Bank of Western Australia v Daleport Pty Ltd

Judgment 1The Plaintiff entered into 4 loan facilities with the First Defendant (Daleport) and these facilities were guaranteed by the Second Defendant (Mr Walton). The Plaintiff alleges that there has been default in relation to the repayment of the facilities and now seeks summary judgment against both Defendants. Although the Statement of Claim sought possession of one property which secured the facilities, that property has now been sold. The claim is only for a monetary judgment against both Defendants. 2The Plaintiff, in its motion, seeks further and in the alternative that paragraphs 40A, 42A, 43A, 44(e) and 44(f) of Daleport's Defence be struck out and that paragraphs 5(a), 5(b)(ii), 5(d)(i) and (iii) and 14 of Mr Walton's Defence to the extent that they claim relief under the Competition and Consumer Act 2010 be struck out. The Defendants concede that paragraphs relating to that Act cannot remain. They also concede that paragraphs referring to the Trade Practices Act 1974 cannot remain although they seek leave in that regard to substitute the provisions in the Australian Securities and Investment Commission Act 2001.

Background 3The First Facility is dated 12 August 2003 and was for an amount of $4 million for the purpose of refinancing facilities Daleport had at that time with Donovan Oates Hannaford. The loan was made to Daleport as trustee for the Walton Family Trust. The security for the loan was (inter alia) Registered First Mortgage over what was described as "The Residential Unit Complex consisting of 24 units at Warwick Farm". The mortgage dated 4 September 2003 identified the property as folio identifier 1/1038339. 4The facility terms provided a credit limit of $4 million reducing to $3 million by no later than 31 October 2003. The credit limit was duly reduced. In a letter dated 12 September 2003 from the Bank to Mr Walton at Daleport the cheques paid on settlement were set out with 2 amounts totalling $3,824,041.23 being paid to Donovan Oates Hannaford. 5The terms of the facility required an unlimited guarantee and indemnity from Mr Walton as well as from Daleport in its corporate capacity. 6Clause 10 of the facility terms attached to the letter of offer said this: (c) By accepting this Offer Letter the Borrower and each Guarantor acknowledges and agrees that: ... (ii) the Borrower and each Guarantor has made its own independent decision and has not relied on any representation made by the Bank, its officers or agents. 7The Letter of Offer also incorporated the Plaintiff's General Terms for Business Lending dated November 2002. Clause 9.1 of those General Terms relevantly provided: 9.1 Manner of payments All payments to the Bank under the Facility Documents must be made: ... e) In full without set off or counterclaim and without any deduction in respect of Taxes unless prohibited by law. 8On 29 November 2004 the Bank agreed to lend to Daleport by way of a Home Loan Facility an amount of $2.5m for the purchase of a unit in the Waterline Apartments at Broadbeach, Queensland. The amount was repayable over 30 years, and one aspect of the security required was a guarantee from Mr Walton. 9On 9 February 2005 the Bank agreed to provide a commercial advance facility to Daleport as trustee for the Walton Family Trust of $2 million with the purpose "to provide funds to refinance existing facility with Grenfull Mortgages" (the Second Facility). On the same day the Bank agreed also to provide to a further facility of $1.7 million with the stated purpose "to provide funds to complete stage 1 of the development of community titled town houses at Leura" (the Third Facility). 10In respect of both facilities the guarantors were to be Mr Walton and Daleport in its own corporate capacity, and the expiry date for both facilities was to be 24 months after the first draw down date but no later than 31 December 2006. 11The First Facility, now reduced to $3 million, was rolled over and had a new expiry date of 24 months after the draw down but no later than 31 December 2006. 12The security for these loans was a first registered mortgage by Daleport in both capacities over the following properties: (a) 31-33 corner Hume Highway and Mannix Parade, Warwick Farm,. (b) 6 Governors Way Macquarie Links NSW, (c) 59 Broadbeach Boulevarde, Broadbeach, (d) Corner Pollar and Herbert Streets, Leura. 13These facilities were said to be subject to the General Terms for Business Lending dated July 2004. Relevantly, clause 9.1(e) was in identical terms to the 2002 General Lending Terms. 14Also on 9 February 2005 the Bank agreed to make available to Daleport a bank guarantee facility in the sum of $50,000. That facility was repayable on demand. 