McCarthy v National Australia Bank Ltd

McCarthy v National Australia Bank Ltd - [2015] NSWCA 32 - NSWCA 2015 case summary — Zoe

Judgment

BASTEN JA: On 23 January 2008, the applicant, Warren Brian McCarthy, obtained financial accommodation from the National Australia Bank Ltd ("the Bank"). The primary purposes of the lending were to provide funds to pay out an existing financial arrangement between the applicant and the St George Bank and to allow the applicant a source of income to support himself, with, at least in anticipation, further funds to be made available to allow the development of a property when the relevant approvals came through.
The applicant proved unable to meet his obligations under the loan agreement as a result of which on 7 January 2014 the Bank commenced proceedings in the Supreme Court, seeking a judgment against the applicant in an amount of some $683,000 and seeking possession of the applicant's land at Korora in northern New South Wales.
The date of service relied upon in the proceedings below appears to have been 28 or 29 January 2014. On 28 February 2014, the Bank obtained a default judgment. It is agreed between the parties, although the Court has no evidence in this respect, that the Bank will seek an eviction of the applicant from his home tomorrow at 9.30am, absent a stay of the judgment and orders in its favour.
On 5 March 2014 the applicant filed a notice of motion seeking to have the default judgment set aside and seeking leave to enter a defence. For reasons which appear to involve the Court's list, that motion did not come on for hearing until 26 November 2014. On 19 December 2014, Hall J dismissed the motion: National Australia Bank v McCarthy [2014] NSWSC 1819.
The orders were entered on the day of judgment: on 20 January 2015 the applicant served a notice of intention to appeal. On 19 February 2015 a summons was filed seeking leave to appeal from the judgment of Hall J. On the same day the applicant filed a notice of motion seeking an injunction or stay of the orders made in the Common Law Division. An affidavit filed in support of the motion (or possibly the application for leave to appeal) merely asserted a belief in the existence of genuine grounds for appeal. No indication was given then as to the urgency of the application for the need for an interlocutory injunction.
Although no objection was taken at the time of filing the motion to the inclusion of a hearing date, namely 2 March 2015 at 9am, the matter has been brought forward as a matter of urgency at the request of the applicant. In the result, there is little material available to this Court except for the file before Hall J and some documents included with the application for leave to appeal.
The applicant had a solicitor, Mr Charles Parisi, who prepared an affidavit in support of the application to set aside the default judgment. The affidavit was sworn on 18 March 2014. It appears that Mr Parisi continued to act for the applicant until shortly before the hearing in November 2014, at which time the applicant appeared for himself. Annexed to Mr Parisi's affidavit was a proposed defence and statement of cross-claim. That document is before the Court only by way of it having been found in the file before the trial judge.
One of the bases upon which the present application is resisted by the Bank is the lack of evidence in support of the grounds set out in the proposed defence. So far as can quickly be identified from the judgment below, the primary grounds sought to be relied upon to defend the proceedings were as follows: (a) that the applicant lacked experience in financial matters and was not given an adequate opportunity to obtain independent advice as to the nature of the somewhat complex arrangements proposed by the Bank; (b) secondly, that, despite their complexity, the effects of the proposed arrangements were represented to him as being in substance the same as the arrangement he had with the St George Bank, which was an equity loan; (c) thirdly, that arrangement had not required him to make specific repayments so long as capitalised interest and outstanding capital did not exceed an agreed proportion of the security available under the mortgage; (d) fourthly, the application did not reflect the applicant's true income which he had conveyed to the Bank's officer, but rather contained an inflated figure; and (e) fifthly, despite reduction of the loan by the sale of particular properties in about 2008, the Bank refused to allow him further borrowings under the restructured arrangements.
Whether or not there was evidence in support of those grounds of defence depended upon two factors. One was an affidavit filed by Mr McCarthy, undated but taken to be in September 2014. Counsel for the Bank suggested that although the defence was detailed and the affidavit made reference to a number of conversations with officers of the Bank, or at least one particular officer, there was a failure to provide support for what were thought by the Bank to be the primary grounds of the defence, set out at par 11(e) of the document, namely that there had been representations by Mr Peter Weingarth of the Bank prior to execution of the agreement. These were, first, that Mr McCarthy did not need to make any loan repayments in that he could rely on the equity and the security property only and could capitalise his interest repayments. Secondly, that he could afford to borrow money from the Bank even though he had no or very little income, and thirdly, that the structure of the loan provided him with little risk in that he was adding to the value of the security property. Whether it is true that those matters (which are similar to aspects of the defence which I have summarised above) were supported by the affidavit evidence is not a factor which I have been able to resolve in the time available.
The second matter relied upon by the applicant is that documents are hoped to be obtained from the Bank in response to a subpoena. That subpoena was not at any stage issued, but it was marked for identification (MFI 2) by Hall J in the proceedings before him on 26 November 2014. The subpoena seeks the originals of the loan applications and other documents prepared by or held by the Bank for the period commencing May 2005 up to May 2008, relating to the applicant's loan applications and loan documentation.
The commencing date is the date that the Bank first dealt with the applicant; the Bank is now suing on a 2008 agreement which was the result of a restructuring of earlier agreements and Mr McCarthy seeks to support his defence on the basis of matters which arose in relation to the earlier arrangements.
Counsel for the Bank had not had an opportunity to consider that subpoena in detail. It was never issued (and therefore not served) although he has seen a copy at the hearing. What I propose to do is to adjourn this application with an interim stay to allow for two things to happen. First, to give Mr McCarthy an opportunity to put on whatever material he thinks fit to indicate how the defences may be supported on the evidential material which was available before the trial judge and, secondly, to allow him to seek additional material by issuing the subpoena to the Bank. The intention is that if the Bank is able to produce some documentation in response to the subpoena, it will do so by 16 March. If it seeks to object to the whole of the subpoena, it may raise that objection on 16 March when I propose that the matter will come back before the Court. Further, if there is some intermediate position or other application to be made, it can be dealt with at that time.
My purpose in dealing with the matter in this way is both to allow the Court and the parties a chance to identify what are the substantial issues to be resolved in terms of a stay, something which I am not in a position to deal with today and, secondly, to ensure that the future prosecution of this matter is expedited, subject to such matters as may be sought to be raised by either party.
I should make clear one further point. Mr McCarthy has relied, I think both before the trial judge and again in this Court, on the fact that there is an investigation pending with the police relating to claims of fraud on the part of the Bank arising from allegations which he has made to the police, about which I know very little. All I can say in that respect is that it is entirely a matter for the police to pursue those matters at such time and to such extent as they see fit. The fact that there is an investigation on foot, or at least that there are complaints outstanding, is a matter of no consequence in this Court. Certainly relief granted in the civil jurisdiction of this Court would not await the outcome of any such investigation.
Accordingly the Court makes the following orders: (1) Adjourn the present motion until 9am on Monday 16 March 2015. (2) Grant an interim stay until that time of the default judgment obtained by the Bank on 28 February 2014. (3) Grant leave to the applicant, Mr McCarthy, to issue and serve no later than 5pm on Monday 2 March 2015 a subpoena to produce documents in the form provided to the Court at the hearing in the Equity Division on 26 November 2014, that subpoena to be returnable on 16 March 2015 with leave to the Bank to take such objection as it thinks fit to the subpoena or any part thereof which objection will be considered by the Court on 16 March 2015. (4) The costs of today will be costs in the motion.

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