Business Finance Pty Ltd (in liq) v Casula Projects Pty Ltd

EVIDENCE

1. On 28 September 2023, I ordered by consent that the evidence received in respect of the Strike Out Application and the Amendment Application would be regarded as evidence in the Second Amendment & Strike Out Application.
2. In support of the Second Amendment & Strike Out Application, Casula Projects relied on the following evidence: 1. affidavit of Simon Della Marta affirmed 4 August 2023 (part of which was not read) and the exhibit to that affidavit; 2. affidavit of Simon Della Marta affirmed 11 August 2023 and the exhibit to that affidavit; 3. affidavit of Hanan Mokdad affirmed on 5 September 2023 (parts of which were not read); 4. affidavit of Simon Della Marta affirmed 16 October 2023 and the exhibit to that affidavit; 5. letter dated 17 October 2017 from Summer Lawyers to the directors of Business Finance; and 6. director's certificate dated 9 October 2017.
3. In opposition to the Second Amendment & Strike Out Application, Business Finance and the Receiver relied on the following evidence: 1. affidavit of Craig Ensor affirmed 27 July 2023 and the exhibit to that affidavit; 2. affidavit of Craig Ensor affirmed 4 August 2023 and the exhibit to that affidavit; 3. affidavit of Craig Ensor affirmed 11 August 2023 and the exhibit to that affidavit; and 4. affidavit of Marcus William Ayres affirmed 30 October 2023 and the exhibit to that affidavit.
4. Mr S Ipp appeared for Business Finance and the Receiver, instructed by Corrs Chambers Westgarth. Mr S Della Marta of Pointon Partners appeared for Casula Projects.

Summary dismissal or strike out application on the basis of Anshun estoppel

1. Paragraph 3 of the Second Amendment & Strike Out Application seeks: An order pursuant to rule 13.4(1) of the UCPR or alternatively pursuant to rule 14.28 of the UCPR the Plaintiffs' Statement of Claim filed 27 March 2023 (SOC) be struck out to the extent the Plaintiffs seek to claim from the Defendant the Loan Management Fee and Default Loan Management Fee under the terms of the New Mortgage referred to in the SOC which will include inter alia paragraphs 21 to 29 of the SOC and any orders sought pursuant to those paragraphs being struck out.
2. Although this paragraph speaks of striking out the relevant parts of the statement of claim, I have taken the references to r 13.4(1) of the UCPR or alternatively r 14.28 of the UCPR to indicate that Casula Projects is seeking the summary dismissal of the claim contained in paragraphs 21 to 29 of the statement of claim or, alternatively, the striking out of those paragraphs.
3. I recently summarised the relevant principles in relation to the court's powers to summarily dismiss proceedings pursuant to rule 13.4 of the UCPR and strike out pleadings pursuant to rule 14.28 of the UCPR in Transport for NSW v Boensch (No 2) [2023] NSWSC 1354, relevantly stating at [40]-[55]: -- 40 The court's power to summarily dismiss proceedings is contained in r 13.4 of the UCPR. Relevantly, subrr 13.4(1) and (2) provide: 13.4 Frivolous and vexatious proceedings (1) If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings - … (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 subrule (1). 41 For many decades, the shorthand expression of the applicable principles for the determination of an application to summarily dismiss proceedings has been described as the "General Steel test", which derives from the decision in General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 at 129; [1964] HCA 69, in which it was held by Barwick CJ that: …the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion….The test to be applied has been variously expressed; "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them" (the pleadings) "to stand would involve useless expense". 42 In Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 at [57], Gaudron, McHugh, Gummow and Hayne JJ commented on the General Steel test in the following way: Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way. 43 This expression of principle was endorsed in Batistatos v Roads & Traffic Authority New South Wales (2006) 226 CLR 256; [2006] HCA 27, Gleeson CJ, Gummow, Hayne and Crennan JJ at [46] (where it was also said that the General Steel test should not be given "canonical force") and Spencer v Commonwealth (2010) 241 CLR 118; [2010] HCA 28, by French CJ and Gummow J at [24]. 44 In Shaw v State of New South Wales [2012] NSWCA 102, Barrett JA (with whom Beazley, McColl and Macfarlan JJA and McClellan CJ in CL agreed) at [32] elaborated on the relevant General Steel test for summary dismissal as follows: "The question is...whether the claims in question are so obviously untenable or groundless that there is 'a high degree of certainty' that they will fail if allowed to go to trial; and whether this is one of the 'clearest of cases' in which the court may accordingly intervene to prevent the claims being litigated." 45 This assessment is to be made taking the party making the claim at its highest, meaning that the party applying for summary dismissal must accept the truth of all allegations in the claim, and the ranges of meaning which assertions in the claim are capable of bearing: see Simmons v New South Wales Trustee and Guardian [2014] NSWCA 405, Gleeson JA (with whom Beazley P and Barrett JA agreed) at [200], citing Penthouse Publications Ltd v McWilliam (Court of Appeal (NSW), Priestley and Meagher JJA and Wardell AJA, 15 March 1991, unrep); Agius v New South Wales [2001] NSWCA 371 at [24]. 46 The recent Court of Appeal decision in GR v Secretary, Department of Communities and Justice [2023] NSWCA 239 similarly dealt with an interlocutory application for summary dismissal, with Adamson JA observing at [123]: A plaintiff is not obliged to substantiate the allegations made in support of the claim in order to resist summary dismissal of the proceedings. Issues of fact are pre-eminently matters for final hearing. Summary dismissal will be refused if there is a triable issue: Wickstead v Browne (1992) 30 NSWLR 1 at 11 (Handley and Cripps JJA); [1992] NSWCA 272. 47 The power of the court to strike out the whole or any part of a pleading is contained in r 14.28(1) of the UCPR, which provides: 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. 48 In relation to the power to strike out a pleading, the court must give consideration to the importance of pleadings for the conduct of a case, particularly to enable the opponent to know the case they have to meet. But the court does not treat them as rigid boundaries beyond which the parties may never stray. 49 In Gould v Mount Oxide Mines Ltd (1916) 22 CLR 490; [1916] HCA 81, Isaacs and Rich JJ at 517, wrote (reading past the gender inappropriate use of "man" from more than 100 years ago): Undoubtedly, as a general rule of fair play, and one resting on the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him, pleadings should state with sufficient clearness the case of the party whose averments they are. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendment or particulars. But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest. 50 These themes were emphasised in Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11, Dawson J at 296-297, who stated (authorities omitted): It is, of course, the purpose of pleadings to define the issues between the parties so that they may know the case which they have to meet and in order that the proceedings upon trial may be conducted in an orderly fashion by reference to those issues. The defined issues provide the basis upon which evidence may be ruled admissible or inadmissible upon the ground of relevance. But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. Special procedures apart, cases are determined on the evidence, not the pleadings. It is incumbent upon the trial judge to see that the pleadings or particulars are amended so that the record reflects the proceedings as they have been conducted, but his failure to do so will not result in the invalidity of those proceedings. 51 In Banque Commerciale, Brennan J added at 288: When the pleadings bring the parties to the issue, the court's function is to determine that issue and to grant relief founded on the pleadings unless the parties are allowed to alter the issues at the trial without amendment of the pleadings… 52 Pleadings not only inform the opponent of the case to be met but also facilitate the just, quick and cheap determination of the real issues in the proceedings. 53 These matters were emphasised by Adamson J (as her Honour then was) in Dickens v New South Wales (No 3) [2018] NSWSC 485 at [36] and [38]-[39]: 36 The importance of pleadings ought not be underestimated. A statement of claim serves a number of functions. It indicates, to the Court and to the defendant or defendants, the basis of the plaintiff's claim for relief. The statement of claim must set out, in numbered paragraphs, the material facts on which the plaintiff relies (UCPR rr 14.6 and 14.7). Where the rules require that certain matters be particularised (such as allegations of fraud or states of mind), the statement of claim must contain those particulars. It is an aspect of natural justice that the defendant be apprised of the case it has to meet by a properly pleaded statement of claim: Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; [2012] HCA 39 at [25] (French CJ, Gummow, Hayne and Kiefel JJ). Where unparticularised allegations of fraud and intention are made, there can be a tendency for the deficient pleading to amount to an abuse of process. Pleadings must be consistent, except where allegations are expressed to be in the alternative: UCPR 14.18. A pleading must not be "embarrassing" in any of the senses set out by Tamberlin J in Shelton v NRMA Ltd [2004] FCA 1393; 51 ACSR 278 at [18]: 'Embarrassment' in this context refers to a pleading that is susceptible to various meanings, or contains inconsistent allegations, or in which alternatives are confusingly intermixed, or in which irrelevant allegations are made that tend to increase expense. … 38 Where a statement of claim is deficient, in that it does not identify the connection between allegations of fact and causes of action alleged; contains a discursive narrative, the relevance of which can only be the subject of conjecture; and makes generalised allegations which could not sensibly be the subject of a response in the defence, it cannot be allowed to stand, if objection is taken. Although there are occasions where a defendant, for forensic reasons, might not take objection to a deficient pleading and prefer to conduct the proceedings on that basis, a defendant who approaches the Court to enforce its rules regarding a pleading is entitled to have the Court require compliance: Northam v Favelle Favco Holdings Pty Ltd (Unreported, Supreme Court of New South Wales, Bryson J, 7 March 1995). 39 The matters to be taken into account in determining which order to make are set out in Part 6 of the Civil Procedure Act 2005 (NSW), the overriding purpose of which is "to facilitate the just, quick and cheap resolution of the real issues in the proceedings": s 56. A properly pleaded statement of claim is, in my view, a prerequisite for the just, quick and cheap resolution of the real issues in the proceedings. 54 The concept of whether a pleading is embarrassing has also been the subject of extensive judicial consideration, drawn together in McGuirk v The University of New South Wales [2009] NSWSC 1424, Johnson J at [32]-[35], as follows: 32 A pleading may be embarrassing even though it contains allegations of material facts sufficient to constitute a cause of action, if the material facts alleged are couched in expressions which leave difficulties or doubts about recognising or piecing together what is referred to: Northam v Favelle Favco Holdings Pty Limited (Bryson J, 7 March 1995, BC9504276 at 5-6). 33 Although the pleading of a conclusion may, in some circumstances constitute a material fact, nevertheless, the pleading will be embarrassing if allegations are made at such a level of generality that the defendant does not know in advance the case it has to meet: Charlie Carter Pty Limited v Shop Distributive and Allied Employees Association (1987) 13 FCR 413 at 417-418. In such a case, the appropriate remedy is to strike out the pleading rather than to order the provision of particulars, as it is not the function of particulars to take the place of the necessary averments in a pleading: Trade Practices Commission v David Jones (Aust) Pty Ltd (1985) 7 FCR 109 at 112-114. 34 Rule 14.28 UCPR provides that pleadings that involve non-compliance are liable to be struck out as an embarrassment. However, generally the Courts recognise that a wide range of discretionary considerations arise where there is a failure to comply with the technical requirements of the pleading rules: Beach Petroleum NL v Johnson (1991) 105 ALR 456 at 466. In many instances, the appropriate order may be to strike out the offending pleading, but grant leave to amend: Rubenstein v Truth & Sportsman Ltd [1960] VR 473 at 476; H 1976 Nominees Pty Ltd v Galli (1979) 30 ALR 181 at 186. 35 It is not the function of the Court to draw or settle a party's pleading. The Court is confined to the function of ensuring that pleadings are within the rules and fulfil the functions for which they exist. Objectionable matter that is so mingled with other matter may lead to the conclusion that the pleading as a whole would tend to embarrass the fair trial of the action ought be struck out: Turner v Bulletin Newspapers Co Pty Ltd (1974) 131 CLR 69 at 72 87-88 and 97-98; Gunns Limited v Marr at [57]-[58]; Fleet v Royal Society for the Prevention of Cruelty to Animals NSW [2005] NSWSC 926 at [55]. 55 The court may receive evidence on the hearing of an application for a summary dismissal under r 13.4 of the UCPR or the strike out of a pleading under r 14.28 of the UCPR: r 13.4(2) and r 14.28(2) of the UCPR.
4. The basis on which Casula Projects seeks the summary dismissal or striking out of the claims made in paragraphs 21 to 29 of the statement of claim is that there is an Anshun estoppel which operates against the bringing of that claim.
5. An Anshun estoppel takes its name from Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. The Anshun principle has more recently been restated in Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28 (and reinforced in Timbercorp Finance Pty Ltd (in liq) v Collins (2016) 259 CLR 212; [2016] HCA 44).
6. In Tomlinson, French CJ, Bell, Gageler, Keane and Nettle JJ explained the operation of Anshun estoppel in the context of the three forms of estoppel arising from a final judgment, saying at [22] (citations omitted): Three forms of estoppel have now been recognised by the common law of Australia as having the potential to result from the rendering of a final judgment in an adversarial proceeding. The first is sometimes referred to as "cause of action estoppel". Estoppel in that form operates to preclude assertion in a subsequent proceeding of a claim to a right or obligation which was asserted in the proceeding and which was determined by the judgment. It is largely redundant where the final judgment was rendered in the exercise of judicial power, and where res judicata in the strict sense therefore applies to result in the merger of the right or obligation in the judgment. The second form of estoppel is almost always now referred to as "issue estoppel". Estoppel in that form operates to preclude the raising in a subsequent proceeding of an ultimate issue of fact or law which was necessarily resolved as a step in reaching the determination made in the judgment. The classic expression of the primary consequence of its operation is that a "judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies". The third form of estoppel is now most often referred to as "Anshun estoppel", although it is still sometimes referred to as the "extended principle" in Henderson v Henderson. That third form of estoppel is an extension of the first and of the second. Estoppel in that extended form operates to preclude the assertion of a claim, or the raising of an issue of fact or law, if that claim or issue was so connected with the subject matter of the first proceeding as to have made it unreasonable in the context of that first proceeding for the claim not to have been made or the issue not to have been raised in that proceeding. The extended form has been treated in Australia as a "true estoppel" and not as a form of res judicata in the strict sense. Considerations similar to those which underpin this form of estoppel may support a preclusive abuse of process argument.
7. In Tomlinson, the majority went on to explain the overlap and distinction between these estoppels and the wider notion of abuse of process, saying at [24]-[26]: 24 To explain contemporary adherence to the comparatively narrow principle in Ramsay v Pigrim, it is appropriate also to explain the relationship between the doctrine of estoppel and the doctrine of abuse of process as it has since come to be recognised and applied in Australia. The doctrine of abuse of process is informed in part by similar considerations of finality and fairness. Applied to the assertion of rights or obligations, or to the raising of issues in successive proceedings, it overlaps with the doctrine of estoppel. Thus, the assertion of a right or obligation, or the raising of an issue of fact or law, in a subsequent proceeding can be simultaneously: (1) the subject of an estoppel which has resulted from a final judgment in an earlier proceeding; and (2) conduct which constitutes an abuse of process in the subsequent proceeding. 25 Abuse of process, which may be invoked in areas in which estoppels also apply, is inherently broader and more flexible than estoppel. Although insusceptible of a formulation which comprises closed categories, abuse of process is capable of application in any circumstances in which the use of a court's procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute. It can for that reason be available to relieve against injustice to a party or impairment to the system of administration of justice which might otherwise be occasioned in circumstances where a party to a subsequent proceeding is not bound by an estoppel. 26 Accordingly, it has been recognised that making a claim or raising an issue which was made or raised and determined in an earlier proceeding, or which ought reasonably to have been made or raised for determination in that earlier proceeding, can constitute an abuse of process even where the earlier proceeding might not have given rise to an estoppel. Similarly, it has been recognised that making such a claim or raising such an issue can constitute an abuse of process where the party seeking to make the claim or to raise the issue in the later proceeding was neither a party to that earlier proceeding, nor the privy of a party to that earlier proceeding, and therefore could not be precluded by an estoppel.
8. The above description of an Anshun estoppel in Tomlinson is reinforced in Timbercorp at [27], where French CJ, Kiefel, Keane and Nettle JJ said: … An estoppel of this kind, an "Anshun estoppel", will preclude the assertion of a claim or of an issue of law or fact if the claim or issue was so connected to the subject matter of the first proceeding as to make it unreasonable, in the context of the first proceeding, for the claim or issue not to have been made or raised in it.
9. In Anshun, one of the matters to be taken into account in determining whether an Anshun estoppel arose was the likelihood of conflicting judgments. Gibbs CJ, Mason and Aickin JJ stated at 603-604: … It has generally been accepted that a party will be estopped from bringing an action which, if it succeeds, will result in a judgment which conflicts with an earlier judgment. … … The likelihood that the omission to plead a defence will contribute to the existence of conflicting judgments is obviously an important factor to be taken into account in deciding whether the omission to plead can found an estoppel against the assertion of the same matter as a foundation for a cause of action in a second proceeding. By "conflicting" judgments we include judgments which are contradictory, though they may not be pronounced on the same cause of action. It is enough that they appear to declare rights which are inconsistent in respect of the same transaction. …

Amendment of defence and cross-claim

1. Section 64 of the Civil Procedure Act 2005 (NSW) (CPA) provides: (1) At any stage of proceedings, the court may order - (a) that any document in the proceedings be amended, or (b) that leave be granted to a party to amend any document in the proceedings. (2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings. …
2. Section 58 of the CPA relevantly provides: (1) In deciding - (a) whether to make any order or direction for the management of proceedings, including - (i) any order for the amendment of a document, and … the court must seek to act in accordance with the dictates of justice. (2) For the purpose of determining what are the dictates of justice in a particular case, the court - (a) must have regard to the provisions of sections 56 and 57, and (b) may have regard to the following matters to the extent to which it considers them relevant - (i) the degree of difficulty or complexity to which the issues in the proceedings give rise, (ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities, (iii) the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties, (iv) the degree to which the respective parties have fulfilled their duties under section 56(3), (v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings, (vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, (vii) such other matters as the court considers relevant in the circumstances of the case.
3. As stated above, section 58(2) of the CPA refers to sections 56 and 57 of the CPA.
4. Section 56(1) provides that the overriding purpose of the CPA and the UCPR is 'to facilitate the just, quick and cheap resolution of the real issues in the proceedings'. Section 56(2) mandates that the court must give effect to the overriding purpose when it exercises any power under the CPA or the UCPR, and when it interprets their provisions. Section 56(3) creates a duty for a party to assist the court to further the overriding purpose.
5. Section 57 of the CPA provides: (1) For the purpose of furthering the overriding purpose referred to in section 56(1), proceedings in any court are to be managed having regard to the following objects - (a) the just determination of the proceedings, (b) the efficient disposal of the business of the court, (c) the efficient use of available judicial and administrative resources, (d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. (2) This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1).
6. Business Finance and the Receiver argue that leave for Casula Projects to amend the defence and cross-claim should be refused on numerous grounds applicable to different parts thereof, principally on the basis of issue estoppel and Anshun estoppel (the principles of which are set out in Tomlinson above), and defects which render them liable to be struck out on the basis that they fail to disclose a reasonable cause of action and/or are embarrassing (the principles of which are set out in Boensch above).
7. Additional expressions of what is to be considered an embarrassing pleading in the context of allegations of unconscionable conduct are to be found in a number of decisions, including several of this court.
8. In Natwest Australia Bank Ltd v Boral Gerrard Strapping Systems Pty Ltd (1992) 111 ALR 631, French J (as the former Chief Justice then was) struck out a pleading of unconscionable conduct against Boral, saying at 638: … I accept, however, the proposition that the pleading is embarrassingly vague in that it fails to adequately disclose the factual foundation upon which Boral's conduct is said to be unconscionable. On the face of it it does not appear that the pleading so far identifies any conduct which would fall within accepted categories of unconscionability. …
9. In Watiwat v Dixon [2017] NSWSC 360, Ward CJ in Eq (as the President then was) at [15]-[22] set out the relevant legal principles regarding the role of pleadings; namely, to state with clarity the case that must be met and define the issues for decision, and thereby minimise the risk of injustice resulting from surprise and reducing expense and delay, concluding at [22]: What is meant by an embarrassing pleading, in the context of an application such as the present, relates to whether the pleading can serve the function of a pleading under the rules; i.e., whether it puts the defendant properly on notice of the real substance of the claim made against it and enables the defendant to know what case it is that the defendant has to meet. A pleading is embarrassing if it is unintelligible, ambiguous or imprecise in its identification of material factual allegations so as to deprive the opposing party of proper notice of the real substance of the claim or defence (Gunns Ltd v Marr [2005] VSC 251 at [14]-[15]) or if it contains inconsistent, confusing or irrelevant allegations (Shelton v National Roads and Motorist Association Ltd (2004) 51 ACSR 278; [2004] FCA 1393 at [18]).
10. In Watiwat, Ward CJ in Eq at [24]-[29] drew particular attention to the failure of the plaintiff in that case to plead the facts, matters and circumstances giving rise to the allegation of unconscionable conduct as the basis for her Honour's finding that the pleading was embarrassing and should be struck out.
11. In O'Brien v Supercheap Security Pty Ltd [2023] NSWSC 21, Ball J dealt with an application to summarily dismiss or strike out a pleading of statutory unconscionable conduct where multiple material facts had not been pleaded, only conclusions. Ball J said at [63]: … Pleadings must be sufficiently intelligible to enable a defendant to know the case it has to meet: UCPR r 15.1(1). It is not enough to "plead a set of facts and a bare conclusion that, in all the circumstances, what has taken place is unconscionable": see Olson v Keefe (No 3) [2018] FCA 2001 at [22] per Bromwich J.

