Monaco Super Fund Pty Ltd v Mastrogiannopoulos
[2019] VSC 632
•17 September 2019 (given ex tempore, revised)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
MORTGAGE RECOVERY LIST
S ECI 2019 00781
| MONACO SUPER FUND PTY LTD (ACN 122 216 620) | Plaintiff |
| v | |
| NICOLETA MASTROGIANNOPOULOS | Defendant |
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JUDGE: | Ierodiaconou AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 16 September 2019 |
DATE OF RULING: | 17 September 2019 (given ex tempore, revised) |
CASE MAY BE CITED AS: | Monaco Super Fund Pty Ltd v Mastrogiannopoulos |
MEDIUM NEUTRAL CITATION: | [2019] VSC 632 |
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PRACTICE AND PROCEDURE – Application to set aside judgment in default of defence – Whether defendant has a defence on the merits – Supreme Court (General Civil Procedure) Rules 2015 r 21.07 – Kostokanellis v Allen (1974) VR 596 – Application for stay of execution of warrant – Supreme Court (General Civil Procedure) Rules 2015 r 66.16 – Abikhair v Ali [2018] VSC 93 – Maher v Commonwealth Bank of Australia [2008] VSCA 122 – Whether special circumstances warranting stay of execution.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms L Mills | Dandanis & Associates |
| For the Defendant | Mr I Percy | WKA Legal |
TABLE OF CONTENTS
Summary.............................................................................................................................................. 1
Background......................................................................................................................................... 1
Evidence............................................................................................................................................... 3
Setting aside a default judgment – applicable principles.......................................................... 3
Whether to set aside default judgment — submissions and analysis...................................... 4
a) Does Mrs Mastrogiannopoulos have a defence on the merits?......................................... 4
Mrs Mastrogiannopoulos’ submissions........................................................................... 4
Monaco’s submissions........................................................................................................ 6
Analysis................................................................................................................................. 8
b) What is the reason for the failure of Mrs Mastrogiannopoulos to file a defence in time? 14
Mrs Mastrogiannopoulos’ submissions......................................................................... 14
Monaco’s submissions...................................................................................................... 15
Analysis............................................................................................................................... 15
c) Has the application to set aside been made promptly after the default judgment came to the knowledge of Mrs Mastrogiannopoulos?...................................................................... 15
Analysis............................................................................................................................... 16
d) If the judgment is set aside, would Monaco be prejudiced in any respect which could not be adequately compensated for by a suitable award of costs?....................................... 16
Analysis............................................................................................................................... 16
Conclusion.......................................................................................................................... 16
Stay of execution — applicable law.............................................................................................. 16
Stay of execution — submissions and analysis.......................................................................... 17
Mrs Mastrogiannopoulos’ submissions......................................................................... 17
Monaco’s submissions...................................................................................................... 18
Analysis............................................................................................................................... 18
Conclusion......................................................................................................................................... 18
HER HONOUR:
Mrs Mastrogiannopoulos is an elderly widow with terminal cancer. Her home has been provided as security for her son’s business loans. The lender says the loans are in default. The plaintiff has obtained a judgment in default of defence and a warrant of possession has been issued. Mrs Mastrogiannopoulos faces eviction from her home of nearly 20 years.
By summons filed on 12 September 2019, Mrs Mastrogiannopoulos, the defendant, seeks to have a default judgment obtained by Monaco Super Fund Pty Ltd (ACN 122 216 620) as Trustee for the Monaco Super Fund (‘Monaco’), the plaintiff, set aside. Monaco opposes the application and maintains the default judgment should not be set aside as Mrs Mastrogiannopoulos has no defence on the merits.
Mrs Mastrogiannopoulos seeks to permanently stay the warrant of possession. Monaco opposes the application and refers to a Deed signed by Mrs Mastrogiannopoulos in respect of the sale of the property.
Summary
I will allow Mrs Mastrogiannopoulos’ applications to stay the warrant of possession and to set aside the default judgment.
At the outset, I acknowledge the assistance of both counsel in this application. Their written and oral submissions, prepared urgently, were of assistance to the Court and focused on the real issues in dispute.
