Australia and New Zealand Banking Group Limited v Bechara

Background 4The plaintiff commenced proceedings seeking possession of the defendants' property in Hunters Hill. 5On 16 August 2013, Harrison J in Australian and New Zealand Banking Group Limited v Bechara [2013] NSWSC 1125, granted leave to the plaintiff to issue a writ of possession and entered judgment for the plaintiff for $507,991.72. The plaintiff has subsequently taken possession of the property and it has been sold. 6On 8 May 2013, the cross claimant filed a cross claim. 7On 13 August 2013, an amended cross claim was filed. 8On 16 August 2013, Harrison J ordered that the amended cross claim be struck out pursuant to Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") r 14.28 and granted liberty to the cross claimant to file within 7 days any proposed further amended cross claim upon which he proposes to rely. No further amended cross claim was filed in that time. 9Family law proceedings have been finalised in the Family Court of Australia. I shall refer to them briefly later in this judgment.

Extension of time 10UCPR 19.3 provides that an order giving leave to amend a document ceases to have effect at the expiration of the time specified in the order as the time within which the amendment must be made. 11UCPR 1.12 reads: "1.12 Extension and abridgment of time (cf SCR Part 2, rule 3; DCR Part 3, rule 2; LCR Part 4, rule 2) (1) Subject to these rules, the court may, by order, extend or abridge any time fixed by these rules or by any judgment or order of the court. (2) The court may extend time under this rule, either before or after the time expires, and may do so after the time expires even if an application for extension is made after the time expires." 12In Arthur Andersen Corporate Finance Pty Ltd v Buzzle Operations Pty Ltd (in liq) [2009] NSWCA 104 at [28] - [43], the Court of Appeal discussed the discretion to be exercised regarding renewal of a statement of claim, which was approved in Agricultural & Rural Finance Pty Ltd v Kirk [2011] NSWCA 67. The considerations which the Court should consider when exercising a discretion under UCPR 1.12 are set out in Arthur Andersen, where Ipp JA (with whom Tobias and McColl JJA agreed) stated at [43]: "...[T]he Court should consider, when exercising a discretion such as that under UCPR r 1.12, the attempts that have been made at service, the length of the delay, the reasons for the delay, whether the delay was deliberate, whether notice was given to the defendant, the conduct of the parties generally, and the hardship or prejudice caused to the plaintiff by refusing the renewal or to the defendant by granting it." 13The rule permits the extension of time whenever it is appropriate to do so to avoid injustice; see FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268 at 283-284 and also El Ali v Government Insurance Office of New South Wales (1988) 15 NSWLR 303. The discretion can be exercised irrespective of whether the time limit is contained in the rules or has been fixed by an order in particular proceedings; see Paino v Hofbauer (1988) 13 NSWLR 193. 14The discretion is to be exercised in light of ss 56 to 59 of the Civil Procedure Act 2005 (NSW); see Arthur Anderson at [36] and Weston in Capacity as Special Purpose Liquidator of One.Tel Ltd (in liquidation) v Publishing and Broadcasting Ltd [2012] NSWCA 79 at [20] per Sackville AJA (with whom Campbell and Young JJA agreed). It should not be exercised to undermine the general importance of compliance with the rules, as stated in Keevers v O'Neill [1977] 1 NSWLR 587 at 591. 15In relation to cross claims, time can be extended after the principal proceedings have been discontinued; see Crayford Freight Services Ltd v Coral Seatel Navigation Co (1998) 82 FCR 328. The Court can extend time for the filing of the cross claim even though judgment has been given on the plaintiff's claim; Seltsam Pty Ltd v Energy Australia; Re Banham [1999] NSWCA 89; (1999) 17 NSWCCR 720. 16There is not an unqualified right to an extension of time; see Outboard Marine Australia Pty Ltd v Byrnes [1974] 1 NSWLR 27 at 30. A sufficient reason for an extension of time being granted must be established by an applicant; Franklin House Ltd v ANI Corporation Ltd (Supreme Court (NSW) Windeyer J, 7 November 1994, unrep). In Schafer v Blyth [1920] 3 KB 140, it was held that the effect of granting or refusing the application, the nature and extent of the non-compliance, as well as delay in making an application for extension are relevant to the exercise of the discretion to extend time. In Tocher v Gordon [2005] NSWCA 135 at [5], [6] and [130] it was held that the presence or absence of a satisfactory explanation will be an influential factor where exercise of the discretion is likely either to cause material disadvantage to the opposing party, or deprive them of a benefit that has accrued as a result of the delay. It was also held in Tolcher that a sufficient explanation may be provided by evidence that the relevant delay was principally attributable to circumstances beyond the applicant's control. Although, it should be noted that depending on the nature of the non-compliance, and the consequences of refusal of an extension, satisfactory explanation of delay is not a pre-condition to the favourable exercise of the discretion; see Comcare v A'Heran (1993) 45 FCR 441 at 444.

