Granite Spings Pty Ltd v Grgic & Ors
[2008] VSC 134
•24 April 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 2020 of 2000
| GRANITE SPRINGS PTY LTD (ACN 077 813 588) | Plaintiff |
| V | |
| JOHN GRGIC & OTHERS | Defendants |
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JUDGE: | BYRNE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 26, 27, 28, 29 February, 28 March 2008 | |
DATE OF JUDGMENT: | 24 April 2008 | |
CASE MAY BE CITED AS: | Granite Springs Pty Ltd v Grgic | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 134 | |
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PRACTICE and PROCEDURE – judgment given in default of defence – application to set judgment aside – whether writ served on defendants – whether solicitor authorised to file appearance
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Strang | Aitken, Walker & Strachan |
| For the Second, Third and Fourth Defendants | Mr C Tannous | Beaumont Lawyers as agents for Sage Solicitors |
HIS HONOUR:
This proceeding was commenced by writ filed on 6 March 2000 against four defendants, John Grgic, Louisa Grguric, her husband Ivan Grguric, and their son John Kennedy Grguric. They have two other sons of whom Ivan Joseph Grguric is the older. The claim was brought upon a guarantee given by each of the defendants dated 19 April 1999. Under this document the guarantors guaranteed to the plaintiff, Granite Springs Pty Ltd, the due and punctual payment of amounts due or to become due to it by a company, Drinks R Us Pty Ltd. By way of further security the guarantors, by cl 25, granted a charge over any land which they owned and agreed to execute, upon request, a mortgage over their property being the land described in folio 3/776893 and being the land situate at and known as 46A Shaftesbury Road, Burwood in New South Wales (“the Burwood land”).
At the time, the title to the Burwood land stood in the name of the four defendants but the name of Louisa on the title was given as Luisa and it was by that name, Luisa Grguric, that she is described in the guarantee. The land at the time was mortgaged to the State Bank of New South Wales Ltd so that the security of Granite Springs ranked after the bank.
I should note that the address of all of the guarantors was incorrectly given in the guarantee as 46 Shaftesbury Road, Burwood. The correct address of Ivan and Louisa Grguric was 46A Shaftesbury Road, Burwood, which is the land given as security to Granite Springs. Number 46A is the block of land behind no. 46; it is the rear lot of a battleaxe subdivision.
In due course, Drinks R Us defaulted under its trading arrangements with Granite Springs and the creditor then turned to the guarantors. This proceeding was commenced on 6 March 2000. On 24 March 2000 an appearance was filed on behalf of the four defendants, Louisa, Ivan and John Grguric (“the Grgurics”), as well as John Grgic. The appearance was filed by Woodhams, O’Keeffe & Co solicitors. Garry Robert Woodhams, a principal of that firm, deposed that he filed the appearance as agent for a Sydney firm of solicitors, Holt & Allan upon instructions of Michael Holt of that firm.
No defence was filed and on 22 May 2000 judgment was entered in default of defence in the sum of $209,533.32 plus $5,436.97 interest plus $4,345 costs.
The Application
Before the court is an application brought by summons filed on 16 May 2007 on behalf of the Louisa and Ivan Grguric senior only,[1] seeking to set aside this default judgment and to undo the steps that were taken in the Court as a consequence. These steps were the making of an order on 2 June 2000 that the defendants execute a mortgage as they were required to do under cl 25 of the guarantee, the making of an order on 25 August 2000 that the Prothonotary be authorised to execute the mortgage on behalf of the defendants, and the execution by the Prothonotary of the mortgage.
[1]The summons was amended on 8 August 2007 to add John Grguric as an applicant.
What the Grgurics say is that they were never served with the court process and that they were unaware of the proceeding or of the orders made against them until late-2006 when they were served with court documents filed in the Supreme Court of New South Wales seeking possession of the Burwood land. They say, too, that they have a good defence to the claim of Granite Springs since they did not give the guarantee upon which it depends: the signatures of the guarantors on that document are not their signatures. They say, too, that they did not instruct or authorise Mr Holt to cause an appearance to be filed on their behalf and they had no knowledge that he had done so.
