Bank of Western Australia Limited v Hollywood Management Pty Limited (in Liquidation)

[2010] NSWSC 935

CITATION:	BANK OF WESTERN AUSTRALIA LIMITED v HOLLYWOOD MANAGEMENT PTY LIMITED (IN LIQUIDATION) & ANOR [2010] NSWSC 935
HEARING DATE(S):	Friday 6 August 2010
JUDGMENT DATE :	24 August 2010
JURISDICTION:	Common Law
JUDGMENT OF:	Hall J at 1
DECISION:	In relation to the relief sought in paragraphs 1 to 7 of the notice of motion filed on 13 July 2010, I make the following orders:- (1) That the defence of the first defendant, Hollywood Management Pty Limited (In Liquidation) is struck out. (2) That the cross-claim by the first defendant/first cross-claimant, Hollywood Management Pty Limited (In Liquidation) is dismissed. (3) That the defence by the second defendant, Chrissanthi Rougalas, is struck out. (4) That the cross-claim by the second defendant/second cross-claimant, Chrissanthi Rougalas, is dismissed. In relation to the further relief sought in paragraphs 8 and 9 of the notice of motion filed on 13 July 2010, I make the following orders:- (1) An order that the plaintiff have possession of:- (a) the land comprised in Certificate of Title Folio Identifier 501/626361 being the land situated at and known as 28 Bryant Street, Padstow, New South Wales (“the First Property”); (b) the land comprised in Certificate of Title Folio Identifier A/408252 being the land situated at and known as 17 Pitt Street, Mortdale, New South Wales, 2223 (also known as 15-17 Pitt Street, Mortdale, New South Wales, 2223) (“the Second Property”); (c) the land comprised in Certificate of Title Folio Identifier B/408252 being the land situated at and known as 19 Pitt Street, Mortdale, New South Wales, 2223 (also known as 19-21 Pitt Street, Mortdale, New South Wales, 2223) “the Third Property”). (2) A writ of Possession for the First Property, the Second Property and the Third Property be issued forthwith. (3) Liberty to the plaintiff to lodge with my associate written submissions on the question of costs sought as against the first defendant and against the second defendant and the basis upon which any costs order is sought. (4) Liberty to the plaintiff to apply with respect to the form of the orders made.
CATCHWORDS:	On application for orders striking out a defence and for the dismissal of a cross-claim pleading reliance upon alleged misrepresentation, misleading and deceptive conduct, unconscionability at general law and relief under the Contracts Review Act (1980) in a case of a secured loan transaction it is necessary for the court in balancing relevant factors to take into account the nature of the proceedings brought in the Possession List, the nature and extent of the alleged default under the loan, the fact and extent of accumulating losses through unpaid principal and/or interest – fact of delay over a period of months since the defendants’ non-compliance with court directions, in particular, the direction to file evidence in support of the defence/ cross-claim and the need for Possession List proceedings to be dealt with speedily
LEGISLATION CITED:	Civil Procedure Act 2005 Contracts Review Act 1980 Corporations Act 2001 (Cth) Fair Trading Act 1987 Real Property Act 1900 Trade Practices Act 1974
CASES CITED:	AON Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 Bishopgate Insurance v Deloitte Haskins [1999] 3 VR 863 Building Insurers’ Guarantee Corporation v Touma [2010] NSWSC 4 Masel v Transport Industries Insurance Co Limited [1995] 2 VR 328 Micallef v ICI Australia Operations Pty Limited [2001] NSWCA 274 Stollznow v Calvert (1980) 2 NSWLR 749
PARTIES:	BANK OF WESTERN AUSTRALIA LIMITED v HOLLYWOOD MANAGEMENT PTY LIMITED (IN LIQUIDATION) & ANOR
FILE NUMBER(S):	SC 09/296799
COUNSEL:	P: J M White
SOLICITORS:	P: Kemp Strang

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HALL J

TUESDAY 24 AUGUST 2010

2009/296799

BANK OF WESTERN AUSTRALIA LIMITED v HOLLYWOOD MANAGEMENT PTY LIMITED (IN LIQUIDATION) & ANOR

JUDGMENT

1 HIS HONOUR: These proceedings were commenced by way of Statement of Claim filed on 23 October 2009 by the Bank of Western Australia Limited against two defendants, Hollywood Management Pty Limited (in Liquidation) (“Hollywood Management”) and Chrissanthi Rougalas (“Ms Rougalas”). The plaintiffs seek an order for possession of three properties.

2 The proceedings concern certain loan facilities granted by the plaintiff to Theodore Rougalas and Ms Rougalas dated 14 July 2008 totalling $1,970,500 and certain mortgages provided as security for the loan monies. Three properties were offered as such security. Hollywood Management is the sole registered proprietor of the First Property identified below. That company is now in liquidation. It was a guarantor of the above loan facilities made by the plaintiff and the mortgage in question constituted security for the guarantee.

3 The plaintiff claims that Hollywood Management was in default under the mortgage and seeks an order in these proceedings for possession of the property described as the land comprised in Certificate of Title, Folio Identifier 501/626361, being the land situated at and known as 28 Bryant Street, Padstow (“the First Property”).

4 The plaintiff also claims an order for possession in respect of two other properties which are registered to both Hollywood Management and Ms Rougalas as tenants in common. The properties are 15-17 Pitt Street, Mortdale (“the Second Property”) and 19-21 Pitt Street, Mortdale (“the Third Property”).

5 The Statement of Claim pleaded the primary facts and assertions relied upon by the plaintiff. These include:-

(1) The First Property . That a mortgage was entered into between the plaintiff and Hollywood Management in respect of “the First Property” , being mortgage number AE141816. As stated above, the plaintiff alleges that Hollywood Management was in breach of the first mortgage in failing to pay money due under the loan facilities granted by the plaintiff.