Background
Monaco filed a writ and statement of claim in this proceeding on 25 February 2019. It says that Mrs Mastrogiannopoulos signed Mortgage AQ507033Y on 9 November 2017.[1] This is the second mortgage because Monaco says that Mrs Mastrogiannopoulos signed Mortgage AQ507033Y earlier that day. This first mortgage secured the sum of $1,050,000 (plus interest, costs, charges, and expenses) and mortgaged Mrs Mastrogiannopoulos’ interest in two of her properties to Monaco Solicitors Pty Ltd ACN 103 138 469 and Melissa Micheli — in first priority — as joint mortgagees.[2] This mortgage was to expire on 22 November 2018, with an interest rate of 13% per annum and default interest rate of 23% per annum. The funds advanced by the mortgagees were used to discharge prior registered mortgages between Mrs Mastrogiannopoulos and Capital Bridging Finance, with the balance to be paid at the direction of Tredstone Transport Pty Ltd ACN 1500 005 815 (‘the company’), Vasilios Mastrogiannopoulos (Mrs Mastrogiannopoulos’ son, ‘Vasilios’), and Mrs Mastrogiannopoulos.[3] This ruling will refer to the second mortgage as ‘the mortgage’.
[1]The documents in respect of this mortgage are contained as exhibits to the affidavit of Mrs Mastrogiannopoulos, sworn 12 September 2019 (‘Mastrogiannopoulos affidavit’): exhibits ‘NM-21’ and ‘NM-16’.
[2]The documents in respect of this mortgage are annexed to the affidavit of Warwick Laing Keay, sworn 13 September 2019 (‘Keay affidavit’): annexure D.
[3]Keay affidavit, pages 2-4.
Within the mortgage, the company is listed as the borrower and chargor, Mrs Mastrogiannopoulos is a guarantor, mortgagor, and chargor, and Vasilios is a co-guarantor and chargor.[4]
[4]Mastrogiannopoulos affidavit, exhibit ‘NM-5’.
Mrs Mastrogiannopoulos says she does not know whether the loan monies were advanced and that she received no benefit from them.
Mrs Mastrogiannopoulos is the registered proprietor of the land described in Certificate of Title Volume 3525 Folio 903, being land in Coburg (‘the first property’). The first property is Mrs Mastrogiannopoulos’ residential property.
Mrs Mastrogiannopoulos mortgaged the first property and the land described in Certificate of Title Volume 08666 Folio 503, being land in Rye (‘the second property’) to Monaco.
Monaco claims Mrs Mastrogiannopoulos is in default under the mortgage. It says it required payment of arrears by notice on or about 24 October 2018 and payment was not made. The mortgage requires repayment of the principal sum ($450,000.00) plus interest within 12 months of the mortgage. Due to failure to adhere to the terms of the mortgage, Monaco maintains it is entitled to repossession.
Monaco commenced the action on 21 March 2019, and on 1 April 2019, Mrs Mastrogiannopoulos filed an appearance. Mrs Mastrogiannopoulos maintains her appearance was filed by Non Stop Legal without her knowledge or consent. It is alleged this firm was acting on the instructions of Vasilios.
On 2 May 2019, Monaco obtained a judgment for the recovery of the property in default of defence.
On 14 May 2019, Monaco caused a warrant of possession to be issued in respect of the property.
On 12 September 2019, Mrs Mastrogiannopoulos filed the summons and a supporting affidavit, sworn on 12 September 2019 (‘the summons’).
Evidence
Mrs Mastrogiannopoulos relies upon the Mastrogiannopoulos affidavit.
Monaco relies upon the affidavits of Jie Maximilian Koh, solicitor, sworn on 2 May 2019 (‘Koh affidavit’) and the Keay affidavit.
Setting aside a default judgment – applicable principles
Rule 21.07 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’) is the applicable rule. It provides that the Court may set aside or vary any judgment given under Order 21. Rule 21.02 is the mechanism for a plaintiff to obtain a default judgment where a defendant does not serve a defence in time. In this proceeding, no defence was served and Monaco consequently obtained a default judgment.
