Loftus v Australia and New Zealand Banking Group Ltd [No 2]
[2016] VSCA 308
•8 December 2016
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2016 0038
| MICHAEL DAVID LOFTUS | Applicant |
| v | |
| AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD [NO 2] | Respondent |
---
| JUDGES: | REDLICH, OSBORN and McLEISH JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | On the papers |
| DATE OF JUDGMENT: | 8 December 2016 |
| MEDIUM NEUTRAL CITATION: | [2016] VSCA 308 |
| JUDGMENT APPEALED FROM: | [2016] VSC 58 (Cameron J) |
---
REAL PROPERTY – Respondent sought possession of land owned by applicant following default on loan pursuant to mortgage – Applicant contended signature on mortgage was forged – Trial judge held that applicant failed to prove that signature on mortgage procured by fraud – Whether applicant denied procedural fairness.
PRACTICE AND PROCEDURE – Appeal – Consent orders proposed allowing appeal and remitting matter to Trial Division – Whether court satisfied that orders made at trial were wrong or attended by sufficient doubt – Newton v Geelong Ethnic Communities Council [2011] VSCA 59; Hennes v Hobsons Bay City Council [2012] VSCA 215; Kovacic v Transport Accident Commission (2016) 76 MVR 82, applied.
COURTS – Judge’s duty to assist self-represented litigant – Whether judge adequately explained law to applicant – Trkulja v Markovic [2015] VSCA 258, considered – Appeal allowed.
---
APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr P Fox QC with Mr T Di Lallo and Mr L C Hogan | Victorian Bar Pro Bono Scheme |
| For the Respondent | Mr R L Moore | HWL Ebsworth Lawyers |
REDLICH JA
OSBORN JA
McLEISH JA:
By an amended application dated 16 September 2016, the applicant seeks leave to appeal against a judgment granting the respondent possession of mortgaged property of which the applicant is the registered proprietor.
The application for leave to appeal had previously been listed for hearing on 22 July 2016. At that hearing it was apparent that the applicant, appearing in person, was not in a position effectively to present his submissions, and so the matter was adjourned to enable him to renew attempts to procure pro bono assistance. The amended application for leave to appeal was prepared with the benefit of such assistance.
On 15 November 2016, the parties approached the Court with proposed consent orders allowing the appeal, setting aside the orders of the trial judge and remitting the matter to the Trial Division with orders for mediation pending a retrial. This Court requested a joint memorandum, or a memorandum on behalf of the respondent, enabling it to be satisfied that the orders made at trial were wrong or at least attended with sufficient doubt to warrant setting them aside and ordering a new trial. That course was taken because the Court considered that it needed to be affirmatively satisfied that there should be a rehearing, given the potential cost and resource implications involved and the desirability of ensuring that any error made at the trial is not repeated.[1]
[1]See Newton v Geelong Ethnic Communities Council [2011] VSCA 59 [16]–[17] (Weinberg JA; Nettle and Redlich JJA agreeing) (‘Newton’); Hennes v Hobsons Bay City Council [2012] VSCA 215 [7] (Harper JA, Beach and Davies AJJA); Kovacic v Transport Accident Commission (2016) 76 MVR 82, 84 [4] (Weinberg and Beach JJA).
The parties filed a joint memorandum accordingly on 1 December 2016. For the reasons that follow, the orders sought be the parties should be made.
Background
In April 2008, the applicant and his business partner applied for a loan from the respondent in order to purchase a retail takeaway food business. The loan application was approved. Two loans, each for $90,000, were offered to the applicant and his business partner respectively. The letter of offer for the applicant’s loan, dated 6 May 2008, was executed by him on 9 May 2008 and the loan amount was advanced on 13 May 2008.[2]
[2]The loan amount was increased to $96,267 by letter of offer dated 7 October 2008. Nothing turns on that increase.
In purported reliance on the executed letter of offer, the respondent lodged a mortgage at the Land Titles Office over a property at Unit 2, 5 Briar Court, South Morang, of which the applicant was the registered proprietor.
The applicant defaulted in his repayments and the respondent served a notice of default under s 76 of the Transfer of Land Act 1958. The applicant failed to remedy the default and the respondent instituted proceedings seeking payment of the sum owed with interest and an order for possession.
