Evolution Lifestyles Pty Ltd v Clarke

The Nature of the Proceedings

1. By statement of claim filed on 20 August 2015, the plaintiff seeks judgment in its favour for possession of real property comprised in Folio Identifier 951/862777 ("the Rutherford property"). It also seeks payment of a monetary sum, interest and costs.
2. The first defendant disputes the plaintiff's entitlement to an order for possession or monetary payment in the sum claimed, contending that the plaintiff did not terminate the contract in accordance with its terms and is not entitled to possession, and that it failed to serve a notice pursuant to s 88 of the National Credit Code.
3. By statement of cross-claim filed on 12 January 2016 the first defendant seeks a declaration that the contract entered between she and the plaintiff on 16 February 2009 was unjust within the meaning of the National Credit Code (found in Schedule 1 of the National Consumer Credit Protection Act 2009 (Cth)) or, alternatively, the Contracts Review Act 1980 (NSW). She further seeks an order setting aside the contract, together with further orders directed at resolution of the competing monetary claims.

The Procedural History

1. The contract at the heart of the dispute was executed on 16 February 2009. It was an unusual contract which has been described as a "rent to buy" contract relating to the Rutherford property. The defendants were permitted possession of the property by way of licence, with an obligation to pay the purchase price plus interest in 780 instalments over a 30 year period. Full ownership of the property up until payment of the final instalment remained with the plaintiff.
2. Broadly, the contract specified: 1. A purchase price of $349,000 with a deposit of $34,000 payable on entry to the contract; 2. The balance of the purchase price of $315,000 was payable over a term of 30 years by way of principal and interest payments of $1,207.60 paid fortnightly; 3. The plaintiff would remain as the registered owner on the title until the purchase price was paid in full; 4. The defendants were granted a licence to occupy the property on entry into the contract; 5. The defendants were liable for all outgoings and insurance attaching to the property by reason of their entry into occupation; 6. The defendants were permitted to make improvements to the property with the plaintiff's consent; 7. The defendants could assign their rights under the contract with the plaintiff's consent; and 8. The defendants could sell or refinance the property at any time to repay the balance of the purchase price.
3. The defendants took possession of the property in January 2009.
4. The defendants made fortnightly payments pursuant to the contract for 6 years. During this period, the defendants also made improvements to the property at a cost of about $24,573.55.
5. On around 18 February 2015 the defendants ceased making any further payments under the contract. This cessation prompted a default notice to be issued by the plaintiff which was not rectified by the defendants in the time specified. By way of correspondence from its solicitor, the plaintiff then sought to terminate the contract with effect on 13 July 2015.
6. The first defendant continued in possession.
7. On 20 August 2015 the plaintiff filed the statement of claim and secured a default judgment on 7 October 2015, for the sum of $27,189.65. The plaintiff sought to enforce the judgment by writ of possession.
8. On 20 November 2015 the first defendant obtained an interim stay of execution of writ.
9. On 11 December 2015 Rothman J made orders setting aside the default judgment against the first defendant and staying the enforcement of any writ of possession until further order. Orders were made to facilitate the hearing of the matter, including an order for expedition. An order was made for payment by the first defendant of an occupation fee of $150 per week to the plaintiff.
10. Some two or so months before the competing claims were listed for joint hearing the plaintiff filed a motion for summary judgment, but the application was refused by Button J on 14 June 2016: Evolution Lifestyles Pty Limited atf Evolution Property Trust v Clarke (No 2) [2016] NSWSC 769.
11. The claim and cross-claim came before me for hearing on 1 and 2 August 2016.

The Case for the Plaintiff

1. The plaintiff relies principally upon the evidence of its sole director, Vanessa Steer. Ms Steer gave evidence to the Court by affidavits of 8 December 2015 and 22 April 2016, and orally on 1 August 2016. Evidence largely of a documentary nature was produced by the plaintiff's solicitor by affidavits of 10 December 2015, 11 December 2015, 9 May 2016, 18 May 2016 and 6 June 2016.
2. Ms Steer deposed that the plaintiff was the registered owner of the Rutherford property. The property was purchased as an investment and had, prior to the contractual arrangement with the defendants, been leased under a rental tenancy agreement. It had been vacant for three or four months before Ms Steer advertised the property for sale.
3. In November or December 2008, Ms Steer placed a sign on the Rutherford property which was either "For Sale by Owner" or "Rent to Own" with a telephone number. She subsequently received a telephone inquiry from the second defendant, who told her that he was interested in the property but, due to previous defaults, he could not obtain finance through a bank. Ms Steer had some discussion with the second defendant about his income and assets, and his access to funds for a deposit. He indicated that, inclusive of a payment from the First Home Owners Grant scheme, he and his partner, Ms Clarke, had $34,000 for that purpose.
4. A meeting was arranged and Ms Steer went to the property leased by the defendants in Rutherford to discuss the sale of the property. The meeting, probably on 17 January 2009, went for an hour or two. Mr Tapper told Ms Steer that, as he had had "previous credit defaults," he was interested in an "instalment contract". He told her, "I know I won't be able to get a loan from any of the banks at present" (Affidavit of Vanessa Steer of 22 April 2016, [14]).
5. Ms Clarke was present at the meeting. She asked Ms Steer specifically whether the proposed contract was a "rent to buy" but was assured that: "It's a mortgage. You are basically paying off a mortgage. This type of finance option enables you to improve your credit rating and then move into the mainstream banking system." (Affidavit of Vanessa Steer of 22 April 2016, [16])
6. Ms Steer asked questions of the defendants as to assets and the like, and completed an "Application Form" for each based upon the information each provided (Ex VS1, pp 92 - 97).
7. The second defendant signed the application form in his name but refused to sign a "Privacy Declaration Form", a document which would have authorised the plaintiff to conduct credit checks, offering Ms Steer his "credit report" instead.
8. Ms Clarke did sign a declaration. She told Ms Steer that she had four children and was "a stay at home mum" in receipt of Centrelink and family benefits payments (Affidavit of Vanessa Steer of 22 April 2016, [28]). Her income was very modest.
9. Although Mr Tapper had told Ms Steer that he had a friend who was a solicitor and who would act for he and Ms Clarke, Ms Steer gave the couple a list of solicitors "who can help you" (Affidavit of Vanessa Steer of 22 April 2016, [30]). In the process of completing an "Instalment Sales Contract Instruction Sheet" (Ex VS2, pp 3), Ms Steer recorded the name of a law firm in the Hunter area that was at the top of the list she provided.
10. During the meeting Ms Steer says that she formed the view that the defendants had a loving and supportive relationship and a strong desire to purchase the property and provide a good home for their family. She understood that it was Mr Tapper's income that would be used to discharge the contractual obligations; Ms Clarke had no real income. Despite that, she concluded that it was "'natural' that I describe them as joint purchasers" (Affidavit of Vanessa Steer of 22 April 2016, [43]).
11. The plaintiff entered into a contract with the defendants for the sale of the property by payment of instalments on 16 February 2009. Contracts for sale were exchanged; settlement was delayed for a period of 30 years.
12. The defendants were permitted to enter the property in late January 2009 prior to execution of the contract on payment of what was referred to by Ms Steer as a "good faith payment" of $880 (T13:37). Ms Clarke had told Ms Steer that she and Mr Tapper wished to paint the property prior to moving in.
13. After the contract was executed on 16 February 2009, the defendants retained possession, thereafter paying a fortnightly instalment by way of payment of the purchase price plus interest, until about 18 February 2015 when instalments ceased to be paid.
14. In late January 2015 the first defendant contacted Ms Steer to advise her that she and the second defendant were to divorce, and raised the issue of the sale of the property.
15. When payment of instalments ceased on 18 February 2015, Ms Steer sent the defendants arrears and default notices by way of post and text message. She also had ongoing communication with Ms Clarke about the sale of the property.
16. In May 2015 she was provided with a copy of an Agency Agreement between the defendants and a real estate agency, with the Rutherford property to be sold by auction. Ms Steer deposed that there had been "an understanding" between the plaintiff and the defendants at the time the contract was entered in February 2009 that, should the defendant's wish to sell the property, there would be a "back to back transfer", with the plaintiff transferring ownership of the property to the defendants, who would immediately transfer it to the new purchaser, upon payment of outstanding monies (Affidavit of Vanessa Steer of 8 December 2015, [18]).
17. A number of documents headed "Notice of Default" directed to the defendants jointly, or to each separately, are in evidence. A notice bearing the date 28 May 2015 and directed to the second defendant at the address of the Rutherford property is relied upon as the notice pursuant to s 88 of the National Credit Code.
18. Although the property was listed for sale in June 2015, Ms Steer asserts that the agent had difficulty in finding a buyer due to the state the property was in, and because of the first defendant's behaviour.
19. Ms Steer exhibited a number of documents evidencing email exchanges between she and the real estate agent contracted to sell the property. Those exchanges suggest that an offer was made on the property in August 2015 for $315,000 but the first defendant rejected the offer as it was too low. Her hope was to achieve a price closer to the $349,000 she and the second defendant contracted to pay for the Rutherford property in 2009.
20. The property has not been sold, and Ms Clarke remains in possession.
21. In her evidence on 1 August 2016, Ms Steer deposed that the Rutherford property was the only property owned by the plaintiff, and it had never before entered into an instalment sales contract.
22. At the pre-sale meeting of 17 January 2009, Ms Steer completed a document headed "Instalment Sales Contract" and a direct debit agreement via which instalment and other payments would be taken by the plaintiff from the second defendant's bank account. At the meeting a figure of $1300.15 was arrived at as the fortnightly instalments payment due on the contract. Interest was charged equivalent to the reference rate plus a premium.
23. She said that, upon payment to the plaintiff of a fee of $880 she allowed the defendants access to the property, even though the contract had not been signed. The payment was "a sign of good faith" which the plaintiff retained (T1:37).
24. On executing the contract, the defendants were obliged to pay the agreed instalment payment. In the contract a fortnightly instalment payment of $1207.60 was specified. Despite that the plaintiff's account of payment against the contract specified $1300.15 as the amount due. Ms Steer conceded having had no access to records of payments through the Ezidebit automated system, as records had been archived and were not available. On being shown statements in the defendant's possession of payments made, Ms Steer was obliged to concede that her schedule of payments made against the contract was in error, and did not reflect the whole of the monies paid by the defendants. As a result, the plaintiff was in error in the amount of money claimed by it as arrears.
25. There was also the question of error in fees and charges billed to the defendants. Ms Steer deposed that she charged the defendants a $10 administration charge each month, together with a fee of $8 described as a "fee for servicing the loan" (T25:7). She was not clear as to the contractual basis for the latter fee, although she believed the plaintiff was entitled to "on-charge" any cost charged to it by the bank through which the plaintiff had financed its purchase of the Rutherford property (T25:8). She said in re-examination that she may have mistaken the definition of the fee (T30:35).

