HSBC Bank Australia Ltd v Chang

Subsequent investigation revealed the defendant's account had been accessed by a third party. The plaintiff accepted that part of the monies were advanced by it on forged cheques drawn on the defendant's account. 5 The present position is that:

(a) the defendant conceded that the plaintiff was entitled to $226,937.44. The defendant paid that sum to the plaintiff on 27 May 2005. That sum no longer forms part of the plaintiff's claim.

(b) the plaintiff concedes $578,000.00 was advanced to a third party. It maintains however that the defendant is liable to it for the whole of that sum and interest thereon.

(c) there are further sums which the defendant asserts were advanced to unauthorised persons. The plaintiff does not accept that assertion and claims that the defendant is liable to it for those sums and interest thereon.

The proceedings 6 The evolution of the proceedings, in substance, was as follows. 7 On 20 July 2004 the statement of claim was filed. 8 On 17 August 2004 a defence and cross-claim (against the plaintiff) were filed. Those documents asserted that, in essence, the plaintiff, in breach of contract and negligently, advanced funds from the defendant's account without proper authorisation. 9 Between 2 November 2004 and 26 July 2005 the defendant was directed to file and serve any amended defence and cross-claim on five occasions. She did not do so. 10 On 27 May 2005 the defendant paid the plaintiff the undisputed portion of the mortgage account. 11 On 23 June 2005 the plaintiff obtained leave to file an amended statement of claim. 12 On 26 July 2005 an amended statement of claim was filed pursuant to leave granted on 23 June 2005. 13 Between 26 July 2005 and 14 November 2005 the defendant was directed by the court on two occasions to file a defence to the amended statement of claim. She did not do so. 14 Between 14 November 2005 and October 2006 informal settlement discussions were held. During this time directions hearings took place and orders for evidence to be served were made. The parties agreed to extensions of time due to the settlement discussions. The settlement discussions were abandoned in October 2006. 15 On 8 December 2006 the plaintiff filed a notice of motion seeking leave to file a further amended statement of claim. 16 On 6 March 2007 the plaintiff was granted leave to file a further amended statement of claim by the 20 March 2007. The defendant was directed to file a defence to the further amended statement of claim by 17 April 2007. 17 On 20 March 2007 a further amended statement of claim was filed pursuant to the leave granted on 6 March 2007. The claim in the further amended statement of claim was for $634,761.24 plus interest together with an order for possession of the Artarmon property. The further amended statement of claim included, in short, claims for false representation resulting in the granting of the loan, a claim under the EFT code, and an assertion that the defendant was liable for failure to take appropriate precautions against unauthorised transactions. 18 On 21 March 2007 the defendant flew to Taiwan. There she became seriously ill. She did not return to Australia until the end of that year. 19 The defendant did not file a defence to the further amended statement of claim by the 17 April 2007. On 23 April 2007 a direction was made that the defendant file a defence or an affidavit explaining why the defence had not been filed. She did not do so. 20 On 16 May 2007 the defendant's legal representatives informed the plaintiff's legal representatives that a defence had been drafted but had not been filed because the defendant was overseas and suffering extreme poor health which prevented her from returning to Australia. 21 In June and July 2007 medical certificates were obtained regarding the state of the defendant's health. 22 In June 2007 the defendant's solicitors indicated to the plaintiff's solicitors that the appointment of a tutor for the defendant may be appropriate. 23 Between 22 June 2007 and the 27 July 2007 further directions (3) were made requiring the defendant to file a defence or an affidavit explaining why a defence had not been filed. The directions were not complied with. 24 On 10 September 2007 the defendant's solicitor informed the court that consideration was being given to whether the appointment of a tutor was appropriate. The plaintiff was directed by the court to file any motion to strike out the defence by 2 October 2007. 25 On 13 September 2007 a notice of motion was filed seeking the appointment of a tutor for the defendant. 26 On 28 September 2007 a notice of motion was filed by the plaintiff seeking to strike out the defence and the cross-claim against the plaintiff. 27 On 10 October 2007 Bell J dismissed the notice of motion to appoint a tutor on the basis that her Honour was not satisfied that the evidence was sufficient to establish the defendant was legally incapacitated. 28 On 16 October 2007 the defendant was directed to file evidence as to the plaintiff's strike out application. No evidence was filed by her.

