Murphy v Overton Investments Pty Ltd

the litigious BACKGROUND 5 It is convenient to decide the estoppel and res judicata questions before considering the substance of the claims under the Contracts Review Act. In order to consider the contentions of Overton, it is necessary to recount in some detail the litigious background to the present proceedings. That entails an examination of proceeding 1181 of 1997 brought by Mr and Mrs Murphy, together with in excess of ninety other Lessees, in the Equity Division of the Supreme Court of New South Wales ("the Equity Proceeding"). It will also entail reference to appeals to the Court of Appeal from orders made in the Equity Proceeding.

the equity proceeding 6 Overton was the defendant in the Equity Proceeding. The relief originally claimed against Overton by the plaintiffs in the Equity Proceeding is not presently relevant. On 9 May 1997, Overton filed a cross-claim in the Equity Proceeding against all of the plaintiffs, including Mr and Mrs Murphy. By its cross-claim, Overton claimed judgment against each of the cross defendants ("the Residents") for arrears of outgoings in respect of their units in the Heritage Village, calculated in accordance with the terms of the leases under which the Lessees occupied those units. The amounts claimed in the cross-claim varied from one Lessee to the next. 7 On 30 May 1997, the Residents filed a defence to Overton's cross-claim. An amended defence was filed on 10 December 1997. In their amended defence, the Residents asserted that Overton was estopped from claiming the moneys sought in its cross-claim. The Residents alleged that Overton had represented that increases in outgoings required to be paid under their leases would never exceed CPI increases and that the Residents had been induced to enter into their leases by reason of that representation. They asserted that, by reason of the representations, Overton was estopped from recovering the amounts claimed. The amended defence also asserted that the contracts comprised in the leases between the Residents and Overton were unjust within the meaning of s 7 of the Contracts Review Act. No claim had been made by the Residents in their statement of claim in the Equity Proceeding for relief based on estoppel or the Contracts Review Act. 8 On 26 March 1998, Windeyer J, sitting in the Equity Division, ordered that all of the issues on Overton's cross-claim as to the amounts due by the Residents under their leases be referred out for inquiry and report pursuant to Part 71 of the Supreme Court Rules. On 23 June 1998, orders were made directing the referee to limit his report to the issues in the cross-claim and those defences to the cross-claim ("the General Defences") that did not raise questions of estoppel or the Contracts Review Act. The parties agreed that none of the evidence relating to the individual circumstances of particular Residents was material in the determination of the General Defences. On 19 November 1998, the referee submitted his report. The report did not address any defence based on estoppel or the Contracts Review Act but was confined to the General Defences. 9 Overton then filed a notice of motion in the Equity Division seeking, amongst other orders, orders striking out those paragraphs of the amended defence that raised the estoppel and Contracts Review Act defences. Overton's motion also sought orders for the adoption of the referee's report and for the entry of judgment on its cross-claim against the Residents. 10 The matter came before Windeyer J on 17 December 1998. At that time there was not yet any agreement as to the amounts that were owing by the Residents on the basis of the referee's report. Windeyer J stood over Overton's motion for the adoption of the referee's report and for judgment on its cross-claim to 4 February 1999. In doing so, his Honour indicated that any matters raised by the Residents as "individual defences" to the cross-claim would have to be pursued by separate actions. His Honour directed the solicitor for the Residents to be in a position to inform the Court by 4 February 1999 of details of those Residents who intended to pursue such separate actions. It is common ground that the "individual defences" to which his Honour referred were the defences based on estoppel and the Contracts Review Act. It is also common ground that both the estoppel defences and the Contracts Review Act defences were, as a matter of pleading, good defences that raised triable issues. 11 On 4 February 1999, Windeyer J was informed that there was still no agreement as to the amounts owing under the leases on the basis of the referee's report. On that day, Overton proffered short minutes of orders as follows: "2. That each cross defendant… who wished to bring cross claims to Overton's cross claim… ("the Outstanding Claims") file and serve by 5 pm on Wednesday 13 February 1999 a verified statement of claim, and a notice of motion seeking further directions returnable before Justice Windeyer on Thursday 18 February 1999. 3. That the proceedings be listed for further argument… on the question of: (a) the amount of the judgment being entered against each of the cross defendants pursuant to the referee's report of 19 November 1999; ……………………… (d) whether, and if so on what terms concerning the payment of all or part of the judgment debt owed to the cross claimant, a stay of the judgment in the proceeding be granted to such of those cross defendants who have filed and served a verified statement of claim in respect of the outstanding claims; ………………………" 12 In the course of the hearing on 4 February 1999, Windeyer J said: "I do not think that separate cross claims can be brought in this action and in fact I am sure they cannot be. I appreciate there are some financial problems but even if they were, they would all have to pay separate fees. ……………………… You cannot have a cross claim on a cross claim. ……………………… The appropriate course then, I would think, would have been to enter judgment for those amounts but staying the judgments in appropriate cases where there were to be cross claims to be brought within a certain period subject to some amounts presumably, being paid. That would then, as I see it, dispose of these proceedings. ……………………… Subject to entering judgment for the amounts, the lack of representative parity and the way these things have gone, makes it desirable to bring them to a conclusion and anybody who want to bring any cross claims ought to be allowed to do so and an appropriate stay ought to be put into place to enable that to happen. I do not think it is a procedurally good way to go ahead, to have 40 different cross claims in this action." 13 Orders were made on 4 February 1999 in accordance with the short minutes proffered by Overton. However, despite the direction about filing individual verified statements of claim, no statements of claims were served by the Residents by 13 February 1999 or at all. Nor did the Residents file a notice of motion seeking further directions returnable on 18 February 1999. 14 Instead, on 23 February 1999, Mr Murphy commenced proceeding number N 159 of 1999 in this Court, purportedly by way of a proceeding under Part IVA of the Federal Court of Australia Act 1976. Mr Murphy purported to act on behalf of most of the Residents, including Mrs Murphy. The statement of claim filed in the Federal Court claimed damages against Overton for: · misleading and deceptive conduct in contravention of Part V of the Trade Practices Act; · negligent advice; and · estoppel by representation. The statement of claim also included claims for relief under s 87 of the Trade Practices Act and under the Contracts Review Act. The allegations of misleading or deceptive conduct and estoppel by representation substantially overlapped the allegations made in the amended defence to the cross-claim in the Equity Proceeding. 15 When the Equity Proceeding came before Windeyer J again on 24 February 1999, his Honour was informed that no verified statements of claim had been served. A note of the hearing on that day records that, since his Honour had given a direction about the service of statements of claim that had not been complied with, his Honour was free to enter judgments once the amounts were ascertained, without any impediment from the claims by the Residents. Short minutes of orders were proffered by Overton once again, which proposed that the Residents make interim payments by a date less than 20 days thence. 16 The transcript of the hearing on 24 February 1999 records that counsel for the Residents had no objection to Overton's figures being relied upon, subject to being given the opportunity to argue that there should be a stay on some part of those amounts by reason of the estoppel and Contract Review Act claims. Windeyer J suggested that one possibility was that the parties might be able to agree that judgment be entered in certain amounts but that there be a stay on enforcement of the judgment in excess of a certain amount until 18 March 1999. 17 Counsel for the Residents informed Windeyer J that he had instructions that the Residents would pay half of what was said to be owing within 28 days. His Honour said that, because the Residents had decided that they were not going to bring separate claims but were going to embark on a class action in the Federal Court, he should not make an order for payment of the full amount. Counsel for the Residents said that if there was sufficient time, he could put before the Court verification of the individual claims by a vast majority of the Residents. Counsel said that he was prepared to go into evidence of individual affidavits verifying the claims by the Residents. His Honour indicated that he would make orders that those Residents who had verified statements of claim would be required to pay 50 per cent of the amount owing under the leases. 18 After his Honour had made orders, counsel for Overton invited the Residents, in open court, to file the verified statements of claim in the Supreme Court. That invitation was not taken up. 19 The matter came before Windeyer J again on 16 March 1999. Several factual issues and issues of calculation and apportionment arising out of the referee's report were debated and ruled on at that time. Overton renewed its invitation to the Residents to commence Supreme Court proceedings by verified statement of claim, presumably in lieu of the representative proceeding that had been commenced in the Federal Court. That offer was declined on behalf of the residents. 20 On 23 March 1999, the Equity Proceeding was again before Windeyer J, when his Honour proceeded to give judgment on certain outstanding issues. His Honour then stood the proceeding over for the purpose of entry of judgment on the cross-claim and, if possible, judgment on the question of costs and the application for a stay. 21 On 30 March 1999, Windeyer J heard argument on several further questions relating to the determination of the amounts due under the leases and decided those questions. Directions were then given that Overton file and serve affidavits showing its final calculations to enable judgment to be entered on the cross-claim on 23 April 1999. The Residents were directed to file and serve a list setting out details of all Residents "for which there is agreement as to the final calculations of the amounts for which judgment is to be entered against each respective [Resident]". The directions stipulated that the parties would "consent to judgment" where there was agreement as to the final calculation of the amounts owing under the leases. 22 By the final order made on that day, Windeyer J stood the proceeding over to 23 April 1999: "…to enable: (i) the entry of judgment by consent against each respective [Resident], as set out in the list of agreed amounts; (ii) further argument on the question of the amount of the judgment to be entered against each respective [Resident] in accordance with the list of disputed amounts; ……………………… (iv) such further orders as the Court deems fit." 23 On 23 April 1999, counsel for Overton proffered proposed short minutes of order. Windeyer J was informed that "as a result of the evidence that took place as a result of his Honour's directions there has been an exchange of information in several directions which has resulted in the final figures…". Discussion ensued concerning a stay. The discussion makes it plain that the matter of a stay was still at large, although there was agreement in principle that those Residents who paid fifty per cent of the proposed judgment amount should have a stay with respect to the balance. Counsel for the Residents sought to extend the benefit of the stay to all of the parties to the class action in the Federal Court. 24 In the course of discussion about the form of the proposed orders, counsel for Overton referred to the fact that the Residents' pleadings still contained defences "which have not been disposed of by the determination of the common issues which your Honour has dealt with". Windeyer J then said: "I am proposing to make an order so that there can't be doubt about this because I have said I was going to do it but the order I was going to make to bring the proceedings under control, that matters arising under [the estoppel and Contracts Review Act defences] be brought by separate action." His Honour also said that he would grant a stay and that it was therefore necessary to identify anyone who was not a party to the Federal Court proceeding. 25 Windeyer J then proceeded to give reasons for making the orders that he was about to make. In the course of those reasons his Honour said: "The matters now raised in the Federal Court, or at least two of the pendant claims, were always recognised, perhaps incorrectly, as being part of the matters for determination in the action in this Court. I considered that this provides justification for a stay. I should say however that I have no way of determining the likelihood of success of those parties who are represented in the class action. It is not possible to come to separate decisions as to what is an appropriate condition in respect of particular residents. No evidence was put before me to make that possible. It is obviously very desirable that the representative action be determined as quickly as possible, but that depends upon how long it takes to get ready and the state of business in the Federal Court. Counsel for the residents affected said that the condition of the stay could be payment of 50 per cent of the judgment sum… it would be unfair to Overton not to require a substantial payment but for the reason I have given I consider that the stay should be ordered… The stay should operate until the conclusion of the Federal Court proceedings or earlier order of this Court as Overton should have the opportunity to apply to have the stay removed if circumstances, including delay in the pursuit of the representative action, justifies that course." 26 After further discussion as to the form of the final orders, Windeyer J made orders relevantly as follows: "2. The report of the referee be adopted. ……………………… 4. All matters arising under paragraphs 4 to 67 of the further amended defence to cross-claim be brought to trial by separate actions by residents raising such defence and that judgments be entered on the cross-claim without regard to such defences, but subject to any application for a stay. ……………………… 6. Judgment be entered for the cross-claimant on the cross-claim against individual cross-defendants for the separate amounts set forth in the column "Equals Total Claimed for Judgment on 23 April 1999" on the document annexed to these orders. 7. Order that interest on such judgments accrue at the daily rate shown in the last column of such document. ……………………… 12. Order that proceedings for enforcement of the judgments against the cross-defendants other than Coxhead, Pegg, Johnston, Starck, Rourke, Deller, Hulscher, Wild, Lucas, Brown, Renaud and Baster be stayed under condition that the cross-defendants obtaining the benefit of such stay pay to the cross-claimant 50% of the amount shown against the name of such cross-defendant in the column headed "Total claim" in the document annexed (interim payments shown on such documents to be credited as part payment of the amount entered against any such cross-defendant) within 21 days of this date and further order that such stay continue until the conclusion of Federal Court Proceedings No. 159 of 1999 or earlier order of this Court." [Emphasis added] 27 The matters arising under paragraphs 46 to 67 of the further amended defence were the estoppel and Contracts Review Act issues.

