Hilton v Gidley

Supreme Court of NSW|2016-03-03|Before: Schmidt J, Mr J, Hislop J

intiff) Ms Z Hillman (Fourth Defendant)

Judgment

In December 2007, by a deed of loan, Mr Hilton advanced a short term loan of US$350,000, together with the sum of AUD$20,000, to Ms Gidley and Mr Shears. The loan was guaranteed by Ms Berkemeier and Mr Bickel, who also provided security by way of an unregistered mortgage over their Stanmore property. The borrowers defaulted and in May 2008 Mr Hilton brought these proceedings against the borrowers and the guarantors. The four defendants' solicitor, in error, filed a submitting appearance.
In July 2008, all four defendants sought leave to withdraw their submitting appearances under Rule 12.5 of the Uniform Civil Procedure Rules 2005 (NSW). Hislop J refused that application in May 2009 at a hearing at which Mr Bickel did not appear, despite having notice that the hearing was to proceed (see Hilton v Gidley [2009] NSWSC 383). In August 2009, judgment for possession of the Stanmore property was given by Patten AJ in Mr Hilton's favour, at another hearing at which Mr Bickel, who now seeks to be relieved of the consequences of the orders made by Hislop J and Pattern AJ, again did not appear. Final orders were then entered in Mr Hilton's favour.
Despite this, even now both Ms Berkemeier and Mr Bickel continue to reside at the Stanmore property, of which they remain registered proprietors. In Mr Bickel's case that remains the position notwithstanding that on his own petition, in 2011, he became a bankrupt.
It was not until October 2013 that Mr Hilton took steps to have a writ of possession issued in respect of the Stanmore Property. The writ and a notice to vacate were then served on Ms Berkemeier and Mr Bickel.
Ms Berkemeier filed a motion in December 2013, seeking to set aside the judgment entered against her by Patten AJ in August 2009 and to set aside the orders made by Hislop J in May 2009. Ms Berkemeier's application prompted Mr Bickel to seek similar relief. His difficulty then was that he was an undischarged bankrupt. Mr Hilton was one of his creditors. His trustee in bankruptcy, Mr Malanos, refused to pursue such an application, on Mr Bickel's evidence because he was not prepared to fund the application, nor were his creditors.
Mr Bickel's motion came before Harrison J in June 2014, the day that Ms Berkemeier's motion came on for hearing. Mr Malanos then appeared, with the result that Mr Bickel's motion was finally not pressed and neither he nor his trustee were heard on Ms Berkemeier's application. Mr Bickel's motion was not pursued again until after he was discharged from his bankruptcy in December 2014.
In July 2014, Harrison J concluded that it was in the interests of justice that orders be made in favour of Ms Berkemeier (see Hilton v Gidley [2014] NSWSC 874.
In the result he ordered: (1) Granted leave to Ms Berkemeier to appear in the proceedings for the purpose of opposing Mr Hilton's motion dated 20 November 2013. (2) Set aside the orders made by Hislop J on 22 May 2009. (3) Set aside the orders made by Patten AJ on 5 August 2009. (4) Directed Ms Berkemeier to file and serve any defence or other pleading upon which she intends to rely within 21 days. (5) Stood the proceedings over for further directions, including directions concerning the position of Mr Bickel. (6) Ordered that the costs of the application be Ms Berkemeier's costs in the proceedings. (7) Granted liberty to all parties to apply on 48 hours' notice.
Those orders affected all four defendants, as well as Mr Bickel's trustee in bankruptcy, but they were later amended to reflect that it was only Ms Berkemeier who was granted relief in respect of the orders made by Hislop J and Patten AJ. Leave to appeal that decision was refused in December 2014, for want of proper joinder of parties (see Hilton v Berkemeier [2014] NSWCA 464 at [14]). It was also concluded that Harrison J's orders under Rules 36.15 and 36.16 were within power and discretion. Ms Berkemeier's case has not yet been heard.
By his amended motion of 12 May 2015 Mr Bickley now also seeks leave to appear in the proceedings for the purpose of seeking a stay of execution of the judgement given against him in 2009; setting aside the writ of possession issued in respect of the Stanmore property; giving him leave to withdraw his 2008 submitting appearance, in order to defend Mr Hilton's claim; and to bring a cross-claim. He has provided a draft defence and cross-claim. The application is opposed. Mr Bickel's standing to pursue his motion remains in issue. That question, together with the merits of his application, were all dealt with at the hearing of the motion.
Under Rule 36.15, a court may set aside a judgment on sufficient cause being shown, if judgment was given, or an order was made "irregularly, illegally or against good faith". What must be demonstrated on such an application is reasons for setting aside a judgment that are not slight or uncertain (see Kendall v Carnegie [2006] NSWCA 302).
Under Rule 36.16 the Court may also set aside a judgment given in the absence of a party such as Mr Bickel, whether or not notice of the hearing was given, as it here undoubtedly was in the case of both the hearings before Hislop J and Pattern AJ. He was not then a bankrupt and so was entitled to appear and be heard.
In considering such a case both the reasons for the absence and the potential merits of the affected party's position, including whether there is an arguable defence, arises for consideration (see Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331 at [48] - [52] where reference is made to Allesch v Maunz [2000] HCA 40; (2000) 203 CLR 172).
There has been considerable delay, both in Mr Hilton's pursuit of the possession of the Stanmore property, explained by him to have resulted from the nature of his security and the state of the market, and in Mr Bickel's pursuit of the relief which he now seeks, he explained, because of his bankruptcy.
In Goater v Commonwealth Bank of Australia [2014] NSWCA 382; (2014) 88 NSWLR 362 a bank had applied for default judgment one day after the time for filing a defence had expired. The judgment was set aside, it being observed at [61]: "One factor relevant to the tolerance the Court should exercise with respect to delay is the extent to which the party in default has notice of the risks attendant upon delay. A second is the information available to the party insisting on the letter of its rights as to the defaulting party's attempts to protect himself or herself. These matters go to the exercise of the Court's discretionary powers."
For reasons which follow, I am satisfied that the orders which Mr Bickel seeks must be refused, he having no standing to bring this application. Further, unlike Ms Berkemeier, he has no case under Rule 36.16 and but a weak case under Rule 36.15. In all of the circumstances which I will discuss, even if he had standing I would not be inclined to exercise the Court's discretion in his favour.

