Zippoz Pty Ltd v National Australia Bank Ltd

Factual and procedural background 2In March 2007 (the Court was informed, without evidence), the applicants (or whichever was or were responsible under the loan agreements) ceased making payments to the respondent and no payment has now been made for over four years. On 14 June 2010 the respondent commenced proceedings against each applicant seeking possession of the properties mortgaged by way of security for the financial accommodation. 3On 19 July 2010 defences were filed by the applicants, who were then unrepresented. Within a month they had solicitors acting for them. On 8 September 2010 the defences were struck out; leave was granted to file amended defences, which were filed on 1 October 2010. 4On 29 October the respondent sought to strike out the amended defences and enter judgment in default. It appears that the position of the applicants at that stage was that they would particularise their defences, but required documents from the Bank in order to complete that task. After some skirmishing in relation to the validity of the notices to produce, the Bank indicated on 12 November 2010 that it had no relevant documents. As will be noted shortly, the basis on which the applicants seek to defend the proceedings is said to be a form of oral agreement, or at least forbearance to sue, upon which the applicants acted to their detriment, without any suggestion that the arrangement was documented by either side. 5On 15 November 2010 Davies J ordered the applicants to provide particulars of their defences by 17 November and to serve affidavits by 26 November. No particulars were supplied by the dates specified, or at all, before the defences were struck out. 6On 24 February 2011 the solicitors then acting for the applicants informed the respondent that they had ceased to act. 7On 22 March 2011 Associate Justice Harrison heard the respondent's motion to strike out the defences and enter judgment. On 30 March 2011 her Honour made orders as sought. 8On the same day, 30 March, the applicants, or more accurately Ms Caporale on behalf of herself and the four other applicants, filed a notice of motion, seeking a stay on the enforcement of the judgments in the Court and also seeking as order 2: "An order from the Court to make an application to have the judgment set aside for all of the entities listed in this application." 9The motion came before Davies J on 21 April 2011. His Honour permitted a further motion to be filed in Court which included order 2, with the addition of a request for an order to allow the applicants to lodge a defence and a cross-claim. It also sought a number of additional orders, with a high level of duplication, but one of which sought to have the orders made on 30 March 2011 set aside. His Honour expressly referred to order 2 in the course of an ex tempore judgment, refusing relief to the applicants. 10Writs of possession were issued in respect of 14 separate properties on 2 May 2011. More than two weeks later, on 18 May, notices of intention to appeal were served, followed on 30 May by, in each case, a summons seeking leave to appeal and a notice of motion for a stay of the enforcement of the default judgments. On 6 June 2011, Giles JA heard motions for stays in each of the proceedings, which stays were granted. His Honour also set down the application for leave to appeal to be heard on Monday, 20 June 2011. It is that application which is now before the Court. 11In addition to key parts of the earlier proceedings, contained in a white folder, the applicants sought to read an affidavit of Rosa Caporale sworn on 14 June 2011. That affidavit set out the deponent's recollection of various conversations between her and a Mr Andrew Vale, who was an employee of the respondent at the time the initial financing arrangements were made between it and the applicants in 2004, and thereafter until sometime between June and October 2008. The respondent objected to the tender of the affidavit, the Court reserving its ruling on the objection. The affidavit should be admitted for the purpose of demonstrating the evidence on which the applicants would seek to rely, were leave to be granted. 12Ms Caporale asserted that, in about February 2007, she had a telephone conversation with Mr Vale in the course of which she discussed an education facility that was being planned for the Illawarra area. She described the "project" as one of which Mr Vale was aware but noted that it had increased in size "significantly from a $30 million-$50 million to a $300 million project". She further explained: "I need to change our payment arrangements as we cannot pay the monthly payments as per the contract. I need the payment arrangements to be able to change to be able for them to be accrued, deferred and/or capitalised until we can resume payments again or we restructure as a result of the project restructure." 13She further claims to have said: "You need to ensure that the current payment methods can be changed so we can proceed with the project and so I need you to arrange the payments to be made in a way so that we are not in default. The payments need to be accrued or deferred or capitalised by the bank, in whichever way it is best." 14Mr Vale is said to have replied in words to the effect, "Alright I understand, leave it with me, I will take care of it". 15Despite the glowing description of the "project" it appears that, until January 2008, the interests which Ms Caporale represented had not fixed upon a site for the proposed development, although one party owned land near Helensburgh, which may have been suitable. She outlined meetings held with government authorities in November and December 2007, which apparently led Ms Caporale to believe that Dapto would be the best place for the project. She reported to Mr Vale on 20 December 2007: "Andrew, there is no going back once we find and purchase the site at Dapto. We will have committed resources and we will need to see this through to the completion." 16In January 2008, she asserted, a site was located. She told Mr Vale: "It looks like the project will now be worth $700 million in total. Once we exchange on this property, there is no turning back, we'll see it through to the end." 17She stated that in April 2008 she advised Mr Vale that "we had bought the site at Dapto". 18It was made clear in the course of argument that "we" did not, in terms of legal entities, refer to any of the applicants, nor was there any suggestion that the properties the subject of the present proceedings were involved in the purchase at Dapto. How the purchase was financed is not revealed in the proposed evidence. 19Approximately two months later, in June 2008, Mr Vale advised Ms Caporale that her files were to be sent to the respondent's Melbourne office. When asked why that was happening, she was allegedly told: "They are being transferred down there to allow you more to continue with the project, and the interest will be capitalised on the loan." 20Ms Caporale further asserted that in October 2008 or thereabouts she received a call from a woman working with the respondent, identified only as Natalie, "confirming" her conversation with Mr Vale some four months earlier. The next contact in relation to the loan facilities appears to have been with a Mr Peter Hatter of the Sydney office of the respondent, in January 2009, warning that the respondent proposed to commence legal action.

Application for leave to appeal 21In the defences, filed on 1 October 2010, but struck out by Harrison AsJ on 30 March 2011, the applicants asserted that they were not in default "as the [respondent] agreed to vary the terms of the payment arrangements in and around March 2007 of the original agreement". Further, and contrary to the manner in which the case was presented in this Court, the defences asserted that each of the applicants has "continued to proceed with the major project and entered into an agreement to purchase the property for a significant sum ...". Before this Court it was said that the purchase of the Dapto property had been completed in 2008 and not by the applicants or any of them. 22When the matter came on for hearing before this Court, seven clear months had passed since Davies J, on 15 November 2010, ordered the applicants to provide particulars of their defences within two days. Even now, no draft defences with particulars have been provided to the Court. As senior counsel for the respondent noted, the demand for forbearance was vague and uncertain. Although at one stage it was alleged that Mr Vale asked how the borrowers intended to pay the interest on the loan facilities, he was given only a range of options for the future. 23The affidavit also set out part of the history of the litigation. Ms Caporale stated that she attended the offices of the applicants then solicitors in October/November 2010 to prepare an affidavit. She says it was never completed, but that there was a draft dated 11 November 2010. She annexed a letter from her solicitors to the solicitors for the respondent, dated 10 November 2010, noting that counsel had been engaged and seeking further time to finalise Ms Caporale's affidavit. She stated that she did not know if there had been a reply. Whether or not a reply was sent, the matter was back in Court on 15 November and the applicants were granted until 26 November to file affidavits. 24As to the period between November 2010 and mid-February 2011 when the solicitors ceased to act, few details are provided in Ms Caporale's affidavit as to what occurred between her and the applicants' solicitors. What is provided suggests, somewhat inconsistently, that the solicitors were insisting that things would need to move expeditiously, but were doing nothing. There could be various explanations of that situation, assuming it has been accurately portrayed in the affidavit. However, it is not a matter on which the Court should speculate: in the absence of evidence the Court should assume that, at least between 16 August 2010 and 24 February 2011, the applicants were represented by competent and diligent solicitors and, at least for a period, by counsel. From late February 2011 until about 3 June 2011, the applicants were unrepresented. Nevertheless, if Ms Caporale's accounts of her conversations with her former solicitors are to be accepted, she was conscious of what needed to be done and, presumably, had received some advice. 25Given the absence of error on the part of the primary judge, on the material before him, the only basis upon which this Court could grant leave would be if there were reasonable prospects of the court hearing the appeal admitting further evidence. That, as counsel for the applicants accepted, raises an issue as to whether the appeal would be from a judgment after a trial or hearing on the merits: Supreme Court Act 1970 (NSW), s 75A(8). If that were the case, the Court is not able to receive further evidence except "on special grounds". Although the underlying orders sought to be set aside were granted by default, the proceedings from which the appeal is sought to be brought were contested proceedings before the primary judge. Counsel for the applicants was prepared to accept that he needed to demonstrate special grounds. 