Kahlefeldt Securities Pty Limited v Guruparan

The evidence 8The second defendant relied principally upon an affidavit sworn in support of her application on 27 April 2012. In that affidavit the second defendant gives a relatively detailed history of, and contextual background to, her life and the events leading up to her marriage, the birth of her children, her work history and her family's arrival in Australia in 1986. Other matters are referred to as well. 9Commencing at paragraph 26 of her affidavit, the second defendant proceeds to deal with the defendants' purchase of their Strathfield property. She said that she and her husband started looking in 1995. They found the Strathfield property. She did not discuss with him how they would pay for it. She said, "I do not know whether my husband obtained a loan for the purchase of the property". She does recall attending a solicitor's office and signing "some papers". She said, "I did not take any notice of what they were and assumed that they were necessary for us to purchase the property". They moved into the property in about September 1995. 10At paragraph 32, the second defendant turns to the topic of a "Business Loan". She said that in or around 2003 her husband told her that he wanted "to borrow some money for the business". She said that she did not know specifically what the money was for and had always assumed that her husband's business had been operating successfully. The second defendant agrees that her signature appears on the mortgage dated 26 September 2003 but says that she did "not recall the circumstances in which [she] signed it". She cannot recall attending the office of Joe Mannix in Castlereagh Street, Sydney to do so, even though he is identified as the witness to her signature on the mortgage. The second defendant said that she could not recall receiving independent legal or financial advice when she signed the mortgage and "did not understand that the effect of the document was such that if the loan for the business was not repaid, [the] family home could be sold". 11At some time during 2005 the second defendant was served with the statement of claim commencing these proceedings. She says that she asked her husband what it was all about and he told her that they had "to vacate the house by a particular date". The second defendant said she was "shocked". 12She subsequently attended the chambers of a barrister named Tony Rogers. He told the second defendant that when she "borrowed the $1.0M, [she] mortgaged the house" and that "now the lenders are trying to sell it". The second defendant said that this was the first time that she had been informed or understood that the family home was at risk of being sold if the business loan was not repaid. 13Following this meeting, the second defendant and her husband arranged for Mark Squire to act as their solicitor in the matter. The second defendant did not have any conversation with him independently of her husband. She read the letters that Mr Squire wrote to the defendants but said that she did not understand them and did not seek any independent advice as to what they contained or meant. The second defendant reiterated that she did not receive advice to obtain independent legal advice about the proceedings or the mortgage. 14The second defendant then said she recalled that in about September 2005 she and her husband attended a hearing of these proceedings with Mr Rogers and Mr Squires. She said that she "did not understand what was happening in the hearing but assumed that [her] lawyers and her husband were taking care of the matter". At one point her husband said to her, "we have to move out of the house today". 15The second defendant thereafter deposes in detail to the circumstances relating to the making of the Consent Orders dated 26 September 2005. It is appropriate for present purposes to set out the precise terms of the paragraphs of the second defendant's affidavit that deal with that topic. They are as follows: "45 I have been shown Consent Orders dated 26 September 2005, a true copy of which is annexed...I cannot now recall seeing the Consent Orders at the hearing in September 2005 or at any time thereafter. I cannot not [sic] now recall receiving advice as to what they contained or meant. 46 At no time during the hearing in or about September 2005 did I give instructions to my legal representatives, Mr Rogers or Mr Squires. At no time during the hearing or the proceedings did I receive advice to obtain independent legal or financial advice. 47 When I returned to the property later that day, the locks had already been changed. We were then given 2 or 3 hours to remove our things from the property. My husband and I, and our 3 sons, then moved in with my husband's niece, her husband and their 2 children. 48 Some time later, my husband said words to me to the effect of: 'I have agreed to pay $180,000 towards the business loan and then monthly payments. They will let us move back into the house once the $180,000 is paid.' 49 I recall that my husband then borrowed the amount of $180,000 from his sister and brother, and I believe that he paid it towards the business loan. 50 We then moved back into the house...in about October 2005. At the time, I thought that the dispute with the plaintiff in relation to the business loan and the court case had been resolved. 