Mango Credit Pty Ltd v Saad

Background

1. On 24 March 2020, the plaintiffs filed a statement of claim seeking an order for possession of land at Bella Vista ("the property"), and leave to issue a writ of possession to enforce that judgment.
2. On 12 May 2020, in the absence of any defence having been filed by the defendant, the plaintiffs filed a notice of motion for default judgment for possession, which was granted on 15 May 2020.
3. On 19 May 2020, the plaintiffs filed a further notice of motion for the issue of a writ of possession, which was issued on 20 May 2020.
4. On 9 July 2020, the Sherriff executed the writ of possession, resulting in the defendant and her family's eviction from the property. The plaintiffs obtained possession of the property, which they have retained since. At present, the plaintiffs have not undertaken not to sell the property (my emphasis).
5. On 7 August 2020, the defendant filed a notice of motion subject of these proceedings, seeking to set aside both the default judgment and the writ of possession.

Setting aside default judgment

1. The Court's powers to set aside default judgment are contained in UCPR 36.16. It reads: "36.16 Further power to set aside or vary judgment or order (cf SCR Part 40, rule 9) (1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order. (2) The court may set aside or vary a judgment or order after it has been entered if- (a) it is a default judgment (other than a default judgment given in open court), or (b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order…"
2. The principles relating to default judgment are well known. Recently in J & M McNamee Holdings Pty Ltd v Mungerie Vale Pty Ltd t/as Greenwood Group Realtors [2019] NSWCA 283, the Court of Appeal stated [48]-[49]: "[48] It is well established that the considerations relevant to an application to set aside a default judgment include whether the applicant has a bona fide ground of defence, an adequate explanation for the failure to defend and the length of any delay: Adams v Kennick Trading (Int) Ltd (1986) 4 NSWLR 503 at 506 (Hope JA; Glass JA agreeing). Whether the plaintiff will be prejudiced if the default judgment were set aside is also relevant. [49] Fundamentally, the question is whether it is in the interests of justice to allow the party seeking to set aside a default judgment to be permitted to defend the proceedings on the merits: Dai v Zhu [2013] NSWCA 412 at [83] (Sackville AJA; Barrett and Leeming JJA agreeing), citing, with approval, the remarks in Reinher Industrial Lease & Finance Pty Ltd v Jordan (Court of Appeal (NSW), 4 June 1974, unrep)."

Explanation for delay and prejudice

1. There is almost a three month delay from the entry of the default judgment to the filing of the defendant's notice of motion. The defendant's explanation for the delay is as follows.
2. On 24 March 2020, the plaintiffs filed a statement of claim seeking possession of the property. An affidavit of service of John Floridis suggests the statement of claim was served on the defendant on 26 March 2020. While she does not recall being served (Aff 7/8/2020 at [48]), she was aware of these proceedings by 9 April 2020, when the Australian Financial Complaints Authority ("AFCA") made a formal complaint on her behalf concerning "Mango Mortgages Pty Ltd". The defendant says that she was under the impression, apparently on the basis of comments made by someone from Westpac, that the lodging of the AFCA complaint had the effect that the plaintiffs would be unable to continue prosecuting the statement of claim (Aff at [50], [55]).
3. On 15 May 2020, the Court entered default judgment. On 20 May 2020, it issued the writ of possession.
4. On 9 July 2020, the defendant was evicted from the property, which was her family home. She says that at that point, she realised that she had been mistaken about the effect of the AFCA complaint and engaged solicitors. On 10 July 2020, her solicitors filed a notice of appearance.
5. The defendant's and plaintiffs' solicitors attempted to negotiate a resolution of the dispute without the need for the filing of a motion to set aside the default judgment. However, by the end of July 2020, it became apparent that negotiation was unlikely to resolve the dispute, leading to the filing of the set aside motion on 7 August 2020.
6. The defendant and her three children have been residing in a hotel with the financial support of relatives.

The defendant's submissions

1. The defendant submitted that the delay is minor and does not cause the plaintiffs actual prejudice.

The plaintiffs' submissions

1. In oral submissions, counsel for the plaintiffs conceded that there was some explanation for delay. However, he said that it was not a particularly good explanation, because the sheriff must have served a notice to vacate prior to actually entering the property and enforcing the writ of possession. While there is no mention of the service of this notice in either of the defendant's affidavits, she would have been on notice that there was a writ that was going to be executed, and she still apparently did nothing.
2. The plaintiffs submitted that the three month delay is a substantial amount of time. During this period of delay, the plaintiffs went to the expense of applying for a writ to be executed and issued. A second notice of motion was filed after judgment was obtained, followed by the enforcing of the writ, and the plaintiffs has been in occupation of that property for about a month and a half (T 30.27-48). The plaintiffs submitted that it is not a question of the mere lapsing of time, but the fact that within that time many changes have occurred to both the plaintiffs' and defendant's circumstances. Even though the defendant has provided some explanation as to what was going on in her head at the time, the plaintiffs submitted that her delay in bringing her notice of motion should count against her.
3. While counsel for the plaintiffs' oral submissions emphasised the costs of enforcing the judgment, he conceded there is still equity in the property for about the next six months.

Resolution - delay and prejudice

1. The delay between judgment being obtained and the writ of possession being executed was relatively short, a little less than three months. The defendant says she was under the impression that her complaint with AFCA would halt the proceedings. Once she found out this advice was incorrect, she acted expeditiously. After that, further delay was caused when her solicitor sought to resolve the matters with the plaintiffs' solicitors.
2. So far as prejudice is concerned, I accept that the plaintiffs have been put to the expense of obtaining and executing a writ of possession, but this should not shut out the defendant, as there is further equity in the property for about six months. In any event, the defendant says that she remains prepared to pay the plaintiffs' costs thrown away by the obtaining of the default judgment. In my view, the defendant has provided an adequate explanation for her delay, and the prejudice to the plaintiffs is not significant.

