Kourosh Jafari v Colonial First State Investments Ltd - [2017] VCC 927

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised

Not Restricted

Suitable for Publication

BANKING AND FINANCE LIST

Case No. CI-15-04035

Kourosh Jafari	Plaintiff
v
Colonial First State Investments Ltd & Ors	Defendant

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JUDGE:	His Honour Judge Woodward
WHERE HELD:	Melbourne
DATE OF HEARING:	21 June 2017
DATE OF JUDGMENT:	13 July 2017
CASE MAY BE CITED AS:	Kourosh Jafari v Colonial First State Investments Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2017] VCC 927

REASONS FOR JUDGMENT
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Subject: SUMMARY JUDGMENT

Catchwords: PRACTICE AND PROCEDURE – Application by defendants for summary judgment against the plaintiff pursuant to ss62 and 63 of the Civil Procedure Act 2010 (Vic) – duties of court to self-represented plaintiff – whether plaintiff should be permitted to re-plead – whether plaintiff entitled to further adjournment – application of the Code of Banking Practice – costs payable on an indemnity basis under agreement between the parties

Legislation Cited: Civil Procedure Act 2010 (Vic); County Court Civil Procedure Rules 2008; Transfer of Land Act 1958 (Vic); Limitation of Actions Act 1958 (Vic); Evidence Act 2008 (Vic); Corporations Act 2001 (Cth); Bankruptcy Act 1966 (Cth); Banking Act 1959 (Cth)
Cases Cited:Neil v Nott (1994) 68 ALJR 509, 510; Minogue v HREOC (1999) 84 FCR 438; Platcher v Joseph [2004] FCAFC 68; Trkulja v Markovic [2015] VSCA 298; Jafari v Alderuccio [2015] VSC 684; National Australia Bank v Rose [2016] VSCA 169; National Australia Bank v Rice [2015] VSC 10; Turner v Bulletin Newspaper Co Pty Ltd (1974) 131 CLR 69; Environinvest Ltd v Pescott; Environinvest Ltd v Blackburne Pty Ltd [2011] VSC 325; Caason Investments Pty Ltd v Cao (2015) 236 FCR 322; [2015] FCAFC 94, Manderson M & F Consulting v Incitec Pivot Ltd (2011) 35 VR 98; JBS Southern Aust v Westcity Group Holdings [2011] VSC 476; Feiglin v Ainsworth (No 2) [2014] VSC 376; Taha v Shaq Industries Pty Ltd [2012] VSC 30; MBF Investments Pty Ltd v Nolan [2011] VSCA 114; (2011) VR 116; Webster Investments Pty Ltd v Anderson [2016] VSC 620; Mackintosh v Johnson (2013) 37 VR 301, 304; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; Blomley v Ryan (1956) 99 CLR 362; Garcia v National Australia Bank (1998) 194 CLR 395; Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27; Christian Youth Camps Limited v Cobaw Community Health Services Limited & Ors [2014] VSCA 112

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	In person
For the Defendant	Mr S J Maiden of Counsel	Ashurst Australia

HIS HONOUR:

Introduction

By summons dated 31 March 2017, the first and fourth defendants (respectively “Colonial” and “Perpetual”) apply for summary judgment under ss62 and 63 of the Civil Procedure Act 2010 (Vic) (“CPA”). They also seek an order pursuant to rule 9.06 of the County Court Civil Procedure Rules 2008 (“Rules”) that the second and third defendants cease to be parties to the proceeding (together, “defendants’ application”). The defendants’ application is supported by the affidavit of Colonial’s Head of Product Solutions, Peter Anthony Labrie affirmed on 31 March 2017 (“Labrie affidavit”).

The plaintiff is Kourosh Jafari. Mr Jafari has represented himself in the proceeding since its commencement, including in the hearing before me. Mr Jafari opposed the application for summary judgment, but indicated that he did not oppose the removal of the second and third defendants as parties in the proceeding, accepting that neither is a legal entity capable of being sued in its own right.

During the course of the hearing, Mr Jafari on a number of occasions made application that, in effect, sought to delay my determination of the summary judgment application. Those applications were variously articulated as an application for a further adjournment of the hearing of the summary judgment application,[1] an application for a temporary discontinuance or stay of the proceeding generally[2] and an application for leave to re-plead[3] (“adjournment applications”).
[1]T39:22-24; T45:L24-25
[2]T44:L5-7
[3]T3:L24-30; T37:L1-4; T54:L6-12

I indicated to Mr Jafari that I was not willing to further adjourn the summary judgment application,[4] but would consider and rule on his adjournment applications as part of my consideration of all of the issues raised before me.[5] I explained to Mr Jafari that, if I determined to refuse his adjournment applications, I would then proceed also to consider and determine the summary judgment application.[6]
[4]T45:L26-T46:L10
[5]T53-54
[6]T53:L16-T54:L3; T57:L24-28

Both in the hearing and in determining the issues for consideration, I have been acutely conscious of Mr Jafari’s status as a self-represented litigant and the obligations that imposes on me as discussed further below. I am nevertheless satisfied that there is no sufficient justification for any further delay in the hearing and determination of the summary judgment application. I am also satisfied that Mr Jafari’s claims as far as I have been able to ascertain them from the pleadings, his affidavit and his argument before me, have no real prospects of success. I therefore propose to grant Colonial and Perpetual’s application for summary judgment and dismiss the proceeding accordingly.

The course of the proceeding

The course that the proceeding has taken to this point is relevant to my determination of Mr Jafari’s adjournment applications.

The proceeding was commenced by writ indorsed with a statement of claim, filed on 7 August 2015. Mr Jafari explained in the course of his submissions that he had only started the proceeding when he did without taking it to lawyers, because a limitation period was about to expire.

Mr Jafari took no further step in relation to the proceeding for over 12 months. On 24 August 2016, Mr Jafari sought and was granted an order extending the date of validity for service of the writ and statement of claim to 24 November 2016. Affidavits of service on the court file disclose that the proceeding was served on all defendants by being sent by prepaid post to an address in Sydney on 18 November 2016. Colonial and Perpetual filed notice of appearance on 14 December 2016.

The parties were unable to agree on consent orders for the interlocutory steps in the proceeding: Ashurst (the solicitors for Colonial and Perpetual) were seeking orders that would accommodate the defendants’ application and Mr Jafari was seeking only the usual orders bringing the matter to trial. Accordingly, the proceeding was listed for a directions hearing before His Honour Judge Cosgrave on 24 February 2017. At that hearing, His Honour made orders for the filing and service of the defendants’ application by 31 March 2017, affidavits in reply and submissions on behalf of both parties. The application was listed for hearing on 28 April 2017.

On 12 April 2017, Mr Jafari sent an email to Ashurst, copied to the court and held on the court file. Later email exchanges referred to below were also copied to the court and remain on the court file. The email of 12 April commenced: “As discussed yesterday and today, I would like to adjourn this matter for several months. There are many reasons which some [sic] can be explained as below”. The email went on to enumerate 11 reasons, including reference to the size of the exhibits, Mr Jafari’s difficulties in collecting the exhibits and some of the exhibits being too dark to read. Relevantly for present purposes, the email stated:

4. As you would appreciate, the affidavit and exhibits contain legal documents which require a lengthy time and a very competent senior counsel to understand and provide legal opinion in order for me to reply to it properly.
5. Unfortunately, the senior counsel who will be engaged in my matter, Mr Willis, informed me that he will be leaving for the US soon and will be back by end of May 2017.
6. My matter is a situation when the bank withholds information from a customer for its own advantage and to the disadvantage of its customer to the point of destruction (I am not the only person in this situation). In my case the bank refused to provide information in its possession as at transactions in June 2008, October 2008 and August 2009 until last week. After nine years.
7. In these folders, amongst many other things such as the “banking code”, there are documents provided in respect to appointment of a “controller” on my company.
8. There are significant issues regarding the timing and reasoning of this appointment, which need to be legally investigated by experts.
9. Further, other questions would be, was there a conflict to appoint the controller by the bank? And did the controller conduct the matter according to its duties and obligations?
…
My claims against the defendants are lawful, legitimate and I am advised that the prospects of winning are very high. Therefore, I need to be represented by competent lawyers which I have been recently in contact with.
Accordingly I would like to adjourn this matter for several months. I would greatly appreciate your co-operation in agreeing with the adjournment.

Ashurst responded to this email later the same day in terms as follows:

The first defendant does not consent to any adjournment of the above proceeding.
You requested an adjournment of the proceeding - and raised many of the below issues [referring to the issues listed in Mr Jafari’s email] at the directions hearing on 24 February 2017. The Honourable Justice Cosgrave refused to grant the adjournment and made the attached orders. We note that pursuant to paragraph 2 of those orders, you are to file and serve any affidavits in reply by 4pm on 14 April 2017.

