National Australia Bank Limited v McCarthy

(a) Defendant's Evidence 14As noted above, at the hearing of the Notice of Motion the defendant appeared in person with Elder John from the Church of Jesus the Christ as Amicus. At the time of the filing of the Notice of Motion, the defendant was legally represented. The Court was advised on 21 November 2014 that the defendant had terminated his solicitor's retainer and would proceed without legal representation. 15The defendant relied upon the following affidavits in support of the application: (1)Affidavit of Warren Brian McCarthy sworn 19 September 2014; and (2)Affidavit of Charles Parisi (Mr McCarthy's former solicitor) sworn 18 March 2014. 16The affidavit of Mr Parisi states that, in effect, no Defence was filed as a consequence of his work commitments in other matters, office closures over Christmas, and difficulties communicating with his client. 17Mr Parisi's affidavit records that the defendant had had "issues" with the plaintiff in relation to the loan and that the defendant had made a complaint to the Financial Ombudsman Service in relation to his dealings with the plaintiff. This complaint is also referred to in the affidavit of Mr Edward Grieve, who is employed in the plaintiff's High Complexity Collections department. Mr Grieve's affidavit was filed in support of the present application. In his affidavit, Mr Grieve relevantly stated: "22. The allegations set out in the Proposed Defence have already been the subject of a complaint and determined by the Financial Ombudsman Service (FOS), except for the allegation made in paragraph 11(g)(i) and (ii) which is as far as I am aware, a new allegation. That allegation is unparticularised and does not specify which 'agreement' or which NAB 'employees' are alleged to have altered the [sic] Mr McCarthy's financial documents. 23. On or about 1 November 2012, FOS determined the complaint in NAB's favour. FOS determined that NAB did not engage in misleading conduct or maladministration in lending and NAB was entitled to enforce its rights under the Home Loan (FOS Determination)." 18Annexed to Mr Parisi's affidavit is a proposed Defence (Annexure G) and a proposed Statement of Cross-Claim (Annexure H). 19The proposed Statement of Cross-Claim stated at [9]: "The cross-claimant refers to and repeats paragraphs 11, 12 and 13 of the defence." 20At [10] of the proposed Statement of Cross-Claim it was asserted that the defendant was "in a position of special disadvantage" at or about the time of the loan agreement without there being any specificity about the "special disadvantage". 21In the proposed Defence, the defendant admits the relevant loan agreement was entered into and that in accordance with the terms of the agreement the plaintiff advanced credit to the defendant. 22In relation to the proposed Defence, the defendant did not admit that he had agreed to make repayments during the term of the agreement. In this respect, it was said: "...the defendant and the plaintiffs [sic] had agreed that the defendant did not need to make any repayments during the term of the Agreement provided that he had sufficient equity in the security property to cover any capitalised interest." (at [4]) 23The "Particulars" of this asserted defence are stated as being: "Discussion between Defendant and Peter Weingarth of the Plaintiff at National Australia Bank Coffs Harbour branch in or about May 2007, June 2007 and in about January 2008." 24This appears to be the primary defence relied upon by the defendant. 25It is observed in passing that in relation to customary bank financing, such an alleged term would be regarded as a most unusual one to the point where, if it was agreed, one might expect special conditions to be stated as a safeguard in recovering the loan monies in the event of default. 26Additional grounds of defence relied upon were outlined at [11] of the proposed Defence. These include grounds relating to the defendant's alleged lack of experience and expertise in financial transactions, his failure to obtain independent legal or financial advice, alleged representations made by the plaintiff said to have induced him into entering into the relevant loan agreement, and alleged fraud by the plaintiff. 27Mr McCarthy's affidavit sworn 19 September 2014 goes to the circumstances in which the 2008 loan agreement with the plaintiff was entered into as well as his prior loans with the plaintiff entered into in or about 2005. The affidavit (which appears to have been prepared by Mr Parisi) does not include any reference to the alleged discussions between himself and Mr Weingarth, as asserted in [4] of the proposed Defence. 28At the hearing the defendant tendered an email sent to him by Peter Field of NAB dated 1 June 2012. That email was marked as Exhibit 1 on the application and purported to deal with a 2005 application for a financial facility made by the defendant. 29The defendant additionally sought to rely upon further material, including letters from State and Federal Members of Parliament, which I did not consider to be relevant to the issues raised in relation to the present application. 30A bundle of documents handed up by the defendant were, however, marked as MFI 1 on the application. That bundle included various documents relating to the defendant's loans with the plaintiff as well as a forensic accounting report prepared by Accountants & More. The tender of this material was objected to by the plaintiff, and was not admitted, on the basis that it pertained to other unrelated loan agreements the defendant has entered into with the plaintiff. It is noted that the draft pleadings on behalf of the defendant do not seek to challenge the other loan agreements. 31The defendant also sought leave to file in court a subpoena to produce on the plaintiff, which requested, inter alia, copies of all loan applications, documents, loan offers etc relating to him. This was objected to on the ground that it was merely a "fishing expedition". The proposed subpoena was marked as MFI 2. I did not allow the filing of the proposed subpoena.

