Plaintiff v Defendant

1. Introduction and brief background to the dispute

1 The plaintiff, Mr Richard Webster Mark Wolfe ("Mr Wolfe") issued proceedings against the defendant, Permanent Custodians Limited ("Permanent") in relation to an Agreement dated 1 December 2009.

2 The 1 December 2009 Agreement related to Permanent staying the execution of a Warrant of Possession ("the Warrant") after it obtained judgment against Mr Wolfe and his former de facto partner, Ms Gayle Nicole Breasley ("Ms Breasley") for defaulting under a Loan Agreement they had entered into with Permanent.

3 Mr Wolfe and Ms Breasley, entered loan agreements and mortgages with Permanent on 20 September 2000 and on 31 March 2004.

4 The relevant Loan Agreement is dated 31 March 2004, in the sum of $323,000. The mortgaged land subject of the Loan Agreement and these proceedings is located at 19 Main Street, Pascoe Vale, more particularly described in Certificate of Title Volume 7681 Folio 037 ("the Property"). The Loan Agreement created a first registered mortgage ("the Mortgage") over the Property of which Ms Breasley was the sole registered proprietor. Mr Wolfe was not a comortgagor.

5 Ms Breasley was also the registered proprietor of the adjoining property at 17 Main Street, Pascoe Vale.

6 On 1 December 2009, only days before Permanent was to enforce the Warrant and evict Mr Wolfe from the Property, Mr Wolfe approached Permanent and negotiated an Agreement to stay the imminent eviction.

7 The 1 December 2009 Agreement contained an onerous term in relation to any future defaults by Mr Wolfe namely, if Mr Wolfe defaulted in any payment which the parties had agreed to, Permanent would enforce its rights under the judgment and Warrant without notice. Mr Wolfe defaulted and Permanent exercised its rights under the 1 December 2009 Agreement.

8 Mr Wolfe contends that Permanent's exercise of its rights was contrary to the law.

9 Before considering the evidence, I make the following observations. Mr Wolfe's Second Further Amended Statement of Claim ("Statement of Claim"), filed on the second day of the trial, is long and difficult to understand. The document pleads numerous causes of action without adequately setting out the material facts relied upon. Despite the unsatisfactory state of the pleadings, at trial, Mr Wolfe persevered with all of his claims. This has unavoidably required a separate analysis of each claim on the facts and the law, resulting in a lengthy judgment. It is therefore appropriate at the outset that I should announce the Court's decision .

10 The Court finds none of the Mr Wolfe's claims are made out. My judgment will show there can be no interference with Permanent's right to enforce its judgment and Warrant. Mr Wolfe's claim contained in his Statement of Claim is dismissed with costs.

11 The Property was Mr Wolfe's family home where he lived with Ms Breasley and their four children until they separated in November 2007. Mr Wolfe remained living in the home and Ms Breasley and the four children moved to other premises.

12 From about April 2008, Mr Wolfe had difficulty paying the Mortgage due to the stress of the separation. He found it difficult to work because of depression, began drinking, let the Property fall into disrepair and eventually stopped making mortgage repayments altogether.

13 On 5 May 2008, Permanent issued a default notice to Mr Wolfe and Ms Breasley. They failed to comply with the default notice.

14 On 15 April 2009, a writ was issued by Permanent against Mr Wolfe and Ms Breasley in this Court, proceeding No. 5956/2009. The writ claimed against Ms Breasley payment of the full debt owed under the 31 March 2004 Loan Agreement and the Mortgage, and possession of the Property. The writ claimed against Mr Wolfe payment of the full debt owed under the 31 March 2004 Loan Agreement.

15 On 10 August 2009, Permanent obtained judgment against Mr Wolfe for payment of $326,602.66 plus costs and interest (in default of him filing an appearance) and judgment against Ms Breasley for possession of the Property and payment of $326,602.66 plus interest and costs (in default of filing her defence) ("the judgment").[1]

16 On 20 August 2009, Permanent obtained a valuation of the Property showing that as at that date the Property had a market value of $625,000.[2]

17 On or about 26 August 2009, Mr Wolfe and Ms Breasley entered into terms of settlement in relation to their November 2007 separation, whereby it was agreed that the Property would be transferred to Mr Wolfe upon the sale of the adjoining property at 17 Main Street.

18 By letter dated 8 September 2009, on a without prejudice basis, Gadens Lawyers, Permanent's solicitors, wrote to Mr Wolfe's then solicitor, Berndadette Elliott of Elliott Stafford and Associates. The letter advised Ms Elliot that Permanent had obtained judgment against Mr Wolfe and Ms Breasley in proceeding No. 5956/2009. The letter went on to say, omitting formal parts:

Our client is now at liberty to proceed to enforce the Judgment to obtain vacant possession of the Security Property. Nevertheless, our client has instructed that should your client and/or Mr Wolfe pay the arrears and costs owing on the Account in full before close of business Tuesday 15 September 2009 and then make all future instalment payments as and when they fall due, then legal action will be held. However, if payments are not made as sought, then our client will proceed to obtain a Warrant of Possession for the security property with a view to obtaining vacant possession of the Property or proceed to a mortgagee sale.

We advise that the arrears and costs owing on the Account as at 3 September 2009 is a total sum of $31,666.19 (comprised of current arrears of $30,104.53, plus outstanding legal costs of $1,561.66).

Finally, we confirm that any payments received will be accepted without prejudice to our client's rights to rely on the existing judgment.[3]

19 On 6 October 2009, in reliance upon the judgment, Permanent obtained the Warrant. The Warrant was scheduled to be executed by the Sheriff's Office in the round of evictions commencing 4 December 2009.[4]

20 Mr Wolfe began to raise money to pay the arrears under the 31 March 2004 Loan Agreement after entering into the terms of settlement with Ms Breasley on or about 26 August 2009 and after the issue of the Warrant on 6 October 2009.

21 Some time in November but prior to 27 November 2009, Mr Wolfe contacted Mr George Erlichster about attempting to keep the Property. Mr Erlichster acted for Mr Wolfe in relation to proceeding No. 5956/2009 from about May 2009 to 6 August 2009, when Ms Elliott took over Mr Wolfe's representation. Mr Erlichster is Mr Wolfe's current solicitor.

22 Mr Wolfe's evidence is that he telephoned Mr Erlichster and sought his informal advice in relation to rectifying the problem, that is negotiating an agreement with Permanent to keep the Property and prevent Permanent from enforcing the Warrant and eviction. Mr Wolfe wanted an opportunity to recommence payments and remain in the Property. While he approached Mr Erlichster for advice he, Mr Wolfe, was principally involved in the negotiations with Gadens. On the same day Mr Wolfe went to Mr Erlichster's office in Caulfield. Mr Erlichster did not charge Mr Wolfe. He made a file note of the meeting and put it on Mr Wolfe's file. Mr Erlichster advised Mr Wolfe to go into Permanent in a last ditch attempt and have a chat with Gadens about what he needed to do.[5]

23 On 27 November 2009, Mr Wolfe went to Aussie Home Loans and discussed his position with the staff. While at the office of Aussie Home Loans, Mr Wolfe telephoned Gadens and spoke to Ms Naomi Grech, a law clerk employed in mortgage recoveries. From approximately November 2009 until Ms Grech's employment with Gadens ceased in October 2010, she was the law clerk responsible for the file relating to Mr Wolfe under the supervision of Sonia Apikian, partner of Gadens.

24 Mr Wolfe told Ms Grech that "he has secured funding to clear the arrears in full, wants to make 12 months' payment in advance and clear all legal costs."[6]

25 Ms Grech advised Mr Wolfe to put his proposal in writing, "setting out what he wants and when he proposes to do it by".[7] Mr Wolfe informed Ms Grech that he had received notice from the Sheriff of the eviction which was to take place in the next week.

26 On the same day, Mr Wolfe sent a letter to Gadens marked to Ms Grech's attention. The letter was without prejudice. Omitting the formal parts, the letter stated:

Dear Naomi,

Re Client: Wolfe, Richard and BREASLEY Gayle

Warrant No. SP090082008

As per our telephone conversation this morning, I advise I have obtained funding to make payment to Permanent Custodians Ltd in the amount equal to:

1. total current arrears.

2. total current legal costs.

3. the equivalent of twelve (12) months' loan repayments in advance.

Please note the funds are available immediately.

As a matter or urgency, kindly relay my offer to your client and advise me directly, at your earliest, of their reply.

Please provide details of payments to be made to my solicitor Mr George Erlichster, who can be contacted on (03) 9525 8571.

Yours sincerely

Richard Wolfe

(0414 423 878)

cc Mr Erlichster, Solicitor

110 Balaclava Road

Caulfield Victoria 3161

Via facsimile: (03) 9525 9811[8]

27 Mr Wolfe's evidence is that the letter dated 27 November 2009 was primarily drafted by "Larry", a person from Aussie Home Loans, and that it was his idea to refer to Mr Erlichster to make the letter sound more formal.[9] Mr Wolfe gave evidence that because in the past he had not received faxes he wanted Gadens to send the pay out figure to Mr Erlichster and for a fax number of his friend, Carlos Sarraglio.[10]

28 Mr Erlichster received the 27 November 2009 letter by fax. Mr Erlichster was a bit confused as to why he received it but did not feel a need to advise Mr Wolfe because "clearly he [Mr Wolfe] had organised this letter to be sent".[11]

29 On 1 December 2009, Ms Grech telephoned Mr Wolfe. Ms Grech's file note of the conversation records:

Time of call 11.43am - 0414 423 878

Advise had spoken to our client and they look like will accept payment proposal. I said have received arrears amount from them, however waiting to get the 12 months in advance. I said once received will let him know. I said he will need to get a cheque to our office prior to eviction for the amount, he said yes.[12]

30 At approximately 4.17 the same day, Ms Grech called Mr Wolfe on his mobile phone. Ms Grech's file note records:

Time of call 4.17pm - 0414 423 878

Advised of figures and that fax being sent to solicitor. Advised of contents of fax. He said okay, will arrange for cheque.

I advised him of payments need to be made from Feb onwards, he said the direct debit previously set up the account has been closed as Gayle was taking money from it. I said we'll arrange for new direct debit forms, he will be paying mortgage.

Wants fax sent to his fax number also of 9354 7188.

31 Ms Grech recalls speaking to Mr Wolfe on a number of occasions during her involvement with the file but does not have a specific recollection of the two conversations with Mr Wolfe on 1 December 2009.

32 Ms Grech's evidence is that she believes that she would have read out the terms of the arrangement that had been agreed by Permanent as set out in a letter dated 1 December 2009. The letter from Gadens to Mr George Erlichster was without prejudice and marked urgent. It was faxed to Mr Erlichster at 14:15 and to Mr Wolfe at his friend Carlos Sarraglio's fax at 16:24.

Permanent Custodians Limited v Gayle Nichole Breasley and Richard Webster Mark Wolfe

Security property: 19 Main Street, Pascoe Vale

Supreme Court proceeding: No. 596 of 2009.

We act on behalf of AMS Mortgage Services Pty Ltd, mortgage manager for Permanent Custodians Limited. We refer to a facsimile received from your client Mr Wolfe on 27 November 2009.

By way of background we confirm that on 12 May 2008 our client served a Default Notice upon your client and Ms Breasley as account number 1057716 was in arrears. As the Default Notice expired unremedied the balance of your client and Ms Breasley's Account became due and payable. Accordingly, our client commenced Supreme Court proceedings against your client and Ms Breasley seeking a judgment for the debt owing and possession of the Property situated at 19 Main Street, Pascoe Vale. On 30 May 2009 your client was personally served with the Writ and Ms Breasley was personally served on 15 June 2009. On 10 August 2009 our client Judgment [sic] for debt owing and for possession of the Property . On 1 October 2009 our client obtained a Warrant for Possession which was sent to the Sheriff's Office and an eviction date has now been set for the first available date from 4 December 2009.

That said, we understand that your client wishes to settle this matter amicably and to that effect wishes to clear the arrears and legal costs in full, make 12 months' payment in advance and then maintain all future repayments as and when they fall due.

Our client will agree to stay the eviction conditional upon a bank cheque payable to GEL Custodians being received at our office by close of business Thursday 3 December 2009 in the amount of $46,134.82 (being comprised of arrears of $40,186.00, agents fees of $214.50, outstanding legal costs of $1,178.32 and two months' payments in advance of $4,556.00). We are instructed that due to our client's system, they can only accept two months payment in advance, however your client has an active direct debit so he should ensure that sufficient funds are in this Account so that all future repayments are maintained. The next repayment due will be on 26 February 2010 in the amount of $2,277.99.

Please note that all payments made will be accepted by our client without prejudice to its rights to rely on the existing Judgment and Warrant for Possession. Accordingly, if the payment of $46,134.82 is not received by the close of business Thursday 3 December 2009 or your client defaults on any repayments from February 2010, then our client reserves its right to proceed with further legal action, including obtaining a fresh eviction date for the Security Property, without further notice. ... [13] (emphasis added)

34 After counsel read the entire contents of the 1 December 2009 letter to Ms Grech under crossexamination, Ms Grech stated that she could not remember whether she read the whole letter or not.[14] However, Ms Grech stated:

But if I had written [referring to the file note] "advised of the contents of the fax" then I would have advised of the contents of the fax.[15]

35 In her witness statement, Ms Grech further states:

If an arrangement was entered into with our borrower to stay an enforcement action, it was the policy of Gadens Lawyers Melbourne and Sydney to always ensure that: (a) it was the term of the arrangement that all payments made by the borrower would be accepted without prejudice to the lender's rights to rely on the judgment entered (or if there was no judgment entered, the default notice); (b) it was a term of the arrangement that if the borrower defaulted under the arrangement, the lender may proceed with a further enforcement action without further notice; and (c) when entering into or confirming arrangements over the phone, to tell the borrower of the terms stated at 12(a) and (b) above.

It was always my practice to follow the policy outlined in paragraph 12 above.[16] (emphasis added)

36 In an affidavit affirmed 5 May 2010 in support of Mr Wolfe's injunction application, Mr Wolfe's evidence was:

On or about 1 December 2009 I received a letter from the defendant's solicitors indicating that they would agree to stay eviction conditional upon receiving the amount of $46,134.82, payable to GEL and being received at the defendant's solicitors' office by the close of business Thursday, 3 December 2009. This amount represented payment of the arrears of $40,186, agent's fees of $214.50, outstanding legal costs of $1,178.32 and two months' of repayments in advance of $4,556 representing the December and January 2009 repayments ("the agreement"). I was told by a representative of the defendant that their system could not accept payments in advance of 12 months. I was also told that my first monthly repayment was due on 26 February 2010 in the amount of $2,227.99. I accepted this offer. Now produced and shown to me marked Exhibit C is a true copy of the aforementioned letter sent from the defendant's solicitors.[17] (emphasis added)

37 Under crossexamination it was put to Mr Wolfe that there was an inconsistency between his evidence in the 5 May 2010 affidavit; his witness statement dated 9 May 2012 and oral evidence. That is, in May 2010, some six months after 1 December 2009, Mr Wolfe's evidence was that he received the 1 December 2009 Agreement by fax on or around 1 December 2009, while his evidence now is that he did not receive the fax letter prior to making payment on 3 December 2009, and that Ms Grech never told him of the contents of the 1 December 2009 letter. When asked whether his 5 May 2010 affidavit represented the true state of affairs and that Mr Wolfe received the letter and knew its contents before he made the payment on 3 December 2009, Mr Wolfe denied receiving the letter or knowing about its contents.

38 Later in crossexamination it was put to Mr Wolfe that Ms Grech had told him of the contents of the 1 December 2009 letter, including that the arrangement was going to be entered into subject to Permanent's rights to rely on the judgment that had been obtained against him. Mr Wolfe's evidence was that he could not recall whether Ms Grech told him of the contents or not. Mr Wolfe conceded that to the best of his knowledge the matters discussed at the time included the fact that he had to pay arrears, legals, any associated fees and the 12 months' in advance and that Ms Grech told him about the 26 February 2010 first repayment date and the repayment amount. However, Mr Wolfe could not recall either way whether Ms Grech said anything about Permanent reserving its rights to rely on the judgment or anything of that nature.[18]

39 In relation to the contents of the 1 December 2009 letter, Mr Wolfe's evidence is that he recalls reading it after payment on 3 December 2009. His evidence is that he did not read the letter in its entirety. That is, he read the first part of the letter which he considered he had discussed with Ms Grech, the amounts to be paid and that it "then got to a point where it was just legal talk so I didn't bother with it".[19]

40 Under crossexamination, Mr Wolfe was asked as to his understanding of the contents of the letter and particularly the second-last paragraph. Mr Wolfe conceded that he understood what the written words meant and what consequences would flow.[20] However, he maintained that at the actual time he read the letter he thought that if he had paid all arrears and Permanent's legal costs the loan would "go back to normal, I didn't understand how if I defaulted again how I would be evicted".[21]

41 Mr Wolfe gave evidence that Ms Breasley would complete all forms for him. He said he had four different types of dyslexia. There was no evidence before the Court as to whether Mr Wolfe has four types of dyslexia.

42 In relation to what Mr Wolfe was told by Mr Erlichster concerning the 1 December 2009 letter, Mr Wolfe's evidence is that he received a call from Mr Erlichster, who was a bit surprised that he had been sent a copy of the letter from Gadens. Mr Wolfe said that he simply wanted to know the payment amount and was busy at the time of the call.

43 Mr Erlichster's evidence was that he contacted Mr Wolfe upon receiving the 1 December 2009 letter and that Mr Wolfe was aware of its contents. Mr Erlichster said:

Well, I did not go through the terms of the letter with him [Mr Wolfe]. He seemed to be aware of the arrangement, that he was aware that - I had no knowledge of what happened between him and Gadens. So the fact was that it was clear from my discussion that he had negotiated with Gadens and come to some conclusion and this was what the letter represented and he was aware of it. He was aware that a deal had been done. This is as far as I can put the position.[22]

44 Mr Erlichster did not provide Mr Wolfe with a copy of the letter because Mr Wolfe indicated he would get a copy. Mr Erlichster recalls telling Mr Wolfe about the sum of $46,000 and the date it was due, which was two days from the date of the letter.

45 Mr Erlichster could not say whether Ms Grech had discussed with Mr Wolfe the contents of the letter and in particular, the sections concerning legal action and the reserving of rights.

Did Mr Wolfe have knowledge about the terms contained in the 1 December 2009 letter before making the first payment to Permanent on 3 December 2009?

46 On balance, I am satisfied that Mr Wolfe understood and knew of the terms contained in the 1 December 2009 letter prior to the first payment he made on 3 December 2009.

47 I accept Ms Grech's evidence that if she made a file note to the effect that the contents of the letter were discussed, this meant that more than just the amount due was discussed and would have included all the terms. In December 2009 Ms Grech was an experienced legal clerk who had worked in the Mortgage recoveries section of Gadens for a number of years. Her file notes were detailed and were consistent with the practice she said she had developed and Gadens' policy to inform the borrower at the time of entering into an arrangement over the phone of the default and notice terms.

48 Mr Wolfe could not recall whether or not Ms Grech would have read all the terms.

49 Mr Erlichster gave evidence that even though he did not go through the terms of the 1 December 2009 letter, in his view, Mr Wolfe was aware of them, being a matter he had negotiated with Gadens himself. Mr Erlichster did not consider that Mr Wolfe had not understood the Agreement reached.

50 Mr Wolfe's evidence is that he did not at any stage make any complaint to Gadens or Permanent about the terms set out in the 1 December 2009 letter, nor did he contact Mr Erlichster about the terms. He did not concern himself with the contents of the letter other than the amounts owed. In his words, he "didn't bother".

51 Ms Grech's evidence in relation to the second conversation with Mr Wolfe on 1 December 2009 has been reconstructed based on her file notes and usual practice. As such, it should only be given weight if consistent with the evidence of other witnesses.[23]

52 The onus of proof is on Mr Wolfe to prove this case. Mr Wolfe has deposed in an affidavit prepared only six months after the 1 December 2009 conversations with Ms Grech that he received the 1 December 2009 letter from the defendant's solicitors on or about 1 December 2009. He has exhibited the 1 December 2009 letter to his affidavit sworn 5 May 2010. In evidence, two and a half years later, Mr Wolfe denies having received the 1 December 2009 letter until after he made the payment on 3 December 2009.

53 Mr Carlos Sarraglio, the owner of the factory where the 1 December 2009 letter was faxed, gave evidence that he was unable to say when Mr Wolfe received or picked up the 1 December 2009 fax letter from the factory.