His Honour Judge Cosgrave heard preliminary argument in relation to the defendant’s application and Mr Jafari’s application for an adjournment, on 28 April 2017. There is no transcript of that hearing, but counsel for Colonial and Perpetual before me, who also appeared at the hearing on 28 April 2017 stated (without contradiction by Mr Jafari), that in the course of the hearing on 28 April 2017:

· Mr Jafari made another application for an adjournment;

· he told Judge Cosgrave that he needed a long adjournment for the purpose of obtaining legal advice and Mr Willis’s name was mentioned;

· he also said he needed the adjournment for reasons including medical treatment of his partner; and

· an adjournment was granted on that occasion.[7]

[7]T51-52

His Honour made orders that day effectively acceding to Mr Jafari’s application for an adjournment (albeit for a little over one month to 2 June 2017, not “several months”) and ordered that Mr Jafari file and serve any affidavit in reply and submissions in response by 4pm on 29 May 2017 (Mr Jafari having failed to do so by the dates set in His Honour’s earlier orders). His Honour also ordered that Mr Jafari pay Colonial and Perpetual’s costs of the adjournment, such costs to be taxed on an indemnity basis in default of agreement.

On 26 May 2017, Mr Jafari sent an email to Ashurst confirming that he was required to attend directions hearings in two matters before His Honour Justice Elliott in the Supreme Court on 2 June 2017 and therefore could not attend the hearing in this Court. He requested in the email that Colonial and Perpetual consent to an adjournment of the hearing on 2 June 2017. Ashurst responded on 28 May 2017, indicating that their clients were not in a position to consent to an adjournment and suggesting that the scheduling difficulties faced by Mr Jafari should have been raised when the orders were first made or at least earlier than the Friday before the hearing. They indicated they would be prepared to consent to rescheduling the hearing to the afternoon of 2 June 2017 if that could be accommodated by the Court.

In his response to that email on 29 May 2017, Mr Jafari stated: “Despite my best efforts I have not been able to get the transcripts in time, in addition as I informed the court and you regarding my personal issues and partner’s health which prevented me from preparing the affidavit and submissions for Friday’s hearing”. Mr Jafari went on to explain why he had overlooked the clash of dates at the time of the hearing before Judge Cosgrave on 28 April 2017 and went on to state: “In this circumstances it is unfair, unreasonable and unnecessary use of the Honourable Court’s time and unnecessary costs for not agreeing for an adjournment to enable me to do the affidavit and submissions and amending my statement of claim which can be done when Mr Willis returns from overseas, which is in about mid-June, considering that your client/s provided documents after almost 8 years that I requested for many years”.

In their response on 30 May 2017, Ashurst stated that their clients were prepared to accommodate Mr Jafari’s request for a further adjournment and suggested a series of possible dates. In that email, Ashurst noted as follows: “All the matters referred to below [referring to Mr Jafari’s email of the day before], with the exception of your other directions hearings (being your preferred counsel’s unavailability, your wife’s medical condition etc), were raised by you at the last hearing and were determined by His Honour at that time. It was for those reasons that the adjournment to this Friday was granted”.

On 31 May 2017, Mr Jafari notified the Court by email that: “21 June 2017 would be preferable date to list the matter to be heard”. Ashurst later confirmed their availability for that date and application was adjourned accordingly on the papers.

Thus, the date for the hearing before me was a delay of almost two months from the original date for hearing ordered by Judge Cosgrave and was proposed by Mr Jafari and agreed to by Colonial and Perpetual. Further:

·    Mr Jafari has had from the date of commencement of the proceeding on 7 August 2015 to amend his statement of claim, in circumstances where he recognised at the time that it had been prepared without consulting lawyers because of the need to issue before expiry of a limitation period;
·    that need to consider and make necessary amendments to the statement of claim became more acute in February 2017 when Colonial and Perpetual first foreshadowed a summary judgment application and/or application to strike out;
·    it appears from the email from Ashurst sent on 12 April 2017, that a number of the matters raised by Mr Jafari in his email that day (I infer, including the need to obtain legal assistance) were mentioned by Mr Jafari during the course of the hearing before His Honour Judge Cosgrave on 24 February 2017, and that His Honour had refused the adjournment sought by Mr Jafari notwithstanding those matters;
·    on 12 April 2017 Mr Jafari again identified the need to obtain legal assistance and flagged his intention to seek that assistance from Mr Willis who, he then said, “will be leaving for the US soon and will be back by end of May 2017”;
·    similar issues were raised by Mr Jafari at the hearing before Judge Cosgrave on 28 April 2017 and appear to have factored in to His Honour’s decision that day to adjourn the defendants’ application to 2 June; and
·    in his email of 29 May 2017 urging Ashurst to consent to a further adjournment, Mr Jafari again referred to his need for more time “to do the affidavit and submissions and amending my statement of claim which can be done when Mr Willis returns from overseas, which is in about mid-June”.

Ashurst and counsel for Colonial and Perpetual had filed and served a 13 page outline of argument dated 21 April 2017, in advance of the original date for the hearing of the application (28 April). They filed and served a supplementary outline dated 29 May 2017. By that date, Mr Jafari had missed two court imposed deadlines for the filing and service by him of any affidavit in reply and submissions in response. His affidavit was in fact not filed and served until the afternoon of 20 June 2017 (“Jafari affidavit”), the day before the hearing. Counsel for Colonial and Perpetual indicated that his clients were willing to proceed with the defendants’ application, notwithstanding very late service of the Jafari affidavit. Mr Jafari did not file and serve any written submissions.

Background to the proceeding

Perpetual was at the relevant time the custodian under a custody agreement with Colonial dated 12 May 2000,[8] pursuant to which Perpetual agreed to provide custodian services with respect to the Colonial First State Wholesale Pooled Mortgage Fund, an unincorporated managed investment scheme (“Fund”). Colonial is the responsible entity of the Fund. The $840,000 loan from Perpetual that is at the heart of this proceeding (“Loan”) was advanced on 11 July 2005 by Perpetual in its capacity as custodian, to 63 Buckley Street Pty Ltd (“63 Buckley”) pursuant to a deed of loan (“Deed of Loan”) dated 11 July 2005,[9] incorporating the terms of a letter of offer (“Letter of Offer”) dated 8 June 2005[10] (together “Loan Agreement”) and Mr Jafari guaranteed the Loan by a guarantee and indemnity in favour of Perpetual dated 11 July 2005 (“Guarantee”).[11]
[8]Exhibit PAL-4 to the Labrie affidavit
[9]Exhibit PAL-8 to the Labrie affidavit
[10]Clause 11.1 of the Deed of Loan
[11]Exhibit PAL-9 to the Labrie affidavit

The Loan was secured by mortgages in favour of Perpetual over land at Seddon, near Footscray (“Buckley St properties”), namely, 59 Buckley St owned by Mr Jafari and neighbouring land at 61 and 63-67 Buckley St, owned by 63 Buckley. The Loan was advanced in part to refinance an earlier loan from Perpetual that had funded 63 Buckley’s purchase of the land at 61 and 63-67 Buckley St in around 2002.

Curiously, under the terms of the Deed of Loan, Perpetual is defined as “Lender” for the purposes of the Loan, whereas the Letter of Offer defines Colonial as “the lender”. Further, clause 11.1 of the Deed of Loan (in addition to providing that the provisions of the Letter of Offer are included and form part of the Deed of Loan) states that: “to the extent of any inconsistency between this Document and the Letter of Offer, subject to clause 12.2 the terms and conditions of the Letter of Offer prevail”.

In my view, nothing of substance turns on this possible anomaly in the documents. There is no doubt that the Loan was validly secured under the mortgages over the Buckley St properties, that Perpetual was the mortgagee and that the mortgages were enforced by Perpetual in its capacity as such mortgagee. Further, the better view is that there is no inconsistency between the documents. The fact that the Letter of Offer uses the term “lender” to define Colonial within the body of the Letter of Offer does not render it as such. It is merely a defined term.

It is sufficiently clear from the Loan facility and security documents as a whole that the Loan was advanced out of the Fund by Perpetual in its capacity as custodian of that Fund and as agent of Colonial,[12] and that Colonial as responsible entity of the Fund was responsible for the day to day management of the Loan.[13] Further, to the extent that there is an inconsistency, Perpetual can also rely on clause 12.2 of the Deed of Loan to resolve any such inconsistency in its favour. In my view, therefore, Perpetual is both the “Lender” as that term is used in the Deed of Loan and is the lender to 63 Buckley in fact.
[12]See how Perpetual is defined as a party on page 1 and clause 14.1 of the Deed of Loan
[13]See also clause 3 of the Letter of Offer, which provides that Colonial “will make any/all decisions in relation to the loan facility applied for over the duration of the loan term”

The circumstances of Mr Jafari’s first involvement in the purchase and development of the Buckley St properties (“Buckley St project”) are set out at length in the reasons of His Honour Justice Hargrave in Bloomingdale Holdings Pty Ltd v 63 Buckley Street Pty Ltd [2008] VSC 168 (“Bloomingdale proceeding”), including in the course of His Honour’s findings at [149] to [206] and at [493] to [494]. Notably, in around 2001, Mr Jafari had recently finished developing two townhouses and was interested in further property development projects. He was encouraged by his then friend Mr Gangemi to invest in projects that Mr Gangemi and another associate of his, Mr Lanciana, were involved in.

