EXCHEQUER AUSTRALIA PTY LTD -v- LEOPARDI [2021] WASC 340 (6 October 2021)

5 Between 25 March 2021 and 29 March 2021, the first defendant paid a total of $23,181.96 in five instalments.

6 On the plaintiff's calculation, with accumulated interest and legal fees, the defendants still owe between $41,241.83 and $44,694.09.[1]

7 In the following reasons I will refer to the first defendant as Ms Leopardi. The second defendant, who appears in these proceedings by her guardians ad litem, does not oppose the relief sought and did not wish to be heard on the application for summary judgment.

8 A plaintiff may apply to the court under O 14 of the Supreme Court Rules 1971 (WA) for summary judgment on the ground that the defendant has no defence to a claim included in the writ.

9 On hearing the application 'unless the Court dismisses the application, or the defendant satisfies the Court with respect to the claim, or the part of the claim, to which the application relates that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim or part, the Court may give such judgment for the plaintiff against the defendant on that claim or part thereof as may be just, having regard to the nature of the remedy or relief claimed'.[2]

10 The principles guiding the court's power to order summary judgment are well established. The application for summary judgment must be supported by an affidavit verifying the facts on which the claim is based and stating that there is no defence to the claim. A defendant may show cause against an application for summary judgment by affidavit or otherwise to the satisfaction of the court.

11 The power to order summary judgment should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried.[3] Summary judgment must be granted only in the clearest of cases, where there is a high degree of certainty about the ultimate outcome if the action went to trial.

12 Exchequer having adduced evidence of the Mortgage, and Ms Leopardi's default, it is for the defendants to satisfy the court that there is a triable issue or an arguable defence. This generally requires a defendant to provide sufficient details of their defence. Allegations, unsupported by evidence, provide no arguable defence and give rise to no issue or question which ought to be tried.

13 On a plaintiff's application, the Rules further provide that the court may refuse summary judgment where 'for some other reason' there ought to be a trial of the claim. It has been said that a defendant may resist summary judgment in favour of a plaintiff on the ground that, even though the defendant cannot point to a specific issue which ought to be tried, he or she may be able to satisfy the court that the circumstances ought to be investigated.[4] The operation of that provision has not been often considered, perhaps because no appeal lies from an order of a judge or a master giving unconditional leave to defend an action.[5]

14 In Miles v Bull, Megarry J said of an equivalent provision:

These last words seem to me to be very wide. They also seem to me to have special significance where, as here, most or all of the relevant facts are under the control of the plaintiff, and the defendant would have to seek to elicit by discovery, interrogatories and cross examination those which will aid her. If the defendant cannot point to a specific issue which ought to be tried but nevertheless satisfies the court that there are circumstances that ought to be investigated, then I think that those concluding words are invoked. There are cases when the plaintiff ought to be put to strict proof of his claim, and exposed to the full investigation possible at a trial; and in such cases it would, in my judgment, be wrong to enter summary judgment for the plaintiff.[6]

16 On or about 12 December 2011, Peter James Bennie and Alicia Rose Bennie, entered into an agreement under which the defendants borrowed $43,600 secured by a Mortgage over the property.

17 By Transfer of Mortgage dated 26 March 2013, the Bennies transferred the Mortgage to Andrew Cecil Thorpe.

18 By Transfer of Mortgage dated 26 February 2015, Mr Thorpe transferred the Mortgage to Exchequer. Mr Thorpe is a director of Exchequer. The other director of Exchequer is Bruce Duckham, a legal practitioner.

19 The transfer to Exchequer was registered on 4 March 2015.

20 By notice in writing dated 14 December 2020, Exchequer demanded from the defendants payment of the amount of $34,750.76 within 31 days failing which Exchequer would commence recovery proceedings for the debt owing under the Loan Agreement and Mortgage and for possession of the property (Default Notice). Exchequer has sent an earlier notice, dated 2 September 2020, but did not rely on it in this application. It accepted that it had not served any notice of demand on the defendants before September 2020.

21 Exchequer relies on three affidavits of Mr Thorpe, and an affidavit of Ebenezer Assibey-Bonsu.

22 The affidavit of Mr Assibey-Bonsu, made 11 March 2021, is to prove the service of the default notice. It was not in dispute.

23 The first affidavit of Mr Thorpe was made 11 March 2021. He attached relevant documents including the certificate of title, the Mortgage and Loan Agreement between the defendants and the Bennies, and the two Transfers of Mortgage. I return to the contents of the Mortgage later in these reasons. Mr Thorpe deposed to the defendants being in default, the service of notice of default, and to his belief that there is no defence to Exchequer's claim.

