In the recent case of Thompson v Perpetual Trustees Victoria Ltd [2021] NSWSC 622 (4 June 2021) the NSW Supreme Court considered a claim brought by a borrower against its former lender for unconscionable conduct in equity.
In response to the claim, without putting on a defence, Perpetual brought an application to have the plaintiff's claim struck out for being out of time and statute barred.
Facts amounting to unconscionable conduct
In 2006 the plaintiffs refinanced a mortgage through a broker and borrowed $227,000 from Perpetual to discharge their $75,000 mortgage and invest the $151,000 surplus that remained in an investment fund managed by Perpetual and spruiked by the broker.
In fact there was no such investment fund and the broker had fraudulently appropriated the $151,000 by submitting a forged authority form to Perpetual and causing it to transfer of the funds to his girlfriend's bank account.
In 2009 the plaintiff inquired about the status of her Perpetual investment, only to learn that no account existed and the surplus had disappeared.
Subsequently, in 2011 the plaintiff sold her home to pay out the Perpetual loan and in 2013 retained a solicitor to demand recovery of the stolen funds from Perpetual. Perpetual did not reply to the demand.
On 23 July 2020, 14 years after the surplus had been stolen, and 11 years after she had learned the money was gone, the plaintiff commenced proceedings against Perpetual claiming it had acted unconscionably in that it paid the surplus to the fraudulent broker and then sought to enforce its full security while knowing full well that it had been misappropriated (Perpetual also refused to re-credit the $151,000 back to the plaintiff).
Limitation period
In her judgment, Rees J observed that limitation periods for equitable remedies are to be determined by analogy to the corresponding remedy in law (and the same statutory bar).
Adopting this principle, Perpetual submitted that the claim for equitable compensation arising from unconscionable conduct was analogous to the 6 year limitation period provided by the ASIC Act 2001 and the s 12CB statutory prohibition against unconscionable conduct in connection with financial services.
Rees J then concluded:
Both sections 12CA(1) and 12CB(1) capture the unconscionable conduct as alleged by the plaintiffs in these transactions. There is an ‘identity’ of unconscionable conduct between the law of equity and section 12CA. Equitable unconscionable conduct is a sub-set of unconscionable conduct within the meaning of section 12CB. The plaintiffs’ claim for equitable damages for unconscionable conduct corresponds to the remedy provided by section 12GF(2) for contravention of sections 12CA(1) and 12CB(1). I consider that the analogy between the statutory remedy and the equitable remedy is apt such that the statutory limitation period should apply to the plaintiffs’ equitable suit, subject to whether it is unjust to apply the statutory limitation in this case.
Rees J also reiterated the importance of limitations and that they should not be considered a mere technicality, stating:
A court of equity acts by analogy to the statute and imposes the same limitation period on its remedy such that the equitable claim cannot now be further pursued against Perpetual. As regrettable as that may seem, it should be noted as Leeming JA stated in Lewis Securities at [29]:
Limitation law is not some “unmeritorious procedural technicality”; it is neither a technicality nor necessarily unmeritorious, as Lord Sumption JSC observed in Abdulla v Birmingham City Council [2012] UKSC 47; [2012] ICR 1419 at [41]. Rather, as McHugh J said in Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541 at 553; [1996] HCA 25, a limitation period “represents the legislature’s judgment that the welfare of society is best served by causes of action being litigated within the limitation period, notwithstanding that the enactment of that period may often result in a good cause of action being defeated.”
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