Australian Timber Supplies Pty Ltd v Romani Agia

EX TEMPORE Judgment 1The plaintiff moves on a notice of motion filed on 11 July 2014. It seeks that proceedings No 2013/321035 in the District Court of New South Wales between the present plaintiff and the present defendant in the Supreme Court proceedings be transferred to this court. 2The power of the court to make that order arises under s 140 of the Civil Procedure Act 2005 (NSW). The court can make the order whenever it considers that removal of the proceedings is appropriate in the light of the particular circumstances of the proceedings and the matters in issue: McCormack v BP Australia Limited [2003] NSWSC 690. The fundamental consideration is whether there is "sufficient cause" for the transfer to be made and that permits a wide range of discretionary considerations. Those considerations may be impressionistic and evaluative: Sanderson Motors Pty Limited v Kirby [2000] NSWSC 924. 3The District Court proceedings were commenced on 24 October 2013. In essence, the plaintiff alleges that it supplied goods to a company in the amount of $169,204.96, and that. by written guarantee made in April 2012, the defendant guaranteed the debts owed by the company. The District Court claim is a simple money claim. 4The relevant course of proceedings in the District Court is that the defendant filed a defence on 13 December 2013. There are various non-admissions, but materially the defendant pleaded that the guarantee is void ab initio on the ground of non est factum. 5The defendant is a migrant from the Sudan and, for various reasons pleaded, he claims that he did not understand what he was doing sufficiently for the guarantee to be binding upon him. 6He also seeks relief under s 7 of the Contracts Review Act 1980(NSW). 7Much more recently, on 21 August 2014, the defendant in the District Court has filed a cross-claim against the plaintiff. It appears that that cross-claim raises similar issues to the defence. There are issues of unconscionable conduct, the Contracts Review Act, and statutory relief is sought in relation to the terms being unfair, misleading and deceptive, and the plaintiff's conduct being unconscionable. There is, in addition, a negligent representation claim. 8The effect of the District Court proceedings is that the plaintiff seeks an order under the guarantee that the defendant pay the debt that was owed by the company with which he was associated. 9The agreement upon which the plaintiff in the District Court relies contained a clause 17. That clause is somewhat common in credit contracts for the supply of goods. The defendant, if that term is enforceable, agreed to charge any real property, both present and future, to the extent of his legal or equitable interest, to secure his obligations under the guarantee. 10The plaintiff in the District Court does not seek any relief to establish the validity of that charge and, indeed, could not do so in that court. 11Clause 17 also contained a consent to the plaintiff lodging a caveat over property of the defendant to protect the charge. 12It appears that the plaintiff lodged a caveat against the property in folio identifier 3/774767, purportedly in exercise of its entitlement under clause 17 of the credit agreement. The registered proprietors of that property are the defendant and his mother, Rita Sayes. 13In due course, the registered proprietors served the plaintiff with a lapsing notice. 14The plaintiff on 17 January 2014 filed, with leave in court, a summons. Relevantly by par 5, the plaintiff sought an order that pursuant to section 74K of the Real Property Act 1990 (NSW), the operation of caveat No AH 978546 be extended until further order of the court. 15On 17 January 2014, Justice Lindsay, by order 5, ordered that the operation of caveat No AH 978546T be extended until further order. That extension is still in effect. 16On 28 March 2014, the defendant in the Supreme Court filed a cross-claim cross summons. He claimed in substance, by order1, a declaration that he and his mother, who is named as the first cross-defendant, hold the land against whose title the caveat was lodged on trust for the mother and the second cross-defendant, who is the defendant's father, in equal shares. 17In a sense, it is somewhat unusual that the defendant in the Supreme Court proceedings has filed a cross-claim that seeks to establish that he does not have any beneficial interest in the land. Rather, he claims, the cross-defendants, his parents, are entitled to the whole of the beneficial interest. 18The second order sought in the cross-claim, to which the plaintiff is third cross-defendant, is a declaration that the interest of the parents has priority over any interest that the plaintiff may have in the land. 19The third order is that the defendant and the mother execute a memorandum of transfer in registrable form transferring the land to the parents as joint tenants. 20The fourth order is a claim that under section 74MA of the Real Property Act, the plaintiff withdraw the caveat. 