New South Wales Supreme Court CITATION : Bahadori & 2 Ors v Permanent Mortgages & 3 Ors [2007] NSWSC 79 HEARING DATE(S) : 7 February 2007 JUDGMENT DATE : 16 February 2007 JURISDICTION : Common Law Division - Administrative Law List JUDGMENT OF : Associate Justice Harrison DECISION : (1) The appeal is dismissed; (2) The decision of Senior Tribunal Member Durie dated 2 May 2006 is affirmed; (3) The summons filed 13 June 2006 is dismissed; (4) The plaintiffs are to pay the defendants' costs as agreed or assessed. CATCHWORDS : Appeal from CTTT: whether acceptance of letter of offer constitutes a contract, interpretation - "reason to believe" s 11(2) of the Consumer Credit Code Consumer Trader and Tenancy Tribunal Act 2001 (NSW) ss 67 Consumer Credit Act (New South Wales) - s 5 LEGISLATION CITED : Consumer Credit Act of Queensland Oaths Act 1900 Consumer Credit Code - s 11 Consumer Credit (New South Wales) Regulations Chapman v Taylor & Ors; Vero Insurance Ltd v Taylor & Ors [2004] NSWCA Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981) 149 CLR 337 Dale v Nicholls Constructions Pty Limited [2003] QDC 453 Helmos Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235 CASES CITED : Jonsson v Arkway Pty Limited (2003) 56 NSWLR 451 Kalokerinos & Anor v HIA Insurance Services P/L & Anor [2004] NSWCA 312 Linkenholt Pty Ltd v Quirk [2000] VSC 166 Masters v Cameron (1954) 91 CLR 353 Park Avenue Pty Limited v Boon [2001] NSWSC 700 Rafiqi & Anor v Wacal Investments Pty Limited (1998) ASC 155-024 Navid Bahadori, Monir Bahadori & Khosrow Bahadori - Plaintiffs Permanent Mortgages Pty Limited - First Defendant PARTIES : 10 Conway Avenue, Rose Bay Pty Ltd - Second Defendant Super City Finance Pty Ltd - Third Defendant Consumer, Trader & Tenancy Tribunal - Fourth Defendant FILE NUMBER(S) : SC 30081/2006 Mr J Stoljar - Plaintiffs COUNSEL : Mr S Jacobs - First Defendant Mr A Rogers - Second Defendant Legal Aid Commission of NSW - Plaintiffs SOLICITORS : Kells, The Lawyers - First Defendant R L Kremnizer & Co - Second Defendant Crown Solicitor, Submitting Appearance - Fourth Defendant LOWER COURT JURISDICTION : Consumer Trader and Tenancy Tribunal of NSW LOWER COURT FILE NUMBER(S) : COM 04/52375; 04/55743; 04/55476; 05/32128 LOWER COURT JUDICIAL OFFICER : Senior Tribunal Member Durie LOWER COURT DATE OF DECISION : 2 May 2006 LOWER COURT MEDIUM NEUTRAL CITATION : [2006] NSWCTTT 248 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADMINISTRATIVE LAW LIST ASSOCIATE JUSTICE HARRISON FRIDAY, 16 FEBRUARY 2007 30081/2006 - NAVID BAHADORI & 2 ORS v PERMANENT MORTGAGES PTY LIMITED & 3 ORS JUDGMENT (Appeal from CTTT: whether acceptance of letter of offer constitutes a contract, interpretation – "reason to believe" s 11(2) of the Consumer Credit Code) 1 HER HONOUR: By summons filled 13 June 2006 the plaintiffs seek an order setting aside the whole of the judgment of the Consumer Trader and Tenancy Tribunal (the Tribunal) dated 2 May 2006 and remitting the matter to the Tribunal to be dealt with according to law. The plaintiffs in this matter are Navid Bahadori, Monir Bahadori, and Khosrow Bahadori. The defendants in this matter are Permanent Mortgages Pty Ltd, 10 Conway Avenue Rose Bay Pty Ltd, Super City Finance Pty Ltd, and the Consumer Trader and Tenancy Tribunal (CTTT). For convenience, I shall refer to the parties by description. I shall refer to the Bahadoris as the borrowers. Likewise, I shall refer to Permanent Mortgages Pty Limited and 10 Conway Avenue, Rose Bay as the lenders. Super City Finance Pty has not played any active role before the Tribunal or on this appeal. The CTTT filed a submitting appearance. Grounds of Appeal 2 The grounds of appeal are that (1) the Tribunal erred in concluding that (a) the letters of 13 November 2002 from Messrs R L Kremnizier to the plaintiff's finance broker Super City Finance, advising that finance in the form of loan advances of $338,000 and $52,000 respectively had been approved; and (b) acceptance of those offers had been made by the plaintiffs on 13 November 2002 by the signing of those letters; (2) the Tribunal erred in concluding that there were no credit until the mortgages of 28 November 2002 were settled; (3) the Tribunal erred in concluding that s 11(3) of the Consumer Credit Code (the Code) requires an objective test in determining the purpose of the loan; and that the relevant test is what a reasonable person standing in the shoes of a credit provider would have understood to be the predominant purpose for which credit was provided; (4) the Tribunal erred in finding that when determining the purpose of the provision of the credit in s 11(3) of the Code, it was not appropriate to consider what the money was used for and it was not important to look at the substance of the transaction in the context of its performance; (5) the Tribunal erred in concluding that the business purpose declarations of 15 November 2002 complied with the form required in regulation 10 of the Consumer Credit (New South Wales) Regulations; (6) the Tribunal erred in failing to consider that in making the business