Supreme Court New South Wales Medium Neutral Citation: Westpac Banking Corporation v Kekatos [2014] NSWSC 1802 Hearing dates: 22 September 2014 Decision date: 19 December 2014 Jurisdiction: Common Law Before: Hamill J Decision: 1) Judgment for the plaintiff against the third defendant in the sum of $19,326,288.75. 2) The third defendant is to pay the plaintiff's costs of the proceedings and the costs of and incidental to the notice of motion. 3) The application for summary judgment against the first defendant is refused. 4) The application for an order for possession of land in folio identifier 5/16538 is refused. 5) The application to strike out the amended defence is refused. 6) The application to strike out the first defendant's amended cross-claim is refused. 7) The first defendant has leave to file a further amended grounds of defence in the form filed in court on 22 September 2014 and marked exhibit A2 on the motion. 8) The first defendant is to pay the plaintiff's costs of and incidental to the notice of motion. Catchwords: CIVIL LAW - summary judgment - judgment for possession of land - where loan used to discharge pre-existing mortgage - liability for principal sum - right of mortgagee to possession - where borrower disputes validity of original mortgage Legislation Cited: Competition and Consumer Act 2010 (Cth) Schedule 2-The Australian Consumer Law Contracts Review Act 1980 (NSW) Federal Court of Australia Act 1976 (Cth) Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: ANZ v Fink [2013] NSWSC 1781 Bank of Australia v ZYX Learning Centres Limited [2014] NSWSC 1676 Bank of Western Australia v Tannous [2010] NSWSC 1319 Collier v Lancer (No 2) [2013] NSWCA 186 Collier v Moreland Finance Corporation (1989) 6 BPR 13, 337; [1989] ANZ ConvR 515 Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561 Dey v Victorian Railway Commissioners [1949] HCA 1; 78 CLR 62 First Mortgage Managed Investments Pty Limited v Pittman [2014] NSWCA 110 General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 Inglis v Commonwealth Trading Bank [1972] HCA 74; 126 CLR 161 Nibar Investments v Manikad Pty Ltd [2014] NSWSC 920 Simmons v Henwood [2013] NSWCA 184 Spencer v The Commonwealth [2010] HCA 28; 241 CLR 118 St George Bank Ltd v Trimarchi [2004] NSWCA 120 State of New South Wales v Williams [2014] NSWCA 177 Wilby v St George Bank [2001] SASC 388; 80 SASR 404 Category: Interlocutory applications Parties: Westpac Banking Corporation (Plaintiff) Vicki Kekatos (First Defendant) Bronte Properties Pty Limited ACN 127 369 359 (Second Defendant) Jerry Kekatos(Third Defendant) Representation: Counsel: P Reynolds (Plaintiff) Rodgers (First Defendant) A Chee (Third Defendant) Solicitors: Gadens Lawyers (Plaintiff) Ronayne Lawyers (First Defendant) Dib Lawyers (Third Defendant) File Number(s): 2013/370509 Publication restriction: Nil Judgment 1This is an application for summary judgment by the plaintiff against the first and third defendants. The case arises from a series of loan transactions between the plaintiff and the defendants and in relation to guarantees provided in respect of those loan agreements. The loans and guarantees were secured by registered mortgage. 2At the hearing of the matter the third defendant, represented by counsel, sought to make no submission against the order sought by the plaintiff and, when pressed, did not oppose that order (T 43). That implied concession was properly made in view of the lack of substance to the defence filed by the third defendant. Apart from a bare assertion of a lack of indebtedness to the plaintiff, the third defendant's defence otherwise admits the contracts and debts and provides no basis upon which it could be said that the debt is not due. Accordingly, I will make orders against the third defendant in the terms sought by the plaintiff. 3In respect of the first defendant, the plaintiff seeks a variety of orders some of which are cast in the alternative. It seeks summary judgment in respect of money it says the first defendant owes, an order for possession of the real property subject of the mortgage and, in the alternative, the striking out of parts or all of the first defendants defence and cross-claim. 4The plaintiff asserts that there is no dispute that loans were offered, that the first defendant had the benefit of those loans, that the loans were secured by a registered mortgage and that there has been default in repayment of the loans. At the very least, it contends that even if there is any merit in the first defendant's contention that she has a legitimate cross-claim pursuant to the provisions of the Contracts Review Act 1980 (NSW), Trade Practices Act 1974 (Cth), Competition and Consumer Act 2010 (Cth) Schedule 2-The Australian Consumer Law or at law, the fact remains that the bank is entitled to the principal sum and to possession of the property. 5The first defendant contends that there is, at least, an arguable case that the defence and cross-claim would not only impact on the amount of indebtedness but also goes to the enforceability of the mortgage. 6The plaintiff commenced proceedings by a Statement of Claim on 9 December 2013. On 31 January 2014 it sought default judgment as there had been no response from the first, second or third defendants. Default judgment was entered. On 4 February 2014 the plaintiff brought a Notice of Motion seeking a writ for possession of certain land subject of a mortgage. A writ of possession was issued on 10 February 2014. On 27 March 2014 and 2 April 2014 respectively, the first defendant sought orders setting aside the default judgment and staying the execution of the writ of possession. By consent on 16 April 2014, the Registrar made those orders along with a number of directions as to the filing of the defence, cross claim and the defence to the cross-claim. 7The first defendant filed a defence on 1 May 2014 and a cross claim on around the same date. On 13 August 2014 she filed an amended defence and cross-claim. On the hearing of the matter, represented by counsel who was retained only the week before, she sought to file a further amended defence. The plaintiff seeks (in the alternative to summary judgment) an order that the amended defence be struck out and objects to leave being granted for the first defendant to rely on the further amended defence. 