Plaintiff v Defendants

Supreme Court of Victoria|2012-04-27|Before: BELL J

PRACTICE AND PROCEDURE - orders of associate justice - application for summary judgment by plaintiff against defendants - plaintiff mostly successful - defendants mostly unsuccessful - plaintiff and defendants appealed - rehearing de novo - whether plaintiff had properly verified its claim - whether defendants had defences with real prospects of success - claims for monetary judgment under second of two interlocking loan agreements - whether clearly established that defendants were in default - whether clearly established that plaintiff entitled to recover - legitimate uncertainty about terms of agreement which could not be resolved summarily - claim for possessory judgment under a mortgage - functionally illiterate defendant entered mortgage to assist wife with struggling business -received no independent advice - same solicitor acted for lender/mortgagor and borrower/mortgagees - whether real prospect of establishing duress and undue influence - mortgage incorporated common provisions relevant to provision of consumer credit to natural persons - mortgage secured provision of business credit to companies - real question about enforceability of mortgage - plaintiff's appeal dismissed - defendants' appeals allowed - defendants granted general leave to defend - 'real prospect of success' - (Vic) rr 22.02-06, 23.01, O 53, r 77.06, (Vic) -, -.

1 On 25 September 2009 Capital One Securities Pty Ltd (the plaintiff) entered into a loan agreement with Soda Kids Holdings Pty Ltd, Soda Kids Pty Ltd and Safari Peak Pty Ltd (the first to third defendants) as borrowers and Josephine Mannella (the fourth defendant) and Daniela Bussolaro (who were then business partners) as guarantors. On 1 March 2010, the plaintiff entered into a mortgage with the fourth defendant and her husband Rocco Mannella (the fifth defendant) with respect to their family home at 14 Peachey Court, Pascoe Vale. On 19 July 2010, the plaintiff entered into a loan agreement (incorporating the first agreement) with the first to third defendants as borrowers and the fourth and fifth defendants as guarantors.

2 The plaintiff alleges the borrowers have failed to repay the money which was lent under the second agreement. By its further amended statement of claim, against all of the defendants it seeks orders in respect of the outstanding amount plus interest. Against the fourth and fifth defendants, it seeks an order for possession of the mortgaged property.

3 By a summons, against all of the defendants the plaintiff sought summary monetary judgment pursuant to r 22.06(1)(b) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) and against the fourth and fifth defendants summary judgment for possession (and damages and mesne profits to be assessed) pursuant to that rule and O 53.

4 The application was heard and determined by Randall AsJ. For reasons explained in a written judgment,[1] his Honour granted the application against the first to fourth defendants but not against the fifth defendant.

5 By separate notices of appeal, the first to fourth defendants, the fifth defendant and the plaintiff have appealed against the orders for summary judgment. The defendants contend no orders for summary judgment should have been made at all and the plaintiff contends a summary order for possession should have been made against the fifth defendant as well as the fourth defendant. Not all of the notices of appeal were correct in form but all of the parties have waived any objections in this regard.

6 The appeals have been brought under r 77.06. By sub-r 77.06(7), an appeal is by way of re-hearing de novo of the application to the associate judge. In the hearing of the appeal, the parties have appropriately focussed their attention on whether the defendants' defences have 'no real prospect of success' as specified in s 64 of the Civil Procedure Act 2010 (Vic) which, in summary judgment applications, is now the central issue to be determined.

SUMMARY JUDGMENT UNDER THE CIVIL PROCEDURE ACT

7 Part 4.4 of the Civil Procedure Act contains new provisions in relation to summary judgment. A plaintiff and a defendant may apply for summary judgment in a civil proceeding (ss 61 and 62). Plaintiffs and defendants by counterclaim may also do so (s 60). The court may order summary judgment in such applications or on its own motion (s 63(2)). It must first be satisfied the claim or defence 'has no real prospect of success' (s 63(1)). Even where it is so satisfied, the court has a residual discretion to allow the proceeding to go to trial (s 64). That discretion is available where the court considers a claim which is lacking any real prospects of success should not be summarily dismiss because it is 'not in the interests of justice' to do so or the dispute is of such a nature that 'only a full hearing on the merits is appropriate' (s 64(a) and (b)).

8 This statutory power of summary dismissal supplements and does not derogate from the court's existing powers of summary disposal of civil proceeding under rules of court (s 65). Those existing powers are to be found in OO 22 and 23 of the Supreme Court (General Civil Procedure) Rules. As the new provisions allow the court to grant summary judgment on a more liberal basis than in the exercise of its existing powers (which also include its inherent powers), it is to be expected, as in the present case, that most applications will be heard and determined under the Civil Procedure Act. A defendant who successfully resists an application for summary judgment made by a plaintiff would ordinarily be given leave to defend under r 22.06(1)(c), as will occur in the present case.

9 As can be seen, pt 4.4 applies to, and states a single standard for determining, applications for summary judgment made by both plaintiffs and defendants. It does not contain a provision like r 22.03(1)(a), which requires a plaintiff to provide an affidavit in support 'verifying the facts on which the claim or the part of the claim to which the application relates is based'. Nor does it contain a provision like r 22.04(1) allowing a defendant to show cause by affidavit. However, it is difficult to see how a plaintiff or defendant could obtain, or resist an application for, summary judgment without supplying an affidavit of that kind, fashioned according to the nature of the case.[2]

10 The object and purpose of pt 4.4, the manner in which the new powers of summary judgment differ from the court's existing powers and the relevant authorities (including those in the Federal Court of Australia and the High Court of Australia) were extensively discussed by J Forrest J in Matthews v SPI Electricity Pty Ltd,[3] Dixon J in Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd[4] and Croft J in JBS Southern Aust Pty Ltd v Westcity Group Holdings Pty Ltd.[5] As that discussion reveals, the new provisions were deliberately intended to liberalise the basis on which a party to a civil proceeding could obtain summary judgment. The new powers of the court are positively directed (see s 8(1)) at achieving the overarching obligation which, in relation to a civil proceeding, is to 'facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute' (s 7(1)). The court must also take other objects into account (see s 9(1)(a)).

