Westendorp & Anor v Morlend Finance Corporation (Vic) Pty Ltd

[1993] HCATrans 167

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M9 of 1993

B e t w e e n -

GERT WESTENDORF and ANNA

WESTENDORF

Applicants

and

MORLEND FINANCE CORPORATION

(VIC) PTY LTD

First Respondent

and

JOHN WILLIAM WESTENDORF

Second Respondent

and

Westendorp 1 18/6/93

MARY ANNETE WESTENDORF

Third Respondent

Application for special leave

to appeal

DEANE J
TOOHEY J
McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 18 JUNE 1993, AT 10.46 AM

Copyright in the High Court of Australia

MR R.A. FINKELSTEIN, QC:  May it please the Court, ~ ~ppear

with my learned friend, MR W.T. HOUGHTON, r the

applicants. (instructed by the Consumer Cr~dit

Legal Service)

MR R. MERKEL, QC: If the Court pleases, I appear with my

learned friend, MR I.S. WILLIAMS, for the first

respondent. (instructed by Michael Flemming &

Associates)

I should indicate before my learned friend

begins, there is an application for extension of

time which we oppose, but we understand that that

may be dealt with as part of the overall

application.

DEANE J: Yes, Mr Finkelstein.

MR FINKELSTEIN: If I could hand to the Court a folder which

contains the relevant legislation and some cases.

The legislation appears as the last document in the

bundle of documents.

TOOHEY J:  Mr Finkelstein, that reprint No 1 is in the form

relevant for our purposes, is it?

MR FINKELSTEIN:  No, there is one amendment to the reprint

which appears - I think there should be a blue

piece of paper which is an Anstat, not an

authorized parliamentary printer's reprint. There

was one relevant amendment on a construction point

effected by 1991 amendment and I hope that that

appears in a blue sheet.

TOOHEY J: Yes, it does.

MR FINKELSTEIN:  So apart from the one amendment otherwise,

it is the first reprint which is the relevant print. The Full Court held that the mortgage

executed by the applicants was not unjust in the

circumstances surrounding the execution of that

mortgage. It accordingly held that the tribunal

Westendorp 2 18/6/93

had no jurisdiction to grant any relief under

section 146(2) of the Credit Act.

In order to arrive at that conclusion, the Full Court first had to determine what was meant by

an unjust contract or an unjust mortgage. It held

that for the purposes of this Act the notion of an

unjust contract was exclusively defined by

section 145 which provides that:

a contract or mortgage is unjust if -

it is either -

unconscionable, harsh or oppressive; or -

has an excessive annual percentage rate or an

excessive interest rate, in summary. It held that unless the contract or mortgage fell within either

section 145(a) or (b), it could not be an unjust

contract. The two reasons given for that

construction were, first, that that follows from

the language of section 145; secondly, it made sense because if one was left with the general notion of an unjust contract or mortgage, that general notion was too vague and uncertain and

therefore not proper, but the concept of a contract

or mortgage being unconscionable, harsh or

oppressive was well known to the law and therefore

could be easily dealt with.

The first thing we say about the decision

generally is that that was a wrong construction of

the legislation. We say that having regard to

especially section 147(1), it is clear that the

notion of an unjust contract or mortgage is broader
than the type of contract or mortgage defined or
described in section 145. Just the opening words

of section 147(1) point clearly, in our submission,

in that direction: 

a regulated contract or a regulated mortgage

is unjust in the circumstances relating to the

contract or mortgage at the time it was

entered into -

or in determining whether it is -

the Tribunal shall have regard to the public

interest and to all the circumstances of the

case, including such consequences as those

arising -

out of following specified events. Without

limiting the generality of (1), if you go to

subsection (2), there is a list of matters to	be
taken into account as relevant circumstances.	The

Westendorp 3 18/6/93

list, which is not an exhaustive list, shows that

facts can come into existence which would render a

contract or mortgage unjust but not necessarily

make it harsh and oppressive or unconscionable.

The other point that I want to direct the

Court's attention to is the amendment that was made

to section 174 by the 1991 Act. That is an

amendment which is set out in that blue sheet and

it is an amendment to subsection (4). What it

effectively does is it makes a marginal alteration

to the existing subsection (4) and adds a further

criterion because it provides that:

(4) In determining whether a contract or

mortgage is unjust, the Tribunal -

(a) must not have regard to any injustice

arising from circumstances that were not

reasonably foreseeable at the time the

contract -

So that is a constraint on what is to be taken into

account, but adds a ground not previously listed -

(b) is not excluded from considering any

conduct relating to the contract or mortgage

by reason only that the conduct constitutes or
may constitute a contravention of this or any

other Act. " .

Before the amendment was passed, there were

suggestions by courts in Victoria that it was
impermissible for the tribunal to look at a breach

of this Act to decide whether or not a contract was

unjust or a mortgage was unjust. So to cure that

problem, the Parliament added as a permissible

indicia of injustice a breach of the Act.

A breach of the Act ordinarily, having regard

to the types of breaches that can exist - the

principal obligations on credit providers under

this legislation for loan contracts is to provide a

deal of detailed information to the borrower and

also to have certain conditions in the contract of

loan or mortgage itself.

But what it does demonstrate, in our

respectful submission, is that it points strongly

to the proposition that it - if you take, for

example, the case of a failure to provide relevant

information, there is a deal of information that

has to be provided, that will not change the form

or terms of the contract from what they might

otherwise have to be to conform with the Act, and

the absence of giving the information will not make

a contract either harsh or unconscionable but is

Westendorp 4 18/6/93

still an indicia of injustice for the purposes of

giving the tribunal jurisdiction to reopen a

transaction.

TOOHEY J: That argument seems to imply that you add a

paragraph, subparagraph (c), which would read more

or less, "The transaction is one which, in the

opinion of the tribunal, is unjust". You want to

open up "unjust" to areas that go beyond section

145(a) and (b), do you not?

MR FINKELSTEIN: Yes.

TOOHEY J: Do you have to do that?

MR FINKELSTEIN: In this case, no.

TOOHEY J:  I was not thinking of in this case, but if you

look at 147, in all the circumstances that are

spelt out, is it not possible to regard those as

circumstances bearing upon paragraph (a)?

MR FINKELSTEIN: 145(a), not exclusively, not necessarily;

they can go beyond that.

TOOHEY J:  I know you say that, but I am just putting to you

the possibility that what section 147 does is point

to a range of circumstances which might be

described for the purposes of paragraph (a) as

constituting unconscionable, harsh or oppressive

conduct. I appreciate that is not the way you put

your argument, but your argument seems to involve

reading a great deal into section 145.

MR FINKELSTEIN:  Can I take Your Honour by way of example to

section 147(2)(h). One of the things that the

tribunal can take into account is:

the extent to which the ..... legal and

practical effect -

of the relevant document was explained. Whether it

is explained or not does not tell you whether the

contract is harsh or unconscionable.

TOOHEY J: It might.

MR FINKELSTEIN:  I accept that it might but all I am saying

is not necessarily so. What the Full Court has

done is it has read section 145 as saying, in

effect, "For the purposes of this part, a contract

or mortgage is unjust if, and only if, it is
unconscionable or the interest rate is too high."

What we are saying is that by reference especially

to 147(1), plus the indicia of factors that can be

looked at in section 147(2), the conclusion does

not follow, that it is an open construction that

Westendorp 18/6/93

section 145 is not exhaustive of unjust contracts

but merely gives particular instances of unjust

contracts.

But the broad language of 147(1) allows a

contract or mortgage to be unjust even if it is not

necessarily unconscionable, harsh or oppressive,

because other circumstances might show that it is

to be treated as unjust in the particular

circumstances of the case or that public interest

might dictate that. What we say is that the

question is, in our respectful submission, plainly
an open question and an important question because

it will decide the ambit significantly of the

operation of the Act and the powers of the

tribunal.