the court of appeal 28 Overton appealed to the New South Wales Court of Appeal from certain of the orders made by Windeyer J on 23 April 1999. The Residents, including Mr and Mrs Murphy, filed a cross-appeal against Orders 4, 6 and 7 made by Windeyer J on 23 April 1999. Overton did not proceed with its appeal. However, the cross-appeal was prosecuted and determined. The essence of the complaint made by the Residents in their appeal was that Windeyer J, by the orders he made on 23 April 1999, effectively denied procedural fairness by disposing of Overton's cross-claim without hearing the merits of the defences of the Residents based on estoppel and the Contracts Review Act. 29 The Residents contended that the fact that those defences were formally addressed in paragraph 4 of the orders of 23 April 1999, as a prelude to the entry of judgment, did not alter that situation. The Residents contended that Windeyer J erred when he ignored the defences, especially the estoppel defences, which raised triable issues of fact that would have constituted shields or defences to Overton's several claims embodied in its cross-claim. The Residents contended that Windeyer J was not entitled to ignore those defences by the expedient of deciding that the issues tendered by them could only be raised in the context of separate actions. 30 The Court of Appeal concluded that, as a matter of law and practical reality, it had been open to the Residents to stand their ground and insist upon determination of the defensive issues tendered in their defence to Overton's cross-claim. They did not do so. More importantly, the Court of Appeal held that they were not prevented from doing so. Instead, the Residents debated whether a cross-claim was preferable to individual verified statements of claim. By February 1999, it appeared that not all of the Residents who were sued in Overton's cross-claim wished to continue fighting. For those who did want to continue, Windeyer J accommodated their wishes, to a degree, by moulding relief to accommodate the switch from Supreme Court to Federal Court. 31 The Court of Appeal considered that it was possible to see a rational basis why the Residents may not have wanted to press their limited defences too far in the February to April 1999 period, especially since an expanded, expedited representative proceeding was then in contemplation, coupled with at least a partial stay of the judgments being proposed to be entered. The Court of Appeal concluded that the critical fact was that the Residents acquiesced in the effective transfer of their limited individual defences "from the debit side of the Supreme Court claim ledger to the enhanced credit side of the Federal Court proceedings ledger". The Court of Appeal was of the view that it was sufficient that the Residents refrained from pressing their defences as impediments to the judgments which were otherwise appropriate to be entered in the light of the referee's report and the various decisions that Windeyer J made in late 1998 concerning the adoption of that report. Accordingly, the Court of Appeal dismissed the Residents' cross-appeal.

THE res judicata ISSUES 32 Overton contends that the Residents generally, and Mr and Mrs Murphy in particular, are estopped from litigating the matters raised by the estoppel and Contracts Review Act defences on two bases. The first contention is that they are estopped by reason of the way in which the appeal to the Court of Appeal was conducted. The second contention is that they are estopped to the extent that orders in the Federal Court proceedings would be inconsistent with the judgments entered in the Equity Proceeding. 33 Mr and Mrs Murphy, on the other hand, rely on the conduct of the Equity Proceeding up to 23 April 1999 and Orders 4 and 12 made on that day as indicating an intention that the entry of judgment pursuant to Order 6 was not to have the effect of precluding the prosecution of the matters raised by the estoppel and Contracts Review Act defences, notwithstanding that the assertion of those matters might be inconsistent with the judgments entered pursuant to Order 6. 34 Alternatively, Mr and Mrs Murphy contend that there was an agreement between Overton, on the one hand, and the Residents, on the other, that, notwithstanding the entry of judgment, as contemplated by Order 6, Overton would not raise res judicata and issue estoppel type defences in answer to individual statements of claim by Residents based on the matters raised by the estoppel and Contracts Review Act defences. 35 In addition, Mr and Mrs Murphy contend that, having regard to the conduct of Overton in the trial before me, Overton is estopped from raising res judicata and estoppel type defences to Mr and Mrs Murphy's claim under the Contracts Review Act.

COURT OF APPEAL 36 Overton relies on four propositions in support of the contention that the proceedings before the Court of Appeal give rise to an issue estoppel. They are as follows: · Where a point is not taken in a court below and evidence could have been given there which, by any possibility, could have prevented that point from succeeding, that point cannot be taken afterwards. · The parties are bound by the course they adopt at trial. · An issue estoppel arises in regard to an assumed state of affairs, or assumed fact, upon which a court made a final decision binding the parties such that, thereafter, the parties are bound by the assumed state of affairs, or assumed fact, upon which the court's decision was founded. · A party is estopped from contending for a different premise from that which was expressly or implicitly agreed or assumed before a court that has made a binding determination.

