Commonwealth Bank of Australia v Clapham

Judgment - EX TEMPORE (revised 1 february 2012) 1HIS HONOUR: The plaintiff (the bank) lent a large sum of money to a company known as Yarralumla Holdings Pty Limited (Yarralumla). The securities taken by the bank for that loan included a mortgage over real estate given by Yarralumla to the bank and a guarantee from each of the defendants (Mr and Mrs Clapham). The guarantee appears to have been supported by a mortgage given by Mr Clapham over some property on the Central Coast of New South Wales. 2Yarralumla fell into default. On 29 December 2008, the bank, Yarralumla and Mr and Mrs Clapham entered into an agreement. Five days earlier, on 24 December 2008, a solicitor had signed a certificate certifying that before Mr and Mrs Clapham and Yarralumla had executed the agreement, she explained the meaning and effect of it to them and the legal consequences that would follow if they signed it. She certified, further, that each of the individuals appeared to understand the explanation. 3It is not necessary to go to the detail of the agreement. It is sufficient to note that, among other things, Yarralumla and Mr and Mrs Clapham acknowledged the validity of the various securities given to the bank; and that they agreed on a process for refinancing or otherwise liquidating the debt owed by Yarralumla to the bank. Time was expressed to be of the essence. Yarralumla and Mr and Mrs Clapham agreed that if they did not strictly comply with their relevant obligations, the bank would be at liberty forthwith and without further notice to enforce the securities, including the guarantees. They agreed, further, that they would consent to the entry of appropriate monetary judgments and would not defend or resist any legal action taken by the bank. 4The amount for which judgment was to be entered, in the event of default, was agreed to be $4,589,791.74 less payments made in reduction of that amount. To jump ahead: it is alleged in the further amended commercial list statement that the amount calculated in accordance with that provision of the agreement is $1,396,115.16; and in the commercial list response (which responded to a not relevantly different statement of contentions) that was admitted. Indeed, all relevant contentions were admitted, and this was apparently done on legal advice because the commercial list response was prepared, signed and filed by the lawyer for Mr and Mrs Clapham. 5The bank seeks today either judgment for the amount that I have mentioned of $1,396,115.16 (which I shall call the lower amount) pursuant to the agreement, or alternatively judgment for a higher amount pursuant to the guarantee. That higher amount would include enforcement expenses and the like, and also interest. The bank does not claim interest on the lower amount. 6On the face of the pleadings, there is no defence to that claim. However, Mr and Mrs Clapham filed a cross-summons and cross-summons list statement in which they asserted that they were entitled to relief in relation to the guarantee by reason of alleged misleading or deceptive conduct. The relief claimed was an order that "the guarantee and indemnity agreement" (what I have called the guarantee) be set aside; or alternatively damages for misleading or deceptive conduct or at law. It is necessary to note that neither the cross-summons nor the list statement in support of it asserted an entitlement to relief in respect of the (settlement) agreement. It is difficult to know how relief of the kind claimed in respect of the guarantee could properly be claimed in respect of the agreement, bearing in mind the solicitor's certificate to which I have referred. 7All those matters suggest that the bank is entitled to judgment against Mr and Mrs Clapham for the lower amount. There is, however, a complication. Mr Clapham applied for legal aid, presumably to enable him (and perhaps Mrs Clapham) to prosecute the cross-claim. The application for legal aid was refused. Mr Clapham lodged an appeal against that refusal (see s 56 of the Legal Aid Commission Act 1979 (NSW)). That appeal has not yet been decided. Accordingly, s 57 of the Legal Aid Commission Act applies. In substance, and in the events that I have outlined, that section requires the proceedings to be adjourned unless the appeal is not in good faith; or is frivolous or vexatious or otherwise intended improperly to hinder or delay the conduct of the proceedings; or unless there are special circumstances that tell against the adjournment. I set out s 57: 57 Adjournment of certain proceedings Where it appears to a court or tribunal, on any information before it: (a) that a party to any proceedings before the court or tribunal: (i) has appealed, in accordance with section 56, to a Legal Aid Review Committee and that the appeal has not been determined, or (ii) intends to appeal, in accordance with section 56, to a Legal Aid Review Committee and that such an appeal is competent, (b) that the appeal or intention to appeal is bona fide and not frivolous or vexatious or otherwise intended to improperly hinder or improperly delay the conduct of the proceedings, and (c) that there are no special circumstances that prevent it from doing so, the court or tribunal shall adjourn the proceedings to such date on such terms and conditions as it thinks fit. 8Mr Sulan of counsel, who appeared for the bank, expressly disclaimed reliance on para (b) of s 57. 9Mr and Mrs Clapham did not appear today. However, Mr Clapham has communicated with the Court, including with the registry and with my Associate, pointing out the pendency of the appeal against the refusal of the application for legal aid and seeking an adjournment pursuant to s 57. Mr Clapham did not appear today, nor did anyone appear for him. I am satisfied that he (and through him Mrs Clapham) had notice that the proceedings were fixed for hearing today. That is apparent, if from nothing else, from an email sent by Mr Clapham to "Listings" on 25 January 2012. 10Although the application for Legal Aid appears to have been made in Mr Clapham's name only, and likewise the appeal from the refusal, Mr Sulan accepted that the debate should proceed on the basis that whatever was decided in relation to Mr Clapham would apply also to Mrs Clapham. 11It follows from the terms of s 57 that I should adjourn the hearing of these proceedings unless I am satisfied that, in the events that I have outlined, there are special circumstances that dictate otherwise. In this context, I do not read the words in para (c) "that prevent it [the court] from doing so" as referring to some insuperable legal or other obstacle preventing, in an absolute way, an adjournment, rather, I read those words as requiring that the special circumstances be of such a kind that, when weighed against the evident underlying policy of section 57, nonetheless the hearing should proceed. 