The second point which the Full Court decided

was in order for a contract - - -

DEANE J: Mr Finkelstein, if I may interrupt you, I forgot

to mention for the record that the Deputy Registrar

has certified that she has received a letter from

the solicitors for the second and third named

respondents advising that their clients do not wish

representations to be made on their behalf and that

they will abide by any order of the Court.

MR FINKELSTEIN:  Thank you, Your Honour. In any event, I

suspect that they may not properly be parties to

the application.

The second significant point that was decided

by the Full Court which is expressed at page 110 of

the application book - and this is where we say the

Full Court fell into serious error - was that it

held at line 20 that:

the definition of "unjust" ins 145 requires -

that is, it is a mandatory requirement -

that a transaction will not be re-opened

against a lender unless the conscience of the
lender is in some way affected by the

circumstances relied upon and established by
the applicant for re-opening.

In other words, what the Full Court has said is that the only way a contract can be unjust as against the lender is if in some way the lender is

involved in the conduct which leads to injustice,

either directly or through an agent, or in some

other way carry some responsibility for the conduct

which has produced an unjust contract.

Westendorp 6 18/6/93

The way that the court did that was to pick up

something that Your Honour Justice McHugh said in

West's case; that is at page 108 of the application

book. They pick out a sentence from Your Honour's

judgment in West, line 21:

If a defendant (the lender) has not engaged in

conduct depriving the claimant (the debtor) of

a real or informed choice ..... ! do not see how

that contract can be considered unjust simply

because it was not in the interest of the

claimant to make the contract -

then they pick up a passage from Mr Justice Hunt in

Esanda, and it is important to note the bits which

the court thought appropriate to underline. It

starts at the bottom of page 108 - and it is a

reference to Your Honour Justice McHugh's judgment
in West's case:

"This passage brings out the important point that, under this Act, a contract will not be

unjust as against a party unless the contract

or one of its provisions is the product of

unfair conduct on his part" -

and the court here underlined "his" -

"either in the terms which he has imposed or

in the means which he" -

underlined again -

"has employed to make the contract."

(Emphasis added.)

DEANE J: They might be suggesting that His Honour should

have said "or her".

MR FINKELSTEIN:  I am not sure whether that is what the

Full Court had in mind, Your Honour, and they

probably just adopted the Interpretation Act, which

includes the "her", and the point is made

unambiguously clear at page 129 of the application

book - it is towards the end of the court's

judgment, Mr Justice Fullagar's judgment - at

line 16:

The express power to re-open as against the

lender which was relied on by the Tribunal

arises from the presence of unfair tactics

only where the tactics were employed by the

lender itself or whether a further three

things a~e established -

And the three further things that are referred to

there is a reference to section 147(2)(i) because

Westendorp 7 18/6/93

there there is a very clear indication that the

legislature does not intend it to be the conduct of

the lender alone that can produce an unjust

contract. There it says that "unfair tactics" or

"unfair pressure" can be exerted by a party to the

contract; that could include the lender, although

if you have a three-party contract it may not

include the lender. But then (i)(ii):

by any person acting -

that would be affecting the conscience of the

lender - I do not have any difficulty with that -

appearing, or purporting, to act for any other
party to the contract or mortgage -

So there you have a clear indication that a third party, not necessarily connected with the lender,

can engage in conduct which would produce injustice

in the making of the contract or mortgage. The

Full Court knows it has to deal with that, because

it is a pointer in the opposite direction, and goes
on to say, or where three further things are

established:

(a) it was exerted or used by one or other of

the persons referred to ins 147(2)(i) and, as

well -

that is cumulatively -

(b) in the established circumstances it would

be unconscionable -

et cetera, and, as well, cumulatively again -

(c) in the circumstances the conscience of the

lender was affected.

So even if you have regard to the conduct of third

persons, according to the Full Court, who have no

connection with the lender, you still have to

affect the conscience of the lender before a

contract becomes unjust. So what they do is they

add to 147(2)(i) a condition which is not there,
and they have to add it because otherwise the

principle which the court decided would not hold

good. Now, the principle which the court - - -

MCHUGH J:  I think you have an arguable point here, but the

critical question in the case is Szigeti, is he
not, and whether or not he was the agent or

appearing to act? If you cannot get that off the

ground then it does not matter, does it?

Westendorp 8 18/6/93

MR FINKELSTEIN: Not so, Your Honour, with the greatest

respect, because one thing that the New South Wales

Court of Appeal has said, and said consistently in

recent times, and without demur, is, "A contract

can be unjust and relief can be given against a

lender albeit that the lender is completely
innocent of any wrongdoing". And it is in respect
of a finding which I have just identified that the

Victorian Full Court has departed in a significant

way from well-established principle in New South

Wales. Can I refer to just two cases and short

passages in two cases on that point.

Behind tab 3 in the bundle that I have

provided to the court, the decision of, I think,

Nguyen v Taylor. The case is, in fact, reported in

the authorized reports, we apologize for not having
the authorized report here. It is a decision of
the Court of Appeal in New South Wales. Can I ask

the Court to go to the fifth page of the judgment,

or the photocopy. It is page, at the top left-hand
corner, 57,552. This is in President Kirby's

judgment, right-hand column, just below half-way

down the page, His Honour says, and he is accurate

when he records the direction of New South Wales

authority:

As has now been repeatedly pointed out by this

Court, the focus of attention of the Act is not simply the unjust conduct of the party
against whom relief is sought. It is upon the

contract which has resulted between the

parties and which may be determined to be

unjust, although the resisting party was

wholly or mainly innocent of the source of the

injustice found.

And there are cases referred to and one of them,

Dillon's case, is cited from, and it is said in the

passage:

" ... it is a mistake to read into the language

of s 9 (of the Contracts Review Act) an

obligation to show that the contract was unjust because it was produced by unfair

conduct or unjust conduct on the part of one

of the parties to it. This is not what the

section says. It addresses attention to the

resulting contract itself. It is true that in

many cases a contract will not be 'unjust'
without some element of unfairness or
injustice on the part of one of the parties

leading to the making of the contract -

and it refers to the check-list -

Westendorp 9 18/6/93

But that list is not, as the subsection makes

it plain, exclusive. The duty of a court

remains to have regard to 'all the

circumstances of the case'. It must consider

the 'public interest', including in the

observance of agreements duly entered. But in

the end, the focus of attention must be upon the contract. The court must decide whether

'in the circumstances' the contract is

'unjust'. A contract may be 'unjust' because

of peculiarities inherent in the circumstances of one of the parties of which the other party

was quite ignorant.

And, in fact, there is a New South Wales case which

looked at a contract where one of the parties was

suffering a form of mental infirmity, or some form
of psychiatric illness, which was wholly unknown to

the lender, and said that that is a type of

circumstance which could produce an unjust

contract, and the fact that the lender had no

knowledge of the physical or mental disability of a

borrower is not to the point.

It may be very important on the question of

what the court should do in the exercise - or

tribunal in our case - of its discretion, when

dealing with relief that a borrower seeks under an

unjust contract, but it does not go to the question

of determining whether there is an unjust contract,

that is to say, the jurisdictional fact which the

tribunal or court must determine before it can go

to the next stage of determining in its discretion

what relief, if any, ought to be given.

Now, there are a series of cases in New South Wales, which make it abundantly clear, in our

respectful submission, that the legislation, when

properly construed, does not require the conscience

of the lender to be affected at all.	And it is
quite clear that our Full Court, that is the

Full Court in Victoria, has departed from the New

South Wales principles.

