Bodapati & Anor v Westpac Banking Corporation & Anor [2015] QCA 7

SUPREME COURT OF QUEENSLAND CITATION: Bodapati & Anor v Westpac Banking Corporation & Anor [2015] QCA 7 PARTIES: PURUSHOTHAMA NAIDU BODAPATI (first applicant) RENUKA BODAPATI (second applicant) v WESTPAC BANKING CORPORATION ABN 33 007 457 141 (first respondent) JULIE ANNE WILLIAMS (second respondent) FILE NO/S: Appeal No 2080 of 2014 SC No 6619 of 2013 DIVISION: Court of Appeal PROCEEDING: Application for Extension of Time/General Civil Appeal ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 10 February 2015 DELIVERED AT: Brisbane HEARING DATE: 28 July 2014 JUDGES: Holmes and Gotterson JJA and Peter Lyons J Separate reasons for judgment of each member of the Court, each concurring as to the orders made ORDERS: 1. Application for extension of time to appeal refused. 2. Application for leave to join Archana Bodapati to proceedings refused. 3. Application for leave to adduce further evidence refused. 4. The applicants pay the respondents’ costs of these proceedings, to be assessed on the standard basis. CATCHWORDS: APPEAL AND NEW TRIAL – APPEAL – GENERAL PRINCIPLES – ADMISSION OF FURTHER EVIDENCE – where the trial judge refused an application for an interlocutory injunction to prevent the sale of property – where applicants seek leave to raise new grounds for relief and to adduce further evidence on appeal – whether applicants should be permitted to raise additional grounds – -- 1 of 18 -- 2 whether applicants should be bound by the conduct of proceedings at first instance – whether some of the evidence is relevant to the ground on which the applicants relied at first instance – whether second applicant should be permitted to give evidence clarifying evidence she gave at first instance EQUITY – INJUNCTIONS – INTERLOCUTORY INJUNCTIONS – GENERALLY – where the trial judge refused an application for an interlocutory injunction to prevent the sale of property – where applicants seek leave to extend time for application to appeal – where property the subject of the proposed interlocutory injunction has been sold – whether utility in appeal where the only benefit possible is an alteration to a costs order EQUITY – GENERAL PRINCIPLES – UNCONSCIONABILITY, UNCONSCIONBALE DEALINGS AND OTHER FORMS OF EQUITABLE FRAUD – SPECIAL DISABILITY – where the trial judge refused an application for an interlocutory injunction to prevent the sale of property – where applicants claim that first respondent engaged in unconscionable conduct when providing finance – whether applicants with tertiary qualifications and 12 months’ experience in the relevant industry were under a special disability or disadvantage Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; [2006] HCA 46, cited Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51; [2003] HCA 18, cited Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14; applied Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33, cited Elkofairi v Permanent Trustee Co Ltd (2002) 11 BPR 20,841; [2002] NSWCA 413, distinguished Kakavas v Crown Melbourne Limited (2013) 250 CLR 392; [2013] HCA 25, cited Louth v Diprose (1992) 175 CLR 621; [1992] HCA 61, applied PSAL Ltd v Kellas-Sharpe [2012] QSC 31, cited Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; [1950] HCA 35, cited Tsigounis v Medical Board of Queensland [2006] QCA 295, cited Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598; [2003] HCA 48, cited COUNSEL: The applicants appeared on their own behalf E Goodwin for the respondents SOLICITORS: The applicants appeared on their own behalf Henry Davis York for the respondents -- 2 of 18 -- 3 [1] HOLMES JA: I agree with the reasons of Peter Lyons J and the orders he proposes. [2] GOTTERSON JA: I agree with the orders proposed by Lyons J and with the reasons given by his Honour. [3] PETER LYONS J: On 10 October 2013, a judge of the trial division refused an application by the first and second applicants (the applicants) for an interlocutory injunction restraining the sale of a property at 23 Stralock Street, Chapel Hill (Chapel Hill property). The applicants have applied for leave to appeal against that judgment, and for an extension of the time within which to make their application. It has not been suggested that the applicants require leave to appeal; and that aspect of their application may be ignored. The material also includes an application on their behalf and on behalf of the third plaintiff in the proceedings in the trial division (Ms Bodapati), to include Ms Bodapati as a party to the proceedings in this Court. The applicants have also applied for leave to adduce further evidence in these proceedings. Background [4] The first applicant and the second applicant are husband and wife. They each hold a doctorate of philosophy in a field of science. [5] In March 1999, the applicants became the only directors of Premacs International Pty Ltd (Premacs), and the second applicant became its secretary. They held these positions until November 2011, when Premacs was deregistered. Throughout this period the applicants were the only shareholders of Premacs1. Premacs was intended by them "to facilitate our property development"2. [6] Over the years, a number of properties were acquired by members of the Bodapati family. As at September 2004, the applicants together were the proprietors of blocks of flats at 34 Bramston Terrace, Herston (Herston property), 47 Punari Street, Currajong (Townsville property), and 21 Brighton Road, Highgate Hill (Highgate Hill property)3. At this time, the second applicant was the owner of the Chapel Hill property; and Ms Bodapati was the owner of a block of flats at 505 Rode Road, Chermside (Chermside property). Mortgages had been given over each of these properties (together, the residential properties) securing indebtedness, initially at least, associated with their purchase (housing loans). The Chapel Hill property was at this time the applicants' family home. [7] By written agreement dated 14 September 2004 (purchase agreement), Premacs agreed to purchase from Coco's Logan Trust Pty Ltd (Coco's Logan) a supermarket business, known as the "Supa IGA Supermarket" conducted on premises at 3896 Pacific Highway, Loganholme4. The purchase price was $400,000 for the business, together with $420,000 for stock in trade. The business was conducted on premises leased from Riklime Pty Ltd. Both Riklime and Coco's Logan were companies associated with Mr Salvatore Coco. On 14 September 2004, Premacs entered into a lease with Riklime of the supermarket premises5. The term of the lease was six years, the 1 Record Book, Volume 1 (1 RB) pp 84-88. 2 1 RB p 52. 3 Record Book, Volume 2 (2 RB) pp 647-648; admitted at 2 RB p 702, para 1. 