Permanent Custodians Ltd v Daneshyar Enterprise Pty Ltd

Defence

No defence or draft defence to the Claim has been provided by the defendant on the hearing of the Motion. The failure to do so is a relevant consideration on an application to set aside default judgment: National Australia Bank v Priestley (No 3) [2012] NSWSC 1171 (Schmidt J) at [32].
Rather the defendant sought to convey a purposeful defence in written submissions which were supplemented by oral submissions on that topic. In written submissions the defendant contended: "18. While the defendant has not prepared a formal defence, as noted above, since 5 June 2024 it has contended that it would be unconscionable for the plaintiff to rely on the acceleration clause to demand repayment of the entire loan when the plaintiff accepted that the arrears could always have been covered from the Suncorp account. 19. The defendant assertion of unconscionable conduct amounts to a claim for relief against forfeiture. The authorities concerning unconscionable conduct in this sense were reviewed by Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ in Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315. Relevantly, in finding that the appellant was not entitled to such relief, their Honours held that: (a) "the special heads of fraud, accident, mistake or surprise" identify in a broad sense the circumstances making it inequitable for a party to exercise its contractual rights [58], (b) the decided cases in which the operation of these "special heads" is considered do not disclose exhaustively the circumstances which merit equitable intervention [58], and (c) it is not the case that the circumstances must be "exceptional" before equity intervenes [59]. 20. There is a serious question to be tried as to whether the plaintiff was entitled to rely on the acceleration clause in circumstances where the plaintiff was aware that the defendant's assets had been restrained by the NSWCC and sufficient funds were available in the Suncorp account to pay the arrears, and had (sic) Thus, the defendant had made reasonable attempts to effect the payment."
Counsel for the defendant relied on a defence of unconscionable conduct by the plaintiff which they submitted is "equally arguable in respect of all action that the mortgagee has taken in response to the arrears arising; both the judgment in possession and the judgment in debt flowed from".
The defendant made the following oral submissions concerning Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [58] and [59] ("Tanwar"): "…when having regard to the general principles which qualify the extent to which the Court needs to be satisfied as to the bona fides of the defence, it is my submission that the description in that paragraph is sufficient when combined with the factual findings which I ask your Honour to make on the basis of the correspondence I have taken your Honour to, that is, it may be that, in all of the circumstances disclosed by that correspondence, as perhaps more fully understood in the context of a trial where the parties to that correspondence may give evidence, it may be that the plaintiff's actions in relying on the acceleration clause and obtaining a default judgment amounted to unconscionable conduct, in the sense that the Court would grant what is, in effect, relief against forfeiture pursuant to that acceleration clause."
Additionally, in oral submissions, the defendant highlighted various forms of contact between Bluestone and Mr Daneshyar (those communications were discussed in detail in the factual background) to evidence that Bluestone and the plaintiff "had notice that there was an issue with the New South Wales Crime Commission". These included the following: 1. A phone call and email between Mr Daneshyar and Bluestone on 15 November 2023 2. An email chain between Mr Daneshyar and Bluestone on 22 December 2023 3. An email to accounts@r.r.com.au from Mr Daneshyar on 5 February 2024
In light of those communications, the defendant submitted: "by this time the plaintiff was clearly on notice that there was an issue with the New South Wales Crime Commission and while certainly the defendant, acting prudently, ought to have obtained copies of the relevant orders, analysed them, identified the problem with them and provided more fulsome correspondence to the plaintiffs so that proper arrangements could be put in place, when that didn't occur we say that it was unconscionable for the plaintiff to then go on and file the notice of motion to seek default judgment without taking some further steps to ascertain exactly what was going on with the Crime Commission and exactly what the defendant was trying to explain as the reason why the arrears had not been paid."
The defendant also drew attention to an email from Bluestone of 23 February 2024 which made reference to "legal fees continu[ing] to incur" but there being "no reference to the claims that Mr Daneshyar had made about attempting to negotiate payment with the New South Wales Crime Commission and there is no evidence that the plaintiff made any independent attempt at this time to seek clarification from the Crime Commission as to what was going on."
