James v Commonwealth Bank of Australia [2016] NSWSC 1321 | Case summary

James v Commonwealth Bank of Australia [2016] NSWSC 1321 | Case summary | Zoe

The District Court proceedings ('the proceedings')

The proceedings were commenced by CBA by the filing of a Statement of Claim on 19 May 2014. CBA sought judgment against Mr James in the sum of $674,920.12. Mr James was sued as a guarantor of the obligations of Print National Nominees Pty Limited under a finance facility. CBA also claimed interest in accordance with the provisions of the guarantee up to the date of judgment, and costs. At the time of commencement of the proceedings the relevant monetary jurisdictional limit of the District Court was (and it remains) $750,000.
On 31 October 2014 CBA obtained summary judgment against Mr James in the sum of $730,241.39. The judgment was obtained following a hearing which took place in Mr James' absence. That judgment led to various applications and appeals. Ultimately, the judgment was set aside by consent by order of the Court of Appeal on 17 July 2015.
In the meantime, on 15 December 2014 Mr James filed a Cross-Claim against CBA. Mr James alleged that CBA was negligent and in breach of duty (including duties under s 111A of the Conveyancing Act 1919 (NSW) and s 420A of the Corporations Act 2001 (Cth)) in exercising a power of sale pursuant to a mortgage over a property at Lisarow. The mortgage was part of the security given to CBA in support of the finance facility provided to Print National Nominees Pty Limited. Mr James was not the owner of the property. However, he claimed that as a result of the breaches of CBA he suffered a loss of $2,150,000. That amount was calculated upon the basis that the Lisarow property had a value of approximately $3.8 million but was sold for only $1.65 million.
By April 2015 Mr James proposed to file an Amended Defence and an amended Statement of Cross-Claim. The proposed Amended Defence included allegations that the guarantee was liable to be set aside due to misleading or deceptive conduct, and that a suspension of rights clause in the guarantee was liable to be set aside under the Contracts Review Act 1980 (NSW) or was otherwise void on various grounds including that it is contrary to public policy, contrary to s 111A(5) of the Conveyancing Act, and contrary to ss 22 and 96 of the Civil Procedure Act. The proposed Amended Defence also contained allegations to the effect that no monies were owed by Mr James under the guarantee because Mr James was entitled to set-off losses he sustained as a result of CBA's conduct in selling the Lisarow property.
The proposed amended Statement of Cross-Claim pleaded the breach of duty case more fully and included an allegation that, by reason of the allegations in the Amended Defence, the suspension of rights clause was liable to be set aside or was otherwise void.
On 29 February 2016 Mr James filed an Amended Defence and an amended Statement of Cross-Claim. These pleadings were largely, although not entirely, in the same form as the April 2015 drafts. (I note that the allegation concerning the suspension of rights clause was deleted from the Cross-Claim.)
The amended Cross-Claim is unclear as to the quantum of damages claimed by Mr James and the manner in which he is said to have suffered loss and damage as a result of CBA's breaches.
On 7 March 2016 the proceedings were listed for hearing to commence on 7 November 2016. A four day estimate was given for the hearing.
On 31 May 2016 an affidavit sworn by Mr Ryan Malloy, an officer of CBA, was served upon Mr James' solicitor. It appears that this affidavit was served in the course of other proceedings, in the Commercial List of this Court, involving Mr James and Australian and New Zealand Banking Group Limited. The affidavit of Mr Malloy indicated that the debt owing by Mr James to CBA pursuant to the guarantee given in relation to the Print National Nominees Pty Limited Finance Facility was $1,073,192.53.
Later on 31 May 2016, Mr James' solicitor sent an email to the solicitor for CBA in the District Court proceedings. The email included the following: Attached is an affidavit sworn on 25 May, 2016 by Mr Ryan Malloy of Commonwealth Bank, which was served this afternoon. The claim of your client in the District Court proceedings exceeds the jurisdiction of the District Court. The damages claimed by our client also exceeds the jurisdiction of the District Court. The matters in issue in the proceedings, particularly concerning the suspension of rights clause relied on by your client are significant and warrant the proceedings being transferred to the Supreme Court. We have been instructed to make an application to transfer the District Court proceedings to the Supreme Court. Please advise whether your client will consent to that application.
On 8 June 2016 the solicitors for CBA sent a letter to Mr James' solicitor. The letter contained the following: The debt owing by your client to our client, as set out in the statement of claim filed on 19 May 2014, is for the principal sum of $672,922.12 owing as at 13 May 2014. Accordingly, the claim falls within the jurisdictional limits of the District Court. Our client rejects your client's assertion that its claim is now outside the jurisdiction of the District Court. The additional amounts owing by your client to our client relate to interest and costs, not to the principal debt claimed against your client. In relation to your client's assertion that his cross-claim exceeds the jurisdictional limit of the District Court, this is an issue your client should have raised at the time the cross-claim was filed and at the very least prior to the allocation of a hearing date by the District Court. Your email also states that the issues in dispute are too complex to be dealt with by the District Court. With respect, we do not agree and are of the view that the issues in dispute are not too complex for the District Court and that our client's claim falls within the jurisdictional limits of the District Court. For the avoidance of any doubt, our client does not consent to your client's proposal to have the proceedings transferred from the District Court to the Supreme Court and will oppose any such application.

