Platinum Mortgage Securities Ltd as manager for the Platinum First Mortgage Income Fund (ARSN 163 188 565) v Nikolyn Pty Ltd (in Liquidation) (Receivers and Manager Appointed)

[2018] WASC 117

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   PLATINUM MORTGAGE SECURITIES LTD as manager for THE PLATINUM FIRST MORTGAGE INCOME FUND (ARSN 163 188 565) -v- NIKOLYN PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGER APPOINTED) [2018] WASC 117

CORAM:   ACTING MASTER STRK

HEARD:   24 MAY 2017

DELIVERED          :   13 APRIL 2018

FILE NO/S:   CIV 2938 of 2016

BETWEEN:   PLATINUM MORTGAGE SECURITIES LTD as manager for THE PLATINUM FIRST MORTGAGE INCOME FUND (ARSN 163 188 565)

AND

THE ENTERPRISE FUND II LTD SINGAPORE CO (REG 200715352M)

AND

THE ENTERPRISE FUNDS III LTD SINGAPORE CO (REG 201104642M)

Plaintiffs

AND

NIKOLYN PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGER APPOINTED)

First Defendant

MOANA NOMINEES PTY LTD (RECEIVERS & MANAGERS APPOINTED)

Second Defendant

DONATO COLASANTE

Third Defendant

ROBERT COLASANTE

Fourth Defendant

ANGELA COLASANTE

Fifth Defendant

ROBERTO POTENTE (aka ROBERT PONTENTE)

Sixth Defendant

LILIANA LUPINI

DOMENIC LUPINI

Seventh Defendants

SYMBOL NOMINEES PTY LTD (RECEIVERS & MANAGERS APPOINTED)

Eighth Defendant

Catchwords:

Practice and procedure - Application to set aside summary judgment entered against absent parties - Standing of one defendant to seek an order setting aside judgment entered against another defendant to set aside judgment - Finance by plaintiffs - Assignment by the first named plaintiff of interest in the loan and supporting securities -  Arguable defence - Standing of assignor to enter judgment - Misleading and deceptive conduct - Unconscionable conduct - Relevant principles - Whether matters call for further investigation at trial - Turns on own facts

Legislation:

Australian Consumer Law, s 18, s 20, s 21, s 22
Australian Securities and Investments Commission Act 2001 (Cth), s 12DA, s12CA
Personal Property Securities Act 2009 (Cth)
Property Law Act 1969 (WA), s 20
Rules of the Supreme Court 1971 (WA), O 14 r 3(1), O 14 r 12, O 18 r 6(2), O18 r 7(2), O23 r 2(3)
Transfer of Land Act 1893 (WA), s 82

Result:

Judgment against third, fourth, fifth, sixth and seventh defendants set aside
Substitution granted

Category:    B

Representation:

Counsel:

Plaintiffs	:	Mr J E Scovell & Ms C M Guy
First Defendant	:	No appearance
Second Defendant	:	No appearance
Third Defendant	:	Mr M N Blandford
Fourth Defendant	:	Mr M N Blandford
Fifth Defendant	:	Mr M N Blandford
Sixth Defendant	:	Mr M N Blandford
Seventh Defendants	:	Mr M N Blandford
Eighth Defendant	:	No appearance

Solicitors:

Plaintiffs	:	HWL Ebsworth Lawyers
First Defendant	:	No appearance
Second Defendant	:	No appearance
Third Defendant	:	Forbes Kirby
Fourth Defendant	:	Forbes Kirby
Fifth Defendant	:	Forbes Kirby
Sixth Defendant	:	Forbes Kirby
Seventh Defendants	:	Forbes Kirby
Eighth Defendant	:	No appearance

Case(s) referred to in decision(s):

Aboyne Pty Ltd v Dixon Homes Pty Ltd [1980] QdR 142

APT Finance Pty Ltd v Bajada [2008] WASCA 73

Bankwest a Division of Commonwealth Bank of Australia v Mann [2015] WASC 187

Blair v Curran [1939] HCA 23; (1939) 62 CLR 464

Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592

Field Camp Services Pty ltd v Site Accommodation Pty Ltd [No 2] [2012] WASCA 27

Longmuir v Prosser (Unreported, WASC, Library No 9141, 7 November 1991)

Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109

Nioa v Bell (1901) 27 VLR 82; 7 ALR 145; 23 ALT 13

Perpetual Trustee Company Ltd v Burniston [No 2] [2012] WASC 383

Shilkin v Taylor;Shilkin v Homestead Furniture Nominees Pty Ltd [2011] WADC 7

Squires v SA Steel and Sheet Pty Ltd (1987) 45 SASR 142

Walton Stores (Interstate) v Maher [1988] HCA 7; (1988) 164 CLR 387

Westpac Banking Corporation v The Bell Group Ltd (in liq) [No 3] [2012] WASCA 157

Westwind Air Charter Pty Ltd v Hawker De Havilland Ltd (1990) 3 WAR 71

Woodings v Stevenson [2001] WASC 172

ACTING MASTER STRK:

1. The first and second defendants entered into a loan agreement with the plaintiffs on or about 21 January 2015.  The loan was secured by guarantees provided by the third to eighth defendants; mortgages provided by the second, fifth, sixth, seventh and eighth defendants (being registered mortgages over four properties and equitable mortgages notified by caveats over another four properties); and a general security deed which was perfected by registration.

2. The first and second defendants defaulted under the terms of the loan agreement.  The plaintiffs commenced proceedings and filed an application for summary judgment against all defendants.

3. After the application for summary judgment was filed, but before it was determined, the first named plaintiff, Platinum, entered into an agreement by which it assigned to La Trobe Financial Asset Management Limited all of its rights, title and interest in the loan agreement and the supporting securities.

4. When the defendants' representative failed to appear at the hearing of the summary judgment application on 12 January 2017, judgment was entered.  The judgment is reproduced in Schedule 1 to these reasons.

5. An application to set aside the judgment was filed by Forbes Kirby Lawyers on behalf of all of the defendants on 15 February 2017.  On the same day, Forbes Kirby Lawyers also filed a defence on behalf of the second to eighth defendants.  The plaintiffs oppose judgment being set aside.

6. Receivers and managers were appointed to each of the first, second and eighth defendants on 3 February 2017.  The first defendant was placed into liquidation on 17 February 2017.  The application to set aside the judgment was filed without the knowledge or approval of the external administrators.

7. The first, second and eighth defendants are no longer represented by Forbes Kirby Lawyers,[1] and they were not separately represented at the hearing of the application to set aside the judgment. The third to seventh defendants maintain that they may still apply to set aside the judgment as against all defendants.

   [1] Forbes Kirby Lawyers ceased acting for the first defendant by order made on 27 April 2017; and for the second and eighth defendants by order made on 25 May 2017.

8. La Trobe, as assignee, also seeks to be substituted for Platinum, as the first named plaintiff in the action.  To give effect to the substitution, La Trobe seeks that the sealed judgment be vacated and a fresh judgment against all defendants be sealed with the substitution of Platinum.  The application for substitution is opposed.

9. The first question to be determined is the standing of the third to seventh defendants to seek orders on behalf of the first, second and eighth defendants.  For the reasons set out below, I find that they do not have standing.

10. A judgment given against a party who does not appear at a hearing of an application under O 14 r 1 of the Rules of the Supreme Court 1971 (WA) (RSC) may be set aside or varied by the court on such terms as it thinks just.[2]  Having determined that the third to seventh defendants do not have standing to apply to set aside the judgment as against all defendants, the application to set aside the judgment requires that I determine the following questions.[3]

    1.Have the third to seventh defendants given a satisfactory explanation for their absence at the hearing?

    2.Have the third to seventh defendants given a satisfactory explanation for any delay in applying to set aside the judgment?

    3.Had the third to seventh defendants appeared at the hearing, would they have been given leave to defend?

    [2] Rules of the Supreme Court 1971 (WA) O 14 r 12.

    [3] Aboyne Pty Ltd v Dixon Homes Pty Ltd [1980] Qd R 142, 143.

11. As to the third question, the third to seventh defendants say that the circumstances surrounding the assignment from Platinum to La Trobe raise an arguable defence.  They say that had they appeared they would have been given leave to defend because Platinum did not have standing to move for judgment.  In order to consider the same, it is necessary to determine whether there was a perfected legal assignment, and if so, when was it perfected?

12. The third to seventh defendants assert that there are a number of arguable defences available to them, in addition to standing.  I have considered all of the defences raised by the defendants.  Not all were supported by evidence or pressed at the hearing.  In these reasons, the matters that I consider and determine include the following. 

    1.Is there an arguable defence based on misleading or deceptive conduct?

    2.Is there an arguable defence based on estoppel?

    3.Is there an arguable defence based on unconscionable conduct?

13. For the reasons set out below, I find that judgment against the third to seventh defendants should be set aside and that they should be given leave to defend.  However, I find that they did not have an arguable defence based on the alleged lack of standing of Platinum.

