Birbilis v GAP Home Loans (Aust) Custodians Pty Limited [2024] QSC 222

Draft SUPREME COURT OF QUEENSLAND CITATION: Birbilis v GAP Home Loans (Aust) Custodians Pty Limited [2024] QSC 222 PARTIES: TERRY BIRBILIS (first plaintiff) JAMES BIRBILIS (second plaintiff) MARIA BIRBILIS (third plaintiff) MICHAEL BIRBILIS (fourth plaintiff) JEREMY BIRBILIS (fifth plaintiff) v GAP HOME LOANS (AUST) CUSTODIANS PTY LIMITED ACN 613 862 730 (defendant) FILE NO: 7385 of 2023 DIVISION: Trial Division PROCEEDING: Trial ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 20 September 2024 DELIVERED AT: Brisbane HEARING DATE: 27 March 2024 JUDGE: Sullivan J ORDER: On the plaintiffs’ claim, the Court orders that: 1. The plaintiffs’ claim is dismissed. 2. The plaintiffs pay the defendant’s costs of and incidental to the plaintiffs’ claim, including any reserve costs, on a standard basis, to be assessed. On the defendant’s counterclaim, the Court orders that: 1. The parties are directed to file and serve their calculation of interest and overall debt by 4pm on 27 September 2024 calculated to 4 October 2024, such calculation to be in accordance with those reasons. 2. Otherwise adjourn the counterclaim to 4 October 2024. -- 1 of 34 -- 2 CATCHWORDS: TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS – MISLEADING OR DECEPTIVE CONDUCT GENERALLY –where the plaintiffs allege the defendant represented that it was a member of the Australian Financial Complaints Authority – where the plaintiffs entered into guarantees and mortgages with the defendant – where the defendant was not a member of the Australian Financial Complaints Authority – where the plaintiffs allege that they would not have entered into guarantees and mortgages with the defendant save for the representation – whether the representation was made – whether the representation was misleading and deceptive conduct which induced the plaintiffs into entering the guarantees and mortgages – whether the loan agreement, guarantees and mortgages should be declared invalid Competition and Consumer Act 2010 (Cth), s 237, s 243 Corporations Act 2001 (Cth), s 436A Addenbrooke Pty Ltd v Duncan (No 2) (2017) 348 ALR 1 Barnes v Forty Two International Pty Ltd [2014] FCAFC 152 Gomba Holdings UK Limited & Ors v Minories Finance Limited & Ors (No 2) [1993] Ch 171 Henville v Walker (2001) 206 CLR 459 I & L Securities v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 Kyabram Proprietary Investments Pty Ltd & Anor v Murray & Anor [2005] NSWCA 87 Leda Holdings Pty Ltd v Oraka Pty Ltd [1999] FCA 444 COUNSEL: The first plaintiff appeared in person The second, third, fourth and fifth plaintiffs did not appear D V Ferraro for the defendant SOLICITORS: The first plaintiff appeared in person The second, third, fourth and fifth plaintiffs did not appear Dentons Australia for the defendant -- 2 of 34 -- 3 Introduction [1] The five plaintiffs in this proceeding are all related. They constitute a mother and a father and their three adult sons. Each of the plaintiffs were directors of a company known as Birbilis Bros Pty Ltd (“BB”). BB had been a family company which acted as a trustee of a family trust called Birbilis Family Trust. As trustee, BB carried on the family business of furniture manufacturing. [2] The plaintiffs’ claim in this matter was for relief under the Australian Consumer Law1 (“ACL”) for what they alleged was misleading and deceptive conduct by the defendant. This conduct was said to have induced BB to enter into a loan agreement and a general security, and to have induced each of the plaintiffs to provide guarantees, and in the case of some of the plaintiffs, two mortgages. [3] The relief sought by the plaintiffs included declarations: (a) that the false and misleading conduct had induced BB or themselves to enter into the various documents; and (b) that the loan agreement, guarantees and mortgages were invalid. [4] The relief also sought an order restraining the defendant from enforcing the loan agreement, guarantees and the mortgages without first participating in a mediation in accordance with the principles of a company known as the Australian Financial Complaints Authority (“AFCA”). [5] No claim for damages or compensation was made in the Originating Application,2 or the Statement of Claim which was directed to be produced. Whilst commenced by an Originating Application, on 30 June 2023, Freeburn J ordered the proceeding to continue as if started by claim. To avoid confusion, I will refer to this proceeding as a claim in these reasons and in the order. [6] The defendant, GAP Home Loans (Aust) Custodians Pty Ltd (“GAP Home Loans”), was one of two entities which had entered into the loan agreement with BB, and the guarantees and mortgages with the plaintiffs. The other lender, and party to the various documents, was SF Mortgage Pty Ltd (“SF Mortgage”). No pleaded allegations of misleading and deceptive conduct were made against SF Mortgage. [7] The defendant subsequently took an assignment of SF Mortgage’s rights and interests under the loan agreement and in the mortgages. [8] The defendant has brought a counterclaim in which it seeks judgment against each of the plaintiffs pursuant to their guarantees for amounts owing, together with recovery of possession of the land the subject of one of the mortgages. The other mortgaged property has already been sold by the defendant as mortgagee in possession. [9] At the hearing of the claim and counterclaim, only one of the plaintiffs appeared. That particular plaintiff was Mr Terry Birbilis. His mother, Maria Birbilis, was present in the Court during the trial but chose not to participate. Mr Terry Birbilis sought to appear on behalf of each of the other plaintiffs. It was indicated to him by 1 Schedule 2 of the Competition and Consumer Act 2010 (Cth). 2 The proceeding was commenced by way of an Originating Application. -- 3 of 34 -- 4 the Court that he could not formally represent and appear for the other plaintiffs. The trial proceeded with only Mr Terry Birbilis appearing and conducting the relevant case. [10] The structure of these reasons will deal first with the claim brought by the plaintiffs and then secondly with the counterclaim brought by the defendant. Plaintiffs’ claim (a) The plaintiffs’ pleaded case [11] The Statement of Claim3 pleaded, inter alia, the following allegations. [12] Mr Terry Birbilis was the agent for BB in BB’s dealings with the defendant. [13] SF Mortgage and the defendant were not members of the company known as AFCA. [14] BB entered into the loan agreement and general security with the defendant, and the plaintiffs entered into the guarantees and mortgages with the defendant. [15] At all relevant times prior to BB entering into the loan agreement, a search of the internet domain name gaphomeloans.com.au would redirect to a website called gapbusinessloans.com.au. [16] In March 2022, prior to the entry into of the loan agreement, the website for gapbusinessloans.com.au had a Privacy and Credit Reporting Policy (“the Policy”) dated 14 June 2019 which included the following statement: “...Complaints If you are dissatisfied with how we have dealt with your personal information, or you have a complaint about our compliance with the Privacy Act and the Credit Reporting Code, you may contact our complaints officer on 1800 992 275 We will acknowledge your complaint within seven days and aim to resolve the complaint as quickly as possible. We will provide you with a decision on your complaint within 30 days. If you are dissatisfied with the response of our complaints officer you may make a complaint to our External Dispute Resolution Scheme, the Australian Financial Complaints Authority (AFCA) which can be contacted on 1800 931 678 or the Privacy Commissioner which can be contacted on either www.oaic.gov.au or 1300 363 992” (“AFCA Representation”) [17] A reasonable person in the position of Mr Terry Birbilis would have understood that the AFCA Representation applied at the relevant time to the defendant. [18] BB relied on the AFCA Representation when entering into the loan agreement with the defendant and SF Mortgage, and each of the plaintiffs relied on the AFCA 3 The Statement of Claim was not obviously drawn by a lawyer. As will be seen, the allegations are somewhat disjointed, but the plaintiffs’ broad case is apparent. -- 4 of 34 -- 5 Representation when entering into their guarantees and mortgages with the defendant and SF Mortgage. [19] The plaintiffs’ pleaded case was that as the defendant and SF Mortgage were not members of the AFCA, the AFCA Representation was misleading and deceptive. This particular plea makes clear enough that the AFCA Representation is said to have represented that the defendant at least was a member of the AFCA. [20] From October 2022, BB and each of the plaintiffs suffered financial hardship. [21] On 7 February 2023, the defendant advised the plaintiffs that the loan agreement was in default. [22] In February 2023, the plaintiffs asked the defendant to consider varying the terms of the loan agreement for financial hardship reasons. [23] The defendant refused the plaintiffs’ request to vary the terms of the loan agreement for financial hardship reasons. [24] Later in February 2023, Mr Terry Birbilis made inquiries of the AFCA about making a complaint to initiate a conciliation conference between the plaintiffs and the defendant on financial hardship grounds. [25] In March 2023, the AFCA advised Mr Terry Birbilis that the defendant was not a member of the AFCA and did not hold an Australian credit licence, being a requirement of membership for the AFCA. [26] As a consequence of the AFCA Representation, the plaintiffs allege they had been induced to enter into the loan agreement with the defendant without receiving the benefit and protection and comfort of the AFCA conciliation conference process and the AFCA code of practice. [27] The plaintiffs allege that they have suffered loss and damage because of the AFCA Representation as they did not have recourse to an independent body to mediate upon the plaintiffs’ financial hardship request. [28] The plaintiffs would not have entered into the loan agreement,4 save for the AFCA Representation. (b) The defendant’s pleaded case [29] Turning then to the Defence, the defendant pleaded, inter alia, the following matters. [30] The Policy appeared on the website for gapbusinessloans.com.au. [31] The Policy was not a document which operated in relation to the defendant, but was one which operated in relation to a related company called GAP Business Loans Custodians Pty Ltd, and accordingly any representation conveyed by the Policy was made by that separate entity and not the defendant. 