Mr Bickel has no standing

When Mr Bickel became a bankrupt in December 2011 on his own debtor's petition, his property vested in his trustee under s 58 of the Bankruptcy Act 1966 (Cth) (see Farrow Mortgage Services Pty Ltd v Winfield [1992] Qd R 182 at 285 Cummings v Claremont Petroleum NL [1996] HCA 19; (1996) 185 CLR 124 at [13]).
Given the definition of "property" in s 5 of the Bankruptcy Act, namely "real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property" and the provision made in s 58(1)(b) as to after acquired property, there can be no question that upon becoming a bankrupt, Mr Bickel no longer had any relevant interest in the Stanmore property (see Foong v Commonwealth Bank of Australia [2014] NSWCA 246 at [11]). That he continued to make mortgage repayments thereafter to the St George Bank, including in 2010, after it commenced proceedings to take possession of the property for mortgage default, which were settled, does not alter the effects of this statutory scheme.
On becoming a bankrupt the property then divisible amongst his creditors under s 116 included: "(b) the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge. …"
Judgment had then already been entered in favour of Mr Hilton in these proceedings, but the orders made had not been enforced against Mr Bickel. Section 60 thus applied. It provided that: "60 Stay of legal proceedings (1) The Court may, at any time after the presentation of a petition, upon such terms and conditions as it thinks fit: (a) discharge an order made, whether before or after the commencement of this subsection, against the person or property of the debtor under any law relating to the imprisonment of fraudulent debtors and, in a case where the debtor is imprisoned or otherwise held in custody under such a law, discharge the debtor out of custody; or (b) stay any legal process, whether civil or criminal and whether instituted before or after the commencement of this subsection, against the person or property of the debtor: (i) in respect of the non-payment of a provable debt or of a pecuniary penalty payable in consequence of the non-payment of a provable debt; or (ii) in consequence of his or her refusal or failure to comply with an order of a court, whether made in civil or criminal proceedings, for the payment of a provable debt; and, in a case where the debtor is imprisoned or otherwise held in custody in consequence of the non-payment of a provable debt or of a pecuniary penalty referred to in subparagraph (i) or in consequence of his or her refusal or failure to comply with an order referred to in subparagraph (ii), discharge the debtor out of custody. (2) An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action. (3) If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action. (4) Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of: (a) any personal injury or wrong done to the bankrupt, his or her spouse or de facto partner or a member of his or her family; or (b) the death of his or her spouse or de facto partner or of a member of his or her family. Note: See also subsection 5(6). (4A) Notwithstanding paragraph (1)(b), this section does not empower the Court to stay any proceedings under a proceeds of crime law. (5) In this section, action means any civil proceeding, whether at law or in equity."
When Mr Bickel attempted to pursue his motion in June 2014, his trustee Mr Malanos did not give his consent and elected not to pursue it himself. In cross-examination Mr Bickel said that the trustee had required him to provide $100,000, which he was not prepared to do and that his creditors were also not prepared to fund or indemnify the trustee. Mr Bickel could then have made an application under s 178 of the Bankruptcy Act, for leave to proceed, if dissatisfied with the trustee's decision, but he did not.
For Mr Bickel reliance is now placed, however, on views taken by Master Greenwood in Crackenback Investments Pty Ltd v Wywsik (Supreme Court (NSW), 25 August 1983, unrep) and Master Harrison in ANZ Banking Group Ltd v Capper & Anor [2001] NSWSC 946 at [20], to submit that after bankruptcy, remaining in possession of the property and on the Register as the registered proprietor, gave a bankrupt in possession the right to defend the title and the resulting right to possession which the title gave, notwithstanding the bankruptcy and the provisions of the Bankruptcy Act. Further, he argued in oral submissions, he also had the right, while a bankrupt who remained in possession of the property, to pursue the applications which he now pursues, without the trustee's agreement or leave of the Court.
Those submissions must be rejected. In ANZ Banking Group Ltd v Capper, no consideration was given to what had been decided in Farrow Mortgage Services or Cummings, which was binding. In the face of those authorities and others such as Bendigo Bank Ltd v Demaria & Ors [2001] VSC 218 at [18], it must be accepted that Master Greenwood and Master Harrison erred in the views which they reached.
The position is that on becoming a bankrupt Mr Bickel was also divested of his right to prosecute these proceedings in order to protect his former interest in the Stanmore property, of which he was divested, when he became a bankrupt. That he has continued living at the property, does not alter that position.
True it is that the Court has a discretion to permit a bankrupt defendant to be heard, where for example it is alleged against him that he had committed serious breaches of fiduciary or statutory duties and was guilty of misleading and deceptive conduct, given the potential impact on his character and reputation, but there is no right of appearance, even in such a case (see Re-Engine Pty Ltd (In liq) v Fergusson [2007] VSC 57; (2007) 209 FLR 1 at [67] and National Australia Bank Limited v Strik [2009] NSWSC 184 at [9] - [10]).
As discussed in Cummings at [13], "it is fundamental to the law of bankruptcy that the bankrupt is divested of both his interest in his property and liability for his provable debts". Accordingly, in Mr Bickel's circumstances he required the Court's leave to pursue the motion. Had Mr Bickel made an application under s 178, consideration would have had to be given not only to his claimed personal interest in these proceedings, but also to whether their pursuit coincided with the due administration of his estate by the trustee and the interests of his creditors.
In May 2014, Mr Bickel applied to the Federal Circuit Court to have his bankruptcy annulled. By consent that application was dismissed in September 2014. Discussions between Mr Bickel and Mr Malanos as to an assignment of his interest in these proceedings to Mr Bickel, also failed to produce an agreement. The trustee's latest position was, apparently, that he neither consented to nor opposed Mr Bickel's application. That did not give Mr Bickel standing.