The applicant alleged that he was never asked to, nor did he, provide the respondent with security for the loan. As such, he contended, his signature on the mortgage was forged and the respondent’s security was defeasible for fraud.
The respondent applied for summary judgment. On 27 March 2014, an associate judge granted that application.[3] She made orders on 2 April 2014 in the following terms:
[3]Australia and New Zealand Banking Group Ltd v Loftus (Unreported, Supreme Court of Victoria, Zammit AsJ, 27 March 2014).
1.[The respondent] recover from [the applicant] possession of all that piece of land being Lot 2 on Plan of Subdivision 607106C and being the whole of the land contained in Certificate of Title Volume 10029 Folio 533 and known as Unit 2, 5 Briar Court, South Morang in the State of Victoria.
2. [The applicant] pay [the respondent] the sum of $132,309.51.
3.[The applicant] pay [the respondent]’s costs of the proceedings (including the costs of this application on an indemnity basis).
On 29 July 2014, Ginnane J allowed an appeal against the above orders.[4] In short, Ginnane J admitted into evidence an affidavit sworn by the applicant after the hearing before the associate judge which went to the question whether the applicant’s signature on the mortgage had been forged. On the basis of that evidence, the ‘no real prospect of success’ test for summary judgment in s 63 of the Civil Procedure Act 2010 was not satisfied.[5] Ginnane J therefore allowed the appeal against order 1 (the order for possession) and order 3 (the costs order), but refused the appeal against order 2 (the order for payment of the indebted sum), as liability under the loan did not depend on the validity of the mortgage.[6]
[4]Australia and New Zealand Banking Group Ltd v Loftus [2014] VSC 342.
[5]Ibid [60].
[6]Ibid [70].
The trial on the issue of possession took place on 16 and 17 November 2015. The applicant was unrepresented at trial, having learnt on the morning of the first day of trial that counsel was unavailable. The respondent was represented by solicitors and counsel.
On 26 February 2016, the trial judge published her reasons for upholding the respondent’s claim for possession.[7] On 9 March 2016, she made the following orders:
1.[The respondent] have possession of all that piece of land being Lot 2 on Plan of Subdivision 607016C and being the whole of the land contained in Certificate of Title Volume 11029 Folio 533 and known as Unit 2, 5 Briar Court, South Morang in the State of Victoria.
2.[The applicant] pay [the respondent]’s costs of the proceeding including any reserved costs to be taxed on a standard basis in absence of agreement.
[7]Australia and New Zealand Banking Group Ltd v Loftus [2016] VSC 58 (‘Reasons’).
The trial judgment
The trial judge noted that the effect of Ginnane J’s decision was that the applicant’s indebtedness to the respondent was no longer in issue. Therefore, the questions that fell for determination were whether the applicant’s signature on the mortgage had been forged (so as to render the respondent’s interest as mortgagee defeasible) and whether the mortgage secured the judgment debt contained in order 2 of Zammit AsJ’s orders.[8] The judge found against the applicant in relation to both questions. Only the first question is relevant for present purposes.
[8]Ibid [29].
In relation to the allegation of forgery, the trial judge preferred the evidence of Mr Neil Holland, a handwriting expert called by the respondent, to that of the applicant.[9] Mr Holland was of the opinion that it was ‘highly probable’ that the signature on the mortgage was not forged.[10] The trial judge also relied on the evidence of Mr Carlo De Cesaris, a small business specialist employed by the respondent who helped the applicant apply for the loan, and Mr Desmond Ryan, the applicant’s trustee in bankruptcy.[11] In addition, she relied on a letter from the applicant’s sister, who assisted him in his dealings with the respondent, to an employee of the respondent. The letter stated that ‘[s]ecurity for the Business loan has always been the home’. Although the applicant in cross-examination denied the truth of the statement in the letter, the judge was critical of the applicant’s failure to call his sister as a witness.[12] The judge noted that the evidence of the applicant’s business partner corroborated the applicant’s evidence, but ultimately held that the applicant’s account ‘[could] not withstand scrutiny’.[13]
[9]Ibid [75].
[10]Ibid [74].
[11]Ibid [79]–[81].