14. La Trobe also seeks to be substituted as the first named plaintiff in the place of Platinum pursuant to RSC O 18 r 7(2), which provides as follows.

    (2)Where at any stage of the proceedings in any cause or matter the interest or liability of any party is assigned or transmitted to or devolves upon some other person, the Court may, if it thinks it necessary in order to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, order that other person to be made a party to the cause or matter and the proceedings to be carried on as if he had been substituted for the first‑mentioned party. 

    An application for an order under this subrule may be made ex parte.

15. The application for substitution was heard with the application to set aside the judgment.  The application for substitution requires that I consider and determine the following.

    1.As a threshold question, was the interest of any party assigned?

    2.If so, is it necessary, to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, that La Trobe be made a party to the matter and the proceedings to be carried on as if La Trobe had been substituted for Platinum?

16. In all of the circumstances, and for the reasons set out below, I am prepared to grant the application for substitution.

Evidence relied upon at the hearing

1. First, the plaintiffs rely on the affidavits filed in support of the application for summary judgment.  They are the nine affidavits of service of Mr Lloyd James McLauchlan, process server, sworn on 25 November 2016; the affidavit of Mr Rhode Truter, operations and credit executive officer of Platinum, sworn 8 December 2016 (the first Truter affidavit); the affidavit of Mr Ashley Stuart Picher, paralegal, sworn 13 December 2016; the affidavit of Ms Kelly Marie Brown, administration assistant, sworn 7 December 2016; affidavit of Ms Christina Marie Ferrone, secretary, sworn 12 January 2017; and the affidavit of Ms Cassandra Michelle Guy, solicitor, sworn 12 January 2017.

2. The plaintiffs also rely on the affidavits filed after judgment was entered, some of which were filed on behalf of the third to seventh defendants: the second affidavit of Ms Christine Marie Ferrone sworn 12 January 2017 (the Ferrone affidavit); the affidavit of Ms Vernessa Peiyu Lee sworn 7 March 2017 (the first Lee affidavit); her affidavit sworn on 26 April 2017 (the second Lee affidavit); her affidavit sworn on 4 May 2017 (the third Lee affidavit); the affidavit of Ms Helen Troughton, a senior asset management officer for La Trobe, sworn 20 March 2017 (the Troughton affidavit); the second affidavit of Mr Rhode Truter sworn 20 March 2017 (the second Truter affidavit); the affidavit of Mr Denis Patrick O'Haire, solicitor, sworn 21 April 2017 (the third O'Haire affidavit); the fourth affidavit of Mr Denis Patrick O'Haire (the fourth O'Haire affidavit); the affidavit of Ms Cassandra Michelle Guy sworn 4 April 2017 (the second Guy affidavit); and the affidavit of Ms Cassandra Michelle Guy sworn 4 May 2017 (the third Guy affidavit).

3. The third to seventh defendants relied on the affidavit of Mr Donato Colasante, the third defendant, sworn on 20 February 2017 (the first Colasante affidavit); his second affidavit sworn 7 March 2017 (the second Colasante affidavit); the affidavit of Ms Liliana Lupini, the first named seventh defendant, sworn on 20 February 2017 (the Lupini affidavit); the affidavit of Mr Denis Patrick O'Haire, sworn on 14 February 2017 (the first O'Haire affidavit); his second affidavit sworn on 20 February 2017 (the second O'Haire affidavit); and the affidavit of Ms Vernessa Peiyu Lee sworn on 7 March 2017 (the first Lee affidavit).

4. My findings of fact below derive from the affidavits.  In relation to important facts, I indicate the source of the facts.

5. A schedule of objections dated 27 April 2017 was produced on behalf of the third to seventh defendants.  They objected to paras 8 and 13 of the Troughton affidavit, and to paras 16(b) and 37 of the second Truter affidavit.  It was not necessary for me to determine the objections, as the paragraphs do not form part of my reasoning.

6. During the course of the hearing, counsel for the third to seventh defendants noted that one option would be for judgment to be set aside; for the plaintiffs to secure leave to discontinue these proceedings; and for fresh proceedings be initiated by La Trobe and the second and third named plaintiffs.  In this context, counsel for the third to seventh defendants noted that on any fresh application for summary judgment, he would hope that there would be affidavits filed by each defendant, which (for reasons that he did not explain), were not filed for the purpose of the hearing.  For completeness, I note that counsel did not seek to adjourn the hearing of the applications so that additional affidavits might be filed.

A.     The standing of the third to seventh defendants

Factual background

1. Mr Bob Jacobs of Auxilium Partners was appointed liquidator of the first defendant.  Before securing leave to cease acting for the first defendant, Forbes Kirby Lawyers asked the liquidator whether he objected to the second to eighth defendants applying to set aside judgment against the first defendant, and if so, the basis for his objection.[4]  By a letter dated 10 April 2017, the liquidator replied stating that he would not be seeking leave to file a defence in the proceeding on behalf of the first defendant; that he did not have the resources and funds to defend the proceedings; and that he was not familiar with any aspects of the proceedings and was unable to comment on the second to eighth defendants' application to set aside judgment as against the first defendant, or generally.[5]

   [4] Third Lee affidavit, 'VL1'.

   [5] Third Lee affidavit, 'VL4'.

2. Mr Jeremy Nipps and Mr Dino Travaglini both of Cor Cordis had been appointed receivers and managers of the second and eighth defendants. Before securing leave to cease acting for the second and eighth defendants, Forbes Kirby Lawyers informed the receivers that the directors of the second and eighth defendants were conducting proceedings in the names of those companies pursuant to the residual powers they possess as directors of a company in receivership. The directors sought the consent and support of the receivers to the continued conduct of the proceedings by the directors. The receivers were not prepared to grant approval without the directors providing an appropriate indemnity to the companies against any adverse cost orders. The directors were not prepared to grant the same. No application was made on behalf of the directors for leave pursuant to s 237 of the Corporations Act 2001.  In an affidavit sworn by Mr O'Haire on 3 May 2017 in support of his firm's application to cease acting for the second and eighth defendants, he stated as follows:[6]

   7.On 1 May 2017, the Directors:

   a.Instructed me that they will not provide an indemnity for costs in these proceedings.

   b.Instructed me to cease acting for Moana and Symbol if Cor Cordis continues to persist with seeking indemnity for costs contained in paragraph 7(a) above; and

   c.Confirmed with me that they will cease to participate in the management of Moana and Symbol save for any of their residual obligations under the Corporations Act 2001.

   d.By telephone on 1 May 2017 to Jarod Munro of Cornwall Stodart, the solicitors for Cor Cordis, I told Mr Munro with words of the same meaning as contained in paragraph 7 above.

   [6] Fourth O'Haire affidavit [7].

3. By an email sent on 3 May 2017 to the solicitors of the plaintiffs and the defendants, the receivers' solicitor noted that he had been advised of the position of the directors and stated:[7]

   In our view, in light of the above:

   1.there is no need for our client to file submissions or attend court;

   2.the default judgment against the companies will simply stand but the individual defendants will be free to pursue their claims; and

   3.we therefore have no comment to make in relation to your proposed consent orders.

   [7] Third Lee affidavit, 'VL11'.

4. When it was put to the receivers solicitor by Forbes Kirby Lawyers that they should not assume that the judgment against the companies would stand, the receivers indicated that they would abide by the court's decision in that regard.[8]

   [8] Third Lee affidavit, 'VL11'.

5. The third to seventh defendants seek that the judgment be set aside as against all defendants.  Very little explanation was given as the reason for the third to seventh defendants taking this position.  The only mention of a reason is in correspondence from Forbes Kirby Lawyers to the liquidator, which states:[9]

   The second to eighth defendants have advised the Court that they will be applying to have the summary judgment entered against Nikolyn set aside.  This is to allow the second to eighth defendants to properly put their own defences before the Court.

Cases in which standing of one party to set aside judgment entered against another were considered

[9] Second Lee affidavit, 'VL1'.

1. The Court of Appeal in Shilkin v Taylor [2011] WASCA 255 considered an appeal which arose out of a default judgment entered against the appellant (as a guarantor) and two other parties (the lessee and another guarantor) in the Magistrates Court for rental and other money owing under a lease. An application by the appellant to set aside the default judgment against the appellant and the other defendants was dismissed in the Magistrates Court, McIntyre SM having concluded that there was no defence to the claim.

2. In the District Court, an appeal by the appellant against that decision was again dismissed.  The primary judge observed that there were two main issues to be determined on the appeal, first, whether the appellant had standing to have the default judgment against the other defendants set aside, and, secondly, whether there was an arguable defence to the claim.  On the first issue, the primary judge held that the effect of the lease was to make the guarantors individually liable as original debtors and to create distinct liabilities in each of the parties.  The appellant did not have standing to set aside the default judgment against the two other parties.[10]  On the second issue, the primary judge did not accept that an arguable defence had been shown.

   [10] Shilkin v Taylor;Shilkin v Homestead Furniture Nominees Pty Ltd [2011] WADC 7 [18].

