Proposed ground 1 of the application for leave to appeal

1. Proposed ground 1 of Bell's application for leave to appeal is, ultimately, that the deed is unenforceable for two reasons:

(a) because it is unconscionable (either at general law or under ss 21-22 of the ACL); and/or

(b) because it contains an unfair term under s 24(1) of the ACL.

1. In addition, the orders sought appear to raise the question whether the deed should be set aside because it was the product of misleading or deceptive conduct in contravention of s 18 of the ACL.
2. As Bell conceded, none of these matters were raised by Bell before the primary judge. That is so even though Bell's application to set aside the decision of the judicial registrar raised entirely new grounds from the ground relied upon before the judicial registrar and in Bell's defence to the Eleventh Klingon proceeding. Furthermore, Bell was represented by counsel on the application to set aside the judicial registrar's decision.
3. It is a fundamental principle that a party is bound by the conduct of its case at first instance, so that only in the 'most exceptional circumstances' might a party raise a new argument, or seek to rely on a new ground, which was not asserted at first instance.[13] In Coulton v Holcombe Gibbs CJ, Wilson, Brennan and Dawson JJ said this:

In a case where, had the issue been raised in the court below, evidence could have been given which by any possibility could have prevented the point from succeeding, this Court has firmly maintained the principle that the point cannot be taken afterwards.[14]

1. Bell also accepted that, had the claims now identified in proposed ground 1 been raised before the judge, they could have been the subject of evidence adduced by Eleventh Klingon. For that reason, leave to appeal on proposed ground 1 must be refused.

Proposed ground 2 of the application for leave to appeal

1. Proposed ground 2 of the application for leave to appeal alleges the judge erred in her interpretation and application of the Code. In oral argument, Bell contended that if the Code applied to the two loan agreements, and if the loans were made in breach of the Code and were thus unlawful and unenforceable, then the legal consequence is that the deed is also unenforceable or liable to be set aside. Bell submitted that the deed could not 'wash clean' the unlawful loan agreements.
2. Bell's argument that the deed cannot 'wash clean' the unlawful loan agreements has no prospect of success. That is because it is entirely permissible for parties to compromise a dispute concerning statutory entitlements. As this Court observed in Viterra Malt Pty Ltd v Cargill Australia Ltd, although a person cannot contract out of certain statutory rights or entitlements, it generally remains possible for parties to a dispute about such statutory rights to compromise the dispute. The distinction between the compromise of a dispute, through a settlement agreement, and the impermissible bargaining away of statutory rights, is well recognised.[15] These remarks apply as much to the statutory entitlements under the Code as they did to the statutory entitlements under the ACL at issue in Viterra Malt. As Bell accepted in oral argument, there are significant public policy reasons favouring the settlement of litigation that support the ability of parties to compromise proceedings, and the enforcement of such compromises, even where significant statutory rights are in play.
3. It may be accepted that the observations in Viterra Malt would not apply if the deed of settlement was not a bona fide compromise of a disputed claim.[16] But there was no suggestion on the appeal that the deed in the present case was other than a bona fide compromise of a disputed claim. It is significant that, in oral argument, Bell eschewed any suggestion that the deed was rendered unenforceable by reason of any conduct of Eleventh Klingon in relation to entry into the deed. He did not contend that Eleventh Klingon's entry into the agreement was not bona fide. He relied solely on what he contended were the legal consequences of the alleged illegality of the two loan agreements as the basis for his argument.
4. Bell contended that, at the time he entered into the deed, he had not been aware that he might have had an argument concerning the operation of the Code. Even accepting that is so, it provides no basis for setting aside the deed in circumstances where his lack of awareness of a particular argument was not caused by, or contributed to by, Eleventh Klingon. It is not uncommon for parties to litigation to settle their dispute in a manner that resolves all of their claims against each other in circumstances where one party may not have a complete understanding of the potential legal arguments available to them. It is entirely permissible for such settlements to occur, and the public policy reasons for encouraging settlement of litigation, and for the enforcement of settlement agreements, apply equally to such settlements. The proposition that a person who, while legally represented, enters into a deed of settlement, could later have a basis to set aside that deed simply because they, or their lawyers, subsequently identified a new legal argument need only be stated to be dismissed. Such an approach to settlements would undermine the public policy of encouraging the effective, and final, settlement of litigation.
5. For this reason, we would refuse leave to appeal on proposed ground 2.
6. For completeness, we also consider that Bell's argument that the judge erred in relation to the application of the Code to the two loan agreements has no prospect of success. Our reasons for that conclusion are set out below.

