Perpetual Trustee Company Limited v Azzi

Contracts Review Act 1980 LEGISLATION CITED : Consumer Credit (New South Wales) Code Uniform Civil Procedure Rules

CASES CITED : Commercial Banking Co of Sydney Ltd v Pollard (1983) 1 NSWLR 74 Commonwealth of Australia v Griffiths & Anor [2007] NSWCA 370

PARTIES : Perpetual Trustee Company Limited (Plaintiff) Carole Azzi (Defendant)

COUNSEL : A Casselden (Plaintiff) J Merkel (Defendant)

SOLICITORS : Gadens Lawyers (Plaintiff) Margiotta (Defendant)

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

11501/2007 - PERPETUAL TRUSTEE COMPANY LIMITED v CAROLE AZZI

JUDGMENT (Summary judgment - Contracts Review Act defence) 1 HER HONOUR: By notice of motion filed 25 June 2008, the plaintiff seeks an order that there be judgment for the plaintiff against the defendant for possession of the land comprised in folio identifier 238/213510. The plaintiff is not pressing paragraphs 1 and 2 of the notice of motion. At this stage it is not seeking judgment for moneys owed. 2 The plaintiff is Perpetual Trustee Company Limited (Perpetual Trustee). The defendant is Carole Azzi (Mrs Azzi). Perpetual Trustee relied on the affidavits of Carey Wingate dated 7 December 2007 and 30 June 2008. Mrs Azzi relied on her affidavits sworn 14 August 2007, 20 August 2007 and 4 March 2008. 3 On 28 June 2007, default judgment was entered. On 6 March 2008, the default judgment was set aside. 4 By statement of claim filed 22 March 2007, Perpetual Trustee seeks possession of the property at Lurnea. The defendant is the registered proprietor of the property. Perpetual Trustee seeks possession of the land contained in registered mortgage number AA249671 (the mortgage). The mortgage imposed an obligation on the defendant to pay money to Perpetual Trustee as required under the terms of the agreement, a breach of which obligation has occurred. The mortgage confers a right to possession of the land on Perpetual Trustee that is contingent on there being default under the mortgage by the defendant. The defendant has defaulted under the mortgage. Perpetual Trustee pleads that it's right to possession of the land arises from the defendant's failure to pay money to it. The defendant's failure to pay money to Perpetual Trustee began on 29 December 2006. The amount of money currently unpaid is $578,518.08 as at 19 March 2007, which has been calculated in accordance with the terms of the agreement. 5 The defendant admits that there is a mortgage between Perpetual Trustee and herself, she was obliged to make payments and under the mortgage Perpetual Trustee is entitled to possession. She admits that payments are in arrears although she disputes the amount. However, by defence at [16] to [19] she pleads: "16. Further and in the alternative, in answer to the whole of the allegations in the Statement of Claim, the Mortgage secured the obligations of the defendant under the Agreement over the property at xx xxxx xxxxxx, Lurnea, and the property was the home of the defendant. 17. At the time the Agreement and the Mortgage were entered into: (a) the defendant owned and resided in the home; (b) the home was the only substantial asset of the defendant; (c) the first defendant had no income or source of income; (e) the value of the home exceeded the amount sought to be borrowed by the first and second defendants; (h) the plaintiff made no inquiry of the defendant as to her income; (i) the plaintiff did not know and did not inquire as to the purpose for which the amount of $300,000.00 to be advanced under the Agreement was to be applied; (j) the plaintiff was indifferent to the ability of the defendant to repay the amount advanced, and was content to lend on the basis of the security value of the home alone. 18. Further and in the alternative, at the time of execution of the Agreement and the Mortgage, the defendant: (a) did not know; (b) had not read; (c) did not understand; and (d) had received no legal or other advice, independent or otherwise, in relation to the terms or the legal and practical effect; of the Agreement and the Mortgage; (e) did not know or understand the amount that could or was to be advanced under the Agreement; (f) did not know that an amount was to be advanced to her husband under the transaction of which the Agreement formed a part; 19. The plaintiff either knew or ought reasonably to have known that the defendant: (a) not read, and did not understand the terms of the Agreement; and (b) did not know the purpose for which moneys advanced under the Agreement were to be applied." 6 Mrs Azzi contends that it would be unconscionable to permit Perpetual Trustee to assert such legal rights as it may have under the agreement and the mortgage, and to obtain possession and sell the property in order to recover any such moneys. Mrs Azzi claims that the agreement and mortgage are unjust and she seeks relief under the Contracts Review Act 1980 and s 70 of the Consumer Credit (New South Wales) Code. 7 The plaintiff's counsel referred to various documents. I accept that they establish the plaintiff's legal entitlement to possession of the property. The documents of interest show that Mrs Azzi was a director of FAD Glass Pty Ltd. Her tax returns disclose that for the year ended 30 June 2002 her nett income was $134,986 and for the year ending 30 June 2003 her nett income was $139,850. Mrs Azzi is also the registered proprietor of an investment property at Miller [tab 5]. 8 Mrs Azzi deposes that she was born in Lebanon in 1977. In 1984 she came to Australia with her parents. Although she had attended primary school in Lebanon, when she came to Australia she commenced Year 1 because she could not speak English. She attended school until Year 11. After completing Year 11, her husband Khaled Azzi, did not wish her to finish Year 12, because he wished to look after her. She left school and she and her husband were married in 1995. They have three children. Since leaving school, she has looked after the children and been a full-time housewife. She is attending TAFE and is currently doing the 3rd year of a floristry course. She has never had a job, profession or occupation apart from housewife and mother. The only paid employment she has ever undertaken is when she worked at Target for approximately six months when she was at school. She says she did some practical experience with a florist in 2006, consisting of approximately 10 hour per week for four or five months as this was a compulsory part of the TAFE course. 9 Mrs Azzi further deposes that her husband has conducted a glass business since approximately 1998. She had never had anything to do with the financial affairs of her husband, or of the household. Since they were married, she had given all bills or papers, which are received in the mail to her husband. 10 Mrs Azzi says that over the years her husband has asked her to sign papers from time to time. She has signed various papers, which he gave her. Each time he has given her papers to sign, he had indicated on the piece of paper where she was to sign and she did so. Her husband did not give the papers to her to read, nor did he give her an opportunity to read them. She did not read them nor did she know what the papers were. 11 Some time in 2003, Mrs Azzi's husband said to her words to the effect, "I am going to transfer all the assets into your name. You will have to sign some papers." She replied, "Is that necessary?" He said, "I have never heard of a wife who complained about having everything transferred into her name." This was the only discussion they had about transferring assets into Mrs Azzi's name. 12 Some time in the second half of 2003, Mr Azzi asked Mrs Azzi to go to a solicitor's office to sign some papers. They went to the offices of a solicitor in Parramatta, who to the best of Mrs Azzi's recollection was named Sid Hawach. The meeting lasted approximately 10 to 15 minutes. During that time Mrs Azzi says that Mr Hawach was talking to her husband and Mr Hawach put some papers in front of her to sign and she signed where he indicated. Mrs Azzi recalls that Mr Hawach told her that some of the documents were in relation to a separation agreement. He did not say anything about any transfer of title, mortgage or loan agreement. She says that neither Mr Hawach nor anybody else has ever informed her that she was signing a mortgage or loan agreement. Nobody ever explained to her that she was undertaking any liability to make repayment to a bank. 13 Mrs Azzi says that at no time was she informed that she was entering into a loan agreement or mortgage, or borrowing money. She says that she did not know, nor was she told that she was signing a document, which had the effect of borrowing money and giving it to her husband. She was not asked to read the document, nor was it given to her to read. She says that as far as she is aware she has never signed any loan agreement or mortgage. 14 The plaintiff referred to a copy of family law terms of settlement undated and not signed by Mrs Azzi. Paragraphs 5 to 8 read: "5. That the Husband transfer to the Wife all his right title and interest in the former matrimonial home situated at and known as xx xxxxx xxxxx Lurnea, in the State of New South Wales. 6. That the Wife shall indemnify the Husband in relation to all outgoings in respect of the said matrimonial home including all payments in respect of the mortgage, rates, taxes, charges, insurance and expenses in relation to repairs and improvements and any other sums due or accruing in respect of the said property. 7. That the Wife continue to pay, as they fall due, all regular instalments in respect of the mortgage, council rates, water rates, household insurance in respect of the matrimonial home situated and known as xx xxxxx xxxxx Lurnea, in the State of New South Wales and the Wife pay forthwith any arrears in respect of any of the said instalments. 8. That parties do all acts and things and sign all documents necessary for the ownership of the company known as FAD Glass Pty Limited to be transferred to the Husband's sole name." 15 On 10 November 2003, Mr Howach solicitor, directed the solicitors acting for Perpetual Trustee to pay on settlement as follows: 1 Sid Hawach & Associates (P16) $2,577.50 2 Sid Hawach & Associates (A147) $990.00 3 Smith Monti Legal $2,707.70 4 National Australia Limited $311,500.00 5 K. Azzi $254,811.80 6 Bank cheque fees $16.00

