Supreme Court New South Wales Medium Neutral Citation: Australia and New Zealand Banking Group Limited v Shiva Ghahreman [2015] NSWSC 113 Hearing dates: 12 February 2015 Decision date: 13 February 2015 Jurisdiction: Common Law Before: Wilson J Decision: Orders made as outlined in paragraph 52 Catchwords: POSSESSION OF LAND – interlocutory rulings - rental income – leave to file amended defence - costs Legislation Cited: Real Property Act 1900 Supreme Court Act 1970 Uniform Civil Procedure Rules 2005 Cases Cited: Garcia v The National Australia Bank Limited [1998] 194 CLR 395 Gregg v Tasmanian Trustees Limited 143 ALR 328 Yerkey v Jones [1939] 63 CLR 649 Category: Procedural and other rulings Parties: Australia and New Zealand Banking Group Limited (Plaintiff) Shiva Ghahreman (First Defendant) Representation: Counsel: Mr B Bellamy (Plaintiff) Mr R Carey (First Defendant) Solicitors: Gaden Lawyers (Plaintiff) Daniel Massey Solicitor & Consultant (First Defendant) File Number(s): 2014/70918 ex tempore Judgment 1. In 2008 the plaintiff, the Australian & New Zealand Banking Group Limited ("the Bank"), made an Acquisition Loan to the defendant, Shiva Ghahreman, and her then husband Siyamak Ghahreman, respectively Mrs and Mr Ghahreman. 2. A mortgage, apparently executed by both debtors, was registered in favour of the Bank over commercial premises at 31/121-129 William Street, Darlinghurst; the premises to be the security against the Acquisition Loan. 3. Subsequent to the loan for $847,000, being drawn down, the defendant and her husband ceased to make payments to the Bank against the loan, in default of the loan contract. 4. On 7 March 2014 the Bank commenced proceedings in the Possessions List of the Common Law Division of this Court for possession of the William Street premises, and debt, against both Mr and Mrs Ghahreman, the second and first defendants respectively. A third defendant, Shazdeh Co Pty Ltd, a guarantor of the loan, was deregistered on 3 August 2014. 5. On 16 October 2014 default judgment was entered against Mr Ghahreman, ordering him to give possession of the William Street property to the Bank, and pay a total of $1,059,671.05 representing the claim amount plus interest. 6. The first defendant, and defendant to these proceedings, remains in possession of the premises. The Bank has not received payment of the judgment amount from Mr Ghahreman. 7. The Possession proceedings remain on foot, although in the ordinary course finalisation of those proceedings is some way off. 8. By Notice of Motion filed on 5 November 2014 the plaintiff seeks the following orders, which are based upon the plaintiff giving the usual undertaking as to damages. They seek that the first defendant in these proceedings be restrained from receiving the rental incomes from the land (which I shall refer to as the Darlinghurst premises) until further order of the Court, and to direct all future rental income from the Darlinghurst premises to be paid into a blocked interest bearing account in the name of both the plaintiff and the defendant, which could not be accessed by the parties until further order of the Court. Alternatively, the Notice of Motion seeks, pursuant to r 13.1 of the Uniform Civil Procedure Rules 2005, judgment for the plaintiff against the first defendant, being possession of the whole of the Darlinghurst premises, and leave to issue a writ of possession in relation to those premises. 9. The third order sought is for the amended defence filed by the defendant on 29 September of last year to be struck out. Costs are sought by the Bank. 10. The defendant opposes the orders sought and asks that the Notice of Motion be dismissed. 11. The plaintiff filed and relied upon an affidavit of Peter Gnaden together with Exhibit PG 1, a voluminous collection of documents. The material includes copies of documents held by the Bank relevant to the Acquisition Loan, the mortgage over the William Street property, and other relevant material. 12. Although the defence to these and the Possession proceedings is unclear, a subject to which I shall return, it seems that there is no dispute that a loan in the name of the first and second defendants was taken out from the Bank, that the loan was fully drawn down in favour of the first and second defendants, and that a mortgage in favour of the Bank was executed by the first and second defendants over the Darlinghurst premises. 13. There is no issue that the terms of the Acquisition Loan have not been met by the borrower, although there is seemingly a dispute as to the identity of the borrower. 14. It is not disputed that the loan is in default. 15. I have referred to the defence as being unclear and that is because the defence, insofar as it has yet been filed, is contradictory. 16. On 29 September 2014 the defendant filed a defence to the Amended Statement of Claim in the Possession proceedings. The defence was accompanied by an affidavit of the first defendant affirming that she believed that the allegations of fact in the defence were true and those allegations of fact which she denied were untrue. 17. In the defence, as then pleaded, Mrs Ghahreman asserted, by way of broad summary, that she was not a client of the Bank and had not signed the relevant loan and mortgage documentation, being a Privacy and Confidentiality Agreement, a joint account authority, and the mortgage which was registered in favour of the Bank. She contended that the signatures appearing on those documents, which the Bank relied upon as being her signatures, were forgeries. 18. Mrs Ghahreman described her relationship with the second defendant as an abusive and coercive one during which she was repeatedly subjected to threats and violence. I note in passing that no independent evidence of these claims has yet been placed before the Court but nothing turns on that for present purposes and the Bank takes no present issue with it. 19. Mrs Ghahreman asserted in her defence that she had no knowledge of the Acquisition Loan, no knowledge of the purchase of the William Street property in her and her husband's names as joint tenants, and no knowledge of the mortgage executed over the property. 20. She asserted that she first became aware of the existence of the loan and the purchase of the property when told about it by the Bank at such time as the Acquisition Loan had fallen into default. 21. The defendant subsequently swore an affidavit on 23 December 2014 which has been filed as part of her defence in the Possession proceedings and which is relied upon in defence of the Notice of Motion. 22. The affidavit directly contradicts, without explanation, some of the most significant assertions of fact raised in her defence as originally pleaded. 23. The defendant has sought leave in these proceedings to file and rely upon an amended defence to the Amended Statement of Claim. The plaintiff opposes leave being granted and submits that the defence should be struck out. 24. In her December affidavit and in her amended defence Mrs Ghahreman contradicts her earlier denials of having signed the Privacy and Confidentiality Agreement, the joint account authority and the mortgage. 25. Indeed, in relation to the latter document she now asserts a specific memory of signing the mortgage at her workplace and of seeking out a co-worker whose name and signature appears on the face of the document. 26. Nothing is advanced by the defendant to account for the complete reversal of a significant factual component of her defence. This unexplained change must be a material factor in any assessment of Ms Ghahreman's credibility as a witness. Her veracity may well be called into question. Her overall reliability must be in some doubt whilst the change continues unexplained. 27. The late filing of the amended defence to the Amended Statement of Claim has also prejudiced the plaintiff in terms of the current motion. As counsel for the plaintiff suggested, events have overtaken the Notice of Motion and the orders sought therein. This has required some flexibility in the Bank's position and in the orders sought by it, another issue to which I will return. 28. On the amended defence it is difficult to see precisely what Mrs Ghahreman's defence is. The first defendant appeared to both deny all responsibility for, and liability under, the Acquisition Loan, and to deny all knowledge of or involvement in the purchase of the property, but also to assert ownership of the premises which secured the loan and sole entitlement to the fruits of ownership, being the not inconsiderable rent currently paid to the defendant by a lessor of the premises. To date, the defendant has received a sum roughly in the order of $120,000 or $130,000 in rent, funds which appear to be no more than a windfall to her. 29. On the evidence available to date, Mrs Ghahreman does not appear to have a legitimate interest in the property and certainly not one which could defeat that of the Bank, and yet Mrs Ghahreman defends the Bank's action seeking possession and disputes the Bank's entitlement to relief. 30. On Mrs Ghahreman's evidence, insofar as it is possible to be certain as to which of her opposed assertions may be accepted, under oppressive pressure from her husband she advanced him the sum of $145,000 by way of a loan shortly before the purchase of the William Street property was effected by him. 31. Although there is no evidence that these funds were applied by Mr Ghahreman to the William Street purchase, if they were, it is arguable that Mrs Ghahreman has some equitable interest in the property. Having regard to the terms of the mortgage, which Mrs Ghahreman - on one version of her evidence - executed, and the liability it imposes upon the mortgagors, any such interest is, however, unlikely to take precedence over that of the Bank. 32. Mrs Ghahreman asserts "duress, unlawful pressure and/or undue influence" by Mr Ghahreman who induced her to sign the mortgage over the William Street property, and that her husband was acting at the time as an agent of the Bank. Agency is to be inferred, she submits, because it was the second defendant who put the mortgage into her hands on the Bank's behalf, and caused her to sign it. 33. The plaintiff's case is that the documents relevant to the Acquisition Loan and the execution of the William Street mortgage were forwarded by post to the address at which Mrs Ghahreman and, to the Bank's knowledge, Mr Ghahreman resided. The package of documents were addressed to both defendants. 34. An assertion of agency in these circumstances appears doubtful. See Gregg v Tasmanian Trustees Limited 143 ALR 328 at 339. That is, however, a matter which cannot finally be determined here. 35. Similarly, Mrs Ghahreman asserts unconscionable conduct by the Bank in seeking enforcement of the loan contract and possession in circumstances where the Yerkey v Jones [1939] 63 CLR 649 principle applies. In Yerkey v Jones it was held at 684 that: "If the creditor has left it to the husband to obtain his wife's consent to become surety and no more is done independently of the husband than to ascertain that she understands what she is doing, then, if it turns out that she is in fact acting under the undue influence of her husband, it seems that the transaction will be voidable at her instance as against the creditor." 