Mortgage Acceptance Nominees Ltd v Camelot Holdings P/L & Ors Re Howarth, M.E. Ex parte Mortgage Acceptance Nominees Ltd Howarth, M.E. v Mortgage Acceptance Nominees Ltd

[1993] FCA 249

JUDGMENT No. ...a.....o 'Le ,,,., on o,o,ooo,

FOR LIMITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRAtIA)	2 8 APR 1993
NEW SOUTH WALES DISTRICT REGISTRY)

GENERAL DIVISION ) PRINCIPAL REGISTRY

BETWEEN: MORTGAGE ACCEPTANCE NOMINEES

LIMITED

\

Applicant j G 690 of 1991

AND: CAMELOT HOLDINGS PTY LTD h ORS)	1
1

Respondents 1

RE: MICHAEL EDWARD HOWARTH	1
) B 2422 of 1992

Judgment Debtor	1
b

EX PARTE: MORTGAGE ACCEPTANCE NOMINEES j	LIMITED	1 1
Judgment Creditor	1

BETWEEN: MICHAEL EDWARD HOWARTH	1
i

Applicant	1	G 568 of 1992
MORTGAGE ACCEPTANCE NOMINEES j
LIMITED	1

AND: Respondents

REASONS FOR J U m N T

This case consists of three separate pieces of litigation. Proceedings numbered G 690 of 1991 were commenced in this Court by Mortgage Acceptance Nominees Limited (Mortgage Acceptance) on 4 November 1991 against what was described as nineteen respondents. Because two respondents as named	respondents. On 7 February 1992 judgment was ordered by	involved two persons, there were actually twenty one
EINPELD J	SYDNEY	28 APRIL 1993

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Justice Hill in favour of Mortgage Acceptance against some only of these respondents (the judgment). The case against the others still continues. One of the unsuccessful

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respondents was Michael Edward Howarth (Howarth) against whom

judgment was entered for $595,414.20 in default of a defence	b
or an appearance at the hearing. This judgment was entered in respect of part only of the case against him, the Court noting:

. . . that this relates only to the claims against him

under the Loan Agreement referred to in paragraph 2 of the statement of claim, the Lease referred to in paragraph 14 and the Guarantee referred to in paragraph 27 of the Statement of Claim and does not relate to claims against him under the Fair Trading Act, claims of negligence or claims for breach of warranty of author1 ty.

The flrst matter before the Court is a motion by Howarth to set aside this judgment.

As a consequence of the judgment, Mortgage Acceptance issued a

bankruptcy notice against Howarth on 7 June 1992 claiming the	judgment debt plus interest, a total of $629,916.90. The
second aspect of this case is an application by Howarth to set aside that bankruptcy notice. No grounds are given but the affidavit in support suggests that it is based on the non- existence of the debt. These proceedings are numbered B 2422 of 1992.
The third element of the litigation is an application and statement of claim in matter numbered G 568 of 1992 issued by Howarth on 12 August 1992 seeking damages and the following additional relief:
1. An order that the respondent be restrained permanently

from enforcing or seeking to enforce the judgment against the applicant obtained in proceedings number G 690 of 1991, or of taking any action, arising out of the judgment.

2.    In the alternative, a declaration that the applicant and the respondent had not reached any agreement relating to the order and entry of judgment, in favour of the respondent, against the applicant for $595,414.20.

3.  An order that the judgment against the applicant in proceedings number G 690 of 1991 be set aside.

Mortgage Acceptance has moved on notice to have proceedings numbered G 568 of 1992 dismissed.

All these proceedings are based upon the same set of facts and	in fact seek the same fundamental determination by the Court.
They arise from a series of tax avoidance schemes entered into

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in the 1980s by some or all of the respondents in G 690 of

V 1991 as a syndicate (the syndicate members) with three subsidiaries or emanations of the State Bank of South Australia (State Bank), viz. Beneficial Finance Ltd (Beneficial Finance), Leasefin Limited (Leasefin), and Mortgage Acceptance (the State Bank entities), in the form of leases of cattle and horses and their progeny. As became common for such schemes after the 1987 stock market crash, the

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syndicate members then owed moneys to the State Bank entities In excess of their pledged assets. Matter number G 690 of

1991 was an action by Mortgage Acceptance to recover moneys

owing by the syndicate members under that company's leases.