In due course, Mr Jafari invested a total of $350,000 and, as Hargrave J ultimately found, it was agreed that this investment represented a 25% interest in the Buckley St project. Hargrave J also found that Mr Jafari made this investment in reliance on false representations by Mr Gangemi and Mr Lanciana that the properties at 61 and 63-67 Buckley St were purchased unencumbered. In fact, those had been provided as security for a loan from Perpetual of $504,000. His Honour also found that Mr Lanciana had validly transferred 100% ownership of 63 Buckley to Mr Jafari and that Mr Gangemi’s company Bloomingdale had no reasonable cause to lodge caveats over the properties at 61 and 63-67 Buckley St. The background to Mr Jafari’s purchase of the neighbouring property at 59 Buckley St in his own name, to form part of the Buckley St project, is discussed by Hargrave J at [194] to [201].

In his affidavit, Mr Jafari summarised the relevant background matters referred to above in the following terms:

In or about May 2005 by way of loan [Colonial] lent me $840,000…and secured the loan by way of registered mortgage…upon the titles of my properties situated at 59, 61, 63-67 Buckley Street Seddon…at the Land Titles Office.
From 2002 [Colonial] already was the mortgagee on 61 and 63-67 Buckley Street Seddon. [Colonial] extended the loan for 12 months (until June 2006) and added my other property (59 Buckley Street Seddon) to the loan and I became the sole “Guarantor” of the loan.
I intended to develop the project, which consisted of approximately 81 apartments of mixed studios, 1 and 2 bedroom units, plus 2 retail and 35 car parks.
Unfortunately, the project stopped due to two unlawful caveats placed on 61 and 63 Buckley Street Seddon, on 17 August 2005 and 18 January 2006, claiming (without any facts) fraud and duress. These unlawful caveats were removed on 27 May 2008 by the order of His Honour Justice Hargrave in [the Bloomingdale proceeding].

The original term of the Loan was 12 months from the beginning of the first day of the month following the date of the advance of funds (that is, 12 months beginning on 1 August 2005) (Loan Agreement clause 6). The interest rate provided for in the Loan Agreement was a variable rate of 5.75% per annum (reducible to 1.75% per annum if paid by the due date) above the 90 day Bank Bill Rate.

In late August 2006, the parties agreed to an informal extension of the Loan term from 1 August to 31 October 2006. A letter setting out the terms of that informal extension was signed by Mr Jafari on 4 September 2006.[14] The letter was sent by Balmain Commercial Loan Administration (“Balmain”), the mortgage administrator for Colonial in relation to the Loan. Among other things, the letter provided that the Loan was to be repaid in full on or before 31 October 2006 “with confirmation of unconditional approval to be received from the incoming Lender at least 10 working days prior to the due repayment date”. And by signing the letter, Mr Jafari acknowledged: “that if the above terms are not satisfied, [Colonial] will impose the exit fee of $25,000 as contained in the letter of offer and the loan will be in default”.
[14]Exhibit PAL-12 to the Labrie affidavit

The loan was not repaid on or before 31 October 2006. The Labrie affidavit states (and I accept) that the failure to repay the loan on that date was an “Event of Default” under clause 9.2 of the Loan Agreement, entitling Colonial to impose the higher “default” interest rate (that is 5.75% above the Bank Bill Rate) on and from that date. However, the default rate of interest was in fact not imposed until 1 May 2007, six months later. Mr Jafari caused 63 Buckley to pay interest at that higher rate, apparently without demur, from that date until the interest payment of $9,100 due for the month of March 2008, payable by 7 April 2008.

In the course of submissions, Mr Jafari accepted that he failed to pay the interest due for March 2008 (and thereafter), stating that he “ran out of money” by that time, “because he also had counsel’s fees, architect’s fees, everyone else’s fees to pay”.[15]
[15]T22:L18-22; see also T23:l29-T24:L5

On 8 April 2008, Balmain sent to 63 Buckley a letter of demand,[16] requiring 63 Buckley to immediately pay the interest arrears “failing which without further notice to you urgent legal action will commence”. On 21 April 2008, Gadens Lawyers on behalf of Perpetual, served on 63 Buckley and Mr Jafari notices to pay under the mortgages securing the Loan and a notice of demand under the Guarantee,[17] thus rendering the entire amount of the Loan due and payable. On 19 May 2008, Gadens Lawyers on behalf of Perpetual gave notice to 63 Buckley and Mr Jafari that Perpetual had entered into and taken possession of the Buckley St properties pursuant to the mortgages over those properties.[18] Perpetual later appointed real estate agents Sutherland Farrelly to market the Buckley St properties for sale.
[16]Exhibit PAL-14 to the Labrie affidavit
[17]Exhibits PAL-15 and PAL-16 to the Labrie affidavit
[18]Exhibit PAL-17 to the Labrie affidavit

The sale process was far from straightforward. On two occasions, parties entered into contracts of sale and paid deposits of $110,000 and $200,000 respectively, but later reneged on the sales and forfeited their deposits. The Buckley St properties were eventually sold by tender for $1,600,000 plus GST, under a contract of sale entered into on 26 May 2009 between Perpetual and 23 Developments Pty Ltd. Mr Jafari confirmed during the course of the hearing that each of the three sales involved parties with whom Mr Jafari had some connection, apparently intending to enter into a joint venture with those parties for the development of the Buckley St properties.[19]
[19]T16:L18-30; T29:L14-16; T29:L24-26; T30:L6-10; T31:L25-30; T66:L12-15; T87:L28-T88:L13; T90:L19-26

Certainly in the case of the ultimate sale, it is clear that Mr Jafari was intimately involved in the sale process as evidenced by a handwritten amendment[20] to the invitation to tender documents to the effect that Mr Jafari and 63 Buckley agreed that the balance of the purchase price after payments to Perpetual, the sales agent and other outgoings “will be kept as vendor’s finance”. Mr Jafari confirmed in the course of the hearing that this amendment was written and signed by him.[21]
[20]Exhibit PAL-25 to the Labrie affidavit
[21]T16:L1-9

The arrangement contemplated by Mr Jafari’s handwritten amendment was later reflected in a letter dated 20 May 2009 from Gadens Lawyers on behalf of Perpetual to Fetter Gdanski Lawyers, for the purchaser, 23 Developments Pty Ltd.[22] Among other things, the arrangement included a requirement that Mr Jafari and 63 Buckley execute an irrevocable authority that, in effect, confirmed their agreement that at settlement of the sale of the Buckley St properties Perpetual was not required to pay any surplus containing proceeds to the registered proprietors (Mr Jafari and 63 Buckley), which surplus proceeds (totalling $581,801.47) were to remain in the property as vendor’s finance. The Irrevocable Authority is dated 26 May 2009 and signed by Mr Jafari on his own behalf and on behalf of 63 Buckley. [23]
[22]Exhibit PAL-26 to the Labrie affidavit
[23]Exhibit PAL-27 to the Labrie affidavit

It appears that the prospective joint venture arrangement between 23 Developments Pty Ltd, 63 Buckley and Mr Jafari did not end well. Mr Jafari stated that the third sale did settle, “but the property by way of fraud has been taken away”.[24] A company search of 63 Buckley provided by the solicitors for Colonial and Perpetual at the conclusion of the hearing (and admitted as proof of the matters stated in it pursuant to s 1274B of the Corporations Act 2001 (Cth)) (“63 Buckley company search”), confirms that a liquidator was appointed to Buckley Street in a court winding up, on 2 August 2013.
[24]T16:L22-30

Further, as discussed below, Mr Jafari is currently prosecuting two proceedings in the Supreme Court. One of those is a proceeding against 23 Developments Pty Ltd in which Mr Jafari alleges that he and 63 Buckley were in a partnership or joint venture with 23 Developments Pty Ltd and Mario Pizaro to develop the Buckley St properties. He seeks a declaration that an interest in the Buckley St properties is held on trust for him and 63 Buckley.[25]
[25]Jafari v 23 Developments Pty Ltd [2017] VSC 193 at [2]

Mr Jafari’s claims

Mr Jafari is not legally trained and I agree with the observation of Hargrave J in the decision in the Bloomingdale proceeding (at [47]) that English is obviously not his first language. Accordingly, in attempting to distil Mr Jafari’s claims in the proceeding from both my review of documents filed with the Court and from Mr Jafari’s remarks during the hearing, I have deliberately avoided giving undue attention to how Mr Jafari has sought to characterise the legal basis for his claims.

Instead, I have sought, first, to identify the facts on which Mr Jafari relies as giving rise to his complaints about the alleged conduct of Colonial and Perpetual and, secondly, to seek to ascertain whether those facts as asserted might arguably support a cause of action in law. I consider this approach to be consistent with my duty where a party is unrepresented to assume the burden of endeavouring to ascertain the rights of parties which are obfuscated by their own advocacy.[26]
[26]Neil v Nott (1994) 68 ALJR 509, 510; Minogue v HREOC (1999) 84 FCR 438, [27]-[29] and [33]; Platcher v Joseph [2004] FCAFC 68, [104]

In his statement of claim and affidavit Mr Jafari identifies the matters set out below as giving rise to his complaints against Colonial and Perpetual. Mr Jafari developed these claims in the course of his submissions.

