BANK OF WESTERN AUSTRALIA LIMITED v HOLLYWOOD MANAGEMENT PTY LIMITED - [2010] NSWSC 935 - NSWSC 2010 case summary — Zoe

NSWNSWSC

BANK OF WESTERN AUSTRALIA LIMITED v HOLLYWOOD MANAGEMENT PTY LIMITED

[2010] NSWSC 935

Supreme Court of NSW|2010-08-06|Before: Hall J

View original source

At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2010-08-06

Before

Hall J

Source

Original judgment source is linked above.

Judgment (81 paragraphs)

[1]

CITATION : BANK OF WESTERN AUSTRALIA LIMITED v HOLLYWOOD MANAGEMENT PTY LIMITED (IN LIQUIDATION) & ANOR [2010] NSWSC 935

[2]

In relation to the relief sought in paragraphs 1 to 7 of the notice of motion filed on 13 July 2010, I make the following orders:- (1) That the defence of the first defendant, Hollywood Management Pty Limited (In Liquidation) is struck out. (2) That the cross-claim by the first defendant/first cross-claimant, Hollywood Management Pty Limited (In Liquidation) is dismissed. (3) That the defence by the second defendant, Chrissanthi Rougalas, is struck out. (4) That the cross-claim by the second defendant/second cross-claimant, Chrissanthi Rougalas, is dismissed. In relation to the further relief sought in paragraphs 8 and 9 of the notice of motion filed on 13 July 2010, I make the following orders:- DECISION : (1) An order that the plaintiff have possession of:- (a) the land comprised in Certificate of Title Folio Identifier 501/626361 being the land situated at and known as 28 Bryant Street, Padstow, New South Wales ("the First Property"); (b) the land comprised in Certificate of Title Folio Identifier A/408252 being the land situated at and known as 17 Pitt Street, Mortdale, New South Wales, 2223 (also known as 15-17 Pitt Street, Mortdale, New South Wales, 2223) ("the Second Property"); (c) the land comprised in Certificate of Title Folio Identifier B/408252 being the land situated at and known as 19 Pitt Street, Mortdale, New South Wales, 2223 (also known as 19-21 Pitt Street, Mortdale, New South Wales, 2223) "the Third Property"). (2) A writ of Possession for the First Property, the Second Property and the Third Property be issued forthwith. (3) Liberty to the plaintiff to lodge with my associate written submissions on the question of costs sought as against the first defendant and against the second defendant and the basis upon which any costs order is sought. (4) Liberty to the plaintiff to apply with respect to the form of the orders made.

[12]

(3) The Third Property . The plaintiff, in respect of the Third property, also relies upon the second mortgage (Mortgage No AE 141836) and alleges default under its provisions and failure to comply with a Default Notice served on the defendants. 6 On 31 December 2009, a defence dated 8 December 2009 was filed on behalf of Hollywood Management and Ms Rougalas. In it, the defendants did not admit the plaintiff's allegations in the statement of claim and denied others. They put in issue matters of fact pleaded by the plaintiff and any entitlement of the plaintiff to relief. In answer to the whole of the allegations contained in the statement of claim, the defendants stated that they relied upon the allegations of fact contained in the cross-claim filed on their behalf. 7 On 31 December 2009, a document was filed entitled "First Cross-Claim Statement of Cross-Claim". An affidavit was sworn by Ms Rougalas on 16 December 2009 verifying the allegations of fact in the cross-claim. 8 Hollywood Management and Ms Rougalas, as cross-claimants, claimed various forms of relief including a declaration that the first and second mortgages were unenforceable, an order that the mortgages be aside, an order restraining the plaintiff from taking steps to enforce the terms of the first and second mortgages, a declaration that the first and second mortgages were "unjust" within the meaning of s.7(1) of the Contracts Review Act 1980 and other orders under that Act. 9 In the alternative, a declaration was sought on behalf of the second cross-claimant (Ms Rougalas) on the basis that it is alleged she was induced to execute the first and second mortgages given by Hollywood Management and herself by misrepresentations of the plaintiff and its agent. 10 Relief is also sought under the Fair Trading Act 1987 and the Trade Practices Act 1974. 11 Further, the cross-claimants claimed damages and interest from 30 January 2009 to the date of judgment. 12 Particulars of the causes of action relied upon in the cross-claim are set out in the first cross-claim.