The story which then unfolded was a bizarre one littered with allegations of forgery and fraud. Ivan and Louisa Grguric contended that, with respect to the Burwood land, their affairs were conducted in their name but, for the most part, without their authority by a succession of villains including dishonest finance brokers and disbarred or disgraced solicitors. Conveyancing documents in which their alleged forged signatures appear show that the signatures were made in the presence of a witness, often described as a solicitor, who certified that they knew the signatory. The consequence of this is that these certificates must be false. Witnesses who spoke of having served them with court process were said to have been mistaken or otherwise ought not to be believed. These are very serious allegations indeed. Central to this cast of miscreants was Ivan Joseph Grguric, their own son. He, too, it was said, had cheated them, first, by putting up their home to secure the guarantee of a debt owed by a company with which he was associated and, later, by using their property and the property of others fraudulently in order to obtain financial benefits for himself.
Nor were these allegations made only by the Grgurics. Granite Springs, not only argued that I should not believe the evidence of the Grgurics, but it alleged that Louisa herself impersonated an elderly family friend, Evelyn Blackman, using a Medicare card and a forged driving licence in her name as proof of identity, for the purpose of defrauding her.
Finally, the Grgurics protested that they did not know any John Grgic. The suggestion here appeared to be that he was a fiction: he did not exist.
In the midst of these allegations, I remind myself what are the issues for determination. The fundamental issue is that as to the service of the initiating process. If the Grgurics satisfy me on the balance of probabilities that they were not served with the writ in 2000, this is an irregularity in the court process. In the ordinary course, the filing of an appearance will overcome deficiencies in service because it is treated as a submission by the defendant to the jurisdiction. But, in this case, the authority of the solicitor entering the appearance is itself in issue. If I am satisfied that Mr Holt was not authorised to act as he did, the procedural significance of the filing of the appearance falls away. These, then, are the two issues which I must address. I do so on the basis that I am to determine them; this is not a case of a defendant merely raising a triable issue.
Furthermore, a proved want of service of the writ is such a fundamental defect in the process that I could not permit the default orders to stand. If the orders had been regularly made, it is apparent that there is a triable issue as to whether the defendants executed the guarantee. It is not for me to determine this issue; it is sufficient that I acknowledge, as I do, that it exists. There would then arise a question as to discretion. In the present case, the long period of time is significant as are the assertions made on behalf of Granite Springs that a trial of its claim against the defendants would be difficult since much of its records no longer exist. In this area, too, the explanation offered for the delay, namely, that the Grgurics were unaware of the proceeding and the orders made was challenged in cross-examination and by contradictory evidence. But having regard to the view that I take as to the consequence of a want of service, these matters do not arise. No alternative case was presented on the basis that the orders should be set aside if the defendants had in fact been served.
Analysed in this way, most of the evidence which was presented by both parties loses much of its significance. True it is that the credit of each of the Grgurics was very much in issue, so that evidence adverse to their credit was receivable. But neither party accepted the usual rule of evidence that they were bound by answers as to credit. I did not intervene to insist upon compliance with this rule because neither party appeared to be concerned about it and because the evidence struck at the heart of the otherwise improbable account that was given by the Grgurics.
I start, then, with the two issues which I have identified. On these matters the evidence was scanty, surprisingly so. The only evidence of service was an affidavit of Ali Oner affirmed 17 March 2000. He said that on 10 March 2000 at 8.21 pm he served John Grgic personally at 46A Shaftesbury Road, Burwood. He said that the person, to whom he spoke there and whom he served, admitted that he was John Grgic. I remind myself that this is the man who, it is said, does not exist. This defendant does not seek that the orders against him be set aside. Mr Oner was not cross-examined.
Although it was apparent from the earliest days of this application that service upon the Grgurics was in issue, no evidence was called on behalf of Granite Springs to contradict the denials of service made by them.
