(c) the contract should be declared void (or may be declared void in other proceedings) under s 106 of the Industrial Relations Act 1996.
Facts
3 Mr Barton was a Certified Practising Account. Mrs Barton was a musician or, it seems, taught music. They were married in or about 1976. Prior to 1992, Mr and Mrs Barton purchased vacant land at 17 Sunnywaters Road, Kincumber and built a home on it. Mr and Mrs Barton were both directors of a company called Tylin Services Pty Ltd, a company originally established by Mr Barton, it seems, as a service company, which allowed certain tax advantages.
4 In about 1999, Mr and Mrs Barton met Mr Glenn Long who, shortly thereafter, become general manager of Thomas Organs International (Australasia) Pty Ltd and, a little later, a principle of Talent Artists Entertainment Group Pty Ltd, which traded as Premiere Pianos and Organs.
5 There were contractual relations between Thomas Organs and Premiere Pianos on the other. It seems that Thomas Organs supplied stock to Premiere Pianos, which stock was then sold retail to the public from a shop at Erina. From about 2000, when Mr and Mrs Barton were in their early 70's, Mr Baron worked as a contractor, seemingly on a casual basis, doing financial work for Mr Long, it seems, at Premiere Pianos. Mr Barton became the secretary and accountant for Talented Artists and later for Thomas Organs.
6 In early 2001, Mr Long acquired an interest in Thomas Organs and became its principal. It seems that Mr Barton performed work as an in-house accountant and bookkeeper and attended to payment of accounts. An arrangement was effected in which Mr Barton would settle accounts for either one or both of Mr Long's companies, if those accounts were pressing, and thereafter Mr Long would reimburse Mr Barton for the expenditure.
7 In or about June 2002, Mr Barton informed Mr Long that he did not wish to continue the arrangement and Mr Barton was added as a signatory to the accounts for the two companies (Thomas Organs and Talented Artists), so that the invoices could be paid by Mr Barton from the company accounts.
8 The catalyst for Mr Barton withdrawing from the arrangement, under which he paid, from his own resources, the companies invoices, seems to have been the fact that a number of the invoices were paid by Mr Barton, but he was not reimbursed for them. It seems, at the time that he withdraw from the arrangement, Mr Barton was owed between approximately $30,000 and $40,000. Mr Long, it is alleged, promised to pay Mr Barton as soon as funds became available.
9 When Mr Young required further finance in 2003, Mr and Mrs Barton provided it. While they at first resisted, they eventually provided additional finance of $50,000, purportedly on condition, from Mr Long, that their home remained safe.
10 The loan eventually guaranteed, in the above agreement, was for $220,000 and agreed to that larger sum on the promise from the then lender (Provident) that it would look to Mr Long's stock before it would look to the guarantee.
11 There is significant detail given of the degree to which Mr Long and, to a lesser extent, Ms Gale Copeland from DSR Asset Finance (a finance broker), acted unconscientiously toward Mr and Mrs Barton. The details are alleged in the pleadings and the affidavit of Patricia Olive Barton, which evidence I accept. It is sufficient, for present purposes, to note that Tylin (Mr Barton's company) was the owner of the "Prime" business. The Prime business failed, there was default in the loan to Permanent Custodians and these proceedings eventuated.
12 For the purpose only of these proceedings, I accept, without deciding that the loans were the primary responsibility of Mr Long. I also accept that both Mr Long and Ms Copeland acted in a manner that gives Mr and Mrs Barton a cause of action against them arising from unconscionable conduct, the Contracts Review Act, and, subject to the operation of federal legislation, the Industrial Relations Act. It is necessary to recite one matter of detail relating to a conversation to which Mrs Barton attests.
