Tyger Financial Services Pty Ltd v Lovrinov - [2010] SASC 349

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
TYGER FINANCIAL SERVICES PTY LTD v LOVRINOV
[2010] SASC 349
Reasons of Judge Burley a Master of the Supreme Court
21 December 2010
PROCEDURE
Application for summary judgment - plaintiff a mortgagee - seeks possession order - defendant alleges duress - whether defendant has disclosed a reasonable basis for defending the claim - factual dispute - defendant's factual assertions differ markedly from pleading in defence and from earlier affidavit evidence - whether defendant's varying evidence capable of establishing duress - if summary judgment denied whether defendant should be ordered to pay alleged mortgage debt into Court.
Wicklow Enterprises Pty Ltd v Doysal Pty Ltd & Anor (1986) 45 SASR 247; Windella (NSW) Pty Ltd v Hughes (1999) 49 NSWLR 158; Grimwade & Ors v Beresford (1974) 9 SASR 157; Inglis & Anor v Commonwealth Trading Bank of Australia (1971-1972) 126 CLR 161; Glandore Pty Ltd v Elders Finance & Investment Co Ltd (1984) 4 FCR 130; Harvey v McWatters (1948) 49 SR (NSW) 173, considered.

TYGER FINANCIAL SERVICES PTY LTD v LOVRINOV
[2010] SASC 349

JUDGE BURLEY. By application filed on 13 September 2010 (FDN 7) the plaintiff has sought a number of orders including, by paragraph 7, the following:
7.Possession of the property at 20 Paxton Street Semaphore South pursuant to the mortgage and/or a Warrant of Sale pursuant to the Enforcement of Judgments Act;
At the hearing of the application on 25 November 2010, the plaintiff did not rely upon the reference to a Warrant of Sale. I shall refer to the residence referred to above as “the property”.
The plaintiff relies upon r 232 of the Supreme Court Civil Rules 2006 which enables a court to enter judgment where a matter may be summarily disposed of. Various affidavits have been filed, all of which were admitted on the application.
Pleadings have been filed, namely a statement of claim and the defendant’s defence and cross-claim against both the plaintiff and a Mr Patrick Bouhamdan. The order for possession does not affect the second defendant by counterclaim and consequently he did not participate in the plaintiff’s application.
Much of what has been pleaded in the statement of claim was not in dispute at the hearing. Where factual assertions were made in the evidence of the defendant in order to counter assertions made in evidence adduced by the plaintiff, Mr Dart, counsel for the plaintiff, submitted that even on the affidavit evidence, it was demonstrably clear that no reliance could be placed upon what was said by the defendant. He accepted that on a summary application the Court did not determine a matter where there were material disputes of fact.[1] He, nevertheless, sought to persuade me that in reality, when the evidence given by the plaintiff in various affidavits is examined carefully, there was no factual basis disclosed which was capable of supporting the defendant’s defence to the proceedings.
[1] Wicklow Enterprises Pty Ltd v Doysal Pty Ltd & Anor (1986) 45 SASR 247
The nature of the dispute between the parties both factually and legally is within a relatively narrow compass. The plaintiff relies upon a loan agreement between it and the defendant for the sum of $20,000.00 and a mortgage in registrable form, both of which the defendant admits having signed. His defence is that he signed the documents under duress and that accordingly each of them is voidable and should be voided by order of the Court. It is little wonder that the defendant is anxious to avoid the transactions, given that the interest rate provided for in the loan agreement is 8 per cent per month reducing to 5 per cent per month if payments due under the loan agreement are made on time.
The Facts
In what follows, I propose to set out my factual findings and identify those matters that raise material factual disputes.
