Capita Mortgage Pty Ltd v Henderson

Supreme Court of NSW|2021-11-30|Before: Fagan J

Judgment

The plaintiff claims judgment for possession of two contiguous parcels of land at Broken Hill, known as 223 Cornish Street. A two storey residence is constructed on the land. Possession is claimed under a registered mortgage. The plaintiff alleges that it acquired the rights of mortgagee under a transfer of the mortgage from a related company. It alleges that the defendant, who is the registered proprietor and mortgagor, has defaulted in repayment of the debt for which the mortgage is security. The defendant says that he did not sign the mortgage of the Broken Hill land. That is the first ground upon which he disputes its validity.
Further, although the defendant does not deny that loan funds were advanced to him, he claims that the lending transaction was brought about by misleading and deceptive conduct contrary to s 12DA of the Australian Securities and Investment Commission Act 2001 (Cth) ("ASIC Act") and s 1041H of the Corporations Act 2001 (Cth); that the lending transaction was unconscionable contrary to ss 12CA and 12CB of the ASIC Act; that the circumstances of the loan contravened regulatory requirements of the National Consumer Credit Protection Act 2009 (Cth) and that it was unjust contrary to the Contracts Review Act 1980 (NSW). Under his defence the defendant seeks relief against enforcement of the loan agreement and the mortgage. Under a cross-claim against the plaintiff and its sole director, Mr Brian Robert Boyd, he seeks damages for the alleged misleading, deceptive and unconscionable conduct.
On the hearing the defendant was self-represented. Mr Boyd had earlier been granted leave to represent the plaintiff corporation. Consequently, the Court has had no assistance from any legal practitioner in endeavouring to assess the defence and cross-claim. They are very difficult documents. It is evident that a solicitor and/or barrister prepared them. The pleader appears to have adopted a scattergun approach, invoking every statutory provision that he or she could find in which the concepts of misleading, deceptive or unconscionable conduct are employed in relation to financial transactions. The facts are pleaded in the form of a litany of complaints about the manner in which the defendant was dealt with, both before and after the lending agreement was signed. There is then a somewhat indiscriminate cross-referencing from the pleaded elements of statutory provisions to the long list of grievances, with very little attention to the significance of whether any particular act complained of was done by the lender or by its director or by its assignee. It is most regrettable that the legal advisor who drafted the defence and cross-claim was not able to appear before the Court to present arguments as to whether the evidence received sustains the factual allegations and whether they, in turn, satisfy the statutory criteria of the provisions relied upon. These complex pleadings have presented the Court with a difficult and time-consuming task of disentangling, ultimately for no benefit to the defendant. The defendant's pleadings have created a great deal of obfuscation.