[19]

(2) In any event, even if leave was required, the Court would readily grant it, given the nature of the claim. 36 It was also observed on behalf of the plaintiff that it did not seek in the proceedings any money order against Hollywood Management. It was not seeking to advance a mere right to payment of a debt due, secured against the property or properties. It was seeking to enforce the security by obtaining possession of the properties. 37 Reliance was placed upon the following observations by the learned authors of Ford's Corporations Law at 27.120:- " Proprietary claim of a secured creditor In relation to the claims of secured creditors against property, neither s.471A suspending the powers of the company's officers nor s.471B imposing a stay of proceedings affects a secured creditor's right to realise or otherwise deal with the property charged under a valid charge in order to recover what is owing under the charge: s.471C. The secured creditor does not require the leave of the Court to deal with the property charged. If, however, the liquidator is unwilling to give up the property, the secured creditor will need to seek the court's leave in order to avoid being in contempt of court: Re Landmark Corp Limited (in liq) (1968) 1 NSWLR 705 … That is because the liquidator is regarded as an officer of the Court carrying out the Court's function to wind up the company. When satisfied that the charge was valid and applied to the property in question, the Court would grant leave as a right: SA Asset Management Corporation v Sheahan … a secured creditor having security over debts owed to the company may sue for them without having to get the liquidator's approval: New Imperial Pty Limited (in liq) v Beveridge (1995) 5 Tas R 246 …" 38 Mr White, on behalf of the plaintiff, also relied upon the fact that there is no suggestion that the liquidator is unwilling to give up one or more of the properties, the subject of the plaintiff's claim. 39 Accordingly, the plaintiff sought an order for possession of each of the first, second and third properties. It was noted that, as the second and third properties are held by Hollywood Management and Ms Rougalas as tenants in common, then, in relation to those properties (but not the first property), the Court will need to assess the plaintiff's entitlement in conjunction with its submissions on relief against Ms Rougalas.

[20]

The statutory provisions 40 As noted above, the plaintiff relies in the motion as against Hollywood Management upon the provisions of Part 13 Rule 13.4 of the UCPR which is concerned with the summary disposal of proceedings. The provisions are as follows:- "13.4(1) If in any proceedings it appears to the Court that in relation to the proceedings generally or in relation in to any claim for relief in the proceedings:- (a) the proceedings are frivolous or vexatious, or (b) no reasonable cause of action is disclosed, or (c) the proceedings are an abuse of the process of the Court, the Court may order that the proceedings be dismissed generally or in relation to that claim. (2) The Court may receive evidence on the hearing of an application for an order under sub-rule (1)." 41 Under the provisions of the above Rule, the Court has power to dismiss proceedings which are found to be an abuse of process or where the case brought by the opposing party is so weak and (in this case, the plaintiff's case) is so strong as to permit proceedings to go to trial would be futile. It is unnecessary here to examine all the other circumstances in which relief may be granted under Part 13 Rule 4. 42 As also stated above, the plaintiff relies upon UCPR Part 14 Rule 14.28 in the alternative in seeking an order that the cross-claim be struck out. Those provisions provide:- "14.28(1) The Court may, at any stage of the proceedings, order that the whole or any part of pleading be struck out if the pleading:- (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the Court. (2) The Court may receive evidence on the hearing of an application for an order under sub-rule (1)." 43 In relation to the provisions of Part 14 Rule 14.28(1), the Court may strike out pleadings on the grounds of "an abuse of the process of the Court" which potentially covers a wide range of matters. The concept of abuse of process overlaps other specific rules that justify the striking out of proceedings or pleadings. It involves wider considerations than mere non-compliance with Rules, orders or directions. The case law indicates that the categories of what constitutes an abuse of process, include:-