51 I have been shown an Agreement as to Judgment dated 26 October 2006, a true copy of which is annexed...I recognise my signature on page 4 of that document. I cannot now recall signing the Agreement as to Judgment nor receiving advice as to what the Agreement as to Judgment contained or meant. At no time did I receive advice to obtain independent legal or financial advice in relation to the Agreement as to Judgment. 52 After moving back into the house, my husband commenced making monthly repayments to the plaintiff of $9,673.62. Each month either my husband or myself would deposit the funds into the plaintiff's bank account, either by cheque or in cash. If I deposited the funds into the bank account, the cheque or cash would be given to me by my husband as I had no income or source of funds of my own. 53 I am currently not employed and do not have an income or source of funds from which to repay the business loan. If I had known that my family home could have been repossessed as a result of the business loan, I would not have signed the mortgage. 54 If I had known that the dispute with the lender and the court case had not been resolved upon paying the amount of $180,000 and moving back into the property in or around October 2005, I would not have signed the Agreement as to Judgment dated 23 October 2006." 16The second defendant had also sworn an earlier affidavit on 19 January 2012. In the events that occurred, the plaintiff tendered certain paragraphs of that affidavit in response to the second defendant's application. Those paragraphs are as follows: "2005 Proceedings 42 In 2005, proceedings were commenced against my husband and myself in connection with the loan by the plaintiff... 43 A defence to that amended statement of claim was executed by myself on or about 6 June 2005... 44 Sometime later I gave instructions to consent to a judgment in the matter as appears [in the Consent Orders dated 26 September 2005]... 45 I cannot now recall the circumstances in which I consented to the judgment [in terms of the Consent Orders]...". 17In response to the plaintiff's tender, the second defendant read the balance of that affidavit. Without intending to discount anything contained in it, it seems to be a fair summary of that affidavit that it supports or is generally consistent with the matters to which the second defendant deposed in her later affidavit. 18The plaintiff also tendered a series of letters that were, or which purport to have been, either written by or on behalf of the second defendant and/or which bear her signature. The significance of the letters for which the plaintiff contends can best be understood by reference to their precise terms. There are four letters. They are as follows. 19The first letter is dated 25 September 2006. It is addressed to the plaintiff. The names of both defendants appear at the end of the letter above which each defendant respectively has signed it. Omitting formalities, the letter is in these terms: "Thank you for your letter informing us of the maturity of the loan facility. As per your request through the information provided by Mr Hank, we are writing this letter to you to seek a rollover for a further term of twelve (12) months with the same applicable terms and conditions as per the last facility. Please send all required agreements for the rollover to our solicitors (details below) at your earliest convenience to get this matter finalized." 20Chak Ogoti of Davidson James and Associates is nominated as the solicitor for the defendants. 21The second letter is dated 7 August 2007. It is addressed to the plaintiff. It is in the second defendant's handwriting and is only signed by her. It is as follows: "As we promised to pay on the 7th day of Aug '07, we are not in a position to pay you the full amount as we have not received the full amount of money due to some documentation problem. I am depositing A$5000 (Five Thousand Dollars) today and the balance A$4,673.62 will be paid before the 17th of Aug '07. We are very sorry for the inconvenience caused by us. I am writing this letter on behalf of my husband since he is down with flu and not in a position to communicate with you. Thank you very much for your patience in this matter." 22The third letter is dated 28 August 2007. It is addressed to the plaintiff. It is signed only by the first defendant even though the names of each defendant are printed at the foot of the page. The letter says this: "We refer to your letter dated 21 August 2007. If you could suggest a way to continue our loan to you without recourse to the Court, we intend to continue our loan arrangement with you for at least next six months." 23The final letter is dated 25 August 2008. It purports to have been written by both defendants but is only signed by the first defendant. The terms of the letter are not particularly significant. The plaintiff emphasised two aspects. First, the one sentence paragraph that reads, "My wife will deposit the interest for the month of August on 25 August 2008". Secondly, the handwritten notation on the top of the letter that reads "Mrs Guruparan telephoned 26/8/08. I agreed to give them until 15 Oct 2008 to pay the loan out in full." 24The author of the notation is not identified. The letter is not signed by the second defendant. She objects to the notation being relied upon in these circumstances. I consider that the fourth letter and its additions should be wholly disregarded for present purposes.

Consideration 25In order to succeed under UCPR 36.15(1), the second defendant must satisfy the onus enshrined in the words "on sufficient cause being shown". As Bryson JA held in Kendell v Carnegie [2006] NSWCA 302; (2006) 68 NSWLR 193 at [45], "sufficient cause" recognised "the need for finality in protecting judgments from being set aside for slight or uncertain causes". 26In my opinion the second defendant has not shown or established the existence of a sufficient cause for the purposes of the rule. Her affidavits are directed to the possible existence of some defence to the claim or a cross-claim in cognate terms. The affidavits not only do not address the issues of impropriety, illegality or absence of good faith, but in contrast they contain no material at all from which any supportable contention in aid of the second defendant's application could be drawn. 27Indeed, as the plaintiff emphasises, the position is to the contrary. The second defendant was represented by a solicitor before the 2005 orders were made. Her solicitor signed them. The defendants were given back possession of the property when they borrowed and paid $180,000. The second defendant signed the 2006 orders, even if she cannot now recall doing so. She knew what the monthly repayments were and played an active and practical role in making them. None of this material assists the second defendant in establishing that the 2005 or 2006 orders are vulnerable in any way to attack. 28In Coles v Burke (1987) 10 NSWLR 429 at 437, Kirby P said this: "The genus which is involved in the phrase "irregularly, illegally or against good faith" appears to me to be misconduct or dishonourable conduct of the person who procured the judgment which it is suggested undermines the authority of that judgment warranting the exceptional course for which r 12A provides. Here, there was no such lack of good faith on the part of the claimants. The signing of the judgment was made in accordance with the authority of the order earlier consented to and after a warning had been given by the letter to which I have referred. It is perhaps undesirable, in the modern practice of the legal profession (where much give and take is required) that judgment should be signed in this way without a final telephone call or other warning. However, the failure to give such a final and further warning could not, on any view, amount to a lack of good faith." 29In AVS Australian Venue Security Services Pty Ltd v Criminale [2006] NSWCA 368, Basten JA dealt with the notions of irregularity and illegally at [35] and [71] as follows: "[35] There is no need to rely upon an implied statutory power to discharge an order made, if it can be said that the order has been entered "irregularly, illegally or against good faith". As noted above, in Coles Kirby P suggested that such language might invoke misconduct or dishonourable conduct on the part of the person who procured the judgment, although he did not specify whether that was necessarily a party or could be a solicitor. However, it would appear that his Honour was dealing with the phrase "against good faith" in the circumstances of that case, and was not seeking to impose a general limitation inconsistent with the source of the statutory language relied upon by the Appellant in this case, namely Anlaby v Praetorius: see Roach v B & W Steel Pty Ltd (1991) 23 NSWLR 110 at 114D, and Smith v Budandan Enterprises (2002) 55 NSWLR 367 at [60]-[67]. ... [71] For reasons noted at [35] above, that authority does not preclude the words 'irregularly' or 'illegally' embracing conduct which was in contravention of the rules, but which did not involve misconduct or dishonourable conduct. Nevertheless, the defendant must fail because there was no irregularity, illegality, contravention of rules or non-compliance with rules, in the conduct undertaken on behalf of the plaintiff. Her Honour's conclusion that the plaintiff was "punctilious in taking every possible step to ensure that the defendant was aware of the proceedings and the progress of the proceedings" (Judgment, p 21) should, with one qualification which her Honour noted, be upheld. The qualification relates to the fact that the directions given by the registrar on 11 September 2002 were notified in a standard, and unamended form. As her Honour correctly found, the plaintiff's solicitor "must be taken to have had knowledge of those orders, and could not seek refuge behind an inexperienced clerk's failures to appreciate that he should have brought the amended orders to the attention of the solicitor": Judgment, p 20. However, as already noted, the amendments, so far as they were relevant for present purposes, were immaterial. There was no shred of evidence that the defendant misunderstood the orders (or even that Mr Taylor on its behalf was concerned to note the orders). No steps were taken, or not taken, because of the failure to note the amendments. Different changes to the standard form of orders, or different circumstances, might give rise to a different conclusion. In the present case, the omissions were clerical errors. They could not, on any view, give rise to an allegation of conduct 'against good faith'." 