24 The affidavit includes the company details for Exchequer. Mr Thorpe is one of two directors. The other director is a legal practitioner, Bruce Duckham. Mr Thorpe was a legal practitioner until he was struck off the roll of practitioners in 2008.

25 In his second affidavit, dated 3 May 2021, Mr Thorpe responded to some of the issues that had been raised by Ms Leopardi.

26 Mr Thorpe deposed that when he was introduced to Ms Leopardi, she told him about her litigation with her former partner and it appeared to him that she was under a great deal of stress.

27 In about January 2013, Ms Leopardi told him that she was in default of the Mortgage over the property and was not able to pay the overdue monies. She said she was expecting to receive money from a property settlement in the Family Court and would be in a position to pay the balance from the settlement. Mr Thorpe deposed:

I told Ms Leopardi that the simplest solution was for the Mortgagees to be paid the full debt due under the Mortgage; and for the party making that payment to be given a transfer of the Mortgage as security until she was in a position to pay out the Mortgage.[7]

28 Mr Thorpe agreed to ask the mortgagees if they would transfer the Mortgage to him and, on 26 March 2013, that was done. On 26 February 2015, Mr Thorpe transferred the Mortgage to Exchequer. Mr Thorpe said he provided notice of assignment in writing to the defendants and requested that all monies due pursuant to the Mortgage be paid directly to Exchequer.[8]

29 The financial dealings between Mr Thorpe and Ms Leopardi were not confined to the Mortgage.

30 In or about February 2012, Ms Leopardi asked if Mr Thorpe could arrange a loan to her which she would repay from the settlement from her Family Court proceedings. On 13 February 2012, Exchequer entered into a loan agreement with Ms Leopardi, secured by a charge over the Gidgegannup property. The terms of the agreement are evidenced by Ms Leopardi's written acknowledgement. In return for Mr Thorpe arranging the loan of $50,000 from Exchequer, repayable on demand, Ms Leopardi loaned $40,000 of that sum to Mr Thorpe, repayable on demand. Ms Leopardi was liable to pay interest only on $10,000.[9] Mr Thorpe apparently had the benefit of that loan assigned to him by Exchequer.

31 In March 2013, Mr Thorpe settled a debt of Ms Leopardi to Dwyer's Legal Pty Ltd and, on 14 March 2013, Ms Leopardi acknowledged her indebtedness and assigned to him the security for the debt. In the same document, Ms Leopardi stated:

You have taken transfer of mortgage L 807007 from Peter James Bennie and Alicia Rose Bennie in consideration of me acknowledging (which I hereby do) that the mortgage is in default, the whole of the secured moneys remain payable, and that you are entitled to call up the mortgage at any time.[10]

32 As a result, by the end of 2014, Ms Leopardi's indebtedness to Mr Thorpe and Exchequer included the loan secured by the Mortgage, the loan from Exchequer (assigned to Mr Thorpe), and the Dwyer's Legal debt.

33 Mr Thorpe deposed to the efforts he made to have Ms Leopardi obtain a loan from a third party so that she could pay out her obligations to him. He said that he arranged for her to consult with a solicitor whom she knew, at no charge. The solicitor, Bruce Duckham, was the other director of Exchequer.[11] On Ms Leopardi's evidence, Mr Thorpe had earlier arranged for Mr Duckham to represent her in various legal proceedings.[12]

34 On 11 June 2015, Ms Leopardi began making payments to Mr Thorpe by direct transfers to his bank account which he applied in reduction of the debt owed to him under the $10,000 loan from Exchequer.

35 On 16 September 2016, Mr Thorpe advised Ms Leopardi, by email, that despite her payments the total debt was growing and that she needed to either sell or refinance the property.[13] Mr Thorpe attached a statement of Ms Leopardi's liabilities. Ms Leopardi included the same email in her third affidavit, although the attached statement of liabilities is different from that exhibited by Mr Thorpe. The statement attached by Ms Leopardi includes $27,000 'research fees', resulting in a total liability of $118,125.31.[14] The statement attached by Mr Thorpe does not include that amount.

36 In his third affidavit, sworn 16 June 2021, Mr Thorpe deposed to his dealings, at the request of Mr Leopardi, with the Bennies in relation to the transfer of the Mortgage. The dealings with the Bennies included the settlement of a claim brought by Mr Leopardi and her mother against the Bennies.

37 Ms Leopardi relies on three affidavits sworn by her in the proceedings, and a further affidavit of Gregory David Gibbens.

38 Initially, Ms Leopardi was unrepresented. Her first two affidavits included a lot of material that is not relevant to the questions arising in the action.

