[2003] VSCA 43
Dai v Zhu [2013] NSWCA 412
Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10
[1995] HCA 19
Hearne v Street (2008) 235 CLR 125
[2008] HCA 36
Morony v Reschke [2017] NSWSC 544
Nelson v Nelson (1995) 184 CLR 538
[1995] HCA 25
Tynan & Timms [2020] FamCA 57
Universal Music Australia Pty Ltd v Pavlovic
Source
Original judgment source is linked above.
Catchwords
[2003] VSCA 43
Dai v Zhu [2013] NSWCA 412
Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10[1995] HCA 19
Hearne v Street (2008) 235 CLR 125[2008] HCA 36
Morony v Reschke [2017] NSWSC 544
Nelson v Nelson (1995) 184 CLR 538[1995] HCA 25
Tynan & Timms [2020] FamCA 57
Universal Music Australia Pty Ltd v PavlovicM Hazan (Plaintiff)
J Simpkins (First Defendant)
JD Cook (Second Defendant)
Judgment (14 paragraphs)
[1]
Music Australia Pty Ltd (No 2) [2017] NSWSC 314
Category: Procedural and other rulings
Parties: John Alan Crawford (Plaintiff/Respondent)
Liam Jerome Timms (First Defendant)
Jacinta Maree Tynan (Second Defendant/Applicant)
Representation: Counsel:
ML Einfeld QC; M Hazan (Plaintiff)
J Simpkins (First Defendant)
JD Cook (Second Defendant)
[2]
Solicitors:
Allsop Glover (Plaintiff)
A Einfeld (First Defendant)
Walter & Elliott Family Lawyers (Second Defendant)
File Number(s): 2019/320837
[3]
Judgment
By a statement of claim filed on 14 October 2019 the plaintiff, John Alan Crawford, sues the first defendant, Liam Jerome Timms, and the second defendant, Jacinta Maree Tynan, for a liquidated sum of $996,085.78 or in the alternative $843,082.76 together with interest. Each of the defendants was served with the statement of claim. On 23 December 2019, Mr Crawford applied by notice of motion for default judgment. On 30 December 2019, default judgment for $830,302.31 was entered against both defendants.
Mr Timms and Ms Tynan are former partners who have been engaged in proceedings in the Family Court for many years. Pursuant to orders made by the Family Court, on 30 November 2019 they exchanged contracts to sell their home in Mosman (the "Mosman Property"). Mr Crawford contends that his judgment debt is secured over the Mosman Property and lodged a caveat to protect his interests. In the circumstances which I will describe, Ms Tynan sought an "anti-suit injunction" in the Family Court against Mr Crawford to prevent the prosecution of these proceedings. On 10 February 2020, her application was dismissed.
On 19 February 2020, Ms Tynan filed a notice of motion seeking to set aside the default judgment, file a defence and remove the caveat. The notice of motion was listed for hearing before me on 6 March 2020. Mr Timms appeared but did not seek to set aside the judgment entered against him. In the meantime the parties agreed on a regime that enabled the sale of the Mosman Property to be completed and the net proceeds of the sale to be deposited into an account maintained by Mr Crawford's solicitors in the names of Mr Crawford, Mr Timms and Ms Tynan. The disbursement of those funds awaits the outcome of Ms Tynan's motion and the proceedings generally. Left for immediate determination is Ms Tynan's motion to set aside default judgment. For the reasons that follow, Ms Tynan succeeds on that motion.
[4]
Setting Aside Default Judgment
Rule 36.16(2)(a) of the Uniform Civil Procedure Rules 2005 ("UCPR") confers on the Court power to set aside default judgment. In determining such an application, the Court must look at the whole of the circumstances to determine whether sufficient cause has been shown for setting aside the judgment (Adams v Kennick Trading (International) Ltd (1986) 4 NSWLR 503 at 506). The most relevant circumstances are whether there exists a bona fide defence, an "adequate explanation for the failure to defend and any delay" and prejudice to the parties (id). These factors are interrelated in that a failure to proffer an adequate explanation for the failure to defend is not necessarily fatal to the application to set aside (id).
In determining whether the defendant has a bona fide defence on the merits, the Court does not embark on a hearing of the full merits of the case but instead considers whether the defence asserted is bona fide and whether there is an arguable or triable issue (Dai v Zhu [2013] NSWCA 412 at [92]; "Dai"). Ultimately, it is necessary to consider whether it is in the interests of justice to allow the party seeking to set aside a default judgment to be permitted to defend the proceedings on the merits (Dai at [83]).
[5]
The Debt Sued Upon
The following paragraphs of the statement of claim upon which default judgment was entered define the debt that Mr Crawford alleged, at least initially, was owing by Ms Tynan:
"7. Between 14 July 2011 and 31 December 2011 the Plaintiff and the First and Second Defendants agreed on the terms of the sale and purchase of the Mosman Property and the "vendor finance".