26While it is not necessary for this Court to reach a final view on the question, it may be doubtful whether there has been a trial or hearing on the merits, in the sense envisaged in s 75A(8). That application did not require resolution of any factual dispute. The evidence required by the applicants would need to provide (i) a satisfactory explanation of the failure to file an acceptable defence so far and (ii) evidence of an arguable defence, on the grounds now sought to be raised: Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331 at [48]-[52] (Hodgson JA, MW Campbell AJA agreeing) and the authorities there discussed. It will be assumed to suffice if the further evidence (which cannot be described as "fresh evidence") satisfies those two elements. 27The respondent said that an amount of approximately $12.7 million was payable under the mortgages when the proceedings were commenced, assuming the applicants were in default. The applicants sought to rely on the circumstances in which the respondent had exercised forbearance from pursuing remedies for default in a timely fashion. However, the applicants accepted that forbearance, absent detrimental reliance, would not be sufficient: see Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; 238 CLR 570 at [78] and [88] (Gummow, Hayne and Kiefel JJ, Heydon J agreeing). 28The evidence in the present case failed to demonstrate with any degree of clarity, taking the affidavit of Ms Caporale at its highest, that there had been some form of detrimental reliance upon an undertaking not to require any payments under the loan facilities. Thus, the vague and uncertain proposals made by her in February 2007, apparently at or about the time the time the applicants ceased making payments, pre-dated by almost a year the purchase of land at Dapto for the purposes of the "project". Further, there was no evidence that the applicants, or any of them, purchased the land at Dapto. Nor, it would appear, was the respondent involved in financing that purchase. 29The search for documentation of any such arrangement failed. It appears to be common ground that the respondent did not have any record of any such agreement, for the period 1 February to 30 April 2007. The applicants noted the limited time period involved in the assurance obtained from the respondent, but that appears to have been the period during which payments ceased to be made and, from the evidence of Ms Caporale, some form of arrangement was reached. Ms Caporale herself is ambivalent on the question of records. Her affidavit stated at paragraph 3: "I have prepared this affidavit on the basis of documents that I have presently, and there may be more documents that I have that are still in archive." 30This statement is remarkable on two counts: first, no document is annexed to the affidavit relating to the substance of any possible defence. Secondly, the idea that there may be relevant documents "in archive", to which access has not been had, goes not merely to the credibility of Ms Caporale, which is not in issue at present, but to the diligence with which the belated attempt to defend the proceedings has been pursued. Further, this statement must be read in the context of an assertion that preparation of such an affidavit had commenced (but not been completed) in October and November 2010. 31These vagueness and uncertainty of the proffered evidence at key points cast doubt on the contention that the applicants have any real prospect of raising an arguable defence. However, there is a further consideration which militates against a grant of leave to appeal. If the appeals were to be unsuccessful, which, on the material presently available, is the more likely outcome, there would be nothing in law to prevent the applicants returning to the Common Law Division and making a further application to set aside the default judgments. If the appeals were to be unsuccessful, such an application would have no prospects of success; however, if leave were refused, the applicants formulated a defence, prepared affidavit evidence in support of the defence and explained satisfactorily why such evidence had not been tendered at an earlier time, the Common Law Division would be called upon to address the best case that the applicants could prepare. If such material were not forthcoming, the applicants would be no worse off. 32Such a course has a further advantage, taking into account the position of the respondent. As senior counsel correctly noted, if leave were to be granted, the respondent would be in the position of meeting a new case for the first time on appeal, with no real prospect of challenging the outcome, if it were adverse. It still has not seen a draft of any proposed defence. If it is required to defend its judgments against a clearly formulated defence, it is entitled to do that in the Common Law Division, with either party having an opportunity to seek leave to appeal against an adverse outcome. 33Taking these factors in combination, the appropriate course is to refuse leave to appeal.