1. The Code regulates the provision of credit in certain limited circumstances. In that regard, s 5(1) of the Code provides as follows:

5 Provision of credit to which this Code applies

(1) This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of precontractual obligations) is proposed to be entered into:

(a) the debtor is a natural person or a strata corporation; and

(b) the credit is provided or intended to be provided wholly or predominantly:

(i) for personal, domestic or household purposes; or

(ii) to purchase, renovate or improve residential property for investment purposes; or

(iii) to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes; and

(c) a charge is or may be made for providing the credit; and

(d) the credit provider provides the credit in the course of a business of providing credit carried on in this jurisdiction or as part of or incidentally to any other business of the credit provider carried on in this jurisdiction.

1. In addition, s 13 relevantly provides as follows:

13 Presumptions relating to application of Code

(1) In any proceedings (whether brought under this Code or not) in which a party claims that a credit contract, mortgage or guarantee is one to which this Code applies, it is presumed to be such unless the contrary is established.

(2) It is presumed for the purposes of this Code that credit is not provided or intended to be provided under a contract wholly or predominantly for any or all of the following purposes (a Code purpose):

(a) for personal, domestic or household purposes;

(b) to purchase, renovate or improve residential property for investment purposes;

(c) to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes;

if the debtor declares, before entering the contract, that the credit is to be applied wholly or predominantly for a purpose that is not a Code purpose, unless the contrary is established.

The judge's decision concerning s 13 of the Code

1. The judge commenced by considering the operation and effect of s 13 of the Code. There was no suggestion that Bell had made a declaration under s 13(2). He contended before the judge (and before this Court) that the statutory presumption in s 13(1) is displaced 'only if' Bell made a s 13(2) declaration.[17]
2. The judge rejected that submission. She observed that the effect of s 13(1) of the Code is that, unless a declaration is made under s 13(2) before the contract is entered into, the starting point will be that the credit contract will be presumed to be subject to the Code; however, that is a presumption only. That presumption is not conclusive and applies 'unless the contrary is established'.[18]

1. By proposed ground 2, Bell sought to challenge the correctness of the judge's decision about the operation and effect of s 13 of the Code. In oral argument, Bell confirmed that ground 2 of his appeal turns on the s 13 argument and that ground 2 could not succeed if this aspect of his case failed.
2. Bell contended, as he had before the judge, that the presumption in s 13(1) could be displaced only by a declaration under s 13(2). He advanced his argument by reference to the section considered as a whole. He pointed to ss 13(3), (4), (5) and (6) as demonstrating the significance that the legislature has attached to the making of a declaration. However, he was unable to cite any authority in support of his construction of s 13.
3. Bell further submitted that where, as here, there has been no declaration, that is the equivalent to there being an ineffective declaration under s 13(3). He submitted that Eleventh Klingon knew, or had reason to believe, that the credit was to be provided for a Code purpose, so as to trigger the operation of s 13(3). The effect of that was, he said, that by reason of s 13(4), paragraph 5(1)(b) of the Code is taken to be satisfied in relation to the loan agreements.