Chronology of events

In 2015 Mr Boyd carried on business as a mortgage broker through a company named Capita Finance Pty Ltd ("Capita Finance"). He was the director and principal. He was also the principal of a company named Capita Asset Management No 9 Pty Ltd ("CAM No 9") that owned land on Wattle Street, Andergrove, a northern suburb of Mackay, Queensland. In January 2015 CAM No 9 was undertaking a subdivision of that land pursuant to which it sought to create a lot to be known as 3 Wattle Street. A house had been constructed on the proposed lot. In early 2015 Mr Boyd expected that the subdivision would be approved and registered within about six months, at which time a sale of No 3 could be completed. Mr Boyd lived in Brisbane and conducted the businesses of his companies from there but he travelled to Mackay regularly.
Up until mid-2014 the defendant lived in Broken Hill, where he occupied the house at 223 Cornish Street and carried on an air conditioning installation and service business. He moved to Mackay and was living and working there during the second half of 2014 and in January 2015. In circumstances that are not established by the evidence, the defendant met with Messrs Loft and Smith who conducted a real estate agency in Mackay under the name 360 Property Management. On about 5 January 2015 the defendant expressed to Mr Loft his interest in purchasing the proposed lot at 3 Wattle Street. He offered to pay $300,000 and Mr Loft conveyed that to Mr Boyd.
On 6 January 2015 the defendant phoned Mr Boyd directly and said that he was interested in buying 3 Wattle Street and wanted to use the equity in his property at Broken Hill to help with the purchase. Later the same day Mr Boyd and the defendant reached agreement upon a price of $315,000. Mr Boyd said that he would accept that the contract should be subject to finance. During this conversation the defendant said that his Broken Hill property was mortgaged to Westpac to secure a debt of about $65,000. He said that it was for sale for $287,000 but that until it was sold he would need a short-term loan "to pay the deposit and associated costs for Wattle Street and also to clear up some outstanding credit issues I have". The conversation ended with the defendant requesting Mr Boyd to contact Westpac to ascertain whether the bank could provide a short-term loan. Mr Boyd agreed to do that and to enquire with other lenders about the possibility of longer term finance for the balance of the purchase of 3 Wattle Street.
At 5:07pm on 6 January 2015 Mr Boyd advised the defendant by email that the contract for sale of 3 Wattle Street would be ready to sign the next day. He requested the defendant to provide documents, which he specified, to establish the defendant's capacity to service a loan. Early on 7 January 2015 the defendant provided a number of such documents to Mr Smith at the real estate agency in Mackay and Mr Smith scanned them and sent them through to Mr Boyd.
At 2:22pm on 7 January Mr Boyd emailed to Mr Smith a letter addressed to the defendant with the following attachments, for execution: 1. a mortgage of the Broken Hill land to CAM No 9; 2. a memorandum of mortgage terms registered No AE720944W, as referred to in the above mortgage; 3. a caveat over the Broken Hill land to protect the interest of CAM No 9 as mortgagee and 4. title searches of the two parcels comprising the Broken Hill land. By his email Mr Boyd requested that Mr Smith print the above attachments and arrange for the defendant to sign the mortgage in the presence of a witness and also sign the caveat.
At 2:31pm on 7 January the contract for the purchase of 3 Wattle Street was sent to Messrs Loft and Smith by email, with a request that they print it and have the defendant sign it. The defendant does not dispute that he signed the contract late that afternoon. Mr Loft gave oral evidence that the contract, mortgage and caveat were all signed in his presence. He signed the mortgage as witness. It was pointed out to him that the contract was dated 7 January 2015 and the mortgage was dated 9 January. He said that he was uncertain, giving evidence about the matter six years after the event, how that came about. Although he said all three documents were signed before him on the one occasion, he admitted to some uncertainty about that because of the lapse of time and because of the date that had been written on the mortgage.
The plaintiff tendered an email dated 9 January 2015 at 9:47am recording that at that time Mr Boyd had just received the signed originals of the mortgage and caveat in Brisbane. The email showed that he scanned the documents and sent the scans to his solicitor for advice as to whether "they look correct". The mortgage as received and scanned was undated, indicating that the date of "9.1.15" that appeared on the document when it was subsequently registered was added later. That date is thus consistent with Mr Loft having had all of the documents signed by the defendant before him at the same time, on 7 January. They were sent to Brisbane by post as hard copy originals, arriving two days later. Mr Loft was cross-examined by the defendant but adhered to his evidence in chief as to the defendant having signed all three documents.
Whilst recognising the limitations of making any comparison of signatures between the various copy documents that have been tendered, I do not see any indication that the defendant's signature on either the mortgage or the caveat has been forged. The defendant tendered a report dated 3 August 2020 prepared by a document examiner, John Heath. He was asked to treat the signatures on the mortgage and the caveat as "questioned" and to compare them to specimen signatures. His conclusion was that the two questioned signatures "bear a strong resemblance to" the specimen signatures and that "there is limited support for the proposition that the questioned and specimen signatures were written by one writer". The expert witness does not suggest in his report that he found the signatures on the mortgage and the caveat so closely similar to each other or to any specimen as to suggest copying or facsimile reproduction, nor so different as to have necessarily been authored by different people. The report provides no support for the defendant's claim that his signature was forged on the mortgage or the caveat. I am satisfied that the defendant signed the contract, the mortgage and the caveat late on the afternoon of 7 January 2015.
By Special Condition 2.3, the contract for the sale of 3 Wattle Street was expressly made subject to registration of a survey plan that would create a separate title for the property. A Disclosure Statement annexed to the contract had the effect that registration of the subdivision had to take place within 18 months. The "Finance" section of the pro forma contract was filled out, so that the defendant's obligation to complete was subject to him obtaining sufficient finance to cover the balance of the purchase price, from a financier of his choice, within 21 days from the contract date. The contract provided that an initial deposit of $1,000 was required to be paid on signing and a further $30,500 "when finance approved". Nothing was, in fact, paid on signing.
Mr Boyd's intention when he sought the defendant's signature on the mortgage and caveat was that they would secure payment to the vendor, CAM No 9, of the deposit of $31,500. The defendant had informed Mr Boyd in the conversation on 6 January, recounted at [6] above, that he was not immediately able to pay that sum. It was Mr Boyd's intention that the caveat would be lodged but not the mortgage, unless there was default in payment of the deposit by some undefined time after the signing of the contract.
From mid-morning on 7 January 2015 Mr Boyd had commenced to receive by email from Mr Smith copies of documents that the defendant supplied by way of substantiation of his financial position. Late in the afternoon of that day, at about the time the contract, caveat and mortgage were being signed in Mackay, Mr Boyd received a report from a credit rating agency named Veda. This disclosed that the defendant had defaulted in payment of creditors to a total of over $27,000. Mr Boyd concluded that the defendant would need to borrow funds to pay out the creditors in order to clear his record and enhance his prospects of securing long-term finance for the balance of the purchase price of 3 Wattle Street.
The mortgage that Mr Boyd obtained in favour of CAM No 9 did not specify any monetary amount of which payment was intended to be secured. The memorandum of terms that was cross-referenced in the mortgage also did not specify any monetary amount and provided no means of identifying what sum was secured. It contained a definition of default that included failure to pay, duly and punctually, all monies due under any "collateral agreement". "Collateral agreement" was defined to include a "loan agreement". Loan agreement was in turn defined to mean: the agreement between the parties pursuant to which this mortgage and any collateral security is given.
At the date the mortgage was executed by the defendant, 7 January 2015, there was arguably no agreement between him and the mortgagee, CAM No 9, pursuant to which the mortgage was given. The contract for the sale of 3 Wattle Street was not a loan agreement and made no reference to the giving of the mortgage "pursuant to" its terms. There is no evidence of any express arrangement, oral or written, by which it was agreed between the defendant and CAM No 9 that this mortgage was to secure performance of the defendant's obligations under the contract of sale or, if so, whether the mortgage was limited to securing his obligation to pay the deposit or extended to securing payment of the whole purchase price. For these reasons the mortgage may have been completely ineffectual because it failed to delimit or qualify the estate or interest of the mortgagee: PT Limited v Maradona Pty Limited (1992) 25 NSWLR 643; Small v Tomassetti [2001] NSWSC 1112; Chandra v Perpetual Trustees Victoria Ltd [2007] NSWSC 694; Sabah Yazgi v Permanent Custodians Limited [2007] NSWCA 240; Provident Capital Ltd v Printy [2008] NSWCA 131; Perpetual Trustees Victoria Limited v English [2010] NSWCA 32. I have previously considered those cases in McLeod v McLeod [2019] NSWSC 804 at [96]-[110].
More importantly for present purposes, even assuming that the mortgage can be construed in a manner that makes it effectual, it could at best only operate as a security in favour of CAM No 9 for the performance of some or all of the financial obligations of the defendant under the contract of sale. That has significant relevance to the subsequent attempt by solicitors acting for Capita Finance to convert the mortgage into a security in favour of that company for quite different obligations of the defendant under a loan agreement of 13 January 2015. I will return to that subject.
On 8 January 2015 Mr Boyd contacted the Westpac manager who was responsible for the defendant's loan account. The manager said that Westpac would not consider lending the defendant any more money until he had either cleared his existing debts, presumably those owed both to Westpac and to his trade creditors, or sold his house. At this time the defendant told Mr Boyd that he expected to net $210,000 from a quick sale of 223 Cornish Street. On 12 January 2015, by email, Mr Boyd proposed to the defendant the following: How about Capita Finance pays out the Westpac loan and takes it over until you sell the property. That way we can also make further loans to you and help you clean up the credit payments. The defendant responded (errors as in original): Thats all very good thank you. Yes if capital corp can pay out west pack and [the principal creditor, for $23,500] be great.
