Advance Investments & Financial Services Group Pty Ltd v IPG Group Pty Ltd

JUDGMENT

1. HIS HONOUR: By Motion, notice of which was filed on 23 March 2023, the defendants seek that orders made by the Court on 21 October 2022 for default judgment against them be set aside. The defendants concede that it would be necessary for them to pay the costs thrown away by the plaintiff. The relief is sought pursuant to the provisions of r 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) (hereinafter "UCPR"). The Motion is contested.
2. The defendants, being the applicants on the Motion, have provided the Court with a Draft Proposed Defence (hereinafter "the Defence") and a Draft Cross-Claim (hereinafter "the Cross-Claim"). The Cross-Claim seeks to join third parties to the proceeding as cross-defendants, being parties other than the plaintiff in the substantive proceedings. The third parties are a solicitor involved in the transactions, the solicitor's firm and Mr Simon Wakim.

Factual History

1. On or about 12 August 2020 the plaintiff, Advance Investments & Financial Services Group Pty Ltd (hereinafter "Advance") entered into a Loan Agreement with the first defendant, IPG Group Pty Ltd (hereinafter "IPG"). Under the Loan Agreement, Advance agreed to lend IPG the sum of $650,000 for a period from 13 August 2020 until 12 November 2020. The second defendant, Rony Isaac, is the sole Director and Shareholder of IPG.
2. The terms of the Loan Agreement provided, amongst other things, that if IPG did not repay the loan by 12 November 2020 the loan would become due and payable and interest of 3% per month would start to accrue. Further, a failure to repay the loan on time would constitute a default event, which would incur a default management fee of $50 for each day of default.
3. Further again, IPG was required by the Loan Agreement to pay $1,100 for each Default Notice sent by Advance, a default fee of 3% of the total amount owing, and a loan discharge fee of $1,100 plus disbursements to cover Advance's legal costs. Over and above the foregoing, in the event of a default, the Loan Agreement stipulated that IPG would indemnify and pay Advance for all reasonable costs, losses, charges, and the like (including legal costs) incurred by Advance incidental to the default event and the exercise of any remedy, including enforcing any rights or security interests.
4. The Loan Agreement was secured by two Mortgages in favour of Advance. Those Mortgages were over properties owned by Mr Isaac in Lilyfield and Pemulway. Each Mortgage provided for interest to accrue on the unpaid balance of the principal sum and the costs and expenses of Advance in relation to the Mortgage and the exercise of its rights and powers pursuant to it. In the event of any default the properties were to be surrendered to Advance, with such default to include the failure to repay the loan on the due date, namely 12 November 2020, or the failure to pay interest as required.
5. On 13 August 2020, being the day after the parties entered into the Loan Agreement, IPG and Mr Isaac entered into a Deed of Variation which varied some of the terms of the Loan Agreement and the Mortgage. The Deed of Variation was such that the loan amount was increased from $650,000 to $665,000 with a special processing fee of $11,000 which was then deducted from the loan amount by Advance.
6. The Amended Statement of Claim, filed on 17 August 2022, claims that IPG failed to pay interest after February 2021 and failed to repay the loan amount by 12 November 2020, being the due date. On 7 May 2021 Advance sent a Demand. IPG did not comply with the Demand and Advance proceeded to commenced these proceedings.

