Supreme Court New South Wales Medium Neutral Citation: Citigroup Pty Limited v Middling [2014] NSWSC 474 Hearing dates: 22 and 23 April 2014 Decision date: 28 April 2014 Jurisdiction: Common Law Before: Adamson J Decision: (1) Grant leave to the defendant to file an amended defence and amended cross-claim in the form of the drafts marked MFI 2 and MFI 3 on the defendant's application. (2) Reserve the question of costs. (3) Direct Mr Quy and Mr Elliot to provide written submissions to my Associate and serve them on the other parties to the proceedings within seven days of the date of these reasons as to why an order not be made against either or both of them that they pay the plaintiff's and the first cross-defendant's costs occasioned by and thrown away by the amendment, including the costs of the hearing on 22 and 23 April 2014 and the costs of the adjournment of the hearing of the matter, on an indemnity basis. (4) Direct the parties to prepare short minutes as to the directions sought for the further conduct of the proceedings when the matter is before me for mention on Friday, 2 May 2014 at 9.30 am. Catchwords: APPLICATION - application for leave to amend and adjourn - where failure to include Contracts Review Act relief due to oversight of legal representative - inadequate or false explanation for delay - whether interests of justice require matter to be litigated - relevance of making personal costs order to discretion to allow amendment Legislation Cited: Civil Procedure Act 2005 (NSW), s 56, s 57, s 58, s 59, s 64 Contracts Review Act 1980 (NSW) Trade Practices Act 1974 (Cth), s 51AC Cases Cited: Commonwealth Bank of Australia v Susan Hannaford Pty Limited (No.2) [2013] NSWSC 574 Murphy v Overton Investments Pty Limited [2002] FCA 921 Peddie v Stein (Supreme Court (NSW), Young J, 26 March 1987, unrep) Perpetual Trustee Co Limited v Stojcevski [2013] NSWSC 1612 Tonto Home Loans Australia Pty Limited v Tavares [2011] NSWCA 389 Tran v Perpetual Trustees Victoria Limited [2012] NSWSC 1560 Category: Procedural and other rulings Parties: Citigroup Pty Limited (Plaintiff/2nd Cross Defendant) Dennis James Middling (Defendant/Cross-Claimant) Perpetual Trustees Victoria Limited (First Cross-Defendant) Representation: Counsel: AR Vincent (Plaintiff) S Wheelhouse SC/D Elliott (Defendant/Cross-Claimant) M Ashhurst SC/P Newton (First Cross-Defendant) Solicitors: Norton Rose Fulbright Australia (Plaintiff) Quy Lawyers (Defendant/Cross-Claimant) Kemp Strang (First Cross-Defendant) File Number(s): 2013/47580 Publication restriction: Nil Judgment Introduction 1This matter was listed for final hearing before me for three days to commence on 22 April 2014, the day following the Easter long weekend. The plaintiff (Citigroup) seeks possession of a property at Canley Vale of which the defendant (Mr Middling) is both occupant and registered proprietor. Mr Middling resisted Citigroup's claim on two bases: first, fraud attributable to Citigroup on agency principles; and secondly, equitable unconscionability. Mr Middling also brought a cross-claim against Citigroup and Perpetual. Perpetual had previously advanced a loan to Mr Middling which was also secured by the property and which was refinanced by the loan made to Mr Middling by Citigroup. 2Mr Middling alleged, in substance, that he had been the victim of fraud by a Mr Lu or Dollar Group Pty Limited, in that he had been inveigled into borrowing some $238,000 from Perpetual to refinance a high-interest loan advanced by GE Finance in the sum of about $38,000. He alleged that the extra $200,000 was paid to Mr Lu or Dollar Group Pty Limited. He had subsequently refinanced the loan with Citigroup. He alleged that he was a disability support pensioner and had no capacity to repay such a loan, which was only made because of false statements made to the lender about his occupation and income. 3After Mr Vincent, who appeared on behalf of Citigroup, had opened the case and read the affidavit evidence in support of its claim, Mr Wheelhouse SC, who appeared with Mr Elliott on behalf of Mr Middling, rose to make an oral application to amend the defence and cross-claim to add a defence and claim under the Contracts Review Act 1980 (NSW) (the Contracts Review Act). There was no notice of motion available to be filed; nor was there an affidavit in support of the application. There was an incomplete proposed cross-claim (which I marked MFI1) which added paragraphs to the prayers for relief but which made no change to any of the allegations of material fact in either the defence or the cross-claim. 4I heard the application for leave to amend and for an adjournment on 22 April 2014. I adjourned the matter to 23 April 2014 and directed the plaintiff to circulate a proposed form of amended defence and cross-claim which was to be the subject of argument on 23 April 2014. 5When the matter resumed on 23 April 2014, Mr Wheelhouse handed up the proposed draft amended pleadings together with an affidavit sworn by Mr Middling's solicitor, Karl Quy. Further argument ensued. After Mr Vincent and Mr Ashhurst had both made submissions in opposition to the application, Mr Wheelhouse sought to re-open the evidence in support of the application by adducing oral evidence from Mr Quy. This occurred after the morning adjournment on 23 April 2014. The proposed amendments The proposed amendments as against Citigroup 6The proposed amended defence and cross-claim add claims for relief under the Contracts Review Act and plead allegations of matters that, if established, could give rise to such relief. As Citigroup does not object to the form of the amendment it is not necessary to set out the proposed amendments against Citigroup in these reasons. 