Thompson v Perpetual Trustees Victoria Limited (No 2)

[2023] NSWSC 459

Supreme Court

New South Wales

Medium Neutral Citation:

Thompson v Perpetual Trustees Victoria Limited (No 2) [2023] NSWSC 459

Hearing dates:

17 and 19 April 2023

Date of orders:

19 April 2023

Decision date:

19 April 2023

Jurisdiction:

Equity

Before:

Henry J

Decision:

See [34]

Catchwords:

CIVIL PROCEDURE — default judgment — where second defendant originated mortgage and forged fraudulent written direction for the payment of funds to third defendant’s account — no appearance by second defendant — no pleading of the Statute of Limitations as a defence by second defendant — requirements of UCPR r 16.7 satisfied

CIVIL PROCEDURE — assessment of damages — where loss and damage suffered by plaintiffs from second defendant’s fraud and deceit — position of plaintiffs but for fraud and deceit — award of general damages for pain and suffering caused by loss of home — award of indemnity costs

Legislation Cited:

Uniform Civil Procedure Rules (NSW) 2005

Limitation Act 1969 (NSW)

Cases Cited:

Australian Iron & Steel Ltd v Hoogland (1962) 108 CLR 471

Lorraine Parker v Juan Campos [2011] NSWSC 306

Magill v Magill (2006) 226 CLR 551; [2006] HCA 51

Whitaker and Paxad Pty Ltd [2009] WASC 47

Williams v Nugara [2021] VSC 331

Category:

Procedural rulings

Parties:

Anne Thompson (First Applicant/Plaintiff)
Raymond Strachan (Second Applicant/Plaintiff)
Eric Lu (Respondent/Second Defendant; self-represented)

Representation:

Counsel:
D Elliott (Applicants)

Solicitors:
Quy Lawyers (Applicants)

File Number(s):

2020/00215584

Publication restriction:

Nil

JUDGMENT – Ex tempore (Revised)

1. This is an application by the plaintiffs, Anne Thompson and Raymond Strachan, for default judgment against the second defendant, Eric Minh Lu, and for an assessment of damages.

2. The application is made in the context of proceedings commenced by the plaintiffs by statement of claim filed 23 July 2020 seeking orders for loss and damages they claim to have suffered as a result of the second defendant's fraudulent conduct and misappropriation of loan moneys advanced to the plaintiffs by Perpetual Trustees Victoria Limited (ABN 47 004 027 258) (Perpetual Trustees), previously the first defendant in these proceedings.

3. The plaintiffs’ application is made by notice of motion filed 31 March 2022 and is supported by two affidavits of service from Talysha Sabatino sworn 4 October 2020 and 17 July 2022, and an affidavit of the plaintiffs sworn 25 May 2022. They also tendered a letter from the plaintiffs’ solicitor to the second defendant dated 3 March 2023 (Exhibit A) and referred to and relied on a summary of the factual background as set out in the judgment of Rees J in these proceedings: Thompson v Perpetual Trustees Victoria Limited [2021] NSWSC 622. I have also been assisted by the written and oral submissions of the plaintiffs’ counsel, including the supplementary submissions received on 19 April 2023.

4. There was no appearance by the second defendant at the hearing before me, when the motion was set down nor at any other stage in the proceedings. The evidence on the application satisfies me that the second defendant was notified of the proceedings, the notice of motion and the listing of the hearing of that motion before me, and that it is appropriate for all matters raised by the motion to be heard and determined in his absence: Uniform Civil Procedure Rules (NSW) 2005 (UCPR), r 18.7.

Factual background

5. The factual background relevant to the issues for determination are summarised as follows.

6. The plaintiffs, who are pensioners, bought a property at Prospect Crescent, Canley Vale (Canley Vale Property) in 1989 subject to a mortgage in favour of Westpac Banking Corporation Limited (Westpac). As at March 2006, the plaintiffs were indebted in the amount of $73,026 to Westpac as mortgagee and GE Finance in relation to car loans.

7. The second defendant was the sole shareholder, director and principal of Dollar Group Pty Ltd (Dollar Group). From 2004, together with Dollar Group, the second defendant was appointed as a mortgage originator for Perpetual Trustees.

