Donnelly v Australia and New Zealand Banking Group Limited

Factual and procedural background

1. In August 2008, ANZ Asia Ltd (ANZ Asia), the second respondent, a company related to the first respondent (the Bank), lent Ms Donnelly and her then husband the equivalent of A$600,000, drawn down in Hong Kong dollars in the amount of HK$4,105,056 under an "Expat Mortgage Loan Facility" granted to them on 12 June 2008. The Donnellys' liability under the facility was secured over a property at Bardwell Valley in Sydney and refinanced existing debts secured on the property. The facility was subject to a power to convert the indebtedness to Australian dollars. That power was exercised on 18 December 2008, after the Australian dollar had fallen sharply against the Hong Kong dollar.
2. The Bank took an assignment of the facility and commenced proceedings against the Donnellys for possession of the secured property and judgment for their indebtedness under the facility. ANZ Asia was joined as second plaintiff, it seems because Ms Donnelly disputed the validity of the assignment. Stevenson J found it to be valid, and a challenge to that finding was not pursued on appeal by Ms Donnelly. Ms Donnelly also defended the proceedings against her on the basis that the Bank had engaged in conduct that was unconscionable under equitable principles and had breached an agreement made in November 2008 in the course of negotiations between the Donnellys and the Bank. The focus of the claim of unconscionable conduct was whether there had been adequate disclosure of the exchange rate risks. Ms Donnelly had previously withdrawn a cross-claim alleging misleading or deceptive conduct by the Bank and asserting a claim under the Contracts Review Act 1980 (NSW).
3. Stevenson J gave judgment on 29 November 2013: Australia and New Zealand Banking Group Limited v Donnelly [2013] NSWSC 1760 (the principal judgment). On 4 December 2013 his Honour directed entry of judgment for the Bank against Ms Donnelly in the sum of $879,685.55 and made orders for possession of the secured property and as to costs.
4. On 9 May 2014 this Court dismissed Ms Donnelly's appeal with costs against the judgment and orders of Stevenson J: Donnelly v Australia and New Zealand Banking Group Limited [2014] NSWCA 145. On 10 December 2014, the High Court refused an application by Ms Donnelly for special leave to appeal against the decision of this Court. Subsequently, on 2 March 2015 this Court dismissed an application by Ms Donnelly to reopen her appeal: Donnelly v Australia and New Zealand Banking Group Limited (No 2) [2015] NSWCA 41.
5. In her summons Ms Donnelly made three claims:

• first that the judgment and orders of Stevenson J were procured by the Bank by the use of a default judgment for possession obtained on 6 December 2011 against Ms Donnelly's former husband, which default judgment was a nullity, and accordingly the giving of judgment against her was an error of law;
• secondly, that the judgment and orders were procured by a "fraudulent loan agreement" signed in Hong Kong on 12 June 2008; and
• thirdly, that the judgment and orders were made irregularly and against good faith.