12Further, in considering s 57, it is necessary to bear in mind the dictates of ss 56 and following of the Civil Procedure Act 2005 (NSW). Although those sections do not speak in terms to the requirements of s 57 of the Legal Aid Commission Act , they do at least, since the commencement of the Civil Procedure Act , provide some context for the consideration of "special circumstances" for the purposes of s 57. 13Because Mr Clapham did not appear and put submissions, I have not had the opportunity of assistance on the meaning of the requirement for the bank (in this case) to show special circumstances. Some of the cases that have turned up in the course of research (and I acknowledge that the research is incomplete) appear to treat the requirements of para (c) as no more than a somewhat more elaborate and more detailed consideration of the circumstances that arise for consideration in any contested application for adjournment. See, for example, Fibre-Tek (Gold Coast) Pty Ltd (in liquidation) v Skye Bennett [2006] NSWSC 1100, in particular at [27] and following. I do not think that an approach of this nature pays sufficient attention to the statutory command in s 57, the operation of which is only to be displaced (in circumstances where para (b) does not apply) upon demonstration of special circumstances. 14In Director of Public Prosecutions v Emanuel [2009] NSWCA 42, Spigelman CJ (with whom Tobias JA and, on this point Basten JA agreed) looked, briefly, at s 57. That occurred in a context where a Local Court magistrate had dealt with an application for adjournment, which had been made in reliance on s 57, "as a matter of general discretionary power with respect to the conduct of criminal proceedings" (see Spigelman CJ at [32]). As his Honour pointed out in the following paragraphs of his reasons, that approach did not do justice to the statutory test and, thus, constituted a denial of procedural fairness. His Honour pointed out further, at [38], that the underlying purposes of s 57 include affording "a reasonable opportunity" for an applicant to present his or her case. 15The matter was considered by Pain J in Waverley Council v Bobolas [2009] NSWLEC 188. Her Honour said at [15] that special circumstances "must be very clearly established" and that they must be "special circumstances" that are relevant to the policy of "ensuring that parties are legally represented wherever attainable". 16In other words, it appeared to her Honour that the purposes of s 57 included the purpose of ensuring (as Spigelman CJ had indicated a few months earlier in Emanuel ) that a party who had pending an application against refusal of a grant of legal aid should not be put to the possible prejudice of presenting his or her case unrepresented until that appeal had been dealt with. 17In this case, the essential right that Mr and Mrs Clapham wish to preserve can only be the right that they seek to advance pursuant to their cross-claim. In particular, as I have noted, they do not by their cross-claim seek to impeach, or otherwise claim relief in respect of, the agreement of 29 December 2008. 18If the bank had wished to proceed with its claim under the guarantee, for whatever the higher amount due under that guarantee may be, then the question of the cross-claim would be directly relevant. But in circumstances where the bank has limited its rights to the agreement, the cross-claim, as a relevant consideration, falls away. 19For those reasons, I am satisfied that there are special circumstances which dictate that the adjournment mandated by s 57, absent the application of either para (b) or para (c), exist. In other words, and trying to rectify that somewhat clumsy phrasing, I am satisfied that the lack of relationship between the claim in respect of which legal aid is sought and the limited claim in respect of which the bank seeks judgment provides a sufficient "special circumstance" to deny the adjournment, and thus to permit the bank to proceed on that limited claim. 20In forming that view, I take into account also the extensive admissions made, obviously on legal advice, on the pleadings; the terms of the agreement to which I have referred; and the preceding certificate of the solicitor to which I have referred. In those circumstances, it seems to me that there is no prospect of any defence to a claim limited to the agreement. In those circumstances, to prevent the bank from obtaining judgment on that agreement simply because there is a separate cross-claim for setting aside the guarantee or for damages, would not appear to me to be in accordance with the dictates of justice as required by s 56 of the Civil Procedure Act . I repeat that, in my view, the commands of s 56 and following are now to be taken into account in consideration whether an adjournment should be granted in accordance with section 57 of the Legal Aid Commission Act . 21It might be that judgment for the bank for the lower amount could carry with it, or lead to, some estoppel in relation to the cross-claim. Mr Sulan indicated that his client undertook that, if the cross-claim were pressed, it would not seek to defend it on the basis of any estoppel that might flow from a judgment in its favour for the lower amount pursuant to the agreement of 29 December 2008. I take into account also that undertaking as part of the relevant special circumstances. 22The agreement has been proved; indeed, as I have said, it is admitted. The amount calculated in accordance with its terms has been admitted. It follows that the bank is entitled to judgment for the amount claimed. It follows, further, that there should be an adjournment of proceedings on the cross-claim until some time after the application for legal aid has been considered. Enquiries made on behalf of the bank suggest that it is to be considered on 8 February 2012. In those circumstances, it seems to me, an adjournment of the cross-claim for directions to 24 February 2012 would be appropriate. 23For those reasons I make the following orders: (1) I direct entry of judgment for the plaintiff against the defendants in the sum of $1,396,115.16. (2) I note that the bank, having obtained judgment in the fashion just indicated, does not wish to pursue its claim for any higher amount under the guarantee. (3) I stand the cross-claim over for directions on Friday, 24 February 2012. 24FOR SUBMISSIONS RE COSTS SEE TRANSCRIPT 25HIS HONOUR: I make no order as to costs. I direct that the exhibits be handed out.