Serobian & Anor v Commonwealth Bank of Australia

HEARING DATE(S) : 24 September 2010 1 November 2010

(a) the Plaintiffs' further amended statement of claim, filed on 16 August 2010, be struck out; (b) the Plaintiffs are to pay the Defendant's costs of its notice of motion filed on 27 August 2010; DECISION : (c) the Plaintiffs are not permitted to file another statement of claim seeking the same relief, or relief based on the same material facts, without the leave of the court, or unless that statement of claim is endorsed as having been drafted, and settled, by a legal practitioner; (d) the balance of the Defendant's notice of motion filed on 27 August 2010 is dismissed; (e) the Plaintiffs notice of motion, filed on 27 October 2010, is dismissed; (f) the Plaintiffs are to pay the Defendant's costs of the notice of motion filed on 27 October 2010.

CATCHWORDS : PRACTICE & PROCEDURE - Strike out of further amended statement of claim - LEGAL PROFESSION - Pro-bono scheme - application for further referral certificate - "special reasons"

Contracts Review Act 1980 LEGISLATION CITED : Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules, Part 7, Division 9

Commonwealth Bank of Australia v Shahen Serobian [2009] NSWSC 302 Gourlay v Casey (1927) 38 CLR 586 CASES CITED : Jess v Scott (1986) 12 FCR 187 Serobian v Commonwealth Bank of Australia (unreported decision of Macready AsJ, 25 June 2010) Serobian v Commonealth Bank of Australia [2010] NSWCA 181

Shahen Serobian (First Plaintiff) PARTIES : Christine Serobian (Second Plaintiff) Commonwealth Bank of Australia (Defendant)

COUNSEL : Mrs Christine Serobian appeared in person for the Plaintiffs Mr P Dowdy (Defendant)

SOLICITORS : Mrs Christine Serobian appeared in person for the Plaintiffs Henry Davis York (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2009/290879 SEROBIAN & ANOR v COMMONWEALTH BANK OF AUSTRALIA JUDGMENT 1 HIS HONOUR: This is the hearing of the Defendant's application to strike out a further amended statement of claim and the Plaintiffs' application for further referral for pro bono legal assistance. Background Facts 2 The Defendant, in these proceedings, initially, brought proceedings, against the Plaintiffs, to recover $8,007,806.85, being moneys lent and advanced to them and secured by mortgage dated 13 December 2004, over their property at Addison Road, Manly. The Defendant also sought a writ of possession of the Manly property. 3 The Plaintiffs filed a cross-claim in which they sought orders that the guarantees they had executed in the Defendant's favour be set aside either pursuant to s 7(1) of the Contracts Review Act 1980, or s 87 of the Trade Practices Act 1974 (Cth). 4 On 24 April 2009, following an eleven-day hearing, Hammerschlag J found in favour of the Defendant, gave judgment for it, against the Plaintiffs, jointly and severally, in the amount claimed, ordered that a writ for possession of the Manly property be issued forthwith, dismissed the Plaintiffs' cross-claim and ordered them to pay the Defendant's costs of the proceedings, including the costs of the cross-claim. His Honour's decision is reported in Commonwealth Bank of Australia v Shahen Serobian [2009] NSWSC 302. 5 The Defendant entered judgment for possession on 13 May 2009 and leave was given to the Defendant to issue a writ of possession forthwith. 6 The Plaintiffs filed a notice of appeal on 24 July 2009, a notice of intention to appeal having been filed previously. The appeal was heard on 3 March 2010 and the appeal was dismissed by orders made on 10 August 2010. The Court of Appeal decision is reported in Serobian v Commonwealth Bank of Australia [2010] NSWCA 181. The Present Proceedings