8In support of the applications to set aside the default judgment and to stay the execution of the writ of possession, the first defendant filed an affidavit sworn on the 26 March 2014 and filed on 2 April 2014. She was also required (and did) swear to the truth of the allegations of fact contained in the cross claim, amended statement of cross-claim, the defence and amended defence. In filing the further amended defence, the third defendant sought to read an affidavit sworn 22 September 2014. In pursuing its application for summary judgment, the plaintiff places some reliance on the fact that a number of the assertions in the sworn documents of the first defendant are inconsistent. Some of those inconsistencies relate to whether or not she had signed certain mortgage documents. The affidavit of 26 March 2014 was read on the hearing of this application although a particular paragraph [13] was both objected to and not pressed. Because that paragraph formed part of the plaintiff's case concerning the inconsistency as to whether the first defendant signed various documents, I admitted paragraph [13] but only on that limited basis. 9The plaintiff read an affidavit of Michael Grace sworn 2 September 2014. Mr Grace is a senior manager in the employ of the plaintiff and he produced as an exhibit to his affidavit two volumes (814 pages) of material ("MG"). At the hearing of the Notice of Motion the first defendant also sought to file in court a further amended defence and an affidavit sworn 22 September 2014. The plaintiff objected to those documents although it did not ultimately oppose leave being granted for the documents to be filed in court. However, it indicated its objection to the first defendant being permitted to amend her defence again. Rather than becoming bogged down on that issue, I resolved to admit those documents as exhibit A1 and A2 and to determine the question of whether the first defendant should be allowed to further amend her defence in the context of determining whether or not the application for summary judgment should be granted and, if so, to what extent and on what terms. The history of the loan agreements 10Counsel for the plaintiff took me carefully through the documents which were annexed to Mr Grace's affidavit in order to establish the history of the loans and security over those loans. Briefly, the chronology is as follows: * On 17 January 2008 the plaintiff offered the first defendant three loan facilities ("the Kekatos facilities"). These were in the sums of $1,700,000, $800,000 and $500,000. The total amount of the facilities was therefore $3,000,000. (MG 1-8) * The proposed security was a registered mortgage by the first defendant over a residential property at 41 New South Head Road, Vaucluse. There was also a guarantee and indemnity provided by the second and third defendants. (MG 2) * The term of the loan was 5 years from the date of drawdown. (MG 4) * These facilities were renewed by offer dated 24 June 2011. (MG 46) * The new agreement provided that the agreement would expire on 3 March 2013. (MG 49) * The first defendant signed each of the letters of offer on a page entitled "acceptance by you". (MG 8, 53) * Each of the letters of offer was accompanied by "general standard terms" and booklets were also provided. (MG 10-45, 57-92, 93-125) * A search of the land title office showed that the first defendant was the registered proprietor of the land subject to the security arrangement offered in the letter of offer. Registered mortgage AD818655K and memorandum 9512212C secured the loan. (MG 126-128) * A registered mortgage AC767949 W dated 17 November 2006 between the first defendant as mortgagor and Perpetual Limited as mortgagee ("the Perpetual mortgage", MG 145) was discharged using the part (almost all) of the funds obtained through the Kekatos facilities. * The statements of four bank accounts show the use of the facilities and the funds contained therein. The statements show that from time to time money was drawn down and that in respect of each of the three facilities the balance remained the same from 3 March 2008 until 30 June 2013. (MG 146-499) * A bank statement for an account numbered 552851006 showed where the interest payments were accumulated and paid from 27 February 2008 until 1 March 2012. During that period, credits into that account roughly equated with the debits. The debits comprised the interest component of the three facilities. (MG 401-499) * As at 1 March 2012 there was a balance of $86.53 following a credit of $18,023.83 which was made on that date to cover interest that had accumulated over the previous month (MG 466). From 1 March 2012 until 30 June 2014 there were no further credit entries but the interest continued to accumulate as debit entries into that account. By 30 June 2014 there was a debit balance of $557,730. (MG 498). * At the same time the total amount of the Kekatos facilities remained the same, that is the amount of the principal sum originally advanced ($3,000,000). 11I break from recounting this chronology to note three matters raised by the first defendant in her defence, notice of cross-claim or affidavits. First, she says that the address on the bank statements (PO Box 2230 Burwood North) was the business address of the third defendant and that she did not have access to mail sent to that post office box. The post office box was also the address of the correspondence sending the original letters of offer preceded the setting up of the Kekatos facilities and the signing of the mortgage relating to them. Secondly, there is contradictory information concerning the first defendant's memory of whether she signed versions of the loan, mortgage and caveat documents. It seems that she does not dispute signing the mortgage documents relating to the Kekatos facilities. However, she appears to dispute the signature on the mortgage to Perpetual Limited (that is mortgage AC767949 W). Third, both letters of offer setting up the Kekatos facilities referred to recent discussions between the bank and the addressee on the letter (the first defendant). However, the first defendant denies having any discussions with the bank concerning the setting up of those facilities. 