1. The first claim by Ms Donnelly is directed to challenging the reasoning at [43] of the principal judgment where Stevenson J found that as the Bank had obtained default judgment against Mr Donnelly, the Bank was entitled to possession as against Ms Donnelly in order that it can exercise its right to sell the property to recover, from Mr Donnelly's aliquot share in the property, the money he owes the Bank under the default judgment. The complaint made by Ms Donnelly is that this approach discloses an error of law.
2. Ms Donnelly's second claim is directed to challenging the finding at [104] of the principal judgment where Stevenson J found that Mr Stuart attached to his email of 10 June 2008 to Mr Donnelly "the Facility Letter and a copy of the Bank's Standard Terms and Conditions". The complaint made by Ms Donnelly is that the Court (Stevenson J) was misled into thinking that there were no differences between the facility letter as signed on 12 June 2008 and the letter of offer attached to Mr Stuart's email of 10 June 2008. Two differences were relied upon before Darke J: 1. A notation in small size print at the foot of the first page of the facility letter signed on 12 June 2008 in the following terms: An investment or facility with ANZ Asia Limited is neither a deposit with nor liability of Australia and New Zealand Banking Group Limited. ANZ Asia Limited is a separate entity from Australia and New Zealand Banking Group Limited and is not an authorised deposit-taking institution under the Banking Act 1959 (Australia). 1. A separate indemnity document by which Ms Donnelly indemnified the Bank against payments it would have to make to ANZ Asia in respect of losses incurred by ANZ Asia under the loan agreement.
3. Ms Donnelly's case is that the undisputed evidence before Stevenson J was that when Mr Stuart presented the letter of offer and the standard terms to the Donnellys for signing on 12 June 2008 he said "They are the same ones that I sent you by email the other day". It was contended that the operative fraud by the Bank was that it had induced Ms Donnelly to sign the facility letter in the belief that the lender was the Bank, which was contrary to the true position, the lender being ANZ Asia.
4. Ms Donnelly's third claim that the judgment and orders were made irregularly and against good faith would seem to depend upon an acceptance of either of her first two claims.
5. On 8 May 2015, the Bank filed a notice of motion seeking orders for the summary dismissal of the proceedings pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 13.4. That rule provides that the Court may order that the proceedings be dismissed generally or in relation to a particular claim if it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings: (a) the proceedings are frivolous or vexatious; or (b) no reasonable cause of action is disclosed; or (c) the proceedings are an abuse of the process of the Court. The Court may receive evidence on the hearing of such an application: r 13.4(2).

Reasons of the primary judge

1. His Honour found that Ms Donnelly was aware of the default judgment against Mr Donnelly when the matter was heard by Stevenson J (she having referred to it in her defence). He observed that Ms Donnelly had not challenged the validity of the default judgment, either before Stevenson J or on appeal. He found that a challenge to the default judgment could not provide a basis to contend that the judgment and orders of Stevenson J were given or entered irregularly or against good faith.
2. Turning to Ms Donnelly's complaint concerning the alleged fraudulent loan agreement, his Honour accepted that in certain circumstances the Court can set aside a judgment that has been procured by fraud. He referred to the statement of relevant principles by Kirby P in Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 538-539. There it was stated that the party seeking to set aside a judgment procured by fraud must establish that the case is based upon newly discovered facts that are material.
3. His Honour noted that the particulars of the alleged fraud focused on the circumstances in which documents were signed by Ms Donnelly on 12 June 2008. In particular it was asserted that Ms Donnelly was not then aware that the documents contained the small notation at the foot of the first page, which his Honour described as a "disclaimer", and the indemnity in favour of the Bank mentioned above.
4. His Honour recorded that counsel for Ms Donnelly encapsulated the fraud as Mr Stuart giving Ms Donnelly a different document to sign (on 12 June 2008) and misrepresenting to her that the document was in fact in the same form as a document she had been given earlier (being one of the documents attached to the 10 June 2008 email).
5. His Honour found that Ms Donnelly was aware at the time of the hearing before Stevenson J that the documents she had signed on 12 June 2008 (and upon which the Bank was relying in the proceedings) were different from those sent by email on 10 June 2008, and that they included the disclaimer and the indemnity. Reference was made to two matters.
6. First, an affidavit of Ms Donnelly sworn on 27 July 2012 in which she had referred to the documents she signed on 12 June 2008 being different from those which had been attached to the 10 June 2008 email. Ms Donnelly said in her affidavit that she was not aware until shown cl 21 of the facility letter much later that the Bank and ANZ Asia were separate legal entities, and that ANZ Asia was not covered by the Banking Act 1959 (Cth). (The terms of cl 21 are set out at [35] below).
7. Secondly, his Honour referred to submissions made by counsel for Ms Donnelly at trial on 13 November 2013 concerning the differences between the documents. His Honour concluded that the alleged fraud based on those facts could not be considered to be based on newly discovered facts.
8. His Honour rejected a further contention on behalf of Ms Donnelly that it was relevant that she did not become aware of the ramifications of what she had signed until after she had read the judgment of this Court given on 9 May 2014, in particular the reference in the reasons of Macfarlan JA at [69] concerning the "disclaimer" at the foot of the first page of the facility letter.
9. His Honour accepted the Bank's submission that Ms Donnelly was attempting to take facts known to her at the time of the hearing before Stevenson J, and which were alleged to involve unconscionable conduct, and recast them as amounting to fraud. His Honour found that this was an impermissible means of seeking to set aside a judgment on the ground of fraud. He also added that it was at the very least questionable whether, on the facts particularised, there existed a proper basis to allege fraud. His Honour concluded that the proceedings were doomed to failure.