37 Overton contends that the judgment of the Court of Appeal itself gives rise to two distinct but related issues estoppel. The first arises, so it is said, as a result of the assumed fact, or assumed state of affairs, upon which the cross-appeal proceeded before the Court of Appeal, namely, that the effect of Windeyer J's orders was to shut the Residents out from litigating their defences. Overton contends that it is directly inconsistent with the findings made by the Court of Appeal, and the assumption made by that Court, as to the basis upon which the cross-appeal was conducted, for the Residents to contend before the Federal Court that the orders made by Windeyer J did not shut them out from litigating the issues raised by the estoppel defence and the Contracts Review Act defence. 38 The second issue estoppel is said to arise as a result of the Court of Appeal's judgment, upholding the orders made by Windeyer J on 23 April 1999, in circumstances where the Residents accepted before the Court of Appeal that the effect of Orders 4, 6 and 7 made by Windeyer J on 23 April 1999 was to shut them out from litigating their estoppel and Contracts Review Act defences. That is to say, Overton contends that there is an issue estoppel because of the acceptance by the Residents in the Court of Appeal that the effect of Windeyer J's orders was to shut out their defences. It is difficult to see how this so-called second issue estoppel is different from the first issue estoppel described above. 39 If there had been no acquiescence by the Residents in the course adopted by Windeyer J, it may have been necessary for the Court of Appeal to determine the question of whether they were precluded from raising the matters that go to the estoppel and Contracts Review Act defences. In other words, if the orders were made over the opposition of the Residents and the effect of the orders had been to deny them the opportunity of agitating those matters altogether, there would have been an error on the part of Windeyer J. However, the determination of the Court of Appeal was that the Residents acquiesced in the course adopted by Windeyer J. 40 An issue estoppel binds parties in respect of any issue of fact or law which was legally indispensable to a judicial decision - Blair v Curran (1939) 62 CLR 464 at 531. It is the cause of action that merges in a judicial decision, so that a defence of issue estoppel may succeed although the causes of action in the two cases are entirely different - Blair v Curran (1939) 62 CLR 464 at 532. The agitation of the matters that would have been raised by the estoppel and Contracts Review Act defences is not legally indispensable to the determination that the Residents acquiesced in the course adopted by Windeyer J. 41 I consider that neither the manner of the conduct of the cross-appeal before the Court of Appeal nor the judgment of the Court of Appeal gives rise to any issue estoppel that would preclude the Residents generally, or Mr and Mrs Murphy in particular, from raising, as applicants in the Federal Court, matters that constituted the estoppel and Contracts Review Act defences to Overton's cross-claim in the Equity Proceeding. The Court of Appeal simply concluded that Windeyer J was not in error in making the orders that he made on 23 April 1999. That was because the Residents, through their legal representatives, acquiesced in the course that was adopted. The Court of Appeal did not need to make, and did not make, any determination as to whether the effect of the orders made by Windeyer J was to preclude the Residents from litigating the matters that would have been raised by the estoppel and Contracts Review Act defences.

inconsistency 42 Overton also contends that an estoppel arises on the principle that the recovery of a judgment is precluded if the judgment would declare or enforce rights or liabilities between parties that are inconsistent with an earlier judgment binding upon them. Thus, an issue estoppel operates to preclude a defendant to a judgment in an earlier action from raising in a later action between the same parties a matter that was or could have been relied upon as a defence to the first action. Overton contends that an issue estoppel arises as a result of failure by Mr and Mrs Murphy to rely on their estoppel and Contracts Review Act defences as impediments to judgment on Overton's cross-claim. Their failure to bring individual claims in the Supreme Court, in circumstances where they were afforded every opportunity of so doing, gives rise, so Overton contends, to an estoppel in its favour. 43 The recovery of a judgment that declares or enforces rights or liabilities between parties that will be inconsistent with an earlier judgment binding upon those parties is precluded by the operation of the rules of issue estoppel and res judicata. It will be enough that two judgments declare rights in respect of the same transaction which are inconsistent - Port of Melbourne Authority v Anshun Pty Ltd ("Anshun")(1981) 147 CLR 589 at 604 and 609-610, or that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it - Anshun at 602. 44 As a matter of law, the principles of issue estoppel operate to preclude a defendant to a judgment in one action from raising in a second action between the same parties a matter that was, or could have been, relied upon as a defence to the first action. Thus: · if a defendant has pleaded, or failed to plead, a matter as a defence to a first action, he or she cannot rely on that matter in a second action, whether the defence to the first action was heard on its merits or not; · a party to a second action cannot raise in that second action a point that was not raised in the first action and that could not be decided in his favour in the second action consistently with the decision in the first action; · a litigant who has had an opportunity of proving a fact in support of a defence and chosen not to do so will be precluded from afterwards advancing that fact before another tribunal.

45 An estoppel arises where a defendant puts on the record in an earlier action a plea that is inconsistent with any traversable allegation made by the plaintiff in the first action and there is a judgment in favour of the plaintiff. An estoppel will also operate to preclude a defendant from setting up, in a second action, a defence that he chose not to press or rely on in an earlier action. The principle of issue estoppel precludes a party to one action from contending to the contrary of a position that, having been distinctly put in issue in the past action, has been formally found against that party. An order dismissing proceedings is capable of giving rise to an issue estoppel, even though the Court making such order has not heard argument or evidence directed to the merits. 46 The amended defence to Overton's cross-claim in the Equity Proceeding, in so far as it concerned Mr and Mrs Murphy specifically, contained assertions that Overton is estopped from claiming the money sought in the cross claim because: (a) Overton, by its servant Ms Patti Taylor, represented to Mr and Mrs Murphy that: (i) the contributions for the Heritage Village would never exceed an amount that could comfortably be paid by a Lessee on the full pension without recourse to other income; and (ii) the contributions required to be paid would never exceed CPI increases; (b) Mr and Mrs Murphy assumed that the contributions required to be paid would not exceed the lesser of CPI increases and that sum that a Lessee on a full pension would be able to afford; (c) On the basis of that assumption Mr and Mrs Murphy entered into the Lease; (d) Overton asserts that Mr and Mrs Murphy are obliged to pay sums in excess of the assumption; (e) It would be unconscionable for Overton to recover any sum greater than would be payable if the assumption in (b) were correct.

47 In addition, the amended defence asserted that the lease of each of the Residents was unjust within the meaning of s 7 of the Contracts Review Act 1980 in that: (a) Overton welcomed as residents persons in receipt of pensions in circumstances where Overton was aware that such persons' incomes were fixed and they would not be able to finance contributions that increased over and above the lesser of CPI increase and the sum that a resident on a full pension would be able to afford to pay without recourse to other income; (b) prior to entering into their leases, the Residents were not given the opportunity to negotiate for the alteration of or to reject any of the provisions of the leases; (c) the provisions of the leases were not the subject of negotiation.

48 It is common ground that the substance of all of those assertions is repeated in the proceedings in this Court brought by Mr Murphy and Mrs Murphy. The matters now sought to be relied on by Mr and Mrs Murphy in relation to estoppel and the Contracts Review Act, if raised as defences, would have gone to the root of Overton's claim for debt in the Equity Proceeding. 49 If Mr and Mrs Murphy were to succeed in their Contracts Review Act claim or if they had succeeded in their estoppel claim and the result was that Overton was not permitted to enforce the Lease according to its terms, the resulting judgment of the Federal Court would be inconsistent with judgment in the amount for which judgment was entered by Windeyer J. That judgment was based on the assumption that the Lease was enforceable according to its terms. If the estoppel and Contracts Review Act defences had been determined in favour of Mr and Mrs Murphy before judgment in the Equity Proceeding, Overton would not have been entitled to judgment, or would only have been entitled to judgment for some lesser amount. 50 Thus, there would be inconsistency between the judgment entered by Windeyer J and any order that might now be made under the Contracts Review Act that had the effect of limiting Overton's entitlement to recover outgoings under the Lease. Prima facie, therefore, an issue estoppel has arisen that would preclude Mr and Mrs Murphy from pursuing their Contracts Review Act claims and would have precluded them from pursuing claims. 51 However, that conclusion must be qualified by the effect of Order 4. Order 4 refers to "all matters arising under paragraphs 4 to 67 of the further amended defence to cross-claim". As I have said, those matters are the estoppel and Contracts Review Act defences. Windeyer J ordered that those matters be brought to trial by separate actions. While the judgments to be entered pursuant to Order 6 were to be entered without regard to such defences, Order 4 contemplated that there would be a stay in respect of any such judgments. Such a stay was put in place by Order 12. The stay was to apply until the conclusion of the proceedings in the Federal Court or earlier order of the Supreme Court. 52 Thus, significantly, the orders of 23 April 1999 expressly contemplate the further prosecution of the proceeding that had already been commenced in the Federal Court. The orders clearly contemplate that, although judgment was to be entered, certain matters that had been raised by way of defence to Overton's claims would be tried by separate action in the Federal Court. Further, Overton was not to be permitted to enjoy the full fruits of its judgments against the Residents until after determination of the Federal Court proceeding. 53 In the absence of Orders 4 and 12, there could be no doubt that the effect of Order 6 would have been to preclude the agitation by the Residents of the matters raised by the estoppel and Contracts Review Act defences. However, to give that effect to Order 6 would be to ignore completely the express and explicit provisions of Orders 4 and 12 and the background against which the orders of 23 April 1999 were made. The orders of 23 April 1999 clearly contemplate that the matters raised by the estoppel and Contracts Review Act defences would be tried on their merits. By that stage, they had already been raised in the Federal Court proceeding to which express reference was made in the orders. The orders were clearly not intended to preclude those matters from being litigated by the Residents. It would not be reasonable to give them that effect. 54 It may have been possible to reconcile Order 6 with the further prosecution in the Federal Court of the matters raised by the estoppel and Contracts Review Act defences if the only relief sought in the Federal Court was damages. For example, a judgment for damages in the Federal Court would not, of itself, be inconsistent with the judgments contemplated by Order 6. One could be set off against the other. The stay would prevent enforcement of the Supreme Court judgment until such time as the Federal Court proceeding was resolved. In the absence of the availability of equitable set off as a defence, mere claims for damages in the Federal Court would not, of themselves, have constituted a defence to the claim in debt under the leases. 55 However, it was clear that the relief claimed in the application originally filed in the Federal Court by Mr Murphy went beyond damages. Thus, the prayers for relief included, in addition to damages pursuant to s 82 of the Trade Practices Act and damages under the general law, the following relief: "4. An order pursuant to s.87 of the Trade Practices Act, 1974, (Comm.) restraining Overton from recovering outgoings in excess of the Estimated Initial Outgoings plus such increase in costs which were fairly and/or reasonably based on the said Estimated Initial Outgoings. 5. An order pursuant to s.7 of the Contracts Review Act, 1980, (NSW) restraining Overton from recovering outgoings in excess of the Estimated Initial Outgoings plus such increase in costs which were fairly and/or reasonably based on the said Estimated Initial Outgoings. 6. An order pursuant to s.7 of the Contracts Review Act, 1980, (NSW) that Overton be restrained from recovering as outgoings under the said Lease any amount for legal or accounting costs. 7. A declaration that Overton is estopped from recovering outgoings under the said Lease in excess of the Estimated Initial Outgoings plus such increase in costs which were fairly and/or reasonably based on the said Estimated Initial Outgoings." 56 The entry of judgment against Mr and Mrs Murphy pursuant to Order 6 of 23 April 1999 constituted enforcement of those provisions of the Lease between Overton and Mr and Mrs Murphy that gave rise to the obligation to pay outgoings. The obligations that arose under the Lease would have merged in the judgment against Mr and Mrs Murphy - Blair v Curran (1939) 62 CLR 464 at 531. There could be no question of the Federal Court refusing to enforce those provisions of the Lease, since they had already been enforced. Similarly, if the Court declared any part of the Lease void or varied any provisions of the Lease, that of itself could have no effect on the judgment entered pursuant to Order 6. 57 Section 7(1) of the Contracts Review Act authorises a court: · to refuse to enforce the provisions of a contract; · to make an order declaring a contract void; · to make an order varying any provision of a contract.