I should say, of course, it may be well known

to the Court, that the Contracts Review Act, which

is the subject of the New South Wales decisions, is substantially the same as the Credit Act. There is one point of departure; it is clear that the

definition of an "unjust" contract which is one

which can be harsh, oppressive or unconscionable,

is plainly, in New South Wales, an inclusive and

not exhaustive definition, because the definition

says "includes". So there, in New South Wales, the

matter is beyond argument. But the section that

the Full Court in Nguyen v Taylor and other cases

deals with, coming to the conclusion that you do

Westendorp 10 MR FINKELSTEIN, QC 18/6/93

not need to affect the conscience of the lender, is

substantially the same as section 147, and the New

South Wales contract is also included in our bundle

of documents behind tab 7.

McHUGH J:  Mr Finkelstein, is the appeal to the Full Court

limited to questions of law?

MR FINKELSTEIN: Yes. Under the legislation it is an - - -

McHUGH J:  It picks up the County Court Act.

MR FINKELSTEIN: It picks up the County Court - there is a

general appeal on questions of law and that why it

goes directly to the Full Court.

McHUGH J: But they can draw inferences of fact.

MR FINKELSTEIN: Yes. I looked to see whether or not there

might be some limiting circumstance, so that there

is a limit because it is a jurisdictional fact

which the tribunal has to find to see if there some

argument based on the administrative law-type

reviews of findings of jurisdictional facts, but I

think it is a general appeal - it is, it is a

general appeal as from the County Court - - -

McHUGH J:  I have got pages of notes of findings of the

respective tribunals and Full Court. The

Full Court itself seems to have made findings of fact.

MR FINKELSTEIN: If it is necessary to deal with that - I

suppose it may be in part because what my learned

friend, Mr Merkel, will say is that, although we

have got some interesting points of law and we can show discomforrnity, in similar legislation between

two appellate courts, he will say that we will lose

on the facts in any event, but what we have done -

if it becomes relevant, we have prepared - what the

application book does not contain is the evidence
before the tribunal.	We have prepared a half a

dozen page document, which extracts evidence that

was led and it shows that the broker, Szigeti, was

asked questions about - can I just make another

point about that first.

What the Full Court did here, on the findings of fact found by the tribunal, was to say that -

they bemoaned Amadio's case, and said since Amadio
there has been a spate of complaints by people who

have entered into credit contracts of one form or

another, with all sorts of sometimes ingenious and

sometimes hopeless arguments. Then the Court said

that what was being alleged here was a case of

fraud, then went on to say that in a case of fraud

you apply the Briginshaw test and, based on the

Westendorp 11 MR FINKELSTEIN, QC 18/6/93

suggestion that is was a claim of fraud against

Szigeti and relying on Briginshaw as setting out

the appropriate criteria the tribunal should have

adopted,_ the court found that no representation was made and that, in any event, it was not acted upon.

Now, first of all, nobody ever suggested that

the case necessarily was a case of fraud and, if

you ever have to have a look at what was said by

Sz~geti when the documents were signed, it is clear that you do not have to make out a case of fraud.

What the complaint that was being made was that the

nature of an insurance policy was, using a general

word, misrepresented. Under the arrangements the

lender did take out insurance; the borrowers paid -

as part of the borrowed money - as part of the

disbursement of the borrowed moneys, went to pay

the premium under an insurance policy. The

insurance policy is for the protection of the

lender, so if there is a default and a shortfall

the lender goes to his insurance company and says,

"There is a loan; there is a shortfall, default;

and I paid my premium to cover me, the lender,

against loss; therefore I want to be indemnified

under the policy".

The complaint that was being made by the

borrowers was they raised the question of insurance

and were led to believe that the insurance policy,

which did exist, protected them, not protected the
lender, and Szigeti, in his evidence before the
tribunal accepted that he was probably asked about

insurance and probably said something about it.

Now, how the Full Court can then say and find that

there was no representation made at all, and if it

was it was not an inducing representation, is only

explicable by the Full Court wrongly elevating the

case against Szigeti as a claim in fraud, then

requiring the strict common law requirements for

proof of a case in fraud and then concluding that that proof is not made out, therefore nothing was said.

Now, that sort of analysis was not open to the

Full Court and what we say is that there was

sufficient evidence before the tribunal to

establish the jurisdictional fact that the contract

was unjust. Then the Full court did not deal at

all with what should be the consequences of such a

finding, that is, what is a proper order. The

tribunal made lots of orders setting aside the

arrangements. The Full Court, because it found on

the question of jurisdiction, did not have to make

any findings saying the tribunal lacked

jurisdiction, did not have to make any findings at

all about what would have been the case had the

tribunal had jurisdiction; that is to say, whether

Westendorp 12 MR FINKELSTEIN, QC 18/6/93

the orders that it had ultimately made were proper
orders that should have been made in the

circumstances of the case. That is not dealt with

at all by the decision of the Full Court.

DEANE J:  I note that the definition of "unjust" in the New

South Wales legislation is inclusive - - -

MR FINKELSTEIN: Correct.

DEANE J:  - - - which is much more open to the construction

that you are arguing for than the section 145.

MR FINKELSTEIN: Under the New South Wales legislation there

is no doubt that that is so and, indeed, one of the

courts in Victoria that has looked at the question

- the Full Court which has looked at the question

said, "If you draw the distinction between the New

South Wales Act and the Victorian Act and the

Victorian Act was substantially modelled on the New

South Wales Act, there was a deliberate choice made

by leaving out the word 'include' that appears in
the New South Wales legislation.", therefore

supporting the argument that it was an exhaustive

definition here.

DEANE J: But the two points of principle you make are

interrelated, in that if you fail on 145 the

arguments in favour of the appellate division's

construction of "unjust" as bearing on the

conscience of the respondent are considerably

stronger.

MR FINKELSTEIN:  No, we do not accept that proposition,

Your Honour. We would say that if we are wrong on

the construction of 145 all that means is that you

might have to find, on a question of degree, graver

conduct to establish injustice, whereas - - -

DEANE J: Not really. I mean, if you are taking

"unconscionable, harsh or oppressive" it is much

easier in the context of the common law, including

equity, to move to conscience of the person

affected, than if you were just talking about

"unjust".

MR FINKELSTEIN:  I accept that, and if all you had was

section 145 that would be a very powerful argument,

but because you have got the criteria specified in

section 147(2) it is clear that some of the indicia

may have nothing whatever to do with the lender.

They are circumstances about which the lender may

or may not have knowledge. But nevertheless they

are circumstances which are to be taken into

account; that is to say, circumstances which it is

proper to be taken into account. And the New South

Wales cases that have held that you do not need to

Westendorp 13 MR FINKELSTEIN, QC 18/6/93

affect the conscience of the lender - that is, you

can add conduct of which the lender is completely

unaware - is based on the construction of the New South Wales equivalent of section 147. They just

look at the circumstances that are there set out,

which are materially the same as the circumstances

in the Victorian Act, and say that that section

itself tells you that you do not need to involve

the lender in particular conduct.

TOOHEY J:  I know you baulk at this approach,

Mr Finkelstein, but it might be said that that in

itself points to the notion of unconscionability,

harshness or oppressiveness under section 145 as

embracing the considerations that appear in

subsection (2). In other words, subsection (2)

provides a dictionary; that is section 147(2).

MR FINKELSTEIN: But it does not because 147(1) shows that

it is wider, as does the opening words to

subsection (2).	It is not a dictionary. They are
specific - - -

TOOHEY J: Well, I was not suggesting it was an exhaustive

dictionary, but was appointed to what Parliament

had in mind by the language of section 145(a).	I
know you come at it in a slightly different way
from that.

