Wolfe v Permanent Custodians Limited
[2012] VSC 275
•11 October 2012
| Send for Reporting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2010 02423
| RICHARD WEBSTER MARK WOLFE | Plaintiff |
| v | |
| PERMANENT CUSTODIANS LIMITED (ACN 001 426 384) | Defendant |
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JUDGE: | ZAMMIT AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9, 10 and 11 May 2012 | |
DATE OF JUDGMENT: | 11 October 2012 | |
CASE MAY BE CITED AS: | Wolfe v Permanent Custodians Limited | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 275 | Revised 29 October 2012 |
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DOCTRINE OF MERGER – Contract – Consideration – Implied terms – Unjust terms – Waiver - Misleading and deceptive conduct – Unconscionability – Estoppel – National Credit Code 2010 Sections 4, 6, 70, and 80 – Transfer of Land Act1958 (Vic) Sections 76 and 77 - Fair Trading Act 1999 (Vic) – Sections 7, 8, 9(1), 158 – Australian Securities and Investments Commission Act 2001 - Sections 12BAB, 12BB, 12CA, 12CB, 12CC and 12DA.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr O. Scoullar-Greig | George Erlichster |
| For the Defendant | Mr S. Hay | Gadens Lawyers |
TABLE OF CONTENTS
1. Introduction and brief background to the dispute
2. Preliminary observations and summary
3. The evidence
Did Mr Wolfe have knowledge about the terms contained in the 1 December 2009 letter before making the first payment to Permanent on 3 December 2009?
Events after 1 December 2009
4. Mr Wolfe’s claims against Permanent
5. The Nature of the 1 December 2009 Agreement – Doctrine of Merger
Effect of judgment – extinguishment of rights pursuant to mortgage
Rights and liabilities of parties pursuant to judgment and the 1 December 2009 Agreement
6. Did the 1 December 2009 Agreement Fail for Want of Consideration Flowing to Permanent?
Can a practical benefit constitute consideration?
7. What Were the Terms of the 1 December 2009 Agreement?
Implied terms
Can the terms be implied at law into the 1 December 2009 agreement?
Did Permanent breach the implied terms in paragraphs 15(d) and (e) of the second further amended statement of claim?
8. Does the Credit Code Apply to the 1 December 2009 Agreement?
Applicability of the National Credit Code 2010.
Statutory presumption
What are the criteria for the application of the Code?
Section 4 of the Code – Deferral of Debt
9. The Application of the Code
Memorandum of Common Provisions (“MCP”) AA547 – was it an implied term pursuant to s 80 of the Code and the 1 December 2009 agreement that it be governed by the MCP?
Section 80 of the Code – Requirements to be met before the credit provider can enforce the credit contract against the defaulting debtor
Remedies for alleged breach
10. Did Permanent Act Contrary to ss 76 and 77 of the Transfer of Land Act 1958 (Vic)? (“TLA”)
11. By Accepting the Lump Sum Arrears Payment, Did Permanent Waive its Right to Rely upon the Judgment or Elect to Continue with the Mortgage?
12. Are the Terms in the 1 December 2009 Agreement “Unjust”?
Unjust Terms – s 70(1) of the Code
Consequences of non-compliance with the Code
Fair Trading Act 1999 (Vic) s 158 – are the terms set out in the 1 December 2009 Agreement unjust?
Are the terms of the 1 December 2009 Agreement contrary to good faith and if so do they result in a significant imbalance in the parties’ rights and obligations?
Good faith
13. Unconscionability
Submissions on unconscionability
Interaction between ss 7 and 8 FTA
Unconscionability under statute
Parties’ Submissions on the Applicability of the Australian Securities and Investments Commission Act 2001 (ASIC Act)
Applicability of the ASIC Act
Submissions on applicability of the FTA
Applicability of the FTA
The test of unconscionability under s 12CB ASIC Act and s 8 FTA
Was Permanent’s conduct unconscionable?
The equitable doctrine of unconscionable conduct
14. Misleading and Deceptive Conduct
When has the Court identified conduct involving silence as giving rise to a reasonable expectation of disclosure?
Did Permanent’s non-disclosure regarding the status of the incomplete direct debit form constitute misleading and deceptive conduct?
Was there a reasonable expectation on the part of Mr Wolfe?
15. Estoppel
Should Permanent be estopped from relying upon the default because of the representation?
16. Conclusion
HER HONOUR:
1. Introduction and brief background to the dispute
The plaintiff, Mr Richard Webster Mark Wolfe (“Mr Wolfe”) issued proceedings against the defendant, Permanent Custodians Limited (“Permanent”) in relation to an Agreement dated 1 December 2009.
The 1 December 2009 Agreement related to Permanent staying the execution of a Warrant of Possession (“the Warrant”) after it obtained judgment against Mr Wolfe and his former de facto partner, Ms Gayle Nicole Breasley (“Ms Breasley”) for defaulting under a Loan Agreement they had entered into with Permanent.
Mr Wolfe and Ms Breasley, entered loan agreements and mortgages with Permanent on 20 September 2000 and on 31 March 2004.
The relevant Loan Agreement is dated 31 March 2004, in the sum of $323,000. The mortgaged land subject of the Loan Agreement and these proceedings is located at 19 Main Street, Pascoe Vale, more particularly described in Certificate of Title Volume 7681 Folio 037 (“the Property”). The Loan Agreement created a first registered mortgage (“the Mortgage”) over the Property of which Ms Breasley was the sole registered proprietor. Mr Wolfe was not a co‑mortgagor.
Ms Breasley was also the registered proprietor of the adjoining property at 17 Main Street, Pascoe Vale.
On 1 December 2009, only days before Permanent was to enforce the Warrant and evict Mr Wolfe from the Property, Mr Wolfe approached Permanent and negotiated an Agreement to stay the imminent eviction.
The 1 December 2009 Agreement contained an onerous term in relation to any future defaults by Mr Wolfe namely, if Mr Wolfe defaulted in any payment which the parties had agreed to, Permanent would enforce its rights under the judgment and Warrant without notice. Mr Wolfe defaulted and Permanent exercised its rights under the 1 December 2009 Agreement.
Mr Wolfe contends that Permanent’s exercise of its rights was contrary to the law.
2. Preliminary observations and summary
Before considering the evidence, I make the following observations. Mr Wolfe’s Second Further Amended Statement of Claim (“Statement of Claim”), filed on the second day of the trial, is long and difficult to understand. The document pleads numerous causes of action without adequately setting out the material facts relied upon. Despite the unsatisfactory state of the pleadings, at trial, Mr Wolfe persevered with all of his claims. This has unavoidably required a separate analysis of each claim on the facts and the law, resulting in a lengthy judgment. It is therefore appropriate at the outset that I should announce the Court’s decision .
The Court finds none of the Mr Wolfe’s claims are made out. My judgment will show there can be no interference with Permanent’s right to enforce its judgment and Warrant. Mr Wolfe’s claim contained in his Statement of Claim is dismissed with costs.
3. The evidence
The Property was Mr Wolfe’s family home where he lived with Ms Breasley and their four children until they separated in November 2007. Mr Wolfe remained living in the home and Ms Breasley and the four children moved to other premises.
From about April 2008, Mr Wolfe had difficulty paying the Mortgage due to the stress of the separation. He found it difficult to work because of depression, began drinking, let the Property fall into disrepair and eventually stopped making mortgage repayments altogether.
On 5 May 2008, Permanent issued a default notice to Mr Wolfe and Ms Breasley. They failed to comply with the default notice.
On 15 April 2009, a writ was issued by Permanent against Mr Wolfe and Ms Breasley in this Court, proceeding No. 5956/2009. The writ claimed against Ms Breasley payment of the full debt owed under the 31 March 2004 Loan Agreement and the Mortgage, and possession of the Property. The writ claimed against Mr Wolfe payment of the full debt owed under the 31 March 2004 Loan Agreement.
On 10 August 2009, Permanent obtained judgment against Mr Wolfe for payment of $326,602.66 plus costs and interest (in default of him filing an appearance) and judgment against Ms Breasley for possession of the Property and payment of $326,602.66 plus interest and costs (in default of filing her defence) (“the judgment”).[1]
[1]Court Book p. 105.
On 20 August 2009, Permanent obtained a valuation of the Property showing that as at that date the Property had a market value of $625,000.[2]
[2]Joint Exhibit 3.
On or about 26 August 2009, Mr Wolfe and Ms Breasley entered into terms of settlement in relation to their November 2007 separation, whereby it was agreed that the Property would be transferred to Mr Wolfe upon the sale of the adjoining property at 17 Main Street.
By letter dated 8 September 2009, on a without prejudice basis, Gadens Lawyers, Permanent’s solicitors, wrote to Mr Wolfe’s then solicitor, Berndadette Elliott of Elliott Stafford and Associates. The letter advised Ms Elliot that Permanent had obtained judgment against Mr Wolfe and Ms Breasley in proceeding No. 5956/2009. The letter went on to say, omitting formal parts:
Our client is now at liberty to proceed to enforce the Judgment to obtain vacant possession of the Security Property. Nevertheless, our client has instructed that should your client and/or Mr Wolfe pay the arrears and costs owing on the Account in full before close of business Tuesday 15 September 2009 and then make all future instalment payments as and when they fall due, then legal action will be held. However, if payments are not made as sought, then our client will proceed to obtain a Warrant of Possession for the security property with a view to obtaining vacant possession of the Property or proceed to a mortgagee sale.
We advise that the arrears and costs owing on the Account as at 3 September 2009 is a total sum of $31,666.19 (comprised of current arrears of $30,104.53, plus outstanding legal costs of $1,561.66).
Finally, we confirm that any payments received will be accepted without prejudice to our client’s rights to rely on the existing judgment.[3]
[3]Court Book pp. 205-206.
On 6 October 2009, in reliance upon the judgment, Permanent obtained the Warrant. The Warrant was scheduled to be executed by the Sheriff’s Office in the round of evictions commencing 4 December 2009.[4]
[4]Court Book p. 106-107.
Mr Wolfe began to raise money to pay the arrears under the 31 March 2004 Loan Agreement after entering into the terms of settlement with Ms Breasley on or about 26 August 2009 and after the issue of the Warrant on 6 October 2009.
Some time in November but prior to 27 November 2009, Mr Wolfe contacted Mr George Erlichster about attempting to keep the Property. Mr Erlichster acted for Mr Wolfe in relation to proceeding No. 5956/2009 from about May 2009 to 6 August 2009, when Ms Elliott took over Mr Wolfe’s representation. Mr Erlichster is Mr Wolfe’s current solicitor.
Mr Wolfe’s evidence is that he telephoned Mr Erlichster and sought his informal advice in relation to rectifying the problem, that is negotiating an agreement with Permanent to keep the Property and prevent Permanent from enforcing the Warrant and eviction. Mr Wolfe wanted an opportunity to recommence payments and remain in the Property. While he approached Mr Erlichster for advice he, Mr Wolfe, was principally involved in the negotiations with Gadens. On the same day Mr Wolfe went to Mr Erlichster’s office in Caulfield. Mr Erlichster did not charge Mr Wolfe. He made a file note of the meeting and put it on Mr Wolfe’s file. Mr Erlichster advised Mr Wolfe to go into Permanent in a last ditch attempt and have a chat with Gadens about what he needed to do.[5]
[5]Witness statement of Richard Webster Mark Wolfe dated 9 May 2012 at para 18.
