Serventy v Commonwealth Bank of Australia [No 2]
[2016] WASCA 223
•20/12/16
SERVENTY -v- COMMONWEALTH BANK OF AUSTRALIA [No 2] [2016] WASCA 223
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASCA 223 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:146/2015 | 6 DECEMBER 2016 | |
| Coram: | NEWNES JA MURPHY JA BEECH J | 20/12/16 | |
| 24 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| B | |||
| PDF Version |
| Parties: | ROLAND PHILIP SERVENTY EVELYN ROXANA SERVENTY COMMONWEALTH BANK OF AUSTRALIA |
Catchwords: | Equity Unconscionable conduct Whether unconscionable for bank to enforce mortgage 'Assetlending' Agency Whether intermediary was agent for bank so that intermediary's knowledge is imputed to the bank Turns on own facts |
Legislation: | Australian Securities and Investments Commission Act 2001 (Cth), s 12CB Trade Practices Act 1974 (Cth), s 51AC |
Case References: | Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 ASIC v Australian Lending Centre Pty Ltd (No 3)[2012] FCA 43; (2012) 213 FCR 380 Australian Competition and Consumer Commission v Flight Centre Travel Group Ltd [2016] HCA 49 Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 Casella v Hewitt [2008] WASCA 13; (2008) 36 WAR 1 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 Esanda Finance Corporation Ltd v Spence Financial Group Pty Ltd [2006] WASC 177 Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87 Jenyns v Public Curator (1953) 90 CLR 113 Kakavas v Crown Melbourne Ltd [2013] HCA 25; (2013) 250 CLR 392 Kowalczuk v Accom Finance [2008] NSWCA 343 Louth v Diprose (1992) 175 CLR 621 Mavaddat v HSBC Bank Australia Ltd [No 2] [2016] WASCA 94 Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146 Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 Paciocco v Australia and New Zealand Banking Group Ltd [2014] FCA 35; (2014) 309 ALR 249 Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; (2016) 90 ALJR 835 Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353 Perpetual Trustee Company Pty Ltd v Burniston [No 2] [2012] WASC 383 Pourzand v Telstra Corporation Ltd [2014] WASCA 14 Saunders v The Public Trustee [2015] WASCA 203 SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138 Tipperary Developments Pty Ltd v The State of Western Australia [2009] WASCA 126; (2009) 38 WAR 488 Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 Wu v Ling [2016] NSWCA 322 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : SERVENTY -v- COMMONWEALTH BANK OF AUSTRALIA [No 2] [2016] WASCA 223 CORAM : NEWNES JA
- MURPHY JA
BEECH J
- First Appellant
EVELYN ROXANA SERVENTY
Second Appellant
AND
COMMONWEALTH BANK OF AUSTRALIA
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : MASTER SANDERSON
File No : CIV 1950 of 2014
Catchwords:
Equity - Unconscionable conduct - Whether unconscionable for bank to enforce mortgage - 'Assetlending' - Agency - Whether intermediary was agent for bank so that intermediary's knowledge is imputed to the bank - Turns on own facts
Legislation:
Australian Securities and Investments Commission Act 2001 (Cth), s 12CB
Trade Practices Act 1974 (Cth), s 51AC
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
First Appellant : Mr F A Robertson
Second Appellant : Mr F A Robertson
Respondent : Ms C H Thompson
Solicitors:
First Appellant : Butcher Paull & Calder
Second Appellant : Butcher Paull & Calder
Respondent : Dentons
Case(s) referred to in judgment(s):
Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552
ASIC v Australian Lending Centre Pty Ltd (No 3)[2012] FCA 43; (2012) 213 FCR 380
Australian Competition and Consumer Commission v Flight Centre Travel Group Ltd [2016] HCA 49
Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256
Casella v Hewitt [2008] WASCA 13; (2008) 36 WAR 1
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226
Esanda Finance Corporation Ltd v Spence Financial Group Pty Ltd [2006] WASC 177
Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87
Jenyns v Public Curator (1953) 90 CLR 113
Kakavas v Crown Melbourne Ltd [2013] HCA 25; (2013) 250 CLR 392
Kowalczuk v Accom Finance [2008] NSWCA 343
Louth v Diprose (1992) 175 CLR 621
Mavaddat v HSBC Bank Australia Ltd [No 2] [2016] WASCA 94
Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Paciocco v Australia and New Zealand Banking Group Ltd [2014] FCA 35; (2014) 309 ALR 249
Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; (2016) 90 ALJR 835
Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353
Perpetual Trustee Company Pty Ltd v Burniston [No 2] [2012] WASC 383
Pourzand v Telstra Corporation Ltd [2014] WASCA 14
Saunders v The Public Trustee [2015] WASCA 203
SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138
Tipperary Developments Pty Ltd v The State of Western Australia [2009] WASCA 126; (2009) 38 WAR 488
Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389
Wu v Ling [2016] NSWCA 322
- REASONS OF THE COURT:
Introduction
1 In 2008, the appellants (the Borrowers) borrowed just under $1 million from the respondent (the Bank). They defaulted on the loan. The Bank sued for the debt and for possession of a property mortgaged to secure the loan.
2 The Borrowers appeal against the grant of summary judgment on the Bank's claim. For the reasons that follow, we are satisfied that the master was correct to grant summary judgment, and consequently we would dismiss the appeal.
The loan and the mortgage
3 Leaving aside matters of defence, the facts sustaining the Bank's claim were not in dispute. Those facts were established by an affidavit of an officer of the Bank,1 and included the following:
(1) The Borrowers were the registered proprietors of land at 181 Railway Road, Gooseberry Hill (the Property).
(2) On or about 28 February 2008, the Bank and the Borrowers entered into a written loan agreement under which the Borrowers borrowed the sum of $993,745 from the Bank and agreed to repay that sum in accordance with the terms and conditions of the loan agreement. Further, the Borrowers secured the payment of the money payable under the loan agreement by a first registered mortgage of three properties, one of which was the Property.
(3) On or about 20 March 2008, the Bank advanced the loan amount to the Borrowers.
(4) As at 11 April 2014, the Borrowers were in default.
(5) By a notice dated 15 April 2014, the Bank informed the Borrowers of the default, stating that unless it was rectified within the time specified in the notice the whole of the amount owing under the loan agreement would become immediately due and payable.
(6) The Borrowers did not rectify the default within the time specified.
The evidence relied upon by the Borrowers before the master
4 Before the master, the Borrowers relied on two affidavits, both jointly sworn by them.2 Those affidavits raised two main complaints. First, they asserted that the loan was made in circumstances where the Bank knew or ought to have known that the Borrowers had no capacity to service it. Secondly, the affidavits raised a complaint about the Bank's conduct in relation to the sale of other properties that the Borrowers owned in Queensland, which were also mortgaged to the Bank to secure the loan.
5 The Borrowers' first affidavit referred to the fact that the Bank had asserted that Mr Wayne Bucknell, the broker with whom the Borrowers had dealt, was not the Bank's agent.3 The relevant letter from the Bank, annexed to the Borrowers' first affidavit, referred to the intermediary agreement between Mr Bucknell and the Bank (in particular to pt 5, cl 5.3) but the agreement was not in evidence before the master. The Borrowers' first affidavit also asserted that the loan application form that was submitted by Mr Bucknell to the Bank misrepresented (by overstating) their income.
6 The Borrowers' second affidavit asserted, in effect, that the loan should be set aside on the grounds of predatory lending and unconscionable conduct because the Borrowers were 'put into' a loan facility by the Bank and its agent that they were obviously unable to service.4 Again, the affidavit referred to the fact that the Bank denied that Mr Bucknell was its agent. It also referred to the discrepancy between the 'fraudulent financial information on the loan application' and the Borrowers' true assets and liabilities.5
7 In response to the Borrowers' affidavits, the Bank filed an affidavit of an officer, Mr Lakeman.6 Mr Lakeman's affidavit referred to the declaration made by the Borrowers in support of the loan application. The Borrowers' declaration, signed by them, was annexed to their first affidavit. It stated that they had been self-employed for 10 years, their net income for the previous year was approximately $250,000, and that they had assets of $2.32 million and liabilities of $950,000.7
The hearing before the master
8 The Borrowers were self-represented at all stages of the primary proceedings.
9 At the outset of the hearing of the summary judgment application, the master invited the Borrowers to explain why the money they had borrowed should not be repaid or why the order sought by the Bank should not be made.8 In oral submissions, Mr Serventy emphasised the inconsistency between the statement of the Borrowers' income recorded by Mr Bucknell in their loan application and the Tax Office assessments of their income.9 He also asserted that Mr Bucknell was acting as the Bank's agent. In response, the master observed that generally, as a matter of law, a broker is the agent of the borrower and asked whether there was anything that would justify a conclusion to the contrary to which the Borrowers could point.10 Mr Serventy submitted that Mr Bucknell was approved by the Bank after a rigorous process and that Mr Bucknell took full responsibility in preparing the loan application.11 Mr Serventy accepted that he and his wife had signed the declaration stating that their gross taxable income was $250,000, saying that they missed that figure.12 Mr Serventy then raised a question as to whether the figure for gross taxable income had been added after the Borrowers had signed the declaration.
The decision of the master
10 The master reserved his decision, and delivered brief oral reasons, which can be summarised as follows:
(1) The material filed by the Bank verified its statement of claim. Consequently, there was an onus on the Borrowers to establish that there was a serious question to be tried, meaning a matter worthy of further investigation and warranting a trial.
(2) The Borrowers raised two matters. First, that the loan should not have been made because it was clear they were not in a position to make the necessary repayments; and secondly, complaints about the sale of the Queensland properties at an undervalue.
(3) As to the first, this was a 'low doc loan'. The evidence did not disclose that there was any action on the part of the Bank which would disqualify it from enforcing the loan covenant. The Bank was presented with a proposal on which it acted and it could not be subject to criticism.
(4) The master explained why he rejected the Borrowers' complaints about the sale of the Queensland properties. Because those complaints are not the subject of the appeal, it is not necessary to say anything more about that aspect of the master's reasons.
(5) The master granted leave to the Bank to bring its application out of time and entered judgment for the Bank.