Proposed defence

1. The defendant (Aff 7/8/2020) attaches a draft defence raising unconscionability defences under the Competition and Consumer Act 2010 (Cth), the Contracts Review Act 1980 (NSW) and under the common law, as well as alleging breaches of the National Consumer Credit Protection Act 2009 (Cth) and equitable relief arising from the agency relationship between Mr Yanis Derums, the director of Mango Credit, and Mr Clint Young of APC Finance.
2. The defendant pleads her defence at [5] of the draft defence as follows: "5. The defendant admits paragraph 5 of the SOC but says that a. the purported Agreement was invalid and liable to be set aside as the Agreement was procured by unconscientious or unconscionable conduct in Equity in circumstances where i at the time of all dealings between the defendant and the plaintiffs the defendant was under a special disadvantage and vulnerable as she was 1 unemployed, 2 a cancer patient undergoing cancer treatment 3 experiencing financial hardship, 4 an unsophisticated person lacking in any business acumen or experience and lacking in financial nous, 5 unable to protect her own interests in her dealings with the plaintiffs 6 unable to service the Agreement 7 in a weak bargaining position relative to the position of the plaintiffs including because she was already in arrears to the first mortgagee (Westpac) under her home loan ii in around August or September 2019, the defendant received an unsolicited telephone call from an agent of the plaintiffs (Mr Clint Young of APC Finance) offering finance, iii in around September 2019 the defendant received a letter of offer from the first plaintiff that 1 did not mention or identify the other lender, Isla Pty Ltd 2 did not mention that any mortgage was required and only mentioned a caveat, 3 falsely identified the defendant as the holder of ABN 97 410 822 535 4 did not make any mention of a power of attorney being granted by the defendant, iv when the defendant signed the Agreement on around 30 September 2019 she had received 1 no legal advice at all 2 no proper or bona fide financial advice v the plaintiffs (including through their agent(s) APC Finance and/or Mr Young) knew (or ought to have known in the sense that they were aware of facts that would raise the possibility in the mind of any reasonable person) of the above circumstances constituting the defendant's special disability but nonetheless procured and obtained the defendant's execution of the Agreement, vi in the alternative, the plaintiffs (including through their agent(s)) were recklessly indifferent as to the defendant's special disability but nonetheless procured and obtained the defendant's execution of the Agreement vii the terms of the Agreement were unfair, oppressive unjust and exploitative including because 1 the defendant had no realistic possibility of meeting her obligations under the Agreement (or at least could not do so without suffering substantial hardship), 2 it was a term of the Agreement that the interest rate was 2 1% per month, which was exorbitant and a penalty, 3 it was a term of the Agreement that the interest rate was 8 95% per month if in default, which was exorbitant and a penalty, 4 it was a term of the Agreement that the defendant pay $52,256 out of the principal borrowed of $305,000 such that she in fact received $282,744, 5 the above terms were not reasonably necessary for the protection of the legitimate interests of the plaintiffs, but rather were an exercise in asset-lending in that the defendant had no realistic payment of servicing the loan and the plaintiffs were predominantly or solely relying on the security to obtain repayment of the loan, 6 the National Credit Code applied to the Agreement but was breached in the manner described in paragraph 5(e) of this Defence below which is repeated as if set out herein, viii in the premises, the defendant was under a special disability or serious disadvantage, known to the plaintiffs, and it was unconscientious for the plaintiffs knowingly to exploit the situation by entering into the transactions under the Agreement and taking their legal benefit ix as a result the Agreement should be set aside in Equity b. in the further alternative the Agreement should be set aside under ss 237 and 243 of the Australian Consumer Law (ACL) as it was procured by unconscionable conduct within the meaning of s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and s 21 ACL in circumstances where i the offer by the plaintiffs in respect of the Agreement was made in trade or commerce, ii the Agreement constituted the supply of financial services to the defendant in the offer was made in the circumstances alleged in paragraph 5(a) of this Defence above and in paragraph 5(e) of this Defence below, which are both repeated as if set out herein, c. in the further alternative the Agreement is liable to be set aside because the Agreement was procured by the plaintiffs' misleading and deceptive conduct contrary to s 18 ACL and misleading and deceptive conduct in respect of financial services contrary to s 12DA of the ASIC Act d. in the further alternative given that the Agreement was a consumer contract the interest terms of the Agreement are void as penalties either in Equity or pursuant to s 12BF(1) of the ASIC Act and s 23 ACL e. in the further alternative, the Agreement is an unjust contract within the meaning of s 7 of the Contracts Review Act 1980 (NSW) in the circumstances outlined in paragraph 5 of this Defence f. in the further alternative, the Agreement is liable to be made void or set aside under the National Credit Code (being Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth)) in circumstances where i the purpose of the purported Agreement (including the loan and mortgage) was wholly for personal, domestic or household purposes because it was in respect of the defendant's home loan, ii as a result, the purpose of the loan was wholly or predominantly for a Code purpose, 1 the purported declaration that the purpose of the loan made under the purported Agreement was for business was false and ineffective under s 13(3) of the National Credit Code in circumstances where the plaintiffs as credit provider (or a prescribed person) (a) knew or had reason to believe or (b) would have known or had reason to believe if the plaintiffs as credit providers (or the prescribed person) had made reasonable inquiries about the purpose for which the credit was provided under the Agreement that the credit was in fact to be applied wholly or predominantly for a Code purpose 2 as a result, the National Credit Code applied 3 the plaintiffs breached the National Credit Code and the Act by its conduct in respect of the Agreement, including (a) engaging in credit activities without a licence in contravention of s 29 of the Act (b) demanding and accepting a fee for engaging in a credit activity and so contravening s 29 in contravention of s 32 of the Act (c) even if they held licence (which is denied) failing to comply with the requirements that they would have had as a licensee under the Act, including (i) failing to provide a credit guide in the manner required by s 113 of the Act, (ii) failing to provide a quote in the manner required by s 114 of the Act, (iii) failing to make a preliminary assessment in the manner required by s 115 of the Act, (iv) failing to make reasonable inquiries, including inquiring about and verifying the defendant's financial situation contrary to s 117 of the Act, (v) failing to assess that the loan was unsuitable when the defendant was never able to comply with her obligations under the Agreement, contrary to s 118 of the Act (vi) failing to provide a credit proposal disclosure document contrary to s 121 of the Act, (vii) suggesting or assisting the defendant to enter into the Agreement being an unsuitable credit contract as the defendant was never able to comply with her obligations under the Agreement (at least without substantial hardship) contrary to s 123 of the Act (viii) failing to provide a credit guide contrary to s 126 of the Act (ix) failing to assess unsuitability and make the necessary inquiries and verifications contrary to s 129 and s 130 of the Act (x) failing to assess that the Agreement was in fact unsuitable contrary to s 131 of the Act, (xi) entering into the Agreement with the defendant despite it being unsuitable for the defendant, contrary to s 133 of the Act 4 in the premises the defendant is entitled to various relief under the National Credit Code and the Act, including voiding the Agreement under ss 179 and/or 180 of the Act (noting that the Defendant reserves the right to put on a cross-claim in due course seeking damages including under s 178 of the Act) g in the further alternative, in the circumstances pleaded above in this paragraph 5 the Court's power under s 76 of the National Credit Code to reopen unjust credit contracts and mortgages is enlivened, given the Agreement is unconscionable harsh and oppressive"
3. Paragraph 5(b)(i) of the defence further pleads: "b in the further alternative the Agreement should be set aside under ss 237 and 243 of the Australian Consumer Law (ACL) as it was procured by unconscionable conduct within the meaning of s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and s 21 ACL in circumstances where i the offer by the plaintiffs in respect of the Agreement was made in trade or commerce…"
4. The defendant has provided extensive evidence to support her case. I shall summarise some of it, including her receipt of legal and financial advice, the certificate issued under the Australian Consumer Law, evidence pertaining to the Contracts Review Act and the alleged agency relationship between Mr Young and Mr Derums.