[60]

(2) Ms Rougalas 71 The basis upon which the plaintiff moves for such an order against Ms Rougalas was that the defence was not being conducted with due despatch. In this respect, reference was made to the decision in Touma (supra). 72 In this latter respect, the relevant case law, as noted in the submissions for the plaintiff, to a large extent addresses questions associated with the dismissal of proceedings in circumstances where a plaintiff does not prosecute them with due despatch. In that context, it was said that delay is the threshold circumstance that enlivens the power, although the significance of delay is to be considered in the particular circumstances of the case involved. The plaintiff's submissions also add reference to the approach to be taken (said to differ from the relevant English authorities) as enunciated in Stollznow v Calvert (1980) 2 NSWLR 749; Micallef v ICI Australia Operations Pty Limited [2001] NSWCA 274. 73 In the present application, Mr White contended that the matters to be considered are now to be dealt with by due regard being given to the provisions of the UCPR, in particular, the provisions of s.56 (Overriding Purpose of the Act) and s.61 (Directions as to Practice and Procedure generally). 74 The submission was that the issue for determination is essentially what is just in all of the circumstances of the case. That, in turn, requires that a balance be struck between the competing interests of the plaintiff and the defendants which, in turn, is a matter to be considered in light of the judgment of the High Court in AON Risk Services Australia Limited v Australian National University (2009) 239 CLR 175, in particular at [137]. 75 As the Second and Third Properties are held by Hollywood Management and Ms Rougalas as tenants in common, in relation to those properties (but not the First Property), Mr White observed that the Court would need to assess the plaintiff's entitlements in conjunction with its submissions on relief against Ms Rougalas. 76 It was acknowledged that Ms Rougalas, as an individual, is entitled, prima facie, to claim relief under the Contracts Review Act. In other words, the provisions of s.6 of the Act do not present a bar to proceedings under the Act by her. 77 Mr White proceeded upon the basis that he did not wish, on the present application, to establish that the defence filed was "manifestly hopeless", acknowledging that the plaintiff was not in a position on this application to put on material to that end. 78 The plaintiff, accordingly, proceeded against Ms Rougalas upon the basis that the evidence indicates that she has not and is not conducting her defence in any active way, though acknowledging that in a case such as the present, there is usually affirmative or positive that the party in question has no intention of doing so. He relied, in particular in this respect, upon the history of the proceedings as detailed above.

[61]

Legal principles - dismissal of proceedings and striking out a defence 79 The power to dismiss proceedings for want of due despatch involves the exercise of a broad discretion vested in the Court, the fundamental criterion being that a balance is to be struck between the plaintiff and the defendant in determining whether justice requires a defence (and in these proceedings, the cross-claim) to be respectively struck out and dismissed. 80 It is not in dispute that the balancing exercise permits a consideration of a wide range of factors. 81 The question as to the exercise of the power to strike out the defence and to dismiss the cross-claim in the present case is to be considered having regard to the nature of the proceedings and the particular factual circumstances concerning the dispute between the parties. 82 Firstly, as earlier indicated, the plaintiff does not seek an order for monetary relief. It seeks orders for possession of the three mortgaged properties that were provided as security for a very substantial loan facility now said to be in default to a very significant extent (in excess of $2.2 million). 83 A further matter of some significance is that, on the evidence in this application, substantial default under the mortgages occurred by 6 August 2009, that is, approximately 12 months after the Facility Agreement was signed. In addition, the evidence establishes that following service of the Default Notices and s.57(2)(b) Notice on 11 August 2009, no attempt was made by the defendants to correct the default specified in the notices within the time stipulated or to otherwise take action in respect of the loan and mortgages. 84 The relevant case law authorities establish a number of general principles or guidelines that are commonly applied in applications for the dismissal of claims for want of prosecution. It is not necessary here to review those authorities in minute detail. They include Bishopgate Insurance v Deloitte Haskins [1999] 3 VR 863, 871-878 and Micallef (supra). Again, in general terms, the following matters are commonly considered and evaluated:-