54 Mr Erlichster's evidence is that he did not give Mr Wolfe a copy of the 1 December 2009 letter: "because I think he [Mr Wolfe] indicated he was going to get a copy some other way".[24]

55 On balance, I do not accept Mr Wolfe's evidence that he did not have the 1 December 2009 letter before the payment was made on 3 December 2009. The inconsistency in his affidavit material sworn 5 May 2010 and his viva voce evidence is troubling, Mr Wolfe's inability to recall whether Ms Grech told him of the contents of the letter and Mr Erlichster's evidence that he thought Mr Wolfe was aware of the arrangements and the contents of the 1 December 2009 letter, are factors which diminish the likelihood of Mr Wolfe's recollection of the relevant facts.

56 Mr Wolfe's inability to recall whether the contents of the 1 December 2009 letter were read to him by Ms Grech over the phone, Ms Grech's evidence as to her usual practice; Gaden's policy that borrowers at the time they were renegotiating an arrangement were told of the default and notice provisions, and that Ms Grech, who is no longer employed by Gadens, is not an interested party in the litigation, support Ms Grech's version of events, which I accept.

57 On 3 December 2009, Gadens received a cheque for $46,134.84 from Mr Wolfe, resulting in the eviction being cancelled. Mr Wolfe set up a direct debit facility for the ongoing payment to Permanent from the National Australia Bank ("NAB"). On the same day, Permanent's agents, AMS Mortgage Services Pty Ltd ("AMS"), sent Mr Wolfe a direct debit form ("the form").

58 Mr Wolfe received the form from AMS on or about 7 December 2009. He completed the form and returned it to AMS by ordinary post as required by AMS with his return address on the envelope.

59 As at 26 February 2010, Mr Wolfe had deposited $10,098.74 in the NAB direct debit facility. These funds were sufficient to make the required payment to Permanent in February 2010 in the amount of $2,277.95.

60 The form is headed "Payment Options and Direct Debit Request". At the top of each page of the form is written:

If you have any questions about this form please call us on 1300 650 921.[25]

61 The form contained information under the heading "What You Need to Do":

• You must attach a statement deposit slip, cancelled cheque or letter from your financial institution for verification, showing the name of all account holders. If the information in this form is inconsistent with the supporting financial institution's documents, we may use the information on the supporting documents to complete your request.[26]

Further the form states under the heading "What You Need to Know":

• Linking your account: ...
• At least one borrower must be an account holder and all borrowers and account holders must sign section 5 of this form.[27]

• In this case the borrowers were Ms Breasley and Mr Wolfe. The account holders were Mr Wolfe and his mother, Lorraine Wolfe.

62 It was not contested that Mr Wolfe failed to correctly complete the form in that:

(c) Mr Wolfe failed to provide a statement, deposit slip, cancelled cheque or letter from the relevant financial institution for verification showing full names of all account holders of the account from which the funds were proposed to be debited.

63 On 14 December 2009, the Mortgage manager for Permanent attempted to call Mr Wolfe and Ms Breasley by telephone to inform them of the issues with the form. However, the telephone numbers held on the file were disconnected. It is not disputed that the payment due in February 2010 was missed by Mr Wolfe.

64 Mr Wolfe's evidence is that he did not check his account to see whether Permanent had debited the moneys for the first instalment payment. This was on the basis that he thought the form had been completed and there was money in the account.

65 In cross-examination Mr Wolfe said that he told Ms Grech that his phone number had been disconnected.[28] In Ms Grech's file notes of the two conversations with Mr Wolfe on 1 December 2009 there is no reference to the phone number being disconnected. There is no reference in Ms Grech's file notes of any other conversation with Mr Wolfe that the phone number was disconnected. In the letter dated 27 November 2009 from Mr Wolfe to Gadens he provides his mobile number but does not say that the number he had previously provided was disconnected.

66 Mr Wolfe in evidence confirmed that he had two conversations with Ms Grech on 1 December 2009. Mr Wolfe's evidence in relation to the second conversation at 4.17pm is that Ms Grech told him that his offer had been accepted however Permanent could only accept two months' repayments in advance and not the twelve months Mr Wolfe had offered. Ms Grech told Mr Wolfe that the first repayment was due on 26 February 2010 in the amount of $2,27.99 and that Permanent would only accept Mr Wolfe's offer if he paid all other costs. Ms Grech told Mr Wolfe this would bring the Mortgage up to date and "back to normal". The total amount Mr Wolfe would have to pay was $46,134.82, including legal fees, and this should be paid by bank cheque delivered to Gadens by 30 December 2009. In his witness statement Mr Wolfe said:

1. Had the defendant explained to me that after going to the effort of borrowing from my family and making payment of almost $50,000 that I would not even be given one opportunity to correct any further default I would not have agreed to this.

67 On 2 March 2010, Gadens wrote to Mr Erlichster (omitting formal parts):

By way of background, we confirm that your client attended our office on 3 December 2009 and provided a cheque in payment of arrears, agent's fees, outstanding legal costs and 2 months' payment in advance, covering payments due December and January. Accordingly, legal action was held subject to the loan being serviced in the future.

That said, we are instructed that neither your client nor Mrs Wolfe made the payment due in February and accordingly we are instructed to immediately proceed to arrange a fresh eviction date to obtain vacant possession of the Property and proceed with the mortgagee sale.

Please note that given the history of this matter, our client has instructed us that they will not enter into any further arrangements and will only accept payment of a full debt in order to stay eviction.[29]

68 On 15 March 2010, Gadens sent a further letter to Mr Erlichster. The relevant parts of the letter state:

We refer to previous correspondence and to our letter dated 2 March 2010 wherein we advise that neither your client nor Ms Breasley made the payment due in February and accordingly we were instructed to immediately proceed to arrange a fresh eviction date to obtain vacant possession of the Property and proceed with a mortgagee sale.

We have since been contacted by your client advising that he (to his knowledge) has a direct debit in place and that he had sufficient funds in the nominated account to cover the payment due in February and he queried why the payment was not taken. No evidence of these allegations was provided.

We note that our letter dated 1 December 2009 referred to mortgage payments being due on the 26th of each month. This was in fact a typographical error and they are due on the 6th of each month but presumably your client and Ms Breasley were aware of it. In any case, our client has advised that there is no direct debit active nor has there been one in place since January 2008. Surely your client would have realised that his nominated account had not been debited if in fact funds were available as alleged?

In any case, even if our client was willing to give your client the benefit of the doubt that he had tried to set up a new direct debit and there were sufficient funds in the nominated account to cover the February instalment, your client and Ms Breasley are in default of a loan agreement and Ms Breasley is in default of a mortgage which secures a loan. This default is as a result of being in default of their Loan Account number 41321 which is secured by a mortgage provided over 17 Main Street, Pascoe Vale. We have been instructed that a garage and fence have been constructed to the Property on the adjoining property without obtaining our client's written consent. Ms Breasley has acknowledged the default and is providing a Notice of Surrender of the Property.

In light of the above, we have been instructed to proceed with legal action to obtain vacant possession of the Property to proceed to a mortgagee sale. Kindly ensure that the Property is vacant prior to the eviction date which the Sheriff's Office has advised us is to occur from the first available date from 9 April 2010.[30]

69 Ms Breasley filed a notice of surrender on 17 March 2010 by which she agreed to surrender to Permanent the Property and for it to proceed with a mortgagee sale.[31]

70 Mr Wolfe made a payment to Permanent on 23 March 2010 in an attempt to rectify the default.[32]

72 Mr Wolfe continued to make payments on the loan between March 2010 and June 2010 and then in August 2010. There have been no payments since September 2010.

73 At the opening of the hearing Mr Wolfe was given leave to file a Second Further Amended Statement of Claim.

74 Permanent filed a Defence to the Statement of Claim dated 11 May 2011.

75 Mr Wolfe claims that he entered into an agreement with Permanent on 1 December 2009 not to proceed with the sale of the Property upon Mr Wolfe paying to Permanent by 3 December 2009 the amount of $46,134.82, representing, inter alia, the total outstanding arrears, agency fees and legal costs.[33]

76 Mr Wolfe alleges that the Agreement was partly oral and partly implied. To the extent that it is oral, it is constituted by the telephone conversations between Mr Wolfe and Ms Grech on 1 December 2009.

77 At paragraph 13 of his Statement of Claim, Mr Wolfe alleges that the fax sent by Ms Grech on 1 December 2009 contained additional terms that were never discussed with Mr Wolfe or made clear to him including that:

1. ...
   1. all payments received by the Defendant from the date of the Agreement were accepted without prejudice to the Defendant's right to rely upon the judgment and Warrant; and

1. b. if the Plaintiff did not pay any further amount due under the Mortgage the Defendant would proceed with further legal action, including obtaining a fresh date for the Property to be sold pursuant to the Warrant.

78 Mr Wolfe alleges that he did not review the 1 December 2009 letter nor was he informed of the terms as set out in the 1 December 2009 letter prior to him making the payment on 3 December 2009. Mr Wolfe alleges:

1. the Agreement would continue to be governed by the Memorandum of Common Provisions ("MCP").
2. Further and/or alternatively, it was an implied term of the Agreement that by the Plaintiff paying all arrears, agency costs, two months' repayments in advance and legal costs relating to the default and obtaining of the judgment and Warrant, the Defendant would no longer rely on the judgment and Warrant upon any new default but would instead commence new enforcement proceedings based upon the new default after providing the Plaintiff with notice of the default and a reasonable opportunity to rectify the default.

(c) Further and/or alternatively, it was an implied term of the Agreement that upon any further default, the Defendant would give the Plaintiff notice of the default and a reasonable opportunity to rectify the default, being 30 days, before the Defendant commenced any further enforcement proceedings, being:

(i) the obtaining of a new judgment and warrant based upon any further default; or alternatively

(d) Further and/or alternatively, it was an implied term of the Agreement that the Defendant would do all things necessary to enable the Plaintiff to have the benefit of the Agreement.

(e) Further and/or alternatively, it was an implied term of the Agreement that the Defendant would not in any way prevent the Plaintiff from performing the Agreement.[34]

79 Mr Wolfe alleges that by reason of Permanent accepting all arrears, agency costs and legal costs and agreeing to receive monthly mortgage repayments towards the Mortgage, Permanent waived its right to rely on the judgment and/or elected to continue with the Mortgage and/or a relationship of credit provider and debtor rather than judgment creditor and judgment debtor.[35]

80 Mr Wolfe goes on to allege that on the basis that Permanent received the form and was aware that Mr Wolfe had incorrectly completed the form and knowing this would result in February the repayment not being processed, Mr Wolfe would be in default.[36] Between 8 December 2009 and 26 December 2010, Permanent failed to notify Mr Wolfe or make reasonable attempts to notify him about the incorrectly completed form[37]and that he had the required funds in his nominated account to be debited towards the first repayment.[38]

81 In the circumstances, Mr Wolfe alleges that[39]:

(a) Permanent acted unconscionably and relies on the common law; Fair Trading Act 1999 (Vic) ("FTA") and the Australian Securities and Investment Commission Act 2001 ("ASIC Act"). As a consequence of the unconscionable conduct Mr Wolfe alleges that he was denied the opportunity to set up the direct debit and/or deposit the repayment directly when it fell due and has therefore suffered loss and damage;

(b) by silence Permanent represented that the form had been completed correctly and/or the direct debit facility had been set up and/or the first repayment would be automatically provided by Permanent without further notice to Mr Wolfe and that such representations were false, misleading and deceptive and that Permanent has engaged in misleading and deceptive conduct pursuant to the ASIC Act; FTA and the common law;

(c) given the circumstances giving rise to the default and Mr Wolfe's reliance on the representations to his detriment, Permanent is estopped from or should be otherwise prohibited from relying on the default to evict Mr Wolfe;

(d) the financial relationship between Mr Wolfe and Permanent is one of mortgagee and mortgagor or alternatively credit provider and debtor, prior to and at the time of the agreement, therefore the Agreement was governed by the Trade Practices Act 1958 (the "TPA"); Consumer Credit Code (the "Code") and the common law. By virtue of Permanent's failure to provide a further default notice in breach of the requirements under ss 76 and 77 of the Transfer of Land Act and ss 80 and 81 of the Code and common law, Permanent unlawfully evicted Mr Wolfe from the Property.

82 Mr Wolfe alleges that if the Court finds the Agreement contains the terms as set out in the 1 December 2009 letter, such terms are unjust.[40]

83 Mr Wolfe finally makes a number of allegations which are more by way of reply to Permanent's defence. Those allegations relate to Permanent's assertion that by virtue of Mr Wolfe's defaults of the MCP (in that he undertook works on the Property without Permanent's consent), Permanent therefore has the right pursuant to the MCP and can, amongst other things, take possession of the Property, sell the Property or do anything else which the law permits them to do as mortgagee of the Property. Given my findings I do not need to address this aspect of the claim.

(1) an order that he is not liable for any fees or charges associated with the default;

(2) an order restraining Permanent and/or their agents from removing, selling or in any way dealing with goods contained in the Property;

(3) a declaration that the terms referred to in the 1 December 2009 Agreement are enforceable;

(6) if the Court finds that the Agreement did not contain the implied terms as pleaded in paragraph 15, an order reopening this transaction to include those terms.

85 Mr Wolfe originally sought an order to exclusive possession of the Property but no longer seeks such an order.

5. The Nature of the 1 December 2009 Agreement - Doctrine of Merger

86 Before addressing Mr Wolfe's legal claims and the defences advanced, it is essential to analyse the nature of the 1 December 2009 Agreement and the legal consequences flowing from that Agreement. The starting point is the judgment dated 10 August 2009 and the Warrant issued 6 October 2009 in Permanent's favour.

87 Referred to as the doctrine of merger, a final judgment extinguishes the cause of action and the rights and liabilities that are its basis. The extent of the parties' rights and liabilities are contained within the judgment and their character is defined by it.

88 The doctrine of merger is a form of res judicata, that being that where the cause of action is litigated at judgment and upheld, it merges in the judgment and loses its separate existence. For that reason, in addition to cause of action estoppel, the cause of action ceases to exist and cannot support a second action.

89 Clarke JA in Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd and others,[41] put this another way:

The first is that the doctrine of merger in the judgment only applies in a case in which the plaintiff establishes his cause of action and it is that cause of action which merges in the judgment. Where the plaintiff fails to establish its cause of action (that is, there is a verdict for the defendant) there is nothing to merge in the judgment and the doctrine of res judicata operates as a true estoppel.

90 In Maganja v Arthur,[42] Yeldham J quoted Halsbury's Laws of England[43] where it said:

When judgment has been given in an action the cause of action in respect of which it was given is merged in the judgment and its place is taken by the rights created by the judgment, so that a second action may not be brought on that cause of action. Merger is not affected by an order which is not a judgment, nor by a judgment which is interlocutory and not final, or which is void. There will be no merger unless the cause of action is the same in both actions, and the plaintiff had an opportunity of recovering the first action ... what he seeks to recover in the second ... .

91 In the present case, we have default judgment in respect of Permanent as to possession of the Property, an enforceable warrant and judgment debt as against both parties in the amount of $326,602.66 plus costs and interest. The Mortgage, the loan and associated security guarantee and any rights associated therein have now been subsumed or merged into the judgments of the Supreme Court.

Effect of judgment - extinguishment of rights pursuant to mortgage

92 Any rights or possible causes of action under the Mortgage, MCP or security guarantee were effectively "extinguished" upon default judgment. Mr Wolfe and Ms Breasley have foregone the opportunity of putting forward a defence seeking to set aside judgment[44]. It would have been at this stage that Mr Wolfe as a defendant should have sought to defend the matter or have made application to set aside the judgment. There can be no independent cause of action so long as the judgment stood[45]. Any issues related to the notice provisions of the Mortgage, the Transfer of Land Act and the MCP, all needed to be raised at the time prior to default judgment as all rights and liabilities pursuant to the Mortgage were subsumed into the higher remedy-default judgment, warrant and the judgment debt.

93 The judgment now has the requisite character of "finality" due to it being an order of the Court and thus stands as having an independent existence to that of the Mortgage and any rights contained therein. Thus, the original loan, guaranteeing the rights and liabilities under it has no relevance. Mr Wolfe and Permanent's liabilities and obligations are now to be found pursuant to the court orders and subsequent to this, the December Agreement.

Rights and liabilities of parties pursuant to judgment and the 1 December 2009 Agreement

94 The higher remedy is contained within the default judgment entered 10 August 2009, and the Warrant issued on 6 October 2009 which was to be executed on or about 4 December 2009. Mr Wolfe and Ms Breasley are indebted to Permanent in the amount of $326,602.66 plus costs and interest. The 1 December 2009 Agreement was entered just prior to the execution of the Warrant. The question here is how does this alter the position of the parties.

95 Pursuant to the 1 December 2009 Agreement, an arrangement was entered into between Mr Wolfe and Permanent. The Agreement contained in the letter dated 1 December 2009 from Gadens states:

Our client will agree to stay the eviction conditional upon a bank cheque ... in the amount of $46,134.82. [46]

96 It then notes that sufficient funds should remain in the direct debit account so that all future payments are met.

97 The pivotal provision is contained on page 2 where it states:

Please note that all payments made will be accepted by our client without prejudice to its rights to rely on the existing Judgment and Warrant for Possession ... or your client defaults in any repayments from February 2010, then our client reserves its rights to proceed with further legal action, including obtaining a fresh eviction date for the Security Property without further notice.

98 The judgment debt of $326,602.66 plus costs and interest still stands. The Warrant still stands. Its enforcement has merely been "stayed". All that the Agreement has done is:

1. Stay the execution date of the Warrant; and
2. allow the debtor to make monthly payments, default of which will allow the creditor to enforce the Warrant and the judgment debt.

99 The Agreement or acceptance of moneys owing by Permanent did not constitute a waiver of its rights to rely upon the judgment debt or the Warrant.

100 Mr Wolfe has valiantly attempted to analyse the case by stepping past the judgment and Warrant. The brick wall, however, faced by Mr Wolfe is the judgment and Warrant. The effect of the judgment is that it created a new relationship, one of judgment debtor and creditor. The relationship of lender and borrower and/or mortgagor/mortgagee no longer exists.

6. Did the 1 December 2009 Agreement Fail for Want of Consideration Flowing to Permanent?

101 Paragraph 48 of Permanent's Defence pleads that the Agreement upon which Mr Wolfe relies is unenforceable and/or was not contractually binding as it lacked consideration. That is, the sums which Mr Wolfe agreed to pay to Permanent were already owed to Permanent pursuant to the judgment. Permanent submits that it received no consideration pursuant to the 1 December 2009 Agreement.

102 Merely promising, as consideration, to perform a duty already owed is not consideration. In Wigan v Edwards,[47] Mason J said:

The general rule is that a promise to perform an existing duty is no consideration ... The rule expresses the concept that the new promise, indistinguishable from the old, is an illusory consideration.

103 The issue is whether Mr Wolfe has given adequate or sufficient consideration. Put another way, what consideration has been given by Mr Wolfe, the judgment debtor, to Permanent, the judgment creditor, for Permanent's promise to stay enforcement of its legal right of execution of the judgment?

104 Mr Wolfe, under the 1 December 2009 Agreement, promised to pay arrears (including legal costs, interest and fees) and that he would continue to make monthly payments in the future. Permanent submits that it was to receive no consideration from Mr Wolfe beyond that which was owed under the judgment. Permanent submits that properly construed the 1 December 2009 Agreement constituted the grant of a voluntary indulgence by Permanent which is not contractually enforceable.[48]

105 Mr Wolfe asserts that Permanent has gained a "practical benefit" in that, Permanent was able to recover "substantial profits" that it would make from the remaining 25 years of the Mortgage,[49] including two months' additional payments which it otherwise would not have,[50] and the avoidance of the costs and risks associated with having to sell the Property (such as a potential claim for a breach of s 77 of the Transfer of Land Act 1958).[51]

106 As discussed at paragraphs 87 to 101, the Mortgage and loan no longer existed. The entirety of the parties' rights and obligations were contained in the judgments and 1 December 2009 Agreement. The Agreement contained no specific interest provision.

107 Mr Wolfe submits that the consideration he provided was that Permanent would be relieved of the need to enforce judgment and the Warrant.

108 As noted in Chesire and Fifoot's Law of Contract:[52]

... it has been settled for over 300 years that the courts will not enquire into the "adequacy of consideration". By this what is meant is that the Court will not seek to measure the comparative value of the defendant's promise and of the act or promise given by the plaintiff in exchange for it, nor will the Court denounce an agreement merely because it seems unfair. This aspect of the doctrine of consideration is labelled the "peppercorn principle" in that it is legally sufficient to agree, for example, to sell a valuable object to let commercial premises in exchange for a nominal consideration, such as a peppercorn. Nevertheless, the promise must have been procured by the offer of something in return capable of expression in terms of a value, however small. ..." But if there is some sort of exchange, the courts will not balance the one side against the other. The parties are presumed to be capable of appreciating their own interests in striking their own bargain (footnote omitted). In 1587 it was said that, "When a thing is to be done by the plaintiff, be it ever so small, this is sufficient consideration to ground an action" (footnote omitted) and this rejection of a quantitative test has been constantly reiterated. It is an axiomatic feature of the common law of contract that the parties are free to make their own bargain without interference from outside.[53]

Can a practical benefit constitute consideration?