Legal advice

1. The defendant's evidence is that Mr Young had agreed to help her furnish a loan from Mango Credit.
2. On 23 September 2019, Mango Credit made an offer to the defendant to provide credit in the amount of $305,000.
3. Mr Young had told the defendant that Mango Credit required her solicitor's details before the loan could go ahead. The defendant searched on Google for a local lawyer, and found the website of Robert Belonogoff from Bluebells Lawyers. The defendant called Mr Belonogoff and had a conversation in words to the following effect: "The defendant: Hi, my name is Mary. I'm looking for a lawyer to help me sign some loan documents. Can you help me? Mr Belonogoff: Yes, sure. The defendant: I need it done quickly. Mr Belonogoff: Not a problem. I can meet with you tomorrow or Thursday? The defendant: Yes, that is fine. Can you come to my house? Mr Belonogoff: Of course. The defendant: Thank you. Also, can you send me your contact details so I can forward them to the lender? Mr Belonogoff: Yes, what is your email address? The defendant: xxxx.com. Mr Belonogoff I'll send it soon."
4. Mr Belonogoff sent the defendant an email on Tuesday 24 September 2019 at 4.25 pm. The email contained his contact details.
5. Records show that the defendant spoke to Mr Belonogoff on the phone again the next day for 5 minutes. She does not remember that call.
6. At some stage around this time, when speaking to Mr Belonogoff, the defendant told him: "I really need this loan, I have bills stacking up and I am most concerned about falling in arrears with Westpac. I just need this money so I can live and to make sure I can get back onto my two feet and look after my kids. If I don't pay Westpac, they are going to take my house."
7. The defendant does not remember Mr Belonogoff giving her any specific advice at that time. He only said that he would help her.
8. Mr Young was calling the defendant throughout this period. She says she spoke to him more than she spoke to Mr Belonogoff. She thinks sometimes Mr Young spoke to Mr Belonogoff directly.
9. The defendant says that Mr Young was always telling her to act urgently. She had trouble doing as he asked, since she was often feeling sick and going to the doctor. When she paid attention to the tasks Mr Young had asked her to do, like signing documents, she did them as quickly as she could without reading them closely.
10. On 27 September 2019, the defendant accepted and signed the offer for finance with Mango Credit. She says that Mr Young was on the phone with her at the time, encouraging her, and that he stayed on the line until she signed. She took photos on her phone of the documents and sent them to him. The defendant's current solicitor has informed her there is a screen shot of the photos with a time stamp of 1.14 pm.
11. The defendant signed the loan documents and mortgage by attending in person upon Mr Belonogoff. Her current solicitor has informed her that this occurred on Monday 30 September 2019, but she does not remember the exact day. She remembers Mr Belonogoff came to her house with the documents in the late afternoon or early evening, staying for around a half an hour. The defendant does not remember him asking her any details, like why she wanted the loan or whether she had an ABN or a business. The first time she saw the loan documents and mortgage was when Mr Belonogoff showed them to her at her house.
12. The defendant says that before she signed the loan documents, at no time did Mr Belongoff: 1. ask her if the ABN on the loan documents was actually hers or anything about the ABN; 2. ask her if she actually ran a business; 3. ask her whether the loan was for business or investment purposes; 4. explain to her how the mortgage worked; 5. mention the National Credit Code; 6. explain to her anything about losing rights under the National Credit Code; 7. explain to her that if she defaulted on the repayments she could lose her house; or 8. mention anything about the risky or short-term nature of the loan.
13. Mr Belonogoff asked the defendant if she had a job. She told him that she was unemployed. He also asked her what she was going to do with the money. She told him she needed the loan to pay bills, especially her Westpac mortgage repayments. He asked for the balance of her Westpac mortgage account, which she emailed to him that evening.
14. Mr Belonogoff did ask the defendant how she was going to repay the loan. She told him she planned to use the rent from a unit she expected to get off her brother. She says that Mr Belonogoff did say something about the interest rate being high.
15. The defendant admits that she did not read the loan documents closely. She did not understand them or how the mortgage worked beyond that she was borrowing $305,000. She says that Mr Belonogoff simply said "just sign here", and she signed. She says that if Mr Belonogoff had explained that she could lose her house, she would not have gone ahead with the loan. She was unemployed and trying to raise and look after her three kids alone. Her purpose in taking out the loan was so that she would not lose her house to Westpac.
16. The defendant also stated that she did not understand she had lost rights under the National Consumer Code, and that she would not have signed the agreement if this had been explained to her. Mr Belonogoff asked her if she had an accountant. She said her accountant was Mr Max Ebrahimi from Ebrahimi & Associates. He said she should go see him the following day and get a document signed.