4 It should be noted that the plaintiffs were not a party to the loan agreement, however I understand that this allegation is really that the plaintiffs would not have caused BB to enter into the loan agreement and would not have otherwise entered into the guarantees and mortgages. -- 5 of 34 -- 6 [32] The plaintiffs were not the borrowers under the loan agreement. [33] BB did not rely upon the alleged AFCA Representation to enter into the loan agreement, and the plaintiffs did not rely upon the alleged AFCA Representation to enter into the guarantees and the mortgages. [34] The defendant relied upon cl 11.16 of the loan agreement which provided that BB acknowledged that it did not enter into the loan agreement as a result of or because of any promise, representation, statement or information of any kind given or offered by or on behalf of the defendant or SF Mortgage. [35] The defendant relied upon cl 4.3(a) of the guarantees which contained an acknowledgment by each of the plaintiffs that they had not relied on any warranty or representation made by or on behalf of BB or SF Mortgage. [36] Even if BB and each of the plaintiffs had known that the defendant was not a member of the AFCA, they would have nonetheless: (a) in the case of BB, entered into the loan agreement and the general security; and (b) in the case of each of the plaintiffs, entered into the guarantees; and (c) in the case of three of the plaintiffs, entered into the two mortgages. (c) Background facts [37] In 2019, BB had entered into a long-term supply agreement with Bunnings Group Limited (“Bunnings”) for the supply of kitchen and joinery products to Bunnings, principally for its wholesale and trade business. This was described by Mr Terry Birbilis as the “Bunnings Deal”. [38] The Bunnings Deal had required BB to acquire specific tooling to set up a system capable of meeting the anticipated supply. [39] Mr Terry Birbilis’s evidence was that the Bunnings Deal had minimum purchase milestones, and in 2020 Bunnings should have ordered $16.5 million worth of stock, which represented 33 per cent of Bunnings national joinery budget. Mr Terry Birbilis’s evidence was that the minimum expectation for the Bunnings Deal was that it would add $6.2 million to the annual bottom line of the business run by BB. Mr Terry Birbilis gave evidence that even if Bunnings had closed its division, BB would have added, at an absolute minimum, $5 million per year in stock purchases which would have resulted in BB receiving at least $1.9 million to its bottom line. The bottom line figures were based on the Bunnings Deal allegedly containing an agreed gross profit margin of 38 per cent for BB. No copy of any document said to form the Bunnings Deal was put before the Court. The sole evidence of the Bunnings Deal came from Mr Terry Birbilis. [40] Mr Terry Birbilis went on to give evidence that Bunnings, in fact, only ordered $600,000 in stock by 2020. Mr Terry Birbilis gave evidence that the Bunnings Deal had become acrimonious, and BB had filed a claim in the Supreme Court of Queensland in June 2021 for breach of contract. He stated that by a combination of the alleged broken Bunnings Deal, and the effect of Covid, the business run by BB had come under financial stress. -- 6 of 34 -- 7 [41] Under cross-examination, Mr Terry Birbilis accepted that the financial stress that BB had experienced since 2020 had continued through to the years 2021 and 2022, and was mounting. I find that by March 2022: (a) BB was in financial stress, and that stress had been mounting for two years; (b) that a failed deal with Bunnings had been, and was continuing to be, a significant source of the financial stress; (c) in June 2021, litigation against Bunnings had commenced in relation to that failed deal, and the underlying relationship with Bunnings had become acrimonious. [42] It was in the context of this mounting financial stress on BB that BB sought additional funding in 2021. In October 2021, Mr Terry Birbilis, on behalf of BB, approached a finance broker, a Mr Greg Barnes, for the purposes of obtaining a $250,000 Covid loan from Westpac. It is evident that BB had already obtained a Covid loan in an amount of $250,000 from the Queensland Rural and Industry Development Authority some time prior to October 2021. Accordingly, this was an attempt to obtain a second Covid loan for an additional $250,000. [43] Mr Barnes was ultimately unable to obtain this second Covid loan from Westpac. As a result of this failure, BB ended up borrowing $250,000 from an entity known as Shift Financial, for a term of five years. Mr Terry Birbilis described the Shift Financial loan as a stop gap loan. [44] At the same time, BB also had two business loans with the ANZ Bank (“ANZ”). One was for $350,000, and the other was for $530,000. [45] Accordingly, by March 2022, BB had existing loan facilities as follows: (a) a $530,000 overdraft with the ANZ; (b) a $350,000 separate facility with the ANZ; (c) a $250,000 business loan from Shift Financial; and (d) a $250,000 Covid loan from the Queensland Rural and Industry Development Authority. [46] These facilities were, or were close to being, fully drawn as at March 2022. Mr Terry Birbilis accepted in cross-examination that at this point in time (being March 2022) it was prudent for BB to continue to seek additional funding. He explained that this would allow BB to possibly try to get some sort of commercial resolution with Bunnings in respect of the ongoing dispute. [47] After Mr Barnes had failed to obtain funding for BB from Westpac, Mr Terry Birbilis said that Mr Barnes was disheartened and not able to help BB any further. [48] Mr Barnes then referred BB to a Sydney-based brokerage company, Peak Capital Pty Ltd (“Peak Capital”) in March 2022. Mr Terry Birbilis said that at this time, he went to Peak Capital’s website and read the biography of the founder, a Mr Peter Nikolaou. He noted that Mr Nikolaou had experience with commercial loans, and Peak Capital -- 7 of 34 -- 8 was an AFCA member and an authorised credit representative of an AFSL holder.5 He said that this gave him comfort. [49] In his affidavit, Mr Terry Birbilis stated that “I am generally aware of AFCA and understand that membership means members adhere to a code and that you could go there if you had a complaint or needed hardship assistance.” His affidavit used the present tense when giving this evidence. He did not explain in his evidence exactly when and how he acquired each part of that alleged knowledge. [50] Peak Capital was, at all times, represented by Mr Nikolaou in its dealings with BB. [51] Mr Terry Birbilis gave evidence that he told Mr Nikolaou that the business of BB needed a loan to keep the family going, principally so they could pay drawings to themselves. Mr Terry Birbilis accepted in cross-examination that such drawings were to be, in part, for living expenses of the family. [52] Mr Nikolaou gave evidence that he had an initial telephone conversation with Mr Terry Birbilis on 4 March 2022. During that call, Mr Terry Birbilis provided a brief outline of the funding requirements of BB and its unsuccessful attempt to obtain a Covid loan through Westpac. [53] Mr Nikolaou also gave evidence that he had been informed by Mr Terry Birbilis that BB needed working capital to keep the business trading until BB had completed its court case against Bunnings. He recalled that Mr Terry Birbilis had said that BB expected to receive millions of dollars from the Court case. [54] Mr Terry Birbilis gave evidence that at some stage he had said to Mr Nikolaou that he would prefer not to deal with any loan sharks. Mr Nikolaou agreed words to this effect had been said. [55] Mr Nikolaou gave evidence of the process he undertook with all his clients at Peak Capital. I accept this evidence. It is worth setting it out in some detail. The process was as follows: (a) Peak Capital completes a comprehensive consultation and due diligence process in order to ensure that it understands the client’s requirements; (b) if the client is identified as one that Peak Capital can assist, Peak Capital will issue a finance proposal to the client for its review and approval; (c) the finance proposal issued by Peak Capital includes terms from proposed lenders, but does not identify who the proposed lenders are at that stage; (d) if the client accepts the proposal, they will then pay the engagement fee; (e) it is only after the payment of the engagement fee that Mr Nikolaou advises the client of the identity of the lender; (f) a finance application process then commences; (g) a finance application is then assessed by the relevant lender and, if approved, the loan is then documented and settled; 5 That is, an Australian Financial Services Licence holder registered with the Australian Securities & Investment Commission. -- 8 of 34 -- 9 (h) once settled, Peak Capital receives a success (brokerage) fee from the client; (i) Peak Capital remains involved throughout the process, from initial application to final loan settlement. [56] Mr Nikolaou gave evidence that he suggested a private lender for BB because BB did not have any other options open to it. Mr Nikolaou gave evidence that his process to obtain funding for clients was to first approach banks, then approach non-bank lenders and lastly approach private lenders. He identified that in this case, bank options had already been exhausted and non-bank lenders were not an option, so he approached two private lenders. [57] On 7 March 2022, an initial proposal for finance document was submitted by Peak Capital to BB. This document had the details of two private lender options. Mr Terry Birbilis signed that initial proposal on behalf of BB. In accordance with Mr Nikolaou’s general process, that initial proposal did not name any potential lenders. That initial proposal recorded what BB (through Mr Terry Birbilis) was then seeking, in the following terms: “1. Funding to assist with the refinance of existing facilities and provide additional funding to support business growth 2. Maximum gearing available 3. Most competitive pricing possible” [58] The first option in the initial proposal was for a facility of $1.957 million (calculated to 75 per cent of the supposed value of the mortgage security offered) for a 12 month period, with interest at 7.95 per cent per annum. The security for the first option was in the form of a general security from BB, together with guarantees and indemnities from all directors and shareholders, and two first mortgages over properties at 62 St Andrews Crescent, Carindale, Queensland (“Carindale Property”) and 9 Barton Street, Holland Park West, Queensland (“Holland Park West Property”) respectively. [59] The second option was for a facility of $1.696 million (calculated to 65 per cent of the supposed value of the mortgage security offered), with interest at 6.95 per cent per annum, and otherwise in the same terms as the first option. [60] On 8 March 2022, Mr Terry Birbilis emailed Mr Nikolaou stating, “Thanks for the private funding offer”, and inquired whether “they” could extend the term of the proposed loan to 18 months if required. [61] On 8 March 2022, Mr Nikolaou responded in the affirmative. He stated that the facility could be extended up to 24 months if BB was servicing the interest monthly. [62] On 10 March 2022, Mr Terry Birbilis then responded to Mr Nikolaou by asking Mr Nikolaou to do up the letter of offer for “this private option.” He further stated, “The family is leaning towards this option with two years due to speed and ease. Then we can work on a Covid loan or a business loan if you feel this is possible.” This response evidences, and I accept, that the larger family group: (a) was being informed of the options being put forward by Peak Capital; and -- 9 of 34 -- 10 (b) was involved in the decision-making process as to what funding option would ultimately be accepted. [63] Mr Terry Birbilis gave an explanation for the importance of a 24 month term to BB in the following terms, “You don’t know with litigation what the other side is thinking, whether they want to honour a contract or do a commercial deal.” He stated that at this time he had no idea what Bunnings’ mindset was or how they wanted to proceed. [64] Mr Terry Birbilis gave evidence that from discussions with Mr Nikolaou he knew that the lender was going to be a second-tier lender. [65] It was clear from this evidence and the communications summarised above, and I find accordingly: (a) that BB and Mr Terry