, the Burnistons received $435,316 to complete the sale of their Thornlie property.[38] The total price paid to the Burnistons for the sale of their Thornlie property was $448,000.[39]

The Burnistons' purchase of the Huntingdale property on 1 July 2008

[36] ts 307 (Mrs Burniston); exhibit 30.

[37] ts 328 (Mrs Burniston).

[38] ts 369 (Mrs Burniston); exhibit 83.

[39] ts 270 (Mrs Burniston); exhibit 83.

On 1 July 2008, the Burnistons made an offer to purchase the property in Huntingdale for a purchase price of $490,000 with a settlement date on or before 22 July 2008. This offer was accepted.[40] Conditional finance was approved by Collins Securities for the Burnistons on 8 July 2008, a loan was agreed by Perpetual on 23 July 2008, and settlement on the Huntingdale property occurred, and the loan was drawn down, on 4 August 2008.
[40] Exhibit 58, trial bundle pages 1032 ‑ 1034 (REIWA contract).
The price received by the Burnistons for the sale of their Thornlie property ($448,000), was only $42,000 less than the price they later paid for the Huntingdale property ($490,000). It appears that there was no mortgage over the Thornlie property.[41] Even if expenses were added to the $42,000 difference in house prices this could not generate an apparent need for the $344,911.44 loan which they later obtained from Perpetual unless the Huntingdale property were an investment property. But nothing was pleaded as arising from this, nor was any submission made by either counsel on this point and it is unnecessary to consider it further.

The Burnistons obtain finance from Collins Securities on 17 July 2008

[41] ts 258, 314 (Mrs Burniston).

On 1 July 2008, when the Burnistons made an offer to purchase the property in Huntingdale, Mrs Burniston thought that the Suncorp finance was still in place. She was later told by Mr Murrie from Mortgage Miracles that it was not. In a busy coffee shop Mr Murrie produced some new forms for the Burnistons' signature.[42] The Burnistons were not given time to read the documents. Mr Murrie said that the documents were 'just standard' and the Burnistons were told to sign them and were not given a copy or an explanation of the documents.
[42] Exhibit B (witness statement of Mrs Burniston) [106] ‑ [112].
A document which was signed by the Burnistons at the coffee shop was a finance approval application to Collins Securities.[43] The cover page indicates that it was prepared by Mortgage Miracles; Ms Thompson was the broker and Mr Murrie was the contact person. The finance approval application is dated 1 July 2008.
[43] Exhibit 58, trial bundle pages 1032 ‑ 1034 (REIWA contract).
The Burnistons signed on pages five and seven of the finance approval application.[44] The text above their signatures on page five included the following:
The undersigned hereby applies for the loan described herein to be secured by a mortgage on the properties described herein and represents that all statements made in this application are true and made for the purpose of obtaining the loan. Verification may be obtained from any source named herein.
…
5. I/We understand and acknowledge that Collins Securities Pty Ltd and the Credit Provider recommends that each Applicant(s) seeks independent legal or other financial advice prior to entering into any contract that the credit provider may offer to the Applicant(s) as a result of this application or any related guarantee.
…
7. I/We state that I/we have read, understand and agree with each and every part of this application.
[44] ts 335 (Mrs Burniston); exhibit 58 (Account application form pages 5 and 7), trial bundle pages 1018, 1020.
The finance approval application to Collins Securities contained a number of false representations.
(i)It said that both Mr and Mrs Burniston had the occupation of 'property management'. They did not. They were pensioners.
(ii)It said that they were both self‑employed. They were not.
(iii)It said that they had savings of $171,500. They did not.
(iv)It gave their postal address as an address in Canning Vale where Ms Thompson lived. They had not provided that information.
On the balance of probabilities, I consider that this information was added after the Burnistons signed the finance approval application. In any event, the Burnistons did not read any of these sections.
Page eight of the finance approval application to Collins Securities contained a declaration that the finance was being used wholly or predominantly for the purpose of a business or an investment or both. That page was missing from the original document which was tendered in evidence. The original document included a faxed page eight which appeared to contain Mr and Mrs Burnistons' signatures, although the signatures appear identical to those on another page. Mrs Burniston said that she did not believe that she had signed that declaration.[45]
[45] Exhibit B (witness statement of Mrs Burniston) [124].
The original of page eight was provided to the court without objection after the evidence had concluded. It could not be retained on the file because it was located in the files of a criminal proceeding in the District Court of Western Australia. The page was required to be returned to that court. A copy of that original page is exhibit 243. It does not contain any signature. I am satisfied that the Burnistons' signatures were copied on to the page eight 'business purpose' declaration without their knowledge.
Since the postal address on the loan application form was that of Ms Thompson, letters from Collins Securities were generally addressed to the Burnistons but sent to Ms Thompson's Canning Vale address. One exception is a letter sent from Collins Securities to Mrs Burniston at her Thornlie address on 12 August 2008. That letter confirmed the details of the Burnistons' loan.[46] The address on this letter appears simply to be a mistake since Collins Securities was aware that the Burnistons had sold the Thornlie property at that time.
[46] Exhibit 103.
Conditional approval for the application to Collins Securities for finance was granted on 8 July 2008 for an amount of $344,911.14.[47]
[47] Exhibit 69, page 2.
On 15 July 2008, Mr Murrie sent an email from a Mortgage Miracles email address to Ms Vidovich, a senior credit manager at Collins Securities. Mr Murrie's email footer described him as a 'relationship manager' at Mortgage Miracles. Mr Murrie enclosed the offer and acceptance for the Burnistons' Thornlie property and said in the email that (i) the Burnistons will be house sitting a property for a minimum of two years, and (ii) the Burnistons will be using the Huntingdale property as an investment property.[48] Both statements were false: the Burnistons intended to live in the Huntingdale property (which they had already agreed to purchase).
[48] Exhibit 69.
On 17 July 2008, Ms Vidovich emailed Mr Murrie and asked for clarification about when the Burnistons had moved into the address which they would be house sitting, and asked for the correct address so that documents could be sent to that address.[49] Handwritten on that email is Ms Thompson's Canning Vale address.
[49] Exhibit 74.
On 17 July 2008, Collins Securities wrote to Mr and Mrs Burniston at Ms Thompson's address, approving a loan for $344,911.14.

