Win Securities Limited v Bower

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S CI 2017 04359

WIN SECURITIES LIMITED (ACN 007 346 223)	First Plaintiff
and
WEBSTER DOLILTA FINANCE LTD (ACN 004 664 322)	Second Plaintiff
v
LUKE THOMAS BOWER	Defendant

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JUDICIAL REGISTRAR:	Matthews JR
WHERE HELD:	Melbourne
DATE OF HEARING:	16 March 2018; written supplementary submissions on 26 March 2018 (plaintiffs) and on 28 March 2018 (defendant)
DATE OF JUDGMENT:	20 April 2018
CASE MAY BE CITED AS:	Win Securities Limited & Anor v Bower
MEDIUM NEUTRAL CITATION:	[2018] VSC 180

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PRACTICE AND PROCEDURE – Summary judgment – Whether defendant has real prospects of success on his defence – Civil Procedure Act 2010 (Vic), ss 61 and 63 – Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27 – Daniel Simon Hausman and Lance Vincent Hodgkinson v Abigroup Contractors Pty Ltd (2009) 29 VR 213 – Application for summary judgment allowed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr T Best	MGR Solicitors
For the Defendant	Mr O El-Hissi, solicitor	NOH Legal

TABLE OF CONTENTS

Introduction......................................................................................................................................... 1

Background......................................................................................................................................... 2

The plaintiffs’ claims.................................................................................................................... 2
The defendant’s defence.............................................................................................................. 4
Relevant procedural history regarding the Application........................................................ 5
Hearing on 27 February 2018 - the defendant’s adjournment application........................... 6
The defendant’s complaint to the Financial Ombudsman Service.............................. 6
Other submissions regarding the adjournment application........................................ 7
Outcome of the adjournment application....................................................................... 7
Outcome of the FOS Complaint........................................................................................ 8

Applicable principles........................................................................................................................ 8

Consideration.................................................................................................................................... 12

Court’s approach to the Application and the use which can be made of the Proposed Amended Defence................................................................................................................................ 12
The defendant’s ownership and possession of the Property............................................... 15
The Loan Agreement.................................................................................................................. 15
The SOC.............................................................................................................................. 15
The Defence........................................................................................................................ 16
The defendant’s revised position: the Bower Affidavit and the Proposed Amended Defence – the Loan Agreement is not an enforceable agreement..................................... 16
The defendant purports to resile from his admission of the Loan Agreement     16
Form of the Loan Agreement.............................................................................. 18
Content of the Loan Agreement which is relevant to the defendant’s argument that it is not enforceable..................................................................................... 18
The defendant’s evidence regarding his understanding of the status of the Loan Agreement............................................................................................ 19
The defendant’s submissions regarding the enforceability of the Loan Agreement      20
The plaintiffs’ submissions regarding the enforceability of the Loan Agreement          23
Analysis................................................................................................................ 24

Conclusion regarding the Loan Agreement.................................................................. 29

The Guarantee............................................................................................................................. 31
The SOC and the plaintiffs’ evidence............................................................................. 31
The Defence........................................................................................................................ 32
The Bower Affidavit and the Proposed Amended Defence....................................... 32
Conclusion regarding the Guarantee............................................................................. 33

The Mortgage............................................................................................................................... 33
The SOC and the plaintiffs’ evidence............................................................................. 33
The Defence........................................................................................................................ 34
The Bower Affidavit and the Proposed Amended Defence....................................... 35
Conclusion regarding the Mortgage............................................................................... 36

The advance of the Loan amount............................................................................................. 36
The SOC.............................................................................................................................. 36
The Defence........................................................................................................................ 36
The Bower Affidavit and the Proposed Amended Defence....................................... 36
Conclusion regarding the advance................................................................................. 37

The default................................................................................................................................... 38
The SOC and the plaintiffs’ evidence............................................................................. 38
The Defence........................................................................................................................ 39
The Proposed Amended Defence and the Bower Affidavit....................................... 40
Conclusion regarding the default................................................................................... 40

The failure to remedy the default............................................................................................. 40
The SOC and the plaintiffs’ evidence............................................................................. 40
The Defence........................................................................................................................ 41
The Proposed Amended Defence................................................................................... 42
The plaintiffs’ evidence.................................................................................................... 42
The alleged offer to pay by the defendant and rejection by the plaintiffs.. 42
The Standstill Agreement.................................................................................... 45

The defendant’s evidence – the Bower Affidavit.......................................................... 47
Analysis............................................................................................................................... 47
Conclusion regarding the failure to remedy the default............................................. 49

The plaintiffs’ entitlement to possession under the Mortgage............................................ 49
The SOC and the plaintiffs’ evidence............................................................................. 49
The Defence........................................................................................................................ 50
The Proposed Amended Defence and the Bower Affidavit....................................... 50
Analysis............................................................................................................................... 50
Conclusion regarding the plaintiffs’ entitlement to enforce the Mortgage.............. 52

The way in which the Guarantee is pleaded and whether this precludes summary judgment being entered for the plaintiffs................................................................................................... 53
The Misleading Conduct Claim and the NCC Defence, including whether the defendant is a borrower under the Loan Agreement.............................................................................................. 55
The Proposed Amended Defence................................................................................... 55
The Bower Affidavit.......................................................................................................... 57
The defendant’s submissions.......................................................................................... 59
The plaintiffs’ evidence.................................................................................................... 59
The plaintiffs’ submissions.............................................................................................. 61
Analysis – is the defendant a borrower?........................................................................ 62
Analysis – the Misleading Conduct Claim.................................................................... 63
Analysis – the NCC Defence............................................................................................ 64
Whether the Credit Code applies here............................................................. 64
Identity of the debtor........................................................................................... 65
Does the purpose of the Loan fall within the purposes identified under the Credit Code?................................................................................................................ 67
Conclusion regarding the NCC Defence........................................................... 67

Prejudice to the defendant if the Application is granted...................................................... 68

Conclusion......................................................................................................................................... 70

JUDICIAL REGISTRAR MATTHEWS:

Introduction

The plaintiffs, Win Securities Limited (‘WSL’) and Webster Dolilta Finance Ltd (‘WDF’), apply by summons filed 29 January 2018 for:

(a) Orders pursuant to sections 61 and 63 of the Civil Procedure Act 2010 (‘CPA’) and to r 22.03 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’), for summary judgment in favour of the plaintiffs; or

(b) Alternatively, for judgment pursuant to r 23.01(2) of the Rules;

(‘Application’).[1]

[1]The Application has been referred to me for hearing and determination, by orders made on the Court’s own motion, pursuant to r 84.04 of the Rules.

In seeking summary judgment, the plaintiffs seek orders that:

(a) The plaintiffs recover possession of the whole of the land described in certificate of title volume 8456 folio 597 and situate at 30 Sanday Street, Glen Waverley, Victoria (‘Property’); and

(b) The defendant pay the plaintiffs’ costs.

The Application is supported by the following affidavits:

(a) Antonino Giovanni Ruvolo, sworn 22 January 2018 (‘First Ruvolo Affidavit’). Mr Ruvolo is the managing director of WSL;

(b) Philip Charles Cunningham, sworn 22 January 2018 (‘Cunningham Affidavit’). Mr Cunningham is the managing director of WDF;

(c) Alecia Louise Roman, sworn 26 February 2018 (‘Roman Affidavit’). Ms Roman is a director of MGR Solicitors, solicitors for the plaintiffs; and

(d) Mr Ruvolo, sworn 8 March 2018 (‘Second Ruvolo Affidavit’).

The plaintiffs also rely on a letter dated 13 March 2018 from the Financial Ombudsman Service (‘FOS’) addressed to the defendant’s solicitor.[2]
[2]At the hearing on 16 March 2018, I indicated to the parties that this was the only document I was taking into account, other than the affidavits I have described in this judgment and their exhibits.

The defendant opposes the application and relies on the following affidavits:[3]

(a) The defendant, sworn 14 March 2018 (‘Bower Affidavit’); and

(b) Omar El-Hissi, sworn 16 March 2018 (‘El-Hissi Affidavit’). Mr El-Hissi is a director of NOH Legal, solicitors for the defendant.

[3]While these affidavits were filed after the time provided for in the orders made on 27 February 2018, the plaintiffs did not press an objection to the defendant relying on them and leave was granted for the defendant to do so.

The plaintiffs provided a written outline of submissions in respect of the Application. Although given opportunities to do so, the defendant did not. At the conclusion of the hearing, the parties were given an opportunity to provide short written supplementary submissions, given that a number of issued had been canvassed which had not been raised prior to that date, which they both did. It has been necessary to provide reasons for judgment which are lengthy and detailed, primarily as a consequence of both the manner in which submissions were made and the number of issues raised by the defendant.

For the reasons set out below, summary judgment will be given for the plaintiffs.

Background
The plaintiffs’ claims

This proceeding was commenced by writ filed on 30 October 2017 and statement of claim dated 27 October 2017 (‘SOC’). The plaintiffs seek an order for possession of the Property, pursuant to a mortgage executed on or about 17 March 2017 by the defendant over the Property in favour of the plaintiffs (‘Mortgage’).

The plaintiffs allege that the Mortgage was granted as security for finance provided by them to Compello Mobile and Wireless Pty Ltd (ACN 114 336 971) (‘Compello’) pursuant to a loan agreement between the plaintiffs and Compello dated on or about 9 March 2017 (‘Loan Agreement’) under which they were to advance Compello the sum of $2,170,000 (‘Loan’). The plaintiffs also allege that on or around 8 March 2017, the defendant provided them with a deed of guarantee which he had signed, guaranteeing the Loan (‘Guarantee’). Pursuant to the Loan Agreement, the Loan was advanced to Compello on or around 17 March 2017.

The plaintiffs also allege that on or about 4 September 2017, Compello defaulted under the Loan Agreement (‘Borrower’s Default’) and that on or about 13 October 2017 they served a notice on the defendant referring to the Mortgage and the default of payment of interest and giving 7 days to remedy the default or they would exercise a power of sale over the property (‘Notice to Pay’).

The plaintiffs further allege that the defendant failed to comply with the Notice to Pay and that on or around 25 October 2017 a further notice was served on the defendant advising him that the plaintiffs would take possession of the Property and exercise their power of sale. The plaintiffs say they are entitled to possession of the Property and to exercise their remedies as mortgagees.

Company searches in respect of Compello dated 26 October 2017 and 19 January 2018 show that the defendant is the sole director and secretary, and sole shareholder, of Compello.[4]
[4]First Ruvolo Affidavit, [5], [6], exhibits ‘AGR 1’ and ‘AGR 2’.

The arrangement between the plaintiffs in respect of this Loan is as follows. The application for loan was submitted to WSL, who then arranged with WDF for it to be a joint lender and mortgagee on a 50/50 basis, with WSL taking the head mortgagee role, responsibility for negotiating the terms of the Loan and being the primary contact.[5] Mr Cunningham deposes that the understanding between the plaintiffs is that whichever of them introduces the loan takes that role.[6]
[5]First Ruvolo Affidavit, [9]; Cunningham Affidavit, [1].
[6]Cunningham Affidavit, [1].

