RHG Mortgage Corporation Limited (formerly known as RAMS Mortgage Corporation Limited) v Cvetkovski [2015] NSWSC 753

Supreme Court New South Wales

Medium Neutral Citation: RHG Mortgage Corporation Limited (formerly known as RAMS Mortgage Corporation Limited) v Cvetkovski [2015] NSWSC 753 Hearing dates: 21 August 2014 Date of orders: 18 June 2015 Decision date: 18 June 2015 Jurisdiction: Common Law Before: Hidden J Decision: Motion to set aside default judgment dismissed. Catchwords: CIVIL PROCEDURE – motion by defendant to set aside default judgment for possession of land – irregularity relating to defendant's status as a person under a disability inconsequential – no arguable defence - delay Legislation Cited: Civil Procedure Act 2005, Protected Estates Act 1983 Real Property Act 1900 Cases Cited: Burrell v R [2008] HCA 34; (2008) 238 CLR 128 Commonwealth Bank of Australia v Buffett (1993) 114 ALR 245 Commonwealth Bank of Australia v Kilpatrick [2013] NSWSC 169 John v John [1965] P 289 Weber v Aquaqueen International Pty Ltd [2013] NSWSC 1181 Texts Cited: Ritchie's Uniform Civil Procedure Category: Principal judgment Parties: RHG Mortgage Corporation Limited (formerly known as RAMS Mortgage Corporation Limited) (plaintiff) Tony Cvetkovski (defendant) Representation: Counsel: J Simpkins (plaintiff) In person (defendant)

