Supreme Court New South Wales Medium Neutral Citation: Perpetual Trustee Company Ltd v Nomak Holdings Pty Ltd [2014] NSWSC 1760 Hearing dates: 03/12/2014 Decision date: 19 December 2014 Jurisdiction: Common Law Before: Garling J Decision: (1) Notice of Motion of 16 July 2013 dismissed. (2) Order Ms Batiste to pay the costs of Perpetual Trustee Company Ltd. Catchwords: PROCEDURE - civil - judgments and orders - set aside judgment; application to -Uniform Civil Procedure Rules 2005, r 13.15 - judgment and orders made irregularly, illegally or against good faith, whether - consent judgment - consent conditional, whether - conduct of plaintiff against good faith, whether - delay - principle of finality - COSTS - costs in the cause Legislation Cited: Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005 Cases Cited: Burrell v R [2008] HCA 34; (2008) 238 CLR 128 Coles v Burke (1987) 10 NSWLR 429 Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd (1994) 8 BPR 15,581 Kendell v Carnegie [2006] NSWCA 302; (2006) 68 NSWLR 193 Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 Perpetual Trustees Australia Ltd v Heperu Pty Ltd (No.2) [2009] NSWCA 387; (2009) 78 NSWLR 190 Shirriff v Nominal Defendant [1999] NSWCA 152 Ultimate Property Group Pty Ltd v Lord [2004] NSWSC 114; (2004) 60 NSWLR 646 Category: Principal judgment Parties: Perpetual Trustee Company Ltd (P) Nomak Holdings Pty Ltd (D1) Donna Batiste (D2) Representation: Counsel: D C Price (P) In person (D2) Solicitors: Gadens Lawyers (P) File Number(s): 1234 Publication restriction: N/A Judgment 1On 16 June 2009, Perpetual Trustee Company Ltd ("Perpetual") commenced proceedings claiming possession of land at Darlinghurst owned by the first defendant, a company, Nomak Holdings Pty Ltd ("Nomak"). As well, Perpetual claimed monetary judgments against Nomak and the second defendant, Ms Donna Batiste. 2Perpetual's claim is set out in an Amended Statement of Claim which was filed on 6 July 2009. Ms Batiste was at all material times the sole director and shareholder of Nomak. 3On 16 July 2009, Ms Batiste filed a Defence on behalf of herself and Nomak, in which she asserted that the loan made by Perpetual amounted to "asset lending" and that at all relevant times Perpetual knew that the only way the loan could be repaid was by sale of the property which was Ms Batiste's residence. Ms Batiste (and Nomak) denied that any monies were due and owing as claimed. 4Ms Batiste also filed with the Defence her own affidavit sworn on 16 July 2009. It included evidence to the effect that she had been incapacitated after being hit by a motor vehicle whilst she was crossing the road. No other details were provided about her accident, her injuries or the nature and extent of her incapacity. 5On 9 September 2009, Perpetual filed a Notice of Motion seeking summary judgment or, alternatively, that the Defence be struck out and default judgment entered in the absence of a defence. 6The Motion was adjourned on a number of occasions until it came before the Court on 1 February 2010. On that day, the Court made orders by consent which disposed of the proceedings. A consent judgment was entered against Nomak, in favour of Perpetual, for possession of the Darlinghurst property. A Writ of Possession was subsequently issued. 7The consent judgment of 1 February 2010 included an order that each of Nomak and Ms Batiste pay Perpetual the sum of $628,478.26 as at 3 June 2009, plus interest, charges and costs to the date of payment. 8On 27 June 2013, Perpetual caused a Bankruptcy Notice to be served on Ms Batiste. It claimed a total outstanding debt of $121,506.97, which was the balance outstanding after a credit of $543,882.18 was allowed against the original judgment sum. It appears that this credit represented the net proceeds of sale of the Darlinghurst property. 9On 16 July 2013, which was over three years after the monetary judgment was entered by consent in favour of Perpetual, Ms Batiste filed a Notice of Motion in this Court seeking an order setting aside that judgment: "... due to the mortgagors breach of their duty of care &good faith &irregular conduct in the sale of the property" (sic) 10This Motion was accompanied by an affidavit sworn on 11 July 2013. From the contents of that affidavit, Ms Batiste set out the following facts: (a)She was the guarantor of a loan made to Nomak by Perpetual; (b)During the period of the loan, neither Nomak nor she could make the loan repayments in accordance with the loan requirements; (c)Prior to February 2010, she made arrangements to sell the property, before it was repossessed, so that she could pay out the loan from the proceeds of sale; (d)The sale which she arranged could not be completed within a time period which was satisfactory to Perpetual; (e)Perpetual brought proceedings to enforce its rights and obtain possession of the property; (f)Due to her illness, unemployment, injuries and disabilities she has not made any repayments on the loan; (g)She felt "coerced" to enter into the consent judgment; (h)She believes that the sale of her apartment was accompanied by irregular conduct of an unspecified kind which resulted in the sale of the property at an undervalue; and (i)She was an aged pensioner, who had no assets or capacity to pay the judgment. 