Starwhist Pty Ltd v Tonge

The loan and subsequent arrangements

1. The Plaintiff claims possession of land at 4278 Tarwoona Road, Twin Rivers, a property almost on the Queensland border with New South Wales some miles east of Boggabilla and Goondiwindi, and judgment for the amount said to be owing. The Plaintiff seeks this relief as a result of a failure to repay a three month loan of $2 million together with interest thereon and a facilitation fee of $200,000 under a mortgage dated 1 December 2010.
2. The brief history is as follows. When the loan was not repaid by 1 March 2011 the Defendant gave a notice under the Farm Debt Mediation Act 1994 (NSW). A mediation took place on 16 December 2011 and that resulted in a deed of that date providing for the Defendant to repay the principal sum, the facilitation fee and interest on the principal sum at the rate of 3% per month. The Defendant did not repay those amounts.
3. On 24 June 2013 the parties entered into a further deed (the "June 2013 Deed") whereby the Defendant agreed to pay the sum of $3,100,000 by 31 July 2013 and when that amount was paid the Plaintiff would release and discharge the Defendant from all further obligations and liabilities. It was also a term of the June 2013 Deed that if the amount of $3,100,000 was not paid by 31 July 2013 the Plaintiff was entitled to charge the Defendant interest on all outstanding monies at the rate of 12% per annum from 31 July 2013 until the date of payment. The deed also gave a right of election to the Plaintiff either to affirm that deed and sue the Defendant for damages for breach of it, to sue the Defendant for specific performance of the deed or to terminate the deed and immediately reinstate the original loan amount outstanding and sue the Defendant for those monies. The amount outstanding as at 24 June 2013 was $4,142,000.
4. Subsequent to the execution of the June 2013 Deed the time for the Defendant to pay the sum of $3,100,000 was extended to 14 August 2013. The Defendant did not pay any monies to the Plaintiff by 14 August 2013.
5. On 4 December 2013 the Plaintiff sent a Notice to Complete pursuant to the terms of the June 2013 deed. That Notice to Complete required the Defendant to pay the amount of 19 December 2013.
6. The Defendant did not pay the money by 19 December 2013 or at all. On 23 December 2013 the Plaintiff exercised its rights under the June 2013 deed, terminated the deed, and reinstated the original loan amount.
7. On 30 May 2016 the Plaintiff issued a s 57(2)(b) notice under the Real Property Act 1900 (NSW) requiring the Defendant to pay the Plaintiff the sum of $6,098,387.10. That resulted in the Defendant issuing the Plaintiff a further notice pursuant to s 9(1A) of the Farm Debt Mediation Act requesting a mediation under that Act.

