NAB v Ganesh
[2019] VSC 642
•19 August 2019 (ex tempore)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2015 04098
| NATIONAL AUSTRALIA BANK LIMITED (ACN 004 044 937) | Plaintiff |
| v | |
| ANANDAVALLI GANESH AND GANESH RADHAKRISHNAN | Defendants |
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JUDGE: | RIORDAN J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 19 August 2019 |
DATE OF RULING: | 19 August 2019 (ex tempore) |
CASE MAY BE CITED AS: | NAB v Ganesh |
MEDIUM NEUTRAL CITATION: | [2019] VSC 642 |
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PRACTICE AND PROCEDURE – Application by plaintiff for leave to discontinue – Application granted.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Segal | Dentons Australia |
| For the Defendants | Second defendant in person |
HIS HONOUR:
This is an application made by the plaintiff in the proceeding for leave to discontinue the proceeding S CI 2015 04098. The proceeding was filed by the National Australia Bank on 6 August 2015 and has a very long history.
It was summarised by Hargrave JA in Ganesh v National Australia Bank Ltd,[1] on 5 September 2018, as follows:
[1][2018] VSCA 224.
In 2009 the bank loaned them [being Mr and Mrs Ganesh] the total of $1,425,500 under six credit facilities. The security for the loans included mortgages over the following pieces of land:
(1)24 Plumpton Avenue, Oak Park – which at that point was the family home owned by the applicants jointly;
(2)29 Glen Drive, Rye – owned by Ms Ganesh; and
(3)20 Marcia Avenue, Rye – owned by Gsquare Group Pty Ltd, of which each of the applicants is a director.
In summary:
(1)The security for the first four facilities was the Plumpton Avenue property. Following a default on those facilities, the applicants voluntarily sold that property and the net proceeds of sale were sufficient to discharge all four facilities except for a small part of the ‘second facility’. Thus, there is an unsecured amount owing by the applicants to the bank under the second facility for that amount. The allocation of net sale proceeds of Plumpton Avenue was itself contentious, and the bank applied to the Court to resolve the proper distribution of those proceeds between the various facilities. The subsequent distribution was in accordance with the Court’s determination.
(2)The so-called ‘sixth facility’ is secured by the Glen Drive property. The loan was for the specific purpose of Ms Ganesh purchasing that property as a rental property. The terms of the sixth facility included interest offset arrangements, under which interest payable on the loan was offset against rental payments on the Glen Drive property deposited into a designated account with the bank. Thus, the sixth facility was a sole purpose facility designed to fund Ms Ganesh’s purchase of the Glen Drive property for rental purposes.
(3)The so-called ‘fifth facility’ is contentious. It is clear that the initial loan arrangements which culminated in the fifth facility were made before the sixth facility. Like Mukhtar AsJ, I will refer to these initial arrangements as the ‘previous facility’. Further, it is uncontroversial that the purpose of the previous facility was to enable the purchase of the Marcia Avenue property. Ms Ganesh had purchased that property under a contract of sale with a nominee clause, and later nominated Gsquare as purchaser. The bank loaned the money to the applicants to enable the purchase to take place, on the security of Gsquare’s guarantee supported by a mortgage over the Marcia Avenue property. It appears that the parties intended a similar offset arrangement would apply to the previous facility but, for some unexplained reason, it was not acted upon.
(4)Later, in 2010, the previous facility was repaid and it was replaced with the proceeds of the so-called ‘fifth facility’. Under the terms of the fifth facility loan documentation, offset arrangements were put in place, as requested by the applicants. The controversial aspect of the fifth facility loan agreement is that the bank took the opportunity to extend the security it had held for the previous facility – which had been limited to a guarantee from Gsquare and the mortgage over the Marcia Avenue property – so as to include the existing mortgages over Plumpton Avenue and Glen Drive properties. The security constituted by Gsquare’s guarantee and the related mortgage over the Marcia Avenue property continue. As a result of these amended arrangements:
(a)the mortgage over the Plumpton Avenue property remained as security for the first, second, third and fourth facilities – and the mortgage became security for the fifth facility also;
(b)the mortgage over the Glen Drive property remained as security for the sixth facility, and it became security for the fifth facility also; and
(c)the Gsquare guarantee and related mortgage became security for the fifth facility instead of the previous facility.
Following defaults under the various facilities, the bank commenced proceedings against the applicants and Gsquare in this Court, seeking judgments for the outstanding amounts of principal and interest due under the loan agreements under the second, fifth and sixth facilities, and possession of the Glen Drive and Marcia Avenue properties. The bank brought a summary judgment application. Mukhtar AsJ determined that the bank was entitled to summary judgment against the applicants for the balance due under the terms of the second facility and the whole of the amount due under the sixth facility. Further, he granted summary judgment for possession of the Glen Drive property. Summary judgment was refused in respect of the claims made under the fifth facility and its securities, including the Marcia Avenue property. Thus, the applicants – through Gsquare – remain in possession of that property and are – together with Gsquare – defending the claims under the fifth facility.[2]
[2]Ibid [4]-[6].
