The Trust Company (PTAL) Pty Ltd v Romeo

Supreme Court of NSW|2013-09-30|Before: Schmidt J

Judgment 1The plaintiffs seek an order for possession of land situated at Elanora Heights, of which the defendants, Mr and Mrs Romeo, are the registered proprietors. Mrs Romeo is a bankrupt. Default judgement has been entered against her. Default judgment entered against Mr Romeo was set aside (see Perpetual Trustee Australia Limited v Romeo (No. 2) [2011] NSWSC 1190). 2Since then the proceedings have had a considerable history. Mr Romeo not only defended the plaintiffs' claim, but he also pursued a cross-claim by which he sought orders under the Contracts Review Act 1980 and the Competition and Consumer Act 2010 (Cth), to have the loan agreements which he and his wife entered, as well as the mortgage over the property which secured their borrowings declared void. Other relief was sought as to the repayment of certain interest. 3Up until the hearing, Mr Romeo was represented. As it finally transpired, while Mr Romeo appeared unrepresented at the hearing, he pressed neither his defence nor his cross-claim. 4When the matter first came on for hearing, his then solicitor sought and was granted leave to file a notice of ceasing to act (see The Trust Company (PTAL) Pty Ltd v Romeo (No 4) [2013] NSWSC 1447). Another solicitor, engaged only for the purpose of that application, made an adjournment application. The hearing was then adjourned from Monday, 30 September to Tuesday, 1 October (see The Trust Company (PTAL) Pty Ltd v Romeo (No 5) [2013] NSWSC 1449). That day I refused a further adjournment application made by Mr Romeo (see The Trust Company (PTAL) Pty Ltd v Romeo (No 6) [2013] NSWSC 1454). 5After I refused his further adjournment application, Mr Romeo was provided with another copy of the Court Book. From what Mr Romeo said, it appeared that while he had the Court Book, which had been prepared by the plaintiffs for the hearing, without his input, contrary to directions earlier given, he had not brought it with him, nor had he provided it to another solicitor who he had approached only half an hour prior to the adjourned hearing commencing on 1 October. That solicitor had finally not been instructed to appear. As it emerged, whether Mr Romeo could not read English as he then claimed, was in dispute. He could certainly understand what was being put to him and was able to clearly articulate his position and the difficulties he confronted with the case proceeding while he was unrepresented. 6Mr Romeo then remained, but did not effectively participate in the hearing. Instead he repeatedly submitted that he could not respond to questions asked of him or put his case, because he could not understand and needed to be legally represented. 7Despite this, I was satisfied that while it could be well accepted that Mr Romeo was in a difficult position and that he did not consider that he was capable of mounting his own case, he did understand that the hearing was proceeding and that he was being given a chance to put his case, if he wished to avail himself of that opportunity. Mr Romeo did not do so, because, he explained, he considered that he could only do so, if he had legal representation, which he had not arranged. 8At one point I adjourned so that Mr Romeo could take the counsel of his wife, who was present in court with him, but on resumption still he insisted on taking no active part in the proceedings.

The defence 9While Mr Romeo did not finally press his further amended defence, it is necessary to refer to the matters which it raised and to take into account what was thereby not put in issue. 10There Mr Romeo admitted that he and his wife were the registered proprietors of the property; that he was one of 10 natural and corporate persons to whom the first plaintiff had advanced some $3,578,435.31; that he had signed the deed of loan, supplementary agreement and mortgage on which the plaintiffs relied; and that not all of the interest instalments due under the loans had been paid. 11Other aspects of the plaintiffs' case were there denied. Mr Romeo also claimed that he did not have a good understanding of English; that he could not comprehend written English; that his wife and others had always read and written documents in English for him; that he was unwell at the time that he had signed various documents; that he had never received a copy of the documents he had signed; and even if he did, he did not comprehend them. The defence also claimed that the mortgage was unjust, that required notices under the Consumer Credit (New South Wales) Code (repealed) had not been given and that it was unjust for the plaintiffs to pursue any enforcement action, because he had offered to buy out the mortgage fro $1.6 million.

12The plaintiffs' case was essentially a documentary one. Mr Romeo did not object to the tender of any of those documents. That any of them were objectionable was, in any event, not apparent. 13The evidence established that: (1)The second plaintiff loaned Mr and Mrs Romeo the sum of $3,250,000 in October 2006, pursuant to a written loan agreement for a fixed term of five years, which they both executed on 26 October. (2)Their application for a loan came from a commercial loan broker, Mr Goldberg, at a time when they were seeking to refinance their existing borrowings from Howard Challenger Mortgage Trust. They provided information in support of their application, including information from the existing lender, a net assets statement and advice from a chartered accountant, Mr Arapidis, who advised that in his opinion, they could service the proposed borrowings without hardship. (3)A solicitor, Mr Huntingdon, then represented them. The funds advanced were paid in accordance with directions which he gave on their behalf. Some $296,407 was paid to them, $2,262,988 was paid to another mortgage fund and the pre-existing mortgage over the property was discharged. Other amounts were paid to Mr Huntingdon and seven other persons or entities, in accordance with his directions. (4)The purpose of the loan was advised by Mr and Mrs Romeo to be predominantly for business or investment purposes. Documents then executed by both Mr and Mrs Romeo confirmed that they had received independent legal advice and had freely and voluntarily signed various loan and mortgage documents; that they had been advised to obtain financial advice before executing the documents; that they had obtained independent advice as to their ability to comply with the loan commitments and that they were satisfied that they had the capacity to meet those commitments. (5)Mr and Mrs Romeo agreed to give a first registered mortgage over the property to secure these borrowings. The mortgage and loan agreements were in unremarkable terms. (6)After settlement an epitome of mortgage, which summarised the terms of the transaction, was sent to both their solicitor and them. The mortgage was then registered. (7)In 2008 the loan agreement was varied by a written supplementary agreement which Mr and Mrs Romeo executed on 8 May 2008. A further $327,500 was then advanced to them, but the term of the loan was not extended. This borrowing was also secured by the mortgage which they had granted. (8)A solicitor, Mr Carbone, then represented them. They then also each executed documents by which they confirmed that the purpose of the loan was predominantly for business or investment purposes; that they had received independent legal advice and had freely and voluntarily signed various loan and mortgage documents; that they had been advised to obtain financial advice before executing the documents; that they had obtained independent advice as to their ability to comply with the loan commitments; and that they were satisfied that they had the capacity to meet those commitments. (9)The sum advanced was paid in accordance with directions which Mr Carbone gave on their behalf. In May 2008 another epitome of mortgage was sent to them and Mr Carbone, reflecting the increased borrowings and confirming that the maturity date of the loan was 1 November 2011. (10)Mr and Mrs Romeo made no interest payments after October 2010. The loan was not repaid when it fell due in November 2011. (11)On 14 November 2011 a notice of event of default and acceleration was sent to them, advising that a number of events of default had occurred under the terms of the loan agreements, including Mrs Romeo's bankruptcy, the failure to repay the loan and the failure to pay interest. That notice accorded with the provisions of clause 13.1 of the 2006 loan agreement. (12)On 14 November a notice of exercise of right to possession was also given. The same acts of default were relied on. Without admission, a notice under s 88 of the National Credit Code was also given, as well as a default notice under s 57(2)(b) of the Real Property Act 1900. (13)A certificate issued by the lender, as provided in clause 23.2 of the 2006 loan agreement, established that as at 30 September 2013, the amount outstanding under the loan was some $5,758,824.77. 14While Mr Romeo was present at the hearing, he led no evidence and advanced no submissions in support of either his defence or his cross-claim. Both made very serious allegations against the plaintiffs. He was plainly not prepared to lead the affidavit evidence which he had filed, even though both he and his wife were present in Court. He was certainly not prepared to be cross-examined on that evidence, in the absence of legal representation. 15On all of the unchallenged evidence, I am satisfied that the plaintiffs have made out their case. Not only were several acts of default established, the term of the loans expired on 1 November 2011. They have not been repaid. That is the act of default on which the plaintiffs' relied, as they were entitled to do, under the terms of the agreements which Mr Romeo entered. The plaintiffs are now entitled to the possession sought of the property which secured the borrowings which have not been repaid, when they fell due in 2011.