Particulars of the sale and purchase of the Mosman Property and the Vendor Loan
(a) The Plaintiff agreed to sell the Mosman Property for a price of $1,800,000 to the First and Second Defendants as joint tenants;
(b) the Plaintiff agreed to lend to the First and Second Defendants jointly and severally a principal sum of $1,000,000 on terms as to repayment of the principal sum and interest with such loan to be evidenced and secured over the Mosman Property respectively by an unregistered Mortgage and a registered Caveat given to the Plaintiff respectively as Mortgagor and Caveator ("the Vendor Loan"); and
(c) the Vendor Loan would be made simultaneously with completion of the sale and purchase of the Mosman Property by reduction of the amount of $1,000,000 from the amount to be paid by the First and Second Defendants for the Mosman Property.
8. After 14 July 2011, the Plaintiff entered into a binding contract for the sale of the Mosman Property for $1,800,000 to the First and Second Defendants as joint tenants.
9. In or about December 2011 the First and Second Defendants as mortgagors jointly and severally signed a mortgage over the Mosman Property in favour of the Plaintiff as mortgagee ("the Second Mortgage").
10. The Second Mortgage was executed by the First and Second Defendants in anticipation of and in consideration for the sale to them by the Plaintiff of the Mosman Property and the Vendor Loan." (emphasis in bold in original)
These paragraphs recount a transaction in which Ms Tynan and her husband purchased the Mosman Property from Mr Crawford for $1.8million, $1million of which was the "Vendor Loan". The balance of the statement of claim then defines aspects of the obligation to repay the Vendor Loan. This includes a so‑called "Side Letter" dated 26 December 2011 which is pleaded as specifying an interest rate of 9% per annum calculated monthly in arrears and an escalating schedule of repayments for the loan until September 2021. The statement of claim pleads that "[o]n or about 30 December 2011 the sale and purchase of the Mosman Property was completed simultaneously with the making of the Vendor Loan", that payments were made under the schedule of payments until 31 December 2015 but thereafter Ms Tynan and her husband "have fallen into default under the terms of the Vendor Loan". Accordingly, it is pleaded that that the "principal and all interest due under the Vendor Loan either pursuant to the terms of the Side Letter or pursuant to the terms of the Second Mortgage then became immediately due and payable to the Plaintiff". The relief claimed in the statement of claim was a judgment for the sum said to be owing under the Vendor Loan.
[6]
The Transactional Documents
An affidavit from Ms Tynan sworn 19 February 2020 was read on the application. Her version of the events surrounding the purchase of the Mosman Property is set out below. At this point it is necessary to set out the effect of the documents annexed to her affidavit concerning the purchase of the Mosman Property.
Consistent with the pleading, annexed to Ms Tynan's affidavit was a copy of a contract for the sale of the Mosman Property signed by her and Mr Timms recording a sale price of $1.8million. [1] The contract is undated but emails exchanged between them and their solicitor in the period 15 to 21 December 2011 suggest that it was signed on 23 December 2011 and that a contemporaneous exchange and settlement was meant to take place on that day. [2] However, Ms Tynan stated in her affidavit that exchange occurred on 30 December 2011. [3] The contract bears a stamp date of 29 December 2011. A set of settlement instructions, bank statements and copies of cheques all suggest that the settlement took place on 30 December 2011. Those documents show that $1.8million was paid to Mr Crawford on settlement with $200,000 provided by Ms Tynan and Mr Timms from their own funds and $1.6million funded by a mortgage over the Mosman Property in favour of the National Australia Bank ("NAB"). [4]
There was also tendered a copy of an unstamped memorandum of mortgage over the property signed by Mr Timms and Ms Tynan and bearing the date "December 2011", [5] a copy of an undated caveat signed by Mr Timms and Ms Tynan acknowledging the existence of an equitable mortgage over the property in favour of Mr Crawford [6] and an unsigned typed letter dated 26 December 2011 addressed to Mr Crawford and his wife from Ms Tynan and Ms Timms. The unstamped mortgage and the caveat were sent to Ms Tynan and Mr Timms' solicitor by email on 23 December 2011 which stated that they were "to be executed by your clients and handed over on settlement on December 30". [7] Ms Tynan and Mr Timms' solicitor forwarded the email to them. [8]
The basis on which the unstamped mortgage was tendered is explained below. Annexure A to the mortgage records that, "[f]or the consideration aforesaid", Mr Timms and Ms Tynan as Mortgagors "covenant with the Mortgagee", ie Mr Crawford, to pay him $1,000,000.00 or so much of that sum as shall remain unpaid twelve months after written notice of repayment of the principal sum was issued. It is also provides for interest to accrue on the unpaid amount at a rate to be agreed and failing agreement at a rate that is 3% per annum above the Reserve Bank of Australia Cash Rate.
[7]
Bona Fide Defence
Annexed to Ms Tynan's affidavit is a draft defence. Paragraphs 1 to 16 of the draft defence assert that the purchase price for the Mosman Property was $1.8million, that the purchase price was funded through a loan with the NAB and deny the existence of the Vendor Loan. The balance of the draft defence pleads a series of alternative defences namely: an absence of consideration for the Vendor Loan; undue influence supposedly exercised by Mr Timms over Ms Tynan; a claim for relief under the Contracts Review Act 1980; a claim for relief under the National Credit Code (being Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth); innocent misrepresentation; unilateral mistake; an absence of writing to support the Vendor Loan and the alleged expiry of the Limitation Act 1969. All of these defences appear to be responsive to the transaction pleaded in the statement of claim, namely, an alleged Vendor Loan of $1million said to be part of a purchase price of $1.8million.