[3]

Submissions

Mr James advanced three principal reasons in support of the application for transfer. These are: 1. that the amount claimed by CBA as plaintiff in the District Court proceedings exceeds the jurisdictional limit of $750,000; 2. that the amount claimed by Mr James as cross-claimant in the District Court proceedings (said to be $1,150,000 plus interest) exceeds the jurisdictional limit of $750,000; and 3. that the proceedings involve complex and important issues of law and fact.
The issues said to be of importance include the proper construction of the suspension of rights clause, whether the clause is rendered void by the operation s 111A(5) of the Conveyancing Act, and whether the clause is void on public policy grounds or due to inconsistency with s 22 of the Civil Procedure Act. The claim that CBA has engaged in misleading or deceptive conduct, and the claim under the Contracts Review Act, are said to add further complexity to the matter.
Mr James submitted that CBA would suffer no prejudice from the making of the transfer order sought other than the loss of the hearing date of 7 November 2016. It was suggested that such prejudice could be alleviated by the grant of an expedited hearing date in this Court.
CBA submitted that each of the matters relied upon by Mr James in support of the transfer application have been known to him and his advisers for a period of about 17 months. It submits that no explanation has been given for the delay in the bringing of the application.
CBA apparently now accepts that, due to the accrual of interest since the commencement of the District Court proceedings, its claim now exceeds the jurisdictional limit of $750,000. However, CBA submits that any difficulties that may arise by reason of claims exceeding the jurisdictional limit can be overcome. It is suggested that one way of overcoming such difficulties would be to make orders both for the transfer of the proceedings from the District Court to this Court, and for the transfer of the proceedings back to the District Court pursuant to s 146 of the Civil Procedure Act. If such orders were made, the scheduled hearing could take place in the District Court without any relevant limitations upon the jurisdiction of that Court in dealing with the matter. CBA also indicated that, should it be necessary to do so in order to preserve the District Court hearing dates, it would be prepared to abandon (pursuant to s 23 of the Civil Procedure Act) any amounts of its claim that exceed the jurisdictional limit of the District Court.
As to Mr James' Cross-Claim, CBA submitted that the amount of the claim could not exceed the amount which CBA claims from Mr James pursuant to the guarantee. Accordingly, there was no basis to contend that the amount of the claim was $2,150,000, or $1,150,000 plus interest.
CBA accepted that an issue of some importance arises in relation to the operation of the suspension of rights clause. However, it pointed out that regardless of whether the matter is heard in the District Court or this Court, an appeal would lie to the Court of Appeal. CBA further submitted that there was nothing especially complex about the facts to be determined.
CBA submitted that any interest in having the proceedings transferred on the basis of the nature of the issues involved is outweighed by the gross and unexplained delay in the bringing of the application in circumstances where transfer would cause the hearing to be vacated at short notice. CBA submitted that the absence of any explanation for the delay in bringing the application should lead the Court to infer that the application has been brought to achieve the vacation of the hearing.
Mr James opposed the suggestion that, following a transfer of the proceedings to this Court, the proceedings be transferred back to the District Court pursuant to s 146 of the Civil Procedure Act. Mr James contended that such a re-transfer would amount to an abuse of process, and in any event was not permissible because the District Court did not have jurisdiction to entertain at least some of the claims he makes. I understood the latter submission to be that the Court could not be satisfied that the Cross-Claim "could properly have been brought as a cross-claim in the District Court" within the meaning of s 146(1)(b) of the Civil Procedure Act. Mr James contended that this lack of jurisdiction afforded a further reason in favour of his transfer application.

