Banksia Mortgages Limited v Croker and Ors

Banksia Mortgages Limited v Croker and Ors - [2010] NSWSC 883 - NSWSC 2010 case summary — Zoe

[11]

The background to the defendants' motion 4 The matter has a regrettably protracted history. It is a part heard possession matter in which the defendants pursue a cross claim. The proceedings were commenced by statement of claim filed in July 2009. The hearing was due to commence on 23 February 2010, with a 4 day estimate. On 2 December, Johnson J ordered that the defendants file any evidence in response to the plaintiff's evidence on the cross claim by 17 February 2010. 5 On 22 February, the defendants made an adjournment application, in circumstances where their former solicitors had ceased to act; Mr Newell of counsel had very recently been briefed; and new solicitors instructed. The application was opposed. The defendants had not complied with the Court's orders, or a notice to produce and efforts at contacting them had failed. The application was stood over to the following day, so that the defendants could provide instructions in relation to the matters raised against them. 6 On 23 February, the adjournment application was pressed in the face of difficulties caused by the loss of the former legal representation and the defendants' financial difficulties. New solicitors and counsel had been instructed, but they knew little about the matter. The defendants' evidence was not on. The circumstances were claimed to involve a fraudster, Mr Hraiki, and the disappearance of $1.6 million of the over $5 million loaned to the defendants. A relationship between the plaintiff and Mr Hraiki was alleged to support the defence of the plaintiff's claim and the cross claim. 7 It was then accepted by Mr Newell that it was not in contemplation that even if entirely successful, the defendants would be relieved of all of their debt. The property securing the loan was valued in excess of $10 million. It being accepted that the plaintiff had adequate security, I concluded that it would not to be prejudiced by the adjournment, which I granted. The defendants were also given the opportunity to replead and put on fresh evidence. 8 The hearing adjourned until 10 May, with the parties agreeing to a tight timetable for further steps required to be taken beforehand. Directions included discovery, with the defendants to serve a list of categories by 5 pm on Friday, 26 February; that categories be agreed by the following Wednesday; and that a verified list be served by the following Friday. Any amended cross claim and further affidavits were required to be served by the defendants, within 14 days. Any expert evidence was to be filed within 28 days. The directions were not complied with. Further orders and directions were made and they, too, were not complied with by the defendants. 9 On 6 May the matter came on for hearing of a motion. Mr Newell then announced that the matter was not ready for hearing. After further discussions between the parties, the hearing was adjourned until June, the parties agreeing on the terms of the orders to be made, which included an order that the defendants' outstanding evidence be served by 14 May and that: "No further defendants' evidence in chief may be relied upon without leave of the court."

[12]

