Alexander Gregg v Tasmanian Trustees Ltd [1997] FCA 128 (28 February 1997)

CATCHWORDS

Trade Practices - Misleading Conduct - Whether husband's misleading representations which induced his wife to execute a mortgage were made as agent for the mortgagee - Whether failure of mortgagee to inform the applicant wife of the changed nature of the transaction constituted misleading conduct.

Trade Practices - Equity - Unconscionability - husband procures his wife's execution of mortgage over matrimonial home as a joint tenant - Whether the equitable presumption favouring a wife in Yerkey v. Jones superseded or subsumed by Amadio - Whether the equitable presumption in favour of a wife in Yerkey v. Jones is not applicable in a changed factual, sociological and legal environment - Whether the applicant wife is in a position of special disadvantage - Whether the respondent mortgagee had notice of facts relating to the wife's position of special disadvantage - Did mortgagee unconscientiously take advantage of the special disadvantage of the wife.

Trade Practices - Misleading conduct - Unconscionability - Whether relief should be partial or total rescission - Whether relief should set aside the mortgage as against the wife only or as against the wife and husband as joint tenants - Whether it is practically just to limit wife's liability under the mortgage to liability she believed she was undertaking - Whether injunctive relief should be granted in addition to setting aside mortgage in whole or in part.

Trade Practices - Misleading conduct - Unconscionability - Whether proceeding for relief under s.87(1A) out of time under s.87(1CA) - Whether cause of action under s.87(1A) accrues when loss and damage is likely to be suffered - Whether loss and damage is likely to be suffered when mortgage executed - Whether loss and damage for unconscionability is likely to be suffered when mortgagee seeks to retain the benefit of the unconscionable mortgage or its unconscionable conduct - Whether loss and damage is likely to be suffered when there is a real rather than a remote chance or possibility of loss - Whether the limitation period under s.87(1CA) for unconscionability under s.51AA applied by analogy to unconscionability in equity - Whether limitation period under s.87(1CA) relevant to the grant of relief under s.80.

Courts - Practice and procedure - Whether principal debtor under the mortgage and the husband's trustee in bankruptcy were persons directly affected by the relief proposed to be granted in a substantial way - Whether principal debtor and trustee had notice of the proceeding - Whether relief should be refused on ground of non-joinder of interested persons as parties.

Legislation

Trade Practices Act 1974 (Cth) ss. 51AA, 52, 80, 87

Cases

Yerkey v. Jones [1939] HCA 3; (1940) 63 CLR 649

Commercial Bank of Australia v. Amadio [1983] HCA 14; (1983) 151 CLR 447

Lisciandro v. Official Trustee in Bankruptcy [1994] FCA 1537; (1995) ATPR 41- 436 and on appeal (1996) 139 ALR 689

Barclays Bank Plc v. O'Brien [1993] UKHL 6; (1994) 1 AC 180

Alderton v. Prudential Assurance Co. [1993] FCA 127; (1993) 41 FCR 435

Sargent v. A.S.L. Developments Ltd. [1974] HCA 40; (1974) 131 CLR 634

Krakowski v. Eurolynx Properties Pty. Ltd. (1995) 183 CLR 563

GIO Australia Holdings Ltd. & Ors. v. Marks & Ors. Full Court of the Federal Court of Australia unreported, 21 November 1996

Demagogue Pty. Ltd. v. Romensky [1992] FCA 557; (1992) 39 FCR 31

National Australia Bank v. Garcia New South Wales Court of Appeal (Mahoney P, Meagher and Sheller JJA), unreported 3 July 1996

Teachers Health Investments Pty. Limited v. Wynne Court of Appeal (Mahoney P, Beazley JJA and Waddell AJA) 1996 Australian Consumer Sales and Credit Law Reporter 56,356

Wik Peoples v. Queensland (1996) 141 ALR 129

Louth v. Diprose [1992] HCA 61; (1992) 175 CLR 621

Re Ferdinando Ex parte Australian and New Zealand Banking Group Ltd. (1993) 42 FCR 243

Krambousanos v. Jedda Investments Pty. Ltd. Federal Court of Australia (1996) 64 FCR 348

Vadasz v. Pioneer Concrete (SA) Pty. Ltd. (1995) 130 ALR 570

News & Ors. Ltd. v. Australian Rugby Football League Ltd. & ors. [1996] FCA 1256; (1996) 139 ALR 193

Pegang Mining Co. Ltd. v. Choong Sam (1969) 2MLJ 52

GIO Australia Holdings Ltd. & Ors. v. Marks & Ors. Full Court of the Federal Court of Australia unreported, 21 November 1996

R. v. McNeil [1922] HCA 33; (1992) 31 CLR 76

Australian and New Zealand Bank Group Ltd. v. Petrik (1996) 2 VR 696

TG12/1996 ALEXANDER GREGG V. TASMANIAN TRUSTEES LTD.

COURT: MERKEL J

PLACE: (HEARD IN HOBART)

DATE: 28 FEBRUARY 1997

IN THE FEDERAL COURT OF AUSTRALIA

TASMANIAN DISTRICT REGISTRY

GENERAL DIVISION NO. TG 12 of 1996

BETWEEN

ALEXANDRA GREGG Applicant

- and -

TASMANIAN TRUSTEES LTD.

(A.C.N. 009 475 629)

Respondent

COURT: MERKEL J.

PLACE: MELBOURNE (HEARD IN HOBART)

DATE: 28 FEBRUARY 1997

ORDERS

1. The parties are directed to prepare minutes of orders to give effect to the conclusions arrived at in the Reasons for Judgment and exchange and file those minutes within 14 days.

2. Reserve liberty to apply.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

TASMANIAN DISTRICT REGISTRY

GENERAL DIVISION NO. TG 12 of 1996

BETWEEN

ALEXANDRA GREGG Applicant

- and -

TASMANIAN TRUSTEES LTD.

(A.C.N. 009 475 629)

Respondent

COURT: MERKEL J.

PLACE: MELBOURNE (HEARD IN HOBART)

DATE: 28 FEBRUARY 1997

REASONS FOR JUDGMENT

INDEX

Page

1.0 INTRODUCTION 2

2.0 THE FACTS 3

2.1 The applicant 3

2.2 Tasram 4

2.3 The mortgage 6

3.0 MISLEADING AND DECEPTIVE CONDUCT 18

3.1 The representations 18

3.2 Were Gregg's representations made by Gregg 22

as agent for the respondent?

3.3 Did Tasmanian Trustees conduct contravene

s.52? 24

4.0 UNCONSCIONABILITY 29

4.1 Section 51AA 29

4.2 Yerkey v. Jones 30

4.3 Amadio 41

4.4 Was the applicant in a position of special

disadvantage in dealing with the respondent? 46

4.5 Did the respondent have notice of the facts and

circumstances that ought to have put it on

inquiry in relation to the applicant's special

disadvantage? 50

4.6 Did the respondent unconscientiously take advantage

of the special disadvantage of the applicant? 52

5.0 WHAT RELIEF IS TO BE GRANTED? 55

6.0 NON-JOINDER OF INTERESTED PERSONS 66

7.0 IS THE PROCEEDING OUT OF TIME? 71

8.0 CONCLUSION 81

1. INTRODUCTION

On 4 June 1993 the applicant and her husband, Marcus Robert Gregg ("Gregg"), granted a first mortgage to the respondent over their matrimonial home at 30 Silwood Avenue, Howrah in Tasmania ("the mortgage"). The mortgage secured repayment of a principal sum of $261,000 lent by the respondent to Tasram Pty. Ltd. ("Tasram") at the same time.

On 13 June 1996 the applicant commenced a proceeding in the Court claiming orders setting aside the mortgage ab initio. The applicant is relying upon ss.51AA, 52, 80 and 87 of the Trade Practices Act 1974 ("the TPA") and upon an alleged entitlement to set aside the mortgage as "unconscionable" in accordance with the principles in Yerkey v. Jones [1939] HCA 3; (1940) 63 CLR 649 and Commercial Bank of Australia v. Amadio [1983] HCA 14; (1983) 151 CLR 447.

2. THE FACTS

2.1 The applicant

The applicant married Gregg in 1975 when she was 19 years old. They have one child, Katherine Gregg, who was born on 23 April 1981.

In the 1970's the applicant graduated from the University of Tasmania holding a Bachelor of Arts degree and a Diploma of Education. In recent years she has been employed as a secondary teacher in the Tasmanian School of Distance Education.

The applicant and her husband earned broadly equivalent incomes and contributed agreed shares of their incomes to the upkeep and maintenance of the family. They maintained separate bank accounts for their earnings. Gregg was an experienced accountant and the applicant had become accustomed to relying upon her husband to manage their financial affairs.

The applicant suffers from multiple sclerosis which is a significant and progressive muscle disease characterised by weakness and wasting. She is just able to self care, she is able to get out of a low chair but has difficulty with stairs and getting in and out of cars. Her physical disability has been increasing and will continue to increase progressively over time. As a consequence her matrimonial home was specifically modified to cater for her present and future needs.

The applicant and her husband initially acquired their home with the assistance of a mortgage. However, as a result of a gift from her father and an inheritance in 1991 after his death, she became the major contributor of funds towards the home. By June 1993 the home was free of any mortgage liability.

The applicant's evidence, which I accept, was that there were no particular matrimonial difficulties between the applicant and her husband in June 1993 when the mortgage was executed by them.

Their permanent separation in January 1994 led to proceedings being issued by the applicant in the Family Court in June 1994. The proceedings were adjourned as a result of her husband's bankruptcy on 10 July 1995.

Although the applicant has had little experience in financial matters I found her to be an intelligent person who was able to recall honestly and with reasonable accuracy the events that led to the granting of the mortgage to the respondent.

2.2 Tasram

By June 1993 Tasram, which commenced trading in 1984, was an expanding business which provided services for small computer systems. The shares in Tasram were held by David Direen ("Direen"), its Managing Director and Paul Tremayne ("Tremayne"), its Technical Director. Early in 1993 Gregg, who had been providing accountancy services to Tasram, was invited to become a "partner" in the business. Both he and the applicant were enthusiastic about the proposal. As a consequence, early in May 1993, Gregg became Tasram's Financial Director on an annual salary of $35,000 and acquired an equal shareholding in the company from the other two Directors for $40,000. The purchase price was never paid. The petrol and mobile telephone accounts of the applicant and her husband were paid by Tasram.

By May 1993 Tasram and Tremayne had become indebted to the Commonwealth Bank in an amount in excess of $250,000. The evidence is not clear as to the precise breakup of that debt but in excess of $210,000 was owing by Tasram on its overdraft and some $48,000 was nominally owing by Tremayne in respect of a home loan.

I was invited by the applicant to infer that the $48,000 loan and the subsequent repayment of it by Tasram had nothing to do with the business of Tasram. Tasram's directors' loan accounts should reflect the payment by it of $48,000 if the payment was on behalf of or for the benefit of one of its directors but there was no evidence as to the state of the respective loan accounts of the directors as at June 1993 or the arrangements made between Tasram and Tremayne concerning the payment of the home loan by Tasram. The only inference I am prepared to draw is that Tremayne received a direct benefit from the refinancing of the Commonwealth Bank loan by the respondent.

In or about May 1993 Tasram's three directors approached the respondent with a view to refinancing the debt due to the Commonwealth Bank. They provided the respondent with a Balance Sheet and Profit and Loss Account of Tasram for the year to 30 June 1992, details of sales to 11 May 1993 and details of the Tasram's history and profile. Tasram's assets totalled $337,943 and its total liabilities were $313,354, leaving it with net assets of only $24,588. The trading profit was in excess of $50,000. Current sales figures for the financial year to May 1993 totalled $2.24 million, which was a significant increase over the previous financial year to 30 June 1992. The respondent regarded Tasram's business as a viable one which was able to service its refinanced debt obligations. Indeed, it did service those obligations until some time in 1995.

There is now a dispute in the Supreme Court of Tasmania between the respondent and Tasram as to whether Tasram is liable to the respondent as the principal debtor, or at all, in respect of the balance due of the original loan of $261,000.

2.3 The mortgage

The refinancing of Tasram's debt to the bank was the final step in the restructuring of Tasram. To enable the necessary funds to be obtained it was proposed that the three directors utilise their properties as security for the loan sought from the respondent.

Direen, Tremayne and Gregg proposed that the respondent refinance the existing loans from the Commonwealth Bank by an advance to Tasram which was to be equivalent to 60% of the valuations obtained by the respondent over the homes of the three directors and a block of residential land.

After obtaining the necessary valuations the respondent accepted the proposal and approved a loan of $261,000. The loan was 60% of $523,500 which was the total of the valuations of the three homes and the block of land offered as security.

The properties were:

ADDRESS OWNER VALUATION

19 Milton Crescent Direen 81,500

West Moonah (home)

11 Bayside Drive Paul & Linda Tremayne 165,000

Lauderdale (home)

30 Silwood Avenue The applicant and 137,000

Howrah (home) Gregg

160B Springfield Avenue Direen 52,500

West Moonah (land) 523,500

The three directors instructed Messrs. Creese Crisp & Fay to act as Tasram's solicitors in respect of the refinancing. The respondent did not have its own legal department or legal documentation and was in the habit of instructing the borrower's solicitors to prepare mortgage documentation. As a consequence, on 26 May 1993, the respondent's Hobart Branch Manager, Robert Voss ("Voss") instructed Tasram's solicitors to prepare the necessary documentation. The letter of that date contained detailed instructions for the preparation of the proposed mortgage which had been agreed to by Tasram, acting through its directors and the respondent, acting through Voss. It included the following instructions -

Re: Loan Application - Tasram Pty. Ltd.

We wish to advise that the Company has approved a loan of $261,000.00 to the above applicant on the following terms and conditions:

SECURITY:- First mortgage over properties owned by the Directors of the Company as follows:

David Allan Direen

19 Milton Crescent, West Moonah

160B Springfield Avenue, West Moonah

Paul Cameron & Linda Gail Tremayne

11 Bayside Drive, Lauderdale

Marcus Robert & Alexandra Maria Gregg

30 Silwood Avenue, Howrah

We assume that Tasram will become the borrower and the guarantees of the Directors provided as Mortgagors.

PERIOD OF LOAN:- Three years.

INTEREST RATE:- 13% reducing to 10% for payment within fourteen days of due date, payable quarterly.

After setting out a number of formal matters relating to insurance, establishment fee, fund availability and variation of interest rates the letter concluded:

Would you please prepare the necessary documentation to fully protect the Company as Mortgagee. Your costs in this matter will be the responsibility of the Mortgagor.

A Solicitor's Certificate is enclosed for completion and return to this office in due course.

The solicitor's certificate is a form of certification to the mortgagee by a solicitor approving the mortgagor's title to the mortgaged property.

Mr. Fay ("Fay"), a partner of the firm instructed by the respondent, attended to the preparation and execution of the mortgages.

Voss' evidence was that the transaction which was proposed by Tasram, approved by the respondent and was intended by him to be conveyed to Messrs. Creese, Crisp and Fay in the letter of 26 May 1993 involved -

* a loan of $261,000 by the respondent to Tasram as principal debtor;

* a guarantee by the three directors, being Direen, Tremayne and Gregg, of the performance of Tasram's obligations as principal debtor;

* collateral mortgages by the respective mortgagors of their properties to secure payment of the principal sum of $261,000 and interest thereon.

Voss's evidence was that there was no discussion with the three directors to the effect that each mortgagor's property was only to secure an amount (apart from interest) equal to 60% of the valuation relied upon for that property. However, there appears to have been considerable confusion on that issue. Evidence has been adduced that at different times Direen, Gregg and even Fay, thought that the liability of the mortgagors' property was limited in each case to 60% of the valuation of the property. When Direen and the Tremaynes requested the discharge of their mortgages they were permitted to do so by Voss on payment of 60% of the original valuation. It is difficult to make a finding on the precise detail of the discussions between Voss and the three directors on that issue as none of the directors gave evidence and Voss' evidence was in general terms. However it is likely that, as a result of the discussions between Voss and the directors, the directors believed that each property was only to secure 60% of the amount of the valuation of that property. Although I am not prepared to find that Voss misled the directors on this issue the confusion became significant because of the later failure, on the part of Fay, to explain to the applicant the content and legal operation of the mortgage prepared by him.

I am satisfied that the proposal approved by the respondent did not involve the applicant or Linda Tremayne becoming personally liable as principal debtors or guarantors for the obligations of Tasram.

Unfortunately, Fay had little prior experience in preparing collateral security documentation. The mortgages prepared by him and executed by the mortgagors -

* were granted separately by each set of mortgagors in respect of their respective properties;

* provided that, although as between the mortgagors and Tasram the mortgagors were "surety" for Tasram as the "Borrower", each of the mortgagors was liable with Tasram to the mortgagee as a principal debtor in respect of the whole of the principal sum of $261,000 and interest thereon;

* provided that the mortgage was not "collateral with any other obligations" and made no reference in the mortgage to the mortgages granted by the other mortgagors.

To suggest that the provisions were complex to a lay person would be an understatement. Under the proposal agreed to by Voss the applicant's home was to be offered as collateral security together with the properties of the other mortgagors and the applicant was not to be liable personally or as a primary debtor. The mortgage contained the following special covenants by the applicant as a mortgagor -

17. The Mortgagor and the Borrower do hereby covenant with the Mortgagee;

(a) any person persons or corporation who or which is identified in this Mortgage as a Borrower and who joins in the execution of this Mortgage, by his or its execution covenants to observe the perform the covenants and obligations of the Mortgagor herein contained except where repugnant to the context.

(b) that notwithstanding anything expressed or implied in this Mortgage the parties hereto acknowledge that the moneys hereby secured by this Mortgage include moneys lent and advanced to the Borrower at the request of the Mortgagor.

(c) although as between the Mortgagor and the Borrower the Mortgagor is surety for the Borrower it is expressly agreed and declared that as between the Mortgagor and the Mortgagee the Mortgagor is and shall remain principal debtor for all the moneys hereby secured and interest and other moneys secured by the Mortgage.

(d) This Mortgage is a continuing guarantee of the due and punctual performance and observance of the obligations of the Borrower as contained or implied in this Mortgage and shall be irrevocable and shall remain in full force and effect notwithstanding any matter or thing whatsoever until the moneys hereby secured and the whole of the obligations of the borrower and the Mortgagor under this Mortgage have been fully paid and satisfied and the liability of the Mortgagor shall be a principal obligation and shall not be construed as ancillary or collateral with any other obligations and may be enforced against the Mortgagor without first having recourse to any other security or guarantee or any other person or corporation and the liability of the Mortgagor shall not be abrogated prejudiced or affected by the granting of time credit or any forbearance indulgence or concession under or pursuant to this Mortgage it being the purpose and intent of the parties hereto that the obligations of the Mortgagor under this Mortgagee shall be absolute and unconditional in any and all circumstances.

I would not expect a discerning, or even sceptical, lay person mortgaging a matrimonial home to appreciate or comprehend the interaction of these clauses with -

* the principal obligations of Tasram, as the Borrower under the mortgage; or

* the counterpart provisions in the mortgages given by the other mortgagors which were never shown to or explained to the applicant.

Finally, no provision was made for any guarantees to be given by the directors of Tasram.

Fay acted as solicitor for the respondent and Tasram in relation to the preparation and execution of the mortgages. In his evidence Fay was ambivalent about his legal relationship with the applicant and Gregg as mortgagors. Ultimately he said he did not turn his mind to that issue at the time. I am satisfied, on the evidence adduced before me, that Fay was not engaged to act, and did not act or purport to act, as solicitor for the applicant or her husband in relation to the mortgage granted by them to the respondent.

The applicant's evidence, which was not challenged, as to how she and her husband came to mortgage their respective interests in the matrimonial home to the respondent, was set out in her affidavit. The relevant paragraphs were -

In early 1993 my husband informed me, when we were at our matrimonial home, situated at 30 Silwood Avenue, Howrah Tasmania of his intentions to become a "partner" and "director" of the Company known as Tasram Pty. Ltd. situated at Warwick Street, North Hobart in Tasmania.

My husband informed me at that time that he had discussed his intentions with the current Directors of Tasram Pty. Ltd., David Direen and Paul Tremayne who approved of the proposition provided that he agreed to use the property situated at 30 Silwood Avenue, Howrah as collateral for a loan to Tasram Pty. Ltd. from "Tasram Trustees" for working capital.

There were four occasions, between May 1993 to approximately early June, 1993 that I can recall when my husband and I discussed the purpose of the loan and its implications while we were at our home at 30 Silwood Avenue, Howrah

On these three or four occasions my husband informed me that our home was to be used for collateral for the sum of $82,000.00 and that the two current Directors of Tasram Pty. Ltd. were to use their respective matrimonial homes as collateral for a loan of a similar amount.

On all these occasions he told me that the loan from Tasmanian Trustee Pty. Ltd. was for working capital because the Company Tasram Pty. Ltd. had a cash flow problem and that we would not be responsible, personally, for this loan.

On these occasions he told me that the Company Tasram Pty. Ltd. was profitable and viable and that it had a high turnover but it needed working capital to over come a short term cash flow problem.

On all these occasions I expressed concern about being caught with a debt of $82,000.00 if the Company Tasram Pty. Ltd. decided it would not meet the loan repayments.

My husband told me on all these above mentioned occasions that the Company Tasram Pty. Ltd. would not legally refuse to meet the repayments and that the only possible way we would be required to pay back the sum of $82,000.00 would be if the Company went bankrupt.

My husband assured me on all these occasions that he had assessed the profitability and viability of the Company and that it would be unlikely that he would use our home to raise money for a Company that had any possibility of becoming bankrupt.

My husband informed me on all these occasions that the money borrowed from Tasmanian Trustees would be used for working capital for Tasram Pty. Ltd. and never at any time was I made aware that part of the loan was to be used for any other purpose other than for working capital for the Company.

On all these occasions I was led to believe from my husband that he would be employed by Tasram Pty. Ltd. as a "Financial Manager" and that he would be on a salary of approximately $35,000.00.

On one of these occasions I can recall that my husband said one of the conditions of employment would be that both our petrol accounts and a mobile phone account may be paid by Tasram Pty. Ltd.

On these three or four occasions when my husband and myself discussed the prospect of using our home as collateral for the said loan my husband never mentioned the sum of $261,000.00 and led me to believe on all occasions that the sum borrowed against our property was $82,000.00 and that the Directors of Tasram Pty. Ltd. were also mortgaging their respective properties for a similar amount.

During the period of these three or four occasions between early 1993 and June 1993 no other person or persons conversed with me in respect to the loan either verbally or in writing and I agreed to use the home at Silwood Avenue as collateral for the loan of $82,000.00 to Tasram Pty. Ltd. entirely on the representation and information presented to me by my husband while in our home in Silwood Avenue, Howrah.

The applicant said in evidence that she thought that the transaction was for the benefit of the family. When asked why she came to that conclusion she said:

I knew that it had been a company that had been around for 13, 14 years and it seemed a good opportunity for my husband in an area of computing in which he'd developed an interest and an expertise in, and also combined his financial knowledge as well.

On 27 May 1993 Fay sent a copy of the mortgage to the applicant and her husband. The accompanying letter which was addressed to the applicant and her husband was in the following terms:

"Re: Mortgage Loan from Tasmanian Trustees Limited

We enclose herewith a photocopy of the Memorandum of Mortgage for your records.

Please do not hesitate to contact the writer if you wish to further discuss this matter".

The letter was not seen by the applicant.

Shortly prior to 4 June Gregg informed Fay that his wife was suffering from multiple sclerosis and would have difficulty in negotiating the stairs to his office. An arrangement was made for Fay to attend to the signing of the mortgage by the applicant in a car in the street outside Fay's office.

That arrangement led to the applicant signing the mortgage in a car outside Fay's office with her husband and Fay present. Her husband said to her that "this represents what I have been talking to you about and you just need to sign" where indicated by him. She noticed that her occupation was incorrect and requested that "home duties" be altered to "teacher". The alteration was made by Fay. The applicant observed the sum of $261,000 on the front page of the mortgage and said in evidence that she "thought of it in terms of the three parts to it." She was referring to the commitment of each director to provide equal security of about $82,000 for the loan to Tasram. Fay recalled some discussion "about the valuation of the property owned by the Greggs and its interaction with the whole quantified sum that was being borrowed from Tasmanian Trustees". Although the applicant is uncertain as to whether any amounts were discussed, in my view, it is likely that she queried the figure of $261,000 and was informed by her husband that the sum accorded generally with a one third share of $82,000 which was being borrowed against the partners respective properties. The applicant's execution of the mortgage was then attested by Fay.

Fay gave evidence to the effect that he assisted Gregg in explaining the details of the mortgage to the applicant. This is denied by the applicant. Gregg did not give evidence. Fay admitted having difficulty in recalling specifically what was said by him. His evidence on this issue was not consistent or reliable. In my view it is unlikely that anything of substance was said on that occasion other than that set out above. I accept the applicant's denial of any explanation by Fay. Overall I prefer her evidence to that of Fay and regard her explanation as more probable.

The applicant was not pressured into entering into the mortgage. Rather, she did so in reliance upon the trust and confidence she reposed in her husband and his representations in relation to the transaction.

In the first half of 1995 Direen and Tremayne requested that the respondent discharge the mortgages over their homes upon payment of an amount equivalent to 60% of the 1993 valuations of the properties. Voss agreed to that proposal. Accordingly, the debt by Tasram was reduced by those amounts and the mortgages over the two properties were discharged leaving the balance of the Tasram debt secured against the applicant's home and the Direen land. The discharges, which released Direen's home and the Tremaynes and their home from any further liability to the respondent, were carried out without reference to the applicant.

In the middle of 1994 the applicant engaged a solicitor to act for her in relation to the Family Court proceedings. She had also become concerned about the mortgage and sought a copy of it through her solicitor. The first occasion on which she became aware of the true nature and extent of her liability under the mortgage was in September 1994 when her solicitor obtained a copy of the mortgage from the respondent.

The position taken by the respondent concerning the mortgage is curious. By April/May 1995, Voss was certainly aware that each of the mortgages secured payment of the whole of the $261,000 owed by Tasram; yet he agreed to the discharge of the mortgages over the homes of the two other directors upon payment of 60% of the valuations for those homes, being $144,000. On 24 July 1995, Fay sent a letter to the applicant's solicitor which stated, inter alia, that the Gregg's proportion of the loan from the respondent was $82,200 (i.e. 60% of the valuation). However, at the same time the respondent insisted that the applicant was liable under the mortgage for the whole of the balance of the principal sum, which was then $113,100, and any interest owing by Tasram. I am satisfied that that was the first occasion on which the respondent decided and indicated to the applicant that it intended to hold her to the terms of the mortgage she executed. Finally, on 27 May 1996, the respondent demanded payment by, and served notice of default on, the applicant in respect of the reduced principal sum of $113,100 and interest of $15,303.

The demand led to the commencement of these proceedings on 13 June 1996.

3.0 MISLEADING AND DECEPTIVE CONDUCT

3.1 The representations

The applicant's case was that she was induced into executing the mortgage in reliance upon misleading and deceptive representations made by her husband on behalf of or as agent for the respondent ("Gregg's representations"). Gregg's representations related to Tasram and to the terms and effect of the mortgage.

In the course of the hearing the applicant broadened her case. Her counsel contended that the respondent's conduct in -

* preparing and procuring the applicant's execution of the mortgage, which did not reflect the transaction represented to her and agreed to by Tasram and the respondent; and

* not informing the applicant of the changes to the transaction

constituted misleading and deceptive conduct in contravention of s.52.

The respondent contested the case on both of the bases put by the applicant.

The s.52 case based on Gregg's representations requires the applicant to establish that -

* the representations made were misleading and deceptive or were likely to mislead or deceive and;

* Gregg acted as agent for the respondent in making the representations.

Gregg made a number of representations to the applicant about the need for the directors to provide the mortgages in order to assist in the financial restructuring of Tasram. Gregg's representations fell into two categories - the reasons for and the terms of the mortgage.

In essence, Gregg said that, although Tasram had cash flow problems and required additional working capital its profitability and financial viability were such that there was little possibility of it becoming bankrupt. The statements were made in the context of all directors agreeing to mortgage their homes on the faith of their view that Tasram's profitability and expansion created little risk for them. They were also made when Tasram needed increased liquidity and capital to finance its expansion and increasing profitability.

Tasram proposed to refinance existing debt at a lower interest rate thereby reducing its interest commitments. The refinancing, together with the consequential elimination of its bank overdraft, was likely to improve Tasram's liquidity and working capital situation.

The applicant conceded that she was not familiar with financial matters. In that context and the context in which the various statements were made by Gregg to the applicant, the statements amounted to, and would have been likely to be understood by her, as a representation that although Tasram had a profitable and expanding business the mortgages of the directors' properties were necessary to enable Tasram to gain greater liquidity and working capital to overcome its cash flow problems and continue to expand its business. In those general terms I am not satisfied that the statements were misleading or deceptive or likely to mislead or deceive as they were, in substance, true.

The representations as to the terms of the mortgage stand in a different category. At the time Gregg made his representations in relation to the mortgage, subject to two matters, they were substantially accurate as they accorded with the proposal agreed to by Voss. The two matters which were inaccurate are -
* Gregg said that it was only upon the "bankruptcy" of Tasram that their home could be at risk whereas the house would be at risk upon default by Tasram;

* the mortgage of the applicant's home was said by Gregg to secure only $82,000 whereas it was to be collateral security together with the other directors' properties for $261,000.

I regard each of the inaccuracies as significant as far as the applicant was concerned. Her home was of obvious importance to her. It was her matrimonial home, it was acquired substantially with her own funds and her progressively deteriorating physical disability increased her dependency on it.

The transaction originally agreed to involved Tasram as principal debtor, the directors as guarantors and the three houses and land offered as collateral security for Tasram's and the directors' obligations. The level of risk to the applicant of that transaction may not have been great. Nevertheless the level of risk, which was important to the applicant, was significantly misrepresented by Gregg.

However, under the mortgage prepared by Fay and executed by the applicant the risk was significantly different and greater than that which had been represented to the applicant. The applicant and Gregg and their home were directly liable, together with Tasram, for the full loan of $261,000 and interest thereon. Also, there were no supporting guarantees of the directors.

Gregg's representations as to the mortgage were, in effect, reiterated by him in the car at the time of execution of the mortgage when he said "this represents what I have been talking to you about and you just need to sign". He also said that the $261,000 represents the three parts of about $82,000 being put up by each of the directors.

The representations as to the terms of the mortgage were relied upon by the applicant and constituted misleading and deceptive conduct by Gregg which induced her to execute the mortgage.

3.2 Were Gregg's representations made by Gregg as agent for the respondent?

Section 84(2) of the TPA provides:

(2) Any conduct engaged in on behalf of a body corporate -

(a) by a director, servant or agent of the body corporate within the scope of the person's actual or apparent authority; or

(b) by any other person at the direction or with the consent or agreement (whether express or implied) of a director, servant or agent of the body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, servant or agent,

shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate.

The sub-section has been accepted as intending to extend, and not merely reflect, the common law. Even in its widest application it is necessary that the conduct be "on behalf of" the principal in the sense that something is done "for" it or is carried out "in the course of the body corporate's affairs or activities": see Lisciandro v. Official Trustee in Bankruptcy [1995] FCA 1527; (1995) ATPR 41-436 at 40,903 and on appeal (1996) 139 ALR 689.

The respondent engaged Fay to prepare, attend to and procure the execution of the mortgage. He did not delegate that task to Gregg. To the contrary -

* Fay wrote to the applicant and Gregg on 25 May 1993 enclosing a copy of the mortgage and requested they contact him if they wanted further information;

* Fay arranged with Gregg for the applicant's execution of the mortgage to be attended to and witnessed by Fay.

Gregg was not requested to procure the execution of the mortgage by the applicant nor was he left by the respondent with any task concerning execution of the mortgage other than to drive the applicant to Fay's office to enable Fay to attend to her execution of the mortgage. It is important to distinguish between Gregg's role on his own behalf, and possibly on behalf of Tasram, in procuring the applicant's agreement to grant the mortgage and his role in relation to its execution. The latter role was merely to ensure the applicant's attendance upon Fay for that purpose.

In these circumstances the facts of the present case do not support a finding of agency in respect of Gregg and the respondent under s.84(2) or the common law.

The applicant's counsel submitted that the cases establish that where the creditor leaves the task of procuring execution of mortgage documents or a guarantee to a person in a position of influence over the mortgagor or guarantor, then the creditor is liable for misrepresentations made by that person in relation to the mortgage or guarantee: see Challenge Bank Ltd. v. Pandya [1993] SASC 3803; (1993) 60 SASR 330. However, it is now recognised that the entrusting of documents for execution to another without more, does not constitute that person as agent of the lender: see Barclays Bank Plc v. O'Brien [1993] UKHL 6; (1994) 1 AC 180 at 193-4, HG & R Nominees Pty. Ltd. v. Fava & Ors. (1995) V.Conv R 54-522 at 66,183-66,186 and Lisciandro at 40,902-3 and on appeal at 696-7. Whilst that circumstance might be a factor to be considered in relation to the unconscionability claim it has no application to a claim under s.52 of the TPA, unless agency is established under s.84(2) or at common law: see Alderton v. Prudential Assurance Co. [1993] FCA 127; (1993) 41 FCR 435 at 447 and Lisciandro. Accordingly, the case based on agency in respect of the representations made by Gregg has not been made out.

3.3 Did Tasmanian Trustees conduct contravene s.52?

A different situation exists in relation to the conduct of Tasmanian Trustees in relation to the mortgage. That conduct was as follows -

* Voss, on behalf of the respondent agreed to the proposal submitted by Tasram and its directors;

* the respondent, acting through Voss and Fay, expected that the directors' procuration of the agreement of their spouses as co- mortgagors to the proposal would be on the basis of their explanation, as lay persons, of the transaction agreed to by Voss on behalf of the respondent;

* the respondent, acting by its agent Fay, was present when Gregg informed the applicant that the mortgage was "what I have been talking about" and that the $261,000 represented the three parts put up by the directors;

* the respondent, acting by its agent Fay, prepared documents which had a quite a different legal effect to the proposal to which Voss had agreed;

* the respondent failed to point out or explain to the applicant or it appears on the evidence before me, to Gregg, that the mortgage documents were different to the transaction to which the parties had agreed.

The fact that neither the respondent, Voss or Fay intended to mislead the applicant is not relevant to a breach of s.52; the question of whether conduct is misleading or deceptive is to be determined objectively. Accordingly, a contravention of s.52 may occur without any intention on the part of the person engaging in the conduct to mislead or deceive: see Parkdale Custom Built Furniture v. Puxu Pty. Ltd. [1982] HCA 44; (1982) 149 CLR 191 at 197 and Fraser v. NRMA Holdings Ltd. (1995) 55 FCR 452 at 467. In Fraser at 467 the Court (Black CJ, von Doussa and Cooper JJ) said:

for the purposes of s.52, if by reason of what was said and what was left unsaid the conduct of the corporation is misleading and deceptive or likely to mislead or deceive, a contravention would occur even if the corporation through its directors and officers did not have knowledge of the undisclosed facts which rendered the conduct in breach of s.52. A contravention of s.52 may occur without knowledge or fault on the part of the corporation, and notwithstanding the exercise of reasonable care.

In the present case I am satisfied that the knowledge and conduct of Voss and Fay in relation to the mortgage is that of the respondent.

In acting as solicitor and agent for the respondent Fay was the alter ego of the respondent.

Whether the knowledge of a solicitor is to be attributed to his client arises in the Turnbulls' case. As against a third party the law imputes to a principal knowledge gained by his agent in the course of, and which is material to, a transaction in which the agent is employed on behalf of the principal, under such circumstances that it is the duty of the agent to communicate it to the principal. In the words of James L.J. in Vane v. Vane "the actual knowledge of the agent through whom an estate is acquired is...equivalent to the actual personal knowledge of the principal". In my view this principle applies to information acquired by a solicitor in the course of acting for his client in a conveyancing matter (Dixon v. Winch). The solicitor is to be regarded as the alter ego of the client and the rights of the other party to the contract cannot be made to depend upon the diligence or lack of diligence exhibited by the solicitor in his dealings with his client. Sargent v. A.S.L. Developments Ltd. [1974] HCA 40; (1974) 131 CLR 634 at 659 per Mason J.

Voss was the servant, and Fay the agent, of the respondent, involved in and responsible for the mortgage transaction on the respondent's behalf. In Krakowski v. Eurolynx Properties Pty. Ltd. (1995) 183 CLR 563 at 582-3 Brennan, Deane, Gaudron and McHugh JJ discussed the liability of a corporation (Eurolynx) for the conduct and knowledge of its servants and agents -

Their knowledge was the knowledge of Eurolynx, for they were the persons who were responsible for the initial negotiations and who had set the scene in which the representation had been made by the s.32 statement and the proffered contract of sale. As Bright J said in Brambles Holdings Ltd. v. Carey:

"Always, when beliefs or opinions or states of mind are attributed to a company it is necessary to specify some person or persons so closely and relevantly connected with the company that the state of mind of that person or those persons can be treated as being identified with the company so that their state of mind can be treated as being the state of mind of the company. This process is often necessary in cases in which companies are charged with offences such as conspiracy to defraud."

A division of function among officers of a corporation responsible for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them.

Once these principles are applied to the present matter the s.52 case against the respondent is a simple one. It impliedly represented to the applicant that the mortgage constituted and accurately reflected the proposal to which it had agreed. Acting through its agent Fay, the respondent then arranged for execution of the mortgage by the applicant without -

* inquiring whether she understood its terms;

* informing her that the mortgage did not reflect the proposal to which it had agreed;

* explaining the terms of the mortgage.

The applicant executed the mortgage in reliance upon an implied, but false, representation that it constituted and reflected the transaction agreed to by the directors, the respondent, Gregg and herself.

An analogous example of a transaction, which was misrepresented, constituting a breach of s.52, was considered in GIO Australia Holdings Ltd. & Ors. v. Marks & Ors. Full Court of the Federal Court of Australia unreported, 21 November 1996. In that case the Court upheld a finding by the primary Judge that the appellant breached s.52 by distributing a promotional brochure which represented that the lender's Margin was set as a fixed rate for the period of the Facility, when the contract documents executed by the borrowers gave the lender power to vary the margin. Foster J in his Reasons for Judgment (which were concurred in by Wilcox and Tamberlin JJ on this aspect) said at 30-31:

Here, the respondents could not, in my view, be regarded as the authors of their own misconceptions. Whilst it is true that a careful and close analysis of the Letter of Offer and the Conditions of Use would have raised the question whether the Margin rate of 1.25% referred to in the Letter of Offer might not be subject to unilateral increase by GIO under the power given by Clause 11.1, this would not, in my view, have been so blindingly obvious as to counteract the ongoing effect of the representation that the Margin was "set" for the life of the Facility. It would also have been noticeable that items such as the "Management Fee", referred to in the brochure as being subject to variation, were expressly singled out in the conditions of Use as being so subject. In my view, in the absence of clear direction from GIO, a discerning, even sceptical, customer would have been unlikely to have ascertained that the margin represented as fixed could, nevertheless, be amenable to variation through the operation of a "catch all" provision such as clause 11.1.

In the circumstances arising in present case it was inherently unlikely that the applicant would have ascertained the changes to the transaction without a clear and cogent explanation of those changes. As a result of the changes the mortgage imposed more onerous obligations upon the applicant, and greater risks to her home, than those originally represented to her.

The fact that the mortgage departed in significant respects from the transaction agreed to by the respondent, gave rise to a reasonable expectation that the changes and their effect would be brought to the attention of the applicant. A failure to do so and remaining silent in the circumstances, in itself, can constitute conduct in contravention of s.52: see Demagogue Pty. Ltd. v. Romensky [1992] FCA 557; (1992) 39 FCR 31 at 32, 40- 41 and 46, Fraser v. NRMA Holdings Ltd. (1995) 55 FCR 452 at 465-467 and Kocsardi v. Elegant Tiles Pty. Ltd. & Ors. Cooper J Federal Court of Australia, unreported, 20 November 1996 at 69.

In my view the conduct of the respondent in relation to the mortgage to which I have referred -

* was misleading and deceptive and likely to mislead or deceive in contravention of s.52;

* induced the applicant to execute the mortgage as a joint owner of her home.

4.0 UNCONSCIONABILITY

4.1 Section 51AA

Section 51AA of the TPA provides:

(1) A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories.

(2) This section does not apply to conduct that is prohibited by section 51AB.

The provision imports into the TPA the doctrine of unconscionability enunciated in Amadio. The doctrine was summarised by Sir Anthony Mason in his article on "The Place of Equity" (1994) 110 Law Quarterly Review at 248-9:

Relief against unconscionable bargains is granted when a transaction, considered in the light of the circumstances in which it was entered into, is so unconscionable that it cannot be allowed to stand. The power to grant relief on this ground was in the past largely confined to cases in which the party seeking relief was a person suffering from some special distinct disability or disadvantage, e.g. the expectant heir, or the inebriated plaintiff in Blomley v. Ryan who was incapable of forming a rational judgment. But the principle according to which relief is granted is not so limited. What is required is that there be an unconscientious taking advantage of the disability or disadvantage of the person in the weaker bargaining position by procuring or retaining the benefit in question in a way that is both unreasonable and oppressive. So, in Louth v. Diprose, the female appellant took unconscientious advantage of the male respondent's infatuation with her by manufacturing a crisis, involving threats of suicide, and inducing him to enter into an improvident transaction whereby he purchased a house which was conveyed to her. In so doing, he expended a large part of his assets.

Whether a plaintiff is entitled to relief on the ground of unconscionable conduct in the sense described above is very largely a question of fact and of value judgment. The cases provide little in the way of specific guidance, offering only very wide general expressions. As Fullagar J. noted in Blomley v. Ryan this is typical of the difference between the common law and equity: the common law looks to "the reality of the assent of the person resisting enforcement of the contract" whereas equity "look[s] at the matter from the point of view of the person seeking to enforce the contract and ... inquire[s] whether, having regard to all the circumstances, it [is] consistent with equity and good conscience that he should be allowed to enforce it."

In Australia, at least, the emergence from the shadows of this ground of equitable relief has relegated the doctrine of undue influence to a position of relative unimportance. The reasons given by the House of Lords for rejecting the case based on undue influence in National Westminster Bank Plc. v. Morgan suggest that unconscionability as an independent ground of relief does not loom large on the English scene. Unconscionability and undue influence overlap, the latter being more limited in scope, concerned as it is with the exercise by the contracting party of an independent and voluntary will.

4.2 Yerkey v. Jones

Amadio has been accepted as stating the law on unconscionability in Australia. A particular difficulty has arisen in reconciling the general principles established in Amadio with the equitable presumption in favour of a "wife", as a category of person suffering a distinct special disadvantage or disability said to have been established in Yerkey v. Jones. The presumption is summarised in the headnote as follows:

The relation of husband and wife is not one of influence, and the fact that a wife confers a voluntary benefit upon her husband by a gift or by becoming surety or otherwise raises no presumption in equity against the transaction: But, if a husband procures his wife to become surety for his debt and it appears that circumstances existed which, if they alone had been the parties to the transaction, would make it liable to be set aside as against the husband, then the guarantee or security may be invalidated also against the creditor if he relied upon the husband to obtain it from his wife and had no independent ground for reasonably believing that she fully comprehended the transaction and freely entered into it.

The rationale for the presumption was stated by Dixon J at 684-6:

If the creditor has left it to the husband to obtain his wife's consent to become surety and no more is done independently of the husband than to ascertain that she understands what she is doing, then, if it turns out that she is in fact acting under the undue influence of her husband, it seems that the transaction will be voidable at her instance as against the creditor. It is not clear how far the same principle is to be applied to a case where the wife is induced to become surety by the husband making some fraudulent or even innocent misrepresentation of fact which, though material, does not go to the nature and effect of the instrument or transaction. It may be said that the making of such a representation is no more to be anticipated by a creditor when a husband procures his wife's guarantee than when any other principal debtor procures a surety. On the other hand, the basal reason for binding the creditor with equities arising from the conduct of the husband is that in substance, if not technically, the wife is a volunteer conferring an important advantage upon her husband who in virtue of his position has an opportunity of abusing the confidence she may be expected to place in him and the creditor relies upon the person in that position to obtain her agreement to become his surety. Misrepresentation as well as undue influence is a means of abusing the confidence that may be expected to arise out of the relation.

In the second case, that where the wife agrees to become surety at the instance of her husband though she does not understand the effect of the document or the nature of the transaction, her failure to do so may be the result of the husband's actually misleading her, but in any case it could hardly occur without some impropriety on his part even if that impropriety consisted only in his neglect to inform her of the exact nature of that to which she is willing blindly, ignorantly or mistakenly to assent. But, where the substantial or only ground for impeaching the instrument is misunderstanding or want of understanding of its contents or effect, the amount of reliance placed by the creditor upon the husband for the purpose of informing his wife of what she was about must be of great importance.

If the creditor takes adequate steps to inform her and reasonably supposes that she has an adequate comprehension of the obligations she is undertaking and an understanding of the effect of the transaction, the fact that she has failed to grasp some material part of the document, or, indeed, the significance of what she is doing, cannot, I think, in itself give her an equity to set it aside, notwithstanding that at an earlier stage the creditor relied upon her husband to obtain her consent to enter into the obligation of surety. The creditor may have done enough by superintending himself the execution of the document and by attempting to assure himself by means of questions or explanation that she knows to what she is committing herself. The sufficiency of this must depend on circumstances, as, for example, the ramifications and complexities of the transaction, the amount of deception practised by the husband upon his wife and the intelligence and business understanding of the woman. But, if the wife has been in receipt of the advice of a stranger whom the creditor believes on reasonable grounds to be competent, independent and disinterested, then the circumstances would need to be very exceptional before the creditor could be held bound by any equity which otherwise might arise from the husband's conduct and his wife's actual failure to understand the transaction: Cf. per Cussen J. If undue influence in the full sense is not made out but the elements of pressure, surprise, misrepresentation or some or one of them combine with or cause a misunderstanding or failure to understand the document or transaction, the final question must be whether the grounds upon which the creditor believed that the document was fairly obtained and executed by a woman sufficiently understanding its purport and effect were such that it would be inequitable to fix the creditor with the consequences of the husband's improper or unfair dealing with his wife.

It is apparent from his Honour's statement of the "final question" and the equitable principles involved in it that Yerkey v. Jones was in reality an early statement of the dichotomy between the law of unconscionability and undue influence in Australia. In that sense Yerkey v. Jones may be seen as a forerunner of the later enunciation of the doctrine of unconscionability in Blomley v. Ryan [1956] HCA 81; (1956) 99 CLR 362 and Amadio which focus on the unconscientious conduct of the creditor.

Counsel for the applicant submitted that the facts of the present case attract the equitable presumption in Yerkey v. Jones.

In New South Wales several recent cases in the Court of Appeal have considered whether Yerkey v. Jones and Amadio are in conflict, and if so, whether Amadio has impliedly overruled or subsumed the presumption in favour of a wife derived from Yerkey v. Jones: see Atkins v. National Australia Bank (1994) 34 NSWLR 155, National Australia Bank v. Garcia 3 July 1996 (Mahoney P, Meagher and Sheller JJA), unreported and Teachers Health Investments Pty. Limited v. Wynne and Burnswood and Ors. v. Wynne Court of Appeal (Mahoney P, Beazley JJA and Waddell AJA) 1996 Australian Consumer Sales and Credit Law Reporter 56,356.

Whether Yerkey v. Jones still represents the law in the State of Victoria was recently said to be a matter which is "yet to be determined": see Duncan v. Commonwealth Bank of Australia, Court of Appeal of the Supreme Court of Victoria, (Winneke P, Tadgell and Phillips JJ.A.) unreported, 23 October 1996. Single Judges of the Supreme Court of Victoria have said that they regard themselves as bound by the "invalidating tendency" in Yerkey v. Jones: see ANZ v. Dunosa, Hansen J unreported, 22 June 1994 and Geelong Building Society (In liquidation) v. Thomas, Hedigan J unreported, 30 April 1996 at 73.

In Garcia at 8-9 Sheller AJ stated the problem as follows:

In the forefront of NAB's appeal was the submission that the decision of the High Court in Commercial Bank of Australia v. Amadio [1983] HCA 14; (1983) 151 CLR 447 had impliedly overruled or subsumed the principle derived from Yerkey v. Jones.

The relevant point of distinction is this. Yerkey v. Jones is said to establish that a creditor, seeking to enforce a wife's guarantee of her husband's debts, which has been obtained by his pressure, influence or misrepresentation or without her full understanding of the nature or effect of the transaction, had notice, because of her husband's assumed dominant position in such relationship and the opportunity that afforded him to abuse his wife's confidence, that the guarantee was so obtained. Put another way and to adapt the language of Amadio the creditor must assume that a wife is under a special disability in dealing with her husband and her husband's creditor. The creditor must so assume because of the relation of husband and wife and, possibly, in the particular case, the fact that the transaction is to the husband's advantage and the wife's disadvantage. In consequence the wife, if she proves, when sued on the guarantee, that she was under a special disability in the circumstances of the particular case, need not prove that the creditor knew or ought to have known of this special disability. The creditor is taken to have known of it. Such a proposition has attracted criticism vividly encapsulated in the observations of Rogers J in European Asian of Australia Ltd. v. Kurland (1985) 8 NSWLR 192 at 200:

"In more recent times, it has been acknowledged that the concept appealed to, in relation to a married woman, is at best a survivor from the days when a married woman was almost incapable in law. I feel compelled to say that in the year 1985 it seems anachronistic to be told that being a female and a wife is, by itself, a sufficient qualification to enrol in the class of persons suffering a special disadvantage. However, counsel for Mrs. Kurland submitted that the iron grip of precedent requires me to submit to such a finding. Were this to be correct, it would affix a badge of shame to this branch of the law. In my opinion, stated in the extreme form embraced by counsel, the proposition is not correct but, nonetheless, it has sufficient claim to accuracy to require a review of this branch of the law so as to bring it into conformity with current thinking and standards. That being a female spouse should place a person shoulder to shoulder with the sick, the ignorant and the impaired is not to be tolerated."

In Amadio the majority, when restating the principles upon which equity will grant relief against a party to a transaction guilty of unconscionable conduct, insisted that the party shown to be under a special disability and seeking to be relieved from obligations under the transaction, in that ground, show that the special disability was "sufficiently evident" to that other party. If the principle derived from Yerkey v. Jones is the law, in this respect married women are treated differently from other persons under a special disability.

In Garcia the Court of Appeal concluded that Amadio is the authoritative statement on equity's jurisdiction to grant relief against unconscionable conduct and that the equitable presumption said to have been established in Yerkey v. Jones -

* was based upon general assumptions about the capacity of married women which now would so often be contrary to experience that it is wrong to accept them, in principle or as a presumption of fact;

* should no longer be applied in New South Wales.

The same question again arose for decision in Teachers Health Investments before a differently constituted Court of Appeal. The trial Judge had found that he was bound to apply the equitable presumption in Yerkey v. Jones to set aside a mortgage granted by the respondent wife as security for a loan granted by the appellant creditor to the respondent's husband and his company. The Court of Appeal re-affirmed that the equitable presumption in Yerkey v. Jones no longer represents the law in New South Wales and has been superseded by the equitable principles in relation to unconscionability established in Amadio.

It is against this background that the applicant's reliance, in the present case, upon the equitable presumption in Yerkey v. Jones needs to be considered.

In considering whether, as a single Judge, I am bound to follow Yerkey v. Jones, two issues emerge. The first is whether the equitable presumption, said to have been established in Yerkey v. Jones, has been subsumed or superseded by the doctrine of unconscionability enunciated in Amadio. The second is whether the equitable presumption of fact based, as it is, on the sociological, legal and factual framework operating in the 1930's is applicable to the quite different sociological, legal and factual framework of the 1990's.

As already indicated, Yerkey v. Jones was a significant stepping stone in the separate development in Australia of the law relating to unconscionability as distinct from the law relating to undue influence. The reasoning of Dixon J in Yerkey v. Jones is based on the equitable considerations which gave rise to the principles of unconscionability enunciated in Amadio. In these circumstances it is difficult to accept that the equitable presumption in favour of a wife has not been subsumed or overtaken by equity's treatment of persons in a position of special disadvantage as outlined in Amadio. Indeed, the retention of the presumption would be inconsistent with the Amadio principles. There is nothing in the majority judgments or principles enunciated in Amadio that would support one principle for all persons in a position of special disadvantage other than married women and another principle for married women. In my view for these reasons and for the reasons set out in the New South Wales Court of Appeal judgments, to which I have referred, the presumption or invalidating tendency in favour of a married woman in Yerkey v. Jones has been subsumed or superseded by Amadio.

I turn to consider the second issue. I am of the view that, in any event, the presumption in Yerkey v. Jones is not applicable in modern Australian society.

It has been long recognised that the principles and doctrines of equity, even more than the common law, adapt to changing facts. In that regard in Wik Peoples v. Queensland (1996) 141 ALR 129 at 228 Gummow J said:

There have been few adherents in recent times to a declaratory theory in an absolute form. For one thing, the principles and doctrines of equity were never "like the rules of the Common Law, supposed to have been established from time immemorial", rather, they were "established from time to time - altered, improved, and refined from time to time. For another, to use the words of Windeyer J, "[l]aw is to be accommodated to changing facts".

In Mabo v. Queensland (No. 2) [1992] HCA 23; (1992) 175 CLR 1 and in Wik the majority of the High Court declined to act on past judicial decisions on the common law which were based on the false assumption of terra nullius. A fortiori, a court will not act on an equitable presumption of fact when the sociological, legal and factual framework giving rise to the presumption no longer exists or has altered in fundamental respects. The fundamentally changed framework was outlined in the New South Wales Court of Appeal decisions to which I have referred.

It is quite clear from the decision in Yerkey v. Jones itself that the presumption was applied in the context of the statutory and sociological framework that existed in relation to married women in Australia in the late 1930's.

World War II led to fundamental changes in the role of women in the Australian workforce. During and after the War, women's, especially married women's, participation in the paid workforce rose steadily. As historian Professor Marilyn Lake recently wrote, far from being under a post-war "condition of house arrest", that participation led to post-war pressure to provide married women with a right to work in the Federal Public Service and the banking sector as well as rights to equal pay and work opportunities. As a consequence of such pressures, over time, the role and economic independence of married women changed.

The present framework is different to that of the late 1930's in many fundamental respects. It is, and is accepted as, commonplace that married women are likely to be employed in all sectors of the workforce and in all occupations and professions. In doing so it is expected that married women might occupy positions of legal, financial or corporate responsibility. Equal pay for equal work has now been long accepted as a right for all women. Affirmative action programs have been undertaken, as a matter of public policy, in order to assist that outcome for all women. Equal opportunity legislation protecting women from discrimination, inter alia, in relation to employment on the grounds of gender, pregnancy or marital status has been enacted throughout the Commonwealth: see Sex Discrimination Act 1984 (Cth), ss.5-7 Anti-Discrimination Act 1977 (NSW) ss.24 and 39, Equal Opportunity Act 1995 (Vic) ss.6-9, Anti-Discrimination Act 1991 (Qld) ss.7-11, Equal Opportunity Act 1984 (SA) s.29, Equal Opportunity Act 1984 (WA) ss.8-10, Sex Discrimination Act 1994 (Tas) ss.14-16, Discrimination Act 1991 (ACT) ss.7 and 8, Anti- Discrimination Act 1992 (NT) ss.19 and 20.

Whilst the present reality is that gender inequality in the workforce may still persist the assumptions which formed the very basis and rationale for the presumption in Yerkey v. Jones in favour of a married woman can no longer be made or regarded as applicable to present Australian society. These factors do not lead me, as a Judge at first instance, to decline to follow or apply Yerkey v. Jones. Rather, they lead me to the conclusion that the equitable presumption as to a matter of fact in Yerkey v. Jones is not applicable as a precedent in the fundamentally different legal and factual environment which exists in Australia today. In my view the conclusion of the Court of Appeal in Garcia as to the inapplicability of the principle or presumption of fact said to be established in Yerkey v Jones in modern Australian society is clearly correct.

However, my reasoning must lead to the conclusion that the principles established by Amadio, and not Yerkey v. Jones, represent the law of Australia rather than just the law of New South Wales or of Tasmania: see Breavington v. Goodman [1988] HCA 40; (1988) 169 CLR 41 at 120-121 per Deane J and Kable v. Director of Public Prosecutions (NSW) [1996] HCA 24; (1996) 70 ALJR 814 at 844-5 per McHugh J and at 860 per Gummow J. That law is the "unwritten law, from time to time, of the States and Territories". It was enacted, in part, in s.51AA of the TPA in relation to the conduct of corporations in trade and commerce. In that regard Para 45 of the Explanatory Memorandum explained the terminology employed in s.51AA -

"The phrase 'the unwritten law, from time to time, of the States and Territories' denotes the non-statutory law (ie the law which is not contained in statutes, instruments under statutes or prerogative instruments) as developed by the courts of the common law and equity. Because of the position of the High Court of Australia as the ultimate appellate court for all States and Territories, the 'unwritten law' of the States and Territories is the same."

However, the judicial deconstruction of the laws "tender treatment" of married women should not lead to sight being lost of the true rationale for that treatment. It arose because of a judicial acceptance that:

"wives do repose confidence and trust in their husbands in relation to their financial affairs": see Barclays Bank PLC v. O'Brien [1993] UKHL 6; (1994) 1 AC 180 at 196 per Lord Browne-Wilkinson.

"the basal reason for binding the creditor with equities arising from the conduct of the husband is that in substance, if not technically, the wife is a volunteer conferring an important advantage upon her husband who in virtue of his position has an opportunity of abusing the confidence she (the wife) may be expected to place in him and the creditor relies upon the person in that position to obtain her agreement to become his surety. At 684-5 per Dixon J in Yerkey v. Jones at 684-5.

Whilst a wife may no longer be presumed to be in a position of special disadvantage by that fact alone, there is no reason to conclude that the laws protection of persons in relationships in which one party reposes trust and confidence in the other, could also be at an end. In principle, such relationships can give rise to a position of special disadvantage which is governed by the Amadio principles: see Burke v. State Bank of NSW (1994) 37 NSWLR 53 at 77-8 per Santow J.

Relationships of confidence and trust of the kind which gave rise to the presumption in Yerkey v. Jones abound in many intimate personal relationships in which emotional dependence or influence leaves one party particularly vulnerable to the other, who using the language of Dixon J, has the "opportunity of abusing the confidence".

That situation was succinctly summarised by the Australian Law Reform Commission in its discussion on "sexually transmitted debt":

The key feature of sexually transmitted debt is the relationship of dependence and the emotional ties that dominate the transaction. These are often found, for example, in wife/husband, parent/child and defacto relationships. The dependent party in the relationship accepts responsibility for the other party's debt primarily because of that relationship. If the other party becomes unable or unwilling, for example, through bankruptcy or divorce, to meet the debt, the dependent party is liable for the debt. In that way the debt is 'transmitted' to the dependent party. A useful generic definition of sexually transmitted debt is

the transfer of responsibility for a debt incurred by a party to his/her partner in circumstances in which the fact of the relationship, as distinct from an appreciation of the reality of the responsibility for the debt, is the predominant factor in the partner accepting liability: see 1994 Report No. 69 Part II "Equality before the Law: Women's Equality" at 240.

Further, development of the law in this area should not lose sight of the social context in which the problem of "sexually transmitted debt" arises. In her article on "Sexually Transmitted Debt - A Feminist Analysis of Laws Regulating Guarantors and Co-Borrowers" (1995) 4 Feminist Law Journal at 93 Nicola Howell said:

The involvement of women in their partners' debts results primarily from societal assumptions about the role of women in (heterosexual) relationships and internalisation of these assumptions by credit providers, men and many of the women themselves. Women are expected to, and do, place a high value on relationships. Many women believe that their relationship with the potential debtor obliges them to help him to gain credit and that to question a credit arrangement is to question their relationship with their partner or to show a lack of trust in him.

For the reasons I have set out it follows that relationships involving emotional dependence or influence, whether between wife/husband, parent/child or unmarried partners of either sex, might fall within a category of special disadvantage that attracts protection under the Amadio principles. Whether there is such a relationship which places one of the parties to it in a position of special vulnerability in relation to the transaction in question, will depend on the facts and circumstances of the particular case rather than on any general assumptions based on the category of relationship relied upon.

I turn to consider the Amadio principles.

4.3 Amadio

In Amadio, Mason J said at 461:

"...relief on the ground of "unconscionable conduct" is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage..."

In distinguishing between unconscionable conduct and undue influence Mason J said at 461:

"In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former 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."

Mason J said at 462 that the principles relating to unconscionability may be invoked:

"...whenever one party by reason of some condition of circumstance is placed at a special disadvantage vis-a-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created. I qualify the word "disadvantage" by the adjective "special" in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party."

In summarising the principles governing an unconscientious bargain Mason J said at 467:

"As we have seen, if A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his own interests, takes unfair advantage of his (A's) superior bargaining power or position by entering into that transaction, his conduct in so doing is unconscionable. And if, instead of having actual knowledge of that situation, A is aware of the possibility that that situation may exist or is aware of facts that would raise that possibility in the mind of any reasonable person, the result will be the same."

and Deane J said at 474-5:

"The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that 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.

...

The adverse circumstances which may constitute a special disability for the purposes of the principles relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible to being comprehensively catalogued. In Blomley v. Ryan (1956) 99 CLR at 405, Fullagar J listed some examples of such disability: "poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary". As Fullagar remarked, the common characteristic of such adverse circumstances "seems to be that they have the effect of placing one party at a serious disadvantage vis-a- vis the other"."

In Louth v. Diprose [1992] HCA 61; (1992) 175 CLR 621 Deane J restated the Amadio principle but defined unconscionable conduct as arising when the stronger party seeks to procure, obtain or retain the benefit of the disadvantaged party's assent to the impugned transaction.

In Lisciandro (on appeal) at 702 Cooper J referred with approval to the following statement by Richardson J in Contractors Bonding Ltd. v. Snee (1992) 2 NZLR 157 at 174:

At the end of the day equity will intervene to deprive parties of their contractual rights where they have unconscionably obtained benefits or have accepted benefits in unconscionable circumstances. That is where they would be acting unconscientiously in receiving or retaining their bargain.

Once the creditor was put on inquiry the onus was cast on it to show that it was:

"in point of fact fair, just and reasonable: Fry v. Lane (1888) 40 Ch.D at 321: see Deane J in Amadio at 479 and also at 637 in Louth.

It must be established that the party applying to impugn the transaction or the creditor's conduct was under a relevant disability or disadvantage. In describing this disability or disadvantage, Deane J at 476 referred to the statement of McTiernan J in Blomley v. Ryan [1956] HCA 81; (1956) 99 CLR 362 at 392 that:

"His weakness was of the kind spoken of by Lord Hardwicke [in Earl of Chesterfield v. Janssen [1750] EngR 25; (1751) 2 Ves. Sen., 125, at 155-156; [1750] EngR 25; 28 E.R. 82, at 100] "in defining the fraud characterised as taking surreptitious advantage of the weakness, ignorance or necessity of another. The essence of such weakness is that the party is unable to judge for himself"."

Deane J then said at 477:

"That weakness constituted a special disability of Mr. and Mrs. Amadio in their dealing with the bank of the type necessary to enliven the equitable principles relating to relief against unconscionable dealing. Put more precisely, the result of the combination of their age, their limited grasp of written English, the circumstances in which the bank presented the document to them for their signature and, most importantly, their lack of knowledge and understanding of the contents of the document was that, to adopt the words of Fullagar J quoted above, they lacked assistance and advice where assistance and advice were plainly necessary if there were to be any reasonable degree of equality between themselves and the bank."

Any special disability must be, as Deane J said at 477:

"sufficiently evident to the [other party to the transaction] to make it prima facie unfair or "unconscientious" of the [other party to the transaction] to procure [the] execution of the [contract] in the circumstances in which the execution was procured".

In referring to the circumstances which put the creditor on inquiry as to whether the transaction had been explained to the Amadios, Mason J stated at 466-467:

"It must have been obvious to [the bank officer], as to anyone else having knowledge of the facts, that the transaction was improvident from the viewpoint of the respondents. In these circumstances it is inconceivable that the possibility did not occur to [the bank officer] that the respondents' entry into the transaction was due to their inability to make a judgment as to what was in their best interests, owing to their reliance on their son, whose interests would incline him to urge them to sign the instrument put forward by the bank."

On the question of when the relevant facts are sufficiently evident to put the creditor on inquiry in Atkins, Clarke JA, with whom Sheller JA and Powell JA in a separate judgment concurred, stated at 172:

"the principles of unconscionability propounded in Commercial Bank of Australia Ltd. v. Amadio furnish adequate grounds of relief to a wife who claims to have been the subject of her husband's improprieties and, in circumstances where, for instance, a creditor knew, or must be taken to have known of the risk that might have occurred (or facts raising that possibility in the mind of a reasonable person)".

Louth v. Diprose and Teachers Health Investments considered the connection between emotional dependence and special disadvantage.

In Louth v. Diprose a woman was ordered to transfer a house acquired by her as a result of a gift from a solicitor who had become infatuated with her. On the solicitor's action to recover the land the trial judge found that he had been emotionally dependent on the woman who, as a result, had great influence on his actions and decisions which she unconscionably misused to procure, accept and retain the benefit of the gift. Although the facts are far removed from the present case, the importance of Louth is the recognition that emotional dependence, or subjection to emotional influence, is a relevant disadvantage which might constitute a ground to set aside a transaction as unconscionable in reliance on Amadio: see Mason CJ at 626, Brennan J at 629-630, Deane J at 638, Dawson, Gaudron and McHugh JJ at 641 and Toohey J at 655.

It can be taken to be established by the authorities to which I have referred, including Yerkey v. Jones, Teachers Health Investments and Louth, that emotional dependence or influence in relation to a financial dealing, which is such that it seriously affects a person's ability to make a judgment as to their own best interests in relation to the transaction, can fall in a category of special disadvantage or disability within the Amadio principles.

In Teachers Health Investments Beazley JA at 18 said that she did:

"not accept that education and experience are necessarily an answer to a claim of unconscionability, particularly where a person is otherwise in an emotionally vulnerable state, as was the respondent.

Some cases have referred to the competing public interest in protecting the vulnerable from unconscionable dealings in relation to a matrimonial home but not rendering the home "unacceptable as security to financial institutions": see Atkins at 174 per Clarke JA and Barclays Bank at 188 per Lord Browne-Wilkinson. The Amadio principles strike an appropriate balance by requiring that, in the usual course, a lender, on actual or constructive notice of a mortgagor's or surety's position of special disadvantage, take appropriate or reasonable steps to ensure that the mortgagor or surety is able to understand the true nature of the transaction into which he or she is entering.

4.4 Was the applicant in a position of special disadvantage in dealing with the respondent?

In the present case the special disadvantage of the applicant in relation to the transaction arises from -

* the matrimonial relationship between the applicant and Gregg and the emotion and intimacy inhering in that relationship;

* Gregg's financial expertise and the applicant's lack thereof, leading her to rely upon and repose particular trust and confidence in her husband in relation to financial matters;

* the applicant's progressively more serious physical disability which placed her in a situation of increasing reliance and dependence upon her husband for both the physical and emotional support she required;

* the applicant's resulting position of vulnerability in respect of any request by her husband to mortgage her interest in the matrimonial home for a business venture proposed by him;

* the applicant's execution of the mortgage in reliance upon Gregg, without her having been given an explanation or understanding of its terms.

I would add that in referring, as I have, to the emotional dependence of the applicant on Gregg and to her being vulnerable to his influence in relation to the transaction I have had regard not only to the affidavit and oral evidence given by the applicant but also to her demeanour in giving oral evidence.

The vulnerability of the applicant was exacerbated by the complexity of the transaction which, when translated into legal form, was almost equivalent to a foreign language to her as a lay person unfamiliar with collateral mortgage documentation.

The resulting situation was a significant comprehension and information imbalance in relation to the transaction as between the respondent and the applicant. In these circumstances, as in Amadio, assistance and advice as to the content "were plainly necessary if there were to be any reasonable degree of equality between" the applicant and the respondent.

Failure to adequately explain a legal transaction which was complex to a lay person, when all the circumstances called for an explanation, has been accepted as a ground to set aside the transaction as unconscionable: see Re Ferdinando Ex parte Australian and New Zealand Banking Group Ltd. (1993) 42 FCR 243 at 249-50 and Krambousanos v. Jedda Investments Pty. Ltd. Federal Court of Australia Branson J, (1996) 64 FCR 348 at 359.

