National Australia Bank Ltd v C H Protheroe Pty Ltd

Judgment

1. The Second Defendant applies by Notice of Motion filed 31 March 2017 to amend his Defence and Cross-Claim. The Plaintiff/Cross-Defendant (the Bank) resists the amendments principally on the basis that it will not be able to meet the added claims between now and the time when the matter is fixed for hearing on 10 July 2017. The Bank accepts, however, that to the extent that the amended pleading deals with existing defences and claims it does so in a clearer fashion than the existing pleadings.

Procedural history

1. The proceedings commenced by the filing of a Statement of Claim on 19 November 2014. The Statement of Claim named three defendants. The first was C H Protheroe Pty Ltd in its own capacity and as trustee for C H Protheroe Family Trust. The second defendant was also C H Protheroe Pty Ltd but this time sued in its own capacity and as trustee for the Strontian Trust. The third defendant was Colin Henry Protheroe who is now the Second Defendant. I shall refer to him as such in this judgment. The claim made was confined to seeking possession of a number of properties mortgaged by the company and the Second Defendant to secure loans made to each of them and for which the then named second and third defendants had guaranteed loans to the first defendant.
2. On 22 January 2015 an appearance was filed for all three defendants by a solicitor, Andrew Quigley.
3. On 6 July 2015 the Plaintiff filed a notice of motion seeking to amend the Statement of Claim, amongst other things, to seek a monetary judgment in relation to the loans. After a contested application Adams J on 28 August 2015 granted leave to the Plaintiff to file and serve an Amended Statement of Claim. That was done on 4 September 2015. The changes made, apart from dealing with the monetary claims, were largely cosmetic changes as a result of consolidating the allegations against the company in all of its capacities and naming it only as the first defendant. Mr Protheroe was thereafter the Second Defendant. A Further Amended Statement of Claim was filed on 28 September 2015. This also made largely cosmetic changes to amounts claimed against the two defendants.
4. On 1 October 2015 Mr Quigley ceased to act for the Defendants and a Notice of Change of Solicitor by Anthony Jefferies of Gillis Delaney Lawyers was filed.
5. The matter was included in the Possession List Call-Up on 27 November 2015 because by that time no defence had been filed by any of the defendants either to the original Statement of Claim, the Amended Statement of Claim or the Further Amended Statement of Claim. I was informed at the Call-Up that the parties had been in settlement negotiations which were ongoing. Consent Orders were made for the filing of a defence and cross-claim by 18 December 2015. The proceedings were stood over to 8 February 2016.
6. No defence or cross-claim was filed. On 18 January 2016 Mr Jefferies filed a Notice of Intention to file a Notice of Ceasing to Act purportedly for the three Defendants although by this stage there were only two.
7. When the matter came before me for directions on 8 February 2016 I was informed that there was a dispute between the two directors of the First Defendant, one of whom was the Second Defendant. The Second Defendant was said to have lost his confidence in the solicitor who had commenced to act at the end of 2015 and the Second Defendant apparently reinstructed Mr Quigley who had previously acted for both defendants.
8. No defence or cross-claim had been filed by either of the defendants. There was said to be a deadlock within the First Defendant between the two directors. That problem was accepted by the Bank but there was no satisfactory explanation for the failure of the Second Defendant to have filed a defence and cross-claim. In the circumstances, I ordered that a defence and cross-claim was to be filed and served by the Second Defendant by 4 March 2016 failing which the Bank was granted leave to move for default judgment against the Second Defendant. The proceedings were stood over to 11 March 2016.
9. On 4 March 2016 the Second Defendant filed a defence which, in general terms, admitted all of the allegations in the Amended Statement of Claim, but sought to defend the claim by asserting that the various instruments being loan agreements, mortgages and guarantees were unjust within the meaning of the Contracts Review Act 1980 (NSW). Because of what is sought in the proposed amended pleadings it is necessary to set out the whole of the pleading in relation to the Contracts Review Act in the defence filed 4 March 2016. It says this: [83] To the extent that the Plaintiff seeks relief against the Second Defendant under one or more or all of the Contracts referred to in paragraph 82 (a) - (h) above, the Second Defendant says that such contracts were unjust in the circumstances relating to it at the time that it was made in terms of s 7 and s 9 of the Contracts Review Act 1980, in that: (a) To the extent that liability is sought to be recovered as against the Second Defendant under personal covenants contained in the Business Markets Loan, any guarantees given by him and the Third Mortgage and the Fourth Mortgage, the Second Defendant says, i The Second Defendant had no reasonable prospect of being able to re-pay the Business Markets Loan. ii The Second Defendant was not able to comply with the conditions of the Business Markets Loan. iii. The commercial setting and purpose and effect of the Business Markets Loan was such as to make it unjust as against the Second Defendant. iv. The fulfilment of financial obligations on the part of the Second Defendant and/or the First Defendant to the Plaintiff in relation to the Business Markets Loan increased the likelihood that the Second Defendant would be unable to fulfill his existing obligations to the Plaintiff. v. The Second Defendant did not understand any of the matters referred to in sub-paragraphs i to iv inclusive herein, so that he was not able to properly understand the practical effect of the contracts being entered into by him. vi. The Plaintiff, by its servants or agents, did not bring home to the Second Defendant the matters referred to in sub-paragraphs i. to iv herein, including to the extent to which the practical effect of the contracts were accurately explained to him. vii. The Second Defendant was advised as to the providence of the transaction by the Plaintiff by its servant or agent, including Julianne Lawrence Agribusiness Manager, in circumstances where the accuracy of the explanation of the provisions of the contract and in the insuring of the proper understanding of the terms of the contract and the credit applied for was of paramount importance. viii. The Second Defendant had previously received advice from the Plaintiff, by its servant or agent including