Alan K Davies Pty Ltd v Agaiby

1. [1]

   The first plaintiff is Alan K Davies Pty Ltd, a company of which the second plaintiff, Mr Alan Davies, is the secretary and sole director. Mr Davies was banned by the Australian Securities and Investment Commission (ASIC) from providing financial services from 30 March 2020 until 6 May 2023. He has not held a financial services licence thereafter.

2. [2]

   The first and second defendants are Mr and Mrs Agaiby. Their daughter, Ms Jackie De Abreu, is the third defendant. She holds a power of attorney in respect of each of her elderly parents. For convenience and without intending any disrespect, I will refer to the third defendant as Jackie, except where otherwise stated.

3. [3]

   By an amended summons filed 17 April 2025, Mr Davies and his company appeal and seek leave to appeal from a decision dated 31 March 2025 by the primary judge (Brender LCM). In brief, the first plaintiff commenced proceedings in the Local Court claiming a 20% commission fee under an alleged oral or written agreement for assisting Jackie and/or her parents to recover allegedly exorbitant premiums paid by Mr and Mrs Agaiby relating to two insurance policies. The primary judge dismissed the claim on the basis that the agreements had been validly rescinded under s 925A of the Corporations Act 2001 (Cth) and were unenforceable.

4. [4]

   Mr Davies and his company appeal on two grounds. They claim that the primary judge erred in law by taking into account an irrelevant consideration (being the plaintiffs’ position on whether the rescission notice was necessary, irrelevant or misconceived) when determining that the rescission notice was issued within a reasonable period, as required by s 925A. They also challenge what is described in the latest iteration of the amended summons as an error of mixed law and fact in relation to the same matter, for which they seek leave to appeal.

5. [5]

   By a notice of contention filed 7 May 2025, the defendants contend that, if error is established, the decision below should be affirmed because: (a) Mr Davies was unlicensed to provide financial services at the relevant times and was previously banned; (b) the agreements are contrary to public policy; (c) Mr Davies provided legal advice when he was not a legal practitioner; (d) there was non-disclosure of the commission fee; and (e) Mr Davies was only belatedly joined as a party. They also seek that the costs order made below not be disturbed.

Relevant background matters summarised

1. [6]

   In early March 2023, Jackie approached Mr Davies seeking assistance in resolving a complaint she had lodged with Resolution Life Australasia Limited (the Insurer) on behalf of her parents regarding the allegedly exorbitant premiums paid by them over many years. The Insurer ultimately agreed to pay a settlement sum of $380,000 to Mr and Mrs Agaiby.

2. [7]

   In early October 2023, Mr Davies’ company commenced proceedings in the Local Court, seeking 20% of the recouped amount as commission for services provided to the defendants pursuant to an alleged oral agreement made on 4 May 2023 (when Mr Davies was banned) and a written agreement dated 10 May 2023 (when Mr Davies was unlicensed).

3. [8]

   On 11 November 2024, Jackie served on the plaintiffs a notice of rescission pursuant to s 925A of the Corporations Act.

4. [9]

   On 6 December 2024, the matter was heard by Brender LCM. The parties provided written closing submissions in February 2025. Mr Davies was joined as a party to the proceeding after he filed a notice of motion dated 12 March 2025 seeking to be joined.

5. [10]

   On 31 March 2025, his Honour delivered judgment: see Alan K Davies Pty Ltd v Agaiby (Local Court (NSW), Brender LCM, 31 March 2025, unrep) (PJ). Several legal and factual issues were raised by the parties. They will be canvassed to the extent that they are relevant to the plaintiffs’ present claims.

Primary judgment summarised

1. [11]

   Brender LCM joined Mr Davies as a party, finding that there was no prejudice to the defendants on the basis that his Honour intended to dismiss the plaintiffs’ substantive claim (PJ[14]-[15]).

2. [12]

   Brender LCM held that both the written and oral agreements were valid and the parties had agreed that Mr Davies would be paid 20% of any money received from the Insurer (PJ[30]-[32]). His Honour accepted the defendants’ position that Mr Davies provided them with a claims handling and settling service, as well as providing financial product advice within the meaning of the Corporations Act while he was unlicensed. His Honour further concluded that the agreements were unenforceable in circumstances where the defendants had given a statutory rescission notice under s 925A of the Corporations Act. His Honour rejected the plaintiffs’ contention that the notice was ineffective because it had not been given within a reasonable period of the defendants becoming aware of the facts entitling them to give such a notice.