7 The Plaintiffs commenced these proceedings in the Equity Division of the Court, by way of a statement of claim, filed on 9 October 2009. On the application of the Defendant, White J struck that pleading out on 28 October 2009. However, his Honour granted leave to the Plaintiffs to re-plead. 8 On 25 November 2009, the Plaintiffs filed an amended statement of claim. The Defendant filed another notice of motion on 7 December 2009, in which it sought to strike out that amended statement of claim. 9 In reasons for judgment delivered on 25 May 2010, Macready AsJ struck out the Plaintiff's amended statement of claim. He ordered the Plaintiffs to file a further statement of claim within 28 days. The period within which to file the further amended statement of claim was extended by his Honour subsequently. 10 The Plaintiffs, in fact, filed a further amended statement of claim on 16 August 2010. The Defendant filed a notice of motion, on 27 August 2010, seeking an order striking out the further amended statement of claim, an order that the proceedings be dismissed, generally, forthwith, and an order for costs, such costs to be calculated on the indemnity basis. 11 The Defendant's notice of motion was listed for hearing, before me, on 24 September 2010. On that date, it appeared to me that the Plaintiffs were agitating, principally, a matter that might be able to be resolved by the Defendant providing a document stating the amount then owing to it since the judgment given by Hammerschlag J, including how the proceeds of sale of a property at The Entrance had been applied (it being asserted by the Plaintiffs that these proceeds had been misapplied, or not applied at all, by the Defendant). 12 The parties were able to reach agreement on the time within which the Defendant was to supply the document including these particulars and the Defendant's notice of motion was adjourned until 1 November 2010. 13 I was informed on 1 November 2010, that the Defendant had complied with the direction given on 24 September 2010. An affidavit, of 22 October 2010, sworn by the Defendant's solicitor, including a copy of a letter dated 1 October 2010, as well as a copy of an email of that date, addressed to the Plaintiffs' email address, annexing that letter, was read by the Defendant, without objection. 14 Included in the letter, the following statements appear: "Attached to this letter is a copy of a letter from this firm dated 23 November 2009 (Letter) which was sent to you setting out how the proceeds of sale of the property at […] Oakland Avenue, The Entrance (Entrance Property) were applied by the Bank. The purpose of the Letter was to assist you in understanding why the allegations made by you against the Bank in the Present Proceeding are without foundation. The information given to you in the Letter accurately reflects the position and explains to you how the proceeds of sale were properly applied by the Bank and its agent. This was confirmed by McCready AJ ( sic ) and Macfarlan JA as follows:-

1. McCready AJ ( sic ) at paragraph 8 of his judgment of 25 May 2010 in the Present Proceeding described the letter as "giving full details of accounting for this amount." (i.e. $275,000).

2. Macfarlan JA in the Court of Appeal, in dismissing your appeal from the decision of Hammerschlag J in the Previous Proceedings (with the agreement of Tobias JA and Sackville AJA), said as follows at paragraph 83:-

"The appellants have not provided any reason to doubt the correctness of the amount for which judgment was entered. In response to their concern that credit had not been given for the proceeds of sale of The Entrance property, the respondent provided, in November 2009, a detailed letter of explanation, attaching relevant bank statements. On the hearing of the appeal, Mrs Serobian, on behalf of the appellants, acknowledged that she had that letter in her possession (Transcript pp 59-60). The letter described the process by which credit was given for those proceeds of sale. The appellants have not cast any doubt upon the accuracy of what is said in that letter." 15 In fact, at [81], [82], and [84] of the Court of Appeal judgment, his Honour Macfarlan JA had also written: "81 The appellants submitted that the judgment entered in favour of the respondent was too high because credit had not been given to them for the $275,000 proceeds of sale of a property at The Entrance in September 2008 that had been the subject of a mortgage to the respondent. 82 The quantum of the appellants' indebtedness to the respondent was not in issue at the hearing at first instance. The amounts of the debts that the respondent claimed were admitted by the appellants in their Response to the respondent's Commercial List Statement (Red Appeal Book p 39T). Increased indebtedness at the time of trial, and then at judgment, was proved by the tender by the respondent of certificates issued under the provisions of the mortgages that the respondent held. … 84 The appellants also complain that they were not for a long period given information about their accounts to which they were entitled. If correct, this is regrettable but does not assist the appellants in any of the challenges that they make to the judgment at first instance."