Proposed grounds of appeal

1. The proposed grounds of appeal when read together with Ms Donnelly's written submissions are directed to three matters.
2. The first asserts that his Honour applied an incorrect approach to what is required to set aside a judgment on the ground of fraud. It was contended that his Honour required Ms Donnelly to establish that the facts supporting her claim could not have been discovered by the exercise of due diligence before the trial before Stevenson J (ground 2).
3. The second is related to the first and asserts that his Honour failed to deal with the substance of Ms Donnelly's claim that the facility letter as signed was a different document from the email attachment of 10 June 2008, and that Mr Stuart had deceived Ms Donnelly into signing the facility with ANZ Asia in the belief that the lender was the Bank (ground 1).
4. Counsel for Ms Donnelly did not press the claim of fraud based on the indemnity signed by Ms Donnelly on 12 June 2008. It is to be noted that the Bank has not make any claim against Ms Donnelly based on that indemnity.
5. The third asserts that the default judgment against Mr Donnelly was a nullity and his Honour erred in concluding that the judgment and orders of Stevenson J could not be challenged on this basis because the point had not been raised either before Stevenson J or on appeal (ground 3). No written or oral submissions were advanced in support of this contention and it may be put aside.

Disposition of application

1. Ordinarily, it is only appropriate to grant leave where there is an issue of principle, a question of general public importance, or an injustice which is reasonably clear, in the sense of going beyond what is merely arguable: Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 at [46]. It is well established that it is not sufficient merely to show that the trial judge was arguably wrong: see Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 at [32].
2. Proposed ground 2 as expressed seems to challenge his Honour's acceptance of the statement of principle in Wentworth v Rogers (No 5). However, in written and oral submissions Ms Donnelly advanced a different contention. It was contended that his Honour applied an incorrect approach to what is required to set aside a judgment on the ground of fraud.
3. Counsel for Ms Donnelly referred to the decisions of the High Court in McDonald v McDonald [1965] HCA 45; 113 CLR 529 and of this Court in Toubia v Schwenke [2002] NSWCA 34; 54 NSWLR 46. These authorities recognise that in an action to set aside a judgment procured by fraud, a plaintiff must prove that he or she was deceived but need not prove that he or she was diligent in discovering the truth. See also Quarter Enterprises Pty Ltd v Allardyce Lumber Company Ltd [2014] NSWCA 3; 85 NSWLR 404 at [99] (Bathurst CJ). As Handley JA explained in Toubia v Schwenke at [41]: Where the action seeks the judicial rescission of a judgment, the plaintiff must prove that he and the Court were deceived and he can only do this by showing that he has discovered the truth since the trial. Where this is done, and the fresh facts are material, fraud is established. … This means there is no need to prove due diligence as well.
4. However, contrary to the submissions of Ms Donnelly, his Honour did not impose any requirement that Ms Donnelly must establish that the facts supporting her claim of fraud could not have been discovered by the exercise of due diligence before the trial before Stevenson J. That contention involves a misreading of his Honour's reasons.
5. Proposed ground 1 is not well drafted but should be approached on the basis that it could be amended to advance Ms Donnelly's complaint in written submissions that Darke J failed to deal with the differences between the facility letter signed on 12 June 2008 and the email attachment of 10 June 2008 and Ms Donnelly's contention that Mr Stuart had deceived her into signing the facility letter with ANZ Asia. In oral argument counsel for Ms Donnelly identified a third difference between the letter of offer and the facility letter (being the reference to "ANZ Asia Limited" on the facility letterhead). Counsel added that Darke J had also failed to consider the significance of the Donnellys' application for finance dated 26 May 2008 having been made on the Bank's own application form, whilst the letter of offer had come from ANZ Asia, not the Bank.