Throughout all of this time Mr Bickel remained in possession of the property. Firstly, because proceedings brought by the registered mortgagee, the St George Bank, were settled, with Mr Bickel continuing to make payments owed to it under the mortgage. Secondly, because Mr Hilton did not for some years pursue the guarantee, initially because of settlement negotiations which were unsuccessfully pursued and later because of his concerns about the state of the market.
When Mr Bickel was discharged from bankruptcy in December 2014, after expiry of three years from his petition, his creditors having not been paid all their debts, his discharge did not revest any of his property in Mr Bickel. Pursuant to s 129AA, that could not occur before 14 December 2020, the section providing: "129AA Time limit for realising property (1) This section applies only to: (a) property (other than cash) that was disclosed in the bankrupt's statement of affairs; and (b) after-acquired property (other than cash) that the bankrupt discloses in writing to the trustee within 14 days after the bankrupt becomes aware that the property devolved on, or was acquired by, the bankrupt. In this subsection, cash includes amounts standing to the credit of a bank account or similar account. (2) If any such property is still vested in the trustee immediately before the revesting time, then it becomes vested in the bankrupt at the revesting time by force of this section. (3) Initially, the revesting time for property is: (a) for property disclosed in the statement of affairs - the beginning of the day that is the sixth anniversary of the day on which the bankrupt is discharged from the bankruptcy; and (b) for after-acquired property that is disclosed before the bankrupt is discharged from the bankruptcy - the beginning of the day that is the sixth anniversary of the day on which the bankrupt is discharged; and (c) for after-acquired property that is disclosed after the bankrupt is discharged from the bankruptcy - the beginning of the day that is the sixth anniversary of the day on which the bankrupt disclosed the property to the trustee. (4) If the trustee, before the current revesting time, gives the bankrupt a written notice (an extension notice ) stating that a later revesting time applies to particular property, then that later time becomes the revesting time for that property. (5) There is no limit on the number of extension notices that the trustee may give (either generally or in relation to particular property). (6) The time specified in an extension notice must be either: (a) a specified time that is not more than 3 years after the current revesting time; or (b) a time that is reckoned by reference to a specified event (for example, the death of a life tenant), but is not more than 3 years after the happening of that event. (7) Any property that becomes vested in the bankrupt under this section thereupon ceases to be subject to section 127."
On discharge from his bankruptcy the position thus remained that any interest in the Stanmore property which Mr Bickel might conceivably now have, remains vested in his trustee for payment of his creditors, as at the date of his bankruptcy. As discussed in Bagshaw v Scott [2002] FCAFC 362; (2002) 126 FCR 27 at [37], in those circumstances the discharge did not change Mr Bickel's position, so far as these proceedings are concerned.
Mr Bickel, nevertheless, argued that his standing to pursue his motion now derives from his discharge; that his proposed defence of these proceedings and cross-claim involve personal rights, lacking a proprietary character; that they are not choses in action; and that they are not vested in his trustee.
The basis for what is claimed for Mr Bickel is not apparent. In order to pursue the cross-claim by which he so belatedly seeks to challenge the guarantee he gave Mr Hilton, he must not only be given leave to appear in the proceedings and to have the judgments given by Hislop J and Patten AJ set aside, the orders giving Mr Hilton possession of the property must also be set aside and the writ of possession stayed. The subject matter of those applications is the property in which Mr Bickel still has no interest.
There is nothing in the Bankruptcy Act which supports the view that Mr Bickel has the necessary interest in the Stanmore property or these proceedings, to now give him standing to pursue the relief which he seeks leave to pursue. The idea that orders should be made in his favour, to give him another opportunity to seek to negotiate an agreement with the trustee, which would give him such standing, as was urged orally and in written submissions, puts the cart before the horse. Unsurprisingly, no authority could be pointed to, which would support the view that such a course was available.
It is not a question of being harsh, to refuse Mr Bickel that opportunity, as was argued. Without standing his application simply cannot be entertained. Nor can an application for an adjournment of his motion, as he finally urged, so that he can pursue avenues he has not till now pursued, to give him standing be entertained. The onus lay on Mr Bickel to ensure that when he sought to press his motion, he had the standing that he requires to be heard.
It was also submitted that given that the "underlying purpose'' of the Bankruptcy Act, is to make available to unsecured creditors the maximum value of any unsecured assets of the bankrupt's property, that it cannot be the correct application of s 58 to hold that Mr Hilton is entitled to soak up the whole of the equity in the Stanmore property, to the detriment of the trustee and unsecured creditors. That underscores that what Mr Bickel seeks to pursue are not personal rights, but claims connected with property which remains vested in the trustee.
The further submission that a secondary consideration in Mr Bickel pursuing his motion was in order to enable him and the trustee to reach a meaningful agreement, which it was difficult to do, if there was no decision on his motion, but further underscored the problem with Mr Bickel's application.
Even if Mr Bickel had standing, Mr Hilton contended that the leave sought would not be granted as a matter of discretion, given the obvious risk that if Mr Bickel failed, he would be unable to recover any costs ordered in his favour. Further, even if Mr Bickel succeeded, all of his equity in the property would go to repay creditors.
There is force in these submissions, given Mr Bickel's evidence and the case otherwise pressed, but it is unnecessary to decide the matter on this basis.
Despite the conclusion as to standing, the other matters argued should be addressed.

