National Australia Bank v Priestley

Does the proposed defence reveal any defence on the merits?

The defendants led no evidence as to the facts on which the proposed defence relied 8By the proposed defence the defendants sought to advance claims as to set off, as well as claims under the Contracts Review Act 1980 and unconscionable conduct. It is supported by an affidavit sworn by one of the defendants verifying the defence, but no evidence was led as to the factual matters referred to in the defence, on which the defence depended. 9It is settled that where an application is made to set aside a default judgment, in order that a defence which depends on facts may be advanced, the applicant must lead some evidence of the facts on which the defence will be established on the merits. Assertions as to a belief that a defence has merit, or is valid, or that the facts on which it is based are true, is not sufficient (see Davies J's discussion in National Australia Bank Ltd v McCann [2010] NSWSC 766 by reference to Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331; Hodgson JA and Vacuum Oil Co Pty Limited v Stockdale (1942) 42 SR(NSW) 239 at 243.) 10On the plaintiff's case the problem with the defendants' application was that it had no evidentiary foundation. Given that the defence sought to be advanced involved oral representations on which the defendants relied to their detriment, what at least was required was some evidence as to the conversations in which the alleged representations were made. 11The defendants' case was that given the detail of the claims advanced in the proposed defence, which had been verified by affidavit, it was not necessary for them to lead any evidence as to the factual matters proposed to be relied on. The decision in National Australia Bank Ltd v McCann was sought to be distinguished on the basis that it was not apparent from that judgment as to the type of case which there arose to be considered. In this case, it was submitted, the affidavit verifying the proposed defence would be accepted as sufficiently establishing an arguable defence on the merits. 12I am satisfied that this submission may not be accepted. To the contrary, given the way in which the oral representations relied on are pleaded, the affidavit verifying the defence is clearly an inadequate basis upon which any conclusions could be drawn that there is an arguable defence on the merits. 13In the case of alleged representations made orally, Rule 14.7 of the Uniform Civil Procedure Rules 2005 requires that a summary of the material facts on which the defendants rely must be pleaded. Rule 14.14 provides that any matter which if not pleaded specifically, may take the opposite party by surprise, must also be specifically pleaded. Rule 14.9 requires that the effect of spoken words must, so far as material, be stated. The proposed defence does not adhere to these requirements. 14What is required is that not only the effect of the spoken words by which it is alleged that the relevant representations were made must be pleaded, but also that the person who made the representations must be identified, as must the time that the representations were made and to whom. If this information is not disclosed, that the other side may be taken by surprise, is evident. 15The proposed defence does not satisfy these fundamental obligations in relation to the August 2004 representations and the defendants have not led any evidence which sheds any light on these matters. In the result, the approach urged for the defendants may not be accepted. They have failed to establish, as they must, that any of the facts on which the proposed defence might rest can be established. 16In these circumstances, it may not be concluded that the defendants have met the onus falling upon them to establish that they have a defence to the plaintiff's claim. There is nothing in the material before the Court which could leave open the view that the requirements discussed by Davies J in McCann do not have to be met in this case. They have not been satisfied.

The defence is not properly pleaded 17The proposed defence, now the sixth basis on which the defendants seek to resist the plaintiff's recovery of the moneys which they borrowed, does not identify the conversations in which it is alleged that the representations they relied on to their very considerable detriment were made, or by whom. The proposed defence rests on certain fundamental claims. At paragraph 52 of the proposed defence it is pleaded: "52 In August 2004 the NAB made certain representations to Christopher and Claire, those representations being: 52.1 The NAB understood Christopher and Claire's goal of acquiring their own farm (being the 3 properties) and carrying on a business of irrigated agriculture on that property; 52.2 The NAB also understood Christopher and Claire's goal of building their long-term wealth by carrying on that business." 18Further representations are pleaded in paragraph 53: "53. To assist Christopher and Claire in achieving those goals, the NAB made further representations to the following effect: 53.1 The NAB would assist Christopher and Claire in the "acquisition" of the 3 properties by providing them with finance to pay out the PIBA mortgage; 53.2 In providing finance to assist with the acquisition of the 3 properties the NAB would do so in a flexible, transparent and simple structure; 53.3 The NAB would provide the assistance of a dedicated Agribusiness Manager and the resources of the entire NAB group who would be focused on providing service to Christopher and Claire in a professional and timely manner; 53.4 The NAB would build a business relationship "that can be trusted and that will continue into the future" a future in which the NAB were committed to agribusiness; and, 53.5 That by making good the representations set out in 52.1 and 52.2 above and the representations set out in 53.1, 53.2, 53.3 and 53.4 above the NAB would help Christopher and Claire to "unlock" the value the NAB wanted to provide to them." 19These representations are called the 'August 2004 representations' in respect of which it is claimed that: "54 Acting in reliance on the August 2004 representations Christopher and Clair adopted the assumption that the NAB would assist them through the drought and then finance them to carry on the business of irrigated agriculture of the 3 farms in good seasons following the breaking of the drought and that the NAB would give them professional advice and assistance in that process ("the long term assumption") and, thus, on the basis of the August 2004 representations and the long term assumption Christopher and Claire entered into the First Mortgage and all other and subsequent mortgages and facility agreements with the NAB." 20It is on the basis of this allegation that the proposed defence substantially hinges. 21It was submitted for the defendants that the defence had to be read in a context where the plaintiff purported to be the leading 'agri' business lender in the State, with various expertise. It had made representations to the defendants, in the context of the goal of building long term wealth. The flux of seasons in agriculture was well understood and it was relevant that at the time the representations were made, the property was in the midst of a 10 year drought, the longest in 110 years. The things which the defendants would have done differently, had the representations not been made was not to enter a mortgage or subsequent mortgages with the plaintiff, as claimed in clause 54. The detriment pleaded was all of the set off claims, which would not have arisen, but for entry into the mortgages. 22By way of example, it was explained in the case of the set off claim at clauses 68 to 81 of the defence, the purchase of the Larrimar property, it was relevant that its acquisition had been 100% financed by the plaintiff. The promised support was then not forthcoming, after the defendants had spent considerable sums clearing the property. When the drought broke, the plaintiff refused to advance further funds, with the result that crops could not be planted on the property, so that income could be earned. That was but one of the detriments claimed. In the case of each set off claim a detriment was specified. 23This was a case, it was also submitted, where the defendants sought relief which impacted on the contract itself, rather than simply pursuing damages. The attack on the contract flowed from a claim brought under the Contracts Review Act and by way of estoppel, in respect of both of which the inducements relied on were the August 2004 representations. 24There are several difficulties with the defence, so understood. 25The defence does not identify who it is claimed made the August 2004 representations. It was explained for the defendants that the Contracts Review Act claim also depends on the August 2004 representations. That claim has also not been adequately pleaded. All that is pleaded is that: "161. In the circumstances pleaded above the Court should make orders pursuant to s 7 Contracts Review Act 1980 setting aside the five mortgages and the Bill Facility which the plaintiff seeks to enforce in these proceedings in whole or in part." 26That this claim has any basis is not apparent. The unconscionability claim is in no better position. 27There are further difficulties. Given the contractual terms which the parties agreed with each other, the defendants are not entitled to pursue the claims which they seek to advance by way of set off. It is settled that a lender's contractual entitlement to be paid in full and without deduction may prevent the borrower from raising defences as to the conduct of the lender by way of set off (see St George Bank Limited v Field [2007] NSWSC 902). There is a distinction between a defence that impeaches a contractual term and a defence that impeaches only the exercise of rights under the contract and it is accepted that it is difficult to attack a term which does no more than postpone a right of resort to the courts until the primary obligation is satisfied (see Daewoo Australia Pty Ltd v Porter Crane Imports Pty Limited [2000] QSC 050). That there is a basis for setting these aspects of the agreement aside is not evident. 28That the defendants have any arguable claim in relation to set off is also not clear. To take an example, in relation to 'grazing business loss' it is pleaded: "120. Had Christopher and Claire been permitted to buy their own cattle from 2004 on they would have been able to build up their own herd and earn income from the sale of calves. While it would have taken some time, and expenditure, to build up a herd, by 2008 or 2009 Christopher could have a herd of 1500 cows and some bulls, and the ability then to sell 1,000 weaners per year $400-500 per head. 121. That would have produced income in the order of, at least, $400,000 per annum for each of the years 2009, 2010 and 2011, a total of at least $1.2m." 29There is no allegation that the plaintiff had any relevant obligations in relation to the grazing business, nor is it explained what it did which prevented the defendants from buying cattle. Other claims rest on allegations that the plaintiff did not make specified further sums available to the defendants, but it is not pleaded that it had any obligation to do so. 30In the result, it may not be accepted that the proposed defence has been adequately pleaded, or that there is a basis for thinking that the attack on the agreement in relation to set off, has any real prospects of success.

Should the default judgment be set aside? 31The defendants' case was that the plaintiff would not be prejudiced if the default judgment was set aside, given the apparent value of the property which secured the loan and what was outstanding. Even accepting that the evidence on which this submission was advanced established what was claimed, that is not a basis on which the default judgment may be set aside, in the circumstances which have arisen for consideration. 32The defendants were given every reasonable opportunity to put on a defence, before default judgment was entered. Even now they have not brought forward a proposed defence which complies with the requirements of the Rules or establishes an apparent basis for a successful defence. Nor have they led evidence which establishes that the case which they seek to advance has any real prospects of success. 33In the circumstances the orders which they seek must be refused.

Costs 34The usual order is that costs follow the event. Unless the parties approach within 14 days, the Court's order will be that the defendants bear the costs of the motions, as agreed or assessed.

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