Hilton v Gidley

The transaction 3By deed of loan dated 6 December 2007, Mr Hilton advanced USD350,000 to Isobelle Gidley and Richard Shears, together with the sum of $20,000 described as "the associated fees in relation to procuring and effectuating the Advance". The deed provided for repayment of the loan on or before 6 January 2008, together with interest "equivalent to 25% of the Advance" as well as the fees. In the event that the loan and/or the fees were not repaid within 30 days after the due date, interest was to accrue on the amount remaining unpaid "at 30% per annum." 4Clause 6(b) of the deed provided for what Mr Hilton could do in the event that the loan was not repaid as provided. It was in these terms: "(b) then after the expiry of the 30 days referred to in the preceding paragraph the Lender may, on or after that time, but not before, take steps to recover the Advance, the Fees and any unpaid interest from any party liable under this Deed including, but not limited to, enforcing any securities given under this Deed and to have the share transfer in VIDA for the 100,000 shares referred to above registered in the name of the Lender." 5VIDA was a reference to Vanuatu Indigenous Development Alliance Limited, a company incorporated in Vanuatu and associated with the borrowers. Ms Berkemeier was not associated with the company in any way. 6The loan was guaranteed by Ms Berkemeier and Mr Bickel, who provided third party security over their property at Douglas Street, Stanmore. By clause 8 of the deed Ms Berkemeier and Mr Bickel agreed as follows: "8. The Guarantors agree to grant an unregistered mortgage to secure the obligations under this Deed of Isobelle and Richard by securing the same over their property known as...Douglas Street, Stanmore..."

