Commonwealth Bank of Australia v Susan Hannaford Pty Ltd [2013] NSWSC 574 | Case summary

Procedural history 7It is important to set out in some detail the procedural history of the proceedings because the lateness of the application to amend the cross-claim and any explanation given for the delay make the issue of discretion to allow the amendment a significant consideration. 8On 8 March 2010 the three Defendants through a solicitor Derek Ziman of Ziman & Ziman Solicitors appeared. On 16 March 2010 Mr Ziman filed a Notice of Ceasing to Act and gave as the last address of the Defendants known to him as unit 103/4 Young Street, Neutral Bay. 9On the same day a Notice of Change of Solicitor was filed stating that Michelle Rockliff of Rockliff Solicitors now appeared for the Defendants. 10On 22 March 2010 two Defences were filed. One was said to be by Marquessa Hannaford and one was said to be for the company and Susan Hannaford. Although by that stage Rockliffs were on the record for the Defendants these Defences were accepted by the Registry for filing by Defendants who were purportedly acting for themselves. The Defences were in identical terms and each was said to be a Defence filed on behalf of all three Defendants. 11The Defences first pleaded that the repayment terms under the loan were amended pursuant to a Loan Switching Request said to have been made by the Plaintiff and accepted by the Defendants on 30 October 2008. This involved the instalments being for the payment of interest only in lieu of principal and interest. 12In the midst of the pleading concerning that Loan Switching Request it was said that the advances were wholly or predominantly for personal, domestic and/or household purposes and that the Consumer Credit Code (NSW) and the Contracts Review Act were applicable to the agreement. The pleading thereafter went on to say that the Bank was seeking monies based on the loan agreement unamended by the Loan Switching Request amendment to the agreement and then in paragraph 12 said this: The advance is in respect of home loan (sic). The Defendants deny the monies claimed by the Statement of Claim is payable, in the alternative, the Defendants say that the agreement is unjust and seek that pursuant to s 7, 8 and 9 of the Contract Review Act 1980 (sic) the agreement be voided and/or on just terms. The Defendants further say that the loan is unjust, unfair and unconscionable under the Consumer Credit (NSW) Act 1995, TPA and ASIC Act and the general law. 13There was no further pleading regarding the Contracts Review Act nor were any particulars or details given of how "the agreement" was said to be unjust. The context suggested that it was the loan agreement that was said to be unjust although s 6(1) of that Act would have precluded relief being granted to the First Defendant. 14Thereafter, the Defences again resumed the pleading concerning the Loan Switching Request and then pleaded that the conduct of the Plaintiff was unconscionable under s 51AA of the Trade Practices Act 1974 or ss 12CA, 12CD and 12CC (each expressed as an alternative) of the Australian Securities And Investments Commission Act 2001 (Cth) and under the general law. 15The Third Defendant responded to paragraph 11 of the Statement of Claim (which asserted the entry into the guarantee by the Third Defendant) by saying this: 9. The Defendants deny paragraph 10-14 deny the Statement of Claim. In reply to paragraph (sic) 10-14 of the Statement of Claim, the Defendants say that the Plaintiffs is (sic) seeking payments in breach of the agreement between the Plaintiff and Defendant and on erroneous basis. The Defendants say that these demands are not made in accordance with the varied agreement and thus is not due and payable. It is apparent from paragraph 5, read in conjunction with paragraph 2 of the Defence, that the agreement referred to in that paragraph (cf the reference to "the agreement " in paragraph 12 of the Defence - [12]-[13] above) is the agreement alleged to have come from the Loan Switching Request which would have required only payment of interest rather than principal and interest. 16The matter came before the Registrar on 30 June, 27 August and 29 October 2010, 31 January and 4 March 2011. On each occasion the matter was adjourned because the Financial Ombudsman Service was said to be still dealing with the matter although why that process took as long as it did was not made clear. FOS appears to have completed its investigation of the matter in March or April 2011 with no alteration to the contractual arrangements between the parties. 17In the meantime on 26 November 2010 Rockliffs had ceased to act for the Defendants. The last known address of the Defendants on the Notice of Ceasing to Act was said to be 103/4 Young Street, Neutral Bay. 18On 18 April 2011 the Registrar directed that the Plaintiff provide to the Defendants copies of the loan agreement and the guarantee document. The matter was listed for judicial directions before me on 19 May 2011. 