7However, Perpetual opposed the amendments on grounds that include the content of particular paragraphs. It is, accordingly, necessary to set out, in summary form, the allegations made against Perpetual and the additional relief sought to be claimed against it. 8In [28] of the proposed cross-claim Mr Middling alleged: "The liability of the Cross-claimant pursuant to the PTVL [Perpetual] loan agreement arose from a contract that was unjust within the meaning of s 7 of the Contracts Review Act (NSW) 1980 in the circumstances of its making by reason of. . ." 9The matters listed include inequality of bargaining power, the incurring of a liability Mr Middling could not meet unless he sold his home, his inability to protect his own interests, including because of his lack of education, mental capacity and economic circumstances, his special disadvantage and the conduct of Dollar Group Pty Limited. 10In [29] of the proposed cross-claim Mr Middling alleged that Perpetual engaged in conduct that was unconscionable and in contravention of s 51AC of the Trade Practices Act 1974 (Cth). The particulars substantially replicate the allegations listed in [28]. 11The additional relief claimed against Perpetual to which objection is taken are the following proposed additions to the prayers for relief: (a) A declaration that a contract of loan made on or about 18 April 2007 between the Cross Claimant and the First Cross Defendant was unjust within the meaning of s 7 of the Contracts Review Act (NSW) 1980. (b) A declaration that the contract of loan made on or about 18 April 2007 between the Cross Claimant and the First Cross Defendant was void: (i) in whole, (ii) or alternatively in part, such that the liability of the cross-claimant under the contract of loan was limited to $38,500. The evidence in support of the application for leave to amend 12Mr Wheelhouse tendered a notice to produce dated 17 April 2014 together with a document produced in answer to the notice entitled "Citibank Introducer Agreement". He also read Mr Quy's affidavit sworn 23 April 2014. Because of the importance placed on the affidavit by all parties, I propose to set it out in full: 1. I am the solicitor for the Defendant/Cross Claimant in these proceedings. 2. I am a sole practitioner and have a small general suburban practice. I do not do much Supreme Court litigation. 3. On 10 January 2012 I had a conference with Mr Middling and went through documents and took instructions for a Proof of Evidence. This was a difficult and confusing process and I did not fully understand the Citibank loan transaction. 4. Mr Middling could not afford to commence proceedings and was not then being sued and the matter did not proceed further until after the Statement of Claim was served and Mr Middling contacted me again. 5. I was unsure of the role played by Citibank until I received the Citibank Introducer Agreement in answer to a Notice of Produce on about 17 April 2014 and had the benefit of a conference with Mr Middling's Senior Counsel and had the documents explained to me. 13As referred to above, after submissions had all but concluded and it was apparent that one of the principal bases on which Citigroup and Perpetual opposed leave being granted was the lack of explanation for the delay, Mr Wheelhouse sought leave to re-open to call Mr Quy to give further oral evidence. The following exchange occurred in his oral evidence in chief: Q. Can you tell the Court why, in relation to the cross-claim filed, it's now the subject of the application for leave to amend, there was no claim for relief under the Contracts Review Act or section 51AC in that original pleading? A. There are two reasons. First, it was difficult to receive or to get instructions from Mr Middling. He is a very simple man. The second reason is, we didn't have a lot of documents to work on at the time. In late January, I wrote to see if they requested some documents. I got them on about 14 April. Q. Is that this year or last year? A. This year, 14 or 17 April. Once I've got them, I have passed them on to my counsellors, and we had a conference, and as a result of that conference, I was advised that Mr Middling would have a defence or a cross-claim under the Contracts Review Act against Citibank, and also against Perpetual Trustee which I never anticipated prior to that. Q. And do you recall what date that conference was? A. When? Q. Yes. A. The conference was prior to Easter. 14In cross-examination, Mr Quy admitted that he had been a solicitor for over 20 years, had conducted litigation including for borrowers against lenders and was aware of the Contracts Review Act when the statement of cross-claim in the present proceedings was drafted by Mr Elliott of junior counsel. He said that he briefed counsel for advice if he did not feel suitably qualified to give advice. Mr Quy said that he did not raise the Contracts Review Act with Mr Elliott either before or after the statement of cross-claim was drafted. Indeed there was no discussion between Mr Elliott and Mr Quy concerning the Contracts Review Act until last week when the Introducer Agreement was produced by Citigroup in answer to the notice to produce. 