The proceedings 7The borrowers defaulted. Mr Hilton then commenced these proceedings by statement of claim filed on 8 May 2008. An amended statement of claim was subsequently filed on 4 June 2008. Before that occurred Paul Fordyce, the solicitor who had prepared the original deed of loan upon the instructions of the borrowers, mistakenly filed a submitting appearance on behalf of all four defendants. This is referred to below. 8In the meantime, on 2 July 2008, Mr Hilton moved the Court by notice of motion filed on that day for, among other things, judgment for $561,475 and a declaration that he had an equitable mortgage over the Stanmore property. By notice of motion filed on 23 July 2008, all four defendants sought leave to withdraw their submitting appearances pursuant to UCPR 12.5. That rule is as follows: "12.5 Withdrawal of appearance An active party may withdraw an appearance by leave of the court." 9The application was supported by an affidavit sworn by Mr Fordyce in which he said that the submitting appearance was filed in error. Ms Berkemeier and Mr Bickel also swore affidavits in which they said that they never instructed Mr Fordyce to file a submitting appearance. Ms Berkemeier also said that she had "been recently advised... that there may be an arguable defence and/or a possible cross claim available to me in connection with these proceedings and I would like an opportunity to be heard in respect of those possible applications." 10The applications to withdraw the submitting appearances first came before Hislop J on 12 August 2008. In the course of submissions, his Honour made the following remarks that have, in the events that have occurred, achieved a degree of significance in the present application: "There is probably sufficient evidence for me to accept that the appearance was entered by mistake in so far as it containing the submitting paragraphs. The evidence from the four defendants supports the solicitor in saying that he did not have instructions. The only argument you have here, which may be viable, is that it ought to be a matter for the Judge to consider, in the exercise of his discretion, whether there is any bona fide defence. That has not been addressed. I can understand why those representing the defendants could be led into error if they took the annotation in Ritchie at face value." 11His Honour later continued: "Assuming that there was an application made by the defendants to put on, either a sworn defence or an affidavit setting out what the defence would be, so they could be considered, would you have an objection to such an application being granted? At the moment it seems to me that is the only fair way of dealing with it if your contentions are right." 12His Honour expressed the view that such an approach could be taken according to a strict timetable and that it was desirable to have Ms Berkemeier's defence "committed to affidavit". Despite opposition from counsel for Mr Hilton, his Honour expressed the view that it was appropriate for the defendants to be afforded an opportunity to put on such evidence as they saw fit concerning the merit of any defence available to them. His Honour therefore adjourned the proceedings to 3 September 2008 with a direction that the defendants file and serve any further evidence as to the merits of their defence by 26 August 2008. 13Before the matter returned to Hislop J, the defendants had changed solicitors and had retained Mr Margiotta. He filed an amended notice of motion, which was served on 2 September 2008, in which the defendants also sought leave to file defences in the proceedings. For her part, Ms Berkemeier swore an affidavit on 2 September 2008. The matters to which Ms Berkemeier deposed are pertinent to the present application and are as follows: "1. I am the fourth defendant in these proceedings. The first defendant, Isobelle Gidley, is my elder sister. 2. I am an early childhood teacher. I currently work casually as an early childhood teacher, teaching preschool & primary school, concentrating mostly on years 1 to 3. 3. I was born in Vanuatu. I lived in Vanuatu until the age of 7 with my parents and my sister. At the age of 7 we went to England and when we returned we moved to Norfolk Island. I was partly schooled at home and spent 3 years in primary school on Norfolk Island. I attended secondary school in Sydney. After school I started studying a Bachelor of Arts at University, but could not complete it. I left University and attended Kindergarten Teachers College at Waverley, and obtained a Bachelor of Arts degree, majoring in sociology and history. I then went to South Africa and married my husband where he worked as a mining engineer. When we left South Africa in November 1974 we went to live in Vanuatu returning for the birth of our first child in Sydney. In 1977 we returned to Vanuatu and lived on our parents coconut plantation. Due to problems at independence of Vanuatu in 1980 we returned to Port Vila where I ran a pre-school. In 1981 we returned to Sydney. When I returned I helped care for our mother who had Alzheimer's disease. In 1984 I divorced and in 1986 our father died, after which I became depressed and had a mental breakdown. I also lost my children to my former husband and had to fight to get them back. After my divorce I was left with no roof over my head and in a very poor financial state. Isobelle helped me get back on my feet. 4. For many years I have relied on Isobelle to assist me, both financially and in other matters. It is part of the culture of Vanuatu that each family member helps the other in financial as well as other matters. As she is the elder sister in an islander family, I rely on her to assist me financially and for emotional support. She helped me with my 2 children after I was divorced. 5. I am one of the registered proprietors of the property known as ... Douglas Street, Stanmore. The property is contained in 2 titles... I am registered as a proprietor on each of the titles as tenant in common in equal shares with Daniel Bickel. The property is an old house which has been subdivided into 2 separate apartments. I live in one apartment, and Daniel lives in the other. 6. Daniel and I first started living in ... Douglas Street Stanmore in about 1999. In approximately 2007 we purchased the property. Neither Daniel nor I had the money to provide a deposit for the purchase. Isobelle gave the deposit to us as a gift. She did so to give Daniel and I somewhere to live. Isobelle also arranged for Daniel and I to take out a loan from St George Bank to buy the property. Daniel contributes to the loan repayments. I am not able to earn enough money from my casual teaching job to pay the monthly instalments on the loan, so Isobelle and Richard make whatever repayments Daniel and I cannot make. 7. I see Isobelle most days. Due to my psychological condition the Psychiatrist advised that I am not to live alone or to involve myself in legal matters as this causes me to get anxious. Approximately a few weeks prior to 6 December 2007 Isobelle had informed me that she was involved in some transaction under which the US government was to provide funds for a project in Vanuatu. I did not know precisely what the project involved. 8. On the morning of 6 December 2007 I received a telephone call from Isobelle during which words to the following effect were said: 'You have to come into town and meet with Paul Fordyce. He wants you to come and sign some documents.' 9. Isobelle did not tell me what documents Paul Fordyce wanted me to sign, or why I was to sign them. She gave me an address to go to, and I went to the office of Mr Paul Fordyce in the city. I had never met him before. There I attended a meeting at which were present Paul Fordyce, Isobelle, Richard, Rory McDonnell, Norman Hilton, Daniel and myself. I cannot recall how long the meeting lasted, to be the best of my recollection it was about 2 hours. The meeting spanned lunchtime, and I recall that there was a plate of sandwiches brought in for lunch. Richard was not there for the entire meeting. He went in and out of the meeting, and then left for a time. Daniel attended the meeting but at some time left to go to work. I recall that at one point Norman Hilton left the meeting. I can't recall why he left the meeting. He returned and informed the meeting that he could transfer the funds. I recall that at the meeting somebody said at the meeting words to the effect: 'The funds have to be transferred this afternoon or else we will miss the deadline for the funds to arrive in the USA. If we miss the deadline, the deal will be lost.' 10. At the meeting, we sat around a table in Mr Fordyce's office. Mr Fordyce was typing a document, and was also writing things on a white board. I was not able to understand what was written on the whiteboard. I recall that on a few occasions during the meeting, words to the following effect were said by Isobelle: 'The deadline for the funds transfer is this afternoon. If the funds aren't transferred by this afternoon, the deal will be off.' 11. I recall that there was urgency expressed by those present at the meeting to get the Loan Deed signed quickly, right then and there, so that Mr Hilton could transfer the funds by that afternoon to meet the deadline. 12. Before I signed the Loan Deed, nobody ever said, either at the meeting or at any other time, that by signing the Loan Deed I was in any way agreeing to guarantee the obligations of Isobelle or Richard under the Loan Deed, or in any way become a surety for the repayment to Norman Hilton of the moneys he was advancing to Isobelle. Nobody, either at the meeting or at any time before it, ever mentioned that by signing the Loan Deed I was giving a mortgage over my property at 82 Douglas Street Stanmore to secure anything. Nobody mentioned a mortgage, or charge, or anything like it, either by myself, Daniel, Isobelle or Richard. Nobody mentioned the fact that my home was on the line or being used as security for anything at all. Prior to signing the deed nobody said to me that if the moneys advanced by Norman Hilton to Isobelle were not repaid on time, Norman Hilton could sell my Stanmore property to recovery anything. At the meeting, nobody mentioned anything about a transfer of shares in VIDA to secure anything. Nobody mentioned a transfer of shares in VIDA to Norman Hilton as part of the payment to him for lending the money. No one mentioned the rate of interest that the loan was to carry, or when it was to be repayable. 13. When Mr Fordyce finished preparing the Loan Deed, copies were made and distributed to everybody. I had a copy of it. Just prior to the time I signed the Loan Deed, Mr Fordyce said to me words to the effect: 'You can go to another lawyer and get your own legal advice about this.' I knew that the deadline for transferring the funds was due to expire soon. I replied to Mr Fordyce 'No.' I did not attempt to obtain any legal advice from anyone about the contents of the Loan Deed because I knew that there was no hope of engaging another lawyer to give me any advice about it and meet the deadline, and because I did not know that there was anything in the Loan Deed which would warrant doing so. I knew that deed had to be signed almost immediately to enable Mr Hilton to make the transfer by the deadline that afternoon, and I was under a great deal of pressure to sign the Loan Deed then and there. I signed the Loan Deed. 14. Prior to the time I signed the Loan Deed, I did not know that by signing it I was giving a mortgage or charge over my Stanmore property to secure the obligations of Isobelle and Richard under the Loan Deed, or to secure anything at all. I did not know what the obligations of Isobelle and Richard under the deed were. Prior to signing the Loan Deed nobody said to me that Norman Hilton was advancing the amount of USD$350,000.00 and $AUD$20,000.00. I thought I heard someone say at the meeting that he was advancing $250,000.00. Nobody said to me what the terms of the loan was, although Isobelle did say to me during the meeting words to the effect that she would repay the loan in a short time. I did not know that by signing the Loan Deed I was guaranteeing anything at all. I certainly did not know that the legal effect of me signing the Loan Deed was to give Norman Hilton a right to sell my Stanmore property to recover the amount he loaned to Isobelle if the loan was not repaid in time. Had I known that I was giving a mortgage or other security over my home to secure any of the obligations of Isobelle or Richard under the Loan Deed, or that my property was to be put on the line to repay the loan, or that I was guaranteeing the loan in any way, I would not have signed the Loan Deed. 15. I never received any advice at all about the meaning or effect of the Loan Deed on me if I signed it, or about the wisdom of entering into the transaction at all. Nobody mentioned to me that I should take any advice apart from legal advice as to the prudence of signing the Loan Deed, or about the risk that Isobelle would not be able to repay the loan moneys in accordance with the terms of the Loan Deed. 16. I knew that the funds Isobelle was borrowing from Norman Hilton were to go to a lawyer in the USA and to be used as a security deposit, to enable the deal in Vanuatu to take place. I did not know to whom they were to be transferred, or the terms on which they were to be deposited. I did not know how Isobelle would be able to repay the loan, or on what terms the money deposited in the USA might be returnable to her. I did not know who or how Isobelle was to receive any money in connection with the proposed deal in Vanuatu. I wanted to help Isobelle because she has always looked after me financially. I also wanted to help the people of Vanuatu. I trusted Isobelle not to enter into any transaction, and not to permit me to enter into any transaction, which might put me at risk financially, and to stop me from entering into any transaction which might put me at financial risk. 17. To the best of my recollection, Daniel signed the Loan Deed first, and then left hurriedly. I also signed it, only a few minutes after Paul Fordyce had told me that he was not acting for me and that I could obtain legal advice from my own lawyer. 18. I refer to the notice of appearance filed on 26 May 2008 and signed by Mr Paul Fordyce. I did not know that Mr Fordyce was acting on my behalf, or purporting to act on my behalf in the proceedings until a few weeks ago. A few weeks ago, Isobelle told me that I had to go and see a lawyer named Atticus Busby, who was employed in Mr Fordyce's office. He informed me that there were proceedings against me, that he had been acting on my behalf, and that he could no longer act for me because of a conflict of interest. That was the first time I was informed of the existence of any proceedings against me, or that any claim was made against my Stanmore property, or that I had signed a document which gave Mr Hilton a mortgage over my property, and that he was attempting to get orders permitting him to sell my property to recover amounts owed to him under the Loan Deed. I had never instructed either Mr Fordyce or anyone else to either act for me, or to file a notice of appearance, or to take any action submitting to such order as the Court may make. I had never been asked by anyone whether or not I wished to file such a document or to take any such action. I had never received any advice from anybody about what course was open to me to take in the proceedings. Mr Busby suggested a solicitor for me and Daniel to go to see. Daniel went to see the solicitor, but was unimpressed by the fact that the solicitor did not return his calls. Isobelle ultimately found a new solicitor for me to go to, Mr Margiotta. I first met with and instructed Mr Margiotta on Sunday 31 August 2008." 14On 6 March 2009 Mr Margiotta wrote to Ms Berkemeier. He informed her that he had filed a notice of intention to cease acting for her in relation to the matter, as foreshadowed in his letter dated 17 February 2009. His letter went on to advise Ms Berkemeier in the following terms: "Your motion to withdraw your submitting appearance is listed for finalisation of hearing before his Honour Mr Justice Hislop on Tuesday, 17 March 2009 at 10.00 am. Following the hearing before his Honour Mr Justice Hislop the matter has been listed for another status conference on Monday, 23 March 2009. Each party has been given liberty to restore the matter to the list on two days' notice. It is important that you instruct other solicitors in this matter to finalise the hearing of your motion to withdraw your submitting appearance on 17 March 2009 otherwise you and the other three (3) defendants will admit the full claim made by the plaintiff Norman Anthony Hilton in this matter. We advise that all defendants including yourself seek independent legal advice from different solicitors." 15On 2 April 2009 the matter again came before his Honour. Ms Gidley appeared in person. There was no appearance for the other defendants. The matter was stood down to 2.00pm to enable them to be present at Court, Ms Gidley having agreed to contact them. All defendants attended at 2.00pm. They indicated to the Court that they desired to have an opportunity to get legal advice and either be represented on the next occasion or resolve the matter before then. The parties agreed to the matter being adjourned to 21 April 2009. Ms Berkemeier was informed that she would not have to attend Court if she had legal representation on the next occasion. 16The proceedings returned before Hislop J on 21 April 2009 as anticipated. Ms Gidley attended in person. There was no appearance for any of the other defendants. However, counsel for Mr Hilton provided his Honour with a letter that became MFI 1. The letter was written by Mr Lombardo of Lombardo Consulting, a solicitor's firm, dated 20 April 2009, addressed to Peter McLachlan, a partner of McLachlan Thorpe, solicitors then acting for Mr Hilton, and was in the following terms: "As you know at short notice I have been caste into the role of providing independent advice to Daniel Bickel and Cynthia Berkemeier ('my clients'). I now wish to write on behalf of my clients to explain their position. 1. My Clients will not be signing any further documents whether they be additional guarantees or mortgage documents. 2. Further to the last point, my clients did not want to provide the existing questionable guarantees but were pressured to do so without any real disclosure of their risks and or the transaction. I am also instructed, and have no reason not to believe them, that the pressure was applied by Gidley, Hilton and their lawyer. 3. I have examined the position of my clients holistically covering their capability financially, mentally etc. and have come to the conclusion that there are many reasons why they are unfit to take upon the roles that Gidley, Hilton and others want them to now take. 4. Further to the last point, my clients should never have been involved in the transaction as they were mentally and financially unfit to do so. 5. I have considered the reasons why my clients were ever caught up in the affairs of Gidley, Hilton and others and have come to the following conclusions: (a) Apart from providing guarantees, my clients had no role in the transactions being advanced by Gidley, Hilton and others. They were never rewarded, nor were they ever to be rewarded. (b) The guarantees were in my view improperly obtained from disadvantaged persons (i.e. my clients) and that my clients were the subject of unfair and unconscionable pressure including being summonsed to a short notice meeting. (c) That one lawyer acted for all parties and that Gidley and Hilton appear to have in concert structured their transaction ignoring the needs of my clients. (d) It seems to me that Gidley and Hilton struck a deal and then had my clients unfairly and unconscionably insure any potential losses. (e) I find it hard to believe that neither Gidley and Hilton did not know or suspect that my clients were unfit to participate in the transaction. (f) I find it hard to believe that neither Gidley and Hilton or the lawyer present could not have insisted that my clients obtain independent legal advice; not the sham opportunity allowed (i.e. they had 10 minutes and were discouraged to do so). 6. I believe that if either of my clients, whether together or alone, would have obtained independent legal advice at the time the transaction was being structured by Gidley, Hilton and the lawyer my clients would not have given the guarantees. 7. Notwithstanding the litigation Gidley and Hilton still freely communicate with each other. 8. It appears to me that Gidley and Hilton, whilst involved in litigation against each other seem to me to again be in concert imposing unfair and unconscionable pressure on my clients including under the cloak of non-prejudice discussions (Note: I am not suggesting legal counsel are acting improperly). 9. Further to the last point, it seems to me that both Gidley and Hilton both want to settle their dispute. 10. It seems to me that that, in concert, Gidley and Hilton appear to be imposing further burdens on my clients. It is almost as if Gidley and Hilton will settle their dispute and my clients will pay for the losses that should in fact be borne by Gidley and or Hilton. 11. Further to the last point, it seems to me that the guarantees given were questionable (and in my opinion unfair and unconscionable) and now both Gidley and Hilton appear to be back again seeking to perfect the guarantees and this time ensure that the loss is borne by my clients. 12. My clients should not be communicating directly with either Gidley or Hilton in relation to their affairs as they are not capable of dealing with any of the issues on any level. 13. Cynthia Berkemeier appears to me to be riddled with medical and psychological issues. 14. It is inevitable that my clients will have to be involved in litigation. They can either have the dispute now in relation to questionable guarantees, or wait until Hilton (or another party) calls on the perfected guarantees. Recommendations 15. This dispute is really a dispute between Gidley and Hilton that should not have ever involved my clients. Gidley and Hilton should settle their dispute in a manner that also releases my clients from any claims. 16. My clients should not sign any further documents. 17. My clients should start a cross claim against Gidley and Hilton to have the guarantees struck out. 18. The lawyer that acted for all parties should be joined in any proceedings. 19. This correspondence should be provided in any proceedings on foot between any of the parties." 17Mr Hilton's counsel pressed for the application to withdraw the submitting appearances to be dismissed. In that context, and with the benefit of Mr Lombardo's letter, his Honour engaged in the following discussion with Mr Hilton's counsel: "HIS HONOUR: The difficulties are that, on the face of this material, each of [the second, third and fourth defendants] may have at least a mountable case. COUNSEL: Well, your Honour, that may be right. But a party who files a submitting appearance, files a submitting appearance and, as I say, takes no step to withdraw it, is bound by that submitting appearance, in the same way as a party who fails to deliver a defence, if judgment is obtained in default, is bound by that judgment unless and until steps have been taken to withdraw it." 18Counsel for Mr Hilton continued a little later in these terms: "COUNSEL: Yes. I fully accept that [the second, third and fourth defendants] may have an arguable defence. I don't concede the issue, but if someone were here today, they would be in a position to put forward the argument. Whether it succeeds is another matter. The court, in the absence of, first of all, a submission to that effect, but also the person actually being here, the court is left in the position as if, in a sense, they had never appeared on the notice of motion. In those circumstances, the court would not determine the notice of motion in the absence of the moving party. The appropriate course is to dismiss the notice of motion, but that is not a res judicata for all time. If the defendants subsequently wished to apply for that order to be set aside, they can do so. Rule 36.16 certainly gives an express power for the court to review its own orders where a party was absent at the time of making those orders, whether deliberate or not." 19Hislop J responded by reference to the possible consequence of acceding to Mr Hilton's proposed approach: "HIS HONOUR: I am concerned about a number of things. One of the matters I am concerned about is the fact that the three other parties, for reasons which are not apparent to me, have not come to Court today, in circumstances where they apparently sought some legal advice and, for some reason, a lawyer is not appearing. He, however, has outlined, in a letter which you passed up to me, certain bases which would prime facie, establish an arguable case. I am therefore reluctant to complete the notice of motion in these circumstances. I appreciate what you say. That it can be turned around and one can seek to set aside any order I make. That only creates additional expense and the like, if it is pursued. That is the first point. I am being frank with you. These are my concerns." 20Despite those concerns, Hislop J published his reasons for judgment on 22 May 2009: see Hilton v Gidley [2009] NSWSC 383. He dismissed the defendants' notice of motion with costs. His Honour dealt with the substantive issues before him at [18] - [26] as follows: "[18] Rule 12.5 UCPR provides: 'An active party may withdraw an appearance by leave of the court.' 'active party' is defined in the dictionary to the UCPR as: 'in relation to any proceedings, means a party who has an address for service in the proceedings, other than: (a) a party against whom judgment has been entered in the proceedings, or (b) a party in respect of whom the proceedings have been dismissed, withdrawn or discontinued, being, in either case, a party against whom no further claim in the proceedings subsists'." [19] Rule 12.5 UCPR confers a discretion on the Court. In Firth v John Mowlem and Co Ltd [1978] 3 All ER 331 Megaw LJ (with whom the other Justices agreed) said, in respect of a similar rule in the UK: 'Each case had to be looked at on its own particular facts, and the judge has a discretion. There was here what can properly be called a 'mistake' and, subject to the question of the exercise of the court's discretion, the judge had jurisdiction to make the order which he did and to set aside the unconditional appearance.' I accept that that principle is applicable in relation to r 12.5 UCPR. I also accept, by analogy with the principles developed in relation to setting aside a default judgment pursuant to r 36.16 UCPR, that, in exercising the discretion, a relevant factor is whether the defendant can show an arguable defence. [20] Counsel for the plaintiff 'handed up' correspondence from the second to fourth defendants (MFI 1) which he put before the Court: 'as a matter of my duty in the absence of those persons, particularly where they have been acting in person, they were clearly aware on the last occasion of the state of play.' [21] The first item of correspondence was an email dated 20 April 2009 to the plaintiff's solicitor from a solicitor who had provided advice to the third and fourth defendants. The email contained material which, if proved, may establish an arguable defence for the third and fourth defendants. The email contained a recommendation [19]: 'this correspondence should be provided in any proceedings on foot between any of the parties' [22] A second email from that solicitor to the plaintiff's solicitor stated: 'My short notice retainer was to provide a holistic independent opinion to the third and fourth defendants. I have done that. No time has been allowed to me to carry out any work to be able to appear tomorrow. In any event, I'm outside Sydney tomorrow. I am checking with Daniel and Cynthia what they wish to do. Out of fairness I think that Daniel and Cynthia should be given time to prepare a defence.' [23] There was also an email dated 20 April 2009 from the second defendant to the plaintiff's solicitor in which he concluded: 'I do not believe I can contribute by attending today [Tuesday 21 April] court hearing but if necessary at any time you can contact me on...' [24] Counsel for the plaintiff submitted that the appropriate course was for the Court to dismiss the notice of motion in respect of the second, third and fourth defendants as there was no evidence in admissible form before the Court to establish that an arguable defence was available to any of them; there was no evidence of an intention to pursue the notice of motion to its conclusion and each of them, it would seem, had made a deliberate decision to absent him or herself from the hearing, the third and fourth defendants, at least, after obtaining legal advice. He submitted that if the second to fourth defendants or any of them had an arguable defence which they wished to pursue and an explanation for their absence from the hearing they could move the Court to set aside any order made in their absence pursuant to r 36.16(2)(b) UCPR. [25] I accept the evidence of Mr Fordyce and the other witnesses that Mr Fordyce had not been instructed to file a submitting appearance, that such had been filed and served as a result of an error in his office and that the first to fourth defendants had not intended to submit to the orders sought by the plaintiff at that time. However the only evidence of the second to fourth defendants which has been admitted as to an arguable defence was that contained in the affidavits of 21 July 2008 that he/she had been advised 'there may be an arguable defence and/or a possible cross-claim available to me' . [26] In these circumstances, having regard to the delay in the proceedings, the plaintiff's understandable desire to proceed with his claim, the absence of the second to fourth defendants and the lack of evidence put forward by them to establish an arguable defence I accede to the plaintiff's request and dismiss the notice of motion in relation to those defendants with costs." 21On 5 August 2009 the proceedings came before Patten AJ on Mr Hilton's application seeking judgment for $678,614 and a declaration that he had an equitable mortgage over the Stanmore property. Mr Hilton also sought an order for possession of the property and an order for its sale. Patten AJ made those and other orders on that day. 22Mr Hilton's application for final judgment was supported by affidavits from Peter Hodges sworn 9 July 2008 and Mr Hilton sworn 3 August 2009. Mr Hodges' affidavit referred to what might be described as formal matters in support of the application. It is unnecessary to refer to it further. 23Mr Hilton's affidavit also contained evidence of a series of formal matters. He annexed a letter from Westpac Banking Corporation, the first mortgagee, dated 20 July 2009, indicating that Ms Berkemeier and Mr Bickle owed the bank approximately $800,000 and that the bank was in effect indifferent to the outcome of Mr Hilton's application. Mr Hilton's affidavit made no reference to the events of 6 December 2007 when the deed of loan was executed, the proceedings before Hislop J or to any material that had been placed before his Honour, including MFI 1. 24By notice of motion filed on 14 October 2013, Mr Hilton sought the following order: "1. That pursuant to leave granted for the issue of a writ of possession on 5 August 2009 the writ of possession be issued in respect of the land...situated at and known as ...Douglas Street, Stanmore." A writ of possession issued on 30 October 2013. Ms Berkemeier was served with notice to vacate the Stanmore property by 10am on 10 December 2013. 25By a later notice of motion filed on 20 November 2013, Mr Hilton sought orders varying orders made by the Deputy Registrar, including a vesting order with respect to the Stanmore property. An affidavit of Christine Louise Perry sworn on 19 November 2013 indicated that as at 30 September 2013, Mr Hilton was owed almost $925,000. 26It would appear clearly that Mr Hilton's latest application has prompted Ms Berkemeier's 6 December 2013 notice of motion. It is supported by her comprehensive affidavit sworn 17 January 2014. Much of what Ms Berkemeier deposes to in that affidavit is an understandable repetition of material referred to in her 2 September 2008 affidavit, to which I have already referred. To the extent that it contains new material, it is referred to in what follows.

Ms Berkemeier's evidence on this application 27Ms Berkemeier said that the first time that she began to appreciate that these proceedings involved a claim for possession of her home was on or about 30 October 2013 when she received a notice to vacate. Ms Berkemeier proceeded to say why she took so long to appreciate the significance of these proceedings. 28Ms Berkemeier said that she had an intense relationship with her only sibling, her older sister Ms Gidley. She said that her sister was always given greater responsibility in dealing with family matters and it was expected within her family that she would eventually come to take the lead concerning major decisions. 29Ms Berkemeier does not have formal qualifications, training or experience in commercial matters. Prior to her marriage in 1974 she had never bought a house or entered into any significant financial transaction. Her father contributed to the house she purchased after she was married. Throughout the course of her marriage, Ms Berkemeier relied upon her husband to handle their financial affairs. Since her divorce in 1984, apart from the deed the subject of these proceedings, she has only been concerned with the winding up of her mother's estate following her mother's death in 1996 and the purchase of her present home in 2007. 30In about 1985 Ms Berkemeier suffered a nervous breakdown, as a consequence of which she agreed the following year to give up primary custody of her children. Her father died the same year and Ms Berkemeier struggled to cope emotionally and required psychiatric assistance. She underwent psychiatric therapy and began to regain emotional stability before her mother died in 1996. 31Ms Berkemeier became traumatised by protracted litigation concerning her mother's estate and proceedings by the mortgagee for possession of her mother's home. Proceedings with the bank triggered further, and more severe, psychiatric illness and Ms Berkemeier became delusional, extraordinarily distressed and anxious. Towards the end of 2011 she was diagnosed as suffering from a schizophreniform psychosis. She was prescribed medication and began regular and ongoing therapy with Dr Taylor, her psychiatrist. While under Dr Taylor's care Ms Berkemeier was, for the most part, emotionally stable although she struggled with medication and became obsessive about the outcome of the litigation concerning her mother's house. She was advised by Dr Taylor "to stay away from litigation". 32Ms Berkemeier's best recollection of signing the deed on 6 December 2007 is set out in paragraphs 33 to 44 of her 17 January 2014 affidavit. Those paragraphs are as follows: "33 On 6 December 2007 I was at home when I received a call from Isobelle. Isobelle said words to the following effect: 'Cynthia, I need you to come and meet me now in the city at my solicitor's office. I won't tell you on the phone what's going on. Just come in and I'll tell you then.' 34 I agreed to go and meet Isobelle straight away, and she gave me the address of her solicitor, Mr Paul Fordyce. I had never met Mr Fordyce before. 35 After my phone call with Isobelle, I went straight to Mr Fordyce's office. I remember that on my arrival I was taken to a boardroom, and in the boardroom were my sister and her partner, Richard Shears (Richard is the second defendant to these proceedings). 36 Also present in the boardroom were Mr Fordyce, Mr Norman Hilton (the plaintiff in these proceedings) and Mr Rory McDonnell (who I understood from the introductions given to me was associated with Mr Hilton in some way). I had never met Mr Hilton previously. I may previously have met Mr McDonnell (along with his wife) once or twice prior to that meeting in a social setting, but I had not spoken with him about any business or financial matters prior to that meeting. 37 Daniel Bickel (who is the co-owner of my home, and the third defendant in these proceedings) then joined the meeting some time after I arrived. Daniel is Isobelle's ex-husband. I do not know when or how Daniel was notified of the meeting. 38 When I arrived at the meeting Mr Fordyce appeared to be giving a presentation about a Vanuatu project that my sister was pursuing. I knew that Isobelle had been involved in various Vanuatu based projects for over a decade and had previously made a charitable donation to one of her educational aid projects out of my superannuation funds once I had become eligible to be able to access them. I had understood the projects that Isobelle was involved with to have a community aid focus. I understood that the particular project under discussion at the meeting was intended to aid the people of Vanuatu and had an educational focus. 39 My recollection is that the mood of the room was upbeat and optimistic with respect to the project, particularly so far as Isobelle, Richard, Mr McDonnell and Mr Hilton were concerned. I recall that a document was circulated around the room toward the end of the meeting. I now know that the document that was circulated was the Deed. 40 My understanding at the meeting was that Mr Hilton was agreeing to fund the aid project that Isobelle had developed for Vanuatu. I recall that toward the end of the meeting Mr Fordyce said something to the effect: 'Cynthia are you willing to put up your house for this project? If you want to get your own advice about this there's a lawyer that you can see across the hall over there, but you've got 5 minutes to make a decision. Norman has to organise a transfer of the funds overseas straight away. If we don't meet the deadline the deal will fall through.' To the best of my recollection, the 'deadline' was 4.00 pm. 41 At the time that Mr Fordyce said the words set out in paragraph 40 above, it did not seem to me that his 'offer' to go across the hall for legal advice was a real offer in the sense that I felt a huge amount of pressure to sign the Deed so that the project could proceed. Further, I did not believe that in the space of 5 minutes I was going to be able to understand any meaningful advice from anyone. I felt a huge amount of pressure to play my part supporting the project. When I was told that I had 5 minutes to make a decision I did not think I had sufficient time to read the Deed and I did not read it. I was not aware of the terms contained in the Deed and I did not understand that what was proposed was that a loan would be made by Mr Hilton to Isobelle and Richard that would be guaranteed by me and secured by a mortgage over my home. I did not take any time to think about the possible adverse consequences of signing the Deed. I signed there and then, in the meeting and in the presence of Mr Hilton, Mr McDonnell, Mr Fordyce, Isobelle, Richard and Daniel. 42 To the best of my recollection, at no point during the course of the meeting did anyone say anything that caused 'alarm bells' to ring from my point of view. I do not believe anyone said anything to the effect of: 'This is a high risk loan'; or 'Cynthia, are you prepared to take on the risk associated with this loan to your sister and Richard?' or any other comment related to the obligations or risks I would assume by agreeing to enter into the Deed. I did not understand that I would receive any benefit from entering into the Deed, but simply that my entering into the Deed would be a show of support that would help commence an aid project in Vanuatu. 43 If I had been told that the transaction reflected in the Deed was a loan by Mr Hilton to Isobelle and Richard, secured by my only significant asset I would not have entered into the Deed. I had never been asked previously by my sister to guarantee her obligations as a borrower and I would not have proceeded to enter the Agreement if I was aware that this was what the Agreement recorded. The transaction, namely the fact that it was a loan to Richard and Isobelle, also is out of context with what I understood the transaction to be and this too would have, I believe, caused me to ask for further information or advice and/or not sign the Agreement. 44 I have tried to reflect on why it was that I signed the document in the circumstances of the 6 December 2007 meeting. My explanation is that I simply did not understand the impact of my actions. At that time, I felt caught up in the hype of the meeting in the sense that it was my perception that Isobelle and Mr Hilton were desperate to get their project up and running and I did not want to get in their way." 33Ms Berkemeier set out the reasons for her delay in defending these proceedings commencing at paragraph 45 of her latest affidavit. It is unnecessary for present purposes to repeat those matters here.

