Appellant v Respondents

1 Jeffrey William Stubbings ("Stubbings") appeals primarily from certain orders made by an associate judge on 23 March 2017 ("the Orders"). Pursuant to the Orders, the court gave summary judgment in favour of the respondents ("the Mortgagees")[1] for possession of 3 properties owned by Stubbings ("the Properties"). Summary judgment was granted essentially based on reasons for judgment published previously by the associate judge on 28 November 2016 ("the Earlier Reasons").[2]

2 In the Earlier Reasons, her Honour found that Stubbings had no real prospect of success in defending the Mortgagees' claims, but ordered the proceeding proceed to trial under s 64(b) of the Civil Procedure Act 2010 (Vic) on the grounds that the dispute was of such a nature that only a full hearing on the merits was appropriate.[3] However, because her Honour found Stubbings obtained a benefit from the transaction with respect to pre-existing obligations,[4] the orders made on 5 December 2016 to give effect to the Earlier Reasons also required Stubbings to provide security to the satisfaction of the Senior Master in the sum of $240,124.42 ("the Security Order"). Her Honour ordered that, in the event this security was not provided by 30 January 2017, the Mortgagees were entitled, on notice, to seek summary judgment (again). Stubbings failed to provide the security ordered. Stubbings also, belatedly, appeals from the Security Order.

3 For the reasons that follow, the associate judge was in error in finding that there was no real prospect of success with respect to Stubbings' defence. Accordingly, the appeal from the Orders will be allowed and leave to defend will be granted. Further, in the circumstances as they now stand, where the Mortgagees have already realised amounts from a mortgagee sale of 1 of the Properties pursuant to the Orders far in excess of the security previously ordered,[5] there is no need to consider the correctness or otherwise of the Security Order. Leave to defend will be granted without any condition with respect to the provision of security.[6]

B.1 The further hearing before the associate judge

4 Upon Stubbings' failure to provide any security, the Mortgagees made a further application for summary judgment.[7] On 23 March 2017, the date of the further hearing, Stubbings swore and filed a further affidavit in opposition. Leave to rely on much of this affidavit was refused. However, the associate judge accepted paragraph 11 of the affidavit into evidence, which read as follows:

The broker fees and loan procurement fees deducted from the loan were paid to various persons who are unlicensed brokers/lenders $58,561.94.

5 In making the Orders, in "other matters" the associate judge referred to, amongst other things, the Earlier Reasons. She noted that Stubbings had no proposal to pay the security ordered. It was further noted that Stubbings wished to sell 2 of the Properties, but the court accepted the Mortgagees' submission that a private sale may not be effectual by reason of caveats lodged on those properties. Her Honour concluded her observations in "other matters" as follows:

1. Paragraph 11 of [Stubbings]'s affidavit relates to the broker and procurement fees about which the Court expressed concern at [98]-[102] and [110] of the [Earlier Reasons]. The Court also expressed concern at [108] of the [Earlier Reasons] in relation to certain sums paid by the [Mortgagees] to Mr Kiatos[8] at his request.
2. The Court has considered whether these concerns justify refusal of summary judgment, notwithstanding the failure by [Stubbings] to pay the security.
3. On balance, the Court considers that [Stubbings]'s interests in relation to these concerns are sufficiently protected by requiring the [Mortgagees] to pay the total sum in question into Court, as required by these orders.
4. The Court does not consider that any other reason is shown why summary judgment should not be given for possession.

6 The orders made on 23 March 2017 included an order that the sum of $60,511.94 be paid into court within 14 days of the first settlement of the sale of any of the Properties. The Mortgagees cross-appealed against this order. The cross-appeal was abandoned during argument.

7 Stubbings had 4 grounds of appeal.[9] The first ground was that the associate judge erred in making the Security Order. The second ground stated the associate judge erred in finding Stubbings had no real prospect of defending the claims made based on unconscionability on the part of the Mortgagees. Thirdly, it was stated that the associate judge erred in finding it was not enough to establish unconscionability to prove a lender was engaged in asset-based lending. Finally, the fourth ground of appeal stated that the associate judge erred in concluding the absence of enquiry by the Mortgagees was unlikely to be enough to establish unconscionability.

8 The Mortgagees sued Stubbings seeking possession of the Properties as first mortgagees. Stubbings accepted he executed all the transaction documents upon which the Mortgagees relied.[10] Stubbings also did not dispute that the Mortgagees made an advance of $1,059,000 ("the Advance") to a company of which Stubbings was the sole director and shareholder, namely Victorian Boat Clinic Pty Ltd ("the Company").[11] According to Stubbings, the Company has never traded.

9 Further, Stubbings knew at the time he executed the mortgage with respect to the Properties that he was mortgaging those properties in order to secure the Advance made to the Company, and that the loan pursuant to which the Advance was made was for a term of 1 year.

10 There was also no dispute that Stubbings defaulted under the mortgage. Ultimately, Stubbings accepted that he was duly served with a notice of default.[12] At no time has Stubbings remedied the alleged default.