The plaintiff is a money lender. The defendant owns the property which is a residential property. On 19 June 2009 the plaintiff lent to the defendant the sum of $20,000.00. A written loan agreement was entered into, a copy of which is in evidence. The loan was for a period of three months with instalments of principal and interest to be made on the nineteenth day of each month. The loan agreement was supported by a mortgage also signed on 19 June 2009. A copy of the mortgage is in evidence. It is in registrable form but it has not been registered. The plaintiff therefore holds an equitable mortgage.[2]
[2] Windella (NSW) Pty Ltd v Hughes (1999) 49 NSWLR 158
The plaintiff has lodged a caveat claiming an interest as equitable mortgagee. Since 19 September 2009 the defendant has been in default under the mortgage because of his failure to pay the instalments due thereunder and the additional failure to pay the principal amount at the expiration of the three month period.
By notice dated 20 October 2009 the plaintiff purported to give notice pursuant to s 132 of the Real Property Act 1886 (SA) demanding payment of the amounts due. Because the property is a residential property s 55A of the Law of Property Act 1936 (SA) applies. The notice dated 20 October 2009 complies with the provisions of s 55A. The notice was served on the defendant on 29 October 2009. The defendant has not complied with the terms of the notice. The plaintiff wishes to claim possession of the property because it intends to exercise its power of sale under the mortgage.
I mention at this stage that the reference to s 132 is incorrect because that section deals with the rights of a mortgagee whose mortgage has been registered. That is not to say that the plaintiff may not exercise a power of sale and in pursuance thereof convey legal title to a third party. The provisions which enable an equitable mortgagee to do so are to be found in ss 47 and 48 of the Law of Property Act 1936. No point was taken by Mr Magarey, counsel for the defendant, that the notice contained reference to s 132 of the Real Property Act.
The initial position taken by the defendant in relation to the proceedings brought by the plaintiff is to be found in his defence which bore the endorsement, as required by the Rules, that the “pleading is put forward in accordance with the instructions of the Defendant”. The defendant asserts that Mr Bouhamdan, the second defendant by counterclaim, is the de facto director of the plaintiff and is also a director of a number of other companies in the “Tyger Group”.
In order to understand the initial position taken by the defendant it is necessary to set out some of the paragraphs of the defence. Paragraphs 2 to 11, both inclusive, of the defence are as follows:
2.The defendant was introduced to Bouhamdam in about May of 2007 by a finance broker, Arthur Garbas, in the context of Mr Garbas assisting the defendant with the finance of a subdivision owned by the defendant at Elizabeth Park. The defendant was told by Spiros Psevdos of Orio Mortgages Pty Ltd, that Orio Mortgages Pty Ltd would only lend money on condition that Bouhamdam took the Defendant’s position as trustee of his family trust jointly with his the Defendant’s wife, Dinka (which matters will be the subject of dispute in other proceedings).
3.By reason of the matters referred to in paragraph 2 above Bouhamdam was in a position of influence and control over financial matters concerning the defendant.
4.In the 2009 year Bouhamdam was indebted to the Defendant for architectural work performed by the Defendant at Bouhamdam’s request for a mixture of work done personally for Bouhamdam, and also in some cases for companies in the Tyger Group for an amount in excess of $100,000. Various conversations took lace [sic] in 2008 and 2009 about the payment of amounts owing to the defendant.
5.In or about mid 2009 the Defendant was indebted to Challenger Bank in an amount of approximately $675,000 secured by way of mortgage over the Defendant’s residential property at Paxton Street Semaphore (‘the property’) and facing the prospect of Challenger Bank taking possession of property, with an order for possession have being made in favour of Challenger Bank. The Defendant had various discussions with Bouhamdam about this from October 2008 to mid 2009. In mid 2009 the Defendant had a discussion with Bouhamdam at Das Café in West Terrace about payment of architectural fees and the Defendant’s need to pay $15,000 to finalise a refinance of the Challenger Bank Debt with the Commonwealth Bank, following which Bouhamdam said he would pay the sum of $15,000 to the Defendant towards his outstanding architectural fees, so that the Defendant could obtain refinance of the Challenger Bank debt through the Commonwealth Bank. The Defendant advised that if the refinance was not obtained by 22 June 2009 then he would lose possession of the property to Challenger Bank.