Mr Hilton's knowledge of Ms Berkemeier's particular circumstances 34Mr Hilton's evidence is contained in his affidavit sworn 10 February 2014. Mr Hilton asserted that at no time prior to the entry of judgment against Ms Berkemeier had she or any other person told him about her personal circumstances or that Ms Berkemeier had suffered from any form of psychiatric illness. Mr Hilton also described in fairly anodyne terms what actually happened at the 6 December 2007 meeting when the deed was signed. Part of his affidavit was in these terms: "35 When I returned to Paul Fordyce's office after 2pm everybody was chatting and appeared in a happy and engaged environment... 36 All parties were present when the documents were signed. All parties signed where designated, had their signatures witnessed and initialled all other pages. All parties were provided with a copy signed by all parties. 37 ...There was no indication in any way to me that Cynthia Berkemeier was anything other than an intelligent woman who was signing the documents willingly and with full knowledge of the terms of the securities being provided by her. She signed or otherwise initialled each of the 12 pages of the loan document. If Cynthia Berkemeier or Daniel Bickel had said or made any suggestion that they did not understand or did not want to sign the documents or provide the security I would have put an end to the loan arrangement. That did not happen." 35He gave the following evidence about the 6 December 2007 meeting when cross-examined before me: "Q. Do you have a recollection one way or the other whether or not Ms Berkemeier or anyone told you, in this meeting, that Ms Berkemeier might be suffering from, or have a mental condition? A. I don't recall that, no. No, I don't recall anyone saying that." 36Ms Berkemeier emphasised, for the particular purposes of the present application, that whatever Mr Hilton said in his affidavit about whether or not he knew or suspected at any time before judgment was entered in his favour, that she was unwell, the following matters must indicate that he did. First, he had by 2 September 2008 been served with Ms Gidley's affidavit sworn that day in which she deposed to having looked after Ms Berkemeier for nearly 30 years and that she was schizophrenic. Secondly, Ms Gidley also raised Ms Berkemeier's condition in open court on 2 April 2008 when she told Hislop J that her "sister is a schizophrenic under a doctor's care" and that "she has been severely ill." Thirdly, Mr Hilton had by 20 April 2009 received the letter from Mr Lombardo, referred to earlier, in which he said that Ms Berkemeier "appears to me to be riddled with medical and psychological issues." 37During his cross-examination before me, Mr Hilton did not maintain his denial of any knowledge of Ms Berkemeier's condition so as to suggest that he had never before obtaining judgment against her been notified of her personal circumstances, but rather appeared to assert that she did not suffer from any relevant psychological or psychiatric condition. For example: "Q. So at least by the time of this letter you were squarely on notice of the matters that Mrs Berkemeier wanted to raise in connection with what had transpired with this loan? A. That is what Mr Lombardo raised. He also suggests that Mr Bickel, Dr Bickel was also mentally and financially unable to deal with it. So that clearly was an invention, now alleging that Dr Bickel Ph.D from Cornell University was also mentally ill equipped. Q. So in short you dismissed that letter? A. Yes, there were many reasons why I term it rubbish, but that is one of them. ... Q. But in fact you were well on notice that issues were being raised about Mrs Berkemeier's psychiatric condition before you applied for the submitting appearance judgment? A. No, I don't agree with that. Q. Well, you had been told about it? A. No, certainly Mrs Berkemeier never raised it with me. Q. Well, you had seen Mr Lombardo's letter? A. I just said Mrs Berkemeier never raised it with me. So at no time did Cynthia discuss it with me. My only recollection is that during friendly meetings with Mrs Gidley, she - I would ask, 'How is Cynthia,' or, 'How is Daniel,' obvious whatever, and she would say, 'Cynthia has not been well from time to time.' There is no reference to schizophrenia. I have never seen any medical opinions from Dr Taylor or anybody else. I have never heard of those people. Q. But you had heard from Mr Lombardo about the problems? A. I read his rubbish letter. Q. And you were aware that Mrs Gidley had raised it in open court as a problem? A. No, I was not aware of that." 38I have earlier referred to some passages from the transcript of proceedings before Hislop J, in which his Honour referred to concerns that he had concerning the possibility that the defendants, including Ms Berkemeier, might have had what he described as "a mountable defence." 39Ms Berkemeier submitted that, even taking account of the competing evidence about it, it remained arguable that between the date of the original transaction on 6 December 2007 and the decision of Hislop J on 22 May 2009, Mr Hilton knew or should have been aware of at least the following things: (1)That in executing the deed, he had entered into a high risk transaction with an interest rate and other benefits to him that were designed to reflect and accommodate that risk; (2)If the contingencies associated with the Vanuatu project were not fulfilled he would be able to rely on his security over Australian real estate, including the Stanmore property; (3)The borrowers could not service even interest payments under the deed from their disclosed incomes; (4)The transaction the subject of the deed was being documented and executed under time pressures and in haste; (5)Ms Berkemeier had not received any legal or financial advice with respect to the deed; (6)Ms Berkemeier had not said anything that would suggest she had any understanding of the transaction; (7)Ms Berkemeier suffered from schizophrenia; (8)Mr Fordyce had filed a submitting appearance purportedly on her behalf and without instructions to do so; (9)Mr Fordyce had purported to act for Ms Berkemeier when he was plainly conflicted at a number of levels in so doing; (10)Mr Margiotta had purported to act for Ms Berkemeier when he was conflicted in so doing; (11)No truly independent solicitor had ever acted on the record for Mrs Berkemeier in the proceedings and she remained unrepresented.

Does Ms Berkemeier have an arguable defence? 40Ms Berkemeier tacitly concedes that there is no utility in her present application unless she can demonstrate at least the existence of a prima facie defence to Mr Hilton's claim. She is understandably encouraged by the fact that Hislop J would appear, if only tentatively, to have accepted that she did. Ms Berkemeier went further and elaborated upon the defence she would hope to mount if given the opportunity to do so. 41Ms Berkemeier indicated that she would apply to have the terms of the deed of loan set aside pursuant to s 7 of the Contracts Review Act 1980 to the extent that it affected her. She contended that the transaction into which she entered bears the following hallmarks referable to the considerations outlined in s 9 of the Act: (1)First, there was a material inequality in bargaining power between Ms Berkemeier, who had limited financial learning and experience, and Mr Hilton, who was a sophisticated, highly qualified and experienced businessman. (2)Secondly, it appears that there was little, if any, real negotiation of the provisions of the deed, and no negotiation with respect to the mortgage given by Ms Berkemeier over the Stanmore Property. (3)Thirdly, it was not reasonably practicable for Ms Berkemeier to negotiate for the alteration of or to reject any of the provisions of the contract in a setting where she was without representation and unlikely to be aware of the way in which the deed would affect her. In that sense, the question of whether she was told that she would need to obtain advice in "five minutes" or that a lawyer could be made available in that time frame whilst the deadline loomed for payment to an account in the United States was not a realistic or genuine offer to obtain advice in the circumstances. (4)Fourthly, Ms Berkemeier was not reasonably able to protect her interests. So much is evident from her failure to raise a single query about the transaction at the 6 December 2007 meeting. There is expert medical evidence to suggest that that was a consequence of her psychiatric condition at the time. (5)Fifthly, the relative economic circumstances, educational background and literacy of Ms Berkemeier compared to Mr Hilton left her at a plain disadvantage. (6)Sixthly, Ms Berkemeier was given no independent legal or other expert advice before entering into the transaction. (7)Seventhly, the provisions of the contract and their legal and practical effect were not accurately explained to Ms Berkemeier by any person. (8)Eighthly, undue influence, unfair pressure or unfair tactics were exerted on or used against Ms Berkemeier because she was called at short notice to a meeting, was not represented and was told that the contract the subject of the meeting had to be executed that same day. (9)Ninthly, the commercial setting, purpose and effect of the deed were extraordinary. The deed involved Ms Berkemeier giving security over her only asset to support the provision of finance to her sister on short notice in respect of a proposal that was all but unexplained in circumstances where, to Mr Hilton's knowledge, neither Ms Gidley nor Mr Shears could afford to repay the amounts advanced to them unless a series of contingencies, which could fairly be described as fanciful, came to pass. 42Moreover, Ms Berkemeier contended that there were public interest considerations raised by virtue of the fact that the deed involved lending on the assumption that sufficient security was available to repay the loan, without regard to the capacity of borrowers themselves, let alone the guarantors, to repay it. In Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41, Basten JA referred to that issue in this way (at [128]): "[128] To engage in pure asset lending, namely to lend money without regard to the ability of the borrower to repay by instalments under the contract, in the knowledge that adequate security is available in the event of default, is to engage in a potentially fruitless enterprise, simply because there is no risk of loss. At least where the security is the sole residence of the borrower, there is a public interest in treating such contracts as unjust, at least in circumstances where the borrowers can be said to have demonstrated an inability reasonably to protect their own interests, for the purposes of, for example, s 9(2)(e) or (f)." 43Ms Berkemeier also drew attention to the fact that the Court of Appeal more recently reviewed the question of whether Contracts Review Act relief was available to a guarantor, who (unlike Ms Berkemeier) had received legal advice in respect of a guarantee in circumstances where the guarantee had been obtained by a lender who knew that the ability of the borrower to repay the amount lent was contingent on future events. In Fast Fix Loans Pty Ltd v Samardzic [2011] NSWCA 260 at [43], Allsop P said: "[43] The complaint about 'asset lending' tended to raise a debate over semantics. 'Asset lending' is not a label or a legal frame of reference. It is a convenient expression, used in cases such as Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41; 14 BPR 26,639 and Spina to describe a form of lending where the lender has little, if any, regard for the capacity of the borrower to repay and rests satisfied with the security to protect itself. As Campbell JA made clear in Kowalczuk at [96]-[99], the conclusion of 'unjust' for the Act, ss 7 and 9 depends on all the circumstances and not on labels. There is no reason why considerations such as those here cannot lead to the conclusion that a contract of guarantee is unjust if entered into by a lender who is uncaring of a guarantor's capacity to repay where there is a real and significant possibility of default by the borrower and the guarantor takes no benefit under the borrowing. This is particularly so in all the other circumstances of this case - most particularly the recognition by the appellant of the only two likely sources of repayment, one (successful refinancing) having a real risk to it. The appellant lent at a significant interest rate, reflecting the underlying commercial risk, appreciating the position the parents had been placed in, without any basis to consider that the parents appreciated the commercial risk or that they could afford to take that risk." 44Ms Berkemeier argued that this line of reasoning ought to apply to her case, possibly with even greater force given the absence of any legal or financial advice, the disadvantage arising from her schizophrenia and its associated effects, and the extraordinary deadlines that were applied to the decision to enter into the deed. 45Ms Berkemeier contended that Mr Hilton's attempts to distinguish himself from the cases dealing with Contracts Review Act relief on the basis that the transaction the subject of these proceedings was a one-off, 'private lend' was not a valid or helpful point of distinction at all. The issue is not whether the lender is regularly in the business of making funds available as a private loan, but whether the particular circumstances of the case, having regard to the criteria in s 9 of the Act taken as a whole, warrant the making of an order setting aside or varying a contract. 46In this particular case, it is fairly arguable that almost all of the considerations set out under s 9 of the Contracts Review Act are triggered and that Ms Berkemeier has an arguable defence available to her in these proceedings. 47Additionally, the cases on unconscionability establish that the Court will consider whether to set aside a transaction on the basis that it is an unconscientious bargain. For example, Kitto J in Blomley v Ryan [1956] HCA 81;(1956) 99 CLR 362 at 415 as follows: "whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands" 48To that list might be added age, sex, and "lack of assistance or explanation where assistance or explanation is necessary": per Fullager J in Blomley v Ryan at 405. 49Two matters need to be established to invoke the Court's jurisdiction to set aside an unconscionable transaction: see Teachers Health Investments Pty Ltd v Wynne (1996) NSW ConvR 55,785: (1)That the party seeking to impugn the transaction was under a relevant disadvantage or disability, in the sense discussed in Blomley v Ryan or, in the words of Deane J in Commercial Bank of Australia v Amadio [1983] HCA 14; (1983) 151 CLR 447 (at 476), in the sense that the weaker party "is unable to judge for himself" through "weakness, ignorance or necessity"; and (2)That any special disability is "sufficiently evident to [the other party to the transaction] to make it prima facie unfair or 'unconscientious' of the [other party to the transaction] to procure the execution of the [contract] in the circumstances in which the execution was procured": Teachers Health Investments Pty Ltd v Wynne at 56,029, quoting Amadio at 476-477. 50Ms Berkemeier submitted that both of these requirements are met by her: (1)She was operating under a relevant disadvantage by reason of her lack of experience, education and the symptoms of her schizophrenia, and she was denied such assistance or explanation as was necessary for her to be able to understand the deed; and (2)Such disadvantage must have been sufficiently evident to Mr Hilton. No person with his experience could sit in a meeting, in the circumstances that occurred on 6 December 2007, and not form a view that Ms Berkemeier was operating at a disadvantage and did not appreciate the ramifications of the transaction into which she was entering. 51In light of these matters, Ms Berkemeier submitted that she has demonstrated the existence of at least an arguable defence.