11 In terms of the standard to be applied, summary judgment can be ordered under s 63(1) if the claim or defence 'has no real prospect of success', which is more liberal than the standard governing the exercise of the existing powers of the court. Summary judgment or dismissal may be ordered under the court's existing powers where the substantive claim or defence is baseless or unarguable, where a fatal allegation of fact is not answered or answerable or where a determinative proposition of law is not disputed or disputable. The new provisions go further and allow the court to order summary judgment, subject to the residual discretion, in cases in which the claim or defence may be none of those things yet have no real prospect of success.

12 A claim or defence will have no real prospects of success if those prospects are no more than fanciful.[6] A claim or defence may be arguable but only fancifully so, which illustrates the additional scope of the court's new power of ordering summary judgment. It is not sufficient for the party to have a merely arguable case. It must have a real prospect of succeeding, although it need not have a probability of succeeding. A real prospect of success is one that is not fanciful or unreal even if the prospects are less that 50 per cent.

13 In deciding whether a claim or defence has more than fanciful or unreal prospects of success under the court's new powers, the legal and factual issues will be examined with a degree of intensity which is appropriate to the circumstances of the case. However, a summary judgment application is not a substitute for a trial of the issues, which is the ordinary entitlement of a party to a civil proceeding.[7] The power to give summary judgment is reserved for cases which 'are not fit for trial'.[8] One of the objects which must be taken into account under s 9(1)(a) of the Civil Procedure Act is 'the just determination of the civil proceeding' by the court. Therefore the power to give summary judgment 'must always be attended with caution'[9] and 'great care'[10] and exercised only in cases where 'it is clear that there is no real question to be tried'.[11]

14 In the present case, the plaintiff alleges the defendants have no real defence to any of its claims, which takes me to the pleadings.

15 In its further amended statement of claim, the plaintiff pleads the relevant terms of the second agreement and the parties thereto. It alleges the mortgage of the fourth and fifth defendants secures the obligations of the first, second and third defendants under the agreement (that is, the earlier mortgage secures the later advances to those defendants). The defendants have defaulted and the due notices have been served. Payments are outstanding under the agreement and the mortgage. The plaintiff is entitled to possession of the property.

16 The plaintiff claims against the first, second and third defendants (under the agreement) and the fourth and fifth defendants (under the guarantees in that agreement) the sum of $231,282.04, being the principal and interest due as at 18 March 2011, plus interest accruing thereafter at the rate of 40 per cent or $1,779.10 per week. It claims against the fourth and fifth defendants possession of the land plus damages and mesne profits to be assessed.

17 By its amended defence dated 27 April 2011, the defendants allege any money advanced by the plaintiff was advanced to a third party, the plaintiff has confused the loan under the second agreement with the loan under the first agreement (which has been fully repaid) and the mortgage has been discharged by the repayment of that first loan.

19 These are the orders for summary judgment made by his Honour:

There be judgment for the Plaintiff against the First to Fourth Defendants for:
1. the sum of $231,282.04 being the principal amount due as at 18 March 2011.
2. interest from 18 March 2011 accruing to the date of judgment at the rate of $1,779.10 per week.
There be judgment for the Plaintiff as against the Fourth Defendant for possession of the land situate and known as 14 Peach[e]y Court, Pascoe Vale in the State of Victoria being the land described in Certificate of Title Volume 8689 Folio 505.
The Fifth Defendant is granted leave to defend.
The First to Fourth Defendants pay the Plaintiff's costs of and incidental to this application and of the proceeding including any reserved costs.

20 In the reasons for decision, his Honour referred to the affidavits relied on by the parties. He set out the material conditions of the two agreements. He noted the first agreement had not been signed by the plaintiff, the fifth defendant was not a party and no mortgage security was required. The fourth and fifth defendants were the guarantors under the second agreement.

21 His Honour found the fourth and fifth defendants had entered into the mortgage to secure an extension of time in which to repay the loan made under the first agreement. It was executed prior to and registered after the making of the second agreement.

22 His Honour referred to the submissions of the fifth defendant, which were adopted by the first to fourth defendants. Those submissions, which were also relied on in this appeal, were as follows:

A number of issues, on which a trial would be necessary, arise with the 'Acknowledgement and Agreement' -

8.1 the plaintiff has not signed it;

8.2 there is no evidence that the plaintiff made any advance under it;

8.3 it is so uncertain as to its terms as to be without meaning and unenforceable;

8.4 the document sought to be incorporated - a loan agreement of 25 September 2009 to which the fifth defendant had not been party - has not been incorporated under the rules of incorporation of extraneous documents into contracts particularly having regard to:

8.4.1 the English illiteracy of the fifth defendant;

8.4.2 the plaintiff placing the document into the hands of the fourth defendant to obtain her husband's signature upon it;

8.4.3 the lawyer ostensibly 'acting for' the defendants also ostensibly acting for the plaintiff in the same transaction.