19Although there was no solicitor on the record for the Defendants since November 2010 the Defendants on each occasion had counsel appearing, presumably by a direct access retainer. 20On 17 May 2011 the Defendants filed a Notice of Motion seeking pursuant to r 9.1 UCPR that they be given leave to cross-claim against the Plaintiff. The affidavit in support of that Motion was by Susan Hannaford whose address was said to be 145/79 Longueville Road, Lane Cove. I note also (its relevance will become clear later) that the affidavit was sworn in front of a Jessica Hensley of 38 Bridge Street, Sydney. It does not seem Ms Hensley was a solicitor and it does not appear on what basis she was entitled to witness the affidavit. She may have been a Justice of the Peace although she did not claim to be on the face of the affidavit. 21It is necessary to set out the entirety of the affidavit for proper consideration of the present application. It said this: 1. I am the Second (sic) Defendant and the Second (sic) Cross-Claimant in the proposed cross-claim in these proceedings. 2. I am a director of the First defendant. I am authorized to make this affidavit on behalf of the First defendant. Where I have stated knowledge of facts, I have personal knowledge of matters deposed in this affidavit. Otherwise I rely on the basis of my verily believing that that the facts I have otherwise stated are true. 3. This affidavit is sworn to support the defendants' application for joining the defendant's cross-claim against the plaintiff. 4. Since I initially received the statement of claim I sought the co-operation of the plaintiff to clarify the nature of the claim. 5. In making this cross-claim, the defendant does not seek to vacate the directions hearing date. 6. The defendants would suffer prejudice if the joinder is not permitted. I do not believe that the plaintiff would suffer any prejudice as this joinder is sought at this early stage of the proceeding and the evidence in the main case would also be evidence in the cross-claim. 7. Leave is sought to join the Cross-claim against this plaintiff. Annexed hereto and marked with letter "B" is a copy of the cross-claim in respect of which leave is sought. 8. In all circumstances, the defendant asks the Honourable Court to make the orders sought in the accompanying Notice of Motion. 22In fact Susan Hannaford was the Third Defendant but nothing turns on that error. Contrary to paragraph 7 of the affidavit there was no form of the proposed Cross-Claim annexed. 23On 19 May I directed that the Defendants' Notice of Motion for leave to file a cross-claim be returnable before me on 17 June 2011. I also directed, on the request of the Plaintiff, that the Plaintiff file and serve a Notice of Motion for summary judgment also returnable before me on 17 June 2011. I directed that the Defendants were to serve any affidavits in response to the Plaintiff's summary judgment application and affidavits by 14 June. 24On 14 June 2011 the Third Defendant swore an affidavit of some 69 paragraphs containing 25 annexures. 25The affidavit was divided into sections with various headings. Those headings were as follows: Failure to serve Motion of summary judgment, affidavits and evidence; Introduction; Plaintiff's failure to serve statutory default notices: beach (sic) of Real Property Act and Consumer Credit Code; Consumer Credit Code; Overcharges Negligence/breach of warranty; Loan switching agreement; Written agreement with the Commonwealth Bank; Breach of agreement by CBA. 26The majority of the affidavit was concerned with what was said to be the agreement to vary the repayments under the Loan Switching Agreement (sic) and the complaint that the Bank would not allow the property to be leased to produce some income. The sole reference in the affidavit to the Contracts Review Act appeared under the heading "Consumer Credit Code" where the following appeared: 23. The monies/advances were wholly or predominantly for personal, domestic and household purposes. The Consumer Credit Code NSW and the Contract (sic) Review Act 1980 is (sic) applicable to the agreement. 27Nothing in the affidavit set out facts or particulars relevant to the Contracts Review Act or to any unjustness in relation to either the loan agreement or the guarantee. Indeed the only passing references to the guarantee was a statement that the Second and Third Defendants were guarantors (paragraph 20) and that they were entitled to full protection under "the Consumer Credit Code and NSW Credit Code" (paragraph 24). Nowhere was it suggested that the Third Defendant did not know that she had executed a guarantee (the relevance of that will be made clear presently). 