The Borrowers' appeal
11 The Borrowers appeal on the ground that the master erred in fact and law in finding that there was no serious question to be tried in that sufficient factual grounds are raised by the appellants in their evidence, including additional evidence proposed to be put before this court, to establish that there was a serious question to be tried regarding the Borrowers' defence that the Bank engaged in unconscionable conduct by the general law or under s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) or s 51AC of the Trade Practices Act1974 (Cth).13 The Borrowers assert that this defence arises because:
(a) the Bank had actual or imputed knowledge that:
(i) Mr Serventy's income could not support his existing financial obligations with RAMS;
(ii) Mrs Serventy was a homemaker with no income; and
(iii) both Borrowers had little financial knowledge;
(b) the Bank knew or ought to have known that the loan granted by it was inappropriate to the Borrowers' needs and that they had no prospect of repaying it; and
(c) the Bank advanced the loan to the Borrowers only on the basis of the assets that they offered as security and without regard to their capacity to repay it.
Summary judgment - general principles
12 The caution with which the power to grant summary judgment is to be exercised is well known.14 It is only in the clearest of cases, when there is a high degree of certainty about what the ultimate outcome of the proceedings would be if they went to trial, that an application for summary judgment should be granted.15 The court may determine any question of law that arises on such an application, but it will usually be appropriate to leave the determination of difficult questions of law for trial.16
The Borrowers' application to adduce further evidence
13 The Borrowers applied for leave to adduce further evidence on the appeal. In essence, they contend that it is in the interests of justice that they be permitted to adduce further evidence because they were not legally represented before the master, and did not understand the need to adduce evidence to establish the arguable defences on which they now rely. The further evidence that the Borrowers wish to adduce includes affidavits sworn by them.17 These affidavits are to the following effect:
(1) The Borrowers dealt with Mr Bucknell between 2000 and 2006 while he was an employee of ANZ Bank in Kalamunda.18
(2) In mid-2006, after a visit to Queensland, Mr Serventy spoke to Mr Bucknell about the possibility of buying two vacant blocks of land in Queensland. Mr Bucknell said that one of his colleagues, Mr Trevor Kinnane, would contact the Borrowers. Following discussion with Mr Kinnane, the Borrowers borrowed from RAMS to purchase the Queensland properties. Although the Borrowers did not understand it at the time, that involved mortgaging the Property.19
(3) The Borrowers had difficulty making the payments on the loan with RAMS.20
(4) In about December 2007, Mr Bucknell contacted the Borrowers and said that he now worked as a mortgage broker for Colonial First State. Mr Serventy told Mr Bucknell that he was not in a position to pay the instalments to RAMS on time as he was only earning an amount of approximately $2,000 to $2,500 per month. Mr Bucknell and Mr Serventy discussed obtaining a loan from the Bank, and Mr Bucknell said that the Bank's interest would be lower than that on the RAMS debt.21
(5) After some discussion, Mr Bucknell prepared a loan application on the Borrowers' behalf.22 Neither of the Borrowers recall seeing any figures relating to income or value of properties at the time when they signed the loan application.23 The declaration attached to the loan application stated that the Borrowers' income was $250,000. That was false. So too was the statement that the Borrowers had life insurance in the amount of $800,000. Someone other than the Borrowers made false and misleading typewritten annotations on their application as to their income, assets and liabilities after they had signed it.24
(6) At settlement of the loan application, the Bank paid the outstanding amount of $947,243.01 to RAMS and the remaining $36,436.09 to the Borrowers.25
(7) Mr Serventy could not afford to make the monthly loan repayments to the Bank. He drew down on his credit cards or used the $36,436.09 which the Borrowers had received.26
The Bank's further evidence
14 The Bank did not oppose the receipt of the Borrowers' proposed further evidence, subject to the Bank being granted leave to adduce further evidence.
15 The Bank seeks to rely on an affidavit of Mr Lakeman sworn 10 March 2016. Mr Lakeman's affidavit sets out the history of the loan, and includes the following:
(1) The Borrowers' initial loan application, seeking a loan of $1 million.27
(2) Valuation reports received by the Bank showing that the initial application did not satisfy the Bank's required loan to value ratio of 80%.28
(3) The Bank sent an email to Mr Bucknell advising him of that fact and asking whether the Borrowers sought to reduce the loan amount or whether they disputed the Bank's property valuations.29
(4) Mr Bucknell responded to the Bank, stating that the Borrowers would like to reduce their loan amount to $984,000 plus the insurance premium.30
(5) At the time of the loan application, Mr Bucknell was an independent broker who was registered with the Bank, thereby entitling him to submit loan applications from prospective customers.31 The terms of Mr Bucknell's appointment are contained in the Bank's third party banking intermediary agreement, a copy of which was annexed to the affidavit.32 We will detail the terms of the intermediary agreement later in these reasons.
Reasons the further evidence was admitted
16 At the hearing of the appeal, the court admitted the additional evidence relied on by both parties.
17 In doing so, we applied the principles governing the receipt of additional evidence on an appeal stated by Mitchell J in Saunders v The Public Trustee.33 None of the evidence sought to be adduced on appeal by the Borrowers is fresh. Nevertheless, the Borrowers were unrepresented before the master and were defending a claim for summary judgment. Accordingly, we considered that it was in the interests of justice in all the circumstances of this case that the additional evidence be admitted to allow proper consideration of the issue of whether there was any serious question to be tried or other reason why there should be a trial of the Bank's action.
