Jenkins v Jamieson

[2023] VCC 672

IN THE COUNTY COURT OF VICTORIA

AT Melbourne

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

BankinG/Finance List

Case No. CI-22-01091

ANTHONY THOMAS JENKINS	First Plaintiff
NADIA JENKINS	Second Plaintiff
v
TIMOTHY JOHN JAMIESON	First Defendant
SIMONE MAREE BERTALLI	Second Defendant

---

JUDGE:	HIS HONOUR JUDGE MACNAMARA
WHERE HELD:	Melbourne
DATE OF HEARING:	18 April 2023
DATE OF RULING:	18 April 2023
CASE MAY BE CITED AS:	Jenkins & Anor v Jamieson & Anor
MEDIUM NEUTRAL CITATION:	[2023] VCC 672

REASONS FOR RULING
---

Subject:Loan Agreement

Catchwords:              Judgment in default of defence – allegation no monies advanced at date of loan agreement – monies previously advanced – disbursement order providing for repayment and redrawing – no arguable defence – whether alleged representations that loan monies could be repaid from profits of real estate joint venture – no profits resulting – not a defence to liability under loan agreement – second borrower wife of first borrower arguable defence based on Garcia v National Australia Bank Ltd (1998) 194 CLR 395

Legislation Cited:      Supreme Court Act1986 (Vic); Penalty Interest Rates Act 1983 (Vic)

Cases Cited:Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146; Garcia v National Australia Bank Ltd (1998) 194 CLR 395; Hoyisun Pty Ltd v Corelli & Anor [2021] VCC 1197; Equuscorp Pty Ltd & Anor v Glengallan Investments Pty Ltd (2004) 218 CLR 471.

Ruling:Arguable defence for second defendant; no arguable defence for first defendant

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr S Hibble	DSA Law
For the First Defendant	Mr M Latham	Rogers & Gaylard Lawyers
For the Second Defendant	Mr S Jenkins	Aintree Group Legal

HIS HONOUR:

1This proceeding was commenced by writ last year.  The plaintiffs’ case as pleaded, which has remained constant since the writ was filed, was for recovery of monies said to have been advanced under a loan agreement which was subject to some two or more variations, together with interest and the enforcement of mortgages said to secure the repayment of the monies lent.

2In May of last year, the plaintiffs filed a request for further and better particulars of a joint defence filed on behalf of the two defendants.  That defence has, as the narrative will disclose, fallen by the wayside, and I have not been taken to it for the purposes of the present application.  It appears, however, that there was a contention that the obligations to make repayment under the loan agreement or agreements was dependent upon, or linked to, development arrangements involving the same interests, though not necessarily the same individuals or legal entities, relative to the development of real estate at Dryburgh Street, North Melbourne.  Amongst the particulars that were sought were requests for an explanation as to whatever set‑off or similar such arrangement was asserted as resulting from the interdependency of those two transactions.

3Aside from the request for further and better particulars, this issue was taken up in at least one piece of correspondence between solicitors.  An email dated 8 November 2022, from the plaintiffs’ solicitors to the solicitor then acting for both defendants, enquired, at paragraph 7, what would be the effect on the defendants’ obligations under the loan arrangements if there were no profit to be derived from the Dryburgh Street Development?  That question was elaborated upon in a number of different subparagraphs.

4Mr Hibble, counsel for the plaintiffs, has informed me – from the bar table, but I did not hear it denied – that no direct response was provided to that question or series of questions, nor were the further and better particulars ever provided.

5Early this year, in the period February to March, with a trial date fixed in March, the plaintiffs complained that they had not had discovery from the defendants, nor been provided with the further and better particulars sought the previous May.  Discovery was made, and that default on the part of the defendants was cured, but the issue of the further and better particulars remained outstanding.

6As a result, the matter was brought before Judicial Registrar Muller, who determined in the circumstances that the defendants’ defence should be struck out, with the plaintiffs to be at liberty to enter judgment against the defendants as if the proceeding were undefended.  He directed that this latter step should be delayed for a period of seven days, presumably giving a final opportunity for the defendants to mend their hand.  That period elapsed, and default judgment was entered.

7I now have before me applications to undo those steps.  The first defendant, Mr Jamieson, through his counsel, Mr Latham, seeks to achieve this result by an application to review the determination of the judicial registrar under Rule 84.03 of the Court’s Rules, which in the circumstances entitles me to review the judicial registrar’s determination and either confirm it, set it aside, or vary it, with liberty to entertain and receive new evidence.  In effect, it provides for a rehearing de novo.

8Mr Jenkins, on behalf of the second defendant, has sought to undo the adverse event for his client by seeking to set aside the judgment in default of defence.  In the circumstances, I believe it is unnecessary for me to place any focus upon the procedural issues as to which is the more appropriate or satisfactory way of proceeding.  I seek to deal with the two applications as a matter of substance.

9Inevitably, in circumstances such as these, two considerations collide and call for resolution.  The one consideration might be thought to be embodied in a decision of the High Court of Australia in 1995 where the Court emphasised, upon an application for a pleading amendment, that the purpose of the legal system was to determine matters upon their substantive legal merits, and that regimes of case management were servants rather than masters.

