MIS Funding No 1 Pty Ltd v Hazra
[2018] VSC 320
•21 June 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2016 01260
| MIS FUNDING NO 1 PTY LTD (ACN 119 268 905) | Plaintiff |
| v | |
| HASAN BASRI HAZRA | Defendant |
AND AMENDED COUNTERCLAIM BETWEEN
| HASAN BASRI HAZRA | Plaintiff by Counterclaim |
| v | |
| COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124) | First Defendant by Counterclaim |
| MIS FUNDING NO 1 PTY LTD (ACN 119 268 905) | Second Defendant by Counterclaim |
---
JUDGE: | CROFT J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 12 June 2018 |
DATE OF JUDGMENT: | 21 June 2018 |
CASE MAY BE CITED AS: | MIS Funding No 1 Pty Ltd v Hazra |
MEDIUM NEUTRAL CITATION: | [2018] VSC 320 |
---
PRACTICE AND PROCEDURE – Application for summary judgment – Where defence and counterclaim have no real prospect of success – Where defendant’s affidavit material shows no case is available – Summary judgment granted – Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd (2011) 35 VR 1 – Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27 – Civil Procedure Act 2010 ss 63, 64.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr H. Forrester | Turks Legal |
| For the Defendant | In person (via videolink from the Supreme Court of Western Australia) |
HIS HONOUR:
Introduction
By application dated 20 April 2018, MIS Funding No 1 Pty Ltd (ACN 119 268 905), the Plaintiff in the principal proceeding and the second Defendant by counterclaim (“MISF”) and the Commonwealth Bank of Australia (ACN 123 123 124), the first Defendant by counterclaim (“CBA”) applied for summary judgment in the principal proceeding and dismissal of the counterclaim. In the alternative, MISF and CBA applied for the striking out of the amended defence and amended counterclaim.
Mr Hasan Basri Hazra (“Hazra”), the Defendant and the Plaintiff by counterclaim, resisted the applications by both MISF and the CBA in their respective capacities in these proceedings, appearing in person at the hearing of this application (by videolink from the Supreme Court of Western Australia).
In anticipation of the hearing of the application and in support of their respective positions, the parties provided detailed written submissions (those provided by MISF and CBA dated 11 May 2018 and those provided by Hazra dated 17 May 2018).
Background
This proceeding is brought on the basis that the Defendant and Plaintiff by counterclaim, Hazra, is liable to the Plaintiff and second Defendant by counterclaim, MISF, for the repayment of a loan. The first Defendant by counterclaim, CBA, and MISF contend that they are not liable to Hazra in any way and the counterclaim is misconceived.
MISF and CBA rely on two affidavits of Mr Steve Tserkezidis sworn 20 April 2018 (“First Tserkezidis Affidavit”) and 11 May 2018 (“Second Tserkezidis Affidavit”) in support of their application. MISF and CBA also rely on the affidavit of Hazra sworn 4 May 2018 (“Hazra Affidavit”).
Hazra executed a loan application on 30 May 2008 (“the Loan Application”) and borrowed $42,240 from MISF, pursuant to a written loan agreement dated 30 June 2008 (“the Loan Agreement”), to acquire an interest in a managed investment scheme called the Willmott Forests Project 2007 (ARSN 089 379 987) and the BioForest Sustainable Timber and Biofuel Project 2007 (ARSN 124 133 535) (“Willmott Forests Project”).
The application for summary judgment is brought on the basis that Hazra has no real prospect of successfully defending the claim and his counterclaim has no real prospect of success.
Loan application
As Hazra’s position with respect to both the principal proceeding and the counterclaim critically depend upon the meaning and operation of the terms of the Loan Application, it is helpful to set out a number of the provisions of that document in full. The following are significant provisions contained in Form 1 – Application Form – 2007 Premium Forestry Blend signed by Hazra on 30 May 2008:[1]
[1]Exhibit ST–1 to the Affidavit of Steve Tserkezidis (20 April 2018).
…
I/we the undersigned hereby apply for the number of Woodlots and Timberlots represented by the number of Premium Blend Woodlots (PBWs) specified below and agree to enter into:
• the Pre-Lease Agreement (if applicable) or Land Tenancy Agreement (as applicable) and the Forestry Management Agreement in relation to the Willmott Project (“Willmott Agreements”); and
• the Land Sourcing and Management Agreement and the Forestry Right in relation to the BioForest Project (“BioForest Agreements”).
I/we acknowledge:
• in relation to the Willmott Project, that the Manager, the registered proprietor or licensor of the land (as applicable) intends to grant, or procure the grant, of a Forestry Right to Willmott Forests Investment Management Pty Ltd (ABN 50 098 718 837) in respect of Project Land occupied by Growers under a Land Tenancy Agreement, which it will hold on trust as agent of those Growers and I/we agree to Willmott Forests Investment Management Pty Ltd being our agent for this purpose; and
• in relation to the BioForest Project, Growers will be issued a Forestry Right (covering both Timber and Carbon Benefits Forestry Covenants) or a Lease, where the Timberlots are located in New South Wales, or a Forestry Right (covering both Timber and Carbon Benefits Forestry Covenants) or a Profit a Prendre, if the Timberlots are located in Queensland.
I/we agree to be bound by:
• the terms of the Constitution for the Willmott Project dated 2 September 1999 (as it may be amended from time to time) each of the Willmott Agreements referred to above and the Terms Agreement and the Loan Agreement (as those terms are defined in the PDS for the Willmott Project) (if applicable); and
• the terms of the Constitution for the BioForest Project dated 8 March 2007 (as it may be amended from time to time) each of the BioForest Agreements referred to above and the Terms Agreement and the Loan Agreement (as those terms are defined in the PDS for the BioForest Project) (if applicable).
I/we acknowledge that the total investment for Woodlots and Timberlots (“Application Money”) is immediately due and payable upon signing this 2007 Application Form unless:
• in relation to the Willmott Project, a Terms Agreement and/or Loan Agreement (as those terms are defined in the PDS for the Willmott Project) is entered into; and
• in relation to the BioForest Project, a Terms Agreement and/or Loan Agreement (as those terms are defined in the PDS for the BioForest Project) is entered into.
…
6.By signing the 2007 Application Form, I/we hereby acknowledge and agree:
(a)that, prior to completing the 2007 Application Form, I/we were given access to and have read and understood the BioForest PDS and the Willmott PDS whether in electronic or printed form;
(b)in relation to the BioForest Project, BioForest Limited may accept or reject this Application in respect of Timberlots in whole or in part and, in relation to the Willmott Forests Project, Willmott Forests Limited may accept or reject this Application in respect of Woodlots in whole or in part;
(c)in relation to the BioForest Project, BioForest Limited will use reasonable endeavours to arrange insurance under the terms of the Forestry Right on my/our behalf and that I/we will pay the relevant premium on receipt of the relevant invoice;
(d)in relation to the BioForest Project, if my/our Application Moneys are not released by the Responsible Entity within a period of nine months from the date of acceptance of this application (other than by reason of my/our default), then the Responsible Entity must refund to me/us the whole of the Application Moneys paid, without interest; and
(e)the BioForest Project and the Willmott Project are intended to be of medium to long term investments and I/we acknowledge the risks of the BioForest Project and the Willmott Project, as set out on page 41 of the BioForest PDS and page 26 of the Willmott PDS respectively.
7.Power of Attorney – Willmott Forests Project
7.1The applicant irrevocably appoints any director for the time being of Willmott Forests Limited to be the applicant’s attorney (“Willmott Attorney”) from the date of this Power of Attorney to the expiration of the Land Tenancy Agreement, Forestry Management Agreement and the Terms Agreement and Loan Agreement (if applicable) in respect of the Willmott Project and BioForest Project collectively the (“Willmott Documents”).
7.2The Willmott Attorney may do in the name of the applicant and on the applicant’s behalf everything necessary or expedient to:
(a)execute and deliver the Willmott Documents;
(b)complete blanks and make amendments, alternations or additions to the Willmott Documents considered necessary or desirable by the Willmott Attorney;
(c)execute and deliver any other documents or do any other acts which are referred to in the Willmott Documents which are ancillary or related to them or the transactions contemplated by them, in the absolute discretion of the Willmott Attorney;
(d)appoint one or more substitute attorneys to exercise one or more of the powers given to the Willmott Attorney and to revoke any of those appointments and within this Power of Attorney, “Willmott Attorney” includes a substitute attorney appointed by the Willmott Attorney under this clause; and
(e)if applicable, stamp and register this Power of Attorney.