3. The Court of Appeal[11] did not find it necessary to resolve the question of whether the appellant had standing to set aside the judgment against the other parties, as it found that neither the appellant, nor the two other parties had a defence.

   [11] Newnes JA, Pullin & Buss JJA agreeing.

4. The decision of the Court of Appeal in Longmuir v Prosser[12] concerns a judgment entered on behalf of a defendant under RSC O 16.

   [12] Longmuir v Prosser (Unreported, WASC, Library No 9141, 7 November 1991).

1. In proceedings commenced in the District Court, the appellant brought a claim against the respondent for the amount due under a loan made to the respondent.  The pleaded claim against the respondent was that her then husband, acting as her agent, borrowed the money.  The respondent in her defence denied that her husband was acting as her agent and denied that the money was lent to her at all. 

2. The respondent's then husband was joined as second defendant.  There was no amendment to the pleading and the case remained one made against a known principal (the respondent) pursuant to a contract made on the principal's behalf by a named agent (the second defendant). 

3. The appellant's solicitors sought and obtained judgment against the second defendant and the action against the respondent was set down for hearing. 

4. Counsel for the respondent applied for judgment for the respondent on the grounds that the appellant, having obtained a judgment against the second defendant, had elected to treat the second defendant as principal and therefore the respondent should be relieved of liability.  In circumstances where no application was made to set aside or rescind the judgment as against the second defendant, judgment was entered in favour of the respondent. 

5. On appeal, the appellant sought to set aside the judgment entered against the second defendant, as it impacted on the appellant's ability to take action against the respondent.  The appeal was allowed and the summary judgment against the second defendant was set aside.  Rowland J[13] observed at page 8 that:

   In my view it is proper that such judgment be set aside.  It should never have been entered.  This Court should forthwith make such order setting it aside.  Once that is done the single basis on which the application for summary judgment was made disappears.  A refusal to make that order would leave the present appellant with no remedy against the respondent in circumstances where the appellant cannot in any way be held personally to blame for the way in which this matter has progressed and where it is not suggested other than for the amount of time that has been lost that the respondent is in any way prejudiced.  No doubt the appellant could pursue a claim for damages against his solicitors but that course of action would involve expense and delay which would far outweigh, in my view, any possible prejudice to the respondent brought about by setting aside the judgment against the second defendant.

   [13] Seaman & Wallwork JJ agreeing.

6. Longmuir has only been cited on one occasion, by Sanderson M in Dendroff v Hartz.[14]  In Dendroff, the defendant's sister, Mrs Robertson, applied for an order that a judgment entered for the defendant against the plaintiff on a counterclaim be set aside.  The judgment came about by reason of there being a failure to comply with a springing order. 

   [14] Dendroff v Hartz.

7. Mrs Robertson was not a party to the action, but was a party to a settlement reached between herself, the plaintiff and the defendant.  The settlement related to assets referred to in the defence and counterclaim.  Mrs Robertson asserted that, if she were to take separate proceedings against the defendant, it would 'amount to a collateral attack on the judgment in favour of the defendant on her counterclaim and would be liable to be struck out'.[15] Mrs Robertson contended that it was necessary for the protection of her interests to have the default judgment set aside.

   [15] Dendroff v Hartz [12].

8. In Dendroff, Sanderson M referred to Longmuir as authority for the proposition that 'a party against whom no cause of action was raised and who was not responsible for the default could nonetheless apply to set aside a judgment if the existence of the judgment was a bar to any further proceedings by that party'.[16] It was held that Mrs Robertson had standing to bring the application to set aside the default judgment. 

Determination

[16] Dendroff v Hartz [16].

1. One defendant would not ordinarily have standing to apply to set aside a judgment entered against another defendant.  Something more is required.

2. This is not a case where the defendants are said to be joint obligees and joint liability will remain merged in a judgment given against one of a number of joint obligees, unless it is set aside.  Nor is this a case where the liability of the defendants was pleaded in the alternative. 

3. However, from the submissions, the affidavit, evidence and the defence filed on behalf of the third to seventh defendants, it is clear that they intend to raise defences that might also have been raised by the first, second and eighth defendants.  In particular, the alleged defences of misleading or deceptive conduct and statutory unconscionability, which they say arise from the circumstances in which the loan agreement was entered into, the term extended and securities procured.

4. The question to be determined then is whether summary judgment as against the first, second and eighth defendants will operate as an issue estoppel, as that doctrine is explained by Dixon J in Blair v Curran,[17] limiting the ability of the third to seventh defendants to raise defences that might otherwise have been raised by all defendants.

   [17] Blair v Curran [1939] HCA 23; (1939) 62 CLR 464.

5. This is not a case where allowing judgment to stand against the first, second and eighth defendants will curtail the ability of the other defendants to put their own defences to the court, even though the defences may also have been raised by the first, second and eighth defendants.

6. Under the terms of the loan agreement and the supporting securities, each of the defendants have distinct, individual liabilities.

7. It is also possible to come to this conclusion because of the way in which judgment came to be entered against the defendants. Judgment was entered pursuant to RSC O 14 r 1 when the defendants failed to appear at a hearing. The court was satisfied that the evidence before it verified all of the facts on which the plaintiffs' claim was based as required by RSC O 14 r 2(1); and the deponents had stated that in their belief, there is no defence to that claim. The plaintiffs having established a prima facie right for summary judgment, the burden shifted to the defendants to satisfy the court why judgment should not be given against them.[18]  The defendants had to satisfy the court with respect to the claim that there was an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim.[19] They would not have had to show a defence on the balance of probabilities, but would have had to at least show cause why there was an arguable defence.[20]

   [18] Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109, 110; Westwind Air Charter Pty Ltd v Hawker De Havilland Ltd (1990) 3 WAR 71, 74.

   [19] Rules of the Supreme Court 1971 (WA) O 14 r 3(1).

   [20] Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2] [2012] WASCA 27 [4].

8. The defendants did not however appear at the hearing.  The court did not consider evidence or make findings of fact or law in relation to the possible common defences, such that it can be said that an issue estoppel would now arise.  If there is no relevant 'finding' there cannot be an issue estoppel.  It is therefore not necessary for the protection of the third to seventh defendants' interests to allow them to apply to set aside the judgment entered against the first, second and eighth defendants.

9. In all of the circumstances, I find that the third to seventh defendants do not have standing to apply to set aside judgment on behalf of the first, second and eighth defendants.

B.     Application to set aside the judgment

1. Have the third to seventh defendants given a satisfactory explanation for their absence at the hearing?

1. I find that the third to seventh defendants have given a satisfactory explanation for their absence at the hearing.  I describe the circumstances in which they were absent, together with my reasons, below.

2. Before the application for summary judgment was filed, the third to seventh defendants were put on notice of it.  On 14 December 2016, a solicitor acting on behalf of the plaintiffs telephoned Mr O'Haire of Forbes Kirby Lawyers to confer.  During that call, Mr O'Haire stated that the application would be opposed.  The application, supporting materials and an amended statement of claim were served on 19 December 2016.

3. Mr O'Haire acknowledged receipt of the documents in a letter dated 22 December 2016,[21] in which he noted:[22]

   I have not had the opportunity to take instructions in relation to the amended statement of claim.  I know I will get those instructions in the new year.

   I refer you to Order 3 Rule 3 of the Rules of the Supreme Court 1971 which states computation of time prescribed in relation to filing excludes the period between 24 December and 15 January.

   In the circumstances it would make sense for you to adjourn the chamber summons for a date after 29 January 2016, which is the last date by which I should be filing a defence to the amended statement of claim.

   [21] The first O'Haire affidavit [6] - [8].

   [22] The reference to 29 January 2016 in the letter would appear to be a typographical error.

4. The letter was transmitted by an email which stated that Forbes Kirby Lawyers would be closed from 5.00 pm on 22 December 2016 to 9.00 am on 9 January 2017.

5. The plaintiffs' solicitor responded by email on the same day, requesting that Mr O'Haire 'please advise, in the new year once you have had the opportunity to review the documents, what appropriate programming orders you may seek at the first return.'[23] There was no suggestion in that communication that the first return would be vacated.

   [23] The first O'Haire affidavit [9].

6. Mr O'Haire then went on leave.  He was overseas from 1 to 11 January 2017 and returned to work on 12 January 2017. 

7. On 10 January 2017, the plaintiffs' solicitor sent an email communication to Mr O'Haire, suggesting programming directions.  The directions contemplated the application for summary judgment being listed for a special appointment and the hearing on 12 January 2017 being vacated. 

8. Mr O'Haire was overseas and says that he was unable to receive emails on 10 January 2017.  His evidence does not address whether his emails were monitored by any other solicitor from his firm while he was on leave and uncontactable, including in the period after his office had re‑opened.  He does not address the fact that another solicitor from his firm, Mr Tolcon, was also sent the email of 22 December 2016, and was copied into the email of 10 January 2017.

9. Mr O'Haire says that it was only in the early afternoon of 12 January 2017 that he saw the email of 10 January 2017.

10. Mr O'Haire says that the judgment was obtained on 12 January 2017 in circumstances where he believed that he and the plaintiffs' solicitor had agreed that the listing should be adjourned to a date after 29 January 2017 as there was insufficient opportunity for him to get instructions from the defendants as the materials served were voluminous.[24]

    [24] First O'Haire affidavit [16].

11. The suggestion by Mr O'Haire in his letter of 22 December 2016, that RSC O 3 r 3 had some application in the context of a first return date on a chamber summons for summary judgment, was misconceived. Further, neither Mr O'Haire nor any other practitioner from the firm on the record took steps to vacate the hearing. A memorandum of consent order was neither agreed nor filed. No communication was sent to the court on behalf of the defendants' seeking to be excused from attendance at the hearing. Mr O'Haire had in fact returned from leave but did not attend court on 12 January 2017. He had not responded to the email of 22 December 2016, and did not advise the plaintiffs' solicitor of his clients' preferred programming orders before the hearing, so that it might have been vacated and orders made on the papers. No solicitor from Forbes Kirby Lawyers attended court in Mr O'Haire's place.

12. Counsel suggested that it was reasonable for Mr O'Haire to not attend court as he had informed the plaintiffs' solicitors that the defendants intended to oppose the application.  It was not.

13. However, there is no suggestion of fault on the part of the third to seventh defendants.  It was not the case that they had instructed Mr O'Haire not to attend, nor is there any evidence to suggest that they had delayed in providing Mr O'Haire with requested instructions prior to 12 January 2017.  In all of the circumstances, I find that the third to seventh defendants have given a satisfactory explanation for their absence at the hearing, being the error of their solicitor.

1. Have the third to seventh defendants given a satisfactory explanation for any delay in applying to set aside the judgment?

1. The third to seventh defendants have satisfactorily explained the delay and established that it was justifiable in all of the circumstances, which are described below.

2. Judgment was entered on 12 January 2017.  The application to set aside the judgment was filed on 15 February 2017.  In his affidavit sworn 20 February 2017, Mr O'Haire seeks to explain the delay in making the application, as follows:[25]

   [25] Second O'Haire affidavit [7] - [14].

   (a)after service of the default judgment on him, Mr O'Haire informed Mr Donate Colasante of the judgment and the circumstances in which it was entered;

   (b)Mr O'Haire arranged to meet with Mr Donate Colasante and his fellow directors at his office on Monday, 16 January 2017;

   (c)at the meeting, Mr O'Haire was instructed to bring an application to set the judgment aside;

   (d)he 'immediately commenced the work of collating all the information necessary to understand whether proper defences existed';

   (e)the gathering of materials was made difficult by the recurring illness of Mr Donato Colasante, with whom Mr O'Haire had primary contact and the disparate places in which the materials were held;

   (f)a decision was made to concentrate on the demands of another creditor of the first defendant, for information and a workout plan, in preference to the application to set aside the judgment, given that the judgment did not take practical effect for 28 days;

   (g)on 3 February 2017, the other creditor appointed receiver and managers to the first defendant, and another round of meetings, information gathering and meetings with insolvency advisors took place;

   (h)Mr O'Haire alone had conduct of all matters relating to the first defendant and its associated entities and stakeholders, and those matters were numerous;

   (i)in all of the circumstances, the filing of the application to set aside the default judgment was done at the earliest possible time.

3. Mr Donato Colasante, the third defendant and a director of the first, second and eighth defendants, says that he was the person entrusted with the commercial affairs of the companies.  He says that he was diagnosed with cancer in 2006; suffers regular bouts of illness associated with the effects of a tracheotomy implant; and during the period between the judgment being entered and the application being filed, he fell very ill and on more than one occasion, his solicitor had to wait for instructions.[26]

   [26] The second Colasante affidavit [4] - [6].

4. On the evidence before me, I find that the delay was caused in part by work which had not been done prior to 12 January 2017 to determine whether the defendants had any defence to the plaintiffs' claim.  In this regard, I refer to the evidence of Mr O'Haire, who says that after being informed of the judgment and meeting with his clients, he 'immediately commenced the work of collating all the information necessary to understand whether proper defences existed'.

5. This evidence does not sit comfortably with Mr O'Haire having informed the solicitor for the plaintiffs that his clients had good defences to the claim whilst conferring in December 2016.  The amendments made to the statement of claim were not voluminous, nor were they complex.

6. The illness of Mr Donato Colasante; the fact that Mr O'Haire was busy in the period between 12 January and 15 February 2017; and the decision to focus on other work related to the first defendant compounded the problem.

7. While any delay is undesirable, there is no evidence that the plaintiffs' suffered any prejudice as a result of the delay.  The delay was not so egregious as to be determinative of the application to set aside the judgment.  I find that the third to seventh defendants have satisfactorily explained the delay and established that it was justifiable in all of the circumstances.

1. Had they appeared at the hearing, would the third to seventh defendants have been given leave to defend?

1. When judgment was entered, the court was satisfied that the evidence before it verified all of the facts on which the plaintiffs' claim was based as required by RSC O 14 r 2(1). The deponents had also stated that in their belief, there is no defence to that claim.

2. Had they appeared, the burden would have shifted to the third to seventh defendants to satisfy the court why judgment should not be entered against them.  They would have had to satisfy the court with respect to the claim that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim.[27] They would not have had to show a defence on the balance of probabilities, but would have had to at least show cause why there was an arguable defence.[28]

   [27] Rules of the Supreme Court 1971 (WA) O 14 r 3(1).

   [28] Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2] [4].

3. An application is to be determined on the basis that the version of the facts put forward by the respondent to the application, assuming that it is not inherently incredible, would ultimately be accepted at the trial of the action.  The court is not bound to accept uncritically as raising a dispute of fact calling for further investigation every statement in an affidavit, however equivocal, lacking in precision or inconsistent with contemporary documents or other statements by the deponent.  However, if after argument there remains real uncertainty as to the applicant's right to judgment without further investigation of the facts, summary judgment must be refused.

4. For the reasons set out below, I find that had the third to seventh defendants appeared at the hearing, they would have been given leave to defend, but not on the basis of a lack of standing on the part of Platinum to move for judgment against them.

Did Platinum have standing to seek judgment on 12 January 2017?

1. The third to seventh defendants say that had they appeared at the hearing of the summary judgment application, they would they have been given leave to defend because of the status of Platinum. 

2. The assignment of a legal chose in action such as a debt has effect only as an equitable assignment until express notice in writing of the assignment is given to a debtor.[29] The position differs in relation to registered mortgages.  Until a transfer of a mortgage is registered on the Torrens title register, an assignee does not have a registered interest in land.[30] Upon registration of a transfer, the assignee must give notice of the transfer as registration is not itself regarded as constructive notice.[31]  Judgment was entered as against the third to seventh defendants under guarantees; as against the fifth defendant pursuant to two registered mortgages; as against the sixth defendant pursuant to an equitable mortgage notified by caveat; and as against the seventh defendant pursuant to an equitable mortgage notified by caveat.

Factual background

[29] Property Law Act 1969 (WA) s 20(1); APT Finance Pty Ltd v Bajada [2008] WASCA 73 [26], [28].

[30] Transfer of Land Act 1893 (WA) s 82.

[31] Nioa v Bell (1901) 27 VLR 82; 7 ALR 145.

1. On or about 10 January 2017, Ms Helen Troughton became the account manager and assumed day to day conduct of the recovery of the asset realisation of the loan and securities which are the subject of this action.  In the Troughton affidavit, Ms Troughton describes the steps taken to perfect the assignment by Platinum to La Trobe.  Mr Rhode Truter was the operations and credit executive officer for Platinum.  In the second Truter affidavit, Mr Truter also describes the assignment to La Trobe. 

1. On 15 December 2016, Platinum and La Trobe entered into an Asset Sale Agreement.  The Asset Sale Agreement transferred all of Platinum's rights, title and interest in the loan agreement and supporting securities to La Trobe.[32]  The second and third named plaintiffs were not parties to the Asset Sale Agreement.

   [32] Troughton affidavit [4]; first Lee affidavit, 'VL7'.

2. Various notices were issued by Platinum and La Trobe concerning the assignment and there is a dispute between the parties as to which of the notices perfected the assignment.

Notices to the Borrowers by La Trobe dated 16 November 2016

1. Before the Asset Sale Agreement was executed, notices were sent by La Trobe to the first and second defendants.  The notices were dated 16 November 2016 and included the following paragraph:[33] 

   You would have recently received a letter from Platinum Mortgage Securities Limited regarding the assignment (ie transfer) of your loan to La Trobe Financial Asset Management Limited for which La Trobe Financial Services Pty Limited is the mortgage manager.  We are pleased to confirm that this process has now been completed, and we welcome you as a La Trobe Financial Customer.