8. The plaintiffs made enquiries with the second defendant regarding a home loan and, from about 30 January to 5 April 2006, the second defendant prepared and negotiated an application for a loan in the amount of $227,500 which was secured by a registered first mortgage in favour of Perpetual Trustees over the Canley Vale Property.

9. On 6 April 2006, the loan and mortgage transaction completed and the funds were used to discharge the Westpac mortgage and, it appears, possibly part of the GE Finance car loans, leaving a surplus of $151,592 (Surplus Funds).

10. On or about 31 March 2006, Perpetual Trustees paid the Surplus Funds in accordance with a forged and fraudulent written direction prepared by the second defendant that requested the Surplus Funds be paid into a Westpac bank account in the name of the second defendant's partner, Thi Hong Tran Nguyen, the third defendant in these proceedings. The written direction was not issued with the plaintiffs’ knowledge or authority nor does it bear either of the plaintiffs’ signatures. The second defendant had falsely told the plaintiffs that the Surplus Funds were to be invested on their behalf with Perpetual Trustees and then used to pay off the loan and mortgage over time.

11. On 4 March 2008, the plaintiffs became aware of the fraud upon receiving a letter from Perpetual Trustees stating that neither Perpetual Trustees or any of its subsidiary companies held an investment in the plaintiffs’ names and that Perpetual Trustees were aware of the Dollar Group and claims that money was invested on behalf of clients with Perpetual Trustees. In December 2008, Perpetual Trustees claimed that the plaintiffs were in default of the loan agreement and that recovery proceedings would be commenced.

12. On 1 December 2011, the plaintiffs sold the Canley Vale Property to their son and daughter-in-law for $400,000 of which $220,360.90 was paid to Perpetual Trustees in full discharge of the loan and mortgage. The plaintiffs continue to live at the Canley Vale Property as the tenants of their son and daughter-in-law.

13. The plaintiffs reported the fraud to the police in September 2009. On 13 September 2013, the second defendant was convicted of 21 charges of cheating or defrauding being a director of a company contrary to s 176A of the Crimes Act 1900 (NSW) with the offences relating to 11 separate victims and the total amount defrauded being $2.163 million. The second defendant was sentenced to nine years imprisonment with a non-parole period of six years: Lu v R [2014] NSWCCA 307. He was released from prison in October 2019.

14. The third defendant was not served with the statement of claim. Attempts to locate her by the plaintiffs’ legal representatives were unsuccessful.

15. As for Perpetual Trustees, it succeeded on an application to strike out the plaintiffs’ claim for being statute-barred. In that application, Rees J found that the five causes of action brought by the plaintiffs against Perpetual Trustees as first defendant, including some equitable claims, were statute-barred or barred by analogy to s 1317K of the Corporations Act 2001 (Cth), noting that the proceedings were commenced 14 years after the payment of the Surplus Funds in accordance with the fraudulent direction, and which I note is also about 11 or 12 years after the fraud was first discovered by the plaintiffs.

Default judgment

16. The requirements for entry of default judgment are set out in UCPR, r 16.7. Rule 16.7(1) provides that judgment may be given for a plaintiff against a defendant in default for damages to be assessed and for costs.

17. Rule 16.7(2) requires that the affidavit in support of the application for default judgment must state when and how the originating process was served on the defendant. That matter is established by the first affidavit of Ms Sabatino in which she deposes to personally serving the statement of claim on the second defendant (also known as Eric Thai) on 28 September 2020.

18. The plaintiffs’ affidavit also satisfies the other requirements of UCPR, rr 16.7(2)(a)–(c). It states that: the matter has not been settled with the defendant; the plaintiffs have personal knowledge of the matters relating to the claim; and the costs are claimed in the total amount of $3,513 comprising filing fees of $1,587, service fees of $330 and solicitors’ fees of $1,596.

19. As the judgment of Rees J held, and as counsel for the plaintiffs accepted at the hearing before me, the limitation period relating to the claim advanced by the plaintiffs against the second defendant, being a claim of fraud by deceit, has expired: Limitation Act 1969 (NSW) (Limitation Act), ss 14(1)(b) and 55.