16 Nearly all of those moneys went off the earlier mortgage held in both names to Mr Azzi personally. 17 Mrs Azzi says that she and her husband are separated but they live under one roof. Mr Azzi helps Mrs Azzi with the children sometimes, but for the most part she is responsible for looking after them. Mr Azzi pays the bills. She has never been contacted by anybody from Perpetual Trustee in connection with any loan agreement or mortgage to ask her about any loan application or to verify any financial information. She says that she has not been asked the purpose of the loan or about any income she may have or whether she could afford to make repayments on any loan agreement or mortgage. 18 Rule 13.1(1) of the Uniform Civil Procedure Rules provides: 13.1(1) If, on application by the plaintiff in relation to the plaintiff's claim for relief or any part of the plaintiff's claim for relief: (a) there is evidence of the facts on which the claim or part of the claim is based, and

(b) there is evidence, given by the plaintiff or by some responsible person, that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part of the claim, or no defence except as to the amount of any damages claimed,

the court may give such judgment for the plaintiff, or make such order on the claim or that part of the claim, as the case requires. 19 In Commonwealth of Australia v Griffiths & Anor [2007] NSWCA 370 Beazley JA with whom Mason P agreed said: "11 The general principles relating to the summary disposal of proceedings are well-known: see General Steel Industries Inc v Commissioner for Railways (NSW) & Ors [1964] HCA 69; (1964) 112 CLR 125 at 129. If it is demonstrated that there is a real question to be tried, the matter is inappropriate for the entry of summary judgment: Dey v Victorian Railway Commissioners [1949] HCA 1; (1949) 78 CLR 62. The tests stated in the authorities as to whether it is appropriate that a case be disposed of by the entry of summary judgment include statements such as that the matter is "so obviously untenable that it cannot possibly succeed"; "manifestly groundless" or "would involve useless expense": see General Steel Industries at 129.

12 The summary disposal of proceedings or part thereof deprives a party of the right to a contested hearing. For that reason it is said that the requirement for establishing that there is no triable issue is demanding: Air Services Australia v Zarb (Court of Appeal, 26 August 1998, unreported). In Webster & Anor v Lampard [1993] HCA 57; (1993) 177 CLR 598, Mason CJ, Deane and Dawson JJ said at 602: "… the issue before the learned Master on the application for summary judgment was not whether [the plaintiffs] would probably succeed in their action against [the defendant]. It was whether the material before the Master demonstrated that that action should not be permitted to go to trial in the ordinary way because it was apparent that it must fail. The power to order summary judgment must be exercised with 'exceptional caution' and 'should never be exercised unless it is clear that there is no real question to be tried." (Citations omitted) 20 Mrs Azzi seeks relief under the Contracts Review Act and Consumer Credit Code. They are remedial pieces of legislation. 21 Sections 7 and 9 of the Contracts Review Act read: "7 Principal relief

(1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following: (a) it may decide to refuse to enforce any or all of the provisions of the contract,

(b) it may make an order declaring the contract void, in whole or in part,

(c) it may make an order varying, in whole or in part, any provision of the contract,

(d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that:

(i) varies, or has the effect of varying, the provisions of the land instrument, or (ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument. (2) Where the Court makes an order under subsection (1) (b) or (c), the declaration or variation shall have effect as from the time when the contract was made or (as to the whole or any part or parts of the contract) from some other time or times as specified in the order.

(3) The operation of this section is subject to the provisions of section 19." And s 9 reads: "9 Matters to be considered by Court

(1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract, or

(b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract,

(b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation,

(c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract,

(d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract,

(e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract,

(g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract.

(3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made.

(4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made.

(5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made." 22 The plaintiff's counsel submitted that the plaintiff is entitled to possession as the defendant obtained a benefit from the moneys advanced. Mrs Azzi's legal representative submitted that, in effect, the transactions were a sham organised by Mr Azzi for his own benefit and that Mrs Azzi did not receive any benefit for herself. If an order for possession was made and the property sold prior to the hearing, that would limit the relief that can be afforded under s 7 of the Contracts Review Act. 23 There are disputed facts. This conflict can only be properly resolved at trial. It is only when the factual findings are actually made that it becomes clear whether these defences apply. Mrs Azzi's credit will be in issue. I still endorse the comments of Rogers J in Commercial Banking Co of Sydney Ltd v Pollard (1983) 1 NSWLR 74 at 80 where his Honour stated that it is generally inappropriate to determine a defence which raises the Contracts Review Act on an application for summary judgment. It is my view that the defendant's defence is not hopeless. It should be permitted to go to trial. The relief currently sought in the defence should more appropriately be pleaded by way of cross claim. The plaintiff's notice of motion filed 25 June 2008 is dismissed. The defendant is to file and serve a cross claim within 14 days. 24 Costs are discretionary. Costs normally follow the event. The plaintiff is to pay the defendant's costs as agreed or assessed.

(1) The plaintiff's notice of motion filed 25 June 2008 is dismissed.

(2) The defendant is to file and serve a cross claim within 14 days.

(3) The plaintiff is to pay the defendant's costs as agreed or assessed. **********

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