FEDERAL COURT OF AUSTRALIA Prasad v Victory Miracle Centre Inc. [2009] FCA 855 SAM KUMARI PRASAD, JAITISH ANUJ and SAM KUMARI PRASAD & NITISH ROBINDRA ANUJ AS EXECUTORS OF THE ESTATE OF THE LATE ARNUCH PRASAD v VICTORY MIRACLE CENTRE INC. ABN 97 956 015 019, EPHRAIM INVESTMENTS PTY LTD ACN 110 851 468, GEORGE PRAKASH MANI, NEIL AVINESH LAL, ANAND PRASAD, RHG MORTGAGE CORPORATION LTD ACN 065 912 932, MORTGAGE GUIDANCE PTY LIMITED ACN 105 571 622, RHG HOME LOANS PTY LIMITED ACN 053 725 741, FINANCE ANALYSIS SERVICES OF AUSTRALIA PTY LIMITED (FORMERLY KNOWN AS NATIONAL BROKERS GROUP PTY LTD) ACN 093 126 393, and NATIONAL BROKERS GROUP PTY LIMITED ABN 20 094 881 231 NSD 401 of 2009 COWDROY J 10 AUGUST 2009 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 401 of 2009 General Division BETWEEN: SAM KUMARI PRASAD First Applicant JAITISH ANUJ Second Applicant SAM KUMARI PRASAD & NITISH ROBINDRA ANUJ AS EXECUTORS OF THE ESTATE OF THE LATE ARNUCH PRASAD Third Applicant/Sixth Cross-Respondent to the First Cross-Claim/Fifth Cross-Respondent to the Second Cross-Claim AND: VICTORY MIRACLE CENTRE INC. ABN 97 956 015 019 First Respondent EPHRAIM INVESTMENTS PTY LTD ACN 110 851 468 Second Respondent/Fourth Cross-Respondent to First Cross-Claim/Third Cross-Respondent to Second Cross-Claim GEORGE PRAKASH MANI Third Respondent NEIL AVINESH LAL Fourth Respondent/Fifth Cross-Respondent to First Cross-Claim/Fourth Cross-Respondent to Second Cross-Claim ANAND PRASAD Fifth Respondent RHG MORTGAGE CORPORATION LTD ACN 065 912 932 Sixth Respondent/Cross-Claimant to First Cross-Claim MORTGAGE GUIDANCE PTY LIMITED ACN 105 571 622 Seventh Respondent/Third Cross-Respondent to First Cross-Claim/Second Cross-Respondent to Second Cross-Claim RHG HOME LOANS PTY LIMITED ACN 053 725 741 Eighth Respondent/First Cross-Respondent to First Cross-Claim/Cross-Claimant under Second Cross-Claim FINANCE ANALYSIS SERVICES OF AUSTRALIA PTY LIMITED (FORMERLY KNOWN AS NATIONAL BROKERS GROUP PTY LTD) ACN 093 126 393 Second Cross-Respondent to First Cross-Claim/First Cross-Respondent to Second Cross-Claim NATIONAL BROKERS GROUP PTY LIMITED ABN 20 094 881 231 Seventh Cross-Respondent to the First Cross-Claim/Sixth Cross-Respondent to the Second Cross-Claim JUDGE: COWDROY J DATE OF ORDER: 10 AUGUST 2009 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Court confirms orders 1 and 3 dated 7 August 2009. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 401 of 2009 General Division BETWEEN: SAM KUMARI PRASAD First Applicant JAITISH ANUJ Second Applicant SAM KUMARI PRASAD & NITISH ROBINDRA ANUJ AS EXECUTORS OF THE ESTATE OF THE LATE ARNUCH PRASAD Third Applicant/Sixth Cross-Respondent to the First Cross-Claim/Fifth Cross-Respondent to the Second Cross-Claim AND: VICTORY MIRACLE CENTRE INC. ABN 97 956 015 019 First Respondent EPHRAIM INVESTMENTS PTY LTD ACN 110 851 468 Second Respondent/Fourth Cross-Respondent to First Cross-Claim/Third Cross-Respondent to Second Cross-Claim GEORGE PRAKASH MANI Third Respondent NEIL AVINESH LAL Fourth Respondent/Fifth Cross-Respondent to First Cross-Claim/Fourth Cross-Respondent to Second Cross-Claim ANAND PRASAD Fifth Respondent RHG MORTGAGE CORPORATION LTD ACN 065 912 932 Sixth Respondent/Cross-Claimant to First Cross-Claim MORTGAGE GUIDANCE PTY LIMITED ACN 105 571 622 Seventh Respondent/Third Cross-Respondent to First Cross-Claim/Second Cross-Respondent to Second Cross-Claim RHG HOME LOANS PTY LIMITED ACN 053 725 741 Eighth Respondent/First Cross-Respondent to First Cross-Claim/Cross-Claimant under Second Cross-Claim FINANCE ANALYSIS SERVICES OF AUSTRALIA PTY LIMITED (FORMERLY KNOWN AS NATIONAL BROKERS GROUP PTY LTD) ACN 093 126 393 Second Cross-Respondent to First Cross-Claim/First Cross-Respondent to Second Cross-Claim NATIONAL BROKERS GROUP PTY LIMITED ABN 20 094 881 231 Seventh Cross-Respondent to the First Cross-Claim/Sixth Cross-Respondent to the Second Cross-Claim JUDGE: COWDROY J DATE: 10 AUGUST 2009 PLACE: SYDNEY REASONS FOR JUDGMENT 1 Before the Court is an application by the sixth respondent ('RHG Mortgage') and eighth respondent ('RHG Home Loans') (both parties act as one in these proceedings and hereafter when referring to both will be known as 'RHG') seeking an order that the hearing of the proceedings which is fixed to commence on Monday 10 August 2009 be adjourned and that the fixture be accordingly vacated. The application is supported by an affidavit of Ms Kristina Fraser sworn on 7 August 2009. Such application is opposed by the applicants in the proceedings ('the Prasads') who have provided written submissions and an affidavit of Ms Emma Nicole Macfarlane sworn on 7 August 2009. No other party opposes the application but the second cross-respondent to the first cross-claim ('Finance Analysis Services') and seventh cross-respondent to the first cross-claim ('National Brokers Group') (who act together in the proceedings) seek the costs thrown away in consequence of any adjournment. 2 The claim arises out of allegations made by the Prasads that in consequence of representations made to the late Mr Arnuch Prasad and Mrs Sam Prasad by the first to the fifth respondents (hereafter, when referred to as a whole, 'the respondents') they were induced to enter into a financial transaction with the second respondent ('Ephraim Investments') whereby an amount of approximately $412,000 was advanced to Ephraim Investments for the purpose of building a church on land to be purchased by the first respondent ('Victory Miracle Centre Inc'); that upon the purchase and subdivision of land the funds advanced would be repaid; and that the late Mr Arnuch Prasad and his wife would be given a home at North Arm Cove near Newcastle on land owned by the respondents. The monies advanced were raised by a loan from RHG Mortgage to the Prasads, secured by a mortgage ('the mortgage') granted to RHG Mortgage over real property owned by Mr Prasad. RHG Mortgage, as appears below, has joined as cross-respondents the mortgage brokers involved in the transaction together with third parties with whom it had a relationship concerning the accreditation of the mortgage brokers. RELEVANT FACTS 3 The proceedings were commenced by the Prasads on 11 May 2009 when a Statement of Claim and Application were filed which, whilst nominating RHG Mortgage as a party, raised no allegations against it. The first directions hearing was held on 20 May 2009 at which stage the Prasads indicated that they wished to file and serve an Amended Statement of Claim ('ASOC'). 4 On 27 May 2009 the Prasads filed the foreshadowed ASOC which articulated a claim against RHG Mortgage. RHG Home Loans was not made a party at that stage. 5 On 11 June 2009 a second directions hearing was held. At that hearing, RHG Mortgage foreshadowed that it would issue a cross-claim against the fourth respondent ('Mr Lal'), a mortgage broker. On 25 June 2009 RHG Mortgage filed its cross-claim against certain of the existing parties and adding RHG Home Loans and Finance Analysis Services to the proceedings as the first cross-respondent and second cross-respondent respectively. On 10 July 2009 RHG Mortgage made minor amendments to the cross-claim which are, for present purposes, of no consequence. 6 On 16 July 2009 the solicitors for the first, third, fourth and fifth respondents filed a notice of ceasing to act. 7 On 27 July 2009 a Further Amended Application and Further Amended Statement of Claim ('FASOC') were served together with a Notice to Admit Facts. On 28 July 2009 a second affidavit sworn by Mrs Prasad was filed. 8 The matter came before the Court on 30 July 2009 for directions. The Court was informed by counsel for the Prasads at the directions hearing that amendments in the FASOC were in a 'narrow compass'. As it transpires, the FASOC contained numerous paragraphs of alleged breaches by RHG Mortgage and RHG Home Loans in respect of the obtaining of the mortgage over the property of Mr Prasad. RHG then indicated that it would have difficulty in preparing itself for the hearing which had been fixed to commence on 10 August 2009 by orders made on 11 June 2009. However, the Court confirmed the hearing date and made orders for the further conduct of the proceedings. 9 A second cross-claim was filed on 6 August 2009 by the second cross-claimant RHG Home Loans. It did not add any new parties to the proceedings. 10 The further application by RHG for an adjournment of the proceedings came before the Court at 4.15 pm on Friday 7 August 2009. RHG'S SUBMISSIONS 11 RHG submits that the FASOC which was served on 27 July 2009 raises new allegations which will require it to make further investigations. RHG foreshadows that both lay and expert evidence may be required and that it is impossible to conduct such investigations in the available time. RHG also submits that the affidavit of Mrs Prasad filed on 28 July 2009 describes in more detail circumstances surrounding the execution of the mortgage documents. No sufficient opportunity has been afforded to investigate certain of those allegations which are raised for the first time. 12 RHG also submits that the capacity of the late Mr Prasad to enter into the mortgage is clearly put in issue. The Prasads foreshadow the calling of medical evidence from the late Mr Prasad's treating doctor, namely Dr Goyal. His report was only served on 29 July 2009. RHG submits that important questions arise relating to such issue. They include whether Dr Goyal, a general practitioner, has the appropriate qualifications to provide any expert opinion relating to the capacity of the late Mr Prasad to comprehend the transaction. Dr Goyal is overseas until 10 August 2009, that is, the proposed first day of the hearing, and no medical records are yet available. 13 The second and seventh cross-respondents have delivered to RHG an affidavit which is yet to be filed in defence to RHG's cross-claims. The factual matters raised will require investigation and response. Accordingly RHG submits that it will suffer serious prejudice if the hearing proceeds on 10 August 2009. 14 RHG submits that there is no prejudice to the Prasads if the proceedings are deferred. RHG has made an offer to suspend the accrual of interest on the mortgage until any adjourned hearing date. It has already provided an undertaking not to take steps to enforce its rights under the mortgage until the determination of the proceedings. THE PRASADS' SUBMISSION 15 The Prasads submit that there is no merit in the submission that the FASOC served on 27 July 2009 contained any significant new allegations. Rather, it simply provided the detail of the allegations made by the Prasads against RHG Mortgage. It submits that the allegation that RHG Mortgage breached its lending guidelines, although not raised previously, is in the nature of particulars to the general allegation already made in the previous ASOC that prudent lending practices had not been adopted when the mortgage was effected. In substance, the Prasads submit that there is no merit to the allegation that new issues have been raised and submit that the amendments made as contained in the FASOC are in a narrow compass. 16 As to the medical condition of the late Mr Prasad, the Prasads acknowledge that the report of Dr Goyal dated 5 February 2009 had not been referred to previously. However, the Prasads maintain that the medical condition of the late Mr Prasad was an issue already notified in the previous Statement of Claim and is raised as an issue going to his special disadvantage only and that no claim is made of non est factum. 17 The late Mr Prasad had made his last will and testament on or about the same time as the entry into the mortgage. RHG has subpoenaed from the late Mr Prasad's solicitors the records relating to such will, but they will not be available until after the commencement of the hearing. The Prasads submit that since non est factum is not raised the records are irrelevant, and a claim for privilege will be raised. If such claim is not upheld the Prasads submit that such records could be inspected during the hearing. 18 The Prasads also submit that the vacation of the hearing date will severely undermine the orderly allocation of business in the Court. They rely upon the fact that on 30 July 2009 RHG sought aN adjournment of the hearing date and that such application was refused. The Prasads submit that in accordance with the principles referred to by the High Court of Australia in Aon Services Australia Limited v Australia National University [2009] HCA 27 and P Dawson Nominees Pty Ltd (ACN 004 743 408) and Another v Australian Securities and Investments Commission and Others (No 2) (2009)255 ALR 466the Court should not exercise its discretion in granting any adjournment which will delay the ultimate disposition of the proceedings and that RHG must show that there has been a material change in circumstances since the last request for an adjournment was rejected. 19 Further, the Prasads rely upon the affidavit of Ms Macfarlane which refers to the mental stress of Mrs Prasad continuing until the resolution of these proceedings; the extra expense which would be incurred if the proceedings were adjourned; and the fact that Mrs Prasad alleges that the wives of the third to fifth respondents (Messrs Mani, Lal and Prasad) have been exerting pressure on her to settle the proceedings. For these reasons it is submitted that there would be a severe prejudice for the Prasads if the hearing date is not maintained. FINDINGS 20 The Court is mindful that since the orders were made on 11 June 2009 fixing the hearing date to commence on 10 August 2009, the proceedings have significantly expanded in their scope. There have been two cross-claims filed in that time. Further, contrary to the submission that the amendments contained in the FASOC which was served on 27 July 2009 were in a narrow compass, significant new factual issues are raised concerning RHG's conduct. The allegations will require investigation concerning compliance with RHG Mortgage's lending guidelines; the identification of the particular guidelines which are alleged not to have been followed; and the preparation of witness statements relating to the requirements of the guidelines and of compliance therewith. Further, the FASOC added a new respondent, namely RHG Home Loans, which, while already a party to the proceedings by reason of the cross-claim, was not included as a party in the Prasads' ASOC. 21 The medical evidence concerning the late Mr Prasad's ability to comprehend legal documentation will become a critical issue, even though non est factum has not been raised. At present there is only a generalised report which the Prasads intend to rely upon, being the report which is addressed as 'to whom it may concern' and which covers the medical conditions in generalised terms of both Mr and Mrs Prasad. Dr Goyal is at present overseas and will not return to Australia until 10 August 2009. His medical records will not be available before 11 August 2009. Those records will need to be examined by RHG and it is foreseeable that medical evidence will be called in reply. Additional issues have been foreshadowed concerning the qualifications of Dr Goyal to express any opinion concerning the ability of the late Mr Prasad to execute documents. No explanation has been tendered why his report dated 5 February 2009 was not served prior to 29 July 2009, namely more than six weeks after the directions were made fixing the hearing for 10 August 2009. 22 The evidence discloses that the late Mr Prasad executed a will at or about the same time that he signed the relevant mortgage documentation. His capacity to sign a will and also to understand a mortgage will become an issue in the proceedings. RHG have subpoenaed the solicitor for the estate requiring production of documents relevant to the execution of the will. Such records are not available and the Prasads have indicated that a claim for privilege will be made. It is unsatisfactory that RHG should have to begin the hearing of the matter with such issue being unresolved. 23 The affidavit of Mrs Prasad which was served on 28 July 2009 provides substantially more detail to some general allegations made in her originating affidavit. Other matters are clarified. It is only reasonable that RHG be afforded the opportunity of seeking instructions from its employees in order to determine whether the allegations are correct. 24 For the above reasons, the issues raised between the Prasads and RHG could only be said to be, at best, in the early stages of preparation in respect of both parties. 25 Further considerations arise regarding RHG in its capacity as a cross-claimant. The cross-claims essentially seek indemnity or contribution from the cross-respondents. The defences of two of the cross-respondents, namely Finance Analysis Services and of National Brokers to the first and second cross-claims were only filed on 6 and 7 August 2009 respectively. Allegations of contractual waiver are raised which will result in the necessity for discovery and inspection to be carried out. 26 It has not been submitted that the various cross-claims instituted by RHG are without foundation. In these circumstances the Court infers the cross-claims to be legitimate steps in the proceedings designed to ensure that all issues between the relevant parties and against third parties are incorporated into the proceedings. Whilst RHG foreshadowed the filing of cross-claim as early as 11 June 2009, the Court is prepared to infer from the nature of the cross-claims now made that the true extent of the possible relief to which RHG might be entitled were not known at that stage. As was observed by Goldberg J in P Dawson Nominees at [38] it is for the Court to determine whether, having considered all of the matters available, a Court would exercise its discretion in varying interlocutory orders previously made. 27 The Court is satisfied that the circumstances arising in the proceedings before the High Court in Aon have no parallel with the present proceedings. The Prasad's claim from its inception on 11 May 2009 has progressed rapidly. The Court is not satisfied that RHG has been guilty of any delay which could attract adverse criticism. At [25] of Aon French CJ emphasised that the overriding consideration on an application of this kind is the interest of justice as well as the consideration of the efficient use of the Court's resources. The Court considers that its resources would be more effectively allocated in providing more time for the parties to prepare in preference to commencing a hearing of a matter which is patently not ready for hearing. Such hearing, if commenced as scheduled, would likely suffer adjournments and delays due to the lack of finality both in the state of the pleadings of the Prasads and accordingly of the evidence to be relied upon by the parties. Further, at [30] of Aon French CJ referred to the fact that there had been no adequate explanation for the delay. In the present circumstances the explanation lies in the fact that there has been the necessity to join in additional parties to the proceedings in the very short period of time since the commencement of the proceedings. 28 The Prasads submitted that a material change in circumstances must be shown from the previous unsuccessful adjournment application (namely the directions hearing on 30 July) if a fresh application is made. The Court observes the first application was made before the FASOC had been considered by RHG; before the second cross-claim was instituted; and before the affidavit of one of the cross-respondents had been filed foreshadowing their defence. 29 There is however a further consideration which the Court must take into account. The Prasads notified the Court on 7 August 2009 (during the contested adjournment application) that they intend to seek leave to rely upon a Second Further Amended Statement of Claim ('2nd FASOC') which has not yet been served. As between the Prasads and RHG, the draft 2nd FASOC handed up during the hearing of the adjournment application suggests that several of the claims made against RHG will not be pursued. However, RHG is entitled to consider all of the issues to be raised against it and to determine the ramifications of the deletion of certain of the claims made against it. 30 Significantly the proposed 2nd FASOC will raise additional claims under the Trade Practices Act against the conduct of the third to fifth respondents, namely Messrs Mani, Lal and Prasad. That is, a hitherto unarticulated claim is to be made against each of the third to fifth respondents. They are legally unrepresented. If the hearing proceeded on 10 August 2009 (8 and 9 August 2009 being a Saturday and Sunday) and if the Court granted leave for the filing of the 2nd FASOC, it would have the consequence that the individual respondents would be facing litigation in respect of which they had had no opportunity whatsoever to obtain any legal advice. 31 The Court is satisfied beyond any doubt that the proceedings are simply not ready to be conducted so as to do justice to all parties. This is not to imply criticism of any party. Rather, it is merely a reflection that during the past 12 weeks since its inception the litigation has become highly complex by virtue of the additional parties, amended pleadings and cross-claims. It would not be in the interest of any party for the litigation to proceed in this premature state. 32 For the above reason, the Court will grant the application that the hearing be adjourned and the hearing dates fixed for 10 August 2009 and following be vacated. The Court will make no order for costs at this stage but rather will reserve any question of costs. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cowdroy. Associate: Dated: 10 August 2009 Counsel for the Applicants: Ms McDonald Solicitor for the Applicants: Marsdens Lawyers Counsel for the Third Respondent: Respondent appeared in person Counsel for the Fourth Respondent: Respondent appeared in person Counsel for the Fifth Respondent: Respondent appeared in person Counsel for the Sixth and Eighth Respondents: Mr Studdy SC and Ms Whitaker Solicitor for the Sixth and Eighth Respondents: Kemp Strang Lawyers Counsel for the Second Cross-respondent to the First Cross-claim and the Seventh Cross-respondent to the First Cross-claim: Mr Young Solicitor for the Second Cross-respondent to the First Cross-claim and the Seventh Cross-respondent to the First Cross-claim: Bransgroves Lawyers Date of Hearing: 7 August 2009 Date of Judgment: 10 August 2009