Suncorp Finance Limited v Klego Pty Limited

[2000] NSWSC 686

CITATION:	Suncorp Finance Limited v Klego Pty Limited & Ors [2000] NSWSC 686
FILE NUMBER(S):	SC 012930/98
HEARING DATE(S):	3 July, 2000
JUDGMENT DATE:	17 July 2000
PARTIES :	Suncorp Finance Limited - Plaintiff Klego Pty Limited (as trustee for Lamont Family Trust) - Defendant
JUDGMENT OF:	Bell J at 1

COUNSEL :	Mr M Meek - Plaintiff Mr B Collins QC/ Mr Newhouse - Defendant
SOLICITORS:	Corrs Chambers Westgarth - Plaintiff Wayne Levick & Associates - Defendant
DECISION:	Appeal dismissed

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

BELL J

Monday, 17 July , 2000

12930/98 - KLEGO PTY LIMITED (as trustee for Lamont Family Trustee) & Ors v SUNCORP FINANCE LTD (ACN 09 705 417)

JUDGMENT

1    HER HONOUR: This is an appeal against a decision of Master Malpass given on 4 April 2000. An Amended Notice of Appeal was filed in court at the commencement of the hearing. The appellants appeal from the whole of the decision of the Master. It is contended that the Master erred by failing to grant an adjournment of the proceedings on 4 April 2000 in circumstances where the appellants were neither represented by counsel nor solicitor. Secondly, it is contended that the Master erred in law in giving judgment for the respondent for reasons which are set out in the grounds of the Amended Notice of Appeal.

2    The respondent by Statement of Claim filed on 1 December 1998 sought orders; (i) for possession of property, known as 7/67 Jacaranda Avenue, Bradbury, New South Wales; (ii) granting leave to the respondent to issue a writ of possession in respect of the property; and (iii) judgment in the sum of $119,672.08 together with interest (calculated pursuant to the subject loan agreement) from 3 November 1998.

3    On the hearing of the appeal, the appellants relied on the affidavit of Wayne Levick sworn on 3 July 2000 together with the affidavits of Dr John Lamont sworn 2 May 2000 and 3 July 2000. Mr Levick’s affidavit discloses that he is the solicitor for appellants having been retained by them in connection with the principal proceedings in or about April 1999. The affidavit recites a somewhat unhappy history. He deposes to making telephone contact with Mr Stevens QC at some time before the proceedings were due to be heard by the Master. He says that as a result of that conversation he understood that Mr Stevens would be available to appear on behalf of his clients on 4 April 2000. He goes on to note that he did not deliver a brief either to Mr Stevens or to a junior. He says “I now recognise that I should have done so, however it was my belief that Mr Stevens and/or his junior would be available to attend court on 4 April 2000.” Mr Levick does not in his affidavit go on to give any account of the proceedings before the Master. He makes no reference in his affidavit to having made any other arrangements for counsel to attend upon the hearing before the Master.

4    Mr Meek, who appeared for the respondent, with the consent of Mr Collins QC who appeared for the appellants, outlined the course the proceedings had taken before the Master. Mr Menadue of counsel, had appeared before the Master on behalf of the appellants and applied for an adjournment of the proceedings. Mr Menadue informed the Master that his instructions were limited to the making of the adjournment application. The Master refused to grant an adjournment. Mr Meek foreshadowed that the appellant was seeking an order for costs against Mr Levick personally having regard to the way the defence and cross claim had been pleaded. The Master encouraged Mr Menadue to get some instructions concerning this latter aspect. It was this which led to Mr Menadue returning to the Master’s Court a little later in the course of the proceedings. It was common ground that the Master had proceeded to give judgment for the respondent in the absence of Mr Menadue.

5    The matter had been specially fixed before the Master on a date some time in February. Mr Levick signed the ‘special fixture’ pro forma document which forms part of the Court file (acknowledging that all affidavits to be read had been filed and served and noting that it was to be assumed that no adjournment of the matter would be granted).

6    The Master gave judgment for the respondent against the first appellant for possession of the subject land and granted leave to the respondent to issue a Writ of Possession in relation to the property forthwith. The Master ordered judgment for the respondent against all the appellants in the sum of $157,460.88.