12I return to the summary of the material provided in the annexure to Mr Grace's affidavit: * There is evidence that on 27 February 2008 the Perpetual mortgage was discharged. The evidence includes a document setting out the cheques payable on discharge of that mortgage in varying amounts depending on the precise date of the transaction and transfer. (MG 500-502) * There is a series of letters of demand from the plaintiff's solicitors commencing 1 May 2013 with respect to the Kekatos facilities. (MG 507-509) * There is a default notice dated 30 August 2013 in respect of the Kekatos facilities in an amount of $3,007,222.26. (MG 512) * There is evidence of the guarantee and indemnity signed by the 3rd defendant but given his stance on the hearing of the application it is unnecessary to dwell on the details of his liability. (MG 527 ff) * There is evidence that the first defendant was the sole shareholder of the company (the second defendant) and that at some time she was an office bearer of that company. (MG 559) * The company's principal place of business was nominated as the same address as the property subject to the mortgage, that is 41A New South Head Road, Vaucluse. (MG 558) * On 27 February 2008 there is a letter of offer to Bronte Properties Pty Ltd for a "Commercial Bill/Acceptance Discount" in the sum of $10,025,000 (the Bronte facility). The letter opens with the words "Dear Vicki". (MG 588 ff) * That loan is secured by guarantees and indemnities in that amount given by the first and third defendant as well as another unlimited guarantee and indemnity by "Kekatos and Partners Pty Ltd". (MG 593) * There are also mortgages over a property in Waverley and the property in New South Head Road Vaucluse. (MG 593) * The letter of offer appears to be signed by the first defendant. (MG 600, 601, 602) * There is evidence that the Bronte facility was renewed or extended in 2011 and again on 29 February 2012. (MG 653) * Letters of demand in respect of the Bronte facility were sent on 15 May 2013 and 30 August 2013. (MG 800-813) The defence and cross-claim 13Including the document that became exhibit A2, the first defendant has filed three versions of her defence. The first was filed on 1 May 2014. An amended defence was filed on 13 August 2014 and the proposed further amended defence was filed in court on the hearing of this notice of motion on 22 September 2014. Each document substantially admits the debt but "relies on the matters pleaded in her cross-claim". A statement of cross-claim was filed on a May 2014 and an amended statement of cross-claim was filed on 13 August 2014. 14The significant alteration to the defence contained in the further amended defence was the addition of the following words to paragraph 4 (which otherwise effectively admits the plaintiff's case "but relies on the matters pleaded in her cross-claim"): "but in doing so [the first defendant] says that, in so far as the plaintiff advanced credit to the first defendant in accordance with the Kekatos Facilities, such moneys as were purportedly advanced to the First Defendant were advanced in circumstances where the first defendant: (a) Was unaware that such moneys were, or were purportedly, to be advanced to her; (b) Was unaware that moneys had been so advanced; (c) Did not at any time have the use or benefit of such moneys; in consequence of which the First Defendant is not liable to the Plaintiff in respect of the said moneys." 15The amended statement of cross-claim seeks relief "pursuant to the Court's general jurisdiction, section 7 of the Contract Review Act, section 87 of the Trade Practices Act or section 238 of the Australian Consumer Law." The relief sought is that the facilities, guarantees and mortgages are "void and unenforceable". 16The cross-claim goes on to plead and particularise the circumstances by which it is asserted that those equitable and legislative jurisdictions are invoked: "3. As at January 2008 through to July 2011: a. The cross claimant was the wife of the third defendant; b. The cross claimant was a house wife who cared for her three children and her infirm in-laws; c. Was experiencing troubles in dealing with her husband; d. Which manifest in verbal and emotional abuse from her husband; e. The cause of those troubles was friction within the family caused by the husband's brother causing the in-laws to lose their home. 4. At the same time she knew that her husband: a. Had named her a director of the second defendant; b. Wanted to pursue the development of land known as Wallace Street Bronte; and c. Needed finance to proceed with the development. 5. In order to proceed with the development of Wallace Street Bronte the Cross-Claimant's husband represented to her: a. That he would proceed to obtain finance without using Cross-Claimant's Family Home as collateral security; b. That the development of Wallace Street Bronte would not put at risk her Family Home; c. That she would incur no personal liability for the costs and liabilities of the development. 6. In January 2008 the husband telephoned the Cross-Claimant and asked her to go to an office in Alexandria to sign some documents. 7. The Cross-Claimant in response: a. Attended the office; b. Where one other person, who she does not know, other than her husband was present; c. Was given documents; d. Was told to sign the documents; e. Was not told what the documents were for beyond being told that the documents were for a loan being obtained by the second defendant with which to develop Wallace Road Bronte; f. Was told that the documents in no way put her Family Home at risk; g. Was not told that she was incurring personal liability for the repayment of the money borrowed to develop Wallace Street Bronte. 8. On being told to sign the documents the Cross-Claimant: a. Did not ask questions as she feared rebuke from her husband for questioning and demeaning him in front a stranger; b. Did not ask questions as she feared rebuke and marital discord at home; c. Signed because she took her husband's word that her home was not put at risk; d. Signed because she believed the documents were for a loan being obtained by the second defendant that was secured on Wallace Road Bronte and a property in her name at Burwood and which she was prepared to allow to be used a security because of the emotional pressure brought to bear upon her by her husband. 9. The documents signed were the Facility, Guarantee and Mortgage. 10. At no time before or at the meeting: a. Were the documents explained to her; b. Was the legal effect of the documents explained to her; c. Was she advised to consider, offered, or told to obtain independent legal and financial advice. d. Obtained or was given any financial or legal advice. 11. At the time of the meeting the Cross-Defendant knew that: a. The driving force behind the development was the third defendant; b. That the Cross-Claimant was, or might be, under the influence of the third defendant to the extent she was incapable or misguided in looking after her own interests; c. That it ought to ensure that the Cross-Claimant was entering into the Facilities, the Guarantee and the Mortgage of her own fully informed free will; d. That it ought to ensure that the Cross-Claimant knew the legal and financial ramifications of entering into the Facilities, the Guarantee and the Mortgage, particularly that she was incurring personal liability to pay $3 million and if the $3 million plus interest was not repaid to the Cross-Defendant her Family Home would be sold by the Cross-Defendant. 12. In the circumstances the process by which the Cross-Defendant came to obtain the obligations continued by the Facilities, the Guarantee and Mortgage is unconscionable and unjust inequity, under the Contract Review Act and section 51AA, and 51AC of the Trade Practices Act. 13. Accordingly the Cross-Claimant should be relieved of any obligations arising from the Facilities, Guarantee and Mortgage; a. On the basis that the Cross-Claimant makes restitution to the Cross-Defendant of any money applied to discharge any previously existing registered mortgage; or alternatively b. Without restitution on the basis of what is pleaded in paragraphs 14 to 17 below. 14. At the time the Cross-Claimant believed that the amount secured against the property was approximately $800,000 plus an amount of $1.8 million which was by way of a cross collateralised liability for the mortgage on title to the Burwood Property. 15. Had the Cross-Claimant been given any legal or financial advice she would have discovered: a. The amount secured on the property was $3 million plus the amount of the cross collateralised liability on the Burwood Property; b. That some person, most likely her husband, had obtained a loan on the Property for $2.5 million and to obtain the loan had signed a mortgage in favour of Perpetual Limited in registrable form which became registered. 16. Upon finding this out, the Cross-Claimant would have refused to allow her husband to proceed with the Wallace Street Bronte Development and would not have signed any documents. 17. Further she would have insisted that the Burwood Property be sold and that her Husband use the proceeds and other money available to him to discharge the mortgage in favour of Perpetual Limited. 18. Again, in the circumstances the process by which the Cross-Defendant came to obtain the obligation contained in the Facilities, the Guarantee and Mortgage is unconscionable and unjust within the meaning of equity, the Contract Review Act and section 51 AA of the Trade Practices Act. 19. Accordingly, the Cross-Claimant should be relieved of any obligations arising from the Facilities, Guarantee and Mortgage. 20. On or about 24 June 2011 the Cross-Claimant was asked by the third defendant to come and sign some documents. 21. The Cross-Claimant in response: a. Attended an office; b. Where one other person, who she does not know, other than her husband was present; c. Was given documents; d. Was told to sign the documents; e. Was not told what the documents were for; f. Was told that she would be told at home that night; g. Was not told that the documents were the Variation, and that the variation was to the Facilities, Guarantee and Mortgage. 22. On being told to sign the documents the Cross-Claimant: a. Did not ask questions as she feared rebuke from her husband for questioning and demeaning him in front a stranger; b. Did not ask questions as she feared rebuke and marital discord at home; c. Signed because it did not occur to her that the documents varied the Facilities, the Guarantee or Mortgage, of which she did not know the terms, and increased her personal liability to the Cross-Defendant and increased the amount payable to the Cross-Defendant secured on her Family Home. 23. The document signed was the Variation. 24. At no time before or at the meeting: a. Were the documents explained to her; b. Was the legal effect of the documents explained to her; c. Was she advised to consider, offered, or told to obtain independent legal and financial advice. d. Obtained or was given any financial or legal advice. 25. At the time of the meeting the Cross-Defendant knew that: a. The driving force behind the development was the Husband; b. That the Cross-Claimant was, or might be, under the influence of her Husband to the extent she was incapable or misguided in looking after her own interests; c. That it ought to ensure that the Cross-Claimant was entering into the Variation of her own fully informed free will; d. That it ought to ensure that the Cross-Claimant knew the legal and financial ramifications of entering into the Variation. 26. In the circumstances the process by which the Cross-Defendant came to obtain the obligations continued by the Facilities, the Guarantee and Mortgage is unconscionable and unjust in equity, under the Contract Review Act and sections20, 21 and 22 of the Australian Consumer Law. 27. Accordingly the Cross-Claimant should be relieved of any obligations arising from the Facilities, Guarantee and Mortgage brought about by the Variation." 17In paragraph 4, alternative relief is sought "declaring the indebtedness of the Cross-Defendant under the said facilities and mortgages to the Cross-claimant is the amount required as at 3 March 2008 to discharge the registered mortgage No 9928568". This is the pre-existing mortgage to Perpetual. In paragraph 13 of the "pleadings and particulars", the first defendant seeks relief of any obligations arising from the facilities "on the basis that [she] makes restitution to the [plaintiff] of any money applied to discharge the previously existing registered mortgage". 18These alternative forms of the relief and pleading recognise the principles derived from cases such as Inglis v Commonwealth Trading Bank [1972] HCA 74; 126 CLR 161, Wilby v St George Bank [2001] SASC 388; 80 SASR 404 and Collier v Moreland Finance Corporation (1989) 6 BPR 13, 337; [1989] ANZ ConvR 515. Those cases represent a particular manifestation of the requirement that a party seeking equity must do equity: Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561. There appears to be, in the alternative pleading, a recognition that the Court may hold that the first plaintiff cannot gain what was described on the hearing as a "$3 million windfall" (T 36) in circumstances where the loan money was applied to discharge the pre-existing Perpetual mortgage: cf ANZ v Fink [2013] NSWSC 1781; Nibar Investments v Manikad Pty Ltd [2014] NSWSC 920. 19The fact that the first defendant puts an alternative case does not resolve the issue on this application for summary judgment. She also contends in the cross-claim that she should be relieved of liability altogether. This appears to be on the basis that, while the money was applied to pay out the Perpetual mortgage, that mortgage itself was not actually executed or signed by her. Accordingly, it will be contended that she received no benefit in discharging the Perpetual mortgage because that mortgage was itself unenforceable: cf Bank of Western Australia v Tannous [2010] NSWSC 1319 at [33]-[34]. 20The plaintiff submits that the pleading is "embarrassing" because it essentially makes an allegation of fraud in relation to the Perpetual mortgage but the pleading is vague and without substance (T26). The defendant's evidence on the motion 21It is unnecessary to detail all of the evidence in the first defendant's affidavit dated 26 March 2014 other than to note the contents of paragraph 14: "14. The signature, which purports to be mine, on Mortgage AD 767949 is not mine. I do not know how and did not know until the commencement of these proceedings that 41A New South Head Road had been mortgaged to Perpetual Limited, or for the amount of $2.5 million. As at 2006 I believed that 41A New South Head Road was encumbered for the original amount borrowed and also for an amount to secure the borrowing on the Burwood property. I believed that the amount secured to repay the amount borrowed to secure the loan used to buy the Burwood Property did not put me at risk of losing my home as the sale of the Burwood Property would cover the amount owing." 22The plaintiff objected to the reading of this affidavit on this notice of motion on the basis that "there has been no indication that they [would] put any evidence on this motion". Counsel said that he "read it once upon a time, but I haven't read it for this purpose." 23The date of the affidavit, 26 March 2014, shows that it was filed in support of the notices of motion filed on 2 April 2014 and 27 March 2014. Those notices of motion sought respectively that the default judgment be set aside and the writ of possession then in existence be stayed. 24As I have said, the orders sought in those notices of motion were made by consent on 16 April 2014. The consent orders made by the Registrar included orders that the first defendant be granted leave to file its original defence and statement of cross-claim. The original cross-claim included the same alternative pleadings 13(a) of the pleadings and particulars. 25While both the defence and cross-claim that are subject to the current application are amended versions of the pleadings subject to the consent orders of 16 April 2014, it is a somewhat unusual feature of the case that the plaintiff consented to judgment being set aside on the basis of those pleadings (and that affidavit) and now seeks summary judgment on what is substantially the same defence and cross-claim. I do not suggest that this disentitles the plaintiff to make its application for summary judgment or that it is even a relevant consideration, but it is an unusual aspect of the chronology. 26The first defendant also relied on an affidavit of 22 September 2014, that is the morning that the motion was heard. It was marked as exhibit A1 along with the proposed further amended defence (Ex A2). That affidavit set out, amongst other things, the matters to which I made reference in paragraph [11]. The plaintiff also took objection to that affidavit. The objection was based on the fact that the plaintiff had no notice of it and that different counsel had indicated at a directions hearing that no evidence would be relied upon on the motion. The test for summary judgment 27The test for summary judgment is well established, although I recently considered (and rejected) an argument that the test was whether the action or defence had "reasonable prospects of success": Commonwealth Bank of Australia v ZYX Learning Centres Limited [2014] NSWSC 1676 at [47]-[70]. 28Spencer v The Commonwealth [2010] HCA 28; 241 CLR 118 was a case concerned with the relevant test under the Federal Court of Australia Act 1976 (Cth). In relation to the common law test, which is reflected in the Uniform Civil Procedure Rules ("UCPR"), French CJ and Gummow J said at [58]: "The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action or on the basis that the action is frivolous or vexatious or an abuse of process. The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this Court in Fancourt v Mercantile Credits Ltd said [48]: 'The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried.' More recently, in Batistatos v Roads and Traffic Authority (NSW) Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde which included the following: 'Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way. 29In Simmons v Henwood [2013] NSWCA 184 Emmett JA emphasised the stringency of the test to be applied at [95]: "Ordinarily a party should not be denied the opportunity to put his case before the court in the ordinary way, after taking advantage of available interlocutory processes. Before a party will be deprived of that opportunity, the court must have a high degree of certainty about the ultimate outcome of the proceeding, if it were to be allowed to go to trial in the ordinary way (see Agar v Hyde [2000] HCA 41; 201 CLR 552 at 575 - 576, [57]). The power to order summary dismissal should only be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried (see Fancourt v Mercantile Credits Ltd [1983] HCA 25; 154 CLR 87 at 99). The defendants have taken me to a number of recent authorities in the Court of Appeal where the Court made reference to and applied the decision of the High Court in Spencer (Collier v Lancer (No 2) [2013] NSWCA 186, State of New South Wales v Williams [2014] NSWSC 177)." See also Collier v Lancer (No 2) [2013] NSWCA 186 at [9]-[11] (Ward and Leeming JJA) and State of New South Wales v Williams [2014] NSWCA 177 at [71] (Emmett JA with whom Macfarlan JA and Simpson J agreed). 