Hislop J and Patten AJ's judgments were not given or entered against good faith

The guarantee which Mr Bickel provided was for a loan provided under a deed which provided in clause 6(b) that in the event the loan was not repaid on the due date, together with interest "equivalent to 25% of the Advance" and fees, interest was to accrue on the amount remaining unpaid at 30% per annum. After the expiry of 30 days from that date Mr Hilton was also entitled to: "(b) … 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."
Mr Bickel submitted that there were many reasons why a person can find themselves entering into a transaction that, if they were thinking clearly, or had the ability to negotiate their own position, they wouldn't enter. Contracts Review Act 1980 (NSW) relief was there to allow the Court to provide a remedy to such people. It followed, it was argued, that in his circumstances, too, like in Ms Berkemeier's case, setting aside his submitting appearance ought not to have been controversial, given what justice demands.
Unarguably the Court had power to permit the defendants' submitting appearances to be withdrawn. In Steinhoff Australia Pacific Limited v Lifestyle Retailing Pty Limited and 1 Or; Lifestyle Retailing Pty Limited and 1 Or v Steinhoff Asia Pacific Ltd [2011] NSWSC 1621, for example, a belated application for leave to withdraw a submitting appearance was granted. There not only had the appearance been entered without instructions, but default judgement had been entered without notice being given, after settlement negotiations failed.
This is quite a different case.
Still, Mr Bickel contended that justice demanded that he now be given the opportunity to advance his defence and cross-claim, in circumstances where final judgment had been made in his absence and against good faith.
As discussed in Kendell v Carnegie & Ors [2006] NSWCA 302; (2006) 68 NSWLR 193 at [45], exercise of the discretions under the Rules to set aside judgments and orders requires recognition to be given to "the need for finality by protecting judgments from being set aside for slight or uncertain causes". There must thus be an evidentiary basis established for the conclusion that the Court's discretion may justly be exercised. If that be established, then as discussed in Goater v Commonwealth Bank of Australia at [20], the principle of finality will not preclude the exercise of the discretion.
The Court's powers under the Rules must always be exercised in light of the overriding purpose specified by s 56(1) of the Civil Procedure Act 2005 (NSW), namely, the just, quick and cheap resolution of the real issues in the proceedings. Proceedings must be also managed, as s 57(1) requires, by having regard to: "… (a) the just determination of the proceedings, (b) the efficient disposal of the business of the court, (c) the efficient use of available judicial and administrative resources, (d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties."
Parties also have duties under s 56(3) to assist the Court to further the overriding purpose and, to that effect, to participate in the processes of the Court and to comply with its directions and orders. In light of those obligations it may be accepted that the defendants' submitting appearance having been filed in error, in 2008 Mr Hilton should have consented to their withdrawal. Instead, considerable time, energy and costs were incurred in pursuit of a settlement, with the hearing of the withdrawal motion repeatedly being deferred, in order for settlement to be pursed.
For his part, when no agreement was reached Mr Bickel also did not act as his duty under s 56 required of him, namely, to pursue his motion to have the entry of his submitting appearance set aside and, if successful, then to pursue his defence. Instead, he failed to appear to press his motion before Hislop J, even after his Honour had required him to appear in person, so that the importance of pursuing his interests in the proceedings could be drawn to his attention. He was granted an adjournment to obtain independent advice. Having obtained that advice from Mr Lombardo, still Mr Bickel did not act to protect his own interests.
Section 58 requires the Court to act in accordance with the dictates of justice, and s 59 requires that the practice and procedure of the Court be implemented with the object of eliminating any lapse of time between the commencement of the proceedings and their final determination, beyond that reasonably required for the interlocutory activities necessary for the fair and just determination of the issues in dispute between the parties and the preparation of the case for trial. Section 60 requires the practice and procedure of the Court to be implemented with the object of resolving the issues between the parties so that costs are proportionate to the importance and complexity of the subject-matter in dispute.
All of these considerations militated against Mr Bickel's motion succeeding at the hearing before Hislop J, at which he did not appear. The advice which an independent solicitor, Mr Lombardo, had given Mr Bickel and Ms Berkemeier, which had been conveyed to Mr Hilton, was then disclosed by his counsel. It advised: "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 (ie 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."
In 2008, Mr Bickel had sworn an affidavit, he said, after receiving advice from his then solicitor Mr Margiotta and Mr Perrignon of counsel. In so far as Mr Lombardo's advice rested on that affidavit, to which I will return, a foundation for the views he came to may be seen. What Mr Lombardo, of course, could not know was the oral evidence which Mr Bickel would eventually give in these proceedings. Unlike the position of Ms Berkemeier, Mr Bickel's evidence on this application showed that there was no foundation for many of the conclusions which Mr Lombardo came to, about his circumstances.
Having been provided with a copy of Mr Lombardo's advice, Hislop J expressed the view that he and the other defendants "may have at least a mountable case". Despite this, in his later judgment, his Honour concluded that while the submitting appearances had been filed in error: "[25] … 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."
Despite this judgment, of which Mr Bickel was plainly made aware, he neither appealed, nor took steps to have it set aside. Nor did he later appear in the proceedings, including before Patten AJ, to resist Mr Hilton's application for an order for possession, despite having repeatedly been given notice of Mr Hilton's intention to pursue his claims. That, in those circumstances, Mr Hilton pursued his application, is difficult to criticise.
While considerations of justice require that parties be given the opportunity to be heard in proceedings such as this, they cannot be forced to take advantage of such opportunities, when they are given. In the result, that unopposed orders for possession were made by Patten AJ against Mr Bickel, was hardly surprising.
Mr Bickel now contends that both judgments were procured against good faith, because Mr Hilton was aware that he had not received commercial or legal advice on the guarantee; that he had been represented in these proceedings by a succession of lawyers, each of whom had conflicts of interest; and that he had pursued the guarantee, the enforceability of which was highly questionable and susceptible to being set aside. He also contends that at the final hearing Mr Hilton was obliged to draw the "more questionable aspects" of his claim to Patten AJ's attention.
Given that Mr Bickel had by then received independent advice from Mr Lombardo which had been disclosed to Hislop J, who dismissed the motion which he had not appeared to press; and that Mr Bickel had notice that Mr Hilton's claim for possession was to be pressed and still he did not appear to mount any resistance to the claim for possession before Patten AJ, these submissions are difficult to accept.
In Kendall a question arose as to whether a consent judgment had been entered against good faith. It was observed at [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."
Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422 was concerned with a written contract entered by one party under a serious mistake about its contents in relation to a fundamental term, in which event it was held at p 432 that the party "will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension".
In Kendall reference was also made to Coles v Burke (1987) 10 NSWLR 429 where judgment entered was found to have been made in accordance with the authority of an order earlier consented to and after a warning had been given by letter. It was there considered that the modern practice of the legal profession was that judgment should not be signed in this way without a final telephone call or other warning, but at p 437 that "failure to give such a final and further warning could not, on any view, amount to a lack of good faith. Therefore, r 12A, likewise, has no application to these circumstances."
In Shirriff v The Nominal Defendant [1999] NSWCA 152 this judgment and Roach v B&W Steel Pty Ltd (1991) 23 NSWLR 110 were considered. There it was observed at [21]: "Roach 23 NSWLR 110. did not question the correctness of this Court's earlier decision in Coles v Burke [1987] 10 NSWLR 429. Kirby P, with whom McHugh JA and, materially, Samuels JA agreed, expressed the opinion that the phrase "against good faith" was concerned with "misconduct or dishonourable conduct of the person who procured the judgment which it is suggested undermines the authority of that judgment ...10 NSWLR 429, 437C."
In this case the evidence does not establish that either the judgments or orders made by Hislop J or Patten AJ against Mr Bickel, were made against good faith, as the result of either misconduct or even dishonourable conduct on Mr Hilton's part.
I will deal later with the question of whether Mr Bickel has established that he has an arguable defence. At the time that he failed to press any defence to Mr Hilton's claims Mr Bickel had Mr Lombardo's advice that he did have an arguable defence. Despite that advice he chose not to pursue his case, for reasons which he explained in his evidence on this application, namely, that he was content to leave Ms Gidley to deal with the proceedings, despite the advice he had received as to conflict of interest.
That was plainly a very bad decision. What, in truth, he now seeks is to be relieved of its consequences. Whether he is entitled to such relief requires his own conduct to be considered.
Like the other defendants, Mr Bickel was initially legally represented in these proceedings, first by Mr Fordyce, who had drafted the loan documents and who mistakenly filed the submitting appearances for all defendants and then by Mr Busby. It was Mr Busby who advised him of the mistaken entry of the submitting appearance and the conflict which appearing for all defendants, including Ms Gidley, raised for Mr Fordyce.