In her affidavit, Ms Tynan states that she and Mr Timms agreed to purchase the Mosman Property for $1.8million. [9] She confirmed that figure was financed from their own resources and a mortgage from NAB of $1.6million. [10] Ms Tynan stated that she had no recollection of the signing the unstamped mortgage or the caveat. [11] In relation to the letter dated 26 December 2011 she states that she does not recall signing it, does not know who prepared it and does not have a signed copy. [12] She denies owing Mr Crawford an additional $1million. [13] Ms Tynan states that she was aware that Mr Timms has made payments to Mr Crawford since 2011. However, she asserts that she attempted to question him about why the payments were being made but did not receive any response. [14]
Ms Tynan states that she and Mr Timms separated in April 2015 and she and her children moved out of the Mosman Property in December 2015. [15] She states that, after she and Mr Timms separated, she "went through [Mr Timms] and my paperwork" and "saw a document which referred to [Mr Crawford] having a first right of refusal if [Mr Timms] and I were to sell the property". [16] She said she sought legal advice in relation to the right of first refusal and her solicitors wrote to Mr Crawford and his wife on 30 March 2017. Their letter refers to the solicitor having sighted "a letter dated 26 December 2011 that appears to have been signed by both of you, as well as by" Ms Tynan and Ms Timms. [17] (Mr Crawford tendered a poor quality copy of the final page of the letter dated 26 December 2011 bearing what appear to be their signatures. [18] ) The letter complains about the right of first refusal and seeks Mr and Mrs Crawford's agreement not to enforce it and the removal of the caveat.
[8]
Delay
On 10 July 2019, orders were made in the Family Court proceedings between Ms Tynan and Mr Timms for the sale of the Mosman Property and joining Mr Crawford as a party to the proceedings. On 6 August 2019, Mr Crawford's solicitors wrote to Ms Tynan's solicitors referring to the orders made on 10 July 2019 and to the loan owed to their client. They foreshadowed commencing proceedings for its recovery. [21] This was followed by a letter dated 4 September 2019 seeking confirmation that the loan would be paid from the sale proceeds of the Mosman Property. On 21 October 2019, Ms Tynan's solicitors advised that they had instructions to accept service of any process commenced by Mr Crawford. The statement of claim was served the following day. On 4 November 2019, Ms Tynan's solicitors wrote to Mr Crawford's solicitors inviting them to withdraw their client's statement of claim and threatening to file an "anti‑suit injunction". Mr Crawford's solicitors responded on 7 November 2019 again seeking confirmation that the debt claimed was owing. On 12 November 2019, Ms Tynan's solicitors responded declining to confirm the amount owing "in the absence of receiving any source documents" and asserting that the "Supreme Court proceedings is forum non conveniens". [22]
On 18 November 2019, Ms Tynan applied to the Family Court for orders under ss 90AF(1) and (2) of the Family Law Act 1975 (Cth) restraining Mr Crawford from enforcing his judgment debt, requiring him to remove his caveat over the Mosman Property and for lodging $1million from the net sale proceeds of the Mosman Property in a controlled monies account "on a without admissions basis". On 18 December 2019, McClelland DCJ in the Family Court fixed the application for hearing on 4 February 2020. On the same day, Ms Tynan's solicitors wrote to Mr Crawford's solicitors seeking their agreement to take no further steps in the Supreme Court proceedings pending the hearing of the application. [23] On 20 December 2019, Mr Crawford's solicitors responded advising that they would apply for judgment but would not take any steps to enforce it until after 4 February 2020. [24] On 23 December 2019 they advised that they were applying for default judgment that day. As noted, default judgment was entered on 30 December 2019.
Ms Tynan's application was heard on 4 February 2020. On 10 February 2020, McClelland DCJ published reasons for refusing to restrain Mr Crawford from prosecuting these proceedings (Tynan & Timms [2020] FamCA 57). His Honour found, inter alia, that as the Family Court was unable to go behind the judgment debt (at [61]) and, in the absence of a draft pleading identifying a basis for challenging it, the Court was unable to make "an assessment of [Ms Tynan's] prospects of successfully applying to set aside the default judgment" (at [69]). This was said to be fatal to her application.
[9]
Prejudice and Costs
It is necessary to consider the respective prejudice to the parties from the grant or refusal of the application to set aside default judgment. In Ms Tynan's case, it follows from the above findings that, if her application was refused, she would lose the capacity to defend a substantial claim to which she has a bona fide defence. In Mr Crawford's case, even if the judgment against Ms Tynan is set aside, he will retain a judgment against Mr Timms which is secured over at least Mr Timms' interest in the sale proceeds of the Mosman Property (although the size of that interest appears to be in issue in the Family Court proceedings).
Otherwise, the prejudice occasioned to Mr Crawford appears to be the costs of the litigation. This has been in part occasioned by the manner in which his case was pleaded which did not reflect the transaction he ultimately contended for. However, it has also been occasioned by Ms Tynan's approach to the litigation which can be characterised as a refusal over time to address the legal basis for his claim. At the very least, Ms Tynan must pay Mr Crawford's costs of applying for default judgment. In relation to the costs of Ms Tynan's notice of motion, I will give the parties the opportunity to make submissions on the papers.