Procedural History

1. The Amended Statement of Claim seeks orders for the payment of the sum of $1,065,677.53, being the amount said to be owing as a consequence of the non-payment of the principal and interest and charges. The Court reiterates that the principal was $665,000.
2. Advance sought judgment for the sum specified above, together with orders for the mortgagee sale of the properties in Lilyfield and Pemulway, which were the security for the loan. Westpac Banking Corporation (hereinafter "Westpac") was named as a party to the proceedings (the third defendant) as a consequence of Westpac holding a Registered First Mortgage over the properties.
3. On 14 October 2022 Advance filed a Notice of Motion seeking default judgment against the defendants. The orders sought included orders for the liquidated sum of $1,308,290.23, plus an order for possession of the properties and leave to issue Writs of Possession for those properties.
4. The Affidavit in support of the Motion was affirmed by Lena Ng, a Director of Advance, and noted that the Claim had been served upon the defendants and a solicitor, Dickran Yakenian. Mr Yakenian had commenced acting for IPG and Mr Isaac in relation to Advance's claim.
5. Two extensions of time were granted to enable the defendants to file Defences. Those extensions of time expired on 30 September 2022. On 29 September 2022, the solicitor acting for Advance wrote to Mr Yakenian, making clear that if the Defences were not filed by 30 September 2022, default judgment would be sought.
6. On 4 October 2022 a further extension of time was sought for the filing of Defences. On that occasion, each of IPG and Mr Isaac were given until 7 October 2022 to file Defences. When the date of 7 October 2022 passed and the Defences had not been filed, Advance brought its Motion for default judgment. Principal Registrar Palagummi granted default judgment on 21 October 2022.
7. On 19 December 2022, Advance obtained Writs of Possession in relation to the properties at Lilyfield and Pemulway. On 28 February 2023, on the application of IPG and Mr Isaac, the Court ordered that the Writs be stayed until 7 March 2023.
8. On 23 March 2023 IPG and Mr Isaac filed the Motion that is now before the Court, being the Motion seeking to set aside the default judgment and the Writs of Possession.
9. On 5 April 2023 the Court made orders, noting that Mr Isaac was to refinance the Pemulway property and pay an amount of $1,313,595.23 into the Trust Account of Advance's solicitor. This payment was to be made by 11 April 2023. Of that amount, $665,000 (being the principal sum) was to be released to Advance and the balance held on trust. If those matters were completed, then Advance was to be restrained from dealing with either the Lilyfield or Pemulway properties until further order of the Court or agreement of the parties. Advance was also ordered to remove caveats that it had filed in relation to the two properties.