The defendant’s defence

Through his then solicitors, R.B. Flinders, the defendant filed his defence on 4 December 2017 (‘Defence’).

In the Defence, the defendant:

(a) Admitted all of the allegations summarised in paragraphs 9 to 11 above, except for the Borrower’s Default, his failure to comply with the Notice to Pay, and that the plaintiffs were entitled to possession of the Property and to exercise their remedies as mortgagees;

(b) Denied that Compello had defaulted under the Loan Agreement, that is, he denied the Borrower’s Default;[7]
[7]Defence, [9].

(c) Denied that he failed to comply with the Notice to Pay, said that he offered to pay the amount set out in the Notice to Pay but this was rejected by the plaintiffs, and said that he entered into an agreement with the plaintiffs whereby the plaintiffs agreed to withhold from issuing proceedings or entering into possession of the Property to allow him an opportunity to on-sell the Property or re-finance through an alternative bank (‘Standstill Agreement’);[8]

(d) Alleged that in breach of the Standstill Agreement, on 25 October 2017 the plaintiffs entered into possession of the Property by changing the locks and issuing this proceeding;[9] and

(e) Denied that the plaintiffs were entitled to possession of the Property and to exercise their remedies as mortgagees.[10]

[8]Defence, [11(a), (b), (c)(i)].

[9]Defence, [11(c)(ii)].

[10]Defence, [13].

Apart from the admissions noted above and what can be fairly characterised as bare denials or non-admissions, the only ‘positive’ or substantive defence pleaded by the defendant in the Defence is that relating to the ‘rejected offer’ to pay and the Standstill Agreement.

In his affidavit in opposition to the Application, the defendant purports to resile from aspects of the Defence and sets out a range of matters which he now relies on in defence of the plaintiffs’ claims.[11] He said that he would seek leave to file an amended defence, which was then currently being finalised.[12] The El-Hissi Affidavit exhibits a copy of the proposed amended defence (‘Proposed Amended Defence’).[13] These matters will be addressed when considering each element of the SOC which the plaintiffs must establish and the question of whether the defence (be it the Defence or the Proposed Amended Defence) has a real prospect of success. The use to which the Proposed Amended Defence can be put is discussed later in these reasons.
[11]Bower Affidavit, [32].
[12]Bower Affidavit, [33].
[13]The Proposed Amended Defence is exhibit ‘OEH-1’ to the El-Hissi Affidavit.

Relevant procedural history regarding the Application

At the time the Application was issued, it was listed for hearing on 9 February 2018.

On 8 February 2018, by consent the parties sought an adjournment of the hearing to 23 February 2018 and proposed directions for the filing of the defendant’s affidavit material, the plaintiffs’ reply material, and written outlines of submissions. Following consultation with the parties and their confirmation that they were available on 27 February 2018, the Application was listed for hearing on that date.

Commensurate with that now being the hearing date and the timetable proposed by the parties, on 9 February 2018 I made orders by consent that:

(a) The defendant to file and serve any affidavit in opposition to the Application by 16 February 2018;

(b) The plaintiffs to file and serve any affidavits in reply by 22 February 2018; and

(c) The parties to exchange and file written outlines of submissions by 11.00am on 26 February 2018;

(‘9 February Orders’).

On 14 February 2018, R.B. Flinders, the defendant’s solicitors on the record,[14] filed a notice of ceasing to act.
[14]A notice of appearance for the defendant had been filed by R.B. Flinders on 10 November 2017.

As at the date of the hearing, 27 February 2018, the defendant did not have a solicitor on the record, had not filed an affidavit in opposition to the Application and had not filed a written outline of submissions.

Hearing on 27 February 2018 - the defendant’s adjournment application

When the Application came on for hearing on 27 February 2018, Mr El-Hissi appeared for the defendant. He informed the Court that he had attempted to file a notice of appearance the day before but the electronic filing had been rejected. He informed the Court that he did not yet have a copy of the file from the defendant’s previous solicitors, despite requesting it, and that he needed time to review the documents. For this reason and for the reasons I will address next, the defendant sought an adjournment of the Application, to a date to be fixed. No affidavit was provided in support of the adjournment application.

The plaintiffs opposed the adjournment application. They stated that on 9 February 2018, the defendant had sent an email to them, copying Mr El-Hissi, and saying that R.B. Flinders were no longer his solicitors. The defendant had consented to the 9 February Orders but had not filed any material.

The defendant’s complaint to the Financial Ombudsman Service

Mr El-Hissi also informed the Court at the hearing that a complaint on behalf of the defendant had been lodged with FOS the day before (‘FOS Complaint’).[15] In general terms, the FOS Complaint was against WSL (WDF was not referred to) and alleged that the lender was required to comply with the ‘Uniform Consumer Credit Code’ and that the defendant did not believe this had occurred.[16]
[15]The FOS Complaint was described in general terms in oral submissions on 27 February 2018 and a copy was subsequently emailed to my associate. A copy of the FOS Complaint is exhibited to the Bower Affidavit as exhibit ‘LB-4’.
[16]Bower Affidavit, exhibit ‘LB-4’.

The defendant submitted that under the FOS terms of reference, the lodging of the FOS Complaint meant that the plaintiffs could not proceed with their Application or the proceeding while FOS was dealing with the dispute.[17]
[17]FOS Terms of Reference 1 January 2010 (as amended 1 January 2018), [13.1(a)(ii), 13.1(d)].

The plaintiffs submitted that they were not prevented by the FOS terms of reference from continuing with the Application, as FOS does not have jurisdiction over the subject of the FOS Complaint. The plaintiffs submitted that the FOS Complaint was filed for an ulterior purpose, being a belated attempt to avoid or prevent the Application being heard.

Other submissions regarding the adjournment application

Mr El-Hissi also stated that a contract for the sale of the Property had recently been executed by the defendant and the putative purchaser, and that this was a further basis for the adjournment sought.

The plaintiffs submitted that a contract of sale cannot be settled without their consent and that as yet no consent had been given. They submitted that this was not a proper basis for an adjournment.

Outcome of the adjournment application

With no affidavit material and no prior notice of either the FOS Complaint or that an adjournment would be sought due to the FOS Complaint, the Court was not in a position to then make a ruling as to whether it was in a position to continue to hear the Application on that day.[18]
[18]I note, for the sake of completeness, that paragraph 13.1(a)(ii) does not prohibit the Court in any way, rather, it functions as a prohibition on what the financial services provider can do.

Therefore, and without ruling on the other reasons given for the adjournment, I adjourned the hearing to 16 March 2018 and made directions as follows:

(a) By 4.00pm on 5 March 2018, the defendant is to file and serve written submissions as to the effect on the Application of the FOS Complaint;

(b) By 4.00pm on 9 March 2018, the plaintiffs are to file and serve written submissions in reply;

(c) By 4.00pm on 13 March 2018, the defendant is to file and serve any affidavits in relation to the FOS Complaint or in opposition to the Application.

Both parties filed written outlines in respect of whether the Application could proceed in light of the FOS Complaint.

Outcome of the FOS Complaint

By letter dated 13 March 2018 addressed to NOH Legal and copied to WSL, FOS informed the defendant that it could not consider the dispute and gave reasons for that response.

Accordingly, by the time of the hearing on 16 March 2018, the defendant no longer pressed his earlier submission that the plaintiffs could not continue with their Application. It was common ground that there was no need for the Court to make any ruling in this regard and that the Court could proceed to hear and determine the Application.[19]
[19]Transcript, 1.22-27.

Applicable principles

Section 61 of the CPA permits a plaintiff to make an application for summary judgment on the ground that the defendant’s defence or part of that defence has no real prospect of success. Section 63 of the CPA provides (subject to s 64) that the Court may give summary judgment in a civil proceeding if it is satisfied that a claim, defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has ‘no real prospect of success’.

Section 64 of the CPA provides that:

Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because—
(a) it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only a full hearing on the merits is appropriate.

The Court of Appeal has set out the test to be applied in this context in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd.[20] Upon the present state of authority:

(a)The test for summary judgment under s 63 of the [CPA] is whether the respondent to the application for summary judgment has a ‘real’ as opposed to a ‘fanciful’ chance of success;
(b)The test is to be applied by reference to its own language and without paraphrase or comparison with the ‘hopeless’ or ‘bound to fail test’ essayed in General Steel;
(c)It should be understood, however, that the test is to some degree a more liberal test than the ‘hopeless’ or ‘bound to fail’ test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
(d)At the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.

[20](2013) 42 VR 27, 40 [35] (‘Lysaght’).

Section 7(1) of the CPA sets out its overarching purpose, being to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute. Section 9 of the CPA requires the Court to have regard to these purposes in making any order or giving any direction in a civil proceeding.

An application made pursuant to s 61 of the CPA it is to be made in accordance with Part 2 of Order 22.[21]
[21]Rules, r 22.03.

Rule 22.04 provides:

(1) An application shall be made by summons supported by an affidavit—
(a)verifying the facts on which the claim or the part of the claim to which the application relates is based; and
(b)stating that in the belief of the deponent the defence to the claim or the defence to the relevant part of the claim—
(i) has no real prospect of success; or
(ii)has no real prospect of success except as to the amount of the claim or as to the amount of the relevant part of the claim.

(2)Where a statement in a document tends to establish a fact within paragraph (1) and at the trial of the proceeding the document would be admissible by or under the Evidence (Miscellaneous Provisions) Act 1958, the Evidence Act 2008 or any other Act to verify the fact, the affidavit under paragraph (1) may set forth the statement.
(3)An affidavit under paragraph (1) may contain a statement of fact based on information and belief if the grounds are set out and, having regard to all the circumstances, the Court considers that the statement ought to be permitted.
(4)The plaintiff shall serve the summons and a copy of the affidavit or affidavits and of any exhibit referred to in the affidavit or affidavits on the defendant not less than 14 days before the day for hearing named in the summons.

Rule 22.05 provides:

(1)The defendant may show cause against the application by affidavit or otherwise to the satisfaction of the Court.
(2)An affidavit under paragraph (1) may contain a statement of fact based on information and belief if the grounds are set out.
(3)Unless the Court otherwise orders, the defendant shall serve a copy of any affidavit and of any exhibit referred to in the affidavit or affidavits on the plaintiff not less than three days before the day for hearing named in the summons.

The requirements set out in Rules 22.04 and 22.05 were considered by the Court of Appeal in Daniel Simon Hausman and Lance Vincent Hodgkinson v Abigroup Contractors Pty Ltd.[22] Of the equivalent of what is now Rule 22.04 in relation to the affidavit in support of summary judgment, the Court of Appeal stated that what ‘must be verified are the facts necessary to establish a good cause of action’.[23] Once the plaintiff has established the elements of its cause of action, there is ‘something akin’ to a shifting of the evidential burden to the defendant.[24]
[22](2009) 29 VR 213; [2009] VSC 288 (‘Hausman v Abigroup’).
[23]Hausman v Abigroup, [60].
[24]See footnote 13 in the reasons of the Court of Appeal in Hausman v Abigroup, where it was stated: ‘Whether there is in fact such a burden upon a plaintiff, once the prerequisites for summary judgment have been satisfied, is a difficult question. Rule [22.05] requires a defendant, who is the subject of an application, in proper form, for summary judgment, to “show cause” why such judgment should not be granted. It may be that this imposes upon a defendant an evidential burden, or something akin thereto’.