Birbilis understood that the options which were being given were from private lenders and not from banking institutions; (b) it was Mr Terry Birbilis who had raised the prospect, on behalf of BB, of the facility being longer than 12 months; (c) the family was aware of the options and had asked for a letter of offer to be done up for the first option, no doubt with a view to obtaining the greatest amount of loan funds on offer; (d) the family required those loan funds to provide for drawdowns, in part to meet living expenses, in circumstances where: (i) BB had been and continued to be under financial stress; (ii) the relationship with Bunnings was acrimonious; (iii) litigation with Bunnings had been on foot for nine months; (iv) existing loan facilities were, or were nearly, all fully drawn; and (v) additional loan facilities from banks were no longer a viable option. [66] On 23 March 2022, an updated proposal for finance was submitted by Peak Capital to BB. The change in the proposal was that the term for both options had increased from 12 months to 24 months, so as to reflect the request made on behalf of BB. [67] The second financial proposal again did not identify any of the proposed lenders. [68] The second proposal for finance was signed by Mr Terry Birbilis on behalf of BB on 23 March 2022. [69] It is relevant to note that at no time when these options were being prepared and presented by Peak Capital did Mr Terry Birbilis raise with Mr Nikolaou any query concerning the AFCA or the potential lender’s membership of the AFCA. Indeed, those two matters were never raised by Mr Terry Birbilis or BB with Mr Nikolaou at any time. [70] On 25 March 2022, BB paid the engagement fee of $1,100 to Peak Capital. BB elected to proceed with option one from the second proposal for finance. This option was for $1.957 million (calculated to 75 per cent of the supposed value of the -- 10 of 34 -- 11 mortgage securities offered) for 24 months at 7.95 per cent interest per annum, with an establishment fee of 2.2 per cent. The security was in the same terms as the initial proposal for finance. [71] Under cross-examination, Mr Terry Birbilis accepted that prior to finding out the identity of the lender, he was happy to proceed with the offered option which provided the highest gearing at 75 per cent of the supposed mortgage security value, and for the longest term of up to 24 months. He accepted that this option had a competitive interest rate. He agreed that he was happy to proceed to the next stage of the application process because he was happy with the terms of the loan. [72] At some time after the engagement fee had been paid on 25 March 2022, the identity of the lender was disclosed to Mr Terry Birbilis on behalf of BB. It is not clear on the evidence as to exactly when and how this occurred. [73] What can be said on the evidence is the following. On or about 1 April 2022, Peak Capital provided to the potential lender a finance submission presented on behalf of BB. BB’s finance submission identified, amongst other things, that the business conducted by BB currently had contracts with Fantastic Furniture and Bunnings. I note that the finance submission made no mention of the acrimonious relationship which then existed with Bunnings, or the Supreme Court proceeding between BB and Bunnings which had been on foot since June 2021. The finance submission identified the purpose of the proposed facility in the following terms, the “client is seeking to consolidate and refinance existing lending facilities as well as obtain additional funds for working capital.” Nothing was said of the plaintiffs requiring funds for the purpose of drawings to themselves, including for living expenses. [74] The finance submission identified that there were existing facilities of $1,384,599 and that the proposed facility which was sought was $2,137,000. The finance submission provided that the following facilities would be discharged from the loan proceeds: (a) the ANZ overdraft of $530,000; (b) the ANZ business loan of $354,599; and (c) the Shift Financial business loan of $250,000. [75] The Queensland Rural and Industry Development Authority Covid loan of $250,000 was identified as being left undischarged. It is apparent from the finance submission that the existing facilities were fully drawn. [76] On or about 1 April 2022, an indicative loan approval was sent to BB. It appeared on a document bearing the masthead “GAP Business Loan” at the top right of the page. It also stated at the start of the document, “Thank you for allowing GAP Business Loans to assist for your finances.” It again contained two options. One was for 70 per cent of the loan to value ratio of the mortgage security, and the other one was for 75 per cent of the loan to value ratio of the mortgage security. The second option resulted in a facility of $2,137,500. The rate for this option 2 was 7.95 per cent per annum. It contained a term of 18 months, with an option to extend to two years on payment of a rollover fee of 0.5 per cent. The brokerage fee for Peak Capital was $23,513 or 1.1 per cent. The establishment and legal fees were $47,025 or 2.20 per cent. Those fees were to be paid to the lender at draw down. This document was not -- 11 of 34 -- 12 itself a binding contract to lend the money. It was part of a process moving towards an ultimate binding loan agreement. [77] On a later date in early April 2022, a terms sheet for the proposed loan was then generated and sent to BB. It was again a document with the words “GAP Business Loans” appearing on the top right of each page. However, this document made plain that the proposed lender was the defendant, GAP Home Loans (Aust) Custodians Pty Ltd. [78] Shortly after he had found out that the lender was going to be the defendant, Mr Terry Birbilis gave evidence that he visited the gapbusinessloans.com.au website. He could not give a specific date for this visit, nor could he say what specific internet search he made to bring up this website. He said that on this occasion he saw the Policy on the website and it contained the extract which appeared in the Statement of Claim. That extract was as follows: “...Complaints If you are dissatisfied with how we have dealt with your personal information, or you have a complaint about our compliance with the Privacy Act and the Credit Reporting Code, you may contact our complaints officer on 1800 992 275. We will acknowledge your complaint within seven days and aim to resolve the complaint as quickly as possible. We will provide you with a decision on your complaint within 30 days. If you are dissatisfied with the response of our complaints officer you may make a complaint to our External Dispute Resolution Scheme, the Australian Financial Complaints Authority (AFCA) which can be contacted on 1800 931 678 or the Privacy Commissioner which can be contacted on either www.oaic.gov.au or 1300 363 992”. [79] It is this extract which is said to underpin the misleading and deceptive conduct of the defendant. [80] Importantly, under cross-examination, Mr Terry Birbilis gave evidence of the following matters which are said to relate to his visit to the website and his perusal of the Policy: (a) he read the whole Policy; (b) when he read the Policy, he specifically saw the following portion of the Policy situated at the top of the second page where the detail of the Policy commences: “Who are we?” “we”, “us” and “our” refer to GAP Business Loans Custodians Pty Ltd ACN 643 966 349”; (c) when he read the Policy, he noticed that the lender identified in the loan terms document, being the defendant, GAP Home Loans Custodians (Aust) Pty Ltd, was a different entity to the entity referred to in the Policy, being GAP Business Loans Custodians Pty Ltd; -- 12 of 34 -- 13 (d) to him, the Policy represented that GAP Business Loans Custodians Pty Ltd was a member of the AFCA; (e) he observed that in the footer of each page of the Policy the internet address, ‘gaphomeloans.com.au’ appeared, which he described as confusing as the Policy “only refers to GAP Business Loans Custodians Pty Ltd”; and (f) in the context of his evidence set out in paragraphs (a) to (e) above, and in response to a question by counsel for the defendant as to whether Mr Terry Birbilis made some further independent inquiry as to whether the defendant was also a member of the AFCA, Mr Terry Birbilis responded that he spoke to Mr Nikolaou about it, asking Mr Nikolaou, “Are they the one company?”, with Mr Nikolaou allegedly replying, “Yes, one’s a business loan and one’s a - a home loan company.”; [81] It was then put to Mr Terry Birbilis that no such conversation occurred with Mr Nikolaou. Mr Terry Birbilis rejected that suggestion. [82] I observe the above purported conversation between Mr Terry Birbilis and Mr Nikolaou as set out in sub-paragraph [80](f) above had not been pleaded in the Statement of Claim, nor had it appeared in the two affidavits of Mr Terry Birbilis which constituted his evidence-in-chief. Mr Terry Birbilis did not suggest to Mr Nikolaou in cross-examination that any such a conversation occurred. This is despite Mr Terry Birbilis cross-examining Mr Nikolaou about other communications he had with him. [83] I note that Peak Capital had been retained by BB. Peak Capital was acting for BB in the loan application process. It was not pleaded, and certainly not proved, that either Mr Nikolaou or Peak Capital were agents of the defendant. Any statement made by Mr Nikolaou in the form of the alleged conversation set out in sub-paragraph [80](f) above was not made on behalf of the defendant or with its authority. [84] A loan agreement was ultimately produced, together with security documents which included the five guarantees and two mortgages. [85] The loan agreement actually had two lenders. One was the defendant and the second was SF Mortgage. The defendant advanced $91,875 and SF Mortgage advanced $1,745,625. [86] The total amount advanced was, therefore, $1,837,500 for a period of 18 months with a rollover option for a further six months. There was a 2.2 per cent (plus GST) establishment fee and a 1.1 per cent (inclusive of GST) brokerage fee. The interest rate was 7.35 per cent per annum with a default rate of 11.35 per cent. There was a monthly facility service fee of $100. The interest was to be paid monthly in advance, with the first six months’ interest prepaid. The total loan was therefore less than had been previously identified in the preferred option, but the per annum interest rate had also reduced. The circumstances for these reductions were not the subject of evidence. [87] Mortgages were given over: -- 13 of 34 -- 14 (a) the Carindale Property by James Birbilis and Maria Birbilis;6 and (b) the Holland Park West Property by Michael Birbilis. [88] The registered mortgages identified that in each case the Mortgagees, being the defendant and SF Mortgage Pty Ltd, were tenants in common with 5 per cent and 95 per cent interests, respectively. [89] Finally, each of the plaintiffs entered into a deed guarantee. The Details page of each guarantee recorded: (a) the “Lender” as the defendant and SF Mortgage; (b) the “Borrower” as BB; and (c) the “Documents” as the loan agreement, the two mortgages, each guarantee and the general security over the whole of the assets and undertakings of BB. [90] Mr Terry Birbilis gave evidence that he visited at some time the website for a company called SF Mortgage Services Pty Ltd which apparently showed that it was a member of the AFCA. That, of course, was a similar but different name to the lending entity SF Mortgages Pty