8.5 even if the loan agreement of 25 September 2009 has been incorporated

8.5.1 the guarantees in the 25 September 2009 loan agreement were specifically limited to 'the advance' under that earlier agreement which had been repaid in full by May 2010 if not significantly earlier and

8.5.2 the failure of the plaintiff to obtain the consent of one of the guarantors of the early agreement voided the guarantees under the early agreement and rendered the 25 September 2009 guarantees incapable of 'incorporation' into the later agreement;

8.6 the fifth defendant stood to gain no benefit at all under the Acknowledgement and Agreement and the plaintiff, by reference to 8.4 above, took unconscionable advantage of the fifth defendant.

23 His Honour referred to the plaintiff's submissions. In summary, those submissions were that the defendants did not dispute the loan but had raised a number of fanciful defences.

24 His Honour said he was 'not impressed by any of the arguments propounded by the fifth defendant'. He considered in detail only two arguments: the plaintiff had not proved any advance had been made under the second agreement and the agreement was so uncertain as to be without meaning and unenforceable.

25 In relation to the advance of loan moneys, his Honour found the plaintiff had 'adequately demonstrated' that $200,000 had been paid to the borrowers under the agreement. He found the 'journal entry referred to in the fourth defendant's affidavit demonstrates the funds emanated from the plaintiff' and were associated with the business separation of the fourth defendant from Ms Bussolaro.

26 In relation to the uncertainty of the terms of the agreement, his Honour referred to the relationship between (going backwards in time) the second agreement, the mortgage and the first agreement. He focussed on whether the second agreement had incorporated the mortgage as a security when the mortgage had been executed after the first agreement was entered into. He acknowledged the mortgage did not secure the borrower's obligations under the first agreement and, on one view of the facts, the funds advanced under that agreement had been repaid. He decided there was arguable doubt about the terms of the agreement, which might lead to inquiry about the surrounding circumstances of the execution of the mortgage and the agreement and the relationship between the two. On that basis, he could not conclude the defence of the fifth defendant had no real prospect of success. He granted that defendant, but that defendant only, leave to defend.

27 Having regard to the issues raised and to the nature of the appeal as a re-hearing de novo, it is now necessary for me independently to consider the evidence.

28 Before both the associate judge and me, the evidence relied on by the plaintiff consisted of these affidavits:

Tom Karas dated 18 March 2011
Tom Karas dated 26 May 2011
Tom Karas dated 24 June 2011
Daniela Bussolaro dated 24 June 2011
Kirenjit Cheema dated 11 July 2011
Mario Merlo dated 21 July 2011

29 The affidavits relied on by the defendants were:

Josephine Mannella dated 25 March 2011
Josephine Mannella dated 17 June 2011
Rocco Mannella dated 17 June 2011
Rocco Mannella dated 25 June 2011
Katherine Moorhouse Perks dated 27 June 2011
Katherine Moorhouse Perks dated 12 July 2011
Rocco Mannella (undated)

30 In his affidavit dated 18 March 2011, Mr Karas described the history of the first and second agreements and the mortgage as well as the business setting in which they had been entered into. The critical documents were exhibited. Of the amounts owing under the first and second agreements, Mr Karas stated the defendants were in default and had failed to repay the moneys due and owing despite repeated demands. As at 16 March 2011, the principal amount owing was $200,000 and the interest owing was $31,282.04. The rest of the affidavit dealt with related matters which are not here material.

31 Mr Karas's affidavit was answered by the affidavit of the fourth defendant dated 25 March 2011. She also went into the business setting. She conceded the first agreement, by which the plaintiff agreed to lend $500,000 to the first, second and third defendants. It was supported by a guarantee from her and Ms Bussolaro. No mortgage was required. The $500,000 was advanced in three instalments ($150,000 on 25 September 2009, $150,000 on 7 October 2009 and $200,000 on 19 October 2009). The amounts could not be repaid within the specified time. Therefore Ms Bussolaro and the fourth and fifth defendants agreed with the plaintiff that the repayment time would be extended in return for the mortgages, which were executed. The $500,000 plus interest of $100,000 was repaid in full between December 2009 and May 2010 (documentary proof was exhibited). Therefore there had been no default under the first agreement.

32 The fourth defendant said she and Bussolaro later decided to sever their business relationship. Under the separation agreement, she had to pay $200,000 to Ms Bussolaro. She borrowed that money under the second agreement on the same terms as the first. The quantum of interest payable under the second agreement was disputed and the plaintiff's claim was manifestly excessive. Mr Karas's evidence that the principal remained unpaid was not disputed. It was not clear whether a payment of $20,000 on 22 October 2010 had been taken into account. A breakdown of the interest payable had been requested but not provided. The mortgage held by the plaintiff more than secured the debt owed to it by the first, second and third defendants.

33 In his affidavit dated 26 May 2011, Mr Karas swore to the truth of the main factual allegations in the plaintiff's further amended statement of claim. The plaintiff was not confusing the two loans. The first, second and third defendants were in default under the first agreement, but only the second agreement was being enforced in the proceeding. The mortgage had not been discharged. The $200,000 had been advanced only after the first, second and third defendants agreed to take a loan on the same terms as the first agreement and the fourth and fifth defendants agreed to be guarantors. At the time of swearing, the principal owing was $200,000 and the interest was $46,623.94.

34 Mr Karas noted the fourth defendant did not dispute the existence of the loan. He exhibited and relied on an email which she had sent to him on 27 January 2011, in these terms:

Hi Tom,

I have been tried [sic] to ring.

I refer to the meeting that we had last week and I confirm that you want [sic] take any further action against me if I'm able to pay you $100,000.00 in the next couple [sic] of week.

The Chinese have funds available will not release funds until they have the lease of the shop for Moonee Ponds which is fair enough Mario is negotiating with Mirvac to get the lease there will be no problem.

Can you please confirm that you are ok with this.

He also referred to and relied on her email dated 2 March 2011:

My name is Josephine Mannella I have been served with a writ on the 1st of March, 2011 can you please confirm the amount outstanding plus interest what's [sic] in the writ it does not seem correct to me please confirm immediately.

Kind regards

Josie Mannella.

35 Mr Karas denied the fourth defendant's statement that $20,000 of the second loan had been paid. He relied on the failure of the defendants to deny the existence of that loan and also the mortgage. There had never been any repayment of principal under the loan.

36 Mr Karas went on to say that in early March 2011, the fourth and fifth defendants agreed to a repayment plan of the then outstanding sum of principal and interest of $237,833. An agreement was drawn up by Mario Merlo of Alliance Legal (the plaintiff's solicitors) reflecting that agreement (which was exhibited). The fourth defendant later told Mr Karas the agreement would not be signed because the business was not going well.

37 Mr Karas denied the fourth defendant's assertion that the $200,000 had been paid to a third party. He referred to and exhibited his solicitor's letter to the fourth defendant's solicitor dated 3 May 2011, the contents of which he adopted as true. That letter set out the circumstances of the first and second agreements and attached the key documents (which were authentic). As that letter truly said, the fourth defendant signed a deed of settlement dated 5 July 2010 authorising the payment of the $200,000 to Ms Bussolaro through State Securities Pty Ltd (paragraph 2.3 of the deed). Therefore the advance was not paid to a third party but to Ms Bussolaro on the fourth defendant's behalf. The fourth defendant did not reply to this letter.

38 The fourth defendant swore a further affidavit dated 17 June 2011. She gave a fuller account of the business background to the transactions and the circumstances in which the first agreement and mortgage had been entered into. Her husband (the fifth defendant) was never a shareholder of the borrowing companies and did not receive any independent advice about benefit from the mortgage.

39 The fourth defendant then set out in detail the amounts which had been borrowed and repaid under the first agreement. By 3 May 2010, the plaintiff had been overpaid the amount of $22,637.08.

40 She went on to describe the breakdown of the business relationship between her and Ms Bussolaro and the role of the plaintiff's solicitor (Mr Merlo) in the preparation of the second agreement and related documents. She and her husband had a setoff or counterclaim against the plaintiff arising from it wrongfully obtaining an injunction against them in respect of the sale of business proceeds. The second agreement was ineffective because the fifth defendant had not guaranteed the first agreement, which had been varied without the consent of the actual guarantors (the fourth defendant and Ms Bussolaro).

41 The fourth defendant replied to Mr Karas's evidence that the plaintiff had paid the $200,000 to Ms Bussolaro at her direction. She said the journal entry in respect of the payment showed the cheque dated 6 September 2010 had been drawn by the 'Primary Capital Group Pty Ltd in trust for Plesiotis Family Trust'. It was not clear the payment had been made under the agreement. The cheque may never have been banked.

42 The fifth defendant swore an affidavit dated 17 June 2011 agreeing with his wife's affidavit. He said he could speak but not read English well. His wife's affidavit had been read to him. He did not receive independent advice in relation to the mortgage. He was not independently represented from his wife.

43 Ms Bussolaro's affidavit dated 24 June 2011 expressed disagreement with much of the fourth defendant's affidavit dated 17 June 2011. She said the fifth defendant had no difficulty with speaking English. She did not dispute he could not read English. He did have an interest in the businesses through related companies and otherwise. She described entering into the first agreement and the mortgage, the business separation between her and the fourth defendant and the payment to her of $200,000 in early September 2010. The payment was made under cl 2.3 of the deed of settlement by way of a cheque dated 6 September 2010 from the Primary Capital Group, which she banked.

44 Mr Karas swore a further affidavit dated 24 June 2011 answering the fourth defendant's affidavit dated 17 June 2011. He said the Primary Capital Group cheque for $200,000 had been paid to Ms Bussolaro pursuant to the second loan agreement. Under a declaration of trust between the plaintiff and Primary Capital Group and a disbursement authority given by Primary Capital Group, both dated 6 September 2010, Primary Capital Group was the lender, the plaintiff was the trustee of the lender and State Securities was the broker of the loan.

45 Mr Karas went on to raise certain issues about the transfer of the defendants' businesses which do not appear to be here material. He said that, as at 29 June 2011, the amount outstanding under the second agreement would be $200,000 in principal and $56,189.08 in interest, and gave particulars of the calculations.

46 The fifth defendant swore a further affidavit dated 25 June 2011, giving details of his limited education and saying he could not read English. His affidavit had to be read to him by his solicitor (Ms Moorhouse Perks). He was the owner of Soda Kids Pty Ltd (which is not a defendant). That company was not a party to any agreement with the plaintiff. He gave a detailed account of the signing of the mortgage and the stressful personal and business circumstances in which he did so. The agreement contained his signature but he did not remember signing it. He alleged he received no consideration for signing the agreement or the mortgage and the plaintiff had taken unconscionable advantage of him.

47 The fifth defendant's solicitor, Ms Moorhouse Perks, swore an affidavit dated 27 June 2011 confirming that she had read his affidavit to him because he could not read English well and that he had limited education. Relying on certain searches, she said (among other things) the plaintiff's solicitor, Mr Merlo, had acted for the plaintiff and the defendants in the loan and mortgage transactions and the interest rates were uncommercial and excessive.