On 10 January 2015 the defendant sought from Mr Boyd, by email, assurance that the contract for purchase of 3 Wattle Street was subject to finance. On 12 January 2015 Mr Boyd confirmed in writing that it was and that "therefore any deposits are refundable should the finance not be approved". This of course was a reference to longer term finance for the balance of the sale price, after the defendant had paid the deposit and contributed whatever additional funds he could towards completion, from the sale of his home at Broken Hill.
Mr Boyd's wife, Ms Paris, worked in the mortgage broking business of Capita Finance. On 13 January 2015 she sent to the defendant a letter of offer from Capita Finance and requested that he sign and return it by way of acceptance. In this transaction Capita Finance was acting as lender rather than broker. The covering letter concluded with this sentence: Please advise your Solicitor of this pending Letter of Offer IMMEDIATELY and seek independent legal advice.
The Letter of Offer included the following terms: Loan Amount $100,000 - $170,000 (Up to) Purpose of Loan To refinance the current Westpac loan fund payments to creditors provide the deposit and costs for the purchase of a property. The loan will be cleared from the potential sale of the security property. Lender Capita Finance Pty Ltd Security The loan will be secured by the following security […]. Mortgage Registered first mortgage by the Mortgagor over the property situated at 223 Cornish Street Broken Hill NSW 2880 described as: Lot 1 on Plan 203488 & Lot 3 on Plan 562399 (the Property). Charge […] Term and Repayment The term of the Loan is for 3 months from the date the Loan is advanced. Final Repayment On the last day of the Term the Borrower must repay all Outstanding Monies. Total No of Repayments 3 (including final repayment) assuming the loan is repaid on the due date.
The interest rate was specified at 12.5% per annum, payable one month after drawdown of any part of the loan and payable thereafter on the same day each month. Provided interest should be paid on or before the due date it would be calculated at the discounted rate of 8.5% per annum. Under cl 3.2 of the letter of offer, unpaid interest would be capitalised monthly. Clause 4 stated that if $100,000 of the loan were drawn down, then monthly interest would be $1041.67 at the full 12.5% rate and $708.33 at the discounted rate.
By 9 January 2015 the defendant had engaged Ms Vanessa Head of Statewide Conveyancing Service to act for him on completion of the purchase of 3 Wattle Street. It does not appear that he sought independent legal advice concerning the Letter of Offer. He initially replied, by email on 13 January 2015, as follows (errors as in original): All looks good if I pay on time is $708.33 payout hopefully in the 3 months if not we can extend up to one year. Hopefully we can sell and pay out in three months. Will sign and return today. Thanks for everything Brian. Mr Boyd responded to this a few minutes later as follows: Yes there is the option to extend for a further period if the Broken Hill property is not settled.
Two hours later, at 5:44pm on 13 January 2015, the defendant emailed back to Mr Boyd the signed execution page of the Letter of Offer. From that point it became a binding loan contract between Capita Finance and the defendant. In an email of 14 January 2015 Ms Vanessa Head acknowledged the defendant's instructions that he was selling his Broken Hill property and she recommended that the Wattle Street contract be made subject to that sale. She also advised as follows: In relation to your finance, I'm unable to provide you with any legal advice in relation to this. Should you wish to engage our office to provide you with legal advice on your finance situation please let me know urgently.
On 29 January 2015 Capita Finance paid out the defendant's debt to Westpac of $64,823.51, obtained a discharge of Westpac's mortgage over the Broken Hill property and caused that discharge to be registered, together with the mortgage in favour of CAM No 9 that had been executed by the defendant in Mackay on 7 January 2015. The latter mortgage was registered with effect from 12 February 2015. In relation to the discharge of Westpac's debt, the total amount drawn down against the defendant's facility with Capita Finance, including various fees, was $67,819.81. Also on 29 January 2015 Mr Boyd caused $31,500 to be drawn down on the defendant's facility with Capita Finance and paid to CAM No 9 in satisfaction of the deposit obligation under the Wattle Street sale contract. The defendant signed a specific authority in relation to the drawdown of the deposit, dated 4 February 2015 and sent by the defendant to Mr Boyd under cover of an email on 6 February 2015. On 19 and 23 February 2015 three amounts totalling nearly $25,000 were paid by Capita Finance to creditors of the defendant, at his request. At the end of February the defendant did not pay the interest that was then due and it was capitalised in accordance with the terms of the Letter of Offer. The opening balance of the defendant's loan account with Capita Finance on 1 March 2015 was $124,819.49.
It was clearly inappropriate for the defendant's mortgage of his Broken Hill land to CAM No 9 to have been registered on 12 February 2015. It was not a mortgage that satisfied the defendant's obligation to Capita Finance, under the Letter of Offer, to provide security for the amounts that were loaned. The deposit due under the contract for Wattle Street was loaned by Capita Finance to the defendant on 29 January and paid to CAM No 9. There was therefore no debt owing by the defendant to CAM No 9 in respect of which that company required, or was entitled to, mortgage security. On the other hand, the terms of the Letter of Offer required the defendant to provide a mortgage of his property to Capita Finance to secure repayment of the amounts loaned by that company. Capita Finance did not obtain such a mortgage.
During March 2015 the defendant requested Capita Finance to pay additional creditors by way of further draw down of his short term loan. The balance of his debt under the Letter of Offer increased accordingly. The three months term of the loan expired on 28 April 2015. On that date Mr Boyd provided the defendant with a statement showing that the balance owing was $129,387.13, including interest for April. Mr Boyd advised that the term of the loan could be extended "on a month by month basis up to a further 3 months". A form of request for extension was provided to the defendant for his signature and he signed and returned it during May 2015. He was advised that the loan would now expire on 28 July 2015.
By email of 14 February 2015 Mr Boyd had advised the defendant that $31,500 of the available limit under the Letter of Offer was being set aside to contribute to the completion of the purchase of 3 Wattle Street. Together with the deposit that had already been paid, that would amount to a total of 20% of the purchase price leaving 80% to be funded by a longer term lender. The intention of this was that the 20% provided by Capita Finance under its Letter of Offer, as well as all other amounts that had been advanced under that facility, would be repaid out of the sale proceeds of the Broken Hill property. Capita Finance acted as broker for the defendant, between February and July 2015, to obtain the longer term finance from La Trobe Financial Services Pty Ltd.
During June 2015 the defendant requested Capita Finance to pay various creditors and to debit the payments to his loan facility. On 8 July 2015 the purchase of 3 Wattle Street was settled. At that time the defendant authorised the drawdown from Capita Finance of $31,500 to be paid to CAM No 9. He authorised the drawing down of various other expenses incidental to the settlement. With accumulated and capitalised interest this brought the balance at the end of July 2015 to $180,368.35. The Broken Hill property had still not been sold at that date.
On 30 July 2015, Ms Paris on behalf of Capita Finance emailed the defendant to point out that his loan had expired and that the company was looking to refinance it. She stated that a valuation of the property would be required for this purpose and that it would have to be established that the value was around $230,000 in order to support a loan from another financier of 80% of value, as would be required to pay out Capita Finance. The defendant responded with two emails describing work that had been done to make the property ready for sale and further work that was required. He sought an extension of the loan from Capita Finance for another three months. I have not identified in the evidence any document by which such a further extension was formalised but it appears to have been accepted and acted upon by both parties. During August, September and October 2015 the defendant made some payments to Capita Finance. On 18 and 19 September 2015 he was reminded that the facility would expire on 29 October. He requested a further extension but this was not agreed. Further payments were made, spasmodically, during the months of November 2015 to February 2016. These largely covered interest as it accrued, although always after the due date.
From 1 February 2016 the defendant repeatedly asserted that the loan from Capita Finance had been granted for a term that would continue until the Broken Hill property was sold. Mr Boyd reminded him, in an email of 1 February 2016 of the following: The original loan was only for a 3 month period as you advised that was sufficient time required to sell the Broken Hill property. […]. We notified you well before Christmas that the loan must be paid out/refinanced by the end of March 2016 and no further extensions would be granted.
I am satisfied that all of the assertions in the above quoted passage are correct. The defendant replied, strongly disagreeing, and said that he would contact the Credit and Investments Ombudsman. On the afternoon of 1 February 2016 Mr Boyd replied that he was "certainly free to contact the Ombudsman and/or seek a legal opinion". At the request of the defendant, Mr Boyd provided a further copy of the Wattle Street contract.
Throughout February 2016 the defendant issued a stream of emails to Mr Boyd in which he vociferously asserted that he had been promised he would not have to repay the loan until the Broken Hill property was sold. I am satisfied that there was no such promise. The defendant lodged a complaint with the Ombudsman who then sent an email to Capita Finance advising that no enforcement action could be taken or continued so long as the defendant's complaint was under consideration and that, in the meantime, the debt or any right to recover it could not be assigned. The defendant made some further payments of interest, always late, up to 9 June 2016. Following the last such payment the balance of the loan was $181,187.32. No payment of interest or principal was made by the defendant after that date. The defendant's complaint remained under consideration by the Ombudsman until a determination was made on 20 July 2018. The plaintiff was unable to take any enforcement action during that period. Interest continued to accrue at the higher rate. The delay, with a hold on enforcement of any part of the debt, was not in anyone's interests. The defendant was never going to be relieved of his liability for the principal part of his debt, whatever relief he might have argued for, with the Ombudsman, in relation to interest or fees.

