LNCP002 Pty Ltd v Feridun Akcan

1. [1]

   By statement of claim filed on 4 June 2020 the plaintiff, LNCP002 Pty Ltd (“the lender”) seeks possession of the family home of Feridun Akcan (“the defendant” also known as “Adam”) in Canada Bay. Mr Akcan guaranteed a loan from the lender to his jewellery business, Diamond House Jewellery Pty Ltd (“Diamond House”). The lender claims that Diamond House defaulted on that loan. Mr Akcan disputes any default.

2. [2]

   By cross-claim filed on 24 August 2020, Mr Akcan and Diamond House seek relief, including damages as against both the lender and MZF investment Group Pty Ltd trading as LaunchCap (hereinafter “LaunchCap”) for breach of contract, unconscionable conduct and misleading and deceptive conduct. The lender is a corporate vehicle set up purely for the purposes of this specific loan whereas LaunchCap and its director Jeremy Fleischner managed the loan.

3. [3]

   A number of issues arose for consideration in this matter. The statement of claim raised the following questions:

   1. (1)

      Were interest payments under the loan agreement due on the 11th day of each month or on some other day?;

   2. (2)

      If the April interest payment was due on 8 April 2020 (rather than 11 April 2020) was the lender estopped from relying on an alleged default on 8 April 2020?; and

   3. (3)

      Was Mr Akcan in default on 9 April 2020?

4. [4]

   The following issues arose for consideration under the cross-claim:

   1. (1)

      Did the lender act unconscionably in issuing a default notice on 9 April 2020?;

   2. (2)

      Was there an implied term of the contract requiring the lender to provide Mr Akcan with a loan statement in a timely manner upon request?;

   3. (3)

      Did the lender breach an implied term of the contract by failing to provide Mr Akcan with a loan statement within a reasonable time after he requested it?;

   4. (4)

      If the lender is unsuccessful in its claim what orders should be made?;

   5. (5)

      Did the lender and/or LaunchCap engage in misleading and deceptive conduct after 18 February 2020 by informing Mr Akcan and his broker that a loan statement would be provided imminently when none was provided until 22 June 2020?; and

   6. (6)

      If the defendant/cross-claimant succeeds in the cross-claim what is the appropriate relief?

The evidence

1. [5]

   The hearing was conducted before me over three days on 10, 11 and 12 May 2020. Mr Young SC appeared for the lender and LaunchCap and Mr Evans of counsel appeared with Ms Chan for Mr Akcan and Diamond House.

2. [6]

   The lender and LaunchCap relied upon the affidavits of Mr Fleischner and the exhibits thereto. Mr Akcan and Diamond House relied upon Mr Akcan’s affidavits and that of his broker, Ms Lordin Arvanitopoulos, as well as the exhibits and annexures thereto. Ms Arvanitopoulos is a finance broker from whom Mr Akcan sought advice as to the refinancing of his loan between late February and mid-June 2020. These three witnesses all gave evidence and were cross-examined.

3. [7]

   It became apparent from the evidence of Mr Fleischner that he was not the sole decision-maker in relation to a number of important factual matters in dispute. One of the individuals providing the funds to the lender was Mr David Fitzgibbon. He provided instructions to Mr Fleischner and a real issue arose as to whether he, rather than Mr Fleischner, was the decision-maker on a number of important issues including the decision to issue the default notice on 9 April 2020. Although Mr Fitzgibbon was a party to a number of relevant emails, no affidavit was ever obtained from him.

4. [8]

   Most of the relevant evidence was in documentary form which I have set out below. In addition to the documents, the facts set out below represent factual matters not in dispute. As it turned out, very few of the relevant factual findings turn on questions of credit, as opposed to the drawing of inferences from proven facts. I will make the relevant factual findings in relation to facts in dispute below at [175]-[183].

Facts

1. [9]

   In October 2019, Mr Akcan was an established jeweller running his own business, Diamond House, out of a jewellery shop in the Top Ryde shopping centre. He had operated his jewellery business for about 38 years at the date of hearing and had worked in the jewellery industry since the age of 18. He arrived in Australia at the age of 15. English is his fifth language. He gave evidence that he had no formal training in English before the age of 15 and learned to speak English primarily through his business.

2. [10]

   In October 2019, Mr Akcan was offered an opportunity to purchase wholesale diamonds at discounts of up to 60%. He needed to borrow about $200,000 in a short time frame to take advantage of this opportunity and approached a mortgage broker to refinance the loan on his home in Canada Bay. That property was already subject to a mortgage and was refinanced at a higher rate so that Mr Akcan could obtain the money he required at short notice.

3. [11]

   Mr Akcan was introduced to Mr Fleischner, the director of LaunchCap, by his broker. Mr Fleischner had commenced operating LaunchCap in May 2018. LaunchCap’s function was to manage loans on behalf of investors. As at the date of hearing, Mr Fleischner had been involved in the private lending industry for four years. The loan to Diamond House was approved and the lender was set up as a corporate vehicle to loan the funds. It was just one of several “LNCP” companies, each of which was set up for an individual loan agreement. These companies were sometimes deregistered once a loan agreement had been paid out.

4. [12]

   The funds for the loan to Diamond House came from external investors. One of those investors was Mr David Fitzgibbon, who was described by Mr Fleischner as the “point man” for the investor group on the Diamond House loan.

5. [13]

   On 30 October 2019, Mr Akcan’s solicitor, Mr Ahmet Nedjat, forwarded him an email with attachments. That email stated that hard copies of the loan documents were being couriered to his solicitor’s office for execution.

6. [14]

   On 31 October 2019, Mr Akcan received a text message from his solicitor advising that the documents had been delivered to his office. Mr Akcan arranged for he and his family members (the guarantors) to attend the solicitor’s office and sign the documents. These documents were:

   1. (1)

      A Letter of Offer and Guarantee and Indemnity;

   2. (2)

      A mortgage and Mortgage Deed;

   3. (3)

      A General Security Deed;

   4. (4)

      A verification certificate and verification of identity certificates.

7. [15]

   Mr Akcan and the guarantors signed these documents on 31 October 2019. The borrower was Diamond House and the guarantors were Mr Akcan and his two family members. After he signed the documents, Mr Akcan hand-delivered them to the office of Piper Alderman, the solicitor for the lender, that same day. When he delivered the documents, there was no date affixed next to his signature on the Letter of Offer and Guarantee and Indemnity, nor on the Mortgage Deed or General Security Deed. These documents came to bear the date 1 November 2019, which appears to be in the same handwriting as the signature of the lawyer from Piper Alderman who signed the documents on behalf of the lender.

8. [16]

   On 4 November 2019, a solicitor at Piper Alderman sent further documents to be signed by Mr Akcan and the guarantors (a “Waiver of Independent Financial Advice” form). These documents were signed on 4 November 2019 and Mr Akcan again hand-delivered these documents to the Piper Alderman office on the same day.

9. [17]

   On 5 November 2019, the same solicitor from Piper Alderman emailed a further document entitled “Undertaking re tax portal statements”. That document included the following requirement regarding payment in advance of three months’ interest:

10. [18]

    This was not a condition that had previously been proposed or agreed to by Mr Akcan. Mr Fleischner conceded in cross-examination that this additional condition was essentially put to Mr Akcan as a “take it or leave it” proposition after the other documents had already been signed. In those circumstances, Mr Akcan and the guarantors signed that document on 6 November 2019 and Mr Akcan again hand-delivered it to the lender’s solicitor on the same day.

11. [19]

    Due to these settlement delays (caused, inter alia, by the lender adding the additional conditions), Mr Akcan did not get the funds he needed until 11 November 2019. Three months’ interest was deducted from the amount advanced to Mr Akcan as well as $13,012.30 in legal fees paid to Piper Alderman.

12. [20]

    Part A of the loan agreement (“Facility Terms”) provides that the principal amount is $2,025,000 with a “higher rate” of 30% per annum interest (the default rate) and a “lower rate” of 11.5% per annum (the ordinary rate). The “Initial Advance Drawdown Date” is recorded as 30 October 2019. That was not the date that Mr Akcan received the funds. This appears to be the date that the monies were advanced by the investors to the lender. The term of the loan is 12 months from the date of the “Initial Advance” with a minimum term of six months.

13. [21]

    Part D (“Terms and Conditions”) sets out the following relevant definitions in cl 1.1:

14. [22]

    Clause 3.4 requires the borrower to obtain refinance for the loan within 12 months:

15. [23]

    Clause 4.2 of the Terms and Conditions provides for early repayment of the loan:

16. [24]

    Clause 5 provides for the payment of interest:

17. [25]

    Clause 7 provides that the guarantors jointly, severally and unconditionally indemnify the lender for the punctual payment of the secured moneys, as well as all charges, costs, and expenses associated with, inter alia, any failure on the part of the borrower to punctually pay the secured moneys.

18. [26]

    Under cl 10(d), an event of default includes any failure to “pay or repay any moneys payable… under any Finance Document when due and in the manner required.” Clause 11.1 provides that in the event of any default the lender may “demand and require immediate payment of the Secured Money in full and take all necessary steps to recover the Secured money from the Obligors or any one of them”.

19. [27]

    Clauses 12.29 and 12.31 deal with variation of the contract and force majeure:

20. [28]

    As stated above, Mr Akcan and the two guarantors also signed an undertaking on 6 November 2019 providing that three months’ interest would be paid in advance as a condition precedent to the initial advance. That undertaking also required that Mr Akcan and the two guarantors provide their tax portal statements on the first day of each month, unless otherwise agreed, and that Mr Akcan provide an invoice for the full amount of the diamonds purchased not later than five business days from the date of the initial advance.

21. [29]

    The Mortgage Deed provided for a mortgage over the Canada Bay premises (Mr Akcan’s family home) as security for the funds advanced under the loan agreement. The mortgage form records that a registered mortgage was granted against the Canada Bay premises, and that the document was executed by the mortgagor on 31 October 2019 and by the solicitor for the mortgagee on 11 November 2019.

22. [30]

    PEXA records indicate that settlement occurred on 11 November 2019. The total funds settled were $1,979,050 (the principal amount of $2,025,000 less three months’ interest at the lower rate paid in advance). Mr Akcan had needed and expected to receive over $200,000 in funds to purchase the diamonds. Instead, he only received $139,672.41, after the advance interest payments and the lender’s legal fees were taken out.

23. [31]

    Mr Akcan proceeded on the basis that the first interest payment was due on 11 February 2020 given that he received the funds on 11 November 2019 and three months’ interest was paid in advance. As the first payment date approached, Mr Akcan realised that none of the loan documents contained any details as to how he was to make the interest payments. He wondered whether, based on previous experience, the interest payments would be debited directly from the account into which the advance was paid.

24. [32]

    In early February 2020, Mr Akcan started making enquiries about how to make the interest payment. He first asked his lawyer, Mr Nedjat, who did not know but offered to ask Mr Mitchell Mackinnon (the broker for Mr Akcan’s loan). Mr Nedjat later contacted Mr Akcan to say that Mr Mackinnon did not pick up his phone and he would let Mr Akcan know once he had spoken to him.

25. [33]

    On 11 February 2020 (the date Mr Akcan believed that the interest payment was due), Mr Akcan telephoned Mr Nedjat and said, “[n]o one has taken money out of [the] Diamond House Jewellery [bank account] what do I do?”. Mr Nedjat said that he had still not heard from Mr Mackinnon.

26. [34]

    On 12 February 2020, a solicitor at Piper Alderman, acting on behalf of the lender, sent a default notice to Mr Akcan by email. That notice claimed that Mr Akcan had been in default since 31 January 2020 as the interest payments were due on the last day of each month. I pause here to note that this was incorrect. It was common ground that the contract actually provided that interest was due on the first day of each month. Mr Fleischner gave the following evidence about the lender’s omission to provide account details for interest payments in cross-examination:

27. [35]

    Mr Akcan responded to the default notice by email of 13 February 2020 in these terms:

28. [36]

    As for Mr Fitzgibbon’s role in deciding to issue the default notice, Mr Fleischner described it as follows:

29. [37]

    Mr Fleischner gave the following evidence about the decision to subsequently withdraw the default notice issued on 12 February 2020:

30. [38]

    On 18 February 2020, Mr Akcan’s solicitor, Seyfi Atila, wrote to Piper Alderman noting that no account details had been provided, and requesting that the lender’s account details be provided urgently. Mr Atila further noted that:

31. [39]

    Mr Fleischner telephoned Mr Akcan on 18 February 2020 after Mr Akcan’s solicitor sent the above email. Mr Akcan’s recollection of that conversation was as follows:

32. [40]

    Although Mr Fleischner recalled having this telephone conversation with Mr Akcan on that date, he did not recall all the details of it. He recalled that the effect of it was that Mr Akcan would pay interest at the lower rate and would not pay legal costs of $2,000.

33. [41]

    Mr Akcan gave evidence that it was during this telephone conversation that he first requested a “loan statement” from Mr Fleischner. A loan statement is a short document (one or two pages) setting out the key elements of the loan including the principal amount, the repayments made to date, and the payout figure. It also indicates whether the loan has ever been in default. Ms Arvanitopoulos’ evidence was that a default-free loan statement was an essential pre-condition to obtaining approval for refinance. Mr Akcan said that he requested that statement on 18 February 2020 in the following terms:

34. [42]

    Mr Fleischner initially denied saying these words to Mr Akcan but conceded that he did not have a sufficient recollection of the conversation to depose as to what he did say. He gave the following evidence as to whether the loan statement was discussed during that conversation:

35. [43]

    Given that Mr Fleischner conceded in cross-examination that Mr Akcan may have raised the issue of the loan statement during the 18 February conversation I am satisfied that he did so. As to whether Mr Fleischner knew that Mr Akcan was refinancing at that time, it was put to Mr Akcan in cross-examination that he was not in fact refinancing at that time and that if he told Mr Fleischner that he was that would have been incorrect. Mr Akcan’s evidence was as follows:

36. [44]

    On 19 February 2020, Mr Akcan wrote to Mr Fleischner confirming that the monthly interest payment of $19,406.25 for February would be transferred to the account details provided and noting that the default interest of $31,218.75 and legal fees of $2,000 would not be paid. On 19 February 2020, Mr Akcan sent a further email attaching a receipt for the interest payment and noting that the interest payment was “for 11th of February 2020”.

37. [45]

    On 25 February 2020, Mr Fleischner, on behalf of the lender, emailed Mr Akcan in the following terms:

38. [46]

    Mr Akcan responded as follows:

39. [47]

    Mr Fleischner then sent the following email:

40. [48]

    On 26 February 2020, Mr Akcan sent Mr Fleischner the following email:

41. [49]

    Mr Fleischner did not reply to Mr Akcan but did forward his email to Mr Fitzgibbon shortly after receiving it. Mr Fitzgibbon replied 30 minutes later saying “[t]hanks”. Mr Fleischner gave the following evidence about his understanding of the effect of that email:

42. [50]

    Mr Akcan did not make an interest payment on 8 March 2020. Mr Fleischner did not contact Mr Akcan on 8 or 9 March 2020. On 10 March 2020, Mr Fitzgibbon emailed Mr Fleischner at 9:21am, stating:

43. [51]

    Mr Fleischner replied to Mr Fitzgibbon at 9:24am that day, stating:

44. [52]

    Mr Fleischner conceded in his evidence that, contrary to his representation to Mr Fitzgibbon on 10 March 2020, it was possible that he had not in fact contacted Mr Akcan on 9 March 2020. He did not remember doing so and he was unable to provide any records of such contact. Mr Akcan denied any such conversation and I am satisfied it did not occur.

45. [53]

    On 10 March 2020, the following text message exchange took place between Mr Fleischner and Mr Akcan:

46. [54]

    On 11 March 2020, Mr Akcan sent Mr Fleischner an email with a payment receipt attached. The following exchange occurred by text:

47. [55]

    Mr Fleischner was asked in cross-examination why he did not challenge Mr Akcan at that time about the “late” payment if he genuinely believed that the March interest payment was overdue as at 11 March 2020 and that Mr Akcan was in default at that point. Mr Fleischner gave evidence that “[a]fter those messages, we discussed it between David [Fitzgibbon] and I working out what we would do next.” As to why he did not issue a default notice on 9 March 2020 if he believed that the interest payment was due on 8 March 2020, his evidence was as follows:

48. [56]

    Ms Arvanitopoulos gave evidence that she had a telephone conversation about refinancing with Mr Akcan in late February or early March. In cross-examination she accepted that it may have been early March. Her affidavit evidence was that it was late February and the evidence of Mr Akcan was that it was late February. I am satisfied this occurred in late February.

49. [57]

    Ms Arvanitopoulos gave evidence that she would have indicated to Mr Akcan that he would need to obtain a loan statement. They arranged to meet in person on 12 March 2020.

50. [58]

    On 11 March 2020, Ms Arvanitopoulos sent an email to Mr Akcan requesting that he bring the following documents to their meeting the next day:

51. [59]

    Ms Arvanitopoulos clarified in her evidence that she believed at that time that the current mortgagee was La Trobe, rather than the plaintiff.

52. [60]

    It was common ground that Mr Fleischner did not provide a loan statement to Mr Akcan following their conversation of 18 February 2020. He agreed in his evidence that it would not have taken long to generate a loan statement in February 2020 and that he had employees who could do it on his behalf. He agreed that he did not have any records or any recollection of requesting that a loan statement be prepared at any time between 18 February and 11 March 2020.

53. [61]

    On 11 March 2020, shortly after receiving Ms Arvanitopoulos’ email about the documents required for seeking refinance, Mr Akcan wrote to Mr Fleischner requesting “the last 5 months mortgage statement” stating that “I would really appreciated [sic] if you could please sent it to me today” (emphasis added).

54. [62]

    Mr Akcan met with Ms Arvanitopoulos on 12 March 2020. She verified his identity and performed a credit check. He informed her that there had been no defaults on the loan at that time. They agreed that Ms Arvanitopoulos would try to arrange refinance for Mr Akcan’s loan with a brokerage fee of 1%. Ms Arvanitopoulos deposed that at the meeting of 12 March 2020 Mr Akcan said the following:

55. [63]

    She further deposed that she said to Mr Akcan:

56. [64]

    Ms Arvanitopoulos said that she requested that Mr Akcan obtain the loan statement as quickly as possible so that a settlement date could be booked in by the end of March, for settlement to be finalised sometime in April 2020. She said that she expected at that time that if the matter proceeded in the ordinary manner, the refinance would be completed within about four weeks.

57. [65]

    Mr Fleischner did not provide a loan statement following Mr Akcan’s request of 11 March 2020.