Andrew Collis Blogg, the Melbourne solicitor for Granite Springs, however, in an affidavit sworn on 27 August 2007, did produce copy letters dated 15 March 2000 from the process server, Express Mercantile, addressed to Tillyard & Callanan the Sydney solicitors for Granite Springs. These letters describe an attempt by an unidentified “agent” to serve the Grgurics on 10 March 2000. The letters are short and important and I will set them out, omitting formal parts:
SERVICE ON: Louisa Grguric
On the 10 March 2000, at 5.28pm, our agent attended the given address of 46 Shaftesbury Road, Burwood, 2034. There our agent spoke with John Grgic. He stated that the defendant does not reside at the address and resides in Queensland. He further stated that we serve him or their solicitor Michael Hold at Kogarah. He refused to provide any further information.
Enquiries made with neighbours failed to reveal any fresh information as to the defendant’s whereabouts.
Notwithstanding, as we have no instructions to conduct a skip trace, we cease action and return all documents unserved pending your further instructions.
SERVICE ON: Ivan Grguric senior
The letter was in identical terms to that for Louisa.
I will not set it out.
SERVICE ON: John Grguric
On the 10 March 2000, at 5.28pm, our agent attended the given address of 46 Shaftesbury Road, Burwood, 2034. There our agent spoke with John Grgic. He stated that the defendant does not reside at the address. He refused to provide any further information.
Enquiries made with neighbours failed to reveal any fresh information as to the defendant’s whereabouts.
Notwithstanding, as we have no instructions to conduct a skip trace, we cease and return all documents unserved pending your further instructions.
A number of things must be said about these letters and their content.
(1)What is their evidentiary value? A feature of the material placed before me on this application by both parties was that much of it was hearsay. No objections were taken to this. The material included letters such as those set out above, the report of the Independent Commission Against Corruption in New South Wales into the wrongdoings of a finance broker who was said to be an associate of Ivan Grguric junior, letters and a report from the New South Wales Police Service about their enquiries into suggested fraudulent dealings with Ms Blackman’s property; newspaper cuttings and a report of a handwriting analyst to the effect that the signatures on the guarantees were not those of the Grgurics. When I enquired about the use I might make of the content of these documents, I was met with the response that this was an interlocutory application so that I might act upon hearsay. I mentioned that no deponent producing this material had complied with Rule 43.03. The matter was left in the rather unsatisfactory position that I should receive everything but that the fact that an assertion is second or more remote hearsay was a matter for the weight which I might give it.
(2)The agent who attempted service is not identified. It is surprising that at 5.28pm this agent was talking to the supposedly fictitious John Grgic. Why did he or she not serve him then? Service was not affected upon this defendant until three hours later at the same address by Mr Oner.
(3)The information given to the agent was false – that Ivan and Louisa Grguric did not live at that address; that they lived in Queensland. The agent, of course, would not have had reason to doubt this. John Grgic then suggested that they be served at the office of their solicitor, Mr Holt. This information and suggestion was not given with respect to John Grguric.
(4)The unserved papers were said to have been returned to Tillyard & Callanan. What did they do with these documents? Did they forward them to Mr Holt? No evidence from this quarter was placed before me. It does seem to be a significant omission on this, the central issue. I do not, of course, speculate as to what Mr Holt might have said if called.
The second and associated issue is as to the authority of Mr Holt to cause the appearance to be filed. Mr Holt was not called to explain this. I start from the position that a solicitor would not do this without instructions from someone on behalf of a defendant.
Each of the Grgurics denied that he or she gave Mr Holt such an instruction and they maintained these denials in the face of cross-examination. When asked for an explanation as to how a solicitor in Sydney would be aware of the litigation in Melbourne and think to act for a defendant, they speculated that Mr Holt did so because he was an associate of Ivan Grguric junior and perhaps involved in his fraudulent activities.
Mr Holt was in 2000 a solicitor practising in Kogarah in Sydney. He had acted on the purchase of the Burwood land in 1991 and had arranged finance for this purchase. He also acted for John Grguric when he purchased his own home in Webb Street, Croydon in New South Wales. One of the many puzzling aspects of this case was the circumstances in which the Burwood land came to be registered in the names, not only of Ivan and Louisa Grguric whose house it was to be, but also in the name of the mysterious John Grgic and the son John Grguric. Mrs Grguric said that she was unaware of this until she saw a solicitor about refinancing.
