Perpetual Limited v Onesemo

CATCHWORDS : PROCEDURE - Pleadings - Amendment - Leave - where cross claimant seeks leave to file further amended cross claim - whether dictates of justice require amendment be allowed

Civil Procedure Act 2005 LEGISLATION CITED : Contracts Review Act 1980 Uniform Civil Procedure Rules 2005

Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 (5 August 2009) Banque Commercials SA (En Liquidation) v Akhil Holdings Limited (1990) 169 CLR 279 Collier v Morlend Finance Corporation (Vic) Ltd (1989) 6 BPR 13,337 Esanda Finance Corporation Ltd v Tong (1997) 41 NSWLR 482 Johnston v Australian and New Zealand Banking Group Ltd; Johnston v Richardson [2003] NSWSC 454 CASES CITED : Lawrance v Norreys (1890) 15 App Cas 210 Middleton v O'Neill (1943) 43 SR(NSW) 178 Nguyen v Taylor [1992] 27 NSWLR 48 Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 St George Bank Ltd v Trimarchi and Anor [2004] NSWCA 120 Wallingford v Mutual Society (1880) 5 App Case 685

Perpetual Limited (Plaintiff/First Cross Defendant) Nofoagafou Onesemo (Defendant/First Cross Claimant) PARTIES : Universal Property Group Ltd (Bathla Investments Pty Ltd) (Second Cross Defendant) Lanka Developments Pty Ltd trading as Win Win Financial Services (Third Cross Defendant) Baskaran Gurusamy practicing as Gurusamy Lawers (Fourth Cross Defendant)

D Barnett (Plaintiff/First Cross Defendant) COUNSEL : A Tibbey (Defendant/First Cross Claimant) D Lloyd (Third Cross Defendant) E Glover (Fourth Cross Defendant)

Dibbs Barker (Plaintiff/First Cross Defendant) SOLICITORS : Peter Baker Solicitor (Defendant/First Cross Claimant) Kennedys (Third Cross Defendant) DLA Phillips Fox (Fourth Cross Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION POSSESSION LIST

2008/283810 PERPETUAL LIMITED v NOFOAGAFOU ONESEMO & ORS

JUDGMENT (Leave to file a further amended cross claim) 1 HER HONOUR: By notice of motion filed 29 December 2009, the defendant/first cross claimant seeks to review the decision of Registrar Greenwood made on 3 December 2009 and an order that the first cross claimant be granted leave to file and serve an amended first cross claim. 2 The plaintiff/first cross defendant is Perpetual Limited ("Perpetual"). The defendant/first cross claimant is Nofoagafou Onesemo ("Mr Onesemo"). The second cross defendant is Universal Property Group Ltd (Bathla Investments Pty Ltd) ("Universal Property") the vendor of the property. The vendor neither consent nor opposes this application. The third cross defendant is Lanka Developments Pty Ltd t/as Win Win Financial Services ("Win Win Financial"). Win Win is a finance broker. The fourth cross defendant is Baskaran Gurusamy practicing as Gurusamy Lawyers ("Gurusamy Lawyers"). For convenience I shall refer to the parties by name. 3 At the hearing of this motion, it was my view that the proposed amended cross claim that was before the Registrar was not properly pleaded and the decision of the Registrar was correct. Since the Registrar made her decision Mr Onesemo has drafted further amended cross claim ("FACC") (Ex A). Leave is sought to file this cross claim. Mr Onesemo relied upon further evidence, his affidavit dated 5 February 2010 and two affidavits of Peter Baker dated 29 December 2009 and 29 January 2010. 4 These reasons are brief as a hearing date of 19 April 2010 has already been allocated. The trial is listed for eight days. My decision needs to be given expeditiously. 5 Counsel for Mr Onesemo submitted that leave should be granted to file an FACC. The first, third and fourth cross defendants opposed such an order being made. 6 The parties referred to Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 (5 August 2009) ('Aon"). In Aon Gummow, Hayne, Crennan Kiefel and Bell JJ moved away from the prior position in Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146. Their Honours stated at [97] and [111]:

"[97] The objectives of case management are now expressly stated in r 21 of the Court Procedures Rules. It cannot be overlooked that later rules, such as r 21, are likely to have been written with the decision in J L Holdings in mind. The purposes stated in r 21 cannot be ignored. The Court Procedures Rules make plain that the Rules are to be applied having regard to the stated objectives of the timely disposal of the proceedings at an affordable cost. There can be no doubt about the importance of those matters in litigation in the courts of the Australian Capital Territory.