The Case for the First Defendant

1. Ms Clarke relies upon her affidavits of 19 November 2015, 10 December 2015 and 5 April 2016, together with evidence she gave before the Court. Documentary evidence was produced by Ms Clarke's solicitor, which includes a report from O'Loughlin Valuers going to matters connected with the value of the Rutherford property.
2. The author of the report opines that the market rental value of the property varied over the period 2009 to 2016, from a minimum amount of $350 per week in 2009 and 2015 - 2016, to a maximum of $400 per week in 2012.
3. In 2003 Ms Clarke began a relationship with the second defendant, Mr Tapper. They lived together from 2008 to 2012.
4. In late 2008 Mr Tapper saw a sales notice in the window of the Rutherford property and spoke to Ms Clarke about purchasing the property. Ms Clarke did not wish to buy a home at that time, believing that she and Mr Tapper would be in a better position to do so at a later time.
5. The defendants inspected the property, with Mr Tapper keen to buy it, whilst Ms Clarke did not wish to do so. In her affidavit of 4 April 2016, Ms Clarke described how intimidated she felt by the second defendant, who was insistent about the purchase.
6. Mr Tapper arranged a meeting with Ms Steer to discuss the prospective purchase.
7. Ms Steer attended the address at which the couple were then living with paperwork associated with the proposed purchase. Ms Clarke had a very young baby at that time and her focus was on caring for the baby and making tea and coffee rather than on the discussion at the meeting.
8. The paperwork was completed that day at the meeting, including an "Instalment Sales Contract: Instruction Sheet" which both defendants signed. Ms Steer told the couple that the income from Mr Tapper's employment was not enough to get the house, as he had a bad credit rating. She said that Ms Clarke's good credit rating was needed to get the house. Ms Clarke asked Ms Steer if Mr Tapper could make the purchase by himself but was told his debts made that impossible. Ms Steer told the defendants that the plaintiff's goal was "to help people with financial difficulties purchase their own home" (Affidavit of Toni Clarke of 10 December 2015, [4]).
9. Mr Tapper had just started a job in the mining industry and was on probation with his employer. He was to earn $78,000 per annum. He had recently received a legacy of $20,000 which would go towards a deposit for the purchase of the Rutherford property. Ms Clarke had the care of her four children and was not otherwise employed. She had no savings. She and Mr Tapper were entitled to a grant under the First Home Owners Scheme.
10. Ms Clarke asked Ms Steer if the proposed contract was a rent to buy contract but was told it was a mortgage.
11. Ms Steer told the defendants that they would have to see a solicitor at Glendale to sign the contract. She provided a document with a list of lawyers entitled "Independent Legal Advice", recommending that the defendants use the legal firm at the top of the list.
12. Soon after, Ms Clarke received a telephone call from Ms Steer who told her that the contracts were ready to sign. Ms Steer told her that she and Mr Tapper would need to go to the particular law firm, urging her: "If you go down and pay today you will get a major discount otherwise you will have to pay full price." (Affidavit of Toni Clarke of 4 April 2016, [31])
13. Shortly after Ms Clarke went to see a solicitor at the firm suggested by Ms Steer. She had her baby and her 26 month old son with her. The solicitor told her that, if she gave instructions and paid his fees that day, the charge would be significantly discounted. She paid a sum to him and signed the contract with Evolution Lifestyles that day. Mr Tapper was not with her and did not sign the contract that day.
14. Ms Clarke deposed that she did not understand what the solicitor told her about the contract and, when she expressed her concern that the contract was a rent to buy scheme, she was told that it was a mortgage in the same way as if she had gone to a bank to borrow money to purchase a home.
15. In her December 2015 affidavit, Ms Clarke deposed that she did not like the Rutherford property and did not want to buy it. She was pressured to do so. She said, at [11]: "At first I did not like the house at all and particularly the colour scheme. I did not really want to go into purchasing a property with Shayne at that stage. We discussed it a lot and I said why not wait 5 years, invest the money and save on top of that and then we will have more for a deposit for a house. I felt I did not really have much say in it. Shayne was being violent to me at that time and very controlling. The day the deposit was made to Evolution Lifestyles account I was very hesitant making the step to purchase a house that day and tried to get Shayne to re-consider. Shayne dragged me up the street by the arm to make me pay the deposit. Shayne would not have been able to get the house by himself as he had been running for years from defaults and my credit rating was good."
16. Ms Clarke felt pressured by Mr Tapper to proceed with the purchase of the Rutherford property. On the day the couple were due to pay the $34,000 deposit for the property, she met Mr Tapper in the street and again suggested they wait before buying a house. He physically grabbed her by the arm and propelled her up the street towards the bank where they obtained a cheque for the deposit monies. Ms Clarke deposed in her April 2016 affidavit that, if she had not done as her husband required, she would have been subjected to violence.
17. Ms Steer allowed the couple early access to the property and they collected the keys around 24 January 2009. The property needed painting and had water damage. The grounds needed tending. She and Mr Tapper undertook that work, as well as other repairs and improvements. She estimates the value of that work as about $50,000. Receipts for various items and work to the value of $24,573.55 have been tendered to the Court.
18. After moving in, the couple paid the instalment payments due to the plaintiff, in an amount roughly equating to $679 weekly. Overall, exclusive of the deposit, and payments for insurance and water rates, the defendants paid $204,432.36 up until 20 August 2015.
19. In 2010 Ms Clarke and Mr Tapper married. The relationship was, however, very troubled, and Ms Clarke says that Mr Tapper was frequently violent to her. Police attended the Rutherford property on numerous occasions and the (then) Department of Community Services ("DOCS") became involved because of concerns for the children in the household. As a consequence of DOCS involvement and court action, Mr Tapper was obliged to leave the Rutherford property in late 2012 or early 2013 (Affidavit of Toni Clarke of 10 December 2015, [16]).
20. Thereafter, Ms Clarke believes that she was stalked by the second defendant. There were frequent intrusions to the Rutherford property, she was followed in her car, and her dog was so badly injured by an attacker as to be subsequently euthanized. Ms Clarke became deeply depressed and found it difficult to maintain her usual lifestyle.
21. The payments to the plaintiff pursuant to the contract were made regularly until the separation of the defendants led to difficulties. Ms Clarke had an agreement with Mr Tapper that he would meet the regular payments to the plaintiff in lieu of child support payments.
22. In January 2015 Ms Clarke became concerned that Mr Tapper may have stopped making the payments. She sent an inquiry about it to Ms Steer by text message but did not receive a response. In April 2015, she received a letter from the plaintiff noting that she and Mr Tapper were in default.
23. She subsequently took steps to sell the Rutherford property, contracting with a real estate agency to handle the sale. One offer was made on the property, but the court proceedings then commenced and the sale fell through.
24. Ms Clarke set out the detail of her education and upbringing. She was the only child of her parents and saw and was subject to domestic violence as a child. Her mother struggled with mental illness and Ms Clarke was left largely to her own devices. She left school at a young age to work to help her mother. She was educated only to Year 8 at school.
25. Ms Clarke gave evidence before the Court on 1 and 2 August 2016.
26. Referring to the meeting with Ms Steer to discuss the possible purchase of the Rutherford property, Ms Clarke deposed that she had felt pressured by both the second defendant and Ms Steer: "[…] I did feel pressured by Vanessa too because, yeah, I felt pressured by her because she was there to fill a, fill a contract out and, and do a deal and if I pulled out like the whole deal pulled out. Initially it was, it was, overall it was my decision, I said yes or no, but I, I was pressured about it. I didn't want anything to do with it." (T37:44)
27. She had not been able to fully attend to the meeting because her two young children were with her.
28. Ms Clarke conceded that Ms Steer had not forced her to sign any document on the day of the meeting, or to enter the contract. She did, however, maintain that she had felt pressured to a degree by Ms Steer to proceed with the purchase, even though Ms Clarke had said to her that she didn't want to do it. The defendant said (at T46:41) that the principal reason for entering the contract was fear of the second defendant: "It was more the fear of, of how things would be, that if I didn't sign it, that really forced me to sign it. I'm not saying Vanessa forced me. She didn't force me at all. She was very, not forceful but, like she obviously knew what she was talking about. She had it all sorted out and everything and, and that's what he wanted. I, I, I didn't, I didn't go along with this because I wanted to. I went along with it because of the intimidation from my, my ex‑husband and the consequences that would happen if I didn't go along with it, because he cornered me and he said to me, "If you don't f'ing go and f'ing do this," he said, "You stuff everything up. This is the only chance I've got.""
29. The solicitor whom Ms Clarke subsequently saw to sign the purchase contract was one recommended by Ms Steer. Ms Clarke said that Ms Steer had required them to let her know the solicitor she and Mr Tapper would use on the day of the meeting, and they selected the name at the top of the list of solicitors given to them by Ms Steer, because she had recommended that solicitor. Ms Clarke said that she had found it difficult at the meeting with the solicitor, because she did not understand the contract, and the presence of her two babies made it hard to concentrate: "[…] I was breastfeeding a child at the time of the meeting. I had another child running around crying. I was under a lot of pressure. I said to my ex-husband - well, he's almost my ex-husband now, but I said to Shane at the time on the phone, "I don't want to - I don't want to do this. Can't you go and do it?" He said, "I can't. I've just started this job. I can't - I'm in a trial period. I can't have a day off," and there was so much pressure. It all had to be done. He didn't even read the documents. He just got - it was after the date that I went down that he went down and he just raced into the office, signed it, and raced out while I waited in the Aldi car park, which I believed it was Glendale. Obviously it was Argenton." (T60:36 - 45)
30. Ms Clarke said the solicitor went through the contract very quickly and she was not able to read it before she signed it. There was pressure on her to complete everything and pay the solicitor's fee that day, to ensure a reduction in the fee payable. She said that Ms Steer believed the man was a good lawyer and recommended him and "who are we to question?" (T62:39).
31. Subsequently, installments were regularly paid until the second defendant ceased to make the payments. Ms Clarke gave some further detail of the violence and intimidation to which she was subjected at around this time, and said that, although she did what she could, she was not able to cope with matters connected with the sale of the house.
32. She acknowledged receiving a termination notice some time around 3 July 2015 which required her to vacate the premises by 13 July 2015. She acknowledged that, in the period leading up to the attempt to sell the property, it was a mess.