15Initially in his cross-examination, Mr Quy said that, until he received the documents in answer to the Notice to Produce, he did not have enough detail to consider the Contracts Review Act. However, he accepted that all he found out when the Introducer Agreement was produced was that another company, Pennley Pty Limited, could be the agent of the introducer. He was pressed by Mr Ashhurst to justify his initial explanation in the following exchange: Q. Then please tell the Court, Mr Quy, what is in the Pennley documents that provided you with information to raise a Contracts Review Act claim, either in relation to the Citibank claim or the Perpetual claim? A. In relation to Perpetual, I have some experience with the earlier case between Perpetual and Mr Tran and Mr Tran won that case by his own fraud in agency. So we approach the cross-claim against Perpetual using the same principle of fraud in agency. So with Perpetual we never consider the Contracts Review Act. Q. You made the deliberate tactical decision to run your claim against Perpetual in the same way that you had run the claim for Mr Tran against Perpetual? A. Yes. 16Mr Quy further agreed with Mr Ashhurst that he had sufficient information to plead the Contracts Review Act before receipt of the documents, and, in particular, that he knew that Mr Middling had limited education, limited numeracy and literacy skills and that he had not received independent legal advice before entering into the transaction. The extent of Mr Quy's concession is apparent from the following exchange at the conclusion of the cross-examination: Q. Indeed you would have known each and every single one of the elements of what you claim is the unjustness in the Citibank contract before you received the details of the Pennley agency, wouldn't you? A. Yes. Q. So I put to you again, Mr Quy, this issue of receiving the Pennley documents is an absolute furphy as a basis for why you only raised the Contracts Review Act claim now, isn't it? A. Yes, when you put it that way. 17Mr Quy accepted, in questions asked from the Bench, that he swore the affidavit that had been drafted for him but that he now accepted that it was not the true explanation for the delay. He agreed that the true explanation for the delay was that he did not turn his mind to the Contracts Review Act until he conferred with Mr Wheelhouse just before Easter. 18For completeness I note that Mr Wheelhouse gave the following explanation in the course of submissions from the bar table (before Mr Quy's affidavit was prepared): A fresh pair of eyes was cast over the matter late last week on the basis there was a difficulty with the agency question, and I was asked to express a view in relation to the agency question, and that caused me to go back and examine the one or two documents that were available in the way I have just done for your Honour, and that led me to the proposition that although the pleading identified the relevant factual matters, it was deficient in its reliance only on equity and not on the statutory relief, your Honour. Unless I speak to my instructing solicitor to get some more detail, that's what I am saying, your Honour. The parties' submissions Mr Middling's submissions 19Notwithstanding the concessions made by Mr Quy in his evidence set out above, Mr Wheelhouse persisted in a submission that Citigroup was responsible for the delay by the late production of the Introducer Agreement. He submitted that the production of the Introducer Agreement late last week was the trigger for consideration of the Contracts Review Act. The importance of the Introducer Agreement to the defence was explained by Mr Wheelhouse as follows. 20Mr Wheelhouse referred to [30] of the cross-claim (which is incorporated by reference into the defence) which was filed on 8 April 2013 which alleged: "In so doing Dollar Group Pty Limited and/ or Lu was acting as the agent for the Second Cross Defendant [the plaintiff] and acted as a Mortgage Originator/ broker in the [sic] respect to the finance application. 21He then referred to the denial of this allegation in the reply to the defence (which was filed on 8 July 2013) and the following allegation that the plaintiff: "paid upfront and trailing commission to Pennley Pty Limited trading as Choice Aggregation Services in respect of the Defendant's loan and mortgage as set out at page 5 of the loan agreement between the Plaintiff and the Defendant." 22Mr Wheelhouse then relied on the Introducer Agreement in support of the proposition that Pennley Pty Limited appointed Ms Lam and or Dollar Group Pty Limited to be an Authorised Person to ensure that the borrower was not subject to any special disadvantage or disability and contended that that relationship was not apparent until the Introducer Agreement had been produced. He submitted that the evidence shows that false evidence was submitted by a Michelle Lam, of Dollar Group Pty Limited, to verify Mr Middling's income and they were relevantly agents, if not in law, then implied agents, of Citigroup because they had been appointed "Authorised Persons" pursuant to the Introducer Agreement by Pennley Pty Limited. Citigroup's submissions 23Mr Vincent submitted that the plaintiff had prepared its case on the basis that the defence of fraud based on actual agency and equitable unconscionability were the only defences. It had made forensic decisions on that basis and had not come to meet any claim or defence based on the Contracts Review Act. Mr Vincent contended that, were Mr Middling permitted to amend to add such a claim for relief, the case could change significantly, not least because the principles of implied agency 24Mr Vincent submitted that if the amendment were allowed, an adjournment would be required to permit Citigroup to consider its position and possibly amend its pleading and adduce further evidence. He also contended that there was prejudice to Citigroup since Mr Corkhill, its principal witness, no longer works for Citigroup. Further as the debt (currently $393,937.61) grossly exceeds the value of the property (which was valued at $265,000 in March 2007), any delay will cause irremediable prejudice to Citigroup. Because of Mr Middling's impecuniosity, any costs order would provide no recompense to Citigroup. 