11 There was no challenge to these underlying facts as found by her Honour.

12 Accordingly, there was no question on appeal that the associate judge properly found that the Mortgagees proved their case, subject to any defences Stubbings might have.[13]

C.2 Facts relevant to the unconscionable conduct defence

13 For the purposes of this appeal, it is unnecessary to canvas each of the defences or potential defences raised by Stubbings.[14] It is sufficient to focus upon the defence raised by Stubbings on the application with respect to unconscionable conduct.[15] The facts relevant to Stubbings' case[16] on this issue are that, at the time the Advance was made, Stubbings already owned 2 of the Properties ("the Pre-existing Properties").[17] The Advance was to be used to pay out existing mortgages with respect to the Pre-existing Properties and to provide almost 100 percent finance for a third property Stubbings had already agreed to purchase ("the Fingal Property").[18]

14 The Advance was provided pursuant to an arrangement aptly described as asset-based lending.[19] In the time leading up to, and at the time of, the Advance, Stubbings was unemployed and was receiving little to no income.[20] In short, neither Stubbings nor the Company had any means by which he or it could meet the monthly repayments over the 12 month period, other than by means involving access to any equity in the Properties.

15 In arranging finance, Stubbings had no direct dealings with the Mortgagees or their legal representatives prior to or at the time of the Advance.[21] Stubbings dealt with a broker, Trayan Zourkas, also known as Johnny Tee[22] ("the Broker").[23]

16 The Broker dealt with Stubbings in a manner that was, "at least", unconventional. He met Stubbings in cafes rather than an office, accepted payments from Stubbings in cash and provided a business card to him that gave no surname, no business name or address and no details of any qualifications.[24] Further, the name on the business card was "Trayan", despite the fact that the Broker introduced himself to Stubbings as Johnny Tee.[25]

17 The Broker represented to Stubbings that, after Stubbings paid out the existing mortgages with respect to the Pre-existing Properties and settled on the Fingal Property, he would receive "$53,000 in residual money to enable [him] to cover interest payments and to renovate the [Pre-existing Properties]".[26] (There is no evidence to suggest the Mortgagees were aware of this alleged representation.)[27] In fact, after the existing mortgages had been paid out and the purchase of the Fingal Property had been settled, there was only $6,959.09 in surplus funds.[28]

18 The Broker told Stubbings that Stubbings would not be able to get a loan personally, and that any loan would need to be through a company.[29]

19 In the application for finance, the stated purpose of the loan was that the funds were for "business purposes", to be used to "set up and expand the business" of the Company, being boat building and/or repairs.[30]

20 On 22 August 2015, Stubbings signed a document, entitled "LEGAL BINDING DOCUMENT MANDATE" ("the Mandate"), by which he personally agreed to pay a "consultancy fee" of $27,000 to the Broker and gave a charge over the Pre-existing Properties to secure that amount.[31] On the face of this document, the amount was payable once a letter of offer had been signed and regardless of whether any moneys were advanced.

21 On 27 August 2015, Stubbings executed a contract of sale for the sum of $815,000 with respect to the Fingal Property, providing a deposit of $5,000.[32] Previously, on 30 June 2015, Stubbings had executed a contract for sale of the Fingal Property for the higher price of $900,000, providing only $100 by way of deposit. Neither contract was subject to finance and, if Stubbings was unable to obtain finance, he had no means of paying the balance of the purchase price.[33]

22 On 19 September 2015, Stubbings met with a solicitor, Con Kiatos ("the Certifying Solicitor"), and signed a number of documents, namely:[34]

(1) A resolution, as sole director of the Company, to execute both the loan agreement and a debenture to be given by the Company as further security.

(2) A document headed "Acknowledgement from the Borrower", executed on behalf of the Company and addressed to the Mortgagees' solicitors, acknowledging that the loan agreement and the debenture had been read and understood and freely given after consulting an independent solicitor.

(3) A "Certificate of Independent Legal Advice", signed as guarantor, in which Stubbings acknowledged receipt of the loan agreement and a debenture charge with the Company as the borrower, that those documents had been fully explained to him by the Certifying Solicitor, and that he could be called upon to repay moneys due from the Company. The Certifying Solicitor also signed this document as Stubbings' solicitor, certifying that he had explained the loan agreement and the debenture charge fully to Stubbings.

23 The Certifying Solicitor also signed a "Certificate on Execution by a Company", recording that he acted for the Company and certifying that the person who had executed the documents for the Company was Stubbings, the sole director and secretary of the Company. The certificate stated that the Certifying Solicitor had explained the loan agreement and the debenture to Stubbings and that Stubbings indicated that he had read and understood the effect of those documents.