29 On 10 December 2007 Walmsley AJ adjourned the defendant's strike out motion as a further notice of motion for a tutor to be appointed was foreshadowed. The adjournment application was opposed by the plaintiff. Orders were made in respect of the defendant's attendance at medical examinations organised by the plaintiff's solicitors. Some difficulties were encountered in the defendant attending the medical examinations which were arranged. 30 On 17 December 2007 a notice of motion was filed seeking the appointment of a tutor for the defendant. 31 On 15 September 2008 Fullerton J refused the application to appoint a tutor as she was not satisfied on the evidence that the defendant was under a legal incapacity. 32 On 23 September 2008 the defendant verified her defence to the further amended statement of claim. 33 On 21 October 2008 the defendant's solicitor certified the defence to the further amended statement of claim. 34 On 28 November 2008 the defence to the further amended statement of claim was filed. 35 On 5 February 2009 the strike out motion was heard.

Consideration 36 There has been a long delay in preparing this matter for hearing. There have been failures to comply with various directions of the court. This has been primarily on the part of the defendant though there has been a failure by the plaintiff in complying with a direction to file its evidence (a matter of difficulty until the defendant's defence to the amended statement of claim was filed) and, though there has been no direction, it has not filed a defence to the defendant's cross-claim against it. 37 The defendant has tendered no evidence to explain the delay or her failure to comply with the directions of the court. However some explanation is available from the evidence tendered by the plaintiff.

38 The final form of the plaintiff's claim did not emerge until the filing of the further amended statement of claim. As a consequence the main thrust of the plaintiff's application was directed to events after the filing of the further amended statement of claim on 20 March 2007. Accordingly little purpose would be achieved by a detailed examination of each of the defaults prior to 10 March 2007 and determining whether each default was excusable or not. However an overview is of assistance.

39 The initial period was from the 2 November 2004 to 26 July 2005. During this period the defendant did not comply with a number of directions by the court to file an amended defence and an amended cross-claim. However the defendant had filed a defence and cross-claim within time. It was a matter for her as to whether an amended defence and cross-claim should be filed or not. 40 In the period 26 July 2005 to 14 November 2005 the defendant did not comply with two directions of the court to file a defence to the amended statement of claim. 41 Generally, in respect of the occasions between 2 November 2004 and 14 November 2005 when the defendant failed to comply with a direction an explanation was proffered by her legal representatives and the plaintiff agreed to their request for an extension of time. 42 In the period 14 November 2005 to October 2006 the parties engaged in settlement negotiations. The plaintiff does not complain about delay during this period. 43 In the period October 2006 to 20 March 2007 there was a failure by the defendant to file a defence to the further amended statement of claim.

44 Between 20 March 2007 and 20 June 2007 the defendant was directed by the court to file a defence to the further amended statement of claim on four occasions. These directions were not complied with. However the defendant was overseas and quite unwell during this period. The defendant's solicitors supplied two medical certificates to the plaintiff's solicitors in July 2007. The first certificate, dated 20 June 2007, diagnosed the plaintiff as suffering from chronic renal failure and coronary arteriosclerosis. A subsequent certificate, dated 21 July 2007, diagnosed chronic renal failure, very close to end stage renal failure, severe anaemia and a urinary tract infection. It certified that the defendant's medical condition was not suitable for a flight overseas and she needed her family to take care of her every day. I am prepared to accept that evidence. 45 By June 2007 the defendant's legal representatives were considering the need for a tutor and had conveyed that concern to the plaintiff's solicitors. 46 On 10 September 2007 the court was informed of the intention to seek an order appointing a tutor and on 13 September 2007 an appropriate notice of motion was filed. 47 The question of the appointment of a tutor was not finally resolved until the judgment of Fullerton J on 15 September 2008. Since then the defendant has filed a defence to the further amended statement of claim. At present there are no outstanding directions so far as the defendant is concerned. The direction to the plaintiff to file its evidence has not yet been complied with.