On 27 November 2009, Mr Wolfe went to Aussie Home Loans and discussed his position with the staff. While at the office of Aussie Home Loans, Mr Wolfe telephoned Gadens and spoke to Ms Naomi Grech, a law clerk employed in mortgage recoveries. From approximately November 2009 until Ms Grech’s employment with Gadens ceased in October 2010, she was the law clerk responsible for the file relating to Mr Wolfe under the supervision of Sonia Apikian, partner of Gadens.
Mr Wolfe told Ms Grech that “he has secured funding to clear the arrears in full, wants to make 12 months’ payment in advance and clear all legal costs.”[6]
[6]Court Book p. 208.
Ms Grech advised Mr Wolfe to put his proposal in writing, “setting out what he wants and when he proposes to do it by”.[7] Mr Wolfe informed Ms Grech that he had received notice from the Sheriff of the eviction which was to take place in the next week.
[7]Court Book p. 208.
On the same day, Mr Wolfe sent a letter to Gadens marked to Ms Grech’s attention. The letter was without prejudice. Omitting the formal parts, the letter stated:
Dear Naomi,
Re Client: Wolfe, Richard and BREASLEY Gayle
Warrant No. SP090082008
As per our telephone conversation this morning, I advise I have obtained funding to make payment to Permanent Custodians Ltd in the amount equal to:
1. total current arrears.
2. total current legal costs.
3. the equivalent of twelve (12) months’ loan repayments in advance.
Please note the funds are available immediately.
As a matter or urgency, kindly relay my offer to your client and advise me directly, at your earliest, of their reply.
Please provide details of payments to be made to my solicitor Mr George Erlichster, who can be contacted on (03) 9525 8571.
Yours sincerely
Richard Wolfe
(0414 423 878)
cc Mr Erlichster, Solicitor
110 Balaclava Road
Caulfield Victoria 3161Via facsimile: (03) 9525 9811[8]
[8]Court Book p. 108.
Mr Wolfe’s evidence is that the letter dated 27 November 2009 was primarily drafted by “Larry”, a person from Aussie Home Loans, and that it was his idea to refer to Mr Erlichster to make the letter sound more formal.[9] Mr Wolfe gave evidence that because in the past he had not received faxes he wanted Gadens to send the pay out figure to Mr Erlichster and for a fax number of his friend, Carlos Sarraglio.[10]
[9]Transcript: 9 May 2012, p. 65, lines 27-28.
[10]Transcript 9 May 2012, pp. 73, lines 28-31; p. 74, lines 1-4.
Mr Erlichster received the 27 November 2009 letter by fax. Mr Erlichster was a bit confused as to why he received it but did not feel a need to advise Mr Wolfe because “clearly he [Mr Wolfe] had organised this letter to be sent”.[11]
[11]Transcript 10 May 2012, p. 143, lines 27-29.
On 1 December 2009, Ms Grech telephoned Mr Wolfe. Ms Grech’s file note of the conversation records:
Time of call 11.43am – 0414 423 878
Advise had spoken to our client and they look like will accept payment proposal. I said have received arrears amount from them, however waiting to get the 12 months in advance. I said once received will let him know. I said he will need to get a cheque to our office prior to eviction for the amount, he said yes.[12]
[12]Court Book p. 109.
At approximately 4.17 the same day, Ms Grech called Mr Wolfe on his mobile phone. Ms Grech’s file note records:
Time of call 4.17pm – 0414 423 878
Advised of figures and that fax being sent to solicitor. Advised of contents of fax. He said okay, will arrange for cheque.
I advised him of payments need to be made from Feb onwards, he said the direct debit previously set up the account has been closed as Gayle was taking money from it. I said we’ll arrange for new direct debit forms, he will be paying mortgage.
Wants fax sent to his fax number also of 9354 7188.
Ms Grech recalls speaking to Mr Wolfe on a number of occasions during her involvement with the file but does not have a specific recollection of the two conversations with Mr Wolfe on 1 December 2009.
Ms Grech’s evidence is that she believes that she would have read out the terms of the arrangement that had been agreed by Permanent as set out in a letter dated 1 December 2009. The letter from Gadens to Mr George Erlichster was without prejudice and marked urgent. It was faxed to Mr Erlichster at 14:15 and to Mr Wolfe at his friend Carlos Sarraglio’s fax at 16:24.
The letter reads (omitting formal parts):
Permanent Custodians Limited v Gayle Nichole Breasley and Richard Webster Mark Wolfe
Security property: 19 Main Street, Pascoe Vale
Supreme Court proceeding: No. 596 of 2009.
We act on behalf of AMS Mortgage Services Pty Ltd, mortgage manager for Permanent Custodians Limited. We refer to a facsimile received from your client Mr Wolfe on 27 November 2009.
By way of background we confirm that on 12 May 2008 our client served a Default Notice upon your client and Ms Breasley as account number 1057716 was in arrears. As the Default Notice expired unremedied the balance of your client and Ms Breasley’s Account became due and payable. Accordingly, our client commenced Supreme Court proceedings against your client and Ms Breasley seeking a judgment for the debt owing and possession of the Property situated at 19 Main Street, Pascoe Vale. On 30 May 2009 your client was personally served with the Writ and Ms Breasley was personally served on 15 June 2009. On 10 August 2009 our client Judgment [sic] for debt owing and for possession of the Property . On 1 October 2009 our client obtained a Warrant for Possession which was sent to the Sheriff’s Office and an eviction date has now been set for the first available date from 4 December 2009.
That said, we understand that your client wishes to settle this matter amicably and to that effect wishes to clear the arrears and legal costs in full, make 12 months’ payment in advance and then maintain all future repayments as and when they fall due.
Our client will agree to stay the eviction conditional upon a bank cheque payable to GEL Custodians being received at our office by close of business Thursday 3 December 2009 in the amount of $46,134.82 (being comprised of arrears of $40,186.00, agents fees of $214.50, outstanding legal costs of $1,178.32 and two months’ payments in advance of $4,556.00). We are instructed that due to our client’s system, they can only accept two months payment in advance, however your client has an active direct debit so he should ensure that sufficient funds are in this Account so that all future repayments are maintained. The next repayment due will be on 26 February 2010 in the amount of $2,277.99.
Please note that all payments made will be accepted by our client without prejudice to its rights to rely on the existing Judgment and Warrant for Possession. Accordingly, if the payment of $46,134.82 is not received by the close of business Thursday 3 December 2009 or your client defaults on any repayments from February 2010, then our client reserves its right to proceed with further legal action, including obtaining a fresh eviction date for the Security Property, without further notice. … [13] (emphasis added)
[13]Court Book p. 111-112.
After counsel read the entire contents of the 1 December 2009 letter to Ms Grech under cross‑examination, Ms Grech stated that she could not remember whether she read the whole letter or not.[14] However, Ms Grech stated:
But if I had written [referring to the file note] “advised of the contents of the fax” then I would have advised of the contents of the fax.[15]
[14]Transcript 10 May 2012, p. 164, lines 15-16.
[15]Transcript 10 May 2012, p. 168, lines 3-5 and 6-10.
In her witness statement, Ms Grech further states:
If an arrangement was entered into with our borrower to stay an enforcement action, it was the policy of Gadens Lawyers Melbourne and Sydney to always ensure that: (a) it was the term of the arrangement that all payments made by the borrower would be accepted without prejudice to the lender’s rights to rely on the judgment entered (or if there was no judgment entered, the default notice); (b) it was a term of the arrangement that if the borrower defaulted under the arrangement, the lender may proceed with a further enforcement action without further notice; and (c) when entering into or confirming arrangements over the phone, to tell the borrower of the terms stated at 12(a) and (b) above.
It was always my practice to follow the policy outlined in paragraph 12 above.[16] (emphasis added)
[16]Witness statement of Naomi Grech dated 10 May 2012, Exhibit D-4.
In an affidavit affirmed 5 May 2010 in support of Mr Wolfe’s injunction application, Mr Wolfe’s evidence was:
On or about 1 December 2009 I received a letter from the defendant’s solicitors indicating that they would agree to stay eviction conditional upon receiving the amount of $46,134.82, payable to GEL and being received at the defendant’s solicitors’ office by the close of business Thursday, 3 December 2009. This amount represented payment of the arrears of $40,186, agent’s fees of $214.50, outstanding legal costs of $1,178.32 and two months’ of repayments in advance of $4,556 representing the December and January 2009 repayments (“the agreement”). I was told by a representative of the defendant that their system could not accept payments in advance of 12 months. I was also told that my first monthly repayment was due on 26 February 2010 in the amount of $2,227.99. I accepted this offer. Now produced and shown to me marked Exhibit C is a true copy of the aforementioned letter sent from the defendant’s solicitors.[17] (emphasis added)
[17]Affidavit of Richard Webster Mark Wolfe affirmed 5 May 2010 at para 10, Exhibit D-2.
Under cross‑examination it was put to Mr Wolfe that there was an inconsistency between his evidence in the 5 May 2010 affidavit; his witness statement dated 9 May 2012 and oral evidence. That is, in May 2010, some six months after 1 December 2009, Mr Wolfe’s evidence was that he received the 1 December 2009 Agreement by fax on or around 1 December 2009, while his evidence now is that he did not receive the fax letter prior to making payment on 3 December 2009, and that Ms Grech never told him of the contents of the 1 December 2009 letter. When asked whether his 5 May 2010 affidavit represented the true state of affairs and that Mr Wolfe received the letter and knew its contents before he made the payment on 3 December 2009, Mr Wolfe denied receiving the letter or knowing about its contents.
Later in cross‑examination it was put to Mr Wolfe that Ms Grech had told him of the contents of the 1 December 2009 letter, including that the arrangement was going to be entered into subject to Permanent’s rights to rely on the judgment that had been obtained against him. Mr Wolfe’s evidence was that he could not recall whether Ms Grech told him of the contents or not. Mr Wolfe conceded that to the best of his knowledge the matters discussed at the time included the fact that he had to pay arrears, legals, any associated fees and the 12 months’ in advance and that Ms Grech told him about the 26 February 2010 first repayment date and the repayment amount. However, Mr Wolfe could not recall either way whether Ms Grech said anything about Permanent reserving its rights to rely on the judgment or anything of that nature.[18]
[18]Transcript 9 May 2012, p. 62, lines 6-19.
In relation to the contents of the 1 December 2009 letter, Mr Wolfe’s evidence is that he recalls reading it after payment on 3 December 2009. His evidence is that he did not read the letter in its entirety. That is, he read the first part of the letter which he considered he had discussed with Ms Grech, the amounts to be paid and that it “then got to a point where it was just legal talk so I didn’t bother with it”.[19]
[19]Transcript 9 May 2012, p. 78, lines 26-30.