The Burnistons' 28 July 2008 deed of agreement with Ms Thompson

As I have explained, the details of the late 2007 (around October 2007) conversations between Ms Thompson and the Burnistons which preceded the investment were vague. I find that it was agreed that Ms Thompson would invest the money she was given ($235,000), and that she promised that the return on that investment would cover the Burnistons' mortgage repayments.[50] That return (described by Mr Burniston as 'interest') on the money the Burnistons paid to Ms Thompson was to be paid into the Burnistons' bank account.
[50] ts 375 (Mrs Burniston); exhibit B (witness statement of Mrs Burniston) [46]; exhibit C (witness statement of Mr Burniston) [107].
The Burnistons expected that there would be sufficient funds in their account from the investment return to make the bank's regular repayments especially as the Burnistons paid no tax.[51] They also expected that there would be a small surplus after their regular loan payments, which surplus the Burnistons intended to use to reduce further their loan.[52]
[51] ts 337 (Mrs Burniston).
[52] Exhibit C (witness statement of Mr Burniston) [109].
The investment agreement was formalised in a deed.[53] The deed was entered on 28 July 2008 between the Burnistons and Ms Thompson. In the deed, Ms Thompson, as trustee for the CA Thompson Family Trust (with her home address provided), as 'Borrower', agreed to borrow $235,000 from the Burnistons, as Lender. The deed recorded the following:
BACKGROUND
A.The Lender has agreed to advance the sum of $235,000 Thousand dollars … to the Borrower ('the Loan Amount').
B.The Lender has agreed to advance the Loan Amount to the Borrower for miscellaneous investment purpose in accordance with this agreement.
C.The parties have entered into this Deed to record this fact and evidence the obligation to repay.
[53] Exhibit 93.
The deed also provided that:
(i)The Loan Amount was to be paid by the Burnistons to Ms Thompson by bank cheque within five business days of signing the agreement.
(ii)Interest was payable monthly on the Loan Amount at the rate of 17.5% per annum.
(iii)The repayment date was the earlier of 60 days from receipt of a written request to terminate the investment agreement or 18 months from the date of the investment agreement.
(iv)Ms Thompson agreed to charge 'the Property' in favour of the Burnistons. There was no definition of 'the Property'.
Although Mrs Burniston did not read the deed carefully and did not have an opportunity to change any of the words in the deed[54], she signed the deed and was bound by its terms consistently with the objective theory of contract.[55] Mr Burniston's signature also appears on the deed.
[54] Exhibit B (witness statement of Mrs Burniston) [157] ‑ [158].
[55] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165, 181 ‑ 182 [46] (the Court).
The terms of the deed are consistent with what Ms Thompson had told the Burnistons. The Burnistons may have a common law power to rescind ab initio their investment agreement with Ms Thompson based on Ms Thompson's conduct. But neither by their actions prior to trial, nor in any pleading or legal submissions in the trial, did they seek to rescind the agreement. So far, they have relied upon the investment agreement and sought to enforce their rights under it.
Neither Mr Burniston nor Mrs Burniston knew many details of the investment which Ms Thompson was apparently going to make with the money the Burnistons were giving her. Mrs Burniston thought that the investment might have been related to 'Mormonville'.[56]
[56] Exhibit B (witness statement of Mrs Burniston) [208].
The reference to Mormonville was to a vague plan about which Ms Thompson had told Mrs Burniston when they discussed a range of places and purposes where Ms Thompson said she used other people's money.[57] The proposal was for Ms Thompson to build a centre for the Mormon church where the older generation could live alongside the younger generation.[58] Mrs Burniston was not told by Ms Thompson 'in so many words' that the money she provided would be used for this Mormonville project; nor was she told how that proposal would generate money.[59]
[57] Exhibit B (witness statement of Mrs Burniston) [45].
[58] Exhibit B (witness statement of Mrs Burniston) [41].
[59] Exhibit B (witness statement of Mrs Burniston) [43] ‑ [44].
Mrs Burniston also said that Ms Thompson promised the Burnistons that the Burnistons could get their $235,000 back at any time with 14 days' notice. Mrs Burniston said that she had 'got a deed to say that we could get the money back at any time we wanted within 14 days of notice'.[60] In fact, the deed provided for the money to be repaid with 60 days' notice and I consider that it is likely that she was told that the repayment period would be with 60 days' notice. But, in any event, it was important to the Burnistons that they could obtain repayment of the capital on demand if it was needed. This was especially because the Burnistons understood that it was their obligation to repay the bank.[61]
[60] ts 378 (Mrs Burniston).
[61] ts 376 (Mrs Burniston); exhibit C (witness statement of Mr Burniston) [110].
No submission was made at trial by counsel for Perpetual that the parol evidence rule excluded any reference to matters beyond the deed for the purpose of construing the promise or agreement made between Ms Thompson and the Burnistons. But, in any event, the external circumstances surrounding the deed are consistent with its objective terms, namely an agreement between Ms Thompson and the Burnistons that the Burnistons would invest money with Ms Thompson and that she would pay them a monthly return based on a rate of 17.5% per annum.
Two points should be clarified. First, at times in their witness statements the Burnistons said, in understandably colloquial terms, that Ms Thompson had promised to pay their debt with the $235,000 which they provided to her. However, it is important to express clearly the precise nature of their agreement with Ms Thompson. Consistently with the deed, the agreement was that Ms Thompson would invest the money they paid to her and that she would pay to the Burnistons the return or interest which would then be used by the direct debit from their account to discharge their loan from Perpetual.
Mrs Burniston quite frankly acknowledged in her evidence that the arrangement with Ms Thompson was that Ms Thompson would invest the $235,000, that she would pay the Burnistons some interest which they would use to pay Perpetual by a direct debit.[62] This evidence is contrary to the submissions of counsel for the Burnistons in relation to the alleged implied term which I consider below. However, this evidence of Mrs Burniston was not only honest and accurate but it is also consistent with numerous other matters. As I have explained:
(i)The Burnistons were told, consistently with the deed, that they could demand the return of $235,000 from Ms Thompson. Their agreement therefore did not permit this capital sum to be used by Ms Thompson to discharge their loan from Perpetual.
(ii)The Burnistons were told that the interest earned by Ms Thompson would be paid into their bank account.
(iii)The Burnistons signed a direct debit authority to permit Collins Securities to withdraw the amount of loan repayments from their account.[63] Collins Securities wrote to Mrs Burniston on 12 August 2008 confirming that payments would be deducted from her United Credit account by direct debit.[64]
(iv)Shortly after the Burnistons moved into their new home they watched their account to see if the payments had arrived from Ms Thompson.[65]
(v)The promise to pay them 17.5% interest, which would be sufficient to discharge their loan repayments, was also consistent with the approach that Ms Thompson had previously taken since 2006 when telling the Burnistons that she was making loans on their behalf. On 28 September 2008, Mrs Burniston went to see Ms Thompson at the offices of Mortgage Miracles. Mrs Burniston said to Ms Thompson that she would not leave until Ms Thompson gave her something in writing acknowledging the money that Ms Thompson owed to the Burnistons.[66] Ms Thompson typed and signed the following:[67]
I acknowledge that I have received the principle [sic] sum of $285,000 as a loan facility from Ann & Michael Burniston and in recognition of the [loan] facility consent to the lodgement of Caveats as security over the following properties held by me …
I also acknowledge and agree that I will be paying interest on the loan facility at a rate of 17.5% PA with [interest] repayments due [monthly] and paid into an account nominated by Mr and Mrs Burniston.
[62] ts 375 (Mrs Burniston).
[63] ts 372 (Mrs Burniston); exhibit 57.
[64] Exhibit 103.
[65] Exhibit C (witness statement of Mr Burniston) [123]; exhibit B (witness statement of Mrs Burniston) [165] ‑ [166].
[66] Exhibit C (witness statement of Mr Burniston) [197] ‑ [199].
[67] Exhibit 123.
The reference to the sum of $285,000 was the combination of (1) the $50,000 of loans paid to Ms Thompson to invest with people in her church from early 2006 which remained outstanding, and (2) the $235,000 paid to Ms Thompson on 28 July 2008.
As to subsequent conduct in (iv) and (v), when the parol evidence rule applies, a court cannot have regard to subsequent conduct as an aid to the interpretation of a written contract such as the deed. But, on the basis upon which the parties proceeded in this case that the investment agreement might have involved oral terms, it is permissible to consider these matters to the extent that the Burnistons were relying upon any separate oral agreement[68] or oral terms separate from those in the deed.[69]
[68] Fazio v Fazio [2012] WASCA 72 [192] ‑ [195] (Murphy JA) and the authorities cited therein.
[69] Mears v Safecar Security Ltd [1983] QB 54, 77 (Stephenson LJ, O'Connor LJ & Sir Stanley Rees agreeing); The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1, 326 [2668] (Owen J).
A second matter relating to the precise terms of the investment agreement between the Burnistons and Ms Thompson is that the agreement was with Ms Thompson (as trustee for her family trust). It was not with Mortgage Miracles. There are several reasons for this conclusion.
(i)The deed itself is an agreement between Ms Thompson, as trustee for the CA Thompson Family Trust, and the Burnistons.
(ii)As I have explained above, Ms Thompson's conduct in relation to the $235,000 investment was the culmination of her scheme involving smaller loans since early 2006. That scheme involved loans between Ms Thompson personally and the Burnistons.
(iii)As explained above, the cheque for $235,000 was addressed to Ms Thompson as trustee for the CA Thompson Family Trust. It was paid into an account in that name.
(iv)On 16 September 2008, Ms Thompson replied to an email from Mr Willoughby at Collins Securities who asked for 'confirmation of the investment you hold for them'.[70] She promised that confirmation and said that the rate of return on the investment was 17.5% per annum paid monthly. She said that the investment was in property. This was consistent with the evidence of the Burnistons which was to the effect that it was Ms Thompson who was personally arranging their 'investment'.
[70] Exhibit 115.
Mrs Burniston said in her witness statement that Ms Thompson told her that '[Ms Thompson] and Mortgage Miracles would be the method for the money to go to pay the loan'.[71] Mrs Burniston did not say when these words were spoken but I find that it was before 28 July 2008 which was the date when Mrs Burniston gave the cheque to Ms Thompson and entered into the deed. In light of all the circumstances above, it is likely that the words spoken referred to Ms Thompson but not Mortgage Miracles.
[71] Exhibit B (witness statement of Mrs Burniston) [151].