Preliminary observations
18 Unconscionable conduct occurs if one party (A) takes advantage of an inability on the part of another party (B) to make decisions in their own best interests, in circumstances where this inability was sufficiently evident to A to render A's conduct exploitative.34 B's special disability is sufficiently evident to A if and only if A actually knows of it or is wilfully blind to it; constructive knowledge is not sufficient.35 That is because unconscionable conduct involves a 'predatory state of mind' and exploitation or victimisation,36 albeit that, in this context, victimisation should not be narrowly understood.37
19 Determining whether a party to a transaction has engaged in unconscionable conduct will entail 'a precise examination of the particular facts' and 'every connected circumstance' as well as 'a scrutiny of the exact relations established between the parties'.38 The evaluative, fact-sensitive nature of this enquiry reinforces the need for caution in the exercise of the power to grant summary judgment. That does not mean that an assertion of unconscionable conduct will be enough to preclude summary judgment.
20 Lending without regard to the borrower's ability to service the loan and solely on the basis of the available security, sometimes referred to as pure asset-lending, may or may not amount to unconscionable conduct; whether it does depends on all the circumstances.39 In this case, for the reasons that follow, there is no evidence and no arguable case that the Bank made the loan to the Borrowers solely on the basis of the assets they offered as security and without regard to their ability to service the loan.
21 The Borrowers' loan application and the accompanying declaration did not suggest, much less reveal, to the Bank any special disadvantage on the part of the Borrowers, including any likely inability to service the proposed loan. The application and accompanying declaration disclosed that:
(1) the Borrowers had a debt with RAMS of about $940,000;
(2) they wished to refinance that debt with the Bank; and
(3) the Borrowers' income in the previous year was $250,000.
22 The interest rate on the proposed loan with the Bank was materially lower than the rate on the loan with RAMS.
23 The Borrowers also rely on the statutory concept of unconscionability, reflected in s 12CB of the Australian Securities and Investments Commission Act2001 (Cth) and s 51AC of the Trade Practices Act 1974 (Cth). Statutory unconscionability is expressly not limited to unconscionability under the general law. It is not necessary to explore in any detail the meaning of the word 'unconscionable' in these statutory settings.40 It is sufficient to observe that the ordinary meaning of the word is something done not in good conscience and which is irreconcilable with what is right or reasonable.41
24 In our opinion, the Borrowers' defence of unconscionable conduct relies critically upon the discussions between Mr Serventy and Mr Bucknell. Unless Mr Bucknell's knowledge and conduct can (arguably) be attributed to the Bank, there is no room for any argument that the Bank's conduct was unconscionable in equity or within the meaning of the relevant statutory provisions.
25 At the hearing of the appeal, counsel for the Borrowers did not accept that it was necessary for them to show an arguable case that Mr Bucknell was the Bank's agent. Counsel submitted that, leaving aside Mr Bucknell, the Borrowers have an arguable case that the Bank engaged in unconscionable conduct in lending purely on the Borrowers' assets, and being reckless or wilfully blind as to their ability to service the loan.42
26 Counsel accepted that the sole evidentiary foundation for that contention is the evidence that the Bank declined the initial loan application on the ground that the Bank's required loan to value ratio of 80% was exceeded by a small margin, notwithstanding the Borrowers' apparent ability to service the loan through their declared income of $250,000.43 We do not accept the logic of this argument. The fact that a bank required strict compliance with its loan to value ratio does not demonstrate or even suggest that it did not have regard to any other factor or circumstances. Further, and in any event, the evidence is that the Bank had regard to the question of the serviceability of the proposed loan; it sought and obtained account statements relating to the RAMS loan and the Borrowers' credit cards.44 As we have said, there was nothing in the loan application and accompanying declaration, or the other material obtained by the Bank, to suggest that the Borrowers would be unable to service the proposed loan.
27 Thus, in order for the Borrowers to have an arguable defence of unconscionable conduct, it is necessary, although not sufficient, that, at least arguably, Mr Bucknell was the Bank's agent, so that what he knew as to the Borrowers' financial circumstances, the Bank thereby knew.
28 We now turn to the question of whether Mr Bucknell was the Bank's agent. We begin by outlining the legal principles relevant to that question.
Agency: general principles
29 The relationship of principal and agent is established by the consent of both parties. The question of whether the parties have established a relationship of principal and agent is determined by consideration of the communications between them.45 The relationship of agency is ordinarily created by contract between the principal and agent.46Where the parties have an agreement in writing, the question of whether an agency relationship exists is one of the proper construction of the agreement.47
30 Agency can also be created through apparent or ostensible authority. That kind of authority can only arise through a representation or conduct by the (putative) principal; a representation by the ostensible agent alone is not enough.48 There is no basis for any contention that there was apparent authority in this case. There is no evidence of any conduct on the part of the Bank by which it held out Mr Bucknell as its agent. What Mr Bucknell said cannot found a claim of apparent authority.
31 The question of whether one party is an agent for another should not be asked in the abstract. One needs to consider the purpose for which one is asking the question of whether A is P's agent.49 In this case the question is whether knowledge of information gained by Mr Bucknell was knowledge to be imputed to the Bank.50
32 Agency is a consensual relationship, generally bearing a fiduciary character, in which by its terms A acts on behalf of and in the interests of P with the necessary degree of control requisite for the purpose of that role. The essential characteristic of an agency relationship is that A acts on P's behalf, and this will generally be in circumstances where A is obliged not to act otherwise than in the interests of P in the performance of their consensual arrangement.51
33 Typical features of a relationship of agency include the following:
(1) An agent may not delegate their authority.