Under cross‑examination, Mr Wolfe was asked as to his understanding of the contents of the letter and particularly the second-last paragraph. Mr Wolfe conceded that he understood what the written words meant and what consequences would flow.[20] However, he maintained that at the actual time he read the letter he thought that if he had paid all arrears and Permanent’s legal costs the loan would “go back to normal, I didn’t understand how if I defaulted again how I would be evicted”.[21]
[20]Transcript 9 May 2012, p. 79, lines 27-29; p. 80, line 4.
[21]Transcript 9 May 2012, p. 80, lines 13-17.
Mr Wolfe gave evidence that Ms Breasley would complete all forms for him. He said he had four different types of dyslexia. There was no evidence before the Court as to whether Mr Wolfe has four types of dyslexia.
In relation to what Mr Wolfe was told by Mr Erlichster concerning the 1 December 2009 letter, Mr Wolfe’s evidence is that he received a call from Mr Erlichster, who was a bit surprised that he had been sent a copy of the letter from Gadens. Mr Wolfe said that he simply wanted to know the payment amount and was busy at the time of the call.
Mr Erlichster’s evidence was that he contacted Mr Wolfe upon receiving the 1 December 2009 letter and that Mr Wolfe was aware of its contents. Mr Erlichster said:
Well, I did not go through the terms of the letter with him [Mr Wolfe]. He seemed to be aware of the arrangement, that he was aware that – I had no knowledge of what happened between him and Gadens. So the fact was that it was clear from my discussion that he had negotiated with Gadens and come to some conclusion and this was what the letter represented and he was aware of it. He was aware that a deal had been done. This is as far as I can put the position.[22]
[22]Transcript 10 May 2012, p.148, lines 3-11.
Mr Erlichster did not provide Mr Wolfe with a copy of the letter because Mr Wolfe indicated he would get a copy. Mr Erlichster recalls telling Mr Wolfe about the sum of $46,000 and the date it was due, which was two days from the date of the letter.
Mr Erlichster could not say whether Ms Grech had discussed with Mr Wolfe the contents of the letter and in particular, the sections concerning legal action and the reserving of rights.
Did Mr Wolfe have knowledge about the terms contained in the 1 December 2009 letter before making the first payment to Permanent on 3 December 2009?
On balance, I am satisfied that Mr Wolfe understood and knew of the terms contained in the 1 December 2009 letter prior to the first payment he made on 3 December 2009.
I accept Ms Grech’s evidence that if she made a file note to the effect that the contents of the letter were discussed, this meant that more than just the amount due was discussed and would have included all the terms. In December 2009 Ms Grech was an experienced legal clerk who had worked in the Mortgage recoveries section of Gadens for a number of years. Her file notes were detailed and were consistent with the practice she said she had developed and Gadens’ policy to inform the borrower at the time of entering into an arrangement over the phone of the default and notice terms.
Mr Wolfe could not recall whether or not Ms Grech would have read all the terms.
Mr Erlichster gave evidence that even though he did not go through the terms of the 1 December 2009 letter, in his view, Mr Wolfe was aware of them, being a matter he had negotiated with Gadens himself. Mr Erlichster did not consider that Mr Wolfe had not understood the Agreement reached.
Mr Wolfe’s evidence is that he did not at any stage make any complaint to Gadens or Permanent about the terms set out in the 1 December 2009 letter, nor did he contact Mr Erlichster about the terms. He did not concern himself with the contents of the letter other than the amounts owed. In his words, he “didn’t bother”.
Ms Grech’s evidence in relation to the second conversation with Mr Wolfe on 1 December 2009 has been reconstructed based on her file notes and usual practice. As such, it should only be given weight if consistent with the evidence of other witnesses.[23]
[23]Sahin and Anor v National Bank Limited and anor [2011] VSCA 64 (8 March 2011).
The onus of proof is on Mr Wolfe to prove this case. Mr Wolfe has deposed in an affidavit prepared only six months after the 1 December 2009 conversations with Ms Grech that he received the 1 December 2009 letter from the defendant’s solicitors on or about 1 December 2009. He has exhibited the 1 December 2009 letter to his affidavit sworn 5 May 2010. In evidence, two and a half years later, Mr Wolfe denies having received the 1 December 2009 letter until after he made the payment on 3 December 2009.
Mr Carlos Sarraglio, the owner of the factory where the 1 December 2009 letter was faxed, gave evidence that he was unable to say when Mr Wolfe received or picked up the 1 December 2009 fax letter from the factory.
Mr Erlichster’s evidence is that he did not give Mr Wolfe a copy of the 1 December 2009 letter: “because I think he [Mr Wolfe] indicated he was going to get a copy some other way”.[24]
[24]Transcript 10 May 2012, p 145, lines 12-13.
On balance, I do not accept Mr Wolfe’s evidence that he did not have the 1 December 2009 letter before the payment was made on 3 December 2009. The inconsistency in his affidavit material sworn 5 May 2010 and his viva voce evidence is troubling, Mr Wolfe’s inability to recall whether Ms Grech told him of the contents of the letter and Mr Erlichster’s evidence that he thought Mr Wolfe was aware of the arrangements and the contents of the 1 December 2009 letter, are factors which diminish the likelihood of Mr Wolfe’s recollection of the relevant facts.
Mr Wolfe’s inability to recall whether the contents of the 1 December 2009 letter were read to him by Ms Grech over the phone, Ms Grech’s evidence as to her usual practice; Gaden’s policy that borrowers at the time they were renegotiating an arrangement were told of the default and notice provisions, and that Ms Grech, who is no longer employed by Gadens, is not an interested party in the litigation, support Ms Grech’s version of events, which I accept.
Events after 1 December 2009
On 3 December 2009, Gadens received a cheque for $46,134.84 from Mr Wolfe, resulting in the eviction being cancelled. Mr Wolfe set up a direct debit facility for the ongoing payment to Permanent from the National Australia Bank (“NAB”). On the same day, Permanent’s agents, AMS Mortgage Services Pty Ltd (“AMS”), sent Mr Wolfe a direct debit form (“the form”).
Mr Wolfe received the form from AMS on or about 7 December 2009. He completed the form and returned it to AMS by ordinary post as required by AMS with his return address on the envelope.
As at 26 February 2010, Mr Wolfe had deposited $10,098.74 in the NAB direct debit facility. These funds were sufficient to make the required payment to Permanent in February 2010 in the amount of $2,277.95.
The form is headed “Payment Options and Direct Debit Request”. At the top of each page of the form is written:
If you have any questions about this form please call us on 1300 650 921.[25]
[25]Court Book p. 115.
The form contained information under the heading “What You Need to Do”:
·You must attach a statement deposit slip, cancelled cheque or letter from your financial institution for verification, showing the name of all account holders. If the information in this form is inconsistent with the supporting financial institution’s documents, we may use the information on the supporting documents to complete your request.[26]
[26]Court Book p. 115.
Further the form states under the heading “What You Need to Know”:
·Linking your account: …
·At least one borrower must be an account holder and all borrowers and account holders must sign section 5 of this form.[27]
· In this case the borrowers were Ms Breasley and Mr Wolfe. The account holders were Mr Wolfe and his mother, Lorraine Wolfe.
[27]Court Book p. 115.
It was not contested that Mr Wolfe failed to correctly complete the form in that:
(a) Ms Breasley did not sign the form;
(b) Lorraine Wolfe did not sign the form; and
(c)Mr Wolfe failed to provide a statement, deposit slip, cancelled cheque or letter from the relevant financial institution for verification showing full names of all account holders of the account from which the funds were proposed to be debited.
On 14 December 2009, the Mortgage manager for Permanent attempted to call Mr Wolfe and Ms Breasley by telephone to inform them of the issues with the form. However, the telephone numbers held on the file were disconnected. It is not disputed that the payment due in February 2010 was missed by Mr Wolfe.
Mr Wolfe’s evidence is that he did not check his account to see whether Permanent had debited the moneys for the first instalment payment. This was on the basis that he thought the form had been completed and there was money in the account.
In cross-examination Mr Wolfe said that he told Ms Grech that his phone number had been disconnected.[28] In Ms Grech’s file notes of the two conversations with Mr Wolfe on 1 December 2009 there is no reference to the phone number being disconnected. There is no reference in Ms Grech’s file notes of any other conversation with Mr Wolfe that the phone number was disconnected. In the letter dated 27 November 2009 from Mr Wolfe to Gadens he provides his mobile number but does not say that the number he had previously provided was disconnected.
[28]Transcript 9 May 2012, p.93, line 19.
Mr Wolfe in evidence confirmed that he had two conversations with Ms Grech on 1 December 2009. Mr Wolfe’s evidence in relation to the second conversation at 4.17pm is that Ms Grech told him that his offer had been accepted however Permanent could only accept two months’ repayments in advance and not the twelve months Mr Wolfe had offered. Ms Grech told Mr Wolfe that the first repayment was due on 26 February 2010 in the amount of $2,27.99 and that Permanent would only accept Mr Wolfe’s offer if he paid all other costs. Ms Grech told Mr Wolfe this would bring the Mortgage up to date and “back to normal”. The total amount Mr Wolfe would have to pay was $46,134.82, including legal fees, and this should be paid by bank cheque delivered to Gadens by 30 December 2009. In his witness statement Mr Wolfe said:
14.Had the defendant explained to me that after going to the effort of borrowing from my family and making payment of almost $50,000 that I would not even be given one opportunity to correct any further default I would not have agreed to this.
On 2 March 2010, Gadens wrote to Mr Erlichster (omitting formal parts):
By way of background, we confirm that your client attended our office on 3 December 2009 and provided a cheque in payment of arrears, agent’s fees, outstanding legal costs and 2 months’ payment in advance, covering payments due December and January. Accordingly, legal action was held subject to the loan being serviced in the future.
That said, we are instructed that neither your client nor Mrs Wolfe made the payment due in February and accordingly we are instructed to immediately proceed to arrange a fresh eviction date to obtain vacant possession of the Property and proceed with the mortgagee sale.
Please note that given the history of this matter, our client has instructed us that they will not enter into any further arrangements and will only accept payment of a full debt in order to stay eviction.[29]
[29]Court Book p. 121.
On 15 March 2010, Gadens sent a further letter to Mr Erlichster. The relevant parts of the letter state:
We refer to previous correspondence and to our letter dated 2 March 2010 wherein we advise that neither your client nor Ms Breasley made the payment due in February and accordingly we were instructed to immediately proceed to arrange a fresh eviction date to obtain vacant possession of the Property and proceed with a mortgagee sale.
We have since been contacted by your client advising that he (to his knowledge) has a direct debit in place and that he had sufficient funds in the nominated account to cover the payment due in February and he queried why the payment was not taken. No evidence of these allegations was provided.
We note that our letter dated 1 December 2009 referred to mortgage payments being due on the 26th of each month. This was in fact a typographical error and they are due on the 6th of each month but presumably your client and Ms Breasley were aware of it. In any case, our client has advised that there is no direct debit active nor has there been one in place since January 2008. Surely your client would have realised that his nominated account had not been debited if in fact funds were available as alleged?
