Williamson v Carneys Lawyers Pty Ltd

The Statement of Claim 8The plaintiff's case against the first defendant alleges that the first defendant breached s 52 of the Trade Practices Act (Cth) 1974 and/or s 42 of the Fair Trading Act 1987, by failing to carry out searches that would have revealed the existence of proposed developments on adjoining properties which might affect the plaintiff's enjoyment of the property, or by failing to advise the plaintiff to undertake those searches himself. 9The case against the second defendant alleges that :- At the time of entering the loan transaction, the second defendant knew or ought to have known about the proposed planning proposal for a sand and basalt mine to be located on the property adjoining Reevesdale. 10The particulars at paragraph 26 of the statement of claim refer to the fact that the second defendant has an office in Goulburn, "local newspaper articles", and a representation by the second defendant on its website that it had "unparalleled knowledge and understanding of the farm sector in which it operates and our clients individual needs." 11At paragraph 27 of the statement of claim it is alleged that the "second defendant failed to advise the plaintiff of the proposed mine on the land adjacent to Reevesdale". At par 28, it is alleged that the loan agreement was "unjust in the circumstances relating to the loan at the time at which it was made pursuant to sections 7 and 9 of the Contracts Review Act 1980, in that "the second defendant knew, or had the information in its possession to enable it to know, that there was a proposed development on the land adjacent to Reevesdale which would affect the plaintiff's enjoyment of his property and would adversely affect the value of the property." The further particulars in relation to this alleged knowledge are those repeated at paragraph 26 of the statement of claim. 12The statement of claim goes on to allege in paragraphs 31 and 32 that "the mine on the land adjoining Reevesdale was given planning approval, subject to conditions, on or about July 2009" and that "in or about September 2009 the conditions of the approval were fulfilled, and the mine is capable in law of being constructed and operated". 13Some general observations about the statement of claim should be made. It is not alleged that there is, or will be, a sand and basalt mine on land adjoining Reevesdale. The height of the allegation is that the mine is capable of being constructed and operated. Since the conditions of approval were allegedly fulfilled in September 2009, nothing has happened for more than three years. The name of the mining company is not particularised, the name of the public authority which approved the mine is not particularised, the title reference to the land and the exact location of the proposed mine on that land are not particularised. The dates on which, and the local newspapers in which, the alleged articles appeared are not identified. The content of the articles is not articulated. 14It is not apparent from the statement of claim how the bank knew, or ought to have known, in July 2007, of a proposal that the plaintiff dates from July 2009. There is simply no temporal connection between the plaintiff's execution of the loan documents and the alleged mining proposal. 15It is not alleged that the terms of the loan were themselves unjust. There is no allegation that the Deed is relevantly unjust. The plaintiff expressly disavowed any intention to pursue an action in negligence against the second defendant, despite the language in the statement of claim that might suggest otherwise.

The Operation of Rule 14.28 UCPR 16The rule states that :- (1) The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading: (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the court. 17The second defendant relies upon (a). It must be established that, assuming all the allegations of fact (such as they are) set out in the pleading are proved, those facts would not establish the essential ingredients of a claim under the Contracts Review Act.

