BETWEEN : CHOICE CONSTRUCTIONS PTY LTD (ACN 008 800 593)

Practice and procedure - Application for summary judgment - Defendants acting in person - Adequacy of affidavit evidence - Whether triable issue - Turns on own facts

Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VicLawRp 47; [1947] VLR 332

Commercial Bank of Australia v Amardio [1983] HCA 14; (1983) 151 CLR 447

Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18

Eng Mee Yong v Letchumanan [1980] AC 331

Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87

Scaffidi Nominees Pty Ltd v Scaffidi & Anor, unreported; FCt SCt of WA; Library No 960588; 11 October 1996

Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598

White v Johnston (1886) 8 ALT 53

Barclays Bank Plc v Coleman [2000] 1 All ER 385

Lloyds Bank v Bundy [1974] EWCA Civ 8; (1975) QB 326

Micarone v Perpetual Trustees of Australia Limited [1999] SASC 265; (1999) 75 SASR 1

1 MASTER NEWNES: On 17 August 2005 I dismissed the plaintiff's application for summary judgment for possession of land under a mortgage and for payment by the defendants of the amount owing under the mortgage. At the hearing of the application, the second-named defendant, Mrs Janceski, who appeared on behalf of herself and her husband, the first-named defendant, was assisted by an interpreter. It seemed to me that in those circumstances the most convenient course was to provide written reasons for my decision. These are those reasons.

2 The facts relevant to this application are dealt with only relatively briefly in the affidavits filed by the parties. The relative paucity of material dealing with the background and circumstances of the transactions in question is likely to be due, in part at least, to the fact that the defendants are unrepresented and have, on their case, limited formal education in their native language, Croatian, and a very limited grasp of the English language.

3 On 24 August 2002, the defendants' son, Michael Knight, agreed to purchase from the plaintiff a unit in Janet Street, West Perth, for the sum of $375,000. The contract of sale was subject to Mr Knight obtaining a loan of $220,000 from a financier, described in the contract as Reliance Finance & Mortgage ("Reliance Finance"). The plaintiff agreed to provide vendor finance of a further $175,000, or $195,000 if Mr Knight took up the plaintiff's offer of a fit-out allowance of $20,000.

4 The contract of sale provided that a deposit of $10,000 was to be paid within 14 days of the plaintiff's acceptance of Mr Knight's offer. It does not appear from the evidence whether that sum was paid or, if it was, whether it was paid from Mr Knight's own resources. In any event, it is clear that a very large proportion, almost 98 per cent, of the purchase price was to be obtained by Mr Knight from funds advanced to him by Reliance Finance and the plaintiff and that the total sum to be borrowed by Mr Knight - and presumably to be secured against the property - exceeded the purchase price of the property.

5 There was attached to the contract, and expressed to form part of it, an annexure which provided that security for the vendor finance was to be provided by way of mortgages over the Janet Street property, the defendants' property in Dianella and a property in Mount Lawley. It is not apparent from the evidence whether mortgages were taken over the Janet Street property and the Mount Lawley property. The annexure also provided that Mr Knight must repay the vendor finance to the plaintiff not later than 24 months after settlement of the contract.

6 In September 2002 the plaintiff registered a mortgage (the "2002 mortgage") over the defendants' property to secure the vendor finance provided by the plaintiff to Mr Knight. What happened thereafter is not entirely clear from the affidavit material before me. According to the defendants, in May 2004 Reliance Finance advised them that the mortgage over the defendants' property had expired and Reliance Finance required that it be paid out. The defendants say it was only then they realised that the plaintiff had registered a mortgage over their property. They say they had arranged alternative finance to pay out the Reliance Finance mortgage but, it seems, they were not in a position to pay out the plaintiff's mortgage. The defendants say that the plaintiff agreed to discharge its mortgage over their property to allow the Reliance Finance mortgage to be refinanced, provided the defendants agreed to execute a new mortgage over their property and made a partial payment of $50,000 in reduction of the vendor finance.

7 It seems that subsequently the sum of $50,000 was paid to the plaintiff, the 2002 mortgage over the defendants' property was discharged and, on 23 July 2004, the defendants granted to the plaintiff the mortgage (the "2004 mortgage") which is the subject of this action. At that time the principal sum was $152,822.51 and interest was payable on that sum at the rate of 16 per cent per annum, or 13 per cent per annum if paid punctually.

8 In this action, the plaintiff says that the defendants have defaulted in payments under the 2004 mortgage and have failed to rectify the default following service of a default notice. At the date of the hearing, an amount of $208,048.69 was due and owing under the 2004 mortgage, and interest continues to accrue in an amount of $86.39 per day. The plaintiff says the defendants have no defence to the claim.