The September Agreement and the 2016 Deed

1. On 29 September 2016 the parties attended a mediation pursuant to the Farm Debt Mediation Act. The parties executed a handwritten Agreement on 29 September 2016 ("the September Agreement") which provided as follows: 1. James Tonge ATF the Olive Grove Trust to pay to Starwhist Pty Ltd ("Starwhist") the sum of $3,750,000 by bank cheque by 5pm on or before 31 October 2016. 2. Upon payment of the sum in clause 1 above: (a) Starwhist will provide to Tonge a discharge of the charge being Registered charge book number 4605 number 668, and (b) Starwhist will provide to Tonge a Discharge of Mortgage AF913859 and AF975986P or in lieu of a discharge and at the option of Tonge Starwhist will agree to an assignment or transfer of that mortgage in a form which is satistactory to Starwhist; (c) Tonge and Starwhist mutually release one another from all claims, demands, suits, causes of action whether at law or in equity arising from or in relation to mortgage AF913859M and mortgage AF975186P and charge book number 4605 number 668; the loan by Starwhist to Tonge on 1 December 2010; and any enforcement action by Starwhist in relation to mortgage AF913859M including the deeds of release dated 16 December 2011 and 24 June 2013. 3. In the event that Tonge fails to comply with his obligations in clause 1 above for any reason, Starwhist is entitled immediately to pursue its rights as they stood immediately prior to this agreement. 4. The parties intend this agreement to be binding and agree that this agreement represents a resolution of the farm debt dispute, and the parties intend to enter into a deed within 7 days which contains the terms of this Agreement and other terms which formally set out the parties' agreement to resolve this farm debt dispute.
2. On 13 October 2016 solicitors for the Defendant wrote to the solicitors for the Plaintiff enclosing a facsimile of a Deed of Settlement and Release ("the 2016 Deed") executed by the Defendant. Clauses 1, 2 and 3 of the 2016 Deed reflected in very similar terms what appeared in paragraphs 1, 2 and 3 of the September Agreement. Because the Defendant submitted on the present Motions that the execution of a formal deed was a condition precedent to the enforceability of the September Agreement reached on 29 September 2016 it is necessary to set out three of the terms included in the 2016 Deed. Those terms provide as follows: 3. In the event that Tonge fails to comply with his obligations in clause 1 for any reason, Starwhist is entitled immediately to pursue its rights as they stood immediately prior to the agreement in the Head of Agreement. 4. Starwhist shall forthwith sign and deliver into escrow as set out below the following documents in registrable form (the "Discharge Documents"): a) A Discharge of Mortgage (form 05DM) for the purpose of effecting the discharge of the real property Mortgage held by it (dealing number AF913859M); b) a Transfer of Mortgage (form 01TL) for the purpose of effecting the transfer or the real property Mortgage held by it (dealing number AF913859M) to a third party nominee; c) a Discharge of Mortgage (form W-05DM) for the purpose of effecting the discharge of the Mortgage under the Water Management Act held by it (dealing number AF975189P); d) a Transfer of Mortgage (form W-01TM) for the purpose of effecting the transfer of the Mortgage under the Water Management Act held by it (dealing number AF975189P) to a third party nominee; and e) a Discharge of charge (and associated PPSR forms) in an agreed form for the purpose of effecting the discharge of the Charge over goods held by it. 5. Starwhist shall forthwith provide a copy of the Discharge Documents to Tonge and deliver the originals into escrow to be held by Fred David as agent for the parties pending delivery in accordance with this Deed. 6. Fred David shall attend the appointment set for settlement of the Contract (or, alternately, for transfer of the Mortgages and discharge of the Charge) on behalf of the parties with the Discharge Documents and deliver them to Tonge or his third party nominee in exchange for tender of payment of the Price.
3. The remainder of the clauses in the 2016 Deed were simply standard mechanical provisions upon which nothing turns.

Subsequent correspondence

1. As noted, the Solicitor for the Defendant, Mr Gillard, forwarded on 13 October 2016 a facsimile counterpart of the Deed executed by the Defendant. The letter attaching it relevantly said this: We enclose a facsimile of the Deed of Settlement and Release executed by James Tonge. The originals are being posted to our office and will be forwarded to you once they have been received. In the meantime, we confirm our respective clients are agreed on the terms set out in this Deed and our client will rely upon them.
2. One of the directors of the Plaintiff, Brian Lincez, said in an affidavit read on the applications that his solicitors forwarded that facsimile copy of the Deed to him. He signed it and retained it in anticipation that he would receive the original Deed as the letter contemplated. He never received the original Deed and did not return to the Defendant a copy that he, Mr Lincez, signed. A copy of the Deed executed by the Plaintiff was, however, annexed to an affidavit read on the present Motions by the Plaintiff's solicitor Fred David. That affidavit was sworn on 5 July 2017 and served shortly thereafter. That was the first occasion that the Defendant saw a copy of the Deed executed by the Plaintiff.
3. On 28 October 2016 Mr Gillard sent a letter by email to the solicitor for the Plaintiff as follows: We have been provided with a copy of a Caveat lodged by a party related to the Second Mortgagee (previously noted only as an unregistered dealing). A copy is enclosed. As a consequence, we anticipate our client will need to seek a Court order in relation to the caveatable interests claimed and equitable relief to allow the sale to proceed. Given the limitations imposed by the Deed, we are instructed to request a formal extension of time for the payment in clause 1 of the Deed for a further 21 days. We will be in further contact early next week to confirm action that will be taken.
4. The letter in response of 31 October 2016 from Mr David said this: We refer to the above matter and to your email and discussion with Mr Fred David. We are obtaining our instructions and endeavour to provide our response during the course of today.
5. There was no evidence of the discussion between Mr Gillard and Mr David. However, Mr David did not provide any response to Mr Gillard that day or at all. The next thing that happened was the filing of the Statement of Claim on 28 February 2017.

