Caro by her Tutor NSW Trustee & Guardian v Caro

Supreme Court of NSW|2015-11-04|Before: Campbell J, Hodgson JA

judgment

This is an application by the defendant to set aside default judgment for possession obtained by the plaintiff on 20th August 2015. A writ of possession was subsequently issued on 24th August 2015. Notice to vacate issued out of the office of the Sheriff at Tamworth on 28th August 2015, fixing Wednesday 21st October 2015 for eviction. I infer for operational reasons, the appointment was twice rescheduled. First, to 2:30 pm on 27th October 2015, and secondly, to 9 am on 28th October 2015.
The defendant's application to set aside the default judgment was made orally to me as common law duty judge on 27th October 2015. He is currently self-represented and appeared by telephone. He was then under the misapprehension that the eviction was to take place at 2:30 pm that day. It was only when Ms Piercy, solicitor, appeared for the plaintiff that the second postponement of the eviction came to my attention. After hearing some oral evidence from the defendant, I stayed the writ of possession until further order and fixed the matter for further hearing on 29th October 2015. On that occasion, the defendant appeared in person and the plaintiff was represented by Mr Mitchell of Counsel. After further evidence, the matter was further adjourned until 9 am 4th November 2015 to allow the plaintiff the opportunity to obtain some further documentary evidence her legal representatives had sought at short notice from solicitors who had previously acted for her. I thought the second adjournment appropriate given the expedition with which the defendant's oral application had been brought on with little notice to the plaintiff. The defendant also tendered further evidence on that day.

Applicable principle

The principles which inform the exercise of the Court's discretionary power to set aside a default judgment are not in dispute. In general terms what is required is an adequate explanation for the failure of the party to appear and the demonstration of "an arguable case on the merits". In Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331 at [48] - [52], Hodgson JA defined an arguable case as one "that might reasonably bring about a different result". His Honour said: … an applicant seeking to set aside a judgment obtained after an undefended hearing does not have to show that a different result is likely should the judgment be set aside and a new trial ordered. However, the circumstances may be such, … as to require "a reasonably clear case of merits to be shown"; that is, that it appear reasonably clear that there is a defence capable of producing a different result. If that defence depends on facts, then there should be some evidence of those facts; and the circumstances may be relevant to the quality of the evidence that is required to show a defence on the merits in particular cases. Among such circumstances could be the degree of the [defendant's] default, and hardship to the [plaintiff].
This principle is particularly apposite in the circumstances of the present case because the plaintiff is not a commercial first mortgagee exercising its rights anterior to exercising a power of sale for default on a registered mortgage. Rather the plaintiff is the defendant's mother, who is the sole registered proprietor and who is nursing-home-bound by reason of infirmity and incapacity due, inter alia, to dementia. The proceedings are brought by the New South Wales Trustee and Guardian (NSWTAG), her lawfully appointed guardian and the manager of her estate.
The guardianship order and financial management order appointing the NSWTAG were made by the New South Wales Civil and Administrative Tribunal on 23rd January 2014. Prior to those orders being made, the defendant may have been appointed his mother's enduring guardian and her attorney under a general power of attorney, on or about 3rd of July 2013. Those matters, however, are no longer germane. For what it is worth, the evidence also establishes that he is the executor of her will and the sole beneficiary under it.
I should also say that the evidence before me demonstrates that the defendant has made an application in the NSW Civil and Administrative Tribunal for revocation of the orders mentioned in the immediately preceding paragraph (see Exhibit D). That however must be a matter of no moment. The NSWTAG clearly has legal authority to bring and maintain the proceedings.

The first ground

In his evidence in chief (Transcript 27 October 2015) the defendant said that he was unaware that judgment had been obtained until he received a letter on 20th October (3.40T). He gave the following evidence (4.15 - .25T): HIS HONOUR Q. Did you receive the statement of claim? A. No, I don't think so. What's the statement of claim? Q. The formal document by which the proceedings were commenced in the Supreme Court of New South Wales. A. No, no, I did not. I only got a letter from Carroll & O'Dea saying that it had happened and I got that on the 21st ‑ on the 20th rather. Q. Of what month? A. Of October. He also said (5.50T): If I'd known there was a Court case going on I would have contested it.
In cross-examination by Ms Piercy, solicitor, when asked whether the process server had attended his home and handed him a copy of the statement of claim he replied, "I'm not sure what that means" (6.35 - .45T). When pressed about the details of the service, which was said to have occurred at 2:39pm on 10th June 2015, he replied (7.20T): To be honest, I ‑ it does not ring a bell. I did have someone, yeah, I don't know whether it has any bearing here but I've had two strokes, my memory is not very good but I do not recall and I've kept all the paperwork, the statement of claim. He denied having received the notice of eviction dated 28th August 2015 from the Office of the Sheriff (8.15T). The defendant did not accept he was wrong when he denied personal service on 10 June 2015 (12.10T).
Following the cross examination I asked the following questions (13.10 - .20T): Q. Before Ms Piercy gives me all of her evidence, and I can tell you this, Mr Caro, that the Court doesn't just make these judgments in the absence of parties unless it's satisfied that there's clear evidence that the statement of claim has been served, so when the Court entered judgment, it acted on the basis of two affidavits in fact from Mr Hennessy when he said he served the statement of claim in June, and he also served something called a notice to occupier in August, so that's why the Court made the judgment in accordance with the usual practice. A. There was not in June but there was paperwork arrived once before but I took it straight to the solicitor, it wasn't in June. Q. What about in August? A. It could have been, yeah, it would have been later than June so I'm not sure of the exact date and what the paperwork was. I just ‑ as soon as it was ‑ I noticed it was to Guy Edwin Caro returned Frances Joan Caro, I went straight to the solicitor with it.
In her affidavit of 28th October 2015 Ms Piercy deposes to having received a telephone call from a Mr David White, solicitor with AW Simpson & Co, on 27th July 2015. Mr White informed her that he had been "instructed to act for Mr Caro (the defendant)". Ms Piercy informed Mr White that her instructions were to apply for default judgment and he asked for a further week to take advice from counsel. Ms Piercy's file note of her telephone conversation with Mr White records that the statement of claim had been personally served. As attachments to an email dated 29th July 2015, Ms Piercy provided a copy of the statement of claim, the consent to act as tutor, and a copy of the affidavit of service sworn on 11th June 2015.
There can be no doubt Mr White was well aware that the statement of claim had been served because on 6th August 2015 he wrote the following: our client has made substantial financial contribution to the purchase and improvement of [the property] and that in the least he is entitled to some remuneration out of the sale proceeds. He also requested that the plaintiff "refrain from entering default judgment at this time".
In his affidavit of service sworn on 11th June 2015 Nathan Robert Hennessey swears that he personally served the defendant at the property on 10th June 2015 at 2:39 pm. At the time of service the defendant identified himself by name.
In a second affidavit of service sworn on 8th August 2015 Mr Hennessey deposes to having served the required notice to occupier at the property on 7th August 2015 at 12:05 pm. Again the person served identified himself as the defendant. The defendant also said there were no other persons in occupation of the property as at 11th May 2015, the date on which the proceedings were commenced. There is no difficulty with this later service of the notice to occupier as no other person was in occupation and, in any event, the 10 days required by the rules had elapsed before default judgment was applied for on 19th August 2015.
I am not satisfied that the defendant was not personally served on 10th June 2015. I accept the affidavit evidence of Mr Hennessey. In arriving at this conclusion I have had regard to the consideration that the defendant admits to having a poor memory because of suffering "two strokes". Nevertheless, he has a recollection of someone coming to his home to deliver papers although he believes that occurred later than June. It seems likely that he has conflated Mr Hennessey's two attendances. Moreover, something prompted his attendance upon Mr White who knew to contact Carroll & O'Dea. Mr White did not protest that his client had not been served, rather he requested the staying of the plaintiff's hand.
All of these circumstances persuade me that the defendant is wrong when he denies personal service. I reject the first ground of the defendant's application.

Explanation for the failure to appear
Even though I have rejected the defendant's evidence that he was not personally served with the statement of claim, it does not follow that he has no explanation for failing to file a defence, or that I should reject that proffered. At face value anyway his evidence supports an inference that he may not himself have appreciated the significance of the statement of claim as the means by which legal proceedings are instituted. Statements of claim in the possession list are served with the possessions list cover sheet designed to draw the recipient's attention in his or her first language of the significance of the document. The first notice is in English. However, at another level the coversheet provides an additional layer that the recipient has to penetrate to get to the pleading.
More significantly, the defendant did not simply ignore the problem. He put the matter in the hands of his solicitors sometime in July and the solicitor contacted the plaintiff's solicitors to seek more time. The solicitor also took the advice of counsel who provided, with a degree of promptitude, preliminary advice by email, a copy of which is attached to the defendant's affidavit of 28th October 2015.
The solicitor also, albeit after judgment had been signed, put detailed submissions to the plaintiff's solicitors seeking to explain why the defendant has an equitable right in the property which may have entitled him to possession. It is apparent that the defendant, through his solicitor, was hoping to arrive at an amicable resolution of the litigation before the day of eviction arrived.
For its part, the NSWTAG instructed its solicitors to continue with the legal process. This was understandable. That it did not respond to the defendant's submissions however, I infer, engendered ongoing hope on the defendant's part that a solution would turn up.
Given that NSWTAG is acting on behalf of his mother, and that the property had been the home that he shared with his mother since it was purchased in November 2005 the defendant's hope against hope is explicable.
In the circumstances I am prepared to accept that his optimism that a solution would be found is the true explanation for the defendant's delay, and in the particular circumstances of the case I do not find that optimism to have been unreasonable, even if circumstances suggest it may have been misplaced.

Arguable case
It is necessary then to consider whether the defendant has shown a reasonably clear case on the merits. What this requires is a reasonably clear demonstration of a defence "capable of producing a different result". In this regard, it must be borne mind that the only remedy sought and obtained by the plaintiff is judgment for possession. It follows that the case that the defendant needs to demonstrate in this way must consist of either a defect in the plaintiff's title, or some right, title or interest of his own entitling him to possession. He does not impugn the plaintiff's title, but seeks to demonstrate an independent entitlement to possession.
In expressing myself in this way, I have not overlooked the interlocutory nature of the application. It would be quite impermissible to approach the matter as though it were possible to make a final determination of the plaintiff's claim at this preliminary stage given that neither party has had the opportunity to prepare in the usual way for, and adduce evidence at, trial. What is required, however, is the demonstration by the defendant by reference to material currently before the Court that if given the opportunity to go to trial, he will have available to him evidence which, if then accepted as reliable, would support findings of fact necessary to make good his case.
In applying that test, I think this case throws up circumstances "relevant to the quality of the evidence that is required to show a defence on the merits" (Magnate Projects [52]). Those circumstances are first and foremost the question of hardship to the plaintiff. Although the prudence of the NSWTAG's management of the plaintiff's finances is questioned by the defendant, I accept the unchallenged evidence of John Franklin, a legal officer employed by the NSWTAG who has informed himself of the circumstances from the contents of the file maintained by the NSWTAG, which he believes to be true.
Mr Franklin says that Mrs Caro currently suffers from age related disabilities, and she resides in an aged care facility in a secure dementia ward. Although the defendant occupies the property, he has not paid rates and other outgoings in respect of it. $3,800 is currently outstanding on council rates and outstanding water charges total $642.49. On 19th August 2014, NSWTAG decided it was necessary to sell the property and her motor vehicle based on advice from its financial planning and asset units. This was considered necessary for various reasons including the need for liquid funds to assist with the plaintiff's living arrangements and ongoing care. Moreover, the property is subject to a reverse mortgage accumulating at the rate of 6.1 per cent per annum on daily balances.
The current balance of the mortgage is $158,254.76. The reverse mortgage facility was entered into on 23rd July 2008. Both the plaintiff and the defendant signed the application (Exhibit 1). Specifically, the defendant acknowledged "in consideration of" the lender providing the loan to his mother that the loan is repayable in various circumstances, including, "if [his mother] ceases to reside in the property". In that event the acknowledgment provides: … 5 [the lender] has the right to sell the security property in the event the loan is not repaid in those circumstances; 6 [the defendant] will not have any right to remain in the security property if [the lender] exercises its rights as mortgagee or sells the security property and [the defendant's] right to reside in the … property ranks behind [the lenders] rights under the mortgage.
It appears clear that the lender's right to repayment has accrued, and the plaintiff is in default of that obligation.
NSWTAG's decision to sell was communicated to the defendant by letter dated 19th August 2014. Different solicitors then acting for the defendant requested an "out of time" review of the decision indicating that the defendant hoped to come into funds that would enable him to, at least, pay out the mortgagee. On 4th November 2014 NSWTAG informed the defendant that it was prepared to offer him the opportunity to purchase, inter alia, the house at market value. The opportunity was to be taken up by the end of 2014. I infer that the defendant was unable to exercise this first option to buy the property then, or since.
Although in sole occupation of the property, the defendant has not paid any rent or other occupation fee, and the plaintiff's sole source of income is a Department of Veterans Affairs war pension. As expressed in annexure "G" to Mr Franklin's affidavit, NSWTAG's view is that the plaintiff "should have the use of her major asset to provide for her in the later stages of her life. Currently she is not receiving any benefit from the property, which [rather] remains a drain on her limited resources."
To my mind these circumstances show that the quality of the evidence required to show an available defence in this case must be cogent. The defendant's case is explained in his then solicitor's letter to NSWTAG dated 18th September 2015, annexure G to Ms Piercy's affidavit of 28th October 2015, and also an annexure to the defendant's affidavit of the same date. Its essential features are that after the death of the defendant's father in 1975, the plaintiff met and married another man who died in 1992 leaving her a home on 48 acres at Woolomin and no other source of income. The defendant sold his own home in Tamworth netting $180,000 and moved to Woolomin to assist his mother. That move was either at the request of his mother, or a family friend. There was nothing to suggest any promise or representation emanating from the plaintiff. The defendant seems to say his funds were depleted improving and running Woolomin. It is unclear, however, to what extent the defendant was required to "dip into his savings". It is asserted he had $50,000 left when Woolomin was sold in 2005, some 12 or so years after he moved there. The case seems to be that before Woolomin was sold, the plaintiff had taken out a small loan, which before me, the defendant said he paid out with his own money to permit settlement of the sale. His solicitor contended that he had paid $30,000 of the purchase price on the property either as a deposit or on some other basis. Before me the defendant said initially he paid $37,000 of the purchase price of $232,500 but then said he thought it might be $27,000. Obviously, the defendant's uncertainty does not imbue his account with cogency and he was unable to produce any financial records supporting his contentions.
