Bengour Pty Ltd v Figtree

Solicitors: Summer Lawyers (Plaintiff) Penhall & Co (First and Second Defendants) File Number(s): 2020/00117746

Judgment

1. By a notice of motion filed on 29 May 2020, the plaintiff seeks orders that the defendants' defence be struck out and that there be judgment for possession of three parcels of land over which the defendants gave a registered first mortgaged in favour of the plaintiff to secure the repayment of funds advanced by, and other sums owed to, the plaintiff.

Background

1. The facts which constitute the background to this application are set out in the paragraphs which follow. There was no substantial dispute concerning any of the underlying facts, most of which were disclosed by the documentary evidence.
2. On 29 October 2019, the defendants and Winlord Pty Ltd (Winlord), a company controlled by the defendants, executed certain mortgage documentation in favour of the plaintiff as lender and mortgagee. The mortgages were to secure the repayment of funds advanced by the plaintiff to Winlord and related sums. The funds were initially intended to be used principally to refinance and complete a development project on land, owned by the second defendant, in Mittagong.
3. The mortgage documentation signed by the defendants and Winlord on 29 October 2019 relevantly included: 1. a mortgage over land in Moss Vale, New South Wales, of which the defendants were registered proprietors as joint tenants, (the Moss Vale Land). This mortgage became a registered first mortgage with reference number xxxxxx40; 2. a mortgage over two separate parcels of land in Mittagong, New South Wales, of which the second defendant was the registered proprietor (the Mittagong Lands). This mortgage became a registered first mortgage with reference number xxxxxx41; 3. a Registered Memorandum of Common Provisions xxxxxxx8P (the Memorandum); 4. Schedule A to the Memorandum; and 5. Schedule B to the Memorandum.
4. The Memorandum (including the completed forms of Schedules A and B) was expressly incorporated into each of the mortgages and contained, inter alia, detailed provisions as to the obligations owed to the plaintiff by Winlord, as borrower and debtor, and the defendants, as guarantors, debtors and mortgagors.
5. Schedule A included: identification of the plaintiff as the lender, Winlord as the borrower, and the defendants as the guarantors and mortgagors; specification of the "Principal Amount" to be advanced to Winlord, namely $2,500,000 and the lower and higher interest rates payable; confirmation that interest was payable monthly in arrears under cl 5.12 of the Memorandum; other provisions relating to interest including retained interest; identification of the land to be mortgaged and the fact that the security was to be by way of registered first mortgage; and, a number of special conditions.
6. In particular, Schedule A stated, in relation to the item "Retained Interest", as follows: "$51,562.50 being non-refundable interest that has been retained by the Lender(s) and deducted from the Principal Amount to pay towards interest owed by the Debtor to the Lender under this Mortgage."
7. In respect of retained interest, special condition 5 in Schedule A also provided: "5. The Debtors and Lender acknowledge and agree that $51,562.50 has been retained (Interest Retention Amount) to pay interest calculated at the Lower Rate of Interest for the Lender's respective mortgage."
8. In addition, in special condition 3 in Schedule A, provision was made for part of the Principal Amount to be advanced by way of Progress Payments as follows: "3. Progress Payments (a) Part of the Principal Amount is intended to finance the Works and is to be advanced by instalments (Progress Payments). (b) In its sole and absolute discretion, the Lender is under no obligation to make any Progress Payment. In order for a Lender to consider making a Progress Payment, requests for Progress Payments are to be made in writing and: (i) specify the amount of money requested to be drawn down; (ii) specify percentage of Works completed and cost to complete the remainder of the Works; (iii) be supported by a certificate from a quantity surveyor appointed by the Lender or one to the satisfaction of the Lender which verifies the value of Works completed and the cost to complete; (iv) be supported by a certificate from a registered surveyor and practising structural engineer acceptable to the Lender, if applicable; (v) authorise the Lender to pay the amount of the claim and specify to whom the payment is to be made; (vi) confirm that the work is being conducted in a workmanlike manner and to best industry standards; (vii) confirm all necessary local council and other approvals or inspections have been sought and obtained as required by any planning or development approval and annex copies of the same; (viii) include certificate from the builder of the Works confirming that all accounts rendered by contractors, sub-contractors and suppliers have been paid in full (and if requested provide proof of same; (ix) contain details of any projected cost overruns. (c) Each request for Progress Payments made by the Borrower (or the building contractor on behalf of the Borrower) must reflect the value of the Works completed and may be subject to inspection by the Lender or a person appointed by the Lender (at the Borrower's cost) before any Progress Payments is made. Nothing in this clause restricts the Lender's right to inspect the site at other times itself or through agents or experts appointed by it."
9. On 29 October 2019, the defendants also signed a number of other documents related to the transaction including: authorities and directions; powers of attorney; and, declarations that they had received legal advice. Their solicitor also certified that relevant advice had been given.
10. On 1 November 2019, the Principal Amount of $2,500,000 was paid out or held as follows, according to the cheque directions signed by Winlord and the "Borrower statement of account" maintained by the mortgage manager on behalf of the plaintiff: 1. $51,562.50 was held by the mortgage manager as retained interest in accordance with special condition 5; 2. $185,000.00 was held for "Civil Works (Progress Payments)" in accordance with special condition 3; 3. $69,400.00 was paid to the mortgage manager for various fees; 4. $3,080.00 was paid to solicitors for legal fees and disbursements; and 5. $2,190,957.50 was paid into Winlord's bank account or at its direction.