The cross claimant's explanation of delay 17Emel Kaya, the cross claimant's solicitor has provided the explanation as to the cross claimant's delay in filing the FAXC. The FAXC was ordered to be filed by 23 August 2013. This was not done. On 12 December 2013, the Registrar ordered that the cross claimant was to file and serve any reply evidence and outline of written submissions in relation to the extension of time for filing the FAXC by 31 January 2013. This was not done. 18The explanation of delay commences on 16 October 2013. This date is well after the time for filing the FAXC had expired. The explanation is as follows. On 16 October 2013, the cross claimant's solicitor forwarded the FAXC to the cross defendant's solicitor. On 21 October 2013, the cross defendant's solicitor wrote to the cross claimant's solicitor disputing that the FAXC disclosed a reasonable cause of action and did not consent to an extension of time. 19On 5 December 2013, Ms Kaya sent a letter to the cross defendant's solicitor, maintaining the cross claimant's instructions that a reasonable cause of action was disclosed and also asked that the cross defendant's solicitor seek instructions from the cross defendant as to whether she consented to the cross claimant filing the FAXC. 20The cross claimant has offered no explanation as to why the FAXC was not filed in accordance with the order of the Court and no action was taken until nearly two months after the time for filing the FAXC had expired. This explanation falls well below that which would be regarded as satisfactory. 21Counsel for the cross claimant submitted that even if the explanation for delay was not satisfactory, that is not the end of the matter to be considered. He urged upon this Court to apply what was said in Cohen v McWilliam (1995) 38 NSWLR 476 at 481. Priestley JA, in Cohen, stated that the Court in considering an application to set aside default judgment should look to the whole of the relevant circumstances including an adequate explanation for delay and the existence of a bona fide defence on its merits but overall the fundamental duty of this Court is to do justice between the parties. I might add this is not an application to set aside a default judgment. 22Nevertheless, while it may not be strictly necessary, I shall briefly examine whether the matters raised in the FAXC articulate arguable causes of action. 23I will first provide some context by briefly outlining the amended cross claim ("AXC") before Harrison J in Australian and New Zealand Banking Group Limited v Bechara [2013] NSWSC 1125. The AXC sought damages, indemnity and costs. It contained allegations that the cross defendant made false representations to the cross claimant to induce him to sign the mortgage refinancing their property, which have not been pleaded in the FAXC. 24In relation to the second claim in the AXC, Harrison J observed that the pleading in the cross claim was novel. While his Honour afforded the cross claimant with an opportunity to file the FAXC, his Honour commented at [24] that the cross claimant "may in fact upon further reflection and with good advice decide that the cross-claim is not worth pursuing". His Honour commented that the costs of the litigation were undoubtedly disproportionate to the merits of the competing claims and stated, at [24], that the cross claim: "[I]s the very real bi-product of the breakdown of the relationship between the defendants ... [and] the economics of conducting litigation are either intentionally or unintentionally ignored or masked by other emotions more powerful than financial self preservation." 25The FAXC seeks firstly, relief in the form of damages; judgment for the cross claimant against the cross defendant for an indemnity for the judgment sum of $507,991.72 on 16 August 2013, the interest payable in the main proceedings for all enforcement costs and default interest claimed by ANZ in the main proceedings; and damages to be assessed for the cross defendant's breach of the first agreement between the cross claimant and cross defendant. 26Further or in the alternative, the cross claimant seeks an indemnity from the cross defendant for the difference between the higher "residential investment loan" interest rate and the lower "residential home loan" rate, being a difference of 0.45% per annum on the interest rate calculated from the principal of $402,394.92 and the lender mortgage insurance of $2,394.94; and all enforcement costs and default interest claimed by the plaintiff against both defendants in accordance with the loan agreement. 27The pleading alleges that there were two agreements that give rise to the claim for damages. The cross defendant submitted that there was no intention to create legal relations in either agreement and for that reason both causes of action, should they proceed to trial, must fail. The cross defendant submitted that both claims are hopeless, doomed to failure, frivolous and vexatious. The cross defendant also contended that the FAXC does not disclose a reasonably arguable cause of action and that it is an abuse of the Court's processes. 28Before I refer to the two agreements, I will briefly outline the Family Court proceedings. On 22 August 2012, Fowler J made parenting orders regarding the cross claimant's and cross defendant's child and property orders (Ex 1). In relation to the Hunters Hill property, his Honour ordered that the property be sold and after all expenses, costs and adjustments were paid, and the mortgage was discharged, the balance of the funds were to be divided between the cross claimant and the cross defendant in the proportion of 45% to the cross claimant and 55% to the cross defendant.