109 The parties referred to the decision of Judd J in MP Investments Nominees Pty Ltd v Bank of Western Australia Ltd[54] and the concept of "practical benefit" and whether it could constitute consideration.

110 As discussed, merely promising, as consideration, to perform a duty already owed is not consideration.[55]

111 The specific application of this rule to debts due and payable is often referred to as the rule in Foaks v Beer. As summarised in Musumeci v Winadell P/L:[56]

Part payment of a debt or the promise thereof, does not afford consideration ... that proposition received the approval of the House of Lords in Foaks v Beer [1884] UKHL 1; (1884) 9 App Cas 605 and has not been overruled.

112 The rule in Foaks v Beer was accepted and applied by this Court in MP Investments Nominees Pty Ltd v Bank of Western Australia Ltd.[57] It should be noted that in SNL Group Pty Ltd v CMA Corporation Ltd [2011] NSWSC 464, the New South Wales Supreme Court refused to apply Foaks v Beer to an agreement which included, inter alia the reappropriation of the payment of a debt. This was because the Agreement dealt with many matters and in that sense provided fresh consideration. The case is distinguishable from the present facts.

113 However, there are circumstances in which the Agreement to perform a duty already owed will constitute consideration because "the promissor in fact obtains in practice a benefit or obviates a "disbenefit", from the promise or its performance."[58] This rule was acknowledged in Williams v Roffey Bros,[59] where the English Court of Appeal held that:

The present state of the law on this subject can be expressed in the following proposition:

(i) if A has entered into a contract with B to do work for, or to supply goods or services, to B in return for payment by B; and

(ii) at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or will be able to complete his side of the bargain; and

(iii) B thereupon promises A an additional payment in return for A's promise to perform his contractual obligations on time; and

(iv) as a result of giving his promise, B obtains in practice or benefit or obviates a disbenefit; and

(v) B's promise is not given as a result of economic duress or fraud on the part of A; then the benefit to B is capable of being consideration of B's promise so that the promise will be legally binding.

114 This proposition is extremely limited in scope; it is expressly restricted to contracts of employment for the supply of goods or services. The question is can the rule in Williams v Roffey Bros be extended to cover the repayment of debt. In Re Selectmove,[60] the English Court of Appeal declined to apply Williams v Roffey Bros to the payment of a debt, finding itself bound by Foakes v Beer.[61]

115 In Musumeci v Winnadell P/L,[62] Santow J addressed the illogical nature of permitting "practical benefit" to be relevant in other cases but not to a payment of a debt. His Honour cited dicta by Lord Blackburn in Foakes v Beer:[63]

Prompt payment of a part of their demand may be more beneficial to them than it would be to insist on their rights and enforce payment of the whole.

When a creditor and a debtor who are at arm's length reach agreement on the payment of a debt by instalments to accommodate the debtor, the creditor will no doubt always see a practical benefit to himself so doing.

117 Santow J applied Williams v Roffey Bros to an agreement to reduce the rent payable under a commercial lease, finding that "practical benefit" was the enhanced capacity for the lessor to maintain a full shopping centre with another competing tenant.[65] However, in recasting the conditions for the application of Williams v Roffey Bros, Santow J retained the first element:

If A has entered into a contract with B to do work for, or supply goods services to B.[66]

118 Indeed, Musumeci v Winnadell P/L is more in line with contracts for goods and services in the sense that the contract was executory on both sides. In Amos v Citibank,[67] the Queensland Court of Appeal appeared to restrict the application of Williams v Roffey to such contracts, at least distinguishing the case in question where a debtor intended for the creditor to accept a sum less than the amount that was due, in "full and final settlement". The Court refused to apply Williams v Roffey Bros to such a situation.

119 In MP Investments Nominees Pty Ltd v Bank of Western Australia Ltd,[68] Judd J held that the application of Williams v Roffey Bros remained a "question of principle" and declined to decide, finding that the plaintiffs had limited their case for consideration for a very narrow basis, the repayment of moneys already due and owing. Judd J did accept:

There are cases in which a benefit may be obvious even though there are existing contractual obligations and entitlements ... In the case of a banker and customer, circumstances may arise in which a bank may compromise its position in order to secure certainty of payment and avoid cost, inconvenience and perhaps loss associated with recovery action.[69]

120 The law as it currently stands in this jurisdiction is that there is no binding authority as to the application or nonapplication of Williams v Roffey Bros principles to the payment of debt. Accordingly, it is a question of first principle involving the requirement that there be sufficient consideration. I consider that there was sufficient consideration moving from Mr Wolfe to Permanent.

121 In Musumeci v Winnadell P/L, to "obtain in practice a benefit, or obviate a disbenefit",[70] was interpreted as requiring:

• that the promise of performance (already owed) was worth more than any likely remedy (taking into account the cost of enforcement action);[71] or

• that the non-performance of the original contract would have been worth more (to the "contract breaker') than performance, taking into account the likely liabilities as a result of breaking the contract.

122 Here, Mr Wolfe has characterised the practical benefit as the ability of Permanent to recover the "substantial profits" that it would make from the remaining approximate 25 years of the Mortgage;[72] including two months' additional payment which it otherwise would not have;[73] and the avoidance of the costs and risks associated with having to sell the Property.[74]

123 However, as already discussed, the Mortgage and loan no longer existed. The entirety of the parties' rights and obligations were contained in the judgments and the 1 December 2009 Agreement. The Agreement contained no specific provision to charge interest. Permanent may have perceived some possible benefit to itself: perhaps, if repayments were consistently made, Permanent had intended to refinance and make profit by way of interest; or perhaps Permanent intended on claiming interest on the judgment debt. However, Williams v Roffey Bros has never been applied to a case of possible, undefined future benefits. In MP Investments Nominees, Judd J refused to apply Williams v Roffey Bros because a plaintiff's claim that the consideration was made by payments of debts due and owing. This, in itself, is not a practical benefit, especially where the creditor has lost the present legal right to enforce payment of the entire debt.

124 In Musumeci v Winnadell,[75] Santow J stated:

The Court should be alert to distinguish promises intended by the terms to be no more than temporary or truly ex gratia, concessions, for example FI [sic] expressly limited to a period of difficult circumstances for performance by the other party, which may not be permanent.

125 On the one hand, the 1 December 2009 Agreement may be characterised as an ex gratia concession and, if payments were made, perhaps Permanent intended to make some profit from Mr Wolfe's repayments. Permanent saw no harm in extending to Mr Wolfe a "second chance". That this was Permanent's position may be reinforced by the fact, upon default, that Permanent so quickly proceeded to execute the Warrant despite being aware of Mr Wolfe's capacity to pay.

126 Furthermore, there was no "disbenefit" to Permanent in relying on its rights under the judgment. Permanent submitted that "there was never any doubt that Permanent would get its money". All of the evidence is to the effect that "there is more than adequate equity in the Property to secure its position. ... As a professional lender, selling property is part of its business, not an inconvenience to be avoided."[76]

127 I consider, given the nature of the 1 December 2009 Agreement, the benefit to Permanent was avoiding the inconvenience of having to sell the Property. Even though I accept that as a professional lender, Permanent may have to sell property as part of its business, that does not mean that the avoidance of such a step does not amount to some, albeit small, consideration.[77] Provided Mr Wolfe met his payments on time, Permanent would not have to enforce the judgment and the Warrant.

7. What Were the Terms of the 1 December 2009 Agreement?

128 As discussed, I consider the Agreement was embodied in the 1 December 2009 letter of which Mr Wolfe had knowledge on or about 1 December 2009.

129 I have already set out (paragraph 79 above, Statement of Claim, paragraphs 15 (a)-(e)) what Mr Wolfe alleges were the implied terms of the 1 December 2009 Agreement. The particulars to paragraph 15(a) to (e) are:[78]

1. reasonable and equitable; 2. necessary to give business efficacy to the Agreement;

1. so obvious that they goe [sic] without saying;

1. capable of clear expression; 2. not contradictory to any express terms of the Agreement,

1. implied as necessary for the reasonable or effective operation of the Agreement in the circumstances of the case;

1. implied by law, including, inter alia, through section 80 of the Consumer Credit Code.

Can the terms be implied at law into the 1 December 2009 agreement?

130 In summary, at paragraphs 15(a), (b) and (c) of the Statement of Claim, Mr Wolfe asks the Court to imply a term that he should have been given some notice to rectify the default before Permanent could enforce its right to execute the Warrant.

131 In my view, this argument must fail given the finding that it was an express term of the Agreement that if Mr Wolfe did not pay any amount due and this therefore included the amount due on 26 February [or 6 February] 2010, Permanent would proceed with further legal action including obtaining a fresh eviction date for the Property pursuant to the Warrant.

132 Mr Wolfe contends that the test to be applied for implying terms into the Agreement is found in Byrne and Frew v Australian Airlines Ltd.[79] Mr Wolfe relies on the joint decision of McHugh and Gummow JJ[80] and contends that the well established criteria as set out in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council[81] is not the correct test as this is an informal agreement.

133 In this case, the parties specifically considered and agreed that there would be no notice obligation on Permanent in the event of default by Mr Wolfe. The actual express term of a contract must have primacy. The Court will only imply terms to the extent that are consistent with the actual term of the contract. The parties can therefore expressly agree to exclude terms that might otherwise be implied. Where the time of a performance has not been specified, a reasonable time is implied.

134 In the BP Refinery case, in the well known statement of the Privy Council, five conditions were specified which must be satisfied before a court may imply a term in a contract which the parties had not thought fit to express:[82]

(2) the term must be necessary to give business efficacy to the contract;

(3) the term must be so obvious that "it goes without saying";

135 In the decision of McHugh and Gummow JJ in Byrne they stated:[83]

In BP itself and in other cases such as Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd, Codelfa Construction Pty Ltd v State Rail Authority of NSW and Adelaide Corp v Jennings Industries Ltd, the question was whether a term should be implied in a formal written contract which was complete upon its face.

That is not the present case. We have referred to the exiguous nature of the evidence as to the form taken by, and the express terms of, the contract of employment between the respondent and the appellants. There are two consequences.

First, this species of implication is concerned with the circumstances of the particular case. The primary judge and Black CJ and Gray J in the Full Court referred to the need to prove facts leading to the implication of a term of this nature. Gray J said:

[T]his Full Court does not know what all of the express terms of the contracts were. It does not know whether they were adequate to make the contracts of employment efficacious or whether any of them would contradict the proposed implied term. An examination of the facts surrounding the creation of each contract of employment might lead to a different result for one appellant from the other.

Secondly, where the contract is not in writing and is oral or partly oral or it appears that the parties themselves did not reduce their agreement to a complete written form, caution is required against an automatic or rigid application of the cumulative criteria identified in BP. We should proceed on the footing that the present case is to be approached in this way.

In such situations, the first task is to consider the evidence and find the relevant express terms. Some terms may be inferred from the evidence of a course of dealing between the parties. It may be apparent that the parties have not spelled out all the terms of their contract, but have left some or most of them to be inferred or implied. Some terms may be implied by established custom or usage, as described above. Other terms may satisfy the criterion of being so obvious that they go without saying, in the sense that if the subject had been raised the parties to the contract would have replied "of course". If the contract has not been reduced to complete written form, the question is whether the implication of the particular term is necessary for the reasonable or effective operation of the contract in the circumstances of the case; only where this can be seen to be true will the term be implied. (footnotes omitted)

136 In order to determine whether the terms should be implied, it is necessary to analyse the Agreement struck on 1 December 2009.

137 The Agreement was not a loan agreement nor was it a fresh mortgage agreement between Mr Wolfe and Permanent. It was an agreement that Permanent would not exercise its rights against Mr Wolfe which it had by virtue of the judgment obtained from this Court, provided Mr Wolfe paid the arrears and legal costs and implicitly met the repayment requirements which had existed under the Loan Agreement and Mortgage. It is true that the mechanics of repayments and the obligations each party had to one another in relation to the use and alterations to the Property were not expressly stated in the 1 December 2009 Agreement. I accept and it was conceded by Permanent that many of the day to day mechanics of the Agreement were to be identical to what was contained in the original Loan Agreement and Mortgage. However, there was an express term considered in the 1 December 2009 Agreement about what would occur in the event that any default in payment occurred by Mr Wolfe. The Loan Agreement and Mortgage provided no more than a point of reference for the mechanics of 1 December 2009 Agreement.

138 Mr Wolfe attempts to restore all rights and obligations that existed under the Mortgage in the 1 December 2009 Agreement. The problem for Mr Wolfe is that there was a fundamental legal phenomenon which occurred when Permanent obtained judgment against him and Ms Breasley, which finally determined the parties' rights under the Mortgage and Loan Agreement. The 1 December 2009 Agreement has the effect of establishing a new set of rights and obligations between Mr Wolfe and Permanent. It would be a legal fallacy to characterise the 1 December 2009 Agreement as restoring the pre-judgment arrangements and putting Mr Wolfe in the shoes of a new mortgagor or debtor with the rights of the parties governed by the pre-existing agreement.

139 The 1 December 2009 Agreement is an independent source of contractual rights and obligations. There was no express agreement bringing back into existence the rights and obligations under the Loan Agreement and Mortgage. In fact, an express term of the 1 December 2009 Agreement was that Permanent reserved its rights under the judgment and confirms that the parties had a clear intention not to bring back into existence the Mortgage or Loan Agreement.

140 In conclusion, I do not accept that it was an implied term of the Agreement that it would be governed by the MCP or that the notice required under the MCP should be given. It is not necessary for the effective operation of the Agreement that such terms be implied. Even if there are terms, which I will refer to as mechanical terms, which could be implied, the default and notice terms were expressly stated and contradict the terms Mr Wolfe seeks to have implied in the 1 December 2009 Agreement.

Did Permanent breach the implied terms in paragraphs 15(d) and (e) of the second further amended statement of claim?

141 Permanent concedes that the terms set out in paragraphs 15(d) and (e) of the Statement of Claim might be implied into the Agreement. That is:

(1) Permanent would do all things necessary to enable Mr Wolfe to have the benefit of the Agreement; and

(2) Permanent would not in any way prevent Mr Wolfe from performing the Agreement.

142 Mr Wolfe alleges Permanent breached the implied terms pleaded at paragraphs 15(d) and (e)[84] because Permanent did not comply with the MCP and because of its conduct in relation to the form. That is, that between 8 February 2010 and 26 February 2010 Permanent failed to notify Mr Wolfe or make reasonable attempts to notify him that he had incorrectly completed the form which would result in the direct debit not being set up and the first payment not being processed.[85] This in turn led to a default[86] and resulted in Mr Wolfe being evicted on 22 April 2010 due to his failure to make the first repayment under the Agreement when it fell due.

143 The duty of co-operation is usually defined in the Butt formula, endorsed by the High Court on numerous occasions.[87] The Butt formula was endorsed by the High Court in Secured Income Real Estate (Australia) v St Martins Investments Pty Ltd.[88]

144 The duty to co-operate, though a broadly stated principle, has limits. The duty to co-operate requires performance only of acts which are necessary to preserve the benefit of the contract, not the benefit of the parties.[89] The duty has been held to impose an obligation not to do anything that would impede a counter party from gaining benefit of the contract. However, as Gyles J said in Council of the City of Sydney v Goldspar Australia Ltd:[90]

The duty of cooperation does not extend to being nice ...

145 In W L Marshall and Another v The Colonial Bank of Australasia[91] the High Court expressed the obligation as follows:

Now, all contractual relations impose upon the parties a mutual obligation that neither shall do anything which is calculated to hamper the other in the performance of the contract on [his] or [her] part.

This rule was recently expressed by Vaughan-Williams LJ as follows:

In this contract, as in every other, there is an implied contract for each party performing the contract that he will not do anything to prevent the other party from performing the contract ... I agree that generally such a term is by law imported into every contract.

146 The 1 December 2009 Agreement between Mr Wolfe and Permanent was entered into after Mr Wolfe and Ms Breasley had defaulted under the original Loan Agreement and Mortgage. The default culminated in Permanent issuing proceedings in this Court and obtaining judgment against them. The 1 December 2009 Agreement required Mr Wolfe to make payments and failing to do so, Permanent could and did exercise its rights under the judgment and Warrant.

147 The evidence is that Mr Wolfe knew of his obligations to ensure payments were made. He transferred just in excess of $10,000 into an account from which the monthly payments were to be directly debited in Permanent's favour. This amount exceeded the amount Mr Wolfe was required to pay in his first repayment in February 2010. Permanent provided Mr Wolfe with the necessary form. At the top of each page of the form was a 1300 number that Mr Wolfe could call if he had any difficulties with the form.

148 Mr Wolfe said that he was not really good at filling out forms[92] and that he obviously misread the form in relation to the requirement that both account holders had to sign it. Mr Wolfe agreed that there was nothing which Permanent did that caused or contributed to him misreading the form.[93] Nor did Permanent give any advice to Mr Wolfe about completing the form. Mr Wolfe did not check on 26 February 2010 when the payment was due or any time prior to being notified about the default to see whether the moneys had been removed from the account by Permanent.

149 Mr Wolfe completed and returned the form to Permanent which was received by Permanent prior to 14 December 2009.[94] On 14 December 2009 the Mortgage manager for Permanent attempted to call Ms Breasley and Mr Wolfe by phone to inform them of the issues with the form. However, the telephone numbers on the file were disconnected.[95]

150 Mr Wolfe submits that in all his dealings with Ms Grech he always provided his mobile number and that Permanent at least had that information. He further submits, Permanent had from 14 December 2009 when it received the form until 2 March 2010, when Gadens wrote to Mr Erlichster advising of the default and of the impending fresh eviction, to contact him and this was not done.

151 The difficulty for Mr Wolfe is that he wants the Court to impose a positive duty on Permanent in relation to the form. It was not Permanent's obligation to complete the form or assist Mr Wolfe to complete the form. The duty to co-operate does not extend to being "nice". Mr Wolfe had access to legal advice and a number he could call if he was had difficulties completing the form. Mr Wolfe knew that filling in forms was not his strong point and that in the past Ms Breasley had completed forms for him. Permanent was not at any stage aware that Mr Wolfe had difficulties completing forms or that he may have needed some assistance. Mr Wolfe did not check that the payments had been made. Mr Wolfe had sufficient commercial acumen to obtain help in the past when he required it. Mr Wolfe sought the assistance of his solicitor, Mr Erlichster, and from "Larry" at Aussie Home Loans to draft the 27 November 2009 letter to Permanent when negotiating the Agreement.

152 Finally, Permanent attempted to notify Mr Wolfe and Ms Breasley about the form on 14 December 2009. The phone number was disconnected. True it is that Permanent did not go a step further and try to contact Ms Breasley or Mr Wolfe on any mobile number or write to Mr Erlichster about the form prior to the default. It is regrettable that this did not occur, however I do not consider it amounts to a breach of the implied terms as pleaded at paragraphs 15(e) and (d) of the Statement of Claim.

8. Does the Credit Code Apply to the 1 December 2009 Agreement?

153 It is pleaded that the terms set out in paragraphs 15(a) to (e) inclusive are implied by law, "including, inter alia, through s 80 of the Consumer Credit Code".

Applicability of the National Credit Code 2010.

154 The Code was adopted in Victoria by the Consumer Credit (Victoria) Act 1995 (Vic). Section 1 states the purpose of that Act "is to regulate the provision of credit." The Code is an appendix to the Consumer Credit (Queensland) Act 1994 (Qld). The Second Reading Speech emphasised the legislation was intended to "regulate by substance and not by form" and to apply to "all consumer credit lending" and "all forms of consumer credit".[96] In giving that speech to the Queensland Parliament, the late Honourable T.J. Burns made it clear that the legislation was intended to have a broad scope. From the time of the earliest Reports,[97] this policy of regulating by substance and not by form, of avoiding artificial distinctions and of writing legislation in comprehensive terms has been a consistent scene in modern consumer credit law.