15On 21 November 2006 there was a further variation and roll over of facilities. The First Facility of $3 million was rolled over to expire on 30 June 2007. Similarly, the Second Facility of $2 million was extended to expire on 30 June 2007. The Third Facility of $1.7 million was increased to $4.7 million and that expired also on 30 June 2007. The bank guarantee of $50,000 was continued, and that facility remained repayable on demand. 16In February 2008 the facilities were rolled over and became repayable on 28 February 2008. A fresh facility was entered into for $1.45 million "to cover construction shortfall, payoff equity release balance, and interest capitalisation and line fee until expiry". This facility also expired on 28 February 2008. Those facilities became subject to the General Terms for Business Lending dated December 2007. Paragraph 10.1(e) was in identical terms to cl 9.1(e) of the earlier General Terms (set out in para [7] above). 17The guarantee provided by Mr Walton and Daleport in its personal (or corporate) capacity was dated 2003 without greater specificity. The Plaintiff says the reasonable inference is that it was signed at or about the time of the First Facility Agreement on 12 August 2003 because one of the requirements of that facility was that there be an unlimited guarantee and indemnity from both Defendants with Daleport's guarantee being given in its corporate capacity. 18In that regard it should be noted that the Defence of Daleport concerning the guarantee puts in issue the true meaning and effect of the guarantee. It does not dispute that such a guarantee was entered into. Paragraph 21 of the Statement of Claim pleads as follows: 21. In order to secure the obligations of the first defendant under the Agreements, the second defendant entered into a written guarantee and indemnity with the plaintiff whereby the second defendant guaranteed due and punctual: (a) payment by the first defendant of the debt owing under the First Commercial Agreement, Second Commercial Agreement, Third Commercial Agreement, Home Loan Agreement and Guarantee Agreement (the Loan Facilities); and (b) the performance by the customer of the first defendant's liabilities and obligations under or by reason of the Loan Facilities. Particulars Clause 2.3 of the written guarantee and indemnity between the plaintiff and second defendant undated (Guarantee). 19Mr Walton's defence to this is found in paragraph 4 of his Further Amended Defence: In relation to paragraph 21 of the Claim, the Second Defendant: (sic) does not admit the allegations therein as the true meaning and effect of the guarantee is a matter of construction and for the court to determine. These paragraphs are silent about the date of the Guarantee. 20One matter which leads strongly to the view that the guarantee was signed in 2003 at the time the First Facility was granted is that, when the First Facility was rolled over and the Second and Third Facilities were entered into on 9 February 2005, a condition of the agreement at that time was that there be a commercial guarantee and indemnity in the Bank's standard form from Daleport in its corporate capacity and from Mr Walton. A note attached to that condition said that such a guarantee was "currently held by the Bank". The only transaction between August 2003 and February 2005 was the Facility to enable the purchase of the Broadbeach property in November 2004. The requirement for a guarantee attached to that Facility was only that Mr Walton provide a guarantee. Since the guarantee which was executed by the Defendants accorded with the requirements of the First Facility, and bears the date 2003, the overwhelming inference is that the guarantee must have been signed at the time of the August 2003 Facility. 21Relevant provisions of the guarantee are these: 2.3 Obligations guaranteed The Guarantor guarantees to the Bank the due and punctual: (a) payment by the Customer of the Guaranteed Money; and (b) performance by the Customer of the Obligations. ... 2.5 Bank not liable The Bank is not liable for any loss suffered by the Guarantor as a direct or indirect result of: (a) the Bank's exercise or attempted exercise of, or failure to exercise, any of its rights contained in this document; or (b) any release or dealing with any other Guarantee or Security Interest (including any prejudice to or loss of the Guarantor's rights of subrogation). ... 5. Payments Each Guarantor must make each payment to the Bank under this document by delivering an unendorsed bank cheque to the Bank at the place, or by direct transfer of cleared funds to the credit of the account that the Bank nominates. ... 