48 A further affidavit of the fifth defendant (undated) said the business 'Soda Kids Moonee Ponds' was owned by his company Soda Kids Pty Ltd and was not his wife's business.

49 An affidavit dated 11 July 2011 of the plaintiff's solicitor in this proceeding, Kirenjit Cheema, attested to his firm's attempts to obtain possession of the mortgaged land.

50 Mr Merlo swore an affidavit dated 21 July 2011 saying he had acted for the plaintiff in preparing the first agreement and for the parties in preparing the second agreement. He described certain events in the interlocutory injunction proceedings and said that on or about 25 March 2011 he received the sum of $40,000 from the first defendant for part payment of his legal fees.

51 On that evidence the parties made certain submissions, which I will summarise.

52 It was submitted for the plaintiff that the second agreement, the securities, the default and all other aspects of its entitlement to monetary and possessory judgment had been proved by the affidavit evidence. The defendants did not dispute the existence of the agreement, only whether money had been advanced under it. Their defences were far-fetched and fanciful. Their contention that money had been advanced to another party and not the defendants was also far-fetched and fanciful. The defendants had made admissions on which the plaintiff relied. The contention of the fifth defendant that the agreement and mortgage were invalid against him because he could not read English and did not understand them should be rejected as untenable. He had filed no further amended defence pleading these allegations.

53 The plaintiff submitted the new test in s 61 of the Civil Procedure Act was less strict than the test in r 22.06 of the Supreme Court (General Civil Procedure) Rules. The court should give full effect to the change in the law. The defendants' defences were spurious and inaccurate and designed only to obfuscate and delay. At the least, the court should make the same orders as the associate judge. As against the fourth defendant, this would allow the plaintiff to seek partition of the mortgaged property and the sale of its interest. If general leave to defend were to be granted to all of the defendants, they should be required to pay the disputed sum into court.

54 As will be seen, the fourth and fifth defendants relied on the plaintiff's failure to prove the terms and conditions of the mortgage. In supplementary written submissions, the plaintiff relied on the terms of the Memorandum of Common Provisions No AA690 which is retained by the Registrar of Titles pursuant to s 91A of the Transfer of Land Act 1958 (Vic). It submitted the defendants were in default of those provisions, giving rise to the plaintiff's right to possession of the subject property.

55 It was submitted for the first to fourth defendants that the plaintiff had not properly verified its claim, as required by r 22.03(1)(a). The claim could not be globally verified. The plaintiff's affidavits were only in general terms. If the fifth defendant was given leave to defend, so should the fourth defendant. If the guarantee was to be set aside against the fifth defendant, it would also be set aside against the fourth defendant.

56 They submitted the date for repayment of the moneys lent under the second agreement had not been established. The linkage between the two agreements, which was necessarily relied on by the plaintiff, was deficient. Any concessions made by the first to fourth defendants were uninformed and unreliable. There was no proof moneys had been advanced by the plaintiff to the first to third defendants under the second agreement. Money had been advanced by another company but not under that agreement. The plaintiff's pleading did not reflect what it was now alleging had occurred. All defendants should be granted leave to defend.

57 The first to fourth defendants objected to the plaintiff's reliance on the Memorandum of Common Provisions No AA690. Evidence of these provisions was being produced late when it could and should have been produced earlier. The provisions only served to support the granting of general leave to defend. A multiplicity of issues arose about the application of the provisions to the case.

58 For the fifth defendant it was submitted the plaintiff had not verified its claim. There was no evidence the mortgage secured the advances which had been made. The mortgage relied on was just a two page document containing no terms. The mortgage referred to the Memorandum of Common Provisions number No AA690, but these had not been proved. If proof of that memorandum was now admitted into evidence, there were many issues about how it applied to this case, including issues arising under the Consumer Credit Code. In any event, it was not established that money advanced under the second agreement was secured by the mortgage. The second agreement referred to the securities given under the first agreement, and that did not include the mortgage.

59 He submitted the linkage between the two loan agreements were deficient in relation to the time for repayment. The first agreement (in item 4 of the schedule) specified the repayment date as being three months from the date of the agreement unless otherwise agreed in writing by the lender, being three months from 25 September 2009. This just could not work in relation to the second agreement. In consequence, the default notices which the plaintiff had served were of doubtful validity. Whether and how this uncertainty about the date of repayment would be resolved by the court was debateable.

60 He further submitted the evidence was in dispute about what had been advanced and repaid. The bare and generalised evidence of the plaintiff's claim was unsatisfactory. Although the fifth defendant had not gone into evidence on this aspect, he was not required to do so. The evidence of the alleged advance was also unsatisfactory. The alleged admissions of the fourth defendant were given without advice. They counted for nothing if there was not a legal liability to pay. These matters could be pleaded by the fifth defendant if leave to defend was granted.

61 Lastly, it was submitted the fifth defendant spoke little and could read no English and had limited education. The circumstances in which the mortgage and second agreement were signed gave rise to the defences of duress and unconscionable conduct contrary to s 8A of the Fair Trading Act 1999 (Vic). The documents were prepared by a solicitor acting for the plaintiff and the defendants and the fifth defendant had no independent representation and advice. He was in a grossly inferior and disadvantaged bargaining position as against the plaintiff.

62 Now to my consideration of the central issue requiring consideration: do the defences of the defendants have real prospects of success as specified in s 63 of the Civil Procedure Act?