The principles concerning r 21.07 are not in dispute. In Kostokanellis v Allen, the Full Court stated that the judge is required to determine:
the just way to which the court’s discretion should be exercised. To do this must involve weighing up the extent to which the defendant is prejudiced by allowing the order and judgment to stand and the prejudice to the plaintiff in setting them aside. In many cases the situation will be that the plaintiff will not suffer any prejudice that cannot be remedied by an appropriate order as to costs … if the defendant does show on affidavit a prima facie defence on the merits it would seem that usually he will be seriously prejudiced if he is debarred from being able to present his defence at a trial of the action. One cannot tell until this has been done whether or not the defendant will succeed in such a defence. While it is undoubtedly relevant to the judge to consider what explanation the defendant has for not appearing … the weight to be attached to his explanation will depend on the circumstances … However, it does not necessarily follow that if the explanation [for non-appearance] does not amount to something which can be categorized as a ‘sufficient reason’ the defendant’s application should fail. It must depend on all the circumstances.[5] (emphasis added)
[5](1974) VR 596, [605] (Gowans, Crockett, Harris JJ).
Whether to set aside default judgment — submissions and analysis
The factors to be considered in determining whether to set aside a default judgment are now addressed in relation to Mrs Mastrogiannopoulos’ application.
a) Does Mrs Mastrogiannopoulos have a defence on the merits?
Mrs Mastrogiannopoulos’ submissions
Mrs Mastrogiannopoulos’ key submissions follow.
The interests of justice require that Mrs Mastrogiannopoulos not be shut out from defending proceedings when there is an arguable defence, as set out in her affidavit.
Firstly, there is unconscionable conduct by Monaco in the form of wilful blindness that amounts to recklessness. Mrs Mastrogiannopoulos’ circumstances placed her under a special disadvantage.
Mrs Mastrogiannopoulos was in a vulnerable position because of her current status as a retired pensioner with limited understanding of English. Her native language is Greek and she has always spoken it at home. Mrs Mastrogiannopoulos has not attended school in Australia and has relied upon her children to communicate on her behalf. She possesses no relevant business experience. Her work was as a cook in the family fish & chip shop and before that, as a cleaner at a hospital.
Mrs Mastrogiannopoulos is heavily reliant on Vasilios, who resides with her. He has a history of asking her to sign documents for loan purposes. He would take her to the appointments. When she questioned him, he got very angry and screamed at her, and threatened once to kill himself.
Mrs Mastrogiannopoulos deposes that Vasilios took her to Seoud Solicitors to sign documents for the mortgage. The lawyer with whom she met spoke English, not Greek. Mrs Mastrogiannopoulos does not recall reading or being given a copy of the documents, nor understanding the effect of the documents. Although there is a solicitor certificate stating the document has been explained to her, it is in English, not Greek.[6] The documents were not translated. She did not realise she was giving a personal guarantee and that she could lose the first property if payments were not made. Accordingly, the mortgage should be set aside on the basis of her lack of capacity to understand the documents and the fact she did not.
[6]Exhibit NM-13 to the Mastrogiannopoulos affidavit.
Mrs Mastrogiannopoulos has no recollection of ever meeting with the lender or its solicitors.
Mrs Mastrogiannopoulos received no benefit from the loans. She is not a director of the company. Mrs Mastrogiannopoulos is listed as a shareholder of the company despite no recollection of this, nor active involvement in its operations. It appears that the loan was to discharge other mortgages in relation to the company.
The interest rate of 25% is very high. The default interest rate on the loan was 35%.
Mrs Mastrogiannopoulos’ income is the age pension. Both the first property and another property that she owns are subject to mortgages and caveats.
In the circumstances above, Monaco ought to have known that the loan could cause severe damage to Mrs Mastrogiannopoulos as guarantor if she could not service it. There was wilful blindness as to her financial position and the ability to fulfil the guarantee.
Secondly, even if the mortgage is enforceable, any liability is more than satisfied by the sale proceeds of the second property. It was sold by Monaco in July 2019 for $1,450,000.
Mrs Mastrogiannopolous says no account of amounts has been provided despite her current solicitors requesting such an account on 3 September 2019.[7]
[7]Mastrogiannopoulos affidavit, exhibit ‘NM-29’.
Thirdly, Mrs Mastrogiannopoulos signed a ‘Deed of Agreement & Indemnity’ on 21 August 2019.[8] It purports to give her agreement to vacate the property and hand over possession on 20 September 2019, with Monaco agreeing not to take steps to evict her beforehand unless she breaches the Deed. However, there is no evidence (including in the Keay affidavit) of the Deed being signed by Monaco. Further, the execution clause is not stated to be in the name of Monaco but another entity, which is one of the credit providers, being Monaco Solicitors Pty Ltd.