(2) An agent has a duty to obey their principal's instructions.
(3) Where the agent retains a discretion as to carrying out their agency, they must exercise it honestly with due care and skill in what reasonably seems to be in the best interests of their principal.
(4) An agent owes their principal a duty of confidentiality.52
34 If parties expressly designate their relationship as involving, or not involving, agency, while that is not determinative it may be an important consideration and must be given proper weight.53
35 In cases like this one, agency is not to be confined to its primary connotation of an authority or capacity to create legal relations between the principal and a third party.54 The concept of agency can extend to 'canvassers' who make no contracts and do not dispose of property but are hired to introduce parties who wish to contract. Such canvassers may have authority to receive and communicate information on their principal's behalf and in so doing they may have the capacity to alter their principal's legal position.55
36 Generally, an insurance broker is the agent of the insured, not the insurer.56 The same approach has been taken to finance brokers.57 It has been said that it will not be sufficient to establish agency to show that a finance broker possessed and completed the finance application form, provided information to the financier as required by the financier and received a fee or commission from the financier.58
37 The delegation by a party to another party of a function that is important or necessary for the delegating party's business does not of itself establish an agency relationship.59 So in Tonto Home Loans v Tavares, the fact that the lender had entrusted the originator to interview applicants and collect and submit information to the lender did not mean that the originator was agent for the lender.60
38 In Permanent Mortgages v Vandenbergh, Murphy J found that it would be unsafe to have resort to the prima facie presumption about finance brokers in dealing with the question of whether a mortgage aggregator was an agent for the lender or the borrower.61 Rather, attention has to be directed to the details of the arrangements between the parties.
39 A duty for a mortgage originator to act in the interests of the borrower is or may be inconsistent with the existence of a relationship of agency, with attendant fiduciary duties, between the mortgage originator and the lender.62 An entitlement for the originator to take into account its own interests, or the interests of a putative borrower, in determining whether to send a loan application to the (particular) lender is inconsistent with an obligation to act in the lender's interests.63 Consequently, the existence of such an entitlement militates against a conclusion of agency on behalf of the lender.
40 These principles show that the question as to agency directs attention to the terms of the agreement between the Bank and Mr Bucknell, to which we now turn.
The intermediary agreement
41 The terms of the intermediary agreement are in the form of schedules A and B. It is apparent that these are schedules to a covering letter. However, the covering letter is not in evidence. The schedules include the following terms.
42 Part 1 of sch A sets out the Products in respect of which the intermediary (Mr Bucknell) is authorised by the Bank to provide Services.
43 Part 2 sets out categories of Services, including the following:
2.1 Personally interview the potential customer.
2.2 Ensure the potential customer accurately completed the relevant Application Forms.
…
2.4 Provide to us all relevant information in support of the customer's application for the Product/s in the format required by us or as agreed between us from time to time including:-
2.4(a) evidence of employment, income and assets including pay slips, group certificates, tax returns and historical financial statements;
2.4(b) current year budget and forward projections;
2.4(c) Property Valuations where in existence;
2.4(d) other requirements for particular loans (e.g. Construction loans);
2.4(e) appropriate 're-finance documentation', for re-finance loans, or other loans where a portion of an advance will re-finance other debts.
…
2.5 In the case of loan Products, liaise between the client and us through the Bank's settlement processes and ensure our settlement requirements, including Home and Building Insurance (if applicable), have been satisfied, in order to facilitate an efficient settlement process.
44 Schedule B sets out terms and conditions. Part 1 of sch B includes prohibitions against the intermediary doing any of the following:
You must not:
1.1 act on our behalf or hold yourself out as representing us for any purpose or gain except as authorised by this intermediary agreement;
1.2 enter into contractual relations on our behalf or hold out or represent to any person that we have or will give our approval to any Product unless we have given you written authority to do so;
…
1.9 present multiple loan applications, via online or other means, of any application initially presented to us for consideration, to any other lender, mortgage provider, or financial institution, whilst we are in the process of considering the application, except where you have been advised that the application has been declined, or, where a period of greater than 48 hours has lapsed from the time you received acknowledgement of that application and no decision has been provided, or if you, your Nominee or the customer requests that the application be withdrawn from the [Bank.]
45 Clauses 1.12 to 1.14 provide as follows:
1.12 In respect of each application for a Product you must ensure completion (and where necessary collection) by you as our agent in accordance with our Procedures of: 100 point identification check list to comply with the Financial Transaction Reports Act, Tax File Number disclosure, Privacy Protection of Information forms and any Bank Account Opening Application.
1.13 You agree to maintain continuous client relationship [sic] including client maintenance and service, addressing general product inquiries on those products introduced to the Bank and customer retention.
1.14 You agree to manage the ongoing relationship with any customers to whom you sell MAV ['Mortgage Advantage'], which includes keeping in regular contact with these customers to ensure the minimum portfolio balance requirements are maintained[.]