11On 19 September 2013, pursuant to an order of the Court that she file any further evidence upon which she relied, Ms Batiste filed a further affidavit. The affidavit commences with the stated intention that Ms Batiste wanted the judgment overturned or set aside: "... so that I am given a fair and reasonable opportunity to challenge the alleged debt so that I will not be bankrupted and to be able to call and cross examine witnesses in my defense, and to provide further material evidence to the Court." (sic) 12Ms Batiste's affidavit concentrated on the events and circumstances surrounding her attempt to sell the property through the real estate agent whom she had appointed, the events and circumstances surrounding the ultimate marketing of the property by the real estate agent appointed by Perpetual to sell the property, and the sale of the property. 13In short, Ms Batiste contends that she would have been able to successfully sell the property for $650,000 had Perpetual, through its appointed agent, cooperated with her in respect of that sale. She adduces evidence that ultimately the property was sold for $620,000 by Perpetual which, she asserts, was an inappropriate sale at less than the property market price. 14She also contends that at the time she agreed to the consent judgment, Perpetual - or an agent on its behalf - had induced her to agree to the judgment (in February 2010) on the basis that Perpetual would allow her a "fair and reasonable time to sell the property". 15The affidavit annexes various documents which establish the following: (a)that the property was offered for sale by public auction on 15 July 2010 - that is five and a half months after the consent judgment, having been marketed by Perpetual's agent for a four week period; (b)that possession of the property was not in fact taken by Perpetual until sometime after 17 May 2010 and probably in the first week of June 2010, that is, about four months after the consent judgment was entered; (c)that the only offer upon which Ms Batiste was relying to sell the property for $650,000 was not a firm, nor an unconditional, one. In an email of 17 May 2010, from Ms Batiste to Perpetual's then agent, Pepper Home Loans, the terms of the buyer's offer was sent to Pepper Home Loans. It was in these terms: "I remain very keen. So would be grateful if you could please: ● email my lawyer (Grant) the draft agreement and strata report to review; ● see if we can get another week for me to get my finance into place; ● advise if the seller would accept $650K running the numbers with lower rent (from its current state) does not support $675K." This seems to me to be a negotiating stance rather than a firm offer. Even if it was to be regarded as an offer, it was highly conditional, there was no certainty or even probability that agreement would have been reached. No other purchaser was ever identified. (d)that the sale of property was completed by a settlement which took place on 19 August 2010. Ms Batiste was informed shortly after that settlement that the shortfall was $203,842.42. By email of 4 February 2011, she told Perpetual's agent that she was not sure that this was the correct amount, and that she thought that: "When the property was repossessed the figure was around $100,000" (e)that on 23 February 2011, Kemp Strang, the lawyers for Perpetual, notified Ms Batiste that Perpetual accepted her proposal to resolve the outstanding debt by payment of $75,000 in three equal sums over the following 12 months - with the payments of $25,000 due in June 2011, September 2011 and January 2012. Ms Batiste acknowledged her agreement in writing on 7 March 2011 to this arrangement. No such payments were ever made. 16The Notice of Motion filed on 16 July 2013 came before the Court for directions on a number of occasions and was ultimately listed for final hearing before the Registrar on 29 November 2013. 17On 26 November 2013, by email, Ms Batiste sought an adjournment of one week due to an unspecified "medical problem". She was informed by return email that such an adjournment would not be granted and that if she wished to persist in the application a medical certificate would be required. Perpetual informed Ms Batiste that it would not consent to an adjournment of the hearing of the Motion. 18By a further email on 28 November 2013, Ms Batiste renewed her application for an adjournment and submitted further proposed orders. No medical certificate was provided. Her request was declined by the Registrar, who informed her that the matter remained listed for hearing on the following day. 19On 29 November 2013, when the matter was called, Ms Batiste did not appear and the Registrar made orders dismissing the Motion filed on 16 July 2013 and ordered Ms Batiste to pay Perpetual's costs. 