Defence filed 13 April 2017

1. In his Defence filed 13 April 2017 the Defendant admitted much of the pleading in the Statement of Claim although, for reasons that are not clear, did not admit the breaches pleaded in paragraphs 8, 13 and 21 which asserted that the Defendant failed to repay the loan on 1 March 2011 or pay in accordance with the terms of the deed of December 2011 or pay in accordance with the June 2013 Deed.
2. The only defence of substance was contained in paragraph 9 of the defence which asserted that the Defendant would rely on an estoppel by conduct. The particulars given were that the Plaintiff was alleged to have assigned its rights under the mortgage to a company called Tripods Funds Management Pty Ltd. The Defendant accepts that no notice under s 12 of the Conveyancing Act 1919 (NSW) was ever given. Further, the evidence on the present Motions establishes without challenge that the proposal by the Plaintiff to assign the mortgages to Tripods did not eventuate because Tripods failed to pay the consideration for the assignment.

Proposed defence and cross-claim

1. The defence which the Defendant now seeks to file continues to plead the non-admissions to which I have referred and the so-called estoppel by conduct. However, during the hearing of the motions Counsel for the Defendant indicated that this defence would no longer be pursued.
2. In addition, the Defendant raises three further defences to the claim. The first, contained in proposed paragraphs 19 to 31 pleaded that the execution of a formal deed was a condition precedent to the Defendant being obliged to attend settlement and to tender the sum of $3.75 million. That defence was undercut, to some extent, by proof of the execution of the counterpart deed by the Plaintiff attached to Mr David's affidavit. However, the Defendant relied on some correspondence suggesting that it was now in a position to tender that amount.
3. The second defence raised in paragraphs 32 to 37 is a promissory estoppel based on the exchange of letters of 28 and 31 October 2016. In short, the Defendant contended that in failing to respond as promised the Plaintiff's solicitors had acted in such a way as to demonstrate that there was no difficulty with the settlement not proceeding on 31 October as the September Agreement provided. The Defendant says it would be unconscionable for the Plaintiff in the circumstances to resile from what he was led to believe, namely, that it was not obliged to settle on 31 October.
4. The third defence in paragraphs 38 to 43 is based on the Contracts Review Act 1980 (NSW) and asserts that the interest rates in the mortgage, 24% at the ordinary rate and 36% at the default rate, were well in excess of the standard variable interest rate at that time and there was a material inequality of bargaining position because "the Defendant was desperate, by force of time available, to obtain finance to complete the contract for purchase of land". There was also an assertion that the Defendant did not get, and was not required by the Plaintiff to get, legal advice prior to entry into the mortgage.
5. The Defendant acknowledges that relief under the Contracts Review Act would only relate to the interest charged and would not relieve him from having to repay the principal sum, the facilitation fee, and interest at reasonable rates.
6. The cross-claim pleads the three substantive matters referred to above and seeks (inter alia) an order for specific performance of the September Agreement by executing the counterpart of the subsequently agreed deed (that order has now passed into history) and an order that the Plaintiff attend at settlement to hand over duly executed discharges of mortgage on the Defendant tendering the sum of $3.75 million.
7. It may be seen that the dispute between the parties is whether the Defendant is confined to paying $3.75 million or the amount due under the original mortgage which to the present time totals something in excess of $7.2 million.

Legal principles

1. The present position, strictly speaking, in relation to the pleadings is that the Defendant has filed a defence which admits almost all of the allegations, does not admit some breaches which are easily shown to have occurred, denies breaching the 2016 Deed (without saying why) and raises an estoppel defence that is demonstrably without any basis. The simple denial of the breach of the 2016 Deed, if that were the only defence, would be struck out under the Possession List Practice Note but the Defendant would be given leave to re-plead that defence properly. If it were not for the proposed amended defence and cross-claim there would be no basis at the present time for giving summary judgment to the Plaintiff. A consideration of that application would only properly be made when any further defence was filed.
2. The Plaintiff opposes the Defendant being granted leave to file the proposed amended defence and the proposed cross-claim on the basis that they contain no arguable defence or claim and in that way are futile. The Plaintiff says, accordingly, that summary judgment should be given on its claim. The question of whether the proposed pleadings are futile is to be dealt with by applying the same principles as are applied to an application for summary judgment or summary dismissal: Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2006] NSWSC 1073 at [11]. The principles are those set out in General Steel Industries Inc v Commissioner of Railways (NSW) (1964) 112 CLR 125 at 129 and more recently in Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 at [57], subsequently affirmed in Spencer v The Commonwealth (2010) 241 CLR 118; [2010] HCA 28 at [24].