The terms of the 28 July 2008 investment agreement and all the surrounding circumstances are clear. It was Ms Thompson who was promising to repay the money; it was not Mortgage Miracles.

The 28 July 2008 payment to Ms Thompson by the Burnistons after the sale of their Thornlie property

As I have explained, on 22 July 2008 the Burnistons received $435,316 to complete the sale of their Thornlie property.[72] On 28 July 2008, the same day as the Burnistons entered into the deed with Ms Thompson for their investment with her, the Burnistons paid $235,000 of the proceeds of sale to Ms Thompson.[73] The payment was made to Ms Thompson in her capacity as trustee for the C A Thompson Family Trust.[74]
[72] ts 369 (Mrs Burniston); exhibit 83.
[73] ts 369 (Mrs Burniston); exhibit 96.
[74] Exhibit 227, statement 48 page 3; exhibit 106; exhibit B (witness statement of Mrs Burniston) [209] ‑ [210].
Another payment made by the Burnistons from the proceeds of sale of their Thornlie property was on 31 July 2008 when a cheque for $167,053.21 was paid from the Burnistons to Spirit Settlements towards settlement of their purchase of the Huntingdale property.[75]

The loan and mortgage from Perpetual drawn down on 4 August 2008

[75] Exhibit 227, statement 48, page 3; ts 369 (Mrs Burniston).

Although no contract of sale for the Huntingdale property was tendered at trial, it appears that settlement of the Burnistons' purchase of the Huntingdale property occurred on 4 August 2008. The Huntingdale property was registered in their names, as joint tenants, on that date.[76] On 4 August 2008, Perpetual also paid $344,911.14 to the Burnistons.[77] The money was paid to the Burnistons as a drawdown upon a contract of loan dated 23 July 2008, secured by a first registered mortgage over the Huntingdale property.
[76] Exhibit 127.
[77] Statement of claim [5]; Further amended defence and counterclaim [5].
The Loan Agreement[78] and the Mortgage[79] both appeared to be signed by Mr and Mrs Burniston.[80] They were witnessed by Ms Thompson. Mrs Burniston said that it was her signature on the Loan Agreement[81] and the Mortgage[82] although she had 'a little concern' whether she had signed the Mortgage on the same day (23 July 2008).[83] It was common ground in closing submissions that these two documents were signed by the Burnistons.[84]
[78] Exhibit 88 (Home loan offer and loan contract).
[79] Exhibit 89 (Registered mortgage).
[80] ts 340 ‑ 341 (Mrs Burniston).
[81] ts 341 (Mrs Burniston).
[82] ts 340 (Mrs Burniston).
[83] ts 340 (Mrs Burniston).
[84] ts 405 ‑ 406 (counsel for the Burnistons).
The Burnistons signed these documents at the offices of Mortgage Miracles. The Loan Agreement and the Mortgage had been sent to Ms Thompson's home address, which was the postal address she had provided for the Burnistons in the loan application.
At the time the Burnistons signed the documents, Ms Thompson only showed the Burnistons the pages which required signature and she pointed to where a signature was required. The Burnistons were not given a copy of the documents to read or to consider. Ms Thompson told them that the signature was 'just bog standard and don't worry about it'. Ms Thompson did not witness the signatures in front of the Burnistons. She told them that the bank was 'funny' about who would witness a signature and that she would arrange the witnessing. Later, but not in the presence of the Burnistons, Ms Thompson signed as a witness.[85]
[85] Exhibit B (witness statement of Mrs Burniston) [139] ‑ [142].
The Burnistons did not realise that the lender was Perpetual prior to the time of signing the documents.[86] They never obtained any advice from Perpetual or Collins Securities; all the advice received was from Ms Thompson or from Mortgage Miracles.[87]
[86] ts 385 (Mr Burniston).
[87] ts 385 (Mr Burniston).
The Loan Agreement is a 12‑page document with a longer accompanying 'Terms of the Loan Contract' booklet. The Loan Agreement document explained that the amount of credit was $344,911.14. The current annual interest rate was 9.7% per annum. Repayments were to be made monthly with a 10‑year period of repayments of only interest. The loan was described as a 'self certified term loan' and it was secured by a registered first mortgage over the Burnistons' Huntingdale property.
The Loan Agreement document contained a sentence saying 'Purpose of the Loan: The purpose of the loan is to: Purchase - Investment'. It also provided for four acknowledgements by the borrower, two of which were as follows:
Borrower's acknowledgements and declarations:
By accepting this offer you:
(1)Acknowledge that you have received a copy of this loan contract, the Terms and the Access Terms and that you have read them carefully and understand them.
…
(3)Declare that you have only relied on representations made in this loan contract. You have not relied on any other promise or representation made by us or anyone else on our behalf.
There was an additional warning in the Loan Agreement document immediately above the spaces for signatures by the Burnistons. The warning was as follows:
BEFORE YOU SIGN
•READ THIS CONTRACT DOCUMENT so that you know exactly what contract you are entering into and what you will have to do under the contract.
•You should also read the information statement: 'THINGS YOU SHOULD KNOW ABOUT YOUR PROPOSED CREDIT CONTRACT'.
•Fill in or cross our [sic: out] any blank spaces.
•Get a copy of this contract document.
•Do not sign this contract document if there is anything you do not understand.
The Burnistons signed below this.
The final page of the Loan Agreement Document included the following:
TO BE COMPLETED IF YOU CHOOSE NOT TO OBTAIN LEGAL ADVICE
IF YOU HAVE ANY DOUBTS OR WANT MORE INFORMATION, CONTACT YOUR GOVERNMENT CONSUMER AGENCY OR GET LEGAL ADVICE
I/WE CERTIFY THAT:
•I/we have read the loan contract (including the Terms and Access Terms) to which this certificate is attached (the 'Document').
•I/we are the borrower(s) named in the Document.
•I/we have been given the opportunity to obtain legal advice on the nature and effect of the Document but have chosen not to do so.
•I/we understand the nature and effect of the Document.
•I/we understand the obligations and risks involved in signing the Document.
•I/we sign the Document freely, voluntarily and without pressure from any person.
The Burnistons also signed below this.
From August 2008, the amount of monthly repayments required to be made by the Burnistons was about $2,700 per month.[88] If Ms Thompson had genuinely invested the Burnistons' money at an interest rate of 17.5% per annum, then the gross monthly return from that investment would have been around $3,400 (on a $235,000 investment) or $4,200 (on a $285,000 investment which included the amounts invested with her prior to the $235,000 investment).