In respect of this default, a Default Notice was served on Hollywood Management on 11 August 2009. The Notice specified “arrears” owing and not paid in the amount of $201,733.09. Hollywood Management failed to correct the default specified in the Notice. The plaintiff alleges that the company was in breach of the first mortgage in failing to pay instalments in accordance with its terms. Accordingly, it seeks an order for possession in respect of the First Property.

(2) The Second Property . The plaintiff relies upon a mortgage said to have been entered into between it and Hollywood Management and Ms Rougalas in respect of the Second Property, 15-17 Pitt Street, Mortdale, being Mortgage No AE 141836.

Similar allegations are made in respect of the second mortgage. These include the allegation that the defendants were in default of the terms of the mortgage and that a Default Notice was given on 11 August 2009 to the defendants (the amount due specified as $201,773.09). The plaintiff alleges that the defendants failed to correct the default specified in the Notice. Accordingly, it alleges that the defendants were in breach of the second mortgage in failing to pay the instalments. The plaintiff seeks an order for possession of the Second Property.

(3) The Third Property . The plaintiff, in respect of the Third property, also relies upon the second mortgage (Mortgage No AE 141836) and alleges default under its provisions and failure to comply with a Default Notice served on the defendants.

6 On 31 December 2009, a defence dated 8 December 2009 was filed on behalf of Hollywood Management and Ms Rougalas. In it, the defendants did not admit the plaintiff’s allegations in the statement of claim and denied others. They put in issue matters of fact pleaded by the plaintiff and any entitlement of the plaintiff to relief. In answer to the whole of the allegations contained in the statement of claim, the defendants stated that they relied upon the allegations of fact contained in the cross-claim filed on their behalf.

7 On 31 December 2009, a document was filed entitled “First Cross-Claim Statement of Cross-Claim”. An affidavit was sworn by Ms Rougalas on 16 December 2009 verifying the allegations of fact in the cross-claim.

8 Hollywood Management and Ms Rougalas, as cross-claimants, claimed various forms of relief including a declaration that the first and second mortgages were unenforceable, an order that the mortgages be aside, an order restraining the plaintiff from taking steps to enforce the terms of the first and second mortgages, a declaration that the first and second mortgages were “unjust” within the meaning of s.7(1) of the Contracts Review Act 1980 and other orders under that Act.

9 In the alternative, a declaration was sought on behalf of the second cross-claimant (Ms Rougalas) on the basis that it is alleged she was induced to execute the first and second mortgages given by Hollywood Management and herself by misrepresentations of the plaintiff and its agent.

10 Relief is also sought under the Fair Trading Act 1987 and the Trade Practices Act 1974.

11 Further, the cross-claimants claimed damages and interest from 30 January 2009 to the date of judgment.

12 Particulars of the causes of action relied upon in the cross-claim are set out in the first cross-claim.

The plaintiff’s notice of motion

13 In a notice of motion dated 6 July 2010, the plaintiff seeks relief against both Hollywood Management and Ms Rougalas. So far as Hollywood Management is concerned, apart from leave to proceed under s.471D of the Corporations Act 2001 (Cth), relief is also sought in respect of Hollywood Management’s cross-claim pursuant to UCPR Part 13 Rule 13.4 or, alternatively, that the cross-claim be struck out pursuant to UCPR Part 14 Rule 14.28.

14 The provisions of each of the above UCPR as pleaded in the notice of motion are set out below.

15 The plaintiff also seeks an order for possession of the property 28 Bryant Street, Padstow (the First Property) and also an order that a writ of possession for that property issue forthwith.

16 In the same notice of motion, the relief sought against Ms Rougalas is, firstly, that her defence be struck out pursuant to UCPR Part 12 Rule 12.7 and, secondly, that her cross-claim be struck out pursuant to the same provisions.

17 In paragraph 4 of the notice of motion, the plaintiff seeks an order for possession of 28 Bryant Street, Padstow (the First Property), in paragraph 8 of the notice of motion, the plaintiff seeks possession of the property, 17 Pitt Street, Mortdale (the Second Property) and possession of the property, 19 Pitt Street, Mortdale (the Third Property) and that a writ of possession for each of those properties issue forthwith.

18 An order is also sought that the defendants’ pay the plaintiff’s costs on a solicitor and client basis.

Hearing of proceedings

19 The proceedings were initially listed for hearing before me on 13 July 2001. On that occasion, Mr J M White of counsel appeared on behalf of the plaintiff.

20 At the commencement of the hearing, the first and second defendants were called outside the courtroom, but there was no appearance by or on behalf either of them.

21 Mr White then moved on the notice of motion.

Factual matters

22 The mortgages granted by Hollywood Management and the second and third mortgages, by Ms Rougalas, secured the abovementioned facilities which had a limit of $1,970,500 granted to Ms Rougalas and her husband, Theodore Rougalas.

23 Hollywood Management, together with two other companies, guaranteed the repayment of the facility to an unlimited extent. The mortgage securities referred to above were provided as security.

24 The evidence establishes that Ms Rougalas and her husband were, by 6 August 2009, in arrears and, accordingly, in default under the mortgages in respect of monthly payments. By 2 September 2009, payments by way of transfers from Hollywood Management were dishonoured. By that date, the balance of the facility provided stood at more than $1,987,500. Default continued thereafter.

25 According to an ASIC search, the registered office of Hollywood Management, since 10 September 2007, was 62 Hollywood Street, Monterey, New South Wales. Since February 2002, it was the principal place of that company’s business.

26 On 11 August 2009, the plaintiff served notices pursuant to s.57(2)(b) of the Real Property Act 1900 addressed to Mr and Mrs Rougalas and Hollywood Management demanding payment of the principal together with interest and fees totalling $201,733.09 together with enforcement expenses within 31 days. If the default was not corrected within the 31 day period specified, then the Notice required payment of the total amount outstanding ($2,173,909.57) including default interest.

