Mango Capital Pty Limited v Patsis

[2017] NSWSC 161

Supreme Court

New South Wales

Medium Neutral Citation:	Mango Capital Pty Limited v Patsis [2017] NSWSC 161
Hearing dates:	28 February 2017
Date of orders:	28 February 2017
Decision date:	28 February 2017
Jurisdiction:	Common Law
Before:	Harrison J
Decision:	(1)   The judgment entered against the first and second defendants by default on 29 August 2016 is set aside. (2)   Direct that the first and second defendants file their defence and any cross claim which they may be instructed to pursue within 21 days of today's date. (3)   Order that the first and second defendants pay the plaintiff's costs thrown away or occasioned by this application. (4)   List this matter before the registrar on Wednesday, 29 March 2017.
Catchwords:	REAL PROPERTY – possession of land – mortgages – writ of possession – order seeking to stay the execution and set aside default judgment – whether satisfactory explanation for failing to defend proceedings – whether arguable defence on the merits – whether personal service took place – fraud – whether elderly – default judgment set aside
Category:	Procedural and other rulings
Parties:	Mango Capital Pty Limited (Plaintiff) Nicolaos Patsis (First Defendant) Eleni Patsis (Second Defendant) Vasilios Patsis (Third Defendant)
Representation:	Counsel: L Young (Plaintiff) I Faulkner SC (First and Second Defendants)   Solicitors: Diamond Conway (Plaintiff) Konstan Lawyers (First and Second Defendants)
File Number(s):	2016/81060
Publication restriction:	Nil

EX TEMPORE Judgment

1. HIS HONOUR: These proceedings were commenced on 15 March 2016 by a statement of claim. The plaintiff sought an order for possession of a property at 3 Harrison Street, Marrickville and incidental orders concerning the costs of the proceedings. No claim was made for a money sum. The first and second defendants are respectively the father and mother of the third defendant. It seems uncontroversial in the events that have occurred that the third defendant raised a series of loans upon the security of the property with the concurrence of his parents, but in circumstance where, on one view of the evidence, they remained assured that these loans were temporary and would be repaid by him or his company in the normal course. For presently relevant purposes, the first and second defendants understood or assumed that their ownership of the property was secure and would not ultimately be imperilled by their son’s borrowing activities.

2. On 29 August 2016, the plaintiff obtained default judgment for possession of the property against all of the defendants. A writ of possession was subsequently issued and, in response to a threat to execute the writ, the first and second defendants by notice of motion filed on 20 December 2016 sought orders seeking to stay the execution and to set aside that judgment.

3. The proceedings before me today deal with the question of whether or not the first and second defendants ought to be granted the relief that they seek. It is trite to observe that on an application such as this the first and second defendants need to establish a satisfactory explanation for why a defence was not filed and that they have an arguable defence on the merits. It is not contested by the plaintiff today that for the purposes of this application a draft defence circulated to the plaintiff by the first and second defendants satisfies that second requirement. The single issue is whether or not the first and second defendants have satisfied me that there is a reasonable or satisfactory explanation for their failure to defend the proceedings.

4. All of the defendants have sworn affidavits on 20 December 2016. The first and second defendants each deny that they were served with the statement of claim. The third defendant deposes to events on 23 March 2016 which purports to explain what occurred when Mr Khoury, a commercial agent, attended the premises with instructions to serve the defendants with the statement of claim. According to the third defendant, personal service upon each of his parents did not take place because when he discovered Mr Khoury was at the door, speaking to his mother, he hastily intervened, sent his mother away and indicated that he would accept service on behalf of himself and the other defendants.

5. Mr Khoury has given evidence today that in fact he personally served all three defendants and has sworn affidavits in respect of each of them in what I might refer to as the usual form. Significant attention today has been directed to the question of whether or not the first and second defendants were in fact served, the plaintiff contending that if they were this application fails at the threshold and the first and second defendants contending that even if they were that is not the end of the matter.

6. The background to the loans secured upon the Marrickville property has been adequately documented in the third defendant's affidavit. It is not for presently relevant purposes contested by the plaintiff that the third defendant has been the guiding hand of the transactions that have led to the mortgage that currently encumbers the property. On one view, none of the moneys advanced by the plaintiff was advanced for the benefit of the first and second defendants and all of it has been diverted by the third defendant to himself or to his interests.

7. It seems clear that the first and second defendants are commercially unsophisticated and English is not their first language. They also depose to circumstances which, if accepted, would suggest that their son was at all times in complete control of all transactions concerning the property and that, in addition, he deceived them to the extent that he provided them with constant assurances that all or any signatures that were required by them on documents were, in effect, no more than formalities and he would make sure they were protected at all times.

8. There is, as I have indicated, a preliminary factual dispute between the defendants, on the one hand, and Mr Khoury on the other hand, about precisely what took place on that evening. Doing the best I can, however, it seems to me that the truth or otherwise of what precisely occurred on that evening is largely beside the point.

9. It is clear that the first and second defendants will contend that they relied upon their son in all respects concerning the transactions affecting their property. That reliance extended even to a transfer of a small share to their son in order to facilitate further advances secured over the property to him by the plaintiff. The ultimate success or otherwise of the defence is not for me to determine. However, a significant portion of it will depend upon the assertion that the third defendant deceived his parents at all times and significantly, for present purposes, also deceived them at the point when the statements of claim had been (to use a neutral term) delivered to the premises by Mr Khoury. It does not seem to me that the ascertainment of who among the defendants and Mr Khoury is telling the truth or in slightly more benign terms, who has the better recollection of what precisely occurred.

10. The first and second defendants will argue that they took no steps to file a defence to the statement of claim, significantly, if not on one view exclusively, because they continued to rely on the third defendant in respect of that issue, as they had in every other respect throughout all of the transactions. Indeed, it is an available inference that the first and second defendants did not at any time up to and including the filing of their notice of motion to set aside the default judgment have any real appreciation or understanding of the effect or import of the statement of claim that commenced these proceedings.

11. Ms Young of counsel for the plaintiff maintains that what I am being asked to do is to set aside the judgment in favour of the plaintiff in circumstance where the first and second defendants took no further steps for their own best interests and, in effect, sat on their hands or procrastinated when they should have been more active in protecting their own interests.

12. While that submission has a superficial appeal, it does not, in my opinion, come to terms with the effect of the fraud that was clearly practised upon them by their son. It seems to me that his deceptive conduct is at the heart of the reasons why, either wholly or at least significantly, no defence was filed by them to the statement of claim.

13. In accordance with the authorities that deal with this area of the law, it seems to me that the first and second defendants have demonstrated in clear terms why they failed to file a defence to the statement of claim and that that explanation offers a sufficient reason why the judgment obtained against them in default of a defence ought to be set aside.

14. It goes without saying, as the discussion between me and counsel will have demonstrated that I have not formed a view, and frankly feel presently unable to form a view, about where the truth lies concerning the events on 23 March 2016. It will, however, be apparent that even if Mr Khoury's recollection is accepted, the interposition of the third defendant in the events that happened thereafter is sufficient to provide his parents with a proper basis for explaining why they took no steps in response to the document that on that analysis had been properly served upon them.

15. The third defendant owns a 100th share of the property as a tenant-in-common. It is conceded by Mr Faulkner of senior counsel for the first and second defendants that the judgment he seeks to set aside can only avail his clients. To the extent that the plaintiff remains armed with the benefit of a judgment for possession against the property in respect of the third defendant, some complications may ensue. It does not seem to me to be any part of the matters I am required to determine that I should attempt to anticipate or resolve those difficulties. It may be that the plaintiff will choose to take no steps to enforce its judgment for possession against the third defendant. Alternatively, if the plaintiff did so, it may correspondingly be that the first and second defendants could enjoin that activity upon giving appropriate undertakings in aid of a demonstration that the third defendant held his interest in the property on a constructive trust for them. There may be other possibilities as well. I say no more about that.

16. In the circumstances it seems to me that the following orders should be made:

1. The judgment entered against the first and second defendants by default on 29 August 2016 is set aside.

2. I direct that the first and second defendants file their defence and any cross claim which they may be instructed to pursue within 21 days of today's date.

3. I order that the first and second defendants pay the plaintiff's costs thrown away or occasioned by this application.

4. I will list this matter before the registrar on Wednesday, 29 March 2017.

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Decision last updated: 03 March 2017