In 1991 Howarth began negotiating a settlement with the State Bank entities on behalf of the syndicate members. Howarth said that the negotiations embraced, and were taken by him to involve, Mortgage Acceptance. In late November 1991 the management of and negotiating authority for Mortgage Acceptance was removed from the control of the persons managing and representing the other entities and given to another company altogether (Pegasus). The remaining State Bank entities are said to have declded early in 1992 that the syndicate members had offered them everything they had

available and their full co-operation in maximising assets and

was that on 6 February 1992, some of the syndicate members

minimising obstruction, delay and cost. Howarth's contention

including Howarth himself agreed on a settlement which was to be entered as a judgment the following day (the agreement). In fact the order of Justice Hill entered by a deputy District Registrar on 13 March 1992 involved only Mortgage Acceptance and was presented for entry by the solicitors for Mortgage Acceptance only. The transcript of the hearing on 7 February 1992 makes clear that that was the judgment his Honour was asked to enter.

Howarth alleged in the present litigation that it was part of the agreement that the judgment would not be enforced against him. The alleged consideration for the agreement was suggested to be that in addition to the realisation of all the assets of the syndicate members participating in the settlement with the State Bank entities, all the progeny could be sold even though the State Bank entities did not have a charge over the progeny, thus allowing the recovery of substantially more than was owed. The agreement was apparently that the State Bank entities would retain $100,000 of thls surplus, as is sald in fact to have occurred. Mortgage Acceptance denied being party to any such agreement.

Slnce the authority to negotiate on behalf of Mortgage Acceptance, previously in the hands of Beneficial Finance, was transferred to Pegasus in November 1991, Mortgage Acceptance

claimed that it was not party to whatever agreement was reached on 6 February 1992 or to any agreement not to enforce

the judgment entered on 7 February 1992. Thus the issues for
determination are:

1.	Whether the agreement was with Mortgage Acceptance.
2.	Whether the agreement included a term that the judgment would not be enforced against Howarth.

The agreement was said to have been made by Howarth with Robert Charles Taplin who at the time of the affidavit relied on in these proceedings was the New South Wales Manager of the

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Lending Division of the Business Banking Division of the State

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Bank. He was responsible for the management in New South Wales of Beneficial Finance and Leasefin at the time, and of Mortgage Acceptance between 1 October and 30 November 1991. Mortgage Acceptance conceded that a discussion between Taplin and Howarth concerning an agreement of the kind alleged by Howarth was held in November 1991. According to the evidence, the basis of the negotiation was that:

l. consent judgment would be given in G 690 of 1991;

2.    In addltlon to the reallsatlon of the syndicate members' assets including the progeny, Howarth would endeavour to have the other respondents pay Mortgage Acceptance a

substantial sum; and

3.   Mortgage Acceptance would not execute or attempt to recover money under the judgment.

Mortgage Acceptance sald that no agreement was in fact reached then or at any later time, and that in fact Taplin had no authority to make any agreement on behalf of Mortgage Acceptance after 30 November 1991 and did not actually or purportedly do so. An alternative argument was put that if there was such an agreement, Howarth did not comply with his obligations under it but in the light of the conclusions I have reached, it is not necessary for me to deal finally with this contention.

For his part, Howarth said that the agreement was actually finalised, that it involved and included Mortgage Acceptance, and that:

1.  Mortgage Acceptance is bound by the agreement not to enforce the judgment.

2.   Mortgage Acceptance is estopped from enforcing the judgment.

3.    The judgment against him should be set aside because it was obtained by mistake on his or Mortgage Acceptance's part or by decelt by Mortgage Acceptance.

However, Howarth's account of the agreement underwent several

changes. At the hearing of this case on 17 December 1992,

Howarth said that the agreement had been made between the mlddle of 1991 and November 1991 by himself and Taplin while a

Mr Nicholas Paten was present. Its terms were that Mortgage

Acceptance would get judgment but "let it sit", that the State Bank entities would receive the progeny and other assets plus $100,000, and that Howarth would try to get the syndicate members to pay an additional substantial sum.

