Weerasinghe v Jamaly
[2015] VSC 45
•23 February 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2013 6083
| JANAKA MANDULA WEERASINGHE (and another according to the Schedule) | Plaintiffs |
| v | |
| NEMATULLA JAMALY (and others according to the attached Schedule) | Defendants |
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JUDGE: | Judd J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 9 December 2014 |
DATE OF JUDGMENT: | 23 February 2015 |
CASE MAY BE CITED AS: | Weerasinghe & Anor v Jamaly & Ors |
MEDIUM NEUTRAL CITATION: | [2015] VSC 45 |
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PRACTICE AND PROCEDURE — Application to set aside judgment — Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 49.02 — Defendants failed to attend trial — Reasonable explanation — Assessment of merits — Civil Procedure Act 2010 (Vic) ss 7, 9, 47–53, 68 — Application refused — Assessment of damages and trial of defendants claim for restitution under the Sale of Land Act 1962 (Vic).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J D McKay | Legoll Lawyers |
| For the Defendants | Mr W G Stark | Rowson Brasse |
HIS HONOUR:
This proceeding was listed for trial on 13 October 2014. The plaintiffs’ claim was for possession of land sold under a terms contract to the defendants. The defendants did not attend the trial, although their solicitor, Bryan Cook, attended to apply for leave to withdraw. Conditional leave was granted.
Following a short trial, in which Mr Cook provided some limited assistance to the court, an order for possession was made, with damages to be assessed. The court declared that the contract of sale, dated 23 December 2011, was validly terminated by the plaintiffs on 11 November 2013. Brief oral reasons were given.
By summons filed on 27 October 2014, the defendants applied for an order pursuant to r 49.02(2) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic). Rule 49.02 provides:
(1)If, when the trial of a proceeding is called on, any party is absent, the Court may—
(a)order that the trial be not had unless the proceeding is again set down for trial, or unless such other steps are taken as the Court directs;
(b)proceed with the trial generally or so far as concerns any claim for relief in the proceeding; or
(c)adjourn the trial.
(2)The Court may set aside or vary any judgment, order or verdict obtained where a party is absent at the trial.
(3)An application under paragraph (2) shall be made within 14 days after the trial.
Relevant considerations on such an application will include the adequacy of any explanation given by the absent party, and whether there is merit in a defence or counterclaim. A court may impose any term or condition upon an order if it thinks fit. A consideration of the merits on an application to set aside judgment will not ordinarily involve the final determination of any issue,[1] as if at trial. Nevertheless, some assessment of the merits is required to decide whether a defendant ought to be permitted to take their case to trial in the ordinary way.
[1]Lau v Citic Australia Commodity Trading Pty Ltd [1999] VSCA 34; Rosing v Ben Shemesh [1960] VR 173.
The application before the court in Lau v Citic Australia Commodity Trading Pty Ltd was to set aside a judgment entered in default of defence. In this proceeding the application is to set aside judgment following a trial, albeit in the absence of the defendants. At trial, the plaintiffs relied upon the contract of sale and notices of default and termination. These documents are not in dispute, except as to their meaning and validity. On the present application, the defendants took the opportunity, through their counsel, to argue for a construction of the contract that suited their case, and to challenge the validity of the notices of default on grounds specified in a proposed amended defence and counterclaim. This was not a case where the construction of the contract, or the validity of the notices, depended upon further evidence to be given by witnesses.
The discretion to set aside judgment and require the plaintiffs to proceed with a new trial of all issues raised by the defendants in their proposed amended defence and counterclaim, must have regard to the provisions of the Civil Procedure Act 2010. Of particular importance is the overarching purpose of the Act to facilitate the just, efficient, timely and cost‑effective resolution of the real issues in dispute.[2] In a civil proceeding, a court must further the overarching purpose by having regard to specified objects.[3] They are relevantly, the efficient use of judicial and administrative resources, timely determination of the proceeding and proportionality. In addition, the Case Management powers[4] authorise the court to identify the real issues in dispute between the parties for adjudication. In that context, the court may summarily dispose of issues that are fanciful or which have no real prospect of success. As a further aid to these objectives, the court may, of its own motion, summarily dispose of a proceeding, or part of a proceeding, that has no real prospect of success.[5]
[2]Civil Procedure Act 2010 (Vic) s 7(1).