Summary dismissal or strike out application on the basis of Anshun estoppel

1. In paragraphs 21 to 29 of the statement of claim, Business Finance makes allegations regarding the failure of Casula Projects to pay the Loan Management Fee and the Default Loan Management Fee despite demands having been made by Business Finance, asserting that this failure is in breach of the obligation to pay the Secured Money as required in the Memorandum containing the terms of the Loan Agreement and the New Mortgage.
2. Paragraphs 21 to 29 of the statement of claim are in the following form (omitting the particulars): 21 It is a term of the Loan Agreement and the New Mortgage that Casula Projects covenanted to pay Business Finance a fee described as the: (a) "Loan Management Fee"; (b) "Default Loan Management Fee" 22 The "Loan Management Fee": (a) is a fee required to be paid monthly from the "Commencement Date" (that is, 18 September 2018) in the amount of $115.00 per month for the monthly management of the loan; and (b) is payable monthly on the "Date for the Payment of Interest". 23 Casula Projects failed or refused to pay the Loan Management Fee. 24 The failure or refusal by Casula Projects to pay the Loan Management Fee is a breach of its covenant to pay the Loan Management Fee under the Loan Agreement and the New Mortgage. 25 The "Default Loan Management Fee": (a) is a fee calculated on a daily basis, in the amount of $75.00 per day, once an "Event of Default" occurs or is deemed to have occurred if Business Finance takes any step in connection with a "Recovery Action"; and (b) is payable immediately upon demand by Business Finance. Demands for payment of the Default Loan Management Fees and the Loan Management Fees 26 On 25 November 2022, Business Finance issued a letter of demand to Casula Projects (Fees Demand). 27 By the Fees Demand, Business Finance: (a) declared that, by reason of the occurrence of "Events of Default" under the New Mortgage, Business Finance was entitled under the New Mortgage to charge: (i) the "Default Loan Management Fee" at the rate of $75.00 per day from the date of default, which amount was payable immediately on demand by Business Finance; and (ii) the "Loan Management Fee" from the "Commencement Date" (that is, 18 September 2018) at the rate of $115.00 per month, which fee was payable monthly under the New Mortgage on the "Date for the Payment of Interest"; and (b) demanded Casula Projects immediately pay: (i) $127,162.50 in "Default Loan Management Fees", being the amount owing as at 25 November 2022 (Default Loan Management Fees Amount); and (ii) $7,015.00 in "Loan Management Fees", being the amount owing as at 25 November 2022 (Loan Management Fees Amount). 28 Casula Projects has failed or refused to pay the Default Loan Management Fees Amount or the Loan Management Fees Amount in satisfaction of the Fees Demand or otherwise in respect of its obligations under the Loan Agreement and the New Mortgage. 29 The failure by Casula Projects to pay the Default Loan Management Fees Amount or the Loan Management Fees Amount is a breach of its covenant in clause 3.1(a)(i) of the Memorandum to pay the "Secured Money" to Business Finance in accordance with the terms of the Loan Agreement and the New Mortgage by the end of the "Term".
3. Casula Projects says that in the Earlier Proceedings, before the Liability Judgment was given by Parker J on 29 August 2023, there was no claim by Business Finance for the Loan Management Fee or the Default Loan Management Fee as part of the amount said to be owing to Business Finance. Casula Projects drew attention to a spreadsheet calculation of the amount claimed by Business Finance attached to an affidavit of the Receiver affirmed 16 August 2022 (served in the Earlier Proceedings) which makes no reference to any Loan Management Fee or Default Loan Management Fee.
4. Instead, the first time a claim or assertion was made for any Loan Management Fee or Default Loan Management Fee was by Business Finance serving an affidavit of the Receiver affirmed 29 August 2022, which attached an amended spreadsheet calculation at the time that Parker J was in the course of delivering the ex tempore Liability Judgment. Subsequently, by updated versions of the spreadsheet calculation of the amount Business Finance claimed was owing by Casula Projects, as Parker J continued to deliver the Liability Judgment, the Loan Management Fee and the Default Loan Management Fee were claimed.
5. Business Finance and the Receiver candidly admit that each of the Loan Management Fee and the Default Loan Management Fee were not included in any calculation of the amount asserted to be owing by Casula Projects at any time prior to the delivery of the Liability Judgment but provide evidence to explain the circumstances. The Receiver has explained (in unchallenged evidence) that the failure to include the Loan Management Fee and the Default Loan Management Fee in the debt calculation which he prepared was an oversight by him in failing to look at the terms of the Original Mortgage in preparing a recalculation of the debt owing to Business Finance. The Receiver also says that it was only during the course of the recalculation that he discovered that the Loan Management Fee and Default Loan Management Fee had not been included in his calculations and at no time did he make a conscious decision not to seek the payment of them, not to include it, or to waive any right of Business Finance to payment of them.
6. Casula Projects says that the failure of Business Finance and the Receiver to raise the Loan Management Fee and Default Loan Management Fee is unreasonable such that an Anshun estoppel operates to preclude the claim for each of them being made in the statement of claim in these proceedings. Casula Projects also argues (at paragraphs 15-16 of its written submissions): 15 In circumstances where Casula [Projects] is precluded from seeking to argue that the higher rate of interest of 24% per annum and the monthly compounding of interest were unconscionable, it is unreasonable for Business Finance to now make claims for Loan Management Fees and Default Loan Management Fees. 16 Just as the [sic] Business Finance asserts in its Submissions in Support of their Notice of Motion for Dismissal and Strike Out filed 28 August 2023 (August 2023 Submissions) at [31] that Casula Projects made a forensic decision at the trial of the Liability Proceeding to not challenge the entitlement of Business Finance to charge interest at the rate of 24% and a compound basis, Business Finance similarly chose not to include claims for Loan Management Fees and Default Loan Management Fees, and should not now be entitled make [sic] those claims. Perhaps the forensic decision by Casula not to challenge the interest at the rate of 24% and on a compound basis, may have been different or at all least Casula ought to have been given the opportunity to further assess its decision not to challenge the interest at the rate of 24% and on a compound basis in the Enforcement Proceedings.
7. I reject the Anshun estoppel submissions by Casula Projects for the following reasons: 1. There is no evidence that Business Finance and the Receiver made a forensic decision not to claim the Loan Management Fee and the Default Loan Management Fee at the trial of the Earlier Proceedings. The evidence of the Receiver (which I accept) is that the omission to claim these fees was an oversight by the Receiver. 2. There has been no finding in the Liability Judgment that Business Finance is not entitled to claim the Loan Management Fee and the Default Loan Management Fee. Any claim for those fees can be met with appropriate defences from Casula Projects on which this court can rule. There is no basis on which it could be said that there is a likelihood of conflicting judgments between the Liability Judgment and any judgment which might be given in these proceedings that Business Finance is or is not entitled to payment of those fees. 3. Casula Projects' decision not to challenge the interest rate of 24% and compounding interest in the Earlier Proceedings was a matter for it. So was its decision to concede that it could not do so at the hearing of these proceedings on 7 September 2023, as reflected in the consent orders made on 14 September 2023. There is no relevant link between these decisions made on behalf of Casula Projects and the oversight of the Receiver to include the claims for the Loan Management Fee and the Default Loan Management Fee and there is no evidentiary basis to say that there is such a link. 4. The outcome of the Earlier Proceedings as reflected in the Liability Judgment was that the amount owing by Casula Projects was required to be recalculated, using a compounding interest rate of 24% as found in the Liability Judgment. Having omitted to do so by oversight, there is no relevant prejudice to Casula Projects for Business Finance and the Receiver to now make the claim for the Loan Management Fee and the Default Loan Management Fee as part of those calculations. That Casula Projects might be liable to pay those fees does not make it unreasonable for those fees to now be claimed. 5. There is otherwise no basis on which I could conclude that the failure of Business Finance and the Receiver to claim the Loan Management Fee and the Default Loan Management Fee was unreasonable so as to give rise to an Anshun estoppel.
8. As a result, I dismiss paragraph 3 of the Second Amendment & Strike Out Application.

Amendment of defence

1. Business Finance and the Receiver take issue with the amendment of paragraphs 11 (first occurring), 11A, 11B-16 and 17 of the proposed amended defence. I will deal with each of these paragraphs in turn.

Paragraph 11

1. Paragraph 19 of the statement of claim is in the following terms: The definition of "Secured Money" in the New Mortgage includes: (a) "Principal Amount" of $1,199,900 stipulated in Schedule A to the New Mortgage (clause 1.1 of the Memorandum); (b) "Interest"; (c) "Outstanding Interest"; (d) "Fees"; (e) "Costs and Expenses"; and (f) such other amounts as expressly set out in the definition of "Secured Money".
2. Paragraph 11 of the proposed amended defence states (omitting the struck-through text proposed to be deleted): The Defendant does not admit paragraph 19 of the Statement of Claim and says that upon a proper construction of the Loan Agreement and New Mortgage the Defendant denies that all fees payable as asserted by the Plaintiffs are payable.
3. Paragraph 11 of the defence previously had a set of particulars which contained the basis on which the proper construction of the Loan Agreement and New Mortgage was asserted. Those matters which were previously particulars to paragraph 11 of the defence have now become part of a new paragraph 11A of the proposed amended defence (the contested form of which is set out below).
4. Business Finance and the Receiver complain that the removal of these particulars from paragraph 11 has denuded it of any logic and meaning and that it now contains a half-stated conclusion and a bare denial. On this basis they say that paragraph 11 of the proposed amended defence is embarrassing within the meaning of rule 14.28(1)(b) of the UCPR and that leave to amend it should be refused.
5. In my opinion, there is force to this submission if the new paragraph 11A of the proposed amended defence is not permitted to stand. So long as paragraph 11 is accompanied by an allowable paragraph 11A, taken together, there would be a sufficient basis on which paragraph 11 of the proposed amended defence does not transgress the requirements of a permissible pleading.
6. During the hearing, Casula Projects conceded that paragraph 11 required amendment so that it would read (additional text underlined): The Defendant does not admit paragraph 19 of the Statement of Claim and says that upon a proper construction of the Loan Agreement and New Mortgage as set out in paragraph 11A below, the Defendant denies that all fees payable as asserted by the Plaintiffs are payable. (T10.40-11.11)
7. Subject to the matters raised in relation to paragraph 11A, which are dealt with below, Business Finance and the Receiver agreed that such a change would address the issues regarding paragraph 11 (T10.40-11.9).
8. I have, however, reached the conclusion that paragraph 11A should not be allowed for the reasons set out below. As a result, I consider that paragraph 11 of the proposed amended defence (even in the further amended form set out above) should not be permitted either, because without a reference to an allowable paragraph 11A, there is no logical meaning in paragraph 11.

Paragraph 11A(a)-(d)

