National Australia Bank Ltd v Sayed

Judgment 1The Plaintiff seeks possession of land at 25 Gahans Lane, Woonona arising out of default under a mortgage which secured two loans made by the Bank to the Defendants. The mortgage is dated 19 June 2006. 2The first loan, described as a Variable Rate Home Loan, was made on or about 21 June 2006 and was in an amount of $500,000. Although the loan was described as a home loan the Defendants signed a declaration pursuant to s 11 of the Consumer Credit Code to the effect that monies advanced under the first loan were to be applied wholly or predominantly for business or investment purposes. 3The second loan, similarly described as a Variable Rate Home Loan, was also dated 21 June 2006 and related to an advance of $430,000 to the Defendants. It is not pleaded that a Business Purposes Declaration was signed in respect of the second loan. 4The Defendants went into default under the first loan on or about 1 October 2008 when they failed to make a repayment in the sum of $3,599.61 due on that day. Similarly, due to the cross-collateralisation of the loans, they went into default under the second loan on the same date by virtue of their default under the first loan. A section 57 notice dated 13 March 2009 was not complied with and proceedings were commenced on 28 May 2010. Procedural history 5The first Defence filed was a joint defence on behalf of both Defendants. It pleaded that the facility agreements and the mortgage were null, void and unenforceable for a variety of reasons including illegality, the unconscionable behaviour of the Bank seemingly under the general law as well as in contravention of the Australian Securities and Investments Commission Act 2001, and because of misleading and deceptive behaviour on the Bank's part. No particulars of any of these matters were provided. 6There was also an assertion that the Business Purposes Declaration, admittedly signed, was not enforceable, not by reason of matters mentioned in s 11(3) of the Credit Code but by reason of the unconscionability pleaded, and also because it was said the Second Defendant had no interest in the loan in relation to a development property at 267-273 Rothery Road, Corrimal for which the first loan was obtained. There were other references in the Defence to the Second Defendant's having no interest in the development property which appeared to suggest a basis for her having no liability to the Bank. 7Finally, there was a pleading about the exercise by the Bank of a power of sale over the development property. The pleading asserted a duty of good faith and (wrongly) a duty of care. It asserted a sale at "a substantial undervalue" but gave no particulars or details. It also asserted a failure to account properly for the proceeds and said that the Defendants required discovery to determine the extent of their loss. 8When the matter first came before me for early judicial directions as a defended matter I was informed that, as a result of correspondence between the parties, the Defendants wished to file an Amended Defence that particularised the matters in the first form of the Defence. I raised with Mr Thomas, who appeared for the Defendants, whether there might not be some conflict in his acting for both of the Defendants by reason of what appeared in the first form of the Defence. He told me that it had not caused him "an enormous amount of concern" but it was something that he was mindful of and would continue to be mindful of. 9I gave leave to the Defendants to file the proposed Amended Defence and Cross-Claim. The Plaintiff was given leave to file a Motion to strike out the pleadings if it was asserted they disclosed no reasonable defence or cause of action. 10No such Notice of Motion was filed but directions were given on two subsequent occasions to enable particulars to be sought and provided and to enable discovery to be given. 11Directions made on 1 February 2011 gave leave to the Plaintiff to file an Amended Statement of Claim. The only amendment was to add to the pleading that the mortgage secured the Defendants' obligations under the second home loan, an allegation that it also secured their obligations under the first home loan. That Amended Statement of Claim was filed on 3 February 2011. The directions also gave leave to the Defendants to file and serve any further Amended Defence to the Amended Statement of Claim. No such defence was filed, presumably because the Amended Defence sufficiently dealt with the mortgage and what it secured. 12On 8 April 2011 the Plaintiff filed a Motion for which I had given leave for such filing by 15 September 2010. The Motion sought that the Amended Defence and the Cross-Claim filed 2 September 2010 be struck out. Alternatively, it sought that each of the Defendants file and serve an affidavit setting out the facts, matters and circumstances on which they relied to establish a proper basis to allege fraud and criminal conduct. The Motion also sought that the Defendants' solicitor file and serve an affidavit disclosing the basis upon which he had satisfied himself there was a proper basis to allege the fraud and criminal conduct. 13The Motion was fixed for hearing before Harrison AsJ on 25 May 2011. The Motion was settled with Consent Orders being made dismissing the Amended Defence and the Cross-Claim filed 2 September 2010 and by providing that the Second Defendant (who became separately represented on the preceding day) was to serve a proposed Defence and any Cross-Claim on the First Defendant and the Plaintiff within 28 days, and if it alleged illegality, fraud or criminal conduct, to serve an affidavit setting out the facts, matters and circumstances relied upon to allege that illegality, fraud or criminal conduct. Thereafter, the Consent Orders provided for the First Defendant to do the same within 21 days from the service of the Second Defendant's proposed pleadings. The Consent Orders provided that Notices of Motion by the Defendants for leave to file the proposed pleadings were to be filed by 20 July 2011 (presumably to see if the other parties would consent to the proposed pleadings beforehand). 14The Defendants did not comply with those directions, although the First Defendant could not be blamed for that since his obligation only arose after the Second Defendant had complied. On 29 July 2011 I extended the times stipulated for the service of proposed pleadings by each Defendant. For reasons not made clear the First Defendant filed its Defence and Cross-Claim on 22 August 2011 (the direction made only permitted service of proposed pleadings). Those pleadings were struck out by consent on 26 August 2011 and I directed that each of the Defendants file and serve Motions for leave to file Defences and Cross-Claims by 30 August 2011. The First Defendant filed his Motion on 31 August 2011 and the Second Defendant filed her Motion in Court at the hearing of the Motions on 9 September 2011. 15This judgment concerns those two Notices of Motion and the adequacy of the pleadings sought now to be filed by each of the Defendants. 16The difficulties associated with the pleading arise because the Defendants wish to raise issues concerning the property at Corrimal. This was a development site, and the development was being conducted by the First Defendant and one Richard Robert Taylor. Monies had been borrowed from the Plaintiff in respect of that site but it is alleged by the First Defendant that he, Mr Taylor and the Bank engaged in some form of illegality to enable the loan to be made. The Corrimal property was sold for about $535,000 - $545,000. The Second Defendant claims not to have been involved with that development property.