Julianne Lawrence Agribusiness Manager, as to the providence of financial transactions in which he had become a party with the Plaintiff. ix. The Second Defendant did not obtain independent financial advice in relation to the providence of the transactions. x. The Plaintiff, by its servants or agents, including Julianne Lawrence Agribusiness Manager, did not advise, in a manner appropriate in the circumstances, the Second Defendant to obtain other independent financial advice in relation to the providence of the transactions. xi. The Second Defendant did not obtain independent legal advice in relation to the contractual obligations being undertaken. xii. The Plaintiff, by its servant or agent including Julianne Lawrence Agribusiness Manager, did not advise in a manner appropriate in the circumstances the Second Defendant to obtain independent legal advice in relation to the contractual obligations being undertaken. xiii. To the knowledge of the Plaintiff, by its servants or agents including Julianne Lawrence Agribusiness Manager, the Second Defendant had limited education and experience in relation to matters of finance and law. xiv. The Second Defendant was not advised by the Plaintiff, by its servants or agents including Julianne Lawrence Agribusiness Manager, of the reality of the risk to which he was exposing himself, in the circumstances of the dealings taking place. xv. The Second Defendant, in the circumstances of the disclosure made, or not made, by the Plaintiff by its servants or agents including Julianne Lawrence Agribusiness Manager, did not appreciate the reality of the risks being undertaken by him. xvi. The Second Defendant was not advised by the Plaintiff or its servant or agent including Julianne Lawrence Agribusiness Manager, of the likelihood of increases in applicable interest rates or the magnitude or possible magnitude of those increases. xvii. The Second Defendant did not appreciate the matters referred in paragraph xvi. xviii. Having regard to the previous trading financial history known to the Plaintiff, by its servant or agent including Julianne Lawrence Agribusiness Manager, at the time of the entry into the Business Markets Loan, that contract was an improvident contract as regards the obligations being entered into by the Second Defendant. (b) To the extent that liability is sought to be recovered as against the Second Defendant under personal covenants contained in the Overdraft, and any guarantees given by him, and/or the Third Mortgage and the Fourth Mortgage, the Second Defendant says; i. The entry into of the Overdraft on the part of the First Defendant as Trustee of: 1. The C H Protheroe Family Trust; and/or 2. The Strontian Family Trust, was in breach of Trust on the part of the First Defendant. ii. Neither the First Defendant nor the Second Defendant had any reasonable prospect of being able to re-pay the said loan or Overdraft. iii. The First Defendant was not able to comply with the conditions of the Overdraft. iv. The commercial setting and purpose and effect of the Overdraft was such as to make it unjust as against the Second Defendant. v. The First Defendant had no reasonable prospect of being able to re-pay the Overdraft. vi. The First Defendant was not able to comply with the conditions of the Overdraft. vii. The commercial setting and purpose and effect of the Overdraft was such as to make it unjust as against the First Defendant. viii. The fulfilment of financial obligations on the part of the First Defendant to the Plaintiff in relation to the Overdraft increased the likelihood that the Second Defendant would be unable to fill his existing obligations to the Plaintiff. ix. The Second Defendant did not understand any of the matters referred to herein in sub-paragraphs i. to viii inclusive, so that he was not able to properly understand the practical effect of the contracts being entered into by him. x. The Plaintiff, by its servants or agents including Julianne Lawrence an Agribusiness Manager, did not bring home to the Second Defendant the matters referred to herein in sub-paragraphs i. to viii inclusive, to the extent to which the practical effect of the contract was accurately explained to him. xi. The Second Defendant was advised as to the providence of the transaction by the Plaintiff by its servants or agents in circumstances where the accuracy of the explanation of the provisions of the contract and in the insuring of the proper understanding of the terms of the contract and the credit applied for was of paramount importance. xii. The Second Defendant had previously received advice from the bank, by its servant or agent, as to the providence of financial transactions in which he had become a party with the Plaintiff. xiii. The Second Defendant did not obtain independent financial advice in relation to the providence of the transactions. xiv. The Plaintiff, by its servant or agent, including Julianne Lawrence and (sic) Agribusiness Manager, did not advise ,in a manner appropriate in the circumstance, the Second Defendant to obtain other independent financial advice in relation to the providence of the transactions. xv. The Second Defendant did not obtain independent legal advice in relation to the contractual obligations being undertaken. xvi. The Plaintiff, by its servant or agent including Julianne Lawrence and (sic) Agribusiness Manager, did not advise in a manner appropriate in the circumstance the Second Defendant to obtain independent legal advice in relation to the contractual obligations being undertaken. xvii. To the knowledge of the Plaintiff, by its servants or agents including Julianne Lawrence and (sic) Agribusiness Manager, the Second Defendant had limited education and experience in relation to matters of finance and law. xviii. The Second Plaintiff was not advised by the Plaintiff, by its servant or agent including Julianne Lawrence Agribusiness Manager, the reality of the risk to which he was exposing himself when, in the circumstances of the dealings taking place. xix. The Second Defendant in the circumstances of the disclosure made, or not made, by the Plaintiff by its servant or agent, did not appreciate the reality of the risk being undertaken. xx. The Second Defendant was not advised by the Plaintiff or its servant or agent including Julianne Lawrence and (sic) Agribusiness Manager, of the likelihood of increases in applicable interest rates or the magnitude or possible magnitude of those increases. xxi. The Second Defendant did not appreciate the matters referred to herein in sub-paragraph xx. xxii Having regard to the previous trading financial history known to the Plaintiff, by its servants or agents, including Julianne Lawrence Agribusiness Manager, at the time of the entry into the contracts, the contracts were improvident contracts as regards the obligations being entered into by the Second Defendant.