10That view of these matters was substantially revised in 2009 when the Court gave its decision in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175. In that case, the Court said that the decision in Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 overemphasised the importance of the legal merits of proceedings and paid insufficient heed to the effects upon the legal system generally of amendments, adjournments, and indulgences to delinquent litigants, and also paid insufficient heed to the entitlement of a litigant who has obeyed the rules and met the various timelines and deadlines required by judicial management to some proper consideration of the merit thereby shown.

11The effect, then, is that matters are rebalanced so that these considerations are thrown into the balance, and the issue of underlying legal merit is no longer overwhelming.

12In effect, both defendants now contend that they have arguable defences which, in the case of the first defendant, are said to be embodied in a draft defence and counterclaim which is to be found as an exhibit to an affidavit by a Ms Bronwyn Jane Goddard sworn 7 March 2023; and Ms Simone Bertalli, the second defendant, through her counsel, Mr Jenkins, says that the merits of her defence are to be found in an affidavit sworn by her 13 April 2023.

13Unsurprisingly, the plaintiffs’ counsel, Mr Hibble, has placed emphasis upon what he says is the delinquency of the defendants in their conduct of the proceeding, and the weakness or non-existence of the defences said to be asserted.

14I will turn first to consider what, in substance, is said to constitute the defence of the first defendant, who is the husband of the second defendant.

15The first point made in the draft defence and enunciated by his counsel, Mr Latham, is a contention that the monies said to have been advanced under a particular nominated loan agreement with a particular date were in fact already outstanding before that loan agreement was signed, and that accordingly there were no advances at all made under that loan agreement.  On its face, this argument, if accepted, does not provide a complete defence to the plaintiffs’ claim.  It cannot be the case that if monies are advanced as loans the principal cannot be recovered, whether or not that principal is to be regarded as comprised within the principal sum or the expression “the monies hereby secured” under a particular loan agreement.

16Mr Latham said that this would be relevant to interest.  I have been told the default interest rate claimed under the loan agreement is in the high teens – that is, nearly 20 per cent per annum; and, if all that could be recovered from the first plaintiff was the principal sum, then interest would be limited to 10 per cent per annum simple under the Supreme Court Act 1986 s58 and the Penalty Interest Rates Act 1983. This is a significant slice out of the plaintiffs’ claim, but falls a long way short of constituting a full defence.

17On the other hand, there is a document styled “Disbursement Order”, which Mr Latham did not mention, but which Ms Bertalli, the second defendant, exhibits in unsigned form and concedes that she signed and inferentially her husband signed too.  This document purports to consolidate a number of pre-existing loans, by way of repayment and redrawing, and subject them to the terms of the loan agreement.  These repayments and redrawing’s were not done with actual currency, or, so far as one can see, with bank cheques or anything along those lines.  They are mere book entries.  However, as High Court authority from earlier this millennium indicates, these transactions are to be regarded as being no less real simply because they are effected by book entry (Equuscorp Pty Ltd & Anor v Glengallan Investments Pty Ltd (2004) 218 CLR 471).

18In my view, this first contention on behalf of the first defendant is not arguable and provides no defence.

19The other element urged by Mr Latham on behalf of the first defendant was that the arrangement between the parties was that the loan repayments would be made from profits derived from the Dryburgh Street Development.  The first defendant, or the first and second defendants, were to have a 50 per cent share of those profits.

20The plaintiffs’ case is that there were no profits, and Mr Hibble took me to email transmissions from the plaintiffs’ solicitor, Mr Preat, during the pendency of this proceeding, inviting those representing the defendants, or forensic accountants appointed by them, to peruse the accounts of the joint venture to satisfy themselves that no profit was derived.  He said, and this was not denied, that this offer was not taken up.  The offer was made in a number of emails, and in particular the email from the plaintiffs’ solicitor of 8 November 2022 to which I have already referred.  That email, as previously noted, enquired what would be the situation if the Dryburgh Street Development either made no profit or retained a loss: would the obligations under the loan arrangement be regarded as discharged by that fact?  To put it another way, does a profit of zero dollars represent an amount which, in the circumstances, the plaintiffs were obliged to take in full and final settlement of their entitlements under the loan arrangements?

21Mr Latham told me it was the plaintiffs’ position that that was the case.  The draft defence and counterclaim did not, so far as I can see, directly state this, though it may be that through a series of relatively opaque paragraphs one might reach that as the conclusion.

22Mr Latham took me to various paragraphs in the draft pleading which asserted the making of a series of representations.  Those representations boil down to statements that the loan obligations would be met out of the profits of the Dryburgh Street Development.  Accepting, for the purposes of my determination today, that such representations were made, that merely indicates a source from which the obligations under the loan arrangements presumed to exist would be met.  The representations do not, as I read them, go the distance of saying that if there were no profits the loan obligations would be discharged.  Nor is there anything said to have been represented along the lines that the loan advances were to be treated as, in effect, equity subscriptions which would be consumed and disappear by book entry if no profit was made.