4 1 RB p 176ff. 5 1 RB p 202ff. -- 3 of 18 -- 4 annual base rental being $260,0006; though no rent was payable for the first six months of the term7. Like the purchase agreement8, the lease provided that if gross sales were less than $100,000 per week for a consecutive four week period, Premacs might elect to terminate the lease9. [8] The purchase was financed by a loan (vendor finance) of $845,000 from Coco's Logan, recorded in a written Loan Agreement (VLA)10 entered into on about 14 September 200411. Under the VLA, the borrowers were Premacs and the applicants. The loan bore interest at eight per cent per annum, and was to be repaid in full within four years12. It was secured by second mortgages over the Highgate Hill, Herston, and Chermside properties13. According to the second applicant, Mr Coco promised a rebate of $25,000 if the loan were repaid within 12 months14. [9] The purchase and loan were settled almost immediately, with Premacs taking over the business on about 15 September 200415. The business continued to operate as a Supa IGA supermarket until some time after 15 September 200516. [10] Mr Coco referred the applicants to Mr Carlson, who held the position of Senior Relationship Manager with the first respondent, for the purpose, it would seem, of obtaining a loan to enable the repayment of the vendor finance. Mr Carlson first contacted them on about 4 October 200417. On 26 October 2004 Mr Carlson provided a letter to the applicants which discussed the financial needs of the Bodapati family, proposals that the second applicant had for her nephews, and what was described as "the current availability of equity for your ventures"18. Thus it referred to properties owned by the Bodapati family and others, noting in each case the estimated market value and level of debt; and identified the first respondent's lending position in relation to each property. Though the advice was said to be preliminary, the letter indicated that the first respondent was close to being able to assist with the purchase of two further businesses. It also stated that valuations, current trading figures for the supermarket, trading figures for any intended purchases, and rental statements would be required19. [11] According to the second applicant, Mr Carlson in October 2004 had said that the first step to obtaining the loan for repaying the vendor finance would be the refinancing of the housing loans20. Around the beginning of 2005, the applicants submitted to the first respondent loan applications for refinancing the housing loans over the Chapel Hill, Townsville, Highgate Hill and Herston properties. Shortly afterwards, the first respondent approved the refinancing of these loans, and the loan secured over the Chermside property. The resulting loan agreements were revised in about April 200521. 6 1 RB p 207, cl 2.7. 7 1 RB p 208, cl 3.1.1. 8 1 RB p 178, cl S(e). 9 1 RB p 232, s 24. 10 1 RB p 236. 11 1 RB p 62, para 83. 12 1 RB pp 236-237. 13 1 RB 63, para 86. 14 1 RB p 60, para 64. 15 1 RB p 63. 16 1 RB pp 75-77. 17 1 RB pp 63-64, para 89. 18 1 RB pp 262-263. 19 1 RB p 263. 20 1 RB pp 64, para 91, 66, para 99. 21 2 RB pp 659-664; pp 702, para 1, 704-705. -- 4 of 18 -- 5 The refinancing resulted in mortgages being granted to the first respondent over the residential properties. [12] The statement of claim alleges that in about January 2005 an agreement was reached between Mr Coco, on behalf of Coco's Logan and Riklime, and the applicants on behalf of Premacs, that the rent free period under the lease would be extended for a further six months, if the amount owing as vendor finance was reduced by $100,000 by 14 March 2005, and the balance of the vendor finance was repaid by 14 September 2005. If the vendor finance was not fully repaid by the latter date, then the payment of $100,000 would be treated as (part) payment of the rent for this six month period22. The second applicant's affidavit provides some support for this allegation23. [13] From about early February 2005, the second applicant sought advances on the proposed loan from the first respondent to Premacs. The second applicant said that she was told in each case that the advance could be obtained by making withdrawals on Premacs' cheque account. The first advance was a sum of $100,000 to make the repayment of vendor finance discussed with Mr Coco in January. Further withdrawals were made on this account in April or May 2005, resulting in total advances of about $290,00024. [14] In June 2005, $204,000 was deposited into Premacs' account, drawn down against the loan secured over the Highgate Hill property. An additional sum of $85,000 was paid into this account, drawn against the loan secured over the Chermside property25. By this means the advances were in effect converted to debts secured by these properties. It is contentious on the pleadings whether this occurred without the prior knowledge or authorisation of the applicants and Ms Bodapati. [15] In June 2005, the second applicant provided Mr Carlson with "figures for the store". It is apparent that he was then working on the proposed loan to repay the vendor finance26. Subsequently, a Sponsor Memo & Credit Approval Summary27 (August Sponsor Memo) was prepared. It is the applicants' pleaded case that this formed part of the internal deliberations of the first respondent which led to the provision of finance to Premacs in September 2005, about to be discussed28. [16] Premacs and the first respondent entered into a business finance agreement (BFA) under which the first respondent promised to provide money to Premacs to a limit of $700,000, by way of a $300,000 business access loan and $400,000 commercial bill facility. The applicants gave a guarantee and indemnity, limited to $700,000 plus costs, charges and interest, of Premacs' liability under the BFA; and Ms Bodapati gave a guarantee and indemnity, limited to $200,000 plus costs, charges and interest, in respect of the same liability. Mortgages were given over the Chapel Hill and Townsville properties as a condition of the provision of this finance (the guarantees and mortgages will be referred to as the supporting securities). The applicants allege that these things occurred on 10 September 200529. The mortgages had to be re-executed on 22 2 RB p 665, para 40. 23 1 RB p 68, para 115. 24 1 RB pp 71-72; and see 2 RB pp 666-667; p 702, para 1. 25 2 RB p 667, para 48; p 702, para 1. 26 1 RB p 73. 27 1 RB p 388 ff. 28 2 RB p 678, para 79. The document was also relied on in the applicants' written submissions at first instance. 29 2 RB pp 675-676; pp 708-709. -- 5 of 18 -- 6 about 16 September 200530. On 19 September 2005, the first respondent drew down $630,000 (it would seem pursuant to the BFA), which was applied to repay the vendor finance31. [17] The business purchased by Premacs was unsuccessful. On 3 June 2011, an order was made that Premacs be wound up in insolvency32. On 4 December 2012, the first respondent appointed the second respondent as receiver and manager of the Chapel Hill property, and receiver and manager of the Herston property33. The application at first instance was brought in anticipation of a sale by the second respondent of the Chapel Hill property34. The sale was scheduled to occur on 12 October 2013, two days after the hearing at first instance. It was common ground that the Chapel Hill property was sold not long after that hearing35. Proceeding at first instance [18] The applicants applied for an interlocutory injunction to restrain the sale of the Chapel Hill property. Ms Bodapati was not a party to that application. The application was founded on the proposition that the BFA and the supporting securities should be set aside on the basis that the first respondent engaged in unconscionable conduct in having the applicants and Premacs enter into them. The applicants' Counsel informed the learned primary Judge that, after discussion with Counsel for the respondents, he would be limiting his argument to "the Amadio argument" (a reference to Commercial Bank of Australia Ltd v Amadio36); and that on that basis, the respondents had said that they would not rely on arguments based on the expiry of limitations periods37. The hearing was conducted accordingly. [19] His Honour required the applicants' Counsel to identify the propositions that were central to the contention that they demonstrated a prima facie case for relief. They may be summarised as follows38:- (a) The applicants were inexperienced in retailing, to the first respondent's knowledge. (b) They were in a losing business from the time that they entered into the purchase agreement and the lease, but they had a right to rescind. (c) They did not know of the intention of the owner of the reversion to sell it, but the first respondent did have that knowledge. (d) The first respondent knew that the applicants had the right to rescind the purchase agreement. (e) The first respondent provided the BFA and supporting securities to the applicants at the last moment, knowing that they would not be in a position to make a worthwhile decision whether to accept the finance. [20] The applicants' Counsel also submitted that the first respondent, when entering into the BFA, had engaged in "pure asset lending", which was unconscionable39. 30 1 RB pp 78-79; 2 RB p 676. 31 2 RB p 650, para 82; p 702, para 1. 32 2 RB p 694, para 104; p 702, para 1. 33 2 RB p 695, para 107; p 716, para 46. 34 2 RB p 716, paras 47-48. 35 See 2 RB pp 774-775. 36 (1983) 151 CLR 447 (Amadio). 37 1 RB p 7, lines 8-12. 38 1 RB pp 13-15; 2 RB pp 757-759. 39 2 RB p 759. -- 6 of 18 -- 7 [21] The learned primary Judge referred to the propositions identified by the applicants' Counsel. He also noted the contention that the late provision of these documents meant that the applicants were not able to get legal advice, and that legal advice might have led to the rescission of the purchase contract. His Honour stated that there was no direct evidence from the applicants as to what course they would have taken, if the documents had been provided in a timely way40. [22] His Honour also noted that there was nothing about the provision of finance by the first respondent which would have made it unacceptable. Rather the complaint of the applicants was that, had they had time to obtain legal advice about the BFA, that might have extended to whether or not they should have exercised the right to rescind the purchase agreement. His Honour observed that the applicants could have obtained legal advice about the purchase agreement at any time from September 2004; and they were aware of their contractual right to rescind by about July 200541. In that context, obtaining advice about the BFA provided only a "collateral reason" for obtaining legal advice about the right to rescission of the purchase agreement. His Honour considered that the lateness of the provision of the documents relating to the BFA would not establish, on a prima facie basis, the first respondent's responsibility for failure to terminate the purchase agreement42. [23] With respect to the first of the five propositions advanced on behalf of the applicants, his Honour observed43 that the applicants were plainly "intelligent tertiary-qualified scientists" who had both held relatively high level employment in scientific fields. They had relatively significant experience in dealing with banks. The provision of security for the BFA was for the benefit of them and Premacs, which was their own company; they were not persons who provided guarantees, without deriving any personal benefit from the obligation which the guarantees secured. He concluded that, in that context, their lack of experience in retail business did not establish, on a prima facie basis, that the applicants were in a position of disadvantage comparable to that considered in Amadio44. [24] With respect to the second proposition, his Honour observed that the first respondent's knowledge that in the period to 30 June 2005 the business had suffered a loss of $287,000, and the fact it had a copy of the purchase agreement, did not mean there was a significant likelihood that the first respondent knew there was a right to terminate the contract. Moreover, the document which reported the loss also projected profit for the following year. However, his Honour noted that the basis for the projection was disputed, and that the applicants' Counsel contended there was evidence of other errors or false statements in the document45. As his Honour later observed, this discussion dealt with the fourth proposition as well as the second proposition [25] With respect to the third proposition, his Honour referred to the submission made on behalf of the applicants that Riklime's intention to sell the reversion made it inevitable that promises to make improvements to the supermarket would not be kept. His Honour regarded this matter, if true, as relating to causation rather than unconscionable conduct on the part of the first respondent46. 40 2 RB pp 755-756. 41 2 RB p 756. 42 2 RB pp 755-757. 43 2 RB p 757. 44 2 RB pp 757-758. 45 2 RB p 758. 