Provident Capital Limited v Ross Leslie Norton

Supreme Court of NSW|2012-01-31|Before: Adamson J

Background to the application 1The plaintiff is the mortgagee of the defendants' residence ( the Property ) by reason of a mortgage granted by the defendants on 1 April 2010 ( the Mortgage ). 2Consent judgment was entered for possession of the Property and for costs on 13 April 2011. On 7 September 2011, the plaintiff filed a notice of motion for a writ of possession and, on 9 September 2011, the Court issued a writ of possession. 3The defendants move on Amended Notice of Motion filed on 7 October 2011 to set aside the consent judgment, either pursuant to UCPR 36.15 or UCPR 36.16. On 11 October 2011 the Court ordered that there be a stay of execution of the writ of possession until further order. On 13 October 2011, the hearing of the plaintiff's notice of motion was listed for 31 January 2012.

The Mortgage and subsequent agreements 4The sum advanced pursuant to the Mortgage was $1.35m. Five months' worth of interest was pre-paid upon settlement. The term of the loan was expressed to be for nine months. The loan was a loan for business purposes and the defendants expected that they would be able to repay it within the term. However, the expected funds to repay the loan were not forthcoming and the defendants defaulted on the loan. 5On 18 October 2010 representatives of the plaintiff met with the defendants as a result of which an agreement was reached, apparently with a view to allowing the defendants some time to refinance the Mortgage. Part of that agreement required the defendants to sign a document entitled "Consent Judgment" which the plaintiff was entitled to hold in escrow and file, in the event of further default. Due to a typographical error in the first document of that nature that was given to the defendants, the plaintiff sent a further corrected document to them under cover of letter dated 27 October 2011. 6On or about 4 November 2010 each of the defendants duly signed the document entitled "Consent Judgment". It was in accordance with the then current Form 44. The relevant orders were: (a)Judgment by consent for the plaintiff, Provident Capital, against the first defendant and the second defendant for possession of the land [the Property was then described by reference to its title details and its address]. (b)The first defendant and the second defendant pay the plaintiff's costs as agreed or assessed. 7The 2010 Consent Judgment was received by the plaintiff on 8 November 2010 and held in escrow. 8By statement of claim filed on 15 March 2011, the plaintiff sought judgment for possession of the Property and an order for costs against the defendants.