[8]Mastrogiannopoulos affidavit, exhibit ‘NM-28’.
Monaco Solicitors Pty Ltd is not a party in this proceeding. Monaco cannot rely on a Deed that is unsigned and to which it is not a party.
The question of enforcement of the Deed is not the subject of this application. Even if it was, it has already been breached by Monaco. Clause 1 provides that Monaco will cause the execution of the warrant of possession to be postponed until on or after 21 September 2019. Mrs Mastrogiannopoulos is informed by the Sheriff’s office that it has not been informed of the postponement of the warrant.
Monaco’s submissions
Monaco’s key submissions follow.
Firstly, there is no draft defence that has been provided. There is no proper available defence. The purported defences are fanciful.
Monaco relies upon two independent solicitor certificates in respect of Mrs Mastrogiannopoulos’ submission that she lacks comprehension of English.[9] Absent compelling evidence calling into question the accuracy of an independent solicitor’s certificate, a court is bound to accept it. If Mrs Mastrogiannopoulos has an issue with the solicitors, she can pursue them separately. It has nothing to do with Monaco’s ability to rely upon the certificates. It is more probable than not that a Court would accept independent certificates as a complete defence.
[9]Mastrogiannopoulos affidavit, exhibit ‘NM-13’, and Keay affidavit, annexure B.
Mrs Mastrogiannopoulos deposes that her son asked her to sign documents so that ‘he could get a loan’. She had previously signed loan documents.
Accordingly, there is evidence that Mrs Mastrogiannopoulos knew the general nature and effect of the numerous security documents signed by her in this matter.
Mrs Mastrogiannopoulos does not say she failed to read the documents or that she was not given an opportunity to do so before signing the documents, or that she was not given a copy of the independent solicitor certificates.
Mrs Mastrogiannopoulos did not complain or try to prevent the sale of the second property. Nor has she complained about other loan documentation.
The Court should be wary of acceptance of the inference by Mrs Mastrogiannopoulos that she has limited understanding of English given that she has lived in Australia for 55 years, operated a fish & chip shop with her husband for 25 years, worked as a cleaner before then, purchased property with her husband and at relevant times was the registered proprietor of three properties, and holds a drivers’ licence.
Monaco takes issue with the proposition that the sale proceeds of the second property are sufficient to discharge the obligations under the mortgage.
As to the submissions about the interest rates, they may be high but the Keay affidavit evidences that they were used to discharge an earlier mortgage with an interest rate of 66%.
Secondly, Mrs Mastrogiannopoulos signed the Deed, and did so in the presence of a solicitor with Non Stop Legal. The Deed provides for: postponement of the warrant of possession, Mrs Mastrogiannopoulos to remain in the first property on terms set out, provision of the keys to the first property to Monaco (which has been done), agreement for public auction on 21 September 2019, and vacant possession by then — with time being of the essence. Further, clause 5 of the Deed provides that Mrs Mastrogiannopoulos shall co-operate in the sale of the first property, and not hinder or obstruct the marketing, sale and auction of it. By bringing the stay application, this clause has been breached.
The Deed provides that upon default and without any notice, Monaco is entitled to immediately cause the Sheriff to reactivate and execute the warrant. Further, that the Deed may be pleaded as a bar to any claim or legal proceeding. The Deed provides that Mrs Mastrogiannopoulos had entered into it fully and voluntarily relying on her own information and investigations. Further, that she had carefully read it and received independent legal advice about it, and understood it. Accordingly, there is no basis to set aside the default judgment that has been regularly entered.
Even if unsigned by Monaco, the Deed would be operable as a deed poll. The name in the execution clause is just a mistake.
Analysis
In Jams 2 Pty Ltd & Ors v Stubbings (No 3) (‘Jams 2’), Robson J outlined some relevant principles concerning unconscionability:[10]
(a)The unconscionable conduct should involve some deliberate wrongdoing, or in some cases recklessness may suffice.
(b)Wilful blindness may constitute sufficient recklessness to invoke unconscionability.
(c)The conduct must demonstrate a high level of moral obloquy on the part of the person said to have acted unconscionably.
(d)The range of unconscionable conduct is wide and may include taking advantage of vulnerability, or lack of understanding, trickery, or misleading conduct.
[10][2019] VSC 150, [262] (citations omitted).