Financial advice

1. On 1 October 2019, the next morning, the defendant called Mr Ebrahimi. A neighbour had given her his name a few months before, and she had only newly engaged him as her accountant. The defendant went to Mr Ebrahimi's office for him to sign the documents that Mr Belonogoff had identified. She did not know if Mr Ebrahimi had all the loan documents. She says she was only at his office for about 10 minutes.
2. Mr Ebrahimi did not explain the loan to the defendant or talk about how it would work for her financially. He did not ask her about an ABN number nor whether if she had a business. He did not mention that she could lose her home or what the National Consumer Code was, nor did he explain what was on the certificate of independent financial advice.
3. At the meeting with Mr Ebrahimi, he repeated several times, "You are just going from shark to shark". He asked her whether she could just borrow money from family. The defendant says she answered, "No, no one will help me and I don't want anyone to help me, I need to get out of this position on my own".
4. When Mr Ebrahimi asked if she had spoken to Westpac to assist, the defendant said, "Yes, but they can't help me. I need to make the repayment by the end of the week". Mr Ebrahimi asked the defendant if she was working, and she told him that she was unemployed. When he asked how she was going to repay the loan, she said, "I am getting a unit in a month or two, I will use the rent or sell it if I need to". He did not explain to her what was on the documents she gave him.
5. Soon after meeting with Mr Ebrahimi, the defendant went to Mr Belonogoff's office and dropped off the documents Mr Ebrahimi had signed. She did not read the loan documents, which stated "trading as Mary Saad ABN XXXXX".
6. The defendant says that this number is not her ABN. She has never had one in her own name, nor has she ever operated a business. She does not know how the ABN came to be on the documents. She had never told Mr Young she had an ABN, and he never asked her if she did.
7. The defendant says that if Mr Young, Mr Belonogoff or Mr Ebrahimi had asked her if the ABN number was hers, she would have told them it was not.
8. The defendant did not think any of the people or the plaintiffs' lawyers looked up the number to check it before she signed the loan documents. If anyone had looked it up, they would have realised that the ABN: 1. was first registered in 2010; 2. listed its first main business location in area code "2234" in NSW, which a Google search shows as comprising the suburbs in south Sydney of Alfords Point, Bangor, Barden Ridge, lllawong, Lucas Heights, Menai, and Menai Central; 3. listed its second main business location in area code "2560", comprising the suburbs in south-west Sydney of Airds, Ambarvale, Appin, Blair Athol, Bradbury, Campbelltown, Campbelltown North, Englone Park, Gilead, Glen Alpine, Kentlyn, Leumeah, Macarthur Square, Rosemeadow, Ruse, St Helens Park, Wedderburn, and Woodbine; and 4. listed its third main business location in area code "2567", comprising the suburbs in south-west Sydney of Currans Hill, Harrington Park, Mount Annan, Narellan, Narellan Vale, and Smeaton Grange.
9. The defendant has never lived or worked in any of those suburbs. "Mary" is a common first name in the Lebanese and Middle Eastern community, as is the surname "Saad".
10. The defendant says that if the loan had been for business or investment purposes, she would have used the ABN for the company TTM3 Group Pty Ltd (ABN XXXXX) to borrow the money. The defendant's late husband had used this company for property development projects. The family home has been its registered office since October 2015. Mr Ebrahimi was aware of this company, as he received an invoice relating to the ASIC fee on its behalf.
11. The postcode for the defendant's family home is XXXX. The suburbs within this postcode are Baulkham Hills, Bella Vista and Winston Hills, in the Richmond area.
12. I note that the defendant has been given a moratorium in relation to her Westpac mortgage (CB 108).