155 As Kirby J said in Australian Finance Direct Ltd v Director of Consumer Affairs Victoria:

During the 20th Century, developments in the variety and significance of consumer credit contracts led to instances of abuse, obfuscation and unfairness, demands for amendments, public inquiries and reforming legislation.[98]

156 Having regard to what the High Court said in CIC Insurance Ltd v Bankstown Football Club Ltd,[99] about "the modern approach to statutory interpretation", the object and purpose of the Code are relevant to interpreting "credit" in s 4(1). That object and purpose form part of the context in which the words of the definition must be interpreted in the first instance. This is reinforced by cl 7 of Schedule 2 which states:

The interpretation that will best achieve the purpose or object of this Code is to be preferred to any other interpretation.

157 The history of the legislation also forms part of the context; cl 8 of Schedule 2 expressly allows a court to refer to the extrinsic materials referred to in subparagraph (1) when interpreting a provision as mentioned in subparagraph (2).

158 The critical presumption provided for in s 11 of the Code is in favour of the application of its provision.

In any proceedings (whether brought under the Code or not) in which a party claims that a credit contract, mortgage or guarantee is one to which the Code applies, it is presumed to be such unless the contrary is established.

160 The expression of a contrary intention must be "plainly and unambiguously expressed".[100] The clear purpose of the Code is consumer protection and as such, the legislation should be strictly construed in favour of the consumer.

161 Notwithstanding that Permanent noted its express intent that all payments will be accepted subject to their right to rely on existing judgment and warrant, and that the Agreement has all the hallmarks of a forbearance agreement, I consider for the reasons set out below, the Agreement to accept payment of the judgment debt by instalments, is caught by the provisions of the Code.

What are the criteria for the application of the Code?

Provision of credit to which this Code applies:

(1) This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of pre-contractual obligations) is proposed to be entered into -

(a) the debtor is a natural person ordinarily resident in this jurisdiction or a strata corporation formed in this jurisdiction; and

(b) the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes; and

(c) a charge is or may be made for providing the credit; and

(d) the credit provider provides the credit in the course of a business of providing credit or as part of or incidentally to any other business of the credit provider.

163 "Credit provider" is defined as follows;[101] though it seems that s 6(1)(d) is more definitive:

"Credit provider" means a person that provides credit, and includes a prospective credit provider.

164 Essentially, the contract must involve a provision of credit, in order to evoke the protections afforded by the Code. Section 4 of the Code governs when credit is provided:

For the purposes of this Code, credit is provided if under a contract -

(a) payment of a debt owed by one person (the debtor) to another (the credit provider) is deferred; or

(b) one person (the debtor) incurs a deferred debt to another (the credit provider).

(5) For the purposes of this Code, a credit contract 'is a contract under which credit is or may be provided, being the provision of credit to which this Code applies.

166 It is not in dispute that Mr Wolfe satisfies the requirement of s 6(1)(a) of the Code.

167 Section 6(1)(b) of the Code requires the credit to be provided or intended to be provided wholly or predominantly for personal, domestic or household purposes.

169 A judgment debt is a personal debt and a loan provided for the purposes of paying a judgment debt is classed as for personal use.[102] Thus, no question arises as to the purpose of the loan.

170 Section 6(1)(c) provides provision of credit to which the Code applies involves "a charge is or may be made for providing the credit". As Permanent would be able to claim interest on the judgment debt,[103] it may be that a "charge" may be made for providing the credit.

171 Permanent could only be described as being in the business of providing credit. Even if the 1 December 2009 Agreement is seen as being "incidental" to the provision of credit it remains caught by s 6(1)(d).

172 Pursuant to the legislation, credit is a contractual deferment of payment of a debt owed (s 4(1)(a)) or the incurring of deferred debt (s 4(1)(b)).

173 The definition of "credit" was adapted from the United States Truth in Lending legislation discussed by Naeve JA in Australian Finance Direct Ltd v Director of Consumer Affairs Victoria.[104] The definition used in the United States legislation:

The term 'credit' means the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment.

174 Looking at paragraph (a) of section 4, deferring the payment of a debt owed covers at a bear minimum the case of forbearance. As Bell J said in Geeveekay Pty Ltd and ors v Director of Consumer Affairs Victoria in relation to s 4(1)(a) of the Code, deferring the payment of a debt owed covers at least the case of forbearance. It may not cover much else, but that will be revealed through the decided cases over time:[105]

What is deferred is the type of the payment. Such a transaction is not a loan as such, and creates no new amount of debt, because the debt is already owed. ... The deferring of the payment of an existing debt, if contractual, comes within paragraph (a) ...

175 Accordingly, the deferring of the payment of an existing debt, and if contractual, comes within paragraph 4(1)(a).

176 Pursuant to the 1 December 2009 Agreement, Permanent granted a stay on effecting the Warrant and gave in effect a forbearance on the judgment debt, so long as all "future repayments are maintained". Any forbearance from demanding the debt did not alter the character of the judgment debt.

177 The next issue is whether the Agreement constitutes a definite present obligation to pay an unavoidable and ascertainable amount in the future. Specifying in the present an obligation to pay that amount in future is what constitutes the "deferral".

178 For the Agreement to be regulated by the Code, first a debt needs to be formed and then deferred. This raises the following questions:

1. Is a judgment debt a debt under the Code?
2. Are the monthly payments to be classed as deferral of debt or is each instalment due at the time of payment?

179 The expression "debt" should be given its ordinary and natural meaning, that is, "a liability or obligation to pay or render something".[106]

180 Alternatively, it may be considered a liquidated sum of money presently due, owing and payable by the debtor to a creditor.[107] Taking a wider scope, a debt includes all sums which any person is legally liable to pay, whether such sums have become actually payable or not.[108] Whilst, obviously the term "due and payable" is most pertinent to dealings with s 459E of the Corporations Act 2001 (Cth), it is arguable that it has a place in statutory interpretation here. It is a personal debt that is currently due and owing by the parties. A judgment debt is one which Mr Wolfe is personally liable to pay and therefore is a debt.

181 The debt in this case is a judgment debt of $326,602.66 plus costs and interest.

182 A further issue is whether the debt, as a judgment debt, has any relation to the nature of the proceeding.

183 In Knowles v Victorian Mortgage Investments Ltd and anor,[109] this issue was raised in relation to a judgment debt arising out of County Court proceedings. By way of background, the plaintiff was approved for a loan, whilst never advanced, the defendant claimed the plaintiff was indebted to it in the sum of over $32,000 being the loan application fee and other associated costs. The plaintiff's intention was to use the loan to pay outstanding solicitor costs and also a judgment debt of the County Court. The defendant in this case attempted to argue that as the judgment debt in the County Court proceedings was commercial in nature, the proposed loan was intended to be used to satisfy a commercial debt (to the extent that the funds were to be used to pay his judgment debt).

184 Against this, the plaintiff submitted that the nature of the litigation was irrelevant because, regardless of the nature of the proceedings conducted, the judgment debt was one in which the plaintiff was personally liable to pay and is therefore a personal debt. In the opinion of Croft J,[110] the plaintiff's argument was correct and it is consistent with the maxim transit in rem judicatam, meaning "a judgment is regarded as of a higher nature than any cause of action".[111] Thus, the judgment debt creates a new and personal obligation regardless of how the subject matter of the underlying proceeding may be characterised. Classing it as a debt due and payable places it outside the scope of the Code as there has been no provision of credit - no provision of credit and no deferral of debt as such.

185 The issue in the present proceeding is the fact that the judgment debt has been deferred by the terms of the 1 December 2009 Agreement. According to the Oxford English Dictionary, the definition of "defer" is to "put off (an action or procedure, an event, matter or question ... ) to some later time; delay; postpone".[112]

186 In Geeveekay, Bell J held that s 4(1)(a) "catches payments of debts owed that, under a contract, are put off to a later time, postponed or delayed."[113] This is the effect of the 1 December 2009 Agreement.

187 Pursuant to s 4(1) the Code only covers credit provided "under a contract". Clause 1(1) of Schedule 1 of the Code defines "contract" to include "a series or combination of contracts or contracts and arrangements". Bell J stated:[114]

The plural here includes the singular.[115] A contract therefore includes a contract and arrangement. I have added the emphasis to highlight that an arrangement is included only if there is a contract to being with. By including arrangements that run with contracts, the Code is wider in this respect than was the Credit Act, which did not extend to a "separate ... arrangement".[116] But even under the Credit Act, a payment made under one contract (a mortgage) was regarded as made under another contract (a loan) if the link between the two made them mutually exclusive.

188 Given my findings that there was sufficient consideration moving from Mr Wolfe to Permanent, there is no issue as to the requirement that the credit is provided under a contract on the present facts. In this case, the "deferral of the payment of debt" was contained in the 1 December 2009 Agreement.

189 Permanent submits that there are strong policy reasons for construing the term "credit" in the Code such as to exclude its operation from agreements made in respect of judgment debts. The most profound is that if lenders are held to be bound by the Code when striking agreements of the type in issue in this case, they will be less willing to extend indulgences of the type Mr Wolfe received in this case. In addition to affecting recovery proceedings such as the one the subject of the judgment, such finding would affect cases in the bankruptcy context where similar indulgences are given to borrowers who are at risk of sequestration orders.

190 Permanent submits that if the Code is held to apply to judgment debts, lenders will have to comply with the precontractual disclosure requirements and, perhaps most important, with the obligation to issue further default (notice[s]) if a borrower fails to comply with the further arrangement. Were this to occur, it is submitted that it would have a detrimental effect on credit consumers who find themselves in financial difficulty.[117]

191 While there may be policy reasons why the 1 December 2009 Agreement should not be caught by the Code, this is a matter ultimately for Parliament. For the reasons set out, I consider the Agreement is caught by the Code.

192 In circumstances where I consider the 1 December 2009 Agreement is a "credit contract" under the Code, the legal question in this case thus turns on the meaning of "debt" in s 4(1)(a) of the Code.

193 By entering the 1 December 2009 Agreement, Permanent agreed to stay execution of the judgment debt (and warrant) on the basis that Mr Wolfe paid the judgment debt to Permanent and payment was deferred. In such circumstances, Permanent provided credit to Mr Wolfe and the 1 December 2009 Agreement as a credit contract.

194 The Code is national uniform legislation that regulates the provision of consumer credit. The legislation was intended to have a broad scope. As Bell J said in Geeveekay's case, "The provisions of the Code on the meaning of 'credit' prescribe the scope of the latest such 'reforming legislation' and should be interpreted in that light".[118]

Memorandum of Common Provisions ("MCP") AA547 - was it an implied term pursuant to s 80 of the Code and the 1 December 2009 agreement that it be governed by the MCP?

195 At paragraph 15(a) of the statement of claim, Mr Wolfe alleges that:

It was an implied term of the Agreement that the Agreement would be governed by the Memorandum of Common Provisions.

196 The particulars to paragraph 15(a) state that it was implied by law, including, inter alia through s 80 of the Consumer Credit Code.

197 "Mortgage debt" is defined in cl 1.1 of the MCP and encompasses "all money which anyone or more of (you) (you defined as a mortgagor):

(a) owe us now;

(b) owe us at any time in the future; or

(c) may come to owe if a particular event occurs or if a particular circumstance is the case."

198 This MCP incorporates certain terms into the Mortgage that secured the money to be repaid under the credit contract covered by the Code. The provisions pursuant to cl 15.1 dictate that where there is a default under the Mortgage the lender "may give you a notice" with subsection (b) allowing the period to remedy default "not less than 30 days". Further, cl 22.1 requires the notice provisions of the Code be complied with before the Mortgage can be enforced.

199 Whether one defines the judgment debt as such or as what could be termed the "Mortgage debt" pursuant to the MCP is irrelevant either way. The Mortgage (and the incorporated provisions of the MCP) and other associated obligations have now ended in that they have been subsumed into the judgment. It matters not whether the lender has referred to the "Mortgage" in the 1 December 2009 Agreement.

200 The 1 December 2009 Agreement related to an agreement to stay the execution of the Warrant. The rights and obligations between the parties emanated from the judgment debt and default judgment for possession. The judgment debt or mortgage debt (according to definition within MCP) are in no way tied to any obligation under the MCP. Furthermore, it is nonsensical for the MCP to have any application as the MCP applied only to the mortgagor and the lender. In this instance the mortgagor was Mrs Breasley, not Mr Wolfe. The plaintiff's submissions at paragraph 24 refer to McMillan v Dunoon and anor[119] ("McMillan") regarding the notion that merger does not apply where there is an independent covenant or collateral security. This case can be fundamentally distinguished on its facts. Gillard J regarded the judgment debt (originating from a loan contract) as distinct from the remedy available by way of enforcing an equitable charge. Those are two independent and separate entities that cannot merge and the rights are distinct. Here, we have a judgment debt and judgment for possession. The rights under the MCP are noted as being incorporated into the Mortgage which is at an end, subsumed into default judgment. The 1 December 2009 Agreement was a last chance for the debtor to show good faith and that he could manage regular repayments. If he could, one surmises that within a few months he would have been offered a new loan by Permanent and possibly new security. The MCP is not an independent covenant, nor an ancillary security of a sort. It is attached to a mortgage which is at an end, merged into a judgment. This case is not dealing with a mere judgment debt like McMillan whereupon he could invoke separately his right under equity to enforce the charge over the Property. The judgment debt in that case did not merge any rights under equity.

Section 80 of the Code - Requirements to be met before the credit provider can enforce the credit contract against the defaulting debtor

201 Even if the 1 December 2009 Agreement is governed by the Code, the plaintiff needs to establish that there has been a failure to serve a s 80 notice and that such a failure invalidates enforcement of Permanent's credit contract/mortgage.

Enforcement of mortgage

A credit provider must not begin enforcement proceedings against a mortgagor to recover payment of money due or take possession of, sell, appoint a receiver for ... to property subject to a mortgage, unless the mortgagor is in default under the mortgage and -

(a) the credit provider has given the mortgagor a default notice, complies with this section, allowing the mortgagor a period of at least 30 days from the date of the notice to remedy the default; and ...

203 Section 80(2)(a) deals with enforcement proceedings prejudgment debt and as such is inapplicable in this matter. The provision states "the mortgagor is in default under the mortgage". Here there was a default judgment and consistent with merger, there is merely a credit contract with the Mortgage and default under the Mortgage now subsumed into default judgment.

204 Even if I was to find that s 80 was applicable to this case, consistent with Davies J in the New South Wales Supreme Court case of Bank of Queensland v Dutta ("Dutta"):[120]

All that s 80 does is to provide a penalty for commencing the proceedings without serving a notice. It contains no express provision that the credit contract or mortgage is unenforceable.

A credit contract, mortgage or guarantee or any other contract is not illegal, void or unenforceable because of a contravention of this Code unless this Code contains an express provision to that effect.

206 In Dutta, the Court accepted that as a matter of construction s 80 merely imposes a procedural condition upon the exercise of the jurisdiction to commence proceedings. Davies J noted that if at an early stage of proceedings an application was made to strike out the proceedings for failure to serve a s 80 notice then proceedings may be dismissed. His Honour went on to say "... even in that case if the real issue was whether or not the Code applied that would scarcely be an appropriate use of the summary dismissal provisions of the Rules".[121] In Dutta's case, it was found that there was at worst an irregularity involved in the commencement of proceedings.

207 Davies J, at paragraph 56, went on to quote from Woods v Bate:[122]

1. In Woods v Bate (1986) 7 NSWLR 560 McHugh JA (as he then was) said (at 567):

In recent times the courts have shown great reluctance to invalidate an act done pursuant to a statutory provision because of the failure to comply with an antecedent condition: ... Speaking generally, I think that, at the present time, the proper approach is to regard a statutory requirement, expressed in positive language, as directory unless the purpose of the provision can only be achieved by invalidating the result of any departure from it, irrespective of the circumstances or resulting injustice: ... (authorities omitted)

208 Pursuant to s 80(4)(c), Davies J held that this subsection "must allow the court to authorise a credit provider nunc pro tunc". This approach was followed by Whelan J in Silberman v Citigroup,[123] who noted that whilst there is some conflicting authority on this subject,[124] there is "now clear line of authority in New South Wales and in South Australia" that accepts the analysis in Dutta.[125] Young JA in Monas v Perpetual Trustees Victoria Ltd,[126] supported the decision and reasoning of Davies J in Dutta and found that noncompliance with s 80 does not mean that there is a failure of a condition precedent to the litigation and that they therefore must be dismissed.[127]

209 In the present case, Permanent has clearly stated that it was to enforce its position without further notice on default by Mr Wolfe. The failure to serve the Section 80 notice resulted from Permanent's view that the Code did not apply to the stay of enforcement of the Warrant. The question to be asked is how disadvantaged was Mr Wolfe? Permanent already had default judgment enforceable against him.

210 Finally, it is worth considering what remedies would be available to Mr Wolfe in the event that there was an alleged breach of s 80.

211 Section 80 provides criminal sanction and s 114 allows the Court to order the credit provider to make restitution. If the 1 December 2009 Agreement were to be held subject to the Code, and if s 80 was found to apply to the enforcement of the credit contract, a breach of s 80 was at worst an irregularity. Section 80(4)(c) allows the Court to authorise the enforcement proceeding non pro tunc.

10. Did Permanent Act Contrary to ss 76 and 77 of the Transfer of Land Act 1958 (Vic)? ("TLA")

212 At paragraphs 39 and 40 of the Statement of Claim, Mr Wolfe alleges that the 1 December 2009 Agreement is governed by the Transfer of Land Act 1958 and relies on ss 76 and 78 to assert that Permanent was required to provide Mr Wolfe with further notice specifying the default under the 1 December 2009 Agreement.

213 This submission is misconceived. Notices pursuant to ss 76 and 77 of the Transfer of Land Act are concerned with the mortgagee's power to sell mortgaged land. They need not be served as a precondition to the taking of possession, which was the matter in issue between Mr Wolfe and Permanent, given Mr Wolfe is not a mortgagor. The lender's entitlement to possession is governed by the terms of the Loan Agreement and Mortgage, as modified by the Code in a case of regulated agreement.

214 Sections 76 and 77 of the Transfer of Land Act only apply as between registered proprietor and registered mortgagee. Even then, the sections govern the power of sale, not the right to possession.

215 The evidence confirms that while Mr Wolfe signed the Mortgage instrument, he did not do so as mortgagor.[128] The fact that Mr Wolfe's name appears on the Mortgage, does not elevate him to the status of mortgagor for the purpose of the 1 December 2009 Agreement.

216 The registered proprietor of the Property, Ms Breasley, has surrendered it to Permanent.[129] Accordingly, ss 76 and 77 have no role to play in the legal relations between Permanent and Mr Wolfe.

11. By Accepting the Lump Sum Arrears Payment, Did Permanent Waive its Right to Rely upon the Judgment or Elect to Continue with the Mortgage?

217 In summary, Mr Wolfe submits that by letting him continue with the Loan Agreement and Mortgage, Permanent waived its right to rely upon the judgment.[130] Mr Wolfe submits that Permanent's conduct and acceptance of the lump sum arrears, legal costs and monthly repayments were such that Permanent should be construed as having continued to act as mortgagor/lender and that such a position is inconsistent with acting as a judgment creditor.

218 As previously discussed, I consider the 1 December 2009 Agreement is one in which Permanent agreed not to enforce its rights under the judgments. Permanent's rights under the Loan Agreement and Mortgage merged into the judgment. At no time was Mr Wolfe a mortgagor under the September 2000 Mortgage. Any rights or liabilities that existed in accordance with the Loan Agreement and/or Mortgage were subsumed or merged into the judgments.

219 The 1 December 2009 Agreement was based on Permanent's right to rely on the judgment if Mr Wolfe failed to meet any of the payments. Upon default on 26 February 2009, Permanent acted immediately and enforced its rights pursuant to the judgment and Warrant. I accept that if Permanent had failed to act immediately upon Mr Wolfe's default, only then could the principles of election or waiver come into play. However, that is not the case and as such I do not consider Permanent waived its right to rely on the judgment nor did it elect to continue with the Mortgage.

12. Are the Terms in the 1 December 2009 Agreement "Unjust"?

220 Mr Wolfe pleads at paragraphs 13 and 46 of the Statement of Claim that the terms of the 1 December 2009 Agreement are unjust.

221 The alleged unjust terms as set out in paragraph 13 of the Statement of Claim are that:

1. ...
   1. All payments received by the Defendant from the date of the Agreement were accepted without prejudice to the Defendant's right to rely upon the judgment and Warrant; and
   2. if the Plaintiff did not pay any further amount due under the Mortgage the Defendant will proceed without further legal action, including obtaining a fresh date for the Property to be sold pursuant to the Warrant.

1. Further and/or in the alternative, if the Court finds that the Agreement contained terms as outlined in paragraph 13 herein, the Plaintiff contends that such terms are unjust and should not be upheld by the Court and further and/or in the alternative, if the Court finds that the Agreement does not contain the implied terms as pleaded in paragraph 15 herein, the Plaintiff contends that such terms not being included in the Agreement is unjust and the transaction should be reopened by the Court and those terms as pleaded in paragraph 15 herein substituted.