6. This complaint is misconceived. Darke J proceeded upon the basis that the assertions of fact in the summons under the heading "Particulars of fraud" were true. His Honour was not required to adjudicate on the truth of those asserted facts. Rather, assuming favourably to Ms Donnelly that the factual allegations supporting her claim of fraud could be made out, the question for his Honour was whether the summons disclosed a reasonable cause of action that the judgment and orders of Stevenson J could be set aside on the ground of fraud.
7. That question involved considering whether Ms Donnelly had discovered fresh facts since the trial concerning the asserted fraud and whether those facts were material. It was not simply a question of whether Ms Donnelly had been deceived by the Bank on 12 June 2008 and induced to sign the facility letter in the belief that the lender was the Bank (rather than an entity separate from the Bank).
8. Adopting that approach, his Honour made the finding already mentioned - Ms Donnelly was aware at the time of the trial before Stevenson J of the differences between the facility letter she signed on 12 June 2008 and the letter of offer she had received by email the previous day. That finding is not sought to be challenged on appeal.
9. It is not to the point that Ms Donnelly contends that she did not turn her mind to whether those known facts supported a claim of fraud until well after the trial before Stevenson J and only shortly before she filed her summons. The finding that she knew the asserted facts at the time of the proceedings before Stevenson J was sufficient for his Honour to conclude that the proceedings to set aside the judgment as procured by fraud were doomed to failure. It was unnecessary for his Honour to consider whether the asserted facts were material.
10. Nonetheless, it should be observed that the absence of either the "disclaimer" at the foot of the first page or the name "ANZ Asia Limited" at the top of the first page of the letter of offer attached to the 10 June 2008 email, was immaterial. The "disclaimer" in the facility letter did no more than repeat the terms of cl 21 of the facility letter, which was in the same terms as cl 21 of letter of offer attached to the 10 June 2008 email. The first page of the letter of offer identified the lender in cl 2 under the heading "LENDER" as: ANZ Asia Limited (herein after referred to as the "Lender") and cl 21 under the heading "ACCEPTANCE" contained the following: An investment or facility with the Lender is neither a deposit with nor liability of Australia and New Zealand Banking Group Limited. The Lender is a separate entity from Australia and New Zealand Banking Group Limited and is not an authorised deposit-taking institution under the Banking Act 1959 (Australia).
11. Both cls 2 and 21 were in larger size print than the notation at the foot of the first page of the facility letter.
12. To this may be added reference to cl 23 of the standard terms and conditions, which provided that the facility was governed by the law of Hong Kong.
13. Thus, the identity of the lender, ANZ Asia, the fact that the lender was a separate entity from the Bank, and the fact that it was not an authorised deposit-taking institution in Australia, were clearly disclosed in the letter of offer, and the governing law, being that of Hong Kong, was clearly disclosed in the standard terms and conditions. His Honour was correct to express doubt that on the facts particularised, there was a proper basis for Ms Donnelly to allege fraud. But as already mentioned, he proceeded upon the basis most favourable to Ms Donnelly that the assertions of fact in the particulars of fraud were true. There was no error in the approach taken by his Honour to the application for summary dismissal.
14. The remaining contentions of Ms Donnelly in her written submissions may be dealt with briefly.
15. First, the assertion that Mr Burgess gave false evidence at the trial in his affidavit of 30 May 2013, is not included in the particulars of fraud relied upon by Ms Donnelly. In any event, the affidavit of Mr Burgess did no more than establish, relevantly, the agreement upon which the Bank relied for its claim by annexing a copy of the facility letter signed by the Donnellys and the standard terms of conditions. Mr Burgess gave evidence that his signature appeared on page 8 of the facility letter and that he had authority of ANZ Asia and the Bank to execute that letter on behalf of both of them.
