Commonwealth Bank of Australia v Dimitrovski

The refinancing arrangement 6On 15 April 2002 the Plaintiff granted a mortgage over the property (as well as over other property) to PNL to secure a loan made to the three borrowers. Quite what those loan arrangements were with PNL prior to 2006 was not made clear. However, on 4 October 2006 ING on behalf of PNL sent a letter of offer to the three borrowers in respect of a further sum of $1,140,000. The letter made clear that when added to the existing loans from PNL the total loan amounts would be $8,570,000. All the loans were to mature on 17 March 2008. 7By the time a refinance application was made at the end of 2007 the loan from PNL was also secured over properties at 25 Redman Avenue, Thirroul, 220 Lawrence Hargrave Drive, Thirroul and 223 - 225 Lawrence Hargrave Drive, Thirroul. 8By 1 December 2007 the Defendant said that the total indebtedness to ING through PNL was $8.4 million. By letter of offer dated 13 December 2007 Perpetual agreed to release those four properties in conjunction with a principal reduction of $4,483,000. The letter of offer was addressed to the three borrowers. 9The Defendant said that his desire was to have the property released from the mortgage to PNL because he wanted to separate his interests from those of his father and the company. 10The Defendant gave evidence that he asked Alan Buxton of Balmain Commercial to assist him with the refinance of the ING facility and that he gave instructions to Mr Buxton about that. Mr Buxton appears to have been a mortgage broker. He said Mr Buxton made applications to various lenders in connection with refinancing that facility and Mr Buxton assisted him in making the application to the Commonwealth Bank. 11 The Defendant said that in order to facilitate the principal reduction of $4,483,000 two loans were sourced by Mr Buxton. The lender of these two loans was Challenger Managed Investments which was to make a loan to Kosta Dimitrovski for $1 million secured over 220 Lawrence Hargrave Drive, Thirroul and a loan to the Shano Developments for $4,163,700 secured over 223 - 225 Lawrence Hargrave Drive, Thirroul and 25 Redman Avenue, Thirroul. 12The Defendant signed a document entitled The Home Loan and Investment Home Loan Application on 19 November 2011. One of the questions in the Application asked "What is the purpose of the Loan" and the answer given was (by a tick) in part "To refinance an existing loan/s" and (by a tick) in part "Other", alongside which the words "Equity Access" were written. 13The Defendant also signed a document called "Low Documentation Loan Declaration". That disclosed his assets as being worth $6 million, liabilities $500,000 and his Gross Taxable income at $360,000. 14Mr Dimitrovski agreed that he signed the relevant documents in front of Tony Ottavio, Manager of the Mortgage Information Centre of the Plaintiff's at Bexley on 20 December 2007. He said at the time he was not provided with a copy of the usual terms and conditions for consumer mortgage lending nor a copy of the memorandum incorporated into the mortgage. It is not clear why that was relevant for the issues in the case. 15Clause 2.1 of the Usual Terms and Conditions relating to the Loan Agreement provided: We will provide the Loan to you only if: ... (c) You or the Security Provider do all things and pay or arrange to pay all monies (including all Government Land Titles Office discharge and transfer registration fees) necessary to give us the security interest we require in the Security Property. 16"Security provider" was defined in clause 1 as meaning "any individual (other than you) or company providing Security. 17Clause 5 entitled "LOAN FUNDING" relevantly provided: 5.1 We make the full amount of the Loan available to you by a single loan drawing unless the Contract provides otherwise or we agree to your request to fund the Loan by progressive Loan drawings. 5.2 We fund the Loan: (a) By paying each Loan drawing in accordance with the Contract and your written instructions; or (b) When you or anyone you authorise asks for credit in a manner approved by us (for example, by having a cheque presented to us for payment or by a withdrawal at an electronic terminal). At the same time, we record your debt to us by debiting the Loan Account. 18 The mortgage which is dated 20 December 2007 was said to be: For the purpose of securing to the mortgagee the payment of the Amount Owing mortgages to the mortgagee all the mortgagor's estate and interest in the land described above (referred to in this mortgage as The Property). 19The provisions of memorandum AC58503 filed in the Department of Lands, Land and Property Information Division were incorporated into the mortgage. Relevant provisions in that memorandum are these: A1. 'Amount Owing' means, when Part 3 does not apply, all money which one or more of you owe us, or will or may owe us in the future, under a Secured Agreement and this mortgage or either of them. Secured Agreement' means: an agreement between one or more of you and us (including a guarantee given by one or more of you) whenever made, under which you undertake to pay or repay us money, and which you acknowledge in writing to be an agreement to which this mortgage extends; and any such agreement as varied. ... A2.2 You are liable for all the obligations, under this mortgage both separately on your own and jointly with any one or more other Persons named in this mortgage as mortgagor, except where clause A2.3 applies. ... A2.5 When there is no Amount Owing, we will release The Property from this mortgage when you ask us to do so. ... A21. When are you in default? You are in default if: (a) You do not pay on time any of the Amount Owing; or (b) you do not keep to the other terms of this mortgage or a Secured Agreement; or ... 20The evidence disclosed that at the time of settlement the amount owing to Perpetual was $8,514,114.85. The settlement was structured in the way shown in exhibit A. Three amounts were paid to Perpetual being $3,372,000 from an internal funding by Perpetual, $3,642,114.85 payable from the two Challenger loans referred to and $1,500,000 from the Bank to Perpetual. From the Challenger loan to Shano Devlopments $109,441.66 was to be paid to the Defendant and from the Challenger loan to Kosta Dimitrovski there was to be paid to the Defendant the sum of $962,066.10. Two amounts from each of the Challenger loans were for the payment of other disbursements on settlement of the Challenger loans. 21The Defendant said that Mr Buxton and a solicitor, Mr Stanizzo, were acting for him in relation to the transaction. From the loan application generated by the Bank in the section headed "Your Solicitor/Conveyancing Firm/Brokers", although Mr Stanizzo's name did not appear, an address of PO Box 94 Warrawong, NSW 2502 appeared. Mr Dimitrovski agreed that that was the postal address of his solicitor Mr Stanizzo. Next to the words "Solicitors (sic) Phone Number" a phone number appeared which Mr Dimitrovski agreed was Mr Stanizzo's phone number. There was similarly a solicitor's fax number provided. There was a letter dated 18 January 2008 from Heidtman & Co to Mr Stanizzo asking for various documents in relation to the transaction. 22As part of the settlement arrangements the Defendant signed two documents on the letterhead of Heidtman & Co. The first of these was addressed to Kosta Dimitrovski and the second was addressed to Shano Developments. The documents were directions for payment of the two loans being obtained by those borrowers from Challenger. The direction in relation to the loan to Kosta Dimitrovski is as per Annexure A to this judgment. The direction in relation to the loan to the three borrowers is as per Annexure B to this judgment. It is to be noted in particular that on Annexure A not only has the Defendant signed the document but his initials appear alongside his name next to the figure of $109,441.66. 23As those documents make clear the Defendant, as part of the whole settlement arrangement, was to receive funds totalling $1,071,507.76. At the completion of the transaction PNL would release the Defendant's property at 2 Jones Lane and the Bank would, in lieu, become the first registered mortgagee. The Defendant said that he knew that and intended that it should happen. 24There was also a faxed direction on the letterhead of Heidtmann & and Co. addressed to the Commonwealth Bank dated 29 January 2008 which said: We advise that the sum of $1,500,000 is to be made payable to Perpetual Nominees Ltd ACF Mortgage Pool. 25The Defendant says that Heidtman & Co were not his solicitors and he did not authorise them to give that direction. The Bank is unable to find any other direction in relation to the payment of the loan funds being borrowed by the Defendant. 26Shortly after the settlement of the loan an amount of $109,441.66 from the Challenger loan to Shano Developments and an amount of $962,066.10 from the Challenger loan to Kosta Dimitrovski were paid into the Defendant's account which had been established as a result of the settlement of the Bank's loan. I accept the evidence of the bank officer Mr Stamef that the description on the bank statement in relation to the Viridian Line of Credit meant that there had been a deposit of two cheques for those amounts.

Application to withdraw admissions and amend defence 27The procedural history is this. The Statement of Claim was filed on 9 February 2012. On 23 March 2012 the Defendant filed a Defence, acting for himself, which said that the property was a unique residence. The Defence then went on: 2. It was agreed between the officers of the Plaintiff and the Defendant, that the Plaintiff would not proceed with any enforcement proceedings concerning the credit agreement dated 28 December 2007 and registered mortgage number AD763766 until such time as the Defendant himself had arranged for the sale of the subject security. 3. Accordingly, the Defendant has taken charge of the sale program and has taken all steps necessary to effect the subject sale. 28The proceedings first came before me for early judicial directions on 3 May 2012. There was no appearance for the Defendant. In a judgment delivered that day I struck out the Defence on the basis that it did not disclose a properly pleaded defence to the claim. I noted that the Plaintiff's solicitors had sought particulars of the agreement alleged in the Defence on 2 April 2012 and again on 19 April 2012 and that there had been no reply to either letter. Because the Defendant was unrepresented I allowed him a further 14 days in which to file a properly pleaded defence. 29On 17 May 2012 the Defendant filed a further Defence. That Defence admitted allegations (made in the paragraphs in the Statement of Claim as numbered below) that: (1) That the Plaintiff was duly incorporated; (2) The Plaintiff agreed to provide a credit amount of $1,500,000 to the Defendant pursuant to a written agreement dated 28 December 2007 (although the Defendant noted that the Plaintiff agreed to increase that limit to $1,560,000); (3) The Plaintiff advanced credit to the Defendant in accordance with the agreement; (4) The Defendant agreed to repay the amount owing under the agreement with interest, charges and expenses; (5) The Defendant would make repayments during the term of the agreement; (6) The agreement enabled the Plaintiff to require the Defendant to repay all monies owing under the agreement upon default by him; (7) The Defendant had defaulted under the agreement by failing to make repayments when due (although he did not admit that the amount owing was the amount alleged of $1,746,862.54). 30In addition, the Defendant admitted (10) (by not pleading to it - r 14.26 UCPR) that he was the registered proprietor of 2 Jones Street (sic), Thirroul and (11) (expressly) that he had granted a mortgage over the property securing his obligations under the agreement although he disputed that the amount to be secured under the mortgage was the same as the amount due under the agreement. He admitted (13) (by not pleading to it) that the instrument conferring the right of possession contingent on a default was the mortgage. 31The Defence then pleaded that the Defendant applied to the Plaintiff's Mortgage Innovation Centre at Bexley for a low-doc loan for $1,500,000 which the Defendant required to be used for the specific purpose of investing in the share market to fund a share portfolio. The pleading continued as follows: 18 On about 28 December 2007 the plaintiff approved a Viridian line of credit facility for the sum of $1,560,000. Despite the plaintiff's knowledge of the defendant's business and financial affairs (sic). ... 21 The plaintiff acted unconscionably. 21.1 by letting the defendant enter a high risk transactions (sic) in which he was likely to lose his home. 21.2 by lending monies to the defendant under circumstances in which the plaintiff knew or ought to have known that the defendant could not afford to make the repayments required. 32When the matter came before me again for directions on 24 May 2012 the Defendant told me that he wished again to amend his Defence. He handed to me a copy of the defence he said he wished to file after speaking to a barrister to finalise it. It was headed "Amended Defence dated 23 May 2012". I placed it on the court file and directed that any further amended defence was to be filed and served by 31 May. The draft defence handed to me did not alter the admissions he had made in the Amended Defence filed 17 May 2012 except that it did not admit paragraph 13. It is the Further Amended Defence filed 31 May 2012 which has given rise to the need by the Defendant to withdraw admissions that he made in the Amended Defence filed 17 May 2012. 33In his Further Amended Defence of 31 May in answer to the allegation in paragraph 3 that the Plaintiff advanced credit to the Defendant in accordance with the agreement the Defendant said this: 2. As to paragraph 3 the defendant does not admit that the plaintiff advanced credit to him in accordance with the loan agreement. The defendant denies that he received the benefit of the loan monies. However, the defendant admits that the plaintiff debited an amount of $1.5 million to his account on 30 January 2008. 34In answer to the allegation in paragraph 13 of the Statement of Claim the Defendant said he could not admit that paragraph. In answer to paragraph 15 of the Statement of Claim which asserted the Defendant had defaulted under the mortgage the Defendant said this: 10. As to paragraph 15, as a consequence of the defendant's pleading at paragraph 2 above, the defendant does not admit payment default under the mortgage. 35The Further Amended Defence then went on to plead a defence under the Contracts Review Act which was said to be a defence "further and in the alternative" to what had gone before. In addition there were defences of unconscionability in reliance of the Trade Practices Act (mistakenly) and the ASIC Act. 36In the course of pleading the Contracts Review Act defence the Further Amended Defence said this: 29 In the premises, and in consideration of the matters pleaded at paragraphs 21 - 27 above, the Plaintiff had no reasonable basis for believing that the Defendant had any capacity to repay the loan advanced to him. 30 Notwithstanding the fact that the Plaintiff had no reasonable basis for believing that the Defendant had any capacity to repay the loan advanced to him on 30 January 2008, the Plaintiff advanced the entire loan amount of $1,5 million to the Plaintiff (sic). [It was agreed at the hearing that the word "Plaintiff" was an error and should have read "Defendant"] ... 32 As a consequence, the loan agreement was entered into in circumstances that make it unconscionable for the Plaintiff to enforce the same. Particulars ... (iii) The Defendant was never in a position that he could afford to repay the loan obtained from the Plaintiff and such information would have been discovered by the Plaintiff had reasonable enquiries been made, (iv) The Plaintiff relied on the Defendant's secured properties as providing security for the loan without any attempt to verify whether the Defendant could meet the repayment obligations under the loan agreement, ... (viii) To the actual knowledge of the Plaintiff, the Defendant lacked the knowledge or ability to protect his interests as regard the loan... (emphasis added) 37As I have noted, the Draft Amended Defence handed to me on 24 May maintained the admission of paragraph 3 of the Statement of Claim. There was nothing in the document asserting that credit had not been advanced to the Defendant under the loan agreement. 38On 23 July 2012 the Defendant applied for Legal Aid. 39On 24 August 2012 the matter came before the Registrar. The Registrar noted that Legal Aid had sought material from the Defendant "four weeks ago" but the Defendant had not provided the material. One of the orders made by the Registrar was that the Defendant was to file and serve any evidence in chief upon which he intended to rely by no later than 11 October 2012. 40Legal Aid was refused on 27 August 2012. An appeal was lodged but that was also unsuccessful and the Defendant was notified of that by the middle of November. 41By the time the matter came before me again for judicial directions on 3 December 2012 the Defendant had not filed his evidence as directed by the Registrar. Part of the reason for that was that there was a stay in place from early September while his Legal Aid appeal was being considered but the delay caused by the stay did not account for the whole of the period since the orders were made. 42At the directions hearing on 3 December 2012 the Defendant indicated that he wanted to amend his Defence again and to file a cross-claim. I directed that he was to provide a draft of an amended defence and any cross-claim to the Plaintiff's solicitors by 14 December 2012. 43The matter came before me again for directions on 5 February 2013. The Defendant had not served draft copies of his proposed amended defence and cross-claim, nor had he complied with the Registrar's direction of 24 August 2012 to file and serve his evidence. 44I directed that the Defendant was to serve all evidence on which he relied by 12 March and I stood the matter over for further directions to 15 March 2013. I then said this: Mr Dimitrovski, if you are still desirous of filing further pleadings, you are going to have to file a notice of motion seeking leave to do so, and in the affidavit in support you're going to need to justify why you have not done it to date, and the matter will be dealt with on a properly contested basis. So if you intend to pursue your desire to file amended pleadings any notice of motion to do so is to be filed and served by 6 March, and the notice of motion is to be made returnable on 15 March before me. And in addition to explaining in your affidavit why it hasn't happened to date, you will need to annex the draft forms of the pleadings you want to file. Unless you do all of those things you will not be successful in getting that leave, and the matter will then proceed to trial on the existing pleadings. DEFENDANT: Thank you. I understand. HIS HONOUR: I can tell you this, just so you can tell Mr Rogers or any other solicitor who is going to act for you. I don't want anyone coming along on 15 March telling me they have just been retained and need more time to consider what the pleading is. It's not going to happen. If there are going to be any amended pleadings that will be finally determined on the 15th and the matter will proceed to trial on whatever is determined. 45When the matter came back before me on 15 March 2013 there had been no application by the Defendant to amend his pleadings. 46The parties were granted leave to obtain a hearing date and the Defendant was not permitted to serve any further evidence without the leave of the Court. I told the Defendant that I would not prevent him filing a Motion to amend his pleadings but that any such Motion was to come before me and he would need strong reasons to justify why he should be allowed to do it when he had not done it in the time permitted previously. 47No application was made until counsel appearing for the Defendant at the hearing applied to amend the Defence of 31 May 2012 on the second day of hearing. I shall return to this matter later in the judgment.

Withdrawal of admission 48I am satisfied that the Plaintiff has established the Loan Agreement, the mortgage, the payment under the loan agreement to PNL and the default by the Defendant. If the Defendant is not permitted to withdraw the admission he made in relation to paragraph 3 of the Statement of Claim there must be judgment for the Plaintiff for possession and for a sum of money, the precise amount of which I shall deal with presently. 49The basis for seeking to withdraw the admission is said to be that at the time it was made the Defendant was unaware of the true position, namely, that the amount of the loan was paid to PNL rather than into an account of the Defendant's from which he could draw funds. The Defendant drew attention to a letter he wrote to the Plaintiff's solicitors dated 24 May 2012 saying: In order to properly prepare my defence and evidence, please advice (sic) to whom Commonwealth Bank of Australia alleges it paid $1,500,000 on 30 January 2008 in relation to Commonwealth Bank of Australia account number 062795 100407767, as I have searched my records and cannot ascertain that I ever had the benefit of the loan from which I am being sued. The money was automatically debited into my account, consequently putting me in a default/maximum rate, which resulted in consequential losses due to the fact that I did not receive the benefit of $1,500,000. 50The Defendant does not say in the letter when it was he searched his records. That is significant because the admission was made in the Amended Defence filed 17 May 2012. The Defendant certainly had the opportunity to search his records a long time before 17 May 2012 and ascertain that the money had been paid to PNL. In particular, during 2008 the Defendant's wife told him that they had used all the money in the Line of Credit. That resulted in the Defendant seeking and obtaining an increase in the credit limit of $60,000. The Defendant said that he did not inform himself about the balance but left it to his wife to inform him. The Defendant acknowledged that bank statements were sent from time to time showing movements in the account. 51Although this issue of the withdrawal of the admission is being dealt with in a final judgment I do not think I should make credit findings in relation to evidence relevant to the withdrawal application. I consider that I should accept the Defendant's evidence for the purpose of deciding whether leave should be given to withdraw the admission. 52The position is, nevertheless, that at a time when the Defendant had the means of knowledge to ascertain where the loan was paid he admitted that it had been paid to him. Nor has he established that he did not know all the relevant facts when he made the admission. 53The Plaintiff opposed leave being given to withdraw the admission and said that it was prejudiced if the admissions were allowed to be withdrawn because it had prepared its case on the basis of the admissions having been made. In particular, the Plaintiff pointed to other evidence which it could and would have called, particularly evidence about the authorisation of the payment of the $1.5 million to PNL. 54The principles associated with withdrawal of admissions are set out in Drabsch v Switzerland General Insurance Co Ltd (Supreme Court of NSW, Santow J, 16 October 1996, unreported). In Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738 Rogers CJ Comm D held that even if admissions were made in error in some cases leave may not be given to withdraw them. His reliance in that case on Apex Pallett Hire Pty Ltd v Brambles Holdings Ltd (Full Court of Supreme Court of Victoria, 8 April, 1988, unreported) suggests that if admissions are made by self-induced mistake that may justify a refusal to grant leave to withdraw them - see at 744D, 748G and 749. A failure to explain properly why the admissions was wrongly made may be fatal - see at 749-750; and see also Maile v Rafiq [2005] NSWCA 410 at [95]. Nor will it be essential for the other side to show prejudice if the admission is withdrawn: Coopers Brewery at 746. 55In my opinion the failure of the Defendant to provide a full explanation of what led to the admission and what information was available to him at the time it was made leads me to exercise my discretion against granting leave to withdraw the admission. What is known is that the Defendant had the bank statements for the Line of Credit that would have shown him at the time the admission was made that the full amount of the loan was debited at the time of drawdown. Further, the Plaintiff's assertion of prejudice and the need for other evidence appears well-founded. 56I note the Plaintiff's submission that even in the Further Amended Defence filed 31 May 2012 there are what appear to be admissions of the Defendant's having received the loan moneys (paragraphs 29, 30 and 32 - set out above at [36]. The Plaintiff submitted that those admissions appeared in the part of the Defence dealing with the Contracts Review Act and that such a defence was pleaded "Further and in the alternative" and not just "In the alternative". 57This is not the time to expatiate on the unsatisfactory ambiguity of the phrase "further and in the alternative" (is "and" really conjunctive in this phrase? Is "further" otiose when a second or subsequent defence is being pleaded? etc). I am satisfied that the Contracts Review Act defence was put forward as a true alternative because it is hard to see how its consideration would be necessary if the Defendant was successful on its primary defence. Accordingly, I read paragraphs 29, 30 and 32 as saying only that if it is held that the loan advance was made to the Defendant then the provisions of the Contracts Review Act ought to avail the Defendant relief. They are not admissions that the advance was paid to the Defendant. 58Nevertheless, for the reasons given earlier leave is refused to permit the withdrawal of the admission in paragraph 3 of the Amended Defence filed 17 May 2012.

Application to amend 59In the event that I am mistaken in holding that the admission should not be permitted to be withdrawn I shall consider the application to amend the Defence and also whether the true factual position would otherwise suggest that leave ought to be given to withdraw the admission. The latter matter arises because generally the authorities suggest that it will be appropriate to grant leave to withdraw if the admission is contrary to actual facts: Drabsch BC9604909 at 8; Coopers Brewery at 742A. A consideration of the latter matter will involve a determination on the whole of the evidence. 60If the Defendant is permitted to withdraw the admission on which he seeks to rely he then seeks to defend the claim, relying in the first instance on the Further Amended Defence filed 31 May 2012. His counsel notified on the second day of the hearing that paragraphs 13-18, 22, 26, 27 and 29-39 were no longer relied on. His defence in substance is therefore to be found in paragraphs 2 and 10 (set out in [33] - [34] above). That is, he denies he received a benefit from the loan monies and does not admit "payment default" under the mortgage despite admitting that he has technically defaulted (paragraph 6 of the Further Amended Defence). 61When the Defendant's counsel opened his client's case he said this: What happened here on settlement, the $1.5 million was immediately used up because it was applied without my client's knowledge or consent to refinance, when other funds that were available from the Challenger loans were available to refinance. Admittedly, due to some advance issues, there would have been a shortfall. But the defendant was never consulted as to his funds being used for the refinance as opposed to being funds available to him after settlement for his own private purposes. ... The factual basis is that the money did not go in, in accordance with our authority. The mortgage secures monies that are advanced pursuant to the loan agreement, and the loan agreement requires that there be an authorisation, we will say, from the defendant to the application of the funds.... I say further than that, there is documentation that required them to have some authority from the defendant, and they did not have that, your Honour. They knew Heidtman & Co were not acting for the defendant but were acting for the financier. ... Effectively, what was required on settlement was that Perpetual receive $5,142,114.85 in total which would then leave the principal owing to it under the reorganised facility at $3.372 million. The defendant says that that money was to come from the Challenger advances which were secured over other properties. What happened was that the other advances were used to pay a sum of $3,642,114.85 to Perpetual to reduce its indebtedness. But other monies advanced under the Challenger facilities were paid and in excess of $1 million was paid into the defendant's account. But the reality is, he should have had the $1.5 million. From the date of settlement, he should have a facility available to him of$1.5 million. $1 million that went into his account should have been used to pay the Perpetual Nominees' account. That would have left a shortfall. But the defendant's case is that had he been advised that settlement was going to take place and $1.5 million of the Commonwealth Bank was being advanced to them was to be used for refinance rather than for his own purpose, other arrangements would have been made. The settlement would not have taken place. But he was not consulted about this. You will see evidence of signed authorities to pay monies but nothing signed by the defendant. 62None of this was signalled by the Further Amended Defence of 31 May 2012. After some debate on the second day of hearing the Defendant's counsel said that he would seek leave to amend the defence. The draft pleading was provided later that day. It became Exhibit 5. 63The amendment involved adding the following paragraph to the Further Amended Defence: 40. In further answer to the whole of the Statement of Claim the defendant says that: (a) the plaintiff has not advanced any money to the defendant pursuant to or in accordance with the Agreement or any agreement between the plaintiff and the defendant; (b) the plaintiff wrongly debited the account of the defendant with an amount of $1,500,000 on or about 30 January 2008 in circumstances where the plaintiff had not advanced any money to the defendant pursuant to the Agreement or any agreement between the plaintiff and the defendant; (c) the Mortgage granted by the defendant to the plaintiff secures monies owing pursuant to a Secured Agreement (as defined in the loan agreement between the plaintiff and the defendant); (d) in circumstances where the plaintiff has not advanced any money to the defendant pursuant to a Secured Agreement the Mortgage secures nothing. Particulars i. On or about 30 January 2008 the plaintiff paid a sum of $1,500,000 to Perpetual Nominees Ltd ACF Mortgage Pool which payment was made without the authority or direction of the defendant; ii. The loan agreement between the plaintiff and the defendant provided in clause 5.2 of the general terms and conditions that the loan was funded by paying loan drawings in accordance with the contract and the defendant's instructions or when the defendant a person authorised by the defendant asks for credit; iii. On or about 30 January 2008 the plaintiff debited the defendant's bank account no. 279510040767 with an amount of $1,500,000. 64There are a number of difficulties in relation to the application to amend. First, as the procedural history set out earlier demonstrates the Defendant was given every opportunity to get his defence into order over a lengthy period of time. Although the Defendant did not have a solicitor on the record he told me that he had been seeing a barrister, Mr English, on 3rd Floor St James Hall Chambers. He filed three different defences up to 31 May 2012. Both the second and third of these were undoubtedly prepared with legal assistance by their form and expression. He was given leave on 3 December 2012 to serve a further draft defence and cross-claim by 14 December. He did not do so. 65On 5 February I gave him a further chance to amend by filing a Motion to do so by 6 March. The Defendant did not file any such Motion. 