It was in July 2008, that the defendants, including Mr Bickel, had filed the motion seeking leave to withdraw their submitting appearance. Mr Bickel then swore an affidavit in support, in which he deposed that Mr Fordyce had acted for him; that he had not instructed him to file the submitting appearance; and that he had been advised that he may have an arguable defence and cross-claim. This was long before he took advice from Mr Lombardo. Unlike Ms Berkemeier, Mr Bickel then clearly understood that Mr Hilton was seeking possession of the Stanmore property.
Despite the advice he had received, Mr Bickel's evidence on this motion was that he then left the proceedings to be dealt with by Ms Gidley, choosing repeatedly not to take independent legal advice and leaving her to deal with his position.
On 8 August 2008 Mr Bickel, Ms Gidley and Mr Busby conferred with another solicitor, Mr d'Apice. On 12 August the motion came on for hearing before Hislop J. It was adjourned to September, but Mr Bickel decided not to engage Mr d'Apice, or any other independent solicitor to act for him, but to continue to rely on Ms Gidley to sort the matter out for him. She then engaged Mr Margiotta, who engaged counsel, Mr Perrignon, to appear for all defendants.
On 3 September Mr Perrignon appeared and sought another adjournment. Settlement negotiations were then pursued, which failed, despite repeated further adjournment of the proceedings.
Terms of settlement were drafted, requiring Ms Gidley to repay the loan, whereupon it was agreed that releases would be given to Mr Bickel and Ms Berkemeier. Mr Bickel executed a deed to that effect, but Ms Gidley did not make the agreed payment. Mr Bickel and Ms Berkemeier then obtained further borrowings from St George Bank, also secured over the Stanmore property and paid $50,000 to Mr Hilton in January 2009, but the principal was not repaid, as had been further agreed. By his proposed cross-claim, Mr Bickel also seeks to recover that payment.
In February 2009 Mr Margiotta ceased to act for the defendants. Mr Bickel did not appear on the next occasion before Hislop J and Mr Hilton's solicitors advised him of the adjournment to 17 March, when the hearing was to proceed.
Despite the advice he had earlier received about conflict and his defence, Mr Bickel again left the matter to Ms Gidley to look after. When Ms Gidley appeared she said that a proposal had been received from Mr Hilton and that it had been suggested that the defendants should seek legal advice before it was accepted, but that had not been possible in the timeframe.
The matter was adjourned to 2 April when Hislop J was advised by Mr Hilton's counsel that it had been suggested to Mr Bickel and Ms Berkemeier that they should obtain separate advice from that obtained by the borrowers. The matter was stood down and Mr Bickel was required to appear in person. Then he confirmed that he wanted to obtain such advice. Hislop J granted another adjournment so that advice could be given.
It was then that Mr Bickel and Ms Berkemeier consulted Mr Lombardo, who wrote to Mr Hilton's solicitors on 20 April. Still Mr Bickel did not appear on 21 April. Again, only Ms Gidley appeared that day.
On his evidence on this application, Mr Bickel understood that his motion would be dealt with that day and still he did not appear to advance his case. At that adjourned hearing Ms Gidley said that she was not authorised to act on his behalf and the email from Mr Lombardo was provided, as I have explained, by Mr Hilton's counsel. Mr Hilton pressed for the motion to be heard, notwithstanding Mr Bickel's absence, noting what had been advised about his defence and submitting that if judgment was given in his absence, an application could later be made to set it aside.
As Harrison J discussed at [96] of his judgment Hislop J was "clearly, and not unreasonably, influenced" by Ms Berkemeier's absence from the Court, having 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 she would seem to have "made a deliberate decision to absent himself ... from the hearing ... after obtaining legal advice." Mr Bickel was in the same position.
Mr Bickel's evidence on this application confirmed that despite Mr Lombardo's advice that he had an arguable defence and the advice he had received about conflict, his decisions not to appear, then and later, were deliberate. That evidence simply does not leave open the conclusion that Hislop J's May 2009 judgment was given against good faith.
The matter later came on before the Registrar on three further occasions, when Mr Bickel also did not appear. Nor did he take available steps to have the judgment set aside. Nor did he appear before Patten AJ in August 2009, to oppose judgment for possession being given. That orders in favour of Mr Hilton were then made, was hardly surprising.
On his own evidence, throughout this time Mr Bickel was well aware of what was transpiring, given the repeated advice he was given by Mr Hilton's solicitors, as to what had occurred when the matter came into the list. His evidence was that apart from discussing the matter with Ms Gidley, he chose to do nothing to advance his position in the proceedings, despite the advice he had received from Mr Lombardo.
On his own evidence, the decisions so to proceed, both before and after the judgments which he now seeks to set aside were given, were entirely his own.
True it is that parties and their legal advisers have a duty of candour to the Court, as discussed in Kavia Holdings Pty Limited v Werncog Pty Limited [1999] NSWSC 932, where evidence known to have been misleading was relied on at an ex parte hearing. It was not misleading evidence about which Mr Bickel now complains. His case is that despite his failure to take any steps to resist the orders Mr Hilton sought, he should have disclosed Mr Bickel's case to Patten AJ. I cannot see that a plaintiff's duty of candour extends to advancing a defendant's case in circumstances where the defence has not been pleaded and where the defendant has elected not even to appear to raise it, knowing that orders for possession are sought.
Unlike the conclusion which Harrison J reached in relation to Ms Berkemeier, that Mr Hilton was on notice that she asserted that she suffered from schizophrenia, a mental illness which his Honour considered "would arguably vitiate the guarantee without more" (at [106]), so that it was incumbent upon Mr Hilton, in good faith, to address this difficulty before Patten AJ, Mr Bickel does not suffer from such a disability. There was clearly nothing of that kind which Mr Hilton ought to have drawn to Patten AJ's attention in Mr Bickel's case, as I will discuss further below.
The result, in Ms Berkemeier's case, consistent with the Mr Hilton's duty of candour, was Harrison J's conclusion that the failure to draw her illness to Patten AJ's attention was that so far as she was concerned, the judgment and orders made against her were given or made against good faith. That was because Patten AJ was not possessed of the true state of facts, before making orders against her, in favour of Mr Hilton.
Nothing of that kind arises in Mr Bickel's case. Clearly he has made bad decisions in relying on Ms Gidley as he did to protect his position in these proceedings, but that does not evidence any relevant disability.
It was Mr Hilton's knowledge of the circumstances in which he had given the guarantee and that Mr Bickel had received advice from Mr Lombardo, that Mr Bickel had an arguable defence, on which his case rested. It was argued that the guarantee which Mr Bickel had provided was so disadvantageous, that he must have been suffering some disadvantage when he gave that guarantee. It was also submitted that "many highly intelligent people have a very developed intellect in a highly specialised area of intellectual life and that doesn't necessarily equate or result in them having commercial nous or commercial savvy or an ability to negotiate for themselves."
This provides no basis on which Mr Bickel could now justly be relieved of the consequences of his decisions not to pursue his case before Hislop J and Patten AJ. Nor does it provide a basis for a conclusion that their judgments were given or entered against good faith.
It was not considerations of that kind, which applied equally to Ms Berkemeier, which led Harrison J to conclude that judgments had been given against her, against good faith.
Harrison J accepted that notice of the hearing in August 2009 had been given. After referring to what transpired at the hearing before Patten AJ, which included reference to the judgment of Hislop J and the tender of the notice of the hearing, Harrison J observed at [104] that Ms Berkemeier's psychiatric condition ought to have been drawn to his Honour's attention. He observed at [106]: "106 Mr 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."
His Honour concluded at 107] - [108]: "107 The 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. 108 I 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."
Such irregularity was established in his case, Mr Bickel contended, by the fact that he had not received legal or commercial advice in respect of the loan; that when he came to be legally represented in these proceedings, he had been represented by a succession of lawyers, each of whom had a conflict of interest; and by the extraordinary terms of the guarantee he had provided, the enforceability of which was highly questionable and which was by its terms susceptible to being set aside. That may not be accepted. Such matters, even if established, cannot establish that the two judgments in issue were given irregularly.
Before Hislop J, Mr Hilton disclosed that there was, undoubtedly, an issue lying between the parties as to whether Mr Bickel had a defence to his claim, given Mr Lombardo's advice. Still, it was for Mr Bickel to pursue such a defence, if he wished. He had both notice and opportunity to do so, by steps available to him to take at relevant times, including at the hearing before Patten AJ, of which he also had notice. That he chose not to do so, for the reasons he explained in his evidence on this application, namely, that he was content not to pursue his defence, but to leave matters in Ms Gidley's hands, despite the advice he had been given as to conflict and the nature of his defence, was unquestionably a bad decision, or rather a series of bad decisions. They, however, did not result in either Hislop J or Patten AJ's judgments and orders being entered either irregularly or against good faith.
In the result no basis for orders under Rule 36.16 was established.