The absence of any meaningful assistance to the applicant in relation to the mortgage and the peremptory circumstances in which execution occurred ensured that any real possibility of assistance to overcome the impairment to the applicant's ability to make a judgment as to her own best interest, inherent in the special circumstances set out above, was lost.

Further, the transaction the applicant entered into was highly improvident from her point of view. She undertook a direct and personal liability in respect of the principal sum of $261,000 lent to Tasram, a company in which she had no financial interest. Further, a part of that sum was applied to the direct benefit of Tremayne, a director of Tasram, with whom the applicant had no relationship of any kind.

On the modest evidence before me it is likely that the liability undertaken by the applicant was greater than her total assets and any means she might have to meet it. The applicant also incurred a direct and personal liability for all interest payments at the lower rate of 10% on that principal sum, or in the event of default, at the higher rate of 13%. Again, on the modest evidence before me it is likely that she lacked the financial capacity to meet those payments. In short, the applicant's unencumbered matrimonial home, being her major asset, specially designed to meet her physical requirements and paid for substantially out of her family inheritance, was to secure obligations which she appeared to have no capacity to meet. The applicant's position was not assisted by the fact that she had no legal entitlement or right to control the destiny of Tasram or the performance of its obligations upon which her future life and wellbeing were to depend after her execution of the mortgage.

In summary -

* the applicant received no direct benefit from the mortgage which was highly improvident from her point of view;

* no advice was given or procedure set in place by the respondent for the applicant to obtain advice or any other assistance in relation to the mortgage;

* the applicant's decision to execute the mortgage was made in reliance upon her husband's explanation of the transaction and the trust and confidence she reposed in him in relation to it;

* the respondent had no reason to believe or expect that the applicant had understood the mortgage she executed;

* the three mortgage transactions entered into and their terms and interaction were complex;

* "assistance and advice were plainly necessary" if there was to be any reasonable degree of equality between the applicant and the respondent;

* the matters to which I have referred placed the applicant in a position of special vulnerability in relation to the transaction which left her "unable to judge for herself" whether it was provident or not.

The applicant has established the requirement of special disadvantage as outlined in Amadio.

4.5 Did the respondent have notice of the facts and circumstances that ought to have put it on inquiry in relation to the applicant's special disadvantage?

In my view the respondent, acting through Voss and Fay, knew or ought to have known of facts and circumstances that disclosed to a reasonable person that there was a real possibility or risk that the applicant was "unable to judge for herself" whether the transaction was provident or not.

Fay or Voss were aware that -

* Gregg, who was an accountant and Tasram's Finance Director, was acquiring his interest in Tasram as an equal "partner";

* Gregg was married to the applicant who was a teacher and was suffering from a serious physical disability as a result of her multiple sclerosis;

* the applicant was required to mortgage her interest as a joint tenant in the matrimonial home to secure a debt of $261,000 and interest thereon but they (Fay or Voss) had no reason to believe that the applicant had the financial capacity to meet that liability;

* the complexities of the transaction were such that it would clearly require explanation to a lay person if that person was to comprehend it and the risks involved;

* Gregg and the applicant did not have a solicitor acting for them and they (Voss or Fay) had no reason to expect that anyone, apart from themselves, might explain the transaction to the applicant or Gregg;

* the objective facts known to Voss and Fay made the mortgage a highly improvident transaction for the applicant;

* it was likely that, in relation to the transaction, the applicant was dependent, reliant upon and trusted her husband who had an interest in persuading her to mortgage her matrimonial home.

In Teachers Health Investments the fact that the transaction was obviously improvident and of no apparent benefit to the wife was held, of itself, to be sufficient to put the lender on notice of the risk of special disadvantage.

Although it is my view that Voss or Fay were aware of each of the matters set out above, if I am in error in that regard, they ought to have been aware of those matters.

These circumstances placed Voss and Fay in a position in which they were aware or ought to be taken to be aware of the risks arising from the special disadvantage and vulnerability of the applicant to which I have referred.

4.6 Did the respondent unconscientiously take advantage of the special disadvantage of the applicant?

The respondent procured the execution by the applicant of the mortgage in the circumstances set out above without taking any steps to enable or assist the applicant to understand the obligations and risks she was undertaking by executing the mortgage.

Although the respondent is not liable for the misleading conduct of Gregg prior to the mortgage, the awareness of Voss as its servant and Fay, as its agent, of the applicant's position of disadvantage, makes that conduct a factor relevant to any assessment of unconscionability: see Burke at 77-79. The respondent's own misleading conduct in relation to the mortgage, which I have outlined in some detail above, is also a significant factor to be considered in that regard.

However, it is also relevant to examine the respondent's conduct in retaining the benefit of the applicant's assent to the impugned transaction. After the execution of the mortgage the respondent discharged the Tremaynes and their home and Direen's home from all liability for Tasram's debt upon payment of 60% of the valuation. That conduct is difficult to reconcile with the almost simultaneous conduct of the respondent in holding the applicant and her home liable for the whole of the outstanding amount due under the mortgage by Tasram. At that time that amount being $113,000, was significantly greater than $82,200, which was 60% of the valuation of the home.

Further, in releasing the Tremaynes and their home as well as Direen's home from the mortgages given by the Tremaynes and Direen, the respondent left the applicant's home together with Direen's land as the sole security for the loan. The applicant was prejudiced by the release as it is likely that she "lost" significant rights of contribution from "co-borrowers" or "co-sureties" being the Tremaynes, their home and Direen's home. Whilst it is not necessary for present purposes to explore the precise entitlement of the applicant to contribution, it is sufficient to say that, in general, co-ordinate liability for the same debt attracts a right of contribution. The Full Court of the Supreme Court of Victoria in ACC v. Baltica General Insurance (1993) 1 VR 467 at 482 summarised the relevant principles:

(a) contribution is "bottomed and fixed on general principles of justice": Dering, at p.321; E.R., at p.1185;

(b) ......

(c) where several persons are debtors all shall be equal: Lord Redesdale in Stirling v. Forrester (1821) 3 Bli. 575, at p.596; 4 E.R. 712, at p.719;

(d) the right arises at law when "one of several persons has paid more than his proper share towards discharging a common obligation": Davies v. Humphreys [1840] EngR 56; (1840) 6 M. & W. 153, at pp. 168-9; [1840] EngR 56; 151 E.R. 361, at pp.367-8.

The release transactions were likely to be prejudicial to the applicant and were carried out without reference to her or her solicitor. It may be suggested that the special clauses in the mortgage, which I have set out, resulted in there being no co-ordinate or common liability with the other mortgagors and their properties and therefore no right of contribution. If that is correct then the exclusion of that right from the mortgage, without explanation or assent, was itself unconscionable.

By mid 1995 Gregg was bankrupt and had separated from the applicant who was becoming increasingly disabled by her multiple sclerosis. The respondent, at that time, indicated to the applicant that it was holding her and her home liable under the mortgage notwithstanding its different treatment of Tremayne and Direen. In the same circumstances, in June 1996, the respondent served notice of default under the mortgage for $113,100 principal and $15,303 interest. From about mid 1995 the respondent determined to accept and retain the benefit of the applicant's assent to the impugned mortgage.

Tasram is now disputing that it was a principal borrower and claims it owes nothing to the respondent. I have no evidence as to Direen's financial circumstances. On the evidence before me the applicant's personal liability and that in respect of her home, has moved from a mere possibility to a primary source of payment of the balance of Tasram's indebtedness.

In my view the circumstances I have set out, lead to the conclusion that the respondent's conduct in procuring, accepting and seeking to retain the benefit of the applicant's assent to and execution of the mortgage is conduct in trade and commerce that is unconscionable in contravention of s.51AA and in equity under the Amadio principles.

5.0 WHAT RELIEF IS TO BE GRANTED?

Section 87(1A) of the TPA provides:

Without limiting the generality of section 80, the Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this sub-section) in contravention of a provision of Part IVA or V or on the application of the Commission in accordance with sub-section (1B) on behalf of such a person or 2 or more such persons, make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in sub-section (2)) if the Court considers that the order or orders concerned will compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage, or will present or reduce the loss or damage suffered, or likely to be suffered, by such a person.

Section 87(2) provides:

(2) The orders referred to in sub-sections (1) and (1A) are -

(a) an order declaring the whole or any part of a contract made between the person who suffered, or is likely to suffer, the loss or damage and the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, or of a collateral arrangement relating to such a contract, to be void and, if the Court thinks fit, to have been void ab initio or at all times on and after such date before the date on which the order is made as is specified in the order;

(b) an order varying such a contract or arrangement in such manner as is specified in the order and, if the Court thinks fit, declaring the contract or arrangement to have had effect as so varied on and after such date before the date on which the order is made as is specified in the order;

(ba) an order refusing to enforce any or all of the provisions of such a contract;

(c) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to refund money or return property to the person who suffered the loss and damage;

(d) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to pay to the person who suffered the loss or damage the amount of the loss or damage;

(e) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, at his own expense, to repair, or provide parts for, goods that had been supplied by the person who engaged in the conduct to the person who suffered, or is likely to suffer, the loss or damage;

(f) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, at his own expense, to supply specified services to the person who suffered, or is likely to suffer, the loss or damage; and

(g) an order, in relation to an instrument creating or transferring an interest in land, directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to execute an instrument that -

(i) varies, or has the effect of varying, the first-mentioned instrument; or

(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the first-mentioned instrument.

In addition to resort to these statutory remedies for the contravention of ss.51AA and 52 the applicant also seeks injunctions under s.80 and equitable remedies in accordance with Amadio. The respondent's counsel submitted that if the mortgage is unconscionable or the applicant was misled, it is just and equitable for the applicant to be bound to the transaction into which she believed she was entering: see Australian and New Zealand Banking Group Ltd. v. Petrik (1996) 2 VR 638. That transaction, it was said, was not only fair, just and equitable but was seen and understood by the applicant as being so and as being for the benefit of her family.

There may have been some force in the respondent's submission had the respondent made an open offer to the applicant in those terms rather than seeking to retain the benefit of the unconscionable transaction. There were compelling circumstances for the respondent to make such an offer particularly after it became aware of Fay's errors in preparing the mortgage documentation; it did not do so. Rather, on the evidence before me, the respondent has singled out the applicant, the most vulnerable of the persons actually or potentially liable to it, for notices of demand and default. In doing so the respondent, having sought to retain the benefit of its unconscionable and misleading conduct in relation to the mortgage, has no equity or other relevant factor in its favour to have it read down to accord with the transaction said to have been agreed to and understood by the applicant. A similar issue arose in Amadio.

At 481 Deane J said:

While the matter was not raised in the bank's notice of appeal, I was, at one stage, inclined to think that the appropriate relief in the present case would be an order setting aside the guarantee/mortgage only to the extent to which it imposed upon Mr. and Mrs. Amadio a potential liability in excess of $50,000 or that any order wholly setting aside the guarantee/mortgage should be conditional upon Mr. and Mrs. Amadio paying to the bank the amount of $50,000 which represents the amount of the potential liability which they intended to undertake. Ultimately, I have come to the view that Mr. and Mrs. Amadio are entitled to have the whole transaction set aside unconditionally. It is true that it is not ordinarily incumbent upon a bank to bring to the attention of a potential guarantor of a customer's account details of a type which are ordinarily to be expected (see Goodwin v. National Bank of Australasia Ltd. (65)). In the present case however, it was, as has been said, evident to the bank that Mr. and Mrs. Amadio stood in need of advice as to the nature and effect of the transaction into which they were entering. It is apparent that any such advice would have included the importance to a guarantor of ascertaining from the bank the state of th customer's account which was being guaranteed and any unusual features of the account. If such information had been obtained by Mr. and Mrs. Amadio, they would not, on the evidence and in the light of the learned trial judge's finding, have entered into the guarantee/mortgage at all. The whole transaction should properly be seen as flowing from the special disability which was evident to the bank and as being unfair, unjust and unreasonable.

See also Mason J at 468 and Alderton v. Prudential Assurance Co. [1993] FCA 127; (1993) 41 FCR 435 at 449 per Heerey J.

In the present case for similar reasons the respondent's submission should be rejected. The applicant was assured by Gregg that her liability and that of her home was limited to $82,000 and could only arise after the "bankruptcy" of Tasram. In that regard, on the respondent's case, the transaction even as originally agreed to by the respondent, was misrepresented to her by Gregg in significant respects. I have already indicated that that is a factor to be considered in relation to unconscionability. If the real risks of the proposal originally agreed to by Voss were properly explained to or understood by the applicant, given the importance of the home to her, I doubt that she would have accepted those risks. Each case must be decided on its own facts. In that regard the present case is a very different one to Petrik, in which the Court of Appeal concluded that it was practically just to limit the relief to binding the successful widow to the transaction into which she believed she was entering with the bank.

Further, it is to be noted that under s.87(1D) it is appropriate to have regard to the conduct of the parties to the proceeding since the contravention of s.51AA occurred. The conduct of the respondent in relation to the applicant since at least mid 1995 affords it little assistance in securing the exercise of the Court's discretion in its favour under s.87(1A), s.80 or in equity.

In my view it is appropriate that the mortgage be set aside under s.87(2)(b) in so far as it imposes obligations on the applicant and mortgages her interest in her home to secure those obligations.

I have arrived at the result set out above under ss.51AA, 52 and 87(1A) of the TPA. I also arrive at the same result applying the Amadio principles.

However, the applicant's counsel has sought more. In substance she submitted that it was unconscionable, as against the applicant, for the respondent to hold any security in relation to her home. It was submitted that:

* the mortgage was of the joint interest in the home;

* the unconscionable and misleading conduct of the respondent led the applicant to participate as a mortgagor of that joint interest;

* as it is unconscionable, unreasonable and unjust for the respondent to retain its entitlement under the mortgage against the applicant's interest, that ought to lead to the conclusion that the whole of the respondent's entitlement in respect of the home should be set aside;

* although, upon his bankruptcy Gregg became a tenant in common by operation of law: see Re Holland; Ex Parte Official Trustee in Bankruptcy (1985) 5 FCR 165 at 166 and Re Francis; Ex Parte Official Trustee (1988) 19 FCR 149 at 153-4, that ought not to affect the applicant's entitlement to set aside the mortgage;

* the facts that Gregg is not a party, that he has not given evidence and that I cannot be satisfied that the mortgage was unconscionable as against him, do not preclude me from granting the relief sought.