9 In answer to the plaintiff's claim, the defendants say that the mortgage was obtained in circumstances which constitute unconscionable conduct on the part of the plaintiff and that the mortgage is therefore unenforceable.

10 The principles applicable to an application of this sort are well known. The overall legal burden of persuading the Court that the claim is a good one and that the plaintiff is entitled to judgment rests throughout on the plaintiff. But once the plaintiff discharges the initial onus of satisfying the Court that in respect of its claim it would, upon the evidence adduced by it, be entitled to judgment, there is an evidentiary onus on the defendant to satisfy the Court that there is a triable issue or dispute between the parties or that for some other reason there ought to be a trial: Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18 at 23; Scaffidi Nominees Pty Ltd v Scaffidi & Anor, unreported; FCt SCt of WA; Library No 960588; 11 October 1996.

11 It is clear that the power to order summary judgment must be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87. The need for exceptional caution is nowhere more important than where the ultimate outcome turns upon the resolution of some disputed issue or issues of fact: Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598. It was never intended that when the facts are in dispute, actions should be disposed of summarily: White v Johnston (1886) 8 ALT 53; although the Court is not bound to accept uncritically as raising a dispute of fact calling for further investigation every statement in an affidavit, however equivocal, lacking in precision or inconsistent with contemporary documents or other statements by the deponent: Eng Mee Yong v Letchumanan [1980] AC 331 at 341.

12 If after argument there remains real uncertainty as to the plaintiff's right to judgment without further investigation of the facts, summary judgment must be refused: Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VicLawRp 47; [1947] VLR 332 at 335. Even if the facts which are established are inconclusive, if it is not possible to say without doubt on the whole of the material that there is no question to be tried, there should be leave to defend: Fancourt v Mercantile Credits Ltd (supra) at 99.

13 The defendants contend that the mortgage is unenforceable and should be set aside. They rely on the doctrine of unconscionability enunciated by Mason, Wilson and Deane JJ in Commercial Bank of Australia v Amardio [1983] HCA 14; (1983) 151 CLR 447. In that case Mason J said that unconscionability occurs:

"... whenever one party by reason of some condition or circumstance is placed at a special disadvantage vis-à-vis another, and unfair or unconscientious advantage is then taken of the opportunity ..."

14 Mason J (at 489) described the special disadvantage as being "one which seriously affects the ability of the innocent party to make a judgment as to his own best interest, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party".

15 The defendants say they did not request the plaintiff to make finance available to their son to assist in his purchase of the Janet Street property. They say that Mr Nardizzi, a director of the plaintiff, "brought us the paperwork during an inspection of the property being purchased and we signed it all at the same time at the property being purchased by our son in West Perth". The defendants say that when they signed the documents, they were not aware that they were signing a mortgage. They say that they did not seek legal advice at the time, nor was it suggested by the plaintiff that they do so.

16 It seems, however, that, immediately prior to the execution of the replacement mortgage in July 2004, the defendants did take legal advice in respect of the 2004 mortgage. In an affidavit filed in this application, Mr Nardizzi says that the plaintiff required the defendants to obtain legal advice, with the aid of a translator, before they entered into the 2004 mortgage. The plaintiff has produced certificates of Mr Ozich, a solicitor, who says that he reads and speaks the Croatian language and that he read and explained the contents of the mortgage to the defendants before it was executed. Mr Ozich says that the defendants stated to him that they understood the contents of the mortgage.

17 The defendants do not say what legal advice was provided to them by Mr Ozich, but they say they had no choice but to enter into the mortgage in 2004 as they were otherwise faced with the forced sale of their property by Reliance Finance under its mortgage, due to the delays in having the plaintiff's mortgage discharged.

18 The events in the middle of 2004 which led to the 2004 mortgage to the plaintiff being executed are described in the defendants' affidavits in what it must be said, with due respect to the defendants, is an incomplete and rather confusing way. That may well be due, at least in part, to the fact that the defendants are unrepresented. It may also be that the defendants have an imperfect grasp of those events and precisely how they came about. The affidavits filed on behalf of the plaintiff do not add anything to the circumstances in which the 2004 mortgage came to be executed, apart from pointing out that the defendants took advice from Mr Ozich.

19 The result is that it is not clear, for example, why plaintiff required the defendants to take legal advice, with the assistance of an interpreter, before entering into the 2004 mortgage, but not before entering into the 2002 mortgage. Nor is it clear whether, by July 2004, the defendants had no practical alternative but to enter into the 2004 mortgage or whether there were practical alternatives open to them.

20 The plaintiff did not accept that the defendants did not have at least a sufficient working knowledge of English to understand the nature of the document they executed in 2002. Counsel for the plaintiff submitted that no inference should be drawn as to Mrs Janceski's command of English from the fact that she had requested the services of an interpreter for the hearing. I accept that submission.

