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  4. Dale v Nichols Constructions Pty Ltd - [2003] QDC 453

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Dale v Nichols Constructions Pty Ltd[2003] QDC 453

Dale v Nichols Constructions Pty Ltd[2003] QDC 453

DISTRICT COURT OF QUEENSLAND

CITATION:

Dale v Nichols Constructions Pty Ltd [2003] QDC 453

PARTIES:

WENDY DALE

First Applicant

ROBERT NORMAN DALE

Second Applicant

v

NICHOLS CONSTRUCTIONS PTY LTD (ACN 010 763 505)

Respondent

and

BROADBENT RADICH SAMPSON LAWYERS

Third Party

FILE NO/S:

D868 of 2000

DIVISION:

 

PROCEEDING:

Originating application

ORIGINATING COURT:

District Court, Southport

DELIVERED ON:

12 December 2003

DELIVERED AT:

Brisbane

HEARING DATE:

10-13 September, 3-4 October 2002

JUDGE:

McGill DCJ

ORDER:

  1. Declare that the transactions between the first applicant and the respondent in January 1998 in respect of a loan of $161,000 and in March 1998 in respect of a loan of $20,000, are both subject to the Consumer Credit Code.
  1. Declare that:
  1. (a)
    in respect of the first credit contract, there were breaches of key requirements in that the provision for default interest was contrary to s 28(1), which was a breach of s 21(1)(c), and there was a failure to state the total interest payable under the contract, which was a breach of s 15(E);
  1. (b)
    in respect of the second credit contract, there were breaches of key requirements in that the contract did not state the annual percentage rate of interest, the method of calculation of the interest charges payable under the contract, and the credit fees and charges that were or might become payable under the contract, in breach of s 15(C), (D) and (G);
  1. Order the respondent pay the first applicant $1,000 as a civil penalty in respect of the first credit contract, and $5,000 as a civil penalty in respect of the second contract.
  1. Declare that the provisions of the first credit contract by which a higher rate of interest was payable unless the borrower was not in default under the contract imposed a liability prohibited by s 21(1) of the Code and were void to that extent.
  1. The application for compensation or restitution for contraventions of the Code is refused.
  1. The application for reopening the second credit contract under s 70 of the Code is refused.
  1. The application for relief under the Trade Practices Act is refused.
  1. Determinations of the amounts payable to discharge the loan contracts under s 77, orders on the third party proceeding, and orders for costs, to be made after further submissions.

CATCHWORDS:

CONSUMER CREDIT – Consumer Credit Code – whether transaction governed by Code – whether any and what breaches of code – remedy – amount required to pay out loans.

Consumer Credit Code ss 6(1)(b), (d), 11(2), 12(1), 21(1), 21(3), 23(1), 28, 70, 76, 80, 103, 107.

Baltic Shipping Company v Dillon (1991) 22 NSWLR 1 - cited

Best v Sutcliffe [1965] NZLR 750 - distinguished

Hungier v Grace (1972) 46 ALJR 492 - distinguished

Jonsson v Arkway Pty Ltd [2003] NSWSC 815 - followed

Linkenholt Pty Ltd v Quirk [2000] VSC 166 - considered

Linter Group Ltd v Goldberg (1992) 10 ACLC 739 - applied

Marshall & Brougham Pty Ltd v Commissioner of Taxation (1986) 45 SASR 571 - distinguished

Park Avenue Nominees Pty Ltd v Boon [2001] NSWSC 700 – not followed

Pertsinidis v Australian Central Credit Union Ltd (2001) 80 SASR 76 - applied

Rabone v Deane (1915) 20 CLR 636 - distinguished

Rafiqi v Wacal Investments Pty Ltd (1998) ASC #155-024 – not followed

Reid’s Brewery Co Ltd v Male [1891] 2 QB 1- cited

State of Queensland v Ward [2002] QSC 171 - considered

Swayne v Palm [1970] SASR 158 – distinguished

COUNSEL:

M E Eliadis for the first applicant

E J Morzone for the respondent

D G Clothier for the third party

SOLICITORS:

Clayton Utz for the first applicant

Hickey Lawyers for the respondent

Bartley & Associates for the third party

  1. [2]
    This is an application for relief under the Consumer Credit Code.  The respondent made two loans to the first applicant, $161,000 in January 1998 and $20,000 on 20 March 1998.  Both were for terms;  the first loan was for 12 months, the second for three months.  In neither case was the principal repaid at the expiration of the term, although substantial amounts have been paid at various times under the first loan.  There is and has been some dispute between the parties as to the amount paid, and as to the amount currently owing. 
  1. [3]
    The proceeding was commenced, probably incorrectly, by originating application filed 13 October 2000, at which time there were two applicants, Mr and Mrs Dale;  however, Mr Dale was a bankrupt, and by the time the matter came to trial, relief was sought only by the first applicant, Mrs Dale.  Both loans were arranged for the respondent by a firm of solicitors, and the respondent has taken third party proceedings against that firm seeking damages in the amount of any loss suffered by the respondent as a result of any breach of the solicitors’ duty to the respondent.  Accordingly, a large number of issues of fact and law arise in this matter.

History of the loans

  1. [4]
    In the latter part of 1995 Mr and Mrs Dale located a house in a residential subdivision they were interested in purchasing. It had been a display home, and the garage was set up as an office (pp. 17, 93), something which suited them as Mr Dale was attempting to set himself up in business as a motivational speaker and personal trainer. For that purpose he used a corporate vehicle, Speak Corporation Pty Ltd. However at that stage the business was in a preliminary state and had little income or trading record (p. 18), and they were unable to obtain finance to purchase the house. In October 1995 they entered into a tenancy agreement with the vendor, Mr Roebuck: document 74.[1]  Mr and Mrs Dale admitted that at times they had difficulty in paying the rent:  p. 46, p. 225.
  1. [5]
    There was a contract of sale of the property by Mr Roebuck to Speak Corporation Pty Ltd for $212,500 entered into on 24 May 1996 with completion due 1 July 1996 (document 70), but evidently that contract was not completed because there was a further contract dated 1 August 1996 for the sale of the same land to Mr and Mrs Dale.  That was due for completion on 1 September 1996:  document 71.  Ultimately a contract dated 16 October 1996 to Mr and Mrs Dale (p.557, Exhibit 28) for $239,000 was settled, and a memorandum of transfer of the land to Mr and Mrs Dale (signed 25 October 1996 – document 21) was registered on 31 December 1996.  It appears that settlement did not take place until December 1996, after Mr and Mrs Dale were able to obtain finance from a company Equity Investments Nominees Pty Ltd, which operated in conjunction with a solicitor’s practice.[2]  This finance was arranged for Mr and Mrs Dale by a finance broker, Kelibber Finance.  That firm obtained a signed statement from Mr Dale setting out some personal particulars[3] and advising that a loan was sought to purchase an investment property, although the house property they were purchasing to live in was identified as the property in question:  document 36.  Mr Dale said that he was advised by the finance broker to take this course in order to facilitate obtaining the loan[4], and that he simply signed the form which they later completed.[5]  This document was sent to the solicitor (p.550)[6] who sent a letter of offer which was signed and returned:  p.552.
  1. [6]
    On 13 December 1996 Mr and Mrs Dale signed a form of mortgage of the land to Equity Investments Nominees Pty Ltd, which was also signed by the mortgagee’s solicitor on 16 December 1996 (p.551), and lodged for registration the following day:  document 23.  It secured a loan of $160,000 due for repayment on 16 December 1997.  Mr and Mrs Dale also signed (pp.148, 49) various other documents, including a declaration that the credit was to be provided for business investment purposes (document 24), and a statutory declaration that, inter alia, the loan was to purchase an investment property:  document 28.[7]  It is not disputed that both of these declarations were in this respect false.  Mrs Dale said that she did not understand these forms, she just signed them because her husband had arranged things in this way:  p.50.  Mr Dale claimed he “skimmed” them, and assumed they were true and correct:  p.231.  I do not accept that he was unaware of the contents or effect of these declarations when he signed them.  He said elsewhere that they were desperate, and this was the only way to get the loan:  p.149.
  1. [7]
    Their financial position remained precarious. In early 1997 there was default on this loan, and they were pressed by the mortgagee’s solicitor to pay: p.56, p.234, Exhibit 6.  The mortgagee took proceedings to obtain possession of the property, which resulted in a default judgment against them for recovery of possession, on which a writ for possession was issued.[8]  Apparently however they were not actually put out of possession, although this put pressure on them to repay the loan before the original term of that first loan expired in December 1997. 
  1. [8]
    In September 1997 Mr and Mrs Dale contacted another finance broker who promptly located another firm of solicitors able to organise a loan from a client.[9]  That firm was the third party, which did quite a bit of this sort of thing (p.547), and the material came to Mr Reid, who was employed as a full time broker to receive applications for finance and to line up lenders with borrowers:  p.401; p.453; p.547.  He filled in a form[10] for the proposal and passed it on to an employed solicitor, Mr Bamberry (p.402), who on 6 October 1997 sent a letter addressed to Mrs Dale by fax, to the finance broker, for forwarding by her to Mrs Dale.[11] 
  1. [9]
    Because of the unfortunate state of the documentation in this case, it is not easy to ascertain exactly what was sent. The first five pages were the first five pages of document 9, viz the letter which is three pages, the acceptance form which is numbered 4 and the receipt which is unnumbered;  this follows from the fax imprints at the top of these pages which are numbered consecutively 1 to 5.    The receipt signed by Mrs Dale included a reference to a “Terms of Loan” document and an information statement.  A copy of the Terms of Loan document with this fax marking (and another fax marking), is Exhibit 5 and shows that it was pages 6 and 7.  Document 19, the pre-contractual statement,[12] was pages 8, 9 and 10.  The certificate of debtors, which is part of document 9, was page 11. 
  1. [10]
    I cannot identify the information statement referred to in the receipt signed by Mrs Dale. There is an information statement in evidence in Exhibit 20.[13]  This was in the possession of the applicant at some stage, but there is no evidence that it was the one sent under cover of the letter document 9, and Mr Radich’s statement (p.489) that it was a one page document is to the contrary.  There is no document to show that the information statement was actually provided;  although Mrs Dale signed a receipt for one, it seems clear enough that she would have been willing to sign anything put in front of her, and I do not regard that as compelling evidence of the existence of the documents referred to in that receipt.
  1. [11]
    There is another document, Exhibit 19, which starts with a cover sheet from Statewide Loan Centre (Joyce Cooper) to Mr and Mrs Dale of 6 October 1997, apparently enclosing the documents which had been sent to Statewide by the third party, and a brokerage agreement (document 8).  However Exhibit 19 is a facsimile, and what were sent through the fax were executed documents, so this is not the fax which was sent by Statewide to Mrs Dale for execution, although it does not seem to have on it any fax markings for any later transmissions.  It has the markings for when the third party sent the fax to Statewide Loans, and a marking of 11 November 1997 at 1.42pm when Statewide Loans sent the fax to someone else.  A clearer copy of the header sheet on Exhibit 19 appears as document 7 in Exhibit 4.  Apparently the documents were faxed by Ms Cooper to Mr and Mrs Dale on 6 October 1997 (p.51), and on 11 November the documents were faxed again, as appears from the addition at the foot of document 7 (and, faintly, in Exhibit 19).[14]  That would explain the fax markings of that date on Exhibit 19, but does not explain how it comes about that Exhibit 19 is a facsimile sent after execution. 
  1. [12]
    The other abnormality about Exhibit 19 is that it includes the brokerage agreement, also executed by Mrs Dale on 11 November 1997, and also referred to in the header document 7 as having been sent both on 6 October and 11 November.  That of course does not have any fax markings from the third party at the top of the page, nor does it have any fax markings relating to transmission by Statewide Loans on 11 November. 
  1. [13]
    Unfortunately nobody appears to have taken any trouble to preserve original documents in the proper order in this matter, and, although there must have been a large number of copies of this documentation at one stage (every time a document is sent through a fax machine it is copied), it is now not possible clearly to identify what was sent by the third party to the broker on 6 October 1997, except that it included document 9, document 19 and Exhibit 5, or rather earlier versions of all of those copy documents.  On 11 November 1997 Mrs Dale signed the brokerage agreement document 8, the acceptance form, the acknowledgement of receipt of documents, and the certificate of the debtors,[15] which were then returned to Statewide together with a cheque.  The documents were then faxed by Statewide to the third party on 12 November 1997 (p.492) and the originals were posted (Exhibit 29, document 44), but the third party was unable to produce at the trial the documentation apparently returned by Statewide both by fax and by mail on 12 November 1997.
  1. [14]
    The proposal was for the loan to be made just to Mrs Dale because during 1997 Mr Dale became bankrupt: pp.94, 100.[16]  He arranged for the trustee in bankruptcy to disclaim what had been his interest in the house[17] and they signed a transfer of title to the house to Mrs Dale:  document 6(2).  For that reason, all the documentation in relation to this loan (and the subsequent loan) related only to Mrs Dale, although it was still Mr Dale who was doing the organising, and carrying on any negotiations.  Initially the proposal was that the loan amount be advanced by lenders other than the respondent,[18] but subsequently one of the proposed lenders withdrew,[19] and the third party then proposed that the whole amount of the loan be advanced by the respondent:  Exhibit 2, para 15.  Further documentation presumably to reflect this (or the increase in the fees charged:  see document 58) was signed by Mrs Dale on 24 December 1997:  documents 10, 11, 12.[20]  Mr Nichols on behalf of the respondent signed its agreement for the loan on 12 January 1998:  document 13.  There was a further letter from the third party to Mrs Dale offering the loan on 16 January 1998 (document 4).
  1. [15]
    It appears that further documentation, including in particular a mortgage, were signed by her dated 21 January 1998:  document 15.[21]  Apparently on that day the documentation was received by Mr and Mrs Dale, signed by Mrs Dale and taken by Mr Dale to the third party.  The mortgage was in favour of the respondent and secured a loan of $161,000 for 12 months.  It was signed on behalf of the third party by Mr Bamberry on 22 January 1998:  document 15.  An authorisation to disburse money dated 27 January 1997 (presumably in error for 1998) was provided by the respondent to the third party:  document 16.  It appears that the actual advance occurred on 28 January 1998.[22]
  1. [16]
    On 16 February 1998 the third party wrote to Mrs Dale enclosing an epitome of mortgage and an unsigned credit contract/loan agreement prepared to comply with the Consumer Credit Code, which she was asked to sign and return:  Exhibit 15.  She did not sign the credit contract.  She and Mr Dale said that they attended that firm on 27 February 1998.[23]  They said they spoke to Grant Reid, the employee who was involved in arranging private lending finance.[24]  She claimed that she was asked by Mr Bamberry to sign an acceptance form and a declaration of purpose, because she was told by him that these documents were required and that it would jeopardise the whole loan if she did not sign:  Exhibit 1, para 32.[25]  She signed two documents dated that day:  document 17, document 46.  The latter is a declaration that the loan was for business purposes.
  1. [17]
    The declaration document 46 is a declaration for the purposes of the Consumer Credit Code that the credit “to be provided to me by the credit provider is to be applied wholly or predominantly for business or investment purposes (or for both purposes).”  It does not on its face indicate whether it relates to the first loan or the second loan.  The evidence of Mrs Dale in her affidavit Exhibit 1 was to the effect that the declaration related to the first loan, and the evidence of Mr Dale in Exhibit 2 was to the same effect.  On the other hand, the respondent and the third party submitted that the declaration related to the second loan. 
  1. [18]
    It appears from the fax imprints at the top of the page that the declaration form was page 6 of a fax sent by the third party on 27 February 1998 at 5.05pm, and document 17 was page 5 of that fax.  That suggests that they were faxed by the third party to Mrs Dale under cover of the standard letter which is document 47.[26]  Document 17 was also signed by her on 27 February 1998.  Document 47 is equally lacking in details of the proposal to which it relates, but it supposedly enclosed a document headed “terms of loan”.  Document 45 is such a document,[27] and refers to a proposed loan of $17,000 for six months;  Mrs Dale said that this document was “possibly” enclosed with the letter of 27 February 1998:  p.72.  On all the evidence, I am prepared to draw the inference that it was.
  1. [19]
    There is also the consideration that the third party could not seriously have been contemplating obtaining a business purpose declaration for the first loan at that stage. Apart from anything else, it had already obtained among other things a warranty by Mrs Dale that no one but the mortgagors would occupy the security property after settlement: document 14.  There were a number of other documents prepared by the third party on the assumption that the Consumer Credit Code applied to the first loan,[28] and it appears clear that well before the first loan was made the third party certainly knew that the loan was for the purpose of paying out an earlier mortgage on the principal place of residence of Mr and Mrs Dale.
  1. [20]
    In all the circumstances I do not accept that the declaration signed by Mrs Dale on 27 February 1998 related to the first loan;  it was signed in connection with a proposal for a further loan.  On the same day Mr Dale had sent a fax to Mr Reid of the third party requesting a loan of $17,000 for developing his business:  p.254, document 61.  Mr Dale conceded (p.254, p.261) that he was initially seeking to borrow further money to develop the business, but Mrs Dale had another pressing financial obligation at this time.  The money borrowed from Equity Investments Nominees Pty Ltd had not been sufficient to pay all of the money owing to the vendor of the house, and there was some part of the purchase price still outstanding:  p.20, p.96.  The loan from the respondent had only been sufficient to pay out the mortgage to Equity Investments Nominees Pty Ltd, and the vendor still had not been paid, and was pressing for payment.  There were negotiations with him as a result of which he agreed to accept $15,000 in satisfaction of whatever the amount unpaid was, so long as it was paid promptly:  Exhibit 2 para 32;  p.106.[29]  According to Mrs Dale she insisted that any money which was borrowed be used to pay off the vendor so that they would be secure in the home (p.25), and Mr Dale said that he accepted this:  Exhibit 2 para 42.  They both asserted in effect that there was some ambiguity initially about the purpose of the second loan, but eventually, and before it was made, they decided that it would be used to pay the vendor.[30]  It is clear that it was in fact used to pay out the vendor:  Documents 55, 60.
  1. [21]
    Mr Dale said that Mr Bamberry had suggested that he approach Mr Nichols directly in relation to the second loan; he even asserted that Mr Bamberry had coached him as to how he should approach Mr Nichols.[31]  It is not disputed that in March 1998 a meeting took place between Mr Dale and Mr Nichols at Mr Nichols’ home, as a result of which Mr Nichols agreed to lend $15,000 for a period of three months with interest and other charges in the sum of $5,000.  The loan was documented as one for $20,000 repayable in three months, but $5,000 was deducted immediately and paid by way of interest and costs, so in effect it was a loan of $15,000 in respect of which interest and other charges amounted to $5,000.  It was common ground that these terms were negotiated on 11 March 1998.  Mr Nichols said that he was told only that the loan was for the purposes of developing Mr Dale’s business;[32]  Mr Dale asserted that, although he had spoken about his business, and shown Mr Nichols material relating to it, he had told him that the purpose of the loan was to discharge the obligation to the vendor:  p.108, Exhibit 2 para 43.
  1. [22]
    On 12 March Mr Bamberry sent to Mr Nichols a fax confirming his instructions to advance “a sum of money” to Mrs Dale:  document 57.  The documentation was signed by Mrs Dale on 20 March 1998;  she signed a second mortgage (document 64),[33] a bill of sale (document 65) and an authority to disburse the loan by means of a payment to “M Roebuck”, the vendor of the house:  document 60.  Evidently a trust account cheque for $15,000 payable to M Roebuck was provided by the third party to Mr Dale on 20 March 1998[34] and he said, and there is no reason to doubt, that it was immediately handed over to Mr Roebuck.