Should Hislop J's judgment and Patten AJ's judgment be set aside? 52It is timely to recall that Ms Berkemeier moved the Court for orders in accordance with UCPR 36.15 and 36.16. Those rules are relevantly as follows: "36.15 General power to set aside judgment or order (1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith. (2) A judgment or order of the court in any proceedings may be set aside by order of the court if the parties to the proceedings consent. 36.16 Further power to set aside or vary judgment or order (1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order. (2) The court may set aside or vary a judgment or order after it has been entered if: (a) it is a default judgment (other than a default judgment given in open court), or (b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or (c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order."

Ms Berkemeier's submissions - Hislop J's judgment 53Ms Berkemeier submitted that the submitting appearance judgment of Hislop J should be set aside because the submitting appearance was plainly entered by mistake. I was referred to Hidden J's judgment in Steinhoff Australia Pacific Ltd v Lifestyle Retailing Pty Ltd [2011] NSWSC 1621.

Ms Berkemeier's submissions - Patten JA's judgment 54Ms Berkemeier submitted that on 5 August 2009 when Mr Hilton made his application before Patten AJ for final judgment against her, none of the matters referred to at [39] above was raised or mentioned. Moreover, Mr Hilton made no reference to the concerns expressed by Hislop J to the effect that Ms Berkemeier may have had a mountable case. Since the entry of judgment by Patten AJ, Mr Hilton has taken no step to enforce it until he applied for a writ of possession on 20 November 2013. 55Ms Berkemeier submitted that the final judgment of Patten JA should be set aside on the basis that it was obtained irregularly or against good faith. That proposition was advanced upon the basis of an analogy with the obligation of a party seeking ex parte injunctive relief to be frank with the court. In this respect I was referred to Kendall v Carnegie and Ors [2006] NSWCA 302; (2006) 68 NSWLR 193 at [60] per Bryson JA in these terms: "[60] There is not and could not, I would think, ever be an exhaustive judicial definition of what is against good faith; only very broad limits are set by proceeding by analogy from circumstances in which judicial remedies are based on good faith, unconscionability, or other concepts closely related to good faith. I would include the passage cited from Taylor v Johnson among the many conceivably available sources from which to proceed by analogy. 'Against good faith' is an expression which requires the impeachment of the intention or behaviour of the person whose good faith is impugned." 56In addressing the broad range of factors that may lead to a finding that a judgment was given or entered against good faith, the Court seeks to ascertain whether the person who has procured the judgment has engaged in misconduct or dishonourable conduct that would warrant the Court adopting an "exceptional course": Coles v Burke (1987) 10 NSWLR 429. In circumstances where a submitting appearance has been filed, any step taken by Mr Hilton could not be described as ex parte. The issue thrown up for consideration is therefore whether or not in the circumstances of the present case Mr Hilton owed a duty that is imposed upon a party who is proceeding ex parte of the type referred to by Santow J in Kavia Holdings Pty Ltd v Werncog Pty Ltd [1999] NSWSC 839 at [1] as follows: "[1] It is well settled that if an applicant for an injunction fails to disclose to the Court all relevant facts which the duty of candour to the Court requires to be disclosed, and in a way which is not misleading, the Court has a discretion to discharge the injunction. The Court may in some cases exercise its discretion by maintaining the injunction, though penalising the applicant by an appropriate order as to costs or by calling upon the Plaintiffs' undertaking as to damages. See for example, Holden v Waterlow (1866) 15 WAR 139 and Thomas A Edison v Bullock (1912) 15 CLR 679 at 682 and the discussion in Spry "The Principles of Equitable Remedies" LBC 1997 at 494-500. While that duty of candour applies with especial stringency to ex parte applications (see for example Frigo v Culhaci (Court of Appeal, 17 July 1998, unreported), its scope extends to any application, contested or not, where evidence is presented to the court in support of an application. Those duties apply to the parties." 57Ms Berkemeier conceded that Mr Hilton was not proceeding ex parte before Patten AJ, at least in the sense that such expression is used where injunctive relief is sought. In Redwin Industries Pty Ltd v Feetsafe Pty Ltd [2002] VSC 427, Habersberger J said this at [11]: "[11] The order of 2 April 2001 was made in the absence of the defendants, but not without notice to them. The defendants chose not to appear. Therefore, it is not correct, in my opinion, to describe the order of 2 April 2001 as one made ex parte, which means in this context in the absence of one party because there had been no notice to that party. Accordingly, the principle of full and fair disclosure on an ex parte application may not apply to the order made on 2 April 2001." 58That statement needs to be compared with what Young J said in Trust Co of Australia Ltd v Perpetual Trustee WA Ltd (No 2) (1995) NSWLR 654 at 659-660 as follows: "...the plaintiff, argued that there was a clear reason for enacting Pt 11, r 3, in its present form, namely, to make it clear that on a submitting appearance, one could proceed immediately to decree. I am unconvinced by that argument. ... ...a more likely explanation for the rule is the purely pragmatic one of identifying in the court who is contesting the plaintiff's claim and who is not, and providing for costs. [The plaintiff] then argues that the rule does not mean the reintroduction of the old equity practice as to submitting defendants. [The plaintiff] says that the words 'Submits to the making of all orders sought and the giving or entry of judgment in respect of all claims made' make it quite clear that the defendant is not entitled to contest the plaintiff's claim. He is not entitled, as under the old equity rules, to be given any notice of hearing, nor is he allowed to file an affidavit so that he cannot even speak as to the form of order without leave. ... However, even though I accept [the plaintiff's] submission, it does not seem to me that it follows as night follows day, that the plaintiff is entitled to a decree or order." 59Young J cited Charles v Shepherd [1892] 2 QB 622 at 624. His Honour said at 660 that: "...Lord Esher MR made it clear that having consulted all the judges of the Court of Appeal the Court was not bound to give judgment for the plaintiff even though the statement of claim may on the face of it look perfectly clear, if it could see any reason to doubt whether an injustice might not be done by giving judgment." 60Ms Berkemeier submitted that a review of the steps taken by Mr Hilton to obtain the judgment from Patten JA revealed the existence of a large number of matters that were known to him, and which arguably spoke unhelpfully to the entry of judgment against her. The application was also made in Ms Berkemeier's absence when it was known that she had not been independently represented in the proceedings at any time, and in circumstances where the transaction, to the extent that it involved Ms Berkemeier and rendered her gratuitously liable for her sister's loan, was highly unusual and definitively improvident. Ms Berkemeier maintained that Mr Hilton was not entitled simply to pass over what he knew of the opinions of Hislop J, however tentative or preliminary they might have been, concerning the availability of an arguable defence. Ms Berkemeier contended that Mr Hilton was not in those circumstances entitled to remain silent and that his silence was against good faith. 61Ms Berkemeier maintained as well that, having regard to the unambiguously drastic consequences for her if the judgment is not set aside, it is in the interests of justice that she be given an opportunity to defend the proceedings against her on their merits. 62Ms Berkemeier also argued that the judgment from Patten AJ ought to be set aside because it was obtained irregularly. That is because Mr Hilton was required to establish a proper evidential basis for the value of the Stanmore property but did not do so. In King Investment Solutions v Hussain [2005] NSWSC 1076; (2005) 64 NSWLR 441, Campbell J at [101] and [119] said this: "[101] A sale will usually not be ordered where there is no evidence of value of the property: Smithett v Hesketh (1890) 44 Ch D 161 at 163; Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 380. In fact there is at least one example of a sale being ordered even though there was no evidence of value: Wickham v Nicholson (1854) 19 Beav 38; 52 ER 262. However, in most cases it would not be a proper exercise of a judicial discretion to order sale at the suit of a second mortgagee unless there was some evidence of value. Without that evidence, it would not be possible to fix a reserve price for any sale, would not be possible to form a view about whether it was appropriate to give the mortgagors time to pay before a sale could be made (and if so how long), and there would be serious difficulties in deciding who should have the conduct of the sale, and what conditions ought be imposed for the protection of the first mortgagee. ... [119] The point, for present purposes, is not that the discretion to order a sale will necessarily be exercised in the twenty-first century in the same way as it was in the nineteenth. Rather, one point is that there is a discretion to be exercised, and without factual material by reference to which the discretion can be exercised, which includes at least the value of the property and the amount owing on the security of it, the exercise of the discretion itself is likely to miscarry. Another point is that the courts have exercised considerable caution in the making of orders for sale." 63Ms Berkemeier's written submission on this point was as follows: "[Mr Hilton] was better placed than most to understand the evidence of valuation that ought to be put forward, and in particular to appreciate the difference between a real estate agent's guesstimate and an independent valuation. [Mr Hilton] failed to place proper evidence of value before the Court. He was not content to rely on the real estate agent's valuation so far as his own interests were concerned: following final judgment he proceeded to have the properties valued again. But he did not give the Court the benefit of the doubt of valuation evidence that he considered credible."