39 In her first affidavit, dated 29 March 2021, Ms Leopardi set out the history of her transaction with the Bennies. In summary, the loan was in part vendor finance for the purchase of the Gidgegannup property, and in part a personal loan to assist Ms Leopardi with a debt for legal fees. The principal sum of $43,000 included the interest.

40 Around the time she purchased the Gidgegannup property, Ms Leopardi was engaged in proceedings in the Family Court with her former de facto. Mr Thorpe was providing some unspecified assistance to her. Ms Leopardi said that, as a result, Mr Thorpe was aware of her circumstances.

Mr Thorpe told me he would transfer the remaining mortgage debt and assist me to enforce the court order for spousal support and child support, from which he would be paid back. This is the reason there was no formal schedule or agreement for regular payment amounts to be made to Mr Thorpe when the mortgage was transferred to him.[15]

42 Ms Leopardi also asserted that, by the payments of $23,181.96 in March 2021, she has now paid the Mortgage in full.

43 Ms Leopardi also relied on an affidavit of Gregory David Gibbens, affirmed 20 April 2021. Mr Gibbens deposed that, on 19 April 2021, on behalf of Ms Leopardi, he presented a bank cheque for $12,568.80 to Mr Duckham, one of the directors of Exchequer. The cheque was presented with two attachments headed 'Notice of Hardship and Notice of Payment Offer', which stated that the offer was 'in settlement of all claims by you as plaintiff in the matter [CIV 1060 of 2021]', and that, by acceptance, the plaintiff would release the first defendant from 'all claims, liabilities, debts and removal of caveats relating to or arising from the Mortgage between the parties ... and all matters between the defendant and Andrew Cecil Thorpe and Exchequer Australia Pty Ltd and shall agree to dismiss the proceedings by consent'. The evidence in this application does not show what other claims or liabilities between Ms Leopardi and Mr Thorpe and Exchequer were intended.

44 In her second affidavit of 27 April 2021, Ms Leopardi stated that, at the time of the transfer of the Mortgage to Mr Thorpe, the defendants had paid at least $15,748.04.[16] She also stated that the Mortgage provided for interest to be included as a component of the principal and no additional interest was due.[17] Ms Leopardi deposed that Mr Thorpe, in offering to help her, told her that the Mortgage debt would be paid out of money she would receive enforcing orders in the Family Court. Ms Leopardi repeated her claim that she believed the balance of the loan secured by the Mortgage to have been paid in full.

45 The third affidavit of Ms Leopardi was filed on 21 July 2021. By then, she was represented.

46 Relevantly, Ms Leopardi deposed to the amounts she says were paid to the Bennies, Mr Thorpe and Exchequer between 2011 and March 2021. Counsel for Mr Thorpe submitted that Ms Leopardi's statement of the amounts is not supported by other documents, but, at this stage of the proceedings, that is a question of weight. There is no reason why Ms Leopardi cannot testify to how much she has paid.

47 Ms Leopardi set out in some detail, not all of it relevant, the history of her dealings with Mr Thorpe. Those dealings went beyond the Mortgage of the Gidgegannup property. She deposed that, in about March 2013, around the time of the assignment of the Mortgage from the Bennies to Mr Thorpe, she and Mr Thorpe made an agreement under which Mr Thorpe told her:

to save me from losing the house or having further financial and legal issues, he would buy the Mortgage and then draft family court documents to have the court-ordered money enforced and paid.[18]

[Mr Thorpe] said that when the Family Court enforced the outstanding money to be paid, I could pay him what he paid for the mortgage and the rest could be used to support my son and me.

Mr Thorpe also told me he had every confidence of his success in leading the enforcement of the Family Court ordered monies from which he would be refunded, without further interest or any other charges.[19]

49 Ms Leopardi further deposed that, at the time, she was dependent on Mr Thorpe for professional advice, with Mr Thorpe also 'running' matters on her behalf with Mr Duckham in the Magistrates Court. One of those matters was with the Bennies, and I infer was the result of the Mortgage being then in default.

50 Ms Leopardi stated that Mr Thorpe did not provide a payment schedule or contact her regarding payments that needed to be made. At no time did Mr Thorpe tell her she was required to make regular repayments, that she was expected to pay the Mortgage outside of an agreement she had with Mr Thorpe, or that he would enforce the Mortgage or charge interest under it.[20]

51 The agreement is not clearly defined in Ms Leopardi's evidence, but it appears to include that Mr Thorpe would buy the Mortgage and then draft Family Court documents to have the 'court-ordered money' enforced and paid;[21] that she could pay Mr Thorpe what he paid for the Mortgage;[22] and that he would be refunded 'without further interest or any other charges'.[23]

52 On 16 September 2016, Mr Thorpe sent to Ms Leopardi a statement of her total liabilities to him at that date in the sum of $118,125.31, which included interest accruing on the Mortgage, interest on two other debts, and (indicative of the other arrangements between them) 'research fees' in the sum of $27,000.