3. [13]

   It is desirable to outline some of the relevant provisions of the Corporations Act which are at the core of the plaintiffs’ challenge.

4. [14]

   Part 7.6 of the Corporations Act establishes a scheme for the licensing of providers of “financial services”. The meaning of “financial service” is set out in s 766A(1), noting that it includes providing “financial product advice” and a “claims handling and settling service” (s 766A(1)(a) and (eb), respectively). Section 911A provides that, subject to the section as a whole, a person who carries on a financial services business in Australia must hold an Australian financial services licence covering the provision of the financial services.

5. [15]

   Section 925A is important. By dint of s 924A, it applies to an agreement with a client entered into in the course of a “financial services business” by a non-licensee who does not hold a licence and is not exempt from the requirement to do so, where the agreement constitutes or relates to the provision of a “financial service” by the non-licensee. It is uncontroversial that, at all relevant times, Mr Davies did not hold a financial services licence.

6. [16]

   Section 925A relevantly provides:

7. [17]

   The effect of the notice is to rescind the agreement (s 925B). It also has the effect that the non-licensee is not entitled to enforce the agreement or to rely on it by way of defence or otherwise as against the client and that the non-licensee is not entitled to recover a commission or fee from the client in relation to that agreement (see ss 925E(2) and 925F(2)).

8. [18]

   Section 925G identifies who carries the onus of establishing the non-application of ss 925E and 925F:

9. [19]

   The rights and remedies available to a client against a non-licensee are additional to the rights and remedies available to the client at general law (s 925I).

10. [20]

    Applying the above provisions, his Honour found that Mr Davies provided both a “claims handling and settling service” and “financial product advice” (PJ[40] and [45] respectively).

11. [21]

    At PJ[70], the primary judge concluded that the plaintiffs’ claim should be dismissed because the agreements had been validly rescinded. In brief, the primary judge’s reasoning is as follows:

12. [22]

    On the issue whether the delay was “unreasonable” for the purposes of determining whether the notice was served within a reasonable period of the defendants becoming aware of the fact entitling them to give the notice, his Honour concluded at PJ[53]-[54] (emphasis added):

Consideration and determination

1. [23]

   Division 4 of Pt 3 of the Local Court Act 2007 (NSW) addresses appeals from the Local Court. A party may appeal to the Supreme Court as of right, but only on a question of law (s 39(1)). Leave is required where an appeal is on a ground that involves a question of mixed law and fact (s 40(1)). There is no provision for an appeal on a question of fact alone, either with or without leave to appeal.

2. [24]

   Section 39 provides:

3. [25]

   Section 40 provides for the circumstances in which leave to appeal is required:

4. [26]

   I will return below to address whether leave to appeal should be granted for Ground 2.

5. [27]

   Turning to one other relevant provision in the Local Court Act, s 41 provides that the Supreme Court may determine an appeal made under ss 39(1) or 40 in the following ways:

6. [28]

   As noted above, Mr Davies raises two grounds of appeal. Both relate to the primary judge’s finding that the rescission notice issued under s 925A was valid and operated to render the agreements unenforceable. This finding is challenged on the basis of both alleged error of law and error of mixed law and fact.

7. [29]

   Focussing upon what Brender LCM said at [53] to the effect that the delay was not unreasonable because Mr Davies regarded the rescission notice as irrelevant and misconceived in circumstances where he asserted it was not necessary for him to have a financial services licence, the plaintiffs’ claim in Ground 1 of the amended summons is that this involves an error of law because the primary judge took into account an irrelevant consideration.

8. [30]

   The language of “irrelevant consideration” might be apt if the primary judge was exercising a discretion in relation to s 925A. The terms of s 925A are set out at [16] above. It is difficult to see how the primary judge was exercising any discretion in determining whether or not s 925A applied. The language of “irrelevant consideration” seems inapt.

9. [31]

   In their written submissions at [13], however, the plaintiffs identified the error of law raised by Ground 1 in different terms to those in the amended summons:

10. [32]

    The proper issue raised by Ground 1, therefore, is whether the primary judge misconstrued the expression “within a reasonable period” by taking into account the state of mind of the recipient of the notice. There can be no doubt that the recipient’s state of mind has no bearing on the question of fact of when the client first became aware of the facts which entitled the client to give a statutory rescission notice. The plaintiffs contend that the position is the same with respect to the reasonable period issue.