In any case, even if our client was willing to give your client the benefit of the doubt that he had tried to set up a new direct debit and there were sufficient funds in the nominated account to cover the February instalment, your client and Ms Breasley are in default of a loan agreement and Ms Breasley is in default of a mortgage which secures a loan. This default is as a result of being in default of their Loan Account number 41321 which is secured by a mortgage provided over 17 Main Street, Pascoe Vale. We have been instructed that a garage and fence have been constructed to the Property on the adjoining property without obtaining our client’s written consent. Ms Breasley has acknowledged the default and is providing a Notice of Surrender of the Property.
In light of the above, we have been instructed to proceed with legal action to obtain vacant possession of the Property to proceed to a mortgagee sale. Kindly ensure that the Property is vacant prior to the eviction date which the Sheriff’s Office has advised us is to occur from the first available date from 9 April 2010.[30]
[30]Court Book p. 122-123.
Ms Breasley filed a notice of surrender on 17 March 2010 by which she agreed to surrender to Permanent the Property and for it to proceed with a mortgagee sale.[31]
[31]Court Book p. 124.
Mr Wolfe made a payment to Permanent on 23 March 2010 in an attempt to rectify the default.[32]
[32]Court Book p. 172.
Eviction occurred on 22 April 2010.
Mr Wolfe continued to make payments on the loan between March 2010 and June 2010 and then in August 2010. There have been no payments since September 2010.
4. Mr Wolfe’s claims against Permanent
At the opening of the hearing Mr Wolfe was given leave to file a Second Further Amended Statement of Claim.
Permanent filed a Defence to the Statement of Claim dated 11 May 2011.
Mr Wolfe claims that he entered into an agreement with Permanent on 1 December 2009 not to proceed with the sale of the Property upon Mr Wolfe paying to Permanent by 3 December 2009 the amount of $46,134.82, representing, inter alia, the total outstanding arrears, agency fees and legal costs.[33]
[33]Statement of Claim, paragraph 12.
Mr Wolfe alleges that the Agreement was partly oral and partly implied. To the extent that it is oral, it is constituted by the telephone conversations between Mr Wolfe and Ms Grech on 1 December 2009.
At paragraph 13 of his Statement of Claim, Mr Wolfe alleges that the fax sent by Ms Grech on 1 December 2009 contained additional terms that were never discussed with Mr Wolfe or made clear to him including that:
13.…
a.all payments received by the Defendant from the date of the Agreement were accepted without prejudice to the Defendant’s right to rely upon the judgment and Warrant; and
b.if the Plaintiff did not pay any further amount due under the Mortgage the Defendant would proceed with further legal action, including obtaining a fresh date for the Property to be sold pursuant to the Warrant.
Mr Wolfe alleges that he did not review the 1 December 2009 letter nor was he informed of the terms as set out in the 1 December 2009 letter prior to him making the payment on 3 December 2009. Mr Wolfe alleges:
15. It was an implied term of the Agreement that:
a.the Agreement would continue to be governed by the Memorandum of Common Provisions (“MCP”).
b.Further and/or alternatively, it was an implied term of the Agreement that by the Plaintiff paying all arrears, agency costs, two months’ repayments in advance and legal costs relating to the default and obtaining of the judgment and Warrant, the Defendant would no longer rely on the judgment and Warrant upon any new default but would instead commence new enforcement proceedings based upon the new default after providing the Plaintiff with notice of the default and a reasonable opportunity to rectify the default.
(c)Further and/or alternatively, it was an implied term of the Agreement that upon any further default, the Defendant would give the Plaintiff notice of the default and a reasonable opportunity to rectify the default, being 30 days, before the Defendant commenced any further enforcement proceedings, being:
(i)the obtaining of a new judgment and warrant based upon any further default; or alternatively
(ii) the enforcement of the existing judgment;
(d)Further and/or alternatively, it was an implied term of the Agreement that the Defendant would do all things necessary to enable the Plaintiff to have the benefit of the Agreement.
(e)Further and/or alternatively, it was an implied term of the Agreement that the Defendant would not in any way prevent the Plaintiff from performing the Agreement.[34]
[34]Statement of Claim, paragraph 15(a)-(e).
Mr Wolfe alleges that by reason of Permanent accepting all arrears, agency costs and legal costs and agreeing to receive monthly mortgage repayments towards the Mortgage, Permanent waived its right to rely on the judgment and/or elected to continue with the Mortgage and/or a relationship of credit provider and debtor rather than judgment creditor and judgment debtor.[35]
[35]Statement of Claim, paragraph 16 and 16.1.
Mr Wolfe goes on to allege that on the basis that Permanent received the form and was aware that Mr Wolfe had incorrectly completed the form and knowing this would result in February the repayment not being processed, Mr Wolfe would be in default.[36] Between 8 December 2009 and 26 December 2010, Permanent failed to notify Mr Wolfe or make reasonable attempts to notify him about the incorrectly completed form[37]and that he had the required funds in his nominated account to be debited towards the first repayment.[38]
[36]Statement of Claim, paragraph 20.
[37]Statement of Claim, paragraph 21.
[38]Statement of Claim, paragraph 24.
In the circumstances, Mr Wolfe alleges that[39]:
(a)Permanent acted unconscionably and relies on the common law; Fair Trading Act 1999 (Vic) (“FTA”) and the Australian Securities and Investment Commission Act 2001 (“ASIC Act”). As a consequence of the unconscionable conduct Mr Wolfe alleges that he was denied the opportunity to set up the direct debit and/or deposit the repayment directly when it fell due and has therefore suffered loss and damage;
(b)by silence Permanent represented that the form had been completed correctly and/or the direct debit facility had been set up and/or the first repayment would be automatically provided by Permanent without further notice to Mr Wolfe and that such representations were false, misleading and deceptive and that Permanent has engaged in misleading and deceptive conduct pursuant to the ASIC Act; FTA and the common law;
(c)given the circumstances giving rise to the default and Mr Wolfe’s reliance on the representations to his detriment, Permanent is estopped from or should be otherwise prohibited from relying on the default to evict Mr Wolfe;
(d)the financial relationship between Mr Wolfe and Permanent is one of mortgagee and mortgagor or alternatively credit provider and debtor, prior to and at the time of the agreement, therefore the Agreement was governed by the Trade Practices Act 1958 (the “TPA”); Consumer Credit Code (the “Code”) and the common law. By virtue of Permanent’s failure to provide a further default notice in breach of the requirements under ss 76 and 77 of the Transfer of Land Act and ss 80 and 81 of the Code and common law, Permanent unlawfully evicted Mr Wolfe from the Property.
[39]Statement of Claim, paragraphs 30-33.
Mr Wolfe alleges that if the Court finds the Agreement contains the terms as set out in the 1 December 2009 letter, such terms are unjust.[40]
[40]Statement of Claim, paragraph 46.
Mr Wolfe finally makes a number of allegations which are more by way of reply to Permanent’s defence. Those allegations relate to Permanent’s assertion that by virtue of Mr Wolfe’s defaults of the MCP (in that he undertook works on the Property without Permanent’s consent), Permanent therefore has the right pursuant to the MCP and can, amongst other things, take possession of the Property, sell the Property or do anything else which the law permits them to do as mortgagee of the Property. Given my findings I do not need to address this aspect of the claim.
In Mr Wolfe’s prayer for relief he seeks:
(1)an order that he is not liable for any fees or charges associated with the default;
(2)an order restraining Permanent and/or their agents from removing, selling or in any way dealing with goods contained in the Property;
(3)a declaration that the terms referred to in the 1 December 2009 Agreement are enforceable;
(4)damages;
(5)costs; and
(6)if the Court finds that the Agreement did not contain the implied terms as pleaded in paragraph 15, an order reopening this transaction to include those terms.
Mr Wolfe originally sought an order to exclusive possession of the Property but no longer seeks such an order.
5. The Nature of the 1 December 2009 Agreement – Doctrine of Merger
Before addressing Mr Wolfe’s legal claims and the defences advanced, it is essential to analyse the nature of the 1 December 2009 Agreement and the legal consequences flowing from that Agreement. The starting point is the judgment dated 10 August 2009 and the Warrant issued 6 October 2009 in Permanent’s favour.
Referred to as the doctrine of merger, a final judgment extinguishes the cause of action and the rights and liabilities that are its basis. The extent of the parties’ rights and liabilities are contained within the judgment and their character is defined by it.
The doctrine of merger is a form of res judicata, that being that where the cause of action is litigated at judgment and upheld, it merges in the judgment and loses its separate existence. For that reason, in addition to cause of action estoppel, the cause of action ceases to exist and cannot support a second action.
Clarke JA in Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd and others,[41] put this another way:
The first is that the doctrine of merger in the judgment only applies in a case in which the plaintiff establishes his cause of action and it is that cause of action which merges in the judgment. Where the plaintiff fails to establish its cause of action (that is, there is a verdict for the defendant) there is nothing to merge in the judgment and the doctrine of res judicata operates as a true estoppel.
[41](1996) 40 NSWLR 543 at 557.
In Maganja v Arthur,[42] Yeldham J quoted Halsbury’s Laws of England[43] where it said:
When judgment has been given in an action the cause of action in respect of which it was given is merged in the judgment and its place is taken by the rights created by the judgment, so that a second action may not be brought on that cause of action. Merger is not affected by an order which is not a judgment, nor by a judgment which is interlocutory and not final, or which is void. There will be no merger unless the cause of action is the same in both actions, and the plaintiff had an opportunity of recovering the first action … what he seeks to recover in the second … .
[42][1984] 3 NSWLR 561 at 563.
[43]4th ed. Vol 26 para 55 at 274.
In the present case, we have default judgment in respect of Permanent as to possession of the Property, an enforceable warrant and judgment debt as against both parties in the amount of $326,602.66 plus costs and interest. The Mortgage, the loan and associated security guarantee and any rights associated therein have now been subsumed or merged into the judgments of the Supreme Court.
Effect of judgment – extinguishment of rights pursuant to mortgage
Any rights or possible causes of action under the Mortgage, MCP or security guarantee were effectively “extinguished” upon default judgment. Mr Wolfe and Ms Breasley have foregone the opportunity of putting forward a defence seeking to set aside judgment[44]. It would have been at this stage that Mr Wolfe as a defendant should have sought to defend the matter or have made application to set aside the judgment. There can be no independent cause of action so long as the judgment stood[45]. Any issues related to the notice provisions of the Mortgage, the Transfer of Land Act and the MCP, all needed to be raised at the time prior to default judgment as all rights and liabilities pursuant to the Mortgage were subsumed into the higher remedy-default judgment, warrant and the judgment debt.
[44]Limprint Pty Ltd v Hexham Tiles Pty Ltd (1991) 49 NSWLR 508
[45]Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502
The judgment now has the requisite character of “finality” due to it being an order of the Court and thus stands as having an independent existence to that of the Mortgage and any rights contained therein. Thus, the original loan, guaranteeing the rights and liabilities under it has no relevance. Mr Wolfe and Permanent’s liabilities and obligations are now to be found pursuant to the court orders and subsequent to this, the December Agreement.
