IN THE COUNTY COURT OF VICTORIA
AT Melbourne
COMMERCIAL DIVISION	Revised
Not Restricted
Suitable for Publication	
  banking and finance list

Case No. CI-20-02612

MCL102 PTY LTD (ACN 638 966 800)	Plaintiff	
		
v		
		
THEORDORA YUEN

and

SCOTT CASEY	Defendant

Third Party	

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JUDGE:	HIS HONOUR JUDGE COSGRAVE	
WHERE HELD:	Melbourne	
DATE OF HEARING:	Determined on the papers (submissions filed 27 May 2022)	
DATE OF JUDGMENT:	7 June 2022	
CASE MAY BE CITED AS:	MCL 102 Pty Ltd v Yuen & Anor (No 2)	
MEDIUM NEUTRAL CITATION:	[2022] VCC 809		

REASONS FOR JUDGMENT (No 2)
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Subject:	RECOVERY OF DEBT – THIRD PARTY CLAIM
Catchwords: 	Default by third party – financial services – financial services× advice – financial products – financial product advice – misleading and deceptive conduct – damages
Legislation Cited:	Australian Securities and Investments Commission Act 2001 (Cth); Australian Securities and Investments Commission Regulations 2001 (Cth); Corporations Act 2001 (Cth); Corporations Regulations 2001 (Cth); County Court Civil Procedure Rules 2018 (Vic); National Consumer Credit Protection Act 2009 (Cth)
Cases Cited:	Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) (2018) 266 FCR 147; Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; Taylor v Crossman (No 2) (2012) 199 FCR 363; Xuan v Xu [2022] FCA 508

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APPEARANCES:
	Counsel	Solicitors	
For the Plaintiff	Mr C. Salpigtidis	Summer Lawyers 	
			
For the Defendant

For the Third Party	Mr G.J. Moloney

         ---	Self-represented 

No appearance	

HIS HONOUR:

Introduction
1	I gave reasons for judgment (“the principal reasons”) in this matter on 28 April 2022, in favour of the plaintiff (“MCL”) against the defendant (“Yuen”).  On 11 May 2022, I made orders that:
(a)	the defendant pay the plaintiff the sum of $275,000, together with interest until the date of judgment in the sum of $207,761.72;
(b)	the plaintiff recover from the defendant possession of the land situated at and known as Unit 302, 632 Doncaster Road, Doncaster, in the State of Victoria, being the whole of the land more particularly described in Certificate of Title Volume 11392 Folio 236;
(c)	the defendant pay the plaintiff’s costs of and incidental to the proceeding, including any reserved costs, such costs to be taxed on an indemnity basis in default of agreement.
2	In the proceeding, Yuen made a third party claim against Scott Casey (“Casey”).  This judgment deals with that claim.  It assumes familiarity with the principal reasons and uses the same terminology.  
Background
3	On 12 July 2021, Yuen filed a third party notice dated 29 June 2021, against Casey.  Casey purported to act as her adviser and agent in relation to her financial dealings with the original mortgagee of the property and, subsequently, MCL.
4	On 22 July 2021, the court made orders for substituted service on Casey.  Yuen was required to effect service by:
(a)	sending a sealed copy of the third party notice and statement of claim and a copy of the substituted service order to an address in Warrandyte;
(b)	sending an SMS text message to the mobile phone number on which Yuen had previously contacted Casey;
(c)	sending emails to two nominated email addresses attaching copies in PDF format of the sealed third party notice, statement of claim and substituted service order.
5	On 9 September 2021, Yuen affirmed an affidavit in which she said that she had effected service on Casey in accordance with the court’s order.  
6	In the eight months after service was effected, Casey did not file or serve an appearance.
7	On 23 May 2022, Yuen emailed the case coordinator of the County Court to ask whether Casey had filed an appearance.  On 24 May 2022, Yuen received a reply from the case coordinator advising that she had checked the court file in this proceeding and no third party appearance had been filed by the listed third party, Casey.
8	Casey did not participate at all in the trial of the proceeding.
9	When I delivered my reasons for judgment, I indicated that orders would be entered after the parties provided further information and/or submissions.
10	After making the orders set out in paragraph 1 above, I gave Yuen the opportunity to make further submissions to the court regarding the third party proceeding.  Yuen filed submissions on 27 May 2022.  
11	On the material before me, I understand that at present Yuen:
(a)	has not paid MCL the judgment amount set out in paragraph 1 of my orders;
(b)	still retains possession of the property; and
(c)	has not yet paid MCL’s costs of the proceeding.
Nature of application
12	Yuen applies to the court for leave to enter judgment against Casey in default of appearance.  
13	The jurisdiction of the court to deal with the application is found in Order 11.11 of the County Court Civil Procedure Rules 2018 (Vic) (“the Rules”).  This provides:
“Default by third party
(1)	Where at the time any judgment is entered or given for the plaintiff against the defendant by whom the third party was joined the third party has not filed an appearance or after appearance has not served a defence, and the time limited for filing an appearance or serving a defence has expired—
	(a)	the third party—
		(i)	shall be taken to admit any claim stated in the third party notice; and
		(ii)	shall be bound by the judgment between the plaintiff and the defendant insofar as it is relevant to any claim or question stated in the notice;
	(b)	the defendant may at any time after satisfaction of that judgment or, with the leave of the Court, before satisfaction, enter judgment against the third party—
		(i)	for any contribution or indemnity claimed in the notice; and
		(ii)	with the leave of the Court, for any other relief or remedy claimed therein.”
14	The Rules require that, before the court acts on such an application, the evidence establishes that:
•	judgment has been entered or given for the plaintiff against the defendant who joined the third party;
•	the third party has not filed an appearance; and
•	the time for filing an appearance has expired.
15	In the present case, each of these requirements has been satisfied. The authenticated order made on 11 May 2022, proves the judgment for MCL against Yuen.  The fruitless search of the court file on about 24 May 2022, establishes the absence of an appearance.  The operation of Rules 11.08(1)(a) and 8.04(a) shows that the time for filing an appearance has expired.
16	The circumstances of the application are such that, not having filed an appearance, Casey is taken to have admitted any claim alleged in the third party notice.  Also, Casey is bound by the judgment between MCL and Yuen insofar as it is relevant to any claim or question in the third party notice.  
17	The statement of claim on the third party notice repeats, for the purposes of the third party proceeding, all the plaintiff’s allegations in its amended statement of claim together with the allegations in paragraphs 4 and 5 in the amended defence and counterclaim.  