58. [66]

    On 17 March 2020, Mr Akcan sent the following email to Mr Fleischner:

59. [67]

    When asked in cross-examination why he said that his accountant needed the loan statement, rather than saying that he needed it urgently for refinance, Mr Akcan said the following:

60. [68]

    Mr Fleischner replied to Mr Akcan’s email of 17 March 2020 one minute later stating:

61. [69]

    Mr Fleischner accepts that despite sending that email, he did not “action” the request at that time. He gave the following evidence about his response to that email:

62. [70]

    As to whether he requested that anyone else prepare a loan statement in response to Mr Akcan’s email of 17 March 2020, Mr Fleischner gave the following evidence:

63. [71]

    Mr Fleischner gave evidence that it would have taken between 30 minutes and one hour to produce a loan statement for Mr Akcan’s account in March 2020. I pause here to note that when a loan statement was finally provided on 22 June 2020 it was a one-page document that contained very little detail. It was never properly explained why it would take that long to prepare the statement. Although Mr Fleischner conceded that he would need to send it to Mr Fitzgibbon for instructions, that is a different question to how long it would actually take to prepare. LaunchCap at that time employed two people to look after the loan accounts. The company was managing approximately 26 loans in March and April 2020. Mr Fleischner said that the company did not deal with requests on every loan on a daily basis, but that around half of the 26 borrowers would have been seeking refinance in mid-March 2020.

64. [72]

    In relation to the process for generating a loan statement, Mr Fleischner said that the normal procedure would be for him to create a draft statement which would then be sent to Mr Fitzgibbon for confirmation or instructions. Despite this, he accepted that he at no stage in February or March 2020 created a draft statement and sent it to Mr Fitzgibbon for approval. Nor could he find any evidence of having asked his employees to do so.

65. [73]

    As to why Mr Fleischner failed to provide the loan statement to Mr Akcan in February or March 2020 despite numerous requests to do so, Mr Fleischner’s explanation was that he did not know that Mr Akcan needed the loan statement for the purposes of refinancing, and believed he possibly wanted the statement “for his records”. He accepted that he had always known that Mr Akcan had planned for the loan to be refinanced early in 2020.

66. [74]

    Mr Fleischner gave evidence that in his experience it was common for borrowers to be provided with loan statements in order to obtain refinance, and that he knew Mr Akcan could not get refinance without it. Despite this, he maintained in cross-examination that he did not know that Mr Akcan needed the loan statement for the purpose of obtaining refinance.

67. [75]

    Ms Arvanitopoulos gave evidence that after this meeting she did not immediately approach a bank to arrange refinance because she was waiting for the loan statement. As to why she was waiting for the loan statement Ms Arvanitopoulos said that:

68. [76]

    On 30 March 2020, Mr Akcan sent the following email to Mr Fleischner:

69. [77]

    Mr Akcan gave the following evidence about the “government announcement” referred to in the above email:

70. [78]

    Counsel for Mr Akcan tendered a bundle of contemporaneous newspaper articles referring to the events of late March 2020 and the various government announcements around that time. One of them included the following:

71. [79]

    Mr Fleischner did not reply to Mr Akcan’s email of 30 March 2020. Instead, he forwarded it to Mr Fitzgibbon asking if he “[had] a sec to have a chat?”. Mr Fleischner gave the following evidence about his delayed response to this email:

72. [80]

    He further deposed that after receiving Mr Akcan’s email of 30 March 2020 in which Mr Akcan sought a deferral of interest payments (extracted above at [76]) he no longer believed that Mr Akcan was refinancing, and so he did not think Mr Akcan still needed a loan statement. He said that he then decided to prioritise responding to requests from other loans in his portfolio.

73. [81]

    By 6 April 2020, Mr Fleischner had still not responded to Mr Akcan’s email of 30 March 2020. On that date at 8:55am, Mr Fitzgibbon sent the following email to Mr Fleischner:

74. [82]

    Mr Fleischner gave evidence that when he received this correspondence from Mr Fitzgibbon, he had not yet requested any documents from Mr Akcan as proof of hardship. As to Mr Fitzgibbon’s comment that the “client [was] aware” that the loan was “active”, he admitted that he knew that Mr Akcan believed the next interest payment was due on 11 April 2020.

75. [83]

    Mr Fleischner further acknowledged that despite knowing that Mr Akcan thought that interest was due on 11 April 2020, he intended to issue a default notice on 9 April 2020 unless agreement was reached as to deferral. He further acknowledged that he took no steps to warn Mr Akcan that if he did not pay interest on 8 April 2020 he would be put into default.

76. [84]

    On 6 April 2020 at 10:38am, Mr Fleischner sent the following email to Mr Akcan in response to his email of 30 March 2020 seeking deferral due to the impact of COVID-19 on his business:

77. [85]

    On 7 April 2020, Mr Akcan replied in the following terms:

78. [86]

    Again, Mr Fleischner did not respond to that email to indicate whether he would accept Mr Fleischner’s request for deferral or not. As to the relevance of the documents he requested in his email of 6 April 2020 to establish COVID-19 hardship, Mr Fleischner gave the following evidence:

79. [87]

    In relation to the last document requested, that being “evidence of and source of funds used to pay our interest for previous months”, Mr Fleischner gave the following evidence:

80. [88]

    Mr Fleischner stated that it was Mr Fitzgibbon who requested the list of documents that he in turn requested from Mr Akcan as evidence of hardship in his email of 6 April 2020.

81. [89]

    Mr Fleischner eventually conceded in his evidence that the information provided in Mr Akcan’s email of 7 April 2020 did constitute evidence of hardship. He said, however, that a decision was made not to enter into a deed of forbearance:

82. [90]

    Mr Fleischner gave the following evidence about the subsequent decision to issue a default notice:

83. [91]

    In relation to whether he seriously considered the impact of COVID-19 on Diamond House, Mr Fleischner’s answers were as follows:

84. [92]

    Regarding the procedure for issuing default notices generally, Mr Fleischner said that:

85. [93]

    On 8 April 2020 at 2:58pm, Mr Fleischner sent an email to Summer Lawyers, with Mr Fitzgibbon copied in, stating:

86. [94]

    Mr Fleischner said that the default notice of 9 April 2020 was checked by both him and Mr Fitzgibbon prior to it being issued. Mr Fleischner said that he and Mr Fitzgibbon discussed the evidence of hardship provided by Mr Akcan on 7 April 2020 and that Mr Fitzgibbon took the view that the hardship problems were either not proved or not sufficient to warrant a deferral of repayments. He said that he and Mr Fitzgibbon jointly instructed Summer Lawyers to issue the default notice of 9 April 2020.

87. [95]

    At 6:30am on 9 April 2020, Mr Akcan was served at his home with a default notice stating that he had failed to pay the interest due on 8 April 2020. That notice claimed that the arrears amount was $50,625.00 and demanded payment within seven days.

88. [96]

    Mr Akcan gave the following evidence about his state of mind on 9 April 2020:

89. [97]

    Mr Akcan could have paid interest at the lower rate on 11 April 2020 if Mr Fleischner had declined to enter into a deed of forbearance. In his oral evidence, he clarified that while Diamond House had less than $19,000 in its trading account at that time, he would have used money from his personal account to make up the shortfall for the April interest payment. Documents were before the Court confirming that to be the case.

90. [98]

    On 16 April 2020, a solicitor for Mr Akcan wrote to Summer Lawyers requesting that the default notice be withdrawn and stating that:

91. [99]

    That email further stated that due to a recent government announcement the lender was obliged to defer repayments for a period of six months upon application by the borrower.

92. [100]

    Summer Lawyers responded to this letter by email of 20 April 2020 stating that the lender was under no obligation to defer the loan repayments and that, regardless of whether payment was due on 8 April or 11 April 2020, the interest had not been paid on either day.

93. [101]

    Mr Akcan gave evidence about the implementation of a government mandate on 23 March 2020 which required non-essential shops to shut down. He stated that:

94. [102]

    Mr Akcan described the impact of COVID-19 on his business in this way:

95. [103]

    Mr Akcan stated that although his business did not shut down completely there were no customers coming in and all of the other shops on his floor of the Top Ryde shopping centre were closing down. He was cross-examined about his statement on 30 March that his business had “stopped” and he gave the following evidence:

96. [104]

    He described his response to the downturn in April and May 2020 in this way:

97. [105]

    Counsel for Mr Akcan tendered a letter from the Top Ryde shopping centre manager, Mr Damian Lewis, dated 9 July 2020 which stated that:

98. [106]

    Mr Fleischner’s evidence also supported Mr Akcan’s evidence as to the impact of COVID-19 on his business and on the economy generally. In his affidavit of 17 February 2021 Mr Fleischner stated that:

99. [107]

    In relation to the COVID-19 situation in June 2020, when Ms Arvanitopoulos was seeking a loan statement, Mr Fleischner stated that:

100. [108]

     When asked in cross-examination why it took him one week to respond to Mr Akcan’s request for a deferral of repayments on 30 March 2020, Mr Fleischner said that:

101. [109]

     He said that some borrowers were given deferrals on their repayments while others went into default.

102. [110]

     Mr Fleischner gave evidence that in early April 2020, while dealing with the requests for deferral, he was working from his home in Sydney due to COVID-19 restrictions. In re-examination, Mr Fleischner gave evidence about having to stand down staff due to the economic consequences of COVID-19:

103. [111]

     On 23 April 2020, Mr Akcan sent an email to Mr Fleischner attaching bank statements for Diamond House for January, February, and March 2020, showing a significant decrease in trade in March 2020. Mr Fleischner could not recall whether he discussed the bank statements with Mr Fitzgibbon in relation to a potential deferral. He was asked the following in cross-examination:

104. [112]

     On the same day, 23 April 2020, a caveat was lodged against a house registered in the name of Mr Akcan’s wife.