The cross-claim 16Mr Romeo's attitude no doubt reflected the serious allegations he had advanced in the cross-claim and the difficulty he confronted in establishing what was there claimed. What was there particularised included that Mr and Mrs Romeo had purchased a restaurant and general store at Church Point in 1989 and that they had then granted mortgages over those properties, as well as the property the subject of these proceedings and another property at Mona Vale, in order to finance the purchase. 17In 1999 they were the victims of a home invasion, which affected them adversely. In the result they engaged a financial adviser, Mr Tony Murray, to deal with their financial affairs. That relationship continued until September 2010, during which they claimed that he had breached his retainer and fiduciary duties to them, by advising them to become involved in improvident borrowings, which had resulted in them being unable to service loans, despite having over $15 million in equity in real property, other than the property the subject of these proceedings. 18It was also claimed that in 2002 or 2003 they were unable to service their debts at a time when their borrowings from the St George Bank stood at only some $1.6 million. It then appointed a receiver. It was Mr Murray who then advised them to refinance and they increased their borrowings to some $1,820,00, granting Howard Mortgage Management Limited a mortgage over their properties, to secure the loan by which they refinanced their borrowings from the St George Bank. Had they not taken that advice, it was claimed that it was likely that they would have agreed to realise the security over their other assets, so that they would have been left with the property the subject of these proceedings, unencumbered. 19As the result of accepting Mr Murray's advice they obtained further funds from other lenders, secured by registered and unregistered charges over the property. In May 2004 their borrowings from Howard Mortgage Management Limited were increased to some $2.4 million. They obtained still further borrowings from other lenders in 2005. 20In 2006, Mr Murray recommended that they increase their borrowings further. That was when they entered the first loan with the plaintiffs. They claimed that the advice provided to the plaintiffs that they could service their borrowings was false. They also claimed that the plaintiffs had failed to make adequate checks as to the accuracy of that advice; such checks, if made, would have revealed that it was false; that they were vulnerable to Mr Murray, who earned brokerage fees on the transaction; that the loan was improvident; and that it only made sense for the lender, if it engaged in asset lending. 21It was further claimed that as at October 2006 approximately $15 million was secured over the property. They were unable to fund repayment of these borrowings and in 2007 and 2008 borrowed further, in order that they could pay interest on their borrowings. Their borrowings climbed to $21.91 million, of which they claimed the plaintiffs were aware, through their agents. 22In the result, it was claimed that the loan agreements and mortgage were unjust and that the plaintiffs had engaged in unconscionable conduct, which warranted orders that the mortgage and loan agreements be declared void and that the plaintiffs repay the interest which Mr and Mrs Romeo had paid on their borrowings. 23Whether such orders would have been made, had the cross-claim been pressed, cannot be determined. Given the evidence on which the plaintiffs relied, that this was a difficult case for Mr Romeo to make out was apparent, particularly when it is considered Mr Murray was not a defendant to the cross-claim. He was an obvious party, a matter raised on the plaintiffs' defence to the cross-claim, which not only denied the claims made against them, but also pleaded in the alternative, that Mr Murray was a concurrent wrongdoer, as were the chartered accountant Mr Arapidis, Mrs Romeo and Mr Romeo himself. Given the declarations and other information which they had provided the plaintiffs as to their financial affairs and their ability to service their loans in 2006 and 2008, at a time when they were legally represented, the basis for these allegations is apparent. 24Further, even on Mr Romeo's own defence, he appeared to accept that at least $1.6 million, the original borrowings from the St George Bank, was a sum for which he should have some responsibility. In those circumstances, that the orders which were sought in the cross-claim would have been made, seems rather doubtful. 25This, however, need not be resolved. The cross-claim was listed for hearing. Mr Romeo had, but declined, to take the opportunity to press his claim. In the result it must be dismissed.

Orders 26For the reasons given, I order that:

The plaintiffs have judgment for possession of the land comprised in Certificate of Title Folio Identifier XX/XXXXX and known as XXX XXXXXXXXXXX Road, Elanora Heights, NSW 2101.
The plaintiffs have leave to use a writ of possession to enforce the judgment, such writ to issue forthwith
The cross-claim is dismissed.
Mr Romeo is to pay the plaintiffs' costs of the proceedings, as agreed or assessed.
All exhibits and subpoenaed material may be returned forthwith; any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined.

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: 04 October 2013

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