Blackbird First Mortgage Corporation Pty Ltd v CAM Engineering and Construction Pty Ltd

[2025] NSWSC 1146

Supreme Court

New South Wales

Medium Neutral Citation:

Blackbird First Mortgage Corporation Pty Ltd v CAM Engineering and Construction Pty Ltd [2025] NSWSC 1146

Hearing dates:

13, 28 August, 3 September 2025

Date of orders:

02 October 2025

Decision date:

02 October 2025

Jurisdiction:

Common Law

Before:

Harrison CJ at CL

Decision:

(1)   Refuse leave to the defendants to file a cross-claim against the plaintiffs in the form of Exhibit A on this application.

(2)   Order that the defendants pay the plaintiffs’ costs of the application for leave.

(3)   Grant liberty to the parties forthwith to approach the List Manager to obtain a hearing date.

Catchwords:

CIVIL PROCEDURE – cross-claims – loan agreement – loan not repaid in accordance with terms of the agreement – statement of claim and defence filed – where defendants have filed a notice of motion seeking leave to file a cross-claim against plaintiff as well as the receivers and managers – where defendants only recently appeared with legal representation – where proposed cross-claim was significantly revised – where it is alleged that personal property sold was at an undervalue or ‘lost’ – whether leave should be granted to file the proposed cross-claim out of time – consideration of delay, lack of sufficient connection, absence of a good arguable case and prejudice – leave refused

CIVIL PROCEDURE – cross-claims – set-off – where plaintiff had raised reliance on ‘anti-set-off’ provisions – where no reference has previously been made to the provisions – whether clauses in the relevant agreements preclude the raising of matters in the proposed cross-claim – s 420A Corporations Act 2011 – consideration of the unfair contract terms provisions in the ASIC Act 2001

MORTGAGES AND SECURITIES – mortgages –duties, rights and remedies of mortgagee – power to appoint a receiver – where plaintiff appointed receivers and/or managers over the assets of the defendants – whether the receivers are an agent for the plaintiff – where the issue should be ventilated at the trial

Legislation Cited:

Australian Securities and Investments Commission Act 2001 (Cth), ss 12BAA, 12BAB, 12BF, 12BG, 12BK

Civil Liability Act 2005 (NSW), s 22(2)

Civil Procedure Act 2005 (NSW), ss 22, 56, 57, 58, 59, 60

Corporations Act 2001 (Cth), ss 420A, 425

Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 (Cth)

Uniform Civil Procedure Rules 2005 (NSW), rr 1.12, 9.1, 14.3

Cases Cited:

Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27

Bridge v Coles Supermarkets Australia Pty Ltd [2017] NSWSC 848

Chapman v Gibbo’s Transport Pty Ltd (No 3) [2023] NSWSC 754

Expo International Pty Ltd (Receivers and Managers Appointed) (In Liq.) and another v Chant and others [1979] 2 NSWLR 820

GE Capital Australia v Davis [2002] NSWSC 1146

General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125; [1964] HCA 69

Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd (No 2) [2007] NSWSC 592

International Advisor Systems Pty Ltd v XYYX Pty Ltd (No 3) [2008] NSWSC 430

Juul v Northey [2010] NSWCA 211

Kent v Batmor Mortgages Pty Ltd [2021] NSWSC 326

National Australia Bank Ltd v C & O Voukidis Pty Ltd [2015] NSWSC 185

Oswal v Commonwealth Bank of Australia [2013] WASCA 58

Pakefx Pty Ltd v Dickson (No 2) [2015] NSWSC 1152

ReDungowan Manly Pty Ltd (in liq) [2014] NSWSC 856

Resolution Life Australasia Limited v AMP Limited; Munich Reinsurance Company of Australasia Limited v AMP Limited [2025] NSWCA 21

Statewide Secured Investments Pty Ltd v Pearsall [2015] NSWSC 680

Tom Kerr (Subaru) Pty Ltd v Hanks [2018] NSWSC 1871

Texts Cited:

Halsbury’s Laws of Australia, 325 - Practice and Procedure, at par 2985 (online at 13 September 2019)

Category:

Procedural rulings

Parties:

Blackbird First Mortgage Corporation Pty Ltd (Plaintiff)
CAM Engineering and Construction Pty Ltd (First Defendant)
Craig Michael Bateman (Second Defendant)
Sarah Samantha Bateman (Third Defendant)
CMB and SSB Investments Pty Ltd (Fourth Defendant)

Representation:

Counsel:
N Carey (Plaintiff)
M Short (First, Second, Third, Fourth Defendants)

Solicitors:
Gadens (Plaintiff)
Warren & Warren (First, Second, Third, Fourth Defendants)

File Number(s):

2024/442645

Publication restriction:

Nil

JUDGMENT

1. HIS HONOUR: By a loan agreement dated on or about 24 November 2023, Blackbird First Mortgage Corporation Pty Ltd agreed to provide, and provided, finance to CAM Engineering and Construction Pty Ltd on certain terms and conditions. Craig Michael Bateman, Sarah Samantha Bateman and CMB and SSB Investments Pty Ltd guaranteed repayment of the money owing under the Loan Agreement. Mr Bateman is the registered proprietor of 73 Buttaba Road, Brightwaters and gave a mortgage to Blackbird over that property on 7 December 2023 to secure repayment of money advanced to CAM Engineering.