1. Paragraph 11A of the proposed amended defence also responds to paragraph 19 of the statement of claim. The form of paragraph 11A(a)-(d) is as follows: (a) Although the Fees are defined in the Memorandum 'as specified in Schedule B (column A)', Schedule B refers to (i) a Loan Management Fee and (b) a Default Loan Management Fee. (b) As to the Loan Management Fee: (i) Clause 1.1 definition in the Memorandum does not define Loan management fee but refers to a Loan Management Fee Percentage means the percentage specified in Schedule A as the '"Loan Management Fee Percentage". (ii) There is no Loan Management Fee Percentage referred to in Schedule A and Schedule B refers to a Loan Management Fee but not a Loan Management Fee Percentage. (c) As to the Default Loan Management Fee it is not referred to the Memorandum. (d) The Indicative Letter of Offer from Business Finance to the Defendant provided in September 2017 does not refer to a Loan Management Fee nor a Default Loan Management Fee.
2. Business Finance and the Receiver make two principal complaints in relation to the form of paragraph 11A(a)-(d). The first of their principal complaints relates to subparagraphs 11A(a)-(c) and the second of their principal complaints relates to subparagraph 11(d). I will deal with each in turn.
3. First, they submit that subparagraphs 11A(a)-(c) fail to disclose a reasonable defence because although Casula Projects pleads that the terms of the Loan Management Fee and the Default Loan Management Fee are not defined in the Memorandum, it has failed to state what it contends is the effect of that pleading and, on that basis, it is embarrassing. They also say that in any event, the definition of Fees in the Memorandum is as follows: "Fees" means the fees listed and described in Schedule B (column A) which are payable by the Debtor to the Lender as specified in Schedule B (column C) and which fees form part of the Secured Money until they are paid to the Lender in full.
4. The definition of "Schedule B" is Schedule B to the Memorandum which forms part of the New Mortgage. Both the Loan Management Fee and the Default Loan Management Fee appear in Schedule B, respectively stated as follows: 1. Loan Management Fee - a fee to be paid by the Debtor to the Lender for the monthly management of the loan, the amount being $115.00 per month, the date for the payment of the fee being monthly on the Date for the Payment of Interest. 2. Default Loan Management Fee - a fee calculated on a daily basis once an Event of Default occurs or is deemed to have occurred if the Lender takes any step in connection with a Recovery Action, the amount being $75.00 per month, the date for the payment of the fee being immediately upon demand by the Lender.
5. Casula Projects say that there is a disconnect between the Memorandum and the New Mortgage because there is no Schedule B to the Memorandum, only a Schedule B to the New Mortgage.
6. While I am very conscious of not curtailing issues concerning the proper construction of the Memorandum and the New Mortgage which might be raised by Casula Projects at the trial, I agree with Business Finance and the Receiver that subparagraphs 11A(a)-(c) fail to disclose a reasonable defence and are also embarrassing. They cannot be sustained in light of the plain provisions of the Memorandum and the New Mortgage. The New Mortgage states: [Casula Projects] covenants with [Business Finance] in terms of the attached schedule and standard terms document 718188316 and charges the estate or interest described in item 1 with the repayment/payment to the Mortgagee of all sums of money referred to in item 5.
7. It is pellucidly clear that the "standard terms document 718188316" is the Memorandum, which is to be read with the New Mortgage, including Schedule B to the New Mortgage.
8. As a result, allowing subparagraphs 11A(a)-(c) to form part of the amended defence and create an issue in the proceedings when there is no reasonably arguable basis for them would not adhere to the dictates of justice in line with s 58 of the CPA, which include facilitating the just, quick and cheap resolution of the real issues in the proceedings as stated in s 56 of the CPA.
9. Second, Business Finance and the Receiver submit that subparagraph 11A(d) fails to disclose a reasonable defence because Casula Projects makes no attempt to plead what it contends is the legal effect of the Indicative Letter of Offer in circumstances where it was superseded by the Original Mortgage and then the New Mortgage, and where the express terms of the Indicative Letter of Offer demonstrate with clarity that its terms are to be supplanted by any loan facility into which the parties enter, being the following: This indicative letter of offer (offer) does not represent a formal offer of a loan facility. Until formal credit approval is obtained and a facility agreement is issued, we do not offer to provide you with a loan facility. The terms and conditions detailed in this offer are not exhaustive and are necessarily general in nature. Any subsequent facility agreement would comprehensively detail the terms and conditions on which the loan facility is offered. … E. In the event of inconsistency between this offer and the formal legal documentation, the legal documentation will prevail to the extent of the inconsistency.
10. I agree that subparagraph 11A(d) fails to disclose a reasonable defence and is also embarrassing because it does not state with any reasonable clarity what the effect of the Indicative Letter of Offer is, and how it is that the express terms of it could provide a defence based on a proper construction that is put forward by Casula Projects. It should not be permitted to form part of the amended defence when it is not reasonably arguable, and so does not accord with the dictates of justice in s 58 of the CPA, including by not facilitating the just, quick and cheap resolution of the real issues in the proceedings as per s 56 of the CPA.

Paragraph 11A(e)-(f)

1. Paragraph 11A(e)-(f) of the proposed amended defence also responds to paragraph 19 of the statement of claim and states (additions underlined): (e) Seeking to include the charge for a Loan Management Fee in the Loan Agreement and New Mortgage is unconscionable conduct on the part of the first plaintiff and is unenforceable by the first plaintiff against the defendant. PARTICULARS i. Business Finance held superior bargaining power to dictate the terms of the Loan Agreement; ii. Business Finance knew or ought to have known that Nick was not able to understand the onerous terms of the Loan Agreement of (i) charging a monthly Loan Management Fee of $115.00 per month and (ii) charging a monthly Default Loan Management Fee varying between $2,325 and $2,250 per month; iii. Frankie McDad, director of Business Finance, exerted undue pressure and/or influence upon Casula Projects given his relationship to Nick, the sole director of Casula Projects at the time of entering into the Loan Agreement. (f) Seeking to include the charge for a Default Loan Management Fee in the Loan Agreement and New Mortgage is unconscionable conduct on the part of the first plaintiff and is unenforceable by the first plaintiff against the defendant. PARTICULARS i. Business Finance held superior bargaining power to dictate the terms of the Loan Agreement; ii. Business Finance knew or ought to have known that Nick was not able to understand the onerous terms of the Loan Agreement of (i) charging a monthly Loan Management Fee of $115.00 per month and (ii) charging a monthly Default Loan Management Fee varying between $2,325 and $2,250 per month; iii. Frankie McDad, director of Business Finance, exerted undue pressure and/or influence upon Casula Projects given his relationship to Nick, the sole director of Casula Projects at the time of entering into the Loan Agreement.
2. These paragraphs plead an allegation of unconscionability. Casula Projects conceded that the matters contained in the particulars should really be in the pleading proper and that what had been attempted to be stated was a claim of unconscionable conduct in equity (T15.37-16.23). But the problem is that the allegations in both the pleading and the particulars are absent any material facts. As the decisions in Natwest, Watiwat and O'Brien remind me, allegations of unconscionable conduct must be founded on a set of material facts and not be expressed with opaque generality or as a set of conclusions.
3. As a matter of fairness to Business Finance and the Receiver, the purpose of providing material facts in the pleading is to give reasonable clarity of the case that is required to be met. The form of the pleading set out in paragraph 11A(e)-(f) does not provide such clarity and cannot be allowed to stand. For that reason alone, it is embarrassing and cannot be permitted as an amendment to the defence in its current form. Allowing it in its current form does not accord with the dictates of justice in s 58 of the CPA, including by not facilitating the just, quick and cheap resolution of the real issues in the proceedings as stated in s 56 of the CPA.
4. Business Finance and the Receiver also say that an Anshun estoppel applies to a claim of unconscionability regarding the entry into the Original Mortgage. Business Finance and Receiver assert that from three out of the four witnesses for Casula Projects who gave evidence at the trial in the Earlier Proceedings regarding the circumstances of Casula Projects' entry into the Original Mortgage, it appears Casula Projects intends to introduce that factual issue into these proceedings and it should not be permitted to do so because of a resulting prejudice to Business Finance and the Receiver. Because of the view that I have formed that the pleading in paragraph 11A(e)-(f) should not be permitted, it is not necessary for me to express any view about that complaint.
5. In the circumstances, if Casula Projects wishes to replead the defence based on unconscionable conduct, it will need to make an appropriate application for leave to do so.

Paragraphs 11B-17

1. Paragraphs 20-26 of the statement of claim are as follows: 20 "Fees" is defined in clause 1.1 of the Memorandum as "the fees listed and described in Schedule B (column A) which are payable by the Debtor to the Lender as specified in Schedule B (column C) and which fees form part of the Secured Money until they are paid to the Lender in full". 21 It is a term of the Loan Agreement and the New Mortgage that Casula Projects covenanted to pay Business Finance a fee described as the: (a) "Loan Management Fee"; (b) "Default Loan Management Fee". Particulars Schedule B to the Loan Agreement and the New Mortgage 22 The "Loan Management Fee": (a) is a fee required to be paid monthly from the "Commencement Date" (that is, 18 September 2018) in the amount of $115.00 per month for the monthly management of the loan; and (b) is payable monthly on the "Date for the Payment of Interest". Particulars Item 3, Schedule B to the Loan Agreement and the New Mortgage (column A) , (column B) and (column C) and the definition of "Date for the Payment of Interest" in clause 1.1 of the Memorandum and in Schedule A to the Loan Agreement and the New Mortgage. 23 Casula Projects failed or refused to pay the Loan Management Fee. 24 The failure or refusal by Casula Projects to pay the Loan Management Fee is a breach of its covenant to pay the Loan Management Fee under the Loan Agreement and the New Mortgage. Particulars Item 3, Schedule B to the Loan Agreement and the New Mortgage (column A), (column B) and (column C), clause 1.1 definition of "Obligation" and clause 3.1 (b) of the Memorandum. 25 The "Default Loan Management Fee": (a) is a fee calculated on a daily basis, in the amount of $75.00 per day, once an "Event of Default" occurs or is deemed to have occurred if Business Finance takes any step in connection with a "Recovery Action"; and (b) is payable immediately upon demand by Business Finance. Particulars Item 6, Schedule B to the Loan Agreement and the New Mortgage (column A), (column B) and (column C) and the definitions of "Event of Default" and "Recovery Action" in clause 1.1 of the Memorandum. … 26 On 25 November 2022, Business Finance issued a letter of demand to Casula Projects (Fees Demand). Particulars The Fees Demand is in writing and comprises the letter from Corrs Chambers Westgarth (Corrs) to Casula Projects, copied to Pointon Partners, dated 25 November 2022.
2. Paragraphs 11B-17 of the proposed amended defence (starting from what appears at page 4 of the document as the mistaken second occurring paragraph 11, but which Casula Projects submitted should be renumbered as paragraph 11B) respond to paragraphs 19-26 of the statement of claim. They are in the following terms (omitting the struck-through text proposed to be deleted): 11B The Defendant does not admit paragraph 20 of the Statement of Claim and repeats paragraph 11A above. 12 The Defendant denies paragraph 21 of the Statement of Claim and repeats paragraph 11A above. 13 The Defendant denies paragraph 22 of the Statement of Claim and repeats paragraph 11A above. 14 The Defendant admits paragraph 23 of the Statement of Claim and denies the Loan Management Fee is payable by the Defendant and repeats paragraph 11A above. 15 The Defendant denies paragraph 24 of the Statement of Claim and repeats paragraph 11A above. 16 The Defendant denies paragraph 25 of the Statement of Claim and says the Default Loan Management Fee it is not referred to the Memorandum and repeats paragraph 11A above. 17 The Defendant admits the Fee Demand referred to paragraph 26 of the Statement of Claim was issued by Business Finance.
3. In light of the view that I have formed that paragraph 11A of the proposed amended defence cannot be permitted, paragraphs 11B-16 of the proposed amended defence cannot be permitted either because each of them contains a pleading which cross-references to paragraph 11A. Paragraph 17 of the proposed amended defence is in a different category as it is an admission without cross-reference to any disallowed part of the proposed amended defence.
4. If Casula Projects wishes to apply to replead paragraph 11A in permissible form, then the reference to it in each of paragraphs 11B-16 might also form part of that application.

Amendment of cross-claim

1. Business Finance and the Receiver also take issue with paragraphs 3-31, 35-36 and 39-54 of the proposed amended cross-claim and consequently paragraphs 5, 6, and 7A-7D of the relief sought in the proposed amended cross-claim.
2. By the Strike Out Application, Business Finance and the Receiver applied for the whole of the cross-claim to be summarily dismissed or, alternatively, an order pursuant to rule 14.28 of the UCPR that paragraphs 3 to 54 of the cross-claim be struck out. Many of the problems with the cross-claim to which Business Finance and the Receiver drew attention at the hearing of the Strike Out Application persist in the proposed amended cross-claim. For this reason, where paragraphs of the proposed amended cross-claim are in exactly the same form as they appeared in the cross-claim that has been filed and are the subject of challenge by Business Finance and the Receiver in opposition to the Second Amendment & Strike Out Application, I will deal with those paragraphs on the basis that there is an application by Business Finance and the Receiver to strike them out of the cross-claim as well as not permit them to remain in the proposed amended cross-claim.
3. I will deal with each of the disputed paragraphs in turn.