Did the Consumer Credit Code apply?

  1. [23]
    Section 6(1) of the Code provides when it applies. There are four requirements:
  1. (a)
    the debtor is a natural person ordinarily resident in this jurisdiction;
  1. (b)
    the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes;
  1. (c)
    a charge is or may be made for providing the credit;  and
  1. (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.

There is no doubt that (a) and (c) were satisfied in this case.  On the face of it (b) was also satisfied, because the purpose of the first loan was to pay out another loan obtained for the purpose of purchasing the personal residence of Mr and Mrs Dale, and that is a personal, domestic or household purpose.[35]  The second loan was used to pay the vendor part of the purchase price for that house, and that is also a personal, domestic or household purpose.  In my opinion whether credit is provided for a particular purpose for the purposes of s 6(1) depends on the intention of the borrower at the time the credit is provided, and not the intention of the lender.  I am satisfied that the actual intention of Mrs Dale in each case was sufficient to satisfy (b).

Purpose for which credit is provided

  1. [24]
    One of the issues which was raised in argument on behalf of the third party was what was involved in the concept of credit being provided for a particular purpose, and for the purposes of s 6(1)(b) of the Code.  It was submitted on behalf of the third party that the provision invited attention to the purpose of the provision of the credit, not the purpose for which it is intended to be used.  However, plainly the purpose referred to is not the purpose of the credit provider, but the purpose of the debtor.  There would be no point in inserting the requirement that the credit be provided for personal, domestic or household purposes of the credit provider;  such a requirement could never be satisfied by circumstances which also satisfied the requirement in s 6(1)(d).  Obviously in all relevant cases the credit provider’s purpose in providing the credit will be a business purpose;  paragraph (b) must therefore be concerned with the purpose of the debtor.
  1. [25]
    It follows from s 4 of the Code that the provision of credit may take the form of deferral of payment of a debt, or when “one person (the debtor) incurs a deferred debt to another (the credit provider)”:  s 4(1)(b).  When s 6(1)(b) speaks of the purpose for which credit is provided, in the case of credit falling within s 4(1)(b), that must mean the purpose for which the deferred debt was incurred.  Where money is borrowed, the purpose for which the deferred debt, that is to say the obligation to repay the money in the future, is incurred, is to get the money now.  But that in itself has neither a personal domestic or household connotation, nor a connotation which falls outside those categories.  Obviously in order to ascertain the nature of the purpose, so as to categorise it, it is necessary to have regard to the intended use of the money:  s 6(5). 
  1. [26]
    Few people borrow money just to have the money; almost invariably, if money is borrowed it is borrowed because of an intention to use the borrowed money for some particular purpose. No doubt that was what the legislature assumed when formulating the test in paragraph (b). However, the paragraph is not framed by reference (relevantly) to the use to which the money is ultimately put; it is framed by reference to the purpose for which the credit is provided or intended to be provided [emphasis added].  It is a test which has to be applied by reference to the future;  it depends on the purpose or the intended purpose of the borrower at some particular time.  That in my opinion can only be a reference to the borrower’s intention at the relevant time as to the use to be made of the money when borrowed.  The “intention” referred to in s 6(5) must in my opinion be the intention of the debtor.
  1. [27]
    Counsel for the third party referred to the decision of Rafiqi v Wacal Investments Pty Ltd (1998) ASC #155-024, where Brabazon DCJ said that the purpose has to be determined by reference to what purpose would have been apparent to a reasonable person standing in the shoes of the credit provider.  With respect, I do not agree with that interpretation.[36]  It seems to me that there are two reasons why such an interpretation is not correct:  s 6(1)(b) is not expressed in terms of the apparent purpose of the debtor, or the credit provider’s understanding of the purpose of the debtor, it is expressed in terms of the purpose, and that is, on its natural meaning, the true purpose.  The second is that an interpretation of s 6(1)(b) as referring to the purpose of the debtor, rather than what is known by the credit provider of the purpose of the debtor, fits more readily with the operation of s 11 of the Act.  Perhaps a third reason is that, if s 6(1)(b) operated by reference to what the credit provider understood, it might be possible for a credit provider to avoid the operation of the Code merely by ensuring that it never became aware of the purpose for which the debtor was borrowing the money.  If it never became aware (whether tested subjectively or objectively) of the debtor’s purpose, paragraph (b) would not, on that test, be satisfied.
  1. [28]
    If paragraph (b) is concerned with the debtor’s actual purpose, that is consistent with the structure of s 11.  Section 11(1) starts from the presumption that the Code applies, that is, relevantly, that the credit was provided for one of the nominated purposes.  However the credit provider is not thereby put in the position of being forced at a later stage to prove the true purpose of the borrower when entering into the transaction in order to escape the operation of the Code, the prospect of which concerned Brabazon DCJ.[37]  Subsection (2) provides a mechanism by which a credit provider can protect itself from a debtor who might not be frank about the true purpose of the loan, which will be effective unless, pursuant to subsection (3), the credit provider has actual knowledge that the declaration given by the borrower is false.  If the credit provider does not follow that precaution, the credit provider runs the risk that a court will find that the true intention of the borrower was that the money borrowed be used for personal, domestic or household purposes, regardless of what was apparent to the credit provider.  It seems to me that once one takes into account s 11, the difficulty his Honour perceived in the operation of the statute by reference to the actual intention of the borrower disappears.
  1. [29]
    There is also the consideration that subsection 11(2), by requiring a declaration by the borrower, assumes that what is relevant is the borrower’s purpose in relation to the application of the credit.  If the purpose was to be determined by reference to what was objectively apparent to the lender, there would be no need for a declaration as to the borrower’s true purpose.  Indeed, the wording of subsection (3) is also more consistent with the proposition that the relevant issue is the true purpose of the borrower rather than what is objectively apparent as to the purpose of the borrower.
  1. [30]
    Counsel for the third party also referred to the decision of Master Harrison of the New South Wales Supreme Court in Park Avenue Nominees Pty Ltd v Boon [2001] NSWSC 700.  In that case reference was made to the decision in Rafiqi, and Master Harrison appears to have accepted that that was the correct test.  In that case the factual situation was unusual:  a son had borrowed money for the purposes of running a cattle property, and subsequently his father had borrowed money for the purpose of refinancing the son’s debt.  If the purpose of the refinancing transaction was to be determined by reference to the purpose of the original loan, it was a business purpose, namely the running of a cattle property.  If the purpose was to be determined by reference to the motive of the father, it was the personal motive of providing assistance to his son.  Master Harrison concluded that the evidence showed a reasonable person in the shoes of the credit provider would have understood that the predominant purpose for which the credit was provided was for running a cattle enterprise, although it appears that that conclusion was reached taking into account evidence directed to the understanding of the borrower (the father) as to what his son would do with the money rather than evidence as to the knowledge of the credit provider of that understanding.  Be that as it may, I am not persuaded that that decision provides any justification for adhering to what I regard as an incorrect interpretation of the statute in Rafiqi.
  1. [31]
    Furthermore, making the statute operate by reference to the actual intention of the borrower does not mean that the test is subjective. “The state of a man’s mind is as much a fact as the state of his digestion.”[38]  It is of course always a question of how that is proved, but every day in criminal courts the Crown  sets out to prove beyond reasonable doubt the existence of some intention in the mind of the accused at some particular time, and from time to time succeeds.  A good indication of the intended use of the money is what was actually done with the money once it had been borrowed:  Linkenholt Pty Ltd v Quirk [2000] VSC 166 at [98] per Gillard J.[39]  Of course, that is relevant because it throws light on the intention of the debtor at the relevant, earlier, time, and accordingly it is not conclusive.  The debtor may change his mind.  Money may be borrowed for one purpose, and then used for another. 
  1. [32]
    Consider a young barrister who wants to buy a second hand set of the Commonwealth Law Reports, and ascertains that an elderly colleague is willing to sell a set for $2,000. The barrister then goes to a credit provider and borrows $2,000, having at that time the intention of using the money borrowed to purchase the set of reports. But after the loan transaction has been completed and he has funds available to him, he discovers that the elderly colleague has died, or changed his mind, or sold the books to someone else. He could just repay the money, but there would be some credit charges not refunded, which would be a waste. He decides instead to spend the money on the purchase of a second hand jet ski, for recreational purposes. In my opinion in those circumstances, although the money is ultimately used for a personal purpose, the purpose for which the credit was provided was not a personal, domestic or household purpose. The Code would not apply to that loan transaction.

The signed declaration

  1. [33]
    The respondent relies on s 11(2) of the Code, which presumes that credit is not to be provided wholly or predominantly for personal, domestic or household purposes if the debtor declares, before entering into the credit contract, that the credit is to be applied wholly or predominantly for business or investment purposes (or for both purposes).  However, subsection (3) provides that such a declaration is ineffective if the credit provider, or any other person who obtained the declaration from the debtor, knew or had reason to believe, at the time the declaration was made, that the credit was in fact to be applied wholly or predominantly for personal, domestic or household purposes.
  1. [34]
    There was no relevant declaration in relation to the first loan. Only one declaration was signed, and that was not before any credit contract for that loan was entered into, or indeed before the credit was provided. In relation to the second loan however the respondent and the third party relied on the declaration signed by Mrs Dale on 27 February 1998, document 46.  It is not disputed that Mrs Dale signed this document, but it was submitted that it did not apply to the second loan.  In my opinion this is correct, for two reasons:
  1. (a)
    the document was signed in the context of a proposal for a loan different from that ultimately made as the second loan, and was therefore not a declaration in relation to the actual transaction between the parties;
  1. (b)
    the declaration was signed too long before the parties entered into the credit contract for the second loan.
  1. [35]
    The declaration form was forwarded under cover of a letter which also included a document headed “Terms of Loan”: document 45. This differed from the second loan in terms of the amount lent, the term of the loan, the basis upon which the charge for credit was to be levied, and in some other less significant respects. I do not think that s 11(2) means that, so long as any declaration is signed before the credit contract is entered into, in whatever circumstances, the subsection will still operate;  for the declaration to operate in relation to a particular credit contract, the declaration must relate to that contract.  Whether or not the declaration relates to a contract will depend on all the relevant circumstances, but in my opinion here the differences are sufficient and sufficiently significant that this declaration should not be seen as relating to the contract for the second loan.
  1. [36]
    I think it is axiomatic that the declaration must relate to the particular transaction entered into for it to be effective. It could hardly have been the legislative intention that so long as any declaration was obtained, any loan subsequently made would be excluded from the Code. Presumably if a declaration is properly made in relation to one loan, it could not operate in relation to a subsequent loan by the same credit provider to the same borrower, even though that declaration would have been made before the subsequent load contract was made.
  1. [37]
    With regard to the timing of the declaration, the second loan was not made until 20 March 1998, and the documentation for it was not signed by Mrs Dale until then.  In my opinion when s 11(2) of the Code speaks of the declaration “before entering into the credit contract” I do not think that it means at any time before entering into the credit contract.  On the contrary, in my opinion it means just before entering into the credit contract.  There are three reasons for this.  First, if the declaration could be given at any time before the credit contract was entered into, this would in my opinion provide less protection to the consumer than a requirement that it be given just before the credit contract was entered into.  At a later stage the consumer will have a clearer understanding of the purpose for which the loan is to be made, which may well be different from the purpose the consumer had in mind at an earlier time.  I cannot see any advantage to the consumer in allowing an effective declaration to be made some time, perhaps some considerable time, before the credit contract is actually entered into.  This is clearly consumer protection legislation, and it ought to be given an interpretation which is more beneficial to the consumer. 
  1. [38]
    The second is that subsection (3) provides that the declaration is ineffective in certain circumstances where someone has knowledge or reason to believe certain things “at the time the declaration was made.”  If the declaration were made some time before the credit contract was entered into, as long as the credit provider did not know at that time that the declaration was false, the credit provider would on the face of subsection (3) be entitled to continue to rely on the declaration even if the credit provider or the relevant person later came to know, prior to the time when the credit contract was made, that the declaration was false.  In my opinion the consumer protection provided by the statute will be weakened if the declaration is not given just before the credit contract is entered into, because it is only in those circumstances that the knowledge of the credit provider or the relevant person at the time when the declaration is made will be most likely to be the same as the knowledge of the credit provider or relevant person at the time the contract is made.  In my opinion the fact that the legislature has made subsection (3) operate by reference to the time when the declaration is made rather than the time when the credit contract is made indicates that the legislature contemplated that the declaration would be made just before the credit contract.  The presence in the section of subsection (3) indicates that the legislature did not intend that subsection (2) could amount in effect to a statutory right in the borrower to waive the protection of the statute.  There should not be any incentive to encourage credit providers to accept, let alone solicit, false declarations from borrowers under subsection (2).
  1. [39]
    The third reason is because I think that the situation is analogous to that considered in Linter Group Ltd v Goldberg (1992) 10 ACLC 739 at 755.  Although that case concerned s 230(8) of the Companies Code, that was also a situation where the protection afforded by the statute would be most effective the closer the declaration was to the relevant date, in that case the date when a security was provided.  In my opinion there are sufficient similarities between the statute and the circumstances then under consideration and the statute and circumstances in this case to make that decision persuasive.
  1. [40]
    It follows that in my opinion there was no relevant declaration in relation to the second loan. It is therefore unnecessary for me to consider whether subsection (3) applied.  However, in case a different view may be taken elsewhere, I find that at the time the declaration was made neither the respondent nor any relevant person associated with the third party knew, or had reason to believe, that the credit was in fact to be applied for the purpose of paying out the vendor in relation to the purchase by Mr and Mrs Dale of their home.  There was no evidence that this purpose was disclosed as early as 27 February 1998.[40]  If my interpretation of s 11 is incorrect, and the declaration can be given at any time before the credit contract is made, it follows that the declaration was effective in relation to the second loan, and it was not covered by the Consumer Credit Code.