As was referred to by his Honour, on 6 December 2016, Associate Justice Mukhtar gave summary judgment with respect to each of the facilities, except the fifth facility, in respect of which he gave leave to defend.[3]
[3]National Australia Bank Ltd v Ganesh [2016] VSC 738.
On 20 March 2017, Justice Vickery dismissed an appeal in this Court from the decision of Associate Justice Mukhtar. With respect to the leave to defend with respect to the fifth facility, Justice of Appeal Hargrave noted that the applicants were not satisfied with that result. They contended the bank’s conduct in connection with the fifth facility nullifies all of the other facilities, and thus, the bank’s claims made in respect of those facilities, and the securities for the facilities, must fail. In other words, they sought to be excused entirely from any liability under any of the facilities. By their counterclaim, they sought relief including repayment of the net proceeds of the sale of the Plumpton Avenue property and interest.
In respect of these remarkable claims, Associate Justice Mukhtar said:
How and in what way their grievance about the fifth facility somehow relieves them from other burdens under all other facilities is not at all clear to me, particularly as, in the events that have occurred, the borrowers have already voluntarily sold their Oak Park property to meet the debts they could not service, and the Court order has been made permitting the Bank to apply the proceeds to pay out indebtedness under the first, second (partially), third and fourth facilities. I think it is preposterous to contend that their challenge to the fifth facility collaterally nullifies all of the other facilities and securities. There is no challenge to the lawfulness of those other facilities. Obligations were unmistakably incurred; benefits have been conferred; defaults have occurred; and, as I would emphasize, Court orders had been made for distribution of funds from a voluntary sale.[4]
[4]Ibid [50].
More specifically, Associate Justice Mukhtar gave the following reasons for granting summary judgment in respect of the bank’s claims made under the second and sixth facilities:
As was submitted for the Bank, I think the sixth facility stands divorced from any dispute about the fifth facility. The evidence is plain that the borrowers have defaulted and the security over Glen Drive is enforceable independently under the sixth facility. I think the borrowers have no basis to undo collaterally their other obligations to the Bank outside the fifth facility even if it can be shown the fifth facility is impeachable or adjustable in some way. The same can be said for the remaining debt under the second facility, secured by the mortgage over Plumpton Avenue which has been sold. That liability has already precipitated and although the security is spent, I see no injustice in completing the recovery so far and ordering summary judgment for the amount remaining due under the second facility. Accordingly, I propose to grant partially the application for summary judgment.[5]
[5]Ibid [58]–[59].
On 18 April 2018, Associate Justice Mukhtar made orders including:
The documents filed on 16 April 2018 (which was dated 12 April 2018) described as ‘Proposed Defence to Amended Statement of Claim dated 10 April 2017’ shall stand as the defence subject to the Court striking through those parts of that document that, by this order, have been struck out.
The defendant shall by 27 April 2018 file and serve a document called ‘Relief or Remedy Sought by Way of Counterclaim’ in which they shall state, by reason of their allegations in their defence, what relief or remedy they seek on a counterclaim.
On 26 June 2018, Associate Justice Mukhtar made orders including:
The defendants’ document dated 27 April 2018 called ‘Relief and Remedy sought by way of Counterclaim’ is struck out in its entirety.
By 20 August 2018, the defendants shall file and serve another document called ‘Relief and Remedy sought by way of Counterclaim - Version 2’ in which they shall state what relief or remedy they seek on a counterclaim by reason of the allegations in their defence.
On 27 August 2018, Associate Justice Mukhtar made orders including:
The ‘Relief and remedy sought by way of Counterclaim - Version 2’ dated 17 August 2018 is struck out but the defendants have leave to file and serve another document titled ‘Relief and remedy sought by way of Counterclaim- Version 3’ and shall do so by 14 September 2018.
Version 3 shall confine itself to stating concisely the relief or remedy that defendants seek if, as they contend, the Court determines that the fifth agreement is unlawful or unenforceable and if, consequently, all securities procured under that agreement are also unlawful or unenforceable.
The defendants did not file a counterclaim pursuant to his Honour’s orders.
On 5 September 2018, Hargrave JA refused the application by the defendants for an extension of time to appeal against the decision of Justice Vickery dismissing the appeal against summary judgment. With respect to the defendants’ contention that the bank’s conduct in relation to the fifth facility made the securities associated with the other facilities unenforceable, his Honour said:
Even if it held at trial that the fifth facility is unenforceable for some reason, and thus the bank cannot enforce the fifth facility against the applicants, the Gsquare guarantee or the mortgage over the Marcia Avenue property, that will have no effect upon the enforceability of the mortgages given by the applicants as security for the first, second, third, fourth and sixth facilities before the fifth facility was entered into. Thus, when there was default under those facilities, there was no legal impediment to the Bank enforcing them over the secured properties, namely, Plumpton Avenue and Glen Drive. Nor, following the sale of Plumpton Avenue and distribution of the sale proceeds against the indebtedness under the first, second, third and fourth facilities, is there any barrier to the bank proceeding to recover (on an unsecured basis) the unpaid balance of the loan under the second facility. Mukhtar AsJ and Vickery J were correct to so hold.[6]
[6]Ganesh v National Australia Bank Ltd [2018] VSCA 224, [22].