Paragraphs 3-31 of the proposed amended cross-claim and paragraphs 5 & 6 of the relief

1. Business Finance and the Receiver assert that the pleading in paragraphs 3-31 of the proposed amended cross-claim is defective. Those paragraphs are in the following terms (additions underlined, grammatical errors left uncorrected and particulars excluded unless relevant): 3 Hanan Mokdad was at all material and relevant times was the registered proprietor of 2 and 4 Holland Crescent, Casula in the State of New South Wales being the land contained in certificates of title, folio identifiers (Fl) 6 & 7/31050 (Casula Land). 4 At all material times the Casula Land had first registered mortgages against the titles to Westpac Banking Corporation being mortgages registered AM330112 over Fl 6/3150 (being 2 Holland Crescent, Casula, $590,000 borrowed) and AK580795 over Fl 6/3150 (being 4 Holland Crescent, Casula, $440,000 borrowed) through mortgage manager, RAMS. 5 In or about May 2017 Hannan Mokdad's interests, through her son NickHoumam Al Jayoush (Nick), were looking to purchase a property to be identified and for this purpose obtained approval to borrow the amount of $800,000 from Private Fund Pty Ltd by providing the Casula Land as security and on or about 22 June 2017 the Casula Projects and Hanan Mokdad entered into mortgage with Private Fund Pty Ltd to borrow $800,000 providing the Casula Land as second mortgage as security. 6 On or about 10 July 2017 Private Fund Pty Ltd registered Caveat AM549917 over the Casula Land claiming a "Mortgage of Estate in Fee Simple" over the Casula Land. 7 On about 17 August 2017 Private Fund Pty Ltd registered Mortgage AM653083 (PF Mortgage) over the Casula Land. 8 On 27 August 2017 the GEM Trust was created by deed dated 27 August 2017 appointing the defendant as the trustee of the GEM Trust. 9 On or about 31 August 2017 Casula Projects in its capacity as trustee of the GEM Trust entered into a contract to purchase the Property for a purchase price of $1,250,000.00 with a deposit paid of $60,000.00. This contract provided for settlement 60 days from the date of the contract (or sooner), so by 30 October 2017. 10 On 1 September 2017 Casula Projects was advised that Private Fund did not have sufficient funds to enable Casula Projects to settle the purchase of the Property. 11 Casula Projects sought and Business Finance offered to lend Casula Projects $1,230,000 to complete the purchase of the Property. 12 On or about 14 September 2017 Business Finance issued to Casula Projects an Indicative Letter of Offer which contained the (inter alia) following Summary of Terms: (a) Facility Limit : $1,355,000.00 [Fees included]; (b) Term: 6 months; (c) Discount Interest rate - the amount of interest you will pay if you pay us interest on time.: 12.00% per annum; (d) Interest rate - the amount of interest you will pay if you don't pay us interest on time.: 24.00% per annum; (e) Fees and charges: (i) Establishment Fee - A fee paid by you to us for approving the loan: $4,010.00 (incl. GST); (ii) Risk Management Fee - A fee paid by you to us for managing the risk of the loan.: waived; (iii) Brokerage & its associated Fees - A fee payable by you to your broker for obtaining you this loan: N/A; (iv) Legal Fee - A fee paid by you to our solicitors for production of loan documents and registration of our interests on the Security.: $990.00 (GST incl.); 13 This Indicative Letter of Offer did not refer to Business Finance charging: (a) [struck-through] (b) Loan Management Fee - a fee to be paid by the debtor to the lender for a monthly management for the monthly management of the loan: $115.00 per month; (c) Default Loan Management Fee - a fee calculated on a daily basis once an Event of Default occurs or is deemed to have occurred if the Lender takes any step in connection with a Recovery Action: $75.00 per day. (d) [struck-through] 14 At the time of entering into the Loan Agreement and Original Mortgage in October 2017, Houmam (Nick) Aljayoush (Nick) who was born 21 April 1991 and then 26 years old, was the sole director of Casula Projects and continued to be the sole director of Casula Projects until 3 November 2017. 15 Nick is the son of Hanan Mokdad (Hanan) who was the sole director of Casula Projects from 19 July 2018 to 10 December 2018 and has been and continues to be the sole director of Casula Projects since 5 June 2019. 16 Frankie McDad is the brother of Hanan and the uncle of Nick. 17 Frankie McDad and his wife Regina Ko were appointed directors of Casula Projects from 3 to 22 November 2017. 18 On 22 November 2017 Frankie McDad ceased to be a director of Casula Projects and Regina Ko remained as the sole director of Casual Projects until 19 July 2018 when Hanan replaced her as the sole director. 19 At the time of entering into the Loan Agreement and Original Mortgage in October 2017, Frankie McDad was a director of Business Finance and has been the sole director of Business Finance since 28 September 2018. 20 On or about 26 September 2017 Casula Projects entered into an agreement to borrow the principal amount of $1,230,000 from Business Finance to complete the purchase of the Property and signed a mortgage to Business Finance of the Property to secure that loan in anticipation of the purchase of the Property with a Lower Rate of Interest of 12% per annum and Higher Rate of Interest of 24% if not paid on time for a 6 month term. 21 On 26 September 2017 Business Finance registered security interest on the Personal Property Securities Register (PPSR) over Casula Projects. 22 On about 6 October 2019 Casula Projects entered into a loan agreement with Private Fund Pty Ltd to borrow the amount of $1,400,000 at a standard interest rate of 12% per annum reducing to 8% per annum if not in default. 23 On about 9 October 2017 Casula Projects completed the purchase of the Property from funds advanced to it by Business Finance and on 11 October 2017 became the registered proprietor of the Property and on 11 October 2017 Business Finance registered mortgage 718326158 (Original Mortgage) over the title of the Property. 24 The BF Mortgage incorporated the terms of the loan made by Business Finance to Casula Projects and the mortgage security provided, which included the following: (a) Schedule "A" and Schedule "B" to the Mortgage; (b) Standard terms registered document no. 718188316 (Standard Terms Document) (called the "Loan Agreement" and the "Original Mortgage"). 25 Schedule "A" of the Loan Agreement inter alia states as follows: Higher Rate of Interest 24% per annum Lower Rate of Interest 12% per annum Minimum Interest Amount 6 month's interest calculated on the Principal Amount Principal Amount $1,230,000.00 Specified Interest Regime Interest Regime A (clause 5.11) Principal Amount $1,230,000.00

26 Schedule "B" of the Loan Agreement inter alia states as follows: Loan management fee - a fee to be paid by the Debtor to the Lender for the monthly management of the loan $115.00 per month. Monthly, on the Date for the Payment of Interest Default Loan Management Fee - a fee calculated on a daily basis once an Event of Default occurs or is deemed to have occurred if the Lender takes any step in connection with a Recovery Action $75.00 Immediately upon demand by the Lender

27 The Standard Terms Document provides (amongst other things) as follows: Clause 1.1 Definitions "Higher Interest Rate" means the higher rate of interest specified in Schedule A as the '*Higher Rate of Interest"; "Interest Regime A" means the interest regime referred to in clause 5.11; "Lower interest Rate" means the lower rate of interest specified in Schedule A as the "Lower Rate of Interest" "Principal Amount" means the amount stipulated in Schedule A as the principal amount advanced by the Lender to the Debtor, the repayment of which is secured by this Mortgage and, if no amount is specified in Schedule A as the '"Principal Amount", that expression shall mean any amount advanced by the Lender to the Debtor, or to any other person at the Debtor's direction, on any transaction or any amount advanced, whether directly or indirectly associated with the grant of this Mortgage; "Specified interest Regime" means any one of: (a) Interest Regime A as referred to in clause 5.11; Clause 5.3 states: The Interest to be paid by the Debtor shall at all times be the Higher Interest Amount unless the Lender notifies the Debtor that the Lower Interest Amount is payable by the Debtor for any Interest Period. Clause 5.11 states: If the Specified Interest Regime applicable to this Mortgage is Interest Regime A: (a) the Debtor shall pay Interest to the Lender monthly in advance on the Date for the Payment of Interest; (b) and, the Debtor fails to pay Interest on the Date for the Payment of Interest, then: (i) The Debtor shall be liable to pay Interest on the Outstanding Interest at the Higher Interest Rate compounding monthly on the Date for the Payment of Interest until the Outstanding interest is paid in full; and (ii) the Interest on the Outstanding Interest compounded on the basis specified in paragraph (i) above shall, become part of the Secured Money as soon as it compounds. (c) Interest once accrued for a month shall be liable for the whole of the month and shall not be refundable or adjustable after the Date for the Payment of Interest. 28 Schedule A (to the Original Mortgage) does not include any reference to the Loan Management Fee nor the Default Loan Management Fee. The Loan Management Fee and the Default Loan Management Fee are only referred to in Schedule B (to Original Mortgage). 29 The Loan Management Fee is not defined correctly in Standard Terms Document as the definition is: "Loan Management Fee Percentage" means the percentage specified in Schedule A as the "Loan management fee percentage". 30 Schedule B of the Mortgage refers to the Loan Management Fee as $115.00 per month and is not expressed as a percentage. 31 Business Finance is not entitled to the Loan Management Fee nor the Default Loan Management Fee as to do so is unconscionable conduct on the part of Business Finance. Particulars (a) Business Finance held superior bargaining power to dictate the terms of the Loan Agreement; (b) Business Finance knew or ought to have known that Nick was not able to understand the onerous terms in the Loan Agreement of … (iii) charging a monthly Loan Management Fee of $115.00 per month and (iv) charging a monthly Default Loan Management Fee varying between $2,325 and $2,250 per month; (c) Frankie McDad, director of Business Finance, exerted undue pressure and / or influence upon Casula Projects given his relationship to Nick, the sole director of Casula Projects at the time of entering into the Loan Agreement.

1. Although it is by no means clear, it appears that paragraphs 5 and 6 of the relief claimed in the proposed amended cross-claim are said to arise out of the conclusionary pleading of unconscionable conduct in paragraph 31 of the proposed amended cross-claim. Paragraphs 5 and 6 of the relief claimed are in the following form: 5 Declaration that the provisions of the Loan Agreement insofar as its provisions require payment by the Defendant of Loan Management Fee and Default Loan Management Fee have no operative function in the Loan Agreement or alternatively those charges are unconscionable. 6 Order that the Loan Agreement be read and construed as if any reference to payment by the Defendant of Loan Management Fee and Default Loan Management Fee were deleted from the Loan Agreement.
2. Business Finance and the Receiver submit that paragraphs 3 to 31 and paragraphs 5 and 6 of the relief claimed are defective for the following reasons: 1. No attempt is made to connect any of the pleaded facts in these paragraphs to any cause of action; they are simply loosely assembled facts unconnected to any cause of action. As a result, they fail to disclose a reasonable cause of action or are embarrassing. 2. The paragraphs are embarrassing as the facts pleaded have no apparent relevance to an issue in these proceedings and it is unclear what is alleged against Business Finance. 3. If the paragraphs are pleaded in an attempt to revisit the issue of what amount was owing by Casula Projects to Business Finance as at 31 May 2018, the paragraphs are an abuse of process as an issue estoppel applies by virtue of what was found in the Liability Judgment at [45] and orders 3 and 4 made in the Earlier Proceedings, which was a judicial determination by Parker J of what amount was owing by Casula Projects to Business Finance as at 31 May 2018. 4. Paragraphs 28, 29 and 30 of the proposed amended cross-claim are observations in the form of submissions regarding the Original Mortgage. 5. There is no attempt to plead a single material fact which might justify a conclusion that Business Finance's conduct was unconscionable as expressed in paragraph 31 and to the extent those facts are contained in the particulars to paragraphs, they should be expressed in the pleaded paragraph, not in particulars. 6. An Anshun estoppel operates against Casula Projects contesting matters that relate to the circumstances of the entry into the Original Mortgage.
3. Casula Projects says that the factual matters establishing the background to it entering into the loan with Business Finance are critical to the claims for relief for unconscionable conduct that are made by Casula Projects in the cross-claim, including by setting up the relationship between the parties. Casula Projects also says that the purpose of pleading all of the matters contained in paragraphs 3 to 30 of the cross-claim is not to attempt to try and subvert what was decided by Parker J in the Earlier Proceedings, particularly the declaration that the quantum of the "Secured Money", including interest and fees, as at 31 May 2018 was $1,199,900.
4. Applying the principles in Natwest, Watiwat and O'Brien, in my view paragraphs 3 to 31 of the proposed amended cross-claim are deficient because they fail to link the factual matters that are expressed in paragraphs 3 to 30 to the pleading of unconscionability that appears in paragraph 31. It is incumbent on Casula Projects to state clearly the case it is making and to set out the substratum of material facts on which it relies for the claim that Business Finance is not entitled to claim the Loan Management Fee or the Default Loan Management Fee because it would be unconscionable conduct for it to do so. In addition, material facts cannot reside in the particulars in the form that they are set out in paragraph 31 of the proposed amended cross-claim. All of those failings mean that the pleading does not accord with the dictates of justice per s 58 of the CPA, including by its failure to facilitate the just, quick and cheap resolution of the real issues in the proceedings as stated in s 56 of the CPA.

