Background
Background to the litigation
For the following reasons, the application for leave to appeal and the appeal should he allowed. BACKGROUND In October 2001, Mr and Mrs Mogilevsky jointly purchased a property in Brighton, Victoria (Brighton property) for $1 million. It was mortgaged to ANZ Banking Group Limited. On 27 July 2006, by a further loan, this time from Westpac Bank Limited, Mr and Mrs Mogilevsky paid out the debt to ANZ, then at about $919,000. Mr and Mrs Mogilevsky entered into a mortgage with Westpac (Brighton Westpac mortgage) in respect of that advance on 19 August 2006 to secure the loan (they describe this as the Edward and Alla Facility Agreement), reflecting the given names of Mr and Mrs Mogilevsky. In opposing the summary judgment application, Mr Mogilevsky relied on his affidavit of 6 November 2015 relevantly to this effect:22. Of the Westpac Loan proceeds, which were paid on 21 September 2006, approximately $919,000 was used to discharge an existing mortgage to the ANZ Bank, and approximately $79,000 remained as surplus funds (the Westpac Loan Surplus). [He produced the] settlement statement from Westpac dated 26 September 2006.23. In or around September 2006, Manly Harbour Developments Pty Ltd Manly Harbour Developments) purchased a development site in Manly Queensland (Manly Project).24. The Manly Project was conducted by Manly Harbour Developments, a company incorporated by [Mrs] Mogilevsky, which was at all times under her sole ownership and control. I had no involvement in Manly Harbour Developments or in the Manly Project. [He produced a] historical ASIC search of Manly Harbour Developments.25. [Mrs] Mogilevsky did not inform me about the purchase of the Manly Project until after she had entered into the contract for its purchase. [Mrs] Mogilevsky used the Westpac Loan Surplus as part of the deposit for the purchase of the Manly Project. [He produced the] Westpac Premium Option Home Loan account statement for period from 21 September 2006 to 21 March 2007 showing the withdrawal of the Westpac Loan Surplus in the sum of $79,000.26. The Manly Project was financed by a $1.6 million Westpac facility obtained in October 2006 (Manly Harbour Facility). [He produced] a copy of letter from Westpac to [Mrs] Mogilevsky dated 10 January 2007 relating to the Manly Harbour Facility.27. [Mrs] Mogilevsky made all the arrangements for the Manly Harbour Facility by herself and without my involvement.28. In order to secure the Manly Harbour Facility, Westpac required me to provide as security, among other things, the existing mortgage over the Brighton Property (Manly Harbour Edward Guarantee).29. I provided the Manly Harbour Edward Guarantee for the benefit of [Mrs] Mogilevsky. I provided the Manly Harbour Edward Guarantee so that Manly Harbour Developments could purchase the Manly Project. My providing the Manly Harbour Edward Guarantee, enabled Manly Harbour Developments to purchase the Manly Project. The money borrowed was applied for that purpose. [He produced the] letter from Westpac dated 20 October 2006 enclosing the business finance agreement for the Manly Harbour Facility.30. At or around the time, the value of the Brighton Property was approximately $1,356,000. 31. In or around September 2007, Iland Properties Pty Ltd, a company incorporated by [Mrs] Mogilevsky (Iland Properties) purchased a development site in Zillmere Queensland (Zillmere Project).32. The Zillmere Project was conducted by Iland Properties, a company incorporated by [Mrs] Mogilevsky. I had no involvement whatsoever in Iland Properties or in the Zillmere Project. [He produced] a copy of a historical ASIC search of Iland Properties. 33. The Zillmere Project was financed by a $1.96 million Westpac facility obtained on 30 November 2007 (Iland Properties Facility). [He produced a letter] from Westpac to [Mrs] Mogilevsky dated 9 January 2008 relating to the Iland Properties Facility. 34. [Mrs] Mogilevsky made all the arrangements for the Iland Properties Facility by herself and without my involvement.35. By March 2008, [Mrs] Mogilevsky had procured increases in the Manly Harbour Facility to $2,300,000. [He produced] a copy of the Details of Variation from Westpac and a letter from Westpac to Ms Mogilevsky regarding the Manly Harbour Facility in the amount of $2,300,000.36. By July 2008 Manly Harbour Pty Ltd was in default under the Manly Harbour Facility. 