La Trobe Financial Asset Management Limited v Nikolyn Pty Ltd as trustee for Nikolyn Unit Trust - [2019] WASC 201

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   LA TROBE FINANCIAL ASSET MANAGEMENT LIMITED -v- NIKOLYN PTY LTD as trustee for NIKOLYN UNIT TRUST [2019] WASC 201
CORAM:   ACTING MASTER WHITBY
HEARD:   27 MAY 2019
DELIVERED          :   14 JUNE 2019
FILE NO/S:   CIV 2938 of 2016
BETWEEN:   LA TROBE FINANCIAL ASSET MANAGEMENT LIMITED
Plaintiffs

AND

NIKOLYN PTY LTD as trustee for NIKOLYN UNIT TRUST
First Defendant

MOANA NOMINEES PTY LTD
Second Defendant

DONATO COLASANTE
Third Defendant

ROBERT COLASANTE
Fourth Defendant

ANGELA COLASANTE
Fifth Defendant

ROBERTO POTENTE also known as ROBERT PONTENTE
Sixth Defendant

LILIANA LUPINI
DOMENIC LUPINI
Seventh Defendants

SYMBOL NOMINEES PTY LTD
Eighth Defendant

Catchwords:

Chamber summons to strike out defence pursuant to O 14 r 1 Rules of the Supreme Court 1971 (WA) and/or O 20 r 19 Rules of the Supreme Court 1971 (WA) - Defence based upon grounds considered not arguable or grounds not raised at earlier application to set aside summary judgment - Issue estoppel- Res Judicata - fifth defendant granted unconditional leave to defend - fifth defendant entitled to plead any defence

Legislation:

Rules of the Supreme Court 1971 (WA), O 14 r 1, O 20 r 19

Result:

Application dismissed.

Representation:

Counsel:

Plaintiffs	:	Mr J E Scovell
First Defendant	:	No Appearance
Second Defendant	:	No Appearance
Third Defendant	:	No Appearance
Fourth Defendant	:	No Appearance
Fifth Defendant	:	Mr S K Shepherd
Sixth Defendant	:	No Appearance
Seventh Defendants	:	No Appearance
Eighth Defendant	:	No Appearance

Solicitors:

Plaintiffs	:	HWL Ebsworth Lawyers
First Defendant	:	No Appearance
Second Defendant	:	No Appearance
Third Defendant	:	No Appearance
Fourth Defendant	:	No Appearance
Fifth Defendant	:	Forbes Kirby
Sixth Defendant	:	No Appearance
Seventh Defendants	:	No Appearance
Eighth Defendant	:	No Appearance

Case(s) referred to in decision(s):

Angel v National Australia Bank Ltd [2001] FCA 1053
Australia & New Zealand Banking Group Ltd v Alirezai (Unreported, Qld, BC 200203260, 17 June 2002)
Blair v Curran (1939) 62 CLR 464
Commercial Bank of Australia Ltd v Amadio [1983] 151 CLR 447
Platinum Mortgage Securities Limited v as manager for The Platinum first Mortgage Income Fund v Nikolyn Pty Ltd (in liq) [2018] WASC 117
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589

ACTING MASTER WHITBY:

This is the plaintiffs' chamber summons to strike out the fifth defendant's amended defence pursuant to O 20 r 19 of the Rules of the Supreme Court 1971 (WA) (RSC).
The plaintiffs seek orders that, pursuant to O 14 r 1 RSC, the whole of the fifth defendant's amended defence dated 13 February 2019 be struck out and that judgment be entered for the plaintiffs on the plaintiffs' claim and the fifth defendant's counter claim dated 19 December 2018. Alternatively the plaintiffs seek an order pursuant to O 20 r 19 RSC that pars 9 and 16 – 19 of the fifth defendant's amended defence dated 13 February 2019 be struck out.

