Kenxue Pty Ltd ATF The Susan Investment Trust v Westpro Finance Pty Ltd [2020] NSWSC 1146

Supreme Court New South Wales

Medium Neutral Citation: Kenxue Pty Ltd ATF The Susan Investment Trust v Westpro Finance Pty Ltd [2020] NSWSC 1146 Hearing dates: 12, 13, 14, 15, 18 and 19 May 2020 Decision date: 10 July 2020 Jurisdiction: Equity Before: Rein J Decision: See [145] Catchwords: CONTRACTS — Breach of contract — Consequences of breach – the Plaintiff entered into contract to loan $6M to the borrower ("YIC") for the purchase of a commercial property, a loan which was arranged through the Defendants – the Plaintiff alleged that the First Defendant, who was retained by the Plaintiff to act on its behalf in the transaction (being of a type with which the Plaintiff was, to the knowledge of the Defendants, entirely unfamiliar), breached its obligations under contract – HELD: the First Defendant was retained by the Plaintiff notwithstanding that the First Defendant was also retained by YIC – the First Defendant breached the express and implied terms of the contract which led the Plaintiff to advance the monies to YIC, and which included a term that the First Defendant would endeavour to ensure that the Plaintiff obtained the same protection that a bank would obtain. CONTRACTS — Misleading conduct under statute — Misleading or deceptive conduct — representations that the property was worth $20M and that the Plaintiff could not go wrong in lending $6M – failing to pass on to the Plaintiff a copy of the sale contract which showed the purchase price as $4.5M – failing to warn the Plaintiff that YIC had no established means of meeting the interest payments and the repayment of the loan without sale of the property – failing to disclose that there was no reasonable basis to rely on the valuation obtained and that it was imprudent to rely on the valuation – whether advice constitutes misleading or deceptive conduct by silence – the Plaintiff (i.e. the lender) and YIC (i.e. the borrower) were both clients of the Second Defendant – HELD: the First Defendant, through the Second Defendant, engaged in misleading and deceptive conduct which led the Plaintiff to advance monies to the borrower. EQUITY — Unconscionable conduct — Special disability or disadvantage — Other party's knowledge – HELD: the First Defendant, through the Second Defendant, engaged in unconscionable conduct by taking advantage of the Plaintiff's lack of experience and by failing to pass on material matter known to the Second Defendant and making statements implying loan was a prudent investment – the unconscionable conduct was a material factor in the Plaintiff proceeding with the loan. CIVIL PROCEDURE — Hearings — Adjournment – Defendants made an application to vacate the hearing on the basis it was to be conducted via AVL due to Covid-19 restrictions – HELD: application to vacate hearing refused, consideration being given to various factors: see [14]. EVIDENCE — Opinion evidence — Exceptions — Expert opinion – admissibility of evidence of banking practices contained in the expert report relied on by the Plaintiff – the expert has many years' of relevant experience and gave evidence of industry practice – HELD: the expert's report based on extensive experience of practice in the relevant area is admissible evidence of banking practice and should be received. AGENCY — Liability of agent — For negligence and breach of duty — Solicitor and client – obligations of a solicitor retained to draft security documents – HELD: the solicitor's retainer was very limited. There was no negligence established and, in any event, the just and equitable apportionment of liability between a negligent solicitor and a defendant who deliberately withheld information and acted as the Defendants had done would require the entire liability to be borne by the Defendants. CONTRACTS — Remedies — Damages – where case of alternative use of money is advanced – Plaintiff advanced evidence (including expert reports) that the money would have been invested into commercial real estate in the Penrith or proximate region – Defendants did not object to the expert reports – whether loss of use of money claim is available where no specific purchase was in contemplation at time of impugned transaction– if loss of use of money claim is available, whether the Plaintiff could recover both interest under s 100 of the Civil Procedure Act 2005 (NSW) and the profit that would have been made on real estate that the Plaintiff would have invested in if it had not loaned the monies – HELD: Plaintiff established the money would have been invested in real estate in the Penrith or proximate region and the likely