There is evidence given by Mrs Mastrogiannopoulos including her lack of English comprehension, no schooling in Australia, relationship with her son and the circumstances of the loan arrangement which give rise to a question as to whether or not she was under a special disadvantage. This is an issue for trial.
Of course, in order to establish a defence, Mrs Mastrogiannopoulos will need to establish that Monaco had knowledge of the circumstances, or, as asserted by her, acted with wilful blindness that constitutes sufficient recklessness. This is also an issue to be established at trial.
There is no evidence from Monaco as to what knowledge, if any, it had of Mrs Mastrogiannopoulos’ particular circumstances. There are no affidavits from the solicitors who gave the certificates. That is unsurprising in circumstances where the application came on urgently. Indeed, the Court was informed that the solicitors will need to obtain advice before providing evidence regarding the advice given. In response to Monaco’s submission that the solicitors may be pursued separately, that may be so, but that is not the proceeding before the Court.[11]
[11]Australia and New Zealand Banking Group Limited v Gianchino & Anor [1998] VSC 52 (‘Gianchino’)’ discussed below is an example where the solicitor who provided the advice was joined in the proceeding.
The question arose as to whether the existence of the two solicitor certificates meant that this issue need not proceed to trial. The authorities relied upon by Monaco indicate that the question of whether a solicitor has given independent advice is an issue for trial.
In St George Bank Ltd v Dunstan (‘St George Bank’), Hayne J dealt with a matter where Ray Sparks Insurance Agency Ltd was registered as the mortgagor for two mortgages.[12] Its directors were Mr and Mrs Sparks and Mr Dunstan, and each held capital in the company. The company loaned money from the Victorian Savings and Loan Society (‘VSLS’). The loan application was signed by Mr Sparks and Mr Dunstan. The letter of offer described the mortgagors as including both of them and their wives, namely Mrs Sparks and Mrs Dunstan. The loan document referred to the personal guarantees of directors. The letter of acceptance was signed by Mr Sparks and Mr Dunstan. Mr Dean Cinque was described in the documentation as the solicitor for the borrowers. He signed a ‘solicitor’s certificate’. VSLS advanced the loan monies to the company after receiving the certificate. Mortgages were registered over two properties. Mr and Mrs Sparks were the mortgagors in respect of one property, and Mr and Mrs Dunstan the other. Mrs Sparks and Mrs Dunstan claimed that it would be unconscionable for the mortgages to be enforced.
[12](Supreme Court of Victoria, Hayne J, 26–27, 31 October and 10 November 1994).
Mrs Sparks and Mrs Dunstan alleged the mortgages were procured by undue influence due to the questionable nature in which the documents were described and executed. Further, they submitted that their signatures had been ‘procured through the agency’ of their husbands and they ‘stood to gain nothing from the mortgage …’.[13]
[13]St George Bank, 16-17.
Hayne J stated that, ‘central to the principles discussed in Amadio is that the circumstances reveal it would be unconscionable or unconscientious for the party in the position of the plaintiff to seek to enforce its rights’.[14] Hayne J held that:
In the absence of some knowledge or reason to know of the disadvantage, there is in my view nothing unconscientious in the lender seeking to enforce its rights against the wife.
In the present case VSLS received a document which purported to be a solicitor’s certificate certifying that the solicitor had ‘fully explained the terms and conditions of the mortgage to which this certificate is annexed’ to the mortgagors ‘who appeared to fully understand the nature of the mortgage, the obligations they are under and the nature of the transaction to which the mortgage was provided. In addition, VSLS received a third party acknowledgement signed by the mortgagors and stating that the provisions of the mortgage to VSLS ‘in respect of the borrowers have been explained to us and that we understand our obligations under the mortgage executed in favour of [VSLS] and that we have received a copy of the mortgage and related memorandum of common provisions.
…
It was not suggested that VSLS had actual knowledge of any undue influence that either [Mr] Sparks or [Mr] Dunstan may have brought to bear upon his wife. The real question in issue is whether in all the circumstances VSLS was aware of the possibility that that situation may exist or was aware of facts that would raise that possibility in the mind of a reasonable person.[15]
[14]Ibid 17.
[15]Ibid 18 (emphasis added).
Hayne J concluded the following in respect of the solicitor’s certificate.