46 2 RB pp 758-759. -- 7 of 18 -- 8 [26] With respect to the fifth proposition, his Honour observed that no authority had been identified to support a conclusion that the provision of regular financing documents late in time could be treated as unconscionable conduct47. He also observed that there was no suggestion that the circumstances of this case were analogous to those considered in Garcia v National Australia Bank Ltd48, or Yerkey v Jones49. [27] On the question of causation, his Honour said that it was difficult to identify in the applicants' allegations, conduct of the first respondent said to be unconscionable; which, if it had not been engaged in, would have meant that the "relevant contracts" (no doubt a reference to the purchase agreement, and the lease) would have been rescinded50. [28] With respect to the allegation that the first respondent engaged in pure asset lending, his Honour considered that such a case was not pleaded; nor was there a basis for it in the evidence. On the contrary, the internal document of the first respondent which led to the approval of finance (the August Sponsor Memo) had projected that the business would be conducted at a profit51. His Honour also observed that employees of the first respondent might have been disposed to advance money to Premacs, because that would suit Mr Coco. He did not consider that that made out a prima facie case of asset lending52. Inaccuracies in that document about the fact that the business would not continue as a Supa IGA supermarket were not associated with any alleged deliberate conduct by the first respondent towards the applicants, in a way which misrepresented the first respondent's knowledge53. It was necessary for the applicants to demonstrate that they had been the subject of victimisation or exploitation by the first respondent, which they failed to establish to the prima facie standard54. [29] His Honour did not consider it necessary to reach any conclusion about damages55. He considered that the balance of convenience would have favoured the grant of an injunction56. He dismissed the application, and ordered the applicants to pay the respondents' costs57. Contentions on application for extension of time [30] The applicants contended that the time for instituting their appeal should be extended because the first respondent supplied them with certain documents for the first time on 31 January 2014; and those documents demonstrate fraud on the part of the first respondent's employees, and that the loan made pursuant to the BFA was an "asset-based loan"58. [31] The applicants contended that the learned primary Judge erred in finding they had failed to demonstrate a prima facie case of unconscionable conduct. They also submitted that relief should have been granted, relying on allegations of misrepresentation and fraud, breach of fiduciary duty and accountability, and economic and punitive duress. 47 2 RB p 759. 48 (1998) 194 CLR 395. 49 (1939) 63 CLR 649. 50 2 RB p 759. 51 2 RB pp 759-760. 52 2 RB p 760. 53 2 RB pp 760-761. 54 2 RB p 761. 55 2 RB pp 261-262. 56 2 RB pp 762-763. 57 2 RB p 753. 58 Submission of the applicants of 25 July 2014 (As' Subs) p 1, paras 3-4. -- 8 of 18 -- 9 [32] A question arose as to the utility of the application and any consequent appeal, when, the Chapel Hill property having been sold, this Court could not grant the relief which the applicants had sought at first instance. The applicants referred to other interlocutory hearings at which they said the learned primary Judge's decision had been relied upon adversely to them, and submitted that that might occur in the future. Reference was also made to the costs order against them. [33] The respondents made a number of submissions in opposition to the application for an extension of time. The first was that the applicants would suffer no prejudice (save by reason of the costs order) if the extension were not granted. Secondly, the explanation for delay should not be accepted. Thirdly, the applicants left it until very late to apply for the injunction sought at first instance. Fourthly, the applicants have low prospects of success on an appeal, if leave were granted59. In their submissions on that topic, the respondents (like the applicants) dealt substantively with the question whether the applicants had established a prima facie case that the mortgage of the Chapel Hill property should be set aside by reason of the first respondent's unconscionable conduct. Utility of appeal [34] At the trial of this matter, it can be expected that the trial judge will decide the case on the basis of the evidence and submissions which are then presented by the parties. If the evidence and arguments advanced on behalf of the applicants then would warrant findings in their favour, there is no reason to think such findings would not be made, by reason of the decision made on an interlocutory application. [35] In principle, the same can be said for any future interlocutory application. However, interlocutory applications are usually determined at a limited hearing, without witnesses giving evidence orally, and often within the time constraints of the applications list. It is not inconceivable that the respondents might seek to rely upon the decision of the learned primary judge at such a hearing. However, that decision could, logically, only be of assistance to them if the application were to be determined by reference to the claim of the applicants relating to entry into the BFA and the provision of related securities, based on unconscionable conduct; and if such an application were contested on substantially the same materials as were before the learned primary judge. It follows that there may possibly be some utility in the appeal, if the applicants were able to demonstrate that, on the materials and arguments presented to him, the learned primary Judge erred in dismissing their application. However, the applicants have indicated that they intend to amend their pleaded case, apparently substantially60. They have not identified any interlocutory application which there is some real prospect a party to these proceedings might bring, in which the decision at first instance might be of some significance. In oral submissions they appeared to identify their real concern as being the potential impact of the judgment at first instance on the Judge hearing the trial61. Accordingly, I would not give weight to this consideration. [36] When the only benefit a party might achieve from a successful appeal is an alteration in its favour of a costs order, that may not be a sufficient basis to grant 59 Submissions of the first and second respondents filed 24 July 2014 (Rs' Subs) p 2, para 6. 60 See the reply to the respondents and additional submissions of the applicants filed 5 May 2014 (Reply Subs) p 2, para 6; p 5, para 40. 