21The defendant and the parents have filed evidence in the Supreme Court proceedings. The evidence is to the effect that the defendant was put on the title to the property with no intention that he have any beneficial interest in the land. Because he is young and was in employment, the appearance that he would be an owner gave the parents a better prospect of raising a loan to purchase the land. They all say that there was no intention that the defendant would have any beneficial ownership in the land, and he has not made any payments in respect of it. It is not necessary for the court today to make any determination concerning the likely success of that claim. It can be said, however, that prima facie if the evidence is established it may well persuade a court that the defendant does not have any beneficial interest in the land. 22On 3 July 2014 Registrar Musgrave set down the Supreme Court hearings for three days commencing on 11 November 2014 before Pembroke J. As I have noted, the notice of motion that is presently before the court was filed about a week later on 11 July 2014. I have been informed by counsel for the plaintiff that when the matter was before the registrar the plaintiff's intention to file the notice of motion was raised and the registrar gave directions that any such notice of motion be filed within a week. I comment that, strictly, the notice of motion should have been filed some time before this matter was set down for hearing. That said, for various practical reasons to which I will come, I do not take the view that lateness is decisive in this case. 23The situation with the District Court is that, on 15 August 2014, orders were made which gave leave to the defendant to file and serve the cross claim to which I have earlier referred. A defence to the cross claim was also to be filed. I have been informed that that has happened. The third order made was that the defendant in the District Court was given leave to obtain expert evidence in the form of legal or financial advice in relation to documents signed by the defendant. There is some doubt as to the time by which the defendant was required to serve that evidence, but it was no later than 19 September 2014. I comment in passing that counsel for the defendant before this court has correctly said that it often happens that timetables are not met, but I must proceed upon the basis that the defendant is required to serve that evidence by no later than 19 September 2014. I was provided with no evidence to suggest that that deadline would not or could not be met. 24As I understand it, once that evidence has been served, there should only be a question of whether evidence in reply is necessary from the plaintiff. The plaintiff is not in a position to comment on the likelihood that it will serve evidence in reply as, of course, it does not yet know what that evidence will be. 25It is in these circumstances that the court has to consider whether, under s140, it should make an order transferring the District Court proceedings to this court. I note that, at the time the hearing was fixed by the registrar, there was some doubt about the time that the proceedings as then constituted would need for hearing. I am told that the defendant suggested one day. The plaintiff thought the hearing would take longer because of the need to cross-examine a number of witnesses, some of whom will need an interpreter. The registrar decided in the circumstances that a hearing of three days would be sufficient. 26It is not possible at this time to be sure whether, if the District Court proceedings are transferred to this court, the two proceedings could properly be heard together within a period of three days. One of the matters expressed by the defendant and the cross defendants in opposition to the order being made is the fear that the hearing in November will be lost if that occurs. I will return to that issue below. 27The summons filed by the plaintiff in this court, as I have indicated, relevantly only seeks an order for the extension of the caveat. That leads to the question of whether, if there is no transfer of the District Court matter, all that will happen at the hearing fixed to commence on 11 November 2014 is the plaintiff will seek a further extension of the caveat, and the defendant as cross claimant will pursue his cross claim against the three cross defendants. If that were to be the case then the issue on the summons would be whether the caveat should be extended on a contested interlocutory basis. 28As counsel for the defendant has properly submitted, it has always been the practice of this court that an extension of a caveat would only be ordered if, one way or another, the caveator committed to prosecuting proceedings to establish the validity of the estate or interest that the caveat was lodged to protect. I refer, for example to Iaconis v Lazar [2007] NSWSC 1103 and Waco Kwikform Ltd v Jabbour [2010] NSWSC 1379. 29Counsel for the defendant suggested that, in practical effect, the District Court claim is the claim whereby the plaintiff is implementing its obligation to perfect its estate or interest. I do not accept that submission, with respect, because the District Court claim is only a money claim to demonstrate that the defendant is indebted to the plaintiff under the guarantee. It is not a claim designed to establish the validity of the charge. It is true that, if the plaintiff loses the District Court claim, the basis for its charge will evaporate, but if it wins the District Court claim it will only have judgment for a sum of money, and will not have established its estate or interest in the property. 