Stacks Managed Investments Limited v Tolteca [2015] QSC 80

The borrower sued its former solicitor for his conduct relating to its entry into the loan. 

In separate proceedings the lender sought possession and the borrower counterclaims for relief founded on “unconscionable conduct” by the lender in the giving of the loan in breach of section 12CB of the Australian Securities and Investments Commission Act 2001.

The lender’s alleged “unconscionable conduct” was 

  1. the loan was far in excess of the amount which Tolteca had unsuccessfully sought from the lender only some 4 months earlier, but there had been no material change in Tolteca’s circumstances;
  2. the lender knew that the sole director of Tolteca was not commercially sophisticated and lacked understanding of the detail of the proposed joint venture transaction;
  3. the lender knew that Tolteca’s solicitor was in control of the direction of the joint venture and that she needed independent advice to enable her to make an informed choice about the subject loan;
  4. the lender failed to enquire into various discrepancies in documentation concerning the loan transaction;

In the proceeding against the solicitor no notice of intention to defend had been filed, although the time allowed to do so under the rules had long since passed. Nothing has occurred in the proceeding save for a request for particulars served 6 months after the claim was filed.

Meanwhile the lender’s proceedings are ready for trial. The lender sought an order that the matter be set down for trial while the borrower sought an order joining the broker to both proceedings and to have the two proceedings heard together. 

The judge determined allowing the broker to be joined would delay the trial of the lender’s proceedings by up to 12 months and, if the proceedings were consolidated the delay would be even longer.

The judge had to decide between two competing considerations:

  1. the desirability of divergent findings in separate proceedings traversing the same subject matter;
  2. the interest of the lender in being allowed to prosecute its action and obtain judgment without being delayed or inconvenienced by borrowers endeavours to obtain a remedy against a further party.

In deciding to reject the joinder and consolidation the judge noted:

  1. the delay and associated increased costs might result in a situation where the lender’s debt became partially unsecured because the value of the land would be insufficient to cover the increased debt;
  2. The case against the broker was weak (including proposed pleadings which had the broker as the borrower’s agent and the lender’s agent);
  3. The explaination for the delay in joining the broker was unconvincing;
  4. If the proceedings against the lender succeeded the borrower would recover all its loss and would not need to recover from the broker.
  5. The two proceedings did not cover the same subject matter. 

Click here to read the full judgement. 

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