Ms Thompson ceases making payments to the Burnistons in September 2008

[88] Exhibit 103.

Subsequent to the 4 August 2008 drawdown of the Perpetual loan, Ms Thompson made some payments into the Burnistons' bank account. On 6 August 2008, Mrs Burniston received a payment from Ms Thompson of $443.16.[89]
[89] Exhibit 223, page 2366; ts 369 ‑ 370 (Mrs Burniston). This payment was not included in sch 1 and 2 to these reasons, as compiled by the plaintiff.
On 20 August 2008, Mrs Burniston received another payment from Ms Thompson; this time the payment was $312.50.[90] Then the regular payments ceased.
[90] Exhibit 223, page 2366; ts 370 (Mrs Burniston).
The Burnistons soon realised that all was not as it had appeared. Mrs Burniston rang and spoke with someone at Collins Securities. This was the first time she had raised concern with Collins Securities.[91] The person with whom she spoke at Collins Securities told her to sell the Huntingdale property, and then expressed surprise when he was told that they were living in it and that the house was not an investment.[92]
[91] ts 379 (Mrs Burniston).
[92] ts 378 (Mrs Burniston).
When Mrs Burniston went to the offices of Mortgage Miracles in August 2008 she was told that Ms Thompson had left Mortgage Miracles and that there was a backlog of problems.[93] Mrs Burniston managed to contact Ms Thompson on 16 September 2008 and she spoke by telephone with Ms Thompson in the presence of Mr Willoughby from Collins Securities. Ms Thompson said that the money paid to her had been invested in property and Ms Thompson said that the first monthly payment that the Burnistons were to receive would be paid directly to Collins Securities.[94]
[93] Exhibit B (witness statement of Mrs Burniston) [169] ‑ [170].
[94] Exhibit B (witness statement of Mrs Burniston) [177] ‑ [179].
On 16 September 2008, immediately after the meeting, Mr Willoughby of Collins Securities emailed Ms Thompson asking for details of the investment which the Burnistons had made with Ms Thompson. Ms Thompson replied the same day. I have inserted the responses of Ms Thompson in italics below the relevant parts of Mr Willoughby's email:[95]
[95] Exhibit 115.
1.You will be making the monthly repayment to the Burnistons' loan account from the funds/dividends from their investment with you this Friday the 19th September 2008.
I have some funds being deposited into my account and will make payment approximately Friday but you need to provide me her BSB and a/c no.
2.You will be providing confirmation of the investment you hold for them and the details in relation to how to redeem the investment and the timing of the monthly dividend payments to their loan account.
Yes once I have been able to re establish myself I will be continuing to make regular monthly payments.
3The rate of return for the investment held.
17.5% pa paid monthly.
4The total amount held by you on behalf of Mr & Mrs Burniston.
235K plus 50K from about two years ago.
5The type of investment the funds are invested in.
Property.
6.The current status of your brokerage Mortgage Miracles in relation to who is in bona fide control of the brokerage.
Mortgage Miracles is not trading until the matter is resolved.
7.Any action being taken by DOCEP against Mortgage Miracles.
Nothing as yet, they have been out to examine some of my files, they say it will take about three weeks to get back to me.
In addition I confirm, to enable Mr & Mrs Burniston to secure their investment held by you that you consent to the lodgement of their interest against the following properties:
Lot 1084 Orton Rd Cardup.
22 Solway Green Canning Vale.
30 Connaught Gardens also has equity in it.
On 2 October 2008, Ms Thompson paid $7,600 directly to Collins Securities on behalf of the Burnistons.[96] The Burnistons redrew this amount from the loan on 8 October 2008.[97]
[96] Schedule 3 to these reasons.
[97] Schedule 4 to these reasons.
On 21 November 2008, Ms Thompson paid a further $3,427 to Collins Securities on behalf of the Burnistons.[98] The Burnistons redrew this amount from the loan in two redraws, dated 3 December 2008 and 7 January 2009.[99]
[98] Schedule 3 to these reasons.
[99] Schedule 4 to these reasons.
The Burnistons made some subsequent payments to Collins Securities, but by April 2009 the Burnistons stopped making payments. They could no longer afford to do so.[100]
[100] ts 374 (Mrs Burniston).
On 17 August 2009, Ms Thompson paid $4,039 directly to the Burnistons' account.[101] A further $4,040 was paid to them by Ms Thompson the next day.[102]

Suspension and termination of the appointment of Mortgage Miracles

[101] Schedule 1 to these reasons.

[102] Schedule 1 to these reasons.

On 10 September 2008, Collins Securities wrote to Mortgage Miracles suspending the appointment of Mortgage Miracles under the Sub‑Originator Agreement by which Collins Securities had appointed Mortgage Miracles. The appointment of Mortgage Miracles was terminated on 17 November 2008.[103]
[103] Exhibit 147.

Was default under the loan proved?

The legal issues which can be dealt with at the outset are whether the Burnistons defaulted under the loan as secured by the mortgage, and whether a notice of default was properly issued.
The primary pleaded claim by Perpetual is for the following:
(i)the sum of $364,978.28 plus interest at the rate specified in the Loan Agreement from 18 September 2009 until payment; and
(ii)possession of the Huntingdale property.
Counsel for the Burnistons, to avoid any doubt, explained that Perpetual was put 'to proof of the default and the amount of the debt'.[104] In written submissions, the Burnistons conceded that even if Perpetual failed to prove default, or to prove the amount of the debt, then Perpetual could 'serve a fresh (correct) demand'. But the Burnistons submitted that the consequence of the error in the previous demand would be that the present action would fail and that Mr and Mrs Burniston would seek the costs of the proceedings.[105]
[104] Defendants' closing submissions dated 6 July 2012 [303].
[105] Defendants' supplementary closing submissions dated 18 September 2012 [8].
The Burnistons' assumption was that costs would be awarded to them if they succeeded only on the basis of a defective demand which could be rectified.
Although, in these reasons, I reject the Burnistons' submission that the demand was defective, I would not have awarded costs to the Burnistons if they succeeded on this point (which they conceded was easily remediable), yet failed (as they have) on (i) agency, including statutory agency, (ii) vicarious liability, (iii) unconscionable conduct (in various forms), (iv) misleading or deceptive conduct, (v) duty of care and negligence, (vi) implied terms, (vii) rectification, and (viii) various issues concerning remedies.
The Burnistons submitted that the notices of default sent by Perpetual to the Burnistons were defective for the following reasons: (i) they did not comply with the Transfer of Land Act 1893 (WA); (ii) there was no proper certificate of the debt due; and (iii) that the notice of default failed to identify the relevant breach. Submissions were also made concerning errors in the total debt alleged and whether that debt was proved.
An affidavit from Ms Arcus was tendered by consent.[106] Ms Arcus was a legal secretary for Gadens Lawyers, the solicitors for Perpetual. She explained how letters of demand and default notices, which she annexed, were separately sent by registered post to Mr and Mrs Burniston at their registered Huntingdale property address. The letters are signed by Gadens Lawyers as solicitors and agents for Perpetual 'authorised to issue this notice on behalf of [Perpetual]'. Contrary to the submission made on behalf of the Burnistons, this evidence is sufficient to show that the notices of demand were sent by registered post to the required address. The Mortgage authorises the solicitor for Perpetual to sign letters from Perpetual.[107] It was not necessary to call the author of the notices to give evidence.
[106] Exhibit A (affidavit of Ms Arcus).
[107] Exhibit 89, cl 24.2, cl 39.1.
The notices of demand sent to the Burnistons were dated 24 September 2009. Each notice said that the Burnistons had failed to make payments of $13,671.83 to Perpetual for the loan secured by the Mortgage.[108] Those payments (described in the notices of demand as the 'arrears') were comprised of:
•01 May 2009                 $2,690.40
•01 June 2009                 $2,760.61
•01 July 2009                  $2,659.78
•01 August 2009             $2,769.52
•01 September 2009        $2,791.52
[108] Exhibits 199, 200.
I am satisfied that those amounts were not paid by the Burnistons who ceased repayments in April 2009.

The quantum of the debt demanded in the default notices

As to the quantum of the debt which was claimed to be due in the default notices, Collins Securities was required to keep and maintain accounting records in relation to loans.[109] An exhibit at trial was a document which contained statements relating to these accounting records.[110] These statements in this exhibit 221 can be described as Collins Statements of Account. The statements in the exhibit were admitted into evidence over objection by counsel for the Burnistons.
[109] Exhibit 29 (Sale, Originating and Servicing Agreement) cl 14.3.
[110] Exhibit 221.
Counsel for the Burnistons objected to the tender of this document on the basis that the document was not a business record and that it was not admissible for the truth of its contents.[111] I overruled this objection on the basis that the statements in the Collins Statements of Account were business records within the wide definition of a 'document prepared or used in the ordinary course of a business for the purpose of recording any matter relating to the business'.[112] In any event, it is clear that the statements in the exhibit 221 were, at least, derived from business records containing identical entries which were also exhibits.[113]
[111] ts 226 ‑ 228.
[112] Evidence Act 1906 (WA), s 79B.
[113] See Exhibits 231 ‑ 232, 234, 236, 237.
Section 79C(2a) of the Evidence Act 1906 (WA) provides that in any proceedings where direct oral evidence of a fact would be admissible, any statement in a document and tending to establish the fact shall, on production of the document, be admissible as evidence of that fact if:
(a)the statement is, or directly or indirectly reproduces, or is derived from, a business record; and
(b)the court is satisfied that the business record is a genuine business record.
The effect of s 79C(2a) is that the Collins Statements of Account (ie the statements in exhibit 221) are evidence admissible for the truth of the contents.[114] As Buss JA has explained, quoting from JD Heydon Cross on Evidence, the section is part of remedial legislation intended to remove the difficulty or, in some instances, impossibility of proving certain business facts by admitting material which in common experience is likely to be accurate.[115]
[114] McKay v Commissioner of Main Roads [No 2] [2010] WASC 153 [23] (Beech J).
[115] Donohoe v The Director of Public Prosecutions (WA) [2011] WASCA 239 [126]; J D Heydon Cross on Evidence, (8th Australian ed, 2010) [35195].
In relation to the amounts for each of the dates above, the Collins Securities Statements of Account show a debit entry for each of the amounts in the notices of demand at the close of the previous day to the date recorded in the notice of demand.[116] Each entry is entitled 'Capitalised interest'. It is apparent from the accounting record that these amounts are the unpaid and accrued daily interest at the variable rate in the accounting record, for the relevant month. Each of those amounts is capitalised.
[116] Exhibit 221, page 2.
Although the Collins Statements of Account are evidence of the truth of their contents the Burnistons dispute the accuracy of the Collins Statements of Account.
The Burnistons point to the provision of the Loan Agreement that the annual loan service fee of $345 is payable annually on the anniversary of funding.[117] However, the Collins Statements of Accounts contain a debit entry of $345 on 4 August 2008 (the date of draw down) for 'Annual Loan Service Fee'.[118] This is not an error. The Loan Agreement also provides for 'fees and charges definitely payable on or before settlement date'. One of those fees is an Annual Loan Service Fee of $345.[119]
[117] Exhibit 88 (offer and loan contract) page 3.
[118] Exhibit 221, page 1.
[119] Exhibit 88 (offer and loan contract) page 3.
The Burnistons then point to an entry on 1 January 2009 for 'Annual Loan Service Fee' of $445, instead of the correct $345. However, on 21 January 2009 there is a credit entry for the same amount, entitled 'reversal', which is effective on 1 January 2009. The only rational inference is that the Annual Loan Service Fee charged on 1 January 2009 was reversed. The effect of this is that the Burnistons were not charged any Annual Loan Service Fee for 2009 prior to 18 September 2009 in the accounts. I do not accept that this undercharging prevents the statements of account being evidence of the truth of their contents.