Mr Hilton's submissions - Hislop J's judgment 64It will be recalled that Hislop J's decision, and his Honour's reasons for judgment, specifically contemplated the possibility of an application by Ms Berkemeier to set it aside as having been made or given in her absence. Counsel for Mr Hilton at the time conceded as much. Despite that concession, by the time the matter came before me on just such an application, the position adopted by Mr Hilton had become considerably more strident. 65Mr Hilton relied upon what was said by Palmer J in Fitter v Public Trustee & Ors [2007] NSWSC 1487. His Honour concluded that a party who files a submitting appearance cannot later set aside a judgment on the ground that it was entered in a party's absence unless the submitting appearance was itself procured by fraud or some other vitiating factor. His Honour had the following things to say at [19]-[24]: "[19] Where a defendant files a submitting appearance, that defendant is not thereafter entitled to contest the plaintiff's claim, so that the Court may proceed to judgment against that party in his or her absence and without further notice: see e.g. Trust Company of Australia Limited v Perpetual Trustees (WA) Limited (No 2) (1995) 36 NSWLR 654. [20] The right to be heard and to have notice of proposed orders, which is protected by UCPR 36.16(2)(b), is surrendered once a submitting appearance is filed. A party who has filed a submitting appearance cannot thereafter avail himself or herself of that rule unless that submitting appearance has been procured by fraud or some other vitiating factor. A vitiating factor might be, for example, if a plaintiff amends the claims for relief against a submitting defendant in such a way as to alter substantially the extent or nature of the relief originally sought and does not give notice of that amendment to the submitting defendant. [21] Nothing of that character has happened in the present case. Ms Fitter received legal advice before instructing Mr Baker to submit a submitting appearance on her behalf. She knew that the effect of her submitting appearance would be that she would probably lose any chance of obtaining any benefit from the deceased's estate. Mr Baker certainly knew that the fate of Ms Fitter's application to the superannuation fund trustees would probably depend upon the fate of the Public Trustee's application under the Forfeiture Act. It is a fair assumption that he so advised Ms Fitter. [22] There is no possible suggestion that Mr Baker acted improperly in carrying out Ms Fitter's instruction to file a submitting appearance. There is no possible suggestion that the Public Trustee and Ms Robb acted improperly or inappropriately in conducting the proceedings thereafter on the footing that Ms Fitter had decided not to participate any further and had surrendered all claim she might have to the deceased's estate whether under the Forfeiture Act or under the Family Provision Act. In these circumstances, in my opinion, UCPR 36.16(2)(b) can have no application. [23] Apart from the rules of Court, the Court has a general and inherent jurisdiction, as a superior court of record, to set aside its own orders if they have been procured by denial of justice. In the circumstances of this case, no ground for the exercise of that discretion has been shown. [24] Finally, I do not accept the submission that the decision of Lloyd AJ was invalid because he did not have evidence as to Ms Fitter's position. The judge was obliged to consider in that regard only such evidence as was presented to him. By her submitting appearance Ms Fitter informed the Court that she did not wish to present any evidence. She admitted thereby that the Court was entitled to make an order against her without regard to such evidence as she might have presented if she had chosen." 66Mr Hilton also contended that UCPR 36.16(2)(b) did not apply because Ms Berkemeier was not absent. Mr Hilton argued that while the principles enunciated in cases such as Cameron v Cole [1944] HCA 5; (1944) 68 CLR 571 per Rich J at 589-591 and BP Australia Ltd v Brown & Ors [2003] NSWCA 216; (2003) 58 NSWLR 322 per Spigelman CJ at [133]-[134] were not in doubt, Ms Berkemeier had not established any basis for them to apply to her or for the discretion contemplated by the rule to be exercised in her favour. There were said to be several reasons for this as follows. 67To start with, Hislop J's orders were not orders made advancing Mr Hilton's pleaded claim for relief, but were in fact orders made in adjudication of Ms Berkemeier's notice of motion to set aside her submitting appearance. Ms Berkemeier was in that sense the moving party and by implication at least an active participant. Hislop J's orders made on 29 May 2009 make that clear if it is not otherwise so. 68Ms Berkemeier had also been represented by solicitors from time to time, being Mr Fordyce who filed the submitting appearance in the first place and continued to act for Ms Berkemeier until 12 August 2008, and Mr Margiotta who appeared for her from 31 August 2008 until 17 March 2009. Mr Perrignon of counsel also represented Ms Berkemeier from time to time. 69Moreover, Hislop J had specifically required all of the defendants to appear before him at 2.00pm on 2 April 2009 and stood the matter down until then to enable that to occur. Ms Berkemeier appeared at that time when it was agreed that the matter should be adjourned until 21 April 2009. His Honour specifically observed that Ms Berkemeier would not be required to attend court on the adjourned date if she were legally represented. In due course Ms Berkemeier chose neither to appear herself nor by a legal representative at that time or thereafter. 70In the meantime, Mr Lombardo was retained to provide independent legal advice. This has been referred to already. Mr Lombardo's letter came to the attention of Hislop J. 71Hislop J received evidence from Ms Berkemeier in the form of her 21 July 2008 affidavit. Mr Fordyce's affidavit was also read and he was cross-examined. Hislop J specifically referred to Ms Berkemeier's affidavit, although he did not consider that it provided evidence of any arguable defence. That is presumably because paragraph [5] of Ms Berkemeier's 21 July 2008 affidavit said no more than the following: "5 I have recently [been] advised and verily believe that there may be an arguable defence and/or a possible cross claim available to me in connection with these proceedings and I would like an opportunity to be heard in respect of those possible applications." 72Next, Hislop J accepted that the filing of the submitting appearance by Mr Fordyce had been done by mistake. But for the establishment of an arguable defence, it seems apparent that his Honour would have granted Ms Berkemeier the relief that she sought: [25] of his Honour's judgment. 73In these circumstances Mr Hilton maintained that there is no proper basis for me to exercise any discretion in favour of Ms Berkemeier pursuant to UCPR 36.16(2)(b). She was neither denied natural justice nor procedural fairness. 74Mr Hilton then contended that even if, contrary to his principal submissions, Ms Berkemeier could establish a proper basis for setting aside Hislop J's judgment, she could not in any event demonstrate that any useful purpose could be achieved by doing so. That amounts to a contention that Ms Berkemeier could not establish the existence of a viable defence, a proposition with I have already expressed disagreement. I observe that in coming to that conclusion I have taken account of Mr Hilton's argument that s 16 of the Contracts Review Act does and will preclude any claim by Ms Berkemeier for relief under that Act. Briefly however, I note that Ms Berkemeier's arguable defences are not limited or restricted to claims for relief under the Act.

Mr Hilton's submissions - Patten JA's judgment 75Mr Hilton referred me to the decision of Barrett J in Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365. His Honour reviewed the authorities concerning the extent of the duty or obligation upon a party to place material before a court in the absence of the other party. His Honour's analysis, at [55]-[68] is instructive: "[55] In submissions made on the defendant's behalf concerning the hearing on 14 December 2009, there was emphasis on a duty of candour said to have been owed to the court by the plaintiff. The case the defendant sought to make was that there had been a breach of such a duty of candour by the plaintiff in the course of the hearing. Reference was there made to the judgment of Isaacs J in Thomas A Edison Ltd v Bullock [1912] HCA 72; (1912) 15 CLR 679. Isaacs J there said at 681: 'There is a primary precept governing the administration of justice, that no man is to be condemned unheard.' [56] Then followed these words: 'and therefore, as a general rule, no order should be made to the prejudice of a party unless he has the opportunity of being heard in defence.' [57] Isaacs J continued: 'But instances occur where justice could not be done unless the subject matter of the suit were preserved, and, if that is in danger of destruction by one party, or if irremediable or serious damage be imminent, the other may come to the Court, and ask for its interposition even in the absence of his opponent, on the ground that delay would involve greater injustice than instant action. But, when he does so, and the Court is asked to disregard the usual requirement of hearing the other side, the party moving incurs a most serious responsibility.' [58] The 'most serious responsibility' requires that the plaintiff 'bring under the notice of the Court all facts material to the determination of' the claim pursued without notice to the defendant. [59] Isaacs J thus began with the general rule already noticed that no order should be made to the prejudice of a party unless that party has had an opportunity to be heard. An exception is then recognised where 'instant action' is necessary and no such opportunity is in fact given. It is in circumstances where the need for 'instant action' causes the general rule to be broken (so that no opportunity to be heard is given) - and in those circumstances only - that the 'most serious responsibility' arises according to Isaacs J's formulation. [60] The contention of the present defendant is that such a duty of disclosure extends beyond the case in which there has been no notice and no opportunity to attend and be heard and is also at work upon the hearing of proceedings in which the defendant does not appear despite clear and unambiguous notice." 76His Honour then set out at [61] what Santow J said in Kavia Holdings Pty Ltd v Werncog Pty Ltd at [1], and continued: "[62] It appears however that this position was based to some extent, although it is not clear to what degree, upon the duty to the court owed by legal advisers. His Honour continued at [2]: 'A legal advisor depends on the instructions given. Nonetheless the legal advisor should remain alert to the importance of ensuring he or she can fulfil the personal duty of candour he or she owes to the Court.' [63] And at [11]: 'This is because the duty of candour is firstly a duty of the party involved, though reinforced by the legal advisor's corresponding duty to the Court.' [64] As I said in J Aron Corp v Newmont Yandal Operations Pty Ltd [2004] NSWSC 533; (2004) 183 FLR 90, I find it difficult to justify the imposition of such a broad duty on parties and their legal advisers in adversarial litigation where the parties are present and represented. Solicitors and counsel, as officers of the court, will always have, in the first place, a duty to the court. That duty includes a clear obligation to be frank and 'not to keep back from the court any information that ought to be before it': Re Gruzman; Ex parte The Prothonotary (1968) 70 SR (NSW) 316 at 323. But where both parties are before the court and represented, I do not think that they have a duty to 'supply the place of the absent party'. As long as litigation remains adversarial, a party can be presumed - indeed expected - to put their best case forward. That is not to say that a wilful misleading of the court will pass without remedy, but a mere failure to present a neutral case or to seek to remedy some deficiency in an opponent's evidence (or, as it was here, entire absence of evidence) cannot lay the foundation for subsequent intervention. In the Marriage of Briese (1985) 10 Fam LR 642 was a case dealing with the specific need for full disclosure of financial affairs in financial proceedings between spouses. Smithers J said (at 662): 'This is quite different from common law litigation between strangers, in which such a general duty does not exist, and obligations would only exist in so far as statute or court rules required. In my view it is fundamental to the whole operation of the Family Law Act in financial cases is that there is an obligation of the nature to which I have referred.' [65] This view was confirmed by the Full Court of the Family Court of Australia in In the Marriage of Black and Kellner (1992) 106 FLR 154. [66] An approach less comprehensive than that suggested in Kavia Holdings was outlined by Young J in Elton v Cavil (No 2) (1994) 34 NSWLR 289. In that case, the applicant for an interlocutory injunction failed to disclose all the material facts in a hearing at which the respondent was present. His Honour said at 324: 'The court needs to maintain its policy that if a person is to obtain an interlocutory order the proper standard of disclosure must be maintained. I appreciate that the present injunction was not granted on an ex parte basis, but it seems to me that a similar policy consideration arises where injunctions are granted on an interlocutory basis where both parties are present because of the limited inquiry which judges customarily make on such an application.' [67] Kavia Holdings and Elton v Cavill were both cases of applications for interlocutory injunction upon the hearing of which both parties were present. The case now before me is different in two respects. First, the defendant was not present, although it had been served and had been afforded ample opportunity to attend and be heard. Second, the application was an application for final relief and therefore not an occasion for what Young J regarded as the 'limited inquiry which judges customarily make' on applications for an interlocutory injunction. [68] It seems to me that the 'most serious responsibility' to which Isaacs J referred is attracted only in those cases where a party has not been given proper notice of a hearing and is absent when an application is pressed. In those cases, the applicant is obliged to bring to the court's attention all relevant facts known to the applicant, including those unhelpful to the applicant's case. That 'most serious responsibility' is not attracted if the defendant has been served and given ample opportunity to attend. Such a defendant's non-attendance does not give rise to an entitlement to some especially favourable treatment. The plaintiff is, in such a situation, under the generally prevailing obligation to assist the court and not to mislead it. If the case is one of interlocutory hearing of the 'limited inquiry' type to which Young J referred, the duty to assist the court is particularly pronounced. But where, as here, the application is an application for final relief and the defendant has not only received the originating process and supporting affidavit but also presented a somewhat relaxed demeanour in the face of the claim (see paragraphs [42] to [45] above), it seems to me that the duty or expectation is confined to honestly, frankness and absence of conduct apt to mislead the court in relation to any material matter." 77Mr Hilton referred to the decision of Slattery J in Mamfredas Investment Group Pty Ltd (formerly known as MAM Marketing Pty Ltd) v PropertyIT and Consulting Pty Ltd & Ors [2013] NSWSC 929 at [95]-[96] as follows: "[95] The position developed in judicial review cases applies equally in other circumstances, as White J confirmed in proceedings to set aside a statutory demand: Takchi Bros Constructions Pty Ltd v Woods [2010] NSWSC 115 ("Takchi"). His Honour summarised the position as follows (at [13]): Prima facie, as the plaintiff obtained the relief it sought in the originating process, it is entitled to its costs (Uniform Civil Procedure Rules, r 42.1). Prima facie, a defendant who files a submitting appearance except as to costs is liable for the costs up to the time of the service of the appearance but not thereafter (Develtor Property Group Pty Ltd v Newcastle City Council [2001] NSWLEC 47; LexisNexis, Ritchie's Uniform Civil Procedure NSW at [6.11.10]). Both parties argued that I should depart from this prima facie position. [96] But in Takchi White J found that the prima facie position, that the submitting party is not liable for costs after its appearance was filed, may be displaced (at [18]). The defendant in that case, whilst serving a submitting appearance, told the plaintiff that it was obliged to explain to the Court the arguments the defendant raised in correspondence as to why the statutory demand should not be set aside. This contention was incorrect, and warranted a departure from the prima facie position." 78Mr Hilton made detailed submissions in support of the contention that there was in any event nothing that he had done, or more pointedly having regard to Ms Berkemeier's submissions, nothing that he had failed to do, in the course of the proceedings before Patten AJ, that attracted any of the epithets enshrined in UCPR 36.15 or triggered the basis for the exercise of any corresponding discretion. His submissions included the following matters. 79Davies J referred to the important authorities in Zakaria v Dr Noyce [2012] NSWSC 981 and said this at [22] concerning lack of good faith: "[22] The significant matter is that for a judgment to be set aside as having been entered against good faith there must be misconduct or dishonourable conduct by the person who procured the judgment. The matter is directed, not to the Court or the Judge who entered the judgment, but to the party who was responsible for bringing it about. Ordinarily such a judgment would be a default judgment or a consent judgment contingent upon the performance of some event. To the extent that the rule is, in that sense, confined to the behaviour of the other party it sits uneasily with a judgment obtained after a hearing at which the complaining party is present and/or represented." 80His Honour referred to irregularity at [24]-[25] in these terms: "[24] Ordinarily irregularity is concerned with a failure to comply with the Rules of Court: Arnold v Forsythe [2012] NSWCA 18 at [88]. That will extend to the position where, for example, default judgment has been obtained on a Statement of Claim that does not properly plead a debt or liquidated sum: Arnold at [59]; or does not plead an essential element of the cause of action: Fenato v Chief Commissioner of State Revenue [2010] NSWCA 80; (2010) 78 NDWLR 20 at [39] and [63]. In addition, a judgment entered for more than is due will be irregular: Alexander v Ajax Insurance Co Ltd [1956] VLR 436; H R Turner & Son Pty Ltd v Rhodes [1970] 1 NSWR 305. [25] A denial of procedural fairness will be a fundamental irregularity that will entitle a person aggrieved to set aside an order as a matter of unconditional right: Cameron v Cole (1944) 68 CLR 571. That right is part of the court's inherent power. Further, such an irregularity falls within r 36.15: Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd [2008] NSWCA 38 at 85." 81In Dimitrovski v Australian Executor Trustees Ltd [2013] NSWSC 337 at [3], Pembroke J said: "[3] The language of Rule 36.15 focuses on the steps pursuant to which the judgment or order was 'given' or 'entered' or 'made'. It does not direct attention to the underlying merits of the position of the party against whom the decision was made. The rule is concerned with irregularity in the process by which the judgment was obtained, not with the correctness of the decision. It is certainly not concerned with whether there was an available defence that might have been relied upon at the time the judgment was given or the order was made. See Perpetual Trustees Australia Ltd v Heperu Pty Ltd [No 2] [2009] NSWCA 387 at [16]; Avery v Saree Holdings Ltd [2012] NSWSC 463 at [100] and [103]." 82Mr Hilton also submitted that the discretion given by UCPR 36.15 was to be exercised having regard to the principle of finality of litigation and to the fact that its exercise should always be informed by that principle: Port of Melbourne Authority v Anshun [1981] HCA 45; (1981) 147 CLR 589 at 609; D'Orta Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 at [34]; Kendell v Carnegie at [45]; Perpetual Trustees v Heperu [No. 2] [2009] NSWCA 387; (2009) 78 NSWLR 190 at [45]; Kahlefeldt Securities Pty Ltd v Guruparan [2012] NSWSC 476 at [25]; Dimitrovski v Australian Executor Trustees Ltd at [9]-[13]. 83It was Mr Hilton's position that the application of these principles to the facts of the present case demonstrated clearly that he had been guilty of no behaviour or conduct that attracted a favourable exercise of the relevant discretion. There had been no demonstrated irregularity or lack of good faith on his part. Illegality has never been suggested. 84Additionally in all of the circumstances, Mr Hilton argued that he has suffered and will continue to suffer significant substantive and procedural prejudice if Ms Berkemeier is granted the relief that she claims. His loan has not been repaid. The passage of time has destroyed or reduced his ability to explore matters referable to the foreshadowed defence. In particular, Mr Hilton drew attention to the following: (1)The events referable to the negotiation of and entry into the deed occurred on 6 December 2007. This is likely to have an inevitable effect on the recollection of witnesses. (2)Mr Hilton will seek to assert and explore that the Stanmore property is held by Ms Berkemeier and Mr Bickel on trust for Ms Gidley and possibly Mr Shears, or that Ms Gidley, and possibly Mr Shears, had an equitable interest in it, so that the equitable mortgage given by Ms Berkemeier and Mr Bickel was at the request of the equitable owners, who were also the borrowers. That would require the investigation of the circumstances surrounding the purchase of the property in 2007, the amount of the alleged gift from Ms Gidley, or contributions by her and/or Mr Shears towards mortgage repayments. There would be a need for access to the conveyancing file, and the question of whether Ms Gidley may already have had an equitable interest in the property prior to its purchase. There is a prejudice attached to seeking records going back so far in order to explore these issues properly. (3)Mr Hilton would also wish to explore the pre-existing economic relations between Ms Gidley, including possibly Mr Shears, and Ms Berkemeier, and possibly Mr Bickel, prior to entry into the deed and prior to the purchase of the property. These potentially include any knowledge Ms Berkemeier had concerning Ms Gidley's Vanuatu business affairs, or any interest, promises or understandings or arrangements that gave Ms Berkemeier an interest in Ms Gidley's Vanuatu business, including any prospect that Ms Berkemeier stood to gain if the $200 million to $300 million aid from the USA had been provided. This would require a documentary investigation that may be difficult or impossible given the passage of time. These matters are said to be relevant not only to issues of unconscionability in equity and the Contracts Review Act claims, but also to the question of whether the purpose of the loan was a business purpose caught by s 6(2) of the Act. (4)Mr Fordyce no longer has his file in relation to the transaction. He provided it to Mr Margiotta and Mr Margiotta was not able to provide it under subpoena to Mr Hilton. It appears it may have been thrown out by Mr Margiotta or lost. (5)Dr Taylor, Ms Berkemeier's treating psychiatrist up to July 2007, has retired and no longer practices. The position with respect to Dr Blicharski appears to be similar. Both doctors will have to give recollection evidence of Ms Berkemeier's medical condition at relevant times after a very lengthy passage of time. (6)There is also no certainty as to what Ms Berkemeier's medical condition will be leading up to or at a contested hearing. Mr Hilton could face applications for adjournments to accommodate Ms Berkemeier's illness, causing further delay. 85Penultimately, Mr Hilton submitted that the relevant provisions of the Civil Procedure Act 2005 combined to produce a complete answer to the present application. I was referred in detail to ss 56 to 59 of that Act and to recent cases dealing with them. An exercise of the discretionary power in UCPR 36.16(2)(b) "is subject to the provisions of the ...Act": Dunwoodie v Teachers Mutual Bank [2014] NSWCA 24 at [46]. It is unnecessary to recite these provisions here. 86Mr Hilton drew attention to the decision of Allsop ACJ in Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 at [36]-[47] and Richards v Cornford (No. 3) [2010] NSWCA 134 at [98]. I was also referred to High Court's analysis in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46 at [51], [56]-[57] with respect to the duty of the parties and their lawyers to assist the Court in furthering the statutory purposes. 87In summary, an application of the provisions of the Civil Procedure Act raises at least the following matters for consideration: (1)The efficient utilisation of the Court's scarce time and resources. (2)The competing rights of other members of the public to the same time and resources. (3)The legal costs incurred by Mr Hilton to date. (4)The right of the parties to have a justiciable controversy determined by a court are not at large and are now viewed in a context that requires parties to act and deal with matters promptly on the merits according to the rules of Court and within an acceptable timeframe. There is no right for a dispute to be determined if and when a party seeks to do so. (5)Mr Hilton is in his late 60s. 88Finally, Mr Hilton contended that Ms Berkemeier was now a tenant in common of the Stanmore property with Mr Bickel's trustee in bankruptcy, ranking after a registered first mortgagee. Mr Hilton submitted that her share "is unlikely to be any more than about $250,000." That submission was not reliably supported by evidence.