The events of 19 March 2011 9A process server, Mr McGuiness, went to the Property on Saturday 19 March 2011, with various documents for the defendants, including: (a)The statement of claim; and (b)A form of consent judgment (which had the relevant matter number endorsed on it and was in accordance with the then current Form 44) for the defendants' signature. 10There is an issue about what occurred when Mr McGuiness served the documents referred to above. 11Mr and Mrs Norton deposed that Mr McGuiness had told them that the documents that were being served were important documents and that they had 28 days to serve their defence. They also deposed that he asked them to sign a document to acknowledge that they had received the statement of claim. They both said that they signed a document believing it to record their receipt of the statement of claim. However, the only document which they appear to have signed at about that time was the form of consent judgment which the process server had brought with him to the Property that day. It was this document which was filed by the plaintiff and caused the entry of judgment against the defendants. 12Mr Norton insisted that he had a clear recollection of 19 March 2011, that it was raining hard and that the process server had seemed apologetic about what he had to do. Mr Norton admitted in cross-examination that he knew that it was the first step in the process whereby the plaintiff would take possession of the Property. He deposed that at the time he was very depressed and concerned about maintaining his employment so that he could make the interest payments; he was worried about providing for his family and very concerned not to upset the home situation because his son was doing his HSC year in 2011. He had not told his children at that time that there was a prospect that their home would be sold. 13He said that he signed the "Consent Judgment" without appreciating what he was signing, in reliance on what the process server had told him about its nature: namely, that it was an acknowledgement of receipt of the statement of claim. 14Mrs Norton's evidence was to similar effect. She was also asked, in the course of her oral evidence, why she had signed the document in two places. At first her answer tended to suggest that she was going to implicate the process server in her having signed the document in the wrong place but she did not. Her evidence was that she could not recall why she had signed the document twice. I put to her that one possible explanation was that she had signed it the first time and then read that she had to signify her consent in a different place, and so she signed it again. She did not accept that explanation, but did not proffer any other. 15Mr McGuiness, who was not required for cross-examination, deposed as follows: "other than by reference to my affidavits of service I do not recall the specific conversations I had with the first defendant and the second defendant when serving them with the plaintiff's statement of claim; the replacement Consent Judgment was clearly headed "Consent Judgment" and I do not see any reason why I would have asked either the first defendant or the second defendant to sign that document as a receipt for the statement of claim that I served on each of them and I do not believe that I made any such request." 16It is necessary for me to determine the factual question of whether the process server misrepresented the nature of the document that bore the heading "Consent Judgment" and procured the signatures of the defendants by reason of his misrepresentation. 17I am not satisfied that the process server made the representation to Mr and Mrs Norton that the document they were signing was an acknowledgement of receipt of the statement of claim. Nor am I satisfied that the process server told them that they had 28 days to put on a defence, a representation which would have been inconsistent with the terms of the "Consent Judgment". 18I prefer the evidence of Mr McGuiness to that of the defendants for the following reasons. 19First, Mr McGuiness was not required for cross-examination. 20Secondly, although his evidence, understandably, did not rise above his usual practice and he did not have a recollection of the actual conversation, the objective probabilities favour his not having asked for their signatures to show receipt of the statement of claim. Such a request would have been otiose, since service would ordinarily be proved, as it was in the instant case, by an affidavit of service by the process server. 21Thirdly, the defendants had a strong interest in believing in some wrongdoing which could be attributed to the plaintiff and which would allow them to stay in the Property for longer than otherwise, and in particular until the end of 2011 because it was their son Joel's HSC year and they had not told any of the children that there was a real prospect that the family home would be sold by the plaintiff. 22By contrast, the process server had no particular interest in doing other than he was retained to do. I consider that the defendants' interest has affected their recollection, which is, at least to this extent, unreliable. The process server's uncontroverted evidence was that he appreciated the nature of the "Consent Judgment" document since he had been instructed to attempt to obtain their signature on it because the one they had already signed was out of date. In these circumstances it is unlikely that he would have told them that they had 28 days to file a defence. 23Fourthly, although I accept the uncontroverted evidence that Mr Norton was depressed at the relevant time and signed documents because he believed that he had no option but to do so, I do not accept that Mrs Norton would have signed a document without taking sufficient notice of its contents to ascertain its nature. She impressed me as being an articulate woman, with an eye for detail. She deposed as follows in her affidavit: "I have not worked outside the home since having our three children. I am responsible for administering the finances of the household and I have made each of the payments to the plaintiff from joint funds." 24Her role in the household made it more likely that she would pay attention to what she was signing, especially in circumstances where her husband was depressed and unlikely to do so. 25Furthermore Mrs Norton had signed an almost identical document in 2010 and sent it to the plaintiff. That she signed the "Consent Judgment" in two places in March 2011 suggests, in the absence of any other explanation, that she read it sufficiently to appreciate where she had to put her signature to signify her consent.

Subsequent events 26Mr Norton deposed that he tried to file a defence in mid-April 2011 but was eventually told by the Registry that judgment had been entered on 13 April 2011 and that a defence could not be filed unless and until judgment was set aside. 27The plaintiff endeavoured to enter into an agreement with the defendants by making an offer to them on 22 September 2011 as to further repayments on condition that the defendants would make no further objections to eviction and would not seek to file a defence or have the plaintiff's judgment against them set aside. This agreement was never made since the defendants did not respond to this offer. 28According to the plaintiff's unchallenged evidence, the arrears of interest as at 7 October 2011 amounted to $194,780. 29Mr Norton appended a draft defence to his affidavit sworn 6 October 2011. The paragraph of his affidavit which refers to it reads as follows: "Having sought legal advice I seek to file a defence in these proceedings. A copy of a draft defence is annexure S. I understand that if I am granted leave to file the defence that I must verify it." 30In the draft defence, the defendants admit the Mortgage and the Deed of Loan, do not admit that they are in default, or the sums owing, and deny that the plaintiff is entitled to possession. The draft defence contains the following further substantive allegations: "In answer to the whole of the statement of claim, the defendants say that clause 5 of the Deed of Loan and Guarantee permitting the discretionary imposition of a roll over fee is void as a penalty. As a result the amount said to be outstanding as at the date of filing the statement of claim cannot be said to be due and payable." 31It can thus be seen that the limits of the defence relate to the allegation that the rollover fee is void as a penalty and therefore there is a dispute as to the amount which the plaintiff is entitled to withhold from the proceeds of any sale of the Property, or otherwise to recover from the defendants. However, this does not affect the plaintiff's right to possession, which arises upon default.