61 See the transcript of the hearing in this Court (T) 1-25. -- 9 of 18 -- 10 leave to appeal62. It may well be that an extension of time within which to appeal might be refused in similar circumstances. However, in each case the Court has a discretion, which is to be exercised in the circumstances of the case. In the absence of any statutory provision to the effect that an extension of time should not be granted if the only benefit which might be achieved by a successful appeal is the alteration in the applicant's favour of a costs order, it is not inevitable that an extension would be refused in such a case. The discretion to extend time is unfettered63. Mr Goodwin of Counsel, who appeared for the respondents, was not disposed to argue that the extension should be refused solely because an appeal would lack utility64. [37] Accordingly I would not be prepared to refuse the application because any appeal would lack utility. Further evidence and new arguments [38] At the hearing of this application, the applicants were invited to identify what, of the additional evidence they wish to rely upon in the appeal, would be of greatest significance65. They identified a Consumer Serviceability Calculation dated 10 January 200566, which appears to have been attached to an internal document of the first respondent, being a Sponsor Memo & Credit Approval Summary with an approval dated 24 January 200567 (January Sponsor Memo). It was said that this document contained a number of errors, primarily related to the income of the Bodapati family, but also to the amount sought for refinancing the housing loans68. [39] The applicants received these documents for the first time on 31 January 201469. The applicants did not demonstrate that the respondents had an obligation to provide these documents to them at some earlier point in time. Nevertheless, that does not mean that the applicants should not be permitted to rely on them in the present proceedings. [40] The submissions of the applicants do not explain how these documents might demonstrate any fraud resulting in their entry into the BFA, and the provision of the supporting securities. Their written submissions in support of the application allege fraud, based on Mr Carlson's letter of 26 October 200470, referred to earlier. The allegation appears to be that the letter showed a willingness to lend money to the applicants, without reference to their capacity to repay it. The allegation may perhaps have been intended to extend to a representation of the first respondent's opinion that the applicants had the capacity to repay unspecified advances made to them; or to a representation that they had such a capacity. Any such representation is inconsistent with the clear terms of the letter71. Beyond that, the additional evidence is completely unrelated to the contents of the letter. 62 See Tsigounis v Medical Board of Qld [2006] QCA 295 at [95] per Keane JA as his Honour then was, with whom Williams JA and Dutney J agreed. 63 Rule 748 of the Uniform Civil Procedure Rules 1999 (Qld). 64 T 1-36 to 1-37. 65 T 1-8 to 1-11. 66 Supplementary Record Book (SRB) pp 911-912. 67 SRB pp 907-910. 68 T 1-3 ff. 69 SRB p 792, para 7; see also p 787. 70 As' Subs pp 5-7. 71 It was restricted to an assessment of equity available to support future loans, and pointed out that trading figures and other income information would also be required. -- 10 of 18 -- 11 [41] The applicants contend that the errors in the January Sponsor Memo amount to misrepresentations72. However it is not said, and there is no basis for saying, that these misrepresentations were made to them; still less that they were induced by the misrepresentations to enter into the BFA, and to provide the supporting securities. [42] Since the applicants have not demonstrated that the additional evidence assists in establishing any fraud relevant to the proposed appeal, fraud does not provide a basis for permitting the applicants to rely on it in this application. [43] The learned primary Judge found that the approval which resulted in the BFA was based on the information in the August Sponsor Memo. That finding was consistent with the case advanced on behalf of the applicants at first instance, and was not challenged in this application. The August Sponsor Memo indicates that the person who ultimately granted the approval relied on the information in it, which included projections of future profitability for the supermarket. There is no evidence to the contrary. No attempt was made to show that the January Sponsor Memo was influential in the decision to approve the loan made to Premacs to repay the vendor finance. Even if it were, it would show that the information before the decision maker included information which the applicants say is erroneous. It would not assist in determining whether the applicants were subject to a special disability when they entered into the BFA and provided the supporting securities. Nor would it establish that the BFA was the product of asset based lending. Accordingly, these allegations do not provide a basis for permitting the applicants to rely on this evidence. [44] The applicants rely on the January Sponsor Memo in support of their new argument relating to breach of fiduciary duty and accountability. They contend that it was one of a number of events which prove that "there was a breach of fiduciary duty by Mr Carlson as we become dependent on the Banker's expertise in assessing our eligibility against banks (sic) requirements for loan approvals"73. However, the applicants' submissions do not demonstrate any connexion between the January Sponsor Memo, and entry into the BFA, which was the critical matter for the proceedings at first instance. The applicants have not shown that the new evidence on which they seek to rely would be of any assistance to them on the proposed appeal, in relation to this argument. [45] Of the balance of the evidence which the applicants seek to adduce on this application, some relate to matters involving Ms Bodapati. As will be discussed later in these reasons, these matters are of no relevance to application made at first instance. There is no reason to permit the applicants to rely on such evidence in these proceedings. [46] The affidavit of the first applicant (affirmed on 16 May 2014) exhibits a copy of the August Sponsor Memo, which, although incomplete, is in some respects more legible than the copy in evidence at first instance74. It does not appear to be materially different from the copy already in evidence. The affidavit repeats, in substance, points made in the affidavits previously filed in support of the applicants' application for an extension of time. There is no reason to receive the later affidavit. [47] The affidavit of the first applicant affirmed on 3 February 201475, in substance, deals with matters relating to the January Sponsor Memo, and to Ms Bodapati. Similarly, there is no reason to receive it as evidence in these proceedings. 72 As' Subs pp 6-8. 73 As' Subs p 9, para 37. 