Of the equivalent of what is now Rule 22.05, the Court of the Appeal stated the following:[25]

63The defendant must satisfy the Court that, in respect of the claim to which the application for judgment relates, a question ought to be tried, or there ought for some other reason to be a trial of that claim. The Court, if so satisfied, will give the defendant leave to defend and the proceeding will continue to trial in the ordinary way. The Court will normally require an affidavit by, or on behalf of, the defendant before it will be satisfied that the defendant is entitled to leave to defend. The standard of diligence required of the defendant in preparing a case in opposition to the application, especially if under pressure of time, is perhaps not as high as that required in preparing for trial.
64.Nonetheless, the defendant is required to use reasonable diligence to put before the Court, albeit in a summary form, all the evidence relied on in the defence. In that regard, it would generally be regarded as an injustice to the plaintiff to introduce for the first time, on appeal, evidence which was readily available for the hearing of the application, but was not produced. An affidavit filed by the defendant may contain a statement of fact based on information and belief.
65.The authorities suggest that an affidavit in opposition to an application for summary judgment must provide sufficient particulars to enable the defence case to be properly understood. A bald denial that the defendant is indebted to the plaintiff will not suffice. The affidavit should, so far as practicable, deal specifically with the plaintiff’s claim and the facts set out in the supporting affidavit to establish that claim. It should state clearly and concisely what the defence is, and identify the facts relied upon in support of that defence.

[25]Hausman v Abigroup, [63]-[65] (citations omitted).

The Court of Appeal principles in Hausman v Abigroup extracted in paragraph 43 above remain good law since the advent of the CPA.[26]
[26]Innovateq Australia Pty Ltd and Anor v Barnes and Ors [2016] VSC 618 (Ierodiaconou AsJ), referring to Capital One Securities Pty Ltd v Soda Kids Holdings Pty Ltd [2012] VSC 163 and to Portbury Development Pty Ltd v Ottedin Investments Pty Ltd and Ors [2012] VSC 490.

The Court of Appeal also stated in Hausman v Abigroup that:[27]

A judge faced with an application for summary judgment should not be required to trawl through the defendant’s material in an effort to see where there can be constructed from that material an answer to the plaintiff’s claim. It must be for the defendant to point to some material, whether legal or factual, that provides an arguable response to that claim. That is so even if it is the plaintiff who must ultimately discharge the burden of persuading the judge that there is no issue that warrants trial, and that summary judgment should therefore be granted.

[27]Hausman v Abigroup, [55].

Rule 23.01(2) provides that:

Where the defence to any claim in a proceeding is scandalous, frivolous or vexatious, the Court may give judgment in the proceeding generally or in relation to any claim.

Consideration
Court’s approach to the Application and the use which can be made of the Proposed Amended Defence

The plaintiffs had prepared for the hearing on the basis of the Defence (that is, the Defence as filed on 4 December 2017). That is unsurprising, given the late service of both the Bower Affidavit and its identification of additional matters the defendant relied upon in defence of the SOC and of the Proposed Amended Defence. The plaintiffs indicated, however, that they were able to make submissions about why the additional matters raised by the defendant did not assist him in opposing the Application.[28]
[28]Transcript, 12.14-17.

Initially, the plaintiffs appeared to adopt the position that the Application should proceed on the basis that summary judgment should be entered for the plaintiffs as the Defence had no real prospects of success, and that the Proposed Amended Defence did not play a role.[29]
[29]Transcript, 10-12.

Rule 22.05 clearly provides the defendant with an opportunity to show cause against the Application. To resist the Application, the Court of Appeal has clearly stated in Hausman v Abigroup, as referred to in paragraph 46 above, that the defendant must satisfy the Court that a question ought to be tried or for some other reason there should be a trial. I do not regard this to be confined to the defendant providing, via affidavit, the evidence to support the defence as then pleaded. Further, such an approach would be unduly restrictive and would not be consistent with the principles summarised by the Court of Appeal in Lysaght,[30] that the power to terminate proceedings summarily should be exercised with caution and only if it is clear there is no real question to be tried.
[30]As cited in paragraph 37 above at (d).

At the hearing, I indicated to the plaintiffs’ counsel Mr Best that given the defendant raised additional matters in the Bower Affidavit that are not in the Defence and that he relies on them to contend that there are triable issues (which the Court is able to take into account on the Application), the Proposed Amended Defence was useful in terms of illustrating to the Court and to the parties what the pleading would look like in respect of those matters. In determining an application for summary judgment, the Court can have regard not just to the current pleadings, but also to whether any defect in the pleadings as currently filed can be cured by an amendment. The Court can also have regard to defences raised in the defendant’s affidavit which are not currently pleaded. Pivotal to the determination of whether there are issues which ought to be tried, however, is the evidence given in the Bower Affidavit, not the Proposed Amended Defence per se.[31] Mr Best confirmed that he did not take issue with that approach.[32]
[31]Transcript, 9-10, 12-13.
[32]Transcript, 13.24, 51-52.

The defendant did not seek to make an application for leave to file the Proposed Amended Defence on the day of the hearing. I informed the parties that I would not be entertaining such an application on that day, as it required consideration of a number of matters which could not be addressed ‘on the run’, such as the adequacy of the pleading. More importantly, some of the amendments could only be made if leave was given to the defendant to withdraw certain admissions, which required consideration of the relevant rules and case law as to whether such leave ought be granted. Neither the plaintiffs nor the Court had had an opportunity to undertake that consideration. Further, leave to file the Proposed Amended Defence may well be moot if the Application is successful.

Below, I have considered each element of the claim which the plaintiffs are required to establish in order to justify summary judgment on the SOC by analysing the relevant parts of the SOC, the evidence relied upon by the plaintiffs, the Defence, the evidence relied upon by the defendant, and the Proposed Amended Defence.

To reiterate, the claim is for possession of the Property. Consideration of the following is required:

(a) The defendant’s ownership of the Property;

(b) The Loan Agreement;

(c) The Guarantee;

(d) The Mortgage;

(e) The advance;

(f) The default;

(g) The failure to remedy the default; and

(h) The plaintiffs’ entitlement to possession under the Mortgage.

The defendant has raised other matters, which also need to be considered:

(a) The way in which the Guarantee is pleaded;

(b) A defence based on the alleged misleading or deceptive conduct of the plaintiffs;

(c) A defence based on the national credit code, as contained within a schedule to the National Consumer Credit Protection Act 2009 (Cth) (‘Credit Code’); and

(d) Prejudice to the defendant if the Application is granted.

The defendant’s ownership and possession of the Property

It is common ground that the defendant is the owner and registered proprietor of the Property and that he is in possession of it.[33] Nothing further need be said about this aspect.
[33]SOC, [2(a), (b)]; Defence; [2]; Proposed Amended Defence, [2].

The Loan Agreement

The circumstances of the entry into the Loan Agreement, the parties to the Loan Agreement, and the enforceability of the Loan Agreement ended up being the key focus of the defendant’s submissions in opposition to the Application. It is therefore necessary to deal with this in considerable detail.

The SOC

The plaintiffs allege that the Loan Agreement was dated on or about 9 March 2017 and was between them as lenders and Compello as borrower. The Loan Agreement is alleged to include terms that the plaintiffs agreed to advance the sum of $2,170,000 (that is, the Loan) to Compello and that Compello agreed to repay the Loan with interest.[34] The Loan Agreement is particularised as follows:

The Loan Agreement is in writing and is set out in a letter of offer from [WSL] and [WDF] to [Compello] dated 2 March 2017 and signed by the director of [Compello] on 9 March 2017 (‘Letter of Offer’).[35]

[34]SOC, [5].

[35]SOC, particulars to [5].

Mr Ruvolo deposes to the Loan Agreement in his first affidavit. He says that he signed the Letter of Offer on behalf of the plaintiffs and it was accepted by Compello on 9 March 2017 when it was executed by the defendant for and on its behalf. He states that the Loan Agreement as pleaded comprises the Letter of Offer executed by the defendant. He then exhibits a copy of the Loan Agreement as exhibit ‘AGR-3’, which he describes as a true copy of the Loan Agreement between the plaintiffs and Compello.[36]
[36]First Ruvolo Affidavit, [7].

The Defence

The defendant admits the Loan Agreement in the Defence, as he admits paragraph 5 of the SOC. Paragraph 5 of the Defence simply states ‘He admits the allegations in paragraph 5’ of the SOC. His admissions therefore include the following:

(a) The parties to the Loan Agreement were the plaintiffs and Compello;

(b) Compello was the borrower under the Loan Agreement;

(c) The Loan was for $2,170,000 and was to be made to Compello; and

(d) Compello agreed to repay the Loan with interest.

The defendant takes no issue, in the Defence, with the description of the Loan Agreement as being constituted by the Letter of Offer which he signed as director of Compello on 9 March 2017.

The defendant’s revised position: the Bower Affidavit and the Proposed Amended Defence – the Loan Agreement is not an enforceable agreement
The defendant purports to resile from his admission of the Loan Agreement

The defendant deposes that ‘I refer to the Defence filed on my behalf of my previous lawyers, RB Flinders. I have not read this Defence prior to it being filed with this Court.’

He goes on to depose that ‘I do not agree to the admissions made at paragraphs 5 and 7 [of the Defence] and refer to the matters set out in this affidavit’. I will discuss paragraph 7 later.

The defendant says nothing more in relation to his assertion that he did not read the Defence prior to it being filed. He says nothing about the circumstances of the preparation of the Defence, such as whether he read previous drafts of it, had it explained to him, or what instructions he gave his then solicitors for its preparation or for its content. He doesn’t say whether he was provided with the Defence prior to it being filed, just that he did not read it.

The defendant’s assertion, in his affidavit, is that ‘I do not agree to the admissions made’ at paragraph 5 of the Defence. He is not specific about with which admissions in paragraph 5 he does not agree. One is left to discern that from the content of the Bower Affidavit and from the Proposed Amended Defence. Since the Bower Affidavit traverses many matters, the relevance of which is not always readily apparent, the clearest expression of what the defendant says about this is to be found in the Proposed Amended Defence.

In the Proposed Amended Defence, the defendant denies the allegations in paragraph 5 of the SOC and says further that:[37]

(a)the [Letter of Offer] did not amount to an agreement as alleged or at all;
(b)the [Letter of Offer] constituted merely an offer by the Plaintiffs to advance monies to, inter alia, the Defendant, and expressly stated that the Plaintiffs’ lawyers would, upon signature of the [Letter of Offer], prepare documentation to establish the loan;
(c)the [Letter of Offer] was simply a negotiation tool used by the parties as a convenient means of providing terms of reference for the preparation of the documentation establishing the loan;
(d)the offer contained in the [Letter of Offer] could be withdrawn or terminated on terms that were vague and uncertain (paragraph 11(y) of the [Letter of Offer]);
(e)in the premises the parties intended not to be bound by the [Letter of Offer] until the Plaintiffs’ lawyers prepared the documents to establish the loan and the [Letter of Offer] amounted to no more than agreement to agree.