Paragraph 36

1. Paragraph 36 of the proposed amended cross-claim states: Clause 5.11 of the Standard Terms Document provides that if Casula Projects fails to pay Interest on the Date for the Payment of Interest, then Casula Projects is liable to pay interest at the Higher Interest Rate of 24% per annum, compounding monthly until the Outstanding Interest is paid in full.
2. Business Finance and the Receiver object to paragraph 36 on the basis that it pleads matters relating to the higher interest rate of 24% and that Casula Projects conceded at the hearing of the Strike Out Application that it was not permitted to make such a claim.
3. In my opinion, paragraph 36 raises a matter concerning the interest rate of 24% which is not the subject of challenge in these proceedings, as indicated by order 2 of the consent orders made on 14 September 2023. In those circumstances, paragraph 36 of the proposed amended cross-claim is not permitted.

Paragraphs 35 and 39

1. Paragraphs 35 and 39 of the proposed amended cross-claim state: 35 On about 11 October 2017 Casula Projects entered into a loan agreement with Partner Invest Pty Ltd (Partner Invest) to lend Partner Invest the principal sum of $170,000 at a standard interest rate of 36% per annum reduced to 19.06% per annum if not in default. … 39 On about 11 October 2017 Casula Projects entered into a loan agreement with Partner Invest Pty Ltd (Partner Invest) to lend Partner Invest the principal sum of $170,000 at a standard interest rate of 36% per annum reduced to 19.06% per annum if not in default.
2. These paragraphs are in exactly the same form and Casula Projects concedes that only paragraph 35 should remain, with paragraph 39 omitted (T26.32-34).
3. Business Finance and the Receiver assert that they are defective on the basis that the facts pleaded in those paragraphs have no apparent relevance to an issue in these proceedings; that it is unclear what is alleged against Business Finance; and that they are, therefore, embarrassing. Casula Projects submits that the facts in these paragraphs form a background but accepts there is no claim against Business Finance in relation to them. During submissions, the following exchange took place (T26.18-30): HIS HONOUR: But it's got to be background [to] a claim. DELLA MARTA: Yes. HIS HONOUR: Which claim is it a background [to]? Because it doesn't form part of your construction argument. It doesn't form part of the unconscionability facts. Which claim and cross-claim does it relate to? Does it form part of the National Consumer Credit Protection claim? DELLA MARTA: I don't know it's that relevant, but it could be. I think it could be, given to establish that claim we need to set out the background of what was going on and the dealings that the parties had had together. It's on that basis, it should tie into that. But that's as high as I can put it.
4. I consider that the pleading of facts which on their face are irrelevant to any claim that might be made is embarrassing. The pleading of irrelevant matters is not in keeping with the dictates of justice in s 58 of the CPA, nor does it facilitate the just, quick and cheap resolution of the real issues in the proceedings as stated in s 56 of the CPA. Accordingly, I do not permit paragraphs 35 and 39 of the proposed amended cross-claim.

Paragraphs 40-46 and 53

1. Paragraphs 40-46 and 53 of the proposed amended cross-claim are as follows (particulars omitted and grammatical errors left uncorrected): 40 Casula Projects repaid money borrowed from Business Finance as follows: (a) On 3 November 2017 an the amount of $804,181.00 paid to Business Finance pursuant to a transfer from Private Fund to or for the benefit of Business Finance; (b) $800,000.00 was to reduce the amount of principal loan amount owed to Business Finance reducing the principal owed to $430,000. (c) The amount of $4,181.00 was paid for the loan establishment fee payable by the defendant to Business Finance. (d) On 6 November 2017 Casula Projects caused the amount of $1,077.55 to be repaid to Business Finance pursuant to a transfer from Private Fund Pty Ltd to Summer Lawyers for payment of their legal costs in discharging the mortgage to Business Finance; 41 On about 3 November 2017 the amount of $170,000 was lent by Casula Projects to Partner Invest. 42 On 14 November 2017 Business Finance through its solicitors pursuant to a power of attorney executed a Release of Mortgage and discharged the BF Mortgage and by orders made by the Supreme Court of NSW in these proceedings on 14 September 2022 the Original Mortgage was reinstated. 43 Casula Projects made payments of interest and other payments pursuant to the Loan Agreement as follows: (a) On 9 November 2017 the amount of $12,300.00; (b) On 11 December 2017 the 2017 the amount of $12,300.00; (c) On 9 January 2018 the amount of $12,300.00; (d) On 26 April 2018 the amount of $35,000.00. 44 As the PPS Registration was still registered on the PPSR, on 21 February 2019 Frankie McDade sent an email to Business Finance's lawyers, Summer Lawyers requesting a payout figure for the defendant over the Property. 45 Summer Lawyers, being solicitors acting on behalf of Business Finance, sent a Lender's Certificate pursuant to Clause 24 dated 21 February 2019 notifying Casula Projects that the Payout Figure, for money owed by Casula Projects to Business Finance, based on the facts, matters and circumstances known to Business Finance at the time of issuing the certificate was $1,199,684.13 as at the Expiry Date of 21 February 2019. 46 Casula Projects did not agree the Payout Figure of $1,199,684.13 was owed to Business Finance but in order to have the PPS Registration removed from the PPSR to permit the Property to be used as security for obtaining additional finance, steps were taken by Business Capital Pty Ltd and Private Fund to pay $1,199,684.13 to Business Finance. … 53 In addition to the money owed to Business Finance which was repaid by Casula Projects as set out in paragraph 40 above, Business Finance has also received additional payments amounting to $1,200,584.13 as referred to in paragraph 46 above.
2. Business Finance and the Receiver submit that these paragraphs are: 1. embarrassing as the facts pleaded in them have no apparent relevance to an issue in these proceedings and it is unclear what is alleged against Business Finance; and 2. an abuse of process if they are pleaded in an attempt by Casula Projects to revisit the issue of what amount was owing by Casula Projects to Business Finance as at 31 May 2018.
3. Casula Projects submit that these facts are, again, "background". But it is entirely unclear what claim they support. They are bereft of connection with any claim expressed in the proposed amended cross-claim. They certainly cannot support a claim that might seek to cavil with the finding in the Liability Judgment that the quantum of the "Secured Money", including interest and fees, as at 31 May 2018 was $1,199,900 because there is an issue estoppel in respect of that finding and it would be an abuse of process for that finding to be challenged in any way in these proceedings. For these reasons, they cannot be permitted because they do not meet the dictates of justice in s 58 of the CPA, including by their failure to facilitate the just, quick and cheap resolution of the real issues in the proceedings as stated in s 56 of the CPA.

Paragraphs 47-52

1. Paragraphs 47-52 of the proposed amended cross claim state: 47 On 29 August 2022, Justice Parker delivered an ex tempore judgment in Supreme Court of New South Wales proceeding numbered 2021/60376 (Liability Proceeding) in favour of Business Finance against Casula Projects. 48 On 14 September 2022, Parker J published written reasons for judgment in the Liability Proceeding having citation Business Finance Pty Ltd v Casula Projects Pty Ltd [2022] NSWSC 1156 (Liability Judgment). 49 Pursuant to the Liability Judgment made on 14 September 2022, and based upon the business records of Business Finance, it was found that on 14 May 2018 a draw down of $800,000 was advanced by Business Finance to or for the benefit of Casula Projects increasing the principal amount then owed to Business Finance by Casula Projects back to the amount of $1,230,000.00 less the advance interest paid on 26 April 2018 in the amount of $35,000.00 thereby reducing the principal amount down from $1,230,000.00 to $1,230,000.00 minus the $35,000.00 = $1,195,000.00. 50 Orders were made pursuant to the Liability Judgment to the effect that: (a) in October 2017, Business. Finance made a loan of $1.23 million to Casula Projects pursuant to a written loan agreement (Loan Agreement); (b) on 14 November 2017, Mr McDad, a director of Business Finance, procured the discharge of the mortgage over the Property (Original Mortgage); (c) the amount of $1,199,900 received in March 2019 was a repayment of principal on the Loan Agreement being the payments referred to in in paragraphs 46(i) to 46(iii) above; (d) Business Finance was entitled to have a new mortgage registered over the Property as security for any money owed by the cross-claimant to the cross-defendant and the new mortgage was granted by the Casula Projects to Business Finance in accordance with the orders made in the Liability Proceedings (New Mortgage). (e) Casula Projects continues to owe interest to Business Finance pursuant to the Loan Agreement which needs to be recalculated which is the purpose of the these proceedings before the Court. 51 Also on 14 September 2022, Parker J made orders to give effect to the Liability Judgment (Orders). The Orders included: (a) a declaration that for the purposes of the Original Mortgage, the quantum of the "Secured Money" (as defined in the Memorandum), including interest and fees, as at 31 May 2018 was $1,119,900; and (b) a declaration that repayments of the "Secured Money" (as defined in the Memorandum) were made in the amounts of $650,000 and $300,000 on 14 March 2019 and in the amount of $249,000 on 18 March 2019. 52 The Liability Judgment did not determine the issue of the quantum of the amount of the: (a) debt owing by Casula Projects to Business Finance pursuant to the Loan Agreement in the period from 1 June 2018 to the date of judgment in these proceedings; (b) "Secured Money" owing by Casula Projects to Business Finance and secured by the New Mortgage in the period from 1 June 2018 to the date of judgment in these proceedings.
2. Business Finance and the Receiver complain that paragraphs 47, 48, 51 and 52 of the proposed amended cross-claim repeat verbatim paragraphs 4, 5, 7 and 8 of the statement of claim without any indication of what is intended to be alleged by the repetition of those facts, which makes the paragraphs embarrassing.
3. Business Finance and the Receiver submit that paragraph 49 of the proposed amended cross-claim is defective because it is difficult to understand as it mixes a pleading of what Parker J is said to have found in the Liability Judgment (without referring to particular paragraphs of the Liability Judgement) with references to evidence and then makes an allegation regarding a payment of $35,000 which is not expressly referred to in the Liability Judgment.
4. They further complain that in any event paragraph 49 of the proposed amended cross-claim is erroneous because Parker J did not make a finding that the debt amount was $1,195,000 as at 31 May 2018, but that the finding in the Liability Judgment was that the principal amount owing as at 31 May 2018 was $1,199,900 and that the interest and fees needed to be recalculated.
5. At the hearing, Casula Projects conceded that paragraph 49 of the proposed amended cross-claim would be removed (T32.28-47).
6. Business Finance and the Receiver contend that paragraph 50 of the proposed amended cross-claim is defective because although it pleads the effect of the orders made on 14 September 2022 arising from the Liability Judgment, it is unclear what is being alleged against Business Finance and it does not otherwise assist Casula Projects in obtaining the relief sought in the proposed amended cross-claim.
7. Casula Projects submitted that all of paragraphs 47 to 52 (excluding paragraph 49, which is to be removed) of the proposed amended cross-claim were required to make the pleading comprehensible and understandable, and if they were to be removed then anyone reading the pleading would not understand what was going on.
8. While there is no problem per se with Casula Projects repeating verbatim in its own pleading material facts which are stated in the pleading against it by Business Finance and the Receiver, the real vice with the form of paragraphs 47 to 52 of the proposed amended cross-claim is that they do not identify any connection between the matters stated in them and any cause of action which is alleged. Business Finance and the Receiver are entitled to have that connection identified so that they can understand the case that they are required to meet. The failure to do so makes this form of pleading embarrassing because it does not adhere to the dictates of justice in s 58 of the CPA, including including insofar as it does not facilitate the just, quick and cheap resolution of the real issues in the proceedings as stated in s 56 of the CPA.
9. For these reasons, paragraphs 47 to 52 cannot be permitted.