Declarations that the Loan Agreement is void in whole or in part

There is an immediate difficulty if the Loan Agreement and Mortgage had been declared void. The difficulty is the terms upon which any such order should be made if the power to make the order were enlivened. Relief under s 12GM of the ASIC Act mirrors the relief under s 87 of the Trade Practices Act where it is established that orders declaring a contract void ab initio may be granted on terms.[376] No submissions were made on this point although in oral closing submissions I indicated that this was a necessary consideration if the claim were to succeed.
[376] Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494 [116] (Gummow J).
In considering the appropriate terms upon which a declaration that the Loan Agreement and Mortgage is void should be made, the terms of the award of the equitable remedy of rescission afford some guidance for the exercise of the discretion.[377]
[377] Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494 [116] (Gummow J); Permanent Mortgages Pty Ltd v Vandenberg [2010] WASC 10; (2010) 41 WAR 353 [392] (Murphy J).
In Maguire v Makaronis,[378] Brennan CJ, Gaudron, McHugh and Gummow JJ said of the consequences of rescission of a loan and mortgage:
To set aside the Mortgage purely in its operation as a security, without conditioning that upon repayment, would be to reform the transaction in an impermissible fashion. It would be to strike down the security interest without ensuring repayment of that which was paid in return for it. The respondents would be left with the fruits of the transaction of which they complain, whereas their equity was to have the whole transaction rescinded and, so far as possible, the parties remitted to their original position.
[378] Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 475.
Their Honours referred to a decision of Dixon CJ, where the Chief Justice had said that 'the equity of the borrower is to have the whole transaction rescinded. The Court will do this so as to remit both parties to their original position. That is why the borrower must submit to the repayment of the moneys borrowed remaining unpaid'.[379]
[379] Mayfair Trading Co Pty Ltd v Dreyer [1958] HCA 55; (1958) 101 CLR 428, 452 (Dixon CJ).
The Burnistons were lent $344,911.14 by Perpetual on 4 August 2008 (the date of the drawdown). They used that money in the purchase of the Huntingdale property.[380]
[380] Exhibit 97.
For these reasons, even if there were grounds upon which to make a declaration that the Loan Agreement was void, it would have been extremely difficult to resist conditions which would have attached to that declaration in terms that the Burnistons repay the $344,911.14 principal advanced to them plus interest (which in Maguire was measured at commercial rates and half‑yearly rests).[381]
[381] Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 477.
As to alternative (b)(i) above, no submission was made, nor any explanation given, concerning why the Burnistons should be entitled to retain the benefit of some or all of the loan made by Perpetual merely because they were unable to meet loan repayments. No authority was cited which suggested that an inability to repay a loan, even where that is known to the lender, could exonerate a borrower as to the extent to which loan repayments could not be made. In one recent authority it was assumed that any arguable case for relief in relation to a loan of $360,000 would be conditioned upon the payment of, at least, $225,000 to the lender.[382]
[382] Moore v BNY Trust Company of Australia Ltd [2012] WASCA 188.
The premise of the Burnistons' alternative relief in (b)(ii) above was some acknowledgement that the Burnistons had obtained the benefit of money lent to them by Perpetual, and had lived in the Huntingdale property from before 4 August 2008 without making any repayments. But the assumption in (b)(ii) above was that $235,000 of the principal received by the Burnistons, and interest on that sum, could be disregarded in a declaration that the Loan Agreement and Mortgage are void. It is hard to understand the reason why this should be so. None was given.
The $235,000 was paid by the Burnistons to Ms Thompson prior to their draw down of the loan from Perpetual. The investment agreement under which $235,000 was paid to Ms Thompson, and by which 17.5% interest was promised, was never rescinded. The Burnistons instructed solicitors to seek repayment of that money.[383] As I explain in the conclusion to these reasons, even if (as appeared to be the assumption of the Burnistons, but as to which there was no evidence) Ms Thompson is insolvent, there may then be further questions concerning whether the investment agreement could be rescinded and $235,000 recovered in preference to some other creditors of Ms Thompson.
[383] Exhibit 155.
No submission was made in relation to any of these remedy issues and it suffices to say that the separate nature of the investment agreement is itself a strong reason why a condition of declaring the Loan Agreement and Mortgage to be void would have been the repayment of $344,911.14 principal with interest at commercial rates and rests less the small amount of repayments made by the Burnistons which were not re-drawn.

Damages

The third aspect of relief sought by the Burnistons, set out above, is damages. In closing submissions, counsel for the Burnistons clarified that the quantum of their damages claim was $235,000 plus interest.[384] No submissions were made on the rate of interest which should be received or the rests.
[384] ts 429 (counsel).
Apart from the Burnistons' assumption that the $235,000, or any part of it, would not be recovered from Ms Thompson (which I address in the conclusion to these reasons), the premise of the Burnistons' claim for damages was that Perpetual's conduct or conduct attributed to Perpetual caused $235,000 loss to the Burnistons. But no submissions were made on causation. There are real difficulties with causal connection.
As I explained in the section of these reasons concerned with duty of care, there is no basis upon which it could be said that Perpetual could be responsible for anything which happened prior to 8 July 2008. That was the date that conditional approval was granted by Collins Securities for the Burnistons' loan application. But, prior to this date:
(i)during 2006 and 2007 the Burnistons had invested money with Ms Thompson, and obtained repayments;
(ii)in late 2007, the Burnistons had discussions with Ms Thompson about investment of the proceeds of the sale of their Thornlie house;
(iii)subsequently, in November 2007 the Burnistons put their Thornlie property on the market;
(iv)in June 2008, the Burnistons entered into a sale contract for their Thornlie property; and
(v)on 1 July 2008, the Burnistons made an offer to purchase the Huntingdale property, which was accepted.
The settlement of these contracts of sale and purchase, and the investment deed with Ms Thompson and payment of $235,000 to Ms Thompson, were consequential upon all these events which occurred prior to 8 July 2008. In order to succeed on causation of damage, the Burnistons would need to have proved that some conduct, or attributed conduct, of Perpetual caused them to enter the investment agreement with Ms Thompson and to pay $235,000 to Ms Thompson. No submissions were made on this matter by the Burnistons,[385] perhaps because the issue of causation would depend upon the nature and content of any common law or statutory duty owed to the Burnistons. But it suffices to say that if I had concluded that Perpetual had breached a statutory or common law duty owed to the Burnistons then the issue of causation would have presented serious difficulty for the Burnistons' case.
[385] Perpetual made reference to causal issues in its written closing submissions [61] ‑ [62].