24 Also on 19 September 2015, Stubbings attended at the offices of an accountant, Jordan Topalidis ("the Certifying Accountant"). On that occasion, the Certifying Accountant completed a "Certificate of Independent Financial Advice", stating to the Mortgagees that the loan was required for business purposes, that the Certifying Accountant had been instructed by Stubbings to explain the financial risk Stubbings was assuming, and that the Certifying Accountant had done so.[35]

25 Stubbings disputed that the documents were explained to him or that he received any independent legal or financial advice from the Certifying Solicitor or the Certifying Accountant, contrary to the certificates.[36]

26 On 30 September 2015, the Company, the Mortgagees and Stubbings (as "guarantor") executed a loan agreement, pursuant to which, amongst other things, Stubbings acknowledged he had "agreed to execute first mortgage and associated documentation" with respect to the Properties in favour of the Mortgagees.[37] This documentation was duly executed.[38]

27 Having set out the facts largely as agreed or as deposed to by Stubbings, the associate judge made a number of material findings, namely:

(1) Stubbings received personal benefits from the transaction; not only by the mortgages for the Pre-existing Properties being paid out, but also by the provision of finance for the purchase of the Fingal Property.[39]

(2) Although Stubbings stated he did not understand the implications of what he was being asked to do or what he did in signing various documents, and that that evidence may be correct, on his own evidence Stubbings was fully aware of many of the unusual features of the transaction and did not have any real prospect of success in establishing that he did not appreciate the overall transaction was attended by significant risk.[40]

(3) Given the documents Stubbings and the Certifying Accountant signed as to the business purpose of the loan, Stubbings' prospects of establishing the Mortgagees knew or ought to have known that the loan was actually for the purpose of Stubbings financing the Properties depended on Stubbings being able to prove that intermediaries knew of this and that their knowledge ought to be imputed to the Mortgagees.[41]

(4) On the evidence, there was no loan application and no other evidence of any discrepancy or other aspect of the financial information supplied to the Mortgagees that should have put them on inquiry.[42]

(5) There did not appear to have been "any financial information" provided by Stubbings to the Mortgagees.[43]

(6) The "only financial information" provided to the Mortgagees was the certificate given by the Certifying Accountant, but this did not certify the capacity to pay.[44]

(7) The only inference to be drawn was that Stubbings intended to repay the loan, or some of it, from the sale of either or both of the Pre-existing Properties, or perhaps all the Properties after renovation.[45]

(8) There was no evidence that the Mortgagees were aware of Stubbings' proposed method of repayment,[46] but even if they were aware of the intention to repay from the sale of any of the Properties, that would not be enough to show the transaction was unconscionable. On the contrary, it would suggest a method of repayment other than by forced sale and would run contrary to the argument of unconscionability.[47]

(9) The absence of direct contact between the Mortgagees, including their lawyers, and Stubbings did not establish that the transaction was unconscionable.[48]

(10) After referring to Stubbings' evidence on various matters concerning his dealings with the Broker,[49] the associate judge said she did not consider that these matters "necessarily" suggested the Broker was an agent of the Mortgagees or their lawyers or was otherwise acting in concert with them. After further observing that "[o]rdinarily a broker is the agent of the borrower", her Honour stated "[a]ll of these matters could well have occurred in that capacity" (emphasis added).[50]

(11) After stating her conclusion that there was not enough evidence to show Stubbings had a real prospect of establishing the Broker was the agent of the Mortgagees or their lawyers or was otherwise acting in concert with them, her Honour stated that the evidence did raise concerns about the nature of the relationship. More specifically, her Honour said that, in combination with other matters, she considered the nature of the relationship between the initial broker,[51] the Broker and the Certifying Solicitor on the 1 hand, and the Mortgagees' lawyers on the other, should be examined at trial.[52]

(12) There were "very large fees" paid to the Broker and the Mortgagees' solicitors.[53] In addition to the $27,000 paid to the Broker,[54] the Mortgagees' solicitors were paid $19,269.44, including a $10,590 "procuration fee" and professional charges of $6,500.[55] These amounts were paid from the Advance before Stubbings received the net proceeds of $6,959.09.[56]

(13) Having referred to the matters in the preceding subparagraph, her Honour found that the documentation did not sufficiently answer the issues raised by way of defence.[57] She noted, correctly, there was no evidence as to how the Mortgagees came into possession of the Mandate, or who the Broker really was.[58] The absence of this explanation was in circumstances where the Mandate was exhibited to an affidavit affirmed by a principal of the Mortgagees' solicitors. That affidavit also did not explain why it was that the Mandate had a fax header recording it had been sent by an entity known as "Pateras Transport".[59]

(14) Further, the associate judge found that the issues raised by Stubbings were not sufficiently explained by the disbursement authority or the tax invoice relied upon by the Mortgagees. The disbursement authority was expressed to be with respect to the first mortgage, yet the tax invoice referred to professional fees incurred not just in respect of the first mortgage, but also in respect of the second mortgage.[60]

(15) Her Honour noted the details of the disbursement fee appeared to be inconsistent with the trust account statement of the Mortgagees' solicitors, which included not only a charge for "procuration fee, costs and disbursements" of $19,269.44 (in accordance with the tax invoice referred to above) but also a charge for "procuration fee, costs and disbursements" of $12,292.50 in relation to the second mortgage. In this regard, her Honour stated:[61]

This entry in the trust account statement implies that separate professional fees were charged for the second mortgage, but in the absence of that document it is unclear whether there was any duplication. Further, there is no evidence of any agreement by way of disbursement authority from [Stubbings] to pay the [Mortgagees'] lawyers a procuration fee in respect of the second mortgage, or how much of the total $12,292.50 this was.[62] Finally, there is nothing in the [Mortgagees'] case to show that the procuration fees were indeed appropriate and in what circumstances or on what basis they were levied.