Applicants' Evidence and Submissions

1. The applicants rely on the Affidavit of Rony Isaac of 22 March 2023 and the Affidavits of Joshua Frangi of 31 March 2023 and 5 April 2023. The Affidavits can be summarised briefly.
2. The Affidavit of Rony Isaac of 22 March 2023 attests to the fact that Mr Isaac is the second defendant and the Director of the first defendant. The Affidavit exhibits significant documentation.
3. In mid-2020, Mr Isaac became aware that a Mr Wakim was selling a Porsche 991 GT2 RS (hereinafter "the Porsche"). Mr Isaac agreed to purchase the Porsche for $575,000. Mr Isaac told Mr Wakim that his funds were tied up in property and Mr Wakim agreed to arrange finance "no questions asked", so long as Mr Isaac agreed to a purchase price of $600,000 instead. This was agreed.
4. On 3 August 2020 Mr Isaac received a WhatsApp message from Stanley Yee of Fusion Legal. The message, which is in evidence, stated that Mr Wakim had asked Mr Yee to contact Mr Isaac to assist him with finance.
5. On 6 August 2020 Mr Wakim provided a contract to purchase the Porsche. Mr Isaac executed it on the same day and returned to Mr Wakim. On 10 August 2020, Mr Yee asked Mr Isaac to deposit $3,300 into the Fusion Legal Trust Account to activate the Loan with the lender. On 12 August 2020, Mr Yee emailed a loan offer from Advance.
6. On 12 August 2020 Mr Isaac executed the Loan Deed and other security documents. These constituted the Loan Agreement and the Mortgages over the two properties.
7. On 13 August 2020 Mr Yee sent the Deed of Variation to Mr Isaac, advising him that the Loan needed to be increased to ensure that Mr Isaac received net an amount of $600,000. The Deed of Variation was also executed by Mr Isaac.
8. Later on 13 August 2020, Mr Yee sent a message stating that Mr Isaac had not received any legal advice from him. The catalyst for that message had been a phone call in which Mr Yee told Mr Isaac that Mr Wakim needed the deal settled urgently. Mr Isaac had asked how he could find a solicitor in time to review the documents. Mr Yee, offered to send a message indicating that Mr Isaac would waive the right to legal advice. Mr Yee told Mr Isaac that he had nothing to worry about, so Mr Isaac agreed, at least according to Mr Isaac's Affidavit.
9. On or about 17 August 2020 Mr Isaac became aware that the Loan had settled with the money having been disbursed, so he collected the Porsche. Mr Isaac had the Porsche for two weeks and was not happy with it. He asked Mr Wakim to sell the car on his behalf and use the money to repay the loan to Advance. In November 2020, the Porsche was sold for $670,000, a profit of $20,000, which was more than was needed to repay the loan.
10. Mr Isaac asked Mr Wakim to keep $5,000 for himself and pay off the Loan Agreement. Mr Wakim agreed to do that and Mr Isaac heard no more about it.
11. Mr Isaac heard nothing further from Mr Yee about the matter, but he kept in contact with Mr Yee because he had decided to engage him for unrelated work.
12. On 6 May 2021 Mr Isaac received a Notice of Default sent by Advance. He testifies in his Affidavit to the fact that he was shocked and confused as he had thought that the Loan had been repaid.
13. When proceedings were first commenced, Mr Isaac attempted to make contact with Mr Yee about the Loan Agreement but was unable to contact him. Mr Isaac advised Advance's solicitor at JP Legal that he thought there must be some kind of fraud, as the Porsche itself was never listed as security for the loan.
14. On 29 August 2022 Mr Isaac instructed solicitor, Mr Yakenian, to whom he had been introduced by Mr Wakim. During the period from late 2022 to early 2023, Mr Isaac sought to negotiate to resolve the proceedings. Mr Isaac, during this period, received letters from the Sheriff requiring him to vacate the properties.
15. In or about February 2023 Mr Isaac asked Mr Yakenian what was going on. Mr Yakenian's advice was to wait until the last day of the Writ and then seek a stay in Court to "buy as much time as possible". Mr Isaac attests to the fact that Mr Yakenian also advised him to apply for it himself, instead of being represented by Mr Yakenian, because it was more likely to be successful.
16. A stay of the Writ of Possession was granted on 27 February 2023, and shortly thereafter Mr Isaac engaged his current solicitors to act for him and IPG in these proceedings. It is those current solicitors that have prepared the Draft Defence and Draft Cross-Claim which are annexed to the Affidavit.
17. The Draft Cross-Claim seeks the repayment of the $665,000 on the basis that the Loan Agreement was void. It also seeks orders setting aside or voiding all of the documents and Default Notices arising in the proceedings.
18. Mr Yee, Fusion Legal, and Mr Wakim are named as proposed cross-defendants, along with Advance. It is alleged in the draft pleadings that the Loan Agreement is liable to be set aside on a number of bases, including under the National Credit Code, the Contracts Review Act 1980 (NSW) and under the general law.