Background

This application arises as a result of Acting Master Strk's decision in Platinum Mortgage Securities Limited v as manager for The Platinum first Mortgage Income Fund v Nikolyn Pty Ltd (in liq)[1] on 13 April 2018 (Set Aside Decision).
[1] Platinum Mortgage Securities Limited v as manager for The Platinum first Mortgage Income Fund v Nikolyn Pty Ltd (in liq) [2018] WASC 117.
In the Set Aside Decision, Acting Master Strk (as Her Honour then was) made orders that summary judgment entered on 12 January 2017 against the third defendant, fourth defendant, fifth defendant, sixth defendant and seventh defendant be set aside. On 19 December 2018 the fifth defendant filed an amended defence and counterclaim, which was later amended on 13 February 2019 (2019 Defence). In the 2019 Defence, the fifth defendant raises a defence of unconscionability based upon the decision of the High Court in Commercial Bank of Australia Ltd v Amadio[2] (Amadio Defence). The plaintiffs' application to strike out pars 9 and 16 – 19 of the 2019 Defence is based on the proposition that the fifth defendant was granted leave by Acting Master Strk to defend the action on limited grounds which did not include the Amadio Defence.
[2] Commercial Bank of Australia Ltd v Amadio [1983] 151 CLR 447.
In January 2015 the first and second defendants entered into a loan agreement with the plaintiffs. The loan agreement was procured by a guarantee granted by the fifth defendant (and the other defendants) and mortgages over two of the fifth defendant's properties. The plaintiffs commenced these proceedings after the defendants failed to comply with notices of default on the mortgages. On 14 December 2016 the plaintiffs applied for summary judgment.
On 12 January 2017 Acting Master Strk, upon failure by the defendants to attend the hearing, entered judgment in favour of the plaintiffs.
On 14 February 2017 the defendants filed an application to set aside the summary judgment. The fifth defendant did not file any direct evidence in opposition to the application,[3] but did rely upon the Amadio Defence contained in its defence dated 18 February 2017 (2017 Defence).[4]
[3] Platinum Mortgage Securities Limited v Nikolyn Pty Ltd [137].
[4] Platinum Mortgage Securities Limited v Nikolyn Pty Ltd [138].
In the 2017 Defence, the fifth defendant also pleaded a defence on the basis that the first named plaintiff procured the breach of the loan agreement by failing to apply the security deposit to unpaid sums. The parties refer to this as the “Security Deposit Issue”.
The fifth defendant did not file any evidence in support of a defence arising from the Security Deposit Issue. Further, a defence arising from the Security Deposit Issue was not advanced in written or oral submissions on behalf of the fifth defendant at the hearing of the Set Aside Decision.
By the 2019 Defence, the fifth defendant seeks to rely upon the Amadio Defence and a defence arising from the Security Deposit Issue.
The basis of the plaintiffs' application is that the fifth defendant is precluded from raising the Amadio Defence and the Security Deposit Issue as defences because all of the defences available to the fifth defendant were litigated in the Set Aside Decision. The fifth defendant is therefore prevented by way of issue estoppel and/or res judicata from raising the Amadio Defence and/or a defence arising from the Security Deposit Issue in the 2019 Defence.
The plaintiffs rely upon the affidavit of Cassandra Michelle Guy sworn on 6 March 2019 and written submissions in support of the strike out application dated 6 March 2019.
In opposition to the application, the fifth defendant relies on written submissions dated 21 March 2019.
The issue I am called upon to consider is whether the fifth defendant is permitted to plead defences that were either considered not arguable defences in the Set Aside Decision, or were not argued at the time of the Set Aside Decision.

Set Aside Decision

In the Set Aside Decision, Acting Master Strk considered each of the arguable defences proposed by the fifth defendant and determined whether each of those defences gave rise to an issue to be tried.
The first of the arguable defences raised by the fifth defendant was a defence based on misleading and deceptive conduct. The Acting Master said:
I am satisfied that the third to seventh defendants have shown, by the evidence adduced on affidavit by Mr Donato Colasante, that there is an issue to be tried. Given that there will be a trial of these issues, it is also not appropriate that I express concluded views as to the defence raised.[5]
[5] Platinum Mortgage Securities Limited v Nikolyn Pty Ltd [123].
The next arguable defence raised was based on estoppel. The Acting Master stated:
However, on the evidence before me, there remains real uncertainty as to the plaintiffs' right to judgment without further investigation of the facts. I therefore find that had they appeared on 12 January 2017, the third to seventh defendants would have been given leave to defend on the basis of estoppel.[6]
[6] Platinum Mortgage Securities Limited v Nikolyn Pty Ltd [128].
The final defence raised was based on unconscionable conduct. The Acting Master said:
The assertions made on behalf of the fifth defendant were not supported by evidence. Unsupported assertions cannot be preferred to the documentary evidence relied upon by the plaintiffs. There was insufficient evidence to ground the claim that the plaintiffs' conduct in relation to the fifth defendant was, in all of the circumstances, unconscionable, under statute or in equity. Had her solicitors appeared on 12 January 2017, the fifth defendant would not have been given leave to defend on the basis of unconscionability.[7]
[7]Platinum Mortgage Securities Limited v Nikolyn Pty Ltd [141].
Counsel for the plaintiffs submit that, given the Acting Master concluded that leave to defend would not have been granted based on a defence of unconscionability, the fifth defendant is now precluded from raising a defence based upon unconscionability. Counsel for the plaintiffs submit that the fifth defendant had ample opportunity to put forward evidence in support of any defence of unconscionability, either at the summary judgment application or at the set aside application.