(16) There were 2 matters that were capable of showing an improper link between the Certifying Solicitor and the Mortgagees' lawyers.[63] First, a false statement was made in May 2016 in 2 letters on the letterhead of the Mortgagees' solicitors. Those letters, purporting to make representations with respect to the "first mortgage/loan" and the "second mortgage/loan" respectively, stated, contrary to the fact, that the conduct with respect to each loan was satisfactory. The Mortgagees' solicitors accepted that they were asked for such letters, but their evidence was that they refused to provide them because the loans were in default. In essence, it was suggested the letters were forgeries. In this regard, the associate judge stated that the "circumstances in which the letters in this case were created should in my view be examined at trial".[64] The second matter was that each of the Certifying Solicitor and Certifying Accountant was paid directly out of the proceeds of the Advance, without any evidence from the Mortgagees that Stubbings had authorised the payment.[65]

(17) With respect to the role of the Certifying Accountant, the evidence included a certificate dated 6 April 2016, apparently signed by him.[66] Another letter in evidence was undated, on "CCK Interior Pty Ltd" letterhead and signed by a person purporting to be a director of that company. The letter stated that Stubbings had been working with that company for the last 2 years on a full time basis "as a 10 employee manager in joinery". This information was incorrect. With regard to both these documents, the associate judge stated that there was nothing to link them to the Mortgagees or the Mortgagees' lawyers.[67]

28 The approach to be taken with respect to a summary judgment application is governed by ss 63 and 64 of the Civil Procedure Act. Pursuant to those provisions, summary judgment may be given if, relevantly, the court is satisfied that a defence has no real prospect of success.[68] However, the court has a discretion not to give summary judgment in these circumstances if it is satisfied the proceeding should not be disposed of summarily because it is not in the interests of justice to do so, or because the dispute is of such a nature that only a full hearing on the merits is appropriate.[69]

29 In short, the court is required to consider whether a defendant has a real, as opposed to a fanciful, chance of success in defending the claim the subject of a summary judgment application.[70] The court must act with caution and it must be clear there is no real question to be tried before a court exercises its discretion to terminate a proceeding summarily.[71]

30 There was no suggestion that the associate judge misdirected herself in identifying the approach to be taken under ss 63 and 64.[72]

31 On an appeal from an associate judge,[73] a judge has the power to, amongst other things, give any judgment and make any order which would have been given or made and make any further or other order as the case may require.[74] The appeal is a rehearing and, ordinarily, an appellant is required to demonstrate error before the court may exercise appellate power.[75]

32 The associate judge referred to a number of cases when discussing the relevant principles applicable to unconscionability. Proceeding on the basis that statutory unconscionability would be pleaded in due course,[76] her Honour stated that it was a requirement for a defendant to establish "moral obloquy on the part of the lender" before a successful defence could be raised.[77] Such an observation is consistent with some of the relevant authorities.[78] However, the most recent cases suggest that no such specific requirement of "moral obloquy" exists.

33 In Director of Consumer Affairs Victoria v Scully,[79] after observing that it was undesirable to attempt a comprehensive definition of the word "unconscionable", the Court of Appeal made a number of general observations with respect to the correct approach to determining whether certain conduct is "unconscionable".

34 The first of these was that the word "unconscionable" was intended to have its ordinary meaning.[80] Then, having made various observations concerning indicia that may assist in determining whether or not certain conduct is unconscionable, it was stated that a court must explain what it understands by the words and phrases in the relevant statutory provision and to do so it will be necessary to use words different from those contained in the provision. However, such words are strictly to explain the words used in the statutory provision, not to replace them.[81]

35 With respect to the meaning of the words "moral obloquy" themselves, Court of Appeal explained:[82]

The phrase "moral obloquy" is not itself part of everyday discourse. Most people would have to consult a dictionary to be sure of its meaning. ... The phrase suggests the very things that are suggested by other phrases such as "import(ing) a pejorative moral judgment" or "highly unethical".

36 After observing that a distinctive quality of unconscionable conduct is that it is unethical and must include "some degree of moral tainting ... of a kind that permits the opprobrium of unconscionability to characterise the [relevant] conduct",[83] the court expressed its conclusion, implicitly rejecting an approach which simply substituted the phrase "moral obloquy" for the word "unconscionable".[84]

37 More recently, in Paciocco v Australia and New Zealand Banking Group,[85] the approach to be adopted by a court in evaluating whether conduct was unconscionable in accordance with statute[86] was considered by the full court of the Federal Court.[87] As part of this consideration, the following was stated:[88]

The evaluation is not a process of deductive reasoning predicated upon the presence or absence of fixed elements or fixed rules. It is an evaluation of business behaviour (conduct in trade or commerce) as to whether it warrants the characterisation of unconscionable, in the light of the values and norms recognised by the statute.

The task is not limited to finding "moral obloquy"; such may only divert the normative enquiry from that required by the statute, to another, not tied to the words of the statute.