7    The grounds of appeal specified in the notice filed in court on 3 July 2000 are as follows:

1. The Master erred in his failure to grant an adjournment where the appellant was not represented by counsel or solicitor.
2. The Master erred in law in giving judgment for the plaintiff because the act of default relied upon in the Statement of Claim was the alleged refusal or neglect to repay the amount borrowed on or before 29 July 1997, whereas the defendant was not under any obligation to repay the amount borrowed until 29 July 2000.
3. The amount claimed in the Statement of Claim wrongly included the amount of the principal sum.
4. The plaintiff had not complied with the provisions of Part 40 rule 11 of the Supreme Court Rules (SCR) which obliged the plaintiff to file an affidavit before the Master setting out particulars of the default alleged.

8    Mr Collins did not seek to justify what appears to be the dilatory conduct of the appellants’ solicitors with respect to the preparation of the matter for hearing before the Master. Unsurprisingly he did not address submissions as to ground 1. I do not propose to deal further with it.

9    The principal focus of Mr Collins’ challenge was ground 2. It was submitted that the appellants had an arguable defence; namely, that the first appellant was not bound to repay the amount borrowed on 29 July 1997 (as stipulated in the loan agreement dated 31 May 1996, as varied by letter dated 20.9.1997). It was said that it was open to the first appellant to contend that the loan had been extended for a further term of three years and accordingly that the sum borrowed was not due and payable until 29 July 2000.

10    As I have noted the proceedings came before me by way of an appeal pursuant to the provisions of Part 60 rule 10 of the Supreme Court Rules (SCR). Mr Collins said that a decision had been taken to bring proceedings by way of appeal (rather than moving to have the judgment set aside pursuant to the provisions of Part 40 r 9 SCR) because Mr Menadue had appeared on the appellants’ behalf. Mr Collins considered that there may be an issue about whether judgment had been entered in the absence of the appellants within the meaning of Part 40 r 9 and for this reason that the preferable course had been to proceed by way of appeal.

11    The evidence said to support the contention that the appellants have an arguable defence to the repondent’s claim is to be found in an exchange of correspondence between the respondent and the first appellant, which is annexed to the affidavit of John Robert Lamont sworn 2 May 2000.

12    By letter dated 5 September 1997 Paul Malek wrote to the first appellant advising that the subject loan (Suncorp Loan 1254101) had been approved for a further term of three years subject to a special condition, namely that the security property at 67 Jacaranda Avenue, Bradbury, was to be re-valued at the expense of the appellants. It was necessary that the valuation show that the property had a minimum value of $110,000 on a vacant possession basis.

13    I should note (because it is the subject of an issue raised on behalf of the appellant’s in written submissions) that Mr Malek wrote on letterhead styled “Metway Business Bank”. He described himself therein as “Commercial Loans Officer”. To my mind nothing of substance turns on this aspect. The ‘footer’ on the Metway Business Bank letterhead describes the bank as “a division of Suncorp-Metway Ltd”. In his affidavit of 2 May 2000 John Robert Lamont describes Paul Malek as the “Commercial Loan Officer, Suncorp Sydney Office”. I consider that it is abundantly plain that Mr Malek in his letters of 5 September and 16 September 1997 was acting on behalf of the respondent and that so much was understood by the appellants.

14    On 12 September 1997 the respondent wrote to the first appellant advising that “Suncorp has approved your request to vary your loan terms and conditions” (again with respect to Loan Account No 1254101). The term of the loan was expressed to be 36 months expiring on 29 July 2000. The amount of the loan was described as $110,000 as at 29 July 1997. The second paragraph of the letter contained the following statement in bold:

“Please note that all conditions contained in this letter must be complied with before variation will be affected. If you have employed solicitors to assist with this transaction, please ensure a copy of this letter is provided to them immediately.”

15    The special condition referred to in the letter of 5 September 1997 is not recited in the document of 12 September 1997. However, on page 2 of the latter document the following is stated:

“All other terms and conditions, as set out in our original letter of offer and associated mortgage ancillary documentation and any variation thereof, remain unchanged and in force.

16    On 16 September 1997 a further letter was sent by the respondent to the first appellant. That letter purported to enclose the respondent’s letter of offer in respect to the renewal of the above loan (Suncorp Loan 1254101). The letter went on to state:

“As previously advised, a condition of approval of this facility was an updated valuation of security property Suite 7, 67 Jacaranda Avenue Bradbury be completed with a minimum value of $110,000 to be achieved on a vacant possession basis. Please forward your cheque for $400 made payable to Carritt, Taylor Valuations Pty Ltd to this office so that we may issue instructions to our valuer.”