   [33] Troughton affidavit [16]; first Colasante affidavit [34] and 'DC4'.

2. The notices were not issued to the third to seventh defendants. On the plain reading of s 20 of the Property Law Act 1969 (WA) (PLA), it is not arguable that by notices issued to the first and second defendants, the assignment of the supporting securities provided by the third to seventh defendants was perfected, so that Platinum did not have standing to move for judgment as against the third to seventh defendants on 12 January 2017.

3. Further, as at 16 November 2016, the assignment process was not complete and the notices were incorrect in their terms.  Had they been sent to the third to seventh defendants, it would not have been arguable that the notices could effect a legal assignment of the supporting securities, which included registered mortgages.

Notices to all of the defendants by Platinum dated 9 December 2016

1. Before the Asset Sale Agreement was executed, notices were again sent in error to the defendants on 9 December 2016.

2. The circumstances in which the notices were issued were explained by Mr Truter.  Clause 4.4 of the Asset Sale Agreement required Platinum to provide to La Trobe at completion, signed notices of the assignment in respect of each debtor affected by the agreement.  On 9 December 2016, Mr Truter prepared and printed notices of the assignment in order to have them ready to provide to La Trobe at completion.  The notices prepared by Mr Truter refer to an Asset Sale Agreement dated 14 December 2016 (and not 15 December 2016).  Instead of placing them on the file ready for completion, on 9 December 2016 Mr Truter issued the notices by post to all of the defendants in error.[34] 

   [34] Second Truter affidavit [54]; a copy of one of the notices that was posted to the defendants is attached to the first Colasante affidavit, 'DC5'.

3. Again, on the plain reading of PLA s 20, it is not arguable that the notices issued on 9 December 2016, before the Asset Sale Agreement was entered into, could discharge the statutory notice requirement contained in PLA s 20.  Nor is it arguable that they could effect a legal assignment of a registered mortgage. 

Notices to the Borrowers by La Trobe dated 16 December 2016

1. On or about 20 December 2016, La Trobe issued a further notice dated 16 December 2016 to the first and second defendants.[35] The notice discharged the statutory notice requirement contained in PLA s 20 and the plaintiffs did not dispute the same.  The Asset Sale Agreement coupled with the notice on 16 December 2016 had the effect contemplated by PLA s 20.  Had the first and second defendants been represented at the hearing, they would have had an arguable defence against judgment being entered against them pursuant to the loan agreement.

   [35] Troughton affidavit [16], 'HT3'; first Lee affidavit, 'VL8'.

2. The second defendant also provided a registered mortgage as security.  The letter dated 16 December 2016 was not enough to perfect legal assignment of the mortgage, a transfer must be registered.[36] Further, upon registration of a transfer, the assignee must give notice of the transfer, as registration of the transfer is not itself regarded as constructive notice.[37] Until a transfer of a mortgage is registered, an assignee does not have a registered interest in land,[38] and must sue to enforce the terms of the mortgage through the name of the assignor.

   [36] Transfer of Land Act 1893 (WA) s 82.

   [37] Nioa v Bell.

   [38] Transfer of Land Act 1893 (WA) s 82.

3. As to the third to seventh defendants, the notice dated 16 December 2016 was not issued to them and therefore cannot ground an arguable defence.

Notices to the first, second, third and seventh defendants dated 10 February 2017

1. After judgment was entered, the plaintiffs took possession of three mortgaged properties, being units 4 and 5, 29 Gympie Way, Willeton; and 448 Knutsford Place, Kewdale. 

2. Notices dated 10 February 2017 were issued by La Trobe to Mr Donato Colasante and Ms Lupini in their capacity as guarantors for the first and second defendants.[39]  The third and seventh defendants could not however rely on these notices to ground an arguable defence for two reasons.  First, the notices were issued after judgment had been entered.  Secondly, because a notice given for purposes other than the assignment will not constitute a valid notice of assignment.[40] The notices issued by La Trobe dated 10 February 2017 were not issued for the purpose of identifying the assignment to the respective defendants.  They were given to advise that possession had been taken of certain properties. 

   [39] First Colasante affidavit [36], 'DC6'; Lupini affidavit [16], 'LL3'.

   [40] Squires v SA Steel and Sheet Pty Ltd (1987) 45 SASR 142.

3. For completeness, I also note that notice by letter alone was not enough to perfect legal assignment of the registered mortgage securities. 

Notice by HWL Ebsworth dated 20 March 2017

1. The registered mortgage transfers were lodged with Landgate on 20 February 2017, and were registered on the respective titles on 16 March 2017.[41]  PPSR registration transfers were effected on 8 March 2017 in relation to the registration granted by Ms Lupini, and on 15 March 2017 in relation to the other defendants.[42]

   [41] Troughton affidavit, [18(a)], 'HT5'.

   [42] Troughton affidavit, [18(b)], 'HT6'.

2. On 20 March 2017, after the transfer of registrations were completed, Ms Troughton instructed solicitors HWL Ebsworth to issue notice of the assignment to each of the defendants.[43]  Notices dated 20 March 2017 were issued under cover letters of the same date.

   [43] Troughton affidavit, [19(a)], 'HT7'.

3. The notices dated 20 March 2017 perfected the legal assignment of the registered mortgages.

4. The third to seventh defendants argued that it was not necessary for there to be a transfer of registration under the Personal Property Securities Act 2009 (Cth) (PPSA) before legal title can be passed under PLA s 20. They say that because the only security registered against the first defendant and the third defendant was under the PPSA, and not the TLA, title to the debt owing pursuant to the guarantee given by the third defendant passed following notices sent in December 2016.

5. The judgment entered on 12 January 2017 was not entered against the first defendant under the general security deed. Therefore, as to the first defendant, there is no need for me to determine whether or not it was necessary for there to be a transfer of registration under the PPSA before legal title can be passed under PLA s 20.

6. The judgment entered on 12 January 2017 was entered against the third defendant only under the guarantee. As to the position of the third defendant, there again is no need for me to determine whether or not it was necessary for there to be a transfer of registration under the PPSA before legal title can be passed under PLA s 20. This is because, as explained above, the first, effective notice issued to the third defendant as guarantor was the notice dated 20 March 2017, after judgment was entered.

What was the standing of Platinum on 12 January 2017?

1. As accepted by the Court of Appeal in APT Finance Pty Ltd v Bajada,[44]

   If express notice in writing of an assignment of a debt is given to the debtor then, but only then, the assignee obtains the legal right and the legal remedy to the debt: McIntosh v Shashoua (1931) 46 CLR 494, 514 (Evatt J). Once there has been a perfected legal assignment, any action must be in the name of the assignee and not in the name of the assignor, as the assignor no longer has any right to sue for the debt: Hughes v Pump House Hotel Co Ltd [1902] 2 KB 190, Bacon v Yatchaw Irrigation & Water Supply Trust (1898) 23 VLR 485, Hobbs v Rawson [1961] WAR 79, 86 (Virtue J), Carob Industries Pty Ltd (In Liq) v Simto Pty Ltd [2000] WASCA 362 [27].

   [44] APT Finance Pty Ltd v Bajada [29].

2. As at 12 January 2017, La Trobe was the legal owner of the debt owed by the first and second defendant under the loan agreement.  Platinum was not entitled to enforce any right of recovery against the first and second defendants under that agreement.  The first and second defendants were not however represented at the hearing and, for the reasons explained above, the third to seventh defendants are not prejudiced by the judgment remaining as against the first and second defendants.

3. The Court of Appeal in APT Finance Pty Ltd v Bajada, also found that where[45]

   ... there has been an equitable assignment and the assignor subsequently sues the debtor, it appears to be unclear whether the assignor must join the assignee as a party to the action: see Three Rivers District Council v Bank of England [1995] 4 All ER 312 at 331 (Peter Gibson LJ), but cf 322 (Staughton LJ), Jennings v Credit Corporation Australia Pty Ltd [2000] NSWSC 210 [31]. In any event, even if the assignee is required to be joined, the failure to do so cannot, in our view, render the action a nullity ... : as to the latter, see Weddell v JA Pearce & Major [1988] Ch 26; Thomas v National Australia Bank Ltd [2000] 2 Qd R 448, and Meagher, Gummow and Lehane Equity Doctrines and Remedies (4th ed) [6‑520].

   [45] APT Finance Pty Ltd v Bajada [30].

4. As at 12 January 2017, assignment of the supporting securities had not been perfected.  There was only an equitable assignment until notice was given on 20 March 2017.  Despite this, the enforcement of rights of recovery under the guarantees and mortgages by Platinum as assignor, without joining La Trobe as assignee, does not render the judgment a nullity.

Can a lack of standing be remedied by variation of the judgment by substitution of Platinum for La Trobe under RSC O 18 r 7(2)?

1. Having determined that it is not arguable that Platinum lacked standing to move for judgment as against the third to seventh defendants, it is not necessary that I determine whether a lack of standing might be remedied by variation of the judgment by substitution of Platinum for La Trobe under RSC O18 r7(2).