Whether the Proceedings are Doomed to Fail 18The relevant sections of the Contracts Review Act are :- Definitions 4(1) In this Act except insofar as the context or subject matter otherwise indicates or requires: ......... 'unjust' includes unconscionable harsh or oppressive; and 'injustice' shall be construed in a corresponding manner. ......... Principal relief 7(1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following: (a) it may decide to refuse to enforce any or all the provisions of the contract; (b) it may make an order declaring the contract void, in whole or in part; ......... (2) Where the Court makes an order under sub-section 1(b) ... the declaration ... shall have effect as from the time when the contract was made ... . ......... Matters to be considered by Court 9(1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract; or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1) the matters to which the Court shall have regard shall to the extent to which they are relevant to the circumstances, include the following: ......... (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract; ......... (h) whether or not and when independent legal or other expert advice was obtained by the parties seeking relief under this Act; (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect; ......... (l) the commercial or other setting, purpose and effect of the contract. ......... (4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made. 19Having regard to these provisions, two issues arise for consideration, namely, whether in the circumstances relating to it at the time it was made, the relevant contract was, or one or more of its provisions was or were, unjust; and whether, and, if so, in what manner, the Court should exercise one or other of the powers conferred on it by s.7(1) of the Act. 20In support of the first of these issues, the plaintiff relies upon certain dicta in the judgments of Deane J and Mason J in Commercial Bank of Australia Ltd v Amadio (1982 - 1983) 151 CLR 447 at 462, 467 and 474. In summary, the plaintiff's argument is that the circumstances under which he executed the mortgage qualify him as (paraphrasing Deane J at 474) a party to the mortgage who was under a special disability or special disadvantage in dealing with the bank, with the consequence that there was an absence of any reasonable degree of equality between himself and the bank, and that disability was sufficiently evident to the bank to make it prima facie unfair or unconscientious that the bank accepted the plaintiff's execution of the mortgage. 21The plaintiff further relies upon the discussion of Amadio in State Bank v Sullivan [1999] NSWSC 396 at [326] by James J, wherein his Honour observes that a "lack of information about a transaction and misinformation about a transaction can place a party to the transaction in a position of special disadvantage". The alleged information that the bank knew or ought to have known was the existence of a proposed development on land adjoining Reevesdale. 22There are several fatal flaws in this analysis. First, Amadio and State Bank v Sullivan were cases concerned with equitable relief on the ground of unconscionable conduct, and were not Contract Review Act cases. 23Second, even if one were to apply these principles to the circumstances of this case, the plaintiff was under no special disadvantage - he was a solicitor who was perfectly capable of carrying out his own enquiries and who had engaged another solicitor to do so. Third, there was no relevant inequality between the plaintiff and the bank, in that, assuming that there were local newspaper articles which alerted its readers to the proposed mine, that information was available and accessible to the plaintiff. Fourth, it is not apparent how the plaintiff's alleged ignorance of publicly available information would have been evident to the bank. Fifth, James J makes it tolerably clear that a lack of information giving rise to a position of special disadvantage is the absence of information about the transaction, in this case the mortgage, not about an external and unrelated circumstance. 24Returning to the case actually pleaded by the plaintiff, the question whether in the circumstances relating to it at the time it was made, the relevant contract was, or one or more of its provisions was or were, unjust, is to be determined by reference to the contract rather than the transaction or investment : West v. AGC (Advances) Ltd. (1986) 5 NSWLR 610, 621 per McHugh JA (as he then was); Elders Rural Finance Ltd. v. Smith (1996) 41 NSWLR 296, 309-310 per Handley JA ; White v Illawarra Mutual Building Society Ltd & Ors. [2002] NSWCA 164. There is nothing to suggest that the terms of the mortgage or the interest rate charged was anything other than consistent with sound commercial practice. 25Relevantly, at 621 of McHugh JA's judgement in West v AGC, the following appears :- If the defendant has not been engaged in conduct depriving the claimant of a real or informed choice to enter into a contract and the terms of the contract are reasonable as between the parties, I do not see how that contract can be considered unjust simply because it was not in the interest of the claimant to make the contract or because she had no independent advice. ............................................................................... A contract will not be unjust as against a party unless the contract or one of its provisions is the product of unfair conduct on his part either in the terms which he has imposed or in the means which he has employed to make the contract. 26There is no pleading suggesting, nor do I understand any part of the plaintiff's case against the second defendant to rest upon, the proposition that he was deprived of an informed choice to enter into the mortgage, or that the second defendant used unconscionable methods to ensure that the plaintiff executed the mortgage. The plaintiff's case was squarely put on the basis that he freely and voluntarily executed the mortgage, albeit unaware of an alleged proposal to develop a mine on adjoining property. As the authorities cited above make clear, a contract which is freely and voluntarily made and which subsequently proves to be against the interests of a party, is not thereby rendered relevantly unjust. 27To the extent that the pleadings suggest that the bank was under a duty to advise the plaintiff of the existence of the proposed development (assuming that the bank possessed such knowledge), where such a proposal might impact upon the value of the property and affect the commercial merits of the purchase of Reevesdale, that proposition has also been roundly refuted by the NSW Court of Appeal : Drury v Stone [2000] NSWCA 45. 28In Permanent Mortgages v MacFadyen [2012] NSWSC 130, Johnson J acknowledged that there is no duty of care between lender and customer, unless the lender advised the customer that the transaction was commercially sound or the lender assumed an obligation to advise and failed to advise that the transaction was not commercially sound. There is no evidence of such an obligation being assumed by the bank in the circumstances of this case. A general representation to the effect that the bank was an experienced lender within the farm sector falls considerably short of a representation to the plaintiff in this case that the purchase of the property was, and would remain, commercially sound. 29The second defendant also relied on the Deed of Forbearance, in particular clause 11, in order to defeat any action against it by the plaintiff arising out of the mortgage. Clause 11 provides that :- 11.1 The customer unconditionally and irrevocably releases and discharges the bank from all actions, suits, claims, demands and causes of action whatsoever at law, in equity and under statute which he may have or which but for this document would, could or might at any future time have or have had against the bank in respect of or arising out of either directly or indirectly any matter referred to in or arising out of this document. 11.2 may be raised or pleaded as a complete defence to the continuance or commencement of any proceedings in respect of the subject matter of this document, which have been or may be brought at any time by the customer against the bank in respect of or arising out of either directly or indirectly any matter referred to in or arising out of this document. 30The plaintiff's response to this argument was to the effect that s 17 of the Contracts Review Act rendered clause 11 of the Deed inoperable. Section 17 provides :- 17 Effect of this Act not limited by agreements etc (1) A person is not competent to waive his or her rights under this Act, and any provision of a contract is void to the extent that: (a) it purports to exclude, restrict or modify the application of this Act to the contract, or (b) it would, but for this subsection, have the effect of excluding, restricting or modifying the application of this Act to the contract. 31Whilst it is not strictly necessary to deal with this argument, I simply observe that on a sensible construction of s 17 of the Act, the reference to "it" in s 17 (1) (a) and (b) is a reference to a provision of a contract which is itself the subject of a claim under the Act. It does not in my view operate to prevent the execution of agreements which are designed to settle disputes between the parties and which contain a provision whereby one party agrees not to pursue a claim under statute, or at law or in equity concerning the subject matter of the dispute. As I have already noted, the plaintiff makes no claim under the Act with respect to the Deed. 32The second defendant also submitted that the absurd and extreme remedy sought by the plaintiff constituted a further ground for striking out the statement of claim. I accept that, assuming the plaintiff was successful in its claim under the Act against the second defendant, this Court has no power to make a declaration that the loan agreement be set aside, that the second defendant repay all interest payments and other expenses to date and that the plaintiff be relieved of all future interest payments and expenses. Remedies available to the Court under the Act are confined by s 7. 33I am satisfied that the plaintiff's pleadings do not disclose a reasonable cause of action against the second defendant. Accordingly, the statement of claim as against the second defendant is struck out. I note that the second defendant did not move on prayer three in the notice of motion. I order that the plaintiff pay the second defendant's costs on the notice of motion, on an indemnity basis. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 November 2012