National Australia Bank Ltd v Busby

[2013] VCC 1227

IN THE COUNTY COURT OF VICTORIA Revised
(Not) Restricted

AT MELBOURNE

COMMERCIAL LIST

EXPEDITED CASES DIVISION

Case No. CI-10-04315

NATIONAL AUSTRALIA BANK LTD	Plaintiff
v.
GARY GORDAN BUSBY & ORS	Defendants

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	16 September 2013
DATE OF JUDGMENT:	17 September 2013
CASE MAY BE CITED AS:	National Australia Bank Ltd v. Busby & Ors
MEDIUM NEUTRAL CITATION:	[2013] VCC 1227

REASONS FOR JUDGMENT

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Catchwords:             Practice and procedure – Application to set aside judgment – Absence of the defendant at the trial – Rule 49.02(2) County Court Civil Procedure Rules 2008 (Vic).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms K. Hamill	Thomsons Lawyers
For the First Defendant	Mr A. Strauch	Rothwell Lawyers

HIS HONOUR:

1Gary Gordon Busby seeks an order setting aside a judgment which National Australia Bank Ltd obtained against him and a co-defendant, Stephen Geoffrey Walters, on 7 February 2012 in the total sum of $1,177,671.14. They had been sued upon two guarantees of loan facilities given by the bank to a company of which they were both directors. The application is made pursuant to Rule 49.02(2) which provides that, “The Court may set aside or vary any judgment, order or verdict obtained where a party is absent at the trial”.

2Mr Busby had been represented at the commencement of the trial on 6 February 2012. After an unsuccessful application by Mr Walters’ counsel to adjourn the trial, Mr Busby’s solicitors obtained leave to file a notice of ceasing to act and his counsel withdrew. The bank’s counsel commenced to open the case. The trial proceeded the following day. Mr Walters (by then unrepresented) did not appear, as he had foreshadowed the previous day. Mr Busby himself made an application to adjourn the trial. The application was refused. Mr Busby then indicated that he wished to leave. He was told it was a matter for him. Mr Busby left the Court and took no further part in the trial. Judgment was entered against Mr Busby and Mr Walters later that day.

3Mr Busby and Mr Walters sought to appeal the judgment and the decisions refusing to adjourn the trial. When the appeal (and the adjourned application for leave to appeal) came on for hearing on 2 August 2013, Mr Busby’s counsel “indicated that his client sought orders for the striking out of the first appellant’s appeal and also his summons dated 27 February 2012 [and] that he did not resist an application for costs if so made by the respondent”.

4Mr Walters also did not pursue the appeal having informed the Court of Appeal, “that he had entered into a personal insolvency agreement and as a result of that agreement, did not regard it as necessary to appear”. Mr Busby’s present application was made by summons filed 30 August 2013. It is supported by an affidavit sworn by Mr Busby which exhibits, amongst other documents, the transcript of the trial on 6 and 7 February 2012.

5The Court of Appeal in Xiau Hui Ying v Perpetual Trustees Victoria Ltd  [2012] VSCA 316 (“Xiao”) reaffirmed the relevant considerations in an application under Rule 49.02(2). These were set out by the Full Court in Rosing v Ben Shemesh [1960] VR 173 at 176 as follows:

“a.       the reason why the party failed to appear when the case was heard;

b.whether there has been any delay by the absent party in launching the application for a new trial;

c.        whether there was a bona fide issue to be tried; and

d.whether the other party would be prejudiced by a new trial in any respect which could not be adequately compensated by a suitable award of costs and the giving of security”.

6As the Court of Appeal said in Xiao at paragraph 68, these are not “inflexible rules, or a complete list of relevant criteria, for the exercise of discretion”. They are, the Court of Appeal said, recognised as matters “among those proper to take into account”.

Applicant’s absence at trial

7On 7 February 2012, Mr Busby left the Court voluntarily. The trial had commenced. He was aware of the responsibility he had to represent himself and the processes that would be followed during the trial. He raised his hearing problems but he declined the assistance that was offered. No doubt he had hoped that Mr Walter’s adjournment application on 6 February would have been granted, or that his own application on 7 February would succeed. These were later grounds of the appeal that did not proceed.

8Plaintiff’s counsel, Ms Hamill, did not contend that Mr Busby’s voluntary departure from Court disentitled him from the relief he sought under Rule 49.02(2). However, she submitted that, “Where the absence is deliberate, the Court should be reluctant to set aside the judgment”. The English Court of Appeal in Shocked v Goldschmidt [1988] 1 All ER 372 at 381 per Leggatt LJ stated that the “predominant consideration” in an application to set aside a judgment after trial “is the reason why the party against whom judgment was given absented himself”. This statement was made after Leggatt LJ had stated that “each case depends on its own facts and that the weight to be accorded to the relevant factors will alter accordingly”. Nevertheless, His Lordship stated eight “propositions or general indications”, the first two of which related to the explanation for the party’s failure to participate in the trial. The second proposition was that, “Where judgment has been given after a trial it is the explanation for the absence of the absent party that is most important: unless the absence was not deliberate but was due to accident or mistake, the court will be unlikely to allow a rehearing”.

9The Court of Appeal in Adams v Cronin (unreported, 6 September 1996) considered an appeal by a plaintiff where the action had been dismissed by reason of her failure to attend the trial having claimed to have forgotten the trial date. In the judgment at page seven, Winneke ACJ referred to Rule 49.02(2) and said that the Court, “in the exercise of its discretion under this rule, will rarely set a judgment aside which has been properly entered against an absent party where that party, being aware of the date of the trial, has failed to attend at court”.

Delay

10Judgment was entered against Mr Busby on 7 February 2012. On 27 February 2012 an appeal and an application for leave to appeal had been filed. That appeal was allowed to run its course until 2 August 2013 when the appeal was struck out. The present application was issued later that month.

11In paragraph 81 of his affidavit in support of the application, Mr Busby said that “subsequent to the judgment being given, I relied on Walters when he advised me to appeal against the decision”. Mr Busby said that, although he had lawyers acting for him on the appeal, he instructed them “that Walters would be responsible for the overall conduct” of the appeal in order to keep costs down. His solicitors “advised that this would lessen my prospects of appeal”. Mr Busby said that he “trusted Walters” and “reiterated my instructions” to the solicitors. He continued in paragraph 82, “I now know this was not in my interests as Walters failed to appear at the Appeal, leaving me with no option but to withdraw the appeal”.

12Upon the hearing of the present application, Mr Strauch of counsel who appeared for Mr Busby informed the Court that he was instructed to waive privilege and state that the appeal was not proceeded with upon the advice of counsel (not Mr Strauch) who had considered that the present application, relying upon Xiao, was the appropriate course to take.

13Mr Busby’s counsel at the hearing of the appeal on 2 August 2013 also represented him on 3 May 2012 upon the application for leave to appeal. Mr Busby was represented by his solicitors at a Directions Hearing before the Registrar of the County Court on 13 June 2012 and apparently at a mediation on 6 June 2013 and corresponded with the respondent bank’s solicitors “on numerous occasions between May 2012 and August 2013”.

Bona fide issue to be tried

14The bank sued upon two guarantees, each of which it alleged were signed by both Mr Busby and Mr Walters to support advances to a company of which they were directors. The first guarantee was dated 27 May 2004 and provided that the guarantors had a “basic liability” of $486,000. Together with interest and other charges, the bank sought to recover the sum of $588,515.20 in respect of Mr Busby’s and Mr Walter’s liability under the first guarantee.

15The second guarantee was dated 13 September 2007 and the basic liability of the guarantees was limited to $700,000. A co-guarantor, the second defendant in the proceeding, Mr Leigh, had settled with the bank and paid $300,000 leaving a balance of $589,155.94 as the sum claimed against Mr Busby and Mr Walters.

16Three issues are relied upon by Mr Busby as defences to the bank’s claims:

a.Mr Walters has denied that the signature on the second guarantee was his. Mr Busby says that “I would not have signed the guarantee unless Leigh and Walters signed the guarantee”. It was submitted that there was a bona fide issue to be tried as to whether Mr Walters had signed the second guarantee and therefore whether Mr Busby could be bound by its terms;

b.Mr Busby said that the bank officer with whom he dealt was Mr Mitchellhill, the manager of the bank’s Box Hill branch. Mr Busby’s personal banking and the banking of his accounting business was also conducted through the branch. Mr Busby said Mr Mitchellhill was well acquainted with his financial affairs. Mr Busby said that he told Mr Mitchellhill that for the company, “I wanted a facility with a limit of $300,000”. He said (at paragraphs 36 and 37 of his affidavit):

36. Mitchell Hill [sic] told me that he understood my position to limit my exposure, particularly in light of the amount I had already put in. He also indicated that given the nature of my relationship with the Plaintiff, I would be looked after and not to worry about the guarantee.

37.In light of the conversation I had with Mitchell Hill, when I executed the guarantee, I was not concerned that it did not reflect liability for $300,000.00 and I relied on that discussion. I did not read the guarantee in light of the conversation. It looked like a standard National Australia Bank Guarantee;

c.the facility offered by the bank in 2007 was a “Debtor’s Finance Facility”. Funds are released by the bank upon receipt of invoices issued to the company’s customers. The invoices are paid directly by the customers to the bank, reducing the amount owing on the facility. Additional funds are released as further invoices are rendered and accepted by the plaintiff. Mr Busby at paragraphs 50 and 51 of his affidavit said:

50.I believe that some of the invoices rendered by Wise Wally and factored by the Plaintiff were fictitious and created by Leigh purely for the purposes of obtaining funds from the Plaintiff. Leigh knew that the Plaintiff would only release funds to Wise Wally as against invoices and I believe that he created some invoices purely for that purpose…

51. I also believe the Plaintiff failed in its auditing process as the Plaintiff did not follow up on delinquent debtors. Wise Wally was still invoicing these debtors and the Plaintiff was still accepting these debts under the DFF. I do not believe the Plaintiff tested the veracity of the invoices by contacting customers as was represented by Mitchellhill to me as a safeguard feature of the DFF. If the plaintiff had off [sic] contacted the Prisons, it would have been aware that the Prisons were claiming an off-set against works being done on behalf of Wise Wally, when Wise Wally failed to pay the Prison’s invoices.

17It was submitted that therefore, “the plaintiff’s own behaviour has contributed to its loss under the facility”.

Discussion of the defences

18In Gajic v Poyser [2007] VSCA 175 (“Gajic”) the Court of Appeal, in considering “the principles that govern the determination of an application to set aside a regularly entered default judgment”, reaffirmed at paragraph 15 the statement of Winneke P in Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 34 at paragraph 5 as follows:

The primary consideration for the judge is that there are merits in the defences to which the Court should pay heed. If there are merits in one or more of those defences the Court will ordinarily exercise its discretion in favour of allowing the matter to pass to final adjudication, provided that the applicant shows that he has an adequate explanation for his failure to file a defence…It is not for the judge, on an application of this nature, to determine the merits of the defence for himself or to seek to resolve factual issues which might at that stage appear to exist on the materials before him.

19In Gajic it was submitted that the judge at first instance, Morris J, had “misdirected himself as to the extent to which he could critically analyse the appellant’s material” (paragraph 10). Chernov JA (with whom Ashley and Neave JJA agreed) concluded, at paragraph 17, “I consider, however, that his Honour did not impermissibly cross the line between, on the one hand, assessing with care whether an arguable defence has been established and, on the other, seeking to determine the credibility of particular deponents or the merits of the claimed defence”.