19. The Draft Cross-Claim also alleges that the Loan Agreement and related documents were unconscionable and that it is unconscionable to permit Advance to enforce them in the circumstances. The pleadings also allege misleading or deceptive conduct and claim that the default charges under the Loan Agreement are penalty clauses and, as a consequence, unenforceable.
20. The Affidavit of Joshua Frangi of 31 March 2023 is formal in character and exhibits Exhibit JF-1, which consists of a number of relevant documents. The searches for the relevant properties are exhibited as are the copies of the caveats that had been lodged by Advance. The Affidavit also exhibits the copies of the orders made by the Court and the Writs of Possession.
21. Exhibit JF-1 to the Affidavit of Mr Frangi of 31 March 2023 also exhibits copies of communications with Advance's solicitor seeking to obtain agreement from Advance, by way of undertaking, that Advance would not take further enforcement action, contingent upon the payment of the loan amount under the refinancing arrangements as was permitted and/or provided for by the orders of the Court of 5 April 2023.
22. The second Affidavit of Mr Frangi, of 5 April 2023 is the Affidavit that was sworn in support of the request for the orders made on 5 April 2023. It testifies to the fact that Mr Isaac would be refinancing the Lilyfield Property and was prepared to pay the proceeds of that sale into Court.
23. The applicants also rely upon the judgment of the NSW Civil and Administrative Tribunal ("NCAT") in Legal Services Commissioner v Yakenian. [1] In those proceedings NCAT, in its Occupational Division, reprimanded Mr Yakenian (the solicitor acting for Mr Isaac initially), fined him, and ordered Mr Yakenian to undergo an education program.
24. The foregoing orders were consequent upon a finding that Mr Yakenian was "guilty" of professional misconduct for misleading the Court, applying for a default judgment without notice, misleading the defendants to proceedings, and applying for Bankruptcy of one of the defendants in those proceedings without notice. These events were said to have taken place in 2016 and do not relate to parties involved in these proceedings other than Mr Yakenian himself.
25. The applicants submit that the central issue for the Court to determine on this application is whether the default judgment against IPG and Mr Isaac should be set aside, so that they may be permitted to run their case as set out in the Draft Defence and Cross-Claim. While the applicants rely on the entirety of the Affidavits to which reference has been made, they highlight certain key facts: 1. The principal owing under the Loan Agreement has now been repaid in full; 2. Advance clearly structured the Loan Agreement to attempt to circumvent the National Credit Code, given that the purchase of the Porsche was clearly for personal or domestic use; 3. Mr Yee acted egregiously by providing incompetent advice and caused Mr Isaac to disclaim having received such advice; and 4. Mr Yee was Advance's solicitor and agent, and his conduct is impugned as unconscionable, including by pressuring Mr Isaac to enter the Loan Agreement.
26. The applicants on the Motion submit that the default judgment should be set aside because the Draft Defence and Cross-Claim disclose a number of triable issues between the parties, including the undermining and invalidity of the very basis for possession and monetary judgment which gave rise to the default judgment. Further, the applicants seek to explain the delay between the entry of the default judgment and the filing of the Motion by the material in Mr Isaac's Affidavit, including in particular on the basis that Mr Yakenian (his then solicitor) provided him with advice that was inappropriate.
27. The applicants compare the prejudice suffered by them with the fact that there is, on their submission, no prejudice to Advance occasioned by the delay. This submission is said to result from two propositions: first, the principal of the original loan has now been repaid and the amounts outstanding are confined to interest, which is the subject of challenge and orders seeking the quashing of certain charges; and, secondly, the proposition that the properties, which are still the subject of the relevant Mortgages, have more than ample security to protect the interests of Advance.
28. The significant security arising from the property results, on the submission of the applicants, in Advance suffering no prejudice by the setting aside of the default judgment. Finally, the applicants submit that they will suffer great prejudice if the default judgment is not set aside because they will lose the opportunity to defend the claim on its merits forever.