Business of providing credit

  1. [41]
    The fourth requirement referred to earlier was also controversial. The respondent company is a construction company, building houses and unit blocks on the Gold Coast.[41]  The company does not lend money to purchasers of its homes or units.[42]  However, from time to time when the company has funds available it lent money on security of a mortgage of land, usually as a result of an approach from the representative of the third party with a loan proposal:  p.285, p.330.  It was evidently sufficiently common for this to occur that the company received more proposals than it has funds available to meet, so most such proposals were rejected:  p.332.  It appears to follow from Mr Nichols’ evidence that money which was used as working capital for the business was, when not otherwise required, routinely lent out for interest.
  1. [42]
    The business of the company is a large and profitable one. The profit and loss statements which are part of Exhibit 4 show that in 1998 the company made a net profit of over $1.5 million on a turnover of about $8.5 million; income included interest in the sum of $283,916.[43]  As at 30 June 1998 there was $3,292,441 in money lent on 19 loans, including the two to Mrs Dale:  document 189, p.320.  For the year ended 30 June 1999 the profit was about $1.25 million, and the interest received was $383,165.[44]  For the year ended 30 June 2000 operating profit was almost $3.9 million, and interest received had increased to almost $400,000.  The money earned in this way was a small but not insignificant part of the respondent’s income.  The purpose of this lending was to make a profit for the company:  p. 310.
  1. [43]
    The respondent did not advertise the availability of loans, or actively seek borrowers, but made the third party aware from time to time that applications for loans would be considered, regularly received them, and, at least at times, regularly made loans in response to them. Mr Nichols said that the loans were never for more than 12 months (p. 373), so new loans must have been made fairly regularly.
  1. [44]
    There are copies of mortgage documents and other documents under tab D in Exhibit 4 which show lending by the respondent on 21 March 1997 as one of a number of lenders but providing 34/49ths of $600,000, on 1 April 1997 lending $50,000, on 8 August 1997 as one of four lending $600,000, on 28 August 1997 lending $28,500, on 30 October 1997 lending $170,000, on 28 November 1997 lending $40,000, on 5 December 1997 lending $68,000, on 18 December 1997 lending $126,000, on 23 December 1997 four transactions with the same borrower for $104,400, $109,200, $111,000 and $112,800, on 20 January 1998 one of a number of lenders but providing 27/62nds of $310,000, on 2 March 1998, lending $550,000, on 2 June 1998 lending $95,000, and on 23 June 1998 lending $280,000, as well as to Mrs Dale.  A list at document 174, which shows relevant mortgages for loans by the respondent (p. 312), indicates another mortgage advance on 3 July 1997, but does not state the amount.  There were also a number of other later advances, but these I think are less relevant.
  1. [45]
    This pattern of repeated lending on a relatively large scale during this period illustrates the more generalised evidence about the lending being undertaken by the respondent.[45]  Indeed, in the light of this material the respondent could hardly have claimed that it was otherwise.
  1. [46]
    It is not necessary for the purposes of the test in s 6(1) for the business of providing credit to be the only or principal business of the credit provider.  But to satisfy the first limb of the definition the credit provider must be carrying on a business of providing credit.  The first question therefore is whether that is satisfied.
  1. [47]
    What occurred here was more than occasional and disconnected loans. There was in my opinion some element of system, repetition and continuity. The system used by the respondent was that when it wanted to make loans it would advise the third party that it would accept proposals for such loans from the third party, and the third party forwarded such proposals. In effect the task of locating borrowers was handled for the respondent by the third party, but that does not I think mean that there was not a system. The system was to have the third party do this,[46] and it appears to have worked well.  There were sufficient loans made for the overall impression to be one of repetition and continuity.  I do not think that it matters that the respondent did not have a place of business;  insofar as some office was required for dealing with borrowers, and indeed so far as dealing with borrowers was necessary, that was really part of the service provided by the third party.  When assessing the nature of the respondent’s activities, I do not think that what was done for the respondent by the third party should be disregarded.  I do not think that it matters that the respondent did not borrow money in order to re-lend it (p.370), because its working capital was sufficient to enable it to lend money to the extent that it wished.
  1. [48]
    This in my opinion is not similar to cases where an individual provides occasional loans as a result of some personal relationship, or where money is lent as part of an overall investment program. I was referred to a number of authorities by counsel for the third party.[47]  These in my opinion are however distinguishable, involving a different regime of lending which was in each case less businesslike than what the respondent was doing here.  As well, these cases were decided under various moneylenders’ Acts, which generally operated by requiring a person carrying on the business of money lending to obtain a licence.  This was enforced by imposing quite severe penalties on a person who ought to have been licensed but was not;  except in Western Australia, no interest on the loans made by that person would be recoverable, and in all other states except Victoria, and in New Zealand, not even the principal was recoverable.[48]  In such circumstances, it is unsurprising that courts would adopt a strict and narrow test of what amounted to carrying on the business of money lending for the purposes of such legislation, and would be astute to ensure that such dire consequences would not fall on any person who did not come clearly within the ambit of the statute.[49]  That context must be borne steadily in mind when considering decisions under those Acts.
  1. [49]
    In Rabone v Deane (1915) 20 CLR 636 Griffiths CJ in dicta suggested that the investing of money on mortgages of real estate, although carried on systematically and on a large scale, could not be regarded as carrying on the business of a moneylender within the meaning of the Act:  p.641.  It is I think sufficient to say that I do not regard that comment as a good guide to the scope of s 6(1)(d) of the Consumer Credit Code.
  1. [50]
    In Best v Sutcliffe [1965] NZLR 750 the defendant lent money on 29 occasions on the security of mortgages on real estate, to persons referred to him by one of two solicitors, or his accountant.  The trial judge accepted the passage from the third edition of Halsbury’s Laws of England (vol.27 p.18 para 27) in the following terms:  “It is a question of fact in each case whether a person is carrying on the business of money lending.  In order to establish that he is carrying on such a business it is not sufficient to prove that he has occasionally lent money at a remunerative rate of interest;  it is necessary to prove some degree of system and continuity in his money lending transactions and something more than loans to friends or relatives.  In considering whether a person is carrying on a business of money lending all loans made by him must be taken into account.”  He also said at p.751 that if: “The lender had been lending money systematically and continually, that is prima facie evidence that the lender was carrying on the business of money lending.”  He agreed that the defendant was lending money on a considerable scale and frequently, but said (pp.753-4):  “The conception of a business, even the simplest one, connotes some form of continuing organisation and, generally, some specific place or places at which it is conducted.  A man who is in business is usually active in seeking customers for his goods or services and, if he finds the demand for them greater than he can supply from his existing resources, he generally tries to increase those resources.”  His Honour concluded that:  “The picture which is conjured up is not one of a business of lending money but rather one of a series of haphazard and casual transactions.  To apply the description ‘business’ to such a loose pattern of events would be to give the word a strained and unnatural meaning” (p.754). 
  1. [51]
    Whatever may have been the position in New Zealand at the time of this decision, I do not consider that it is a necessary or even general feature of a business that it is conducted at some specific place or places now, or indeed at the time when the relevant events occurred. Insofar as some form of continuing organisation is required, the respondent was undoubtedly carrying on a business, the business of a construction company, and whatever form of continuing organisation it had for that business was also available for the business of lending money. Indeed, the fact that the lender is a company which is carrying on a business contributes to the overall conclusion that it was carrying on a business of providing credit.
  1. [52]
    Apart from that, I do not think that the organisation and system associated with the respondent’s activities should be considered without regard to the activities of the third party. The third party had a substantial organisation. Mr Reid was employed solely to consider applications for finance, and to line up suitable potential borrowers with potential lenders. The third party advertised for potential lenders, and the respondent made contact with it in response to an advertisement. The third party did not need actively to promote its activities to borrowers; on the evidence of Mr Reid (p.479) it had far more potential borrowers than it could accommodate, and most applications for loans were not successful. The respondent was taking advantage of the third party’s organisation, and I do not think that should be left out of the picture. There is certainly no suggestion that anything like that was occurring with the solicitors and the defendant in Best, or at least if it was, no regard was had to it by the court.
  1. [53]
    It is also I think significant to note the comments of the trial judge at pp.752-3: “This is the transaction which Mr Dugdale on behalf of the plaintiffs asks me to declare illegal, with the result that the plaintiffs would be entitled to have their property released from the mortgage given to the first defendant without paying any money at all. If, in fact, the first defendant is a moneylender, that is undoubtedly the result which must follow, and the fact that in those circumstances Parliament would have made legal what was morally dishonest is no concern of mine; but when the Court is invited to come to a conclusion, the results of which are so unjust and so contrary to the general feelings of right and wrong, it will naturally scrutinise the evidence upon which it is said it must come to that conclusion with anxious care.” There is nothing like that context here.
  1. [54]
    The decision of the trial judge in Best was confirmed by the Court of Appeal, although at p.758 the Court conceded that in some circumstances it may be the proper inference from the number, nature and regularity of transactions that a business is being carried on.  The Appeal Court was also influenced by the nature of the legislation as appears at p.759:  “We cannot conceive that what the respondent did was within the mischief which the Act was intended to prevent, and that is a material consideration in applying this Act.”  I on the other hand would have no hesitation in concluding that someone like the respondent, lending money regularly through someone like the third party, was just as much an appropriate subject for regulation by this Code as anyone else who was providing consumer finance, if and insofar as the transaction did involve the provision of consumer finance.  There is no reason at all in my view why people such as the respondent, if making loans on a regular basis through someone like the third party, should not be subject to regulation under the Consumer Credit Code for consumer loans.
  1. [55]
    A similar approach to that in Best was adopted in Swayne v Palm [1970] SASR 158, where indeed the trial judge said that he was relying on the considerations which led to the decision in Best (supra):  p.165.  On appeal the Full Court said among other things at p.166:  “If a sensible interpretation can be given to the definition of the word ‘moneylender’ without catching in the net a large number of people who would not in normal understanding be regarded as moneylenders, then we should incline to adopt that interpretation.  This is all the more just when one realises the harsh consequences that fall upon the unfortunate lender of money who finds himself characterised as having a business but not a licensed business of money lending.”  Later at p.170 a passage, which I quoted earlier from the judgment of the trial judge in Best at pp.752-3, is also quoted.
  1. [56]
    These decisions typify the attitude of judges to this issue when it came to be considered in the context of the Moneylenders Acts, for the reasons to which I have referred.  It do not consider that that approach is appropriate when construing the provisions of the Consumer Credit Code.
  1. [57]
    In Hungier v Grace (1972) 46 ALJR 492 the High Court held that a series of loans made by one person to another, although involving some element of frequency and regularity, and at a relatively high rate of interest, did not mean that the lender was carrying on a business of money lending.  Although the Chief Justice said at p.495 that it was possible to carry on the business of a moneylender with only one borrower, that would have to be an exceptional example of that business, and it seems to me that the circumstance that this was really a continuing commercial relationship between two individuals meant that the decision was unsurprising.  See in particular Walsh J at p.497.  The present case is quite different.
  1. [58]
    In Marshall & Brougham Pty Ltd v Commissioner of Taxation (1986) 45 SASR 571 Jacobs J said at p.576:  “Many of the cases are concerned with statutory definitions, and are coloured by the penal and sometimes Draconian consequences imposed on those who carry on the business of money lending in contravention of the licensing or other provisions of a statute.”  In that case it was held that lending money to financial institutions such as banks as a means of accessing the short term money market was not carrying on the business of lending money.
  1. [59]
    When dealing with the interpretation and application of the definition in the Consumer Credit Code, I prefer to follow the approach of Shaw J in Jonsson v Arkway Pty Ltd [2003] NSWSC 815.  His Honour, when dealing with an issue in relation to the Consumer Credit Code, said at para 28:  “It seems to me that insufficient attention has been given to the need to broadly and liberally interpret beneficial legislation of this kind.”  He added at para 32: “The contemporary principle of statutory interpretation is to apply a purposive approach to ascertain the meaning of the statute.”[50]  Adopting that approach, I find that the respondent was carrying on a business of providing credit, and that both of these loans were made in the course of it. 

Part of or incidental to another business

  1. [60]
    I will make precautionary findings about the applicability of the second and third limbs of this part of the definition. I do not think that loans made by the respondent were made as part of another business. Although it had another business, the making of loans was not part of that business. I think that what was contemplated by that provision was a situation where, in the course of one particular business, the credit provider also provided credit. For example, a retailer who provided credit to customers as part of the business of selling products would be providing credit as part of a business: Reid’s Brewery Co Ltd v Male [1891] 2 QB 1.  That was not the situation here. 
  1. [61]
    As to the third limb, it was submitted on behalf of the third party that this meant an activity which inseparably depended on or appertained to the business of the respondent. The difficulty with that approach is that it would seem to cover the same ground as what I understand to be credit provided as part of the other business. The example given by counsel for the third party, a trader who provided credit to customers on an isolated or sporadic basis, would in my opinion be still a provision of credit as part of another business. Something else, and in my opinion something less, is required by way of a connection to another business by this aspect of the test. It must have been intended by the legislature to cover situations which were distinct from the provision of credit to customers of the other business. But there has to be some connecting factor such that the provision of credit could be said to be incidental to the other business.
  1. [62]
    If the activities of the respondent were not sufficiently commercial, systematic and repetitious to qualify as a business of lending money for profit, in my opinion the circumstance that what was being lent was the working capital of the ordinary business of the respondent, when that working capital was not immediately required for that business, would in my opinion provide a sufficient connection for those loans to be said to be made incidentally to the construction business carried on by the respondent.
  1. [63]
    Again I am conscious of the fact that this is consumer protection legislation, and that therefore it is likely that the legislature intended a fairly wide definition to apply in these circumstances, so that the protection of the Code would be extended to more rather than fewer borrowers.[51]  The use of a threefold alternative test also seems to me to be an attempt by the legislature to cast the net wide.  The expression is much wider than “carrying on the business of money lending”, the expression used in earlier legislation providing some consumer protection in this field, and it is difficult to believe that the change was not deliberate.  In my opinion no narrow or restrictive construction should be applied to s 6(1)(d) of the Code, and adopting that approach in my opinion the activities of the respondent fall comfortably within that paragraph.
  1. [64]
    It follows that all of the requirements of s 6(1) of the Code applied to both of these loans, and both were therefore subject to the operation of the Code.

First loan – breaches of the Code

  1. [65]
    The applicant relies on four breaches of the Code in respect of the first loan:
  1. (a)
    that there was no credit contract in the form of a written document signed by the debtor and the credit provider, in breach of s 12(1);
  1. (b)
    that there was no pre-contractual statement that set out the method of calculation of interest charges and the frequency with which interest charges are to be debited, in breach of s 14(1) and s 15D of the Code;
  1. (c)
    default interest had been charged on the full amount of the principal outstanding from time to time rather than on the sum which was overdue from time to time, in breach of s 21 of the Code;
  1. (d)
    the respondent had demanded and been paid from time to time charges not authorised by the contract, in respect of the respondent’s time, inconvenience and expense in collecting payment, in breach of s 21(3) of the Code.
  1. [66]
    As to the first alleged breach, there was no credit contract as such. A document intended to function as a credit contract was sent by the third party to Mrs Dale on 16 February 1998 (Exhibit 15) but she did not sign it, and in any case the transaction had been completed the previous month.  It was submitted on behalf of the third party that the letter of offer from the third party dated 1 October 1997 which was signed and returned by Mrs Dale amounted to a credit contract within s 12(1)(b) of the Code.  However that was not a written document signed by the credit provider;  the credit provider is the respondent, not the third party.  The document was nowhere signed by the respondent.  It was not signed on behalf of the respondent by the third party. 
  1. [67]
    That document, the letter from the third party to Mrs Dale, purported to be an offer on behalf of an unnamed client, but at that stage the third party had no authority from the respondent to offer a loan on these terms by the respondent. The respondent agreed to lend money to Mrs Dale by signing an instruction to the third party on 12 January 1998:  document 13.  I am not persuaded that at any time prior to that document being provided the third party had the respondent’s authority to make any offer of anything on the respondent’s behalf to Mrs Dale.  Mr Reid said that when he received the application from the finance broker (document 44) he completed an internal document headed loan proposal (document 53) which referred to a lender other than the respondent, and which was given to Mr Bamberry, who sent the letter of offer:  p.454, and see p.402.  Mr Reid apparently did not even have instructions from the lender referred to in document 53 to make an offer to Mrs Dale;  as he explained the system on p.455, ordinarily there would not have been instructions from the lender to make a binding offer, that is the sort of offer contemplated by s 12(1)(b) of the Code, prior to the time when this documentation was sent out.[52] 
  1. [68]
    In these circumstances, the wording of the letter, document 9, was entirely inapt.  The statement that there was a client “who is prepared to accept your proposal” was false.[53]  The proposition that the letter and the contents were an offer capable of being accepted by the addressee so as to make a binding contract was false.  Careful consideration of clause 10 of the letter suggests that, although the documentation was generally described as an offer by the third party or the client to Mrs Dale which was subject to acceptance by her, at best what was occurring was the solicitation from Mrs Dale of an offer by her which was to be accepted by the notification to Mrs Dale of the lender’s name.[54]
  1. [69]
    Once the respondent had signed the loan agreement form, document 13 (which is only an agreement between the respondent and the third party), a further letter was sent on 16 January 1998:  document 4.  With that letter were included the mortgage which had been prepared (document 15), and apparently a “deed of loan” for signing and return, although I have not been able to identify that document in the evidence.
  1. [70]
    There is I think only one document in writing signed by or on behalf of the parties which might be capable of amounting to a written contract document for the purposes of s 12(1):  that is the mortgage, document 15.  That was signed by Mrs Dale, and by Mr Bamberry as solicitor on behalf of the mortgagee.  When Mrs Dale signed the mortgage document and returned it to the third party this was an offer to mortgage the house property in return for a loan on the terms and conditions set out in the mortgage, to which she was offering to adhere, and that offer was accepted in writing by the signature on the mortgage of Mr Bamberry.  It is necessary for the credit contract to set out the whole terms of the agreement between the parties, but it is not clear that the mortgage does not do this.  Accordingly I am not persuaded there was a breach of s 12(1) of the Code.  Even if there had been, because there had to be a credit contract separate from the mortgage, it would have been at most a technical breach only, and of no particular significance.
  1. [71]
    With regard to the second alleged breach, the pre-contractual statement relied on was document 19, which was apparently part of the fax sent by the third party to the finance broker, Ms Cooper, for forwarding to Mrs Dale:  document 9.  Document 19 is expressed as an offer by Mrs Dale to “a client of Broadbent & Radich” to borrow the amount of credit on the terms and conditions specified in “the credit contract” and not otherwise identified.  As a pre-contractual statement this document is not very satisfactory.  However, the applicant relied only on the failure to set out in the pre-contractual statement the matters required by s 15(D).  The statement omitted the first matter listed in s 15, the credit provider’s name.  It stated the amount of credit, and said that the annual percentage rate under the contract was 11 percent.  What was proposed[55] was a lower rate of 11 percent and a higher rate of 16 percent, and that is what was incorporated in the mortgage:  document 15.  Accordingly there was more than one rate provided under the contract, but the higher rate was referred to in the pre-contractual statement as the default rate.
  1. [72]
    Section 15D requires a statement of “the method of calculation of the interest charges payable under the contract and the frequency with which interest charges are to be debited under the contract.”  There is no statement in document 19 of these matters.  This breach is relied on by the applicant.  Heading C:  calculation of interest charges states:  “Interest is to be calculated for the entire duration of the credit contract and there is no interest free period under the credit contract.”  This does not identify the method of calculation of interest charges;  it does not indicate whether interest is charged on the total amount for the whole period, or on the amount outstanding from time to time, or on what basis.  It does not indicate whether, and if so when, unpaid interest is capitalised, although the statement does elsewhere, under “E: repayments” identified that interest is to be paid monthly in arrears.  The total amount of interest charges payable is identified, from which it can be deduced that interest is calculated on the amount of credit at the stated annual rate for the term of one year. 
  1. [73]
    This matter is complicated by the fact that item E: repayments states that the amount of credit shall be repaid by one payment 11 months from the date of the advance, when the mortgage, and I think other documents, identified the term as 12 months.  The statement does not identify the credit fees and charges that are or may become payable under the contract and when each fee or charge is payable, merely stating that there are no retained credit fees or charges, which I suppose means moneys deducted from the amount of credit.  The letter of 6 October 1997, document 9, refers to payment of an amount shown as item 14 on the terms of loan, apparently as an establishment fee, and there were also costs associated with the mortgage.  The statement referred to a default rate of interest of 18 percent, and stated:  “If an interest payment or the repayment of the amount of credit is not paid on due dates as set out in paragraph E then you will be charged default interest at 18 percent.  The default interest will be calculated on a daily basis whilst the default continues.”  The mortgage provides in effect that interest is to be payable at the higher rate of 16 percent per annum but if interest at the lower rate of 11 percent per annum is paid on time it will be accepted in satisfaction of the obligation to pay interest.  The statement does not identify that default interest is to be charged in this way, rather than being imposed on the amount payment of which is late.

Default interest

  1. [74]
    The matter is complicated because s 28 of the Code restricts the way in which default interest can operate.  That section provides:

“(1) A credit contract may not provide that an annual percentage rate applicable under a credit contract to any part of the unpaid balance will differ according to whether the debtor is in default under the contract.

  1. (2)
    However, a credit contract may provide for such a differential rate if the higher rate is imposed only in the event of default in payment, in respect of the amount in default and while the default continues.”

The statement under heading “I: default rate” could be consistent with the permitted mechanism for default rate in s 28(2), although the expression there is not sufficiently clear to enable me to determine whether that definitely was the case.  On the other hand, it is clear that the provision about higher and lower rates of interest in the mortgage (document 15) is not consistent with the requirements of s 28(2), and, insofar as the mortgage purported to provide for a higher rate, that provision was in breach of s 28(1) of the Code.  It follows in my opinion that the provision for payment of the higher rate in the event of default is therefore invalid and of no effect:  s 21(1)(c), (2).