10. The cross-claim merely made reference to those paragraphs of the defence that pleaded the Contracts Review Act. The relief sought in the cross-claim was a declaration that each of the first mortgage, the second mortgage, the third mortgage, the fourth mortgage, the business markets loan, the business loan guarantee, the overdraft and the overdraft guarantee were unjust in terms of the Contracts Review Act, and sought an order that each of those instruments: to the extent that they impose a liability upon the Second Defendant/cross-claimant be varied by a reduction of the interest and monies payable thereunder to such extent as in the opinion of the court is just and is necessary to avoid an unjust consequence or result within the meaning of s 7(2) of the Contracts Review Act 1980.
11. On 11 March 2016 a direction was made that the Second Defendant was to serve evidence of his defence and cross-claim by 15 April 2016.
12. On 26 April and again on 8 June 2016 a submitting appearance was filed on behalf of the First Defendant.
13. Thereafter the Second Defendant served his evidence including evidence of an expert concerning the serviceability of the loans by the Second Defendant. The Plaintiff responded to that evidence including with the report of an expert.
14. On 16 September 2016 I made directions concerning issues and questions for the experts and for those experts to meet in conclave to provide answers by 21 October 2016.
15. Thereafter difficulties emerged in relation to the meeting of experts. The evidence given to me in an affidavit of the Plaintiff's solicitor of 31 October 2016 pointed strongly to the Second Defendant's expert raising a number of scarcely reasonable difficulties about the time and place of an experts' meeting and when the Second Defendant's expert would be able to respond to the questions and issues for expert comment. The result was that on 31 October 2016 I made further directions requiring the experts to meet, and where and by what date that was to happen.
16. On 28 November 2016 the Second Defendant's solicitor filed a Notice of Intention of Ceasing to Act. On 29 November 2016 a Notice of Change of Solicitor was filed by Peter Jackson from Jackson & Associates disclosing that Mr Jackson now acted for the Second Defendant.
17. The matter came before me again on 9 December 2016. It should be noted that the transcript correctly records Mr Mason as appearing for the Plaintiff and Mr Kelly for the Second Defendant but thereafter reverses their names throughout the transcript.
18. I was informed that the experts met in conference and were in the process of finalising their report. From the Bank's perspective I was told that once the report was finalised the matter was ready to be listed for a hearing.
19. Mr Kelly said that since he had come into the matter and reviewed the file it appeared that the cross-claim required amendment. I enquired of the nature of the proposed amendments. I was told that they had not been fully developed but the amendment would include a claim under the Code of Banking Practice (the Banking Code) for breach of contract. The expert engaged by the Second Defendant, I was told, had provided an opinion that the loans at the time they were entered into were not serviceable and that raised issues of the Banking Code. I was told that there may well be claims under the Australian Securities and Investments Commission Act 2001 (Cth). Counsel also indicated that they had reviewed the Second Defendant's affidavit and it seemed to be inadequate so leave would be sought to file further evidence.
20. I said that I was not going to delay appointing a hearing date on the basis of those foreshadowed applications. I also said this: New solicitors come into the matter and think the previous solicitors have not done a proper job, so it has to all be revisited. I am not going to slow the matter down because your client has new solicitors in the matter. There have been extraordinary delays on the part of your clients since these proceedings commenced, I think more than two years ago, so if you are coming into it now, you are going to have to move at double time to bring the matter up to scratch, if you feel it is not up to that level.
21. I directed that any proposed amended cross-claim be served on the Plaintiff's solicitors by 6 January 2016. A timetable was put in place so that if consent was given the amended cross-claim was to be filed by 25 January 2017 but if consent was not given a Motion was to be filed and served with supporting affidavits by that day and made returnable on 3 February 2017 before me. I also directed the parties to approach the Listing Manager by 12 December 2016 for a final hearing date with such hearing not to be before 3 April 2017.
22. On 18 January 2017 Mr Jackson filed a Notice of Intention of Ceasing to Act and on 25 January 2017 he filed a Notice of Ceasing to Act. On 2 February 2017 a Notice of Change of Solicitor was filed by Joel Hubbard of Hubbard Commercial Lawyers Pty Ltd.
23. The matter came before me for further directions on 3 February 2017. No proposed amended cross-claim had been served in accordance with the directions.
24. The Plaintiff had endeavoured to have the matter listed for final hearing but through no fault of its solicitors that had not occurred. In those circumstances I directed that the matter was to be listed for final hearing on 10 July 2017 (that being a date indicated as available by the Listing Manager) on the basis of a four to five day hearing.
25. I said to the solicitor for the Second Defendant: HIS HONOUR: Well, for a start I am going to direct that the matter be fixed for hearing on 10 July. It is then a question of whether you can move with sufficient speed if you want to amend the pleadings because given the delays and this is now I think the second change of solicitor in the last six months from your client, which causes me to have some suspicions, the matter will proceed at the moment on the existing pleadings. If the plaintiff is prepared to consent to the proposed amended cross claim that you want to bring and that can be got ready for 10 July I am not going to stand in the way of that. If the plaintiff doesn't consent you are going to have to put on a motion fairly promptly after the mediation.
26. The solicitor for the Bank said that he expected that there may be difficulties with an amended set of pleadings in March for a hearing date in July. He pointed out that there was reasonably extensive expert evidence that had been filed on the basis of the existing pleadings and he noted that the experts had met in conclave in 2016.
27. I said that the matter would go to trial on 10 July and: … it is really a question of whether the defendant/cross claimant can move with sufficient speed to get any amendments including evidence completed so that the whole thing can go.
28. I directed that any proposed amended cross-claim be served on the Bank's solicitors by 27 February 2017. I directed that if consent was given to the amended cross-claim it was to be filed by 10 March 2017 but if consent was not given a notice of motion was to be filed and served by 10 March returnable on 17 March 2017.