46 Part 2 of sch B contains general obligations of the intermediary, including the following:
You must:
2.1 disclose to any person for whom you or your Nominees act as intermediary or adviser that you or your Nominees will receive a commission from us and comply with any laws which oblige you to disclose further details of such commission;
2.2 if you charge, or may charge, a customer a fee for submitting a loan application to us (whether a brokerage fee or application fee or any other type of fee), also obtain a written acknowledgment signed by each customer acknowledging that such a fee will, or may be, payable to you by that customer;
…
2.4 Comply with:-
(i) all applicable laws, licences and relevant codes of conduct or practice, applicable to you;
(ii) all Bank lending policies and procedures as determined by us from time to time; and
(iii) all prudent and generally acceptable banking and financial service industry practices in the performance of the Services.
…
2.6 act honestly in your dealings with customers and represent fairly and accurately the terms and conditions of any Product;
2.7 promote our reputation and our Products and neither you or any of your Nominees, to engage in any conduct which may adversely affect our good name or business reputation provided that this clause does not prevent or restrict you from offering products of our competitors (including loan, credit card and savings products);
2.8 allow us to carry out an inspection or audit of:
(a) all records relating to the performance of the Services;
(b) the Data Security Requirements;
2.16 comply with our lending policies, procedures and utilise our systems as provided to you from time to time in the performance of the Services;
…
2.18 promptly forward to us all completed applications, associated documents (with your identifying number inserted) and money received and in any event within 48 hours of receipt;
2.19 ensure all information and material submitted to us is to the best of your knowledge and belief true, accurate and not misleading in any respect[.]
47 Part 4 contains detailed provisions governing the use by an intermediary of an employee or sub-agent referred to as a Nominee to perform the Services. Relevant provisions in this regard include the following:
If you wish to perform the Services through an employee or sub-agent or contractor you agree:
4.1 that only accredited Nominees will personally interview the potential customer and the Intermediary identifying number of the Nominee who personally interviewed the proposed customer(s) will be noted on any loan application submitted and supporting documents and on any CONNECT Customer Referral Form;
4.2 to only perform the Services through Nominees approved in writing by us (in accordance with the attached Authority to Act) and to maintain an up-to-date register of Nominees;
4.3 to be responsible for ensuring each Nominee complies with all of your duties and obligations and for the actions taken and advice given by Nominees;
4.4 Nominees shall comply with our lending policies, procedures and utilise our systems in the performance of Services;
…
4.22 that Nominees do not present multiple loan applications, via online or other means, of any application initially presented to us for consideration, to any other lender, mortgage provider, or financial institution, whilst we are in the process of considering the application, except where you have been advised that the application has been declined, or, where a period of greater than 48 hours has lapsed from the time you received acknowledgement of that application and no decision has been provided, or if you, your Nominee or the customer requests that the application be withdrawn from the [Bank];
…
4.27 that Nominees maintain continuous client relationship [sic] including client maintenance and service, addressing general product enquiries on those products introduced to the Bank and customer retention;
…
4.34 In order for an accredited Nominee to maintain our minimum Product Compliance requirements, they must:
i) Lodge at least one (1) loan application to us, each 6 months; or
ii) Attend a 'Product/process upskilling' workshop facilitated by us.
…
4.39 We reserve the right to cancel the accreditation of any Nominee who fails to meet the Minimum Product Compliance Requirements as set out under 4.34(i) or (ii) above.
4.40 We may suspend our accreditation of a Nominee at any time without giving you or the Nominee notice, where loans applications [sic] have been submitted to us by that Nominee containing fraudulent or misleading information or we suspect the Nominee has participated in fraudulent or dishonest activity, or had knowledge of any fraudulent or dishonest activity. Following any such suspension we will give notice in writing to you advising of that suspension.
Any such suspension of a Nominee will be for a reasonable period of time to allow us to conduct our investigations.
48 The general provisions in pt 5 include the following:
5.3 Our arrangement is one of principal and agent only in respect of you acting in accordance with clause 1.12 to comply with the Financial Transaction Reports Act and is not to be construed as implying any other relationship.
…
5.12 Nothing in this agreement prevents you from marketing to potential customers, products or services of other financial institutions, whether or not those products or services are offered in competition to our Products or in competition to other products or services offered by us.
The proper construction of the intermediary agreement: is the intermediary an agent of the Bank?
49 Under the intermediary agreement, the primary functions of the intermediary are to:
(1) personally interview potential customers;
(2) ensure a customer accurately completes an application form;
(3) provide to the Bank all relevant information in support of the customer's application in the format required by the Bank; and
(4) liaise between the customer and the Bank through the Bank's settlement processes when the customer is obtaining a loan product to ensure that the Bank's settlement requirements are satisfied in order to facilitate settlement.64
50 The intermediary is also obliged to ensure completion of relevant identification checks, and to maintain continuous client relationships with customers.65
51 In performing the Services, the intermediary must comply with all Bank lending policies and procedures, and they must ensure that all information and material submitted to the Bank is, to the best of the intermediary's knowledge, true and accurate and not misleading.66 The intermediary is also obliged to promote the Bank's reputation and products, and must not engage in any conduct which might adversely affect the Bank's good name and business reputation, although it may offer competitors' products.67
52 In our view, taken together, the following considerations indicate that, under the intermediary agreement, the intermediary is not appointed to act on the Bank's behalf, is not obliged to act only in the interests of the Bank, and is not appointed the Bank's agent.