return from such investment – the Court allowed 20% for vicissitudes – question raised as to whether Plaintiff is entitled to both loss of use of money claim (real estate investment) and s 100 interest – held the Plaintiff was not entitled to both – the damages issue referred to above was identical in relation to the misleading and deceptive conduct claim and unconscionable conduct claim. Legislation Cited: Civil Liability Act 2002 (NSW) Civil Procedure Act 2005 (NSW) Competition and Consumer Act 2010 (Cth) Evidence Act 1995 (Cth) Trade Practices Act 1974 (Cth) Cases Cited: ACCC v Dukemaster Pty Ltd [2009] FCA 682 AGC Industries Pty Ltd v Karara Mining Ltd [2019] WASC 140 APS Satellite Pty Ltd (formerly known as "SkyMesh Pty Ltd") v Ipstar Australia Pty Ltd [2016] NSWSC 1898 ASIC v Kobelt [2019] HCA 18; (2019) 368 ALR 1 Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1 Barker v GE Mortgage Solutions Limited [2013] QCA 137 Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282 Cardtronics Australasia Pty Ltd v FX Investments Australia Pty Ltd [2020] FCA 218 CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd [2004] VSCA 232 Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226 Coote v Kelly; Northam v Kelly [2016] NSWSC 1447 County Securities Pty Limited v Challenger Group Holdings Pty Limited [2008] NSWCA 193 Custom Credit Corporation Ltd v Lynch [1993] 2 VR 469 David v David [2009] NSWCA 8 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; (1992) 110 ALR 608 Esso Petroleum Company Ltd v Mardon [1976] EWCA Civ 4; [1976] QB 801 F Gliksten & Son Ltd v State Assurance (1922) 10 Ll L Rep 604 Gambro Pty Ltd v Fresenius Medical Care Australia Pty Ltd [2007] FCA 1828; (2007) 245 ALR 15 Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1 Gestmin SGPS S.A. v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm) Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 Grincelis v House (2000) [2000] HCA 42; 201 CLR 321 Hill End Gold Ltd v First Tiffany Resource Corporation [2011] NSWCA 276 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 Ipstar Australia Pty Ltd v APS Satellite Pty Ltd [2018] NSWCA 15; (2018) 356 ALR 440 Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) 46-054 La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd [2011] FCAFC 4; (2011) 190 FCR 299 Lauvan Pty Ltd v Bega [2018] NSWSC 154; (2018) 330 FLR 1 Liao v LNG Properties Pty Ltd [2019] NSWSC 1846 Lloyd's Non-Marine Underwriters v Lawlor et al. (1997) 167 DLR (4th) 2 Mal Owen Consulting Pty Ltd v Ashcroft [2018] NSWCA 135; (2018) 97 NSWLR 1163 Manwelland Pty Ltd v Dames & Moore Pty Ltd [2001] QCA 436 McLean v Sydney Water Corporation [2001] NSWCA 122 MGICA (1992) Ltd (formerly MGICA Ltd) v Kenny & Good Pty Ltd and Kenny (1996) 140 ALR 313 MGM Bailey Enterprises Pty Ltd v Austin Australia Pty Ltd [2002] NSWSC 259 Micarone v Perpetual Trustee (1999) 75 SASR 1 Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 MPB (SA) Pty Ltd v Gogic [1991] HCA 3; (1991) 171 CLR 657 National Australia Bank Limited v Paul Burness in his capacity as Trustee of the Bankrupt Estate of Mark William Bradley [2007] NSWSC 247 National Australia Bank Ltd v Smith [2014] NSWSC 1605 Nominal Defendant v Cordin [2017] NSWCA 6 Octaphon Pty Ltd v Esanda Finance Corp Ltd (unreported, NSWSC, 3 February 1989) Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; (2016) 333 ALR 569 Permanent Trustee Co Ltd v O'Donnell [2009] NSWSC 902 Perpetual Trustees Australia Ltd v Schmidt [2010] VSC 67 Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 77 ALJR 768 Richtoll Pty Ltd v WW Lawyers Pty Ltd (in Liquidation) [2016] NSWSC 438 Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 Smart v AAI Ltd; JRK Realty v AAI Ltd (No 2) [2015] NSWSC 621 Snowden v Australia Mortgage Assist Pty Ltd [2019] NSWSC 1799 South Australia v Johnson (1982) 42 ALR 161 St George Bank Ltd v Quinerts Pty Ltd [2009] VSCA 245; (2009) 25 VR 666 Sweetman v Bradfield Management Services Pty Ltd [1993] FCA 907; (1994) ATPR 41-290 Tran v Perpetual Trustees Victoria Ltd [2012] NSWSC 1560 Westgyp Pty Ltd v Northline Ceilings Pty Ltd [2018] WASC 244 Texts Cited: Miller, Russel V, Miller's Australian Competition & Consumer Law Annotated (Thomson Reuters, 42nd ed, 2020) Walmsley, S, Abadee, A & Zipster, B (eds), Professional Liability in Australia (Lawbook Co, 2nd ed, 2007) Category: Principal judgment Parties: Kenxue Proprietary Limited as trustee for the Susan Investment Trust (Plaintiff) Westpro Finance Pty Limited (First Defendant) Andre Kemp (Second Defendant) Representation: Counsel: Mr D Williams SC with Mr N Riordan (Plaintiff) Mr M McCulloch SC with Mr R Notley (First and Second Defendants)