purpose declarations as statutory declarations pursuant to the Oaths Act 1900 the business purpose declarations were given a whole new effect; that is to say, a borrower would be discouraged from submitting that s.11(3) of the Code applies because in order to do so the borrower would have to admit to making a false declaration under Oaths Act 1900; (7) the Tribunal erred in concluding that it did not have jurisdiction to hear the application under the Code. The plaintiffs contend that the Tribunal should have found that the credit contracts and related mortgages the subject of the proceedings, were credit contracts and mortgages to which the Code applied and, accordingly, that the Tribunal had jurisdiction to hear the application before it. 3 The issue before the Tribunal was whether it had jurisdiction to hear the matter. Senior Member Durie held that the credit contracts into which the Applicants entered are not within the Consumer Credit Code 1995 and that therefore this Tribunal does not have jurisdiction to hear these applications under that Code. 4 These grounds can be reduced to four. They are firstly, were the declarations made "before entering into the contract" for the purposes of section 11(2) of the Code?; secondly, did the credit providers know or have reason to believe within the meaning of section 11(3) at the time the Declarations were made that the credit was in fact being applied wholly or predominantly for personal, domestic or household purposes; thirdly, even if the Declarations were ineffective, was the credit "provided or intended to be provided wholly or predominantly for personal, domestic or household purposes" within the meaning of section 6(1)(b) of the Code, such that the Code applied, and lastly, were the declarations substantially in compliance with the Credit Code Regulations at Clause 10. The appeal 5 Section 67 of the Consumer Trader and Tenancy Tribunal Act 2001 (NSW) (the Act) allows for an appeal to be made to this court on a question with respect to a matter of law. A reference to a matter of law includes a reference to a matter relating to the jurisdiction of the Tribunal. The onus lies on the plaintiff to demonstrate that there has been an error with respect to a matter of law. 6 The width of s 67 was discussed in Chapman v Taylor & Ors; Vero Insurance Ltd v Taylor & Ors [2004] NSWCA 456. Hodgson JA (with whom Beazley and Tobias JJA agreed) stated succinctly [at para 33]: "… in my opinion, to establish an error of law by the Senior Member, it was necessary to show that he applied a wrong principle of law. That could be shown either from what he said, or because the ultimate result, associated with the facts that he expressly or impliedly found, indicates that he must have applied the wrong principle of law". 7 See also Kalokerinos & Anor v HIA Insurance Services P/L & Anor [2004] NSWCA 312 at paragraphs [39], [40], [41], [47] and [59]. 8 Section 67(3) of the Act provides that, after deciding the question, the subject of an appeal, the court may affirm the decision of the Tribunal, or it may make an order in relation to the proceedings in which the question arose as, in its opinion, should have been made by the Tribunal, or may remit its decision on the question to the Tribunal and order a rehearing of the proceedings by the Tribunal. The Consumer Credit Code 9 Before I deal with these issues it is helpful to set out some of the provisions of the Code. The Code appears as an appendix to the Consumer Credit Act of Queensland. It obtains force in NSW from the Consumer Credit (New South Wales) Act - s 5. 10 A "credit contract" is defined in s 5 of the Code as follows: "For the purpose of this Code, a "credit contract" is a contract under which credit is or may be provided, being the provision of credit to which this Code applies." 11 Schedule 1 to the Code contained a definition of "contract" as follows: ""Contract" includes a series of combination of contract, or contract and arrangements." 12 Section 6 sets out the transactions to which the Code applies and reads: "6 Provision of credit to which this Code applies (1) This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of pre-contractual obligations) is proposed to be entered into- (a) the debtor is a natural person ordinarily resident in this jurisdiction or a strata corporation formed in this jurisdiction; and (b) the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes; and (c) a charge is or may be made for providing the credit; and (d) the credit provider provides the credit in the course of a business of providing credit or as part of or incidentally to any other business of the credit provider. (2) If not all the debtors under a credit contract ordinarily reside, or are strata corporations formed, in this jurisdiction, this Code applies only if credit is first provided under the contract in this jurisdiction. (3) If this Code applies to the provision of credit (and to the credit contract and related matters)- (a) this Code applies in relation to all transactions or acts under the contract whether or not they take place