13 In July of August 2007 Mrs Barton spoke with Ms Louise Skillbeck, a senior administrator of DSR Asset Finance, who had telephoned Mrs Barton in relation to arrears on the line of credit to Permanent Custodians. Mr Barton was, at that time, in hospital. Part of the conversation involved Mrs Barton, allegedly, telling Ms Skillbeck that all of the loans were Thomas Organ Company loans and had nothing to do with Mr or Mrs Barton. The conversation, reported at [74] of Mrs Barton's affidavit, does not, unless it is suggested that Mrs Barton refers to herself in the third person, sound as if it is accurately reflected in the affidavit. Nevertheless, Mrs Barton attests to a conversation from Ms Skillbeck, in response to that comment, in the following terms:
"Yes I know but I believe she told AFIG that it was all for the Bartons for some new venture. Gail advised me that she told AFIG that these were Thomas loans. Gail doesn't work for me anymore, I got rid of her, but when she consolidated the Money Tree Loan and the further $150,000."
14 The submissions made on behalf of Mr and Mrs Barton suggest that the terms of that conversation were to the effect that Ms Skillbeck informed Mrs Barton that Ms Copeland had told Permanent Custodians that the loan had nothing to do with the Bartons. Those are not the terms of the conversation. Indeed, a proper construction of paragraph [74] of the affidavit of Mrs Barton is that Ms Copeland told Permanent Custodians that it was for a new venture for the Bartons and told her supervisors that she had told Permanent Custodians that they were loans for Thomas Organs. It seems as if Ms Skillbeck was suggesting that it was that duplicity by Ms Copeland that occasioned her dismissal. No other evidence ties Permanent Custodians to any conduct, or any knowledge of the conduct, of Mr Long or Ms Copeland.
The Defendants' Case
15 In short, Mr and Mrs Barton submit that redress is available through equitable relief, or through the Contracts Review Act, or through s 106 of the Industrial Relations Act, which redress would either void or vary the terms of the mortgage or grant recompense equal to the amount owed in the mortgage.
16 The facts as set out above are largely uncontroversial, in the sense that, at this stage of the proceedings, they are facts alleged, with which no party takes issue. The question that arises is, if those facts were able to be proved, whether Mr and/or Mrs Barton have a defence and/or whether any of the defences alleged is an answer to the statement of claim filed.
Equitable Relief
17 The submissions made on behalf of Mr and Mrs Barton allege that "there are reasonable grounds to suspect that there may be evidence which establishes the facts existed, to the plaintiff's knowledge, that reasonably raise the possibility of knowledge of Long's fraud. There are no such reasonable grounds.
18 The submission is based upon an analysis of Mrs Barton's affidavit (paragraph [74]), which suggests that Ms Skillbeck suggested that Ms Copeland had told her that she (Ms Copeland) had told Permanent Custodians that all of these loans were for Thomas Organ Company. That is not the effect of the conversation between Ms Skillbeck and Mrs Barton to which Mrs Barton attests in paragraph [74] of her affidavit.
19 Equity will grant relief for unconscionable conduct in circumstances where unconscientious advantage has been taken of an innocent party whose will is overborne, so that it is not exercised independently and voluntarily. It will also grant relief in circumstances where, although the exercise of will is independent and voluntary, the innocent party is unable to make a worthwhile judgment as to what is in his or her best interests: Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447 at 461 (per Mason J).
20 In the judgment of Deane J in Amadio, his Honour made clear that the special disability, of which the High Court there spoke, must be "sufficiently evident to the stronger party to make it prima facie unfair or 'unconscientious' that it procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which it was procured or accepted".
21 The suggestion, made in submissions, that Permanent Custodians were aware of the disability or had taken advantage of them is unavailable. There is no basis, at this stage, for a reasonable suspicion that such knowledge occurred. Indeed, as I read paragraph [74] of Mrs Barton's affidavit, it attests to the opposite, namely, that Permanent Custodians were also misled about the purpose of the loan.
22 From the perspective of Permanent Custodians, it could have good reason to conclude that Mr Barton, at least, was fully aware of that which he was doing. Mr Barton, as previously stated, was a Certified Practising Accountant; he was refinancing a prior loan; his (and Mrs Barton's) company was the registered owner of the music business for which the money was being supplied; and Mr Barton was the company secretary of Thomas Organs.
