Southlea Holdings Pty Ltd v Gregory - [2022] SASC 66

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
SOUTHLEA HOLDINGS PTY LTD v GREGORY
[2022] SASC 66
Judgment of the Honourable Auxiliary Justice Dart
REAL PROPERTY - TORRENS TITLE - MORTGAGES, CHARGES AND ENCUMBRANCES - POWERS AND REMEDIES OF MORTGAGEE - POSSESSION
Respondent borrowed money over four tranches - renovation of residential property - subdivision of other land - loans for short-term - term extended - term expired - monies not repaid - applicant seeks an order for possession and judgment for the debt due - respondent says transactions were unjust - National Credit Code - unconscionable.
Held:
1. The transactions were neither unjust nor did the applicant act unconscionably.
2. Applicant entitled to orders for possession.
3. Applicant entitled to judgment on an amount to be fixed.
Real Property Act 1886 (SA) Part 17; National Consumer Credit Protection Act 2009 (Cth) Schedule 1, referred to.
Corporation of the Town of Moonta v Rodgers & Rodgers (1980) 26 SASR 143; Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161; Bendigo & Adelaide Bank Ltd v Brackenridge [2020] SASC 114; Hraiki v Beljon [2008] NSWSC 775; Perebo Pty Ltd v Wayville Residential Investments Pty Ltd [2019] SASC 35; Blomley v Ryan (1956) 99 CLR 362, considered.

SOUTHLEA HOLDINGS PTY LTD v GREGORY
[2022] SASC 66

The applicant seeks an order for possession in respect of two properties owned by the respondent. It also seeks a judgment in a dollar amount for the debt said to be owed by the respondent. The applicant is a registered second mortgagee in respect of the land. The respondent borrowed money in four tranches. Each loan was for a fixed term subject to agreed variations. The final agreed term expired in August 2018. The debt was not repaid at that time, or any time since. The applicant is entitled to the order for possession.
Factual background
At the relevant time the respondent was a manager employed by a company called Wanted Worldwide. It was a debt collection business. The owner of the business was Mr Frank Carbone. He was an acquaintance of Mr Frank Quaini who is the director of the applicant.
In December 2013 Mr Carbone sent an email to Mr Quaini on behalf of the respondent. He indicated that the respondent was looking to renovate a property at Blackwood and get it ready for sale. Funds were sought from Mr Quaini at that time. It appears that nothing developed from that email. At about that time it appears that monies were borrowed by the respondent from CEG Finance Pty Ltd. That debt was repaid.
On or about 21 November 2016 the respondent sent an email to Mr Quaini enclosing a budget and details of the renovation works to be carried out at the Blackwood property. She sought a loan to permit the work to be carried out. On 25 November 2016 parties entered into a loan agreement in the amount of $100,000. The concessional interest rate (if no…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

Case: [2022] SASC 66
Decision Date: 1 July 2022

CaseChat Overview and Summary

In the case of Southlea Holdings Pty Ltd v Gregory, the applicant sought an order for possession of two properties owned by the respondent and a judgment for the debt claimed to be owed. The applicant was a registered second mortgagee in respect of the land, and the respondent had borrowed money from the applicant in four separate loans. The loans were for a fixed term, subject to variations agreed by the parties, but the debt was not repaid when due. The respondent, who was a manager employed by a debt collection business, had borrowed money from the applicant to finance renovations and a subdivision of land. The loans were secured by a mortgage over the properties in question. The applicant sought an order for possession and a judgment for the outstanding debt. The legal issues that the court was required to decide included whether the transactions between the parties were unjust and whether the applicant had engaged in unconscionable conduct. The court found that the transactions were not unjust, and there was no evidence of unconscionable conduct by the applicant. The court concluded that the applicant was entitled to an order for possession and a judgment for the debt due.