[10]
Duties Act 1997
At the hearing of this application, the transfer of the Mosman Property that was registered in late 2011 was not tendered. As noted, the evidence suggests that it was only stamped to reflect a purchase price of $1.8million. However, counsel for Ms Tynan tendered an exhibit to her affidavit which included the unstamped mortgage. As the mortgage pre‑dated 1 July 2016, stamp duty was payable (Duties Act, s 203A). Although none of the parties objected, I indicated that I would reject the tender of the mortgage in the absence of an undertaking to pay the duty. Counsel for Ms Tynan stated that his client declined to proffer the undertaking. In the absence of that undertaking, Mr Einfeld proffered an undertaking on behalf of his client in terms of s 304(2)(b) of the Duties Act.
Section 304 provides:
304 Receipt of instruments in evidence
(1) An instrument that effects a dutiable transaction or is chargeable with duty under this Act is not available for use in law or equity for any purpose and may not be presented in evidence in a court or tribunal exercising civil jurisdiction unless:
(a) it is duly stamped, or
(b) it is stamped by the Chief Commissioner or in a manner approved by the Chief Commissioner.
(2) A court or tribunal may admit in evidence an instrument that effects a dutiable transaction, or is chargeable with duty in accordance with the provisions of this Act, and that does not comply with subsection (1):
(a) if the instrument is after its admission transmitted to the Chief Commissioner in accordance with arrangements approved by the court or tribunal, or
(b) if (where the person who produces the instrument is not the person liable to pay the duty) the name and address of the person so liable is forwarded, together with the instrument, to the Chief Commissioner in accordance with arrangements approved by the court or tribunal.
(3) A court or tribunal may admit in evidence an unexecuted copy of an instrument that effects a dutiable transaction, or is chargeable with duty in accordance with the provisions of this Act, if the court or tribunal is satisfied that:
(a) the instrument of which it is a copy is duly stamped, or is stamped in a manner approved by the Chief Commissioner, or
(b) the copy is duly stamped under section 299.
Mr Einfeld clarified that the undertaking extended to informing the Chief Commissioner [of State Revenue] of his client's case that the true purchase price was $2.8million and that it may extend to any duty owing in relation to the transfer of land the subject of the proceedings. [27]
[11]
Family Court Affidavits
During the course of the hearing of the notice of motion, Mr Einfeld sought to tender an affidavit sworn by Ms Tynan on 18 November 2019 that was read in the hearing before McClelland DCJ and two financial statements sworn by Ms Tynan in the Family Court proceedings between her and her husband dated 8 June 2017 and 13 June 2019 respectively. It was said that those statements contain admissions of Ms Tynan's indebtedness to Mr Crawford. At the conclusion of argument on their admissibility, I admitted Ms Tynan's affidavit dated 18 November 2019 and rejected the tender of the two financial statements. I indicated reasons for those rulings would be provided in the judgment on the motion.
Counsel for Ms Tynan, Mr Cook, submitted that the tender of the affidavits should be rejected on the basis that their deployment in these proceedings was contrary to the implied undertaking that restricts the use of material produced by one party under compulsion in proceeding for any purpose other than that for which it was given, without the leave of the Court (Hearne v Street (2008) 235 CLR 125; [2008] HCA 36 at [96]; "Hearne"). Mr Einfeld submitted that the implied undertaking was not engaged as Ms Tynan's affidavit dated 18 November 2019 was read in the proceedings before McClelland DCJ. In relation to her financial statements, although they were not "read" or tendered in the proceedings before McClelland DCJ, Mr Einfeld submitted that the effect of their contents was disclosed in open court. In particular, an affidavit sworn by Mr Crawford's solicitor on 28 January 2020, Mr Dermot Maxwell, that was read in the proceedings before McClelland DCJ, described the effect of those financial statements as involving an acknowledgement by Ms Tynan of her indebtedness to the plaintiff. Mr Einfeld referred to a statement by Gleeson JA sitting at first instance in Universal Music Australia Pty Ltd v Pavlovic & Ors; Pavlovic & Anor v Universal Music Australia Pty Ltd (No 2) [2017] NSWSC 314 at [28] that "the implied undertaking ceases to apply to a document which is read or referred to in open court in a way that discloses its contents".
These submissions raised an issue about what type of disclosure or reference to such material in open court brings the implied undertaking to an end. In Hearne, Hayne, Heydon and Crennan JJ described the implied undertaking as operating "unless [the material] is received into evidence" (at [96]). In Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 32; [1995] HCA 19 ("Esso"), Mason CJ stated:
"The implied undertaking is subject to the qualification that once material is adduced in evidence in court proceedings it becomes part of the public domain, unless the court restrains publication of it."
[12]
Conclusion
It follows that the default judgment will be set aside. Given the above findings I will allow Mr Crawford the opportunity to file an amended statement of claim, if he so chooses, before Ms Tynan is required to file a defence. Given the potential significance of the sum involved and the difficulties that may be faced by the parties in progressing the matter during the current pandemic I will continue to case manage the matter for the present. Copies of all of the documents the subject of the following orders should be emailed to my Associate direct.
In relation to the costs of the motion, I will make orders for submissions and determine that issue on the papers.
Finally, I note that the effect of the undertaking agreed to by the plaintiff should be to bring to the attention of the Chief Commissioner of State Revenue the material suggesting that the purchase price for the Mosman Property was $2.8million but that duty of only $1.8million was paid on the transfer. If the undertaking had not been proffered, I would have referred a copy of these reasons to the Chief Commissioner of State Revenue direct.
Accordingly, in respect of the document which is pages 33 to 34 of Exhibit JMT1 to the affidavit of Jacinta Maree Tynan sworn 19 February 2020, the Court notes the undertaking of the plaintiff by his counsel in accordance with r 31.13(2) of the UCPR.
Otherwise, the Court orders that:
(1) Pursuant to Uniform Civil Procedure Rule 31.13(2), specify that the relevant time for the plaintiff to forward to the Chief Commissioner of State Revenue the name and address of the persons liable to pay duty is 28 days from the date of this judgment;
(2) The default judgment entered against the second defendant on 31 December 2019 be set aside;
(3) On or before 30 April 2020 the plaintiff file and serve any amended statement of claim;
(4) On or before 21 May 2020 the second defendant file and serve her defence;
(5) The second defendant pay the plaintiff's costs of his application for default judgment;
(6) Reserve costs in respect of the notice of motion filed by the second defendant on 19 February 2020;
(7) Direct the plaintiff and second defendant by 5.00pm on 7 May 2020 to each file and serve submissions in respect of the costs of the second defendant's notice of motion filed 19 February 2020 such submissions not to exceed four pages;
(8) Grant the plaintiff and second defendant liberty to file and serve submissions in reply on costs by 14 May 2020 such submissions not to exceed two pages;
(9) There be liberty to apply to Beech-Jones J on 2 days notice;
(10) The matter be listed for further directions before Beech-Jones J on 28 May 2020 at 9.30am.
[13]
Endnotes
Exhibit JMT1 to the affidavit of Jacinta Tynan sworn 19 February 2020 at p 7.
JMT1 at p 5.
Tynan affidavit at [33].
JMT1 at pp 16 to 32.
JMT1 at pp 33 to 34.
JMT1 at pp 37 to 38.
JMT1 at p 32.
id.
Tynan affidavit at [24].
Tynan affidavit at [29].
Tynan affidavit at [39].
Tynan affidavit at [41].
Tynan affidavit at [36] and [39].
Tynan affidavit at [44].
Tynan affidavit at [8].
Tynan affidavit at [48].
JMT1 at p 46.
Exhibit 1 at p 25.
Tynan affidavit at [50].
Exhibit 1, tab 4.
Exhibit 1, tab 1.
JMT1 at page 77.
JMT1 at p 85.
JMT1 at p 86.
Tynan affidavit at [69].
Tynan affidavit at [72].
Tr 06/03/2020 at p 5.20.
[14]
Amendments
23 April 2020 - Para [15] - amended to read "when the documents described in [10] are considered ..."
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: 23 April 2020
The copy of the letter dated 26 December 2011 that was tendered was unsigned. However, the evidence satisfies me that it was signed sometime around late December 2011 (see [23]). The letter recounts that its terms and conditions are "personal, confidential and binding". It records Mr Timms and Ms Tynan agreeing that amounts set out in a repayment schedule are "due and payable" on the last day of the month specified. The monthly payments commence at a rate of $2400 per month and increase over the period from January 2012 to September 2021 with substantial lump sums due at particular times. The last entry records a lump sum payment of $55,556.00 due in September 2021 by which time the cumulative payments that were meant to have been made were $1,009,505.00 and the balance owing would have been $9,505. (It is unclear what interest rate, if any, a total sum of $1,019,010.00 is said to reflect.)
Five other aspects of the letter dated 26 December 2011 should be noted. First, the letter does not purport to record any consideration being proffered for the indebtedness assumed by Ms Tynan and Mr Timms. Second, the letter contains provision for interest to accrue at a rate of 9% per annum on the difference between the cumulated table of payments that should have been made and the actual payments. Third, the letter purports to record Ms Tynan and Ms Timms conferring on Mr Crawford and his wife a right of first refusal to repurchase the Mosman Property for a total sum consisting of "a) Price Paid on 31 December 2011; b) Stamp Duty paid on a) above [and the] c) Cumulative total of all monies paid under the Schedule of Payments". Fourth, the letter includes a condition to the effect that, if any amount was outstanding on 31 December 2022, then an additional amount of $100,000 was due and payable. Fifth, the letter stated that if there was "un‑remedied payment default" then Ms Tynan and Mr Timms agreed to sell the "property back for $1,715,490 ($1,800,000 less stamp duty) plus the cumulative amount of any [p]ayments made under the Schedule of Payments".
