First Mortgage Managed Investments Limited v Pittman (No.2)

[2014] NSWSC 1929

Supreme Court

New South Wales

Medium Neutral Citation:	First Mortgage Managed Investments Limited v Pittman (No.2) [2014] NSWSC 1929
Hearing dates:	18 December 2014
Date of orders:	18 December 2014
Decision date:	18 December 2014
Jurisdiction:	Common Law
Before:	Garling J
Decision:	(1)Order that the Notice of Motion of 15 December 2014 to re-open the Second Cross-claim to enable Ms Locke to adduce further evidence and to cross examine witnesses about existing evidence is dismissed. (2)Order that Ms Locke, if so advised, is to file any submissions with respect to the Second Cross-claim on or before 4:00 pm Friday 30 January 2015. (3)Order the Second Cross-claimants to file any submissions in reply on or before 4:00 pm Friday 13 February 2015. (4)Upon receipt of the last of these submissions, judgment reserved with respect to the Second Cross-claim.
Catchwords:	PROCEDURE – civil – application – re-open Second Cross-claim to adduce further evidence – proceedings have been fully determined – applicant has previously made deliberate decision not to participate in hearing - prejudice to cross-claimants if application granted – potential for inconsistent findings if new evidence adduced – contrary to administration of justice for Court to make inconsistent findings – not in interests of justice to grant application – application dismissed
Legislation Cited:	Civil Procedure Act 2005 Contracts Review Act 1980 Uniform Civil Procedure Rules 2005
Cases Cited:	First Mortgage Managed Investments Pty Ltd v Basil James Pittman [2012] NSWSC 1332 First Mortgage Managed Investments Pty Ltd v Pittman [2014] NSWCA 110 First Mortgage Managed Investments Pty Ltd v Pittman (No.2) [2014] NSWCA 272 Smith v New South Wales Bar Association [1992] HCA 36; (1992) 176 CLR 256
Category:	Procedural and other rulings
Parties:	First Mortgage Managed Investments Limited (P) Basil James Pittman (D1, Cross-Claimant) Rex Neil Webster (D2, Cross-Claimant)) Christopher M Edwards (D3) Margot Locke (Defendant to 2nd Cross-Claim)
Representation:	Counsel: J Lazarus (Cross-Claimants on 2nd Cross-claim) M Rosenblatt (D to 2nd Cross Claim) Solicitors: Bransgrove Lawyers (P) Brock Partners (D1 and D2) Somerset Ryckmans (D to 2nd Cross-Claim) HWL Ebsworth Layers (D3)
File Number(s):	2008/00288217
Publication restriction:	Not applicable

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EX TEMPORE Judgment

First Judgment

1. Having delivered a judgment in these proceedings on 1 November 2012, on 18 December 2012, I made orders, including dismissing the Second Cross‑claim brought by Mr Pittman and Mr Webster as cross-claimants against Ms Margot Locke as cross-defendant: see First Mortgage Managed Investments Pty Ltd v Pittman [2012] NSWSC 1332.

2. In summary, the Second Cross‑claim was dismissed because the principal relief which I had granted, namely the setting aside of the mortgage relating to the land of Mr Pittman and Mr Webster, meant that they owed no money to the plaintiff, First Mortgage Managed Investments Pty Limited (“FMMI”) and there was therefore no basis for relief to be granted on the Second Cross‑claim against Ms Locke.

Court of Appeal

3. FMMI appealed against that decision and in a judgment of the 7 April 2014: First Mortgage Managed Investments Pty Ltd v Pittman [2014] NSWCA 110, the Court of Appeal allowed that appeal in part. On 19 August 2014, the Court of Appeal in a second judgment, First Mortgage Managed Investments Pty Ltd v Pittman (No.2) [2014] NSWCA 272 granted leave to Mr Pittman and Mr Webster to file a cross-appeal naming Ms Locke as a cross-respondent. The Cross-Appeal which Mr Pittman and Mr Webster were allowed to file, sought an order setting aside the order which had been made dismissing the Second Cross-Claim in December 2012.

