Guardian Mortgages v Miller

CATCHWORDS : Proceedings concerning properties - plaintiff seeking order for possession -order for judicial sale - cross-claim for relief against forfeiture - mortgage - resale of mortgaged property - bridging loan - caveat - unjust or unconscionable transaction - misleading or deceptive conduct - clog on equity of redemption - Contracts Review Act 1980 NSW s7 - Consumer Credit Code (NSW) s 70 - Real Property Act 1900 (NSW) s 57(2)(b) - Trade Practices Act 1974 (Cth), s 51AA, s 51AB, s 51AC, s 52, s 53 - Australian Securities and Investments Commission Act 2001 (Cth) s 12CA, s 12CB, s 12CC - Fair Trading Act 1987 (NSW) s 42 and s 43. Australian Securities and Investments Commission Act 2001 (Cth) s 12CA, s 12CB, s 12CC Consumer Credit Code (NSW) s 70 LEGISLATION CITED : Contracts Review Act 1980 (NSW) s 7 Fair Trading Act 1987 (NSW) s 42 and s 43 Real Property Act 1900 (NSW) s 57(2)(b) Trade Practices Act 1974 (Cth), s 51AA, s 51AB, s 51AC, s 52, s 53 Asia Pacific International Pty Ltd v Dalrymple (2000) 2 Qd R 229 Blomley v Ryan (1956) 99 CLR 362 Cityland & Property (Holdings) v Dabrah [1967] 2 All ER 629 Commercial Bank of Australia v Amadio (1983) 151 CLR 447 Commonwealth of Australia v Verwayen (1990) 170 CLR 394 Morrell v Fisher & Westell Executors & Co (1849) 154 ER 1350 CASES CITED : Murphy v Wright (1992) NSW ConvR 55-652 Re Hodson and Howes' Contract (1887) 35 Ch D 668 Silkdale Pty Ltd v Long Leys Co Pty Ltd (1995) 7 BPR 14, 414 Takemura v National Australia Bank Ltd [2003] NSWSC 339 Troncone v Aliperti (1994) NSW ConvR 55-703 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 Yarrangah Pty Ltd v National Australia Bank Ltd (1999) 9 BPR 17,061 Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445 PARTIES : Guardian Mortgages Pty Limited David Miller FILE NUMBER(S) : SC 12280/03 COUNSEL : M W Young (Plaintiff) A Blank (Defendant) SOLICITORS : Bransgroves Solicitors (Plaintiff)

• 32 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

JUDGMENT 1 HIS HONOUR: The Plaintiff has brought these proceedings for an order for possession in relation to the property 182 Slade Road, Bardwell Park, being the whole of the land contained in Folio Identifier 3/19035 ("the mortgaged property"); and for an order for the judicial sale of a separate property, 5 Lambert Road, being the whole of the land identified as 172/A/11368 ("the charged property"). 2 The Defendant opposes the making of these orders, and by way of a cross-claim, seeks relief against forfeiture.

THE FACTS 3 On 20 December 2002 the Defendant entered in a contract to purchase the mortgaged property for the sum of $530,000 from Annette Margaret Weidenhofer. The contract provided for settlement to take place on or by 3 March 2003. The contract recorded that the purchaser's solicitor/conveyancer was the Defendant himself. The Defendant moved into the property under licence and paid a deposit of $20,000. 4 On 29 April 2003 Community First Credit Union agreed to lend to the Plaintiff $424,000 secured by first mortgage over the mortgaged property. The Defendant expected to provide the balance of the purchase price upon satisfaction of a judgment for approximately $125,000 which he had secured in August 2002. 5 On or about 5 June 2003, the settlement date for the purchase was rescheduled for 26 June 2003. However on or about 19 June 2003, the Defendant learned that the balance of the moneys which he had expected to receive was not forthcoming, leaving him in the position where he would be unable to complete the purchase, unless he was able to secure a bridging loan. 6 On 26 June 2003 the vendor served a notice to complete, requiring completion on or before 11 July 2003. 7 On 3 July 2003, the Defendant entered into a contract for the resale of the mortgaged property to Peter Michael Davis for the sum of $630,000. The completion date was specified to be the forty-second day after the contract date. The Defendant who prepared the contract nominated himself as the solicitor for the vendor. 8 On 15 July 2003, the Defendant received a letter from the solicitors acting for his vendor, indicating that the vendor was prepared to postpone terminating the contract provided that the Defendant proceeded to settlement before 3.30 pm on 21 July 2003. 9 In an affidavit, sworn by the Defendant in the proceedings, he deposed that on 18 July 2003, he had a telephone conversation with Darryl Benn of Fincorp Pty Ltd, a Director of the Plaintiff, to the following effect: David Miller: "I urgently need a bridging loan of about $125,000.00 to settle the purchase of a property in Bardwell Park for a total of $530,000.00. I have already arranged a loan of $424,000.00, to be secured by a first mortgage."

Darryl Benn: "What would the property be valued at?"

Darryl Benn: "How long do you require the loans funds for?"

David Miller: "For a minimum of one month to a maximum of three months."

Darryl Benn: "If the property is valued by our panel of valuers at $600,000.00 or more, I will provide a loan facility of $125,000.00 for one month to three months at 3% per month."

David Miller: "I have been issued with a Notice to Complete by the vendor's solicitors. I have to settle the matter by 21 July 2003." 10 In an affidavit which he swore, and also in oral evidence led before me, Mr Benn said that this conversation took place before 18 July, and in that regard identified a loan application form which had been signed by the Defendant, which bore the date 17 July. He denied making any statement to the effect that he would provide a loan facility, in the amount sought "for one month to three months at 3% per month". 11 In this loan application form the Defendant disclosed that the purpose of the loan was to "settle purchase of residential home", noted that the property had been resold and that the Defendant's occupation was that of solicitor, employed by Thompson & Associates at 14 Hartill-Law Avenue, Bardwell Park. It provided the telephone number 9556 2183 as his employer's telephone number, and stated that he had been employed in that firm for 12 years and had a gross annual wage of $171,000. 12 There was in evidence a letter from the Defendant dated 18 July 2003, in which he referred to "recent telephone discussions" and noted that "as mentioned" he required a loan facility of $125,000 to complete the purchase. This letter which was not consistent with the Defendant's evidence as to this conversation having occurred that day, concluded by noting: "The facility will only be needed for 30 days by which time, the new purchaser will have completed the purchase of the property and I will discharge the facility in full." 13 It may be observed that had the purchaser from the Defendant completed the purchase within the 42 days from 3 July 2003 for which the contract for on-sale had provided, then this statement of intention would have been capable of fulfilment, and there would have been no need for a loan of up to three months. This paragraph of the letter is therefore also inconsistent with the Defendant's evidence. 14 On 18 July 2003, a letter of offer was sent by the Plaintiff to the Defendant, under cover of a facsimile transmittal sheet, which requested its signature and return together with credit card details for the non refundable application and valuation fees of $495 and $650 respectively. This document made reference to the following relevant aspects of the offer: PURPOSE OF LOAN This loan is subject to being for business purposes only. You will be required to sign a declaration confirming same prior to entering into the contract. This indicative offer is not the contract.

PRINCIPAL LOAN AMOUNT $125,000.00 (One Hundred and Twenty Five Thousand Dollars Only) provided this amount does not exceed 85% of our assessment of the current market value of the security property (see Property Valuation).

TERM One (1) month, commencing on the day of settlement.

INTEREST RATE 14.50% per Month or part thereof reducing to 12.00% per Month or part thereof provided that all payments are made as and when they fall due. The Lender reserves the right to vary this rate at any time prior to settlement of this advance.

MONTHLY REPAYMENT AMOUNT Accrued interest only & fees, payable in arrears upon maturity.

SECURITY A registered caveat and registered second mortgage over freehold property at 182 Slade Road, Bardwell Park NSW 2207.

ADDITIONAL SECURITY Deed of Priority.

PROPERTY VALUATION We shall commission a Valuation Report to determine the value of the security property. The valuation shall be for the sole benefit of the Lender and shall remain the property of the Lender. A non refundable valuation fee of $650.00 is payable upon acceptance of this offer.

We reserve the right to amend the loan approval or attach such further conditions as we may deem appropriate after receiving the Valuation.

APPLICATION FEE A total non refundable amount of $495.00 is due upon acceptance of this offer.

ESTABLISHMENT FEE A non refundable establishment fee of $2,200.00 which will form part of the Principal Loan Amount.