105. [113]

     On 27 April 2020, a solicitor acting for Mr Akcan emailed the solicitor for the lender noting that they were instructed that Mr Akcan’s broker was in negotiations with Mr Fleischner to “amicably” resolve the matter and that they were awaiting the outcome of these negotiations. The solicitor for Mr Fleischner forwarded this email to Mr Fitzgibbon who forwarded it to Mr Fleischner. Mr Fleischner replied to Mr Fitzgibbon saying:

106. [114]

     Ms Arvanitopoulos stated that in early May she eventually arranged a valuation of Mr Akcan’s house with ANZ despite not having obtained a loan statement as she did not want any further delay. The ANZ valuation came to $2.85 million, amounting to $2,280,000 at an LVR (loan to value ratio) of 80%.

107. [115]

     The interest rate offered by ANZ at that time was 2.29% for an 80% LVR. She deposed that if a loan had been obtained from ANZ at that time (in late March or April 2020) Mr Akcan would have saved about $10,000 per month in repayments while increasing the value of the mortgage advance.

108. [116]

     On 25 May 2020, Ms Arvanitopoulos sent a letter to LaunchCap indicating that she was acting on behalf of Mr Akcan in relation to refinancing the mortgage. She noted that due to COVID-19 there had been significant delays with banking institutions and stated that she was aware of the “absolute urgency” of getting Mr Akcan refinanced. She informed LaunchCap that a valuation had been performed which met the loan requirements and that she was hopeful that the loan would be refinanced within the next month. She reiterated the urgency of the refinance arrangements and asked that LaunchCap contact her directly to make arrangements. LaunchCap did not respond to this letter.

109. [117]

     Ms Arvanitopoulos deposed that she received a telephone call from Mr Fleischner on 26 May 2020 in which she requested a loan statement. She said that Mr Fleischner was “very critical” of Mr Akcan and said the following:

110. [118]

     Mr Fleischner recalled having this phone conversation with Ms Arvanitopoulos on or about 26 May 2020 but did not have a detailed recollection of it. He denied telling her that he would provide a default-free statement. He also denied telling her that he would tell Mr Akcan that Ms Arvanitopoulos had “sorted it out”. In relation to whether Mr Akcan had “defaulted six times”, Mr Fleischner gave the following evidence:

111. [119]

     Mr Fleischner deposed that he would not have provided a loan statement showing no defaults as he believed that would be a false and misleading statement due to his belief that Mr Akcan was in default.

112. [120]

     On 26 May 2020 at 4:14pm, Ms Arvanitopoulos emailed Mr Fleischner requesting that:

113. [121]

     Mr Fleischner responded at 7:03pm that day saying, “I’ll sort this tomorrow”.

114. [122]

     Ms Arvanitopoulos emailed Mr Fleischner again on 27 May 2020, and then on 28 May, 1 June and 2 June 2020 requesting a loan statement, stating that Mr Akcan had said that things had been “sorted out” with Mr Fleischner.

115. [123]

     Mr Akcan recommenced his interest payments on 1 June 2020. He paid $10,000 on that day.

116. [124]

     On 2 June 2020, Mr Fleischner finally replied to Ms Arvanitopoulos, saying:

117. [125]

     On 4 June 2020, Ms Arvanitopoulos emailed Mr Fleischner in the following terms:

118. [126]

     On 4 June 2020, the lender filed the statement of claim in these proceedings.

119. [127]

     On 6 June 2020, Mr Fleischner replied to Ms Arvanitopoulos, stating:

120. [128]

     On 9 June 2020, Mr Akcan made a $9,406.25 interest payment and emailed Mr Fleischner stating:

121. [129]

     On 15 June Mr Akcan made a further $7,406.25 interest payment and reiterated this request, noting that:

122. [130]

     Mr Akcan emailed Mr Fleischner’s solicitor at Piper Alderman on 18 June 2020 again seeking a loan statement. He noted that he had been seeking the statement since 11 March 2020.

123. [131]

     On 22 June 2020, Mr Fleischner finally emailed a loan statement dated 18 June 2020 to Mr Akcan and Ms Arvanitopoulos. This statement indicated that default interest of $50,625 a month was payable for April, May and June 2020, and that these amounts had not been paid.

124. [132]

     On 28 July 2020, Mr Akcan emailed Mr Fleischner stating:

125. [133]

     On 3 August 2020, Ms Arvanitopoulos emailed Mr Fleischner requesting a default-free statement. She stated that:

126. [134]

     Mr Fleischner replied on 5 August 2020 stating that:

127. [135]

     Mr Fleischner gave the following evidence about Mr Fitzgibbon’s involvement in the procedure for issuing a loan statement:

The pleadings

1. [136]

   The statement of claim was filed on 4 June 2020. The lender sought possession of the premises at Canada Bay and leave to issue a writ of possession. Two defaults were relied upon: failure to make an interest payment at the ordinary rate on 8 April 2020 and failure to pay interest at the default rate following a notice issued pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW) on 14 April 2020.

2. [137]

   An amended defence was filed on 18 August 2020. The amended defence relied on the following matters: that the contract was varied orally or in writing such that repayments were due on the 11th of each month; that the lender was estopped from asserting that interest payments were due on the 8th of each month; that the lender breached an implied term requiring it to provide a loan statement to Mr Akcan upon his request; that the borrower should be granted relief against forfeiture; or that the borrower should be granted relief under a force majeure clause.

3. [138]

   Mr Akcan filed a cross-claim on 24 August 2020. The cross-claim relied on three matters: that the lender breached an implied term of the contract requiring it to provide a loan statement to Mr Akcan upon request; that the lender engaged in unconscionable conduct by failing to provide a loan statement, refusing a deferral on hardship grounds, and then issuing a default notice on 9 April 2020; and that the lender engaged in misleading and deceptive conduct by representing that a loan statement would be provided in March 2020.

4. [139]

   The damages said to have been incurred as a result of this conduct included the loss of the opportunity to refinance, payment of default interest, and loss of Mr Akcan’s home if the lender is successful.

5. [140]

   The cross-claimants also plead unconscionable conduct on the part of Mr Fleischner and LaunchCap in breach of ss 20 or 21 of the Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law (“the ACL”). The particulars of the unconscionable conduct are set out at [55] of the cross-claim as follows:

6. [141]

   Misleading or deceptive conduct in breach of s 18 of the ACL is pleaded in relation to the representation on 17 March 2020 that Mr Fleischner would “get this actioned… now”.

7. [142]

   As to the relief sought, the cross-defendants seek injunctions under s 232 of the ACL and damages under s 236 of the ACL.

8. [143]

   In their defence to the cross-claim, the cross defendants admitted that no loan statement was provided but disputed the implication of a contractual term requiring the provision of that document. They further submitted that the force majeure clause was irrelevant and otherwise denied any unconscionable conduct or misleading or deceptive conduct.

Submissions

1. [144]

   Mr Young submitted that the lender was entitled to possession of the Canada Bay property due to the defaults identified in the statement of claim. It was submitted that the question of whether the payments were due on the 8th or the 11th of each month was irrelevant as payment was not made on 11 April 2020 in any event. Mr Young further submitted that the estoppel case “goes nowhere” because there was non-compliance with the s 57(2)(b) notice sent on 14 April 2020.

2. [145]

   It was submitted that the defendant’s force majeure argument referred only to the definitional clause in cl 1.1. The only substantive force majeure clause in the contract was cl 12.31 which provided that the lender’s obligations under the agreement could be suspended due to force majeure but made no similar provision for any other party such as Diamond House.

3. [146]

   As for the argument that there had been a variation as to the date that interest was due, it was submitted that any proper interpretation of the relevant documents did not support a variation of that term.

4. [147]

   As for the estoppel argument, it was submitted that the pleading merely compiled “two pages of historical complaints against the plaintiff”. It was submitted that no attempt had been made to establish “any form of estoppel known either to common law or equity” and that “[n]o such estoppel exists”.

5. [148]

   As for the claim headed “relief against forfeiture”, it was submitted that that claim had to be raised by way of cross-claim rather than defence and that there was no actual claim for relief against forfeiture because Diamond House was not seeking to tender the money required to rectify the default and then request equitable relief against forfeiture.

6. [149]

   As for the claims made in the cross-claim, it was submitted that following Mr Akcan’s email of 30 March 2020, Mr Fleischner was entitled to conclude that Diamond House was no longer seeking to refinance. By 11 April 2020, at the latest, the loan was in default anyway and the type of loan statement sought by Mr Akcan could not “truthfully” be provided from then onwards.

7. [150]

   As for the 30 March 2020 email, it was submitted that it amounted to a repudiation of the contract by Mr Akcan. It was submitted that Mr Akcan had exaggerated the true situation as his business had not “stopped”; it remained open. Similarly, the assertion that he would not be able to make any more repayments was false. Significant reliance was placed on the 30 March 2020 email as evidence that Mr Akcan refused to make any more payments at all.

8. [151]

   It was submitted that the fact that Mr Akcan was also running a wholesale business widened the difference between the actual facts and the representations made by him in his email of 30 March 2020, and that Mr Akcan was “fooling” the lender at that time.

9. [152]

   As for the text message sent by Mr Fleischner on 10 March 2020, it was submitted that message was a follow-up after a failure to pay on 8 March 2020. Mr Young submitted that the proper construction of that text exchange was that Mr Fleischner was reminding Mr Akcan that there had been no payment on 8 March 2020 but he was not going to make a “big issue” about the lateness even though it was a breach of the agreement.