25Mr Vincent also submitted that, if the amendment were refused, Mr Middling might have recourse against Mr Quy for damages in negligence, but if it were allowed, neither Citigroup nor Perpetual would have recourse against any solvent person, except if a personal costs order were made against one or more of the defendant's legal representatives. There would, in that event, be no recompense for the escalation in the debt by reason of the inevitable delay in bringing the proceedings to their conclusion. 26Mr Vincent confirmed that he was instructed to seek a personal costs order on an indemnity basis against Mr Quy. Perpetual's submissions 27Mr Ashhurst submitted that the proposed amendment against Perpetual ought not be granted for the following four reasons: (1)There is no proper explanation for the delay. (2)It added substantial new allegations of fact, contrary to the defendant's submission that none would be added; (3)There is no relevant allegation of causation pleaded against Perpetual; (4)The amendment, if granted, would be futile since any claim for relief under the Contracts Review Act is out of time by reason of the provisions of s 16(c) of the Act. 28Mr Ashhurst submitted that such explanation as had been given was not a proper explanation. He contended that I ought infer that nothing that could be said would have assisted the defendant. Further he submitted that the defendant's legal advisers made a deliberate tactical decision to run Mr Middling's defence and cross-claim on the same basis on which they had conducted Mr Tran's case where they did not need to rely on the Contracts Review Act and that the amendment ought be refused on that basis. He referred me Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; 239 CLR 175 at [4] where French CJ said: Save for the dissenting judgment of Lander J in the Court of Appeal, the history of these proceedings reveals an unduly permissive approach at both trial and appellate level to an application which was made late in the day, was inadequately explained, necessitated the vacation or adjournment of the dates set down for trial, and raised new claims not previously agitated apparently because of a deliberate tactical decision not to do so. In such circumstances, the party making the application bears a heavy burden to show why, under a proper reading of the applicable Rules of Court, leave should be granted. [Emphasis added.] 29Mr Ashhurst submitted that the amended pleading added a substantial number of material allegations in [28] and [29]. 30Mr Ashhurst also submitted that the allegation of causation in the draft cross-claim was so broad as to provide no inkling as to the basis on which the case against Perpetual was put. In [49] of the proposed cross-claim Mr Middling alleged merely: "By reason of the above, the Cross Claimant has suffered loss and claims declaratory and consequential relief." 31Mr Ashhurst submitted that any reliance on the Contracts Review Act was time-barred since the only potentially available provision in s 16 of the Contracts Review Act is s 16(c) which provides: Time for making applications for relief An application for relief under this Act in relation to a contract may be made only during any of the following periods: . . . (c) the period of the pendency of maintainable proceedings arising out of or in relation to the contract, being proceedings (including cross-claims, whether in the nature of set-off, cross-action or otherwise) that are pending against the party seeking relief under this Act. 32He submitted that the relevant contract is the contract between Mr Middling and Perpetual and that the proceedings pending against Mr Middling neither arise "out of the [Perpetual] contract", nor are they "in relation to the [Perpetual] contract". 33Mr Ashhurst referred me to Peddie v Stein (Supreme Court (NSW), Young J, 26 March 1987, unrep) which concerned a father (the plaintiff) who transferred property to his daughter and son-in-law (the defendants/cross-claimants). The father alleged that it was a term of the contract that the land was to be subdivided into three. The transferees argued that the land was transferred to them absolutely. The father contended that if the true construction of the contract was as the transferees contended, it was unjust under the Contracts Review Act. Young J said: In the instant case the plaintiff's [father's] statement of claim contains the fourth and fifth counts claiming relief under the Act. The defendants [daughter and son-in-law] put on a defence to that claim and also filed a cross-claim on 7 June 1985 seeking a declaration that they were beneficially entitled to the whole of the land alternatively to certain lesser interests. The defence to this cross-claim filed on 10 September 1986 does not contain any reference to the Contracts Review Act at all. In my view subs(c) only applies to a situation where the cross-claim raises matters to which one defence is the Contracts Review Act and that defence is pleaded to the cross-claim. It would be unfair in such a situation for the person seeking to rely on the Act, when attacked, after the two year period had expired, not to be able to rely on the Act as a shield. It is to that case and that case alone that that par (c) is directed. In this respect I agree with the late Professor Peden in his book on Unjust Contracts, p 149 that "The present section makes clear that the extended limitation period is only available by way of the shield rather than as a sword." To my mind it would be quite an unjustifiable extension of par (c) to say that whenever a defendant as well as defending proceedings files as cross-claim at least in the situation where the cross-defendant does not plead the Contracts Review Act that any claim for relief on that Act in the statement of claim become automatically validated. 