Davies v Murphy [2011] QCATA 111

CITATION: Davies v Murphy [2011] QCATA 111 PARTIES: Michele Davies (Applicant/Appellant) v Vickie Murphy (Respondent) APPLICATION NUMBER: APL188-10 MATTER TYPE: Appeals HEARING DATE: On the papers HEARD AT: Brisbane DECISION OF: Justice Alan Wilson, President DELIVERED ON: 13 May 2011 DELIVERED AT: Brisbane ORDERS MADE: Application for leave to appeal refused. CATCHWORDS: APPEAL – LEAVE TO APPEAL – MINOR CIVIL DISPUTE – EQUITABLE DEFENCE – where the respondent was guarantor for a loan agreement between her daughter and the applicant – where the daughter defaulted in payments on the loan – where the applicant sought to recover the money from the respondent – where the Acting Magistrate found that it would be unjust to enforce the agreement as the respondent had not sought independent legal advice – where relief was granted on equitable grounds – where the applicant seeks leave to appeal that decision – whether leave to appeal should be granted – whether the Acting Magistrate had jurisdiction to recognise and give effect to an equitable defence Commercial Bank of Australia v Amadio (1983) 151 CLR 147 Grassby v R (1989) 168 CLR 1 Herald & Weekly Times Pty Ltd v Victoria [2006] VSCA 146 National Australia Bank Ltd v Garcia [1998] -- 1 of 4 -- 2 HCA 48 Tucci v Victorian Civil and Administrative Tribunal & Anor [2010] VSC 425 APPEARANCES and REPRESENTATION (if any): This matter was heard on the papers, pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (QCAT Act). REASONS FOR DECISION [1] This is an application to the Appeal Tribunal for leave to appeal the decision of an Acting Magistrate, sitting as an Ordinary Member of QCAT, at Bundaberg. [2] Mrs Vicky Murphy executed documents as guarantor under a loan agreement between her daughter Katie Murphy, and the applicant/appellant Michele Davies, in the amount of $7,000. The total amount loaned was $11,000. Katie Murphy defaulted on her payments, so Ms Davies sought the money from Vickie Murphy. [3] At the hearing, Mrs Murphy’s representative argued that she had misunderstood the nature of the contract as a result of misrepresentations about it, and because she had not sought legal advice. [4] The learned Acting Magistrate found in Mrs Murphy’s favour, holding that it would be unjust to enforce the agreement as there was no independent legal advice sought or obtained by Mrs Murphy before entering into the agreement and, therefore, he could not be satisfied that she had properly understood the ramifications of it. [5] The learned Acting Magistrate did not cite particular authority for his finding. It is apparent, however, that the decision was made on equitable grounds, on the basis of a finding of unconscionable conduct.1 [6] Ms Davies now seeks leave to appeal that decision. Leave is necessary: QCAT Act, s 142(3)(a)(i). [7] Leave to appeal will ordinarily only be granted where there is some question of general importance upon which further argument, and a decision of the Appeal Tribunal, would be to the public advantage; or, there is a reasonably arguable case of error in the primary decision and a reasonable prospect that the applicant would obtain further substantive relief. Another question sometimes asked is: is leave necessary to correct a substantial injustice to the applicant, caused by some error? [8] Ms Davies advances three grounds for appeal: that the decision was incorrect; that the respondent should have sought legal advice; and that 1 See, eg, Commercial Bank of Australia v Amadio (1983) 151 CLR 147 (Amadio). -- 2 of 4 -- 3 the respondent’s failure to seek legal advice is not a valid reason for the Tribunal not to enforce the provisions of the agreement. Ms Davies also argues that Mrs Murphy was at no special disadvantage which would justify a finding of unconscionable conduct. [9] In Amadio, Mason J (as his Honour then was) described unconscionable conduct as: … a situation in which the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position.2 [10] The principles in Amadio were subsequently developed and refined so that it was also, later, found in Garcia’s case that it would be unconscionable to enforce a transaction of suretyship that was not properly understood, especially if the lender took no steps itself to explain its purport and effect, and did not reasonably believe that it had been explained by a competent, independent and disinterested stranger. 3 [11] In this case, Mrs Murphy alleged that she did not understand the agreement, and that its nature and effect had been misrepresented to her. The learned Acting Magistrate was satisfied, on the basis of the evidence given at the hearing, that Mrs Murphy did not understand the nature of the agreement because no independent legal advice had been sought by her and because Ms Davies had not taken steps to ensure that she properly understood the agreement. That finding appears, with respect, to have been reasonably open on the evidence. [12] An issue that then arises is whether QCAT has an implied jurisdiction to recognise, or give effect to, an equitable defence of the kind relied upon by Mrs Murphy here. [13] The question whether inferior courts and tribunals have an implied jurisdiction to grant equitable relief is one which has been considered by higher courts, at some length. [14] In Grassby v R it was found that a Magistrates Court does have an equitable jurisdiction ‘… arising by implication upon the principle that a grant of power carries with it everything necessary for its exercise’. 4 The term ‘necessary’ in that context has been defined as a power to make orders which are reasonably required by, or legally ancillary to, the accomplishment of specific remedies.5 [15] In Herald & Weekly Times Pty Ltd v Victoria6 the central question in an application arising from proceedings in QCAT’s sister tribunal in Victoria, the Victorian Civil and Administrative Tribunal (VCAT), was whether that 2 461. 3 National Australia Bank Ltd v Garcia [1998] HCA 48, [31]. 4 (1989) CLR 1, 16-17. 5 Pelechowski v Registrar, Court of Appeal (1999) 162 ALR 336, 348. 6 [2006] VSCA 146, [25]. -- 3 of 4 -- 4 tribunal had the jurisdiction to grant an injunction in an application which was based on an action in equity. The Victorian Court of Appeal found that the correct test for whether a tribunal could exercise equitable jurisdiction was whether the equitable claim was so related to the primary proceeding (which was not one arising in equity) that it formed a part of it. [16] In a case with similar factual circumstances to those in the present case, Tucci v Victorian Civil and Administrative Tribunal & Anor7 a judge of the Victorian Supreme Court considered the question whether VCAT had jurisdiction to hear a claim by a landlord against a guarantor of the tenant’s obligations under a lease. It was found that, notwithstanding that VCAT is not a court, it was intended to have the power to recognise and give effect to an equitable defence because equitable principles and defences would be relevant in many kinds of disputes which relate to guarantees. [17] In the present case, the application to enforce the guarantee arose at law. Mrs Murphy’s defence that she did not understand her obligations under the contract, due both because of the misrepresentations as to the nature of the contract, and the lack of legal advice, arose in equity. It is inescapable that, in light of the learned Acting Magistrate’s findings, the claim and the equitable relief granted were sufficiently connected to the proceeding. [18] It follows that the Tribunal did have jurisdiction to recognise and give effect to Mrs Murphy’s equitable defence. [19] Otherwise, the learned Acting Magistrate’s decision was reasonably open on the evidence. The learned Acting Magistrate was, with respect, careful to give each party a full hearing and an opportunity to present its case and no error is apparent on the face of the transcript or the reasons given at the conclusion of the hearing. [20] The application for leave to appeal must be refused. 7 [2010] VSC 425, [46]-[47]. -- 4 of 4 --