(a) The “overcharging claim”: Colonial and Perpetual unfairly started charging 63 Buckley increased interest, at a time when they knew that 63 Buckley was involved in legal proceedings seeking (among other things) the removal of unlawful caveats over the property at 61 and 63-67 Buckley St, which were in turn preventing 63 Buckley and Mr Jafari from refinancing the Loan. The increased interest was unfair because Mr Jafari did not cause the delay in the refinancing, which was instead caused by the unlawful caveats. Further, Colonial and Perpetual had full knowledge of the unlawful claims by the caveators. In those circumstances, Mr Jafari was an innocent party and a victim. If Colonial had not charged unfair interest payments, Mr Jafari could have made all the payments and refinanced Colonial and Perpetual (statement of claim at [8]; Jafari affidavit at [6] and [7]). This claim also appeared to encompass an allegation that Mr Jafari was suffering hardship (arising from the pressures of the court proceedings in relation to the unlawful caveats) and that Colonial was obliged to have regard to that hardship before undertaking enforcement action.[27] As I understand it, Mr Jafari relies on the Code of Banking Practice (“Code”) as the foundation for these claims.
[27]T25-26; T34:L2-4; T65:L12-16

(b) The “controller claim”: Colonial and Perpetual appointed a controller to 63 Buckley without informing Mr Jafari and did so only one week before Justice Hargrave delivered the decision in the Bloomingdale proceeding, which was 100% in Mr Jafari’s favour. Appointment of the controller was without just cause and involved a conflict of interest. The appointment of the controller jeopardised Mr Jafari and 63 Buckley’s credit rating, and prevented the refinancing (Jafari affidavit at [10], [11] and [15]). Indeed, on a number of occasions in the course of submissions, Mr Jafari made clear that it was the act of appointing the controller that “stopped everything. It destroyed my credibility, my credit rating, my company’s credit rating”.[28] Later he asserted that Balmain said they could not assist with any refinancing “because the minute the controller is on the company there’s no way we can apply [for refinancing]”.[29] Mr Jafari also explained that there was a need to examine whether the controller had a conflict of interest because his appointment was “in-house”.[30]

(c) The “accounting claim”: despite numerous requests commencing in May or June 2008, Colonial and Perpetual failed and refused to provide itemised invoices of recovery expenses and other costs purportedly charged by Colonial and Perpetual to 63 Buckley under the terms of the Loan Agreement (statement of claim at [8], [18] and [25] and Jafari affidavit at [12] and [13]).

(d) The JVR claim: Colonial and Perpetual’s conduct was misleading and deceptive and unconscionable, in putting their interests with and LVR of 30% or less above and to the detriment of Mr Jafari’s interest, which was over 70% of LVR (statement of claim at [26]). Mr Jafari did not develop or explain this claim in the course of submission, so its meaning is obscure.

[28]T20:L5-8

[29]T27:L9-12; see also T56:L18-20 and T75:L2-5; T91:L16-17

[30]T55-56; T67: L8-11; T68:L16-26; T69:L8-12; T73:L16-19; T74:L26-31

In addition to the claims summarised above, in the course of the hearing Mr Jafari referred to up to three other potential claims. As far as I could discern them, these were as follows:

(e) The “repayment of interest claim”: the two forfeited deposits paid under the first two contracts of sale of the Buckley St properties were together sufficient to repay all outstanding interest payments and thus took the Loan out of default.[31]

(f) The “sale at undervalue claim”: Perpetual sold the Buckley St properties at less than market value.[32]

(g) The “Loan Agreement claim”: a full review of the terms of the Loan Agreement was likely to identify provisions that were unfair or unconscionable.[33] Moreover, Colonial was required to explain the Loan Agreement to Mr Jafari and ensure that he had received independent legal advice and independent financial advice before entering into the Loan Agreement.[34] It appears that the Code has relevance to this claim as well.[35]

[31]T75-76

[32]T88-89

[33]T36:L9-23; T37:L24-T38:L9; T39:L12-21; T42:L2-27

[34]T14:L27-29; T42:L12-15; T63:L12-20

[35]T14:L27-31T42:L12-27; T63:L14-19

Self-represented litigant

The Court of Appeal in Trkulja v Markovic[36] discussed the principles relating to a judge’s duty to ensure a fair trial, noting that the authorities have not been consistent regarding the governing rationale of the duty of a judge in relation to the conduct of a civil trial in which a self-represented litigant appears.[37] After some examples of those inconsistencies, the Court stated (omitting citations):

Whatever the rationale for the judge’s duty may be, it is clear that the boundaries of legitimate judicial intervention are flexible and will be influenced by the need to ensure a fair and just trial. It follows that what a judge must do to assist a self-represented litigant depends on the circumstances of the litigant and the nature and complexity of the case. The circumstances of the litigant include his or her age, physical and mental health, level of education, proficiency in the English language, level of intelligence, personality and experience as well as his or her understanding of the case
The judge may also take into account whether a self-represented litigant is legally qualified or has had prior experience in litigation and whether it may be inferred from his or her qualifications or experience that he or she has a working knowledge of the substantive area of law that he or she is litigating and applicable court procedure.[38]

[36][2015] VSCA 298

[37]Trkulja v Markovic [2015] VSCA 298, per Kyrou and Kaye JJA and Ginnane AJA at [32]

[38]Trkulja v Markovic [2015] VSCA 298, per Kyrou and Kaye JJA and Ginnane AJA at [37] and[38]

The Court later identified the proper scope of assistance to be offered in the following terms (again, omitting citations):

In determining the proper scope of assistance to be offered to a self-represented litigant, the touchstones are fairness and balance. The assistance may extend to issues concerning substantive legal rights as well as to issues concerning the procedure that will be followed. In some cases, it may be necessary for the judge to identify the issues and the state of the evidence in relation to them so as to enable the self-represented litigant to consider whether he or she wishes to adduce evidence. It is elementary that a judge ought to ensure that the self-represented litigant understands his or her rights so that he or she is not unfairly disadvantaged by being in ignorance of those rights. Notwithstanding this, the judge should refrain from advising a litigant as to how or when he or she should exercise those rights.
The High Court has stated that a frequent consequence of self-representation is that the court must assume the burden of endeavouring to ascertain the rights of parties which are obfuscated by their own advocacy. Similarly, this Court has endorsed the proposition that ‘[c]oncealed in the lay rhetoric and inefficient presentation may be a just case’.
It is clear that a judge cannot become the advocate of the self-represented litigant. This is because the role of a judge is fundamentally different to that of an advocate. Further, a judge must maintain the reality and appearance of judicial neutrality at all times and to all parties. Accordingly, the restraints upon judicial intervention stemming from the adversary tradition are not relevantly qualified merely because one litigant is self-represented.[39]

[39]Trkulja v Markovic [2015] VSCA 298, per Kyrou and Kaye JJA and Ginnane AJA at [39] to [41]

As I have noted above, Mr Jafari is not legally trained and English is not his first language. However, it is apparent from the Court documents as filed and from his submissions during the hearing that he has a good grasp of English, including some familiarity with what might be described as the language of the law. He has also been engaged in the business of property development since at least the early 2000s, if not earlier. I infer from this and more generally from Mr Jafari’s submissions before me and the decision in the Bloomingdale proceeding, that Mr Jafari has a long history of dealings with banks, including in relation to property development projects. For example, during submissions Mr Jafari stated that “I’ve had been dealing with the Commonwealth Bank for 20 years, I had a very good limit with them actually and I didn’t need to put a lot of applications in”.[40]
[40]T70:L11-14

Moreover, Mr Jafari is also no stranger to litigation – far from it.[41] In addition to the Bloomingdale proceeding, in which Mr Jafari represented himself for the last nine days of the trial, Mr Jafari is noted as having appeared in person during the appeal from the decision in the Bloomingdale proceeding (Gangemi v Osborne [2009] VSCA 297). He was also a party (with Mr Osborne) in a proceeding in the Federal Court seeking (successfully) to set aside Mr Gangemi’s Personal Insolvency Agreement under Part X of the Bankruptcy Act 1966 (Cth). The report for that decision suggests that he and Mr Osborne were represented by solicitors and counsel in that proceeding.[42]
[41]See also Mr Jafari’s comments at T48, where he appears to refer to involvement in a number of other proceedings that have apparently not resulted in reported or unreported decisions
[42]Osborne v Gangemi [2011] FCA 1252

Mr Jafari has commenced and is pursuing two separate proceedings in the Supreme Court, being the claim against 23 Developments Pty Ltd and others discussed above, as well as a proceeding against Alderuccio Solicitors, the solicitors responsible for preparing and lodging the caveats that Hargrave J found in the Bloomingdale proceeding had been lodged without reasonable cause. It is notable that in that proceeding, Mr Jafari made application by summons filed 10 July 2014 to join the legal representatives for each of two of the other parties to the Bloomingdale proceeding (in total, three counsel and a solicitor), as well as the Legal Practitioners’ Liability Committee. In his judgment of 2 December 2015 dismissing that summons, Elliott J stated (citations omitted):[43]

It is often difficult for a litigant in person to properly formulate a claim identifying a cause of action, in accordance with the Supreme Court Rules or otherwise. Depending on the complexity of the matter, some of the principles and rules may be difficult to grasp without formal legal training. Accordingly, the court takes on some responsibility for ensuring that a litigant in person is able to fairly ventilate the real issues notwithstanding any such difficulties. However, it is also important that parties or proposed parties are not faced with allegations that are irrelevant or scandalous. When serious misconduct is alleged, material facts need to be clearly identified, which in turn need to constitute a cause of action known to the law. This position is adopted by the court not only in fairness to the opposing party or proposed party. It is also a matter of fairness to the litigant in person that she or he is not given false hope or expectation in relation to claims that are plainly hopeless.
To be clear, “[a] frequent consequence of self-representation is that the court must assume the burden of endeavouring to ascertain the rights of parties which are obfuscated by their own advocacy”. In this case, I have been unable to ascertain any rights of Jafari that give rise to a cause of action against any of the Proposed Defendants, obfuscated or otherwise.
For the reasons stated, the Proposed Statement of Claim does not disclose any cause of action, or any basis upon which a cause of action might be pleaded, against any of the Proposed Defendants. In those circumstances, the application for leave to join the Proposed Defendants shall be dismissed.