In essence the applicant's case was said to entitle her to rescission, rather than partial rescission, of the mortgage.

The submission raises the issue of whether the claim in equity by only one joint proprietor of the matrimonial home ought to entitle that proprietor to have the mortgage set aside as against both joint proprietors. The reality is that the mortgage is of the interest of the mortgagors as joint tenants and accordingly required agreement to and execution of the mortgage by both the applicant and Gregg as joint tenants. The applicant's primary concern was and remains the liability of her home, rather than just her interest in it.

I have found the respondent's conduct in relation to the mortgage to have been misleading and unconscionable. If I grant no further relief in relation to Gregg's, now the trustee's, interest ("Gregg's interest") then the respondent is entitled to enforce the mortgage against that interest and compel the sale of the applicant's home unless it receives $113,100, and the interest thereon, payable to it by Gregg. Although that outcome may not be unconscionable as against Gregg, in the circumstances of the present case, for the reasons I have already set out it is unconscionable as against the applicant and her interest in and right to occupy her home.

It is helpful to consider the nature of the Court's jurisdiction to grant equitable relief. That matter was recently considered by the High Court in Vadasz v. Pioneer Concrete (SA) Pty. Ltd. (1995) 130 ALR 570 at 578-579 per Deane, Dawson, Toohey, Gaudron and McHugh JJ -

The appellant suggested that to set aside the guarantee in the present case only to the extent of past indebtedness was an invitation to others to misrepresent the terms of a contract because they would be no worse off than if they had revealed the true position. But that suggestion misconceives the ordinary function of civil remedies, including equitable relief. It may, depending upon whether the respondent would in fact have supplied its goods on the basis of the more limited guarantee which the appellant was prepared to give, be true to say that the orders made by the trial judge and upheld by the Full Court disadvantage the respondent only to the extent that it is unable to enjoy the benefit of its misrepresentation and is required to bear its own costs of the trial. Such a result would not, however, be either surprising or inappropriate. The concern of equity, in moulding relief between the parties, is to prevent, nullify, or provide compensation for, wrongful injury. If it appears that the other party would not have entered into the contract at all if the true position were known, the contract may be set aside in its entirety as in Amadio.

The appellant is "seeking the assistance of a court of equity and he who seeks equity must do equity". the court must look at what is practically just for both parties, not only the appellant. To enforce the guarantee to the extent of future indebtedness is to do no more than hold the appellant to what he was prepared to undertake independently of any misrepresentation. This approach has been taken in several cases. A similar approach was taken by the Court of Appeal in New South Wales to proceedings under the Contracts Review Act 1980 (NSW) in setting aside an "unjust" contract. There a guarantee was enforced against the guarantor to the extent that she believed she had agreed to. As Olsson J said in the present case: "the practical approach adopted by the learned trial judge was clearly justified, if not demanded, by the situation revealed by the evidence."

Relief under s.87(1A) is likewise compensatory. A court, in moulding relief under the section or in equity to prevent, nullify or provide compensation for wrongful injury ought to do so "in a manner which is practically just for both parties".

Considering the matter in that light the proper exercise of the Court's power under s.87(1A) and in equity is, in so far as the mortgage relates to Gregg's interest as a tenant in common, to achieve an outcome which -

(a) leaves undisturbed the personal liability of Gregg under his covenant in the mortgage that the mortgagors' liability in respect of the amount secured is "joint and several";

(b) limits the liability of the home as security under the mortgage to Gregg's present estate or interest as a tenant in common in the home but on the basis that the principal sum secured is no more than the $82,000 originally represented to the applicant;

(c) ensures that the amount secured by the mortgage to the respondent is proportionate to Gregg's estate or interest. Accordingly, if Gregg's estate or interest is an equal share the mortgage of that estate or interest will secure payment of $41,000 and interest thereon; if it is less, e.g. a one quarter share, then it will only secure $20,500 and interest thereon.

In arriving at that outcome I have taken into account all of the factors, to which I have referred above, in relation to the respondent's conduct but have desisted from setting aside the whole of the mortgage in relation to Gregg's interest. In my view, to do so might provide a greater benefit to the applicant than is warranted by the special circumstances of the present case. I have treated the outcome in respect of Gregg's interest differently to the outcome in respect of the applicant's interest as the applicant's case on unconscionability and misleading conduct is not identical in respect of both interests. In particular, absent evidence from Gregg or an application by his trustee in the proceeding, it is not unconscionable or practically unjust, as against the applicant and Gregg, for Gregg's interest in the home to stand as security for a share which is proportionate to Gregg's interest as set out above but on the basis that the security under the mortgage does not exceed the sum of $82,000. I have selected that sum as an appropriate ceiling as it represents the amount of the security which the applicant was led to believe was being offered as collateral for Tasram's loan.

I have also taken into account the problems the respondent's conduct has created for the applicant in respect of contribution by the other mortgagors and their properties. The outcome I have provided for can overcome, in an appropriate manner, the loss, or possible absence, of contribution rights of the applicant against the other mortgagors and their properties.

It is not possible to weigh up the matters to which I have referred with any precision but the overall outcome is one which is compensatory in a reasonable and "practically just" manner in all the circumstances.

I turn to the question of relief under s.80 of the TPA. The section confers jurisdiction on the Court to grant an injunction if the Court is satisfied a person has engaged or is engaging in conduct that constitutes or would constitute a contravention of, inter alia, Part IVA and V which include ss.51AA and 52.

The Court when exercising its statutory or equitable jurisdiction might grant injunctive relief to enjoin a respondent from engaging in unconscionable conduct or from seeking to enforce an unconscionable transaction. The Court of Appeal of the Supreme Court of Victoria (Brooking, Tadgell and Phillips JJ.A) in Petrik at 645 was prepared to grant an injunction restraining a mortgagee from enforcing its mortgage in an unconscionable manner. In that case the Court concluded that it was not unconscionable to enforce the mortgage to the limited extent originally intended and agreed to by the mortgagor ($20,000 and interest of $5,000) rather than for the amount of the mortgage as executed ($200,000).

I have also concluded that in obtaining and seeking to enforce and retain the benefit of the mortgage from the applicant and Gregg the respondent has engaged in misleading and unconscionable conduct.

In such circumstances the jurisdiction conferred under s.80 is enlivened. As is made clear in s.87(1A) the jurisdiction of the Court under that section is not to limit the "generality of section 80".

Accordingly, if the jurisdiction in s.80 is enlivened I see no reason why appropriate injunctive orders restraining the respondents from engaging in conduct which seeks to enforce or retain the benefit of the mortgage should not be granted. The factors that led the Court of Appeal to grant such relief in equity in Petrik apply equally to the jurisdiction conferred by s.80.

As was the case in Petrik at 645, it is appropriate to grant injunctions in accordance with my reasons for judgment unless the respondent by its counsel gives an undertaking in lieu of the injunction.

6.0 NON-JOINDER OF INTERESTED PERSONS

In the course of the hearing I raised with counsel for the applicant my concern that certain persons, including Tasram and Gregg's trustee in bankruptcy, had not been joined as parties to the proceeding but might be affected by the relief sought by the applicant.

At the conclusion of the hearing I granted the applicant leave to file an affidavit within 14 days -

"in relation to notice given to the other parties to the mortgage and any other interested persons of these proceedings and the attitudes of those parties to these proceedings".

Pursuant to that leave the applicant filed and served an Affidavit of her solicitor which disclosed that:

(a) the trustee had been given a copy of the Application, Statement of Claim and Defence;

(b) the trustee did not wish to be or to become a party to the proceeding;

(c) the solicitor representing Tasram and Messrs. Direen and Tremayne was aware of the proceeding and had attended Court during part of the hearing;

(d) no step had been taken by or on behalf of Tasram, Direen or Tremayne to indicate that they wished to become parties to the proceeding.

Since the filing of the Affidavit the solicitor for Tasram stated his intention to apply to be heard as amicus curiae on the ground that the Court should be made aware that Tasram denied that it was indebted to the respondent. The matter was relisted for mention. Upon being informed that the Court was aware of that matter the solicitor for Tasram made no application.

The relief that I have determined to be appropriate sets aside the mortgage as against the applicant and limits the liability of Gregg's interest in the home under the mortgage to an amount of principal which is proportionate to his interest and interest due under the mortgage on that amount. The effect of these orders, which leave undisturbed Gregg's personal liability, is unlikely to be substantial as far as the trustee or Gregg's creditors are concerned. The net result could leave the respondent as an unsecured creditor in respect of the debt to the extent it is not satisfied by the realisation of Gregg's estate or interest in the home. Further, without knowing the extent of Gregg's interest in the home I am unable to say whether it is likely to realise more or less than $41,000. However, it is likely that rights and obligations of the trustee will be directly affected by the relief, I have determined to be appropriate, although I cannot ascertain whether the net affect is adverse, beneficial or neither, as far as the trustee is concerned.

The relief can only affect Tasram if, contrary to its present position, it is liable under the mortgage as a principal debtor. However, clause 17(c) of the mortgage provides that as between Tasram and the mortgagors the mortgagors are a "surety" for Tasram which is the principal debtor under the mortgage. Accordingly, on the evidence before me the effect of the relief is only indirect -

* as it merely removes the applicant as a "surety" and limits the liability of the house as a collateral security;

* leaves undisturbed Tasram's liability (which it disputes) as a principal debtor.

The relief might also affect Direen, who is not a party to the mortgage, but is a mortgagor under another mortgage to secure the debt due to Tasram. But the effect of the relief is, at best, indirect in so far as it might affect contribution rights.

The issue for the Court is whether it is sufficient that notice of the proceeding has been given to those persons rather than to require that they be joined as parties.

The test in such circumstances was considered by the Full Court in News & Ors. Ltd. v. Australian Rugby Football League Ltd. & ors. [1996] FCA 1256; (1996) 139 ALR 193 at 297-301. The Court accepted that the principle to be applied was stated by Lord Diplock, delivering the opinion of the Judicial Committee of the Privy Council, in Pegang Mining Co. Ltd. v. Choong Sam (1969) 2MLJ 52 at 55-6 -

The cases illustrate the great variety of circumstances in which it may be sought to join an additional party to an existing action. In their Lordships' view one of the principal objects of the rule is to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity of being heard. To achieve this object calls for a flexibility of approach which makes it undesirable in the present case, in which the facts are unique, to attempt to lay down any general proposition which could be applicable to all cases.

It has been sometimes said as in Moser v. Marsden [1892] 1 Ch 487 and in Re IG Farbenindustrie AG [1944] Ch 41 that a party may be added if his legal interests will be affected by the judgment in the action but not if his commercial interests only would be affected. While their Lordships agree that the mere fact that a person is likely to be better of financially if a case is decided one way rather than another is not a sufficient ground to entitle him to be added as a party, they do not find the dichotomy between "legal" and "commercial" interests helpful. A better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?

The Full Court at 299 concluded that notice given to a non party before trial -

does not, and could not extend the jurisdiction of the court to make orders which offend the test stated in Pegang Mining. Absent an application for joinder by a defendant, or by a third party who claims to be directly affected by the proposed orders, it is for the party prosecuting the proceedings to choose who are the necessary parties to enable the court to make the orders sought. Generally speaking, to permit that party to transfer to others who might be affected by the outcome of the proceedings the responsibility in deciding whether or not they should apply to be joined could be productive of uncertainty and inconvenience.

Although certain players and coaches, who were directly affected by the injunctive orders made at trial in News Ltd., were given notice of the proceedings the Full Court set aside those orders on appeal as it concluded that those persons ought to have been joined as parties as the orders "affect" the rights and obligations of those persons in a "direct and substantial way". The Court added at 300 -

In our opinion, the non-joinder of the players and coaches, to the extent that orders made did so affect them, is not cured by the fact that they were permitted to make submissions after the delivery of judgment to the trial judge as to the form of the orders. By that stage, they had been deprived of the opportunity to participate in the trial of the issues that had already been determined in a way that the trial judge thought required redress in the terms of the orders made.

In applying these principles to the present case I note the observations of Lord Diplock that -

* the object of the joinder rule is to prevent injustice being done to a person whose rights will be affected by its judgment without that person being given an opportunity to be heard;

* to achieve that object calls for flexibility of approach which makes it undesirable to attempt to lay down any general proposition which could be applicable to all cases.

In the present case only the trustee is likely to be directly affected by the relief I have determined as appropriate. It is unlikely the trustee will be affected in a substantial way although the ultimate effect of the relief might be to increase the claim of the respondent as an unsecured creditor. I am satisfied that the trustee is aware of and understands his rights in relation to the proceeding and has decided, and stated to the applicant, that he does not wish to become a party. These circumstances make the present case distinguishable from News Ltd.

In my view the making of the orders I have determined to be appropriate in the circumstances without joining the trustee as a party, does not "offend the test stated in Pegang Mining".

Tasram and Direen stand in a different position. I am satisfied that their rights and obligations are not affected in a direct or a substantial way by the orders I propose to make. They have had notice of the proceeding, are aware of their rights and determined that they did not wish to be heard in the proceeding.

In the circumstances I am satisfied that it is not necessary or appropriate that I decline to grant relief on the ground of non- joinder of interested persons as parties.

7.0 IS THE PROCEEDING OUT OF TIME?

Section 87(1CA) provides:

(1CA) An application under sub-section (1A) may be commenced -

(a) in the case of conduct in contravention of Part IVA - at any time within 2 years after the day on which the cause of action accrued;

or

(b) in any other case - at any time within 3 years after the day on which the cause of action accrued.