The Relevant Law

1. To resolve the competing claims it is necessary to determine whether: 1. the plaintiff terminated the contract between it and the defendants lawfully pursuant to a contractual right for non-payment; and 2. in relation to the cross claim, whether the contract is unjust within the meaning of the National Credit Code ("the Code") or, alternatively, the Contracts Review Act.
2. At the time the contract was executed the Consumer Credit (New South Wales) Code applied. It continued to apply until the commencement of the Code on 1 July 2010. The contract is a "carried over instrument" within the meaning of s 4 of the National Consumer Credit Protection (Transition and Consequential Provisions) Act 2009 (Cth).
3. The plaintiff relies upon a notice of default ("the Notice") served on the first defendant, although directed to the second defendant, on 28 May 2015 (Ex VS1, pp 60). Receipt of the Notice was conceded by the first defendant; its effect is in dispute.
4. Section 88 of the Code outlines certain criteria in order for a default notice to be effective. In short, enforcement action cannot be taken if a notice of default does not comply with each criterion. Section 88 relevantly provides: "Enforcement of credit contract (1) A credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract unless: (a) the debtor is in default under the credit contract; and (b) the credit provider has given the debtor, and any guarantor, a default notice, complying with this section, allowing the debtor a period of at least 30 days from the date of the notice to remedy the default; and (c) the default has not been remedied within that period; and (d) if the credit contract is for a reverse mortgage, the credit provider has spoken to one of the following persons by telephone or in person in that period and has thus both confirmed that the debtor received the default notice and informed the person of the consequences of failure to remedy the default, or has made reasonable efforts to do so: (i) the debtor; (ii) a practising lawyer representing the debtor; (iii) a person with a power of attorney relating to the debtor's financial affairs. Criminal penalty: 50 penalty units. Note: If a debtor or guarantor has given a credit provider a hardship notice or a postponement request there may be extra requirements that the credit provider must comply with before beginning enforcement proceedings: see sections 89A and 94. […] Default notice requirements (3) A default notice must contain a prominent heading at its top stating that it is a default notice and specify: (a) the default; and (b) the action necessary to remedy the default; and (c) a period for remedying the default; and (d) the date after which enforcement proceedings in relation to the default, and, if relevant, repossession of mortgaged property may begin if the default has not been remedied; and (e) that repossession and sale of mortgaged property may not extinguish the debtor's liability; and (f) the information prescribed by the regulations about the debtor's right to: (i) give a hardship notice under section 72; or (ii) give a postponement request under section 94; or (iii) make an application to the court under sections 74 and 96; and (g) the information prescribed by the regulations about: (i) the approved external dispute resolution scheme of which the credit provider is a member; and (ii) the debtor's rights under that scheme; and (h) that a subsequent default of the same kind that occurs during the period specified for remedying the original default may be the subject of enforcement proceedings without further notice if it is not remedied within the period; and (i) that, under the Privacy Act 1988 , a credit reporting body (within the meaning of that Act) may collect and hold default information (within the meaning of that Act) in relation to the default; and (j) any other information prescribed by the regulations. […] When default notice not required (5) A credit provider is not required to give a default notice or to wait until the period specified in the default notice has elapsed, before beginning enforcement proceedings, if: (a) the credit provider reasonably believes that it was induced by fraud on the part of the debtor or mortgagor to enter into the credit contract or mortgage; or (b) the credit provider has made reasonable attempts to locate the debtor or mortgagor but without success; or (c) the court authorises the credit provider to begin the enforcement proceedings; or (d) the credit provider reasonably believes that the debtor or mortgagor has removed or disposed of mortgaged goods under a mortgage related to the credit contract or under the mortgage concerned, or intends to remove or dispose of mortgaged goods, without the credit provider's permission or that urgent action is necessary to protect the mortgaged property. Non-remedial default (6) If the credit provider reasonably believes that a default is not capable of being remedied: (a) the default notice need only specify the default; and (b) the credit provider may begin the enforcement proceedings after the period of 30 days from the date of the notice. […]"
5. The plaintiff principally relies upon the predecessor to s 88 of the Code, that being s 80 of the Consumer Credit (New South Wales) Code. The plaintiff asserts that, given the similarity between the two sections, principles articulated in relation to the latter remain relevant. Specifically, the principle that a breach of s 80 does not automatically invalidate proceedings: Monas v Perpetual Trustees Victoria [2011] NSWCA 417.
6. The first defendant asserts that rulings in relation to the former Code can amount to no more than guidance to the Court.

Cross-claim: Unjust contract

1. Necessary in the determination of this claim is to consider whether the contract was unjust in the circumstances in which it was made, having regard to the factors in s 9 of the Contracts Review Act. This exercise involves a conclusion of fact involving a broadly based value judgment: Riz v Perpetual Trustee Australia Ltd [2007] NSWSC 1153; (2008) NSW Conv R 56-198 at [51].
2. Section 9 of the Act outlines the matters to which the Court is to have regard: "(1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract, or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation, (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract."
3. The defendant relies upon ss 76 and 77 of the Code as the foundation for her claim for relief against an unjust contract. Those provisions are as follows: "76 Court may reopen unjust transactions Power to reopen unjust transactions (1) The court may, if satisfied on the application of a debtor, mortgagor or guarantor that, in the circumstances relating to the relevant credit contract, mortgage or guarantee at the time it was entered into or changed (whether or not by agreement), the contract, mortgage or guarantee or change was unjust, reopen the transaction that gave rise to the contract, mortgage or guarantee or change. Matters to be considered by court (2) In determining whether a term of a particular credit contract, mortgage or guarantee is unjust in the circumstances relating to it at the time it was entered into or changed, the court is to have regard to the public interest and to all the circumstances of the case and may have regard to the following: (a) the consequences of compliance, or noncompliance, with all or any of the provisions of the contract, mortgage or guarantee; (b) the relative bargaining power of the parties; (c) whether or not, at the time the contract, mortgage or guarantee was entered into or changed, its provisions were the subject of negotiation; (d) whether or not it was reasonably practicable for the applicant to negotiate for the alteration of, or to reject, any of the provisions of the contract, mortgage or guarantee or the change; (e) whether or not any of the provisions of the contract, mortgage or guarantee impose conditions that are unreasonably difficult to comply with, or not reasonably necessary for the protection of the legitimate interests of a party to the contract, mortgage or guarantee; (f) whether or not the debtor, mortgagor or guarantor, or a person who represented the debtor, mortgagor or guarantor, was reasonably able to protect the interests of the debtor, mortgagor or guarantor because of his or her age or physical or mental condition; (g) the form of the contract, mortgage or guarantee and the intelligibility of the language in which it is expressed; (h) whether or not, and if so when, independent legal or other expert advice was obtained by the debtor, mortgagor or guarantor; (i) the extent to which the provisions of the contract, mortgage or guarantee or change and their legal and practical effect were accurately explained to the debtor, mortgagor or guarantor and whether or not the debtor, mortgagor or guarantor understood those provisions and their effect; (j) whether the credit provider or any other person exerted or used unfair pressure, undue influence or unfair tactics on the debtor, mortgagor or guarantor and, if so, the nature and extent of that unfair pressure, undue influence or unfair tactics; (k) whether the credit provider took measures to ensure that the debtor, mortgagor or guarantor understood the nature and implications of the transaction and, if so, the adequacy of those measures; (l) whether at the time the contract, mortgage or guarantee was entered into or changed, the credit provider knew, or could have ascertained by reasonable inquiry at the time, that the debtor could not pay in accordance with its terms or not without substantial hardship; (m) whether the terms of the transaction or the conduct of the credit provider is justified in the light of the risks undertaken by the credit provider; (n) for a mortgage - any relevant purported provision of the mortgage that is void under section 50; (o) the terms of other comparable transactions involving other credit providers and, if the injustice is alleged to result from excessive interest charges, the annual percentage rate or rates payable in comparable cases; (p) any other relevant factor. Representing debtor, mortgagor or guarantor (3) For the purposes of paragraph (2)(f), a person is taken to have represented a debtor, mortgagor or guarantor if the person represented the debtor, mortgagor or guarantor, or assisted the debtor, mortgagor or guarantor to a significant degree, in the negotiations process prior to, or at, the time the credit contract, mortgage or guarantee was entered into or changed. Unforeseen circumstances (4) In determining whether a credit contract, mortgage or guarantee is unjust, the court is not to have regard to any injustice arising from circumstances that were not reasonably foreseeable when the contract, mortgage or guarantee was entered into or changed. Conduct (5) In determining whether to grant relief in respect of a credit contract, mortgage or guarantee that it finds to be unjust, the court may have regard to the conduct of the parties to the proceedings in relation to the contract, mortgage or guarantee since it was entered into or changed. Application (6) This section does not apply: (a) to a matter or thing in relation to which an application may be made under subsection 78(1); or (b) to a change to a contract under this Division. (7) This section does apply in relation to a mortgage, and a mortgagor may make an application under this section, even though all or part of the mortgage is void under subsection 50(3)." 77 Orders on reopening of transactions The court may, if it reopens a transaction under this Division, do any one or more of the following, despite any settlement of accounts or any agreement purporting to close previous dealings and create a new obligation: (a) reopen an account already taken between the parties to the transaction; (b) relieve the debtor and any guarantor from payment of any amount in excess of such amount as the court, having regard to the risk involved and all other circumstances, considers to be reasonably payable; (c) set aside either wholly or in part or revise or alter an agreement made or mortgage given in connection with the transaction; (d) order that the mortgagee takes such steps as are necessary to discharge the mortgage; (e) give judgment for or make an order in favour of a party to the transaction of such amount as, having regard to the relief (if any) which the court thinks fit to grant, is justly due to that party under the contract, mortgage or guarantee; (f) give judgment or make an order against a person for delivery of goods to which the contract, mortgage or guarantee relates and which are in the possession of that person; (g) make ancillary or consequential orders."

