National Australia Bank v Sayed

Proposed amended cross-claim

1. Subsequent to the hearing of the Motion Mr Hall SC provided a redrafted cross-claim which built not on the Amended First Cross-Claim filed 18 August 2015 but on the inadequately pleaded proposed cross-claim put forward by Mr Sayed before Mr Hall was retained to assist him. That is contrary to r 19.5 Uniform Civil Procedure Rules 2005 (NSW) which relevantly provides: 19.5 Mode of amendment generally (cf SCR Part 20, rules 7 and 8; DCR Part 17, rules 7 and 8; LCR Part 16, rules 7 and 8) (1) Subject to any directions referred to in rule 19.6, amendments to a filed document must be made by filing a fresh document that has been amended in accordance with these rules or pursuant to an order of the court. (2) The amendments must be indicated as follows: (a) the omission of existing matter must be indicated in such manner (such as striking through the matter, with or without underlining) as does not affect the legibility of the matter being omitted, and (b) the insertion of new matter must be indicated in such manner (such as the use of underlining, bolding or italics) as distinguishes it from existing matter (including existing matter to be omitted). … (4) An amended document must retain the existing paragraph numbering, with any additional paragraphs that are inserted after an existing paragraph bearing the number of that paragraph together with the letters "A", "B" and so on, as in these rules.
2. Because the proposed cross-claim does not comply with that Rule and because in substance it leaves in place a number of unsatisfactorily pleaded matters drafted by Mr Sayed, the latest form of the proposed cross-claim will not be permitted to be filed.
3. I am satisfied that the claim concerning Lot 42 should be permitted to be pleaded but that should be done properly either by building on or substituting for the matters pleaded in the Amended First Cross-Claim filed 18 August 2015.
4. However, the reintroduction of the claim concerning the Woonona property and the cross-collateralisation should not be permitted for the reasons which follow. Some further background concerning the litigation is necessary.
5. The whole of the proceedings between NAB and Mr Sayed were being heard by Adams J from 20 August 2012. Negotiations appear to have been conducted in the background to that litigation. Those negotiations led to the signing of the In Principle Agreement.
6. Subsequently a draft deed of settlement was prepared by NAB's solicitors. That draft deed of settlement included clause 7(a) which provided for releases to be given by Mr and Mrs Sayed for any claims that they may have had against NAB "in respect of the Woonona loan, Woonona mortgage, Corrimal loan, Corrimal mortgage, Corrimal sale and the Proceedings".
7. NAB claimed that the Deed of Settlement containing that clause was agreed to by Mr and Mrs Sayed. NAB sought specific performance of it and was successful before Rein J on 22 October 2012.
8. Mr Sayed appealed to the Court of Appeal, and the Court of Appeal upheld his argument that there was no binding agreement in relation to the proposed deed containing clause 7(a): Sayed v National Australia Bank Limited [2013] NSWCA 304.
9. NAB then sought specific performance of the In Principle Agreement. In a judgment given on 16 April 2015 Harrison AsJ ordered the parties to specifically perform the In Principle Agreement: National Australia Bank Limited v Sayed (No 4) [2015] NSWSC 420.
10. What is very clear from the Court of Appeal's judgment is that what was excluded from the In Principle Agreement was the claim that Mr Sayed was making in respect of the Corrimal property. What is equally clear is that the In Principle Agreement was a settlement of everything concerned with the Woonona property and the right of the Bank to possession of it. This is made clear in the Court of Appeal's judgment as follows: [58] There are cogent grounds for concluding that the parties intended that the In Principle Agreement was to be an immediately binding contractual arrangement. First, the In Principle Agreement was signed when the proceedings before Adams J were still part-heard. The parties clearly intended that, by signing the In Principle Agreement, the proceedings before Adams J would come to an end immediately. Secondly, and more significantly, the fact that the parties deleted the word "Non" before the word "binding" is very compelling evidence of their intention to enter into a legally binding arrangement immediately. … [60] The Bank did not seek specific performance of the In Principle Agreement. That may well (sic) because of the absence in it of any provision for mutual releases. That is to say, the Bank was only prepared to enforce the contract if it obtained a release from Mr and Mrs Sayed that it regarded as satisfactory. For example, there is no reference in the In Principle Agreement to disposition of the cross-claim. On one view, the effect of the In Principle Agreement was to confer the benefit of a compromise on Mr and Mrs Sayed, without any real benefit for the Bank, other than finality and certainty in being able to obtain possession of the Woonona property and to enforce the security that it has over that property. The Bank may well prefer to pursue its original causes of action, rather than accept a reduced payment in full satisfaction without any release of the claims made in the cross-claim.