28The address of Susan Hannaford in the affidavit was said to be 30A Beatty Street, Balgowlah Heights and the affidavit was said to have been sworn at Sydney before Valentina Ortakovska, a Justice of the Peace. 29On 15 June 2011 the Defendants filed a Notice of Motion seeking leave pursuant to r 19.5 UCPR to amend the Defence. 30On 17 June 2011 I granted leave to the parties to obtain a hearing date for the summary judgment Motion and I stood the proceedings over for further directions to 30 June so that arrangements could be made to deal with the proposed amendments to the Defence and the leave to file a cross-claim before the summary judgment Motion was heard. I raised with Counsel for the Defendants that the form of the proposed Cross-Claim had not been annexed to the Affidavit in support of the Motion to file it. 31On 29 June 2011 a Notice of Appointment of Solicitor for the Defendants was filed by Belgrave Lawyers. On the same day, and without any leave having been given, Belgrave Solicitors filed what was called a First Cross-Claim on behalf of all the Defendants. The Registry should not have accepted this document for filing. 32The Cross-Claim alleged that the Bank had charged excessive interest rates and charges. It claimed that the Bank was negligent for not having transferred the property into the personal names of the Defendants to avoid land tax as it was asserted the Bank had agreed to do, it claimed that the Bank had behaved unconscionably and in breach of warranty in not permitting the property to be leased, it alleged misleading and deceptive conduct by having represented that the loan agreement would be varied so that it became an interest-only loan for a period of five years (this was the so-called Loan Switching Agreement) and it then pleaded this under a heading "Unjust contract/Contract (sic) Review Act 1980": 36. Marquessa Hannaford is the second cross-claimant in this proceeding. 37. At the time of the loan origination with second cross-claimant, Marquessa Hannaford was a teenager of 16 years old. 38. The second cross-claimant was induced to sign the guarantor documents without any understanding of the documents being signed. 39. In breach of the Contract Review Act the second cross-claimant was not provided legal advice in relation to the mortgage documents or guarantor documents and was coerced by the cross-defendant into signing the documents without independent legal advice. 33The relief claimed did not include any relief under the Contracts Review Act. 34The proceedings came before me again for Directions on 30 June 2011. The Cross-Claim that had been filed the day before had not been served on the solicitors for the Plaintiff. This was the form of Cross-Claim which was said to have been annexed to the affidavit in support of the Notice of Motion filed 17 May 2011. The issue of the proposed Cross-Claim could not be dealt with because it had never been served on the Plaintiff's solicitors in the six week period since the Notice of motion was filed. 35Further, although the Motion to amend the Defence had been filed on 15 June no form of the proposed defence nor any affidavit in support of that Motion had been served nor made available to the Court. I directed that the unserved material should be made available to the Plaintiff's solicitor and stood the matter over to 29 July 2011 with an indication that if the Plaintiff did not consent to the proposed amended Defence and the cross-claim which had been filed I would deal with the Notices of Motion on that day. 36When the matter came back before me on 29 July it transpired that only on the night before had a proposed amended Defence been served on the Plaintiff's solicitor. I was told that Mandoh & Associates had filed a Notice of Appointment as solicitor that morning. As subsequently appeared, that was indeed the case. In the circumstances I stood the Motions over to 5 August for hearing before me. 37The hearing of the Defendants' two Notices of Motion took place before me on 5 August 2011. At the end of that hearing I directed that the First Cross-Claim filed without leave be removed from the Court file, that a further draft amended defence and a draft cross-claim be served by 19 August 2011 on the Plaintiff's solicitors, I made directions for the giving of consent or otherwise by the Plaintiff to those pleadings and stood the Motions over part heard to 2 September 2011. The reason those orders were made was because the pleadings put forward by the Defendants were defective. 38Amended draft pleadings were served and a further hearing took place before me on 2 September 2011. The further draft pleadings were found still to be defective from a pleading point of view. As a result I made orders that the Defendants were to serve a further draft defence and further draft cross-claim by 9 September 2011 and I stood the Motions over part-heard to 16 September 2011. 39On 16 September 2011 a further hearing took place before me and I delivered judgment on that day granting leave to the Defendants to file the further draft pleadings with certain particular amendments that I specified in the judgment. The Amended Defence and the First Cross-Claim were filed on 21 September 2011. The reason put forward by the Defendants for not having filed the Cross-Claim within the time limited by the Rules (r 9.1) was that the Defendants were said to have been told by the Financial Ombudsman Service that they could not file a cross-claim whilst the matter was being investigated by the Service. This was an unsatisfactory explanation but I was prepared to overlook the breach of the Rules because, at the time, although there was a solicitor on the record for the Defendants, the Defences indicated that the Defendants were self-represented. 40It should be noted that in the various drafts of the pleadings put forward during the three days of hearing of the Motions and in the pleadings ultimately filed on 21 September 2011 the only claim in relation to the Contracts Review Act was a claim by the Second Defendant, Marquessa Hannaford. 41The Plaintiff's Notice of Motion for summary judgment seeking possession of the land against the First Defendant was heard by Hidden J on 28 September 2011. His Honour delivered judgment on 24 August 2012. 42In his judgment, Hidden J noted that the Defence of the Defendants raised three discrete related issues being: (a) That the Defendants and the Bank entered into a "Switching Agreement", by which the requirement for monthly payments of principal and interest was varied to monthly payments of interest only and that the Bank in breach of that agreement continued to apply payments to the principal; (b) In the alternative that the Bank was estopped from "avoiding" that Switching Agreement by a course of conduct which led the Defendants to believe that it had been accepted; and (c) That the Bank acted unconscionably in breach of provisions of the ASIC Act based upon the same course of conduct. 43His Honour held that the Switching Agreement was not made and the Defences were unarguable in answer to the Bank's claim for possession at [27]. 44On 5 September 2012 Hidden J directed that as to the balance of the relief sought in the Statement of Claim the Defendants were to file and serve any further evidence by 28 September 2012. He stood the proceedings over to the Registrar's List on 29 August 2012. The Defendants failed to comply with Hidden J's order for the service of evidence. 45On 29 October 2012 when the matter came before the Registrar he directed by consent that the Defendants were to file and serve any further evidence by 19 November 2012. The proceedings were stood over to my list on 7 February 2013. An affidavit sworn 21 November 2012 by Marquessa Hannaford was filed on 4 December 2012 more than two weeks late. No affidavit was filed by Susan Hannaford. 46The matter came before me again on 7 February 2013. I was then informed by Mr Mandoh, for the Defendants, that he had received instructions recently that Susan Hannaford (whom he wrongly described as the Second Defendant), who had not previously intended to put on an affidavit, now intended to do so. He sought until 15 April to do that but he could not explain to me what had changed the Third Defendant's mind about swearing an affidavit. I directed that the Defendants were to serve all affidavits on which they relied by 1 March 2013 and that any affidavits served after that time could not be relied upon without my leave or the leave of the judge hearing the proceedings. 47The Plaintiff said it wished to apply to reinstate the registration of the First Defendant because that company had been deregistered. Directions were made in relation to that Motion and a Notice of Motion was filed on 28 February 2013. The Motion was to be returnable before me on 7 March 2013. 48The matter came before me again on 7 March 2013. I was informed that proceedings between the Plaintiff and the Second Defendant/Second Cross-Claimant (Marquessa Hannaford) had settled. The Bank discontinued its proceedings against the Second Defendant and by consent I ordered that the Second Cross-Claimant's First Cross-Claim was dismissed with no order as to costs. 49No further evidence had been filed by the Third Defendant. Mr Mandoh sought to hand up a Notice of Ceasing to Act in relation to the Third Defendant. When I inquired whether Mr Mandoh had given Susan Hannaford a Notice of Intention of Ceasing to Act he said that he sought my leave to hand up the Notice of Ceasing to Act because "I don't know where she is, your Honour. I can't contact her". I declined to allow the filing of the Notice of Ceasing to Act and said he would need to follow the ordinary procedure of notification to her whether by substituted service or otherwise. The Plaintiff's Motion for reinstatement and the proceedings generally were stood over to 12 April 2013 for hearing before me. 50On 12 April 2013 I heard the Plaintiff's application to reinstate the registration of Susan Hannaford Pty Ltd and I gave judgment on that day: Commonwealth Bank of Australia v Susan Hannaford Pty Ltd [2013] NSWSC 342. 51At the conclusion of that determination Mr Mandoh sought to hand up an affidavit of Susan Hannaford sworn 11 April 2013. He said that he would seek leave to amend the Cross-Claim and Defence filed on her behalf because she wanted to raise a defence under the Contracts Review Act. I directed him to file a Notice of Motion which is the subject of this judgment. 52The motion came on for hearing before me on 10 May 2013. Mr Mandoh, the solicitor for the Third Defendant, read the Third Defendant's affidavit of 11 April 2013. He also sought to read a further affidavit of Susan Hannaford of 9 May 2013. This affidavit was handed to counsel for the Plaintiff for the first time after the hearing commenced. I adjourned briefly to enable counsel to read this affidavit and obtain instructions. When the matter resumed Mr Mandoh sought to read an affidavit he had sworn on the preceding day. It had been emailed to the Plaintiff's solicitor late on the afternoon of 9 May. These affidavits had been directed to be served by 1 March 2013. 53Counsel for the Plaintiff also informed me that the form of the cross-claim sought to be filed had only been sent by Mr Mandoh on the evening of 9 May. The only explanation for these delays was that Mr Mandoh had only received instructions with regard to the documents on 9 May. When such instructions were sought was not disclosed nor was any other explanation provided for the late provision of instructions. 54The matters contained in Susan Hannaford's affidavits concerning the basis for any claim under the Contracts Review Act had never been raised in any affidavits filed or served earlier in the proceedings nor in any form of the pleading put forward. In summary in the affidavits the Third Defendant said that at the time she signed some loan documents with the Bank she did not understand that she was signing a personal guarantee. She simply understood it was a refinance of the Company's home loan. She said she felt pressured to sign the documents, that she did not receive any legal advice and that the Bank's representative said that she did not need legal advice because the documents were standard company mortgage documents that were not negotiable. 55In neither of her affidavits did she give any explanation for not having raised this issue at an earlier time. The only evidence concerning delay was contained in paragraph 2 of her affidavit of 11 April 2013 which said: The reason for the brief delay in preparing and serving this affidavit was due to a very serious heart condition that made me unfit to prepare this affidavit at an earlier time. Annexed and marked "A" is a copy of the doctor's letter. (emphasis added) 56There was a letter from a Dr Farzam dated 9 April 2013 that said: Susan Hannaford is suffering from tachycardia and acute cardiac arrhythmia. She has a history of hospital admissions with the same complaint. This has caused her to be unfit for work from March 6 2013 to April 9 2013. 57Since the order I made for the service of her further affidavit was made on 7 February 2013 with affidavits to be filed by 1 March 2013 the doctor's report does not assist in providing an explanation for the failure to swear affidavits in the time I directed nor for the failure to raise the new claim at any time during the last two years. Moreover, it makes reference only to fitness for work (presumably as an actress since that is what the Third Defendant's occupation is) and says nothing about her ability to attend to other matters such as the swearing of affidavits or giving instructions to lawyers. 58In her affidavit of 9 May 2013 she said this in relation to any explanation for delay: 24. I currently reside overseas and due to an ongoing heart condition there have been repeated admissions to hospital, in addition, for medical reasons I am unable to travel back to Australia. Annexed and marked "E" is a copy of the doctor's letter confirming that I am "unfit to travel". 25. In addition to my medical circumstances, on April 19 2012 Emmanuel Margolin my de facto partner of 28 years died. ... 59The further medical report from Dr Farzam of 30 April 2013 said this: Ms Susan Hannaford has been suffering from repeated episodes of tachycardia and acute cardiac arrhythmia. Ms Hannaford has had a history of hospital admissions due to this condition over the past several years. Due to her medical condition Ms Hannaford is unfit to travel. 