66When the matter came before me again on 15 March the Defendant again said that he wanted to amend his pleadings. I said that he could file a Motion to do so if he wished. He did not file any such Motion. 67Secondly, the Defendant gave no evidence at the hearing about the factual substratum of the proposed defence - I was merely told it by the Defendant's counsel as a submission in support of what the Defendant's defence was. In that way, I was never told what the other arrangements would have been to pay out PNL. It was evidence that I would have expected to see in the Defendant's affidavit affirmed on 15 March 2013. The only evidence at all relating to the Defendant's state of knowledge appears in paragraph 34 of that affidavit as follows: Exhibited to me at the time of affirming this Affidavit and marked "GD-17" (Page 66) is a true copy of a Direction to the Plaintiff from Heidtman & Co Lawyers solicitors for Perpetual Nominess Limited to pay $1,500,00.00 to Perpetual Nominees Ltd ACF Mortgage Pool. I did not authorise this Direction to Pay. I did not have any knowledge of the Direction to Pay by Heidtman & Co Lawyers until I received a copy of it from enquiries I made of the Mortgage Innovation Centre - Bexley in June 2012. It may be noted that the Defendant does not say that he was unaware that the loan from the Plaintiff was to be paid to PNL. 68I note that the witness to his affidavit was a person who gave her address as L3/169 Phillip Street, Sydney where 3rd Floor St James Hall Chambers are located. The affidavit has been prepared in such a way, and using such expression, that I have no doubt it was prepared by a lawyer. 69Thirdly, the submission sat very uneasily with the Defendant's oral evidence which was that he left it to the broker, and to a lesser extent his solicitor, to organise the refinance. He gave this evidence (T 59 - 61): Q. When you say the broker, who are you referring to? A. Buxton. Q. Did you leave it to him to do what needed to be done to refinance the ING facility? A. Yes. Q. Did you leave it to him to give whatever instructions needed to be given to pay out the ING facility of approximately $8.5 million? A. Pretty much. Q. Did you leave it to him to liaise the lenders from which monies were being obtained to refinance and pay out the ING indebtedness? A. Yes. ... Q. Did you give Mr Stanizzo instructions to act for you in relation to the refinancing of the ING facility? A. Yes. Q. Did you also give your broker instructions to assist you in refinancing the ING facility? A. Yes. Q. Did you leave it to Mr Stanizzo and your mortgage broker to take steps necessary to refinance the ING facility? A. Yes. Q. And to your knowledge those steps included dealing with financial institutions? A. Yes. Q. So we are clear, the financial institutions are the three that we have identified. The first is Challenger, do you accept? A. Yes. Q. Do you accept you gave instructions to Mr Stanizzo and your broker to deal with the Commonwealth Bank of Australia Limited? A. I can't recall giving Mr Stanizzo instructions with the Commonwealth Bank. Q. Do you recall giving your broker instructions to deal with the Commonwealth Bank in relation to obtaining funds in connection with the refinance of the ING facility? A. Yes. Q. Do you recall giving Mr Stanizzo and your broker instructions to deal with Perpetual Nominees Limited in relation to refinancing the ING facility? A. Yes. Q. So of those three, the only part you do not recall is giving Mr Stanizzo instructions to deal with the Commonwealth Bank of Australia? A. That's right. 70A little later he gave this evidence (T 65): Q. But do you recall being told precisely what the amount that was required to repay the loan from Perpetual Nominees Limited? A. Precisely? Well, it would have - possibly. Q. Who possibly would have told you that? A. The broker. "This is what you have to pay." Q. And did you leave it to your broker to take the steps to direct how that amount would be repaid? A. That's right. The solicitor was involved also. 71The inference I draw from that evidence is that the Defendant knew that the money being obtained from the Plaintiff was to be used to refinance the ING facility through PNL. I am strengthened in that view by the Defendant's failure to say otherwise in his affidavit (as discussed earlier). No attempt was made by his counsel to deal with that evidence in re-examination nor to seek leave to lead evidence as a result of it in order to support the pleading in the proposed amendment. 72Fourthly, there was no explanation for why there was such undue delay in applying to amend and why it could not have been done on each previous occasion when leave was given. 73Counsel for the Defendant submitted that the proposed amendment simply clarified the legal basis for what appears in the Further Amended Defence of 31 May 2012 and it was in the interests of justice that the matter be heard on its true merits. 74In my opinion the time has passed for pleadings to be amended. I have particular regard to the provisions of s 64(2) Civil Procedure Act 2005 which in turn refers to s 58 of the Act. I discussed the principles in relation to late applications to amend in a case on not entirely dissimilar facts in Commonwealth Bank v Hannaford (No 2) [2013] NSWSC 574 at [65] - [73]. I note that one of the considerations under s 58(2)(b) is the degree of expedition with which the Defendant has approached the proceedings (subpara (ii)) and another is the use (or lack of it) the Defendant has made of opportunities given to him to amend during case management of the proceedings (subpara (v)). Both of those considerations tell against the Defendant. 75I do not consider that the proposed amendments simply clarify the existing defence. The existing defence simply denies that the Defendant received a benefit from the loan monies. That defence could have been met by the Plaintiff pointing to the use of the loan moneys to assist in paying out the PNL loan. The amendment goes well beyond that point to argue that no money was advanced in accordance with the agreement and that the mortgage secures nothing. 76Had I not refused to grant leave to withdraw the admission I would have refused leave to the Defendant to amend his defence.