11. The Court of Appeal summarised the effect of the In Principle Agreement at [22] as follows: Apart from clause 1, the effect of the In Principle Agreement might be summarised as follows: judgment for the Bank in the sum of $700,000 will be entered forthwith against Mr and Mrs Sayed; that judgment will be stayed until 23 December 2012; judgment for possession of the Woonona property will be entered in favour of the Bank and a writ of possession will be issued forthwith; that writ of possession will be stayed until 23 December 2012; Mr and Mrs Sayed will pay the settlement sum of $670,000 by 23 December 2012; if the settlement sum of $670,000 be paid by 23 December 2012, the Bank will accept that sum in full and final accord and satisfaction of the judgment debt of $700,000; if the settlement sum of $670,000 be unpaid by 23 December 2012, the Bank will be entitled to enforce the writ of possession and the judgment debt of $700,000, and will be entitled to recover interest on the judgment debt from 23 August 2012, together with enforcement expenses, on an indemnity basis; the terms of the email concerning credit listing sent at 12.31pm on 23 August 2012 will be observed; and the settlement sum of $670,000 and the judgment debt of $700,000 both include any amount owing by Mr Sayed in respect of his "classic account" with the Bank.
12. The Court also made it clear that it was the release in proposed clause 7(a) of the Settlement Deed which was the sticking point and in respect of which no agreement was reached: [57] It is clear that the parties never reached accord as to the terms of the proposed deed of settlement and release. It may well be that, in the end, only one clause was in dispute, namely, the terms of clause 7(a). However, there can be no doubt that Mr Sayed was not prepared to enter into a deed of settlement and release that contained clause 7(a), at least in the broad terms in which it was drafted. On the other hand, it is equally without doubt that the Bank was not prepared to enter into a deed of settlement and release that did not contain clause 7(a).
13. In the proceedings that were heard by Adams J before the settlement that produced the In Principle Agreement Mr Sayed pleaded that the Bank acted unconscionably in relation to the Woonona home loan and the Woonona mortgage and acted in breach of the Code of Banking Practice. Particular complaint was made about the alleged behaviour of a representative of NAB in making representations to Mr Sayed that led to him restating his income in the loan application. That was said to impact on Mr Sayed's ability to service and repay both the Corrimal loan and the Woonona home loan. In that context the defence pleaded as follows: 36. The terms of the Corrimal Loan (and the First Home Loan pleaded by the plaintiff, which is not admitted), the Woonona Home Loan (and the Second Home Loan pleaded by the plaintiff, which is not admitted), the Corrimal Mortgage and the Woonona Mortgage have the effect of cross-collateralising the security taken by the plaintiff over Corrimal and Woonona, so that a default under the Corrimal Loan gave rise to a default under the Woonona Home Loan and vice versa ("the Cross-Collateralisation"). Asset lending 37. As a consequence of the Cross-Collateralisation and the matters pleaded in paragraphs 28 - 36 it can be inferred that the plaintiff provided financial accommodation to the first defendant pursuant to the terms of the Corrimal Loan (alternatively, the First Home Loan pleaded by the plaintiff, which is not admitted), the Woonona Home Loan (alternatively, the Second Home Loan pleaded by the plaintiff, which is not admitted), the Corrimal Mortgage and the Woonona Mortgage without regard to the ability of the first defendant to repay by instalments under the said terms, in the knowledge that adequate security would be available in the event of default. Particulars The value of Corrimal was at least $750,000 The value of Woonona will be further particularised. 38. As a consequence of the matters pleaded in paragraph 37 the financial accommodation to the first defendant pursuant to the terms of the Corrimal Loan (alternatively, the First Home Loan pleaded by the plaintiff, which is not admitted), the Woonona Home Loan (alternatively, the Second Home Loan pleaded by the plaintiff, which is not admitted), the Corrimal Mortgage and the Woonona Mortgage constituted asset lending.