Although Cinque was the borrower’s solicitor, he was asked as a solicitor to certify as solicitor to his having explained certain matters to each mortgagor. Either he made that explanation or he did not. Each of Mrs Dunstan and Mrs Sparks denies that he did. Not having had any evidence from Cinque himself, and the evidence of [Mrs Dunstan and Mrs Sparks] not being challenged in this respect, I am prepared to assume for present purpose that he did not give the explanation described in the certificate. But that does not mean that VSLS, having received a certificate from a solicitor, is then in a position where, as a reasonable lender, it should conclude that the certificate is or may be false. The fact that Cinque may have been acting for the borrower is nothing to the point of whether VSLS is entitled to assume that the solicitor is telling the truth in a certificate when, as is well known, to fail to do so would be an act of grave professional misconduct imperilling the solicitor’s future in the profession. Whatever duties the solicitor may owe to the borrower, those duties cannot extend to permitting, let alone requiring, him to tell the lender an untruth in the certificate.
Thus I do not consider that VSLS was in a position where it should have been aware of the possibility that the wife was subject to the undue influence of her husband. The certificate which VSLS received was sufficient to put to rest what otherwise should have been a real and lively suspicion of such a possibility.[16]
[16]Ibid 20-21.
Ultimately, Hayne J held that Mr Sparks exerted undue influence over Mrs Sparks (but that was not the case with Mr and Mrs Dunstan). However, these were not matters of which VSLS was, or ought to have been, on notice. Accordingly, VSLS succeeded in the proceeding.
St George Bank was a decision made after a trial. So too, are the other cases on which Monaco seeks to rely.
In Gianchino, Byrne J considered evidence regarding a solicitor’s advice in circumstances where that solicitor, Mr Cooper, and the person receiving that advice (‘the deceased’) had both died prior to trial. The deceased had mortgaged land as security for loans made by the bank to his son. The same son was the executor of the deceased estate and became the defendant in the proceeding by which the bank sought possession of the land.
The deceased was said to be at a special disadvantage because of his inability to read English and lack of independent legal advice. Prior to the mortgage being executed, the bank obtained a letter from the solicitor, Mr Cooper, stating that he had given the deceased advice regarding the effect of the proposed mortgage on the security of the land. The deceased and his son had both attended a meeting with the solicitor regarding the advice. The son gave evidence that he translated the advice into Italian for the deceased as best he could.[17] Byrne J held that there was ‘little controversy’ about the advice given. The solicitor had sworn interrogatories prior to his death, and the son agreed that this was the advice given.[18]
[17]Gianchino [15].
[18]Ibid [16].
Byrne J rejected the attack on the solicitor as not being truly independent.[19] Further, he held that it was ‘not a case where the precarious nature of [the son’s] finances called for any warning from the Bank’.[20] Byrne J concluded that:
Having received a letter of advice in these terms from a solicitor and there being no indication to the contrary, the Bank is entitled to proceed with the transaction on the basis that the advice had been given and the deceased had, in the exercise of his own informed judgment decided to grant the mortgage as security in accordance with its terms. This is an answer to any defence to the Bank’s claims based on undue influence or special disadvantage.[21]
[19]Ibid [27].
[20]Ibid [27].
[21]Ibid [28] (citations omitted).
In McIvor v WestPac Banking Corporation[22] (‘McIvor v Westpac’), Applegarth J observed:
Courts have considered reliance by financiers on solicitors certificates in a variety of legal contexts. The issue which emerges from these authorities is whether the financier was possessed of any knowledge that could preclude reliance on the solicitors’ certificates … Absent circumstances where a party is put on notice that the advice has not been given, has not been given properly or has not been understood, the party seeking to enforce the contract is entitled to rely on the certificate.[23]
[22][2012] QSC 404 (14 December 2012).
[23]Ibid [93].
Further:
Ordinarily, a solicitor’s assumption of legal and professional responsibilities provides sufficient assurance that he or she will give the requisite advice independently, competently and in a disinterested manner. The provision of a solicitor’s certificate does not wholly eliminate the risk of undue influence or misrepresentation. But it does provide a bank with a degree of assurance … Although the risk of undue influence is not wholly eliminated by such a certificate, it usually will be sufficient to put to rest what otherwise would have been a suspicion of undue influence.[24]
[24]Ibid [98].