[65]

• At a directions hearing, a Judge, Associate Judge or Registrar may give directions and make orders as it considers appropriate with a view to the just, quick, cheap and effective management and disposal of the proceedings. 87 The issue of delay very often arises for consideration in terms of the prejudicial consequences of delay to the conduct of litigation. In that regard, "delay" may occasion prejudice in one or more respects in relation to the possibility of a fair trial of issues in an action. However, delay may not be confined to that matter. Prejudice resulting from delay may be found in the burden which the other party to a claim must bear by being kept at risk in relation to an unresolved claim due to a dilatory approach to the proceedings by the other party. That has particular relevance in possession proceedings such as the present. 88 In at least most cases involving alleged default concerning secured loan finance, an expeditious determination of proceedings is desirable and, indeed, may be essential in the interests of both or all parties. This is especially so, given that there may be significant ongoing or accruing liability under a loan agreement for the payment of principal and/or interest. The liability continues to operate or accumulate whilst and until the proceedings have been finally determined, as in this case where interest is running at $17,787 per month. The mortgagor's equity in such cases becomes progressively diminished. That will often work to the detriment of lender and borrower alike. Accordingly, proceedings in the Possession List often involve pressing or urgent aspects. They, accordingly, call for appropriate case management as Practice Note No SC CL 6 indicates, particularly so in those cases where the grounds upon which a claim is disputed may be considered to be dubious or of doubtful merit. However, in this latter respect, by reason of the way in which the present application has been argued, as earlier discussed, I do not make any findings as to the merits of the defence or cross-claim filed in the present proceedings. 89 In Bishopgate (supra) Tadgell and Ormiston JJ observed (at 875):- "… There is a temptation in applications of this kind to look only to past and present prejudice. In each case, however, one must look at each of the elements of prejudice asserted and examine the time at which it is likely to be suffered, always making due comparison between prejudice which the defendant has suffered or will be likely to suffer because of inordinate and inexcusable delay and any prejudice it might have suffered in any event …" 90 In a case where a lender seeks orders to enforce a security and there has been delay in pursuing a defence (and a cross-claim) - as in the present case - there arises a risk of a continuing nature both in terms of unpaid principal and the accumulation of loss through unpaid interest. Such a risk may, of course, be a legitimate or an acceptable one where there is explanation of any delay and the party opposing a strike out/dismissal application demonstrates to the appropriate standard a defence or a case on the merits. 91 Accordingly, the character of the litigation in question is a matter to be taken into account in any application such as the present. These proceedings have at least elements of a commercial aspect and character to it. In AON Risk Services (supra), Heydon J at [13] made the following observations:- " The character of the litigation commenced . The litigation thus commenced was commercial litigation. While in general it is now seen as desirable that most types of litigation be dealt with expeditiously, it is commonly seen as especially desirable for commercial litigation. Its claims to expedition may be less than those of proceedings involving, for example, extraordinary prejudice to children; or the abduction of children; or a risk that a party will lose livelihood, business or home, or otherwise suffer irreparable loss or extraordinary hardship, unless there is a speedy trial … But commercial litigation does have significant claims to expedition. Those claims rest on the idea that a failure to resolve commercial disputes speedily is injurious to commerce, and hence injurious to the public interest … Commercial life depends on the timely and just payment of money. Prosperity depends on the velocity of its circulation. Those who claim to be entitled to money should know, as soon as possible, whether they will be paid. Those against whom the entitlement is asserted should know, as soon as possible, whether they will have to pay. In each case, that is because it is important that both the claimants and those resisting claims are able to order their affairs. How they order their affairs affects how their creditors, their debtors, their suppliers, their customers, their employees and, in the case of companies, their actual and potential shareholders, order their affairs. The court are thus an important aspect of the institutional framework of commercial. The efficiency or inefficiency of the courts has a bearing on the health or sickness of commerce." 92 The general principles and guidelines relating to strike out/dismissal applications do, as earlier noted, pay due regard to the nature of the proceedings in which applications are made. This is necessary, inter alia, so that the balancing of relevant factors in the exercise of the discretion takes into account the possibility of further unwarranted delay with the attendant risk of prejudice. 93 In cases such as the present, there may not exist, in terms of the duration of delay, the lengthy periods of delay that have on occasion existed in other classes of case. However, the same commercial imperative as may exist in proceedings in the Possession List may not operate to the same extent in those other classes of case. 94 It is accepted that the question of personal blameworthiness on the part of a litigant is a relevant matter to be taken into account: Stollznow (supra). 95 In the present case there is no evidence that suggests that the lawyers acting for the defendants were at fault in not filing and serving the evidence to be relied upon by the defendant/cross-claimants. 96 However, that said, there is simply no evidence either way, it being noted, of course, that the defendants have not appeared to provide any explanation for not having complied with the case management directions given by the Registrar. 97 So far as the cross-claim is concerned, in Stollznow (supra), it was laid down that the discretion to dismiss an action for want of prosecution was the discretion to do what was just in all the circumstances and that, on an application to dismiss for want of prosecution, fixed formulae should not be prescribed to limit the discretion to do what was just between the parties in the circumstances. 98 The balance to be struck by the Court is one as between the plaintiff and the defendant and, in the end, the Court must decide whether, on balance, justice demands that the action be dismissed: Masel v Transport Industries Insurance Co Limited [1995] 2 VR 328 at 335. 99 In the present proceedings, the following matters are noted:-