Mr Bickel has no case under Rule 36.16

Mr Bickel also claims, however, that like Ms Berkemeier he has a strong prima facie defence to Mr Hilton's claim, one that he has not to this point advanced.
To advance this aspect of his case reliance was placed on what was decided in Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 under the Contracts Review Act as to asset lending, that is lending money without regard to a borrower's ability to repay the loan, in the knowledge that adequate sums are available in the event of default. It was also argued to be relevant that such relief is available even where a guarantor has received legal advice (see Fast Fix Loans Pty Ltd v Samardzic [2011] NSWCA 260).
Relief in equity for unconscionability was also claimed to be available to Mr Bickel (see Blomley v Ryan (1956) 99 CLR 362 at 415). Relevant disability or disadvantage sufficiently evident to the other party, it was accepted however, had to be established for such relief to be granted. Relief under the Trade Practices Act and Fair Trading Acts was also adverted to, on the basis of a "subtle inequality" in bargaining power between Mr Bickel and Mr Hilton (see ACCC v Lux Distributors Pty Limited [2013] FCAFC 90).
The test under this Rule is that discussed in Magnate Projects Pty. Ltd, where it was observed at [51] that: "… a person applying to set aside an order, regularly made in his or her absence, ordinarily bears an onus of showing an arguable case on the merits, that is, a case that might reasonably bring about a different result, as well as an explanation for his or her absence".
I have already discussed the decisions which resulted in Mr Bickel not appearing to advance his case. They provide no adequate explanation for his absence at the hearings before either Hislop J or Patten AJ.
Harrison J concluded in Ms Berkemeier's case that she had established the existence of a defence on a prima facie basis, observing at [94]: "The 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."
For reasons which follow, I am satisfied that Mr Bickel's circumstances were not akin to Ms Berkemeier's, notwithstanding the consequences of the improvident guarantee which he chose to give. It is, I suppose, conceivable that had he advanced a defence before Patten AJ, Mr Bickel might have succeeded against Mr Hilton, given that he also took no benefit under this transaction and does not appear to have the capacity to repay the loan. On the evidence that he gave on this application, however, a basis for that conclusion is difficult to see, given his understanding of what he was doing, the risk he was taking and his refusal to take legal advice available to him, before giving this improvident guarantee.

The guarantee

On Ms Berkemeier's application, Harrison J concluded in her case (at [93]) that: "The 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. …"
There is no reason to come to a different view in Mr Bickel's case. From his perspective the guarantee was also entirely improvident. That alone, however, does not demonstrate that Mr Bickel has an arguable defence, notwithstanding the Court's wide discretionary powers, including those it is granted by the Contracts Review Act.
The exercise of any available discretion under that Act in favour of Mr Bickel requires matters specified in s 9 to be considered. Ignorance of a person's disability, if there be one, does not preclude an order under the Contracts Review Act, although that is relevant to the terms of any orders which might be made (see Khoshaba at [93] - [96].) Whether relief would be granted also requires consideration of Mr Bickel's conduct and the setting, purpose and effect of the guarantee which he now seeks to attack. Consideration must also be given to the public interest (see Khoshaba at [76] - [77]).
As discussed in Tonto Home Loans Australia Pty Ltd v Tavares; FirstMac Ltd v Di Benedetto; FirstMac Ltd v O'Donnell [2011] NSWCA 389: "269 The public interest is the subject of particular reference in the CRA , s 9(1). One aspect of the public interest recognised early is keeping people to their freely entered bargains: Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 at 9. By stating the importance of this aspect of the public interest shortly, I should not be thought to be consigning it as a matter of mere note only. It is fundamental, indeed it inheres in the CRA itself. It is an aspect of society that is of vital importance. As Story J said, writing extra-judicially ("Contract" (1832) 9 Encyclopaedia Americana 156), "confidence in promises is ... essential to the existence of social intercourse among men ...". Its strength as an operative legal norm that can be seen as fundamental is directly related to circumstances which give it strength - the just and free circumstances that give rise to the bargain. As Finn J said, writing extra-judicially in "Unconscionable Conduct" (1994) 8(1) Journal of Contract Law 37 at 49, if parties are to be held to their bargains once made, the law should act with vigour to promote the conditions necessary to make the freedom of contract effective, free and just. 270 Another aspect of the public interest is the advancement of the protection, which the CRA manifestly intends to give, to those not able fully to protect themselves and to those preyed upon by dishonesty, trickery and other forms of predation. The Peden Report (J R Peden Harsh and Unconscionable Contracts: Report to the Minister for Consumer Affairs and Co-operative Societies and the Attorney-General for New South Wales , 1976) said that the reference to public interest "would direct the courts' attention to the underlying purpose of the Bill, namely to prevent unjust dealings which offend against community standards of business morality": J R Peden The Law of Unjust Contracts (Butterworths, 1982) at 122."

