Permanent Custodians Ltd v Daneshyar Enterprise Pty Ltd

[2024] NSWSC 1338

Supreme Court

New South Wales

Medium Neutral Citation:

Permanent Custodians Ltd v Daneshyar Enterprise Pty Ltd [2024] NSWSC 1338

Hearing dates:

20 August 2024

Date of orders:

24 October 2024

Decision date:

24 October 2024

Jurisdiction:

Common Law

Before:

Walton J

Decision:

(1) The Notice of Motion filed by the defendant on 28 June 2024 is dismissed.

(2) The defendant shall pay the plaintiff’s costs of the Notice of Motion.

Catchwords:

NOTICE OF MOTION – Default Judgment – Application to set aside – Order for payment of debt – Mortgage – Loan agreement – Loan in arrears – Acceleration clause – NSW crimes commission – Restraining orders – Restrained property – Third party authority – Forfeiture – Unconscionable conduct – Delay – Whether arguable defence – Mortgagee’s consent – Eviction – Writ of possession – Debt – Money owed – Prejudice

Legislation Cited:

Crimes Act 1900 (NSW)

Property Land Act 1974 (Qld)

Cases Cited:

Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161

J & M McNamee Holdings Pty Ltd v Mungerie Vale Pty Ltd [2019] NSWCA 283

Kostopoulos v GE Commercial Finance Australia Pty Ltd [2005] QCA 311

National Australia Bank Ltd v C & O Voukidis Pty Ltd [2014] NSWSC 384

National Australis Bank v Priestley (No 3) [2012) NSWSC 1171

RHGMortgage Securities Pty Ltd v BNY Trust Company of Australia Ltd [2009] NSWSC 1432

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315

Westpac Banking Corporation v Parker [2012] NSWSC 514

Category:

Principal judgment

Parties:

Permanent Custodians Ltd (Plaintiff)
Daneshyar Enterprise Pty Ltd (Defendant)

Representation:

Counsel:
M Collins (Plaintiff)
S Young (Defendant)

Solicitors:
Dentons Australia Pty Ltd (Plaintiff)
Abbas Jacobs Lawyers (Defendant)

File Number(s):

2024/021433

JUDGMENT

1. By a Notice of Motion filed on 28 June 2024 (“the Motion”), the defendant, Daneshyar Enterprise Pty Ltd, sought, inter alia, an order setting aside the default judgment obtained by the plaintiff, Permanent Custodians Limited, on 5 March 2024 (“the Default Judgment”). The default Judgment was in the form of a “Judgment Order” (produced in exhibit 4 in these proceedings). That order was executed by the Principal Registrar on 6 March 2024, but, it was entered on 5 March 2024.

2. By the Default Judgment, there was an order for the payment of debt outstanding under the plaintiff’s registered mortgage, AS479379 (“the Mortgage”) pursuant to a loan agreement (“the Loan”) and possession of the whole of the land in folio Identifier 9/14/111234 situated at and known as 851 Punchbowl Road, Punchbowl in the State of New South Wales (“the Property”).

Background

3. The defendant purchased, at the dates specified, the following properties:

1. 837 Punchbowl Rd, Punchbowl for $910,000 on 22 November 2019,

2. 154 Picnic Point Rd, Picnic Point for $930,000 on 30 March 2020,

3. 406 Marion St, Condell Park for $590,000 on 22 October 2020, and

4. The Property, for $1,025,000 on 30 April 2022.

4. The first three named properties were mortgaged to the National Australia Bank (“the NAB Mortgages”), whereas the Property was mortgaged to the plaintiff.

5. The defendant entered into a loan agreement with the plaintiff which advanced funds to the defendant secured by the Mortgage. The Loan and Mortgage were managed on behalf of the plaintiff by Bluestone Servicing Pty Ltd (“Bluestone”). I will discuss the contents of the loan agreement below.

6. On 3 June 2021, Mr Daneshyar, the sole director of the defendant, was charged under s 86(3) of the Crimes Act 1900 (NSW), namely, specially aggravated take/detain with intent to ransom in company and occasioning actual bodily harm. The plaintiff pleaded not guilty to this offence.

7. On 13 September 2023, all of the defendant’s property was restrained by the New South Wales Crime Commission (“NSWCC”) by an order of this Court, which included, inter alia, the properties secured by the NAB Mortgages and the Property (collectively the restraining orders for all the properties shall be referred to as the “restraining orders”. The restraining order operating with respect to the Property shall be referred to as the “restraining order”.)

8. On 12 October 2023, the defendant’s former solicitors negotiated a variation to the NSWCC restraining orders which provided for monthly repayments of the NAB Mortgages to be made from the defendant’s Suncorp bank account (the “Suncorp account”). The variation did not provide for repayment of the Loan by the plaintiff, and the defendant fell into default. In Mr Daneshyar’s affidavit of 27 June 2024, he stated that he did not realise that only the properties subject to the NAB Mortgages were caught by the variation to the restraining orders. Mr Daneshyar stated that the balance of the defendant’s Suncorp bank account, at that time, was $500,000.

9. Mr Daneshyar did not understand and failed to communicate to the plaintiff that a further variation of the NSWCC restraining orders was required. Consequently, the defendant remained in default.

10. On 23 November 2023, the plaintiff issued a default notice to the defendant. I note that Mr Daneshyar is listed as the Guarantor.

11. In November and December 2023, Mr Daneshyar sought to arrange payment of the arrears and future monthly repayments from the Suncorp account pursuant to a “third party authority”. It appears Mr Daneshyar requested from Bluestone (over the phone) and received a third party authority form via email on 15 November 2023, which he signed on 16 November 2023 authorising Ms Melanie Horswill to deal with Bluestone on Mr Daneshyar’s behalf. However, on 20 November 2023, a representative of Bluestone sent Mr Daneshyar an email highlighting that Melanie Horswill had not signed the document and must do so “in order to [be] add[ed] on the account”.

12. On 18 December 2023, a representative from Bluestone sent an additional email to Mr Daneshyar attaching the third party authority form to be completed.

13. On 22 December 2023, a representative from Bluestone emailed Mr Daneshyar to follow up his account arrears of $17,262.42. Four minutes later Mr Daneshyar replied with the following:

“I have discussed with your team many times the right person to contact regarding the loan. The NSW crimes commission has sceased (sic) my accounts and I have put them onto the right person to contact to get the accounts upto (sic) date.”

14. On 18 January 2024, the plaintiff filed a claim in these proceedings (“the Claim”) seeking, inter alia, judgment for possession of the Property and debt for money owing under the Mortgage.

15. On 19 January 2024, the defendant was served with the Claim. Mr Daneshyar was informed by the defendant’s accountants on the day that the defendant had been served with the Claim.

16. No defence was or has been filed or served on the plaintiff by the defendant to date.

17. On 5 February 2024, Mr Daneshyar made a further attempt to arrange for the plaintiff to be paid from the Suncorp account via an email to [email protected] advising that the NSWCC had ceased all of his bank accounts. The communication was as follows:

“To whom it may concern,

Regarding my council fees that I need to pay

For the properties

154 picnic point road

Picnic point NSW 2213

837 Punchbowl road

Punchbowl nsw 2196

851 Punchbowl road

Punchbowl nsw 2196

A 10/406 Marion street

Condell park nsw 2200 (commercial property noy sure if subject to council fees)

The NSW CRIMES COMMISSION have ceased all my bank accounts in order for any payment that need to be made the person named in the attachment of this email

Melanie from Suncorp will be dealing with any outgoings out of my accounts

Someone from your team needs to contact her in regard[s] to the outstanding payments and any future payments as she is the one that corresponds with the crimes commission regarding payments

If there is anything I can assist with please let me knkn (sic).”

18. On 23 February 2024, a representative from Bluestone emailed Mr Daneshyar to follow up his account arrears of $34,386.57. The text of that email included the following:

“We’d appreciate it if you could please confirm if we can schedule the payment today to bring the account back to current? With the on going action, legal fees continue to incur as well. We can only hold off the action once the account is brought up to date.”

(Emphasis added)

19. As mentioned earlier, on 5 March 2024, the Default Judgment was entered. The defendant’s director, Mr Daneshyar was not then aware of the Default Judgment, however, a file note of a phone call between Bluestone and Mr Daneshyar on that day at approximately 1.19pm indicated that he may have been made aware of the Default Judgment.The note recorded that Mr Daneshyar stated that he would call back in an hour with his lawyer. The file note read as follows:

“TALKING TO: Abbas FULLY ID, yes, VERIFIED CONTACT DETAILS: No update as per customer, CONTENT: Abbas answered the call and advised that he needs to talk to his lawyer. [A]sking for his plan on the account as we will now proceed to the next course of action which is JMT. [S]tated that he will give us a call in an hour with his lawyer.”

20. On 18 March 2024, the Court issued a writ of possession for the Property (“the Writ”).

21. On 3 April 2024, pursuant to the Writ, the NSW Sheriff issued a notice to vacate and scheduled an eviction to take place at the Property on 16 May 2024 (“the First Eviction”).

22. On 16 April 2024, the defendant’s solicitors emailed the plaintiff’s solicitor and asserted that the plaintiff was “aware of the circumstances as to why the loan has not been paid” and requested particulars of the Default Judgment, which had recently come to the defendant’s attention.

23. On 13 May 2024, the First Eviction was stayed at the plaintiff’s request.

24. On 15 May 2024, at the plaintiff’s request, the NSW Sheriff issued a further notice to vacate and scheduled an eviction to take place at the Property on 24 June 2024 (“the Second Eviction”).

25. The affidavit of Mr Daneshyar of 27 June 2024 asserted that it was not until 4 June 2024, that Mr Daneshyar became aware that the NSWCC restraining orders had not included an exception for the Mortgage. This appears inherently improbable considering the email that the defendant’s lawyers had sent, on presumably the instructions of the director of the defendant , on 16 April 2024 to the plaintiff’s solicitors, acknowledged the default judgment and asserted that the plaintiff “was aware of the circumstances as to why the loan has not been paid”.

26. On 5 June 2024, the defendant’s solicitors sent an email to the NSWCC with a view of obtaining a further variation to the restraining orders to allow repayments of the Loan in relation to the Property. A copy of the Claim and Default Judgment Order was also sent to the NSWCC. I also note at this juncture the subject of this email chain was “RE: NSWCC v Abbas Daneshyar – proceeding number 2023/00291877” (which was not the file number for this proceeding).

27. On 24 June 2024, the Second Eviction took place and the plaintiff was placed into possession of the Property by the NSW Sheriff, by way of execution of the Default Judgment and the Writ.

28. Additionally, on 24 June 2024, a number of emails were exchanged between the defendant’s solicitor and the NSWCC. In an email sent at 12.12 pm, the NSWCC enquired about whether the mortgagee had consented to the variation orders proposed by the defendant’s solicitors. At 12:25 pm, the defendant’s solicitors replied that “we have not sought the Mortgagee’s consent as the Mortgage[e] is not a party to these proceedings”. At 1:39 pm the NSWCC sent a further reply which stated, “To expedite our approach to the Court in seeking these orders, it would be prudent to confirm the Mortgagee is not opposed to the proposed course of action, being the payment of arrears and then resumption of the mortgage repayments”. Having regard to the evidence before the Court, this email was not replied to.

29. On 2 July 2024, at 11:46am the NSWCC sent revised consent orders to the defendant’s solicitor for consideration and asked, “Can you please advise if you have made contact with the Mortgagee in respect of the proposed course of action?”.

30. The defendant’s solicitor returned those signed orders via email at 6.03pm (“the Consent Orders”), however, did not provide a response regarding contacting the Mortgagee.

31. The NSWCC sent a further email on 2 July 2024, at 6:18pm asking the following questions:

“1. Have contacted the Mortgagee regarding the proposed course of action?

2. Does your client consents[.] to the Commission providing the Court a copy of the orders made regarding the judgment (if requested by the Court)?”

32. That email also received no reply from the defendant’s solicitor.

33. On 22 July 2024, the NSWCC emailed the defendant’s solicitor to reiterate those questions and advised they had not approached the Court seeking the orders as a result of the defendant’s failure to answer the questions.

34. On 31 July 2024, the NSWCC emailed the defendant’s solicitors informing them that they had received communication from the Mortgagee’s solicitors who advised they are preparing contracts for the sale of the Property.

35. On 31 July 2024, the NSWCC informed the defendant, via an email to the defendant’s solicitors, that the plaintiff had informed the NSWCC that it was preparing contracts for the sale of the Property and as a result the NSWCC had updated the orders to accommodate for that sale and requested the defendant’s consent (“the alternative consent orders”).

36. On 2 August 2024, the defendant’s solicitors sent a reply to the NSWCC opposing the alternative consent orders and any such sale of the Property and requested the NSWCC “immediately approach the Court to make” the consent orders.

37. As at 5 August 2024, the NSWCC had confirmed that it consented to varying the restraining orders for payment of arrears of up to $60,000 as itemised in the defendant’s solicitors’ email dated 24 June 2024 and for further ongoing payments, however, was of the view that “the parties should not approach to (sic) Court seeking any orders regarding the property which are inconsistent with the previous orders made by the Court in favour of the Mortgagee”. As such the Court was not approached to make the consent orders.

The Loan and Mortgage agreements

38. Counsel for the plaintiff, Mr M Collins, drew the Courts attention to the general terms and conditions of the Loan. Some important terms are extracted below:

7. Payments you must make

7.1 You must make all the payments and pay all the credit fees and charges specified in the Financial Table (as varied from time to time). In addition, on the final repayment date, you must pay us the amount you owe us in respect of all your loan accounts.

7.2 Payments will be credited to your loan account only when actually received by the Lender. All payments must be made in full when they are due, without setting off or deducting any amounts you believe the Lender owes you, and without counter claiming any amounts from the Lender.

7.3 You may with our approval make weekly or fortnightly repayments of the amount specified by us instead of making monthly repayments. If you want to make weekly or fortnightly repayments, please make appropriate arrangements with us.

7.4 Payments are to be made by direct debit or by any other reasonable method we direct. You must sign a direct debit authority to authorise us to debit one of your bank accounts and you must keep that account open. You authorise us to obtain any money due under your loan agreement by using the direct debit authority. If an attempted direct debit fails, we may make further attempts to direct debit your account until the direct debit is successful.

7.5 The amount of each payment may include any applicable direct debit fees, taxes or charges relating to the payment method.

7.6 If any payment is due:

(a) on a day which is not a business day; or

(b) on a day which is the 29^th, 30^th or 31^st of a month with no such date,

7.7 the payment must be made on or before the next business day. However, if that means that the payment is due in the next calendar month, your payment is due on the last business day of the current calendar month.

7.8 The amount you owe us must be repaid within 180 days from the date you die (or if there is more than one borrower, the last borrower dies) unless other arrangements are made for the continuation of the loan to our satisfaction. We will discuss this with your executor or beneficiaries and seek to agree a mutually acceptable solution.

7.9 If you are required by law to deduct any amount from a payment due to us, unless we can receive a credit or rebate for that deduction, you must make an additional payment so that the amount we receive is not reduced.

…

20. Monetary events of default

A monetary event of default is an event of default that occurs as a result of your failure to make a payment. Each of the following is a monetary event of default:

(a) You do not pay any money due to us under your loan agreement or any other agreement by the due date for payment; or

(b) you do not pay any amount exceeding $50,000 to any person other than us by the due date for payment.

…

22. What the Lender can do if an event of default occurs?

22.1 Subject to clauses 22.2 to 22.6 inclusive, at any time after an event of default occurs, we can take any of the following actions.

(a) Demand and require immediate payment of any money due under your loan agreement.