63 The defendants submitted the loan agreement was not enforceable against them because the plaintiff did not sign it. In relation to the plaintiff's monetary claim, this defence has no real prospect of success. It is true the agreement was not signed by the plaintiff. But, all other things equal, it is enforceable as a valid oral agreement. The defendants raised no legal question about its validity and enforceability as such.

64 The defendants submitted there was no evidence any advance had been made under the agreement by the plaintiff as lender to the defendants as borrowers. They criticised the use by the associate judge of the expression 'emanated from the plaintiff'.

65 As we have seen, the second agreement was dated 19 July 2010. By cl 1, the plaintiff agreed to advance the sum of $200,000 to the first to third defendants or at their direction. The agreement has to be read with the deed of settlement between those companies and the fourth defendant, Ms Bussolaro and J & D Fashion House Pty Ltd dated 5 July 2010. The evidence clearly establishes the $200,000 was borrowed to enable Ms Mannella and her companies to separate from Ms Bussolaro's business. Under cl 2.3 of the deed, the fourth defendant had to pay the sum of $200,000 to Ms Bussolaro within 24 hours of the receipt of finance through State Securities.

66 State Securities was not party to or otherwise mentioned in the deed. Mr Karas's undisputed evidence was that State Securities was the broker of the loan made under the second agreement, the plaintiff was the trustee of Primary Capital Group (which was itself a trustee of the Plesiotis Family Trust) and Primary Capital Group advanced the $200,000 loan moneys in accordance with the agreement. The supporting documents are in evidence. There is no reason to doubt Mr Karas's evidence in these respects and, on the whole of the evidence, I think there is no real prospect of it being rejected at trial.

67 The evidence of the first to fourth defendants and Mr Karas also establishes the $200,000 payment was made to Ms Bussolaro as contemplated by the deed. Their evidence (including the physical cheque and the bank details) proves the making of the payment and Ms Bussolaro's evidence proves she received the payment and banked the cheque. Reading the deed and the agreement together, as the commercial setting undoubtedly requires, I would conclude the payment was made under the agreement and at the borrower's direction in accordance with its terms. I reject the submissions made by the first to fourth defendants (and adopted for the fifth defendant) that the payment was made by and to a stranger to the agreement. Having regard to the terms of the deed and the agreement and the clearly proved payment, those submissions are fanciful and unreal.

68 The defendants submitted the terms of the agreement were uncertain, without meaning and unenforceable with respect to the time for repayment of the borrowed amount.

69 As we have seen, the second agreement refers to and must be read with the first agreement. Clause 3 of the second agreement provides (in full):

The Borrower and the Guarantor and each of them acknowledge and agree that:

(a) the Further Advance is made by the Lender pursuant to and on the same terms and conditions as the Loan Agreement;

(b) the Further Advance shall be and is governed by the terms of the Loan Agreement; and

(c) the securities given by the Borrower and Guarantor and each of them shall apply to and secure the Further Advance made pursuant to this Acknowledgment and Agreement.

As the plaintiff submits, cl 3(a) picks up the repayment provisions of the first agreement (which is the 'Loan Agreement' referred to). The 'Further Advance' referred to is the $200,000 which is at issue.

70 Under the first agreement, repayment of the funds then advanced had to be made in accordance with cl 3.1, which provides:

The Borrower must repay the Moneys Hereby Secured to the Lender:

(a) by bank cheque or other immediately available funds;

(b) in the lawful currency of the Commonwealth of Australia;

(c) on the Repayment Date;

(d) to the account specified by the Lender to the Borrower,

or in such other manner as the Lender directs.

Clause 1.1 defines 'Repayment Date' to mean 'the date set out in Item 4'. In that item, the repayment date is specified to be 'Three (3) months from the date of this agreement unless otherwise agreed in writing by the Lender'. There are default, notice of demand and default interest provisions in cll 4 and 5 which all depend on the identification of the repayment date.

71 The repayment provisions of the first agreement are time-dependent on the date of that agreement. Repayment of the sums advanced had to be within three months of that date. As the agreement was dated 25 September 2009, repayment had to be by 25 December 2009.

72 There may be a problem with the first agreement in relation to the time for repayment of further advances. The repayment provisions dealt with repayment of the initial advance of $150,000 as above but not expressly with repayment of further advances, which were in contemplation (item 1(b)) and, on the evidence, made. The agreement might be interpreted as implicitly requiring repayment of further advances within three months of being made, but that is debatable, may not be relevant and was not covered in argument.

73 The defendants submitted the second agreement was void for uncertainty because 'the same terms and conditions' with respect to the repayment time in the first agreement could not be dropped into the second agreement. I reject as fanciful and unreal the proposition that the agreement is for this reason generally void for uncertainty. Money was advanced in accordance with the agreement. The advance was not a gift and will not be converted into one by acceptance of the defendants' submissions. The court will probably interpret cl 3(a) of the second agreement in such a way as to bring legal certainty to the transaction in relation to the time for repayment of the money which was advanced.

74 However, in relation to the proper interpretation of the repayment provision, it is not clear what the resolution of the court will be. The court could decide the provision requires repayment on demand, within three months of the date of the agreement, within three months of the date of the advance or within a reasonable time in all the circumstances. There may well be other options to consider. Depending on the interpretation adopted, the default, notice of default and default interest provisions will also require interpretation and application. The amount recoverable by the plaintiff will be determined in consequence.