The documents described in [9] are completely consistent with the parties having effected a sale of the Mosman Property for a purchase price of $1.8million. A copy of the transfer was not tendered. However, in a letter dated 21 December 2011, Ms Tynan and Mr Timms' solicitor enclosed a copy of the transfer and requested a cheque for stamp duty of $84,510.00. That figure is consistent with a purchase price of $1.8million. Contrary to the statement of claim, the documentary material demonstrates that the "sale price" of $1.8million was not partly funded via a Vendor Loan of $1million. Instead, it was fully paid by Ms Tynan and Ms Timms and funded by a combination of their own funds and a loan from the NAB.
However, when the documents described in [10] are considered, a very different transaction emerges. Considered as a whole, the documents are capable of suggesting that the parties agreed upon an additional component of the sale price of the Mosman Property of $1million to be funded by the Vendor Loan. If that is correct, then the true purchase price was $2.8million.
Four matters should be noted about a transaction of that nature.
First, if that is the true transaction entered between the parties then there the material is also capable of suggesting that either an object, or at least aspect, of the transaction was the evasion of payment of the proper amount of stamp duty. As noted, the evidence suggests that stamp duty was only paid on a purchase price of $1.8million.
Second, the terms of the "loan" as recorded in the unstamped mortgage are very different to those recorded in the letter dated 26 December 2011. The two documents do not refer to each other. The "loan" referred to in the unstamped mortgage is only repayable 12 months after a demand is made and interest runs on the principal sum at 3% above the Reserve Bank of Australia Cash Rate. The repayment terms and interest provisions of the letter dated 26 December 2011 are completely different.
Third, neither the unstamped mortgage nor the letter dated 26 December 2011, records the proffering of any consideration by Ms Tynan or Ms Timms for any Vendor Loan (although Senior Counsel for Mr Crawford, Mr Einfeld QC, contended that the mortgage was effective as a deed).
Fourth, critically the form of transaction suggested by a consideration of all of the documents was not the transaction sued upon in the statement of claim and the subject of a default judgment. As noted, the latter involved a purchase price of $1.8million funded by a Vendor Loan of $1million and the material demonstrates that the $1.8million was fully paid without a Vendor Loan.
In one part of her affidavit Ms Tynan "note[s] that the letter [from her solicitors] refers to the [letter of 26 December 2011] but does not seek to challenge the existence of the Vendor Loan". Ms Tynan explained that the subject of the letter from her solicitors was the right of the first refusal and she "did not properly understand the meaning and effect of the [letter dated 26 December 2011] and how it related to the purchase of the Mosman Property". [19]
Mr Einfeld submitted that Ms Tynan's explanation of the letter from the solicitor dated 30 March 2017 was fanciful and that the letter clearly amounted to an acknowledgement of her indebtedness to Mr Crawford. Mr Einfeld submitted that Ms Tynan has not disputed the existence of her indebtedness to Mr Crawford over a long period. He also referred to an affidavit sworn by Ms Tynan on 18 November 2019 in support of her application to the Family Court to restrain the pursuit of these proceedings. [20] The circumstances in which that affidavit was tendered in these proceedings are addressed below. In one part of that affidavit Ms Tynan states:
"Liam took complete control of the purchase of the Mosman Property. I had almost nothing to do with the transaction. Liam was responsible for dealing with the conveyancer….
On or around 29 December 2011, Liam and I purchased the Mosman Property from [Mr Crawford].
Liam and I entered into a mortgage agreement with John for $1,000,000… A copy of the unregistered mortgage and the caveat appear at page 15 [to an exhibit]. I cannot recall signing the mortgage document or the caveat.
On 26 December 2011, a letter was written that sets out additional terms and conditions in relation to the repayment of the Crawford Loan… I do not recall who prepared this letter and I cannot recall reading the terms and conditions of that letter."
In the balance of the affidavit Ms Tynan asserts that Mr Timms dealt with Mr Crawford in relation to the making of cash repayments of the loan and that she was not aware of how much was paid.
I accept that this affidavit amounts to an acknowledgement by Ms Tynan of an indebtedness to Mr Crawford. In light of that and the documents she appears to have signed, I am sceptical of Ms Tynan's explanation of the transaction as given in her affidavit. However, that is not determinative so far as whether the interests of justice warrant the setting aside of the default judgment.
The starting point is the claim as pleaded. For whatever reason, Mr Crawford filed a statement of claim that pleaded that the purchase price for the Mosman Property was $1.8million which was funded by a Vendor Loan for $1million which was due and payable. In response to that case, Ms Tynan has not just a bona fide defence; she has a strong defence. As noted, Ms Tynan appears to be able to prove that the purchase price of $1.8million was funded by a combination of a loan from NAB and funds provided by her and Mr Timms. It would also follow that she has a reasonably strong basis for contending that any documents that purported to create a loan for $1million to fund a purchase price that was in fact met with other funds, reflects a transaction that was either not supported by any consideration or was otherwise liable to be set aside as unfair.