74 SRB p 794ff. 75 SRB p 927ff. -- 11 of 18 -- 12 [48] The affidavit of the second applicant affirmed on 3 February 201476 contains further evidence about the circumstances in which the applicants executed the BFA and the supporting securities77. She also gave evidence about this at first instance78. No reason has been shown for permitting her to give additional evidence on this topic in this application. The affidavit contains much that is of an argumentative nature, and not properly the subject of evidence. Otherwise it deals with matters which are of no real relevance to the application made at first instance. There is no reason to permit the applicants to rely on this affidavit in these proceedings. [49] The respondents opposed the application to adduce the further evidence on a number of additional grounds. I do not consider it necessary to give them specific consideration. [50] I am therefore not prepared to permit the applicants to adduce the further evidence on which they now seek to rely. [51] At the hearing before the learned primary Judge, a fundamental question was whether the applicants had demonstrated, on a prima facie basis, that the mortgage of the Chapel Hill property was unenforceable. Mention has already been made of the way the parties' legal representatives agreed on the limited manner in which the proceedings at first instance would be conducted. Ordinarily, on the hearing of an appeal, a party is bound by the way it conducted its case at first instance; though it may be permitted on the appeal to raise a new point when no additional evidence could have been led at the initial hearing, for example, the new point being a point of law only79. Even then, a party will not always be permitted to raise a new point on appeal80. Here, at least by their conduct, the legal representatives of the parties agreed about the scope of the issues for the hearing at first instance. No sufficient reason has been shown to permit the applicants to depart from the course to which they then agreed. In particular, the additional evidence on which the applicants have sought to rely would not justify permitting them to do so. [52] Moreover, if the applicants were permitted now to advance new considerations, the respondents would suffer the disadvantage of not having had the opportunity to advance their limitation arguments at first instance. In addition, Mr Goodwin has submitted that, had the new matters been advanced at first instance, different evidence would almost certainly have been adduced by both parties, and the first respondent might have sought to cross-examine the first and second applicants81. These submissions were not controverted, nor is there any obvious reason to reject them. They should be accepted. [53] Accordingly, I would not be prepared to permit the applicants in this application (and any resulting appeal) to rely on matters beyond those on which they relied at the hearing at first instance. Principles relevant to the applicants' unconscionable conduct claim [54] The expression "unconscionable conduct" focuses on the position of the person against whom relief is sought. However, the condition of the person claiming relief is of some significance. In Louth v Diprose82 Brennan J said: 76 SRB p 942ff. 77 SRB pp 947-948. 78 1 RB pp 77ff. 79 See Suttor v Gundowda Pty Ltd (1950) 81 CLR 418, 437-438; cited with approval in Coulton v Holcombe (1986) 162 CLR 1, 8. 80 Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598 at [51]. 81 Rs' Subs p 9, para 46. 82 (1992) 175 CLR 621, 626. -- 12 of 18 -- 13 "The jurisdiction of equity to set aside gifts procured by unconscionable conduct ordinarily arises from the concatenation of three factors: a relationship between the parties which, to the knowledge of the donee, places the donor at a special disadvantage vis-à-vis the donee; the donee's unconscientious exploitation of the donor's disadvantage; and the consequent overbearing of the will of the donor whereby the donor is unable to make a worthwhile judgment as to what is in his or her best interest." [55] The submissions for the applicants acknowledged (correctly) that, to succeed on the basis of unconscionable conduct, they would need to demonstrate that, in entering into the BFA and providing the supporting securities, they (and in particular the second applicant) were subject to a "special disadvantage"; and that to do that they would have to show that they were subject to a disabling condition or circumstance which seriously affected their ability to make a judgment as their own best interests83. The acknowledgment was based on the judgment of Mason J in Amadio84. In Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd,85 the High Court applied the test formulated by Mason J in Amadio, including the requirement relating to a "special disadvantage", explained as meaning an inability to make a judgment in the best interests of the person making it86. This matter is critical to the determination of these proceedings. [56] There was no suggestion that statutory provisions which the applicants relied upon in their statement of claim altered these principles in their application to the present case. Were the applicants subject to a special disadvantage or disability? [57] In essence, the applicants contended they were subject to a special disadvantage because of their lack of business expertise in relation to the conduct of a supermarket business; whereas the first respondent had specialist knowledge needed to assess a customer's ability to repay a loan, including, it was contended, superior knowledge relating to the conduct of a supermarket business87. [58] The respondents submitted that the applicants were well educated and intelligent; with commercial experience, and in particular had been operating the supermarket for a year when they entered into the BFA and provided the supporting securities. They also had access to the books and records of the supermarket business. They had not contended that the terms of the BFA or the supporting securities were "unconscionable". They had not contended that the first respondent was more experienced than the applicants in the operation of a supermarket. Elkofairi v Permanent Trustee Co Ltd88, relied upon by the applicants, was factually a different case. The applicants had not alleged that they and Premacs could not service the loan made under the BFA.89 [59] The learned primary Judge was conscious that it was sufficient for the applicants to establish their case on a prima facie basis. No submissions were made about his Honour's use of this expression. I take it to mean that the applicants had to demonstrate 83 As' Subs p 11. 84 At 462. 85 (2003) 214 CLR 51 (Berbatis). 86 Berbatis at [14] and [15] Gleeson CJ; [55] and [57] (Gummow and Hayne JJ); [184] (Callinan J); Kirby J seemed to apply the same test, though with different results: [115] and [117]. 87 As' Subs p 11, para 51; p 12, para 52; and Reply Outline of Submissions p 5, para 33. 88 (2002) 11 BPR 20,841; [2002] NSWCA 413 (Elkofairi). 89 See Rs' Subs pp 6-7. -- 13 of 18 -- 14 a sufficient likelihood of success to justify the granting of interlocutory relief in the circumstances, which include the nature of the rights asserted and the practical consequences of granting such relief90. I shall use the expression in that sense. [60] There is no reason to think that the applicants could not make a decision as to whether it was in their best interests to enter into the BFA. Its implications were relatively straightforward. As they appreciated, it carried with it commercial advantages by reason of the promises of Mr Coco. The loan, and the repayment of vendor finance, provided them with the benefit of a rebate of $25,000. It also secured a rent free period of six months, said by the second applicant to be worth $130,00091. Moreover, they had been contemplating a loan from the first respondent for this purpose since about October 2004, when they commenced to deal with Mr Carlson. [61] Entry into the BFA resulted in the applicants' taking on a liability to the first respondent, in order to discharge their liability for the outstanding vendor finance. The applicants have not shown that, in such a case, in order to make a decision in their own best interests, it was necessary for them to make a reliable judgment about the supermarket's prospects. Their liabilities remained substantially the same (save for the reduction in indebtedness resulting from Mr Coco's promises, just discussed). If the supermarket was not commercially successful, then its operation would not provide a means of discharging either liability. [62] Moreover, by then, the applicants had been involved in the conduct of the supermarket for about a year. They were no longer without experience in the operation of a supermarket. By September 2005, the applicants undoubtedly knew that the business was operating at a loss. The second applicant knew that by April 200592. The statement of claim alleges93 that the applicants had provided to the first respondent "in MYOB format the trading figures used by (the first respondent) to record the trading losses of $286,722.00 … for the nine (9) months ending 30 June 2005", the trading figures being reproduced in the August Sponsor Memo94. The second applicant deposed that, in September 2005, the supermarket was still running at a loss95. Indeed, the second proposition advanced by their Counsel, referred to earlier, was to the effect that the supermarket was a losing business from the time that Premacs commenced to operate it. [63] According to the second applicant, Mr Coco had earlier represented that the turnover of the business was $160,000 per week96. However, by July 2005 she plainly knew that the turnover had been less than $100,000 for four weeks in succession97. The significance of this must have been apparent to her, because she deposed that she was then "considering terminating the Business Sale Contract" under clause S(e) (in fact, this clause permitted termination of the lease98). It could not be said that she did not appreciate the commercial significance of the low turnover figures. 90 See Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 at [65], [71], [19]. 91 1 RB p 79, para 200. 92 See 1 RB p 72, para 141. 93 2 RB p 682, para 85(f)(i)(A). 94 See 1 RB pp 397, 399. It is not clear whether these were the figures provided in about June 2005, said to be exported into an Excel spreadsheet: 1 RB p 73, para 145. The Statement of Claim elsewhere refers to "excel spread sheet format of MYOB data", apparently provided in April 2005: 2 RB p 682, para 85(f)(i)(D). 95 1 RB p 79, para 200. 96 1 RB p 61, para 71. 97 1 RB p 76, para 173. 98 See 1 RB p 178. -- 14 of 18 -- 15 [64] In those circumstances, it cannot be said that the applicants' limited experience in operating a supermarket meant that they were not in a position to appreciate the difficulties being experienced by the supermarket business; nor that they were not in a position to make a decision whether, nevertheless, it was in their own best interests to enter into the BFA. [65] Given their previous experience borrowing from banks, including the first respondent, they must have expected that they would have had to provide security for moneys advanced under the BFA. They had provided mortgages on a number of previous occasions, and must have understood their effect. It appears that they had also provided a guarantee of the lease from Riklime to Premacs99; and in any event there was no suggestion that they did not understand the essential features of a guarantee. [66] More generally, their education and employment history demonstrates that the applicants are intelligent, well-educated people. There was no suggestion of any physical or mental condition which might have affected their ability to decide whether it was in their best interests to enter into the BFA and provide the supporting securities. [67] The applicants' material refers to the fact that they were given little time to consider the BFA and the supporting securities before they were required to sign them. Their submissions on unconscionable conduct do not refer to this question. As the submissions for the respondents point out, the applicants do not contend that the terms of the BFA or the supporting securities were "unconscionable". In the circumstances of the present case, discussed a little earlier in these reasons, the ability of the applicants to make a decision in their own interests was not seriously affected by the short time within which they had to sign the documents. [68] It seems to me, therefore, that the applicants have not demonstrated, even on a prima facie basis, that they were not in a position to make a decision as to whether it was in their best interests for them, and Premacs, to enter into the BFA and provide the supporting securities. [69] The applicants relied on Elkofairi in support of their case. The contention appears to be that, because the provision of finance pursuant to the BFA was "asset based lending", it was unconscionable, and the applicants were in a position of special disability, comparable to that of the successful appellant in Elkofairi. [70] In Elkofairi, the principles formulated in Amadio's case were applied100. Although the circumstances of the appellant in that case provided a strong basis for concluding she was subject to a special disability, they were generally unknown to the respondent mortgagee. It was therefore necessary to determine whether the circumstances which were known to the mortgagee were sufficient to establish that the appellant was subject to a special disability. The mortgage secured a loan made to the appellant and her husband. The mortgage was over their jointly-owned family home. The loan application identified the purpose of the loan as "refinance-investment" although it stated that the purpose of the loan was "wholly or predominantly for business or investment purposes (or for both purposes)". The recommendation for approval recognised that $446,000 of the loan was intended to refinance an existing debt secured over the home, and identified that the balance of $350,000 was "for business purposes"101. Three letters from the husband's accountants were provided 99 2 RB p 652, para 19. 100 Elkofairi at [50], [52]. 