Submissions of the Parties

1. Ms Klooster, for the plaintiff, made the following submissions in relation to the cross-claim: 1. There was no material inequality in bargaining power between the plaintiff and Ms Clarke; 2. The plaintiff did not pressure Ms Clarke to sign the contract. Any pressure exerted on Ms Clarke to be a party to the contract came solely from the second defendant; 3. The plaintiff had no knowledge of the undue influence the second defendant was placing on Ms Clarke; 4. Ms Clarke understood the nature and effect of the essential contract terms, including the risks associated with non-payments; 5. It was reasonably practicable for Ms Clarke to negotiate or reject any provisions of the contract; 6. Except for the concession as to clause 9.5(ii) which is no longer sought to be enforced, none of the terms of the contract are unjust.
2. In the event that the contract is found to be unjust, the plaintiff submits that relief should not be awarded to the first defendant. He deposes that one matter which weighs heavily into whether relief should be provided is whether or not the circumstances of unjustness were known to the plaintiff. In this case, he contends, there is no evidence of that knowledge.
3. Mr Batley, for the first defendant, identifies particular features of this transaction which should give rise to a finding that the contract was unjust. Those include: 1. The complexity of the contract and the terms providing for forfeiture of payments in the event of default and other unfair terms; 2. The lack of adequate explanation of her rights and liabilities under the contract; 3. Ms Steer's representation that the contract was a mortgage; 4. The relative lack of sophistication of the defendant; 5. The defendant's reluctance to enter the transaction and the pressure placed upon her directly by Mr Tapper and the indirect pressure applied by Ms Steer; 6. The improvidence of the transaction given the high cost compared to market rental and high cost compared to ordinary bank rate mortgage finance and the risks of default and termination of the contract; 7. The financial hardship to the defendant caused by the contract terms.
4. Broadly, the complexity and unjustness of the contract terms and the context in which the negotiations took place are the substance of the allegations of the unjustness of the contract.

Did Evolution Terminate the Contract Lawfully?

1. To answer these questions, it is necessary to determine whether valid default and termination procedures were followed by the plaintiff.
2. There is no dispute that from mid-February 2015 the defendants ceased to make instalment payments that fell due under the contract and were in default of the contract as provided by clause 9.1(ii).
3. Clause 9.2 of the contract sets out the obligation that falls upon the vendor in the event of such default, if it is to rely upon default to terminate the contract. The vendor must serve a "Notice of Default" upon the purchaser which: 1. Allows the purchaser a period of at least one month from the date of service of the Notice of Default to remedy the default; and 2. Specifies the default and action necessary to remedy it; and 3. Is served upon the purchaser.
4. Clause 9.3 provides that, if the purchaser fails to comply with the Notice of Default, the vendor may serve a Notice of Termination, and the contract shall be terminated in accordance with the Notice of Termination. The Notice of Termination must: 1. Specify reliance upon the Notice of Default to terminate the contract; and 2. Specify the requirement for vacant possession immediately or by a particular date or within a particular period.
5. Examination of the documents relied upon by the plaintiff as the Notice of Default and the Notice of Termination respectively reveals a failure to comply with the terms of the procedures provided for by the contract.
6. A document directed to the defendants and dated 26 May 2015 (Ex VS1, pp 57) is described as a Notice of Default (as are a series of earlier documents). It stated that a payment required to be made on 25 May 2015 was dishonoured and outstanding.
7. There followed a reference to arrears administration charges that flowed from non-payment, being: "Less than 14 days overdue 5% 15-28 days overdue 10% 29 days + overdue 25%".
8. The document concluded: "You will need to make payments on this outstanding amount urgently by 13/6/15. Continued non-payment will be reported to credit authorities. If payment has been made please disregard this notice."
9. The total amount in arrears was asserted in a separate Notice of Arrears to be $12,978.27, an amount the plaintiff concedes was substantially in error, the actual arrears being much less, an error brought about by the plaintiff's poor account keeping and the excessive administration charges levied against the defendants.
10. The document was under the hand of Ms Steer.
11. Although the document is headed "Notice of Default" it does not comply with the vendor's contractual obligations as to service of such a notice. The document does not specify the default and the action necessary to remedy it, nor does it allow the defendants a period of at least one month to remedy the default.
12. A document is headed Notice of Arrears of the same date is also in evidence. It refers to earlier notices of arrears of 5 March 2015, 28 March 2015, 7 April 2015, 14 April 2015, 29 April 2015 and 13 May 2015, and notes that "no payment has been received as at the date of writing. As previously indicated payment(s) were required within 14 days of the due date".
13. A further Notice of Default, directed to Mr Tapper at the address of the Rutherford property, and dated 28 May 2009, is relied upon by the plaintiff as the relevant Notice for the purposes of the contract and for the purposes of s 88 of the Code.
14. It is in similar terms to the document of 26 May 2015, and refers to the dishonoured and outstanding payment of 25 May 2015, and an arrears administration charge payable at a particular percentage referable to the length of time overdue.
15. It concludes: "You will need to make payments on this outstanding amount urgently by 16/6/15. Continued non-payment will be reported to credit authorities. If payment has been made please disregard this notice."
16. This document does not comply with the vendor's contractual obligation as to service of a default notice. No issue is taken with service, despite the fact that the notice is directed to Mr Tapper alone, but it is contended, and I accept, that the purported notice fails to specify the nature of the default and the action necessary to remedy it, and it does not allow a period of at least a month to remedy the default.
17. Further documents in similar terms were sent in June 2015. None of these documents comply with the terms of the contract for a default notice.
18. Neither do the documents termed "Notice of Default" comply with s 88 of the Code. As to that, the section provides, relevantly: "Enforcement of credit contract (1) A credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract unless: (a) the debtor is in default under the credit contract; and (b) the credit provider has given the debtor, and any guarantor, a default notice, complying with this section, allowing the debtor a period of at least 30 days from the date of the notice to remedy the default; and (c) the default has not been remedied within that period; and (d) [….]"
19. The plaintiff submits that nothing turns upon the defects in the default notice since the notice referred to a dishonoured payment that had not been rectified, and the plaintiff in fact took no action to terminate the contract within a period of one month, even though no such period was expressly referred to on the purported notice. Additionally, the plaintiff relies upon earlier notices of 28 March 2015, 7 April 2015 and 26 May 2015 which warned of "legal action" against the defendants due to the outstanding repayments.