Conclusion

I conclude that the Loan Agreement and Mortgage are enforceable. I have also concluded that Perpetual has proved the debt claimed of $364,971.49 at 18 September 2009 and that the default notice was properly issued and not satisfied. There was no dispute that, in these circumstances, Perpetual is entitled to an order for possession and an order for payment of the sum owing at 18 September 2009 together with interest under the Loan Agreement until the date of payment
Although these reasons dispose of the many causes of action raised by the Burnistons, it is necessary to reiterate that these proceedings were only between Perpetual and the Burnistons. This has several consequences.
First, it is clear from my reasons that it may be that as between the Burnistons and Mortgage Miracles there could be a claim based upon misleading or deceptive conduct or for unconscionable conduct. But these reasons do not adjudicate between the Burnistons and Mortgage Miracles, although it has been necessary to make findings upon which the foundation of agency and vicarious liability submissions needed to be considered.
Secondly, as between Mortgage Miracles and Collins Securities, in the Sub‑Originator Agreement there is an undertaking by Collins Securities:[386]
[T]o indemnify and keep indemnified [Mortgage Miracles] against all actions, claims, demands, losses, damages, costs and expenses of whatever nature which [Mortgage Miracles] may suffer or incur or become liable to by reason of any default on the part of [Mortgage Miracles] under this Agreement or by reason of any liability to a third party occasioned or contributed to by any act, omission neglect breach or default of whatever nature on the part of [Mortgage Miracles].
[386] Exhibit 54, cl 15.1.
Since neither Mortgage Miracles nor Collins Securities was a party to these proceedings there was no issue concerning any set off which Collins Securities might assert against Mortgage Miracles.[387] Nor was there any issue raised concerning the extent to which Perpetual was answerable for the indemnity given by Collins Securities or the limited indemnity which Perpetual had, in turn, given to Collins Securities.[388] It is not necessary to express any opinion on those questions.
[387] Exhibit 54, Sub-originator agreement, cl 15.6.
[388] Exhibit 29, Master Trust Deed, cl 18.3.
Thirdly, another person who was not party to these proceedings was Ms Thompson. Issues relating to Ms Thompson which were not raised in these proceedings concern the agreement between her and the Burnistons for their investment of $235,000 with her. The assumption by the Burnistons was that the $235,000 which they invested with Ms Thompson, in her capacity as trustee for the C A Thompson Family Trust, was irrecoverable. There was no evidence concerning the assets which Ms Thompson held as part of that trust. And the Burnistons have not sought to rescind ab initio their investment agreement with Ms Thompson (as trustee).
Although the Burnistons have not sought to rescind ab initio that investment agreement, the conduct of Ms Thompson may mean that it is voidable and could be rescinded at common law.[389] On the assumption (which I do not decide) that the investment agreement were able to be rescinded, further issues may arise which could have had an impact on these proceedings. The further issues which may arise are based on further assumptions, upon which the Burnistons proceeded but on which there was no evidence and which I do not decide, that Ms Thompson is insolvent and that she retains no assets in her capacity as trustee for the C A Thompson Family Trust. The further questions which may arise concern whether the Burnistons' rights to restitution of their $235,000 paid under an avoided contract are to be preferred over general creditors of Ms Thompson,[390] or whether the Burnistons have any rights to trace the funds that were provided to Ms Thompson in her capacity as trustee. None of these issues were ventilated in this hearing and it is not necessary to express any opinion on them.
[389] Car & Universal Finance Co Ltd v Caldwell [1965] 1 QB 525.
[390] In re Eastgate ex parte Ward (1905) 1 KB 465; Tilley v Bowman Ltd [1910] 1 KB 745; Kison v Papasian (1994) 61 SASR 567, 569 (King CJ; Mullighan J agreeing).
Finally, and beyond the legal considerations directly raised in this case, there is a provision in Lending Manual for Collins Securities which explains that considerations relating to cessation of legal or recovery action include 'the viability of continued action, the impact on the reputation of [Perpetual] and genuine hardship of the borrower'.[391] From the evidence in this case there can be little doubt of the latter. This is a matter for Perpetual and Collins Securities to consider.
[391] Exhibit 26, cl 23.3.
I will direct the parties to consider these reasons and provide a minute of orders, agreed if possible, within three working days.

Schedule 1: Direct credit payments from the Broker to the Borrowers

DIRECT CREDITS FROM KT TO UNITED CREDIT ACCOUNT
No.	Trial Bundle Page No.	Description	Date		Amount
1.	2278	Direct Credit Kate Interest	11.01.06	$	150.00
2.	2279	Direct Credit Kate Interest	16.01.06	$	125.00
3.	2279	Direct Credit Kate Interest	16.01.06	$	312.50
4.	2280	Direct Credit Kate Feb Interest	09.02.06	$	150.00
5.	2281	Direct Credit Kate Interest	15.02.06	$	125.00
6.	2281	Direct Credit Kate Interest	15.02.06	$	312.50
7.	2282	Direct Credit Kate Interest	08.03.06	$	150.00
8.	2282	Direct Credit Kate March Interest	15.03.06	$	125.00
9.	2282	Direct Credit Kate March Interest	15.03.06	$	312.50
10.	2284	Direct Credit Kate Interest	11.04.06	$	150.00
11.	2284	Direct Credit Kate Interest	19.04.06	$	125.00
12.	2285	Direct Credit Kate Interest	19.04.06	$	312.50
13.	2285	Direct Credit Kate Interest	09.05.06	$	150.00
14.	2286	Direct Credit Kate Interest	17^05.06	$	125.00
15.	2286	Direct Credit Kate Interest	17.05.06	$	312.50
16.	2287	Direct Credit Kate June Interest	08.06.06	$	150.00
17.	2287	Direct Credit Kate June Interest	17.06.06	$	125.00
18.	2287	Direct Credit Kate June Interest	17.06.06	$	312.50
19.	2410	Swift Fr Catherine Thompson	17.08.09	$	4,039.00
20.	2410	Swift Fr Catherine Thompson	18.08.09	$	4,040.00
TOTAL PAYMENTS MADE BY WAY OF DIRECT CREDIT FROM KT				11,604.00

Schedule 2: Cheques from Ms Thompson deposited by the Burnistons

CHEQUES AND DEPOSITS FROM KT TO UNITED CREDIT UNION
No.	Trial Bundle Page No (Cheques)	Cheque Number	Date of Cheque	Amount	Date of Deposit	Trial Bundle Page No	Amount
1.	1201	1308	03.08.06	$ 150.0C	08.08.06	2289	$ 150.00
2.	1202	1310	18.08.06	$ 437.50	18.08.06	2289	$ 437.50
3.	1203	1336	06.09.06	$ 150.00	05.10.06	2295	$ 150.00
4.	1204	1346	15.09.06	$ 437.50	19.10.06	2295	$ 437.50
5.	1205	1367	04.10.06	$ 150.00	11.11.06	2298	$ 150.00
6.	1206	1373	11.10.06	$ 312.50	16.01.07	2304
7.	1207	1374	11.10.06	$ 125.00	16.01.07	2304	$ 587.50
8.	1208	1409	09.11.06	$ 150.00	16.01.07	2304
9.	1209	1420	15.11.06	$ 437.50	16.11.06	2298	$ 437.50
10.	1210	1440	06.12.06	$ 150.00	13.12.06	2301	$ 150.00
11.	1211	1443	13.12.06	$ 437.50	21.12.06	2301	$ 437.50
12.	1212	1458	16.01.07	$ 437.50	19.02.07	2307
13.	1213	1472	06.02.07	$ 150.00	19.02.07	2307	$ 587.50
14.	1214	1478	16.02.07	$ 437.50	19.06.07	2321	$ 437.50
15.	1215	1500	07.03.07	$ 150.00	08.03.07	2310	$ 150.00
16.	1216	1514	15.03.07	$ 437.50	21.03.07	2310	$ 437.50
17.	1217	1522	05.04.07	$ 150.00	12.04.07	2313	$ 150.00
18.	1218	1525	16.04.07	$ 437.50	19.04.07	2313	S 437.50
19.	1219	1538	07.05.07	$ 150.00	08.05.07	2317	$ 150.00
20.	1220	1539	16.05.07	$ 437.50	18.05.07	2317	$ 437.00
21.	1221	1549	07.06.07	$ 150.00	09.06.07	2321	$ 150.00
22.	1222	1582	29.06.07	$11,000.00	03.07.07	2324	$11,000.00
23.	1223	1595	16.07.07	$ 312.50	24.07.07	2324	$ 312.50