[37]Proposed Amended Defence, [5].

In this way, the defendant says that the Loan Agreement as pleaded in the SOC and relied upon by the plaintiffs is not an enforceable agreement and that he was a borrower. I will deal with the latter assertion later in these reasons, as it seems to have more relevance when considering the proposed defence based on the Credit Code, however it does affect various aspects of the defendant’s revised position and the Proposed Amended Defence.

Form of the Loan Agreement

The Letter of Offer is in the form of a letter from the plaintiffs to Compello, setting out the terms of the offer, and it is signed by Mr Ruvolo on behalf of WSL. The final page of the Letter of Offer is an acknowledgment from the defendant and is signed and dated by him (‘Acknowledgment’).

Content of the Loan Agreement which is relevant to the defendant’s argument that it is not enforceable

The below description is drawn from the Loan Agreement that is exhibit ‘AGR-3’.

The document is titled ‘Loan Offer’. The second paragraph of the Loan Agreement is as follows, the capitalised terms being defined terms within the document:

IT IS AGREED in consideration of the Lender agreeing to provide financial accommodation at the request of the Borrower and the Guarantor that the parties are bound by the terms and conditions of this document. In addition, the Borrower and Guarantor must abide by the terms of any security given by the Borrower and Guarantor.

In the document, WSL and WDF together are the Lender; Compello is the Borrower; and the defendant is the Guarantor.

The Loan Agreement contains provisions dealing with failing to proceed with the loan offer, termination of it, or withdrawal from it, as follows:

11(n) Failure to proceed
Failure to proceed with the Loan Offer after acceptance will necessitate the charging of costs and fees in connection with the application, preparation of the mortgage documents, valuations and disbursements.
11(y)Right to withdraw
If any event or circumstance occurs or arises which in the opinion of the Lender causes a material adverse change either in the financial condition of the Borrower or any Guarantor or in the value or quality of the Mortgaged Property or properties over which security is to be taken, the Lender may withdraw this offer if it has not been accepted or, if it has been accepted, terminate the agreement to lend.

In the document, the Property is the Mortgaged Property.

The Acknowledgement also deals with these aspects, amongst others, and I set it out in full below (emphasis added):

I Luke Thomas Bower in our capacity as Company Director of Compello Mobile and Wireless Pty Ltd ACN: 114 336 971 accept the offer of loan on the above terms and conditions. I request the Lender to prepare the necessary documents to establish the loan. If I withdraw from the transaction before it settles, I undertake to pay the Lender’s application fees, legal costs and any disbursements incurred. The Borrower appoints the Lender as its agent to make on the Borrower’s behalf any payment to third parties as the Lender sees fit in connection with the loan and the Borrower shall reimburse in full the Lender any such payment including any GST payable thereon the Lender being in no way liable therefore.
DATED: 09/03/17 [the date is in handwriting]
Signed on behalf of
Compello Mobile and Wireless Pty Ltd
ACN: 114 336 971
[handwritten signature]
LUKE THOMAS BOWER
Director/Guarantee [sic]

There are other aspects of the content of the Loan Agreement that are relevant to this question, however these will be referred to below in the context of the defendant’s submissions and the analysis.

The defendant’s evidence regarding his understanding of the status of the Loan Agreement

It was common ground that there was an earlier letter of offer from the plaintiffs dated 7 February 2017 and signed by the defendant on 13 February 2017 in almost identical terms to the Letter of Offer, save that the loan amount in the earlier document was $2,600,000 (‘Previous Letter of Offer’).[38] Mr Ruvolo deposes that the Previous Letter of Offer was not proceeded with, due to a subsequent valuation not meeting the criteria set out by the plaintiffs.[39] The defendant does not dispute this explanation.
[38]The Previous Offer is exhibit ‘AGR-21’ to the Second Ruvolo Affidavit, which the defendant also refers to in his affidavit.
[39]Second Ruvolo Affidavit, [5]–[8].

Referring to the Previous Letter of Offer, the defendant says in his affidavit that he:[40]

believed that the document was a summary offer letter which would be followed by formal loan documents being prepared containing final loan terms and conditions. I was not aware that the offer letter was to constitute a final loan agreement but understood it to be a terms of reference for the preparation of the final documents establishing the loan being prepared. I otherwise note that the acknowledgment signed on 13 February 2017 states “… I request the Lender to prepare the necessary documents to establish the loan”. By this I understood that the loan would be established by the documents to be prepared by the Plaintiffs’ lawyers following this document.

[40]Bower Affidavit, [25].

The defendant then goes on to state that the Letter of Offer contained a statement to the same effect as set out in the preceding paragraph.[41] He does not state whether he had the same understanding about the Letter of Offer as he deposed to regarding the Previous Letter of Offer. Strictly speaking, therefore, there is no evidence as to his understanding of the Letter of Offer in this regard, although the submissions made on his behalf at the hearing were to the effect that he had the same understanding of the Letter of Offer as deposed to regarding the previous one. I have treated it this way.

The defendant’s submissions regarding the enforceability of the Loan Agreement

[41]Bower Affidavit, [26].

The defendant submitted that the enforceability of the Loan Agreement was ‘the most critical point; that is, the highest triable issue that is before the court.’[42] The defendant’s primary submission was that the Loan Agreement falls into that category of agreement identified by the High Court in Masters v Cameron[43] as not giving rise to an enforceable contract.
[42]Transcript, 85.18-19.
[43](1954) 91 CLR 353.

In that case, the High Court stated as follows:[44]

Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution.
…
Cases of the third class are fundamentally different. They are cases in which the terms of the agreement are not intended to have, and therefore do not have, any binding effect of their own. The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, as in Summergreene v Parker[45] or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed. These possibilities were both referred to in Rossiter v Miller.[46] Lord O’Hagan said: ‘Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed …’

[44](1954) 91 CLR 353, 360-361 (some citations omitted).

[45](1950) 80 CLR 304.

[46](1878) 3 App Cas 1124.

The defendant submits that the Loan Agreement is a document that only deals with major matters and that it contemplates that others will or may be regulated by provisions to be introduced into the formal document. According to the defendant, although it sets out the major matters such as the amount, interest rates ‘and so on’, it is not ‘a document that comprehensively sets out all the terms of the conditions of the suite of documents that will comprise the loan.’[47]
[47]Transcript, 57.11-20.

The defendant relies on the phrase ‘I request the Lender to prepare the necessary documents to establish the loan’ in the Acknowledgment to say that the signed Letter of Offer does not constitute an enforceable agreement, since other documents will be prepared to ‘establish the loan’. He says that until those documents are prepared and executed, there is no binding agreement.

The defendant also relies on other aspects of the Loan Agreement as being matters which will be regulated by provisions to be introduced into the formal document. Primarily, the defendant relies on the description of the security in the Loan Agreement as being a ‘Mortgage by Luke Thomas Bower … in favour of the Lender in respect of [the Property]’, and a ‘Guarantee by the Guarantor’ with the ‘Guarantor’ being identified as ‘Luke Thomas Bower’. The defendant submits that the Loan Agreement does not set out any of the terms of the mortgage or which memorandum of common provisions it incorporates and that it does not set out any terms of the guarantee. This is said to be indicative of the Loan Agreement not comprising the enforceable contract.

The defendant also submits that the provisions of the Loan Agreement which permit either party to terminate or withdraw from the transaction[48] mean that it is not an enforceable contract, as the parties have reserved to themselves a right to withdraw at any time until the formal document is signed.
[48]Loan Agreement, paragraphs 11(n) and (y) and the Acknowledgment.

As a result of these matters, the defendant submits that the Loan Agreement falls within the third category of documents identified by the High Court in Masters v Cameron.[49] It is said to only deal with major matters and that others will be dealt with in the formal document, and the parties can withdraw at any time until the formal document is signed. Mr El-Hissi was not able to take me to any authorities which considered documents of the type considered here, such as the Letter of Offer, or the phrase in the Acknowledgment relied on by the defendant.[50]

The plaintiffs’ submissions regarding the enforceability of the Loan Agreement

[49](1954) 91 CLR 353.

[50]Transcript, 88.17–89.6.

The plaintiffs submitted that the defendant had the Letter of Offer, and he then had the documents sent under cover of letter dated 3 March 2017 from the plaintiffs’ solicitors to Kamal Kohli (the defendant’s mortgage broker[51]) enclosing a letter of the same date from the plaintiffs’ solicitors to Compello and copies of the following documents for signing (‘3 March Letter’):[52]
[51]Bower Affidavit, [3].
[52]Exhibit ‘LB-2’ to the Bower Affidavit is described as a copy of the 3 March 2017 letters to Mr Kohli and to Compello: Bower Affidavit. [10]. Exhibit ‘LB-2’ does not include the 3 March Enclosures. See Transcript, 91.4-7, where Mr El-Hissi says that the documents which establish the loan so far as the plaintiff is concerned are the 3 March Enclosures.

1.   Mortgage in duplicate
2.   Memorandum of Common Provisions (for your retention and including copies of the Mortgage and Letter of Offer)
3.   General Security Agreement
4.   Company Warranty Deed
5.   Deed of Guarantee
6.   Australian Legal Practitioner’s Certificate
7.   Form of Acknowledgment given by a Borrower
8.   Mortgagor/Borrowers Acknowledgment and Undertaking
9.   Disbursement Order and Authorisation x 2
10. Certificate of Execution by a Company
11. Direct Debit Authority x 2
12. Direct Debit Service Agreement (for your retention)
(‘3 March Enclosures’)

The plaintiffs say that presumably the defendant had looked at them and was satisfied with them, as he signed the 3 March Enclosures (on 8 March 2017). He then signed the Letter of Offer (on 9 March 2017), which is his acceptance of it. The plaintiffs say that the terms of the Letter of Offer are express that upon signing it becomes the agreement. The plaintiffs submit that the requirement for matters such as the provision of the mortgage and guarantee were conditions to be fulfilled for the Loan to be advanced. They say that the Loan Agreement was a complete agreement.[53]

Analysis

[53]Transcript, 94.9–95.5.

As a starting point, the context for the High Court identifying three categories of agreements (the third category often being described in subsequent cases and commentary as an ‘agreement to agree’) is set out in the opening sentence of the passage cited above. It bears repeating here:

Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases.[54]

[54]Masters v Cameron (1954) 91 CLR 353, 360.

Here, is the Loan Agreement one where terms of a contractual nature have been agreed and is it also agreed that there will be a formal contract, other than the Loan Agreement itself?

While the defendant did not submit as such in these terms, presumably he relies on the phrase in the Acknowledgment that the Lender was to prepare documentation to ‘establish the loan’ as putting the Loan Agreement within this context. During the course of argument, I raised with Mr El-Hissi the question of how to interpret this phrase, and he responded that it was so obvious as to go without saying. He said that it referred to the 3 March Enclosures.

In submissions, the defendant did not clearly draw this together. I understand the import of the submission to be that the Loan Agreement did not establish the loan and it was the 3 March Enclosures which performed that function, but since the plaintiffs plead the Loan Agreement and rely on it to found their right to possession of the Property, they cannot succeed on the Application.