Particulars

The Plaintiff refers to sections 70(1); 70(2)(a) to (e), (g) to (m) and (o); (5) and (7); and 71 of the Consumer Credit Code, sections 12BF, BG, BH, BK and GM of the Australian Securities and Investment Commission Act 2001; section 158 Fair Trading Act 1999 and the common law - and the circumstances outlined herein.

222 Sub-division BA of the Australian Securities and Investments Commission Act 2001 ("ASIC Act") (containing the provisions relied upon by the plaintiff at paragraph 46 of the Statement of Claim) commenced on 1 July 2010 and therefore does not apply to the 1 December 2009 Agreement.[131]

223 Under s 70(1), a debtor can ask the Court to "reopen" an unjust contract.[132] When considering whether a transaction is unjust, a court is to have regard to:

• all the circumstances of the case (s 70(2) of the Code).

224 In addition, the Court may have regard to the following as referred to in the Mr Wolfe's pleadings:

(a) the consequences of compliance, or noncompliance, with all or any of the above provisions of the contract ... ;

(b) the relative bargaining power of the parties ... ;

(c) ... its provisions were the subject of negotiation;

(d) whether or not it was reasonably practicable for the applicant to negotiate for the alteration of, or to reject, any of the provisions of the contract ... ;

(e) whether or not any of the provisions of the contract ... impose conditions that are unreasonably difficult to comply with, or not reasonably necessary for the protection of the legitimate interests of a party to the contract ... ;

(g) the form of the contract and the intelligibility of the language in which it is expressed;

(h) whether or not, and if so when, independent legal or other expert advice was obtained by the debtor ... ;

(i) the extent to which the provisions of the contract ... and their legal and practical effect were accurately explained to the debtor ... and whether or not the debtor ... understood those provisions and their effect;

(j) whether the credit provider executed or used unfair tactics on the debtor ... ;

(k) whether the credit provider took measures to ensure the debtor ... understood the nature and implications of the transaction and, if so, the adequacy of those measures;

(l) whether at the time of the contract ... that the debtor could not pay in accordance with its terms or not without substantial hardship;

(m) whether the terms of the transaction or the conduct of the credit provider is justified in the light of the risks undertaken by the credit provider;

(o) any other relevant factors.

225 Pursuant to s 70(7) of the Code, the term "unjust" encompasses "unconscionable, harsh or oppressive". At common law in the case of Maisano v Car and Home Finance Pty Ltd[133] ("the Maisano case") the concept was said to include both:

• substantive unconscionability (ie. the idea that terms of the document itself are unconscionable); and

• procedural unconscionability (ie. the idea that the conduct of the parties at or prior to the time of the transaction was entered into was unconscionable).

226 The contract is not unjust simply because it is not in the interests of the debtor to enter into the contract,[134] nor because the debtor is unable to pay the debts when called upon to do so, nor because enforcement of the contract will lead to the loss of the debtor's home.[135] Furthermore, a contract will not be unjust because it fails to comply with the relevant consumer legislation.[136] This will not, on its own, amount to unjust conduct.

227 The current matter does not involve a sales person exerting unfair pressure, undue influence or unfair tactics on Mr Wolfe.[137] There is a distinction between a contract which is "unfair" and one that is "unjust". As McHugh J in West v AGC Advances Ltd noted:[138]

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 meanings he has employed to make the contract.

228 While it is arguable that the terms were unfair for Mr Wolfe, I do not consider the alleged offending terms were unjust. As Deputy President McKenzie said in VCAT's case of Maisano v Car and Home Finance Pty Ltd (Credit) ("Maisano"):[139]

"Unjust" in such a context has a much broader meaning than unconscionable, this was found to be plain from the long list of factors to be taken into consideration in s 70(2).

229 Non-compliance with the provisions of the 1 December 2009 Agreement meant that Mr Wolfe lost possession of the family home. The consequences were severe. That said, Permanent was in a solid position to enforce judgment and execute the Warrant. The Warrant was scheduled to be executed by the Sheriff's Office on 4 December 2009, directing the Sheriff to enter the Property and cause Permanent to have possession of it. On 27 November 2009, Mr Wolfe for the first time contacted Gadens about staying the eviction and reaching an agreement which would enable Mr Wolfe to remain in the Property. It is in the background of defaulting under the original loan and Mortgage, the recovery proceedings issued by Permanent and the judgment given by this Court in favour of Permanent, that the terms of the 1 December 2009 Agreement must be considered. On the one hand it was "just" that Permanent provided Mr Wolfe with one last opportunity to remain in his home. However, as was ruled in Esanda Finance Corporation Ltd v Tong,[140] a contract is not unjust because enforcement of the contract will lead to the loss of the debtor's home.

230 It is obvious that in one sense there was inequality in bargaining power in so far as Permanent made an offer on certain terms which Mr Wolfe could either accept or reject. However for present purposes, the inequality in bargaining power was not taken advantage of by Permanent in any relevant sense. Mr Wolfe had experience in borrowing money and managed to enter discussions to stay the execution of the Warrant and find the requisite funds to pay two months in advance loan repayments, arrears and legal fees to date. There does not appear to be any relevant inequality in the bargaining position of Mr Wolfe and Permanent in terms of Mr Wolfe's ability to appreciate the risks involved and to protect his own interest thereto. Mr Wolfe had access to legal advice and when necessary sought legal advice.

231 As to whether the Agreement was the subject of negotiation, there was some opportunity for negotiation. Mr Wolfe prior to the 1 December 2009 Agreement spoke with Permanent's solicitors regarding his ability to meet the arrears and other associated costs payable to date. The Agreement was instigated by Mr Wolfe's offer. Mr Wolfe sought advice from "Larry" and Mr Erlichster in relation to the best way to negotiate with Permanent.

232 It was not necessarily open to Mr Wolfe to negotiate for the alteration to the terms. Mr Wolfe's focus was on making the required payments and keeping possession of his home. Once payment had been made to Permanent there was no opportunity for Mr Wolfe to alter the terms, Permanent was giving Mr Wolfe a final opportunity in an effort for Mr Wolfe to keep his home. On the facts, I do not consider there should there have been an opportunity for Mr Wolfe to alter the terms.

233 The conditions that the Agreement provided were not in substance unreasonably difficult to comply with, so long as Mr Wolfe made the regular payments by direct debit. The terms of the Agreement were reasonably necessary to protect Permanent's interests as it had default judgment and at Mr Wolfe's request stayed the execution of the Warrant. It was completely within Permanent's rights to ensure that any payments were accepted "without prejudice to the defendant's right to rely on the judgment and Warrant" and, further, that if "the plaintiff did not pay any further amount due under the Mortgage the defendant will proceed with further legal action". Permanent merely reserved the right to retain its position on further default of Mr Wolfe, it was a necessary business decision to rely on such rights considering Mr Wolfe's recent credit history.

234 The alleged contract is not a standard form document, nor does it contain difficult or complex terminology.

235 The legal advice issue is murky in that Mr Wolfe negotiated the 1 December 2009 Agreement with Permanent directly, yet Permanent faxed a copy to Mr Wolfe's solicitors (who had not been involved in the new Agreement's creation). That said, Mr Wolfe was savvy enough to have used legal services before and had the opportunity to engage a solicitor for this purpose. He chose not to. There is no evidence that Permanent engaged in conduct depriving Mr Wolfe of a real or informed choice to enter into the Agreement. Quite the contrary is the case here, in that the 1 December 2009 Agreement was forwarded to Mr Wolfe's solicitor by facsimile in addition to being communicated to Mr Wolfe directly.

236 Ms Grech made Mr Wolfe aware of the terms of the 1 December 2009 Agreement. This does not amount to an explanation by Permanent to Mr Wolfe. However, I consider that Mr Wolfe understood the actual words used by Ms Grech. He may not have considered the default and notice terms as important given he had the money to make the necessary payments of arrears and then future monthly payments. Mr Wolfe would not as at 1 December 2009 have thought he would be in default.

237 Mr Wolfe's own evidence is that he understood that the words used in the 1 December 2009 Agreement: " ... that means they [Permanent] come and take the Property if I defaulted on the loan".[141] Mr Wolfe subsequently gave evidence: "I didn't understand basically that if I paid all the arrears and paid all the legals and as far as I was concerned the loan would go back to normal, I didn't understand how if I defaulted again how I would be evicted".[142]

238 I do not accept that Mr Wolfe did not understand the terms of the 1 December 2009 Agreement. He may not have paid much attention to the terms given his main concern was raising the monies to pay the arrears and future payments. There is no substantive evidence that Mr Wolfe did not understand the effect of the transaction. It was a relatively uncomplicated situation. If future payments were made, Permanent would not enforce its Warrant.

239 On the basis of the evidence before the Court, I do not consider that there was any conduct by Permanent which could amount to unfair tactics. The Agreement was sent to Mr Wolfe's solicitor by facsimile in addition to a facsimile number provided by Mr Wolfe.

240 Permanent enforced its position immediately upon default. It did so even though there were sufficient funds in Mr Wolfe's account to cover the repayment. Permanent's decision to enforce its position immediately upon default is consistent with the terms as set out in the 1 December 2009 Agreement.

241 Mr Wolfe was aware that default judgment had been entered and that the Warrant was to be stayed subject to his payment of future repayments. Other than Ms Grech reading the terms of the 1 December 2009 Agreement and sending the Agreement to Mr Erlichster, Permanent did not take steps to ensure Mr Wolfe understood the implications of nonpayment.

242 That said, there was undoubtedly only one consequence of Mr Wolfe's failure to pay, the eviction from the Property pursuant to Permanent's legal rights. The evidence is that Mr Wolfe knew that failure to comply with the terms of the 1 December 2009 agreement would have the severe consequence for Mr Wolfe, that is the loss of the family home.

243 Permanent took no active enquiries to ensure that Mr Wolfe could pay in accordance with the terms without hardship. However, Mr Wolfe had been under a similar agreement previously (the original Loan Agreement) and understood the impact of the repayment rate.

244 Further, the letter Mr Wolfe caused to be sent to Ms Grech on 27 November 2009 said:

I advise I have obtained funding to make payment to Permanent Custodians Ltd in the amount equal to:

1. total current arrears.

2. total current legal costs.

3. the equivalent of twelve (12) months' loan repayments in advance.

245 Mr Wolfe's evidence is that this letter was drafted at the office of Aussie Home Loans with the assistance of "Larry". The letter clearly represents that not only did Mr Wolfe have the capacity to pay the arrears and legal costs consistent with the terms of the 1 December 2009 Agreement, but also the equivalent of twelve months loan repayments in advance. This was over and above what was required of Mr Wolfe under the 1 December 2009 Agreement, which only required two months payments in advance sufficient funds in his Account so that future repayments were maintained.

246 Considering Mr Wolfe's credit history, Permanent arguably has issued terms on balance with the risk of Mr Wolfe defaulting and the right to possession. Permanent had good cause to approach the Agreement and its terms with caution. Permanent was approximately one week from evicting Mr Wolfe, when Mr Wolfe commenced the negotiations. The effect of the 1 December 2009 Agreement, was to stay execution of the judgment and Warrant. In such circumstances while the default and notice provisions are onerous, they are not unjust.

247 Just because a transaction exhibits one of the above factors does not render the transaction unjust.[143]

248 Mr Wolfe, while not necessarily a sophisticated businessman, was nonetheless experienced in borrowing and able to negotiate a stay on the Warrant. Mr Wolfe had previously enlisted the services of a solicitor, but for whatever reason had chosen not to seek independent legal advice on this occasion, he was given at least an opportunity to remain in the family home. Permanent did not engage in unfair tactics or induce Mr Wolfe to enter into the Agreement, nor had it instigated the negotiations that led to the Agreement and nor had it done anything but retain the rights it currently had according to the law. However unfair this may be, it does in any way equate to being unjust. Mr Wolfe could reasonably protect his own interests.

249 There is a strong public interest in the enforcement of contractual obligations freely entered into. This was a last ditch effort by Mr Wolfe to maintain possession of his home and enter an agreement with Permanent on very strict terms. Public interest dictates that both procedurally and substantively the Agreement should not be held to be unjust or to contain unjust terms. In doing so could lead to lenders in the future not providing their debtors with "last chances". The overall ripple effect on the community would be considerable. As Patton AJ said in Permanent Mortgages Pty v Michael Robert Cook and Karen Cook ("Cook"):[144]

When Parliament adopts so general, and inherently variable, a standard as that of "justness" Parliament intends the courts to imply contemporary community standards about what is just.

250 Mr Wolfe's situation is not such that it would be in the public interest to find the December Agreement is "unjust". Rather, as Gleeson CJ said in Baltic Shipping Co v Dillion:[145]

The general police of the law is that people should honour their contracts. That policy forms part of our idea of what is just.

251 It is necessary for the Court to look at the circumstances relating to the credit contract at the time it was entered into. Here, we have Permanent in a position where it is able to execute the Warrant and recover the judgment at the time the 1 December 2009 Agreement was entered into. Yet Permanent gave Mr Wolfe a "last chance" and now it is in the unenviable position of refuting the alleged unjustness of the Agreement.

252 I do not consider that at the time the 1 December 2009 Agreement was entered into it was unjust.

Fair Trading Act 1999 (Vic) s 158 - are the terms set out in the 1 December 2009 Agreement unjust?

253 Part 2B of the Fair Trading Act 1999 (Vic) ("FTA") was inserted by the Fair Trading (Amendment) Act 2003 (Vic) which provides that unfair terms in consumer contracts are void. This part largely applies to agreements as defined in s 3 as follows:

'Consumer contract' means an agreement, whether or not in writing or whether of specific or general use, to supply goods or services of a kind ordinarily acquired for personal domestic or household use or consumption, for the purposes of the ordinary personal, domestic use or consumption of those goods or services.

A term in a consumer contract is to be regarded as unfair if, contrary to the requirements of good faith and in all the circumstances, it causes a significant imbalance in the parties' rights and obligations arising under the contract to the detriment of the consumer.

255 Section 32X provides a list of matters that the Court or Tribunal can take into account in determining whether the consumer contract is unfair. These can be broadly divided into those matters where the term has given rights to the supplier but not to the consumer (such as penalising the consumer for breach but not the supplier; allowing a supplier to unilaterally terminate; allowing a supplier to unilaterally vary) and those items where the consumer is directly limited (such as in the right to sue; limiting the evidence that can be led; or imposing the evidential burden of the consumer). Despite the apparent comprehensiveness of these two sections, the fundamental test is essentially in two parts:

(i) is the term contrary to good faith?

(ii) does it result in a significant imbalance in the parties' rights and obligations?

256 Section 32Y provides that an unfair term in consumer contract is void. Additionally, s 32Z imposes pecuniary penalties upon a supplier when a standard form contract (defined in s 32U as a consumer contract that has been drawn up for general use in a particular industry, whether or not the contract differs from other contracts used in that industry) contains prescribed unfair terms. It illustrates a paradigm shift in moving from a scenario where it is only unfairness in the process of contract formation that can be examined for the question of substantive unfairness of the particular provisions within the contract itself.

257 The legislation imposes a positive obligation on suppliers to ensure that contracts are fair.

Are the terms of the 1 December 2009 Agreement contrary to good faith and if so do they result in a significant imbalance in the parties' rights and obligations?

258 Terms must be accessible to the consumer and clearly expressed so that the consumer can both access the terms and have reasonable opportunity to understand them.[146] On the facts, Mr Wolfe was given notice of the unusual terms. In this instance, the unusual terms would be the ability of Permanent to enforce the Warrant upon default without any provision of notice.

259 There should be no unfair surprise to Mr Wolfe. Director of Consumer Affairs Victoria v Train Station Health Clubs Pty Ltd (Civil Claims),[147] is a case which considered cl 11 of a gymnasium membership which stated:

Change of location of a club within 12 kilometres, or change of the name of a club, or change of the name of the operator, or change of ownership of the operator, or change of ownership of a club, does not absolve the customer, in any way at all, from honouring their terms of this contract.

260 Harbinson J held that the clause was unfair, referring to the English authority of Director General of Fair Trading Ltd v First National Bank[148] ("National Bank") and the principle of "fair and open dealing" discussed therein. Harbinson J found that cl 11 was:[149]

[A] term which in my view would surprise consumers, it is one which they would not expect. However, I can envisage that such a term might be perfectly fair if it was brought to a consumer's attention prior to signing of a contract.

261 Permanent drew Mr Wolfe's attention to the unusual clause and given the circumstances of the stay, it is not unexpected that the Agreement would contain such a term.

262 When looking to the issue of imbalance, the Court must enquire into and assess the likely effect of the term and the respective rights and obligations of the parties, to determine if a provision is weighted in favour of a party attempting to rely on the terms.[150] When considering the magnitude of Permanent's rights to "proceed with further legal action, including obtaining a fresh eviction date for the security property without further notice", there is arguably an imbalance with the term to the substantial detriment of the consumer, Mr Wolfe. However, the notice and default provision must be understood in the context of a history of the default and this in effect being a forbearance agreement.

263 In the Director of Consumer Affairs Victoria v AAPT Ltd,[151] President Morris held that good faith was not a consideration in its own right but "assisted only in determining whether there is a significant imbalance in the rights and obligations of the parties to the detriment of the consumer". This approach was rejected in Jetstar Airways Pty Ltd v Free[152] by Cavanough J, who considered that the words must have been included in the prohibition on unfair contract terms for a reason, and moreover a natural reading of s 32W suggested an independent operation for the phrase "contrary to the requirements of good faith".

264 While the High Court has left open the question of whether Australian law should recognise a duty of good faith in contract performance,[153] an implied duty of good faith has recently been recognised in Australia by both Federal and State courts in a number of cases.[154] These decisions suggest that an implied duty of good faith precludes a party from exercising a contractual power capriciously for an extraneous purpose. This standard, being concerned with the manner of exercise of a power, is not immediately transferrable to the role of good faith in assessing whether a term is unfair.

265 In the National Bank case, Lord Bingham held [155] that good faith in the context of the English provisions embodied a principle of "fair and open dealing":

The requirement of good faith in this context is one of fair and open dealing. Openness requires that the terms should be expressed fully, clearly and legibly, contain no concealed pitfalls or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the customer. Fair dealing requires that the supplier should not, whether deliberately or unconsciously, take advantage of a consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those lists in Schedule 2 to the Regulations.

266 In this matter, I must consider whether Permanent has taken advantage of Mr Wolfe's bargaining position.

267 Reference to a party's legitimate interests was rejected by Cavanough J in Jetstar,[156] on the ground that the prohibition on the unfair terms is concerned with the nature of the term not the individual characteristics or interest of particular parties to the contract. Permanent had default judgment and the Warrant. The notice provision in the 1 December 2009 Agreement is not unexpected given the circumstances.

268 Pursuant to s 32X(h) of the FTA, the Court can look to whether the terms are unfair taking into account whether it was individually negotiated and whether it has the effect of permitting the lender to unilaterally determine whether the contract had been breached. Here, there are no notice provisions and Permanent could unilaterally determine the contract at will. Looking at the type of default that can lead to such an action, (defaults in any repayments), I consider that this is not a trivial default and may increase risks for the lender such as Permanent and other consumers dealing with the lender.

269 In AAPT,[157] a clause allowed the supplier who immediately terminated the contract where the consumer had breached the contract or changed its address or contact details without notifying the supplier. President Morris held this to be too onesided and broadly drawn and accordingly unfair:

A customer may breach the Agreement in a manner which is inconsequential, yet faces the prospect of having the service terminated. Further, if the customer changes his or her address (which will not necessarily be the address for the recipient or billing information) this will also provide a ground to AAPT to terminate the Agreement.

270 The breach in this case, namely that Mr Wolfe failed to pay the instalment on time was not inconsequential.

271 In regard to contract formation, Ormiston JA in Maxitherm Boilers Pty Ltd v Pacific Dunlop Ltd and anor,[158] found that:

Where a term is so onerous or is otherwise of a kind such as to suggest that it might not reasonably expected to be part of the terms of the contract, the issue is whether the accepting party can reasonably be taken to have assented to the particular term.

272 Buchanan J in the same case at [569] suggested that where the terms that could be incorporated into a contract are unusual, special notice, such that will fairly and reasonably bring the terms to the attention of the party to be bound, must be given.