7.3The applicant declares all acts, matters and things done by the Willmott Attorney in exercising powers under this Power of Attorney will be as good and valid as if they had been done by the applicant and agrees to ratify and confirm whatever the Willmott Attorney does in exercising powers under this Power of Attorney.
7.4The applicant indemnifies the Willmott Attorney against liability, loss, cost, charges or expenses arising from the exercise or powers under this Power of Attorney.
7.5The applicant declares that a person (including, but not limited to, a firm, body corporate, unincorporated association or authority) who deals with the Willmott Attorney in good faith may accept a written statement signed by the Willmott Attorney to effect that this Power of Attorney has not been revoked as conclusive evidence of that fact. The applicant declares that the applicant and a person (including, but not limited to, an executor, administrator, successor, substitute or assign) claiming under the applicant are bound by anything done by the Willmott Attorney in exercising powers under the Power of Attorney.
8.Power of Attorney – BioForest Project
8.1The applicant irrevocably appoints any Director for the time being of BioForest Limited to be the applicant’s attorney (“BioForest Attorney”) from the date of this Power of Attorney to the expiration of the Land Sourcing and Management Agreement and the Forestry Right (if applicable) which are summarised on pages 68 to 75, of the BioForest PDS (“BioForest Documents”).
8.2The BioForest Attorney may do in the name of the applicant and on the applicant’s behalf everything necessary or expedient to:
(a)execute and deliver the BioForest Documents;
(b)complete blanks and make amendments, alterations or additions to the BioForest Documents considered necessary or desirable by the BioForest Attorney;
(c)execute and deliver any other documents or do any other acts which are referred to in the BioForest Documents which are ancillary or related to them or the transactions contemplated by them, in the absolute discretion of the BioForest Attorney;
(d)appoint one or more substitute attorneys to exercise one or more of the powers given to the BioForest Attorney and to revoke any of those appointments and within this Power of Attorney, “BioForest Attorney” includes a substitute attorney appointed by the BioForest Attorney under this clause; and
(e)if applicable, stamp and register this Power of Attorney.
8.3The applicant declares all acts, matters and things done by the BioForest Attorney in exercising powers under this Power of Attorney will be as good and valid as if they had been done by the applicant and agrees to ratify and confirm whatever the BioForest Attorney does in exercising powers under this Power of Attorney.
8.4The applicant indemnifies the BioForest Attorney against liability, loss, cost, charges or expenses arising from the exercise or powers under this Power of Attorney.
8.5The applicant declares that a person (including, but not limited to, a firm, body corporate, unincorporated association or authority) who deals with the BioForest Attorney in good faith may accept a written statement signed by the BioForest Attorney to effect that this Power of Attorney has not been revoked as conclusive evidence of that fact. The applicant declares that the applicant and a person (including, but not limited to, an executor, administrator, successor, substitute or assign) claiming under the applicant are bound by anything done by the BioForest Attorney in exercising powers under the Power of Attorney.
The nature of the managed investment scheme into which Hazra invested is set out in detail in the respective product disclosure statements.[2] These product disclosure statements also provided a summary of the Loan Agreement, an example of which is contained in the Willmott Forests 2007 Product Disclosure Statement.[3] Critical in the present context, are the following paragraphs:[4]
[2]Exhibit ST–2 to the Affidavit of Steve Tserkezidis (20 April 2018).
[3]See Exhibit ST–2 to the Affidavit of Steve Tserkezidis (20 April 2018), Willmott Forests 2007 Product Disclosure Statement, 68–9.
[4]Exhibit ST–2 to the Affidavit of Steve Tserkezidis (20 April 2018), Willmott Forests 2007 Product Disclosure Statement, 68–9 [10.1]–[10.4].
10.1The following is a summary of the Loan Agreement with each Grower, who elects to pay for their Woodlots on finance, provided by MIS Funding, is required to execute.
10.2MIS Funding will advance the total purchase price for the Woodlots plus a Loan Application Fee of $12.87 per Woodlot (Principal Amount) on the date directed by Willmott Forests.
10.3The Grower agrees that MIS Funding has relied on the information provided by the Grower in the 2007 Application Form and the Finance Application Form in making the advance.
10.4An advance will not be made unless MIS Funding is satisfied that the 2007 Application Form has been accepted by Willmott Forests and the Finance Application Form has been accepted by MIS Funding, the Loan Agreement has been executed by the Grower or by Willmott Forests under power of attorney, the Grower has provided Willmott Forests with an irrevocable power of attorney to execute all other relevant agreements on its behalf and, if necessary, any guarantees that are required to be executed have in fact been executed.
It should also be noted that, a few pages on from this summary in the same product disclosure statement, there is a reference to the right of an investor to a cooling off period:[5]
[5]Exhibit ST–2 to the Affidavit of Steve Tserkezidis (20 April 2018), Willmott Forests 2007 Product Disclosure Statement, 71 [15].
15 Cooling off
If the Project is considered a “liquid” (as defined in the Corporations Act) managed investment scheme; and you invest in the Project as a “retail” investor (as defined in the Corporations Act), you may be entitled to a 14 day cooling off period commencing from the earlier of:
(a)the date you receive confirmation of your investment; or
(b)five business days after the issue of Woodlots to you as per your application.
If, during this 14 day period, you decide that you no longer wish to invest in the Project, please notify us in writing and include your signature. We reserve the right to seek further information from you to clarify that you are investing as a retail investor. If on receipt of your notification, we determine that you are entitled to “cool off”, we will refund your investment and return the invested funds to you. In accordance with the Corporations Act, the amount refunded will be adjusted to account for any tax or duty paid or payable by you. You may also be charged any reasonable administrative costs incurred by us in relation to the acquisition and termination of your investment. The right to “cool off” does not apply in certain circumstances including:
(a)if the Project is considered to be non-liquid (as defined in the Corporations Act) at the time the Woodlot is issued to you, the Grower;
(b)if you exercise your rights or powers as a Grower in the Project during the 14 days.
Whether you have a right to “cool off” in a particular case is likely to depend on the circumstances of the Project at the time your application is accepted and your Woodlot(s) are issued.
By letter dated 11 July 2008 from Mr Adrian Hart, Group Administration Manager, Willmott Forests, Hazra’s application for finance through MIS Funding No 1 in relation to 2007 Premium Forestry Blend was confirmed.[6] The letter also provided information in relation to interest rates, payments and requested advice as to any change of bank details since Hazra’s application was submitted. A fortnight or so later, by letter dated 29 July 2008 from Ms Crystal McPhee, Senior Application Process Specialist, Willmott Forests, Hazra was informed that his application for three Premium Blend Woodlots was accepted on 25 June 2008.[7] He was also advised that his application means that he had become a Grower in two distinct projects—the Willmott Forest Project - 2007 and the BioForest Sustainable Timber and Biofuel Project 2007. Payments were then made by Hazra with respect to these schemes as foreshadowed in the 11 July 2008 letter by direct debit from the bank account which he had designated.[8] Hazra’s evidence is, however, that, in summary, due to adverse family circumstances and stresses at the time, he was not aware that these payments were being made.[9] Nevertheless, the evidence is that this in fact occurred, as was conceded at the hearing. It is also clear that Hazra did not seek to avail himself of the cooling off provisions to which reference has been made.
[6]Exhibit ST–4 to the Affidavit of Steve Tserkezidis (20 April 2018).
[7]Exhibit ST–8 to the Affidavit of Steve Tserkezidis (20 April 2018).
[8]Exhibit ST-11 to the Affidavit of Steve Tserkezidis (20 April 2018).
[9]Affidavit of Hasan Basri Hazra and Objection to Application for Summary Judgment/Strike Out of Amended Defence and Amended Counterclaim (4 May 2018), [27]–[28].
The claims and defences
The principal submission by MISF is that the defence filed by Hazra does not disclose a proper defence to its claim. It is contended that, given the statements made by Hazra in the Hazra Affidavit, particularly that he did not properly read and therefore understand the Loan Application, no amendment to the pleadings will cure those defects. As a result, it is submitted that Hazra has no real prospects of successfully defending the claim and that the counterclaim is defective for the same reasons. The counterclaim, it is said, attempts to plead causes of action against MISF and CBA involving implied terms, unconscionable conduct, misleading and deceptive conduct and illegality. However, it is submitted that it is clear from the pleading itself and the Hazra Affidavit, that the claims have no real prospect of success.