Respondent's Evidence and Submissions

1. The respondent relies on three Affidavits of Alex Phang, dated 6 March 2023, 4 April 2023 and 24 May 2023. Mr Phang is the solicitor for Advance.
2. In the first Affidavit, Mr Phang deposes that the Writ of Possession in relation to the Lilyfield property was executed on 28 February 2023, prior to Advance receiving notice of the stay that had been granted that day. The Affidavit essentially relates to that aspect.
3. The Affidavit of Mr Phang of 4 April 2023 sets out the chronology that gave rise to the issuing of the Default Notice and the commencement of proceedings by Advance. It also sets out the timetable of negotiations about the filing of the Defence, the issue of the default judgment, the issue of the Writs of Possession and the issue of the stay of the Writs and other procedural aspects.
4. The Affidavit of Mr Phang of 24 May 2023 updates the chronology of events by annexing communication between the parties since the filing of the Motion to set aside default judgment. The communications relate essentially to the filing of evidence and other procedural steps on the Motion.
5. The respondent also relies on the transcript of proceedings before Ierace J on 5 April 2023 because, it seems, Advance was under the impression that the applicants on the Motion would be moving on the Motion to set aside the default judgment on 5 April 2023. In fact, on that date the applicants were moving on a different Motion relating to the withdrawal of caveats, to which earlier reference has been made. The transcript discloses a discussion about the reasons for delay in bringing the application and other aspects and ultimately the parties reached a general consensus on the orders that ought to be made on 5 April.
6. The respondent opposes the orders in the current Motion, seeks for the Motion to be dismissed and seeks indemnity costs. The respondent's approach is predicated on two bases.
7. First, default judgment was entered more than eight months prior to the hearing. There is, on the submission of the respondent, no adequate explanation for the three months that it took the applicants to bring the Motion. The application by Motion was filed only weeks before an auction was due for one of the properties, which had already been scheduled and which would most likely have satisfied the judgment debt.
8. Secondly, the respondent submits that the applicants' case lacks merit.
9. On the issue of delay, the respondent submits that the evidence before the Court does not adequately explain the reasons for the delay that has occurred. The respondent also criticises the applicants for failing to expedite the Motion, once it had been filed, and failing to file and serve the Defence or Cross-Claim.
10. Once default judgment issued a Defence or Cross-Claim could not be filed. Nevertheless there is, on the submission of the respondent, no adequate explanation for the failure to file a Defence or Cross-Claim prior to the default judgment issuing. Further, the respondent points to material delays that have occurred in the preparation by the applicants of material for the hearing of the Motion.
11. The respondent submits that it would suffer prejudice if the Court were to set aside the default judgment as such an order would unwind all of the enforcement action that the respondent has, thus far, undertaken. As a consequence, the respondent points to significant prejudice that would be suffered if the steps taken for enforcement of the default judgment were set at nought or rendered nugatory.
12. On the merits of the proposed Defence, the respondent has submitted that the Draft Defence amounts to no more than mere denials of the allegations and non-specific references to various bases upon which the Loan Agreement is said to be invalid. The respondent's submission gives the example of the general claim under the Contracts Review Act, which does not specify how or in what way the Contracts Review Act would be held to provide a remedy or would be said to apply in such a way as to void the contract or so much of the contract as is unconscionable.
13. The respondent also highlights various factual aspects which it says the Court ought to take into account in exercising the discretion reposed in it. The respondent points to the fact that Mr Isaac initially waived the right to legal advice in the early stages of the loan negotiation. Further, Mr Isaac confirmed that he did not receive legal advice from Mr Yee, yet Mr Isaac signed a Statutory Declaration attached to the Loan Agreement to the effect that he had received independent advice and entered into the Agreement freely and voluntarily.
14. The respondent has also submitted that Mr Isaac is an experienced and sophisticated investor with significant property holdings. He is not in the position of a person suffering any special disability or vulnerability. Rather, Mr Isaac clearly understands how lending and legal relationships work and is not of the class to which unconscionability would ordinarily apply.
15. Submissions on unconscionability also deal with the improbability of the application of the National Credit Code, the principles of equity, the Contracts Review Act and other stated remedies and why those remedies do not apply to the Loan Agreement as alleged in the Draft Defence.

