Atanaskovic v Robey
[2014] ACTSC 187
•5 August 2014
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Atanaskovic v Robey & Ors |
Citation: | [2014] ACTSC 187 |
Hearing Date(s): | 4 August 2014 |
DecisionDate: | 5 August 2014 |
Before: | Mossop M |
Decision: | Application dismissed with costs |
Category: | Interlocutory application |
Catchwords: | PRACTICE – declaration to set aside enforcement order – declaration that registered mortgage obtained in contravention of ss 18, 20 Australian Consumer Law – mortgage registered following default judgment of the Supreme Court of New South Wales – res judicata – issue estoppel |
Legislation Cited: | Australian Consumer Law ss 18, 20 |
Cases Cited: | John Ljubomir Atanaskovic trading as Atanaskovic Hartnell v Anthony James Robey & Ors [2014] NSWSC 150 |
Texts Cited: | Spencer Bower, Turner and Handley, The Doctrine of Res Judicata (LexisNexis Butterworths, January 1996, 3rd ed) |
Parties: | John Ljubomir Atanaskovic t/a Atanaskovic Hartnell ( Plaintiff) |
Representation: | Counsel: Mr M W Sneddon ( Plaintiff) |
| Solicitors: Atanaskovic Hartnell ( Plaintiff) | |
File Number(s): | SC 290 of 2014 |
Introduction
This is an application in proceedings brought by Anthony James Robey, the first defendant, and Gabrielle Robey, the second defendant for the following substantive orders:
1.A declaration that the registration in the Supreme Court of the Australian Capital Territory on 26 June 2014 of the enforceable order made on 28 February 2014 in the Supreme Court of New South Wales be set aside;
2.A declaration that the registered mortgage folio identifier 759:79 over the first and second defendants' family home at 26 Meredith Circuit Kambah in the Australian Capital Territory was obtained in contravention of sections 18 and 20(1) of the Australian Consumer Law, is invalid and cannot be relied upon by the plaintiff or any other person.
The first and second defendants were not legally represented. At the hearing of the application I gave leave to the first defendant to represent the second defendant. The third defendant was the New South Wales Trustee and Guardian and did not appear in relation to the application on the basis that no orders would be made affecting its interests.
Facts
The first defendant engaged the plaintiff to act for him in relation to litigation in 2010. By November 2011 in excess of $580,000 for costs and disbursements were incurred by the plaintiff in acting for the first defendant. A mortgage was entered into to secure those costs over the first and second defendants' home. There was an agreement reflected in the terms of the mortgage that the plaintiff's mortgage would be a second mortgage after the mortgage securing what I will refer to as the Bromhead loan. The lender, Mr Bromhead, subsequently died and the New South Wales Trustee and Guardian is the executor of his estate.
Notwithstanding a number of attempts to obtain payment from the first defendant the plaintiff's fees remained unpaid. The business circumstances of the first defendant and his companies deteriorated. The plaintiff commenced proceedings in November 2013 in the New South Wales Supreme Court to recover his fees and obtain possession of the first and second defendants' property pursuant to the mortgage. Those proceedings were served on the first and second defendants. No appearance was entered by the first or second defendants and a judgment was sought. The proceedings also sought declarations in relation to the priority as between the two mortgages, that of the plaintiff and that securing the Bromhead loan. The plaintiff and the third defendant consented to making declarations to the effect that the plaintiff's mortgage took priority to the third defendant's mortgage or purported mortgage.
Kunc J considered it appropriate to give judgment for the plaintiff against the first and second defendants and make the declarations which the plaintiff and the third defendant had consented to. His Honour made orders and published his reasons for making those orders on 28 February 2014: [2014] NSWSC 150. The orders were entered in the New South Wales Supreme Court on 3 March 2014.
Pursuant to the provisions of the Service and Execution of Process Act 1992 (Cth) the plaintiff had the orders of the New South Wales Supreme Court registered in the Supreme Court of the Australian Capital Territory on 26 June 2014. It is in that context that the present application dated 23 July 2014 and filed 24 July 2014 was brought.
Grounds of the application
The grounds for the application are set out in some detail in the application in proceedings and I will endeavour to summarise them.
The first defendant was a director of Wizard Information Services Pty Ltd. He was involved in a dispute with the Westpac Banking Corporation in which the plaintiff provided legal services. A mediation process was entered into and, in order to secure the plaintiff's fees in relation to that process, the plaintiff proposed that the first defendant provide the plaintiff with security for that debt. The first defendant and the plaintiff expected that the debt would be repaid from funds that the first defendant would receive from a solar project being funded in part by a grant from the Commonwealth government.
In March 2013 the Commonwealth government withdrew funding from the project and the company from which the first defendant was expecting payment, Wizard Power Pty Ltd, went into administration.
Since May 2013 the plaintiff has sought payment of the debt but the first defendant has not had funds to make the payment. In August 2013 the first defendant explained his lack of funds to the plaintiff and sought a further indulgence, while the administrator of Wizard Power Pty Ltd investigated pursuing claims against the Commonwealth. In November 2013 the first and second defendants were served with a statement of claim for the proceedings in the New South Wales Supreme Court but neither responded.
The reasons for failing to respond are set out in some detail in paragraph 9 of the grounds of the application in proceeding. In relation to the first defendant, who as between him and his wife was principally responsible for these matters, the grounds allege that he was unwell at the time with a stomach virus and severe sciatic pain. He said that he misread the document, thinking that there were more documents to follow and once they were received there would be 28 days to respond. He also said that his understanding was influenced by information in the statement of claim which the plaintiff knew would be misleading.
In relation to the priority given to the security for the Bromhead loan, the grounds of the application stated:
13. It was of the upmost importance to both [the first and second defendants] that the security of the Bromhead loans to Wizard Power had priority over any security offered to [the plaintiff].
...
18. At no time prior to the execution of the mortgage with the plaintiff did the plaintiff inform either [the first defendant] or [the second defendant] that the Bromhead documentation [was] not sufficient for [the first defendant] or [the second defendant] to be able to rely on [the first defendant’s] undertakings.
The first defendant’s undertakings were earlier outlined in the grounds of the application as cl 3.1 of the plaintiff’s mortgage. That clause acknowledged the existence of the mortgage securing the Bromhead loan and that it had priority over the plaintiff's rights under the plaintiff’s mortgage. Clause 3.1 also acknowledged that the plaintiff was prepared to execute a reasonable inter‑creditor agreement with the senior mortgagee documenting that priority. I interpolate no such documentation was ever prepared.
It is alleged that at no time prior to the finalisation of the plaintiff’s mortgage did the plaintiff inform the first or second defendants of any matter that could impact upon the plaintiff's undertakings that the Bromhead mortgage had priority. The grounds also denied that the second defendant was ever a client of or ever owed money to the plaintiff.
The grounds claim that the representations in clause 3.1 of the mortgage were misleading and deceptive or likely to mislead and deceive contrary to s 18 of the Australian Consumer Law or alternatively, were unconscionable and in contravention of s 20(1) of the Australian Consumer Law. It also alleges that the first and second defendants are persons who have suffered loss and damage as a result of the plaintiff's conduct and seeks relief under s 236(1) of the Australian Consumer Law.
In evidence before me and in his submissions the first defendant indicated that his claim of misleading and deceptive conduct went beyond merely the making of the representations contained in the plaintiff’s mortgage and extended to representations made by the solicitor with carriage of the matter being conducted on behalf of the first defendant.
As will be apparent, the grounds of the application read like a pleading for final relief. Plainly enough, seeking such relief by an application in proceedings is not appropriate. However, it is not appropriate to deal with the matter on the basis of the inadequacy of the procedure adopted by the first and second defendants. Instead it is appropriate to look at the substance of what the first and second defendants are attempting to achieve; namely, having the decision of the New South Wales Supreme Court stayed and a declaration of the invalidity of the plaintiff's mortgage.
The judgment of Kunc J
Kunc J was dealing with an application for default judgment, both as to a liquidated sum and a claim for possession of land against the first and second defendants. As between the plaintiff and the third defendant he was asked to make a consent declaration and resolve the question of costs. The plaintiff and the third defendant appeared at the hearing of the application. The first and second defendants did not.
His Honour recited the identity of the parties and the terms in clause 3.1 of the mortgage. He was satisfied as to service on the first and second defendants of the statement of claim. He recorded the terms of the rules which required a defence to be filed within 28 days and found that the first and second defendants were in default and the plaintiff was entitled to apply for default judgment. He found that the affidavit in support satisfied the amounts claimed were properly due and owing under the plaintiff's mortgage and that there had been an event of default: see [2014] NSWSC 150, [6]-[8].
He was further satisfied that the requirements of the Legal Profession Act 2004 in New South Wales that had to be met prior to the plaintiff's suing for legal costs had been satisfied. As a consequence, he found that the plaintiff was entitled to default judgment on its liquidated claim: see [2014] NSWSC 150, [9]-[11].