11. It followed from this that the Commencement Date (as defined in cl 1.1 of the Memorandum) was 1 November 2019 and the Date for Payment of Interest (as defined in cl 1.1 of the Memorandum and specified in Schedule A) was the first day of each month.
12. The parties to the mortgages, including the Memorandum and Schedules A and B, fell within the defined terms set out below as follows: 1. the "Lender" was the plaintiff - Schedule A and cl 1.1 of the Memorandum; 2. the "Borrower" was Winlord - Schedule A and cl 1.1 of the Memorandum; 3. the "Guarantor" was each of the defendants - Schedule A and cl 1.1 of the Memorandum; 4. the "Mortgagor" was Winlord and each of the defendants - Schedule A and cl 1.1 of the Memorandum; and 5. the "Debtor" was Winlord and each of the defendants, jointly and severally - cl 1.1 of the Memorandum.
13. Under the terms of the mortgages and the Memorandum (including Schedules A and B) each of the defendants, as a "Debtor", was liable to pay the Secured Money (or any part thereof) to the plaintiff in accordance with the terms of the Memorandum: cl 3.1(a)(i) of the Memorandum. The "Secured Money", as defined in cl 1.1 of the Memorandum, included, inter alia, the Principal Amount and interest payable under, and calculated in accordance with, the Memorandum. Consequently, the defendants were liable to pay: interest in arrears calculated in accordance with the Memorandum and Schedule A on the first day of each month; and, any other amounts which might fall within the definition of "Secured Money" when they became due.
14. Further, similar obligations on the part of the defendants also arose out of the guarantee and indemnity given by the defendants in cl 28 of the Memorandum. In particular, cll 28.5 and 28.6 provided: "28.5 The Guarantor [each defendant] agrees to guarantee to the Lender [the plaintiff] and indemnify the Lender as to: (a) the payment by the Debtor [Winlord and each of the defendants] of the Secured Money (or any part thereof) in accordance with the terms of this Mortgage; (b) the performance and compliance by the Debtor with all of the Obligations. 28.6 The Guarantor agrees that if the Debtor fails, refuses or neglects to: (a) pay the Secured Money (or any part thereof) to the Lender; or (b) meet any of the Obligations - the Lender may demand that the Guarantor pay to the Lender: (i) the amount that the Debtor fails to pay to the Lender; and/or (ii) any amount that will result in the Lender being fully indemnified for the Debtor's failure to meet any of the Obligations."
15. Clause 18 of the Memorandum dealt with events of default and provided: "18.1 if any one or more of the events set out in clause 18.2 occur, an Event of Default will have occurred or will be deemed to have occurred for the purposes of this Mortgage. 18.2 The occurrence of any one or more of the following are Events of Default: (a) the Debtor fails to pay any Secured Money in accordance with this Mortgage; … 18.3 If an Event of Default occurs, or is deemed to have occurred: (a) the Lender may demand the immediate payment to it of the Secured Money and the Debtor is obliged to repay the Secured Money in full to the Lender in accordance with that demand; (b) the Lender may exercise any right, power or privilege conferred on it as a Mortgagee by this Mortgage, whether under any Legislation or at common law, or in equity; (c) the Lender may: (i) take possession of and eject any occupants from the Mortgaged Property; and (ii) sell, assign, transfer, dispose of, or exchange the Mortgaged Property, or grant options in respect of or over the Mortgaged Property; …"
16. The "Mortgaged Property", as defined in cl 1.1 of Memorandum, included "the Land" which term was defined as including "the whole of the land described in the … Mortgage Form and/or … Schedule A". Thus, in this case, the Mortgaged Property included the Moss Vale Land and the Mittagong Lands.
17. The retained interest of $51,562.50 referred to in Schedule A and special condition 5 covered interest at the lower rate for the first three months (1 November 2019 to 31 January 2020).
18. On 23 January 2020, the first defendant emailed "Michael Gee" (which appeared to be an abbreviation of the name of Mr Michael Geering) of Option Mortgages, the mortgage broker for the borrowers, stating that the defendants had decided to sell the one of the parcels in the Mittagong Lands and "not do the development". The email also contained the following: "Please inform the lenders and advise them to take on-going interest payments out of the balance owing and to also pay [the mortgage manager] out of these funds as I want to keep it all together as a cost centre. As a matter of interest my overseas project remains positive and I am hoping to be paid my fees by the end of Fenruary. If this occurs we will be paying out the loan in full from these funds."
19. On 17 February 2020, the first defendant sent another email to "Michael Gee" which contained the following: "As previously advised wehave decided at this stage not to proceed with the development of the two blocks. We hav echosen to sell the property with the house and the two approved, partially completed blocks. And also sell the land. … The lenders should take the interest out of the available funds on a monthly basis. The sale of these two properties will more than cover the outstanding debt."
20. The retained interest of $51,562.50 covered interest at the lower rate for the first three months (1 November 2019 to 31 January 2020).
21. After the retained interest had been exhausted at the end of the first three months, the interest, payable in arrears, for the fourth month fell due on 1 March 2020. It was not in dispute that the amount due for interest for the fourth month (at the lower rate) was not paid on 1 March 2020.
22. As a result of the failure to pay the amount due for that interest on 1 March 2020, an Event of Default occurred, by virtue of cl 18.2(a) of Memorandum. In these circumstances, under cl 18.3 of the Memorandum, the plaintiff became entitled, inter alia: 1. to demand immediate payment of the Secured Money and each of the defendants was liable to repay the Secured Money in accordance with the demand: cl 18.3(a); 2. to exercise any right, power or privilege conferred on it as a mortgagee, whether under legislation such as the Real Property Act 1900 (NSW) or at common law, or in equity: cl 18.3(b); and 3. to take possession of and eject any occupants from the mortgaged properties, being the Moss Vale Land and the Mittagong Lands: cl 18.3(c).
23. On 3 March 2020, a representative of the mortgage manager sent an email to the first defendant informing him of the fact that the direct debit payment of the fourth month's interest had "bounced" and that he was "now in default of [his] loan agreement". The email also contained the request: "Please can you organise payment of $11,997.31 to our account attached urgently."
24. That payment was not made.
25. On 4 March 2020, the solicitors for the plaintiff issued: 1. to Winlord, a default notice as a result of the failure to pay the interest due on 1 March 2020 and requiring $15,520.61 to be paid within 7 days after service of the notice in order to remedy the default; and 2. to the defendants, default notices and notices under s 57(2)(b) of the Real Property Act relating to each of the mortgages as a result of the failure to pay the interest due on 1 March 2020 and requiring $15,520.61 to be paid within 31 days after service of the notice in order to remedy the default.
26. These notices informed Winlord and the defendants that if the default was not remedied within the times specified, the plaintiff proposed to accelerate the debt due under the agreement, in Winlord's case, or the mortgages, in the defendants' case, so that the entire debt was repayable immediately and to take other steps available to the plaintiff to recover the amount owed.
27. No payments were made by Winlord or the defendants in response to these notices.
28. On 13 March 2020, the first defendant responded by email to the mortgage manager's email of 3 March 2020 in terms which included the following: "I apologise for my tardiness in replying. I did however write to the Broker in both January and February to advise the lenders that we were now planning to sell the house on three acres and not do the development asking them to divert the held back funds to interest… I assumed this was OK. As you are aware I have been expecting a major payment from China … some of this payment would be used to complete the development and even pay out most of your debt. Although everything is now finalised, the coronavirus has got in the way and the Chinese cannot leave China to do their final inspection…. So we have now two lots [the Mittagong Lands] on the market. … I intend to have both blocks sold or exchanged by 30th April at the latest. As soon as Chinese restrictions are lifted I also believe the Chinese will settle and this should give me enough funds to settle your debt in full. In my previous correspondence sent to you via the broker I asked that the interest be paid out of the funds held back as they will not be used for development and we are paying interest on these funds anyway. I felt that this would avoid default. Hope this can be quickly resolved."
29. On the same day, the representative of the mortgage manager responded by email to the first defendant stating: "… Please be advised that interest cannot be taken from funds that were allocated for construction. Please note your facility remains in default with interest accruing on a daily basis at the higher rate. We further advise that the lawyers will be moving to possession proceedings if arrears payments aren't paid by close of business Monday 16th March. This information was relayed to the broker Ben Flood on several occasions."
30. No payments of arrears by Winlord or the defendants were made in response to this email.
31. On 20 April 2020 the plaintiff filed a statement of claim commencing these proceedings seeking the following relief: "As against the First Defendant 1. Judgment for the Plaintiff for possession of the land described in folio identifier 52/xx73 being the [Moss Vale land]. 2. Leave to issue a writ of possession forthwith. 3. Costs on an indemnity basis As against the Second Defendant 4. Judgment for the Plaintiff for position of the land described in folio identifier 52/xx73 being the [Moss Vale Land]. 5. Judgment for the Plaintiff for position of the land described in folio identifier 1/xx26 being [one of the parcels in the Mittagong Lands]. 6. Judgment for the Plaintiff for position of the land described in folio identifier 2/xx26 being [the other parcel in the Mittagong Lands]. 7. Leave to issue a writ of possession forthwith. 8. Costs on an indemnity basis".
32. There were no persons in occupation of either the Moss Vale Land or one of the two parcels of the Mittagong Lands other than the defendants. On 22 April 2020, Mr Floridis, a licensed process server, served the occupiers of the other parcel of the Mittagong Lands with a copy of the statement of claim and a notice to occupier, as required by r 6.8 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR).
33. On 13 May 2020, the defendants filed their defence.
34. On 29 May 2020, the plaintiff filed a notice of motion seeking orders that: 1. the defendants' defence be struck out, under r 14.28 of the UCPR; 2. there be summary judgement for the plaintiff to the effect of the relief sought in the statement of claim, under r 13.1 of the UCPR.
35. On 22 June 2020, the defendants filed a document headed "First Cross Claim" which sought relief including various forms of declarations, an order that the statement of claim be dismissed as well as damages and remedial compensation, based on alleged unconscionable conduct by the plaintiff and misleading or deceptive conduct, contrary to the Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law and related matters.
36. No payment of any sum has been made by Winlord or the defendants to the plaintiff since 1 March 2020.
37. I shall consider whether the defence should be struck out first and then I shall address the question of whether there should be summary judgment.

Should the defence be struck out?

1. Rule 14.28 of the UCPR provides: "(1) The court may at any stage of the proceedings order that the whole or any part of a 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 subrule (1)."
2. In the present case, the principal issue is whether the defendant's defence discloses a "reasonable … defence" to the plaintiff's claim.

The plaintiff's claim

1. The substance of the plaintiff's claim is that: 1. there has been default by Winlord and the defendants, at least in relation to the payment of interest due under the contractual arrangements between the parties and secured by the mortgages; 2. thus there are relevant Events of Default, and these have not been remedied within the times specified in the notices of default issued on 4 March 2020; and 3. in these circumstances, under s 60 of the Real Property Act and cl 18.3(c)(i) of the Memorandum, the plaintiff is entitled to possession of the Mortgaged Property, that is the Moss Vale Land and the Mittagong Lands, and may bring proceedings in this Court for possession of that land.

The defence

1. The defendants' defence filed on 13 May 2020 admits formal matters concerning incorporation of the plaintiff, the defendants' roles in Winlord and the defendants' ownership of the Moss Vale Land and the Mittagong Lands, in pars 1 to 4.
2. Paragraphs 5 to 11 of the defence respond to the allegations in the statement of claim concerning the contents and terms of contractual documentation signed by Winlord and the defendants. Although these paragraphs purport to take issue concerning the date of the agreement between the plaintiff and the defendants, there is no doubt that Winlord and the defendants signed the documentation on 29 October 2019. Otherwise, those paragraphs of the defence generally rely on the terms and conditions of the contractual documentation "as if the same were fully pleaded herein" or words to that effect. Nothing in these paragraphs constitutes or provides a reasonable defence to the plaintiff's claim.
3. Paragraphs 12 and 13 of the defence contain admissions that the Principal Amount was advanced on 1 November 2019 and that Winlord was required to pay interest on 1 March 2020. The defence does not admit that the defendants were similarly liable to pay interest. Given the terms of the mortgage documentation, including the Memorandum and Schedule A, the defendant's non-admission does not disclose, or provide a basis for, a reasonable defence to the plaintiff's specific allegation as to their liability to pay interest or to the plaintiff's claim as a whole.
4. Paragraph 14 of the defence responds to the plaintiff's allegation that Winlord and the defendants failed to pay the interest amount due on or about 1 March 2020. There is no denial or non-admission of that allegation but merely a recounting of: 1. a previous proposal (which was not adopted at the first defendant's request) for an amount equal to 12 months' interest, and not three months' interest, to be retained out of the Principal Amount; 2. the requests made by the first defendant to his broker in the emails of 23 January and 17 February 2020 referred to above for the interest accruing after the first three months to be paid from the amount held, in accordance with special condition 3, for "Civil Works (Progress Payments)"; and 3. the mortgage manager's rejection of such a request in the email of 13 March 2020, which has also been quoted above.
5. This material in par 14 of the defence means that the allegation that Winlord and the defendants failed to pay the interest amount due on or about 1 March 2020 is in effect admitted. Nothing in that paragraph otherwise constitutes, or provides a sufficient foundation for, a defence to the plaintiff's claim.
6. Paragraph 15 of the defence is a simple non-admission that the failure to pay interest on 1 March 2020 constituted an Event of Default under the contractual arrangements between the parties. No basis for this non-admission is pleaded. In light of the contractual terms and the circumstances outlined above, par 15 does not disclose, or provide a basis for, a reasonable defence to the plaintiff's claim.
7. Paragraphs 16 to 20 of the defence contain bare denials of allegations in the statement of claim that: 1. on 4 March 2020 the various notices of default, referred to above, were issued on behalf of the plaintiff to Winlord and the defendants; 2. Winlord and the defendants have failed to pay the amounts sought in the notices by the dates specified or at all; 3. Winlord and the defendants have failed to pay to the plaintiff not only the amounts sought in the notices but also all of the Secured Moneys, in breach of various specified terms of the contractual arrangements between the parties; and 4. The defendants are indebted to the plaintiff in the sum of $2,394,395.98, excluding the costs of commencing and enforcing the present proceedings.
8. There is no basis disclosed in the defence or in the evidence before me on this application which appears to provide any foundation for the denials of the matters in subpars (1) and (2) of the preceding paragraph. Indeed, I did not understand that those matters were in dispute during the hearing of this application. The allegations in subpars (3) and (4) are not necessary to found the plaintiff's claims for possession, which is the only substantive relief sought in the statement of claim. Consequently, the bare denials in pars 16 to 20 of the defence do not disclose or provide a foundation for a reasonable defence to the plaintiff's claim.
9. The remaining paragraphs of the defence plead: 1. statements by the Prime Minister concerning potential legislation for a moratorium "affecting the activities of Banks and mortgagees" during the COVID-19 pandemic and seeking an adjournment of the proceedings: par 21; 2. an intention on the part of the defendant to file a cross claim but seeking to defer the filing pending the potential legislation referred to above: par 22; 3. difficulties experienced by the defendants selling the Mittagong Lands because of the COVID-19 pandemic: par 23; 4. a request on 1 November 2019 by the first defendant to draw down $29,000 for "preliminary experts reports and the appointment of a private certifier for" the Mittagong subdivision and delay by the plaintiff in releasing the funds leading to "damage and delay to Winlord in and about the commencement of site works": par 24; and 5. a Japanese project (details of which could not be disclosed) which was expected to yield sufficient funds on or before 30 June 2020 to permit the repayment in full of amounts owed to the plaintiff: pars 25 and 26.
10. None the matters pleaded in pars 21 to 26 by themselves or together constitute an arguable defence to the plaintiff's claim for possession. Indeed, Mr O'Sullivan of counsel, who appeared for the defendants, did not submit to the contrary and indicated that he proposed to abandon all of those paragraphs if the defendants were permitted to file an amended defence.

Conclusion on striking out the defence

1. In all the circumstances, I am satisfied that the defence filed by the defendants does not disclose a reasonable defence to the plaintiff's claim for possession and, if it were allowed to remain, it would have a tendency to cause prejudice, embarrassment or delay in the proceedings. As a result, I propose to order that the defence be struck out under r 14.28 of the UCPR.
2. I turn now to consider the more substantial part of the application, whether there should be summary judgment in favour of the plaintiff.

Should there be summary judgment in favour of the plaintiff?

Relevant provision of the UCPR and preconditions for granting summary judgment

1. Summary judgment may be ordered under r 13.1 of the UCPR. That rule relevantly provides: "(1) If, on application by the plaintiff in relation to the plaintiff's claim for relief or any part of the plaintiff's claim for relief - (a) there is evidence of the facts on which the claim or part of the claim is based, and (b) there is evidence, given by the plaintiff or by some responsible person, that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part of the claim, or no defence except as to the amount of any damages claimed, the court may give such judgment for the plaintiff, or make such order on the claim or that part of the claim, as the case requires. …"
2. At the outset, I note that the affidavit of Mr Benbow affirmed 29 May 2020 was read without objection. Mr Benbow is the director of the plaintiff, was authorised to make the affidavit on its behalf and had access to the loan account and loan file of the plaintiff relating to this matter. His evidence established not only the terms contained in the mortgages, the Memorandum and Schedules A and B, signed by the defendants on 29 October 2019, but also, inter alia, the amount of the funds paid out and held on 1 November 2019, the fact that interest for the fourth month was not paid on 1 March 2020, the fact that notices of default were sent on 4 March 2020 and the fact that the amount demanded in those notices was not paid within the times specified in the notices or otherwise. Thus, it appears to me that there is evidence of the facts on which the plaintiff's claim for possession is based and, thus, the requirement in r 13.1(1)(a) of the UCPR has been met. I did not understand that there was any submission to the contrary.
3. In addition, at par 13 of his affidavit, Mr Benbow states, in effect, that he believes that the defendants have no good defence to the plaintiff's claim as set out in the statement of claim. Having regard to this material and the affidavit as a whole, I find that there was evidence given by "some responsible person" satisfying the requirement in r 13.1(1)(b) of the UCPR. Once again, it was not submitted that this was not so.
4. Consequently, the discretion to give summary judgment for the plaintiff is enlivened in the present case.

Principles concerning the exercise of the discretion whether to grant summary judgment

1. The principles which apply to an application for summary judgment are well established and can be stated shortly.
2. The exercise of powers to terminate proceedings summarily must always be attended with caution and should never be exercised unless it is clear that there is no real question to be tried: Spencer v Commonwealth of Australia (2010) 241 CLR 118; [2010] HCA 28 (Spencer) at [24]; Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99; [1983] HCA 25.
3. On a summary judgment application, the real issue is whether there is an underlying cause of action or defence, not simply whether one is pleaded: Spencer at [23]; O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71 (O'Brien) at [3].
4. The critical question can be expressed as whether there is more than a "fanciful" prospect of success or whether the outcome is so certain that it would be an abuse of the process of the Court to allow the action to go forward. Demonstration of the outcome of the litigation is required, not an assessment of the prospect of its success: Spencer at [25] and [54]; O'Brien at [3].
5. Accordingly, it will be necessary to understand the nature of, and factual foundation for, the defence to the plaintiff's claim for possession sought to be propounded by the defendants in this case. For the reasons given above, it does not appear that the defence filed on 13 May 2020 discloses any viable defence.

Proposed amended defence and proposed amended cross claim

1. Perhaps recognising that their defence was liable to be struck out, the defendants foreshadowed an application for leave to amend their defence and a proposed form of amended defence was attached to the defendants' written submissions. The proposed amended defence included a paragraph which sought to rely, by way of defence, on the matters alleged in the cross claim filed on 22 June 2020.
2. In the written submissions of the defendants, however, it was said that: "it is desirable that the defendants be given leave to amend their Cross-Claim in the form annexed to these submissions and marked "B" to take account of the proposed amendments to the defence".
3. In these circumstances, it appears that the defendants seek to rely on the proposed amended cross claim, not the cross claim in its present form. As a consequence, it seems to me that the proper course is to consider the proposed amended defence and the proposed amended cross-claim and determine whether they disclose a defence which has more than a "fanciful" prospect of success or raises a real question to be tried so that an outcome of the proceedings adverse to the defendants is not certain.

The proposed amended defence

1. Although the proposed amended defence is in somewhat better form than the corresponding paragraphs of the defence, pars 1 to 20 do not change the substance of the matters sought to be pleaded by way of defence. Thus, for substantially the same reasons given above in relation to pars 1 to 20 in the original defence, these paragraphs of the proposed amended defence do not disclose an arguable defence to the plaintiff's claim for possession.
2. The remainder of the proposed amended defence is as follows: "21. In further answer to the entirety of the plaintiff's Claim, the defendants refer to and repeat the matters set out in the Statement of Cross-Claim filed on 22 June 2020 ("Cross-Claim") by way of defence and to the extent that the Cross-Claim claims damages or compensation pursuant to sections 236 and 237 of the Australian Consumer Law, equitable set off of any such damages or compensation against any amount of the defendants may be found to owe the plaintiff."
3. In view of the foreshadowed reliance of the proposed amended cross claim instead of the cross claim of 22 June 2020, whether par 21 of the proposed amended defence discloses a viable defence depends on whether the proposed amended cross claim discloses such a defence.

The proposed amended cross claim

1. Paragraphs 1 to 8 of the proposed amended cross claim allege formal and background matters that are not, to any significant extent, in dispute. Substantially all of these matters were pleaded in the original cross claim and admitted in the plaintiff's defence to cross claim filed on 21 July 2020.
2. In addition, further non-contentious matters are pleaded at pars 26 and 27 but these do not appear to be directly related to any claim by the defendants or any defence to the plaintiff's claim.
3. The proposed amended cross claim otherwise contains allegations concerning 6 matters which can be described as follows: 1. contraventions of s 18 of the Australian Consumer Law: pars 9 to 17 and 18 to 20; 2. breach of the Agreement (constituted by the mortgages, the Memorandum and Schedules A and B): pars 17A and 17B; [1] 3. estoppel: pars 9 to 16 and 21 to 25; 4. an implied term: par 28; 5. unconscionable conduct: pars 29 to 31; and 6. circumvention of the National Credit Code: pars 32 to 33.
4. It is necessary to consider whether any of these matters raises a defence to the plaintiff's claim for possession which is more than fanciful and is not certain to fail.