27 The evidence establishes that the default was not rectified and the account fell further into arrears so that by mid-October 2009, the balance owing was $2,206,934.66 and by 28 January 2010 the balance stood at $2,282,110.18 which, as noted in the submissions for the plaintiff, represented more than $311,000 above the facility limit. Interest was debited to the account at that stage at $17,787.03 per month.

Relief sought by Hollywood Management under the Contracts Review Act

28 In relation to the relief sought in the cross-claim by Hollywood Management under the Contracts Review Act, the plaintiff contends that the provisions of the Act are not available at all to Hollywood Management by reason of the provisions of s.6(1) of that Act which provides as follows:-

“6(1) The Crown, a public or local authority or a corporation may not be granted relief under this Act.”

29 Accordingly, it is submitted that Hollywood Management, being a corporation, must fail in its claim under the Contracts Review Act.

30 In relation to the causes of action based on alleged misleading and deceptive conduct, the plaintiff contended that they were inadequately pleaded and are liable to be struck out. In any event, it was contended that paragraphs 10.3 and 10.4 and the particulars in paragraph 17.1.1 indicate that, as a matter of pleading, no sustainable claim for misleading representation has in any event been made out. It was observed in the submissions for the plaintiff that the material allegation appears to be a “failure to make inquiries about Ms Rougalas’ capacity to pay the loan”. I will return to this aspect of the matter below.

Liquidation of Hollywood Management

31 Hollywood Management went into liquidation on 10 May 2010 on the petition of the Chief Commissioner of State Revenue.

32 On 8 June 2010, the solicitor for the plaintiff wrote to the Liquidator, Mr Peter Hillig, for the purpose of inquiring as to whether he intended to take an active role in the proceedings.

33 On 11 June 2010, Mr Hillig advised that he neither consented to nor objected to judgment being entered in favour of the plaintiff.

34 The provisions of Division 1A of the Corporations Act (“effective of winding up order”), insofar as is relevant, provides:-

“471 Effect on creditors and contributories
On order for winding up a company operates in favour of all the creditors and contributories of the company as if it had been made on the joint application of all the creditors and contributories.
…
471B Stay of proceedings and suspension of enforcement process
While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:-
(a) a proceeding in a court against the company or in relation to property of the company; or
(b) enforcement process in relation to such property;
except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.
471C Secured creditor’s rights not affected
Nothing in s.471A or s.471B affects a secured creditor’s right to realise or otherwise deal with the security.”

35 It was observed in the submissions for the plaintiff that the preliminary question is whether the plaintiff requires the Court’s leave to proceed against Hollywood Management in relation to the first, second and third properties. In this respect, the plaintiff submitted:-

(1) That leave is not required by the plaintiff before it can proceed to obtain orders for possession.

(2) In any event, even if leave was required, the Court would readily grant it, given the nature of the claim.

36 It was also observed on behalf of the plaintiff that it did not seek in the proceedings any money order against Hollywood Management. It was not seeking to advance a mere right to payment of a debt due, secured against the property or properties. It was seeking to enforce the security by obtaining possession of the properties.

37 Reliance was placed upon the following observations by the learned authors of Ford’s Corporations Law at 27.120:-

“ Proprietary claim of a secured creditor
In relation to the claims of secured creditors against property, neither s.471A suspending the powers of the company’s officers nor s.471B imposing a stay of proceedings affects a secured creditor’s right to realise or otherwise deal with the property charged under a valid charge in order to recover what is owing under the charge: s.471C. The secured creditor does not require the leave of the Court to deal with the property charged. If, however, the liquidator is unwilling to give up the property, the secured creditor will need to seek the court’s leave in order to avoid being in contempt of court: Re Landmark Corp Limited (in liq) (1968) 1 NSWLR 705 … That is because the liquidator is regarded as an officer of the Court carrying out the Court’s function to wind up the company. When satisfied that the charge was valid and applied to the property in question, the Court would grant leave as a right: SA Asset Management Corporation v Sheahan … a secured creditor having security over debts owed to the company may sue for them without having to get the liquidator’s approval: New Imperial Pty Limited (in liq) v Beveridge (1995) 5 Tas R 246 …”

38 Mr White, on behalf of the plaintiff, also relied upon the fact that there is no suggestion that the liquidator is unwilling to give up one or more of the properties, the subject of the plaintiff’s claim.

39 Accordingly, the plaintiff sought an order for possession of each of the first, second and third properties. It was noted that, as the second and third properties are held by Hollywood Management and Ms Rougalas as tenants in common, then, in relation to those properties (but not the first property), the Court will need to assess the plaintiff’s entitlement in conjunction with its submissions on relief against Ms Rougalas.

The statutory provisions

40 As noted above, the plaintiff relies in the motion as against Hollywood Management upon the provisions of Part 13 Rule 13.4 of the UCPR which is concerned with the summary disposal of proceedings. The provisions are as follows:-

“13.4(1) If in any proceedings it appears to the Court that in relation to the proceedings generally or in relation in to any claim for relief in the proceedings:-
(a) the proceedings are frivolous or vexatious, or
(b) no reasonable cause of action is disclosed, or
(c) the proceedings are an abuse of the process of the Court,
the Court may order that the proceedings be dismissed generally or in relation to that claim.
(2) The Court may receive evidence on the hearing of an application for an order under sub-rule (1).”

41 Under the provisions of the above Rule, the Court has power to dismiss proceedings which are found to be an abuse of process or where the case brought by the opposing party is so weak and (in this case, the plaintiff’s case) is so strong as to permit proceedings to go to trial would be futile. It is unnecessary here to examine all the other circumstances in which relief may be granted under Part 13 Rule 4.