Rights and liabilities of parties pursuant to judgment and the 1 December 2009 Agreement
The higher remedy is contained within the default judgment entered 10 August 2009, and the Warrant issued on 6 October 2009 which was to be executed on or about 4 December 2009. Mr Wolfe and Ms Breasley are indebted to Permanent in the amount of $326,602.66 plus costs and interest. The 1 December 2009 Agreement was entered just prior to the execution of the Warrant. The question here is how does this alter the position of the parties.
Pursuant to the 1 December 2009 Agreement, an arrangement was entered into between Mr Wolfe and Permanent. The Agreement contained in the letter dated 1 December 2009 from Gadens states:
Our client will agree to stay the eviction conditional upon a bank cheque … in the amount of $46,134.82. [46]
[46]Comprising arrears, agent’s fees and outstanding legal costs and two months’ payments in advance.
It then notes that sufficient funds should remain in the direct debit account so that all future payments are met.
The pivotal provision is contained on page 2 where it states:
Please note that all payments made will be accepted by our client without prejudice to its rights to rely on the existing Judgment and Warrant for Possession … or your client defaults in any repayments from February 2010, then our client reserves its rights to proceed with further legal action, including obtaining a fresh eviction date for the Security Property without further notice.
The judgment debt of $326,602.66 plus costs and interest still stands. The Warrant still stands. Its enforcement has merely been “stayed”. All that the Agreement has done is:
1.Stay the execution date of the Warrant; and
2.allow the debtor to make monthly payments, default of which will allow the creditor to enforce the Warrant and the judgment debt.
The Agreement or acceptance of moneys owing by Permanent did not constitute a waiver of its rights to rely upon the judgment debt or the Warrant.
Mr Wolfe has valiantly attempted to analyse the case by stepping past the judgment and Warrant. The brick wall, however, faced by Mr Wolfe is the judgment and Warrant. The effect of the judgment is that it created a new relationship, one of judgment debtor and creditor. The relationship of lender and borrower and/or mortgagor/mortgagee no longer exists.
6. Did the 1 December 2009 Agreement Fail for Want of Consideration Flowing to Permanent?
Paragraph 48 of Permanent’s Defence pleads that the Agreement upon which Mr Wolfe relies is unenforceable and/or was not contractually binding as it lacked consideration. That is, the sums which Mr Wolfe agreed to pay to Permanent were already owed to Permanent pursuant to the judgment. Permanent submits that it received no consideration pursuant to the 1 December 2009 Agreement.
Merely promising, as consideration, to perform a duty already owed is not consideration. In Wigan v Edwards,[47] Mason J said:
The general rule is that a promise to perform an existing duty is no consideration … The rule expresses the concept that the new promise, indistinguishable from the old, is an illusory consideration.
[47](1973) 47 ALJR 586; 1 ALR 497 at 594; 512.
The issue is whether Mr Wolfe has given adequate or sufficient consideration. Put another way, what consideration has been given by Mr Wolfe, the judgment debtor, to Permanent, the judgment creditor, for Permanent’s promise to stay enforcement of its legal right of execution of the judgment?
Mr Wolfe, under the 1 December 2009 Agreement, promised to pay arrears (including legal costs, interest and fees) and that he would continue to make monthly payments in the future. Permanent submits that it was to receive no consideration from Mr Wolfe beyond that which was owed under the judgment. Permanent submits that properly construed the 1 December 2009 Agreement constituted the grant of a voluntary indulgence by Permanent which is not contractually enforceable.[48]
[48]Defendant’s closing submissions, paragraph 3.
Mr Wolfe asserts that Permanent has gained a “practical benefit” in that, Permanent was able to recover “substantial profits” that it would make from the remaining 25 years of the Mortgage,[49] including two months’ additional payments which it otherwise would not have,[50] and the avoidance of the costs and risks associated with having to sell the Property (such as a potential claim for a breach of s 77 of the Transfer of Land Act 1958).[51]
[49]Plaintiffs’ submissions, paragraph 6.
[50]Plaintiffs’ submissions, paragraph 8.
[51]The plaintiff did not plead that the right to constitute interest on the judgment debt constituted a practical benefit.
As discussed at paragraphs 87 to 101, the Mortgage and loan no longer existed. The entirety of the parties’ rights and obligations were contained in the judgments and 1 December 2009 Agreement. The Agreement contained no specific interest provision.
Mr Wolfe submits that the consideration he provided was that Permanent would be relieved of the need to enforce judgment and the Warrant.
As noted in Chesire and Fifoot’s Law of Contract:[52]
… it has been settled for over 300 years that the courts will not enquire into the “adequacy of consideration”. By this what is meant is that the Court will not seek to measure the comparative value of the defendant’s promise and of the act or promise given by the plaintiff in exchange for it, nor will the Court denounce an agreement merely because it seems unfair. This aspect of the doctrine of consideration is labelled the “peppercorn principle” in that it is legally sufficient to agree, for example, to sell a valuable object to let commercial premises in exchange for a nominal consideration, such as a peppercorn. Nevertheless, the promise must have been procured by the offer of something in return capable of expression in terms of a value, however small. …” But if there is some sort of exchange, the courts will not balance the one side against the other. The parties are presumed to be capable of appreciating their own interests in striking their own bargain (footnote omitted). In 1587 it was said that, “When a thing is to be done by the plaintiff, be it ever so small, this is sufficient consideration to ground an action” (footnote omitted) and this rejection of a quantitative test has been constantly reiterated. It is an axiomatic feature of the common law of contract that the parties are free to make their own bargain without interference from outside.[53]
[52]9th ed at p.177 [4.12].
[53]Ibid.
Can a practical benefit constitute consideration?
The parties referred to the decision of Judd J in MP Investments Nominees Pty Ltd v Bank of Western Australia Ltd[54] and the concept of “practical benefit” and whether it could constitute consideration.
[54][2012] VSC 43.
As discussed, merely promising, as consideration, to perform a duty already owed is not consideration.[55]
[55]Wingan v Edwards (1973) 47 ALJR 586; 1 ALR 497 at 494 and 512 per Mason J.
The specific application of this rule to debts due and payable is often referred to as the rule in Foaks v Beer. As summarised in Musumeci v Winadell P/L:[56]
Part payment of a debt or the promise thereof, does not afford consideration … that proposition received the approval of the House of Lords in Foaks v Beer (1884) 9 App Cas 605 and has not been overruled.
[56](1994) 34 NSWLR 723 at 739.
The rule in Foaks v Beer was accepted and applied by this Court in MP Investments Nominees Pty Ltd v Bank of Western Australia Ltd.[57] It should be noted that in SNL Group Pty Ltd v CMA Corporation Ltd [2011] NSWSC 464, the New South Wales Supreme Court refused to apply Foaks v Beer to an agreement which included, inter alia the reappropriation of the payment of a debt. This was because the Agreement dealt with many matters and in that sense provided fresh consideration. The case is distinguishable from the present facts.
[57][2012] VSC 43. See also Martech International Pty Ltd (ACN 009 022 799) v Energy World Corporation Ltd (ACN 090 124 994) and ors (“Martech v Energy World”) (2006) 234 ALR 265 (Federal Court of Australia per French J (at [14]); Kelen v Vitaman Pty Ltd and ors [2010] NSWSC 328 at [73] and [93]; Naray v Deputy Commissioner of Taxation [2005] SMCA 1893 at [33]; Andrew Hennessey v Architectus Group Holdings Pty Ltd [2010] NSWSC 1390 at [62].
However, there are circumstances in which the Agreement to perform a duty already owed will constitute consideration because “the promissor in fact obtains in practice a benefit or obviates a “disbenefit”, from the promise or its performance.”[58] This rule was acknowledged in Williams v Roffey Bros,[59] where the English Court of Appeal held that:
[58]Musumeci v WinadellP/L (1994) 34 NSWLR 723.
[59]Williams v Roffey Bros and Nicholls (Contractors) Ltd [1991] 1 QB 1.
The present state of the law on this subject can be expressed in the following proposition:
(i)if A has entered into a contract with B to do work for, or to supply goods or services, to B in return for payment by B; and
(ii)at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or will be able to complete his side of the bargain; and
(iii)B thereupon promises A an additional payment in return for A’s promise to perform his contractual obligations on time; and
(iv)as a result of giving his promise, B obtains in practice or benefit or obviates a disbenefit; and
(v)B’s promise is not given as a result of economic duress or fraud on the part of A; then the benefit to B is capable of being consideration of B’s promise so that the promise will be legally binding.
This proposition is extremely limited in scope; it is expressly restricted to contracts of employment for the supply of goods or services. The question is can the rule in Williams v Roffey Bros be extended to cover the repayment of debt. In Re Selectmove,[60] the English Court of Appeal declined to apply Williams v Roffey Bros to the payment of a debt, finding itself bound by Foakes v Beer.[61]
[60](1995) 1 WLR 474.
[61]At 481.
In Musumeci v Winnadell P/L,[62] Santow J addressed the illogical nature of permitting “practical benefit” to be relevant in other cases but not to a payment of a debt. His Honour cited dicta by Lord Blackburn in Foakes v Beer:[63]
Prompt payment of a part of their demand may be more beneficial to them than it would be to insist on their rights and enforce payment of the whole.
[62](1994) 34 NSWLR 723.
[63](1884) 9 App Cas 605 at 622.
And in Re Selectmove Ltd:[64]
When a creditor and a debtor who are at arm’s length reach agreement on the payment of a debt by instalments to accommodate the debtor, the creditor will no doubt always see a practical benefit to himself so doing.
[64](1995) 1 WLR 474 at 481.
Santow J applied Williams v Roffey Bros to an agreement to reduce the rent payable under a commercial lease, finding that “practical benefit” was the enhanced capacity for the lessor to maintain a full shopping centre with another competing tenant.[65] However, in recasting the conditions for the application of Williams v Roffey Bros, Santow J retained the first element:
If A has entered into a contract with B to do work for, or supply goods services to B.[66]
[65]At 747-78.
[66]At 747.
Indeed, Musumeci v Winnadell P/L is more in line with contracts for goods and services in the sense that the contract was executory on both sides. In Amos v Citibank,[67] the Queensland Court of Appeal appeared to restrict the application of Williams v Roffey to such contracts, at least distinguishing the case in question where a debtor intended for the creditor to accept a sum less than the amount that was due, in “full and final settlement”. The Court refused to apply Williams v Roffey Bros to such a situation.
[67]Unreported judgment, Queensland Court of Appeal, 10 May 1996, McPherson and Davies JJA and Ambrose J.
In MP Investments Nominees Pty Ltd v Bank of Western Australia Ltd,[68] Judd J held that the application of Williams v Roffey Bros remained a “question of principle” and declined to decide, finding that the plaintiffs had limited their case for consideration for a very narrow basis, the repayment of moneys already due and owing. Judd J did accept:
There are cases in which a benefit may be obvious even though there are existing contractual obligations and entitlements … In the case of a banker and customer, circumstances may arise in which a bank may compromise its position in order to secure certainty of payment and avoid cost, inconvenience and perhaps loss associated with recovery action.[69]
[68][2012] VSC 43.