37. By January 2010 Iland Properties was also in default under the Iland Properties Facility.38. [Mrs] Mogilevsky attempted to hold on to the Zillmere Project despite the defaults. To that end, in July 2011 [Mrs] Mogilevsky negotiated an agreement with Westpac (Deed of Forbearance), whereby Westpac refrained from the immediate exercise of its rights to take control of the Zillmere Project, and which required me to provide an unlimited guarantee and indemnity in favour of Westpac for all the liabilities under the Iland Properties Facility (Iland Properties Edward Guarantee). The [produced] Deed of Forbearance was executed on 15 July 2011.39. As at 28 June 2011, based on the Deed of Forbearance, the following amounts were owed to Westpac under the Manly Harbour Facility and the Iland Properties Facility:a.$3,512,179.58 under the Manly Harbour Facility; andb.$2,973,707.11 under the Iland Properties Facility.40. After the Deed of Forbearance, as at 15 July 2011:a.The [Brighton Westpac mortgage], under which [Mrs] Mogilevsky and I were jointly mortgagors, was security for the Manly Harbour Facility and the Iland Properties Facility (in addition to the Westpac Loan);b.I was personally liable for $700,000 plus 20%, together with any further government duties and charges, costs, fees and expenses, of the then outstanding amount as guarantor in respect of the Manly Harbour Facility; andc.I was personally liable for $2,973,707.11, together with any further government duties and charges, costs, fees and expenses under the Iland Properties Edward Guarantee.…41. I entered into the Deed of Forbearance, in so far as it concerned the Manly Harbour Facility and the Iland Properties Facility, and provided the security referred to above at paragraph 38 of this affidavit, for the benefit of [Mrs] Mogilevsky. I did this so that Iland Properties could keep the Zillmere Project despite the defaults. My entering into the Deed of Forbearance providing the necessary security to Westpac enabled Iland Properties to keep the Zillmere Project for some time due to forbearance by Westpac.42. As a result of the Deed of Forbearance, as at [28 June 2011], [Mrs] Mogilevsky's liability to or security provided to Westpac bank under the Manly Harbour Facility and the Iland Properties Facility was as follows:a.The [Brighton Westpac mortgage], under which [Mrs] Mogilevsky and I were jointly mortgagors, was security for the Manly Harbour Facility and the Iland Properties Facility (in addition to the Westpac Loan);b.The amount of $3,512,179.58, together with any further government duties and charges, costs, fees and expenses as guarantor in respect of the Manly Harbour Facility; andc.The amount of $2,973,707.11, together with any further government duties and charges, costs, fees and expenses as guarantor in respect of the Iland Properties Facility.43. On 3 November 2011, [Mrs] Mogilevsky transferred her interest in the Brighton Property to me. On 23 November 2011, the transfer of land between [Mrs] Mogilevsky and me was registered on the title of the property.44. At the time of the transfer on 3 November 2011, [Mrs] Mogilevsky's debt to Westpac, which was secured against the [Brighton Westpac mortgage], was approximately $6,300,000.45. Based on the City of Bayside property valuations, the value of the Brighton Property in 2010 was approximately $1,660,000, and in 2012 was approximately $1,795,000. This value is based on the valuation given in the City of Bayside in their [produced] valuation and rate notice for 2010 and 2012. 46. Iland Properties and [Mrs] Mogilevsky did not comply with the terms of the Deed of Forbearance and Westpac took control of Iland Properties Pty Ltd and the Zillmere Project.47. Westpac took steps to sell the Manly Project land and Zillmere Project land.48. Westpac also took steps to take possession of the Brighton Property, and, on 3 September 2012, served me with a notice under section 76 of the Transfer of Land Act. At the same time, Westpac also served me with a notice under section 76 of the Transfer of Land Act for my property at 2 Forest Avenue, Hepburn Springs, Victoria, being the land described in certificate of title volume 10114 folio 363 (Hepburn Property). [He produced] a copy of a historical land search for the Hepburn Property. 49. As at 26 September 2012, I was indebted to Westpac in the sums of $700,000 plus 20% under the Manly Harbour Edward Guarantee, $3,482,423.39.11 under the Iland Properties Edward Guarantee, $160,881.97 jointly with [Mrs] Mogilevsky under another loan agreement, and $1,173,647.70 jointly with [Mrs] Mogilevsky under the Westpac Loan.50. As at 26 September 2012, Mrs Mogilevsky was indebted to Westpac in the amount of approximately $5,303,474.22 under the Manly Harbour Facility and the Iland Properties Facility.51. On 11 October 2012, Mrs Mogilevsky and I entered into an Agreement with Westpac (Terms of Settlement Deed). Under the [produced] [Terms of Settlement Deed], Mrs Mogilevsky and I were required to pay Westpac the amount of $1,265,000 (the Payment Sum), which included an amount for the final repayment of the Westpac Loan. In exchange for the Payment Sum, Westpac, among other things, would discharge the [Brighton Westpac mortgage]. 