(b) Call up the loan and require payment of the amount you owe us.

(c) Exercise any right or power conferred by law, your loan agreement or any security.

…

22.3 We will not:

(a) require you to repay the amount you owe us;

(b) take enforcement action against you; (c) enforce any security held to secure repayment of your loan, unless:

(d) we have given you at least 30 days written notice of the event of default;

(e) if the event of default is remediable, you have not remedied that event of default within 30 days; and no event of default of the same type has arisen during that period.

(f) no event of default of the same type has arisen during that period.

39. Clause 22.1(a) and (b) are relevant to the plaintiff’s alternative case as to whether the defendant has an arguable defence, and in particular whether the acceleration clause has any bearing on a claim for possession. That is, the provision, shows the claim for possession was not contingent on there being any acceleration. The defendant is in default on the Loan as payments under the Loan are in arrears. It follows that an entitlement to possession arises in the present case (see cl 22.3).

40. Some important terms of the Mortgage are as follows:    

4.2 Monetary events of default

Each of the following is an event of default:

(a) you or a borrower do not pay any money due to us under the mortgages or any other agreement by the due date for payment; or

(b) you or a borrower do not pay any amount exceeding $50,000 to any person other than us by the due date for payment.

4.4 When we can take action under the mortgage

…

(b) We will not take enforcement action under the mortgage unless:

(i) we have given you at least 30 days written notice of the event of default;

(іi) if the event of default is remediable, you have not remedied that event of default within 30 days; and no event of default of the same type has arisen during that period.

4.5 Our enforcement rights

Subject to clause 4.4, at any time after an event of default occurs, we may sign anything and do anything we consider appropriate to recover the debt and deal with the secured property. We may do this how and when we decide in our absolute discretion, and with or without taking possession of the secured property, whether or not in conjunction with other property. We do not lose any rights or forgive any event of default unless we do so in writing. We can take action even if we do not do so promptly after the event of default occurs. If we hold collateral security, we can enforce any one of the securities first or all of them at the same time. Our costs of exercising these rights will form part of the debt. Without limitation, we may do any of the following if an event of default occurs.

(a) Demand and require immediate payment of the debt.

(b) Exercise any right, power or privilege conferred by law, the mortgage or any other agreement.

(c) Deal with the secured property in any way we see fit (including the contracts and other property that form part of the secured property), including:

(i) sell the secured property in one line or by separate lots;

(ii) rescind, vary or complete any contract for sale of the secured property;

(iii) lease or license the secured property on any terms and for any period (and to the extent possible, no legislation operates to restrict or limit any lease or licence by us under this clause 4.5(c));

(iv) subdivide or consolidate the secured property;

(v) repair, cleanse, repaint, demolish, rebuild, alter or construct completely new buildings or structures on the secured property;

(vi) prepare plans and specifications and obtain approvals from any competent authority in relation to the secured property;

(vii) give or transfer the secured property to any competent authority;

(viii) acquire additional property for development, sale or lease in conjunction with the secured property; or

(ix) carry on any business activities on the secured property.

…

The applicable law

41. There was no dispute between the parties as to the applicable law and principles applying to the disposition of the Motion. Counsel for the plaintiff provided an adequate summary, in that respect, and that forms the basis for what follows.

42. The court's power to set aside a default judgment is contained in r 36.16(2)(a). of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”).

43. The court retains that power even where the judgment has been executed.

44. The general position in relation to the Motion is that the Court requires the defendant to:

1. provide an explanation for why it did not file a defence;

2. provide an explanation for any delay in applying to set aside the judgment; and

3. show that it has a bona fide ground of defence, being a reasonable defence on the merits.

45. In J & M McNamee Holdings Pty Ltd v Mungerie Vale Pty Ltd [2019] NSWCA 283 (at [48]- [51]) Gleeson JA (with whom Brereton JA and Simpson AJA agreed) stated:

“48. It is well established that the considerations relevant to an application to set aside a default judgment include whether the applicant has a bona fide ground of defence, an adequate explanation for the failure to defend and the length of any delay. Whether the plaintiff will be prejudiced if the default judgment were set aside is also relevant.

49. Fundamentally, the question is whether it is in the interests of justice to allow the party seeking to set aside a default judgment to be permitted to defend the proceedings on the merits.

50. Two further matters referred to by Sackville AJA in Dai v Zhu should be mentioned. One is the observation by his Honour at [89] that the rationale for the requirement that the applicant for relief demonstrate a bona fide ground of defence is that, "In the exercise of its 'unfettered, though judicial, discretion' the Court will consider ... (a) whether any useful purpose would be served by setting aside the default judgment, and (b) how it came about that the applicant found himself bound by a judgment regularly obtained".

51. The other matter, which is related to this, is his Honour's observation at [92] that, "In determining whether the defendant has a bona fide defence on the merits, the Court does not embark on a hearing of the full merits of the case... [A]ll that is necessary is for the defendant to show that the defence is asserted bona fide and that there is an arguable or triable issue. His Honour continued at [92]:

The nature of the evidence required in a particular case may depend on the circumstances, including the cogency of the defendant's explanation for the delay or failure to comply with orders of the Court.”

46. As to the issue of whether the defendant has a defence on the merits, it is relevant for the court to consider the defendant’s apparent prospects of success in the proceedings.

47. The plaintiff accepted that the court is not required to make any determinative adjudication on the ultimate substantive strength of any proposed defence, but the defendant must demonstrate facts showing good grounds of defence and that the grounds are arguable or triable. It is not sufficient for the defendant to depose that it believes it has a good defence without providing evidence of the material facts supporting such an assertion.

Consideration

Explanation for the failure to file a defence

48. The defendant accepted that it’s reason for failing to defend the proceedings was unsatisfactory. It accepted that the defendant’s director was informed of the proceedings by his accountants, however, he did not realise that the defendant was required to file a defence.

49. Reliance was placed upon the defendant’s status as a small business with a single director facing multiple complex criminal and civil proceedings for the first time. It was contended that in those circumstances the explanation for the failure to defend is not fatal to the Motion.

50. The defendant’s explanation for the failure to file a defence is neither adequate nor satisfactory.

51. A representative of Bluestone had communicated with Mr Daneshyar regarding the completion of a third-party authority for the purposes of payment from the Suncorp account in November to December 2023 and January to February 2024 without Mr Daneshyar having completed the necessary steps.

52. What then followed must raise real doubt about the defendant’s reliance on its director not realising he was required to file a defence. Those circumstances were as follows:

1. on 23 February 2024, Bluestone wrote to Mr Daneshyar confirming that the arrears on the account were $34,388.57 and that Bluestone could only hold off ongoing legal action once the account was brought up to date;

2. on 5 March 2024, Bluestone informed Mr Daneshyar that they were proceeding to judgment. Mr Daneshyar responded that he would call back in an hour with his lawyer, however, he did not do so.

53. That consideration is made more acute by the following circumstances:

1. The fact that Mr Daneshyar had legal representation; and

2. Mr Daneshyar acknowledged that the restraining order prevented payments being made from the defendant’s Suncorp account towards the loan account and that the NSWCC had not given consent to vary the restraining order to allow such payments to be made.

No satisfactory explanation for delay to apply to set aside judgment

54. Mr Daneshyar deposed to having not been aware that the Default Judgment was granted.

55. However, as earlier outlined in this judgment, the defendant’s solicitors confirmed on 16 April 2024 that it had come to their client’s attention that the plaintiff had obtained the Default Judgment and a copy of the Default Judgment was provided to the defendant’s solicitors on 22 April 2024.

56. On 20 May 2024, the plaintiff’s solicitors emailed the defendant’s solicitors informing them that the Second Eviction was scheduled for 24 June 2024 and the plaintiff intended to proceed with that eviction.

57. It is in that context that consideration needs to be provided as to any explanation by the defendant for its delay in filing the Motion until 28 June 2024.

58. Counsel for the defendant, Mr S J Young submitted that the critical period of delay was “relatively modest”, being, in his submission, 6 weeks. The defendant submitted that delay should be counted from 6 March 2024, when Mr Daneshyar spoke to a Bluestone representative and said he would call back with his lawyer as he “should have taken steps which would have resulted in him ascertaining that default judgment”.

59. The defendant contended that delay should only be counted until 16 April 2024 because the period between 16 April 2024 and 28 June 2024, when the Motion was filed, should be taken as explained “by the fact that the parties were making good faith efforts to negotiate a potential resolution to this matter which would not require the court’s intervention”. The defendant stated that conclusion can be inferred as those negotiations could not be provided to the Court in evidence as privileged correspondence.

60. Counsel for the plaintiff made brief oral submissions on delay stating,

“the defendant’s explanation of delay is simply unsatisfactory and while the authorities indicate that delay alone is not generally a basis for the Court to reject an application of this type, it is one of the things that the Court would take into account in considering whether the defence is pressed bona fide. And the delay here is not adequately explained.”

61. In my view, the defendant’s submission that delay should not be counted between 16 April 2024 and 28 June 2024 because good faith efforts to negotiate a resolution were taking place should be rejected. The evidence suggests that the plaintiff’s solicitors never accepted there was a proper basis for a resolution. An email from the plaintiff’s solicitor on 22 April 2024 that stated “our client is not aware of any basis upon which the judgment could be set aside”.

62. In relation to the communications with the NSWCC, although the NSWCC were clearly open to a variation order concerning the Property, they made persistent enquiries requiring the Mortgagee’s consent that were consistently ignored by the defendant. These circumstances are as follows:

1. On 24 June 2024, the NSWCC enquired as to the Mortgagee consent to the consent orders, however, the defendant’s solicitors replied that consent was not sought as the mortgagee was not a party to the proceeding. As earlier mentioned in this judgment, this email chain was titled, inter alia “NSWCC v Abbas Daneshyar”. The NSWCC replied that it would be prudent to confirm the mortgagee’s consent but no reply by the defendant was received. At this time, the second eviction took place by way of execution of the Default Judgment and Writ.

2. Revised consent orders, proposed by the NSWCC, were signed by the defendant on 2 July 2024, however, the question regarding the Mortgagee’s consent was reiterated by the NSWCC twice on 2 July and once more on 22 July 2024 without response. As a result, the NSWCC did not approach the Court.

63. Although the mortgagee may not have been a party in the proceeding that related to the original restraining order (presumably NSWCC v Abbas Daneshyar), the mortgagee was clearly a party that would be materially affected by the consent orders. In my view, “good faith negotiations” cannot be used to describe communications where recurring questions regarding materially affected parties were consistently ignored.

64. In the result, I find that the defendant has not provided an explanation for the delay in applying to set aside the Default Judgment and as such, is a factor I will consider when determining whether to grant or dismiss the Motion.

Defence

65. No defence or draft defence to the Claim has been provided by the defendant on the hearing of the Motion. The failure to do so is a relevant consideration on an application to set aside default judgment: National Australia Bank v Priestley (No 3) [2012] NSWSC 1171 (Schmidt J) at [32].

66. Rather the defendant sought to convey a purposeful defence in written submissions which were supplemented by oral submissions on that topic. In written submissions the defendant contended:

“18. While the defendant has not prepared a formal defence, as noted above, since 5 June 2024 it has contended that it would be unconscionable for the plaintiff to rely on the acceleration clause to demand repayment of the entire loan when the plaintiff accepted that the arrears could always have been covered from the Suncorp account.

19. The defendant assertion of unconscionable conduct amounts to a claim for relief against forfeiture. The authorities concerning unconscionable conduct in this sense were reviewed by Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ in Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315. Relevantly, in finding that the appellant was not entitled to such relief, their Honours held that:

(a) “the special heads of fraud, accident, mistake or surprise” identify in a broad sense the circumstances making it inequitable for a party to exercise its contractual rights [58],

(b) the decided cases in which the operation of these “special heads” is considered do not disclose exhaustively the circumstances which merit equitable intervention [58], and

(c) it is not the case that the circumstances must be “exceptional” before equity intervenes [59].

20. There is a serious question to be tried as to whether the plaintiff was entitled to rely on the acceleration clause in circumstances where the plaintiff was aware that the defendant’s assets had been restrained by the NSWCC and sufficient funds were available in the Suncorp account to pay the arrears, and had (sic) Thus, the defendant had made reasonable attempts to effect the payment.”

67. Counsel for the defendant relied on a defence of unconscionable conduct by the plaintiff which they submitted is “equally arguable in respect of all action that the mortgagee has taken in response to the arrears arising; both the judgment in possession and the judgment in debt flowed from”.

68. The defendant made the following oral submissions concerning Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [58] and [59] (“Tanwar”):

“…when having regard to the general principles which qualify the extent to which the Court needs to be satisfied as to the bona fides of the defence, it is my submission that the description in that paragraph is sufficient when combined with the factual findings which I ask your Honour to make on the basis of the correspondence I have taken your Honour to, that is, it may be that, in all of the circumstances disclosed by that correspondence, as perhaps more fully understood in the context of a trial where the parties to that correspondence may give evidence, it may be that the plaintiff's actions in relying on the acceleration clause and obtaining a default judgment amounted to unconscionable conduct, in the sense that the Court would grant what is, in effect, relief against forfeiture pursuant to that acceleration clause.”

69. Additionally, in oral submissions, the defendant highlighted various forms of contact between Bluestone and Mr Daneshyar (those communications were discussed in detail in the factual background) to evidence that Bluestone and the plaintiff “had notice that there was an issue with the New South Wales Crime Commission”. These included the following:

1. A phone call and email between Mr Daneshyar and Bluestone on 15 November 2023

2. An email chain between Mr Daneshyar and Bluestone on 22 December 2023

3. An email to [email protected] from Mr Daneshyar on 5 February 2024

70. In light of those communications, the defendant submitted:

“by this time the plaintiff was clearly on notice that there was an issue with the New South Wales Crime Commission and while certainly the defendant, acting prudently, ought to have obtained copies of the relevant orders, analysed them, identified the problem with them and provided more fulsome correspondence to the plaintiffs so that proper arrangements could be put in place, when that didn't occur we say that it was unconscionable for the plaintiff to then go on and file the notice of motion to seek default judgment without taking some further steps to ascertain exactly what was going on with the Crime Commission and exactly what the defendant was trying to explain as the reason why the arrears had not been paid.”

71. The defendant also drew attention to an email from Bluestone of 23 February 2024 which made reference to “legal fees continu[ing] to incur” but there being “no reference to the claims that Mr Daneshyar had made about attempting to negotiate payment with the New South Wales Crime Commission and there is no evidence that the plaintiff made any independent attempt at this time to seek clarification from the Crime Commission as to what was going on.”

72. The defendant submitted this matter can be distinguished from Kostopoulos v GE Commercial Finance Australia Pty Ltd [2005] QCA 311 (“Kostopoulos”) because the NSWCC made representations showing an intention to vary the restraining orders by consent and that the delay in seeking the variation on the basis of obtaining the mortgagee’s consent was not reasonable because the mortgagee’s consent was not required. Having regard to those circumstances, counsel the defendant made the following further submissions in that regard:

“circumstances do make this case a different one to Kostopoulos where, notwithstanding the fact that, as a Queensland decision it is not binding on your Honour and of course it is a decision, as with all decisions of this nature, that turns on its own facts, but your Honour sees at paragraph 50 of Kostopoulos that the Court proceeded on the basis that Mr Kostopoulos was not able to make the payments that he was obliged to make under the terms of the mortgage. With respect to the arrears, we say it is significant that part of the reason why the arrears could not be paid is because default judgment had been entered and possession had been taken, and that caused the negotiation with the Crime Commission to go off the rails.”