60In relation to the delay Mr Mandoh said this in his affidavit: 2. I first received instructions to take over carriage of this matter for the defendants on or about September 2011. At this time I was approached by Marquessa Hannaford, the daughter of the third defendant and herself the second defendant in the proceedings at the time ("Marquessa"). Marquessa stated to me words to the effect of "I would provide you with instructions on behalf of the defendants, including my mother in this matter". 3. At around this time, a motion had been filed by Marquessa to amend the defence to the plaintiff's claim and file the first cross-claim on behalf of the defendants ("first application to amend defendants' pleadings"). The amended documents sought to be filed had been pre-prepared by someone else at the time Marquessa initially approached me to act on the defendants' behalf, however leave was ultimately given by the court to file the amended documents after extensive modifications were made thereto. 4. At this time I had not had direct contact with the third defendant, Susan Hannaford ("Susan"), who ! was told by Marquessa was overseas and unwell. 5. Subsequently, I have indicated on a number of occasions to Marquessa that I could not continue to act for Susan if I could not get instructions directly from her, and that I would file a notice of ceasing to act. 6. On or about 8 April 2013, I received a telephone call from Susan from the United States of America. She stated to me words to the following effect, that at the time of signing the loan documents: (a) she was unaware that there was a personal guarantee in the loan documents that she signed with the plaintiff's representatives; (b) she had received no legal advice whatsoever from any legal practitioner in relation to her rights and obligations as a personal guarantor; (c) the guarantee that was in the documents was not explained to her; (d) she did not understand what a personal guarantee was or what it's (sic) implications were; (e) she believed that the Balgowlah Heights property, 30A Beatty Street, Balgowlah Heights was the security for the company refinance. 7. Susan instructed me to seek a further amendment of the defence and cross-claim on her behalf, to reflect what she had stated to me. 8. I asked Susan why she had not contacted me directly previously, at the time the first application to amend the defendants' pleadings was made, so that we could incorporate her position in the pleadings then. She stated words to the effect that she has been in ill health and could not do so at that time. She said she could send me a medical certificate. 61It should first be noted that Mr Mandoh is in error in saying that he first received instructions to take over the carriage of this matter for the Defendants in or about September 2011. As appears in paragraph 34 he filed a Notice of Appointment of Solicitor on 29 July 2011 and thereafter conducted the three days of hearing of the proposed amended Defence and the proposed cross-claim before me. 62Secondly, Mr Mandoh's report of what the Third Defendant told him, namely that she had been in ill health and could not contact him during 2011 when the proposed amended pleadings were being considered, was not supported by anything in the Third Defendant's affidavits. Neither of the medical reports refers specifically to 2011 nor (as noted earlier) to the fact that the Third Defendant was unable to contact Mr Mandoh or any other solicitor nor provide instructions, nor swear affidavits at any time. 63Thirdly, it is significant that, although the Second Defendant was said by Mr Mandoh to be providing the instructions on behalf of all the Defendants including the Third Defendant, at no time did she apparently provide instructions about the circumstances of the Third Defendant's execution of the loan documents and guarantee that might give rise to a Contracts Review Act claim. In that regard I note that the Second and Third Defendants swear to having signed the documents together. 64Further, it is apparent from the affidavits sworn by the Third Defendant in 2011 that the Third Defendant was in Sydney in May and June 2011 at and after the time the Notice of Motion seeking leave to file a cross-claim had been filed. When I asked Mr Mandoh at the hearing of the present Motion why the Third Defendant had not instructed him in relation to the Contracts Review Act claim in 2011 he informed me that she was overseas and it was difficult to get instructions. There was no evidence of when the Third Defendant left Australia. If she was suffering from the heart conditions reported by Dr Farzam her condition was not so serious that she was unfit to travel in 2011 as appears presently to be the case.

Consideration 74In my opinion the application to amend the cross-claim should be refused for the following reasons. These reasons have regard to the matters listed in s 58(2)(b). 75First, any explanation concerning delay is entirely inadequate (s 58(2)(b) (ii) CLA). Nothing in the medical evidence suggests that the Third Defendant was incapable of giving instructions. Further, her medical condition could not have been a serious impediment to the proper conduct of the proceedings in 2011 because she swore affidavits and travelled from Australia to the United States of America. 76Secondly, it cannot be said that the Third Defendant was not aware of rights that she may have under the Contracts Review Act (s 58(2)(b)(i)). Reference was made to that Act in the various iterations of the pleadings put forward from the time of the first defences in March 2010 through to the Amended Defence and Cross-Claim allowed to be filed in September 2011. Moreover, from at least the time of the Cross-Claim put forward in 2011 the Second Defendant made a claim based on the unjustness of the contracts. 77It is difficult to understand what might have occurred as late as February 2013 to cause the Third Defendant to realise that she had no knowledge of signing a guarantee. In that regard, I am assuming that the affidavit I was informed the Third Defendant wished to serve and rely on in February 2013 was, in substance, the same as the affidavit that was put forward in support of the application to amend the Cross-Claim in April 2013. Certainly, there is no evidence from the Third Defendant about how it is that for the first time in 2013 she realised that she did not know she signed the guarantee when the claim against her personally had always been made on the basis of that guarantee. 78Thirdly, I have regard to the dilatory way the Defendants have acted during the course of the proceedings with particular reference to the matters in paragraphs 20 and 34 (the failure to serve a copy of the proposed cross-claim from 17 May until 29 June 2011), the matters in paragraphs 29 and 36 (the failure to serve the proposed amended defence from 15 June until 29 July 2011) resulting in an adjournment of the hearing of the Motion, the matters in paragraphs 44 - 46, 49 and 51 (the repeated failures to serve evidence in accordance with Court orders) and the matters in paragraphs 52 and 53 (the late service of draft pleading and affidavits for the hearing of this Motion). None of those failures in due expedition arose from circumstances beyond the control of the Defendants (s 58(2)(b)((iv) & (v)). 79Fourthly, the Cross-Claim filed on 21 September 2011 was the fourth attempt to plead the matters sought to be raised (see paragraphs 30, 35, 36 and 37. The present proposed amended cross-claim would be the fifth attempt to raise the matters sought to be raised by the Third Defendant. In my opinion, having regard to what was said in Dennis, the limit has already been well and truly reached to justify a refusal of leave. 80Fifthly, as a result of the judgment of Hidden J and the resolution of the matters between the Bank and the Second Defendant, the remaining matters in issue between the Plaintiff and the Third Defendant are significantly confined (s 58(2)(b)(vi)). The issues contained in the Amended Defence filed 21 September 2011 and the cross-claim filed 21 September 2011 are these: 81(1) The Switching Agreement. This is the allegation that the Bank agreed to alter the repayments so that they became repayments of interest only. From that allegation the Defendant asserts a breach of contract by the Bank, says alternatively that the Bank is estopped from denying that there was such an agreement and pleads unconscionability for not honouring it. 82In his judgment of 24 August 2012 Hidden J determined that the Switching Agreement was never concluded, not the least reason for which was that the arrears first required to be paid by the Bank were never in fact paid (see at [20] - [22]). Hidden J further found that the Bank was not estopped from its conduct by denying such an agreement or that its conduct was unconscionable in the manner pleaded in the Defence (at [22]). 83It is difficult to see how in the face of the failure the principal debtor (the First Defendant) to make out such Defences that they are now available to the guarantors. The Third Defendant was a party to the summary judgment application and would, even if not a guarantor, be bound by the result by reason of the doctrine of extended estoppel: Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; (2001) 53 NSWLR 198. 84(2) The Second Defendant's claim under the Contracts Review Act. The Second Defendant's claims have been dismissed by consent. 85(3) Unconscionability on the Bank's part by refusal to consent to the lease of the property and a refusal to register the transfer from the Company to the directors to avoid land tax. These would appear to be the only issues in the proceedings which have not been determined. 86As the proceedings are presently constituted, the hearing is likely to be a confined one and will take no more than a day. If the Third Defendant is now entitled to raise a Contracts Review Act defence in relation to the execution of the guarantee and, it would seem from her affidavits, also the execution of the loan documents, the proceedings are likely to take at least double the length of time that will now be needed and maybe more. There will be delay in all of the evidence in relation to these new issues being served and a hearing date for a two or three day hearing will be much further in the future than a hearing date that can now be obtained on the present proceedings as they are constituted. These matters amount to actual prejudice in relation to the Plaintiff, and the more so because it is now clear that the sale of the land will leave a considerable shortfall for what is claimed pursuant to the guarantee. 87Finally, there is the issue of the bona fides of the claim now sought to be made. In her affidavit of 11 April 2013 the Third Defendant said this: 6. I do not recall signing a guarantee with the Commonwealth Bank. All I recall is that in about 2004 I signed some loan documents with the Bank's representatives. These were not explained to me by the Bank's representatives and I did not understand that there was a personal guarantee involved, in which I was personally liable for $5,500,000. I simply understood that it was a refinance of the company home loan. ... 9. At the time of signing the loan guarantee I did not receive any legal advice from any solicitor in relation to the guarantee. The Bank's representative stated words to the effect of "you don't need legal advice to sign standard company mortgage documents, they're not negotiable. 10. I did not understand the relevance, effect or consequence of the documents I was signing and had absolutely no idea at all that I was signing a personal guarantee for the company refinance, let alone a personal guarantee for $5,500,000. All the documents provided by the Commonwealth Bank representative were bundled together in a pile on the kitchen/dining room table. The Bank representative never mentioned that there was a personal guarantee included in the pile of company mortgage documents. All of the places for my signature were pre-marked by the Bank with "sign here" post-its. The Bank representative then flipped the pages to each signing page, not allowing me the opportunity to read the individual pages one by one. The banker then pointed with his finger to the areas for me to sign. ... 16. I was shocked when I discovered that my teenage daughter, who was around 17 years old at the time had also been tricked by the Bank into signing a personal loan guarantee for $5,500,000. 88It is to be noted that the Third Defendant does not say when it was that she discovered her daughter had signed a personal guarantee and, thereafter, what enquiries she might have made about whether she had signed one. However, in the First Cross-Claim filed 21 September 2011 (as well as earlier forms of that document) paragraph 3 said this: Pursuant to the loan agreement the first defendant was the mortgagor and cross-defendant was the mortgagee and the second cross-claimant and third cross-claimant signed separate guarantee contracts purportedly guaranteeing the first cross-claimant's obligations under the loan agreement. 89That pleading is quite inconsistent with what the Third Defendant now wishes to put forward, namely, that she was unaware that she signed such a guarantee. Even if, looking at the matter most favourably to the Third Defendant, paragraph 3 of the First Cross-Claim filed 21 September 2011 was merely accepting that she had signed such a guarantee although she had not been aware of it at the time, there is no explanation for why she did not raise her lack of awareness about the signing of that guarantee by no later than the date of filing of the First Cross-Claim on 21 September 2011 or at the earlier times that the various forms of that document were put forward. If the Third Defendant had been unaware that she signed the guarantee one might have expected a statement to that effect in answer to paragraph 11. 90Further, the issue of the unjustness of the Guarantee was raised with respect to the Second Defendant in the Cross-Claim filed on 29 June 2011. In the final form of this document filed on 21 September 2011 the following particulars of unjustness were common to both the Second and Third Defendants (based upon complaints now made by the Third Defendant in her affidavits): (b) At this time the second cross-claimant did not have independent legal advice, nor did the cross-defendant inform her of the need for independent legal advice; (c) The second cross-claimant signed the loan guarantee: i) as loan guarantor; ii) without receiving independent legal advice as to the effect of the guarantee; iii) ... iv) the subject loan was a multi-million dollar loan; v) the cross-defendant did not inform her of the need for independent legal advice as guarantor of the loan; vi) the second cross-claimant did not understand and/or appreciate what she was signing or getting into; vii) the effect of the documents she was signing were not properly explained to the second cross-claimant by the cross-defendant; viii) the terms of the loan and guarantee were not negotiable; ix) there was material inequality in bargaining power between the cross-defendant and the second cross- claimant; ... 91Again, if the Third Defendant's present complaints about these matters are genuine one might have expected them to have been pleaded on the Third Defendant's behalf in 2011 if not at the time the first Defence was filed. Where there is no explanation for not having done so I am entitled to be sceptical about why, at this late stage and in the light of the conduct of this litigation by the Defendants, the matter of the unjustness of the guarantee is now being raised for the first time. 92Taken together all of these matters mean that the Third Defendant should not now be entitled to amend the Cross-Claim. To permit amendment would be contrary to the provisions of ss 56 to 58 CPA. Further, the Plaintiff would suffer actual prejudice in the delay and increase in cost of a longer hearing.

Commonwealth Bank of Australia v Susan Hannaford Pty Ltd

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