53 An issue in the application by Exchequer is whether interest was payable on the Mortgage. Liability to pay interest is directly relevant to the balance owing, or whether Ms Leopardi has repaid the loan secured by the Mortgage. There are two aspects to the question: first, as a matter of construction, was interest payable; second, whether Ms Leopardi has demonstrated a defence of estoppel which should go to trial.

54 The evidence of Ms Leopardi, that interest was included in the capital sum secured, is supported by the deletion of cl 3 of the Mortgage, the clause under which the covenantor would have been obliged to pay interest on the sum advanced. Exchequer relied on the Mortgage providing for the payment of interest on default pursuant to cl 4.

55 Counsel for Exchequer submitted that interest became payable from 26 March 2013, on the following basis:

(1) Secured Moneys is defined to mean the Principal Sum and 'all interest that has accrued in the future may accrue on the Principal Sum': cl 2.1.28.

(2) By cl 5.2, 'the Secured Moneys shall immediately become due and owing without any demand or notice' if a Covenantor defaults in the performance of its obligations under any Collateral Documentation.

(3) On 14 March 2013, Ms Leopardi gave a written acknowledgement that the Mortgage was in default. Exchequer argues that the written acknowledgement by Ms Leopardi is Collateral Documentation within the meaning of cl 2.1.6 of the Mortgage, acknowledging that the Secured Moneys are payable.

56 I doubt that the note of 14 March 2013 can properly to be described as a 'covenant for payment' of the Secured Moneys, and thus Collateral Documentation, as submitted by Exchequer.

57 Further, the schedule to the Mortgage provides for the date for the first payment of interest 'on demand after an Event of Default or at the sole discretion of the Mortgagee, one (1) month after the date of an event of Default'. It does not appear to be in dispute that Exchequer did not make demand for payment of interest immediately upon default. The evidence of Ms Leopardi is that interest was not demanded, and she relied on her agreement with Mr Thorpe.

58 Exchequer relied on an alternative submission, that notice of default had been given by the Bennies at the time that Mr Thorpe first took assignment of the Mortgage. There is secondary evidence of a default notice, but the notice itself is not been produced.

59 Exchequer further submitted that Ms Leopardi acknowledged her obligation to pay interest in an email dated 21 September 2016.[25] In my opinion, the document relied upon is ambiguous and an equally consistent reading of it is that Ms Leopardi was referring to interest being included in the principal sum under the Mortgage.

60 The total claimed in this action (which is confined to the sum owing under the Mortgage originally granted to the Bennies) is comparatively small. The legal costs, despite very reasonable costs claimed by the solicitors for Exchequer, are already a major component of the amount claimed, and are already disproportionate to the value of the subject matter and the financial position of the defendant.[26]

61 I am not, however, satisfied that this matter can be disposed of summarily.

62 First, Ms Leopardi may have a defence in estoppel with regard to her obligation to pay interest. Counsel for Exchequer properly pointed to the documents, including emails from Ms Leopardi, which might be read as inconsistent with that defence. But, in my opinion, those documents must be read in the context of the relationship between Mr Thorpe and Ms Leopardi in which he was providing her with advice and assistance in relation to ongoing legal proceeding.

(1) from about 2011, Mr Thorpe had assisted her regarding numerous legal matters, including by engaging Mr Duckham to represent her but with Mr Thorpe preparing most of the necessary court documents;[27]

(2) Mr Thorpe first discussed the issue of her ability to pay out the Mortgage around the time it was due to expire in January 2013;[28]

(3) at that time, she expected to receive a lump sum of $30,000 within 21 days, sufficient to discharge the Mortgage which, at the time of the assignment of the Mortgage to Mr Thorpe, had a balance of $21,167.50;[29]

(4) Mr Thorpe told her that he would buy the Mortgage and then draft Family Court documents to have court ordered money paid, Ms Leopardi could pay him what he paid for the Mortgage and use the rest for support;[30]

(5) Mr Thorpe told her that he was confident of enforcement 'from which he would be refunded, without further interest or any other charges';[31]

(6) Ms Leopardi was in desperate financial need and was dependent on Mr Thorpe for his advice;[32] and

(7) from the time of assignment of the Mortgage, Mr Thorpe never provided any payment schedule or contacted her regarding payment, specifically, he did not tell her she was required to make regular payments for that he would charge interest.[33]

64 Ms Leopardi submitted that in those circumstances, the parties proceeded on the assumption that the Mortgage had been varied and was not payable unless and until the Family Court orders had been enforced, was to be repaid using monies received under those orders, and no penalty interest was payable. The subsequent actions of Exchequer (of which Mr Thorpe is a director) represented departure from those assumptions.