in this jurisdiction; and (b) this Code continues to apply even though the debtor ceases to be ordinarily resident in this jurisdiction. (4) For the purposes of this section, investment by the debtor is not a personal, domestic or household purpose. (5) For the purposes of this section, the predominant purpose for which credit is provided is- (a) the purpose for which more than half of the credit is intended to be used; or (b) if the credit is intended to be used to obtain goods or services for use for different purposes, the purpose for which the goods or services are intended to be most used." 13 Section 11 reads: "11 Presumptions relating to application of Code (1) In any proceedings (whether brought under this Code or not) in which a party claims that a credit contract, mortgage or guarantee is one to which this Code applies, it is presumed to be such unless the contrary is established. (2) Credit is presumed conclusively for the purposes of this Code not to be provided wholly or predominantly for personal, domestic or household purposes if the debtor declares, before entering into the credit contract, that the credit is to be applied wholly or predominantly for business or investment purposes (or for both purposes). (3) However, such a declaration is ineffective for the purposes of this section if the credit provider (or any other relevant person who obtained the declaration from the debtor) knew, or had reason to believe, at the time the declaration was made that the credit was in fact to be applied wholly or predominantly for personal, domestic or household purposes. For the purposes of this subsection, a relevant person is a person associated with the credit provider or a finance broker (or a person acting for a finance broker) through whom the credit was obtained. (4) A declaration under this section is to be substantially in the form (if any) required by the regulations and is ineffective for the purposes of this section if it is not." (1) Were the declarations made " before entering into the contract " for the purposes of section 11(2) of the Code? 14 The argument before the Senior Tribunal Member centred around whether the signing of documents dated 13 November 2002 by borrowers constituted a contract between the parties as discussed in Masters v Cameron (1954) 91 CLR 353. The significance of this argument is that if this document is a contract, the subsequent declaration is not valid and therefore the Code applies and the Tribunal has jurisdiction. 15 Masters has been helpfully summarised recently in Helmos Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235 at [55]-[59] where Young CJ in Eq recapitulates: "55 As is well known, the High Court in Masters v Cameron (1954) 91 CLR 353 at 360, said that cases of the present type may belong to one of three classes. The three classes set out were: 1. Where the parties have reached final agreement on the terms of their contract and agree to be immediately bound but wish to restate those terms in a fuller or more precise way in a formal document; 2. Where the parties have reached final agreement on all the terms and intend not to depart in any way from them but the performance of some part of the contract is made conditional on the execution of a formal contract; 3. Where the parties intend there not to be a concluded contract unless and until a formal document is executed. 56 The vital question is always what the parties intended by the words they have used. In a case where the parties have expressly or impliedly indicated that there will be a further agreement, it is a question of construction whether the execution of a further contract is a condition of the bargain or else is merely an expression of the desire of the parties as to how their transaction will be completed: Von Hatzfeldt-Wildenburg v Alexander [1912] 1 Ch 284, 289. Each case turns on its own facts. 57 In Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622, 628, MH McLelland J said: "There is in reality a fourth class additional to the three mentioned in Masters v Cameron ... namely, '... one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.' " The words quoted derive from Sinclair, Scott & Co v Naughton (1929) 43 CLR 310 at 317. 58 McLelland J's decision was affirmed in this Court as GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631. The court there consisted of Kirby P, Glass and McHugh JJA. The lastmentioned gave the leading judgment with which the other two judges noted their agreement. 59 At page 634, McHugh JA said: "The decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of surrounding circumstances … . If the terms of a document indicate that the parties intended to be bound immediately, effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction. Even when a document recording the terms of the parties' agreement specifically refers to the execution of a formal contract, the parties may be immediately bound." 