(1) Formal deed a condition precedent

1. The Defendant relies in particular on two matters to suggest that the proper construction of the agreement was that a formal deed would be a condition precedent to the payment obligation by the Defendant under the September Agreement. The first matter was contained in particular (d) of paragraph 21 of the proposed defence (the paragraph asserting a condition precedent) which provided: (d) In light of the level of dispute between the plaintiff and defendant, and the parties expressly agreeing that a deed would be entered into so as to more full (sic) and extensively set out the terms of the parties (sic) resolution, it was a condition precedent to the payment of the $3.75 million that the deed be entered into and each party receive duly executed counterparts.
2. The second matter relied upon was the fact that an incoming mortgagee would need a properly executed deed in any event.
3. The Defendant accepted that the agreement was immediately binding but said that the formal deed was a condition precedent to performance under the agreement and in particular to the payment of the $3.75 million. The Defendant pointed specifically to what appears in paragraph 2(b) of the September Agreement where reference is made to discharge, assignments or transfer of the mortgage.
4. The Defendant pointed to clause 4 of the 2016 Deed to submit that the escrow arrangements there set out were necessary to facilitate any settlement and that their inclusion in the 2016 Deed can be seen to be objectively anticipated by the provisions of clause 2(b) of the September Agreement.
5. The Defendant accepted that no further evidence was to be called in relation to the construction point. The matter was one of legal argument. The Defendant stressed, in that regard, the high bar that a party has in seeking summary judgment. He submitted that the legal argument put forward by him would have to be shown to be manifestly hopeless.
6. In my opinion, the proper construction of the September Agreement does not lead to the conclusion that a formal deed was a condition precedent to performance under the agreement. The matters in the September Agreement which point to that view are these: (a) The obligation to pay the $3.75 million was an unqualified obligation in paragraph 1 and it was to be performed by 5pm on 31 October; (b) Clause 3 provided that if "for any reason" the Defendant failed to comply with clause 1 the Plaintiff was entitled immediately to pursue its rights; (c) Clause 4 provided that the parties intended that the agreement was to be binding and represented a resolution of the dispute; (d) Clause 4 did not require the parties to enter into a deed within seven days but said merely that the parties intended to do so, and that the other terms were to be formal terms to effect the agreement; (e) Nothing in clause 2(b) meant that the mortgage in favour of the Plaintiff could not be discharged nor assigned nor transferred simply because there was not a more formal document setting out the parties' arrangements. Clause 2(a) required the Plaintiff to provide to the Defendant a discharge on payment of the money. Any incoming mortgagee, would, if a discharge of the Plaintiff's mortgage was being effected, only be concerned that on settlement it was receiving a discharge of the Plaintiff's mortgage in registrable form. If, on the other hand, there was to be an assignment or transfer of the Plaintiff's mortgage a more formal deed would not add anything to the instruments which would need to be made available on the settlement of any such assignment or transfer. In that way the escrow and other arrangements in clauses 4, 5 and 6 of the 2016 Deed are not essential to effect the terms of the September Agreement; (f) If regard is had to the history of the dispute between the parties as the Defendant contends, that matter strongly favours a construction that the parties would have wanted certainty from the mediation with the result that they intended the execution of the September Agreement to bind them immediately in all respects. Quite apart from the specific history between these parties, it is a pointer to the parties being immediately bound that the proceedings were settled at a mediation: Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551 at 14,570-14,571; Michael Lahodiuk v Vincent Page and Prid Pty Ltd [2013] NSWSC 512 at [18].
7. In my opinion, the agreement falls into the first category described in Masters v Cameron (1954) 91 CLR 353 or, more particularly, as McLelland J (as his Honour then was) said in Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 at 628, it is really in a fourth class of case additional to the three mentioned in Masters v Cameron as recognised by Knox CJ, Rich and Dixon JJ in Sinclair Scott & Co Ltd v Naughton (1929) 43 CLR 310 at 317, namely: … one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.
8. It is not insignificant that the contract in Baulkham Hills Private Hospital being construed by McLelland J referred to the arrangement as "legally binding agreement in principle … until such time as formal contracts were exchanged". In the present case the words "in principle" are not used. Rather the agreement says that it is intended to be binding and represents a resolution of the farm debt dispute. In A W Ellis Engineering Pty Limited and Ors v Malago Pty Ltd and Ors [2012] NSWSC 55 at [116] and Michael Lahodiuk at [22] the fact that the document was headed "Heads of Agreement" was said to be an indicator that the agreement was made at that time with the parties being bound; a fortiori in the present case where the document is headed "Agreement".
9. I note in passing that neither party executed a deed within seven days of the agreement and that, although a facsimile copy of a deed was forwarded by the Defendant's solicitors, the promise of the executed counterpart was never fulfilled. To the extent that post-execution conduct can be regarded as showing that the parties intended to be immediately bound, the failure of both parties to enter a formal deed within seven days is such an indication: Scook v Premier Building Solutions Pty Ltd (2003) 28 WAR 124; [2003] WASCA 263 at [25].
10. In my opinion, the September Agreement was a legally binding agreement and the performance envisaged under it was not dependent upon the execution of any further document. The defence contained in paragraphs 21-31 is hopeless and should not be permitted to be pleaded. Similarly paragraphs 3 to 13 of the proposed cross-claim are disallowed.