20. I accept that the documents termed "Notice of Default" would have flagged to Ms Clarke that payments had not been made against the contract as required, and warned her in a general way that the vendor was contemplating some action. However, where the consequences of default are so onerous to the defaulting party, here the purchaser, it is reasonable to expect the vendor to comply strictly with the terms of the contract to notify the purchaser of default, the means of rectifying the default, and the intention to terminate the contract.
21. It does not seem to me to be sufficient to rely upon documents which do not comply with what is contractually required as demonstrative of a general intention to terminate the contract.
22. The plaintiff further relies upon s 88(6) of the Code, which provides: "Non-remedial default (6) If the credit provider reasonably believes that a default is not capable of being remedied: (a) the default notice need only specify the default; and (b) the credit provider may begin the enforcement proceedings after the period of 30 days from the date of the notice."
23. The plaintiff contends that the ongoing failure of the defendants to make the required payments was a basis upon which to assert a reasonable belief that the default is not capable of being remedied. However, there is no evidence that the plaintiff made inquiries of the defendants as to their capacity to rectify the default. Ms Steer had been advised by Ms Clarke that, following her separation from the second defendant, she had arranged with him to pay the instalment payments in lieu of child support. There is no evidence that the plaintiff made any direct inquiry as to Ms Clarke's capacity to make the payments by other means, or any inquiry of Mr Tapper as to his capacity to make good the deficit, or that the plaintiff had this knowledge through some other source.
24. Whilst the plaintiff submits that the proposed sale by the defendant of the Rutherford property was a basis upon which to form the belief referred to by s 88(6), I do not accept that an intention to sell the property could ground such a belief, particularly in circumstances where the plaintiff accepts that the defendants were entitled to sell the property at any stage, with "back to back" transfer of the title. Ms Clarke had advised the plaintiff that she and Mr Tapper intended to divorce, a circumstance which would frequently precipitate the sale of a jointly owned property.
25. I am therefore unable to conclude that it was reasonable for the plaintiff to believe that the default could not be rectified. Accordingly, s 88(6) can offer no comfort to the plaintiff.
26. The plaintiff relies upon s 88(5)(c) of the Code. Section 88(5) provides: "When default notice is not required (5) A credit provider is not required to give a default notice or to wait until the period specified in the default notice has elapsed, before beginning enforcement proceedings, if: (a) the credit provider reasonably believes that it was induced by fraud on the part of the debtor or mortgagor to enter into the credit contract or mortgage; or (b) the credit provider has made reasonable attempts to locate the debtor or mortgagor but without success; or (c) the court authorises the credit provider to begin the enforcement proceedings; or (d) the credit provider reasonably believes that the debtor or mortgagor has removed or disposed of mortgaged goods under a mortgage related to the credit contract or under the mortgage concerned, or intends to remove or dispose of mortgaged goods, without the credit provider's permission or that urgent action is necessary to protect the mortgaged property."
27. The Court was referred to Monas v Perpetual Trustees Victoria Limited [2011] NSWCA 417 as authority for the proposition that authorisation can be given to the credit provider to begin enforcement proceedings, even where such proceedings have already commenced and are underway. I accept that the Court has that power, but I would not be prepared in the circumstances of this case to authorise the commencement of proceedings.
28. In determining not to authorise proceedings pursuant to s 88(5)(c), the following features are of relevance: 1. The asserted unjust nature of the contract (discussed below); 2. The ease with which cl. 9.2 of the contract could have been complied with by the plaintiff; 3. The doubt that attaches to the purported default, given that the defendants had made instalment payments in excess of that required over a period of about 6 years, with the consequence that the default may not have been for the amount referred to in the notice of 28 May 2015; 4. The incorrect assertion as to the extent of the purported default contained within the "Payment Summary" (CB 1, pp 135) which accompanied the notice of 28 May 2015 (as well as earlier and later notices), which vastly overstated the extent of any default, by several thousands of dollars; 5. The fact that the plaintiff charged fees to the account of the defendants which were not authorised by the contract or by law with neither the "Administration Charge" nor the "Fee for Servicing Your Loan" being fees that the plaintiff was entitled to charge; 6. The focus of the Notice of Default of 28 May 2015, which appeared to have been directed to advising the defendants of the extent of an "Arrears Administration Charge" rather than providing proper notice of a default and the means of rectification, within the specified time frame; and 7. The significantly disadvantageous consequences to the defendant of default and termination, having regard to the nature of this contract.
29. The overall context of s 88(5) of the Code is also relevant, since the sub-section generally is directed to circumstances where the purchaser has acted fraudulently or dishonestly, or cannot be found. That is not the situation here.
30. The Notice of Termination relied upon by the plaintiff (CB 1, pp 141) is a letter dated 3 July 2015 directed to the second defendant at the address of the Rutherford property. It is headed "Notice of Termination and Intented [sic] Issue of Statement of Claim for Possession and Debt".
31. Contrary to cl. 9.3 of the contract, the purported notice did not specify reliance on the Notice of Default or, indeed, even refer to the notice. Reference was made to "the final notice of arrears sent on 26 May 2015" and a copy of the notice was enclosed. The letter went on: "Our client remains open to accepting payment of the arrears, but takes the realistic position that because no payment has been received since February this year, it is unrealistic to believe that arrears will be paid."
32. The notice of 26 May 2015, which was not a Notice of Default as required under the contract, overstated the extent of the arrears by a very significant sum.
33. In circumstances where the contract provides for a process of notification of default and for termination of the contract, the procedures ought to be complied with. They were not complied with by the plaintiff, and I do not regard it as in the interests of justice to overlook that non-compliance, or retrospectively authorise proceedings which were commenced in breach of a contract, to the benefit of the plaintiff, where the plaintiff already enjoyed terms very much more advantageous than those relevant to the defendants.
34. Strict compliance was, in my view, essential. In the absence of such compliance, there was neither a valid Notice of default, nor a Notice of Termination.