The available contemporaneous records do not support the defendant's version of events. The central part of the defendant's version is that he directly contributed to the acquisition of the property by paying out the debt on the Woolomin property and contributing the deposit for the property. He says he also made improvements on the current property and provided a schedule setting out the things he had purchased or work he had paid for.
The contemporaneous documents establish that Woolomin was sold for $371,000. The purchasers paid a 10 per cent deposit of $37,100 and consented to the release of part of the deposit to fund the deposit on the property. The purchase price of the property, as I have said, was $232,500. A letter addressed to the plaintiff, care of her then solicitors, from J.V. Goodwinn & Co. Stock and Station Agents dated 7th November 2005 (forming part of Exhibit C) shows that $23,500 was released from the Woolomin deposit and paid to Armidale First National as the deposit on the property. Moreover, a letter from the solicitors again to the plaintiff, and again dated 7th November 2005 (also forming part of Exhibit C) demonstrates that the small debt due on the Woolomin property was paid out from the proceeds of sale, rather contradicting the defendant's account. After payment of the balance of purchase price on settlement of the property and a number of other debts including outstanding land tax, a surplus of $85,176.50 from the Woolomin sale was paid to the plaintiff.
These contemporaneous documents strongly suggest that the purchase of the property was fully funded from the Woolomin sale leaving a surplus which was paid to the plaintiff, not the defendant. All of the correspondence relating to the sale and purchase is to the plaintiff personally. It does not involve the defendant. The only contemporaneous evidence of any involvement in any matter concerned with the sale or purchase, is his attendance with his mother at a conference instructing the solicitors on 29th September 2005 (see Ms Piercy's affidavit 30th October 2015).
Mr Mitchell of Counsel reminded me that relevant principles are discussed in Baumgartner v Baumgartner [1987] HCA 59; 164 CLR 137 at 148 - 9; and Calverley and Green [1984] HCA 81; 155 CLR 242 at 246. I am not satisfied that the defendant has discharged his onus of showing a real case on the merits engaging the quite different principles discussed in either case. That is to say, I am not satisfied that he has pointed to material that suggests he would have evidence available at a trial which, if accepted, would be capable of demonstrating an equitable interest, say, giving rise to a constructive, or alternatively resulting, trust of the legal estate for his benefit as a tenant in common with his mother in a share proportionate to his contribution to the purchase price of the property, or other financial or material contribution, supporting a right of possession competing with his mother's undoubted right.
I say nothing about any possible entitlement to any other equitable claim on the possible proceeds of sale which may arise out of actual contributions made in respect of the Woolomin property which was sold to finance the purchase of the property, or in respect of the property itself.
Before I pronounce orders it necessary for me to mention one final point. This morning, the defendant contacted my chambers and informed my Associate that he had found some additional information that could influence my decision. Case law makes clear that once a judgment is reserved, leave is required by any party wishing to file further submissions or, in this case, provide further evidence and this Court will not grant leave without an application; see Re Application by the Chief Commissioner of Police (Vic) [2005] HCA 18; 214 ALR 422; Bale v Mills [2001] NSWCCA 226; Nguyen v R [2008] NSWCCA 322; Kendirjian v Ayoub [2008] NSWCA 194. The defendant had made no such application and my Associate confirmed that I will be handing down judgment at 2 pm and that no further information could be passed on. The substance of this call was communicated via email to the plaintiff's solicitors and the defendant. I record that the defendant's application was heard over part of three days. On each of them he was given more than one opportunity to put evidence before the Court, of which he availed himself.
For these reasons I make the following orders: 1. Refuse and dismiss the defendant's application to set aside the default judgment for possession in favour of the plaintiff; 2. The defendant to pay the plaintiff's costs of and incidental to the application on the ordinary basis forthwith after they have been agreed or assessed; 3. Dissolve the stay of the writ of possession pronounced on 27th October 2015.

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: 06 November 2015

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