However, it is now common ground that, having regard to the fact that the Lease is a land instrument within the meaning of the Contracts Review Act, the only applicable principal relief available under the Contracts Review Act was under s 7(1)(d). By that provision, a court is authorised to make an order requiring the execution of an instrument that: · varies the provisions of the land instrument; · terminates or affects the operation or effect of the land instrument.

58 An order requiring the execution of an instrument that varied or affected the terms of the Lease would have no effect on the judgment. There would be little utility in prosecuting the Federal Court proceeding that had been commenced on 23 February 1999 if the effect of the judgments to be entered pursuant to Order 6 made on 23 April 1999 was to preclude the grant of a substantial part of the relief claimed in the proceeding. 59 It was clearly in the contemplation of Windeyer J, from 17 December 1998 onwards, that the matters raised by the estoppel and Contracts Review Act defences would not be agitated in the proceeding before him. On 17 December 1998, his Honour indicated that those matters would have to be pursued by separate actions. That position was maintained consistently until the orders were made on 23 April 1999. The idea of the separate trial of the matters raised by the estoppel and Contracts Review Act defences was not suggested by the Residents. It emanated either from Windeyer J or from a proposal advanced on behalf of Overton. The Residents may have acquiesced in the procedure that was adopted. However, I do not consider that the orders should be taken to have the effect that the estoppel and Contracts Review Act defences that were to be brought to trial by separate actions would never be tried. I do not consider that any acquiescence by the Residents in the procedure had that consequence. 60 The course that was adopted was unusual. However, the nature of the Equity Proceeding was unusual. There were in excess of 90 individual claims in contemplation. Windeyer J clearly took the view that it would be unwieldy for those claims to be litigated in the cross-claim brought by Overton, which was a claim in debt. All of the issues as to the amounts owing under by the Residents their leases had been resolved by 23 April 1999 as a result of the referee's report and the various decisions that had been made by Windeyer J following delivery of that report. 61 Neither the parties to the Equity Proceeding nor the Supreme Court should be taken to have intended that the effect of the orders of 23 April 1999 was to preclude the Residents from agitating the matters that they had sought to agitate from the time when they filed the amended defence to the cross-claim. It had been made clear, by filing the application in the Federal Court, that the Residents wished to continue to agitate those matters. I do not consider that the judgments entered pursuant to Order 6 of 23 April 1999 had the effect of precluding Mr and Mrs Murphy from prosecuting their claims under the Contracts Review Act. Nor would it have precluded them from pursuing the claims in respect of which they have already been unsuccessful in the Federal Court.

conclusion on res judicata issues 62 It follows from the foregoing that the principles of res judicata, cause of action estoppel or issue estoppel do not apply in the present case. Based on my reasoning in relation to inconsistency, Overton does not make out its claims of Anshun estoppel, election or waiver estoppel. Since I do not consider that Mr and Mrs Murphy are estopped from pursuing their claims under the Contracts Review Act, I would dismiss Overton's motion in so far as it seeks summary dismissal of those. 63 It is not necessary to consider the question of the application of Order 29 in relation to the res judicata and issue estoppel questions. It follows from the conclusions that I have reached that it is unnecessary to deal with any of the other matters raised by Mr and Mrs Murphy in answer to the res judicata and issue estoppel questions. I shall now deal with their substantive claims under the Contracts Review Act.

general principles 64 Mr and Mrs Murphy seek orders pursuant to s 7(1)(d) of the Contracts Review Act. Section 7(1)(d) relevantly provides as follows: "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:

(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 provision of the land instrument; or

(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting the operation or effect of a land instrument." 65 Mr and Mrs Murphy seek orders in relation to the Lease. The relief that they seek in the current form of their respective applications is expressed as follows: "4. A declaration that the lease dated 20 October 1992 between the Applicant and spouse and the Respondent as Lessor is unjust within the meaning of s 7 of the Contracts Review Act 1980 (NSW). 5. An order pursuant to s 7(1)(d) of the Contracts Review Act 1980 (NSW) that the respondent execute an instrument that has the effect so far as is possible of avoiding the unjust consequences of the lease." However, the argument makes clear that there are three separate and independent heads of claim. The three heads of claim relate to: · the representations made by Mrs Taylor referred to in paragraphs [38] to [83] of My Earlier Reasons, relating to the level of outgoings for which Mr and Mrs Murphy would be responsible under the Lease; · provisions in the Lease that entitle Overton to recover from Mr and Mrs Murphy contributions in respect of certain legal and accounting expenses incurred by Overton; · provisions in the Lease that entitle Overton to recover from Mr and Mrs Murphy contributions in respect of interest on certain moneys borrowed by Overton and impose an obligation on Mr and Mrs Murphy to pay interest on overdue contributions in respect of outgoings levied by Overton.

66 The Contracts Review Act regulates contracts, not investments. It is important to bear in mind that, in considering an application under the Contracts Review Act, it is the contract, or its provisions, that must be unjust. It is not the transaction but the contract or its provisions that must be examined - see West v AGC Advances Ltd ("West") (1986) 5 NSWLR 610 at 621. The intention of the legislation was to confer on the courts a new and wide discretion to determine the existence and extent of harshness in a contract and thereby to develop a doctrine of unconscionability suitable to present and future business and community needs and standards - NSW Parliamentary Debates (1980) at 5858 [emphasis supplied by McHugh JA in West]. 67 Section 4 defines "unjust" to include "unconscionable, harsh or oppressive". "Injustice" has a corresponding meaning. A contract may be unjust in the circumstances when it was made because of: · the way it operates in relation to the claimant; or · the way in which it was made; or · both the way it operates and the way it was made.

Thus, in some cases, a provision of a contract may be unjust 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. 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. Putting it another way, a contract may be unjust under the Contracts Review Act because its terms, consequences or effects are unjust. That might be characterised as "substantive injustice". On the other hand, a contract may be unjust because of the unfairness of the methods used to make it. That might be characterised as "procedural injustice" - West at page 620. 68 The claim by Mr and Mrs Murphy in relation to the misleading conduct of Overton through Mrs Taylor can be characterised as being based on procedural injustice. The claims relating to legal and accounting expenses and interest charges can be characterised as being based on substantive injustice. I shall deal with the two types of claim separately.