24.	1224	1616	16.08.07	$ 312.50	20.08.07	2327	$ 312.50
25.	1225	1630	31.08.07	$ 312.50	03.09.07	2331	$ 312.50
26.	1226	1639	17.09.07	$ 312.50	18.09.07	2331	$ 312.50
27.	1227	1650	15.10.07	$ 312.50	01.11.07	2337	$ 312.50
28.	1228	1652	04.10.07	$ 312.50	21.11.07	2337	$ 312.50
29.	1229	1662	29.10.07	$ 312.50	$ 312.50
30.	1230	1684	16.11.07	$ 312.50	10.12.07	2340	$ 312.50
31.	1231	500020	21.11.07	$ 312.50	04.01.08	2343	$ 625.00
32.	1232	1689	04.12.07	$ 312.50	04.01.08	2343
33.	1233	1067	02.01.08	$ 312.50	$ 312.50
34.	1234	500033	18.12.07	$ 312.50	2340	$ 362.50
35.	1235	1694	21.01.08	$ 312.50	30.01.08	2343	$ 312.50
36.	1236	1696	31.01.08	$ 312.50	04.02.08	2346	$ 312.50
37.	1237	1697	16.02.08	$ 312.50	05.03.08	2349	$ 312.50
38.	1238	500127	17.03.08	$ 312.50	20.03.08	2349	S 312.50
39.	1239	500156	04.04.08	$ 312.50	09.04.08	2353	$ 312.50
40.	1240	500176	Illegible	$ 312.50	29.04.08	2353	$ 312.50
41	1241	500190	29.04.08	$ 312.50	06.05.08	2356	$ 312.50
42.	1242	500215	09.05.08	$ 327.50	16.05.08	2356	$ 327.50
43.	1243	500228	20.05.08	$ 312.50	23.05.08	2356	$ 312.50
44.	1244	500238	Illegible	$ 312.50	10.06.08	2359	$ 312.50
45.	1245	500251	Illegible	$ 312.50	18.06.08	2359	$ 312.50
46.	1246	500263	30.06.08	$ 312.00	04.07.08	2362	$ 312.00
47.	1247	500298	16.07.08	$ 312.50	23.07.08	2362	$ 312.50
48.	1248	500311	28.07.08	$ 312.50	$ 312.50
49.	1249	500329	15.08.08	$ 312.50	20.08.08	$ 312.50
TOTAL PAYMENTS MADE BY WAY OF CHEQUES FROM KT							$24,751.50

Schedule 3: Direct credits to Collins Securities by Ms Thompson

DIRECT CREDITS TO COLLINS SECURITIES FROM KT
No.	Trial Bundle Page No.	Description	Date	Amount
1.	2217	mortgagemiracles - kate wages	02.10.08	$ 7,600.00
2.	2217	kate thompson - burniston	21.11.08	$ 3,427.00
TOTAL DIRECT CREDIT PAYMENTS FROM KT				$ 11,027.00

Schedule 4: Direct credit from Collins Securities to the Burnistons

DIRECT CREDIT FROM COLLINS SECURITIES TO THE DEFENDANTS
No.	Trial Bundle Page No.	Description	Date	Amount
1.	2217	Loan Redraw	08.10.08	$7,600.00
2.	2217	Loan Redraw	03.12.08	$2,866.14
3.	2217	Redraw	07.01.09	$560.86
TOTAL DIRECT CREDIT PAYMENTS TO THE DEFENDANTS				$11,027.00

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: PERPETUAL TRUSTEE COMPANY LTD -v- BURNISTON [No 2] [2012] WASC 383 (S)

CORAM: EDELMAN J

HEARD: 15 OCTOBER 2012

DELIVERED : 15 OCTOBER 2012

FILE NO/S: CIV 2900 of 2009

BETWEEN: PERPETUAL TRUSTEE COMPANY LTD
Plaintiff
AND
MICHAEL BURNISTON
ANN BURNISTON
Defendants
(BY ORIGINAL ACTION)
MICHAEL BURNISTON
ANN BURNISTON
Plaintiffs
AND
PERPETUAL TRUSTEE COMPANY LTD
Defendant
(BY COUNTERCLAIM)

Catchwords:

Practice and procedure - Suppression of parties to proceeding and reasons for decision - Suppression order made on interim basis to give affected parties the opportunity to make submissions concerning the manner in which the suppression should be lifted

Legislation:

Nil

Result:

Interim suppression order made

Category: B

Representation:

Original Action

Counsel:

Plaintiff: Ms C H Thompson
Defendants: Mr C M Slater

Solicitors:

Plaintiff: Gadens Lawyers
Defendants: Legal Aid (WA)

Counterclaim

Counsel:

Plaintiffs: Mr C M Slater
Defendant: Ms C H Thompson

Solicitors:

Plaintiffs: Legal Aid (WA)
Defendant: Gadens Lawyers

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

Nil

[The suppression order was removed in its entirety from the primary reasons for decision referred to below on 23 April 2013.]

EDELMAN J: The reasons for decision which I will shortly deliver to the parties concern litigation between a lender and borrowers. My reasons for decision are substantial, comprising 117 pages. Substantial parts of my reasons involve legal issues, although the legal issues and the facts are inextricable. I explain in my reasons for decision that the issues raised, which I consider in detail, include whether the lender's demand for payment was defective; whether statutory preconditions for payment were met; issues of unconscionable conduct (in various different forms) and misleading or deceptive conduct; issues concerning rectification of the loan agreement; whether terms should be implied into the loan agreement; whether a duty of care arises; contributory negligence; mistake and misrepresentation; issues of agency and vicarious liability including an extended legislative concept of agency; and remedies.
I have not heard from any of the parties, nor from any interested person, concerning whether the names of the parties or my reasons should be suppressed. At the commencement of the trial, counsel for the lender said that if I considered that suppression orders were appropriate, or if such orders were sought by the borrowers, then the lender would have no submissions to make on that matter. Taking into account the considerations in Practice Direction 8.2, pars 1 ‑ 6, I have decided that the reasons should be suppressed until further order.
Suppression decisions usually require an exercise of discretion which is heavily dependent upon the particular facts. They should not be lightly taken. The suppression of a judicial decision, in whole or in part, has the necessary effect of rendering the process of justice less open and less transparent. Whenever possible without rendering the order nugatory, reasons for suppression should be given.
A fundamental principle of the public system of litigation is open and transparent justice. It is a principle of fundamental concern, but it is not absolute. It must be weighed against other competing interests that might support suppression. The reason for suppression in this case is because my reasons for decision consider matters which may be the subject of pending criminal proceedings against a person or persons who were not a party or parties to the case before me, nor called as a witness or witnesses. Publishing these reasons could potentially indirectly affect those proceedings.
On the other hand, a significant reason in support of the publication of my reasons for decision in this matter is that there may be other actions in this court or other courts involving similar issues which could be affected by my decision on the legal issues involved.
I have considered various alternatives to suppression. One possibility is whether it is possible to suppress part of my reasons only. I do not consider that this is possible. Many of the parts of my reasons are interrelated. The suppression of some parts of the reasons, but not other parts, would render much of the reasons incomprehensible.
Another possibility is that the reasons be published with the names of all the persons involved anonymised in my judgment and the names of the parties to the action suppressed (and anonymised). At the moment it seems to me that this would be sufficient to overcome any potential prejudice to an affected party. I will direct that these reasons be provided to the potentially affected person or persons and I will give that person or persons the opportunity to make any submission to me concerning the lifting of the suppression, subject to anonymising the names of the persons involved and suppressing the names of the parties to the proceeding.
I will also hear, at short notice, any application which any interested person wishes to make to lift the suppression order. In the absence of such an application by Monday 19 November 2012, the suppression order will be lifted subject to orders suppressing the names of the parties to the proceeding and subject to publication of an anonymised version of my reasons. The suppression order will be lifted entirely, and the full judgment published, as soon as the possibility of prejudice to any criminal proceedings has passed.
In the interim, the orders I make are for the suppression of the names of the parties in this proceeding until further order, and the suppression of these reasons for decision until further order.