ADMINISTRATION FEE A non refundable administration fee of $2,000.00 is due before we start preparing loan and security documentation.

LEGAL FEES & DISBURSEMENTS The Lender's legal expenses, stamp duty and disbursements shall be payable by the Borrowers(s). These costs shall be payable whether or not the matter proceeds or does not proceed for any reason. The Borrower(s) waives any right to have this amount assessed and agrees that it is a reasonable charge.

DISCHARGE A discharge fee being 1% of the greater of the Principal Loan Amount or the balance outstanding of the loan at settlement will apply.

ACKNOWLEDGEMENT OF FINANACIAL ADVICE In accepting this offer of finance, the Borrower(s) undertake to receive independent advice of their ability to comply with the loan commitment, and will, prior to settlement, give the Lender independent legal and financial advice.

SPECIAL CONDITIONS A formal letter of offer will be issued once Guardian Mortgages Pty Ltd receives the valuation report (if required) and after it completes its own due diligence.

By accepting this loan offer, you acknowledge that the proposed loan does not fall within the definition of a "consumer loan" under the Consumer Credit Code as this would require different procedures and documentation. 15 Again it is obvious from this document that the loan being offered was a loan for only one month, and was not one that involved an interest rate of only 3% per month. 16 A copy of this offer bearing the Defendant's signature but undated, was returned to the Plaintiff, as was an authority for the Plaintiff to charge the application and valuation fees to a credit card. This document was signed by the Defendant and dated 21 July but was incomplete in that the necessary particulars identifying his credit card were left blank. 17 The Defendant deposed that, on 20 July 2003, he had a further telephone conversation with Mr Benn to the following effect: Darryl Benn: "You will be visited by a John Van Nguyen, a valuer, who will value the property. If it is valued at $600,000.00 or more, you can take it that your loan will be approved."

David Miller: "If the valuation is $600,000.00 or more, will you be in a position to provide the funds for settlement on 21 July 2003? The vendor's solicitors have instructions to rescind the contract if settlement has not taken place on 21 July 2003."

Darryl Benn: "I understand the urgency. Subject to the valuation, the funds will be available in time." 18 Mr Benn however deposed in his affidavit, and gave oral evidence, to the effect that this second conversation also took place on or before 18 July 2003, and not on 20 July. In this regard he pointed to the fact that the valuation report of United Valuers Pty Ltd, signed by John Van Nguyen, disclosed that his inspection had taken place on Saturday, 19 July 2003. He also pointed to the fact that he was not at his place of work on 20 July, that being a Sunday. The valuation report placed a market value of $630,000 on the property. 19 The Defendant deposed that, on 21 July 2003, he had a telephone conversation with Ms Melissa Salter of Bransgroves, to the following effect: David Miller: "Has my loan been approved?"

Melissa Salter: "Mr Benn has asked that you deposit $1,145.00 into account number 062 516 1017 0601 so that loan documents can be raised."

David Miller: "The matter must be settled by tomorrow or I will be in default under the terms of a Notice to Complete issued to me by the vendor's solicitors."

Melissa Salter: "I cannot proceed with the matter unless you deposit the funds."

David Miller: "I will do it today." 20 The deposit of the sum of $1145 referred to in this conversation had been an express condition of the letter of offer that was issued to the Defendant on 18 July 2003. This sum was deposited to the Plaintiff's account that day, although the time that this occurred is obliterated by the bank stamp. 21 The Defendant deposed that, at about 2.00 pm on 21 July 2003, he received a telephone call from Jeffrey O'Brien, the vendor's solicitors to the following effect: Jeffrey O'Brien: "Did you know that a caveat has been placed on the title of the property by Guardian Mortgages?"

David Miller: "I did not know that. Guardian Mortgages had no authority to do that. I have not entered into any agreement with them. We are still negotiating the terms of the bridging loan.

Jeffrey O'Brien: "I will need to get instructions from my client." 22 He deposed that, about 15 minutes later, he received a further call from Mr O'Brien who said: My client is willing to extend the date for settlement until tomorrow, but if settlement does not proceed tomorrow my client will rescind the contract and you will have to vacate the property forthwith. 23 In cross-examination the Defendant was somewhat less certain about the timing of the call from Mr O'Brien, conceding that it would have occurred "no earlier that 2 o'clock and no later than 6 o'clock". 24 The Defendant also deposed that at about 2.30 pm on this day, he telephoned Paul Viscardi, who he describes as an officer of Mid West Property Development Pty Ltd, and had a conversation with him to the following effect: David Miller: "I have just found out that Guardian Mortgages have put a caveat on the property - in spite of the fact that we have not yet reached any agreement as to the terms of the loan. I feel that they are trying to force me to accept credit on their terms and I don't like it. Could I borrow the funds from you instead?

Paul Viscardi: "Yes, we would be happy to lend you the funds at 2% per month. However, we can't do so while there's a caveat on the title - because we wouldn't be able to have a second mortgage recorded." 25 Although the Defendant initially tendered an affidavit from Mr Viscardi, who incidentally, was also nominated as the solicitor acting for the purchaser from the Defendant, it was later withdrawn when it became apparent that the deponent was not available for cross-examination. The conversation accordingly remains uncorroborated. In the absence of any sufficient reason being offered by the Defendant beyond the bare assertion by the Defendant on 23 November 2004 that "he is not available", I draw the inference that Mr Viscardi (assuming in the Defendant's favour, that such a person exists and was a solicitor), would not have assisted the Defendant's case. 26 The Defendant next deposed that at about 3.00 pm he telephoned Mr Benn and had a telephone conversation to the following effect: David Miller: "Guardian Mortgages have lodged a caveat against the title of the property without my consent but at the same time Melissa Salter has not yet been approved."

David Miller: "I could have got alternative funding at 2% per month but I relied on your representations that funds would be available today for settlement."

Darryl Benn: "I will try to remedy this matter." 27 He deposed:

At that point I felt I had no choice but to proceed to enter into a loan agreement with the Plaintiff on whatever terms would be offered. I knew that, even though the caveat had been wrongly lodged, it would take days if not weeks to have it removed - by which time the vendor would have rescinded the contract and my family and I would have been forced to move out of the property. 28 Mr Benn, in his affidavit, denied that the Defendant indicated to him, at any time that he could have obtained alternative funding, and by implication, placed this alleged conversation into issue. 29 The Defendant then said that, at about 4.00 pm he attended the office of the Plaintiff in King Street, Sydney and picked up the loan documents. He said that when he read the documents he noticed the warning that he needed to obtain independent legal advice before signing the agreement. He said that he then made arrangements to receive that advice from Mr Michael Carroll, of Carroll & Associates. The need for such advice, it may be noted, should not have been a surprise to the Defendant since it was referred to in the offer of 18 July. 30 The Defendant acknowledged, in his affidavit, that at the time of signing the loan agreement he "understood the nature and effect of its terms". He asserted however that he only signed the agreement because he "felt (himself) to be under great pressure and saw no alternative to" doing so. He also deposed: 30. I believed that if I did not agree to the terms proposed by the Plaintiff then the Plaintiff would decline to provide the bridging loan.

31. I believed that if the funds were not provided settlement would not take place on time, the vendor would rescind the contract and my family and I would have to move out of the house straight away. 31 In his oral evidence, he suggested that although he had been inquiring about the loan documents, he had been informed by Ms Salter that they were not ready, and that it was not until the end of the day or at about 4.30 pm that he collected them. He also suggested, during cross-examination that the conversations which he had earlier said had occurred between himself and Mr O'Brien at about 2.00 pm and with Mr Benn at 3.00 pm, may have occurred somewhat later. 32 The version of events given by the Defendant in relation to the events on 21 July 2003 was placed into issue by the Plaintiff, which relied upon the business records which were placed into evidence. They do not support the Defendant's account, in that they show the following sequence of events:

11.23 am (a) and Ms Salter, an employee of Bransgroves Solicitors, who were acting for the Plaintiff in relation to the documentation of the loan and registration of the security documents, and Jodie Cherry, an employee of the Plaintiff, communicated by e-mail in relation to the unwillingness of Community First Credit Union, the incoming first mortgagee to register the Plaintiff's caveat with the documents. 11.28 am

(b) 11.52 am Bransgroves created a merged security document.

(c) 1.58 pm Ms Salter sent an e-mail to Ms Cherry advising that the Defendant had collected the documents after 1.00 pm but had not yet returned them. She also indicated that he had been advised that they were needed by 2.00 pm in order to be ready by 3.00 pm (for settlement).