In McIvor v Westpac, Applegarth J concluded that he preferred the evidence of three solicitors over the evidence of Ms McIvor in respect of their respective certificates that they had given independent legal advice to her. Each of the three solicitors gave oral evidence. Two could not recall the specific advice but gave evidence as to their practice. The third could specifically recall the advice. Applegarth J held that Ms McIvor did not have a proper recollection of the advice and had reconstructed matters.[25]
[25]Ibid [81].
In all the cases above, there was factual determinations made after trial.[26] Here, there is a factual contest that will need to be determined at trial. There is insufficient evidence to draw the inferences urged by Monaco in respect of Mrs Mastrogiannopoulos. There is evidence from Mrs Mastrogiannopoulos about her circumstances including that she received no benefit from the loan which Vasilios arranged, she felt pressured by Vasilios, that she did not understand the meaning of the documents she signed, that Vasilios arranged and took her to meet with a solicitor, that the solicitor spoke with her in English, the documents were in English, and that her native language is Greek. As discussed above, if Mrs Mastrogiannopoulos’ circumstances amount to a special disadvantage, then there is also the critical question of Monaco’s knowledge, if any.
[26]See also Jams 2.
Although there is no draft defence, this is not fatal as Mrs Mastrogiannopoulos relies upon her affidavit. Given the above, there is arguably a defence on the merits. On the material before me, I cannot accept Monaco’s submission that it is fanciful.
It would be unjust to deny Mrs Mastrogiannopoulos the opportunity to plead her unconscionability defence.
As to the question of whether there is a defence as to monies owing having already being repaid, that is also a factual issue to be determined at trial, particularly in circumstances where no recent account has been provided by Monaco. Mr Keay deposes that the amount owing under the mortgage ‘exceeds $785,000.’ Further, that a detailed statement of indebtedness is being prepared by Monaco and other mortgagees and that the net amount received after sale of the second property was insufficient to discharge the other mortgage. This is not a case where a current certificate of indebtedness is before the Court.
Finally, in respect of the Deed, it is not a deed poll. It is expressed as a Deed. Following the hearing on 16 September 2019, a version signed by Monaco Solicitors Pty Ltd was provided. Leave will be given to file an affidavit that exhibits this version.
There is a question to be ventilated as to why the Deed is signed by a different entity, and whether it can be relied upon, and whether or not the substance of the Deed is enforceable. That is perhaps a question for another day.
b) What is the reason for the failure of Mrs Mastrogiannopoulos to file a defence in time?
Mrs Mastrogiannopoulos’ submissions
Mrs Mastrogiannopoulos says that she has no recollection of receiving the writ and statement of claim, but if she did, she would have given it to Vasilios. He had said that he would take care of the matter.
The notice of appearance was filed by Non Stop Lawyers. They are Vasilios’ solicitors. Mrs Mastrogiannopoulos did not speak with anyone in the firm regarding the notice of appearance. She does not speak to Vasilios about his business loans anymore because he becomes upset and angry (as discussed above).
Monaco’s submissions
There is no credible explanation for the delay. Mrs Mastrogiannopoulos was personally served with the writ and statement of claim on 21 March 2019.[27] She says she has no recollection of this but deposes that she took no further steps in the proceeding because her son was dealing with the matter. There is however no explanation from Vasilios for the delay.
[27] Koh affidavit, page 1.
Analysis
It is common ground that Mrs Mastrogiannopoulos was personally served with the writ although she does not recollect that.
I do not draw an adverse inference from the lack of affidavit from Vasilios in respect of this application. It was made urgently and Mrs Mastrogiannopoulos has deposed (as discussed above) that Vasilios became angry when she discussed the loans with him. She no longer retains the solicitors who also act for him but has retained her own solicitors.
I accept the evidence of Mrs Mastrogiannopoulos that she relied upon Vasilios and his solicitor. I find it is a credible explanation for the delay.
c) Has the application to set aside been made promptly after the default judgment came to the knowledge of Mrs Mastrogiannopoulos?
Mrs Mastrogiannopoulos recalls an occasion when she was taken by Vasilios to the offices of Non Stop Lawyers and met with a woman who asked her to sign something and said everything would be okay. She became concerned when she received a notice to vacate.
On 3 September 2019, Mrs Mastrogiannopoulos appointed new solicitors. They then corresponded with Monaco’s solicitors. This application was then filed.
Monaco refers to its submissions above.