Alteration of the mortgage of the Broken Hill land

In supplementary submissions provided to the Court after the first day of hearing, the plaintiff stated that in about September 2016 it "came to the attention" of the Brisbane-based solicitor who acted for Mr Boyd's companies that CAM No 9 was named as mortgagee on the mortgage of the defendant's Broken Hill land, not Capita Finance. The factual content of the supplementary submissions has not been adopted on affidavit or in oral evidence but I treat the relevant parts, including oral explanations of the submissions that were given by Mr Boyd during the second day of the hearing, as admissible evidence so far as they constitute admissions against the plaintiff's interests.
According to those supplementary submissions, in September 2016 the solicitor for Mr Boyd's companies did the following things with respect to the registered mortgage of the defendant's land to CAM No 9: struck through the typed name of Capita Asset Management No 9 Pty Ltd where it appeared as Mortgagee; handwrote Capita Finance Pty Ltd in as Mortgagee and initialled the handwritten insertion; and caused the document to be registered as the Second Mortgage on 2 September 2016.
Mr Boyd informed the Court in oral submissions that there were two originals of the mortgage that had been signed on 7 January 2015 and that the alterations were made on the second original. I do not accept that. Having compared the altered document with the form of mortgage that was registered on 12 February 2015, bearing Land and Property Information No AJ251938E, I find all the handwriting on each document to be identical with the handwriting on the other document, except for the signature of the solicitor in the bottom right-hand corner, certifying the document to be correct for the purposes of the Real Property Act 1900 (NSW). I find that what was altered by the solicitor in September 2016 was a copy of the original mortgage to CAM No 9 that had been registered on 12 February 2015.
On 2 September 2016 this altered document was registered against the defendant's titles to the Broken Hill property as a second mortgage to Capita Finance, ranking behind the existing mortgage to CAM No 9, which was constituted by the same document but in its unaltered form. Then on 12 September 2016 the solicitor acting for Mr Boyd's companies cause there to be registered a discharge of the mortgage to CAM No 9.
Section 42 of the Real Property Act contains the following provisions that are relevant to the legal efficacy of the purported mortgage to Capita Finance (emphasis added): 42 Estate of registered proprietor paramount (1) Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded except - (a) the estate or interest recorded in a prior folio of the Register by reason of which another proprietor claims the same land, […] (2) In subsection (1), a reference to an estate or interest in land recorded in a folio of the Register includes a reference to an estate or interest recorded in a registered mortgage, charge or lease that may be directly or indirectly identified from a distinctive reference in that folio. (3) This section prevails over any inconsistent provision of any other Act or law unless the inconsistent provision expressly provides that it is to have effect despite anything contained in this section.
The document as altered in September 2016 did not take effect as a mortgage to Capita Finance. When the name of the mortgagee was changed from CAM No 9 to Capita Finance the document purported to effect a completely different transaction. The reference to the memorandum of terms No AE720944W now had the effect of making this a security for the defendant's obligations to Capita Finance under the Letter of Offer dated 13 January 2015, whereas when CAM No 9 was the named mortgagee the document may not have been security for any delimited obligation or, if it was, the obligation could only have been that of the defendant as purchaser under the contract for sale of 3 Wattle Street. All of the defendant's obligations to CAM No 9 under that contract had been satisfied more than a year prior to September 2016. The defendant was entitled to have the mortgage in its unaltered form discharged.
There is no suggestion in the evidence that the defendant assented to the transformation of the transaction that occurred through the solicitor's handwritten alterations. They were made over a signature that had been placed 20 months earlier. The changes were made without reference to the signatory. The instrument thus altered was a nullity, void ab initio. It did not gain indefeasible effect by registration because what has been described above amounted to fraud within the meaning of s 42(1). The alteration and the lodgement for registration were both fraudulent actions on the part of the solicitor. Mr Boyd made legal submissions to the contrary but I reject them out of hand. In such a plain case I do not consider it necessary to examine the terms in which the concept of fraud has been expounded in the authorities on s 42(1). It should have been self-evident to whoever made the alterations and lodged the altered document that one could not legitimately use the one signed instrument both as a registrable mortgage to CAM No 9 to secure whatever obligations the defendant owed to that company under the contract of sale and then, by alteration of a copy or duplicate of the instrument without assent of the registered proprietor, as a registrable mortgage of the same land to secure a different obligation to a different company under a loan agreement. This was a fraud on the registered proprietor and a fraud on the Register. The subsequent discharge of the mortgage as it had been originally signed and registered did not remedy the fraud.

