Greater Building Society Limited v Engel
[2009] NSWSC 727
•31 July 2009
CITATION: GREATER BUILDING SOCIETY LIMITED V ENGEL [2009] NSWSC 727 HEARING DATE(S): 15 December 2008
JUDGMENT DATE :
31 July 2009JUDGMENT OF: Hulme J at 1 DECISION: That the judgment entered against Mr Engel be set aside; That the leave to issue writ(s) of possesion and the writ(s) of possession issued in the proceedings be set aside; That each of the proceedings 14051/08, 14052/08 and 14445/08 be consolidated with the others; That Mr Engel have leave to file on or before Monday 17 August 2009 a Defence to the Statement of Claim; That Defences to all three actions shall be included in the one document; I reserve the question of costs; I stand the proceedings over until 19 August 2009 at 9.15am before me. PARTIES: Greater Building Society Limited
Terence Melvin Engel
Marie Vernita EngelFILE NUMBER(S): SC 14051/08; 14052/08; 14445/08 COUNSEL: Plaintiff: Ms C Fox
Defendants: Mr H StoweSOLICITORS: Plaintiff: Hunt & Hunt
Defendants: Mason Lawyers
RS HULME J
IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
- File Nos: 14051/08
- 14052/08
14445/08
Friday, 31 July 2009
: These reasons concern an application to set aside judgment in 3 sets of proceedings involving the same parties. The Applications are made by only one of the Defendants, Mr Engel.
Proceedings 14051/08
2 In these proceedings the Plaintiff claims money said to be owing under:-
- (i) A “Loan Contract” entered into on or about 31 December 2003 whereunder $200,150 was advanced;
- (ii) A “Constant Credit Contract” entered into on of about 31 December 2003 whereunder $175,000 was advanced.
3 The Plaintiff alleges that on or about 30 January 2004 property at 12 Macquarie St, Bolton was owned by Mr Engel and mortgaged to secure repayment of the moneys owing under those loan contracts and also seeks possession of that property.
4 On 16 October 2008 default judgment in a principal amount of $413,826.02 and for vacant possession of the land at 12 Macquarie Street was entered.
5 Affidavits of 10 and 18 September by Sheryl Kilby indicate that the Statement of Claim was served personally by her on each of the Defendants at 6.28 pm on 18 August 2008
6 In an affidavit of the Plaintiff’s solicitor it is said that in early March 2008, the Plaintiff issued to the Defendants notices under s 57 of the Real Property Act 1900 (NSW) of the Plaintiff’s intention to take legal action and to exercise its power of sale.
Proceedings 14052/08
7 In these proceedings the Plaintiff claims money said to be owing under:-
- (i) An “Initial Loan Contract” entered into on or about 2 June 2004 whereunder $310,150 was advanced;
- (ii) An “Agreement to Increase Amount” entered into on or about 20 December 2004 whereunder a further $350,000 was advanced.
8 The Plaintiff alleges that on or about 30 June 2004 the property at 12 Macquarie St, Bolton was owned by Mr Engel and mortgaged to secure repayment of the moneys owing under those loan contracts and on this account also seeks possession of that property.
9 The Plaintiff alleges that on or about 30 June 2004 property at 14 Macquarie St, Bolton was owned by Mr and Mrs Engel and mortgaged by to secure repayment of the moneys owing under those loan contracts and on this account seeks possession of that property also.
10 On 20 October 2008 default judgment in a principal amount of $714,924.07 and for vacant possession of the lands at 12 and 14 Macquarie Street was entered.
11 Affidavits of 1 September by Sheryl Kilby indicate that the Statement of Claim was served personally by her on each of the Defendants at 6.28 pm on 18 August 2008.
12 The Plaintiff’s solicitor’s affidavit to which reference has been made indicates that on or about 11 July 2008 the Plaintiff issued to the Defendants notices under s 57 of the Real Property Act of the Plaintiff’s intention to take legal action.
Proceedings 14445/08
13 In these proceedings the Plaintiff claims money said to be owing under:-
- (i) A “Loan Contract” entered into on or about 5 April 2002 whereunder $165,000 was advanced;
14 The Statement of Claim alleges that on or about 24 June 2002 the property at 14 Macquarie St, Bolton was owned by Mr and Mrs Engel and mortgaged to secure repayment of the moneys owing under this loan contract and again seeks possession of that property.
15 On 17 November 2008 default judgment in a principal amount of $161,177.50 and for vacant possession of the land at 14 Macquarie Street was entered.