42 As also stated above, the plaintiff relies upon UCPR Part 14 Rule 14.28 in the alternative in seeking an order that the cross-claim be struck out. Those provisions provide:-

“14.28(1) The Court may, at any stage of the proceedings, order that the whole or any part of pleading be struck out if the pleading:-
(a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or
(b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or
(c) is otherwise an abuse of the process of the Court.
(2) The Court may receive evidence on the hearing of an application for an order under sub-rule (1).”

43 In relation to the provisions of Part 14 Rule 14.28(1), the Court may strike out pleadings on the grounds of “an abuse of the process of the Court” which potentially covers a wide range of matters. The concept of abuse of process overlaps other specific rules that justify the striking out of proceedings or pleadings. It involves wider considerations than mere non-compliance with Rules, orders or directions. The case law indicates that the categories of what constitutes an abuse of process, include:-

(1) Proceedings that are doomed to fail – either because they disclose no cause of action or because of events that have occurred since the commencement or because the proceedings are untenable in the known or admitted circumstances.

(2) Proceedings that the plaintiff (or, as in this case, the cross-claimant) does not intend to prosecute.

44 Insofar as relief in the notice of motion as against Ms Rougalas is concerned, the provisions of Part 12 Rule 12.7 provide as follows:-

“12.7(1) If a plaintiff does not prosecute the proceedings with due despatch, the Court may order that the proceedings be dismissed or make such other order as the Court thinks fit.
(2) If the defendant does not conduct the defence with due despatch, the Court may strike out the defence, either in whole or in part, or make such other order as the Court thinks fit.”

Affidavit evidence

45 The plaintiff relied upon affidavit evidence in support of the notice of motion. In that respect, the following affidavits were read on the hearing of the application:-

(1) Affidavit of Michael Brian Wirth sworn 8 July 2010.

(2) Affidavit of Michael Brian Wirth sworn 13 July 2010.

(3) Affidavit of Jeremy Richard Ettiene Sutton sworn 28 April 2010.

(4) Affidavit of Kevin Ellis Burns sworn 23 April 2010.

46 The affidavit of Mr Burns referred to a number of documents which together constituted Exhibit KEB1 to the affidavit.

47 In his affidavit sworn 13 July 2010, Mr Wirth stated that he sent to Ms Charleston on 6 July 2010 notice of orders made by the Court on 6 July 2010 which were in the following terms:-

“1. The plaintiff to file a notice of motion to set aside the defence and cross-claim by 5.00 pm on Wednesday 7 July 2010.
2. The hearing of the Notice of Motion be set down for Tuesday 13 July 2010.”

48 On 6 July 2010, Mr Wirth sent to Ms Charleston a copy of the notice of motion filed in the proceedings.

The issue of notice to the second defendant

49 On 8 July 2010, Mr Wirth caused a letter on Kemp Strang letterhead dated 8 July 2010 together with the notice of motion and affidavit of Mr Wirth sworn 8 July 2010 to be sent to Charleston Bishop Legal, solicitors, at the firm’s DX address.

50 In his affidavit sworn 13 July 2010, Mr Wirth gave evidence of communications that he had on the first day of hearing of the application, namely, 13 July 2010. On that occasion, he spoke to Ms Charleston at approximately 11.30 am advising her that the notice of motion was listed for that day and to confirm that the notice of motion and affidavit had been served on her the previous week. Ms Charleston indicated that she did not act in the matter and could not answer the question. Ms Charleston confirmed that position by an email sent that day at 11.50 am.

51 According to Mr Wirth, he telephoned Ms Rougalas at approximately 11.55 am on 13 July 2010. He spoke to Ms Rougalas who indicated that he would have to speak to her daughter, Athena, as she had been dealing with the matter with her solicitor. Authority was given to speak to her.

52 At approximately 1.15 am on the same date, he spoke to Ms Rougalas’ daughter, Athena, on her mobile phone. According to Mr Wirth, Ms Rouglas’ daughter confirmed that they had received the notice of motion and affidavit by email. She said that the solicitors had indicated that the bank was proceeding to get possession that day (13 July 2010) and that “… we can no longer get any further adjournments. Is that right?”. Mr Wirth responded, “Yes. We are instructed to have your defence and cross-claim struck out”.

53 There was further discussion in which Ms Rougalas’ daughter is said to have said words to the effect of “we” did not have a defence and could not do anything about the matter and that she was under the impression the bank would get an order for possession.

Evidence

54 The evidence of Mr Sutton was directed to establishing service of the Default Notice dated 11 August 2009 on Hollywood Management and the Default Notice on Ms Rougalas on the same date. The evidence extended to the service of a letter and Default Notice on Hollywood Management by ordinary mail addressed to Hollywood Management’s directors at 28 Bryant Street, Padstow.

55 The balance of the affidavit went to service of correspondence and default notices on Ms Rougalas (paragraphs 11 to 39).

56 The affidavit Mr Burns sworn 23 April 2010, employee of the plaintiff bank, went to the merits of the plaintiff’s claim. It established the underlying transactions including the loan and mortgages relied upon by the plaintiff.

57 In that respect I note that the evidence indicates that the plaintiff entered into a loan facility totalling $1,970,500 upon terms and conditions referred to in a letter addressed to Mr and Mrs Rougalas dated 1 July 2008. The purpose of the facility was expressed to be “Refinance current debt with other Financial Institution”. The expiry date of the loan was said to be 180 months from the initial draw down date.

The procedural history of the proceedings

58 Reliance was placed upon the affidavit of Mr Wirth sworn 8 July 2010 in order to establish the procedural history concerning the conduct of the proceedings. In that respect, in brief, it was noted:-

• The statement of claim was filed on 9 November 2009.

• The defence filed on behalf of both defendants was received by the plaintiff on 18 December 2009.

• On 13 January 2010, a letter was sent to the solicitors then acting for the defendants indicating that a sealed copy of the pleadings had not been received.

• On 29 January 2010, Mr Wirth spoke to the solicitor for the defendants, and there was discussion as to a possible refinancing of the loan.