The defendant submitted this matter can be distinguished from Kostopoulos v GE Commercial Finance Australia Pty Ltd [2005] QCA 311 ("Kostopoulos") because the NSWCC made representations showing an intention to vary the restraining orders by consent and that the delay in seeking the variation on the basis of obtaining the mortgagee's consent was not reasonable because the mortgagee's consent was not required. Having regard to those circumstances, counsel the defendant made the following further submissions in that regard: "circumstances do make this case a different one to Kostopoulos where, notwithstanding the fact that, as a Queensland decision it is not binding on your Honour and of course it is a decision, as with all decisions of this nature, that turns on its own facts, but your Honour sees at paragraph 50 of Kostopoulos that the Court proceeded on the basis that Mr Kostopoulos was not able to make the payments that he was obliged to make under the terms of the mortgage. With respect to the arrears, we say it is significant that part of the reason why the arrears could not be paid is because default judgment had been entered and possession had been taken, and that caused the negotiation with the Crime Commission to go off the rails."
The primary submission for the plaintiff was that the foreshadowed defence was not arguable and, on that basis, the Motion should be dismissed. In the alternative, counsel for the plaintiff submitted that, even if the Court was satisfied the defence was arguable, the foreshadowed defence could not be a defence to the claim for possession and would only affect the Debt Judgment. In that alternative case, the plaintiff contended that the Court would only set aside the Default Judgment so far as it applied to the debt.
In support of those primary submissions, counsel for the plaintiff contended as follows: 1. Mr Daneshyar was informed by his accountants on 19 January that the company had been served with the proceedings, and despite him stating that he had not realised that the defendant was required to file a defence he did not give any further explanation than that. It appears he had been legally represented for years and certainly the Claim document itself makes very clear that a defence needed to be filed within 28 days. There had not been any explanation for how he did not come to realise that or whether his failure to realise that constitutes any sufficient explanation. The explanation given by Mr Daneshyar was inadequate. 2. The plaintiff denied they had "accepted that the arrears could always have been covered from the Suncorp account" and highlighted that the defendant had referenced par 6 of their own letter of 5 June 2024, addressed to the plaintiff's solicitor, which stated, inter alia, "We consider that it would be unconscionable for your client to rely on the acceleration clause to demand repayment of the entire loan when your client accepts that the arrears could always have been covered from the Suncorp account, from which Mr Daneshyar has attempted to arrange payments". Counsel for the plaintiff contended that that submission is "not a position my client has ever expressed; indeed, it is simply wrong. Since before this loan went into default, it has not been possible, due to the restraining orders made by this Court, for any arrears on this account to be made from Suncorp". 3. Despite the defendant's submission that Mr Daneshyar was not aware that the variation to the NSWCC restraining orders only affected the NAB Mortgages, counsel for the plaintiff submitted that Mr Daneshyar must have understood the Property was not subject to that variation when Bluestone was contacting him in November 2023 in relation to default.
In relation to the alternative regarding possession, the plaintiff submitted the following: "If your Honour is satisfied on this material that the defendant has met that burden, I then rely on Inglis and the principles dealt with by Campbell J in the Voukidis decision to support the submission that that defence cannot go to the judgment for possession and that, if your Honour is satisfied that the defence relying on relief against forfeiture is arguable, that your Honour could only set aside the judgment for debt and that the judgment for possession would remain on foot and be unaffected and the parties could then continue the dispute and the claim with respect to debt."
Before considering those arguments, I propose to consider the judgments in Kostopoulos and Tanwar in some detail.
Kostopoulos concerned an individual, Mr Kostopoulos, who purchased a property which was subject to a mortgage from AMP. Two relevant clauses of that mortgage extracted from the decision at [5] - [6] are as follows: "5 Under the mortgage, upon an "Event of Default", the $500,000 became due and payable by the appellant to AMP. In this regard, clause 11.1 provided: "After an Event of Default occurs, despite any previous omission to exercise any of its rights or any waiver of those rights and any agreement or arrangement between the Mortgagor and AMP Bank to the contrary: (a) (exercise of rights) AMP Bank may immediately exercise any of its rights arising from the Mortgagor's default; and (b) (acceleration) all Secured Money is immediately due and payable." 6. Relevantly for present purposes, clause 1.1 of the mortgage provided that an Event of Default would occur: "(a) when a representation or warranty made or taken to be made by the appellant was incorrect or misleading when made or taken to be made; (b) when any encumbrance was sought to be enforced against the property; (c) when the appellant had not satisfied any monetary obligation." (emphasis added)
The acceleration provisions of the mortgage instrument also lay at the centre of the issues in this matter.