6.By reasons of the matters referred to in paragraph 5, and through conversations that took place over the next few months, Bouhamdam was aware that the Defendant was in a precarious financial position in that he could lose the property being his family home if the $15,000 was not provided. Further Bouhamdam was in a position to exert financial pressure over the defendant by reason of the matters referred to in paragraphs 2 and 4 above.
7.On 19 June 2009 Bouhamdam told the Defendant to collect the cheque for $15,000 from ‘Drew Woods’ at an office in King William Street (Level 2 80 King William Street). During this conversation Bouhamdam did not disclose that Drew Woods was a solicitor acting for the plaintiff on Bouhamdam’s instructions in his capacity as de facto director of the Plaintiff, or that the Defendant would be required to sign documents classifying the payment as a loan or mortgage.
8.On 19 June 2009 the Defendant attended at Drew Woods’s office in King William Street and learned that the office was the office of a law firm, Mouldens, of which Drew Woods was an employee. At this meeting:
8.1.    Drew Woods provided the Defendant with a loan agreement and mortgage for execution.
8.2.    The Defendant said words to the effect ‘What the hell is this’ and ‘Are you kidding me’ as the Defendant expected that he was collecting a cheque for $15,000 for payment of his architectural fee owed by Bouhamdam.
8.3.    Drew Woods said words to the effect ‘This is what Patrick arranged, don’t ask me anything’. Drew Woods did explain the terms and effect of the mortgage and loan agreement.
8.4.    The Defendant then said words to the effect ‘I am signing this under protest as Bouhamdam owes me money’.
8.5.    Drew Woods replied by saying ‘that is a matter between Patrick (Bouhamdam) and you’.
8.6.    The Defendant signed the loan agreement and mortgage referred to in the statement of claim because he was desperate for the $15,000 to be paid to Challenger Bank so that the refinance with the Commonwealth Bank could go through.
9.Following the meeting referred to in paragraph 8 the Defendant called Bouhamdam and arranged a meeting at Das Caffee at 60 West Terrace, at which time Bouhamdam said words to the effect that he had no money, and the only way he could pay the $15,000 to the Defendant was through this deal, and that Bouhamdam would pay the loan to the Plaintiff.
10.In or about September of 2009 the Defendant was assaulted, and whilst recovering in hospital was visited by Bouhamdam at Royal Adelaide Hospital hospital [sic] on 24 September 2009, at which time Bouhamdam said he would fix the loan with the plaintiff.
11.The Loan Agreements and Mortgage were entered into as a result of the undue influence or economic duress exerted by the Plaintiff though [sic] its defacto director, Bouhamdam over the Defendant or alternatively unconscionable conduct of the Plaintiff and Bouhamdam arising out of:
11.1.1. Bouhamdam being the de facto director of the Plaintiff as set out in paragraph 2;
11.1.2. The matters referred to in paragraph 3;
11.1.3. Bouhamdam’s knowledge of the Defendant’s financial position and desperation to pay Challenger so as not to lose his house as set out in paragraph 6;
11.1.4. The fact that Bouhamdam owed a substantial amount of money to the Defendant as pleaded in paragraph 5;
11.1.5. The fact that Bouhamdam provided instructions to Drew Woods;
11.1.6. The fact that the loan documents and mortgage were provided to the Defendant in circumstances where:
11.1.6.1.The Defendant thought he was attending at Drew Wood’s [sic] office to collect a cheque for monies owed by Bouhamdam to the Defendant;
11.1.6.2.The Defendant had not been told that he was attending at Drew Wood’s [sic] office to sign a loan agreement or mortgage;
11.1.6.3.The Defendant was not given the opportunity of taking away the loan agreement and mortgage and getting independent legal advice and financial advice, especially given the deadline for refinance of the Challenger Debt;
11.1.6.4.That the loan agreement and mortgage were signed with the Third Defendant knowing that the Defendant was desperate for the $15,000, and had communicated to Drew Woods the fact that he was signing the documents under protest.