MR FINKELSTEIN: Yes. I am not pretending that the

construction of whether 145 is exhaustive or not is

absolutely straightforward, as it was in the New

South Wales legislation, but I think it is true to

say that the New South Wales legislation makes it

quite plain what the intention of the Parliament

was, but what we are saying is that there are

sufficient indicia in these sections grouped
together to point to - and also having regard to

the nature of the legislation. It is remedial

legislation giving remedial legislation a

restrictive construction. It does not conform with

the intentions of Parliament and it should not be

viewed in that light.

If a court is bound to say that section 145,

bearing in mind the other provisions, 146 and 147, bearing all of those sections in mind, is bound to say that section 145 is exhaustive, well, you

cannot strain the language, but you should not
approach beneficial legislation in a way where, if

a particular construction is open, that

construction should not be preferred when it

benefits the class of person who is designed to be

protected by this legislation which are borrowers

of small sums of money.

Westendorp 14 MR FINKELSTEIN, QC 18/6/93

There is no discrepancy between Victorian decisions and decisions of other courts on the construction of 145 because the legislation is

different in New South Wales. There is a direct

discrepancy between our Full Court and New South

Wales Full Court on whether the lender must be

involved in wrong-doing or wrong conduct which

produces an unjust contract, and that is an issue

which we say has to be determined. I do not mean

"has to" in the mandatory sense, but should be

determined by this Court because it has produced

the consequence that the law in New South Wales is

different to the law in Victoria on legislation
which is substantially the same, and in respect of

section which is almost identical.

TOOHEY J:  Mr Finkelstein, had that expression "affecting

the conscience of the lender" appeared in judgments of the Victorian Supreme Court under the Credit Act

prior to Westendorp v Morlend?

MR FINKELSTEIN: I think the answer is "No". It was the

product of the argument in this case. The way the

case was argued appears at page 101 of the

application book, at the bottom of the page, there

was a very very long notice of appeal but, as the

court seems no doubt to have correctly identified,

the case was put on three bases. First, this is

the last four lines of the page:

if Mr Szigeti made any such representation as

alleged, he was not an agent of the

lender ..... secondly that the evidence did not

sustain a finding that the alleged

representation was made or that it was acted

upon, and thirdly that the -

mortgages were not unjust. Now, we assume from the

description of the first ground of argument on the

appeal to the Full Court that what was being

with the lender and there was no evidence tying him	contended for was that Mr Szigeti had nothing to do	in with the lender and, therefore, you cannot have
an unjust contract and, indeed, that is the way
that the Full Court approached the problem.
I should say, however, by way of passing, to the extent that it is relevant and deals with the facts of the case, Szigeti was, in a sense,
arguably at least, a representative of the lender
because the contract documents were given either by
the lender or the lender's solicitor for Szigeti to
obtain the execution of the borrowers to the
documents, and the statements about which the
applicants complain, as statements that were made
to them that led them to believe that they had a
measure of protection by insurance which was being

Westendorp 15 MR FINKELSTEIN, QC 18/6/93

paid for, were made at the time the documents were
being executed. In fact, the female applicant said

in her evidence that she had her pen in the air and

was about to sign when the topic of insurance was

raised by her, whether she was protected by

insurance.

There are a series of English cases followed

by one of the judges on the Court of Appeal but not

referred to anywhere but Mr Justice Brooking in

another Victorian case, that says that when a

lender gives to a person, usually in a particular

class, documents for execution by mortgagees or

borrowers, and that person to whom the documents

are given exercises some influence - either makes a

false statement or exercises sc~e influence in the

procuring of the documents - tjen the lender is

affected by that and the lender cannot be in a:· y

better position than the person to whom he gave the

documents to obtain execution. One of the cases

that deals with that is set out in our cases, it is

the fourth case, Kings North Trust v Bell.

McHUGH J:  I must say in the facts of this case it does

seem a strange proposition that if a finance broker

who is the age~t of the borrowers is asked by the

finance company to get the borrowers to sign a

document you can say that the finance broker has

somehow become the agent of the lender.

MR FINKELSTEIN:  No, I am not suggesting that you can find

as a fact on the evidence that was ·1ed before the

tribunal, a finding of agency. All I am saying
though, is that there was some element of agency.

If you ever have to go to the stage of saying that

the lender's conscience is affected because when the lender gives the documentation to the broker for execution, that is not uncommonly treated as the broker or the person to whom the documents have

been given, acting as agent for the procuration of

the signature. It is not necessarily an agent for

anything else, but merely for the purposes of

obtaining a signature. Then he makes statements in

the course of obtaining the signature. There are

cases which - a number of Court of Appeal decisions

in England - make the lender responsible for that

conduct. But, our principal point is that you can

have an unjust contract whether or not the lender
has any involvement at all in any wrongdoing and

the court erred in saying that the tribunal lacked

jurisdiction by reason of the lender being

uninvolved at all in any wrongdoing if there was

wrongdoing or however you describe the conduct of

Szigeti. And wrong, in the way that it construed

this legislation, and that by reference to

section 147 substantially alone, unaided, we would

say not needed to be aided by the definition

Westendorp 16 MR FINKELSTEIN, QC 18/6/93

section, if it be a definition section in section

145. They are the two points that we say are

sufficiently important, not in this case, but in

all cases which will come under this legislation to

warrant the granting of special leave by the Court.

Our application is out of time and the

affidavit in support of the application deals with

that point and it is at page 154 paragraph 2. It

shows that the decision of the Full Court was
handed down on 17 December which left the time for

making the application 7 January 1993:

The Christmas vacation intervened and I had

difficulties obtaining instructions. I have

also had a number of dealings with the Legal

Aid Commission of Victoria concerning the

funding of this action. I also believed

(wrongly) that Order 60 Rule 4 of the High

Court Rules applied to the serving and filing of an application for special leave to appeal and that the time for lodging an appeal did

not run in the vacation.

Then the deponent found out that that construction

of the rules was incorrect.

I think it is substantially because of the intervention of the Christmas period and a wrong

belief that time ceases running during that period.

We asked for the extension of time - - -

DEANE J: What date does that take us to, from 17 December

allow for the Christmas period?

TOOHEY J:	The affidavit was sworn on 26 February.
MR FINKELSTEIN: Yes, it is about seven weeks late.	I think

that -

DEANE J: The deponent thought that the Court registry was

closed all January?

MR FINKELSTEIN:  No, that is not the point that was being

made. Thought that time ceased to run.

DEANE J:	Up until when?
MR FINKELSTEIN:	The affidavit does not say but one would

have thought - - -

DEANE J: Early January.

MR FINKELSTEIN:  The belief was that the time did not run

during the period of the Court vacation, not the

opening of the registry.

Westendorp 17 MR FINKELSTEIN, QC 18/6/93

DEANE J: That we just close down for the whole of January?

MR FINKELSTEIN: Well, under the rules in Victoria, although

the prothonotary's office is open, time does not

run during various vacations. I think they have
changed the rules now because they have got rid of
some of the vacations, but there are rules which
stop time running for certain events during

vacation albeit that the registry may be open,

because they assume that others might be away as

well. In any event, the time period is short and

there has been no suggestion that any prejudice at

all is occasioned by the relatively short period of

the extension. Even if there was not a wrong

belief about the effect of the rules, the period is

seven weeks and could not, in a case like this,

cause any injustice at all to the other side.	May
it please the Court.