16 The lender submitted that the document was not a contract within the three categories set out in Masters. According to the lender it was the formation of the contract that the parties would proceed further with their negotiations. The borrowers submitted that by accepting the terms set out in the letter dated 13 November 2002 a contract was formed. 17 The Tribunal Member's reasoning can be found at paragraphs (s) to (t) of his well crafted reasons, which state: "s. I accept the submissions of Mr Titterton in relation to the various categories of contract discussed in Masters v Cameron, but not that they lead to the conclusion for which he contends. If he were correct, in the event that the mortgagees did not advance the monies, the Bahadoris could have gone to Equity and obtained orders for specific performance (subject to their being able to pay the fees due to the mortgagees). Could they have done so? t. I consider that they could not. Firstly, the offer was expressed to be indicative only. There were several matters which could have been changed between 13 November and the final settlement. What rate of interest would Equity have declared was that to be paid? Next, and perhaps more telling, is that the Applicants would have had to provide a satisfactory valuation of the property. In that context, satisfactory must have meant satisfactory to the mortgagees. How could an Equity judge have exercised this task? The situation is not analogous to the withholding of consent to assignment to a lease." 18 The difficulty with the borrowers' argument is that the letter (Bundle p26) is that it is a letter by R L Kremnizer &Co, solicitors. The letter is addressed to Deb Pahari at Super City Finance (the broker). The subject of the letter is expressed to be "Bahadori". It is a six page document and commences: "We advise that the following application for finance has been approved subject to the following indicative terms and conditions: 1. Loan Advance: The lesser of $52,000.00 or 75.00% of valuation. 2. Interest Rate: 19% reducing to 16.5% upon payment within seven days, monthly on the total amount to be advanced. The Lender reserves the right to vary this rate at any time prior to settlement of this advance. 3. Term: 12 months. 4. Security: 2nd Mortgage over the property known as 69 Mearants Lane, Glenwood." 19 The following pages address another 19 items. The borrowers were required to sign every page. Towards the end of the letter it relevantly states: "This offer is open for forth-eight (48) hours, but in any event the Lender reserves the right to withdraw this letter of offer prior to acceptance, prior to the forty-eight hours. … WE hereby accept the above terms and conditions. Cheque for $935.00 is enclosed being the Deposit and Valuation Fee as mentioned above." 20 The identity of the Lender is not revealed anywhere in the letter. While it is arguable that Kremnizer & Co was the agent of the Lender the identity of the lender had not been revealed to the borrowers. Thus, the identity of one party to the contract is not known by the other party. It is my view that acceptance of offer contained in the letter in these circumstances does not constitute a binding contract. The Senior Tribunal Member's decision on this issue was correct. 21 Alternatively, on this issue, the borrowers submitted that the letter of 13 February 2002 fell within the definition of "credit contract" because credit "may" have been provided in accordance with it. The borrowers also submitted that the letter spelt out an "arrangement" which falls within the definition of "contract" in Schedule 1 to the Code. This issue was not raised nor argued before the Senior Tribunal Member. Normally, a new point cannot be taken on appeal – see Kalokerinos & Anor v HIA Insurance Services P/L & Anor [2004] NSWCA 312 at [61]. It is my view that this issue could have been ventilated at the Tribunal and raising new issues on appeal should not be encouraged. (2) Did the credit providers know or have reason to believe within the meaning of section 11(3) at the time the Declarations were made that the credit was in fact being applied wholly or predominantly for personal, domestic or household purposes? 22 The borrowers' submission amounted to this. Had Kremnizer & Co analysed all of the documents provided to them and in particular, the statement of assets and liabilities provided on 24 December 2002, it had "at the very least reason to believe at the time the declarations were made that the credit was in fact to be applied wholly or predominantly for personal, domestic and household purposes even if they did not have actual knowledge or actual belief as to that matter." 23 By the 24 December 2002, the borrowers had signed prior documents that were furnished to the Kremnizer letters that stipulated that the loan was for investment or business purposes. It was common ground that the borrowers had not read the documents they signed. 