Issue Estoppel /Res Judicata

Counsel for the plaintiffs submit that the Amadio Defence has already been litigated and the principles of issue estoppel or res judicata preclude the fifth defendant from now relying upon the Amadio Defence.
In the case of Blair v Curran[8] the High Court referred to the principles of res judicata and issue estoppel in the following terms:
The distinction between res judicata and issue - estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order. [532].
[8] Blair v Curran (1939) 62 CLR 464.
Counsel for the plaintiffs' submit that the plaintiffs should not be required to re‑litigate the Amadio Defence, as Acting Master Strk has already decided that the fifth defendant has no arguable defence on that basis.
The case of Angel v National Australia Bank Ltd[9] (Angel) is relied upon by the plaintiffs in support of their application. In that case, the National Australia Bank (NAB) obtained summary judgment against Mrs Angel in this court on 15 December 2000. Mrs Angel did not appeal the summary judgment decision. Mrs Angel sought to bring an action in the Federal Court based upon unconscionable conduct on the part of NAB. NAB sought to strike out Mrs Angel's claim as an abuse of process on the basis that:
(a)Mrs Angel had sought to resist the application for summary judgment in the Supreme Court by raising a defence of statutory unconscionability – she was therefore, estopped from denying that NAB was not entitled to enforce its security by taking possession of the property in question (issue estoppel); and
(b)Mrs Angel was prevented from re‑litigating issues which had previously been finally determined against her (res judicata).
[9] Angel v National Australia Bank Ltd [2001] FCA 1053.
His Honour Justice Carr said:
In the Supreme Court proceedings between the respondent and the applicants in this matter the pleadings were incomplete. Under O 14 of the Rules of the Supreme Court of Western Australia (which is in familiar terms) it was for the applicants to show cause or satisfy the Master that there was an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of the claim or part of the claims. Accordingly, where, as in this case, the party contesting a plaintiff's application for summary judgment swears an affidavit, I think that it is permissible to have regard to that affidavit and to any other affidavit evidence of what steps were taken and what transpired leading up to the entry of judgment. I think that this is essential in order to determine what was the res which was adjudicated.
There is no dispute that the parties who were the subject of the judgment in the Supreme Court proceedings were one and the same as the parties who are now litigating in the same capacity in this application.
Furthermore, I think that it is clear that the judgment given in the Supreme Court proceedings was a final judgment in respect of which res judicata would operate…
The more difficult question, in my view, is whether the cause of action in the Supreme Court proceedings was the same as that which the applicants wished to litigate in the present application. [52] – [54]
…
In my view, what the Supreme Court judgment decided, or the res, was that the respondent was entitled to possession of the property and was not precluded from doing so by the allegedly unconscionable conduct of the sort raised by Mrs Angel before the Master.
It follows from this that the applicants' claims against the respondent based on other allegedly unconscionable conduct, allegedly misleading or deceptive conduct and negligence did not, in my opinion, form part of the res decided in the Supreme Court proceedings and that the res judicata rule does not shut out those claims. [61] – [62]
His Honour then went on to consider whether estoppel (as established in Port of Melbourne Authority v Anshun Pty Ltd[10] (Anshun) applied. His Honour determined the following:
Nevertheless, I consider that the further claims which the applicants now seek to raise in this application could and should have been raised before Master Sanderson by way of a proposed defence and counterclaim in the Supreme Court proceedings. In my view, the principle explained in Anshun applies to the present case.
In that case Gibbs CJ, Mason J and Aickin J explained the principle in Henderson v Henderson (1843) 3 HARE 100 [67 ER 313] in terms short of the extension of that principle by the Privy Council in Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581. At 602 their Honours said:
[W]e would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiffs' claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding [68] – [69]
…
I think that the rule in Anshun applies to the present application [72].
[10] Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.
The plaintiff also relies upon the case of Australia & New Zealand Banking Group Ltd v Alirezai (Alirezai).[11] In that case, His Honour Justice Mullins said:
As the decision in Angel v National Australia Bank Ltd illustrates, the fact that the judgment which was relied on to raise the Anshun estoppel was given on a summary basis does not preclude the application of the estoppel. It must be a relevant factor, however, that the judgment relied on to give rise to the estoppel was given without a trial. The estoppel was found to exist against mortgagors in Angel v National Australia Bank Ltd who sought to bring an action against a bank in the Federal Court seeking damages and relief under the TPA in respect of the mortgage, after the mortgagors had been unsuccessful in resisting a summary judgment application in Supreme Court proceedings brought by that bank for recovery of possession of the mortgaged property. The mortgagors had raised in defence of the summary judgment application facts that were relied on to allege unconscionable conduct against that bank, although these were different facts from those put forward in the subsequent Federal Court proceedings. Carr J found that the judgment for possession was based on the fact that nothing in the mortgagors' material resisting the summary judgment application gave rise to an issue or question which ought to be tried and as the matters which the mortgagor sought to raise in the Federal Court including the right to possession of the subject property would conflict with the judgment in the Supreme Court proceeding, the rule in Anshun applied [126].
[11] Australia & New Zealand Banking Group Ltd v Alirezai (Unreported, Qld, BC 200203260, 17 June 2002) (Mullins J).
Counsel for the plaintiffs submit that Angel and Alirezai are authority for the fact that, even where a decision is made on a summary basis, it may still give rise to res judicata and Anshun estoppel principles.
Counsel for the fifth defendant submits that the plaintiffs’ application is wholly misconceived as the fifth defendant is not bound to raise in her defence only those matters upon which, in the Set Aside Decision, the Acting Master found she had an arguable case.
Further, counsel for the fifth defendant relies upon the terms of the orders made by the Acting Master in the Set Aside Decision, being that the summary judgment made against the fifth defendant be set aside with no conditions placed upon the defence which the fifth defendant would later be permitted to plead. The fifth defendant’s position is that once that order was made, the fifth defendant was placed in the position as if summary judgment had ever been entered. The effect of the order is to return the parties to their respective positions prior to the summary judgment application.
Counsel for the fifth defendant relies upon the following passages in the Set Aside Decision in support of the fact that there has been no determination of the issues by the Acting Master:
If after argument there remains real uncertainty as to the plaintiffs' right to judgment without further investigation of the facts, I should find that they had appeared on 12 January 2017, the third to seventh defendants would have been given leave to defend. … Given that there will be a trial of these issues, it is also not appropriate that I express concluded views as to the defence raised.[12]
[12] Set Aside Decision at par 123.