The crux of Hazra’s defence and counterclaim is based upon, what can only be described as, his imperfect and erroneous understanding of the provisions of the Loan Application which, on his own evidence, he did not read properly. Moreover, the same applies with respect to the product disclosure statements and, particularly, the explanation contained in the Willmott Forests Project 2007 Product Disclosure Statement which—as has already been observed—contains a summary explanation of the structure of the managed investment scheme and a summary of critical provisions of the investor documents, including the Loan Application. In this respect, it is also noted that the provisions of the Loan Application, signed by Hazra, are to the effect that he had read the relevant provisions of the product disclosure statements.[10]
[10]See Loan Application, Exhibit ST–1 to the Affidavit of Steve Tserkezidis (20 April 2018), [6(a)]; and above, [8].
It is also clear from Hazra’s evidence that not only did he not properly read or understand the provisions of the Loan Application and its significance in the process of investment by a potential “Grower” in the managed investment scheme documents, but that his understanding of that document was coloured by his own view as to how loan application documents in the finance industry generally would operate.[11] Critically, in this respect, he thought that a loan application was simply a “form” and that its completion was a mere “form filling exercise” which would, in turn, lead to an offer of finance from the financier.[12] I accept that it is common knowledge that if one were, in the ordinary course, applying for mortgage finance from a bank, this is the process that would be followed and that if the applicant did accept the bank’s offer following its receipt of the finance application, then loan and mortgage documents would be provided by the bank to the potential borrower for execution. If these documents were not executed the bank would not provide the finance applied for. However, in the present circumstances, this is not the process as, in my view, is made perfectly clear by the provisions of the Loan Application itself and certainly as summarised in the provisions of the product disclosure statements to which reference has been made.
[11]Affidavit of Hasan Basri Hazra and Objection to Application for Summary Judgment/Strike Out of Amended Defence and Amended Counterclaim (4 May 2018), [3(a)].
[12]Affidavit of Hasan Basri Hazra and Objection to Application for Summary Judgment/Strike Out of Amended Defence and Amended Counterclaim (4 May 2018), [4].
More particularly, in terms of Hazra’s understanding, reference is made to the fourth (unnumbered) paragraph in the extract from the Loan Application which is set out above[13] which deals with the time at which moneys are due to be paid by the potential investor in the scheme. Much is made of the reference in these provisions to the entering into, subsequently, of a Terms Agreement as a Loan Agreement—which Hazra says supports his understanding of the documents. In my view, reading these provisions in the context of the Loan Application and the nature of the scheme, it is quite clear that if a potential investor is financing his or her investment themselves, then the moneys are due immediately, but that if investment is being financed through the scheme itself, then moneys will only be payable when the Loan Application is approved (or there is an agreement for payment on terms). This process of loan application approval is also relied upon by Hazra in support of his understanding of the process.
[13]See above, [8].
However, a reading of subsequent provisions of the Loan Application and the explanation of the scheme as provided in the product disclosure statements does, in my view, make it clear that all a potential investor needs to do is to execute a Loan Application and the process of executing scheme documents flowing from that application in order to secure the applicant’s investment in the scheme is then placed in the hands of the relevant entities associated with the scheme who, under very extensive power of attorney provisions, are enabled to fill in and complete and execute the necessary scheme documents if they approve the application for a loan; and without reference to the borrower. This is, in my view, made very clear by the provisions of paragraphs 7 and 8 of the Loan Application. In the present circumstances, this process was followed and notice was given to Hazra by the 29 July letter from Willmott Forests that his Loan Application had been approved and the process of executing relevant documents completed as contemplated by the Loan Application.
There is no basis, in my view, for construing the Loan Agreement provisions or any associated documents as indicating that any further steps were required of Hazra once he had executed and delivered the Loan Application. There were no further documents to be provided to him, the process of investment was then out of his hands. The only further information required of him was as set out in the letter of 11 July 2008 insofar as Willmott Forests asked him to advise them whether or not any bank details had been changed. This is a perfectly sensible administrative step and does not affect the position vis-à-vis the operation or interpretation of the Loan Application or associated documents.
For these reasons, each allegation of unconscionable conduct or misleading and deceptive conduct falls away, as it stems from Hazra’s failure to read the Loan Application and his own, subjective, understanding of its meaning and significance. For example, Hazra refers to clause 7 of the Loan Application—the extensive power of attorney provision—as being a “hidden” term and being in “small print”.[14] However, it is, as MISF observes, in the same size font as everything else and is at the top of the page with a bold heading, “Power of Attorney”. On any view, it is simply nonsense to say that this provision is “hidden”. It is perfectly clear if one troubles to read the Loan Application; a clearly important, and quite short, and relevantly clearly expressed document.