17    Mr Collins submitted that it is open, having regard to the contents of the correspondence referred to above, to conclude that the offer of the variation in the terms of the loan made by the respondent in the letter of 12 September 1997 was accepted by the first appellant. The offer was not conditioned on the first appellant obtaining a satisfactory valuation. On such a view the loan amount was not due and payable on or before 29 July 1997 as claimed in the Statement of Claim. The reference in the letter of 12 September to “all other terms and conditions as set out in our original letter of offer and associated mortgage ancillary documentation and any variation thereof” was said to be referable to the original loan and did not pick up the special condition set out in the respondent’s letter of 5 September 1997.

18    Mr Collins acknowledged that the subsequent letter of 16 September 1997 enclosing the letter of offer might be thought to run counter to his submission as to the proper construction of the agreement. However, he noted that it was only necessary for him to point to a tenable argument to get over the low threshold posed in General Steel Industries Inc. v Commissioner for Railways (NSW) (1964) 112 CLR 125.

19    It appears that the offer of variation of the subject loan, dated 12 September 1997, was enclosed in the letter of 16 September 1997 (this is recited in paragraph 1 of the latter document). The letter of 16 September sets out as a condition of approval that an updated valuation of the security property be completed with a minimum value of $110,000 to be achieved on a vacant possession basis. It is not suggested that such a valuation was obtained.

20    Mr Collins submitted had the Master seen the Metway/Suncorp documents referred to above, he would not have entered judgment upon the basis of a Statement of Claim which founded on one default, namely the failure to repay the amount borrowed before 29 July 1997. I am not persuaded that is so but in any event the submission loses force when one has regard to the contents of the affidavit of Robert John Lamont sworn on 2 May 2000. I do not read that document as providing support for the suggested construction for which Mr Collins contends. Mr Lamont deposes (paragraph 27) to a telephone conversation with Mr Malek on 5 September 1997 in which he was advised by Mr Malek that the three year extension of the loan had been approved and that Suncorp needed to obtain a valuation of the security property. Thereafter he recites that he received a letter from the Documentation Officer of the Suncorp Sydney office on or about 12 September 1997. A copy of that is annexed to his affidavit. He goes on to set out that on or about 16 September 1997 he received a letter from Paul Malek with an enclosed letter of offer. Acknowledgment and acceptance of the offer dated 12 September 1997 was made under company seal and was forwarded to Suncorp. It is not asserted on behalf of the appellants that Mr Lamont understood the loan to have been varied with effect notwithstanding the absence of a satisfactory valuation.

21    At the commencement of the proceedings before me Mr Collins filed in Court a document described as an “Amended Defence”. That document pleads a defence that in accordance with the “third loan agreement” the first appellant was not liable to repay the principal under the loan agreement as extended until 29 July 2000. I note that this document should properly be titled the Second Further Amended Defence. There have been three defences previously filed in the proceedings. In none of those earlier defences have the appellants sought to maintain that the loan principal was not repayable until July 2000.

22    In the light of the whole of the evidence including the contents of the affidavit of John Robert Lamont sworn 2 May 2000 I do not consider that the construction for which Mr Collins contends discloses a tenable defence to the claim made by the respondent.

23    Mr Collins next submitted that the Master erred in entering judgment for possession because the requirements of Part 40 rule 11(c) of the Supreme Court Rules (SCR) had not been complied with. That rule relevantly provides as follows:

“Unless the court otherwise orders, judgment for possession of land shall not be given or entered against a defendant in his or her absence, unless the plaintiff files an affidavit -
…
(c) Where the plaintiff claims possession by reason of default
in the payment of money, setting out particulars of the
default.”

24    It was Mr Collins’ submission that at the time when the Master gave judgment in favour of the respondent the appellant was unrepresented. It was common ground that Mr Menadue left the court following his unsuccesful application for an adjournment. In these circumstances Mr Collins submits that the requirements of Part 40 r 11 SCR apply.