16 Mrs Serobian, the second Plaintiff, who, once again, appeared, for the Plaintiffs, in the present proceedings (as she had in the Court of Appeal, before Macready AsJ and also before me on 24 September 2010) acknowledged receipt of the email and the copy letter referred to in the affidavit of the Defendant's solicitor. 17 On 27 October 2010, the Plaintiffs filed a notice of motion, which was made returnable on 1 November 2010, in which they sought, substantively, what I understand to be: a a referral for legal assistance under Division 9 Part 7 UCPR; b an order that a further statement of claim be filed after documents produced in answer to subpoenas that had been issued had been inspected; c an order that verification of pleadings not occur until after documents produced in answer to subpoenas that had been issued had been inspected. 18 When the matter was before me on 24 September 2010, the parties had noted, correctly, in the short minutes of order, that the Plaintiffs had been advised to seek the benefit of legal advice in relation to this proceeding. Determination 19 From the relief that is sought in the Plaintiffs' notice of motion, it appears that the Plaintiffs accept that the further amended statement of claim, in its most recent emendation, cannot stand. At the hearing, Mrs Serobian acknowledged that this was so. Looking at the pleading, there is little doubt that this concession was appropriate. It is unnecessary, therefore, to identify the specific defects therein. 20 The Plaintiffs' notice of motion was unsupported by any affidavit evidence. Nor was there any other sworn evidence relied upon to give substance to the matters asserted in the further amended statement of claim. 21 An attempt was made to rely upon the affidavit of the Defendant's solicitor and the annexures to that affidavit to establish that the Defendant had been guilty of fraud. However, any such suggestion was not only denied, but was countered, by Mr Dowdy, counsel appearing for the Defendant, expressly confirming that no part of the [Defendant's] continuing claim against the Plaintiffs included any amount referred to on the last page of the Grant Thornton account, being page 1 of statement 17 (annexed to the affidavit): T10.21-10.26. Mr Dowdy stated, specifically, that the amount referred to in those bank statements ($620,751.68 DR) had been "written off" by the Defendant. 22 The statements made by Mr Dowdy appeared to confirm what had been stated in the letter dated 1 October 2010, that "the [Defendant] has not added interest … or its costs of the Previous Proceedings and the appeal to the Court of Appeal to the Judgment Amount owed by you." 23 The Defendant's concession means that only the balance of the amount sought in the proceedings heard and determined by Hammerschlag J, and in the Court of Appeal, is the subject of the Defendant's claim against the Plaintiffs. 24 The Defendant, very properly, accepted that I should deal with the Plaintiffs' notice of motion, today, if possible, even though it had been filed so recently. 25 During the hearing before Macready AsJ, on 25 May 2010, the Plaintiffs had indicated a desire to obtain legal assistance. His Honour referred to Division 9 of Part 7, Uniform Civil Procedure Rules 2005 and identified what needed to be done to apply for an order under that Division and pointed out, clearly, that he had mentioned this matter so that the Plaintiffs could avail themselves of the service prescribed by the Rules. 26 In fact, his Honour, subsequently, on 25 June 2010, ordered that there be a referral for pro bono legal assistance. That was limited to the provision of services to investigate: 1. Whether there is any claim for failure to account for the proceeds of the sale of the property at 62 Oakland Avenue, The Entrance.

2. Whether there is any fraudulent conduct by Commonwealth Bank of Australia bank officers as to the amount owing in the hearing before Hammerschlag J and if the person giving the advice is of the view that any such claim is appropriate to draft any statement of claim. 27 Mrs Serobian informed me, without objection, from the Bar Table, that she had, in fact, conferred with Mr David Ash of counsel on, or about, 26 July 2010 and that he had provided certain advice on the two matters the subject of the referral by Macready AsJ. 28 There was a suggestion by Mrs Serobian during her submissions, that it was not part of Mr Ash's function to settle a statement of claim if that were appropriate. When I read to her the terms of the order made by Macready AsJ, she accepted that this was so and that her earlier statement appeared to be incorrect. She acknowledged that Mr Ash had not settled the further amended statement of claim the subject of the Defendant's notice of motion. 29 UCPR r 7.36(2A) provides that the court may not refer a litigant for assistance under this rule if the litigant has obtained assistance under a previous referral at any time during the immediately preceding period of 3 years, unless the court is satisfied that there are special reasons that justify a further referral. It is clear that the Plaintiffs had obtained assistance under a previous referral pursuant to the direction of Macready AsJ in June 2010. 30 The meaning of "special reasons" is not defined in the rule. "Special"; conveys the notion of being out of the ordinary, extraordinary or exceptional. The Oxford Dictionary defines "special" as meaning "of such a kind as to exceed or excel in some way that which is usual or common; exceptional in character, quality or degree". The Macquarie Dictionary states the meaning: "of a distinct or particular character or purpose"; "being a particular one"; "particular, individual or certain"; "different from what is ordinary or visual"; "extraordinary, exceptional". 31 In Jess v Scott (1986) 12 FCR 187, the Full Federal Court (Lockhart, Sheppard and Burchett JJ) considered a provision which allowed a court "for special reasons" to permit an appeal out of time. At 195, it was said that what that rule required was: "… that there be shown a special reason why are the appeal should be permitted to proceed, though filed after the expiry of twenty-one days. In that context, the expression "special reasons" is intended to distinguish the case from the usual course according to which the time is twenty-one days. But it may be so distinguished (not necessarily will, for the rule gives a discretion) wherever the Court sees a ground which does justify a departure from the general rule in the particular case. Such a ground is a special reason because it takes the case out of the ordinary. We do not think the use of the expression "for special reasons" implies something narrower than this. …