Assignment of mortgage and debt to plaintiff

On 4 January 2017 Mr Boyd executed on behalf of Capita Finance a transfer to the plaintiff of the purported mortgage of the Broken Hill land that had been registered on 2 September 2016. Mr Boyd was the sole director of both companies and he controlled their respective affairs. The transfer of mortgage was registered against both of the defendant's titles on 23 January 2017. This did not give rise to an indefeasible title of the plaintiff to the mortgage interest because the interest transferred by Capita Finance was void and unenforceable for fraud.
On 31 January 2017 Capita Finance assigned to the plaintiff the defendant's debt under the Letter of Offer. Notice of the assignment was given in writing, immediately. The invalidity of the purported mortgage to Capita Finance and the inefficacy of the purported transfer of the mortgage to the plaintiff are not matters that detract from the enforceability of the debt or the assignment thereof.
The property at 3 Wattle Street was sold in early June 2019 and $71,076.91 was paid to Capita Finance out of the proceeds on 5 and 6 June. Interest has been incurred since then and nothing further has been paid. The balance claimed as at 30 November 2021, as submitted by Mr Boyd in an email to the Associate of 2 December 2021, is $277,525.71. Unless the defendant is entitled to relief under the statutory provisions that he has invoked, that amount remains payable to the plaintiff.

Defences pleaded against enforcement of the debt

The defendant alleges that the debt obligation created in terms of the Letter of Offer is void or unenforceable for reasons set out in the several paragraphs of his defence that I will consider under the following subheadings.

Defence pars 2D and 24A

It is alleged that the defendant was not provided with the mortgage of his land to CAM No 9, or with the memorandum of mortgage terms that was referred to therein, and further that he did not sign any mortgage document. I have found that the defendant did sign the mortgage to CAM No 9 but whether he did or not and whether he received a copy of the memorandum of mortgage terms are matters that have no bearing at all upon the enforceability of the Letter of Offer. The terms of that letter were accepted by the defendant six days later and, as I have found, the resulting loan agreement was not contractually connected with or secured by the mortgage to CAM No 9.

Defence par 24B

Paragraph 24B of the defence makes cross-reference to 10 earlier paragraphs in which conduct of the plaintiff, Mr Boyd and Capita Finance is impugned as misleading and deceptive contrary to s 12DA of the ASIC Act and s 1041H of the Corporations Act. The relevant part of s 12DA is as follows: 12DA Misleading or deceptive conduct (1) A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive. The relevant part of s 1041H of the Corporations Act is in these terms: 1041H Misleading or deceptive conduct (civil liability only) (1) A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive.
"Financial services" is defined very widely in s 12BAB, quoted at [55] below. In s 1023B of the Corporations Act "financial product" is given a definition that, for present purposes, is practically the same as in the ASIC Act. "Financial services" is defined by s 761A and Pt 7.1, Div 4 (ss 766A-766H) of the Corporations Act in extremely convoluted terms, again similar to the ASIC Act definition of those words. In the first instance I will consider this part of the defence on the assumption that Capita Finance's provision of a bridging loan falls within the statutory expressions "financial product" and "financial services", although doubt that that is so.
The defendant's allegations of misleading and deceptive conduct may be grouped. First, in pars 2H, 2I and 2J of the defence it is alleged that, whereas the defendant contracted with CAM No 9 to purchase 3 Wattle Street for $315,000, its value was only $250,000 at the date of sale; further, that the contract was subject to a condition that permitted settlement at any time up to 7 July 2016. There is no evidence that the value of the property was only $250,000. The contract expressly provided that it could be settled up to 18 months after it was entered into, depending upon when subdivision approval might be granted. That was not misleading in any sense and could not possibly constitute misleading conduct in relation to the bridging loan under the Letter of Offer.
Secondly, in pars 2O and 2P it is alleged that Mr Boyd represented that the loan under the Letter of Offer would be for as long as required to sell the Broken Hill land. I do not accept that Mr Boyd made such a representation. It is alleged that he did not advise that it was the policy of the plaintiff and/or Capita Finance that such a loan would have a maximum term of six months. The failure to state this was not misleading. At the time of the bridging loan being sought by the defendant he informed Mr Boyd that the Broken Hill land was being actively marketed. I find that it was expected by both parties that the land would be sold within three months. In the Letter of Offer a three-month term was very clearly and prominently stated. Mr Boyd agreed in writing that the loan could be extended "for a further period if the Broken Hill property is not settled". The length of the further period was not specified but could only have been understood as a reasonable period. This was honoured by extension for nine months.
I am unable to find in the communications contemporaneous with the signing of the Letter of Offer anything that could reasonably have been taken by the defendant as a representation that he would be entitled to insist upon extending the loan indefinitely whilst his land at Broken Hill remained unsold, irrespective of circumstances. I find that the long delay in effecting a sale of the property was due to the defendant undertaking renovations and repairs to the house on the land and failing to complete this work in an expeditious manner. It was no part of the terms of the bridging loan, or of any representation by the lender, that repayment would be deferred indefinitely while such renovations were undertaken.
Thirdly, in par 2Q the defendant alleges that details of his financial circumstances set out in a loan application to Capita Finance were incorrect. This document bears a handwritten date of 7 January 2016, which must have been intended by whoever wrote it to be 7 January 2015. The document records that the purposes for which a loan was being sought were the purchase of a home, being 3 Wattle Street, ($110,000); credit consolidation ($30,000) and renovations ($30,000). I do not accept that this document was brought into existence at 7 January 2015 and I cannot make a finding as to when it may have been created. 7 January 2015 was the day the contract was entered into and the caveat and mortgage in favour of CAM No 9 were signed. At that date neither Mr Boyd nor the defendant had proposed a loan of $170,000 for the above purposes. Whatever may be the explanation for this loan application document, there is no evidence that it was ever used in a way that could have constituted misleading or deceptive conduct towards the defendant. It purports to be a record of information that he provided to Capita Finance. If there are errors in it with respect to his financial position and if he ever saw the document at any relevant time, given his knowledge of his own affairs that could not have been misleading to him.
Fourthly, in par 2R the defendant complains that the plaintiff and Capita Finance did not verify aspects of his financial position before the Letter of Offer was issued, particularly respecting the value of the Broken Hill land, the value of the defendant's motor vehicle, the identity of his employer, his rate of remuneration, his rental and other expenses and, generally, his capacity to service a loan. Failure of the prospective lender to verify information bearing upon the borrower's financial capacity does not, in the circumstances of this case, amount to conduct misleading and deceptive of the borrower.
Finally, in pars 2Z, 2ZA and 2ZC the defendant makes wide ranging allegations that Mr Boyd and Ms Paris on behalf of Capita Finance and the plaintiff directed misleading representations to La Trobe Financial Services Pty Ltd in connection with the provision of long-term finance to the defendant for the balance of the purchase price of 3 Wattle Street. Any such misrepresentations might have been actionable by La Trobe Financial Services Pty Ltd but they do not support any complaint by the defendant with respect to his bridging loan from Capita Finance.