[14]Affidavit of Hasan Basri Hazra and Objection to Application for Summary Judgment/Strike Out of Amended Defence and Amended Counterclaim (4 May 2018), [7].
Hazra also suggests that MISF did not adequately inform him of its acceptance of the Loan Application prior to executing the Loan Agreement on his behalf. As indicated, this is contrary to the clear terms of the Loan Application and not a proper defence which could impugn the Loan Application or the Loan Agreement. Moreover, Hazra received the benefit of the Loan Agreement, acquired his interest in the Willmott Forests Project and made payments up to 30 November 2010 when he defaulted. Moreover, Hazra does not say that he would not have entered into the Willmott Forests Project upon properly reading the relevant documents.
The defence filed by Hazra—as amended on 16 February 2018—also alleged “misleading and deceptive conduct”. The allegations are, however, liable to be struck out as they do not plead any material facts and, as indicated, must fail in any event because the crux of Hazra’s case is entirely misconceived. The counterclaim also alleges the Loan Agreement is not valid for a number of reasons. However, none of those allegations amounts to any cause of action against MISF or CBA which has any real prospect of success.
The illegality claim pleaded at paragraph 14 of the amended counterclaim must fail as the loan was not a financial product under the Corporations Act 2001.
The unconscionable conduct allegation contained in paragraph 14B of the amended counterclaim must also fail because the matters set out in the particulars, even if proven, could not amount to unconscionable conduct as against MISF or CBA. In substance, the matters particularised go to the failure to provide clear documentation, to suggest or require guidance or legal or other advice. There is, however, no basis in the scheme documents on which an argument could be mounted in favour of such obligations or any of them. Moreover, there is no basis for the implication of any such obligations as a matter of general law. More particularly, there is an allegation made that MISF was under an obligation to communicate with or inform or obtain the consent of Hazra before the Loan Agreement in particular was completed and executed under the power of attorney provisions contained in the Loan Application. Again, there is no basis for such a requirement and the Loan Agreement provisions make it clear, in my view, that no such obligation existed.
A duty and breach of a good faith obligation is alleged in paragraphs 14C to 14E of the amended counterclaim. However, even assuming a general implied duty of good faith into the contract, which is not a concept accepted by the law of Australia, the allegations as to what MISF was expected to do cannot be said to form part of that duty. In other words, the suggestion that MISF was required to inform Hazra of the acceptance of the Loan Application prior to executing the Loan Agreement, apart from being a non-sequitur, cannot be said to be a “good faith” obligation. As I have indicated, it was clearly entitled to do so under the provisions of the Loan Application. Moreover, it cannot be said to be a failure on the part of MISF to perform its contractual duties honestly, reasonably and not capriciously.
For the preceding reasons, the misleading and deceptive conduct allegations contained in paragraph 14F of the amended counterclaim are bound to fail. Even considering every other allegation in the pleading, there is nothing which can be said to be an allegation of misleading and deceptive conduct which has any real prospect of success. Moreover, none of the allegations in paragraphs 15 or 16 of the amended counterclaim are capable of impugning the Loan Agreement. They are not causes of action or defences which could cause the Loan Agreement to be set aside.
Finally, there is an allegation with respect to liability of the CBA which is, as far as it is understandable, that MISF was an agent or otherwise authorised to act on behalf of the CBA to enter into the Loan Agreement and that, as a wholly owned subsidiary of the CBA, the latter was under an obligation to supervise or otherwise control MISF. Liability of the CBA is said to arise because it “permitted” MISF “to execute the Loan Application and Loan Agreement” to gain an advantage for MISF “in the form of a loan without the written consent of the Defendant” and to cause detriment to the Defendant. The basis of any CBA liability is, however, unclear. Putting aside the pleading issues and problems with paragraph 17, the essence of the paragraph is an attempt to try to sheet home alleged liability of MISF to CBA on the basis that CBA is a parent company. However, no material facts, such as, of knowing involvement are pleaded. Moreover, the allegation seems to be directed at “failing to monitor the activities” of MISF and “permitting” it to carry on its business. In other words, it appears that Hazra says CBA should be liable in the same way as MISF purely on the basis that CBA was the parent company. There is no basis for this allegation in fact or law, and I accept that it is vague and embarrassing and should be struck out. In any event, there is no real prospect of success against MISF and, consequently, there can be no prospect of success against CBA.