Did the Defendant authorise the payment? 77The principal issue that arises for determination is whether the Defendant gave authority for the payment by the Bank of the $1.5 million to PNL. The Defendant submitted that this was required by cl 5.2 of the loan agreement. He submitted that the only authority came from Heidtman & Co. and this was not the authority of the Defendant. The result was, it was submitted, that it could not be shown that money had been lent that was secured by the mortgage with the result, following Perpetual Ltd v Costa [2007] NSWSC 1093 and Commonwealth Bank of Australia v Hamilton [2012] NSWSC 242 that the mortgage was void. 78The evidence regarding the refinancing strongly indicates that the whole of the refinancing arrangement would not have proceeded to settlement had it not been for the payment by the Bank to PNL of the $1.5 million. This is because the debt owed to PNL would not have been able to be repaid. 79Quite why the refinancing transaction was organised in the way it was was not made clear. It seems from the internal memo of ING of 26 January 2008 that it was originally expected that the funds ING would provide under the two loans would, with the internal refinance from PNL, be sufficient to repay PNL's debt. It seems to have become clear, perhaps after 26 January, that more money would be needed. On one view the amount needed to make up the shortfall was a little under $500,000. That shortfall seems to have led to the restructuring of the loan so that the whole of the money borrowed from the Bank went to PNL and the amounts from each of the ING loans contained in the bank cheques payable to the Defendant (totalling a little more than $1m) were given to him to enable him to reduce the indebtedness to the Bank. 80I do not believe his evidence that he did not know of the arrangement whereby the loan from the Plaintiff would be used to pay out part of the PNL debt. The following matters are significant. 81First, the loan application which he signed said the loan was partly to refinance an existing loan and partly for equity access. 82Secondly, the authorities he signed to Heidtman & Co show clearly that he knew he was receiving two bank cheques from the settlement totalling $1,071,507.76. He did not give evidence that he expected to receive both the $1.5m and the amount of those cheques. Yet he knew he was receiving them and signed authorities to that effect. 83Thirdly, I accept the evidence of Mr Stamef that those cheques were deposited across the counter at the Plaintiff into the Defendant's account. That could not have happened in the circumstances of this transaction without the Defendant's knowledge. I do not accept his denials of knowledge of the cheques. A person in the Defendant's position would not easily forget receipt of two cheques addressed to him for more than $1m. 84Fourthly, when his wife prepared the schedule of transactions on the account, a document put forward by the Defendant, the cheques totalling $1,071,507.76 were referred to as "advance from Shano Developments P/L loan" and "advance from Kosta Dimitrovski loan" respectively. The evidence of the Defendant that he thought that meant the amounts were a loan to him from those entities is inherently unlikely and I do not believe it. The fact that his wife knew their provenance when she had not been involved in the refinancing transaction indicates that she had been told that fact by the Defendant at some time. 85Fifthly, the Defendant had both a broker and solicitor acting for him on the transaction. I have set out his evidence about this earlier in the judgment. That evidence discloses that whilst it was the broker (in particular) and also the solicitor who were arranging and looking after everything to do with the transaction he was told by the broker what he had to pay to pay out PNL. It also discloses that he gave authority to those persons to take all necessary steps to refinance and to the broker to deal with the Plaintiff to obtain the funds. 86The likelihood is that the written instructions to the Plaintiff were given by the broker or the solicitor who had the authority to deal with the Plaintiff in respect of the transaction. Although the Plaintiff says that he cannot remember giving instructions to the solicitor to deal with the Plaintiff he provided the solicitor's details to the Plaintiff and those details appear on the loan application. 87I accept that other written instructions cannot now be found. In the ordinary course of a conveyancing transaction the solicitor for the borrower provides written instructions to the lender. Given that there is a written authority from Heidtman & Co to the Plaintiff in respect of the loan, the likelihood is that the Defendant's broker or solicitor gave such instructions to Heidtman & Co. 88Neither Mr Buxton nor Mr Stanizzo was called to give evidence. If they did not authorise the payment of the loan to PNL either directly or by instructing Heidtman & Co I would have expected the Defendant to call them in his case. Not only were they not called but the Defendant himself did not give evidence that he did not authorise them to give the instructions to the Plaintiff either directly or indirectly. I infer that their evidence would not have assisted the Defendant. 89In addition, there was no explanation for the failure to call the Plaintiff's father, Kosta Dimitrovski, who also signed the various authorities to Heidtman & Co in respect of the loans. Given the Defendant's professed ignorance concerning the cheques totalling $1,071,507.76 I would have expected him to be called to corroborate the Defendant's lack of knowledge in that regard. I infer his evidence would not have assisted the Defendant. 