Supreme Court New South Wales Medium Neutral Citation: Aquamore Fund 2 Pty Ltd v Church Point Apartments Pty Ltd (receivers and managers appointed) [2023] NSWSC 511 Hearing dates: 8 and 11 May 2023 Date of orders: 16 May 2023 Decision date: 16 May 2023 Jurisdiction: Equity - Commercial List Before: Rees J Decision: Recusal application dismissed; judgment for plaintiff. Catchwords: BANKING AND FINANCE — lender advances $3.25m secured by mortgage and guarantees – default – lender appoints receiver – property sold – borrower and guarantors sued for balance – lender entitled to amount sought. COURTS AND JUDGES — apprehended bias — application made after judgment reserved — guarantor referred to in judgment given by judge four years' earlier in unrelated proceedings – waiver of right to seek recusal — principles at [41]-[43] —guarantor's solicitor aware of earlier judgment – issue of recusal already raised in proceedings – solicitor aware that judge allocated to hear the matter two weeks before hearing – solicitor's knowledge imputed to client — solicitor also a cross-defendant – whether knowledge imputed to solicitor as a party can be imputed to his client – actual knowledge required – principles at [49] – right waived by arguing the merits. APPREHENDED BIAS — principles at [55]-[60] — guarantor not a party to earlier proceedings — no findings against guarantor in previous judgment — guarantor not giving evidence in these proceedings — no related issues — recusal application rejected. CIVIL PROCEDURE — service — pleadings served on borrower by providing to receiver and manager — receiver's power to 'defend proceedings in relation to secured property' does not extend to accepting service — service on receiver is not effective service on corporation — principles at [75]-[77] — whether waiver of irregularity of service – principles at [80]-[81] — guarantors' solicitor twice appears for borrower at directions hearing — no appearance for borrower at trial — borrower files recusal motion after trial — no waiver. Legislation Cited: Civil Procedure Act 2005 (NSW) ss 56 ,57, 58 62, 66 Corporations Act 2001 (Cth) s 109X Uniform Civil Procedure Rules 2005 (NSW) r 7.30, 10.14, 10.22, 29.5 Cases Cited: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 Australian National Industries Ltd v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 411 Boyle v Sacker (1888) 39 Ch D 249 British American Tobacco Australia Ltd v Peter Gordon & Anor [2007] NSWSC 109 Carbotech-Australia Pty Ltd v Yates [2008] NSWSC 540 Carver v de Robillard [2006] FCA 1041 Chamoun v District Court of New South Wales [2018] NSWCA 187 Cohen v McWilliam (1995) 38 NSWLR 478; (1995) 128 FLR 263 Deckers Outdoor Corporation Inc v Farley [2010] FCA 391 Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337 Ford Excavations Pty Ltd v Do Carmo [1981] 2 NSWLR 253 Goodman Fielder Consumer Foods Pty Ltd v Graincorp Foods Australia Pty Ltd [2020] NSWSC 706 Hamod v New South Wales [2011] NSWCA 375 Huynh v Attorney General (NSW) (2021) 107 NSWLR 75; [2021] NSWCA 297 Johnson v Alexander [2002] NSWSC 824 Kerr v American Express Australia Ltd [2009] FCA 1219 Laming v Jennings [2018] VSCA 335 Lennox v Amcor Ltd trading as Amcor Cartonboard (No 2) [2009] FCA 962 Livesey v New South Wales Bar Association [1983] HCA 17; (1983) 151 CLR 288 Mandie v Memart Nominees Pty Ltd (No 3) [2016] VSC 267 Menzies v Paccar Financial Pty Ltd (No 4) (2014) 101 ACSR 25; [2014] NSWCA 210 Michael Wilson & Partners v Nicholls [2011] HCA 48; (2011) 244 CLR 427 NT Power Generation Pty ltd v Power and Water Authority (2004) 219 CLR 90; [2004] HCA 48 Pacific General Securities Ltd v Soliman & Sons Pty Ltd [2006] NSWSC 13 Porter v Australian Prudential Regulation Authority (2010) 184 FCR 382 QGC Pty Limited v Bygrave (2010) 186 FCR 376; [2010] FCA 659 R v El-Zeyat [2012] NSWSC 340 Re Lifestyle Residences Hobsons Bay Pty Ltd (recs & mgrs apptd) [2023] VSC 179) Re Refugee Tribunal ex parte H [2001] HCA 28; (2001) 75 ALJR 982 Roladuct Spiral Tubing Pty Ltd v C & P Trading Pty Ltd (1993) 114 FLR 392 Sargeant v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634 Singh v Deputy Commissioner of Taxation [2011] FCA 889 Smits v Roach [2006] HCA 36; (2006) CLR 423 Sunshine Retail Investments Pty v Wulff [1999] VSC 415 The Hills Shire Council v Mouawad (2014) 203 LGERA 233; [2014] NSWLEC 59 Thornberry v The Queen (1995) 69 ALJR 777 Urban Transport Authority of New South Wales v Nweiser (1992) 28 NSWLR 471 Vakauta v Kelly [1989] HCA 44; (1989) 167 CLR 568 Texts Cited: Dal Pont, Law of Agency, 4th ed (2020) Category: Principal judgment Parties: Aquamore Fund 2 Pty Ltd (Plaintiff) Church Point Apartments Pty Ltd (receivers and managers appointed) (First Defendant) Gregory Walker (Second Defendant) Forest Apartments Pty Ltd (Fourth Defendant) The Gosford Pty Ltd (Fifth Defendant) Representation: Counsel: Mr R Alkadamani (Plaintiff) Solicitors: Independent Legal (Plaintiff) Beazley Lawyers (Second, Fourth, Fifth Defendants) File Number(s): 2021/87782 Judgment 1. HER HONOUR: The plaintiff lender, Aquamore Funds 2 Pty Ltd, seeks judgment of some $1.15 million against: 1. the borrower, Church Point Apartments Pty Ltd (receivers and managers appointed), being the first defendant; and 2. guarantors Gregory Walker, Forest Apartments Pty Ltd and The Gosford Pty Ltd, being the second, fourth and fifth defendants respectively. 1. The only appearance for these defendants at the hearing was by Mr Walker, in person, notwithstanding that he is represented in these proceedings by solicitor Philip Beazley. As Reeves J noted in QGC Pty Limited v Bygrave (2010) 186 FCR 376; [2010] FCA 659, the solicitor on the record represents an essential component of the court's ability to maintain control over the litigation before it; the role of the solicitor on the record is critical to the court's ability to ensure that the cases before it are managed efficiently, promptly and inexpensively: at [53], [57]. As will become apparent, significant difficulty ensued in this matter by the suggested ambiguity of Mr Walker's legal representation. 2. During the hearing, Mr Walker applied to vacate the hearing and then sought leave to adduce evidence. I refused both applications, with reasons to follow. After judgment was reserved, Mr Walker brought an application that I recuse myself for apprehended bias by reason of my judgment in In the matter of Scientific Management Associates Pty Ltd [2019] NSWSC 1643. After judgment was reserved on the application for recusal, and without leave, the Court received a further submission from Mr Walker. This submission should not have been sent and I decline to engage with it: Huynh v Attorney General (NSW) (2021) 107 NSWLR 75; [2021] NSWCA 297 at [249] (per Leeming JA) (successfully appealed on a separate issue); NT Power Generation Pty ltd v Power and Water Authority (2004) 219 CLR 90; [2004] HCA 48 at [192]). 3. To address each of these matters in some sensible order, it is convenient to first set out the genesis and procedural history of this matter. These proceedings 1. These proceedings arise from a Facility Agreement executed by the lender, the borrower and Mr Walker as guarantor, on 21 August 2019, by which the lender agreed to advance $3,442,500. The funds were to be used to buy a property in Ryde Road, Pymble from Greatest Ever Properties Pty Ltd. The loan was secured by a mortgage over the Pymble property. 2. The facility went into default. The Facility Agreement was amended, including by adding further guarantors, being Keith Snell and the fourth and fifth defendants. The facility went into default again. Mr Walker tried to sell the property, to no avail. The lender appointed a receiver to sell the property. On 17 February 2021, contracts for sale were exchanged, with a six month settlement period. 3. These proceedings were commenced on 29 March 2021. The lender sued the borrower and each of the guarantors for moneys owing under the Facility Agreement. As Mr Snell had since passed away, Margaret Snell was sued in her capacity as executrix of her husband's estate, being the third defendant. 4. On 21 April 2021, a Commercial List Response for the second, fourth and fifth defendants was filed by Mr Beazley. 5. In June 2021, Mrs Snell filed a Commercial List Response, together with a cross-claim against the lender and Mr Beazley. Against the lender, Mrs Snell sought relief under the Contracts Review Act 1980 (NSW). Against Mr Beazley, Mrs Snell sought damages or equitable compensation by reason of the solicitor's breach of duty of care and fiduciary duties owed to Mr Snell. In short, Mrs Snell contended that Mr Beazley had acted for Mr Walker since 2007 and, when purportedly acting for her husband on this transaction, did so in a position of conflict of interest. 