DEANE J:	Yes Mr Merkel.
MR MERKEL:	If the Court pleases. We would submit that my

learned friend's submissions where he glossed over

the difficulties of the factual issues indicate why

this is a particularly inappropriate vehicle for

the grant of special leave and we propose to divide

our submissions into two parts. The first is to

demonstrate that on the findings of fact by the affidavit as being issues sought to be raised on

appeal, there is no reason to expect that the Court

would ever get to the issues of principle that my

learned friend seeks to raise.	if my learned
friend, as he foreshadows, not in	affidavit as
to the grounds that he seeks to s	the Full Court

was in error upon, but to go to his proposed notice

of appeal, Your Honours will see that what, in the

last two grounds is seeking to do, is to re-run all

of the facts which will take this Court to

precisely the dilemma that the Full Court

encountered when that occurred before it. Can I just indicate, Your Honours, where

those points appear. At pages 166 to 168 - and I
think these pages in the appeal book got out of

order - Your Honours will see, if one goes to 167,

"Grounds Of Challenge To The Full Court Decision",

and then one has to go back a page to 166 - - -

DEANE J: Ours are in order.

MR MERKEL:  Sorry, Your Honours. I hope the numbers have

not changed though mine are out of order.	Do they
coincide? Is it 166 and 167?

DEANE J: Page 166 is "Grounds Of Challenge To The Full

Court Decision".

Westendorp	18	18/6/93
MR MERKEL:	Yes, Your Honour.	Those three pages set out the

grounds of challenge and Your Honours will see that

they are limited to points of law and they,

therefore, do not seek to raise before this Court,
on this application, a challenge to the factual

findings by the Full Court and that was advisedly so for the reasons I will take Your Honours to in respect of the dilemma on that ground faced by the

Full Court.

If Your Honours then go to pages 174,

Your Honours will see that the grounds 15, 16 and

17 seek to confront this Court with what was, quite

frankly, a horrendous situation that the Full Court

was confronted with. I say horrendous for the

following reasons: the hearing before the tribunal

occupied 11 sitting days over some 14 months. about 870 pages of transcript, and there were 73

exhibits. As the Full Court indicated, the

tribunal, in effect, stated findings by way of

conclusions of law rather than find particular

facts. The tribunal in particular went to

subsections, for example, of 147(2), and said, "I
find that there was undue influence by Szigeti
appearing and purporting to act", then never made
any factual findings which explained how that
conclusion was reached.

So, when this matter came on before the

Full Court, it occupied five sitting days and the
Full Court had to examine the entirety of the

evidence which it did, because it was, in effect,

an unfettered right of appeal, and it came to

conclusions - ·

McHUGH J: What do you mean by an unfettered right of

appeal?

MR MERKEL:  The right of appeal from the County Court is an

appeal on inferences drawn on facts and it is not

limited to questions of law, so it was open to the

Full Court. In fact, as I understand it, I may

stand corrected, but I believe the Full Court

examined all the evidence and came to its own
conclusions based upon that evidence. That is what

in fact happened before the Full Court.

McHUGH J:  Has the Full Court got jurisdiction to interfere

with primary findings of fact unless there is no

evidence to support those findings of fact?

MR MERKEL:  No, it would have the same jurisdiction of any

appellate court. But it did not do that,

Your Honour, save that in so far as it was able to

ascertain what were the primary findings of fact as

against conclusions drawn from unstated facts. It

Westendorp 19 18/6/93

said that the conclusions which the tribunal acted

upon were not reasonably open to it on the evidence

that it examined. For example, it went to the

detailed evidence of the conversations that were

said to constitute the misrepresentation and it

found, just by way of example, that the

representation said to be found by the tribunal,

that Mrs Westendorp was told that she would have no

fear against any loss if she signed the documents,

was just unsustainable on any of the evidence.

DEANE J:  Mr Merkel, I have got a bit confused. Was it not

an appeal to the Full Court from the credit

tribunal, not from a county court?

MR MERKEL:  Yes, Your Honour, that is right. Under the

Credit Administration Act the provision in respect

of the appeal is that it is treated as if it were

appeal from a county court.

DEANE J:	I had not followed, thank you.
TOOHEY J:	In that event is it an appeal by way of

rehearing?

MR MERKEL:  Yes, Your Honour. As I understand it, it comes

up as an appeal by way of rehearing in the sense

that it is used in the appellate jurisdiction.	I
may stand corrected but that is how it was dealt
with and I am fairly sure that is correct. So
that, for those reasons, what in fact the Full

Court was confronted with was a minute examination

of the evidence to have to find whether the

findings which were mostly by way of conclusion

that in so far as they were factual or reasonably

open to the credit tribunal, it came to the

conclusion that all the primary findings, indeed

any primary findings that could give it any path to

relief were not there.

TOOHEY J: But that rather depends, does it not, on the view

the Full Court took of the operation of the Act?

MR MERKEL: With respect, not, Your Honour, because what

occurred - and this is why I say that, on the
findings of the Full Court, one never gets to my
learned friend's question because the Full Court

found, and it was not really seriously put in

issue, that Szigeti was the agent and engaged as

the agent for the borrowers, that there was no

evidence in which it could be found that he had

appeared to act, purported to act, or acted for

Morlend, that the evidence as to what

representation, if any, was made concerning the

liability of the two applicants, was capable of so

many different explanations and my learned friend

broached one of them, that in fact there was

Westendorp 18/6/93

disability insurance and the conversation relied

upon by Mrs Westerndorp could equally be related to

household insurance or disability insurance as the
insurance that was ultimately put before the

Full Court as being the only one it related to,

namely an insurance against liability. The

Full Court said there are so many meanings you can

give that· evidence that they could not be satisfied

that there was in fact the misrepresentation which

would get my learned friend even to the door of the

widest view he takes of unjust conduct.

TOOHEY J:  You mean that none of the evidence led would

support any of the paragraphs under section 147(2)?

MR MERKEL:  That is the effect of the Full Court's findings,

Your Honour.

TOOHEY J: In those terms or - I know that you say, "the

effect of".

MR MERKEL:  I can take Your Honours to it, but it comes out

extremely powerfully in the Full Court's

conclusions that they do not get to the door.

DEANE J:  What is the strongest on the finding that, in

effect, no finding of a representation is open?

McHUGH J: Well, 117 through 118 clearly - - -

MR MERKEL:  I think it starts at really 112, _Your Honours.

McHUGH J: That is his summary, is it not?

MR MERKEL:  I think that if one starts at 112 - in other

words, starting at 112 and then at the bottom of
112 His Honour goes on to set out the conclusions.

May I indicate, one of the problems confronting the court was that Mr Westendorp gave evidence of the

same conversation - that is one of the applicants -

and he never suggested there was any representation

of the kind. Mrs did, but in terms that just said,

"I asked about insurance and they said 'Yes, you do

not have to worry about that',",

DEANE J: Is (a) at the top of 113 the strongest finding? In other words, representation of this character

covers the whole area of the relevant - - -

MR MERKEL:  Yes, Your Honour, but it comes to subcategories

because, for example - - -

DEANE J:  But when it goes on it seems to be on the basis of

even if (a) be not correct, is it not?

MR MERKEL:  Yes, except for this, Your Honour, that my

learned friend could not seriously contend that if

Westendorp 21 18/6/93

a misrepresentation was made that did not induce

that that would possibly be unjust. And, what

Their Honours go on and say is eliminate every

factual element that would get the court to the

argument my learned friend wishes to put. For

example:

(b) the evidence does not support that the

conclusion that the critical representation,

if made -

which is putting it at its highest -

induced any of the Westendorps to contract -

or -

played any part in causing any of them to

contract -

(c) goes on to deal with Szigeti so that he does

not get to the 147 -

DEANE J:  I do not follow why you are troubling about that.

MR MERKEL: Sorry, Your Honour.

DEANE J: If the Full Court has found that the evidence was

incapable of supporting any identifiable

representation of the relevant character is not the

rest, as it were, on the base of, "even if that be

wrong"?

