Supreme Court New South Wales Medium Neutral Citation: Perpetual Trustee Company Limited v Varma [2011] NSWSC 1322 Hearing dates: 21 October 2011 Decision date: 21 October 2011 Jurisdiction: Common Law Before: Davies J Decision: The Defendant's Notice of Motion of 5 August 2011 is dismissed Catchwords: PROCEDURE - judgments - setting aside - proposed defence relies only on cross-claim - "no set-off" clause in mortgage - no defence disclosed - application to file cross-claim - pleading of cross-claim embarrassing - Defendant given 3 opportunities to prepare proper pleadings - applications refused Legislation Cited: Australian Securities and Investment Commission Act 2001 Civil Procedure Act 2005 Trade Practices Act 1974 Category: Principal judgment Parties: Perpetual Trustee Company Limited (Plaintiff) Arun Deo Varma (First Defendant) Kamlesh Deo Varma (Second Defendant) Representation: D Gasic (Plaintiff) A Kumar (Defendants) Norton Rose (Plaintiff) Kent Attorneys (Defendants) File Number(s): 2011/28734 Judgment 1These proceedings commenced on 28 January 2011 claiming possession of land at 241 Northumberland Street, Liverpool, and claiming a judgment in an amount of a little over $1.2 million. The claim was alleged to have arisen out of a loan agreement entered into on 23 December 2003. The funds advanced paid out some facilities with the Commonwealth Bank. The loan was repayable on 1 January 2005. 2The original loan agreement was varied by two supplementary deeds of loan on 14 June 2006 and March 2007, which extended the repayment date to 1 January 2010. The loan was not repaid at that time. 3The Defendants filed a defence on 28 March 2011, which was struck out on 6 May 2011. They were given leave to file any further defence and Cross-Claim by 20 May 2011, and in the meantime the Plaintiff was restrained from obtaining a default judgment until 2 June 2011. No further defence was filed by the time stipulated or thereafter, with the result that on 4 August 2011 the Plaintiff obtained a default judgment in the matter. 4On 5 August 2011 the Defendants by Notice of Motion asked that judgment be set aside, for leave to amend the defence (although there was no defence in place at that time), and for leave to file a Cross-Claim in the matter. 5The Motion came before me on 30 August 2011 when I indicated to Mr Kumar of counsel, who appeared for the Defendant, that the proposed form of the pleadings was unsatisfactory in a number of respects, in particular that it was not apparent from the pleading precisely what the defence to the claim was, nor the proper basis for the Cross-Claim. 6There was also no explanation on that day for the fact that the Plaintiff was able to obtain a judgment when the Defendants had previously been given leave to file any further pleadings by 20 May 2011. That is to say, there was no explanation for the failure to file further pleadings by the time stipulated nor for almost 3 months. 7When the matter came back before me on 9 September 2011 the Defendants read some affidavits which were put forward to explain the delay. They were most inadequate in doing so, but I indicated that I was prepared to overlook the inadequate explanation and deal with the form of the pleadings that were then put forward for filing to see if there was a defence on the merits, and if there was a case for any Cross-Claim that might be filed. 8On that occasion I indicated to Mr Kumar, both from what I had read myself and on the basis of what Mr Gasic on behalf of the Plaintiff submitted, that the proposed pleadings did not properly plead a defence, and did not identify the causes of action that were sought to be brought in the Cross-Claim. 9In particular it was apparent that what were being relied upon for both the defence and the Cross-Claim were representations alleged to have been made by the Plaintiff to a company called Veda Advantage. It was said, not in the pleading but in submissions made to me by Mr Kumar, that it was as a result of the provision of that wrong information to Veda Advantage concerning how much the Defendants owed the Plaintiff that the Defendants were not able to borrow money from other lenders. 10Because the pleadings were still inadequate, I stood the matter over to today to enable further proposed pleadings to be prepared. In the meantime a new solicitor has come on to the record on behalf of the Defendants, although Mr Kumar who has appeared for some time in the matter, has appeared again today. 11The proposed defence for consideration today, which is entitled "Amended Defence", denies the main provisions of the Statement of Claim, and then makes reference to a Cross-Claim that the Defendants wish to file. The Cross-Claim is put forward as the defence to the claim. The Cross-Claim is a detailed document extending to some 81 paragraphs. 12As best as I could understand it, the Cross-Claim repeated the pleading concerning representations made to Veda Advantage but it characterised them not only as misrepresentations giving rise to breaches of section 52 of the Trade Practices Act 1974 but as unconscionable behaviour contrary to the Trade Practices Act and the Australian Securities and Investment Commission Act 2001 , as breaches of contract, as breaches of statutory duty, and as negligence. It also claimed unjust enrichment, and made claims arising from the disposal of properties, and for damages for personal injury because it is said that the Defendants suffer psychiatric injury, presumably from the making of these misrepresentations. 13The Cross-Claim provides some information that might be regarded as particularisation of damage at least in relation to the inability of the Defendants to obtain further finance. The amount claimed is a little over $3 million largely made up of what are said to be opportunity losses involved in the building of a unit complex and the sale of those units. 14All of the claims, effectively, are said to result in damages, although the relief claimed seeks orders under s 87 of the Trade Practices Act and s 12G and 12M of the ASIC Act restraining the Plaintiffs from enforcing the loan. This is in circumstances where the loan agreement in the first instance was used in its majority to pay out an earlier facility. 15When I came to ask Mr Kumar about how there was a connection between the losses claimed and the misrepresentations made, it transpired that he wanted to rely on other representations not pleaded in this document which took place before the loan agreement and mortgage were entered into. The thrust of those representations was that the facility which Perpetual would provide would be a similar but better facility than that which the Defendants previously had, and that would result in the facilities being rolled over, it would seem, to whatever date the Defendants wanted it to be rolled over to. 16As the matter has not been set out in the pleading it is difficult to know precisely what the representations were in that regard. I note in passing at this juncture that the original loan agreement with Perpetual, as I have said, was in fact rolled over on two occasions by supplementary deeds of loan. 17The mortgage entered into with the Defendants contains in clause 10.14 effectively a prohibition against the Defendant setting off any claim in diminution of what is owed under the mortgage to Perpetual. The clause provides: Set-Off The Mortgage and the right to receive any moneys payable hereunder are free from any equities, set-off or cross-claim which but for this provision the Mortgagor would be entitled to set up against the Mortgagee or the Lender or any intermediate Mortgagee or any assignee. ... 18Even if that clause had not been contained in the mortgage I do not consider that the defence puts forward any defence to the claim that is made. What it purports to do is invoke the Cross-Claim which itself in substance only claims damages against the Plaintiff for the misrepresentations and the other transgressions alleged. No defence is pleaded - only a Cross-Claim. 19But clause 10.14 in the mortgage clearly operates to prevent such a cross-claim being put forward as a defence that operates by set-off. 20In circumstances where the Defendants have had ample opportunity, on three occasions at least, to put forward a defence that provides a defence in substance to the claim, I do not consider it is appropriate to set aside the judgment to permit the filing of this defence. 21The other issue is whether, however, notwithstanding that the Plaintiff will be entitled to maintain the judgment it already has, I should permit the Cross-Claim to be filed in the proceedings where the Cross-Claim suffers from the defects to which I have referred and others to which I have not referred. 22It contains material, which in legal terms is embarrassing because it is impossible to discern from what is pleaded the claim or cause of action that is being made. There are frequent references throughout the Cross-Claim to s 51 A of the Trade Practices Act which I shall charitably assume is a reference to one or more of s 51AA, s 51AB and s 51AC However, s 51 AAB(2) provides that s 51AA and s 51AB do not apply to the provision of financial services. "Financial services" are defined in a very lengthy and complicated way in the ASIC Act but the intent of s 51 AAB(2) seems to be to bring claims in relation to the provision of financial services and unconscionable behaviour claims under the ASIC Act . 23The Cross-Claim does indeed refer to the ASIC Act in the alternative. However, before the Cross-Claim would be allowed to be filed it would need to remove or clarify the reference to this part of the Trade Practice Act . 24That is, however, not the only problem however with the Cross-Claim. Principally, it does not set out the cause of action that is said to arise from the representations made before the entering into of the facilities, and those representations have not even been pleaded. I am told that those are the representations that led to the losses in conjunction with the misrepresentation alleged concerning the provision of the information to further advantage. 25Once again, where the Defendants have had three opportunities to get their pleadings into order I do not think it is consistent with s 56 and s 58 of the Civil Procedure Act 2005 that they should be permitted to file this Cross-Claim in these proceedings. If they do in fact have a good claim based on these representations or otherwise, they can bring separate proceedings. 26For those reasons I dismiss the Defendant's Notice of Motion of 5 August 2011. ********** 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: 08 November 2011