Discussion 89It will be apparent that there are several issues arising for consideration.

Delay 90One of the many remarkable things to emerge from these proceedings is the way in which Ms Berkemeier has consistently displayed such a complete and fundamental lack of attention to her own best interests, from as early as her entry into the transaction that has generated the proceedings, to her conduct over the years once they came to her notice. Even then Ms Berkemeier did not attend to obviously significant matters, which should have excited her attention, with willingness or enthusiasm or anything like it. She has on the contrary performed in a way that reflects a casual imprudence at best or a studied indifference at worst. In saying as much I accept that there is evidence from her describing her upbringing and background, legal and emotional travails and her apparently chronic battle with mental illness. These are all important matters in the scheme of this case, to which my attention has been clearly directed. I refer to these aspects of her conduct now more for the purpose of comparing and contrasting the commendable way that she has dealt with the proceedings since late last year when she appears to have chanced upon competent legal assistance, with a somewhat impoverished demonstration of self preservation over the period of six years before then. It is at least arguable, however, that Ms Berkemeier has caused or contributed to delay. 91Mr Hilton has also not acted at all times with celerity. He cannot be criticised for delay either in the commencement of the proceedings in May 2008 or in the time it took to obtain orders from Patten AJ in August 2009. By way of contrast, the proceedings thereafter were left by him to fall into desuetude until revived by Mr Hilton's motion filed on 14 October 2013. That period of litigious inaction may not have been matched by corresponding inaction elsewhere, but in the scheme of commercial disputes adjudicated in this Court, such a delay is certainly unusual. Mr Hilton presumably had reasons for taking the time that he did to bring things to a head. It is difficult for Mr Hilton to garner support from delay caused by Ms Berkemeier having regard to his own position in that respect. 92It is only important to observe that the period of time that has elapsed since 6 December 2007 is not entirely or necessarily the fault of only one person. Delay must be assessed in order to see who or what may have caused it and who may have suffered prejudice as a result. In the present case I incline to the view that the very slow pace with which the case has progressed avails neither party in terms of discretionary considerations affecting the grant of claimed relief or in the proof or demonstration of substantive or procedural prejudice. Since August 2009, Ms Berkemeier appears content to have done nothing to provoke action in the proceedings lest it rebound to her disadvantage, and Mr Hilton appears to have been similarly content to do nothing until it suited him. The one common and inescapable consequence of the delay is that Ms Berkemeier's asset has been subject to the accruing burden of increasing debt and Mr Hilton's prospects of complete recovery of his loan have correspondingly but inversely diminished.

Does Ms Berkemeier have an arguable defence? 93The transaction into which Ms Berkemeier entered was definitively improvident. It provided her with no benefit, advantage or opportunity of any kind whatsoever. She stood to make nothing from the transaction but on the contrary was exposed to crushing loss. It was a transaction framed entirely for the benefit of others. It had no upside at all for Ms Berkemeier and a very dangerous and highly likely downside. The time frame for repayment of the loan secured by Ms Berkemeier's home was short and realistically unattainable. Repayment of the loan was based upon events over which not only did Ms Berkemeier have no control, but over which the borrowers themselves had no real or effective control. Default under the loan was as close to a certainty as one could imagine. Hindsight does not make that prospect any clearer than it was, or should have been, at the time the transaction was consummated. To resort (in my opinion very helpfully) to the vernacular, Ms Berkemeier was a sitting duck. She was ripe for the picking and was taken advantage of in the most tragic and cynical way. It defies common sense to believe that any person mindful of his or her own position and interests would have proffered a valuable security in what I consider to have been the certain knowledge that it would soon be lost. 94The material in evidence in this case makes it at least arguable that Ms Berkemeier was relevantly ignorant, inexperienced and impaired. The words of Allsop P at [43] in Samardzic are apposite. Neither the lender nor the borrowers could have had any reasonable anticipation that Ms Berkemeier had any capacity to repay, in circumstances where there was a real and significant possibility, verging on certainty, of default by the borrowers. As I have stated, Ms Berkemeier took no benefit under the transaction and her true rights and entitlements were not merely not respected but were wholly disregarded. 95I hasten to observe that I am not deciding the question of whether or not Ms Berkemeier's position will translate into a successful defence. That is not my concern. I am only concerned with the question of whether or not she has established the existence of a defence on a prima facie basis. It will be apparent that I am satisfied of that.