• On 7 April 2010, Mr Daniel Gavan of Gavan Property Group Pty Limited spoke to Mr Wirth indicating that Mr and Mrs Rougalas had provided him with instructions to proceed with the sale of the Padstow property and both Mortdale properties.

• On 16 April 2010, Charleston Bishop Legal wrote to Kemp Strang advising that they acted for the defendants and, in relation to the directions hearing on 20 April 2010, sought a period of six weeks in which to serve evidence in reply.

• On 20 April 2010, a direction was made by the Registrar for the plaintiff to serve evidence in chief by 4 May 2010 and the defendants were to serve evidence in support of their defence and cross-claim by 1 June 2010.

• On 28 April 2010, the plaintiff served its evidence in chief.

• On 28 April 2010, Kemp Strang served the affidavit of Mr Burns (23 April 2010) and the affidavit of Mr Sutton (28 April 2010).

• On 25 May 2010, Kemp Strang sought from Charleston Bishop Legal an indication as to whether the defendants would be proceeding with the cross-claim as served.

• On 10 May 2010, Mr Peter Hillig was appointed official liquidator of Hollywood Management.

• On 7 June 2010, Ms Charleston advised Mr Wirth that a further week would be required to serve the defendants’ evidence.

• On 8 June 2010, the Registrar made an order that Ms Rougalas was to serve evidence in chief by 5.00 pm on 21 June 2010 and that if that order was not complied with, the plaintiff had leave to file a notice of motion returnable for 29 June 2010.

• On 11 June 2010, Mr Hillig advised Mr Wirth that he would neither consent nor object to judgment being entered in favour of the plaintiff.

• On 25 June 2010, Mr Charleston requested the plaintiff’s solicitors not to file the notice of motion and indicated that she would obtain instructions from her clients. On that occasion, there was discussion of a moratorium to permit Ms Charleston’s clients to obtain a refinance or to sell the properties. Ms Charleston expressed that that was a good idea and asked Mr Wirth to get instructions to defer filing a notice of motion.

• On 4 July 2010, Ms Charleston advised that her firm was no longer acting on behalf of Ms Rougalas and would, accordingly, not be attending the directions hearing on 6 July 2010.

• On 6 July 2010, the Registrar set the plaintiff’s notice of motion to set aside the defence and cross-claim down for hearing on 13 July 2010.

59 The affidavit evidence of Mr Wirth sworn 8 July 2010, established that no evidence by either defendant to the proceedings has been served on the plaintiff’s solicitors.

Further evidence on the question of notice of hearing

60 The plaintiff relied upon further affidavit evidence filed on behalf of the plaintiff since the hearing commenced on 13 July 2010. It was contended that the evidence addressed any uncertainty that may have existed on the latter date as to whether Ms Rougalas had received all the relevant documents concerning the present application and any matters arising out of the telephone conversation between Mr Wirth and Ms Rougalas’ daughter on 13 July 2010.

61 On 6 August 2010, Mr White sought to rely upon the following material:-

(1) Affidavits of Mark Gerard Slater sworn 4 August 2010 and 10 November 2009.

(2) Letter from Michael Brian Wirth dated 5 August 2010.

(3) Affidavit of Kevin Ellis Burns sworn 4 August 2010.

(4) Two affidavits of Michael Brian sworn 13 July 2010.

(5) Affidavit of Morrie Fahd sworn 28 October 2009.

62 The plaintiff additionally relied upon the fact that there was no appearance by or on behalf of Ms Rougalas on 13 July 2010 or on 6 August 2010 as evidence of a continuing situation in which the defence and cross-claim was not been pursued by the defendants.

63 Mr White referred, in his submissions, to the fact that the Court ultimately has a discretion in respect of the power vested in it under Part 12 Rule 7 in circumstances where it is satisfied that the defence and cross-claim have not been prosecuted with due despatch. In this respect, reliance was placed upon the observations made in Building Insurers’ Guarantee Corporation v Touma [2010] NSWSC 4.

The hearing of the application

64 As stated above, the hearing of the plaintiff’s notice of motion commenced on 13 July 2010. On that occasion, I had indicated that, given in particular the fact that Ms Rougalas’ solicitor had only recently withdrawn from the case, the fact that substantive relief of a significant nature was being sought and, having regard to the terms of the conversation between Mr Wirth and Ms Rougalas and her daughter on 13 July 2010, there was a question as to whether or not Ms Rougalas had been properly served and had had property opportunity to respond to the notice of motion.

65 Following a short adjournment on 13 July 2010, Mr White indicated that he would seek the opportunity to establish that Ms Rougalas had received proper notice of the application and had proper opportunity to deal with it. Accordingly, the proceedings were stood over until 6 August 2010.

66 On 6 August 2010, the evidence established that Ms Rougalas had been served with the (then part-heard) notice of motion and the affidavits in support of the motion and had been given notice of the adjourned hearing notice. There was no appearance by or on behalf of Ms Rougalas on 6 August 2010.

67 In addition, the evidence confirmed that the liquidator of Hollywood Management did not wish to participate in the proceedings and did not oppose the order sought against Hollywood Management.

68 The letter from Kemp Strang to Smith Hancock dated 4 August 2010 was marked as Exhibit C on the application and a facsimile transmission dated 5 August 2010 from Peter Hillig to Kemp Strang was tendered and marked as Exhibit D on the application.

The defence and cross-claim

(1) Hollywood Management

69 By reason of the fact that the defence dated 8 December 2009 and filed on 31 December 2009 consists of non-admissions and denials, it is necessary, in order to understand the case pleaded by Hollywood Management, to examine the terms of the cross-claim in which it seeks various forms of relief. In that respect, the following matters are noted:-

• Both Hollywood Management and Ms Rougalas seek orders under the provisions of s.7(1)(a) of the Contracts Review Act . However, so far as Hollywood Management is concerned, Mr White, on behalf of the plaintiff, contended, as noted earlier, that the company was not an eligible claimant under the Act as s.6(1) states that a “corporation” may not be granted relief under the Act. In terms of s.6, the position of Ms Rougalas is, of course, quite different and her cross-claim under the Act is discussed below.)