On 2 October 2018, Associate Justice Mukhtar proposed to refer the proceeding to the Commercial Court for trial, which his Honour later did on 8 October 2018 and noted in ‘Other Matters’:
The writ in this matter was filed in August 2015. The years of interlocutory instability lead this Court to now have the matter referred to the Commercial Court for pre-trial directions. That is especially so because on 5 September 2018 Hargrave JA refused the defendants leave to appeal out of time from the decision of Vickery J which (in October 2017) dismissed an appeal from a decision of Mukhtar AsJ (in December 2016) to give summary judgment against the defendants for four out of the five facilities in this case. Hargrave JA found that the appeal was totally without merit. Thus, the remaining dispute concerns one facility arising under the fifth agreement as it has become known in this case. The fifth agreement was made to pay out and close a previous facility of $396,000.
The Court has experienced great difficulty in getting the defendants to prepare a satisfactory defence and counterclaim to enable an orderly trial. Those difficulties necessitated the Court ordering the defendant to file a separate counterclaim, that is, separate to the defence. The Court struck out two versions of their counterclaim in April and August this year and gave them an opportunity to file a third version by 14 September. They have not done so.
There is sufficient in the defence to not cause embarrassment in the fair and orderly conduct of a trial. The problem has been the composition of the counterclaim, which is based on claiming loss and damage according to the same allegation as comprise the defence. More extensions of time to give the defendants more opportunity to improve their counterclaim will lead to more disputes and delays. As litigants in person, it is unlikely that more coercive Court orders will produce a more meaningful counterclaim. It is one of those cases where things will have to be fashioned at trial. The plaintiff is content with adapting to that state of affairs, as against the prospect of further delay.
Accordingly, on 1 February 2019, I made orders for the plaintiff to file and serve its witness outlines by 1 March 2019 and for the defendants to do so by 1 April 2019 and for the matter to be listed for trial on an estimated duration of three days. The plaintiff has filed and served its witness outlines. The defendants have not.
In ‘Other Matters’ in those orders, I stated:
Pursuant to the Court’s obligation to give effect to the overarching purpose under s 8 of the Civil Procedure Act 2010, the Court has made the following trial directions and identified to the parties the issues to be tried (‘the Trial Issues’) are as follows:
(a)Is the fifth agreement (as it is referred to in the Defence to the Amended Statement of Claim dated 10 April 2017) invalid or otherwise unenforceable by reason of the plaintiff’s wrongful conduct in the incorporation of a term extending the security under the fifth agreement to mortgages over the Plumpton Avenue Property and the Glen Drive Property (as defined in the Amended Statement of Claim filed 10 April 2017)?
(b)If the plaintiff did engage in the wrongful conduct, referred to in sub-paragraph (a), did the defendants suffer any damage, and if so what damage, as a result of such wrongful conduct?
For completeness, I mention that, on 6 May 2019, I ordered by consent an extension to 28 June 2019 for the defendants to file and serve their witness outlines, and the defendants have failed to comply with that order.
On 12 August 2019, the matter was listed to hear the plaintiff’s application for leave to discontinue the proceeding. It was adjourned on the application of the defendants for the reason that both defendants were too ill to attend.
Mr Ganesh appeared today on his own behalf and on behalf of his wife, who he explained was too ill to attend. The plaintiff sought leave to discontinue the proceeding. The evidence discloses that the plaintiff has:
(a) written off the debt due under the fifth facility;
(b) discharged the mortgage over the Marcia Avenue Property, being the sole mortgage remaining to be enforced in the proceeding; and
(c) returned the certificate of title to the defendants.
The defendants have no objection to the leave being granted to the plaintiffs to discontinue the proceeding and do not contest the fact that that there should be no order as to costs.
The submissions made by the defendants relate to the fact that they continue to contend that they are entitled to broad relief beyond that which the bank now concedes by reason of what they contend is the wrongful conduct of the bank. The fact that the defendants continue to contend that they should be entitled to broad-ranging, if I might say, unspecified relief against the bank for the wrongdoing arising out of the fifth facility is not part of any current proceeding before this Court, both counterclaims having been struck out by the Associate Judge.
In those circumstances, in my opinion, it is appropriate that this matter be brought to an end and, pursuant to r 25.02 of the Supreme Court (General Civil Procedure) Rules 2015, I will give leave for this proceeding to be discontinued. Further, as the defendants are self-represented, I accept the bank’s submission that, in accordance with Cachia v Hanes,[7] there be no order as to costs.
[7](1994) 179 CLR 403, 410–1 (Mason CJ, Brennan, Deane, Dawson and McHugh JJ).
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