Orders 34There remains a question as to the stay presently in force. On 20 June 2011 this Court ordered that the stay of enforcement of the writs of possession, then in force, should continue until the delivery of this judgment. That stay should continue in force for a period of 14 days from the date of this judgment. 35The costs of the proceedings in this Court, including the costs of the stay application reserved by Giles JA, should follow the event. 36One further matter requires comment. There was no material before this Court to demonstrate Ms Caporale's authority to act, as she appears to have done in the past, for both individual and corporate parties. Because the applicants are now all legally represented, no issue arises at the present time. Nevertheless, she purported to swear an affidavit on behalf of all the applicants. If at any point legal representation should cease, but proceedings continue, the Court will need to be affirmatively satisfied that she has authority to take steps, and potentially incur liabilities, on behalf of others. 37The Court makes the following orders: (1) Dismiss the amended summons seeking leave to appeal from the judgment of Davies J of 21 April 2011. (2) Order, under s 135(2)(b) of the Civil Procedure Act 2005 , that the Sheriff take no further action to enforce the writs of possession in proceedings Nos 2010/150149, 2010/150119, 2010/150085, 2010/150096, 2010/150075, issued on 4 May 2011, for 14 days from the date of these orders. (3) Order the applicants to pay the respondent's costs in this Court, including the costs reserved on 6 June 2011. 38YOUNG JA: I have read in draft the judgment of Basten JA and agree with his Honour's reasons and agree that the orders which he proposes are the only orders which this Court should make. However, I wish to add a few remarks of my own. 39When I read the papers initially, it seemed that the appellants' prime defence was that there had been an oral variation of the mortgage. Just what variation was left rather vague. 40During the address of Mr Rollinson of counsel who appeared for the appellants and put everything that could possibly be said in their favour, he virtually abandoned the defence of variation and instead, quite properly, indicated that the defence must be one of promissory estoppel. However, he indicated it would take some days for that defence to be properly pleaded. 41Whichever way it is pleaded that defence would seem to me to run into difficulties, not the least of which is that the Bank indicated by January 2009 that any impression the appellants may have had that there was some forbearance in collecting current interest had come to an end. 42The proceedings were commenced in the case of Rosa Caporale on 14 June 2010. I assume that the other proceedings were commenced about the same date. 43Thus the issue in the proceedings is who was entitled to possession as at 14 June 2010 as between the plaintiff and the defendant. 44This Court is a little in the dark in that no-one has provided copies of the relevant mortgages. Assuming that they are in common form, the mortgagee would be entitled to possession if the mortgagor was in arrears of interest for 14 days or perhaps one month. Even if the alleged arrangement was made between Mr Vale and Mrs Caporale was established, that would not excuse non payment of interest between January 2009 and June 2010. Thus, whatever factual finding were made about the alleged arrangement, it would not seem to affect the right to possession as at 14 June 2010. 45Accordingly, it is not necessary to consider the position in January 2009 when the appellants knew that any previous arrangement was at an end. 46As Basten JA points out, this question is really not one for this Court: we are only considering whether there is purpose in granting leave to appeal. However, I think it is appropriate, when the possession of people's homes is on the line, to be as liberal as one can in considering whether there is a possible line of defence. As can be seen, I regretfully have come to the view that there is not. 47There is no doubt that on the material before him that Justice Davies was correct in the order he made. I cannot see how any fresh evidence could affect the position. Accordingly, there is no reason to grant leave to appeal.

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: 23 June 2011