Application of Law to the Facts

In my view, Angel and Aliezai are distinguishable because they both involved circumstances in which summary judgment was ordered in another court. There is no judgment in favour of the plaintiffs in this court. In this case, summary judgment has been set aside. Counsel for both parties could refer to no authority directly on point: that in and of itself is informative.
In setting aside the summary judgment, the Acting Master only needed to find that the fifth defendant had an arguable defence on one ground. That was sufficient to set aside the summary judgment. In order to ensure the parties had the benefit of the Acting Master's views on each and every arguable defence raised by the defendants (in the event of an appeal), the Acting Master considered each of the defences raised and formed a view as to whether, had they been raised in isolation, they would have constituted grounds to set aside the summary judgment. In my view, the Acting Master's decision did not determine or litigate the issues raised in relation to each and every defence. It is wholly appropriate and not uncommon for defendants who have been given leave to defend and resisted a summary judgment application, or in this case, been successful in setting aside a summary judgment, to raise defences that were not raised on the initial application.
The fifth defendant is entitled to raise the Amadio Defence and/or a defence arising from the Security Deposit Issue. The fact that the Amadio Defence was considered not to give rise to an arguable defence at the time of the Set Aside Decision does not mean that it cannot be raised now - res judicata and/or Anshun issue estoppel do not arise. The Acting Master did not make a final determination in relation to that matter. Likewise, the fact that the fifth defendant did not raise the Security Deposit Issue at the Set Aside Decision or the summary judgment application, does not preclude the fifth defendant from raising that issue as a defence now.

The effect of successfully resisting a summary judgment application, or successfully setting aside a summary judgment, is that the parties are in, or returned to, the position they would have been as if summary judgment had never been entered.
I therefore, dismiss the plaintiffs’ chamber summons. I will hear the parties as to final orders and costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
EP
Associate to Acting Principal Registrar Whitby
14 JUNE 2019