How Mr Bickel came to give his guarantee

The loan Ms Gidley obtained from Mr Hilton at short notice was for a venture she was pursuing in Vanuatu, about which there was limited evidence, but there is no issue that the project depended on Ms Gidley obtaining further funding.
Mr Hilton contends that no pressure, unfair tactics or inappropriate conduct was exercised or exerted over Mr Bickel during the meeting at which the documents were executed and that he was not aware of any unusual conditions in the loan documents. On information he was provided, he expected that the borrowings could be repaid by Ms Gidley and Mr Shears.
That was the only occasion that Mr Hilton had provided such a private, short term loan. The loan of $US350,000 had to be paid into the "William H Schaap Trust" in America, the day the loan documents and guarantee were drafted and executed. The high rate of interest agreed was reflective, Mr Hilton said, of the risk he understood he was taking. The funds he provided came from the sale of an investment property, which had loans secured over his family home.
Like Mr Bickel, Mr Hilton said that he had expected from information he had been provided about the Vanuatu venture, that there was no problem with the borrowers' capacity to repay the loan, which would be repaid from a grant Ms Gidley would receive. Nevertheless, it is evident that Mr Hilton also required the guarantees which Mr Bickel and Ms Berkemeier provided, because he appreciated that otherwise, the loan he was prepared to advance was not adequately secured by the Australian security that the borrowers were able to provide themselves. The borrowers were not otherwise in a position to repay the short term loan Mr Hilton agreed to provide.
The loan provided by Mr Hilton was not only guaranteed by Mr Bickel and Ms Berkemeier, it was also secured by an unregistered mortgage over a property at Leichhardt owned by Ms Gidley and her partner Mr Shears, by a fixed and floating charge over the assets of a company and a transfer of one half of Ms Gidley's shares in that company.
There is no question, however, that Mr Bickel was a volunteer, gaining no benefit from providing this guarantee, other than a personal one, namely, the assistance which he said he wanted to give Ms Gidley. Like Ms Berkemeier, he has no capacity to pay what he guaranteed.
It was Mr Bickel's case that throughout the events which culminated in him providing the guarantee and orders later being made against him in these proceedings, he had been unduly influenced by Ms Gidley and had allowed her to make decisions for him. On his case, Mr Hilton was aware of his disadvantage and had taken unfair advantage of him. In practical terms, this predilection had not only prevented him from acting in his own interests in relation to the guarantee, but from later negotiating in his own interests during settlement negotiations and in the conduct of these proceedings.
That was the more so in circumstances where the provisions of the guarantee and their practical effect had not been adequately explained to him and he had not received independent advice, before he gave his guarantee. Given the commercial setting and the undue influence and pressure he had been subjected to, he had defences of unconscionability and under the Contracts Review Act. It was also submitted to be relevant that even Mr Hilton had observed him to be "compliant" at the meeting at which he executed the guarantee, which had made clear to Mr Hilton, it was submitted, the disadvantage he was labouring under.
These submissions are difficult to accept. Mr Bickel was unarguably imprudent, in supporting Ms Gidley as he did, but his evidence as to how he came to give this guarantee does not establish that he was suffering relevant disability, let alone one of which Mr Hilton was put on notice.
Ms Gidley is Ms Berkemeier's sister. Mr Bickel is married to Ms Gidley. They separated in 1992. Mr Bickel's evidence is that he remains close to her and her partner. He relies on her, including in relation to his financial affairs. He relied on her when he purchased the Stanmore property with Ms Berkemeier, with funds which Ms Gidley then provided him, together with a bank loan. She later also helped him meet his mortgage repayments. It appears that without her assistance he could never have bought that property.
Mr Bickel and Ms Berkemeier live in separate apartments at the Stanmore property, which they purchased as tenants in common in 2007, with the deposit given to them by Ms Gidley. They borrowed the rest of the funds to finance the purchase from the St George Bank.
In Ms Berkemeier's case Harrison J concluded as to the guarantee that she gave, that: "93 … 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. 94 The 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. … … 98 Moreover, 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."
Those conclusions rested on evidence of Ms Berkemeier's understanding of the loan arrangements and these proceedings; her personal circumstances, particularly the psychiatric illness from which she suffers; and the strength of her case under s 7 of the Contracts Review Act 1980 (NSW). These considerations led Harrison J to conclude that "it is fairly arguable that all of the considerations set out under s 9 of that Act were triggered" and that Ms Berkemeier had an arguable defence (at [45]). His Honour also considered that there was an argument as to unconscionability available to her.
Such conclusions are not available in Mr Bickel's case, even though the consequences are equally serious for him.
Mr Bickel's oral evidence revealed why he gave this improvident guarantee, namely, in order to help Mrs Gidley, whom he trusted, when she assured him that there would be no issue with her repaying her proposed borrowings, which he understood she required urgently. He also said that he was aware of both her business ventures in Vanuatu and the purpose for which she required the loan Mr Hilton agreed to provide at such short notice.
Mr Bickel also expected that if Mrs Gidley's proposed venture in Vanuatu succeeded, he might have had the benefit of some of the proceeds, by way of further assistance from her, although they had no formal agreement to that effect.
Unlike Ms Berkemeier, Mr Bickel suffers from none of her significant disadvantages. To the contrary, he is a world renowned scientist, now aged 69 years. While not a man of commerce like Mr Hilton undoubtedly is, given his qualifications and many years of experience in accounting and as a director of significant companies, Mr Bickel is, however, also a highly intelligent man. He has for many years been employed at the Australian Museum as a world renowned research scientist in entomology. He is highly educated, holding a PHD from Cornell University attained in 1982. He is highly literate, having published some 90 academic papers in his field of expertise.
On this application Mr Bickel relied on his 2008 affidavit, sworn he said, after he had conferred with Mr Margiotta and Mr Perrignon and, at a time when he understood that Mr Hilton was pursuing possession of the Stanmore property. In submissions he tried to distance himself from concessions which he made in cross-examination, about what he had there deposed.
It was argued that the evidence which he had given in cross-examination, which largely corroborated that of Mr Hilton and Mr Fordyce, as to how he came to provide the guarantee at the meeting during which the documents which recorded the parties agreement, were discussed and drafted in the presence of Mr Fordyce, Mr Hilton, Ms Gidley, her partner Mr Shears, Ms Berkemeier and Mr Bickel, should be "treated with some caution". It was also submitted that in the case of departure from the affidavit, what he had there deposed to should be preferred.
That submission had to be advanced because Mr Bickel's oral evidence departed in such significant ways from his affidavit evidence, so as to undermine the case which he sought to advance.
I certainly do not accept that Mr Bickel's affidavit evidence should be preferred over the oral evidence which he gave in cross-examination, because it had been prepared closer in time to the events which had occurred, as was argued.
That is because the answers which Mr Bickel gave in cross-examination were consistent with him adhering to his oath when he gave his evidence, not with him having problems either with his memory, or his understanding. His oral evidence underscored that the case he claimed in his 2008 affidavit that he wished to advance, faced real difficulties.
In that affidavit Mr Bickel had said, for example, that when he signed the documents Mr Fordyce had drafted, neither Mr Fordyce nor anyone else had said that Mr Fordyce was not acting as his solicitor, or that he should obtain legal advice as to the effect of the loan deed, or any other advice as to the wisdom of entering the deed. He also said that he was anxious to return to work and did not read the document before signing it.
Mr Bickel also said in his affidavit that he had signed the guarantee because Ms Gidley had asked him to, without considering the consequences, if she and Mr Shears were unable to repay. He also said that if he had been informed that he should obtain independent legal advice, he probably would have done so and not signed the loan; and that if he had been informed that the effect of the deed would be to enable Mr Hilton to sell the Stanmore property if the loan was not repaid, he would not have signed it. Nor would he have signed it if he had been told there was a risk that Ms Gidley might not be able to repay. Nor would he have signed if he knew that Ari Ben Menashi was involved.
Contrary to what Mr Bickel there deposed, on the evidence which he gave in cross-examination, it became apparent that even before he went to the meeting, Mr Bickel had decided to help Ms Gidley. He also said that before he went to Mr Fordyce's office, although he had been given only sketchy details, he knew that Ms Gidley was trying to borrow money for a security deposit for the financial venture she was pursuing in Vanuatu; and that the purpose of the meeting was to enter legal documents, so that she and Mr Shears could borrow the money she required. He said that he had assisted her by providing the guarantee as a favour, to enable her to get the grant she was seeking. He also agreed that he was aware that he was to sign legal documents at the meeting, but not as to their nature, but he did know, he also said, that if he signed the documents, the bond or guarantee for that would be the Stanmore property.