1. Bell's argument concerning the operation and effect of s 13 of the Code has no prospects of success. The judge's decision in that regard was plainly correct.
2. A s 13(2) declaration triggers a presumption that credit provided is not provided for a Code purpose. That is a separate (and opposite) presumption from that contained in s 13(1). The making of a valid s 13(2) declaration will displace the presumption in s 13(1), but that is not the only means by which the s 13(1) presumption may be displaced. The express words of s 13(1) provide for the presumption to be displaced by the lender establishing to the contrary. That leaves open the possibility that there will be evidence that establishes that the purpose of the loan was not a Code purpose. There is no basis to read s 13(1) as requiring that, in order to establish the contrary, there was a declaration under s 13(2).
3. As for the proposition that the absence of a declaration under s 13(2) is, in substance, equivalent to there being an ineffective declaration, and that s 13(3) was satisfied in this case, this submission overlooked the words in s 13(3) 'the declaration is ineffective if, when the declaration was made ...'. That is, s 13(3) expressly operates only where a declaration has been made. It has no operation where there has been no declaration.
4. The judge was thus correct to approach the matter on the basis that the presumption in s 13(1) applied (so that the Code applied to Eleventh Klingon's provision of credit to Bell) unless Eleventh Klingon established to the contrary. That, as the judge correctly concluded, required consideration of whether Eleventh Klingon had 'established to the contrary' by demonstrating that the pre-conditions in s 5(1) were not met in relation to the two loan agreements.[19]
5. In oral argument Bell did not advance any argument concerning the judge's conclusions about the preconditions in s 5(1). He accepted that s 13 was the key to ground 2 and that ground 2 could not succeed if this aspect of his case failed. It is thus unnecessary to deal with the judge's conclusion that the conditions in s 5(1) were not satisfied.

1. For completeness, we also note that ground 2 purported to raise an additional argument concerning the validity of the two loan agreements, namely that they were shams designed to avoid the application of the Code.
2. As the High Court explained in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd:

'Sham' is an expression which has a well-understood legal meaning. It refers to steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences.[20]

1. No contention that the loan agreements or parts of them were shams was advanced before the trial judge. Rather, Bell had contended before the judge that Recital E in the first loan agreement was an attempt to contract out of the Code and thus void by reason of s 334 of the NCCP Act. That is quite a different proposition from the contention that the loan agreements, or parts of them, were sham contracts. Like ground 1, had an argument based on the doctrine of sham been advanced below, it could have been the subject of evidence. Thus leave to appeal on this basis must be refused.

1. For the foregoing reasons, we would refuse leave to appeal.
2. In light of our decision to refuse leave to appeal, it is unnecessary to consider whether to grant Bell's application for a stay of the judge's order or whether to grant Eleventh Klingon's application for an order for security for costs.

[1] Being $551,713.60 under the first loan agreement and $1,054,678.43 under the second loan agreement.

[2] The Code is Schedule 1 to the NCCP Act. The parties have referred to the Code, at times, as the 'National Consumer Credit Code'.

[3] The ACL is Schedule 2 to the Competition and Consumer Act 2010 (Cth).

[4] [2024] NSWCA 133.

[5] Eleventh Klingon Pty Ltd v Bell [2025] VCC 364, [120] ('Reasons').

[9] Reasons, [153]-[165], [190], [193].

[13] Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1, 7-8 (Gibbs CJ, Wilson, Brennan and Dawson JJ); [1986] HCA 33 ('Coulton'); Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418, 438 (Latham CJ, Williams and Fullagar JJ); [1950] HCA 35 ('Suttor').

[14] [1986] HCA 33; (1986) 162 CLR 1, 7-8; [1986] HCA 33, citing Suttor [1950] HCA 35; (1950) 81 CLR 418, 438 (Latham CJ, Williams and Fullagar JJ); [1950] HCA 35; University of Wollongong v Metwally [No 2] (1985) 59 ALJR 481, 483; [1985] HCA 28; Bloemen v The Commonwealth (1975) 49 ALJR 219. Mason CJ, Wilson, Brennan and Dawson JJ cited this passage from Coulton with approval: Water Board v Moustakas (1988) 180 CLR 491, 497; [1988] HCA 12. See also O'Brien v Komesaroff [1982] HCA 33; (1982) 150 CLR 310, 319; [1982] HCA 33; Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598, 1608 [51] (Gleeson CJ, McHugh and Gummow JJ); [2003] HCA 48.

[15] (2023) 74 VR 1, 66-67 [367]-[368] (Sifris, Walker and Whelan JJA); [2023] VSCA 157 ('Viterra Malt').

[16] See, eg, Wigan v Edwards (1973) 1 ALR 497, 512 (Mason J); see also Creative Academy Group Pty Ltd v White Pointer Investments Pty Ltd [2024] NSWCA 133, [127]-[130] (Adamson JA).

[20] Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471, 487 [46] (Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ); [2004] HCA 55, citing Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449; [1988] FCA 289.