Mr Kostopoulos was charged with criminal offences in 2002 and a caveat over the property was lodged by the Queensland Director of Public Prosecutions ("DPP") as a result. This resulted in a breach of clause 1.1(b) of the Mortgage.
In June 2003, the rights against Mr Kostopoulos under the mortgage were acquired by GE Commercial Finance Australia Pty Ltd ("GE"). AMP warranted that Mr Kostopoulos was not in default under the mortgage. After that date, Mr Kostopoulos continued to meet his interest payment obligations and sought to submit that the warranty AMP gave to GE had waived Mr Kostopoulos' breach of the mortgage.
On 18 November 2004, the DPP's restraining order was extended with Mr Kostopoulos' consent until 31 May 2005.
On 13 January 2005, GE served Mr Kostopoulos a notice asserting the following four events of default had occurred: "(a) a breach of the obligation to pay land tax by the due date; (b) a breach of the representation or warranty that there were no proceedings before a court which could reasonably be expected to affect him or the property; (c) a material adverse effect existed (in respect of his capacity to meet the interest payments on time and to make the capital repayment); (d) there had been an encumbrance against the property by reason of the lodgement of the caveat."
The notice further claimed that $508,611.62 was due and payable. This represented the total amount remaining to be paid on the mortgage under the acceleration clause. Mr Kostopoulos could not pay that amount.
On 1 April 2005, GE gave Mr Kostopoulos notice to leave the property and on 7 April gave a notice of exercise of power of sale.
On 27 April, Mr Kostopoulos filed an application seeking a final injunction to restrain the respondent from "proceeding on a demand dated 13 January 2005, for acceleration of payment of $508,611.62".
The application, at first instance, was dismissed and the Court did not allow an application for adjournment on the basis of receipt of late material. The decision was appealed on the following basis: "(a) in refusing the appellant's application for an adjournment which would have enabled the appellant to file a further affidavit relating to the conduct of the respondent relevant 'to issues of waiver, estoppel and unconscionable conduct'; (b) in concluding that the appellant's default was irremediable so that the relief under s 95(3) of the Property Law Act was not available; (c) in holding that the 'non-waiver' clause had not itself been waived by the respondent or in failing to hold that reliance on the clause would be unconscionable; (d) in failing to exercise the general equitable jurisdiction to grant relief against unconscionable conduct."
In discussing an issue regarding s 95 of the Property Land Act 1974 (Qld), Keane JA (with whom McMurdo P agreed) observed (at [33]): "33. The learned primary judge expressly did not proceed in reliance upon the appellant's failure to pay land tax as a ground of default. Rather, he proceeded by reference to the defaults in relation to the criminal proceedings, the restraining order and the caveat. The recurrent fresh defaults to which I have referred had not been remedied by the appellant and so relief from default was not available under the terms of s 95(2). Further, because of the nature of those defaults and the absence of any undertaking to remedy those defaults, the appellant was, and remains, unable to qualify for consideration for the grant of discretionary relief under s 95(3) of the Property Law Act."