PROCEDURAL INJUSTICE 69 The claim under this head is pleaded as follows: (1) There was a material inequality in the bargaining power between Mr and Mrs Murphy and Overton prior to the execution of the Lease; (2) Prior to the execution of the Lease there was no negotiation of the terms of clause 5 of the Lease. The relevant parts of clause 5 are set out in paragraph [29] of My Earlier Reasons; (3) Mr and Mrs Murphy took no steps to negotiate for the alteration of the provisions of clause 5 of the Lease because they did not appreciate the need to negotiate with Overton to ensure that the Lease was consistent with representations made on behalf of Overton; (4) At the time Mr and Mrs Murphy entered into the Lease they were not able reasonably to protect their interests in so far as Overton was able to recover by way of outgoings under clause 5 of the Lease amounts in excess of those reasonably and fairly based on the estimates furnished by Overton; (5) Overton knew and appreciated the extent of the contingent liability imposed on Mr and Mrs Murphy at the time of the execution of the Lease and knew that Mr and Mrs Murphy did not appreciate the extent of that contingent liability; (6) Overton did not accurately explain or explain at all to Mr and Mrs Murphy, prior to their entering into the Lease, the level of outgoings to which Mr and Mrs Murphy were contingently liable and the effect of clause 5 generally in relation to Overton's entitlement to increase outgoings above that which Mr and Mrs Murphy, as persons in receipt of a full pension, were able to pay from income as distinct from the depletion of assets; (7) The provisions of the Lease imposed conditions that had become unreasonably difficult to comply with so far as Mr and Mrs Murphy, who are in receipt of full aged pensions are concerned. 70 Mr and Mrs Murphy rely on the findings made in paragraphs [178], [179], [181], [182], [186], [189], [191], [195], [197], [198], [200], [201], [202], [203] and [233] of My Earlier Reasons. In summary, they rely on the failure of Mrs Taylor, during the discussions that she had with Mr and Mrs Murphy prior to their entering into the Lease, to reveal the full level of expenditure that was recoverable from Mr and Mrs Murphy under the Lease. 71 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 - West at 622. The Contracts Review Act is beneficial legislation and must be interpreted liberally. However, it operates within and not outside the domain of the law of contract, except for certain ancillary relief not presently relevant. The Lease was an ordinary commercial document containing no unfair or unjust terms, except to the extent that Mr and Mrs Murphy may be able to establish their complaints concerning legal and accounting expenses and interest charges. If Overton had been guilty of no unfair conduct in relation to the entering into of the Lease, there could be no ground for relief under the Contracts Review Act - see West at 631. 72 I have found that Overton, through Mrs Taylor, engaged in conduct that was misleading in so far as Overton failed to disclose the full extent of the outgoings to which Mr and Mrs Murphy could be required to contribute. There has been no suggestion, as I have found, that the outgoings are excessive for what Mr and Mrs Murphy received as occupiers of a unit in the Heritage Village. They received what they bargained for, in that Mr Murphy understood that the benefits of the Heritage Village were to be funded entirely by the Lessees. However, he was misinformed as to the relationship that his liability to contribute towards outgoings would bear to the age pension. 73 The Act makes it plain that, whether or not a contract, or any of its provisions, is unjust requires an examination of the position of both parties. Sections 9(1), 9(2)(d), 9(2)(f), 9(2)(l) and 9(5) make that clear. The direction in s 9(1) to have regard to the public interest points to the necessity, in determining whether the contract is unjust, to consider the position and rights of the party against whom relief is claimed. Section 9(2)(d) emphasises that parties to a contract are entitled to insist on such contractual provisions as are necessary to protect their legitimate interests. It is clear that, the concept underlying the Heritage Village is that it will be funded in its entirety by contributions from the resident lessees. Mr Murphy understood that that was the effect of the Lease, having had legal advice in connection with it. 74 The essence of Mr and Mrs Murphy's complaint is that the Lease was unjust in the circumstances relating to it at the time it was made because: · Mr and Mrs Murphy did not have the same capacity as Overton to ascertain the extent of the outgoings in respect of which Overton was entitled to require contribution from Mr and Mrs Murphy and other lessees; and · They were misled as to the extent of the outgoings that were being incurred and in resect of which they could be liable to make contributions. 75 Mr and Mrs Murphy rely on the decision of the New South Wales Court of Appeal in Elders Rural Finance Ltd v Smith (1996) 41 NSWLR 296 ("Elders v Smith"). The majority of the Court of Appeal in that decision held that a finance contract entered into between a borrower and a lender, to enable the borrower to acquire a rural property and to carry on business on the property, fell within s 7 of the Contracts Review Act. The majority also held that orders made under the Act relieving the borrower of any obligation to pay interest or legal fees on the loan made under the finance contract should not be set aside. 76 Handley JA distinguished West's Case because, in West's Case, which was also a claim by a borrower against a lender, the lender played no part in the investment decision of the borrower and was not involved "in the wider transaction" - see Elders v Smith at 309. Handley JA relied on the finding of the trial judge that the lender played a far more significant role, in that: · an associated company of the lender was the agent for the vendor who sold the rural property to the borrower; · the lender was asked to provide 100 per cent finance for the purchase; · the lender was closely and directly involved in the compilation of financial projections that were crucial to its decision to lend; · the lender was the only party who ever evaluated those projections or was in a position to do so.

His Honour considered that it was significant that the trial judge found that it was unjust that the lender ever entered into the transaction and that, in such a case, the distinction between the contract and transaction was meaningless. 77 Mahoney P agreed with Handley JA in the result in Elders v Smith, but for different reasons. Mahoney P considered that the trial judge's decision was a discretionary decision, involving an assessment of the significance and the seriousness of factors relevant to his decision, the weighing of the factors, and the determination of whether there had been at the time a contract that was unjust - at 301. His Honour accepted that the contract under consideration was not, under the general law, unconscionable, harsh or oppressive. The borrower made a serious blunder in entering into it. However, under the ordinary law, the burden of the blunder would remain on the borrower - at 302. Mahoney P observed that, had he been the judge at trial level, he may not have come to the conclusion to which the trial judge came, but that that was not the matter on which the appeal turned. His Honour had to consider whether, applying the proper principles, the case was one in which he should set aside the discretionary judgment to which the trial judge came. Mahoney P that he would not be justified in doing so. 78 The contract under consideration in Elders v Smith was, on the trial judge's assessment, "quite improvident". While such a contract would not have been set aside by a court of Equity as sufficiently harsh, oppressive or unconscionable, the Contracts Review Act was intended to set a standard less onerous than that required by the general law. The contract was such that, if the projections of cash flow proved wrong, the borrower could not repay the loan and would be financially ruined - Elders v Smith at 302. Further, there was a finding that it was probable that the projections were wrong, in the sense that it was unlikely they would be fulfilled. That required that all relevant factors result favourably and the trial judge held that they were unlikely to do so. The lender knew that and knew that the borrower did not realise it was so. Yet the lender did not sufficiently bring home to the borrower the risk, what could happen to the borrower and the likelihood of it. Mahoney P observed that, as the lender knew, the borrower relied on the lender and thought that the lender's acceptance of the contract gave assurance to them. On the other hand, the lender did not bring home to the borrower the true position - see Elders v Smith at 302 - 303. 79 Meagher JA considered that the judgment of the trial judge was tainted with legal error - at 305. His Honour referred to the observation by McHugh JA in West that, if a defendant has not 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, that contract cannot be considered unjust simply because it was not in the interest of the claimant to make the contract or because the claimant had no independent advice - West at 621. Meagher JA considered that the trial judge in Elders v Smith had departed from the fundamental principle formulated by McHugh JA and had granted relief because the lender was, through its commercial experience, of greater ability to foresee impending disaster, although there was nothing in the slightest degree unjust in the contract or in the manner in which it was reached. His Honour concluded that the trial judge had penalised a transaction rather than reform an unjust contract. He considered that the trial judge was minded to regard the investment, not the parties' agreement. 80 Mr and Mrs Murphy do not point to any aspect of the Lease itself that was unjust, other than the provisions relating to the legal and accounting expenses and the interest charges. The most that they can do is to point to the fact that, but for the misleading conduct on the part of Mrs Taylor in failing to disclose the true extent of recoverable outgoings, they would not have entered into the Lease. There was no evidence that the value of the Lease, at the time that they entered into it, was less than the consideration paid for its grant - see paragraphs [210] and [214] of My Earlier Reasons. In the events that have occurred, it may well be that the Lease now has a value less than it did at the time of its grant. That, however, cannot be determinative as to whether or not the Lease was unjust in the circumstances relating to it at the time it was made. As I have found, there was no evidence that Mr and Mrs Murphy are not receiving value for the maintenance fees for which they are liable under the Lease. It may be that the Lease was beyond the means of Mr and Mrs Murphy, in the sense that, if Overton chose to recover its full entitlement by way of contribution to outgoings, they would be unable both to meet those contributions from their pension income and to live at a standard that they regarded as appropriate. However, that is an entirely different matter from the matter that was regarded as critical by the trial judge and Handley JA in Elders v Smith. 81 I am mindful of the need for uniformity in the interpretation of legislation such as the Contracts Review Act - see Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485. The critical factor in Elders v Smith was that the transaction that the borrower entered into in that case was improvident in the sense that, as a result of buying the rural property and carrying on business on it, with the outgoings under the finance contract, the borrower was, in effect, doomed to incur substantial losses without any benefit. While there was no suggestion that the interest rates charged by the in Elders v Smith lender were excessive, or that the terms of the financing transaction were in any way harsh or unconscionable, the financing contract enabled the borrower to enter into a disastrous investment. It was, of course, the investment in the rural property and the carrying on of business on it that gave rise to the borrower's losses. However, in the present case Mr and Mrs Murphy, as I have said, did not demonstrate that they were not receiving fair value for the outgoings they have been paying. I do not consider that the Contracts Review Act is concerned with a contract that gives rise to no disadvantage to a party. A contract must be unjust in a sense that includes the concepts of unconscionability, harshness and oppression - see paragraph [65] above. 82 Section 9(1) of the Contracts Review Act requires that, in determining whether a contract or a provision of a contract is unjust in the circumstances relating to it at the time it was made, the Court must 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 compliance or non compliance with the provisions. If Mr and Mrs Murphy do not comply with the requirements of clause 5 relating to the payment of contributions for outgoings, Overton has certain remedies available to it under the terms of the Lease and under the general law. However, no complaint is made about the justice or fairness of those provisions, except in relation to legal and accounting expenses and interest charges. 83 The provisions of s 9(2) of the Contracts Review Act are concerned, for the most part, with matters of procedural justice, although the Court must also have regard to all the circumstances of the case, subject to s 9(4), and the public interest. Section 9(4) provides as follows: "In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made." 84 Section 9(2) directs attention to a number of specific matters to which the Court must have regard, to the extent that they are relevant to the circumstances. I shall deal with each of those separately: (a) Whether or not there was a material inequality in bargaining power between the parties to the contract. Despite the finding that Mr and Mrs Murphy were under a disadvantage, in the sense that they were unaware of the fact that the estimate of maintenance fees was not based on a calculation that took account of all expenditure that was being incurred by Overton, I found was no material inequality of bargaining power between the parties - see paragraphs [236] - [237] of My Earlier Reasons. (b) Whether or not prior to or at the time the contract was made its provisions were the subject of negotiation. The Lease was the subject of limited negotiations in regard to Mr Murphy's request for a garage - see paragraph [74] of My Earlier Reasons. To the extent that it is relevant, Mr Murphy did not instruct his solicitor to engage in other negotiations as to the terms of the Lease - see paragraph [74]. (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. I was not taken to evidence directed towards the question of reasonable practicality. Nor was I asked to draw an inference that it would not have been reasonably practicable to seek an alteration of the terms offered by Overton. There is no evidence that Mr and Mrs Murphy wished to seek an alteration to or reject any of the provisions of the Lease, other than negotiations for the use of a garage, which were not pursued by Mr Murphy. (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. Other than the claims relating to legal and accounting expenses, dealt with below, there is no evidence that any of the provisions of the Lease is unreasonably difficult to comply with or is not reasonably necessary for the protection of the legitimate interests of Overton. (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 who he or she represented, because of his or her age or the state of his or her physical or mental capacity. Mr Murphy was very perceptive and had a clear understanding of the effect of the documentation intended to regulate the arrangements between Overton and Mr and Mrs Murphy - see paragraph [236] of My Earlier Reasons. I was not taken to evidence of any detriment suffered by Mr and Mrs Murphy by reason of their age. (f) The relative economic circumstances, educational background or 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. Overton was aware that Mr and Mrs Murphy had an expectation that the maintenance fees that Mr or Mrs Murphy would be called on to pay would not increase disproportionately to increases in the age pension - see paragraph [85] of My Earlier Reasons. While Mr and Mrs Murphy were not highly educated, Mr Murphy was quite literate and had no difficulty in understanding the provisions of the Lease, as I found in paragraphs [32], [33] and [78] of My Earlier Reasons. (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. There was no evidence that the physical form of the Lease or its language rendered the language unintelligible. The Murphys did not present their claim on such a basis. To the contrary, Mr Murphy's belief and understanding was that his and Mrs Murphy's obligations were as specified in the legal documentation - see paragraph [85] of My Earlier Reasons. (h) Whether or not and when independent legal or other expert advice was obtained by the party seeking relief under the Act. Mr and Mrs Murphy had the assistance of their own independently instructed solicitors - see paragraph [236] of My Earlier Reasons. (i) The extent (if any) to which the provisions of the contract and their practical legal effect were accurately explained by any person to the party seeking relief under the Act, and whether or not that party understood the provisions of the contract. Mr and Mrs Murphy were advised by their own independently instructed solicitors, and had a clear understanding of the effect of the documentation intended to regulate the arrangements between Overton on the one hand, and Mr and Mrs Murphy, on the other - see paragraphs [74] and [236] of My Earlier Reasons. (j) Whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under the Act. Mr and Mrs Murphy did not present their claim on this basis. There was no evidence of undue influence, unfair pressure or unfair tactics except for the failure to disclose the true level of outgoings to which Mr and Mrs Murphy might be liable to contribute. (k) The conduct of the parties to the proceedings in relation to similar contract or courses of dealing to which any of them has been a party. Mr and Mrs Murphy did not present their claim on such a basis. (l) The commercial or other setting, purpose and effect of the contract. Mr and Mrs Murphy did not present their claim on such a basis.