29. On 16 March 2017 I directed my Associate to enquire of the Second Defendant's solicitor whether a notice of motion had been filed in accordance with the directions given. My Associate received an email from Mr Hubbard saying this: We have yet to file a Notice of Motion, and have not yet provided amended pleadings to the Plaintiff's solicitors for their client's approval. We have experienced delays due to inter alia a critical party suffering a stroke and pneumonia. I am seeking an estimate from Counsel of the time to provide amended pleadings and expect to be in a position to advise the Court later on today.
30. On the morning of 17 March 2017 my Associate received an email from Mr Hubbard which contained Short Minutes of Order and an affidavit sworn by him. The Short Minutes of Order provided for any proposed amended cross-claim to be served on the Plaintiff's solicitors by 7 April 2017 and for 20 April 2017 being the date upon which any amended cross-claim which was consented to would be filed or the day by which a notice of motion seeking leave to amend would be filed.
31. The affidavit first complained of a delay in obtaining documents from the former solicitors. A number of documents were said to have been received by 17 February and the Plaintiff made a bundle of other documents available to assist. A mediation took place on 20 February 2017 but the matter was not resolved. The affidavit went on to say that subsequent to that mediation the Second Defendant sought to have a meeting with a suitably qualified counsel to have counsel advise on a number of issues. The Second Defendant also sought to obtain the assistance of a rural consultant specialist, Mr Any McLaughlin. However, Mr McLaughlin had been in poor health and suffered a number of strokes which meant that he did not meet with counsel until 9 March 2017.
32. Mr Hubbard disclosed in the affidavit that the issues raised by counsel concerned the receivers' sale of various assets of the Defendants and an issue of whether the Plaintiff was knowingly involved in what was said to be the receivers' breaches of the Farm Debt Mediation Act 1994 (NSW).
33. The matter came before me for directions later that day. Mr Hubbard indicated that the intention of the amended cross-claim was to make a claim against the receivers for the sale of various properties and for breaches of the Farm Debt Mediation Act. I said that it was too late to be making a new claim of that nature and that any such claim would need to be made in separate proceedings. I said I was prepared to give him a short time to amend the pleadings to include the Banking Code. The Plaintiff's counsel said that his client still did not know what the claim concerning the Banking Code was.
34. Mr Hubbard told me that counsel had only been briefed on that day. When I asked why counsel had been briefed so late when I had been informed on 3 February 2017 that amendments were to be prepared Mr Hubbard said simply that there were "some issues" that needed to addressed in order for that to happen. I said also that it had not been explained why there had been a number of changes of solicitors which at least seemed partly to be responsible for the delays in serving the proposed amendments to the pleadings.
35. I extended the time for the service of the proposed amendments to 24 March 2017 and directed that the Second Defendant was either to file amended pleadings by consent or a notice of motion seeking leave to amend by 31 March 2017. I also directed that any further evidence to be relied on in support of the amendments was to be served by 24 March. A motion was filed on 31 March 2017 together with an affidavit which annexed the proposed pleadings. No explanation was given in the affidavit for any of the delays in the proceedings generally by the Second Defendant or in serving the proposed amendments.

The proposed pleadings

1. The proposed amended defence removes all of the paragraphs from the earlier form of the defence and replaces it with a new pleading. In relation to paragraphs 1 to 81 of the Further Amended Statement of Claim the Second Defendant admits a number of those paragraphs which he had previously admitted but says that he does not plead to a number of other paragraphs which he had previously admitted. In respect of some of the latter group of paragraphs (see for example 39, 48, 49-53) it may be doubted that nothing is pleaded against the Second Defendant because he is said to be a guarantor for matters pleaded in those paragraphs directed to the First Defendant. Nothing ultimately turns on this change of approach because, to the extent that the paragraphs not pleaded to in fact contain a pleading against the Second Defendant, they will be taken to be admitted by the failure to traverse them (r 14.26 Uniform Civil Procedure Rules 2005 (NSW)).
2. The substantive change to the defence is found in paragraphs 12-27 of the proposed amended defence. Paragraphs 12-27 deal in groups with different instruments but the pleading in respect of each group is almost identical with that in each other group. In that regard paragraphs 12-15 deal with the Third Mortgage (as defined in the Amended Statement of Claim), paragraphs 16-19 deal with the Fourth Mortgage, paragraphs 20-23 deal with the Business Markets Loan and paragraphs 24-27 deal with the Overdraft.