11. [33]

    I consider that Ground 1 erroneously elides two matters which have been described as “conditioning facts” before a valid rescission notice can be given under s 925A.

12. [34]

    In ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; [2014] FCAFC 65 at [1422] and [1426], the Full Court of the Federal Court (Jacobson, Gilmour and Gordon JJ) identified the following two pre-conditions to the giving of a statutory notice of rescission under s 925A (emphasis added):

13. [35]

    In Woodlawn Capital Pty Ltd v Motor Vehicles Insurance Ltd [2016] NSWCA 28, Ward JA (as her Honour then was and with whom Macfarlan and Gleeson JJA agreed) adopted and applied the twofold analysis of s 925A in ABN AMRO. Addressing the “first condition” in s 925A at [76], her Honour said:

14. [36]

    It may be interpolated here that it is well-settled that the client bears the onus of establishing when they first became aware of the relevant facts, or to adduce sufficient evidence to enable a finding to be made by way of a properly drawn inference as to the date on which they became aware of the facts entitling them to give the notice (see ABN AMRO at [1437] and Woodlawn at [108]).

15. [37]

    As to the “second condition” in s 925A (i.e. that the notice be given within “a reasonable period” after the relevant awareness was attained), Ward JA said in Woodlawn at [110] that, since it could not be established when the client first became aware of the facts entitling the client to give notice:

16. [38]

    In the light of these intermediate authorities, the legal position may be summarised as follows. Section 925A poses two relevant questions. The first is when the client became aware of the facts entitling the client to give notice. This involves a question of fact which is ordinarily capable of direct proof and is a question in respect of which the client carries the burden of proof. As stated above, it may be accepted that the state of mind of the recipient of the notice is irrelevant to this question.

17. [39]

    The second question can only be resolved if the client discharges the onus in respect of the first question. The second question is whether, having established the timing of the requisite awareness, the notice was then given within a reasonable period therefrom. In my view, the two conditions are different in nature and scope, but both raise questions of fact for determination. The state of mind of the recipient of the notice is irrelevant to the first condition, but is not irrelevant to the second condition.

18. [40]

    The plaintiffs do not challenge the primary judge’s finding of fact that, by 4 August 2023, the defendants were aware of the facts which entitled them to give a notice under s 925A(2). Ground 1 of the amended summons relates not to that finding but rather to the primary judge’s finding that the notice was given within a reasonable period from that date. I shall now explain why I reject Ground 1.

19. [41]

    There is much to be said for the proposition that the determination of whether a notice was given within a reasonable period after the required awareness was attained raises a question of fact and not a question of law for the purposes of s 39(1) of the Local Court Act. An analogy may be drawn with cases, admittedly arising in different statutory contexts, which include phrases such as “within a reasonable period” or “within a reasonable time”. For example, in Guiseppe v Registrar of Aboriginal Corporations (2007) 160 FCR 465; [2007] FCAFC 91, the Full Court of the Federal Court addressed s 71(1) of the Aboriginal Councils and Associations Act 1976 (Cth). It provided that if the Registrar considered that there may be grounds for appointing an administrator to an aboriginal corporation, the Registrar may serve on the public officer of the corporation a notice in writing calling upon the corporation to show cause, within a reasonable period specified in the notice, why an administrator should not be appointed. The Full Court held that the reasonableness of the period of notice constituted a statutory condition which had to be objectively determined. That issue was not resolved by simply asking whether it was reasonably open to the Registrar to set the period specified in the notice. Significantly, the question of reasonableness of the period was described by Gyles and Edmonds JJ at [21] as a question of fact for the primary judge to determine. Their Honours added that there “is no one reasonable period” (presumably reflecting the range of circumstances in which the issue could arise).

20. [42]

    In the present proceeding, the primary judge acknowledged that the approximate 15-month delay in serving the notice was considerable, but added that the question of whether or not the period was unreasonable needed to be viewed in context and with regard to all relevant surrounding circumstances. This involved consideration of any prejudice suffered by Mr Davies and his company because of the delay. Mr Koikas (who appeared for the plaintiffs) ultimately agreed that prejudice to the plaintiffs was relevant to the determination of whether the period within which the notice was served was reasonable, but he submitted that this did not include consideration of Mr Davies’ state of mind.