11.1.6.5The rates of interest being charged were unconscionably high and not reasonably necessary for the protection of the legitimate interests of the Plaintiff (and Bouhamdam);
11.1.6.6.The granting of a mortgage in respect of a payment of $15,000 that should have been from Bouhamdam to the Defendant was not reasonably necessary for the protection of the legitimate interests of the plaintiff and Bouhamdam.
I next turn to the affidavit of the defendant sworn on 3 November 2010 (FDN 8). In that affidavit he admits having signed the loan agreement and the mortgage. At paragraph 8 of the affidavit he describes the circumstances surrounding the signing of the documentation. He said that Mr Bouhamdan owed him $15,000.00 for architectural services and that prior to signing the documents he had asked for payment on a number of occasions. He received a part payment of $5,500.00 but a balance of $15,000.00 was still owing as at June 2009. Paragraph 8.11 of his affidavit is as follows:
8.11Early in June 2009 I asked Patrick [Mr Bouhamdan] for $15,000 because I needed to make a payment to a bank (Challenger Bank) which had a mortgage over my house at 20 Paxton Street Semaphore South aforesaid; I told him I needed to make the payment on Tuesday 23rd June 2009.
The defendant next refers to going to a solicitor’s office. It is common ground that the solicitor is Mr Drew Woods. At the meeting at Mr Woods’ office, he (Mr Woods) produced the loan agreement and mortgage. The defendant said that he initially refused to sign it. The relevant parts of the defendant’s affidavit are as follows:
8.17He asked me “Do you know that Patrick asked me to prepare these documents. Do you know what these are?”
8.18I looked at the documents and saw that they were a loan agreement and a mortgage and said “This is crazy. I am not going to borrow my own money”.
8.19Drew said “Patrick told me that this is the only way we can advance the money you requested. I made bank cheques $15,000 to Challenger and another cheque for Goran Lovrinov”.
8.20I replied “I am not signing any of this”.
8.21Drew said “Take time to read the documents if you like and then you can sign and get the cheques today”.
8.22I looked at the documents and found a schedule which stipulated 8% per month interest rate.
8.23I then said “What crap is this? I am definitely not signing this”.
8.24At this point that Durim said “Goran, you better sign or there will be trouble because Patrick will go mental”.
8.25I replied “Are you crazy? I will not sign this”.
8.26At that point Durim’s face changed colour and he looked frightened.
8.27I looked at Drew who just said to me “It is up to you whether you want this or not. I just did what Patrick instructed me to do”.
8.28Then Durim said “Goran, I strongly suggest that you sign this and we will sort things out between us later. Patrick went to lots of trouble to organize this money”.
8.29I felt scared of what reaction Patrick would have if I did not sign and for that reason I signed.
8.30When I signed I believed because of Durim’s words “we will sort things out between us later” which I understood him to be saying on behalf of Patrick that Patrick would sort something out after I had signed and I wouldn’t be regarded as having borrowed the money referred to in the said documents.
In his next affidavit sworn on 10 November 2010, the defendant sets out in more detail the monies which he asserts were owing to him by various persons in 2009. He also deals with the requirement to pay Challenger Bank $15,000.00.
The apparent purpose of the affidavit was to explain some discrepancies as to dates and conversations referred to in the defence which were inaccurate. There are material discrepancies between what is set out in the defence and what he said in his affidavit of 10 November 2010. At paragraph 10 of his affidavit he refers to the assertion in the defence that he was not given an opportunity of taking the loan agreement and mortgage away to get independent legal advice. At paragraph 10.2 he admitted that Mr Woods gave him the opportunity of taking the documents away but said that the independent advice had to be obtained that day.