4. The Court of Appeal in that judgment also ordered that, subject to compliance by Mr Pittman and Mr Webster with service of the Cross Appeal, the order made in December 2012 with respect to the Second Cross-Claim be set aside. The Court of Appeal ordered that the Second Cross-Claim by Mr Pittman and Mr Webster against Ms Locke be remitted to me for hearing and determination.

Present Proceedings

5. The matter came before me on 12 December 2014. At the request of Mr Lovas of counsel, who anticipated that he would be instructed to appear for Ms Locke in the matter, I was asked to stand the proceedings over until 16 December 2014 to enable Mr Lovas to obtain further instructions and to identify what his client's position would be. On that latter day, for reasons beyond the control of the parties, or the Court, it was necessary for the matter to be stood over until today, 18 December 2014.

6. Some background to the Second Cross-Claim is necessary. The Second Cross-Claim was first filed on 27 April 2009. A Defence was filed by Ms Locke on 28 July 2009. That Defence was filed at a time when she was legally represented. On 17 December 2010, an Amended Defence was filed by Ms Locke, again whilst she was legally represented.

7. One of the causes of action pleaded in the Second Cross-claim against Ms Locke was a breach of contract claim. Paragraph 55 of the Second Cross-claim pleaded that in 2006, with respect to the loan from FMMI, Ms Locke entered into an agreement with Mr Pittman and Mr Webster pursuant to which Ms Locke would arrange for funds to be lent by FMMI for the purposes of property development; that Ms Locke would have the sole responsibility for repaying the principal and interest on that loan; that Mr Pittman and Mr Webster would sign such documents as Ms Locke required in order to give effect to the loan; and neither Mr Pittman nor Mr Webster would be obliged to repay any of the principal or interest.

8. The existence of that contract or agreement (“the 2006 Agreement”), including those particular terms to which I have just referred, were admitted in the original Defence when it was first filed in 2009, and again admitted in the Amended Defence filed in 2010.

9. The Second Cross-claim also pleaded that there had been a breach of the 2006 Agreement because Ms Locke had failed to make the required repayments of principal and interest on the FMMI loan. That allegation was also admitted, again in both the Defence and the Amended Defence.

10. As well, the Second Cross-claim pleaded that by reason of the breaches of the 2006 Agreement, the cross-claimants had suffered loss and damage, namely, the amount of any liability of Mr Pittman and Mr Webster to FMMI under the loan agreement. It was alleged that, to the extent that FMMI obtained possession of the land owned by Mr Pittman and Mr Webster, that constituted loss and damage.

11. The pleading of the causing of loss and damage was not denied or in any way contradicted. In fact, there was no pleading directed at that allegation, and it was not traversed. Thus, in accordance with the r 14.26(1)(a) of the Uniform Civil Procedure Rules 2005 (“UCPR”), that allegation is taken to be admitted.

12. Although the allegation in the Second Cross-claim did not formulate any specific monetary sum or otherwise quantify the amount owed by Mr Pittman and Mr Webster to FMMI, that is unsurprising since the relief they were seeking was to have the loan agreement set aside in whole or in part. However, it is now plain, as a consequence of the decision of the Court of Appeal, that the liability of Mr Pittman and Mr Webster to FMMI is $1,951,266 plus interest.

13. The cross-claimants, Mr Pittman and Mr Webster, now seek to proceed on the Second Cross-claim only with respect to a cause of action for a breach of contract in which the existence of the contract is admitted and has always been admitted, and the breach of the agreement is admitted and has always been admitted.

14. Ms Locke was legally represented in the proceedings until a point in time in April 2011 when she ceased to instruct lawyers. During the period whilst lawyers were instructed, affidavits were filed by Ms Locke, the first being that of 8 October 2010 and the other two being filed somewhat later.

15. On 14 April 2011, Ms Locke's lawyer, Mr Adrian Walmsley of A R Walmsley & Co, sent an email to the solicitor for Mr Pittman and Mr Webster which said:

“I must advise that we will not be presenting any evidence or advancing any arguments on behalf of our client at the hearing of this matter. Counsel will appear on Monday to advise the court of the above and will then seek leave to withdraw.”

The proceedings were listed before the Registrar on Monday 18 April 2011.

16. When the hearing of the whole proceedings commenced on 4 July 2011, the matter was called. There was no appearance by, or on behalf of, Ms Locke. The Court, at the commencement of that hearing, was informed of the substance of the email which I have just quoted. The hearing proceeded in July 2011 and it was concluded in that month when judgment was reserved.

17. On 16 August 2011, a document signed by Ms Locke and entitled "Final Submissions" was purportedly filed in the Registry of the Supreme Court. That document included factual material and assertions, as well as submissions of law. On 17 August 2011, the Registrar of the Common Law Division wrote to Ms Locke and pointed out that the hearing of evidence, and submissions advanced by the parties in the proceedings had been concluded, and that judgment was reserved. He then said:

“If you wish to seek leave to reopen the hearing of the matter so as to enable you to put evidence before the court or to make submissions about the evidence, you need to make an application via a Notice of Motion pursuant to rule 18.1 of the Uniform Civil Procedure Rules 2005. The Notice of Motion and any evidence upon which you rely to support the orders which you seek must be served on all other parties to the matter.

Unless consent is forthcoming from all parties, a hearing will be required to determine any application which you may make. I draw your attention to the entirety of Part 18 of the UCPR for the manner and form of the application. Unless and until this occurs the Court will not consider your document called "Final Submissions" and it will not become part of the court file.”

18. The Court delivered judgment in December 2012. Between 18 August 2011, when the letter of the Registrar might first have come to her notice, and the date of delivery of judgment, no application was made by, or on behalf of, Ms Locke to seek to re-open the proceedings.

19. In the judgment of December 2012, the Court made a series of findings of fact based upon the evidence before it, as to the circumstances in which the 2006 agreement was entered into, the circumstances around the 2008 variation of that agreement, and as to the proper characterisation of the circumstances insofar as they affected Mr Pittman and Mr Webster. The Court concluded that having regard to its findings of fact and its characterisation of the facts and circumstances, the 2006 agreement and the later variation were unjust within the meaning of the Contracts Review Act 1980, and that relief ought to be granted.

20. In substance, the first judgment of the Court of Appeal upheld the finding that the contract was unjust and should be set aside. The orders of the Court of Appeal dealt with an issue as to whether Mr Pittman and Mr Webster had obtained any and, if so, what benefit which ought be taken into account when the grant of relief was to be considered. The result of the Court of Appeal can best be encapsulated in this way. In [217] of its first judgment, Sackville AJA (with whom Beazley P and Gleeson JA agreed) said this:

“FMI has failed in its challenge to the findings that the FMI mortgage was unjust when entered into. However it has succeeded in establishing the primary judge's discretion as to the grant of relief miscarried. FMI has also succeeded in establishing that the respondent should not be relieved of her obligation under the FMI mortgage to repay that portion of the moneys advanced which they used to discharge the Moranon mortgage and the Flamanda mortgage. Thus FMI's appeal succeeds in part.”

This Notice of Motion

21. The issue confronting the Court, and with which this judgment deals, is whether the Court, on Ms Locke’s application, ought make directions which would allow Ms Locke time to file evidence, allow Mr Pittman and Mr Webster time to file evidence in reply, and then fix a hearing estimated to take between three and four days during which the Court could hear the evidence, observe witnesses being cross-examined and challenged, and then having had such a hearing, makes finding of fact to determine the Second Cross-claim. Ms Locke has outlined in a five page document which, together with what Mr Rosenblatt has said today, outlines what they anticipate would be put before the Court by way of evidence on such a hearing. I will not describe that outline in detail. It is sufficiently captured in the documents before the Court, and in the transcript of today's proceedings. It is clear that what Ms Locke seeks to do is to challenge a number of the findings of fact made by the Court which underpinned its conclusion that the FMMI mortgage was unjust within the meaning of the Contracts Review Act.

22. As well, it is apparent that Ms Locke seeks to adduce evidence which would challenge, and thereby put in issue, the existence of the contract and the terms of it which has been admitted on the pleadings since at least July 2009.