20Chernov JA referred to Morris J’s comments that, when determining whether there are merits in the defence, this did “not mean that the court must accept uncritically as giving rise to a genuine dispute every statement in an affidavit, however equivocal, lacking in precision, inconsistent with undisputed contemporary documents, or other statements by the same person, or inherently probable”.

21Chernov JA noted that “observations to this effect” had also been made by McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787 following a decision in Eng Mee Yong v Letchumanan [1980] AC 331, 341 “a case in which the Privy Council came to a like view in relation to the “vague, self-contradictory and implausible assertions” of a caveator who unsuccessfully sought the removal of the caveat”.

22Mr Walters alleged that the signature on the second guarantee was not his. It was on the basis of a statement in an affidavit he swore in July 2011, that Her Honour Judge Kennedy on 3 August 2011 granted Mr Busby and Mr Walters leave to defend the proceeding. In relation to Mr Walters, the bank’s counsel for the purpose of that application conceded “the authenticity of the third defendant’s signature on the second guarantee is a triable issue”. On the basis of a statement by Mr Busby that “if he was aware that the third defendant was not going to execute the second guarantee, under no circumstances would he have executed it”, Her Honour considered Mr Busby’s defence had a real prospect of success.

23In paragraphs 48 and 49 of his affidavit in the present application, Mr Busby says:

48.I refer to the affidavit of Walters sworn 15 July 2011 and in particular to paragraphs 4 and 5 thereof. I believe that Walters did not sign the Second Guarantee.

49.On 28 August 2013, I had a telephone conversation with Walters regarding the contents of his affidavit sworn 15 July 2011. Walters stated to me that he re-affirmed the contents of that affidavit and the signature on the guarantee purporting to be his is not. He further stated to me that he can recall at the time crossing out his signature on the counterpart guarantee with two lines.

24Paragraphs 4, 5 and 6 of Mr Walter’s affidavit sworn 15 July 2011 read as follows:

4.Receipt of Caffrey’s affidavit was the first time I ever recall having seen the DFF.

5.        I refer to page 28 of the DFF at Exhibit LTC 5 of the Caffrey’s Affidavit,   purportedly being my signature on the guarantee. That is not my signature.

6.I refer to page 25 of the DFF at Exhibit LTC 5 of the Caffrey’s Affidavit where I have signed as a director of Wise Wally. That signature is not so dissimilar to my own signature that I cannot say with certainty that I did not sign the DFF on behalf of Wise Wally. As Caffrey’s Affidavit was the first time I saw the DFF, if I did sign the DFF, I can only say that the document must have been open to the signature page at the time I purportedly signed the DFF.

25In an earlier affidavit Mr Walters swore on 31 January 2012, at paragraphs 31 to 34 Mr Walters said:

31.I do not recall signing the Guarantees as alleged. There has been expert evidence obtained by Busby’s solicitor which indicates the documents may have been signed by me.

32.I note that one of the purported signatures has been crossed out and I query whether at the time I was informed of the nature of the document and withdrew consent. In that case the basis of the plaintiff’s claim would fail. In retrospect I believe I should have the signatures examined. I have not been asked to provide a same of my signature for comparison.

33.Over the years I have been asked to sign documents from time to time and I was happy to do so as a director. I have never been willing to sign as a guarantor of the company and, save as I note in the next paragraph, would not have done so as I was aware that I would have no financial capacity to repay. If I did sign a guarantee it was due to mistake or by reason of being misled as to the nature of the document.

34.Whilst I do not recall, I conceded that I may have been willing to sign a guarantee for the amount of $300,000.00 on the basis that it would be shared at least three ways and that it was likely that I could raise a share in the amount.