16 An affidavit of 22 September by Mark Read indicates that the Statement of Claim was served personally by him on each of the Defendants at 7.38 pm on 5 September 2008
Mr Engel’s Response
17 Mr Ross Mason, Mr Engel’s solicitor, deposes to the fact that he was spoken to by Mrs Engel in late August or early September, that he met with her on 4 September in relation to the facts of the 3 sets of proceedings, concluded that she had no reasonable grounds of defence but that further investigation should occur in respect of a possible defence by Mr Engel. He wrote to the Plaintiff’s solicitors on 15 September saying that he acted on behalf of Mr Engel, that he had been provided with Statements of Claim in proceedings 14051 and 14445, observing that to properly advise his client he would appreciate receiving copies of documents referred to in those Statements of Claim and some others and seeking 21 days after provision of the documents to file any defence. The other documents sought were referred to in terms:-
- “9. All applications for finance lodged in respect of the loans, the subject of the proceedings.
- 10. If your client asserts that our client was given legal and/or financial advice prior to the execution of the documents relied upon by your client, the certificates and other documents relied upon by your client to support such assertion.”
18 The Plaintiff’s solicitors replied by facsimile on 16 September. It would appear that at that time no documents were supplied but an original of the facsimile letter with copies of the documents falling within paragraphs 1 to 8 of the request was received on 18 September. The Plaintiff’s solicitors advised that their instructions were not to agree to the further 21 days requested, that in the case of the “First Statement of Claim” the time to file a Defence had expired on 15 September and that they proposed to file for judgment on 19 September.
19 On 18 September the Defendant’s solicitors wrote again advising inter alia that a Statement of Claim in proceedings 14052/2008 had also been served, that Mr Engel was then aged 70, was resident interstate, that they regarded it as necessary to take comprehensive instructions from him as to the circumstances surrounding the execution of the documents and asking until 29 September to file any Defence. On 22 September the Plaintiff’s solicitors wrote back again advising that the Plaintiff did not agree to an extension of time.
20 There followed further correspondence to which it is unnecessary to refer. On 27 November Notices of Motion, seeking that enforcement of the writs of possession that had then issued be stayed and that default judgment be set aside, were filed in the 3 proceedings. The Notices of Motion were supported by affidavits, including an affidavit from Mr Mason annexing Mr Engel’s proposed Defence and one from Mr Engel deposing to matters relied on in those Defences and summarised below.
21 Sacrificing some accuracy for brevity, in short Mr Engel alleged that he was but a joiner by trade and contented himself with pursuing such activities, that his wife was a real estate agent and dealer in property and that for all practical purposes, all financial matters in his household and even the opening of the mail were dealt with by Mrs Engel. He said that the monies borrowed were wholly or predominantly for the benefit of his wife or corporations controlled by her and that he merely signed documents when she asked him to do so; that the details and ramifications of the various transactions were not understood by, or explained to, him; and that the Plaintiff knew or should have known that he was relying entirely on his wife to protect his interests and lacked understanding as to what was occurring. Although there are differences between the 3 Defences, Mr Engel alleges that he was in a position of special disadvantage and that the Plaintiff knew or ought to have known of the fact, that it is unconscionable for the Plaintiff to rely on the documents founding proceedings 14051 and 14052 and that, but for the Plaintiff’s conduct the Defendant could and would have discharged the loan relied on in proceedings 14445 and accordingly its enforcement in those proceedings of the mortgages over the 12 and 14 Macquarie Street properties is unconscionable. Mr Engel deposed to the property at 12 Macquarie St having been his home since about 1974 and that at 14 Macquarie St, an investment property.
22 If allowed to defend Mr Engel proposes to rely on the principle for which Garcia v National Australia Bank (1998) 194 CLR 395 is the best known authority and also on s51AC of the Trade Practices Act 1974 (C’th) which proscribes unconscionable conduct.
23 In opposition to the applications, the Plaintiff adduced as annexures A to H to an affidavit of Jason Moffat, evidence of a number of documents entitled “Managers Contract Explanation Checklists” signed by various of its employees and “Loan Contract Form of Acknowledgement – Borrower” which purport to bear signatures of Mr Engel. By comparison of the numbers on the checklists with those referred to in the Notices of Intention to take Legal Action, the checklists seem to relate to the following loans:-
- (i) $165,000 on 4 April 2002 – see annexures A and B
- (ii) $200,150 - The checklist is dated 8 January 2004. – see annexures C, D, E and F. (There seems to be duplication of the first 2 documents.)
- (iii) $310,150 or $660,150 though the checklist is dated 10 June 2004. – see annexures G and H.