Summary judgment
Pursuant to r 23.01(1) and r 23.03 of the Rules, both of which are now to be read in light of s 63 of the Civil Procedure Act 2010, for MISF to succeed in a summary judgment application it must demonstrate that on the pleadings and affidavit evidence Hazra has “no real prospects of success” on the pleaded case.
The test for summary judgment was summarised by the Court of Appeal in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd.[15] Chief Justice Warren and Nettle JA (Neave JA agreeing) said the following:[16]
[15](2013) 42 VR 27 at 37–40 [24]–[35].
[16]Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27 at 40 [35].
Upon the present state of authority:
a)the test for summary judgment under s 63 of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a “real” as opposed to a “fanciful” chance of success;
b)the test is to be applied by reference to its own language and without paraphrase or comparison with the “hopeless” or “bound to fail test” essayed in General Steel;
c)it should be understood, however, that the test is to some degree a more liberal test than the “hopeless” or “bound to fail” test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
d)at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.
In Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd,[17] Dixon J also summarised the principles which he considered now applied to an application for summary dismissal. In particular, his Honour noted that the court may be satisfied, on an interlocutory application, that there is no real prospect of success in a civil proceeding but nevertheless consider the dispute to be of such a nature that only a full hearing on the merits is appropriate. His Honour said, “[w]hether a full hearing on the merits is appropriate is a relevant discretionary consideration in the circumstances of each proceeding.”[18]
[17](2011) 35 VR 1 at 8–9 [18].
[18]Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd (2011) 35 VR 1 at 8–9 [18].
In this proceeding, the relevant documents are admitted save for the Loan Agreement. The question is whether the defence and counterclaim as pleaded has any real prospect of success. There is no further evidence necessary for the Court to undertake that task. Hazra has not filed any relevant affidavit evidence in response to this application to support his claims or defences. Rather, the Hazra Affidavit assists MISF as it demonstrates Hazra’s real case, which is in essence that if one presumes a “form filling exercise”, whatever that means, then one might not read the Loan Application properly and if one does not read the Loan Application carefully one might not realise that it is a Loan Application.
As, for the preceding reasons, the Court accepts that there is no cause of action pleaded, and that what is currently pleaded has no real prospect of success, the matter should not be allowed to go to full hearing on the merits.
For the reasons set out below, MISF says that Hazra has no defence or counterclaim and there is no evidence that could be led at trial that would defeat the claim or support the counterclaim. Accordingly, this proceeding can and should be disposed of summarily.
Defence and counterclaim
This is not a “defective PDS” case, or a typical “misleading and deceptive conduct” case. There is no allegation that MISF made any representations to Hazra which induced him to invest, borrow, acquire or do anything which has led to him suffering some loss or damage. Ultimately, the Hazra Affidavit is fatal to Hazra’s defence and counterclaim. He has produced no evidence which could assist his case. Rather, he admits to signing the Loan Application without reading it carefully. He therefore wishes to imply terms into the Loan Application or change the loan application process to correspond with his understanding at the time. That misunderstanding was not caused by anything said or done by MISF or CBA or Willmott Forests, but by his own failure to read the Loan Application properly.
Finally, and critically, whilst Hazra attempts to impugn the loan application process, he does not at any point in the Hazra Affidavit or the pleading state that he would not have invested in the Willmott Forests Project or borrowed to do so, had he properly read and understood the Loan Application and the loan application process.
There is no evidence which could be led at trial which could make good any of Hazra’s purported causes of action or defences.
Proof of MISF’s claim
Proof of MISF’s claim is set out in the two affidavits of Mr Steve Tserkezidis.
Mr Tserkezidis is a Risk Manager in Group Credit Structuring employed by CBA. MISF is a fully owned subsidiary of the CBA and he is authorised to give evidence on MISF’s behalf. He does so from the information contained in the business records kept and maintained by MISF in the course of its business and from information supplied directly or indirectly by persons who had or may reasonably be supposed to have had personal knowledge of the matters dealt with in the information they supplied. There are a number of key documents which form part of the First Tserkezidis Affidavit and Second Tserkezidis Affidavit which prove MISF’s case. They are all business records and some of them have been admitted.