14. Those matters were said to amount to unconscionable conduct in breach of ss 12CB and 12CC of the Australian Securities And Investments Commission Act 2001 (Cth) which in turn was said to mean that the Plaintiff was not entitled to possession of the property nor judgment against Mr Sayed and he was entitled to the relief in s 12GM of the ASIC Act.
15. It is clear, therefore, that what was settled and formed part of the In Principle Agreement were complaints concerning the entry into the Woonona facility and mortgage and various acts of wrongdoing alleged on the part of NAB including the cross-collateralisation of the Woonona facility. Those matters are res judicata as a result of the judgment by Harrison AsJ in Sayed (No. 4).
16. To the extent that the matters now pleaded as paragraphs 43A to 43C and 49 to 60 were not expressly raised in the Defence of 22 August 2011 they fall clearly within the principle from Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589. The joint judgment said (at 602): [37] In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few. See the illustrations given in Cromwell v. County of Sac. (1876) 94 US (24 Law Ed, at p 199) . (at p603) [38] It has generally been accepted that a party will be estopped from bringing an action which, if it succeeds, will result in a judgment which conflicts with an earlier judgment. In this respect the discussion in Brewer v. Brewer [1953] HCA 19; (1953) 88 CLR 1 is illuminating. (at p603) … [40] The likelihood that the omission to plead a defence will contribute to the existence of conflicting judgments is obviously an important factor to be taken into account in deciding whether the omission to plead can found an estoppel against the assertion of the same matter as a foundation for a cause of action in a second proceeding. By "conflicting" judgments we include judgments which are contradictory, though they may not be pronounced on the same cause of action. It is enough that they appear to declare rights which are inconsistent in respect of the same transaction. (at p604)
17. It is apparent that success on the defences which I have identified would conflict with the judgment given by Harrison AsJ. In any event, the subject matter of those paragraphs were so relevant to the subject of the Defence to the Bank's claim that it would have been unreasonable not to rely on it. No explanation has been offered for not having done so previously.
18. It is clear from the Court of Appeal's judgment that the only matter which lay outside the settlement of the proceedings was the cross-claim in relation to the Corrimal property.
19. There is a further reason why the paragraphs concerning Woonona should not now be allowed to form part of the Cross-Claim. When the Amended First Cross-Claim was filed on 18 August 2015 the claims in relation to the Woonona property were expressly abandoned. Those paragraphs were paragraphs 5-10, 45 and 47-51. There is no evidence before me explaining why when those claims were abandoned in August 2015 they should now in a slightly different form be permitted to be revived. Such an approach to the litigation is entirely inconsistent with ss 56-58 of the Civil Procedure Act 1995 (NSW). The present proceedings have been foot since 28 May 2010. It is entirely unacceptable that a party should be seeking to revive an abandoned claim or to bring a new claim if that is its proper characterisation six years after proceedings have commenced with no explanation for why that is sought.

Privileged documents

1. Mr Sayed sought access to the unredacted form of the documents identified at [11] above. The basis for the claim was to be found in s 122 of the Evidence Act 1995 (NSW) and the principle said to have been articulated in Council of the New South Wales Bar Association v Archer [2008] NSWCA 164; (2008) 72 NSWLR 236 at [48]. The principle is concerned with implied waiver of client legal privilege.