  1. [75]
    Bearing in mind the effect of s 28, it was accurate to refer to only one interest rate in the pre-contractual statement.  That greatly simplified the requirement to state the calculation of interest charges, but nevertheless I do not think that what was stated there was sufficiently clear and explicit to satisfy that requirement.  On the other hand, the information required was simple and straightforward, and it follows obviously enough from what was stated next in the statement, and would be readily understood as following naturally from what information was provided.  Although there has been a breach of this provision, I do not regard it as a particularly serious breach.
  1. [76]
    The third matter relied on was the breach of s 21(1)(c) to which I have already referred.  The respondent and third party did not appear to dispute that there had been incorrect claims as to the entitlement to default interest, although the respondent submitted that there was an entitlement to default interest once the principal became due and payable, because then there was no breach of the Credit Code provision.  It is true that once the date for repayment had passed there had been default in respect of the repayment of the principal, but I do not think that this is of assistance to the respondent. 
  1. [77]
    Section 28 in my opinion provides in subsection (1) that a credit contract may not provide certain things in relation to default interest.  Subsection (2) permits other, different provisions to be made for default interest in a credit contract.  If a credit contract contains a provision which falls within subsection (1), that provision is one prohibited by the Code, because it is in breach of s 28(1).  The provision of the mortgage which imposed the monetary liability in breach of s 28(1), which is made void to the extent that it does so by s 21(2), is the provision for interest to be paid at the higher rate in the event of default.  That part of the mortgage which imposed an obligation to pay interest at 11 percent per annum whether or not there was default remains valid and effective, because to that extent it does not impose a monetary liability in respect of an interest charge exceeding the amount that may be charged consistently with the Code.  But I do not interpret s 21 as providing in effect that, if a credit contract contains an impermissible provision for default interest which is in breach of s 28(1), the credit contract is to be construed as if instead it contained a different provision dealing with default interest which was permitted under s 28(2). 
  1. [78]
    The position with this contract is that it does not contain the permitted provision for default interest. So when the impermissible provision is rendered void, the result is that there is no provision in the contract for default interest at all. There is therefore no entitlement to default interest. The fact that the contract does not comply with the Code does not mean that the Court should interpret it as if it had contained a different provision which would comply with the Code. It is a matter for a credit provider who wants to impose a provision for default interest to do so in a way which is consistent with the requirements of the Code, but if the credit provider does not insert such a provision in the contract, the Court will not do so for it. It follows that there is no entitlement at all to default interest under the first contract.

Additional payments

  1. [79]
    The remaining issue is as to occasions when Mr Nichols demanded payment for his time, inconvenience and expense, and credited parts of payments made to him to that rather than treating them as payments of money owing under the mortgage, It was not disputed that there was no entitlement under the contract to impose such charges. Mr Nichols accepted the general proposition that this had occurred: p.329.
  1. [80]
    There were a number of these mentioned in the applicant’s material. Exhibit 2 refers in paragraph 64 to a payment of $350 on 22 April 1998, a payment of $400 on 22 January 1999, $250[56] from a payment of $5,000 on 27 September 1999.  Ultimately Mr Nichols did not dispute that these payments had been made, and that they had not been brought to account.[57]  Apart from these, a payment of $650 on 25 October 1999 was originally receipted for “legal and inconvenience” (document 264), $300 was deducted from a payment of $2,400 on 16 November 1999 (documents 255 and 325) and $300 was shown in Mr Nichols’ record Exhibit 9 as “for my expenses” on 6 March 2000.  All were ultimately conceded as properly credited to the account:  Exhibit 8. 
  1. [81]
    It was submitted for the respondent that at these times the loan transaction was seriously in default and that there had been considerable personal inconvenience to Mr Nichols in relation to this matter, so that, although not permitted under the contract,[58] such demands were not unreasonable.  I do not accept this argument.  It is quite unacceptable that extra payments should be demanded and pocketed by a lender without credit being given for them, whatever the state of the account between the parties.  Lenders have certain remedies which are provided for under the contract and which are regulated by the Code, and no extra-contractual recovery should be countenanced.  Nevertheless the fact remains that this did not happen very often, and did not involve large amounts of money.
  1. [82]
    In relation to the first credit contract, therefore, the respondent has contravened a key requirement, namely s 21(1) at the time the credit contract was entered into:  s 100(1)(i).  By imposing a provision for default interest which was contrary to s 26(1), there was a breach of s 21(1)(c) which is a key requirement, and that breach occurred at the time the credit contract was entered into.  There was no specific allegation that the credit contract was in breach of any of the requirements of s 15, including any of those made key requirements by s 100(1), but paragraph 41 of the statement of claim alleged a breach of s 15 in respect of this contract, which raised this issue.  The only key requirement in s 15 breached by document 15 was s 15(E).  The total of the interest charges payable under the contract was not stated.  This is not very serious.  A breach of s 14 in relation to the pre-contractual statement in respect of the matter referred to in s 15 and required by s 14 to be included in the pre-contractual statement is not in my opinion a breach of a key requirement as defined in s 100.

Second loan – breaches of Code

  1. [83]
    Again it was submitted that there was no credit contract in the form of a written contract document signed by both parties as required by s 12.  Again, there was a mortgage (document 64) and that sets out most of the terms of the contract, and functions as a written credit contract.  Accordingly there was no breach of s 12(1) of the Code.  Here however there is the difficulty that document 64 does not identify the amount of interest paid in respect of the term of the loan.  Clause 30 in the schedule to the mortgage says: “The mortgagor will pay interest on the principal sum together with any other moneys in advance at the date of settlement.  An amount of money representing the interest has been agreed between the parties.”  Clearly that does not comply with the requirement of the Code as to the content of the loan contract.  The mortgage did not comply with the requirements of s 15(C), (D), (E) and (G).  Those are all key requirements.  
  1. [84]
    The position was further complicated by the fact that there was a contemporaneous bill of sale which also purports to record the terms of the loan between the parties: document 65.  This however refers in recital 1(b) to the proposition that: “Interest in a lump sum of $3,000 is paid to the grantee at settlement.”  Unless the balance of $2,000 represents costs as distinct from interest, which is not dealt with by either of the documents, which is also unsatisfactory, this is not consistent with document 64.  The bill of sale did not comply with the requirements of s 15(C), (D), and (G), which are key requirements.  Overall therefore I am prepared to find that s 12 has been complied with, although neither of the documents relied on as a credit contract satisfies all of the requirements of s 15.
  1. [85]
    It was alleged that there was no pre-contractual statement, or information statement in the form required by the regulations. It was conceded by the respondent and the third party that there was no pre-contractual statement or information statement in respect of the second loan.
  1. [86]
    When the second loan was settled, $5,000 was retained by way of interest and other charges in respect of the three month term, and only an amount of $15,000 was actually advanced. The applicant alleged that this was a breach of s 23(1) of the Code.  Section 23(1) requires the loan to be made in full without deducting an amount for interest charges under the contract, and it appears to follow that there was a breach of that section.
  1. [87]
    It was further submitted that there had been a breach of s 21(3), in that default interest at the rate of 20 percent per annum had been charged on the sum of $20,000 in circumstances where credit in an amount of $15,000 only was provided to the applicant.  That submission however is really inconsistent with the proposition that the credit contract involved a breach of s 23(1).  If the amount advanced was only $15,000, it has been paid in full;  that amount was paid in full to Mr Roebuck at the direction of Mr Dale on behalf of Mrs Dale.  But this was in form a loan of $20,000 of which $5,000 was used to pay interest and costs, in breach of s 23(1).  The amount lent was $20,000.  That was the amount required to be repaid, and when it was not repaid interest on that amount became payable at the default rate of 20 percent.  There was therefore no breach of s 21(3) as alleged.[59] 

Breaches after contract

  1. [88]
    It was also submitted that there had been other breaches of the Code in relation to the way in which matters proceeded in respect of the two loans. On 2 September 1998 the respondent filed an application in the District Court at Southport seeking possession of the subject property.  That concluded on 25 September 1998 with judgment for possession in favour of the respondent.[60]  This proceeding was taken in respect of the second loan, and it is clear that no default notice complying with s 80(2) was given prior to the time when the proceeding commenced.
  1. [89]
    The respondent however submitted that this was an issue which could and should have been raised in that proceeding, and since it was not raised then the applicant was now estopped from raising it in the present proceeding. Indeed, it was submitted that the effect of that proceeding was that the applicant was estopped from raising any claims in relation to the second loan transaction.

Issue estoppel

  1. [90]
    The proceeding brought by the respondent against the applicant in 1998 was not an action seeking relief generally under the mortgage, that is seeking to enforce the security and seeking payment of whatever amount was owing; it was an application under s 78(2)(c)(i) of the Land Title Act to obtain possession of the mortgaged land.  That statutory entitlement arose in the event of the mortgagor defaulting under the mortgage, provided it was a registered mortgage.  It was a right subject to the terms of the mortgage, but there was nothing in the second mortgage which provided to the contrary.  The issue therefore in that proceeding was whether there had been default under the mortgage so that, as against the mortgagor, the mortgagee was entitled to possession under the statute.
  1. [91]
    It would not be a defence to such a proceeding to assert that the default was different from the default alleged by the applicant; so long as there was some default, so far as that Act was concerned the applicant was entitled to succeed: Pertsinidis v Australian Central Credit Union Ltd (2001) 80 SASR 76 at 81 per Doyle CJ. 
  1. [92]
    Whether a failure to give the notice required by s 80 of the Code would be a defence to a claim for relief under the Land Titles Act depends on the terms of the Code.  Section 80 does not contain any specific provision as to what effect a failure to give the notice required by s 80 has in proceedings to recover possession of mortgaged property, other than that it is an offence against the Code which renders the credit provider liable to a maximum penalty of 50 penalty units.[61]  Section 114 provides in subsection (1):  “If a credit provider contravenes a requirement of or made under this Code (other than one for which a civil effect is specifically provided by Division 1 or by any other provision of this Code), the court may order the credit provider to make restitution or pay compensation to any person affected by the contravention and, in that event, may make any consequential order it considers appropriate in the circumstances.”  Accordingly there is a power to require the credit provider to make restitution or pay compensation activated by commencing a proceeding in breach of s 80, but that in itself does not give rise to a defence to the mortgagor if such proceedings are commenced. 
  1. [93]
    There is no specific provision in Division 1 or elsewhere in the Code for any other civil consequences of a breach of s 80.  Section 170 of the Code relevantly provides:

“(1) 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.

  1. (2)
    Except as provided by this section, this Code does not derogate from rights and remedies that exist apart from this Code.” [emphasis added]

That is an unusually explicit provision, which makes it clear that there are to be no implied civil consequences flowing from the terms of any provision in the Code.  It clearly applies to a contravention of s 80.

  1. [94]
    There is no express provision in the Code to the effect that a failure to give a notice required by s 80 renders the mortgagee’s right to possession given by the Land Title Act unenforceable.  It follows from the terms of s 170 that the Code therefore does not derogate from the right under the Land Title Act, and the mortgage was not unenforceable notwithstanding that the commencement of the proceeding to enforce the mortgage rendered the respondent apparently liable to a criminal sanction and a claim for compensation.  Accordingly, proof that the respondent had not complied with s 80 would not have been a good defence in that proceeding.[62] 
  1. [95]
    Nor could any of the matters raised now in relation to the second loan have been raised in response to that proceeding. None of them go to the validity of the mortgage, and none were such that, if the applicant had been successful, the result would have been that there would have been no default under the mortgage. There was certainly a substantial amount owing under the mortgage, and it was not necessary to establish just what amount was owing in order to show that there had been default entitling the mortgagee to possession.
  1. [96]
    That proceeding had been started by originating summons, and under the District Court Act and rules then in force there was no mechanism for a counter-claim to be raised in response to an originating summons.[63]  Accordingly it was not open to the applicant on that basis to obtain the relief sought in the present proceedings in the earlier proceedings, and therefore no question of issue of estoppel or Anshun estoppel.[64]  As to the latter, it certainly cannot be said that a determination in the present application that there was a breach of s 80 is an outcome which in some way is contradictory to the judgment obtained in 1998.  The two judgments do not prescribe rights which are inconsistent in respect of the same transaction.  No basis for any issue estoppel arises.
  1. [97]
    It follows that I can and do find there has been a breach of s 80 by the respondent.  However, the proceeding was not without notice.  On 22 June 1998 the third party sent a notice of exercise of power of sale in form 7 under the Property Law Act s 84 on behalf of the respondent to the applicant.[65]  The notice in form 7 identified the default and threatened proceedings unless within 30 days of service of the notice the default was remedied.  It may not have been a notice of default under the Consumer Credit Code, but it was for practical purposes as effective at drawing the attention of the applicant to the situation she had placed herself in as a result of the failure to repay the money lent at the end of the term of the second loan.

Other breaches

  1. [98]
    The next matter alleged on behalf of the applicant was that the respondent had taken further security in the form of a mortgage from Mr Dale to secure obligations under the credit contracts, contrary to s 44(1) of the Code.  That section provides:  “A credit provider must not enter into a mortgage to secure obligations under a credit contract unless each mortgagor is a debtor under the contract or a guarantor under a related guarantee.”  It was not disputed that securities had been obtained from Mr Dale in circumstances where he was not a debtor and where there was no related guarantee.  Section 44(3) provides that a mortgage which does not comply with this section is unenforceable.  There is also a provision permitting the court on application by one of the parties to an unenforceable mortgage to order that the credit provider discharge the mortgage.  However there is no application by Mr Dale seeking an order under s 44(4) before me.  It does not appear therefore that the breach of s 44 has any direct relevance to the matters in issue in this proceeding, although it may be a part of a general picture of disregard by the respondent, and the third party, of the respondent’s obligations under the Consumer Credit Code.  It would mean that no costs relating to the creation or enforcement of any prohibited securities could be charged to the applicant, but none are claimed in Exhibit 8.
  1. [99]
    It was also alleged that there had been a breach of s 76 of the Code, in that the respondent had failed to provide a fully particularised statement of the amount required to pay out the credit contract.  I accept that there was a request for a particularised payout figure, and that the respondent provided a response which was not properly particularised:  Exhibit 21.  The solicitors for the applicant requested proper particulars, and the respondent did not provide them within seven days after the request was given, or at all:  p.512.  It follows that under s 77 there is jurisdiction in the court to determine the amount payable in order to pay out the credit contract on the date of determination.

Was the second loan contract unjust?

  1. [100]
    The applicant also alleges that the contract for the second loan was unjust within the meaning of s 70(1) of the Code.  Relevantly that provides:  “The court may, if satisfied on the application of a debtor … that, in the circumstances relating to the relevant credit contract, … at the time it was entered into … the contract … was unjust, reopen the transaction that gave rise to the contract …”  Subsection (2) then sets out a number of matters to be considered in determining whether a term of a particular credit contract is unjust;  the court is to have regard to the public interest and to all the circumstances of the case, and may have regard to a list of particular matters, the last of which is “any other relevant factor.”  This has to be assessed at the time the contract was entered into, and taking into account the circumstances that were then reasonably foreseeable;  injustice arising from circumstances that were not reasonably foreseeable at that time must be disregarded:  s 70(4).  However in determining whether to grant relief the court may have regard to the conduct of the parties since it was entered into:  s 70(5).  Subsection (7) provides that “unjust” includes unconscionable, harsh or oppressive.
  1. [101]
    I am not aware of any authority or guidance at least in courts in this state as to what is meant by a contract being “unjust” for the purposes of the Code.[66]  A contract might be unjust because of its terms, and the way in which they would operate, either if the contract is properly performed or if the contract is breached, or because of the way in which the contract came to be made.  A contract in particular terms may be unjust with a particular debtor, even though an agreement in the same terms might not be unjust with another debtor if the contract came to be made under different circumstances.  A contract is not unjust simply because it is not in the interests of the debtor to enter into the contract,[67] or because the debtor is unable to pay the debt when called upon to do so, or because enforcement of the contract will lead to the loss of the debtor’s home.[68]
  1. [102]
    Particular features of the second loan are that it was for a relatively short term, only three months; that it was at a very high interest rate, the equivalent, if one treated the whole amount retained of $5,000 as being interest, of 133 percent per annum interest on the amount provided ($15,000);  that the interest charged was deducted when the loan was made, so that payment of the interest on the loan was necessarily secure to the respondent.  The significance of this last feature I think is more apparent than real;  for practical purposes the respondent lent $15,000 to the applicant, which had to be repaid together with $5,000 by way of interest and costs three months later.  Nevertheless, in form the amount of the principal was $20,000, interest was paid on time in respect of the term of the loan, and there was therefore nothing else due until three months later, when the amount which became due was principal rather than interest for the purposes of the contract.
  1. [103]
    Dealing with the various matters to which attention is directed by s 70(2), the significance of a failure to comply with the requirements of the contract was just that interest was payable at 20 percent per annum on the amount in default.  In relation to this contract, the respondent had greater bargaining power because there was no particular pressure on the respondent to make this particular loan.  There was considerable pressure on the applicant to obtain this loan, but the pressure did not come from the respondent.  The terms of the loan were certainly subject to negotiation;  this was not in any sense a contract of adhesion.  Indeed, the terms were thrashed out between Mr Dale and Mr Nichols, and the documentation then modified (not particularly thoroughly) to accommodate what had actually been agreed.  It follows that it was practicable for the applicant to negotiate of the loan and the details of the contract, although of course in the circumstances the applicant was not necessarily going to obtain a favourable outcome from those negotiations. 
  1. [104]
    There were no problems in terms of age or physical or mental condition afflicting the debtor or any person negotiating for the debtor, and there was nothing about the form of the contract which rendered it unfair or unjust. There had been no independent advice obtained by the applicant, except insofar as Mr Dale was able to provide advice and assistance, and it does appear that Mr Dale was aware of the essential features of the transaction, and understood them. There was no unfair pressure or undue influence or unfair tactics used by the respondent to secure the agreement to these terms; all the pressure came from the applicant, or rather Mr Dale, and if there was any unfairness involved it was on his part, in not being frank about his financial position, or what the money was actually to be used for: p.287. There was no reason for the respondent to think at the time when the loan was negotiated in March 1998 that Mrs Dale could not repay the money, or could not do so without substantial hardship. I think it very likely that Mr Dale had indicated to the contrary, that there would be a capacity to repay in three months time. The return on the transaction was generous for a loan secured by a second mortgage on the house property, and also by way of a bill of sale over certain office equipment said to have a value of just over $18,000: document 66.  On the other hand, there was already a significant debt secured on the house, and the equipment subject to the bill of sale was largely computer equipment which may well have been difficult to sell in the event of an attempt to enforce the bill of sale. 
  1. [105]
    There is no suggestion that either Mr or Mrs Dale was unaware of the extent of the obligations under the agreement, and this is not a case where the injustice arises because of any consequences not reasonably apparent to the debtor before she was committed to the contract. It is difficult to identify comparable transactions involving other credit providers; this was a transaction by a debtor who would not have been able to obtain credit from most credit providers. The interest rates and charges, although very high, were still much less than those charged by the credit provider in State of Queensland v Ward [2002] QSC 171.  Consideration of the public interest involves the proposition that those engaged in the business of providing credit, or where that is part of or incidental to their business, should not be engaged in unconscionable, harsh or oppressive conduct.[69]  On the other hand, it can also be seen to be part of public policy that people should honour their contracts;  this forms part of our idea of what is just:  Baltic Shipping Company v Dillon (1991) 22 NSWLR 1 at 9 per Gleeson CJ.
  1. [106]
    With such guidance as I am able to obtain from the authorities and the terms of the section, in particular the matters referred to in s 70(2), I am not persuaded that the second loan contract was unjust.  There is nothing about it that strikes me as unconscionable, harsh or oppressive.  The interest rate was quite high, but the respondent was simply taking advantage of the extreme willingness of the applicant to enter into the transaction.  But the applicant, and her husband by whom she was guided and who did the negotiating, were mature and intelligent adults, quite capable of looking after their own interests.  There was no aspect of exploitation of the applicant by the respondent;  if anything it was the respondent who was exploited, by being induced to enter into the transaction, because I doubt whether either Mr or Mrs Dale had any real prospect as at March 1998 of being able to repay $20,000 in three months time.  The particularly high interest rate only ran for the first three months, so the respondent was not even exploiting the possibility of default.  If it had been 20 percent interest for three months and 133 percent interest thereafter, I think the contract would have been unjust, but that was not the situation. 
  1. [107]
    The applicant was not a vulnerable person, by reason of poverty or otherwise. Mr and Mrs Dale certainly faced financial difficulties associated with the purchase of this house, but that was because they chose to purchase a house they really could not afford. They were undoubtedly a very poor credit risk at the time, a fact which if anything they tried to conceal, and they found themselves in these difficulties by trying to live beyond their means. In all the circumstances I would not characterise the second loan contract as unjust. It follows that no relief under s 70 will be given in respect of it.

