Inruse Pty Limited as trustee for the 224 Hinxman Trust v Equity Lenders Pty Ltd

THE COURT ORDERS THAT:

1. The application be dismissed.
2. Pursuant to r 40.02 of the Federal Court Rules 2011, the applicant pay the respondents' costs in a lump sum fixed at $80,137.72. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT THAWLEY J:

OVERVIEW 1 The applicant, Inruse Pty Limited as trustee for the 224 Hinxman Trust, seeks damages against the respondents, Equity Lenders Pty Limited and its sole director, Mr Robert Kirk. Equity Lenders is a mortgage originator and broker, linking private lenders with borrowers, particularly in the construction and building industries. Inruse makes investments in the Hinxman Trust for the purposes of generating wealth for Mr Swain and his family. Unless otherwise stated in these reasons, a reference to Inruse is a reference to Inruse in its capacity as trustee of the Hinxman Trust. 2 By three loan agreements between July and December 2021, Inruse lent money to Construxn Pty Ltd, a construction and property development company based in Queensland. Mr Nelson Wayne Leon was the sole director and shareholder of Construxn. 3 The three loans were as follows: (a) The First Loan, made on 13 July 2021: a loan of $262,500, secured by a second mortgage over 69A Albert Street, Goodna, Queensland (the Goodna property) and 36-46 Bromley Street, Cornubia, Queensland (the Cornubia property). The First Loan was for 6 months at an interest rate of 24% pa ($31,500), with three months interest prepaid on drawdown ($15,750) and a "Funder Fee" of 4.4% ($11,550) payable to Inruse on drawdown. Interest became payable at 48% in certain circumstances. By 14 October 2021, the borrower was in default such that interest was payable at 48%; (b) The Second Loan, made on 18 August 2021: a loan of $222,700, secured by a second mortgage over 40 Glenmore Crescent, Rochedale, Queensland (the Rochedale property). The first mortgagee was Certane Ct Pty Ltd, being an investment vehicle for the Australian Secure Capital Fund (ASCF). The Second Loan was for 2 months at an interest rate of 24% pa ($8,908), fully prepaid on drawdown together with a "Funder Fee" of 4.4% ($9,798.80) payable to Inruse on drawdown. Interest became payable at 48% in certain circumstances. On 18 October 2021, the borrower requested an extension until 18 November 2021. Inruse granted this extension at the default rate of interest of 48%, but Construxn defaulted on repayment; and (c) The Third Loan, made on 13 December 2021: a loan of $579,500, secured by a third mortgage over 47 Edward Street, Brisbane. Certane was the first and second mortgagee. The Third Loan involved a refinancing (and therefore a discharge) of the First Loan. The Third Loan was for three months at a "lower rate" of 48% pa, with the whole of the interest deducted from the principal on the loan date (a total of $69,540). Interest became payable at a "higher rate" of 60% in certain circumstances. An establishment or lender's fee of 4.4% ($25,498) was paid to Inruse at drawdown. Unless the loan was repaid before the loan repayment date and there had not been any event of default, a "deferred commitment fee" of $100,000 was payable. Before entering into the Third Loan, Construxn was in default under both the First and Second Loans. Construxn defaulted by not repaying the Third Loan on 13 March 2022. 4 In respect of each of the loans: (a) Equity Lenders acted for Inruse as broker and mortgage originator; and (b) Bransgroves Lawyers acted for Inruse. 5 On 12 June 2022, Construxn was placed under administration: Swain at [10]. Inruse has not been repaid the amounts owing under the Second and Third Loans which, after default, accrued interest at 48% and 60% respectively. 6 Inruse blames Equity Lenders and Mr Kirk for its predicament. By its primary case, Inruse claims that it was induced to engage Equity Lenders and make the loans by representations contained in documents accessed on or through its website, namely a "Private Lender Guide" and "FAQ's on becoming a lender on the Equity Lenders panel of lenders" (FAQs). The Guide and FAQs, amongst other things, provided information as to what Equity Lenders would do if a lender became a lender on Equity Lenders' panel of lenders, lending on first or second mortgages. The Guide and FAQs addressed loans in which the maximum loan to value (LVR) was 70%. 7 Mr Swain was the controlling mind of Inruse. He has 18 years' experience in the banking industry and 39 years' experience as a business manager assisting clients with their business and wealth management. Since 2016, he has devoted his attention solely to managing his family wealth. He had experience in private lending before the relevant events the subject of these proceedings. 8 After twice reading the Guide and FAQs carefully, Mr Swain contacted Mr Kirk at Equity Lenders and, after discussions, instructed Equity Lenders that Inruse preferred to lend on a second mortgage basis, charging interest of between 18% and 24% pa, with an LVR up to 90%. 9 In accordance with Mr Swain's instructions, Equity Lenders put forward the First Loan at 24% interest with an LVR in respect of two properties of 85.7% and 85.736%. The Second and Third Loans had an LVR of about 75%. 10 Inruse says that it was induced to deal with Equity Lenders by the representations it says were conveyed in the Guide and FAQs, including that Equity Lenders would only put forward loans where the lenders funds would be "safe" or "secure" and where there was sufficient equity in the security property to repay the loans. 11 Inruse claims that, were it not for the representations, Inruse would have engaged a different mortgage broker, and that: (i) it would have entered into different private loans at the same or similar rates to those which it in fact entered into; and (ii) it would not have suffered the losses it did. 12 Inruse claims damages: (a) under s 236(1) of the of the Australian Consumer Law (ACL), being Sch 2 of the Competition and Consumer Act 2010 (Cth) for a breach of s 18(1) of the ACL on the basis that Equity Lenders engaged in misleading or deceptive conduct by making certain representations about Equity Lenders' lending policies; (b) against Mr Kirk on the basis that he was "involved in" the contraventions within the meaning of s 2(1) and s 236(1) of the ACL; (c) for breach of contract, the alleged terms finding analogues in the alleged misleading or deceptive representations; and (d) for negligence at common law and under s 267(4) of the ACL on the basis that Equity Lenders failed to comply with the guarantee under s 60 of the ACL by failing to provide services with due skill and care. 13 For the reasons which follow, each of Inruse's claims should be dismissed.