Defence pars 26 and 27

In pars 26 and 27 of the defence it is alleged that the conduct of the plaintiff, Mr Boyd and Capita Finance as pleaded in various earlier paragraphs, ranging between par 2H and par 2ZM, was unconscionable within the meaning of the unwritten law of the States and Territories of Australia and was in breach of ss 12CA and 12CB of the ASIC Act. The relevant parts of those sections are as follows (emphasis added): 12CA Unconscionable conduct within the meaning of the unwritten law of the States and Territories (1) A person must not, in trade or commerce, engage in conduct in relation to financial services if the conduct is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories. (2) This section does not apply to conduct that is prohibited by section 12CB. 12CB Unconscionable conduct in connection with financial services (1) A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of financial services to a person; or (b) the acquisition or possible acquisition of financial services from a person; engage in conduct that is, in all the circumstances, unconscionable. […] (3) For the purpose of determining whether a person has contravened subsection (1): (a) the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and (b) the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section. (4) It is the intention of the Parliament that: (a) this section is not limited by the unwritten law of the States and Territories relating to unconscionable conduct; and (b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and (c) in considering whether conduct to which a contract relates is unconscionable, a court's consideration of the contract may include consideration of: (i) the terms of the contract; and (ii) the manner in which and the extent to which the contract is carried out; and is not limited to consideration of the circumstances relating to formation of the contract.
These provisions only apply in relation to or in connection with financial services, as defined in s 12BAB of the ASIC Act. The following subsections of s 12AB appear relevant (emphasis added): 12BAB Meaning of financial service When does a person provide a financial service? (1) For the purposes of this Division, subject to paragraph (2)(b), a person provides a financial service if they: (a) provide financial product advice (see subsection (5)); or (b) deal in a financial product (see subsection (7)); or (c) make a market for a financial product (see subsection (11)); or (d operate a registered scheme; or (e) provide a custodial or depository service (see subsection (12)); or (ea) provide a superannuation trustee service; or (f) operate a financial market (see subsection (15)) or clearing and settlement facility (see subsection (17)); or (g) provide a service (not being the operation of a derivative trade repository) that is otherwise supplied in relation to a financial product (other than an Australian carbon credit unit or an eligible international emissions unit); or (h) engage in conduct of a kind prescribed in regulations made for the purposes of this paragraph. (1AA) Without limiting subsection (1), for the purposes of this Division, a financial product is a financial service.
This complex and possibly circular definition takes one to the meaning of "financial product", as follows (emphasis added): 12BAA Definition of financial product General definition of financial product (1) Subject to subsection (8), for the purposes of this Division, a financial product is a facility through which, or through the acquisition of which, a person does one or more of the following: (a) makes a financial investment (see subsection (4)); (b) manages financial risk (see subsection (5)); (c) makes non-cash payments (see subsection (6)). (4) For the purposes of this section, a person (the investor ) makes a financial investment if: (a) the investor gives money or money's worth (the contribution) to another person and any of the following apply: (i) the other person uses the contribution to generate a financial return, or other benefit, for the investor; (ii) the investor intends that the other person will use the contribution to generate a financial return, or other benefit, for the investor (even if no return or benefit is in fact generated); (iii) the other person intends that the contribution will be used to generate a financial return, or other benefit, for the investor; and (b) the investor has no day-to-day control over the use of the contribution to generate the return or benefit. Note 1: Examples of actions that constitute making a financial investment under this subsection are: (a) a person paying money to a company for the issue to the person of shares in the company (the company uses the money to generate dividends for the person and the person, as a shareholder, does not have control over the day-to-day affairs of the company); or (b) a person contributing money to acquire interests in a registered scheme from the responsible entity of the scheme (the scheme uses the money to generate financial or other benefits for the person and the person, as a member of the scheme, does not have day-to-day control over the operation of the scheme). Note 2: Examples of actions that do not constitute making a financial investment under this subsection are: (a) a person purchasing real property or bullion (while the property or bullion may generate a return for the person, it is not a return generated by the use of the purchase money by another person); or (b) a person giving money to a financial services licensee who is to use it to purchase shares for the person (while the purchase of the shares will be a financial investment made by the person, the mere act of giving the money to the licensee will not of itself constitute making a financial investment). Meaning of manages a financial risk (5) For the purposes of this section, a person manages financial risk if they: (a) manage the financial consequences to them of particular circumstances happening; or (b) avoid or limit the financial consequences of fluctuations in, or in the value of, receipts or costs (including prices and interest rates). Note 1: Examples of actions that constitute managing a financial risk are: (a) taking out insurance; or (b) hedging a liability by acquiring a futures contract or entering into a currency swap. Note 2: An example of an action that does not constitute managing a financial risk is employing a security firm (while that is a way of managing the risk that thefts will happen, it is not a way of managing the financial consequences if thefts do occur). Meaning of makes non-cash payments (6) For the purposes of this section, a person makes non-cash payments if they make payments, or cause payments to be made, otherwise than by the physical delivery of Australian currency in the form of notes and/or coins. Note: Examples of actions that constitute making non-cash payments are: (a) making payments by means of a facility for direct debit of a deposit account; or (b) making payments by means of a facility for the use of cheques; or (c) making payments by means of a purchased payment facility within the meaning of the Payment Systems (Regulation) Act 1998 , such as a smart card; or (d) making payments by means of traveller's cheques in Australian currency.
I do not consider that a loan agreement such as the bridging loan under Capita Finance's Letter of Offer dated 13 January 2013 falls within the above definition of "financial product". Provision of the loan was not a "financial service". If I am wrong in that, and if ss 12CA and 12CB apply, I nevertheless would not find that either of those provisions was infringed. Amongst the defendant's allegations of unconscionable conduct are the paragraphs considered under the preceding subheading (pars 2H, 2I, 2J etc). None of those would amount to unconscionable conduct in the relevant sense, either alone or taken in combination. I address the defendant's additional allegations of unconscionable conduct, in pars 26 and 27 of the defence, as follows.
In par 2W the defendant has pleaded the terms of the Letter of Offer and in par 2X he alleges that that bridging loan was "unsuitable for the defendant" for the following reasons: (a) It was for an amount greater than the value of the Land; (b) On the sale of the Land no surplus would be available; (c) It was for a term of 3 months, yet the sale of the Land was beyond the Defendant's control as it was dependent upon the market and may have taken a period of time greater than 3 months; (d) It was for a term of 3 months, yet plans for Wattle Street may not have been registered until July 2016 (and were not registered until June 2015).; (e) Interest only payments were at least $14,450 per annum ($170,000 x 8.5%), but at an interest rate of 12.5% on $170,000 were $21,250 per annum. Together with repayments on the La Trobe Loan of $19,293.72, the loan payments of the Defendant were at least $40,543.72 per annum, 70% of the Defendant's net annual income of $57,600. After payment of rates, water and electricity with respect to the Land and Wattle Street and payment of all other living expenses the Defendant had an annual deficit and sold his belongings and used pay day lenders and pawn shops to survive; (f) The Loan amount was insufficient, after payment of the credit defaults, payout of the Westpac loan and purchase of Wattle Street, to fund renovations to the house on the Land so that its value could not be improved to assist its sale; (g) The Loan was unnecessary unless the La Trobe loan was also entered into.
Having regard to the cross-reference from pars 26 and 27 to the above particulars, it is apparent that the defendant equates his allegation of the loan being "unsuitable" with the statutory concept of unconscionable conduct on the part of the lender. Items (a)-(g) are intended as particulars of unconscionability. As to (a) and (b), there is no evidence upon which I could determine the value of the Broken Hill land at 13 January 2015. The Letter of Offer created a facility of up to $170,000. I have no evidentiary basis for a finding, on the balance of probabilities, that the Broken Hill land was worth less than $170,000 at the date the loan agreement was made. Further this could have no bearing on the fairness or good conscience of the lender unless it knew the value was less. The position was quite the contrary. By 8 January 2015 the defendant had told Mr Boyd that the property was being marketed at a price of $287,000 and that he expected a quick sale at $210,000.
After the Letter of Offer had been accepted by the defendant, he obtained a letter dated 17 January 2015 from the licensee in charge of the First National real estate agency at Broken Hill in the following terms: During our inspection we consider the features of the property including size, location, condition and improvements. We also review current market conditions and measure your property against comparable sales - other properties that have sold in current market conditions. By doing so we can submit to you a considered estimate of market value. Our considered estimate is that if offered for sale in the current market conditions which prevail today the property would be best listed in the vicinity of $250,000 to achieve a sale price of $230,000 to $240,000.
If the defendant was correct in telling Mr Boyd on 7 January 2015 the property was already listed at $287,000, then I assume that was with a different agent. The above letter was passed on by the defendant to Mr Boyd. While not constituting admissible opinion evidence for the purpose of proving value, so far as actual value may be an issue in these proceedings, the letter from the real estate agent is sufficient to satisfy me that Mr Boyd had reasonable grounds for believing that the property's value exceeded the maximum that was proposed to be loaned by Capita Finance.
As to (c), the surrounding circumstances and communications make clear the intention of both parties that the facility under the Letter of Offer would be discharged within three months, by application of the proceeds of sale of the Broken Hill land, which the defendant said his agent was actively marketing. This was a typical bridging loan, a very common arrangement where a borrower has contracted to purchase a second property and where funds to complete the purchase are required more urgently than the timeframe within which they could be released from sale of the first property. Bridging finance on security of the property that is proposed to be sold can be made available almost instantly. There is nothing unconscionable about an advance in these circumstances, where it is recognised by both parties that the only source of funds for repayment will be the proceeds of the intended sale. It is an inherent feature of any sale of property, including in connection with the discharge of a bridging loan, that the vendor is dependent upon the market, both as to timing and as to price. A bridging loan is not unconscionable merely because it carries this self-evident risk.
As to (d), the potential extension of time for completion of the Wattle Street purchase, depending upon approval of the subdivision plan, has no bearing on the fairness of the Letter of Offer. This circumstance is incapable of supporting the defendant's contention that it was unconscionable to lend on the terms of the Letter of Offer.
As to (e), the interest rates do not of themselves make the Letter of Offer unconscionable. The loan was never intended by either party to continue up to settlement of the contract for 3 Wattle Street, when the La Trobe loan would be drawn down and the defendant would commence to incur interest thereon. Settlement and drawdown of the La Trobe loan was expected by both parties to take place no earlier than six months after the Letter of Offer, which is in fact what occurred. The bridging loan was entered into in the expectation of both the defendant and Capita Finance that the Broken Hill land would have been sold to discharge the debt within three months so that the defendant would never be trying to service both facilities concurrently. The contract comprised in the Letter of Offer cannot be characterised as unconscionable, at the date when it became binding, by reference to the subsequent, unanticipated event that the defendant failed to sell the Broken Hill land before the Wattle Street contract fell due for completion and the La Trobe loan had to be drawn.
As to (f), I am not satisfied on the balance of probabilities that the amount of the bridging loan was insufficient to fund any renovations of the Broken Hill property that may have been necessary to improve its value and assist in its sale. There is no evidence before the Court from which I could assess the condition of the property as at 13 January 2015, or from which I could determine what work was required to be done, or how much it would cost, or whether the expenditure would actually improve the property in a respect that would assist with its sale. The defendant's contention in this respect does not establish that the Letter of Offer was unconscionable.
As to (g), I do not accept that in any relevant sense the bridging loan from Capita Finance was "unnecessary". Given that the defendant desired to purchase 3 Wattle Street, he had to borrow the deposit of $31,500 from somewhere. He also had to clear the Westpac debt and clear his outstanding creditors, in order to improve his credit standing sufficiently to be able to borrow the balance of the Wattle Street purchase price. It is meaningless to assert that the bridging loan was "unnecessary" without context as to other decisions that the defendant made and the capital requirements that resulted from those decisions.
Taking together all of the items (a)-(g) in par 2X, the evidence falls far short of establishing anything like a case that the Letter of Offer was unconscionable or that its presentation to the defendant or acceptance by him was the product of unconscionable conduct by the lender, Capita Finance. The plaintiff is an assignee of the debt under the Letter of Offer and there is no evidence or even any coherent allegation of unconscionable conduct on its part.
Defence pars 26 and 27 also cross-refer to par 2ZK, in which the defendant alleges that on about 7 August 2015 he received an offer to purchase the Broken Hill land for $180,000 and that "the plaintiff and/or Capita Finance did not agree to this sale". Paragraph 2ZK continues as follows: This meant that the defendant was forced to attempt to maintain the [bridging] Loan and the La Trobe loan which was impossible.
There is evidence of an offer of $180,000 for the Broken Hill property but there is insufficient evidence for me to be satisfied on the balance of probabilities that the defendant wished to accept this. When informed of the offer, Mr Boyd wrote to the defendant in the following terms: Don't forget there are extra costs at settlement including your solicitor's fee, Council rates, agent's commission. Best to do the numbers as if the Mortgagee doesn't get enough to "clear" the mortgage the settlement won't proceed.
At this date the balance of the loan stood at $179,098.97. In view of the defendant's repeated failure to pay interest in a timely manner over the preceding seven months and the emergence of a steady stream of additional, unanticipated creditors, it seems in retrospect to have been unwise of Mr Boyd not to have encouraged sale of the Broken Hill property at this price, assuming that the prospective purchaser would really have seen it through. Be that as it may, this event in August 2015 has nothing to do with the assessment of whether conduct leading to the Letter of Offer seven months earlier was unconscionable or whether the bargain itself may be so characterised.
In summary, none of the allegations that are cross-referenced in pars 26 and 27 of the defence as particulars of unconscionability are sufficient to sustain the defendant's case in that respect.

