Kyabram Property Investments Pty Limited and Anor v Murray and Anor; Murray v Duddy

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION PROGRESSIVE LIST

12184 of 2001 KYABRAM PROPERTY INVESTMENTS PTY LIMITED (First plaintiff)

NORTH CENTRAL SECURITIES LIMITED (Second plaintiff)

12555 of 2001 WENDY JILL MURRAY (Plaintiff)

EX TEMPORE JUDGMENT 1 Shaw J: These are two actions in the Common Law Division of this Court whereby Kyabram Property Investments Pty Ltd (the plaintiff in the first matter) sues Mr and Mrs Murray (the defendants in the first matter) to enforce loans granted by an associated finance company given to facilitate the purchase of a property known as West Garawan, which is located near Gunnedah and upon which various crops are grown. The Statement of Claim seeks possession of the property and monies owed. It is defended by the Murrays on the basis of a cross claim which calls in aid the doctrine of unconscionability and the Contracts Review Act 1980 (NSW). 2 The second and associated proceeding is one in which Mrs Murray seeks indemnity against Eric Keith Duddy on the basis, as I understand it, that she had purchased the property in question at his request or on his behalf.

3 It is regrettable that, despite the matter being set down for trial today (8 April 2003), last Friday (4 April 2003) and very late in the afternoon, notice was given that the Murrays (whom I will call the defendants) would seek an adjournment in order to amend their pleadings to raise a qualitatively new and different defence. Both the application to the court and the formal documentation in support of it were presented on the day of trial. Obviously this last minute raising of a new point causes not only disruption to the Court's list but cost and inconvenience for the parties and their witnesses. 4 The new point that is sought to be agitated by way of answer to the claim by Kyabram (which I will refer to as the plaintiff) is also based upon the Contracts Review Act, but it has not been previously pleaded or particularised and is not adequately supported, so it is said in the affidavit of the defendants' solicitor, by evidence currently filed. The defence is based upon principles determined by Bryson J in Smith v Elders (1995) NSW ConV R 55-727 and by the Court of Appeal in Elders v Smith (1996) 41 NSWLR 296. Senior Counsel, briefed only recently, has advised the defendants that this is a point which is fairly arguable and also that it will require further detailed affidavit evidence in its support, as well as expert evidence from someone qualified in rural matters dealing with the profitability of the property in question and the operations of the defendants before and after the loan. The plaintiff has indicated that, should such evidence be filed, they would need time to prepare a detailed evidentiary response to it. The Court has been given a proposed amended cross claim which incorporates allegations based upon the Elders v Smith decisions. The judgment of the Court of Appeal in that case rests upon notions of inequality of bargaining power and the facts, as found, that the financier knew and appreciated the extent of the risks and what might happen to the plaintiffs (the Smith partnership) whereas the plaintiffs did not understand those risks or the implications of them. The Court of Appeal, by majority, dismissed the appeal against the judgment of Bryson J, on the basis that the trial judge had held that Elders clearly understood that the loan would place considerable strain on the Smiths' ability to generate sufficient income to service the borrowings and that the proposition was a safe one for the financier. 5 The fundamental test guiding trial judges as to the circumstances in which an adjournment should be granted is to be found in the judgment of the High Court in Queensland v JL Holdings Pty Limited (1997) 189 CLR 146 at 154 where Dawson, Gaudron and McHugh JJ referred to the raising of a new defence and said:

If it is arguable, the applicants should be permitted to argue it, provided that any prejudice to [the defendants] might be compensated by costs.

6 And as their Honours said at 155: Justice is the paramount consideration in determining an application such as the one in question. Save in so far as costs may be awarded against the party seeking the amendment, such an application is not the occasion for the punishment of the party for its mistake or for its delay in making the application. 7 Kirby J at 174 referred to an order excluding the applicants from raising an arguable defence as being 'manifestly unreasonable in the circumstances'. 8 Thus, the primary question is whether Mr Forster, SC, appearing for the defendants, has raised a fairly arguable defence which should, in the interests of justice, be heard by this Court. In my view, he has. Not only is the Elders principle well established but material has been placed before the Court which tends to indicate that the operations on West Garawan have, by and large, been unprofitable in the years between 1992 and 1996. The lenders required a lease in the sum of $200,000 per annum, whereas nothing like that was made by the operator of the property in question during the relevant period. In three of the relevant years, losses were made and in the other two years only modest profits, quite disparate to the sum involved in the proposed, lease were generated. It will be a matter for the trial judge to determine the state of knowledge of the plaintiff, and in particular whether the plaintiff had access to available valuation and financial records. 9 Mr Bolster of counsel, appearing for the plaintiff, has made some cogent points distinguishing the proceeding from Elders v Smith. In particular, he has pointed out that the state of knowledge of his client is a matter of hot dispute and there is a paucity of evidence, so far, before the Court to support any prior knowledge which would show that his client conducted itself oppressively in relation to the defendants. He criticised the balance sheet material put before the Court as not dealing solely with one property, but dealing with the financial position of an individual. He made the point that, unlike the Elders case, what was envisaged was not a long term proposition, that the defendants were competent people, with independent legal and accounting advice. 10 Nevertheless, it is my view that Mr Forster, SC, has made out a fairly arguable case upon which the Court should hear evidence and argument. 11 Accordingly, I propose to grant the adjournment and to make orders that: 1) the hearing date fixed for today be vacated; 2) these proceedings be placed in the next call over; 3) leave be granted to the defendants/cross claimants to amend the cross claim in the form filed today in court. 12 Sperling J has previously ruled in an interlocutory judgment in these proceedings ([2002] NSWSC 1101), delivered on 18 November 2002 that the two proceedings presently before the Court should be heard together and hence it is appropriate (and no party submitted to the contrary) that the claim brought by Mrs Murray against Mr Duddy based upon indemnity must likewise be adjourned. 13 The question then arises as to costs. It is inevitable, in my opinion, and I heard no argument to the contrary, that the defendants seeking the adjournment today should pay the costs of the other parties thrown away as a result of the adjournment, including the costs of Mr Eric Duddy, who consented to the adjournment subject to costs. Hence, an order for costs will be made to be paid by the defendants to the other parties in the two proceedings. 14 However, the parties seeking costs have both contended that costs should be paid forthwith, and should not await the disposition of the proceedings. In particular, it was put by Mr Hamill of counsel, representing Mr Duddy, that unless those costs were paid in that form his client's continued representation might be in jeopardy because of a financial strain on him. 15 Part 52 Rule 9A of the Supreme Court Rules 1970 deals with the situation where an order for costs is made before the conclusion of the proceedings. It provides that, in that circumstance, 'a party may not, except with the leave of the Court, make an application to proceed with the taxation of the costs until after the conclusion of the proceedings'. This constitutes a hurdle for those contending that costs should be paid forthwith as distinct from the usual procedure. Sympathetic as I am to those who must be burdened by what have been lengthy proceedings, and who are additionally burdened by this belated application for amendment and adjournment, I do not think that there are sufficient grounds for leave to be granted or for the unusual order sought being made. Campbell J, sitting in the Equity division of this Court, said in Equityloan Limited v Windy Dropdown Pty Limited (Unreported, NSWSC, 12 March 2003) that the principle underlying the Rules is one designed to ensure that: There are not applications for taxation or assessment of costs which are made repeatedly in the course of a matter coming to trial. In these circumstances the usual rule for the payment of costs ought to be made.

16 In relation to the second proceedings before the Court, those brought by Mrs Murray against Mr Duddy, like orders should be made including a vacation of today's hearing, the placing of the proceedings in the next call over and granting leave to the plaintiff to further amend the amended statement of claim and to the defendant to file a reply. 17 I make orders accordingly.

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