6.5 No representations by the Bank The Guarantor acknowledges that it has not relied upon and will not rely on any representation, statement or promise made by or on behalf of the Bank in deciding to enter into this document or to exercise any right under it. ... 12.1 Nature of obligations and enforcement The Guarantor's obligations in this document: (a) are principal obligations, and not ancillary or collateral to any other right or obligation; and (b) may be enforced against the Guarantor without the Bank first being required to: (i) exhaust any remedy it may have against the Customer; or (ii) enforce any Collateral Security. 12.2 Preservation of Guarantor's obligations The Guarantor's obligations in this document are absolute, unconditional and irrevocable. The liability of the Guarantor under this document extends to and is not affected by any circumstance, act or omission which, but for this subclause, might otherwise affect it at Law or in equity including: (a) the grant of any time, waiver or other indulgence or concession; (b) the discharge or release of the Customer, any other guarantor or any other person; (c) any transaction or arrangement that may take place between the Bank and the Customer, the Guarantor or any other person; (d) the occurrence of an Insolvency Event in relation to the Customer, the Guarantor or any other person; (e) the Bank or any other person dealing or not dealing in any way with any other Security Interest, document or agreement; (f) the Bank or any other person: (i) exercising or not exercising any other Security Interest or any right or remedy conferred on it by Law or by any document or agreement; or (ii) not recovering any money owing by the Customer; (g) any variation (including a variation which increases or. extends the duration of, the Guaranteed Money or the Obligations), replacement, extinguishment, unenforceability, failure, loss, abandonment or transfer of any Facility Document (including this document and any other Collateral Security held by the Bank from any person at any time); (h) the Obligations or the obligations of the Guarantor or any other person under this document or any other Facility Document (including any other Security Interest) being or becoming illegal, void, voidable, unenforceable or disclaimed by a liquidator or trustee for creditors or in bankruptcy; (i) the Bank not giving the Guarantor notice of any default by the Customer or any other person; (j) the Bank not disclosing any information to the Guarantor; (k) any representation made or information given by the Bank to the Guarantor; (l) any change in the legal capacity, rights or obligations of, or other circumstance related to, the Customer, the Guarantor or any other person; (m) any legal limitation, disability, incapacity or other circumstance related to the Customer, the Guarantor or any other person; (n) any invalidity or irregularity in the execution of this document or any deficiency in the powers of the Customer or the Guarantor; (o) any assignment by the Bank, with or without the knowledge of the Customer or the Guarantor; (p) any obligation of the Customer being discharged by operation of Law; (q) any person who was intended to be bound as a guarantor or surety in relation to Guaranteed Money or the Obligations not becoming bound or ceasing to be bound; (r) any laches, acquiescence, delay, act, omission or mistake on the part of, or suffered by, the Bank or any other person, in relation to this document or any other Security Interest, document or agreement; (s) the receipt by the Bank or any other person of any dividend or money after an Insolvency Event in relation to the Customer, the Guarantor or any other person; (t) any judgment or right which the Bank may have or exercise against the Customer, the Guarantor or any other person; (u) the opening or operation of a new account by the Customer with the Bank or any other person; (v) the amendment of the constitution, trust deed or other constituent document of the Customer or the Guarantor; (w) if the Customer or the Guarantor is a member of a partnership, firm, joint venture or association, any change in the structure, membership, name or business of that partnership, firm, joint venture or association; (x) if the Customer or the Guarantor is a trustee of a trust, any breach or variation of the terms of that trust; or (y) if the Guarantor is a director or shareholder of the Customer, any change in that directorship or shareholding. 12.3 Continuity This document is a continuing security, and remains in full force until the Guaranteed Money has been irrevocably paid in full and the Obligations have been performed in full despite any transaction or other thing (including a settlement of account or intervening payment). ... 