30It has been said that before proceedings are summarily disposed of the case must be "so obviously untenable that it cannot possibly succeed", "manifestly groundless" or "hopeless": see for example Dey v Victorian Railway Commissioners [1949] HCA 1; 78 CLR 62 at 91; General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 at 129. The application in the present case 31The failure of the defendants to respond to the initiating process filed in December 2013 resulted in some delay once the first defendant applied to have the default judgment being set aside. 32Further, the fact that the original loan was used substantially to pay out and discharge the Perpetual mortgage would ordinarily lead to the conclusion that any defence or cross-claim based on the Contract Review Act and similar provisions could not defeat the claim for the principal sum or impact on the plaintiff's right to possession of the land which secured the facilities through which that principle sum was advanced. As Adams J said in ANZ v Fink at [39]: "Spending the advances in this way was a matter entirely for the borrowers and was not brought about by ANZ lending them the funds which they sought: in no relevant sense could the advancing of the borrowed funds have been a detriment to the borrowers. Neither of these matters are capable, to my mind, of justifying relief under the Contracts Review Act which, on the assumption that the borrowers succeeded, would prevent ANZ from enforcing the loan agreements in respect of recovery of the principal sums." 33The same approach was taken by Davies J in Nibar Investments v Manikad where his Honour said at [13]-[17]: "The Defendant and Ms Angelou may well have arguments from the Contracts Review Act and principles of unconscionability that might afford some relief in limiting any monetary judgment against them. However, it does not seem to me that those arguments would serve to diminish the obligation of the Defendant to repay the $900,000 principal lent by the Plaintiffs. In Australian and New Zealand Banking Group Limited v Fink [2013] NSWSC 1781 Adams J was dealing with a Notice of Motion for summary judgment for possession where the principal sum advanced by the Plaintiff had been used to pay a prior mortgage. In those circumstances, Adams J held that to the extent of the payment of principal to the earlier mortgagee there could be no defence to the claim for summary judgment for possession. The position in the present case seems to me to be analogous. The $900,000 was advanced which enabled Defendant to complete the contract to buy the land. The Defendant retains the land. Further, the principle derived from Collier v Moreland Finance Corp (1989) 6 BPR 13, 337; [1989] ANZ ConvR 515 tends to support the proposition that there can be no defence to that part of the claim that relates to the principal sum. Mr Allen has directed my attention to what the Court of Appeal said in First Mortgage Managed Investments Pty Limited v Pittman [2014] NSWCA 110 at 187. But it does not seem to me that what is there said diminishes the point that the $900,000 that was advanced would be repayable in all circumstances. It may be that the Defendant and Ms Angelou will recover damages or will show an entitlement not to have to pay moneys over and above the $900,000. However, where they have the consideration of the land purchased for the $900,000 that principal sum must be repaid. That is not able to be done without the land being sold." 34However, the difficulty and distinction in this case arises from the fact that the first defendant seeks to establish that, even though the money advanced by the plaintiff was applied to pay out the existing loan, she may not have been under an obligation to pay that loan and so did not obtain the benefit of the money so advanced. This distinction was recognised by Davies J in Bank of Western Australia v Tannous where his Honour said at [32]-[35]: "Although it is a little difficult to discern, the claim made against FMA by the Defendants appears to be derived from the principle as expressed in such cases as Collier v Morlend Finance Corporation (Victoria) Pty Ltd (1989) 6 BPR 13,337; (1989) NSW ConvR 55-473 which ordinarily requires a borrower obtaining relief under the Contracts Review Act to give credit for any sums paid to discharge a pre-existing obligation of the borrower. The Cross-Claims alleging that the prior obligation, evidenced by the mortgage to FMA, was itself unjust seems to be a pre-emptive strike against Bankwest's calling in aid that principle to say that, at the very least, the Defendants should not have relief to the extent of $571,171. However, I consider that such an approach is misconceived. A consideration of what orders should be made and what relief is given to the borrower occurs at the second stage of the proceedings. The first stage is whether the contract was unjust having regard to the matters referred to in s 9: Mizzi v Reliance Financial Services Pty Ltd [2007] NSWSC 37 at [39] and the cases there cited. The second stage is said to be truly a discretionary power to be exercised if the Court "considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result": Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 at [109] per Basten JA. One of the considerations in the exercise of that discretion involves a consideration of any benefit that the borrowers obtained as a result of the unjust contract. That is why, in the ordinary case, the discharge of a pre-existing mortgage by the payment