Contraventions of s 18 of the Australian Consumer Law

1. In pars 9 to 17 and 18 to 20 of the proposed amended cross claim, it is in effect alleged that: the plaintiff's representative made the "First Bengour Representation" and the "Second Bengour Representation"; the defendants relied on those representations; the mortgage manager's email of 13 March 2020 contradicted those representations; and thus, those representations were misleading or deceptive in contravention of s 18 of the Australian Consumer Law.
2. The First Bengour Representation was alleged to be a representation made in an indicative term sheet provided on behalf of the plaintiff on 22 October 2019 that, of the principal amount of $2,500,000 to be lent, $202,125 would be withheld (the Withheld Amount) and applied for the payment of interest for the 12 months term of the loan, see pars 10 and 11 of the proposed amended cross claim.
3. In par 15, however, it was alleged that in further negotiations, Winlord requested a change so that the Withheld Amount should be held as follows: 1. an amount equivalent to three months' interest for the payment of interest, rather than 12 months; and 2. the balance for use by Winlord for progress payments for civil works as part of the development of the site in question.
4. It was also alleged that in response to that request, a further indicative Term Sheet was prepared in accordance with what had been requested and provided on 25 October 2019. This was said to be the Second Bengour Representation. It was alleged that Winlord and the defendants entered into the contractual arrangements with the plaintiff in reliance upon those representations.
5. At this point it can be noted that the change requested by Winlord and contained in the Second Bengour Representation was actually given effect to in the item "Retained Interest" and special conditions 3 and 5 in Schedule A (relevant which have been quoted above) which dealt with retained interest and the Progress Payments for civil works. In other words, these terms of the contractual arrangements between the plaintiff, Winlord and the defendants reflected the changes from what was in the First Bengour Representation sought by Winlord and the defendants. Further, these terms were consistent with the Second Bengour Representation.
6. The statement in the mortgage manager's email of 13 March 2020 "that interest cannot be taken from funds that were allocated for construction" does not contradict the First or Second Bengour Representation. The First Bengour Representation had been rendered inapplicable as a result of Winlord's request that the arrangement be changed, which request had been acted upon by 25 October 2019. The mortgage manager's statement is consistent with the Second Bengour Representation and special conditions 3 and 5.
7. I can discern no basis upon which it could be concluded that, as alleged, the two Bengour Representations were misleading or deceptive in contravention of s 18 of the Australian Consumer Law. Nor do the relevant paragraphs of the proposed amended cross claim assist to establish any arguable defence to the plaintiff's claim for possession.

Breach of the Agreement (constituted by the mortgages, the Memorandum and Schedules A and B)

1. Paragraphs 17A and 17B contain allegations to the effect that Winlord requested "a draw down of $290,000" in November 2019 for expert reports and appointment of a private certifier for the subdivision at the Mittagong Lands but the plaintiff delayed in releasing the funds in breach of the Agreement causing loss and damage.
2. The defendant's affidavit material before the Court established that the amount requested was actually $29,000, that the first defendant had requested the broker, Mr Geering, to obtain the funds on 8 November 2019 and that the funds were received on 27 November 2019. There was no allegation in the proposed amended cross claim nor was there other information provided to the Court as to: (a) whether and when Mr Geering made the request to the plaintiff or its representatives; or (b) whether and when Mr Geering or anyone else on behalf of Winlord complied with the applicable requirements of special condition 3(b) and (c); or (c) why the opening words of special condition 3(b) that "[i]n its sole and absolute discretion, the Lender is under no obligation to make any Progress Payment" were not applicable in the present case.
3. In all the circumstances, I am not satisfied that the paragraphs of the proposed amended cross claim alleging a contravention of the contractual arrangements between the parties because the plaintiff delayed in advancing funds as a Progress Payment under special condition 3 raise a viable claim against the plaintiff or an arguable defence to the plaintiff's claim for possession, which is not bound to fail.

Estoppel

1. Based upon pars 9 to 16 of the proposed amended cross claim, which have been commented upon already in relation to the alleged contraventions of s 18, pars 21 to 25 effectively allege that since the defendants relied upon the First and Second Bengour Representations, the plaintiff was estopped from asserting that the sum withheld for Progress Payments for civil works could not be used to pay interest. This was said to be so because the defendants told the plaintiff that they were not proceeding with further development of the site. It was then alleged that, if the plaintiff had allowed the sum withheld for Progress Payments to be used to pay interest, the defendants would not have been in default and the plaintiff would not be entitled to possession.
2. As explained above, the First Bengour Representation was no longer applicable after 25 October 2019, at the latest. The Second Bengour Representation was reflected in, and given effect to by, special conditions 3 and 5. Under those special conditions, the sum retained for Progress Payments for civil works was not permitted to be made available to pay interest, at Winlord's request or otherwise. Further, there was no other provision of the contractual arrangements between the parties that imposed any obligation on the plaintiff to accede to a request for the sum held for Progress Payment to be used to pay interest. Nothing the defendants have pleaded in pars 9 to 16 and 21 to 25 establishes anything to the contrary.
3. In the circumstances, there does not appear to be any basis for contending that the plaintiff was estopped from asserting that the sum withheld for site works could not be used to pay interest. Accordingly, in my view, these pars 9 to 16 and 21 to 25 do not disclose, or give rise to, an arguable defence to the plaintiff's claim for possession.