• The cross-claim, alternatively, claims relief on the basis of alleged misrepresentations by the plaintiff and its “agent” and, alternatively, on the basis of alleged misleading and deceptive conduct, relying upon the provisions of the Fair Trading Act and the Trade Practices Act . There is an additional alternative count which relies upon the doctrine of unconscionability under the general law.

• The substantive claim based on alleged misleading and deceptive conduct as particularised in the cross-claim (paragraph 17.1.1) was that the plaintiff allegedly did not allow or make adequate inquiries about Ms Rougalas’ capacity to pay the principal and interest due under the loan. Whilst that may be a relevant matter to a claim under the Contracts Review Act by Ms Rouglas, it was contended for the plaintiff not to be capable of constituting misleading and deceptive conduct, vis a vis, Hollywood Management.

• Insofar as any defect in the pleading may be cured by an application to amend the pleading, in the circumstances of the present case where the company is in liquidation and the liquidator has made it clear that he does not wish to be involved in the conduct of the proceedings, no question of curing any defect by an amendment arises.

70 As noted earlier, the plaintiff sought an order against Hollywood Management for dismissal pursuant to the provisions of Part 13 Rule 13.40, alternatively, Part 14, Rule 14.28, whereby its defence be struck out and an order under Part 17.7 in respect of Ms Rougalas for her defence/cross-claim to be struck out and judgment be entered in favour of the plaintiff for possession.

(2) Ms Rougalas

71 The basis upon which the plaintiff moves for such an order against Ms Rougalas was that the defence was not being conducted with due despatch. In this respect, reference was made to the decision in Touma (supra).

72 In this latter respect, the relevant case law, as noted in the submissions for the plaintiff, to a large extent addresses questions associated with the dismissal of proceedings in circumstances where a plaintiff does not prosecute them with due despatch. In that context, it was said that delay is the threshold circumstance that enlivens the power, although the significance of delay is to be considered in the particular circumstances of the case involved. The plaintiff’s submissions also add reference to the approach to be taken (said to differ from the relevant English authorities) as enunciated in Stollznow v Calvert (1980) 2 NSWLR 749; Micallef v ICI Australia Operations Pty Limited [2001] NSWCA 274.

73 In the present application, Mr White contended that the matters to be considered are now to be dealt with by due regard being given to the provisions of the UCPR, in particular, the provisions of s.56 (Overriding Purpose of the Act) and s.61 (Directions as to Practice and Procedure generally).

74 The submission was that the issue for determination is essentially what is just in all of the circumstances of the case. That, in turn, requires that a balance be struck between the competing interests of the plaintiff and the defendants which, in turn, is a matter to be considered in light of the judgment of the High Court in AON Risk Services Australia Limited v Australian National University (2009) 239 CLR 175, in particular at [137].

75 As the Second and Third Properties are held by Hollywood Management and Ms Rougalas as tenants in common, in relation to those properties (but not the First Property), Mr White observed that the Court would need to assess the plaintiff’s entitlements in conjunction with its submissions on relief against Ms Rougalas.

76 It was acknowledged that Ms Rougalas, as an individual, is entitled, prima facie, to claim relief under the Contracts Review Act. In other words, the provisions of s.6 of the Act do not present a bar to proceedings under the Act by her.

77 Mr White proceeded upon the basis that he did not wish, on the present application, to establish that the defence filed was “manifestly hopeless”, acknowledging that the plaintiff was not in a position on this application to put on material to that end.

78 The plaintiff, accordingly, proceeded against Ms Rougalas upon the basis that the evidence indicates that she has not and is not conducting her defence in any active way, though acknowledging that in a case such as the present, there is usually affirmative or positive that the party in question has no intention of doing so. He relied, in particular in this respect, upon the history of the proceedings as detailed above.

Legal principles – dismissal of proceedings and striking out a defence

79 The power to dismiss proceedings for want of due despatch involves the exercise of a broad discretion vested in the Court, the fundamental criterion being that a balance is to be struck between the plaintiff and the defendant in determining whether justice requires a defence (and in these proceedings, the cross-claim) to be respectively struck out and dismissed.

80 It is not in dispute that the balancing exercise permits a consideration of a wide range of factors.

81 The question as to the exercise of the power to strike out the defence and to dismiss the cross-claim in the present case is to be considered having regard to the nature of the proceedings and the particular factual circumstances concerning the dispute between the parties.

82 Firstly, as earlier indicated, the plaintiff does not seek an order for monetary relief. It seeks orders for possession of the three mortgaged properties that were provided as security for a very substantial loan facility now said to be in default to a very significant extent (in excess of $2.2 million).

83 A further matter of some significance is that, on the evidence in this application, substantial default under the mortgages occurred by 6 August 2009, that is, approximately 12 months after the Facility Agreement was signed. In addition, the evidence establishes that following service of the Default Notices and s.57(2)(b) Notice on 11 August 2009, no attempt was made by the defendants to correct the default specified in the notices within the time stipulated or to otherwise take action in respect of the loan and mortgages.

84 The relevant case law authorities establish a number of general principles or guidelines that are commonly applied in applications for the dismissal of claims for want of prosecution. It is not necessary here to review those authorities in minute detail. They include Bishopgate Insurance v Deloitte Haskins [1999] 3 VR 863, 871-878 and Micallef (supra). Again, in general terms, the following matters are commonly considered and evaluated:-

(1) The nature and the cause of delay.

(2) The likelihood of prejudice.

(3) The nature of the proceedings.