12.6 Limitations on Guarantor's rights Until the Guaranteed Money has been irrevocably paid and the Obligations have been performed hi full, the Guarantor may not: ... (e) in reduction of its liability under this document, raise a defence, set off or counterclaim available to itself, the Customer or a co-surety or co-indemnifier against the Bank or claim a set off or make a counterclaim against the Bank; ... 22On 2 July 2008 Gadens, acting on behalf of the Bank, wrote to the Directors of Daleport giving notice of a default, in particular that the Company had failed to pay the facilities by the expiry date. That date was originally 28 February 2008, but in a further letter of 19 September 2008 by Gadens to the Directors of Daleport it was pointed out that the Bank had said on 17 April 2008 that it was prepared to extend the term of the facilities to 30 June 2008. 23When the facilities were not repaid the Bank commenced these proceedings on 22 October 2008. The last form of the Defences are Further Amended Defences of each of the Defendants filed 19 April 2011. Defences 24In its Defence Daleport denies it is in default because of the matters pleaded in paragraphs 38 to 43A of the Defence. In turn, paragraph 38 incorporates paragraphs 21-24 and 25-28, asserting that the conduct in those paragraphs amounts to unconscionable conduct. 25There is considerable detail provided in these paragraphs of the Defence but it may be summarised as follows: (a) In May 2003 Mr Walton and a Graham Campbell (Daleport's broker) met Bank representatives at a cafe in the Rocks to discuss the refinancing with the Bank of an existing loan Daleport had from Donovan Oates Hannaford secured by the Warwick Farm property; (b) a property development at Leura was discussed and the Bank indicated it would like to be involved; (c) In September or October 2004 Mr Campbell told the Bank that Daleport would only refinance a loan from Grenfell Securities with the Bank if the Bank provided the necessary finance for all stages of the Leura development; (d) Between 9 February 2005 and 12 December 2007 the Bank represented to Daleport that it "would finance all stages of the Leura development and or at the least stage 1 to completion of the Leura development". Representations included a statement that Daleport could ignore the expiry dates in the various loan facilities because the Plaintiff would roll over the facilities when they approached their expiry date or when they expired. The dates given for the making of the representations are said to include numerous times on the telephone between February 2005 and 12 December 2007, in meetings at the Leura site on 1 June 2007, and on Macquarie Links Golf Course on 23 May 2005 and 29 May 2006; (e) The Bank ratified the representations by rolling over the facilities when they expired and for providing what is said to be "a substantial percentage" of the cost of construction of stages 2 and 3 of the Leura development; (f) Between 1 June 2007 and 12 December 2007 the Bank did not advise the Defendants that the Bank required all of the facilities to be repaid by 28 February 2008 and that it would not roll over or extend the facilities after that date. The Defendants were so advised of that on 12 December 2007. Further, after receipt by Daleport of a letter of 8 August 2007 from Angus Begg Solicitors, for the Bank, advising that Daleport was in default, no demand was made for repayment, and the Bank subsequently said that Daleport could ignore the letter because the loan facilities would be rolled over; (g) A meeting was held on 13 February 2008 between Mr Walton and others and Bank representatives because the Defendants had not signed the loan offer of 1 February 2008 which rolled the facilities over to 28 February 2008. Because the Bank said that if the Defendants did not sign the loan offer the Bank would not provide any more funding for the Leura development, Mr Walton felt threatened, financially compelled and forced to sign and accept the loan offer; (h) All of these matters caused Mr Walton to be of the honest and reasonable belief that the Plaintiff would roll over and extend the facilities until such time as the development at Leura was completed "or in the alternative stage 1 of the development was completed". 26As I have said, the matters detailed above are said in paragraph 38 of Daleport's Defence to amount to unconscionable conduct. It is not made clear in the pleading if this is unconscionable conduct in its general law understanding or whether it is some form of statutory unconscionable conduct. However, the better view is that it is not conduct in contravention of statutory provisions concerning unconscionability because paragraphs 41-43A of the Defence make specific reference (albeit wrongly) to ss 51AB and 51AC Trade Practices Act and s 22 Australian Consumer Law - being Schedule 2 of the Competition and Consumer Act 2010 (all of which deal with unconscionable conduct). 