273 The evidence is that Permanent drew Mr Wolfe's attention to the onerous provisions and the terms were proportionate given Mr Wolfe's financial history. He was orally informed by Ms Grech and then informed again in writing. The 1 December 2009 Agreement was plainly written and at no time prior to the default did Mr Wolfe seek assistance or clarification of the terms. Mr Wolfe was obviously anxious to remain in the family home and was prepared to take whatever measures were required to achieve this. While the notice and default terms are onerous, the evidence supports the fact that Mr Wolfe was aware of them and, in circumstances where he had already lost possession of the family home due to defaults, I do not consider the terms are unfair.

274 At paragraphs 30 and 31 of the Statement of Claim Mr Wolfe alleges:

1. In the circumstances the Defendant ought to have notified the Plaintiff that he needed to re-submit the Form and/or make alternate arrangements to deposit the First Repayment before the First Repayment fell due in circumstances where it has sought to evict the Plaintiff on the basis of his failure to deposit the First Repayment when it fell due - where:

(a) the Plaintiff was in a position of special disadvantage in that the Defendant was the only one that could alert the Plaintiff to the fact that he had incorrectly completed the Form after it was submitted to the Defendant;

(b) the Defendant knew that the Plaintiff had incorrectly completed the Form;

(c) the Defendant should have known that the Plaintiff believed that the First Repayment would be processed by direct debit;

(d) it was within the Defendant's power to notify the Plaintiff that he had incorrectly completed the Form prior to the First Repayment being due; and

(e) it was aware that by not notifying the Plaintiff that he had incorrectly completed the Form, this caused a Default.

1. In the above circumstances the Defendant has acted unconscionably.

Particulars

The plaintiff refers to the common law and the provisions section 8 of the Fair Trading Act 1999 and sections 12CA, CB and CC of the Australian Securities and Investments Commission Act 2001 ("ASIC Act").

275 Division C of the ASIC Act was in force at the time the 1 December 2009 Agreement was entered into.

276 In summary, Mr Wolfe makes claims of unconscionability which include:

(a) situational unconscionability, under the common law, alleged to arise out of Permanent's knowledge and superior position;[159]

(b) Sections 12CA, CB and CC of the ASIC Act 2001);

(c) Section 8 of the FTA which mirrors ss 51AB of the former Trade Practices Act 1974 ("TPA") and a possible claim under s 7.

277 The various claims of unconscionability are overlapping. It is necessary to consider first, whether the conduct was unconscionable within the meanings of s 8 FTA and s 12CB ASIC Act, before addressing s 7 FTA and s 12CA ASIC Act, which enacts the common law.[160]

278 Unconscionability under s 12CB ASIC Act and s 8 FTA is unfettered by equitable notions and has its ordinary meaning, which involves "notions of serious misconduct or something which is clearly unfair or unreasonable".[161] For reasons which I will later set out, I consider that Permanent's conduct falls short of unconscionability.

279 The common law position is picked up by s 7 FTA and s 12CA of the ASIC Act.

1. Unconscionable conduct within the meaning of the unwritten law

(1) A person must not, in trade or commerce, engage in conduct which is unconscionable, within the meaning of the unwritten law, from time to time.

(2) this section does not apply to conduct that is prohibited by s 8 or s 8A.

(1) A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services of a kind ordinarily used for personal, household or domestic purposes to a purchaser, engage in conduct that is in all the circumstances, unconscionable.

12CA. Unconscionable conduct within the meaning of the unwritten law of the State and Territories

(1) A person must not, in trade or commerce, engage in conduct in relation to final services if the conduct is unconscionable within the meaning of the unwritten law, from time to time of the States and Territories.

(2) This section does not apply to conduct that is prohibited by s 12 of CB.

12CB. Unconscionable conduct in connection with financial services

(1) A person must not, in trade or commerce, in connection with:

(a) the supply or possible supply financial services to a person (other than a listed public company); or

(b) the acquisition or possible acquisition of financial services from a person (other than listed public company); engaged in conduct that is, in all the circumstances, unconscionable.

283 "Situational unconscionability" describes a situation where:

(1) "a party is under a special disadvantage" as a result of the respective position of the parties (as opposed to something 'constitutional' such as limited education or language skills);[162] and

(2) the other party takes unfair or unconscientious advantage of that special disadvantage when entering into the agreement.

284 For reasons which I will expand upon, I consider that the conduct alleged to be unconscionable occurred after the entry into the contract. This falls outside of the doctrine of unconscionable conduct where the relevant time is the time of entry into the contract.

285 Mr Wolfe refers to the terms of the 1 December 2009 Agreement which allowed Permanent "to still rely on the judgment while in effect continuing to act as mortgagor and to sell the Property without notice or any opportunity to remedy any alleged default" as the unjust terms.[163] Mr Wolfe submits that the Court may set aside the terms "as being exercised in unconscionable circumstances in accordance with the common law"[164], citing Mason J's statement in Amadio[165] that courts have jurisdiction to set aside contracts and other dealings on the grounds of unconscionable conduct. In relation to the definition of 'unconscionable' Mr Wolfe refers[166] to Australian Competition and Consumer Commissioner v CG Berbatis Holdings Pty Ltd[167] where Mason J said:

The term 'unconscionable' is used as a description of various grounds for equitable intervention to refuse enforcement of or to set aside transactions which often defend equity and good conscience.

286 Mr Wolfe alleges the unjust terms may be set aside because they were unjust in nature or by reason of Permanent's "conduct under well established principles of situational disadvantage and an accordingly unconscionable exercise of a position of power".[168]

287 Mr Wolfe's case then outlines what seems to be the elements of "situational disadvantage" as follows:[169]

1. Mr Wolfe was in a "special situation of disadvantage" by reason of:

a. his belief that he had correctly completed the direct debit form; and

1. his reliance on [Permanent] to inform him if they were not going to process the direct debit form.

1. [Permanent] was in a superior position by reason of:
   1. its knowledge that Mr Wolfe had made an administrative error in completing the direct debit form; and
   2. it being the only person who could inform Mr Wolfe of this administrative error once the direct debit form was submitted.

288 Mr Wolfe goes on to submit that Permanent "unconscionably used this position" by its knowledge of Mr Wolfe's intent and ability to complete repayments; its knowledge of the mistake three months prior to the need to rely on the form and its knowledge of its rights to evict where the direct debit not to occur; its ability to contact Mr Wolfe to permit him the opportunity to correct the error and its failure to do so; it continuing to evict Mr Wolfe although the February payment was made in cash shortly after being made aware that the form had not been processed.

289 In addressing Mr Wolfe's claims of unconscionability, Permanent cites[170] Body Bronze International Pty Ltd and ors v Fehcorp Pty Ltd,[171] where Macaulay AJA examines s 51AC of the TPA which he expressly notes is 'at large', that is, not constrained by equitable doctrine and argues, that in light of this, Mr Wolfe was not in a position of "special disadvantage".

290 In Alievski v Cross Country Realty Victoria Pty Ltd,[172] Bell J considered an appeal under s 109 of the Magistrates' Court Act 1989. The appellant alleged the Magistrate had erred in her application of ss 7 and 8 of the FTA and its equivalent s 51AA and s 51AB of the TPA. Bell J stated as follows:[173]

I think it would have been an error of law for the Magistrate to apply s 51AA(1) instead of s 51AB(1). Section 51AA(1) does not apply to conduct which is prohibited by s 51AB or s 51AC. Thus it is logically necessary to consider s 51AB (and s 51AC) first. If s 51AB (or s 51AC) is found to apply, s 51AA does not.

291 Thus, it appears that Mr Wolfe can rely on both provisions, but there is a hierarchy in their application; s 7 will only become relevant if it is determined that s 8 does not apply. This reasoning can be extended to the ASIC Act.

Parties' Submissions on the Applicability of the Australian Securities and Investments Commission Act 2001 (ASIC Act)

292 Mr Wolfe pleads[174] that the ASIC Act applies to the 1 December 2009 Agreement because it relates to a financial service, which includes "a service ... supplied in relation to a financial product".[175]

293 Permanent appears to accept the ASIC Act applies[176] and accordingly that a financial product includes "a security".[177]

294 In this case, there is no "service" supplied in relation to a "security". Rather there has been an agreement to accept a payment of a judgment debt by instalment. The fact that the judgment debt and the Warrant, result from an agreement which involved a security, does not give the judgment debt that character. The doctrine of merger operates to extinguish the preexisting character of any judgment debt.

295 However, the 1 December 2009 Agreement will nevertheless fall within the scope of the ASIC Act, for the following reasons:

(a) Section 12CB applies to the supply of "financial services";

(b) for the purposes of the relevant part (Division 2 of Part 2 of the Act), "financial service is defined in s 12BAB;[178]

(c) "financial service" includes the provision of service in relation to a "financial product";[179]

(d) "financial product" is defined to include "a credit facility (within the meaning of the regulations)";[180]

(e) "credit facility" is defined in the Regulations as meaning "a contract, arrangement or understanding under which payment of a debt owed by one person (a debtor) to another person (a credit provider) is deferred".[181]

296 The unconscionable conduct must occur "in connection with the supply or possible supply of financial services". Supply is defined as including "provide, grant or confer"[182] and "agreeing to supply".[183] As such it appears that, unlike the common law, the enquiry as to unconscionability under s 12CB is not limited to the time of entry into the agreement.[184] Furthermore, although many of the factors in s 12CC focus on the time of entry into the agreement, the strength of bargaining positions;[185] disclosure;[186] and the terms as negotiated or otherwise,[187] section 12CC(1)(j) outlines that postcontract conduct is relevant. Section 12CC does not limit the matters the Court may have regard to.[188] The conduct prohibited is conducted that is "in all the circumstances", unconscionable. Thus, unlike the common law, the time frame for the enquiry is not limited to precontract conduct.

297 Mr Wolfe argues that the unjust terms may be set aside as unconscionably exercised terms under ss 7 and 8 of the FTA.[189] Though it appears that only s 8 was referred to in the Statement of Claim.[190]

298 Permanent appears to argue merely that the conduct was not unconscionable

299 Section 8 applies to conduct which occurs, "in trade or commerce, in connection with the supply or possible supply of goods of services of a kind ordinarily used for personal, household or domestic purposes to a purchaser".

300 Trade or commerce is defined to include "any business or professional activity whether or not carried on for profit".[191] Here, it would seem that Permanent's decision to accept payment of the judgment debt by way of instalment was part of its business or professional activity.

301 However, the business activity must be in connection with the supply of goods or services. Clearly there was no provision of goods. Services includes:

"any rights (including rights in relation to, and interests in real or personal property) benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce."

The section continues to provide that the services includes those that are conferred under a contract for or in relation to:

(a) The performance of work ... ;

(b) The provisions ... of facilities ... ;

(c) The conferring of rights or benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar payment.

The use of the word "includes" indicates that the three cases outlined are mere examples. I consider the general definition of "services" is broad enough to include financial services.

302 The services must be "of a kind ordinarily used for personal, household or domestic purposes". Here, the decision to accept deferred payment of the judgment debt is a provision of the service to assist in personal or household finances;[192] it appears to be caught by the definition.

303 I consider that the 1 December 2009 Agreement is caught on the basis that the original transaction was for "personal, household or domestic purposes".

304 I consider that under the FTA it is necessary to look at the whole transaction in order to determine its character. Accordingly, the original loan would also have a "personal" character: it was a "housing loan facility" provided for the purposes of assisting with the re-finance of Wizard Home Loan account.[193]

305 The failure to include financial services in the list of specific services is, in my opinion, insufficient to lead to a conclusion that financial services are excluded. The equivalent section to s 8 FTA in the now repealed TPA was s 51AB. Section 51AAB(2) provided that the section did not apply to the supply of financial services. There is no such equivalent exclusion here.

306 The definition of consumer is contained in s 4B of the TPA and focuses on the value of goods and services provided and whether or not they were for "personal, domestic or household use or consumption". The word consumer is not used in s 12CB of the ASIC Act or s 8 of the FTA, however the word "purchaser" is used in s 8 FTA. It is defined as someone to whom services are supplied and s 8 provides that the services must be for "personal, household or domestic purposes. It thus seems that the question of the applicability of s 8 relates to the purposes of the loan and whether it was for "personal, domestic or household purposes", as opposed to a broader question of the applicability of the provision to financial services.

The test of unconscionability under s 12CB ASIC Act and s 8 FTA

307 In Tonto Home Loans Australia Pty Ltd v Tovaris,[194] the New South Wales Court of Appeal stated that:

The context of "unconscionable" in the ASIC Act does not give it a distinct or different meaning from its equivalent provisions in the TPA or FTA. All three sets of provisions have similar purposes in the protection of consumers and the promotion of just and fair market.

308 In Pheonix v Free Wesleyan,[195] Black J stated with regard to the ASIC Act:

The concept of unconscionability in this section involved "serious misconduct or something clearly unfair or unreasonable" and contemplates actions which show "no regard for conscience, or that are irreconcilable with what is right or reasonable" or involve a "high degree of moral obloquy".[196] Section 12CB(2)[197] set out a list of factors to which the Court must have regard in determining whether s 12CB(1) was contravened and these factors are indicative of the concept of unconscionability in this section.[198]

309 The parties made much of the "requirement" of moral obloquy and whether that requires "intentional" or "reckless" conduct.[199]

310 However, I consider that to focus on moral obloquy detracts from the real words of the section.

311 In Contra Home Loans Australia Pty Ltd v Tavares,[200] Allsop P (with whom Bathurst CJ and Campbell JA agreed), stated:[201]

Spieglman CJ in World Best Holdings at 583 [121] referred to a "high level" of moral obloquy. Whether that is too stringent and whether "significant" or "real" may be preferable need not be decided. What is required is some degree of moral tainting in the transaction of a kind that permits the opprobrium of unconscionability to characterise a conduct of the party.

312 Further, in Canon Australia Pty Ltd v Patton,[202] Basten JA observed that the use of "such concepts as high moral obloquy is to risk substituting for the statutory term language of no greater precision ... ".[203]

313 In Tonto Home Loans Australia Pty Ltd v Tavares,[204] Allsop P (with whom Bathurst CJ and Campbell JA agreed), stated with regard to unconscionability:

It is neither possible nor desirable to provide a comprehensive definition. The range of conduct is wide and can include bullying and thuggish behaviour, undue pressure and unfair tactics, taking advantage of vulnerability or lack of understanding, trickery or misleading conduct. A finding requires an examination of all the circumstances.

314 In PSAL Ltd v Kellas-Sharpe,[205] Applegarth J stated that "The approach of the general law to the protection of the vulnerable may inform assessments of whether conduct is "unconscionable within the meaning of statute"". His Honour then referred to Kavakas v Crown Melbourne Ltd,[206] where Harper J stated:

One of equity's enduring concerns has been the protection of the vulnerable. But that protection must be both principled and consistent. Neither principle nor consistency are served without a clear conception of both; and that in turn requires careful identification of what is encompassed by the vulnerability which equity is prepared to protect. It requires, an equally careful assessment of the proper measures of protection which in any given set of circumstances is appropriate. So, for example, while equity will sometimes intervene in circumstances where there has been an inequality of bargaining power, sometimes it will not. Again, it may on occasion be proper for equity to protect people from themselves. Ordinarily, however, each must accept responsibility for his or her action or inaction.

315 In this case, the conduct said to be unconscionable relates to the knowing reliance on a breach which Permanent knew would occur, had the ability to prevent; and failed to prevent. Mr Wolfe's vulnerability is said to arise as a result of Permanent's knowledge (that he had incorrectly completed the form) and Mr Wolfe's lack of knowledge. As far as vulnerability goes, this is, in my opinion, at the lesser end of the scale. The issue is did Permanent take some unconscientious advantage of that vulnerability? Permanent gave no further benefit beyond what it was already entitled to under the judgment. It made an agreement not to execute its rights under the judgment, Mr Wolfe breached the conditions of that Agreement, and Permanent reverted to its preexisting right. It does not seem to me that Permanent gained anything by doing so: the sale price of the security would cover the debt, there was no benefit to Permanent in obtaining the payment of arrears and then executing the Warrant. The decision to rely on the preexisting rights when there was a discretion to permit more time for payment was a business decision, but not one made in the hope of obtaining a further benefit. While allowing more time may have been the "decent" thing to do in the circumstances, a judgment as to unconscionability "is not to be informed merely by a sense of distaste for the impugned conduct".[207]

316 In Body Bronze v Fehcorp[208], the Victorian Court of Appeal held that there may be nothing offensive to conscience in a commercial participant taking a rational commercial decision to break a contract in circumstances where the burden of performance may be greater and more onerous than the burdens associated with the breach. The element of awareness was insufficient in that case to transform a deliberate breach into unconscionable conduct. If that is so, then here, where Permanent has simply enforced its legally and equitably obtained rights, there must be something over and above awareness that the other party will be adversely affected by the decision. Mr Wolfe argues that Permanent's knowledge of his genuine attempt to pay; Permanent's ability to correct the situation by making further attempts to contact him and the consequences for Mr Wolfe of failure to pay turns reliance on the Warrant into unconscionable conduct. However, as discussed, while Mr Wolfe may have been vulnerable, Permanent does not seem to have "taken advantage" of that vulnerability. Rather, Permanent made some attempts to bring the matter to Mr Wolfe's attention, and when those attempts failed, relied on its legal rights. There was no particular advantage or benefit in doing so, other than to ensure that it obtained what it was already entitled to. There was no obligation on Permanent to "take reasonable steps" to ensure Mr Wolfe had every opportunity to comply with the Agreement and its failure to do so is difficult to classify as unconscionable when there was no apparent ulterior motive in taking that course of action.

317 There are very few cases where the conduct impugned is unconscionable was postcontract conduct. However, Leveraged Equities v Goodridge,[209] is one such case. There the plaintiff had successfully argued at trial that the defendant had engaged in unconscionable conduct under s 12CB of the ASIC Act by making margin calls and selling the shares when they were not met.[210] Rares J held that:

One circumstance relevant here is that Leveraged Equities had and exercised power to control the disposition of Mr Goodridge's property that he had offered to the Bank as security. He was vulnerable to abuse of that power.[211]

318 His Honour continued noting that a mortgagee is not ordinarily a fiduciary to a mortgagor because "the mortgagee does not undertake or agree to act in the mortgagor's interest ... Rather, the mortgagee acts in its own interest which often will be transparently different to and in conflict with the mortgagor."[212]

319 The trial judge's basis for the finding of unconscionable conduct was the "misuse of the power of sale" because Leveraged Equities required him to comply with conditions which "were not reasonably necessary to protect its legitimate interests ..."; namely first, it required him to pay money in accordance with the timetable and a series of demands that were not valid and, secondly, it threatened, and then proceeded, to sell his property without a legitimate interest (on my findings above) that it was entitled to protect".[213]

320 On appeal, Jacobson J (with whom Finkelstein and Stone JJ agreed) found, contrary to the trial judge's finding, that the margin calls were properly made and that there was a legitimate interest to protect. His Honour then dealt with the unconscionability argument in short fashion stating that:

Absent some conduct ... which could be characterised as taking a proper advantage of Mr Goodridge (which there was not), there is nothing unconscionable in a margin lender enforcing its legal rights to protect itself against a fall in the value of its security.[214]

321 The situation is very similar to that here. Leveraged Equities did not have to choose to enforce its rights at that particular moment. It had a discretion, it may have given Mr Goodridge more time: to see what the market would do, or to raise the funds necessary to meet the margin call. The fact that it did not do so, did not make its reliance on legal rights unconscionable. Similarly here, the simple fact that Permanent did not have to execute the Warrant does not turn its decision to do so into an unconscionable one. It was a business decision to ensure that it obtained payment of its debts in the most economic fashion.

The equitable doctrine of unconscionable conduct

322 Section 7 FTA and s 12CA ASIC Act prohibit conduct which is unconscionable "within the meaning of the unwritten law". This includes unconscionable conduct, undue influence, equitable estoppel, relief from forfeiture and penalties and unilateral mistakes.[215] As no other grounds were argued or pleaded, the only aspect of these provisions which will be examined is in relation to unconscionable conduct.

323 The equitable doctrine which entitles a party to seek relief against unconscionable conduct "may be invoked whenever one party by reason of some condition or circumstance is placed at special disadvantage vis-à-vis another, an unfair unconscientious advantage is then taken of the opportunity thereby created".[216] Thus, to successfully invoke the doctrine, it is necessary to establish that: (1) one party was under a "special disability" and (2) the other party took unfair advantage of that situation. Then the onus then shifts to the stronger party to establish that the transaction was nevertheless "fair just and reasonable".[217]

324 The essence of "special disability" is that the party is unable to properly judge the matter for themselves.[218] Sometimes referred to as "situational disability", the special disability may occur solely as a result of the information available to the party, and their subsequent ability to understand the transaction.[219] The doctrine does not rest solely on what is referred to as "constitutional disability", that is circumstances such as limited education, language difficulties and so on.