(d) 2.20 pm Ms Salter sent an e-mail to Ms Cherry to the effect that the Defendant still had not dropped off the documents.

(e) 2.28 pm Ms Salter sent an e-mail to Mr Cherry advising that he had "just dropped them off" and that she would fax a lender certificate.

(f) 2.41 pm Bransgroves sent a letter (recorded in its system as an "agent stamp and register document") instructing Burkharts to stamp and register the mortgage as prime and two caveats as collateral.

(g) 2.55 pm A Legalco online title search of the mortgaged property was made which revealed that no caveat had been lodged at that time.

(h) 3.15 pm A certificate of Confirmation of Stamping was issued by the Commissioner for State Revenue for transaction 1509739 (mortgage).

(i) 3.19 pm A certificate of Confirmation of Stamping was issued by the Commissioner for State Revenue for transaction 1509773 ("the first caveat").

(j) 3.21 pm A certificate of Confirmation of Stamping was issued by the Commissioner for State Revenue for transaction 1509788 ("the second caveat").

33 The first caveat which showed the Plaintiff as caveator and the vendor to the Defendant (Annette Margaret Weidenhofer) as registered proprietor, recounted that the Plaintiff claimed an interest under a mortgage from the mortgagor and equitable owner - a reference to the Defendant's interest as purchaser from Ms Weidenhofer. It was lodged as dealing number 9807298 and was endorsed by the Land Titles Office as "Approved, PRT : 22/07/03: 09: 25: 03. However a registration notice issued by the Registrar General recorded its registration/recording as having occurred on 21 July 2003, and an online search made on the following morning at 11.35 am shows that it was by then endorsed on the title. 34 This would accord with a fax that was sent to Bransgroves by the solicitors for the vendor to the Defendant, at 4.55 pm on 21 July, which noted the undertaking that Bransgroves would "withdraw the caveat on title first thing in the morning to enable settlement to take place at 3 pm tomorrow". 35 Mr Benn provided an explanation in his affidavit in relation to the lodgement of the caveat, as follows: 9. The lodging of a caveat a day prior to the advance of funds is a standard practice by Guardian, on the advice of its solicitors, in order to ensure it obtains the correct priority.

10. Had the loan not proceeded or had the Defendant indicated he did not wish to proceed the caveat would have been removed. Moreover it is Guardian's policy not to charge any cancellation fees for loan which do not go ahead. According had the Defendant been able to secure alternative funding he could have taken it up without any financial penalty from Guardian. 36 The second caveat which showed the Plaintiff as caveator, and the Defendant as registered proprietor, recorded that the Plaintiff claimed an interest as equitable mortgagee. It was dated 22 July 2003 and was lodged after settlement of the loan as dealing number 9810654. It bore the signed consent of the Defendant to its lodgement. 37 Among the documents signed by the Defendant dated 21 July 2003 was a statutory declaration purportedly subscribed before Michael Carroll, solicitor, in the following terms: 1. We acknowledge having each received a copy of the following documents …

2. I authorise and direct you to pay the loan advance as directed by my solicitors.

3. I authorise and direct you to complete the mortgage documents and (without limiting the generality of the foregoing) to insert into the mortgage document the date, the repayment date and other information necessary to give effect to the intention of the parties. We authorise you to alter the documents to correct any error. …

38 Another document which was signed by him, and again ostensibly subscribed before Mr Carroll, was a Loan Repayment Ability Declaration in the following terms: I certify, warrant and represent to you that:

I have applied for a interest only loan of $125,000 (One Hundred Twenty-Five Thousand Dollars) through Guardian Mortgages P/L payable by monthly instalments of $15,000 over 1 months at 144% per cent per annum fixed.

My current gross income per annum is $171,000 (a) I are aware of my financial obligations under my proposed loan with you; and

(b) I have fully disclosed to you all details of my income and expenditure in the application form.

I know my income and expenditure and based on that knowledge and my understanding of my current financial position, I declare to you that I are able to make all the required monthly repayments and repay the loan in accordance with its terms and can do so without substantial hardship.

I are not aware of any factors, for example, a possible claim made against us involving payment of an amount of money, ill health or disability, or other factor which may result in a decrease in income or increase in expenditure, which may affect my ability to make the repayments or which may cause substantial hardship to us to make repayments.

I acknowledge that you insist that we take independent legal and financial advice in relation to this loan. I acknowledge that you are relying on this letter in agreeing to make a loan. 39 The Defendant also signed a Declaration, which also ostensibly was subscribed before Mr Carroll, to the following effect: 1. I am the Mortgagors named in certain loan and security documents in favour of Guardian Mortgages P/L (Lender) relating to property located at 182 Slade Road, Bardwell Park.

2. I have received independent legal advice regarding the loan and security documents referred to in paragraph 1.

3. After receiving that advice I freely and voluntarily signed the following documents … 40 Mr Miller also signed, on this day, an undertaking to provide the Plaintiff with a copy of an "unconditional loan approval of (the) new purchaser", a copy of the deposit paid to the agent, and an acknowledgement that the contract for resale had been unconditionally exchanged. This document bore a fax header showing a time 2.54 am. 41 The final supporting documents of relevance which the Defendant signed on 21 July comprised a declaration (s 11 of the Consumer Credit Code) to the effect that the loan was to be "offered wholly or predominantly for business or investment purposes (or both purposes)"; an acknowledgment of the approval of the loan application; and an authority for disbursement of the loan funds upon completion of the purchase. 42 The mortgage which was signed by the Defendant was in accordance with the Real Property Act, and it was in due course registered. It secured a loan of $125,000 and was expressed to be repayable after one month. The interest rate fixed was 14.5% per month or 174% per annum, reducible to 12% per month or 144% per annum for payment on time. In each case the rate was a simple rate. The mortgage also provided for $15,000 to be payable by way of damages for late repayment, although that provision had not been included in the offer of 18 July. 43 On its face the document was signed by David Miller in the presence of Michael Carroll. There was no evidence to show that Mr Carroll had in fact witnessed the execution of this document, or that he had given the certification which the Plaintiff required. Although the signature "Michael Carroll" and "David Miller" on this document, and on the declarations earlier mentioned, appear to bear remarkable similarity, I am not in a position to determine for myself whether the former was a genuine signature or not. However since neither party raised any question in this regard, I am prepared to assume that the document was regularly executed, and that Mr Carroll provided independent advice to the Defendant concerning the transaction. 44 The mortgage document contained the following provisions of relevance: 29. The MORTGAGOR covenants to pay the MORTGAGEE on the EXPIRY DATE such of the PRINCIPAL that has not been repaid by the MORTGAGOR or the BORROWER as at the EXPIRY DATE. This covenant shall be enforceable whether or not the BORROWER is liable to pay the PRINCIPAL on or before the EXPIRY DATE or at all.

30. To the extent that the BORROWER does not pay the same the MORTGAGOR will pay interest on the PRINCIPAL or upon any judgment or order in which this or the preceding clause must become merged at the rate of the HIGHER RATE.

31. To the extent that the BORROWER does not pay the same by the said INSTALMENTS DUE date, the MORTGAGOR covenants to pay to MORTGAGEE interest by equal monthly payments on the INSTALMENTS DUE day of each and every month in each of every year until the PRINCIPAL and any outstanding monies under this Mortgage have been be fully paid. The first of the Monthly Payments is computed from the FIRST INSTALMENT DUE date. This covenant will be enforceable whether or not the BORROWER is liable to pay the said interest on the due dates or at all.

32. Notwithstanding the MORTGAGOR will be entitled to the LOWER RATE of interest provided that the LOWER RATE payment is made within seven days of the INSTALMENTS DUE date or FIRST INSTALMENT DUE date and all other covenants of the MORTGAGE have been observed by the MORTGAGOR.

33. If any part of the PRINCIPAL is repaid prior to the EXPIRY DATE the MORTGAGOR will be liable to continue paying interest on the entire PRINCIPAL until the MORTGAGE is discharged.