10 The defendants' evidence was still not put on. 11 On 2 June, there was yet a further adjournment application, unsupported by any motion and foreshadowing an application to join another party. These applications were opposed, concerns then being raised as to whether adequate equity remained in the property to protect the plaintiff's position. Affidavits were relied on for the defendants, which dealt with the imminence of expert evidence being completed. Again, the parties engaged in discussions, which included the provision of further security to the plaintiff. 12 The matter was adjourned and on 4 June the adjournment application was further pressed, opposed and refused. It was, however, agreed that the hearing scheduled to commence on 7 June should be adjourned until 8 June. The hearing commenced that day with Mr Newell making yet another adjournment application, with the filing of a motion supported by an affidavit. The application was opposed. The parties had failed to agree on terms as to the provision of the further security which they had been discussing. I concluded that the plaintiff could no longer be denied a hearing of its application, in circumstances where the proposed enhancement of its security was only available, if it agreed to enter into a legal relationship with a stranger, on terms which it was not prepared to accept. 13 The plaintiff then opened its case, tendering various affidavits and other documents. Mr Newell then received instructions to make yet another adjournment application, seeking an adjournment until 2pm, in order to put on evidence in support of the application. That short adjournment was granted and after hearing the parties, the hearing was adjourned to 16 August, on the basis of undertakings given to the Court that $150,000 would be paid to the plaintiff by 5 pm on 18 June and directions given in relation to the filing of the defendants' outstanding evidence. 14 The undertakings were not complied with, nor was all of the evidentiary material served. On 21 June, a further extension to serve evidence was not pressed, the defendants accepting that they were in contempt of court. An expert's report in relation to lending was served on 21 June, as well as a statement made by Mrs Croker to the police on 18 June. 15 On 25 June, the undertaking had still not been met, nor other outstanding evidence served. The plaintiff filed a motion seeking that orders be made in its favour. On 20 July, the motion was not pressed, in circumstances where an outstanding expert accounting report was to be served that day and an outstanding affidavit to be sworn by Mrs Croker, which provided the factual foundation for that expert's report, was to be filed by 26 July. The report was served on 21 July. 16 On 28 July, Mrs Croker's outstanding affidavit had still not been served, but the $150,000 had been paid. Directions were then given for the filing of a motion which the defendants foreshadowed in relation to further discovery and seeking leave to rely on further evidence. The motion was listed for hearing on 5 August. 17 Mrs Croker's outstanding affidavit has still not been served. The evidence led in support of the motion is scant to say the least. There has been no explanation as to why Mrs Croker's evidence has not been put on, other than the defendants' ongoing financial difficulties. What was required to be done has been known and repeatedly promised for some time. Mrs Croker has now also fallen ill, with the result that nothing can now be advanced as to when further evidence could be put on. 18 The matters in issue between the parties must be determined in accordance with the requirements of the Civil Procedure Act 2005. Relevantly they include s 56, which provides that the Act has as its overriding purpose the 'just, quick and cheap resolution of the real issues in the proceedings' and requires that parties assist the Court to further that purpose. Section 57 requires that the Court manage the proceedings by paying regard to how the parties have fulfilled their obligations in the proceedings, including in relation to any lack of expedition and the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. Section 58 requires that the Court act in accordance with the dictates of justice, and that consideration be given to the degree of expedition with which the respective parties have approached the proceedings, and the degree to which they have been timely in their interlocutory activities and the degree of injustice that would be suffered by the respective parties, as a consequence of any order or direction made. 19 The ongoing delays in this matter, coupled with the costs which have resulted from the way in which the defendants have conducted themselves, when considered together with the escalating burden of what here lies in issue between the parties, means that one of the factors against which the parties' respective positions must be assessed is the question of cost. That is a factor emphasised in s 60 of the Civil Procedure Act. 20 Section 61 of the Civil Procedure Act governs the applications which the defendants make. It provides: 61 Directions as to practice and procedure generally (cf SCR Part 23, rule 4; Act No 9 1973, section 68A) (1) The court may, by order, give such directions as it thinks fit (whether or not inconsistent with rules of court) for the speedy determination of the real issues between the parties to the proceedings. (2) In particular, the court may, by order, do any one or more of the following: (a) it may direct any party to proceedings to take specified steps in relation to the proceedings, (b) it may direct the parties to proceedings as to the time within which specified steps in the proceedings must be completed, (c) it may give such other directions with respect to the conduct of proceedings as it considers appropriate. (3) If a party to whom such a direction has been given fails to comply with the direction, the court may, by order, do any one or more of the following: (a) it may dismiss the proceedings, whether generally, in relation to a particular cause of action or in relation to the whole or part of a particular claim, (b) it may strike out or limit any claim made by a plaintiff, (c) it may strike out any defence filed by a defendant, and give judgment accordingly, (d) it may strike out or amend any document filed by the party, either in whole or in part, (e) it may strike out, disallow or reject any evidence that the party has adduced or seeks to adduce, (f) it may direct the party to pay the whole or part of the costs of another party, (g) it may make such other order or give such other direction as it considers appropriate. (4) Subsection (3) does not limit any other power the court may have to take action of the kind referred to in that subsection or to take any other action that the court is empowered to take in relation to a failure to comply with a direction given by the court.