75 In conclusion, by reason of the terms of the loan agreement which the plaintiff has entered, it cannot succeed against the defendants without calling on the court to interpret the repayment provisions in a way which is commercially and legally workable. While it is likely the court will do so, there is legitimate room for argument about what the court's determination will be. On the evidence, I cannot see much room for debate about the surrounding circumstances that the court will take into account in analysing the question. But there is scope for legitimate debate about the interpretation of the repayment provisions which should be adopted and this could really affect the outcome of the plaintiff's monetary and possessory claim. The defendants therefore have a defence with real prospects of success against these claims.

76 The fifth defendant submits he signed the agreement and the earlier mortgage under duress or in circumstances of statutory unconscionability. In consequence, the mortgage and the guarantees in the agreement are unenforceable against him. The fourth defendant relies on these defences of the fifty defendant in her capacity as a co-mortgagor and co-guarantor.

77 I have set out the evidence of the circumstances in which the mortgage and the agreement were entered into by the fifth defendant. The evidence is in dispute in relation to some aspects of this important issue. Suffice to say that, on the evidence so far, the fifth defendant has real and not fanciful prospects of establishing that he was a non-party to the first agreement, executed the mortgage to assist his wife as he co-owned the subject property with her and entered the second agreement on the same basis. He appears to have had some association with his wife's businesses, so it may be that he received some benefit from the transactions. But, on his case which may well be accepted, he cannot read English and could not have read the documents in question. He received no independent legal or other advice and the plaintiff's solicitor acted not only for the plaintiff but for the fifth and other defendants in relation to the second agreement, the terms of which are arguably very onerous.

78 On that analysis, the fifth defendant has defences - duress and statutory unconscionability - which are not fanciful and have real prospects of success in relation to the plaintiff's action against him for enforcement of the mortgage and the guarantee in the second agreement. On the evidence before me, a court may find the plaintiff knew of the fifth defendant's disabilities and took inequitable and unconscionable advantage of him. The fifth defendant's defences in this regard are not fanciful or unreal. Those defences also have real and not fanciful implications for the capacity of the plaintiff to enforce the mortgage and the guarantee against the fourth defendant.

79 The fourth and fifth defendants therefore have defences with real prospects of success in relation to the plaintiff's action for possession of the mortgaged property and the enforcement of the guarantees in the second agreement.

80 The plaintiff relies on cl 3(c) of the second agreement, which I have already set out. By that clause, the securities given by the borrower and the guarantors apply to the further advance made under the agreement.

81 The agreement does not indentify what these securities are. It is not submitted, and I do not think, it is arguable the agreement is generally void for uncertainty on this basis. What is submitted by the fourth and fifth defendants is that the guarantees in the second agreement were limited to the advance made under the earlier agreement, which have been repaid in full. Therefore the guarantees in the second agreement are legally ineffective to secure the $200,000 which was advanced under it.

82 Clause 3(c) of the agreement is an ambiguous provision which will have to be interpreted before the court can give legal effect to it at the suit of the plaintiff. The interpretative options would appear to be that the provision incorporates the securities given under the first agreement (being the deed of charge dated 25 September 2009 executed by the first, second and fourth defendants in pursuance of cl 9.1 of the first agreement), the securities previously given by the borrowers as guarantors to the plaintiff whether under the first agreement or not (which may pick up the mortgage executed by the fourth and fifth defendants dated 1 March 2010) or that the clause is incapable of certain interpretation and is void. There are real and not fanciful difficulties inhibiting the plaintiff's possessory claim in the present proceeding whichever interpretation is adopted. It is not my function either to choose the likely interpretation or identify the likely resolution of the difficulties.

83 The fourth and fifth defendants have real prospects of success in relation to the reliance by the plaintiff on cl 3(c) of the agreement in the enforcement of securities against them.

84 The plaintiff sought summary judgment for possession of the property of the fourth and fifth defendants, which is their family home. It obtained that judgment against the fourth defendant on the basis of a two-page mortgage which incorporated memorandum of common provisions No AA 690. That memorandum was the source of the terms and conditions of the mortgage.

85 As the associate judge stated, the memorandum was not produced in the evidence at the hearing before his Honour. Nor was it produced in the evidence at the commencement of the hearing of the appeal before me. No application for special leave to rely on supplementary evidence under r 77.06(7)(b) had been made. In that respect, the plaintiff's claim was not then properly verified as required by r 22.03(1)(a). In consequence, it would not have been possible for me to determine that the fourth and fifth defendants were in default under the mortgage or that the plaintiff had established their defences had no real prospect of success. The plaintiff's appeal would necessarily have failed, and the fourth and fifth defendants' appeals would necessarily have succeeded, in relation to the possessory orders.

86 Late in the hearing, the plaintiff sought special leave to supplement its evidence by tendering the memorandum referred to in the mortgage. The memorandum tendered was memorandum of common provisions No AA 689. When I pointed out that this was not the relevant memorandum, the plaintiff sought special leave to tender the correct one with written submissions. Subject to objection, I agreed with that course. I have received the correct memorandum and the submissions of the parties. Because the document was submitted so late without reasonable excuse, I will refuse the leave. However, I will consider the submission on the basis that leave was granted.

87 It appears that memorandum of common provisions No AA690 is the form of memorandum which is appropriate for incorporation in a mortgage securing money to be repaid under a credit contract or related guarantee which is covered by the Consumer Credit Code. Clause 5.1 of the document defines 'the secured money' in those material terms. The operation of the mechanical provisions of the memorandum depends on the application of that definition. The Consumer Credit Code regulates the provision of consumer credit to natural persons.