85 I accept that Mr and Mrs Murphy were misled as to the extent of the outgoings that were being incurred by Overton and, as a result, as to their liability under the Lease. I accept that Mr and Mrs Murphy did not have the same capacity to ascertain the extent of the outgoings. I do not consider that any other matter relied on by Mr and Mrs Murphy leads to the conclusion that the Lease was unjust. In any event, I have found that there was no evidence that Mr and Mrs Murphy are not receiving value for the maintenance fees that they are paying - see paragraph [213] of My Earlier Reasons. 86 Consistently with the result in Elders v Smith and the observations made in West's Case, I would be disposed to conclude that, having regard to my conclusion that the Lease was entered into by Mr and Mrs Murphy as a consequence of conduct on the part of Overton, through Mrs Taylor, that contravened s 52 of the Trade Practices Act, the Lease was unjust, within the meaning of the Contracts Review Act, in the circumstances in which it was entered into. That is to say, it was attended with procedural injustice. I have found that, but for the conduct of Overton about which Mr and Mrs Murphy complained, they would not have entered into the Lease. 87 Having found that the Lease was unjust, in the circumstances relating to it at the time it was made, it is then necessary for the Court to consider whether it is just to make an order for or with respect to requiring the execution of an instrument varying the provisions of the Lease or otherwise affecting the operation or effect of the Lease, for the purpose of avoiding, as far as practicable, any unjust consequence or result. That requires an examination of all of the circumstances in order to identify any relevant unjust consequence or result of the Lease having been unjust. 88 The conclusion that I have reached is that Mr and Mrs Murphy entered into the Lease in circumstances where they were unaware that the contributions that they might be required to make to outgoings in order to provide the facilities of the Heritage Village might constitute a greater proportion of the age pension than they had understood. The unjust consequence or result would be that they could be required to contribute to outgoings a greater proportion of their income than they had understood. 89 In the absence of any evidence that the value of the leasehold interest granted by the Lease was less than the consideration paid for its grant, that unjust consequence or result would be avoided if Mr and Mrs Murphy were not required to contribute to outgoings to a greater extent than they had understood they would be required to contribute, until they had had an opportunity to dispose of their leasehold interest and realise the investment they had made. 90 In My Earlier Reasons, I concluded that, from March 1994 onwards, Overton was maintaining the position that, while up to that time there had been an under recovery of expenditure, Overton intended thereafter to seek to recover full reimbursement of all expenditure incurred in operating the Heritage Village. Mr and Mrs Murphy accepted that they were able to manage the increase in contributions with effect from 1 July 1994. They were not called upon to bear any further increase until 27 November 1996. They effectively had more than two years within which to rearrange their affairs, including selling their leasehold interest under the Lease, or surrendering it if need be, so as not to be in a position where the maintenance fees would be beyond their means - see paragraph [234] of My Earlier Reasons. There was no evidence that, if Mr and Mrs Murphy had disposed of the Lease within a reasonable time after March 1994, they would have realised an amount that was less than the consideration they had paid for its grant. 91 For the reasons given in My Earlier Reasons for concluding that no actionable estoppel arose in relation to the grant of the Lease, I consider that, having regard to the events that have happened, it is not appropriate to make any order pursuant to s 7(1)(d) of the Contracts Review Act in order to avoid any unjust consequence or result of the Lease.

SUBSTANTIVE INJUSTICE 92 Mr and Mrs Murphy contend that there was substantial injustice in the Lease, in the sense that there was some inherent injustice or unfairness, irrespective of the manner in which the Lease was entered into. While complaint is made about two quite distinct provisions, the same circumstances relating to the Lease at the time it was made are relied on. The provisions that are relied on by Overton for recovery of the legal and accounting expenses and interest are contained in clause 5 of the Lease. 93 The relevant provisions of clause 5 of the Lease are as follows:

"(c) Without in any way limiting the generality of the foregoing the Outgoings in respect of which the Lessor may levy contributions shall include provision for:

(v) expenditure incurred in carrying on the operations of the Village;

(vi) interest upon any monies borrowed or raised in respect of or for the administration of the Village;

(x) payment of amounts relating directly to the running of the Village comprising salaries and wages of staff of the Village and all fees and sums payable to persons not being staff of the Village who provide goods and/or services to the Village or to the Lessor or to the Trustee in relation to the operation of the Village including but without limiting the generality of the foregoing auditing and legal charges, consultants fees, wages and costs of administration generally;

(xiv) any such other reasonable and proper expenses and outgoings as the Lessor may from time to time decide.

(g) In addition to the Outgoings and Outgoings of Apartments in this clause, the Lessor may require the Lessee to pay and discharge and to keep the Lessor indemnified against all other outgoings, charges and liabilities for which the Lessor shall determine the Lessee to be separately liable in respect of the Premises, including (but not by way of limitation) any liability arising from any requirement of any competent authority or other body where such requirement applies to or in respect of the Premises.