[43]Jafari v Alderuccio [2015] VSC 684, per Elliot J at [51]-[53]

Similar considerations confront me in this application.

The Code of Banking Practice

A number of the claims raised by Mr Jafari raise the Code. It is therefore useful at this point to set out my observations and findings concerning the Code. A copy of the Code was exhibited to the Labrie affidavit.[44] The “Publication History” on the contents page of the Code states that is was last amended in May 2004, and so it appears that the version exhibited was current at the time of the Loan Agreement.
[44]At PAL-6

The operation and effect of the Code was the subject of recent decision of the Court of Appeal in National Australia Bank v Rose,[45] (“Rose”) an appeal from a decision of Elliot J that also thoroughly examined the operation and effect of the Code.[46] Mr Jafari referred to the decision in “NAB v Rose” during his submissions and it has clearly informed (possibly among others) his claim raised during submissions that Colonial and Perpetual were obliged to ensure that he obtained legal advice and financial advice before signing the Loan Agreement.[47]
[45][2016] VSCA 169
[46]Rice v National Australia Bank v Rice [2015] VSC 10
[47]T39:18-21; T42:L8-27

The evidence on behalf of Colonial and Perpetual in relation to whether either Perpetual or Colonial had adopted the Code comprises, essentially, Mr Labrie’s information and belief that they had not, and a copy of a document obtained from a website maintained by the Australian Bankers’ Association listing the banks that have adopted the Code, which list does not include either Colonial and Perpetual.[48] A note at the foot of the list states: “Please note this list was copied from the website of the Australian Securities and Investments Commission (ASIC) on August 13, 2003 as it reported on compliance with this Code”. I am willing to admit that evidence on the basis set out in the defendants’ written outline.[49]
[48]Exhibit PAL-7 to the Labrie affidavit
[49]At [9] to [12]

In response to that evidence, Mr Jafari has deposed to a series of phone calls made by him during June 2017 to the Financial Ombudsman Service, the Financial Services Council and the Australian Prudential Regulation Authority, during which he was given information which he asserts establishes that Colonial had adopted the Code.[50] Counsel for Colonial and Perpetual objected to that evidence as hearsay. I uphold that objection. The statements on which Mr Jafari relies clearly offend the hearsay rule,[51] and do not meet any of the exceptions to the rule. Further, the most relevant question is whether Perpetual adopted the Code, and none of the evidence relied on by Mr Jafari traverses that question.
[50]Jafari affidavit at [19]-[23]
[51]s59 of the Evidence Act 2008 (Vic). It is also arguable that the statements only establish that Colonial was a member of the relevant organisation, and does not go as far as proving Colonial had adopted the Code, regardless of the hearsay rule

In all the circumstances, I am satisfied on the evidence that neither Colonial nor Perpetual had at any relevant time adopted the Code. I am reinforced in that view by two further matters. First, banks and other financial institutions that adopt the Code would generally be expected to amend their standard loan and guarantee documentation to incorporate the notices and other disclosures provided for in the Code. An example of these is set out in Rose. None of the documents comprising the Loan Agreement have any of the hallmarks of documents drawn up to comply with the Code.

Secondly, it comes as no surprise that neither Perpetual nor Colonial has adopted the Code. Perpetual is a corporate trustee company and Colonial (at least as far as its business is revealed by this proceeding) is the responsible entity of a managed investment scheme. Neither is a “bank” as that term is generally understood.[52] More importantly, there is no evidence that either operates a “banking business” within the meaning of the Banking Act 1959 (Cth). Indeed, as neither is an “authorised deposit taking institution” or “ADI” within the meaning that Act,[53] they are each expressly prohibited from carrying on a banking business.[54]
[52]For example, consistently with more general definitions, such as: "An establishment for the custody, deposit, loan, exchange, or issue of money, which it pays out on the customer’s order”
[53]A list of ADI’s as at 26 June 2017 appears on the website of the Australian Prudential Regulation Authority at: accompanied by the description: "The institutions listed on this page are regulated by APRA in accordance with the Banking Act 1959
[54]s8(1) of the Banking Act 1959 (Cth)

I would add that, even if either had adopted the Code, it is far from clear that any of Colonial or Perpetual’s conduct in connection with either the provision or enforcement of the Loan offends any of the provisions of the Code in a way that caused any loss to Mr Jafari, or at all. I discuss this further below when dealing with each of the claims advanced by Mr Jafari.

The adjournment applications

The discussion above of the course of the proceeding to date shows that Mr Jafari first raised grounds for an adjournment of the proceeding at the hearing before Judge Cosgrave on 24 February 2017. His Honour refused to adjourn the proceeding generally, but set a generous timetable for the steps leading up to the first date for the hearing of the defendants’ application, namely 28 April 2017. In accordance with that timetable, Mr Jafari has had access to the Labrie affidavit and the extensive exhibits to that affidavit since early April 2017. I note, in passing, that the Labrie affidavit and exhibits include exhaustive details of the recovery expenses and other charges incurred by Perpetual in connection with the enforcement of the mortgages over the Buckley St properties, being the information that Mr Jafari alleges he had been seeking since May or June 2008.

Mr Jafari next pressed for an adjournment by his email to Ashurst dated 12 April 2017, apparently raising similar issues to those raised before Judge Cosgrave on 24 February 2017. These issues were again raised before Judge Cosgrave at the hearing on 28 April 2017, and ultimately led to an adjournment of the defendants’ application for a little over one month to 2 June 2017. The parties cooperated in again adjourning the hearing to 28 June 2017.

In the adjournment applications before me, Mr Jafari referred variously to the ill-health of his partner, the pressure of the various legal proceedings in which he has been involved (notably the two proceedings brought by him in the Supreme Court), the need for him to obtain legal assistance in formulating his claims and, in that regard, the availability of Mr Willis. In relation to the latter, it seems that Mr Willis was leaving for the US soon after 12 April 2017 and was first due back at the end of May. It then appears from Mr Jafari’s email of 29 May that his return date was mid-June. And before me, Mr Jafari asserted that Mr Willis had only just returned.[55]
[55] T49:L25-26

I am sympathetic to Mr Jafari’s personal circumstances, particularly in so far as it concerns his partner’s undoubtedly serious medical condition. However, I’m bound to note that these various grounds for the adjournment applications have now been relied on by Mr Jafari for close to 5 months, have featured in emails and assertions from the bar table but never formally deposed to by Mr Jafari (or otherwise) and are entirely uncorroborated by, for example, any note or letter from Mr Willis or any other legal advisor, confirming a willingness to assist Mr Jafari in properly formulating his claims. Moreover, even assuming Mr Willis was willing to assist Mr Jafari in the manner suggested, I am sceptical about Mr Jafari’s assertions concerning Mr Willis’s absence overseas for, it would seem, two months or more.

So far as the pressures of the proceedings in the Supreme Court are concerned, I have no doubt that these involve a heavy time and emotional commitment for Mr Jafari. However, both proceedings were brought and are being actively pursued by him so, in that sense, those competing commitments are self-inflicted. The consequences of the pressures on Mr Jafari in the two Supreme Court proceedings should not be visited on the defendants in this proceeding.

Given the delays to date and that it appears that the factors inhibiting Mr Jafari from progressing or re-formulating his claims in the proceeding are little changed (if at all) since February this year, I have no confidence that a further adjournment will see any real advancement in Mr Jafari’s position. This view is reinforced by Mr Jafari’s concession made more than once in the course of the hearing that, if given more time, he may decide to abandon the proceeding altogether.[56]
[56]T39:L25-27; T44:L5-9; T45:L13-14

Section 8 of the Civil Procedure Act 2010 (Vic) (“CPA”) states that I must give effect to the overarching purpose, which is to “facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute”.[57]
[57]CPA s7

In the course of his remarks during the hearing, Mr Jafari frequently referred to the status of Colonial and Perpetual (particularly Colonial) as a bank. He did this both to emphasise the power and resources imbalance between he and Colonial and Perpetual, and to draw attention to the fact that Colonial is one of a class of entities (namely, banks) that has been the subject of considerable media scrutiny and criticism and the long-running and ongoing Commonwealth Parliamentary Inquiry into Consumer Protection in the Banking, Insurance and Finance Sector (“Banking Inquiry”).

In applying the overarching purpose to the adjournment applications and, indeed, to the defendants’ applications, these considerations (or, at least, the power and resources imbalance) are relevant to the just resolution of the real issues in dispute in this case. I am also required to have regard to them in my duties to Mr Jafari as a self-represented litigant, as discussed above. However, they do not trump the other elements of the overarching purpose, namely, efficient, timely and cost-effective resolution. They are merely matters to be weighed into the balance.