73. The primary submission for the plaintiff was that the foreshadowed defence was not arguable and, on that basis, the Motion should be dismissed. In the alternative, counsel for the plaintiff submitted that, even if the Court was satisfied the defence was arguable, the foreshadowed defence could not be a defence to the claim for possession and would only affect the Debt Judgment. In that alternative case, the plaintiff contended that the Court would only set aside the Default Judgment so far as it applied to the debt.

74. In support of those primary submissions, counsel for the plaintiff contended as follows:

1. Mr Daneshyar was informed by his accountants on 19 January that the company had been served with the proceedings, and despite him stating that he had not realised that the defendant was required to file a defence he did not give any further explanation than that. It appears he had been legally represented for years and certainly the Claim document itself makes very clear that a defence needed to be filed within 28 days. There had not been any explanation for how he did not come to realise that or whether his failure to realise that constitutes any sufficient explanation. The explanation given by Mr Daneshyar was inadequate.

2. The plaintiff denied they had “accepted that the arrears could always have been covered from the Suncorp account” and highlighted that the defendant had referenced par 6 of their own letter of 5 June 2024, addressed to the plaintiff’s solicitor, which stated, inter alia, “We consider that it would be unconscionable for your client to rely on the acceleration clause to demand repayment of the entire loan when your client accepts that the arrears could always have been covered from the Suncorp account, from which Mr Daneshyar has attempted to arrange payments”. Counsel for the plaintiff contended that that submission is “not a position my client has ever expressed; indeed, it is simply wrong. Since before this loan went into default, it has not been possible, due to the restraining orders made by this Court, for any arrears on this account to be made from Suncorp”.

3. Despite the defendant’s submission that Mr Daneshyar was not aware that the variation to the NSWCC restraining orders only affected the NAB Mortgages, counsel for the plaintiff submitted that Mr Daneshyar must have understood the Property was not subject to that variation when Bluestone was contacting him in November 2023 in relation to default.

75. In relation to the alternative regarding possession, the plaintiff submitted the following:

“If your Honour is satisfied on this material that the defendant has met that burden, I then rely on Inglis and the principles dealt with by Campbell J in the Voukidis decision to support the submission that that defence cannot go to the judgment for possession and that, if your Honour is satisfied that the defence relying on relief against forfeiture is arguable, that your Honour could only set aside the judgment for debt and that the judgment for possession would remain on foot and be unaffected and the parties could then continue the dispute and the claim with respect to debt.”

76. Before considering those arguments, I propose to consider the judgments in Kostopoulos and Tanwar in some detail.

77. Kostopoulos concerned an individual, Mr Kostopoulos, who purchased a property which was subject to a mortgage from AMP. Two relevant clauses of that mortgage extracted from the decision at [5] – [6] are as follows:

“5 Under the mortgage, upon an “Event of Default”, the $500,000 became due and payable by the appellant to AMP. In this regard, clause 11.1 provided:

“After an Event of Default occurs, despite any previous omission to exercise any of its rights or any waiver of those rights and any agreement or arrangement between the Mortgagor and AMP Bank to the contrary:

(a) (exercise of rights) AMP Bank may immediately exercise any of its rights arising from the Mortgagor's default; and

(b) (acceleration) all Secured Money is immediately due and payable.”

6. Relevantly for present purposes, clause 1.1 of the mortgage provided that an Event of Default would occur:

“(a) when a representation or warranty made or taken to be made by the appellant was incorrect or misleading when made or taken to be made;

(b) when any encumbrance was sought to be enforced against the property;

(c) when the appellant had not satisfied any monetary obligation.”

(emphasis added)

78. The acceleration provisions of the mortgage instrument also lay at the centre of the issues in this matter.

79. Mr Kostopoulos was charged with criminal offences in 2002 and a caveat over the property was lodged by the Queensland Director of Public Prosecutions (“DPP”) as a result. This resulted in a breach of clause 1.1(b) of the Mortgage.

80. In June 2003, the rights against Mr Kostopoulos under the mortgage were acquired by GE Commercial Finance Australia Pty Ltd (“GE”). AMP warranted that Mr Kostopoulos was not in default under the mortgage. After that date, Mr Kostopoulos continued to meet his interest payment obligations and sought to submit that the warranty AMP gave to GE had waived Mr Kostopoulos’ breach of the mortgage.

81. On 18 November 2004, the DPP’s restraining order was extended with Mr Kostopoulos’ consent until 31 May 2005.

82. On 13 January 2005, GE served Mr Kostopoulos a notice asserting the following four events of default had occurred:

“(a) a breach of the obligation to pay land tax by the due date;

(b) a breach of the representation or warranty that there were no proceedings before a court which could reasonably be expected to affect him or the property;

(c) a material adverse effect existed (in respect of his capacity to meet the interest payments on time and to make the capital repayment);

(d) there had been an encumbrance against the property by reason of the lodgement of the caveat.”

83. The notice further claimed that $508,611.62 was due and payable. This represented the total amount remaining to be paid on the mortgage under the acceleration clause. Mr Kostopoulos could not pay that amount.

84. On 1 April 2005, GE gave Mr Kostopoulos notice to leave the property and on 7 April gave a notice of exercise of power of sale.

85. On 27 April, Mr Kostopoulos filed an application seeking a final injunction to restrain the respondent from “proceeding on a demand dated 13 January 2005, for acceleration of payment of $508,611.62”.

86. The application, at first instance, was dismissed and the Court did not allow an application for adjournment on the basis of receipt of late material. The decision was appealed on the following basis:

“(a) in refusing the appellant's application for an adjournment which would have enabled the appellant to file a further affidavit relating to the conduct of the respondent relevant ‘to issues of waiver, estoppel and unconscionable conduct’;

(b) in concluding that the appellant's default was irremediable so that the relief under s 95(3) of the Property Law Act was not available;

(c) in holding that the ‘non-waiver’ clause had not itself been waived by the respondent or in failing to hold that reliance on the clause would be unconscionable;

(d) in failing to exercise the general equitable jurisdiction to grant relief against unconscionable conduct.”

87. In discussing an issue regarding s 95 of the Property Land Act 1974 (Qld), Keane JA (with whom McMurdo P agreed) observed (at [33]):

“33. The learned primary judge expressly did not proceed in reliance upon the appellant's failure to pay land tax as a ground of default. Rather, he proceeded by reference to the defaults in relation to the criminal proceedings, the restraining order and the caveat. The recurrent fresh defaults to which I have referred had not been remedied by the appellant and so relief from default was not available under the terms of s 95(2). Further, because of the nature of those defaults and the absence of any undertaking to remedy those defaults, the appellant was, and remains, unable to qualify for consideration for the grant of discretionary relief under s 95(3) of the Property Law Act.”

88. Keane JA then gave consideration to the equitable jurisdiction of the Court, under a heading dealing with the same subject matter, (at [48] – [62] of the judgment). Paragraphs [48] to [55] are relevant in this matter. Below is an extract of those passages:

“Equitable jurisdiction

48. At this point, it becomes necessary to consider the appellant's argument that equitable doctrines associated with relief from forfeiture, penalties and unconscionable conduct were apt to preclude the respondent from exercising its right to accelerate payment of the principal.

49. The appellant sought to put his case in terms of the exposition by Lord Wilberforce in Shiloh Spinners Ltd v Harding of:

“the right of courts of equity in appropriate and limited cases to relieve against forfeiture for breach of covenant or condition where the primary object of the bargain is to secure a stated result which can effectively be attained when the matter comes before the court, and where the forfeiture provision is added by way of security for the production of that result.”

50. This doctrine is concerned with the principle of equity that the “failure to redeem a mortgage upon the covenanted date for repayment [does] not destroy the equity of redemption without the proper exercise of a power of sale or a foreclosure suit in equity.”13 In my view, this doctrine is irrelevant in the circumstances of the present case for several reasons. First, the point at issue is not whether the acceleration is apt to deny the appellant's right to redeem the mortgage; he remains entitled to redeem the mortgage notwithstanding the acceleration. But he is not able to do so. Secondly, it is the repayment of the debt which is one of the principal objects of the transaction. Because of the appellant's inability to pay, this Court cannot, by its orders, achieve that object, ie the repayment of the principal debt by granting of relief to the appellant conditioned upon the payment of the principal.