An implied term

1. In par 28 of the proposed amended cross claim, it is alleged that the Agreement (constituted by the mortgages, the Memorandum and Schedules A and B) contained an implied term that the sum withheld for Progress Payments for civil works could, at the election of Winlord, be used either to pay interest or for civil works. This, however, is inconsistent with the provisions of Schedule A, in particular the item "Retained Interest" and special conditions 3 and 5. Moreover, even if it were not inconsistent, such a term would not be necessary to give business efficacy to the agreement nor would it be so obvious that it would go without saying: see Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 355; [1982] HCA 24 .
2. In my view, the contention that the plaintiff was in breach of the Agreement because it failed to apply the sum retained for Progress Payments to pay the interest due on 1 March 2020 or thereafter would be bound to fail. Consequently, par 28 of the proposed amended cross claim does not provide a basis for concluding that the defendants have raised a triable defence to the plaintiff's claim for possession.

Unconscionable conduct

1. In pars 29 to 31 of the proposed amended cross claim, the defendants allege that the plaintiff's refusal to apply the sum withheld for Progress Payments for civil works to pay interest due, after being informed that Winlord and the defendants did not intend to proceed with further development of the site, was unconscionable within ss 20 and 21 of the Australian Consumer Law. This refusal was said to have led to service of the notices of default and the asserted entitlement to "possession of [sic] the penalty interest and costs". Particulars were provided in subpars 31(a) to (h).
2. As to unconscionability under the unwritten law, within s 20 of the Australian Consumer Law, the first defendant's own affidavits establish that the defendants were experienced business persons and developers with anticipated access from a variety of sources to sufficient funds to discharge the loans. No position of special disadvantage was alleged other than that the sale of the Mittagong Lands was being delayed by the COVID-19 pandemic. There was no allegation that the defendants were so disadvantaged as to be unable to make the interest payment of $15,520.61 demanded on 4 March 2019 from any other resources they might have. There was no allegation that the plaintiff knew of any such special disadvantage on the defendants' part. Further and even if these difficulties could be overcome, it does not appear to me that the plaintiff's reliance on its contractual rights when interest due under the mortgages was not paid could, in the circumstances pleaded and the facts as disclosed on the evidence before me, amount to knowingly taking advantage of the defendants' position of special disadvantage so as to offend good conscience: see generally Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51; [2003] HCA 18 and Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14.
3. Thus, it does not appear to me that the defendants have raised a triable defence to the plaintiff's claim for possession, based on s 20 of the Australian Consumer Law.
4. Similarly, it does not appear to me, having regard to the alleged circumstances already mentioned and the matters relied upon by the defendants (set out in the pleaded particulars to par 31), that the plaintiff's relevant conduct of not permitting the funds, withheld for the purpose of Progress Payments for civil works in accordance with special condition 3, to be used to pay the interest for the fourth month or the payment demanded in the notices sent on 4 March 2020, could be characterised as involving such a departure from accepted community standards as can objectively be seen to be against conscience: Ipstar Australia Pty Ltd v APS Satellite Pty Ltd [2018] NSWCA 15 at [195] and noting also [277]; 356 ALR 440. More specifically, but without attempting to be exhaustive: 1. the allegation that the amount held for Progress Payments exceeded the amount of the unpaid interest, does not mean that the plaintiff's conduct in not allowing some of money held for Progress Payments to pay interest was not reasonably necessary to protects its legitimate interests; 2. the fact that the higher rate of interest was payable if interest was not paid when due, does not mean that the plaintiff's not allowing money held for Progress Payments to be used to pay interest was "in order to make an unconscionable profit" or was an unfair tactic, especially in the absence of any legal obligation on the part of the plaintiff to allow the money to be so used and given the terms of the contractual arrangements as to the payment of interest; 3. having agreed to Winlord's and the defendant's request for money to be held for Progress Payments for civil works, it was not inherently unreasonable for the plaintiff to refuse to allow that money to be used to pay interest and it does not follow that it was not reasonably necessary for the protection of the plaintiff's legitimate interests; 4. it was not alleged that any mistaken impression of the defendants as to the use that could be made of the money held for Progress Payments in accordance with special condition 3 was something which was known to the plaintiff and of which the plaintiff in some way took advantage unconscientiously; and 5. the fact that the plaintiff was prepared to lend to Winlord rather than directly to the defendants, was something that the defendants agreed to, after receiving advice from their legal advisers as recorded in the acknowledgements and certificates which were signed on 29 October 2019, and, in the circumstances, there does not appear to be any basis for concluding that such an arrangement involved unconscionability on the part of the plaintiff.
5. In all the circumstances alleged and established on the evidence before me, I am also not satisfied that pars 29 to 31 of the proposed amended cross claim raise a triable defence to the plaintiff's claim for possession, based on s 21 of the Australian Consumer Law, which is not bound to fail.

Circumvention of the National Credit Code

1. The allegations in pars 32 to 33 of the proposed amended cross claim to the effect that: (a) the plaintiff required that the borrower be Winlord, a company, as opposed to the defendants themselves who resided on the Moss Vale Land; and, (b) the plaintiff wished to circumvent the provisions of the National Consumer Credit Protection Act 2009 (Cth) and the National Credit Code concerning the dwelling house of the defendants, appear only to be relevant to the unconscionability pleading, which has been considered above. They do not constitute an independent defence to the plaintiff's claim for possession.