23In my view, therefore, these matters provide the first defendant no defence; and the determinations, and the consequences of those determinations, as made by the learned Judicial Registrar, should stand as regards the first defendant.

24As to the situation of the second defendant, Mr Jenkins, on her behalf, reiterated the propositions relative to the loan transactions, asserting that, given that no advances were made as at the date of the loan agreement, there was a total failure of consideration.  I must necessarily reject that argument.

25A further matter which I should have dealt with relative to the situation of the mortgages securing the loan obligations as regards both defendants is a contention made by Mr Latham that even if the principal sum of the amounts advanced were recoverable as such it would not be secured by the relevant mortgages.

26Mr Hibble, on behalf of the plaintiffs, took me to affidavit material that quoted from the definition of “monies hereby secured”, and that expression, as stated in the mortgages, covered all monies now or hereafter owing by the mortgagor or mortgagors to the mortgagees.  That is an expression wide enough to cover all obligations past, present, and future; and therefore, even had I accepted, which I do not, the arguments put relative to the operation of the loan agreement as advanced by both defendants, that would not have the effect that the principal sums admittedly advanced could not be recovered and would not be secured by the mortgages.  Neither defendant has a defence on that score.

27There was a further matter advanced by Mr Jenkins, and that related to the defence available to a married woman by reason of the decision of the High Court of Australia in Garcia v National Australia Bank Ltd (1998) 194 CLR 395. At paragraph 34 of his outline, Mr Jenkins, by reference to a formulation of the defence identified by the High Court in Garcia’s case by Judge Woodward in Hoyisun Pty Ltd v Corelli & Anor [2021] VCC 1197 at paragraph [109], and translated to the facts of the present case, as follows:

“34.1Ms Bertalli did not understand the purport and effect of the transactions constituted by the loan agreement;

34.2   the transactions were voluntary, and that Ms Bertalli did not obtain any direct or immediate benefit from the loan agreement;

34.3   the plaintiffs knew that Ms Bertalli was Mr Jamieson’s husband, and could be expected to repose trust and confidence in him and therefore may have understood that Ms Bertalli may not have fully and accurately explained the transactions to him; and

34.4   the plaintiffs nonetheless did not take steps to explain the transactions to Ms Bertalli or find out if a stranger had explained it to her.”

28Mr Jenkins referred to an affidavit from his client which he said made good the various points in this formulation.  He conceded that there was a certificate as to independent legal advice from a solicitor who was acting jointly for the two defendants in the loan transactions.  He contended that in the circumstances, and having regard to the Garcia doctrine, the solicitor had a conflict of interest, and the certificate from him alone ought not to be regarded as meeting the Garcia problem.  I accept that proposition.

29Mr Hibble, on behalf of the plaintiffs, undertook a substantial critique of the second defendant’s material and arguments on these points.  In so far as Mr Jenkins contended that there were no transactions between the plaintiffs and the second defendant, he drew attention to her having signed the disbursement order and the loan agreement.  As to the contention that the proceeding until early this year was conducted without any regard to her involvement and without any proper attention to her individual and separate interests based on Garcia, he noted that according to the affidavit it was Ms Bertalli’s own decision, in effect, to distance herself from instructing the solicitors acting for both defendants, but that she attended a mediation in the proceeding held pursuant to the Court’s orders and directions.  Mr Hibble observed that the manner in which mediations are customarily conducted necessarily entailed the presumption that the mediator gave a full and complete explanation to the parties as to what the case was about and what was at stake.  Therefore, he said, in effect, the argument based on Garcia advanced on behalf of Ms Bertalli should be taken with a large grain of salt.

30Mr Jenkins said the question for the Court’s consideration now was not whether the defence would ultimately succeed; that was a matter for trial.  It was sufficient that the defence should be treated as arguable, and he said that so much had been established, and therefore the application on behalf of the second defendant should succeed.  He said that in the circumstances the second defendant, Ms Bertalli, would be mightily prejudiced if the default judgment was to stand against her, but the plaintiffs were not seriously prejudiced.

31Mr Hibble, understandably, was strongly in disagreement with this latter proposition.  The evidence did not disclose how the very large amount now said to be outstanding related to the value of the security to be found in the collateral mortgages.  With interest running at a default rate close to 20 per cent, it is not a wild speculation to think that the amounts outstanding might already have outpaced the value of the security held by the plaintiffs for those amounts, or, if not, would outpace the value of that security before a trial in the future might be completed.

32Therefore, it must be conceded that there is a very substantial prejudice to the plaintiffs if the second defendant’s application is successful and, as against her success, one has to consider that she, as a litigant, has been demonstrated to be comprehensively delinquent in the manner already described.

33Ultimately, however, in my view, the balance as between these considerations favours the view that there would be a greater injustice to the second defendant, if she were precluded from being able to run her argument based on Garcia’s case and have it considered by the Court, than the plaintiffs suffer if the matter has to go to a trial; and therefore the proper outcome is that the application on behalf of the second defendant, which I think must be regarded as entailing an application to set aside the default judgment and to extend the time within which she is entitled to file her defence, must succeed.