It should not be overlooked that r 15(2) enables leave to be given "at any time"; the "special reasons" relevant to such a power cannot but describe an elastic test, suitable for application across a range of situations, from an oversight of a day to a neglect persisted in during a prolonged period. It would require something very persuasive indeed to justify a grant of leave after, for example, a year; equally, it may be said, something much less significant might justify leave where a party is a few days late. "Special reasons" must be understood in a sense capable of accommodating both types of situation. It is an expression describing a flexible discretionary power, but one requiring a case to be made upon grounds sufficient to justify a departure, in the particular circumstances, from the ordinary rule prescribing a period within which an appeal must be filed and served." 32 In exercising a power that is able to be exercised where there are "special reasons", the discretion of the court is very wide and necessarily so; but it must have, as its basis, some circumstance which it can reasonably regard as "special reasons" for lifting the particular circumstance out of the usual: Gourlay v Casey (1927) 38 CLR 586, at 591, per Isaacs, Gavan Duffy and Powers JJ. 33 In this case, there is no evidence that would enable me to be satisfied of any special reasons. In fact, there are no reasons at all, let alone any special reasons, why a further referral by the Court should be made. 34 In the circumstances, I am unable to make an order as sought by the Plaintiffs for a further referral for legal assistance. 35 As the Plaintiffs acknowledge that the further amended statement of claim cannot stand in its present form, I shall strike it out. It follows that the subpoenas that have been issued by the Plaintiffs should also be set aside. 36 On the issue of the subpoenas, I note, for completeness, that Mrs Serobian stated that the reason why the Plaintiffs required the documents sought in the subpoenas was because "we have further amounts [a] further case which is in the High Court as well in regards to the appeal, I would like to actually have the subpoenas produced by the bank in that respect": T 11.12-11.14. 37 That, of course, is not a legitimate purpose for the subpoenas having been issued in the present case and provides a further reason to not allow the subpoenas to stand. I propose to set them aside. 38 When I indicated that my view was that I could not grant the relief sought and would provide reasons later, Mrs Serobian sought an additional two weeks to re-draft, with legal assistance, the further amended statement of claim. I pointed out to her that I had already allowed, in effect, five weeks, for that to occur. She did not dispute that that had been the effect of the adjournment from 24 September 2010 until 1 November 2010. 39 In the circumstances, I am not prepared to permit the matter to be further adjourned. The statement of claim, which was, initially, filed over 12 months ago, with two further amendments, has been drafted in a form that is liable to be, or which has been, struck out. If the Plaintiffs do, in fact, have a proper claim, without legal advice, and the assistance of a legal practitioner, in drafting a pleading in proper form, they are unable, themselves, to do so properly. To allow another two weeks would only be to put off the inevitable. 40 This does not mean that the Plaintiffs are prevented from filing another statement of claim if they wish to and they can do so. However, they should not be permitted to file such a statement of claim, against the Defendant, seeking the same relief, or relief based upon the same material facts, without the leave of the court, or unless that statement of claim is certified as having been drafted and settled, by a legal practitioner. 41 In this regard, I am not prepared to dismiss their claim generally, and thereby prevent them from proceeding, if, with legal assistance, they are able to properly articulate such a claim. 42 For completeness, I should note that I gave the Defendant an opportunity to have further argument, on another date, on the issue of the dismissal of the Plaintiffs' claims generally, but I was informed that the Defendant would be satisfied with an order in the terms referred to. 43 Accordingly, the orders of the Court are that: (a) the Plaintiffs' further amended statement of claim, filed on 16 August 2010, be struck out; (b) the Plaintiffs are to pay the Defendant's costs of its notice of motion filed on 27 August 2010; (c) the Plaintiffs are not permitted to file another statement of claim seeking the same relief, or relief based on the same material facts, without the leave of the court, or unless that statement of claim is endorsed as having been drafted, and settled, by a legal practitioner; (d) the balance of the Defendant's notice of motion filed on 27 August 2010 is dismissed; (e) the Plaintiffs notice of motion, filed on 27 October 2010, is dismissed; (f) the Plaintiffs are to pay the Defendant's costs of the notice of motion filed on 27 October 2010. **********

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