1. Although there is no evidence at all that the Bank did know, could have known or should have known of the oppressive relationship between the second and first defendants, this alone is not determinative of the Yerkey v Jones issue. 2. In Garcia v The National Australia Bank Limited [1998] 194 CLR 395, it was held that the principles applied in Yerkey v Jones do not depend upon the creditor having at the time the guarantee is taken, notice of some unconscionable dealing between the husband as borrower and the wife as surety: "Yerkey v Jones begins with the recognition that the surety is a volunteer, a person who obtained no financial benefit from the transaction, performance of the obligations of which she agreed to guarantee." 1. Thus, what does seem of some relevance to the possible application of the principle here is the very different factual scenario that pertains. 2. Mrs Ghahreman was not a guarantor or surety to a facility obtained by her husband for his benefit or the benefit of a third party. She was not, to use the terminology of the authorities, a volunteer. 3. Mrs Ghahreman's position was quite different. On her own case Mrs Ghahreman, whilst repudiating any liability under the Acquisition Loan, asserts ownership of the William Street property and asserts entitlements to profits flowing from that ownership to the exclusion of the secured creditor, the Bank. She has already received substantial profit from her asserted ownership, profits which she says go to support her living expenses. 4. None of the authorities to which the defendant has referred the Court and upon which she relies reflect these circumstances. In my view there is then a real issue as to whether the defence asserted is even available. 5. The plaintiff contends that no defence is disclosed on the proceedings and urges the Court to strike out the defence and order possession of the premises in William Street to it or, in the alternative, award possession to the Bank whilst directing that the sum of $145,000 be retained from the disposal of the property until such time as the legitimacy of Mrs Ghahreman's claim can be assessed by the Court. 6. The latter is an attractive proposition on a number of fronts and not least because Mrs Ghahreman's defence, once the nature of it is determined with some precision, something which I cannot do in these proceedings, seems untenable. 7. However, the Court is mindful that this is a preliminary proceeding and the defendant, albeit in breach of the orders of the Registrar of this Court of 7 August 2014 that she file and serve her defence in the Possession claim by 31 October 2014, almost three months ago, has not yet fully put on her defence. It may be that there will be some evidence that goes to support contentions that in my view appear currently to be resoundingly hollow. 8. The Court cannot shut Mrs Ghahreman out from a full hearing at this early stage. 9. Additionally the defendant submits, and I accept, that Orders 1 and 2 sought by the Notice of Motion are inapposite, there having been no action commenced by the plaintiff pursuant to the relevant statutory provisions under the Real Property Act 1900. 10. Whilst s 69 of the Supreme Court Act 1970 may, as the plaintiff submits, give the Court the power to make the orders sought as part of interlocutory proceedings, I am not convinced that that is so in light of the existence of a specific statutory provision governing such claims to rents against mortgaged properties. 11. I return now briefly to another consequence of the defendant's failure to file the defence in accordance with the orders of the Court, something touched upon earlier, and that is the issue of prejudice to the plaintiff. 12. As earlier noted the plaintiff complained, in my view with justification, of the late filing of the amended defence overtaking and, to some extent, undermining its motion. 13. One consequence necessitated by that was the plaintiff's preparedness both to amend the orders sought to recognise the potential claim by the defendant to an equitable interest reflecting the loan of $145,000 to her husband. Another was its willingness to settle, an offer being made to the defendant open for seven days in seemingly generous terms. Another consequence is costs thrown away by the plaintiff, a feature conceded in submissions by the defendant. 14. I propose to order costs in favour of the plaintiff for the proceedings on the Notice of Motion on that basis. 15. The orders the Court makes are these: 1. The Notice of Motion is dismissed in so far as prayers 1 and 2 are concerned. 2. The Defence to the Amended Statement of Claim is struck out to the extent that it is inconsistent with the Defence to the Statement of Claim. 3. Subject to order 4, leave to the defendant to file and serve the proposed Amended Defence relied upon at the hearing of the Notice of Motion is refused. 4. Leave is granted to the defendant to file and serve an Amended Defence to the Amended Statement of Claim which is cognisant of my reasons delivered on 13 February 2015. 5. Costs of the proceedings on the Notice of Motion are awarded in favour of the plaintiff on the ordinary basis. 6. Matter is adjourned for directions hearing to 9am on 26 February 2015 before the Common Law Registrar. ********** 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 February 2015