Was the contract unjust?

1. The defendant raises a number of features of the transaction with the plaintiff which she relies upon to establish that the contract was unjust: 1. Inequality in bargaining power between she and the plaintiff; 2. The inability to negotiate as to the terms of the contract; 3. The defendant could not meet her obligations under the contract without substantial hardship and the plaintiff knew or ought to have known that; 4. The dire consequences of any default, being that the plaintiff would be entitled to terminate the contract and take possession of the Rutherford property, retaining the deposit and all payments made against the contract, and with no obligation to compensate the defendant for the cost of any improvements; 5. The terms of the contract were of themselves unfair and very much weighted in favour of the interests of the plaintiff and against those of the defendant; 6. The first defendant was personally unable to protect her position in entering the contract because of her deprived upbringing and her difficult circumstances; 7. She did not receive any or adequate independent legal advice and did not understand the nature of the contract; and 8. She was subject to direct pressure from the second defendant to enter the contract and indirect pressure from Ms Steer to do so.
2. Having carefully considered the evidence adduced by the parties, I conclude that the contract entered into between the plaintiff and defendant was an unfair one, as were the circumstances in which the contract was made.
3. The contract between the parties was entered against a background, on the one hand, of a violent and intimidatory relationship and, on the other, limited inquiries as to the capacity of the defendants to meet their contractual obligations in circumstances where it should have been obvious to the plaintiff that difficulties were likely to arise for them in that regard. There was additionally misrepresentation as to the nature of the contract by the plaintiff (through Ms Steer) in that the financial arrangement between the defendants and the plaintiff was characterised as a typical mortgage.
4. The only meeting Ms Steer, as the sole representative of the plaintiff, had with the defendants was on 17 January 2009. The meeting was at the home of the defendants where the couple's two young children were present.
5. Whilst this Court did not hear evidence from the second defendant, it did hear from Ms Clarke. On the basis of having heard her evidence, I have concluded that Ms Clarke is not a sophisticated woman, and her lack of sophistication would or should have been obvious to Ms Steer who, having regard to her evidence and demeanour in Court, I conclude to be a woman of education and business acumen.
6. The contract was one which bound the defendants contractually for a period of 30 years and in respect of which any default would likely have disastrous consequences. There was information available to the plaintiff through Ms Steer which should have made it plain that the defendants were individuals with limited capacity to meet the obligations imposed upon them by the contract. The possibility of default, and the enormous loss to the defendants that would flow from default, should have been plain to the plaintiff at the outset.
7. The inquiries made by the plaintiff of the defendants' ability to meet their financial obligations pursuant to the contract appear to have been limited. The defendants were asked to complete an "Application Form" and to sign a document permitting the plaintiff to obtain a credit report. Mr Tapper's employment was noted on the application form as "Xstrata", and he advised Ms Steer that his employment was newly obtained. A copy of a letter offering him employment made that clear (Ex VS2, pp 4); it was dated 13 January 2009, a mere four days prior to the meeting on 17 January 2009, and apparently prior to any employment contract between Mr Tapper and Xstrata being completed. In addition, a schedule of Annual Remuneration to the offer of employment (Ex VS2, pp 5), should have made it clear to the plaintiff that the second defendant's income was dependent upon a number of factors being met.
8. Whilst the plaintiff submits that it was entitled to have regard to the fact that the second defendant's gross annual income was $115,596, the base salary was in fact $49,275. Additional income was dependent upon roster allowances, a flexibility payment, and a performance payment being made at the maximum level. For a new employee with no established work performance history, any payment over and above the base salary could not be entirely certain.
9. No payslips verifying income seem to have been provided prior to the date on which the contract was signed, 16 February 2009. Hence, it would seem that the plaintiff entered the contract with the defendants without having made any proper inquiry as to the second defendant's actual salary.
10. The fact that the actual salary received by Mr Tapper could vary was made clear by the payslips he subsequently provided to the plaintiff, showing fortnightly incomes between 15 March 2009 and 12 April 2009 of $3,842, $2,979, and $3,452 (Ex VS2, pp 6-8).
11. The second defendant was candid in telling Ms Steer that he was not a person to whom any bank would lend money, as he had a bad credit rating, and owed money. There is no dispute that he gave Ms Steer a document concerning his credit rating, and refused to sign a privacy agreement that would have allowed the plaintiff to make proper inquiries as to his credit-worthiness.
12. The document he provided to Ms Steer of itself suggested that further inquiries should be made as to Mr Tapper's credit worthiness. Mr Tapper gave Ms Steer a copy of an Individual Credit Report (Ex VS2, pp 13-21), a document which said on its face it was not to be used by credit providers (at pp 15). It made reference to 5 overdue accounts (being in arrears for in excess of 60 days), including a loan contract from 2008 that was in default for the sum of $10,099. Other unpaid debts amounting to some thousands of dollars were also noted.
13. With information such as this available to it, a responsible credit provider should have insisted on Mr Tapper giving his consent to a credit worthiness check, by requiring him to sign the privacy declaration.
14. The declaration that Ms Clarke signed, but Mr Tapper did not, noted that consent by the applicant to a credit check carried out by the plaintiff was for the purpose obtaining information: "To assess an application by each applicant for credit To assist each applicant avoid defaulting on their credit obligations To notify other credit providers of a default by any applicant To assess each applicant's credit worthiness." (Ex VS1, pp 97)
15. In the absence of Mr Tapper's consent, necessarily the plaintiff could not have made proper or fulsome inquiries about his credit worthiness. Such inquiries were clearly indicated on the information the plaintiff had available to it.
16. Ms Steer was well aware that Mr Tapper was someone ineligible for finance through a bank, and that his interest in an instalment purchase arrangement was because he could not obtain bank finance.
17. That knowledge and his refusal to allow credit checks should have signalled to the plaintiff that Mr Tapper, the only one of the defendants with any real income, was not an appropriate person to enter into a long term contractual arrangement involving a substantial debt.
18. There could be no question that Ms Clarke alone would not have been in a position to meet the financial obligations imposed upon her by the proposed contract. Her income was that of a sole supporting parent; she was not employed.
19. Ms Clarke's evidence is that she clearly expressed her reservations about entering the arrangement to buy the Rutherford property to Ms Steer, and asked if the second defendant could do it by himself. Her concerns in that regard, particularly against the known background of the second defendant's poor credit history, should have given rise to a further concern about the suitability of the defendants to enter a contract of this nature.
20. Instead, Ms Steer told Ms Clarke that only with her co-operation could the second defendant enter the contract. I accept Ms Clarke's evidence in this regard, having concluded that she was a truthful witness without guile. I did not form the same view of Ms Steer, who gave her evidence in a guarded and sometimes evasive manner, and who appeared at times to endeavour to anticipate the direction of questions put to her in cross-examination and forestall them.
21. This comment from Ms Steer as to the necessity of Ms Clarke's involvement in the loan arrangement, which appears to have been made in the presence of the second defendant (since there is no evidence of any private conversation between Ms Steer and Ms Clarke at the January 2009 meeting) could only have added to the pressure upon Ms Clarke to enter the contract for purchase of the Rutherford property.
22. Adding to the impetus to execute the contract was Ms Steer's assurance that the contractual arrangement was akin to paying off a mortgage. This assurance was a misrepresentation in my view, and one which was significant in Ms Clarke's decision to proceed with the contract.
23. An individual paying off a mortgage typically owns the property the subject of the mortgage, with repayments against the mortgage serving to discharge debt and, generally, increase the mortgagor's equity in the property. The financial arrangement with the plaintiff entered into by Ms Clarke gave her neither legal nor equitable ownership of the Rutherford property, with ownership remaining with the plaintiff until payment of the final instalment payment, 30 years after the date of entering the contract. The arrangement was very different to that pertaining to an individual who obtained bank finance to purchase a property subject to mortgage.
