Supreme Court New South Wales Medium Neutral Citation: National Australia Bank Ltd v Zerafa [2013] NSWSC 1515 Hearing dates: 17 October 2013 Decision date: 23 October 2013 Jurisdiction: Common Law Before: Davies J Decision: (1) Dismiss the Plaintiff's Notice of Motion filed 30 August 2013. (2) The Plaintiff is to pay the Defendants' costs of the Motion. Catchwords: PROCEDURE - summary judgment - bank loan and mortgage - default by reason of provision of incorrect information to bank - whether incorrect information provided by agent of borrower - forgery alleged - forgery supported by handwriting expert - factual and credibility issues - summary judgment refused Legislation Cited: Civil Procedure Act 2005 Contracts Review Act 1980 Cases Cited: Bank Fur Gemeinwirtschaft AG v City of London Garages Ltd [1971] 1 WLR 149; [1971] 1 All ER 541 Daleport Pty Ltd v Bank of Western Australia Ltd [2012] NSWCA 402 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Griffin v Matthews [2012] NSWCA 348 Sidebottom v Cureton (1937) 54 WN (NSW) 88 Wickstead v Browne (1992) 30 NSWLR 1 Category: Interlocutory applications Parties: National Australia Bank Ltd (Plaintiff) Joseph Angelo Zerafa (First Defendant) Reign Ridge Estate Pty Ltd (Second Defendant) Representation: Counsel: M Lewis (Plaintiff) P Nagle (Defendants) Solicitors: DibbsBarker Lawyers (Plaintiff) Leigh Johnson Lawyers (Defendants) File Number(s): 2011/293177 Judgment 1The Plaintiff seeks summary judgment for possession of land at 138 Stahls Road, Oakville and for a sum of money said to be outstanding to the Plaintiff pursuant to a loan agreement and a mortgage. Background 2The First Defendant entered into a home loan agreement with the Plaintiff on 9 February 2009 in respect of a loan of $1,040,000 to enable the purchase by the Second Defendant (a company that the First Defendant controlled) to purchase the Oakville property. A mortgage was provided by the Plaintiff on the same day and a guarantee was provided by the Second Defendant on 13 February 2009. 3Supporting documentation in respect of the loan was provided to the Plaintiff. Two items of documentation are relevant for the proceedings. The first consists of bank statements from the Commonwealth Bank in the name of the First Defendant for the period 1 October 2008 to 31 December 2008. The second document was a valuation in respect of the Oakville property. 4Clause 14.1 of what the Plaintiff alleges is the Home Loan Agreement entered into by the First Defendant relevantly provides: 14.1 You are in default if: ... (e) you or another person gives us information which we reasonably believe to be incorrect or misleading in connection with this contract or a security; ... (k) we reasonably believe you or another person has acted fraudulently in connection with this contract or another agreement you have with us. 5The Plaintiff alleges that the information contained in the Commonwealth Bank statements and the valuation was incorrect or misleading and that the First Defendant or another person has acted fraudulently in connection with the home loan. For the purposes of the Motion the Plaintiff relies only upon the incorrectness of the Commonwealth Bank statements, and fraud in relation to them. The Amended Defence 6The Amended Defence filed 13 September 2013 admits that the Plaintiff provided financial accommodation to the First Defendant in the form of a NAB Choice Package Variable Rate Interest Only Home Loan dated 9 February 2009 and that pursuant to that home loan $1,040,000 was advanced to the First Defendant. The Amended Defence admits that the Second Defendant mortgaged the property but did not admit that the signature on the mortgage which purported to be that of Lawrence Cauchi was his signature and said that he was not the company secretary at that time as the mortgage purported to state. At the hearing of the Motion Mr Nagle of Counsel for the Defendants said that the non-admission was an error and that the signature on the Mortgage was that of Mr Cauchi. 7The Amended Defence denies that the Business Purposes Declaration purportedly signed by the First Defendant was in fact signed by him, asserting that it was a forgery, and also denies that the Second Defendant executed the Guarantee, asserting that the signature of the First Defendant on it was a forgery. 8As far as the Commonwealth Bank statements are concerned the Amended Defence asserts that statements of the account were true and correct at the time that they were handed directly to the lending manager, Ryan Hutton, by the First Defendant. 9The allegation that the First Defendant was in default under the home loan because of the provision of incorrect or false information was denied by the Defendants. One of the particulars associated with that denial said this: (c) The First Defendant relies upon the New South Wales Contracts Review Act as clauses 14(e) and or (k). ... (i) As to reliance by the Plaintiff upon Clause 14 (e) and or (k) of the said loan agreement, the First Defendant claims that the proper construction of the said clause is as follows: a. The words "person or persons" have to belong to the borrower and or mortgagor and or the guarantor group or to the borrower and or mortgagor or guarantor group of persons, who have involved themselves on behalf of the Defendants and has or have knowledge of the "person or persons" role in the misleading and or the fraudulent act and or false or misleading information given to the