Mr Einfeld submitted that, given Ms Tynan's acknowledgement of indebtedness to Mr Crawford, then the interests of justice warrant the refusal of Ms Tynan's application. However, that submission only begs the question as to what indebtedness Ms Tynan has acknowledged? If it was the indebtedness pleaded in the statement of claim, then she nevertheless has a reasonably strong defence. If it was an indebtedness based on a purchase price of $2.8million, then that is not pleaded in the statement of claim and other issues may arise if it was. The first is whether that was the true purchase price, a matter Ms Tynan at least now disputes. The second would be whether s 304(1) of the Duties Act 1997 would preclude Mr Crawford from being able to prove that transaction by any means in the absence of the transfer or contract for sale being up stamped (see [41] and Ash Street Properties Pty Ltd v Pollnow (1987) 9 NSWLR 80). Third, even if it could be so proved, is Ms Tynan's indebtedness based on the loan described in the unstamped Mortgage or the letter 26 December 2011, noting that they are not the same. Fourth, if it is based on the former, has 12 months elapsed since any notice was given requiring repayment (or is that not required when the property is sold)? Fifth, in any event, was such a transaction void for possible illegality or for being contrary to public policy (see Nelson v Nelson (1995) 184 CLR 538 at 604 to 605 and 612 to 613 per McHugh J)?
The existence of these issues throws up the difficulties for the Court if it refused Ms Tynan's application to set aside a default judgment against her on the basis that, if it was granted, Mr Crawford might plead a different cause of action. In the end result, I am satisfied that Ms Tynan has a bona fide defence to the case that is pleaded. To the extent that there is material suggesting that Mr Crawford can enunciate a different basis on which Ms Tynan is liable and in respect of which she appears to have acknowledged an indebtedness then until such a basis is properly pleaded it cannot be determined whether she has a bona fide defence. The matters just noted suggest some basis for concluding that she does.
As noted, on 19 February 2020, Ms Tynan filed her notice of motion to set aside the default judgment. In the meantime, the completion of the sale of the Mosman Property was due to occur on 10 February 2020 but was postponed. It has now occurred.
In her affidavit filed in these proceedings, Ms Tynan stated that her solicitor's office was closed for the Christmas period at midday on 20 December 2019. [25] She then stated: [26]
"Had I been aware that, notwithstanding the fact that my antisuit injunction application was listed for interim hearing … on 4 February 2020, [Mr Crawford] would have applied for a default judgment, I would have taken steps to file a defence in the Supreme Court including by giving instructions to my solicitors to taken any necessary steps in that regard immediately."
This passage and the statement in Ms Tynan's affidavit that her solicitor's office was closed at midday on 20 December 2019 conveys that the email from Mr Crawford's solicitor dated 20 December 2019 advising that he would apply for default judgment was not conveyed to her. This was not explored during the hearing. It seems difficult to understand in the age of emails being forwarded to different devices that such an email was not received and acknowledged. More importantly, it is to be remembered that Mr Crawford's solicitor's email of 20 December 2019 was a response to Ms Tynan's solicitors' email of 18 December 2019 which sought confirmation that no steps would be taken in the Supreme Court proceedings pending the hearing in the Family Court on 4 February 2020. Even if Ms Tynan's solicitors did not receive the email of 20 December 2019, they were not entitled to proceed into the Christmas break on the understanding nothing would happen.
In terms of an explanation for the failure to defend, this could be described as only just an adequate explanation. Ms Tynan's application to the Family Court would not have been compromised had she filed a defence. Her failure to do so appears to be the result of her solicitors failing to properly act in her interests.
In his submissions, Mr Einfeld went further and submitted that the relevant inquiry was to consider the whole period from August 2019 to February 2020. He submitted that, throughout that period, Ms Tynan was not disputing her indebtedness to Mr Crawford and this application was only made belatedly when her application was refused by the Family Court on 10 February 2020. In one sense Mr Einfeld is correct. However, subject to considering the prejudice occasioned to Mr Crawford, this does not mean that the interests of justice warrant the refusal of the application. In her affidavit filed in support of her application to the Family Court, Ms Tynan repeatedly referred to the "alleged Crawford loan". The tenor of the correspondence from her solicitors and the application made to the Family Court was that she wanted the Family Court to consider that loan as part of the division of family property including possibly allocating it wholly to Mr Timms on the basis that it was a transaction that Ms Tynan denied having any real connection with. In other words, Ms Tynan did not seek to address whether as a matter of law she owed the obligation because she wanted it dealt with via the property division regime administered by the Family Court. Ms Tynan now has to confront the circumstance as to whether it is her debt. Given the above findings this course of events does not mean it is not in the interests of justice for Ms Tynan's application to be allowed.
Section 304(2)(b) refers to "arrangements approved by the court". Those "arrangements" are provided for in UCPR r 31.13 which provides:
"31.13 Unstamped documents: arrangements under section 304 of the Duties Act 1997
(1) The "usual undertaking by person liable" if given to the court by a party in relation to an instrument referred to in section 304(2) of the Duties Act 1997 is an undertaking that the party will, within a time specified by the court, transmit the instrument to the Chief Commissioner of State Revenue.
(2) The "usual undertaking by person not liable" if given to the court by a party in relation to an instrument referred to in section 304(2) of the Duties Act 1997 is an undertaking that the party will, within a time specified by the court, forward to the Chief Commissioner of State Revenue the name and address of the person liable to pay duty on the instrument under that Act together with the instrument."
As the mortgagee, Mr Crawford is not the person liable to pay stamp duty (Duties Act, s 207). It follows that his undertaking is of the kind referred to in UCPR r 31.13(2). At the time his undertaking was proffered, I neglected to specify a time period. Allowing for the restrictions imposed by the current pandemic I will specify a period of 28 days from the date of this judgment.