This circumspection with respect to the use of the term "moral obloquy" in describing the evaluation has been echoed in later cases.[89]

38 Finally, as her Honour observed, the mere fact that the transaction in question involved asset-based lending was not enough, in itself, to demonstrate the loan was unconscionable.[90] In all cases concerning unconscionability, all the circumstances must be considered.[91]

39 Although the relevant authorities are not entirely settled,[92] there is a real possibility that the associate judge incorrectly stated the approach to be taken by a court in determining whether conduct could be found to be unconscionable conduct for the purposes of the Australian Consumer Law. By stating that "moral obloquy ... is required", it appears that the associate judge may have superimposed a diversionary requirement, rather than using such language as part of a description or explanation of the relevant statutory language.[93]

40 However, it is unnecessary to resolve this matter because whether or not her Honour correctly stated the law with respect to statutorily defined unconscionable conduct, she ought to have found on the facts that there was a real prospect of success in Stubbings establishing that the Mortgagees' conduct, in all the circumstances, was infected with "moral obloquy" and was other than in accordance with the values and norms recognised by statute, so as to attract the operation of s 21 of the Australian Consumer Law.[94] In short, the facts before the court demonstrated Stubbings had a real prospect of success in establishing the relevant transactions entered into involved unconscionable conduct of the Mortgagees, so as to entitle him to relief.

41 To elaborate, the following matters ought to have satisfied the associate judge that there was a real prospect of Stubbings successfully defending the claim for possession of all of the Properties:

(1) The loan was asset-based lending.[95]

(2) There was no evidence of any capacity of the Company or Stubbings to repay the Advance, or to make any of the monthly interest payments (leaving aside the first month which was drawn from the principal advanced).

(3) The Mortgagees made no enquiries with respect to any capacity to repay, and there is a real prospect it ought to be inferred that the Mortgagees were content to proceed on the basis of enforcing the security.[96]

(4) The stated purpose of the Advance was for the Company to "set up and expand the business", and yet nearly the entirety of in excess of $1 million in funds was directed to Stubbings' property-related transactions, with a paltry amount left over[97] that, on no sensible view, could be remotely adequate to set up or expand a meaningful business.[98]

(5) Notwithstanding the significant amount of the Advance, with respect to a person who was completely at arm's-length from the Mortgagees, there was no written loan application.

In my view, there is a real prospect of Stubbings establishing at trial that these matters, at the very least, put (or ought to have put) the Mortgagees on enquiry in relation to the loan not being for the stated purpose and that there may have been real issues with the capacity of the Company and Stubbings to meet their respective obligations. For the associate judge to find otherwise was an error in the exercise of the court's discretion.[99]

42 The matters stated in the preceding paragraph are enough to dispose of the appeal. However, there are a series of other matters that were relevant to the exercise of the court's discretion, and add weight to the conclusion stated above. Those matters include:

(1) There was no evidence on behalf of the Mortgagees as to their relationship with the Broker, or how the Broker knew to approach the Mortgagees or their solicitors to seek the Advance.[100]

(2) There was no evidence on behalf of the Mortgagees as to how the Broker obtained documents on the Mortgagees' solicitors' letterhead.[101]

(3) There was no explanation as to why the Mortgagees' solicitors paid the Broker, the Certifying Accountant, or the Certifying Solicitor without sighting any authority from Stubbings.[102]

(4) The "very large fees" paid to the Broker and the Mortgagees' solicitors.[103]

(5) There was no explanation as to how the Mandate came into the possession of the Mortgagees' solicitors.[104]

(6) Stubbings paid a very small deposit for the purchase of the Fingal Property,[105] which was well below what, commercially, might ordinarily be expected, and was seeking almost 100 per cent finance with respect to the Fingal Property.

(7) The absence of any apparent proper reason why the Advance was to be made to the Company in circumstances where nearly all the funds were to be paid for the Properties with Stubbings as the registered proprietor and mortgagor.[106]

(8) The existence of correspondence on the letterhead of the Mortgagees' solicitors which falsely stated the position with respect to the first mortgage and the second mortgage.[107]

43 For completeness, it is plain that Stubbings knew he was signing a mortgage, that executing the mortgage and entering into the related transactions were attended with risk,[108] and that the Advance was to be used to pay out the mortgages for the Pre-existing Properties and to purchase the Fingal Property. However, this knowledge is not a bar to successfully alleging that the conduct of the Mortgagees was unconscionable and that, as a consequence, Stubbings ought to be granted relief.[109] Further, the possibility of Stubbings selling 1 of the Properties after 30 September 2015 does not preclude him from establishing an unconscionability defence.[110] Leaving aside the fact that each of the Properties was to secure the full amount of the Advance, the possible sale of any of the Properties did not eradicate the likelihood, if not the high likelihood, that Stubbings would default with respect to the first monthly interest payment due on 30 October 2015.

44 Furthermore, in case this matter is to go further, although not raised as a ground of appeal, it is appropriate to record a further view I have formed on the materials the subject of this appeal. If I am incorrect with respect to the existence of a real prospect of success of a defence based on unconscionability, then, at the very least for the reasons stated by her Honour,[111] this is a (presumably quite rare) case where the court's discretion ought to be exercised under s 64 of the Civil Procedure Act in requiring a full hearing of the merits. It is unclear, based on the reasons contained in "other matters",[112] why the associate judge considered there was not "any other reason shown why summary judgment should not be given for possession" of all of the Properties, given her Honour's reasons to the contrary in the Earlier Reasons.