Plaintiff to allow the plaintiff to terminate, or b. If the Plaintiffs own employees and or agents and or contractors and or brokers are the perpetrator and or the originator of the misleading and or false and misleading information and or fraudulent activity alleged against the borrower and or the mortgagor and or the guarantor, the Plaintiff cannot rely upon a breach of the said clauses to terminate the said loan agreement or the said mortgage and to rely upon the guarantee. The Plaintiff's case 10The main evidence given by the Plaintiff was by Helen Hien Thu Tran who is a Late Stage Mortgage Collections Consultant in the Collections Department of the Plaintiff. She was not involved in the approval of the loan. Her evidence was given almost entirely by reference to documents which she had identified and read that were in the Bank's possession. 11She exhibited a number of these documents to her affidavit. They included the Mortgage with its Memorandum, the Home Loan Credit Contract Details which was not signed by either of the Defendants, a Business Purposes Declaration purportedly signed by the First Defendant, a Consumer Guarantee purportedly executed by the Second Defendant by the signature of the First Defendant, an Authority to Disclose Information to the Plaintiff purportedly signed by the First Defendant and an Acknowledgment and Consent for Payment of Commission and Privacy purportedly signed by the First Defendant. 12This Acknowledgement, which was addressed to the Plaintiff from the First Defendant, relevantly said this: Re: Application for a NAB Choice Package Home Loan ('Loan') with NAB ('Application') I/we have submitted my/our Application to NAB following an introduction by: Lawrence Cauchi ('Introducer/Broker') being the person who makes the referral. [Complete if the person who makes the referral is associated with a broker group:] Money matters choice ('Broker Group'). I/we acknowledge and agree that: Neither the Introducer/Broker nor the Broker Group (if any) is an agent of NAB for any purpose; NAB is not my/our agent, nor the agent of the Introducer/Broker or the Broker Group; Neither the Introducer/Broker nor the Broker Group (if any) has any authority to bind NAB or to make representations on behalf of NAB. ... 13The Plaintiff also relied upon two emails from Lauren Thurbon at Money Matters Mortgages Pty Ltd to Mr Hutton. The first such email was sent on 27 January 2009 at 9:21pm and the subject was "FW: Reign Ridge - Zerafa Loan application". The email read: Hi Ryan, The above application is for the purchase of 138 Stahls Road Oakville NSW 2765 the property title is to be in the company's name and Mr. Zerafa as the Guarantor. Mr. Zerafa is a Contract Electrician and he does not advertise as he mostly (sic) Project Manager on Multiple Building site for the same developer. He recently sold his property at Tennyson and has been living with his sister at West Hoxton Park his weekly rent and food generously he pays his sister $500.00 per week as she has been recently separated and it is like help but no thank you, if you know what I mean (Family). The property was settled late last year and the funds were kept in trust by the real estate to be used towards the purchase of 138 Stahls Road Oakville as per contract. The property consists of main dwelling and two granny flats which he can rent the grannies if need be to assist in his payments and the loan. We also declared the Amex Merchant Card as a precaution please note that it has been cancelled from July 2008. Documents to follow is his bank statements and financials. Please advice if more information is need it. Thank-you & have a nice day. Kind Regards, Lauren Thurbon Money Matters Mortgages Pty Ltd 14The email had a pdf attachment called "RR loan application". That document was also in evidence. 15The second email from Ms Thurbon to Mr Hutton was dated 28 January 2009 at 4:17pm. The subject was "reign riddge (sic) purchase urgent". The email simply said: thanks Thank-you and have a nice day. Kind Regards Lauren Thurbon Money Matters Mortgages Pty Ltd 16There was a pdf attachment entitled "Joe Zerafa statements". Those statements consisted of four pages in relation to the account of a Mr J A Zerafa of 47 Mithinnia Circ West Hoxton NSW 2171 for account number 06 2596 10208696 at the Commonwealth Bank for the period 1 October 2008 to 31 December 2008. Those statements show that the opening balance on 1 October was $167,180.45. The closing balance on 31 December was $196,272.91. The balance of funds in those four pages did not ever fall below $165,000. 17The further evidence on behalf of the Plaintiff was that it subpoenaed the Commonwealth Bank for bank statements for that period on that account. The statements it received consisted of eight pages for Mr J A Zerafa, 138 Stahls Road, Oakville. The opening balance on 9 October 2008 was $1,364.13 and the closing balance on 31 December 2008 was $724.19. The entries in those statements bear little relationship to the entries in the statements forwarded by Ms Thurbon. 