2. Section 122 relevantly provides: Loss of client legal privilege: consent and related matters (1) … (2) Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120. (3) Without limiting subsection (2), a client or party is taken to have so acted if: (a) the client or party knowingly and voluntarily disclosed the substance of the evidence to another person, or (b) the substance of the evidence has been disclosed with the express or implied consent of the client or party. (4) The reference in subsection (3) (a) to a knowing and voluntary disclosure does not include a reference to a disclosure by a person who was, at the time of the disclosure, an employee or agent of the client or party, or of a lawyer of the client or party, unless the employee or agent was authorised by the client, party or lawyer to make the disclosure. (5) A client or party is not taken to have acted in a manner inconsistent with the client or party objecting to the adducing of the evidence merely because: (a) the substance of the evidence has been disclosed: (i) in the course of making a confidential communication or preparing a confidential document, or (ii) as a result of duress or deception, or (iii) under compulsion of law, or (iv) if the client or party is a body established by, or a person holding an office under, an Australian law - to the Minister, or the Minister of the Commonwealth, the State or Territory, administering the law, or part of the law, under which the body is established or the office is held, or (b) of a disclosure by a client to another person if the disclosure concerns a matter in relation to which the same lawyer is providing, or is to provide, professional legal services to both the client and the other person, or (c) of a disclosure to a person with whom the client or party had, at the time of the disclosure, a common interest relating to the proceeding or an anticipated or pending proceeding in an Australian court or a foreign court. (6) …
3. The principle can be traced back to Attorney General (Northern Territory) v Maurice (1986) 161 CLR 475 and was restated in Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 at [29] as follows: Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is "imputed by operation of law". This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege. Thus, in Benecke v National Australia Bank, the client was held to have waived privilege by giving evidence, in legal proceedings, concerning her instructions to a barrister in related proceedings, even though she apparently believed she could prevent the barrister from giving the barrister's version of those instructions. She did not subjectively intend to abandon the privilege. She may not even have turned her mind to the question. However, her intentional act was inconsistent with the maintenance of the confidentiality of the communication. What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.
4. In Archer Hodgson JA (with whom Campbell JA and Handley AJA generally agreed) said at [48]: … It is not enough to bring about a waiver of client legal privilege that the client is bringing proceedings in which the content of the privileged communications could, as a reasonable possibility, be relevant and of assistance to the other party. For the client to do this is not inconsistent with the maintenance of the privilege, and does not give rise to unfairness of the type in question. What would involve inconsistency and relevant unfairness is the making of express or implied assertions about the content of the privileged communications, while at the same time seeking to maintain the privilege. In this respect, it may be sufficient that the client is making assertions about the client's state of mind, in circumstances where there were confidential communications likely to have affected that state of mind.
5. The matter is put this way by Mr Sayed. Paragraph 31 of the Amended First Cross-Claim filed 18 August 2015 pleads: On or about 30 July 2009 NAB rejected without explanation a proposal under which Lot 41 would be sold for a consideration of $300,000. Particulars: Correspondence between Kells Lawyers and Dibbs Barker dated 3 July 2009, 30 July 2009 and 3 August 2009.
6. The Defence to that paragraph, being paragraph 23 of the Defence to Amended First Cross-Claim filed 9 October 2015, reads: As to paragraph 31 of the cross-claim, NAB: (a) Does not admit paragraph 31; and (b) Relies on the terms of the correspondence between Kells Lawyers and Dibbs Barker dated 14 July 2009, 30 July 2009, 3 August 2009 and 4 August 2009.
7. Mr Sayed then points to the dates and descriptions of documents 29, 32 and 37 as follows: [29] Diary note 16/7/2009. Communication between legal advisor and client containing advice on valuations and conditional offer for one lot. [32] Diary note 24/7/16 [scil. 09]. Communication between legal advisor and client containing advice as to conditional offer for one lot. [37] Diary note 6/8/2009. Communication between legal advisor and client containing advice concerning conditional offer for one lot.
8. Mr Sayed argued that what was relied on was the constructive denial in paragraph 23 of the Defence that there was a breach of duty by the taking of those steps. He submitted that this amounted to a pleading that the Bank's state of mind was informed by the advice and that this was the basis for the Bank not being negligent. Mr Sayed relied on the timing of the events, the description of the documents and from the fact that the Bank was aware at this stage that it was being pressed by Mr Sayed to comply strictly with its obligations as mortgagee in possession.
9. As far as documents 19, 20 and 30 (and probably 31 although that was not mentioned by Mr Sayed's counsel) those documents were said to be related to the issue of the landlocking of Lot 42.
10. In relation to document 58 Senior Counsel for Mr Sayed frankly acknowledged that he had very little information as to the content of the document. The description is this: Diary note 3/11/2009. Communication between legal advisor and client containing advice as to preparation of contracts for sale.
11. Senior Counsel suggested that there was a sufficient inference that the advice was relevant to the decision to proceed by a particular method, and that method of sale is what is attacked by Mr Sayed in his cross-claim and defended by the Bank in its Defence to the Cross-Claim.
12. No reference was made to document 36 which might be thought to be in a similar category. The description of that document is: Diary note 6/8/2009. Communication between legal advisor and client containing advice as to mortgagee's obligations in exercising power of sale.