21. [43]

    I am not persuaded that the primary judge took into account an irrelevant consideration or asked himself the wrong question. The nature and significance of any prejudice suffered by the plaintiffs as a result of the delay necessarily involved consideration of relevant surrounding circumstances, including the matters to which the primary judge referred at PJ[53] (see at [22] above). In essence, his Honour found that the delay caused the plaintiffs no prejudice because, throughout the entire 15-month period, Mr Davies was adamant that his right to receive the commission fee did not depend on him holding a financial services licence. In my respectful view, the primary judge was correct when he stated at [53] that any rescission notice given at any time during the 15-month period would have made no difference to Mr Davies because his consistent position was that the licensing issue was simply irrelevant. Mr Davies’ state of mind on this matter was directly relevant to the issue whether notice was given within a reasonable period.

22. [44]

    Notably, the plaintiffs do not assert or point to any evidence which suggests that during the 15-month period the defendants took some step which amounted to an affirmation on their part of the agreements. The plaintiffs were on notice during the period starting on at least 4 August 2023 that the defendants were adamant that they had no liability to pay the commission fee because Mr Davies was not licensed. The defendants’ position on this matter was maintained up to 11 November 2024 when the notice was given, and beyond. Throughout this entire period, Mr Davies’ consistent position was that the claim against the defendants did not depend upon him being licensed. More particularly, in the circumstances here, Mr Davies’ state of mind was centrally relevant to the question of the plaintiffs’ prejudice.

23. [45]

    This is reflected in the following narrative chronology:

(c) Ground 2 and whether leave to appeal should be granted

1. [46]

   At the commencement of the hearing, the Court pointed out that Ground 2 as formulated in the amended summons was misconceived because the Court lacked jurisdiction to consider and determine an alleged error of fact alone having regard to the terms of s 40(1) of the Local Court Act. The defendants did not oppose the plaintiffs’ application to amend the amended summons so as to state that Ground 2 related to an alleged error of mixed law and fact and that the delay in giving the s 925A notice amounted to “legal unreasonableness”.

2. [47]

   The principles guiding the grant of leave to appeal under s 40 of the Local Court Act are similar to those applying to the need for leave under s 101(2) of the Supreme Court Act 1970 (NSW). The principles were relevantly outlined in Styles v Rowley [2023] NSWSC 1053 at [56]-[57], noting in particular what is said regarding the approach that should be taken to small claims:

3. [48]

   Basten J emphasised some relevant features of these provisions in Souaid v Nahas [2019] NSWSC 1132 at [3] (emphasis added):

4. [49]

   Applying those principles here, I would not grant leave to appeal in respect to Ground 2. It does not raise any issue of principle or question of public importance. Nor am I satisfied that the plaintiffs have demonstrated that there is a reasonably clear injustice that goes beyond something which is merely arguable. I have explained above why I have rejected the plaintiffs’ contention that the primary asked himself the wrong question in assessing whether the notice was served within a reasonable period. Having rejected that contention, there is truly no question of “mixed law and fact” presented by Ground 2.

5. [50]

   Finally, I consider that leave to appeal should be refused having regard to the relatively small sum of money involved, being $77,351. As Bellew J pointed out in Namoi Sustainable Energy Pty Limited v Buhren [2022] NSWSC 175 at [38]-[39], the intention of the Local Court Act is that this Court should have supervision over Local Court decisions in matters of law. I respectfully agree with his Honour’s observations that, where small claims are involved, it is important that there be early finality in litigation. There is also a need for legal costs to be proportionate to the value of the claim in issue. It is notable that, in this case, the defendants’ costs below were estimated to be $84,000 on a party-party basis, having been confirmed by the parties at the hearing that the $42,000 specified was only 50% of the party-party costs (see the affidavit dated 22 July 2025 affirmed by the defendants’ solicitor, Mr Mofazzal Haque Kazi).

6. [51]

   The Court was informed that it was now contemplated that a fixed sum costs order would be made in relation to the Local Court proceedings dependent upon the outcome of the present proceeding. This does not detract, however, from the existing evidence, which powerfully indicates that the legal costs are entirely disproportionate to the legal costs.

(d) Notice of contention

1. [52]

   It is unnecessary to determine the defendants’ notice of contention.

Conclusion

1. [53]

   For all these reasons, leave to appeal in respect to Ground 2 of the amended summons filed 17 April 2025 will be refused. The amended summons filed 17 April 2025 will be dismissed, with costs. The defendants’ notice of contention need not be addressed.