Paragraph 12 of the affidavit of 10 November 2010 is as follows:
12.12.1   I refer to the letter from me dated 15th September 2009 a copy of which forms exhibit “DNW6” to the affidavit sworn by Drew Woods herein on 10th September 2010.
12.2   I wrote that letter because the person referred to in my previous affidavit as “Durim” (who is sometimes hereinafter so referred to) asked and pleaded with me to do so.
12.3   He told me he was asking me to write the letter because Patrick needed more time to replace the money.
Exhibit “DNW6” is a handwritten letter on the letterhead of the defendant and is dated 15 September 2009. It is as follows:
Tyger Financial Services P/L
c/o Mouldens Solicitors
80 King William St lev. 2.
Adelaide
Att: Drew Woods
RE: Loan for $20,000 – by G. Lovrinov
Dear Drew,
Further to our telephone conversations with you and then Durim, I formally seek an extension of time of 2 months, and wish to pay monthly installments [sic] until then.
Please contact me with confirmation in writing and I will pay you the installment [sic].
Yours Sincerely,
[Signature]
G. Lovrinov.
This letter, taken in isolation, clearly constitutes an admission by the defendant that there was a loan agreement for $20,000.00 and that he was bound to make repayments under that agreement. His explanation in paragraph 12 of his affidavit of 10 November 2010 is nonsensical. In particular, why would “Durim” plead with the defendant to write the letter “because Patrick [Bouhamdan] needed more time to replace the money”?
The defendant’s final affidavit was sworn on 25 November 2010. In it he refers to the affidavit of Mr Woods sworn on 16 November 2010 and in particular to Exhibit “DNW5”. That document is an authority to the plaintiff and to the plaintiff’s solicitors which has been signed by the defendant. It is dated 19 June 2009. It consists of a direction as to the disbursement of the loan amount of $20,000.00. Six cheques were to be drawn including an initial payment under the loan agreement to the plaintiff; a cheque for solicitors’ fees; three cheques for creditors (presumably of the defendant); and a small amount to the defendant himself. There is no reference in that document to a payment to Challenger Bank.

The defendant deals with this document at paragraph 3 of his affidavit of 25 November 2010. He refers to his liability to Challenger (or Perpetual Trustees Victoria Ltd) and his desire to refinance. At paragraph 3.9 of his affidavit he said:
3.9To discharge the mortgage I needed to not be in arrears with Challenger. I have now reminded myself that the arrears to Challenger were in the order of $14,000 and I used money that had been paid to me by clients to do so.
It is against this changing evidence on the part of the defendant that the plaintiff submits that the defendant’s defence of duress is a sham. The primary contention of the plaintiff was that the defendant had failed to disclose an arguable ground of defence in relation to the plaintiff’s claim for an order for possession based on the loan agreement and the mortgage. An alternative position was put that, if I concluded that an arguable ground of defence had been disclosed, the factual basis for it put forward by the defendant was so tenuous that the defendant ought to be required to pay the amount of the loan into Court as a condition of being permitted to defend the proceedings brought by the plaintiff.
In Grimwade & Ors v Beresford[3], Walters J considered an application for summary judgment under Order 14 of the Supreme Court Rules 1947. That rule included the granting of leave to defend if the Court was not satisfied that the plaintiff was entitled to an order for summary judgment.
[3] (1974) 9 SASR 157
His Honour referred to a number of cases on the question of how the discretion to grant a summary judgment is to be exercised. He said[4]:
It is well accepted that the purpose of Order 14 is to enable the plaintiff to obtain summary judgment without trial, if he can clearly prove his claim and the defendant is unable to set up a bona fide defence or to raise, by way of answer to the claim, an issue which ought to be tried (Roberts v Plant). A defendant is bound to show that he has some reasonable grounds of defence to the action (Crump v Cavendish). The Order “is intended to prevent a man clearly entitled to money from being delayed where there is no arguable defence to be brought forward” (Anglo-Italian Bank v Wells, per Jessel MR at p 199). To enable a defendant successfully to resist an application under the Order, sufficient facts and particulars must be given to show that there is really a bona fide defence (Wallingford v Mutual Society). It is not enough merely to deny the debt, to allege fraud or misrepresentation, or to state a legal objection.
