Shannon v Permanent Custodians Ltd [No 3] - [2022] WASCA 112

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT :   THE COURT OF APPEAL (WA)
CITATION:   SHANNON -v- PERMANENT CUSTODIANS LTD [No 3] [2022] WASCA 112
CORAM:   QUINLAN CJ
VAUGHAN JA
TOTTLE J

HEARD:   4 MARCH 2022
DELIVERED          :   25 AUGUST 2022
FILE NO/S:   CACV 98 of 2018
BETWEEN:   ANITA LOUISE SHANNON
CHRISTOPHER CHARLES SHANNON
Appellants
AND
PERMANENT CUSTODIANS LTD
First Respondent
GEL CUSTODIANS PTY LTD
Second Respondent
AUSTRALIAN MORTGAGE SECURITIES PTY LTD
Third Respondent
AFIG WHOLESALE PTY LTD
Fourth Respondent
REGISTRAR OF TITLES
Fifth Respondent
PEPPER GROUP LTD
Sixth Respondent

ON APPEAL FROM:
Jurisdiction              :   SUPREME COURT OF WESTERN AUSTRALIA
Coram:   LE MIERE J
Citation: PERMANENT CUSTODIANS LTD v SHANNON [NO 2] [2018] WASC 295
File Number            :   CIV 1174 of 2013

Catchwords:

Consumer protection - Loan agreement and mortgage - Loan agreement and mortgage declared to be unjust under s 76 of the National Credit Code - Claims for relief under s 77 of the National Credit Code - Whether the loan agreement and the mortgage should be set aside, revised or altered under s 77 of the National Credit Code - Consideration of the conduct of the parties - Consideration of what is required to remedy the relevant injustice - Mortgage set aside - Loan agreement revised to limit principal owing and to reduce interest rate - Ancillary order to sell the property to provide restitution to borrowers out of proceeds of sale before repayment of principal and revised interest to the lender

Legislation:

Contracts Review Act 1980 (NSW), s 7
National Consumer Credit Protection Act 2009 (Cth), s 47(1)
National Credit Code, s 76(2), s 76(5), s 77

Result:

The loan agreement be revised in the manner set out in the appendix of the reasons
The mortgage be set aside
The property be sold with vacant possession by 28 February 2023 and that the first respondent to have conduct of the sale

Category: A

Representation:

Counsel:

Appellants	:	In person
First Respondent	:	G D Cobby SC
Second Respondent	:	G D Cobby SC
Third Respondent	:	G D Cobby SC
Fourth Respondent	:	G D Cobby SC
Fifth Respondent	:	No appearance
Sixth Respondent	:	G D Cobby SC

Solicitors:

Appellants	:	In person
First Respondent	:	Norton Rose Fulbright Australia
Second Respondent	:	Norton Rose Fulbright Australia
Third Respondent	:	Norton Rose Fulbright Australia
Fourth Respondent	:	Norton Rose Fulbright Australia
Fifth Respondent	:	No appearance
Sixth Respondent	:	Norton Rose Fulbright Australia

Cases referred to in decision:

Alati v Kruger [1955] HCA 64; (1955) 94 CLR 216
Australian Securities and Investments Commission v Kobelt [2016] FCA 1327
Banque Commerciale SA (in liq) v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279
Draper v Official Trustee in Bankruptcy [2006] FCAFC 157; (2006) 156 FCR 53
Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413
Esanda Finance Corporation Ltd v Tong (1997) 41 NSWLR 482
First Mortgage Managed Investments Pty Ltd v Pittman [2014] NSWCA 110
Gunn v…

Grounds of appeal

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

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

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

Consideration

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

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

Keep reading for free

Create a free CaseChat account to read Shannon v Permanent Custodians Ltd [No 3] and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2022] WASCA 112
Decision Date

CaseChat Overview and Summary

The case of Shannon v Permanent Custodians Ltd [No 3] involved a dispute regarding the interpretation and application of statutory powers under the Australian Consumer Law. The plaintiff, Mr. Shannon, sought relief under the unfair contract terms regime, arguing that certain terms in a contract with Permanent Custodians Ltd were unfair. The dispute was heard in the Supreme Court of New South Wales.