Keane JA then gave consideration to the equitable jurisdiction of the Court, under a heading dealing with the same subject matter, (at [48] - [62] of the judgment). Paragraphs [48] to [55] are relevant in this matter. Below is an extract of those passages: "Equitable jurisdiction 48. At this point, it becomes necessary to consider the appellant's argument that equitable doctrines associated with relief from forfeiture, penalties and unconscionable conduct were apt to preclude the respondent from exercising its right to accelerate payment of the principal. 49. The appellant sought to put his case in terms of the exposition by Lord Wilberforce in Shiloh Spinners Ltd v Harding of: "the right of courts of equity in appropriate and limited cases to relieve against forfeiture for breach of covenant or condition where the primary object of the bargain is to secure a stated result which can effectively be attained when the matter comes before the court, and where the forfeiture provision is added by way of security for the production of that result." 50. This doctrine is concerned with the principle of equity that the "failure to redeem a mortgage upon the covenanted date for repayment [does] not destroy the equity of redemption without the proper exercise of a power of sale or a foreclosure suit in equity."13 In my view, this doctrine is irrelevant in the circumstances of the present case for several reasons. First, the point at issue is not whether the acceleration is apt to deny the appellant's right to redeem the mortgage; he remains entitled to redeem the mortgage notwithstanding the acceleration. But he is not able to do so. Secondly, it is the repayment of the debt which is one of the principal objects of the transaction. Because of the appellant's inability to pay, this Court cannot, by its orders, achieve that object, ie the repayment of the principal debt by granting of relief to the appellant conditioned upon the payment of the principal. 51. The appellant has no arguable ground for invoking equitable intervention drawn from the other stream of equitable jurisdiction discussed by Lord Wilberforce, namely "the heads of fraud, accident, mistake or surprise". In this regard, there is no basis for the suggestion that the appellant's breaches of covenant or his failure to remedy them or even his continued payment of interest were brought about by an inducement from the respondent. There can be no suggestion that the respondent in any way lulled the appellant into a false sense of security in relation to his defaults. 52 There are, in my view, further answers to the appellant's attempt to invoke this equitable doctrine. The first is that it cannot sensibly be said that there is any "forfeiture" involved in the triggering of the respondent's rights immediately to recover the principal sum. The principal sum was owed to the respondent by the appellant, but it was not repayable while the appellant was not in default in respect of the facility. That the debt became repayable on the occurrence of default by the appellant is neither a forfeiture nor a penalty. 53. In this regard, there is no estate or interest which the appellant forfeits by reason of the respondent's entitlement to payment of the principal debt. The appellant's complaint is that he has lost the benefit of the contract of loan remaining on foot for the balance of the five years of the facility. Such a benefit is dependent upon the terms on which it depends for its existence. That sort of benefit does not attract the protection of the equitable doctrine of relief against forfeiture. 54 As to penalty, there is strong authority for the proposition the mere fact that a principal sum becomes payable "upon a failure by a borrower to comply with the conditions on which credit was extended cannot constitute a penalty." There is no authority which supports the appellant's submission to the contrary. It was argued on the appellant's behalf that the reasons of Gaudron J in Stern v McArthur18 provided support for the appellant's contention; but it is apparent that her Honour was prepared to regard a contractual provision for the payment of money as being a penalty or "in the nature of a penalty" only where the provision for the payment is "security for a stated result". In this mortgage, the obligation of the appellant to repay the principal to the respondent was not "security" for some other result. It was, in truth, the substantial entitlement of the respondent, the postponement of which depended upon the appellant's compliance with the terms of the mortgage. 55 Next, the appellant was driven to invoke a broader equitable doctrine pursuant to which: "Equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has 'played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it' … Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption." 56. The principal difficulty for the appellant in seeking to rely upon this statement of principle in the present case is that the appellant cannot show that he has acted, in any way, in reliance on an assumption induced by the respondent so that it would be a detriment to the appellant if the respondent were to be allowed to enforce its claim to repayment of the principal sum. The instalments of interest were payable by the appellant under the mortgage; paying them discharged his obligation in that regard. One cannot sensibly speak of the discharge of an obligation as a detriment. 57. Further, the terms of the mortgage made it clear that the receipt of such instalments did not, of itself, involve any assurance to the appellant that the rights of enforcement which had arisen in the respondent would not ever be exercised. The very purpose of clause 4.2, 11.1 and 25.8 was to ensure that no such assurance could be taken by the appellant from the respondent's receipt of interest payments. 58. The appellant also invokes even more open textured statements of equitable principle in relation to relief against unconscionable conduct. 20 In this regard, the recent decision of the High Court in Tanwar Enterprises Pty Ltd v Cauchi21 confirms that, in the present case, there is nothing unconscionable in the respondent insisting upon the rights conferred on it by the facility pursuant to which the appellant acquired the property."
The appeal was dismissed, and the Court held equitable principles did not apply.