26The expert report obtained by Mr Busby referred to in Mr Walter’s affidavit was a report by a forensic handwriting expert Trevor Clinton Joyce. The report was tendered in evidence by the bank at the trial on 7 February 2012. Upon the hearing of this application, the bank’s counsel, Ms Hamill, told the Court (without demur from Mr Strauch) that the bundle of documents included in the second guarantee contained three signatures which appeared to be Mr Walter’s. Mr Joyce said that it was “highly probable” that one of the signatures was Mr Walter’s and that it was “probable” that the signature on the guarantee was that of Mr Walter’s.

27The transcript of the trial includes the evidence of Tracey Lee Arthur at pages 99-101. Ms Arthur identified her signature as a witness to the signature of Mr Walter on the guarantee. Ms Arthur was the personal assistant to Mr Leigh, the second defendant in the proceeding. She said that she had no “independent recollection of Mr Walters signing the document”. Ms Arthur said she was “asked to witness documents fairly regularly”. She said that her usual practice when witnessing documents was that, “My boss usually called me into the same room as the people signing and I sign after I’ve seen them sign the actual document”. She said that she had never “signed a document as a witness when there hasn’t been a signature for the person to witness” and that she had never “been asked to witness a document that’s already been signed by somebody”.

28Mr Busby exhibited the transcript of the trial to his recent affidavit. He pursued an appeal from the judgment given at the trial. Mr Busby has chosen to selectively refer to paragraphs in one affidavit sworn by Mr Walters and a recent telephone conversation with Mr Walters in which he “reaffirmed the contents of that affidavit”. Mr Busby states that this is the basis of his belief “that Walters did not sign the second guarantee”. It is difficult in the circumstances to regard Mr Busby’s statement and his reasoning as raising a bone fide issue to be tried.

29The second issue raised by Mr Busby is the alleged representation by the bank officer Mr Mitchellhill as to the limit of the exposure under the fist guarantee to $300,000. I have earlier quoted in full paragraphs 36 and 37 of Mr Busby’s affidavit.

30Mr Mitchellhill gave evidence at the trial. His evidence extensively canvassed the conversations and dealings which he says he had with Mr Busby, particularly at paragraphs 95-99 and 101-111 where, although the transcript refers to the witness as Liam Caffery, it clearly was evidence given by Mr Mitchellhill.

31Mr Busby makes no attempt in his affidavit to address the evidence given by Mr Mitchellhill and offers only brief statements of the bare substance of the conversation he says he relied upon, which conflict with the actual terms of the document he signed. These statements would ordinarily be insufficient from which to conclude that Mr Busby had raised a bona fide defence based upon misleading and deceptive conduct on the part of the bank officer. His failure to consider Mr Mitchellhill’s detailed evidence further highlights the paucity of the material he relies on.

32The position is similar in relation to the defence based upon the alleged breach by the bank of a duty of care owed to the guarantors, including Mr Busby, to investigate the veracity of the invoices presented to it as the basis for advances. I have earlier quoted from paragraphs 50 and 51 of Mr Busby’s affidavit. There are no facts which support the beliefs stated by Mr Busby that Mr Leigh created and submitted “fictitious” invoices to the bank, or that the plaintiff “did not follow up on delinquent debtors” or test “the veracity of the invoices by contacting customers”. There is no basis upon which the Court can determine whether these matters contributed to the bank’s losses, or if they did, the extent of those losses.

Prejudice

33      The bank relies upon the following matters:

a.the bank has incurred substantial costs to date and it is unlikely any further costs would be recovered if the judgment were set aside;

b.it is unlikely that Mr Busby would be able to afford representation at a retrial which would be the cause of further inconvenience and expense;

c.Mr Mitchellhill’s professional reputation has been defended once at the earlier trial and he should not have to repeat the ordeal.

34Mr Strauch submitted that these matters were not out of the ordinary and any order for the costs of the application or costs thrown away could be dealt with by a conditional order. Further, the costs of the appeal had been provided for by an order for security for the bank’s costs of the appeal and there was no evidence that the bank’s actual costs exceeded the amount of the security provided.