of part or all of the proceeds of the loan agreement held to be unjust would result in an order that ultimately required repayment of that sum to the new lender. However, that will not necessarily be so. If it can be shown that the pre-existing liability was itself unenforceable or unjust in whole or in part, the discretionary order made in respect of the unjust contract sued upon would take account of that unenforceability or that unjustness. To do so, there would be no necessity to join the prior mortgagee because no order or relief would be sought, nor would need to be sought, against that mortgagee. Because that loan agreement has been fully performed and discharged, and because any pre-existing mortgage has itself been discharged, there is no longer a justiciable issue between the borrower and the prior mortgagee/lender. No doubt the borrowers in such a case will lead evidence suggesting reasons that the pre-existing mortgage/loan agreement was unenforceable or unjust, and that the discharge of that arrangement by the incoming lender was not a benefit to the borrowers for that reason. One can envisage also that the incoming borrower may need to counter that evidence, by calling evidence from the outgoing mortgagee/lender to answer the claims of unenforceability or unjustness. But none of that justifies the joining of the outgoing mortgagee/lender, because it has no legal or equitable interest to protect." 35Davies J went on to discuss the case of St George Bank Ltd v Trimarchi [2004] NSWCA 120 in which the son of elderly migrant parents obtained a loan of around $2.6 million from National Mutual by forging their signatures and misrepresenting their financial position. He received the benefit of a loan secured against the parents' property. When he had difficulties repaying the loan, he persuaded his parents to sign the documents in relation to a loan from St George Bank for $2,675,000, $2.6 million of which paid out National Mutual. Mason P (with whom Sheller JA and Cripps AJA agreed) said at [21]-[25]: "The parties also joined issue as to the enforceability, in light of the Act, of the National Mutual transaction as regards the respondents. The perceived relevance of examining the unjustness of the 1994 transaction [with National Mutual] was that the appellant argued that its conduct could not be unjust within s 9 of the Act because it resulted in the respondents being discharged from their obligations to National Mutual. These were obligations as principal borrowers vis-à-vis National Mutual, whatever might be their rights of recoupment against their son, the principal debtor (Grounds B-C). Alternatively, it was argued that avoidance of the respondents' mortgages was an excessive and disproportionate remedy in so far as the respondents had obtained the discharge of the earlier mortgages. The direct relevance of the respondents' position vis-à-vis National Mutual to the issues joined between the present parties is not immediately apparent. Certainly, the fact that the St George money discharged the National Mutual debt is not conclusive (as the appellant contended: see Grounds B-C). The Act requires separate attention to be given to the transaction being sought to be enforced and the "justness" of that contract. Simply because the money advanced by St George went to discharge the earlier mortgage transaction involving National Mutual did not mean that relief had to be withheld, a fortiori where the respondents were effectively guarantors of their son's primary obligation, to the knowledge of the appellant through Mr Briggs; where the earlier transaction was tainted as regards the respondents; and where one element of the unjustness of the present transaction was the absence of independent legal advice as to the respondents' rights to challenge the National Mutual loan or financial advice as to the consequence of committing to the St George Bank transaction (J62-63). [I have adopted the emphasis of Davies J when he analysed Trimarchi in Tannous] 36As Davies J explained in Tannous at [42]: "It is notable that in Trimarchi, not only was National Mutual not a party, but no order was made under the Contracts Review Act or otherwise in relation to the National Mutual contract and mortgage. Rather, what was determined was that that contract and mortgage was liable to be set aside on the basis of the unjustness and, for that reason, the Plaintiff was not entitled to claim that the borrowers had the benefit of the amount that paid out that National Mutual mortgage." 37In First Mortgage Managed Investments Pty Limited v Pittman [2014] NSWCA 110, Sackville AJA (with whom Beazley P and Gleeson JA agreed) considered the concept of "unwarranted benefits" and the case of Tremarchi at [172]-[174]: "The language of "unwarranted benefit" has been applied in cases under the Act, typically to ensure that the weaker party accounts for the benefit received from an unjust loan used in part to discharge a pre-existing mortgage: Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413; 11 BPR 20,841, at [98]-[110], per Santow JA (with whom Campbell AJA agreed). Sometimes the language is more blunt, as in Collier v Morlend Finance Corporation (Victoria) Pty Ltd [1989] ANZ ConvR 515; 6 BPR 13,337, where Meagher JA said (at 13,342) that it would be "monstrous to suggest" that the Court should set aside a mortgage where the borrowers had utilised the greater part of the loan to discharge a prior mortgage. The fundamental reason why an "unwarranted benefit" is ordinarily taken into account in determining the relief that should be granted under s 7(1) of the Act is that to do otherwise would go beyond the statutory mandate of granting relief to avoid the unjust consequences or result of an unjust contract. The question in each case where a contract has been found to be unjust must be what relief is required to avoid the unjust consequences or result of the contract. The principles to which I have referred do not necessarily mean that if moneys lent pursuant to an unjust contract are applied in part by the borrower to discharge a pre-existing liability, any relief granted to the borrower must account for the moneys so applied. As Mason P (with whom Sheller JA and Cripps AJA agreed) observed in St George Bank Ltd v Trimarchi [2004] NSWCA 120, at [24], the fact that an unjust loan was used to discharge a prior debt is not conclusive as to the nature of any relief that should be granted to the borrower." 