[69]52 at [112].
The law as it currently stands in this jurisdiction is that there is no binding authority as to the application or non‑application of Williams v Roffey Bros principles to the payment of debt. Accordingly, it is a question of first principle involving the requirement that there be sufficient consideration. I consider that there was sufficient consideration moving from Mr Wolfe to Permanent.
In Musumeci v Winnadell P/L, to “obtain in practice a benefit, or obviate a disbenefit”,[70] was interpreted as requiring:
· that the promise of performance (already owed) was worth more than any likely remedy (taking into account the cost of enforcement action);[71] or
· that the non-performance of the original contract would have been worth more (to the “contract breaker’) than performance, taking into account the likely liabilities as a result of breaking the contract.
[70]Williams v Roffey Bros [1991] 1 QB 1 at 16.
[71]This was also how the argument was put in Re Selectmove [1995] 1 WLR 474.
Here, Mr Wolfe has characterised the practical benefit as the ability of Permanent to recover the “substantial profits” that it would make from the remaining approximate 25 years of the Mortgage;[72] including two months’ additional payment which it otherwise would not have;[73] and the avoidance of the costs and risks associated with having to sell the Property.[74]
[72]Plaintiff’s submissions, paragraph 6.
[73]Plaintiff’s submissions, paragraph 8.
[74]The plaintiff did not plead that the right to claim interest on the judgment debt constituted a practical benefit.
However, as already discussed, the Mortgage and loan no longer existed. The entirety of the parties’ rights and obligations were contained in the judgments and the 1 December 2009 Agreement. The Agreement contained no specific provision to charge interest. Permanent may have perceived some possible benefit to itself: perhaps, if repayments were consistently made, Permanent had intended to re‑finance and make profit by way of interest; or perhaps Permanent intended on claiming interest on the judgment debt. However, Williams v Roffey Bros has never been applied to a case of possible, undefined future benefits. In MP Investments Nominees, Judd J refused to apply Williams v Roffey Bros because a plaintiff’s claim that the consideration was made by payments of debts due and owing. This, in itself, is not a practical benefit, especially where the creditor has lost the present legal right to enforce payment of the entire debt.
In Musumeci v Winnadell,[75] Santow J stated:
The Court should be alert to distinguish promises intended by the terms to be no more than temporary or truly ex gratia, concessions, for example FI [sic] expressly limited to a period of difficult circumstances for performance by the other party, which may not be permanent.
[75](1994) 34 NSWLR 723 and 746.
On the one hand, the 1 December 2009 Agreement may be characterised as an ex gratia concession and, if payments were made, perhaps Permanent intended to make some profit from Mr Wolfe’s repayments. Permanent saw no harm in extending to Mr Wolfe a “second chance”. That this was Permanent’s position may be reinforced by the fact, upon default, that Permanent so quickly proceeded to execute the Warrant despite being aware of Mr Wolfe’s capacity to pay.
Furthermore, there was no “disbenefit” to Permanent in relying on its rights under the judgment. Permanent submitted that “there was never any doubt that Permanent would get its money”. All of the evidence is to the effect that “there is more than adequate equity in the Property to secure its position. … As a professional lender, selling property is part of its business, not an inconvenience to be avoided.”[76]
[76]Defendant’s closing submissions, paragraph 4.
I consider, given the nature of the 1 December 2009 Agreement, the benefit to Permanent was avoiding the inconvenience of having to sell the Property. Even though I accept that as a professional lender, Permanent may have to sell property as part of its business, that does not mean that the avoidance of such a step does not amount to some, albeit small, consideration.[77] Provided Mr Wolfe met his payments on time, Permanent would not have to enforce the judgment and the Warrant.
[77]Defendant’s closing submissions, paragraph 4.
7. What Were the Terms of the 1 December 2009 Agreement?
As discussed, I consider the Agreement was embodied in the 1 December 2009 letter of which Mr Wolfe had knowledge on or about 1 December 2009.
Implied terms
I have already set out (paragraph 79 above, Statement of Claim, paragraphs 15 (a)-(e)) what Mr Wolfe alleges were the implied terms of the 1 December 2009 Agreement. The particulars to paragraph 15(a) to (e) are:[78]
[78]Statement of Claim, paragraph 15.
The terms are implied:
1.in presumed fact, as terms are:
a.reasonable and equitable;
b.necessary to give business efficacy to the Agreement;
c.so obvious that they goe [sic] without saying;
d.capable of clear expression;
e.not contradictory to any express terms of the Agreement,
or alternatively:
2.implied as necessary for the reasonable or effective operation of the Agreement in the circumstances of the case;
or alternatively:
3.implied by law, including, inter alia, through section 80 of the Consumer Credit Code.
Can the terms be implied at law into the 1 December 2009 agreement?
In summary, at paragraphs 15(a), (b) and (c) of the Statement of Claim, Mr Wolfe asks the Court to imply a term that he should have been given some notice to rectify the default before Permanent could enforce its right to execute the Warrant.
In my view, this argument must fail given the finding that it was an express term of the Agreement that if Mr Wolfe did not pay any amount due and this therefore included the amount due on 26 February [or 6 February] 2010, Permanent would proceed with further legal action including obtaining a fresh eviction date for the Property pursuant to the Warrant.
Mr Wolfe contends that the test to be applied for implying terms into the Agreement is found in Byrne and Frew v Australian Airlines Ltd.[79] Mr Wolfe relies on the joint decision of McHugh and Gummow JJ[80] and contends that the well established criteria as set out in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council[81] is not the correct test as this is an informal agreement.
[79]Byrne and Frew v Australian Airlines Ltd (1995) 185 CLR 410.
[80]Ibid at 427-428.
[81](1977) 180 CLR 266.
In this case, the parties specifically considered and agreed that there would be no notice obligation on Permanent in the event of default by Mr Wolfe. The actual express term of a contract must have primacy. The Court will only imply terms to the extent that are consistent with the actual term of the contract. The parties can therefore expressly agree to exclude terms that might otherwise be implied. Where the time of a performance has not been specified, a reasonable time is implied.
In the BP Refinery case, in the well known statement of the Privy Council, five conditions were specified which must be satisfied before a court may imply a term in a contract which the parties had not thought fit to express:[82]
(1) the term must be reasonable and equitable;
(2) the term must be necessary to give business efficacy to the contract;
(3) the term must be so obvious that “it goes without saying”;
(4) it must be capable of clear expression;
(5) it must not contradict any express term.
[82]BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 283.
In the decision of McHugh and Gummow JJ in Byrne they stated:[83]
[83]Byrne v Australian Airlines Ltd (1995) 131 ALR 422, 433-444.
In BP itself and in other cases such as Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd, Codelfa Construction Pty Ltd v State Rail Authority of NSW and Adelaide Corp v Jennings Industries Ltd, the question was whether a term should be implied in a formal written contract which was complete upon its face.
That is not the present case. We have referred to the exiguous nature of the evidence as to the form taken by, and the express terms of, the contract of employment between the respondent and the appellants. There are two consequences.
First, this species of implication is concerned with the circumstances of the particular case. The primary judge and Black CJ and Gray J in the Full Court referred to the need to prove facts leading to the implication of a term of this nature. Gray J said:
[T]his Full Court does not know what all of the express terms of the contracts were. It does not know whether they were adequate to make the contracts of employment efficacious or whether any of them would contradict the proposed implied term. An examination of the facts surrounding the creation of each contract of employment might lead to a different result for one appellant from the other.
Secondly, where the contract is not in writing and is oral or partly oral or it appears that the parties themselves did not reduce their agreement to a complete written form, caution is required against an automatic or rigid application of the cumulative criteria identified in BP. We should proceed on the footing that the present case is to be approached in this way.
In such situations, the first task is to consider the evidence and find the relevant express terms. Some terms may be inferred from the evidence of a course of dealing between the parties. It may be apparent that the parties have not spelled out all the terms of their contract, but have left some or most of them to be inferred or implied. Some terms may be implied by established custom or usage, as described above. Other terms may satisfy the criterion of being so obvious that they go without saying, in the sense that if the subject had been raised the parties to the contract would have replied “of course”. If the contract has not been reduced to complete written form, the question is whether the implication of the particular term is necessary for the reasonable or effective operation of the contract in the circumstances of the case; only where this can be seen to be true will the term be implied. (footnotes omitted)
In order to determine whether the terms should be implied, it is necessary to analyse the Agreement struck on 1 December 2009.
The Agreement was not a loan agreement nor was it a fresh mortgage agreement between Mr Wolfe and Permanent. It was an agreement that Permanent would not exercise its rights against Mr Wolfe which it had by virtue of the judgment obtained from this Court, provided Mr Wolfe paid the arrears and legal costs and implicitly met the repayment requirements which had existed under the Loan Agreement and Mortgage. It is true that the mechanics of repayments and the obligations each party had to one another in relation to the use and alterations to the Property were not expressly stated in the 1 December 2009 Agreement. I accept and it was conceded by Permanent that many of the day to day mechanics of the Agreement were to be identical to what was contained in the original Loan Agreement and Mortgage. However, there was an express term considered in the 1 December 2009 Agreement about what would occur in the event that any default in payment occurred by Mr Wolfe. The Loan Agreement and Mortgage provided no more than a point of reference for the mechanics of 1 December 2009 Agreement.
Mr Wolfe attempts to restore all rights and obligations that existed under the Mortgage in the 1 December 2009 Agreement. The problem for Mr Wolfe is that there was a fundamental legal phenomenon which occurred when Permanent obtained judgment against him and Ms Breasley, which finally determined the parties’ rights under the Mortgage and Loan Agreement. The 1 December 2009 Agreement has the effect of establishing a new set of rights and obligations between Mr Wolfe and Permanent. It would be a legal fallacy to characterise the 1 December 2009 Agreement as restoring the pre-judgment arrangements and putting Mr Wolfe in the shoes of a new mortgagor or debtor with the rights of the parties governed by the pre-existing agreement.
The 1 December 2009 Agreement is an independent source of contractual rights and obligations. There was no express agreement bringing back into existence the rights and obligations under the Loan Agreement and Mortgage. In fact, an express term of the 1 December 2009 Agreement was that Permanent reserved its rights under the judgment and confirms that the parties had a clear intention not to bring back into existence the Mortgage or Loan Agreement.
In conclusion, I do not accept that it was an implied term of the Agreement that it would be governed by the MCP or that the notice required under the MCP should be given. It is not necessary for the effective operation of the Agreement that such terms be implied. Even if there are terms, which I will refer to as mechanical terms, which could be implied, the default and notice terms were expressly stated and contradict the terms Mr Wolfe seeks to have implied in the 1 December 2009 Agreement.
Did Permanent breach the implied terms in paragraphs 15(d) and (e) of the second further amended statement of claim?
Permanent concedes that the terms set out in paragraphs 15(d) and (e) of the Statement of Claim might be implied into the Agreement. That is:
(1)Permanent would do all things necessary to enable Mr Wolfe to have the benefit of the Agreement; and
(2)Permanent would not in any way prevent Mr Wolfe from performing the Agreement.