In relation to the proceedings for possession his Honour was satisfied that the plaintiff had demonstrated, by reference to sections 93 and 94 of the Land Titles Act 1925 (ACT), that the statutory prerequisites for the present proceedings for possession in reliance on the plaintiff's mortgage had been satisfied. His Honour said that in so far as he was exercising a jurisdiction which could only be exercised by the ACT Supreme Court that jurisdiction was conferred upon the New South Wales Supreme Court by the relevant cross-vesting legislation. His Honour was satisfied that the procedural requirements for default judgment for possession of land set out in the Uniform Civil Procedure Rules 2005 (NSW) had been satisfied and therefore, the plaintiff was entitled to an order for possession: see [2014] NSWSC 150, [12]-[13].
As between the plaintiff and the third defendant the parties had agreed on a form of declaration reflecting the final relief set out in the statement of claim. That was a declaration to the effect that the mortgage granted by the first and second defendants to the plaintiff took priority over the document dated 2011 and described as a mortgage in respect of the Kambah property in favour of the late David Edward Bromhead, whose estate was being administered for the third defendant.
His Honour proceeded on the basis that he needed to be satisfied that it was appropriate to make such a declaration and would have to be independently satisfied that the making of the declaration quelled a real dispute and that there was utility in making it. He was satisfied that there was evidence supporting the making of the declaration. He was also satisfied that there was utility in resolving all the issues as between the parties. At [17] his Honour said:
17.In particular, this involves foreclosing the possibility that while [the third defendant] might accept that the Bromhead Document does not have priority over the [plaintiff's mortgage] in relation to the Kambah property [the first and second defendants] might at some later stage seek to assert that it does. While I suspect that even the acceptance of such an assertion by [the first and second defendants] would be of no practical help to them, I cannot rule out that they would not do so. The legal and economic reality of the situation as between [the plaintiff],[the third defendant] and [the first and second defendants] suggest that there is sufficient interest to achieve finality and certainty as between the parties to warrant such a declaration being made. The court will do so.
The issue of costs was also resolved on the basis that there be no order as to costs as between the plaintiff and the third defendant: see [2014] NSWSC 150, [18]-[20].
Consideration
The starting point for any consideration must be the existence of a judgment of the New South Wales Supreme Court. That judgment was given on 28 February 2014. No appeal was lodged in relation to that judgment. No application that might have been able to be made to set aside or vary the judgment was made between the date on which it was given and the date on which it was entered, namely 3 March 2014.
A judgment by default, like one by consent, is final even though the court might have power in limited circumstances to set it aside: see Spencer Bower, Turner and Handley, The Doctrine of Res Judicata (LexisNexis Butterworths, 1996, 3rd ed) at [163]. In Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508 the New South Wales Court of Appeal found that a judgment in the County Court of Victoria in default of appearance was a final judgment even though the County Court had power to set it aside. As a consequence, such a decision operated as a res judicata and may give rise to an issue of estoppel.
The decision of Kunc J establishes as between the parties in this case that the first and second defendants were liable to pay $587,596.58. Further, it establishes that the plaintiff was entitled to possession of the property in Kambah. Finally, it establishes that the mortgage to the plaintiff takes priority over the mortgage or purported mortgage securing the Bromhead loans.
It is a necessary ingredient of the decision in relation to possession and of priority of mortgages that there was a valid and enforceable mortgage to the plaintiff over the property in Kambah. As a consequence, by reason of the doctrine of res judicata or issue estoppel, it is not open in collateral proceedings for the first and second defendants to seek orders or findings inconsistent with those identified components of Kunc J’s judgment.
In my view this means that it is not open to the first and second defendants to now contest in these proceedings whether or not there was a valid mortgage over the Kambah property, as they do by seeking order 2 in their application.
It may well have been possible for the first and second defendants to put on a defence and counter-claim in the proceedings in the New South Wales Supreme Court making the allegations of a breach of the provisions of the Australian Consumer Law and seeking relief in that court on the basis of those allegations. Having not done so, however, they are bound by the decision of the court until that decision is set aside, either on appeal or otherwise.
The position may be slightly different if the claim was one for damages which might conceivably exist alongside an enforceable mortgage. There would, however, be likely to exist almost insuperable obstacles to raising such a contention in circumstances where it was not raised in the New South Wales court: see Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.
It is enough for present purposes to find that any such claim could not, by reason of the extant judgment of Kunc J, affect the plaintiff's entitlement to possession of the property and hence the entitlement to have Kunc Js orders enforced.