Defence par 28

In par 28 of the defence it is alleged that, because of breaches of ss 12DA, 12CA and 12CB of the ASIC Act, the defendant is entitled pursuant to s 12GM to have the plaintiff's claim for debt and for possession of the Broken Hill land dismissed. The alleged breaches of statutory provisions have not been established and the defendant cannot be relieved of the debt or other obligations arising under the agreement comprised in the Letter of Offer on this basis.

Defence pars 29-31

In pars 29 and 30 of the defence it is alleged that, in contravention of the National Consumer Credit Protection Act, the plaintiff: 1. failed to supply a credit guide as required by s 113(1), being a written statement of particulars of the lender, its Australian credit licence number and its fees and charges; 2. failed to have undertaken within the preceding 90 days a credit assessment, as required by ss 115 and 116, to determine that the proposed loan would be "suitable" for the defendant; 3. failed to make reasonable enquiries to verify the defendant's financial situation, as required by s 117; 4. proceeded to advance the bridging loan when it was unsuitable for the defendant, contrary to ss 118, 131 and 133.
Each of the provisions referred to above is a civil penalty provision for the purposes of the Act, with the consequence that any breach will empower the Court under s 179(1) as follows: to make such order as the court considers appropriate against the defendant to: (c) compensate the plaintiff, in whole or in part, for the loss or damage; or (d) prevent or reduce the loss or damage suffered, or likely to be suffered, by the plaintiff.
Section 180A confers further power upon the Court to grant remedies if it is satisfied that a person who provided a credit service to a consumer engaged in conduct that was "unfair or dishonest", if such conduct had the result of causing the consumer to enter into a contract or to grant a mortgage, that he or she would not otherwise have entered into, or granted.
The evidence does not establish any breach of s 115 or s 116 by the plaintiff or by Capita Finance or by Mr Boyd. The relevant party is Capita Finance, which made the loan to the defendant. Mr Boyd, on behalf of that company, made a preliminary assessment of whether the bridging loan would be suitable for the defendant. He did so on 7 and 8 January 2015 by collecting information from the defendant concerning his earnings, his debts and the value of the property at Broken Hill that the defendant proposed to sell. Mr Boyd further investigated the defendant's financial position by contact with the manager of his account at Westpac Bank and by reviewing the credit report from Veda. Further, Mr Boyd obtained from the defendant information concerning the listing for sale of his Broken Hill property, from which an indication of value was given. I consider that these were reasonable steps to verify the defendant's financial situation. Unfortunately, they failed to reveal his true position because the defendant did not disclose the extent of his creditors.
Section 118(3) creates a presumption that if the consumer would only be able to meet the financial obligations created by a proposed credit contract by selling his or her principal place of residence, then those obligations could only be discharged "with substantial hardship", unless the contrary is proved. If the consumer's obligations under a credit contract can only be complied with under substantial hardship then, by force of subs (2)(a), the contract will be regarded as unsuitable and, by force of s 133, the credit provider should not enter into it. Those provisions are not engaged on the facts of this case. It was a premise of the bridging loan, as both the defendant and Mr Boyd well knew, that in order to repay the debt the defendant would have to sell his property at Broken Hill. That was not his principal place of residence. He had moved from there to Mackay seven months earlier and the whole purpose of this bridging finance was to enable him to fulfil his obligations under the contract for purchase of 3 Wattle Street, which was to become his principal place of residence. In the meantime, his principal residence was a rented property in the Mackay area.
The evidence does not enable me to make an affirmative finding, one way or the other whether Capita Finance supplied to the defendant a credit guide as required by s 113. However, assuming that there was a breach of that obligation it would not in my view justify granting, under s 179 or s 180A, any relief from the defendant's obligations under the bridging loan agreement. The agreement of 13 January 2015 was a straightforward, readily comprehended transaction whereby the defendant was assisted to gain access to the capital value of his property at Broken Hill in an expeditious fashion, by mortgage loan, in order to fund the acquisition of a residence in North Queensland where he had chosen to live. The reasons why the whole scheme did not work were that the defendant had greater debts than he had acknowledged, either to himself or to the lender, when the transaction was made and that he elected, for reasons known only to himself, to expend considerable time and money upon making improvements to the Broken Hill property while its sale was pending, leading to both more debt and deferred repayment.
By way of particulars of the alleged breaches of ss 115-118, 131 and 133, the defendant has referred, again to numerous paragraphs of his pleading in the range 2A-2ZF. Many of those cross references are inapposite. Those that are material I have already addressed above.

Defence par 32

In par 32 of the defence it is alleged that the bridging loan from Capita Finance to the defendant was "unjust in the circumstances relating to the contract at the time it was made", within the meaning of s 7 of the Contracts Review Act 1980 (NSW). Once again the defendant has cross-referenced this claim to his allegations in pars 2A-2ZF, this time as particulars of injustice. I have considered the matters that, by force of s 9 of the Act, must be taken into account in determining whether s 7 is engaged. For reasons that have been considered above in connection with other aspects of the defendant's pleading, I do not find any of those particulars substantiated and I do not find that the bridging loan contract was unjust. The defendant has not established an entitlement to relief under the Act.
The bridging loan in this case exhibited some of the features that the Victorian Court of Appeal identified, in Jams 2 Pty Ltd v Stubbings [2020] VSCA 200, as typical of "asset based lending". In the following extract from the Court of Appeal's judgment I have omitted citations: [1] Asset-based lending involves lending on the value of the assets securing the loan, without any consideration of the borrower's ability to repay the loan from their own income or other assets. No credit-risk analysis other than the calculation of the loan amount to security value ratio is undertaken by the lender. Thus, the lender makes the loan 'without regard to the ability of the borrower to repay by instalments under the contract, in the knowledge that adequate security is available in the event of default'. [2] There are numerous cases which have considered whether, in the circumstances of the particular case, asset-based lending constitutes unconscionable conduct in equity or under various statutory provisions which prohibit such conduct. The prevailing view is that the existence of asset-based lending, while a relevant factor in deciding whether a particular loan resulted from unconscionable conduct, is not determinative - because "all the circumstances" of each case must be considered. For example, there may be irregularities with the loan application which put the lender on notice that further inquiries should be made.
In the present case, the defendant's ability to service the loan with interest payments was not disregarded by the lender but both parties were fully aware that the defendant's capacity to repay the principal was limited to the proceeds of sale of the land at Broken Hill, against which the loan was to be secured. To that extent, the transaction was "asset based". I have taken that factor into account in assessing whether the transaction was unconscionable in equity or under any of the statutory provisions that have been invoked and in applying the criteria in s 9 of the Contracts Review Act to determine whether the agreement was unjust.

Defence par 33

In par 33 the defendant alleges that the conduct of the plaintiff, Capita Finance and Mr Boyd was "unconscionable in equity" and on that basis he seeks to be relieved from his obligations to repay the loan. The particulars of unconscionability are again, those pleaded in pars 2A-2ZF, which I have already considered. It is the conduct of Mr Boyd and of Capita Finance that is relevant, not that of the plaintiff which is no more than an assignee of a claimed debt. I do not find that the defendant has proved unconscionable conduct on the part of either Mr Boyd or Capita Finance.

Cross-claim

In pars 42-47 and 49 of his cross-claim the defendant relies upon all the same statutory provisions and equitable principles as pleaded in his defence. He has particularised his claims under those provisions and principles on the same factual basis as in the defence. In the cross-claim the defendant seeks damages under numerous heads, including interest and costs incurred under the borrowing arrangement and various alleged consequential losses.
The cross-claim causes of action all fail for the same reasons that I have given above in stating why I consider that these allegations are not sustainable as matters of defence.

Judicial sale

I have found that the loan agreement comprised in the Letter of Offer dated 13 January 2015 is contractually binding and not vitiated upon any of the numerous grounds agitated by the defendant. The wording of the Letter of Offer under the heading "Security", quoted at [21] above, is a specifically enforceable agreement on the part of the defendant to grant a mortgage in favour of Capita Finance over the two parcels that comprise 223 Cornish Street, Broken Hill. In Fisher & Lightwood's Law of Mortgage (3rd Ed 2013), the learned authors state at [1.41]: [An] agreement to execute a mortgage will ordinarily be specifically enforced if the mortgagee has already advanced the monies: Takemura v National Australia Bank Ltd (2003) 11 BPR 21, 185 and see Northcote and Fry, Specific Performance, 6th ed, Stevens, London, 1921, [54].
As stated by Leeming JA in National Australia Bank Ltd v Clowes [2013] NSWCA 179 at [25]: An equitable mortgage will also arise where there is a specifically enforceable agreement between mortgagor and mortgagee to create a mortgage. I have held that the rights of Capita Finance under the loan agreement have been effectively assigned to the plaintiff. Those rights include the right to have the term for grant of a mortgage specifically enforced. The plaintiff therefore holds an equitable mortgage of the Broken Hill land.
Quoting further from Fisher & Lightwood, at 1.33: An equitable mortgage is a contract which operates as a security and is enforceable under the equitable jurisdiction of the court. The court carries it into effect either by giving the creditor immediately the appropriate remedies or by compelling the debtor to execute a security in accordance with the contract: Ashton v Corrigan (1871) LR 13 Eq 76; Hermann v Hodges (1873) LR 16 Eq 18. The "appropriate remedies" in the present case include an order for judicial sale and ancillary orders to carry such a sale into effect.
In King Investment Solutions v Hussain [2005] NSWSC 1076 Campbell J considered the power of the Court to make an order for sale of property to which title was registered under the Real Property Act 1900 (NSW), in respect of which a creditor of the proprietors held an un-registered second mortgage. His Honour held as follows: [81] […] The interest of a mortgagee of Torrens title land is only ever, even when the mortgage is registered, in the nature of a statutory charge, together with some of the attributes of an old system mortgage that are not inconsistent with the Torrens system and such equitable rights as arise from the contract between the mortgagor and mortgagee. An unregistered mortgage will likewise be regarded by equity as conferring an equitable charge together with some of the attributes of an old system mortgage that are not inconsistent with the Torrens system and such equitable rights as arise from the contract between the mortgagor and mortgagee. As seen earlier […], an order for judicial sale is the standard way of enforcing an equitable charge. Indeed, the Court can order sale even where there is a charge or lien which expressly excludes the right to a legal mortgage: Tenant v Trenchard (1869) LR 4 Ch App 537. [82] I conclude that the Court has jurisdiction to order a sale at the suit of an unregistered mortgagee of Real Property Act 1900 land. However, further consideration will need to be given to the circumstances in which, and terms on which, it is proper to make such an order. […]
The above conclusions must be equally applicable to a specifically enforceable agreement to grant a registrable Real Property Act mortgage, as in the present case. That agreement, comprised in the Letter of Offer, will in Campbell J's words, "likewise be regarded by equity as conferring an equitable charge together with some of the attributes of an old system mortgage that are not inconsistent with the Torrens system and such equitable rights as arise from the contract between the mortgagor and mortgagee". The Court has jurisdiction to order a sale at the suit of the plaintiff in this case, as assignee of the specifically enforceable promise to grant a mortgage. The exercise of this jurisdiction does not depend upon the service of a notice under s 57(2)(b) of the Real Property Act: see Guardian Mortgages v Miller [2004] NSWSC 1236 at [86]; King Investment Solutions v Hussain at [84].
In King Investment Solutions v Hussain Campbell J made observations concerning conditions that should be imposed when ordering a judicial sale and evidence that should be before the Court to enable appropriate conditions to be formulated. Some of the precautions referred to by his Honour are specific to the situation where a sale is ordered at the suit of an equitable mortgagee or chargee whose rights rank behind those of a prior encumbrancer. For the purposes of the present case, the following passages of Campbell J's judgment are relevant: [101] A sale will usually not be ordered where there is no evidence of value of the property: Smithett v Hesketh (1890) 44 Ch D 161 at 163; Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 380. In fact there is at least one example of a sale being ordered even though there was no evidence of value: Wickham v Nicholson (1854) 19 Beav 38; 52 ER 262. However, in most cases it would not be a proper exercise of a judicial discretion to order sale at the suit of a second mortgagee unless there was some evidence of value. Without that evidence, it would not be possible to fix a reserve price for any sale, would not be possible to form a view about whether it was appropriate to give the mortgagors time to pay before a sale could be made (and if so how long), and there would be serious difficulties in deciding who should have the conduct of the sale, and what conditions ought be imposed for the protection of the first mortgagee. [102] […] If the Court is authorising the sale, it should exercise some control over the terms and manner of conduct of the sale. The various topics listed in the last sentence of the previous paragraph are the sort of matters that should be addressed in exercising that control. [103] In the nineteenth century, if there was any doubt about the amount the mortgagor owed to the mortgagee, the court's practice was to order an account be taken, and to give the mortgagor an opportunity of paying the amount found to be due, before any sale was ordered […]. The present relevance of this practice is that it shows the importance the Court attached to needing to know how much debt was secured by the property, before the order for sale was made. [...] [104] The courts have repeatedly fixed a reserve price when ordering sale: [citations omitted]. [105] Such a reserve is calculated to be sufficient to cover the amount due for principal and interest and costs to the first mortgagee when the mortgagor is given the conduct of the sale. By analogy, when a second mortgagee is given the conduct of the sale it should also be sufficient to cover the principal, interest and costs of the first mortgagee. In the present case, when the amount owed to the first mortgagee was not known, it was not possible to have a sound basis on which a reserve price could be fixed. [106] It is usual […] for the Court to give consideration to what security a person seeking an order for sale should be required to provide [citations omitted]. [107] There is a decision that, when mortgagors were given the conduct of a sale security was not required, because they alone would be liable for the costs of sale: Davies v Wright (1886) 32 Ch D 220. However this decision was not followed in Brewer v Square [1892] 2 Ch 111 at 115 - in Brewer, when mortgagors were given the conduct of a sale, they were ordered to bring into court a sum of money as security for costs, with the amount ordered being fixed on the basis that it covered additional costs, beyond those which the mortgagors would need to meet in carrying out the sale. Brewer v Square is the better decision in this respect. [111] There will always be a question of discretion whether it is appropriate to order an immediate sale, or to allow some further time in which redemption can take place. [Survey of authorities concerning the point at [111] and [119] omitted] [119] The point, for present purposes, is not that the discretion to order a sale will necessarily be exercised in the twenty-first century in the same way as it was in the nineteenth. Rather, one point is that there is a discretion to be exercised, and without factual material by reference to which the discretion can be exercised, which includes at least the value of the property and the amount owing on the security of it, the exercise of the discretion itself is likely to miscarry. Another point is that the courts have exercised considerable caution in the making of orders for sale. [120] Before the court can order a sale of mortgaged property consideration must be given to who is to have the conduct of the sale. [122] In a case concerning a somewhat similar right of sale arising under the Bankruptcy Rules it has been held that the conduct of the sale will generally be given to the mortgagee when the security is insufficient (because the mortgagee has an interest in that situation in maximising its recovery), and to the mortgagor when the security is likely to be more than sufficient (because the mortgagee in that situation has no interest in maximising any surplus over the amount of the mortgage debt) but the Court has full discretion in the matter: [citations omitted]. […] [123] These cases provide a further illustration of why it is necessary for the court to know whether or not the security will be insufficient, and hence needs to know the value of the property and the amount secured on it before a proper exercise of discretion can be engaged in. [127] In New South Wales, an equitable mortgagee of land has no entitlement to an order for possession, of the type provided for by section 79 Supreme Court Act 1970 prior to its repeal on 15 August 2005, and now by section 20 Civil Procedure Act 2005: Mills v Lewis (1985) 3 BPR [97205] at 9431 - 9431.3 per Priestley JA (with whom Hope and Glass agreed). However, if there is a covenant in the mortgage entitling an equitable mortgagee to possession upon default, once there has been a default an equitable mortgagee is entitled to a declaration that it is entitled to possession, and, in an appropriate circumstance, an order in the nature of specific performance requiring the mortgagor to give possession to the mortgagee: ibid.
I will order that the Broken Hill property be sold and that the net proceeds, after meeting all costs of sale, be paid first in discharge of the debt owed to the plaintiff and that any balance be accounted for to the defendant. The amount owing has been established in the proceedings. However, there is at present no evidence of the current value of the property. Tentatively, and subject to the receipt of valuation evidence, I am inclined to order that the sale be on the following terms: 1. The sale not be deferred for any further time to be allowed to the defendant to redeem the mortgage. 2. The plaintiff have conduct of the sale. 3. The plaintiff not be required to provide security in respect of the sale.
There would be no warrant for allowing the defendant further time in which to pay out his debt as he has demonstrated both an unwillingness and an inability to do so. It would not be appropriate for the Court to order that the defendant have conduct of the sale as the Court can have no confidence that he would act responsibly and with expedition. On present information I see no need for the plaintiff to provide security as all expenses of sale will be met out of the proceeds. The Court is not aware of any other party having a legal claim upon the proceeds in priority to the plaintiff's claim. A reserve will be set in light of the evidence of value, when received.

Orders

The judgment for debt to which the plaintiff is entitled is the figure of $277,525.71 referred to at [43] above, together with interest thereon at the rate prescribed under the Uniform Civil Procedure Rules, calculated from 1 December 2021. Interest for the period between 1 December 2021 and the date of these reasons and orders cannot be imposed on the defendant at the contractual default rate of 12.5% because no further interest will fall due under the loan agreement until the end of this month.
The following orders will be entered: 1. Judgment for the plaintiff against the defendant in the sum of $277,525.71, together with interest on that amount at the rate prescribed under the Uniform Civil Procedure Rules calculated from 1 December 2021. 2. Declare that the plaintiff holds an equitable mortgage over the whole of the land comprised in Lot 1 Deposited Plan 203488 and in Lot 3 Deposited Plan 562399, both parcels being at Broken Hill, Parish of Picton, County of Yancowinna. 3. The cross-claim is dismissed. 4. Direct that the plaintiff file and serve within 21 days a current valuation of the land at Broken Hill referred to in the declaration of the Court made this day, such valuation to be sworn or affirmed by an appropriately qualified land valuer. 5. Upon the valuation being filed and served in accordance with the direction in order (3), the plaintiff may apply for the proceedings to be relisted for the purpose of the parties being heard as to further final orders with respect to judicial sale.
Upon the proceedings being relisted as envisaged in order (5), I will make an order for sale of the Broken Hill land on such terms and conditions as may then appear appropriate and I will make an order for removal from the Register of mortgage No AK720138, that was registered on 2 September 2016.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 December 2021

Australian Securities and Investment Commission Act 2001(Cth)

National Credit Code Real Property Act 1900(NSW)

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