27 Paragraphs 3 to 8 appear to relate to the refinancing of the Bonbeach units; and paragraphs 9 to 13 to the Black Rock loan.
28 Otherwise by his proposed amended defence, the applicant seeks to admit - subject to an asserted right of set-off - default in making payments on the Black Rock loan, and service upon him of notice of demand. Then his proposed defence departs from the numbering of the statement of claim. Probably, the applicant seeks to deny indebtedness - on the footing that he has a set-off; and to deny the plaintiff's asserted right to go into possession.
The proposed amended defence. What should be done about it?
29 Counsel for Perpetual submitted today, I thought with some asperity, that Mr Gheorghiu had been permitted by this Court to roam far and wide in seeking to make out a new case. The Court was not focusing upon the merits or otherwise of an appeal on the case as it had been pleaded, argued and decided below. In any event, counsel submitted, the material upon which Mr Gheorghiu now sought to rely was not new material. It had long been known to him, and he had provided no explanation for not having previously advanced a case in reliance on that material.
30 For my part, the prospect of a man no longer young being put out of his home and his profession, in circumstances where his private company, and then he, made large borrowings, those borrowings on his account having been engineered by a finance broker whom he sought to argue was the agent of the lenders, there being an alleged commonality of mortgage manager, and lenders which were likely interrelated, was a prospect which should cause the Court to carefully consider all potentially relevant material, and the use to which the applicant might legitimately put it. Particularly that is so where the applicant was unrepresented, and where refusal of enlargement of time within which to appeal from an adverse summary judgment would spell the end of the litigation. If I had considered that the matters sought to be pleaded by Mr Gheorghiu were of any revealed substance, a question would have arisen whether he should have been precluded from relying upon them, because they would turn on evidence long since available and known to him. In my opinion, however, those matters and the evidence which could support them are insubstantial, and the applicant should be refused leave to rely upon the proposed amended defence. I should say why that is so.
31 First, paragraphs 3 to 8 relate to refinancing the Bonbeach property. Central to the proposed defence is the allegation that Mr Zanelli acted as the agent of Challenger Mortgage Management Pty Ltd, a company controlled by Perpetual. But probably the lender in respect of the Bonbeach property was Perpetual Trustee Company Ltd, not the plaintiff in the present litigation. In any event, the defence could have no traction unless Mr Zanelli had been the agent of the mortgage manager subject to the alleged control of Perpetual; and on that point, I consider - see later in these reasons - that his case falls down.
32 Second, building upon the allegations which I mentioned a moment ago, Mr Gheorghiu sought to complain that Mr Zanelli completed a false loan application, one that should have been rejected if the real facts be known. So, the argument ran, because no loan should have been made, Mr Gheorghiu would have avoided all of his loss and damage.
33 But that case could not hold up. At the time when Mr Gheorghiu's private company refinanced the Bonbeach property, it already had a very large borrowing and was paying a high rate of interest. The units, according to Mr Gheorghiu, had by then been completed. But certainly none of them had been sold when the refinancing occurred, which seems to have been in late 2004; so there was still need for a loan, desirably at lower interest. Moreover, there seems to have been a need to meet future interest payments. Capitalisation of interest, as occurred, made sense.
34 Next, by the time that the Black Rock property was refinanced by Perpetual, Mr Gheorghiu's financial position seems to have been extremely difficult for reasons other than the refinancing of the Bonbeach property. Contrary to what he told us on 13 April - that is, that borrowings on the security of Black Rock as at August 2005 were about $400,000 - there were in fact two mortgages over the Black Rock property at that time, securing amounts which totalled about $650,000.[2] Moreover, as Mr Gheorghiu deposed at paragraph 5 of his affidavit sworn 8 December 2006, before re-financing through Perpetual he had attempted to extend his existing borrowing with the Commonwealth Bank, but had been rebuffed. One can accept that by August 2005 he might have needed additional money to meet payments on the Bonbeach loan; but only a small fraction of the money which he had borrowed on the security of the Black Rock property from Perpetual could have gone in that direction.
35 Third, I turn to that part of the proposed case which rested in the first place upon alleged representations by Mr Zanelli that the Bonbeach units were of high quality, were valuable, that if the applicant's company changed its loan to "his company" it would not need to sell any unit for less than $700,000, and that he, Zanelli, would introduce investors to buy the units at not less than $700,000 each. According to the proposed defence the applicant - rather, his company - was thereby induced to refinance of the Bonbeach property.
36 That part of the applicant's proposed case sought to make Perpetual responsible for the making of the loan on the basis that Mr Zanelli was not simply the agent of the lender, but that the lender was Perpetual. Exhibits 5 to 8 to the plaintiff's affidavit sworn 21 March this year show, however, as I mentioned a little earlier, that the lender was probably Perpetual Trustee Company Ltd. So, even if Mr Zanelli had acted as agent for the lender in respect of the Bonbeach re-financing, and even if, utterly improbably, his agency could have extended to making the alleged representations, and even if, utterly improbably, Mr Gheorghiu had been induced by those representations to take out a loan which was otherwise desirable, it would take him nowhere.