20On 5 December 2013, Ms Batiste filed a Notice of Motion seeking a review of the orders made by the Registrar on 29 November 2013. She filed an affidavit in support of the Motion on that day. 21On 25 June 2014, Price J made orders, by consent, setting aside the orders of the Registrar of 29 November 2013. He also ordered, in effect, that Ms Batiste's original Notice of Motion of 16 July 2013 be heard afresh and determined. 22Accordingly, this judgment deals with Ms Batiste's Motion of 16 July 2013 to set aside the consent judgment entered on 1 February 2010. 23In addition to the evidence previously described, Ms Batiste also relies upon an affidavit sworn on 28 November 2014. The substance of that affidavit relates to the content of a Notice to Produce dated 21 October 2013, which was apparently served in October 2013, requiring production of documents by 1 November 2013. 24As well, when the hearing of the Motion commenced, Ms Batiste sought to call upon a Notice of Motion in identical terms to the one which had previously been served, requiring production of a range of documents on Friday 28 November 2014. 25Counsel for Perpetual produced one document in answer to paragraph 7 of the Notice to Produce, and otherwise submitted that the Notice should be set aside for failure to comply with r 34.1(1) of the Uniform Civil Procedure Rules 2005 ("UCPR"). That rule permits a party to serve a Notice to Produce upon any other party requiring production to the Court of "... any specified document or thing". 26Perpetual submitted that the form of the Notice to Produce did not comply with this requirement because the terms of it required production of broad classes or groups of documents and did not adequately refer to a specified document. 27I ruled that the Notice failed to comply with r 34.1, and accordingly, by order, set aside the Notice. The reason for that order was the manifest non-compliance with the obligation upon the party serving the Notice to address it in terms which specify a particular document. Description of a class of documents or a range of documents does not fall within a Notice permitted by the rule. 28In addition to the affidavits upon which Ms Batiste relied, in the course of submissions made from the bar table, including in answer to questions from the Bench, Ms Batiste volunteered some further information. Having confirmed her submission that the original consent judgment was entered into as a result of the agreement of the solicitors for Perpetual to allow her a fair and reasonable time to sell the property, Ms Batiste gave a further factual account of that agreement. She said that the agreement, upon the basis of which she entered into the consent judgment, was one in which she was given a fixed period (to the best of her recollection of between six and eight weeks) to arrange for the sale of the property; that she had not done so during that period; she had sought and been granted an extension of that period; and that when she communicated, by the email of 17 May 2010 to which I have earlier drawn attention, the offer of the then proposed purchaser, she was seeking a further extension of time to enable the sale to go ahead; and that both the further request for an extension of time and the offer had been rejected by Perpetual. 29Ms Batiste also acknowledged that her entry into the agreement in March 2011 to repay Perpetual the sum of $75,000, reflected a sum of money that she had negotiated which, on her view, represented the sum which she thought was outstanding under the loan less an adjustment in the sale price of the property to reflect the $30,000 price difference between the offer that she wished to accept and the price obtained at public auction. She accepted that this was the sum that she contended was properly due. 30When asked whether there was any evidence that explained the delay between the entry of consent judgment and filing of the Motion in July 2013, in addition to the period occupied up until August 2010 when the sale of the property was completed, Ms Batiste pointed to negotiations which had taken place resulting in the agreement of March 2011, and that in 2012 she had made a complaint against Perpetual to the Financial Ombudsman Service, which had in turn been referred by them to the Credit Ombudsman Service. She also said that shortly after the Credit Ombudsman Service had finalised her complaint, without any relief for her, Perpetual, by its solicitors, had served her with a Bankruptcy Notice, and that she had brought the Notice of Motion to set aside the judgment in order to avoid the consequences of the Bankruptcy Notice. 31In the course of her submissions, Ms Batiste characterised the purchaser whose offer I have referred to earlier, as being a genuine purchaser who was apparently an investor who worked for a bank in either South Australia or Western Australia (she referred to both States), and who, had Perpetual's agent agreed to an extension of time and to accept the price, would have gone ahead with the purchase. 32Perpetual opposed the relief sought in the Notice of Motion. Applicable Rules 33Division 4 of Pt 36 of the UCPR provides the basis for setting aside judgments. 34Rule 36.15 is in the following form: "36.15 General power to set aside judgment or order (1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith. (2) A judgment or order of the court in any proceedings may be set aside by order of the court if the parties to the proceedings consent." 35Because of the passage of time between when the consent judgment was entered and the application to set it aside was filed, r 36.16 has no application. It is not suggested that rr 36.17 or 36.18 have any relevance to this application. Principles of Law 36In order to succeed, Ms Batiste must show that the consent judgment was made "... irregularly, illegally or against good faith". Here the central question is whether it was made "... against good faith". 37In Coles v Burke (1987) 10 NSWLR 429, Kirby P, with whom Samuels and McHugh JJA agreed, considered the phrase "irregularly, illegally or against good faith", in the context of a District Court rule. There is no reason to think that there is any difference in the interpretation of the phrase in the rule which is here applicable. Kirby P said at 437: "The genus which is involved in the phrase "irregularly, illegally or against good faith" appears to be me to be misconduct or dishonourable conduct of the person who procured the judgment which it is suggested undermines the authority of that judgment warranting the exceptional course for which [the rule] provides." 38The Court of Appeal further considered the phrase in Kendell v Carnegie [2006] NSWCA 302; (2006) 68 NSWLR 193. Again the Court of Appeal was considering a District Court Rule but as was noted, r 36.15 of the UCPR is in very similar terms. The principles applicable are, in my view, the same. 39At [52], Bryson JA, with whom Hodgson and McColl JJA agreed, expressed his agreement with observations made by Fitzgerald JA in Shirriff v Nominal Defendant [1999] NSWCA 152 where his Honour had said the following: "[19] ... I do not consider that the passage last quoted is intended to express a general principle that, whenever it would be contrary to good faith for a party to attempt to retain the benefit of an order, that order must have been made against good faith. For example, a matter arising subsequent to an order, or fresh evidence which could not have been obtained with proper diligence prior to the order, might make it unjust for a party to retain the benefit of the order, but would not mean that the orders was 'made ... against good faith'. ... [21] Roach did not question the correctness of this Court's earlier decision in Coles v Burke. Kirby P, with whom McHugh JA and, materially, Samuels JA agreed, expressed the opinion that the phrase 'against good faith' was concerned with 'misconduct or dishonourable conduct of the person who procured the judgment which it is suggested undermines the authority of that judgment ..." (references omitted) 40In [52] of Kendall, Bryson JA went on to say: "...the reference in Roach ... to unconscionability in later relying on a judgment which had been entered up as a result of a mistake, is not in my respectful opinion authorised by the terms of [the rule], which relates to good faith to the circumstance in which the judgment was given, and does not extend to lack of good faith in reliance on the judgment at some later time." 41Later in the judgment at [60], his Honour said: "There is not and could not, I would think, ever be an exhaustive judicial definition of what is against good faith; only very broad limits are set by proceeding by analogy from circumstances in which judicial remedies are based on good faith, unconscionability, or other concepts closely related to good faith ... 'Against good faith' is an expression which requires the impeachment of the intention or behaviour of the person whose good faith is impugned." 42The proper application of the rule means that even if the Court is satisfied that the judgment was obtained against good faith, sufficient cause must be shown before the Court will exercise its discretion to set aside the judgment. 43When the Court exercises this discretionary power in accordance with the UCPR, it is obliged by s 56 of the Civil Procedure Act 2005 to have regard to the overriding purpose set out in s 56(1) of that Act. 44As well, in considering whether to exercise the discretion to set aside a judgment, even one entered by consent, it is essential to recognise the need for the finality in judgments of the Court. This is, as Bryson JA said in Kendall at [45], one way in which the Court protects judgments from being set aside "... for slight or uncertain causes". 45The High Court of Australia said in Burrell v R [2008] HCA 34; (2008) 238 CLR 128 at [15]-[16]: "15. Secondly, it is important to recognise that underpinning consideration of the issues presented in this matter are fundamental principles about finality of litigation. As was said in D'Orta-Ekenaike v Victoria Legal Aid: "A central and pervading tenet of the judicial system is that controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances." That tenet finds reflection in rules concerning the bringing of an action to set aside a final judgment on the ground that it was procured by fraud and in doctrines of res judicata and issue estoppel. The principal qualification to the general principle of finality is provided by the appellate system. But in courts other than the court of final resort, the tenet also finds reflection in the restrictions upon reopening of final orders after they have been formally recorded. 16. The third consideration of principle which it is necessary to state at the outset is related to the second. It is that the principle of finality serves not only to protect parties to litigation from attempts to re-agitate what has been decided, but also has wider purposes. In particular, the principle of finality serves as the sharpest spur to all participants in the judicial process, judges, parties and lawyers alike, to get it right the first time. Later correction of error is not always possible. If it is possible, it is often difficult and time-consuming, and it is almost always costly." (references omitted) 46The Court of Appeal in Perpetual Trustees Australia Ltd v Heperu Pty Ltd (No.2) [2009] NSWCA 387; (2009) 78 NSWLR 190 identified some principles which it is appropriate to ensure are applied. These principles include: (a)That controversies once resolved are not to be reopened except in a few narrowly defined circumstances: [32]; (b)A power to reopen proceedings such as that conferred by r 36.15 of the UCPR, is to be narrowly confined and sparingly exercised: [33], [45]; (c)The power provided for in r 36.15 is based upon conduct which resulted in the entry of the judgment itself, and not on the merits of the judgment or conduct of proceedings prior to the entry of judgment: [16]; (d)Rule 31.15 of the UCPR can only have limited application to judgments or orders made or entered after a hearing on the merits: [17]. Discernment 47I am wholly unpersuaded that the consent judgment was entered into "... against good faith". 48The contention of Ms Batiste is that the judgment was entered into subject to a condition, namely, that she should be given either a specified time, or perhaps a reasonable time, to sell the property prior to possession being taken by Perpetual. 49On any view, her complaint with respect to the inadequacy of time relates to circumstances which arise well after the judgment was entered. There is simply no evidentiary basis for a finding that the conduct of Perpetual, or its lawyers, leading up to the entry of the consent judgment is capable of being impeached. There is no evidence from which I can draw any intention on the part of those who entered into this agreement to do anything other than comply with such an agreement. 50As well, no such suggestion was ever made contemporaneously with the taking of possession by Perpetual and the sale. It is true that Ms Batiste insisted upon a public auction sale, and insisted upon Perpetual obtaining a proper price for the property. None of this constitutes any basis to suggest that the judgment obtained some months before, was obtained against good faith. 51There are further reasons as to why this judgment should not be set aside. The first is that the evidence of the agreement is most imprecise. Ms Batiste contends variously that the agreement was to give her a fixed time or, alternatively, a reasonable time. There is no evidence that the time allowed, namely, four months, as a minimum, was an unreasonable time. Indeed, having regard to the fact that the evidence suggests that a marketing period engaged in by Perpetual was of the order of four weeks, it is hard to see that there could be any suggestion that four months did not constitute a reasonable time for the sale of the property. 52Secondly, the offer upon which Ms Batiste relies as being the basis for her complaint that she ought to have had a further opportunity to have engaged in the sale was not, upon examination, an offer capable of acceptance. I have earlier set out the terms of the offer. It was at best, in my judgment, a negotiating stance and not one which could have been accepted, nor one which necessarily would have resulted in a sale of the property in the reasonably foreseeable future. 