[12]Ibid [86]–[87].
[13]Ibid [88].
In addition, the judge held that there was no evidence upon which she could be satisfied that any fraud should be ‘brought home’ to the respondent so as to impeach the indefeasibility of its interest as mortgagee.[14] The judge had earlier noted the high standard of proof applicable where fraud is alleged.[15]
[14]Ibid.
[15]Ibid [35]–[38].
The amended application for leave to appeal
The applicant relies on the following proposed grounds of appeal:[16]
[16]The application for leave to appeal states that the decision appealed from is the trial judge’s ‘decision’ of 26 February 2016. Strictly speaking, appeals are brought against a court’s orders, rather than its reasons for judgment: see Ah Toy v Registrar of Companies (NT) (1985) 10 FCR 280, 285–7 (Toohey, Morling and Wilcox JJ). It is apparent from the application for leave to appeal that the application is brought in relation to the orders of 9 March 2016.
1.The trial Judge fell into legal error by not explaining to the Applicant the issue of indefeasibility of title in a manner sufficient to afford the Applicant the opportunity to:
a.make application for leave to amend his defence to address the issue of indefeasibility;
b.seek the adjournment of the trial to permit him to obtain legal advice; and
c.make submissions that by reason of a personal equity between the Applicant and the Respondent any mortgagee interest in the subject property of the Respondent was not indefeasible.
2.The trial Judge fell into legal error by:
a.failing to warn the Applicant, adequately or at all, of the consequences of not calling Cathy Loftus to give evidence at trial where failure to do so may lead to an adverse inference being drawn against the Applicant; and
b.drawing adverse inferences against the Applicant by reason of his failure to call Cathy Loftus to give evidence at trial.
3.The learned trial Judge fell into legal error by:
a.failing to inform the Applicant of his right to object to, or otherwise preventing, the Respondent from adducing ‘normal practice’ or tendency evidence of Carlo De Cesaris concerning the Applicant's signature on the real property mortgage and related documentation in the absence of the direct recollection of that witness;
b.allowing into evidence the ‘normal practice’ or tendency evidence of Mr De Cesaris concerning the Applicant’s signature on the real property mortgage and related documentation in the absence of the direct recollection of that witness; and
c.relying on the ‘normal practice’ evidence of Mr De Cesaris in preference to the evidence of witnesses called on behalf of the Applicant, who gave evidence to the contrary.
4.The trial Judge fell into legal error by restricting the Applicant’s cross‑examination of Mr Holland, the expert forensic document examiner witness called by the Respondent, by:
a.enquiring as to the basis, and making comment as to limited weight based upon age alone, of an article used by the Applicant to put questions to Mr Holland; and
b.‘urging’ the Applicant to ‘move on’ and making comments as to limited weight to be given to the article in such a manner as to discourage the Applicant’s questioning of Mr Holland.
In substance, each of the grounds of appeal goes to the contention, as stated in the joint memorandum, that ‘the applicant’s lack of representation required the court to play a greater role in ensuring that the trial was fair’ and that it failed to do so.
Ground 1
The joint memorandum records that on the first day of trial the judge made clear that the proceeding was about whether the judgment debt was secured by the mortgage. The applicant confirmed that he had prepared for the trial on the basis that that was the live issue in the proceeding. The respondent’s counsel confirmed that the central factual issue was whether the applicant had signed the mortgage, but also submitted that the respondent could rely on the principle of indefeasibility in any event, as there was no allegation of fraud against the respondent.
The joint memorandum states that following this discussion the judge ought to have identified and explained, in layman’s terms, the principle of indefeasibility and why the respondent could succeed on its claim even if it failed to prove that the mortgage was duly executed. The parties say that the judge should have explained to the applicant that he would have to bring home fraud to the respondent, or that he may be able to raise a personal equity ‘exception’ to indefeasibility as between the parties (that is, by virtue of no mortgage having been agreed between them and the respondent none the less registering one). Without such an explanation, it could not be said that the applicant had an opportunity to present his case, including the opportunity to consider whether he wished to seek advice, apply for an adjournment, amend his pleadings, adduce further evidence or make submissions on these matters.
As mentioned earlier, the judge relied on the higher standard of proof where fraud is alleged. This imposed a particular onus on the applicant in proving that he had not signed the mortgage. However, if the applicant sought to establish a personal equity, he had to do so only on the balance of probabilities. The joint memorandum states that, because the judge did not invite the applicant to seek an adjournment to obtain legal advice, the applicant was denied the opportunity to rely upon a personal equity as between himself and the respondent, to which the lesser standard of proof would have applied.
Ground 2
During the trial, the applicant gave evidence that his sister assisted him in his dealings with the respondent. In a letter to an employee of the respondent, she stated that ‘[s]ecurity for the Business loan has always been the home’. The applicant denied the truth of this statement in cross-examination and stated that he would not call his sister to give evidence.
The joint memorandum states that the judge ought to have explained to the applicant the principle in Jones v Dunkel[17] and the possibility that an adverse inference would be drawn from his failure to call his sister. Although that point was not taken by counsel for the respondent, the judge was critical of the applicant’s failure to call his sister and held that the letter ‘reflected the situation as it stood’.[18] The joint memorandum describes this as a denial of procedural fairness to the applicant.
[17](1959) 101 CLR 298.
[18]Reasons [87]; see also at [86].
Ground 3
Ground 3 centres on the evidence of Mr De Cesaris, whose role has been adverted to above. Mr De Cesaris assisted the applicant in applying for the business loan and witnessed the applicant’s signature on the mortgage. Mr De Cesaris gave evidence at trial that he had no specific recollection of witnessing the applicant sign a mortgage, but that it was his signature as witness on the mortgage and that it was his normal practice never to sign a document as a witness unless he saw the signature of the person witnessed. As mentioned above, Mr De Cesaris’s evidence was preferred by the judge over that of the applicant’s business partner, who said that at no time did Mr De Cesaris say anything about a mortgage or security from the applicant.
The parties jointly contend that the ‘normal practice’ evidence was inadmissible or should have been excluded under s 135 of the Evidence Act 2008. The procedures for admitting tendency evidence had not been followed. The unfair prejudice occasioned by the admission of the evidence, and justifying its exclusion pursuant to s 135, derived from the conclusory nature of the statement and the fact that it could not be effectively tested in cross-examination. The parties further state that the judge should have informed the applicant of his entitlement to object to the admission of the statement.
Ground 4
Ground 4 concerns the evidence of Mr Holland, the handwriting expert called by the respondent. The applicant sought to cross-examine him by reference to an article as to expert examination of signatures.[19] The judge asked the applicant what weight he sought to have the Court place on the article. She noted, prior to commencement of cross-examination, that while ‘limited cross-examination’ would be allowed the Court may give limited weight to the article given its age and the uncertain veracity of the journal. The Court ‘urged’ the applicant to ‘move on’.
[19]Jacques Mathyer, ‘The Expert Examination of Signatures’ (1961) 52 Journal of Criminal Law and Criminology 122.
The joint memorandum states that the applicant was entitled to cross-examine Mr Holland on the contents of the article. The applicant had not sought to tender the article. He could not, at that stage, be required to identify it. There was no reason why the applicant, in cross-examination, was required to prove the content or provenance of the article. Of itself, the age of the article was not relevant to its utility or reliability. The approach taken by the trial judge inappropriately discouraged the line of cross‑examination. The judge’s comments were said to have placed unnecessary pressure on the applicant, and inhibited him from presenting his case to the best of his ability.
Analysis
The joint memorandum rightly states that trial judges have an overriding duty to ensure a fair trial, which includes ensuring that an unrepresented litigant understands, and is therefore able to vindicate, his or her rights.[20] As the Court explained in Trkulja v Markovic:[21]
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.[22] 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.[23] 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.[24]
[20]Russell v Yarra Ranges Shire Council [2009] VSC 486 [16] (Kaye J); Trkulja v Markovic [2015] VSCA 298 [32]–[43] (Kyrou and Kaye JJA and Ginnane AJA). See also Charter of Human Rights and Responsibilities Act 2006 s 24(1); Slaveski v Smith (2012) 34 VR 206, 220–2 [49]–[56] (Warren CJ, Nettle and Redlich JJA).
[21][2015] VSCA 298 [39].