52. In October 2012, I managed to organise a high interest loan …53. On 19 November 2012, pursuant to the [Terms of Settlement Deed], I made the required payment of $1,265,000 to Westpac and the [Brighton Westpac mortgage] was discharged. …54. Since the completion of the [Terms of Settlement Deed], I have had and continue to have the burden of servicing the [high interest loan].55. The [Terms of Settlement Deed] also required that I provide vacant possession of the Hepburn Property to Westpac as mortgagee in possession.56. I had a mortgage with Westpac on the Hepburn Property (Hepburn Mortgage). As at 26 September 2012, I was indebted to Westpac under the Hepburn Mortgage for approximately $160,881.97.57. The [Terms of Settlement Deed] required that the proceeds of sale of the Hepburn Property be used to pay off the Hepburn Mortgage and any excess proceeds from the sale to be used to pay off the outstanding amount owing under the Manly Harbour Facility.58. On or about 25 March 2013, the Hepburn Property was sold for $180,000. The amount of approximately $160,000 of the sale proceeds was used to discharge the Hepburn Mortgage. The amount of approximately $20,000 of the sale proceeds was used to pay off the outstanding amount owing under the Manly Harbour Facility. …
Evidence
Evidence Before The Court
As to the contentions strenuously advanced for the Trustee that Mr Mogilevsky failed to produce important evidence at the hearing to support his case, in all the circumstances of this case, this would place the burden too high on the party seeking to demonstrate a case that may be open on the documents produced. As noted in Dandaven v Harbeth Holdings Pty Ltd [2008] FCA 955 per Gilmour J (at [6]):…(a)the Court must be very cautious not to do a party an injustice by summarily dismissing proceedings;(b)the Court ought not dismiss a claim based on a predictive assessment of prospects, where it is possible that if the claim went to trial, it may succeed; (c)in a case where evidence can give colour and content to allegations, and where questions of fact and degree are important, the Court should be more reluctant to dismiss a proceeding on the face of a pleading; (d)it is not Parliament's intention to require the Court to engage in lengthy and elaborate trials on an interlocutory basis for the purposes of determining whether or not a proceeding has no reasonable prospects of success. It may be necessary for the opposing party to provide no more than an outline of evidence, sufficient to show that there is a genuine dispute, to prevent the summary application becoming a trial;(e)if there is a real issue of fact or law to be decided, and the rights of the parties depend upon it, it is obviously appropriate that the matter goes to trial. It cannot be said that where there is a real factual dispute and that factual dispute must be resolved to determine whether the claim succeeds that there is ‘no reasonable prospect of success’; (g)it ought not be used to shut out proceedings where, on a proposition of law, there may be room for doubt. On questions of law, an inquiry as to their merit should not be for the purpose of resolving them and also not simply to determine whether the argument is hopeless, but in order to decide if it is sufficiently strong to warrant a trial;(h)evidence of an ambivalent character will usually be sufficient to amount to reasonable prospects; (i)in determining if there are real issues of fact in issue so as to preclude summary judgment the courts must draw all reasonable inferences in favour of the non-moving party. (emphasis added) For summary judgment purposes, the absence of the Manly Harbour Edward Guarantee document should not be fatal, as contended by the Trustee, when it is open, at least, to infer from the offers, the Terms of Settlement Deed and the Deed of Forbearance that the Brighton Westpac mortgage may have been used to secure the Manly Harbour Facility at the least. The intervening signed documents referred to in the Brighton Westpac mortgage were not available. However, the inference is open that Mr Mogilevsky, as he has sworn, joined in providing the Brighton Westpac mortgage as security for facilities granted to the companies controlled by Mrs Mogilevsky. Ultimately a detailed documentary analysis may reveal that this conclusion is misplaced. But at least there is sufficient evidence to support that issue going to trial. It cannot be said the assertions are implausible.