Agency

1. The defendant deposes that sometime in late September 2019, just before she entered into the loan agreement but after she was forwarded the loan offers, she had a phone call with Mr Young where he talked about investing in bitcoin. They had a conversation to the following effect (Aff, [32]-[34]): "Mr Young: I told you there wouldn't be any problems and I can get the loan from [Mr Derums]. The defendant: Yes, thank you so much for your help. Mr Young: I have a thought. The defendant: What is it? Mr Young: Well, [Mr Derums] and I are really into bitcoin, and we are making so much money from it together. The defendant: Okay, that's good? Mr Young: What if I helped you make enough money from it you can pay all your bills, pay back [Mr Derums] and pay off your house complete? The defendant: That would be amazing. How though? It seems too good to be true? Mr Young: No, we always do it. When you get the money, transfer it to me and I will help you. The defendant: I don't know, I need the money. Mr Young: I don't need all of it, pay the bills you have now and Westpac back, and by the time the next set of bills come you would have more than enough back to pay it all. The defendant: Do you think so? Mr Young: Don't worry, I'll show you my account and how I do it and how much money we made."
2. The defendant says that Mr Young used a computer program to log into an account on a website. She does not remember its name. Mr Young showed her positive transactions. She does not remember the exact figures, but it was more than $10 million. It was after seeing these transactions that she believed that he was truthful about his successes in buying bitcoin, and she felt she could trust him to do it for her. The computer program gave Mr Young unrestricted access to, and control over, everything on her computer.
3. After he showed the defendant the program, they had a conversation to the following effect: "Mr Young: See that, imagine what I can do for you. The defendant: Yeah. Mr Young: I just want to help you get rid of all your debt and make sure you can look after your kids. The defendant: Okay, let's do it."
4. In early November 2019, the defendant says she had a conversation with Mr Young to the following effect (Aff, [40]-[48]): "The defendant: Where is the money? I have a repayment due next Monday. Mr Young: You need to set up a trust account for a business with an ABN, which is not in your name, so I can transfer the money from the bitcoin. It can't be in your name. The defendant: OK, I have a company I can use with an ABN. Mr Young: Perfect, send me the details please."
5. On 5 November 2019, the defendant emailed Mr Young an ASIC extract of her and her deceased husband's company.
6. On 11 November 2019, she emailed Mr Young confirming that he had set up a trust account with the account details. After sending this email, the defendant tried to call Mr Young but there was no answer. The next morning, she tried to call him again there was no answer. The defendant checked the account he had told her to open. She says she tried to call him many, many times, but he did not answer. She even asked her son to call Mr Young on his phone so he would not recognise her number, but he did not answer.
7. In or about early December 2019, Mr Young finally answered a call. The defendant says that they had a conversation to the following effect: "The defendant: Where have you been? I have been trying to call you for weeks. Mr Young: I am sorry Mary, I have been sick. The defendant: I need to pay the interest, where is the money? What have you done, you told me to open the account, I did but there is no money in there. Mr Young: I'll have a look and get back to you. The defendant: [Mr Young], you have to get back to me as soon as possible. I don't have the money to pay this loan, you took it all. Mr Young: I'll get back to you."
8. The defendant tried to call Mr Young again in the following days, but she again received no answer. She says that the outstanding money has never been reimbursed.
9. In or around early December 2019, the defendant looked over the loan documents and found a telephone number for Mango Credit. When she called the number, a woman answered. The defendant said she wanted to speak to Mr Derums and gave the woman her number. The woman said someone would contact her.
10. The next day or so, she was called by a man who introduced himself as Yanis Derums. They had a conversation to the following effect: "Mr Derums: Hi Mary, this is Yaris [Derums] from Mango Credit. How are you? The defendant: Not good. Mr Derums What happened? The defendant: [Mr Young] told me you were good friends with him. Mr Derums: Yes. The defendant: Well he just screwed me over. [Mr Young] took the money. He said he was going to put it into bitcoin or something like you do with him, but he isn't answering my calls, won't tell me where the money is and I don't have the money to pay you back. [Mr Derums laughed] Mr Derums: And what do you want me to do? The defendant: Please, I just need a few more months and I will work out how to get your money back. Mr Derums: Okay, I will give you 2 months."
11. The defendant says the last time she spoke to Mr Young was in early January 2020. They had a conversation to the following effect: "The defendant: [Mr Young], where is the money? What have you done with it, have you scammed [me]? [Mr Young]: Yes, I have, sorry."
12. Mr Young hung up. The defendant says she has tried to call him many times since, but he never answers.
13. There is further evidence provided by the defendant's solicitor, Mr Joshua Frangi (Aff 7/9/2020, [4]-[12]) of the unsuccessful efforts to locate Mr Young. Also in evidence are many emails from Mango Credit to Mr Young from 23 September 2019 onwards.

National Consumer Code

1. The defendant submitted that there is no doubt that if she borrowed the money with the purpose of paying off her mortgage, then that qualifies as a purpose under the National Consumer Code. In any proceedings in which a party claims that the National Consumer Code applies to the contract or mortgage, it is presumed to apply unless the contrary is established: s 13(1).
2. Mango Credit rely on the fact the defendant made a declaration (witnessed by Mr Belonogoff) that the purpose of the loan was for investment and business purposes. Under s 13(2) of the National Consumer Code, it is presumed that the credit is not intended to be provided for a purpose under the Code in cases where the debtor has made such a declaration. However, even then, the debtor is able to rebut that presumption. The defendant submitted that even if she made a declaration that the credit was for business or investment purposes, it may be arguable that the declaration does not prevent the National Consumer Code from applying if the Court finds that the financial services provided were of a kind "ordinarily" acquired for personal use.
3. The defendant submitted that her declaration will be ineffective if she proves that, when it was made, her credit provider knew or had reason to believe that the purpose was in fact one under the National Consumer Code - or that it would have known, or would have had reason to believe so, if it had made reasonable inquiries: s 13(3). The defendant says that refinancing an existing home loan in default is a National Consumer Code purpose.
4. The defendant says that even if she later used some, or even most, of the advance for what she understood to be a cryptocurrency investment (but in fact was a scam by Mr Young), that does not mean that the purpose as at the time of the loan was not a Code purpose. It is the defendant's evidence that her primary impetus for taking out the loan was because her Westpac mortgage was in default and Westpac had recently taken steps to enforce it. As at 2 September 2019 Westpac, had issued her a default notice under s 57(2)(b) of the Real Property Act 1900 (NSW).
5. According to the defendant, if the National Consumer Code applies, it is clear that the plaintiffs have breached the Code in a number of respects and the loan and mortgage are liable to be set aside.