(2) Estoppel

1. The estoppel claim is confusingly pleaded. Paragraphs 32 and 33 plead the letters of 28 and 31 October 2016 (referred to at [14]-[15] above). The pleading then continues: 34. Despite the fact that the Plaintiffs solicitor advised on 31 October 2016, that "we are obtaining our instructing and endeavour to provide our response in the course of today", neither the Plaintiff nor the Plaintiffs solicitors, until the statement of claim was served on or about 28 February 2017, communicated to the Defendant, or the Defendant's solicitors, as to any difficulty with the settlement not proceeding on 31 October 2016. 35. Following the execution of the 29 September 2016 agreement, and the execution by the Defendant of the Deed of Settlement and Release on 13 October 2016, the Defendant on the assumption or expectation, created and encouraged by the Plaintiff, that the 29 September 2016 agreement was binding, the Defendant took steps to obtain finance from the incoming mortgagee in respect of the redemption of the $3.75 million to the Plaintiff. (a) The Defendant arranged for finance to redeem or pay the $3.75 million under the 29 September 2016 agreement, including paying application fee in respect of the same. (b) Even though the Plaintiffs solicitors advised on 31 October 2016 that "we are obtaining our instructing (sic) and endeavour to provide our response in the course of today", neither the Plaintiff nor the Plaintiffs solicitors, until the statement of claim was served on or about 28 February 2017, communicated to the Defendant, or the Defendant's solicitors, as to any difficulty with the settlement not proceeding on 31 October 2016. (c) The Defendant is and remains ready, willing and able to duly perform the 29 September 2016 agreement and the 13 October 2016 Deed of Settlement and Release, as executed by the Defendant on 13 October 2016. 36. By reason of the matters pleaded in paragraphs 32 to 35 above, the Plaintiff is estopped from denying the enforceability of the 29 September 2016 agreement by operation of promissory estoppel. Particulars It would be unconscionable for the Plaintiff in the circumstances a [scil. as] pleaded in paragraphs 32 to 35 above to deny or seek to resile from the enforceability of the 29 September 2016 agreement. 37. Further or in the alterative, [by] reason of the matters pleaded in paragraphs 32 to 35 above, the Plaintiff is estopped from denying an obligation to provide a duly executed version of the Deed of Settlement and Release by operation of promissory estoppel. Particulars It would be unconscionable for the Plaintiff in the circumstances a [scil. as] pleaded in paragraphs 32 to 35 above to deny or seek to resile from the enforceability of the Deed of Settlement and Release.
2. The Plaintiff asserts that two estoppels are pleaded. The first is (at [35]) that the September Agreement is binding and that the Plaintiff is estopped from denying its enforceability. The second estoppel is characterised as the Plaintiff being estopped from denying an obligation to provide a duly executed version of the 2016 Deed (at [37]).
3. The second of these can be put to one side because it is dependent upon the earlier argument that the provision of a formal deed was a condition precedent to the enforceability of the agreement. In any event the Plaintiff has now provided an executed counterpart of the 2016 Deed. It is likely that it did not do so earlier because the Defendant's solicitor promised to forward an executed counterpart but did not do so.