[111] An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in J L Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases. On the contrary, the statements are not consonant with this court's earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future." 7 The provisions of the Civil Procedure Act 2005 are the starting point in determining this application. 8 Section 64(1) of the Civil Procedure Act is the source of the Court's power to allow amendments to pleadings. Section 64 reads: "64 Amendment of documents generally

(1) At any stage of proceedings, the court may order: (a) that any document in the proceedings be amended, or (b) that leave be granted to a party to amend any document in the proceedings.

(2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings. …" 9 The power under s 64 must be exercised subject to s 58 of the Civil Procedure Act. It reads: "58 Court to follow dictates of justice

(1) In deciding: (a) whether to make any order or direction for the management of proceedings, including: …

(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." 10 Subsection 58(2)(a) provides that the Court must consider the matters in s 56 and s 57 of the Civil Procedure Act in order to determine what are the dictates of justice in a particular case. The matters enumerated in s 58(2)(b)(i)-(vii) may be taken into account by the Court in determining what are the dictates of justice. 11 Section 56 provides as follows: "56 Overriding purpose

(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.

(4) A solicitor or barrister must not, by his or her conduct, cause his or her client to be put in breach of the duty identified in subsection (3).

(5) The court may take into account any failure to comply with subsection (3) or (4) in exercising a discretion with respect to costs." 12 Section 57 provides that: "57 Objects of case management

(1) For the purpose of furthering the overriding purpose referred to in section 56 (1), proceedings in any court are to be managed having regard to the following objects: (a) the just determination of the proceedings,

(b) the efficient disposal of the business of the court,

(c) the efficient use of available judicial and administrative resources,

(d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. (2) This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1)." 13 In addition to these mandatory and discretionary factors, the observations of the High Court in Aon are relevant. While the High Court in Aon dealt with the Rules of the Supreme Court of the ACT, they are similar to those in New South Wales. The High Court in Aon stated at [102] and [103]: "[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. While 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 JL 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." 14 It is necessary to consider first, the nature and importance of the amendments; secondly, the extent of the delay and the prejudice caused to the cross defendants; thirdly, the point the litigation has reached when the amendments are sought; and fourthly, the cross claimant's explanation for delay. The statement of claim and further amended cross claim 15 By statement of claim filed 3 April 2008, Perpetual seeks possession of the property at Oxley Park, New South Wales being the land comprised in Certificate of Title Folio Identifier 2/SP75615. Mr Onesemo has cross claimed against four defendants. 16 Mr Onesemo has now served a valuation certificate. There are no objections to the amendment to paragraph 12 of the proposed FACC that alleges that the property was overvalued. The contentious pleadings are contained in paragraphs 13, 17 and 18 of the FACC. 17 Generally, pleadings should comply with r 14.1 and r 14.4 of the Uniform Civil Procedure Rules 2005. They read: "14.1 Application This Part applies to proceedings commenced by statement of claim and to proceedings in which a statement of claim has been filed. 14.14 General rule as to matters to be pleaded specifically

(1) In a statement of claim, the plaintiff must plead specifically any matter that, if not pleaded specifically, may take the defendant by surprise.

(2) In a defence or subsequent pleading, a party must plead specifically any matter:

(a) that, if not pleaded specifically, may take the opposite party by surprise, or

(b) that the party alleges makes any claim, defence or other case of the opposite party not maintainable, or

(c) that raises matters of fact not arising out of the preceding pleading. (3) Matters which must be pleaded pursuant to subrule (2) include (but are not limited to) fraud, performance, release, statute of limitation, extinction of right or title, voluntary assumption of risk, causation of accident by unknown and undiscoverable mechanical defect and facts showing illegality."

