FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Skeers [2007] FCA 1551

FINANCIAL SERVICES – mortgage broker engaged in conduct alleged to be unconscionable, misleading and deceptive – broker does not appear – whether declarations of contravention appropriate

Australian Securities and Investments Commission Act 2001 (Cth), ss 4(1), 5, 12BAB, 12BAA, 12CB(1), 12CB(2), 12CB(5), 12DA(1)

Australian Securities and Investments Commission Regulations 2001 (Cth), reg 2B

Australian Competition and Consumer Commission (ACCC) v Radio Rentals Ltd (2005) 146 FCR 292 cited

Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 cited

GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Pty Ltd (2001) 117 FCR 23 cited

Houghton v Arms (2006) 225 CLR 553 cited

IN THE MATTER OF TONADALE PTY LTD ACN 065 214 619 AND KELVIN MARK SKEERS

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v KELVIN MARK SKEERS and TONADALE PTY LTD ACN 065 214 619

ACD 27 OF 2006

GYLES J

9 OCTOBER 2007

SYDNEY (VIA VIDEO LINK TO CANBERRA; HEARD IN CANBERRA)

IN THE MATTER OF TONADALE PTY LTD ACN 065 214 619 AND KELVIN MARK SKEERS

THE COURT:

1.                  Declares pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth)that the first defendant in trade or commerce, in connection with the supply of financial services to Mr Aj Biega (Biega),engaged in conduct that was, in all of the circumstances, unconscionable and in contravention of s 12CB(l) of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) in that the first defendant on or about 5 August 2004 prepared and submitted a loan application to Pepper Homeloans Pty Limited (Pepper Homeloans) on behalf of Biega (First Loan Application)in circumstances where the first defendant knew that:

(a)        the information contained in the First Loan Application was not correct;

(b)        at the time the First Loan Application was lodged with Pepper Homeloans it was likely that Biega had insufficient income to enable him to meet all loan repayments under the loan if granted;

(c)        if the loan sought in the First Loan Application was granted it was likely that Biega would have to sell his assets to repay the loan.

2.        Declares pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth)that the first defendant in trade or commerce, in connection with the supply of financial services to Biega, engaged in conduct that was, in all of the circumstances, unconscionable and in contravention of s 12CB(1) of the ASIC Act,in that the first defendant on or about 23 November 2005 prepared and submitted a loan application to Pepper Homeloans on behalf of Biega (Second Loan Application) in circumstances where the first defendant knew that:

(a)        the information contained in the Second Loan Application was not correct;

(b)        at the time the Second Loan Application was lodged with Pepper Homeloans it was likely that Biega had insufficient income to enable him to meet all loan repayments under the loan if granted;

(c)        if the loan sought in the Second Loan Application was granted it was likely that Biega would have to sell his assets to repay the loan.

3.        Declares pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) that the first defendant in trade or commerce, engaged in conduct in relation to financial services that was misleading or deceptive or was likely to mislead or deceive in contravention of s 12DA(1) of the ASIC Act, in that the First Defendant between mid-July to 5 August 2004 represented to Pepper Homeloans that they had been informed by Biega that:

(a)        Biega had an income of $75,000 per annum;

(b)        Biega had full time employment;

(c)        Biega owned furniture that he estimated as being worth $100,000;

(d)        Biega owned computer and art equipment which he estimated as being worth $40,000; and

(e)        Hussey and Hussey were Biega’s accountants,

when if fact Biega had not informed the first defendant of any of these matters.

4.         Declares pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth)that the first defendant in trade or commerce, engaged in conduct in relation to financial services that was misleading or deceptive or was likely to mislead or deceive in contravention of s 12DA(1) of the ASIC Act, in that the first defendant on or about 23 November 2005 represented to Pepper Homeloans that they had been informed by Biega that:

(a)        Biega had an income of $10,000 per month;

(b)        Biega was in full time employment;

(c)        Biega owned furniture which he estimated as being worth $120,000;

(d)        Biega owned antiques and memorabilia which he estimated as being worth $100,000; and

(e)        Hussey and Hussey were Biega’s accountants,

when in fact Biega had not informed the first defendant of any of these matters.

5.        Declares pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth)that the first defendant in trade or commerce, engaged in conduct in relation to financial services that was misleading or deceptive or was likely to mislead or deceive in contravention of s 12DA(1) of the ASIC Act, in that the first defendant on or about 5 August 2004 represented to Biega that:

(a)        they would only include, in any loan application they lodged on Biega’s behalf, details of Biega’s income, assets and employment status consistent with the information provided to them by Biega,

when in fact

(b)        the first defendant intended to, and did in fact, include in the First Loan Application details of Biega’s income, assets and employment status which were different from the information provided to them by Biega.