The Loan Application
On or about 30 May 2008, Hazra executed a Willmott Forests 2007 Premium Forestry Blend Project MIS Funding No 1 Pty Limited Loan Application. Moreover, there does not appear to be any dispute that Hazra made an application for a loan from MISF to invest in the Willmott Forests Project.
The Loan Agreement
Hazra denies being a party to the Loan Agreement. However, it is not disputed that he executed the Loan Application which clearly provided that Hazra irrevocably appointed, pursuant to the power of attorney clause, a director for the time being of Willmott Forests Limited to execute all relevant agreements, including the Loan Agreement.
For the reasons discussed above, and the evidence contained in the First Tserkezidis Affidavit, the Loan Agreement was validly executed by a person appointed pursuant to the power of attorney clause.
The Loan Agreement Advance
The evidence in the Second Tserkezidis Affidavit is directed towards proof of the advance of funds from MISF to the relevant entities for the Willmott Forests Project. The evidence is that the sum of $73,095,011.18 was advanced from MISF by way of bank transfer and cheque to Willmott Forests Limited and BioForest Limited in a number of separate tranches. Hazra’s loan of $42,240 comprised part of this sum of $73,095,011.18. The Second Tserkezidis Affidavit and the supporting documents demonstrate the transfers and receipts of the different tranches of moneys.
The Default Event
Hazra made payments under the Loan Agreement for the first two years between 1 July 2008 and 30 November 2010. On or about 30 November 2010, Hazra was in default under the Loan Agreement as he failed to pay the amount due and payable.
The Notices
It is admitted in the defence that on or around 9 September 2011, Hazra was issued with a notice of default and a demand was made for the payment of $46,432.93 plus interest and costs.
Interest
Interest is charged at 14.20% pursuant to clause 5(b) and 10 of the Loan Agreement.
Costs
MISF is entitled to indemnity costs pursuant to clause 5(d) of the Loan Agreement.
It is well established that the Court’s discretion to award costs in cases where there is a contractual right to those costs will ordinarily be exercised consistently with such right.[19] In Chen v Kevin Mcnamara & Son Pty Ltd,[20] Redlich JA (with whom Maxwell P and Robson AJA agreed) noted that:[21]
Generally however, where the parties have unmistakably agreed to the making of a special costs order, such a term will be given effect[22] to unless there is some other discretionary consideration that militates against the making of such an order.[23]
There is no other discretionary consideration which militates against the making of such an order in the present proceedings.
[19]See Taree Pty Ltd v Bob Jane Corporation Pty Ltd [2008] VSC 228, [43]; Talacko v Talacko [2009] VSC 579, [44].
[20][2012] VSCA 229.
[21]Chen v Kevin Mcnamara & Son Pty Ltd [2012] VSCA 229, [8].
[22]Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2) [1993] Ch 171.
[23]Re Adelphi Hotel (Brighton) Ltd [1953] 2 All ER 498; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 3) [2010] NSWSC 1139.
Hazra entered into the Loan Agreement, which included a term at 5(d) for the payment of costs on a full indemnity basis. The term for the provision of indemnity costs is unambiguous. Moreover, Hazra has been on notice of MISF’s claim for indemnity costs from service of the Statement of Claim.
By contrast, and having regard to Hazra being a litigant in person,[24] CBA is entitled to its costs on a standard basis only, as it is not privy to the clause of the Loan Agreement which provides that legal costs will be recoverable on a full indemnity basis.
[24]See Raptis v City of Melbourne [2017] VSC 488, [23]–[32] and the authorities there cited.
Conclusions
For the preceding reasons, it is clear, in my view, that the amended defence and amended counterclaim by Hazra have no real prospects of success on the pleaded cases and, additionally, on the evidence before the Court there is no prospect of amendment to the pleadings which would adduce a case on the part of Hazra which had any real prospects of success.
Consequently, the application for summary judgment should be granted, the provisions of s 63 of the Civil Procedure Act 2010 being satisfied and in circumstances where there is no basis for any finding that it is in the interests of justice that the matter proceed to trial or that the dispute is of such a nature that only a full hearing of the merits is appropriate; for the purposes of s 64 of the Civil Procedure Act.
The parties are to bring in orders to give effect to these reasons.
0
4
0