(h) Any contribution in respect of Outgoings levied by the Lessor under this clause shall become due and payable to the Lessor or as the Lessor may direct in writing within seven (7) days of receipt of notice of the levy and in respect of any moneys not paid on or before the day appointed for payment, the Lessee shall pay interest on the overdue sum from the day appointed for payment of the sum to the time of actual payment at the rate of two percent (2%) per annum above the rate quoted, from time to time by the State Bank of New South Wales (or such other trading bank as the Lessor may from time to time nominate) on overdraft accommodation on amounts in excess of One Hundred Thousand Dollars ($100,000.00). The Lessor may waive payments of interest wholly or in part. All overdue and unpaid contributions of Outgoings (including interest thereon) may be recovered as a debt due to the Lessor in any Court of competent jurisdiction or at the Lessor's election irrevocably deducted from the Monies Owing or Lease Deposit or Refund." 94 The pleading of the claims of substantive injustice can be summarised as follows: (1) There was a material inequality in the bargaining power between Mr and Mrs Murphy and Overton prior to the execution of the Lease. (2) Prior to the execution of the Lease there was no negotiation of the terms of clause 5 of the Lease. (3) Mr and Mrs Murphy took no steps to negotiate for the alteration of the provisions of clause 5 of the Lease because they did not appreciate the need to negotiate with Overton to ensure that the Lease excluded provisions that: (a) legal and accounting costs incurred by Overton in litigation against the Residents (or any of them) and or against the Director-General of the Department of Fair Trading or any other officer or department of the New South Wales Executive were recoverable under the Lease; (b) interest on monies borrowed or raised by Overton was recoverable under the Lease over and above an entitlement by Overton to recover from Lessees. (4) Overton did not accurately explain to Mr and Mrs Murphy prior to their entering into the Lease the effect of clause 5 in relation to the following matters: (a) that legal and accounting costs incurred by Overton in litigation against the Residents (or any of them) and or against the Director-General of the Department of Fair Trading or any other officer or department of the New South Wales Executive were recoverable under the Lease; (b) that interest on monies borrowed or raised by Overton was recoverable under the Lease over and above an entitlement by Overton to recover from lessees: · interest on unpaid accounts; and/or · interest on expenditure of the Village for the period from when the expenditure was occurred until the account was received. (5) The provisions of clause 5 of the Lease whereby Mr and Mrs Murphy are obliged to pay: · legal and accounting costs incurred by Overton in litigation with the Residents or the Director-General of the Department of Fair Trading or any other officer or Department of the New South Wales Executive; and/or · interest on monies borrowed or raised, impose conditions on Mr and Mrs Murphy which are not reasonably necessary for the protection of the legitimate interests of Overton.

JURISDICTION 95 Overton contends that the claim under the Contracts Review Act in relation to legal and accounting expenses and interest charges is outside the jurisdiction of the Federal Court in this proceeding, notwithstanding the determination made by the Full Court. Overton says that the claim made by Mr and Mrs Murphy under the Trade Practices Act, which was the foundation of the Court's jurisdiction in the proceeding, has no relationship with the claims made under the Contracts Review Act with respect to legal and accounting fees and interest charges. 96 Where the Federal Court has jurisdiction to determine a matter falling within ss 75 and 76 of the Constitution giving rise to the exercise of federal jurisdiction, the Court also has jurisdiction to decide an attached non-severable claim. The classification of a claim as non-severable does not necessarily mean that it is, or must be, united to the federal claim by a single claim for relief. While that may be a common illustration of a non-severable claim, the non-severable character of an attached claim may emerge from other aspects of the relationship between the federal and the attached claim. For example, the resolution of the attached claim may be essential to a determination of the federal question. Further, the attached claim and the federal claim may so depend on common transactions and facts that they arise out of a common sub-stratum of facts. In such instances, where the Court exercises federal jurisdiction, it will have jurisdiction to determine the attached claim as an element in the exercise of its federal jurisdiction - Phillip Morris Inc v Adam P. Brown Male Fashions Pty Ltd (1981) 148 CLR at 512. 97 A matter arises under a law only when it is necessary in litigation to determine whether that law confers a right or affords a defence that is in issue in the litigation. A matter arises under a law of the Parliament when in a proceeding it is necessary that there should be a decision upon a claim made by one of the parties to the litigation which is based on that law - Felton v Mulligan (1971) 124 CLR 367 at 382. There is a difference between a proceeding arising under a law and a matter arising under a law. A matter need not be a proceeding. It may be part of a proceeding as, for example, where a defence is relied on that the law authorising the proceeding is unconstitutional. A matter, therefore, might arise under a law made by the Parliament in a proceeding that does not arise under that law - Felton v Mulligan at 382. Accordingly, Overton contends that the claims made under the Contracts Review Act with respect to legal and accounting expenses and interest charges do not constitute a "matter" within s 76 of the Constitution or s 39B(1)(a)(c) of the Judiciary Act 1903 and that the Court, therefore, has no jurisdiction. 98 Overton does not contend that the claim of "procedural unfairness" in relation to the entering into of the Lease is not within the jurisdiction of the Court. It accepts, quite properly, that that claim arises out of a substratum of facts that is common to the claim made in the proceeding under the Trade Practices Act. I consider, on balance, for the same reason, that Mr and Mrs Murphy's claims in relation to the legal and accounting expenses and interest charges arise out of the same substratum of facts as the other claims in respect of which the Court has jurisdiction. The question is whether the Lease or any provision of the Lease was unfair in the circumstances relating to the Lease at the time it was made. The respective positions of Overton and Mr and Mrs Murphy fall to be investigated in relation to the claims made under the Trade Practices Act as well as all of the claims made under the Contracts Review Act. I am satisfied that the Court has jurisdiction to determine all questions that arise under the Contracts Review Act.

LEGAL AND ACCOUNTING EXPENSES 99 In the Equity Proceeding, Windeyer J, in adopting the relevant part of the referee's report, held that certain legal and accounting expenses incurred by Overton in connection with litigation relating to the Heritage Village were outgoings in respect of which contributions could be required from the Lessees generally, and Mr and Mrs Murphy in particular. As the referee observed, clause 5 of the Lease is entirely consistent with the concept of a self-funding retirement village, which would not be subsidised by any person. Clause 5 was necessary to achieve the object of a self-funding retirement village. 100 Mr and Mrs Murphy contended, however, that the provisions of clause 5, in so far as they justified contributions in respect of the relevant legal and accounting costs, were unjust because: · Mr and Mrs Murphy were advised that the contributions shown in the estimates covered all outgoings recoverable under the lease and that, by implication, that included outgoings by way of legal or accounting costs; · Mr and Mrs Murphy had no appreciation, nor should they have been expected to have any appreciation, that Overton would be entitled to recover from them legal costs incurred in litigation against residents or against the Director-General of the Department of Fair Trading or any other officer or department of the New South Wales Executive, regardless of what order, if any, was made by the Court or Tribunal in which such litigation was conducted.

It was made clear in oral argument that the second ground includes a complaint that claims for legal and accounting costs may be made against particular Lessees, rather than the residents in toto.

101 Mr Murphy, on whom Mrs Murphy also relied, read and understood the provisions of the Lease and believed that that the documentation that he read set out his and Mrs Murphy's rights and obligations in relation to the Heritage Village. He believed and understood that his and Mrs Murphy's obligations and liabilities were as specified in the legal documentation. On the other hand, he had a belief or expectation, induced by Overton's conduct, that in the ordinary course of things, the maintenance fees that he or Mrs Murphy would be called on to pay would not increase disproportionately to increases in the age pension - see paragraphs [84] and [85] of My Earlier Reasons. 102 The legal and accounting expenses, of course, were not matters that could have been disclosed by Mrs Taylor in her discussions with Mr and Mrs Murphy before they entered into the Lease. It was not suggested that there was any reason to believe or expect, at that time, that expenses in the order of those that have in fact been incurred were likely to be incurred. However, on the other hand, Mr Murphy understood that the Heritage Village was planned to be self-funding by the residents and understood that no body would be subsidising the Heritage Village - paragraph [177] of My Earlier Reasons. The determination in the Equity Proceeding was that the legal and accounting expenses in question fell within one or other of the following categories: · expenditure incurred in carrying on the operations of the Village; · amounts relating directly to the running of the Village comprising fees and sums payable to persons who provide services for the Village or to the Lessor in relation to the operation of the Village including legal charges and consultants fees; · such reasonable and proper expenses and outgoings as the lessor may from time to time decide. 103 It is not for this Court to consider the correctness of the determination made by the referee as adopted by Windeyer J in the Equity Proceeding. However, if the expenses in question fall within those categories, there is nothing unjust in requiring the residents to contribute towards those expenses. The concept underlying the Heritage Village was that the manager, namely Overton, was to provide various facilities and services on the basis that the costs of so doing would be borne by the Lessees. The manager of the Heritage Village should not be in a position whereby it would be out of pocket as a result of providing the facilities and services required by the Lessees. By extension, if costs are incurred by particular Lessees, there is no reason why those costs should be borne by Lessees who did not incur them. Certainly, that would not be an unjust consequence of the Lease. The provisions of clause 5 are no more than was reasonably necessary for Overton to protect its legitimate interests in not having to subsidise the operations of the Heritage Village.