2. If it was arguable, then I would have concluded that RSC O 18 r 6(2) cannot be used to substitute La Trobe for Platinum into the judgment secured as against a defendant in circumstances where Platinum had no legal right to move for judgment as against that defendant.

3. Like O 18 r 6(2), RSC O 18 r 7(2), is a remedial provision and should be given a beneficial interpretation. Like RSC O 18 r 6 (2), RSC O 18 r 7(2) is designed to avoid unnecessary technicality so as to enable parties to litigate the real issues between them in an expeditious, effective and cost efficient way.[46]

   [46] APT Finance Pty Ltd v Bajada [34], where the Court of Appeal considered the nature and application of Rules of the Supreme Court 1971 (WA) O 18 r 6(2).

4. However, there are limits.[47] It is accepted, for example, that RSC O 18 r 6(2) would not assist a person seeking to be substituted if the action was a nullity.

The standing of the second and third named plaintiffs

[47] APT Finance Pty Ltd v Bajada [34]; Woodings v Stevenson [2001] WASC 172 [12].

1. While the third to seventh defendants queried the standing of the second and third named plaintiffs,[48] they did not develop an argument in relation to the same.

   [48] Submissions of the second to eighth defendants dated 3 April 2017 [19].

2. The second and third named plaintiffs are companies registered in Singapore, and are syndicated lenders who co‑lend directly to borrowers in conjunction with Platinum.[49]

   [49] Second Truter affidavit sworn 20 March 2017 [4].

3. On or about 21 January 2015, the plaintiffs, the first defendant and the second defendant entered into a written loan agreement.  The loan agreement was comprised of a credit facility deed dated 21 January 2015, a deed of variation dated 10 February 2016, a deed of variation dated 2 May 2016, and the Memorandum of Common Provisions L164935.  The obligations of the first and second defendants under the loan agreements were secured by guarantees and mortgages provided by the second to eighth defendants in favour of the plaintiffs.

4. The loan agreement expressly provides that a power or right of or obligation, representation or warranty in favour of, more than one of the plaintiffs as lenders under the loan agreement is for the benefit of them separately and jointly.[50]  The second and third plaintiffs were not parties to the Asset Sale Agreement.  It is not arguable that the judgment entered by the second and third plaintiffs as against all of the defendants is prejudiced by the assignment by the first plaintiff of its rights in the loan agreement and supporting securities.

Other arguable defences

[50] Memorandum of Common Provisions L164935 [100]; First Truter affidavit, 'F' [112].

1. The third to seventh defendants say that had they appeared, they would also have been given leave to defend on grounds in addition to that of standing.  In the defence filed on 15 February 2017, the defendants attempt to plead a number of defences.  Not all were relied upon by the third to seventh defendants at the hearing, supported by evidence, or raised in the written submissions filed.  The following defences were presented.

Is there an arguable defence based on misleading or deceptive conduct?

1. The third to seventh defendants say that representations were made to the effect that upon expiry of the loan term, the plaintiffs would extend the loan term for a further 12 months. They say that there are serious questions to be tried as to whether the plaintiffs' conduct in requiring the securities to be revalued before granting an extension of the loans, and requiring additional securities, was misleading and deceptive in breach of s 18 of the Australian Consumer Law[51] (ACL) (alternatively s 12DA of the Australian Securities and Investments Commission Act2001 (Cth) (ASIC Act), which contains a prohibition on misleading conduct in relation to financial services).

   [51] Competition and Consumer Act 2010 (Cth) sch 2 ('Australian Consumer Law').

2. ACL s 18 relevantly provides that a 'person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.' The purpose of the prohibition on misleading and deceptive conduct 'is to enforce a standard of conduct by corporations that meets community expectations of fair dealing in business activity'. The conduct 'is measured against an objective view of what constitutes fair dealing in trade or commerce in the given circumstances'. There must be a 'likelihood that the conduct of a corporation would be misleading or deceptive having regard to all relevant circumstances'.[52]

   [52] Bankwest a Division of Commonwealth Bank of Australia vMann [2015] WASC 187 [50], citing with approval Perpetual Trustee Company Ltd v Burniston [No 2] [2012] WASC 383 [190] (Edelman J) (Burniston); Westpac Banking Corporation v The Bell Group Ltd (in liq) [No 3] [2012] WASCA 157 [473], [474] (Lee AJA).

3. If it is established that the plaintiffs contravened ACL s 18, then, subject to issues of causation and discretion, the court has power to set aside the loan agreement and supporting securities or decline to enforce them. The court also has the power to award damages.[53]

   [53] Australian Consumer Law s 237, s 243, and s 236.

4. The facts that are said to give rise to this serious question to be tried are set out in the first Colasante affidavit.[54]  In his affidavit, Mr Donato Colasante describes the circumstances in which the defendants entered into the loan agreement with the plaintiffs and provided the supporting securities.[55]

   [54] Submissions of the second to eighth defendants dated 7 March 2017 [77].

   [55] First Colasante affidavit [12] - [29].

5. The first and second defendants had a number of facilities with Bankwest.  In about August 2014, Bankwest decided not to renew the facilities after their expiry in October 2014 and Platinum was introduced to Mr Donato Colasante as potential funder to refinance the Bankwest facilities.  He alone carried out the discussions and dealings with Platinum.

6. Various documents were presented to Mr Donato Colasante for consideration.  They included a letter dated 31 October 2014, a letter dated 7 November 2014 which attached an indicative quote for the pricing of the loan, and letters dated 12 and 18 December 2014 by which he was advised of the indicative terms for mortgage finance.  All but the first letter refer to a loan term of 12 months with potential for extension.

7. Mr Donato Colasante deposes that between 7 November 2014 and 12 December 2014, he had a meeting with Mr Rhode Truter and Mr Peter Kenneday of Platinum.  Mr Nigel Wood of Westcorp Capital, a finance broker, was also present at the meeting.  Mr Donato Colasante says that: [56]

   21)At the Meeting I stressed that 12 months would not be enough time to obtain a refinance from a bank and we would need another 12 months.  Truter and Kenneday assured me that Platinum would extend the term of the loan and even spoke about extending it for 24 months.

   22)During the Meeting, Truter or Kenneday never spoke about revaluation of the property to extend the term of the loan.

   23)It was on that basis I accepted, on behalf of all borrowers and security providers, the terms of the Offer Letter.  Before accepting the terms of the Offer Letter I discussed them with the other directors of Nikolyn and recommended acceptance of the offer from Platinum.  I did not speak to my mother (Fifth Defendant) about it.

   [56] First Colasante affidavit [21] - [23].

8. Mr Donato Colasante says that in or about November 2015 on numerous occasions, he spoke to Mr Truter about the extension of the loan term when the expiry of the initial term was drawing near; and Mr Truter was both confident and re-assuring that the loan term would be extended for 12 months.

9. Mr Donato Colasante says that in early 2016, Mr Truter told him that the secured properties need to be revalued before the loan could be extended.  Additional securities were later demanded.  Mr Donato Colasante says that he felt extreme pressure to procure additional securities because a default rate of interest of 17% per annum was being applied.

10. The question of whether conduct is misleading or deceptive must be considered by analysing the relevant surrounding facts and circumstances.[57]  To obtain relief, the third to seventh defendants will need to prove reliance, and the express terms of the documents must affect their claim of reliance.

    [57] Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60 [39], [109]; (2004) 218 CLR 592, 605, 625.

11. The circumstances in which the loan agreement came to be executed are also described by Mr Rhode Truter in his affidavit sworn on 20 March 2014.  The plaintiffs say that prior to entering into the loan agreement, the defendants' broker sent an application for the loan to the plaintiffs and submitted that it be a '12 month facility with the exit strategy being the refinance of the debt to ANZ /Main-stream lender at the end.'[58]

    [58] Second Truter affidavit [2].

1. The plaintiffs also ask the court to focus on the language used in the documents, the commercial circumstances which the documents address and the objects the documents are intended to secure.  They point out that the letter dated 12 December 2014, by which Platinum advised the indicative terms for mortgage finance, included the following:

   8.The Borrowers shall provide a bank refinance offer within 9 months of the loan date, failing which it shall submit to the Lender an application to extend the loan repayment date for a further 12 months.

2. The plaintiffs say the proper construction of the word 'application' means that it is a request capable of being approved or declined.  They contend that it is unreasonable and inherently incredible to say that the plaintiffs intended to approve the extended loan term if they required 'an application'.  They say that the evidence would not be accepted at trial and therefore the proposed defence has no prospect of success and is not sufficient to set aside the judgment.  They say that, in any event, the defendants accepted the terms on which the loan agreement was varied, being for 2 months and then a further 6 months, by signing a first and then a second variation.

3. An application for summary judgment is to be determined on the basis that the version of the facts put forward by the respondent to the application, assuming that it is not inherently incredible, would ultimately be accepted at a trial of the action.  If after argument there remains real uncertainty as to the plaintiffs' right to judgment without further investigation of the facts, I should find that had they appeared on 12 January 2017, the third to seventh defendants would have been given leave to defend. 