53 First, the starting point is that a finance broker is generally the agent of the borrower, rather than the lender.
54 Secondly, under the intermediary agreement, the intermediary has no obligation to send any particular loan applications to the Bank. In deciding whether to send a loan application to the Bank, as opposed to some other lender, the intermediary is free to act in the borrower's interests and, for that matter, its own interests. That is clear from cl 5.12 of the intermediary agreement.68 It is true, as is emphasised by the Borrowers, that under the intermediary agreement,69 if the intermediary, or its Nominee, initially sends a loan application to the Bank, it must not send a corresponding loan application for the same prospective client to any other lender for at least 48 hours after the application is sent to the Bank. However, to our minds, that provision creates a very limited constraint on the freedom of the intermediary to act in the borrower's interests when making a loan application.
55 Thirdly, other provisions of the intermediary agreement militate against the conclusion that, by the agreement, the intermediary is the Bank's agent. Clause 5.3 of the agreement provides that the arrangement between the parties is one of principal and agent only in respect of the intermediary's function under cl 1.12. That express provision must be given proper weight. Further, by cl 1.1 in sch B of the agreement, the intermediary must not act on behalf of the Bank or hold itself out as representing the Bank for any purpose except as authorised by the intermediary agreement. Also, by cl 1.2, the intermediary must not enter into contractual relations on behalf of the Bank, or hold out or represent to any person that the Bank has or will give its approval to any Product.
56 Fourthly, the intermediary agreement contemplates that the intermediary may 'act for' a borrower as intermediary,70 and may charge fees, including brokerage fees, to that borrower.71
57 Fifthly, the agreement provides for the intermediary to delegate performance of its obligations to a Nominee or contractor, albeit on conditions.72
58 Sixthly, the intermediary is free to retain and use a customer's personal information, so long as the customer consents.73
59 Seventhly, in substance, the intermediary provides services to the Bank in providing to the Bank the information it needs in order to decide whether to make a loan, and in relation to the ongoing management of the loan. The delegation by the Bank to the intermediary of a function that is important or necessary for the Bank's business does not of itself establish an agency relationship.74 The fact that the intermediary completes the loan application form, provides information to the Bank in the manner required by the Bank, and receives a fee or commission for doing so, is not sufficient to make the intermediary the agent of the Bank.75 Nor, in our opinion, is the fact that, in performing its functions, the intermediary must act in accordance with the Bank's policies and procedures, and must promote the Bank's reputation and products. Such obligations fall short of duties to act in accordance with the Bank's instructions and in the Bank's interests, to the exclusion of the interests of the intermediary and the prospective borrower.
60 For these reasons, in our opinion the intermediary agreement does not reveal, even arguably, an intention that the intermediary is to be the Bank's agent to receive information from prospective borrowers on the Bank's behalf, so that knowledge of the information thereby received by the intermediary can be imputed to the Bank. Rather, the intention revealed by the agreement is that:
(1) the intermediary is to facilitate the receipt by the Bank of an application and accompanying information from a prospective borrower;
(2) the intermediary's role is to ensure that:
(a) the application and accompanying information are in the appropriate format, as prescribed by the Bank or agreed by the parties; and
(b) to the best of the intermediary's knowledge, the information received by the Bank from a prospective borrower is accurate;
(3) only by the intermediary sending the application and accompanying information to the Bank is the Bank to acquire knowledge as to the circumstances of a prospective borrower.
61 The Borrowers submitted that the fact that the intermediary agreement expressly appoints the intermediary as agent for a particular purpose, albeit a limited one, supported a conclusion that, at least arguably, the effect of the agreement was to create a wider agency.76 How that is so was not explained. Contrary to this submission of the Borrowers, the terms of cl 5.3 provide an obstacle to their contention that Mr Bucknell was the Bank's agent. That is because, as we have observed, cl 5.3 expressly states that the parties' arrangement is one of principal and agent only in respect of the intermediary acting for the Bank in ensuring completion of the 100 point identification check list under cl 1.12.
62 In our view there is no impediment to this court determining the proper construction of the intermediary agreement in an appeal against the grant of summary judgment. There is no reason to expect that any extrinsic evidence could inform the construction issue in this case. Counsel for the Borrowers submitted that discovery may reveal documents that support their case that Mr Bucknell was the Bank's agent.77 In our view, given that the intermediary agreement provides no foundation for a conclusion of agency (in any relevant respect), that submission is too speculative to support a conclusion that summary judgment should have been refused because 'there ought for some other reason to be a trial'.78
63 It follows that, in our opinion, summary judgment on the Bank's claim was rightly given, and the appeal must be dismissed.
Conclusion
64 For the reasons given, we would dismiss the appeal.
1 Affidavit of Daniel Morfitis sworn 13 February 2015.
2 The first was sworn on 9 June 2015 and the second on 30 June 2015.
3 Borrowers' first affidavit [24].
4 Green AB 175, 180.
5 Green AB 176.
6 Affidavit of Paul Lakeman sworn 5 August 2015.
7 Green AB 170.
8 ts 4.
9 ts 4 - 5.
10 ts 7.
11 ts 8 - 9.
12 ts 10.
13 In force in February 2008, and continued in force in this context by item 6(1) of sch 7 to the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth).
14Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99.
15Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 [57]; Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 [46].
16Casella v Hewitt [2008] WASCA 13; (2008) 36 WAR 1 [36]; SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138 [20].