INTEREST 104 Mr and Mrs Murphy's complaint under this head is that the effect of the provisions in question is to enable Overton to recover interest on the same amount twice. That first raises a question as to the true construction of the provisions in question. That question was not resolved in the Equity Proceeding. 105 Mr and Mrs Murphy make no complaint about clause 5(h). Rather, their complaint concerns the effect of clause 5(c)(vi), in conjunction with clause 5(h). That is to say, they accept that it was not unjust or unfair to require Mr and Mrs Murphy to pay interest in respect of any contributions for which they are liable and which are overdue. Their complaint is that, in some circumstances, the result will be double recovery for Overton. 106 Thus, Mr and Mrs Murphy postulated the following possible set of circumstances: (1) Overton notifies an estimate of contributions to outgoings pursuant to clause 5(b). (2) Mr and Mrs Murphy and other Lessees fail to pay contributions on the appointed day. (3) As a consequence, in order to continue the administration and operation of the Heritage Village, Overton borrows money and incurs an interest charge in respect of that borrowing. (4) Overton levies contributions on all Lessees in respect of that interest, pursuant to clause 5(c)(vi). (5) Mr and Mrs Murphy and any other defaulting Lessees pay interest to Overton pursuant to clause 5(h).

Mr and Mrs Murphy contend that, in those circumstances, in so far as the borrowing by Overton was to make up the shortfall resulting from the default by Lessees, Overton, having received interest pursuant to clause 5(h), would also be entitled to be reimbursed pursuant to clause 5(c)(vi) in respect of the interest paid out. In those circumstances, it will have recovered twice. 107 The concept underlying the Heritage Village would clearly entitle Overton to be reimbursed for any interest expense it incurred to a third party in respect of monies borrowed for the administration and operation of the Heritage Village. There is nothing untoward about clause 5(c)(vi). If there were double recovery, it would be by reason of the operation of clause 5(h). However, I do not consider that the scheme of the provisions results in double recovery. 108 Overton maintained a separate maintenance fund in its accounting records in relation to the administration and operation of the Heritage Village. For accounting purposes that maintenance fund can be treated as a separate entity. One of the expenses of the Heritage Village, to be charged to the fund would be interest on money borrowed for the purposes of the Heritage Village that would be charged pursuant to clause 5(c)(vi). Income of the fund would include, not only arbitrary contributions by Lessees, but also interest charged to Lessees who had not paid their share of the outgoings, pursuant to provisions such as clause 5(h). Income of the maintenance fund must be applied in meeting expenses of the Heritage Village, including interest charged to the maintenance fund pursuant to clause 5(c)(vi). The income would include the interest charged to Lessees under clause 5(h). I do not consider that the provisions, properly construed and given effect to, involve any double recovery. I do not consider that clause 5(c)(vi) entails any substantive injustice.

third party interests 109 The order propounded on behalf of Mr and Mrs Murphy concerning the interest charges is as follows: "For the purpose of the next three clauses only, where clause 22(2) secondly occurs, in the Trust Deed, it shall be referred to as clause 22(3). Overton is not entitled to recover both interest under clause 5(h) of the Lease, on the one hand, and also interest under clause 5(c)(vi), on the other hand, insofar as the unpaid contributions to Outgoings, upon which clause 5(h) interest is based, relate to any items of expenditure by Overton, in relation to which Overton has borrowed or raised monies and, also, has levied the lessees for interest on monies borrowed or raised, pursuant to clause 5(c)(vi) of the Lease. Overton is not entitled to recover both interest under clause 22(3) of the Trust Deed, on the one hand, and also interest under clause 5(c)(vi), on the other hand, insofar as the payment by Overton of Outgoings from its own funds (upon which clause 22(3) interest is based), relates to any items of expenditure by Overton, in relation to which Overton has borrowed or raised monies and, also, has levied the lessees for interest on monies borrowed or raised, pursuant to clause 5(c)(vi) of the Lease. Overton can elect, in the circumstances provided for in the previous two paragraphs, to levy interest under either clause 5(h) or clause 5(c)(vi) but not under both sub-clauses in relation to the same item of expenditure incurred by Overton. Likewise, Overton can elect to levy interest under either clause 22(3) of the Trust Deed or clause 5(c)(vi) of the Lease, but not under both sub-clauses in relation to the same item of expenditure incurred by Overton." 110 That form of order indicates a further problem that would arise in relation to the granting of relief under the Contracts Review Act. The Lease has now been assigned by Overton to Cuzeno RVM Pty Limited ("Cuzeno"). Cuzeno is not a party to either of the proceedings before me. Cuzeno could not be required, by an order pursuant to s 7(1)(d) of the Contracts Review Act made in these proceedings, to execute an instrument varying the provisions of the Lease. 111 Section 12 of the Contracts Review Act provides as follows: " (1) Where in proceedings for relief under this Act in relation to a contract it appears to the Court that a person who is not a party to the contract has shared in, or is entitled to share in, benefits derived or to be derived from the contract, it may make such orders against or in favour of that person as may be just in the circumstances.

(2) The Court shall not exercise its powers under this Act in relation to a contract unless it is satisfied:

(a) that the exercise of those powers would not prejudice the rights of a person who is not a party to the contract; or

(b) that, if any such rights would be so prejudiced, it would not be unjust in all the circumstances to exercise those powers,

but this subsection does not apply in relation to such a person if the Court has given him an opportunity to appear and be heard in the proceedings."

112 No instrument executed by Overton intended to vary the terms of the Lease would have any effect until registered. Since Overton is no longer the registered proprietor of the leasehold interest, no instrument could be registered. 113 Section 12(1) may authorise the Court to make an order requiring Cuzeno to execute an instrument. However, since Cuzeno is not a party to the proceedings, it has not been given any opportunity to be heard. Section 12(2) is therefore applicable. An order requiring Cuzeno to execute an instrument varying the terms of the Lease would affect the rights of Cuzeno. By reason of the assignment, Cuzeno now has the benefit of the rights originally conferred upon Overton as Lessor. However, I am not satisfied that an order such as that proposed on behalf of Mr and Mrs Murphy (see paragraph [111] above), would not prejudice the rights of Cuzeno. Nor am I satisfied that it would not be unjust to make such an order.

TIME LIMITS 114 Under s 16 of the Contracts Review Act, any application for relief under the Act in relation to a contract may be made only during any of the following periods: (a) the period of two years after the date on which the contract was made; (b) the period of three months before or two years after the time for the exercise or performance of any power or obligation under or the occurrence of any activity contemplated by, the contract; and (c) the period of the pendency of maintainable proceedings arising out of or in relation to the contract, being proceedings that are pending against the parties seeking relief under the Act. 115 Clearly the period in paragraph (b) has long since expired, since the Lease was entered into on 20 October 1992. Overton also contends that paragraphs (b) and (c) do not operate in relation to any amounts owed by Mr and Mrs Murphy up to 15 May 1998, being the date up to which damages in the cross claim in the Equity Proceedings was limited. Overton contends that paragraphs (b) and (c) cannot apply where the exercise or the performance of any power or obligation under the Lease have merged in that judgment. 116 The period referred to in paragraph (b) would only permit relief in respect of the exercise or performance of any power or obligation under the Lease after 23 February 1997, being the period of two years prior to the commencement of this proceeding. For the reasons that I have already given, I do not consider that the judgment in the Equity Proceeding would preclude Mr and Mrs Murphy from a remedy that would otherwise be available in resect of any of any moneys that were the subject of that judgment. 117 Paragraph (c) requires that there be maintainable proceedings pending against Mr and Mrs Murphy arising out of or in relation to the Lease. The present proceeding is not a proceeding pending against Mr and Mrs Murphy. Further, the Equity Proceeding has now been fully disposed of. The Contracts Review Act claims could have been brought during the pendency of the Equity Proceeding and, indeed, the claims were made initially during the pendency of that proceeding. 118 I would be inclined to conclude that paragraph (c) is only satisfied in relation to an application that is made during the period of pendency of a proceeding. The claims made in the amended defence to Overton's cross-claim were made during the pendency of that cross-claim. However, no application for relief was made until the commencement of this proceeding. On the other hand, at the time of the commencement of this proceeding, the cross-claim in the Equity Proceeding was still pending. I would be disposed to the view that paragraph (c) is satisfied. However, having regard to the conclusions I have reached on the substance of the claims under the Contracts Review Act, the question is academic.

CONCLUSION 119 It follows from what I have said that Mr and Mrs Murphy's claims under the Contracts Review Act must fail. Accordingly, in so far as these proceedings are still current, I would order that they be dismissed. Before doing so, however, I shall give the parties an opportunity of making further submissions as to the appropriate order, in the light of the Full Court's remitter. I will also give the parties the opportunity of making submissions on the question of costs, both of Overton's motion for summary dismissal, and of the substantive claims under the Contracts Review Act. I certify that the preceding one hundred and nineteen (119) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Counsel for the Applicant: Mr W G Hodgekiss with Mr G A Moore

Solicitor for the Applicant: The Aged Care Rights Service

Dates of Hearing: 20, 21, 24, 29 August, 3, 21, 28 September, 8 October, 8, 9 November 2001