On the other hand, the defence sought to be set up need only show that there are facts which may constitute a plausible defence and which demonstrate that there is a triable issue to be decided. Generally speaking, leave to defend ought to be given unless there is patently no defence in law and no possibility of a real defence on questions of fact (Jacobs v Booth’s Distillery Co Ltd; Fieldrank Ltd v E Stein). But in any case, as Lord Esher MR pointed out in Sheppards & Co v Wilkinson, “the summary jurisdiction conferred by this Order must be used with great care. A defendant ought not to be shut out from defending unless it [is] very clear indeed that he [has] no case in the action under discussion”. The power to give summary judgment under the Order is intended only to apply to cases “where there can be no reasonable doubt that the plaintiff is entitled to judgment, and where, therefore it is inexpedient to allow a defendant to defend for mere purposes of delay” (Jones v Stone). [Citations omitted.]
[4] At 160.
Reliance was also placed on such decisions as Inglis & Anor v Commonwealth Trading Bank of Australia (1971-1972) 126 CLR 161. That case confirmed a general rule that a mortgagor would normally be required to pay the mortgage debt into Court in order to obtain an injunction restraining the mortgagee from exercising a power of sale. It is not a mandatory requirement and the application of the rule has been much refined in subsequent cases.[5] In this case, no injunction is sought and the defence impugns the validity of the mortgage. These are two grounds of material distinction between Inglis and this matter.
[5] See for example Glandore Pty Ltd v Elders Finance & Investment Co Ltd (1984) 4 FCR 130 in which Morling J appears to have taken the approach of Sugerman J in Harvey v McWatters (1948) 49 SR (NSW) 173 at 178.
In my opinion, the plaintiff has demonstrated that it is entitled to an order for possession based on the combination of the loan agreement and mortgage. If no arguable ground of defence is disclosed by the defendant, the plaintiff is clearly entitled to an order for possession. Having considered the respective submissions of the parties as to the latter point, I am “very nearly [of the view that it is necessary] to give judgment for the plaintiff”[6]. I nevertheless have formed the view that it would be inappropriate to rule against the defendant because that would involve a rejection of his current version of the events which might form the basis of the defence of duress. That being the case, the only matter to be determined is whether or not I have power to require the defendant to pay the amount of the loan into Court.
[6] Grimwade v Beresford at 161.
Mr Dart said that if an amount was to be paid into Court, the sum of $20,000.00 would be appropriate rather than to attempt at this stage to embark upon a calculation of interest bearing in mind prepayment of principal and interest contemplated by the loan and the accrual of interest since default. Mr Magarey did not demur.
Order 14 Rule 6 of the Supreme Court Rules 1947 clearly permits the Court to give leave to the defendant to defend the proceedings subject to conditions. May the same be said of 6R 232? I think not. Its terms permit summary judgment to be given but there is nothing in the rule about leave to defend, conditionally or otherwise. The effect of the rule is that if a defendant discloses a reasonable basis for defending the action, the application for summary judgment is to be refused. By the narrowest of margins, the defendant has succeeded in satisfying me that there is a reasonable basis for defending the claim. Whether, at trial, the defendant succeeds in establishing that defence remains to be seen, but it is clear to me that the factual disputes between the parties concerning the allegations of duress may only be dealt with at trial rather than on this summary hearing.
For the above reasons, the application in terms of paragraph 7 will be refused. Because there is no power in 6R 232 to impose a condition of payment into Court, and because the Inglis case should be distinguished, that aspect of the plaintiff’s application will also be refused.
As to costs, an order should await the decision of the trial Judge, to whom that question is referred.
My orders are:
1.Application for a possession order is refused.
2.Costs referred to the trial Judge.