Ltd. It is unclear from the evidence when this search was said to have taken place. In any event, the only misleading conduct is pleaded to be engaged in by GAP Home Loans and the product of this search does not form part of the elements of the pleaded causes of action. [91] Each of the loan agreement, guarantees and mortgages were executed on 31 May 2022. The loan agreement facility was also drawn down on 31 May 2022. [92] Within five months of the drawdown, on 14 October 2022, the directors of BB appointed a voluntary administrator to BB pursuant to s 436A of the Corporations Act 2001 (Cth). That appointment was an immediate event of default under cl 9(b) of the loan agreement and cl 11.3(a) of the mortgages. The defendant only became aware of that appointment as a result of a letter from the administrator dated 17 October 2022. By 30 November 2022, BB was also in breach of cl 5.1 of the loan agreement, in that it had failed to pay its monthly interest repayment to the defendant and SF Mortgage. As noted previously, the first six months of interest had been pre- paid at drawdown, pursuant to the terms of the loan agreement. [93] On 9 December 2022, and pursuant to cl 9 and cl 10.1 of the loan agreement, a notice of default was then sent to BB to pay the full outstanding debt under the loan agreement in the amount of $1,845,048.79. BB duly failed to make the payment of that amount. [94] On 16 December 2022, pursuant to cl 10.1 of the loan agreement, the defendant and SF Mortgage issued a notice to BB terminating the loan agreement and demanding the full amount outstanding under the loan agreement in the amount of $1,847,697.36. [95] A 5 January 2023 email from a Mr Peter Arnold of the defendant to Mr Terry Birbilis suggests that Mr Terry Birbilis had raised by that stage, at least the prospects of some proposal with the defendant. Mr Arnold requested in the email for the proposal to be sent as soon as possible. 6 The parents of Mr Terry Birbilis. -- 14 of 34 -- 15 [96] On Monday 9 January 2023, Mr Terry Birbilis wrote to Mr Arnold, stating that he was working on multiple strategies. The first was to engage a real estate agent for the sale of the properties, and he indicated that this was happening now. The properties being referred to were obviously the two mortgaged properties. The email also identified that the second strategy was Mr Terry Birbilis engaging with three other funders, one of whom was said to have given a verbal indication that they would cover the loan repayments in advance while two other funders were said to be looking at the matter that week. The third strategy was identified as the family funding the repayments themselves. It was stated that he would have a clearer picture of the three options as the week progressed. [97] On Wednesday 11 January 2023, Mr Arnold asked Mr Terry Birbilis to send through: (a) a pre-sale contract for the sale of both security properties; (b) an executed agency agreement for both properties; (c) evidence that the marketing budget had been paid; and (d) a copy of the appointed agent’s submission. [98] The email from Mr Arnold asked for the above to be done as a matter of priority, and Mr Arnold strongly encouraged Mr Terry Birbilis to arrange payment of the interest arrears. [99] On the same day, a Ms Morris of the defendant sent a further email identifying that as a result of the event of default, in accordance with cl 10.1 of the loan agreement, the lender was exercising their right to cancel the facility and demanded immediate payment of the debt in full. The email identified that the default interest rate of 11.35 per cent had been charged from 16 December 2022. I find that the loan agreement had already been cancelled on 16 December 2022. [100] On 17 January 2023, a deed of company arrangement was put forward by Mr Terry Birbilis in the BB administration. The defendant and SF Mortgage did not vote in favour of that proposed deed. A sufficient number of other creditors of BB voted in favour of the proposed deed so that it became effective on 6 February 2023. The terms of the deed were not before the Court. [101] On 10 February 2023, demands were sent by the defendant to each of the guarantors for repayment of the full debt in the amount of $1,881,480.96. [102] On 10 February 2023, a litigation funder, known as Litigation Funding Solutions (“LFS”), by its managing director, wrote to the defendant’s director, Mr Arnold. LFS identified that BB had signed a litigation funding agreement on 9 February 2023 and LFS had allocated $200,000 to assist the plaintiffs to service future interest payments for approximately one years’ duration. That was claimed by LFS to be the period of time that it would most likely take to secure a determination or settlement with Bunnings in the Supreme Court action which had previously been commenced in 2021. [103] It was a condition of the proposal by LFS that the defendant and SF Mortgage agree that the litigation funder be entitled to a first security position with respect to the fruits of the Bunnings litigation. In this respect, LFS required the defendant and SF -- 15 of 34 -- 16 Mortgage to enter into a subordination deed that acknowledged the litigation funder would have priority in relation to the proceeds from that legal action. [104] One of the securities held by the defendant and SF Mortgage was a general security over, effectively, the whole of the undertaking of BB. [105] On 13 February 2023, Mr Arnold responded to LFS, informing it that the loan agreement had been cancelled and the entire amount of the outstanding debt was being sought. He also identified that the defendant was not interested in subordinating its security position to the litigation funder. Mr Arnold identified that the defendant might reconsider that position once the sale of one or both of the secured mortgage properties were under unconditionally exchanged contract. [106] On 28 February 2023, SF Mortgage assigned in writing all its right, title and interest created by the loan agreement and mortgages, to the defendant. [107] On 12 May 2023, the defendant engaged Newpoint Advisory Pty Ltd (“Newpoint”) to be its agent for the sale by the defendant of the Holland Park West Property as mortgagee in possession. The Holland Park West Property was sold at auction on 5 July 2023, with settlement taking place on 4 August 2023. [108] On 14 August 2023, the defendant had issued a notice of exercise of power of sale to Mr James Birbilis and Mrs Maria Birbilis in respect of the Carindale property, which was the subject of the other mortgage. No sale of that property has occurred. (d) Did the defendant engage in misleading and deceptive conduct? [109] I have concluded that the defendant did not engage in misleading and deceptive conduct in respect of BB or each of the plaintiffs as alleged in the pleading. [110] The effect of the plaintiffs’ pleaded case was that the pleaded extract from the Policy, found on the gapbusinessloans.com.au website, had represented that the defendant was a member of the AFCA. The AFCA was and is a company which, amongst other things, allows guarantors to lodge complaints against lenders who are members of the organisation. It was pleaded that a reasonable person in the position of Mr Terry Birbilis would have understood the AFCA Representation as applying to the defendant. [111] The simple answer to this pleaded case emerged from Mr Terry Birbilis’s evidence given in his affidavit of 20 June 2023 and under cross-examination. He gave evidence to the effect that he had read the Policy in full and had noted that the Policy was expressed to be in respect of an entity which was not the defendant. He understood that the Policy only referred to GAP Business Loans Custodians Pty Ltd and that the Policy represented that GAP Business Loans Custodians Pty Ltd was a member of the AFCA. The only thing he pointed to in his evidence-in-chief as confusing was the presence of the website address ‘gaphomeloans.com.au’ at the bottom of each page of the Policy. In reply evidence, he did not refer to the prior documents which had the mast heading “GAP Business Loans” and then had the defendant as the lender. When he was taken to his answers in cross-examination, to the effect that he was aware that the defendant had a different corporate name to the one in the Policy, the -- 16 of 34 -- 17 plaintiff again fell back on his conversation with Mr Nikolaou to the alleged effect, “That’s one and the same business”.7 [112] I note that in respect of the footer of the Policy, that the website name appearing there is: (a) in small lettering (ie smaller than the rest of the Policy wording); (b) physically separated by a clear gap from the actual operative wording of the Policy; and (c) not a qualification to the operative wording of the Policy. [113] I find that the evidence of Mr Terry Birbilis was to the effect that he understood that the terms of the Policy made clear that it was applicable to the entity named GAP Business Loans Custodians Pty Ltd, as opposed to the defendant which was GAP Home Loans Custodians (Aust) Pty Ltd. Accordingly, Mr Terry Birbilis was aware on reading the Policy that, on its face, it only applied to an entity which was different to the defendant. [114] The Policy was not a document provided by the defendant as part of the loan process documentation. On Mr Terry Birbilis’s case, it was a document which he had unilaterally found on the internet. [115] Having found it, on the plaintiffs’ case, Mr Terry Birbilis never raised this document or its content with the defendant or Peak Capital. [116] Given that Mr Terry Birbilis had read and subjectively understood that the Policy was applicable by its terms to that different entity (and not the defendant), I do not accept that a reasonable person in the position of Mr Terry Birbilis would have understood that the Policy applied to the defendant. More importantly, I do not accept that Mr Terry Birbilis would have subjectively understood that the Policy applied to the defendant. Even if it could be said that there was some oddity in the website address ‘gaphomeloans.com.au’ appearing in the footer, this mere oddity would not have been sufficient to constitute or represent that the Policy applied to an entity other than GAP Business Loans Custodians Pty Ltd. It would not have, and in the case of Mr Terry Birbilis, did not, overcome the effect of the express statement in the Policy that it applied to an entity which was different to the defendant. [117] That position does not change by reason of Mr Terry Birbilis allegedly making a subsequent inquiry of Mr Nikolaou in the following purported terms, “Are they the one company?”, with Mr Nikolaou allegedly responding, “Yes, one’s a business loan and one’s a - a home loan company.”8 [118] First, and fundamentally, Mr Nikolaou was a director and representative of Peak Capital, which was an entity retained by BB. It was neither pleaded nor proved that he or Peak Capital were an agent of the defendant. Nor was there any pleading or evidence that his response on that occasion to Mr Terry Birbilis had been otherwise authorised, or acquiesced in, by the defendant. 7 This is the second articulation of what Mr Nikolaou stated. 