2. CAM Engineering failed to repay the loan by the repayment date in accordance with the terms of the Loan Agreement. Blackbird issued a demand for payment of outstanding monies on 7 November 2024 but CAM Engineering had also failed to pay the monies that are owing in response to that demand.

3. By its statement of claim filed on 28 November 2024, Blackbird now claims possession of the Buttaba Road property, leave to issue a writ of possession and judgment for $574,937.50. The defendants filed a defence on 24 December 2024 contending that Blackbird did not provide proper notice of default under the mortgage, that the General Security Agreement is void, unenforceable and ineffective and did not create the relevant security interests, that the guarantee is unenforceable and that Blackbird affirmed the loan's continuation and waived strict compliance with the repayment date. The defence pleads in addition that the total amount did not become due and payable as alleged and that the demands were ineffective. The defendants further maintain that Blackbird is not entitled to charge default interest and that the default interest rate and additional charges are unenforceable penalties. There is a further contention that Blackbird engaged in unconscionable conduct and that the defendants are entitled to relief against forfeiture.

4. Then, on 21 July 2025, the defendants filed a notice of motion seeking an order pursuant to UCPR 1.12 and 9.1(1) granting leave to file a statement of cross-claim against Blackbird as well as Richard Albarran and Brent Trevor-Alex Kijurina, the receivers and managers of CAM Engineering and CMB and SSB Investments, appointed by Blackbird.

5. The defendants have until very recently appeared without legal representation. The form of the originally proposed cross-claim reflected that fact. In general terms, it sought relief against Blackbird and the receivers concerning their alleged sale of certain real and personal property for what was alleged to be an undervalue. Other allegations were made as well. The defendants have now retained legal advisers and the proposed cross-claim has been significantly revised. It became Exhibit A on this application.

6. By their proposed cross-claim, the defendants relevantly seek relief against Blackbird and the receivers in the nature of orders setting aside or declaring void sales of property alleged to have been made by the receivers, equitable compensation and/or damages, an order pursuant to s 425(2)(c) of the Corporations Act 2001 fixing the remuneration of the receivers and an order for the set-off of sums due to Blackbird against any amount owing by Blackbird to the defendants. The defendants allege that the receivers failed to take reasonable care in exercising their powers of sale over the corporate defendants’ property, in breach of s 420A of the Corporations Act 2001.

7. More particularly, the allegations pleaded relate to the alleged sale by the receivers of several items of personal property. The items of personal property are shares in each of two yachts, a substation, a six-seat electric golf kart, a 3.5 tonne excavator, an eleven-seater bus, a Hilux work ute, a ride-on lawn mower, and a smooth drum roller. It is not clear from the proposed cross-claim which of the defendants are alleged to have been the owners of the specified items of personal property. The cross-claim does specify who purchased the property and the date on which it was purchased. All of the nominated sales of property pleaded in the proposed cross-claim are alleged to have occurred between approximately 4 March 2025 and 24 April 2025, relating only to the yacht shares. No dates have been provided for the alleged sale of the other items of property.

8. The defendants’ application for leave to file a cross-claim out of time is opposed.

Principles

9. UCPR 9.1(1), read with UCPR 1.12 and s 22 of the Civil Procedure Act 2005, contemplates the grant of leave to file a cross-claim in cases commenced by statement of claim after the 28-day period set by UCPR 9.1(1)(a) and 14.3(1). In this case, the statement of claim was served on 2 December 2024. The defendants could have filed the proposed cross-claim by 30 December 2024 without leave.

10. The exercise of a discretion to grant leave to file a cross-claim should be exercised having regard to the case management considerations in ss 56 to 60 of the Civil Procedure Act, judicially, and in such a way as to ensure that no prejudice is suffered by the potential cross-defendant as a result of the delay: International Advisor Systems Pty Ltd v XYYX Pty Ltd (No 3) [2008] NSWSC 430 at [4]. Central considerations are the consequence of the grant of leave for the position of other parties and the expeditious conduct of the proceedings: Tom Kerr (Subaru) Pty Ltd v Hanks [2018] NSWSC 1871 at [40]. Accordingly, cross-claims must be brought in a timely fashion, and there must be a satisfactory explanation for the delay: Statewide Secured Investments Pty Ltd v Pearsall [2015] NSWSC 680 at [113], [115]. The exercise of the discretion to grant leave will be informed by similar or parallel considerations to those that apply in relation to adjournments and amendments: Bridge v Coles Supermarkets Australia Pty Ltd [2017] NSWSC 848 at [24]. In accordance with the joint judgment in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [111]:

"All matters relevant to the exercise of the power to [grant leave to file a cross claim out of time] should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application [for the grant of such leave]".

11. Pursuant to s 22(2) of the Civil Procedure Act, leave will not be granted to a defendant to make a cross-claim against a third party, such as the receivers, unless the relief sought against the third party "relates to, or is connected with, the subject of the first proceedings". The degree of connection sufficient to justify a cross-claim against a third party need not be a substantial degree of similarity, but "the presence or absence of such similarity is likely to be relevant to the exercise of the Court's discretion": ReDungowan Manly Pty Ltd (in liq) [2014] NSWSC 856 at [22].

12. In considering the discretion to grant leave, it is also appropriate to consider whether a defendant has a good arguable case on the merits of the proposed cross-claim, as that appears from the proposed pleading and the evidence: Statewide Secured Investments at [114]; Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd (No 2) [2007] NSWSC 592 at [37]; Pakefx Pty Ltd v Dickson (No 2) [2015] NSWSC 1152 at [55]; Kent v Batmor Mortgages Pty Ltd [2021] NSWSC 326 at [31], [32]-[39]; Chapman v Gibbo’s Transport Pty Ltd (No 3) [2023] NSWSC 754 at [44].

Plaintiffs’ submissions

13. Although the plaintiffs are not the moving parties on this application, it is convenient to consider their submissions first. One reason why I propose to take that approach is, as the defendants have emphasised, that the plaintiffs’ latest response to the application to amend now raises a legal issue relying upon what are described as “anti-set-off” provisions in the Blackbird security documents to which no specific reference had previously been made.

14. Blackbird and the receivers originally submitted that I ought to exercise my discretion to refuse leave to the defendants to file the proposed cross-claim for the following four principal reasons:

1. the delay in the provision of the cross-claim and the lack of any sufficient explanation for that delay;

2. the lack of a sufficient connection between the matters pleaded in the cross-claim and Blackbird's claim;

3. the absence of a good arguable case on the merits of the proposed cross-claim; and

4. Blackbird and the receivers will suffer prejudice if leave is granted.

15. The plaintiffs’ made the following arguments in support of those categories.

Delay

16. The proceedings were commenced on 28 November 2024. The defendants were served on 2 December 2024. Accordingly, the provision of the proposed cross-claim to the defendants at the 3 July 2025 directions occurred more than six months after the date by which they would have been entitled to file a cross-claim without leave.

17. All of the alleged sales of property pleaded in the cross-claim are said to have occurred by no later than 24 April 2025, now five months ago. Most of the property was not sold by the receivers. The sales of property which the receivers agree they sold occurred within the period by which the defendants could have filed the cross-claim without leave.

18. The defendants’ evidence does not suggest that they only became aware of those sales at some later date, and does not explain why it took them until 3 July 2025 to provide the proposed cross-claim. Nor have the defendants explained why it took them more than three and a half months from 13 March 2025 when the Court noted that they “were now represented and may be seeking to…file [a] cross-claim”. These matters are all to be considered in the context that the parties would have been asking for a hearing date at the next directions after 30 May 2025.

19. In their submissions, but not in Mr Bateman's evidence, the defendants assert, under the heading "Explanation for delay", that they are self-represented and that this had in large part been caused because "the entirety of [their] assets [had] been taken from them by or on behalf of [Blackbird]". That is, it appears to be asserted that any delay in the filing of the cross-claim lies at the feet of Blackbird and the receivers, rather than the defendants. Blackbird and the receivers reject that assertion. Although cognisant of the relative difficulties faced by unrepresented litigants, Blackbird and the receivers submitted that this is an insufficient explanation for the delay. Further, and in any event, the 13 March 2025 indication was given when the defendants were represented and had engaged counsel. The defendants have put on no evidence about what steps they took, or were unable to take, to advance the production of any cross-claim at the time they were represented, or at any time.

20. The plaintiffs submitted instead that the defendants have waited until the last moment before the allocation of a hearing date to seek to file their cross-claim. The fact that there has yet to be a hearing date allocated is not decisive in the defendants' favour. There is a strong available inference that the defendants' delay was a forensic choice. Although the circumstances were different, the plaintiffs emphasised the comments of McColl JA in Juul v Northey [2010] NSWCA 211 at [247] that the defendant "could not … stand by and let the proceedings continue then seek to file a cross-claim at the end of the day".

21. In such circumstances, it would be inconsistent with the case management concepts to be found in ss 56 to 60, and the principles in Aon Risk Services at [30], to grant leave and risk "the potential for loss of public confidence in the legal system which arises where a court is seen to accede to applications made without adequate explanation or justification".

Lack of sufficient connection with proceeding

22. The plaintiffs submitted that there is a lack of sufficient connection between the claims made in the cross-claim and Blackbird's claim.

23. Blackbird's claim, and the issues joined by the defendants in relation to that claim, concern the defendants’ liability under several agreements entered into with Blackbird. Blackbird seeks orders for possession, or alternatively payment of the loan amount under those agreements. By contrast, the cross-claim seeks to make a collateral attack on the conduct of the receivers in allegedly selling the defendants' assets at an undervalue. The pleaded allegations in the cross-claim have nothing to do with the defendants' liability under the agreements relied upon in Blackbird's claim. Instead, the connection sought to be made by the defendants consists of Blackbird's alleged unconscionable conduct in its appointment of the receivers, and in the allegation that somehow Blackbird's debt would have been paid off sooner but for the sales allegedly made at an undervalue. However, there is no claim advanced in the cross-claim, or in the defendants' evidence in support of it, as to Blackbird's role in the sale of the relevant assets.

24. The defendants submit that the cross-claim is "an essential feature of [their] defence of the primary claim" and that it is "largely defensive" in that had the relevant sales not been made at an undervalue, "the debt underpinning [Blackbird]'s claim would have been paid off”. However, on Blackbird's claim, the repayment date under the Loan Agreement was 27 May 2024 and the loan was not repaid on that date. As a consequence, the total amount owing became immediately due and payable. Blackbird further alleges that pursuant to two notices issued on 7 November 2024 and 12 November 2024, demand for payment was made under the Loan Agreement which, as at 26 November 2024, had not been acted upon, with the consequence that as at that date, the total amount owing was $574,937.50. The defendants relevantly deny the allegation that the total amount owing pursuant to the loan became due and payable by 27 May 2024, deny that the 7 November 2024 demands were effective, deny being indebted to Blackbird in the amount claimed, and deny that Blackbird is entitled to possession.

25. All of the sales of property pleaded in the cross-claim are alleged to have been made after the date that Blackbird alleges the loan became due and payable. Only the "600Kva Substation” is alleged to have been sold before the demands were issued and before commencement of the proceedings although the substation is now alleged to have been “removed”, not sold, on or around 8 November 2024, one day after the first notice was issued. Accordingly, even on the defendants' own claims in the cross-claim, the sums owed to Blackbird could not have been "paid off" prior to when those amounts are alleged to have been due and payable, and prior to the commencement of the proceedings.

26. The plaintiffs submitted that even if I were satisfied that, although not substantially similar, there was a relevant connection sufficient to enliven the power under s 22 of the Civil Procedure Act, the connection is tenuous and should favour the plaintiffs in the exercise of my discretion.

Lack of good arguable case

27. The plaintiffs submitted that there is no good arguable case raised by the cross-claim and that that should be a matter weighing against the exercise of my discretion to grant leave.

28. First, the receivers are not the proper cross-respondents to the vast majority of the claims made in the cross-claim. The receivers did not sell the majority of the personal property, with the exception of the shares in the two yachts, which were sold on 4 March 2025 and 24 April 2025. In respect of the personal property not sold by the receivers, not only did they not sell that property, but they are also not aware of who did.

27. Second, there are a number of claims made in the cross-claim that have no evident basis. The defendants plead that in respect of some items of personal property, there is a breach of relevant statutory provisions based on the supposition that sales were made at an undervalue or that because the defendants do not know the sale price of the property, the sale must have been made for no consideration at all. Such claims can have no prospects of success.

28. Third, other than the broad assertion as to "the manner in which the cross-defendants exercised their powers as secured creditor and appointed the receivers", there is no pleaded allegation in the cross-claim to substantiate how Blackbird is said to be liable for unconscionable conduct.

Prejudice

31. The plaintiffs submitted that the prejudice to them balances against leave being granted.

32. Blackbird was ready to take a hearing date on 3 July 2025. It has been prejudiced by the defendants' delay in expending time and cost in considering the proposed cross-claim, defending this application, and by not having met its legitimate expectation that a hearing date would have been allocated on or about 3 July 2025.

33. The receivers face prejudice for similar reasons. They have had to expend time and cost in reviewing materials and considering their position in opposition to the motion in relation to proceedings with which they have little connection. Further, should leave be granted, they will shoulder the lion's share of the burden in seeking to defend the cross-claim. They can also be expected to expend additional cost and time in seeking further and better particulars of the defendants' claims, and expend significant further costs in the preparation of responsive evidence. All in circumstances where the receivers are not the proper cross-respondents for the majority of the defendants' claims.