34Mr Ashhurst contended that Mr Middling sought to use the Contracts Review Act as a sword as against Perpetual and he was, therefore, out of time. He submitted that Perpetual was properly to be characterised as a third party to separate proceedings, although it was a party to the principal proceedings, but only by way of joinder through the cross-claim. He submitted that [28] and [29] and the prayers for relief in (a) and (b) ought not be allowed, even if the amendment were otherwise granted. Mr Middling's submissions in response 35Mr Wheelhouse submitted that limitation questions ought not be determined at an interlocutory stage. He contended that the Contracts Review Act was beneficial legislation that ought be given a broad construction. He said that the claim for declaratory relief under the Act against Perpetual ought be permitted to be included in the amended pleading since it was not such as to warrant being struck out, had it been contained in the pleading as filed. He referred to Murphy v Overton Investments Pty Limited [2002] FCA 921, which concerned separate proceedings in different courts, where Contracts Review Act relief was raised as a shield in one of the proceedings. 36Mr Wheelhouse contended that it was "extremely difficult" to understand the nature of the two transactions and that it was not a case of a standard loan and mortgage transaction because of the involvment of intermediaries, the relationship of which to the lender was obtuse. He said further: ". . . unless you are in possession of the Citigroup introducer agreement, which contains the express terms of the relationship between the introducer Pennley and Citigroup and understand from that agreement that Ms Lam or the Dollar Group is an authorised person under that agreement and thus is in the position of fulfilling the various obligations imposed on the introducer under the agreement to assess the borrower to determine where the borrower has special disabilities, it is very difficult to see how an agency argument against Citigroup would work. And it is difficult to see how the disabilities suffered by Mr Middling can be visited upon Citigroup." 37After having sought initially to defend Mr Quy's conduct, ultimately, Mr Wheelhouse submitted that I ought "not visit upon Mr Middling in relation to the pleading against Citibank, the sins of his solicitor." Mr Wheelhouse submitted that the failure to plead the Contracts Review Act and s 51AC of the Trade Practices Act could not accurately be classified as a "deliberate tactical decision" notwithstanding Mr Quy's admission in cross-examination. He submitted that it was an inadvertent and unwise decision, but it was neither deliberate nor tactical because the Contracts Review Act was not even considered. 38Mr Wheelhouse submitted, in substance, that because Citigroup would make a loss on the transaction even if it won the proceedings, because of the disparity between the amount of the debt and the value of the security, it did not matter if the disparity became greater over time. Reasons Civil Procedure Act 2005: s 56, s 57, s 58, s 59 and s 64 39Mr Middling's application for leave to amend is governed by s 64 of the Civil Procedure Act 2005 (NSW) (the Civil Procedure Act) which, by s 64(1), confers a discretion on the Court, relevantly, to make amendments to the pleadings. Section 64(2) provides: "Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings." 40Section 58(2) makes the matters referred to in s 56 and s 57 of the Civil Procedure Act mandatory relevant considerations for the purposes of determining the dictates of justice. Section 56 identifies the overriding purpose of the Act and UCPR as being "to facilitate the just, quick and cheap resolution of the real issues in the proceedings." The consequences of a grant of leave to amend would be neither quick nor cheap since the proceedings would be inevitably delayed and additional costs incurred. There would be significant costs thrown away as a result of an adjournment. Unless a personal costs order were made against Mr Middling's legal representatives, such costs would not be recoverable since it is common ground that the evidence establishes that the debt Mr Middling owes to Citigroup exceeds the value of the property. As he is a disability support pensioner, the prospects of his being able to meet any adverse costs order are likely to be nil. There would, accordingly, be prejudice to Citigroup, in terms of an increase in the disparity between the amount of the debt and the value of the security, and costs and prejudice to Perpetual in terms of costs. Further delay increases the loss to Citigroup if it is eventually successful in the proceedings. Delay is also prejudicial in itself. 41However, the word "just" in s 56 is not to be disregarded. If leave to amend is refused, Mr Middling will be deprived of whatever benefit the Contracts Review Act might confer on him. Although no judgment, even on a preliminary basis, can be made as to whether Mr Middling would have a good defence to Citigroup's claim for possession on the basis of the Contracts Review Act, there are features of the proceedings and of Mr Middling himself that suggest that it ought to have been pleaded at the outset since it may provide the widest basis for relief available to him. There is, accordingly, the potential that Mr Middling will suffer prejudice if he is not permitted to amend to rely on the Contracts Review Act. He will suffer prejudice in any event if the amendment is not granted because he will have lost the chance of relying on the Contracts Review Act. It is not possible to value that chance at this stage of the proceedings. 