51. The appellant has no arguable ground for invoking equitable intervention drawn from the other stream of equitable jurisdiction discussed by Lord Wilberforce, namely “the heads of fraud, accident, mistake or surprise”. In this regard, there is no basis for the suggestion that the appellant's breaches of covenant or his failure to remedy them or even his continued payment of interest were brought about by an inducement from the respondent. There can be no suggestion that the respondent in any way lulled the appellant into a false sense of security in relation to his defaults. 

52 There are, in my view, further answers to the appellant's attempt to invoke this equitable doctrine. The first is that it cannot sensibly be said that there is any “forfeiture” involved in the triggering of the respondent's rights immediately to recover the principal sum. The principal sum was owed to the respondent by the appellant, but it was not repayable while the appellant was not in default in respect of the facility. That the debt became repayable on the occurrence of default by the appellant is neither a forfeiture nor a penalty.

53. In this regard, there is no estate or interest which the appellant forfeits by reason of the respondent's entitlement to payment of the principal debt. The appellant's complaint is that he has lost the benefit of the contract of loan remaining on foot for the balance of the five years of the facility. Such a benefit is dependent upon the terms on which it depends for its existence. That sort of benefit does not attract the protection of the equitable doctrine of relief against forfeiture. 

54 As to penalty, there is strong authority for the proposition the mere fact that a principal sum becomes payable “upon a failure by a borrower to comply with the conditions on which credit was extended cannot constitute a penalty.” There is no authority which supports the appellant's submission to the contrary. It was argued on the appellant's behalf that the reasons of Gaudron J in Stern v McArthur18 provided support for the appellant's contention; but it is apparent that her Honour was prepared to regard a contractual provision for the payment of money as being a penalty or “in the nature of a penalty” only where the provision for the payment is “security for a stated result”. In this mortgage, the obligation of the appellant to repay the principal to the respondent was not “security” for some other result. It was, in truth, the substantial entitlement of the respondent, the postponement of which depended upon the appellant's compliance with the terms of the mortgage.

55 Next, the appellant was driven to invoke a broader equitable doctrine pursuant to which:

“Equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has ‘played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it’ … Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption.”

56. The principal difficulty for the appellant in seeking to rely upon this statement of principle in the present case is that the appellant cannot show that he has acted, in any way, in reliance on an assumption induced by the respondent so that it would be a detriment to the appellant if the respondent were to be allowed to enforce its claim to repayment of the principal sum. The instalments of interest were payable by the appellant under the mortgage; paying them discharged his obligation in that regard. One cannot sensibly speak of the discharge of an obligation as a detriment.

57. Further, the terms of the mortgage made it clear that the receipt of such instalments did not, of itself, involve any assurance to the appellant that the rights of enforcement which had arisen in the respondent would not ever be exercised. The very purpose of clause 4.2, 11.1 and 25.8 was to ensure that no such assurance could be taken by the appellant from the respondent's receipt of interest payments.

58. The appellant also invokes even more open textured statements of equitable principle in relation to relief against unconscionable conduct. 20 In this regard, the recent decision of the High Court in Tanwar Enterprises Pty Ltd v Cauchi21 confirms that, in the present case, there is nothing unconscionable in the respondent insisting upon the rights conferred on it by the facility pursuant to which the appellant acquired the property.”

89. The appeal was dismissed, and the Court held equitable principles did not apply.

90. Kostopoulous has been cited with approval by McDougall J in RHGMortgage Securities Pty Ltd v BNY Trust Company of Australia Ltd [2009] NSWSC 1432 (“RHG Mortgage”) as follows (at [173]):

“173. It follows that, if a receiver is appointed and does sell the charged Receivables, the forfeiture involved will result from the plaintiffs' inability to satisfy the enlivened obligation to pay the outstanding balance of principal. As Keane JA pointed in Kostopoulos at [50], the plaintiffs' inability to repay the outstanding balance of principal means that the Court could not achieve that object by imposing an appropriate condition on the grant of relief against forfeiture.”

91. This authority has also been cited with approval by Adamson J (as his Honour then was) in Westpac Banking Corporation v Parker [2012] NSWSC 514 (“Parker”) as follows (at [34]):

34. I do not consider that the equitable jurisdiction to grant relief against forfeiture is relevant to the Parkers' application in light of the authorities which establish that a clause in a mortgage which suspends payment of the principal owing if payments by instalments are made in accordance with the terms of the agreement between the parties is not a penalty and does not involve forfeiture: Kostopoulos v GE Commercial Finance Australia P/L [2005] QCA 311 at [48]-[54], per Keane JA, McMurdo P and Dutney J agreeing; RHG Mortgage Securities Pty Limited & Ors v BNY Trust Company of Australia Limited & Anor [2009] NSWSC 1432.”

92. The headnote to the judgment in Tanwar explains the background circumstances of that matter as follows:

“Three contracts for the sale of land stipulated the same completion date. At first, time was not stated to be of the essence. After the completion date was extended several times, a new date was fixed. Time was made of the essence. The purchaser was unable to complete the contracts on the new date because of a delay in obtaining finance. Finance became available the following day. The vendors were aware that the purchaser then wished to complete the contracts but issued notices of termination. The purchaser sought specific performance on the basis that the contracts had not been validly terminated, alternatively consequent upon relief against forfeiture of the contracts.”

93. The majority of the High Court (Gleeson CJ, McHugh, Gummow, Kirby, Hayne and Heydon JJ) made the following observations bearing upon the question of unconscionability as follows (at [58] – [60]):

“58. What Lord Wilberforce in Shiloh Spinners called “the special heads of fraud, accident, mistake or surprise” identify in a broad sense the circumstances making it inequitable for the vendors to rely upon their termination of Tanwar's contracts as an answer to its claim for specific performance. No doubt the decided cases in which the operation of these “special heads” is considered do not disclose exhaustively the circumstances which merit this equitable intervention. But, at least where accident and mistake are not involved, it will be necessary to point to the conduct of the vendor as having in some significant respect caused or contributed to the breach of the essential time stipulation. Tanwar's situation falls beyond that pale. The statement by Mason CJ in Stern respecting the insignificance of subsequent events for which the vendors were in no way responsible is fatal to the main thrust of Tanwar's case.

59 It should be made clear that what is said above does not support any proposition that the circumstances must be “exceptional” before equity intervenes. In their joint judgment in Stern116, Deane and Dawson JJ, with reference to what had been said by Mason and Deane JJ in Legione117, said, in a passage which puts the point of present significance:

“Mason and Deane JJ were not saying that there must be unconscionable conduct of an exceptional kind before a case for relief can be made out. Rather, what was being said was that a court will be reluctant to interfere with the contractual rights of parties who have chosen to make time of the essence of the contract. The circumstances must be such as to make it plain that it is necessary to intervene to avoid injustice or, what is the same thing, to relieve against unconscionable — or, more accurately, unconscientious — conduct.”

60 Thus, it remains for Tanwar to show that it is against conscience for the vendors to set up the termination of the contracts. In the present appeal, as already has been indicated, there was no representation by the vendors which could found any estoppel. Nor has Tanwar asserted that there was any mistake in any relevant sense.”

94. Whilst no draft defence has been provided to the Court (under instructions given by the defendant), the written submissions of the defendant are, in a general sense, productive of an assessment, as earlier mentioned, that the defendant intended to rely upon a defence based upon unconscionable conduct. In substance, it would appear that the defence would amount to a claim for relief against forfeiture although the particulars of any defence, in that respect, are scant.

95. I turn then to my considerations of that foreshadowed defence in the light of the submissions made by the parties and the evidence.