17 Affidavit of Roland Philip Serventy sworn 26 February 2016 (RPS); affidavit of Evelyn Roxana Serventy sworn 13 May 2016 (ERS).
18 RPS [12]; ERS [13].
19 RPS [14], [23] - [38]; ERS [15] - [25].
20 RPS [40], [46]; ERS [26].
21 RPS [43], [49] - [50].
22 RPS [56], annexure RS13; ERS [33].
23 RPS [59]; ERS [30].
24 RPS [60] - [64]; ERS [30] - [31].
25 RPS [71].
26 RPS [76] - [77].
27 Affidavit of Paul Lakeman sworn 10 March 2016 (Lakeman) [15(a)], annexure PL3.
28 Lakeman [15(h)] - [15(i)], annexures PL6, PL7, PL8.
29 Lakeman [15(j)], annexure PL9.
30 Lakeman [15(k)], annexure PL10.
31 Lakeman [16].
32 Lakeman [17], annexure PL18.
33Saunders v The Public Trustee [2015] WASCA 203 [83] - [90].
34Louth v Diprose (1992) 175 CLR 621, 632, 637; Kakavas v Crown Melbourne Ltd [2013] HCA 25; (2013) 250 CLR 392 [124].
35Kakavas v Crown Melbourne [156] - [161]; Mavaddat v HSBC Bank Australia Ltd [No 2] [2016] WASCA 94 [79].
36Kakavas v Crown Melbourne [161]; Mavaddat v HSBC Bank Australia [79].
37Wu v Ling [2016] NSWCA 322 [14] - [15].
38Jenyns v Public Curator (1953) 90 CLR 113, 118 - 119; Kakavas v Crown Melbourne [18], [122], [158] - [159]; Wu v Ling [7]. The same is true of the statutory jurisdiction to relieve against unconscionable conduct: Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 [291] - [293]; Wu v Ling [7].
39Kowalczuk v Accom Finance [2008] NSWCA 343 [96]; Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353 [206] - [214]; compare ASIC v Australian Lending Centre Pty Ltd (No 3)[2012] FCA 43; (2012) 213 FCR 380 [212].
40 See, for example, Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; (2016) 90 ALJR 835 [181] - [191], [288] - [294]; Perpetual Trustee Company Pty Ltd v Burniston [No 2] [2012] WASC 383 [323] - [324].
41 See the cases collected by Gordon J in Paciocco v Australia and New Zealand Banking Group Ltd [2014] FCA 35; (2014) 309 ALR 249 [283].
42 Appeal ts 51 - 52.
43 Appeal ts 52 - 53.
44 Lakeman [15(q)], annexures PL14, PL15, PL16.
45Permanent Mortgages v Vandenbergh [279].
46Australian Competition and Consumer Commission v Flight Centre Travel Group Ltd [2016] HCA 49 [77].
47Permanent Mortgages v Vandenbergh [279] - [283].
48Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [36]; Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146, 187; Tipperary Developments Pty Ltd v The State of Western Australia [2009] WASCA 126; (2009) 38 WAR 488 [108] - [109]; Pourzand v Telstra Corporation Ltd [2014] WASCA 14 [113], [130].
49Tonto Home Loans v Tavares [173].
50 Compare Tonto Home Loans v Tavares [173].
51Tonto Home Loans v Tavares [177]; ACCC v Flight Centre [77].
52Permanent Mortgages v Vandenbergh [288].
53Tonto Home Loans v Tavares [182]; Permanent Mortgages v Vandenbergh [280]; Perpetual Trustee Co v Burniston [250].
54Tonto Home Loans v Tavares [171], [174].
55Tonto Home Loans v Tavares [178].
56Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226, 234.
57Esanda Finance Corporation Ltd v Spence Financial Group Pty Ltd [2006] WASC 177 [54], [61] - [64]; Perpetual Trustee Co v Burniston [245].
58Esanda Finance v Spence Financial Group [65]; Perpetual Trustee Co v Burniston [246].
59Tonto Home Loans v Tavares [194]; Perpetual Trustee Co v Burniston [182], [248].
60Tonto Home Loans v Tavares [191] - [193].
61Permanent Mortgages v Vandenbergh [316].
62Perpetual Trustee Co v Burniston [251].
63Tonto Home Loans v Tavares [187].
64 Schedule A pt 2, cls 2.1, 2.2, 2.4, 2.5.
65 Schedule B pt 1, cls 1.12, 1.13.
66 Schedule B pt 2, cls 2.16, 2.19.
67 Schedule B pt 2, cl 2.7.
68 See also sch B pt 2, cl 2.7.
69 Schedule B pt 1, cl 1.9; see also sch B pt 4, cl 4.22.
70 Schedule B pt 2, cl 2.1.
71 Schedule B pt 2, cl 2.2.
72 Schedule B pt 4.
73 Schedule B pt 2, cl 2.3.2(a).
74Tonto Home Loans v Tavares [194]; Perpetual Trustee Co v Burniston [182], [248].
75 See, by analogy, Esanda Finance v Spence Financial Group [65]; Perpetual Trustee Co v Burniston [246] - [248]; Tonto Home Loans v Tavares [191] - [193].
76 Appeal ts 53 - 54.
77 Appeal ts 5.
78Rules of the Supreme Court 1971 (WA) O14 r 3(1).
13