10. [153]

    Mr Young accepted that Mr Fleischner’s evidence was that as at 30 March 2020 he did not consider Mr Akcan to be in default. He accepted that the fact that Mr Akcan was going to be put into default if he did not pay on 8 April 2020 was never communicated to Mr Akcan. It was submitted that the words “I’ll get this actioned for you now” in the email of 17 March 2020 did not mean that he was going to act on it now; it merely meant that he would respond to it. Despite this, Mr Young accepted that it was never actioned in any “way, shape or form”. Reliance was placed on the fact that by the last week of March 2020, Mr Fleischner was the only person working at LaunchCap thus it was easy to understand the difficulties he was experiencing. It was accepted that the COVID-19 emergency put a different sheen on the issues in this case.

11. [154]

    As for the repeated requests for the loan statement, it was submitted that most of those requests were made in May and early June, by which time Diamond House was already in default.

12. [155]

    As for the claim of misleading and deceptive conduct, it was submitted that the only relevant representation was on 17 March 2020 when Mr Fleischner said that he would “get this actioned… now”. It was submitted that such a representation could not “conceivably” cause any loss to anyone. It was submitted that the relevant counterfactual was to ask what Mr Akcan would have done if that representation had not been made? Mr Young contended that Mr Fleischner’s conduct was not a contractual promise and one could not sue for the breach. Rather, it was submitted that Mr Akcan had to show that he would have done something to put himself in a much better position if not for the relevant statement.

13. [156]

    As for the question of whether there was an implied contractual term obliging the lender to provide a loan statement to Mr Akcan, it was submitted that cl 4.2 was the only relevant provision and that clause did not imply an obligation on the part of the lender to provide a loan statement. Clause 4.2 provided that Mr Akcan had to give 30 days’ notice in the event of refinance. The lender submitted that because such notice had not been given, it was under no obligation to provide a loan statement. It was submitted that it was one thing to assert the implied right to receive a payout figure from the mortgagee in circumstances in which the equity of redemption had arisen and a payout figure was a practical necessity for redemption to proceed, but it was another thing to claim such an implied right when the equity had not yet arisen. It was further submitted that no such implied term was necessary for the businesslike operation of cl 4.2.

14. [157]

    Reliance was placed on the fact that Mr Akcan at one stage indicated that his accountant needed the loan statement (as opposed to his mortgage broker). This was said to be another basis to infer that Mr Fleischner did not know why Mr Akcan was requesting a loan statement.

15. [158]

    The lender accepted that Mr Fleischner knew about the plan to refinance but submitted that Mr Akcan already knew how much was owed and thus did not need a loan statement to obtain refinance. As for the submission that there was a duty to act in good faith, it was submitted that the decision in Kosho Pty Ltd v Trilogy Funds Management Ltd [2013] QSC 135 could be distinguished.

16. [159]

    Overall, as to the claim in relation to the failure to provide the loan statement it was submitted that the ANZ would not have loaned Mr Akcan money during that time as it would have been obvious to the bank that Diamond House was badly affected by the COVID-19 pandemic.

17. [160]

    Mr Young then turned to consider the cross-claim itself. He submitted that Mr Fleischner never represented that he would provide a loan statement within a short period of time. It was submitted that even if he had done so and Mr Akcan had relied on that statement, Mr Akcan could not show any loss arising from the representation.

18. [161]

    As for the unconscionability claim, Mr Young addressed each of the claims made at [55] of the cross-claim (extracted above at [140]) as follows.

19. [162]

    In relation to [55(a)] (failure to provide the loan statement), it was submitted that Mr Akcan never made it clear that that the loan document was required for the purposes of refinancing. Nor did Mr Akcan give the impression that “this [was] some life or death situation” where he urgently needed the document for refinance. It was said that Mr Akcan did not indicate to Mr Fleischner that he would be greatly prejudiced if he did not get the document. Mr Young noted that it was never suggested to Mr Fleischner in cross-examination that he had intentionally failed to provide the loan statement for some “nefarious purpose”.

20. [163]

    As to [55(b)] (implied term under cl 4.2 of the loan agreement), it was submitted that there was no such requirement under that clause.

21. [164]

    As to [55(c)] (the impact of the COVID-19 pandemic), it was submitted that the lender’s position was one that it was perfectly entitled to take given the approach taken by Mr Akcan, in particular by his email of 30 March 2020.

22. [165]

    As to [55(d)] (insisting on strict compliance when the lender was in breach of the contract), it was submitted that the lender had not breached the contract because there was no implied term under cl 4.2. It was otherwise submitted that Mr Akcan was not entitled to any serious consideration or forbearance arising from his email of 30 March 2020 because his language was brusque and he incorrectly stated that the lender was legally obliged to grant mortgage relief.

23. [166]

    As to who the relevant decision-makers were, Mr Young submitted that the evidence disclosed that the ultimate decision-maker was “the committee of Fleischner and Fitzgibbon”. It was submitted that Mr Fleischner was not a mere “cipher”. It was submitted that nothing flowed from the failure to call Mr Fitzgibbon.

24. [167]

    Mr Evans submitted that the lender’s actions had to be judged in the context of the beginning of the COVID-19 pandemic and the significant uncertainty arising from that. It was submitted that business owners like Mr Akcan were largely “in the dark” about what was going to happen and there were many conflicting announcements in a short period. Despite the fact that people were not permitted to leave their homes to shop for jewellery, Mr Akcan kept his shop open even though his sales decreased by 90%. It was submitted that this was a factor in his favour and not one that should be used against him as the lender sought to do. The only two months in which Diamond House did not make payments on the loan were April and May 2020, at the height of the lockdown. Mr Akcan resumed making payments in June 2020. He has continued to make payments at the court rate every month since that time. It was submitted that numerous attempts were made to settle this matter and Mr Akcan always acted in good faith.

25. [168]

    It was submitted that Mr Akcan’s assertion in his email of 30 March 2020 that his business had “stopped” was not a false statement, but one that had to be viewed through the lens of events that were occurring around that time. Counsel for Mr Akcan also drew attention to the fact that although Diamond House as the borrower had insufficient funds to make repayments, Mr Akcan could have drawn on his own funds to pay interest if he had been refused a deed of forbearance. Bank documents were before the Court that supported this proposition. This was said to be relevant both as to his ability to obtain refinance and to the fact that the lender never explored Mr Akcan’s capacity to make reduced or deferred repayments before issuing a default notice on 9 April 2020.

26. [169]

    Although the defendant conceded that the due date under the loan agreement was the first day of each month it was submitted that this condition was varied by the subsequent words and actions of the lender.

27. [170]

    As for the absence of Mr Fitzgibbon as a witness, it was submitted that both he and Mr Fleischner acquiesced as to the due date being the 11th rather than the 8th of each month, as evidenced by Mr Fitzgibbon saying “[t]hanks” after receiving Mr Akcan’s email stating that the due date was the 11th of each month.

28. [171]

    It was submitted that there was a live issue as to why on 6 April 2020 Mr Fleischner requested documents that he already had and which he conceded would not have materially influenced the decision to enter into a deed of forbearance. Reliance was placed on the fact that Mr Fleischner said in that email, “we need to remedy as soon as possible”. He did not inform Mr Akcan that he and Mr Fitzgibbon considered the payment date to be 8 April 2020 nor that they intended to issue a default notice on 9 April 2020. Mr Fleischner did not elaborate on how the documents he sought might assist him to make a decision. It was submitted that the tone of Mr Fleischner’s email and his apparent willingness to consider a deed of forbearance was inconsistent with the email correspondence between Mr Fleischner and Mr Fitzgibbon around that time.

29. [172]

    It was submitted that if the lender had genuinely been considering a deed of forbearance, Mr Fleischner would not have sought irrelevant and historical information from Mr Akcan. Mr Evans submitted that Mr Fleischner’s email of 6 April 2020 was misleading to the extent that it suggested that once Mr Akcan provided that material the lender would enter into a deed of forbearance.

30. [173]

    It was submitted that onus rested on the lender to show that it was acting properly and that the email correspondence of 6 April 2020 suggested that the lender had already decided not to enter into a deed of forbearance before requesting proof of hardship from Mr Akcan. Additionally, even though Mr Fleischner accepted that Mr Akcan provided evidence of hardship, it was submitted that Mr Fitzgibbon was the relevant decision-maker and although he did not give evidence he clearly did not accept Mr Akcan’s evidence of hardship.

31. [174]

    It was submitted that, by its conduct in the preceding weeks and months, the lender was estopped from issuing a default notice to Diamond House on 9 April 2020.

Factual findings

1. [175]

   As stated above, very few factual findings turned on questions of credibility in this matter. I have already found that that Mr Akcan asked Mr Fleischner for a copy of the loan statement during the telephone conversation on 18 February 2020. Mr Fleischner conceded as much in cross-examination.

2. [176]

   I am also satisfied that Mr Fleischner always knew that Mr Akcan would be seeking refinance. That fact was expressly acknowledged in cl 3.4 of the loan agreement. It would have constituted an event of default on Mr Akcan’s part if he had failed to obtain refinance during the term of the loan. I do not accept Mr Fleischner’s evidence that he did not apprehend from Mr Akcan’s repeated requests that Mr Akcan needed the statement for refinancing. His evidence on this point was unconvincing as he was not able to advance any other possible reason for the requests other than “for his records”. It was the common understanding of the parties prior to signing the loan agreement that refinance would be sought early in 2020 (after the diamonds were sold over Christmas). By the time of the second request on 11 March 2020 it was sought “today” and by the time of the third request on 17 March 2020 Mr Akcan had made it clear that he needed it “urgently”.