42I accept Mr Vincent's submission that the introduction of a claim for relief under the Contracts Review Act has the undoubted potential to affect the extent to which wrongdoing on the part of Dollar Group Pty Limited and Ms Lam might affect the enforceability of the loan by Citigroup. The following passage from the judgment of Allsop P in Tonto Home Loans Australia Pty Limited v Tavares [2011] NSWCA 389 (with whom Bathurst CJ and Campbell JA agreed) shows the extent to which broader principles are made relevant under the Contracts Review Act : [264] The position of the lenders should not be judged as detached third parties, distinct and separate from what happened. Nor should they be seen as complicit with, or actually knowing of, Streetwise's deception, fraud and predatory conduct towards the borrowers. While not having actual knowledge or actual notice of Streetwise's behaviour, the lenders' position should be assessed by reference to the reality of the significant responsibility of those structuring the elements of the lending programmes or, in the case of Permanent, those providing the wholesale funds. The mortgage manager (Tonto HL) with delegated lending authority operated the guidelines loosely and in a way which reflected a lack of concern with the suitability of the borrowers and serviceability. The mortgage manager brought into the roles of interviewing and selecting prospective borrowers an intermediary whose commercial attractiveness bespoke the inhering risks to which I have referred, heightened by Tonto HL's agreement not to contact prospective borrowers before settlement. These considerations materially facilitated the ability of Streetwise to effect these frauds. [265] In all the circumstances, these considerations are relevant to conclude that the unjustness of the contracts can be seen as unjustness affecting Tonto HL and the lenders. This conclusion is relevant to the assessment of unjustness and the extent to which the lenders should be viewed as bearing responsibility for what happened and in applying the broad considerations contained in the CRA, founded as they are in justice and fairness. Looking at these events as brought about primarily by the fraud of Streetwise, a fair assessment is that the business structure put in place by the lenders in how it operated was significantly responsible for the preying upon these people by Streetwise. That is not to ignore the basis upon which the trial and appeal proceeded, that "Lo Doc Lending" per se was not unjust. Nor is it to introduce an enterprise concept of agency; rather it is to recognise that a sub-contracted lending structure of the kind here, in which persons such as Streetwise are "chased" to become the introductory agents, should have guidelines enforced with real vigour to deal with the obvious objective risks of fraud and deception. No one criticised these guidelines. Their operation was loose, and affected by the attitude found by his Honour. It is only fair and just to recognise the significant responsibility of the lenders in these circumstances. [266] Unjustness is a not concept or word with immutable or unvarying content. The degree of unjustness here stems primarily from the fraud and procedural injustice of Streetwise. Though not the agent in law of Tonto HL or Permanent, it was, as I have explained, the link in the business enterprise for which, in the sense I have discussed, the lenders, through Tonto HL, should take significant responsibility. 43The dicta in Tonto illustrates why the case will be different, and potentially broader, if the amendment is granted. However, it also shows the potential prejudice to Mr Middling if the amendment is refused since, as I understand it, it is not suggested that Citigroup was itself guilty of any wrongdoing although it is possible that it used the people who are alleged to have been relevant malefactors as part of its business, although not necessarily as its legal agents. 44The matters which I am obliged to take into account under s 57 of the Civil Procedure Act are listed in s 57(1)(a) - (d). They relate to the just determination of the proceedings, the efficient disposal of the business of the Court, the efficient use of available judicial and administrative resources, and the timely disposal of the proceedings. I accept that these matters, apart from the first, weigh heavily in the balance against the grant of leave. 45The matters which I may, as distinct from must, take into account, include, as s 58(2)(b) provides, the degree of difficulty or complexity to which the issues in the proceedings give rise. Although there may be some difficulty or complexity in the matter, I do not regard the identification of the Contracts Review Act as an appropriate matter to be pleaded by way of defence to Citigroup's claim for possession as being particularly difficult or complex. The arrangements between Citigroup, Dollary Group Pty Limited, Ms Lam and Pennley Pty Limited might be germane to s 9(2)(j) of the Contracts Review Act but they are not determinative of the availablity of relief under that Act, which may also depend on other factors, which were from the outset known by Mr Quy. 46Mr Quy's admission that he effectively used as a precedent the pleading in another case against Perpetual in which Dollar Group Pty Limited and Mr Lu were also involved (which I take to be the case of Tran v Perpetual Trustees Victoria Limited [2012] NSWSC 1560 in which Mr Quy was the solicitor on the record and Mr Elliott was counsel) is of concern. Each matter turns on its own facts. Mr Middling was entitled to have his legal representatives consider his circumstances and advise him as to what, if any arguable avenues for relief were available to him. If they did not have the expertise to fulfil this duty, they ought not have accepted his instructions. 