30In my view in fact the summons is defective. The plaintiff was granted an extension of the caveat until further order, and at the time no one adverted to the need to require the plaintiff to seek relief to establish that it has a valid charge and an entitlement to execute on that charge. Strictly, so that all matters in dispute between the parties are dealt with in these proceedings, the plaintiff should in addition have sought relief to execute the charge. As the charge is only an equitable charge orders of the court will be necessary for its execution. 31Counsel for the plaintiff has indicated that it was understood by the plaintiff that at least the issue of the validity of its charge would have to be established at the hearing. I accept that that was probably the implicit intent of the plaintiff, but it is a matter that will require to be remedied by proper amendment of the plaintiff's summons. 32 It therefore becomes necessary to consider the substance of the issues relevant to the question of removal of the District Court proceedings into this court. 33One matter to be observed is that the proceedings that would naturally be heard first are the District Court proceedings, and not the Supreme Court proceedings. If the guarantee is unenforceable, that is the end of the plaintiff's case. If the issues that arise in the Supreme Court are dealt with first, that will not finally resolve the dispute between the parties. In the cross claim in this court the defendant cross claimant is seeking orders in the interests of his parents, the first and second cross defendants. They have no interest but to support his claim. If they succeed then that will be to the disadvantage of the plaintiff third cross defendant. Accordingly, the dispute on the cross claim is really between the cross claimant and the first and second cross defendants against the third cross defendant. The former parties, if successful, will establish that beneficial ownership of the land resides solely in the parents. 34The next question will be which party, as between the parents and the plaintiff, has priority. I am presently inclined to think that because all claims are equitable the outcome will depend upon the rule "where the equities are equal the first in time prevails". For the cross claim to be usefully determined, it will be necessary for the priority issue to be dealt with. If the summons is not amended to make the validity of the charge an issue before the court, I do not see how the priority issue can finally and properly be dealt with. There would be a somewhat strange situation where the plaintiff would be seeking a continuation of the caveat on an interlocutory basis, and from its perspective the priority issue would be determined on interlocutory considerations, but from the perspective of the other parties they would want the issue to be determined on a final basis. 35In written submissions counsel for the defendant suggested that the problem may be resolved by the defendant being prepared to contest the Supreme Court proceedings upon the assumption that the guarantee was valid. That in my view also raises potential problems. They are problems which have serious conceptual implications which are not entirely easy to fathom. They do seem, however, to lead to a possibility, that if the Supreme Court proceedings were conducted on that basis, the plaintiff might succeed in establishing its charge and that it has priority over the parents, but then at a later time the defendant may succeed in the District Court proceedings, which would have the logical result that the charge was invalid. At the very least that is an undesirable way for the court to exercise its jurisdiction. It does give rise to potential problems, which I acknowledge may ultimately be illusory, but there would be a situation where the court had declared that the plaintiff was entitled to a charge and entitled to maintain its caveat in contested proceedings between the parties, based upon an assumption as to the validity of the guarantee, which was actively under challenge by the party proffering the assumption. In my view, in a somewhat novel way the existence of the two proceedings in different courts gives rise to the same problems as can arise in circumstances where parties ask the court to make an order under UCPR Rule 28.2 for the separate determination of matters. The High Court has cautioned against the wisdom of taking that course: see Tepko Pty Ltd v Water Board (2001) 206 CLR 1. 36At present I cannot entirely foresee the juridical problems that could arise out of the court determining the Supreme Court proceedings, which logically are secondary to the District Court proceedings, before the District Court proceedings are determined. 