Decision
Reasons for decision
The primary judge set out those principles from [27]-[35] after citing s 17A of the FCC Act as follows: 27. This section is cognate with s.31A of the Federal Court of Australia Act 1976 and, accordingly, this Court is guided by the approach taken by the Federal Court as I previously suggested in Ejueyitsi v Bond University [2012] FMCA 872 at [24] (see also George v Fletcher [2010] FCAFC 53 at [75] and [105]). 28. The High Court discussed s.31A in Spencer v Commonwealth (2010) 241 CLR 118 and made a number of observations (which I set out as follows in, no particular order). First, the joint majority (comprised of Hayne, Crennan, Kiefel and Bell JJ) noted (at 139) that s.31A departs radically from the basis upon which earlier forms of provision permitting the entry of summary judgment have been understood and administered. Those earlier provisions were understood as requiring formation of a certain and concluded determination that a proceeding would necessarily fail. 29. The previous approach referred to in that passage is best represented by cases such as General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 and Dey v Victorian Railways Commissions (1949) 78 CLR 62. In the General Steel Industries case, Barwick CJ said (at 83) that the test could be described as applying where a proceeding “is so clearly untenable that it cannot possibly succeed”. The joint majority’s assertion in Spencer that there has been a departure from the approach espoused by Barwick CJ is informed by s.31A(3) (s.17A(3) FCC Act), which provides that a proceeding need not be hopeless or bound to fail for it to have no reasonable prospects of success. 30. Relevantly, French CJ and Gummow J discussed Parliament’s intention behind the introduction of s.31A(3). The section was introduced by the Migration Litigation Reform Act 2005. That amending legislation also inserted s.17A into the Federal Magistrates Act 1999 (as it then was). At the time, the Attorney-General said in his Second Reading Speech that:The bill … strengthens the power of the courts to deal with unmeritorious matters, by broadening the grounds on which federal courts can summarily dispose of unsustainable cases. 31. The inference their Honours were seeking to draw, perhaps, is that Parliament’s intention in introducing ss.31A and 17A was to lower the bar for obtaining summary dismissal. Such an inference had previously been drawn by the Federal Court in Dandaven v Harbeth Holdings Pty Ltd [2008] FCA 955 and White Industries Aust Pty Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298.32. However, the majority observed that where there are real issues of fact and/or law to be decided, and the rights of the parties depend upon it, it is appropriate that the matter go to trial. In Spencer, the party seeking to defend the summary dismissal of the proceedings had identified both a factual and a constitutional question to be tried. The joint majority concluded that, since the factual question depended upon what evidence would be subsequently adduced, and the constitutional question may be affected by the resolution of the factual question, the proceeding could not suitably be determined on a summary basis. 33. The phrase “no reasonable prospect” should not be paraphrased, defined, or further explained. The joint majority (at 141) was adverse to the possibility that the phrase would spawn a lexicon or list of words or phrases intended to capture most or all cases in which a court might be satisfied that there is no “reasonable prospect”. Rather, their Honours said that:full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is “no reasonable prospect” of success.34. Spencer has been and continues to be applied by this Court in respect of s.17A (see, e.g., Jackson v P/T Constructions WA Pty Ltd [2015] FCCA 1014 at [14]; Henry v Leighton Admin Services Pty Ltd [2015] FCCA 1923 at [5]; Bloomfield v Grainger [2014] FCCA 2074 at [10]). The Federal Court has similarly continued to rely on Spencer (see Keenan v Bundaberg Port Authority [2016] FCA 134 at [45]; Australian Securities and Investments Commission v Cassimatis (2013) 220 FCR 256; [2013] FCA 641 at [15]-[30]; Krajniw v Newman (No 2) [2015] FCA 673 at [9]-[13]; Crocker v Toys R Us (Australia) Pty Ltd (No 3) [2015] FCA 728 at [8]-[11]). 35. Section 17A of the FCC Act, insofar as it concerns summary judgment is manifested by r. 13.07 of the Federal Circuit Court Rules 2001, the terms of which are as follows:13.07 Disposal by summary judgment(1) This rule applies if, in a proceeding:(a)in relation to the whole or part of a party’s claim there is evidence of the facts on which the claim or part is based; and(b) either:(i)there is evidence given by a party or by some responsible person that the opposing party has no answer to the claim or part; or(ii)the Court is satisfied that the opposing party has no reasonable prospect of successfully defending the claim or part.(2)The Court may give judgment on that claim or part and make any orders or directions that the Court considers appropriate.(3)If the Court gives judgment against a party who claims relief against the party obtaining the judgment, the Court may stay execution on, or other enforcement of, the judgment until determination of that claim.
