Supreme Court New South Wales Medium Neutral Citation: Momentum Mortgages Limited (Receivers and Managers Appointed) v Mark Anthony Elmowy [2014] NSWSC 972 Hearing dates: 17 July 2014 Decision date: 24 July 2014 Before: Harrison J Decision: 1. Subject to orders (2) and (3) below, grant leave to Mr Meehan and Ezcape Street Projects Pty Ltd to amend the cross-claim in the form of the document attached to their submissions filed on 3 June 2014 in support of the application to amend. 2. Refuse leave to amend to include a claim alleging a breach of duty by a mortgagee in possession to sell the property at or for not less than its market value. 3. Order that paragraphs 83 to 86 of the proposed amended cross-claim be struck out but grant leave to Mr Meehan and Ezcape Street Projects Pty Ltd to replead those paragraphs in accordance with the rules if so advised. 4. Order that Mr Meehan and Ezcape Street Projects Pty Ltd pay the costs of this application to amend. 5. Grant liberty to apply on 7 days' notice in respect of these orders. 6. Otherwise stand the proceedings into the Registrar's list for directions on 4 August. 2014. Catchwords: PROCEDURE - amendment - application to amend cross-claim - whether amended cross claim pleads causes of action barred by limitation periods - whether amendments based upon evidence that goes beyond what has been exchanged - whether proposed form of cross-claim is deficient Legislation Cited: Corporations Act 2001 Property Law Act 1974 (Qld) Category: Procedural and other rulings Parties: Momentum Mortgages Limited (Receivers and Managers Appointed) (First Plaintiff) Equity Trustees Limited ATF Bookmakers Superannuation Fund (Second Plaintiff) Mark Anthony Elmowy (First Defendant) Christopher Scott Meehan (Second Defendant) Ezcape Street Projects Pty Limited (Third Cross Claimant) Representation: Counsel: R Harper SC (First Plaintiff) M Condon SC (Second Plaintiff) N Kidd SC (First Defendant, Second Defendant and Third Cross Claimant) Solicitors: Garland Hawthorn Brahe (First Plaintiff) Holman Webb (Second Plaintiff) Levitt Robinson (First Defendant, Second Defendant and Third Cross Claimant) File Number(s): 2009/294349 Publication restriction: Nil Judgment 1HIS HONOUR: Mr Meehan and Ezcape Street Projects Pty Ltd apply by notice of motion filed on 8 May 2014 for leave to amend the cross-claim. The proceedings were originally commenced on 11 May 2009 and defences to the statement of claim were filed shortly thereafter. The cross-claim was filed on 20 September 2010. 2The application to amend is supported by affidavits sworn by Chrystalla Georgiou on 7 May 2014 and Tamara Rabadi on 14 July 2014. Those affidavits set out the background to the application, to which some reference is necessary. 3Even though the proceedings were commenced in 2009, Momentum did not serve any evidence in support of its claim until it served an affidavit affirmed by Mr Gilbert on 23 July 2012. Equity Trustees did not do so until it served the affidavit sworn by Mr Fleming on 29 January 2013. The applicants served evidence, in the form of an affidavit from Mr Meehan sworn 18 September 2013, at or about the date it was sworn. Momentum served an affidavit in reply affirmed by Mr Gilbert on 8 April 2014. Equity Trustees have served no evidence in reply. 4Correspondence from Levitt Robinson on 14 April 2014 raised the prospect of an amended cross-claim and furnished the solicitors for Momentum and Equity Trustees with what was proposed. Consent to the filing of the document was not given by 7 May 2014 when the present application was filed. Subsequent correspondence among the parties led the applicants to vary the form of their proposed amended cross-claim but agreement about it was never reached. 5The proceedings have not yet been given a hearing date. None appears imminent. The proposed amendments are said not to raise new factual matters but are based upon and arise out of evidence already served by the parties so far. The applicants contend that their amendments simply raise additional sources of legal power authorising the Court to grant differently characterised alternative relief. 6By way of contrast, Momentum contends that some of the amendments purport to plead causes of action that are barred by operation of statutory limitation periods. They also dispute the contention that the amendments are based only upon evidence that has already been exchanged, or that they will not generate additional evidence from any party. (The applicants have in fact conceded that some evidence in reply may become necessary by reason of the matters that they now seek to include in the cross-claim). 7Momentum and Equity Trustees also point to deficiencies in the form of the proposed pleading. In particular, complaint is made about the failure of the unconscionable conduct section commencing at paragraphs 83 to 86 to identify with precision the facts and circumstances said to support the allegations. 8The applicants have included a claim based upon an alleged failure to sell the property as a mortgagee in possession in breach of s 85 of the Property Law Act 1974 (Qld) and s 420A of the Corporations Act 2001. As the property has not yet been sold, this claim is novel. Momentum and Equity Trustees contend that it is doomed to fail. Disposition 9These proceedings have been around for some time. The proposed amendments do not appear likely to disrupt the glacial progress they have so far generated. Although it is not a matter that attracts the same significance as it once did, there is no evidence of any substantive or procedural prejudice that would be occasioned if the amendments were allowed. There is on the contrary some prospect that the applicants would be denied an opportunity to litigate all relevant issues in the proceedings if the amendments were refused. On balance, the question of countervailing prejudice favours the grant of leave. 10There may in due course be some merit in the limitation defences but the trial judge will be better placed to adjudicate upon them. I am otherwise disinclined to put the applicants out of court at this stage upon the assumption that the defences must succeed. 11I have considerable doubt about the claims that there has been a breach of any duty to sell by a mortgagee in possession when the property is yet to be sold. Even if the statutory provisions relied upon supported such a case, the applicants remain protected until such time as the property is sold, and such a sale would appear by definition to be necessary before any quantification of alleged losses arising from the putative breaches could be reliably assessed in any event. It is also a claim that is bound to be based to a considerable degree upon additional evidence that no one has so far contemplated. That is likely to include both lay evidence as well as evidence from expert valuers and real estate agents. There is little doubt that its inclusion in any amended cross-claim would also be associated with significantly increased costs. It is highly likely as well to delay the already well overdue hearing of the proceedings. 12The unconscionable conduct case suffers from the deficiencies that have been identified by Momentum and Equity Trustees. It should be repleaded if it is to be permitted at all. Conclusion 13In my opinion the applicants should be granted leave on terms to replead their cross-claim. The following orders should be made: (1)Subject to orders (2) and (3) below, grant leave to Mr Meehan and Ezcape Street Projects Pty Ltd to amend the cross-claim in the form of the document attached to their submissions filed on 3 June 2014 in support of the application to amend. (2)Refuse leave to amend to include a claim alleging a breach of duty by a mortgagee in possession to sell the property at or for not less than its market value. (3)Order that paragraphs 83 to 86 of the proposed amended cross-claim be struck out but grant leave to Mr Meehan and Ezcape Street Projects Pty Ltd to replead those paragraphs in accordance with the rules if so advised. (4)Order that Mr Meehan and Ezcape Street Projects Pty Ltd pay the costs of this application to amend. (5)Grant liberty to apply on 7 days' notice in respect of these orders. (6)Otherwise stand the proceedings into the Registrar's list for directions on 4 August 2014. ********** 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: 24 July 2014