3. [177]

   I am satisfied that Mr Fleischner had no reasonable basis for his failure to provide the loan statement to Mr Akcan when it was requested. He was unable to provide any explanation for not providing it on 18 February or 11 March 2020. As for his failure to action the request on 17 March 2020, he explained that it was because he was busy due to pressures arising from the COVID-19 pandemic. It was not put to Mr Fleischner that he deliberately declined to do so for some ulterior purpose such as forcing Mr Akcan to remain locked into this loan rather than refinancing at a lower rate of interest. In those circumstances, it is not open to me to make such a finding. It is, however, open to me to find that Mr Fleischner did not see the request as a priority and effectively ignored it on that basis.

4. [178]

   Mr Fleischner was reasonably frank in his evidence. He gave answers that were not always in his interest. Some of his answers suggested that he did not fully comprehend the significance of his actions at that time. He seemed defensive when it was suggested to him that Mr Fitzgibbon was the primary decision-maker, yet he conceded that he was bound to act on Mr Fitzgibbon’s instructions (see above at [92]). His evidence was internally inconsistent as to the degree of autonomy he exercised in managing this loan.

5. [179]

   Mr Fleischner’s evidence as to why Mr Akcan was issued with a default notice on 9 April 2020 was particularly illuminating as to the attitude of the lender. He accepted that he knew Mr Akcan thought that payment was not due until 11 April 2020. He agreed that he delayed responding to Mr Akcan’s email of 30 March 2020 for one week without providing a basis for his delay. He accepted that none of the documents he requested from Mr Akcan on 6 April 2020 would have assisted in establishing hardship. He was satisfied as of 7 April 2020 that Mr Akcan had established hardship due to COVID-19. He said that a decision was made or a “directive” given that no deferral would be granted but that this decision was never communicated (at [89]-[90]). He agreed that he took no steps to warn Mr Akcan of the lender’s intention to issue a default notice on 9 April 2020, despite knowing that Mr Akcan thought payment was not due until 11 April 2020.

6. [180]

   It is not clear to me that Mr Fleischner would have put Mr Akcan into default at that time if not for the instructions of Mr Fitzgibbon, who did not give evidence in this matter. To the extent it is necessary to do so, I am satisfied that it was Mr Fitzgibbon who decided to issue the default notice of 9 April 2020, rather than Mr Fleischner.

7. [181]

   As for whether Mr Fleischner told Ms Arvanitopoulos in May and June 2020 that he would provide her with a default-free loan statement (see [117] above), I prefer the evidence of Ms Arvanitopoulos to that of Mr Fleischner. The contemporaneous documentation shows that Mr Fleischner was saying one thing to Mr Akcan and Ms Arvanitopoulos and another to Mr Fitzgibbon. That is a factor that goes against Mr Fleischner’s credibility. Moreover, there was nothing about Ms Arvanitopoulos’ evidence that led me to have any doubts as to her reliability or credibility. Much of her evidence was consistent with the contemporaneous documentation and the evidence of Mr Akcan.

8. [182]

   The above findings represent those factual findings which turned on issues of credibility. The remaining factual findings turn on inferences to be drawn from the following four pieces of contemporaneous documentation:

   1. (1)

      The text messages between Mr Fleischner and Mr Akcan on 10 March 2020;

   2. (2)

      The email from Mr Fleischner to Mr Akcan on 17 March 2020 informing him that he would “get this actioned… now”;

   3. (3)

      Mr Akcan’s email of 30 March 2020 seeking a deferral of repayments due to COVID-19; and

   4. (4)

      The email from Mr Fleischner to Mr Akcan on 6 April 2020 requesting certain documents and advising that a deed of forbearance deed would be entered into if Mr Akcan provided that documentation (at [84] above).

9. [183]

   I shall consider the significance of these documents below.

Consideration

1. [184]

   The first question for determination is whether the lender was entitled to issue a default notice to Diamond House at dawn on 9 April 2020. There are two aspects to this question. If I am satisfied that the terms of the loan agreement were varied such that repayments were due on the 11th day of each month rather than the 8th, the lender’s claim fails at the first hurdle as it had no basis to issue the default notice on 9 April 2020. If, on the other hand, I am satisfied that the interest payments were due on the 8th day of each month, the question is whether by its conduct the lender was nonetheless estopped from issuing the default notice on 9 April 2020.

2. [185]

   Mr Young submitted that the factual dispute as to whether the due date was 8 April 2020 or 11 April 2020 was irrelevant because Mr Akcan did not make the payment on 11 April 2020 anyway. I do not accept that submission. I am satisfied that the evidence concerning the relevant due dates is central to the determination of the lender’s claim. Moreover, once the lender sent the default notice on 9 April 2020 demanding payment of $50,625.00 within seven days, it was too late for Mr Akcan to pay interest at the ordinary rate on 11 April 2020. To the extent that Mr Young implied that the lender would have accepted payment at the lower rate on that date and withdrawn the default notice of 9 April 2020, nothing in the conduct of the lender both before or after 9 April 2020 supported such an inference.

3. [186]

   It is not difficult to understand why Mr Akcan believed that interest payments were due on the 11th day of each month. He received the funds on 11 November 2019. The first three months’ interest was already deducted from the amount he received so no issue arose as to the due date until February 2020. A default notice was issued on 12 February 2020 and then withdrawn. It was in the context of correspondence about that misunderstanding that Mr Akcan first had the opportunity to assert his understanding that the due date was the 11th day of each month.

4. [187]

   While the basis of Mr Akcan’s understanding is logical and readily apparent, the fact remains that he signed a loan agreement which provided that interest was payable from 30 October 2019 and interest was to be paid on the first day of each month. Although that meant that Mr Akcan was paying a very high interest rate on money he did not even have between 30 October and 11 November 2019, those were the terms he agreed to when he signed the initial offer. It is tolerably clear that this was never explained to him but those were the terms of the contract he signed.

5. [188]

   Clause 12.29 set out the circumstances in which the terms of the contract could be varied. That clause required any variation to be in writing and signed by or on behalf of both parties.

6. [189]

   At no stage did Mr Fleischner ever state, orally or in writing, that he was prepared to vary the repayment date to the 11th day of each month. Nor am I satisfied that Mr Akcan’s unilateral assertions in his emails of 13, 25 and 26 February 2020 support a variation. With the exception of the last of these emails, his assertions were immediately contradicted by Mr Fleischner. These unilateral assertions are incapable of constituting a mutually acknowledged written variation to the express terms of the contract.

7. [190]

   I am further satisfied that the repayment date was varied to the 8th day of each month by Mr Fleischner’s email of 25 February 2020 (extracted above at [47]). to be the 8th day of every month. Although Mr Akcan continued to insist that the due date should be the 11th day of each month (which was the obvious date for such payments), there was nothing in the material before me to permit a conclusion that the contract was thus varied.

8. [191]

   Mr Akcan asserted in his amended defence and written submissions that, in the alternative, a collateral contract arose under which the due date was the 11th of each month. This argument was never adequately developed and cannot be sustained. A collateral contract may arise where an inducement is offered for entry into the principal contract, such that the consideration under the collateral contract is the making of the principal contract: Heilbut, Symons & Co v Buckleton [1913] AC 30 at 47; Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133 at 139; [1919] HCA 64. But that is not this case. The relevant discussions about the due date for payment occurred in February, some three months after the parties signed the contract. In those circumstances, it is not possible to infer a collateral contract: Hercules Motors Pty Ltd v Schubert (1953) 53 SR (NSW) 301 at 303.

9. [192]

   I am satisfied that the original terms of the contract required payment to be made on the first day of each month, with interest accruing from 30 October 2019 but the date for repayment was varied to the 8th of each month by Mr Fleischner’s email of 25 February 2020.

10. [193]

    Although I am satisfied that the contract was varied such that payments were due on the 8th day of each month rather than the 11th, that is not the end of the matter. I have already found that Mr Fleischner knew that Mr Akcan believed the payments to be due on the 11th day of each month. I am also satisfied, to the extent that it is relevant, that Mr Fitzgibbon was aware of this because Mr Fleischner forwarded the relevant emails to him and he acknowledged receipt of those emails.

11. [194]

    A question arises as to whether the lender was entitled to issue a default notice on 9 April 2020 given its conduct from mid-February to 9 April 2020. Mr Akcan relied on the principles of estoppel by conduct as set out in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; [1988] HCA 7 (“Waltons v Maher”). The elements of this equitable estoppel were set out by Brennan J at 428-9 as follows:

12. [195]

    Further, in the joint judgment of Mason CJ and Wilson J, their Honours observed that the “common thread” in the relevant cases was an element of unconscionability (at 404):

13. [196]

    I am unable to accept Mr Young’s submission that Mr Akcan had not established “any form of estoppel known either to common law or equity”. Mr Akcan asserted that he, as director of Diamond House, had been induced to believe that he was permitted to make the payments on the 11th day of each month and acted in reliance upon that assumption. The lender induced that assumption by its conduct in March 2020, in particular the text messages of 10 and 11 March 2020. Mr Fleischner knew of Mr Akcan’s assumption and did nothing to disabuse him of it. The lender did not fulfil that expectation and Mr Akcan suffered detriment as a result. I have already set out the conduct on the part of the lender giving rise to such an estoppel, but it can be summarised as follows:

    1. (1)

       The first time that the question of repayments arose in February 2020 Mr Akcan made it clear that he believed the repayments were due on the 11th day of each month.

    2. (2)

       When Mr Akcan did not make a payment on 8 March 2020 no default notice was issued on 9 or 10 March 2020. Instead a text was sent on 10 March 2020 by Mr Fleischner checking whether the payment was “good to go”. This could only mean, in the context of the other findings I have made, “good to go [tomorrow]”. At no stage during that exchange was there any suggestion that the lender believed Mr Akcan to be in default by not paying on 8 March 2020.