18A Senior Financial Crime Investigator, Gregory Lemme, swore an affidavit where he detailed his examination of the two sets of bank statements, noted the discrepancies between them and concluded, based on his experience as an SFC Investigator in the Financial Crime, Enterprise Services and Transformation Department of the Plaintiff that he believed the bank statements forwarded by Ms Thurbon had been altered and that they were not a true and accurate copy of the original statements. He went on to say: I reasonably believe that the First Defendant or another person has given the Plaintiff information which is incorrect or misleading and/or the First Defendant or another person has acted fraudulently in connection with the home loan. 19The Plaintiff relies upon the reference on the Acknowledgement identifying Money Matters and Mr Cauchi as the Introducer/Broker and Broker Group together with the emails and attachments from Ms Thurbon to submit that the incorrect or misleading information was given to the Plaintiff by the Defendants' broker. 20The Plaintiff says, therefore, that there has been a default within clause 14.1 of the home loan contract. The Defendants' case 21The main evidence for the Defendants is an affidavit of the First Defendant sworn 20 September 2013. He said that at the end of 2009 he decided to buy 138 Stahls Road, Oakville where he was then living with his mother and his nephew. The property was his sister's and she was going through a separation with her husband Lawrence Cauchi. I note that the reference to "the end of 2009" must be an error. 22The First Defendant said that he was introduced to Mr Hutton by Mr Cauchi. He met Mr Hutton on three occasions at the Oakville property. At some stage he received from the North Sydney branch of the NAB an application which he thinks was called a home loan package form. He said he agreed with Mr Hutton that he would take out the mortgage in his company's name and that the company would go guarantor (the statement in the first paragraph of Ms Thurbon's email that Mr Zerafa would be the guarantor appears to be an error). 23The First Defendant said that he signed documents with Mr Hutton at McDonalds at McGrath's Hill. He cannot remember all of the documents that he signed but he remembers Mr Hutton mentioning a loan agreement and a mortgage and indicating that a particular document was a guarantee. He said he signed the documents where Mr Hutton indicated. He agrees that the signature on the mortgage was his signature but denies that the signature on the guarantee is his signature. 24He has looked at the bank statements attached to Ms Thurbon's email and says that they are not the bank statements that he provided to Mr Hutton. He said that he gave bank statements to Mr Hutton at the Oakville property (although he does not say when) and that they were the correct statements, (presumably the same as those that the Plaintiff obtained under subpoena from the Commonwealth Bank). 25He says further that the signature on the Business Purposes Declaration is not his signature and neither is the signature on the Acknowledgment in relation to who his broker was. He says that Money Matters Mortgages were not his brokers, that he has never met, nor does he know, Lauren Thurbon and that Mr Cauchi's only involvement in the matter was to introduce him to Mr Hutton. 26The Defendants also relied on an affidavit of Stephen Dubedat, a handwriting expert. Mr Dubedat annexed a report to his affidavit detailing an examination of questioned signatures on six separate documents. Mr Dubedat concluded that the questioned signatures on four documents, including the Business Purposes Declaration and the Guarantee were not genuine. He found that a signature on a document headed "Acceptance of the Credit and Package" offered by NAB and on an undated Guarantee were probably genuine. Mr Dubedat was not asked to examine the signature on the Acknowledgment and Consent document but it transpired during the hearing of the Motion that that document had not then been available to the Defendants to enable that to be done. 27The Defendants' case, in short, is that any fraud and alteration of documents was perpetrated by Mr Hutton. The basis for that is that there were only two persons who could have altered the bank statements because only two persons had possession of them. The first was the First Defendant (and he denied it) and the other was Mr Hutton. 28The Defendants also rely on the Contracts Review Act to argue that, to the extent that it is suggested by the Plaintiff that Clause 14.1(e) or (k) is satisfied by a person other than someone acting on behalf of the Defendants, those clauses are unjust terms and should be varied or read down. Should summary judgment be given? 29Consideration of whether summary judgment should be given must involve acting in accordance with the principles in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128 - 129 as the Plaintiff accepts. The Plaintiff submits that those principles mean that even if the Defendants provide evidence which tends to show the existence of a triable issue, it is open to the Plaintiff to show that on the whole of the evidence there is really no substance in the defence sought to be established: Bank Fur Gemeinwirtschaft AG v City of London Garages Ltd [1971] 1 WLR 149; [1971] 1 All ER 541. 30In the first place it is necessary to see what disputed questions of fact remain upon a consideration of the evidence adduced by each side on the Motion because if there is a serious conflict as to any matter of fact summary disposal will be inappropriate: Sidebottom v Cureton (1937) 54 WN (NSW) 88. 31First, although there is evidence from the Plaintiff tending to show that it received the Commonwealth Bank statements from Lauren Thurbon at Money Matters Mortgages Pty Ltd there is evidence from the First Defendant that Money Matters Mortgages Pty Ltd were not acting as his brokers in the matter. Whether they were his brokers is a crucial issue. If they were there cannot be much doubt that the broker supplied incorrect information in the form of the false bank statements. 