18	In paragraph 4 of the third party statement of claim, Yuen alleges that Casey engaged in misleading and deceptive conduct pursuant to section 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (“the ASIC Act”) by:
(a)	wrongfully making an application for finance in the name of a corporate entity while knowing that the loan was for a personal purpose;
(b)	making false representations for the purposes of inducing Yuen into entering into the loan agreement.
19	Yuen also alleged that Casey, by making the representation contained in paragraph 4 of the amended defence and counterclaim:
(a)	made a misleading representation with respect to a future matter within section 12BB of the ASIC Act;
(b)	gave misleading information within the meaning of the National Consumer Credit Protection Act 2009 (Cth) (“the NCCP Act”);
(c)	made a false or misleading statement within section 1041E of the Corporations Act 2001 (Cth) (“the Corporations Act”);
(d)	engaged in misleading and deceptive conduct within the meaning of section 1041H of the Corporations Act.
20	The representation alleged in paragraph 4 of the amended defence and counterclaim had three elements, namely:
•	advising that Casey could arrange for Yuen to obtain a loan from a company called “Magnolia Capital”;
•	despite the loan being for Yuen’s personal use, the loan would need to be made by MA SOF 32 to Friseur Pty Ltd; and
•	within six months of receiving the loan from MA SOF32, the loan would be converted into a mainstream facility in an agreement with the Bendigo Bank.
21	The prayer for relief in the third party notice sought the following relief against Casey:
(a)	a declaration that Yuen was entitled to be indemnified by Casey against any judgment including costs which MCL might obtain in the proceeding, alternatively, a declaration that Yuen was entitled to contribution from Casey in such proportion as the court deemed just and equitable;
(b)	alternatively, damages under section 12GF of the ASIC Act, sections 178 or 179 of the NCCP Act, and section 1041I of the Corporations Act.
22	Although by his non-appearance, Casey is deemed to have admitted the claim against him, it is appropriate that the court be satisfied that the claims made by Yuen are maintainable and warrant the grant of relief.
Analysis
23	I am not satisfied that there is a valid claim under the NCCP Act. Here, a loan was made in large part for business purposes because it replaced the loan previously made to Friseur by the ANZ Banking Group. Further, the loan was made in connection with issues arising from Yuen’s hairdressing business and was advanced to a company and not to an individual. For these reasons, it is difficult to see how the NCCP Act would apply.
24	The claims under the Corporations Act also present a problem. Section 1041E relates to false and misleading statements which induce a person to do certain things in relation to financial products. Section 1041H prohibits misleading or deceptive conduct in relation to financial products or a financial service. Section 766A(1) has the effect of limiting financial services to particular services involving financial products. 
25	A credit facility, as set out in the Corporations Regulations 2001 (Cth) (“the Regulations”), is not a financial product for the purposes of chapter 7 of the Corporations Act in which sections 1041E and 1041H fall (see section 765A(1)(h)(i)). From regulation 7.1.06(1)(a) it appears that a mortgage is not a financial product for the purposes of chapter 7. On that basis, there would be no foundation for a claim under this part of the Corporations Act. 
26	Section 12DA of the ASIC Act provides: 
“(1) A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive…
(2) Nothing in sections 12DB to 12DN limits by implication the generality of subsection (1).”
Accordingly, in order for Yuen to establish a contravention of section 12DA she must show that Casey engaged in conduct in trade or commerce in relation to financial services and the conduct was misleading or deceptive. 
27	As noted by Halley J in Xuan v Xu, the expression “in relation to” financial services in section 12DA has been found to be “extremely wide” and an indirect or less than substantial connection may be sufficient.
28	Courts have construed the expression “in trade or commerce” broadly such that it is not limited to conduct undertaken for the dominant purpose of making a profit. It includes activities which have a trading or commercial character. In the present case, Casey conducted himself as the agent of Yuen and Friseur and was paid for his services. 
29	A court determines objectively whether or not conduct is misleading or deceptive. The court is to examine and assess the party’s conduct as a whole viewed in the context of all relevant facts and circumstances at the time the conduct in question takes place. The phrase “likely to mislead or deceive” does not require proof that any individual was actually misled or deceived. Conduct is likely to mislead or deceive if there is a real, or not remote, possibility of a person being misled. It is not enough to merely cause confusion.
30	The critical concepts in relation to section 12DA(1) are conveniently set out in the reasons of Halley J in Xuan v Xu. So far as currently relevant, the position with “financial services” is that:
(a)	A financial service includes providing “financial services advice” or providing “a service that is otherwise supplied in relation to a financial product”;
(b)	“financial product advice” means “a recommendation or a statement of opinion … that “(a) is intended to influence a person … in making a decision in relation to a particular financial product …”; 