Mr Holt was involved in the business activities which Ivan Grguric junior was conducting and which gave rise to the need for the guarantee in 1999.
On 11 August 2004, Mr Holt’s practising certificate was cancelled by order of the Legal Services Commissioner for a number of acts of misconduct including misappropriation of trust money and matters in fraud of State Revenue.
The fact that a solicitor, or indeed any person, has been found guilty of serious dishonesty does not mean that he is incapable of acting honestly or properly. For my present purposes, I will assume, in the absence of evidence to the contrary, that somebody told Mr Holt about this proceeding and that somebody asked him to file the appearance and that he instructed Mr Woodhams to act for his clients in accordance with that request. Who that somebody or somebodies was or were, I cannot say. On the evidence before me, it seems possible that the proceeding was brought to Mr Holt’s attention by Tillyard & Callanan acting on the information provided by Mr Oner. When the writ came to his attention is, likewise, unknown. There is much to be said for the inference that Mr Holt obtained instructions from Ivan Grguric junior for Ivan had a filial interest in protecting his parents’ home, especially as it was given as security for a debt in which he had an interest. If it be the case that he was involved in forging his parent’s signatures, as they say, this concern would be so much greater. If this were the case, he may have hoped to fend off the Granite Springs litigation and to negotiate some resolution of it. Such an inference, however, sits uneasily with the fact that in May 2000, prior to the entering of the default judgment, Mr Holt was saying in his correspondence with solicitors for Granite Springs that he was no longer acting for Ivan Grguric senior and that he, Ivan, was representing himself. But it is not necessary that I resolve these matters. For my present purposes it offers a scenario which explains why Mr Holt acted as he did, which scenario is consistent with the sworn evidence of the Grgurics, which also removes the inherent improbability of the fact that he, spontaneously and unrequested, caused the appearance to be entered.
On the fundamental issue as to service, I am faced with the evidence of non-service given by the Grgurics. This evidence is uncontradicted. The hearsay evidence offered by Granite Springs tends to support the conclusion that they were not served personally. If the position were otherwise, I would have expected Granite Springs to have offered some material to that effect or an explanation for not offering it.
A good deal of the hearing was devoted to evidence led to persuade me that the Grgurics were not reliable witnesses. I must confess that some of these points were well made and it does seem likely that they are less ingenuous than they would have me accept. Given the seriousness of the allegations, the unsatisfactory state of the evidence and the fact that these were credit issues, peripheral to the principal issues before me and issues which might require detailed examination at trial, I prefer not to determine whether they are well founded. It is sufficient that I record that, I am not prepared to reject the evidence of the Grgurics on the issue of service. I find that the writ in this proceeding was not served personally upon them. I accept, too, that they did not instruct or authorise Mr Holt to file an appearance on their behalf.
This finding carries with it the consequence that the default judgment cannot stand. This is regrettable, especially having regard to the long period of time which has elapsed. I am mindful too of the evidence of Patrick Charles Oliver Stone, the Granite Springs director, who has deposed to the prejudice which his company would suffer. Documents have gone; the company is in a quiescent state. He does, however, speak of having passed to the company’s solicitors documents at the time that the proceeding was commenced. As I mentioned in argument, this litigation is not likely to raise a serious issue as to the guaranteed debt. Proof of these matters may be assisted by the provisions of cl 21 of the guarantee. The substantial issue at trial is likely to be the contest as to the validity of the signatures on the guarantee. These are not, I would suppose, matters in respect of which any missing Granite Springs documents would lend much assistance.
I will therefore set aside the default judgment entered on 22 May 2000 against the second, third and fourthnamed defendants. The consequential orders of 2 June 2000 and 25 August 2000 regarding the execution of the mortgage in favour of Granite Springs may await the outcome of the trial.
If requested, I will give directions with a view to a speedy hearing of this matter. I will hear counsel as to the terms of the orders which will be made to give effect to these conclusions and as to costs. The question, too, may arise as to whether this proceeding should be cross-vested to the Supreme Court of New South Wales where the witnesses are located.
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