The mortgage broker 18 Fraud is alleged against the mortgage broker (at [13] of the FACC). It is a very serious allegation. Paragraph [13] reads: "13. Without the knowledge or consent of the defendant and cross claimant, Byron Fernando, mortgage broker employed by the third cross defendant submitted documents to "Steve" of Mortgage Ezy Pty Limited that did not accurately represent the information provided by the defendant to the second and third cross defendant and that falsely, fraudulently and misleadingly represented the following: i. That the defendant and cross claimant earned $74,234, when in fact he earned $46,800 per year; ii. That the defendant and cross claimant worked for Trans Oz Asia Pty Ltd which he did not; iii. Provided two false payslips; iv. That Mrs Onesemo had gifted her husband, the defendant and cross claimant, with $50,000; v. Provided false ATO PAYG payment summary for the year ending 30 June 2006 showing earnings of $74,234.00; vi. That the defendant and cross claimant had superannuation worth $10,000; vii. That the defendant and cross claimant had furniture worth $35,000; viii. That the defendant and cross claimant had a car worth $5,000. 19 Rules 15.3 and 15.4 of the Uniform Civil Procedure Rules concern fraud. They read:

"15.3 Allegations of behaviour in the nature of fraud

A pleading must give particulars of any fraud, misrepresentation, breach of trust, wilful default or undue influence on which the party relies.

(1) A pleading that alleges any condition of mind must give particulars of the facts on which the party pleading relies.

(2) In subrule (1), condition of mind includes any disorder or disability of mind, any malice and any fraudulent intention, but does not include knowledge." 20 In Johnston v Australian and New Zealand Banking Group Ltd; Johnston v Richardson [2003] NSWSC 454 Davies AJ stated at [26]: "26 … Fraud must be pleaded specifically and with particularity: see Banque Commerciale S.A. (En Liquidation) v Akhil Holdings Limited (1990) 169 CLR 279 at 285; Wallingford v Mutual Society (1880) 5 App Cas 685 at 701 and Middleton v O'Neill (1943) 43 SR(NSW) 178 at 184. In Lawrance v Norreys (1890) 15 App Cas 210 at 221, Lord Watson said:- 'In my opinion, a plaintiff who desires to avail himself of the provisions of sect. 26 is not released from the ordinary rule of pleading applicable to cases of fraud, which was thus expressed by Earl Selborne in Wallingford v Mutual Society [(1880)] 5 App. Cas. [685 at] 697: 'General allegations, however strong may be the words in which they are stated, are insufficient to amount to an averment of fraud of which any Court ought to take notice.' It is not a sufficient compliance with the rule to state facts and circumstances which merely imply that the defendant, or some one for whose action he is responsible, did commit a fraud of some kind. There must be a probable, if not necessary, connection between the fraud averred and the injurious consequences which the plaintiff attributes to it; and if that connection is not sufficiently apparent from the particulars stated, it cannot be supplied by general averments. Facts and circumstances must in that case be set forth, and in every genuine claim are capable of being stated, leading to a reasonable inference that the fraud and the injuries complained of stood to each other in the relation to cause and effect.'" 21 The identity of the person so closely connected with the company has now been identified so that deficiency that appears in the earlier amended cross claim has been rectified. That person has been identified as Byron Fernando who was employed by Win Win so his state of mind can be treated as the state of mind of the company. However, paragraph 13 does not plead that Mr Fernando was the author of or involved in the making of these false documents. However, r 15.4 states that condition of mind does not include knowledge. The alleged false documents are identified with precision. If the cross claimant did not prepare these documents at the meeting with Mr Fernando, a reasonable inference can be drawn that he was the author. Whether the cross claimant can establish this is a matter for trial. It is my view that this pleading is adequate. The lender 22 Paragraphs 17 and 18 make allegations against the lender, Perpetual. They read: 17. Further or in the alternative, the contracts with the first cross defendant, the second cross defendant and third cross defendant were unjust at the time they were each made and at times thereafter within the meaning of the Contracts Review Act 1980. Particulars (a) The cross claimant repeats the particulars set out at paragraphs 11 and 12; (b) The plaintiff/first cross defendant failed to prudently require sufficient and appropriate verification of the income and assets of the defendant/cross claimant, such as tax assessment notices, group certificates, copies of filed tax returns, proof of superannuation entitlement and proof of ownership of car before approving the loan and entering into the mortgage with the defendant/cross claimant; (c) The plaintiff/first cross defendant failed to prudently require an accurate valuation of the property; (d) The plaintiff/first cross defendant relied upon an inaccurate valuation of the property; (e) The plaintiff/first cross defendant chose not to contact the defendant/cross claimant directly, prior to entering into the mortgage, but acted at all times through intermediaries. 18. Without the knowledge or consent of the defendant and cross claimant, Byron Fernando, mortgage broker employed by the third cross defendant submitted documents to "Steve" of Mortgage Ezy Pty Limited that did not accurately represent the information provided by the defendant to the second and third cross defendant and that falsely, fraudulently and misleadingly represented the following: i. That the defendant and cross claimant earned $74,234, when in fact he earned $46,800 per year; ii. That the defendant and cross claimant worked for Trans Oz Asia Pty Ltd which he did not; iii. Provided two false payslips; iv. That Mrs Onesemo had gifted her husband, the defendant and cross claimant, with $50,000; v. Provided false ATO PAYG payment summary for the year ending 30 June 2006 showing earnings of $74,234.00; vi. That the defendant and cross claimant had superannuation worth $10,000; vii. That the defendant and cross claimant had furniture worth $35,000; viii. That the defendant and cross claimant had a car worth $5,000." 23 Claims have been made against Perpetual under the Consumer Credit Code, Contracts Review Act and a claim for unconscionable conduct. Counsel for Perpetual submitted that correspondence between its solicitors and Mr Onesemo's solicitors amount to representations that he is not alleging fraud against it nor is he alleging that it had knowledge that the documents (payslips etc) were fraudulent. It is not alleged that his signature on the mortgage was forged. Counsel for Perpetual submitted that without allegation of fraud made against it, Mr Onesemo cannot rely on the Contracts Review Act, Consumer Credit Code and unconscionable conduct. 24 Counsel for Mr Onesemo referred to St George Bank Ltd v Trimarchi and Anor [2004] NSWCA 120 where it states at [36]:

"36 These submissions overlook the deficiencies disclosed on the face of the Certificates. Moreover, they are legally misconceived, because a transaction may be unjust even though one party to it was not privy to or on notice of (all of) the circumstances rendering it unjust (see eg Collier v Morlend Finance Corporation (Vic) Ltd (1989) 6 BPR 13,337, Esanda Finance Corporation Ltd v Tong (1997) 41 NSWLR 482). Of course, the state of mind of the "innocent" party is relevant to the unjustness calculus and to the discretionary remedial response." 25 In Nguyen v Taylor [1992] 27 NSWLR 48 at 54 the court reiterated that the focus of attention of Contracts Review Act is not simply the unjust conduct of the party against whom relief is sought. It is upon the contract which has resulted between the parties and which may be determined to be unjust, although the resisting party was wholly or mainly innocent of the source of the injustice found. It is my view that the claims against the lender are properly pleaded.

The solicitor 26 Mr Onesemo pleads a claim for breach of fiduciary duty against his solicitor. At paragraph 25(o), Mr Onesemo pleads: (o) witnessing a statutory declaration that was purportedly, but not in fact, signed by Mrs Onesemo, prior to receiving from Mr Onesemo, prior to meeting Mrs Onesemo and which contained information that was false." 27 Mr Gurusamy solicitor's submitted that this pleading should be struck out because it is doomed to failure. On 8 August 2006, Mr Gurusamy witnessed the statutory declaration. On 17 August 2006, Mr Gurusamy was retained by Mr Onesemo. Mr Gurusamy's solicitor submitted that on 8 August 2006, the solicitor had not yet been retained. The solicitor merely witnessed the statutory declaration. As there was no retainer between Mr Gurusamy and Mr Onesemo there could be no breach of fiduciary duty. Mr Gurusamy's solicitor pointed out that a solicitor, or any other authorised party, who witnesses a statutory declaration is not required to undertake their own investigation into the accuracy or correctness of the document. The duty of a solicitor, or any other authorised party, who is simply asked to witness a statutory declaration extend no further than, first, ensuring the identity of the declarant; secondly, warning the declarant that there are penalties for making a false declaration; thirdly, asking the declarant sign the declaration; and fourthly, watching the declarant sign the declaration. It is not alleged that Mr Gurusamy failed to do any of these. 28 However, it is my view that this pleading is one that should be left for trial because it depends on the evidence given as to when the retainer was entered into on an earlier date.