90Sixthly, although the Defendant said that he wanted his property freed from his business interests and to use it for his own and his family's purposes the Schedule of transactions prepared by the Defendant's wife shows that the Defendant used substantial funds from the account to loan to, or make payments on behalf of, companies associated with his business interests. Indeed from 10 April 2008 that appears to be all the account was used for. That is consistent with the Defendant receiving in net terms from the whole refinance transaction something less than the full amount of the loan from the Plaintiff and with the somewhat unusual arrangements made for the way settlement was effected. 91What seems clear is that, at least by March 2008, the PNL facility needed to be refinanced. The debt was increasing in such a way that the internal loan from PNL and the Challenger loans were not going to be sufficient to repay the debt. The Plaintiff may well have desired to extricate his property at Jones Lane from the business loans and may well have wanted some funds to use for private investment. However, the only way that the Plaintiff could extricate his property was to repay PNL. By the time the matter was settled that could only be done by paying (in net terms) some of the loan funds obtained from the Plaintiff. The Defendant would then be left with the remainder and his property, although still mortgaged, would not be at risk by matters associated with the company and his father. 92Accordingly, I find that the Defendant was aware that he would not receive the whole of the funds from the Plaintiff because some of them were needed to ensure that PNL was paid out. I find that the Defendant knew that he was to receive the two cheques totalling $1,071,507.76 from the refinance arrangement - he signed the two authorities that made that clear and placed his initials on one of them right next to his name and the amount. I find that written instructions were given to the Plaintiff in accordance with clause 5.2 of the Loan Agreement. Those written instructions included at least the letter from Heidtman & Co which was authorised by the Defendant or those acting for him on the transaction (Mr Buxton and Mr Stanizzo) and may have been authorised by Kosta Dimitrovski but with the Defendant's knowledge and agreement. 93These findings mean that the true position accords with the admission made by the Defendant in his Amended Defence of 17 May 2012 that he sought to withdraw. In the same way as it may be appropriate to permit the withdrawal of an admission where it is contrary to the true facts (Drabsch at 8) it may well be appropriate to refuse leave to withdraw where the admission is consistent with the true facts. These findings strengthen my view that it is not appropriate to permit withdrawal of the admission in the present case. 94In the light of my findings it is not necessary to consider whether, if the loan proceeds had not been paid in accordance with the contractual arrangements, the Defendant would nevertheless have a liability to the Plaintiff by reason of the Plaintiff having paid out and obtained a release of the PNL mortgage. The Defendant's submission was that in circumstances where contractual arrangements had not been followed he would have no liability to the Plaintiff, notwithstanding that he obtained the benefit of the payment to PNL by having his property released from its mortgage. Such a submission would appear to be contrary to principles associated with subrogation (Taleb v National Australia Bank Ltd [2011] NSWSC 1562; (2011) 82 NSWLR 489 at [68] -[70]) and to rights which would flow by way of equitable charge (see Fisher & Lightwood's Law of Mortgage, 2nd Australian Ed, (2005) Lexis Nexis Butterworths at [1.36]).

Conclusion 95For the reasons given the Defendant should not be permitted to withdraw his admission that the advance was paid to him and should not be permitted to amend his defence to plead matters inconsistent with that admission. 96As indicated earlier the Plaintiff has established that the loan was made, that it was secured by the mortgage over the Defendant's property, that the Defendant has defaulted under the loan agreement and the mortgage, and that the Plaintiff is entitled to possession of the property. 97Mr Stamef's evidence is that the amount outstanding at 13 June 2013 was $2,012,934.49. There was further evidence that the daily rate of accrual of interest is $377.44. The amount outstanding to today (28 August) is $2,041,997.37 ($2,012,934.49 + $29,062.88). 98No submissions were made about the appropriate length of time the Defendant should have to vacate the property. The property is the Defendant's home. The Plaintiff should be given leave to issue a writ of possession but that it not be executed prior to 23 October 2013. However, if either party wishes to vary the date for execution of the writ they should apply to me no later than 11 September 2013 on 2 days' notice to the other side. 99I make the following orders: (1)Judgment for the Plaintiff for possession of the land in folio identifier B/346642 known as 2 Jones Lane Thirroul; (2)Judgment for the Plaintiff in the sum of $2,041,997.37. (3)Leave to the Plaintiff to issue a writ of possession such writ not to be executed prior to 23 October 2013. (4)Any application to vary the date for execution of the writ is to be made to me no later than 11 September 2013 on 2 days' notice.

Annexure A Annexure B 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: 28 August 2013