SCHNEIDER v NATIONAL AUSTRALIA BANK LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MEAGHER,SHELLER and POWELL JJA 29 May 1995, 10 August 1995 [1995] NSWCA 419 PROCEDURAL FAIRNESS — amendment of summons — legal representation By two summonses, against the respondents, Barry James Schneider and Jennifer Beatrice Schneider, filed on 22 January 1990, the appellant, National Australia Bank (NAB) claimed judgments for possession of certain lands and leave to issue writs of possession to enforce ie judgments. The respondents filed a cross claim claiming damages * for breaches of a lease agreement whereby they alleged NAB agreed to lease a prime mover to the Schneiders and to advance an amount of $133,000 to them; * for contravention of the Trade Practice Act 1974; and * for negligent misrepresentation. On 28 November both proceedings came for hearing before Windeyer J. An application for adjournment made by the Schneiders and opposed by NAB was refused. Thereafter Mr Schneider refused to take part in the proceedings. An application was made by the appellant to amend the summonses to include a monetary claim. Windeyer J permitted NAB to amend its summonses but the monetary claims were adjourned. NAB, by its own delay, had created a situation in which it was not permitted to complete its case on the date fixed for hearing. The appellants challenged the decision of Windeyer J on the basis that there was a denial of procedural fairness involving: 1. the refusal of his Honour of an adjournment of the hearing of the proceedings and the cross claim; 2. the granting of leave to amend the proceedings so as to enable the respondent bank in each proceeding to seek a judgment for debt; and 3. the dismissal of the cross claim. Held: (per Meagher and Powell JJA) Once it is accepted that the refusal of an adjournment was appropriate and Mr Schneider on behalf of his wife and himself elected to take no part in the proceedings it was inevitable that the bank would obtain an order for possession and the cross claim would be dismissed leaving the bank free to seek to obtain judgment for the debts owing under the mortgages. (per Sheller JA dissenting) His Honour was in error in dismissing the cross claims when he did. Once his Honour reached the conclusion that part of NAB's case should not proceed, the Schneiders were entitled to reserve their case in defence and on their cross claims. ORDERS Appeal dismissed with costs. Meagher JA I agree with Powell JA. Sheller JA By two summonses, No 10230/90 against Barry James Schneider and Jennifer Beatrice Schneider and No 10231/90 against Barry James Schneider, filed on 22 January 1990, National Australia Bank Limited (NAB) claimed judgments for possession of certain lands and leave to issue writs of possession to enforce the judgments. On 2 January 1991 the city agents of Belbridge Hague 2 UNREPORTED JUDGMENTS and Co, the solicitors then acting for the Schneiders, filed a cross claim, in 10230/90 and also, apparently, in 10231/90, in similar terms, mutatis mutandis, claiming damages * for breaches of a lease agreement whereby they alleged NAB agreed to lease a prime mover to the Schneiders and to advance an amount of $133,000 to them; * for contravention of the Trade Practices Act 1974; and for negligent misrepresentation. Between February 1990, when notices of appearance were filed, and 5 October 1993, the proceedings were listed on several occasions for directions. On 5 October 1993 Belbridge Hague and Co wrote to NAB's solicitors advising that they no longer acted for the Schneiders. In January 1994 they filed a notice of ceasing to act. On 11 July 1994 the hearing of the proceedings was expedited. On 20 July 1994 Greaves Wannan and Williams, solicitors, wrote to NAB's solicitors that they acted as city agents for David Koschitzke, the solicitor for the Schneiders. On 30 August 1994 the court sent a notice of call-over for 30 September 1994 when the matter was fixed for hearing on 28 November 1994. On 18 November 1994 Mr Koschitzke gave notice of intention to cease acting as solicitor for the Schneiders. On 22 November 1994 Trafalms, an acronym for "The Rural Australian Finance Advisory and Litigant Management Services", wrote to NAB's solicitors that the Schneiders had made an urgent application for legal aid and that Mr Schneider was ill as a result of stress and the drought. Accompanying this was a document signed by Mr Schneider authorising Mr Hastie of Trafalms to speak on the Schneiders' behalf. On 25 November 1994 the Schneiders applied to Simpson J to vacate the hearing date. The application was based upon concerns about Mr Schneider's health and the Schneiders' intention, "partly implemented", to seek legal aid. Simpson J refused the adjournment on the grounds that expedition had been ordered some months before, the application for legal aid was very late and the proceedings concerned investment or business properties not the Schneiders' family home or farm. On 28 November 1994 Mr Schneider swore an affidavit stating that the reason his solicitor had. in November 1994, filed a notice of ceasing to act, was the Schneiders' failure to provide funds and outlining attempts he had made to obtain legal aid. A notice of appeal against the refusal of legal aid was pending. On 28 November 1994 both proceedings came on for hearing before Windeyer J. Mr Schneider applied for an adjournment which NAB opposed. His Honour had before him the reasons for Simpson J's refusal of the earlier application for adjournment, the affidavit of Mr Schneider and affidavits filed by NAB. After some argument Windeyer J said he did not propose to grant the adjournment, that he would give some short reasons and adjourn the matter to start at midday. After the adjournment his Honour indicated that he proposed to proceed. Mr Schneider said: "I will be sitting in silence". The following appears in the transcript: "(Mr Rein sought to amend the summons to include a claim for judgment in a specific sum calculated to the end of October and then interest thereon. Mr Rein handed up a document so that his Honour could see that notice was given to the defendants back in 1992. Mr Rein further said that a copy of the Amended Summons in both matters was sent to the solicitor acting for the defendants last week.)" His Honour directed attention to the difference between Mr Schneider's taking part in the proceedings, when he would be shown documents and entitled to speak, and not taking part in proceedings but sitting in court in which case he URJ SCHNEIDER v NATIONAL AUSTRALIA BANK LTD (Sheller JA) 3 would not be shown documents. Mr Schneider said he was not in a position to take part in the proceedings and explained why. His Honour asked Mr Schneider whether he wanted to bring a particular witness he mentioned to the court the next day. After some further interchange Mr Schneider said he had not got a barrister "for tomorrow until the legal aid, what I've applied for and appealed against, until they reply. I don't have their answer to my appeal." A little later his Honour said: "I wish to make it clear I do not propose to adjourn the case. If you thought you would be ready to run it tomorrow with or without legal assistance, well and good. The case is going to be heard." Mr Schneider then said: "As I mentioned to you, I will be sitting in silence. I am being denied natural justice. If you want to run the case it will have to be appealed against, that is all. I can't help that." The transcript continued as follows: "HIS HONOUR: I should now note that I intend to proceed with this case on the basis that Mr Schneider has said that he does not wish to take part in it. Although he will, therefore, remain in the Court, it will be as if the case were being conducted in his absence. In saying that, all I mean is that I do not intend that documents which the plaintiff wishes to place into evidence should be shown to him to see if he has any objection to them, nor do I intend to ask him or allow him to make submissions at any time during the hearing of the action, whether it be in relation to amendments or otherwise. I should add, that Mr Schneider, when asked whether or not he would be able to pay for legal representation, said that he would be able to do so when a Mr Gorman, to whom I have already referred, paid to him amounts due to him, for sales of produce, those amounts being due under an agreement. It is those amounts which were the subject of the cheques which were not honoured on presentation and, therefore, I do not think there is any basis on which I could hold that funds will be available for representation at some reasonable time in the future. I therefore propose to proceed. SCHNEIDER: Your Honour, may I remain in the Court? HIS HONOUR: Yes. In principle you should not remain at the Bar table but I have no objection to you staying there. (Mr Rein sought to file an amended summons without it being served, a copy having been sent to the solicitor who was then on the record last week.) HIS HONOUR: I propose to allow the document to be filed but I would not propose to allow you to proceed on that part." In reasons for judgment he then gave his Honour said: "Tn each of these matters the plaintiff seeks leave to file an amended summons, the effect of which is to claim not only possession of the mortgaged properties but judgment for the amount said to be due by the defendants to the plaintiff secured by those mortgages. While I appreciate that notice of intention to make that claim was given as far back as 1992, nothing was done by way of amendment until last week. At that stage notice was given to the then solicitor who has filed in court today a notice of ceasing to act. While he was still on the record at the time a copy of the proposed amended summons was sent to him, the solicitors for the plaintiff were aware that he would be filing the notice of ceasing to act. In those circumstances it was at least likely the defendants would be unrepresented. I do not think that I should allow the claim for judgment for the amount due under the mortgages to proceed today. 4 UNREPORTED JUDGMENTS I will give leave to the amended summons to be filed and I will proceed with the hearing of the claim for possession and it would be my intention, if that claim succeeds to stand over the remaining matter under that amended summons, being the claim for judgment for the debt said to be due by the defendants to the plaintiff." After that Mr Rein. for NAB, read and tendered affidavits. At the conclusion of the evidence his Honour gave reasons for judgment on the claims for possession and said: "Default has been made by the defendant under the mortgage in that they have failed to pay on demand the sums secured by the mortgage. Notice of demand was given and not complied with and, although it is not necessary for the purpose of these proceedings, notice under s57(2)(b) of the Real Property Act was given, as required prior to the exercising of any power of sale. It follows from this, there being no defence and the matter being dealt with, as I have earlier said, in the presence of Mr Schneider but he having elected to take no part in the proceedings and Mrs Schneider not appearing, the plaintiff is entitled to the order for possession claimed in each amended summons. As I earlier stated, in the circumstances which have arisen, I did not intend to proceed with the claim for judgment for the amount said to be due under the mortgages and it will be necessary to serve that amended summons on Mr and Mrs Schneider prior to that claim proceeding. What I have dealt with is the claim which was in fact made under the original summons. On further consideration, in case there is any difficulty, I consider it more desirable to proceed on the original summons and make the orders which I propose under it and then to stand over the matters which will remain under - the amended summons. That would prevent any procedural difficulty occurring in the future. In each action I give judgment for possession as sought in par I of the summons. I give leave to issue a writ of possession forthwith. I order the defendants in action 10230/90 and the defendant in 10231/90 to pay the plaintiffs costs to date. I stand over the matters remaining on the amended summons. I give liberty to restore those matters to the list after 14 days after service of those documents. There being no appearance for the cross claim [sic] during the hearing and therefore, no evidence being tendered on the cross claim, the cross claim is dismissed with costs in each action. Mr Schneider, who I allowed to address the Court after I had made the orders sought a stay on judgment. While it was somewhat irregular, I thought it best to allow him to so address the Court. He asked for a stay for 28 days. He says that he considers that his cross claim, if successful, would be for an amount in excess of the plaintiffs claim against him. There is no basis on which I could find that to be the position but I think that the reasonable course is to order that execution not be levied under the writ of possession for 14 days. So, I will amend my second order which will now give leave to issue a writ of possession forthwith but order that execution not be levied on such writ for 14 days. also order that the exhibits may be returned on the undertaking of the plaintiff to bring them back to court in the event of any appeal being lodged." The Schneiders appealed from this decision. On 15 March 1995 NAB applied to have the appeal dismissed as incompetent. The Court adjourned the application and said that the parties should be ready to deal with the appeal on its merits. An amended notice of appeal was filed. In substance this was based on the ground of a denial of procedural fairness. URJ SCHNEIDER v NATIONAL AUSTRALIA BANK LTD (Sheller JA) 5 Iam quite satisfied that, but for the order made by Windeyer J permitting NAB to amend its summonses, it was appropriate for his Honour to proceed as he did. The summonses had been listed for hearing for some time. The Schneiders should have been ready to proceed on 28 November 1994. His Honour gave them the benefit of a short adjournment and indicated he was prepared to entertain an application that the matter be stood over for one day to enable a witness to be present. It may seem harsh that the Schneiders found themselves left at short notice without a solicitor but for the reasons given by Simpson and Windeyer JJ it was appropriate that the hearing go on on 28 November 1994. The Schneiders had proper notice of the hearing date and every opportunity to lead evidence and to address such matters in argument as they wished relevant to the cases in hand. However the amendment of the summonses puts a different complexion on the matter. By the amendments NAB sought judgment against the defendants in the sum of $291,902.57. His Honour said that notice of intention to make the claim was given as far back as 1992 but "nothing was done by way of amendment, until the week before the hearing." There was no excuse for this dilatoriness. Understandably and, in my opinion, correctly, his Honour did not allow NAB's monetary claims to proceed on 28 November 1994. NAB had by its own delay created a situation in which it was not permitted to complete its case on the day fixed for hearing. The monetary claims were adjourned. Quite obviously when these come back for hearing the Schneiders must be permitted, if they wish, to defend them. With all respect it seems to me that it would have been far better if the cross claims had been stood over so that all the monetary claims and cross claims could have been resolved at the one time. The question is did his Honour err in a way which entitles this Court to interfere. On 28 November 1994 the Schneiders were unrepresented. They applied to have the summonses seeking only judgments for possession and leave to issue writs of possession adjourned. The application was twice refused. His Honour ruled that Mr Schneider could not make submissions at any time during the hearing whether in relation to the amendments or otherwise. Application was made to amend the summonses to include the monetary claims. His Honour took the view that the amended claims should not proceed on that day. Clearly the application to amend strengthened the Schneiders' case for an adjournment. Indeed, NAB should have foreshadowed its application to amend at the time the adjournment applications were being made before Simpson and Windeyer JJ. The Schneiders could not be required to proceed with their defence to the claims or with their cross claims until NAB had closed its case on the summonses. Once NAB amended the summonses it was not permitted to complete its case on 28 November 1995. When it came to do this on the adjourned date it may have led evidence which, as a result of cross examination or otherwise, would have assisted the Schneiders in their cross claims. Once his Honour reached the conclusion, which as I have said I regard as the correct one, that part of NAB's case should not proceed, the Schneiders were entitled to reserve their case in defence and on their cross claims. Accordingly in my opinion and with the greatest of respect his Honour was in error in dismissing the cross claims when he did. I would propose the following orders: 1. Grant leave to Barry James Schneider and Jennifer Beatrice Schneider to appeal from the decision of Windeyer J of 28 November 1994; 2. Appeal allowed; 6 UNREPORTED JUDGMENTS 3. Set aside that part of his Honour's order of 28 November 1994 dismissing the appellants' cross claims with costs; 4. Stand the cross claims over to be heard at the same time as the balance of me respondent's claim or alternatively to a date to be fixed by Windeyer J. 5. Dismiss me respondent's application to dismiss the appeal with no order as to costs; 6. The respondent to pay the appellants' costs of the appeal including reserved costs. Powell JA I have read, in draft, the Judgment which has been prepared by Sheller JA in this matter. Although, in his Judgment, Sheller JA has set out many of the relevant facts, the facts that I am unable to share the conclusion to which his Honour has come, and that the reasons for my inability to do so are based upon matters to which his Honour has not referred in his Judgment, require me to set out the additional matters upon which I rely in coming to the conclusion that the present Appeal should be dismissed. Those additional matters are as follows: 1. the land, possession of which was sought in the two actions which were dealt with by Windeyer J, were the subject of three mortgages granted to the Respondent Bank, details of those mortgages being as follows: (a) Mortgage Registered No W503156 granted by Mr and Mrs Schneider at some time prior to 26th March 1987 in respect of the land comprised in Certificate of Title Registered Volume 13671 Folio 250, that land, apparently being vacant land, being Lot 7 in Deposited Plan Registered No 258193 situate in Sladen Street East, Henty - this mortgage seems as if it may have been granted by Mr and Mrs Schneider to secure overdraft accommodation up to an amount of about $30,000.00 to be provided by the Respondent Bank; (b) Mortgage Registered No W503157 granted by Mr Schneider at sometime prior to March 1987 in respect of the land comprised in Certificate of Title Registered Volume 5121 Folio 82, upon which land appears to have been erected a cottage property not occupied by Mr and Mrs Schneider - known as 10 Sladen Street East, Henty - it is likely that this mortgage was given to secure the overdraft accommodation to which I have earlier referred; (c) Mortgage Registered No 837516 granted by Mr and Mrs Schneider on 26th March 1987 over the lands comprised in Certificates of Title Registered Volume 3677 Folio 70 and Volume 3977 Folio 12 - those lands - apparently vacant quarter acre residential allotments - being Lots 34, 35, 36 and 37 in Deposited Plan Registered No. 12486 and situate in Fox Street, Henty - in the Cross-Claim to which Sheller JA has referred in his Judgment, it is asserted by Mr and Mrs Schneider that this mortgage was granted in consideration of the Respondent Bank agreeing to extend from $30,000.00 to $50,000.00, the limit of the overdraft facility earlier provided to Mr and Mrs Schneider; 2. the Judgment which was delivered by Windeyer J on 28th November 1994, in respect of which Judgment and the Orders made thereunder this appeal is brought, makes it clear that, prior to the commencement of the two sets of proceedings with which his Honour dealt, the Appellants had made default under the several mortgages in that they had failed to pay on demand the sums secured by the several mortgages, and, further, that - although as his Honour correctly pointed out it was not necessary for the purposes of those proceedings that that be done - notices pursuant to the provisions of s57(2B) of the Real Property Act 1900 had by then been given. It seems to be accepted that, at the time when URJ SCHNEIDER v NATIONAL AUSTRALIA BANK LTD (Powell JA) 7 default was made, the amount owing under the mortgages was at least $96,000.00 (see transcript at 2-3) an amount which appears to have exceeded what was then thought to be the total of the market value of each of the several properties secured by the mortgages; 3. although Notices of Appearance appear to have been filed in each proceeding in February 1990 and although, as Sheller JA has recorded in his Judgment, a Cross-Claim was filed in proceeding No 10230 of 1990 on 2 January 1991 - the papers provided to the Court do not contain a copy of any Cross-Claim filed in proceeding No 10231 of 1990 - not only do the papers provided to the Court not contain a copy of any Defence said to have been filed in either proceeding, but it appears to be conceded that no such Defence was filed in either proceeding (see Transcript at 5, 7). The absence of any Defence to either proceeding is hardly surprising since: (a) as I have earlier pointed out, the existence of the several mortgages and of the debt secured by them appears at all relevant times to have been admitted; (b) in the absence of some contractual or statutory provision to the contrary, the Respondent Bank's rights to possession of the several properties could not be defeated by any Cross-Claim on the part of Mr And Mrs Schneider whether or not that Cross-Claim were for a liquidated sum or for unliquidated damages, even if, in the former case, the liquidated sum exceeded any mortgage arrears, or, in the case of unliquidated damages, the claim upon which it was based was one which might give rise to an equitable set-off (see, for example, National Westminister Bank Plc v Skelton!; Ashley Guarantee Ple v Zacaria2) it following that, there being default under the several mortgages, and there being no Defence in either proceeding, the Respondent Bank was in each proceeding entitled to an Order for possession no matter what be the amount of any mortgage arrears and notwithstanding the later filing of the Cross-Claim (National Westminister Bank Plc v Skelton3; Ashley Guarantee Plc v Zacaria+; Murphy and Ors v Abi-Saab and Ors5). 4. in the Cross-Claim which was filed in January 1991, the facts upon which Mr and Mrs Schneider sought to base their several claims for damages related to an agreement alleged to have been made on or about 30 July 1987 by a Mr Armstrong on behalf of the Respondent Bank and by Mr Schneider on behalf of Mrs Schneider and himself, it following, that, even if, on any hearing of the Cross-Claim, the relevant facts were established: - (a) since the debt for which Judgment was later to be sought by the Respondent Bank and the claims for damages which Mr and Mrs Schneider sought to set up in their Cross-Claim arose out of different transactions, it would be at the very least highly doubtful whether or not any equitable set-off would be allowed (see, for example, British Anzani (Felixstowe) Ltd v International Marine Management (UK) Ltd®); (b) even if - which, as I have earlier noted, does not appear to have been the case - Mr Schneider had filed a Cross-Claim in the second proceeding based upon the same facts, that Cross-Claim could not have [1993] 1 WLR 72 (Note) [1993] 1 WLR 62 supra supra Court of Appeal, 20th July 1995 (as yet unreported) [1980] | QB 137 and cases there referred to ANRYNS 8 UNREPORTED JUDGMENTS been supported, as any rights which Mr Schneider may have had in the matter would have arisen out of an agreement to which he and Mrs Schneider were jointly parties. 5. if my understanding of what occurred be correct, then, the position as at 28th November 1994, when the proceedings came before Windeyer J was as follows: (a) subject only to formal proof of the several mortgages and of default thereunder. the ResPondent Bank was entitled to an Order for possession without being required to establish what was the amount then owing under the several mortgages; (b) that being so, it would have been open to the Respondent Bank, notwithstanding that it obtained an Order for possession in the proceedings, later to commence proceedings to recover the amount said to be due under the mortgages (see, for example, Murphy and Ors v Abi-Saab and Ors"); (c) in the absence of any evidence tendered by Mr and Mrs Schneider in support of the Cross-Claim, it would inevitably be dismissed; (d) even if evidence were tendered in support of the Cross-Claim, and even if it were held that the Cross-Claim were made out, the result would merely have been that there would have been an award of damages in favour of Mr and Mrs Schneider, the amount of which damages, in my view, for the reasons which I have earlier set-out, could not have been the subject of any equitable set-off against the amount of the debt due under the mortgages, a position which, at least at one stage in her argument (Transcript at 7), counsel for the Appellants appeared ready to concede. As will be apparent from what Sheller JA has written in his Judgment, the basis upon which the Appellants sought to support the Appeal was that in all the circumstances there had been a denial of procedural fairness, that denial of procedural fairness involving: (a) the refusal by Windeyer J of an adjournment of the hearing of the proceedings and the Cross-Claim; (b) the granting of leave to amend the proceedings so as to enable the Respondent Bank in each proceeding to seek a Judgment for debt; and (c) the dismissal of the Cross-Claim in proceeding No 10230 of 1990 and - if, contrary to my understanding, a Cross-Claim had also been filed in that proceeding - in proceeding No 10231 of 1990. Although he and I disagree as to the Orders which ought to be made in order to dispose of these proceedings, Sheller JA accepts that, had it not been for the amendment of the Summons in each proceeding, it would have been appropriate for Windeyer J to proceed with the hearing of the proceedings and the Cross-Claim or Cross-Claims, but indicates that the amendment "puts a different complexion on the matter", a view which I regret I am unable to accept. Once it is accepted that the refusal of an adjournment was, in the all the circumstances, appropriate, and once it is shown, as was undoubtedly the case, that, for good reason or ill, Mr Schneider on behalf of his wife and himself, elected to take no part in the proceedings, it was, as I have earlier sought to demonstrate, inevitable that the Respondent Bank would in each proceeding obtain an Order for possession and that the Cross-Claim - or, if more than one, the Cross-Claims - would be dismissed leaving the Respondent Bank free, whether by way of later 7. supra URJ SCHNEIDER v NATIONAL AUSTRALIA BANK LTD (Powell JA) 9 amendment to the proceedings, or by way of the commencement of fresh proceedings, to seek to obtain against Mr and Mrs Schneider Judgment for the debts owing under the mortgages. In all the circumstances therefore, I am of the opinion that the Orders appropriate to be made are: 1. APPEAL dismissed. 2. ORDER that the Appellants pay the Respondents costs of the proceedings. Appeal dismissed with costs. COUNSEL: Appellant: YF Holt Respondent: M Walton SOLICITORS: Appellant: BJ Schneider Respondent: Dibbs Crowther and Osborne