(2) A person may not be granted relief under this Act in relation to a contract so far as the contract was entered into in the course of or for the purpose of a trade, business or profession carried on by the person or proposed to be carried on by the person, other than a farming undertaking (including, but not limited to, an agricultural, pastoral, horticultural, orcharding or viticultural undertaking) carried on by the person or proposed to be carried on by the person wholly or principally in New South Wales"
82 Put shortly, Mr Gor submitted that, at the relevant time in 2008, each of the Defendants were carrying on the business of investment in property and the letting out and collection of rental income from those properties. He submitted that the Defendants entered into loan agreements and mortgages with the Plaintiff in 2008 for the purposes of the Defendants' business of property investment. Mr Gor submitted that the fact that each Defendant worked in other capacities as well did not prevent a finding adverse to them under s.6(2) of the Act. He submitted that the position was clear cut and indisputable on the evidence so that a finding ought be made to the requisite standard for a summary judgment application that s.6(2) applied to each of the Defendants so that relief under the Act was not open to them.
83 Ms Wilkinson submitted that none of the Defendants was caught by s.6(2) of the Act in that they were not conducting the trade, business or profession of property managers or property investors. She submitted that each Defendant had the occupation as stated by them in their tax returns and affidavits. Ms Wilkinson pointed to the limited nett income stream to the Defendants from rental properties disclosed in the evidence. She submitted that s.6(2) required the Court to consider the primary or predominant trade, business or profession of a person and that, in the case of each Defendant, the primary or predominant occupation was that asserted by the particular Defendant. Ms Wilkinson submitted that, even if there was an argument on this issue contrary to the Defendants, the position was not so clear cut that the Court should resolve the issue against them on a summary judgment application.
84 It has been said that the application of s.6(2) should be looked at as a matter of substance and not form: Ford v Perpetual Trustees Victoria Limited [2009] NSWCA 186; 75 NSWLR 42 at 65 [98]; Agricultural and Rural Finance Pty Limited v Atkinson [2010] NSWSC 635 at [29].
85 The words "trade, business of profession" are very wide and cover the whole gamut of professional and commercial activity: Ellison v Vukicevic (1986) 7 NSWLR 104 at 111. The expression "for the purpose of" has the meaning that the contract under consideration is entered into as an ordinary incident of the carrying on of a particular trade, business or profession then being carried on or proposed to be carried on: Ellison v Vukicevic at 111.
86 In Commercial Bank Company of Sydney Limited v Pollard [1983] 1 NSWLR 74, Rogers J considered (at 78-80) a submission on a summary judgment application by reference to s.6(2) Contracts Review Act 1980. His Honour was not satisfied that the Plaintiff had shown that the Act was inapplicable in that case by reason of the statutory exclusion. Further, his Honour observed (at 80) that it was inappropriate that a defence under the Contracts Review Act 1980 should be dealt with on an application for summary judgment upon the basis that the Defendants had failed to adduce any evidence on the merits to sustain the defence so propounded. Ms Wilkinson referred to the judgment of Harrison AsJ in Perpetual Trustee Company Limited v McAndrew [2007] NSWSC 1452 where her Honour, at [26], adopted the approach of Rogers J in Commercial Banking Company of Sydney Limited v Pollard.
87 Section 6(2) of the Act has been applied in a number of cases to exclude an application for relief: Westpac Banking Corporation v Bagshaw [2000] NSWSC 650 at [46]; Sweeney v Howard [2007] NSWSC 852 at [67].
88 Ms Wilkinson relied upon the decision of Hunter J in Commonwealth Bank of Australia v Roubas [1997] NSWSC 475; BC9703751 at 49-50. After referring to authorities concerning the meaning of the term "business", Hunter J said:
"With respect, I would adopt that view as a guide to the application of s6(2) to the facts of this case. In my opinion, the circumstances the subject of this litigation disclose not the acquisition of loan facilities for the purpose of a trade or business carried on by the Roubases or proposed to be carried on by them. At the time the Roubases were full time sign writers in carrying on their own business of sign writing from premises which they owned and in which they resided at Mortlake. Through Topden, the Rooty Hill property had been acquired which was a mixture of rental producing units consisting of three retail shops and associated dwellings. Their interest in that company in my view does not amount to the carrying on of any business by them (see Toscano v Holland Securities Pty Ltd (1985) 1 NSWLR 145 at 149 and Australian Bank Ltd v Stokes (1985) 3 NSWLR 174 at 176). The West Ryde property was also an income producing property. Even if one were to treat the Topden activities as those of the Roubases, I am far from persuaded that the subject loan was in any sense "entered into as an ordinary incident of the carrying on of (any) particular trade or business ... then being carried on or proposed to be carried on". I would distinguish that description of a contract of loan from one, as in this case, entered into to permit the Roubases to obtain an income producing investment in which any involvement of the Roubases was consistent with their continuation of the full time conduct of their sign writing business and the giving of karate teaching lessons by Roubas. Indeed, that income was a not an insignificant element in the consideration of their capability of servicing the May loan in addition to their other commitments. Accordingly I make the following orders."
