Macmillan v Ward - [2021] WASC 178

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   MACMILLAN -v- WARD [2021] WASC 178
CORAM:   MASTER SANDERSON
HEARD:   13 MAY 2021
DELIVERED          :   4 JUNE 2021
PUBLISHED           :   4 JUNE 2021
FILE NO/S:   CIV 1953 of 2020
BETWEEN:   GEMMA TONI MACMILLAN
Plaintiff
AND
LAUREN EMMA ALEXANDRA WARD
Defendant

Catchwords:

Practice and procedure - Application to set aside default judgment - Turns on own facts

Legislation:

Nil

Result:

Application refused

Category: B

Representation:

Counsel:

Plaintiff	:	B Grubb
Defendant	:	C Terren

Solicitors:

Plaintiff	:	Hager Grubb & Partners Lawyers
Defendant	:	Roe Legal Services

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

Nil

MASTER SANDERSON:

It is never - never ever - wise for an individual to alter their financial position based on assurances given in an online romance.
The defendant is 32 years of age. She is currently unemployed and lives with her mother. She has no assets. She met Rajpal Singh Saini online in 2019. After communicating briefly between February and April the couple fell out of contact. They reconnected in April 2020. A romantic relationship developed. Saini told the defendant he was her soul mate. He said he was a real estate entrepreneur who had ₤100,000,000 to invest in Australia. He found a property in City Beach. It is owned by the plaintiff. It was on the market for $6 million. Saini told the defendant she should purchase the property in her name and he would pay the purchase price. An offer and acceptance was prepared. It was unconditional. It made no mention of Saini. The defendant signed the offer and acceptance agreeing to pay the full purchase price of $6 million with a deposit of $600,000.
The deposit was not paid on the due date. Saini assured the defendant the deposit would be paid in due course. It was never paid. The plaintiff issued a default notice and had it served on the defendant. The defendant took no action. The plaintiff by notice terminated the contract. The plaintiff then issued these proceedings seeking payment of the $600,000 deposit. The writ was served on the defendant but she took no action. She did not enter an appearance. The plaintiff entered default judgment and applied for a means inquiry. The plaintiff also issued a bankruptcy notice and had it served on the defendant. The defendant faced financial ruin. At last she instructed solicitors. They undertook negotiations with the plaintiff and her solicitors. Those negotiations came to nothing. Now the defendant applies to set aside the default judgment. Her position is hopeless. She says she entered into the contract for the purchase of the property as agent for Saini. There is no way she could make good that claim. I will explain why but first I need to outline the facts in a little more detail.
Soon after the defendant and Saini reconnected, they started to look at real estate together. Appearing as attachment LEW5 to an affidavit of the defendant affirmed 5 March 2021 is a communication passing between the defendant and Saini detailing a number of property both in Western Australia and in New South Wales. The City Beach property is mentioned. A flavour of this communication is provided by a reference to a property in the Sydney suburb of Tamamara:
I did a viewing of the property on Monday. It's a really cool location and a beautiful home. Price is around $15M. Agent is checking on some potential building restrictions on the master (has a huge balcony that is not being utilised). I have established a connection with the agent … who is actually going to show me some other off the book properties, however this one directly below … he sent me today that I know you will love. It is just down the road from the OG Point Piper.
It is also clear the defendant was aware of restrictions that applied to Saini under the Foreign Investment Review Board (FIRB) provisions. In the same communication she had this to say:
Are you aware or have your dutiful lawyers made you aware that any brand new buildings in Australia you are able to buy as a foreign purchaser without getting approval? So this will apply to Taskers and Darling Point and other new builds. An agent may be aware of it when describing the popularity for Darling Point.
The defendant says in or about June 2020, Saini sent her a link to the City Beach property. Saini had told the defendant the two of them would 'invest in property together, build up a portfolio for me and then work on charity work together'. Saini told the defendant he had communicated with a real estate agent, Oliver Hess, from Realmark Coastal who was selling the City Beach property. The defendant contacted Mr Hess and on 1 July 2020 she inspected the property. Subsequent to the inspection she had two further telephone conversations with Mr Hess and some email communication. It seems Saini told Mr Hess he wanted to offer $6 million to purchase the property.
On 7 July 2020 the defendant received an email from Mr Hess attaching a draft offer and the Joint Form of General Conditions for the Sale of Land. The defendant signed the offer and acceptance straight away and returned it to Mr Hess. Such was her attention to detail, she did not even retain a copy of the signed offer and acceptance.
The offer and acceptance itself is attachment LEW7 to the defendant's 5 March 2021 affidavit. The contract was signed without qualification. It was not subject to finance, nor was it subject to any other condition of any significance. The document does not mention Saini. On the face of it, the defendant offered to purchase the City Beach property for $6 million with a deposit of $600,000 payable 7 days after the signing of the offer and acceptance. As I indicated above, when the deposit was not paid, the plaintiff issued a default notice, then a notice of termination of the contract, then she issued these proceedings. Eventually, in November 2020, the defendant consulted the law firm of Paiker & Overmeire who agreed to act for her pro bono. Harold Paiker is an old fashioned solicitor - experienced, able, gimlet-eyed and shrewd. He realised immediately the defendant's position was hopeless. He clearly felt the only option was for the defendant to throw herself on the mercy of the plaintiff. On 13 November 2020, Mr Paiker sent a letter to the plaintiff's solicitors. A copy of this letter appears as attachment GTM8 to the plaintiff's affidavit sworn 1 April 2021. The letter was headed 'without prejudice' and appropriately large parts of it have been redacted. No doubt it contained an offer of settlement. It reads in part:
Mr Saini led my client to believe she was in a genuine relationship with him and as such my client has only now unfortunately come to realise and accept she has been effectively scammed by Mr Saini.
My client is extremely contrite and embarrassed by her involvement in this matter. She has requested that I on her behalf to assure you that she never at any stage acted in concert with Mr Saini and expresses her deep regret for the stress, inconvenience and losses that your client has suffered by reason of this matter.
The matter could not be settled. The plaintiff decided to press on. Mr Paiker decided he could assist the defendant no further. She has now engaged her present solicitors to attempt to set aside the default judgment.
The principles governing an application to set aside a default judgment were not in dispute. It is for the party seeking to set aside the judgment to establish there is a serious question to be tried. The test is the same as the test for summary judgment. After all, there would be no point in setting aside a judgment if a defendant was immediately faced with a summary judgment application which could not be answered. For completeness, I should mention the judgment here was regular - although the question of a regular judgment against an irregular judgment does not, these days, hold the significance it once did. In any event, the defendant seeks to have the judgment set aside based on the merits of her defence. It is also relevant to look at the circumstances in which the judgment was entered. It is for the defendant to explain why the plaintiff was allowed to enter judgment and why no steps were taken to (in this case) enter an appearance. While an explanation for the delay is necessary, if a defendant is able to establish she has a defence on the merits, judgment will, generally speaking, be set aside.
The defence put by the defendant is that she was the agent for a disclosed principal, Saini. It was accepted by counsel for the plaintiff that if the defendant could establish from the surrounding circumstances she was the agent of Saini, and the plaintiff knew that to be the case, then the plaintiff was not entitled to enforce the contract against the defendant. As I have said, there is nothing on the face of the contract which indicates the defendant was acting as an agent for a disclosed principal. It therefore has to be the surrounding circumstances which established the plaintiff was an agent for a disclosed principal. It was not in dispute as between Saini and the defendant that there may have been an agency relationship - although the evidence does not necessarily establish that to be the case. However, for the purposes of this application, that agency relationship can be assumed. The question is whether or not the plaintiff either directly or via her real estate agent, was aware she was contracting as an agent for Saini.
In his written submissions, counsel for the defendant put the position this way:
39.The defendant's case is that the plaintiff, by their agents Mr Hess and Realmark Coastal knew that the true principal who was purchasing the property was Mr Saini and not the defendant. The plaintiff's knowledge arises from the following:
39.1.Mr Saini was the first person to contact the plaintiff's agents about the Property;
39.2.Mr Saini told the plaintiff's agents to only deal with him in relation to the financials;
39.3.Mr Saini told the plaintiff's agent that he wanted to offer $6,000,000 (the asking price) to purchase the Property;
39.4.Mr Saini told the plaintiff's agent that he needed documents showing that he was the purchaser and that 'Even though we are purchasing this property in Lauren's name, for the purpose of this transfer, we will have to say that I am purchasing this property'.
40. The knowledge of the plaintiff's is also to be inferred by the conduct of the plaintiff's agents in that:
40.1.there was a very limited amount of communication between the plaintiff's agents and the defendant;
40.2.that communication was limited to an inspection of the Property, discussion about finishes for the renovations on the Property, and otherwise asking her to sign the Contract;
In her affidavit filed in opposition to this application, the plaintiff deals with the state of knowledge of Mr Hess and his associate, Mr Hughes. Paragraphs 34 to 38 of that affidavit read as follows:
34.As to paragraph 38 of the Defendant's First Affidavit, I am informed by Oliver Hess, Licenced Sales Representative from Realmark Coastal and verily believe that it is untrue that Mr Saini first made contact with Mr Hess in respect of the sale of the Property. The first contact with Realmark was made by:
34.1the Defendant, on or about 29 June 2020 wherein she confirmed her inspection of the Property was to take place on 1 July 2020, which she then attended in the company of her mother, along with Mr Hess and Mr Swan Hughes of Realmark. Mr Hess and Mr Hughes further informed me and I verily believe that, at the Property inspection both the Defendant and her mother were asking many questions about the Property and its 'finishes' and at no stage did the Defendant appear to them to be either depressed or anxious in any respect – and that she then asked further questions of Realmark by telephone after the inspection. Attached hereto and marked Annexure 'GTM‑16' are true copies of the WhatsApp communications between the Defendant and Mr Hess, confirming her inspection of the Property; and
34.2subsequently, the next and second contact was made by Mr Saini on WhatsApp on 5 July 2020, to which Mr Hess responded on 6 July 2020. Attached hereto and marked Annexure 'GTM‑17' are true copies of the WhatsApp communications as between Mr Saini and Mr Hess.
35.As to paragraph 43 of the Defendant's First Affidavit, I am informed by Mr Hess and Mr Hughes that Mr Saini never told them to communicate only with him and not the Defendant, in relation to the Property. I further believe such a statement by the Defendant to be untrue, by reason of her admissions as to ongoing communications with Realmark regarding the Property at paragraphs 44, 46, 47, 50, 51, 52, 53, 54 and 55 of the Defendant's First Affidavit and GTM‑16 above.
36.As to paragraph 45 of the Defendant's First Affidavit, I am informed by Mr Hess and Mr Hughes and verily believe that, at no stage did Mr Saini ever inform them he was paying the entire purchase price for the Property. Furthermore, I am informed by Mr Hess and Mr Hughes that:
36.1Mr Hughes has been a director and/or licensee of various real estate businesses, for some 22 years;
36.2Mr Hess has been a licensed sales representative for some 4½ years;
36.3in their experience, it is not uncommon in real estate transactions for a third party to pay either a deposit or purchase price, on behalf of a Buyer under a Contract of Sale and this happens regularly in respect to the following relationships: husbands / wives; de facto partners; boyfriends / girlfriends; and/or parents / children;
36.4real estate agents don't usually make inquires of a Buyer demanding they disclose their confidential financial details and ability to complete any purchase. Once a Buyer has executed the Contract of Sale, their ability to complete the purchase is either: subject to finance; or unconditional. Such financial matters are for a Buyer and their respective lenders to resolve between themselves, prior to executing the Contract of Sale and committing to pay the deposit and purchase price. They do not involve the agent.
I also refer GTM‑17 above.
37.As to paragraphs 46 and 47 of the Defendant's First Affidavit, I am informed by Mr Hess and Mr Hughes, and verily believe that at no time did the Defendant ever state to them that she did not understand: the Contract of Sale; her liability to pay the deposit of $600,000 under it, or any of her other legal obligations regarding the purchase of the Property.
38.As to paragraphs 48 of the Defendant's First Affidavit, I am informed Mr Hess and Mr Hughes, and verily believe that Realmark emailed to the Defendant an executed copy of the Offer & Acceptance on 9 July 2020 at 8:21pm. Attached hereto and marked Annexure 'GTM‑18' is a true copy of that email. In reliance upon the Contract of Sale entered into by the Defendant, the Property was immediately taken off the market.
Given this is an interlocutory application, the hearsay material contained in those paragraphs is admissible. It would be admissible on a summary judgment application. Faced with that evidence, there is no basis upon which it could be concluded the plaintiff or her agents were aware the defendant was acting as an agent for a disclosed principal. The defence is bound to fail.
For the sake of completeness, I should add, had the defendant established she had an arguable defence, I would have accepted her explanation for not filing an appearance and defending the action. She was clearly of the belief Saini would arrange for the action to be defended and she took no action for that reason. Given she has also produced evidence of an unstable mental health state, it would have been appropriate to extend her an indulgence. But the issue does not arise.
There are two features of this application which are strange. First, it is difficult to understand how the defendant committed herself to this purchase. Taken in the overall, the evidence does not suggest she is entirely naïve. The tone of the text messages passing between the defendant and Saini do not suggest that is the case. It surely would have occurred to her that an individual who had access to vast wealth and who was an experienced businessman would have methods for investing in Australia which did not involve someone who he had never met and had known online for only a matter of months. Even if the defendant had faith in Saini, she could have had him lodge with the real estate agent the $600,000 deposit before she signed the contract. Apart from all of that, the Consumer Affairs authorities in this State are forever warning of the dangers of scams arising from online romances. Warnings against the pernicious practices of offshore individuals is all pervasive. How can the defendant have fallen for this scam? Perhaps the answer lies in the ancient aphorism: 'Love is blind'.
The second strange feature of this case is the nature of the scam itself. As a rule these scams follow a pattern. In the course of the romance the overseas party will mention a need for funds - usually a temporary need with the funds being repaid with interest in a short timeframe. Assurances are given - once the funds are advanced the relationship will move ever closer to sun lit uplands. Thus the milking process begins. The overseas individual benefits as funds are transferred to their account. But here there was no question of Saini obtaining a financial benefit. He appears never to have asked the defendant for any money; even if he had done so she had nothing to give him. So he had the defendant enter into the offer and acceptance as a consequence of which she is ruined financially while he gains no benefit whatever. What was Saini's motive? The answer to that psychological enquiry is beyond the scope of these reasons.
No one benefits in this case. The defendant faces bankruptcy. The plaintiff has a judgment which will never be satisfied and she is out of pocket for her legal fees. It is a sorry situation.
The defendant's application will be dismissed. The defendant ought pay the costs of the application including the reserved costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson
4 JUNE 2021