[13]

Discovery 21 The orders finally pressed were to require production in terms sought by the defendants in February 2010, as well as the production of further documents, which has resulted from the defendants' inspection of the documents produced. Preparation of verified lists of documents is also sought. 22 The motion was supported by an affidavit sworn by Mr McCartney, which set out material served by the defendants since he took over carriage of the matter in February and their recent pursuit of further discovery. There has been significant discovery given, it appears, but dissatisfaction that there has not been discovery of material which the defendants believe go the heart of the parties' cases. It was argued that the further discovery sought was forensically important to the defendants and that certain cross examination would depend upon it and would be made more difficult by the absence of lists. Further amendment of the defendants' cross claim was also foreshadowed in Mr McCartney's recent correspondence, as the result of the further discovery sought. 23 Annexed to an affidavit sworn by Mr Chick, the plaintiff's solicitor, was a deal of ongoing correspondence between the parties in relation to discovery. In a reply sent to Mr McCartney's 30 July letter when further discovery was sought, it was indicated that a suggested list of categories had been provided on 8 March, with follow up letters sent on 23 and 25 March, 5 and 13 April and 25 May. Documents had been available for inspection since 12 March and there had been inspection on 26 March and again more recently. The defendants have a copy of all discovered documents. The correspondence also revealed ongoing discussion as to categories of documents in dispute and the adequacy of the production provided. Responses were provided in relation to other documents sought in the letter of 30 July, indicating that the plaintiff had instructed as to various further categories sought, that no further documents existed to be produced. 24 The plaintiff's position was that the defendants could have no legitimate grievance in relation to discovery and that the production of lists at this stage of the hearing, would unnecessarily and considerably add to the cost of the proceedings. 25 I have come to the conclusion that is too late to permit the course now so belatedly embarked on by the defendants. 26 On any view the defendants have received the consideration which justice demands that their ongoing financial difficulties have caused them in dealing with this litigation. They have received considerable accommodation from the plaintiff at various junctures and even when various of their applications were resisted, their difficulties have received repeated positive consideration by the Court. I am satisfied that the defendants have been given every proper opportunity to advance their case. 27 If there were serious problems with discovery, they had to be dealt with long before the hearing commenced on 8 June. But for the adjournment of the hearing that day, the defendants would have had to run their case without the discovery only belatedly pursued on 30 July. The matter is part heard, with the hearing due to resume on 16 August. If there was any real problem with discovery, that must have been apparent long before 30 July, when the motion seeking further discovery was filed and Mr McCartney wrote to the plaintiffs, informing it of the defendants' attitude. The defendants now complain that it has only recently been revealed that copies of certain emails were not kept by the plaintiff and no steps were taken to have computer records reconstituted, to retrieve them. In submissions it became apparent, however that the defendants had long believed that such documents had existed and yet no steps were taken to pursue the discovery of such material. 28 The evidence amply reveals that the defendants have simply failed to take available steps to deal with any real problems in relation to the discovery given, in a timely way. No adequate explanation has been forthcoming for their failures. 29 Justice must be done to both parties. Further costly discovery now so belatedly pursued may not be permitted, if that is to be achieved. The orders now sought cannot be fairly accommodated within the available timeframe. The further discovery sought is unjustifiably oppressive at this late stage of the litigation. The consequences of the course which the defendants have pursued to this point must now be born, without further relief from whatever their decisions have brought them in relation to discovery.