[4]

Determination

Section 140(1) of the Civil Procedure Act provides: The Supreme Court may, of its own motion or on application by a party to proceedings before the District Court or the Local Court, order that the proceedings, including any cross-claim in the proceedings, be transferred to the Supreme Court.
The discretionary power conferred by s 140(1) is to be exercised judicially, having regard to the particular circumstances of the case at hand and the applicable guiding principles set forth in ss 56 to 60 of the Civil Procedure Act. It is for Mr James, as the party seeking the transfer, to satisfy the Court that it is appropriate to make the order.
The case advanced for transfer rests partly upon difficulties said to arise due to the limitations upon the jurisdiction of the District Court, and partly on a claimed advantage in having the issues in the proceedings determined in this Court rather than the District Court. However, as submitted by CBA, there has been a lengthy delay in raising these matters and seeking the transfer.
There is no suggestion that the proceedings were not properly commenced by CBA in the District Court. Nevertheless, as the amount claimed was less than $100,000 below the monetary limit, it should have been appreciated by the parties that the amount of the claim, including interest under the guarantee, would come to exceed the limit if determination of the claim was significantly delayed.
Further, when Mr James filed his Cross-Claim in December 2014, claiming that he suffered a loss of $2,150,000, it should have been appreciated that there was at least a question as to whether the District Court had jurisdiction to determine the claim.
Finally, as evidenced by the content of his proposed amended pleadings, Mr James was aware by April 2015 of the nature of the issues that are now said to be better determined in this Court.
Even if it was reasonable not to raise the question of transfer whilst the judgment in favour of CBA remained in existence, there is no reason why the question should not have been raised once that judgment had been set aside in July 2015.
The question was not raised until May 2016. By that time the proceedings had already been set down for hearing in the District Court.
There are some jurisdictional questions involved with the District Court proceedings. It is clear that CBA's claim now exceeds the monetary jurisdictional limit, although CBA has indicated that it would, if necessary to preserve the District Court hearing date, abandon any excess above the limit. In any case, as pointed out by CBA, the District Court can give a judgment for an amount in excess of the jurisdictional limit, although the judgment creditor is prevented from recovering more than the jurisdictional limit exclusive of costs and interest (Richards v Cornford (2010) 76 NSWLR 572; [2010] NSWCA 99 at [12]).
It is difficult to see how the amount claimed by Mr James on his Cross-Claim could ever exceed the amount claimed against him under the guarantee. Any loss suffered by Mr James as a consequence of the allegedly wrongful conduct of CBA was suffered in his capacity as a guarantor. The amount of such loss would seem to be the amount by which his liability as a guarantor was increased.
Further, to the extent that Mr James succeeds on his Cross-Claim (which success would involve overcoming the asserted effect of the suspension of rights clause), the judgment so obtained would be able to be set off against a judgment obtained by CBA against Mr James, so that the latter judgment would be taken to have been satisfied by, or reduced by, the amount of Mr James' judgment (see s 96 of the Civil Procedure Act).
In these circumstances there is no substantial risk of prejudice or injustice to either of the parties arising from the quantum of the claims brought in the District Court.
Mr James has suggested that the District Court does not have jurisdiction to determine at least some of the claims he makes. However, with the possible exception of the Contracts Review Act aspect of his defence, it is my opinion that the District Court has jurisdiction to determine all of the matters he raises. In any case, any jurisdictional difficulties of this kind are of Mr James' own making. The issues Mr James wishes to raise had been formulated by April 2015. Any jurisdictional difficulties should have been raised long ago.