27In fact these sections (except s 51AC) are not relevant. The conduct concerned predated the enactment of the Competition and Consumer Act 2010 in any event, and Pt IVA of the Trade Practices Act (dealing with unconscionable conduct) does not apply to conduct engaged in relation to financial services - s 51AAB TPA . The making of the loans was the provision of a financial service within the definition of s 4 TPA because it falls within the definition of financial service in s 12BAB Australian Securities and Investment Commission Act 2001. 28Otherwise the Defence denies that Daleport is indebted to the Bank because it is said that the terms and conditions are only contractually enforceable in circumstances where the Plaintiff has not acted unconscionably towards Daleport in the manner referred to in paragraphs 38 and 41 - 43A of the Defence and did not act in a misleading and deceptive way in contravention of s 52 TPA and s 18 of the Australian Consumer Law . 29Paragraph 44 of Daleport's Defence says that because of the matters pleaded in that Defence Daleport denies that the Bank is entitled to relief, and then claims the following relief as follows: (a) that the loan facilities be set aside; (b) the mortgages granted by Daleport to the Bank be set aside; and (c) relief be granted under s 87 of the TPA as the Court considers appropriate and s 87 Competition and Consumer Act 2010 . 30Mr Walton's Defence seeks to incorporate paragraphs 38 to 43A of Daleport's Defence and says by reason of those matters he is not in default. 31In answer to paragraph 25 of the Statement of Claim, which pleaded the service of a demand on Mr Walton, Mr Walton said this in his Defence: In relation to paragraph 25 of the Claim, the Second Defendant denies that he has never received the Notice dated 15 October 2008 and otherwise repeats and relies on paragraph 6 herein. 32There seem to be 2 errors about this pleading. The double negative ("denies that he has never received") must be a mistake. Secondly, what was contained in paragraph 6 before it was amended might have been thought to have some relevance to paragraph 25 of the Statement of Claim, but the amended form of paragraph 6 of the Further Amended Defence appears to have no relevance to it. Paragraph 6 now denies paragraphs 23 and 24 of the Statement of Claim and repeats and relies upon paragraph 12 of Daleport's Defence. Paragraphs 23 and 24 of the Statement of Claim alleges that Daleport was indebted to the Bank and had failed to pay the debt. Paragraph 12 of Daleport's Defence denies that it is indebted to the Bank because of the matters pleaded in paragraph 38-43A of its Defence (the complaints of unconscionability). 33There is evidence from a person who was previously employed as an administrative assistant at Gadens who, on 15 October 2008, posted a copy of the demand to Mr Walton at the address 19/59 Broadbeach Boulevarde, Broadbeach, Queensland, 4218. That is in fact the address of the property purchased in November 2004 with the facility of $2.5 million from the Bank. 34There was abundant evidence of correspondence written by and to Mr Walton at that address from July 2007 (when Mr Walton entered into a lease of that property from Daleport) to 15 December 2008 when Mr Walton said in a letter, "both the Plaintiff and their lawyers are well aware that I currently reside at the above address" which was the address at 19/59 Broadbeach Boulevarde. 35I note that although two affidavits of Mr Walton were read at the hearing of the motion, there was no evidence from Mr Walton that he did not receive the demand as he asserts in his Defence. 36I am satisfied on all of the evidence that Mr Walton did receive the notice. In any event, cl 14 of the guarantee says that a notice is effective if it is sent by pre-paid mail to the person's address which is the address in the Schedule (a different address from the Broadbeach address) or another address that the person notifies the sender. Mr Walton had written a number of letters to Bank West in August 2008 giving the Broadbeach address as his address and the Bank had responded to the same address. In my opinion, that was a sufficient notification, with the result that the demand was properly served upon Mr Walton even if he did not receive it for some reason. Cross-Claim 37Daleport filed a cross-claim in the proceedings and the final form of this claim was an Amended