Contracts Review Act

1. The defendant also made submissions concerning the Contracts Review Act. Section 7(1) of the Contracts Review Act gives the Court the power to grant various relief, including setting aside a contract, if it is found that the contract was "unjust in the circumstances relating to the contract at the time it was made". A defendant may call upon the Act as a defence without making a substantive application: see Commercial Banking Co of Sydney Ltd v Pollard [1983] 1 NSWLR 74 at 76-78. The Contracts Review Act operates more broadly than the general law, such that a contract may be unjust even if it is not unconscionable: see Antonovic v Volker (1986) 7 NSWLR 151.
2. A contract may be unjust "because of the way it operates in relation to the claimant [under the Act] or the way in which it was made or both": see West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 620 per McHugh JA. Section 4(1) of the Contracts Review Act provides that "unjust" includes "unconscionable, harsh or oppressive". Unjust is also said to mean "contrary to right and justice and to ordinary standards of fair play": see Suncorp-Metway Ltd v Bellairs [2009] NSWSC 135 at [57]. Section 9(2) provides a non-exhaustive list of factors relevant to an assessment of what is unjust, including that the Court is to "have regard to the public interest and to all the circumstances of the case".
3. One of the matters of "public interest" that the Court is required to take into account is the protection of those not fully able to protect themselves, being the victims of dishonesty, trickery and other forms of predation: see Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 at [269]-[270].
4. Section 9 of the Contracts Review Act also lists matters to be considered by the Court determining whether a contract is unjust. Those matters include the following: 1. the material inequality of bargaining power (s 9(2)(a)); 2. lack of negotiation of terms (s 9(2)(b)); 3. lack of reasonable practicability of negotiation to alter terms (s 9(2)(c)); 4. whether conditions were unreasonably difficult to comply with or not necessary (s 9(2)(d)); 5. lack of reasonable capacity for a party to protect its interests (s 9(2)(e)); 6. economic circumstances, educational background and literacy (s 9(2)(f)); 7. whether a party received independent expert advice (s 9(2)(h)); 8. whether a party was subject to undue influence, unfair pressure and unfair tactics (s 9(2)(j)); and 9. the setting, purpose and effect of the contract (s 9(2)(l)).
5. The defendant submitted that all of these factors weigh in her favour. She had unequal bargaining power, she was unable to negotiate terms and there was little prospect of her being able to repay the loan. As to s 9(2)(e) of the Contracts Review Act, the defendant does not submit that she lacked legal capacity. However, she says her capacity was affected to some degree by her physical and mental state resultant from domestic violence she had endured: see Dillon v Baltic Shipping Co (The "Mikhail Lermontov") (1989) 21 NSWLR 614 ("Lermontov") at 654. The defendant also had a limited educational background and did not finish high school.
6. As to s 9(2)(j) of the Contracts Review Act, the defendant submitted that it has been held that one example of "unfair pressure or unfair tactics" is misleading and deceptive conduct: Lermontov at 658. Her claim is that Mr Young engaged in misleading conduct. She says that she was told that Mr Derums knew Mr Young and was good friends with him. In the first instance, the defendant wishes to allege that Mr Young was the plaintiffs' agent. A person may be liable under s 9(2)(j) even if they had not authorised the agent to act as the agent did, and they did not know of the agent's conduct: Antonovic v Volker at 156-157. Regardless, the defendant submitted that if Mr Derums knew that Mr Young was a fraudster and had defrauded people before, s 9(2)(j) is a relevant factor to her case.
7. The defendant further submitted that a mortgage is liable to be set aside under the Contracts Review Act if the mortgagor receives an inadequate explanation of the transaction which makes no reference to the principal sum and interest or that the person's home is at risk: National Australia Bank Ltd v Winskill (unreported, NSWSC, 15 Nov 1996, Dunford J). A mortgage can also be set aside as an unjust contract under the Act if the commercial setting, purpose and effect is such that in practical terms a successful outcome was not to be expected: see State Bank of NSW v Hibbert [2000] NSWSC 628.
8. Finally, the defendant submitted that although procedural injustice is not an express factor under s 9 of the Contracts Review Act, it is also relevant. The defendant says she had little time and no advice as to the loan documents, and that she did not understand them. Substantive injustice is also not an express factor, but is relevant. The defendant submitted that her loan was really asset lending, and was unfair and unreasonable in nature, with exorbitant interest pursuant to interest clauses that were plainly void as penalties.
9. As to the relief that the Court may award in respect of an unjust contract, the defendant submitted that it is very broad and a matter of discretion. It includes declaring the contract void in whole or in part.
10. The defendant submitted that she has a good defence based on misleading conduct in respect of the representation in the loan offers that there would be no mortgage but only a caveat.
11. She also submitted that she has a good defence based on unconscionable or unconscientious conduct. The defendant proposes to allege an agency between Mr Young and the plaintiffs. Even leaving aside agency, it is sufficient to establish unconscionable conduct if the person ought to have known of the circumstances giving rise to the special disability or unconscionability. She says that nothing the plaintiffs have put in their submissions, even if accepted, would mean that she does not have a good defence. The Court is not to embark on a hearing of the full merits of the case, but is to consider whether her defence is bona fide and an arguable or triable issue: see Dai v Zhu [20131 NSWCA 412 at [92] (Sackville AJA, Barrett and Leeming JJA agreeing).
12. If the defendant makes out any of her defences, the fact that the net $282,000 was advanced to her will not be determinative of the result of the proceedings. All of the defences she raises, if made out, result in highly discretionary remedies. The fact that she was scammed out of the money will be highly material, even if the allegation that the fraudster was associated with the first plaintiff is not made out. It may lead, for instance, to considerations of change of position.
13. Further, in oral submissions, counsel for the defendant stated that she proposes to file a cross claim against the plaintiffs seeking relief.