Applicable Principles

1. As is obvious from the foregoing, the Court has the discretion to set aside any default judgment. Apart from the general jurisdiction to control its own procedure, the UCPR r 36.16(2)(a), prescribes such a process.
2. The fundamental principles guiding a court requested to exercise the discretion under the rule are relevantly: whether the applicant has a bone fide ground of defence; whether an adequate explanation for the failure to defend on time has been provided; and, the length of any delay. [2] It may also be appropriate to set aside default judgment where there is the potential for great injustice to be done to the defendant if the default judgment is not set aside. Where it is clear enough that there are real issues that might appropriately be the subject of a contested hearing, the level of prejudice to the defendant in not setting aside default judgment is significant. [3]
3. The Court of Appeal has also stated that the bar to the triable issue is lower than might otherwise thought to be the case. All that a defendant has to show is that there is an arguable or triable issue for the Court to determine. [4] This is relevant to the general principle that parties should not be denied the chance to defend a case on its merits.
4. However, the enquiry by the court into the existence of a "defence on the merits" does not involve any determination on the ultimate substantive strength of the proposed defence. [5] Even though no determination is required on the ultimate substantive strength, the apparent strength of the defence may influence the assessment of the sufficiency of the explanation for the default. [6]
5. In weighing the two aspects, delay and arguable defence, authority seems to indicate that the "argueability" of the defence is the primary consideration and the delay is the subsidiary matter. Some authority suggests that the issue of delay, or an explanation for it, is not essential and even where there is no explanation for the delay, it may still be appropriate to set aside the Default Judgment. [7]
6. Further, the fact that a default judgment has been substantially, but not irreversibly, executed is not a bar to the default judgment being set aside. [8]
7. Ultimately the exercise of the Court's discretion must have regard to the overall interests of justice and the competing interests and prejudice that is to be or will be suffered by the respective parties. [9] While it is unnecessary to determine or to deal at length with the merits of the defendants' claims, it is appropriate to refer to the principles that underpin the causes of action upon which they rely.
8. While expressed in a number of ways, the kernel of at least one of the causes of action raised by the defendants in their Defence and Cross-Claim is unconscionable conduct, either under the general law or under statute. The central aspect of unconscionability in equity is that one party to a transaction is at a special disadvantage in dealing with the other party because of illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affecting her or his ability to protect her or his own interest and the other party unconscientiously takes advantage of the opportunity thus placed in his/her/its hands. [10]
9. The foregoing description or definition is not intended to be exhaustive or a codification of that which may be able to be remedied in equity under the rubric of unconscionability. Nevertheless, unconscionability requires more than mere unfairness.
10. The other aspect that needs comment at this stage is that for equity to relieve unconscionability, it is unnecessary that the party taking advantage of the special disadvantage has caused the relevant disadvantage. It is sufficient if the party were aware of the special disadvantage and took unfair advantage of the opportunity presented.
11. The statutory remedies that tend to extend the doctrines of unconscionability under the general law still require something more than mere unfairness. By operation of s 21(4) of the Australian Consumer Law, [11] Parliament has expressly provided that the operation of s 21 is not limited by the unwritten law relating to unconscionability. Further, Parliament has prescribed criteria, which a court may take into account in determining whether a person has contravened s 21 of the Australian Consumer Law.
12. Again, Parliament has expressly provided that the criteria prescribed by s 22 of the Australian Consumer Law do not limit the matters to which a court may have regard. Those criteria include: the relative strengths of the bargaining position of the supplier and the customer; the capacity of the customer to understand any documents relating to the supply or possible supply of the goods or services; any undue influence or pressure or unfair tactics used against the customer by the supplier; comparable costs of acquisition of the goods or services from a person other than the supplier; the consistency of the supplier's conduct towards one customer as against others; industry codes; the extent to which the contract governing the supply of the goods or services was able to be negotiated; the terms and conditions of any such contract; and the extent to which the supplier and the customer acted in good faith. [12] It also includes all conduct that would be included within the term "unconscionable conduct, under the general law". [13]
13. I reiterate that, notwithstanding that s 21 of the Australian Consumer Law is of broader reach than the general law relating to unconscionability, the term "unconscionable" does not equate with mere unfairness. The conduct must still be unconscionable, albeit that unconscionability is not confined to a situation where the purchaser, relevantly, is under a special disadvantage known to the vendor. It does, however, require that the conduct of the impugned party shows "no regard for conscience"; be inconsistent with that which is right, or reasonable; which imports a pejorative moral judgement. [14]
14. Ordinarily, unconscionability requires moral fault or responsibility, rather than mere negligence and usually involves an intentional act. The limits of that which amounts to unconscionable conduct have not been expressed. Nevertheless, it at least includes the dictionary definition, which is conduct showing no regard for conscience or that is irreconcilable with what is right, or reasonable. [15]
