[2000] HCA 41
Commonwealth of Australia v Griffiths (2007) 70 NSWLR 268
[2007] NSWCA 370
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Source
Original judgment source is linked above.
Catchwords
[2000] HCA 41
Commonwealth of Australia v Griffiths (2007) 70 NSWLR 268[2007] NSWCA 370
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
HIS HONOUR: Before the Court is a Motion on notice filed 3 March 2020 in which the plaintiff, Prime Capital Securities Pty Limited (hereinafter, "Prime Capital"), seeks summary judgment for possession of the land comprised in the title that is otherwise disclosed in the Statement of Claim, being land situated in Lidcombe.
That Motion relies upon the provisions of Uniform Civil Procedure Rules 2005 (NSW) (hereinafter, "UCPR"), rule 13.1, and Prime Capital also seeks an order granting leave to issue a writ of possession.
Finally, the plaintiff seeks its costs of the Motion and the proceedings on an indemnity basis, pursuant to the terms of the relevant loan arrangements. It is necessary to set out some background.
Capital Securities XVIII Pty Limited (hereinafter, "Capital Securities"), a related body corporate to the plaintiff, Mr Chiciak (the defendant), and VC Administrator Pty Limited (hereinafter, "VC Administrator") entered into a loan agreement on 19 June 2018 pursuant to which Capital Securities advanced $600,000 to VC Administrator (hereinafter, "the Loan Agreement").
Mr Chiciak guaranteed the obligations of VC Administrator to Capital Securities. [1] Mr Chiciak and his solicitor swore a statutory declaration confirming that Mr Chiciak had received independent legal advice and independent financial advice.
Further, as security for the loan, the defendant mortgaged the land in Lidcombe. [2]
The Loan Agreement required repayment by 30 June 2019, being 12 months from the date of the initial advance under the loan agreement. The principal has not been repaid.
In early 2019, Capital Securities purportedly assigned its rights under the Loan Agreement and Mortgage documents to the plaintiff. There is a letter from the solicitor for the plaintiff to the defendant dated 18 April 2019 which indicates, on its face, that it enclosed a "Notice of Assignment of Debt". [3] There is some dispute between the parties as to whether the Notices of Assignment of Debt which were sent to the defendant and VC Administrator were dated. The plaintiff notes that a complete and executed version of the Deed of Assignment of Debt and Security dated 21 March 2019, containing the Notices of Assignment of Debt, is in evidence. [4]
In any event, on or before 10 April 2019, the assignment and the identity of the plaintiff as the mortgagee were registered on the title of the Lidcombe property that is the subject of these proceedings. As a consequence, and given the presumption of regularity in relation, at least, to the registration, an effective deed of assignment must have given rise to the registration.
The defendant concedes that defaults occurred under the Loan Agreement on 1 March 2019, 1 April 2019, and 1 May 2019, when amounts for interest or fees were not paid by VC Administrator.
There then occurred negotiations for a new agreement and, on 3 May 2019, the plaintiff offered VC Administrator a new facility in the amount of $720,000, subject to a valuation of the Lidcombe property at or above $1.2 million. VC Administrator and Mr Chiciak accepted that offer.
However, a subsequent valuation determined the property was worth $1.1 million and, as a consequence, Prime Capital, instead of simply not proceeding with a new facility, made a reduced offer, with a limit of $660,000. That subsequent offer was, on the evidence before the Court, rejected by the defendant and VC Administrator.
On 23 May 2019, Mr Chiciak in fact advised the plaintiff that he would instead pay out the Loan Agreement in full on or before 19 June 2019. As already stated, that payment did not occur.
On 30 May 2019, Prime Capital issued a notice of default under the Loan Agreement. The default was not rectified and, on 20 June 2019, Prime Capital terminated the Loan Agreement and demanded repayment of the principal sum from Mr Chiciak. No payments have been made under the Loan Agreement since 1 February 2019.
The plaintiff relies on three Affidavits of Mr Paul Scanlon sworn on 7 December 2019, 5 December 2019, and 3 March 2020. The defendant relies, in terms of its evidence, on two Affidavits of Mr Chiciak, the defendant, sworn on 19 November 2019 and 19 May 20. Notwithstanding that reliance, there is no express reference to the material in the Affidavits of Mr Chiciak in the defendant's written submissions in relation to this Motion.
The plaintiff submits that essentially there is no dispute about the relevant underlying facts, and that seems, subject to what now follows, to be the situation, after the submissions that I have received from the parties. There is certainly no dispute as to whether there has been default under the Loan Agreement.