These two accounts of the agreement need to be compared with other evidence about its terms and circumstances. A selection of this evidence follows:

1.    18 March 1992

Howarth's then solicitor, Karageorge (to Mortgage Acceptance's solicltor Elizabeth Ollver: see her affidavit of 2 September 1992 paragraph 7):

... he s p o k e w i t h a hi- David Walsh a t

B e n e f i c i a l i n February 1992 and was

i n f o r m e d by Mr Walsh t h a t the m a t t e r was

n o t p r o c e e d i n g and t h a t judgment would not

be e n t e r e d . I w i l l be attending C o u r t t o

make a s u b m i s s i o n t o set a s i d e the

judgment .

2.   18 March 1992

Karageorge apparently told Justice Hill in Court:

I am j u s t a bit concerned a b o u t the 8 t h

d e f e n d a n t [Howarth] b e c a u s e I was a d v i s e d

t h i s morn lng by the a p p l i c a n t ' s sol ici tor

there was a	judgment	a g a i n s t h i m . . .
H e h a s been	a d v i s e d by hi-	Walsh t h a t these

p r o c e e d ~ n g s a g a i n s t h i m would not be

e n f o r c e d ; the l a t e s t m e e t i n g b e t w e e n Mr

Howarth and M r David	Walsh took p l a c e a t
1.15 pm on 25 February .

In cross examination Howarth was asked why Walsh was mentioned on these occasions. He said:

I m i g h t h a v e g o t the wrong name.

3.    10 J u l v 1992

Howarth t o O l i v e r (see her a f f i d a v i t paragraph 10) when

he  was s e r v e d w i t h the b a n k r u p t c y n o t i c e :

I would l i ke t o h a v e a m e e t i n g w i t h the

s y n d ~ c a	t e	members,	Mortgage	A c c e p t a n c e ,
i t s	solicitors	and	the	solicitors

r e p r e s e n t i n g	the	R e s p o n d e n t s	i n	o r d e r	t o
come	t o	some	sort	o f	s e t t l e m e n t
arrangement	i n	r e l a t i o n	t o	the	Camelot

B r e e d i n g V e n t u r e .

I d o not want t o a c c e p t service o f the

B a n k r u p t c y N o t i c e t o d a y . I f I d o , i t w i l l

mean t h a t I w i l l be u n a b l e t o d o d e a l s

w i t h Mortgage A c c e p t a n c e or B e n e f i c i a l .

Ba log , Howarth 's f o rmer s o l i c l t o r , s a i d t h a t h e had b e e n

instructed b y Howarth t h a t ( s e e paragraph 5 o f h i s

a f f i d a v i t o f t h i s d a t e ) :

. . .	the	b a s l s	f o r	h i s	[ H o w a r t h ' s ]
c o n s e n t i n g	t o	the	s a i d	judgment	g r a n t e d

a g a i n s t	h i m	was	p u r s u a n t	t o	a n	Agreement
r e a c h e d	b e t w e e n	h i m	and	o f f i c e r s	o f	the

company whereby i f he c o n s e n t e d t o

judgment	the company would	t a k e no f u r t h e r
a c t i o n	t o e n f o r c e the	judgment .

5.    12 Auaus t 1992

S t a t e m e n t  o f C l a i m i n G 568 o f 1992 paragraph 4 :

On or a b o u t 6 F e b r u a r y 1992 i t was agreed

b e t w e e n the A p p l i c a n t and Robert T a p l i n on

b e h a l f o f the Respondent t h a t :

( a ) T h e A p p l i c a n t would consent to the

entry o f judgment a g a i n s t h i m and h is

companies i n f a v o u r o f the Responden t

for the amount c l a i m e d by the

Respondent t o g e t h e r w i t h interest .

(b) The A p p l i c a n t would endeavour t o h a v e

the	r e s p o n d e n t s	t o	the	a c t i o n ,	other
t h a n	h i m s e l f	and	companies	which	he

c o n t r o l l e d settle the p r o c e e d i n g s

w i t h the Respondent by the payment t o

i t o f a s u b s t a n t i a l sum o f money.

( c ) In c o n s i d e r a t i o n o f the m a t t e r s

d e t a i l e d i n s u b paragraphs ( a ) and

( b ) the Respondent would not e x e c u t e

or a t t e m p t t o e x e c u t e or a t t e m p t t o recover the moneys d u e under the

judgment .