32This question of fact involves a resolution of the signature on the Acknowledgement. The First Defendant denies it is his signature. There is a reasonable explanation why Mr Dubedat has not examined it. 33Secondly, the First Defendant says that he provided Mr Hutton with correct bank statements at one of the meetings he had with him at the property. If that is correct it may add weight to the Defendants' account of matters and require some response from Mr Hutton about his subsequent receipt of the false statements from Ms Thurbon and why the loan went ahead in those circumstances. I note that there was no evidence from Mr Hutton with no explanation for his absence other than an assertion from the Bar Table that he "had moved on" and is "unavailable to give any evidence". Even if it is not appropriate to draw a Jones v Dunkel inference from Mr Hutton's absence, there is an issue of fact involving credibility to be dealt with in relation to this assertion of the First Defendant. 34Thirdly, there is an issue about whether the Credit Code applies to the loan. Although the Plaintiff puts into evidence a Business Purposes Declaration apparently signed by the First Defendant, the First Defendant denies it is his signature, and the evidence from the handwriting expert is that the First Defendant's signature on that document is not genuine. There is no evidence to the contrary on the Motion. It cannot be said, therefore, that the Credit Code does not apply in respect of the loan. I note in that regard that there does not appear to have been service of a s 80 Notice prior to the commencement of the proceedings. Until it is resolved whether or not the loan contract is subject to the Credit Code the non-service of a s 80 Notice means that it would be inappropriate to make an order for possession or to give judgment against the Defendants. 35Fourthly, the First Defendant invokes the Contracts Review Act 1980 in relation to clauses 14 (e) and (k). The particulars in relation to that pleading, although reading more like a submission than particulars, draw attention to the unfairness of those provisions if "person" can refer to someone who is not in any way an agent of, or connected with, the borrower and, in particular, is in fact an employee of the Plaintiff. The last assertion arises because it is alleged by the Defendants that the wrongful provision of the material was perpetrated by Mr Hutton, an employee of the Plaintiff. 36Nevertheless, consideration must be given to the Contracts Review Act defence when all of the evidence is available to show the source of the incorrect information in the bank statements and how that source is connected, if at all, with the Defendants. 37It may be accepted that the Contracts Review Act benefits only the First Defendant but the principle in Wickstead v Browne (1992) 30 NSWLR 1 would make it inappropriate to give summary judgment against one of two defendants: Daleport Pty Limited v Bank of Western Australia [2012] NSWCA 402 at [5]; Griffin v Matthews [2012] NSWCA 348 at [21] -[25]. 38Despite these issues of fact, the Plaintiff submits that, having regard to ss 56 - 60 Civil Procedure Act 2005 and consistent with General Steel principles, the Court can look to the end result and say that the overwhelming probability is that the Plaintiff will be successful. It is said that the principle in Gemeinwirtschaft supports that approach. 39 Even if that submission is correct as a matter of principle two things point strongly against such a conclusion in the present case. First, there is no evidence from Mr Hutton to answer any of the assertions of the First Defendant that might be thought to involve Mr Hutton. Secondly, the evidence of the First Defendant that some, but not all, signatures on the bank documents are not his is supported by the evidence of the handwriting expert for the documents he has examined. There was no handwriting evidence to the contrary. I note also that the First Defendant's affidavit, where he asserted that certain signatures were not his, was sworn a week before the report of the handwriting expert. Conclusion 40I do not consider, on the basis of the evidence before me on the Motion, that it can be said there is an overwhelming probability that the Plaintiff will be successful at the end of the case. There are many suspicious aspects to the case, not all of which arise against the Defendants. Certainly, the First Defendant's credibility will be a significant issue, but so too will the precise course of events that led to the property being purchased in the company's name although the loan was made to the First Defendant, as well as the involvement of Money Matters, Ms Thurbon and Mr Cauchi. 41The Plaintiff does not establish that the defence is so obviously untenable that it cannot succeed. The matter must be allowed to go to trial. 42Accordingly, I make the following orders: (1)Dismiss the Plaintiff's Notice of motion filed 30 August 2013. (2)The Plaintiff is to pay the Defendants' costs of the Motion. ********** Amendments 29 October 2013 - Citation corrected on coversheet to read Wickstead v Browne (1992) 30 NSWLR 1 Amended paragraphs: Coversheet 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: 29 October 2013