Supreme Court New South Wales Medium Neutral Citation: Ocvirk v Permanent Custodians Limited [2013] NSWSC 1021 Hearing dates: 26 July 2013 Decision date: 26 July 2013 Before: Ball J Decision: 1. Paragraphs 21 to 24 of the defence to the cross claim filed on 1 January 2013 be struck out. 2. Leave to the first and second cross defendant to replead paragraph 24(a) of the cross claim filed on 1 January 2013. 3. The first and second cross defendants pay Permanent Custodians Limited's costs of the motion. Catchwords: PRACTICE AND PROCEDURE - civil - strike out of pleadings - operation of Uniform Civil Procedure Rules 2005 (NSW) r 14.28 Legislation Cited: Real Property Act 1900 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Taleb v National Australia Bank Ltd [2011] NSWSC 1562 Category: Procedural and other rulings Parties: Josip Ocvirk (Plaintiff/First Cross Defendant) Irena Ocvirk (Plaintiff/Second Cross Defendant) Permanent Custodians Limited (First & Second Defendants/Cross Claimant) Representation: D L Warren (Plaintiffs/Cross Defendants) A Casselden (First & Second Defendants/ Cross Claimant) Heard McEwan Legal (Plaintiffs/Cross Defendants) Gadens Lawyers (First & Second Defendants/ Cross Claimant) File Number(s): 2012/377157 Publication restriction: Nil EX TEMPORE Judgment 1By a Notice of Motion filed on 22 May 2013 the cross-claimant, Permanent Custodians Limited ("Permanent"), seeks to strike out certain paragraphs of the defence to the cross-claim of the first and second cross-defendants, Mr and Mrs Ocvirk. 2Before dealing with the application itself, it is necessary to say something about the background to the proceeding. 3Prior to 11 May 2004, Mr and Mrs Ocvirk owned a property in College Street, Blackbutt (the property) as joint tenants. On 11 May 2004 they transferred a half interest in the property to Roger, their son, and Gordana, his wife, with the result that Mr and Mrs Ocvirk owned a one-half share as joint tenants and Roger and Gordana owned a one-half share as joint tenants with the two-half shares being held as tenants in common. 4In August 2005 Permanent agreed to lend Mr and Mrs Ocvirk, Roger and Gordana $648,000 secured by a first registered mortgage over the property. The money was lent and the mortgage was registered. A proportion of the loan, amounting to $359,195.20, was paid by Permanent to National Australia Bank to pay out a first registered mortgage that NAB then had over the property. Of that amount, approximately $66,000 related to a debt owed by Mr and Mrs Ocvirk. The balance related to debts owed by Roger and Gordana. 5Roger and Gordana assumed responsibility for making payments due under the loan agreement. They defaulted and have since been made bankrupt. As at January 2013, the amount owed to Permanent was $677,394.07. Mr and Mrs Ocvirk allege that they had no knowledge of the mortgage granted to Permanent until about 9 March 2012 and they say that their signatures on the mortgage and loan agreement were forged by Roger and/or Gordana. They commenced this proceeding seeking a declaration to that effect. They also claim that the loan agreement is void and, since the mortgage secured amounts due under the loan agreement, the mortgage itself secured nothing and it is liable to be set aside. They make an alternative claim against Torrens Assurance Fund. They also make a claim against the third defendant which arranged the mortgage. Those claims are not relevant to the current application. 6On 1 January 2013, Permanent filed a cross-claim against Mr and Mrs Ocvirk and Roger and Gordana. It claimed possession of the property on the basis of the mortgage. If that claim fails, it also makes a number of alternative claims. Two of those alternative claims are relevant to the current application. 7The first is that Permanent is subrogated to the rights of NAB under the NAB mortgage. The second is that Mr and Mrs Ocvirk are liable in restitution to repay moneys advanced to them. 8In defence to the claims based on subrogation and restitution, Mr and Mrs Ocvirk plead the following in paragraphs 21 to 24 of their defence to cross-claim: 21. They deny paragraph 34, and say that upon payment in full of the moneys owing to the National Australia Bank the mortgage was discharged and thereby the NAB had no interest in the land and additionally all of the Cross Defendants were released from the personal covenants under any mortgage to the NAB. 22. As to paragraph 33 and 34 they say on or after 8 September, 2005 no moneys were owing to the NAB by the First and Second Cross Defendants under the NAB Mortgage which was discharged and as such:- (a) There were no rights to assign; (b) The NAB was no longer a creditor or secured creditor; (c) The Cross Claimant was not entitled to the conveyance of the legal estate, or any charge on the land; (d) There were no rights of subrogation available to the Cross Claimant. 23. As to paragraph 35 they deny that the Cross Claimant is entitled to the Orders sought. RESTITUTION 24. As to paragraph 36, the First and Second Cross Defendants say:- (a) They do not admit that any or all of the moneys were advanced for their benefit or that such moneys were received and had by them. (b) That if moneys were advanced by the Cross Claimant upon a mistaken belief, the belief was not engendered or brought about or induced by them but by the negligence or failure of the Cross Claimant itself. The First and Second Cross Defendants are not liable for loss caused to the Cross Claimant by its own action or inaction or self induced mistake or belief. 9It is those paragraphs that Permanent seeks to strike out under Uniform Civil Procedure Rules 2005 (NSW) r 14.28. That rule gives the court power at any stage of the proceedings, relevantly, to strike out part of a pleading if the pleading discloses no reasonable defence or has a tendency to cause prejudice, embarrassment or delay or is otherwise an abuse of process of the court. 10It is not easy to understand the defence to the claim based on subrogation. Mr Warren, who appeared for Mr and Mrs Ocvirk, relied on a number of arguments. First, he submitted that subrogation is only available where the person seeking subrogation did not obtain the security they bargained for. The difficulty with that argument is that the claim, based on subrogation, is only pleaded as an alternative if Permanent's primary claim fails. Permanent's primary claim is that it did obtain the security it bargained for. Mr and Mrs Ocvirk dispute that. It is in those circumstances that Permanent relies on a claim based on subrogation. It seems clear, in those circumstances, that Permanent would not have obtained the security it had bargained for. 11Secondly, Mr Warren submitted that the mortgage to NAB has been discharged and due to the system of indefeasibility that operates under the Real Property Act 1900 (NSW) there can be no mortgage to which Permanent can be subrogated. In my opinion, that submission is not correct and is inconsistent, for example, with the decision of Bryson AJ in Taleb v National Australia Bank Ltd [2011] NSWSC 1562. 12The third submission made by Mr Warren was that subrogation is an equitable remedy and that, in the particular circumstances of this case, the court should not grant that remedy. However, it is not clear from Mr Warren's submission what circumstances he relies on, and certainly no relevant circumstances are pleaded in paragraphs 21 to 23 of the defence to the cross-claim. 13In my opinion, paragraphs 21 to 23 of the cross-claim should be struck out. They do not raise an arguable defence and they have a tendency to cause prejudice because they leave it uncertain what the defence is and on what facts it depends. 14That leaves paragraph 24 of the defence to cross-claim. 15Paragraph 24 has two limbs. In the first limb, Mr and Mrs Ocvirk do not admit that any of the money advanced by Permanent was for their benefit or that that money was received and had by them. That non-admission is inconsistent with other paragraphs in the pleading in which Mr and Mrs Ocvirk admit that the sum of $66,485.69 was paid to discharge an obligation they owed to NAB. It follows that paragraph 24(a) should be struck out. However, Mr and Mrs Ocvirk should be given leave to replead paragraph 24(a) in relation to the balance of the amount claimed by Permanent. 16Paragraph 24(b) pleads, in effect, that Permanent is not entitled to maintain a claim for restitution because it was not labouring under a mistake or the mistake was self-induced. In my opinion, it is not the law that a claim for restitution must fail where the mistake on which the claimant relies is self-induced. What is critical is that the payment was made and that it occurred as a result of a mistake. For that reason, in my opinion paragraph 24(b) of the defence does not raise an arguable defence and it should be struck out. 17The first and second cross-defendants should pay Permanent's costs of the motion. ********** 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: 01 August 2013