[71]

(6) Ms Rougalas has failed to attend the hearings on 13 July 2010 and 6 August 2010 and has not otherwise provided any evidence in response to the plaintiff's application.. 100 The above factors are matters to be considered in respect of the failure by Ms Rougalas to litigate the defence and to prosecute the cross-claim. Conclusions 101 In relation to Hollywood Management, I am of the opinion that the defence/cross-claim based on the Contracts Review Act are not maintainable by reason of s.6 of that Act, which prevents relief from being granted on an application by a corporation. 102 I am satisfied that by reason of s.471C of the Corporations Act, the provisions of s.471A and s.471B do not affect the plaintiff's right to an order for possession. In the alternative and, insofar as it may be necessary to obtain leave, leave is granted to the plaintiff pursuant to s.471B of the Corporations Act to proceed with the present proceedings including, in particular, the present application. 103 The further or alternative cause of action by Hollywood Management alleging misleading and deceptive conduct (paragraphs 17 and 18) of the cross-claim do not plead or otherwise set out the particulars of the matters relevant or germane to the pleaded allegations. As noted above, the only particulars identified pertained to Ms Rougalas' capacity to pay principal and interest. The pleading is, accordingly, seriously deficient and does not identify the basis upon which the misleading and deceptive conduct claim was pleaded and sought to be pursued in the proceedings. On that basis, the pleading, in respect of the above causes of action, should be struck out. Given that the company is in liquidation and the liquidator has indicated, effectively, that he does not wish to pursue or participate in the proceedings, there is no basis for an application to replead the misleading and deceptive conduct claim in proper form. Accordingly, an order is to be made for the defence by Hollywood Management to be struck out and the cross-claim by it dismissed pursuant to Part 13 Rule 4(1) of the UCPR. 104 In relation to the defence and cross-claim by Mrs Rougalas, the evidence clearly establishes that she, as second defendant to the proceedings, has not conducted her defence with due dispatch. The evidence similarly establishes that Ms Rougalas has failed, as cross-claimant, to prosecute the proceedings by way of cross-claim with due dispatch. In the circumstances where, on the evidence on the application, a substantial default has occurred under the loan facilities, the failure by the second defendant to comply with the Court's directions to file evidence and the absence of any explanation for the failure by her to pursue the defence and cross-claim, an order should be made that the defence be struck out and the cross-claim proceedings be dismissed.