4. I am satisfied that the third to seventh defendants have shown, by the evidence adduced on affidavit by Mr Donato Colasante, that there is an issue to be tried.  Given that there will be a trial of these issues, it is also not appropriate that I express concluded views as to the defence raised.

Is there an arguable defence based on estoppel?

1. The misleading conduct alleged against the plaintiffs, as deposed to by Mr Donato Colasante, is relied on to establish the defence of equitable estoppel.  The third to seventh defendants say that the plaintiffs are estopped from requiring the securities to be revalued, or requiring additional securities before extending the term for a further 12 months.

2. Again, the third to seventh defendants do no more than assert that this is a possible defence in the most high level way and point to the alleged conduct.  Estoppel is not pleaded in the defence filed on behalf of the second to eighth defendants.

3. In considering whether there is an arguable defence based on estoppel, I have applied the elements of promissory estoppel from the decision of Brennan J in Walton Stores (Interstate) v Maher.[59]

   [59] Walton Stores (Interstate) v Maher [1988] HCA 7; (1988) 164 CLR 387, 428 - 429.

4. I note that to obtain relief, the third to seventh defendants will again need to prove reliance, being the third element, and the express terms of the documents must affect their claim of reliance.

5. However, on the evidence before me, there remains real uncertainty as to the plaintiffs' right to judgment without further investigation of the facts.  I therefore find that had they appeared on 12 January 2017, the third to seventh defendants would have been given leave to defend on the basis of estoppel. 

Is there an arguable defence based on unconscionable conduct?

1. The third to seventh defendants contend that there is a serious question to be tried as to whether certain conduct of the plaintiffs was unconscionable in breach of ACL s 20 (alternatively ASIC Act s 12CA).

2. During the course of the hearing, when making submissions in relation to unconscionability, Counsel referred to the possible application of ACL ss 20 or 21.  I adopt the approach taken by the court in Bankwest v Mann,[60] and for present purposes, deal with the widest of the sections, being ACL s 21.

   [60] Bankwest v Mann.

3. As noted by the court in Bankwest v Mann at [77] and [78]:

   ACL s 21(1) relevantly provides that a person must not, in trade or commerce, in connection with the supply of services to a person 'engage in conduct that is, in all the circumstances, unconscionable'. The 'services' to which ACL s 21 applies includes contracts between and bank and its customer. ACL s 21(2) sets out a number of factors that the court may have regard to for the purposes of s 21(1). One remedy for a contravention of ACL is for the court to refuse to enforce a contract entered into as a result of the contravention.

   ACL s 21 is in identical terms to the former Trade Practices Act 1974 (Cth) s 51AC, the law in relation to which is conveniently summarised in the judgment of Murphy JA in Permanent Mortgages:[94]

   In s 51AC of the Trade Practices Act, the word 'unconscionable' is not limited to unconscionable behaviour under the general law or s 51AA of the Trade Practices Act: Australian Competition & Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850; (2003) 200 ALR 491 [183] - [185].

   Like s 12CC of the Australian Securities & Investments Commission Act 2001 (Cth), it is intended to build upon, and not be constrained by, the general law: Australian Securities & Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; (2005) 56 ACSR 131 [30].

   The word 'unconscionable' should be given its natural and ordinary meaning, ie 'doing what should not be done in good conscience': ASIC v National Exchange [33], [39].

   It is necessary to show more than unreasonableness, unfairness or simply misleading or deceptive conduct: ACCC v 4WD Systems [185].  The term imports a perjorative moral judgment or moral obloquy: Hurley v McDonald's Australia Pty Ltd [1999] FCA 1728; [2000] ATPR 41-741, 40,585; ASIC v National Exchange [43].

   It requires a consideration of whether the conduct is 'contrary to the norm of conscientious behaviour' or 'offends against basic notions of good conscience and fair play': ASIC v National Exchange [44].

   Section 51AC(3) provides that the 12 factors referred to therein are factors to which the court may have regard 'without in any way limiting' the matters to which the court may have regard for the purpose of determining whether a contravention of s 51AC has occurred: Australian Competition & Consumer Commission v Oceana Commercial Pty Ltd [2004] FCAFC 174; [181]. Further, in considering the potential application of s 51AC, it is not permissible to 'search through the twelve criteria set out ... find one that seems to fit the case in hand, and then move to a conclusion of unconscionable conduct': ACCC v Oceana [181].  All of the circumstances must be considered.

   [Footnotes omitted]

4. It is the alleged conduct of the plaintiffs in:

   •first, requiring the securities to be revalued before granting an extension of the loans, and requiring that additional securities be provided;

   •secondly, securing and relying upon the guarantee provided by fifth defendant, Ms Angela Colasante; and

   •thirdly, securing and relying upon the guarantee from the first named seventh defendant, Ms Lupini,

   that grounds the claim of statutory unconscionability by the third to seventh defendants. 

Requiring the securities to be revalued before granting an extension of the loans, and requiring additional securities

1. The misleading conduct alleged against the plaintiffs, as deposed to by Mr Donato Colasante, also grounds the claim that the plaintiffs' conduct was, in all of the circumstances, unconscionable.

2. The third to seventh defendants however do no more than raise this defence in the most high level way and point to the alleged conduct. While ACL s 18 is pleaded in the defence filed on behalf of the second to eighth named defendants on 15 February 2017, statutory unconscionable conduct is not pleaded.

3. If after argument there remains however, real uncertainty as to the plaintiffs' right to judgment without further investigation of the facts, I should find that had the third to seventh appeared they would have been given leave to defend.  In light of the factual context outlined in the first Colasante affidavit, I am satisfied that the third to seventh defendants have shown that there is an issue to be tried as to whether requiring the securities to be revalued before granting an extension of the loans, and requiring additional securities, whilst charging default interest, was unconscionable.  Again, given that there will be a trial of these issues, it is also not appropriate that I express concluded views as to the defence raised.

Securing and relying upon the security provided by fifth defendant

1. The following submission was made on behalf of the fifth defendant:

   80.There are serious questions to be tried as to whether it is unconscionable in breach of section 20 of the Australian Consumer Law (alternatively section 12CA of the Australian Securities and Investments Commission Act 2001 (Cth) for the first named plaintiff to rely on the guarantee purportedly given by the fifth defendant. The third defendant deposes at [29] to the fact that the fourth defendant told him that he was present when the fifth defendant signed the mortgage documents, and that the lawyer did not explain the documents to fifth defendant.[61]

   [61] Submissions of the second to eighth defendants dated 7 March 2018 [80].

2. In summary, the defendants say that the fifth defendant had an unequal bargaining power with the plaintiffs, had no knowledge of the day to day business of the first defendant and second defendant, was not given the loan agreement and security documents prior to the date on which she signed them, lacked comprehension to understand the documents and various other factors which all give rise to it being unconscionable for the plaintiffs' to accept the guarantees and corresponding securities granted by her to the plaintiffs.

3. Statutory unconscionable conduct is not however pleaded in the defence filed on behalf of the second to eighth named defendants on 15 February 2017.  Rather, it is pleaded that the fifth defendant's securities offend equity and are void.[62]

   [62] Defence filed on behalf of the second to eighth named defendants on 15 February 2017 [21].

4. There is evidence that the fifth defendant was born on 17 March 1939 and that she held an Italian passport.[63]  Mr Donato Colasante deposes in his first affidavit at [29] that the fourth defendant told him that he was present when the fifth defendant signed the mortgage documents, and that the lawyer did not explain the documents to the fifth defendant before witnessing her signatures.  There is no direct evidence from the fifth defendant before the Court.

   [63] Second Truter affidavit, 'RT7' and'RT13'.

5. In their submissions dated 20 March 2017, the plaintiffs summarise the documentary evidence they rely upon to establish that the fifth defendant has no arguable defence based on statutory unconscionability.  [64]

   [64] Submissions of the plaintiff dated 20 March 2017 [52] - [57]. 

6. The assertions made on behalf of the fifth defendant were not supported by evidence.  Unsupported assertions cannot be preferred to the documentary evidence relied upon by the plaintiffs.  There was insufficient evidence to ground the claim that the plaintiffs' conduct in relation to the fifth defendant was, in all of the circumstances, unconscionable, under statute or in equity.  Had her solicitors appeared on 12 January 2017, the fifth defendant would not have been given leave to defend on the basis of unconscionability.

Securing and relying upon the securities provided by the first named seventh defendant

1. As to the securities provided by the first named seventh defendant, the asserted position is as follows.

   78.There are serious questions to be tried as to whether it is unconscionable in reach of section 20 of the Australian Consumer Law (alternatively section 12CA of the Australian Securities and Investments Commission Act 2001 (Cth) for the first named plaintiff to rely on the guarantee purportedly given by the first named seventh defendant, and as to whether the Memorandum of Provisions was incorporated into the guarantee. The facts giving rise to these serious questions to be tried are:

   (a)Ms Lupini deposes that she did not have any idea who the mortgage was being given to or for what purpose.  She did not know that it was an extension of an already existing loan:  affidavit of Liliana Lupini sworn on 20 February 2017 ('Liliana Affidavit') at [7].