Analysis
I find the application was made promptly after new solicitors were engaged by Mrs Mastrogiannopoulos. They communicated, as is proper, with Monaco’s solicitors beforehand, and those communications began immediately after being instructed by Mrs Mastrogiannopoulos.
d) If the judgment is set aside, would Monaco be prejudiced in any respect which could not be adequately compensated for by a suitable award of costs?
Mrs Mastrogiannopoulos says that any prejudice could be compensated by a suitable award of costs, or the proceeds of the sale of the second property.
Analysis
Monaco has not demonstrated that any prejudice it could suffer would not be compensated for by a costs order.
Conclusion
It is in the interests of justice that the default judgment be set aside and Mrs Mastrogiannopoulos have the opportunity to file a defence.
Stay of execution — applicable law
Derham AsJ set out the following principles in Abikhair v Ali, which I adopt.[28]
Pursuant to r 66.16 of the Rules and the inherent jurisdiction, the Court has a discretionary power to stay execution of a judgment, but only on grounds which are relevant to a stay of enforcement of proceedings. The jurisdiction does not extend to grounds which are matters of defence, which ought to have been raised in the proceeding itself. The Court is required to take into account all the circumstances of the case and is not bound by decisions on other sets of facts.
The Court has a wide discretion, is required to take into account all the circumstances of the case and the discretion is not circumscribed by rigid rules. The circumstances that will justify a stay of execution are special circumstances which go to the enforcement of the judgment. Prima facie a successful party is entitled to the benefit of the judgment obtained and the presumption that the judgment is correct. It is in those circumstance that the applicant bears the onus of establishing special circumstances warranting the stay of that right.
[28][2018] VSC 93 [22]–[25] (citations omitted).
The following principles in Maher v Commonwealth Bank of Australia[29] (‘Maher’) are applicable and I adopt them.
[29][2008] VSCA 122.
In Cellante and Ors v G Kallis Industries Pty Ltd (‘Cellante’), Young CJ (with whom Brooking J agreed), cited with approval the observation of Mahoney JA (with whom Moffit P and Glass JA agreed) in Re Middle Harbour Investments Ltd (in liq) that:
… where an applicant for a stay has not demonstrated an appropriate case but has left the situation in the state of speculation or of mere argument, weight must be given to the fact that the judgment below has been in favour of the other party.
Young CJ concluded that an applicant for a stay under r 66.16 must show special or exceptional circumstances to take the case out of the general rule that an appeal does not operate as a stay.
…
In Cellante, Young CJ stated that special circumstances would ‘exist where for whatever reason, there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed.[30]
[30]Ibid [21], [22], [25] (citations omitted).
Stay of execution — submissions and analysis
Mrs Mastrogiannopoulos’ submissions
There is a real risk that the property will be sold and it has been her principal place of residence for nearly 20 years. She is unwell and suffers from anxiety and undergoes treatment for terminal cancer. Mrs Mastrogiannopoulos says little prejudice will be suffered by Monaco if the stay is granted. She says the sale proceeds from the second property should be sufficient to meet the amounts owed.
Monaco’s submissions
Monaco submits it is entitled to enforce its warrant immediately. The onus to establish there are special circumstances are on Mrs Mastrogiannopoulos, and they are not established. Prima facie, Monaco is entitled to enforce its judgment.
There is no compelling evidence as to why the defence was not filed. Monaco refers to the personal service on the writ on Mrs Mastrogiannopoulos. It refers to the fact Vasilios has not deposed to an affidavit as to why he has not filed a defence on behalf of his mother. Monaco refers to submissions of Mrs Mastrogiannopoulos as being fanciful, and that she is in default under the Deed. She entered into the Deed with assistance from Non Stop Legal and she has partly complied with the Deed by handing over keys and allowing inspections.
Analysis
I find there are special circumstances in this matter. Mrs Mastrogiannopoulos will be removed from her home of nearly 20 years if the auction proceeds on Saturday 21 September. Her defence may be nugatory. There will be no prejudice suffered by Monaco that cannot be alleviated by a costs order. As to the Deed and the lack of affidavit from Vasilios, I refer to the analysis above.
Conclusion
I will make orders staying the warrant of possession dated 14 May 2019 until the hearing and determination of this matter or until further order, and setting aside the default judgment dated 2 May 2019. Accordingly, the auction of the first property scheduled for 21 September 2019 will not proceed.
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