16. It may be accepted that Mr Burgess did not refer in his affidavit to the Donnellys' earlier application to the Bank dated 26 May 2008, or to the letter of offer attached to Mr Stuart's email to Mr Donnelly of 10 June 2008. Those matters were the subject of evidence from Mr Stuart who had the direct dealings with the Donnellys. The fact that Mr Burgess did not refer to those earlier documents does not support the "irrebuttable presumption" for which Ms Donnelly contended, that Mr Burgess had knowledge and approved the alleged fraud by Mr Stuart in deceiving Ms Donnelly that the facility letter was in the same terms as the letter of offer.
17. Importantly, the unparticularised allegation against Mr Burgess does not assert that Ms Donnelly discovered any different facts relating to Mr Burgess' affidavit evidence after the trial before Stevenson J, which were material, from those known at the time of the trial concerning the alleged conduct of Mr Stuart.
18. Secondly, the assertion that the cross-examiner misled Ms Donnelly at the trial with respect to exhibit 1 (being the 10 June 2008 email and attachments) by treating it as identical to the facility letter signed by Ms Donnelly on 12 June 2008, is again not included in the particulars of fraud. In any event, the transcript of the cross-examination of Ms Donnelly makes clear that the cross-examiner did no such thing.
19. The cross-examiner obtained Ms Donnelly's confirmation that exhibit 1 was the document which she had printed off from her email system the preceding day, that is, on 10 November 2013. Ms Donnelly agreed with the cross-examiner that exhibit 1 was a copy of Mr Stuart's email including attachments of 10 June 2008, which email Ms Donnelly's then husband had forwarded to her on 11 June 2008. The cross-examination focused on what parts of the letter of offer Ms Donnelly had read on her computer screen on 11 June 2008 and her understanding of what she had read.
20. It can be accepted that the cross-examiner did not ask Ms Donnelly any questions about the notation appearing at the foot of the first page of the facility letter which she signed on 12 June 2008. Nor did the cross-examiner challenge Ms Donnelly's affidavit evidence that she was not aware until "much later" after 12 June 2008 of the terms of cl 21 of the facility, which appeared in the same terms in the letter of offer attached to the 10 June 2008 email. However, the absence of cross-examination on those matters cannot be taken as having misled either Ms Donnelly or Stevenson J in the manner now contended for by Ms Donnelly.
21. One further matter should be mentioned. Counsel for Ms Donnelly submitted that the Bank's fraud had gone "unnoticed" by Stevenson J and also by Darke J. With respect to the proceedings before Stevenson J the submission proceeds upon an incorrect premise. Counsel for Ms Donnelly accepted in this Court that fraud was not pleaded or raised by Ms Donnelly in those proceedings. Accordingly, it is not the case that Stevenson J had overlooked the alleged fraud by the Bank. It was simply not an issue before him.
22. With respect to the summary dismissal application, Darke J proceeded upon the basis which has been explained above. He assumed that the asserted facts relied upon for the fraud claim could be established. He was correct to conclude nonetheless that the judgment or orders of Stevenson J could not be set aside on the ground that they had been procured by fraud.

Conclusion

1. As already mentioned the summons seeking leave to appeal from the decision of the primary judge was not filed until 31 July 2015. Accordingly Ms Donnelly is outside the period limited for the filing of a summons seeking leave to appeal: UCPR r 51.10. It seems that Ms Donnelly or her advisers were under the misapprehension that the decision of the primary judge was a final decision and leave was not required. The Bank and ANZ Asia did not oppose the motion for an extension of time for filing the summons if the Court were disposed to grant leave to appeal.
2. For the reasons outlined above, the primary judge made no error in concluding that the summons discloses no reasonable cause of action against either the Bank or ANZ Asia. Even if there were no timing difficulties, leave to appeal from the dismissal of the proceedings would not be granted. Accordingly, both the notice of motion for an extension of time and the summons seeking leave to appeal should be dismissed with costs.

Amendments 04 November 2015 - Typographical corrections Para [13] heading, change to: Reasons of the primary judge Para [21], change to Banks' to Bank's 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: 04 November 2015