3. It is convenient, therefore, simply to set out paragraphs 12-15 so that the issues between the parties on the present application can be understood. 12. Further and in answer to the Further Amended Statement of Claim, the second defendant says, under the Third Mortgage, that the terms of that instrument were unjust with reference to section 9(2) of the Contracts Review Act 1980 in that: (a) the instrument was improvident upon the second defendant and he would not have been able to service the loan upon which the Third Mortgage was based given his means, liabilities, and assets at the time the instrument was executed; Further Particulars 1. The second defendant had already entered into the Fourth Mortgage. (b) the second defendant had a limited education where he had left all formal schooling by the age of 14 years, and did not understand the terms of the instrument; (c) the second defendant relied upon the plaintiff to advise him accurately of his legal obligations under the instrument; (d) the second defendant relied upon the plaintiff to advise him accurately of his financial obligations under the instrument; (e) the business relationship between the second defendant and the plaintiff before and leading up to the execution of the relevant instrument by the second defendant was one where the second defendant placed trust or faith in the plaintiff to manage his business affairs with the plaintiff such that it would not detriment him; Particulars 1. Conversations between the second defendant and a representative of the plaintiff, Julieanne Lawrence, in person from March 2008 up to and including 15 September 2009. 2. Previous dealings with the plaintiff in relation to the first defendant for the First Mortgage and Second Mortgage. 3. Previous dealings with the plaintiff in relation to the Fourth Mortgage. 4. Further particulars may be provided in due course. (f) the plaintiff did not appropriately advise the second defendant to obtain independent legal advice regarding the relevant instrument; (g) the plaintiff did not appropriately advise the second defendant to obtain independent financial advice regarding the relevant instrument; (h) in the circumstances, and having regard to the plaintiff's obligations under the Banking Code of Practice 2004 as saved by the Banking Code of Practice 2013, the plaintiff: 1. did not appropriately advise the second defendant as to risks involved in entering into the relevant instrument; and / or 2. in breach of its obligations under the Banking Code of Practice 2004, extended the loan facility to the second defendant under the relevant instrument in circumstances where it knew he would not be able to repay it according to its terms. Particulars 1. The provisions of the Banking Code of Practice 2004 were incorporated into the relevant instrument by binding representation in writing by the plaintiff. 2. Clause 25.1 of the Banking Code of Practice 2004. 3. The operation of that part of the Banking Code of Practice 2004 was saved by operation of clause 41.2 of the Banking Code of Practice 2013. (i) the plaintiff was aware of the second defendant's circumstances as they relate to all of the subparagraphs above. Particulars 1. Conversations between the second defendant and a representative of the plaintiff, Julieanne Lawrence, in person from March 2008 up to and including 15 September 2009. 2. Previous dealings with the plaintiff in relation to the first defendant for the First Mortgage and Second Mortgage. 3. Previous dealings with the plaintiff in relation to the Fourth Mortgage. 4. Further particulars may be provided in due course. 13. As a result of the matters in paragraph 12 above, the second defendant invokes the power of the Court under section 7(1)(a) of the Contracts Review Act 1980 to refuse to enforce the Third Mortgage against the second defendant, and denies that he is liable for the relief sought by the plaintiff thereby in relation to the Third Mortgage. 14. Further and in the alternative, the second defendant says in relation to the Third Mortgage that he: (a) suffered from a relevant disability or position of disadvantage by reason of: i. his limited education, where he had left all formal schooling by the age of 14 years, and did not understand the terms of the instrument; ii. his reliance upon the advice of the plaintiff in relation to his legal obligations under the instrument; Particulars 1. Conversations between the second defendant and a representative of the plaintiff, Julieanne Lawrence, on or around 15 September 2009. iii. his reliance upon the advice of the plaintiff in relation to his financial obligations under the instrument; iv. his reliance upon the advice of the plaintiff in relation to interest repayments for which he would be liable under the instrument; v. the relationship between the second defendant and the plaintiff before and leading up to the execution of the relevant instrument by the second defendant where the second defendant placed trust or faith in the plaintiff to manage his business affairs with the plaintiff such that it would not detriment him. Particulars 1. Conversations between the second defendant and a representative of the plaintiff, Julieanne Lawrence, in person from March 2008 up to and including 15 September 2009. 2. Previous dealings with the plaintiff in relation to the first defendant for the First Mortgage, and Second Mortgage. 3. Previous dealings with the plaintiff in relation to the Fourth Mortgage. 4. Further particulars may be provided in due course. (b) the plaintiff took advantage of the relevant disability or position of disadvantage by way of: i. not appropriately advising the second defendant to obtain independent legal advice regarding the relevant instrument; ii. not appropriately advising the second defendant to obtain independent financial advice as to the providence of the relevant instrument; iii. in the circumstances, and having regard to the plaintiff's obligations under the Banking Code of Practice 2004 as saved by the Banking Code of Practice 2013: 1. not appropriately advising the second defendant as to risks involved in entering into the relevant instrument; and / or 2. in breach of its obligations under the Banking Code of Practice 2004, extending the loan facility to the second defendant under the relevant instrument in circumstances where it knew he would not be able to repay it according to its terms; and Particulars 1. The provisions of the Banking Code of Practice 2004 were incorporated into the relevant instrument by binding representation in writing by the plaintiff. 2. Clause 25.1 of the Banking Code of Practice 2004. 3. The operation of that part of the Banking Code of Practice 2004 was saved by operation of clause 41.2 of the Banking Code of Practice 2013. 3. by so doing, obtaining a benefit by way of the security under the relevant instrument, along with any relevant interest, costs and charges. iv. being in a business relationship with the second defendant such that it was aware of his circumstances, including his already existing liabilities; Particulars 1. Conversations between the second defendant and a representative of the plaintiff, Julieanne Lawrence, in person from March 2008 up to and including 15 September 2009. 2. Previous dealings with the plaintiff in relation to the first defendant for the First Mortgage, and Second Mortgage. 3. Previous dealings with the plaintiff in relation to the Fourth Mortgage. 4. Further particulars may be provided in due course. 15. As a result of the matters in paragraph 14 above, the defendant denies that he is liable for the relief sought by the plaintiff in relation to the Third Mortgage.
4. The proposed amended cross-claim removes in the prayers for relief references to the First Mortgage, the Second Mortgage, the Business Loan Guarantee and the Overdraft Guarantee. It added to each of prayers 1 and 2 after "(g) The Overdraft" the words: insofar as it relates to the use of the properties owned by the second defendant and secured by the Third Mortgage and the Fourth Mortgage as surety for the obligations of the first defendant in the Overdraft.
5. In addition, the first prayer for relief sought that the contractual documents in respect of which a claim was still made were void ab initio or were avoided as far as practical as an unjust consequence or result to the Second Defendant by the operation of the above-mentioned instruments, alternatively that the Court would refuse to enforce those instruments under the Contracts Review Act.