325 Contrary to Permanent's submissions, there is no need for "positive wrongdoing" such as an inducement to enter the transaction; knowledge operates upon the conscience.[220] In Jedda Investments, it was held, with reference to Amadio, that unconscionable conduct[221] "does not require a wrongful action antecedent to enter into the relevant agreement ... [where] one party operates under a special disability as to the true state of affairs it would prima facie be unfair or unconscientious for the party in the stronger position to procure the execution of a security document, or to take the benefit it provides, where it is sufficiently evident to it that the party under the misapprehension as to the true state of affairs, was operating under that disability in entering into it."

326 The focus of the enquiry, in a claim of unconscionable conduct, is the entry into the relevant transaction.

327 In Amadio, Mason J summarised the doctrine as applying as follows:[222]

A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his own interest, takes unfair advantage of his [A's] superior bargaining power of position by entering into that transaction, his conduct in so doing is unconscionable.

The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of a quality between them and (ii) the disability was sufficiently evident for the stronger party to make it prima facie unfair or "unconscientious" that he procure, or accept the weaker party's assent to the impugned transaction in the circumstances in which it procured or accepted it.

329 In distinguishing between undue influence and unconscionable conduct, the High Court has said that:[224]

Undue influence [looks] to "the quality of consent or assent of the weaker party, while unconscionable conduct looks to the attempted enforcement or retention of the benefit of a "dealing with a person under a special disability".

330 I was not taken to any case where the "special disability" arose subsequent to the entry into the transaction. Indeed, it seems that this would expand the fundamental basis of the doctrine, which requires that the stronger party be aware of the special disability at the time of entry into the transaction.[225] Indeed, the focus on what the party knew, at the time of entry into the transaction, has the effect that the "offending" party, should always have been on notice that it would be unconscionable to rely on the terms given the circumstances in which the contract was entered into. To expand the doctrine and refer to the reliance on legal rights (and not the acquiring of legal rights) as the essence or source of the unconscionability would be to conflate the doctrine with that of estoppel.

331 Mr Wolfe's claim is based on Permanent's knowledge of the error on the form. As such, it cannot succeed. It does not constitute knowledge of a disability at the time of entry into the transaction.[226]

332 Mr Wolfe has not claimed that he was under a "special disability" at the time of the entry into the transaction. Nevertheless, it is highly unlikely that Mr Wolfe would be considered in the situation of "special disadvantage" at this time, a weaker bargaining position is not the same as an inability to understand the transaction.

1. ...by its silence and the circumstances referred to above, the Defendant represented that the Form had been completed correctly and/or the direct debit facility had been set up and/or the First Repayment would be automatically processed by the Defendant without further notice to the Plaintiff ("the Representations").

Particulars

The Defendant created the Representations by:

1. not informing the Plaintiff that he had incorrectly completed the Form;
2. not informing the Plaintiff that the direct debit facility would not be set-up; and

1. not informing the Plaintiff that it did not intend, to, or would not, process the First Repayment.

1. The representations were false, misleading and deceptive in that:

1. the Form had not been correctly completed and the defendant knew that fact; 2. the Defendant did not set-up a direct debit facility; and

1. the First Repayment was not processed.
2. As a result of the matters aforesaid the Defendant has engaged in misleading and deceptive conduct.

Particulars

The Plaintiff refers to sections 12BB and 12DA Australian Securities and Investments Commission Act 2001 and s 9(1) of the Fair Trading Act 1999 and the common law.

1. As a result of having acted in reliance on the Representations, the Plaintiff has been denied the opportunity to set-up the said direct debit facility and/or deposit the First Repayment directly with the Defendant when it fell due and has thereby suffered loss and damage.

334 Identical provisions, save in one respect, have been enacted in the former Commonwealth TPA[228] and the State and Territory Fair Trading Acts[229] which prohibit misleading or deceptive conduct in trade or commerce. The Commonwealth provision applies to corporations, while the State and Territory provisions to "persons":

1. A corporation [person] shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

335 Sub-section (2) provides in each jurisdiction that nothing in the preceding provisions of the legislation shall be taken as limiting by implication the generality of subs(1).

336 The TPA provision does not apply to the supply, or possible supply, of financial services. Instead, the relevant sections have been mirrored in the ASIC Act, Part 2, Division 2, to cover misleading and other conduct by persons in the provision of financial services. The misleading or deceptive conduct section is s 12DA(1). 'Financial services' are defined in s 12BAB of the ASIC Act.

337 I refer to paragraphs 293 to 295 in relation to the discussion on the applicability of the ASIC Act.

338 For completeness, the relevant provisions pursuant to the ASIC Act state:

12BB Misleading representations

(1) For the purposes of Sub-Division (s 12DA to 12DN), if a person makes a representation about a future matter (including the doing of, or the refusing to do, any act) and the person does not have reasonable grounds for making the representation, the representation is taken to be misleading.

(2) For the purpose of applying sub-section (1) to a proceeding concerning a representation made by a person about a future matter, the person is taken not to have had reasonable grounds for making the representation unless it adduces evidence to the contrary.

(3) Sub-section (1) does not limit by implication the meaning of a reference in this Division to:

(a) a misleading representation; or

(b) a representation that is misleading in a material particular; or

(c) conduct that is misleading or is likely or liable to mislead.

12DA Misleading or deceptive conduct

(1) A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive.

339 Essentially, Mr Wolfe's misleading and deceptive claim raises the question of whether he had "a reasonable expectation in all the circumstances" that material information known to Permanent would be disclosed to him. Put another way, did Permanent owe Mr Wolfe a positive duty of disclosure?

340 Mr Wolfe at paragraph [86] of his submissions states:

In the circumstances it is reasonable to expect that if the defendant knew of any reason why the February repayment would not be made by direct debit and this could be communicated to the plaintiff, that this would have been done, even if there existed no positive duty on the defendant to do it.

341 The guiding test in determining whether silence constitutes misleading and deceptive conduct is the "reasonable expectation" test, originally formulated by French J in Kimberley NZI Finance Ltd v Torero Pty Ltd:[230]

... unless the circumstances are such as to give rise to the reasonable expectation that if some fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist.

342 In Demagogue Pty Ltd v Ramensky,[231] Gummow J agreed noting:

... whether in the light of all relevant circumstances constituted by acts, omissions, statements or silence there has been conduct which is or is likely to be misleading or deceptive.[232] In determining this, silence is but one of the circumstances to be considered against the broader factual matrix.

To speak of 'mere silence' or of a duty of disclosure can divert attention from the primary question. Although 'mere silence' is a convenient way of describing some fact situations, there is in truth no such thing as 'mere silence' because the significance of silence always falls to be considered in the context in which it occurs. The context may or may not include facts giving rise to a reasonable expectation in the circumstances of the case, that if particular matters exist they will not be disclosed.[233]

344 In a situation of "mere" silence or nondisclosure, it is necessary to look at the defendant's knowledge of contextual factors pertaining to a plaintiff's attributes.

345 In ASIC v Camelot Derivatives Pty Ltd (in liq) ("Camelot")[234], when determining whether a contravention of s 12DA had occurred, Foster J found that:[235]

... [T]he task of the court is to examine the relevant course of conduct as a whole. The context in which the alleged conduct occurred is to be determined in light of the relevant surrounding facts and circumstances ...

Although the relevant test is objective, the attributes of the target audience are relevant.

When has the Court identified conduct involving silence as giving rise to a reasonable expectation of disclosure?

346 In Ramensky v Demagogue Pty Ltd[236] and Demagogue v Ramensky ("Demagogue")[237] Spender J placed significant weight on the unusual nature of the information that was not disclosed to the purchasers of a unit off the plan, concluding that the vendor had engaged in misleading and deceptive conduct. The issue related to difficulties with access to the site via a road licence over Crown land and the purchasers had enquired about this matter. The vendors real estate agent stated: "Well, look, of course there will be access. The developer will build a driveway up to the road." At first instance, his Honour viewed the requirement to obtain a road licence as being, " ... so unusual and unexpected in a development of this kind, that it was in all the circumstances incumbent on Demagogue to reveal the true position", referring to the authority of Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd,[238] Rhone-Poulenc Agrochimie SA v Uim Chemical Services Pty Ltd.[239] In his assessment of the circumstances of the transaction, he concluded that:

Here the circumstances were special and out of the ordinary. Moreover, the express representations by Demagogue were such as to indicate that there was nothing unusual at all about this aspect of the development. In this case, there was both a positive misrepresentation, and a misrepresentation conveyed by a failure to say anything about a road licence ... created a clear but erroneous impression that there was nothing unusual concerning the access to this site, and in particular, there was no suggestion that a road licence from the Lands Administration Commission was necessary to provide such access.[240]

347 The vendor appealed. The vendor's appeal was dismissed by the Full Federal Court. Black CJ and Gummow J agreed with the trial judge's assessment that the requirement to obtain a road licence to access the development was either unusual or unexpected.

348 In Hai Quan Global Smash Repair v Ledabow Pty Ltd ("Global Smash Repairs")[241], a vendor selling their panel beating business where a vendor made otherwise truthful representations that the weekly turnover of the business was $25,000 and that the business obtained insurance work from NRMA. The vendor did not expressly guarantee that NRMA insurance work would continue to flow. However, it did remain silent about a change of control provision in its preferred repairer agreement and failed to inform the insurer of the proposed business sale. Following sale completion, NRMA terminated its agreement and the purchasers did not receive any further work from NRMA (19% of the business revenue). Nine months later, the business ceased to trade largely as a result of the purchaser's own inability to competently manage the business. The Court's conclusion that the vendor had misled the purchasers was largely based upon the vendor's knowledge that the purchasers were extremely ignorant and naïve in insurance industry practises and business management; were both born in Vietnam and had relatively little industry experience; in contrast the vendor was a particularly shrewd business man who planned to take advantage of the purchasers' inexperience[242]. It was on such a basis that a reasonable expectation of disclosure was triggered, such that the vendor was obliged to disclose the information to meet the standard of conduct required by s 52 of the TPA. It was from the perspective of the particular purchasers that the requirement for consent became unusual, unexpected and material information.

349 "Duty" and "reasonable" expectation are normative terms and Madgwick J found[243] that it was fair and just in the circumstances to expect the vendor to speak up as to vital matters within his/her specific knowledge.

350 In Metalcorp Recyclers Pty Ltd v Metal Manufacturers Ltd[244] ("Metalcorp") a case which involved sale of scrap copper to Metal Manufacturers, an allegation of misleading and deceptive conduct arose out of circumstances where the buyer knew that in all probability the copper it was buying had been stolen but did not communicate this knowledge to the seller before the seller advanced payment to its supplier. The seller had previously dealt with the supplier without issue.

351 The primary foundation for the misleading and deceptive conduct claim lay in the longstanding business relationship between the seller and buyer. The parties had a trading history that spanned approximately ten years and maintained a practice where the buyer would isolate the seller's deliveries until it could inspect and, if appropriate, notify the seller of any problems. This relationship provided the background context against which the Court evaluated and assessed the buyer's conduct. One of the many things the Court extrapolated from this relationship was that the parties traded on the basis of mutual trust and respect, such that the buyer would not have any grounds to suspect the seller was knowingly trafficking in stolen property.

352 In the context of the parties' historical relationship and practices, the Court found that when the buyer questioned the seller about short delivery but remained silent about possible theft, this 'conveyed a representation that the buyer on inspection had found no reason for rejecting the delivery, that it had accepted it, and intended to pay for it in the ordinary course'. It was this misleading impression which the seller relied upon that was held to amount to misleading and deceptive conduct. It was the retention of this information which was contextualised by the parties' previous relationship, trading delivery and the level of trust existing between the parties. This had the effect of changing the very nature of the critical conversation itself into a misleading representation by delivery. This could only be corrected by some positive form of action by the buyer, as Handley JA noted,[245] relying on the principles espoused by Black J in Demagogue Pty Ltd v Ramenvsky:[246]

In the absence of some positive duty to speak, silence can only be misleading or deceptive against a background of other facts known to both parties which may be actually said so incomplete that it conveys a misrepresentation.

353 Miller and Associates Insurance Brokers Pty Ltd v BMW Australia Finance ("Miller")[247] involved an independent, commercial relationship negotiated at arm's length. In late 2000, Miller sought a $3.975 million insurance premium funding loan from BMW, on behalf of a client. BMW required the insurance policy to be both signable and cancellable. During negotiations, Miller sent BMW a bundle of documents in support of the application that included an insurance contract, but Miller provided no explanation of the contents of the bundle. The insurance contract contained in the bundle differed from what BMW expected. BMW commenced proceedings against Miller in the Supreme Court arguing that Miller's silence in failing to disclose that the insurance contract was not signable or cancellable constituted misleading and deceptive conduct.

354 The High Court in Miller referred to the "reasonable expectations" approach of the Full Federal Court in Demagogue in its determination of whether silence or nondisclosure may be misleading or deceptive. Where a party holds a reasonable expectation that certain information would be disclosed, this may assist in characterising silence or nondisclosure as misleading and deceptive.[248]

355 French CJ and Kiefel J warned of the risk of imposing a positive duty of disclosure on a defendant, beyond the requirements of the statutory duty under s 52 TPA, noting that the language of "reasonable expectation" is not statutory. They recognise that it would be unrealistic to characterise conduct by people holding information back for their own benefit as necessarily misleading or deceptive.[249] Ultimately, the Court held that Miller's alleged failure to volunteer further information regarding the insurance policy could not be characterised as misleading and deceptive under s 52. As French CJ and Kiefel J quoted: "A copy of the policy was put in the hands of BMW, who simply did not read it."

356 Essentially in Miller's case there was no reasonable expectation created in the course of the negotiations that the other party relied on. It is this creation of an expectation that can lead to a situation where silence may be considered to be misleading and deceptive. It is a fact based enquiry, requiring "close analysis of all the circumstances of the transaction".[250]

Did Permanent's non-disclosure regarding the status of the incomplete direct debit form constitute misleading and deceptive conduct?

Was there a reasonable expectation on the part of Mr Wolfe?

357 Permanent submits at paragraph 34 of its closing submissions that a banker who receives an improperly completed form and who fails to "contact the sender" makes no representations of the type alleged. It is necessary to look beyond the immediate transaction as has been noted above, as it is a preexisting relationship between Permanent and Mr Wolfe that ultimately will colour the reasonable expectation of Mr Wolfe regarding disclosure. Following the reasoning in Metalcorp, the foundation for the misleading and deceptive claim lay in the longstanding relationship between Mr Wolfe and Permanent (lender/borrower). This relationship was further coloured by the default judgment and stay on the Warrant. Permanent was aware of the marital problems, payment issues and subsequent turn around by Mr Wolfe in paying the arrears, legal and agency costs to that date and was aware of the funds in the relevant bank account. It was this context that coloured both the nature and importance of the withheld information and Permanent's conduct in remaining silent. While Mr Wolfe was not a sophisticated businessman, he had demonstrated an ability to negotiate the fresh 1 December 2009 Agreement with Permanent, draft letters to Permanent in the course of negotiations, obtain assistance from solicitors and "Larry" when necessary; and was able in a very short period of time to raise the funds required to satisfy the terms of the 1 December 2009 Agreement. Ultimately, the more knowledge that a defendant possesses about a plaintiff and their attributes, the more likely it is that the defendant will have to disclose a matter that is unusual and unexpected in the context of that knowledge in order to meet the standard of conduct.

358 Permanent had no knowledge that Mr Wolfe had difficulties completing forms or that he did not have access to assistance to complete forms if necessary.

359 The form contained instructions which were written in plain English and as previously noted, Mr Wolfe had the ability to obtain help to complete the form.

360 Permanent was aware that there was money deposited in Mr Wolfe's account for the necessary payment in February. When it received the form, it became aware that the form was incorrectly completed. The attempts by Permanent to contact Mr Wolfe and Ms Breasley on phone numbers provided to them but which had later been disconnected at that stage, confirm that Permanent was aware of the error and had tried to communicate that information to Mr Wolfe. I do not consider the fact that Permanent's silence from that point onwards amounts to a representation that can be characterised as misleading and deceptive. Permanent did not at any stage imply that the incorrect form would be accepted. Its conduct was to the contrary. As soon as it became aware the form was incorrectly completed, it tried to contact Mr Wolfe to inform him of the error. As the Court held in Miller's case, to find Permanent acted in a manner that can be characterised as misleading and deceptive would be to impose an obligation on them to volunteer information in order to avoid the consequences of Mr Wolfe's own carelessness in relation to completing the form and:

...may lead to the imposition of a requirement to volunteer information which travels beyond the statutory duty "to act in a way which does not mislead or deceive".[251]

Should Permanent be estopped from relying upon the default because of the representation?

361 At paragraph 37 of his Statement of Claim, Mr Wolfe pleads:

Further and/or in the alternative, by reason of the matters aforesaid and the Plaintiff's reliance on the Representations to his determent, the Defendant is estopped from or should otherwise be prohibited from relying on the Default to evict the plaintiff from the Property.

Particulars

By reason of the Representations the Plaintiff did not submit the Form or make alternate arrangements for the payment of the First Repayment before the First Repayment fell due.

362 Paragraph 37 appears to be a generalised plea of estoppel. No category of estoppel is formulated directly on the pleading. Rather, it is founded "[b]y reason of the Representations the Plaintiff did not resubmit the Form ... " and "the Plaintiff's reliance on the Representations to his determent [sic]" and, further, "by reason of the matters aforesaid".

363 One infers that Mr Wolfe is referring to the unconscionability aspect pleaded at paragraph 30 and the representations pleaded at paragraph 33 of the Statement of Claim.

364 At paragraph 31 of the Defence, the defendant refers to the embarrassing nature of the pleadings "in that it does not sufficiently identify 'the circumstances' said to give rise to the unconscionability alleged".

365 There is no need for the Court to descend into an analysis of the various species of estoppel. Essentially, the question is whether Permanent, by its silence, induced or created a legitimate expectation on behalf of Mr Wolfe that the Agreement and form had been properly executed. That is, is it unconscionable for Permanent to resile from such an expectation?

366 Equity, it is said, mends no man's bargain.[252] Certainty of contract, especially where the parties freely agreed to be contractually bound by a pivotal provision that allows Permanent to "rely on the existing judgment and warrant for possession" and should Mr Wolfe default, Permanent reserved its rights to proceed with further legal action, including a fresh eviction date for the security property without further notice".

367 Prima facie the parties should be held to such an agreement. Nevertheless, this does not exclude equities jurisdiction for relief, especially where it would be offensive to good conscience to do otherwise. However, the difficulty in this case is that the pleadings are confusing and do not necessarily equate with the submissions made on behalf of Mr Wolfe. At best, the pleadings provide an indirect approach to equitable estoppel based on "the matters aforesaid", assuming this is a reference to the unconscionability pleading at paragraph 30 of the Statement of Claim and the plaintiff's reliance on the representations to his detriment [sic]. On this basis, it is submitted on behalf of Mr Wolfe in the opening address (at Main Issue 4 and 5) that Permanent's unconscionable conduct in procuring the alleged breach, should be estopped from relying on the breach. It is this unconscionable conduct and Permanent's unconscionable insistence on strict legal rights that is at the very basis of Mr Wolfe's equitable estoppel claim.

368 In this case, we have an agreement between the parties and the handover of a form which created the expectation that direct debits were to commence as arranged. The monies were in the account. Mr Wolfe asserts that the bank by its silence created an assumption or an expectation that all is well and that Mr Wolfe was prevented from rectifying the situation to his detriment.

369 The difficulty is that Mr Wolfe relies on the Court making a finding that Permanent made representations to Mr Wolfe by merely not contacting him.

370 There is no evidence to suggest, nor can an inference be drawn, that Permanent knew that Mr Wolfe would assume the matters as articulated as the representation. Permanent was entitled to assume that Mr Wolfe had read the form and would know that if he did not complete it properly it could not be used to effectively set up a direct debit. Mr Wolfe was familiar with direct debit forms and had signed such forms before. Mr Wolfe could have checked that the direct debit was made on the due date. On the facts, Permanent never accepted the form. Indeed, upon receipt of the incorrectly completed form, Permanent's staff tried to contact Mr Wolfe. As soon as the monthly payment became due, Permanent acted and enforced its rights under the Agreement. Mr Wolfe breached his obligation to pay the monthly instalment, Permanent acted immediately. It did not behave in a manner consistent with a representation that "all was well".

371 I accept that Permanent was entitled to assume that Mr Wolfe knew the consequences of failing to properly complete the form.

372 In conclusion, I do not find that Mr Wolfe has established the necessary elements of the numerous causes of action he claims against Permanent.