8 T1-26 ll 30-31. -- 17 of 34 -- 18 [119] Put shortly, even if Mr Nikolaou had made the statement attributed to him, his making of such a statement was not conduct engaged in by or on behalf of the defendant. Whatever Mr Nikolaou said, it was not attributable to the defendant. [120] Secondly, the response of Mr Nikolaou, in my view, does not communicate that the Policy applied to the defendant. Mr Terry Birbilis supposedly asked if they (that is, the two companies) were the one company. The purported response whilst initially in the affirmative, then continued in a way that indicated that they were different companies. At best, that response may mean that they were related companies. The purported query to Mr Nikolaou was not said to have been made by reference to the Policy or the Policy’s content. Such a response by Mr Nikolaou could not have been taken to have be a representation that the two distinctly identified companies were one and the same company for the purpose of the operation of the Policy. [121] Thirdly, I am not satisfied that such a conversation occurred. The conversation was not pleaded. Further, the existence of the conversation did not sit well with what was, in fact, pleaded. The pleaded case was based on two facts. One being the redirection of the GAP Home Loans website to the GAP Business Loans website. The second was the terms of the extracted Complaints portion of the Policy. The implication being that the combination of those two facts meant that a reasonable person in the plaintiff’s position would have formed the view that the defendant made the AFCA Representation. The pleading made no mention of that part of the Policy that expressly identified that the Policy applied to an entity which was different to the defendant. [122] In addition to the conversation not having been pleaded, it also did not appear in either of the two affidavits of Mr Terry Birbilis, relied on by him in the trial for his evidence- in-chief. The alleged conversation only emerged in cross-examination as a belated explanation as to why Mr Terry Birbilis may have been misled despite the express terms of the Policy he was taken to in cross-examination and which he accepted he had read and understood to be reference to an entity different to the defendant. [123] Further, the alleged content of the purported conversation supports that it is unlikely for it to have occurred. The Policy, the content of the Policy, the AFCA and the defendant’s membership of the AFCA are not referred to at all in the conversation. Mr Terry Birbilis’s contention is that the AFCA Representation was materially important to him. He purportedly made this inquiry of Mr Nikolaou in the context of his having read and understood the express wording of the Policy as to who it applied to, but also his having some confusion by the presence of the internet address ‘gaphomeloans.com.au’ in the footers of the Policy, and the presence of the masthead references to ‘Gap Business Loans’ in prior documents. It seems likely that if Mr Terry Birbilis was materially concerned about the defendant being a member of the AFCA and about the Policy applying to the defendant despite the express terms of the Policy as he read them, then he would have raised the AFCA membership issue, the Policy or the specific content of the Policy in the conversation with Mr Nikolaou. The failure to ever mention any of those matters in light of his reading and his actual subjective understanding of the Policy, seems highly improbable. (e) Did BB or the plaintiffs rely upon the alleged misleading and deceptive conduct? [124] As a result of my finding that there was no misleading and deceptive conduct by the defendant, the claim ought to be dismissed. It is strictly unnecessary to make any -- 18 of 34 -- 19 further findings, but despite this, I will make findings on the reliance issue in the event that I am wrong on this first issue. [125] The starting point is the concession by the defendant in closing submissions that the AFCA Representation did represent that the entity to which the Policy applied was a member of the AFCA. Of course, the defendant submitted that the relevant entity to which the Policy applied was GAP Business Loans Custodians Pty Ltd, and not the defendant. [126] The defendant also accepted that at the relevant time, both it and GAP Business Loans Custodians Pty Ltd were not members of the AFCA. They had previously both been members of the AFCA, but had ceased their membership in July 2021. Mr Arnold gave evidence that the wording of the Policy had been overlooked at the time of the change. I accept that evidence. I also find that had Mr Terry Birbilis raised with the defendant the defendant’s membership of the AFCA or through Mr Nikolaou, he would have been told that the defendant was not a member of the AFCA. [127] The defendant also accepted that had the AFCA Representation represented that the defendant was a member of the AFCA (which it denied), then that representation would have constituted misleading conduct engaged in by the defendant. [128] If, contrary to my findings above, the defendant had misleadingly represented that it was a member of the AFCA, I would nonetheless conclude that BB and each of the plaintiffs did not rely upon the defendant being a member of the AFCA when deciding to enter into the loan agreement, general security, mortgages, and guarantees. In saying this, I bear in mind that for causation purposes under s 237 and s 243 of the ACL, the misleading and deceptive conduct does not have to be the sole cause of the loss and damage. It only has to be “a” cause in the sense that it has materially contributed to the loss and damage.9 My reasoning on this reliance issue is as follows. [129] First, I note the express evidence given on reliance. Mr Terry Birbilis gave evidence that: (a) he positively took comfort from the defendant being part of the AFCA and that there would be some sort of mediation or debt relief process if things had gone really bad; and (b) if he had known the true status of the defendant, he might have looked for further alternative loans because the defendant ended up being basically a private lender masquerading as a reputable lender. [130] In cross-examination, Mr Terry Birbilis gave evidence that had he known the true position, he: (a) probably would have discussed more with Mr Nikolaou as to who the lender was; (b) probably would have looked at and checked with Mr Nikolaou who the defendant was and researched further before accepting the loan; 9 Henville v Walker (2001) 206 CLR 459 and I & L Securities v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109. -- 19 of 34 -- 20 (c) would have discussed it with his family and he would probably have gone with an alternative lender; and (d) would have gone and explored other options with other lenders. [131] In cross-examination, Mr Terry Birbilis denied he would have accepted the funding from the defendant anyway, despite the defendant not being a member of the AFCA. [132] This evidence from Mr Terry Birbilis is relevant in that it articulates his contention in the case, namely that he says that the transaction would probably not have occurred with the defendant. However, the resolution of the ultimate question of whether there was reliance by BB and the plaintiffs at the relevant time receives little assistance from Mr Terry Birbilis swearing at trial that he would have done something different had he known the true position. Such evidence is necessarily hypothetical and therefore carries little weight.10 The issue is principally to be assessed by way of an examination of the objective facts as they existed at the time. [133] Secondly, BB’s financial circumstances which existed during the period when funds were being sought by BB with the help of Peak Capital point to BB having a real and pressing need for access to that further funding. [134] It is clear that BB had been in financial stress for at least two years. [135] The financial stress was reflected, in part, by the fact that all of BB’s pre-existing loan facilities were, effectively, fully drawn. This included a facility of $250,000 with another lender which had recently been entered into when funding from a mainstream bank had proved to be unachievable. [136] The fully drawn nature of the pre-existing facilities was evidenced by the settlement completion record generated at the time of the drawdown of the loan agreement on 31 May 2022. That record showed that the following pre-existing facilities were discharged by the loan agreement funds: (a) an ANZ Retail and Small Business loan being paid out for $529,374.46 (on a $530,000 limit); (b) a second ANZ Retail and Small Business loan being paid out for $350,163.59 (on a $350,000 limit); (c) a Queensland Rural and Industry Development Authority Covid loan being paid out in the amount of $250,547.95 (on a $250,000 limit); and (d) a Bankwest loan being paid out in the sum of $252,489.41. [137] The Bankwest facility may have been a personal facility separately held by one of Mr Terry Birbilis’s brothers. Mr Terry Birbilis gave some evidence that a personal loan to his brother was refinanced by the loan agreement with the defendant. The Bankwest facility had not otherwise been identified as a facility of BB. [138] In addition, the Shift Financial business loan of $250,000, which had been drawn down in full, remained undischarged as at 31 May 2022. 10 Barnes v Forty Two International Pty Ltd [2014] FCAFC 152 at [184] and Addenbrooke Pty Ltd v Duncan (No 2) (2017) 348 ALR 1 at [499]-[502]. -- 20 of 34 -- 21 [139] The fully drawn nature of the existing facilities, and the inability to access new mainstream banking facilities at a time of persistent financial stress for BB, would have provided an incentive to plaintiffs for the loan agreement to have proceeded with the defendant. The prospect of finding a different private lender would have caused further delay in the face of pressing financial needs on the part of BB and the plaintiffs. Objectively, the family would seek to avoid such a delay. [140] Thirdly, but related to the second point, one of the principal causes of BB’s financial difficulty was its dispute with one of its major customers, Bunnings. BB had, on its case, made significant investments in capital equipment and manufacturing facilities for the purposes of the Bunnings Deal. BB alleged Bunnings was not ordering products anywhere near the level BB asserted that the Bunnings Deal contemplated. This had led, inter alia, to unresolved litigation with Bunnings in the Supreme Court, which commenced in June 2021, resulting in an ongoing acrimonious relationship with Bunnings and the financial stress which had been building over the two years. At the time the loan agreement was being negotiated and entered into, all of these Bunnings’ circumstances were front of mind for the plaintiffs. Mr Terry Birbilis spoke to Mr Nikolaou of the funding in the context of being needed to keep BB’s business trading until BB had completed the Bunnings court case. At times, Mr Terry Birbilis gave evidence of the funds from the loan agreement being needed for working capital. At other times, he gave evidence that the funds were needed for drawings including for living expenses for family members. [141] It is clear that BB and the plaintiffs were anxious to obtain further funding in the short term. [142] The evidence supports (and I make) a finding that the funding from a new facility was needed both to keep BB’s business going and to provide living expenses for the plaintiffs personally. These findings support the existence of an incentive to the plaintiffs for the loan agreement to have proceeded with the defendant. I rely on my observations above that the family objectively sought to avoid any delay in obtaining further funding in this circumstance. [143] Fourthly, Mr Terry Birbilis in his dealings with Mr Nikolaou, never raised as a criterion to be met by a private lender that it