24 The check lists indicate, inter alia, that the Plaintiff’s employees had advised the borrowers to obtain advice from their own solicitor, ensured the borrowers had received and read a copy of the Loan Contract and Mortgage, explained to the borrowers they must repay all moneys owing under the Contract by the due dates and if they failed to comply that the Plaintiff could sue them and take any property subject of a mortgage. The check lists also indicated that each of the borrowers had signed the Loan Contract and, if applicable, the mortgage and the “Loan Contract Form of Acknowledgement” in the presence of one or other of the Plaintiff’s employees.
25 The Loan Contract Acknowledgements, by the handwritten circling of the answers “yes” indicate that the signatory had been told by someone from the Plaintiff to obtain advice from the signatory’s own solicitor, except in the case of annexure H, had obtained that advice, understood that he must repay all moneys owing under the contract and if he failed to comply with his obligations the Plaintiff could sue him for any money owed and take property the subject of any mortgage.
26 In response to these documents, the Plaintiff in his affidavit of 10 December 2008 acknowledged that the signatures on the 4 “Loan Contract Form of Acknowledgment – Borrower” documents appears to be his and that the handwritten form of “Terence Engel” on 2 of those documents (but not the others) was his. He went on to say that he did not recall ever seeing the documents before, did not recall ever being required to answer questions of a document he was asked to sign for his wife or ever being advised by a representative of the Plaintiff or anyone else to obtain financial or legal advice before signing. In an earlier affidavit, he expressed himself in relation to these matters somewhat more strongly.
27 The Plaintiff also said that he had never read any loan documents, including those signed with the Plaintiff and had “never received financial or legal” (presumably advice) before signing loan documents.
28 In an earlier affidavit of 26 November 2008, the Plaintiff accepts that the signatures on the Loan Contracts for the $165,000, $200,150, $175,000 and the $310,150 loans are his. It would seem that at the time of signing that affidavit, neither he nor his solicitor had a copy of the agreement increasing that last mentioned figure to $660,150.
29 Clearly if the checklists and acknowledgments annexed to Mr Moffat’s affidavit accurately reflect the history of the transactions to which they refer, the unconscionability of which Mr Engel complains will not be established. His case is not strengthened by his lack of recollection in some areas but enough of what he says is inconsistent with the Plaintiff’s documents and supportive of a case of unconscionability to lead me to the conclusion that Mr Engel has a fairly arguable defence on the merits – see Cuttle v Brandt (1947) 64 WN (NSW) 96 at 98; Reinher Industrial Lease & Finance Pty Ltd v Jordon (unreported, NSWCA, 4 June 1974).
30 I am also satisfied that, within the authorities, a sufficient explanation has been given for the delay in filing a defence – see Evans v Bartlam (1937) AC 473; Davies v Pagett (1986) 10 FCR 226; Cohen v McWilliam (1995) 38 NSWLR 476.
31 Before one could be filed by Mr Engel’s solicitor, the latter was required by s347 of the Legal Profession Act 2005 (NSW) to be satisfied that “on the basis of provable facts … that (a) defence had reasonable prospects of success” and as he said in his affidavit of 10 December, he could not be so satisfied until he obtained detailed affidavits – or I would add, instructions – of Mr and Mrs Engel. In my judgment to be reasonably so satisfied it was also appropriate to firstly obtain copies of the relevant loan documents and to have sought to obtain the documents referred to in paragraphs 9 and 10 of his letter of 15 September quoted above.
32 I do not ignore the evidence in the affidavit of the Plaintiff’s solicitor to the effect that in March and July 2008, the Defendants were served with notices under s 57 of the Real Property Act of the Plaintiff’s intention to take legal action and to exercise its power of sale and that each of the Defendants should then have sought legal advice. Perhaps in the case of Mr Engel the reason he did not is that, as he deposed to, his wife attended to all financial matters and opened all of the mail received in the household. But even if that not be so, and Mr Engel had earlier opportunity to do what was done after service of the Statement of Claim, the cases referred to above satisfy me that he should be allowed in to defend.
33 In that respect, it is appropriate to record my view that the actions of the Plaintiff or its solicitors (or both) in refusing the 3 week extension of time to file a Defence requested in Mr Engel’s solicitor’s letter of 15 September was utterly unreasonable. Any significant lending organisation or person practicing in the field of litigation associated with substantial lending or mortgages knows that there are circumstances that may afford a defence to borrowers and that the proper consideration of those circumstances commonly requires the expenditure of some moderate degree of time. Though the Rules allow a minimum of 28 days for a Defence to be filed, they also envisage that that time is liable to be extended and provide no basis for the view that the 28 days should be insisted upon, no matter what and particularly when there is adequate indication that the issues liable to arise are being, apparently, sensibly addressed. Solicitors can be expected to know also of the principles by which courts grant extensions of time for the filing of Defences.