In submissions, the defendant appeared to place some significance on the fact that the 3 March Enclosures did not include the Letter of Offer. The significance of this was not explained, however I understood it to be that if the 3 March Enclosures were the documents which established the loan, then the Letter of Offer not being one of those enclosures meant that it was not a document establishing the loan.

Whether the Loan Agreement is enforceable is to be determined by reference to the document as a whole. In the context of the whole of the document, I do not accept the defendant’s submissions that the Loan Agreement is unenforceable. I do not consider that a defence on these grounds has a real prospect of success. My reasons are set out below.

First, I do not accept that the Loan Agreement is a document falling within the context of the third class of cases identified by the High Court in Masters v Cameron.[55] There is nothing within the document to suggest that it was intended by the parties to record their agreement as to major matters in some (other) formal contract. It is apparent from the terms of the Loan Agreement that this was the formal contract, for the reasons I have set out below.
[55](1954) 91 CLR 353.

The defendant appeared to accept that the parties’ intention is to be gleaned from the document itself. Referring to the defendant’s evidence as to his understanding that the Loan Agreement was a ‘terms of reference for the preparation of the final documents establishing the loan being prepared’,[56] Mr El-Hissi stated that ‘it’s obviously an objective test, not a subjective test. It may be a relevant consideration as to what he believed it was or wasn’t. It’s not a determinative consideration’.[57]
[56]Bower Affidavit, [25]-[26]. The full extract is set out at paragraph 74 of these reasons.
[57]Transcript, 85.30–86.3. See also Transcript, 58.19-22.

In my view, it is clear that the intention is to be determined objectively from the document itself and not by reference to a party’s subjective intention.[58] Even if that were not the case, I would not give any weight to the defendant’s evidence in this regard, which appears to be no more than self-serving statements to fit the position he has now adopted.
[58]Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, [552]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, [40]; GT Corporation Pty Ltd v Amare Safety Pty Ltd [2008] VSC 143, [302].

Second, the indicia of an enforceable contract are present in the Loan Agreement. The Letter of Offer is an offer which sets out the terms of the agreement, there is consideration, and by signing the Acknowledgment, there is acceptance.

I do not accept the defendant’s submission that the fact that the Loan Agreement does not set out the terms of the mortgage, the guarantee, or the other collateral documents, means that there were key terms which remained to be negotiated. Rather, reading the Loan Agreement as a whole, the provision of such documents, such as the executed mortgage and guarantee, were conditions which had to be fulfilled. The second last paragraph of the Loan Agreement is as follows:

If this offer is not accepted within seven (7) days it will lapse. If the Borrower wishes to take up the loan please sign where indicated, initial each page and keep a copy for the Borrower’s records. Upon acceptance of the offer, the Lender’s Solicitors will be instructed to prepare mortgage documents.

The Loan Agreement contains all of the provisions one would expect it to contain as to matters such as the loan amount, interest rate and default interest, repayment obligations, events of default and rights on default, termination, Borrower’s warranties. Apart from the separate documents referred to in the previous paragraph, the defendant did not identify any of the provisions of the Loan Agreement which required further negotiation or documentation.

Third, and similarly, I do not accept the defendant’s submission that the right to withdraw from or terminate the Loan Agreement meant that the parties had reserved the right to ‘withdraw at any time until the formal document is signed’. Rather, it is apparent from the wording of the provisions relied on by the defendant that these provisions simply set out when the parties could withdraw or terminate and what the consequences of such action would be. In effect, these provisions created contractual rights to withdraw from or terminate the agreement. Indeed, the wording of paragraph 11(y) of the Loan Agreement (which is one of the provisions relied on by the defendant) is consistent with it being an enforceable contract: in the circumstances identified in that paragraph, the plaintiffs can withdraw the offer if it has not been accepted or, if it has been accepted, ‘terminate the agreement to lend’. This is consistent with the Letter of Offer, once signed by the defendant on behalf of the Borrower, being the ‘agreement to lend’.

Fourth, the terms of the Loan Agreement are not consistent with it being a mere ‘agreement to agree’:

(a) The second paragraph of the Letter of Offer is set out in paragraph 69 above. It clearly states that it is agreed that the parties ‘are bound by the terms and conditions of this document’. The structure and content of the Letter of Offer is to set out the terms and conditions of the offer, being the loan offer, and to provide for its acceptance. By accepting the offer, the Borrower agrees to be bound by it.

I specifically drew this paragraph to Mr El-Hissi’s attention and asked how this was consistent with the defendant’s submissions, and his response was that ‘the final statement in that letter clearly says that the loan is – well, it doesn’t say the loan is not established, but by implication it means documents will be drafted to establish the loan’.[59] He did not address this paragraph directly, rather he referred to submissions he had already made;
[59]Transcript, 61.9-22.

(b) Clause 4 of the Loan Agreement states that ‘If the initial drawdown of the loan has not been effected within thirty (30) days from the date of acceptance of the Loan Offer, the offer will lapse’. Clause 11(n) of the Loan Agreement states that ‘Failure to proceed with the Loan Offer after acceptance will necessitate the charging of costs and fees in connection with the application, preparation of the mortgage documents, valuation and disbursements’. These are consistent with the accepted Letter of Offer comprising the loan agreement, as it is acceptance of the Letter of Offer that triggers the rights and obligations therein referred to;

(c) Clause 11(z) of the Loan Agreement provides that the Lender may assign or novate its rights and/or obligations under ‘this document’, the Security, any other collateral document or security, or any part of them; and that the Borrower may not assign, novate, transfer or deal with its rights or obligations under ‘this document’, the Security, or any other collateral document or security. The references in this context to ‘this document’ are inconsistent with it being a mere ‘agreement to agree’;

(d) Clause 11(bb) states that ‘If there is inconsistency between this document and the Security the terms and conditions of this document will prevail’. Such a provision is inconsistent with an ‘agreement to agree’; and

(e) Special conditions (e) (loan purpose) and (f) (repayment strategy) both state that if the purpose and strategy described in those special conditions are not accurate, then amongst other things, the Borrower should ‘not sign this Letter of Offer’. If the Borrower was not at risk of being bound by the document upon signing, then there would be no need for such a warning.

Fifth, I do not accept the defendant’s submission that the key phrase relied upon by him in the Acknowledgment about the Lender preparing the ‘necessary documents to establish the loan’ means that the Loan Agreement is not enforceable. In my view, this merely acknowledges that, the Borrower having accepted the loan offer contained in the Letter of Offer, further documentation is to be prepared. It does not signify that there is no loan agreement without that further documentation. The 3 March Enclosures may be, as the defendant submits, the documents that were referred to in this part of the Acknowledgment, but that does not mean that the Loan Agreement is not binding in its own right.

Sixth, even if the defendant’s submission that the Loan Agreement was a mere ‘agreement to agree’ because other documents are referred to in the Loan Agreement but are not set out in detail (such as the mortgage and the guarantee) was correct, the evidence is that those other documents were received by Compello and the defendant before the Letter of Offer was signed by the defendant. The Letter of Offer was signed by the defendant on 9 March 2017, and the 3 March Enclosures (which included the mortgage and guarantee) were signed by the defendant and/or Compello, as the case may be, on 8 March 2017. Therefore, to the extent that the defendant says the terms of the Loan Agreement were not fully known to him because they merely referred in general terms to other documents, that cannot be accepted.

Conclusion regarding the Loan Agreement

For these reasons, I do not consider the defence in respect of the Loan Agreement, as articulated in the Proposed Amended Defence and as supported by the Bower Affidavit, to have a real prospect of success. In my view, the proposed defence that the Loan Agreement is not enforceable and is nothing more than an ‘agreement to agree’ has no real prospect of success.

In coming to that view, I have not considered whether the defendant would, or should, be given leave to withdraw his admissions in regard to the Loan Agreement. I have approached the question on the basis of what is in his affidavit and the Proposed Amended Defence and the submissions made on his behalf.

Given my conclusion in this regard, it is unnecessary for me to make any findings on the defendant’s evidence that he did not read the Defence before it was filed and that he does ‘not agree with’ certain admissions in the Defence, including those dealing with the Loan Agreement. If it was necessary to make any findings, then I would note the following:

(a) Mr Best informed the Court that upon receipt of the Bower Affidavit, the plaintiffs had told the defendant’s solicitor that they required the defendant to attend the hearing for cross-examination and that they had been informed that he would not attend. Mr El-Hissi informed the Court that the request for the defendant’s attendance had been made in the late afternoon preceding the hearing and that the defendant could not be present.[60] The Court may order any party or the maker of any affidavit to attend the hearing of the application for summary judgment for examination and cross-examination,[61] which also means that the Court may decline to make such an order. The plaintiffs did not seek an order or adjournment of the hearing to enable cross-examination to occur. That being said, it remains the case that the defendant did not make himself available for cross-examination and so the plaintiffs were not able to test his evidence at the hearing. In all these circumstances, I note that the defendant’s evidence was not tested via cross-examination, but take it no further than that;
[60]Transcript, 70.1-5. Given when the Bower Affidavit was provided to the plaintiffs, I do not regard the timing of the plaintiffs’ request as unreasonable.
[61]Rules, r 22.07(1).

(b) The defendant had the opportunity to fully and properly explain what he meant by this aspect of his evidence, in that his affidavit could have dealt with it, but he elected not to do so. There are a number of aspects of this evidence which are unexplained (see paragraph 63 above), which tends to suggest that the defendant may have chosen not to do so as they do not advance his case. He just says he did not read the Defence before it was filed and does not agree to certain admissions. For example, he does not say that he didn’t know what the Defence contained, that it wasn’t prepared in accordance with his instructions, that he didn’t have a copy of it, or that the Defence as filed differed in material respects from earlier drafts he may have seen;

(c) The plaintiffs submit that there are aspects of the Defence which have clearly been drawn on the defendant’s detailed instructions, particularly paragraph 11 of the Defence (which contains no amendments in the Proposed Amended Defence), which is particularised by reference to text messages between the defendant and the plaintiffs and email correspondence between them. This is the paragraph which also pleads the Standstill Agreement, which is particularised as being an oral agreement. The plaintiffs also refer to the documents provided by the defendant’s then solicitors in response to a request for the documents referred to in those particulars, which Mr Ruvolo exhibits to the First Affidavit, and which they say must have been obtained from the defendant. I accept the plaintiffs’ submission in this regard. It stretches credulity for the Defence to refer to such matters but for the defendant to somehow now say that he does not agree with other aspects of the Defence; and

(d) The plaintiffs submit that the defendant does not state, in his affidavit, that the Proposed Amended Defence is true and correct. This may be due to the Bower Affidavit being prepared prior to the El-Hissi Affidavit and the Proposed Amended Defence.[62] All that the defendant states in his affidavit in this respect is that he believes he has an arguable defence and intends to instruct his lawyers to file an amended defence.[63] In my view, where the Bower Affidavit provides a factual basis for the elements of the Proposed Amended Defence, that is sufficient for the purposes of considering whether the defendant has a real prospect of successfully defending the claims made against him. Saying he does not agree to certain admissions is not, of itself, providing a factual basis for what is mere assertion.