Breach of Trade Practices Act?

  1. [108]
    The statement of claim alleges that the conduct of the respondent was unconscionable and contrary to s 51AC(1)(a) of the Trade Practices Act 1964.  This aspect of the case did not receive any prominence in the applicant’s argument, although it was not abandoned.  In the statement of claim orders were sought under s 87 of the Act avoiding the second loan contract ab initio, or varying it, and varying the first loan contract.
  1. [109]
    There was in my opinion nothing in the circumstances surrounding the first loan contract or the conduct of the respondent which rendered the contract unconscionable for the purposes of s 51AC of the Trade Practices Act.  There was no serious misconduct, nothing clearly unfair or unreasonable, nothing which shocks the conscience.  The paperwork may have been sloppy and there may have been a failure to comply with some of the requirements of the Consumer Credit Code, but in my opinion a good deal more than that is required in order to make conduct unconscionable for the purposes of s 51AC.  In relation to the second loan contract, although the concepts of “unjust” for the purposes of s 70 of the Consumer Credit Code and “unconscionable” for the purposes of s 51AC of the Trade Practices Act are different, a consideration of the various factors reviewed above in relation to the second loan contract does not lead me to the conclusion that there was anything unconscionable about the second loan contract either.
  1. [110]
    It follows that the applicant is not entitled to any relief under s 87 of the Trade Practices Act.

Claim for compensation

  1. [111]
    The applicant also claimed compensation under the Code, relying on s 107(1) for an order that the respondent pay an amount by way of compensation for loss arising from the contravention of a key requirement, and on s 114 in respect of the breaches of other requirements of the Code.
  1. [112]
    Section 107(1) refers to compensation for loss arising from the contravention and subsection (2) emphasises the point that the court may only order compensation if the debtor has suffered a loss arising from the contravention, and the amount of the compensation is not to exceed the amount of the loss.  Further, if there has been an order in respect of a civil penalty under s 104, whether it is allowed or refused, an order may not be made under s 107:  subsection (3).
  1. [113]
    On its face s 114 is not so restrictive, not referring expressly to loss, and not containing any express restriction of compensation in the amount of the loss.  Nevertheless the concept of paying compensation in my opinion implies that there has to be some loss or harm or injury suffered which could be the subject of compensation.  It may be that s 114 is wider in the sense that it is not necessary to show financial loss as such in order to obtain an order for compensation under s 114, but the section in my opinion is not directed to an order that payment be made simply because the provision of the Code has been breached.  That would be tantamount to imposing a civil penalty, but the Code deals specifically with civil penalties, and s 114 applies in cases where civil penalties are not applicable.  In my opinion s 114 does not justify an order for compensation merely because of a breach of the section.  It is necessary for the debtor to show that there has been some actual disadvantage to the debtor as a result of the breach, in the form of monetary loss or in the form of some other harm, and the amount of the compensation should be referrable to the amount of the loss or the extent of the harm.
  1. [114]
    Although claims were made under both s 107(1) and s 114(1), the latter in relation to contravention of sections 12(1), 21(3), 44(1), 76, 81, 82 and 91(1) of the Code,[70] there was nothing to show what loss or other harm the applicant had suffered as a result of any of the breaches of the Code.  The applicant had suffered some distress and upset as a result of these transactions as a whole, but that arose largely because of her inability to make payments required by one or other of the loan contracts in accordance with the contract, and as a result of pressure from the respondent for payment.  Insofar as extra, unauthorised charges were demanded and paid, no loss will be suffered if they are brought to account as payments of interest or principal, as I have.
  1. [115]
    The analysis of Ambrose J in State of Queensland v Ward [2002] QSC 171 at para [97] suggests that his Honour regarded the power to compensate under s 114(1) as a power to provide monetary compensation in respect of loss or detriment to the debtor.  In that case his Honour was unpersuaded that compliance with the requirements of the Code which had not been complied with would have prevented any borrowers from entering into the transactions, or diminished the financial losses they suffered as a result, and accordingly was not persuaded that the breaches of the Code were causative of any loss or detriment to the borrowers.  I would respectfully agree with that approach, and applying it in the present case the position is similar;  there is no reason to think that any financial loss or detriment that the applicant has suffered would not have been suffered in the same way had the requirements of the Code been complied with. 
  1. [116]
    It may be that if the respondent had been required to comply with the requirements of the Code in relation to the second loan transaction it would not have proceeded with that transaction, but the applicant can hardly base a claim for compensation on that circumstance. I am certainly not persuaded that if the respondent had been willing to proceed with that transaction in accordance with the requirements of the Code the applicant would have declined to do so. I am not persuaded that there has been any loss or detriment shown by the applicant which could properly be the subject of an order for compensation under s 107 or s 114.  Indeed, I did not understand that counsel for the applicant was able to identify any.
  1. [117]
    It may be that Mr Dale suffered some loss or detriment in connection with the securities that he gave in relation to the loan contracts which were in breach of s 44 of the Code, but there was no evidence that the first applicant, Mrs Dale, suffered any loss or other detriment as a result of the breaches of s 44(1) of the Code.  There was no loss suffered because of the failure to give the notice required by s 80 before commencing proceedings in the District Court in 1998;  I do not doubt that if notice had been given what followed would have been exactly the same.  The applicant was not in fact put out of possession as a result of the judgment, so the only detriment ultimately suffered by the applicant was the order for costs.  If as I believe the proceeding would have gone ahead in exactly the same way and with exactly the same result if notice had been given in compliance with s 81, the liability for costs is not something which flows from or is caused by the breach of s 80, and therefore should not be the subject of an order for compensation.

Civil penalty

  1. [118]
    If a credit provider has contravened the key requirement, the court may order the credit provider to pay an amount as a civil penalty: s 102(2).  In respect of the first credit contract, there were breaches of key requirements in that the provision for default interest was contrary to s 28(1), which was a breach of s 21(1)(c), and a failure to state the total interest payable under the contract, which was a breach of s 15(F).  In respect of the second credit contract, there were breaches of key requirements, in s 15(C), (D) and (G).  In accordance with s 102(1), there will be a declaration accordingly.
  1. [119]
    The applicant also sought a civil penalty in respect of each contract. The court in considering whether to do this must have regard to the matters listed in subsection (4) of that section, which are as follows:

“(a) the conduct of the credit provider and debtor before and after the credit contract was entered into;

  1. (b)
    whether the contravention was deliberate or otherwise;
  1. (c)
    the loss or the detriment (if any) suffered by the debtor as a result of the contravention;
  1. (d)
    when the credit provider first became aware, or ought reasonably to have become aware, of the contravention;
  1. (e)
    any systems or procedures of the credit provider to prevent or identify contraventions;
  1. (f)
    whether the contravention could have been prevented by the credit provider;
  1. (g)
    any action taken by the credit provider to remedy the contravention or compensate the debtor or to prevent further contraventions;
  1. (h)
    the time taken to make the application and the nature of the application;
  1. (i)
    any other matter the court considers relevant.”
  1. [120]
    With regard to the conduct of the credit provider before and after the contracts were entered into, there was no relevant conduct on the part of the respondent before the first contract was entered into, nor was there anything about the conduct of the respondent before the second contract was entered into which strikes me as relevant to the imposition of such a penalty. In relation to the conduct of the respondent after the contracts were entered into, there was some complaint from Mr and Mrs Dale about the manner and language of the respondent on various occasions, and from Mr Dale that the respondent was not keeping proper records of payments being made, and was not always acknowledging the full amount of payments which were being made. There were some records kept by the respondent,[71] but their format was not such as to encourage any great confidence in their reliability. 
  1. [121]
    The respondent has conceded that there were some occasions when amounts were received but were not credited to the account, on the basis that they were compensation for trouble and inconvenience. I think that this is a relevant consideration, although as I indicated before that did not happen very often and only relatively small amounts were involved. There is also some dispute in relation to whether particular payments had been made; I have dealt with that elsewhere. I will bear all this in mind, but this behaviour was not a breach of any key requirement, and I cannot impose any civil penalty in respect of it.
  1. [122]
    There was also some criticism of the way in which the respondent had enforced the various securities, but on the face of it the respondent was entitled to enforce securities if the applicant was in default, subject to the validity of securities given by Mr Dale. I do not think there was a situation where the respondent was deliberately enforcing securities it knew were unenforceable. The respondent was frequently threatening to enforce its securities, but it appears generally to have held back.[72]  Even after it obtained a judgment for possession, that judgment was not enforced.[73]  When some office equipment was seized under the bill of sale, it was subsequently returned before the full amount payable had been repaid.  This is certainly not a case where the respondent was exercising vigorously all of its available remedies at the earliest possible moment. 
  1. [123]
    Mr Dale complained that the pressure that he was being put under by the respondent, and the amount of money that he was paying as a result of that pressure, made it impossible in a practical sense for him to refinance the loans, because he could not get together enough by way of deposit. I take it that he means that other more conventional lenders would not lend on the security of the house as much as he required to pay out the loan to the respondent, and he was unable to accumulate the balance. However, paying the money to the respondent should have had the same effect as accumulating it himself. It may be that the difficulty was in raising and retaining money to cover the loan application and establishment fees. In any case, the respondent was entitled to press for payment once the applicant was in default. Mr Nichols impressed me as a straightforward, down to earth, perhaps somewhat blunt man, and he may well have been forthright in his language and manner when seeking to recover repayment of money which was due to him.[74]  Without wishing to be seen to be encouraging such behaviour, nevertheless I do not regard it as particularly serious.  I accept his evidence that he was not violent or aggressive:  p.301.  Nothing remotely as serious as was alleged in State of Queensland v Ward (supra) occurred in the present case.  Again, any such conduct was not a contravention of a key requirement.
  1. [124]
    The applicant’s conduct before the first contract was made included statements made by the finance broker, Ms Cooper, about the income of the applicant, and the purpose of the loan, which were inaccurate. The former suggested a capacity to service the loan which was not really present, while the latter appears to be calculated to conceal the circumstance that Mr Dale was bankrupt. I am sceptical of the suggestion from Mr Dale that these matters owed their origin to the finance broker rather than to him or Mrs Dale. In relation to the second loan, I am not persuaded that Mr Dale made it clear to Mr Nichols when they were negotiating the second loan that it was for the purpose of paying out the vendor on the house rather than financing Mr Dale’s business, although I think it likely that by the time the money came to be advanced it was apparent at least to Mr Bamberry that the payment was to be made to the vendor. Mr Bamberry requisitioned a cheque payable to Mr Roebuck, and I think it more likely than not that he would have been aware at that time that Mr Roebuck was the vendor.
  1. [125]
    After the contracts were entered into, there were problems with payments of interest under the first contract which was not always paid on time, and there was a failure to repay the principal when it became due. In relation to the second contract, there was a failure to repay the principal when it became due. These were not I think deliberate failures on the part of Mrs Dale; the position was simply that she and her husband did not have the financial capacity to pay back the money borrowed, and often did not have the financial capacity to pay the interest. On the other hand, there were significant amounts paid, particularly during the first couple of years after the loans were made, as will be apparent when I deal with the accounts. Overall there has been fault on both sides, but probably more on the part of the applicant and her husband rather than the respondent.
  1. [126]
    I accept that the contraventions of the Code were not deliberate. Mr Nichols said and I accept that he knew nothing about the Consumer Credit Code, and he was relying on the third party:  p.288.  The third party appears to have been attempting to comply with the Code in relation to the first transaction, and I think that the failures were not deliberate, although they suggest that the procedures in place to comply with the Code were not as good as they ought to have been.  Perhaps the explanation for this is that Mr Radich did not believe that the Code actually applied, because of the nature of his clients.  That was his evidence at the trial (p.483);  indeed he maintained in the witness box that the Code did not apply to these transactions.  I am not persuaded that Mr Radich did not at the time honestly believe the Code did not apply.  In relation to the second transaction, at an early stage the third party had reason to believe that it was not a Code transaction, and obtained a declaration, and I accept that the people concerned on behalf of the third party honestly believed that the Code did not apply to the second loan.  There was no deliberate contravention.  As I have indicated earlier, I am unable to identify any financial loss or other detriment suffered by the applicant as a result of the contraventions.  Insofar as the applicant has been distressed, it has been more because of the inability to pay or repay money which was properly payable.
  1. [127]
    I do not consider that there is anything of particular significance in the circumstances arising from the matters referred to in paragraphs (d), (e) and (f) of subsection (4).  The “system” the respondent had was to leave compliance with the applicable legal requirements in the hands of the third party.  No particular action has been taken to remedy the contravention, but in circumstances where there is an issue as to whether or not the Code applies to the respondent, that is I think unsurprising.  There was some delay before the question of the applicability of the Consumer Credit Code was raised by the applicant:  that I suspect was because she could not afford legal advice.
  1. [128]
    One factor which is relevant is whether the breach was an isolated and perhaps gratuitous occurrence, or whether it is part of a systematic failure to comply with the Code. Some of the circumstances of this matter suggest that the deficiencies are likely to have been repeated with other loans which were within the Code arranged by the third party. It appears that a breach of s 28(1) resulted from the application of a standard form of default interest provision in the mortgage, which suggests that the requirements of this section were not generally followed.  In relation to the second loan, the declaration was obtained, and initially at least the third party had reason to believe that the borrowing was not one covered by the Code, and in these circumstances I regard the breaches of the Code as being of less significance, although the documentation of the transaction was inadequate even as an ordinary commercial loan, for the reasons that I have given.
  1. [129]
    I should also mention that s 103 limits the amount of civil penalty which may be imposed to the amount of all interest charges payable under the contract from the date it was made, unless the debtor has suffered a loss greater than that amount.  As I have indicated elsewhere, the applicant has not demonstrated that she has suffered loss as a result of a breach of any of these requirements, so the relevant limit is the total of interest charges payable under each of the contracts.  This however as I will indicate is not a case which will be testing that limit.
  1. [130]
    There was some guidance given by the Court of Appeal in relation to civil penalties in State of Queensland v Ward [2003] QCA 366, although for present purposes not very much, because of the limited grounds of that appeal, and the very different facts in that case.  The decision does establish that issues of fact relevant to an order under s 102(2) are to be decided on the civil rather than the criminal standard.  The conclusion that it was relevant to take into account what was found to be unjust conduct by the credit provider in that case is of no relevance here.  In that matter penalties of $10,000 in relation to each 27 transactions were imposed by the trial judge, who said he gave weight principally to deterrence of similar types of loan sharking activities, the serious impact upon the community of such activities which are probably linked to organised crime, and contributing to a fund under s 106 of the Code which will be available to assist in overcoming or at least controlling extortionate loan sharking activities:  [2002] QSC 171 at [74].  The Court of Appeal, in rejecting the argument that the charges were excessive in the circumstances, did not say anything which provides any useful guidance to me in this matter.  I am not aware of any other decisions under the Code which provide any guidance for the assessment of a civil penalty.
  1. [131]
    The starting point in my opinion is that credit providers are required to comply with the Code in relation to transactions where it applies, and, unless some penalty is imposed in circumstances where the Code has not been complied with in relation to an applicable transaction, credit providers generally will not be deterred from breaching the requirements of the Code. On the other hand, whether a breach is serious or trivial, whether or not it caused loss to the debtor, and whether or not compliance with the Code might have led to the debtor’s not entering into the transaction, are I think particularly relevant features. As I have indicated earlier, some of the breaches were in my opinion relatively minor matters. There was some doubt about the applicability of the Code to the first transaction, and there was at one stage good reason to think that the Code did not apply to the second transaction. In these circumstances this is not a case for a large penalty.
  1. [132]
    Another matter which I think is relevant is the total amount of interest charges payable under the transaction by the debtor, and the rate of return, because these reflect the benefit to the credit provider of the transaction. Civil penalties will not be effective as a deterrent if they are not significant in comparison to that benefit.
  1. [133]
    The most serious of the breaches was the breach of s 28 relating to the impermissible imposition of default interest, which could well have led to the debtor’s paying a good deal more money than she ought to have been paying.  But, on the analysis I have given above, that breach has in this case led to an automatic penalty on the respondent, because the respondent cannot recover default interest under the terms of the contract, even such default interest as might have been recovered had the contract been worded differently.  If I were wrong about this interpretation, so that the respondent is entitled to recover such default interest as could have been imposed in a way which was consistent with the Code, it would mean that the respondent had not suffered any adverse consequence from the failure to comply with s 28.  In those circumstances, a much more substantial penalty would be appropriate.  Indeed, I would impose a penalty equivalent to the amount of default interest recoverable.  But on my understanding of the operation of these provisions of the Code, the respondent is suffering that penalty anyway.
  1. [134]
    Accordingly, the penalty in respect of the first loan should be only in respect of the contravention in failing to state the total interest payable, something easily calculated from the information stated in the mortgage. In all the circumstances, in my opinion an appropriate level of civil penalty in respect of the first loan transaction is $1,000, and in respect of the second loan transaction, $5,000.
  1. [135]
    The remaining matter to determine is the balance now payable under each of the credit contracts. In order to do that, it is necessary to resolve some disputes as to whether or not particular payments were made, or whether or not they should be applied as payments off the loan. There was also some issue at times about whether particular payments were to be applied to the first loan or the second loan. In these circumstances, it is necessary to say something about the credibility of the witnesses.