47Section 58(2)(b) of the Civil Procedure Act refers to the degree of expedition which the respective parties have approached the proceedings including the degree to which they have been timely in their interlocutory activity. Mr Middling's legal representatives have not approached the proceedings with any degree of expedition. Mr Quy's explanation for the delay was false, as he ultimately admitted. Mr Middling consulted Mr Quy for the first time in January 2012, over two years ago. Mr Quy had briefed Mr Elliott to draft the cross-claim which was filed over a year ago on 8 April 2013. 48Whether an explanation for delay is forthcoming is a significant matter in the exercise of the discretion whether to grant leave to amend. In Aon, the plurality said at [103]: Not only will [the parties seeking the leave] need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. 49I respectfully agree with what Davies J said in Commonwealth Bank of Australia v Susan Hannaford Pty Limited (No.2) [2013] NSWSC 574 at [73], when considering this passage: In my opinion, that is likely to mean that the explanation for delay will in most cases not be regarded as subsidiary to showing the bona fides of the proposed amendment. 50In that case, however, unlike the present, it was the principal of the defendant herself who was responsible for the delay and who sought leave to amend to claim relief under the Contracts Review Act. The importance of an explanation for the delay was also addressed by Davies J in Perpetual Trustee Co Limited v Stojcevski [2013] NSWSC 1612 where his Honour said at [31]: Furthermore, the judgments in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 make perfectly clear that in the absence of adequate explanation for delays and change of approach to litigation, it is unlikely that such applications will be successful. 51The true explanation for the delay was not given willingly by Mr Quy; it was extracted from him at the conclusion of the cross-examination. The true explanation is that neither Mr Quy, nor apparently Mr Elliott, actually considered the application of the Contracts Review Act but were content to run Mr Middling's defence on the same basis as they had run the proceedings on behalf of Mr Tran, a previous client. It was only when they conferred with Mr Wheelhouse in the days before the hearing was due to commence that the availability of relief under the Contracts Review Act was considered. 52I reject Mr Wheelhouse's submission that any part of the delay or any explanation can be laid at the door of Citigroup. The Notice to Produce is dated 17 April 2014. There was no delay in production. I do not accept that it provided any relevant "trigger" for consideration of the Contracts Review Act. Mr Middling's legal advisers were made aware of the relevance of Pennley Pty Limited from at least the date of the filing of the reply on 8 July 2013. 53The next matter is the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective party. I accept Mr Middling himself was not responsible for the lack of expedition in preparing an appropriate defence and cross-claim that made relevant allegations and claimed relevant and arguably available relief. That he consulted Mr Quy in January 2012, ten months before the default notice relied upon in the statement of claim was sent by Citigroup, shows that he was not dilatory in seeking legal advice regarding his predicament. Although Mr Ashhurst obtained the concession from Mr Quy that the failure to plead the Contracts Review Act was a "deliberate tactical decision", it was not one that was made either deliberately or competently or on instructions or, indeed, after any consultation with Mr Middling. Indeed, as Mr Quy ultimately conceded, he was aware of all of the matters that are presently relied upon in support of the Contracts Review Act relief before the cross-claim was filed. He was aware of many of them from the first conference when Mr Middling's limitations would have been apparent to him. 54It is not uncommon that forensic decisions taken by a party's legal representatives have consequences which are visited on a party. Nonetheless, in my view, it can fairly be said that the lack of expedition was beyond the control of Mr Middling although it was well within the control of his legal representatives. 55Another matter which is germane to the exercise of my discretion is the use that any party has made or could have made of any opportunity available to the party in the course of the proceedings. In my view, the appropriate course would have been for the defendant's legal representatives to have a motion, a draft amended pleading and an affidavit in support that set out the true explanation for the delay at least before the hearing commenced on 22 April 2014. 56Section 59 of the Act is also relevant. It provides that in any proceeding the practice and procedure of the Court should be implemented with the object of eliminating any lapse of time between the commencement of the proceeding and their final determination beyond that reasonably required for the interlocutory activities necessary for the fair and just determination of the issues in dispute between the parties and the preparation of the case. Obviously the grant of leave to amend and consequential adjournment will lead to to an increase in the time between commencement of the proceedings and their final determination. 