be a member of the AFCA. If this had been something that was material to Mr Terry Birbilis in his dealings with Peak Capital (including at the outset), it would have been expected to have been raised by him in his discussions with Mr Nikolaou. The very first part of Mr Nikolaou’s standard practice in respect of clients was to complete a consultation and due diligence process in order to understand the particular requirements of a client. The absence of any mention of the AFCA by Mr Terry Birbilis to Mr Nikolaou at any stage strongly points against Mr Terry Birbilis or any of the other plaintiffs regarding the defendant’s membership or non-membership of the AFCA as being material to a decision to proceed with the loan agreement. [144] Fifthly, but related to the fourth point, at no stage did Mr Terry Birbilis ever raise with Mr Nikolaou or the defendant the topic of the Policy, its specific content, or the AFCA, or the defendant’s membership of the AFCA, after Mr Terry Birbilis is said to have read the Policy. As I have observed previously, given Mr Terry Birbilis (on his case) knew that the Policy on its face applied to an entity different to the defendant, it would have been unlikely that he would not have raised the question of -- 21 of 34 -- 22 the defendant’s membership of the AFCA, the Policy or the contents of the Policy with Mr Nikolaou, if the issue of the defendant’s membership of the AFCA had been “a” material consideration to him when deciding to proceed with the loan agreement and associated securities. The absence of any of those matters being raised by Mr Terry Birbilis with Mr Nikolaou points strongly against Mr Terry Birbilis having been concerned as to whether or not the defendant was a member of the AFCA. [145] Sixthly, Mr Terry Birbilis identified that prior to finding out the identity of the private lender involved, he and the family at large were happy with the terms of the proposed lending option. He indicated to Mr Nikolaou that BB wanted to proceed with that option. This occurred without any reservation as to the identity of the private lender and whether the private lender was a member of the AFCA. This confirms that BB’s criteria set out in the initial finance proposal was considered by the plaintiffs to have been met. This also provides support for the defendant’s membership or non- membership of the AFCA not being a material consideration in BB’s and the plaintiffs’ decisions to enter into the loan agreement and securities with the defendant. [146] While I accept that Mr Terry Birbilis told Mr Nikolaou (most likely at an early stage) that he did not want to be involved with a loan shark, that did not equate to the lender being a member of the AFCA. Whilst Mr Terry Birbilis never explained when and how he knew about the AFCA, his evidence was to the effect he knew something about the AFCA when he looked up Peak Capital’s website. On his case then, he knew about the AFCA and yet never mentioned it once in his dealings with Peak Capital and the defendant up to and including the execution of the loan agreement and securities. [147] In my view, all of these factors point to Mr Terry Birbilis not having relied upon the defendant being a member of the AFCA when deciding on his part for BB to enter into the loan agreement and to provide his guarantee. I reject Mr Terry Birbilis’s evidence to the contrary. I do not accept that if Mr Terry Birbilis had known that the defendant was not a member of the AFCA that he would have sought to cause BB not to enter into the loan agreement, and the various securities not to be given. [148] Seventhly, none of the other four plaintiffs11 gave evidence in this proceeding. Mr Terry Birbilis was but one director of BB, albeit a managing director. I note that Mr Terry Birbilis gave evidence that the others trusted him in making business decisions. However, by their not giving evidence, Mr Terry Birbilis’s evidence to that effect was unable to be tested. In addition, there was evidence that supports that the larger family was involved in the decision-making process. In this respect, the email communications of 10 March 2022 referred to the family leaning towards a particular option. [149] There were other objective reasons why the other family members would have been personally interested in the lending decision. These included: (a) that three of the plaintiffs were pledging their personal real properties as mortgage securities; (b) all of the plaintiffs were exposing themselves to unlimited guarantees; 11 That is, the plaintiffs other than Mr Terry Birbilis. -- 22 of 34 -- 23 (c) all of the plaintiffs had an interest in the continuing success of the underlying business of BB in which they were involved; and (d) all of the plaintiffs had an interest in obtaining or gaining drawings, including for living expenses. [150] I do not accept Mr Terry Birbilis’s submission that he made all the business decisions for BB. I find that the other four plaintiffs had their own interests in the obtaining of further funding, and were participating in the decision to enter into the loan agreement and associated securities. [151] The failure of those plaintiffs to give evidence and expose themselves to cross- examination on the issue of reliance allows me to more readily draw the inferences that are already available on the evidence, including in particular that the defendant’s membership or non-membership of the AFCA was not “a” material factor in BB’s and their personal decisions for the loan agreement and securities to be entered into with the defendant. [152] The various factors two to seven above, in my view, support that the membership or non-membership of the defendant in the AFCA was not material to any of the plaintiffs when deciding whether BB would enter into the loan agreement and whether they would enter into the guarantees and mortgages which concerned them personally. [153] I find that BB did not enter into the loan agreement and the general security because of any alleged AFCA Representation, assuming one occurred. I equally find that Mr Terry Birbilis and the other plaintiffs did not enter into their guarantees or the two mortgages because of the AFCA Representation, assuming one occurred. On that basis, I find that neither BB, nor any of the plaintiffs, suffered loss or were likely to suffer loss because of the AFCA Representation, assuming one occurred. [154] In light of the findings that I have made above, it is unnecessary to consider any of the other arguments made in the plaintiff’s claim. The plaintiffs’ claim must fail and, accordingly, I dismiss that claim. Counterclaim (a) Cancelling the loan facility agreement and right to sell as mortgagee in possession [155] Much of the counterclaim is not in dispute and is the subject of admissions in the answer to the counterclaim. [156] BB went into default on 14 October 2022 by the appointment of a voluntary administrator. That was an event of default pursuant to the loan agreement and each mortgage. On 30 November 2022, BB had separately defaulted under the loan agreement by failing to pay a monthly interest instalment in advance. [157] As a consequence of the defaults, the defendant had certain rights, including the right to cancel the loan agreement. This right was exercised on 16 December 2022 by the sending of a requisite notice to the plaintiff. Another right which had arisen was the right to take possession of each of the mortgaged properties and to then sell as mortgagee in possession. -- 23 of 34 -- 24 [158] The defendant has exercised this right in relation to the Holland Park West Property. The defendant is entitled to exercise this right in relation to the Carindale Property. I will make a declaration in accordance with this entitlement. (b) Right to payment under the guarantees [159] The loan agreement was cancelled. The underlying debt was accelerated so that it became immediately due and payable. SF Mortgage assigned all of its rights and interests under the loan agreement and mortgages to the defendant. This meant that each plaintiff was liable under their individual guarantees to pay all moneys which BB owed to the defendant, together with other liabilities imposed under the loan agreement, guarantees and mortgages. [160] The defendant is entitled to judgment in respect of the amounts owing under each guarantee. [161] The next sub-heading will deal with quantum. However, it is necessary to make some general observations as to particular contractual features of that quantum calculation. [162] First, the appropriate interest rate under the loan agreement was initially 7.35 per cent per annum. The interest rate on default was then 11.35 per cent per annum. The default rate is to be applied from 16 December 2022. [163] Secondly, cl 5.2 of the loan agreement provides for that interest to be compounded on the anniversary of the loan, namely 31 May of each year. [164] Thirdly, the loan agreement, guarantees and mortgages have the effect that costs connected with the exercise of rights and powers under the guarantees and mortgages will also be payable by each plaintiff. This is found in cl 11.1 of the loan agreement, cl 7.1 of each guarantee and cl 15.2 of each mortgage. To the extent that those costs include legal costs and expenses, they will be on a full indemnity basis or solicitor and own client basis, whichever is greater. [165] More particularly, cl 7.1 of each of the guarantees provides as follows: “Costs and expenses (a) The Guarantor must pay the Lender for: (i) the Lender’s costs, charges and expenses in connection with the negotiation, preparation, execution, stamping and registration of this Guarantee; (ii) the Lender’s costs, charges and expenses in connection with any consent, or any exercise or non-exercise of any of the Lender’s rights or powers under this Guarantee; and (iii) any stamp duty, loan duty or other duty (including duties and taxes on receipts) or payments (including fines or penalties) in relation to this Guarantee, including in each case: (iv) the Lender’s reasonable internal administration costs; and -- 24 of 34 -- 25 (v) legal costs and expenses on a full indemnity basis or solicitor and own client basis, whichever is higher. (b) The Lender may debit the Guarantor’s account with these amounts as soon as they are incurred by the Lender, whether or not the Lender has demanded payment from the Guarantor.” (underlining added) [166] Clause 15.2 of each of the mortgages provides as follows: “Costs and expenses The Mortgagor must pay: (a) the Mortgagee’s costs, charges and expenses in connection with the negotiation, preparation, execution, stamping and registration of the Mortgage; (b) the Mortgagee’s costs, charges and expenses in connection with any consent, or any exercise or non-exercise of rights (including those arising from any Event or Default); and (c) any stamp duty, loan duty or other duty (including duties and taxes on receipts) or payments (including fines or penalties) in relation to the Mortgage, including in each case: (d) the Mortgagee’s reasonable internal administration costs; and (e) legal costs and expenses on a full indemnity basis or solicitor and own client basis, whichever is higher. The Mortgagee may debit the Mortgagor’s account with any amounts described in this clause 15.2 with effect from the date they are incurred by the Mortgagee, whether or not the Mortgagee has demanded payment from the Mortgagor or anybody else.” (underlining added) [167] Clause 11.1 of the loan agreement provides as follows: “ Costs and expenses The Borrower must pay the Lender on demand for: (a) the