37. If the MORTGAGOR discharges after the EXPIRY DATE the MORTGAGOR must pay the DAMAGES FOR LATE PAYMENT. 42. In accordance with s 58A(1) of the Real Property Act 1900 ("the Act") any notice or lapse of time prescribed by s 57 of the Act (not being notice or lapse of time relating to default in the payment of any principal, interest or other money under this mortgage) is hereby dispensed with. 43. In addition to all costs and expenses which the MORTGAGOR may be liable at law or in equity to pay in respect of this MORTGAGE, the MORTGAGOR is additionally liable for all costs and expenses incurred by the MORTGAGEE, in consequence of or occasioned by any one or more of the following: (a) any default on the part of the MORTGAGOR and/or the BORROWER;

(b) any act taken by the MORTGAGEE for the preservation of the security, or otherwise in relation to, this MORTGAGE;

(c) the preparation, execution and registration of this MORTGAGE or any Caveat protecting this mortgage whether or not the advance proceeds; or

(d) The preparation of the discharge and attendance at settlement of this MORTGAGE.

44. The costs and expenses payable by the MORTGAGOR include (but are not limited to) the internal administrative costs of the MORTGAGEE, the liability of the MORTGAGEE to pay legal costs and the liability of the MORTGAGEE to pay disbursements (whether or not the MORTGAGEE has yet paid the said legal costs or disbursements). These costs and expenses are to be paid on an indemnity basis. The liability of the MORTGAGOR for the costs and expenses shall arise immediately upon the MORTGAGEE becoming liable to pay the same. The costs and expenses shall be secured on and constitute a charge over the PROPERTY and shall carry interest at the HIGHER RATE from the date the liability of the MORTGAGOR arises until the date of payment by the MORTGAGOR.

53. The MORTGAGOR will pay all outstanding interest, together with any other monies payable under this MORTGAGE on the EXPIRY DATE.

65. In the event the MORTGAGOR defaults under this mortgage the MORTGAGEE shall have a right to take possession of the PROPERTY and exercise power of sale and/or foreclosure and the MORTGAGOR shall yield and surrender possession of the PROPERTY to the MORTGAGEE in the event of a default.

66. In the event the MORTGAGOR defaults under this mortgage that event shall create a caveatable interest by the MORTGAGEE in any real property owned now or in the future by the MORTGAGOR ("OTHER PROPERTY"). The MORTGAGEE shall have the right to take possession of that OTHER PROPERTY and exercise power of sale and/or foreclosure to recover monies owing under the MORTGAGE and the MORTGAGOR shall yield and surrender possession of the OTHER PROPERTY to the MORTGAGEE in the event of a default. 45 The Annexure to the mortgage was only partially completed in that it provided: Date: July 2003

46 Prior to settlement on 22 July there were several e-mail exchanges between Ms Salter and Ms Cherry discussing the need to obtain a copy of the contract for on-sale to Peter Davis, and for a confirmation that he had loan approval. 47 An e-mail sent at 2.09 pm from Ms Cherry to Ms Salter noted that the Defendant had just dropped off the contract. Clearly there had been some concern to this point as to whether there was in existence a genuine contract for resale. That led Bransgroves to send a fax, at 2.18 pm to the agent shown on the document, which had been provided, to confirm that the first page, which was enclosed was a genuine copy of the contract and that the agent held a deposit of $10,000. A fax was also sent to Mr Viscardi, of C G Taylor & Sons, the firm which was recorded, on this page, as the solicitor for the purchaser, asking for confirmation of the purchaser's loan approval, and for confirmation that the contract for sale was unconditional. 48 Although the documents which were tendered do not reveal whether the agent or Mr Viscardi ever replied to these letters, it is clear that the Plaintiff allowed the matter to proceed to settlement without receiving them. 49 At 4.20 pm a further e-mail was sent from Ms Salter to Mr Cherry advising that the Defendant's purchase had been settled, and confirming that Bransgroves' agents were on their way to withdraw the first caveat and to register the second caveat. An online search made at 4.47 pm this day shows that while the first caveat was still on the title, there were also unregistered dealings noted comprising the withdrawal of the first caveat, the transfer to the Defendant, a mortgage, and the second caveat. The Plaintiff's second mortgage was later registered as dealing 9673858. 50 The Defendant's contract for the resale of the property was not completed, although no reason for that was offered. As a consequence the Defendant fell into default when he failed to pay the principal advanced, or the accrued interest at the expiry of one month from the date of the advance. By his defence the Defendant admitted his failure to repay the principal loan. 51 Evidence was presented in the Plaintiff's case to prove that a copy of the verified statement of claim, which had been filed on 1 September 2003, was served on the Defendant, along with a notice under s 57(2)(b) of the Real Property Act, on 16 September 2003. That notice specified default in the repayment of principal which it was asserted had fallen due on 24 August 2003. There was also evidence of service, on the same day, of the notice of claim for possession which was required to be served on the occupiers. 52 Although no evidence was tendered in relation to the Defendant's ownership of the charged property, the fact of his ownership was admitted in paragraph 8B of his further amended defence.

The defence and cross-claim 53 The Defendant submitted that the mortgage was by its terms, and/or in the circumstances in which it was made: a. Unjust within the meaning of s7 of the Contracts Review Act 1980 NSW; and/or

b. Unjust within the meaning of s70 of the Consumer Credit (New South Wales) Code : and/or

c. Unconscionable within the meaning of s51AA and/or s51AB and/or 51AC of the Trade Practices Act 1974 (Cth); and/or

d. Unconscionable within the meaning of s12CA, s12CB, s12CC of the Australian Securities and Investments Commission Act 2001 (Cth); and/or

e. Unconscionable within the meaning of s43 of the Fair Trading Act 1987 (NSW) and/or

f. Obtained as a result of misleading or deceptive conduct within the meaning of s42 of the Fair Trading Act 1987 (NSW) ; and/or

g. Obtained as a result of misleading or deceptive conduct and/or false or misleading representations within the meaning of s52 and s53, respectively, of the Trade Practices Act 1974 (Cth); and/or

j. Obtained as a result of undue influence and/or pressure at general law. 54 The particulars given in support of these claims were to the following effect: (1) At the time the Mortgage was entered into the Defendant was in a position of special vulnerability; to wit: (i) The Defendant had been served with a Notice to Complete in respect of the Land;

(ii) The Defendant had encountered, at short notice, a shortfall in the funds he had expected to be available to complete the purchase of the Land;

(iii) On morning of 21 July 2003, the solicitor for the vendor had threatened that the vendor would rescind the contract in the event that settlement did not occur on the following day;

(iv) At that time the Defendant was resident in the property (the Land) with his family pursuant to a licence agreement. On the morning 21 July 2003 (in the same telephone conversation referred to in the foregoing paragraph herein), the solicitor for the vendor indicated that, if the contract were rescinded, the Defendant and his family would have to vacate the property (the Land) forthwith;

(v) On the morning of 21 July 2003, prior to the conclusion of any agreement between the parties, the Defendant became aware that a caveat no. 9807298U ("the Caveat") had been placed on the Land by the Plaintiff;

(vi) The Defendant believed on reasonable grounds that he would be unable to obtain a bridging loan from a lender other than the Plaintiff while the Caveat remained on the title to the Land;

(vii) The Defendant further believed on reasonable grounds that there was insufficient time to have the Caveat removed from the title to the Land prior to the vendor's rescinding the contract.

(2) At the time the Mortgage was entered into the Plaintiff was aware of the position of special disability that the Defendant was in, as described in paragraph 3(1)(i-iv) herein. Particulars (i) Telephone conversations between the Defendant and Mr Darryl Benn on 18 July 2003, 20 July 2003 and 21 July 2003;

(ii) Telephone conversations between the Defendant and Ms Melissa Salter on 21 July 2003

(3) The Plaintiff took advantage of the Defendant's position of special disability. Particulars (i) On 21 July 2003, without notice to the Defendant or the Registered Proprietor of the Land, the Plaintiff caused the Caveat to be lodged with the Department of Lands (sic) in respect of the Land.

(ii) At the time at which the Caveat was lodged, no agreement had as yet been entered into between the parties, notwithstanding that paragraph (1) of the Caveat states that the interest claimed is a mortgage.

(iii) The placement of the Plaintiff's Caveat on the title of the Land meant that it would have been difficult or impossible for the Defendant to obtain a bridging loan from a lender other than the Plaintiff.

(iv) The Mortgage purports, in Annexure "A" to that document, to require interest at the extraordinary rate of 144%, rising to 174% in relation (per clause 76 of Memorandum No. 9676858X incorporated in the Mortgage) to "any judgment or order in which this or the preceding clause must become merged."