[22]McWhinney v Melbourne Health (2011) 31 VR 285, 293 [25] (Neave, Redlich and Mandie JJA), quoting Tomasevic v Travaglini (2007) 17 VR 100, 130 [141] (Bell J).
[23]Werden v Legal Services Board (2012) 36 VR 637, 651 [57] (Redlich JA; Tate JA agreeing).
[24]Pamamull v Albrizzi (Sales) Pty Ltd [No 2] [2011] VSCA 260 [102] (Neave, Harper and Hansen JJA).
The Court went on to say:[25]
A failure by a judge to provide the necessary advice and assistance to a self‑represented litigant may constitute a denial of procedural fairness and warrant an appellate court setting aside the trial judge’s decision and remitting the matter for a further hearing in accordance with law.[26] It is well established that not every departure from procedural fairness at a trial will entitle the aggrieved party to a new trial. An appellate court will not order a new trial where such a trial would inevitably result in the making of the same order as that made by the trial judge at the first trial. However, where a denial of procedural fairness affects the entitlement of a party to make submissions on a material issue of fact, it is more difficult for an appellate court to conclude that compliance with the requirements of procedural fairness could have made no difference.[27]
[25][2015] VSCA 298 [44] (Kyrou and Kaye JJA and Ginnane AJA).
[26]See, eg, Downes v Maxwell Richard Rhys & Co Pty Ltd (in liq) (2014) 46 VR 283, 303 [105]–[106], 304 [115] (Osborn JA; Whelan JA agreeing); Bahonko v Moorfields Community [2008] VSCA 6 [27], [39] (Nettle JA; Buchanan and Redlich JJA agreeing).
[27]Stead v State Government Insurance Commission (1986) 161 CLR 141, 145–6 (Mason, Wilson, Brennan, Deane and Dawson JJ).
Based on the contents of the joint memorandum, we are persuaded, for the purposes of making consent orders, that the judge did not explain the legal issues sufficiently to enable the applicant to decide how to present his case, including whether to adduce evidence. The parties accept, in effect, that the applicant was under the misapprehension that he only had to show that he had not signed the mortgage in order to succeed, even though he also needed either to bring fraud home to the respondent, which he did not attempt to do, or could have relied on a personal equity ‘exception’ to indefeasibility on the balance of probabilities, which he also did not pursue. Moreover, the judge drew an adverse inference from the failure of the applicant to call his sister as a witness without warning him about that possibility.[28]
[28]See also Downes v Maxwell Richard Rhys & Co Pty Ltd (in liq) (2014) 46 VR 283, 303 [105]–[106] (Osborn JA; Whelan JA agreeing)
These matters concerned important issues in the running of the trial. By concentrating only on the question of forgery, the applicant’s defence of the case against him was fundamentally incomplete. The parties must be taken to accept that it cannot be said that the same result would necessarily have been reached in any event. There is an apparent basis for that acceptance. In particular, although the judge found that the applicant had failed to establish that the signature on the mortgage was not his, if a personal equity ‘exception’ had been pursued, the resolution of such a claim would not necessarily have depended on the validity of the signature — which would, in any event, have been decided on the ordinary onus. Further, had the applicant understood the legal issues involved, other evidence may have been led. That is most apparent in respect of the failure to call his sister.
For the above reasons, we are satisfied that the orders made at trial were either wrong or attended by sufficient doubt to warrant granting the relief sought by the parties.[29]
[29]Newton [2011] VSCA 59 [16] (Weinberg JA; Nettle and Redlich JJA agreeing).
Conclusion
We will make the consent orders sought on the basis of the above matters, which concern proposed grounds 1 and 2. We prefer to say nothing about ground 3. Although there is some apparent substance in the matters raised in respect of ground 4, it is unnecessary to say anything further in relation to it either.
The Court should not pass from this matter without acknowledging the considerable assistance rendered to it and to the administration of justice in this case by pro bono counsel for the applicant. The case exemplifies the difficulty that courts frequently confront when parties represent themselves, and the tradition of counsel offering pro bono assistance to alleviate those difficulties is invaluable. The parties in the present case are themselves also to be commended for pursuing a resolution of the proceeding, aided, in the case of the applicant, by the assistance to which we have referred.
- - -
4
7
0