Credibility – Mrs Dale

  1. [136]
    It was submitted on behalf of the third party that it was not so much Mrs Dale’s honesty which was in question but rather the reliability of her recollection. I think there is some force in that submission. Mrs Dale said that on 27 February 1998 she attended the third party’s office and executed the acceptance form and Code declaration in connection with the first loan.[75]  I have found that these documents related to the second loan, having been forwarded by fax that day together with documentation relating to the proposed second loan.  Documents relating to the first loan had been forwarded under cover of an earlier letter on 16 January, but they were separate, and were not executed.  It follows that the evidence of Mrs Dale, and indeed Mr Dale, to the effect that documentation executed by her on 27 February 1998 related to the first loan was wrong.  It also follows that I reject their evidence that they were told by Mr Bamberry in effect that the first loan would be withdrawn in some way unless they signed that documentation.  In these circumstances, there must be some serious doubt about the reliability of her evidence.
  1. [137]
    Another matter raised relates to an occasion in October 1998 when the computer equipment and other items secured under the bill of sale were seized on behalf of the respondent. There is a good deal of conflict in the evidence surrounding this. One aspect was that both Mrs Dale and Mr Dale alleged that Mr Radich, who attended with others when the goods were seized, had attributed the seizure to a failure to pay the costs of proceedings in the District Court to recover possession of the land.[76]  As mentioned earlier, there had been proceedings which led to a judgment on 25 September 1998 for possession in favour of the respondent.[77]  Mrs Dale was also ordered to pay the respondent’s costs including reserved costs to be taxed.  A bill of costs in taxable form was prepared by the third party (Exhibit 7) which came to $5,373.45, and was sent to Mrs Dale under cover of a letter dated 2 October 1998:  Exhibit 29, document 22.  This indicated that the third party was prepared to accept $5,000 provided that she agreed with the bill.  A copy of the letter was provided for her to sign and return if she accepted the lower rate, although she was told that if it was not received back duly signed within five days they would presume she wanted the bill taxed.  She did not sign and return the acknowledgement within five days or at all.  Nevertheless the bill has never been lodged for taxation.
  1. [138]
    Also on 2 October 1998 Mr Dale telephoned Mr Reid and said that he would bring in $1,000 on Monday and $1,000 on Tuesday:  document 327.  I accept that this is unrelated to the question of costs;  there had been no interest payment since 17 July 1998, and no doubt Mr Nichols had been pressing for payment.  Judgment for possession had been obtained, and a warrant for possession on 30 September 1998 (document 425), and at one time it was proposed that the warrant be executed on 10 October 1998:  document 366.
  1. [139]
    On 6 October 1998 Mr Dale telephoned Mr Radich and advised that he could not pay on Monday, and that he was going to Melbourne: Exhibit 27.  There was some discussion about the proposed execution of the warrant for possession.  Mr Radich then telephoned Mr Nichols and received instructions to repossess the property covered by the bill of sale immediately.[78]  Mr Radich then telephoned to arrange for a removalist:  Exhibit 27.  The removalist’s account for shifting the equipment is also dated 6 October 1998 (document 392).  A letter which was no doubt handed over at the time when possession was taken is also dated 6 October 1998:  document 386.  In these circumstances it appears clear that these goods were in fact seized on 6 October 1998.
  1. [140]
    At this time the bill and letter had only been sent four days earlier, and the time limit for agreeing to the figure of $5,000 had not expired. In these circumstances it seems too early for the third party to be taking steps to enforce the claim in this way. The diary notes in Exhibit 27 show clearly enough that the instructions to seize the goods were related to the earlier advice from Mr Dale that he would not be paying the money promised for the Monday, which was not related to the costs.  Of course Mrs Dale had been ordered to pay costs to be taxed, and Mr Radich was claiming that these came to over $5,000, and he could well have referred to the fact that this order for costs had been made and that he was claiming about $5,000 as a result of it.  But I do not accept that he demanded payment specifically of that sum otherwise the goods would be seized.[79]  In oral evidence Mrs Dale was not clear about any such demand, saying rather that Mr Radich had complained about the second loan being unpaid, and about unpaid fees:  p. 76.
  1. [141]
    Mr Dale in his affidavit Exhibit 2 has the goods being seized in about November, which is wrong.  He relates the return of the goods also to the payment of $5,000.  On 7 October 1998 Mr Dale sent a fax to Mr Nichols referring to an agreement to pay $2,000 on 8 October to the third party in cash “to go into their account towards costs.”  In return the respondent would agree to stay execution and leave the applicants’ family in the house until next Friday.  He also agreed to pay the third party another $3,000 in cash on 14 October 1998.  Presumably the first $2,000 was paid, because there is a note on 15 October 1998 that a further $400 cash had been paid and the total now received was $2,400:  document 398.  Another diary note of 28 October records payment of a further $1,550, and instructions about a guarantee:  document 250.  It also records a later meeting on the same day with Mr Dale when the guarantee was handed over, and when there were telephone instructions from Mr Nichols to release the equipment if $1,400 was paid.  In response Mr Dale threatened that Mrs Dale would go bankrupt.  There was a further telephone conversation in which Mr Radich urged Mr Nichols to release the equipment, as it would allow the business to continue.  At that stage Mr Nichols sought a further conversation with Mr Dale:  document 250. 
  1. [142]
    The third party issued a letter dated 28 October 1998 receipting $1,550 (document 272) rather than a trust account receipt.  According to Mrs Dale the cheque was actually for $1,599 (p.124), and this receives some support from a Metway Bank statement (document 271) showing a bank cheque withdrawal for $1,599 on 28 October.  Document 272 relates this payment to “legal costs re Magistrates Court matter 742/98”.  The file number of the proceeding in the District Court which led to the order for possession was 742/98.
  1. [143]
    It is not clear when, or indeed if, the remaining $1,000 was paid. On 10 November 1998 however the third party wrote to Mr Nichols stating that it had received $5,000 of the costs for the court proceedings:  Exhibit 26 and see p.517.  It indicated then that instructions had been given to allow the return of the seized equipment.  It also acknowledged instructions to withdraw implementation of the warrant for possession.  The bulk of the goods seized were actually returned by removalist on 19 November 1998:  p.501;  document 399.  Some of the computer equipment had been taken back earlier by Mr Dale after Mr Nichols authorised its release:  Exhibit 26.
  1. [144]
    There are no accounting records in relation to the payment of the $5,000 which have been disclosed by either the respondent or the third party.[80]  On 25 September 2002 the solicitors for the applicant sent a fax to the solicitors for the third party seeking production of copies of any documentation in relation to the $5,000 payment:  Exhibit 23.  In response the solicitors for the third party advised by letter of 1 October 2002 that the third party received $5,000 “after 2 October 1998 and before 10 November 1998.  However our client advises that it is no longer in control or possession of any accounting or receipt documentation in respect of this $5,000 payment by or on behalf of your client.  Our client maintains that the $5,000 was not paid in respect of the return of office equipment seized by the respondent pursuant to a bill of sale.  The $5,000 was paid in respect of a costs order by Judge Hanger in favour of the respondent in the respondent’s District Court proceedings to obtain an order for mortgagee possession:”  Exhibit 24.  These payments do not appear in the trust account ledger relating to the second loan:  document 241. 
  1. [145]
    The whole thing is very curious, but it seems clear that $5,000 was paid during this period by Mr and Mrs Dale to the third party, and that it was applied towards satisfaction of the costs order made in the District Court. It also appears that no other money was paid to the respondent after the goods were seized, until 10 November 1998 when $500 was paid, although by this time the respondent had apparently already given instructions for the goods to be released.  Mr Nichols said that Mr Dale pleaded with him to obtain the goods back, and he agreed to do this but “he had to pay the costs incurred through repossessing the goods’:  p.303.  On the following page however when asked if they discussed how much that was he replied:  “No, I have no idea on court costs because Broadbent & Radich done that.”  That suggests perhaps some confusion between costs associated with seizing the goods and costs of the court proceedings, but supports the view that he wanted the third party’s costs paid in return for release of the goods seized.
  1. [146]
    It was submitted on behalf of the third party that it was common ground that $5,000 had not been paid by 19 November 1998.  But Exhibit 24 is clearly to the contrary.  It was also submitted that Mr Dale had not understood that the payment was on account of the third party’s costs:  p.195.  Mr Dale certainly said there that his understanding was that the payment of $5,000 came off the loan, and was to go back to Mr Nichols.  It was not his understanding that the fees of the third party had to be paid, and he claimed that he was confused when there was a reference to it coming off the legal fees in the receipt given to him after he paid the $5,000.  There is no receipt for $5,000 identified in the material;  presumably this is a reference to the receipt for $1,550 which is document 272, which refers to legal costs.  But his evidence is not only inconsistent with the evidence of Mr Nichols, it is inconsistent with his own fax of 7 October 1998 document 328 which refers specifically to payments going towards the third party’s costs.
  1. [147]
    In all the circumstances I am satisfied that the decision to seize the goods was unrelated to the order for costs. On the other hand, payment of the solicitors’ costs was required in order to achieve the return of the goods, but on the evidence that was at the instance of Mr Nichols rather than Mr Radich. The order for costs not having been taxed, no specific amount was payable under it in the absence of some agreement between the parties to fix the costs at a particular figure. The offer of the third party to fix the costs at $5,000 was not accepted according to its terms. Nevertheless it was open to the third party to accept payment of $5,000 in satisfaction of the applicant’s obligation to pay costs under the order. The respondent was entitled to seize the goods under the bill of sale, and was entitled to retain them until the full amount secured by the bill of sale was paid. In effect the respondent was offering the applicants the opportunity to recover the goods without that payment, in return for the applicants’ agreeing to pay the costs fixed at $5,000 and actually paying them. That was what occurred. In these circumstances the order for costs has been satisfied, and no amount is recoverable in respect of those costs either pursuant to the order or pursuant to the bill of sale, or for that matter the mortgage. However, the applicant is not entitled to credit for this amount in respect of either principal or interest for either loan.
  1. [148]
    What appears to have happened is that the fact that the return of the goods was made dependent upon payment of the costs has led Mr and Mrs Dale to conclude that the goods were seized in order to enforce payment of the costs. I am satisfied that did not occur, but it is by no means clear that Mr and Mrs Dale could not have reasonably believed at the time that that was what was occurring. Accordingly this does not reflect on their credit, although Mr Dale’s assertion in his evidence at p.195 that the payment of $5,000 was not related to the costs was wrong, and I think that assertion does reflect adversely on his credit.

Mr Dale

  1. [149]
    Several other matters were relied on about the credibility of Mr Dale It was suggested that it was implausible that Kelibber Finance would have been the origin of false statements made in the personal particulars form document 36.  But I do not regard it as implausible that this idea would come from the finance brokers.  They would be in a better position to appreciate that the loan would be more readily available if it was for a commercial purpose, as Mr Turnbull confirmed was the case.  Whether they were paid depended on whether the loan could be arranged, so they had an interest in the loan actually being made.  After that document was signed the deception was not carried through thoroughly, and a careful consideration of the material available to Mr Turnbull would have revealed the true position.  On the other hand, it is more difficult to accept that the inaccuracies in the material sent by Ms Cooper to the third party document 44 had their origin with her.
  1. [150]
    There are various other aspects of Mr Dale’s evidence which were I think unsatisfactory. In his affidavit Exhibit 2, paragraph 12[81] is incorrect.  Exhibit 29 document 44 shows that the executed documents were sent by fax to the third party by Ms Cooper on 12 November 1997, and the originals were forwarded by her by mail.  So Mr Dale did not return the originals to the third party, but he may have taken them to Ms Cooper.  Paragraph 19 is also false, as shown by Exhibit 16.  Settlement occurred on 28 January, so Mr Bamberry would not have said it had occurred on 19 January.  Paragraph 20 is wrong where it claims that no other documents were executed.  Documents 14, 38, 40, 41, 42 and document 8 in Exhibit 29 were all executed by Mrs Dale on 21 January 1998;  documents 14 and 40 were witnessed by the same person who witnessed the mortgage document 15.  That makes it unlikely that document 40 was executed in the presence of Mr Bamberry, although it is possible that Mr Dale, asked to provide among other things a certificate of independent legal advice, and not wishing (or being able) to spend money on a solicitor, contacted Mr Bamberry to find out whether that document was really necessary.  It is I think not all that implausible that Mr Bamberry told him the wording to put at the foot of the document.  After all, what mattered from Mr Dale’s point of view was what was going to be acceptable to the respondent and the third party, so it would be unsurprising for him to try to find that out in advance.  I do not think that there would be anything particularly inappropriate about Mr Bamberry suggesting a form of words for a certificate that no independent legal advice was obtained or thought necessary by the borrower.  Mr Bamberry did not think that he would have done this (p.405) but he had virtually no recollection of these events at all, so I do not place much weight on that.  On the other hand, Mr Dale’s evidence of conversations with Mr Bamberry before the first mortgage was signed, and how he relied on him, at pp.146-7 is confusing and implausible.
  1. [151]
    There was a good deal of dispute in the evidence about what occurred on 27 October 1999 between Mr Dale, Mr Nichols and Mr Radich.  The different versions are supported to some extent by diary notes by Mr Radich (document 242) and Mr Dale (document 317).  However, it does not seem to me to be necessary to make any finding about what actually occurred in order to resolve the matters in issue in the action.  The incident reflects but does not assist in resolving conflicts in the evidence.
  1. [152]
    In evidence-in-chief Mr Dale said that he never said to any solicitor or finance broker with respect to obtaining loans from the respondent that the loan was for business purposes: p.96. But apart from contradictory oral evidence, that is inconsistent with his fax document 61.[82]  Mr Dale said that the payment of $5,000 to obtain the return of the seized goods was made to the third party by bank cheque in December, for which $5,000 was withdrawn from his bank account on 7 December 1998:  p.125, referring to document 261.  That document does show a withdrawal on that day of $5,000, but that cannot be the payment made to the third party to obtain the release of the equipment.  The third party acknowledged that it had received $5,000 from Mr and Mrs Dale, but much earlier, before 10 November 1998, as noted previously.  I have already referred to a number of documents which suggest that that amount was paid by a number of payments between early October and early November.  On the other hand there are no documents from the third party showing payment to it of a cheque for, or cash of, $5,000 on or about 7 December 1998.[83]  Mr Dale claimed that on 4 June 1999 there was a payment of  $5,280 of which $280 was treated as a payment for inconvenience.  That was based on the figure of  $5,280 in the bank statement document 301, which has a note attributing $5,000 “to cover no 6”, presumably the earlier cheque for $5,000 which was dishonoured.  But the extra payment was not mentioned in his list document 326 in the statement of claim, or in Exhibit 2.  This claim emerged for the first time in the witness box, at p.130.  I do not accept it.
  1. [153]
    There was also a good deal about Mr Dale’s evidence which seemed to be inherently implausible. I think there is some force to the submission on behalf of the third party that Mr Dale was doing his best to paint himself and Mrs Dale as the victims of dishonesty and unscrupulous tactics of others, without accepting any responsibility himself for his own actions. Although I do not accept all the criticisms of his evidence made on behalf of the third party, overall, bearing in mind in particular the matters referred to earlier, I was not particularly impressed with the reliability of Mr Dale’s evidence, and generally do not accept it unless it is supported by contemporaneous documents or other reliable evidence, or is inherently plausible.

Mr Nichols

  1. [154]
    Mr Nichols was a straightforward and somewhat down-to-earth witness, who is obviously upset and frustrated by all the difficulties that he has had as a result of entering into these transactions, and I can appreciate why he would become frustrated about them. There were some aspects of Mr Nichols’ evidence which caused me some concern. He asserted that the payment of $5,000 made to the third party on 27 April 1999 was not received by him (p.296), when the documentation clearly shows that this payment was passed on by the third party, and was received on 6 May 1999. 
  1. [155]
    He maintained that he was told by the third party that they did not lend on transactions covered by the Consumer Credit Code (p.286, p.307) and I do not accept that occurred.  The third party’s documentation clearly contemplated loans being subject to that Code.  Apart from the internal form document 53, and the presence of a pre-contractual statement as part of the standard form documents, there was a standard form “information for proposed lenders” (Exhibit 14), a copy of which was sent to Mr Nichols (p.377), which contemplates that the Consumer Credit Code may apply to a loan.  This was one of the documents referred to in the agreement to lend signed by Mr Nichols on 12 January 1998:  document 13.  Another document referred to there was a summary of the loan terms, which was document 50.  This identifies the first loan as subject to the Consumer Credit Code. 
  1. [156]
    Both Mr Bamberry (p.437) and Mr Reid (p.475) indicated that it was unusual for the third party to make loans which were, or were treated, as a matter of precaution, as being covered by the Consumer Credit Code, but their evidence was really inconsistent with an established practice that no such loans be made.  Mr Reid agreed that it was not his job to filter out loans which might be subject to the Code:  p.476.  In these circumstances, I am not prepared to accept Mr Nichols’ evidence that he was told by anyone on behalf of the third party that it did not make loans which were subject to the Consumer Credit Code.[84]  It is possible that at some point Mr Radich or someone else may have expressed the opinion that loans made by the respondent would not be subject to the Code, but that is a different issue.  If this is what Mr Nichols really meant, there was at least some imprecision in his evidence, which is relevant to reliability. 
  1. [157]
    I do not accept that Mr Nichols was dishonest in his evidence. Overall I prefer the evidence of Mr Nichols to that of Mr Dale. For that reason, I am not persuaded that Mr Dale when he met Mr Nichols at his home to discuss the second loan disclosed that it was for the purpose of paying out the vendor. I also do not accept Mr Dale’s evidence that he told Mr Reid this (p. 110), which Mr Reid denied (p. 460), although Mr Reid has little recollection of this matter.

