Fink’s Folly – there is
(almost) no consumer protection for business loans
Fink’s case shows just how hard it is for a small business
owner to challenge a business loan debt using consumer laws
In Australian & New Zealand Banking Group v
Fink  NSWSC 506, Justice Adamson of the Supreme
Court of New South Wales decided that the debtors, André and
Cecile Fink, had failed to prove they were entitled to
relief from their loan debts under either the Contracts
Review Act or the National Credit Code or for breach of the
How did the Finks get into loan
Since 1987, the Finks had run an antique business,
specialising in 18th century French antiques in Woollahra in
Sydney. Previously, they had a shop in France.
In 1996, they raised funds by an auction of antique stock
which they used to buy land on Wallis Island, near Forster,
300kms north of Sydney. It is accessible by boat or
In 2000 they started to build a “traditional French
Château” on the land, using loan funds from the NAB,
supplemented by funds from an antique stock auction in 2002,
along with a business loan. The loans were secured by
By 2007, the building of the stone château, which they
called “Château Le Marais”, was a near completion. The Finks
refinanced with the ANZ Bank. They obtained new home loans,
and a business loan and overdraft facility, to provide
working capital and to complete the building work. The loans
were in their personal names because the land and business
were in their personal names.
In 2008, the Global Financial Crisis significantly
diminished the market for 18th century French antiques which
made it difficult to sell stock to raise funds to complete
“Château Le Marais”.
In 2010, after a failed stock auction, the ANZ Bank
approved a further temporary extension (increase in
amount and more time to repay) of the business loan
facility, on condition that the Finks execute a goods
and property mortgage over their stock. Later in 2010, the
Finks sold all of their antique stock by auction, and the
net proceeds were paid to the ANZ Bank under the mortgage.
By 2013, the Finks were in default under their home loans
and the Bank repossessed “Château Le Marais”.
The 2015 decision quantified the debt due at
$3,389,750.48 and dealt with the Finks’ application for
relief from repayment of the debt under the consumer laws
The Finks use a trilogy of consumer
laws and codes to seek relief from repayment
The Finks used the Contracts Review Act 1980 (NSW), the
National Credit Code 2009 (Cth) and the Banking Code to seek
relief from repayment of the debt. This is what the Court
The Contracts Review Act and the home
Looking at the Finks, the Court concluded that it was not
in any way improvident or beyond the means of Mr and Mrs
Fink to repay the home loans when they were advanced in
2007. They were experienced business people, knew the nature
and effect of a loan or mortgage, and were capable of
protecting their own interests.
Looking at the ANZ Bank, the Court concluded that the
bank did no more than act in a commercially reasonable way,
even if the building project made little sense commercially.
The Court granted no relief, and said:
To lend money on unremarkable commercial terms for the
completion of a partially constructed dwelling, even if its
style and location give it the character of a folly rather
than an investment, is not unjust where the borrowers have a
demonstrated capacity to pay and there is, as here, no
reason to believe that they are not capable of acting in
their own interests.
Were it otherwise, the provision of funds for
depreciating or whimsical assets, such as luxury cars or
boats, or overcapitalised real estate, would be put into
The Contracts Review Act and the
business loan facilities
The ANZ Bank established that the business loan
facilities were for working capital and for the purchase of
antique stock, and so they were not subject to the Contracts
Although it had decided against it, the Court did express
views on the application of the Act, had it been a consumer
loan. The central issue was whether there was substantive
injustice in the ANZ Bank requiring the goods and
property mortgage as a condition of the extension of the
business loan facility in 2010. Was it reasonably
necessary to protect ANZ’s legitimate interests?
The Court concluded that it was not unreasonable. Nor was
it unreasonable for the ANZ Bank to refuse to provide funds
to complete the building work – It was not obliged to
share the “vision” of its customers.
The National Credit Code and the
business loan facilities
The National Credit Code applies to loans for personal,
domestic or household purposes.
The Court concluded that the business loan facilities
were used for rent and for working capital for the antique
business. Although part was used for building work on
“Château Le Marais”, it was not the dominant purpose. In any
case, “Château Le Marais” was to have a business purpose –
to be used to display antiques for sale.
The Banking Code and the business loan
The Finks failed in their claims that the ANZ Bank had
not acted fairly and reasonably against them in breach of
the Banking Code, by not giving a sufficient extension of
time for repayment of the loan extension; and by not
exercising the care and skill of a diligent and prudent
banker by refusing to advance further funds to complete
“Château Le Marais” or to return the stock to France for
Would extending the Unfair Contract
Term Protections to Small Business have made a difference to
The fact that the Finks failed to obtain relief from
payment of the ANZ Bank debt, particularly the business loan
facilities, demonstrates how difficult it is for a business
person to use the consumer laws and codes to challenge a
The Australian Government has released draft legislation
to extend protection against unfair contract terms for small
businesses [28 April 2015].
Essentially, small businesses across Australia are to be
given the rights of consumers to challenge unfair terms
under the Australian Consumer Law for general contracts and
under the ASIC Law for financial instruments.
The new proposals would not have made a difference to the
Finks’ situation because they already had these rights under
Contracts Review Act (which is restricted to NSW).
Fink’s Folly lay in having insufficiently liquidity to
complete “Château Le Marais”, and not in maltreatment by the
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Copyright Anthony J Cordato 2015 Sydney