Howarth (paragraphs 3, 4 and 5 of his affidavit of thls

date) :

3. On 6 F e b r u a r y 1992 I had a m e e t i n g

w i t h R o b e r t T a p l i n and a person known

t o me	a s N i c k ,	i n the o f f i ces o f	the
B e n e f i c i a l	F inance	C o r p o r a t i o n L t d	i n

S y d n e y . . .

4 . Dur ing the c o u r s e o f the m e e t i n g

[Taplin] s a i d " ... we can g e t

judgment a g a i n s t you and y o u r

companies and j u s t l e t i t s i t " .

5. The m a t t e r was then l i s t e d and

judgment	was	then	g i v e n	w i t h	my
consent	a g a i n s t	me	i n	f a v o u r	o f

[Mortgage Acceptance] i n accordance

w i t h the t e r m s o f the agreement

r e a c h e d .

[ " N i c k " was a p p a r e n t l y Mr P a t e n who was Genera l

Manager o f Mortgage Accep tance f rom 18 June

1990 t o 30 Sep tember 1991. A f t e r t h a t d a t e he

d i d n o further work for the company.]

Howarth ( p a r a g r a p h 9 o f h i s a f f i d a v i t o f t h i s d a t e ) :

Had I not b e l i e v e d t h a t B e n e f i c i a l by i t s

a u t h o r ~ s e d o f f i c e r T a p l i n had a g r e e d t o

not e n f o r c e i t s judgment I would neither

h a v e agreed t o make a v a i l a b l e t o

B e n e f i c i a l the s a i d p r o g e n y nor would I

h a v e c o n s e n t e d t o h a v e judgment e n t e r e d

a g a i n s t me.

1 8 . 16 December 1 9 9 2

Howarth	( p a r a g r a p h s	9	and	10	o f	h i s	a f f i d a v i t o f	t h i s
d a t e ) :

9 . M y a f f i d a v i t , sworn on 1 2 t h A u g u s t

1992 ... was i n error i n t h a t i t

refers t o i n paragraph 3 a m e e t i n g

h e l d	w i t h	R o b e r t	T a p l i n	on	6 t h
F e b r u a r y	1992.	The	m e e t i n g	I	refer

t o t o o k p l a c e i n 1991, the l a s t

m e e t i n g w i t h Mr T a p l i n b e i n g h e l d on

1 5 t h November 1991 . . . A n y f u r t h e r

m e e t i n g s	I	had	w i t h	r e p r e s e n t a t i v e s
o f	...	[Mortgage	A c c e p t a n c e ]	were

h e l d w i t h hT David Walsh i n 1992.

10. On 6 t h February 1992 I a t t e n d e d a m e e t i n g

w i t h Mr.- David Walsh .

These variations and gyrations, together with Howarth's oral evidence which, to say the least, demonstrated to me a marked degree of agility with the facts, might be enough to destroy his account of any agreement with Mortgage Acceptance of the