Mr Radich

  1. [158]
    With regard to Mr Radich, he was not directly involved with the making of either of the loans, although he was involved to some extent in enforcement attempts. Generally his evidence seems to be consistent with the documentation, although there is one part of his evidence I do not accept: his statement that no letter of offer was sent out to a potential borrower unless they were very, very certain that the loan could and would be done: p. 484. The evidence of what occurred in the present matter with the first and particularly the second loan is contrary to this, and supports the evidence of Mr Reid that ordinarily there would not have been instructions from the lender to make a binding offer at the time when the initial documentation was sent out: p. 455. I am also unimpressed by his record-keeping in relation to this matter; in particular the inability to identify any documents in relation to the payment of $5,000 so that the goods seized would be released, on the instructions of Mr Nichols, is unsatisfactory. I have mentioned some other areas where the record-keeping appears to have been defective. It is not that I suspect that documentation has been suppressed. But someone who is not careful and reliable about record-keeping may well not be careful and reliable about other matters.
  1. [159]
    He said that he was not concerned about obtaining payment of the costs of the District Court proceeding from Mrs Dale, because he could rely on payment by the respondent: p. 495. But he appears to have treated the effect of the order as being that Mrs Dale had to pay him these costs. He did not obtain Mr Nichols’ instructions in respect to the offer to compromise the amount payable pursuant to the order at $5,000 (p. 520), and it is apparent that the $5,000 paid by Mrs Dale was not paid into his trust account, because there is no mention of that payment in the trust account ledger: document 241. I also note, as of some relevance to credit, that he has come under the adverse notice of the Solicitors Complaints Tribunal, although not in relation to the matters the subject of this action: p. 513, Exhibit 22.

Others

  1. [160]
    Mr Bamberry was called and gave evidence, but he obviously had very little independent recollection of this matter. For example, he agreed that he had signed as a witness to Mrs Dale’s signature on the second mortgage on 20 March 1998, although he had no recollection of this:  p. 44.  His evidence may be of some value in relation to the way the system worked, although it must be remembered that he was a very young and inexperienced employed solicitor at the relevant time (p. 400) and one who did not find this work congenial:  p .427.  Like Mr Reid, he was no longer directly associated with the third party.  Mr Reid also had almost no independent recollection about this matter[85] but I think his evidence about the way in which systems worked within the office of the third party, particularly systems in which he was involved, is likely to be reliable.
  1. [161]
    I am therefore, treating all of the witnesses’ oral evidence with a good deal of caution although I think the least reliable was Mr Dale. Ultimately therefore this is not a matter where I have the assistance of a witness whom I regard as entirely reliable and whose evidence is therefore a good guide to what actually occurred in relation to various transactions. For that reason I have sought wherever possible to work out what actually occurred on the basis of the contemporaneous documentation, although in a number of respects, as will be apparent, even that task has been made difficult by the deficiency in the documentation, particularly in relation to the period prior to the second loan being made.

List of payments

  1. [162]
    I was provided by the applicant (document 355) and the respondent (Exhibit 8) with schedules from which it is possible to extract the payments alleged to have been made by the applicant, and accepted as having been made by the respondent.  I think it fair to say that the respondent’s position by the time of trial had changed somewhat from its initial position, as put forward on its behalf by the third party:  document 325.  To some extent this involved bringing to account the payments which had earlier been treated as extra payments to compensate Mr Nichols for his time and inconvenience;  by the time the matter reached trial, the respondent did not dispute that these payments ought to be brought to account.
  1. [163]
    Accordingly, ultimately there were not a large number of disputed payments, although the matter is complicated by the fact that there is at least one payment which appears on both the applicant’s and the respondent’s schedules, which I am satisfied was not made.
  1. [164]
    The schedules refer to a payment on 2 April 1998 of $1,475.93.  However I am satisfied that no such payment was made.  What appears to have occurred is that on 20 April 1999 a cheque for $1,475.83 was paid to Mr Nichols, and he wrote that in his book Exhibit 9.  But when the cheque was deposited the following day, it bounced:  the bank statement shows cheque 1141 for $1,475.83 presented on 21 April 1998 and reversed the following day:  document 274.  Another payment of $1,475, by a different cheque (cheque 000007) was made the following day, and as well they paid on 22 April $350 in cash:  Dale Exhibit 2 para 64(a), and see his diary entry document 312.   That this extra payment was made was accepted by Mr Nichols at p.293.  Exhibit 9 records the receipt on 21 April of $1,475, and that is consistent with the applicant’s list (document 326) which has that figure on that date, but significantly does not record a payment on 20 April 1998.  It occurs to me that, given the financial difficulties Mr and Mrs Dale had at the time, it is exceedingly unlikely they would be making a payment like this as an additional, early payment. 
  1. [165]
    What I think has happened is that Mr Nichols has not crossed out the payment of 20 April 1998 even though the cheque did not clear and there was a replacement payment the following day, which has been written in.  When document 325 was being prepared, the payment on 20 April 1998 was apparently taken into account, but the date was incorrectly recorded as “02” rather than “20”.  No doubt the applicant thereafter was happy to agree to this, but I am not persuaded that there was a payment on 2 April or 20 April which was made, and will take into account only the payment of $1,825 on 21 April.
  1. [166]
    There are other complications; in some cases the dates are out, even where the same date appears in both schedules. I have prepared in Annexure A a schedule which includes a list of the payments made in respect of the first loan which I accept were made, and the dates of such payments. The schedule also includes interest at 11 percent per annum pursuant to the mortgage in respect of that loan, capitalised in accordance with the terms of the mortgage on the 19th day of each month.  My schedule, like the schedules provided at the conclusion of the trial, brings the account up to the time of the trial.  At the trial I varied an earlier order of the Court[86] so as to make a stay of enforcement conditional upon the applicant’s paying $1,000 per month towards the interest on the first loan.  Of course I do not know if that amount has been paid, and therefore will have to receive some further evidence after these reasons are circulated before I can calculate the final payout figure as at the date on which judgment is given.
  1. [167]
    One matter which appears also to have been accepted by both sides is that (with one exception) all payments of principal and interest should be treated as having been made in respect of the first loan. There were a number of payments made to the third party which were deposited into the third party’s trust account and documented as being in respect of the second loan.[87]  I was concerned that this amounted to an application by the third party on behalf of the respondent of these payments to this loan, in which case they ought now to be treated as payments of interest, or principal, in respect of that loan.  Ultimately however in circumstances where both parties appear to be proceeding on the basis that all payments should be applied to the first loan, I am content to proceed on that basis also.  The one exception was the disputed payment of $2,000 on 3 July 1998.  the respondent submitted that if (which was disputed) it was made, it must have been in respect of the second loan.  Since it does not fit the pattern of payments for the first loan, I accept this, and it will become the sole payment applicable to the second loan.
  1. [168]
    Another matter where the schedules of both parties appear to be in error is a payment of $2,000 on 29 October 1999.  Document 378 includes a diary note of 1 November recording a conversation with Mr Nichols about allowing Dale to retain the car as he paid $2,000 on Friday last.  In 1999 the Friday before 1 November was 29 October.  However, there is no reference to that payment in Exhibit 9.  Mr Dale’s list document 326 gives a cheque number 175; however, document 270, the bank statements from 25 October to 7 November 1999 does not include cheque 175, although it does include cheques 170, 171, 172, 176 and 178.  The next statement for that account, from 8 November to 21 November 1999, includes cheques 174, 177 and 179, but not 175.  Document 233 is a receipt signed by Mr Nichols on 2 November 1999 for $1,900, and is noted “payment for 29.10.99 re voided cheque 000175.”  That is consistent with the non-appearance of that cheque number in the bank statement.  A diary note of 11 November 1999 refers to “only $1,900” being received from Mr Dale on 2 November 1999.  Document 373 also refers to $1,900 being paid on 2 November, with a reference to a further payment of $2,100 tomorrow.  That would be consistent with the payment in fact made on 16 November 1999 referred to in a letter signed by Mr Nichols (p.133) which is document 255.  There is a reference to a payment having been made in a diary note document 238, but the amount is not set out.  Mr Dale at p.133 claimed that he paid an extra $300 for Mr Nichols’ inconvenience, and the bank statement document 275 includes an entry for cheque 184 on 16 November 1999 in the sum of $2,400, as does document 326.  The schedule handed up on behalf of the respondent during submissions refers to the payment on 16 November 1999 as to $2,400.  I am therefore satisfied that $1,900 was paid on 2 November 1999, and $2,400 on 16 November 1999, but do not accept that there was any effective payment on 29 October 1999.
  1. [169]
    Comparing the list of payments claimed by the applicant in document 355, and the list acknowledged on behalf of the respondent in Exhibit 8, there are relatively few payments which are directly in dispute between the parties.  The first is the alleged payment of $2,000 on 3 July 1998.[88]  That is a somewhat puzzling payment, because it is the first payment of a round figure, and at the time it was made all of the monthly payments of about $1,476 being made on the first loan had been made.  It was not a payment in advance of the payment due on 19 July, because that payment was also made.  Nevertheless, there was a withdrawal of this amount on that day from a bank account shown in document 259, and the payment does have the support of the affidavit of Mr Jeremy sworn 24 September 1998, document 258.[89]  This is admissible under s 92 of the Evidence Act, Mr Jeremy having since died:  p.27.  There is of course the consideration that by this time the second loan was overdue for repayment, and this could perhaps be seen as a part repayment by Mr Dale of whatever he could afford:  p.177.  Although the evidence was not very satisfactory, despite my wariness about the reliability of the evidence of Mr Dale, on the whole I think it more likely than not that this payment was made, and I have taken it into account in Annexure C.
  1. [170]
    The next disputed payment is the payment of $1,599 on 28 October 1998.  That payment was made, but I am satisfied it was part of the sum of $5,000 paid in respect of legal costs for the action for possession, as referred to earlier, and therefore it is not properly brought to account as a payment of interest or principal.  I have therefore not included it in Annexure A.
  1. [171]
    Document 355 claims a payment of $5,000 on 8 December 1998.  This is not supported either by Mr Dale’s list document 326, or by Mr Nichols’ list Exhibit 9.  Although there was a withdrawal of $5,000 on 7 December 1998 (document 261) I am not persuaded that all of this was paid to Mr Nichols the following day.  I will not include this alleged payment in Annexure A.
  1. [172]
    Document 355 includes payments of $5,000 on both 27 April and 6 May.  But the payment received by the respondent on 6 May was the payment made to the third party on 27 April, so this payment ought not to be counted twice.  I will include the payment of 27 April 1999, but not the payment of 6 May.  The payments of 20 May and 4 June included in document 355 were also disputed.  For reasons as set out in a footnote in Annexure A, I accept that payments of $5,000 were made on each of 20 May and 7 June, and these two are included in Annexure A.  There are no other payments disputed on the comparison of these two schedules.
  1. [173]
    In Annexure A I have calculated interest at 11 percent per annum on money outstanding on the first loan, with unpaid interest capitalised on 19th of each month.  Accordingly the amount required to pay out the first loan as at 19 September 2002 was $116,144.28.  This however will have to be brought up to date, something I cannot do until I have information about payments made since the trial.  For this reason, I will circulate these reasons, and invite further submissions in this matter.
  1. [174]
    I have also calculated as Annexure B the consequences for the first loan if there was an entitlement to charge default interest at 16 percent per annum on money which was overdue for payment.  Payments made were applied firstly in satisfaction of any amounts overdue, then in satisfaction of any interest accrued due or accruing, and finally in reduction of principal.  On the basis of this calculation the payout figure as at 19 September 2002 would be $148,844.69.  This finding is made as a precautionary finding, and also for the purposes of the third party claim.  Again it needs to be brought up to date.
  1. [175]
    The position with the second loan is somewhat simpler, in view of the approach taken by both parties as treating all payments as credited to the first loan, except for the disputed payment of $2,000 on 3 July 1998.  Interest at 20 percent per annum did not begin to accrue until 20 June 1998, following the failure to repay the $20,000 on that date.  Interest on the loan up to 20 June 1998 had been prepaid.  I have in Annexure C calculated the amount required to be paid, as at 20 December 2003, to pay out this loan at $53,602.58.

The third party claim

  1. [176]
    The respondent alleged against the third party in a statement of claim filed 18 February 2002, that the third party was retained by the respondent to attend to all the legal requirements including the preparation of necessary documents in respect of the two loan transactions, the subject of the applicant’s application.  So much is admitted in the defence of the third party.  The respondent alleged that if it had been aware that the Consumer Credit Code applied to either transaction, it would not have entered into that transaction but instead would have lent the money in some other remunerative transaction not covered by the Code.  That allegation is not admitted by the third party.  I am not persuaded that this is made out.  I do not accept Mr Nichols’ evidence that he was told that the third party did not lend on transactions covered by the Code, and it is clear that documentation was provided to him prior to his agreeing by signing document 13 showing that the proposed loan was subject to the Consumer Credit Code.  In these circumstances I do not accept that at this time Mr Nichols had any attitude towards Code loans.[90]  It may well be that Mr Nichols with the benefit of hindsight would prefer not to have entered into any transaction which was governed by the Code, but that does not provide any cause of action against the third party.
  1. [177]
    The alternative basis of the respondent’s claim is that there was a negligent failure properly to document the transactions in accordance with the requirements of the Code, so as to place the respondent in breach of those requirements, and the respondent has as a result suffered loss to the extent that the respondent is worse off than if the requirements of the Code had been satisfied. Mr Nichols said, and I accept, that he relied on the solicitor to do everything properly: p. 309. That was reasonable enough.
  1. [178]
    There are two aspects to this. In one important respect the respondent is worse off than it would have been had the requirements of the Code been satisfied; for reasons given earlier, it has lost the opportunity to recover default interest on overdue money, because of a failure to include in the documentation a clause providing for default interest which was consistent with the requirements of the Code. Had such a clause been provided, there is no reason to think that the transaction would not have proceeded in the same way as it has, and the result would have been that the respondent would have been entitled to recover in respect of the first loan the amount calculated in Annexure B, rather than the amount calculated in Annexure A. As at 20 September 2002, the difference was $32,700.41.  It will be necessary to re-calculate this amount after the figures in the two annexures are brought up to some appropriate date after the date on which judgment is given.  This is a loss suffered by the respondent which would have been avoided had the contract been properly documented as required by the Consumer Credit Code.
  1. [179]
    Although Mr Radich expressed the opinion that the Code did not apply to the transaction because of the nature of the respondent (p.483), it was his practice in cases such as this to document the transaction as if the Code did apply to it, on a precautionary basis. In such circumstances, if it turns out that the Code does apply and there was a failure properly to document the transaction, in my opinion the solicitor was negligent. Indeed, it was conceded on behalf of the third party that if the loan was regulated by the Code and was not properly documented then the third party was responsible for that.
  1. [180]
    It was also submitted that the third party was not necessarily liable to indemnify the respondent in respect of any civil penalty imposed. That argument however was based on considerations of causation, rather than any public policy ground. It was pointed out that some of the matters in respect of which the penalty was sought related to the conduct of the respondent, or Mr Nichols personally, for which the third party should not be held responsible. I can see that in principle that could well be right, but the contraventions of key requirements that I have found, in respect of which a civil penalty has been imposed, were all deficiencies in documentation, for which the third party was responsible. Accordingly the third party is liable to indemnify the respondent for the total of the civil penalties, $6,000. As to the claim for an indemnity in respect of costs, I will deal with that in connection with the question of costs of the proceeding generally.

Conclusion

  1. [181]
    I will therefore make the following orders:
  1. Declare that the transactions between the first applicant and the respondent in January 1998 in respect of a loan of $161,000 and in March 1998 in respect of a loan of $20,000, are both subject to the Consumer Credit Code.
  1. Declare that:
  1. (a)
    in respect of the first credit contract, there were breaches of key requirements in that the provision for default interest was contrary to s 28(1), which was a breach of s 21(1)(c), and there was a failure to state the total interest payable under the contract, which was a breach of s 15(E);
  1. (b)
    in respect of the second credit contract, there were breaches of key requirements in that the contract did not state the annual percentage rate of interest, the method of calculation of the interest charges payable under the contract, and the credit fees and charges that were or might become payable under the contract, in breach of s 15(C), (D) and (G);
  1. Order the respondent pay the first applicant $1,000 as a civil penalty in respect of the first credit contract, and $5,000 as a civil penalty in respect of the second contract.
  1. Declare that the provisions of the first credit contract by which a higher rate of interest was payable unless the borrower was not in default under the contract imposed a liability prohibited by s 21(1) of the Code and were void to that extent.
  1. The application for compensation or restitution for contraventions of the Code is refused.
  1. The application for reopening the second credit contract under s 70 of the Code is refused.
  1. The application for relief under the Trade Practices Act is refused.
  1. [182]
    I will make determinations pursuant to s 77 of the amount payable in order to discharge the first and second credit contracts.  The amount required to discharge the second credit contract as at 20 December 2003 is $53,602.58.  It will be necessary for further evidence and submissions to be received, and for further calculations to be undertaken in order to determine the amount required to pay out the first credit contract.
  1. [183]
    In respect of the third party proceedings, I will order that the third party pay to the respondent the difference between the amount required to pay out the first credit contract as determined, and the amount which would have been required to pay out the first credit contract had it included a provision for default interest which was consistent with s 28(2) of the Code, and provide an indemnity in respect of the total civil penalty of $6,000.  The actual amount payable cannot be determined until Annexures A and B can be brought up to date.
  1. [184]
    I will circulate these reasons and invite further submissions in order to finalise the orders. I will also invite submissions in relation to costs, and to correct any errors of calculation.

Footnotes

[1]  Most of the documents put before me were included in a bundle of documents which became Exhibit 4.  I shall refer to documents in Exhibit 4 in this way, ie as “document 74”.  These documents are not in chronological order, and there is a good deal of duplication, particularly in volume 2.  This has made the evidence particularly difficult to disentangle.  Later in the trial there was a further bundle of documents tendered which became Exhibit 29;  documents in this bundle will be identified as “Exhibit 29 document 1”.  There are some other documents which are separate exhibits which will be referred to by their exhibit number. 

[2]  Turnbull, p.550.  Prior attempts to obtain bank finance had failed:  pp.32, 153.

[3]  Document 36.  The form overstated their assets:  p.228.

[4]  P.98, pp.227-8.  That advice appears to have been accurate:  p.559.

[5]  I regard his explanation of how this occurred at p.230 as unsatisfactory.

[6]  Apparently a valuation of the property at $230,000 (document 51) was sent with it:  Exhibit 28, p.551.  The solicitor said he relied on the statement document 36, although before the mortgage was signed he had documentation showing that the Dales were living in the property to be purchased:  p.555.

[7]  The other documents that were signed on this occasion were document 25 (answers to mortgagee’s requisitions on title), document 30 (trust account authority for the mortgagee’s solicitors costs), document 31 (a blank authority for the balance of the loan), document 32 (an undertaking on requisitions), document 34 (a document giving particulars of the loan) and document 33 (a declaration that the mortgagee’s solicitors were not acting for them).  This last declaration was accurate;  there was another solicitor who was acting for Mr and Mrs Dale in relation to this transaction (p.20 and see p.49, p.97), who gave a certificate to that effect on the same day:  document 35.  The documents were signed at the office of that solicitor:  pp.48-9.