Cross-Claim filed in August 2009. In the very unfortunate manner of pleading employed by the Defendants in this matter the Amended Cross-Claim merely said that Daleport repeated and relied on paragraphs 1 - 43 of its Amended Defence filed 5 August 2009. That was a forerunner of the Further Amended Defence relied upon on the present application. In substance that Defence was the same as the Further Amended Defence where unconscionability was pleaded by virtue of the same representations now alleged to have been made. Sections 51AB, 51AC and 52 TPA were relied upon, and the final paragraph of that Defence claimed relief in the same terms as the Further Amended Defence with 2 differences. First, the Competition and Consumer Act 2010 was not referred to. Secondly, a claim was made for damages under s 82 TPA. 38The Bank sought by Notice of Motion that Daleport provide security for the Plaintiff's costs of that Cross-Claim. On 28 October 2010 Hislop J ordered that Daleport provide security for the Plaintiff's costs in relation to the Amended Cross-Claim in the sum of $60,000 and that the Amended Cross-Claim be stayed until such security was provided: Bank of Western Australia v Daleport [2010] NSWSC 1207. The security was not provided and the Cross-Claim was ultimately dismissed. 39In the present Motion the Bank seeks in the alternative that any relief to be granted by the Court to Daleport under s 87 TPA be confined to non-monetary relief. The basis for the seeking of that order is the order made by Hislop J in requiring the provision of security for costs of Daleport's Cross-Claim. Because one of the orders available under s 87(1A) is an order directing a person who engaged in the contravention of one of the provisions of Pt IVA or V to pay the amount of loss or damage suffered, a claim for relief under s 87 contained in the Defence, although otherwise allowable (see Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238 at [11]) would simply be a way of avoiding the requirement to provide security for costs and the consequential striking out of the Cross-Claim when it was not provided. 40Mr Ledger, who appeared for the Defendants, submitted that a claim for relief under s 87 could be made in a Defence, and he referred to Bitannia . He also made reference to what was said in Marks v GIO Australia Holdings (1998) 196 CLR 494 at [56], [99] and [151] concerning the wide construction to be given to s 87 and the remedies contained therein. In particular, Mr Ledger referred to what Kirby J said at [151] that "[j]udges should not narrow or confine what Parliament has so amply provided". None of that can be gainsaid. 41But any such right is subject to a procedural order which may have the effect of preventing such a claim being brought in a defence or cross-claim. One such order is an order that security be provided for a claim by the Defendant against the Plaintiff in a cross-claim. No-one can suggest that such an order limits the scope of s 87 and its remedies. Similarly, where such a claim is being made in a defence (as Bittania allows), a similar order may be made for security, and if security is not provided the claim may not be able to be made. 42In Bank of Western Australia v Daleport Hislop J said at [16]: In my opinion, the cross claim arises out of the same matters as the claim. However, it extends beyond being purely defensive and seeks to claim substantial damages far exceeding any alleged liability to the plaintiff. That claim will involve the plaintiff incurring costs which it would not have incurred had the cross claim been confined to matters relating to the defence of the plaintiff's claim. The first defendant has become, in substance, a plaintiff to the extent of the damages claimed by it and is, to that extent, susceptible to an order for security for costs. Any such order, however, would not include security for any part of the costs incurred in the defence of the proceedings. 43In circumstances where security was not provided for the bringing of a cross-claim, and the cross-claim was dismissed, it would be an abuse of process for a similar claim to be made in a defence. Some of the remedies provided for in s 87 are effectively defensive remedies, but some provide for compensation and damages for contraventions of the Act. The defendants should not be deprived of the benefit of any of the defensive remedies but, where security has not been provided when ordered, It is appropriate that an order should be made limiting any relief under s 87 to non-monetary relief. Summary judgment 44The application for summary judgment must be decided according to the principles set out in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129 - 130.