4. It is the former estoppel which is of greater significance. The Plaintiff's characterisation of it as only an estoppel that the September Agreement was enforceable does not seem to me to come to grips with the real issue that is apparent from paragraphs 32, 33 and 35(b). The point being made by the Defendant is that he believed as a result of the letter of 31 October 2016 that he was not obliged to settle on that day, and he has never been given notice of the requirement to pay $3.75 million since that letter. The detriment is said to be the organisation of the finance to pay out $3.75 million but could more properly be expressed as either the failure to ensure that the $3.75 million was paid by 31 October 2016 notwithstanding the letter requesting the extension, so that the present position that the Plaintiff now adopts would not be maintainable by it.
5. The letter of 28 October 2016 referred to a caveat being lodged, and a copy of the caveat was provided with the letter. The caveat prohibited the action in clauses 1, 2, 4 and 7 in section (J) Schedule 2 of the caveat. That meant no dealing such as a Discharge of Mortgage or a Transfer of Mortgage could be registered whilstever the caveat remained on the title. The Defendant recognised that and indicated that it would probably have to get a court order to allow the "sale" (presumably, the refinancing) to proceed. The request for an extension was not, on one level, unreasonable despite the entirely unsatisfactory history of the Defendant in relation to this debt.
6. The Plaintiff could have rejected the request out of hand and required the Defendant to settle or threatened to sue for the whole amount if the Defendant did not settle. Although there is no evidence of the "discussion" between the solicitors, the discussion could not have ruled out any chance of an extension or the letter of 31 October would not have been written in the terms it was. The Defendant was entitled to rely on the terms of the 31 October letter to assume it was not required to settle on that day unless a negative response came back that day. No response came and, indeed, there was thereafter (on the evidence I have) no further contact between the parties until the Statement of Claim issued.
7. The Defendant thereafter did nothing about settling. By not offering to settle on 31 October the Defendant suffered a detriment because the September Agreement obliged it to do so, and after 31 October it became liable (in the absence of an estoppel) for the much greater amount that was owing to the Plaintiff immediately before the settlement at the mediation. The Defendant tendered evidence which, despite internal inconsistencies concerning dates, shows, prima facie, that it is likely in a position to tender the amount of $3.75 million if called upon to do so.
8. In those circumstances it seems to me that the Defendant has an arguable case, which cannot be described as hopeless, that an estoppel arose with the result that he was not obliged to pay the greater amount unless and until it was given further notice by the Plaintiff that it intended to enforce the terms of the September Agreement. I am conscious also that there is likely to be some further evidence, at least about the discussion between Mr Gillard and Mr David on 31 October that led to Mr David writing in the terms he did.
9. I have already indicated that the Defendant has pleaded this estoppel poorly. However, the matter was argued on the basis of an estoppel in the way I have described. I should, therefore, give effect to the substantive claim and not base any decision in this regard on any narrow pleading point.