Plaintiff's Evidence 32The plaintiff read the following affidavits on the application: (1)Affidavit of Edward Grieve sworn 11 July 2014; (2)Affidavit of Peter Weingarth sworn 11 July 2014; and (3)Affidavit of Anita Bains sworn 11 July 2014. 33The plaintiff also produced to the Court a document purporting to relate to the application in respect of the relevant loan agreement. That document was marked as MFI 3. 34The plaintiff did not seek to rely upon any further evidence.

Affidavit of Edward Grieve sworn 11 July 2014 35Mr Grieve is employed in the plaintiff's High Complexity Collections department. His affidavit was prepared on the basis of the plaintiff's records and is directed towards the allegations made by Mr Parisi in his affidavit in respect of the history of the matter.

Affidavit of Peter Weingarth sworn 11 July 2014 36Mr Weingarth was the Business Banking Manager of the plaintiff's Business Banking Centre in Coffs Harbour from June 2006 to March 2009. He recalled the defendant being a customer and detailed the agreements entered into between the plaintiff and the defendant prior to the execution of the 2008 loan agreement. 37In respect of the 2008 loan agreement, Mr Weingarth stated that: "At no stage did I advise Mr McCarthy that he did not need to make any repayments during the term of the Home Loan Agreement." (at [9]) 38He further said that: "In response to paragraph 11 of the Proposed Defence, at no stage did Mr McCarthy do or say anything to me to indicate that he did not understand the Home Loan Agreement. Based on my dealings with Mr McCarthy and our discussions I believed that he understood his commitments and the issues we discussed, such as debt reduction and serviceability." (at [16]) 39Mr Weingarth stated that he did not provide any legal or financial advice to the defendant and that it was not his practice to do so with any customer: at [17]. 40In addition, he stated that he did not make any representations to the defendant to the effect that the defendant did not need to make repayments under the loan agreement, that the defendant could afford to borrow money, or that the loan structure had little risk: at [18]. He proceeded to state that he did not make any representations or say anything to the defendant to induce him into executing the agreement: at [19]. 41Mr Weingarth additionally stated that he did not alter the defendant's financial documents as alleged, nor was he aware of any National Australia Bank employee doing so: at [20]. 42Finally, he stated that at the time the documents were executed he was not aware, or did not suspect, that the defendant was under any mistaken belief as to the loan terms or that he was in a position of special disadvantaged, as alleged in the proposed Defence: at [21]-[22].

