Ask Funding Limited ACN 94 503 385 v Magyari

CASES CITED : Takemura v National Australia Bank Ltd [2003] NSWSC 339

TEXTS CITED : E L G Tyler, P W Young, C Croft, Fisher & Lightwood's Law of Mortgage, 2nd Australian ed (2005)

PARTIES : Ask Funding Limited (Plaintiff) Claudia Carmen Magyari (Defendant)

COUNSEL : S Golledge (Plaintiff) Claudia Carmen Magyari (in person) (Defendant)

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2009/290721 ASK FUNDING LIMITED ACN 94 503 385 v CLAUDIA CARMEN MAGYARI JUDGMENT - EX TEMPORE

1 The plaintiff, Ask Funding Limited, was formerly known as Impact Capital Ltd until 26 November 2008. It carries on the business of a lender. 2 Proceedings were commenced by the plaintiff against the defendant, Claudia Carmen Magyari, by way of Statement of Claim filed on 23 September 2009. Although the plaintiff and the defendant have been in communication after the plaintiff commenced the proceedings, an application was made for default judgment and on 29 December 2009 judgment was entered against the defendant in favour of the plaintiff in the amount of $293,054.38 with an order that the defendant pay the plaintiff's costs of $3,039. 3 The plaintiff today seeks a declaration that from about 7 March 2007 there existed between the plaintiff and the defendant an agreement (the Loan Contract) for the defendant to give or cause to be given to the plaintiff a first ranking registered mortgage (the Mortgage) over the whole of her interest in the property, being folio identifier 374/794130 and known as 18 Barclay Close, Kariong in the State of New South Wales (the Property) pursuant to Special Condition 2 and Item 12 of the Loan Contract to secure the repayment to the plaintiff by the defendant of the moneys due and payable under the Loan Contract. 4 The plaintiff also seeks a declaration that the Loan Contract should be specifically performed and carried into effect. The plaintiff also seeks an order that the defendant specifically perform the Loan Contract and carry it into effect and an order that if the defendant fails to comply with the order, a Registrar of the Court be authorised to execute all such instruments and do all such things in the name and on behalf of the defendant as may be necessary to grant to the plaintiff the Mortgage. 5 On 8 March 2010 the plaintiff's solicitors wrote to the defendant advising her that the proceedings were listed for hearing today at 10.00am. That letter included the following: "In the interests of the parties and to avoid further legal costs of the hearing, our client invites you to sign and return to us the enclosed draft mortgage over 18 Barclay Close, Kariong ("the Property") and provide to us your written consent that you will produce the Certificate of Title of the Property to facilitate registration of the Mortgage.

Please return to you us the signed Mortgage and your consent that you will produce the Certificate of Title document by 17 March 2010.

Do not hesitate to contact the writer should you have any questions." 6 Mr Golledge, of counsel, appears for the plaintiff today. When the matter was called for hearing the defendant appeared unrepresented. Mr Golledge indicated to the Court that this came as a surprise to the plaintiff because no communication had been received from the defendant that she would appear today and from the procedural history of the proceedings, the defendant had not appeared in the applications in the past, nor in respect of the application for default judgment. 7 Miss Magyari indicated that she was not represented and proceeded to appear unrepresented. 8 The plaintiff relied upon the affidavit evidence of Brendan Lyle sworn 26 November 2009, who is a general counsel and a commercial director of the plaintiff. I understand that Mr Lyle presently resides in New York. 9 The plaintiff also relied upon a number of paragraphs in the affidavit of its solicitor, Mark Petrucco sworn on 10 March 2010. 10 That affidavit evidence establishes that on 7 March 2007 the defendant signed the Loan Contract entitled "Matrimonial Fixed Real Security Contract". Item 5 of the Loan Contract provided that the amount of credit is $190,800. The Loan Contract included the following: "The Borrower offers to borrow the Amount of Credit from the Lender on the basis of the terms and conditions set out in this contract which includes the attached Standard Terms & Conditions (version 1) and any special conditions, annexure and/or schedules. The Borrower agrees that once the Lender accepts this offer, a binding contract will exist between them as follows." 11 Item 2 of the Loan Contract identified the defendant as the borrower. Item 3 identified the "Matter" as Magyari v Magyari. It identified the name and address of the defendant's solicitor, being the borrower's solicitor, as Denise King of Erina Legal in Erina. 12 Item 12 of the Loan Contract was in the following terms: Item 12 Mortgage The Borrower will grant or procure the granting of certain mortgages (Mortgage) namely an irrevocable instruction, an equitable mortgagee's caveat and first ranking registered mortgages to the Lender from the person(s) set out in Item 13 and over:

(1) the land set out in item 14 ("the Land"); (2) the benefits of any insurance policy or claims in respect of such Land and/or improvements from time to time; (3) Any property other than money being the subject of the Settlement Proceeds, namely the personal property described in Item 15 below ("Personal Property") including any attachments, equipment and accessories to the Personal Property already in existence or acquired in any Settlement of the Matter; and (4) the benefits of any insurance policy or claims in respect of such Personal Property. 13 Item 13 identified the defendant as the mortgagor.

14 Item 14 identified the land which included three properties. The property relevant to today's application is the property at Barclay Close, Kariong. 15 The special conditions provided as follows: SPECIAL CONDITIONS 1. When Amount of Credit Advanced Provided no Event of Default has occurred, and subject to the provisions of this Credit Contract the Lender will provide the whole of the Amount of Credit as soon as practicable upon execution of this Credit Contract and satisfaction of the Precondition.

2. Mortgages The Borrower agrees:

2.1 that the Borrower shall give, or procure to be given to the Lender, the Mortgage as set out in Item 12 and will cause the Mortgage to be registered under any applicable legislation;

2.2 that the Mortgage will be security for the payment of the Loan and all other moneys payable and all other obligations of the Borrower under this Credit Contract;

2.3 to perform and observe or procure the performance and observance of all obligations in favour of the Lender under the Mortgage;