45 A final point on the exercise of the court's discretion. A court ought to act with particular caution[113] when it is required, under the relevant statutory provisions, to consider "all the circumstances", and where, despite a substantial body of affidavit evidence filed by the Mortgagees,[114] there are serious issues that have remained unexplained, and where the application was made at a time when there had been no discovery in the proceeding.

46 As noted above,[115] the associate judge required Stubbings to provide security in the sum of $240,124.42 as a condition of ordering that the proceeding proceed to trial. On appeal, there was no submission put on behalf of the Mortgagees that her Honour was in error in determining that such an amount should be ordered by way of security. On the contrary, the Mortgagees submitted her Honour was correct in this regard.[116]

47 In the circumstances, it would be inappropriate to revisit this issue, save to note that, although Stubbings failed to pay the security, the Mortgagees have now received well in excess of $240,124.42 from the sale of the Pre-existing Properties.[117] Accordingly, no further security will be ordered.

48 Further, by reason of these events having occurred, it is not necessary to address Stubbings' contention that the associate judge was incorrect in her finding that Stubbings obtained a benefit or benefits from the transaction.[118]

49 The parties will be invited to submit any proposed orders with respect to the proceeds of the sale of the Pre-existing Properties, together with any other appropriate order the case may require.[119]

50 For the reasons stated, Stubbings has succeeded with respect to ground 2 and, on that basis, the appeal will be allowed. In light of this, it is unnecessary to determine grounds 1 and 4. Ground 3 has failed.[120]

51 I will invite the parties to finalise appropriate orders, but such orders will include, in substance, the following:

1. Leave is granted to the applicant/appellant to appeal out of time.

2. The time for serving a notice of appeal pursuant to r 77.06.2 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) is extended, now for then, to 15 May 2017.

3. Orders 2 and 3 of the orders made on 23 March 2017 are set aside and, in lieu of those orders, the court orders that the plaintiffs' amended summons filed 19 August 2016 is dismissed.

[1] The Mortgagees are Jams 2 Pty Ltd, Conterra Pty Ltd and Janaco Pty Ltd.

[2] Jams 2 Pty Ltd v Stubbings [2016] VSC 711.

[4] Earlier Reasons, [5], [74], [113]-[114].

[5] Stubbings did not seek a stay of the Orders. Stubbings was self-represented until shortly before the hearing of the appeal (when counsel agreed to appear for him pro bono).

[6] At the time of the hearing, the Mortgagees had already sold a second of the Properties, but settlement had yet to take place.

[7] The application was made pursuant to the Civil Procedure Act 2010 (Vic), s 61, and the Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 22.03.

[9] Initially, there were 6 grounds of appeal (the subject of the amended notice of appeal filed 15 May 2017, which replaced in its entirety the original notice filed on 11 April 2017), but 2 of them were abandoned, properly, during the hearing: see fn 12 below. The amended notice of appeal was filed pursuant to an order made by the court on 12 May 2017. In light of Stubbings' lack of representation at that point in time, the Mortgagees consented to leave being granted for the appeal to be brought out of time: see r 77.06.2 of the Supreme Court Rules.

[11] Originally, the Mortgagees pleaded that the Advance was made to Stubbings, but leave was granted on 21 September 2016 to amend the statement of claim to allege the advance was made to the Company: Earlier Reasons, [2], [11].

[12] Earlier Reasons, [31]-[33]. During the course of the appeal, Stubbings expressly abandoned grounds of appeal referable to this issue.

[14] The amended defence filed 16 August 2016 included allegations of conspiracy and an unjust transaction with reference to the National Credit Code (Schedule 1 of the National Consumer Credit Protection Act 2009 (Cth)). Some of the potential defences raised were abandoned for the purposes of the summary judgment application: Earlier Reasons, [12], [41], [59], [82].

[15] To date, this defence has not been pleaded. Her Honour was critical of Stubbings in failing to fully articulate his proposed defence, including failing to identify with precision how his case was put: Earlier Reasons, [3], [43]. See further fn 76 below.

[16] As to the evidentiary requirements of a defendant to put its case before the court, see Hausman v Abigroup Contractors Pty Ltd [2009] VSCA 288; (2009) 29 VR 213, 225-226 [63]-[65] (Weinberg and Bongiorno JJA and Williams AJA). Further, as to agreed facts, see Evidence Act 2008 (Vic), s 191.

[18] Earlier Reasons, [15], [74], [77].

[23] Initially, Stubbings sought finance through another broker, Theo Kassinidis. Attempts to obtain finance from Australia and New Zealand Banking Group Ltd were unsuccessful. Stubbings was advised he would need to obtain "second tier" funding, and was introduced to the Broker for this purpose: Earlier Reasons, [77]-[78].

[27] Earlier Reasons, [92]-[97]. See also par 15 above.

[28] Earlier Reasons, [37], [63]. For completeness, Stubbings said that even $53,000 was insufficient for his purposes, but that, when he raised this with the Broker, the Broker stated refinance would be organised with Westpac in the succeeding 3 months: Earlier Reasons, [64]. See also at [67], [69].