Mr Wolfe alleges Permanent breached the implied terms pleaded at paragraphs 15(d) and (e)[84] because Permanent did not comply with the MCP and because of its conduct in relation to the form. That is, that between 8 February 2010 and 26 February 2010 Permanent failed to notify Mr Wolfe or make reasonable attempts to notify him that he had incorrectly completed the form which would result in the direct debit not being set up and the first payment not being processed.[85] This in turn led to a default[86] and resulted in Mr Wolfe being evicted on 22 April 2010 due to his failure to make the first repayment under the Agreement when it fell due.
[84]Statement of Claim, paragraph 44.
[85]Statement of Claim, paragraph 21.
[86]Statement of Claim, paragraph 25.
The duty of co-operation is usually defined in the Butt formula, endorsed by the High Court on numerous occasions.[87] The Butt formula was endorsed by the High Court in Secured Income Real Estate (Australia) v St Martins Investments Pty Ltd.[88]
[87]Butt v McDonald (1896) 7 QLJ 68, 70-71 (Griffith CJ).
[88](1979) 144 CLR 597, 607 per Mason J, Barwick CJ, Gibbs, Stephen and Aickin JJ; Moorgate Tobacco Co Ltd v Philip Morris Ltd [No. 2] (1983) 156 CLR 414, 435.
The duty to co-operate, though a broadly stated principle, has limits. The duty to co-operate requires performance only of acts which are necessary to preserve the benefit of the contract, not the benefit of the parties.[89] The duty has been held to impose an obligation not to do anything that would impede a counter party from gaining benefit of the contract. However, as Gyles J said in Council of the City of Sydney v Goldspar Australia Ltd:[90]
The duty of cooperation does not extend to being nice …
[89]Australis Media Holdings Ltd v Telstra Corp Ltd (1998) 43 NSWLR 40.
[90][2006] FCA 472 [162].
In W L Marshall and Another v The Colonial Bank of Australasia[91] the High Court expressed the obligation as follows:
Now, all contractual relations impose upon the parties a mutual obligation that neither shall do anything which is calculated to hamper the other in the performance of the contract on [his] or [her] part.
This rule was recently expressed by Vaughan-Williams LJ as follows:
In this contract, as in every other, there is an implied contract for each party performing the contract that he will not do anything to prevent the other party from performing the contract … I agree that generally such a term is by law imported into every contract.
[91][1904] 1 CLR 632 at 647.
The 1 December 2009 Agreement between Mr Wolfe and Permanent was entered into after Mr Wolfe and Ms Breasley had defaulted under the original Loan Agreement and Mortgage. The default culminated in Permanent issuing proceedings in this Court and obtaining judgment against them. The 1 December 2009 Agreement required Mr Wolfe to make payments and failing to do so, Permanent could and did exercise its rights under the judgment and Warrant.
The evidence is that Mr Wolfe knew of his obligations to ensure payments were made. He transferred just in excess of $10,000 into an account from which the monthly payments were to be directly debited in Permanent’s favour. This amount exceeded the amount Mr Wolfe was required to pay in his first repayment in February 2010. Permanent provided Mr Wolfe with the necessary form. At the top of each page of the form was a 1300 number that Mr Wolfe could call if he had any difficulties with the form.
Mr Wolfe said that he was not really good at filling out forms[92] and that he obviously misread the form in relation to the requirement that both account holders had to sign it. Mr Wolfe agreed that there was nothing which Permanent did that caused or contributed to him misreading the form.[93] Nor did Permanent give any advice to Mr Wolfe about completing the form. Mr Wolfe did not check on 26 February 2010 when the payment was due or any time prior to being notified about the default to see whether the moneys had been removed from the account by Permanent.
[92]Transcript 9 May 2012, p.88, lines 16-17.
[93]Transcript 9 May 2012, p.91, line 2.
Mr Wolfe at paragraph [86] of his submissions states:
In the circumstances it is reasonable to expect that if the defendant knew of any reason why the February repayment would not be made by direct debit and this could be communicated to the plaintiff, that this would have been done, even if there existed no positive duty on the defendant to do it.
The guiding test in determining whether silence constitutes misleading and deceptive conduct is the “reasonable expectation” test, originally formulated by French J in Kimberley NZI Finance Ltd v Torero Pty Ltd:[230]
… unless the circumstances are such as to give rise to the reasonable expectation that if some fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist.
[230](1989) ATPR (Digest) 46-054.
In Demagogue Pty Ltd v Ramensky,[231] Gummow J agreed noting:
… whether in the light of all relevant circumstances constituted by acts, omissions, statements or silence there has been conduct which is or is likely to be misleading or deceptive.[232] In determining this, silence is but one of the circumstances to be considered against the broader factual matrix.
[231](1992) 39 FCR 31.
[232]Ibid at [41].
As Black CJ quoted:
To speak of ‘mere silence’ or of a duty of disclosure can divert attention from the primary question. Although ‘mere silence’ is a convenient way of describing some fact situations, there is in truth no such thing as ‘mere silence’ because the significance of silence always falls to be considered in the context in which it occurs. The context may or may not include facts giving rise to a reasonable expectation in the circumstances of the case, that if particular matters exist they will not be disclosed.[233]
[233]Ibid at [32].
In a situation of “mere” silence or non‑disclosure, it is necessary to look at the defendant’s knowledge of contextual factors pertaining to a plaintiff’s attributes.
In ASIC v Camelot Derivatives Pty Ltd (in liq) (“Camelot”)[234], when determining whether a contravention of s 12DA had occurred, Foster J found that:[235]
… [T]he task of the court is to examine the relevant course of conduct as a whole. The context in which the alleged conduct occurred is to be determined in light of the relevant surrounding facts and circumstances …
Although the relevant test is objective, the attributes of the target audience are relevant.
When has the Court identified conduct involving silence as giving rise to a reasonable expectation of disclosure?
[234][2012] FCA 414.
[235]At [47]-[48].
In Ramensky v Demagogue Pty Ltd[236] and Demagogue v Ramensky (”Demagogue”)[237] Spender J placed significant weight on the unusual nature of the information that was not disclosed to the purchasers of a unit off the plan, concluding that the vendor had engaged in misleading and deceptive conduct. The issue related to difficulties with access to the site via a road licence over Crown land and the purchasers had enquired about this matter. The vendors real estate agent stated: “Well, look, of course there will be access. The developer will build a driveway up to the road.” At first instance, his Honour viewed the requirement to obtain a road licence as being, “ … so unusual and unexpected in a development of this kind, that it was in all the circumstances incumbent on Demagogue to reveal the true position”, referring to the authority of Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd,[238] Rhone-Poulenc Agrochimie SA v Uim Chemical Services Pty Ltd.[239] In his assessment of the circumstances of the transaction, he concluded that:
Here the circumstances were special and out of the ordinary. Moreover, the express representations by Demagogue were such as to indicate that there was nothing unusual at all about this aspect of the development. In this case, there was both a positive misrepresentation, and a misrepresentation conveyed by a failure to say anything about a road licence … created a clear but erroneous impression that there was nothing unusual concerning the access to this site, and in particular, there was no suggestion that a road licence from the Lands Administration Commission was necessary to provide such access.[240]
[236](1992) Q Comv R 54-429.
[237](1992) 110 ALR 608.
[238](1988) 79 ALR 83.
[239](1986) 12 FCR 477.
[240]Ramensky v Demagogue Pty Ltd (1992) BC 9203501, p 11.
The vendor appealed. The vendor’s appeal was dismissed by the Full Federal Court. Black CJ and Gummow J agreed with the trial judge’s assessment that the requirement to obtain a road licence to access the development was either unusual or unexpected.
In Hai Quan Global Smash Repair v Ledabow Pty Ltd (“Global Smash Repairs”)[241], a vendor selling their panel beating business where a vendor made otherwise truthful representations that the weekly turnover of the business was $25,000 and that the business obtained insurance work from NRMA. The vendor did not expressly guarantee that NRMA insurance work would continue to flow. However, it did remain silent about a change of control provision in its preferred repairer agreement and failed to inform the insurer of the proposed business sale. Following sale completion, NRMA terminated its agreement and the purchasers did not receive any further work from NRMA (19% of the business revenue). Nine months later, the business ceased to trade largely as a result of the purchaser’s own inability to competently manage the business. The Court’s conclusion that the vendor had misled the purchasers was largely based upon the vendor’s knowledge that the purchasers were extremely ignorant and naïve in insurance industry practises and business management; were both born in Vietnam and had relatively little industry experience; in contrast the vendor was a particularly shrewd business man who planned to take advantage of the purchasers’ inexperience[242]. It was on such a basis that a reasonable expectation of disclosure was triggered, such that the vendor was obliged to disclose the information to meet the standard of conduct required by s 52 of the TPA. It was from the perspective of the particular purchasers that the requirement for consent became unusual, unexpected and material information.
[241](2004) ATPR 42025; [204] FCA 1224.
[242]Hai Quan Global Smash Repair v Ledabow Pty Ltd (2004) ATPR 42025; [204] FCA 1224 at [44].
“Duty” and “reasonable” expectation are normative terms and Madgwick J found[243] that it was fair and just in the circumstances to expect the vendor to speak up as to vital matters within his/her specific knowledge.
[243]Ibid at [64]
In Metalcorp Recyclers Pty Ltd v Metal Manufacturers Ltd[244] (“Metalcorp”) a case which involved sale of scrap copper to Metal Manufacturers, an allegation of misleading and deceptive conduct arose out of circumstances where the buyer knew that in all probability the copper it was buying had been stolen but did not communicate this knowledge to the seller before the seller advanced payment to its supplier. The seller had previously dealt with the supplier without issue.
[244](2004) ATPR (Digest) 46-243; [2003] NSWCA 213.
The primary foundation for the misleading and deceptive conduct claim lay in the longstanding business relationship between the seller and buyer. The parties had a trading history that spanned approximately ten years and maintained a practice where the buyer would isolate the seller’s deliveries until it could inspect and, if appropriate, notify the seller of any problems. This relationship provided the background context against which the Court evaluated and assessed the buyer’s conduct. One of the many things the Court extrapolated from this relationship was that the parties traded on the basis of mutual trust and respect, such that the buyer would not have any grounds to suspect the seller was knowingly trafficking in stolen property.
In the context of the parties’ historical relationship and practices, the Court found that when the buyer questioned the seller about short delivery but remained silent about possible theft, this ‘conveyed a representation that the buyer on inspection had found no reason for rejecting the delivery, that it had accepted it, and intended to pay for it in the ordinary course’. It was this misleading impression which the seller relied upon that was held to amount to misleading and deceptive conduct. It was the retention of this information which was contextualised by the parties’ previous relationship, trading delivery and the level of trust existing between the parties. This had the effect of changing the very nature of the critical conversation itself into a misleading representation by delivery. This could only be corrected by some positive form of action by the buyer, as Handley JA noted,[245] relying on the principles espoused by Black J in Demagogue Pty Ltd v Ramenvsky:[246]
In the absence of some positive duty to speak, silence can only be misleading or deceptive against a background of other facts known to both parties which may be actually said so incomplete that it conveys a misrepresentation.