96. There was no dispute in these proceedings that the defendant was in a state of indebtedness under the Mortgage. The defendant was in default on the Loan and Mortgage in accordance with the default notice.

97. The Claim (which sought to claim the full amount remaining under the Loan relying on the acceleration clause, namely cl 22.2(b) under the Loan and cl4.4(b)(i) of the Mortgage) was filed on 18 January 2024. It is clear that more than 30 days’ notice of default was provided to the defendant such that reliance on the acceleration clause was available under the Loan and Mortgage.

98. In those circumstances, the accelerator provisions of the Loan and Mortgage were triggered. The default judgment placed the plaintiff in possession of the property. There is no stay or injunction preventing sale of the property.

99. The restraining order continues to operate with respect to the Property. Hence, since the Loan went into default, it has not been possible for any arrears on the Suncorp account to be made.

100. It is not the case, therefore, that the setting aside of the Default Judgment will, on the evidence, vary those circumstances.

101. The NSWCC did confirm that it would consent to the variation of the restraining order for the payment of arrears but that position was dependent upon the mortgagee not being opposed to that course of action resulting in reversion to the defendant making a payment of arrears and resuming mortgage payments. The position of the plaintiff was and is that it would not consent to such a course because the debt had been accelerated and a variation to the restraining order to pay arrears and then continue repayments was not an available response to the Claim.

102. It follows that the submission made by the defendant that the arrears “could have always been covered from the Suncorp account” may not be accepted when expressed at that level of generality.

103. When the entirety of the defendant’s contentions, such as they were, are considered in the light of the evidence in these proceedings, there must be real doubt about the prospect of the defendant making out a defence based upon the equitable doctrine of forfeiture.

104. Counsel for the plaintiff relied upon the judgment of the Queensland Court of Appeal, Kostopoulos. The defendant also seemed to, at least implicitly, rely on that authority. I propose, with respect, to follow that judgment, as a judgment of an intermediate appellate court and one that has been applied in this Court in RHG Mortgage and Parker.

105. I agree with the submission of the plaintiff that the factual circumstances in Kostopoulos are consistent with those operating in the present matter because:

1. The mortgagor was charged with a criminal offence, which restrained dealings with his property and there was a lodgement of a caveat over the property.

2. The proceedings concerned a debt acceleration clause under the mortgage (although it was noted that in these proceedings 30 days’ notice of default was required before acceleration could occur whereas in Mr Kostopoulos no notice was required).

3. The acceleration clause was activated by default (although in Kostopoulos the default was non-monetary, namely, that a caveat was placed on the property).

106. Whilst the defendant directed attention to [50] of Kostopoulos and in particular, the reference by Keane JA to the appellant in that matter being “entitled to redeem the mortgage notwithstanding the acceleration [,but] he [was] not able to do so”, the Court was there alluding to restraints operating upon the appellant of the kind discussed in [33] of the judgment in Kostopoulos. The Court found there was no right in forfeiture.

107. In Kostopoulos, the fact that the debt had become “repayable on the occurrence of default by the appellant” did not constitute forfeiture (at [50]) and the benefit under the Mortgage was dependent upon the terms “on which it depended for its existence” (at [53]). There was no reliance, in that matter, or in the current proceedings, that the plaintiff (the appellant in Kostopoulos) acted in reliance on an assumption induced by the defendant (the respondent in Kostopoulos) such that it would be a detriment to the plaintiff (appellant) if the defendant (the respondent) were to be allowed to enforce its claim to repayment of the principle sum (at [56]).

108. Further, it was not suggested by the defendant, in any foreshadowed defence, that success upon the defence would result in the vitiation the Mortgage.

109. These considerations also underline why a failure by the defendant to provide a draft defence is particularly relevant in this matter to the exercise of the Court’s discretion against the granting of the Motion.

110. There is a further factor pointing to the weakness of the proposed defence.

111. In order to make good the suggested defence, it is necessary for the defendant to show that it is “against conscience” (Tanwar at [60]) for the plaintiff to act under the acceleration clause of the Mortgage.

112. Thus, I agree with the submission of the counsel for the plaintiff that it would be necessary to show that the plaintiff had acted unconscionably or unconscientiously in order for relief against forfeiture to be available.

113. The Court does not have a pleaded defence as to what actions or inactions by the plaintiff constituted unconscionable conduct. If a defence were allowed, it may be accepted that additional evidence may be called on the question, but for present purposes the Court has the bare submissions of the defendant suggestive of circumstances that may give rise to a case in unconscionably. But even within those broad parameters, there must be real doubts as to whether the defendant has an arguable defence. My reasons for this conclusion appear below.

114. First, the plaintiff took the following active steps to alert the defendant as to its default:

1. On 23 November 2023, the plaintiff issued a default notice to the defendant. I note that Mr Daneshyar was listed as the Guarantor.

2. On 15 November 2023, Bluestone sent a third party authority form to Mr Daneshyar per his request.

3. On 20 November 2023, a representative of Bluestone sent Mr Daneshyar an email highlighting that the proposed third party, Melanie Horswill, had not signed the document.

4. On 18 December 2023, a representative from Bluestone sent an additional email to Mr Daneshyar attaching a third party authority form.

5. On 22 December 2023, a representative from Bluestone emailed Mr Daneshyar to follow up his account arrears of $17,262.42.

115. Secondly, the following additional factors are relevant:

1. As earlier mentioned, Mr Daneshyar relied to the email of 22 December on the same day stating “I have discussed with your team many times the right person to contact regarding the loan. The NSW crimes commission has sceased (sic) my accounts and I have put them onto the right person to contact to get the accounts upto (sic) date".

2. I agree with the submissions on the plaintiff that there is no obligation under the Mortgage or Loan on a lender to interrogate reasons for default and to then take steps to try to deal with those reasons for default to bring the account back into order.

3. The NSWCC was seeking the mortgagee’s consent to vary the orders, but as I have earlier noted, the observations of a senior solicitor for the NSWCC made on 24 June 2024 were that the defendant needed to confirm with the mortgagee was not opposed to the proposed course of action (see at [28] above). The communication from the NSWCC was not responded to by the defendant or his lawyers.

116. Having regard to the entirety of the aforementioned considerations, and the intimation by the defendant as to a potential defence, on the evidence before the Court as to the Motion, I consider that the defendant has a weak case on the merits of the foreshadowed defence outlined in the defendant’s submissions.

117. I turn to the further and alternative issue raised by the plaintiff as to the orders for possession.

118. In Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 (“Inglis”), Walsh J stated (at [166] – [167]):

“I am aware, of course, that the amended statement of claim includes charges that in relation to the keeping of accounts and in failing to give proper statements of account to the plaintiffs and in other ways the defendant has acted wrongfully. In this connexion, I may refer particularly, perhaps, to pars 94 and 94A of the amended statement of claim. But it is not those acts against which relief is sought in the present application. In my opinion the fact that those charges have been made and there has not yet been an adjudication upon them is not a reason for restraining the defendant from exercising its powers under the mortgage. As I have stated, it is not in dispute that there was an indebtedness under the mortgage, that is to say, that there were advances of money which were not repaid. Neither the existence of disputes as to the correct amount of that indebtedness nor the claim already mentioned that, whatever it ,was, it had been counterbalanced by the claim of the plaintiffs for damages is a ground, in my opinion, for preventing the mortgagee from exercising its rights under the mortgage instrument. In Morgan & Son Ltd. v. S. Martin Johnson & Co. Ltd. (1), a passage was cited from the judgment of Lord Cottenham in Rawson v. Samuel (2), and in which Lord Cottenham referred to some earlier cases which he described as being cases where-I quote his words-" the equity of the bill impeached the title to the legal demand".