88 The fourth and fifth defendants make the point, which seems not only to be really arguable but actually correct, that the secured money in the present case was not consumer credit provided to and owed by natural persons. The credit was provided under the second loan agreement by the plaintiff to the first to third defendants, which are companies, for business purposes.

89 Those defendants also make the point, which equal force, that cl 38.1 of memorandum of common provisions No AA 690 requires the notice provisions in s 80(2) of the Consumer Credit Code to be complied with before the mortgage can be enforced. There is no evidence that those provisions have been complied with.

90 The defendants made a number of other points, all stemming from the same origin that the wrong common provisions have apparently been incorporated in the mortgage, which are unnecessary to consider.

91 The submissions made on behalf of the plaintiff do not adequately answer the submissions of the fourth and fifth defendants on this subject. I am not suggesting the mortgage is invalid or unenforceable. But in light of the defences now raised by those defendants, which I expect to be properly pleaded in amended defences, the plaintiff will need to rethink how it puts its claim for the enforcement of the mortgage.

92 The fourth and fifth defendants relied on other defences to the possessory claim which appear to raise really triable issues, including whether the mortgage secured the money advanced under the second agreement. In view of the conclusion I have reached about the failure of the plaintiff to verify its possessory claim (and in any event the uncertainty of the terms and condition of the mortgage), it is unnecessary to consider these other defences.

93 The fourth and fifth defendants have real and not fanciful prospects of success in their defence to the plaintiff's action for possession under the mortgage.

94 If the defendant were granted leave to defend, the plaintiff sought a condition under r 22.06(1)(c) that the disputed sum be paid into court.

95 I am not prepared to impose such a condition. There is uncertainty as to what the disputed sum is and the basis on which it might be recovered. Further, on the evidence, there is no reason to think the defendants might not be able to meet any judgment in the plaintiff's favour. If the plaintiff obtains judgment, its loss of use of the money in dispute will be compensated by the judgment interest provisions.

96 The defendants have established that they have real and not fanciful prospects of success in their defence against the monetary and possessory claims in the plaintiff's further amended statement of claim. Therefore the plaintiff's appeal will be dismissed and the defendant's appeals will be allowed. The orders of the associate judge dated 8 November 2011 will be set aside. The defendants will have general leave to defend with respect to all of the plaintiff's claims under r 22.06(1)(c). I will include the fifth defendant in these orders so that he has leave to defend in the same general terms as the other defendants. As the plaintiff's application for summary possessory judgment was not properly verified and was bound to fail against the fourth and fifth defendants, the plaintiff must pay the costs of those defendants of that application both before the associate judge and in the appeal. The plaintiff will have a certificate under s 4 of the Appeal Costs Act 1998 (Vic) in relation to the costs of the appeal of those defendants. I do not consider the plaintiff failed to verify its claim against the first to third defendants. The application against those defendants was reasonably brought. There will be an order that the costs of the plaintiff and those defendants of the application for summary judgment both before the associate judge and in the appeal will be their costs in the proceeding.

[1] Capital One Securities Pty Ltd v Soda Kids Holdings Pty Ltd [2011] VSC 563 (8 November 2011).

[2] The requirements for the content of such affidavits were discussed in Hausman v Abigroup Contractors Pty Ltd [2009] VSCA 288; (2009) 29 VR 213, 225-226 [60]-[66] (Weinberg and Bongiorno JJA, Williams AJA) ('Hausman').

[3] [2011] VSC 168 (10 May 2011) [15]-[22] ('Matthews').

[4] [2011] VSC 222 (27 May 2011) [7]-[18] ('Ottedin').

[5] [2011] VSC 476 (23 September 2011) [34]-[50] ('JBS').

[6] Matthews [2011] VSC 168 (10 May 2011) [21] (J Forrest J), citing Swain v Hillman [2001] 1 All ER 91, 92 (Lord Woolf MR) ('Swain'); Ottedin [2011] VSC 222 (27 May 2011) [18(2)] (Dixon J); Cullia v Gook [2011] VSC 412 (18 August 2011) [10]-[11] (Hargrave J); JBS [2011] VSC 476 (23 September 2011) [53] (Croft J); APN Funds Management Ltd v Australian Property Investments Strategic Pty Ltd [2011] VSC 555 (28 October 2011) [4] (Bell J). Swain [2001] 1 All ER 91, 92 (Lord Woolf MR) was cited with approval in Hausman [2009] VSCA 288; (2009) 29 VR 213, 224 [59] (Weinberg and Bongiorno JJA, Williams AJA).

[7] Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552, 575-576 [57] (Gaudron, McHugh, Gummow and Hayne JJ); see also Batistatos V Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256, 275 [46] (Gleeson CJ, Gummow, Hayne, and Crennan JJ).

[8] Three Rivers District Council v Bank of England [No 3] [2003] 2 AC 1, 260 [95] (Lord Hope), citing Swain [2001] 1 All ER 91, (Lord Woolf MR); see also Spencer v The Commonwealth [2010] HCA 28; (2010) 241 CLR 118, 130 [21] (French CJ and Gummow J) ('Spencer').

[9] Spencer [2010] HCA 28; (2010) 241 CLR 118, 131 [24] (French CJ and Gummow J).

[10] Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99 (Mason, Murphy, Wilson, Deane and Dawson JJ) ('Fancourt'); Hausman [2009] VSCA 288; (2009) 29 VR 213, 223 [53] (Weinberg and Bongiorno JJA, Williams AJA).

[11] Fancourt [1983] HCA 25; (1983) 154 CLR 87, 99 (Mason, Murphy, Wilson, Deane and Dawson JJ).

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