Mango Credit's submissions - arguable defence

1. Mango Credit submitted that although defences of this sort are often found to be sufficiently arguable to set aside a default judgment, there are aspects of the defendant's proposed defence that make it considerably weaker than average.
2. Mango Credit contends that the proposed defence is not raised by a guarantor who says she was unconscionably persuaded to guarantee the debt of another. In this case, the guarantor conferred a benefit, as she was the borrower.
3. Mango Credit submitted that her business purposes declaration under s 13(2) of the National Consumer Code will make it difficult for her to invoke the Code, as the presumption of business purposes arises unless the lender can be shown to have known that the declaration was false. In any event, the actual predominant purpose of the loan was not for "personal, domestic or household" use but for investment in cryptocurrency.
4. Mango Credit contends that on the defendant's own evidence, she sought the loan in order for her to engage in cryptocurrency speculation in the hope that she could use the profits to pay off debts, including her Westpac mortgage. According to Mango Credit, cryptocurrency speculation is inherently hazardous, and the defendant entrusted a fraudulent broker as her agent for making that speculation. The defendant says that the money she was investing in cryptocurrency simply disappeared.
5. Mango Credit insisted that the defendant obtain independent legal advice prior to entering into the loan transaction, which she did. However, in her affidavit dated 7 September 2020, it appears that the defendant did not inform her solicitor that she intended to use the majority of the loan money for cryptocurrency speculation, only telling him she urgently needed to make Westpac mortgage repayments and pay other bills. If she had done so, presumably the solicitor would have very strongly advised her not to proceed with the transaction.
6. Mango Credit submitted that on the facts of the defendant's case, establishing an arguable defence is the lesser of the defendant's difficulties in relation to her notice of motion.

Resolution - arguable defence

1. The defendant has provided a draft defence that seeks relief under the Contracts Review Act, equitable relief and breaches of the National Consumer Code, Australian Consumer Law and the Australian Securities and Investments Commission Act 2001 (Cth). As far as her claim involving agency is concerned, the defendant has to establish that the legal rights of the plaintiffs are governed by the acts and state of mind of Mr Young as agent, as if they were the plaintiffs' own: see Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679 at 693-8; Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 at [103] per Handley JA.
2. As to the application of the National Consumer Code, under s 13(2), the credit is presumed not to be for Code purposes if the debtor has declared, before entering into the contract, that it is to be applied wholly or predominantly for business or investment purposes. The defendant made such a declaration in this case. However, the declaration will be ineffective if the person who obtained the declaration from the debtor knew, or had reason to believe, that the credit was in fact to be applied wholly or predominantly for personal, domestic or household purposes. Refinancing an existing home loan in default is a National Consumer Code purpose. If the National Consumer Code applies to the defendant's loan, and the plaintiffs' conduct is held to have breached the Code, the loan and mortgage may be set aside.
3. The defendant's evidence regarding the Contracts Review Act claim is set out in detail earlier in this judgment. The facts are complicated and involve allegations of fraud, undue influence and her general lack of understanding of her obligations under the loan, and of the consequences in the event of her default. Her evidence demonstrates an arguable defence. I note that the Contracts Review Act is beneficial legislation which offers discretionary relief.
4. The defendant does not need to make out her defence, but merely demonstrate that it is bona fide and a triable issue. Having considered her evidence, I am satisfied that the defendant raises an arguable defence, and that she should be afforded the opportunity to have a trial on its merits. It is my view that it is in the interests of justice to set aside the default judgment.
5. The final issue to be determined is whether there is any utility in setting aside the default judgment where the writ of possession has been executed and the plaintiffs are in possession.