[3]Ibid s 9.
[4]Ibid pt 4.2.
[5]Ibid s 63.
In my opinion, the Act requires the court to undertake a more critical assessment of the merits of a proposed defence (and counterclaim) than was required prior to its enactment. While it may be appropriate to continue to employ the language of ‘arguable defence’ before a new trial can be justified, it now seems clear that something more is required than merely raising a defence by an adequate pleading, verified by affidavit. Much will depend, of course, upon the nature of the issues for determination. Highly contentious factual issues, where credit may be important, stand at one end of the spectrum. It would be unusual for a judge hearing an application to set aside judgment to be in a position to form a view about the prospects of any party on such a controversy. On the other hand, it may be open to the judge to decide that a claim is fanciful, in the sense that it has no real prospect of success.
The present case does not involve such complexity. The central issue between the parties is the proper construction of the contract of sale. Both sides have had an adequate opportunity to advance their respective constructions. There were also questions of statutory construction. Once again the parties advanced their competing positions. In the circumstances, I propose to approach the assessment of merits, having regard to the obligations and powers of the court under the Civil Procedure Act. In so doing it is necessary to identify the real issues for determination, and test the merits of the defendants case by asking, in respect of each contentious issue, whether the defendants have no real prospect of success.[6]
[6]Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158, [35].
The defendants now have a new solicitor. The first defendant has filed two affidavits in support of the summons: the first was sworn on 27 October 2014; the second, on 8 December 2014. The defendants’ solicitor has also filed an affidavit in support of the application, sworn 8 December 2014.
The defendants provided an adequate explanation for their non‑attendance at the trial. Mr Cook, who attended the trial, assured the court that the defendants had notice of the trial commencing on 13 October 2014. Mr Cook told the court that he had had no contact with the first defendant for about 10 days, despite making attempts on a daily basis. He said he had no contact at all with the other two defendants. Mr Cook said he had no idea of the defendants’ whereabouts. When asked whether he was confident that the defendants had notice of the trial, Mr Cook responded:
MR COOK:Yes, Your Honour. I had contact with him of [sic] the day that this was mentioned for listing and I informed him via text that this matter was now to be stood down and again I have rung this morning as soon as I had notification this matter was listed this morning and I again have received no answer.
Mr Cook was directed to file an affidavit in which he set out the substance of what he had told the court in support of his application to cease to act on behalf of the defendants. He did so on 15 October 2014. Mr Cook deposed:
2.I was last in personal contact with the First Defendant who is the nominated spokesman for all Defendants on Friday October 3rd at 10am at the Melbourne Children’s Court in respect to another matter.
3.I again requested at [sic] the Children’s Court the Defendant to place funds in Trust for Counsel and other fees and he promised to me that it would be done that day, it was not so done.
4.I have between September 6th and October 3rd 2014 requested by correspondence and numerous telephone calls, some answered but mostly not, whereupon if not answered I would leave a voice message for the First Defendant to contact me in regards required appointment and fees required.
5.My last text telephone message sent by me to the First Defendant was on Friday November 10th at 2.27pm where I informed him that I would be applying to cease to act for all Defendants on Monday November 13th 2014, that the Court hearing date of Monday November 13th 2014 was vacated however on standby awaiting notification of trial time and date, that I would notify him as soon as I was informed of a new hearing date and time, also advising him to collect the Defendant’s legal file in respect to these matters, I did not receive a reply.
6.My second last message to the First Defendant was left for him on his mobile message bank on Monday November 13th 2014 at 10.12 am advising of the hearing date and time and requesting his attendance at this Honourable Court, I received no reply.
7.My last message to the First Defendant was on Monday November 13th 2014 at 3.51pm advising him of the Court result to which I shortly thereafter received a return telephone response that the First Defendant would collect the legal file on Tuesday at an agreed time of 11am.[7]
[7]Emphasis added.