The explanation for delay 29 On 1 July 2009, the cross claimant changed solicitors. It only became apparent to the current solicitor on perusal of the discovered documents and after taking further instructions from the client that the documents were false, fraudulent and misleading. Mr Baker in his affidavit sworn 29 December 2009, deposed that this information was conveyed to all parties in the affidavit of Mr Onesemo dated 21 July 2009 and served on 3 August 2009. As the matter was fixed for mediation on 24 September 2009, in view of the possibility of settlement and to contain costs, the cross claim was not amended prior to mediation. The matter did not settle. On 17 November 2009, the notice of motion to file an amended cross claim was filed. It was heard on 3 December 2009 and leave to file the cross claim was rightly refused by the Registrar. Since then Mr Onesemo's legal representatives have attempted to cure deficiencies in the earlier amended cross claim. This current motion was filed on 29 December 2009. 30 In my view the pleading of fraud is central to the success of Mr Onesemo's claim against the mortgage broker. The fraud may also give rise to remedies the Contracts Review Act and Consumer Credit Code and the claim of unconscionable conduct against. So far as the lender is concerned, the nature and extent of the relationship between these cross defendants during the loan process will be of importance in the trial. That includes the involvement of the solicitor, the fourth cross defendant. The production and use of fraudulent documents and the legal remedies are a real issue in dispute. 31 With the trial fixed for 19 April 2010 and if the amendments are permitted, the question is whether the parties can be realistically ready for trial. All parties agree that amended defences need to be filed and discovery may have to be given in relation to the documents set out in paragraph [13] of the FACC. After taking all these factors into account, it is my view that the dictates of justice required that the amendment be allowed. 32 Leave is granted to file the further amended cross claim. The further amended cross claim is to be filed and served by 12 February 2010. Defences to the further amended cross claim are to be filed and served by 11 March 2010. The cross defendants are to file and serve defences to the further amended cross claim by 11 March 2010. The defendant/first cross claimant is to file and serve any further affidavits by 25 February 2010. The cross defendants are to file and serve any evidence by 31 March 2010. The cross defendants are to make any request for particulars by 16 February 2010. The defendant/first cross claimant is to answer particulars by 25 February 2010. Grant leave to the defendant/first cross claimant to subpoena Mortgage Ezy Pty Limited. Abridge the time for service to 5.00 pm on 16 February 2010. Matter to be listed for return of subpoena on 19 February 2010 at 9.00 am. Grant leave to the defendant/first cross claimant's Mr Baker to uplift original documents on his undertaking to return same by 11 March 2010.Costs are reserved.

(1) Leave is granted to the defendant/first cross claimant to file a further amended cross claim.

(2) The further amended cross claim is to be filed and served by 12 February 2010.

(3) The cross defendants are to file and serve defences to the further amended cross claim by 11 March 2010.

(4) The defendant/first cross claimant is to file and serve any further affidavits by 25 February 2010.

(5) Defendant/first cross claimant to file and serve any further lay affidavits by 25 February 2010.

(6) The cross defendants are to file and serve any evidence by 31 March 2010.

(7) The cross defendants are to make any request for particulars by 16 February 2010.

(8) The defendant/first cross claimant is to answer particulars by 25 February 2010.

(9) Grant leave to the defendant/first cross claimant to subpoena Mortgage Ezy Pty Limited. Abridge the time for service to 5.00 pm on 16 February 2010.

(10) Matter to be listed for return of subpoena on 19 February 2010 at 9.00 am.

(11) Grant leave to the defendant/first cross claimant's Mr Baker to uplift original documents on his undertaking to return same by 11 March 2010.

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