Moreover, the opprobrium that banks are presently attracting in the media and elsewhere does not, of course, in any way disentitle them from being accorded the same rights as all other defendants in civil proceedings. In particular, they are as much entitled to the benefits to litigants derived from the overarching purpose as is Mr Jafari. In this case, that includes eventually bringing to an end the indulgences granted to Mr Jafari in response to his repeated requests for adjournment and delay, and finally hearing and determining their application to have Mr Jafari’s claims examined against the test laid down in s62 of the CPA.

It was for this reason that I declined Mr Jafari’s application for a further adjournment of the hearing of the defendants’ application. Likewise, and for the same reasons, I decline Mr Jafari’s application for a “stay” of the proceeding generally.

Application to re-plead

To the extent that the adjournment applications included an application by Mr Jafari for an opportunity to re-plead, I have been assisted, and accept, Colonial and Perpetual’s supplementary outline dated 29 May 2017 on this issue.

As was submitted on behalf of Colonial and Perpetual, generally speaking, if a pleading is struck out, the Court will grant leave to amend the pleading or serve a replacement.[58] In appropriate cases, leave to re-plead can be made conditional on the pleader first satisfying the Court that there is a sound basis to support the causes of action pleaded.[59] However, leave to amend will be refused where the amendment would be futile.[60] But those authorities concern cases where the pleading is struck out, and not applications for summary judgment. The distinction between the two situations was described by the Court of Appeal in Manderson M & F Consulting v Incitec Pivot Ltd:[61]

The authorities reviewed by Croft J in JBS Southern Aust v Westcity Group Holdings [2011] VSC 476, which disclosed the underlying rationale for s 63 of the [Civil Procedure Act 2010], make it clear that an inquiry as to whether a case has ‘no real prospects of success’ involves considerations extending beyond an analysis of the sufficiency of the statement of claim to plead a cause of action. The new power under s 63 is not one to be exercised by reference only to the sufficiency of the pleading.

[58]Turner v Bulletin Newspaper Co Pty Ltd (1974) 131 CLR 69, per Jacobs J at 97-98

[59]For example, Environinvest Ltd v Pescott; Environinvest Ltd v Blackburne Pty Ltd [2011] VSC 325

[60]Caason Investments Pty Ltd v Cao (2015) 236 FCR 322; [2015] FCAFC 94, per Glimour and Foster JJ at [21]

[61](2011) 35 VR 98, per Redlich JA and Judd AJA at [32]

A pleadings summons under r 23.02 of the Rules involves the court looking only at the pleading itself and accepting (for the purposes of the application) that the facts relied on in the pleading will be established. No affidavit or other extrinsic evidence can be used in support of the application. In contrast, an application for summary judgment under CPA s62 requires consideration of the merits of the proceeding. And, accordingly, a decision under that section that a claim has no real prospects of success is a decision on the merits that (albeit, in a summary way) finally determines the proceeding, subject to appeal.

In this case, Colonial and Perpetual might well have sought to have Mr Jafari’s statement of claim struck out under r 23.02 of the Rules. However, they have elected to set themselves the more rigorous task of seeking summary judgment. That election must be respected. It has two consequences. First, summary judgment will not be granted merely because of inadequacies in the pleading.[62] Secondly, a finding that the proceeding has no real prospects of success will not necessarily invoke the requirement that leave be given to re-plead.
[62]Feiglin v Ainsworth (No 2) [2014] VSC 376, per Elliott J at [45]

On the other hand, it is possible that a pleading might be struck out with leave to re-plead as an alternative to granting summary judgment if the Court is satisfied that the circumstances show that an arguable case might be pleaded.[63] It is for this reason that I have identified the three other potential claims referred to by Mr Jafari in the course of the hearing. I cannot give summary judgment on an un-pleaded claim, but I can (and do) have regard to them in determining whether I should entertain Mr Jafari’s oral application to file an amended pleading. I deal with each of these claims in turn.
[63]For example, Taha v Shaq Industries Pty Ltd [2012] VSC 30, [14], [18]-[19]

The repayment of interest claim

I have not done any calculations to determine whether Mr Jafari is correct in his assertion that the two forfeited deposits totalling $310,000 paid under the first two contracts of sale of the Buckley St properties were together sufficient to repay all outstanding interest payments (and, presumably, enforcement costs incurred to that date). However, for purposes of considering this issue, I am prepared to assume that they were.

The difficulty with this claim, and the reason that it can be disposed of very briefly, is that by the time those sums were received, the term of the Loan had well and truly expired and Perpetual had (by their lawyers, Gadens Lawyers) validly served a notice to pay for the entire amount of the Loan together with all interest and enforcement costs then outstanding. There is nothing in the Loan Agreement or at law on which Mr Jafari could rely as obliging Perpetual on receipt of the forfeited deposits, to reinstate the Loan and permit Mr Jafari to continue to service the Loan in accordance with its terms.

The sale at undervalue claim

A claim based directly on s420A of the Corporations Act 2001 (Cth) is available only to 63 Buckley, which is not a party to the proceeding. Accordingly, in bringing any claim based on the circumstances of the sale by Perpetual of the Buckley St properties, Mr Jafari is limited to his rights both as mortgagor (of 59 Buckley St) and guarantor (in respect of the other Buckley St properties) under s77(1) of the Transfer of Land Act 1958 (Vic) (“TLA”) (as construed and applied in recent cases such as MBF Investments Pty Ltd v Nolan[64]), at common law and in equity (the latter encompassing a form of derivative right under s420A of the Corporations Act 2001 (Cth) as discussed in Webster Investments Pty Ltd v Anderson).[65]
[64][2011] VSCA 114; (2011) VR 116
[65][2016] VSC 620, per Croft J at [94]-[99]

The Buckley St properties were marketed by Sutherland Farrelly on behalf of Perpetual and eventually sold (on the third attempt) for $1,600,000 plus GST, under a contract of sale entered into on 26 May 2009 between Perpetual and 23 Developments Pty Ltd. Mr Jafari exhibited to his affidavit two valuations of the Buckley St properties. One dated 18 July 2008 for $2.5 million prepared by FVG Property Consultants & Valuers and a second dated August 2010 for $3 million by Egan National Valuers. On the face of it, the sale price achieved by Sutherland Farrelly is materially below these valuations, which fall either side of the sale date.

On the other hand, there is no suggestion anywhere in the material of any act or omission of either Sutherland Farrelly or Perpetual that would remotely approach a breach of any of the applicable duties (and, most notably, the duty to exercise the power of sale in good faith having regard to its own interests but not disregarding the interests of Mr Jafari and 63 Buckley).

There are two other significant impediments facing Mr Jafari in any claim based on the circumstances of the sale of the Buckley St properties. First, as explained above, Mr Jafari himself participated actively in the sale process and provided over $500,000 to the purchaser 23 Developments Pty Ltd as vendor finance, in furtherance of a proposed joint venture between him and the purchaser for the development of the Buckley St properties. There is no suggestion of any complaint by him at the time, that the price being paid by his proposed joint venture partner was too low or not in good faith.

Secondly, a claim this kind is entirely new and relies on new and different facts than those currently pleaded, giving rise to a cause of action that probably accrued on 26 May 2009. It could be expected that Colonial and Perpetual would argue strongly that they would be seriously prejudiced by the addition of this claim at such a late stage, in a way that could not be fairly met by an adjournment, an award of costs or otherwise.[66]
[66]r 36.10(6) of the Rules

The Loan Agreement claim

Mr Jafari was unable to point to any particular provision of the Loan Agreement that might form the basis of some claim based on unconscionability or the like. His position appeared to be that if a senior lawyer with relevant experience reviewed the document, they were bound to find something that gave rise to a cause of action maintainable by Mr Jafari. He was reinforced in this view by submissions to the Banking Inquiry (two of which were exhibited to his affidavit) and commentary derived from that Inquiry.

I have read the Loan Agreement. It is an unexceptional document of 11 pages (with the annexed letter of offer comprising a further 9 pages) in standard font. The language of the document is relatively straightforward and its structure is neither particularly complicated nor convoluted. I could see nothing in it (nor in the Guarantee or other facility or security documents) that is likely to have caused any particular difficulty to an experienced property developer like Mr Jafari.

In the absence of any attempt by Mr Jafari to provide even the vaguest particulars of what it was about the documents that he considered to be unfair or unconscionable, I do not propose to speculate any further on how the terms of the Loan Agreement might form the basis of an additional claim by him in the proceeding.

Similarly, in my view, there is nothing in the terms of the Loan Agreement or Guarantee or the circumstances in which 63 Barkley and Mr Jafari entered into those agreements (as far as those circumstances are disclosed in the materials or during the hearing) that would provide even the most rudimentary basis for a claim that the transaction comprising the Loan Agreement should be set aside or rendered unenforceable.