6. In August 2021, the lender filed a second cross claim against Mr Beazley, seeking damages in the event that the first cross claim was successful and led to the lender being unable to recover all of the monies owed. 7. Somewhat curiously, notwithstanding that Mr Beazley was now a cross-defendant to the first cross claim and the second cross claim, he continued to act for the second, fourth and fifth defendants. This was productive of further difficulty in this matter. 8. A series of directions were made for evidence to be served. None was served by the second, fourth or fifth defendants. On 11 November 2021, Ball J noted that the first, second, fourth and fifth defendants "have not served and do not intend to rely on any affidavit evidence." His Honour made a guillotine order: any evidence served by these defendants could not be relied upon without the leave of the Court. 9. On 18 February 2022, Hammerschlag J made orders in chambers that any Notice of Change of Solicitor for the second, fourth and fifth defendants be filed and served by 25 February 2022. No Notice of Change of Solicitor was filed. 10. As such, Mr Beazley remained on the record as solicitor for the second, fourth and fifth defendants. Rule 7.30 of the Uniform Civil Procedure Rules 2005 (NSW) makes this plain: (emphasis added) 7.30 Effect of change A change for which notice is required or permitted to be given under this Division does not take effect— (a) as regards the court, until the notice is filed, and (b) as regards any person on whom it is required or permitted to be served, until a copy of the notice, as filed, is served on that person. 1. Mr Beazley also continued to appear for the borrower and guarantors in the proceedings from time to time. On 2 September 2022, Mr Beazley appeared for the first and second defendants before Ball J, at a directions hearing. On 23 September 2022, Mr Beazley appeared for the first, second, fourth and fifth defendants, when the matter was listed for directions before Ball J. 2. The lender's solicitor, Lewis Seelenmeyer, continued to correspond with Mr Beazley in his capacity as the solicitor for the guarantors. For example, on 23 September 2022, Mr Beazley advised by email that his clients concurred with the position taken by Mrs Snell's solicitor in respect of proposed short minutes of order concerning motions for discovery. Mr Seelenmeyer said there are many more examples of emails sent from Mr Beazley in 2022 as solicitor for the second, fourth and fifth defendants. 3. On 11 November 2022, motions for discovery were heard. This gained significance on the recusal application. Counsel for the lender, Mrs Snell and Mr Beazley appeared before Ball J in the motions list, when his Honour referred the motions to me for hearing. According to the transcript, Mrs Snell's instructing solicitor then re-mentioned the matter: DAPOGEE: Rees J handed down a judgment in 2019 that included credit findings of the deceased. The deceased's conduct will be relevant to some of the matters traversed in today's application. So, I wanted to raise that with your Honour and say that it may be that your Honour forms the view that Rees J is not the appropriate person to hear these motions. And I should say, I raise this with apologies to my colleagues who I have not raised this issue with; it only just occurred to us as we left this courtroom. HIS HONOUR: Are you going to make an application before Rees J to disqualify herself? Is that what you're telling me? DAPOGEE: I don't have instructions. Your Honour, I'd hoped to raise the issue now in the hope that it would be – I might say – merely administrative, if I can put it that way, and potentially dealt with by your Honour as part of this list, although I completely accept the point your Honour made. 1. The matter was stood down in his Honour's list. According to Mr Seelenmeyer, Mrs Snell's counsel advised the lender's counsel that she would be asking Ball J to have the motion heard by a judge other than myself, given adverse credit findings I had previously made against Mr Snell. On learning of this, Mr Seelenmeyer did a search on Austlii and found my judgment in Scientific Management. 2. The transcript records that Mrs Snell's counsel then appeared before Ball J: CLEMMETT: … Your Honour, I have spoken to my friend Mr Rabi[h Alkadamani], who appears for the plaintiff. He was on his way up to Court and I have indicated to him the nature of the application that was to be made, which is an application that this matter be dealt with by a judge other than her Honour Rees J. We're hopeful that that can be dealt with administratively rather than a formal application having to be made before her Honour. In circumstances where her Honour has heard a matter previously involving the deceased, Keith Snell, and I act for his widow, the deceased's conduct is one of the issues in the proceedings and will be relevant on the application. HIS HONOUR: But why is it relevant? I mean, this is just a discovery application isn't it? CLEMMETT: It is, your Honour. The proceedings involve a Contracts Review Act claim, and so there is a question as to the commercial history between the parties and Mr Snell's business expertise; and those are matters that arise on the categories for discovery. HIS HONOUR: I'll hear this matter at 3 o'clock. 1. Ball J determined the discovery motions, following which his Honour listed the matter for final hearing for four days commencing on 8 May 2023. Importantly, the fact that I gave judgment in Scientific Management was specifically raised at this time. 2. In April 2023, the proceedings were resolved as between the lender, Mrs Snell and Mr Beazley. 3. On 19 April 2023, the proceedings having been allocated to me for hearing, my tipstaff emailed the parties advising that the matter was listed for hearing before me. The hearing was then more than two weeks away. 4. On 26 April 2023, the lender's solicitor circulated a draft email to the parties, to be sent to my chambers to inform me of the partial settlement of the proceedings. On 27 April 2023, Mr Beazley replied, "I haven't acted for them for a while." Mr Seelenmeyer replied firmly that Mr Beazley remained on the record. An email then followed from Mr Walker to the plaintiff's solicitor, advising that he consented to the proposed email being sent to my chambers "but please note I will be seeking an adjournment … as I am [sans] representation." The lender's solicitor replied to both Mr Walker and Mr Beazley, advising that any application to adjourn would be opposed, must be made by motion with an affidavit in support, and should be made at the earliest opportunity. 5. On 4 May 2023, I made orders in chambers giving effect to the settlement. 6. On 8 May 2023, the hearing commenced in respect of the lender's claims against the borrower and remaining guarantors. As mentioned, Mr Walker appeared in person. It does appear, however, that Mr Beazley continued to assist his client, including by going through my judgment in Scientific Management with Mr Walker, witnessing Mr Walker's affidavit in support of the recusal application and assisting in the preparation of written submissions on the recusal application (Mr Beazley is the "Author" in the properties field of the Microsoft Word document). Mr Walker preferred to refer to Mr Beazley as his friend. Whilst that may well be the case, to be clear, Mr Beazley is Mr Walker's solicitor in these proceedings. Adjournment application 1. Having already decided Mr Walker's application for an adjournment, I will next provide my reasons for that decision. The application was made orally, soon after the trial commenced. No motion was filed. No affidavit or other evidence was adduced in support of the application. The application was opposed. Mr Walker submitted that he had been told that Mr Beazley could not represent him in these proceedings as a cross-defendant. Mr Walker said he was seeking legal advice to try and ascertain whether he could obtain the legal representation he believed he required. Mr Walker added in reply that he was told recently that Lawcover had refused Mr Beazley representing him. 2. Section 66(1) of the Civil Procedure Act 2005 (NSW) provides that the court may adjourn proceedings. While this power is cast in broad terms, its exercise is governed by section 58 of the Act, which requires that, when deciding whether to grant an adjournment, "the court must seek to act in accordance with the dictates of justice," in respect of which the court must have regard to sections 56 and 57 of the Act. 3. The interaction of these provisions was considered extensively by Beazley JA (with whom Giles and Whealy JJA agreed) in Hamod v New South Wales [2011] NSWCA 375. In particular, her Honour considered, at [139] ff, that the exercise of section 66 is subject to the principles of case management set out by the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27: see likewise Menzies v Paccar Financial Pty Ltd (No 4) (2014) 101 ACSR 25; [2014] NSWCA 210 at [48]–[64]. 4. I note also that, in Thornberry v The Queen (1995) 69 ALJR 777, the High Court held, per curiam (Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ), that a refusal of an adjournment which results in a party being unable to adequately present its case is a miscarriage of the Court's discretion. This decision has been followed in civil matters: Singh v Deputy Commissioner of Taxation [2011] FCA 889; Kerr v American Express Australia Ltd [2009] FCA 1219; Lennox v Amcor Ltd trading as Amcor Cartonboard (No 2) [2009] FCA 962; Cohen v McWilliam (1995) 38 NSWLR 478; (1995) 128 FLR 263 (Court of Appeal). 5. In the absence of evidence, I am reluctant to place much weight on Mr Walker's submission as to precisely when he was told, and indeed if he was told, that Mr Beazley would no longer represent him. Mr Beazley remains on the record and thus does continue to represent Mr Walker. 6. Further, the matters which are said to have prompted Mr Beazley to decline to represent Mr Walker are of some antiquity. Mr Beazley became a party to these proceedings, by the cross-claims, almost two years ago. In February 2022, that is, some 15 months ago, Hammerschlag J made orders directing that any Notice of Change of Solicitor be filed. Presumably, Mr Beazley's ability or willingness to continue to act for the guarantors was then in issue. No notice was filed and Mr Beazley continued to appear on behalf of the guarantors at directions hearings. He continued to communicate with the lender's solicitor as the solicitor for these guarantors. There is no reason to think that refusal of an adjournment will result in Mr Walker being unable to adequately present his case in these circumstances. In short, the matter raised by Mr Walker as necessitating an adjournment is, according to the Court's record, incorrect and, further, nothing new. 7. The dictates of justice also require the Court to consider the lender's position. When the adjournment application was made, the final hearing had begun. Where these proceedings have been on foot for some time, the lender should not lose its hearing, absent good reason. On balance, I am not satisfied that the basis of the application for an adjournment meets this description. The application is refused. Application to adduce evidence 1. Likewise, having already decided Mr Walker's application for leave to rely on further evidence, I will provide my reasons for that decision. As mentioned, the second, fourth and fifth defendants served no affidavits; Ball J made a guillotine order requiring leave before being permitted to rely on any evidence. Mr Walker sought leave to rely on a portion of an affidavit sworn by Mr Beazley on 18 May 2022 in respect of the first and second cross-claims. Mr Beazley there deposed that the financier for the purchaser of the Pymble property had obtained a valuation. The valuation was annexed to Mr Beazley's affidavit and sought to be relied upon by Mr Walker. 2. The lender opposed leave being granted to rely on the valuation, where the valuer did not comply with the expert's code of conduct, the valuer was not available for cross-examination and the lender was in no position to meet such evidence. The matter was also said to fall outside the pleadings. If leave was granted to rely on the affidavit, then Mr Beazley was required for cross examination. Mr Walker advised that Mr Beazley was not then available, but would be available the following morning. In reply, Mr Walker submitted that the valuation only became relevant when the proceedings against Mrs Snell and Mr Beazley settled. He did not think that the hearing would go ahead. 3. Section 62(1) of the Civil Procedure Act 2005 (NSW) provides that the Court make give directions as to the conduct of any hearing, including directions as to the order in which evidence is to be given: see also Uniform Civil Procedure Rules, rule 29.5. The power to make such directions includes a power to grant leave for a party to adduce further evidence at trial: see for example, Goodman Fielder Consumer Foods Pty Ltd v Graincorp Foods Australia Pty Ltd [2020] NSWSC 706 at [48] (per Henry J). In deciding whether to grant leave, the Court will consider whether allowing the application is in the interests of justice, having regard to prejudice that may be suffered by the party resisting the application, and the reason why the evidence was not led in the first place: Urban Transport Authority of New South Wales v Nweiser (1992) 28 NSWLR 471 at 478 (per Clarke JA, Mahoney and Meagher JJA agreeing). 4. The lender's opposition to leave being granted was well-founded. Whilst the lender's counsel would presumably have some familiarity with the valuation report, by reason of it having been annexed to Mr Beazley's affidavit in respect of the cross-claims, there would have been no reason to expect that this evidence would be relied upon by the second, fourth and fifth defendants, where those defendants had served no evidence at all, and given the guillotine order. On becoming aware of the application for leave to adduce this evidence on the first day of trial, the lender was in no position to meet this evidence. Were I to grant leave to Mr Walker to rely on such evidence, it would be necessary to vacate the hearing. This matter was listed for hearing six months ago. Mr Walker has had ample time to prepare for the hearing, including by seeking leave to rely on such evidence in a timely manner, to avoid the present prospect that the trial will need to be vacated. Leave to rely on such evidence is refused. Recusal application 1. The hearing was concluded on 8 May 2023 and judgment was reserved. Later that afternoon, my chambers received an email from Mr Walker advising that it had been brought to his attention that I gave judgment in Scientific Management. Mr Walker advised that he was preparing a motion for me to disqualify myself for apprehended bias. 2. A motion and affidavit in support by Mr Walker was duly provided. Mr Seelenmeyer provided an affidavit in response. The plaintiff issued a notice to produce to Mr Walker and Mr Beazley, seeking communications between themselves or with Mr Snell, the defendants or their legal representatives, referring to the Scientific Management judgment. In answer to this notice, Mr Beazley produced an email from himself to Mr Walker on 29 November 2019 – being two days after the judgment was handed down – providing a link to the judgment on Caselaw NSW with the instruction, "Read this." Mr Walker had nothing to produce in answer to the notice. Waiver of right to seek recusal 1. The plaintiff submitted that the time to take any objection to me hearing the matter on the basis of apprehended bias was well before the hearing commenced. Mr Walker was said to have waived any right to object, when he elected to engage in the merits of the dispute with the knowledge, imputed via his solicitor, that I had decided the Scientific Management proceedings. 2. From the bar table, Mr Walker said he did not read the Scientific Management judgment at the time. Had he read it, "I would not have taken notice of who the judge was." I certainly accept the latter submission. Mr Walker also said from the bar table that he was not aware that Mrs Snell requested that the discovery motions be heard by a judge other than myself in November 2022. Further, he did not think that this matter would get to a hearing as he had been led to believe that the matter would be settled without his involvement, "So I didn't take any notice. I had other things going on in my life at the time which are on a personal level, and I was not a party to many details at that time, and I wasn't aware of that." Principles 1. An objection upon the ground of bias can be waived: Vakauta v Kelly [1989] HCA 44; (1989) 167 CLR 568 at 577 (per Dawson J). Brennan, Deane and Gaudron JJ explained why this was so at 572: The reason why that is so is obvious. … It would be unfair and wrong if failure to object until the contents of the final judgment were known were to give the party in default the advantage of an effective choice between acceptance and rejection of the judgment and to subject the other party to a situation in which it was likely that the judgment would be allowed to stand only if it proved to be unfavourable to him or her. 1. A legal representative's knowledge of a ground of apprehended bias can be imputed to their clients for the purpose of determining waiver, as the lawyer is the client's agent: Smits v Roach [2006] HCA 36; (2006) CLR 423. In that case, a barrister's knowledge (that the judge's brother was a partner of the law firm suing the client for unpaid fees) was imputed to the client. It made no difference whether only the barrister, and not the clients, knew of the disqualifying relationship between the judge and the partner of the law firm. In most cases, the Court has no reliable basis for discriminating between the knowledge of counsel and the knowledge of their clients; the Court is not privy to communications between counsel and their clients, which are ordinarily confidential and privileged: at [45] (per Gleeson CJ, Heydon and Crennan JJ). Further, at [47]: The considerations according to which a principal is affected by an agent's knowledge, and the relevance of the circumstances in which the agent acquired the knowledge, depend upon the context in which the problem arises. Having regard to counsel's role in the conduct of litigation, when a characterisation of the legal nature and quality of counsel's acts and omissions depends upon knowledge of some fact or circumstance, then counsel's clients are affected by that knowledge. In this context, there is no reason in principle to distinguish between the knowledge of [the barrister] and that of his clients, or between knowledge that [the barrister] acquired as counsel for the appellants and knowledge that he acquired in some other capacity. … there is no basis for ignoring any part of [the barrister's] knowledge, present to his mind, when conducting the litigation. 1. An example of the application of these principles, in the context of a solicitor's knowledge, is Carbotech-Australia Pty Ltd v Yates [2008] NSWSC 540. There, a party waived their right to disqualify a referee where their solicitor was aware of the facts sufficient to apply for recusal but, rather than ask the referee to withdraw from the reference on the basis of ostensible bias, made further submissions and engaged in debate with the referee on the substance of his findings: at [72]. Brereton J observed at [74]: (citations omitted) … while knowledge is essential for there to be a waiver, what is required is knowledge of the right waived — not of every fact that constitutes that right. What is important is that, as [the letter from the party's solicitor] establishes, [the party] knew by then of any right to object on grounds of bias — even if it did not know the whole detail … and with that knowledge, adopted the inconsistent course of arguing the merits … with a view to persuading the Referee to a different view; only when they failed in that course did they indicate … that they would oppose adoption of the report. … Consideration 1. There are two questions here: whether, in the circumstances, Mr Walker is imputed with the knowledge of his solicitor; and, whether Mr Beazley was aware of his client's right to object. 2. As to the first question, whilst Mr Beazley did not appear at trial, he has acted for Mr Walker throughout these proceedings and continues to do so. Mr Beazley's knowledge of a ground of apprehended bias can be imputed to his client, Mr Walker, for the purpose of determining waiver. 3. As to the second question, ascertaining whether Mr Beazley was aware of his client's right to object is hampered by Mr Beazley's non-appearance and the paucity of evidence adduced by Mr Walker on the recusal application. Mr Walker read a one-page affidavit by himself; there was no affidavit from Mr Beazley. The lender endeavoured to redress this lacuna by the notice to produce and Mr Seelenmeyer's affidavit as to his dealings with Mr Beazley in the proceedings generally. 4. There are three pieces of evidence to be considered. First, Mr Beazley (and Mr Walker) was aware of the judgment in Scientific Management at the time it was handed down. Mr Beazley provided Mr Walker with a link to the judgment two days later, with the instruction: "Read this." Obviously enough, Mr Beazley was sufficiently familiar with the contents of the judgment to form the view that Mr Walker should read it, notwithstanding that Mr Walker was not a party to the Scientific Management proceedings. 1. Second, the fact that I gave judgment in Scientific Management, and the possibility that my credit findings made in respect of Mr Snell supported a recusal application, was specifically raised at the hearing of the parties' motions for discovery in November 2022. Whilst Mr Beazley did not appear in the motions list that day for the second, fourth and fifth defendants, he was represented by counsel as cross-defendant on the first and second cross-claims. The knowledge of Mr Beazley's counsel can be imputed to Mr Beazley. 2. The question of whether knowledge imputed to Mr Beazley may then be imputed to Mr Walker is more complicated. Generally, the knowledge of an agent that may be imputed to the principal is actual rather than constructive knowledge: Sargeant v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634 at 659 (per Mason J); Ford Excavations Pty Ltd v Do Carmo [1981] 2 NSWLR 253 at 266 (per Hutley JA); Dal Pont, Law of Agency, 4th ed (2020) at 22.49. While constructive and imputed knowledge are not the same, in Sunshine Retail Investments Pty v Wulff [1999] VSC 415, Hedigan J observed that species of knowledge which arise 'by operation of the law' should not be imputed to the principal: at [117]. This does not mean that constructive knowledge can never be imputed to a principal; rather, it depends on the circumstances of the relationship between the principal and agent, and whether the agent had a duty to communicate knowledge to the principal: Laming v Jennings [2018] VSCA 335 at [97]-[98]. Having regard to these authorities, I consider that Mr Beazley's imputed knowledge should not be imputed further to Mr Walker. 3. Did Mr Beazley have actual knowledge of this matter? It is customary for legal representatives to report to their clients, and thus for Mr Beazley's counsel and solicitor appearing on the discovery motion to report to him on the day's events. Further, Mr Beazley continued to act for the second, fourth and fifth defendants in the proceedings and, according to Mr Seelenmeyer, to communicate with the parties. It is likely that, as a consequence of these matters, Mr Beazley became aware of what had happened at the hearing of the discovery motions. However, Mr Seelenmeyer did not annex any communications with Mr Beazley on this subject. While it would be open to infer that Mr Beazley became aware of this matter, overall, I do not consider that there is a sufficient evidentiary basis to find that Mr Beazley had actual knowledge of this matter. 4. Third, more than two weeks before the final hearing, Mr Beazley received an email from my tipstaff advising that the matter was listed for hearing before me. 5. As such, I conclude that Mr Beazley knew of the judgment in Scientific Management. The fact that I was the judge is a matter of public record. Mr Beazley also knew that I had been allocated to hear the the lender's claims against his clients. Did Mr Beazley know of a right to object on the ground of apprehended bias? As I understand it, the right is said to arise from the contents of the judgment. As mentioned, Mr Beazley was sufficiently familiar with the contents of the judgment to form the view that Mr Walker should read it. To the extent that the judgment provided a basis to seek recusal, Mr Beazley had actual knowledge of this ground of apprehended bias. In these circumstances, Mr Walker is imputed with such knowledge and waived his right to seek recusal by proceeding to argue the merits of the case. Apprehended bias 1. If I am wrong about this, Mr Walker said that, while he did not give evidence in Scientific Management and was not a party, he was mentioned 136 times in the judgment. The property with which these proceedings was concerned was also mentioned. Mr Walker referred to my observation, "Mr Snell was in the thrall of property developer Greg Walker and, from time to time, lent money to Mr Walker for his developments: Scientific Management at [32]. Mr Walker understood that this suggested that he had power or control over Mr Snell. Mr Walker believed that I formed an unfavourable view of him and Mr Snell in the judgment. Mr Walker noting that there was "never a kind word" said of him in the judgment and no reference to the profitable property developments which he and Mr Snell had undertaken. Mr Walker expressed concern that he was tainted with the same brush as Mr Snell, coming into these proceedings. 2. The plaintiff submitted that there was simply no logical connection between any aspect of the Scientific Management proceedings and the determination of the issues between the parties in the current proceedings. No findings were made in respect of the credit of Mr Walker, who did not give evidence. No party's credit was sought to be impugned in these proceedings. The mere fact that a judge has heard another matter involving a co-defendant and made findings concerning the co-defendant is not of itself sufficient to establish that the matter will not be decided on its legal and factual merits. Otherwise, Courts would be prevented from determining matters involving banks, government departments and other entities that are regularly before the Courts. Principles 1. The question of apprehended bias turns on whether a fair-minded lay observer – properly informed as to the nature of the proceedings, the matters in issue and the conduct which is said to give rise to an apprehension of bias – might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide: Re Refugee Tribunal ex parte H [2001] HCA 28; (2001) 75 ALJR 982 at [28]; Michael Wilson & Partners v Nicholls [2011] HCA 48; (2011) 244 CLR 427 at [31]. The principle gives effect to the requirement that justice should both be done and be seen to be done: Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337 at [6] (per Gleeson CJ, McHugh, Gummow and Hayne JJ). 2. Obviously enough, it would be far easier for me to simply recuse myself without further ado but this would itself be a failure to exercise my judicial function. In Livesey v New South Wales Bar Association [1983] HCA 17; (1983) 151 CLR 288, Mason, Murphy, Brennan, Deane and Dawson JJ observed at 294: If a judge at first instance considers that there is any real possibility that his participation in a case might lead to a reasonable apprehension of pre-judgment or bias, he should, of course, refrain from sitting. On the other hand, it would be an abdication of judicial function and an encouragement of procedural abuse for a judge to adopt the approach that he should automatically disqualify himself whenever he was requested by one party so to do on the grounds of a possible appearance of pre-judgment or bias, regardless of whether the other party desired that the matter be dealt with by him as the judge to whom the hearing of the case had been entrusted by the ordinary procedures and practice. 1. Likewise in Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337; [2000] HCA 63, Gleeson CJ, McHugh, Gummow and Hayne JJ observed at [19]-[21]: [19] Judges have a duty to exercise their judicial functions when their jurisdiction is regularly invoked and they are assigned to cases in accordance with the practice which prevails in the court to which they belong. They do not select the cases they will hear, and they are not at liberty to decline to hear cases without good cause. Judges do not choose their cases; and litigants do not choose their judges. If one party to a case objects to a particular judge sitting, or continuing to sit, then that objection should not prevail unless it is based upon a substantial ground for contending that the judge is disqualified from hearing and deciding the case. [20] … In a case of real doubt, it will often be prudent for a judge to decide not to sit in order to avoid the inconvenience that could result if an appellate court were to take a different view on the matter of disqualification. However, if the mere making of an insubstantial objection were sufficient to lead a judge to decline to hear or decide a case, the system would soon reach a stage where, for practical purposes, individual parties could influence the composition of the bench. That would be intolerable. [21] It is not possible to state in a categorical form the circumstances in which a judge … may properly decline to sit. Circumstances … may include such factors as the stage at which an objection is raised, the practical possibility of arranging for another judge to hear the case … These problems usually arise in a context in which a judge has no particular personal desire to hear a case. … 1. Here, I have no particular personal desire to hear this case but, further, I have already heard it. Whilst I do not consider that this changes the principles which I must apply, it does mean that I will examine the application with care. Recusal applications should be made in a timely manner as, if a judge disqualified themselves at short notice, it is not always possible to find a replacement judge to hear the matter in order to preserve the allocated hearing date, thereby causing the parties to waste legal costs and the Court to waste resources: The Hills Shire Council v Mouawad (2014) 203 LGERA 233; [2014] NSWLEC 59 at [49], [51] (per Pepper J). The late stage of the proceedings at which an objection is raised, and the difficulty in finding another judge to hear the matter may weigh against recusal: Mandie v Memart Nominees Pty Ltd (No 3) [2016] VSC 267 at [98] (per McMillan J). 2. The relevant principles concerning recusal for apprehended bias are stated by Gleeson JA (with whom Hulme and Button JJ agreed) in Chamoun v District Court of New South Wales [2018] NSWCA 187 at [36]-[38]: 36 The test of apprehension of bias is objective. It does not require an assessment of the state of mind of the judge in question, as is necessary on an inquiry about actual bias: Johnson v Johnson at [12]; Michael Wilson & Partners v Nicholls at [33]. 37 The application of the apprehension of bias principle requires two steps. The first is the identification of what it is said might lead the judge to decide a case other than on its legal and factual merits. The second is that there must be an articulation of the logical connection between that matter and the feared deviation from the course of deciding the case on its merits: Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337; [2000] HCA 63 at [8]; Michael Wilson & Partners v Nicholls at [63]. Only once these two steps have been completed can the reasonableness of the asserted apprehension of bias be assessed: Ebner at [8]. 1. In British American Tobacco Australia Ltd v Peter Gordon & Anor [2007] NSWSC 109, Brereton J summarised the principles at [62]-[63]: (citations omitted) [62] … The decision whether a judicial officer might not bring an impartial mind to the resolution of an issue does not involve prediction: the question is one of possibility (albeit it real and not remote), not probability. … for a judge to be disqualified, there must be a "substantial basis" for the conclusion of apprehended bias; the apprehension must be "firmly established". … [63] … The hypothetical fair-minded observer is a lay person informed as to the relevant facts of the case, sufficiently knowledgeable to bring a rational and reasonable assessment to bear on the question of whether the judge might be biased, and having a basic knowledge … that a judge is a professional who by training, tradition and oath is required to discard irrelevant, immaterial and prejudicial material and can be ordinarily assumed to comply with the judicial oath. His Honour noted the importance of precise identification of the issue said to have been prejudged, and the lay observer's assumed knowledge of a judge's ability to consider an issue afresh, aided by evidence and argument: at [83]. Substantive issues 1. As the fair-minded lay observer is one properly informed as to the nature of the proceedings and the matters in issue, it is necessary to have regard to the substantive issues to be resolved in these proceedings. The lender seeks judgment against the borrower and guarantors for moneys owing under the Facility Agreement. 2. The guarantors' Commercial List Response was filed after contracts for sale of the property had been exchanged but before completion. While the pleading did not engage with the lender's factual contentions, broadly, the guarantors queried the amount of their liability, where the lender had then taken possession of the property over which the loan was secured by a registered mortgage, but the sale of the property had not then settled. The guarantors were not then aware of the terms and conditions of the sale of the property and suggested that the lender and its receivers and managers may not have mitigated the lender's loss, having regard to the timing of the marketing and sale of the property and agreeing to sell the property on a delayed settlement basis. The precise basis of these allegations was not stated, nor particularised. 3. That is, the guarantors did not take issue with the underlying contract between the lender and the borrower, nor the validity of their guarantees, but raised an issue with the quantification of their liability to the lender including, potentially by reason of the lender and receiver's actions in realising its security. Scientific Management 1. Turning to the conduct which is said to give rise to an apprehension of bias, it is necessary to say something about Scientific Management. Put shortly, shareholders brought an oppression suit under sections 232 and 233 of the Corporations Act 2001 (Cth) against Mr Snell and others. A recurring theme in the allegations of oppression was the extent to which Mr Snell had lent money or made investments in other businesses, in particular, property development, car dealerships and boats, either in his own name or through the Scientific Management group, and the extent to which those personal transactions came 'onto the books' of the companies by way of accounting entries when the loan or investment proved to be a bad one. In that context, it was necessary to introduce various companies, people and businesses, including Mr Walker: Scientific Management at [29]. 2. As a consequence, the judgment referred to several transactions between Mr Snell and Mr Walker. The fact that Mr Walker's name appears 136 times (in a judgment of some 51,000 words) is not particularly informative. The question is whether there is any logical connection between the reference to Mr Walker in that case, and the feared deviation that I might not bring an impartial mind to bear upon the issues to be decided in this case. In Scientific Management, I concluded at [276]: … Mr Snell had something of a blind spot when it came to … Mr Walker … and proceeded to fund [Mr Walker's] various ventures, initially using his own funds and then reimbursing himself by transferring the loans to [Scientific Management]. When his dealings with Mr Walker … proved financially disastrous, Mr Snell transferred the risks associated with those investments to [Scientific Management] in circumstances where it must have been apparent to him that it was not in the interests of [Scientific Management] to take on these bad loans. Mr Snell's persistence in this course of conduct, in the face of sustained inquiry and objection by the other major shareholder of the company, did amount to oppressive conduct. … The focus and the findings were, unsurprisingly, in respect of Mr Snell. 1. Scientific Management does refer to the Pymble property and Greatest Ever Properties, being a property and company which recur in these proceedings. A fair-minded and informed observer would know the context in which the property and company arises in each proceedings. 2. As to the Pymble property in Scientific Management, Mr Snell lent personal funds to Mr Walker in 2006 in relation to the property but, after the oppression suit was commenced, made accounting entries such that his loan was recorded as loan from Scientific Management: Scientific Management at [34]-[35]. The only significance of Greatest Ever Properties was Mr Snell's attempt to explain his actions by suggesting he had agreed at the time when the loan was said to have been made that Greatest Ever Properties would hold the Pymble property on trust for Scientific Management. I did not accept this explanation, where the company did not exist at the relevant time: Scientific Management at [249]. 3. In contrast, this case concerns a loan obtained 14 years later in August 2019 – when judgment in Scientific Management was reserved – to fund the purchase of the Pymble property from Greatest Ever Properties. The underlying transaction between the borrower and Greatest Ever Properties is not in issue. The only issue is the quantification of the defendants' liability to the lender including, potentially by reason of the lender and receiver's actions in selling the property. Conclusion 1. A judge should disqualify themselves inter alia from hearing related matters in which the same issues and the credit of the same witnesses arises for determination, or unrelated proceedings where an adverse credit finding has been made in respect of the same witness: for example, Australian National Industries Ltd v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 411; R v El-Zeyat [2012] NSWSC 340 (per Johnson J); The Hills Shire Council v Mouawad. As to what it is said might lead me to decide this case other than on its legal and factual merits, Mr Walker points to my judgment in an unrelated matter, Scientific Management, where I made adverse credit findings in respect of someone else, Mr Snell. 2. Even more difficult to ascertain is the logical connection between this matter and the feared deviation that I might not bring an impartial mind to bear upon the issues that are to be decided. There is no overlap of issues between the two proceedings. Whilst the propriety of Mr Snell's actions was certainly in issue in Scientific Management, the propriety of Mr Walker's conduct was not. There is no overlap of parties: Mr Walker was not a party to the Scientific Management proceedings, nor were any of his companies. There is no overlap of witnesses. Mr Walker was not called as a witness in Scientific Management. Nor did Mr Walker give evidence in this case. There is no prospect that I will need to assess the credibility of Mr Walker. Nor, given the issues sought to be agitated by him at the hearing, is there any warrant to examine his actions in this matter, as opposed to those of the lender and its receiver. 3. Turning then to the reasonableness of the asserted apprehension of bias, there is no issue which it is said that I have pre-judged. Where a lay observer is assumed to know of a judge's ability to consider an issue afresh, aided by evidence and argument, I do not consider that a fair-minded lay observer, properly informed, would reasonably apprehend that I might not bring an impartial and unprejudiced mind to the resolution of the substantive issues in this case. Mr Walker has not established a substantial basis for a conclusion of apprehended bias. I decline to recuse myself. Service on receiver 1. Turning then to a procedural matter which was not raised by Mr Walker, the lender claimed to have served the borrower on 31 March 2021 by emailing the Summons and Commercial List Statement to the receiver, who had earlier agreed, orally and in writing, to accept service by email. In taking this course, the lender relied on the powers of the receiver under a mortgage and General Security Agreement. 2. Under the mortgage, the lender was entitled to "commence, defend, prosecute, settle, discontinue and compromise litigation … in relation to the Secured Property" on behalf of the mortgagor: clauses 9.10(c). The lender could appoint a Receiver as its agent and delegate to the Receiver any of the Mortgagee's rights under the mortgage: clause: 10.1(a). The instrument of appointment of the receiver is not in evidence. Whether the lender delegated its right to "defend … litigation … in relation to the Secured Property" is not known. In any event, under the General Security Agreement, the receiver was authorised to "bring, prosecute, enforce, defend and discontinue all actions and proceedings … in relation to all or any of the Secured Property": clause 9.6(o). 3. The lender submitted that the receiver's power to "defend" proceedings on behalf of the borrower carried with it a power to accept service of those proceedings. I do not agree. First, the receiver has power to "defend … all actions and proceedings … in relation to all or any of the Secured Property". This is unsurprising where a receiver is appointed to collect and realise the property as a means of realising the lender's security. To achieve this end, the receiver is conferred with power to conduct proceedings which concern the property, if need be. Here, the proceedings are not in relation to the Pymble property but to recover monies owing under the Facility Agreement following the sale of that property. Second, whilst I have been unable to find any authority on this point, I consider that the receiver's power to defend proceedings can be exercised once those proceedings had been properly commenced against the borrower, including by valid service. At that point, the receiver can take over the defence of the proceedings. Absent express conferral of a power to accept service on the borrower's behalf, the power to defend does not extend so far. 4. Rather, rule 10.22 of the Uniform Civil Procedure Rules 2005 provides: 10.22 Personal service on corporation Personal service of a document on a corporation is effected— (a) by personally serving the document on a principal officer of the corporation, or (b) by serving the document on the corporation in any other manner in which service of such a document may, by law, be served on the corporation. 1. As to the manner in which a document may be served on a corporation according to law, section 109X of the Corporations Act 2001 (Cth) provides: 109X Service of documents (1) For the purposes of any law, a document may be served on a company by: (a) leaving it at, or posting it to, the company's registered office; or (b) delivering a copy of the document personally to a director of the company who resides in Australia …; or (c) if a liquidator of the company has been appointed—leaving it at, or posting it to, the address of the liquidator's office in the most recent notice of that address lodged with ASIC; or (d) if an administrator of the company has been appointed—leaving it at, or posting it to, the address of the administrator in the most recent notice of that address lodged with ASIC; or (e) if a restructuring practitioner for the company has been appointed—leaving it at, or posting it to, the address of the restructuring practitioner in the most recent notice of that address lodged with ASIC. 1. Noteworthy, a receiver does not appear alongside a liquidator, administrator or restructuring practitioner in this list. As Brereton J explained in Pacific General Securities Ltd v Soliman & Sons Pty Ltd [2006] NSWSC 13 at [61]-[62]: (citations omitted) [61] … This is unsurprising, since although the appointment by a creditor under a charge of a receiver and manager may well dominate exclusively a company's affairs and dealings and relations with the outside world, it does not permeate the company's internal domestic structure, which continues to exist notwithstanding that the directors no longer have authority to exercise their ordinary business management functions and does not completely displace the directors, but effectively suspends their powers to the extent necessary to enable the discharge of the receiver's functions. [62] Thus the appointment of a private receiver (unlike that of a liquidator or administrator) does not have any special consequence so far as service is concerned, and does not mean that service in a manner which would otherwise have been valid is no longer sufficient. … See likewise Porter v Australian Prudential Regulation Authority (2010) 184 FCR 382 at [25] (per Perram J); Re Lifestyle Residences Hobsons Bay Pty Ltd (recs & mgrs apptd) [2023] VSC 179) at [42] (per Heytey AsJ). 1. Whilst it is open for the lender to seek orders for substituted and informal service under rule 10.14 of the Uniform Civil Procedure Rules, this is in the event that a document cannot practicably be served in accordance with the rules, or steps other than those prescribed by the rules have been taken for the purpose of bringing the document to the notice of the person concerned. Here, there is nothing impracticable about serving the borrower at its registered office. Nor has the lender taken any other steps for the purpose of bringing the document to the notice of the borrower. Rather, the lender has simply taken a step which is not envisaged by the Uniform Civil Procedure Rules, the Corporations Act, the mortgage or General Security Agreement. 2. Of course, the sole director and shareholder of the borrower is Mr Walker. He is clearly aware of the proceedings brought against his company, having participated in these proceedings since inception. But that does not mean that the borrower has been served. Waiver of ineffective service 1. It may be that the borrower has waived any irregularity in the manner of service. A party who enters an appearance waives any irregularity in the manner of service. Even if no formal appearance is entered, a party who attends court and argues the merits or the substance of the matter will usually be treated as having waived any irregularity in the manner of service: Boyle v Sacker (1888) 39 Ch D 249 at 252 (per Cotton LJ); Roladuct Spiral Tubing Pty Ltd v C & P Trading Pty Ltd (1993) 114 FLR 392 at 394 (per Pincus, Ambrose and White JJ); Johnson v Alexander [2002] NSWSC 824 at [14] (per Levine J); Carver v de Robillard [2006] FCA 1041 at [40] (per Lindgren J). 2. For example, in Deckers Outdoor Corporation Inc v Farley [2010] FCA 391, there was no evidence that contemnors had been personally served with the contempt motion, charge or evidence in support. However, the contemnors' counsel appeared on their behalf at two directions hearings and took no objection to service. The contemnors each filed an affidavit in defence of the contempt proceeding. Tracey J was satisfied that the proceedings had been brought to the contemnors' attention in sufficient detail for them to provide the instructions which were necessary for the preparation of their affidavits and the protective purposes served by rule requiring personal service had been satisfied: at [165]-[167]. 3. Here, although no Notice of Appearance has been filed on behalf of the borrower, Mr Beazley appeared for the borrower on 2 and 23 September 2020: see [15]. Further, the motion and affidavit in support on the recusal application was filed on behalf of the borrower and Mr Walker. 4. Mr Beazley's appearance on the two directions hearings was not to argue the merits of the proceedings. Mr Walker did not appear for the borrower at the hearing, nor argue the substance of the case on behalf of that party. The recusal motion was filed on behalf of the borrower after the hearing was concluded. I do not consider that, by Mr Beazley's appearances at the directions hearings or the filing of the recusal motion, the borrower has waived any defect in service and, in the result, I am not prepared to make orders against the borrower. Of course, the lender is at liberty to commence fresh proceedings against the borrower, these proceedings having not been properly commenced at that entity at all. Facts 1. Turning, finally, to the substantive issues, the lender relied on the evidence of its chief operations officer, Danny Procopis, and solicitor Alexander Roth. The defendants had no evidence. 2. On 12 August 2019, the borrower applied to the lender for a nine month loan of $3.25 million, to be guaranteed by Mr Walker and secured over a property in Ryde Road, Pymble. According to the application, the borrower proposed to acquire the Pymble property for $5.1 million. Attached to the application was an unexecuted contract for the sale and purchase of land, by which Greatest Ever Properties sold the Pymble property to the borrower for $5.1 million. Also attached was a valuation of the Pymble property dated 8 February 2019 from TRH Valuation Services, albeit addressed to another lender, opining that the property was worth $5.1 million. 3. On 15 August 2019, Aquamore obtained a valuation from All Property Valuation Services in respect of the Pymble property. The valuer concluded that market value was $5.1 million. The price in the contract for sale was considered to be fair and reasonable. Facility Agreement 1. On 21 August 2019, the lender, the borrower and Mr Walker executed a Facility Agreement, under which the lender agreed to advance $3,442,500. Clause 13 set out the terms of a guarantee and indemnity given by Mr Walker, including: 13.10 Principal and independent obligation … (b) This clause 13 is enforceable against a Guarantor: … (ii) whether or not the Financier has made demand on any Obligor [the Borrower and each Guarantor] …; (iii) whether or not the Financier has given notice to any Obligor or any other person on respect of any thing; or (iv) whether or not the Financier has taken any other steps against any Obligation or any other person; … That is, whether or not the lender sought to recover the monies owed from the borrower, the lender was entitled to recover the monies from the guarantors. 1. Clause 19.5 provided that a certificate or statement, signed on behalf of the lender by any of its Authorised Representatives, was conclusive and binding on the borrower and Mr Walker "except in the case of manifest error." 2. The borrower also granted a first registered mortgage over the Pymble property to the lender. Relevantly, the lender was entitled to appoint a receiver and manager of the Secured Property: clause 9.11. The receiver would be the agent of the mortgagor "who alone shall be responsible for the Receiver's acts and omissions": clause 10.1(a). 3. The advance was drawn down in full. By November 2019, the facility was in default. On 20 December 2019, the parties executed a Deed of Amendment and Restatement, which varied the terms of the facility agreement and added Mr Snell and the fourth and fifth defendants as guarantors. The facility limit was also increased to $3,505,022.88. 4. By February 2020, the facility was again in default. According to emails between the lender and the defendants, the borrower was then endeavouring to refinance the facility. On 26 March 2020, Mr Walker advised the lender's solicitor, Phil Hustler, that the incoming lender was relying on a new valuation of $5.3 million for the Pymble property, which "Your panel valuer has actually revised to 5.4m. To make this happen I believe we would require a 65% LVR at the new valuation to make the numbers work. Would your client consider this please." Mr Walker offered to send Mr Hustler the valuation. Mr Hustler advised "I just do not follow [your] emails … Can you please review these and possible re-phrase them as otherwise I simply don't know what instructions I am seeking." In any event, the lender declined Mr Walker's proposal. There is no evidence that Mr Walker provided any new valuation to the lender. 5. On 1 May 2020, the parties executed a further Deed of Amendment and Restatement, reducing the facility limit to $3,442,500 and bringing the term of the facility to an end on 1 August 2020. The borrower failed to repay the facility on that date, such that interest at the default rate commenced to run. On 13 August 2020, letters of demand were issued by the lender, together with notices pursuant to section 57(2)(b) of the Real Property Act 1900 (NSW). Borrower attempts to sell the property 1. In September 2020, Mr Walker proceeded to list the Pymble property for sale with Savills and to pay for the selling agent and sales campaign. On 21 September 2020, Mr Walker informed the lender's solicitor, Mr Roth, that the agent "has strong early interest." 2. On 25 September 2020, the parties executed a Deed of Forbearance. The lender agreed not to enforce its remedies until 21 November 2020, while the borrower agreed to engage a reputable real estate agent to market the Pymble property, and to pay the agent's marketing fees: clause 6. The borrower also agreed to provide weekly updates to the lender on marketing and sale activities and to reimburse the lender for the costs of obtaining a valuation of the property, estimated to be $3,850: clause 7. (This may be a reference to a report prepared by the architect, "Phase 1 Environment Planning Research and Analysis", rather than a valuation). The borrower and guarantors also acknowledged that the moneys then owed to the lender stood at $3,583,265.23, and interest continued to accrue at the default rate: clause 10. 3. On 28 September 2020, Mr Walker provided an update on the marketing campaign, "the enquiry level is good." On 2 October 2020, Savills provided a marketing campaign update: whilst the agent was pleased with the level of enquiry, "the location of the site is seeming to be of concern to most groups." 4. On 19 October 2020, Savills advised the lender "we were not receiving much interest due to limited information being provided." The agent had obtained plans, which it was able to share with interested parties, "We've got a few groups speaking to council. We speak with one group in particular … Pricing at this stage seems to[o] far off expectation". The agent further advised that for many inspecting the property, "they simply didn't want to adopt the concerns of the site and didn't engage on price (a vast majority), for those more recently, they're seeing value at high $2m range." 5. On 22 October 2020, the expression of interest period under the marketing campaign being undertaken by Savills in relation to the Pymble property ended. The expression of interest campaign did not result in an offer to purchase the property being accepted by the borrower. Receivers appointed 1. On 2 December 2020, the lender appointed receivers and managers to the borrower. On 17 February 2021, contracts for sale were exchanged to sell the Pymble property for $3.74 million, with settlement in six months, that is, on 21 August 2021. The sale was completed on 28 September 2021; the lender received net sale proceeds of $3,160,640.64. This amount was credited to the borrower's loan account on 11 October 2021. The balance of the account was then $1,776,513.63. Default interest continued to accrue. 2. Shortly before the hearing, the lender's claim against Mrs Snell and its cross-claim against Mr Beazley were settled. The settlement moneys were credited to the borrower's loan account on 2 May 2023, leaving a balance of $1,070,825.24. Default interest and fees continued to accrue. 3. As at 5 May 2023, according to a Financier's Certificate prepared pursuant to clause 19.5 of the Facility Agreement, the amount owing is $1,149,098.99, with interest accruing at a daily rate of $755.57. Mr Procopis explained, in detail, the amount owing to the lender after receipt of the net proceeds of sale of the Pymble property and moneys paid by Mrs Snell and Mr Beazley in settlement. I note that this amount includes legal costs already paid by the lender to its solicitor and counsel, being $420,231.70 and $21,235.50 respectively. Further solicitor and counsel's will be payable on conclusion of the hearing. Conclusion 1. As mentioned, the guarantors did not take issue with the underlying contract between the lender and the borrower, nor the validity of their guarantees, but raised an issue with the quantification of their liability to the lender including, potentially by reason of the plaintiff's actions in realising its security. Orally, Mr Walker complained that the sale price was inadequate when compared with purchaser's valuation, which was not admitted into evidence but was said to be higher than the sale price as the purchaser was able, during the delayed settlement period, to obtain a revised development consent for the property, where Mr Walker said he had asked the lender to give him an opportunity to obtain such a consent. Further, Mr Walker complained that default interest continued to accrue during the period of delayed settlement. Finally, Mr Walker did not understand the loan statement. 2. It is certainly the case that the lender sold the Pymble property in February 2021 for less than the valuations obtained in August 2019. Specifically, $3.74 million was $1.36 million, or 27%, less than the earlier valuation of $5.1 million. There is some evidence that Mr Walker obtained a slightly higher valuation of $5.3 million in March 2020: see [91]. 3. There is also evidence that the borrower and Mr Walker attempted to sell the property themselves, in September and October 2020, with the assistance of Savills. According to Savills' emails, those inspecting the property voiced various concerns and saw "value at high dollar $2m range." This campaign did not result in an offer to purchase the property being accepted by the borrower. 4. The receivers achieved a higher sale price than that discussed with Savills, being $3.74 million. Given Savills' inability to find a buyer at all, I am not satisfied that the lender's actions in realising the security were deficient. In any event, any responsibility for the receiver's acts and omissions fell at the feet of the borrower, where the receiver was the borrower's agent: clause 10.1(a), memorandum of common provisions. 5. If it be the case that the purchaser increased the value of the property during the delayed settlement period, by obtaining a revised development consent, then the purchaser's subsequent valuation was likely based on features of the property which did not exist on the date of the contract of sale. Further, there is no evidence that Mr Walker asked the lender for time so that he could obtain a revised development consent before putting the property on the market. Rather, the evidence is that Mr Walker asked the lender for an opportunity to attempt to sell the property. The lender acceded to this request and Mr Walker was unsuccessful in finding a buyer. 6. The contract of sale had a delayed settlement of six months. There is no evidence to suggest that this period was unreasonable in the circumstances. Presumably, agreeing to such a settlement period had the consequence that the purchaser was prepared to buy the property at all and at that price. 7. Mr Walker has not established "manifest error" in respect of the certificate provided by the lender pursuant to clause 19.5 of the Facility Agreement. Mr Propocis' evidence makes plain the basis on which the outstanding amount has been calculated, as does the detailed loan statement. 8. In the result, the lender is entitled to judgment against each of the guarantors other than Mrs Snell for the money owing under the Facility Agreement, including interest that has accrued pursuant to the provisions of the Facility Agreement and Aquamore's costs on a solicitor-client basis pursuant to clause 17.4 of the Facility Agreement. 9. For these reasons I make the following orders: 1. Dismiss the first and second defendants' motion filed on 11 May 2023, with costs. 2. Judgment against the second, fourth and fifth defendants in the sum of $1,157,410. 3. Order the second, fourth and fifth defendants to pay the costs of the plaintiff's solicitors from and including 29 April 2023 on a solicitor-client basis, as agreed or assessed, except to the extent: 1. any such costs have been included in any tax invoices rendered by the plaintiff's solicitors to the plaintiff prior to the date of this order; or 2. any such costs are referrable to any cross-claims filed in the proceedings or the defence filed on behalf of the third defendant/first cross-claimant. 1. Order the second, fourth and fifth defendants to pay the costs of the plaintiff's counsel from and including 14 November 2022 on a solicitor-client basis, as agreed or assessed, except to the extent any such costs are referrable to any cross-claims filed in the proceedings or the defence filed on behalf of the third defendant/first cross-claimant. ********** 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: 16 May 2023