23. Shortly put, as I understand it, Ms Locke seeks to establish a case that she ought not to be found to be an individual who was solely responsible for the repayment of moneys to FMMI, but that Mr Pittman and Mr Webster were jointly liable with her because they had a financial interest in the outcome of the development which ultimately, Ms Locke says, was unsuccessful, not through any failing on her part, but because of one or more matters, including perhaps an inaccurate valuation of the kind one sees from time to time in complex property developments.

24. In short, what Ms Locke seeks to do is have the Court make orders which would facilitate a complete re-hearing of the facts and evidence relating to the Cross-claim against her including the adducing of such further evidence as would be appropriate.

25. Mr Pittman and Mr Webster oppose that application. They submit, putting it concisely, that the application comes far too late in the proceedings, and that they would be severely prejudiced at this stage by any such application. As well, they submit that having regard to the admissions in the pleadings, such an exercise would be futile.

26. The Court has a discretion to grant leave to a party to re-open proceedings where those proceedings have not been finally determined by a judgment. That discretion must be exercised judicially and must be exercised to further the interests of justice. In so doing, the Court is obliged to have regard to the statutory provisions of the Civil Procedure Act 2005. In particular, the Court is obliged when exercising a discretionary power under that Act, or the UCPR, to do so in a way which furthers the overriding purpose. That overriding purpose contained in s 56(1) of the Civil Procedure Act is to ensure a just, quick and cheap determination of the real issues in the proceedings.

27. In a number of decisions, the Court has considered the power to re-open proceedings. It is clear that the exercise of the discretion depends largely upon the Court's view as to whether the interests of justice are served better by granting, rather than refusing, the application.

28. The High Court of Australia dealt with the issue of whether proceedings should be re-opened in Smith v New South Wales Bar Association [1992] HCA 36; (1992) 176 CLR 256. In the joint judgment of Brennan, Dawson, Toohey and Gaudron JJ, at p 266 their Honours said:

"If an application is made to re-open on the basis that new or additional evidence is available, it will be relevant at that stage, to enquire why the evidence was not called at the hearing. If there was a deliberate decision not to call, ordinarily that will tell decisively against the application. … But assuming that that hurdle is passed, different considerations may apply depending on whether the case is simply one in which the hearing is complete …, or one in which reasons for judgment have been delivered …. It is difficult to see why, in the former situation, the primary consideration should not be that of embarrassment or prejudice to the other side ... In the latter situation, the appeal rules relating to fresh evidence may provide a useful guide as to the manner in which the discretion to re-open should be exercised"

29. As well, there is a strong public interest in the finality of the litigation, and the timely conclusion of litigation. These are matters to which the Court is also required to have regard.

Discernment

30. As can be seen, having admitted that an agreement of the kind pleaded existed, and having admitted that she was in breach of the agreement, Ms Locke determined in April 2011 that, although she had filed factual affidavits no doubt putting in issue certain of the facts that were before the Court, she would not appear in the proceedings; she would not advance those facts before the Court; she would not challenge the evidence of Mr Pittman and Mr Webster; and she would not make any submission to the Court with respect to the Second Cross-claim at the principal hearing of the proceedings.

31. I am satisfied that making the admissions, and deciding not to appear were, on the basis of the evidence and material before me today, carefully considered decisions taken on the basis of legal advice. No other rational inference is available. Ms Locke did not suggest otherwise. Even after the principal hearing had concluded, Ms Locke, seemingly acting for herself and unaided by lawyers, had a change of mind, and wished to put further matters before the Court. She was properly advised by the Registrar of the Common Law Division of the manner in which she needed to do that, and that if she wished matters to be taken into account by the Court, what the appropriate and formal procedure was to enable that to happen. She did not follow that procedure and, I would infer, formed the view at that stage, that she did not want to put matters of fact before the Court, nor any relevant submissions.

32. The proceedings have now been fully determined on all questions of fact relevant to all claims, including the Second Cross-claim. Those findings of fact have been upheld in the Court of Appeal (except to the extent that relief is involved). The application which is now made will have the effect of challenging those findings of fact in whole or in part, and seeking to challenge the existence of a cause of action, namely, a breach of a contract or agreement, which it is accepted, has been admitted on the pleadings for many years. No application is made to amend the pleadings or withdraw the admissions.