Lender’s costs, charges and expenses in connection with the negotiation, preparation, execution, stamping, and registration of this document; and (b) the Lender’s costs, charges and expenses in connection with any consent, or any exercise or non-exercise of rights (including those arising from any Event of Default); and (c) any stamp duty, loan duty or other duty including duties and taxes on receipts or payments including fines or penalties in relation to this document, the Security or the Guarantee or any collateral security; and (d) including in each case: -- 25 of 34 -- 26 (i) the Lender’s reasonable internal administration costs; (ii) legal costs and expenses on a full indemnity basis or solicitor and own client basis, whichever is higher.” [168] I accept that cl 11.1 of the loan agreement, cl 7.1 of the guarantees and cl 15.2 of the mortgages would allow costs incurred in the counterclaim to be recouped as part of the amount owing under the guarantees. I also accept that those clauses could also be used to seek to have those costs awarded on an indemnity basis in the exercise of the costs discretion.12 This is because the bringing of the counterclaim for debt and also for a declaration as to the right to possession under the Carindale Property mortgage, would be the incurring of costs and expenses in connection with the exercise of the defendant’s rights or powers under each guarantee and under the Carindale Property mortgage. Those costs are thereby caught by cl 11.1 of the loan agreement, cl 7.1 of the guarantees and cl 15.2 of the mortgages on their proper construction. [169] However, I reject the additional and separate submission to the effect that the costs of defending the plaintiffs’ claim would be allowed as part of the amounts recoverable on the counterclaim, or would be able to be used in a similar fashion as part of the exercise of the costs discretion on the plaintiffs’ claim. [170] The authorities clearly point against this additional and separate submission. Clause 11.1 of the loan agreement, cl 7.1 of the guarantees and cl 15.2 of the mortgages do not, on their proper construction, allow for the costs of defending the plaintiffs’ claim to be recovered as part of the amounts owing under the guarantees or mortgages, and do not allow those clauses to be used in the exercise of the discretion for costs in the plaintiffs’ claim. [171] In this respect, I refer to the decision of the New South Wales Court of Appeal in Kyabram Proprietary Investments Pty Ltd & Anor v Murray & Anor [2005] NSWCA 87, in which Beazley JA delivered the principal reasons, and with which Hodgson and Ipp JJA agreed. Kyabram concerned a clause in a mortgage. That clause was broadly similar to cl 11.1 of the loan agreement, cl 7.1 of the guarantees and cl 15.2 of the mortgages in the present proceeding. Shorn of its surplus wording, the clause in Kyabram provided as follows:13 “…the Mortgagor will, upon demand, pay to the Mortgagee…all expenditure incurred by the Mortgagee for or in connection with this mortgage…or on account of any default…or incidental to the exercise of any right or remedy conferred on the Mortgagee under or by virtue of this [mortgage].”14 [172] In Kyabram, there had been a primary proceeding whereby the successful party sought relief pursuant to the mortgage, including a monetary judgment founded on the personal covenants. There was then a cross-proceeding where the mortgagor had been the party defending a cross-claim based on allegations that the mortgage had 12 See the reasoning of Burchett J in Leda Holdings Pty Ltd v Oraka Pty Ltd [1999] FCA 444 at [16] to [21], where a broadly similar clause in a lease was under consideration. 13 The full clause can be seen at para [9] of Kyabram Proprietary Investments Pty Ltd & Anor v Murray & Anor [2005] NSWCA 87. 14 Kyabram Proprietary Investments Pty Ltd & Anor v Murray & Anor [2005] NSWCA 87 at [19]. -- 26 of 34 -- 27 been entered into in circumstances which were said to be unconscionable or, alternatively, that the mortgage had been unjust in the circumstances relating to it at the time it was made, in contravention of s 7 of the Contracts Review Act 1980 (NSW). [173] One of the issues for the Court of Appeal was the issue of the mortgagee’s legal costs in defending the cross-proceeding (and costs of the appeal arising from that cross- proceeding). Her Honour framed the issue as follows: “[20] The question which arises is whether the phrase “the Mortgagor will upon demand pay to the Mortgagee all expenditure incurred by the Mortgagee for or in connection with this Mortgage” is wide enough to include the costs of the defence to the Cross-Claim.” [174] The decision of the Court of Appeal was that the clause on its proper construction was not wide enough to include those costs. In that respect, the reasoning was as follows: “[21] A similar question arose for consideration in Leda Holdings Pty. Limited v. Oraka Pty. Limited [1999] FCA 444 where Burchett J at [16] considered the provisions of a lease in which a lessor was entitled to costs on an indemnity basis incurred in connection with an event of default or the tenants non- compliance with its obligations under the lease, including legal costs and expenses. The tenant had brought proceedings against the lessor alleging a contravention of s.52 of the Trade Practices Act. That claim ultimately failed and the lessors were held to be entitled to succeed in enforcement proceedings they had brought against the tenant. In dealing with the lessor’s claim for costs on an indemnity basis of the Trade Practices proceedings in accordance with the provisions of their lease, Burchett J held that that action did not fall within the costs provisions in the lease. A similar decision had been made in Quadrascan Graphics Pty. Limited v. Crosfield Electronics ANZ Pty Limited (Carr J, Federal Court of Australia, unreported, 18 May 1995). [22] In this case, the provisions of clause 14 are wider than those contained in the lease to which consideration was given in Leda Holdings. However, when the clause is read as a whole, the phrase “expenditure incurred…for or in connection with the mortgage”, does not naturally extend to the costs of defending a claim that the mortgage has been entered into unconscionably or that it was unjust in the circumstances in which it was made. Accordingly, for that reason also, I would refuse to allow costs of the Cross-Claim, either at first instance or on the appeal, on an indemnity basis…” [175] Here, on the proper construction of this clause, the defence of the plaintiffs’ misleading and deceptive conduct case will not be included in the lender’s costs and expenses incurred in connection with an exercise of the lender’s rights or powers under the guarantees or the mortgages. Accordingly, cl 11.1 of the loan agreement, -- 27 of 34 -- 28 cl 7.1 of the guarantees and cl 15.2 of the mortgages have no operation in respect to the legal costs of the defence of the plaintiffs’ claim. [176] The result of these conclusions is that these clauses will allow costs and expenses, including legal costs and expenses, to be claimed as part of the quantum of the counterclaim only if they are in connection with an exercise of the defendant’s right or power under the guarantees or mortgages. That has consequences in terms of what can be recovered as part of the quantum of this case, and also has consequences about whether particular costs orders should be on an indemnity basis. These will be dealt with under the next sub-heading, which deals with the quantum of the amount recoverable under the guarantees. (c) Quantum of amount owing under the guarantees [177] In relation to quantum, Mr Arnold of the defendant gave evidence-in-chief in support of it. He identified that prior to January 2024, the defendant had predominantly used an accounting system called EasyLodge in relation to the day-to-day conduct and running of the defendant’s business. [178] Since January 2024, he identified that the defendant started predominantly using a system called Expert1 Tango (“Tango System”). The Tango System had the following features: (a) it allowed the input of all debits and credits associated with any facility the defendant provided to any of its customers; (b) it allowed the calculation and debiting of any interest on the relevant facility in accordance with the terms of a loan agreement applicable to that facility; (c) it allowed the recording and reflecting of the amounts owing to the defendant with respect to any facility it had provided to a customer in real time. [179] The Tango System also allowed: (a) the generation and issuing of loan statements with respect to amounts owing under a facility with the defendant, so that those statements could be provided to customers; (b) the generation of a payout statement with respect to any facility that the defendant had with any of its customers. [180] For the purposes of the trial, the defendant caused the Tango System to generate a payout statement calculated as at 27 March 2024. The payout amount at that stage was given as $1,372,940.82. That statement was said to not include unbilled legal fees and charges after 7 February 2024. Mr Arnold separately exhibited a loan statement generated from the system to 4 March 2024. It showed a closing balance as at that date in the sum of $1,361,950.23. It showed individual credits and debits. [181] Mr Arnold: (a) exhibited invoices he swore were issued by Dentons Australia Ltd, the solicitors for the defendant, with respect to legal costs incurred in enforcing the defendant’s rights under the securities up to 7 February 2024; -- 28 of 34 -- 29 (b) exhibited an Excel spreadsheet showing how $35,000 had been paid to Newpoint as the agent for the defendant in the selling of the Holland Park West Property where the defendant had been mortgagee in possession; (c) exhibited copies of invoices which were received and paid by Newpoint as that agent; (d) exhibited a copy of the Newpoint invoice for the shortfall of its costs and disbursements in the sum of $4,671.12, which went beyond the $35,000 figure already accounted for; (e) exhibited an email from Newpoint as the agent, setting out how the proceeds of the sale from the Holland Park West Property were to be applied, with invoices and rates notices relevant to how those monies were to be adjusted and applied; (f) exhibited the duly executed contract of sale for the Holland Park West Property, dated 5 July 2023, which settled for a gross amount of $880,000. [182] There are a number of unsatisfactory features for how the quantum claim was presented in this case. Simply because the defendant has the type of computer accounting system deposed to does not mean that its calculations should be treated as inviolate. It was submitted that as the payout statement and loan statement produced financial records, they were consequently admissible as evidence of the truth of what they recorded on their face. That submission does not take into account that the computer generated payout statement and loan statement are but one part of the admissible evidence which has to be examined. That evidence needs to then be weighed with other evidence which was adduced in the proceeding. If other evidence shows that their inputs are incorrect, their accuracy is thereby compromised. [183] The first particular feature of the unsatisfactory nature of the quantum evidence is the claim for incurred legal costs up to 7 February 2024. The loan statement lists a number of legal fees said to be incurred between 18 November 2022 and 4 August 2023. They are: (a) 18 