The substance of the defendants' defence

1. Looked at more broadly, the problem for the defendants in the present case appeared to me to be as follows. In so far as it could be discerned from the pleadings and proposed pleadings relied upon by the defendants and their affidavit evidence, the substance of their proposed defence to the plaintiff's claim for possession was that: 1. the plaintiff could have permitted the defendants and Winlord to use the funds held for Progress Payments for civil works, in accordance with special condition 3, to pay the interest due, as there would be no further civil works after the defendants decided to sell the properties rather than undertake further development; and 2. it was a breach of contract or unconscionable or otherwise contrary to law for the plaintiff not to permit that to be done.
2. While it can be accepted that the plaintiff could have permitted the funds held for Progress Payments to be used to pay the interest due, there was no obligation on the plaintiff to do so. Special condition 3 makes that entirely clear. The defendants have not pointed to any circumstance which would effectively impose an alternative obligation on the plaintiff to permit the funds to be used in this way.
3. Indeed, the plaintiff could have chosen to do various things to assist Winlord and the defendants to pay the interest and other amounts due, or otherwise to avoid an Event of Default occurring. For example, the plaintiff could have given or lent any required amount to Winlord and the defendants, or the plaintiff could have forgone payment and released the defendants from the obligation to pay. There was, however, nothing identified by the defendants which would support the contention that the plaintiff was under a legally relevant obligation to assist Winlord and the defendants in these ways or by permitting the amount held for Progress Payments to be used to pay interest or other sums due.
4. Furthermore, it has not been alleged that the defendants or Winlord could not pay the interest or other amounts due: 1. because the conduct of the plaintiff caused them to be impecunious; or 2. from their other resources.

Conclusion

1. At its minimum, the foundation for the plaintiff's claim for possession is that the defendants have not paid the $15,520.61 demanded in the notices of 4 March 2020 within the time specified for payment. This is an Event of Default and the plaintiff's right to possession thereupon arises under cl 18.3(c)(i) of the Memorandum and s 60 of the Real Property Act. The plaintiff is not seeking to recover any amount due under the contractual arrangements between the parties in its statement of claim. It is only seeking orders for possession.
2. For all of the reasons given above, it does not appear to me that the defendants have raised any arguable defence to the claim for possession.
3. The requirements of r 6.8 and r 13.1(1) of the UCPR have been complied with. The defendants have raised no triable defence to the claim for possession. The evidence establishes that an Event of Default has occurred and the plaintiff is consequently entitled to possession of the Mortgaged Land, being the Moss Vale Land and the Mittagong Lands. In these circumstances, it is appropriate in my view to order that there be summary judgment in favour of the plaintiff as sought in the notice of motion filed on 29 May 2020.

Stay of the orders for possession

1. The defendants' evidence established that substantial steps had been and were being taken to sell the Moss Vale Land and the Mittagong Lands and to obtain funds from other sources in order to repay the amounts due to the plaintiff in full, in the not too distant future. During oral submissions, the question was raised whether, if summary judgment were ordered and leave to issue writs of possession were granted, the writs of possession should be stayed or should lie in the registry until the end of September. As I understood it, the end of September was chosen because that date would allow the defendants sufficient time to take steps to sell or complete the sale of the properties or to obtain other funds. If the amounts due are repaid or other satisfactory arrangements are made by that time, cadit quaestio. There will be no need for execution of the writs of possession.
2. Mr Young of Senior Counsel, who appeared for the plaintiff, said during oral submissions that there would be little prejudice in staying the writs for the time proposed as the plaintiff would likely be holding off, in any event, from executing the writs, except if it appeared that the sales of the properties being undertaken by the defendants would not come to fruition.
3. In all the circumstances, I accept that it is appropriate to order that there be leave to issue writs of execution forthwith but to stay the execution of those writs up to and including 5 pm on 30 September 2020.

Costs

1. In its notice of motion, the plaintiff sought costs on an indemnity basis. I accept that the plaintiff is entitled to its costs. In my view, however, apart from an entitlement to indemnity that might arise under the contractual arrangements between the plaintiff and the defendants, there was no other sufficient ground to order that the defendants should pay costs on an indemnity basis. Further, if the plaintiff is entitled to indemnification in respect of its costs in these proceedings under the mortgages, including the Memorandum and Schedules A and B, it will not be necessary to order that costs be paid on an indemnity basis.
2. Consequently, I do not propose to order that the costs be paid on an indemnity basis.

Orders

1. For these reasons, the orders of the Court are: 1. The defence filed by the first and second defendants on 13 May 2020 is struck out. 2. Under r 13.1 of the Uniform Civil Procedure Rules 2005 (NSW), there is summary judgment for the plaintiff against the first defendant as follows: 1. Judgment for the plaintiff for possession of the land described in folio identifier 52/xxxxx73 known as xx, Moss Vale, New South Wales. 2. There is leave to issue a writ of possession in respect of the land above forthwith. 3. The execution of the writ of possession is stayed up to and including 5 pm on Wednesday 30 September 2020. 1. Under r 13.1 of the Uniform Civil Procedure Rules 2005 (NSW), there is summary judgment for the plaintiff against the second defendant as follows: 1. Judgment for the plaintiff for possession of the land described in folio identifier 52/xxxxx73 known as xx, Moss Vale, New South Wales. 2. Judgment for the plaintiff for possession of the land described in folio identifier 1/xxxx26 known as xx, Mittagong, New South Wales. 3. Judgment for the plaintiff for possession of the land described in folio identifier 2/xxxx26 known as xx, Mittagong, New South Wales. 4. There is leave to issue a writ of possession in respect of each parcel of land above forthwith. 5. The execution of the writ of possession is stayed up to and including 5 pm on Wednesday 30 September 2020. 1. The defendants are to pay the plaintiff's costs.

Endnote

1. The references to the "second cross-defendant" and the "cross-defendants" in these paragraphs appear to be mistaken. 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: 27 August 2020