Plaintiff v Defendant [2005] VSC 464 | Case summary

Background

5 Owenlaw conducted a mortgagee's auction of a property at 2-6 Murphy Street, South Yarra ("the property") on 24 February 2005. Matarol Pty Ltd was the registered proprietor of the property, which had been mortgaged to Owenlaw on 16 July 2004, as security for an advance to it of $3,640,000 by Owenlaw.

6 Mr David Baird was the successful bidder at the mortgagee's auction. He signed a Contract of Sale of Real Estate in relation to the property ("the contract") in which the purchaser is described as "David Baird, 570 Wallan Road Whittlesea and/or nominee". I note that Mr Baird has made no nomination of an alternative purchaser under the contract.

7 The contract is exhibited to Mr Owen's 26 July 2005 affidavit. The purchase price is shown as $4,562,000 and the deposit as $400,000. The date for the payment of the balance purchase monies is "Forty Five days from the day of sale or earlier by mutual agreement". Mr Baird's signature appears on the front page of the contract and his initials are to be found on the page headed "Particulars of Sale", beside the description of the purchaser, the address of the property and between the reference to the deposit and the balance of purchase monies. Mr Baird's initials also appear between the description of the settlement date and the record of the day of sale.

8 Mr Baird provided Owenlaw's agent with the cheque, drawn on M.K. River's account, on 24 February 2005. In his 21 October 2005 affidavit, Mr Owen deposes that Owenlaw's agent advised him by telephone on the following day, 25 February 2005, that the cheque had been dishonoured. As a result of the advice, he caused a notice of rescission of the contract to be served on Mr Baird. Written confirmation of the dishonour of the cheque was received from the National Australia Bank by Owenlaw's agent by a facsimile transmission dated 25 February 2005. The bank sent Owenlaw's agent a formal dishonour notice some days later. M.K. River maintains that there is an issue between the parties as to whether or not the rescission notice was served before Owenlaw was notified of the cheque's dishonouring.

The entry of judgment

9 The writ was served by post on 12 May 2005 at the registered office of M.K. River, at the offices of WHK Smith Read, accountants. Ms Gulenc is the principal of the firm. She deposes, in her 15 July 2005 affidavit, that she did not become aware of the writ until after default judgment had been entered against M.K. River and its solicitors had contacted her, enquiring as to whether the writ had been received in her office. In her affidavit, she describes how the writ eventually came to light on 12 July 2005, when it was located in a file by a member of her staff.

10 Owenlaw had entered judgment in default of appearance against M.K. River on 3 June 2005. Mr Edwards deposes that he became aware of the default judgment when he received a notice by facsimile transmission from Owenlaw's solicitors on 22 June 2005.

11 M.K. River filed a summons on 13 July 2005, seeking the setting aside of the default judgment. M.K. River submits that the Court should take it into account that the fault in relation to the loss of the writ was that of M.K. River's accountant, rather than its own.

The proceeding against Mr Baird

12 In the Baird proceeding Owenlaw claims relief under the contract against Mr Baird personally. Default judgment was entered on 5 July 2005 in the Baird proceeding. However, that default judgment has been set aside, by consent.

13 In his 28 July 2005 affidavit, Mr Baird deposes as to his belief that he has a proper defence and counterclaim in the Baird proceeding. M.K. River also relies upon the affidavit, sworn on 29 July 2005, by Mr Baird in the Baird proceeding. In that affidavit Mr Baird deposes to his belief that he has a good defence and exhibits a draft defence and counterclaim alleging, inter alia, that there was an agreement to the effect that a deposit of five per cent only would be payable under the contract and that the date for payment of the balance of purchase monies would be reduced from 60 days to 45 days. He alleges that Owenlaw's agent neglected to return the cheque to him.

14 In his 28 July 2005 affidavit, Mr Baird deposes that he had made inquiries which indicated that there were insufficient funds in M.K. River's account and had told Owenlaw's agent that he could not hand over the cheque at that time. He maintains that the agent informed him that the cheque would only be retained for the purpose of conducting a credit check upon M.K. River. Mr Baird deposes that he allowed the agent to have the cheque on the basis that it would not be presented until sufficient funds were cleared into M.K. River's bank account for it to be presented.

15 Mr Baird's account of events is strenuously contested by Owenlaw. Mr Owen deposes in his 26 July 2005 affidavit that he was present at the auction on 24 February 2005. He maintains that he signed the contract on behalf of Owenlaw and that Mr Baird signed it as purchaser, in his presence. After the auction, he conducted all the negotiations with Mr Baird. He asked Mr Baird why the cheque was drawn on M.K. River's account and whether he was a director of M.K. River. Mr Baird stated that he was not. Mr Baird told Mr Owen that M.K. River was the purchaser of the property. Mr Owen informed Mr Baird that, as Mr Baird was not a director of the company, Mr Owen would not agree to sell the property to M.K. River. However, he would sell it to Mr Baird, or to his nominee. Mr Owen deposes that Mr Baird agreed to this arrangement. He states that he noted that the deposit was less than ten percent of the purchase price and that he agreed to accept the lesser amount, on condition that Mr Baird would agree to a reduced settlement period of 45 days. The particulars of sale in the contract were completed and initialled by Mr Baird and himself.

16 Mr Owen contests Mr Baird's account of events, to the extent that it differs from his. He denies that there was any offer to pay further monies to Owenlaw, after the dishonour of the cheque.

17 Mr Owen also deposes to the fact that M.K. River (a company through which Mr Edwards conducts his practice as a solicitor) also acted for the mortgagor of the property, in proceedings in which it sought orders restraining the exercise of the mortgagee's power of sale under the mortgage. The application for an injunction to stop the sale was dismissed on 22 February 2005 by the Court, but the proceeding continues as a claim for damages. Mr Edwards continues to act as solicitor for the mortgagor.

Submissions

18 Counsel for M. K. River argues that there could be inconsistent judgments, if Owenlaw were to fail in the Baird proceeding and yet retain the default judgment in this proceeding. It is submitted that there are factual issues in dispute and that the affidavit material establishes that M.K. River has an arguable defence, based on Owenlaw's fraud, duress and the total failure of consideration for the cheque.

19 Counsel for M.K. River also relies upon the circumstances of the entry of judgment and the fact that the writ was initially mislaid through the fault of its accountant, rather than its own.

20 Counsel for Owenlaw submits that there are conflicts in the various accounts of events in M.K. River's material. He argues that any defences are so weak and contradictory as to be unarguable. He refers to what he submits are differences between the statements of various deponents and the terms of the defence which has been filed in the proceeding after the Master's decision to set aside the default judgment.

21 Counsel for M.K. River concedes that there are some discrepancies, but has informed the Court that the pleadings would be amended to accord with the defence established by the evidence.

22 Finally, counsel for Owenlaw submits that some security should be lodged by payment into Court of either the sum of $400,000, or five percent of the purchase price, as a condition of the setting aside of the default judgment. This, he submits would secure Owenlaw's position.

23 M.K. River responds that any amount recovered by Owenlaw in the proceeding would be in the nature of a windfall, in light of the subsequent resale of the property for the same price. He submits that the circumstances do not warrant such a penalty being imposed upon Owenlaw.

Section 6

24 Section 6 of the Instruments Act 1958 provides:

Plaintiff v Defendant

At a glance

Court

Decision date

Before

Source

Judgment (10 paragraphs)

Parties