20. However, the Limitation Act and the authorities make clear that it is for a defendant to specifically plead the Statute of Limitations as a defence to an action on a common law cause of action. If they do not, the Court may assume that they intend to waive that defence: Australian Iron & Steel Ltd v Hoogland (1962) 108 CLR 471 at 488–9, per Windeyer J.

21. Section 68A of the Limitation Act also provides that a party does not have the benefit of any extinction of a right, here being the extinction of a cause of action under the applicable part of the Limitation Act, unless, as part of the proceedings, the party has pleaded or otherwise appropriately claimed that the right has been extinguished. That position is consistent with UCPR r 14.14, which requires that a party must plead in a defence any matter that relies on a Statute of Limitation.

22. In this case, the second defendant has not filed an appearance or a defence to the statement of claim and has not taken any active steps in the proceedings which seek to raise or rely on a limitation period defence. It follows that the requirements of UCPR r 16.7 have been met and it is appropriate for the Court to make an order for default judgment in favour of the plaintiffs against the second defendant.

Assessment of damages

23. The claims advanced by the plaintiffs against the second defendant are causes of action in tort, being fraud by deceit, which is also described in the statement of claim as involving the misappropriation of funds.

24. At the hearing, the plaintiffs submitted that they are entitled to damages that would restore them as close as possible to the position they would have been in but for the fraud, which they said amounted to the value and security of owning their own home.

25. The authorities recognise that in cases where a party has been deceived or defrauded, that party is, as far as possible, to be put in the position they would have occupied but for the deceit or fraud: Williams v Nugara [2021] VSC 331 (Williams v Nugara) at [42]; Magill v Magill (2006) 226 CLR 551; [2006] HCA 51 at [40]–[41].

26. Based on the facts summarised above and the evidence on this application, I am satisfied that the loss of the Canley Vale Property was caused by the second defendant's deceit and fraudulent conduct and amounts to loss and damage suffered by the plaintiffs in these proceedings.

27. In my view, the sum of $495,000 represents the compensable loss to the plaintiffs for the loss of value of the Canley Vale Property. That amount is calculated by reference to the valuation evidence adduced at the assessment hearing, which values the property at between $850,000 and $935,000 at 25 May 2022, and from which I take a mid-point of $895,000, less the benefit the plaintiffs received from selling the Canley Vale Property and paying out the loan owed to Perpetual Trustees.

28. The plaintiffs also claim general damages for the pain and suffering arising from the humiliation and trauma of losing their home due to the deceitful conduct of a cunning, putative friend.

29. I am satisfied that an award of general damages is appropriate in this case.  The evidence establishes that the plaintiffs have suffered stress and anxiety as a consequence of losing their home due to the second defendant's conduct.  Such a head of loss has been awarded in other cases: see, for example, Williams v Nugara at [54]; Lorraine Parker v Juan Campos [2011] NSWSC 306 at [23]; Whitaker and Paxad Pty Ltd [2009] WASC 47.

30. The plaintiffs seek an amount of $100,000 for general damages. In my view, that amount is outside the range of what is appropriate for this case noting that plaintiffs’ counsel accepted that they not entitled to an amount equating to exemplary damages as the second defendant has already served time in gaol. The conclusion I have come to, based on a review of the authorities to which I have referred, is that an amount of $25,000 is an appropriate award in this case.

31. The plaintiffs do not press their other pleaded claims for loss or damages in relation to rent or the unpaid GE Finance loan.

32. Accordingly, I assess the total of the damages to be awarded to the plaintiffs to be $520,000.

33. The plaintiffs also seek the payment of their costs on indemnity basis. In my view, this is a case where it is appropriate for the Court to exercise its discretion and award indemnity costs in favour of the plaintiffs so as to fully compensate them for their costs in these proceedings, and I will so order.

34. For these reasons I make the following orders:

1. Judgment be entered against the second defendant for the plaintiffs in the sum of $520,000.

2. The second defendant pay the plaintiffs’ costs in the proceedings in so far as they relate to the second defendant on an indemnity basis.

3. List the proceedings for directions before the Equity Registrar at 9.30am on 3 May 2023.

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Decision last updated: 02 May 2023