The first agreement 29The FAXC at [1(c3)] sets out the agreement that is alleged to give rise to the first cause of action. It reads: "The cross-defendant became pregnant by the cross-claimant in about September 2002. The cross-claimant and cross-defendant agreed, during the pregnancy, in many conversations between them, on which they both relied, that following the birth of their new child, the cross-defendant would return to paid work as soon as she could, and the cross-claimant would give up paid employment to be the primary full-time carer for their child, and the cross-defendant would maintain all mortgage payments on the NAB loan and mortgage out of her income, and on any subsequent refinance of that loan and mortgage that occurred while the cross-claimant was the primary carer for their child. ('The first agreement')." 30It is alleged that in 2009, the cross defendant unilaterally ceased paying the loan and breached this agreement and, consequently, the cross claimant, as joint borrower and mortgagor with the cross defendant, defaulted on their joint loan and mortgage (FAXC [1(c6)]). The cross claimant submitted that he has an action to seek damages for his half share of the liability to ANZ (FAXC [1(c8)]). 31The cross defendant asserted that the "promise" that the cross claimant relies upon does not amount to a contractual promise and even if there is consideration, there cannot be a contract if the parties did not intend on making legal relations. She contended that there was no objective intention following Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; (2004) 219 CLR 165 at 178-180, where the High Court held that the test of intention is an objective test. The cross defendant submitted that the present case differs from those cases where it has been held that a husband and wife entered into agreements with the requisite intention, which she submitted are created in a commercial environment. She referred the Court to J W Carter, Elisabeth Peden and G J Tolhurst's Contract Law in Australia (5th ed 2007, LexisNexis Butterworths), at 171, where the learned authors state: "Experience of life shows that close relatives do not usually intend the various arrangements which they make to create legal relations and that they prefer to rely on 'family ties of mutual trust and affection.' The law therefore recognises a rebuttable presumption of fact that relatives, such as husband and wife ... do not intend their agreements to be contracts." 32The cross defendant also referred to Balfour v Balfour [1919] 2 KB 571 at 578-579. Balfour was applied by Dixon J (as his Honour then was) in Cohen v Cohen (1929) 42 CLR 91 when his Honour found that an arrangement between a husband and wife, where the husband agreed to pay the wife an annual sum by way of a "dress allowance" was never intended by the parties to create legal relations. In Cohen, at 96, Dixon J stated: "... these matters only arise if the arrangement which the plaintiff made with the defendant was intended to affect or give rise to legal relations or to be attended with legal consequences (Balfour v. Balfour, Rose & Frank Co. v. J. R. Crompton & Bros. Ltd.). I think it was not so intended. The parties did no more, in my view, than discuss and concur in a proposal for the regular allowance to the wife of a sum which they considered appropriate to their circumstances at the time of marriage." [Footnotes omitted] 33The cross claimant submitted that there can be a finding of an intention to create legal relations. 34The cross defendant submitted that there was no consideration. She contended that abstaining from taking a course of action is not consideration; rather it is an assertion, and as there was no consideration, there was no contract. The cross claimant, however, submitted that abstaining from taking a course of action is capable of being consideration. 35The cross defendant submitted that the cross claimant's undertaking to care for a child of his marriage cannot constitute consideration, as that is what a father is bound to do in any event. The cross defendant also contended that the effect of such a contract results in the cross defendant promising that she will work and support the cross claimant and pay off his loan and mortgage debts. This, the cross defendant submitted, is a contract that seeks to ensure her servitude for life. The cross defendant submitted that such a contract, even if all elements of a contract are present, cannot be enforceable because it amounts to a contract for servitude. 