November 2022 legal fees - default $1,989.00; (b) 7 December 2022 legal fees - default $600.00; (c) 7 December 2022 legal fees - default $1,500.00; (d) 8 December 2022 Default Notice $25.00;15 (e) 31 December 2022 legal fees - Dentons $1,560.00; (f) 4 August 2023 default action and settlement discharge $56,537.40. [184] None of those entries are referrable to specifically identified invoices issued by Dentons. This can be contrasted to entries for legal costs in the period 12 November 2023 to 4 March 2024, which identify each individual legal cost entry in the loan statement by a specific invoice number. [185] As stated previously, Mr Arnold exhibited what he described as the invoices received from Dentons. That bundle of invoices was presented in a disorganised and non- 15 I have assumed that this is a legal disbursement as no evidence for it is otherwise available. -- 29 of 34 -- 30 chronological fashion. For the same relevant period ending on 4 August 2023, the only Dentons invoices which are exhibited in this particular bundle are as follows: (a) 21 December 2022 $3,366.00; (b) 17 May 2023 $11,749.65; (c) 31 May 2023 $5,599.11; (d) 29 June 2023 $2,394.92; (e) 30 June 2023 $21,783.54; (f) 31 July 2023 $15,962.65. [186] The dates in that list immediately above are the issuing dates shown on each individual invoice. [187] It should be noted that the invoice dated 29 June 2023 in the sum of $2,394.92 was described as being for the sale of the Holland Park West Property. Separate documents exhibited by Mr Arnold sourced from Newpoint show that this invoice had been separately paid by Newpoint and accounted for in the loan statement within the combined $35,000 figure on 30 May 2023 and the $4,671.12 figure on 6 September 2023. There is another Denton’s invoice dated 31 May 2023 for $1,133.55, which can also be shown to have been paid from these sources. However, this invoice only appeared in the evidence amongst the Newpoint invoices and was not at risk of being double-counted. [188] The analysis set out above shows that the invoices for the period to 4 August 2023 (excluding the already accounted for 29 June 2023 invoice) are for the sum $58,460.95. This is to be contrasted with the legal cost figure, which is booked in the payout statement in the amount of the sum of $62,211.40. [189] The two do not accord. [190] In addition, as I have found previously, cl 11.1 of the loan agreement, cl 7.1 of the guarantees and cl 15.2 of the mortgages would allow a claim for legal costs of the counterclaim to be recovered as a guaranteed liability but would not allow the legal costs of the defence of the plaintiffs’ claim to be recovered on that basis. [191] The defendant did not, by its evidence, ever attempt to prove which legal costs were attributable to the counterclaim and which were attributable to the defence of the plaintiffs’ claim. There is no basis for the Court to apportion the costs between the two forms of proceeding. It was for the defendant to prove the allowable inputs of legal costs attributable to the counterclaim. It has not done so and therefore has not discharged its onus on this issue. Accordingly, any invoice for legal costs of the Supreme Court proceedings will not be recoverable as a liability under the guarantees or mortgage. [192] Those costs will still be able to be the subject of a costs order. In the case of the costs of the counterclaim, cl 11.1 of the loan agreement, cl 7.1 of the guarantee and cl 15.2 of the mortgage will be relevant to the basis of the costs order. -- 30 of 34 -- 31 [193] In respect of the invoices up to 4 August 2023 listed in paragraph [185] above, the two invoiced amounts in sub-paragraph [185](e) and sub-paragraph [185](f) will be excluded as they are invoices for costs of the Supreme Court proceedings, where the defendant has not discharged its onus. [194] I must do my best in the circumstances of the evidence before me. Given the invoices are the primary evidence of what was charged by Dentons and excluding the invoices I have identified, the appropriate figure to use for the recoverable legal costs pursuant to cl 11.1 of the loan agreement, cl 7.1 of the guarantees and cl 15.2 of the mortgages up to 4 August 2023 is $20,714.76. [195] For the purposes of the interest computation, the figure of $20,714.76 should be taken as being incurred on 4 August 2023. [196] The second unsatisfactory aspect to the evidence is that the loan statement includes an invoice which is not exhibited to Mr Arnold’s affidavit. It is dated 27 November 2023 in the sum of $1,933.25. [197] In addition, Mr Arnold’s affidavit contains two invoices which do not appear in the loan statement. They are an invoice number 1640544 issued 9 August 2023 for the sum of $1,628.66, and an invoice number 1699766 issued 29 February 2024 for the sum of $2,041.60. [198] The first of those invoices is for enforcement costs associated with the sale of the mortgaged property. On the evidence before me, this invoice was not met within the combined $35,000 figure on 30 May 2023 and the $4,671 figure on 6 September 2023. It is not at risk of double payment. Accordingly, I would allow this $1,628.66 invoiced figure on the counterclaim with an incurred date of 9 August 2023. [199] In relation to the second invoice, its unsatisfactory aspect is overtaken by the fact that all of the invoices for legal costs after 4 August 2023 (with the exception of invoice 1640544 issued 9 August 2023 for $1,628.66) are costs attributable to the Supreme Court proceedings. Each of these invoices are accordingly not recoverable as liabilities under cl 11.1 of the loan agreement, cl 7.1 of the guarantees and cl 15.2 of the mortgages for the reasons previously explained. The defendant did not discharge its onus in respect of these costs. Again, such legal costs will be recoverable by a costs order, and in the case of costs attributable to the counterclaim, the basis of the costs order will have regard to cl 11.1 of the loan agreement, cl 7.1 of the guarantees and cl 15.2 of the mortgages. [200] The third unsatisfactory matter is a series of monthly charges of $100 facility service fees, which are booked in the payout statement for the periods after 16 December 2022. On 16 December 2022, the facility was terminated. Accordingly, no monthly facility service fee will accrue after that date pursuant to cl 6.2(b) of the loan agreement. I will disallow all of the $100 monthly facility service fees after 16 December 2022. [201] Fourthly, I was unable to verify exactly how the monthly interest charges appearing in the settlement statement were calculated. The case was pleaded on the basis that interest was only to be compounded on the anniversary of the loan, being 31 May. That is what the relevant cl 5.2 in the loan agreement provided for. Accordingly, -- 31 of 34 -- 32 there should only be compounding of interest on 31 May 2023 and then on 31 May 2024. [202] As a result of my conclusions above, a re-calculation of the amount due and owing under the guarantees will be necessary. I will require that calculation to set out, with specificity, how the interest is calculated. I accept that interest should be calculated at 7.35 per cent prior to 16 December 2022. I note that the item for 31 May 2022 in the sum of $67,713 in annexure “A” is the interest calculation for the first six months. I have retained that figure as it is uncontroversial. [203] Attached to this judgment and marked annexure “A” are the items (excluding interest other than the uncontroversial sum of $67,713 for the first six months of the facility) which I am satisfied the evidence sufficiently supports are the relevant inputs16 into the debt calculation. These items will be used in the calculation of the overall recoverable debt, which includes the calculation of the recoverable debt in accordance with these reasons. I will give each party seven days to file and serve their calculation of interest and the overall debt. The interest calculation should transparently identify the mathematical basis of each calculation and how the compounding of the interest on the 31 May dates has been incorporated into the calculation. I will ask for the total calculation of interest to be up to and including 4 October 2024. If I am satisfied with the calculation in light of my review of the parties calculation, I will then deliver the final orders for the counterclaim on that date. If I require to hear from the parties further on the calculations, I will advise them of this prior to 4 October 2024. The calculations I am requesting are purely mathematical. This will not be an opportunity to re-argue the case. Conclusion [204] On the plaintiffs’ claim, the Court orders that: 1. The plaintiffs’ claim is dismissed. 2. The plaintiffs pay the defendant’s costs of and incidental to the plaintiffs’ claim, including any reserve costs, on a standard basis, to be assessed. [205] On the defendant’s counterclaim, the Court orders that: 1. The parties are directed to file and serve their calculation of interest and overall debt by 4pm on 27 September 2024 calculated to 4 October 2024, such calculation to be in accordance with those reasons. 2. Otherwise adjourn the counterclaim to 4 October 2024. [206] When the final orders are made on the counterclaim, they will ultimately include: (a) the monetary judgment against each of the plaintiffs; (b) a declaration that the defendant is entitled to recovery of possession of the land contained in Title Reference 18434243 being Lot 50 on Registered Plan 848118 located at 62 St Andrews Crescent, Carindale in the State of Queensland; 16 The inputs are both credits and debits. -- 32 of 34 -- 33 (c) an order that the plaintiffs pay the defendant’s costs of and incidental to the counterclaim, including any reserve costs, to be assessed on an indemnity basis. [207] Clause 7.1 of the guarantees operate as a contractual agreement between the parties that such costs of the counterclaim should be on an indemnity basis. When exercising the discretion to order costs, it ordinarily should be exercised17 so as to reflect the contractual right. There is nothing present in the current circumstances of the counterclaim which would indicate that this ordinary position should be departed from. 17 Gomba Holdings UK Limited & Ors v Minories Finance Limited & Ors (No 2) [1993] Ch 171 at 194 where Scott LJ delivered the judgment of the Court and also the authorities referred to in Kyabram Property Investments Pty Ltd & Anor v Murray & Anor [2005] NSWCA 87 at [14] per Beazley J, with whom the other members of the Court agreed. -- 33 of 34 -- Date Transaction description Debit Credit 31/05/2022 Opening Balance 31/05/2022 Settlement Drawdown $1,837,500.00 31/05/2022 Interest Charges $67,713.33 31/05/2022 Service Fee Prepayment 6 mths $600.00 31/05/2022 Loan Repayment $68,313.13 30/11/2022 Service Fee $100.00 1/02/2023 Default Notice - Registered Post $27.75 1/05/2023 Legal Fees - Default deposit $5,090.10 30/05/2023 Default Fee - Receiver Newpoint Advisory $35,000.00 4/08/2023 Default action & Settlement discharge $20,714.76 4/08/2023 Selling Costs - Agent fees $17,413.00 4/08/2023 Selling Costs - Disbursements $1,495.35 4/08/2023 Repayment - Settlement Proceeds $880,847.94 4/08/2023 Legal Fee Deposit Cr $5,090.10 4/08/2023 GST Credit RIC $5,144.06 9/08/2023 Legal Fees - Dentons $1,628.66 6/09/2023 Receiver Fee - Newpoint Advisory $4,671.12 12/11/2023 GST Credit RIC $929.36 27/11/2023 GST Credit RIC $1,382.56 30/11/2023 GST Credit RIC $511.35 4/03/2024 GST Credit RIC $1,622.69 TOTAL $1,991,954.07 $963,841.19 ANNEXURE "A" -- 34 of 34 --