Hawkins v Kingsway Group Ltd [2009] NSWCA 399

New South Wales Court of Appeal

CITATION: Hawkins v Kingsway Group Ltd [2009] NSWCA 399

HEARING DATE(S): 30 November 2009

JUDGMENT DATE: 30 November 2009

JUDGMENT OF: Tobias JA at 1; Basten JA at 32

EX TEMPORE JUDGMENT DATE: 30 November 2009

DECISION: Summons for leave to appeal dismissed with costs

CATCHWORDS: PROCEDURE – Judgments and orders – Actions to review or set aside judgment – Application seeking leave to appeal from summary judgment – Where no error disclosed – Prospects of succeeding on appeal remote – Application dismissed - Application for extension of time in which to file summons for leave to appeal – leave granted due to particular factors in case warranting some leniency – not to be used as precedent for other such applications

Contracts Review Act 1980 LEGISLATION CITED: Real Property Act 1900 Uniform Civil Procedure Rules 2005

CATEGORY: Procedural and other rulings

PARTIES: David Charles Hawkins Kingsway Group Ltd

FILE NUMBER(S): CA 40275/09

COUNSEL: A: In Person R: P G Cutler

SOLICITORS: A: In person R: Willis & Bowring

LOWER COURT JURISDICTION: Supreme Court - Common Law Division

LOWER COURT FILE NUMBER(S): SC 12721/08

LOWER COURT JUDICIAL OFFICER: Fullerton J

LOWER COURT DATE OF DECISION: 27 February 2009

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40275/09

TOBIAS JA BASTEN JA

Monday 30 November 2009 DAVID CHARLES HAWKINS v KINGSWAY GROUP LTD Judgment on application for leave to appeal 1 TOBIAS JA: On 27 February 2009 Fullerton J entered summary judgment in favour of Kingsway Group Limited (the respondent) against Diddy Boy Pty Limited (Diddy Boy) and David Charles Hawkins (the applicant) in the sum of $2,633,989.55 together with costs. That judgment was entered pursuant to a notice of motion filed on 17 December 2008 in which summary judgment was sought in the amount referred to pursuant to r 13.1 of the Uniform Civil Procedure Rules 2005. 2 From that decision of her Honour the applicant seeks leave to appeal as well as an extension of time in which to file the summons for leave to appeal which was not in fact filed until 10 August 2009. Although out of time, the applicant has filed an affidavit sworn today in which he purports to set out an explanation as to the delay in lodging the summons for leave to appeal. Without reciting the rather tortured circumstances that occurred between the time of her Honour's judgment of 27 February 2009 and the date upon which the summons was ultimately filed, in my view there is sufficient evidence in the affidavit to explain the delay which would justify the granting of an extension of time to file the summons for leave to appeal up to and including 10 August 2009. 3 The circumstances giving rise to the litigation between the parties commences with Diddy Boy entering into a contract to purchase the property at 16 Gasworks Road, Waverton in July 2006 (the property). The applicant asserts that on 4 October 2006 the respondent issued a loan approval in the sum of $3 million to assist Diddy Boy with the purchase of the property and the carrying out of its refurbishment pursuant to a development consent previously granted by North Sydney Council (the Council). 4 Ultimately the amount of the loan that was offered by the respondent and accepted by Diddy Boy was $2.2 million, later reduced to $2.13 million after a valuation of the property had been obtained (the loan). The terms of the loan were accepted by Diddy Boy and the applicant and ultimately drawn down on 20 October 2006. It was for a term of 12 months so that the principal of the loan became repayable on 20 October 2007. Although it is asserted, and it may be the case, that as at that date the applicant or Diddy Boy had paid all arrears of interest which were then owing, the fact remains that the principal of the loan which became due on 20 October 2007 was not repaid then and has not been repaid since. 5 The primary judge's orders were made against Diddy Boy as the borrower and against the applicant as guarantor of Diddy Boy's obligations under the loan agreement. The respondent also took a mortgage over the property as security for the loan. 6 Diddy Boy went into liquidation at some point as a consequence whereof the present proceedings between the applicant and the respondent relate only to the applicant's guarantee of Diddy Boy's obligation to repay the loan. The company's liquidation occurred after Fullerton J had made her orders. 7 On the first day of the hearing before her Honour on 26 February 2007 an amended defence was filed with leave on behalf of both Diddy Boy and the applicant in which each asserted that the respondent was not entitled to claim the amount owing under the loan because prior to the loan being made an agreement had been entered into between the parties whereby the respondent promised to advance a further sum of $800,000 when requested by Diddy Boy to enable the latter to complete the refurbishment of the property in accordance with the requirements of the Council's development consent. 8 Paragraph 15 of the amended defence also alleged that the respondent, having exercised its power of sale under the Real Property Act 1900 in relation to the mortgage which it held over the property to secure the loan, had sold the property for less than its true market value and had conducted itself in such a manner as would breach its duty to both Diddy Boy as borrower and owner and the applicant as guarantor with respect to the sale. In this respect the applicant accepted that in order to succeed on any such claim it would be necessary to establish that the mortgagee sale was either fraudulently conducted or conducted with reckless disregard for the interests of Diddy Boy as mortgagor and the applicant as guarantor. 