(4) The effect of the disregard of Court orders, including case management directions.

85 Whilst the general principles or guidelines have not altered greatly over time, it is necessary for the Court in an application to dismiss proceedings to have regard and give effect to the relatively new provisions of s.56 of the Civil Procedure Act 2005, which are to be applied with due regard to the provisions of s.58 of that Act. Under s.56, the Court has an obligation to give effect to the overriding purpose stated in s.56(1), namely, “… to facilitate the just, quick and cheap resolution of the real issues in the proceedings”.

86 Practice Note SC CL6 (Supreme Court, Common Law Division – Possession List) mandates an efficient disposition of proceedings in the Possession List. It is sufficient to note the following matters specified in the above Practice Note:-

• At an early stage, a judge may, following a judicial directions hearing, consider striking out a defence if no reasonable defence on the merits is disclosed, whether or not a notice of motion seeking such an order has been filed and served: paragraph 17.

• A judicial directions hearing is intended, inter alia, to identify steps which are required to facilitate the just, quick and cheap resolution of the real issues in the proceedings in accordance with s.56 of the Civil Procedure Act : paragraph 17(b).

• At a directions hearing, a Judge, Associate Judge or Registrar may give directions and make orders as it considers appropriate with a view to the just, quick, cheap and effective management and disposal of the proceedings.

87 The issue of delay very often arises for consideration in terms of the prejudicial consequences of delay to the conduct of litigation. In that regard, “delay” may occasion prejudice in one or more respects in relation to the possibility of a fair trial of issues in an action. However, delay may not be confined to that matter. Prejudice resulting from delay may be found in the burden which the other party to a claim must bear by being kept at risk in relation to an unresolved claim due to a dilatory approach to the proceedings by the other party. That has particular relevance in possession proceedings such as the present.

88 In at least most cases involving alleged default concerning secured loan finance, an expeditious determination of proceedings is desirable and, indeed, may be essential in the interests of both or all parties. This is especially so, given that there may be significant ongoing or accruing liability under a loan agreement for the payment of principal and/or interest. The liability continues to operate or accumulate whilst and until the proceedings have been finally determined, as in this case where interest is running at $17,787 per month. The mortgagor’s equity in such cases becomes progressively diminished. That will often work to the detriment of lender and borrower alike. Accordingly, proceedings in the Possession List often involve pressing or urgent aspects. They, accordingly, call for appropriate case management as Practice Note No SC CL 6 indicates, particularly so in those cases where the grounds upon which a claim is disputed may be considered to be dubious or of doubtful merit. However, in this latter respect, by reason of the way in which the present application has been argued, as earlier discussed, I do not make any findings as to the merits of the defence or cross-claim filed in the present proceedings.

89 In Bishopgate (supra) Tadgell and Ormiston JJ observed (at 875):-

“… There is a temptation in applications of this kind to look only to past and present prejudice. In each case, however, one must look at each of the elements of prejudice asserted and examine the time at which it is likely to be suffered, always making due comparison between prejudice which the defendant has suffered or will be likely to suffer because of inordinate and inexcusable delay and any prejudice it might have suffered in any event …”

90 In a case where a lender seeks orders to enforce a security and there has been delay in pursuing a defence (and a cross-claim) – as in the present case - there arises a risk of a continuing nature both in terms of unpaid principal and the accumulation of loss through unpaid interest. Such a risk may, of course, be a legitimate or an acceptable one where there is explanation of any delay and the party opposing a strike out/dismissal application demonstrates to the appropriate standard a defence or a case on the merits.

91 Accordingly, the character of the litigation in question is a matter to be taken into account in any application such as the present. These proceedings have at least elements of a commercial aspect and character to it. In AON Risk Services (supra), Heydon J at [13] made the following observations:-

“ The character of the litigation commenced . The litigation thus commenced was commercial litigation. While in general it is now seen as desirable that most types of litigation be dealt with expeditiously, it is commonly seen as especially desirable for commercial litigation. Its claims to expedition may be less than those of proceedings involving, for example, extraordinary prejudice to children; or the abduction of children; or a risk that a party will lose livelihood, business or home, or otherwise suffer irreparable loss or extraordinary hardship, unless there is a speedy trial … But commercial litigation does have significant claims to expedition. Those claims rest on the idea that a failure to resolve commercial disputes speedily is injurious to commerce, and hence injurious to the public interest …
Commercial life depends on the timely and just payment of money. Prosperity depends on the velocity of its circulation. Those who claim to be entitled to money should know, as soon as possible, whether they will be paid. Those against whom the entitlement is asserted should know, as soon as possible, whether they will have to pay. In each case, that is because it is important that both the claimants and those resisting claims are able to order their affairs. How they order their affairs affects how their creditors, their debtors, their suppliers, their customers, their employees and, in the case of companies, their actual and potential shareholders, order their affairs. The court are thus an important aspect of the institutional framework of commercial. The efficiency or inefficiency of the courts has a bearing on the health or sickness of commerce.”

92 The general principles and guidelines relating to strike out/dismissal applications do, as earlier noted, pay due regard to the nature of the proceedings in which applications are made. This is necessary, inter alia, so that the balancing of relevant factors in the exercise of the discretion takes into account the possibility of further unwarranted delay with the attendant risk of prejudice.

93 In cases such as the present, there may not exist, in terms of the duration of delay, the lengthy periods of delay that have on occasion existed in other classes of case. However, the same commercial imperative as may exist in proceedings in the Possession List may not operate to the same extent in those other classes of case.

94 It is accepted that the question of personal blameworthiness on the part of a litigant is a relevant matter to be taken into account: Stollznow (supra).

95 In the present case there is no evidence that suggests that the lawyers acting for the defendants were at fault in not filing and serving the evidence to be relied upon by the defendant/cross-claimants.