53Thirdly, there is little if any satisfactory explanation in the evidence, or even in the submissions taken at their highest, which would provide a reason for a court after many years to permit a judgment to be set aside and the proceedings reopened. After the passage of many years, good cause would need to be shown to explain the delay and allow the Court to proceed further. Such explanations as have been proffered do not approach a sufficient cause to set aside the judgment. 54Fourthly, the property has been sold and all that remains in dispute between the parties is whether the sale of the property, which occurred in 2010, was undertaken by Perpetual or its agents in circumstances which realised an appropriate price for the property. A mortgagee exercising its power of sale is obliged to act in good faith: Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676. 55As Young CJ in Eq put it in Ultimate Property Group Pty Ltd v Lord [2004] NSWSC 114; (2004) 60 NSWLR 646: "26. In my view, authority compels me to say that there is no common law duty in negligence on a mortgagee in New South Wales which makes a mortgagee liable in common law damages if he fails to get a good price for the mortgaged property. ... 38. The duty is a duty to act conscionably towards the mortgagor and persons under the mortgagor. The duty is not to be considered in some mechanical way, but the whole of the mortgagee's conduct with respect to the sale is to be considered. The mortgagee may, up to a point, act solely in its own interests, but it must also act conscionably towards the mortgagor and those claiming under the mortgagor. ... 40. Indeed, it is a fundamental principle in the textbooks that mere inadequacy in the price obtained and the value will not normally of itself be sufficient for a mortgagor to upset a purported sale ... ." 56Young CJ in Eq expressly approved of the following extract from the decision of McClelland CJ in Eq in Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd (1994) 8 BPR 15,581 at 15,583: "... in exercising its power of sale, a mortgagee must act in good faith, which involves an obligation to deal fairly with the interests of the mortgagor, which in turn involves an obligation to refrain from acting in wilful or reckless disregard of those interests. ... Any departure from reasonable standards must be so serious as to be properly characterised as unconscionable, in order to render the mortgagee accountable. If a failure by a mortgagee to take reasonable steps to obtain a proper price is sufficiently serious to be characterised as unconscionable as that expression is understood in equity, then in the taking of accounts between the mortgagee and mortgagor, the mortgagee will be accountable on the basis of wilful default for the price which would have been obtained if the mortgagee had not been guilty of unconscionable conduct." 57The difference in price between what Ms Batiste contends should have been obtained ($650,000) and what was obtained after the property was offered for sale by auction ($620,000) is less than five per cent of the total. Whilst examination of conduct is not a matter of mere numbers and percentages, there is nothing immediately apparent about this sale which in any way suggests that the mortgagee's conduct has been so serious and so derelict as would give rise to a proper basis for complaint. 58Fifthly, the relief sought is inappropriate. Ms Batiste accepts that on any view of the calculation of sums outstanding to Perpetual, she owed it money. Her March 2011 agreement to pay Perpetual the sum of $75,000 itself acknowledges her indebtedness to Perpetual. Yet the relief she seeks is to set aside the monetary sum judgment which has been obtained, and to be allowed to defend the entirety of the proceedings. She has no good defence to the claim for possession or for a monetary judgment. At best she seeks to complain about the sum of the judgment in those circumstances, it is not appropriate to set aside the judgment. 59Finally, as a matter of discretion, in circumstances where Ms Batiste had a fair and proper opportunity to sell the property and had been offered and accepted a fair and reasonable settlement of her indebtedness, which included being allowed to repay that indebtedness over an extended period of 12 months and without additional interest, it is neither in the interests of justice nor is it fair and just that she be allowed any further opportunity to deal with the proceedings and the underlying debt. Conclusion 60I am not satisfied that the Court should set aside the consent judgment which was entered into in these proceedings in the circumstances which I have described. It follows that the Notice of Motion of Ms Batiste must be dismissed. 61There is no reason why costs ought not follow the event. Orders 62I make the following orders: (4)Notice of Motion of 16 July 2013 dismissed. (5)Order Ms Batiste to pay the costs of Perpetual Trustee Company Ltd. ********** 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: 19 December 2014