[62]The defendant states that at the time of swearing his affidavit, an amended defence is being finalised: Bower Affidavit, [33].

[63]Bower Affidavit, [41].

These matters reinforce, in my view, that the defence regarding the Loan Agreement as set out in the Proposed Amended Defence has no real prospect of success.

The Guarantee
The SOC and the plaintiffs’ evidence

At paragraph 6 of the SOC, the plaintiffs allege that:

On or about 8 March 2017 [the defendant] provided the following documents to [WSL] and [WDF]:
(a)A Deed of Guarantee signed by [the defendant] and witnessed by his Solicitor Christine Brophy guaranteeing the loan (the ‘Guarantee’)

There are other documents listed in paragraph 6 of the SOC, which are not relevant to this question.

By this paragraph, the plaintiffs allege that the defendant signed the Guarantee and that this guaranteed the Loan.

The plaintiffs submit that as security for the loan, the defendant provided a personal guarantee in favour of the plaintiffs, together with a mortgage over the Property. I will deal with the mortgage in the next section. Mr Ruvolo deposes that the defendant executed the Guarantee and exhibits a copy of the Guarantee.[64] The parties to the Guarantee were WSL and WDF as Lender and the defendant as Guarantor. The terms of the Guarantee include:
[64]First Ruvolo Affidavit, [18]; Exhibit ‘AGR-8’.

(a) The Guarantor irrevocably and unconditionally guarantees to the Lender the due and punctual payment of the Debt, the Debt being defined as all money which Compello is liable to pay to the Lender, including interest;

(b) The Guarantor must pay the Debt immediately on demand to the Lender;

(c) The Guarantee is continuing and irrevocable;

(d) The Lender has no obligation to give notice to the Guarantor of any default by Compello or to include in any demand made under the Guarantee particulars of the default of Compello resulting in such demand;

(e) Any demand to be made upon the Guarantor under the Guarantee can be signed by the Lender’s solicitor and may be served by (amongst other nominated means) post to the Guarantor’s address specified in the Guarantee or as last known to the Lender or by email; and

(f) The Lender is not obliged to take any action against any person or under any security prior to claiming from the Guarantor.

The Defence

Paragraph 6 of the Defence is an admission of paragraph 6 of the SOC.

The Bower Affidavit and the Proposed Amended Defence

The defendant does not resile from his admission of paragraph 6 of the SOC in the Defence. The Proposed Amended Defence contains that admission, unamended, and then adds:

In further answer to paragraph 6, the Defendant says that:
(a)He did not receive any advice from Christine Brophy as expressly set out in the Australian Legal Practitioner’s Certificate;
(b)Christine Brophy held a registered caveat on the Property which caveat was removed at the insistence of the Plaintiffs in order to allow the Plaintiffs to register the Mortgage.

There was no submission on behalf of the defendant that this proposed amendment to paragraph 6 of the Defence had any bearing on his admission of the Guarantee. The defendant does not refer to the Guarantee in his affidavit.

Conclusion regarding the Guarantee

Based on the above, it appears that it is common ground that the defendant executed the Guarantee and that its purpose was to guarantee the Loan.

The Mortgage
The SOC and the plaintiffs’ evidence

The following allegations are made in the SOC regarding the Mortgage:

3.On or about 17 March 2017 Mr Bower executed a mortgage over the Property in favour of [WSL] and [WDF] (the ‘Mortgage’).
PARTICULARS

The Mortgage is in writing and is contained in the following documents:
(a)a two-page section 74 Transfer of Land Act form entitled ‘MORTGAGE’ dated 17 March 2017 signed by Mr Bower as mortgagor (the ‘s 74 Form’); and

(b)the Gadens’ Memorandum of Common Provisions registered No AA1888 being a twenty-eight page (28) document attached to the s 74 Form entitled ‘Memorandum of Mortgage’ (‘Memorandum of Common Provisions’)

4. The Mortgage:
(a) identifies the Property as the ‘Land/s’ in the s 74 Form;
(b)comprises express written terms as set out in the Memorandum of Common Provisions which include the following:
i.Clause: 10.2: “at any time after an event of default … at any time after an Event of Default occurs how and when the Mortgagee in its absolute discretion decides, the Mortgagee may sign anything and do anything the Mortgagee considers appropriate to recover the Secured Money and deal with the Secured Assets. Without limiting the rights specified in the last sentence, the Mortgagee may do any or more of the following”:
ii.Clause 10.2(a): “Demand and require immediate payment of the Secured Money”;
iii.Clause 10.2(c): “Eject occupants from, enter or otherwise take possession of, and withdraw from possession of the Mortgaged Land”;
iv.Clause 10.2(d): “Sell, assign, transfer, dispose, exchange, barter, and grant options in respect of the Secured Assets”.

5.The Mortgage was granted as security for finance provided by [WSL] and [WDF] to [Compello] (the ‘Borrower’) under a loan agreement between the Borrower and [WSL] and [WDF] dated on or about 9 March 2017 (the ‘Loan Agreement) which included the following express terms …

Mr Ruvolo deposes that the defendant executed the Mortgage, that it was granted by the defendant as security for the Loan, and he exhibits a copy of the Mortgage (including the Memorandum of Common Provisions as pleaded).[65]
[65]First Ruvolo Affidavit, [15], exhibit ‘AGR-7’.

Mr Ruvolo further deposes that the defendant’s liability under the Mortgage arises by reference to its terms, including clauses 2 (in particular, clause 2.3), 3, 10 and 12 of the Memorandum of Common Provisions and the definitions at clause 13 for the following terms: ‘Collateral Documents’ (which includes any guarantee); ‘Guarantor’; ‘Secured Assets’ (which includes the further term ‘Mortgaged Land’, being the Property); and ’Secured Money’.

The Misleading Conduct Claim and the NCC Defence, including whether the defendant is a borrower under the Loan Agreement
The Proposed Amended Defence

Paragraph 14 of the Proposed Amended Defence is as follows:

Further and in the alternative, the Defendant says further that:
a.in or about early January 2017 he approached Mr Kamal Kohli, mortgage broker (Kamal), to arrange a refinance of the Property;
b.at all material times Kamal acted as the Plaintiff’s [sic] agent within the course and authority of the agency;
c.Kamal suggested that an application for finance be made to the Plaintiffs;
d.on the recommendation of Kamal the Defendant completed an Application for Mortgage [(Mortgage Application)] on 20 January 2017;
e.the Defendant was named as the Applicant in the [Mortgage Application] as well as Compello. Compello was included as a joint applicant on the recommendation of Kamal;
f.at the time of making the [Mortgage Application] Kamal told the Defendant that the loan would be in the form of a residential mortgage secured against the Property and Compello was only required as a joint applicant to strengthen the application;
PARTICULARS

The representations identified in paragraphs (c) to (f) were oral and were to the effect alleged (Oral Representations)

g.by:
i.the [Letter of Offer] the Plaintiffs represented that the Plaintiffs would engage their lawyers to prepare documentation to establish the loan advance to the Defendant and by implication this represented that the [Letter of Offer] did not establish the loan;
ii.the [3 March Letter] the Plaintiffs formally confirmed the advance to the Defendant and provided for execution copies of the [sic], inter alia, the Mortgage. The said letter identified the subject matters as “Advance to Luke T Bower”;
(Express Representations).

h.Each of the Oral Representations and the Express Representations (collectively Representations) were made in trade and commerce and the provision of financial services in accordance with the Australian Securities and Investments Commission Act (Cth) (ASICA);
i.Based on the Representations and induced thereby, the Defendant executed, inter alia, the Mortgage and the other documents identified in paragraph 6 of the [SOC].
j.The Representations were false, misleading and/or deceptive in that:
i.the advance by the Plaintiffs to the Defendant was not a residential mortgage;

ii. the advance was to Compello and not to the Defendant;
iii.the Plaintiffs’ lawyers did not prepare documents to establish the loan but rather relied on the [Letter of Offer] as establishing the loan.

k.Further, on or about 30 January 2017, unknown to the Defendant and without the Defendant’s authority, Mr Lesley Cameron from Liberty Network, a broker acting under the direction and/or with the authority of the Plaintiffs, amended the [Mortgage Application] as follows:
i.On page 1 of 9 a cross being put on “Guarantor” and strike through on “Borrower” above the Defendant’s name;
ii.On page 3 of 9 the value of the Property being increased to $4m;
iii.On page 4 of 9 the Funds Position section being completed;
iv.On page 6 of 9 the Loan Purpose Checklist deleted with a visible section redacted when compared to the original [Mortgage Application] as completed by the Defendant

[(Amended Mortgage Application)]
l.The Plaintiffs, based on the [Amended Mortgage Application], agreed to offer the advance to the Defendant.
m.Further and alternatively, notwithstanding the purpose of the loan advance stated in the [Mortgage Application], ie. to refinance the existing mortgage on the Property used as the Defendant’s principal place of residence and to otherwise apply the remaining proceeds mostly to refinance vacant land and construct a property for investment purposes, and in breach of section 13(3) of the [Credit Code] … the Plaintiffs required the Defendant to execute a business purpose declaration.
n.By reason of the Representations and the matters referred to in paragraph 5 above,[128] the Mortgage was a “credit contract” within the meaning of section 4 [of] the [Credit Code].
[128]I presume this cross-reference to paragraph 5 of the Proposed Amended Defence is a reference to the allegation that the Loan Agreement is not an enforceable agreement.
o.In accordance with section 5 of the [Credit Code], the [Credit Code] applies to the Mortgage as:
i.The monies advanced under the Mortgage were predominantly used to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes.

p.In breach of the [Credit Code] the Plaintiffs failed, refused and/or neglected to:
i.ensure that the Mortgage complied with the disclosure requirements set out in sections 16 and 17, including, without limitation, providing the Form 5 and the Form 7 as set out in the Regulations to the [Credit Code];
ii.act in accordance with section 72 and in circumstances where it was communicated that the Defendant was suffering financial hardship in making the repayments under the Mortgage;
iii.to provide the Defendant with a payout statement in accordance with section 83(1);
iv.comply with section 88 insofar as the Notice to Pay was allegedly served and relied upon by the Plaintiffs;
v.accept the Defendant’s proposal to repay all monies allegedly in arrears and to otherwise remedy the default in accordance with section 89.

q.By reason of the conduct of the Plaintiffs as aforesaid the Plaintiffs have engaged in conduct that:
i.was misleading and deceptive within the meaning of sections 12DA and/or 12DC of ASICA; and
ii.was unconscionable within the meaning of section 12CB of ASICA.

r.By reason of the Plaintiff’s [sic] as aforesaid, the Loan Agreement (as alleged by the Plaintiffs) and the Mortgage are void, and/or ought to be set aside pursuant to section 12GM of the ASICA.

I have treated paragraphs (a) to (l), (q) and (r) of paragraph 14 of the Proposed Amended Defence as the Misleading Conduct Claim, and paragraphs (m) to (p) as the NCC Defence.

The Bower Affidavit

Generally speaking, the Bower Affidavit contains evidence in respect of most of these allegations.