[245]Metalcorp Recyclers Pty Ltd v Metal Manufacturers Ltd (2004) ATPR (Digest) 46-243 at 54,203-4.
[246](1992) FCR 31 at 32.
Miller and Associates Insurance Brokers Pty Ltd v BMW Australia Finance (“Miller”)[247] involved an independent, commercial relationship negotiated at arm’s length. In late 2000, Miller sought a $3.975 million insurance premium funding loan from BMW, on behalf of a client. BMW required the insurance policy to be both signable and cancellable. During negotiations, Miller sent BMW a bundle of documents in support of the application that included an insurance contract, but Miller provided no explanation of the contents of the bundle. The insurance contract contained in the bundle differed from what BMW expected. BMW commenced proceedings against Miller in the Supreme Court arguing that Miller’s silence in failing to disclose that the insurance contract was not signable or cancellable constituted misleading and deceptive conduct.
[247](2010) 270 ALR 204.
The High Court in Miller referred to the “reasonable expectations” approach of the Full Federal Court in Demagogue in its determination of whether silence or non‑disclosure may be misleading or deceptive. Where a party holds a reasonable expectation that certain information would be disclosed, this may assist in characterising silence or non‑disclosure as misleading and deceptive.[248]
[248]Miller and Associates Insurance Broking Pty Ltd v BMW Australian Finance Ltd (2010) 270 alr 204 AT [20] and [95].
French CJ and Kiefel J warned of the risk of imposing a positive duty of disclosure on a defendant, beyond the requirements of the statutory duty under s 52 TPA, noting that the language of “reasonable expectation” is not statutory. They recognise that it would be unrealistic to characterise conduct by people holding information back for their own benefit as necessarily misleading or deceptive.[249] Ultimately, the Court held that Miller’s alleged failure to volunteer further information regarding the insurance policy could not be characterised as misleading and deceptive under s 52. As French CJ and Kiefel J quoted: “A copy of the policy was put in the hands of BMW, who simply did not read it.”
[249]Ibid at [20].
Essentially in Miller’s case there was no reasonable expectation created in the course of the negotiations that the other party relied on. It is this creation of an expectation that can lead to a situation where silence may be considered to be misleading and deceptive. It is a fact based enquiry, requiring “close analysis of all the circumstances of the transaction”.[250]
[250]Ibid at [91].
Did Permanent’s non-disclosure regarding the status of the incomplete direct debit form constitute misleading and deceptive conduct?
Was there a reasonable expectation on the part of Mr Wolfe?
Permanent submits at paragraph 34 of its closing submissions that a banker who receives an improperly completed form and who fails to “contact the sender” makes no representations of the type alleged. It is necessary to look beyond the immediate transaction as has been noted above, as it is a pre‑existing relationship between Permanent and Mr Wolfe that ultimately will colour the reasonable expectation of Mr Wolfe regarding disclosure. Following the reasoning in Metalcorp, the foundation for the misleading and deceptive claim lay in the longstanding relationship between Mr Wolfe and Permanent (lender/borrower). This relationship was further coloured by the default judgment and stay on the Warrant. Permanent was aware of the marital problems, payment issues and subsequent turn around by Mr Wolfe in paying the arrears, legal and agency costs to that date and was aware of the funds in the relevant bank account. It was this context that coloured both the nature and importance of the withheld information and Permanent’s conduct in remaining silent. While Mr Wolfe was not a sophisticated businessman, he had demonstrated an ability to negotiate the fresh 1 December 2009 Agreement with Permanent, draft letters to Permanent in the course of negotiations, obtain assistance from solicitors and “Larry” when necessary; and was able in a very short period of time to raise the funds required to satisfy the terms of the 1 December 2009 Agreement. Ultimately, the more knowledge that a defendant possesses about a plaintiff and their attributes, the more likely it is that the defendant will have to disclose a matter that is unusual and unexpected in the context of that knowledge in order to meet the standard of conduct.
Permanent had no knowledge that Mr Wolfe had difficulties completing forms or that he did not have access to assistance to complete forms if necessary.
The form contained instructions which were written in plain English and as previously noted, Mr Wolfe had the ability to obtain help to complete the form.
Permanent was aware that there was money deposited in Mr Wolfe’s account for the necessary payment in February. When it received the form, it became aware that the form was incorrectly completed. The attempts by Permanent to contact Mr Wolfe and Ms Breasley on phone numbers provided to them but which had later been disconnected at that stage, confirm that Permanent was aware of the error and had tried to communicate that information to Mr Wolfe. I do not consider the fact that Permanent’s silence from that point onwards amounts to a representation that can be characterised as misleading and deceptive. Permanent did not at any stage imply that the incorrect form would be accepted. Its conduct was to the contrary. As soon as it became aware the form was incorrectly completed, it tried to contact Mr Wolfe to inform him of the error. As the Court held in Miller’s case, to find Permanent acted in a manner that can be characterised as misleading and deceptive would be to impose an obligation on them to volunteer information in order to avoid the consequences of Mr Wolfe’s own carelessness in relation to completing the form and:
…may lead to the imposition of a requirement to volunteer information which travels beyond the statutory duty “to act in a way which does not mislead or deceive”.[251]
[251]Miller and Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited [2010] HCA 31 at [21].
15. Estoppel
Should Permanent be estopped from relying upon the default because of the representation?
At paragraph 37 of his Statement of Claim, Mr Wolfe pleads:
Further and/or in the alternative, by reason of the matters aforesaid and the Plaintiff’s reliance on the Representations to his determent, the Defendant is estopped from or should otherwise be prohibited from relying on the Default to evict the plaintiff from the Property.
Particulars
By reason of the Representations the Plaintiff did not submit the Form or make alternate arrangements for the payment of the First Repayment before the First Repayment fell due.
Paragraph 37 appears to be a generalised plea of estoppel. No category of estoppel is formulated directly on the pleading. Rather, it is founded “[b]y reason of the Representations the Plaintiff did not resubmit the Form … “ and “the Plaintiff’s reliance on the Representations to his determent [sic]” and, further, “by reason of the matters aforesaid”.
One infers that Mr Wolfe is referring to the unconscionability aspect pleaded at paragraph 30 and the representations pleaded at paragraph 33 of the Statement of Claim.
At paragraph 31 of the Defence, the defendant refers to the embarrassing nature of the pleadings “in that it does not sufficiently identify ‘the circumstances’ said to give rise to the unconscionability alleged”.
There is no need for the Court to descend into an analysis of the various species of estoppel. Essentially, the question is whether Permanent, by its silence, induced or created a legitimate expectation on behalf of Mr Wolfe that the Agreement and form had been properly executed. That is, is it unconscionable for Permanent to resile from such an expectation?
Equity, it is said, mends no man’s bargain.[252] Certainty of contract, especially where the parties freely agreed to be contractually bound by a pivotal provision that allows Permanent to “rely on the existing judgment and warrant for possession” and should Mr Wolfe default, Permanent reserved its rights to proceed with further legal action, including a fresh eviction date for the security property without further notice”.
[252]Shiloh Spinners Ltd v Harding [1973] AC 691 at 723; Legione v Hatley (1983) 152 CLR 406 at 447.
Prima facie the parties should be held to such an agreement. Nevertheless, this does not exclude equities jurisdiction for relief, especially where it would be offensive to good conscience to do otherwise. However, the difficulty in this case is that the pleadings are confusing and do not necessarily equate with the submissions made on behalf of Mr Wolfe. At best, the pleadings provide an indirect approach to equitable estoppel based on “the matters aforesaid”, assuming this is a reference to the unconscionability pleading at paragraph 30 of the Statement of Claim and the plaintiff’s reliance on the representations to his detriment [sic]. On this basis, it is submitted on behalf of Mr Wolfe in the opening address (at Main Issue 4 and 5) that Permanent’s unconscionable conduct in procuring the alleged breach, should be estopped from relying on the breach. It is this unconscionable conduct and Permanent’s unconscionable insistence on strict legal rights that is at the very basis of Mr Wolfe’s equitable estoppel claim.
In this case, we have an agreement between the parties and the handover of a form which created the expectation that direct debits were to commence as arranged. The monies were in the account. Mr Wolfe asserts that the bank by its silence created an assumption or an expectation that all is well and that Mr Wolfe was prevented from rectifying the situation to his detriment.
The difficulty is that Mr Wolfe relies on the Court making a finding that Permanent made representations to Mr Wolfe by merely not contacting him.
There is no evidence to suggest, nor can an inference be drawn, that Permanent knew that Mr Wolfe would assume the matters as articulated as the representation. Permanent was entitled to assume that Mr Wolfe had read the form and would know that if he did not complete it properly it could not be used to effectively set up a direct debit. Mr Wolfe was familiar with direct debit forms and had signed such forms before. Mr Wolfe could have checked that the direct debit was made on the due date. On the facts, Permanent never accepted the form. Indeed, upon receipt of the incorrectly completed form, Permanent’s staff tried to contact Mr Wolfe. As soon as the monthly payment became due, Permanent acted and enforced its rights under the Agreement. Mr Wolfe breached his obligation to pay the monthly instalment, Permanent acted immediately. It did not behave in a manner consistent with a representation that “all was well”.
I accept that Permanent was entitled to assume that Mr Wolfe knew the consequences of failing to properly complete the form.
16. Conclusion
In conclusion, I do not find that Mr Wolfe has established the necessary elements of the numerous causes of action he claims against Permanent.
It is common practice for lenders to give borrowers a further opportunity to remedy a default under a loan and mortgage. What is unusual in this case is the fact that the lender, Permanent, had already obtained a judgment and warrant against the borrower, therefore changing the very nature of their legal relationship and the rights and obligations owed.
Mr Wolfe entered into an Agreement on 1 December 2009 in which I have found he knew of the onerous term that any default in payment on his part would result in Permanent enforcing its rights under the judgment and Warrant, without any notice to Mr Wolfe.
The Agreement was a “last chance” for Mr Wolfe to remain in the family home. It was an agreement initiated by Mr Wolfe. Permanent’s attitude that this was in effect a last chance was clear from the default term in the 1 December 2009 Agreement. No further default would be tolerated by Permanent. It had already gone to the trouble of obtaining judgment and the Warrant and was days from the eviction being enforced.
This is not a case of wilful disregard by Mr Wolfe of his obligations under the 1 December 2009 Agreement. It was carelessness on Mr Wolfe’s part. Carelessness which has had very serious consequences for Mr Wolfe. Equally, I do not consider Permanent’s conduct was highhanded. Permanent elected in circumstances where Mr Wolfe had a poor credit history, to make a business decision and consistent with the terms of the 1 December 2009 Agreement to exercise its rights immediately when Mr Wolfe breached the payment terms.
Given my findings, I order that the proceedings be dismissed.
Subject to any further submissions on costs I consider the plaintiff should pay the defendant’s costs of the proceeding.
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