Turning first to the Court’s equitable jurisdiction, there are two threshold requirements that must be met before a court will set aside a transaction on the grounds of unconscionability.[67] First, there must be a special disability or disadvantage affecting the ability of the relevant person to make a judgment as to her or his best interests. Secondly, the special disability or disadvantage must have been known or sufficiently evident to the other person. Mr Jafari falls at the first hurdle.
[67]Mackintosh v Johnson (2013) 37 VR 301, 304 [11] (Buchanan and Whelan JJA and Hargrave AJA)

As discussed above,[68] Mr Jafari is an experienced businessman and, while English is not his first language, there is no suggestion in the material nor from his appearance before me, that he suffered from any relevant lack of understanding of the nature and effect of the Loan Agreement and Guarantee or any of the other facility and security documents. In my view, accepting that the categories of special disadvantage are not closed, none of Mr Jafari’s personal characteristics elevated him into the category of a person with a disabling condition that seriously affected his ability to make a judgment as to his own best interests.[69]
[68]At [44]
[69]Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, per Mason J at 462

As to what is sometimes described as “situational” disadvantage (that is where, in all the circumstances, there is a lack of assistance or explanation where assistance or explanation is necessary[70]) once again, there is nothing in the material nor from the parties’ submissions before me that could be said to have imposed on either Colonial or Perpetual any duty to provide any relevant assistance or explanation to Mr Jafari. In particular, I have been unable to identify any unusual or unexpected features of the Loan Agreement or Guarantee that might otherwise have given rise to such a duty.
[70] Blomley v Ryan (1956) 99 CLR 362, 405.7 (Fullagar J)

And for completeness, the nature of the relationship between Mr Jafari as guarantor under the Guarantee and 63 Buckley as borrower, bears none of the hallmarks of the relationships that would ordinarily attract the operation of the principles in cases such as Commercial Bank of Australia Ltd v Amadio[71] and Garcia v National Australia Bank.[72] Mr Jafari as sole director and shareholder of 63 Buckley had everything to gain from the Loan Agreement and was directly and intimately involved in all aspects of the negotiation and entry into of the Loan Agreement and Guarantee.
[71](1983) 151 CLR 447
[72](1998) 194 CLR 395

To the extent that Mr Jafari relies on the Code to impose on Colonial or Perpetual any obligation to provide him with notice or assistance (such as notice that he should seek independent legal and financial advice as occurred in Rose), my finding above[73] that neither Colonial nor Perpetual adopted the Code effectively disposes of that issue. As the decisions at first instance and on appeal in Rose make clear, the Code can only have contractual effect if it is adopted by a contracting party or otherwise expressly incorporated into the terms of the facility and security documents. Neither of those factors was present here. Nor is there any other basis for applying the terms of the Code to the Loan Agreement or Guarantee.
[73]At [52]

I note (again for completeness), even if the Code had applied, Mr Jafari would have faced considerable, and probably insurmountable, difficulties in establishing that any breach by Colonial or Perpetual of the Code caused him any loss or that he could otherwise maintain a claim in reliance on the Code. Those difficulties include:

· Mr Jafari is a “sole director guarantor” within the meaning of the Code, and therefore does not enjoy the protection of a number of the provisions of the Code (see clause 28.15) ‑ notably clause 28.5, which comprises the specific prohibition on asking a prospective guarantor to sign a guarantee unless the prescribed notice has been given.

· Strictly speaking, Perpetual has not sought directly to enforce the Guarantee. Instead it has proceeded in reliance on the mortgages of the Buckley St properties (albeit, in one case, a third party mortgage given by Mr Jafari).

· In stark contrast to the facts in Rose,[74] there is no suggestion here that Mr Jafari was acting under any misapprehension or misunderstanding about the nature and extent of his liability under the Guarantee. Thus it is difficult to imagine how Mr Jafari could maintain an argument that he would have acted any differently had he been given notices of the kind contemplated under clause 28.4(a) of the Code (noting, again, that Mr Jafari as a “sole director guarantor” would not have the benefit of clause 28.5 of the Code).

· Given the documentation was executed almost 12 years ago, the potential difficulties for Mr Jafari under the Limitation of Actions Act 1958 (Vic), again loom large in respect of these types of claims.

[74]See, for example, Rose on appeal at [52] to [56]

In the circumstances described above, I am satisfied on all of the material currently available to me concerning the potential claims that Mr Jafari adverted to in the course of his submissions, that no reasonably arguable case based on any of those claims might be pleaded. I therefore refuse Mr Jafari’s application that he have leave to re-plead as an alternative to, or in addition to, any order for summary judgment.

Application for summary judgment

Turning finally to the application I am called upon to determine, I have again been assisted by the written outline on behalf of Colonial and Perpetual dated 21 April 2017, which again I generally accept. That outline begins by setting out the provisions of the CPA and the Rules on which the application relies and cites the well-known test for an application under s63 of the CPA stated in the decision of the Court of Appeal in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd.[75] It is unnecessary for me to repeat it.
[75](2013) 42 VR 27, per Warren CJ and Nettle JA (Neave JA agreeing) at [35]

The written outline responds substantively to allegations at paragraphs 2 and 6 of Mr Jafari’s statement of claim. I accept those submissions but, in my view, the allegations do not add anything material to the claims that Mr Jafari presses, as I understand them.[76] They can therefore be disregarded. The paragraphs of the statement of claim that appear to inform the claims summarised above commence with paragraph 8 of the statement of claim, and the overcharging claim. I will deal with that and the remaining claims in turn.
[76]As listed in paragraph 40 above

The overcharging claim

Commencing at paragraph 29 of the Labrie affidavit, Mr Labrie has set out at length, with supporting documentation, each component of the sums claimed by Perpetual as due and payable to it under the terms of the Loan. Despite having access to that material since early April 2017, Mr Jafari has not pointed to any calculation error or other defect or omission in Mr Labrie’s analysis or, with one exception, in any particular item of the principal, interest, fees, costs or expenses listed.

The exception is the exit fee of $25,000, apparently charged against the facility on 11 August 2009. Mr Jafari made passing reference to this in the course of his oral submissions.[77] However, the letter of offer which forms part of and is included in the Loan Agreement (clause 11 of the Loan Agreement) clearly states in bold type on page 7 that “if the loan is not fully repaid on maturity CFS reserves the right to charge a fee of $25,000”. Further, in the letter of 29 August 2006 from Balmain to Mr Jafari setting out the terms of the informal extension of the Loan to 31 October 2006 and signed by Mr Jafari, he expressly acknowledged that if the terms for repayment were not satisfied, CFS will impose the exit fee of $25,000. That letter was signed and dated by Mr Jafari on 4 September 2006. There is no dispute that Mr Jafari failed to repay the Loan at maturity on 31 October 2006.
[77]T76:L11-24

In any event, as explained above, Mr Jafari’s complaint appears not so much to be focused on Colonial and Perpetual’s technical entitlement to claim particular items of interest, fees, costs or expenses. Rather, his claim appears to be that they began charging interest at the higher rate applicable under the Loan Agreement at a time when, to their knowledge, Mr Jafari’s attention and diminishing financial resources were being directed to the Bloomingdale proceeding. And, as a result, he ceased to be in a position to pay the higher interest rate.

Mr Jafari does not dispute that he failed to make the interest payment due for March 2008. Indeed, he frankly admitted that he could not afford to do so. Mr Jafari also conceded that his lack of funds by March 2008 arose primarily as a result of the financial burden of the Bloomingdale proceeding and not from the imposition of the higher interest rate under the Loan Agreement (which he had by then been paying for almost 12 months). Mr Jafari also does not relevantly take issue with the letters of demand and notices to pay. Thus there can be no doubt that 63 Buckley was in default under the Loan Agreement and Perpetual’s entitlement to enforce its securities had crystallised.

Even assuming (against the objection by counsel for Colonial and Perpetual) that Colonial and Perpetual had knowledge of the matters referred to in paragraphs 6 and 7 of the Jafari affidavit, there is nothing about that information that could be said to have given rise to or engaged any obligation on the part of Colonial or Perpetual to have delayed or withheld enforcement action under the terms of the Loan Agreement, the Guarantee, the mortgages of the Buckley St properties or otherwise.

The closest that Mr Jafari came to identifying a basis for a claim at law arising from the matters referred to in paragraph 8 of the statement of claim and in paragraphs 6 and 7 of the Jafari affidavit, appears again to depend on establishing that Colonial and Perpetual had adopted the Code. In particular, Mr Jafari asserted that Colonial was obliged to have regard to his hardship before undertaking enforcement action.[78] This assertion has echoes in clause 25.2 of the Code, which provides as follows:

With your agreement, we will try to help you overcome your financial difficulties with any credit facility you have with us. We could, for example, work with you to develop a repayment plan. If, at the time, the hardship variation provisions of the Uniform Consumer Credit Code could apply to your circumstances, we will inform you about them.

[78]T25-26; T34:L2-4; T65:L12-16

Assuming this is the basis for Mr Jafari’s claim, I have found above that the Code has not been adopted either by Colonial or Perpetual. Even if it did apply, it is difficult to see how a provision in these general terms could be construed as precluding Perpetual from taking action to enforce its securities. It is also relevant to note that Colonial and Perpetual had not acted precipitously in relation to enforcement of the Loan Agreement. They could have taken action as early as 1 November 2006, when the Loan first went into default.[79] Also, they deferred for 6 months the imposition of the higher interest rate to which Perpetual was entitled on and from the date of that default.
[79]See at [30] above

To the extent that Mr Jafari’s claims might extend to a dispute as to particular items of the costs and expenses levied by Perpetual, I am satisfied that the evidence set out in the Labrie affidavit, is sufficient to establish that those items were duly payable pursuant to the terms of the Loan Agreement and form part of the Secured Money within the meaning of the Loan Agreement. I note, however, that I do not rely in that regard on the purported “Dobbs certificate” at paragraph 44 of the Labrie affidavit. There is no evidence that Mr Labrie meets the definition of “the Lender or an officer of or agent for the Lender” in clause 12.3 of the Deed of Loan.