30In Kendell at [52] and [53] Basten JA also said this: "[52] In my respectful opinion Fitzgerald JA's observations show clearly that the reference in Roach to its being contrary to good faith to attempt to retain the benefit of an order if it had been obtained contrary to a promise or representation binding on the client was not the real basis for decision, and was not an exposition of the reference to "against good faith" in r.12A. The reference in Roach v B&W Steel to unconscionability in later relying on a judgment which had been entered up as a result of a mistake is not in my respectful opinion authorised by the terms of r.12A, which relates good faith to the circumstance in which the judgment was given, and does not extend to lack of good faith in reliance on the judgment at some later time. [53] In Smith v Budandan Enterprises [2002] 55 NSWLR 367 at 374 [60] to 375 [67] M.W. Campbell AJA (with whom Mason P. and Beazley JA agreed) considered the effect of Roach v B&W Steel on observations in Coles v Burke and said (at 375[67]: "In my view Roach makes it clear that the ground of irregularity referred to in Pt.31 r.12A can be made out without misconduct or dishonourable conduct being established." In my respectful view this observation should be understood with the benefit of Fitzgerald JA's observations in Shirriff v The Nominal Defendant, to which the Court of Appeal was not referred in Smith v Bundanan Enterprises. The observations of MW Campbell AJA at [63] do not, if correctly understood, give approval to the reference in Roach to retaining the benefit of an order innocently obtained. The force of the words "against good faith" in their context in r.12A was well expressed in Coles v Burke by Kirby P." 31The second defendant has conspicuously failed to approach the satisfaction of any formulation of the requirements of the relevant rule. 32The second defendant also sought to rely upon UCPR 36.16(2)(c). I was referred in particular to a discussion of that rule undertaken by Adamson J in Provident Capital Ltd v Norton [2012] NSWSC 17 at [43] - [48]. From my position the second defendant's reliance upon that rule appeared to be faint. That is not surprising. There are no facts in this case that could bring the second defendant within the operation of the rule. The rule does not apply to the second defendant and it cannot assist her in the present application. 33Finally, the second defendant sought to invoke the inherent jurisdiction of the Court. The Court has relevantly an inherent jurisdiction to set aside a default or irregularly obtained judgment. I was referred in particular to a brief consideration of that jurisdiction by Rothman J in First Mortgage Managed Investments Ltd v Oberlechner [2006] NSWSC 1397 at [40] - [43]. It was not suggested, and I would find it difficult to accept, that any consideration of the second defendant's application relying upon an exercise of the Court's inherent jurisdiction would proceed upon any relevantly different principles in this case to those that apply under UCPR 36.15. Nor in my opinion would any different result be produced. 34I am finally also mindful, in the present context, and in the light of the authorities to which I have referred, of what has been said by the High Court in D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 at [34] - [36]: "Finality [34] A central and pervading tenet of the judicial system is that controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances. That tenet finds reflection in the restriction upon the reopening of final orders after entry and in the rules concerning the bringing of an action to set aside a final judgment on the ground that it was procured by fraud. The tenet also finds reflection in the doctrines of res judicata and issue estoppel. Those doctrines prevent a party to a proceeding raising, in a new proceeding against a party to the original proceeding, a cause of action or issue that was finally decided in the original proceeding. It is a tenet that underpins the extension of principles of preclusion to some circumstances where the issues raised in the later proceeding could have been raised in an earlier proceeding. [35] The principal qualification to the general principle that controversies, once quelled, may not be reopened is provided by the appellate system. But even there, the importance of finality pervades the law. Restraints on the nature and availability of appeals, rules about what points may be taken on appeal and rules about when further evidence may be called in an appeal (in particular, the so-called "fresh evidence rule") are all rules based on the need for finality. As was said in the joint reasons in Coulton v Holcombe: "[i]t is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial". [36] The rules based on the need for finality of judicial determination are not confined to rules like those mentioned above. Those are rules which operate between the parties to a proceeding that has been determined. Other rules of law, which affect persons other than the parties to the original proceeding, also find their justification in considerations of the need for finality in judicial decisions. And some of those rules are rules of immunity from suit."

Conclusion and orders 35Whatever sources of relief may be available to the second defendant, they are not to be found in the present application. I can see no basis for the contention that the 2005 or 2006 orders, made with the consent of the second defendant, were entered, or made, irregularly, illegally or against good faith. In the circumstances the second defendant's application should be dismissed with costs.

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