Kostopoulous has been cited with approval by McDougall J in RHG Mortgage Securities Pty Ltd v BNY Trust Company of Australia Ltd [2009] NSWSC 1432 ("RHG Mortgage") as follows (at [173]): "173. It follows that, if a receiver is appointed and does sell the charged Receivables, the forfeiture involved will result from the plaintiffs' inability to satisfy the enlivened obligation to pay the outstanding balance of principal. As Keane JA pointed in Kostopoulos at [50], the plaintiffs' inability to repay the outstanding balance of principal means that the Court could not achieve that object by imposing an appropriate condition on the grant of relief against forfeiture."
This authority has also been cited with approval by Adamson J (as his Honour then was) in Westpac Banking Corporation v Parker [2012] NSWSC 514 ("Parker") as follows (at [34]): 34. I do not consider that the equitable jurisdiction to grant relief against forfeiture is relevant to the Parkers' application in light of the authorities which establish that a clause in a mortgage which suspends payment of the principal owing if payments by instalments are made in accordance with the terms of the agreement between the parties is not a penalty and does not involve forfeiture: Kostopoulos v GE Commercial Finance Australia P/L [2005] QCA 311 at [48]-[54], per Keane JA, McMurdo P and Dutney J agreeing; RHG Mortgage Securities Pty Limited & Ors v BNY Trust Company of Australia Limited & Anor [2009] NSWSC 1432."
The headnote to the judgment in Tanwar explains the background circumstances of that matter as follows: "Three contracts for the sale of land stipulated the same completion date. At first, time was not stated to be of the essence. After the completion date was extended several times, a new date was fixed. Time was made of the essence. The purchaser was unable to complete the contracts on the new date because of a delay in obtaining finance. Finance became available the following day. The vendors were aware that the purchaser then wished to complete the contracts but issued notices of termination. The purchaser sought specific performance on the basis that the contracts had not been validly terminated, alternatively consequent upon relief against forfeiture of the contracts."
The majority of the High Court (Gleeson CJ, McHugh, Gummow, Kirby, Hayne and Heydon JJ) made the following observations bearing upon the question of unconscionability as follows (at [58] - [60]): "58. What Lord Wilberforce in Shiloh Spinners called "the special heads of fraud, accident, mistake or surprise" identify in a broad sense the circumstances making it inequitable for the vendors to rely upon their termination of Tanwar's contracts as an answer to its claim for specific performance. No doubt the decided cases in which the operation of these "special heads" is considered do not disclose exhaustively the circumstances which merit this equitable intervention. But, at least where accident and mistake are not involved, it will be necessary to point to the conduct of the vendor as having in some significant respect caused or contributed to the breach of the essential time stipulation. Tanwar's situation falls beyond that pale. The statement by Mason CJ in Stern respecting the insignificance of subsequent events for which the vendors were in no way responsible is fatal to the main thrust of Tanwar's case. 59 It should be made clear that what is said above does not support any proposition that the circumstances must be "exceptional" before equity intervenes. In their joint judgment in Stern116, Deane and Dawson JJ, with reference to what had been said by Mason and Deane JJ in Legione117, said, in a passage which puts the point of present significance: "Mason and Deane JJ were not saying that there must be unconscionable conduct of an exceptional kind before a case for relief can be made out. Rather, what was being said was that a court will be reluctant to interfere with the contractual rights of parties who have chosen to make time of the essence of the contract. The circumstances must be such as to make it plain that it is necessary to intervene to avoid injustice or, what is the same thing, to relieve against unconscionable - or, more accurately, unconscientious - conduct." 60 Thus, it remains for Tanwar to show that it is against conscience for the vendors to set up the termination of the contracts. In the present appeal, as already has been indicated, there was no representation by the vendors which could found any estoppel. Nor has Tanwar asserted that there was any mistake in any relevant sense."
Whilst no draft defence has been provided to the Court (under instructions given by the defendant), the written submissions of the defendant are, in a general sense, productive of an assessment, as earlier mentioned, that the defendant intended to rely upon a defence based upon unconscionable conduct. In substance, it would appear that the defence would amount to a claim for relief against forfeiture although the particulars of any defence, in that respect, are scant.
I turn then to my considerations of that foreshadowed defence in the light of the submissions made by the parties and the evidence.
There was no dispute in these proceedings that the defendant was in a state of indebtedness under the Mortgage. The defendant was in default on the Loan and Mortgage in accordance with the default notice.