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kind alleged. But even if his evidence, so far as it was consistent, were accepted, it does not support an enforceable agreement of the kind alleged. Although there is no dispute that a discussion along the lines, but not precisely as, now suggested took place between Howarth and Taplin at meetings on 8 and 15 November 1991, Howarth himself said that there was no agreement to settle as at 5 December 1991 and that they were only part way through negotiations at that time. His own notes of the November meetings show that he did not believe there was as yet any agreement. Moreover, other evidence, notably the affidavit of Richard Frank (Ric) Curtis and its annexures, showed that Howarth made an offer to Curtis representing Mortgage Acceptance on 4 December 1991 which was rejected the next day. Howarth in substance conceded in evidence that Curtis' dlary note of the conversation was	correct. A prior phone call to Curtis on 19 November 1991 and	the 4 December letter of offer would have involved a payment
by Howarth himself of $50,000. It is hardly conceivable that such an offer would have been made if the agreement had been in place at that time.
Howarth did not allege any meetings with operatives of any of the State Bank entities between November 1991 and 6 February
1992 when a meeting undoubtedly took place. Howarth first
said it was with Taplin and then said it was with Walsh. Taplin said it was with him but not on behalf of or concerning Mortgage Acceptance. Walsh said it was not with him but that he had had a meeting with Howarth few days earlier. Walsh said that he was never employed by Mortgage Acceptance, never had authority to negotiate on its behalf, and never purported, pretended or tried to do so. In my opinion, whoever it was did not represent Mortgage Acceptance. Although Howarth's dealings with Mortgage Acceptance had been through Taplin until 15 November 1991, it is clear from Curtis' evidence that Howarth became aware that Curtis had taken over then because he contacted Curtis in Adelaide by telephone on 19 November. By then he certainly knew that Taplin was no longer negotiating for Mortgage Acceptance but that Curtis was. I think Walsh was an afterthought or later rationalisation, presumably after the evidence against Howarth's contentions in this case was made known. As it happens, the alteration was fut~le because Walsh was not and did not affect to be an available negotiating representative of Mortgage Acceptance.
Both Taplin, on behalf of Beneficial Finance and Leasefin, and Howarth put in writlng the agreement reached on 6 February
1992. Taplin's memorandum of that day shows that he had
sought instructions from his superiors in Adelaide about it
but not on behalf of Mortgage Acceptance and not about the
agreement now alleged by Howarth. Taplin's concerns were with
the debts due to Beneficial Finance and Leasefin, not Mortgage
Acceptance. Moreover a letter from Beneficial Finance of 10
February, acknowledged as correct by Howarth's signature, and
Howarth's reply of the next day which apparently followed some
telephone conversations between them, said nothing about the
supposed agreement on the Mortgage Acceptance debt. This is
despite Howarth's tendency, as revealed by the evidence, to B
note everything that took place.

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Moreover, Howarth's failure to carry out his side of the agreement -- for example, to consent to judgment (he did not attend Court on 7 February 1992 or instruct solicitors to do so), and to try to persuade his fellow syndicate members to pay money to Mortgage Acceptance (there was no evidence of any steps taken in this regard) -- further undermines his claims about it. Neither of the solicitors Howarth was using during the period in question gave ev~dence of having received any

instructions about any such agreement as is alleged. Nor did

his later solicitor Balog give evidence about how Howarth came to m~stake an agreement with Taplin for an agreement with Walsh, nor that he was ever instructed that the alleged agreement was made with Walsh. Oliver's evidence of a conversation with Karageorge concerning an agreement having

been made with Walsh not to enter judgment and that he had	instructions to move to set aside the judgment on that basis
agaLn tends to deny an agreement with Taplin.
Furthermore, at the meeting with Oliver on 10 July 1992 when the bankruptcy notice was served, Howarth's proposal to settle his debt to Mortgage Acceptance made no mention of any prior agreement of the kind alleged. Not only did he not deny this conversation in oral evidence, he referred to the questioning of his failure to raise the agreement as "hair splitting",
which it certainly was not. Indeed his reason for seeking to delay service of the bankruptcy notice was that he would not be able to do deals with Mortgage Acceptance or Beneficial Finance, when the suggested agreement would establish that he had already done the ultimate "deal". Nor has any explanation been offered or reason proffered as to why Mortgage Acceptance would enter a judgment but agree to do nothing to enforce it. Moreover, Howarth has not suggested or evidenced any defence on the merits if the judgment was set aside.
I do not accept Howarth's evidence that there was an agreement by Mortgage Acceptance to withhold enforcement of the judgment. Any agreement to this effect on or about 6 February
1992 was not with Mortgage Acceptance. There is no estoppel.
No mistake, unilateral or mutual, has been evidenced. There is no evidence of deceit on the part of Mortgage Acceptance.
The motion to set aside the judgment in G 690 of 1991 and the
application to set aside the bankruptcy notice in B 2422 of 1992 are both dismissed with costs. The application in G 568
of 1992 is dismissed with costs.

I cc-*,',, 15,s 2nd the -(oot'*~l

J,s: L: ;,nl;,d

Counsel and solicitor	Mr E Strasser instructed
for Michael Edward Howarth	instructed by
Richard A Licardy & CO b
and later by Carneys
Solicitors 4
Counsel and Solicitor	Mr S L Walmsley
for Mortgage Acceptance	instructed by
Nominees Ltd	Smits Leslie Barwick
Dates of Hearing	17 & 22 December 1992

Written submissions completed	26 February 1993
Date of Judgment	28 April 1993