I note in passing that counsel for Mr James suggested that if this Court did not order transfer, it was possible that Mr James may invoke s 144 of the Civil Procedure Act so that the District Court itself transfers the proceedings pursuant to s 144(2). This is a matter that the parties should urgently bring to the attention of the District Court so that any such transfer occurs well prior to the scheduled hearing date, thereby enabling this Court to consider, prior to that date, whether to remit the proceedings pursuant to s 144(3)(b).
I turn now to the question whether it would be advantageous for the proceedings to be heard in this Court due to the nature of the legal and factual issues involved. The issues concerning the validity and enforceability of the suspension of rights clause are in my view far from straightforward and of some general importance. These issues, coupled with the related issues concerning misleading or deceptive conduct and relief under the Contracts Review Act, are undoubtedly suited to this Court. So too is the claim that CBA breached its duties as a mortgagee exercising a power of sale. These matters would be appropriate to agitate in the Commercial List. The factual issues in the case, whilst not simple, do not seem to me to be overly complex.
Once again, however, Mr James should have raised this question long ago. Consideration should have been given to the question when the proposed amended pleadings were prepared in April 2015. At the very least the question should have been raised before the filing of the amended pleadings in February 2016, and before the matter was set down for hearing.
In any event, I do not think that the nature of the case renders it unsuitable for determination in the District Court. Whilst the case may be of a type not commonly found in that court, the District Court routinely deals with difficult cases as they arise. There is no reason to think that a judge of that court will not diligently and competently determine this matter.
The proceedings have been on foot for more than two years. A hearing date, now less than two months away, would be lost if an order for transfer was made. Mr James accepts that loss of the hearing date would cause prejudice to CBA. The Court is not in a position to alleviate such prejudice by simply granting an expedited hearing as suggested by Mr James. That would involve the displacement of other litigants seeking to have their cases heard in this Court. No good reason has been shown for taking that course.
In all the circumstances, I am not satisfied that it is appropriate for the proceedings to be transferred to this Court. It is desirable that the proceedings proceed to final hearing as soon as possible. A hearing date in November 2016 has been set in the District Court. Any jurisdictional difficulty arising from the Contracts Review Act claim can be dealt with prior to that date pursuant to s 144 of the Civil Procedure Act. I do not think that keeping the matter in the District Court will occasion any significant prejudice or disadvantage to either party. As far as Mr James is concerned, any prejudice or disadvantage may fairly be regarded as the product of his own actions, and his delay in agitating the question of transfer. Finally, the nature of the issues is not such as to render them unsuitable to be determined in the District Court. Any advantages in having those issues determined in this Court are in my opinion outweighed by the delay which will occur if the matter is transferred now.
For these reasons, Mr James' application for transfer is dismissed. It is therefore not necessary to consider the further question whether it is open, and if so appropriate, for the proceedings to be transferred back to the District Court pursuant to s 146 of the Civil Procedure Act. Mr James should pay CBA's costs.

James v Commonwealth Bank of Australia

At a glance

Court

Decision date

Before

Source

Judgment (5 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (2)

Cited By (2)