District Court New South Wales Medium Neutral Citation: Chrapacz by her tutor Lengyel v Rebfin Pty Limited [2013] NSWDC 164 Hearing dates: 23 and 24 July 2013 Decision date: 24 July 2013 Jurisdiction: Civil Before: P Taylor SC DCJ Decision: Application allowed in part. Catchwords: AMENDMENT - proposed statement of claim inadequate - vacation of hearing - relevant matters Legislation Cited: Consumer Credit (New South Wales) Code, s 11, s 21 Contracts Review Act 1980 Cases Cited: Aon Risk Services Australia v Australian National University (2009) 239 CLR 175; (2009) 258 ALR 14; (2009) 83 ALJR 951; [2009] HCA 27 Category: Interlocutory applications Parties: Halyna Chrapacz by her tutor Ferdinand Lengyel (plaintiff) Rebfin Pty Ltd ACN 102 365 471 (defendant) Representation: Mr M R Hall with Mr G Stapleton (plaintiff) Mr V Bedrossian (defendant) Holman Webb Lawyers (plaintiff) D'Arcy Sloman Peacock Lawyers (defendant) File Number(s): 2012/42736 Publication restriction: No ex tempore Judgment 1Halyna Chrapacz signed mortgages dated 15 November 2005, 22 March 2006 and 11 July 2006 in favour of the defendant, Rebfin Pty Ltd ("Rebfin"). In connection with those unregistered mortgages she respectively made payments to the defendant of $26,237 on 21 December 2005, $164,000 on 30 June 2006, and $149,304 on 13 October 2006. She also made a payment of $7,800 for commission making a total of payments made of $347,341. 2In 2011 the defendant commenced proceedings against the plaintiff in the Local Court seeking a further $36,000 claimed to be owing. A consent judgment was entered for that sum (plus interest and perhaps costs) on terms that enforcement of judgment be stayed pending the outcome of these proceedings commenced on 9 February 2012. 3Ms Chrapacz says she paid the total sum of $347,341 whilst labouring under a mistake. She believed she was obliged to make the payments but now asserts that her belief was mistaken. The initial statement of claim provides no further details of the mistake. In an amended statement of claim, the name of the plaintiff was amended to show that she brings the proceedings by her tutor, Ferdinand Lengyel, and the connection of the payments to the unregistered mortgages was identified. 4The matter was listed for a three-day trial commencing yesterday. In breach of directions Ms Chrapacz had filed no evidence. On Monday, the day prior to the first day of trial Ms Chrapacz filed a notice of motion seeking orders in the following terms: "1 That this Honourable Court Order: (a) that leave be granted to file this Notice of Motion in Court at the Hearing of these proceedings on 23 July 2013; (b) that pursuant to UCPR 18.2(c) and, to the extent necessary, the requirements of UCPR 18.2 and 18.4 in relation to filing and service of this Notice of Motion be dispensed with; (c) that this Notice of Motion be made returnable instanter in Court on 23 July 2013; (d) that the Plaintiff be granted leave pursuant to UCPR 19.1 to Further Amend her Amended Statement of Claim filed in these proceedings; (e) that the Plaintiff be granted leave to file in Court on 23 July 2013 her Further Amended Statement of Claim in the form of the Further Amended Statement of Claim proposed in the Holman Webb letter dated 11 July 2013 to D'Arcy Sloman Peacock. 2 Alternatively to the Orders sought in paragraph 1 of this Notice of Motion, an Order that the hearing of these proceedings to commence on 23 July 2013 be vacated. 3 Such further or other Order as Court seems necessary." 5Orders 1(a), 1(b) and 1(c) were not opposed and were accordingly granted. At the outset of the hearing of the application Ms Chrapacz sought to amend the notice of motion seeking order 2 not as an alternative to order 1 but in addition to it. Thus, the issues before me were whether leave to further amend the statement of claim in the form proposed should be granted and whether the hearing should be vacated. 6Rebfin only faintly opposed the amendment of the statement of claim and then only because it did not want to strengthen any argument that the trial be vacated. The further amendments to the statement of claim were substantial although the nature of the mistake and why the mortgages did not give rise to entitlements in Rebfin remained undisclosed. The application of the Consumer Credit Code and related instruments was pleaded. It was alleged that the mortgages purported to impose obligations contrary to s 21 of the Code, and that those obligations were void. 7In the course of submissions Ms Chrapacz identified three respects in which Rebfin was said to have no entitlement to the payments received. 8First, Ms Chrapacz was said to have paid a greater amount than she was obliged under the mortgage documents (although the size of that overpayment remained uncertain). 9Secondly, the mortgages were credit contracts under the Consumer Credit Code and imposed an interest rate of 120 per cent which was in excess of the 48 per cent said to be allowed under s 21 of the Code and related instruments. 10Thirdly, it was said that the $7,800 commission, and perhaps other amounts, were said to be prohibited charges under the Code. 11As to the second and third arguments, it was not disputed that there remained a number of hurdles for Ms Chrapacz to overcome to succeed in the proceedings. She needed to establish that the mortgages were a credit contract under the Code. The mortgages were not in evidence but it was conceded that they contained a declaration under s 11(2) of the Code that credit was to be applied, "wholly or predominantly for business or investment purposes". Such a declaration would ordinarily "conclusively" (see s 11(2)) establish that credit was, "not to be provided wholly or predominantly for personal, domestic or household purposes" and thus, outside the ambit of the Code. 12No argument was raised that the declaration was outside the required form (see s 11(4)). It was said that Rebfin knew or had reason to believe that the declaration was incorrect and therefore ineffective pursuant to s 11 of the Code. Ms Chrapacz conceded that no claim was to be maintained for relief under the Contracts Review Act 1980 nor was any claim maintained that her signature was forged (as she had apparently successfully maintained in other potentially related proceedings involving a different lender). 13It seems to me that Ms Chrapacz would need to plead far more facts than she has done or than she has proposed to do in the further amended statement of claim in order to maintain the claim she has identified before me. Her counsel did not demur to this suggestion when asked. Not only would the three respects in which (some part of) the payments were not owing need to be identified in the pleading but also other matters such as who at Rebfin knew or ought to have known that the declaration was false, and the factual circumstances relied on to assert that Rebfin ought to have so known. The extent to which the payments by Ms Chrapacz were overpayments by reason of each of the three arguments presented should also be identified in pleadings or particulars. 14Because the proposed further amended statement of claim does not identify the real basis of the plaintiff's claim and because Ms Chrapacz conceded that a pleading should do so I do not propose to grant leave to file a statement of claim in the form proposed. 15The second and perhaps major issue in the application is whether the trial should be vacated. Ms Chrapacz submitted that the matter was unprepared for trial largely by reason of her prior solicitor's conduct. I accept that the proceedings were a long way from being ready for trial when the present solicitors took over the conduct of the matter on 15 May 2013. The plaintiff at that stage was in default of a number of directions for the filing of evidence. The correspondence between the plaintiff's tutor and the plaintiff's solicitor supports the submission that part of the blame for that default, probably a major part, lay with the solicitors. 16Secondly, Ms Chrapacz submitted that the matter had proceeded expeditiously since the matter was taken over by the new solicitor. I am not so readily persuaded of that. At this stage there remains no pleading or even draft pleading of the claim the plaintiff wishes to maintain. An unsigned affidavit of Ms Chrapacz has been served and I am told that the major affidavit on the plaintiff's side from the tutor, Mr Lengyel, is well progressed. Whether Mr Lengyel is the person best placed to unravel the financial transactions, rather than perhaps an expert accountant, might be doubted. 17Further, Ms Chrapacz submits that a significant witness, the person who is said to have fraudulently procured her signature, is soon to be released from prison apparently in early August 2013. Ms Chrapacz has some confidence that he will be cooperative. Whether he is cooperative, how valuable his evidence will be and whether he survives the inevitable challenge to his credit all remain to be revealed. 18Ms Chrapacz also submits that the evidence, including that of the witness soon to be released from prison, can be completed by mid-August 2013. Thus, it would seem that the resolution of the proceedings could still occur this year were the trial to be vacated. 19Finally, Ms Chrapacz has offered to provide security in the sum of $50,000 to cover not only the Local Court judgment in favour of Rebfin but also, in part at least, any adverse costs orders made today. She does not oppose orders that she pay the costs of the application, the costs of the vacation of the trial, and the costs thrown away by reason of any amendment to the statement of claim. 20Rebfin argues that the tutor, Mr Lengyel, was not frank in suggesting that he was unaware of the trial date. Having heard Mr Lengyel in evidence I do not accept this submission. Mr Lengyel was, as appears from a close reading of his affidavit, unaware of the proposed length of the trial rather than of the date itself. 21Rebfin also submits that in accordance with the decision of Aon Risk Services Australia v Australian National University (2009) 239 CLR 175; (2009) 258 ALR 14; (2009) 83 ALJR 951; [2009] HCA 27 costs orders alone are insufficient to compensate the defendant for the delay in the resolution of the proceedings, and the Court also must take into account the effect on other litigants of vacated hearings. These matters cannot be disputed and are matters of importance. 22However, this is a case of money lending and appears to depend largely on the legal entitlements of the defendant recorded in documents, and the application of statutory provisions. Although litigation is of course stressful to the parties I think that the security offered and the costs orders that have been proposed have a significant remedial effect in a commercial case such as this. Further, it seems to me that a properly prepared case with affidavits will likely consume less of the court's time then were the plaintiff to be forced on and proceed with what might be expected to be disorganised oral evidence and arguments about the extent to which the case presented was outside the pleadings. The likelihood that the defendant will be disadvantaged by some surprise emerging in the evidence would be lessened by requiring the plaintiff to serve affidavits that have not yet been served. 23I take into account that this is the first occasion that Ms Chrapacz has applied for the vacation of the trial date and that the fault lies substantially at the feet of her former solicitor. It would be most unlikely for Ms Chrapacz again to receive the indulgence of the vacation of a trial date. It might also be relevant that the hearing dates allotted to parties in this case will likely be used by other matters rather than be wasted. I continue to have doubts about whether the plaintiff has reasonable prospects of success in this claim but this is not a strike out application. I was assured from the bar table that the plaintiff will have her house in order in the very near future. That may reveal whether and to what extent the plaintiff's claim is viable. 24In all the circumstances I propose to vacate the hearing date and make the following orders: 1. Grant leave to the plaintiff in accordance with paragraph 1(d) of the amended notice of motion filed 23/7/13 to file a further amended statement of claim as set out in order 3 hereof. 2. Refuse leave sought in paragraph 1(e) of the further amended notice of motion to file a further amended statement of claim in the form proposed. 3. Conditional on order 9, grant leave to the plaintiff to file by 16 August 2013 a further amended statement of claim pleading and particularizing the case presented in argument, including the three respects for relief asserted by the plaintiff, on terms that a draft of that pleading is served on the defendant by 2 August 2013. 4. Grant leave to the defendant to file a notice of motion by 9 August 2013 seeking to revoke the leave granted in order 3, in the event that the further amended statement of claim does not, in the opinion of the defendant, properly plead the case as presented in court on this application. 5. Vacate the hearing dates. 6. Order the plaintiff to file and serve all its evidence in the matter (including affidavits and any bundle of documents) by 16 August 2013. 7. Order the plaintiff to pay the defendant's costs of the application, any additional costs caused by the vacation of the hearing dates, and any costs thrown away by reason of any amendments to the amended statement of claim. 8. Reserve to the final determination of the proceedings the question of whether the costs in order 7 should be assessed on an indemnity basis noting that the defendant appears to have a good entitlement to have those costs assessed on an indemnity basis in the event that the defendant is successful in the proceedings. 9. Order the plaintiff by 2 August 2013, to deposit into court, or alternatively into an interest bearing account in the name of her instructing solicitor, or alternatively in such other form of security as the parties' solicitors agree, the sum of $50,000, such sum to be held until the conclusion of the proceedings as security for the Local Court judgment and costs orders against the plaintiff and not to be paid out until so ordered by the court. 10. Stand over the matter to 23 August 2013 at 9.30am before the list judge for further directions and to obtain a new hearing date. ********** 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: 03 September 2013