The relevant principles and their application 32The defendants rely on the Court's powers under UCPR 36.15 and UCPR 36.16 to set aside judgments that have been entered. They submit that the judgment was made "irregularly, illegally or against good faith" within the meaning of UCPR 36.15(1). They rely on the following grounds, which I have extracted from their written submissions: (a)The process server engaged by the plaintiff did not tell the defendants that the Consent Judgment was a judgment; (b)The defendants were not given an opportunity to read the Consent Judgment; (c)The process server falsely told the defendants that the Consent Judgment was a receipt for the statement of claim; (d)The plaintiff concedes that it provided the Consent Judgment to the process server via its solicitors for the purposes of procuring the defendants' signatures thereon; (e)The process server was the agent of the plaintiff; and (f)The judgment was procured against good faith and entered in the absence of the defendants. 33They also submit that the power under UCPR 36.16(2)(b) is enlivened because the judgment was made "in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment". 34The plaintiff accepts that there is an issue of fact, the determination of which could give rise to a power under UCPR 36.15 but says that UCPR 36.16 is not enlivened because the defendants were not truly "absent" since the application for judgment was made by filing the document in the Registry and by appending their signatures to the "Consent Judgment" document, they were constructively present. 35As to the exercise of the discretion to set aside a judgment, the defendants contend that, if they establish wrongdoing on the part of the process server, it should be attributed to the plaintiff and that the judgment cannot stand. They also say that there are issues to be tried, including the amount outstanding under the deed of loan and whether the roll-over payments amount to a penalty, which it was not appropriate to determine on a notice of motion. 36I propose to deal with each of the grounds relied upon in the order in which they appear above. 37As to (a) and (b), I do not consider that lack of good faith or irregularity is established if, as is alleged, the process server did not inform the defendants that the document which was headed "Consent Judgment" was indeed a consent judgment. I do not consider that the defendants have established that they were not given sufficient time to read the document. The document is a two-page document, which, as I have earlier found, was in an almost identical form to one that they had earlier signed. Its import is tolerably clear to anyone with a reasonable grasp of English, including the defendants. If the defendants chose not to read every word of the document before signing it, it was not because they were not given the opportunity to read it. 38As to (c) it follows from the findings I have made above as to what occurred on 19 March 2011 that I am not satisfied that there was any wrongdoing on the part of the process server. In particular I am not satisfied that he told the defendants that their signatures were required to indicate that they had received the statement of claim. 39I am inclined to consider that both of the defendants appreciated the nature of the document they were signing, but if they did not, it was not because of any act or omission of the process server. Their preparedness to sign an almost identical document in the previous year because they felt that they had to, as a matter of practical reality, also persuades me that they knew what they were signing. 40As to (d) I do not consider that, in all the circumstances, there was anything untoward in the plaintiff using a process server to obtain the defendants' signatures on a Consent Judgment document which was in almost identical form to one they had signed earlier, which was still held in escrow. 41As to (e), a nice question would arise as to whether the conduct of the process server could be attributed to the plaintiff for the purposes of UCPR 36.15 (as it did in the case of a solicitor, see Coles v Burke (1987) 10 NSWLR 429, at 437C-D). However, this question does not arise for determination in the instant case because I have not found that the process server acted in any way that could be characterized as amounting to an illegality, irregularity or lack of good faith. 42It follows from the findings set out above that the power under UCPR 36.15 is not enlivened. 43There is some force in the plaintiff's submission that UCPR 36.16(2)(b) does not apply because it could not be said that the defendants were "absent" when they had actually signed the document on the basis of which the Court entered judgment. However, it is not necessary that I come to a final view on this matter since I would not, in any event, exercise any discretion I had under this provision in favour of the defendants for the reasons set out below. 