There was no basis upon which Mr Cook could have reasonably assumed that the trial would be vacated or stood down, prior to attending court on Monday 13 October 2014. It now appears that Mr Cook sent a text message to the first defendant at around 2.04 pm on Friday 10 October 2014, in which he said:
Nemet. Your court case on Monday will not go ahead. But if you can’t bank the money today I will lodge a ceasing to act for you Monday. You will then have to appear on the new date perhaps later in the week on your own. I will be advised of the new date and will let you know and also give you all paperwork on your matter Tuesday morning. If nil money banked I wish you the very best for the future and please plan to pick up documents from Dandenong first thing Tuesday. Bryan
Mr Cook had informed the first defendant, being the person from whom he took instructions on behalf of the defendants, that the trial would not proceed on Monday. Mr Cook had no reasonable basis on which to so advise the defendants. Regrettably, he did not inform the court on Monday 13 October 2014 of what he had told the first defendant. The defendants, not unreasonably, relied on what they were told by their solicitor.
In support of their application to set aside the judgment, the defendants, through their new solicitor, sought to persuade the court of a meritorious defence and counterclaim. The new solicitor produced a proposed amended defence and counterclaim, which contained significant revisions.
By their amended statement of claim the plaintiffs alleged a terms contract of sale of 2 Halcyon Way, Narre Warren South. The contract was dated 23 December 2011. The purchase price was $880,000. Settlement was due on 18 February 2013. The plaintiffs’ case was relatively simple. They alleged that the defendants failed to complete on the due date. A default notice was served, but the date for completion was extended to 2 October 2013. Settlement did not take place on the new date, and a further default notice was served. The contract was terminated on 11 November 2013. The plaintiffs claimed possession and damages.
At the time the contract was executed, the property was mortgaged to the ANZ Bank by the plaintiffs as security for a loan of $780,000. There was a second, undisclosed mortgage. The plaintiffs were required to pay instalments to the ANZ Bank of $5,800 per month. They were in default under both mortgages.
By their earlier defence and counterclaim, dated 27 May 2014, the defendants admitted execution of the contract, but claimed that they were misled into believing that they would take a transfer with a mortgage back to the plaintiffs. The defendants claimed that the plaintiffs owed them $10,000 as a sales commission, and were obliged to return a cash payment of $15,000. The basis for these claims was unclear. The defendants further alleged collusion, deceit, misrepresentation and negligence by the plaintiffs and Wayne Revell, a solicitor or solicitor’s clerk. It would appear that Mr Revell was accused of causing the defendants to believe that they had taken a transfer and granted a mortgage.
The defendants alleged that their mortgage payments were to be $5,559.49 per month for 17 months. They also claimed that Mr Revell wrongly demanded, and was paid, $9,000. The defendants sought an order that the contract be declared void as a sham, or set aside as unconscionable, and the plaintiffs return the cash payment of $15,000, the instalments, and the deposit of $88,000, less a fair rental of $2,000 per month. In the alternative, the defendants sought an order that they be entitled to purchase the property for $735,488.67. Such an order would require the cooperation of the mortgagees.
The proposed amended defence and counterclaim turned the defendants’ case on its head. The defendants admitted execution of an agreement, but denied that settlement was to take place on 18 February 2013. They alleged that the contract of sale was a loan agreement under which they obtained credit of $792,000 with monthly repayments of $5,559.49. They alleged that the loan contract was to be replaced by another contract after 12 months from the date of possession (18 February 2012), but at lower monthly repayments. The amount was not specified. The defendants further alleged a breach of the contract of sale as a result of a demand by the plaintiffs for the cash payment of $15,000. They admitted that they went into possession of the property on 18 February 2012.
The defendants now allege a term of the contract that completion was not due until 18 February 2018. That allegation was based upon cl 2.2 of the Special Conditions which, on their face, contemplated the payment of the instalments until the fifth anniversary of the settlement date (18 February 2013) prescribed in the conditions of sale.