6.         Declares pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth)that the first defendant in trade or commerce, engaged in conduct in relation to financial services that was misleading or deceptive or was likely to mislead or deceive in contravention of s 12DA(1) of the ASIC Act, in that the first defendant between early November and 23 November 2005 represented to Biega that:

(a)        they would only include, in any loan application they lodged on Biega’s behalf, details of Biega’s income, assets and employment status consistent with the information provided to them by Biega,

when in fact

(b)        the first defendant intended to, and did in fact, include in the Second Loan Application details of Biega’s income, assets and employment status which were different from the information provided to them by Biega.

7.         Orders that the first defendant pay the plaintiff’s costs of the proceedings.

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

IN THE MATTER OF TONADALE PTY LTD ACN 065 214 619 AND KELVIN MARK SKEERS

REASONS FOR JUDGMENT

1                     On 3 October 2007 I made declarations and orders against Tonadale Pty Ltd, the second defendant.  That company was represented and consented to the relief granted.  Kelvin Mark Skeers, the first defendant, has not appeared on the hearing.  The claims against the first defendant are undefended.  They arise out of the same facts as were relevant to the case against the second defendant.  Indeed, the second defendant accepted liability for the actions of the first defendant.  Nonetheless, because declarations are sought that are novel, I reserved in order to consider whether there is a proper basis for those declarations.  However, I have not approached that question as if this were a contested hearing.  On that basis, I am satisfied that declarations and the order for costs are appropriate.

2                     Counsel for the plaintiff, Australian Securities and Investments Commission (ASIC) made detailed submissions in writing as to the facts proved on the evidence and as to the applicable law and supplemented those submissions orally at the hearing and by two subsequent memoranda.  I am satisfied that the factual content of the declarations sought is well founded.  I should say something, albeit briefly, about the law. 

3                     Two general points can be made.  First, each of s 12CB(1) and s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (the Act) prohibits certain conduct by “a person” which, in the absence of any special definition, includes a natural person.  As all of the conduct in this case occurred in the Australian Capital Territory, the sections apply according to their terms (s 4(1) together with the definitions of “Territory” and “this jurisdiction” in s 5 of the Act).  Second, there is no difficulty in each of the first and second defendants being responsible for the conduct of the first defendant (Houghton v Arms (2006) 225 CLR 553).

Declarations 1 and 2 – section 12CB

4                     Section 12CB(1) provides as follows:

“A person must not, in trade or commerce, in connection with the supply or possible supply of financial services to a person, engage in conduct that is, in all the circumstances, unconscionable.”

5                     There is no doubt that what occurred was “in trade or commerce”.  “Financial service” is defined in s 12BAB of the Act.  That, in turn, incorporates the definition of “financial product” in s 12BAA.  A “credit facility” (within the meaning of the regulations) is such a product (s 12BAA(7)(k)).  Regulation 2B of the Australian Securities and Investments Commission Regulations 2001 (Cth) defines “credit facility” in a manner that is apt to pick up what took place between the second defendant, Mr Biega and Pepper Homeloans.

6                     The conduct was, in all the circumstances, “unconscionable”.  That term, in this section, is not limited as it is in s 12CA by a connection with the unwritten law (cf s 51AA of the Trade Practices Act 1974 (Cth); Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51; GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Pty Ltd (2001) 117 FCR 23 at [113]–[126]).  Section 12CB is the equivalent of s 51AB of the Trade Practices Act (as to which, see, Australian Competition and Consumer Commission (ACCC) v Radio Rentals Ltd (2005) 146 FCR 292 at [23]–[24]).  The width of the concept is underlined by the factors referred to in s 12CB(2).

7                     It may be accepted for present purposes that, as the loan in question was required to complete the purchase of a private residence, the financial services were of a kind ordinarily acquired for personal, domestic or household use within the meaning of s 12CB(5).

Declarations 3, 4, 5 and 6 – section 12DA(1)

8                     Section 12DA(1) provides as follows:

“A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive.”

9                     It follows from what has been said that the conduct was in trade or commerce and was in relation to financial services.  In my opinion, it was misleading and deceptive and was likely to mislead or deceive each of Pepper Homeloans and Mr Biega in the respects alleged.

Conclusion

10                  Declarations 1 to 6 (inclusive) and an order for costs will be made.

Associate:

Dated:         9 October 2007