Conclusions

35I consider that any issue of prejudice can largely be dealt with by orders for costs or by making the payment of costs, or the provision of security pending the taxation of those costs, a condition of any order setting aside the judgment.

36However, I am not satisfied in this case that Mr Busby has offered any real explanation as to why he was not prepared to represent himself at the trial. An application before Her Honour Judge Kennedy on 5 and 6 December 2011 for an adjournment of the trial was granted, as his counsel Mr Cameron said, because Mr Busby “was in the process of refinancing to obtain funds so that he could properly defend a trial” (transcript page 2) and that Mr Busby was “aware he’s had his chance and he was granted an adjournment. We cannot push the issue on behalf of the first defendant very firmly because we were granted an adjournment and we have no expectation that we, of ourselves, would be entitled to a second one”. Mr Busby absented himself from the trial when it was clear the trial would proceed to conclusion.

37I also consider that the delay by Mr Busby in making the application has not been satisfactorily explained and in the circumstances should militate against the granting of the application. The explanation in Mr Busby’s affidavit is that he misplaced his trust in Mr Walters, rather than following his solicitor’s advice. The participation of his lawyers in the appeal process does, however, appear to be much greater than Mr Busby concedes. It is also not clear why Mr Walters’ failure to pursue his appeal meant that Mr Busby had to do likewise.

38The explanation offered by Mr Strauch is inconsistent with that offered in the affidavit. It is unclear whether Mr Busby’s solicitors or counsel drafted the affidavit. No explanation was offered for the inconsistency. Both explanations seem improbable. What is clear is that the present application was not made until more than 18 months after the judgment was entered. Mr Busby could have made the application earlier, or he could have proceeded with his appeal. It would be inappropriate to countenance the present application following the delays which have been a consequence of him choosing to appeal the judgment and then not follow that through to its conclusion.

39The issues to be tried remain the issues that were before Her Honour Judge Kennedy on the summary judgment application. However, in determining the bone fides of these issues, it is necessary to consider the way in which Mr Busby has presented these issues in the present application. In my view, Mr Busby’s statements in his recent affidavit should not be accepted uncritically, particularly when Mr Busby had the opportunity to address the evidence given at the trial. This included the evidence by Mr Mitchellhill of the circumstances in which the first guarantee was executed, by Ms Arthur whose signature was affixed as a witness to the purported signature of Mr Walters, and the statements by the hand writing expert Mr Joyce about Mr Walter’s purported signatures. The statements in Mr Busby’s affidavit are essentially assertions without providing any adequate factual basis. Accordingly, I am not satisfied that there are bona fide issues of defence which require the judgment to be set aside.

40Upon the hearing of the summary judgment application, the bank submitted that the concession by Mr Busby and Mr Walters that the first guarantee was limited to a liability of $300,000 made it appropriate to enter judgment for that sum with leave to defend only in respect of the balance of the claim. Her Honour Judge Kennedy considered that general leave to defend should be granted because of the possibility that the first guarantee may be set aside on the basis of a representation “pursuant to the wide powers the Court had under section 87 of the Trade Practices Act” and similar provisions, which included “orders rescinding/varying the contract where there is misleading and deceptive conduct” (paragraphs 26 and 29).

41Upon the present application, if I had been persuaded that there were bona fide issues to be tried, I would have allowed judgment for $300,000 to stand and to have set aside the judgment only as to the balance. I am, however, not satisfied in relation to three of the usually relevant considerations for applications under Rule 49(2).

42In the circumstances, the first defendant’s application by summons filed 30 August 2013 will be dismissed. I order that the first defendant pay the plaintiff’s costs of the summons, and the hearings yesterday and today, to be assessed by the Costs Court in default of agreement.

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Certificate

I certify that these 11 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 17 September 2013.

Dated: 17 September 2013

Catherine Kusiak

Associate to His Honour Judge Anderson