44The applicable principles were usefully summarized by Barrett J (as his Honour then was) in Workers Compensation Nominal Insurer v Detailed Flooring Pty Limited [2010] NSWSC 1056, at [17]-[19]: "In arguing that the court should exercise its discretion under rule 36.16(2)(b) to set such orders aside, an applicant must contend with the proposition that great value attaches to certainty in the outcome of litigation. The approach to be taken to an application such as the present is indicated in the joint judgment of Gibbs CJ, Mason J, Wilson J, Brennan J Deane J and Dawson J in University of Wollongong v Metwally (No 2) [1985] HCA 28; (1985) 59 ALJR 481 at 482-3: It may be assumed, without deciding, that the court has power to vacate its order of 22 November 1984, notwithstanding that it has been perfected. If such power exists, it must be exercised with great caution, after weighing what might otherwise be irremediable injustice against the public interest in maintaining the finality of litigation: see State Rail Authority of New South Wales v Codelfa Construction Pty Ltd (1982) 150 CLR 29 at 38. The present is not a case in which an order was made by mistake or as a result of fraud, or a case in which by some accident an order has been made against a party who was not heard. This passage enjoins "great caution" in approaching applications of the kind that Mr Davis has sought to pursue. It also gives some examples of situations in which it may be found appropriate for the court to intervene in relation to a final order that has been perfected: where the order was made by mistake, where the order was made as a result of fraud and where, by some accident, an order has been made against a party who was not heard. The central question is whether it is unjust to let the perfected order stand. The matter was put thus by Jordan CJ (Davidson J and Roper J concurring) in Vacuum Oil Co Pty Ltd v Stockdale (1942) 42 SR NSW 239 at 243-4: The question is whether, upon the material that has been placed before us, there is a real likelihood that it would be unjust to the defendant to allow the judgment to stand. If so, it should be set aside on such terms as it will minimise the possibility of injustice to the plaintiff. If not, we should not interfere." 45In light of the findings I have made above, the defendants were not influenced to sign the Consent Judgment by any untoward conduct of the process server or by the plaintiff. Even if they signed it without reading it because they were too upset about their situation to do so, this would not be sufficient to warrant the setting aside of the judgment. It would provide an explanation, but not a satisfactory one, as to why the defendants signed a document from which they now wish to resile. The plaintiff was entitled to rely on their signatures appended to the document as being a proper basis on which to file it. There is no element of injustice or unconscionability which can be attributed to the plaintiff in these circumstances. The Court, too, was entitled to rely on their signatures when it entered the judgment on the basis of the document entitled "Consent Judgment" signed by the defendants. 46Whether the defendants have established that they have a defence to the plaintiff's claim is also a matter germane to the exercise of my discretion to set aside a judgment which has been entered, if such discretion is available under UCPR 36.16(2)(b) in the instant case. I do not consider that the defendants have shown that they have any defence to the plaintiff's claim for possession. Although their counsel made various submissions from the bar table to the effect that they were only partly in default, that they were not in default on the day judgment was obtained and that they would not be in default if the roll-over fee were not taken into account, there was no substantial evidence on the basis of which I could find that the defendants were not in default, thereby disentitling the plaintiff to possession of the Property. 47When I suggested, in the course of oral argument, that it might be otherwise if, for instance, there were an allegation under the Contracts Review Act 1980, the defendants' counsel submitted that that defence would be available, having regard to Mr Norton's depression and that this was an issue to be tried. I consider it to be too late for the defendants, who seek a favourable exercise of this Court's discretion, to make such a submission. It was almost a year ago that they were served with the statement of claim for possession and they signed the "Consent Judgment". They had ample time to consider what defences, if any, would be available to them. 48In my opinion, no sufficient cause has been shown to take the significant step of overriding the effect of the consent judgment entered on 13 April 2011 and the consequential writ of possession issued on 9 September 2011. Accordingly, even if I had the power to set aside the consent judgment under UCPR 36.16(2)(b), I would not exercise my discretion to do so in the circumstances of this case. 49The plaintiff has asked me to reserve the question of costs, since, if the plaintiff is successful, it seeks an order for indemnity costs. Since the Mortgage entitles the plaintiff to an indemnity for costs, such an application would appear to be otiose. However, by reason of the plaintiff's request, I will reserve the question of costs. 50For the foregoing reasons, I make the following orders: (a)the defendants' amended notice of motion filed on 7 October 2011 be dismissed; (b)the stay of execution of the writ of possession granted on 11 October 2011 is lifted; and (c)the costs of the notice of motion are reserved, pending further argument

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