Mr Bickel also said that even before he attended that meeting, he had already decided to sign the legal instruments, as a favour to Ms Gidley and that he knew that there was time pressure to get the deal done. He was present while the documents were drafted and terms discussed, but he could not recall details. However, he knew that he was giving a guarantee and security over the Stanmore property. He also said that he thought it would be a technicality, because everything had already been worked out by Ms Gidley and that her venture was likely to succeed and that there would not be a problem. He had also been told that she had financial support from Ari Ben Menashi.
On his own evidence, Mr Bickel was not only capable of understanding what was discussed at the meeting he attended and the guarantee which he signed, had he taken time to read it, even though he was not familiar with the legal language there employed, he did read at least part of that document, before he signed it. It was drafted and its terms were discussed in his presence, but he did not pay much attention to what was said at the meeting. Nevertheless, on his oral evidence, he did understand what he was agreeing to do by giving that guarantee, which he knew was to be secured by unregistered mortgage over the Stanmore property.
When shown the loan deed which he had signed at the meeting, Mr Bickel said that while he had not read it in detail, he probably would have read it and seen both the amount of the loan and that he and Ms Berkemeier were the guarantors. He also knew that Mr Hilton, who was present, was the lender. He also said that he did not pay much attention to the details of the document, there being pressure to get it signed that day, but that he assumed that it was a valid and fair document and that he thought it was okay.
It follows that while Mr Bickel did not read the guarantee in any detail before he signed it at the meeting, having already decided to give Ms Gidley the help she required, he well understood from what he did read, what he was agreeing to do by providing his guarantee. Mr Bickel acted deliberately, understanding the risk he was running and refusing to take the independent legal advice then made available to him, contrary to what he had deposed in his affidavit.
Mr Bickel also said: "Q. And that the solicitor for Isobelle and Richard had advised you and Cynthia to get your own legal advice and you had chosen not to? A. Well, wait. First of all, this had to be done, there was a tremendous pressure to get it done and I think Mr Fordyce said there is somebody across the hall who can advise you if you need it. I mean, however this is not what I would consider to be, you know, proper legal advice, totally independent legal advice. Q. But you recall Mr Fordyce saying to you that there was someone across the hall who could give you and Cynthia advice if you wanted to get it? A. Yes. Q. And you could go there immediately to get it? A. Yes. Q. And you made the decision not to do that? A. Yes."
At the hearing there was thus finally no issue between the parties that Mr Bickel had executed the guarantee after he was told that another independent solicitor was available to give him advice, before he executed the guarantee, which he refused to take. It was not Mr Bickel's case, finally, that the solicitor was not available to give him such advice, had he wished to take it.
In the result, it has to be concluded that unlike Ms Berkemeier, Mr Bickel knew what he was undertaking, by giving his guarantee for Ms Gidley's borrowings and that he did have an opportunity to obtain independent legal advice, before he gave that guarantee. While Mr Bickel acted contrary to what common sense would dictate, the decision to give that guarantee was not the result of advantage which Mr Hilton took of him.
Contrary to his case, Mr Bickel did in fact, have the opportunity to seek independent advice before he signed the agreement and he chose not take it. In Khoshaba the view was taken at [91] that any recommendation by the prospective lender to the plaintiff to take such advice would have had no effect. Here, in fact, it did have no effect. Mr Bickel did not then want to take such advice, having already decided that he would help Ms Gidley.
During these proceedings too, even after Mr Bickel received legal advice as to the conflict between he and Ms Gidley, still he decided, repeatedly, to leave the litigation in her hands and not to take steps to protect his own interests. In Khoshaba it was observed at [90] that even pensioners must take responsibility for their own actions. It is difficult to see a just basis for concluding that Mr Bickel should not also have such responsibility.
It follows that while in the case of a person like Ms Berkemeier, labouring under the disabilities discussed by Harrison J, an arguable basis for relief can be seen (see Khoshaba at [94] - [95]), that was not Mr Bickel's situation.
Contrary to the evidence given by Ms Berkemeier, which Harrison J accepted, 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, Mr Bickel's evidence established that he was well aware of what the proceedings concerned, long before he decided not to appear at the hearing before Hislop J. Still, he decided not to appear, but to leave Mr Hilton's claims to Ms Gidley to manage, despite the repeated advice that he received that there was a conflict of interest and that he had a defence.
Unlike Ms Berkemeier, who had no formal qualifications, training or experience in commercial matters, or significant financial transactions and her ongoing, longstanding, serious mental health problems, for which she required psychiatric treatment, there was no suggestion that Mr Bickel suffered from any such disabilities.
In submissions in reply it was suggested that Mr Bickel's demeanour, when giving evidence "was entirely consistent with that of a person with a poor mastery of even the most basic details of commercial transactions". I am quite unable to accept that submission, given the evidence I have earlier discussed. Nor do I accept that he was not following the cross-examination. That Mr Bickel gave answers to questions which were adverse to his case reflects that he was an honest witness who adhered to his oath, not that he was not following what was being put to him, or that he lacked the capacity or understanding to do so.
That Mr Bickel agreed that he had read letters sent to him by Mr Hilton's solicitors in 2008, for example, but did not in 2016 recollect their content, is hardly surprising and does not evidence the types of problems for which he contended in submissions.
Reliance was also placed on Kakavas v Crown Melbourne Ltd [2013 HCA 25; (2013) 250 CLR 392 at [118]: "Essential to the principle stated by both Mason J and Deane J in Amadio is that there should be an unconscientious taking advantage by one party of some disabling condition or circumstance that seriously affects the ability of the other party to make a rational judgment as to his or her own best interests. It may well be that an unconscientious taking of advantage will not always be manifest in a demonstrated inequality of bargaining power or in a demonstrated inadequacy in the consideration moving from the stronger party to the weaker; but the abiding rationale of the principle is to ensure that it is fair, just and reasonable for the stronger party to retain the benefit of the impugned transaction."
The evidence did not, however, establish either that Mr Bickel had any such disabling condition which affected his capacity to make rational judgments as to his best interests, or that Mr Hilton was aware of that condition, or that he took unfair advantage of it. The help Mr Bickel was prepared to give to Ms Gidley, by providing the guarantee over the Stanmore property she helped him to acquire, was for reasons which he explained and which no doubt were good ones for him, at the time, even though financially involving considerable risk, given that they had no sure upside for him, even if her Vanuatu venture succeeded. As he explained in his evidence, he expected that Ms Gidley's deal would eventuate and that again, he might benefit from it, even though he had not made any formal agreement with her in that regard.
Mr Bickel was prepared to take a risk which common sense would dictate not to be a sensible one. That he also chose not to take the independent legal advice he was offered, or even to read the details of the guarantee which was drafted in his presence before he gave the guarantee, were matters for him. As discussed in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [44], ordinarily, to sign a document known and intended to affect legal relations, as Mr Bickel did, conveys a representation to a reasonable reader of the document "that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents".
While there is no question that Mr Bickel was a volunteer and the guarantee which he provided was entirely improvident, from his own evidence Mr Bickel certainly understood that this was the effect of his signature, so far as Mr Hilton was concerned. That was his intention in providing his help to Ms Gidley as he did. Undoubtedly, those decisions proved to be very disadvantageous. That, however, is not a proper basis for the relief which he seeks.
Mr Bickel accepted that his conduct of the proceedings did not accord with the obligations imposed by s 56 as to the just, quick and cheap resolution of the real issues in the proceedings. The case he pressed was that despite all of the evidence as to his own conduct, he had an arguable case, which he had not advanced, because of his decision to leave the conduct of his case in Ms Gidley's hands. He submitted that his capacity to make sound judgments in his own interests was comprised and that the terms of the guarantee itself and the circumstances in which it was given, were such that they should have put Mr Hilton on notice of his problem, which he should have raised before Patten AJ. I cannot accept that a basis for these submissions has been established on the evidence I have discussed.
In the result, given the weakness of his case, the circumstances in which orders were made against him, and his contribution to delay, I am not satisfied that Mr Bickel has established a basis for an order in his favour under Rule 36.15

Orders and Costs

The usual order as to costs is that they follow the event. That would be an order in Mr Hilton's favour for costs as agreed or assessed. If the parties wish to be heard on the question of costs, they should approach within 14 days.
Otherwise the Court's order will be that the motion is dismissed with an order for costs as agreed or assessed in favour of Mr Hilton

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