24. The plaintiff relies upon the fact that the first defendant obtained independent legal advice and signed an acknowledgement that she understood the contract, but there are real questions as to the adequacy of the advice Ms Clarke received, and the circumstances in which she came to receive that advice.
25. Ms Steer's evidence is that the second defendant told her that he had a friend who was a solicitor and his friend would act for him and Ms Clarke in relation to the contract. Despite that, Ms Steer gave the couple a list of solicitors from whom to select a representative (CB 2, pp 411). There is no evidence about how the list of legal firms was compiled, or by what criteria firms were added to the list. There is no apparent logic in the list itself. The firms nominated were not local to the defendants, with the closest (two firms at Argenton) a drive of some 40 minutes away, and others as far away as Foster, Old Bar, or Baulkham Hills. It is notable that none of the firms were in Rutherford, or nearby Maitland.
26. Since Ms Steer gave evidence that the arrangement entered between the plaintiff and defendants was the only experience of such a contract that the plaintiff had, the list could not have been compiled by reference to extensive dealings with lawyers with experience of such contracts.
27. Ms Clarke's evidence is that Ms Steer required her and Mr Tapper to "choose" a solicitor at the meeting so that the details of the chosen firm could be added to the forms completed that day. A selection was made from the list provided by Ms Steer. The list is endorsed with a note as to an appointment time, and costs for the legal work, supporting Ms Clarke's account of the time pressure that she says Ms Steer placed upon her and the second defendant to select a firm at the meeting on 17 January 2009.
28. The fact that the firm chosen was the first on the list suggests that little or no thought went into the selection. Ms Clarke said, and I accept, that Ms Steer recommended that particular law firm.
29. I accept also the evidence of Ms Clarke that, when the contract was ready to sign, Ms Steer contacted Ms Clarke to tell her that and, in doing so, urged her to "go down and pay today" to get a discount from the solicitor. Ms Steer's knowledge of the solicitor's fee structure suggests some personal knowledge of the firm.
30. The evidence of Ms Clarke in that regard calls into question the independence and certainly the efficacy of the legal advice she received, a question that cannot be resolved on the available evidence. Suffice to say that I accept Ms Clarke's evidence that, on attending the solicitor's office, she was under some pressure to give instructions, pay the solicitor's fees that day (to receive a reduction in those fees), and sign the contract, such that she felt unable to properly read the contract or take steps to fully inform herself as to its terms: "We were told it had to be done ASAP. It had to be done within a certain time frame. Like it had to be done straight away." (T59:49)
31. Particularly in circumstances where she was accompanied by a baby and a toddler to the meeting with the solicitor, she was not in a position to take in what she was told. There is no basis upon which to conclude that she received any advice, or warning, about the unusual nature of the contract, or the fact that neither ownership of, nor equity in, the Rutherford property passed to her prior to payment of the 780th instalment. It is clear that her understanding of the contract, its terms and effect, was very limited.
32. The advice Ms Clarke said that she received, that the contract was akin to a mortgage through a bank, was wholly incorrect. The financial arrangement bore no resemblance to that typically provided by a bank to a home buyer, and nor was the arrangement a mortgage in the usual sense, since the defendants had no legal or equitable interest in the Rutherford property against which to secure finance.
33. I have concluded that Ms Clarke did not understand the effect of the contract that she signed, and particularly, she did not understand that monies paid by her pursuant to the contract, inclusive of the deposit of $34,000, would not secure her any legal interest in the Rutherford property until such time as the full purchase price was paid.
34. The fact that Ms Clarke signed a standard document acknowledging that she understood the contract and did not require it to be translated into another language says little about her true level of understanding in my view.
35. Since Ms Clarke was generally reluctant to purchase the property, and the terms of the contract were so markedly disadvantageous to her, had she been told, or been told and understood, the true effect of the contract, it is most unlikely that she and the second defendant would have entered it.
36. The contract is heavily weighted in the vendor's favour and many of its terms are overtly unfair in operation. The deposit of $34,000 paid by the defendants did not give rise to equity in the property; the costs of improvements to the property made by them were forfeit (a contractual term the plaintiff concedes was unjust); the interest rate payable at any given time was always higher than average bank interest rates; and the payments made against the contract gave the defendants no equity until completion of the contract 30 years from the date of execution.
37. The terms of the contract were such that there was little risk of loss to the plaintiff in the event of default; indeed, in circumstances where the plaintiff is entitled to retain, in the event of default, the licence fee, the value of improvements, the deposit paid, and it had the benefit of repayments made at a level well above market rent over six years, default by the defendants could be seen as potentially advantageous to the plaintiff.
38. The terms of the contract were unreasonable and Ms Clarke entered into it without the capacity to exercise a truly informed choice. There was certainly pressure upon her from Mr Tapper, but also from Ms Steer, who made Ms Clarke's participation in the bargain a prerequisite to Mr Tapper being able to purchase the Rutherford property. Neither Mr Tapper nor Ms Clarke had the opportunity to negotiate the contract, or its terms. Mr Tapper understood that he would not be able to obtain finance from a more conventional bank lender, and he told Ms Clarke that the purchase of the property was his chance to enter the property market.
39. The plaintiff seems to have directed its activities at such individuals - persons whose circumstances did not allow them to obtain finance through a bank. Indeed, even the email address used by the plaintiff at one stage on the documentary evidence was firsthomeangel@[...], suggesting a role of somehow aiding would-be home buyers to enter the market. It is notable that Ms Steer characterised what she was doing for Ms Clarke and Mr Tapper as "assisting" them (T25:46), even though that "assistance" involved their entry into a contract which was against their interests, and in favour of those of the plaintiff.
40. In those circumstances, where finance through the plaintiff was Mr Tapper's perceived only chance of home ownership; where negotiation of the terms, even accepting for the moment that the defendants understood the effect of the terms, was not an option; where the terms of the contract were inherently unfair; and where Ms Clarke was subjected to unacceptable pressure from Mr Tapper but also Ms Steer to enter the contract with some urgency, the Court can readily conclude that the contract was unjust.
41. There could be no public interest in upholding a contract which is so markedly unfair to one party.
42. The combination of all the circumstances leads me to find that the contract is an unjust one, both in the circumstances in which it was entered, and in its operation.
43. A finding that a contract is unjust does not necessarily mean relief under the Contracts Review Act should be granted, the granting of relief being discretionary. Section 7 of that Act provides: "7 Principal relief (1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following: (a) it may decide to refuse to enforce any or all of the provisions of the contract, (b) it may make an order declaring the contract void, in whole or in part, (c) it may make an order varying, in whole or in part, any provision of the contract, (d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that: (i) varies, or has the effect of varying, the provisions of the land instrument, or (ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument. (2) Where the Court makes an order under subsection (1) (b) or (c), the declaration or variation shall have effect as from the time when the contract was made or (as to the whole or any part or parts of the contract) from some other time or times as specified in the order. (3) The operation of this section is subject to the provisions of section 19."
44. Section 19 relates to orders affecting land.
45. However, the coalescence of features in the present matter militates in favour of the grant of relief. Those features include: 1. The clear indications from the outset of Ms Steer's dealings with the second defendant that he was not a person who was likely to successfully discharge the obligations under the contract; 2. The plaintiff's failure to undertake adequate inquiries as to the defendants' capacity to repay the loan without significant hardship, in circumstances where Mr Tapper had only commenced employment on a probationary basis a few weeks prior to entering the contract, Ms Clarke was in receipt of benefits, and Mr Tapper openly acknowledged his bad credit rating; 3. The plaintiff's insistence that finance would not be made available to Mr Tapper alone, without Ms Clarke's participation; 4. The misrepresentation made by Ms Steer to Ms Clarke as to the nature of the financial arrangement, by describing it as paying off a mortgage; and 5. The unjust terms of the contract which provide no basis upon which the first defendant could receive any reasonable return for her investment in the property.