(3) Contracts Review Act

1. This defence, as the Defendant made clear, is only a partial defence and is no defence at all to the Plaintiff's claim for possession. What is challenged is not the principal sum nor the $200,000 facility fee but the rate of interest in the light of the facility fee.
2. The interest rate under the mortgage was 3% per month reducible to 2% per month if interest was paid on the due date for payment and the other obligations under the mortgage were observed. In paragraph 41 of the proposed defence the Defendant pleads that the interest rates charged were well in excess of the standard variable interest rate from time to time between 1 December 2000 and the present time. In paragraph 42 he pleads that the Plaintiff knew or reasonably ought to have known: (a) That the Defendant was desperate by force of time available to obtain finance to complete the contract to purchase the land and was therefore in a material inequality in bargaining position in relation to the interest rates; (b) For similar reasons he was in that position despite having to pay the $200,000 application fee; (c) That he had little or no input of negotiation as to the interest rates nor the application fee; (d) By reason of the application fee the interest rates charged were unreasonable and were not legitimate to protect the interests of the Plaintiff; (e) The Defendant did not, and was not requested nor required by the Plaintiff, to obtain legal advice prior to entry into the mortgage; and (f) Being 61 years of age and having suffered at least six strokes and being unable to handle stress and pressure the Defendant was not reasonably able to protect his interests.
3. At the hearing of the application the Defendant abandoned that part of sub-paragraph (e) that pleaded he was not requested nor required by the Plaintiff to obtain legal advice. He maintained, however, that he did not obtain legal advice notwithstanding signing an acknowledgement that he had been given independent legal advice prior to signing the mortgage and security documentation, and despite signing a further document some eight days before the mortgage was executed saying that he had appointed Roger John Cornforth as a solicitor to give him legal advice concerning the security documents which he thereafter listed. The advice that he was said to have received was set out in this document and it concluded by saying that after he received the above advice he freely and voluntarily signed the loan documents.
4. Although the Defendant's counsel sought to pass off those documents by saying that the Defendant might have a lot of explaining to do in that regard, the only evidence that I have is that the Defendant in fact received legal advice before he entered into the mortgage. In those circumstances he should not be permitted to raise as part of his Contracts Review Act defence an absence of legal advice. If some explanation was needed about the documents to suggest, perhaps, that no legal advice had in fact been obtained, the Defendant ought to have led such evidence to resist the Plaintiff's Motion: Commonwealth Bank of Australia Pty Ltd v Susan Amelia Quinn [2015] NSWSC 78 at [16]; Bank of Western Australia Limited v Maia Primanzon; Bank of Western Australia Limited v Violetta Primanzon and Alexandre Pachkovski [2010] NSWSC 862 at [109].
5. Although the Defendant eschewed any suggestion that he was complaining about the application fee in terms of a Contracts Review Act defence, sub-paragraphs (b) and (c) in paragraph 42 might suggest otherwise. These paragraphs should be redrafted to make clear that the only complaint was the rate of interest in the circumstances that an application fee of $200,000 was payable.
6. In my opinion, the Defendant should be permitted to argue at the hearing that the contract was unjust by reason of the rates of interest charged. That is no indication that I consider the argument will be successful. It is clear that this was a short term loan, seemingly in the nature of a bridging loan and apparently in circumstances where the Defendant had not been able to obtain funds from other than a last resort lender. The point is not so much that the rates were in excess of the standard variable interest rate but that, on their face, they are quite high. The claim that the Defendant was not able to protect his interests by reason of his age and health seems to be bound up with the complaint about the interest rates and should be allowed to form the basis of the Contracts Review Act claim, although it is difficult to see why, if the Defendant was the age identified, that says anything about his ability to protect his interests.
7. Accordingly, the Contracts Review Act claim identified in paragraph 42 is arguable. However, sub-paragraph (e) may not be relied upon and paragraph 42 should be clarified, in any event, to remove any suggestion that there is a complaint about the application fee per se.
8. There is a further matter justifying the Contracts Review Act claim going to trial. The relationship between ss 7 and 19 of the Contracts Review Act is unclear. Section 7 sets out the relief that can be given if a court finds a contract or a provision of a contract to have been unjust. However, s 19 provides that orders made under s 7(1)(b) or (c) have no effect in relation to a contract so far as the contract is constituted by a land instrument that is registered under the Real Property Act. In the present case there was no separate loan agreement. The contract is constituted by the mortgage which is registered. The Court would appear to be limited to the powers provided in ss 7(a) and (d). It is most unlikely that the Court would grant the relief in s 7(1)(a), that is, not to enforce the interest provisions of the contract. It could not reasonably be argued that no interest at all should be payable.
9. The only other relief is found in s 7(1)(d) which enables the Court to make an order requiring the execution of an instrument that varies or terminates the provisions of the land instrument. On the face of it, any such order would be prospective and not retrospective, partly because of the wording of s 7(1)(d) and partly because the section should not be seen as a further exception to the indefeasibility obtained by the registration of the instrument in the first place.
10. The parties were content to raise this issue with even a faint suggestion from senior counsel for the Plaintiff that it might be a matter that would need to dealt with at a final hearing. Neither counsel directed me to any authority on the point (I am not being critical - there may be none) and the matter was not extensively argued. The situation does not often arise because where there is a mortgage there is ordinarily an underlying loan agreement which can be varied without the strictures of s 19.
11. Accordingly, the defence based on the Contracts Review Act should be permitted to go to trial with the limitations I have stipulated.