38His Honour at [182]-[183] accepted a submission that Trimarchi had been misapplied in that case and that it stood "for the proposition that an unjust loan or mortgage can be declared wholly unenforceable under the Act even if the borrower uses the funds advanced to discharge a pre-existing liability, but only if the borrower establishes that the pre-existing liability arose under a transaction that could have been avoided at the suit of the borrower." 39The first defendant's case on these issues may be weak in view of the history of the matter and the flow of money as established by the plaintiff's evidence. But I am unable to conclude that it is hopeless or so obviously untenable that it is destined to fail. If it was accepted at trial that the first defendant did not sign the documents associated with the Perpetual mortgage, it is conceivable that the trial Judge may find that it could have been avoided at the suit of the first defendant. It may be held that the principles applied and discussed in Trimarchi and Tannous would lead to some relief, including in relation to the principal sum. 40As Davies J explained in Tannous at [35], it may be that the plaintiff will need to call "evidence from the outgoing mortgagee/lender to answer the claims of unenforceability or unjustness". 41In the end, I am unpersuaded that the first defendant should be denied the opportunity to have her defence and cross-claim heard and determined in the usual way at a final hearing. 42For those reasons, I propose to refuse the orders for summary judgment against the first defendant and the order for possession sought in orders 1(a), 1(b) and 1(c) of the notice of motion. Pleading 43In the alternative, the plaintiff seeks orders (2 and 3) striking out the amended defence and amended cross-claim. 44Such orders under rule 14.28 UCPR can only be made where the pleading: (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the court. 45I am satisfied that that the further amended defence (Ex A2 on the hearing of the notice of motion) to which the plaintiff objects and the amended notice of cross-claim disclose a reasonable defence and cross-claim in the relevant sense. It may be preferable for the pleading specifically to assert that the first defendant asserts that she did not sign the Perpetual mortgage and that this is the basis upon which the defence pleads that she "did not at any time have the use or benefit" of the money advanced under the Kekatos Facilities. However, that is not a matter that would surprise the plaintiff in view of the history of the matter. 46I do not accept the submission that the pleading is embarrassing due to the failure properly to particularise the allegation of fraud. As was pointed out in argument, the allegation is not made against the plaintiff. If the first defendant's evidence is accepted, it is more likely an allegation of forgery against the third defendant. In any event, these are matters for the final hearing and I do not think that the plaintiff is embarrassed for the matter to proceed on the current pleadings. 47Another submission concerned inconsistencies between the pleadings and the evidence (T 31). That is no doubt a matter upon which the plaintiff will rely in contesting the merit of the first defendant's defence and cross-claim. However, I do not accept that this is a basis to strike out the pleading in the present case. 48In the absence of the belated filing in court (over objection) of the further amended defence, I may have formed a different view. In particular, the amendment to paragraph 4, set out above at [14], makes the assertion that the first defendant did not "at any time have the use or benefit of such moneys". As I have said, by reference to her affidavit, that appears to be based on the assertion that she did not sign the Perpetual mortgage and that the signature that purports to be hers is not her signature. It is that assertion that distinguishes the case from cases such as ANZ v Fink and Nibar Investments. 49Based on the content of the proposed further amended defence, I propose to refuse orders 2 and 3 in the notice of motion. However, I note and accept the concession made by counsel for the first defendant that "there are likely to be cost penalties and the like" in view of the very late reliance on this further amendment (T 51). Costs and orders 50The third defendant should pay the costs of the proceedings and notice of motion as between he and the plaintiff. 51The question of who should pay the costs as between the first defendant and plaintiff is more difficult. While the first defendant has successfully resisted all of the orders sought in the notice of motion, it did so by filing a further amended defence on the morning of the hearing. That document was provided to counsel by email between 8:30 and 9:00am on the morning the motion was to be heard (T 1-2). As I have said, counsel for the first defendant conceded that the circumstances meant that there are likely to be costs penalties. The first defendant should pay the costs of and incidental to the notice of motion. 52I make the following orders: (1)Judgment for the plaintiff against the third defendant in the sum of $19,326,288.75. (2)The third defendant is to pay the plaintiff's costs of the proceedings and the costs of and incidental to the notice of motion. (3)The application for summary judgment against the first defendant is refused. (4)The application for an order for possession of land in folio identifier 5/16538 is refused. (5)The application to strike out the amended defence is refused. (6)The application to strike out the first defendant's amended cross-claim is refused. (7)The first defendant has leave to file a further amended grounds of defence in the form filed in court on 22 September 2014 and marked exhibit A2 on the motion. (8)The first defendant is to pay the plaintiff's costs of and incidental to the notice of motion. (9)The matter is listed before the Registrar on 9 February 2015 for directions. ********** 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: 22 December 2014