Relief from forfeiture of the deposit

1. Under the contract, the deposit of $34,000 paid by the defendants is forfeit upon default. That is a term which is, in my view, unjust, in circumstances where the defendants had entered the contract and complied with its terms for about six years prior to any default.
2. Had they entered into a more typical mortgage arrangement, the deposit paid against the purchase price of real property would have contributed to the overall equity of the purchasers in the property.
3. The plaintiff concedes that s 55(2A) of the Conveyancing Act 1919 (NSW) gives the Court the power to order the return of the deposit to the defendant. It provides: "55 Right of purchaser to recover deposit etc (1) […] (2) […] (2A) In every case where the court refuses to grant specific performance of a contract, or in any proceeding for the return of a deposit, the court may, if it thinks fit, order the repayment of any deposit with or without interest thereon. (3) […]"
4. Relevant to the exercise of that discretionary power are the features to which I have already referred, including the unjust nature of the contract, Ms Steer's representation that the financial arrangement between the plaintiff and the defendants was a mortgage, the indirect pressure placed upon Ms Clarke by Ms Steer to enter the contract, Ms Clarke's flawed understanding of the terms and effect of the contract and the apparently flawed legal advice she received in that regard (from a solicitor recommended by Ms Steer), and the failure of the plaintiff to issue relevant notices in compliance with the contract that accurately stated the amount of any default.
5. Accordingly, justice requires the return to Ms Clarke of the deposit paid.

Conclusion

1. I propose to dismiss the plaintiff's statement of claim and enter judgment for the first defendant, upholding her cross-claim and setting aside the contract.
2. In substitution of the rights and obligations of the parties under the contract, and to effect a just resolution of this matter, the following is required: 1. The payments made by the first defendant (current to today's date by way of "good faith" payment, occupation fees, administration fees and charges, and pursuant to the contract as instalment payments, should stand to the first defendant's credit. 2. The deposit of $34,000 should also stand to the first defendant's credit. 3. The value of improvements accepted by the plaintiff as having been carried out by the defendant, being an amount of $24,573.55, should stand to the first defendant's credit. 4. The market rent for the property between the period 24 January 2009 to 30 days from the date of these orders, as established by the report in evidence of O'Loughlin Valuers, should stand to the credit of the plaintiff. 5. The plaintiff is to pay the first defendant the difference between those amounts paid by the first defendant standing to her credit, and the rental income which the plaintiff would have received in the period noted at (4) above. 6. The first defendant is to give the plaintiff vacant possession of the Rutherford property within 30 days of the date of these orders.

orders 1. The statement of claim is dismissed. 2. The cross-claim is upheld and the contract set aside. Judgement is entered for the first defendant. 3. The plaintiff is to pay the first defendant the sum, calculated by reference to paragraph 173(5) of the Court's reasons, being a total sum of $114,889.93. 4. The first defendant is to give the plaintiff vacant possession of the Rutherford property within 30 days of today. 5. Costs in favour of the first defendant.

Amendments 12 September 2016 - Order 3 amended to reflect parties short minutes of order calculation. 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: 12 September 2016