37It has been pointed out in submissions by counsel for the plaintiff that, in his affidavit evidence, the defendant in both courts raises the factual basis of his challenge to the validity of the guarantee. I refer to paragraphs 18 to 24 of his affidavit of 26 March 2014 in these proceedings, and also to paragraph 14 of his District Court affidavit sworn on 27 May 2014. It is not entirely clear how the defendant will seek to rely upon that evidence in the Supreme Court proceedings, however it does appear to be clear that the plaintiff must challenge the credit of the defendant, both in relation to the evidence that he gives in his attempt to establish the invalidity of the guarantee on the one hand, and also the evidence that he gives to try to demonstrate that he does not have any beneficial interest in the land on the other. That at least gives rise to possibilities of inconsistent findings on the issue of credit as between the two courts. The issue could go both ways, but the Supreme Court could find against the defendant's credit in relation to the existence of the trust on the one hand, and on the other hand the District Court could find for the defendant's credit on the issue of the validity of the guarantee, or vice versa. 38For these reasons I have concluded that it is entirely undesirable that the two proceedings continue in different courts. Furthermore, if the plaintiff is successful in these proceedings, assuming as I do that it would amend to seek to establish the validity of its charge, and that it has priority over any claim made by the defendant in favour of his parents, it would ordinarily be the case that the plaintiff would seek orders to enforce its charge because the defendant is already in default, assuming that the guarantee is valid. That would mean that, even if the Supreme Court proceedings were dealt with first, there is a high likelihood that, if the plaintiff succeeds, the defendant and his parents will seek to stay proceedings on any judgment pending the outcome of the District Court proceedings. 39In all of those circumstances I propose to make an order under s140 of the Civil Procedure Act that the District Court proceedings be transferred into this court. The fact that they have been transferred into this court in the first instance merely gives this court powers to case manage those District Court proceedings. It does not follow automatically that, because the proceedings have been transferred to the Supreme Court, they will necessarily be heard by Pembroke J when the matter comes before him on 11 November 2014. Among other things, I take the view that ultimately Pembroke J should be given the opportunity of deciding for himself, at an appropriate time, what the course of the two proceedings should be, although pending Pembroke J being in a position to take control of the proceedings I will manage them myself. 40The position is that the defendant, is as I have indicated, required to serve any expert evidence by 19 September 2014. It seems to me that the appropriate course is for this court to proceed on the basis that the defendant will comply with that direction and that the appropriate course would be for the court to fix a time for all other evidence, presumably in reply, to be filed within some short period thereafter. In due course I will invite counsel to address me in relation to the timetable that is appropriate. 41That timetable will involve the matter being stood over to a suitable time sufficiently before 11 November 2014 for the court to make the best determination it can on the basis of the actual circumstances concerning the preparation of the case as to how this matter should proceed. As I say, the transfer of the District Court proceedings into this case does not mean necessarily that either both proceedings will be heard on 11 November 2014 or indeed that hearing date will be lost. 42After hearing further from counsel I have made the following orders: (1)Direct the plaintiff to file any amended summons it wishes to file limited to making a claim to establish the validity of its charge the priority of that charge and consequential relief by Friday 5 September 2014 (2)Order that proceedings 2013 of 321035 in the District Court of NSW in which Australia Timber Supplies is the plaintiff and Romani Agia is the defendant be transferred to this court (3)Direct the plaintiff to file and serve all of its further evidence in chief by Friday 12 September 2014 (4)Direct the to defendant subject to order 5 to serve all of the evidence including expert evidence upon which it wishes to rely by Tuesday 30 September 2014 (5)Direct the defendant to file and serve any evidence of the defendant that responds to the defendant's expert evidence by Tuesday 7 October 2014 (6)Direct the plaintiff to file and serve its evidence in reply by Tuesday 14 October 2014 (7)Grant the parties liberty to apply on 3 days notice (8)Directs the plaintiff if it is prepared to give the usual undertaking as to damages to support the order extending the caveat to do that by taking whatever steps are available by Friday 5 September 2014 (9)Order that the costs of the notice of motion be the parties in the cause (10)Stand both the proceedings over to 9:30 am on Friday 17 October 2014 before Robb J for directions