36The cross defendant submitted that the cross claimant's claim in this Court is apposite to Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589 and is prevented by Anshun estoppel. She tendered the orders and written reasons of the Family Court of Australia (Ex's 1 and 2), submitting that the decision of the Family Court (Ex 2 [816] to [828]) dealt with the sale of the property and the division of any surplus amount. The cross defendant contended that should this Court make a decision in the proceedings pleaded in the FAXC, it would be allowing an action that would interfere with the orders made by the Family Court and in effect adjust them to make the cross defendant totally liable for the loan. 37Counsel for the cross claimant stated that it was for this Court to determine whether the Family Court has jurisdiction to determine the issues that are sought to be raised in the present case. The cross claimant also submitted that the Family Court order was made in 2012 and the present proceedings were initiated by ANZ in 2013 and the causes of actions presently pleaded arose as a result of the actions of ANZ in commencing enforcement proceedings. 38While I do not have to decide this point, it is my tentative view that this agreement is most unlikely to amount to a contract and further, if it does, it is an issue that should have been litigated in the Family Court where orders were made in relation to the matrimonial home and the division of its proceeds.

The second agreement 39It is alleged that sometime in mid 2006 to 14 August 2006, the cross claimant and cross defendant entered into an oral agreement that the cross defendant would arrange to refinance their loan from the National Australia Bank to ANZ, as a residential domestic home loan (FAXC [2(b1)]). It is alleged that the cross defendant breached this agreement, by refinancing the National Australia Bank loan with ANZ, as a residential investment home loan which had a higher interest rate of 0.45%, compared to ANZ's residential home loan and also incurred lender mortgage insurance of $2,394.94 (FAXC [2(b2)]). The cross claimant pleaded that he did not know that the cross defendant had breached the agreement and that the interest rate was higher than it ought to have been. He seeks an indemnity for the higher 0.45% and the lender mortgage insurance. The cross claimant seeks damages from the cross defendant for breach of this second agreement. 40The cross defendant again submitted that there was no intention to create legal relations; the cross claimant had not provided consideration; and the cross claimant faced an Anshun estoppel. The cross defendant also submitted that this cause of action is statute barred following s 14(1)(a) of the Limitation Act 1969 (NSW), which provides that the limitation period is 6 years from the date on which the cause of action first accrues which was around August 2006 and the limitation period expired around August 2012. 41The cross claimant argued that the limitation argument is a defence and following Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 533 limitation questions should not be decided in interlocutory proceedings except in the "clearest of cases". The cross claimant further argued that it may be that damages accrued in 2013 when ANZ began enforcement action. 42Counsel for the cross claimant then submitted that if the limitation defence is raised, it is open to the cross claimant to file a reply alleging that fraud or deceit was involved and that s 55 of the Limitation Act may apply, leaving open the question of whether the cause of action for the second agreement is statute barred. 43This issue should have been argued in the Family Court proceedings where it would have been taken into account in the property settlement. 44The causes of action pleaded in the FAXC are barely arguable and I adopt the words of Harrison J quoted in [24] of this judgment. 45The cross claimant has already had one opportunity to amend his cross claim. There has not been a satisfactory explanation by the cross claimant in seeking an extension of time for the filing of the amended cross claim. Taking those factors into account in exercise of my discretion, I decline to grant an extension of time to file the FAXC. The notice of motion is dismissed. 46Costs are discretionary. Costs usually follow the event. The cross claimant is to pay the cross defendant's costs as agreed or assessed.

The Court orders that: (1) The cross claimant's notice of motion filed 6 December 2013 is dismissed. (2) The cross claimant is to pay the cross defendant's costs as agreed or assessed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 June 2014