[17]

The accountant's report 40 The Uniform Civil Procedure Rules 2005 deal extensively with what is required in relation to expert reports (see for example Rule 31.27 and 31.28). The defendants' compliance with its obligations, is problematic to say the least. The Court has wide discretions which must be exercised in order that the requirements of the Civil Procedure Act earlier mentioned are satisfied. 41 Various of the defendants' financial records were provided in May and the accountant's report was served on 20 July, but it was announced at the hearing on 5 August that it has to be recast. Rule 31.28(4) requires that exceptional circumstances be established for the late service of an expert's report. In the circumstances that cannot be established. The mere fact that a party is aware of what the contents of a report may be, is not sufficient to establish such circumstance. Were that the only difficulty, ameliorating steps could conceivably be taken to deal with what has emerged, but given that the report recently needs to be revisited and the hearing is due to resume on 16 August, a basis for granting the leave sought is difficult to see. 42 There is another more fundamental difficulty with its receipt. The defendants intended that Mrs Croker would put on factual evidence to provide a basis for the opinions expressed in the report. That has not occurred, even though what was required to be done has obviously been long known by the defendants. There is still no indication as to when this affidavit might emerge, or what it might contain. I have now refused leave to serve any further affidavit from Mrs Croker. In those circumstances, leave to rely on the accountant's report must also be refused. 43 There were other objections to this report on the basis of relevance. It is unnecessary to deal with them, given the conclusions I have otherwise reached, but it is pertinent to observe that they may well have some proper foundation, given that they go to the absence of any evidence supporting various assumptions made. These objections appear to go beyond what it is envisaged Mrs Croker's evidence might address. Whether those submissions would be accepted, may simply not be determined, given the ongoing absence of any supporting evidence from Mrs Croker. 44 In all of these circumstances it simply cannot be concluded that the plaintiff could fairly be required to meet an accountant's report, yet to be further amended, as is here proposed.

[20]

"85 In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of "specialised knowledge"; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be "wholly or substantially based on the witness's expert knowledge"; so far as the opinion is based on facts "observed" by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of "specialised knowledge" in which the witness is expert by reason of "training, study or experience", and on which the opinion is "wholly or substantially based", applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v R (1999) 197 CLR 414, on "a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise" (at [41])." 51 These views have received repeated attention in the authorities, with consideration being given to the time at which an assessment may be made as to whether an expert's opinions have been shown to rest in a necessary way on proven facts. In Rhoden v Wingate [2002] NSWCA 165, the Court of Appeal observed at [86]:

[29]