9 Her Honour rejected the claims of both Diddy Boy and the applicant, finding that on the evidence filed there was no agreement entered into between the parties prior to 15 October 2006 whereby the respondent offered to finance the refurbishment of the property by advancing a further sum of $800,000 and/or that it was a condition of the original loan of $2.13 million that it would not be repayable unless and until those further moneys were advanced. 10 In his affidavit filed in response to the motion for summary judgment and sworn 25 February 2009, the applicant deposed in paragraph 9 that it was agreed between himself and Diddy Boy, the mortgage broker (Mr Brodie) and the loan manager of the respondent (Peter Hatheier) that the loan would proceed in two parts, namely, an amount of $2.2 million to be advanced to facilitate settlement of the purchase of the property and an amount of $800,000 to be subsequently advanced once a construction certificate was issued for the then approved refurbishment or an amended refurbishment in respect of which Diddy Boy was seeking a s 96 modification from the Council. 11 Her Honour rejected that evidence and the documents which purported to support it upon the basis of relevance as well as form: see [14] of her reasons. She also rejected some correspondence attached to that affidavit upon the same basis. Although the applicant has not sought to challenge the rejection of that evidence, a consideration of it is illustrative of the fact that that evidence, even if it had been admitted, provided no support for the applicant's case as alleged in the amended defence of himself and Diddy Boy. 12 Certainly, paragraph 9 of the applicant's affidavit was objectionable in form and no attempt was made by the applicant before her Honour to put into proper form any alleged conversations between the parties which may have supported the agreement which was pleaded. 13 What is clear from the letter of 4 October 2006 from the respondent to Mr Brodie, the broker, is that originally an application for finance had been made in relation to the project at Waverton seeking a loan of $3 million, the stated purpose of the loan being to assist, firstly, with the purchase of the property and, secondly, with the costs associated with the DA-approved refurbishments. However, it is clear from that document – and this was made explicit in bold type in the second-last paragraph of the letter – that it was not to be construed as a formal letter of offer but was for preliminary discussion purposes only. The only formal letter of offer issued was on 13 October 2006 for a loan of $2.2 million which, as I have already noted, was later amended after a valuation of the property was obtained to $2.13 million. 14 At no time was a letter of offer issued or any other documentation tendered or sought to be tendered by the applicant which was capable of supporting an agreement of the nature of that alleged in the amended defence whereby the respondent would either lend to Diddy Boy a further $800,000 or which sought to amend the terms of the letter of offer for $2.13 million so as to provide that the amount of the loan was not repayable at the end of the 12 month term in the event that the respondent had not provided the further finance referred to. What is more, the correspondence, some of which did and some of which did not get admitted into evidence, establishes the contrary. 15 Thus in a letter dated 11 May 2007 from the applicant to Mr Hatheier, the senior loans manager of the respondent, and which was admitted into evidence, the applicant attached an amended timetable for the project which he asserted might take him slightly beyond what he referred to as the rollover date in October. The letter then proceeds, "I have spoken with my financial adviser, David Brodie, about this aspect and of the requirement to increase the facility with a construction package." 16 Two points emerge from that statement. The first is that contrary to the assertion of the applicant, Mr Brodie appears to have been engaged on behalf of the applicant and was his or Diddy Boy's financial adviser/broker engaged to find finance and who had no relevant contractual relationship with the respondent. The second is that although the letter asserts a requirement to increase the facility with a construction package, what is significantly absent from it is any suggestion that the respondent was under some contractual obligation to provide that facility for the purpose referred to. 17 The project timetable which was attached to that letter also provides that the refurbishment was to be commenced by the builder on 30 May 2007, that on 30 June 2007 it was proposed to on-sell the property on an "as is basis" with assignment of the refurbishment contract and the covenants as to completion. It was anticipated that the sale would be settled by 30 November 2007, which one assumes would have then enabled the principal of the loan, namely $2.31 million, to be repaid. I point this out because it seems to me that it is a further indication that there had been no agreement entered into between the parties whereby the respondent would provide the further refurbishment finance which the applicant and Diddy Boy alleged in their amended defence. 18 In an email which was rejected by her Honour dated 27 June 2007 from Mr Brodie to Mr Hatheier, and which appears to have been copied to the applicant, there is set out under the heading "Funding required" a requirement for a further $1.2 million. Again there is nothing in this email which suggests that Mr Brodie was aware of any agreement between Mr Hatheier on the one hand, and the applicant and Diddy Boy on the other, of a contractual obligation to provide that funding as alleged in the amended defence. One would have expected Mr Brodie to have asserted such a contractual obligation if it existed, as the applicant asserts that Mr Brodie was party to the relevant negotiations which he alleged took place prior to 13 October 2006. 19 In a further email of 6 July 2007 which was also admitted into evidence, from Mr Hatheier to Mr Brodie and copied to the applicant, Mr Hatheier wrote that the respondent was not prepared at that time to reduce the agreed term of the loan and was therefore not prepared to make available any additional funds. The email continues, "Kingsway's concerns are that Diddy Boy has been provided approximately $500,000 to date in additional funds and if it is now unable to provide $25,000 to meet this requirement then we have further concerns about moving forward into a construction facility on this project. Should you provide confirmation that the council contribution has been paid and the CC issued, we may be prepared to consider a construction facility for this development." 20 There is no evidence of any response either from Mr Brodie or from the applicant which might suggest that the refusal of the respondent to advance the additional funds was in breach of a contract entered into between the parties prior to 13 October 2006 to that effect. 21 There then follows a number of emails. The first is dated 16 August 2007 from Diddy Boy to Mr Hatheier and copied to Mr Brodie. It is signed by the applicant. Paragraphs 3 and 4 of that document provide as follows, "Diddy Boy P/L has provided Kingsway with updated statements as to the status of the refurbishment including site meetings with representatives of Kingsway and was given to believe that Kingsway was satisfied with the amended refurbishment program - at no time was Diddy Boy P/L advised to the contrary. Kingsway was then offered an opportunity to refinance this property and declined that opportunity." 22 One would have thought that if there had been a pre-existing contractual agreement between the parties whereby the respondent would provide refurbishment finance of the nature of that alleged in the amended defence, there would have been some mention of it by the applicant in the email to which I have just referred. It is conspicuously absent. It is unnecessary to refer to the other emails as they do not advance the applicant's case. 23 In the foregoing circumstances it seems to me that her Honour was entirely justified in finding as she did at [17] of her judgment, that there was "nothing in the evidence relied upon by the defendants or the plaintiff to support the proposition advanced by the defendants that the plaintiff had undertaken to finance those refurbishments. As I noted earlier, the evidence is to the contrary." 24 In my view, what her Honour said is clearly correct, and certainly there is nothing to suggest that she was in error in coming to the conclusion that she did. 25 With respect to the claim that the property was sold by the respondent at an under value pleaded in paragraph 15 of the amended defence, her Honour rejected that claim upon the basis of cl 7.1 of the Deed of Guarantee and Indemnity that had been entered into by the applicant at the time of the loan. That clause provided as follows: "71. Guarantors Not to Claim Benefits or Enforce Rights Until the Guaranteed Money is paid in full and all obligations of the Borrower under the Agreement are fully and finally discharged or released, a Guarantor must not in any way: (1) claim the benefit or seek the transfer (in whole or in part) of any other guarantee, indemnity or security held or taken by the Lender; (2) make a claim or enforce a right against any other Obligated Person or against the estate or any of the property of any of them (except for the benefit of the Lender); or (3) raise or claim any set-off, counterclaim or defence available to any other Obligated Person in reduction of the Guarantor's liability under this Deed." 26 At [20] her Honour recognised that Diddy Boy's rights to claim damage or loss upon the sale of the property by the respondent as mortgagee were reserved under the mortgage upon proof of fraud or reckless disregard of the interests of the mortgagor as provided in cl 6.7 of that document. 27 Nothing apparently was put to her Honour to suggest that cl 7.1 did not apply to the circumstances with which her Honour was faced. In particular nothing was put to her Honour to suggest that that clause was in any way invalid or that it was capable of being set aside under the Contracts Review Act 1980 as unjust. Nor were any of the other matters which are now the subject of the applicant's written submissions to this Court filed today and set out in paragraphs 15, 16 and 17 thereof and which are unnecessary to repeat, advanced before her Honour. What the applicant says is had he known that cl 7.1 was in the guarantee he would not have executed it. He now alleges that he never read it. What is more, he asserts, without any evidence to support it, that he never had in his possession either a copy of the Deed of Loan between the respondent and Diddy Boy or a copy of the Guarantee and Indemnity which he had executed. 28 I find this surprising given that it is apparent from the manner in which the applicant has conducted this litigation that, although a litigant in person and not a lawyer, he has some reasonable working knowledge not only of the development industry in which he was engaged but also of some of the legal rights and obligations that he was entering into. He asserts that he has never seen a clause like cl 7.1 in a guarantee before but that may or may not be so. The simple fact of the matter is that it was there. If he did not read it then that can only be because of fault on his part. But at the end of the day the fact remains that none of the matters which he now seeks to advance before this Court as indicating error on the part of her Honour was advanced before her. If matters of fact are not advanced before the primary judge then it does not lie in the mouth of an applicant for leave to appeal to assert that had they been put to the trial judge his or her decision may have been different. The judge can only determine a matter upon the material put before him or her and any appeal or leave to appeal from that decision must be determined on that basis. 29 Finally an allegation was made in the applicant's submissions of what I can only describe as an allegation of apprehended or possibly actual bias on the part of her Honour when she was informed by counsel for the respondent at the hearing on 26 February that there were proceedings pending in the Federal Court in Canberra for the winding up of Diddy Boy. 30 The relevance of that is not entirely clear and her Honour did ask the applicant whether he had informed counsel that the proceedings were before the Federal Court to which the applicant answered in the negative. Her Honour then said, "That does not stand well in your favour. Let us move on." What thereafter appears does not seem to me to indicate that her Honour took any further notice of the comment that she had made and in any event it could not have reflected upon the credit of the applicant as he gave no oral evidence and was not cross-examined on his affidavit. In my view the material upon which the applicant now relies as suggesting some form of bias or even apprehended bias on the part of the primary judge is without foundation. 31 For the foregoing reasons, in my opinion the prospects of the applicant succeeding in any appeal from her Honour's decision are remote to the point that they do not justify a grant of leave to appeal in this matter. In my view the summons for leave to appeal should be dismissed with costs. 32 BASTEN JA: I agree with the orders proposed by the presiding judge and with his Honour's reasons. I would add this in relation to the extension of time which the court is minded to grant. 33 The orders in this matter were made on 27 February 2009. Absent the filing a notice of intention to seek leave to appeal, an application for leave to appeal should have been filed within one month, that is, by 27 March. Had a notice of intention to appeal been filed within that period there would have been an extended period to file the application for leave, namely, three months from the date of the orders, being a period expiring on 27 May 2009. 34 In the present case there was no notice of intention filed within the relevant period. There was not even a notice of intention filed within the period which the applicant understood to be the relevant period, a matter to which I will return. Accordingly there is a requirement for an extension of a significant period, namely, something over four months. 35 The applicant has belatedly filed an affidavit giving explanations for the delay. That affidavit was not filed when this matter first came before the Court, nor was it filed in a timely matter in accordance with the directions of the Court, nor does it contain any explanation as to why that did not happen, although we were given some verbal explanation this morning from the bar table. No doubt the matters which are raised in the affidavit, including the collapse of the applicant's business and various family concerns, attract sympathy. There are other matters relied on which invite comment. 36 First, it is not uncommon for applicants to assert that they receive misleading advice from court officers in respect of the obligation to institute or take steps in proceedings in this Court. In this case, the affidavit stated that the applicant was told that an appeal had to be filed by 5 April 2009 or a notice of intention to appeal filed by that date. That period was based, one would understand, on the fact that the reasons of the primary judge were delivered on 5 March 2009. One must suspect that the court officer who gave the advice was not told that the orders had been made at an earlier time, as a result of which omission the advice was erroneous. The incorrect advice, if based on inaccurate information supplied by the applicant, provides no justification for his reliance upon a different period than that provided by the rules. 37 A second reason put forward was that the applicant was seeking a transcript of the hearing below. However, the appeal is against the orders made and the appeal should be brought on the basis of reasons given by the trial judge. If it is necessary to obtain a transcript that can be done, but it does not provide a justification for delay in filing a notice of intention to appeal, nor, I would add, for the filing of a notice of appeal. 38 Thirdly, there was an attempt to pass on to court officers the responsibility for the period of delay from 20 July 2009 until 10 August 2009. The latter was the date upon which compliance with the rules, in terms of the number of documents and the nature of the documents, was eventually achieved. The suggestion is that the summons for leave to appeal was provided to the Registry for filing on 20 July. The document which was before this Court was in fact dated 27 July; no explanation was given as to how that date fitted with the explanation given in the affidavit. The fact that the papers were not stamped on the date they were provided to the Registry indicates that they were not in proper form at that time. There is no reason to suppose that the other side was given notice on 20 July of what had happened. Accordingly the fact that incomplete documents may have been lodged is not an excuse or justification for late service. 39 None of these three matters in my view assisted the applicant. The extension of time which has been granted is ultimately of no consequence in this matter because leave to appeal is to be refused. However, it is significant that a period of four and a half months is said not to involve any prejudice to the other party to the appeal. That is not necessarily so and is not something which should be assumed. There were factors in this case which allowed for some leniency to be conceded to the applicant, but they were particular to this case and provide no precedent in relation to the attitude the Court would take in relation to other such applications. 40 TOBIAS JA: The order of the court will be as I have proposed. **********