89 What does the evidence reveal in the present case with respect to these Defendants? The focus of attention must be upon the substance and not the form in considering this issue.
90 The question to be considered is whether the agreements and mortgages in these cases were entered into in the course of or for the purpose of a trade, business or profession carried on by the Defendants wholly or principally in New South Wales. I do not consider that there is any warrant for reading into s.6(2) qualifications such as the "primary" or "predominant" trade, business or profession of the person. A person may carry on more than one trade, business or profession. It will be a question of fact in each case to consider what finding should be made in the light of the evidence. Of course, on a summary judgment application, a finding adverse to a defendant should only be made when the demanding test referred to at [30] above is made out.
91 I am satisfied that, at the time when the loan agreements and subsequent mortgages were entered into in 2008, each of the Defendants was engaged in the business of owning valuable commercial premises which were leased out for rental return. They did so in person and not through a company. The evidence reveals that each Defendant was engaged in such a business with respect to different premises, in different locations, being conducted for different purposes. The purpose of each Defendant engaging in this business was to rent the premises for profit. The Darlinghurst property operated as a restaurant. The Leichhardt property operated as a commercial laundry and dry cleaning business.
92 In their 2008 tax returns, each of Violetta Primanzon and Alexandre Pachkovski provided the same home address in South Coogee which was different from any of the premises which were disclosed as rental properties (Exhibit SD1, pages 304, 318; Exhibit SD1 page 223 re Maia Primanzon). None of the premises specified as rental properties by the Defendants were used by them for residential purposes. As revealed in the Defendants' own application to the Plaintiff, these were valuable properties rented for a range of commercial purposes.
93 Although not determinative in these circumstances, it is helpful to consider some of the criteria commonly used by courts to identify the existence of a business for taxation purposes. The fact that the Defendants have repeatedly and regularly derived rental income from a growing portfolio of commercial properties in the Sydney area for the purpose of profit-making since at least 2004, and have done so in an organised and business-like manner by the keeping of books and records, tends to fortify a conclusion that they were conducting a business of managing properties when the relevant loans were entered into: Ferguson v Federal Commissioner of Taxation (1979) 37 FLR 310 per Bowen CJ and Franki J at 314. That the Defendants were concurrently engaged in the practice of other professions does not preclude a finding that these additional activities constituted the carrying on of a business: Ferguson v Federal Commissioner of Taxation at 314. The scale of the Defendants' activities, given the estimated value of their "other assets/investments" described by them in 2007 (see [65] above), is also indicative of the existence of a business: Evans v Federal Commissioner of Taxation (1989) 20 ATR 922 at 939.
94 In my view, the position is clearly distinguishable from that referred to by Hunter J in Commonwealth Bank of Australia v Roubas. The Defendants carried on the business of operating a portfolio of investment properties in different parts of Sydney for gain, and the agreements and mortgages entered into by them with he Plaintiff were directly for this purpose.
95 I have had regard to the description given by each Defendant to their occupation in considering this question. I do not accept the submission of the Defendants that, before s.6(2) can apply, it is necessary in effect that the Defendants be considered to carry on the business of property managers. Each of the Defendants owned a range of valuable properties which were rented for different purposes and produced an income. The fact that some may have produced a greater rental income than others is not to the point. The test in s.6(2) is not whether the person was carrying on a successful or profitable trade, business or profession.
96 I have taken into account the circumstances of each Defendant in considering this issue. The case of each Defendant has been considered individually, although it is obvious that there is very substantial overlap as between the Defendants and the evidence which bears upon this issue.
97 It is entirely clear that the agreements and mortgages under present consideration were entered into for the purpose of the business of the portfolio of commercial properties rented out by the Defendants. In the circumstances of these cases, I am well satisfied that the demanding test for summary judgment has been made out so that s.6(2) may be called in aid by the Plaintiff with the consequence that each Defendant cannot rely upon a claim for relief under the Contracts Review Act 1980.
98 I am satisfied that the plaintiff has made good its claim for summary judgment in each case as the Contracts Review Act 1980 has no application. As that statute was the sole basis of the Defendants' cases, then it is appropriate that the Plaintiff have summary judgment in each proceeding.