Affidavit of Anita Bains sworn 11 July 2014 43Ms Bains has been an Associate at the plaintiff's Business Banking Centre in Coffs Harbour since 2006. 44Ms Bains stated that in or about January 2008 she was assisting Mr Weingarth. She attended the meeting between the defendant and Mr Weingarth during which the defendant signed the loan documents. In respect of that meeting, she recalled Mr Weingarth pointing out certain aspects of the agreement to the defendant, including the term, interest rate, repayments, and security taken by NAB: at [10]. 45She stated that before the documents were signed she said to Mr McCarthy "are you happy with that?" or "are you comfortable with that?". He replied in the affirmative: at [11]. 46Ms Bains additionally said she recommended that the defendant seek independent legal and financial advice prior to signing the documents: at [12]. In support of this, she annexed to her affidavit a copy of the "Customer Interview Record" made subsequent to that meeting. She said that although she could not recall saying those words to him, she would not made that entry on the Customer Interview Record unless those words had in fact been said: at [13]. 47She finally stated that at the time the documents were executed she was not aware, or did not suspect, that the defendant was under any mistaken belief as to the loan terms or that he was in a position of special disadvantaged, as alleged in the proposed Defence: at [14]-[15].

Defendant's submissions 48The defendant did not rely upon any written submissions. 49In the course of oral submissions on 26 November 2014, he advanced a number of arguments on his own behalf. 50Firstly, he asserted that he had not been given any opportunity to seek financial or legal advice. 51Secondly, he stated that the financial records relied upon by the plaintiff in relation to the loan transaction were incorrect. It was argued that these records incorrectly stated the defendant's income (as being higher than it was) and were used by the plaintiff to satisfy itself as to the defendant's ability to service the loan. 52Thirdly, he claimed that he was acting under duress at the time the relevant loan agreement was entered into, in particular, as a result of a medical condition. 53Fourthly, he claimed that his lawyer at the time was not acting in his best interests. He said this was demonstrated through his lawyer's failure to file necessary documents and comply with directions of the Court. 54Fifthly, he has made payments to the plaintiff bank and has continued to service the loan for the last eight months or so as a sign of good faith.

Plaintiff's submissions 55I have had the benefit of short written submissions on behalf of the plaintiff dated 24 November 2014. Those written submissions were supplemented with oral submissions on 26 November 2014. 56In its written submissions the plaintiff noted the relevant history of the proceedings and the principles that apply in respect of setting aside a default judgment: at [1]-[9]. 57The plaintiff observed that the primary defence raised by the defendant is that he asserts it was agreed with the plaintiff that he did not need to make any repayments during the course of the loan: see [4] of the proposed Defence. However, it was submitted that there was no evidence adduced by the defendant in support of that defence: at [10]. 58Accordingly, the plaintiff submitted the Court should dismiss the defendant's application with costs on the basis that the defendant "has not put forward any matters to demonstrate that he has an arguable defence on the merits": at [11]-[12]. 59In the course of oral submissions on 26 November 2014, Mr Price said "it will be my ultimate submission that the real issue on this motion is whether or not there is evidence to establish a bona fide defence": T 20. 60Mr Price contended that, in order for the defendant to succeed on the application, one must look at the draft pleadings and identify whether there is any evidence to support the allegations made, specifically, whether a representation was made by a bank officer that the defendant did not have to make repayments during the course of the loan: T 21. It was submitted that there was no evidence adduced by the defendant of any such discussions or representations. 61It was further argued that there was no evidence to support the defendant's claim that he was ignorant of the contents of the agreement, that the plaintiff induced him to enter into the agreement, that the plaintiff knew or ought to have known of the defendant's mistaken belief, or that he had requested the plaintiff to act as his financial advisers: T 24-25. There was also no evidence as to the defendant suffering from a medical condition at the relevant time or that his lawyers failed to act in his best interests: T 44. 62In respect of the defendant's assertion that the plaintiff had altered his income on financial documents prepared prior to the execution of the loan agreement, the defendant relied upon Perpetual Trustees Victoria v Longobardi [2009] NSWSC 654 to support the proposition that the defendant bore the ultimate responsibility for signing the documents and that, if he chose not to read the documents, the responsibility lies with him. In Perpetual Trustees Victoria v Longobardi, McDougall J observed at [104]: "To the extent that the use of apparently false declarations of income, and therefore erroneous (although arithmetically correct) assessments of capacity to repay, are indicia of injustice, the responsibility for this must remain with Mr and Mrs Longobardi. If they had completed the documents signed in January before sending them off, or had checked and corrected the document signed in February before sending it off, it is unlikely that the transaction would have proceeded. If, however, it did, it would be a clear case of asset lending and, at least prima facie, a clear case for deciding that the loan agreement and mortgage were thereby unjust." 63It was additionally noted in respect of the defendant's assertion that he was not advised to or did not obtain independent advice, that the affidavit of Ms Bains refers (at [12]) to her recommending the defendant obtain independent advice in respect of the loan as well as giving the defendant the opportunity to read the documents. No evidence was adduced by the defendant to the contrary: T 28. On this aspect the submission was made that the decision of the Court of Appeal in Provident Capital Limited v Papa [2013] NSWCA 36 established that the failure of a borrower to obtain independent advice was not fatal to a lender and that it was simply one factor to be considered. Rather, the issue to be considered is whether the borrower would have in fact sought independent advice had he been told to obtain it. 64It was submitted that in the circumstances outlined above, and having regard to the defendant's admission in his affidavit at [47] that he did not read the loan documents prior to signing them, the application to set aside the default judgment "can simply not succeed": T 21.