(v) The Mortgage contains a penalty clause, in Annexure "A, in purporting to require the payment of "Damages for Late Payment" in the sum of $15,000.00. 55 As a result the Defendant asserts that the mortgage was unenforceable to the extent that the Plaintiff relied upon it for the remedy sought (possession of the mortgaged property and judicial sale of the charged property). 56 By a late amendment the Defendant also asserts that there was a failure to serve a notice that complied with s 57 of the Real Property Act, and that the statement of claim was issued prematurely. 57 In relation to the claim for judicial sale of the charged property the further amended defence records that the Defendant: a. denies that on its true construction Clause 66 charges the land;

b. says that Clause 66 purports to be a right arising on the mortgagor's default and is void as a penalty;

c. if Clause 66 is valid, which is denied, says that the Plaintiff has failed to serve a valid notice pursuant to s 57 and 58A of the Real Property Act 1900 and in consequence could not exercise any power of sale.

d. admits that clause 66 of the mortgage purports to decree that a default by the mortgagor gives rise to a caveatable interest on the part of the mortgagee in respect of other property owned by the mortgagor;

e. says that clause 66 is unconscionable and consequently unenforceable; (1) on its face; and/or

(2) by reason of all of the matters pleaded at paragraph 4 herein. 58 As a consequence, the Defendant disputes the Plaintiff's entitlement to a charge over the charged property, or to the relief sought, and insofar the Plaintiff's claim is one for specific performance of the mortgage, he opposes any such order, by reason of the matters elsewhere set out in the defence, and by reason of what was asserted to be an excessive rate of interest. 59 Although by his cross-claim the Defendant asserted that he was ready, willing and able to repay the principal sum together with interest calculated, at a reasonable commercial rate and reasonable legal expenses, there was no evidence of the tender by him of any such sum, or of its payment into Court.

Factual findings of relevance for these issues 60 So far as the Defendant's case depends upon the version of facts which he gave, either in his affidavit, or in his oral evidence, I am unable to accept that version save so far as it is supported by independent evidence. I find him to be a witness who was untruthful, evasive and prepared to say almost anything that would suit his own case, no matter how preposterous it was, and no matter how inconsistent it was with the documentary evidence. 61 I am satisfied that he deliberately lied when completing the loan application insofar as he described himself as a solicitor and supplied particulars of his employment. His claims, in the witness box, in an attempt to justify these particulars, did him no credit whatsoever, being patently evasive and untruthful. 62 In this regard, his answers that "ones status as a solicitor is not negatived by whether one is formally admitted or not"; that he conducted legal work for Thompson & Associates in an annex to his wife's dressmaking and alterations shop at 14 Hartill-Law Avenue, Bardwell Park "within the scope of my being overseen by another practitioner by the name of Thompson"; and his concession that this solicitor who he named as David Thompson (without knowing his full name), did not work at the premises, that he was not aware of the location of his office and that he was supervised by him only by way of a contact number and a mobile number which he "would ring and run the details of any work past him", and that he had first met him in 2001, borders on nonsense. Why it could conceivably be that Mr Thompson, if he exists at all, would enter into such an arrangement and permit what amounted to an employee, who did not hold a practising certificate, working out of an annex to a dress shop, is inexplicable to say the least. 63 The Defendant's explanation, for the entry on the application form, which stated that he had worked for this firm for 12 years, to the effect that he had understood this question to relate to his domicile, fares no better. The absurdity of this answer is only reinforced by the fact that earlier in the application he had stated that he had been residing at Bardwell Park for 8 months, and at his previous address at Clemton Park for 5 years. 64 While he claimed to have been admitted as a solicitor in Thailand and Bangladesh, as the result of acting for some trading firm that did business in those countries, there was tendered a letter from the Law Society of Thailand which showed no record of his registration, as well as a copy of the Lawyers Act B.E. 2528 (1985), s 35 of which provides that it was a precondition to obtaining a licence to act as a lawyer in Thailand that the licensee be a Thai national (which the Defendant was not). 65 At one stage of his evidence he claimed to "hold a practising certificate to do legal work" in those countries, and to be admitted in those jurisdictions, yet he was later somewhat less certain about this, indicating that he was "not sure as to the accuracy" of his admissions. 66 The Defendant accepted that he did not hold a practising certificate in New South Wales. He claimed to have passed certain law exams although they were not identified. He also acknowledged having been convicted, in his absence on 12 December 2003, of nine breaches of the Legal Profession Act. While he purported ignorance of the precise nature of these breaches, he accepted that, in general terms they related to having held himself out as entitled to practice as a solicitor in New South Wales. He said that he had prepared an application to set aside the convictions although he had not yet filed it. 67 Apart from being satisfied that these matters have very great significance for the Defendant's credibility, I am also satisfied that he deliberately misrepresented his status and employment in the loan application so as to paint a better picture of himself, in order to obtain the advance. 68 Further concern as to his credibility arose in relation to the cross-examination concerning the document which the Defendant acknowledged having annexed to an affidavit, which he had prepared in support of his application to set aside the summary judgment which had been obtained. This was a copy of a document bearing a date 2 December 2003, purporting to be on the letterhead of Australian Secured Investments Ltd offering him a loan of $700,000, which bore a signature B. Lee. The Defendant accepted that this signature had a pictorial similarity to the signature Belinda Lee which had been placed on the loan approval which had been issued by the first mortgagee (Community First Credit Union) on 29 April 2003, and that the two documents were almost word for word the same. While the Defendant denied fabricating the December 2003 document, which he had relied upon in support of the application to set aside the judgment, the inference that he did so is overwhelming. Associated with this was the circumstance that although the Defendant acknowledged that he had prepared and filed this affidavit, and endorsed it with the name of Slattery Thompson & Associates, Solicitors of Earlwood, at no time had any appearance been filed on his behalf by that firm. The Defendant accepted that Mr Livers of the firm had not seen the affidavit until after it was filed, even though it bore his firm's name. His explanation that this firm had subsequently accepted instructions to act for him, is not capable of belief, in the absence of any appearance having been filed by it. 69 An important question in the proceedings is whether the Defendant received, signed and returned the security documents after learning of the caveat, as he asserted, or before learning of its presence on the title. In this regard, I am again satisfied that he has not told the truth. 70 Significantly, the business records which I have noted earlier show that his account cannot be correct, in that he had collected and returned the documents by 2.58 pm, and in that the caveat could not have been lodged before 3.19 pm, when it was stamped. It follows that it was not the presence of the caveat which forced him to sign the security documents, and to bind himself to taking the advance from the Plaintiff. It also follows that paragraph 4(g)(v) of the defence which the Defendant verified on oath was untrue, insofar as it was there asserted that he learned of the caveat on the morning of 21 July 2003. It cannot be dismissed as the Defendant sought to do, as a typographical error. 71 I similarly reject the Defendant's account that Mr Benn said to him on 18 July 2003, or at any time, that the Plaintiff would lend him the sum required at an interest rate of 3% per month for one to three months. Mr Benn was unshaken in his evidence, and he impressed as a truthful and credible witness. I accept his denial of this conversation, and also of the conversation which the Defendant said occurred at about 3.00 pm on 21 July. 72 The obvious untruth in relation to the 18 July conversation is established when one traces the sequence of events disclosed by the business records, and by the fact that the conditional offer of 18 July shows that the loan offered was for one month at an interest rate of 14.5% per month reducible to 12% per month for prompt payment. It is also established by the fact that, in the Defendant's letter to the Plaintiff of 18 July, he stated that the facility was only needed for 30 days. The Defendant's attempts to explain that this letter did not mean what it says provides a clear illustration of his evasiveness in the witness box. His implicit suggestion that the valuer recorded the wrong date of his inspection on the valuation report, and his insistence that it occurred later than 19 July fare no better in terms of credibility, there being no apparent reason why such an error might have occurred. 73 The untruth in relation to the 21 July conversation is established by the objective records as to the return of the loan documents and the stamping of the caveat. Generally it is obvious from the sequence of events that is shown on the face of these documents, that the Defendant had attempted to manipulate their timing. In these circumstances, and in the face of denials by Mr Benn, I cannot accept that the conversations to which the Defendant deposed, occurred in the terms which he asserted. 74 Additionally, absent corroboration from Mr Viscardi, I am not prepared to accept that he offered the Defendant an alternative line of bridging finance at 2% per month. Even if he had done so, as Mr Benn explained, there was nothing to prevent the Defendant from indicating that he did not wish to proceed with loan from the Plaintiff and from taking up an alternative borrowing. 75 Otherwise, in considering the Defendant's asserted vulnerability, it is important to note that, although his contract for purchase was executed on 20 December 2002 for completion on 31 March 2003, he did not obtain finance from the first mortgagee until 29 April 2003. The notice to complete was issued on 26 June 2003, requiring completion on 11 July 2003, yet the Defendant did not approach the Plaintiff for a bridging loan until 17 or 18 July 2003, even though he had been aware from 19 June 2003 that the judgment monies which he had expected would provide the balance of the purchase price, were not forthcoming. 76 Additionally, having completed his purchase on 22 July 2003, he then seems to have done nothing to force completion of the contract for onsale, which he had purportedly secured, even though he stood to make a capital gain in the order of $100,000 and even though its completion would have allowed him to discharge his borrowings. 77 These circumstances are to be understood in a context where, on his own account, or admissions in cross-examination, he had legal qualifications, he was familiar with legal documents, he was "something of a businessman", he was a "solicitor's agent and a property developer", he understood the transactions into which he was entering, he had no illusions as to the "terms, meaning or effect" of the mortgage, and had received independent legal advice. The borrowing, he also acknowledged was not required for the purchase of a residence for himself, but for business or investment purposes. 78 I am satisfied that the problem which he had was of his own making, in that he had delayed taking the steps needed to secure finance in a timely way and in that he allowed the Plaintiff, at most, four working days between the application and settlement to investigate and process the matter. I am equally satisfied, from the true sequence of events that he had received, signed and returned the loan documents before any caveat was entered upon the title. It was untrue for him to assert that it was the existence of the caveat that forced him to take the loan from the Plaintiff, or that he was in any respect, at any time, misled as to the terms of the finance offered by it, or unaware of their force and effect. 79 I am also not persuaded that he had been offered any alternative line of credit, at a lower rate of interest, or that anything that was said or done by the Plaintiff prevented him from either seeking another line of finance earlier, or taking it up on 21 or 22 July. If, contrary to my assessment, there was in fact an alternative lender available, then there was nothing to stop the Defendant from obtaining a loan from that source. As Mr Benn explained, had the Defendant wished to take up a loan elsewhere, the Plaintiff would have withdrawn the caveat and waived the fees. 80 The Defendant, I am satisfied, was not at any time misled in relation to the transaction, nor was any false or misleading representation made to him. Nothing was done by the Plaintiff to force him to enter into the mortgage. Such pressure that he felt himself under to secure the loan was entirely of his own making, and there is no basis whatsoever for a finding that the Plaintiff took advantage of him. He was not an ingénue and he was able to make his own business decisions in relation to this transaction as a whole. That it turned out to be disadvantageous was his fault, and not the fault of anyone else. 81 If anyone was deceived by misleading conduct or by misrepresentation it was the Plaintiff, and not the Defendant, in that the former was presented with an entirely false impression of the Defendant's occupation and employment. Moreover the Defendant by his conduct placed the Plaintiff in a position where it had precious little time to investigate the Defendant's bona fides, and was left in the position where it did not receive the independent assurance which it sought from the agent and solicitor, who were recorded on the contract for onsale, as to its genuineness, as to the availability to the purchaser of any loan which he needed to complete the purchase, or as to his payment of the deposit. 82 The Plaintiff was entitled to rely upon the Defendant's assertion that he was a solicitor, and also upon his declaration that he had obtained independent legal advice, and upon his statement that he had a contract for resale and expected to be able to repay the loan within 30 days. There was no reason for it to doubt these assertions, in the light of what was then known, and there is additionally no basis for any finding that it took any unfair advantage of the Defendant.

The s 57(2)(b) notice 83 The Defendant contended that the s 57 notice was defective, insofar as the default specified was: (A) Principal due on 24 August 2003 and remaining unpaid as at 2 September 2003. 84 By reason of the blanks left on the Annexure to the mortgage (see above), and the terms of clause 29 (see above), it is asserted that the principal was not due on 24 August 2003, and that while, at best, it fell due on 1 September 2003, the better construction of the document is that the due date was 30 September 2003. If follows, so it was submitted, that the statement of claim (filed on 1 September and served on 16 September 2003) was issued and served prematurely, and that this is a fatal defect for the proceedings. The Defendant concedes that while a failure to serve a proper notice is not fatal to a claim for possession, he contends that such a failure would be fatal to any exercise by the Plaintiff of a power of sale. 85 The concession that a failure to serve a s 57(2)(b) notice does not provide a defence to a claim for possession accords with authority: Silkdale Pty Ltd v Long Leys Co Pty Ltd (1995) 7 BPR 14, 414. It provides no answer to the Plaintiff's claim in relation to the mortgaged property. 86 The Plaintiff's claim in relation to the charged property, does not depend upon an exercise of a power of sale under s 58 of the Real Property Act, or indeed upon the exercise of any other power under that Act, since the charge is not registered on the title to the property. The Plaintiff's claim is one for specific performance and for judicial sale. It does not depend upon the service of a valid s 57(2)(b) notice. In any event the claim for specific performance and judicial sale of the charged property was not made until the amended statement of claim was filed on 4 May 2004, which is to be taken as the date for commencement of that part of the proceedings (SCR Part 20 Rule (3A)). There could be therefore no question as to the premature commencement of the proceedings with respect to this claim. 87 Irrespective of these considerations, it is clear that the mortgage was intended to be for a term of one month from the time of the advance, and that as a result default occurred when that period expired. Clearly there is an inconsistency in the mortgage document in relation to the "Term" and the "Expiry Date", and that the manner in which the latter was expressed constitute a falsa demonstratio. The rule which applies is that expressed in Morrell v Fisher (1849) 154 ER 1350 at 1355: The … rule means that it there be an adequate and sufficient description, with convenient certainty of what was meant to pass, a subsequent erroneous addition will not vitiate it. The characteristic of cases within the rule is, that the description so far as it is false, applies to no subject at all; and so far as it is true applies to one only. 88 By applying the Term of one month, a definite date is yielded, while applying the Expiry Date no date is yielded. The present case accordingly is one that is appropriate for an application of the rule. 89 So far as there might be a residual ambiguity that is, in any event, resolved by reference to the Defendant's letter to the Plaintiff of 18 July, the formal letter of offer and acceptance dated 21 July, and the loan repayment ability declaration. 90 In order to secure justice in the proceedings in relation to the claim concerning the mortgaged property, in circumstances where the point taken is purely technical, and where there had been an admitted continued default for over 12 months in the repayment of the principal (even if the Defendant's submission is correct and the due date or expiry date was 30 September 2003), I would allow the amendment of the statement of claim, identified in the Plaintiff's submission in reply, as follows: 6AA Further, the Defendant has continued after the commencement of these proceedings in its failure to repay the principal, and has thus further defaulted under the Mortgage. 91 In these circumstances, the Defendant's submission concerning the sufficiency of the s 57(2)(b) notice and the existence of a relevant cause of action are of no avail.

The statutory defences 92 The relevant statutory provisions upon which the Defendant relies are to the following effect: (a) Contracts Review Act 1980 (NSW)

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) …

70 Court may reopen unjust transactions (1) Power to reopen unjust transactions . 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. (2) Matters to be considered by Court . 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 of the debtor 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) 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; (o) any other relevant factor.

51AA Unconscionable conduct within the meaning of the unwritten law of the States and Territories (1) A corporation must not, in trade or commerce, engage in conduct that 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 51AB or 51AC.

51AB Unconscionable conduct (1) A corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services to a person, engage in conduct that is, in all the circumstances, unconscionable. (2) Without in any way limiting the matters to which the Court may have regard for the purpose of determining whether a corporation has contravened subsection (1) in connection with the supply or possible supply of goods or services to a person (in this subsection referred to as the consumer ), the Court may have regard to: (a) the relative strengths of the bargaining positions of the corporation and the consumer; (b) whether, as a result of conduct engaged in by the corporation, the consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the corporation; (c) whether the consumer was able to understand any documents relating to the supply or possible supply of the goods or services; (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer or a person acting on behalf of the consumer by the corporation or a person acting on behalf of the corporation in relation to the supply or possible supply of the goods or services; and (e) the amount for which, and the circumstances under which, the consumer could have acquired identical or equivalent goods or services from a person other than the corporation.