Solicitors: Kemp Strang Lawyers (plaintiff) File Number(s): 2006/264052

Judgment 1. HIS HONOUR: On 26 September 2005, the defendant entered into three loan agreements with the plaintiff, which were secured by mortgages over three properties, two at Kiama and one at Albion Park. On 4 May 2006, the defendant having defaulted on the loans, he was issued with default notices under s 57(2)(b) of the Real Property Act 1900 in relation to each of the properties. Payment was not made in accordance with those notices, and on 25 July 2006 the plaintiff commenced proceedings in this court by statement of claim seeking possession of the three properties. 2. On 6 September 2006, the Mental Health Review Tribunal ordered that the defendant's estate be subject to management under the Protected Estates Act 1983. Three days later, on 29 September, the Office of the Protective Commissioner (OPC) informed the plaintiff's solicitors by letter that it now acted for the defendant. The OPC conducted investigations into the defendant's loan transactions and, on 21 December 2006, wrote to the plaintiff's solicitors to advise that those investigations had been completed and the OPC was of the view that the properties should be sold and the loans repaid. 3. On 19 March 2007, the plaintiff's solicitors wrote to the OPC seeking confirmation that it consented to act as the defendant's tutor, noting that the documents required by UCPR r 7.16 had not been filed. In its reply of 10 April 2007, the OPC noted that the plaintiff had been co-operating with it in the process of selling the properties and said that, in the circumstances, it would be premature to make a decision on the tutorship issue. In the meantime, on 27 March 2007, the plaintiff filed a notice of motion for default judgment. That judgment was entered on 27 April 2007. 4. In August and September 2007, the property at Albion Park and one of the Kiama properties were sold by the defendant, through the OPC. In April 2008, the other property at Kiama was sold by the plaintiff as mortgagee in possession. 5. On 8 July 2014, some seven years after the default judgment was entered, the defendant filed a motion seeking an order setting it aside. He did so without legal representation, and he was not represented at the hearing of the motion. He told me that his affairs were no longer in the hands of the OPC. 6. With his motion he filed a draft defence. That document addresses the statement of claim by admitting the mortgages but not admitting the remaining paragraphs, those dealing with default and the plaintiff's entitlement to possession. However, he read two affidavits in which he asserted that the loan documents and, as I understand it, the mortgages were unjust, misleading and fraudulent. He maintained those assertions in oral argument. However, neither in the affidavits nor in oral argument did he provide any meaningful particulars of those allegations. I mean no disrespect to him when I say that the affidavits and his oral address were confusing, and it was by no means clear what he was trying to convey. 7. What does emerge from this material is that there were previous loans which were refinanced by the loans leading to these proceedings. Otherwise, he appeared to be complaining of a difficulty relating to an initial drawdown, the nature of which is obscure, and an inability to find out where he was to make repayments on the loans. I note that he was represented by a solicitor in respect of the mortgages, who witnessed his signature on each of them, and it appears from this material that he remained in contact with that solicitor for some time afterwards. 8. The defendant also tendered a bundle of documents, which I admitted over objection on the basis that I would determine their relevance before giving judgment. It is sufficient to say that they are not relevant. Some of them pre-date the subject loans and appear to relate to the earlier loans. The other documents consist of correspondence, most of which relates to the subject loans but which includes some letters concerning his management under the Protected Estates Act. There is also a copy of a psychiatric report of 3 August 2007. None of this material throws any light on his assertion that the relevant documentation is unjust, misleading or fraudulent, or raises any other matter by way of defence to the plaintiff's claim. 9. The effect of the notice of motion is to invoke the court's power to set aside a default judgment, pursuant to UCPR r 36.16(2)(a). It appears also to seek the exercise of the court's power to set aside a judgment on the basis that it was entered irregularly: s 63 of the Civil Procedure Act 2005, r 36.15(1). The notice of motion raises the issue that at the time of service of the statement of claim the defendant was under a legal incapacity and a tutor had not been appointed. Counsel for the plaintiff, Mr Simpkins, fairly acknowledged as much, noting that at the time the notice of motion for default judgment was filed, a tutor not having been appointed, the plaintiff was restricted by r 7.17(1) from taking any further step in the proceedings. 10. However, Mr Simpkins submitted, and I accept, that this irregularity does not render the proceedings void: John v John [1965] P 289 (cited in Ritchie's Uniform Civil Procedure at [7.17.5]). Section 63 of the Civil Procedure Act provides that a failure to comply with any requirement of the Act or the Rules is to be treated as an irregularity, and that irregularity does not invalidate proceedings or any step taken in them, subject to the court's discretion to set aside (among other things) a judgment or order in the proceedings: subs (2) and (3). Mr Simpkins argued that the irregularity is inconsequential, given that the OPC had decided that it was appropriate for the properties to be sold and the loans repaid. A default judgment need not be set aside on the basis of irregularity if the irregularity causes no injustice: cf Commonwealth Bank of Australia v Buffett (1993) 114 ALR 245. 11. Mr Simpkins cited the following passage from the judgment of Garling J in Weber v Aquaqueen International Pty Ltd [2013] NSWSC 1181 at [116]-[120]: "116 The exercise of a discretionary power to set aside a judgment or order, whether under rr 36.15 or 36.16 of the UCPR, must necessarily pay attention to the important principle of finality of litigation. 117 As the High Court of Australia has 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.' 118 In considering whether to exercise the discretion to set aside a judgment, this principle must be kept firmly in mind. 119 In Kendall v Carnegie [2006] NSWCA 302; (2006) 68 NSWLR 193, Bryson JA, with whom Hodgson and McColl JJA agreed, said at [45], that the phrase 'sufficient cause' recognised the need for finality in judgments of the Court by protecting those judgments from being set aside '... for slight or uncertain causes'. Although this case was dealing with Part 31 Rule 12A of the District Court Rules 1973, the terms of that rule are identical to r 36.15 of the UCPR. The remarks of Bryson JA are apposite here. 120 In determining whether 'sufficient cause' has been shown, as required by r 36.15, or else whether it is 'appropriate' in accordance with r 36.16 to exercise the Court's discretion to set aside a judgment, it is necessary to look at the whole of the relevant circumstances." 1. I accept, for the reasons put by Mr Simpkins, that the irregularity in the present case is of no consequence and has caused no injustice. As to the defendant's motion generally, the considerations of finality examined by Garling J in Weber v Aquaqueen loom large in the present case. Moreover, the defendant has not raised an arguable defence to the plaintiff's claim. As I have said, his draft defence does no more than formally put relevant matters in issue, and neither in his evidence nor in his submissions did he articulate any matter by way of defence. In Commonwealth Bank of Australia v Kilpatrick [2013] NSWSC 169, Schmidt J found that there was no evidence of any irregularity for which the defendant in that case had contended. Her Honour added at [14]: "In any event, even if irregularity were established, the Court has discretion to make the order sought, which would not be exercised, if it appears that the foreshadowed defence is manifestly hopeless (see Faircharm Investments Ltd v Citibank International plc [1998] EWCA Civ 171)." 1. Finally, as Mr Simpkins pointed out, setting aside the default judgment would be futile as the properties have been sold. 2. I should record that the defendant sought to explain the long delay in filing his motion by the assertion that he did not become aware of the default judgment until a matter of months before he filed it. This was a matter he raised in oral argument. However, he also made reference in oral argument to having received advice in 2009 to take the matter to "the tribunal", which I understand to have been a reference to the CTTT. That said, I do not find it necessary to resolve this issue. The other matters upon which Mr Simpkins relied in opposition to the motion demonstrate that it cannot succeed. 3. The defendant's motion is dismissed. If the defendant wishes to put any argument that costs should not follow the event, he should have the opportunity to do so.