Mr Nolan 58 Orders were sought under s 166 of the Evidence Act requiring the plaintiff to call Mr Nolan to give evidence. He was a former employee of the plaintiff, who dealt with the defendants' original loan application. The plaintiff have not put on evidence from Mr Nolan and do not propose to call him. Their evidence comes from other officers, including those who approved the loan. This issue was first raised for the defendants in Court on 28 July. A written request was made on 30 July. At the hearing on 5 August, the motion was amended to refer to s 169, but it then soon became apparent that leave was required under s 168, before any application under s 169 could be entertained. The plaintiff opposed the leave sought. 59 Mr Nolan's evidence was said by the defendants to be critical, because the plaintiff sought to rely on hearsay evidence in relation to representations which he had made, which was inconsistent with the evidence which Mrs Croker would give. In accordance with s 167, the question to which Mr Nolan's evidence went was said for the defendants to be what he said about the defendants obtaining financial advice in relation to the proposed investment, for which part of the loan moneys were to be used. The defendants had been represented by a broker, Mr Hraiki and had borrowed the money in part to make an investment in a venture in which Mr Hraiki was also involved. 60 The plaintiff's letter of offer to the defendants of 18 November 2005, required in special condition (d) that a summary of the investment strategy recommended by the defendants' financial planner be provided. The defendants claim that Mr Nolan countermanded this special condition and that it was never complied with. The plaintiff's case is that it was. 61 What Mr Nolan told Mr McCluskey appears in an affidavit sworn by Mr McCluskey. No objection was taken to the receipt of his affidavit. He was a member of the lending committee which initially refused the loan and later approved it. Emails passing between he and Mr Nolan are also annexed. Mr McCluskey has not yet been cross examined, but Mr Curnow, another member of the lending committee, has already given evidence and been cross examined about his knowledge of these matters. 62 The plaintiff's position was that the evidence showed that the special condition imposed by the committee was insisted on and complied with. Information about the investment strategy was provided to the plaintiff and the defendants' solicitor in January 2006, after Mr Nolan wrote to the defendants' broker requesting that it be provided. 63 Mr McCluskey's affidavit was served in February 2010. A request to call Mr Nolan, was required to be made within 21 days (s 168). Under s 168(2) the defendant was obliged to seek leave to make a request, it having been made out of time. The plaintiff argued that in the circumstances such leave was not sought before the request was made on 30 July and that it would not now be granted, nor would orders be made under s 169. 64 The plaintiff submitted that these provisions were not designed to create a situation where it was obliged to call evidence from a witness who the defendants expected would be hostile to their case. 65 Mr Nolan no longer works for the plaintiff. Whether or not he is available to give evidence is not known. There was no evidence that the defendants had yet sought him out, but the court was informed that they intended to subpoena him. 66 The defendants' complete lack of attention to the question of Mr Nolan being called, until 30 July, when they have had Mr McCluskey's affidavit since February and it was received in evidence without objection on 8 June, with the hearing due to resume on 16 August, lends support to the conclusion that no discretion may be exercised in their favour, notwithstanding the importance which it is now claimed that his evidence might have to the parties' respective cases. 67 In Trimcoll Pty Ltd v Deputy Commissioner of Taxation [2007] NSWCA 307, the Court of Appeal considered the operation of the system established by the Evidence Act, for the making of a request that another party call a witness. As was observed at [62], such requests are usually made before trial, at a time when there may be doubt about the factual matters in issue. That is certainly not the case here. 68 The defendants have had Mr McCluskey's affidavit since February. Given the claims made in the cross claim and Mrs Croker's evidence, it is apparent that this request ought to have been made long ago, certainly before Mr McCluskey's affidavit was tendered without objection. Section 168 limits the time when such requests may be made. There was no explanation as to why the defendants have not complied with that time limit. Nor, until the hearing of the motion, did they seek leave to make a request outside that time. The section requires the Court to be satisfied that there is good reason for granting the leave 69 Were such leave to be granted, the provisions of s 169 must be considered, the plaintiff opposing the order. Section 169 requires that: 169 Failure or refusal to comply with requests (1) If the party has, without reasonable cause, failed or refused to comply with a request, the court may, on application, make one or more of the following orders: (a) an order directing the party to comply with the request, (b) an order that the party produce a specified document or thing, or call as a witness a specified person, as mentioned in section 166, (c) an order that the evidence in relation to which the request was made is not to be admitted in evidence, (d) such order with respect to adjournment or costs as is just. (2) If the party had, within a reasonable time after receiving the request, informed the other party that it refuses to comply with the request, any application under subsection (1) by the other party must be made within a reasonable time after being so informed. (3) The court may, on application, direct that evidence in relation to which a request was made is not to be admitted in evidence if an order made by it under subsection (1) (a) or (b) is not complied with. (4) Without limiting the circumstances that may constitute reasonable cause for a party to fail to comply with a request, it is reasonable cause to fail to comply with a request if: (a) the document or thing to be produced is not available to the party, or (b) the existence and contents of the document are not in issue in the proceeding in which evidence of the document is proposed to be adduced, or (c) the person to be called as a witness is not available. (5) Without limiting the matters that the court may take into account in relation to the exercise of a power under subsection (1), it is to take into account: (a) the importance in the proceeding of the evidence in relation to which the request was made, and (b) whether there is likely to be a dispute about the matter to which the evidence relates, and (c) whether there is a reasonable doubt as to the authenticity or accuracy of the evidence that is, or the document the contents of which are, sought to be proved, and (d) whether there is a reasonable doubt as to the authenticity of the document or thing that is sought to be tendered, and (e) if the request relates to evidence of a previous representation - whether there is a reasonable doubt as to the accuracy of the representation or of the evidence on which it was based, and (f) in the case of a request referred to in paragraph (g) of the definition of request in section 166 - whether another person is available to give evidence about the conviction or the facts that were in issue in the proceeding in which the conviction was obtained, and (g) whether compliance with the request would involve undue expense or delay or would not be reasonably practicable, and (h) the nature of the proceeding. 70 Fundamental to the exercise of any discretion is s 167, which provides:

[30]

167 Requests may be made about certain matters A party may make a reasonable request to another party for the purpose of determining a question that relates to: (a) a previous representation, or (b) evidence of a conviction of a person for an offence, or (c) the authenticity, identity or admissibility of a document or thing. 71 The question identified by the defendants was Mr Nolan's representation as to the defendants obtaining financial advice. It is the basis which Mr Nolan had for making this representation, which the defendants wish to explore. Their case is that it had no foundation. That is certainly a question relating to the representation. Had the request been made before Mr McCluskey's evidence was received, perhaps it might have been more readily apparent that the request was a reasonable one. 72 In the circumstances, such a request not having been made, I am satisfied that good reason for the request being made out of time, which is required to be established by s 168, has not been shown. 73 The evidence Mr McCluskey has given explains why the plaintiff imposed a condition on the loan which the defendants were seeking, the lending committee having initially refused the loan application, because of a concern that the defendants could not service the loan, given the information provided. 74 Mr Nolan was dealing with the defendants and was advised that the committee required more information about the proposed investment. Mr Nolan told McCluskey that the defendants were obtaining financial advice as to that investment. Mrs Croker's evidence will be that she never informed Mr Nolan that such advice was being obtained. It appears that while Mr Nolan spoke to Mrs Croker, he was dealing with the defendants' broker. Whoever the source of Mr Nolan's advice was, the result of the advice was that the committee considered the application further and imposed a condition on the loan, requiring the provision of information by the defendants in relation to the proposed investment. Information was later provided and the loan was then made. 75 In the circumstances, it is difficult to see what could turn on Mr Nolan's advice to Mr McCluskey that the defendants were obtaining financial advice about the investment, the accuracy of which the defendants now wish to challenge, even though Mr McCluskey's evidence as to what he was told by Mr Nolan and the steps which were then taken by the committee, has already been admitted without objection. 76 The fact is that whatever basis Mr Nolan had for what he told Mr McCluskey after the loan was initially rejected, the result was that the committee approved the loan, subject to a requirement that required information about the investment to be provided. Information was provided before the loan was made. Apparently it satisfied the plaintiff. What the committee intended; the adequacy of the condition actually imposed; whether or not the document provided in fact satisfied the condition imposed; and whether the loan ought to have been made at all, or on the basis of the document provided; may all be put in issue, but they do not depend on a resolution of the question which the defendants identified as arising under s 167 in relation to Mr Nolan's representation. 77 On the evidence on which the defendants' relied in support of their application, such as it is, the considerations arising under s 169 also lead to the conclusion that no discretion requiring the plaintiff to call Mr Nolan can be now be exercised. 78 Firstly, I am unable to conclude that the plaintiff's refusal to call Mr Nolan is unreasonable in the circumstances, given that Mr McCluskey's evidence has already been received without objection. Even though Mrs Croker will give evidence that she did not tell Mr Nolan that the defendants were receiving financial advice, it is apparent that there were other possible sources for such information. Irrespective of the accuracy of what Mr McCluskey was told, it is the actions taken by the committee as a result and what followed, on which issues lying between the parties appear to turn. Ultimately, the representation does not appear to have the crucial significance which the defendants belatedly assert. 79 Secondly, the considerations required by s 169(2) and (5) do not favour the defendants, given the delay in making this request and the state of the evidence. Whether or not Mr Nolan is even available to give evidence is not known, but it appears that a subpoena, while intended to be served by the defendants, has still not been served. Whether it has been issued, or whether he has even been located, is not apparent.

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Cases Cited (11)

Cited By (1)