The defendant states, on numerous occasions, that he believed the arrangement was for a residential mortgage advanced to him as borrower.[129] He also refers, several times, to the Property being his principal place of residence, both at the time of entering into the arrangements with the plaintiffs and currently.[130]
[129]Bower Affidavit, [8], [9], [11], [12], [27].
[130]Bower Affidavit, [3], [8], [18], [40].

In addition, the defendant states that he approached Mr Kohli to arrange the refinancing of the Property, that Mr Kohli was a mortgage broker he had had previous dealings with, that Mr Kohli suggested a private lender be approached and subsequently suggested WSL as a lender.[131] He further states that he was not aware that other brokers, as referred to by Mr Ruvolo,[132] were involved in the application process other than Kamal.[133] He gives evidence as to the representations which he says were made to him.
[131]Bower Affidavit, [3]-[5].
[132]Second Ruvolo Affidavit, [3], [5].
[133]Bower Affidavit, [22].

The defendant also deposes to the circumstances under which he executed the 3 March Enclosures, including the solicitor’s certificate which was signed by Christine Brophy, who he says was a person who alleges he owes money to, and that she wanted him to execute the documents so that a repayment could be made to her of part of the monies he owed to her. He says that the plaintiffs required Ms Brophy’s caveat over the Property to be removed so that the Mortgage could be registered. He also says that Ms Brophy did not give him any ‘actual legal advice’ about the loan documents and their terms and effect.[134]
[134]Bower Affidavit, [13]-[14].

Further, the defendant states that he did not understand that the business purpose declaration which he had signed was so that the Loan would not be subject to the Credit Code and he did not appreciate the significance of the declaration at the time he signed it.[135]
[135]Bower Affidavit, [15].

The defendant’s submissions

The defendant made submissions based on the Bower Affidavit, along with further submissions. Mr El-Hissi referred to paragraph 11(a) of the Loan Agreement, which provides:

The Borrower will be required to execute the form of Mortgage and Common Provisions used by the Lender. Copies may be inspected at the Lender’s office at any time.

He submitted that if Compello is the borrower and is not mortgaging any property, that provision cannot be satisfied. Mr El-Hissi acknowledged that it may be a typographical error but submitted it added to the confusion.[136] He also relied on the subject line of the 3 March Letter as pleaded at paragraph 14(g)(ii) of the Proposed Amended Defence.

[136]Transcript, 92.1-8.

In submissions, Mr El-Hissi referred to the defendant’s statements in his affidavit that the Property was his principal place of residence. However, he also stated that it was not clear why the plaintiffs, in their submissions, had placed so much emphasis on this issue. Mr El-Hissi said that he was not sure that the point is “extremely relevant, perhaps insofar as raising prejudice is concerned”. I raised the possibility that the plaintiffs had emphasised it since the defendant had mentioned it so many times in the Bower Affidavit, and questioned whether this was to assist him with the NCC Defence. Mr El-Hissi stated that the defendant did not have to live in the Property to make a complaint under the Credit Code. He confirmed that the relevance of the assertion that the Property is the defendant’s principal place of residence was relevant only so far as the prejudice he would suffer if the Application was granted.[137] I will return to this later.
[137]Transcript, 71.21–72.18.

The plaintiffs’ evidence

Self-evidently, since the NCC Defence is raised only in the Proposed Amended Defence, the plaintiffs have not yet addressed it in their own pleadings.

Mr Ruvolo deposes to the loan application process and the background to entering into the Loan Agreement and the other documents which constitute the 3 March Enclosures. In summary, he:

(a) States that he was approached on about 30 January 2017 by a broker, Mr Punnaka DeZoysa (who regularly submits loan applications to him). Mr DeZoysa told him that he had been contacted by another broker, Kamal, who was acting for Compello and the defendant and who wanted Mr DeZoysa to broker the loan on his behalf. A loan application was submitted,[138] seeking finance approval for $860,000 with $800,000 of it required ‘to refinance vacant land and construct a property for investment purposes’ and the remainder ‘to provide funds for a future business/investment purpose’. The Property was stated to be ‘vacant’. There were a number of aspects of the documentation which were incomplete;[139]
[138]Second Ruvolo Affidavit, exhibit ‘AGR 19’. This is the document referred to as the Mortgage Application in the Proposed Amended Defence, as described above.
[139]Second Ruvolo Affidavit, [3].

(b) Took the view that by the Mortgage Application only a second registered mortgage over the Property was able to be offered, since the amount to be borrowed was not sufficient to pay out the first registered mortgagee, being Westpac Bank;[140]

(c) States that after speaking with Mr DeZoysa and explaining that WSL could not assess the application on the information provided, a newly completed and signed loan application was submitted. In this application, the defendant was listed as a guarantor and was seeking finance approval for Compello to borrow $2,600,000. A first registered mortgage over the Property was proposed as security. A completed and signed Loan Purpose Checklist and Business Purpose Declaration were also submitted.[141] The latter document states that the credit is ‘to be applied wholly or predominantly for: business purposes; or investment purposes other than investment in residential property’ and contained a warning that it should only be signed if it was for one of those purposes and that by signing the declaration the debtor may lose protection under the Credit Code.[142] It was this application which the plaintiffs subsequently approved;[143] and

(d) Gives a number of examples where the defendant provided the address of ‘Unit 1, 14 Bevis Street, Bentleigh East VIC 3165’ (‘East Bentleigh Address’) as his residential address (and not the Property), including on the Mortgage Application where the East Bentleigh Address was listed as his current address and his address after settlement of the loan.[144]

[140]Second Ruvolo Affidavit, [4].

[141]Second Ruvolo Affidavit, [5], exhibit ‘AGR 20’.

[142]Exhibit ‘AGR 20’. The Business Purpose Declaration was signed by the defendant. The name of the borrower is not set out in that document.

[143]Second Ruvolo Affidavit, [6].

[144]Second Ruvolo Affidavit, [3], [9], exhibit ‘AGR 23’.

The plaintiffs’ submissions

The plaintiffs rely on the documents executed by Compello and by the defendant, being the Loan Agreement and the documents referred to in paragraph 6 of the SOC, to establish that the borrower is Compello only and not the defendant.

I have already summarised the key provisions of the Loan Agreement and how the various persons are defined. Compello is the Borrower, the defendant is the Guarantor, and the defendant is providing the Guarantee as security for the Loan, which is in turn secured by the Mortgage over the Property.

The Guarantee is consistent with this, as is evident from the summary provided in paragraph 108 above and from a perusal of the document itself.[145]
[145]See First Ruvolo Affidavit, exhibit ‘AGR 8’.

The other documents, being the solicitor’s certificate, acknowledgment given by a borrower or surety to a solicitor, and the borrowers acknowledgment and undertaking,[146] are consistent with the Borrower being Compello and not the defendant.
[146]First Ruvolo Affidavit, exhibit ‘AGR 9’.

The plaintiffs also submitted that the defendant’s evidence as to the Property being his principal place of residence should be rejected, on the basis that it was mere assertions and the defendant had not grappled with or led evidence to contradict the documentary evidence that the East Bentleigh Address, or some other address, was his principal place of residence and not the Property.

Analysis – is the defendant a borrower?

I accept the plaintiffs’ submissions in this regard. I do not consider there to be any credible evidence from the defendant that is capable of giving him a real prospect of establishing that he is a borrower. Further, and given the conclusions I have reached in paragraphs 209 and 211 below, the Representations do not assist the defendant in this regard.

While it was not put in this way, either in the Bower Affidavit or in the defendant’s submissions, I have assumed that the main purpose of his attempts to establish that he is a borrower is to give him a basis for the NCC Defence.

There were no submissions made as to how the defendant being a borrower assists him with other elements of his defence. He admits that the Loan was advanced, he admits the Mortgage, and he contends that the advance was made pursuant to the Mortgage. He has produced no cogent evidence to establish that there was not a default in the required payments or that he has not failed to remedy the defaults by making payment to the plaintiffs. In those circumstances, even if he is a borrower, he has produced no credible evidence to establish that the Mortgage is not able to be enforced. It is not clear where this takes the defendant’s argument.

In the Bower Affidavit, the defendant draws attention to the Notice to Pay being addressed to both he and Compello. In submissions, this was said to support the contention that they were co-borrowers. In my view, this does not necessarily follow, as it is consistent with the monies being owed by Compello as borrower and the defendant as guarantor.

Analysis – the Misleading Conduct Claim

The defendant’s evidence in regard to Kamal does not establish that Kamal was the plaintiffs’ agent.[147] No submissions were made by Mr El-Hissi about this. There is nothing in that evidence to establish any of the usual indices of agency. Mr Ruvolo’s evidence regarding his contact with the mortgage brokers[148] is inconsistent with Kamal being an agent of the plaintiffs. Accordingly, there is no real prospect of the defendant successfully establishing that the Oral Representations were made by or on behalf of the plaintiffs: there is no allegation that the plaintiffs made these representations themselves, just that they were made by their agent Kamal. That being the case, there is therefore no real prospect of the defendant establishing that the Oral Representations constitute contraventions of the ASICA by the plaintiffs or that they are a basis for obtaining the relief he seeks, being that the Loan Agreement and the Mortgage are void and/or ought to be set aside.
[147]See paragraph 193 above.
[148]See paragraphs 199(a) and (c) above.

Given the findings I have already made as to the enforceability of the Loan Agreement and the meaning of ‘establish the loan’ within the Acknowledgment, it follows that I do not regard the first of the two pleaded Express Representations[149] as providing a basis for a defence which has real prospects of success.
[149]See paragraph 14(g)(i) of the Proposed Amended Defence.

True it is that the heading of the 3 March Letter referred to the subject matters as ‘Advance to Luke T Bower’. However, it is apparent, and it ought to have been apparent to the defendant, that the 3 March Enclosures, both in themselves and taken with the Letter of Offer, were a suite of documents whereby Compello was the borrower, the defendant was the guarantor, and security for the loan was to be provided in the form of the Mortgage given by the defendant over the Property as well as charges given by Compello and the Guarantee. Taking the evidence as a whole, there is no real prospect that the second of the two pleaded Express Representations will provide a basis for a successful defence.[150]
[150]See paragraph 14(g)(ii) of the Proposed Amended Defence.

Given these conclusions, the defendant’s attempts to discredit or cast doubt upon the bona fides of the solicitor’s certificate, the acknowledgement signed by the defendant and given to Ms Brophy, the borrower’s acknowledgment and undertaking and the company warranty deed, or to reduce or eliminate the plaintiffs’ ability to rely on them, do not assist him with establishing that his defence has a real prospect of success. In any event, it does not appear from the Proposed Amended Defence that these matters form part of his defence.

It is not apparent, either from the Proposed Amended Defence or the defendant’s submissions, what use is sought to be made of his allegations regarding the amendments to the Mortgage Application which he says were not authorised. In my view, the proposition that somehow the Loan Agreement or the Mortgage ought to be rendered void because they are different to what the defendant says was contained in the Mortgage Application has no real prospect of successfully founding a defence. For example, he has not explained, or made any attempt to explain, how it is that he (or Compello) accepted a loan of $2,170,000 when the amount on the Mortgage Application was for $860,000. That alone would have illustrated to him at the time of receiving the Letter of Offer, the 3 March Letter and the 3 March Enclosures that the arrangements being entered into were different to those which he says apply to the Mortgage Application.