24 The Tribunal Member stated: "dd. What then did either of the credit providers in this case know, or what did they have reason to believe. At the hearing, Mt Titterton argued that the definition of credit provider should be read widely so as to include a further company called La Trobe Home Finance Pty Limited. That company appears to have acted as agent for the mortgagees in the negotiations leading up to the credit contracts, and as manager of the mortgages after then. Mr Titterton argued that any knowledge which La Trobe had was also knowledge of the mortgagees. He may well be correct in his arguments as to the effects of the definition, but when I turn to the facts of the case, I can see no difference. ee. The evidence before me as to knowledge was that whilst the Applicants may well have told both Super City (their broker and agent) and their solicitor that the purpose of the loans was personal, all that the credit providers were told was that the purpose was investment. There is no evidence that the purpose made known to Super City was ever made known to the mortgagees. I accept the evidence from each of the Applicants that they did not write the word "investment" on any of the loan applications, and that they do not know in whose writing the word appears. To a lay eye, there appears to have been at least two scribes. However, there is no evidence that any of the handwriting appearing on the loan applications and other documents was added after signature by the applicants. ff. The only other evidence which may have alerted the mortgagees is that the security for the loans was a residential property, and that most of the money was to be used to discharge an existing mortgage. I consider these facts to be at best inconclusive, and given the declarations not to be ones which should have set the mortgagees off on a line of enquiry. In this regard I accept the submission by Mr Titterton that the remarks set out in Beatty et al at paragraph 11.30 of their commentary on the Code are correct. There was no other argument put to me." 25 The Senior Tribunal Member made a finding that although the borrowers' solicitors may well have known that their broker and solicitor may have known that the purpose of the loans were personal this was never made known to the lenders. 26 A detailed analysis of the statement of assets and liabilities does not disclose the existence of a business nor the purpose of the loan. However, in order for the lender to know or have reason to believe that the credit was in fact to be wholly or predominantly for personal, domestic or household purposes it would have had to embark on a chain of enquiry and disregard the portion of the same form where it contains a signed declaration that the credit was wholly or predominantly for business or investment purposes. The Senior Tribunal Member made a finding that there was no evidence that the purpose, being refinance of an existing mortgage on home, was made known to the lenders. It is my view that the decision of the Senior Tribunal member is correct and the declarations are to give rise to the presumption contained in s 11(2) of the Code. (3) Was the credit " provided or intended to be provided wholly or predominantly for personal, domestic or household purposes " within the meaning of section 6(1)(b) of the Code, such that the Code applied? 27 The borrowers submitted that in the event that the declarations were ineffective, the issue arises as to whether the credit contract falls within s 6. The only sub-section of s 6 that was in controversy was subsection (1)(b), namely whether the credit provided by the defendants to the plaintiffs was provided, or intended to be provided, wholly or predominantly for personal, domestic or household purposes. 28 The answer to this question depends of whether Park Avenue Pty Limited v Boon [2001] NSWSC 700 or the decision of Shaw J in Jonsson v Arkway Pty Limited (2003) 56 NSWLR 451 is considered correct and binding. There are two divergent views. Park Avenue followed a Queensland District Court decision of Rafiqi & Anor v Wacal Investments Pty Limited (1998) ASC 155-024. Jonsson followed a decision of the Supreme Court of Victoria, Linkenholt Pty Ltd v Quirk [2000] VSC 166. The Senior Tribunal Member preferred the Park Avenue line of reasoning. In one sense, it is unnecessary for me to determine this issue. My comments on this topic are obiter dicta. However, due to the conflict on this issue, I shall state my views. 29 The borrowers submitted that the Senior Tribunal Member was bound to follow Jonsson. The lenders submitted that Shaw J's statements in Jonsson were obiter dicta, and that the reasoning in Park Avenue is correct. As I had the delegated authority of a Judge to hear Park Avenue any appeal was to the Court of Appeal and therefore both decisions are equal in terms of precedent. 30 In Jonsson, Shaw J was called upon to decide the question of whether the jurisdictional provision in s 6 of the Code that applies to credit provided for "personal, domestic or household purposes". In dispute was the interpretation of s 6(1)(b) of the Code. Shaw J held that the jurisdictional provisions of the Code applied to credit obtained for the purpose of providing a home for the borrower's parents as beneficiaries under a family trust. 