MR MERKEL:	Yes, Your Honour.
McHUGH J:	Can I ask you, how do you defend what the Full Court found at 113(a), having regard to the
extract of evidence which is quoted at page 22 in
the judgment of the senior referee?
MR MERKEL: Because, Your Honours, what - - -
McHUGH J:	Mr Westendorp Junior claimed that Mr Szigeti
had assured him there would be a policy of
insurance in place to protect his parent's
house.

Then he quotes the evidence.

'.R MERKEL:  Yes, Your Honour, because what the Full Court

did was ~t took into account - first of all that

was not evidence given in the presence of Mr and

Mrs Westendorp senior, the applicants, that was

said to have been given in a private conversation

separately to the critical evidence. There was no

linkage of - - -

Westendorp 22 18/6/93

DEANE J: But that would not matter, would it, in that, if

you have a son getting his parents to guarantee his

business, it is obvious that the parents are going

to place reliance on the son and what is said to

him about their protection?

MR MERKEL:  What Your Honour says is right, but there was no

evidence establishing the chain that all the

evidence pointed the other way. And the real

problem - can I indicate to Your Honours how far

removed this is from reality. Morlend had insisted

to Szigeti that the contract documents which were

under the Credit Act be signed after legal advice

be given to the Westendorps and would not agree to

advance the moneys until they have, in effect,

certification to the effect that they had received

legal advice, and Mr Dines was engaged by Szigeti

for the purpose, and also Szigetis had an

accountant advising them as to how the tax

consequences would best be dealt with, with a

lease.

Now, what Their Honours did is looked at the

totality of the evidence and the exhibits and the findings of the tribunal and had regard to all of those matters and came to the conclusion that the

factual finding relied on by the tribunal was

untenable on any view and that the - - -

McHUGH J: Well, that is the problem, Mr Merkel, is it not,

that looking at the paper, the present applicants'

case might look a rather surprising one, but the

senior referee saw them, he heard them give

evidence, and you have got evidence such as I

pointed out to you at page 22? How can the

Full Court then intervene and say there was no evidence to support this?

MR MERKEL:  But, Your Honour, what the Full Court said is

there was no evidence to support the representation

alleged and, indeed, on a fair overview - Your

Honours have recently handed down a judgment which

indicated the role of an appellate court on

findings of fact - it is open to say that it was

glaringly improbable on the evidence that they are

not restricted or blinded.

We say that, in effect, Your Honours, looked

at in the five days they had to suffer the detail

of this evidence, they came to the conclusion that

in so far as one could find a particular factual

finding that gave rise to the con.cl us ion that

needed to get my learned friend's argument to the

starting gate, it was not reasonably open. But, my

learned friend does not seek to challenge that,

that this application is not put in his affidavit

on the basis that the findings of fact were not

Westendorp 23 18/6/93

reasonably open to the Full Court.	He has come
here on the basis that they are.

TOOHEY J: Could I just ask you this? That if you put

Szigeti to one side and the relationship between
Szigeti and the parties, is it your proposition

that, conceding for the purposes of argument,

everything Mr Finkelstein says about the operation
of section 145 and 146 and 147, that there are

findings of fact which would make it impossible for

an appeal to succeed?

MR MERKEL:  Yes, Your Honour.

TOOHEY J: In other words, it is your argument, is it, that

there is nothing else in the case apart from

Szigeti that would point to the operation of any of the paragraphs of section 147(2)?

MR MERKEL: Absolutely, Your Honour. And, may I indicate

the starting -

TOOHEY J: Well, I can hardly ask you to prove a negative.

It is probably a matter for Mr Finkelstein to

persuade us otherwise.

MR MERKEL:	That is so, but I started only with Your Honours on the first subparagraph at 113, and His Honour
the learned presiding judge says, "Well, if that is good the others are not necessary, but each of the
other subparagraphs are just as good."

TOOHEY J: They go to Szigeti, all those subparagraphs.

MR MERKEL:	Yes, of course they do, Your Honours.
TOOHEY J:	But if you look at page 114 at the end of paragraph (d), Mr Justice Fullagar goes on:

Further, I am of opinion that the evidence did

not support the conclusion that the findings

of failures to comply with particular

provisions of the Act made the contracts

unconscionable or harsh or oppressive.

That suggests he is moving beyond Szigeti to other

areas of debate.

MR MERKEL:  Yes, he is, Your Honour. I should say they are

the summary of his conclusions. His Honour goes in

and gives a detailed exposition as to why that was so. There is a further fundamental problem for my learned friend's case, and it is this: it was

never really seriously put, and it could not be and

it is not sought to be raised on the grounds my

learned friend challenges the Full Court as being

Westendorp 24 18/6/93

in error, that Szigeti was anything other than the

agent for the borrowers.

There is no case I am aware of where relief,

even under the Contracts Review Act which is my

learned friend's widest view of section 147, has

been granted to a plaintiff who was induced to

enter into a contract on the basis of a

misrepresentation by his or her own agent.

Nguyen's case was exactly that situation, that

relief was not granted because the vendor was

induced to sign the contract by his own agent, and

they said the purchaser cannot have his contract

reopened in those circumstances. So that, in

effect, even looking ahead and if everything I have

put thus far was found to be wrong, the high-water

mark of my learned friend's case is that his

clients were misled by their own agent, or the

agent engaged by their children to assist them and

the elders because the starting point for this

contract was part of the loan was used to finance a

payment out of the previous contract which was

secured by a mortgage over the applicants home.

TOOHEY J: Yes, but if "unjust" has the wide meaning which

it is contended, it is not inconceivable that in

these areas such as as insurance brokers, mortgage
brokers and so on, where the relationship between
the insurer and the broker is a continuing one,
that the courts might treat whose agent it is as

not terribly important.

MR MERKEL:  I understand that the facts can vary,

Your Honour, but the real problem is that, taking

the widest view, when you have a factual finding

that not only was Szigeti not the agent of the

lender but he did not, in making any

representation, appear, purport or act, then one

finds that you do not have formal legal agency, you

do not even have apparent conduct that could bind
the credit provider.	So we say that, at the end of

the day, this falls within the category of case

which had been struck out as not disclosing a cause
of action in the summary proceedings under the

Contracts Review Act.

There is a decision of the Court of Appeal in

New South Wales which is Hogan v Howard Finance,

(1987) ASC 55-594, where the Court of Appeal upheld

a judgment at first instance where it was not

arguable that there was injustice when the conduct

relied upon could not attach direct or indirectly

to anything said or done by the credit provider.

Further, my learned friend is bereft of

authority to support his widest proposition because

the Credit Review Act cases have all been applying

Westendorp 25 18/6/93

what Your Honour Justice McHugh said in West's case
where Your Honour said that a contract could not be

unjust unless it was unjust in its terms or in the

manner in which the credit provider procured it to

be obtained.

McHUGH J: That dictum of mine that is cited seems to me at

best to be taken out of context and it may well be

wrong.

MR MERKEL:  I cannot really quarrel with Your Honour on that

proposition.	I will move on to my next point, Your
Honours.

The point I am really making is that at the

bottom line, what the cases have all said is it is

hard to imagine circumstances where, in effect, a

party who has acted, not only innocently, but in a

manner that is beyond reproach, could be deprived

of their contract. What I am saying in the present case is that given those factual findings, that for

this Court to get to my learned friend's points it

would have to allow the appeal to proceed in the

manner it proceeded before the Full Court; this

Court would then be treating it as an appeal on a

question of fact.

Can I move on to the second point which is the

second error that my learned friend makes in the

present case, and that is that he is asking

Your Honours to construe the Credit Act by

reference to the Contracts Review Act. It is

fundamental that he says, "Look, there is a wider view taken in New South Wales under the Contracts

Review Act than under the Credit Act. " , but that is

not so. Your Honours have only been drawn to one

distinction between the two pieces of legislation.