33. There is clear prejudice to Mr Pittman and Mr Webster if this application is granted. At the very least, that prejudice consists of additional costs which would be occasioned by a further hearing and further preparation for such a hearing in circumstances where all witnesses required to give evidence, will have given evidence during the principal trial, except for Ms Locke. Those witnesses would need to be recalled and further examined. As well, there is the prejudice that findings of fact which are favourable to Mr Pittman and Mr Webster and upon which the result the Court of Appeal turned, may be set aside which may lead to further proceedings in the Court of Appeal, by FMMI, and potentially imperil the partially favourable result of that appeal.

34. There is prejudice to Mr Pittman and Mr Webster because they are exposed to ongoing stressful litigation which throws into doubt the findings made in earlier litigation some years ago, as confirmed by the Court of Appeal.

35. There is also potential for inconsistent findings of fact between the claim and the Second Cross-claim, because the evidence will be different. Even if FMMI takes no further action on the principal claim, it is contrary to the proper administration of justice for a court to make any such inconsistent findings. As well, the findings of fact urged by Ms Locke would be inconsistent in substance and effect with the admissions on the pleadings.

30. As well, the public interest in the finality of litigation and the timely disposal of the litigation weighs heavily in my consideration of what ought be done.

31. I am satisfied that on two previous occasions there has been a deliberate decision made by Ms Locke not to participate in the original hearing by adducing evidence or advancing submissions or by challenging evidence as it was given. I cannot see any basis that would permit Ms Locke, some years later, consistently with the principle of finality of litigation, to now be entitled to call new or additional evidence. There is no suggestion that that evidence was not available to be called in 2011 at the hearing.

32. I am therefore not persuaded that granting the application made by Ms Locke serves to further the overriding purpose of the Civil Procedure Act, nor is granting the application consistent with the principle of finality of litigation. Nor can I see that the prejudice to Mr Pittman and Mr Webster could be remedied or ameliorated in any way if I was to grant the application made by Ms Locke.

33. I accept, necessarily, that if I do not grant the application, Ms Locke will not have another chance to rectify erroneous findings of fact which she says should never have been made. But the position is that Ms Locke has had a number of chances to address the facts, she has chosen not to, and she is now seeking a further chance, not a chance for the first time, to address those issues.

34. Having regard to all of these matters, I am not satisfied that it is in the interests of justice to permit Ms Locke to now adduce any further evidence in the proceedings nor to permit her to re-open the proceedings to tender such evidence or to cross-examine witnesses who may have given evidence in the existing proceedings. Such a course would be substantially inconsistent with the pleadings.

35. Accordingly, I refuse the application to re-open the proceedings.

Case Management Order

42. The consequence then is how should I determine the Cross-claim which has been remitted to me? The appropriate course is that it will be determined on the basis of the existing evidence and pleadings, and each party will have an opportunity to put in submissions with respect to what the Court should find, and what outcome should be reached with respect to the Second Cross-claim.

43. I note that counsel for Mr Pittman and Mr Webster of 5 December 2014 has filed in Court written submissions on the Second Cross-claim setting out what relief is sought and the basis for that relief. What I propose to do is to fix a timetable for further submissions by Ms Locke as the cross defendant if she is so advised, and for any submissions in reply by the Second Cross-claimants.

Orders

44. I make the following orders.

1. Order that the Notice of Motion of 15 December 2014 to re-open the Second Cross-claim to enable Ms Locke to adduce further evidence and to cross examine witnesses about existing evidence is dismissed.

2. Order that Ms Locke, if so advised, is to file any submissions with respect to the Second Cross-claim on or before 4:00 pm Friday 30 January 2015.

3. Order the Second Cross-claimants to file any submissions in reply on or before 4:00 pm Friday 13 February 2015.

4. Upon receipt of the last of these submissions judgment reserved with respect to the Second Cross-claim.

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Decision last updated: 06 March 2015