The court's reasoning was based on the principle that, in the absence of evidence of unconscionability or unfairness, the court should not interfere with the contractual arrangements between parties. The court noted that the respondent had willingly entered into the transactions with the applicant and that there was no evidence of any disadvantage or exploitation on the part of the applicant. The court also rejected the argument that the respondent's imprudence in entering into the transactions provided a basis for finding them to be unjust. The court held that, unless there was a sound reason to do otherwise, the parties should be left to the consequences of their contractual bargain. The court's decision was based on the principle that the law should not interfere with the freedom of parties to enter into contracts unless there is clear evidence of unfairness or unconscionability. The court held that the applicant was entitled to an order for possession and a judgment for the debt due, and the parties were directed to confer on the form of the orders.

Orders

Orders of the court

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Background

Background to the litigation

The applicant seeks an order for possession in respect of two properties owned by the respondent. It also seeks a judgment in a dollar amount for the debt said to be owed by the respondent. The applicant is a registered second mortgagee in respect of the land. The respondent borrowed money in four tranches. Each loan was for a fixed term subject to agreed variations. The final agreed term expired in August 2018. The debt was not repaid at that time, or any time since. The applicant is entitled to the order for possession. Factual background At the relevant time the respondent was a manager employed by a company called Wanted Worldwide. It was a debt collection business. The owner of the business was Mr Frank Carbone. He was an acquaintance of Mr Frank Quaini who is the director of the applicant. In December 2013 Mr Carbone sent an email to Mr Quaini on behalf of the respondent. He indicated that the respondent was looking to renovate a property at Blackwood and get it ready for sale. Funds were sought from Mr Quaini at that time. It appears that nothing developed from that email. At about that time it appears that monies were borrowed by the respondent from CEG Finance Pty Ltd. That debt was repaid. On or about 21 November 2016 the respondent sent an email to Mr Quaini enclosing a budget and details of the renovation works to be carried out at the Blackwood property. She sought a loan to permit the work to be carried out. On 25 November 2016 parties entered into a loan agreement in the amount of $100,000. The concessional interest rate (if no default) was 2.5% per month. The money was to be repaid by 31 May 2017. In March 2017 there were further email exchanges. A second loan of $100,000 was agreed. This was to be used to complete a subdivision of land at Coromandel Valley. One of the subdivided blocks was to be sold. It was to be repaid on 6 March 2018. On 28 June 2017 a deed of variation was agreed which had the effect of extending the date for repayment of the first loan until November 2017. On 31 August 2017 a third loan of $100,000 was entered into. This was recorded in a document called a Deed of Variation. At the same time the respondent signed a document called Declaration of Purpose, which stated that the money was to be used for the Blackwood renovations and/or the Coromandel Valley subdivision. The repayment date for the first two loans did not change. The third loan was due to be repaid on 1 August 2018. The concessional interest rate was reduced to 2% per month. In December 2017 a fourth advance was agreed in the amount of $40,000. This was for the purpose of finalising the subdivision and the work at the Blackwood property. The mortgage was registered at that time. At the time of the first advance a caveat had been lodged on the title noting the interest of the applicant as mortgagee. The final loan agreement acknowledged that the total sum borrowed was $367,831.74. It provided that all of the money due was to be repaid on 24 August 2018. The loan was not repaid by the date agreed between the parties. A notice of default and intention to sell was served on or about 27 August 2018.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

At its highest for the respondent, it might be said that the transactions she entered into with the applicant were imprudent. It is not clear that that is so but, assuming it to be the case, that provides no basis to make a finding that the transactions were unjust. They were transactions entered into by two people willingly. Unless there is a sound reason to do otherwise, the Court should leave people to the consequences of their contractual bargain. This is not a case of a person being at a disadvantage and a lender taking unconscientious advantage of that.[8] [8] Blomley v Ryan (1956) 99 CLR 362.Conclusion The four contracts entered into between the parties are not unjust. There is no evidence of unconscionable conduct by the applicant. The applicant is entitled to an order for possession and for judgment on the debt due to it. I will hear the parties as to the form of the orders.

Ratio Decidendi

Legal Principle Established

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