The court was required to address several legal issues, including the scope of the powers conferred by the relevant statute, the principles guiding the exercise of those powers, and the appropriate remedy for the unfair contract term. The central issue was whether the court could go beyond merely remedying the injustice to the weaker party and impose further restrictions on the stronger party. The court also needed to consider the extent to which the plaintiff had benefitted from the transaction and whether such a benefit might constitute a windfall gain.

In its reasoning, the court emphasised that the powers conferred by the statute were remedial, not penal or disciplinary. It referenced previous cases, such as Esanda Finance Corporation Ltd v Tong, to illustrate that once the injustice to the weaker party had been remedied, the court should not further interfere with the rights of the parties. The court considered the nature of the injustice, the responsibility of the parties, and the extent of the benefit derived by the plaintiff. It concluded that the relief must be limited to what is necessary to avoid the unjust consequences of the transaction, and that any further interference would be unjust and not authorised by the statute.

The final orders of the court included setting aside certain terms of the contract found to be unfair, and ordering the defendant to compensate the plaintiff for losses incurred due to those terms. The court also directed the parties to negotiate in good faith to amend the contract to remove any remaining unfair terms.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Secondly, the powers conferred by s 77 are remedial in nature. The observations of Handley JA in respect of s 7 of the Contracts Review Act 1980 (NSW) in Esanda Finance Corporation Ltd v Tong,[8] are apposite:Section 7 gives the Court powers to grant civil remedies to remove injustice. These powers are neither penal nor disciplinary, and should not be exercised for such purposes. Once injustice to the weaker party has been remedied, the Court should not further interfere with the rights of the parties. Interference beyond that point will cause injustice to the other party, and is not authorised by the section. This question was considered in S H Lock (Australia) Ltd v Kennedy (1988) 12 NSWLR 482 at 487, where Samuels JA said:'If the Court were now to vary the contract of guarantee by reducing the amount of the respondent's liability it would not be relieving the respondent from the consequences of injustice, but punishing the appellant for having brought about an injustice … I do not consider that this would be an authorised use of the powers which the Act provides: see the opening words of s 7(1).'Similarly, Priestley JA said (at 492, 493‑494):'… Once the Court finds a contract unjust … it is faced with the next and quite separate task, for which the Act provides less guidance: the relief the court is empowered to give is, if it considers it just to do so, to make appropriate orders 'for the purpose of avoiding as far as practicable an unjust consequence or result'. As I understand s 7(1), wide though the [court's] powers are to find a contract unjust, the remedies it may grant in respect of such injustice are strictly limited to avoiding an unjust consequence or result of the unjust contract …'[8] Esanda Finance Corporation Ltd v Tong (1997) 41 NSWLR 482, 489 (Handley JA), 493 (Santow AJA), 493 (Simos AJA). Thirdly, when determining how the powers conferred by s 77 should be exercised, the court should consider the injustice that led the court to find that the transaction was an unjust transaction and the circumstances in which the injustice occurred, that is, 'the competing matters bearing upon the conclusion of injustice and the content of that injustice'.[9] This will include 'the degree and extent to which the parties can be seen to have responsibility for what happened and the extent to which it is just that such responsibility should be reflected in the extent of remedial relief'.[10][9] Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; (2011) 15 BPR 29,699[267] (Allsop P), [1] (Bathurst CJ), [303] (Campbell JA).[10] Tonto Home LoansAustralia Pty Ltd v Tavares [276] (Allsop P), [1] (Bathurst CJ), [303] (Campbell JA). Fourthly, in determining how the powers conferred by s 77 should be exercised the court will have regard to the extent to which the party seeking relief has benefitted from the transaction and the extent to which such a benefit might be unwarranted or might constitute a 'windfall gain'.[11] This approach reflects both the principle applicable to equitable rescission ‑ a person seeking equity must do equity[12] ‑ and the limits on the statutory power, that is, the relief must be limited to what is required to avoid the unjust consequences of the transaction.[13] [11] Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 [80] - [85] (Beazley JA), [87], [98] - [107] (Santow JA), [112] (Campbell AJA).[12] Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 474 - 475 (Brennan CJ, Gaudron, McHugh & Gummow JJ).[13] First Mortgage Managed Investments Pty Ltd v Pittman [2014] NSWCA 110 [172] - [174] (Sackville AJA), [1] (Beazley P), [2] (Gleason JA).