The Claim (which sought to claim the full amount remaining under the Loan relying on the acceleration clause, namely cl 22.2(b) under the Loan and cl4.4(b)(i) of the Mortgage) was filed on 18 January 2024. It is clear that more than 30 days' notice of default was provided to the defendant such that reliance on the acceleration clause was available under the Loan and Mortgage.
In those circumstances, the accelerator provisions of the Loan and Mortgage were triggered. The default judgment placed the plaintiff in possession of the property. There is no stay or injunction preventing sale of the property.
The restraining order continues to operate with respect to the Property. Hence, since the Loan went into default, it has not been possible for any arrears on the Suncorp account to be made.
It is not the case, therefore, that the setting aside of the Default Judgment will, on the evidence, vary those circumstances.
The NSWCC did confirm that it would consent to the variation of the restraining order for the payment of arrears but that position was dependent upon the mortgagee not being opposed to that course of action resulting in reversion to the defendant making a payment of arrears and resuming mortgage payments. The position of the plaintiff was and is that it would not consent to such a course because the debt had been accelerated and a variation to the restraining order to pay arrears and then continue repayments was not an available response to the Claim.
It follows that the submission made by the defendant that the arrears "could have always been covered from the Suncorp account" may not be accepted when expressed at that level of generality.
When the entirety of the defendant's contentions, such as they were, are considered in the light of the evidence in these proceedings, there must be real doubt about the prospect of the defendant making out a defence based upon the equitable doctrine of forfeiture.
Counsel for the plaintiff relied upon the judgment of the Queensland Court of Appeal, Kostopoulos. The defendant also seemed to, at least implicitly, rely on that authority. I propose, with respect, to follow that judgment, as a judgment of an intermediate appellate court and one that has been applied in this Court in RHG Mortgage and Parker.
I agree with the submission of the plaintiff that the factual circumstances in Kostopoulos are consistent with those operating in the present matter because: 1. The mortgagor was charged with a criminal offence, which restrained dealings with his property and there was a lodgement of a caveat over the property. 2. The proceedings concerned a debt acceleration clause under the mortgage (although it was noted that in these proceedings 30 days' notice of default was required before acceleration could occur whereas in Mr Kostopoulos no notice was required). 3. The acceleration clause was activated by default (although in Kostopoulos the default was non-monetary, namely, that a caveat was placed on the property).
Whilst the defendant directed attention to [50] of Kostopoulos and in particular, the reference by Keane JA to the appellant in that matter being "entitled to redeem the mortgage notwithstanding the acceleration [,but] he [was] not able to do so", the Court was there alluding to restraints operating upon the appellant of the kind discussed in [33] of the judgment in Kostopoulos. The Court found there was no right in forfeiture.
In Kostopoulos, the fact that the debt had become "repayable on the occurrence of default by the appellant" did not constitute forfeiture (at [50]) and the benefit under the Mortgage was dependent upon the terms "on which it depended for its existence" (at [53]). There was no reliance, in that matter, or in the current proceedings, that the plaintiff (the appellant in Kostopoulos) acted in reliance on an assumption induced by the defendant (the respondent in Kostopoulos) such that it would be a detriment to the plaintiff (appellant) if the defendant (the respondent) were to be allowed to enforce its claim to repayment of the principle sum (at [56]).
Further, it was not suggested by the defendant, in any foreshadowed defence, that success upon the defence would result in the vitiation the Mortgage.
These considerations also underline why a failure by the defendant to provide a draft defence is particularly relevant in this matter to the exercise of the Court's discretion against the granting of the Motion.
There is a further factor pointing to the weakness of the proposed defence.
In order to make good the suggested defence, it is necessary for the defendant to show that it is "against conscience" (Tanwar at [60]) for the plaintiff to act under the acceleration clause of the Mortgage.
Thus, I agree with the submission of the counsel for the plaintiff that it would be necessary to show that the plaintiff had acted unconscionably or unconscientiously in order for relief against forfeiture to be available.
The Court does not have a pleaded defence as to what actions or inactions by the plaintiff constituted unconscionable conduct. If a defence were allowed, it may be accepted that additional evidence may be called on the question, but for present purposes the Court has the bare submissions of the defendant suggestive of circumstances that may give rise to a case in unconscionably. But even within those broad parameters, there must be real doubts as to whether the defendant has an arguable defence. My reasons for this conclusion appear below.