34. Given the lack of specificity in a number of the claims of sales made at an undervalue, it cannot be the case, as the defendants assert, that "there will be no new evidence of any substance filed on [their] behalf" or that there will be no relevant evidence to be filed on behalf of Blackbird or the receivers.

Plaintiffs’ supplementary submissions

35. These were filed on 3 September 2025. The plaintiffs now contend that there are clauses in each of the relevant agreements upon which Blackbird’s main claim is based which preclude the raising of the matters pleaded in the proposed cross-claim.

36. The Loan Agreement contains the following clauses:

“7.3 No set-off or counterclaim

Notwithstanding any term, whether express or implied, in this Deed or any rule of law or course of conduct to the contrary, payments under this Deed must be made by the Borrower without set-off or counterclaim and, subject to clause 7.4, free and clear of and without, any deductions whatsoever.

7.4 No withholdings

Any payments to be made under this Deed, whatever their nature, must, to the full extent permitted by law be made by the Borrower without any deduction for, or on account of, any income or other taxes, imposts, deductions or other withholdings of any kind (collectively ‘withholdings’), If the Borrower is compelled by law to deduct any withholdings from any payment, the Borrower must ensure that the deduction made does not exceed the minimum legal liability in that regard. The Borrower must also pay to the Lender whatever additional amount is necessary (after allowing, for the avoidance of doubt, for withholdings from that amount) to ensure the Lender receives the full amount of the payment due under this Deed as if the withholdings had not been deducted.”

37. Clause 4.1 of the General Security Agreement is in the following terms:

“4. PAYMENT

4.1 Place, manner and time of payment

The Grantors, subject to clause 9.1, must pay the Secured Money to the Secured Party in accordance with any Collateral Document which obliges the Grantors to pay it and in the absence of written agreement:

(a) upon demand, at a place and in a manner, reasonably required by thee Secured Party; and

(b) in immediately available funds and without set-off, counter claim, conditions or, unless required by law, deductions or withholdings.”

38. The plaintiffs described these provisions as the “No Set Off Clauses”. They contend that clauses such as these mean that the proposed cross-claim is unarguable: the authorities establish that such clauses prevent a defendant from raising, via a cross-claim or defence, a set-off or counterclaim in defence of proceedings to recover secured moneys owing to a secured creditor and, in particular, establish that such clauses preclude reliance upon s 420A of the Corporations Act upon which the defendants specifically rely.

39. The plaintiffs referred to Oswal v Commonwealth Bank of Australia [2013] WASCA 58 and National Australia Bank Ltd v C & O Voukidis Pty Ltd [2015] NSWSC 185. In Oswal, Pullin JA said this at [45], [48] and [54]:

“45… Clauses of this kind are enforceable: Coca Cola Financial Corporation v Finsat International Ltd [1998] QB 43; [1996] 3 WLR 849, 857 - 858; Hausman v Abigroup Contractors Pty Ltd [2009] VSCA 288; (2009) 29 VR 213. The purpose of such a clause is to prevent the holding up of payments while disputed cross-claims are litigated: Hausman [24]. Clauses of this kind are important to financiers and they frequently appear in contracts used in the banking industry, in international financing agreements and in building contracts.

…

48 However, a set-off or counterclaim would not have been open to Garuda in this case. If Garuda (or Mr Oswal if he is entitled to do so) wished to recover the mistaken payment, it would have to do so in separate proceedings. This is because cl 6.1(c) prohibits Garuda from raising a set-off or counterclaim in defence of proceedings to recover the secured moneys under the Loan Agreement.

…

54 The expression 'without set-off' excludes all form of set-off, no matter what jurisprudential basis might exist for the set-off. Thus it excludes statutory set-off and equitable set-off. It excludes all of the four kinds of equitable set-off that the authors of Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (4th ed, 2002) have detected: see [37-035]...”.

40. In Voukidis, Davies J dealt with a motion by a defendant for leave to amend a cross-claim. The proceedings concerned a claim by the bank for possession of a property pursuant to certain loan facilities entered into by the fourth defendant, her husband and companies connected with them. The fourth defendant was a borrower under some facilities and a guarantor in respect of others. She had originally filed a cross-claim against the second and third defendants claiming contribution from them as co-guarantors. After summary judgment for possession had been given by Campbell J in relation to two other properties, his Honour had given the fourth defendant leave to replead her defence to raise a claim that the bank had sold a property at a gross undervalue, and that it had therefore breached its duties as a mortgagee in possession or alternatively under s 420A of the Corporations Act. Leave was later sought to file an amended cross-claim against the bank, seeking relief, including damages, for breach of s 420A. The application effectively raised the same issues as in these proceedings.

41. Davies J considered the relevant principles concerning delay and the need for it to be explained. His Honour then considered the defence which raised reliance upon s 420A. His Honour noted that the guarantee given by the fourth defendant included a clause that “[u]ntil the Bank receives all the amounts which the customer owes the Bank and you are no longer liable to the bank under this guarantee and indemnity, you must not without the Bank’s prior written consent… claim or have the benefit of any set-off or make any counterclaim against the customer for any reasons and whether or not the customer is insolvent:”

42. Davies J considered the decision of Bryson J in GE Capital Australia v Davis [2002] NSWSC 1146 from which the following propositions emerge:

1. Section 420A of the Corporations Act does not operate so as to confer a right to recover damages or any other right to a remedy on guarantors;

2. If a guarantor shows that the mortgagor would, if they made a claim, be entitled to a remedy under s 420A(1), then the guarantor is entitled to a similar remedy by way of equitable defence “subject to the provisions of the guarantee”;

3. However, the guarantee in that case, having a similar form to that in Voukidis, Oswal and in this case – whereby there is no right of set-off or counterclaim – had the effect that the guarantor had no ability to set-off or counterclaim without first paying the amount of the debt.

43. Davies J then held that the relevant clauses were indistinguishable from those considered in GE Capital and that the fourth defendant had to pay her full liability to the bank before making any cross-claim in reliance upon s 420A. In the light of the principles in General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125; [1964] HCA 69, his Honour held that the claim could not succeed.

Defendants’ submissions

Delay and prejudice

44. The defendants rely on the explanation for delay previously conveyed in their written submissions dated 28 July 2025, referred to at paragraphs 15 and 17 of Mr Michael Bateman’s 27 August 2025 affidavit, namely, that the delay has been occasioned by the fact that the defendants have not to date been in a position to fund legal representation in the proceedings in a meaningful way, including preparing and prosecuting the foreshadowed cross-claim. In addition, certain information was not available to them until receipt of the plaintiffs’ evidence in reply served on 24 June 2024. The application for leave to bring the cross-claim was promptly brought shortly thereafter. The issues are complex.

45. Furthermore, the plaintiffs have not pointed to any significant prejudice that would be occasioned by the delay in the defendants bringing the cross-claim.

Good arguable case

46. In Resolution Life Australasia Limited v AMP Limited; Munich Reinsurance Company of Australasia Limited v AMP Limited [2025] NSWCA 21 at [14], the Court said:

“The power of the Court to grant or refuse leave to amend a pleading must be exercised in the way that best promotes the Court’s overarching purpose to facilitate the just, quick and cheap resolution of the real issues in the proceedings, as efficiently as possible, and in accordance with the dictates of justice: Civil Procedure Act, ss 64(2), 58(1)(ii)(a). As summarised at [s.64.10] of Ritchie’s Uniform Civil Procedure 2005 (NSW), the proposed amendment must be proper both as to substance and form, and not liable to be struck out if it appeared in an original pleading: Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2006] NSWSC 1073 at [10]-[11] (Barrett J).”

47. Halsbury's Laws of Australia at [325-2985], in the context of amendments to pleadings, says:

“An amendment which is futile because it is obviously bad in law will not be allowed. But it is no ground for refusing an amendment that it raises a claim or defence which may appear not to have much chance of success. Provided the case is arguable, whether it ought to succeed is a question for the judge at trial.”

48. The defendants maintain the claims raised in the proposed cross-claim are arguable. Whether the claims ought to succeed should be a question for the judge at trial.

Relevant provisions of loan documents and unfair contract terms

49. The defendants submitted that clauses 7.3 and 7.4 of the Loan Agreement (and similar provisions of the General Security Agreement) that require the them to repay the debt the subject of the proceedings without set-off or counterclaim are matters which the plaintiffs would be able to raise in their defence to the cross-claim, in the event that leave is granted for it to be filed.

50. However, the authorities upon which the plaintiffs rely do not render the claims contained in the proposed cross-claim bad in law or futile in circumstances where none of the decisions cited contains any consideration of how the Australian Securities and Investments Commission Act 2001 unfair contract terms provisions operate in respect of the no set-off clauses. The defendants suggest that is unsurprising because those authorities predate the introduction of those provisions: the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 received royal assent on 12 November 2015. Oswal was delivered in 2013 and Voukidis in March 2015.

51. The defendants also submitted that their reliance on these provisions need not be pleaded in the proposed cross-claim in circumstances where they anticipate that the relevant provisions of the loan documents would be raised by the plaintiffs in any defence that may be filed in response to it. It would then be open to the defendants to raise the operation of the ASIC Act unfair contract terms provisions in their reply.

ASIC Act

52. The defendants’ contentions about these provisions were as follows.

53. Section 12BF of the Act relevantly provides that a term of a “small business contract” (as defined in s 12BF(4)) that is a standard form contract (as defined in s 12BK) or a financial product (as defined in s 12BAA) or a contract for the supply or possible supply of financial services (as defined in s 12BAB) is void if:

1. the term is unfair (as defined in s 12BG(1));

2. the contract is a standard form contract (as determined under s 12BK);

3. the contract is a financial product (as defined in s 12BAA) or a contract for the supply, or possible supply, of services that are financial services (as defined in s 12BAB): s 12BF(1).

54. A small business contract is defined as in s 12BF(4):

“(4) A contract is a small business contract if:

(a) the upfront price payable under the contract does not exceed $5,000,000; and

(b) at least one party to the contract satisfies either or both of the following conditions:

(i) the party makes the contract in the course of carrying on a business and at a time when the party employs fewer than 100 persons;

(ii) the party's turnover, worked out under subsection (7) for the party's last income year (within the meaning of the Income Tax Assessment Act 1997) that ended at or before the time when the contract is made, is less than $10,000,000.”

The defendants foreshadowed that they will lead evidence establishing that it satisfies both of these limbs.

55. A term is unfair if it would cause a significant imbalance in the parties’ rights and obligations, is not reasonably necessary to protect the legitimate interest of the party who would be advantaged by it and would cause detriment (financial or otherwise) to the other party if it were applied or relied on: s 12BG(1).

56. In determining whether a term of the contract is unfair, the court must consider the extent to which that term is transparent and the contract as a whole and may consider any relevant matter: s 12BG(2)–(3).

57. The defendants submitted that there remains a live issue as to whether the anti-set-off and counterclaim clauses relied upon by the plaintiffs offend these provisions.

McLure P’s dissent

58. In addition, the defendants’ note the dissenting judgment of McLure P in Oswal which relevantly stated:

“14. Whether as part of the common law of abatement or otherwise, there is authority for the proposition that if a liquidated amount has been paid by the principal debtor to the creditor and it is or should be appropriated by the creditor to the guaranteed debt, the amount of the guaranteed debt will be directly reduced and no issue of set-off arises: Murphy v Glass (1869) LR 2 PC 408; Bechervaise v Lewis (1872) LR 7 CP 372; O'Donovan J and Phillips J, The Modern Contract of Guarantee (4th ed), Loose leaf service [11.750]. In those circumstances, the debt is directly reduced or extinguished by the creditor's receipt of moneys for which the principal debtor is entitled to be credited.

…

16. Moreover, I would need to be persuaded that cl 6.1(c), on its proper construction, is not confined to simply identifying the scope of the borrower's obligation in relation to the making of individual payments due under the Loan Agreement. That is, it is arguable that cl 6.1(c) says nothing about the way in which the borrower (or derivatively the guarantor) can defend legal proceedings for damages for breach of the Loan Agreement or alternatively a claim in debt, particularly after the Loan Agreement has been terminated (albeit prospectively).”

59. The defendants emphasised that plaintiffs have not cited any authority in which this issue, or McLure P’s dissent, has been considered further. The defendants submitted that the issue raised by McLure P remains arguable.

Effect of “no set-off”

60. The defendants further submitted that it remains arguable whether the precise effect of the non set-off clauses preclude them bringing the cross-claim at all or whether it simply has the effect of preventing them from setting off any interest which would accrue on the unpaid portion of the debt against which any damages would otherwise be offset.

61. Moreover, it remains to be determined whether the effect of the non set-off clauses is to preclude a litigant agitating any cross-claim or if it relates to the manner in which the final relief is framed, namely whether there are judgments going both ways or whether the amounts are offset in some way.

The Receivers as an agent of Blackbird

62. An additional issue raised by the proposed cross-claim is that the receivers are not an agent for Blackbird. Clause 10.2 of the General Security Agreement provides that:

“The Secured Party [ie Blackbird] may appoint, by written notice to the Grantor [ie the defendants], a Receiver as the agent of the Secured Party and delegate to a Receiver any of the Secured Party’s rights under this Deed.”

63. On 7 November 2024, the receivers wrote to Mr Bateman on a without prejudice basis relevantly as follows:

“As you are aware, [the proposed Third Cross-Defendant] and [the proposed Second Cross-Defendant] were appointed as Receivers and Managers of the Company, Receivers of the Guarantors and Agents for the Mortgagee of the Property.”

64. The defendants submitted that it is at least arguable that the written notice referred to in clause 10.2 can be provided by an agent on behalf of the Secured Party. However, the defendants note that the statement may be interpreted as the proposed second cross-defendant and third cross-defendant being appointed as agents in respect of the Buttaba Road property and not more broadly. That is an issue which should be ventilated at the trial.

65. In any event, the proposed cross-claim contains a further allegation against Blackbird arising from its authorisation of the receivers making payments towards their costs and expenses incurred in connection with the receivership. Therefore, even I were ultimately against the defendants in respect of the claim against Blackbird on the basis that the receivers were its agent, there remains an additional aspect of the proposed cross-claim against Blackbird.

66. The proposed cross-claim is not futile in the General Steel sense. These are issues the defendants should be permitted to ventilate at trial.

Scope of receivers’ duties

67. In response to the matters raised, the defendants rely upon the passage in Expo International Pty Ltd (Receivers and Managers Appointed) (In Liq.) and another v Chant and others [1979] 2 NSWLR 820 at 834 per Needham J. That passage relevantly reads:

“The conclusion I draw from the authorities to which I have referred is that the receiver in a case such as the present (as distinct from a case where the receiver is appointed by the court and, possibly, a case where he is the agent of the mortgagee) has certain duties towards the mortgagor which are enforceable by the latter directly against the receiver. Those duties include the duty to exercise his powers in good faith (including a duty not to sacrifice the mortgagor's interests recklessly); to act strictly within, and in accordance with, the conditions of his appointment; to account to the mortgagor after the mortgagee's security has been discharged, not only for the surplus assets, but also for his conduct of the receivership...”.

68. The defendants submitted that the duty to act in good faith, which Needham J noted included a duty not to sacrifice the mortgagor’s interests recklessly, is broad enough to encapsulate the allegations against the receivers contained in the proposed cross-claim. This duty is over and above the statutory duty contained in s 420A of the Corporations Act.

69. In any event, the defendants’ intended reliance on the statutory duty contained in s 420A applies at the very least in respect of the sale of the shares in the two yachts, as particularised at paragraphs 33 to 66 of the proposed cross-claim. The plaintiffs’ arguments in respect of the duty to safeguard does not negate the arguable claim the defendants have in respect of those items of property.

Consideration

70. In my opinion, the defendants’ application for leave to file a cross-claim out of time should be refused. This is for the following reasons.

71. First, there has been delay between service of the statement of claim upon the defendants on 2 December 2024 and the provision of the proposed cross-claim on 3 July 2025. The sales of property about which the defendants complain were completed by no later than 11 January 2025. There is no satisfactory explanation for why the contentions now appearing in the proposed cross-claim were not, or could not have been, formulated and served at a time when the defendants could have done so without leave. Even if the defendants’ unrepresented status amounts to an explanation, they acquired legal representation in March 2025 and still did not seek the leave for which they now ask.

72. Secondly, there is no evidence sufficient to establish the existence of a good arguable case. The defendants’ assertion that the yacht shares were sold at an undervalue or that their property was otherwise lost rises no higher than their say so. One can readily sympathise with an application to file a cross-claim out of time that is apparently meritorious and supported by credible evidence. Even now I am not able to point to the existence of material that shows or suggests that the defendants’ interests have somehow been disregarded or sacrificed as the result of the plaintiffs’ actions in disposing of property recklessly of without proper regard for the defendants’ rights. Moreover, it is not clear that the plaintiffs were responsible for the impugned sales in any event.

73. Thirdly, the no set-off clauses in the security documents would in my view apply to the proposed cross-claim so as to deprive a majority of its contentions of legal force. The defendants are not otherwise precluded from litigating their claims against the plaintiffs but not, by reason of the specified terms of the Loan Agreement and General Security Agreement, in a way that forestalls the plaintiffs’ entitlement to judgment for the secured sums if they are otherwise entitled to succeed on their claims.

74. Fourthly, even if, as the defendants contend, the authorities upon which the plaintiffs rely in this last respect are now subject to the ASIC Act unfair contract terms provisions, there is no material before me upon which I could form even a preliminary view about it. It may be accepted that the defendants do not now like some of the contractual provisions upon which the plaintiffs seek to rely. That is not the same as a demonstration of how it can be said that any of those provisions are liable to be set aside as unfair or unconscionable or penal.

75. Finally I note that, quite apart from these matters, I am otherwise of the opinion that, if it were to become relevant, the matters pleaded in the proposed cross-claim reveal a sufficient connection between the claims made and Blackbird’s claim. The terms of s 22(2) of the Civil Liability Act 2005 are in my view satisfied to the extent that the relief sought in the proposed cross-claim “relates to, or is connected with, the subject of the … proceedings”.

Orders

76. In these circumstances I consider that the following orders should be made:

1. Refuse leave to the defendants to file a cross-claim against the plaintiffs in the form of Exhibit A on this application.

2. Order that the defendants pay the plaintiffs’ costs of the application for leave.

3. Grant liberty to the parties forthwith to approach the List Manager to obtain a hearing date.

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Decision last updated: 02 October 2025