Mr Cook submitted that the implied undertaking operated differently in relation to documents tendered on interlocutory applications in that with such material it was necessary for it to pass into the public domain before the implied undertaking ceases. He relied on the following passage from British American Tobacco Australia Services Ltd v Cowell (representing the Estate of McCabe (deceased)) (No 2) (2003) 8 VR 571; [2003] VSCA 43 ("BAT v Cowell") at [48] to [49]:
"For these reasons, it may be concluded as follows. Where documents are provided to a party to litigation under some coercive process of the court with the result that an implied undertaking attaches to the effect that, without the leave of the court, they not be used otherwise than for the purposes of the litigation, the party bound by that undertaking is not freed of it simply because the document in question is marked as an exhibit in the proceeding in the course of which it was provided. To the extent that knowledge of the document has become public by dint of its tender in open court, members of the public will be free to make use of that knowledge as they will (subject always of course to any order specially made protecting confidentiality and the like), but the party affected by the undertaking remains bound as to use of the document itself. The distinction seems to us a valid one between, on the one hand, use of the document the contents and probably the provenance of which are known in detail to the party by virtue of a privilege extended to it by the processes of the court and, on the other hand, use of the information about it which comes to the knowledge of the public by reason of the proceedings in open court (and during which, it may be supposed, the document is marked as an exhibit). The knowledge of the one cannot be equated with the knowledge of the other.
Given the particular considerations requiring that a party's privacy be respected so far as compatible with the administration of justice in open court, there seems no logical, or indeed practical, reason why the mere passing of the document into evidence (as witness its being marked as an exhibit) should be taken to relieve the party bound by the implied undertaking from its obligations in that respect. Arguably at least, it would be different if that party was seeking not to make use of the document itself, but to use only the information about it of which the public had become aware (or which, to use another phrase, had passed into "the public domain") by reason of its use in open court." (emphasis added)
This extract suggests that, inter alia, a different approach in relation to the implied undertaking should be adopted with respect to material tendered during an interlocutory hearing as opposed to a final hearing depending on, at least, whether the person who deploys the material is a member of the public or a party to the proceedings and the extent to which the material has been disseminated. I respectfully decline to follow this passage. With respect to their Honours, there are both "logical" and "practical" reasons why the mere passing of a document into evidence is sufficient to relieve the party of the implied undertaking. One logical reason is that, as the above passages make clear, the High Court has expressly stated that. It did so without any qualification much less one that concerns the classification of the relevant hearing during which the material was received into evidence as interlocutory or final. A practical reason is that a breach of an implied undertaking is a contempt of court with potentially serious consequences. The persons bound by such an undertaking should be able to ascertain with clarity when they are and when they are not bound by the undertaking. However, the approach stated in this passage would require a person bound by the undertaking to ascertain which parts of the evidence tendered in Court was some "of which the public had become aware" before they could determine whether they were free to use it for reasons unrelated to the proceedings.
Otherwise, I note that this passage appears to treat the tender of the material in open court and the material "com[ing] to the knowledge of the public" as distinct steps. They are not. As the passage from the judgment of Mason CJ in Esso set out above makes clear, "once material is adduced in evidence in court proceedings it becomes part of the public domain". Once that is appreciated, the basis for distinguishing between material tendered in interlocutory applications and other proceedings so far as the implied undertaking is concerned dissipates.
Mr Cook also referred to a passage from the judgment of Black J in Morony & Ors v Reschke & Ors [2017] NSWSC 544 at [6] in which, by reference to BAT v Cowell, his Honour queried whether the implied undertaking would cease in relation to an affidavit that was "'read' in a manner that does not disclose its content in open court". However, given that I will not follow BAT v Cowell, this query falls away. Otherwise, an affidavit represents a witness' evidence in chief in written form. When an affidavit is "read" in open court it is no different to the evidence having been given orally in the witness box.
It is not clear whether Ms Tynan's affidavit sworn 18 November 2019 was produced under compulsion but, even if it was, the implied undertaking ceased when it was read in open court in the proceedings before McClelland DCJ (see Family Law Act 1975, s 97(1)). The subject matter of the affidavit was closely related to the subject matter of these proceedings and the relevance of the material is discussed above (at [25] to [27]). Accordingly, I allowed the tender of that affidavit in these proceedings.
It seems clear that the two financial statements the subject of Mr Einfeld's tender were produced by Ms Tynan under compulsion. They were not read or tendered by her in the proceedings before McClelland DCJ. At most, the effect of one part of them was disclosed through the affidavit of Mr Crawford's solicitor. In those circumstances, there is some doubt about the extent to which the implied undertaking ceased in relation to those statements. Assuming that it has, I nevertheless rejected the tender of these statements under s 135 of the Evidence Act 1995. Although the statements contain acknowledgements of indebtedness, there was other evidence to the same effect. Moreover, given the statements concern Ms Tynan's personal affairs, were produced under compulsion and were not introduced into evidence in the Family Court by her, I considered that their probative effect was outweighed by the prejudice occasioned to her from their tender in these proceedings.