6. Two further substantive prayers for relief were added, (a) that there be a declaration that the remaining instruments were voidable by reason of the unconscionable conduct of the Plaintiff/Cross-Defendant and (b) that the Court rescind so much of them so as to obtain restituo in integrum between the parties, and the Second Defendant offered to do equity for any benefit obtained as a result of those instruments. The pleading of the cross-claim was an incorporation of various paragraphs in the proposed amended defence.
7. Mr Samuel Delaney, the solicitor for the Bank, swore an affidavit of 6 April 2017 which detailed the history of the proceedings relevantly, identified what Mr Delaney saw as the new allegations and the new factual issues and set out the work that he said the Bank would need to do if those new issues were allowed to be raised.
8. Mr Delaney identified the allegations and the new factual issues as follows: a. the proposed amendments raise a number of allegations for the first time including that: i. NAB engaged in unconscionable conduct; ii. Mr Protheroe suffered from a relevant disability or position of disadvantage by reason of his limited education where he had left all formal schooling by the age of 14 years; iii. Mr Protheroe relied on NAB to advise him accurately of his legal and financial obligations under the instrument; iv. Mr Protheroe placed trust or faith in NAB to manage his business affairs with NAB such that it would not detriment him; v. NAB breached its obligations under clause 25.1 of the Banking Code of Practice (the Banking Code Allegation); vi. an "Overdraft Facility" provided to CH Protheroe Pty Ltd (the Company) is voidable; and vii. Mr Protheroe obtained no benefit personally from the Overdraft. b. the proposed amendments give rise to a number of new factual issues including: i. Mr Protheroe's intellectual capacity; ii. whether Mr Protheroe did in fact rely on NAB to advise him accurately of his legal and financial obligations and to manage his business affairs; iii. what was the relevant standard of care and skill required to be discharged by NAB in its dealings with Mr Protheroe; iv. what were NAB's credit assessment methods; v. did NAB's conduct fall short of the relevant standard of care; vi. what position would Mr Protheroe have been in had the various facilities and securities not been entered into; vii. what position would NAB have been in had the various facilities and securities not been entered into; and viii. what benefit Mr Protheroe received by reason of the Overdraft made available to the Company;
9. Mr Delaney identified the problems in being able to meet the new allegations and issues by the date fixed for hearing. First, by reason of what was said to be the breach of the Banking Code, the Bank would wish to engage a banking expert to provide evidence that the Bank acted with the care and skill of a diligent and prudent banker. Clause 25.1 of the Banking Code provides: Before we offer or give you a credit facility (or increase an existing credit facility) we will exercise the care and skill of the diligent and prudent banker in selecting and applying our credit assessment methods and informing our opinion about your ability to repay it.
10. Mr Delaney said that in February 2017 he spoke with a former senior banker who has expertise in agricultural lending about his capacity to give an opinion in the matter if the Second Defendant were to advance an allegation concerning the Banking Code. He took the matter no further because nothing by that stage had been raised. After receipt of the present application Mr Delaney spoke to the same expert who said that he would not be available until June 2017 because he is having cancer surgery. Mr Delaney said that based on his experience in many cases involving allegations of imprudent lending, he is aware that it is difficult to locate appropriately qualified and available experts. They mostly consist of retired bankers who are willing to take on such assignments.
11. Secondly, the expert already engaged by the Bank, Mr Honey, was a forensic accountant who was engaged because of allegations made by the Second Defendant concerning his ability to service the loan. Mr Honey met with the Second Defendant's expert in conclave and prepared the expert report which was filed on 14 February 2017. Because the issue of what the Second Defendant's position would have been had the various facilities not been advanced to him is raised by the amendments, Mr Honey will need to be re-engaged after relevant documents are obtained from Rabobank. Those documents are necessary because part of the loan facilities made available to the First and Second Defendants were to replace existing finance with Rabobank. Mr Delaney says that Mr Honey is not available before 24 April and will be travelling overseas from 8 June 2017 until shortly before the hearing of the proceedings.
12. Mr Honey, of course, will only be in a position to prepare his report when the Second Defendant serves his further expert evidence.
13. Thirdly, there are less significant problems involving the availability of the Plaintiff's counsel who has been involved continuously since 4 August 2015 in the proceedings as well as the solicitor assisting Mr Delaney who is due to be on annual leave from 12 April to 3 May 2017.

Legal principles

1. In Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27 the joint judgment of Gummow, Hayne, Crennan, Kiefel and Bell JJ said: [102] The objectives stated in r 21 do not require that every application for amendment should be refused because it involves the waste of some costs and some degree of delay, as it inevitably will. Factors such as the nature and importance of the amendment to the party applying cannot be overlooked. Whilst r 21 assumes some ill-effects will flow from the fact of a delay, that will not prevent the parties dealing with its particular effects in their case in more detail. It is the extent of the delay and the costs associated with it, together with the prejudice which might reasonably be assumed to follow and that which is shown, which are to be weighed against the grant of permission to a party to alter its case. Much may depend upon the point the litigation has reached relative to a trial when the application to amend is made. There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates. Rule 21 makes it plain that the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the court's discretion. Invariably the exercise of that discretion will require an explanation to be given where there is delay in applying for amendment. [103] The fact that an explanation had been offered for the delay in raising the defence was regarded as a relevant consideration in J L Holdings. Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for. The importance attached by r 21 to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. There can be no doubt that an explanation was required in this case.
2. Rule 21 there referred to is from the Court Procedures Rules 2006 (ACT) and is the equivalent of s 56 of the Civil Procedure Act 2005 (NSW).
3. Relevant portions of the Civil Procedure Act provide: 56 Overriding purpose (cf SCR Part 1, rule 3) (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. (3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court. … 58 Court to follow dictates of justice (1) In deciding: (a) whether to make any order or direction for the management of proceedings, including: (i) any order for the amendment of a document, and (ii) any order granting an adjournment or stay of proceedings, and (iii) any other order of a procedural nature, and (iv) any direction under Division 2, and (b) the terms in which any such order or direction is to be made, the court must seek to act in accordance with the dictates of justice. (2) For the purpose of determining what are the dictates of justice in a particular case, the court: (a) must have regard to the provisions of sections 56 and 57, and (b) may have regard to the following matters to the extent to which it considers them relevant: (i) the degree of difficulty or complexity to which the issues in the proceedings give rise, (ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities, (iii) the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties, (iv) the degree to which the respective parties have fulfilled their duties under section 56 (3), (v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings, (vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, (vii) such other matters as the court considers relevant in the circumstances of the case.

Determination

1. Counsel for the Plaintiff correctly accepted that insofar as the proposed amended pleading sought only to deal with matters that had already been in substance pleaded, the proposed pleadings more clearly articulated those matters. His real point of contention, however, was that the Plaintiff was likely not to be in a position to meet the allegations concerning a breach of the Banking Code and unconscionability because the latter claim was intimately connected with the allegation about breach of the Banking Code.
2. I do not consider that the allegations identified by Mr Delaney ([44] above) as new allegations in (i), (ii), (iii) and (iv) were not in substance part of the existing claim in the cross-claim. I accept that the allegations of a breach of the obligations under the Banking Code, unconscionable conduct to the extent that it is reliant on breaches of the Banking Code, and a claim that the overdraft facility is voidable are new allegations and are dependent upon further evidence which will need to be responded to by the Bank. I do not infer from the amendments that the Second Defendant is asserting that he obtained no benefit personally from the loans.
3. Four things lead me to the view that the Second Defendant should not be given leave to amend in relation to the claims concerning breach of the Banking Code and unconscionability to the extent that it is reliant on breaches of the Banking Code.
4. First, having regard to s 58(2)(b)(ii) and (iv) the failures of the Second Defendant to conduct himself expeditiously to bring these proceedings to a hearing are significant. The failures may be summarised as follows: (a) No defence was filed by the Second Defendant for 12 months after the filing and service of a statement of claim; (b) Notwithstanding that failure, the Second Defendant failed to file a defence and cross-claim pursuant to direction given on 27 November 2015, noting that the direction was consented to by the Second Defendant; (c) The Second Defendant then failed to file a defence and cross-claim pursuant to a direction given on 8 February 2016; (d) The proposal to amend the cross-claim was first raised some two years after the Statement of Claim was filed and served. At that stage the proceedings were ready to be allocated a hearing date with both lay and expert evidence being complete; (e) Although directions were given on 9 December 2016 for the service of a proposed amended cross-claim by 6 January 2017 and thereafter for steps to be taken for the filing of that document or a notice of motion seeking leave to do so by 25 January 2017, those directions were not complied with; (f) Although on 3 February 2017 directions were made for the proposed amended cross-claim to be served by 27 February and thereafter either the cross-claim or a notice of motion filed by 10 March 2017, those directions were not complied with; (g) It was not until 24 March 2017 that the proposed amended pleadings were served on the Plaintiff's solicitors. However, contrary to a direction made on 17 March 2017 the additional evidence to be relied upon in support of those amended pleadings was not served by 24 March 2017 and has not been served by the date of the hearing of this application. The failures in (f) and (g) above occurred in circumstances where a hearing date of 10 July had been allocated.
5. Secondly, no explanation has been provided for the amendments being put forward at the late stage at which the proceedings have reached. As noted earlier, at the time it was first proposed that the Second Defendant wished to amend, the evidence on both sides had been completed with the experts having met in conclave and being in the process of preparing a joint report. The only reason that can be inferred from what has been said on one or two occasions by whichever lawyer was then acting for the Second Defendant, was that the new lawyer or lawyers, having looked at the existing pleadings, thought that further matters should be added.
6. Associated with a failure to explain the reasons for the proposed amendments, and why they are put forward so late, is the failure of the Second Defendant to explain the dilatory way he has conducted the defence of the proceedings and the claim he wishes to make and, in particular, the failure to explain why various directions made by the Court have been ignored. No explanation has been offered for the three changes of solicitors acting for the Second Defendant that appear to have contributed to the delays and the failures to abide by court directions.
7. With regard to delay in complying with court directions, it should be noted that during the various times since December 2016 when the proposed pleadings were supposed to be being prepared and served, those acting for the Second Defendant appeared to have been devoting their attention to collateral matters relating to the proceedings.
8. For example, Mr Hubbard sent an email on 7 March 2017 raising allegations of non-compliance by the Bank with the Farm Debt Mediation Act. Although that was responded to by the Bank's solicitor, on 21 March Mr Hubbard served notices under that Act on the Bank requesting a mediation. The Bank's solicitor wrote on 23 March concerning those notices. He informed Mr Hubbard that a mediation under the Act had already been held and concluded with Heads of Agreement. Further the securities the subject of the request were the subject of a s 11 certificate which meant that the Act did not prevent the proceedings.
9. On 28 March Mr Hubbard withdrew the request for mediation without explaining why it had been made in the first place. However, he then sent in the same email another s 9(1A) Form requesting a mediation in relation to security over Water Licences.
10. Further, a mediation (apparently outside the purview of the Farm Debt Mediation Act) was held unsuccessfully on 20 February. It was only after that time that attempts were made to organise a conference with "a suitably qualified counsel" (to use Mr Hubbard's words in his affidavit of 17 March 2017).
11. I expressed the view in Commonwealth Bank of Australia v Susan Hannaford Pty Ltd (No. 2) [2013] NSWSC 574 at [73]: … that the explanation for delay will in most cases not be regarded as subsidiary to showing the bona fides of the proposed amendment. The Court of Appeal in that case apparently accepted that view: Hannaford v Commonwealth Bank of Australia [2014] NSWCA 297 at [21] and [98]-[100].
12. No explanation was offered for why attention was given to matters other than those the subject of court directions when those directions had not been complied with and the Second Defendant's solicitor had been specifically told by me that he would need to move with expedition to have amendments approved.
13. Thirdly, and not unrelated to the earlier two matters, is the failure of the Second Defendant to have served the further evidence on which he relies or at least to have given an indication of what that evidence will be. Clause 25.1 of the Banking Code, on its face, raises an issue analogous to what is determined under s 5O of the Civil Liability Act 2002 (NSW) and the requirement in r 31.36 for people commencing professional negligence claims. The Second Defendant, by seeking to make a claim based on clause 25.1 of the Banking Code at such a late stage in the proceedings is seeking a considerable indulgence. What is at stake is a hearing date with a potential for a postponement of at least six months, in circumstances where there is no evidence to suggest that the Bank did not exercise the care and skill of a diligent and prudent banker in accordance with that clause. The bona fides of the proposed amendment is a significant consideration in the exercise of discretion. That was reason for my direction that the evidence in support of the proposed amendments be served. In his affidavit in support of the amendments the solicitor does not provide any explanation why that direction has not been complied with nor what the evidence from the Second Defendant's expert, if such a person has been engaged, is likely to be.
14. It would not be fair to the Bank to permit the amendment on the entirely speculative assumption that expert opinion will sustain the pleading. Given the imminence of the hearing date the Bank may feel that it has no choice but to expend money on expert opinion so that that expert can be prepared to answer whatever evidence is forthcoming at a later time. If the evidence is not forthcoming the cost will have been wasted and, in all likelihood because of the negative equity position, will not be recoverable in fact even if a costs order was made in favour of the Bank.
15. Fourthly, the prejudice mentioned in the preceding paragraph is not the only likely prejudice to the Bank. There is likely to be significant prejudice to the Bank if the amendments are permitted. The loans made to the First and Second Defendants are in the order of $10,000,0000 and there was a negative equity position at the date of hearing this present application. The prejudice to the Plaintiff would be significant if the proceedings cannot be heard on 10 July. The state of the lists in the Common Law Division at the present time is such that a five day hearing would not be able to be allocated until 2018.
16. I accept the evidence of Mr Delaney that a three month period is likely to provide significant problems and is likely to mean that evidence, which has not yet been served by the Second Defendant, would not be able to be met, particularly in the light of the position of the Bank's expert witnesses.
17. For those reasons, I will not grant leave to the Second Defendant to amend to include the claim under the Banking Code and the related claim of unconscionability dependent upon breaches of the Banking Code.
18. I consider, on balance, that any further evidence about what position the Second Defendant would have been in if the loans had not been made will be able to be met by the Bank having regard to Mr Honey's availability. The order I will make in relation to the service of further evidence by the Second Defendant is intended to assist that process. The time limited will be short because the evidence was previously directed to be served by 24 March.
19. The Second Defendant should be allowed to rely on unconscionability to the extent that it is unrelated to any breaches of the Banking Code. The existing Defence raises (in a very poor manner) sufficient matters from which it can be inferred the Second Defendant was alleging that he was in a special position of disadvantage to the knowledge of the Bank unrelated to the Banking Code and the Bank's duties thereunder. A combination of the matters in paragraph 83 (a) viii, ix to xiii and xviii, and the corresponding sub-paragraphs in paragraph 83(b) lead to that view. Unconscionability is pleaded in a more appropriate way in the proposed pleading and I do not consider that the Bank is prejudiced in being able to meet that claim. It is, of course, closely aligned with, although not identical with, principles governing the determination of unjustness of contracts under the Contracts Review Act.

Conclusion

1. As to the form of the pleading, the Second Defendant will not be allowed at this late stage particulars which leave open the addition of further particulars. I make the following orders: 1. The Second Defendant is given leave to file and serve an amended defence in the form annexed to the affidavit of Joel Lewis Hubbard sworn 29 March 2017 omitting the following portions: 1. Paragraph 12(e) particular 4; 2. Paragraph 12(h); 3. Paragraph 12(i) particular 4; 4. Paragraph 14(a)(v) particular 4; 5. Paragraph 14(b)(iii); 6. Paragraph 16(e) particular 3; 7. Paragraph 16(h); 8. Paragraph 16(i) particular 3; 9. Paragraph 18(b)(iii); 10. Paragraph 18(b)(iv) particular 3; 11. Paragraph 20(e) particular 4; 12. Paragraph 20(h); 13. Paragraph 20(i) particular 4; 14. Paragraph 22(a)(v) particular 4; 15. Paragraph 22(b)(iii); 16. Paragraph 22(b)(iv) particular 4; 17. Paragraph 24(e) particular 4; 18. Paragraph 24(h); 19. Paragraph 24(i) particular 4; 20. Paragraph 26(a) particular 4; 21. Paragraph 26(b)(iii); 22. Paragraph 26(b)(iv) particular 4. 1. The Second Defendant is given leave to file and serve an amended cross-claim in the form annexed to the affidavit of Joel Lewis Hubbard sworn 29 March 2017. 2. Such amended defence and cross-claim are to be filed and served by 21 April 2017. 3. Any further evidence, lay or expert, in relation to the permitted amendments is to be served by 28 April 2017. Any evidence not served by that date will not be permitted to be relied upon by the Second Defendant without my leave or the leave of the trial judge. 4. The Second Defendant is to pay the costs thrown away by reason of the amendments. 5. The Second Defendant is to pay the Plaintiff's costs of the Second Defendant's Notice of Motion filed 31 March 2017.

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