2.4 that insurance shall be taken out over any property the subject of the Mortgage in accordance with the terms of the Mortgage; and 2.5 that the obligation of the Lender to lend the Amount of Credit or any part of the Amount of Credit which is not already lent is conditional upon the Lender holding the Mortgage duly signed by the Borrower and the delivery to the Lender of such instruments and documents (if any) that are necessary for the registration of the Mortgage. 16 There was an important notice within the Loan Contract cautioning the recipient to read the document with reference to things that the recipient must know about the proposed credit contract. There was also a notice of disclosure produced by the plaintiff as required by the Consumer Credit Act and Code. The standard terms and conditions were attached to the Loan Contract. 17 The defendant initialled the pages of the Loan Contract and signed the last page thereof. The defendant also signed the Statement in respect of the Notice of Disclosure. The standard terms and conditions that are in evidence were not signed. 18 The plaintiff advanced the amount of credit to the defendant by paying it to her solicitors. No repayments have been made under the Loan Contract, nor has the defendant provided the Mortgages. 19 The defendant indicated that she would like to ask Mr Lyle some questions. No notice was given of the defendant's possible appearance today. Mr Lyle is in New York. The defendant indicated that if ordered to pay the costs thrown away in respect of any adjournment that may be necessary, she could not do so. In those circumstances I invited the defendant to cross-examine Mr Petrucco if she wished to do so and she did so. 20 The defendant asked Mr Petrucco why it was that the plaintiff did not contact her direct before commencing these proceedings. Mr Petrucco was not in a position to know the answer to that question and indicated that he did not know. 21 The defendant gave evidence that she has no attachment to the Property and has to pay $750 every month representing the difference between the rental income and the amount of a loan in respect of the Property. It is not clear to me with whom that loan is secured but it is apparent from the evidence the defendant gave that the loan is approximately $150,000 and there may be some equity of approximately $400,000 in the Property. 22 The defendant complained that no representative of the plaintiff came to see her to ask her about the properties that were mentioned in the Loan Contract. She referred to the fact that they did not check the correctness of the information that was supplied by her solicitor who prepared the application. 23 The defendant also referred to the Family Court proceedings between herself and her former husband. They had apparently been ongoing for some years at the time that this Loan Contract was entered into with the plaintiff. 24 It is also apparent that the defendant and her solicitor who appeared for her in the Family Court proceedings fell out. By October 2006 the defendant had a bill outstanding to those solicitors of approximately $86,000. 25 Orders were made in the Family Court in January 2007 pursuant to which the Property was transferred from either a joint tenancy or from her husband's name into her own name. There were other orders made at the same time and it would appear that there was a non-compliance with the order for the ex-husband to transfer the Property and recourse was had to the facility at the Family Court to have the Property transferred. 26 At some stage prior to the entry into the Loan Contract with the plaintiff, and at about the time of or a little after the Family Court orders were made, the defendant negotiated with the National Australia Bank, apparently with the assistance of her solicitor, to re-finance the properties that were transferred to her pursuant to the Family Court orders and to obtain funding to pay the solicitor's fees. 27 The defendant accepted in evidence that at the time she was negotiating directly with the National Australia Bank she had detailed discussions with the officer of that bank who explained to her the effect of a mortgage. She accepted in her cross-examination that she understood the effect of a mortgage and understood that it could be a source of repayment for a debt, that is, she understood that the lender to whom the mortgage was given would be at liberty to sell the property in circumstances where the debt was unpaid so as to obtain the funds to pay out the debt owed to that lender. 28 There was a problem with the settlement of that re-finance with the National Australia Bank. It is apparent that one of the properties that was to be the subject of the mortgages to the National Australia Bank had a caveat and/or a mortgage on its title that prevented the settlement of that re-finance. It is not clear to me what happened in respect of the further financial arrangements with the National Australia Bank. 29 The defendant indicated that the amount that she was seeking from the National Australia Bank was approximately $700,000 which would cover both the re-financing of the properties and the payment out of the legal costs. She accepted that she was keen to get the legal costs paid.

30 It is also apparent that the breaking up of the relationship with her ex-husband had some complexity to it, in particular in relation to the nature of the transactions in respect of the properties, which apparently included a third party and a corporation in respect of a Tasmanian property. 31 The defendant was represented by the solicitor throughout the period up to the time that she entered into the Loan Contract with the plaintiff. The defendant was also consulting with her accountant at Kincumber. It was late February / early March in 2007 when the defendant's solicitor invited her to come to the office in Erina. At that time the defendant was advised that there was a new financier or lender who was willing to advance funds to her. It would appear that in late February, the defendant was not willing to finalise or sign the Loan Contract because of the increased amount from $86,000 to $190,000. It is clear that the defendant understood that the loan amount, that is the amount of credit, was to pay her legal costs so that any bill that she might otherwise have to pay was going to be paid by the plaintiff advancing the funds to the solicitors. 32 In any event, a couple of weeks later the defendant's solicitor's son, Mr Brown, attended upon the defendant at her clinic, she being a naturopath, and had a discussion with her in relation to the Loan Contract. At this time the defendant signed the Loan Contract. 33 In cross-examination the defendant claimed that she was crying at the time that Mr Brown came to her clinic, however with persistence Mr Golledge obtained a number of admissions from the defendant. These included that the defendant understood and could see that the amount of credit in the Loan Contract was $190,800 and that she understood that was the amount that was the subject of the Loan Contract; and that the defendant was agreeing to make available the three properties in Item 14; and that a mortgage as referred to in item 12 was to be granted over those properties. 34 The defendant has made a number of allegations about her former solicitor which have been untested. However, the defendant tendered a letter which is Exhibit 1. In that letter Mr Lyle is referred to as having provided a copy of his file note to the defendant's former solicitors at Erina Legal in August 2009. That file note recorded a conversation of a meeting on 12 March 2009 between Mr Lyle and the defendant. 35 That part of Exhibit 1 reads as follows: "1. Claudia claims that when she advised Denise King that she wanted her costs assessed, King replied that she would 'finish her' if she went through with the assessment.