The proceeding for relief under s.87(1A), in respect of contraventions of ss.51AA and 52, must be commenced within 2 and 3 years respectively from the day on which the cause of action accrued. The respondent submitted that the cause of action accrued when the mortgage was entered into on 4 June 1993. Accordingly, it is said, the proceeding, which was commenced on 13 June 1996, was out of time under s.87(1CA). Reliance was placed on the following passages in Demagogue.

Gummow J (at 43):

"Thus, whilst s.82 is concerned with the recovery of an amount representing the loss or damage, s.87 is concerned with compensation, whether in whole or in part, for loss or damage and with the reduction of loss or damage, and with the prevention of loss or damage which is likely to be suffered. In the phrase "likely to be suffered", the word "likely" speaks for a "real chance or possibility": Western Australia v. Wardley Australia Ltd. (1991) 30 FCR 245 at 261.

One significant distinction between ss.82 and 87 is the quia timet operation s.87. On the appeal to the High Court in Wardley Australia Ltd. v. Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 527:

"The Act draws a clear distinction in Pt VI between loss or damage which may be recovered under s.82 and the likelihood of loss or damage which may be prevented, or, if not prevented, reduced by one of the remedies under s.87."

Black CJ (at 33):

In these circumstances I consider it to be clear that the loss or damage contemplated by s.87(1A) is not limited to loss or damage in the s.82 sense but was intended to include the detriment suffered by being bound to a contract unconscionably induced.

Sections 87(1) and 87(1A) are part of the same scheme and cover much common ground. They can each be enlivened by a contravention of s.52 and the concept of loss and damage in each subsection must be the same.

In my view, the loss or damage for the purposes of both ss.87(1) and 87(1A) will include the detriment suffered by being bound to a contract induced by misleading or deceptive conduct in contravention fo s.52. Proof of loss or damage of the sort that would be an "amount of ... loss or damage" for the purpose of s.82 is not a prerequisite for the grant of relief under either subsection.

Cooper J (at 47):

In my opinion "loss or damage" in s.87(1) means no more than the disadvantage which is suffered by a person as the result of the act or default of another (Halsbury's Laws of England (4th ed), Vol 12 par 1102) in the circumstances provided for in the section.

In Demagogue their Honours were concerned with a breach of s.52, rather than s.51AA, and were not concerned with s.87(1CA). However, the passages to which I have referred were relied upon by the respondent as establishing that the relevant "detriment" was suffered by the applicant, or the "real chance" of loss was likely, when the applicant entered into the mortgage which I have found to have been an improvident transaction for the applicant. The judgment of Cooper J at 48 offers strongest support for that view. It was at that point of time, so it was said, that the cause of action accrued.

In the present case, the essence of the applicant's cause of action based on unconscionability, as propounded in Amadio and Louth, was the conduct of the respondent in procuring, accepting and retaining the benefit of the applicant's assent to the unconscionable transaction: see Deane J in Louth at 637. It was not until at least May 1995 that Voss had occasion to turn his mind to the fact that the mortgage differed significantly from the proposal to which he had agreed. Indeed, even at that point of time he was acting in accordance with and honouring the spirit of that proposal, rather than the mortgage, in discharging the homes of the Tremaynes and Direen from the mortgage on repayment of 60% of the valuations. It was not until about July 1995 that the respondent stated that it was taking a different course with the applicant in holding her to be "bound" to the terms of the mortgage rather than the proposal represented to the applicant. That step was an important element in the conduct I have found to be unconscionable.

Had the respondent recognised and accepted Fay's errors in July 1995 or treated or offered to treat the applicant in the same way as it treated Tremayne and Direen the applicant's case for unconscionability might have been a very different one.

When the respondent determined to hold the applicant to the mortgage she executed in 1995 a real chance of loss or detriment arose.

In all of these circumstances the cause of action under s.51AA for the relief sought under s.87(1A) accrued during 1995 and the proceeding is not out of time under s.87(1CA).

There is an alternative ground for the same conclusion. Returning to the words of s.87(1A) it is clear that the cause of action accrues when loss or damage has been or is likely to be suffered rather than when the unconscionable or misleading conduct occurs. The orders sought under s.87(1A) are to "prevent or reduce the loss or damage suffered or likely to be suffered"; that is an essential element in the cause of action. In GIO Australia Holdings Ltd. & Ors. v. Marks all of the members of the Court (Wilcox and Tamberlin JJ at 4 and Foster J at 47- 48) concluded that the cause of action for relief in respect of misleading conduct in contravention of s.52 does not arise if the only loss claimed is that of a mere disappointed expectation: see Gates v. City Mutual Life Assurance Society Limited [1986] HCA 3; (1986) 160 CLR 1. The decision reinforces the view that a cause of action in reliance upon s.87(1A) does not necessarily accrue when the transaction is entered into but accrues when loss and damage is suffered or is likely to be suffered.

On the evidence before me, prior to early to mid 1995 Tasram was not in default, was not disputing its liability and appeared to have the capacity to meet its loan obligations. All four properties and five mortgagors had "co-ordinate" liabilities and the risk of loss or damage to the applicant may be fairly described as a chance or possibility. After default by Tasram in 1995, the releases in respect of the Tremaynes and Direen and the decision to hold the applicant liable under her mortgage in accordance with its terms the chance or possibility certainly became a"real chance or possibility". In these circumstances, on the alternative ground the cause of action for relief under s.87(1A) accrued during 1995 and the proceeding was not out of time.

If I am wrong in my analysis of s.87(1CA) in relation to the facts of the present case and the cause of action accrued on 4 June 1993 that is of no avail to the respondent as the limitation period relates only to the statutory causes of action under s.87(1A) of the TPA and does not in terms affect the right in equity of the applicant to set aside the mortgage or to injunctive relief in equity and under s.80 of the TPA.

However, the respondent's counsel submitted that a limitation period is imposed by analogy. In that regard reliance is placed on Isaacs J in R. v. McNeil [1922] HCA 33; (1992) 31 CLR 76 at 100:

Where a court in Equity finds that legal right, for which it is asked to give a better remedy than is given at law, is barred by an Act of Parliament, it has no more power to remove or lower that bar than has a court of law. But where equity has created a new right founded on its own doctrines exclusively, and no Act bars that specific right, then equity is free.

and para 3415 of Meagher, Gummow and Lehane JJ Equity - Doctrines and Remedies 3rd Edition which is as follows:

Equity did apply the Statute of Limitations by analogy, thereby furnishing an illustration of the maximum that equity follows the law. As Lord Westbury said in Knox v. Gye (1872) LR 5 HL 656 at 674:

Where a court of Equity frames its remedy upon the basis of the common law, and supplements the common law by extending the remedy to parties who cannot have an action at common law, there the court of equity acts in analogy to the statute; that is, it adopts the statute as the rule of procedure regulating the remedy it affords. Where the remedy in equity is correspondent to the remedy at law, and the latter is subject to a limit in point of time by the Statute of Limitations, a court of Equity acts by analogy to the statute, and imposes on the remedy it affords the same limitation.

There are many other statements to the same effect. There are many illustrations of equity acting by analogy.

The submission is misconceived. As is made clear in the succeeding paragraph 3416 in Meagher, Gummow and Lehane, the equitable principle of applying the Statute of Limitations by analogy only applies when the statute in terms bars the equitable remedy. Section 51AA and s.87(1CA) have no such operation nor can I discern any such intention from the sections. The provisions extend, and are intended to extend, rather than limit, the remedies available for unconscionable conduct.

Further, as is pointed out in paragraph 3417 in Meagher, Gummow and Lehane the principle of imposing a limitation period by analogy, being an equitable one, will only apply when it is conscionable to do so. Allied to that principle is the notion of unconscientious reliance upon a legal right: see Wardley in the Full Court of the Federal Court at 238 and the cases there referred to. I cannot conceive of any reason why it is conscionable in the present case to require that the applicant's claim in equity for unconscionable conduct be brought within 2 years of the accrual of the cause of action merely because statutory claims under ss.51AA and 87(1A) have such a limitation. In the present case it was not until September 1994 that the applicant became aware of the terms of the mortgage and not until July 1995 that the respondent elected to enforce them against her. In those circumstances, which are by no means unusual, it would be unconscionable and an unconscientious reliance upon a right for the respondent or the Court to enforce a statutory time limit by analogy which resulted in the applicant's proceeding in equity being out of time. That is particularly so when there is no counterpart limitation period for a cause of action arising in equity.

Accordingly, for those reasons, I have concluded that s.87(1CA) does not prevent the grant of the relief sought in the present case.

Further, s.87(1CA) only applies to an application under s.87(1A). In terms and in its operative effect s.87 offers an additional remedy to that available under other sections such as ss.80 and 82: see Trade Practices Commission v. Milreis Pty. Ltd. and Others (1977) 14 ALR 623 and Poignand v. NZI Securities Australia Ltd. [1992] FCA 369; (1992) 109 ALR 213 per Gummow J. Section 82 contains its own limitation period (s.82(2)) but no such period is provided for in s.80. Accordingly, whether it is appropriate to grant an injunction under s.80 more than 2 or 3 years after a contravention of Part IVA or V has occurred appears to be a matter which might go to discretion rather than jurisdiction.

However, the respondent has submitted that -

* there is a line of authority which questions whether relief by way of damages can be granted under s.87 in circumstances where the claim for damages under s.82 is time barred: see Sent v. Jet Corporation of Australia Limited [1986] HCA 35; (1986) 160 CLR 540 and Keen Mar Corp. Pty. Ltd. v. Labrador Park Shopping Centre Pty. Ltd. (1988) ATPR 40-853 at 49,191 to 49,193;

* I should prefer that line of authority to that which states that the existence of an identical but statute barred remedy is only a factor to be considered in determining whether to exercise discretion to grant non-statute barred relief: see Fenech v. Sterling [1984] FCA 310; (1984) 57 ALR 98 and James v. Australian and New Zealand Banking Group Ltd. (1986) 64 ALR 347 at 395;

* as injunctive relief is specifically contemplated in s.87 the time bar in s.87(1C) should be treated as operating by analogy or legislative intention to s.80;

* that conclusion is reinforced in the present case by the fact that identical arguments are put and the same relief is sought under ss.80 and 87(1A) or (2).

The submission is misconceived. The jurisdiction, conferred by s.87(1A) is additional to that conferred under s.80, is expressed to not limit the generality of s.80 and is expressed to be compensatory. If a party wishes to enliven that jurisdiction that can only be achieved if the application to do so is commenced within the time provided in s.87(1CA).

The jurisdiction to grant "an injunction" conferred by s.80 arises only if the Court is satisfied that a person has engaged or is proposing to engage in conduct that constitutes or would constitute, inter alia, a contravention of Parts IV, IVA or V. The jurisdiction conferred is not expressed to be compensatory and arises irrespective of loss and damage. These distinctions are important. Section 80 has a clear public interest element which is absent in s.87(1A) which is limited to relief compensating an applicant who has suffered or is likely to suffer loss and damage. It is to be noted that the time limit in s.87(1CA) does not apply to the broader public interest compensatory provisions in s.87(1). For example there is no time limit in s.87 in respect of a claim for compensatory relief in respect of a contravention of Part IV.

The differences in wording, function and operation of ss.80 and 87(1A) make it quite inappropriate to imply a statutory time limit for relief under s.80 when there is nothing in the section which expressly or by implication warrants that course.

I would add that several significant amendments to s.87 have been made since the decisions relied upon by the respondents. However, given the conclusion I have arrived at on the inapplicability of the time limit in s.87(1CA) to s.80 it is unnecessary to consider the effect of the amendments on the authorities relied upon.

The respondent also submitted that the delay by the applicant in seeking relief is relevant to the discretion under s.80. However, for the reasons set out in the course of this judgment I am not satisfied that there was any delay or that there are any other discretionary considerations which should result in injunctive relief being refused.

Accordingly, irrespective of whether the additional remedies under s.87(1A) are unavailable by reason of s.87(1CA) the Court nevertheless has jurisdiction in equity and under s.80 to grant injunctive relief.

8.0 CONCLUSION

The conclusion I have reached is that -

* the respondent has engaged in misleading, deceptive and unconscionable conduct in relation to the mortgage;

* the applicant is entitled to relief under the TPA and in equity.

The relief that is appropriate is as follows -

* the mortgage be set aside in so far as it binds the applicant or mortgages the applicant's estate or interest in the home;

* the mortgage be varied to limit the security given to the respondent to the estate and interest in the home of Gregg (and now that of his trustee in bankruptcy) so that it secures a principal amount, not exceeding $82,000, proportionate to the interest of Gregg as outlined in these reasons;

* the mortgage be varied to secure interest due and unpaid to the date of judgment at the lower, rather than the higher, rate provided for in the mortgage but any interest due and unpaid after judgment shall be at the rate provided for under the mortgage;

* an injunction restraining the respondent from enforcing the mortgage in relation to the applicant or the applicant's or Gregg's interest in the home other than as security for the payment of principal and interest payable by Gregg but limited to Gregg's interest in the manner set out above.

Save as set out above the personal or other obligations of Gregg under the mortgage are to remain undisturbed.

I have provided that interest be payable at the lower rate as that is consistent with my conclusion that it is unreasonable for the respondent to have sought to retain the benefit of the mortgage up to judgment. In those circumstances it seems to me that it would be unconscionable for it to be entitled to enforce its security in respect of Gregg's interest in a manner which is likely to affect the applicant with respect to interest at the higher rate prior to judgment.

As the applicant has largely succeeded in her claim the respondent is to pay the applicant's taxed costs of and incidental to the proceeding.

The parties are directed to prepare Minutes of Orders to give effect to these Reasons for Judgment.

I certify that this and the preceding 81 pages are a true copy of the Reasons for Judgment of the Honourable Justice Merkel

Associate:

Date:

HEARD: 25, 26 and 27 November 1996

PLACE: Tasmania

JUDGMENT: 28 February 1997

APPEARANCES: Dr. J.A. Scutt instructed by Ms. A. Crotty of Anna Crotty Solicitors appeared for the applicant

Mr. P.W. Tree instructed by Mr. M. Chambers of Shields Heritage & Co. appeared for the respondent