15. Perhaps the best explanation, at this preliminary stage, is that prescribed by Gaegler J [16] who traced the background to the development of unconscionability as a cause of action and its relationship with the statutorily broader expression. His Honour said: "[81] 'Unconscionable' is an obscure English word which centuries of use by courts administering equity have transformed into a legal term of art. In Australia, the central concern of a court administering equity in identifying conduct as unconscionable has long been understood to be to relieve against a stronger party to a transaction exploiting some special disadvantage which has operated to impair the ability of a weaker party to form a judgment as to his or her interests. [82] Section 12CA of the Australian Securities and Investments Commission Act 2001 (Cth) ('the ASIC Act') gives statutory expression to that equitable conception of unconscionable conduct. The section's prohibition against engaging in conduct in relation to financial services that is 'unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories' operates to impose an additional statutory sanction on conduct that is unconscionable in equity. Suggestions that its reference to conduct that is unconscionable within the meaning of the unwritten law imports some more expansive and less precise denotation are contradicted by extrinsic material explaining the precise choice of statutory language and have been properly refuted. [83] Section 12CB of the ASIC Act does something more. The section's prohibition against engaging in conduct in connection with the supply or possible supply of financial services 'that is, in all the circumstances, unconscionable' is expressed to be 'not limited by the unwritten law of the States and Territories relating to unconscionable conduct'. Those words make clear that the statutory conception of unconscionable conduct is unconfined to conduct that is remediable on that basis by a court exercising jurisdiction in equity. Furthermore, determination by a court exercising jurisdiction in a matter arising under the section of whether conduct is, in all the circumstances, unconscionable is required by s 12CC to be informed by the numerous considerations specified in that section, each of which has the potential to bear positively or negatively on the characterisation of conduct as conduct that is or is not unconscionable, and each of which must be taken into account if and to the extent that it is applicable in all the circumstances. [84] Exactly what s 12CB does might be seen in different ways. The section might, on the one hand, be seen to confer statutory authority on a court exercising jurisdiction in a matter arising under it to develop the equitable conception of unconscionable conduct taking into account a range of considerations that are broader than those traditionally taken into account by courts administering equity and that include the considerations specifically identified in s 12CC. The section might, on the other hand, be seen to prescribe a normative standard of conduct, which standard a court exercising jurisdiction in a matter arising under it is required to recognise and to administer having regard to considerations which include those identified in s 12CC. Both perspectives on the operation of the section can be found, sometimes intertwined, in the case law. Examination of the legislative history and pre-history of s 12CB, much of which Edelman J helpfully refers to in his reasons for judgment, yields no real indication of a legislative intention to adopt one view in preference to the other. [85] The difference between the perspectives is diminished when it is recognised that the Commonwealth Parliament can be taken to have understood that '[a]ny standard or criterion will have a penumbra of uncertainty under which the deciding authority will have room to manoeuvre - an area of choice and of discretion; an area where some aspect of policy will inevitably intrude', that '[t]he degree of vagueness or discretion will be affected by what is conceived to be the object of the law and by judicial techniques and precedents' and that, '[g]iven a broad standard, the technique of judicial interpretation is to give it content and more detailed meaning on a case to case basis'. The distinction between a judicially developed standard and a statutory standard developed judicially can in practice be a fine one. [86] The difference in perspective nevertheless bears on how a court exercising jurisdiction in a matter arising under s 12CB goes about determining whether impugned conduct is, in all the circumstances, unconscionable. For reasons which will become apparent, I consider that identification of the correct perspective bears materially on the resolution of this appeal. [87] The correct perspective, in my opinion, is that unambiguously adopted by the Full Court of the Federal Court in relation to materially identical provision in Australian Competition and Consumer Commission v Lux Distributors Pty Ltd. The correct perspective is that s 12CB operates to prescribe a normative standard of conduct which the section itself marks out and makes applicable in connection with the supply or possible supply of financial services. The function of a court exercising jurisdiction in a matter arising under the section is to recognise and administer that normative standard of conduct. The court needs to administer that standard in the totality of the circumstances taking account of each of the considerations identified in s 12CC if and to the extent that those considerations are applicable in the circumstances. [88] The Commonwealth Parliament's appropriation in s 12CB of the terminology of courts administering equity in the expression of the normative standard which the section prescribes serves to signify the gravity of the conduct necessary to be found by a court in order to be satisfied of a breach of that standard. 'Unconscionability', as has been long and well understood, 'is not a slight matter, and behaviour is only unconscionable where there is some real and substantial ground based on conscience for preventing a person from relying on what are, in terms of the general law, that person's legal rights'." (Footnotes omitted.)
16. While his Honour was dealing with the provisions of the Australian Securities and Investments Commission Act 2001 (Cth), no relevant distinction applies in the overall approach to the issues. The foregoing is reiterated and stated for the purposes of understanding the principles applied by the Court in determining whether the plaintiffs have an arguable case expressed in their Defence and Cross-Claim.
17. Lastly, it is necessary to very briefly deal with the issue of penalty under contract. As the term suggests, classically a "penalty" in a contract is a term which imposes on a defaulting party a different obligation or liability as a "punishment" for breach of the contract. [17]
18. A contract may validly stipulate an amount that assesses an appropriate compensation or estimates damage that is stipulated as payable on breach. However, where such a contractual term stipulates an agreed sum for breach or default which exceeds that which can be regarded "as a genuine pre-estimate of the damage likely to be caused by the breach", [18] the term will ordinarily be considered a penalty and unenforceable at law.
19. The foregoing principles are sufficient to understand the basis upon which the applicants allege an arguable case. As already stated, the Court is not determining the allegation, it is assessing whether the applicants have an arguable case and, in so doing, applies the principles outlined above.