51AC Unconscionable conduct in business transactions (1) A corporation must not, in trade or commerce, in connection with: (a) the supply or possible supply of goods or services to a person (other than a listed public company); or … engage in conduct that is, in all the circumstances, unconscionable. …

(3) Without in any way limiting the matters to which the Court may have regard for the purpose of determining whether a corporation or a person (the supplier ) has contravened subsection (1) or (2) in connection with the supply or possible supply of goods or services to a person or a corporation (the business consumer ), the Court may have regard to: (a) the relative strengths of the bargaining positions of the supplier and the business consumer; and (b) whether, as a result of conduct engaged in by the supplier, the business consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c) whether the business consumer was able to understand any documents relating to the supply or possible supply of the goods or services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the business consumer or a person acting on behalf of the business consumer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and (e) the amount for which, and the circumstances under which, the business consumer could have acquired identical or equivalent goods or services from a person other than the supplier; and (f) the extent to which the supplier's conduct towards the business consumer was consistent with the supplier's conduct in similar transactions between the supplier and other like business consumers; and (g) the requirements of any applicable industry code; and (h) the requirements of any other industry code, if the business consumer acted on the reasonable belief that the supplier would comply with that code; and (i) the extent to which the supplier unreasonably failed to disclose to the business consumer: (i) any intended conduct of the supplier that might affect the interests of the business consumer; and (ii) any risks to the business consumer arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the business consumer); and (j) the extent to which the supplier was willing to negotiate the terms and conditions of any contract for supply of the goods or services with the business consumer; and (k) the extent to which the supplier and the business consumer acted in good faith. …

52 Misleading or deceptive conduct (1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1).

53 False or misleading representations A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services: (a) falsely represent that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; (aa) falsely represent that services are of a particular standard, quality, value or grade; (b) falsely represent that goods are new; (bb) falsely represent that a particular person has agreed to acquire goods or services; (c) represent that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have; (d) represent that the corporation has a sponsorship, approval or affiliation it does not have; (e) make a false or misleading representation with respect to the price of goods or services; (ea) make a false or misleading representation concerning the availability of facilities for the repair of goods or of spare parts for goods; (eb) make a false or misleading representation concerning the place of origin of goods; (f) make a false or misleading representation concerning the need for any goods or services; or (g) make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy. … (d) Australian Securities and Investments Commission Act 2001 (Cth)

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 (1) A person must not, in trade or commerce, in connection with the supply or possible supply of financial services to a person, engage in conduct that is, in all the circumstances, unconscionable. (2) Without limiting the matters to which the Court may have regard for the purpose of determining whether a person (the supplier ) has contravened subsection (1) in connection with the supply or possible supply of services to a person (the consumer ), the Court may have regard to: (a) the relative strengths of the bargaining positions of the supplier and the consumer; and (b) whether, as a result of conduct engaged in by the supplier, the consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c) whether the consumer was able to understand any documents relating to the supply or possible supply of the services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer or a person acting on behalf of the consumer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the services; and (e) the amount for which, and the circumstances under which, the consumer could have acquired identical or equivalent services from a person other than the supplier. …

12CC Unconscionable conduct in business transactions (1) A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of financial services (see subsection (6)) to another person (other than a listed public company); or (b) … engage in conduct that is, in all the circumstances, unconscionable. (2) Without in any way limiting the matters to which the Court may have regard for the purpose of determining whether a person (the supplier ) has contravened subsection (1) in connection with the supply or possible supply of financial services to another person (the service recipient ), the Court may have regard to: (a) the relative strengths of the bargaining positions of the supplier and the service recipient; and (b) whether, as a result of conduct engaged in by the supplier, the service recipient was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c) whether the service recipient was able to understand any documents relating to the supply or possible supply of the financial services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the service recipient or a person acting on behalf of the service recipient by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the financial services; and (e) the amount for which, and the circumstances under which, the service recipient could have acquired identical or equivalent financial services from a person other than the supplier; and (f) the extent to which the supplier's conduct towards the service recipient was consistent with the supplier's conduct in similar transactions between the supplier and other like service recipients; and (g) if the person is a corporation - the requirements of any applicable industry code (see subsection (11)); and (h) the requirements of any other industry code (see subsection (11)), if the service recipient acted on the reasonable belief that the supplier would comply with that code; and (i) the extent to which the supplier unreasonably failed to disclose to the service recipient: (i) any intended conduct of the supplier that might affect the interests of the service recipient; and (ii) any risks to the service recipient arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the service recipient); and (j) the extent to which the supplier was willing to negotiate the terms and conditions of any contract for supply of the financial services with the service recipient; and (k) the extent to which the supplier and the service recipient acted in good faith. …

Misleading or deceptive conduct or misleading representations 93 The Consumer Credit Code did not apply to the transaction since its purpose was one related solely to business or investment purposes (see ss 6 and 11). I am also not persuaded that the Australian Securities and Investments Act has any application. Although the Defendant initially placed reliance on the Fair Trading Act, this was abandoned during argument, although had it been available or pursued, the same result would have followed. 94 Having regard to my factual findings, the claims brought under ss 52 and 53 of the Trade Practices Act must fail. In this regard, I am not persuaded that the mortgage security was obtained as a result of misleading or deceptive conduct, or as a result of misleading representations, within the meaning of the relevant provisions. I expressly find that there never was any representation made by the Plaintiff to the effect that the interest rate which it would charge would be 3% per month, that seemingly being the only misleading representation or misleading or deceptive conduct which was asserted.

Transaction unjust or unconscionable 95 The submission that the mortgage was unjust within the meaning of s 7 of the Contracts Review Act; or unconscionable under one or other of s 51AA, s 51AB and s 51AC of the Trade Practices Act, raises additional considerations insofar as the Defendant places reliance upon:

(a) the continuation of a rate of interest after judgment (under clause 30) which would exceed the prevailing court rate for interest on its judgments.

(b) the provision for interest to run after default at 174% per annum until repayment of the principal, accrued interest and other charges (under clause 31 and 33)

(c) the creation (under clause 66) of a charge over any other property owned by the mortgagee, upon default. 96 As I have observed earlier while reference was made to the Fair Trading Act in the defence this was not pursued in the final submissions. 97 This submission needs first to be considered in the light of the matters identified in s 9 of the Contracts Review Act, which is to the following effect: 9 Matters to be considered by Court (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. … 98 As was held in West v AGC (Advances) Ltd (1986) 5 NSWLR 610 the matters listed in s 9 are not exhaustive in determining whether a contract is unjust. McHugh JA there said at 620-621: Under s 7(1) a contract may be unjust in the circumstances existing when it was made because of the way it operates in relation to the claimant or because of the way in which it was made or both. Thus a contractual provision may be unjust simply because it imposes an unreasonable burden on the claimant when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision: cf s 9(2)(d). In other cases the contract may not be unjust per se but may be unjust because in the circumstances the claimant did not have the capacity or opportunity to make an informed or real choice as to whether he should enter into the contract: cf s 9(2)(a), 9(2)(e), 9(2)(f), 9(2)(g), 9(2)(i), 9(2)(j). More often, it will be a combination of the operation of the contract and the manner in which it was made that renders the contract or one of its provisions unjust in the circumstances. Thus a contract may be unjust under the Act because its terms, consequences or effects are unjust. This is substantive injustice. Or a contract may be unjust because of the unfairness of the methods used to make it. This is procedural injustice. Most unjust contracts will be the product of both procedural and substantive injustice.

The definition of "unjust" in s 4 is not exclusive. It is in my opinion a mistake to think that a contract or one of its terms is only unjust when it is unconscionable, harsh or oppressive. Contracts which fall within any of those categories will be "unjust". But the latter expression is not limited to the so-called "tautological trinity". The Contracts Review Act 1980 is revolutionary legislation whose evident purpose is to overcome the common law's failure to provide a comprehensive doctrinal framework to deal with "unjust" contracts. Very likely its provisions signal the end of much of classical contract theory in New South Wales. Any contract or contractual provision, not excluded from the operation of the Act and which the court considers is unjust in the circumstances existing at the time when it was made, may be the subject of relief under the Act. Moreover, the provisions of s 9(2) do not exhaustively indicate the criteria as to what can be taken into account in determining whether a contract or any of its provisions is unjust. The provisions of s 9(2) of the Act are concerned for the most part with matters of procedural injustice. But the court is entitled to have regard to all the circumstances of the case, subject to s 9(4), and the public interest …

It is important to bear in mind that it is the contract or its provisions which must be unjust …

If a Defendant has not been engaged in conduct depriving the claimant of a real or informed choice to enter into a contract and the terms of the contract are reasonable as between the parties, I do not see how that contract can be considered unjust simply because it was not in the interest of the claimant to make the contract or because she had no independent advice …

… under this Act, a contract will not be unjust as against a party unless the contract or one of its provisions is the product of unfair conduct on his part either in the terms which he has imposed or in the means which he has employed to make the contract … 99 In support of the claim under s 7, the Defendant relies upon:

(b) the absence of negotiations concerning the provisions of the mortgage,

(c) the inability of the Defendant to negotiate for the alteration or omission of any of the provisions of the mortgage

in circumstances where he was attempting to secure funds on short notice to prevent the purchase of a property, in which he resided with his family, falling through. 100 I am not persuaded that this submission has been made good save in one relatively minor respect. For the reasons already advanced, it does not come well from the Defendant to assert that he was in a position of disadvantage, in view of his admitted familiarity with legal transactions and his understanding of the mortgage. The claim to emergency arising from his asserted need to preserve the contract, and the availability of premises for the residence of himself and his family is somewhat empty when it is remembered that the advance was required for a business transaction, in which the Defendant had onsold the property on 3 July 2003 upon terms requiring completion within 42 days. So far as it is asserted that the Defendant attempted to negotiate the interest rate with Mr Benn, for the reasons already advanced, I disbelieve his account of the conversation, and I accept Mr Benn's evidence that there was no mention by him of any interest rate other than that shown in the loan offer. Although the Defendant submitted that on Mr Benn's evidence "it emerged that the Defendant sought a much lower interest rate than that ultimately contracted for", the basis for that submission is not evident to me. 101 As I have already observed the Defendant was not an ingénue, who was taken advantage of by the Plaintiff, and it was not the Plaintiff's fault that he had left it so late to seek the finance which he needed. 102 Moreover there can be nothing unjust in the continuation of interest at the contracted rate until the loan is repaid. The purpose of interest is to compensate the lender for making the monies advanced available to the borrower for his use, and it can hardly be asserted that there is anything unusual in such a term. 103 The taking of a further charge could not be regarded as unjust in the circumstances of a second mortgage, where the Defendant was effectively borrowing 100% of the purchase price, and where he acknowledged familiarity with the terms of the loan. 104 The interest rate, although admittedly high, does not constitute of itself an unconscionable or unjust provision, in a case such as the present involving a commercial loan, where there was no unconscionable pressure, placed on the Defendant by the Plaintiff, to enter into the transaction. 105 In any event the Court is not in a position to determine whether the rate charged was, or was not, one which fell within the range for commercial bridging or short term loans, since no evidence was called by the Defendant in relation to this aspect of the case. That the rate was in excess of the commercial rate was in fact rejected by Mr Benn, in cross-examination. While it may be possible, in a general way to take judicial notice of prevailing interest rates, for example from credit and store card interest charges, as was suggested in Cityland & Property (Holdings) v Dabrah [1967] 2 All ER 629 and in Asia Pacific International Pty Ltd v Dalrymple (2000) 2 Qd R 229, I am not in a position to determine the prevailing rate for short term bridging loans secured by second mortgage. 106 The decision of Shepherdson J in Asia Pacific does not assist the Defendant insofar as a compound interest rate of 20% per month for one month was there held to have been unconscionable and read down to a simple rate of 15% per month, a rate in excess of the default rate in the present case. 107 Nor does Cityland assist, in that it was a case where relief was granted in circumstances where the lender had artificially increased the principal amount to 157% of the amount actually advanced, constituting a collateral advantage in the nature of a premium in favour of the lender. 108 In summary, the Defendant was not a person placed in the kind of disadvantaged or vulnerable position of which others had taken advantage, and which had led the courts to set aside transactions on the basis of unconscionability or injustice, for example in Blomley v Ryan (1956) 99 CLR 362; Commercial Bank of Australia v Amadio (1983) 151 CLR 447; Commonwealth of Australia v Verwayen (1990) 170 CLR 394; and Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445. 109 The one aspect of concern, however, is that which arises in relation to the provision for the Damages for Late Payment of $15,000 which is contained in clause 37 of the mortgage. 110 In the circumstances of a contract which provided for a loan for one month, which attracted a default interest rate of 14.5% for one month, which provided for the mortgagor to pay to the mortgagee, all of the costs and expenses incurred by it as a result of any default, including administrative and legal costs upon an indemnity basis, as well as interest upon those costs and expenses until their payment at the default rate (clause 44 to 46), and which also permitted the mortgagee, upon default, to the benefit of a charge over any other real property owned by the Defendant (clause 66), this provision can only be viewed as an unjust penalty. 111 The default interest rate and those other provisions mentioned are more than adequate to compensate the Plaintiff in the event of a default, and the sum of $15,000 bears no relationship whatsoever to any loss that could not be otherwise recoverable under the mortgage. 112 This clause can, and in my view, should, be severed, although without otherwise affecting the Plaintiff's rights to the relief claimed. 113 Similar considerations apply in relation to the submissions which were advanced in reliance upon the Trade Practices Act.

Clogging of the equity of redemption 114 As the Defendant submitted, the concept of clogging the equity of redemption has been subsumed by the general test of unconscionability, with the consequence that the considerations which apply in relation to the statutory defences are equally relevant for this claim. 115 Apart from the late payment damages clause, which can be severed, I am accordingly unpersuaded that this ground of defence and claim for relief fails. 116 In addition to the authorities previously referred to, it is to be noted that in Takemura v National Australia Bank [2003] NSWSC 339 Young CJ in Eq held that: … short of unconscionability including what is sometimes comprehended in the defence of lack of clean hands, the mere fact that there is a high interest rate charged in trade and commerce between people of business does not of itself mean that equity would decline specific performance. 117 Having regard to the approach that was taken to high interest charges in this case and in Dalrymple, and also having regard to the findings which I have made in relation to the circumstances in which the mortgage was given, including the Defendant's lack of clean hands, I am not persuaded that he is entitled to any form of relief beyond severance of the late payment damages clause. I am persuaded that the Plaintiff is entitled to the relief claimed, including an order for possession of the mortgaged property, and for specific performance of clause 66 and judicial sale of the charged property. 118 In relation to the Plaintiff's claim concerning the charged property, I accept the Plaintiff's submissions, which were not placed into issue by the Defendant, concerning the Court's power to grant the relief sought. 119 In summary it was submitted that clause 66, by permitting the Plaintiff to lodge a caveat to protect the borrower's obligations created, by necessary implication, an equitable charge: Murphy v Wright (1992) NSW ConvR 55-652 and Troncone v Aliperti (1994) NSW ConvR 55-703. Moreover by being contractually given rights of possession and sale the Plaintiff was placed in the position of an equitable mortgagee. 120 In Re Hodson and Howes' Contract (1887) 35 Ch D 668, the English Court of Appeal held that s 21 of the Conveyancing and Law Property Act 1881 (England) did not empower an equitable mortgagee, when exercising power of sale, to convey a legal estate in the land in question, and that a provision in the mortgage deed conferring a power of sale on an equitable mortgagee would be similarly limited to disposal of the equitable estate. Since, as Fisher & Lightwood's Law of Mortgage Australian Edition 1995 at [20.39] points out, s 112 of the NSW Act follows the wording of the 1881 English Act, an unregistered mortgagee of Real Property Act land in NSW cannot convey, pursuant to its power of sale under the Conveyancing Act, any more than an equitable interest in land, without resorting to one of the devices outlined in [20.39] of Fisher & Lightwood, being either a conveyance by power of attorney or by means of an order for sale under s 103. 121 In Yarrangah Pty Ltd v National Australia Bank Ltd (1999) 9 BPR 17,061, Young J held that although s 103 of the Conveyancing Act was not applicable to Real Property Act land, there is an inherent power in a Court of Equity to order judicial sale with respect to Real Property Act land in circumstances analogous to those where an order for sale under s 103 would be available in relation to Old System land. It follows that the Plaintiff requires the assistance of an order of the Court for judicial sale, analogous to an order for sale under s 103 of the Conveyancing Act. 122 The one matter of concern in respect of which I invited submissions, was whether, instead of appointing the Plaintiff as the Court's agent for sale, I should appoint an independent Receiver. However, in view of the Defendant's stated preference, in its written submission in reply, for the approach advanced by the Plaintiff, by reason of his desire to avoid incurring further costs, I will appoint the Plaintiff as the agent for sale. In this regard it may be accepted that, in the exercise of its power, it will be subject to the usual duties of a mortgagee exercising a power of sale, although I consider that it should, in due course, provide an accounting to the Court, as its agent. 123 I will stand the matter over to a date to be fixed, to hear any argument as to costs, and to allow the parties to bring in short minutes of the orders to be made pursuant to these findings. **********

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