The alternative to entertaining an application for final relief would be some form of short stay of the enforcement of the registered judgment pending an application being made in New South Wales that might affect the enforceability of the orders made by Kunc J. Such a possibility is affected by the terms of ss 105 and 106 of the Service and Execution of Process Act 1992 (Cth). Section 105 of that Act provides:
105 Enforcement of judgments
(1)Upon lodgment of a sealed copy of a judgment, or a fax of such a sealed copy, the prothonotary, registrar or other proper officer of the appropriate court in a State other than the place of rendition must register the judgment in the court.
(2)Subject to subsection (4), a registered judgment:
(a)has the same force and effect; and
(b)subject to sections 106 and 108, may give rise to the same proceedings by way of enforcement;
as if the judgment had been given, entered or made by the court in which it is registered.
...
Section 106 provides:
106 Stay may be granted
(1)A court of a State in which a judgment has been registered under subsection 105(1) may, on application by a person against whom the judgment has been given, entered or made, order that proceedings in that court by way of enforcement of the judgment:
(a)not be commenced until a specified time; or
(b)be stayed for a specified period.
(2)The order:
(a)must be made subject to conditions that:
(i) within the period specified in the order, the person make and prosecute an appropriate application for relief in respect of the judgment; and
(ii) the application be prosecuted in an expeditious manner; and
(b)may be made subject to such other conditions, including conditions as to the giving of security, as the court thinks fit.
(3)For the purposes of paragraph (2)(a), an appropriate application for relief is an application to set aside, vary or appeal against the judgment, being an application made to a court or tribunal that has jurisdiction under the law in force in the place of rendition to grant the application.
Section 105 therefore compels this Court to treat the judgment registered pursuant to the Act as if it were a judgment of this Court. Section 106 means that while it is possible to achieve a stay of a registered order that must be done on the basis of there being contemplated "an appropriate application for relief in respect of the judgment" in the home jurisdiction. In my view s 106, by making a qualified grant of power to stay such a registered order, limits the capacity of this Court to grant a stay of a registered order.
While the first and second defendants did accept that if some orders preventing or postponing the enforcement of Kunc J’s decision were made then they might, at some stage, have to seek by appeal or other means to have Kunc Js orders set aside, there was no evidence of any steps having been taken in that regard and no clear expression of intention to make any particular application. Although I have not examined the provisions of the Uniform Civil Procedure Rules 2005 it seems to me highly unlikely that an application could successfully be made to Kunc J himself. That is because it is likely that, if for no other reason, any relief would be refused on a discretionary basis.
For many months prior to the commencement of the proceedings the first defendant was on notice of the plaintiff's intention to pursue payment. That was reflected in correspondence which the first defendant received and was reinforced by meeting with representatives of the plaintiff in August 2013.
As at the point when the first defendant was served with the proceedings the first defendant gave evidence that he was ill and that he had misread or misunderstood the document. That was notwithstanding the fact that he was familiar from his previous experience with court processes and the obligation to take steps within particular periods. There was, however, no evidence as to how long his condition lasted. There was evidence that at least on the day before the judgment was given the first defendant was on notice that it would be given and there was evidence that shortly after the judgment was given the first defendant was sent all the documentation relating to the application.
He was sent a copy of Kunc J’s order by letter dated 28 February 2014. There was no explanation as to why, between 27 February 2014 and 23 July 2014, the first and second defendants took no steps in relation to the proceedings or the judgment against them. As a consequence, in the unlikely event that there was some capacity for Kunc J to revisit his decision, notwithstanding that the orders were given on 28 February 2014 and entered on 3 March 2014, it is extremely unlikely that any discretionary power would be exercised in favour of revisiting the decision.
Similarly, in relation to any application for an extension of time in which to appeal to the Court of Appeal, the absence of any explanation for delay and the absence of any identified arguable error on the part of Kunc J, it appears to me extremely unlikely that the first and second defendants would obtain such an extension.
In light of the above considerations I would, in the exercise of my discretion, refuse to grant any stay of the registered judgment because I am not satisfied that there is a reasonably arguable basis for interfering with that decision available to the first and second defendants in New South Wales.
As a consequence, I am not satisfied that there is any appropriate application for relief that would have reasonable prospects and hence, no appropriate basis on which to grant a stay of the enforcement of the registered judgment, having regard to the terms of s 106 of the Service and Execution of Process Act 1992. For these reasons the appropriate order is that the application in proceedings dated 23 July 2014 be dismissed.
The plaintiff sought costs of the application but only in relation to the first defendant. In my view it is appropriate that costs follow the event. I will, therefore, order the first defendant pay the plaintiff's costs.
The orders of the Court are:
1. The application in proceedings dated 23 July 2014 is dismissed.
2. The first defendant is to pay the plaintiff's costs of the application.
| I certify that the preceding fourty-four [44] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Master Mossop. Associate: Date: |
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