There is an inclusive definition in the Credit Act,

and our court has said that the exclusive

definition therefore should be taken to be intended

by the difference. But, in Gray's case the Full

Court indicated that one of the reasons why the
precision was drawn in that way in the Credit Act
was to have that legislation overcome the anomalies
and the uncertainties that previously existed in

the moneylending legislation.

Can I just take Your Honours to that passage.

It is in case No 6 in my learned friend's list of

authorities. Their Honours gave this difference

quite detailed consideration. It is a joint

judgment of Their Honours Justices McGarvie and

Gobbo and what my learned friend has not done is to

appreciate the distinction between the two

legislative codes. He has just taken you to one

isolated aspect. But what Their Honours did is

trace the history of the credit legislation

Westendorp 26 18/6/93

stemming initially from the Moneylender's Act and,

at the bottom of page 560, Their Honours said, at

line 44, the problems of introducing what my

learned friend is seeking to introduce:

The consequences which the senior referee has imported into the Act through the construction

he has given to "unjust" -

which is unjustice at large, in section 145 -

would re-introduce the irrationalities of

earlier comparable legislation where the

monetary loss imposed on a credit provider for

a breach of an Act was entirely unrelated to

and usually out of proportion to the gravity

of the breach and any loss resulting to the

debtor.

Such guidance as comes from the

authorities as to the meaning of "unjust" ins

145 indicates that before the tribunal can

reopen the transaction that gave rise to a

regulated contract, the contract must have

been actually unjust in the circumstances

relating to it at the time it was entered

into.

And then Their Honours go on to quote what was said

in Lupi and conclude, in lines 20 to 25, referring

to what Your Honour Justice McHugh said in West.

Secondly, my learned friend has not taken

Your Honours to important words in section 147

itself, which undermine the second league of his

argument that the criteria give an indication of

the width of section 145. So at first we say the

use of wording in 145 is chosen and the distinction

is to be given effect to. But second, when one

goes to 147(2) the important words are:

the Tribunal shall have regard include, to the

extent they are relevant in the circumstances

He starts with saying, "They all are relevant and

therefore you widen 145".	We say that the process
is the other way around.	You must approach what is

the definition of an unjust contract in 145 and

within the context of that definition, whether it

be wide or not, one then only goes to the relevant

circumstances to the extent they are relevant to

that definition.

TOOHEY J: I do not follow that. That is a curious

argument, is it not, Mr Merkel? It assumes that

Westendorp 27 18/6/93

Parliament has legislated a whole list of matters,

some of which can never be relevant.

MR MERKEL:  No, Your Honour. One can assume that they are

all capable of being relevant but they may or may

not be, depending upon the circumstances of the

particular case.

TOOHEY J:  I understand that.

MR MERKEL: That is all I say, Your Honour, I do not go to

the next stage and say that they are redundant or unnecessary but what I am indicating is that they are all capable of being relevant but none of them

necessarily take you to widen the definition.

TOOHEY J: Well, that is the argument I do not understand.

If they are all capable of being relevant, in some circumstances, then what light do you say they

throw on section 145?

MR MERKEL:  Your Honour they do not throw light on section

145 for this reason, that being relevant does not

necessarily mean that it will result in injustice.

It is a relevant circumstance to have regard to,

which together with all the circumstances may

result in a section 145 injustice. One of the

problems with the tribunal, I should add, which the

courts have had to deal with is that whenever the tribunal found one subheading in 147(2) satisfied or met, he then concluded that meant the contract

was unjust and, of course, that is wrong. One has

regard to it as but one of many circumstances and
then you lead to the conclusion, "Well, having

regard to all the circumstances, does that lead to

injustice?".

TOOHEY J: Could I just take you one step further? When you

say that, are you saying, in effect, that the

whether a contract is unconscionable, harsh or paragraphs in section 147(2) throw light upon oppressive?

MR MERKEL:  We say not really, Your Honour, because it tells

you no more than that those circumstances can be

relevant to whether it is harsh, unconscionable or

oppressive, but we say they do not assist in
defining it. That is how we put it. They do not
tell you what the outer limit of the definition is,

given its inclusive nature.

TOOHEY J:  I understand that but at least on your argument

they throw light upon whether the contract or

mortgage is unconscionable, harsh or oppressive

and, therefore, must throw light upon whether a

contract or mortgage is unjust.

Westendorp 28 18/6/93

MR MERKEL:  Yes, that is the purpose of them.

TOOHEY J: That is the inevitable consequence of your

argument.

MR MERKEL: Yes. We say they are not irrelevant, Your

Honour, but we do say you cannot, in effect, pull

yourself up by the bootstrap. For example, none of

those circumstances are inconsistent with the

narrow view the Full Court has taken because, for

example, if you only had a representation under one

subsection it does not follow that that would be

injustice. That is how we put it, Your Honours.

TOOHEY J:  I know, I appreciate that, but you do not exclude

subsection (2) in a consideration of whether a

contract is unjust.

MR MERKEL:  No, you do not. Could I hand up to

Your Honours, just on this problem of my learned

friend using the Contracts Review Act to interpret

the Credit Act, a brief summary of the

distinctions.

Can I just apologize, firstly, this is a

heading that comes up in a matter later in

Your Honours' list, but dealing with the very same

point.

TOOHEY J:	I must say, Mr Merkel, it seems to me you are giving more force to Mr Finkelstein's argument than
I understood it to me.  It did not seem to me that
he was suggesting that the Credit Act should be construed by reference to the proper construction of the Contracts Review Act. Indeed, he pointed out that in this area the Contracts Review Act is
quite clear by its inclusive definition.

MR MERKEL: Well, Your Honours, I only mention that - I do

not intend to take it any further, but he did say

that the New South Wales Contract Review Act cases

were running into conflict with the Victorian

Credit Act cases. What we indicate is that, in

fact, the decisions in New South Wales, under the

Credit Act, are consistent with the decisions in

Victoria under the Credit Act, and what my learned

friend is, in effect, seeking to do is to construe

the Credit Act by reference to Contract Review Act

decisions.

But we do submit, with respect, that for the

reasons we have indicated, this is an inappropriate

vehicle and as inappropriate vehicle as one could
get when one looks at the factual findings, and the

underlying result that was achieved for special

leave to be granted. So that, even if my learned

friend's point was a proper one, we say this is not

Westendorp_ 29 18/6/93

a case in which leave should be granted.	If the
Court pleases.

DEANE J: Thank you, Mr Merkel. Mr Finkelstein.

MR FINKELSTEIN:  Thank you. Can I just deal with the

factual issue?

DEANE J: Well, I think you need to.

MR FINKELSTEIN:  I know that, Your Honour. In fact, to the

extent that the Court may have to look at factual

matters, they will be of very short compass.	Can I
explain to the Court - - -

DEANE J: Let me put this question to you: assume, for the

sake of argument, that you succeed in your attack

on "unjust" being tied to the conscience of the

lender, or what have you, what would be the

position if the Court, having said that "unjust"

does not have the narrow meaning in terms of being

tied to the conscience of the lender, then said,

"Well now, what result does that lead to on the

factual findings of the Full Court"?

MR FINKELSTEIN:  I have to answer the question, but I have

to do it in a round-about way.

DEANE J:  I do not see why.

MR FINKELSTEIN: Because this Court has to understand what

the Full Court did on the factual question. What

the Full Court did on the factual question was to - it is two passages in the judgment of the court -

DEANE J: Let me reframe my question so you can answer it

briefly. Let us say the court held that, and then

said, "Where does that lead on the basis that there

was no representation made of the relevant

character?" .

MR FINKELSTEIN:  Then we are in trouble. But I still want

to address the issue in a different way.