…

" I am of the opinion that the case is not one in which the Court should intervene to restrain the exercise by the mortgagee of whatever powers it has under the mortgage instrument. Of course, any mortgagee i" subject to the requirements of the law, including various equitable principles, in respect of the manner in which he or it exercises powers given by a mortgage deed. But at present I am not concerned with any such question as that. The problem before me is whether, in the circumstances and having regard to the nature of the action that has been brought and the claims made in it, the defendant should be prevented, in aid of the plaintiffs' claims, from exercising any rights at all under the mortgage instrument, until those claims have all been finally determined. In my opinion the principles on which the Court has always acted do not permit the Court to intervene because of the existence of those claims…”

119. Walsh J’s judgment was sustained on appeal where Barwick CJ (with whom Menzies and Gibbs JJ agreed stated (at [169]):

“The case falls fairly, in my opinion, within the general rule applicable when it is sought to restrain the exercise by a mortgagee of his rights under the mortgage instrument. Failing payment into court of the amount sworn by the mortgagee as due and owing under the mortgage, no restraint should be placed by order upon the exercise of the respondent mortgagee's rights under the mortgage. In my opinion, the appeal should be dismissed”.

120. In National Australia Bank Ltd v C & O Voukidis Pty Ltd [2014] NSWSC 384 (“Voukidis”) Campbell J observed (at [25] – [28]):

“25. The matters relied upon by the first defendant as demonstrating an underlying defence, are set out in a proposed amended defence handed up in Court during argument on the 6th of March 2012. A further version was tendered as Exhibit 2 on 8th March 2012. It includes averments to the following effect:

“(a) That the Bank wrongfully and unconscionably caused the surplus funds for the sale of the other Burwood property to be paid into the controlled money account rather than applying them to the reduction of the second portfolio facility;

(b) In December 2012 ‘wrongfully and unconscionably caused’ the term deposit to be paid in reduction of the Bills Facility, rather than in reduction of the debts secured by the mortgage on the Burwood property.”

It is also averred that the provision of the term deposit was meant to be an interim security which would be released when the mortgage over the Drummoyne property was established; from what was argued by counsel, it may be that these matters are also relied upon as an estoppel by representation. The amended defence seeks a discharge of the first mortgage and a discharge of the fourth guarantee.

26. The only remedy sought by the Bank is summary judgment for possession. It does not seek to recover the monetary debt. It is difficult to see how there could be any complaint about the surplus funds given that the Bank has dealt with them in accordance with Court orders, likewise, the term deposit. These funds in total amount to about $2 million and would be insufficient to discharge the whole of the indebtedness of Mr and Mrs Voukidis and their related entities. They are insufficient to discharge the total of the indebtedness of Mrs Voukidis alone. But, as I have said, the term deposit was initially frozen by virtue of a Court order and the Bank had no choice but to comply with it. The surplus funds remain in the same category.

27. Nothing brought forward in the Amended Defence, or by way of argument, vitiates the Bank's title under its mortgage. To the extent to which the various matters raised by the first defendant might be arguable, and it is not obvious to me that they are, they are caught by the principle discussed in Inglis. That is to say, these matters do not undermine the Bank's title as mortgagee to possession, but rather arise by way of counterclaim or setoff and as such cannot defeat the claim for possession.

28. The first defendant's averments may after a hearing on the merits give rise to claims which sound in damages or equitable compensation and they should be permitted to continue. But that does not mean that the Bank is not entitled to possession.”

121. Counsel for the plaintiff advanced a submission, in the alternative, predicated on Inglis and Voukidis such that, if the defendant had met the burden of making out an arguable defence, the Court should only set aside the judgment for debt and not possession (which would remain on foot).

122. The defendant accepted that the mortgagee was entitled to possession under the terms of the mortgage and “that is a distinct matter from the debt judgment”. However, it was contended that the unconscionable defence was equally applicable in respect to all actions the mortgagee might take in response to arrears on a Loan and Mortgage. The judgment in possession and debt flowed from the same default for the same causes (that is, the plaintiff’s level of knowledge).

123. The defendant sought to deal with Inglis and Voukidis by submitting that, on those cases, the mortgagor had alleged set-off and sought interlocutory relief against the mortgagee exercising a power of sale in circumstances where the mortgage wanted to advance a set-off. Here it was submitted, the unconscionable conduct defence should result in a different outcome because the plaintiff should not be permitted to rely, in the circumstances of unconscionable conduct, with the acceleration clause or possession under the loan. The general principles applied to unconscionable conduct are equally applicable to any claim the mortgagee may take under the mortgage, even though surrounding circumstances may vary in a way that effects whether unconscionable conduct may be established.

124. It is strictly unnecessary to deal with this issue. However, I will make some brief observations.

125. The problems besetting the Motion by the failure to produce a draft defence reach a high point in respect of the alternative submissions of the plaintiff because of an absence of definition (and authority) as to how the defence, in this respect, may be formulated.

126. In any event, the way that the defendant has constructed its argument as to the alternative contentions necessarily invokes the same considerations that I have entertained in finding that there was an insufficiency of a trailable defence arising from that primary argument. Furthermore, I do not consider that Inglis and Voukidis may be distinguished from the present case in the manner suggested by the defendant.

Prejudice to the plaintiff

127. The plaintiff will be prejudiced by the setting aside of Default Judgment because it will be unable to proceed to sell the property and wind up its secured loan to the defendant. The plaintiff was concerned about its exposure to the defendant in circumstances where the defendant’s director has been charged with serious offences and as such significant restraints on his income and assets.

128. Nonetheless, the defendant submitted that the plaintiff’s interests are adequately protected by its ongoing security and the NSWCC restraining orders, which the NSWCC had, at one point in time, indicated that it was willing to vary to ensure that the arrears owing to the plaintiff can be paid.

129. In oral submissions counsel for the defendant stated, “we say that the prejudice to the defendant, in allowing the mortgagee sale to proceed, in circumstances where the mortgagee was never at real risk of being deprived of the monthly repayments, that the prejudice to the plaintiff is outweighed by the potential prejudice to the defendant”.

130. Counsel for the defendant submitted that the defendant’s equity in the properties will be diminished by the sale expenses and the defendant will be unable to invest the cash in the Suncorp account in an alternative real estate investment because of the NSWCC restraining orders.

131. The defendant also submitted that the ultimate extent of the prejudice cannot be determined until the outcome of the defendant’s director’s criminal proceedings, and consequently of the NSWCC proceedings, which ultimately seeks forfeiture of the defendant’s assets, have been determined.

132. Having considered those submissions, I am of the view that the plaintiff’s oral submissions on prejudice, as appear below, represent a proper balancing of considerations as to prejudice:

“The question of prejudice can be addressed by reference to the merits of the defence. If an inadequate defence is permitted to be pressed, there will be prejudice to all parties. My client has an entitlement under its mortgage, as do most mortgagees to recover its costs of enforcement proceedings. If there is a delay where the defendant pursues a defence that will almost certainly fail, then there will be prejudice to the defendant and prejudice to my client in the delay and its ability to recover its debt.”

133. In my view, in consideration of my findings in relation to the existence of a bona fide defence, the prejudice to the plaintiff is greater than any possible prejudice to the defendant in granting the Motion to set aside the Default Judgment.

CONCLUSION

134. In reaching a final conclusion on the Motion, it is necessary to take into account not only the Court’s earlier assessments as to delay, the merits of any defence and prejudice but additionally the broader consideration of what determination will best serve the interests of justice.

135. In coming to that conclusion I have taken into account the additional considerations raised by the defendant that there is some complexity in the proceedings because of the interaction of the parties’ commercial relationship, the restraining orders and the defendant’s director’s ongoing criminal proceeding..

136. Nonetheless, I do not consider, in the balancing of all of those considerations, that it is in the interests of justice to grant the Motion.

137. Orders should be made dismissing the Motion with costs (I do not consider costs in the cause to be an appropriate outcome).

ORDERS

138. The Court makes the following orders:

1. The Notice of Motion filed by the defendant on 28 June 2024 is dismissed.

2. The defendant shall pay the plaintiff’s costs of the Notice of Motion.

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Decision last updated: 24 October 2024