34 And though I do not need to rely on this, it is not inappropriate to compare the speed at which those on the Plaintiffs’ side of the record moved with what they expected after service of the Statements of Claim. I do not have before me the full history of transactions during the periods to which I am about to refer, but documents filed by the Plaintiff indicate that:-
- (i) In matters 14051 and 14052, the Defendants defaulted no later than 31 December 2007, Real Property Act notices were served in early March 2008, the amounts owing as at 17 July 2008 were calculated for inclusion in the Statements of Claim, the Statements of Claim were verified on 29 July, filed on 7 August and served on 18 August;
- (ii) In matter 14445, the Defendants defaulted no later than 30 April 2008, Real Property Act notices were served in early July 2008, the amount owing as at 21 August 2008 was calculated for inclusion in the Statement of Claim, the Statement of Claim was verified on 25 August, filed on 27 August and served on 5 September.
35 One matter that has concerned me is whether some terms should be imposed on Mr Engel as a condition of granting his application. The tenor of his evidence is to the effect that:-
- (i) If reasonably advised as to the effect of the documents, he would have signed the documents the subject of proceedings 14445, the loan then obtained being secured over 14 Macquarie St;
- (ii) If reasonably advised as to the effect of the documents, and advised by his wife that everything was OK, it is likely he would have signed the documents the subject of proceedings 14051, having regard to the fact that that the principal of the borrowings under those documents was about $375,000 leaving substantial equity in his home at 12 Macquarie Street;
- (iii) If reasonably advised and even if advised by his wife that everything was OK, he would not have signed the documents the subject of proceedings 14052. As has been said, those documents include mortgages over both the 12 and 14 Macquarie St properties.
36 In the face of this evidence, even if Mr Engel succeeds after a contested hearing, the likely result will be that he loses any interest he has in 14 Macquarie and, subject to any refinancing he can effect, will remain indebted to the Plaintiff. Mr Engel also deposed to the result of financial enquiries indicating some reasonable prospect of being able to refinance so as to retain his home which, according to a valuation in evidence, is worth in the vicinity of $850,000 to $900,000.
37 On the other hand, the Plaintiff’s obtaining of the documents and mortgages the subject of proceedings 14051 and 14052 undoubtedly would have affected Mr Engel’s equity in, and impeded Mr Engel being able to deal with, the property at 14 Macquarie St and in these circumstances it is conceivable that the relief Mr Engel may be entitled to in the later proceedings may extend to some limitation of the Plaintiff’s rights under the documents relied on in proceedings 14445. On behalf of Mr Engel it is submitted that it would be unconscionable for the bank to enforce rights (to the significant prejudice of the First Defendant) which arose by reason of its unconscionable conduct in respect of other closely related loans.
38 I have wondered whether it might not be sufficient in the circumstances to allow the judgment entered in proceedings 14445 to remain merely staying all proceedings thereon until the other actions are determined. However, the conclusion at which I have arrived is that the better course is to set aside all three judgments and matters consequent thereon.
39 Costs were not the subject of argument and hence at this stage I make no decision in relation to them. My criticism of the Plaintiff and its solicitors clearly have a bearing on what orders should be made and I am not disposed at this stage to make an order simply that costs be costs in the cause. The terms of any the mortgage or other agreement may also have a bearing on what costs order should be made though it may be that that aspect will have to await any claim for final relief.
40 A wider question is why there have been instituted 3 sets of proceedings when only 2 properties were involved and notices under the Real Property Act would seem to have been given in relation to all transactions more than a month before any proceedings were commenced. It may well be that there has been a great deal of unnecessary duplication and costs that neither party should have to bear.
41 Finally, it is appropriate to record that, due to the pressure of other matters, my decision on these applications has been delayed much longer than was desirable, or I originally contemplated. The Plaintiff has thus good grounds for being given a degree of expedition. Having regard to what has occurred to date, preparation for trial by both sides should not take very long and accordingly what I propose to do is to stand the proceedings over for about 3 weeks to enable the parties to reflect on how long they need to be ready for trial, and what directions if any may be needed.
42 One of the orders sought by the First Defendant was that the 3 sets of proceedings be consolidated. That is clearly appropriate.
43 The orders I make in each matter are:-
- (i) That the judgment entered against Mr Engel be set aside;
- (ii) That the leave to issue writ(s) of possession and the writ(s) of possession issued in the proceedings be set aside;
- (iii) That each of the proceedings 14051/2008, 14052/2008 and 14445/2008 be consolidated with the others;
- (iv) That Mr Engel have leave to file, on or before Monday 17 August 2009, a Defence to the Statement of Claim;
- (v) That Defences to all 3 actions shall be included in the one document;
- (vi) I reserve the question of costs;
- (vii) I stand the proceedings over until 19 August 2009 at 9.15 before me.
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