The plaintiffs contended that the words ‘fifth anniversary’ were obviously erroneous. They pointed out other ‘typographical’ errors in the contract, including the Preliminary Settlement Date, which was handwritten as ‘18 February 2012’. That was the date the defendants were to, and did, go into possession. They argued that the contract made it clear that 12 monthly instalments of $5,559.49 were to be paid from the date of possession (18 February 2012), followed by the balance payable as a lump sum of $784,756, on 18 February 2013. Accordingly, final settlement was to take place on 18 February 2013, one year after the defendants commenced to pay instalments.
In the proposed amended defence and counterclaim, the defendants admitted the default notices and non‑completion of the contract on 13 February 2013 and 2 October 2013. But they alleged that the default notices were defective, in that they failed to comply with the National Consumer Credit Code.
The defendants appeared to have abandoned the claim that they were induced to believe that they had taken a transfer with a mortgage back to the plaintiffs. Instead, they alleged various contraventions of the Sale of Land Act 1962, including the plaintiffs’ failure to pay the deposit to the mortgagee, their failure to comply with ss 24 and 27 of the Sale of Land Act, and default under the mortgages over the property. The defendants further alleged a breach of s 29M of the Sale of Land Act by reason of the plaintiffs’ failure to disclose a second mortgage, and claimed that the contract was, at their option, void. They sought repayment of $197,911.33, which sum included the deposit and instalments.
The defendants alleged that the contract of sale was regulated under the National Consumer Credit Code. The argument advanced on their behalf was elaborate and unpersuasive. While there are circumstances in which the Code may apply to a terms contract, its application does not extend to a private treaty, involving the sale of land by vendors who were not in the business of providing credit, or where the provision of credit was incidental to some other business. The application of the Code to the provision of credit is prescribed under s 5 which requires, as a condition for its application, that:[8]
The credit provider provides the credit in the course of a business of providing credit carried on in this jurisdiction or as part of or incidentally to any other business of the credit provider carried on in this jurisdiction.
[8]National Consumer Credit Protection Act 2009 (Cth) sch 1, s 5(d).
The defendants did not advance any proposed evidentiary foundation that would assist them in characterising the plaintiffs as credit providers under the Code, and every indication was to the contrary. As with the alleged breaches of the Sale of Land Act, the defendants claimed that, as a result of the plaintiffs’ breaches of the Code, the contract was, at their option, void. They claimed restitution in the sum of $197,911.33.
The defendants’ claim for specific performance was, at best, vague in its formulation. Presumably the contract they wish to enforce does not require completion until 18 February 2018. They do not specify any obligation to pay instalments, or interest after the first year. The defendants have paid no instalments at all since July 2013. They have not tendered rent, or any amount to complete the contract, or to satisfy terms on which they themselves rely.
In my opinion, the defendants have no reasonable prospect of success on the counterclaim for specific performance. The contention that the contract be construed so as to give them until 18 February 2018 to complete is opportunistic. It has no merit. It is not even arguable. They propose to sue upon a contract based on what are, in my opinion, obvious typographical errors in the document. They seek specific performance of a contract that does not seem to impose upon them any obligation to pay instalments after 18 February 2013, although not due for completion until 18 February 2018.
In their proposed counterclaim, the defendants alleged that the plaintiffs failed to comply with ss 24 and 27 of the Sale of Land Act, by retaining the deposit monies. They also alleged that there were two mortgages over the property, only one of which was disclosed, and that both were in default. The pleading continued:
Despite the plaintiffs’ breaches of the Agreement, the Defendants remain ready, willing and able to perform the Agreement.
The defendants’ claim for specific performance is inconsistent with a claim to have avoided the contract under s 29F or s 29N of the Sale of Land Act. In paragraph 39 of the proposed counterclaim, the defendants claim:
As a result of the plaintiffs’ breach of the Sale of Land Act 1962, the Agreement is, at the option of the defendants, void.