65 Further, in my opinion, the claim by Exchequer (through Mr Thorpe) that on the assignment of the Mortgage it was immediately entitled to interest at the default rate, when interest was capitalised under the Mortgage, and where Ms Leopardi alleges an agreement under which Mr Thorpe would not claim interest, requires investigation. If interest is not payable, Ms Leopardi has paid an amount sufficient to discharge the Mortgage. Exchequer also claims legal fees, but the amount payable depends upon when the Mortgage was discharged.

66 Finally, I cannot ignore that Mr Thorpe, a former legal practitioner, was providing assistance to Ms Leopardi. On the defendant's case, that included assistance in relation to court proceedings. The other director of Exchequer, a practitioner, had also acted for her in legal proceedings. Those circumstances, as they relate to the agreements between Exchequer and Ms Leopardi, raise potential issues, including unconscionability, which have not been properly investigated.

67 I am not satisfied that this is a matter which can be properly disposed of summarily in the way the plaintiff seeks. Ms Leopardi will be given leave to defend.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Counsel for the plaintiff handed up a schedule during the hearing calculating the amount due with reference to an interest rate of 6%, pursuant to s 32 of the Supreme Court Act 1935 (WA), and 8%, the standard rate payable under the Mortgage. The figures here reflect these two rates.

[3] Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99.

[4] Miles v Bull [1969] 1 QB 258; HSBC Bank Australia Ltd v Mavaddat [2015] WASC 153 [95]; Wedge v Service Finance Corp Ltd [2002] WASCA 54.

[5] Supreme Court Act, s 60(1)(b).

[7] Affidavit of Andrew Cecil Thorpe sworn 3 May 2021 [16].

[8] Affidavit of Andrew Cecil Thorpe sworn 3 May 2021, ACT 1.

[9] Affidavit of Andrew Cecil Thorpe sworn 3 May 2021, ACT 4. See also affidavit of Andrew Cecil Thorpe sworn 3 May 2021, ACT 14.

[10] Affidavit of Andrew Cecil Thorpe sworn 3 May 2021, ACT 5.

[11] Affidavit of Andrew Cecil Thorpe sworn 11 March 2021, ACT 1.

[12] See affidavit of Krysten Sara Leopardi sworn 21 July 2021 [18].

[13] Affidavit of Andrew Cecil Thorpe sworn 3 May 2021, ACT 13.

[14] See affidavit of Krysten Sara Leopardi sworn 21 July 2021, KSL 3.

[15] Affidavit of Krysten Sara Leopardi sworn 29 March 2021 [25].

[16] Affidavit of Krysten Sara Leopardi sworn 27 April 2021 [22].

[17] Affidavit of Krysten Sara Leopardi sworn 27 April 2021 [30].

[18] Affidavit of Krysten Sara Leopardi sworn 21 July 2021 [28].

[19] Affidavit of Krysten Sara Leopardi sworn 21 July 2021 [29] - [30].

[20] Affidavit of Krysten Sara Leopardi sworn 21 July 2021 [40] - [41].

[21] Affidavit of Krysten Sara Leopardi sworn 21 July 2021 [28].

[22] Affidavit of Krysten Sara Leopardi sworn 21 July 2021 [29].

[23] Affidavit of Krysten Sara Leopardi sworn 21 July 2021 [30].

[24] Affidavit of Andrew Cecil Thorpe sworn 11 March 2021, ACT 3.

[25] Affidavit of Krysten Sara Leopardi sworn 21 July 2021, KSL 3.

[26] The financial position of the plaintiff is not known.

[27] Affidavit of Krysten Sara Leopardi sworn 21 July 2021 [17] - [18].

[28] Affidavit of Krysten Sara Leopardi sworn 21 July 2021 [22].

[29] Affidavit of Krysten Sara Leopardi sworn 21 July 2021[23] - [25].

[30] Affidavit of Krysten Sara Leopardi sworn 21 July 2021 [28] - [29].

[31] Affidavit of Krysten Sara Leopardi sworn 21 July 2021 [30].

[32] Affidavit of Krysten Sara Leopardi sworn 21 July 2021 [33].

[33] Affidavit of Krysten Sara Leopardi sworn 21 July 2021 [40] - [41].