Hislop J's judgment 96His Honour was provided with Mr Lombardo's letter. It was not formally tendered. His Honour described it as "material which, if proved, may establish an arguable defence for the third and fourth defendants." His Honour later referred to counsel's submissions which emphasised that "there was no evidence in admissible form before the Court to establish that an arguable defence was available to any of them." It is reasonably apparent that his Honour would have proceeded to grant Ms Berkemeier leave to withdraw her submitting appearance if she had been there in person or by her counsel or solicitor to prosecute the claim. His Honour accepted that the submitting appearance had been served in error. He was however clearly, and not unreasonably, influenced by Ms Berkemeier's absence from the Court. In that respect he referred to the submissions made on behalf of Mr Hilton that "there was no evidence of an intention to pursue the notice of motion to its conclusion" and that Ms Berkemeier would seem to have "made a deliberate decision to absent...herself from the hearing...after obtaining legal advice." Significantly, his Honour reiterated counsel's concession that if any of the defendants "had an arguable defence which they wished to pursue and an explanation for their absence from the hearing they could move the Court to set aside any order made in their absence." That is what Ms Berkemeier now seeks to do. 97Despite the competing contentions and detailed submissions on this issue from the parties, it seems to me to be particularly uncontroversial. The submitting appearance prepared by Ms Berkemeier's then solicitor was filed by mistake. Mr Hilton does not now seek to suggest otherwise. The concerns aired in the authorities about the limitations upon a party's entitlement to appear to oppose orders while a submitting appearance remains current can have no application to an attempt to withdraw such an appearance. The only vaguely viable basis for doing so consists in Ms Berkemeier's delay. I have already indicated that delay in this case cannot assist either party. It is not an answer to Ms Berkemeier's application to reagitate her original application. 98Moreover, it is in my opinion in the interests of justice that Ms Berkemeier be given an opportunity to apply to have the judgment of Patten AJ set aside. If only prima facie, the defence foreshadowed by her is arguably compelling, whatever may be its ultimate fate if exposed to adversarial scrutiny. It would be churlish in my view, in the particular circumstances of this case, to refuse Ms Berkemeier the opportunity to seek to withdraw her original submitting appearance or to decline to make the orders that she seeks.

Patten AJ's judgment 99It may be accepted for present purposes that the making of orders in the absence of a party who has filed a submitting appearance will not always or ever be automatic. The Court retains a discretion to grant or to refuse relief in such a case and in all cases. So much is hardly controversial. The issue arising for consideration here is whether the moving party has a duty or obligation to draw matters to the attention of the court that are not, or which may not be, apparent, but which arguably are things that a court at the point of making an order or exercising a discretion ought properly to have before it. When Mr Hilton sought his final relief from Patten AJ, Ms Berkemeier's submitting appearance obviously remained current. The duties and obligations to which Mr Hilton was arguably subject are therefore to be considered having regard to the fact that Ms Berkemeier was a submitting defendant. 100The thrust of Ms Berkemeier's case is that Hislop J had cause to pause, in the sense that he recognised the existence of an arguable defence, but his tentative view, or the material upon which it was based, was not in terms placed before Patten AJ for consideration or comment. Ms Berkemeier referred to the famous comments in Re Thom (1918) 18 SR (NSW) 70 at 74-75 as follows: "It is perhaps easy by casuistical reasoning to reconcile one's mind to a statement that is in fact misleading by considering that the deponent is not under any obligation to make a complete disclosure. By this means a practitioner may be led into presenting a statement of fact which, although it may not be capable of being pronounced directly untrue in one particular or another, still presents a body of information that is misleading, and conceals from the mind of the tribunal the true state of facts which the deponent is professing to take place before it. For that reason it is proper on such an occasion as this to express condemnation of any such casuistical paltering with the exact truth of the case." 101Ms Berkemeier was informed of the proceedings before Patten AJ. The letter giving her notice of the application was tendered. It was dated 31 July 2009 and was addressed to Ms Berkemeier at the Stanmore property. It referred to the proceedings and said simply: "We confirm that this matter is next before the Court at 9am on Wednesday, 5 August 2009 and our client will be applying for orders which will affect you." 102Exactly what transpired before Patten AJ can be gleaned from the transcript of the proceedings before his Honour on 5 August 2009. For presently relevant purposes, that is as follows: "HIS HONOUR: Do you have an opponent? PLAINTIFF: No because the first to fourth defendants, who are the other parties to the loan deed, filed submitting appearances. They brought an application for the submitting appearances to be withdrawn and that application was dismissed by Hislop J. The plaintiff seeks final orders in respect of the proceedings. PROPOSED SHORT MINUTES OF ORDER HANDED UP HIS HONOUR: These proceedings were commenced in what way? PLAINTIFF: By statement of claim which was filed 8 May 2008. HIS HONOUR: There are six defendants? COUNSEL: There was a loan to the first and second defendants guaranteed by the third and fourth defendants. The fifth and sixth defendants are first registered mortgagees of properties owned by a variety of the first to fourth defendants. The sixth defendant, which is FastFix, is the first mortgagee on a property which the plaintiff now accepts is not going to have any equity in it to satisfy his debt so therefore no relief is being sought against the sixth defendant. The fifth defendant, the bank, is registered mortgagee of the property owned by the third and fourth defendants. They were joined to be able to seek orders for judicial sale and they have consented and do consent to the orders that I have put before your Honour. HIS HONOUR: I think you said that some or all of the first to fourth defendants filed submitting appearances and then sought to be relieved. COUNSEL: They all served them at the same time through the same solicitors. HIS HONOUR: But Justice Hislop refused to permit that? COUNSEL: Yes. The reference to that decision of Hislop J is [2009] NSWSC 383. HIS HONOUR: Are they aware of the proceedings today? PLAINTIFF: They have notification in writing. I would submit they would not need to be, as they have put in a submitting appearance, but a letter has been written to them. HIS HONOUR: Perhaps you might tender a copy of that. COUNSEL: There is an error in one, a reference to the letter being submitted on 5 July. All the others refer to 5 August. We have had no response in relation to that. There are four letters, one to each of the defendants. EXHIBIT #A LETTERS TO DEFENDANTS TENDERED ADMITTED WITHOUT OBJECTION HIS HONOUR: The fifth defendant has a registered mortgage? COUNSEL: Yes and that is in relation to the third and fourth defendants. HIS HONOUR: Is there an affidavit you rely on? COUNSEL: Two affidavits. The first is Peter Hodges sworn 9 July 2008 and the affidavit of Norman Anthony Hilton sworn 3 August 2009. I seek to tender and read those affidavits including the annexures. ... HIS HONOUR: Is there a statutory basis for the exercise of the judicial power of sale? COUNSEL: There is but I don't need to rely upon that. I tender the notice in the paper just in case but at this stage I don't need to rely upon that. The loan deed is just all your Honour needs to look at, at page 4 of Mr Hilton's affidavit. HIS HONOUR: I have read that. COUNSEL: The funds were to be advanced to the first and second defendants, certain amounts to be repaid and the case was to run upon it. In relation to the guarantee both guarantors, the third and fourth defendants, are listed in the description of the parties. They agreed to provide security in para 7 and the other two paras that become relevant in relation to the first and second defendants are paras 7(d) and (e) which relate to the first defendant providing security by way of a share transfer. That was not done. Also by 9 which is a straight forward obligation, the first defendant has approved repayment to transfer 40,000 shares in VIDA. In the mortgage memorandum that was to be attached to the security given by all four defendants, page 14, para 6, in particular the last four lines (read). In relation to the first and second defendants it is concluded the obligation is to repay the funds they borrowed. The third and fourth defendants, upon a correct interpretation of the deed and also the mortgage memorandum, they agreed to provide security and to guarantee the debt (e) and therefore they are liable for the debt in the same way as the first and second defendants." 103Is it possible to discern the presence of misconduct or dishonourable conduct in what transpired before his Honour? At a fundamental level it is apparent that counsel for Mr Hilton referred the Court to the judgment of Hislop J. It was perfectly proper for him to have done so. Whether or not his Honour considered the judgment in detail or at all is unknown. Nothing appearing from the transcript suggests that he did, and his Honour did not refer to it thereafter. As I have already noted, the judgment contains a clear statement of Hislop J's view about the availability of an arguable defence. 104It will be recalled that Barrett JA in Satz referred to "a somewhat relaxed demeanour in the face of the claim" exhibited by the defendant with whom he was there concerned. Ms Berkemeier's attitude to this litigation could on one view be similarly described. It seems more likely that she was in denial about what confronted her. I do not accept that the letter notifying the proceedings never arrived at the Stanmore property. It is not possible for me to say whether it came to Ms Berkemeier's attention or whether she read it when it did. I am also not able to say with confidence what effect, if any, Ms Berkemeier's mental illness may have had upon her ability to respond to the notification she received. However, the very issue of Ms Berkemeier's oft referred to psychiatric condition is the very matter to which specific attention should have been drawn. 105The relevant duty is, as Barrett JA considered, "confined to honesty, frankness and absence of conduct apt to mislead the court in relation to any material matter". Ms Berkemeier contends that it was in effect insufficient for Mr Hilton's counsel to refer to Hislop J's judgment without either taking Patten AJ to the relevant passages in the judgment or indicating that his Honour's concerns were underpinned by the specific matters referred to at [39] above. I do not think that so wide a submission can be correct, but I do consider that Ms Berkemeier's alleged illness should have been referred to. 106Mr Hilton was clearly on notice that Ms Berkemeier asserted that she suffered from schizophrenia, even if he disputed her claims. Unfortunately, the alleged illness assumes a potential significance at two distinct but independently critical stages. The first is at the meeting on 6 December 2007 when the fateful guarantees were provided. The establishment of the claimed mental illness at that time would arguably vitiate the guarantee without more. Secondly, Ms Berkemeier's curious disregard for her own interests is arguably referable to the same condition, and to her associated determination to avoid courts and litigation. In my opinion, it was incumbent upon Mr Hilton in good faith to address the possibility that Ms Berkemeier was affected by a mental condition that she claimed vitiated her liability in the first place and may have influenced her attitude to defending the claim against her in the second place. If that proposition requires testing, it can be done by asking what Patten AJ, or anyone in his position, would have done if informed of Ms Berkemeier's claimed psychiatric condition in a way that would have armed him with the same state of knowledge about it as Mr Hilton himself possessed. In my view, it is highly likely that his Honour would have required information sufficient to be satisfied that Ms Berkemeier's psychiatric illness did not influence or affect her entry into the contract of guarantee. It is worthwhile observing that Hislop J's judgment refers to an arguable defence but not to what that defence may have involved. Indeed, his Honour's judgment makes no reference to Ms Berkemeier's claimed mental or psychiatric illness or anything of that nature, and does not refer to its possible significance. Patten AJ would not have gained any indication that Ms Berkemeier may have been ill from reading Hislop J's judgment. 107The Court should always be comfortably satisfied before coming to a conclusion or making a finding that a judgment has been given or entered, or an order has been made, against good faith. By the same token, there is something particularly troubling about the prospect that a defendant could lose an opportunity to set aside an improvident transaction when one of the factors potentially influencing a conclusion about its alleged improvidence was at the same time instrumental in causing the opportunity to be lost. The availability or otherwise of a defence based on Ms Berkemeier's mental illness is completely irrelevant to the determination of whether the judgment or orders were given or made against good faith. On the contrary, the failure to draw that possibility to the attention of Patten AJ is not. In this case I am satisfied that Patten AJ was not possessed of the true state of facts before making orders in favour of Mr Hilton. It was against good faith for Mr Hilton not to have told him. 108I am not satisfied that the judgment was obtained irregularly. The registered mortgagee of the Stanmore property was joined to the proceedings in order to facilitate the making of orders for judicial sale and consented to the orders that Patten AJ was asked to make. Even if there were an irregularity of the sort to which Ms Berkemeier refers, it was of no practical significance. It would be an improper exercise of discretion to set aside his Honour's orders on this basis alone.

Orders 109In these circumstances I make the following orders: (1)Grant leave to the fourth defendant to appear in these proceedings for the purpose of opposing the plaintiff's notice of motion dated 20 November 2013 and seeking orders (2) and (3) below. (2)Set aside the orders of Hislop J made on 22 May 2009. (3)Set aside the orders of Patten AJ made on 5 August 2009. (4)Direct the fourth defendant to file and serve any defence or other pleading upon which she intends to rely within 21 days of today's date. (5)Stand the proceedings over before me for further directions, including directions concerning the position of the third defendant, to Monday 4 August 2014 at 9.30am. (6)Order that the costs of this application be the fourth defendant's costs in the proceedings. (7)Grant liberty to all parties to apply to me on 48 hours' notice.

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