2. Claudia is very dissatisfied with the work of Erina Legal, especially as it relates to their costs.

3. Claudia advises that an employee of Erina Legal drive (sic) to her child's school with the loan document and pressured her to sign it then and there." 36 The conflict between the apparent statement to Mr Lyle about where the document was signed and the evidence given today has not been the subject of any further evidence today. I should also say that there is nothing in the evidence to indicate one way or the other the position of Ms King and no adverse inference should be taken from these reasons in respect of that solicitor's conduct. 37 If the defendant is dissatisfied with her former solicitor, that is a matter as between the defendant and her former solicitor and not presently an issue between the parties to these proceedings. 38 The defendant in her final submissions once again indicated that she did not have any attachment to the Property and perhaps it would be a good thing that the Property is sold and the burden of it is taken off her hands. Notwithstanding that submission the defendant continued to oppose the orders sought by the plaintiff on a number of bases. 39 The first is that she claims she did not have the benefit of the loan. That submission is without foundation. The evidence is that the defendant was in debt to her solicitors, irrespective of any dispute in respect of the amount of the bill, and it is clear that the solicitor was paid the amount of the loan to satisfy the defendant's debt to those solicitors. If that had not happened the defendant would have been liable to the solicitor for her fees. 40 The defendant referred to herself today as a "third party in all of this". That seems to me to be a misconception of her position. The defendant was the borrower under the Loan Contract. The defendant had the benefit of the moneys that were advanced to a person to whom she owed the amount and in those circumstances she is not a third party. 41 The defendant also referred to a transaction in relation to the West Gosford property in respect of which Mr Lyle and the plaintiff received an amount of $10,000 for the removal of a caveat. That submission was not supported by any evidence and although it was not objected to it does not seem to me to be a matter that is of any relevance to this application. 42 The defendant also made a submission that she was the "underdog" in this matter and made reference to her family and her present incapacity to earn income. They are matters that are obviously of deep concern to her and one can understand that there would be some compassion to people who are in a difficult position by reason of ill health. But this is clearly not a matter that affects the position, having regard to the submission that the defendant made, that it would probably be better if the premises were sold and taken off her hands. 43 The defendant accepts that she has not paid any amount to reduce the debt the subject of the judgment that was entered against her in December 2009. 44 There was a question that arose during the proceedings as to whether the plaintiff had served a Default Notice on the defendant. The defendant claimed that she did not receive that Default Notice. In reply to that claim the plaintiff relied upon the evidence of Ben Nadenic who swore an affidavit on 17 March 2010. That evidence is that the Default Notice was posted to the defendant's address at 18 Barclay Close, Kariong, New South Wales. The defendant conceded that she lived at those premises at that time, albeit that she was in hospital from time to time. 45 It is also of note that the defendant appeared today. Mr Petrucco's letter notifying the defendant that the proceedings were on today was addressed to her at the same address at Barclay Close, Kariong, albeit that presently it appears the defendant is residing or staying with persons in Victoria. 46 In support of the claim for the declaration and orders the plaintiff relied upon the decision in Takemura v National Australia Bank Ltd [2003] NSWSC 339, a judgment of Young CJ in Eq, as his Honour then was. There was also reliance on Fisher & Lightwood's Law of Mortgage, 2nd Australian ed (2005), for the proposition that an agreement to provide a mortgage is an example of a contract which the courts will enforce by granting specific performance. It was submitted that this is particularly so where the contract has been performed by the intended mortgagee. There is no doubt that the intended mortgagee has performed the contract by providing the loan. 47 Mr Golledge also referred to an award of damages being no adequate substitute for a promise to grant security and submitted that there was no evidence of any factor in this case which would persuade the Court not to exercise its discretion. 48 The defendant did not file a defence. Notwithstanding that procedural irregularity I allowed the defendant to give evidence. As the matter developed there was a hint of a possible claim of unconscionability with which Mr Golledge had to grapple during the course of the day. It did not amount to a claim of unconscionability as against the plaintiff and at its highest it seems to me to be a claim that the defendant's former solicitor may not have explained to her the detail and particulars of the amount of the legal costs that were charged to her which was the reason for the loan. 49 There is a conflict in the defendant's evidence. In her oral evidence she claimed that Mr Brown attended her clinic and asked her to sign the Loan Contract. In the letter (Exhibit 1) there is a claim that Mr Brown attended her child's school and asked her to sign the Loan Contract. The defendant claims she was distressed at the time she signed the Loan Contract. This does not amount to a matter that would prevent me from exercising my discretion in the plaintiff's favour. 50 It is true that the Loan Contract does not include the specific terms of the proposed mortgage. That of itself does not prevent a Court of Equity settling the terms of the security. The proposed mortgage that the plaintiff proffered to the defendant by its letter in Exhibit A includes the following terms in annexure A:

1. This mortgage is given in consideration of the Mortgagee at the request of the Mortgagor (which request is testified by its execution hereof) in respect of advances or accommodation already granted or afforded or presently granting or affording advances or accommodation or at any time or from time to time hereafter granting or affording advances or accommodation and in each such case whether such advances or accommodation are at the discretion and during the pleasure of the Mortgagee or otherwise to the Mortgagor. FOR CONSIDERATION AFORESAID the Mortgagor hereby irrevocably appoints the Mortgagee and each of the officers of the Mortgagee jointly and each of them severally the attorney of the Mortgagor for the purpose of signing all documents and doing all acts on behalf of and in the name of the Mortgagor necessary to perfect the within security and immediately on or at any time after any breach or default by the Mortgagor hereunder to exercise in the name of the Mortgagor all rights, powers and remedies of the Mortgagee expressed or implied herein or to deal with the Mortgaged Land in any way which the Mortgagee may in its absolute and unfettered discretion deem fit and to receive any moneys payable to the Mortgagor in respect of the Mortgaged Land whether in respect of insurance compensation or otherwise and to do all things required to be done by the Mortgagor hereunder and to execute all documents and to do all things necessary in regard to any such matters.

2. PRINCIPAL SUM In this Mortgage unless the contrary intention appears "the principal sum" means all monies now or hereafter actually or contingently payable to the Mortgagee by the Mortgagor under Loan Contract dated 7 March 2007 between the Mortgagee as lender and the Mortgagor as borrower. 51 I am, however, minded to amend paragraph 2 of Annexure A to limit it to a specified figure of the judgment debt with interest and costs up to today. The mortgage is otherwise in a standard form and contains no unusual or, in my view, oppressive provisions such that it would not be enforced by this Court. 52 Accordingly, I make the declaration in paragraph 1 of the Statement of Claim. I make the declaration in paragraph 2 of the Statement of Claim. I make the order in paragraph 3 of the Statement of Claim. 53 I order that the plaintiff amend the form of mortgage in exhibit A to limit the principal sum to the amount of the judgment debt plus costs as ordered on 12 December 2009, plus costs of this application, plus interest on the judgment debt up to 19 March 2010. 54 I order that the plaintiff provide the mortgage as amended to the defendant by no later than 29 March 2010 by serving it on the defendant at the address provided today during her evidence. 55 I order that if the defendant fails to sign and return the mortgage to the plaintiff by no later than 23 April 2010, a Registrar of the Court is authorised to execute all such instruments and do all such things in the name of and on behalf of the defendant as may be necessary to grant to the plaintiff the mortgage referred to in these orders. 56 I list the matter for directions on 27 April 2010. 57 I grant liberty to restore on short notice. 58 I order that the defendant pay the plaintiff's costs of this application.

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