Analysis – the NCC Defence
Whether the Credit Code applies here

The Credit Code applies to contracts which are ‘credit contracts’ within the meaning of the Credit Code.[151] Section 5(1) of the Credit Code sets out the provision of credit to which the Credit Code applies. Section 5(1) is set out below (emphasis added):
[151]Credit Code, s 4.

5(1)This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of precontractual obligations) is proposed to be entered into:
(a) the debtor is a natural person or a strata corporation; and
(b)the credit is provided or intended to be provided wholly or predominantly:
(i)for personal, domestic or household purposes; or
(ii)to purchase, renovate or improve residential property for investment purposes; or
(iii)to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes; and

(c)a charge is or may be made for providing the credit; and
(d)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.

Section 204 of the Credit Code defines ‘strata corporation’ to mean:

(a)a body corporate incorporated in relation to land subdivided wholly or mainly for residential purposes under a law of this or some other jurisdiction providing for strata, cluster, precinct or other subdivision of land; or
(b)a body corporate whose issued shares confer a right to occupy land for residential purposes.

Relevantly, the application of the Credit Code turns on the identity of the debtor and the purpose of the provision of credit.

Identity of the debtor

Compello is identified as the sole borrower under the Loan Agreement. Compello is a company registered in Victoria, has an Australian Company Number (‘ACN’), and is regulated by the Corporations Act 2001 (Cth) (amongst other things).[152] A strata corporation created in Victoria must be called ‘Owners corporation 1 –Plan No [the relevant plan number]’,[153] and a strata corporation created in Victoria is not a corporation within the meaning of the Corporations Act 2001 (Cth) and consequently does not have an ACN.[154]
[152]First Ruvolo Affidavit, exhibit ‘AGR 1’.
[153]Subdivision (Procedures) Regulations 2000, reg 57(1) and (2).
[154]Subdivision Act 1988, s 29.

It is readily apparent that the provisions of s 5(1) are cumulative,[155] such that for the contract to be a credit contract within the meaning of the Credit Code and for the Credit Code to apply, the debtor must be a natural person or a strata corporation. Compello is neither of these. Therefore, unless the defendant can establish that he was a borrower or co-borrower under the Loan Agreement, then the Credit Code does not apply to the Loan Agreement.
[155]Credit Code, s 5(1).

For a guarantee to be regulated by the Credit Code, the guarantee must secure obligations under a credit contract that itself is regulated by the Credit Code.[156]
[156]Credit Code, s 8.

Here, in entering into the Guarantee, the defendant guaranteed Compello’s obligations under the Loan Agreement. Putting it in more neutral terms, the defendant did not provide any evidence to contradict the proposition that he had given the Guarantee in order to secure the Loan or to explain why he executed the Guarantee. As noted above, in the Proposed Amended Defence the defendant admits the Guarantee and that it secured the Loan. During the course of submissions, in response to a question from me, Mr El-Hissi properly acknowledged these matters.[157]
[157]Transcript, 82.13-28.

For a mortgage to be regulated by the Credit Code, the mortgage must secure obligations under a credit contract or guarantee that is itself regulated by the Credit Code.[158]
[158]Credit Code, s 7.

Unless the Loan Agreement is a credit contract regulated by the Credit Code, then the Guarantee is not regulated by it either. Unless the Loan Agreement or the Guarantee are regulated by the Credit Code, then the Mortgage is not regulated by it either.

Given the findings I have already made regarding the defendant’s contention that he is a borrower and that the advance was made to him under the Mortgage, it follows that he is not a ‘debtor’ within the meaning of s 5(1)(a) of the Credit Code. Accordingly, the Credit Code does not apply to the Loan Agreement, the Guarantee or the Mortgage. Therefore, there is no real prospect of the defence succeeding in this regard.

Does the purpose of the Loan fall within the purposes identified under the Credit Code?

If the Property was the defendant’s principal place of residence, then this would seem to be a use that falls within s 5(b)(i) of the Credit Code, being ‘personal, domestic or household purposes’. In my view, the weight of the evidence is that at the time the Loan Agreement was entered into and for the period after that time, the Property was not the defendant’s principal place of residence. The preponderance of the evidence is that his principal place of residence was the East Bentleigh Address.[159]
[159]See paragraph 199(d) above, also see Second Ruvolo Affidavit, exhibit ‘AGR 20’.

However, that does not dispose of the question. It seems tolerably clear from the documentation that the purpose of the Loan was to refinance the Westpac loan and provide further capital for the completion of the works at the Property and possibly for other property investments. There is no evidence before the Court as to the purpose for which the Westpac loan was granted, so I am unable to be sure that the purpose of the Loan Agreement falls within s 5(b)(iii) of the Credit Code. However, it seems to me that if it does not fall within that section, then it is possible that it may fall within s 5(b)(ii) of the Credit Code, if it is a residential property for investment purposes and if the defendant is able to refute any evidence to the contrary, such as the text of the business purpose declaration which he signed. I make no finding in that regard, as it is not necessary to do so.

I am unable to put it any higher than this, as there was no evidence led or submissions made as to the allegations of breach of the Credit Code which are pleaded in paragraph 14(p) of the Proposed Amended Defence. This means that the defendant has not established that he has a real prospect of defending the plaintiffs’ claims by his allegations of breach of the Credit Code.

Conclusion regarding the NCC Defence

Since I do not regard the defendant as having a real prospect of successfully establishing that he is a borrower or co-borrower of the Loan, it follows that the Credit Code has no application here. Accordingly, the NCC Defence and the attempt to render the Loan Agreement and/or the Mortgage void or have it set aside on the basis of that defence, such that the plaintiffs are not able to enforce them, also has no real prospects of success.

Prejudice to the defendant if the Application is granted

Mr Bower deposes that on 3 March 2018 he signed an unconditional contract of sale for the Property, with a sale price of $2,705,000 and settlement due on 27 April 2018 (‘Proposed Sale’). He also deposes that a deposit of $270,000 has been paid and is held on trust by the selling agent.[160]
[160]Bower Affidavit, [37], [38].

He further states that:

At the moment the Property is my principal place of residence. The sale proceeds from the Contract will be sufficient to discharge the monies due to the mortgagee and will be sufficient to pay the costs of the selling agent. In the event that the sale is not proceeded with I will be liable to the selling agent for a commission as the property has been sold and the contract is unconditional.[161]
…
I also believe that the prejudice which I stand to suffer in the event that summary judgment is granted far outweighs any prejudice to be suffered by the plaintiff in the event that the sale of the property proceeds.[162]

[161]Bower Affidavit, [40].

[162]Bower Affidavit, [41].

The defendant submitted that the money from the Proposed Sale will extinguish the liability to the plaintiffs. He says that the plaintiffs will not suffer any prejudice if possession is not granted, since there is a guaranteed sale where the plaintiffs hold the first registered mortgage and the title to the Property.

Mr El-Hissi also submitted that because the Property is the defendant’s principal place of residence and he would be ‘kicked out of where he lives, without having access to some of the surplus funds from settlement, he will suffer prejudice’. As I noted during the hearing, however, there is no evidence from the defendant in regard to the matters raised by Mr El-Hissi. The defendant says nothing about this at all, including as to matters such as how long he would need to move out, or whether he has somewhere else to live. Further, he says nothing about the surplus funds referred to by Mr El-Hissi. Mr El-Hissi invited me to draw inferences regarding these matters, but stated that he was unable to take it any further.[163] The only evidence which the defendant has produced as to prejudice is that referred to in paragraph 229 above.
[163]Transcript, 74.22–75.22.

The plaintiffs submit that the defendant has not sought their consent to the Proposed Sale of the Property, or to the previous sale a short time prior to then which was not proceeded with.[164]
[164]The defendant deposes to this previous sale contract, which fell away when the purchaser exercised their rights under the ‘cooling-off’ provisions: Bower Affidavit, [34] – [36]. Mr Ruvolo states that no consent has been sought to that sale and that the plaintiffs’ solicitors informed the defendant’s solicitor that it was not consented to: Second Ruvolo Affidavit, [11].

Mr Ruvolo deposes that he has concerns about any potential sale by the defendant. Mr Ruvolo refers to four caveats currently registered on the title to the Property, and that he is informed by the first caveator that a notice of default dated 13 December 2017 was served on the defendant showing the amount in default pursuant to the first caveator’s unregistered mortgage to be $740,997.26. He states that he believes that based on the information available to him regarding the current value of the Property, there will be insufficient funds to repay the plaintiffs’ debt in full and satisfy the first caveator, let alone the further three caveators.[165]
[165]Second Ruvolo Affidavit, [12].

Mr Ruvolo also refers to the third registered caveat, which was lodged on behalf of the caveator by the defendant’s solicitors where the caveator claims an interest pursuant to a mortgage with the defendant dated 19 October 2014.[166] It appears that this caveat was lodged on 9 February 2018.
[166]Second Ruvolo Affidavit, [12]; Roman Affidavit, [8] and exhibit ‘ALR 4’.

The Bower Affidavit contains no information regarding any of the four caveats currently registered on the title to the Property.

In my view, the defendant has not established that the potential prejudice to him warrants the Application being refused. The only potential prejudice which should be considered is that for which there is evidence: therefore, it is only the consequences of the Proposed Sale not proceeding which is a source of potential prejudice. No submissions were made as to whether, and in what circumstances, prejudice of the kind contended for is a factor to be taken into account when determining the Application. I do not need to make any finding in that respect, as I do not regard the defendant’s evidence as establishing prejudice which would warrant the dismissal of the Application.

Conclusion

For these reasons, I am satisfied that the plaintiffs have established the necessary elements of their claim to possession of the Property.

The defendant seeks to defend the claims based on his allegations that the Loan Agreement is not an enforceable agreement; that the Loan was made to him pursuant to the Mortgage; that he offered to pay the amount set out in the Notice to Pay and this was rejected by the plaintiffs, such that he did not fail to comply with the Notice to Pay; that he entered into the Standstill Agreement with the plaintiffs, with the result that the plaintiffs should have withheld from entering into possession of the Property or issuing proceedings; that the Credit Code applies to the Loan and the Mortgage, which the plaintiffs have breached, and that the Misleading Conduct Claim results in the Loan Agreement and the Mortgage being void or subject to being set aside. I do not regard the defendant’s defence (either as pleaded in the Defence or foreshadowed in the Proposed Amended Defence, supported by the Bower Affidavit) to have a real prospect of success.

I do not accept the defendant’s submission that the fact that the plaintiffs wanted to cross-examine him, coupled with there being four affidavits filed in support of the Application, goes to whether a triable issue exists. Further, I do not accept the defendant’s submission that the larger volume of evidence which needs to be produced and the facts that need to be negated or agreed leads to the conclusion that triable issues exist. It is a matter of coming to a view based on the pleadings, evidence and submissions and by application of the relevant principles of law.

I am not persuaded by the defendant’s submissions as to prejudice if the Application is granted.

Accordingly, the Application will be granted and orders will be made that the plaintiffs recover possession of the Property. I will hear the parties on the form of orders and as to costs.

[2018] VSC 180

20 April 2018