(4) Other matters

1. The Defendant sought leave to withdraw an admission made in the existing defence in relation to paragraph 28 of the statement of claim.
2. Paragraph 28 said this: On or around 13 October 2013 [scil. 2016], the parties executed a deed of settlement and release which incorporated the terms of the September 2016 agreement as well as additional terms, being a deed complying with s 11C of the Farm Debt Mediation Act (the October 2016 deed).
3. In his affidavit in support of the application to file amended pleadings the solicitor for the Defendant said that at the time of preparing the defence he believed that the deed had been entered into by the Plaintiff but since that time he had confirmed that the Plaintiff had not executed the deed. In fact, as is now clear, the Plaintiff did execute the deed or, at least, a copy of the facsimile of the deed forwarded to it from the Defendant. The fact that the Plaintiff had executed it did not become clear until Mr David swore his affidavit on 5 July 2017.
4. The position is, therefore, that the Plaintiff did execute the deed (as Mr Lincez makes clear in his affidavit) and the Defendant should not be permitted to withdraw the admission made.
5. The defence filed 13 April 2017 pleaded that the Statement of Claim did not contain a paragraph 29. The belief that there was no paragraph 29 appears to have been because the copy of the Statement of Claim provided to the Defendant did not contain page 11 where paragraph 29 appears. Although the matter was raised with the solicitor for the Defendant at a directions hearing on 31 May 2017 the same pleading has found its way into the proposed amended defence. Counsel for the Defendant accepts that a proper pleading must be made to paragraph 29. He indicates that paragraph 29 will be admitted except for any substantive defences raised to the claim. Such a pleading should be permitted.
6. When pleading the Contracts Review Act defence the Defendant has pleaded in paragraph 40 that the monies advanced under the loan were in fact $1,930,000 rather than $2 million. No explanation has been provided for the assertion that less than $2 million was advanced. The pleading is inconsistent with the admission to paragraph 5 of the Statement of Claim which pleaded that the Plaintiff agreed to loan and did loan to the Defendant the sum of $2 million. Counsel for the Defendant accepted that there was no evidence to justify the pleading in paragraph 40. The assertion that the advance was $1,930,000 should be deleted.

Conclusion

1. The result is that the two substantive matters that should be permitted to go to trial are a defence and claim that the Defendant is liable only for $3.75 million based on the estoppel arising from the letters of 28 and 31 October 2016, and based on the allegation that the mortgage was unjust by reason of the interest rates charged.
2. The Defendant should prepare amended pleadings consistent with these reasons and provide them to the solicitors for the Plaintiff within 14 days of the date of this judgment. If any issues remain in relation to the form of the pleadings that cannot be resolved between the parties the matter can be re-listed for further argument.
3. As far as costs are concerned I consider that each party has had some success. My prima facie view is that each party should pay his and its own costs of both motions but if the parties wish to address me on costs the matter will be dealt with either at the next directions hearing or by written submissions on the papers.
4. The orders that I make are these: (1) Leave to the Defendant to file an amended defence consistent with these reasons but in particular: (a) Omitting paragraph 9 from the words "except as to the proper" to the end of the paragraph; (b) By pleading appropriately to paragraph 29 of the Statement of Claim; (c) By omitting paragraphs 21 to 31 of the proposed defence; (d) By omitting paragraphs 3 to 13 of the proposed cross-claim; (e) In relation to paragraphs 34 to 37 of the proposed defence and paragraphs 16 to 19 of the proposed cross-claim, by pleading reliance only on an estoppel arising from the letters of 28 and 31 October 2016; (f) By removing in paragraph 40 of the proposed defence and paragraph 22 of the proposed cross-claim the words "(which were in fact $1.930 million rather than $2 million)"; (g) By re-pleading the matters in paragraph 42 of the proposed defence and paragraph 24 of the proposed cross-claim to confine the Contracts Review Act claim to one based upon the interest rates charged including, if desired, the rates in the light of the application fee; (h) By omitting paragraph (e) from paragraph 42 of the proposed defence and paragraph 24 of the proposed cross-claim. (2) The Plaintiff's Notice of Motion filed 20 June 2017 is dismissed. (3) The Defendant's Notice of Motion filed 13 June 2017 is dismissed with no order as to costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 July 2017