31 In Jonsson Shaw J stated: "28 Regrettably, there has been some divergence of judicial interpretation in relation to this provision. It seems to me that insufficient attention has been given to the need to broadly and liberally interpret beneficial legislation of this kind. The Tribunal has observed the principles articulated in a number of judgments, in particular, Rafiqi v Wacal Investments Pty Ltd [1998] ASC 155-024 (QDC) per Brabazon DCJ; Linkenholt Pty Ltd v Quirk [2000] VSC 166 per Gillard J; and Park Avenue Nominees Pty Ltd v Boon [2001] NSWSC 700 per Harrison M. 29 In contrast to the distinction drawn by the learned District Court Judge in Queensland, Brabazon DCJ, in Rafiqi, I would prefer the approach taken by Gillard J in Linkenholt. His Honour said at [98]: "It is appropriate to consider what the money was used for in order to determine the purpose of the provision of the credit. In considering the question it is important to look at the substance of the transaction in the context of its performance..." 30 His Honour's emphasis was that the Court should consider the substance and reality of the transaction (at [121]). 31. I accept the plaintiff's submission that where credit is obtained both for personal purposes and an investment purpose the Code will apply if more than half of the credit is used for personal purposes." 32 In Park Avenue, an issue for determination was the interpretation of s 6(1)(b) of the Code. Relevantly I stated: "If the correct objective test is applied, the relevant intention will be that which a reasonable person standing in the shoes of a credit provider would have understood the predominant purpose for which credit was provided. Mr Weir Snr's subjective reasoning for lending (sic – should read borrowing) the money was never conveyed to the lender." 33 I adopted what Brabazon J said in Rafiqi which is: "Any other interpretation would put an intolerable burden on a credit provider. The difference between s.6 (1) and (5) seems to be that s.6 (1) allows an objective approach to be adopted to allow the court to decide that the relevant intention for the purpose of the Credit Code will be that which a reasonable person standing in the shoes of the credit provider would have understood the predominant purpose for which the credit is to be provided." 34 The Senior Tribunal Member in preferring the Park Avenue approach said: "w. As His Honour notes (albeit obiter), there has been a divergence of judicial opinion as to the approach to s.11(3). Dealing first with the comments of Gillard J in Linkenholt Pty Ltd v Quirk [2000] VSC 166, Mr Rogers submits that they must be read in the full context that that approach was the one urged upon his Honour by both counsel in the case. He submits from that that the comments are of little authority. x. I do not agree with that. What his Honour was saying in Gillard was that the application of monies is a relevant factor in determining purpose, but that it is only one such factor. His Honour was not saying that application was the only factor to take into account. bb. In my opinion, I should follow the decision of Master Harrison. The remarks of Shaw J were obiter, and (with respect) do not appear to have been made after consideration of the proper meaning of what Gillard J said. Further, they are not directed to the question of what is the substance and the reality of a transaction (para 30). In a case like this, the debtors may well take the view that the substance and reality of a transaction is that the purpose to which they intend to apply the money is personal – the refinancing of a mortgage over their house where the money originally borrowed was for a purely personal reason. The mortgagees may take the position that the loans were for an investment purpose as that was the notification to them on the loan applications and on the declarations under s.11 (2). …I respectfully agree with the Master's reasoning and that of His Honour Judge Brabazon in Rafiqi. As the decision of Master Harrison was on appeal from the Fair Trading Tribunal I consider it to be binding on me in any event, and I shall follow it. " 35 It is my view that reasoning of Shaw J at [28] to [31] in Jonsson was ratio decidendi and for purposes of comity it should be the test applied to the interpretation of s 6(1)(b) of the Code. Having said that, I have some reservations with the Jonsson approach. 36 There are five possible ways in which s 6(1)(b) could be interpreted. Firstly, objectively from the viewpoint of the lender at the time the contract is entered into; secondly objectively from the viewpoint of the borrower at the time that the contract is entered into; thirdly, by the objective facts known to both parties at the time of entering into the contract; fourthly, on the subjective knowledge of either the lender or borrower; and finally on the test in Jonsson of the actual use of the funds. 37 The first approach was adopted in Park Avenue and in Rafiqi. This approach requires an objective test as to what a reasonable person standing in the shoes of the credit provider would have understood to be the predominant purpose for which the credit is provided. This reflects the phrasing of s 6(1)(b) which seems to suggest through the express words "provision of credit" that the section be interpreted from the viewpoint of the lender. 38 The second approach has been contemplated in a more recent decision of the Queensland District Court, Dale v Nicholls Constructions Pty Limited [2003] QDC 453. The Senior Tribunal Member considered Dale, when he stated: "Mr Titterton referred me to a more recent decision of the Queensland District Court, that of His Honour Judge McGill in Dale v Nicholls Constructions Pty Limited [2003] QDC 453. The relevant passages are at paragraphs 24 and following. His Honour concluded that the test as stated in Rafiqi and Park Avenue Nominees was incorrect, and it appears that His Honour was of the opinion that the purpose was to be ascertained from the application of the money. With great respect to His Honour, I find his reasoning difficult to follow; there appear to me to be real inconsistencies between what is said internally within paragraphs 27, 28 and 29 of the judgment, and also between the approach His Honour appears to espouse there and what he says in paragraph 32." 39 McGill J in Dale accepts in part what Shaw J said in Jonsson. McGill J agrees that what is actually done with the money once it is borrowed could be an indication on the intended use of the money. His Honour's example in paragraph 32 does not adopt this test wholly, but instead looks to the actual intention of the borrower but says that the test is an objective one. A reasonable person in the shoes of the borrower would always believe that they are receiving the money for the purpose for which they are actually borrowing it (except if they are being dishonest). If that is so, the objective outcome would always be the same as the actual one. 40 The third approach would be to consider the objective facts known to both parties as to what the purpose for the provision of credit was, at the time in which the credit is entered into, or proposed to be entered into. Such an approach is similar to that used in the interpretation of a contract where the implied term is ambiguous – Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981) 149 CLR 337, per Stephen J at 352. The fourth possible approach, to undertake a subjective test, can be disregarded as it cannot, in my view, be what is required in s 6(1). 41 As previously stated, the interpretation of Shaw J in Jonsson v Arkway Pty Ltd was the ratio decidendi of that case and for the purposes of comity that test should be applied. The reservation I have is that if one considers what the money was used for in order to determine the purpose of the provision of the credit and in doing so considers the substance of the transaction in the context of its performance, it may involve facts that occurred after the transaction was entered into, and rather than looking at it from the credit provider it looks at the reality of the transaction. This course of reasoning seems to go beyond what s 6(1)(b) contemplates. Factors which occur after the transaction was entered into, should not in my view, be considered. As a matter of statutory construction, to read these words and give them their ordinary and natural meaning, the section requires that the intended purpose of the legislation be discerned from the time the contract is entered into, or proposed to be entered into. This reasoning in Jonsson goes beyond what s 6(1)(b) contemplates. (4) Were the declarations substantially in compliance with the Credit Code Regulations at Clause 10? 42 The borrowers submitted that the declaration did not substantially comply with Clause 10 of the Credit Code Regulations. The lender submitted that it did. 43 The declaration contains all that is set out in Clause 10 but has required that declaration be made under the Oaths Act 1900. The submission was that making the declaration on that basis would later discourage a borrower from asserting that the declaration was false; in so doing, a borrower would have to admit to having made a false declaration. The Tribunal Member did not accept this submission. I agree with the Tribunal Member that by asking that the declaration be under the Oaths Act, the lenders were emphasising to borrowers the importance of the step they were taking. The lenders were, in effect, going further than they needed to. The Senior Tribunal Member was correct. 44 The result is that there has been no error with respect to a matter of law. The appeal is dismissed. The decision of Senior Tribunal Member Durie dated 2 May 2006 is affirmed. The summons filed 13 June 2006 is dismissed. 45 Costs are discretionary. Costs usually follow the event. The plaintiffs are to pay the defendants' costs as agreed or assessed. The Court orders: (1) The appeal is dismissed. (2) The decision of Senior Tribunal Member Durie dated 2 May 2006 is affirmed. (3) The summons filed 13 June 2006 is dismissed. (4) The plaintiffs are to pay the defendants' costs as agreed or assessed. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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