The plaintiff's submissions

1. The defendant submitted that if the judgment is set aside, she is entitled to possession. Counsel for the defendant referred to Goater v Commonwealth Bank of Australia (2014) 88 NSWLR 362; [2014] NSWCA 382 per Basten JA with Gleeson and Sackville JJA agreeing ("Goater").
2. In Goater, Basten JA stated at [12]-[14]: "[12] There is something unsettling about the proposition that an erroneous judgment cannot, as a matter of law, be set aside once the orders have taken effect. Generally, orders of a superior court are likely to take effect long before any appeal can be heard and determined. Lodging an appeal does not usually carry any entitlement to a stay. If the effect of obedience to a court order cannot readily be reversed, a stay may well be granted, but that is to protect the practical value of the right of appeal, not because as a matter of law the appeal could not be upheld once the orders had been satisfied. By parity of reasoning, the failure to grant a stay where a stay would have been appropriate cannot deprive an appellate court of the legal power to set aside an erroneous judgment; the practical consequences of reversal may be another matter. [13] There is no reason why this reasoning should not apply with respect to a judgment affecting ownership of land. If the land were sold pursuant to a power of sale before the judgment was reversed, it might well be impossible for the successful appellant to recover the property, but that problem does not arise in this case. The property has not been sold and the Bank has agreed not to exercise its power of sale pending determination of the appeal. [14] The proposition that, as between the Bank and the borrowers, this Court would not be able to grant necessary relief in the event that the underlying judgment were to be set aside would be startling. That issue was addressed by the Court in United Starr-Bowkett Co-operative Building Society (No 11) Ltd v Clyne (1967) 68 SR (NSW) 331, a case where tenants had been unlawfully ejected from premises of which they had a continuing entitlement to possession. Sugerman JA stated at 344, after noting that the relevant judgment should be set aside: 'In the result, and for the reasons stated, the judgment for the claimant in ejectment and the writ of habere facias should be set aside in each of the four cases. That is sufficient relief in the cases of the applicants ... against whom the writ has not been executed. The applicant Smart has, however, been put out of possession and we should therefore award a writ of restitution (Cole on Ejectment, p 349) but for the circumstance that counsel for the applicant informs us that somebody else, who is not a party to these proceedings, is now in possession. In these circumstances... I think we should leave the applicant Smart to move before a judge in chambers for such relief as he may be advised upon service on the person now in possession.' (See also Walsh JA at 350-351.)"
3. The defendant also referred to Prime Capital Securities Pty Ltd v Sara [2016] NSWCA 171 ("Sara"), where Payne JA dealt with a motion seeking a stay of an already executed writ of possession. In Sara, Payne JA confirmed that if the default judgment was set aside, the mortgagor could regain possession, stating at [13]: "[13] Nothing in what I have said, however, means that as between Prime Capital and the applicants, the Court would not be able to grant necessary relief in the event that the underlying default judgment were to be set aside. Plainly, the Court would have such a power, including the power to ensure that the applicants would be able to recover possession of the home at Hurlstone Park, if successful in that application: see Goater v Commonwealth Bank of Australia [2014] NSWCA 382; 88 NSWLR 362."

The plaintiffs' submissions

1. The plaintiffs submitted that there is no utility in setting aside the default judgment even if there is an arguable defence. This is because they say that having already obtained possession, the plaintiffs have no need to pursue these or any other proceedings for possession. If the judgment was set aside, Mango Credit's next step would be to discontinue these proceedings in the circumstances that they had become otiose.
2. The plaintiffs submitted that to reinstate possession, the defendant will need to bring a claim against the plaintiffs which includes an order for possession. Setting aside the writ is meaningless, as it is spent and has no further work to do. Setting aside the writ of possession would not have the effect of reversing the act of the Sheriff in having executing it at the time it was valid, or the taking of possession of the land by the plaintiffs. Whether or not either or both are set aside, the plaintiffs would be entitled to remain in possession of the land: see Wilde v Australian Trade Equipment Co Pty Ltd (1981) 145 CLR 590; (1981) 34 ALR 148 ("Wilde") and Nationwide News Pty Ltd v Samalot Enterprises Pty Ltd (1986) 5 NSWLR 227.
3. In Wilde, Stephen, Murphy and Wilson JJ stated at 157: "…So long as the earlier decision stands, and no stay is operative, it is a lawful decision and the action taken in reliance upon it is lawful. It is true that from the moment it is set aside the order can no longer provide the lawful justification for further action, but whether what has been done can be undone will depend upon the availability of appropriate remedies, to bring about the appropriate relief."
4. As to Goater, senior counsel for the plaintiffs submitted that that case merely concerns power. In Goater, the trial judge had found there was no power for him set aside a default judgment and restore possession of the land in the circumstances where the writ of possession had been executed. The Court of Appeal determined that the Court did have that power. It is not an indication that the power should be exercised in this case.
5. Counsel for the plaintiffs submitted that in these proceedings, there is no suggestion that the primary judge lacked the power to make the decision. The plaintiffs submitted that the question in these proceedings is whether in the interests of justice the power should be exercised in circumstances where setting aside the judgment would not restore possession of the land to the defendant (T 24.22-26). The plaintiffs further differentiated Goater by arguing that these current proceedings are not about an irregularity and breach of contract (T 26.43-50).

Resolution

1. It is my view that it is arguable that in accordance with Goater and Sara that Ms Saad can recover possession of the land, even though the writ of possession has already been executed, provided it is not sold in the interim. As such, there is utility in setting aside the default judgment.

Result

1. It is my view that the defendant has a bona fide defence, and has provided an adequate explanation for her failure to defend the plaintiffs' motion and for the delay in filing her own. It is in the interests of justice to set aside the default judgment.

Undertaking not to sell

1. At the hearing of these proceedings, I requested that senior counsel for the plaintiffs seek instructions as to an undertaking not to sell the property before these proceedings are revolved. He stated that he will seek instructions on this topic if the defendant is successful in her application to set aside default judgment.
2. The plaintiffs are to give an undertaking within 48 hours of this decision not to sell the property until the resolution of these proceedings. I grant liberty to restore in relation to expedition on 5 days' notice if the undertaking is not forthcoming.

The Court orders that: (1) The default judgment entered on 20 May 2020 is set aside. (2) The defendant is to file and serve a defence and cross claim within 14 days. (3) The defendant is granted liberty to restore in relation to expedition on 5 days' notice if the plaintiffs do not make an undertaking within 48 hours of this judgment not to sell the property until the resolution of these proceedings. (4) Costs are reserved. (5) The matter is listed for a directions hearing on 20 October 2020 at 9.00 am before the Registrar. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 September 2020