Additional submissions and correspondence on behalf of the parties 65At the conclusion of the hearing on 26 November 2014 I requested the plaintiff provide my Associate with an updated account statement in respect of the subject loan. I subsequently received further correspondence from Mr Price by way of email in respect of the current circumstances of the loan. 66In an email dated 27 November 2014 Mr Price advised that the current balance of the loan is $692,780.16. It was further stated: "The Bank accepts that Mr McCarthy has made payments to the loan account this year, but those payments have not been servicing the loan as they have been for amounts less than the interest which has been accruing." 67In a subsequent email of 28 November 2014, Mr Price stated: "For the avoidance of doubt, the defendant was required to make minimum monthly payments of $4,280.38 (to be applied against interest and principal)." 68On 9 December 2014 I received a further email from Mr Price. That email attached correspondence (with the defendant's consent) the plaintiff had received from the defendant on 3 December 2014 in the following terms: "I am able to meet the repayments, however I have made the decision that I will not make any further payments until the court has made the final decision at the hearing." 69I additionally received an email from the defendant on 9 December 2014 by way of reply. In that email, the defendant raised a number of matters, inter alia: (1)At no time was he told, advised or given the opportunity to seek independent legal or financial advice; (2)At the time of making the loan application, he was under duress and therefore trusted the plaintiff's advice when he was allegedly told by the bank manager that he had "no choice but to sign" the documents; (3)He decided to stop making payments until a final court decision is made in the "circumstances of the reported fraud" of the plaintiff.