(c)	a “financial product” includes “a credit facility (within the meaning of the regulations)”;  
(d)	a credit facility is defined by the regulations to include “the provision of credit for any period” so that such a credit facility is a financial product.
31	The credit facility here is the mortgage. By reason of sub-regulation 2B(1)(a)(i), that form of credit is a financial product. The representations and/or statements made by Casey to Yuen constitute “financial services advice”. This is because they constituted “financial product advice” in making recommendations or statements of opinion intended to influence Yuen and her company to make the decision to proceed with the borrowing from MCL and give the mortgage as security. Such advice is a “financial service” within section 12BAB(1)(a) and “financial product advice” within section 12BAB(5).
32	Insofar as any of Casey’s statements or opinions in relation to the financial service or product constitutes a representation as to a future matter, section 12BB becomes relevant. This provides that if a person makes a representation with respect to any future matter and the person does not have reasonable grounds for making the representation, the representation is taken to be misleading. Unless evidence is adduced to the contrary, the person making the representation is deemed not to have had reasonable grounds for making the same if the representation does not come to pass. I note that simply because a person has reasonable grounds for making a representation does not necessarily mean that the representation is not misleading.
33	To the extent that Casey advised Yuen (implicitly at least) that it was in her best interests to enter into the loan and security arrangement with MA SOF 32, I regard his conduct as misleading or deceptive because that advice was not soundly based. If Yuen had a problem meeting her obligations to the ANZ with respect to a loan of about $128,000, then in the absence of a substantial change in her fortunes, Yuen would not be able to honour her commitments to MA SOF 32 for a loan of $275,000.
34	Insofar as Casey represented that he had arranged a loan facility with Bendigo Bank and the loan from MA SOF 32 would transfer to Bendigo Bank in six months or less, that was false. There was no evidence to support the proposition that Casey had obtained loan approval from Bendigo Bank and ample reason to consider his assertions about Bendigo Bank to be an invention.
35	If the representation were to the effect that he would obtain a suitable loan from Bendigo Bank within six months, the representation was one as to the future. But in circumstances where it did not come to pass, and there was no evidence to suggest a reasonable basis for the representation, it is deemed to be misleading and deceptive by virtue of section 12BB. I note that in his dealings with both Yuen and Schifter, Casey represented that he had already organised the loan with Bendigo Bank.
36	I am satisfied that Yuen relied upon what Casey told her and that a significant part of the loss and damage she suffered resulted from his conduct in contravention of the ASIC Act. Yuen is entitled to recover the loss and damage suffered under section 12GF(1) of the ASIC Act. 
37	While I have considered the applicable evidence and law in some detail, I accept Yuen’s argument that she does not have to prove all the details of her case in order to obtain relief but has only to establish that the claims she makes under the ASIC Act are legally available to her.
38	Because Yuen has not yet satisfied the judgment against her, she requires leave from the court:
•	under Rule 11.11(1)(b)(ii) to obtain damages or compensation against Casey rather than indemnity or contribution;
•	under Rule 11.14(2) to enforce any orders against Casey before she satisfies the judgment in favour of MCL.
Yuen seeks leave to act now so that she can recover what she can from Casey so she might more readily satisfy the judgment against her.
39	Given that Casey was actively involved in dealing with Yuen and arranging the finance from MA SOF 32 and misrepresented the true position to Yuen, Schifter and the lender, he is largely responsible for the difficult position in which Yuen finds herself. Accordingly, I consider it appropriate that Yuen have leave to obtain judgment against Casey now for damages or compensation and that she be permitted to enforce that judgment immediately.
40	However, there is one important limitation on the leave given by the court. At the time Yuen entered into the loan and security arrangement with MA SOF 32, she owed a debt of $128,458.29 to the ANZ and had granted that bank a first registered mortgage over the property. In my view, the court has to take this debt into account. Casey should be liable to Yuen only to the degree to which he caused her financial position to materially worsen. This involves a comparison between her current position and the position she would have been in assuming the ANZ loan had continued. Either way, it seems inevitable that, unless Yuen’s financial situation significantly improved, she would have been forced to sell the property.

Conclusion 
41	I order that there be judgment in favour of Yuen against Casey for damages and that Yuen have leave to enforce that judgment immediately before satisfying the judgment against her in favour of MCL. I invite Yuen’s counsel to make further submissions as to the amount of damages and the form of order his client seeks.