Paragraphs 52A

1. Paragraphs 52A of the proposed amended cross-claim states: 52A Business Finance was in breach of section 21 of The Australian Consumer Law contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth), in trade or commerce, in connection with Goods or services, engaged in conduct that is, in all the circumstances, unconscionable. Particulars (a) Business Finance held superior bargaining power to dictate the terms of the Loan Agreement; (b) Business Finance knew or ought to have known that Nick was not able to understand the onerous terms in the Loan Agreement of (i) charging a monthly Loan Management Fee of $115.00 per month and (ii) charging a monthly Default Loan Management fee varying between $2,325 and $2250 per month; (c) Frankie McDad, director of Business Finance, exerted undue pressure and/or influence upon Casula Projects given his relationship to Nick, the sole director of Casula Projects at the time of entering into the Loan Agreement.
2. Business Finance and the Receiver complain that the pleading of statutory unconscionable conduct is defective for the same reasons as that the pleading of unconscionable conduct in subparagraphs 11A(a)-(f) of the proposed amended defence is defective, which is that it expresses a legal conclusion without setting out any of the material facts on which that conclusion is based.
3. Casula Projects conceded at the hearing that the same problems exist with paragraph 52A (T33.40-49).
4. Applying the principles in Natwest, Watiwat and O'Brien, allegations of unconscionable conduct must be founded on a set of material facts and not be expressed with opaque generality or as a set of conclusions. Accordingly, the form of paragraph 52A is embarrassing for failing to set out the case to be met, does not meet the dictates of justice in s 58 of the CPA, including by its failure to facilitate the just, quick and cheap resolution of the real issues in the proceedings as stated in s 56 of the CPA, and cannot be permitted.

Paragraph 52B

1. Paragraphs 52B of the proposed amended cross-claim states: 52B Casula Projects repeats paragraphs 5 to 31, 35, 36 and 39 to 46 and 52C above of this First Cross-Claim.
2. Business Finance and the Receiver submit that paragraph 52B is defective because no attempt is made to connect the pleaded facts with any cause of action, the repetition of these paragraphs has no apparent relevance to an issue in these proceedings, and it is unclear what is alleged against Business Finance.
3. Casula Projects submits that it is seeking to tie those facts into the claim which appears in paragraph 52D of the proposed amended cross-claim (dealt with below).
4. In my view, paragraph 52B is embarrassing and cannot be permitted. If it is proposed that the facts stated in paragraph 52B are to be tied into the pleading in paragraph 52D, then this must be explicitly stated. Failure to do so means that the pleading in its current form lacks sufficient clarity so as to enable Business Finance to know the case that it has to meet. It does not adhere to the dictates of justice in s 58 of the CPA, including by its failure to facilitate the just, quick and cheap resolution of the real issues in the proceedings as stated in s 56 of the CPA.

Paragraph 52C

1. Paragraph 52C of the proposed amended cross-claim is as follows: 52C In entering into the Loan Agreement with Casula Projects: (a) Business Finance held superior bargaining power to dictate the terms of the Loan Agreement; (b) Business Finance knew or ought to have known that Nick was not able to understand the onerous terms in the Loan Agreement of (i) charging a monthly Loan Management Fee of $115.00 per month and (ii) charging a monthly Default Loan Management fee varying between $2,325 and $2250 per month; (c) Frankie McDad, director of Business Finance, exerted undue pressure and/or influence upon Casula Projects given his relationship to Nick, the sole director of Casula Projects at the time of entering into the Loan Agreement.
2. Business Finance and the Receiver contended that paragraph 52C appears to repeat the particulars to paragraph 52A and attempts to plead elements of unconscionability but is defective because it contains a series of conclusions without alleging any material facts which might justify the conclusions. There is also no actual allegation of unconscionability alleged in the paragraph, making its relevance to any pleaded claim and what is alleged against Business Finance unclear.
3. Casula Projects did not attempt to support paragraph 52C in submissions.
4. In any event, it suffers from the same problems that I have identified above in relation to paragraph 52A and therefore cannot be permitted.