Consideration 70The defendant did not file a defence within the prescribed time, and accordingly, the plaintiff obtained default judgment in accordance with Part 16 of the Uniform Civil Procedure Rules. There is no suggestion of any irregularity in this respect. Further, there is no suggestion that there was any delay by the defendant in making this application (the Notice of Motion being filed some 7 days after default judgment was entered). 71The question for consideration, in accordance with the relevant principles, is therefore whether the defendant has any bona fide defence and whether there is any arguable or triable issue. 72It is well-established that where an application is made to set aside a default judgment, in order for a defence dependent on facts to be advanced, the applicant must lead some evidence of the facts on which the defence will be established on the merits: National Australia Bank v Priestley (No 3) [2012] NSWSC 1171 at [10]. 73In Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331, Hodgson JA (with whom Campbell AJA agreed), considered that the circumstances require "a reasonably clear case of merits to be shown". His Honour observed that: "52. If that defence depends on facts, then there should be some evidence of those facts; and the circumstances may be relevant to the quality of the evidence that is required to show a defence on the merits in particular cases. Among such circumstances could be the degree of the applicant's default, and hardship to the respondent. ... 55. Assertions in the affidavit of Mr Nassif that was read, to the effect that he believed that the defence and cross-claim 'have merit' or that the cross-claim is 'valid', do not in my opinion appropriately support any assertions of fact so as to amount to evidence supporting a defence on the merits or a cross-claim." 74In National Australia Bank Ltd v McCann [2010] NSWSC 766, Davies J, citing Magnate Projects, supra, held that an affidavit verifying a Defence is not sufficient evidence on an application to set aside default judgment: "In my opinion, it is quite insufficient for Ms McCann in the present case simply to swear that she believes the facts in the Defence are true to show, in the circumstances of this case, that there is a Defence on the merits to the claim. An affidavit verifying a Defence where the deponent swears to a belief that the allegations of fact in the Defence are true is not sufficient." (at [43]) 75It has been held that where a defence sought to be advanced involved oral representations on which the defendant relied to his or her detriment, what is required, at least, is some evidence as to the conversations in which the alleged representations were made: National Australia Bank v Priestley (No 3) [2012] NSWSC 1171 at [11]. 76As noted above at [ REF _Ref406503765 \r \h 27], the affidavit of Mr McCarthy does not include any reference to the discussions he alleges he had with Mr Weingarth, in which Mr Weingarth purportedly advised that the defendant did not need to make any repayments during the term of the loan on the condition he had sufficient equity in the security property to cover any capitalised interest. Nor was any other evidence adduced by the defendant in support of this assertion, save for the affidavit of Mr Parisi. However, as the authorities make clear, Mr Parisi's supporting affidavit in insufficient in this regard. What is needed is evidence from the defendant himself that the representations were made. 77To the contrary, the plaintiff on this application has relied upon the affidavits of Mr Weingarth and Ms Bains, both of whom swear that no representations were made to the effect asserted by the defendant. 78There is no suggestion that the defendant did not have sufficient time to prepare and serve a Defence. The affidavit of Mr Parisi indicates that he received the plaintiff's solicitor's letter of 8 January 2014 advising that proceedings had been commenced on the same date. Further, that on that same date he received instructions from his client to file a Defence and Statement of Cross-Claim: at [28]. Accordingly, his office closure over the Christmas period in no way impeded his ability to communicate with the plaintiff or his client. 79Mr Parisi stated that he did not prepare the draft Defence until 6 February 2013, and that it was not finalised until on or about 20 February 2014 as a consequence of his other commitments which precluded him from being able to discuss outstanding matters with his client. 80It is unfortunate that the defendant, now self-represented, may have been disadvantaged by his solicitor's delay in drafting the proposed Defence. However, the delay is not a critical issue to the outcome of the present application to set aside the default judgment. The critical issue has been discussed above and involves an absence of evidence in support of the proposed Defence. Notwithstanding, I am not satisfied that the asserted defence has any evidentiary foundation. Further, I am not satisfied that the relevant loan agreement was affected by any fraud, illegality, or anything of that nature. 81It is well-accepted that allegations of fraud (see [ REF _Ref406660668 \r \h 26] above) involve such serious issues that it is incumbent upon the person invoking them to adduce evidence by which the cogency of such allegations may be dteremined (that is, evidence that is appropriate to an application such as the present): see Dunwoodie v Teachers Mutual Bank Ltd, supra at [44], extracted at [ REF _Ref406660940 \r \h 12] above. It is sufficient to record that there was no evidence adduced in the present application in relation to the allegations of fraud raised in the proposed Defence. 82Similarly, in relation to allegations of "duress" there is both an absence of specificity in relation to the same and an absence of evidence. 83In the circumstances, I must dismiss the application to set aside default judgment.

Orders 84I make the following orders: (1)The defendant's Notice of Motion filed 5 March 2014 is dismissed. (2)I will hear the parties on the costs of the Notice of Motion.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 December 2014