23 With that information, there is no basis upon which Permanent Custodians could suspect that Mr Barton was unaware of the nature of the loan; unable to exercise an independent and voluntary will in relation to that which was in his best interests; or that he suffered a special disability of a kind that would make Permanent Custodians suspect that issues of fairness arose in relation to the loans in question.
24 As is made clear from the above, if Mr and Mrs Barton were to prove the allegations made, it would show a good cause of action against Mr Long and perhaps others. It does not show a good cause of action against Permanent Custodians, which was not a party to any of the alleged overbearing, unfair or coercive conduct.
Contracts Review Act
25 For all of the reasons outlined above, it cannot be said of Permanent Custodians that they have acted in a way which is unfair, or even in a manner which is arguably unfair. On the material before the Court (even that which may be the grounds of reasonable suspicion), Permanent Custodians have acted, always at arms' length, and perfectly properly. The loan itself is unremarkable. It is a short-term loan, the terms of which have not been subject to any submission that any or all are unfair.
26 It has been said (Beneficial Finance Corporation v Karavas (1991) 23 NSWLR 256 at 277 per Meagher JA at 277) that there is jurisdiction under the Contracts Review Act to make orders in favour of a party to a contract who proves a relevant disability, even though the other party to the contract is unaware of that disability. His Honour opines that it would be unsound to exercise the jurisdiction in those circumstances.
27 There may be circumstances in which the damage, to a party to a contract, who suffers from a relevant disability, is so great, or the circumstances of its execution so extraordinary, that another party to the contract, unaware of the disability, is required, by the courts, to meet that damage. I cannot, at the moment, envisage such a circumstance. Nevertheless, whether there is jurisdiction or otherwise, as a matter of discretion, in these circumstances, no such jurisdiction, if there be jurisdiction, should be exercised.
Unfair Contract for Performance of Work
28 The last remaining ground upon which Mr and Mrs Barton maintain that they have a defence which they should be given leave to file, is the ground that raises s 106 of the Industrial Relations Act.
29 The provisions of s 106 of the Industrial Relations Act allow the Industrial Court of New South Wales to vary or void a contract for the performance of work, including a contract or arrangement, or any related condition or collateral arrangement. Mr and Mrs Barton submit that the mortgage is a collateral arrangement to a contract for the performance of work and can be voided or varied by the Industrial Court. There are significant difficulties with that argument. It is unnecessary for me to deal fully with this argument.
30 The significant hurdles, over which Mr and Mrs Barton must climb in relation to the voiding or varying of the mortgage through an order under s 106 of the Industrial Relations Act, include the proposition that, on the authority of the High Court, for the arrangement to be varied or voided (even if collateral), it must be the arrangement or part of those arrangements in accordance with which Mr and Mrs Barton worked.
31 The fact, if it be the fact (and I accept wholly that is the fact), that the entry into the mortgage was a condition of the contract or arrangement with Mr Long (or his companies), does not mean that the mortgage itself is a contract or arrangement, collateral or otherwise, whereby work is performed in an industry. In other words, the mere fact that Mr and/or Mrs Barton may take proceedings under s 106 of the Industrial Relations Act against Mr Long and/or his related companies and obtain damages or compensation, which damages or compensation would include the indebtedness under the mortgage and/or any interest or cost associated therewith, does not mean that, in relation to an innocent third-party mortgagee, the Industrial Relations Commission could void the mortgage.
32 The arrangement whereby work was performed in any industry was the arrangement with Mr Long and his companies. The mortgage may have been a collateral arrangement or related condition to the arrangement and may form a head of damage in relation to proper compensation for an unfair contract (if this be one), but s 106 of the Industrial Relations Act does not give the Industrial Court of New South Wales the jurisdiction to void a registered mortgage in which the mortgagee is a person, corporate or individual, who is not party to the contract or arrangement that is said to be unfair, nor party to the contract or arrangement in accordance with which Mr and Mrs Barton worked; see Fish v Solution 6 Holdings Limited [2006] HCA 22; (2006) 225 CLR 180 at 195; Batterham v QSR Limited [2006] HCA 23; (2006) 225 CLR 237.