13. Counsel for NAB submitted that waiver occurs when there is a forensic deployment of legal advice or the receipt of legal advice by a party, rendering maintenance of the confidentiality of that advice inconsistent. He said that no state of mind was involved. There was simply a denial of a breach of legal duty without any reference to a state of mind.
14. In Wayne Lawrence Pty. Limited v. Hunt & Ors. t/a Hunt Musgrave & Peach [1999] NSWSC 1044 Hodgson CJ in Eq (as his Honour then was) considered the decision of the majority of the Full Court of the Federal Court in Telstra Corporation Ltd. v. BT Australia Pty. Ltd. (1998) 85 FCR 152; 156 ALR 634. In that case a defendant pleaded that it undertook certain action in reliance on a certain representation. The majority of the Full Court held that the pleading thereby opened up as an element of the cause of action an issue which could not fairly be assessed without examination of the relevant legal advice. The majority considered that the party was taken to have waived reliance on the privilege. Hodgson CJ in Eq went on to say: [12] Accepting that the decision of the majority in that case correctly interprets and applies s.122(1), it seems to me still that the question of whether the advancing of a person's state of mind is to be taken as consenting to the giving of evidence of confidential communication, or as waiving privilege, is a matter of degree in each case. It does not seem to me that the assertion of a belief must, in all circumstances, be taken as consenting to evidence being led of any legal advice or confidential communication that could be relevant to whether such a belief was held or the reasonableness of such belief. It seems to me that factors relevant to whether that consent is to be considered as having been given, or whether privilege is taken to have been waived, would include the significance of the belief to the case as a whole; the relevance of the reasonableness of the belief to the case as a whole; the probability or otherwise of the legal advice being relevant to the holding of that belief, or being relevant to its reasonableness; and in circumstances where the Court inspects the legal advice in question in order to make a decision, the extent to which the legal advice does in fact bear upon the holding of the belief or its reasonableness, and the extent to which the legal advice relevant to those matters is inextricably bound up with legal advice going to other questions as to which there has been no consent or waiver. It seems to me that, on the basis of all those matters at least, the Court has to make a judgment as to what is reasonable, and what is fair in the particular case.
15. In my opinion, the situation in the present matter is some distance removed from the cases where it has been held that a party has waived the privilege. It is not easy to discern from any pleading in the Defence to the Amended First Cross-Claim that the NAB is relying upon a state of mind or a belief, let alone that such state of mind or belief was informed by legal advice received. The thrust of NAB's Defence, as paragraph [23] thereof demonstrates, is that NAB denies that it acted in breach of its responsibilities as a mortgagee. The fact that there are diary notes which predate the alleged rejection of an offer does not lead to an inference that the Bank formed a belief or a state of mind in rejecting the offer based on advice to which the diary note refers. I was not, for example, taken to any of the correspondence referred to in paragraph 31 of the Amended First Cross-Claim or paragraph 23 of the Defence to the Amended First Cross-Claim to demonstrate that the pleading in effect identified a belief or state of mind on the Bank's part. Of course, as Hodgson CJ in Eq made clear in Wayne Lawrence, even if a belief or state of mind is asserted, that would not be sufficient in itself to amount to a waiver of the legal advice that may have brought that belief or state of mind about.
16. The references in documents 19 and 20 to DA approval and the reference in document 30 to advice concerning right of carriageway between the lots is quite insufficient to lead to an inference that a denial of breach of duty resulted from a state of mind that was informed by the legal advice referred to.
17. The legal advice identified in documents 36 and 58 is simply too speculative to draw an inference that it was a justification for the method of sale adopted by the Bank.
18. Nothing in the Bank's Defence to the Amended First Cross-Claim seems to me to involve inconsistency or unfairness by seeking to maintain the privilege on the documents concerned. In my opinion, the Bank should not be directed to discover unredacted copies of the documents concerned. That is not to say that when the evidence in relation to the Cross-Claim is complete the issue may not again be raised by what is said in the Bank's affidavits. My decision is based solely on the pleading in relation to the Cross-Claim.

Conclusion

1. I make the following orders: 1. The First Defendant's Notice of Motion filed 4 March 2016 is dismissed 2. The First Defendant is to pay the Plaintiff's costs of the 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: 27 May 2016