[37] In fact, not only was a first mortgage executed, but Stubbings also executed a second mortgage with respect to each of the Properties. This mortgage was arranged by the same solicitors acting for the Mortgagees, in favour of another mortgagee with respect to a further advance: Earlier Reasons, [19], [25]-[26], [65]. For the disposition of this appeal, it is unnecessary to discuss this further.

[38] The mortgage incorporated the memorandum of common provisions retained by the Registrar of Titles in number AA1955.

[40] Earlier Reasons, [76]-[80], [113].

[51] See fn 23 above.

[52] Earlier Reasons, [97]. See also at [108].

[53] Earlier Reasons, [98]. Stubbings gave evidence that he was not aware that any of these fees were to be charged (Earlier Reasons, [66]), however he did not dispute he signed the Mandate and a disbursement authority in relation to these fees: Earlier Reasons, [98]-[100].

[54] See par 20 above.

[56] For completeness, the evidence filed suggested that the net proceeds would have been $16,360.47, but the Mortgagees' solicitors were required to pay outstanding council rates with respect to both of the Pre-existing Properties as caveats had been lodged in that regard.

[58] Ibid. See par 16 above.

[62] In order to counter this finding, on the appeal the Mortgagees sought leave to file a further affidavit exhibiting a disbursement authority signed by Stubbings with respect to the second mortgage. I will grant the leave sought (despite the fact that this document could have been tendered before the associate judge), but note that, in contrast to the exhibit with respect to the first mortgage, the exhibit does not include the "enclosed tax invoice" referred to in the authority. In short, a number of her Honour's observations remain pertinent.

[65] Earlier Reasons, [105], [108].

[66] This certificate "confirm[ed]" that the Certifying Accountant's firm were accountants for the Company "and its officers". According to Stubbings, this information was untrue and he did not authorise the creation of the certificate.

[68] Section 63(1).

[69] Section 64.

[70] Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158; (2013) 42 VR 27, 40 [35] (Warren CJ and Nettle JA, with whom Neave JA agreed).

[72] See Earlier Reasons, [13]-[14].

[73] Supreme Court Act 1986 (Vic), s 17(3); see also Supreme Court Rules, rr 77.06, 77.06.1.

[74] Supreme Court Rules 77.06.9(2)(c) and (d).

[75] Glass (a pseudonym) v Chief Examiner [2015] VSC 29, [2] (Garde J); Oswal v Carson [2013] VSC 355, [11] (Ferguson J), citing Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194, 203-204 [14] (Gleeson CJ, Gaudron and Hayne JJ).

[76] At the time of the original hearing (which was conducted on 21 September 2016 and 20 October 2016), Stubbings' amended defence alleged that: (1) the Advance was predominantly for a "domestic purpose"; (2) Stubbings did not have any income; (3) Stubbings had no assets other than the Properties; and (4) Stubbings had no means to satisfy his obligations. The amended defence did not make any allegations specifically raising causes of action based on unconscionable conduct. The application proceeded on the basis that, if leave were granted, a further amended defence containing the matters raised in the summary judgment application would be pleaded in due course. No exception was taken to this course: cf Ray v Newton [1913] 1 KB 249, 258.2 (Hamilton LJ). To date no such proposed pleading has been proffered. In due course, Stubbings intends to rely upon Schedule 2 of the Competition and Consumer Act 2010 (Cth) ("the Australian Consumer Law"), s 21, or the Australian Securities and Investments Commission Act 2001 (Cth), s 12CB. Section 21(1) of the Australian Consumer Law provides: (1) A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of goods or services to a person (other than a listed public company); or (b) the acquisition or possible acquisition of goods or services from a person (other than a listed public company); engage in conduct that is, in all the circumstances, unconscionable. Section 12CB of the Australian Securities and Investments Commission Act is in like terms with respect to financial services_._ It is unnecessary to consider which of these provisions is applicable for the purpose of raising a defence based on unconscionable conduct: but see s 131A of the Australian Consumer Law.

[77] Earlier Reasons, [43]. See also at [47] and [55].

[78] See, for example, the discussion of relevant authorities by Hargrave J in Director of Consumer Affairs v Scully (No 3) [2012] VSC 444, [28]-[34].

[79] [2013] VSCA 292; (2013) 303 ALR 168.

[80] At 180 [38] (Santamaria JA, with whom Neave and Osborn JJA agreed).

[81] At 181 [45], referring to Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503, 519 [39] (French CJ, Hayne, Crennan, Bell and Gageler JJ).

[83] At 183 [48], quoting Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; (2011) 15 BPR 29,699, 29,766 [293] (Allsop P, with whom Bathurst CJ and Campbell JA agreed).

[84] At 187 [58]. Cf Violet Homes Loans Pty Ltd v Schmidt [2013] VSCA 56; (2013) 44 VR 202, 219 [58] (Warren CJ, Cavanough and Ferguson AJJA), an earlier decision of the Court of Appeal which referred to the "necessary element of moral obloquy". This earlier decision was relied upon by the associate judge (Earlier Reasons, [43]-[45]) and was expressly referred to by the Court of Appeal in Director of Consumer Affairs Victoria v Scully [2013] VSCA 292; (2013) 303 ALR 168, 172 [15], 184 [51].