101 At [17]-[18]. -- 15 of 18 -- 16 in support of the loan application. They identified the husband as the borrower, and made vague statements to the effect that he had capacity to repay the loan. They provided no information about the appellant102. There was nothing in the information available to the mortgagee to indicate that the appellant had any income, or any capacity to repay the loan, except from the sale of the family home. [71] Beazley JA, with whom the other members of the Court agreed, concluded that the appellant's "lack of income, in the circumstances of this transaction - that is a large borrowing secured over her only asset, in circumstances where the application form failed to disclose any income for either husband or wife - placed her in a special position of disadvantage"; and that "the absence of any relevant financial information was sufficient to put the respondent on notice of the appellant's lack of capacity to meet the repayment obligations under the mortgage"103. [72] It will immediately be apparent that the conclusion that the appellant was in a position of special disadvantage, to the respondent's knowledge, was based on the circumstances of the case. It does not amount to a decision that, in every case where the only, or primary, means by which a loan might be recovered is through the enforcement of mortgages, the borrower will have been in a position of special disadvantage when he went into the transaction104. In any event, as the learned primary Judge correctly noted, the August Sponsor Memo projected a future profit105. The evidence does not demonstrate that in entering into the BFA, the first respondent did so on the basis that the only likely source of repayment of the loan was from the sale of mortgaged properties. [73] Accordingly, in my view the applicants have failed to establish that the learned primary Judge erred in concluding that they had not shown, on a prima facie basis, that they were in a position of special disadvantage when entering into the BFA and providing associated securities. Other considerations relevant to unconscionable conduct [74] To obtain relief a party alleging unconscionable conduct must establish that the behaviour of the other party was unconscientious. Thus, as Deane J said in Amadio106, it must be established that the "disability was sufficiently evident to the stronger party to make it prima facie unfair or 'unconscientious' that he procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which he procured or accepted it". In the same case, Mason J107 considered it a condition of the application of the doctrine that the other party know, or ought to know108, of the existence of the disabling condition which seriously affects the ability of the innocent party to make a judgment in that party's own best interests, and of the effect of that condition on the innocent party. The submissions made on behalf of the applicants in the hearing at first instance recognised the need to establish such knowledge109. 102 At [20]-[23]. 103 At [56]. 104 See PSAL Ltd v Kellas-Sharpe [2012] QSC 31 at [88] per Applegarth J. 105 See 1 RB p 397. 106 At 474. 107 At 462. 108 In Kakavas v Crown Melbourne Limited (2013) 250 CLR 392 (Kakavas) at [150]-[162] the High Court explained that the party claiming relief had to demonstrate that the other party knew of the first party's special disability; or that the other party was wilfully ignorant of it. 109 See 2 RB p 759 at ll 11-12. -- 16 of 18 -- 17 [75] Because, in my view, the applicants do not establish that they were subject to a special disability at the time of the BFA, it follows that they cannot establish that the first respondent knew of the existence of that disability. Likewise, no question arises as to whether, in taking advantage of the applicants' condition or circumstances, the first respondent acted with a "predatory state of mind"110. The respondents' submissions deal with the question of causation, but in the context of a claim for equitable compensation, not relevant to the relief sought at first instance. It is unnecessary to deal with this question. [76] The applicants have not challenged the other findings of the learned primary Judge in relation to their case based on unconscionable conduct. [77] It follows that they have not established a sufficient prospect of success on an appeal, to justify an extension of time. Application to add Ms Bodapati as a party to this appeal [78] The stated ground for this application was that by inadvertence Ms Bodapati was not included as an applicant in the application for an extension of time within which to appeal, nor as an appellant in the proposed appeal111. The new material on which the applicants seek to rely includes an affidavit by her. That affidavit deals with what is said to be falsified information in the January Sponsor Memo; whether she applied for refinancing of the loan secured over the Chermside property; whether the signature on the loan application112 is hers; and the circumstances in which she signed guarantees, presumably including the guarantee she signed in relation to the BFA. The applicants' submissions also refer to the fact that her financial circumstances were taken into account in the August Sponsor Memo. [79] The transaction which the applicants sought to impugn before the learned primary Judge was the mortgage given by the second applicant over the Chapel Hill property. The brief evidence of Ms Bodapati about the circumstances in which she signed the guarantee relating to the BFA is of no assistance on the critical question in these proceedings, namely, whether her parents (and in particular her mother) were under a special disability when they (on behalf of Premacs) entered into the BFA, and when her mother provided the supporting guarantee and mortgage. Nor is the other evidence of Ms Bodapati of assistance on that question. In any event, it was not necessary to join Ms Bodapati as a party to the present application, or the proposed appeal. She was not a party to the application at first instance, and no order for costs was then made against her. It has not been suggested that she has any relevant interest in the proposed appeal. [80] Accordingly, I would refuse the application to add Ms Bodapati as a party. Conclusion [81] In my view, the applicants have failed to establish that the decision of the learned primary Judge is affected by any relevant error. I would for that reason refuse the application for the extension of time. I would also refuse the application to join Ms Bodapati as a party to these proceedings, and the application to adduce further evidence in these proceedings. 110 See Kakavas at [161]. 111 See 2 RB p 780. 112 The application is found at SRB p 897. -- 17 of 18 -- 18 [82] In their written outline, the respondents have sought the costs of these proceedings. The applicants have not identified any reason why they should not be ordered to pay those costs. Accordingly I would order that the applicants pay the respondents' costs of these proceedings, to be assessed on the standard basis. -- 18 of 18 --