    3. (3)

       Mr Akcan paid promptly on 11 March 2020.

    4. (4)

       No default notice was ever issued in March 2020 and Mr Fleischner’s evidence was that he did not believe Mr Akcan to be in default as at 30 March 2020.

    5. (5)

       On 30 March 2020, Mr Akcan sought deferral of his interest payments given the impact of COVID-19 on his business.

    6. (6)

       Mr Fleischner on behalf of the lender did not respond to Mr Akcan’s email on 31 March, 1 April, 2 April, 3 April, 4 April or 5 April. At a time when it would have been obvious to Mr Fleischner that Mr Akcan needed an answer urgently, no answer was provided until 6 April 2020. This was at a time when the COVID-19 pandemic had created an atmosphere of uncertainty for business owners such as Mr Akcan. The failure to respond to that email could only have led Mr Akcan to believe that there was no opposition to that course being taken. It is common ground that the lender did not contact Mr Akcan during that period to suggest otherwise.

    7. (7)

       It was not until 6 April 2020 that Mr Fleischner sent an email to Mr Akcan indicating:

    8. (8)

       Mr Akcan replied promptly to this email on 7 April 2020 indicating that the lender already had all of those documents. Mr Fleischner agreed in his evidence that that was the case. He also agreed that none of the documents he requested could have assisted in assessing whether Mr Akcan’s business was suffering hardship due to COVID-19.

    9. (9)

       After receiving that information on 7 April 2020, the lender did not reply to Mr Akcan. Mr Akcan was never advised that the information provided was inadequate. He could not have been so advised as Mr Fleischner’s evidence on oath was that he believed that Mr Akcan had established hardship by that time. It was Mr Fitzgibbon who found otherwise. At that stage of the negotiation, the ball was very much in the lender’s court. There was nothing Mr Akcan could do but wait until he received advice from the lender as to whether they would enter into a deed of forbearance.

    10. (10)

        The following day was 8 April 2020. Mr Fleischner knew that Mr Akcan did not believe payment was due on that day. Despite this, he did not communicate with Mr Akcan on behalf of the lender to advise him that, contrary to the approach taken in March 2020, failure to make an interest payment on 8 April would be treated as an event of default. Nor was there any indication that his request for deferral had been determined against him. The lender was silent on both repayment and deferral whilst Mr Akcan waited for a response.

    11. (11)

        The lender’s response came the following day. A default notice was served on Mr Akcan at 6:30 in the morning at his home.

14. [197]

    I am satisfied that all of the elements referred to by Brennan J in Waltons v Maher are made out, including the requirement that it would be unconscionable for the lender to seek to rely on its strict rights, having induced in Mr Akcan the assumption that he could pay interest on the 11th day of each month and not be in default and in conveying the impression that it was still considering his request for deferral due to COVID-19 hardship.

15. [198]

    As for Mr Akcan’s reliance on the force majeure clause, the only relevant clause is cl 12.31 which provides that the lender’s obligations under the agreement may be suspended due to force majeure but makes no similar provision for any other party such as Diamond House.

16. [199]

    Similarly, although the defence pleaded relief against forfeiture, that is a matter for the cross-claim rather than the defence and it was not pressed at the hearing.

17. [200]

    Finally, although misleading and deceptive conduct was also pleaded in the defence, it was at no stage articulated how that claim could be a defence to the claim. It was however squarely raised in the cross-claim, which I will consider below.

Conclusion: statement of claim

1. [201]

   I am not satisfied that the lender was entitled to issue a default notice on 9 April 2020; the lender was estopped from doing so given its previous conduct.

2. [202]

   I will next consider the issues raised in the cross-claim before addressing the question of the appropriate relief in this matter.

The cross-claim

1. [203]

   Mr Akcan relied on three causes of action based on the continued failure of Mr Fleischner to provide him with a copy of the loan statement despite numerous requests, as well as the conduct of the lender and Mr Fleischner after the default notice was issued on 9 April 2020. Those three causes of action were:

   1. (1)

      Breach of an implied term of the contract. The implied term was said to oblige the lender to provide a loan statement upon request by the borrower;

   2. (2)

      Unconscionable conduct under ss 20 or 21 of the ACL. This was said to arise from a course of conduct including failure to provide the loan statement, refusal to defer or reduce payments due to COVID-19 hardship and the issue of a default notice during hardship negotiations; and

   3. (3)

      Misleading and deceptive conduct under s 18 of the ACL, based on Mr Fleischner’s representation on 17 March 2020 that the request would be “actioned… now” and his subsequent failure to do so.

2. [204]

   I shall deal with each of these claims in turn.

3. [205]

   Clause 4.2 of the contract provides for the borrower’s right of early repayment. The question is whether cl 4.2 contained an implied term requiring the lender to issue a loan statement within a reasonable time after the borrower’s request to facilitate early repayment. I am satisfied that notice under cl 4.2 is irrevocable and requires the borrower to specify the exact amount to be paid out. It is difficult to see how the exact amount could be specified with certainty without the loan statement. I do not accept the submission made on behalf of the lender that Mr Akcan knew that precise amount. He probably could have worked out an approximate amount but that would not have been sufficient to comply with the requirements of cl 4.2.

4. [206]

   I have considered the five requirements for the implication of a term as set out in B.P. Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283. Those requirements are:

5. [207]

   I am satisfied that without the implied right to obtain a loan statement, the express right to early repayment under cl 4.2 is meaningless. The term is reasonable and equitable and necessary to give business efficacy to the contract because without it, the lender could prevent early repayment by simply refusing to provide a loan statement (which is the effect of what happened in this case). The implied term is obvious, capable of clear expression and not contrary to any of the express provisions of the contract. It is also in accordance with the statement in Butt v McDonald (1896) 7 QLJ 68 at 70-71 (as adopted by Mason J in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607; [1979] HCA 51) that:

6. [208]

   It was common ground at the hearing that it was the shared understanding of the parties to the loan that it would be paid out by way of refinance. This common understanding was enshrined in cl 3.4 (extracted above at [22]), which provided, inter alia, that failure on the part of the borrower to obtain refinance prior to the termination date would be an event of default, time being of the essence.

7. [209]

   The lender relied on the decision of Bryson J in Nadrak Pty Ltd v Permanent Custodians Ltd (1994) 6 BPR 13,344.

8. [210]

   The issue in that matter concerned the right of discharge at any particular point of time and damages claimed for delay. That is a different question. The issue in this case is whether the lender was required to provide a loan statement in circumstances where provision of the loan statement was a necessary pre-requisite to providing notice under cl 4.2 and exercising the right of early repayment. The fact that Diamond House had no “present” right to redeem is a different point.

9. [211]

   I cannot accept the lender’s contention that it was under no obligation to facilitate refinance by way of the provision of a loan statement until after it received notice under cl 4.2. Such an argument is contrary to the terms of cl 4.2 which require the exact amount to be included. Again, to the extent that the lender contended that it would not have taken the point if the notice had not specified the correct amount, that was inconsistent with the manner in which it behaved in relation to the loan standing back and considering it as a whole.

10. [212]

    I do not accept the lender’s construction of cl 4.2, namely that Diamond House had to first give notice specifying the amount and date of repayment and then the lender would put itself in a position to allow the mortgage to be redeemed, including by providing a loan statement. Again, that submission ignored the requirement in cl 4.2 that the written notice specify the amount to be repaid.

11. [213]

    For these reasons I am satisfied that it was an implied term under the contract that the lender was required to provide a loan statement on request and this implied term was breached by the lender.

12. [214]

    In written submissions Mr Akcan and Diamond House also relied upon breach of an implied term of good faith by failing to provide a loan statement and then defaulting Mr Akcan on 9 April 2020: Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 and Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 at [144]. In Cordon Investments, Bathurst CJ (Macfarlan and Meagher JJA agreeing) observed that the duty of good faith has commonly been held to include the following matters (at [145]):

13. [215]

    To the extent that it is necessary to do so, having regard to the nature of the agreement between the parties, I am satisfied that it was an implied term of the loan agreement that the parties at all times act in good faith. For reasons I have already stated and which I consider further below in relation to the claim of unconscionable conduct, I am satisfied that the lender’s conduct fell below the standards of conduct that would be considered reasonable given the interests of the parties. I am thus satisfied that the lender by its conduct breached the implied term of good faith.

14. [216]

    The claim of unconscionable conduct was made under ss 20 and 21 of the ACL. The parties agreed that the conduct occurred in trade or commerce and thus those sections were applicable. Although s 20 of the ACL was pleaded, the defendant’s submissions addressed s 21. No issue was taken about this by the lender and I will proceed on the basis that s 21 is the relevant provision. Unconscionable conduct under s 21 is not limited by the common law doctrine of unconscionability (s 21(4)(a), ACL) and thus does not require the party seeking relief to be under a special disadvantage (cf Blomley v Ryan (1956) 99 CLR 362 at 405; [1956] HCA 81 per Fullagar J). Section 21 of the ACL provides as follows:

15. [217]

    Section 22 of the ACL sets out the matters to which the Court may have regard for the purposes of unconscionable conduct under s 21. Mr Akcan and Diamond House relied upon a course of conduct including the acts or omissions I have already set out above at [140] as well as the failure to provide the loan statement.

16. [218]

    The relevant principles in relation to statutory unconscionability were set out by Allsop CJ in Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199; [2015] FCAFC 50 at [296] (subsequently adopted by Kiefel CJ and Bell J in Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; [2019] HCA 18 at [14]):

17. [219]

    In Australian Competition and Consumer Commission (ACCC) v Lux Distributors Pty Ltd [2013] FCAFC 90 at [23], Allsop CJ referred to the need to evaluate the facts of each case “by reference to a normative standard of conscience… permeated with accepted and acceptable community values”. This includes the expectation that “consumers will be dealt with honestly, fairly and without deception or unfair pressure” (at [23]). In Tonto Home Loans Australia Pty Ltd v Tavares; FirstMac Ltd v Di Benedetto; FirstMac Ltd v O'Donnell [2011] NSWCA 389, Allsop P (Bathurst CJ and Campbell JA agreeing) held that the range of conduct captured by statutory unconscionability is wide and can include (at [291]):

18. [220]

    Where, as here, a system or pattern of conduct is relied upon, unconscionable conduct may be established by “a systemic pattern of behaviour involving an accumulation of minor incidents” each of which, in isolation, may not be substantial: Australian Competition and Consumer Commission (ACCC) v Get Qualified Australia Pty Ltd (In Liq) (No 2) [2017] FCA 709 at [66] per Beach J.

19. [221]

    An assessment of whether conduct is unconscionable is an “objective value judgment” of the impugned behaviour, although the subjective state of mind, whether actual or constructive, will be “relevant to the broader sense” of the test: Australian Competition and Consumer Commission v Medibank Private Ltd (2018) 267 FCR 544; [2018] FCAFC 235 at [247] per Beach J (Perram and Murphy JJ agreeing).

20. [222]

    Mr Fleischner’s evidence was that he could not think of any reason why Mr Akcan would need a loan statement beside refinancing, although he somewhat faintly ultimately suggested that he might have needed it “for his records”.

21. [223]

    I have already made the factual findings necessary to consider this ground. I am satisfied that Mr Fleischner knew that Mr Akcan needed to refinance, knew that he needed a loan statement to do so, did not act on the request on 18 February 2020, did not act on the request of 11 March 2020 and did not even act on the urgent request on 17 March 2020 despite replying immediately to say that the request would be “actioned… now”. In total 13 requests for such a statement were made by both Mr Akcan and his mortgage broker Ms Arvanitopoulos before a statement showing a default was finally issued on 22 June 2020.

22. [224]

    Although the lender’s state of mind is relevant, I do not accept the lender’s submission that because there was no “malice” or “nefarious” purpose on the part of Mr Fleischner, the conduct of the lender could not be unconscionable. The evidence disclosed that Mr Fleischner did not take the request seriously or give it any priority despite Mr Akcan saying he needed it “urgently” on 17 March 2020, after his two earlier requests were ignored. No explanations were provided for the first two failures and the explanation for the third failure to respond (to the 17 March 2020 email) was that Mr Fleischner did not get around to it as he was busy. To the extent that this issue turns on an assessment of the relevant conduct as against accepted and acceptable community values, the conduct of the lender fell far short.

23. [225]

    I am satisfied that had Mr Akcan been provided with the loan statement at any time after his first request on 18 February 2020 and prior to the issue of the default notice on 9 April 2020 he would have been able to obtain refinance with ANZ bank at a significantly lower rate. I accept the evidence of Ms Arvanitopoulos in that respect. Mr Young’s assertion that Mr Akcan would not have been able to obtain refinance at the lower rate was not supported by any evidence. Nor do I accept Mr Young’s submission that a loan statement was not required because the incoming mortgagee could simply have relied on uncorroborated assurances by Mr Akcan as to the state of the loan. That submission was contrary to the evidence of both Mr Akcan, that he has never obtained refinance without a loan statement, and Ms Arvanitopoulos, which was that she would not waste her time applying for refinance without a loan statement. It was also contrary to the evidence of Mr Fleischner, which was that you could not refinance without a loan statement.

24. [226]

    As for the submission that any conduct after Mr Akcan’s email of 30 March 2020 could not have been unconscionable because Mr Akcan had repudiated the contract on that date, I reject it. Consistent with the findings I have already made about that email, I am satisfied that it was written by a man who spoke English as his fifth language and was operating a jewellery business in an empty shopping centre in the midst of Sydney’s initial COVID-19 shutdown. There were several announcements by the government and various banks about mortgage relief, although there were no concrete policies at that time that would have assisted Mr Akcan. They were uncertain times. The 30 March 2020 email is clearly a request for some form of relief in that climate. It is also clear from Mr Fleischner’s response of 6 April 2020 that he did not consider Mr Akcan’s email to be a repudiation of his obligations under the contract.

25. [227]

    I am satisfied that the lender’s failure to provide a loan statement caused considerable detriment to Mr Akcan and no reasonable explanation for that failure has ever been provided. The cross-claimants have established unconscionable conduct under s 21 of the ACL. I include in that finding the lender’s conduct in issuing the default notice on 9 April 2020 whilst negotiations about deferral were ongoing for the reasons I have already provided.

26. [228]

    Finally, the cross-claim also asserted that the lender and LaunchCap engaged in misleading or deceptive conduct under s 18 of the ACL by Mr Fleischner’s representation of 17 March 2020, in which he stated in response to Mr Akcan’s request for a loan statement that he would “get this actioned… now”. That section provides as follows:

27. [229]

    As above, it was agreed that the relevant conduct occurred in trade or commerce.

28. [230]

    The cross-claimants also relied on s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (“ASIC Act”). It is in the same terms but applies specifically to the provision of financial services. That section provides as follows:

29. [231]

    Section 12BB of the ASIC Act provides that a representation with respect to a future matter will be misleading where the representor has no reasonable grounds for the representation and places an evidential burden on the representor to demonstrate reasonable grounds for the representation:

30. [232]

    A representation may be misleading even if reasonable grounds are identified. Where a representation relates to the representor’s future conduct, reasonable grounds will require that the representor had both the ability and intention to perform: Awad v Twin Creeks Properties Pty Limited [2012] NSWCA 200 at [10].

31. [233]

    The question of whether a person had reasonable grounds is judged at the time of the representation, although subsequent events may shed light on the overall probability that the representation was reasonable: Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513; [1998] FCA 1405; City of Botany Bay Council v Jazabas Pty Limited (ACN 060 105 053) [2001] NSWCA 94 at [83] per Mason P, Beazley JA agreeing.

32. [234]

    I have already found, in considering the unconscionability argument, that Mr Fleischner had no reasonable grounds to promise that he would get the request “actioned… now” and then ignore it without any explanation. I have already rejected Mr Young’s submission that it was “highly dubious” that Mr Akcan could have obtained refinance at a lower rate if the loan statement had been provided in February or March, due to the impact of COVID-19. I accept the evidence of Ms Arvanitopoulos on this issue for the reasons already provided.

33. [235]

    I am satisfied that Mr Fleischner’s intention was to get Mr Akcan “off his back” by promising immediate action and then immediately forgetting about it. I am satisfied that he knew he should have provided a loan statement by that time because, having ignored two previous requests, Mr Fleischner replied just one minute after the third request. Despite these findings, I am not satisfied that Mr Fleischner acted in a misleading and deceptive manner in so doing. He simply considered the request to be a low priority and wrote what he did to get Mr Akcan off his back.

Conclusion: cross-claim

1. [236]

   I am satisfied that the lender breached an implied term of the contract by repeatedly failing to provide the loan statement and that the lender and Mr Fleischner acted unconscionably in failing to provide the loan statement and sending the default notice on 9 April 2020 in the midst of negotiations about a deferral of repayments. I am not satisfied that Mr Fleischner’s statement on 17 March 2020 that he would get Mr Akcan’s request “actioned… now” was misleading and deceptive conduct under either the ACL or the ASIC Act.

Relief

1. [237]

   The orders I would make in relation to the statement of claim are that it be dismissed with costs.

2. [238]

   The orders I make in relation to the cross-claim should, as near as possible, place Mr Akcan back into the position he would have been had he not been wrongly issued with a default notice on 9 April 2020 and had he been provided with the loan statement within a reasonable time after his first request and, at the very latest, by the time of the second request on 11 March 2020.

3. [239]

   I note that Diamond House made no repayments in April or May 2020. Payment at the non-default rate was made in June 2020. Since the statement of claim was filed the payments have been made monthly at the court rate, that being 4% above the cash rate last published by the RBA (thus between 4.25% and 4.10% during the relevant period).

4. [240]

   I have already held that had the loan statement been issued within a reasonable time Mr Akcan would have been able to refinance and would be have been paying a much lower interest rate of 2.29% (as per the evidence given by Ms Arvanitopoulos).

5. [241]

   I would grant the declaration sought relieving Mr Akcan of the obligation to pay interest at the lower rate under the loan agreement (11.5%) from the time that he would have been able to obtain refinance. I would also grant the mandatory injunction sought requiring the lender to issue a loan statement that records the payment of interest without default and states a payout figure of the principal amount and any applicable fees.

ORDERS

1. [242]

   Accordingly, I make the following orders:

   1. (1)

      The statement of claim is dismissed.

   2. (2)

      Verdict for the cross-claimants on the cross-claim filed on 24 August 2020.

   3. (3)

      The plaintiff is to issue a loan statement to Diamond House free of any default notation within seven days of this judgment to enable refinancing of the loan.

   4. (4)

      The loan statement issued by the plaintiff is to be calculated by applying an interest rate of 2.29% from 8 April 2020 until the date of settlement and offsetting that as against the payments already made.

   5. (5)

      The plaintiff/cross-defendants are to pay the defendant’s/cross-claimants’ costs on the ordinary basis.

   6. (6)

      The parties have leave to apply to vary these orders by consent in accordance with the judgment within seven days.