DEANE J: But the Full Court has found that.

MR FINKELSTEIN:  In a way which does not make sense, with

the greatest respect.

DEANE J: But no matter what you say, are you not utimately

saying that your success or failure will depend on

your success or failure on the factual findings

made by the - - -

MR FINKELSTEIN:  No. No, it will depend on whether or not

the approach of the Full Court, in challenging the

Westendorp 30 MR FINKELSTEIN, QC 18/6/93

factual finding was a correct approach and that is

what I have to explain to this Court. What the

Full Court did, at page 116, was set out the

finding in relation to the representation made.	It
is set out at line 25.	It does not mirror the

evidence. It is a summary of the effect of the

representation.

Then the Full Court says, correctly no doubt,

that the finding made by the tribunal was not

seriously challenged by the lender. Then what the

Full Court says is, and I take the Court to

page 123, they do find that the representation was

not made, but the way they do it is, they say, as

appears from line 20, page 123, you have got to

treat it as a case of fraud. Why? No reason for
that, and it is not an allegation in fraud and it

does not have to be an allegation in fraud to be

relevant conduct. But they say, "No, you have got

to treat as a case in fraud".

They refer to Briginshaw, back at page 121,

telling you how satisfied the court has to be when

you make a serious allegation. So they elevate the

allegation; they apply a legal test to it, which is inapplicable; and then they say, based on elevating

the nature of the allegation to a fraud allegation,

and applying a legal test as to standard of proof,

which is not applicable, that on that test we have

failed. But we say two things about it: even on

that test the evidence was, in part., uncontradicted

on what was said on the fact that there were

statements about insurance, but what we say is that the Full Court approached the whole issue the wrong

way. If you get rid of the approach of the

Full Court and say that it is not a case in fraud,

and the Briginshaw test is not the test on the

standard of proof, therefore you get rid of the

Full Court conclusion. You are left with the

tribunal's findings of fact. So you do not have to

view all the facts. That is why I could not

answer - - -

McHUGH J: But that passage at line 20 is the only time the

Court mentions fraud, is it not? Elsewhere it

talks about false representation.

MR FINKELSTEIN:  No, I think that it is always treated as a

case in fraud.

McHUGH J: Well, look at page 120, line 14.

MR FINKELSTEIN: If you look at page 124, line 25 or 26,

dealing with how you have to succeed in an action

for deceit.

Westendorp 31 MR FINKELSTEIN, QC 18/6/93

McHUGH J: Yes, I know, but they have gone past it by this

stage.

MR FINKELSTEIN:  No, no. Because what they are doing -

first of all they say that the burden of proof is

the Briginshaw burden of proof, then you have to

prove inducement, and properly prove inducement,

and then they go to the deceit cases to show how

that is to be done. So what they have done is they

have elevated it into a fraud case and I can

demonstrate, if the Court bears with me for just a

few moments - if I could hand to the Court a

document I threatened to hand up earlier but did

not.

MR MERKEL:  Can I indicate to Your Honours I cannot stop my

learned friend from handing a document up, but this summary of evidence is highly contentious and - - -

MR FINKELSTEIN: It is not; it is straight out of the

transcript.

MR MERKEL:  What in fact happened below is we took

Their Honours to the actual evidence.

DEANE J: Well, in fairness to other matters in the list, we

have gone a long long time for a leave application.

MR FINKELSTEIN:  I understand that, Your Honour. All I

wanted to address the Court's attention to is from

the bottom of page 2 there are collected - and we

tried to be neutral about this. My learned friend

might say that this was all contentious, but we

tried to be neutral about it. Can we just say that

there was a deal of evidence to support the making

of the statement, and if you go to the top of
page 5 of this document, what is extracted from the

transcript is again his concession:

it was possible that the mother had asked

about insurance over the house ..... he said it
was possible the mother did ask him about
whether there was insurance over their house,

and that he answered by saying, "you have

nothing to worry about" -

and that is extracted from the transcript.

Now, it may be that on the Briginshaw test, if

applicable, an appellate court could say that the

ordinary test of misrepresentation or misconduct of

finding of fact made by the tribunal was not open.

the type that is relevant under this Act - that is,

on the balance of probabilities - then there is no occasion for the Full Court to have overturned the

findings of fact made by the tribunal. It was

Westendorp 32 MR FINKELSTEIN, QC 18/6/93

because the Full Court went into error in
approaching the case as a fraud case, and imposing
a burden of proof that was inapposite, that led it,

in any event we say wrongly, but, in any event, to make the finding of fact that it did - that is the

tribunal - make the finding of law that the
tribunal could not base its finding on facts before

it.

The document demonstrates that it is wrong and

we overcome the issue by saying that it is the

approach of the Full Court in looking at the way

the tribunal conducted itself which is wrong. If

the Court accepts that then you restore the factual

findings of the tribunal without necessarily going

into any detailed analysis of the facts.

DEANE J:  I do not follow that. I mean, if we accepted that

we would then have to hear the challenge to the

tribunal's findings of fact. I mean, we could not

possibly say, "The Full Court has approached the
appeal on the wrong basis, therefore we restore the

original finding".

MR FINKELSTEIN:  I accept that. The answer is that

substantially the whole	of the evidence that we
would seek to deal with	to support the tribunal's
finding is contained in	these short pages, and
it - - -

TOOHEY J: But your obstacle is more fundamental than that.

You put it to us on the basis, Mr Finkelstein, that the approach in regard to fraud was wrong, but

paragraph (a) at the top of page 113 is not

confined to fraud, it is a finding by the

Full Court that the evidence was incapable of

supporting any finding made in these terms. If you

go back to the terms - they appear at the bottom of

page 112 - it is that the statement was even made,

let alone whether it was fraudulent.

MR FINKELSTEIN: Well, Szigeti himself says it.

TOOHEY J:  I know you would wish to challenge that, but that

is what the Full Court said.

MR FINKELSTEIN:  What the court did was set out its

conclusions first and then justify them by the

legal analysis later. And the legal analysis shows

that it was a fraud claim with a fraud standard of

proof.

TOOHEY J:  Once you get to this stage you are really taking

us into another Court of Appeal to review the

findings made below.

Westendorp 33 MR FINKELSTEIN, QC 18/6/93

MR FINKELSTEIN: But only because we say that, in this

to impose this sort of burden on an applicant for relief. It is not an unimportant question about what the correct approach is for a tribunal. How cautious should the tribunal be of evidence being led before it by an applicant? Does

sense, the approach of the Full Court to this type Act-type cases,

of case erred. That is, it was wrong of the

it have to apply a Briginshar.rtype standard, or can

it apply a lesser standard, that is, on the balance

of probabilities a case is made out?

So that that is a point which, at the moment,

suggests that the higher onus - leaving the

Full Court undisturbed - is required by an

applicant when dealing with representations as

being conduct which seeks to bring about injustice.

May it please the Court.

DEANE J: Thank you, Mr Finkelstein. The Court will

announce its decision on this application at 2 pm.

AT 12.15 PM THE MATTER WAS ADJOURNED

UNTIL LATER THE SAME DAY

UPON RESUMING AT 2.00 PM:

DEANE J: In view of the factual findings of the Appeal

Division of the Supreme Court, the Court considers that the present case does not provide an appropriate vehicle for a consideration of the questions of construction of provisions of the

wish to raise in an appeal to this Court. Credit Act 1984 (Vic.) which the applicants would	Accordingly, the application for special leave to
appeal is refused.

MR MERKEL:  If the Court pleases, we would seek costs.

DEANE J: Mr Finkelstein? The application is refused with

costs.

AT 2.01 PM THE MATTER WAS ADJOURNED SINE DIE

Westendorp 34 18/6/93