21 In Amardio, the circumstances that showed special disadvantage were summarised by Deane J (at 477) as follows:

"The result of the combination of their age, their limited grasp of written English, the circumstances in which the bank presented the document to them for their signature and, most importantly, their lack of knowledge and understanding of the contents of the document was that ... they lacked assistance and advice where assistance and advice were plainly necessary if there were to be any reasonable degree of equality between themselves and the bank."

22 Both Mason and Deane JJ held that the special disadvantage of Mr and Mrs Amardio was plainly evident to the bank manager who, though not guilty of moral wrongdoing, took unconscientious advantage of their plight. His failure to enquire whether they understood the document and his too ready acceptance of his belief that it had been explained to them by their son, the bank's customer, amounted to unconscionable conduct.

23 In this case, the defendants say they have had little formal education and have a poor command of English. On their evidence, the 2002 mortgage was presented to them by the plaintiff, and its execution procured, without the defendants being afforded the opportunity to obtain legal advice. The defendants say they did not request the plaintiff to make funds available to their son and it is not suggested that the defendants gained any material benefit from providing the mortgage to the plaintiff. There is no evidence as to whether any explanation was given to them as to what they were signing. The defendants say they did not realise that what they were signing was a mortgage, although they do not say what they understood it was.

24 I do not consider that at this stage it is possible to form any clear view as to the defendants' command of the English language. The defendants say it is poor. Mr Nardizzi, on behalf of the plaintiff, says in his affidavit that in 2004 when the plaintiff required the defendants to obtain legal advice they also required the defendants to have the assistance of a translator "in the event that they had difficulty fully understanding [their obligations under the mortgage] in English". That might suggest the plaintiff was aware that the defendants had, or appeared to have, a limited command of the English language. But whether or not the defendants had a sufficient knowledge of English to understand what they were signing, and what the plaintiff knew of the defendants' capacity in that respect, are matters that can only properly be explored at trial.

25 The transaction itself does not appear to have been a commonplace one. The deposit was small and the proportion of borrowed funds very high. Mr Knight had, at best, little or no equity in the property at the time of its transfer to him. Indeed, it seems that the combined, apparently secured, borrowings from Reliance Finance and the first plaintiff significantly exceeded the purchase price of the property. Accordingly, it might be considered, on the face of it, a transaction which appeared to involve more than the usual element of risk for a person providing a third party security.

26 It seems to me that, once again, those are matters to be explored at trial. For instance, the value of the other security taken by the plaintiff to secure its debt may bear upon the prudence of the mortgage given by the defendants.

27 As counsel for the plaintiff stressed at the hearing, the plaintiff sues in these proceedings, not on the 2002 mortgage, but on the 2004 mortgage, in respect of which the defendants had the benefit of legal advice. The plaintiff also says that despite having legal advice in June 2004, there was no complaint by the defendants until the default notice was served in 2005.

28 The defendants, however, say that having entered into the 2002 mortgage, they were left in a position in July 2004 where they had no alternative but to enter into the 2004 mortgage. At that stage, legal advice was of no assistance to them, except perhaps to let them know more clearly the predicament in which they found themselves. If those facts were made out, I do not think it is necessarily an answer for the plaintiff to say that the defendants obtained independent legal advice before entering into the 2004 mortgage. The significance or effect of the lack of complaint by the defendants until service of the default notice in 2005, if proved, is a matter that can only properly be investigated at trial.

29 I accept that the defendants' affidavits do not condescend to the level of detail that might be expected in a matter of this nature, but that is not unusual where litigants are unrepresented. Due allowance must be made for the fact that the affidavits have been prepared by the defendants without the benefit of legal advice, albeit they have clearly been prepared, or settled, with the assistance of someone with a reasonable knowledge of English. But where defendants are unrepresented it will rarely be possible or appropriate to determine the matter on the basis of a rigorous examination of the defendants' affidavit evidence. Generally all that can be done is to determine whether it appears there are factual issues that should properly be further investigated at trial.

30 In the present case I consider that there are. On the basis of the affidavit material, I am not satisfied as to the plaintiff's entitlement to judgment without further investigation of the facts at trial. I do not consider it can be said that the defendants' case is unarguable.

31 I should, however, make it clear that I make no finding as to whether or not the conduct of the plaintiff was in fact unconscionable. That is not the question to be determined on this application. On this application it is only necessary for the defendants to establish that, on the necessarily limited material that is available on an application of this nature, there is a question which ought to go to trial. The question of whether or not the conduct of the plaintiff was unconscionable is something that ultimately can only be determined at trial.

32 It was for the above reasons that I dismissed the plaintiff's application for summary judgment and gave the defendants leave to defend.