Paragraphs 52D-52J

1. Paragraphs 52D to 52J are in the following form: 52D In entering into the Loan Agreement with Casula Projects, Business Finance was required to be the holder of an Australian Credit Licence pursuant to the provisions of the National Consumer Credit Protection Act 2009 (Cth) (NCCP) but at all relevant times Business Finance was not the holder of an Australian Credit Licence. 52E Casula Projects repeats paragraphs 5 to 31, 35, 36 and 39 to 46 and 52C above of this First Cross-Claim. 52F As a result of not being the holder of an Australian Credit Licence the Court may make such orders pursuant to section 180(1) of the NCCP as the Court considers appropriate against the cross-defendant to prevent the cross-defendant from profiting from the cross-claimant or to compensate the cross-claimant, in whole or in part, for any loss or damage suffered as a result of the cross-defendant's conduct, to prevent or reduce the loss or damage suffered or likely to be suffered, by the cross-claimant as a result of the cross-defendant's conduct and to compensate the cross-claimant, in whole or in part, for any loss or damage suffered by the cross-claimant as a result of the cross-defendant's conduct. 52G The whole of the terms of the Loan Agreement claiming: (a) charging in a monthly Loan Management Fee of $115.00 per month; (b) charging a monthly Default Loan Management Fee varying between $2,325 and $2,250 per month; (c) the Establishment Fee for approving the loan in the amount of $4,010.00 (inclusive of GST); and (d) any legal costs charged including the amount of $1,077.55 (GST inclusive) or any other costs and expenses: are void and are unenforceable by the cross-defendant against the cross-claimant. 52H As a result pursuant to sections 180(2)(d) and 180A(2) of the National Consumer Credit Protection Act 2009 (Cth) the cross-claimant seeks orders that the cross-defendant be directed to refund to the cross-claimant an amount determined by the Court by removing from an amount claimed by the cross-defendants an amount for the Loan Management Fee of $115.00 per month and the monthly Default Loan Management Fee varying between $2,325 and $2,250 per month which is also to be determined: (a) Less the following payment by the cross-claimant: (i) on 14 March 2019 the amount of $350,000.00; (ii) on 14 March 2019 the amount of $600,000.00; (iii) on 18 March 2019 the amount of $249,900.00; (iv) on 18 March 2019 the amount of $684.13 by two payments of $402.28 and $281.85, (b) Less rent on the Property paid to the cross-defendant on or about 19 December 2022 in the amount of $2,430.00; 52I The cross-claimant was forced to sell the Property which was sold on about 14 April 2023 for the amount of $1,900,000.00 and after adjustments the cross-defendant received the amount of $1,797,799.73 plus the deposit of $95,000.00 which totals $1,892,799.73 (less payment of the agent's commission and legal costs on the sale) 52J The cross-claimant claims damages against the cross-defendant pursuant to sections 180(2)(e) and 180A(2) of the National Consumer Credit Protection Act 2009 (Cth) that the cross-defendant has suffered in connection with the cross-defendant's conduct as assessed by the Court.
2. Paragraph 52D of the proposed amended cross-claim is the commencement of allegations made in the pleading in relation to the operation of the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act) and attempts to set up the jurisdictional prerequisite to the matters contained in paragraphs 52E to 52J. I am satisfied that if the allegations made in paragraph 52D are to be struck out, then all of paragraphs 52E to 52J must also be struck out.
3. Business Finance and the Receiver contend that paragraph 52D contains a conclusion without alleging any material facts to justify the conclusion contained in it and also makes no attempt to plead the statutory provisions of the NCCP Act that enlivens the requirement to hold an Australian credit licence, and should not be allowed because it is embarrassing.
4. The principal submission made by Business Finance and the Receiver, however, is that all of these paragraphs fail to disclose a reasonable cause of action because the terms of the NCCP Act do not apply to the New Mortgage for the following reasons: 1. Section 29 of the NCCP Act provides that: [a] person must not engage in a credit activity if the person does not hold a license authorising the person to engage in the credit activity. 1. Section 6 of the NCCP Act sets out the conditions in which a person is to be taken as engaging in a "credit activity", which includes reference to: 1. with respect to "credit contracts": a person who is a credit provider under a credit contract, a person who carries on a business of providing credit to which the National Credit Code applies, or a person who performs the obligations, or exercises the rights, of a credit provider in relation to a credit contract; 2. with respect to "mortgages": a person who is a mortgagee under a mortgage, or a person who performs the obligations, or exercises the rights, of a mortgagee in relation to a mortgage. 1. The Dictionary contained in s 5 of the NCCP Act defines "credit contracts" as having the same meaning as in section 4 of the National Credit Code; "mortgagee" to mean mortgagee under a mortgage; and "mortgage" as a mortgage to which the National Credit Code applies. 2. Section 4 of the National Credit Code (which is located in Schedule 1 to the NCCP Act) provides that "[f]or the purposes of this Code, a credit contract is a contract under which credit is or may be provided, being the provision of credit to which this Code applies". 3. Section 5(1) of the National Credit Code provides: This Code applies to a provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of pre-contractual obligations) is proposed to be entered into: (a) the debtor is a natural person or a strata corporation; and (b) the credit is provided or intended to be provided wholly or predominantly: (i) for personal, domestic or household purposes; or (ii) to purchase, renovate or improve residential property for investment purposes; or (iii) to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for inverted investment purposes; and (c) a charge is or may be made for providing the credit; and (d) the credit provider provides the credit in the course of the business of providing credit carried on in this jurisdiction or as part of or incidentally to any other business of the credit provider carried on in this jurisdiction. 1. Each of the elements in s 5(1)(a) to (d) need to be satisfied before the National Credit Code applies because of the use of the conjunction "and" between each of them. 2. The "debtor" for the purposes of the loan agreement between Business Finance and Casula Projects is a corporation (being Casula Projects) and therefore is neither "a natural person or a strata corporation". As a result, Casula Projects cannot satisfy the precondition in s 5(1)(a) of the National Credit Code, with the result that the loan agreement is not governed by the National Credit Code, is not a "credit contract" as defined in s 5 of the NCCP Act, and did not involve Business Finance engaging in a "credit activity" as defined in s 6 of the NCCP Act. 3. Section 7(1) of the National Credit Code provides: This Code applies to a mortgage if: (a) it secures obligations under a credit contract or a related guarantee; and (b) the mortgagor is a natural person or a strata corporation. 1. As with s 5(1), each of the elements in s 7(1) need to be satisfied before the National Credit Code applies due the use of the conjunctive "and" between each of them. 2. Because the loan agreement is not a "credit contract", the New Mortgage does not secure obligations under a "credit contract", meaning that the first element in s 7(1)(a) is not satisfied. Further, the "mortgagor" for the purposes of the New Mortgage between Business Finance and Casula Projects is a corporation (being Casula Projects) and is therefore neither "a natural person or a strata corporation", which means that the second element in s 7(1)(b) is not satisfied. As a result, the New Mortgage is not governed by the National Credit Code, is not a "mortgage" as defined in s 5 of the NCCP Act, and does not involve Business Finance engaging in a "credit activity" as defined in s 6 of the NCCP Act. 3. The result is that Business Finance was not required to hold a licence under the NCCP Act to engage in the loan agreement and the New Mortgage (it being conceded that Business Finance did not hold such a licence at the relevant time). 4. It follows that paragraph 52D of the proposed amended cross-claim fails to disclose a reasonable cause of action and leave to amend should be refused.
5. Casula Projects submits that the "debtor" under the loan agreement and the Original Mortgage was Mr Al Jayoush, pointing to an unregistered form of the Original Mortgage which was executed by Mr Al Jayoush in his stated capacity as sole director and sole secretary of "Casula Projects Pty Ltd ACN 618821837 in its corporate capacity and as Trustee for GEM Family Trust" as the "Borrower/Debtor/Mortgagor" on 26 September 2017, and witnessed by Paul Kaperonis. In Schedule A to that document, the "Debtor(s)" are listed as "Casula Projects Pty Ltd ACN 618821837 in its corporate capacity and as Trustee for GEM Family Trust Nick Houman Al Jayoush" and the "Guarantor" is listed as "Nick Houman Al Jayoush".
6. In response to this argument, Business Finance and the Receiver say that there is no evidence that the form of the Original Mortgage signed by Mr Al Jayoush (in which his name appears as one of the "Debtor(s)" and as the "Guarantor" in Schedule A) was ever signed by Business Finance. They also say that neither the Original Mortgage (which was registered and signed by Business Finance and Casula Projects) nor the New Mortgage (which was registered and signed by Business Finance) contain any such mention of Mr Al Jayoush.
7. I have looked closely at the registered Original Mortgage (dealing number 718326158, registered 11 October 2017) and the registered New Mortgage (dealing number 722101942, registered 11 November 2022). As I have mentioned above, they are signed by both parties.
8. The mortgagor in the Original Mortgage is listed as "Casula Projects Pty Ltd ACN 618 821 837 in its corporate capacity as Trustee for GEM Family Trust". The mortgagor in the New Mortgage is listed as "Casula Projects Pty Ltd ACN 618 821 837 as Trustee for GEM Family Trust". The Original Mortgage is signed by Mr Al Jayoush as sole director and sole company secretary of Casula Projects on 26 September 2017. The New Mortgage is signed by Hanan Mokdad as sole director and sole company secretary of Casula Projects on 3 November 2022.
9. The Original Mortgage is signed by Samantha Parsons for Business Finance on 29 September 2017. The New Mortgage is signed by the Receiver for Business Finance on 8 November 2022.
10. There is absolutely no mention of Mr Al Jayoush being a debtor or guarantor in either the Original Mortgage or the New Mortgage. I cannot put any reliance on the unregistered form of the Original Document which refers to Mr Al Jayoush as the debtor and guarantor. Nor is there any evidentiary value in the letter dated 17 October 2017 from Summer Lawyers to Business Finance which refers to Mr Al Jayoush as the "Guarantor" and extends the "Portfolio Obligor" to include him in that capacity by reference to some unidentified document. The director's certificate dated 9 October 2017 does not advance the submission put by Casula Projects either.
11. In these circumstances, I agree with the analysis provided by Business Finance and the Receiver that the NCCP Act has no application to the loan agreement, the Original Mortgage, or the New Mortgage. As a result, I consider that paragraphs 52D to 52J of the proposed amended cross-claim do not disclose a reasonable cause of action and should not be permitted. Allowing those paragraphs to remain would not adhere to the dictates of justice in s 58 of the CPA, including by not facilitating the just, quick and cheap resolution of the real issues in the proceedings as stated in s 56 of the CPA.
12. Even if I had not reached that view, I consider that there are separate bases on which paragraphs 52D to 52J of the proposed amended cross-claim should not be permitted as was submitted by Business Finance and the Receiver. These are: 1. Paragraph 52D: This paragraph contains a conclusion about the requirement of Business Finance to hold an Australian Credit Licence under the NCCP Act without reference to the material facts for that conclusion and for that reason, it is embarrassing. 2. Paragraph 52E: This paragraph repeats a whole series of paragraphs from earlier in the proposed amended cross-claim, none of which I have permitted to remain, and is therefore embarrassing. 3. Paragraph 52F: This paragraph builds on the unsupported conclusion stated in paragraph 52D without pleading any material facts and for that reason it is embarrassing. 4. Paragraph 52G: This paragraph contains a conclusion regarding certain terms of the loan agreement being void and unenforceable without reference to any supporting material facts and for that reason it is embarrassing. 5. Paragraph 52H: This paragraph rests on the jurisdictional conclusion stated in paragraph 52D which is unsupported by material facts and for that reason it is embarrassing. 6. Paragraph 52I: This paragraph contains a conclusion that Casula Projects was forced to sell the Property, without pleading any material facts which might support that conclusion. For that reason, it is embarrassing. 7. Paragraph 52J: This paragraph also rests on the jurisdictional conclusion stated in paragraph 52D which is unsupported by material facts and, therefore, this paragraph is also embarrassing.

Paragraph 53

1. Paragraph 53 of the proposed amended cross-claim states: 53 In addition to the money owed to Business Finance which was repaid by Casula Projects as set out in paragraph 40 above, Business Finance has also received additional payments amounting to $1,200,584.13 as referred to in paragraph 46 above.
2. Business Finance and the Receiver submit that there is no attempt in paragraph 53 to explain how those allegations have any relevance to the issues in dispute in these proceedings. Moreover, it is unclear what is being alleged against Business Finance. For those reasons, this paragraph is embarrassing.
3. During the hearing, I repeatedly pressed Casula Projects to identify what relevance the matters pleaded in paragraph 53 had to any claim made in the proposed amended cross-claim, but it was unable to do so (T47.39-48.41).
4. In my view, paragraph 53 is untethered to any cause of action contained in the proposed amended cross-claim and is therefore embarrassing and not in accordance with the dictates of justice in s 58 of the CPA, including by its failure to facilitate the just, quick and cheap determination of the real issues in the proceedings as expressed in s 56 of the CPA. Accordingly, it should not be permitted.

Paragraph 54

1. Paragraph 54 of the proposed amended cross-claim is as follows (omitting the struck-through text proposed to be deleted): 54 Alternatively, when the Property was sold on about 14 April 2023 Casula Projects owed the amount of $641,376.22 to Business Finance less any rental payments on the Property received by Business Finance or on its behalf since 19 December 2022, or as calculated as part of the settlement of the sale of the Property.
2. Business Finance and the Receiver submit that paragraph 54 is defective because there is an issue estoppel which prohibits Casula Projects from relitigating the amount of the debt as at 31 May 2018; there are no material facts which could be said to justify the debt figure alleged to be owed; and there is a failure to plead any material facts as to how and why the debt figure is to be further reduced by unspecified "rental payments on the Property received by Business Finance" and by some process described as "calculated as part of the settlement of the sale of the Property". They say that for these reasons, paragraph 54 is embarrassing.
3. During the hearing, I also repeatedly pressed Casula Projects to identify what relevance the matters pleaded in paragraph 54 had to any claim made in the proposed amended cross-claim, but it was unable to do so (T47.39-48.41).
4. I am satisfied that paragraph 54 should not be permitted because it is embarrassing for the reasons given by Business Finance and the Receiver, although I express no view on the submission that there is an issue estoppel because it is not clear to me when the unspecified payments were made.

Paragraphs 7A-7D of the relief

1. Paragraphs 7A to 7D of the relief sought in the proposed amended cross-claim are as follows (additions underlined): 7A Declaration the first plaintiff, in breach of section 21 of The Australian Consumer Law contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth), in trade or commerce, in connection with goods or services, engaged in conduct that is, in all the circumstances unconscionable so to make void the following provisions of the Loan Agreement: (a) Charging a monthly Loan Management Fee of $115.00 per month; and (b) Charging a monthly Default Loan Management Fee varying between $2,325 and $2,250 per month. 7B Order pursuant to section 180 of the National Consumer Credit Protection Act 2009 (Cth) that the whole of the terms of the Loan Agreement claiming: (a) charging a monthly Loan Management Fee of $115.00 per month; (b) harging a monthly Default Loan Management Fee varying between $2,325 and $2,250 per month; (c) Establishment Fee for approving the loan in the amount of $4,010.00 (inclusive of GST); and (d) any legal costs charged including the amount of $1,077.55 (GST inclusive) or any other costs and expenses: are void and unenforceable by the cross-defendant against the cross-claimant. 7C Order pursuant to section 180(2)(d) and 180A(2) of the National Consumer Credit Protection Act 2009 (Cth) that the cross-defendant is not entitled to claim from the defendant and is restrained from: (a) charging the Defendant a monthly Loan Management Fee of $115.00 per month; (b) charging the Defendant a monthly Default Loan Management Fee varying between $2,325 and $2,250 per month; (c) Less the proceeds from the sale of the Property in the amount of $1,892,799.73. 7D Order pursuant to sections 180(2)(e) and 180A(2) of the National Consumer Credit Protection Act 2009 (Cth) that the cross-defendant pay damages to the cross-claimant the cross-claimant has suffered in connection with the cross-defendant's conduct as assessed by the court.
2. As all of the causes of action on which the relief claimed in paragraphs 7A to 7D are not permitted, those paragraphs must also fall from the proposed amended cross-claim. Accordingly, paragraphs 7A to 7D are also not permitted.

CONCLUSIONS

1. In summary, I have concluded that: 1. Casula Projects has failed in its application to summarily dismiss or strike out paragraphs 21 to 29 of the statement of claim; 2. Casula Projects has failed in its application for leave to amend paragraphs 11, 11A and 11B-16 of the defence; 3. Casula Projects has failed in its application to amend all parts of the cross-claim that it wished to add; and 4. Business Finance and the Receiver have succeeded in their application to strike out paragraphs 3 to 31, 35, 36, 39 to 52, 53 and 54 of the cross-claim, leaving only paragraphs 1 and 2 remaining (paragraphs 32, 33, 34, 37, 38 already proposed to be removed), in which case the whole of the cross-claim should be struck out.

ORDERS

1. Based on my conclusions, I make the following orders: 1. The amended notice of motion filed 31 October 2023 by the defendant/cross-claimant is dismissed. 2. The statement of cross-claim filed 1 June 2023 is struck out. 3. The defendant/cross-claimant is to pay the costs of the plaintiffs/cross-defendants of the notice of motion filed 25 September 2023 and the amended notice of motion filed 31 October 2023.

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: 15 March 2024