The controller claim

I have found above that there can be no doubt that 63 Buckley was in default under the Loan Agreement and Perpetual’s entitlement to enforce its securities had crystallised. That entitlement to enforce encompassed a right to serve notices under s76 of the TLA and for Perpetual itself to enter into possession of the Buckley St properties pursuant to the mortgages over those properties, and exercise its power of sale under s77 of the TLA.

It appears that Mr Jafari’s concerns about this process have arisen because a solicitor at Gadens Lawyers (perhaps in endeavouring to explain to Mr Jafari the difference between a mortgagee taking possession and other forms of enforcement, such as a receivership) referred to it as involving an “in-house” appointment. Mr Jafari also appears to have conflated the role of a mortgagee in possession of property of a company with that of an independent receiver or controller, because Perpetual lodged with ASIC of a notice of appointment of a controller in respect of the property of 63 Buckley.

However, the evidence establishes that Perpetual validly entered into possession of the Buckley St properties and engaged Sutherland Farrelly as its real estate agent to market and sell the properties. There is nothing objectionable or improper in this process and nor does it involve any actionable conflict of interest. I agree with the submission by counsel for Colonial and Perpetual that: “entry by a mortgagee itself into possession of a mortgaged property following unremedied default under the mortgage, is an everyday occurrence.”[80]
[80]T72:L23-26

So far as the notice of appointment of controller lodged with ASIC is concerned, it appears from the 63 Buckley company search that this was a notice pursuant to s 427(1B) of the Corporations Act 2001 (Cth) of Perpetual’s entry into possession of property of a corporation. Further, the evidence is that Perpetual entered into possession only of the property of 63 Buckley comprising the Buckley St properties registered in the name of 63 Buckley.[81] There was no appointment of a receiver or controller to the assets and undertaking of 63 Buckley more generally, which (as Mr Jafari would appear to be aware) would ordinarily involve the appointment of an independent insolvency practitioner into that role.
[81]Exhibit PAL-8 to the Labrie affidavit

The accounting claim

There is some evidence that Colonial and Perpetual failed to provide to Mr Jafari a breakdown of a number of the items of costs and expenses that accrued in the course of the enforcement of the Buckley St mortgages.[82] However, in the absence of more precise particulars of that failure or assistance from Mr Jafari as to the source of the obligation to provide that breakdown, I have been unable to identify how any such failure could be said to give rise to a breach of the Loan Agreement, particularly one that might be said to render the Loan Agreement unenforceable.
[82]Exhibit KJ5 to the Jafari affidavit

In their written outline on this issue, the defendants speculate that Mr Jafari may here be relying on a breach of fiduciary duty by Colonial and Perpetual.[83] To the extent that they have speculated correctly, I accept those submissions. It is also possible that Mr Jafari again relies on provisions of the Code (for example, clause 10.1). I have dealt with the question of the application of the Code. And, again, even if it did apply in this case it is difficult to see how a breach of those provisions can be relied upon by Mr Jafari to put into doubt the validity of Colonial and Perpetual’s enforcement of the Buckley St mortgages.
[83]Written outline dated 21 April 2017 at [34]-[36]

More importantly, I accept the submissions on behalf of Colonial and Perpetual that any purported failure by them to provide a breakdown of costs and expenses is not alleged to have caused any loss.[84] I would add that I am satisfied that the matters relied on by Mr Jafari under this head of claim also did not in fact cause any loss.
[84]Written outline dated 21 April 2017 at [27]

The loss that Mr Jafari points to generally in his claims against Colonial and Perpetual is in substance loss that flows from his inability to arrange to refinance the Loan. In my view, the evidence establishes overwhelmingly that the step that Colonial and Perpetual took that put an end to Mr Jafari’s prospects of refinancing the Loan, was the appointment of the controller on 13 May 2008 (or, more accurately, Perpetual’s entry into possession of the Buckley St properties on that date). [85] I have referred above to Mr Jafari’s concessions to that effect,[86] being concessions that are entirely in accord with commercial common sense.
[85]I put to one side for the purposes of this analysis the evidence that would suggest that the cause of that loss was in fact the Bloomingdale proceeding and the circumstances giving rise to that proceeding
[86]At [40(c)] above

Thus, any failure to provide a breakdown of costs and expenses at or after that date can have had no relevant causative effect on Mr Jafari’s alleged loss. As to when that failure is alleged to have occurred, despite Mr Jafari’s assertions in the course of submissions that it may have occurred earlier, the evidence is that the alleged refusal by Colonial or Perpetual to provide information first occurred in June 2008.[87] That evidence accords with the pleading.[88] I have already dealt with Mr Jafari’s claims based on the appointment of the controller.[89]
[87]Jafari affidavit at [12]
[88]Statement of claim at the particulars to [8]
[89]At [99] above and following

The JVR claim

I accept the defendants’ submissions as set out in their written outline in respect of this claim.[90] It is not clear what Mr Jafari intends by his allegation of “misleading [and] deceptive” conduct. It cannot be a reference to s52 of the Trade Practices Act 1974 (Cth),[91] because conduct can only be misleading under that section if it induces or is capable of inducing error.[92] Not only does the statement of claim fail to allege that any conduct of the defendants induced Mr Jafari into error or was capable of doing so, it does not identify any conduct said to have that character. So far as unconscionability is concerned, I have dealt with this above.[93]
[90]Defendants’ written outline dated 21 April 2017 at [37]-[39]
[91]The impugned conduct predated the commencement of the Australian Consumer Law
[92]Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, 198
[93]At [82] and following

For the reasons above, I am satisfied that all of the claims raised by Mr Jafari in his statement of claim, affidavit and submissions, have no real prospects of success and Colonial and Perpetual are entitled to summary judgment in the proceeding.

On the question of costs, Colonial and Perpetual seek an order for their costs on an indemnity basis, relying on the provisions of the Loan Agreement and Guarantee; more particularly, clause 12.11 of the Deed of Loan and clause 10.1 of the Guarantee. In their written submissions, Colonial and Perpetual submit (and I accept) that unambiguous agreements governing parties’ liabilities for costs will generally be given effect to, save where there is “some overriding discretionary consideration which would make enforcement of the agreement unjust”.[94] I am satisfied that there is no such consideration in this case and the parties should be treated as bound by the terms of the agreement they made.
[94]Citing Christian Youth Camps Limited v Cobaw Community Health Services Limited & Ors [2014] VSCA 112, per Maxwell ACJ, Neave and Redlich JJA at [10]

Clause 12.11 of the Deed of Loan provides in effect that 63 Buckley must pay or reimburse Perpetual (as “Lender”) for the costs, charges and expenses of Perpetual in connection with “the contemplated or actual enforcement or preservation of any rights under [the Loan Agreement]”, including legal costs and expenses on a full indemnity basis. I am satisfied that the costs of and incidental to this proceeding are costs falling within that description and thus form part of the “Secured Money” within the meaning of the Deed of Loan.

Clause 10.1 of the Guarantee in effect requires Mr Jafari as Guarantor upon demand by Perpetual to pay all costs (including legal costs on a full indemnity basis), expenses and other amounts incurred or paid by Perpetual (again, as “Lender”) in respect of the Guarantee and the Documents (including those arising in consequence or on account of the exercise or purported or attempted exercise of any of Perpetual’s rights or powers or for the preservation or in any manner in reference to this Guarantee and/or the Documents). “Documents” is relevantly defined by the Guarantee to include the Deed of Loan and each of the mortgages securing the Buckley St properties. Again, I am satisfied that this clause obliges Mr Jafari to pay Perpetual’s costs of and incidental to this proceeding on an indemnity basis, including by encompassing the costs that 63 Buckley is obliged to pay under the Deed of Loan.

However, to the extent that Colonial has incurred costs independently of Perpetual, I am not satisfied that those costs are the subject of the costs clauses of either the Deed of Loan or Guarantee referred to above. They each refer only to the costs of the “Lender”, which (as discussed above)[95] is defined by both documents only as Perpetual “as custodian of” the Fund. In my view, if Colonial has incurred costs independently of the costs of Perpetual, Colonial should have those costs only on the standard basis.
[95]At [24]

In the circumstances, I propose to make orders that:

(a) The writ, statement of claim and defence in the proceeding each be amended pursuant to r 36.01 of the Rules by deleting reference to Colonial First State Wholesale Pooled Mortgage Fund as second defendant and Colonial First State Income Fund as third defendant, and naming Perpetual Nominees Limited as second defendant.

(b) There be summary judgment for the defendant in the proceeding pursuant to ss62 and 63 of the CPA.

(c) The plaintiff pay the defendants’ costs of and incidental to the proceeding (including the costs of and incidental to the defendants’ summons dated 31 March 2017) on the standard basis in default of agreement in respect of the costs of the first defendant and on an indemnity basis in default of agreement in respect of the costs of the second defendant.

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Certificate

I certify that these 38 pages are a true copy of the reasons for decision of His Honour Judge Woodward delivered on 13 July 2017.

Dated: 13 July 2017

Simon Bobko
Associate to His Honour Judge Woodward