57I accept Mr Vincent's and Mr Ashhurst's submissions that many of the principles to which I have referred in s 56, s 57, s 58 and s 59 weigh very heavily against any discretion in Mr Middling's favour. However, notwithstanding these matters, I am not disposed to refuse the application for leave to amend because I am persuaded that it is in the interests of justice to allow it. If Mr Middling can make out a defence under the Contracts Review Act, he may be able to retain his house, which is his only valuable asset, as well as being his home. Whether such a defence is available cannot be determined until final hearing. However, he would be doubly disadvantaged if he were not permitted to have his claim for relief determined on the merits in circumstances where his legal advisers apparently acted with insufficient diligence, competence or regard for his interests. 58It was put by Mr Ashhurst that the only way in which the prejudice to Perpetual could be overcome would be if I were to make a personal costs order against at least Mr Quy and that this was a matter that was germane to the exercise of my discretion whether to allow the amendment. I accept the relevance of the prejudice to Citigroup and Perpetual that would be occasioned if a costs order were made against Mr Middling personally since he would be unlikely to be able to pay such costs. However, I am disposed to allow the amendment in any event since I am satisfied that it ought be allowed even if I do not make a personal costs order against any of Mr Middling's legal representatives, which is a matter to be determined later, after they have had an opportunity to be heard. The form of the pleading: the allegations against Perpetual 59In order to determine whether the contract between Mr Middling and Citigroup is unjust, it may be necessary to determine whether the contract between Perpetual and Mr Middling was itself unjust within the meaning of the Contracts Review Act. This is not to say that the contract between Mr Middling and Perpetual which has been fully performed by the repayment of the debt could be undone, but rather that there may be factors associated with the antecedent contract which bear on the availability of a Contracts Review Act defence to Citigroup's claim for possession. Accordingly it may be necessary for the judge who hears this matter to make findings about the contract between Perpetual and Mr Middling. In these circumstances I consider [28] of the draft amended cross-claim ought be included within the grant of leave. Paragraph [29] is concerned with s 51AC of the Trade Practices Act. It was not suggested that that claim is time-barred. Accordingly I consider that this paragraph ought be included within the grant of leave. 60As for the claim for relief in prayers 1(a) and (b) of the draft cross-claim, I consider there to be force in Mr Ashhurst's argument that such relief is unavailable because of s 16 of the Contracts Review Act. However, a declaration, which is the relief claimed in prayer 1(a) is a particular type of relief which does not necessarily lead to any alteration in the legal rights of the parties and, accordingly, may be available even if s 16 is construed as Mr Ashhurst contended. The prayer in 1(b) is in a separate category since it does not refer to the Contracts Review Act at all. Although it is not presently apparent that such relief could be granted, I am not satisfied that the grant of leave to amend should exclude 1(b). Costs 61Ordinarily the party seeking an indulgence by way of leave to amend is required to pay the costs occasioned by the amendment, including costs thrown away. In the present case, the amendment application necessarily resulted in an adjournment of the matter. There is no basis for suggesting that Mr Middling himself was in any way responsible for the need for the amendment. Practice Note SC Gen 5 sets out the applicable procedure where the Court is minded to make a costs order against a legal practitioner personally. It provides that I may direct the practitioner to provide written submissions to the Court within a specified period. The evidence of Mr Quy was that he briefed Mr Elliott to draft the defence and cross-claim. Accordingly, I will require both Mr Quy and Mr Elliott to provide written submissions to the Court as to why a costs order on an indemnity basis ought not be made against each of them personally. Orders 62I make the following orders: (1)Grant leave to the defendant to file an amended defence and amended cross-claim in the form of the drafts marked MFI 2 and MFI 3 on the defendant's application. (2)Reserve the question of costs. (3)Direct Mr Quy and Mr Elliott to provide written submissions to my Associate and serve them on the other parties to the proceedings within seven days of the date of these reasons as to why an order ought not be made against either or both of them that they pay the plaintiff's and the first cross-defendant's costs occasioned by and thrown away by the amendment, including the costs of the hearing on 22 and 23 April 2014 and the costs of the adjournment of the hearing of the matter, on an indemnity basis. (4)Direct the parties to prepare short minutes as to the directions sought for the further conduct of the proceedings when the matter is before me for mention on Friday, 2 May 2014 at 9.30 am. ********** 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 April 2014