[8]  Exhibit 29, documents 36, 37;  see also pp.32, 56-7, 234-5.

[9]  P.99.  The finance broker sent a loan summary (document 44) and a copy of the valuation (document 51) to the third party on 1 October 1997:  Exhibit 29, document 3.  The loan summary gave a different street number for the residential address and the security (which used the lot number) and referred to an “ex-husband”, although Mr and Mrs Dale were then still married and had no intention of even separating:  Mr Dale p.155, Mrs Dale p.45.  It contained an exaggerated income for Mrs Dale:  p.237.

[10]  Document 53;  Reid p.454.  The form has (in my view correctly) identified the proposed transaction as one within the Consumer Credit Code.  Although  the form makes provision for this, Mr Reid said that such identification on this form was unusual (p.475) and it may well have been Mr Bamberry, or someone else, who circled “yes”.

[11]  Dale p.240.

[12]  This is a document appropriate if the Code applies, and the Terms of Loan Exhibit 5 said that it applied.  This is consistent with document 53.

[13]  The document was produced at p.490 where it is described as Exhibit 18;  it is noted on p.491 that the exhibit numbers recorded in the transcript that day were wrong.

[14]  Apparently the delay in signing was because of some dispute over the broker’s fee:  p.243.

[15]  See also p.52;  these she said were not signed at the premises of the third party:  p.62.

[16]  The bankruptcy was subsequently annulled after he entered into an arrangement with his creditors:  p.137.  It was not his first bankruptcy:  p.137.  He had been bankrupt in 1993 (p.140) and there had been some delay in his discharge:  p.140.

[17]  Exhibit 29, document 40.

[18]  Reid p.472-3

[19]  Dale p.101, p.245, Mrs Dale p.33.

[20]  See pp. 22, 57.  Apparently this was signed at the third party’s office, with Mr Bamberry:  p.402.  The documents duplicate the three signed pages in document 9.  I suspect that there would also have been a letter like document 9, but cannot identify it in the material.  Document 12 refers to a terms of loan document, a pre-contractual statement, an information statement and a certificate of debtors;  presumably the last is document 11.  If any of the others were provided to her at this time, I cannot identify them in the material.  Document 56 may be the first page of the pre-contractual statement, or may not.

[21]  See also documents 14, 38, 40, 41 and 42, and Exhibit 29, document 8 (which says the property is “owner occupied”).  The mortgage was witnessed by a neighbour:  p.248.  I reject the evidence of Mr Dale (p.105 and p.249) that it was signed at the third party’s office;  this was contrary to his affidavit Exhibit 2 para 18.  Document 40 has something written by Mr Dale:  p.251.  He said that he was told to write this by Mr Bamberry or the loan would not go through.  I do not accept that either.

[22]  See Exhibit 16, p.449.  The statement in the letter from the third party, Exhibit 15, that settlement occurred on 19 January, was wrong, but may have been the source of this date in the evidence of Mrs Dale (p.22) and Mr Dale, Exhibit 2 para 19.  Settlement may have been held up waiting for the documents faxed by Dale on 27 January:  document 6.

[23]  Mr Dale Exhibit 2 para 25;  Mrs Dale Exhibit 1 para 25;  Mr Dale at one point claimed that they were called in to sign additional documents on 20 February 1998:  p.255, but see p.256.  There are no documents in evidence with this date.

[24]  Mr Dale:  Exhibit 2 para 25.  Mr Reid denied that documents 17 and 46 were signed in his presence:  p.465.

[25]  See also Mr Dale p.259;  Exhibit 2 para 29.

[26]  The third party was able to produce a file copy of this letter:  Exhibit 17; p.450.  It was a fax of eight pages.

[27]  There is one inconsistency:  Document 17 refers to an establishment fee of $1,500, as does document 48, but document 45 has an establishment fee of $500.  Given the general level of care in preparation of documents in this matter, this does not exclude document 45 as the relevant Terms of Loan.  The inconsistency is also present in Exhibit 17.

[28]  Document 19, Document 53, Exhibit 5.  Mr Radich conceded that the first loan was documented as a Consumer Credit Code transaction:  p.488.

[29]  The shortfall was originally about $50,000:  p.20.

[30]  The evidence of Mrs Dale at p.25 lines 45-57 suggests that for some time after this decision Mr Dale was not telling the respondent or the third party of the true purpose.

[31]  Mr Bamberry had no recollection of the former, and denied the latter:  p.406.  Mr Reid also denied he had done this:  p.470.  Mr Nichols said (p.286) he was initially phoned by Mr Bamberry about a proposed second loan, and he later suggested to Mr Bamberry that he have a talk with Mr Dale.  That would be consistent with the suggestion of a meeting with Mr Nichols having come to Mr Dale from Mr Bamberry;  it supports Mr Dale’s version in Exhibit 2 para 41.  The “coaching” may have been no more than saying to tell Mr Nichols the truth:  p.139 line 41.  For Mr Bamberry to have said that is neither implausible nor inappropriate.

[32]  Exhibit 3 para 15;  p.287.

[33]  Witnessed by Mr Bamberry, although he had no recollection of doing so or of seeing her at any time that year:  pp.403, 417, 424.  He denied that he would have signed as a witness unless he had seen her sign.  On the whole I think it more probable that she did sign at the third party’s office.

[34]  See document 55, and Bamberry p.413.

[35]  The fact that they were operating their business – Speak Corporation – from the house (p.44) is in my opinion irrelevant.  They ran the business from their home;  they did not live at the office.

[36] Rafiqi was not followed in Jonsson v Arkway Pty Ltd [2003] NSWSC 815 at [29].

[37]  His Honour at p.148,574 referred to “an intolerable burden on the credit provider”.

[38] Edgington v Fitzmaurice (1885) 29 Ch D 459 at 483 per Bowen LJ.  See also Everett v Griffiths [1924] 1 KB 941 at 961 per McCardie J.

[39]  In Jonsson v Arkway Pty Ltd (supra) at [29] – [31] Shaw J followed Linkenholt.  If his Honour was intending to say, however, that the use to which the money borrowed was put was conclusive, with respect, I do not agree.

[40]  I doubt if they had that purpose themselves at that time.  Mr Dale p.254 line 32;  p.261 line 53.

[41]  Exhibit 3, para 5;  most of the balance of this paragraph is also taken from Exhibit 3.

[42]  P.289, with the exception of part of the price of one unit, or two:  p.311.

[43]  This included bank interest, but most was interest from loans:  p.319, document 190.

[44]  Almost all of this was on money lent other than to banks:  document 207.  There were 12 loans outstanding, totalling $1,967,996 on 30 June 1999:  document 206.

[45]  See for example Nichols p.325 line 15.  I do not regard this answer as a conclusive admission.

[46]  Mr Nichols contacted the third party after seeing a newspaper advertisement placed by it:  p.285.

[47] Rabone v Deane (1915) 20 CLR 636 at 640;  Best v Sutcliffe [1965] NZLR 750;  Swayne v Palm [1970] SASR 158;  Hungier v Grace (1972) 46 ALJR 492;  Marshall & Brougham Pty Ltd v Commissioner of Taxation (1987) 45 SASR 571.

[48]  Pannam “The Law of Moneylenders” (Law Book Co, 1965) p.201.  At p.3 he suggested that the legislation, based on the English Act of 1900, uses a definition, ie “a person whose business is that of money lending”, which is “not so much a definition as a reformulation of the request for a definition.”  See chapter 3 for a discussion of the effect of the decisions on this definition.

[49]  This sometimes produced unsurprising decisions;  see Lapin v Abigail (1930) 44 CLR 166 at 192-3 per Isaacs J, and the guarded conclusion of Dixon J at 200.

[50]  See Acts Interpretation Act 1954 s 14A(1).

[51] Jonsson v Arkway Pty Ltd [2003] NSWSC 815 at [28] per Shaw J.

[52]  The respondent came into the picture later:  Reid pp.472-3.  I do not accept the contrary evidence of Mr Radich that there would be no letter of offer unless “we were very very certain that the loan could be done and would be done”:  p.484.  The evidence of what occurred here with both the first loan and, particularly, the second loan when the equivalent letter was sent out the same day the request was received, and weeks before there was any agreement from Mr Nichols, is much more consistent with the evidence of Mr Reid.

[53]  There may have been a client who was interested in considering this proposal further, but that was all.

[54]  Clause 10 provided:  “This is intended to be binding on you from the date that we receive back the signed acceptance form and we subsequently notify you of the lender’s name.  If you default by not proceeding with the loan then that named lender will have a right of action against you.”  It is by no means clear to me how that latter proposition can be sustained.  Note also:  Radich p.486, re document 47.

[55]  See document 53.

[56]  A comparison of document 246 and document 325 shows that $300 was applied in this way, not $250.

[57]  At p.293 he said he had no recollection of the payments on 22 April 1998, 22 January 1999 and 20 September 1999 but did not dispute them.

[58]  Mr Nichols claimed to have believed that he was entitled to be paid these amounts under clause 7 of the mortgage.  I do not agree.  Ultimately the point was not pressed on his behalf.

[59]  Indeed, even if the loan is treated as one of $15,000 with $5,000 interest payable at the end of the term with the principal, once that was not paid there was an entitlement to interest at 20 percent per annum on the whole $20,000, without any breach of s 21(3).

[60]  Document 424;  the judgment was drawn up by the Court Registry and has the wrong date on it.

[61]  Contrast s 44(3) of the Code.

[62]  There is a helpful and more detailed discussion of this point, with reference to a number of authorities on statutory construction, in McGill and Willmott “Annotated Consumer Credit Code”  (LBC 1999) at para [80.25] where there is an explanation of why Graham v Aluma Lite Pty Ltd (1996) 39 NSWLR 58 is distinguishable.

[63]  Indeed, the UCPR does not make provision for a counter-claim by a respondent, only a counter-claim by a defendant, so one can be brought only in a proceeding started by a claim, or directed to be continued as if started by a claim under r 14.

[64] Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.  This principle is not readily applicable to proceedings commenced by originating summons or application:  Gilmour Holdings Pty Ltd v Brisbane City Council (1984) 52 LGRA 378 at 381.

[65]  Exhibit 29 document 19.

[66]  New South Wales decisions on analogous legislation, and a detailed discussion of s 70, appear in McGill and Willmott “Annotated Consumer Credit Code”  (LBC 1999) pp.449-512.

[67] West v AGC Advances Ltd (1986) 5 NSWLR 610 at 621 per McHugh JA.

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

[69]  See Trade Practices Act 1974 s 51AC.

[70]  This list is taken from paragraph 44(g) of the statement of claim;  the list in the written submissions on behalf of the applicant was somewhat different, and suggests that the reference to “81, 82” was intended to be to section 80(1), and 80(2).

[71]  See Exhibit 9, Exhibit 11, and Nichols pp.290-1.

[72]  See Radich pp.501-2.

[73]  Nichols said and I accept that he did not want to put the family out of their home:  p.304.

[74]  He conceded that there had been heated exchanges between himself and Mr Dale “quite often”:  p.356.  See also Dale p.132.  I did not assess Mr Dale as someone who would be particularly distressed by this.  He seemed to me to be a vigorous and highly motivated individual.

[75]  Exhibit 1 para 25, pp.23-4.

[76]  Dale Exhibit 2 paras 95-99;  p.263.  Mrs Dale Exhibit 1 para 57.

[77]  Document 424, which bears the incorrect date of 11 September 1998.  See document 387.  The matter had been adjourned from 11 September 1998 (see document 388) when costs were reserved.  I have had reference to the file in that matter, and the endorsement on the file shows that the order for possession was made on 25 September. 

[78]  See also Nichols p,303, p.381.

[79]  Dale p.263.  Mr Radich denied this at pp. 495, 498, 499, 533, 534.

[80]  Perhaps the problem was that they were searching for a single payment of $5,000, rather than a series of payments adding to $5,000:  Radich p.518.

[81]  And his oral evidence to the same effect:  p.104.

[82]  Not literally, as his answer was confined to oral communication, but there was no reason for him to be saying one thing in a fax and something different when speaking.

[83]  The applicant’s list document 326 does not refer to this payment.

[84]  I also do not accept Mr Dale’s evidence at p. 155 that he was told by both Reid and Bamberry that Nichols will lend only for investment purposes.

[85]  See example p.468.

[86]  Made by consent on 17 December 2000: p. 212.

[87]  See document 241:  the payments were $5,000 on 27 April 1999 (document 240);  $3,750 on 1 September 1999 (document 245);  $4,000 on 12 October 1999 (document 243)..

[88]  Mr Dale’s evidence of this is in Exhibit 2 para 64(b);  pp.123-4;  p.176, where he explained that the payment was in cash after two cheques totalling $2,000 had been provided earlier, but had not been cashed because of lack of funds.  Copies of two cheques for $1,000, dated 3 July 1998, appear in document 333.  Their existence provides some support for his account.  Mr Nichols agreed that he received these cheques, and that they were not met on presentation:  p.296.  He denied however that he received $2,000 cash:  pp. 296, 351.

[89]  Obtained by Mr Dale to verify the payment:  p.122.

[90]  See Nichols pp.288, 307.  He has since ceased all lending through the third party:  p.288.  Mr Radich denied that Mr Nichols refused to enter into transactions covered by the Code:  pp.540-1

Close

Editorial Notes

  • Published Case Name:

    Dale v Nichols Constructions Pty Ltd

  • Shortened Case Name:

    Dale v Nichols Constructions Pty Ltd

  • MNC:

    [2003] QDC 453

  • Court:

    QDC

  • Judge(s):

    McGill DCJ

  • Date:

    12 Dec 2003

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Baltic Shipping Co v Dillon ("The Mikhail Lemontov") (1991) 22 NSWLR 1
2 citations
Jump To
Cite 1 - (1991) 22 NSWLR 1
Cite 2 - (1991) 22 NSWLR 1
Best v Sutcliffe [1965] NZLR 750
6 citations
Jump To
Cite 1 - [1965] NZLR 750
Cite 2 - [1965] NZLR 750
Cite 3 - [1965] NZLR 750
Cite 4 - [1965] NZLR 750
Cite 5 - [1965] NZLR 750
Cite 6 - [1965] NZLR 750
Edginton v Fitzmaurice (1885) 29 Ch D 459
1 citation
Jump To
Cite 1 - (1885) 29 Ch D 459
Esanda Finance Corporation Ltd v Tong (1997) 41 NSWLR 482
1 citation
Jump To
Cite 1 - (1997) 41 NSWLR 482
Everett v Griffiths (No 4) [1924] 1 KB 941
1 citation
Jump To
Cite 1 - [1924] 1 KB 941
Gilmour Holdings Pty Ltd v Brisbane City Council (1984) 52 LGRA 378
1 citation
Jump To
Cite 1 - (1984) 52 LGRA 378
Graham v Aluma Lite Pty Ltd (1996) 39 NSWLR 58
1 citation
Jump To
Cite 1 - (1996) 39 NSWLR 58
Hungier v Grace (1972) 46 ALJR 492
3 citations
Jump To
Cite 1 - (1972) 46 ALJR 492
Cite 2 - (1972) 46 ALJR 492
Cite 3 - (1972) 46 ALJR 492
Investments Pty Ltd (1998) ASC 155-024
1 citation
Jump To
Cite 1 - (1998) ASC 155-024
Jonsson v Arkway Pty Ltd [2003] NSWSC 815
5 citations
Jump To
Cite 1 - [2003] NSWSC 815
Cite 2 - [2003] NSWSC 815
Cite 3 - [2003] NSWSC 815
Cite 4 - [2003] NSWSC 815
Cite 5 - [2003] NSWSC 815
Lapin v Abigail (1930) 44 CLR 166
1 citation
Jump To
Cite 1 - (1930) 44 CLR 166
Linkenholt Pty Ltd v Quirk [2000] VSC 166
2 citations
Jump To
Cite 1 - [2000] VSC 166
Cite 2 - [2000] VSC 166
Linter Group Ltd v Goldberg (1992) 10 ACLC 739
2 citations
Jump To
Cite 1 - (1992) 10 ACLC 739
Cite 2 - (1992) 10 ACLC 739
Marshall & Brougham Pty Ltd v Commissioner of Taxation (1986) 45 SASR 571
2 citations
Jump To
Cite 1 - (1986) 45 SASR 571
Cite 2 - (1986) 45 SASR 571
Marshall & Brougham Pty Ltd v Commissioner of Taxation (1987) 45 SASR 571
1 citation
Jump To
Cite 1 - (1987) 45 SASR 571
Park Avenue Nominees Pty Ltd v Boon [2001] NSWSC 700
2 citations
Jump To
Cite 1 - [2001] NSWSC 700
Cite 2 - [2001] NSWSC 700
Pertsinidis v Australian Central Credit Union Ltd (2001) 80 SASR 76
2 citations
Jump To
Cite 1 - (2001) 80 SASR 76
Cite 2 - (2001) 80 SASR 76
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
1 citation
Jump To
Cite 1 - (1981) 147 CLR 589
Rabone v Deane (1915) 20 CLR 636
3 citations
Jump To
Cite 1 - (1915) 20 CLR 636
Cite 2 - (1915) 20 CLR 636
Cite 3 - (1915) 20 CLR 636
Reid's Brewery v Male [1891] 2 QB 1
2 citations
Jump To
Cite 1 - [1891] 2 QB 1
Cite 2 - [1891] 2 QB 1
State of Queensland v Ward [2002] QSC 171
4 citations
Jump To
Cite 1 - [2002] QSC 171
Cite 2 - [2002] QSC 171
Cite 3 - [2002] QSC 171
Cite 4 - [2002] QSC 171
State of Queensland v Ward[2004] 1 Qd R 429; [2003] QCA 366
1 citation
Jump To
Cite 1 - [2003] QCA 366
Swayne v Palm (1970) SASR 158
3 citations
Jump To
Cite 1 - (1970) SASR 158
Cite 2 - (1970) SASR 158
Cite 3 - (1970) SASR 158
West v AGC (1986) 5 NSWLR 610
1 citation
Jump To
Cite 1 - (1986) 5 NSWLR 610

Cases Citing

Case NameFull CitationFrequency
Cash Solutions (Aust) Pty Ltd v Turner [2008] QDC 1082 citations
Dale v Nichols Constructions Pty Ltd [2004] QDC 261 citation
Hoskin v Ask Funding Ltd [2016] QDC 1043 citations
Secure Funding Pty Ltd v West [2017] QDC 1693 citations
Shakespeare Haney Securities Ltd v Crawford[2009] 2 Qd R 156; [2009] QCA 857 citations
1

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