There is dispute about the amount that is owing, and there is dispute, notwithstanding the evidence of Mr Scanlon in his Affidavit of 5 December 2019, regarding whether the Deed of Assignment of Debt and Security was invalid or whether the defendant was unaware of the date on which the assignment took effect because the Notice provided was undated.
The defendant's submission regarding the dating of the Notice relies on an irregularity that seems to have no or little substance. The parties certainly acted, as at May 2019, on the basis that the assignment had occurred [5] , and in my view little or nothing turns on the issue of the lack of a date on the Notice of Assignment that was provided with the letters to which I have already referred.
There are allegations in the Amended Defence that are substantive. The first of them, which may in effect be a particular of the second, is that the Loan Agreement is subject to the National Credit Code. [6] The second is that Capital Securities engaged in unconscionable conduct in inducing the defendant to enter the guarantee and Mortgage documents. Thirdly, the defendant submits that certain provisions of the Loan Agreement are penal.
I will deal with the third matter first. The aspects of the Loan Agreement that are said to be penal, and, if accepted, would therefore be unenforceable, are aspects that go to the amount that is repayable by way of fees and other matters. They do not go to the repayment of the principal of $600,000 and would not vitiate the Loan Agreement as a whole.
The first matter raised, relating to the National Credit Code, has some difficulties. The National Credit Code applies only to circumstances where the borrower is a natural person or a strata corporation. [7] Since the borrower was VC Administrator, a corporate entity other than a strata corporation, the National Credit Code does not apply to the Loan Agreement.
The second aspect, which relates to unconscionable conduct and relies on an allegation, referred to in the Amended Defence at [24], that the defendant suffers mental or psychiatric difficulties, is a matter that seems to me to be substantive and could be the subject of argument.
At this time, no Cross-Claim has been filed by the defendant or VC Administrator. Further, the substantive proceedings that are pursued by the plaintiff are proceedings only for possession, and not for quantum. The issue of what, if anything, arises as a result of the possession and mortgagee sale, and what amounts are paid or payable, are matters not for the Court at the moment, and they certainly do not arise on the Statement of Claim that is before the Court and for which summary judgment is sought.
The issue of unconscionability, and indeed, the issues relating to the National Credit Code, if that be different, and whether the defendant may be entitled to an award of damages, are matters that do not arise in these proceedings and do not, on their face, seem to affect the requirement of the defendant to meet the obligation of VC Administrator in relation to the principal sum under the Loan Agreement, being $600,000.
There are a number of aspects which, it seems to me, the Court needs to deal with. While I hesitate to rehearse or reiterate the principles that apply to the making of a summary judgment, it is important that the Court make clear that the principles that are set out in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69, and indeed, in Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41, are principles that the Court applies. They are principles that are well established.
In the words of Barwick CJ in General Steel at CLR 129:
"The test to be applied has been variously expressed; "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them" (the pleadings) "to stand would involve useless expense "."
In Agar v Hyde, the plurality of Gaudron, McHugh, Gummow and Hayne JJ said at [57] that all of those tests described by Barwick CJ in General Steel are intended to describe a high degree of certainty about the outcome of the proceedings if it were to proceed to trial.
In the Commonwealth of Australia v Griffiths (2007) 70 NSWLR 268; [2007] NSWCA 370, Beazley JA, as her Excellency then was, with whom the then President 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) (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 Railways Commissioners (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: Airservices Australia v Zarb (Court of Appeal, 26 August 1998, unreported). In Webster v Lampard (1993) 177 CLR 598 at 602, Mason CJ, Deane J and Dawson J said:
… 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)
The other aspect to which the plaintiff referred, and which is important to restate, is that stated by his Honour Davies J in Nibar Investments Pty Ltd v Manikad Pty Ltd [2014] NSWSC 920 at [12], where his Honour said:
"The defendant and Ms Angelou [the cross-claimant] may well have arguments from the Contracts Review Act and principles of unconscionability that might afford some relief in limiting any monetary judgment against them. However, it does not seem to me that those arguments would serve to diminish the obligation of the Defendant to repay the $900,000 principal leant by the Plaintiffs."
Against the application of Nibar, the defendant raises the distinguishing feature, which in some circumstances may well be a distinguishing feature, that Nibar concerned a defendant who was in fact the borrower and to whom the amount of the loan was paid. This case involves a defendant who is a guarantor to amounts paid to the company of which the defendant is principal.
However, in answer to a question from the Court, counsel for the defendant makes it clear that the defendant is not disputing that the guarantor obtained benefit from the loan. It seems, on the face of it, that even if the Court were, ultimately, on any damages issue, to find that the lender engaged in unconscionable conduct at the time of the execution of the Loan Agreement, or at some subsequent time, those issues fall into the same category as those matters which dispute the amount of fees and the amount of interest that may otherwise be payable, either as a result of some allegation that the requirements are penal, or on the basis of payments that may or may not have been made.
It seems that if ultimately a claim were made alleging unconscionable conduct and damages were payable, which is a possibility, those damages may result in an amount greater than or less than $600,000 being payable to the plaintiff. But at the moment, those aspects are better dealt with at the time that any issue as to quantum is dealt with by the Court, if there be dispute as to quantum.
As previously mentioned, there is, at present, no Cross-Claim for unconscionable conduct seeking damages. The defendant here seeks to rely on unconscionable conduct as a shield rather than as a sword, and the issue is pleaded for the purpose of defeating the claim for possession.
It seems to me that when an allegation of unconscionable conduct is used as a shield in this way, it cannot overtake the obligation to repay the principal sum and, therefore, there is no arguable case that there has not been default under the Loan Agreement and that the defendant is not obliged to repay at least some of the amounts that are owing. If, ultimately, a court were, on a proper claim therefor, minded to award damages, and those damages were greater than $600,000, then that would be a matter for later proceedings, and these issues are not raised either by the Statement of Claim with which the Court is dealing or with the Amended Defence thereto.
On the face of it, all that the defendant claims by way of an "arguable case" are different matters associated with damages that may or may not be payable, and as a consequence relate to amounts, rather than the validity of the mortgage and the rights of the plaintiff under the Real Property Act 1900 (NSW).
As I previously mentioned, the mortgage in favour of the plaintiff is now registered. I emphasise that one of the most fundamental features of the system of land title in Australia is indefeasibility of title, in which the State guarantees the title of those with a registered interest in land to the extent of that interest. Such interests in land include mortgagees.
The principle is so important, and adherence to it is so essential, that registered title can be successfully challenged only in the most exceptional circumstances. None of those circumstances are before the Court in these proceedings.
That which is before the Court in the Statement of Claim is a claim for possession. It is not a claim for any damages arising under the Loan Agreement.
In those circumstances, default having been conceded, and possession being the only remedy sought, the Amended Defence does not provide an arguable case, and the high bar for summary judgment imposed by the principles established by Barwick CJ in General Steel to which I have referred and to which the plurality in Agar v Hyde refer, have been satisfied in the view of the Court.
In relation to costs, it is conceded by the defendant that the terms of the Loan Agreement require payment of costs on an indemnity basis. The Court takes the view that any costs that are paid, if the defendant is successful in any issue associated with unconscionability or the other matters raised, would be a matter that the defendant could claim as a head of damage in relation to those matters. Moreover, there is nothing in those circumstances that impacts upon the discretion to award costs under s 98 of the Civil Procedure Act 2005, and, as a result, the Court makes orders to the following effect:
1. Judgment for the Plaintiff against the Defendant for possession of land comprised in Torrens Title Folio Identifier 148/8683, being the land situated at and known as 27 Ostend Street, Lidcombe in the State of NSW pursuant to r 13.1 of the Uniform Civil Procedure Rules 2005 (NSW);
2. Leave is granted for the Plaintiff to issue and to execute a writ of possession;
3. The Defendant pay the Plaintiff's costs on an indemnity basis;
4. Leave is granted for the Defendant to approach the Common Law Duty Judge with a Motion for a stay of the writ of possession;
5. The parties are directed to negotiate through legal representatives as to the most appropriate way of dealing with the issue of the alleged sale and the most appropriate manner to realise the best value for the property; and
6. The proceedings otherwise be dismissed.
[3]
Endnotes
See the Loan, Security and Guarantee Deed in the Affidavit of Paul Scanlon sworn 7 November 2019, exhibit PJS-1, p 10-88.
See the Mortgage in the Affidavit of Paul Scanlon sworn 7 November 2019, exhibit PJS-1, p 89-90.
See the Letter in the Affidavit of Paul Scanlon sworn 7 November 2019, exhibit PJS-1, p 131.
Affidavit of Paul Scanlon sworn 5 December 2019, exhibit PJS-1, p 35-42.
See for example the document containing the conditional offer to increase the facility limit to $720,000 provided by the plaintiff (not Capital Securities) and signed by the defendant in the Affidavit of Paul Scanlon sworn 5 December 2019, exhibit PJS-1, p 140-146.
Sch 1 to the National Consumer Credit Protection Act 2009 (Cth).
See National Credit Code, s 5(1)(a).
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Decision last updated: 24 July 2020
Parties
Applicant/Plaintiff:
Prime Capital Securities Pty Ltd
Respondent/Defendant:
Victor Bohdan Chiciak
Legislation Cited (5)
(National Credit Code) Real Property Act 1900(NSW)