25 The evidence before the Master in support of the respondent’s claim in this respect was the affidavit of Russell John Gallagher sworn on 5 May 1999. Mr Gallagher deposes to the fact that on 6 July 1998 the first appellant was in arrears with respect to repayments owing to the respondent pursuant to the loan agreement (paragraph 13). On that day Mr Gallagher caused a notice pursuant to S 57(2)(b) of the Real Property Act, 1900 to be served on the first appellant. A copy of that notice exhibited to Mr Gallagher’s affidavit. Mr Collins submited that exhibiting the s 57(2)(b) notice falls short of the requirements of the Rules since Mr Gallagher did not depose to its contents as being correct. Mr Gallagher further states that he caused to be sent by registered post a written demand by the respondent to the second and third appellants for the sum of $114,106.08 (which was the amount then owing pursuant to the loan agreement to the respondent under the terms of the loan agreement and secured by the guarantee) together with a copy of the s 57(2)(b) notice served on the first appellant. Mr Gallagher goes on to state that as at 5 May 1999 the appellants were indebted to the respondent in respect of the cause of action for which the proceedings were commenced in the sum of $130,484.80 (the affidavit of Bob Gannon the respondent’s Manager, Credit Management, was also before the Master, recited that the records of the appellant showed the amount of the debt, as defined in the mortgage and memorandum, due and payable to the appellant as at 3 April 2000 was $157,460.88).

26    Mr Collins submitted that the affidavit of Mr Gallagher was deficient in that the global figures it set out failed to provide the necessary particulars of default contemplated by Part 40 r 11(c). He submitted that the requirements of the subrule cannot be waived. The importance of this provision, so he submitted, is to ensure that a defendant to proceedings is not placed in any difficulty if he wishes to bring a redemption suit in order to restore his position under the mortgage. Unless the mortgagor knows what the principal is, what the interest is and how it is calculated, the “legal avenues open to him cannot be properly made the subject of any informed decision”. Thus he submitted the Master should have had before him a complete particularised break down of all interest (both penalty and normal interest) together with fees, charges and the principal amount in order that he might be satisfied that the appellants were in breach of the agreement before ordering possession. Mr Collins urged the need for the utmost precision in the drafting of an affidavit setting out particulars of default. Thus he was critical of paragraph 19 in the affidavit of Mr Gallagher (as to the first appellant’s indebtness as at 5 May 1999) in that it does not therein set out the nature of the default relied upon. I consider this a somewhat strained approach to the reading of the affidavit.

27    I do not consider that the Master’s judgment should be set aside upon the basis of a failure to comply with the provisions of Part 40 r 11 SCR. The proceedings had been specially fixed for hearing before the Master. At the time they were so fixed, the appellants were represented by Mr Levick, who consented to that course. On the day appointed when the matter was called on counsel appeared on behalf of the appellants upon the limited basis of seeking to have the proceedings adjourned. It was not suggested that any notice of this application had been given. As things turned out judgment was given in the absence of the appellants because the appellants through the actions of their solicitor effectively chose not to defend the proceedings. There was evidence before the Master to support summary judgment and the grant of leave to issue a writ of possession.

28    The appellants were aware of the default upon which the respondent relied. In his affidavit of 2 May 2000 Mr Lamont states that in late July or early August 1998 he received a Notice of Demand dated 6 July 1998 requiring the repayment of the entire loan with interest (paragraph 44). He goes on to note that on or about 27 August 1998 he sought legal advice from Mr Jonathan Harris, solicitor, of Harris Hyde Page. Annexed to his affidavit is a letter addressed to the respondent by that firm, on behalf of the first appellant, making an offer of settlement. Also annexed to his affidavit is a copy of the respondent’s letter, dated 27 August 1998, rejecting that offer. In that letter Mr Gallagher, Manager Business Bank Collections, states:

“I further advise that I am prepared to give your clients until 17 September 1998 to pay the full balance outstanding. Failure to pay the entire debt by that date will result in immediate recovery action commencing without further notice to your clients. Please contact this office after 31 August for an exact figure of the debt outstanding.”

29    I do not consider that the appellants have shown that the Master’s decision was attended by error or that upon the additional material placed before me on the hearing of this appeal I should set aside the Master’s judgment.

ORDERS:

1. The appeal is dismissed.

2. The appellants are to pay the respondent’s costs as agreed or
assessed.

Last Modified: 09/27/2000