[85] (2015) 236 FCR 199.

[86] In this particular case, s 12CB of the Australian Securities and Investments Commission Act.

[87] At 271-276 [283]-[306] (Allsop CJ, with whom Besanko and Middleton JJ agreed).

[89] Colin R Price & Associates Pty Ltd v Four Oaks Pty Ltd [2017] FCAFC 75, [50]-[52] (Rares, Murphy and Davies JJ); Commonwealth Bank of Australia v Kojic (2016) 341 ALR 572, 583-586 [55]-[59] (Allsop CJ, with whom Besanko and Edelman JJ agreed), noting that both these cases were decided after the associate judge delivered the Earlier Reasons. But contrast Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; (2016) 333 ALR 569, 609-610 [188] (Gageler J), referring with approval to Attorney-General of New South Wales v World Best Holdings Ltd [2005] NSWCA 261; (2005) 63 NSWLR 557, 583 [121] (Spigelman CJ). For completeness, none of the other members of the High Court in Paciocco v Australia and New Zealand Banking Group Ltd (French CJ, Kiefel, Keane and Nettle JJ) took issue with Allsop CJ's observations in the court below concerning the evaluation process: see, in particular at 633-634 [292]-[294] (Keane J, with whom French CJ and Kiefel J agreed).

[90] Earlier Reasons, [44]; referring to Violet Home Loans Pty Ltd v Schmidt [2013] VSCA 56; (2013) 44 VR 202, 219 [59] and Perpetual Trustees Australia Ltd v Schmidt [2010] VSC 67, [200], [207] (J Forrest J). See also Earlier Reasons, [54].

[91] Ibid. See "in all the circumstances" in both s 21(1) of the Australian Consumer Law and s 12CB(1) of the Australian Securities and Investments Commission Act.

[93] Cf Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199, 276 [304]-[305]; Director of Consumer Affairs Victoria v Scully [2013] VSCA 292; (2013) 303 ALR 168, 187 [58].

[94] Or, if applicable, s 12CB of the Australian Securities and Investments Commission Act.

[95] Although each case must involve consideration of all the circumstances (see par 38 above), various cases have recognised that asset-based lending has the potential for injustice based on unconscionability: see, for example, Bank of Queensland Ltd v Dutta [2010] NSWSC 574, [195] (Davies J); Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; (2008) 77 NSWLR 205, 227 [96] (Campbell JA, with whom Hodgson and McColl JJA agreed); Riz v Perpetual Trustee Australia Ltd [2007] NSWSC 1153, [70] (Brereton J). See also Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413, [56]-[59] (Beazley JA, with whom Santow JA and Campbell AJA agreed), noting however in that case there was only 1 property subject to the security_._

[96] Cf Butler v Vavladelis [2012] VSC 186, [21]-[23] (Hargrave J); Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41, [92] (Spigelman CJ).

[97] See par 27(12) and fn 56 above.

[98] The attempt by the Mortgagees to meet this fact was by means of an affidavit sworn by the Mortgagees' solicitor: Earlier Reasons, [83]. In that affidavit, the solicitor spoke of "my understanding that the loan was required for business purposes". The affidavit continued: "[Stubbings] advised at the time that the loan was procured and that it was required to assist with the purchase of the [Fingal Property] for the purpose of boat building and/or repairs. [Stubbings] has some 15 or more boats on the Fingal [P]roperty which appear to be works in progress." As to the boats located on the Fingal Property, this was evidence of the position in August 2016, not September 2015 when Stubbings did not have possession of the Fingal Property. Further, the solicitor's evidence, such as it was, did not identify on what occasion, or by what means, Stubbings "advised" as deposed to; noting that there was no direct contact between Stubbings and the Mortgagees' solicitors: see par 27(9) above. Furthermore, and in any event, each of the Properties, including the Fingal Property, was a residential property.

[99] House v The King [1936] HCA 40; (1936) 55 CLR 499, 505.2 (Dixon, Evatt and McTiernan JJ).

[100] See also par 27(10) above.

[102] Earlier Reasons, [101], [105], [108].

[103] See par 27(12) above.

[104] See pars 20, 27(3) above.

[105] See par 21 above.

[106] See pars 13, 17, 18 above.

[107] See par 27(16) above.

[108] See par 27(2) above.

[109] See, for example, Perpetual Trustees Australia Ltd v Schmidt [2010] VSC 67, [200]-[214] (J Forrest J).

[110] Cf Earlier Reasons, [88]. See also par 27(8) above.

[111] See Earlier Reasons, [4], [97], [110]-[112].

[112] See par 5 above.

[113] See par 29 above.

[114] The Mortgagees relied upon a total of 8 affidavits on the application. See also Earlier Reasons, [2], [17].

[115] See par 2 above.

[116] For completeness, in their written submissions, the Mortgagees stated that her Honour was correct in ordering the security that she did. In oral argument, submissions were initially made that further security should be ordered if the court were to find in favour of Stubbings on the substantive issues concerning unconscionability, but ultimately this submission was not pressed.

[117] See par 3 above.

[118] See par 27(1) above. In essence, Stubbings contended that any benefit he received was from the Company and not from the Mortgagees.

[119] See par 31 above.

[120] See par 38 above.