33 It is unnecessary for me to consider the other arguments in relation to the purported defence under s 106 of the Industrial Relations Act. In particular, I do not consider the operation of the Independent Contractors Act 2006 (Cth), nor the operation of the Workplace Relations Act 1996 (Cth), as amended.
34 However, I do make the comment that, even assuming that Mr and Mrs Barton could vary or void the mortgage in an action against Mr Long and his companies in the Industrial Court of New South Wales, it is not a defence in these proceedings. The legislature has not conferred, on the Supreme Court of New South Wales, original jurisdiction in relation to orders under s 106 of the Industrial Relations Act. Such a jurisdiction is sometimes exercised by the Supreme Court of New South Wales, but only in circumstances where the matter may be the subject of orders under s 8 of the jurisdiction of Court (Cross-Vesting) Act 1987, i.e. where it is joined with proceedings in this Court and proceedings either in the Federal Court of Australia, the Family Court of Australia or the Supreme Court of another State or of a Territory.
35 In other words, the claim under the Industrial Relations Act is not a claim which can be agitated in this Court, as a defence to these proceedings or as a cross-claim.
Conclusion
36 As a matter of fact, there is not, on the evidence before the Court, a basis for suspecting, or determining, that there is an arguable case that may be pleaded in defence of the statement of claim.
37 Permanent Custodians have not been shown to have had knowledge of any unfairness, special disability or disadvantage. Nor have Permanent Custodians been shown, even arguably, to have been involved in taking unconscientious advantage of any disability or unfairness.
38 The remedies, if there be any, of Mr and Mrs Barton lie against Mr Long and his companies or other persons involved in the unconscientious behaviour.
39 Further, there is an unusual lack of cohesion in the notion that a person may, under the terms of equitable principle, the Contracts Review Act or the Industrial Relations Act, void a mortgage of a mortgagee, who has not been shown to have engaged in, relevantly, fraud. The provisions of the Real Property Act 1900 grant indefeasibility of title for which the only relevant exception would be fraud on the part of the mortgagee. The notion that conduct, less than fraud, could amount to a basis for relief from the specific provisions of the Real Property Act, and the effect of indefeasibility of title, raises significant issues.
40 It would seem that the terms of the defences may relate to the contract and its enforceability or validity, but not the interest in land that is evidenced (and rendered indefeasible) by the provisions of the Real Property Act: see Khan v Hadid (No 2) [2008] NSWSC 119 at [104]-[115]; Permanent Custodians Ltd v El Ali [2008] NSWSC 1264 at [44]-[60]. The Court of Appeal (Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 and Perpetual Trustee Company Limited v Albert and Rose Khoshaba [2006] NSWCA 41) have determined that the Contracts Review Act may override indefeasibility, but, so far, not in circumstances where the mortgagee is innocent of any unfair conduct.
41 Nevertheless it is unnecessary for me to determine the last mentioned matter. On the facts as presented, applying the basis in law of these defences, there is no grounds for defence.
42 In the foregoing I have not dealt with the discretionary elements associated with this application. It is fair to remark, as was the submission on behalf of Permanent Custodians, that it is usual, when seeking to set aside a default judgment, for the applicant to explain the delay. No real explanation has been given for the delay or the failure to file a defence (if there were one) in a timely manner. Nevertheless, it is unnecessary for me to determine this issue finally. If there were a defence available, I would, notwithstanding the delay, grant leave to set-aside the default judgment and file a defence. The remedy for any prejudice to Permanent Custodians would, in that circumstance, be in the appropriate order for costs.
43 The Court makes the following orders: