Supreme Court New South Wales Medium Neutral Citation: Commonwealth Bank of Australia v Osman [2013] NSWSC 1473 Hearing dates: 4 October 2013 Decision date: 04 October 2013 Jurisdiction: Common Law Before: Schmidt J Decision: 1. An order pursuant to r 13.1 of the Uniform Civil Procedure Rules 2005 that summary judgment be entered for the plaintiff against the second defendant in the amount of $2,259,156.61. 2. An order pursuant to s 101 of the Civil Procedure Act 2005 that interest be paid on that amount at the rate of $1,430.46 per day. 3. That the second defendant pay the plaintiff's costs of the proceedings on an indemnity basis. Catchwords: PROCEDURE - possession - notice of motion - motion against second defendant - monetary order sought - orders made Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth) Civil Procedure Act 2005 Contracts Review Act 1980 Real Property Act 1900 Uniform Civil Procedure Rules 2005 Category: Procedural and other rulings Parties: Commonwealth Bank of Australia (Plaintiff) Kemal Osman (First Defendant) Mick Osman (Second Defendant) Representation: Counsel: Mr B Koch (Plaintiff) Solicitors: Henry Davis York (Plaintiff) No appearance (Second Defendant) File Number(s): 2013/105703 Publication restriction: None EX TEMPORE Judgment 1HER HONOUR: In these proceedings the plaintiff Bank seeks possession of land, as well as orders requiring the defendants to pay it some $2,721,530 plus interest. By motion filed on 29 July it seeks orders against, relevantly, the second defendant, Mr Mick Osman, who filed a defence in June and appeared earlier in the proceedings, but did not appear to defend the motion. At the hearing the Bank pressed only a monetary judgment against Mr Mick Osman. 2The hearing of the motion proceeded ex parte, in circumstances where the motion had earlier come before me on 18 September 2013 and it was adjourned for hearing today, because Mr Mick Osman did not then appear, having earlier appeared in the proceedings. Taking the view that there might have been some misadventure, I adjourned the hearing of the matter to today. 3There was today again no appearance by Mr Mick Osman, but yesterday advice was sent by him by email to the Bank, advising that he was unwell and that he hoped that the matter would adjourn. There was no appearance by Mr Mick Osman today and no application for an adjournment of the hearing of the motion and any further adjournment was opposed by the plaintiff Bank. In the circumstances, I concluded that the hearing would not be further adjourned and thus continued to hear the motion, taking the view that Mr Mick Osman had been given a fair opportunity to appear to defend the motion. It was a matter for him whether or not he availed himself of that opportunity. 4The handwritten defence which Mr Osman filed in June refers to Bankwest, not the plaintiff, and claims that he was not told, amongst other things, that it would 'default' him, if he was behind in land tax, rates or the property value went down. He complains about a valuation and that he had not been provided with copies of an unidentified contract, although he concedes that he had executed a contract provided to him. 5It is difficult to understand all that is pleaded in this document, but he claims, amongst other things, to have gone to the Bank Ombudsman and that he had been forced into default because "They took all my business away and put the receivers in". He also says that he had no income and asked "So how was I meant to pay the loan?" 6He also claimed that he was not told that he had to pay interest and principal after 12 months. He said also that he had not been given the opportunity to run the motel under supervision; that the restaurant had been leased for 20 years; and that once that was registered, a receiver had come in. 7It is apparent on the face of that defence that it is not properly pleaded, as the Uniform Civil Procedure Rules 2005 require, and that it discloses no defence to the plaintiff's claim. 8The Bank's motion was supported by two affidavits sworn by Mr Hornstra, the Bank's senior manager in the Group Credit Structuring Unit. He there deposed to the earlier course of the proceedings and the basis on which the Bank now presses its claim. Initially both defendants filed a joint defence and as a result of earlier directions given, Mr Mick Osman filed his 6 June defence. 9The first defendant, Mr Kemal Osman, is active in the proceedings. He has filed an amended defence and cross-claim, by which he seeks relief against the Bank so far as he is concerned, under the Contracts Review Act 1980 and the Australian Securities and Investments Commission Act 2001 (Cth) in relation to his guarantee, a home loan contract, a business loan contract and the mortgage, to which I will refer further. As I appreciate it, the basis of his claim is one of undue influence. 10The evidence discloses that the Bank loaned funds to a company Cypress Pine Pty Limited in May 2008 under the terms of a written loan agreement. The defendants were directors of that company. The loan was secured over the property the subject of these proceedings by a registered first mortgage entered in August 2008. Under the terms of the loan agreement, contrary to Mr Mick Osman's defence, it is clearly provided that during the first 12 months of the loan, interest-only payments were required to be made and that for the following 48 months, there were to be monthly repayments of principal and interest. 11The loan was guaranteed by the defendants under the terms of an 8 August 2008 agreement between the parties. That guarantee and indemnity required the defendants to repay the borrowings, limited on Mr Hornstra's evidence to some $1,402,728 plus interest, together with other amounts owing under the loan to the Bank. 12The defendants also entered into a home loan contract in May 2008, which was also secured over the property. In July 2008 they entered into a business loan contract, also secured over the property. The mortgage required, amongst other things, that the first defendant would pay all rates and taxes before they fell due and all enforcement expenses in the event of any breach. 13Cypress failed to pay all amounts owing under its loan agreement. The loan first fell into arrears in October 2012. It failed to pay the interest and principal as required by the terms of that agreement and the first defendant failed to pay rates and taxes when they fell due. In June 2013 the plaintiff Bank paid outstanding council rates in response to a demand made of it by Goulburn City Council, under the terms of a bank guarantee earlier given to the Council. 14On 16 October 2012 the Bank served a demand for repayment of the loan in the sum of some $1,315,394 on Cypress. It was not met. Demands were served on the defendants under their guarantees in February 2013. They were also not met. This failure was also a default under the mortgage. 15The defendants also failed to pay all amounts owing under the home loan and business loan contracts, beginning from 8 October 2012. As at 15 February 2013, those borrowings were in the sum of some $1,344,275. 16A notice under s 57(2)(b) of the Real Property Act 1900 was served on the defendants, but it was not complied with. Further demands were later made for payment of some $2,720,630, but they were also not complied with. It appears that no payments have been made under any of the loans since these proceedings were commenced in April 2013. 17The defendants' borrowings were connected with the building of a motel at another property. In September 2012 the plaintiff appointed agents for the sale of other property owned by the defendants, including the property where the motel was located, as mortgagees in possession, after a complaint to the Financial Ombudsman Service was resolved by agreement executed by Mr Mark Osman in June 2012. That agreement was not adhered to, the properties were later sold, realising various amounts which were applied to reduce the borrowings the subject of these proceedings. 18Today the plaintiff relies on a certificate of debt executed by Mr Perry, Manager Group Credit Structuring Risk Management on 3 October 2013, which is certified in accordance with provisions of the parties' agreements and which indicates that as at 3 October 2013, the total amount payable under the guarantee, the loans and the mortgage is some $2,259,156.61. 19The Bank has also relied on affidavits of service sworn by Ms Melanie Anne McKernan, one of the plaintiff's solicitors, which deposes to various telephone conversations with Mr Mick Osman and the consequent service upon him of affidavits and other documents relied on today by the plaintiff Bank. There is also an affidavit of service sworn by Ms Vanessa Lee Bruce, a secretary in the employ of the plaintiff's solicitor, as to service of other relevant documents. 20I am satisfied that the evidence establishes the plaintiff's right to the orders which it seeks against the second defendant, Mr Mick Osman, under the terms of the parties' loan agreements, the mortgage and the guarantee. The loans in issue were secured over the property under the registered first mortgage, as to which Mr Osman granted the guarantee earlier referred to. 21The evidence establishes that each of these loans are in default, as well as other relevant defaults on which the plaintiff is entitled to rely, contrary to the defence which Mr Mick Osman has pleaded. That defence establishes no defence to the claim and no basis upon which the relief which the plaintiff Bank seeks today could be refused. 22The plaintiff also seeks an order against the second defendant for costs on an indemnity basis, relying on the terms of the guarantee which he gave, which I am satisfied provides pursuant to clause 1.1 and the definition of "costs", that Mr Osman is liable to pay the Bank's costs on that basis. 23In those circumstances I am satisfied that the orders which the Bank presses today should be made. For those reasons, I make the following orders: 1. An order pursuant to r 13.1 of the Uniform Civil Procedure Rules 2005 that summary judgment be entered for the plaintiff against the second defendant in the amount of $2,259,156.61. 2. An order pursuant to s 101 of the Civil Procedure Act 2005 that interest be paid on that amount at the rate of $1,430.46 per day. 3. That the second defendant pay the plaintiff's costs of the proceedings on an indemnity basis. ********** 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: 09 October 2013