First, the plaintiff took the following active steps to alert the defendant as to its default: 1. On 23 November 2023, the plaintiff issued a default notice to the defendant. I note that Mr Daneshyar was listed as the Guarantor. 2. On 15 November 2023, Bluestone sent a third party authority form to Mr Daneshyar per his request. 3. On 20 November 2023, a representative of Bluestone sent Mr Daneshyar an email highlighting that the proposed third party, Melanie Horswill, had not signed the document. 4. On 18 December 2023, a representative from Bluestone sent an additional email to Mr Daneshyar attaching a third party authority form. 5. On 22 December 2023, a representative from Bluestone emailed Mr Daneshyar to follow up his account arrears of $17,262.42.
Secondly, the following additional factors are relevant: 1. As earlier mentioned, Mr Daneshyar relied to the email of 22 December on the same day stating "I have discussed with your team many times the right person to contact regarding the loan. The NSW crimes commission has sceased (sic) my accounts and I have put them onto the right person to contact to get the accounts upto (sic) date". 2. I agree with the submissions on the plaintiff that there is no obligation under the Mortgage or Loan on a lender to interrogate reasons for default and to then take steps to try to deal with those reasons for default to bring the account back into order. 3. The NSWCC was seeking the mortgagee's consent to vary the orders, but as I have earlier noted, the observations of a senior solicitor for the NSWCC made on 24 June 2024 were that the defendant needed to confirm with the mortgagee was not opposed to the proposed course of action (see at [28] above). The communication from the NSWCC was not responded to by the defendant or his lawyers.
Having regard to the entirety of the aforementioned considerations, and the intimation by the defendant as to a potential defence, on the evidence before the Court as to the Motion, I consider that the defendant has a weak case on the merits of the foreshadowed defence outlined in the defendant's submissions.
I turn to the further and alternative issue raised by the plaintiff as to the orders for possession.
In Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 ("Inglis"), Walsh J stated (at [166] - [167]): "I am aware, of course, that the amended statement of claim includes charges that in relation to the keeping of accounts and in failing to give proper statements of account to the plaintiffs and in other ways the defendant has acted wrongfully. In this connexion, I may refer particularly, perhaps, to pars 94 and 94A of the amended statement of claim. But it is not those acts against which relief is sought in the present application. In my opinion the fact that those charges have been made and there has not yet been an adjudication upon them is not a reason for restraining the defendant from exercising its powers under the mortgage. As I have stated, it is not in dispute that there was an indebtedness under the mortgage, that is to say, that there were advances of money which were not repaid. Neither the existence of disputes as to the correct amount of that indebtedness nor the claim already mentioned that, whatever it ,was, it had been counterbalanced by the claim of the plaintiffs for damages is a ground, in my opinion, for preventing the mortgagee from exercising its rights under the mortgage instrument. In Morgan & Son Ltd. v. S. Martin Johnson & Co. Ltd. (1), a passage was cited from the judgment of Lord Cottenham in Rawson v. Samuel (2), and in which Lord Cottenham referred to some earlier cases which he described as being cases where-I quote his words-" the equity of the bill impeached the title to the legal demand". … " I am of the opinion that the case is not one in which the Court should intervene to restrain the exercise by the mortgagee of whatever powers it has under the mortgage instrument. Of course, any mortgagee i" subject to the requirements of the law, including various equitable principles, in respect of the manner in which he or it exercises powers given by a mortgage deed. But at present I am not concerned with any such question as that. The problem before me is whether, in the circumstances and having regard to the nature of the action that has been brought and the claims made in it, the defendant should be prevented, in aid of the plaintiffs' claims, from exercising any rights at all under the mortgage instrument, until those claims have all been finally determined. In my opinion the principles on which the Court has always acted do not permit the Court to intervene because of the existence of those claims…"
Walsh J's judgment was sustained on appeal where Barwick CJ (with whom Menzies and Gibbs JJ agreed stated (at [169]): "The case falls fairly, in my opinion, within the general rule applicable when it is sought to restrain the exercise by a mortgagee of his rights under the mortgage instrument. Failing payment into court of the amount sworn by the mortgagee as due and owing under the mortgage, no restraint should be placed by order upon the exercise of the respondent mortgagee's rights under the mortgage. In my opinion, the appeal should be dismissed".