Consideration

1. One of the aspects of the respondent's criticisms relating to delay may, in my view, be dealt with relatively easily. Complaint is made of the delay between the filing of the Motion and its hearing.
2. The timing of the hearing was a matter for the Court. While the respondent correctly raises the absence of an application for expedition by the applicants, and the delay is said to have been a prejudice to the respondent, the respondent also could have applied for expedition and did not. While it would have been optimal if an application for expedition were to have been filed, it is, on this application, neutral on the issue of delay.
3. There are two periods of time that are not "neutral". The first period is the time during which the applicants failed to seek to defend the proceedings when they could have. The second period is the time between the default judgment coming to the knowledge of the applicant and the filing of the Motion, which was a period of three months.
4. As would be clear from the summary of evidence in these reasons, the applicants instructed different solicitors following the issuing of the default judgment and the grant of the Writ of Possession which, on the application of the applicants, was heard on 28 February 2023 and had been stayed until 7 March 2023. The present Motion was filed on 23 March 2023.
5. The Motion should have been filed at least before 7 March 2023 and, optimally, prior to 4 October 2022. I take the view that the delay between October 2022 and 28 February 2023 was a result of the advice of Mr Isaac's then solicitors, which included advice to wait until the last day before the Writ was executed and to appear self-represented.
6. While the explanation of the delay from the time that new solicitors were engaged until the filing of the current Motion is not explained in a manner that is fully satisfactory, I take the view that some of the period would have been reasonably necessary for the new legal team to be instructed fully and determine an appropriate response. Nevertheless, there was a delay by the applicants from at least 4 October 2022 until 23 March 2023, a period of at least five and-a-half months.
7. The delay of approximately five and-a-half months, some of which period has some explanation, must be measured against the injustice of denying to the applicants an ability to agitate an arguable claim, if there be one. I now deal with that issue.
8. I accept that Mr Isaac is neither unsophisticated nor, if it be different, unfamiliar with business and lending. Nevertheless there is, on the facts alleged, an issue as to the role of Mr Yee and on whose behalf, if anyone, he was acting, from whom he was receiving instructions, and in whose interests he was acting.
9. There is an overwhelmingly arguable case against each of Mr Wakim, Mr Yee and Fusion Legal. The arguability of such case of course depends on acceptance of the allegations in the Cross-Claim and the factual assertions upon which they are based, but the truth or reliability of evidence, if there be any, is for the trial.
10. The principal sum has been repaid. There is an arguable basis for the claim on unconscionability, which largely depends on the state of knowledge of Advance of the events in question relating and leading up to the loan and the relationship, if any, between Advance and Mr Yee. I assume for the present there was no relationship between Advance and Mr Wakim.
11. As already stated, the loan required the borrower to pay: a default interest of 3% per month; together with an amount of $1,100 for each Default Notice sent, the number and frequency of which, assuming default, was in the discretion of Advance; and, was also required to pay an amount of $1,100 to discharge the loan, as well as all legal and other cost and losses. Over and above the foregoing, the applicants were required to pay $50 per day for each day in default as a "default management fee".
12. In my view, there is an arguable basis that one or more of the requirements to pay which were imposed on the borrower by the terms of the Loan Agreement, particularly in the context of all the requirements, was a penalty and unenforceable. Unconscionability is not a remedy that would ordinarily provide relief from repayment of the principal. Nor would the penalty argument, if successful.
13. As a consequence, there is an arguable case, the success of which would affect the amount of interest and other charges that may be recoverable under the Loan Agreement. Given that the only amount in issue between the parties, or more accurately, not already repaid, relates to the interest and other charges and the level of security available, the prejudice suffered by Advance by vacating the default judgment is a prejudice confined to the delay in recovery of such interest and other charges, which is capable of compensation by appropriate orders at the conclusion of the substantive hearing and is likely, if ordered, to be recovered.
14. Further, given the circumstances to which these reasons refer, I consider that the delay between the default judgment on 4 October 2022 and the filing of the Motion on 23 March 2023 (and its hearing) ought not to outweigh the desirability of permitting the applicants to agitate any arguable claim.
15. For the foregoing reasons, the Court grants the Motion and the orders sought therein. The Court makes the following orders: 1. Set aside default judgment of the Court in this matter on 4 October 2022; 2. The defendants are granted leave to file and serve the Defence and Cross-Claim upon which they have relied in the Motion, within 7 days of the date of this judgment; 3. The defendants shall pay the plaintiff's costs thrown away, as a result of this order, except the costs of the hearing of this Motion, which shall be costs in the cause; 4. The matter is listed for Directions before the Registrar on 21 August 2023.

Endnotes

1. Legal Services Commissioner v Yakenian [2019] NSWCATOD 98 (N Isenberg, Senior Member; D Fairlie, Senior Member; and E Hayes, Member).
2. Dunwoodie v Teachers Mutual Bank Ltd (2014) 9 BFRA 433; [2014] NSWCA 24.
3. Cronau v Vavakis (No 3) [2018] NSWSC 1973.
4. Dai v Zhu [2013] NSWCA 412 at [92].
5. Adams v Kennick Trading (International) Ltd (2008) 4 NSWLR 503; [2008] NSWSC 906.
6. Pham v Gall (2020) 102 NSWLR 269; [2020] NSWCA 116.
7. Byron v Southern Star Group Pty Ltd (t/a KGC Magnetic Tapes) (1995) 123 FLR 352 (Priestley JA).
8. Goater v Commonwealth Bank of Australia (2014) 88 NSWLR 362; [2014] NSWCA 382.
9. Dai v Zhu, supra, at [83]-[92].
10. Blomley v Ryan (1956) 99 CLR 362 at 415; [1956] HCA 81; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 461 (Mason J) and 474 (Deane J); [1983] HCA 14.
11. Competition and Consumer Act 2010 (Cth), Sch 2 ("Australian Consumer Law"): Australian Consumer Law (NSW).
12. Australian Consumer Law, s 22(1).
13. Australian Consumer Law, s 21.
14. Hurley v McDonald's Australia Ltd [1999] FCA 1728 (Heerey, Drummond & Emmett JJ)
15. Qantas Airways Ltd v Cameron (1996) 66 FCR 246; [1996] FCA 1483.
16. Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; [2019] HCA 18.
17. Legione v Hateley (1983) 152 CLR 406 at 445 (Mason and Deane JJ).
18. Ringrow Pty Ltd v BP Australia Ltd (2006) 224 CLR 656 at [10]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 August 2023