   (b)Ms Lupini deposes that she relied entirely on her husband's judgment which she has always totally trusted. Ms Lupini states that if she had been given the truth about the circumstances of the mortgage she would have refused to sin it: Lupini Affidavit at [8].

   (c)Ms Lupini deposes that before the telephone call from her husband asking her to attend at the office to sign papers, she had not been told anything about the need to sign papers, let alone for a mortgage for nearly $3 million: Lupini Affidavit at [9].

   (d)Ms Lupini deposes that she does not recall being provided any documents to retain or sighting or being provided with a memorandum of common provisions:  Lupini Affidavit at [11] and [12].

   (e)Ms Lupini deposes that she did not receive any independent legal or financial advice before signing the mortgage: Lupini Affidavit at [15].

   (f)Ms Lupini deposes that she does not recall signing a guarantee: Lupini Affidavit at [10].

   79.Ms Lupini did not sign the guarantee signed by the other guarantors:  annexure D to the Truter Affidavit at 66.  Ms Lupini appears to have signed the Deed of Variation dated 2 May 2016 in which she was purported added as a guarantor:  annexure C to the Truter Affidavit at 56.

2. Statutory unconscionable conduct is not pleaded in the defence filed on behalf of the second to eighth defendants.  Rather, it is pleaded that, in all of the circumstances, the mortgage provided by the first named seventh defendant offends equity and is void.

3. However, in light of the evidence of Ms Lupini, and having given careful consideration to ACL s 22, I am satisfied that there is an issue to be tried in relation to the circumstances in which Ms Lupini came to provide securities in favour of the plaintiffs.

4. As noted above, the defendants raised many possible defences.  For completeness I address the following, as they were pressed at the hearing.

5. The third to seventh defendants claim that they were not provided with a copy of the memoranda of provisions which were incorporated into the supporting securities.  They say that the failure to provide the memoranda as renders the securities void and unenforceable.

6. The plaintiffs say that each of the defendants acknowledged receipt of the memoranda by signing and returning a copy of the cover of the memoranda to the plaintiffs.  They also say that the defendants provide no legislative basis or authority to support the proposition that the failure to provide a further copy of the memoranda to the defendants to keep for their records, renders the securities which incorporate the provisions void and unenforceable.

7. In all of the circumstances, and in particular, in light of the documentary evidence, I am not satisfied that there is an issue to be tried in relation to the provision of the memoranda.

8. The third to seventh defendants also say that notices of default issued by the plaintiffs were invalid and of no effect as they were sent to the wrong addresses.  On the evidence before me, it is not arguable that the notices were sent to addresses other than those which were compliant with the legislative and contractual requirements for notices, and I find that the assertion does not ground an arguable defence. 

C.     Should La Trobe's application for substitution succeed?

1. For reasons I have set out above, I find that La Trobe is now the legal owner of the debts owed by the first and second defendant under the loan agreement.  Further, assignment of the supporting securities was perfected  on 20 March 2017.

2. In circumstances where I have determined that it is appropriate to set aside judgment against the third to seventh defendants, I now turn to whether it is appropriate for La Trobe's substitution application to be granted under RSC O 18 r 7(2).

3. The court may at any stage in the proceedings, if it thinks necessary, order that another person be made a party to the proceeding as if they had been substituted for the first mentioned party if the interests of effectively and completely determining the dispute are served.

4. The third to seventh defendants do not appear to resist substitution if judgment is set aside.[65] They do however contend that there is another option available to the court. That is, for the court to refuse the substitution application, require the plaintiffs to obtain leave under RSC O 23 r 2(3) to discontinue the proceedings (which the represented defendants say they will not oppose subject to an appropriate costs order), and require La Trobe to commence fresh proceedings.[66]  In all of the circumstances, adopting this course would be inappropriate.

   [65] Submissions of the second to eighth defendants dated 3 April 2017 [40].

   [66] Submissions of the second to eighth defendants dated 3 April 2017 [41].

5. RSC O 18 r 7(2), like O 18 r 6(2), is a remedial provision and should be given a beneficial interpretation.[67] Like O 18 r 6(2), it is designed to avoid unnecessary technicality so as to enable parties to litigate the real issues between them in an expeditious, effective and cost efficient way.

   [67] APT Finance Pty Ltd v Bajada [34].

6. La Trobe now has the legal right and interest in the loan agreement and securities.  It is just and efficient that I substitute La Trobe for Platinum in proceedings that will continue as against the third to seventh defendants. 

Determination

1. For the reasons set out above, I determine as follows.

   1.The third to seventh defendants do not have standing to seek orders on behalf of the first, second and eighth defendants.  The application brought by the third to seventh defendants to set aside judgment as against first, second and eighth defendants should be dismissed.

   2.The third to seventh defendants have given a satisfactory explanation for their absence at the hearing on 12 January 2017.

   3.The third to seventh defendants have given a satisfactory explanation for any delay in applying to set aside the judgment.

   4.Had the third to seventh defendants appeared at the hearing on 12 January 2017, they would they have been given leave to defend.  They have an arguable defence based on misleading and deceptive conduct and statutory unconscionability.  They do not however have an arguable defence based on the alleged lack of standing of the first named plaintiff when judgment was entered against them under the supporting securities.  It is also not arguable that the judgment entered by the second and third plaintiffs as against them is prejudiced by the assignment by the first named plaintiff of its rights in the loan agreement and supporting securities.

   5.The interest of the first named plaintiff has been assigned to La Trobe Financial Asset Management Limited.  Is it necessary, to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, now as between La Trobe, the second plaintiff, the third plaintiff, and the third to seventh defendants, that La Trobe be made a party to the matter and the proceedings are to be carried on as if La Trobe had been substituted for the first named plaintiff.

2. I will hear from the parties as to the final form or orders and on costs.

Schedule 1 - Judgment entered on 12 January 2017

The Defendant having entered appearance herein and the Court having under Order 14 Rule 3 ordered that judgment as hereinafter provided be entered for the Plaintiff against the Defendant, IT IS THIS DAY ADJUDGED THAT:

1.Within 28 days of Judgment, the Fifth Defendant deliver up to the Plaintiffs vacant possession of all of that land located in the State of Western Australia at:

(a)3 Throsby Street, Shelley more particularly described as:

Lot 1 on Strata Plan 63453 being the whole of the land in Certificate of Title volume 2785 folio 68.

(b)A Throsby Street, Shelley more particularly described as:

Lot 2 on Strata Plan 63453 being the whole of the land in Certificate of Title volume 2785 folio 69.

2.Within 28 days of Judgment, the Second Defendant deliver up to the Plaintiffs vacant possession of all of that land located in the State of Western Australia at:

(a)Unit 4, 29 Gympie Way, Willetton more particularly described as:

Lot 4 on Strata Plan 25105 being the whole of the land in Certificate of Title volume 2125 folio 788.

(b)44493 South Coast Highway, Kalgan more particularly described as:

Lot 1 on Survey-Strata Plan 34258 being the whole of the land in Certificate of Title volume 2129 folio 241.

3.Within 28 days of Judgment, the Eighth Defendant deliver up to the Plaintiffs vacant possession of all of that land located in the State of Western Australia at:

(a)Unit 5, 29 Gympie Way, Willetton more particularly described as:

Lot 5 on Strata Plan 25105 being the whole of the land in Certificate of Title volume 1983 folio 877.

(b)Unit 7, Ground Floor, Del Mar, 3 The Palladia, Mandurah more particularly described as:

Lot 7 on Strata Plan 53989 being the whole of the land in Certificate of Title volume 2682 folio 228.

4.Within 28 days of Judgment, the Seventh Defendants deliver up to the Plaintiffs vacant possession of all of that land located at 448 Knutsford Avenue, Kewdale in the State of Western Australia more particularly described as:

Lot 23 on Plan 3701 being the whole of the land in Certificate of Title volume 1944 folio 772.

5.Within 28 days of Judgment, the Sixth Defendant deliver up to the Plaintiffs vacant possession of all of that land located at 46 Marble Place, Forrestfield in the State of Western Australia more particularly described as:

Lot 44 on Plan 20104 being the whole of the land in Certificate of Title volume 2015 folio 35.

6.The Defendants pay to the Plaintiffs the sum of $3,113,268.11 being the total amount outstanding under the Loan Agreement, Guarantees and the Mortgages together with interest at the daily rate of $672.00 being calculated in accordance with and in the manner under the Loan Agreement, Guarantees and the Mortgages from Judgment until payment.

7.The Defendants pay to the Plaintiffs the Plaintiffs' costs of the action, including the costs of the application, on a full indemnity basis.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

ASI
ASSOCIATE TO ACTING MASTER STRK

13 APRIL 2018