96 However, that said, there is simply no evidence either way, it being noted, of course, that the defendants have not appeared to provide any explanation for not having complied with the case management directions given by the Registrar.

97 So far as the cross-claim is concerned, in Stollznow (supra), it was laid down that the discretion to dismiss an action for want of prosecution was the discretion to do what was just in all the circumstances and that, on an application to dismiss for want of prosecution, fixed formulae should not be prescribed to limit the discretion to do what was just between the parties in the circumstances.

98 The balance to be struck by the Court is one as between the plaintiff and the defendant and, in the end, the Court must decide whether, on balance, justice demands that the action be dismissed: Masel v Transport Industries Insurance Co Limited [1995] 2 VR 328 at 335.

99 In the present proceedings, the following matters are noted:-

(1) The defendants have been default under the Facility Agreement over a protracted period of time. The evidence does not suggest that any complaint was directed to the plaintiff or its legal representatives about the circumstances in which the Loan Facility was originally agreed or established and, of course, no proceedings were instituted in that respect by Ms Rougalas prior to the filing of the cross-claim.

(2) The amount of outstanding principal and interest in this matter is substantial (in excess of $2.2 million).

(3) The pleading in the cross-claim seeking relief under the Contracts Review Act , The Trade Practices Act , The Fair Trading Act and under the general doctrine of unconscionability is supported by very few particulars of the factual circumstances that are alleged to support the claims of “unjustness” , the “misrepresentation” , the “misleading and deceptive conduct” or the “unconscionability” .

(4) The difficulty arising from the deficiencies in the defence and cross-claim are compounded by the fact the defendants have failed to provide the evidence they rely upon in support of their defence/ cross-claim as directed by the Registrar.

(5) There is no explanation for the defendants’ delay or failure to comply with the Court’s directions.

(6) Ms Rougalas has failed to attend the hearings on 13 July 2010 and 6 August 2010 and has not otherwise provided any evidence in response to the plaintiff’s application..

100 The above factors are matters to be considered in respect of the failure by Ms Rougalas to litigate the defence and to prosecute the cross-claim.

Conclusions

101 In relation to Hollywood Management, I am of the opinion that the defence/cross-claim based on the Contracts Review Act are not maintainable by reason of s.6 of that Act, which prevents relief from being granted on an application by a corporation.

102 I am satisfied that by reason of s.471C of the Corporations Act, the provisions of s.471A and s.471B do not affect the plaintiff’s right to an order for possession. In the alternative and, insofar as it may be necessary to obtain leave, leave is granted to the plaintiff pursuant to s.471B of the Corporations Act to proceed with the present proceedings including, in particular, the present application.

103 The further or alternative cause of action by Hollywood Management alleging misleading and deceptive conduct (paragraphs 17 and 18) of the cross-claim do not plead or otherwise set out the particulars of the matters relevant or germane to the pleaded allegations. As noted above, the only particulars identified pertained to Ms Rougalas’ capacity to pay principal and interest. The pleading is, accordingly, seriously deficient and does not identify the basis upon which the misleading and deceptive conduct claim was pleaded and sought to be pursued in the proceedings. On that basis, the pleading, in respect of the above causes of action, should be struck out. Given that the company is in liquidation and the liquidator has indicated, effectively, that he does not wish to pursue or participate in the proceedings, there is no basis for an application to replead the misleading and deceptive conduct claim in proper form. Accordingly, an order is to be made for the defence by Hollywood Management to be struck out and the cross-claim by it dismissed pursuant to Part 13 Rule 4(1) of the UCPR.

104 In relation to the defence and cross-claim by Mrs Rougalas, the evidence clearly establishes that she, as second defendant to the proceedings, has not conducted her defence with due dispatch. The evidence similarly establishes that Ms Rougalas has failed, as cross-claimant, to prosecute the proceedings by way of cross-claim with due dispatch. In the circumstances where, on the evidence on the application, a substantial default has occurred under the loan facilities, the failure by the second defendant to comply with the Court’s directions to file evidence and the absence of any explanation for the failure by her to pursue the defence and cross-claim, an order should be made that the defence be struck out and the cross-claim proceedings be dismissed.

Orders

105 In relation to the relief sought in paragraphs 1 to 7 of the notice of motion filed on 13 July 2010, I make the following orders:-

(1) That the defence of the first defendant, Hollywood Management Pty Limited (In Liquidation) is struck out.

(2) That the cross-claim by the first defendant/first cross-claimant, Hollywood Management Pty Limited (In Liquidation) is dismissed.

(3) That the defence by the second defendant, Chrissanthi Rougalas, is struck out.

(4) That the cross-claim by the second defendant/second cross-claimant, Chrissanthi Rougalas, is dismissed.

106 In relation to the further relief sought in paragraphs 8 and 9 of the notice of motion filed on 13 July 2010, I make the following orders:-

(1) An order that the plaintiff have possession of:-

(a) the land comprised in Certificate of Title Folio Identifier 501/626361 being the land situated at and known as 28 Bryant Street, Padstow, New South Wales ( “the First Property” );
(b) the land comprised in Certificate of Title Folio Identifier A/408252 being the land situated at and known as 17 Pitt Street, Mortdale, New South Wales, 2223 (also known as 15-17 Pitt Street, Mortdale, New South Wales, 2223) ( “the Second Property” );
(c) the land comprised in Certificate of Title Folio Identifier B/408252 being the land situated at and known as 19 Pitt Street, Mortdale, New South Wales, 2223 (also known as 19-21 Pitt Street, Mortdale, New South Wales, 2223) “the Third Property” ).


(2) A writ of Possession for the First Property, the Second Property and the Third Property be issued forthwith.

(3) Liberty to the plaintiff to lodge with my associate written submissions on the question of costs sought as against the first defendant and against the second defendant and the basis upon which any costs order is sought.

(4) Liberty to the plaintiff to apply with respect to the form of the orders made.

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