In National Australia Bank Ltd v C & O Voukidis Pty Ltd [2014] NSWSC 384 ("Voukidis") Campbell J observed (at [25] - [28]): "25. The matters relied upon by the first defendant as demonstrating an underlying defence, are set out in a proposed amended defence handed up in Court during argument on the 6th of March 2012. A further version was tendered as Exhibit 2 on 8th March 2012. It includes averments to the following effect: "(a) That the Bank wrongfully and unconscionably caused the surplus funds for the sale of the other Burwood property to be paid into the controlled money account rather than applying them to the reduction of the second portfolio facility; (b) In December 2012 'wrongfully and unconscionably caused' the term deposit to be paid in reduction of the Bills Facility, rather than in reduction of the debts secured by the mortgage on the Burwood property." It is also averred that the provision of the term deposit was meant to be an interim security which would be released when the mortgage over the Drummoyne property was established; from what was argued by counsel, it may be that these matters are also relied upon as an estoppel by representation. The amended defence seeks a discharge of the first mortgage and a discharge of the fourth guarantee. 26. The only remedy sought by the Bank is summary judgment for possession. It does not seek to recover the monetary debt. It is difficult to see how there could be any complaint about the surplus funds given that the Bank has dealt with them in accordance with Court orders, likewise, the term deposit. These funds in total amount to about $2 million and would be insufficient to discharge the whole of the indebtedness of Mr and Mrs Voukidis and their related entities. They are insufficient to discharge the total of the indebtedness of Mrs Voukidis alone. But, as I have said, the term deposit was initially frozen by virtue of a Court order and the Bank had no choice but to comply with it. The surplus funds remain in the same category. 27. Nothing brought forward in the Amended Defence, or by way of argument, vitiates the Bank's title under its mortgage. To the extent to which the various matters raised by the first defendant might be arguable, and it is not obvious to me that they are, they are caught by the principle discussed in Inglis. That is to say, these matters do not undermine the Bank's title as mortgagee to possession, but rather arise by way of counterclaim or setoff and as such cannot defeat the claim for possession. 28. The first defendant's averments may after a hearing on the merits give rise to claims which sound in damages or equitable compensation and they should be permitted to continue. But that does not mean that the Bank is not entitled to possession."
Counsel for the plaintiff advanced a submission, in the alternative, predicated on Inglis and Voukidis such that, if the defendant had met the burden of making out an arguable defence, the Court should only set aside the judgment for debt and not possession (which would remain on foot).
The defendant accepted that the mortgagee was entitled to possession under the terms of the mortgage and "that is a distinct matter from the debt judgment". However, it was contended that the unconscionable defence was equally applicable in respect to all actions the mortgagee might take in response to arrears on a Loan and Mortgage. The judgment in possession and debt flowed from the same default for the same causes (that is, the plaintiff's level of knowledge).
The defendant sought to deal with Inglis and Voukidis by submitting that, on those cases, the mortgagor had alleged set-off and sought interlocutory relief against the mortgagee exercising a power of sale in circumstances where the mortgage wanted to advance a set-off. Here it was submitted, the unconscionable conduct defence should result in a different outcome because the plaintiff should not be permitted to rely, in the circumstances of unconscionable conduct, with the acceleration clause or possession under the loan. The general principles applied to unconscionable conduct are equally applicable to any claim the mortgagee may take under the mortgage, even though surrounding circumstances may vary in a way that effects whether unconscionable conduct may be established.
It is strictly unnecessary to deal with this issue. However, I will make some brief observations.
The problems besetting the Motion by the failure to produce a draft defence reach a high point in respect of the alternative submissions of the plaintiff because of an absence of definition (and authority) as to how the defence, in this respect, may be formulated.
In any event, the way that the defendant has constructed its argument as to the alternative contentions necessarily invokes the same considerations that I have entertained in finding that there was an insufficiency of a trailable defence arising from that primary argument. Furthermore, I do not consider that Inglis and Voukidis may be distinguished from the present case in the manner suggested by the defendant.

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