It is unclear whether the defendants intend, by their pleading, to avoid the contract or merely assert an option, and not to go so far as to exercise the right, if there be a right. Had the defendants purported to avoid the contract under the Sale of Land Act, the plaintiffs might respond with allegations of election, waiver or estoppel. The question whether the right to avoid the contract was amenable to election, waiver or estoppel was not explored.[9] Nor did the parties address the question whether a right to avoid the contract under the Sale of Land Act survived termination by the plaintiffs. In that regard, I note that s 29N provides that the contract is voidable by the purchaser at any time before completion.
[9]See generally Australian Horizons (Vic) Pty Ltd v Ryan Land Co Pty Ltd [1994] 2 VR 463.
The parties’ failure to address questions concerning the right to avoid the contract may be explained by the defendants’ overt refusal, during submissions, to embrace the right to avoid under the Sale of Land Act. They pressed their claim for specific performance. They cannot have it both ways. As matters stand, the defendants must be taken not to have elected to avoid the contract.
Notwithstanding the defendants’ reluctance to exercise the right to avoid, they rely upon such a right as a basis to recover the deposit and instalments, should they fail in their claim for specific performance. One difficulty confronting the defendants is the termination by the plaintiffs on 11 November 2013. Section 29F of the Sale of Land Act provides:
29F Purchaser may avoid prohibited terms contract
(1)Except where otherwise expressly provided, if a terms contract is entered into in contravention of this Act—
(a)the contract is voidable by the purchaser at any time before completion of the contract; and
(b)if the contract is avoided, a person is entitled to recover any money paid by that person under that contract.
(2)A terms contract is not voidable by the purchaser if a court is satisfied that—
(a)the vendor has acted honestly and reasonably and ought fairly to be excused for the contravention; and
(b)the purchaser is substantially in as good a position as if all the relevant provisions of this Act had been complied with.
(3)Despite subsection (1), if a terms contract is entered into in contravention of this Act and is avoided by the purchaser before the completion of the contract, the purchaser is liable to pay an occupation rent for the period during which the purchaser was—
(a) in actual possession of the land; or
(b) entitled to the receipt of the rents and profits of the land.
Should the defendants hereafter purport to exercise a right to avoid a contravening contract, it is arguable that their right to recover money paid survives termination by the vendors. Furthermore, the vendors’ right to damages may not survive a valid avoidance by the purchasers of a contravening contract under the Sale of Land Act, notwithstanding earlier termination by the vendors. On the other hand, the plaintiffs may challenge the defendants’ right to avoid the contract at all, by raising election, waiver or estoppel. These are questions for trial. At present, the defendants have not sought to avoid the contract, and there is an open question as to whether they have any right to do so.
For the reasons given above, the defendants’ application to set aside judgment for possession must fail. They have failed to establish any basis upon which the declaration of termination by the plaintiffs should be set aside. In addition to possession, the plaintiffs sought damages. They quantified their claim by reference to unpaid monthly instalments until termination, unpaid insurance, rates, damage to the property and an occupation fee. There is no occasion to set aside the order for an assessment of those damages, although the defendants should now have the right to resist the claim by exercising any right they may have to avoid the contract under the Sale of Land Act, and to seek recovery of instalments and deposit. The plaintiffs will have a corresponding right to raise defences to any claimed right to avoid the contract. There is no occasion to disturb the order for costs made at trial. The remaining issues for trial will be confined to the plaintiffs’ claim for damages, and the defendants’ claims for repayment of the deposit and instalments under the Sale of Land Act.
The just, efficient, timely and cost‑effective resolution of the remaining issues in dispute may require the claim and counterclaim to be re‑pleaded. The proceeding might also be transferred to a more suitable court. Further directions for the trial of the remaining issues will be required.
Ordinarily, an applicant to set aside a judgment in default of attendance at trial will bear the costs of the application, even if successful. Had the defendants participated in the trial on 13 October 2014, this application would not have been necessary. While the defendants have not been successful, this application has been made in unusual circumstances. I will hear the parties on the question of costs, and in particular, whether the costs of the application, or some part of them, ought to be borne by the defendants’ previous solicitor, Mr Cook.
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