373 It is common practice for lenders to give borrowers a further opportunity to remedy a default under a loan and mortgage. What is unusual in this case is the fact that the lender, Permanent, had already obtained a judgment and warrant against the borrower, therefore changing the very nature of their legal relationship and the rights and obligations owed.

374 Mr Wolfe entered into an Agreement on 1 December 2009 in which I have found he knew of the onerous term that any default in payment on his part would result in Permanent enforcing its rights under the judgment and Warrant, without any notice to Mr Wolfe.

375 The Agreement was a "last chance" for Mr Wolfe to remain in the family home. It was an agreement initiated by Mr Wolfe. Permanent's attitude that this was in effect a last chance was clear from the default term in the 1 December 2009 Agreement. No further default would be tolerated by Permanent. It had already gone to the trouble of obtaining judgment and the Warrant and was days from the eviction being enforced.

376 This is not a case of wilful disregard by Mr Wolfe of his obligations under the 1 December 2009 Agreement. It was carelessness on Mr Wolfe's part. Carelessness which has had very serious consequences for Mr Wolfe. Equally, I do not consider Permanent's conduct was highhanded. Permanent elected in circumstances where Mr Wolfe had a poor credit history, to make a business decision and consistent with the terms of the 1 December 2009 Agreement to exercise its rights immediately when Mr Wolfe breached the payment terms.

377 Given my findings, I order that the proceedings be dismissed.

378 Subject to any further submissions on costs I consider the plaintiff should pay the defendant's costs of the proceeding.

[5] Witness statement of Richard Webster Mark Wolfe dated 9 May 2012 at para 18.

[9] Transcript: 9 May 2012, p. 65, lines 27-28.

[10] Transcript 9 May 2012, pp. 73, lines 28-31; p. 74, lines 1-4.

[11] Transcript 10 May 2012, p. 143, lines 27-29.

[14] Transcript 10 May 2012, p. 164, lines 15-16.

[15] Transcript 10 May 2012, p. 168, lines 3-5 and 6-10.

[16] Witness statement of Naomi Grech dated 10 May 2012, Exhibit D-4.

[17] Affidavit of Richard Webster Mark Wolfe affirmed 5 May 2010 at para 10, Exhibit D-2.

[18] Transcript 9 May 2012, p. 62, lines 6-19.

[19] Transcript 9 May 2012, p. 78, lines 26-30.

[20] Transcript 9 May 2012, p. 79, lines 27-29; p. 80, line 4.

[21] Transcript 9 May 2012, p. 80, lines 13-17.

[22] Transcript 10 May 2012, p.148, lines 3-11.

[23] Sahin and Anor v National Bank Limited and anor [2011] VSCA 64 (8 March 2011).

[24] Transcript 10 May 2012, p 145, lines 12-13.

[28] Transcript 9 May 2012, p.93, line 19.

[34] Statement of Claim, paragraph 15(a)-(e).

[35] Statement of Claim, paragraph 16 and 16.1.

[39] Statement of Claim, paragraphs 30-33.

[41] (1996) 40 NSWLR 543 at 557.

[42] [1984] 3 NSWLR 561 at 563.

[44] Limprint Pty Ltd v Hexham Tiles Pty Ltd [2000] NSWCA 229; (1991) 49 NSWLR 508

[45] Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502

[46] Comprising arrears, agent's fees and outstanding legal costs and two months' payments in advance.

[47] (1973) 47 ALJR 586; 1 ALR 497 at 594; 512.

[48] Defendant's closing submissions, paragraph 3.

[49] Plaintiffs' submissions, paragraph 6.

[50] Plaintiffs' submissions, paragraph 8.

[51] The plaintiff did not plead that the right to constitute interest on the judgment debt constituted a practical benefit.

[54] [2012] VSC 43.

[55] Wingan v Edwards (1973) 47 ALJR 586; 1 ALR 497 at 494 and 512 per Mason J.

[56] (1994) 34 NSWLR 723 at 739.

[57] [2012] VSC 43. See also Martech International Pty Ltd (ACN 009 022 799) v Energy World Corporation Ltd (ACN 090 124 994) and ors ("Martech v Energy World") [2006] FCA 1004; (2006) 234 ALR 265 (Federal Court of Australia per French J (at [14]); Kelen v Vitaman Pty Ltd and ors [2010] NSWSC 328 at [73] and [93]; Naray v Deputy Commissioner of Taxation [2005] SMCA 1893 at [33]; Andrew Hennessey v Architectus Group Holdings Pty Ltd [2010] NSWSC 1390 at [62].

[58] Musumeci v Winadell P/L (1994) 34 NSWLR 723.

[59] Williams v Roffey Bros and Nicholls (Contractors) Ltd [1991] 1 QB 1.

[62] (1994) 34 NSWLR 723.

[63] [1884] UKHL 1; (1884) 9 App Cas 605 at 622.

[67] Unreported judgment, Queensland Court of Appeal, 10 May 1996, McPherson and Davies JJA and Ambrose J.

[68] [2012] VSC 43.

[70] Williams v Roffey Bros [1991] 1 QB 1 at 16.

[71] This was also how the argument was put in Re Selectmove [1995] 1 WLR 474.

[72] Plaintiff's submissions, paragraph 6.

[73] Plaintiff's submissions, paragraph 8.

[74] The plaintiff did not plead that the right to claim interest on the judgment debt constituted a practical benefit.

[75] (1994) 34 NSWLR 723 and 746.

[76] Defendant's closing submissions, paragraph 4.

[77] Defendant's closing submissions, paragraph 4.

[79] Byrne and Frew v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410.

[82] BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 283.

[83] Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 131 ALR 422, 433-444.

[87] Butt v McDonald (1896) 7 QLJ 68, 70-71 (Griffith CJ).

[88] (1979) 144 CLR 597, 607 per Mason J, Barwick CJ, Gibbs, Stephen and Aickin JJ; Moorgate Tobacco Co Ltd v Philip Morris Ltd [No. 2] [1984] HCA 73; (1983) 156 CLR 414, 435.

[89] Australis Media Holdings Ltd v Telstra Corp Ltd (1998) 43 NSWLR 40.

[90] [2006] FCA 472 [162].

[91] [1904] HCA 31; [1904] 1 CLR 632 at 647.

[92] Transcript 9 May 2012, p.88, lines 16-17.

[93] Transcript 9 May 2012, p.91, line 2.

[96] Queensland, Parliamentary Debates, Legislative Assembly, 4 August 1994, 8828-8829 (Tom Burns, Deputy Premier and Minister for Consumer Affairs).

[97] Committee of the Law Council of Australia, report on fair consumer credit laws to the AttorneyGeneral of the State of Victoria (the Molomby Report) (1961-1962) 11.26 (207) [2007] HCA 57; 241 ALR 67 at 82-32.

[98] [2007] HCA 57; (2007) 234 CLR 96 [50].

[100] Re Adelphi Hotel (Brighton) Co Ltd [1953] 1 WLR 955 at 961, PER Vaisey J.

[102] Knowles v Victorian Mortgage Investments Ltd [2011] VSC 611 at [53].

[103] Supreme Court Act 1986 (Vic), ss 57 and 101.

[104] [2006] VSCA 245; (2006) 16 VR 131.

[105] [2008] VSC 50; (2008) 19 VR 512.

[106] Powell (as joint liquidators of Nolex Yachts Australia Pty Ltd (in liq) v Fryer [2001] SASC 59; 37 ACSR 589 at 598; [2001] SASC 59; 159 FLR 433 per Olsson, Duggan and Williams JJ in the context of the Corporations Act s 588G.

[107] Rothwells Ltd v Nommack (No 100) Pty Ltd [1990] 2 Qd R 85; (1988) 13 ACLR 421 at 422 per McPherson J.

[108] Ex parte Kemp; Re Fastnedge (1874) LR 9 Ch App 383 at 387.

[109] [2011] VSC 611.

[111] Spencer Bower, Turner and Handley, The Doctrine of Res Judicata (Lexus Nexus, 4th ed 2011 (260).

[112] Shorter Oxford English Dictionary, (Oxford University Press, 5th ed, 202, (625).

[113] Geeveekay Pty Ltd v Director of Consumer Affairs Victoria [2008] VSC 50; (2008) 19 VR 512 at [69].

[114] Geeveekay Pty Ltd v Director of Consumer Affairs Victoria [2008] VSC 50; (2008) 19 VR 512 at [44].

[115] Interpretation of Legislation Act 1984, s 37(d).

[116] Avco Financial Services Ltd v Abschimski [1994] VicRp 76; [1994] 2 VR 659 at 697.

[117] Defendant's closing submissions, paragraphs 40 - 45.

[118] Geeveekay Pty Ltd and ors v Director of Consumer Affairs Victoria [2008] VSC 50; (2008) 19 VR 512 at [42].

[119] [2005] VSC 444 at 440.

[120] [2010] NSWSC 574 at [146] referring to Dale v Nichols Constructions Pty Ltd [2003] Qd C 453 at [92] - [93].

[121] [2010] NSWSC 574 at [154].

[122] (1986) 7 NSWLR 560.

[123] [2011] VSC 514.

[124] Permanent Mortgages Pty Ltd v Cook [2006] NSWSC 1104.

[125] Consistent with the earlier decision in Shakespeare Hanney Securities Ltd v Crawford [2009] QCA 85; [2009] 2 Qd R 156 cf and applied in CKM (Mortgages) Ltd v Burtenshaw [2010] NSWSC 1044, Perpetual Trustees Victoria Ltd v Monas [2011] NSWSC 5, Commonwealth Bank SelbyFullgrabe [2011] SASC 102 and Mango Media Pty Ltd v Comitogianni [2011] NSWSC 152.

[126] [2011] NSWCA Court of Appeal 417 at [37].

[127] Patten AJ determined that s 80 was a proper basis for summarily dismissing the proceeding. He did not relying upon a decision of the New South Wales Court of Appeal in Graham v Aluma Lite Pty Ltd, which dealt not with the Code but with the Credit (Home Finance Contracts) Act 1984. Davies J in Dutta held that the difference between the Code and the 1984 Act had the result that the decision in Graham did not dictate the outcome of a failure to serve notice under s 80.

[130] Statement of Claim, paragraph 16.1.

[131] Subdivision BA of the ASIC Act was inserted by cl 7 of Schedule 3 of the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010. In accordance with s 2 of that amendment Act, Part 1 of Schedule 3 (including cl 7) commenced on 1 July 2010. The provisions do not apply to an agreement entered into on 1 December 2009.

[133] [2005] VCAT 1755.

[134] West v AGC Advances Ltd (1986) 5 NSWLR 610 at 621 per McHugh JA; Esanda Finance Corporation Ltd v Murphy (1989) ASC 55 to 703; Custom Credit Corporation Ltd v Lupi [1992] VicRp 8; [1992] 1 VR 99.

[135] Esanda Finance Corporation Ltd v Tong (1997) 41 NSWLR 482 at 491.

[136] Custom Credit Corporation Ltd v Gray [1992] VicRp 36; [1992] 1 VR 540; Moreland Finance Corporation (Vic) Pty Ltd v Westendorp [1993] VicRp 72; [1993] 2 VR 284; Custom Credit Corporation v Lynch [1993] VicRp 86; [1993] 2 VR 469; McKenzie v Smith (1998) ASC 155-052.

[137] Unlike the case of Marsh v Lombard Finance Pty Ltd (commercial case) [2010] NSWCTT 224 (21 May 2010) which as a result was reopened as unjust.

[138] (1986) 5 NSWLR 610 at 621-2.

[139] [2005] VCAT 1755 (12 August 2005).

[140] (1986) 5 NSWLR 610 at 621-2.

[141] Transcript 9 May 2012, p 79 at lines 27-29.

[142] Transcript 9 May 2012, p 80, lines 13-17.

[143] Custom Credit Corporation Ltd v Luupi [1992] VicRp 8; (1992) 1 VR 99; Moreland Finance Corporation (Vic) Pty v Westendorp [1993] VicRp 72; [1993] 2 VR 284; Damanin v Cowan [2010] NSWSC 1118.7

[144] [2006] NSWSC 1104 (24 October 2006) at [643].

[145] (1991) 22 NSWLR 1 at 9.

[146] See s 163 FTA that the terms be legible and expressed in clear language.

[148] [2001] UKHL 52; [2002] 1 AC 481.

[150] Director General Fair Trading Ltd v First National Bank [2001] UKHL 52; [2002] 1 AC 481 at 499.

[151] [2006] VCAT 1493 at [33] ("AAPT").

[152] [2008] VSC 539 at [101 - [102] ("Jetstar").

[153] Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 186 ALR 289.

[154] Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 2 NSWLR 234; Hughes Aircraft Systems International v Airservices Australia (No 3) (1997) 776 FCR 151; South Sydney District Rugby League Football Club v News Ltd [2000] FCA 1541; (2000) 177 ALR 611; Laurelont Pty Ltd v Stockdale and Leggo (Qld) Pty Ltd [2001] QCA 212 but compare Service Station Association v Burg Bennet and Associates [1993] FCA 445; (1993) 45 FCR 84; Esso Australia Resources Pty Ltd v Southern Pacific Petroleum [2005] VSCA 228.

[157] Director of Consumer Affairs Victoria v AAPT Ltd [2006] VCAT 1493 at [53].

[158] [1998] 4 VR 559 at 561.

[159] Statement of claim, paragraph 30.

[160] Alievski v Cross Country Realty Victoria Pty Ltd [2010] VSC 316 at [11].

[161] Body Bronze v Fehcorp [2011] VSCA 196; (2011) 282 ALR 571 at [89] citing Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 2) [2009] FCA 17; (2009) 253 ALR 324.

[162] See the distinction drawn between constitutional and situational disadvantage in Australian Constitution and Consumer Commission v Samson Holdings Pty Ltd (2002) 117 FCR 301 at [48] and [64]. See also, ACCC v CG Berbatis Holdings Pty Ltd ("Berbatis Holdings") (2003) 197 ALR 153 at [9] - [10].

[163] Plaintiff's submissions, paragraph 10.

[164] Plaintiff's submissions, paragraph 66

[165] Commercial Bank of Australia v Amadio and anor ("Amadio") [1983] HCA 14; (1983) 46 ALR 402 at 412.

[166] Plaintiff's submissions, paragraph 67

[167] 203 HCA 18 at [42] per Mason J.

[168] Plaintiff's submissions, paragraph 69.

[169] Plaintiff's submissions, paragraphs 70 and 71.

[170] Defendant's closing submissions, paragraphs 32 and 33.

[171] [2011] VSCA 196.

[172] [2010] VSC 316.

[174] Statement of claim, paragraph 2(d).

[176] Defendant's closing submissions, paragraph 33.

[181] Australian Securities and Investments Commission Regulations 2001 r 2B(3).

[184] See Leveraged Equities Ltd v Goodridge [2011] FCAC 3 at [415]-[417] where post-contract conduct (the making of a margin call) was found not to be unconscionable conduct under s 12CB ASIC Act but not on the ground that it was conduct occurring after the entry into the agreement.

[186] Section 12CC(1)(i) see also (c).

[187] Section 12CC(1)(b), see also (k).

[188] Section 12CC(1) and ACCC v Simply No Knead (Franchising) Pty Ltd [2000] FCA 1365 at [37].

[189] Plaintiff's submissions, paragraph 66(b).

[190] Statement of Claim, paragraph 30.

[192] As discussed, a judgment debt is a debt of a personal nature, any previous character is subsumed into the judgment debt.

[193] See clause 5 of the Loan Agreement between Mr Wolfe, Gail Breasley and Permanent dated 31 March 2004, Court Book p. 58.

[194] [2011] NSWCA 389.

[195] Phoenix Lacquers and Paints Pty v Free Wesleyan Church of Tonga in Australia Inc (admins apptd) and others [2012] NSWSC 214 at [23].

[196] Hurley v McDonalds' Australia Pty Ltd (2000) ATPR 41 - 741; [1999] FCA 1728; Australian Competition and Consumer Commissioner v No. 4 WD Systems Pty Ltd (2003) 200 ALR 411; 59 IPR 435; [2003] FCA 850 at [184]; AttorneyGeneral (New South Wales) v World Best Holdings Ltd (2005) 63 NSWLR 557; 223 ALR 346; [2005] NSWCA 261 at [121]. [See also Australian Securities and Investments Commissioner v National Exchange Pty Ltd [2005] FCAFC 266; 148 FCR 132 at 140 [30]; Australian Competition and Consumer Commission v Samton Holdings Pty Ltd [2002] FCA 62; 117 FCR 301 at 316-317 [44]; Qantas Airways Ltd v Cameron [1996] FCA 1483; (1999) 66 FCR 246 at 262.]

[198] Australian Securities and Investments Commission v Skeers [2007] FCA 1551.

[199] See defendant's closing submissions, paragraph 33d and plaintiff's submissions, paragraphs73-74.

[200] [2011] NSWCA 389.

[202] [2007] NSWCA 246; [2007] 244 ALR 759 at [4].

[203] Cited in PSAL Ltd v Callas-Sharpe [2012] QSC 31 at [87].

[204] [2011] NSWCA 389.

[205] [2012] QSC 31.

[206] [2009] VSC 559 at [426].

[207] Body Bronze v Fehcorp [2011] VSCA 196; (2011) 282 ALR 571 at [94].

[208] [2011] VSCA 196

[210] Goodridge v Macquarie Bank [2010] FCA 67.

[214] Leveraged Equities Ltd v Goodridge [2011] FCAFC 3 at [4117].

[215] See Body Bronze v Fehcorp [2011] VSCA 196; (2011) 282 ALR 571 at [p 7 and the cases cited therein].

[216] Armadio at 462 per Mason J; at 472 per Deane J, with whom Wilson J agreed.

[217] Amadio at 466, 474, 477; Jedda Investments Pty Ltd v Krambousanos (1997) 72 FCR 138 ("Jedda Investments") at BC 9700554 p. 11.

[218] Amadio, 461, 476-77, see also Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621, 627, Brennan J; Jedda Investments at BD 9700554 p.12.

[219] Jedda Investments BC 9700554 p.13; Melverton v Commonwealth Development Bank of Australia (1989) NSW Comv R 55-484; BC 8902001 at 17; Begbie v State Bank of New South Wales Ltd [1993] FCA 579; (1994) ATPR 41-288; ACCC v Chattshouse Investments (1996) 142 ALR 147 at 188.

[220] Jedda Investments at BC 9700554 pp.13-14 and 17 referring to Amadio, 466 and 477.

[221] Jedda Investments at BC 9700554 p.14 referring to Amadio at 466 and 477.

[222] At 462 (emphasis added). See also ACCC v Samton Holdings (2002) 189 ALR 76 [48] where the Federal Court of Australia stated that equity will "set aside a contract or disposition resulting from the knowing exploitation by one party of the special disadvantage of another."

[223] At 474-75 (the second emphasised section was cited in Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457 at [76] per Gaudron, Gummow and Kirby JJ).

[224] Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457 at [74] per Gaudron, Gummow and Kirby JJ referring to Amadio at 474.

[225] Amadio at 467. See also Malverton v Commonwealth Development Bank of Australia, unreported judgment, Supreme Court of New South Wales, 30 June 1989, Hodgson J.

[226] Statement of Claim, paragraphs 33-35.

[227] Statement of Claim, paragraphs 33-36.

[228] Trade Practices Act 1974 (Cth) s 52(1).

[229] Fair Trading Act 1999 (Vic) s 9(1).

[230] (1989) ATPR (Digest) 46-054.

[231] [1992] FCA 557; (1992) 39 FCR 31.

[234] [2012] FCA 414.

[237] [1992] FCA 557; (1992) 110 ALR 608.

[238] [1988] FCA 40; (1988) 79 ALR 83.

[239] (1986) 12 FCR 477.

[240] Ramensky v Demagogue Pty Ltd (1992) BC 9203501, p 11.

[241] (2004) ATPR 42025; [204] FCA 1224.

[242] Hai Quan Global Smash Repair v Ledabow Pty Ltd (2004) ATPR 42025; [204] FCA 1224 at [44].

[244] (2004) ATPR (Digest) 46-243; [2003] NSWCA 213.

[245] Metalcorp Recyclers Pty Ltd v Metal Manufacturers Ltd [2003] NSWCA 213; (2004) ATPR (Digest) 46-243 at 54,203-4.

[246] (1992) FCR 31 at 32.

[247] [2010] HCA 31; (2010) 270 ALR 204.

[248] Miller and Associates Insurance Broking Pty Ltd v BMW Australian Finance Ltd (2010) 270 alr 204 AT [20] and [95].

[251] Miller and Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited [2010] HCA 31 at [21].

[252] Shiloh Spinners Ltd v Harding [1973] AC 691 at 723; Legione v Hatley [1983] HCA 11; (1983) 152 CLR 406 at 447.