QBE Insurance (Australia) Limited v Kalead Etri

Judgment - Ex Tempore 1The plaintiffs, QBE Insurance (Australia) Limited and Suncorp-Metway Limited, by Notice of Motion filed on 1 March 2011, seek leave to cross-examine the first, second and third defendants (Khaled Etri, Zeina El Sadik and Hanan Etri) on their affidavits verifying Lists of Documents filed pursuant to orders made by McDougall J on 15 December 2010. There was no appearance of the first and second defendants on this application. I am satisfied that they were served with the Notice of Motion. 2The third defendant defends the Motion and moves on a Motion filed on 4 April 2011, seeking an order that the preliminary discovery process be terminated forthwith. There are other orders sought in the third defendant's Notice of Motion, but they are not being pressed today. The two motions have been heard together. Mr G Lucarelli appears for the plaintiffs and Mr T Rickard appears for the third defendant. 3The background to these applications is set out conveniently in QBE Insurance (Australia) Limited v Kalead Etri [2011] NSWSC 468 as follows: 2 The context in which this application is made is that in December 2010 McDougall J made orders for preliminary discovery against the first, second and third defendants. The third defendant is the sister of the first defendant and the second defendant is the wife of the first defendant. The first and second defendant borrowed money from the second plaintiff, Suncorp-Metway Ltd, and in securing that loan Suncorp-Metway obtained mortgages over two properties that have been referred to in the proceedings as the Berala property and the Auburn property. 3 In June 2009 the loan was in arrears and the amount outstanding was approximately $1.2 million. Negotiations took place between the the first and second defendants and Suncorp-Metway via the solicitors for the first and second defendants, Queen Street Chambers Solicitors & Barristers. 4 The proposal was that Suncorp-Metway would accept either $1.2 million and discharge the mortgages over both the Berala and Auburn properties, or approximately $350,000 in exchange for a discharge of the mortgage over only the Auburn property. It is apparent that agreement was reached whereby $347,000 was to be paid by the first and second defendants for the discharge of the mortgage on the Auburn property but the mortgage would remain on the Berala property. 5 On settlement of the loan in respect of the Auburn property on 24 June 2009, the payment was made by the first and second defendants' agents and the discharge of mortgage was handed over to the defendants' agents by Suncorp-Metway. Unfortunately, and it would appear prima facie inadvertently, the discharge of the mortgage in respect of the Berala property was also handed over to the defendants' agents. The relevant Certificates of Title were also handed over to the first and second defendants' agents. Thereafter the unencumbered Berala property was transferred to the third defendant and a mortgage was registered in the name of Ausgrow Pty Ltd, the fourth defendant. For various reasons that mortgage has now been discharged (it being suggested that the director of Ausgrow knew nothing about that mortgage). 4The orders for preliminary discovery that were made by McDougall J relevant to this application include the following: 2.14 All documents referring to the payment of any deposit by Hanan in relation to the purchase of the Property, including (but not limited to) banking records, trust account receipts, copy cheque butts, bank guarantee or deposit bond. 2.15 All documents referring to the payment of any purchase price by Hanan for the purchase of the Property, including (but not limited to) banking records, trust account receipts, settlement statements, copy cheque butts, bank cheque receipts, directions to pay. 2.16 All documents referring to the receipt by the Borrowers of any amount of deposit or purchase price in relation to the sale of the Property to Hanan including (but not limited to) banking records showing funds being deposited, trust account receipts, settlement statements, directions to pay. ... 3. Documents relating to the Ausgrow Mortgage 3.1 All loan applications received by Ausgrow from Hanan or from any broker or other agent acting for Hanan. 3.2 The loan agreement or agreements including letters of offer and any other document referred to therein between Hanan and Ausgrow. 3.3 Any guarantee given by any person or company as security for any loan between Ausgrow and Hanan. 3.4 All documents referring to the intended purpose of any loan by Ausgrow to Hanan. 3.5 All documents relating to the drawdown of any loan from Ausgrow to Hanan including (but not limited to): (a) loan account statements; (b) draw down notice or letters confirming drawdown. 3.6. All documents referring to the payment of loan monies to any third person at the direction of Hanan, including (but not limited to): (a) directions to pay; (b) settlement instructions; (c) settlement sheets or reports. 3.7 All documents referring to any repayments made by Hanan or by any person on Hanan's behalf to Ausgrow including (but not limited to): (a) loan account statements; (b) arrears notices or demands; (c) banking records showing deposits. 3.8 All documents containing or referring to any instructions sought from or given by Ausgrow to any solicitors or agents relating to the safe keeping of the certificate of title for the Property. 3.9 All documents containing or referring to any instructions sought from or given by Ausgrow to any solicitors or agents relating to the registration of the Ausgrow Mortgage. 5In purported compliance with the orders made by McDougall J, the first defendant filed an affidavit sworn on 28 January 2011 in the following terms: I say on oath: