Supreme Court New South Wales Medium Neutral Citation: Perpetual Trustees Victoria Limited v Drakos [2021] NSWSC 1327 Hearing dates: 15 April 2021 Date of orders: 21 October 2021 Decision date: 21 October 2021 Jurisdiction: Common Law Before: Garling J Decision: (1) Further Amended Notice of Motion dismissed. (2) Applicants to pay the respondent plaintiff's costs. (3) The Writ of Execution issued in this matter on 1 October 2008 not be enforced before 15 January 2022. Catchwords: CIVIL PROCEDURE –mortgage default – application to set aside judgment – proposed defence does not raise an arguable defence – application to set aside judgment refused Legislation Cited: Civil Procedure Act 2005 Cases Cited: Adams v Kennick Trading (Int) Ltd and Others (1986) 4 NSWLR 503 Dai v Zhu [2013] NSWCA 412 Reinehr Industrial Lease and Finance Pty Ltd v Jordan NSWCA 4 June 1974, (unreported) Gattellaro v Westpac Banking Corporation [2004] HCA 6; (2004) 78 ALJR 394 Texts Cited: Not Applicable Category: Procedural rulings Parties: Perpetual Trustees Victoria Limited (P) John Drakos (D) Representation: Counsel: J Foley (P) M Klooster (D) Solicitors: T G Law (P) SS Lawyers (D) File Number(s): 2008/285001 Publication restriction: Not Applicable Judgment 1. These proceedings concern members of the Drakos family. The parents, Mr John Drakos ("the father") was one of the two registered owners of a property in Miller Street, Ashfield, NSW ("the Property"), the other registered proprietor of the Property was his wife, Mrs Tasia Drakos, who was also known as Tula Drakos ("the mother"). Where referred to jointly, I will call the father and the mother "the parents". 2. The father and mother had two children, Mr Paul Drakos ("Paul") and Ms Bonnie Drakos ("Bonnie"). 2001 1. In June 2001, a loan in the sum of $480,000 was made by Perpetual Trustees Victoria Ltd as trustee of the Millenium Trusts ("the plaintiff"), to the parents. The loan will be described in greater detail in due course. 2. As a security for the loan, the parents provided a first registered mortgage over the Property. As at the present time, the parents remain the registered proprietors of, and the mortgage remains registered over, the Property, notwithstanding that the mother died in January 2015 and the father died in August 2017. 3. Although Paul and Bonnie were appointed jointly as the executors of their father's estate, they have not attended to the transfer of the Property into their names as executors. 2008 1. The lawyers acting for the plaintiff, upon its instructions, served a Notice of Demand dated 25 March 2008, addressed to the parents, in writing. It noted that the mortgage was in arrears by $13,144.48 and that the total amount outstanding was $482,425.55 – which was increasing at the rate of 15.10% pa. 2. The default was not rectified within the time specified in the Notice of Demand. 3. Proceedings were commenced in this Court by the plaintiff filing a Statement of Claim on 6 June 2008. 4. That Statement of Claim referred to the mortgage which was registered on the title of the Property and various of the obligations of the parents pursuant to that mortgage. It pleaded the fact of a breach of the mortgage – being the failure to pay the requisite sum. It pleaded that the plaintiff served the parents with the Notice of Demand dated 25 March 2008. It also pleaded the failure to rectify the default and the ongoing breach of the terms of the mortgage. 5. The plaintiff claimed an entitlement to possession of the land. It did not claim a monetary judgment. 6. The Statement of Claim was verified by an officer of Challenger Mortgage Management Pty Ltd, which had been appointed as the manager in respect of the loan and mortgage taken out by the parents. He averred that the allegations of fact in the Statement of Claim were true. He expressed that opinion on the basis of his own knowledge of, familiarity with, and understanding of the plaintiff's records. 7. On 21 June 2008, Mr Richard Wellmeela, a licenced process server, served each of the parents with a sealed copy of the Statement of Claim. He served the Statement of Claim personally by delivering it to each of the parents at the Property. 8. It appears that the parents sought legal advice because on 21 July 2008, Mr Ian Miller, a solicitor of Hunt & Hunt Solicitors, filed a Notice of Appearance. However, no Defence was filed by or on behalf of the parents to the plaintiff's claim. 9. On 10 September 2008, the plaintiff filed a Notice of Motion seeking a default judgment for the possession of the land and seeking an order that the Court issue a Writ of Possession for the Property. That Notice of Motion was supported by an affidavit from the same officer of Challenger Mortgage Management Pty Ltd who had verified the Statement of Claim. The officer averred to all matters necessary to obtain the default judgment. 10. On 26 September 2008, judgment was entered in favour of the plaintiff against the parents for possession of the Property. 11. On 1 October 2008, a Writ of Possession was issued, and an eviction was scheduled to take place on 27 October 2008. On 24 October 2008, an order was made staying the execution of the Writ of Possession until 3 November 2008. 12. It seems clear from the records kept by Kemp Strang, the solicitors who acted for the plaintiff during this period, that when the eviction was stayed the parents made a proposal to repay the arrears on the loan. According to the electronic records of Kemp Strang, Paul provided the sum of $20,000 towards the arrears of the mortgage. Those electronic records contain the following two notes: 04/12/2008 We confirm the arrears have been cleared. We are presently sending letters to the borrowers reserving your rights before closing our file as instructed. 05/12/2008 The file was closed as the arrears were fully paid. Letters reserving your rights under judgment have been sent out to the borrowers. 1. These notes are corroborated by the Statement of Account for the loan which records two payments being made into the account during November 2008. The first payment on 10 November 2008 was for $53,500, the second payment on 28 November 2008 was for $20,000. 2. The judgment which was entered on 26 September 2008 remains in place. Whatever the precise terms of the agreement between the plaintiff and the parents were at that time, it is clear that the entirety of the debt referred to in the Letter of Demand had not been repaid. It is also clear that the judgment for possession remained in place, and that no application to set it aside was made by or on behalf of the parents. 3. Those two facts are consistent with the probability that in December 2008, as the electronic notes of Kemp Strang record, a letter to the borrowers which reserved the rights of the plaintiff under the judgment would have been sent. I am satisfied that it was. 4. According to the Statement of Account following upon the two payments in November 2008, to which reference has been made, the next payments were made in March 2009. The third of those, made on 26 March 2009, was dishonoured. Payments continued. The final payment recorded in the Statement of Account is recorded as occurring on 29 August 2016. There are no further credits noted to the account since then. 2017-2020 1. It is not apparent that the death of the mother in 2015 was drawn to the attention of the plaintiff. 2. On 30 March 2017, Kemp Strang, acting on behalf of the plaintiff, sent a letter to the father drawing his attention to the fact that as at 29 March 2017, the loan account was in arrears in the sum of $26,157.35. The letter demanded the payment of that sum within a period of seven days from the date of that letter. 3. On 11 April 2017, in a handwritten letter sent by facsimile, the father sought an extension of time to pay the arrears until 30 May 2017. On 16 April 2017, in a similar handwritten fax, he sought a further extension to 30 June 2017. 4. On 30 June 2017, a solicitor, Mr Bergagnin, sent an email to Kemp Strang which included the statement that he had been consulted by Paul and Bonnie with respect to the arrears. He told Kemp Strang that Paul and Bonnie had been unable to locate any documents other than those which had come into being recently, being the letter of 30 March 2017, and some subsequent documents. He asked for some "background or a chronology or details of the mortgage and default". 5. A response was sent from Kemp Strang seeking a copy of the Death Certificate of the mother, and a copy of any Power of Attorney or Authority enabling Kemp Strang to respond to Paul and Bonnie's queries on behalf of their father. 6. Nothing further seems to have occurred at that point in time, although I note that the father died in August 2019. 7. On 27 March 2019, Thompson Geer, then acting for the plaintiff, sent a letter addressed to the Estate of the late Tasia Drakos noting that the extent of the arrears was $119,959.51. The letter demanded payment of the arrears within 30 days. The letter included this paragraph: "If the arrears are cleared as stipulated above, the lender will withhold executing Judgment on the basis that you comply with the terms of the loan agreement and mortgage including maintaining the repayments as and when they fall due." 1. A letter in identical terms was sent to the father. As well as these letters being sent to the Property, they were also addressed to a post office box which had been previously used for written communications. 2. On 6 May 2019, SS Lawyers advised the plaintiff's lawyers that they acted for the Estate of the each of the late mother and father. There does not seem to have been any notification to the plaintiff or its lawyers prior to that letter that the father had died. 3. SS Lawyers sought copies of all of the relevant documents from Thompson Geer. 4. On 16 December 2019, probate of the father's Will was granted in this Court. The executors appointed by the Will were Bonnie and Paul. They were equally entitled to the Estate after payment of all debts and expenses. 5. Correspondence ensued. It is not necessary to set out the detail of all of that correspondence. In a letter of 6 April 2020, from Thompson Geer to SS lawyers, it was noted that the plaintiff was not prepared to postpone enforcement action indefinitely, that it had not been provided with any indication that a resolution of the matter was forthcoming, and that no satisfactory proposal had been submitted by the Executors of the Estate. The letter concluded with the statement that if the mortgage debt remained outstanding or a satisfactory arrangement had not been made by 30 April 2020, the plaintiff would take steps to enforce its judgment. 6. On 24 July 2020, a Notice of Motion was filed by the plaintiff seeking the issue of a Writ for Possession of Land. It was supported by an affidavit of Mr Sheldon DaCosta, an officer Advantage Financial Services Pty Ltd which was the corporate body responsible for the service and management this particular loan. Mr DaCosta deposed to the ongoing default and that, as at the date of his affidavit, the total amount owing was $588,680.22. 7. The plaintiff obtained a Writ of Possession which was scheduled to be executed by the Sheriff on 6 October 2020. On 27 August 2020, Thompson Geer wrote directly to Paul and Bonnie and to the occupiers of the Property. They sent a copy to SS Lawyers. That letter noted that the eviction had been scheduled to occur and noted various matters surrounding that surrendering of possession. 8. On 29 September 2020, Paul and Bonnie filed a Notice of Motion seeking various orders of a procedural kind and seeking an order that there be a stay pending further order on the execution of the 2008 judgment. 9. After various interlocutory orders enabling the preparation of this matter for an interlocutory hearing were made, the Court heard the Further Amended Notice of Motion on 15 April 2021. 10. This judgment deals with that further Amended Notice of Motion. Further Amended Notice of Motion 1. On 3 March 2021, Paul and Bonnie as "applicants" filed a Further Amended Notice of Motion which sought the following orders: "7. That execution on all proceedings under the judgment entered on 26 September 2008 be stayed, pending further Order. 7A. In the alternative to order 7 above, an order that the judgment on 26 September 2008 be set aside. 8. Any such further order as the Court sees fit. 9. Costs. 10 That Paul Drakos be joined as a Third Defendant to the proceedings. 11. That Bonnie Drakos be joined as a Fourth Defendant to the proceedings. 12. An order under Uniform Civil Procedure Rule 7.10 that Paul Drakos and Bonnie Drakos be appointed as the representative of the Estate of the late Tasia Drakos (also known as Tula Drakos) for the purpose of these proceedings. 13. Leave for the Defendants to file and serve the Cross-Claim in the form served." 1. Insofar as it was sought to join Paul and Bonnie as the third and fourth defendants, they each were described in the Notice of Motion in this way: "Paul Drakos in his own capacity and as Executor of the estate of the late John Drakos and legal representative of the estate of the late Tasia Drakos." 1. It can be observed in the Further Amended Notice of Motion that the relief sought by Paul and Bonnie, to whom I will also refer as the applicants, is conveniently categorised into three separate areas. The first is a procedural area, namely orders which regularised the joinder of Paul and Bonnie in their various capacities and which regularised the existing names of the deceased mother and father who are still named as first and second defendants. 2. There is no significant dispute or opposition to these procedural orders on the assumption that there would be utility to the making of such orders. 3. The second order is one seeking to set aside the judgment entered in 2008, thereby permitting the filing of a defence to the original Statement of Claim. 4. The third group of orders, which do not necessarily depend upon the applicants' success with respect to the preceding group of orders, is that the applicants ought to have leave to file a cross-claim, and that there should be a stay of execution of the current Writ of Possession to enable that cross-claim to be heard and determined. The cross-claim is one seeking an accounting under the mortgage. 5. There is a further basis advanced for the claim for a stay on the execution of the Writ of Possession being that the applicants each advance hardship grounds which they submit are sufficient to justify the stay. 6. It is to be kept in mind that in considering this second and third group of orders, the Court is approaching the matter not as a final determination of all questions of fact but, rather, in accordance with the ordinary principles governing interlocutory applications. 7. It is convenient to commence with the application to set aside the judgment. Application to Set Aside Judgment 1. As earlier indicated, the judgment was entered in September 2008. 2. The discretionary power of the Court to set aside a judgment is relevantly to be found in r 36.16(2) as follows: "(2) The Court may set aside or vary a judgment or order after it has been entered if: (a) it is a default judgment (other than the default judgment given in open court) …" 1. This provision involves the exercise of a discretion. Ultimately, the question which it is necessary to consider is whether it is in the interests of justice to set aside a default judgment so as to permit a party to defend the proceedings on the merits: Reinehr Industrial Lease and Finance Pty Ltd v Jordan (NSWCA 4 June 1974, unreported); Adams v Kennick Trading (Int) Ltd and Others (1986) 4 NSWLR 503 at 506-507 per Hope JA (with whom Glass JA agreed); Dai v Zhu [2013] NSWCA 412 at [83] per Sackville AJA (Barrett and Leeming JJA agreeing). 2. In exercising the discretionary power conferred on the Court by r 36.16(2)(a) of the UCPR, the Court is under a duty to give effect to the "overriding purpose" stated in s 56(1) of the Civil Procedure Act 2005, namely: "To facilitate the just, quick and cheap resolution of the real issues in the proceedings." 1. The provisions of ss 57, 58 and 59 of the Civil Procedure Act are also relevant to be considered in the exercise of the power. 2. As Sackville AJ said in Dai at [89]: "… the authorities consistently state that, as a general rule, a defendant who seeks to set aside a judgment by default regularly obtained must show that he or she has a bona fide defence. This ordinarily requires the defendant to file an affidavit demonstrating a prima facie defence on the merits. The rationale for this requirement is that in the exercise of its 'unfettered, though judicial discretion' the Court will consider: (a) whether any useful purpose would be served by setting aside the judgement, and (b) how it came about that the applicant found himself bound by judgment regularly obtained." 1. Whether or not a defendant has a bona fide defence on the merits is not determined by the Court embarking on the hearing of the full case. All that is necessary is for the defendant to show that the defences are asserted bona fide and that there is an arguable or triable issue: see Dai at [92]; Adams v Kennick Trading at 506-507. The cogency of the defendant's explanation for the delay or failure to comply with the orders of the Court is also a relevant matter. The Plaintiff's Evidence 1. The plaintiff accepted that it could not produce to the Court a signed copy of the loan agreement which had been entered into by the parents. 2. However, a collections officer employed by Advantedge Financial Services Pty Ltd, the delegate of the Manager of the plaintiff for the purpose of servicing and managing loans entered into by the plaintiff, gave evidence that she was able to produce various documents, to which I make reference below. I am satisfied that the officer was well familiar with (by reason of her employment) the nature of loans made by the plaintiff in and around May 2001, and the records kept by various of the management organisations and the plaintiff with respect to such loans. 3. The officer was not cross-examined. 4. From those records, the following facts emerge. On 4 May 2001, the parents signed a loan application, the purpose of which was to refinance an existing debt. That was said to be for investment purposes. The parents selected the variable interest rate option and elected to pay interest only for the first year. The repayment frequencies were noted as being monthly, and the amount which they sought to borrow was $480,000. Two properties were offered by way of security. 5. The parents, at the same time, signed a document headed "Declaration of Purpose" which in its heading referred to the Consumer Credit Code and the Consumer Credit Regulation. Both parents declared that the credit was to be provided by the credit provider to them and was to be applied wholly or predominantly for business or investment purposes. 6. A Mortgage Loan Schedule, which was signed by each of the parents, indicated that the facility of $480,000 that was being provided was described as a "Premium Facility". The interest rate was variable, and interest only was being paid for one year. The indicative repayment originally in the document was described in a monthly amount at a rate of 8.85%. That printed amount seems to have been amended at one point to a sum which reflected a rate of 8.1%. 7. The Guide attached to the relevant loan details included the following: "Interest rate: an indicative interest rate is shown in the attached schedule – the initial interest rate will be set out in the loan documentation … Rate changes: variable rates are periodically reviewed by the Lender having regard to the general level of markets rates and its overall cost of funds, and you will be notified of all changes to interest rates during the loan term. Where payments are made late or not made as required by the loan documentation, default interest will be payable." 1. On 22 May 2001, a preliminary loan approval was issued by Interstar Securities (Australia) Pty Ltd ("Interstar"), which was a mortgage originator. It recorded that the notional repayment for the loan was $3,241.94 per month – which was a sum which indicated an interest rate of 8.1%. The parents signed a Direct Debit authority on 31 May 2001, so as to permit the monthly payment of those sums. 2. On 6 July 2001, Interstar sent a pro forma letter to the parents. It was a confirmation of the Direct Debit request. It included the following details: "Borrower Name: Drakos J & T Loan Number: MN3062000000XXXXXXX Mortgage Manager: Trilogy Mortgage Securities Pty Ltd Settlement for the above loan was effected 26-Jun-01 and we wish to confirm details of your loan and implementation of the Direct Debit Request (DDR) received by our office. Loan Amount: $480,000.00 Facility Type: Premium Loan ID Number: 7028 Interest Rate: 8.10%" 1. Of importance is the loan number which is set out above. 2. As well as that detail, the plaintiff has produced a copy of a Loan Statement with respect to the loan bearing the same number as that set out above. It recorded the loan as commencing on 26 June 2001, with a nominal maturity date of 15 October 2030. The Loan Statement which was issued on 8 November 2002 recorded the interest rate as being 7.85%. That percentage was reflected by the amounts debited to the Loan Statement which were attributed to interest. 3. The plaintiff has also produced a standard form of Loan Agreement which existed at the time. It was the form which commenced being used on 8 February 2001 and reflected a particular loan which was entered into on 25 June 2001. It was not said that this document was in fact the Loan Agreement entered into by the parents but, rather, was an example of a standard form of loan agreement which was used at the time by the plaintiff. The documents provide for the date upon which a payment is to be made and the circumstances in which payments could be varied by the lender. A schedule is attached to that document. Included on that schedule, in a standard form for a premium loan of the kind which the parents obtained, was the recording of the notional monthly repayment, an initial higher rate of interest and an initial lower rate of interest. Those rates differed by 2%. 4. The Interstar Loan Terms and Conditions booklet has also been produced. This is a standard loan terms and conditions booklet provided to all borrowers at the time. The following contents are of interest: 1. the borrowers were required to sign and return the Loan Agreement form to the lender's solicitors before a draw-down of the facility could be made. Payment of interest was described in this way: "You shall pay interest to Us on the balance outstanding from time to time on the Facility calculated on a daily basis at the Higher Rate and debited monthly on the last day of each Calendar Month provided however that if you pay or have paid to us in accordance with the provisions of the Loan Agreement, the instalment or instalments payable during that Calendar Month within three days of the due date for payment and You and any other party to a Security is not in default of the performance or observance of any of your obligations in accordance with this Agreement …We shall calculate the debit interest for the period at the Lower Rate." 1. the lender was entitled to change either the higher rate or lower rate from time to time to reflect their view of the market conditions and cost of funds. Any change would be notified to the borrower; 2. the extent of fees and charges and the lender's entitlement to charge the borrower for those are also described. 1. Further on in the booklet, the events of default are described – including the fact that the loan would be accelerated if an event of default occurred. The booklet also provides for the enforcement expenses of the lender to be debited to the loan and which would attract interest at the same rate as the principal monies. 2. Finally, the plaintiff produced a loan statement issued on 25 March 2021 with respect to the same loan number as has previously been identified, and which identifies the borrowers as the parents. It consists of 18 pages and is said by the plaintiff to be a complete statement of all transactions on the loan. It is issued under the letterhead of Challenger Mortgage Management Pty Ltd, which the evidence shows purchased Interstar whilst this loan was on foot. 3. The Loan Statement records all of the variations in interest rates which have been applied to the loan – including a higher rate of interest applied when it is apparent that the loan is in default. 4. The Loan Statement records the last amount credited to the account, representing a payment by the Borrowers, which occurred on 29 August 2016. 5. The Loan Statement records that the account balance as at the date of issue, 25 March 2021, was $670,917.45 in debit. Applicants' Submissions 1. The applicants submit that they have, standing in the shoes of their parents, an arguable defence to the claim by the plaintiff. 2. The first argument is that the applicants dispute that the plaintiff is entitled to charge interest at all under the mortgage. This argument has two parts – the first is that in the absence of the production to the Court of the original loan agreement, secured by the mortgage, there is no proof of any agreement as to interest rates and that there is no proof of the existence of an interest clause authorising the debiting of interest to the parents' loan account. If this argument is to succeed, the applicants concede that the plaintiff would be entitled to charge interest on the capital sum of the loan after default of repayment in accordance with s 100 of the Civil Procedure Act 2005. 3. If this argument that the plaintiffs were not entitled to charge interest on the loan be correct, the applicants submit that it must follow that there was no event of default under the mortgage when the default notice issued as the capital debt had been discharged in full prior to 25 March 2008. 4. The applicants' argument with respect to the issue as to whether the plaintiff was entitled to charge interest on the loan, identifies as its principal basis that the plaintiff has been unable to produce either the original or a copy of the written loan agreement specifying its entitlement to charge interest, and that there is no right to charge interest contained within the mortgage document itself which has been produced. 5. To the extent that the plaintiff relies upon either post-contractual conduct or other facts by way of surrounding circumstances, the applicants point to the fact that so far as any existing documents show, no interest rate as a percentage was ever disclosed by the plaintiff to the parents prior to the loan agreement being entered into. 6. Insofar as the plaintiff points to evidence of its usual practice, the applicants submit that the weight attributable to such evidence would be minimal and would not displace the question of whether or not there is triable issue with respect to the interest claim. In any event, the applicants point to the fact that the evidence about usual practice is so vague and unspecific as to be unhelpful. 7. In particular, the applicants point to the fact that the business records produced by the plaintiff show the difference between the lower and higher rate of interest rates as 2% in the period between June 2001 and June 2002, but that as and from 15 June 2002, the gap between the lower and higher rates of interest was fixed at 4%. The applicants point to the fact that even looking at the plaintiff's practice, there is nothing to permit this change of margin to occur. 8. As well, the applicants point to the inadequacy of the Default Notice. They submit that having regard to the interest issue described above, there was in fact no default at the time the Notice was issued. Secondly, they say that the plaintiff in these proceedings had not demonstrated effective service by post of the Default Notice. The applicants identify this as a stand-alone issue not relying on any question as to interest. 9. In summary, the applicants submit that what they are doing is in substance pursuing the conventional remedy of having the mortgage discharged through a redemption suit. They accept that this would normally require an account to be taken so as to determine the amount owing under the mortgage and point to the fact that that is what they seek to do by way of the proposed cross-claim. They say that they should be entitled to proceed in this way without being at risk of losing the Property which has a much higher value than the mortgage. Plaintiff's Submissions 1. The plaintiff opposed the relief sought in the applicant's Further Amended Notice of Motion. It argued that the proposed Defence did not disclose any reasonable defence to the plaintiff's claim; the proposed cross-claim did not disclose any reasonably arguable cause of action; that there was no adequate explanation for the significant delay in seeking to file either the proposed Defence or the proposed cross-claim; and that it was not in the interests of justice for the judgment to be set aside or for the proceedings to, in effect, be re‑opened to permit the cross-claim to be filed. 2. The first and principal issue is whether the proposed Defence raises any arguable defence. The plaintiff submits that the proposed Defence, in substance, does not constitute a defence at all. Rather, it submits that it seeks to re-agitate issues of fact and procedural steps which were available to have been argued by the parents when the proceedings against them were commenced and which were not. 3. Insofar as the proposed Defence and proposed cross-claim assert that the proceedings were brought in breach of the relevant Consumer Credit Code ("the Code") because no Notice of Default had been issued, the defendant points to the Default Notice that was in fact issued on 25 March 2008 and on the evidence served in compliance with the statutory provisions. 4. In addition, the plaintiff points to the fact that each of the parents executed a Business Purposes Declaration in relation to the funds which were advanced under the loan and that as a consequence, by reason of s 11(2) of the Code, the loan was presumed conclusively not to have been provided for personal, domestic or household purposes and, accordingly, the Code did not apply to the loan. 5. In respect of the plaintiff's principal argument that there was no default as at 2008 because interest was not payable under the loan, the plaintiff pointed to the fact that such an argument was based solely upon the proposition that the plaintiff could not locate the executed loan agreement and that the extant mortgage does not contain any specific entitlement to charge interest. 6. The plaintiff submitted that this proposition is not reasonably arguable. It submits that it was a commercial lender and that any claim that a loan lent by such a body would be advanced interest free is simply inconceivable. 7. Further, the plaintiff pointed to the fact that the evidence establishes that the load was preceded by extensive loan application documents, executed by the parents, and that there is in existence a standard form of loan agreement entered into by the plaintiff at the time. The plaintiff submitted, in accordance with the judgment of Kirby J in Gattellaro v Westpac Banking Corporation [2004] HCA 6; (2004) 78 ALJR 394, that: "No procedure of human records is perfect. Documents and files get lost. In earlier times with paper records, the larger the organisation, in a sense, the greater risk of loss. Now, with electronic records, the risks are different but no less. The law, recognising these realities, will ordinarily allow for proof to be given by secondary means of the contents of documents and records alleged to have been lost." 1. In addition, the plaintiff points to the documents which came into existence after the Notice of Default was given, which are consistent with the charging of interest in accordance with (a) a commercial practice; and (b) standard documentation. 2. Finally, the plaintiff pointed to the fact that no issue was ever taken by either of the parents who might be expected to know what their own obligations were under the loan agreement as to any amount owing under the loan on two occasions when the parents had a chance to dispute that matter: namely, first in 2008, when the proceedings were commenced and judgment was obtained; and again in 2017, when the father sought two extensions to remedy a default in payments under the mortgage. 3. The plaintiff resists an action for an account of the kind which the proposed cross-claim seeks. It submits that it has put into evidence in these proceedings details of how it has calculated the amount owing under the loan, effectively providing the account sought by Paul and Bonnie; that Paul and Bonnie have not identified any entries in the Statements of Account which could be the subject of any dispute (leaving aside the question of interest); and, pursuant to the terms of the Mortgage (which is in evidence), the plaintiff has the right to issue a statement of the amount secured under the mortgage. Such a statement is taken under the terms of the mortgage to be conclusive evidence of the amount owing unless that is shown by evidence to be wrong. The plaintiff submits that there is no such evidence available here. 4. Finally, the plaintiff submits it is not in the interests of the plaintiff, or the applicants for the orders to be made in circumstances where the practical consequence of permitting the applicants to file the proposed Defence and proposed cross-claim will be that interest will continue to accrue on the loan and the plaintiff will incur enforcement expenses which it is entitled under the mortgage to deduct from the proceeds of sale. The plaintiff pointed out that both of these factors will erode such equity in the Property which Paul and Bonnie have. Discernment 1. It seems that there are a number of facts which are clearly established. 2. First, the parents entered into a commercial loan, as they acknowledged, with an independent commercial financier with whom they had no relationship of any kind other than that occurring by reason of the loan. 3. Secondly, the loan was an ordinary part of the plaintiff's typical loan transactions which were carried out in a standard manner at the time and in accordance with standard documentation. It was the plaintiff's custom, and business purpose to charge interest on all loans which were made. It established a Statement of Account for each loan and applied, in the ordinary course of its business, debits to that account by way of interest, enforcement expenses and fees, and credits to that account by way of payments which were made by or on behalf the borrowers. 4. The accounts provided in these proceedings demonstrate that the account was in arrears in 2008, when proceedings were taken, that those arrears were cleared in November 2008, but that in 2009 the account again went into arrears. No further payment has been on the account since 29 August 2016 which remains in arrears. 5. Thirdly, at a time when it was open to the principal borrowers to take the sort of challenges which are now being taken by the applicants, they did not do so at a time when they had a solicitor acting for them. They did not file any Defence to the proceedings brought in 2008 to contest the basis that the loan was in arrears. When the loan fell into arrears in 2016, the father who was then the surviving borrower did not seek to deny that the loan was in arrears – rather, he accepted that fact and sought additional time to pay the debt. He did not assert that interest was not chargeable on the loan. 6. Fourthly, the applicants have no direct knowledge of the borrowing when it was initially made, nor do they have any direct knowledge of any of the dealings between the plaintiff and their parents. They have some knowledge that the loan was in arrears because Paul Drakos made a payment of $20,000 towards those arrears. They are quite unable to give any evidence about the terms and conditions of the loan. 7. Fifthly, the documents provided by the plaintiff dealing with the loan, including the mortgage and the loan application forms, together with documents referrable to other loans taken out at the same time, the Statement of Account, and the solicitor's records and notes are all consistent with the claims made by the plaintiff and are entirely inconsistent with the arguments now sought to be raised by the applicants. 8. In my view, the proposed Defence does not raise any arguable defence to the claim. 9. The claim that was brought by the Statement of Claim in 2008, which resulted in a judgment being entered for possession of the Property, was based upon the fact that there was a default in the loan because payments had not been made on time. The borrowers, the parents of the present applicants, must be taken to have accepted that fact, and conceded that they had no defence. 10. First, having instructed a solicitor, the parents did not file any defence contesting the entitlement of the plaintiff to judgment for possession based upon an arrears in the payments of the loan. 11. Secondly, the parents made payments after the judgment was entered to bring the loan back into order. They were considerable payments – over $70,000. 12. This conduct is clear evidence that the plaintiff was regarded by the parents as entitled legally to possession because the loan was in arrears. The loan was in arrears because interest had been charged and not all of the relevant payments had been met. 13. There is no basis to conclude that at that time, particularly considering that the parents had the benefit of instructing a solicitor who filed an appearance in the proceedings, and, I would infer, gave advice to the parents about their prospects of success in the proceedings, that they had any defence to the proceedings at that time. 14. There have been no payments made on the loan since 2016. It is clearly still in arrears. 15. The applicants principally seek to argue that these conclusions are wrong because, in the absence of providing a signed loan agreement executed by the borrowers, the plaintiff cannot establish an entitlement to charge interest. In my view, this is a nonsense. It would be simply absurd to conclude that a commercial lender would enter into a commercial loan agreement with borrowers with whom, on the evidence, there was no other relationship, where the commercial lender would not seek to make any profit at all from the transaction and would, for no established reason, give the borrowers the benefit of money without cost. 16. Such a defence is unarguable. It was clearly not one argued by the applicants' parents, and on the basis of all of the documents produced in these proceedings now, such an argument would be entirely contrary to the established practice of the plaintiff. 17. In my view, a defence that there was no entitlement to interest has no prospect at all of succeeding. 18. Given that that was the substantive argument in support of the setting aside of the judgment, the applicants have not established any other reason to set aside the judgment. Notice of Default was, on the evidence, properly given. Any change of interest rate fell within the terms of the loan which I am satisfied existed. 19. In coming to that conclusion, I have not taken into account the extended delay since the judgment was entered and the absence of any real reason being proffered by the applicants for that delay. It is to be recalled, as I have earlier said, that when the proceedings were brought contemporaneously with the default, the judgment was entered without any opposition from the applicants' parents, the borrowers. 20. Even though the arrears were paid later that year, no application was made by the borrowers then to set the judgment aside. Indeed, the probabilities are that the arrangement for the repayment of arrears was that the plaintiff would retain the judgment, but would not enforce it whilst ever the loan was kept in order. However, I do not need to make a decision finally upon that proposition. 21. Once the loan fell into arrears in 2016, the father did not seek to challenge the fact of the arrears or the existence of the judgment. He simply sought more time to pay the arrears. 22. From that time until these proceedings were brought, whilst I acknowledge that the applicants may not have been in a position to bring the proceedings until after their father's death, there is no real explanation as to how it is that these proceedings have taken the length of time which they have to be brought. 23. Conversely, allowing the Defence to be filed leading to a hearing of the matter would cause considerable prejudice to the plaintiff. It has had a regular judgment for a considerable period. It has arranged its affairs by way of taking enforcement action at a time of its choosing, and it should not now be punished by these proceedings being brought at such a late stage. 24. Accordingly, I have determined that it would not be appropriate to allow the applicants to file a defence and for the judgment therefore to be set aside. 25. The applicants' cross-claim seeks an accounting of the monies under the loan. At the moment, an accounting is not due in the sense that they have been provided with the Statements of Account for which the plaintiff contends. Those accounts, accompanied by the requisite certificate, are prima facie evidence of the amounts outstanding under the loan. The applicants do not point, leaving aside the question of the charging of interest, to any fact or facts which may suggest that there is any error in the accounts. 26. In those circumstances, the proposed cross-claim would not give the applicants any further information than they already have. There is no utility in permitting a cross-claim to be filed. 27. In addition, if the plaintiff proceeds to execute the Writ, take possession of the Property over which it has judgment, and to exercise its power of sale, then at that time, if a proper accounting does not take place, the applicants would be at liberty to bring proceedings for such accounting. In other words, declining now to permit the applicants to file a cross-claim does not preclude them seeking the appropriate relief in due course at the appropriate time. 28. It also follows that there is no utility in making the procedural orders. Conclusion 1. In all of the circumstances, I have concluded that the applicants have not shown that the judgment for possession of the plaintiff in respect of the Property at Ashfield ought be set aside, nor that the applicants have any reasonable prospects of defending the proceedings, and they have not shown that there would be any utility in permitting them to file a cross-claim. 2. The applicants' Further Amended Notice of Motion must be dismissed. 3. It follows that the applicants, being wholly unsuccessful, should pay the plaintiff's costs. Hardship 1. The applicants have put evidence before the Court showing a degree of hardship if the Writ of Execution is permitted to be enforced immediately. 2. In my view, the degree of hardship is not great and not such as would prevent the Writ being executed within a reasonable time. I would determine that reasonable time to be about three months. 3. I order that the Writ of Execution not be enforced before 15 January 2022. Orders 1. I make the following orders: 1. Further Amended Notice of Motion dismissed. 2. Applicants to pay the respondent plaintiff's costs. 3. The Writ of Execution issued in this matter on 1 October 2008 not be enforced before 15 January 2022. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 October 2021