Determination 48 The essential criterion for the exercise of the power under r 12.7 is whether or not, in all the circumstances, justice requires that the proceedings be dismissed [or the defence struck out] - Witten v Lombard Australia Limited (1968) 2 NSWR 529 at 534. Mason P has described summary dismissal as an extreme measure - Fairey v Fairey No.2 [2000] NSWCA 173 at [5]. 49 There are many factors which may be relevant in determining whether justice requires that proceedings should be dismissed [or a defence struck out] see Hoser v Hartcher [1999] NSWSC 527 at [19] - [30]. Regard must be had to the objects of the Civil Procedure Act 2005, see, in particular, sections 56 and 59 thereof. 50 Primary considerations are the length of the delay, procedural non-compliance and prejudice to the parties. 51 On the face of the pleadings the defendant has an arguable defence to the claim as now formulated by the plaintiff. There is no evidence before me to establish that the defence is untenable. The delay and procedural non-compliance have been discussed earlier in these reasons. As the plaintiff observed, the primary consideration is the events since the filing of the further amended statement of claim on 20 March 2007. There has been some delay by the defendant since that time but in my opinion it is largely explicable. Initially the defendant was overseas and in ill health which would have created difficulty obtaining the defendant's instructions in relation to the settling of the defence. Then, from about June 2007 until 20 September 2008, the defendant's solicitors were of the opinion that the defendant required a tutor to be appointed and steps were taken to obtain the appropriate orders. 52 Rule 7.14 of the UCPR provides that a person under a legal incapacity may not carry on proceedings except by his or her tutor. Accordingly, if the defendant was legally incapacitated, she could take no steps in the proceedings until a tutor had been appointed. Although the applications to the court for the appointment of a tutor were unsuccessful it has not been suggested the applications to appoint a tutor were not made bona fide. 53 Following the dismissal by Fullerton J of the application for the appointment of a tutor the defendant signed the defence to the further amended statement of claim, it was certified and filed. In my opinion, whilst there has been delay occasioned by the defendant since 20 March 2007 much of that delay is explicable for the reasons referred to above. 54 The plaintiff has asserted that it would be prejudiced if its application was refused. The primary areas of prejudice alleged were presumed prejudice by reason of the passage of time, that the plaintiff will be delayed in receiving money to which it is entitled and the possibility that the value of the mortgaged property may be eroded with the passage of time. 55 There is no evidence of actual prejudice to the plaintiff. I note that the plaintiff has pleaded that the payment on forged cheques was investigated and established by the Victorian police. The plaintiff is entitled to interest on the money outstanding if its claim is upheld. There is no satisfactory evidence that the defendant has relocated permanently to Taiwan and no evidence was put before the court as to the value of the mortgaged property. 56 The plaintiff also asserts that the costs of preparing its case for hearing would be thrown away if the defendant ultimately does not defend the proceedings. It submits that the court can have no satisfaction that the defendant has any interest in properly defending the case. I am not prepared to infer that the defendant will not defend the proceedings. The plaintiff's solicitor gave evidence that relevant documents and some proofs of evidence have been obtained from which I infer at least part of the plaintiff's costs of preparation has already been incurred. 57 The amount claimed by the plaintiff, including interest, is in the order of $1 million. The defendant stands to lose the Artarmon property. In my opinion the prejudice to the defendant, if she is prevented from contesting the plaintiff's claim on the merits, far outweighs the suggested prejudice to the plaintiff if the application is refused. 58 I have considered the competing contentions of the parties. In my opinion justice does not require that the orders sought by the plaintiff should be made at this time. The plaintiff's application is dismissed. 59 However the history of the matter is unsatisfactory. Not all of the defendant's defaults are explained by the evidence before me. It will be necessary to impose a strict timetable on the parties and to ensure that it is complied with. 60 I propose to list the matter before me at 9:30am on 27 February 2009 for directions. 61 In my opinion the circumstances of this matter are such that the costs of this application should be costs in the cause.

(2) The costs of the application are to be costs in the cause.

(3) The proceedings will be listed for directions before me at 9:30am on 27 February 2009.

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